As I understand it, the purpose of the bill is not to do away with contract carriers at all. What the Commission seeks to have done, however, is to possibly make even a better service for you than that which now exists by requiring that a contract carrier be limited to what in your business is a very specialized service, as you may be one big customer that they have. Therefore they set their trucks up and operate almost exclusively for you, we will say, thereby giving you better service.

Now, this bill doesn't in any way stop the possibility of your using contract carriage, does it?

Mr. MATHEWS. As I understand it, Senator, it would permit the common carriers to complain that they are in a position to render that same service, and therefore the Commission would take the contract carrier out of business, or could.

Senator SMATHERS. Well, we have all agreed-you just heard the Department of Commerce here, and you heard probably the Secretary of the ICC yesterday

Mr. MATHEWS. I didn't hear him.

Senator SMATHERS. Apparently they are in agreement that they should strike out the words "an not provided by common carriers." Mr. MATHEWS. This, of course, was prepared around that, and I didn't understand what the Secretary was saying.

Senator SMATHERS. If we leave out the words "not provided by common carriage," even though there may be common carriage in the area, it does not prohibit you from still doing business with the contract carrier.

Mr. MATHEWS. With the suggestion of changes in the wording you were making awhile ago, Senator, that might change that, although I haven't had an opportunity to review it. I didn't have the bill in front of me, and this statement was based on the bill as it was worded, and I will not burden you with reading further on that because that might be ambiguous to the situation as it would exist should the bill be changed.

Senator SMATHERS. All right.

Senator SCHOEPPEL. Mr. Chairman, that just points out we have a perplexing problem here to incorporate language in the bill. Our friends from the ICC submitted a bill the way they wanted it. Now there have been some changes suggested. Now you come up with these points, and we have to wrestle with it.

Now, some of these explanations here, by way of illustration, furnish us with an opportunity for discussing this matter in executive session and otherwise, to keep this thing on some kind of a, let us say, progressive yet equitably fair legislative basis.

Mr. MATHEWS. Senator, as you probably know, the contract carrier is very closely tied into the meat business. Many of them originated in connection with the meat business.

Senator SCHOEPPEL. That is what I found out when I was chairman of the utilities commission of my State of Kansas, with the packing plants all on this side of the Missouri River in quantities, I well understand that.

Mr. MATHEWS. We feel we must do everything we can to protect those carriers who render us an invaluable service.

Now, departing entirely from this, Senator Smathers, as I understand this, one bill, which I believe I heard you say was reported out, would require the contract carrier to file his rate schedule.

Senator SMATHERS. File his what?

Mr. MATHEWS. His rates, as public information.

Senator SMATHERS. Right.

Mr. MATHEWS. If that comes to pass, then the argument that the common carrier uses, that he never knows what the contract carrier is charging, is no longer valid. If he is unwilling to meet it, he can get his commodity somewhere else, which is a point of contention, that we can't bring rates into this matter, even though we find a carrier willing to do it, properly, competent to do it for us, and yet he can't get authority to do it because the common carrier says, “I can perform the service." We can't afford to pay him for it under his rate schedule. So consequently, we want to protect the specialized carriers and there are many specialized common carriers that do very well for us, but the hard core of our meat movement from the Missouri River by truck is our contract carrier.

Senator SMATHERS. To put it another way, I think what you are saying is you want to have a competitive situation existing with respect to who is going to carry your meat.

Mr. MATHEWS. That is right.

Senator SMATHERS. And if you get a common carrier there, that is fine, but if the common carrier is given an exclusive right by some legislation, then, of course, the price of delivery of that meat could get-we will say if the ICC approved it, it is a long procedure there— but it could get very high.

You want to make it possible for contract carriers to still get certificates to carry your meat, even though there may be a common carrier available, but you feel that the contract carrier can do a better job for you than the common carrier?

Mr. MATHEWS. That is true, unless the common carrier is willing to perform it as well, and at the same rate that the contract carrier does

it.

Senator SMATHERS. Now, if they strike out of this bill this provision, "not provided by common carriers," I am just talking off the cuff here, do you believe that this bill, then, endangers your operation materially in limiting contract carriers to just what it says. That is, to do business under continuing contracts with one person or a limited number of persons for the furnishing of transportation services of a special and individual nature?

Wouldn't you say yours is of a special and individual nature? It has to be frozen in most instances, doesn't it?

Mr. MATHEWS. Well, a large part of it is fresh, but that is worse than frozen, as far as the transportation of it.

Senator SMATHERS. All right, so it would be of a specialized and individual nature?

Mr. MATHEWS. That is right.

Senator SMATHERS. So this legislation, then, does permit this kind of contract carriage?

Mr. MATHEWS. Without reviewing it carefully, I think it probably does.

Now, one other phase of the contract carrier thing, Senator, if I can proceed, is in connection with the fertilizer business, which we are in in a large way, and wherein we use contract carriers and contract carriers are very important.

(The portion of the statement not read follows:)

Mr. MATHEWs. The fact that the common carrier and particularly the general commodity common carrier cannot perform the services as well and the latter not as cheaply does not prevent such carriers from coming in and objecting to contract carrier authority. If S. 1384 is adopted, such objection will almost automatically block any new authority.

Apart from inadequate service and inefficient methods of operation, the general commodity common carrier cannot ordinarily be used for distribution purposes because of its rate setup. The carrier insists on charging for each item on a less-than-truck-load rate. Distribution of product, particularly meat, is not properly speaking a less-than-truckload service. The carrier is guaranteed a considerable volume and a regularity of movement so that convenient and economical routes of movement can be laid out. Contrast this with the occasional movement of one shipment of product where there is no volume guaranteed and no continuity of movement.

I will illustrate this with a case with which we were faced a couple of years ago. A contract carrier of meat out of Sioux City, Iowa, published distribution rates into several States from the plant of several meatpackers. The Middlewest Motor Freight Bureau, supported by a few general commodity common carriers, came in and objected to the rates of this carrier on the grounds that they were lower than the less than truckload rates published by it for its members, although it could not show that its members ever moved any of the traffic under those rates. The contract carrier came in and demonstrated that, under its methods of doing business, the rates were highly compensatory.

Under the law as it stands today, a contract carrier can charge rates basee on its own costs and the case was dismissed. Under the proposed bill if we attempted to get a carrier from another plant to perform this service, we would be barred because general commodity carriers would be willing to perform the service half as well for twice the rate. If the present carrier is compelled to convert, his rates would be easier to attack despite their compensatory nature. This certainly is not in the public interest.

The presence of the contract carriers has been an important element in preventing the overall cost of the distribution of meat rising more than it has. The enactment of this bill would increase the cost of such distribution. The major portion of such increase in distribution cost would unquestionably be reflected in the form of a decreased price which the producer would receive for his livestock.

Another phase of our business which would be seriously affected by the enactment of S. 1384 is the manufacture and sale of fertilizer. The method of distributing this commodity has been completely changed within the last few years. In most cases, it is distributed by mixing plants within a distance of approximately 200 miles. Any such mixing plant which is without flexible low-cost truck transportation to all of its marketing areas is under an impossible handicap. As far as the railroads are concerned, they are physically unable to perform the greater portion of this service. They do retain the long haul of the fertilizer material, and it is to their distinct advantage to improve the overall efficiency of the fertilizer industry. The small contract carrier is the backbone of this distribution. The service of the general commodity trucker is distinctly inferior and certainly his rates, and probably his costs, are entirely too high. Yet under S. 1384 such truckers could unquestionably block the issuance of proper contract carrier authority.

The enactment of S. 1384 would do immeasurable harm to the meatpackers of this country who are already operating under extremely narrow margins. It would also lower the price received by the producer for his livestock. It would seriously cripple the fertilizer business. There are undoubtedly many other businesses in the same situation. We urge this committee to recommend the rejection of S. 1384.

92433-57--16

Mr. MATHEWs. Now, I have another statement I would like to make here in connection with the first bill I talked about, the private carriage, and it has further to do with changing the words.

I prepared this later. I would like to read it into the record. It is only part of a page.

Senator SMATHERS. All right, sir.

Mr. MATHEWS. If you accept the false premise that changing the act is desirable, and recommend some change, any change at all, so that the question then becomes a matter of just what the change should be, we wonder, as a result, what substitute amendments might be offered on the floor and with what even more serious results than you can now foresee.

We wonder also, even assuming that whatever change you might propose would remain in the final bill, what legislative history might occur, either on the floor of the Senate or the other body, that you cannot now foresee and would not desire.

Senator SMATHERS. Are you asking us these questions?

Mr. MATHEWS. I am just putting this in as a question for you to consider when you review it.

Senator SMATHERS. May I just interrupt you right there to say that if anybody can foresee what the Members of the United States Senate may or may not do, then that particular person has a great future.

Mr. MATHEWS. Senator, that is the very reason why we do not want the present definition changed, the very reason.

Senator SMATHERS. I think they are all reasonable men, but we have a rule here in the Senate that they can offer as many amendments as they might see fit to offer, so we don't know. We are only concerned at this moment with what this subcommittee does, and if you have some suggested amendments that you think we should consider, we would be very happy to have them from you.

Mr. MATHEWS. Sir, there are no suggested amendments to that bill as it now stands. Our suggestion is that we do not change that part of it that S. 1677 pertains to. I think I would be repeating myself in the rest of my statement, because it is along the same lines. We just don't see what would be gained from it.

Senator SMATHERS. Well, you seem to me a very reasonable man, and a man who certainly knows his business. Obviously you are representing your particular interest very well and deserving of commendation from the boss of your particular company, but what I am interested in knowing is, if we strike out that language there and say, "and not provided by common carriers".

Mr. MATHEWs. That is on 1384, sir?

Senator SMATHERS. Yes, on 1384, we are talking now about contract carriers. It makes it possible for you people, as I see it, to still do business with contract carriers in the same fashion that you do it today.

Is that not your conclusion about it?

Mr. MATHEWS. I think so.

May I suggest this? I will get a transcript of the change and I will review it.

Senator SMATHERS. We will leave the record open so that you may submit a new statement in the light of these changes.

Mr. MATHEWS. I would like to do that, sir.

Senator SMATHERS. We thank you very much, sir, and we will place at this point in the record your subsequent statement. (The material referred to is as follows:)

SUPPLEMENTAL STATEMENT OF H. O. MATHEWS IN OPPOSITION TO SENATE BILL No. 1384

My name is H. O. Mathews. At the time I appeared in opposition to S. 1384 I was informed that Chairman Clark of the Interstate Commerce Commission had suggested certain amendments and I requested time to study these amendments to see to what extent, if any, they met my objections.

I have obtained a copy of the printed statement of Chairman Clark but have not been able to get the copy of the transcript of his oral testimony before the Commission.

Based upon Chairman Clark's prepared statement my opposition to S. 1384 is intensified rather than eliminated. As I read his testimony, no change is suggested in section 1 of the proposed bill. The entire change to be in section 2. While the test to be applied to a new contract carrier is possibly modified to some extent by the amendments, it would still be extremely difficult to obtain new contract carriage within the definition of section 1 of the act.

At the time of my testimony I was not certain whether carriage in a refrigerated trailer was considered specialized service by the Interstate Commerce Commission. I now find that it is not considered specialized service. As I mentioned in my original testimony, we have two types of common carriers in the meat business-those carriers who specialize in perishable products and general commodity carriers. It is the latter type in which the Commission is particularly interested. These general commodity carriers often times do purport to offer refrigerated service but our experience with them has, on the whole, been extremely bad.

The reason for my intensified opposition is that Chairman Clark apparently interprets section 1 of S. 1384 as putting some of the present contract carriers in a position where they are neither proper contract carriers nor entitled to convert to common carriers. Under his interpretation of the bill the Commission might therefore put a number of contract carriers out of business. From our standpoint this would be a catastrophe. At the time of my previous testimony I had assumed that under the bill an existing contract carrier would either continue as a contract carrier or would be converted to a common carrier. Chairman Clark's statement makes it plain that he feels that there is a group of present contract carriers who, under the proposed definition, would not qualify as contract carriers or common carriers and who could be ordered to cease business.

This magnifies a situation which I mentioned in the portion of my previous statement not read to the Commission. I wish to repeat it here. The presence of the contract carrier has been an important element in preventing the overall cost of the distribution of meat rising more than it has. The enactment of the bill would increase the cost of such distribution. The major portion of such increase in distribution cost would unquestionably be reflected in the form of a decreased price which the producer would receive for his livestock. Senator SMATHERS. Any questions, Senator Yarborough? Senator YARBOROUGH. NO.

Senator SMATHERS. Senator Schoeppel?

Senator SCHOEPPEL. No questions.

Senator SMATHERS. Thank you very much, Mr. Mathews. We appreciate very much your staying over. At this point we will insert a statement from a similar group of individuals on S. 1384. (The material referred to is as follows:)

VIEWS OF OSCAR MAYER & Co., GEO. A. HORMEL & Co., JOHN MORRELL & CO., THE RATH PACKING CO., OPPOSING NEW DEFINITION OF CONTRACT CARRIER AS CONTEMPLATED BY S. 1384

PRELIMINARY

The views expressed herein are on behalf of Oscar Mayer & Co., Geo. A. Hormel & Co., John Morrel & Co., and the Rath Packing Co. These companies operate meat-packing plants at Austin, Minn., Fremont, Nebr., Dallas and Fort