permitted to continue by filing what is supposed to be the minimum rate which you charge to one of the persons with whom you have a contract?

Mr. OREN. That is a question as to whether you want to go all out on regulation or not. I don't believe that Congress should legislate any more than is completely necessary. Now, if you are out to protect the public, and that is the purpose of your legislation-and they, I think, should come first-you don't have to worry about these shippers with whom we draw these contracts. They are pretty well paid, and they are pretty good men who know what they are doing, and I don't think that you should exactly say that you shouldn't permit the different modes of transportation. We get higher rates in some instances than probably the common carriers do.

Senator LAUSCHE. But it is a fact that you are given special treatment in the way the law is written now; aren't you?

Mr. OREN. But it isn't the public that is concerned. It is a shipper who is willing to go out and draw a contract with us. It is a shipper. It is people who are in business, who know what they are doing. You don't have to fear that anybody is going to get hurt.

Senator LAUSCHE. One question further: What does the Interstate Commerce Commission recommend with respect to this subject under discussion?

Mr. OREN. They are asking for actual rates; they are asking us to file exact rates.

Senator LAUSCHE. And are you of the opinion that the Interstate Commerce Commission is proposing that, not because it is interested in the public, but it is interested in the common carriers?

Mr. OREN. I think it is interested in strengthening the commoncarrier industry. We have no quarrel. I think that the common carrier needs to be strong, but I think sometimes competition will make it stronger than to have a monopoly that is subsidized. I don't think it will strengthen the common-carrier industry to have all competition wiped out or having everybody wiped out of the field. You see, there was a day of the railroads when we had things a little different from what we have today. We have trucks that can go wherever the highways go.

Senator LAUSCHE. Is there any limitation now in the law upon the number of contracts you may make with different shippers? Mr. OREN. No; the courts have decided there is not.

Senator LAUSCHE. You contract with as many shippers as you are able to serve with your facilities?

Mr. OREN. As long as we cover the territory and as long as we only over the roads that we are told we can; as long as we only haul the commodities, a very limited number of commodities.

go

Senator PURTELL. Specified commodities?

Mr. OREN. Limited as to territory, limited as to the contract; there must be a contract, limited as to shippers, even limited as to the intended use of the property.

Senator LAUSCHE. Thank you.

Senator PURTELL. Of course, you know that this proposal, S. 1384, that we are talking about, and you have addressed yourself to, says the Commission may do this upon its own initiative. Now, I don't know that you paid too much attention to that.

Upon application of a permit holder or upon complaint of an interested party, after notice of hearing, revoke a permit and issue in lieu thereof a certificate *** if it finds that any person holding a permit whose operations on the date of enactment of this paragraph do not conform with the definitions of a contract carrier.

Mr. OREN. The new interpretation of the contract carrier.
Senator PURTELL. That is right.

Mr. OREN. But that isn't the interpretation of the contract carrier when the Motor Carrier Act of 1935 was passed. I am asking to be defended in what I am doing under the circumstances in which I went into this business.

Senator PURTELL. Well, I wanted to point out that that was in there. You may disagree. If you were not at that time conforming with the definition of a contract carrier, then they may revoke your license.

Mr. OREN. The new definition. There aren't many that could conform or would conform to the new definition, because I think any of these 3 could take on with us and say we didn't conform in one or the other. Now, that doesn't mean that the Motor Carrier Act of 1935 permitted us to become a contract carrier, as such, under the Motor Carrier Act of 1935 or 1941, because it has been tested in court, and it has been tested all of the way through as to what the Congress has intended, and today, after 25 years, it is pretty well established as to what we can do and what we can't, and it has been cut down, too, by an awful lot of rules and regulations. We don't want it cut down any more.

Senator PURTELL. If there are no other questions, I want to thank you, Mr. Oren, for coming here. You have added much to the information that we have available to us, for our deliberations.

Mr. OREN. Thank you.

Senator PURTELL. I want to state here, if there are any other people from out of town, if you would let the committee clerk know about it, we will try to put you on tomorrow at 2:30, when we are resuming these hearings. Will you do that?

Then the hearings are recessed until tomorrow afternoon, at 2:30. (Whereupon, at 4: 25 p. m., the subcommittee adjourned to Wednesday, May 8, 1957, at 2: 30 p. m.)

SURFACE TRANSPORTATION-SCOPE OF AUTHORITY

OF ICC

WEDNESDAY, MAY 8, 1957

UNITED STATES SENATE,

SUBCOMMITTEE ON SURFACE TRANSPORTATION, OF THE
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D. C.

The subcommittee met at 2:30 p. m., Hon. George A. Smathers (chairman of the subcommittee) presiding.

Present: Senators Smathers, Schoeppel, and Yarborough.
Also present: Frank Barton, committee counsel.

Senator SMATHERS. Mr. Rothschild, we are always very happy to have your very able contributions to our labors. It is nice to see you. Mr. ROTHSCHILD. Shall I proceed, sir?

Senator SMATHERS. You proceed, yes.

STATEMENT OF LOUIS S. ROTHSCHILD, UNDER SECRETARY FOR TRANSPORTATION

Mr. ROTHSCHILD. I am here to present the views of the Department of Commerce on S. 1677 and S. 1384, two of the series of bills which are the subject of these hearings. The Department of Commerce has a special interest in these bills because they parallel in principle two of the recommendations of the Presidential Advisory Committee on Transport Policy and Organization.

As you will recall, the principal emphasis of the Advisory Committee's report is on the need to revise two broad major areas of Federal transportation policy. In its letter of transmittal to the President, the Advisory Committee said that

*** in conformity with today's availability of a number of alternate forms of transport, Federal policies should be amended (1) to permit greater reliance on competitive forces in transportation pricing and (2) to assure the maintenance of a modernized and financially strong system of common carrier transportation adequate for the needs of an expanding and dynamic economy and the national security.

In connection with the latter recommendation to assure the maintenance of the common-carrier industry, the Advisory Committee proposed a number of specific actions, two of which are as follows:

(1) Redefine a private carrier by motor vehicle as any person not included in definition of a common or a contract carrier who transports property of which he is the owner, provided that the property was not acquired for the purpose of such transportation.

(2) Redefine motor and water contract carriage as being that transportation providing services for hire but otherwise equivalent to bona fide private carriage and require that actual, rather than minimum, charges be filed.

S. 1677 corresponds in objective to the first of these proposals. S. 1384, insofar as it would redefine contract carriage, parallels the objective of the second proposal with the exception that the Advisory Committee's recommendation would redefine water as well as motor contract carriage.

In my testimony before this committee on April 17, 1957, on S. 943, I discussed the phase of the Advisory Committee recommendation that would require contract carriers to file their actual, rather than minimum, charges with the Interstate Commerce Commission.

Senator SMATHERS. You might be interested in knowing that the committee reported that bill out today favorably, the full committee. Mr. ROTHSCHILD. Fine, sir.

Senator SMATHERS. We are following your recommendations to the letter in some respects.

Mr. ROTHSCHILD. Even with that qualification, Mr. Chairman, that is an encouraging message.

Senator SMATHERS. Well, we are making a little headway. We are taking little bites, instead of a big bite, but we are making headway. Excuse me, you go ahead.

Mr. ROTHSCHILD. These and other Advisory Committee recommendations were translated into legislative proposals by the Department of Commerce and are contained in S. 1457 which is pending before your committee. As I stated in my testimony on April 17, the Department's purpose in submitting this legislation was to provide the Congress with a study document incorporating the Advisory Committee's recommendations. We are not wedded to the specific language of S. 1457 and would be agreeable to alternative proposals, provided the objectives of the report would be realized.

The term "private carrier of property by motor vehicle" is defined by section 203 (a) (17) of the Interstate Commerce Act meaning any person not included in the term "common carrier by motor vehicle" or "contract carrier by motor vehicle" who transports in interstate or foreign commerce property of which he is the owner, lessee, or bailee, when such transportation is for the purpose of sale, lease, rent, or bailment, or in furtherance of any commercial enterprise.

S. 1677 would amend this definition by adding a proviso to the effect that any such person who purchases, transports, and sells property for the purpose of fostering a highway transportation business is engaging in a public transportation service and shall be included within the terms "common carrier by motor vehicle" or "contract carrier by motor vehicle."

The purpose of the proposed amendment is to enable the ICC to cope more effectively with the invasion of the for-hire motor carrier industry by persons allegedly operating as private carriers but who in actuality are public transporters. It is not unusual for business establishments which deliver in their own trucks merchandise which they manufacture and sell to purchase articles at or near the point of delivery and transport these articles to their own terminal for sale to others, thereby obtaining compensation for the use of their vehicles which otherwise would return empty.

To an even greater extent, however, there are certain pseudoprivate truck carriers who transport in both directions freight which they purchase only for the purpose of sale at destination. In general, the sale price of the merchandise is its cost, plus an amount equal to

or frequently slightly below the transportation charges of authorized carriers.

As a result of these practices, regulated common carriers are encountering increasingly severe and unfair competition. The ICC has repeatedly called attention to the dangers of this pseudoprivate transportation to both shippers and carriers.

In determining whether persons are "private carriers," as distinguished from "common carriers" or "contract carriers," as defined by section 203 (a) (14) and (15) of the act, the Commission and the courts have applied what is known as the primary-business doctrine; that is, whether or not the primary business of the carrier is that of supplying transportation or whether the furnishing of such transportation is merely incidental to its nontransportation business. This principle was affirmed by the Supreme Court in Brooks Transportation Company v. United States (340 U. S. 925).

This Department believes that legislation in the nature of S. 1677 is necessary and desirable to assist the Commission in overcoming the difficulties inherent in the definition of "private carrier of property by motor vehicle" now contained in the act. However, we think that the phrase "for the purpose of fostering a highway transportation business" is vague and ambiguous and would be difficult to interpret and administer. In view of this, we suggest that consideration be given to the definition of "private carrier of property by motor vehicle" contained in section 10 (c) of S. 1457.

Senator SMATHERS. What was that, 10 (c)?

Mr. ROTHSCHILD. Yes; section 10 (c) amends section 203 (a) (17) of the Interstate Commerce Act so as to define the term "private carrier of property by motor vehicles" as meaning:

any person not included in the terms "common carrier by motor vehicle" or "contract carrier by motor vehicle" who, in a commercial operation, transports in interstate or foreign commerce by motor vehicle property of which he is the owner, lessee, or bailee, provided such ownership, lease, or bailment is not undertaken for the purpose of such transportation.

This proposed definition would constitute a modification of the primary-business doctrine to the extent that the application of such doctrine has enabled persons to transport property for compensation under an owner, lessee, or bailment relationship which was acquired specifically for the purpose of such transportation. The definition would not, however, nullify the primary-business test, nor would the definition work a hardship on legitimate private carriers. Manufacturers, retailers, service establishments, and other enterprises of all kinds would still be able to transport their goods without difficulty. Senator SCHOEPPEL. I would like to ask the distinguished gentleman this question: To that extent you would modify the principle established in Brooks Transportation versus the United States?

Mr. ROTHSCHILD. That is correct; and we would modify the proposed amendment, the amendment proposed by the Interstate Commerce Commission, by including our definition of private carrier, rather than their vague and ambiguous one. In any event, provision should be made for appropriately franchising carriers who have been operating legally as private carriers under the present law, but who would lose their exempt status under a redefinition of "private carrier of property by motor vehicle." Section 24 (b) of S. 1457 provides for the issuance, upon application and after investigation and hearing,