As a private truck operator as well as substantial user of for-hire carriage I am interested in my ability to continue bona fide private truck operation, interstate, much as now conducted, without unnecessary restrictions, statutory or administrative. Within the panel setup of TAA, private truck operation is represented only in the user panel, though I realize that there may be many members of that panel who have no specific interest in private struck operation, lacking any need of that transportation method in their individual businesses. The proposed new section 203 (c) is only one of several proposals for statutory change in either the definition of private carrier or in some other provision of the present law relating to private truck operation. Such proposals have come from the Commission, the Cabinet Committee, rail carriers, and motor carriers. They differ in the degree of damage which they might do to private truck operation, but all are objectionable to private truck operators, individually and organized, for reasons which I set out below. It is true, as Mr. Waehner's letter states, that Congress will give consideration to the subject this session; hearings are set before the Senate Committee beginning May 6 on at least one bill on he subject, S. 1677, which I understand to be the Commission's bill. It may well be that private truck operators, in opposing any change, are taking a calculated risk-a risk of something more objectionable than suggested section 203 (c)but it is my belief that if private truck operators make the showing to Congress which can be made, they do not have too much to fear.

A brief résumé of the subject up to the present time may be of assistance. In the course of its administration of provisions of the plan affecting private carrier, the Commission heard and decided two cases, the so-called Shenley and Lenoir Chair cases, in which the operations concerned were held to be bona fide private operations. These cases went through the lower court and to the United States Supreme Court, the Brooks Transportation cases, where the Commission was upheld and validity of the primary business test finally established. Despite the protestations of for-hire carriers at the present time that they have no intention of injury to bona fide private carriage it should be kept in mind that all through the Commission and court cases the for-hire position was not so liberal; they did want to hurt bona fide private carriage and did their best to bring about that result. I do not believe that their basic position or interest (and it is a legitimate self-interest) has changed. The point of attack merely has been shifted and adapted to present conditions.

At present there is a certain amount of illegal or "Pseudo" private-truck operation-though such language really is a misnomer-rather the operation is illegal "for hire" truck operation. This illegal movement is accomplished by means of "buy and sell" and other substerfuges. Whether there are "widespread unscrupulous practices" is doubtful; the "widespread" feature has never been documented by anyone to the best of my knowledge. My information on the subject leads me to believe rather that there is a fringe of illegal operation, rather inconsequential as to volume, which is making trouble for all other private operators. The Commission claims it has no effective method of dealing with this situation unless there is a change in the statute.

Private truck operators oppose the addition of proposed section 203 (c) and other changes which have been suggested. This opposition I think is based on two beliefs. First, that no change is needed to cope with the illegal operation situation; second, that the change suggested bears the possibilities of substantial damage to legitimate private truck operation. On the first point-there is no question but that present "pseudo" private-truck operation is illegal. Under the present Commission decisions, in applying the primary business test, and under the court's approval of those decisions, such operators, if prosecuted, will be convicted. There is simply no such thing as a "pseudo" private truck operation (illegal) which cannot be reached under the present law. To declare twice illegal what the law already says is illegal accomplishes nothing. The requirement presently is for policing and enforcement; it would still remain so under proposed section 203 (c). I do not beileve that the Commission has made an adequate effort to enforce the law in this respect, perhaps until recently because of a completely inadequate personnel, but that situation has in part at least been remedied. A few prosecutions with stiff penalties would change the situation entirely. Only this past week Commissioner Clarke, in a talk at Phoenix, Ariz., to the Western Highway Institute and speaking of privatetruck operations, said:

"With the Commission's limited staff and facilities, it is an absolute impossibility to police these operations effectively. *** If the industry (the for-hire motor carrier industry) were to exercise a certain amount of detective work

itself, reporting to the Commission flagrant instances of illegal for-hire transportation *

Note the Commissioner's reference to illegal for-hire transportation; also his tacit admission that it is a policing job. This policing job is going to remain exactly the same whether or not section 203 (c) is enacted.

On the second point-potential damage to private truck operation-it seems clear that if any change is made in the private-carrier definition, or in the statutory provisions immediately relating to that definition the whole subject matter will be relitigated, before the Commission and before the courts. The legislative history of the change will, of course, be important but nevertheless the contention will be made that Congress intended some change in the present situation with respect to private truck operation, otherwise no bill would have been passed. Private truck operators know from experience what the for-hire carrier poistion will be, as radical a curtailment of private truck operation as is possible to achieve. We simply do not know what the end result will be, and we feel that in accepting any change we are starting down a road to an unknown destination.

Specifically with respect to proposed section 203 (c), note the opening prohibition against any person engaging "in any transportation business for compensation" without operating authority. This opens up the old for-hire carrier argument that compensation, not primary business, should be the test under the law. That question has been once thoroughly litigated-the Shenley-LenoirBrooks cases; private truck operators are satisfied with the decision arrived at; they see no need for their being put to the same risk again.

May I request your careful consideration of the subject matter before you reply to the TAA questionnaire.

WM. H. OTT.

Mr. WAEHNER. The health and growth of our business enterprises are directly related to the health and growth of our regulated transportation system. The laws under which this system operates therefore should be sufficiently clear in themselves to permit the average businessman to determine from the statutes the line of demarcation between legal and illegal transport operations.

Senator SMATHERS. All right, sir, thank you very much, Mr. Waehner.

Mr. WAEHNER. Thank you, sir.

Senator SMATHERS. Mr. Baker, thank you very much.

(Discussion off the record.)

Senator SCHOEPPEL. Thank you, very much.

Senator SMATHERS. Thank you, we appreciate your appearing here.

Mr. BAKER. Thank you, Senator, for letting us appear. We appreciate it.

Senator SMATHERS. All right, was there one other gentleman from out of town?

Mr. MACKIE. Sir, I have to be here the next 2 days. It is very late. I would like to comment on two bills. Perhaps you would prefer in view of the hour-it is now 5 o'clock-to defer me. It won't inconvenience me in the least.

Senator SMATHERS. I think we may as well hear you, sir.

All right, Mr. Mackie, you just go ahead.

Mr. MACKIE. Mr. Chairman, I would like to comment first on S. 1677 which is the private carrier bill.

Senator SMATHERS. All right, sir.

Mr. MACKIE. I will run through briefly a good deal of this paper in order to save your time.

As I understand it, it will all be published in the record anyway. There are two reasons which have dictated among others the large growth of private carriage. One of them is freedom from economic

regulation, and the other is the one that you mentioned a moment ago, namely, freedom from the Federal excise taxes.

These two together, among other things, have made many carriers seek to have their operations classified as private.

You have heard discussion today about pseudo-private carriage, the back-haul, and the buy-and-sell operation, and I won't go through that again. The matter has been commented on a number of timesin the progress report at the end of Senate Resolution 50, the 81st Congress, the Commission in its 67th annual report, again in its 68th annual, again in its 69th, and at considerable length in its recent 70th report.

The Presidential Advisory Committee on Transport Policy and Organization commented on it, and the Commission in a very lengthy appendix, S. 1920, addressed to Senator Magnuson, along with a letter of December 22, 1955, again addressed itself to the subject.

The Commission likewise addressed itself to this subject in connection with the investigation of the Senate Small Business Committee.

And, now, in S. 1677 it has made a definitive statutory recommendation by way of a proviso at the end of the present definition of private carriage.

We are in agreement with the objectives of the Commission in this field, but we have some reservations as to whether or not its proposed method would be effective. We are disturbed at the use of a "purpose" test which is always very hard to prove, and we think it might run into difficulties of interpretation.

We are worried at the indefiniteness of the phrase "fostering a highway transportation business." There has been a good deal of discussion before you of the Brooks case which laid down the primary business test as the governing criterion in establishing private carriage. That doctrine has been very helpful to private carriers and they are understandably jealous of it. They don't want it disturbed and we understand that and are sympathetic to their views.

However, even since that case was laid down, the Commission has been unable to accomplish the type of regulation which it feels it should, as these reports that I have cited bear out, and there are cases in the books which show that there are still problems.

I call your particular attention to one: 1. C. C. v. Woodall Food Products Co. (112 Fed. Supp). The facts in that case indicated that a company that purported to be a poultry dealer arranged with its customers to have them call the poultry processing plant down in Texas and order what they wanted, and then tell Woodall that the order had been placed. The price that was paid to the plant and the price that the customers ultimately paid Woodall was based upon a Department of Agriculture formula. Woodall had the poultry invoiced to him, so that he would own it, and then he transported it to these customers pursuant to the order that they had placed. He had taken title, and the price that he charged the customer was the Department of Agriculture formula plus a differential depending upon the distance that it had to transport from the plant in Texas to the customer's shop.

The Commission took the position that that was not private carriage, but was unauthorized contract carriage, and the carrier took

it to the courts and the court said no, Woodall was engaged in private carriage. Now, that is after the primary business test in the Brooks case, so that I think a case like that is pretty clear evidence that there is something wrong with the law as it is written today if that kind of result can come out.

We strongly support the proposal that Dr. Baker has just told you about, namely the addition of another clause at the end of the proposed section 203 (c) advocated by the Commission in the contract carrier bill. We believe that if that addition is put in, commercial highway transportation in interstate or foreign commerce would, with the exceptions noted in that statute, be required to fall into one of three speciffed classes:

One, duly certificated common carriage; two, duly permitted contract carriage; and three, transportation which is wholly within the scope and in furtherance of a primary business enterprise other than transportation, of the transporter. Then everybody will be covered. We think that a situation such as the Woodall Food Products case just mentioned, could not occur in the event that that addition to the statute were made.

It seems that this would take care of not only buy-and-sell, but additionally of many of the back-haul problems. We recognize the concern of some bona fide private carriers lest in the course of dealing with pseudo- private carriage, the legitimate practices of bona fide private carriers be placed in jeopardy. We fully recognize the importance of protecting the bona fide private carriers in that regard. One of their principal concerns has been with any possible return to the so-called compensation test from which they believed they had gotten away as a result of the decision in the Brooks case. It is that concern which has led them to point with fear to the language suggested by the Commission in the proposed new section 203 (c) (as set forth in S. 1384 and in our above suggestion) "no person shall engage in any transportation for compensation." Obviously no one seeks a reactivation of the highly controversial "compensation" test. If the words "for compensation" can be eliminated from the clause without doing damage to its effectiveness, serious consideration should be given to so amending it. Perhaps, if our suggestion for the insertion of the word "business" in that clause were adopted, the words "for compensation" might appropriately be eliminated.

I wish to reiterate again our belief that the right of one to transport his own materials, supplies and products in his own vehicles is a basic right which should not be disturbed. It is not that right, but rather the practices whereunder the field of for-hire carriage is invaded, that need attention.

If some such steps as these are not taken, the consequences may be dire indeed. They were succinctly stated last fall by ICC Commissioner Walrath in a formal address in which he called attention to the tremendous expansion of private carriage which he characterized as "not in the public interest" nor in the "best interest" of private

carriers

as shippers and consumers—unless you are prepared to replace and perform the historical functions of public carriage.

Thank you.

Senator SMATHERS. Thank you very much, Mr. Mackie.

Senator Schoeppel, do you have any questions?

Senator SCHOEPPEL. No questions, thank you. I am sorry I was called out.

Senator SMATHERS. I think your statement has been very helpful and we appreciate it.

(The complete statement of Mr. Mackie is as follows:)

STATEMENT BY DAVID I. MACKIE ON BEHALF OF THE ASSOCIATION OF
AMERICAN RAILROADS ON S. 1677

My name is David I. Mackie. I am chairman, Eastern Railroad Presidents Conference, having an office at New York, N. Y. I appear on behalf of the Association of American Railroads in support of S. 1677 with the ultimate objectives of which we agree. S. 1677 would amend the definition of "private carrier of property by motor vehicle" as contained in section 203 (a) (17) of the Interstate Commerce Act.

The act imposes economic regulation on common carriers and contract carriers. The railroads, all of which are common carriers, are subjected to economic regulation by part I of the act, the common and contract motor carriers by part II and the common and contract water carriers by part III. Private carriers by motor vehicle are free of economic regulation. They are subject only to the safety requirements prescribed by the Commission.

While all for-hire carriers are subject to the 3 percent Federal excise tax on the movement of property and the 10 percent Federal excise tax on the movement of persons, private carriers are exempt from these taxes.

Thus, two incentives-freedom from economic regulation and exemption from Federal excise taxes-have caused many persons to seek to bring their operations within the definition of private carriage.

Private carriage has, for these reasons among others, grown enormously in recent years. To the extent that growth has occurred in bona fide private carriage the transportation by a concern of its own materials, supplies, and products in its own vehicles-no one can properly complain.

But much of this growth is not bona fide private carriage. It is pseudoprivate carriage so-called buy and sell and back hauling. Under the buy-and-sell method of operation, bills of sale and invoices are used to make it appear that the commodities transported are those of the vehicle owner.

The back-haul method of operation is engaged in by concerns which deliver in their own trucks articles which they manufacture or sell and, in order to avoid a return empty movement, purchase merchandise at or near their point of delivery for transportation back to a point near their own terminal, and sale to some purchaser. That back-haul transportation is performed only in order to receive compensation for an otherwise empty return movement of the truck. Both types of pseudoprivate carriage undermine the strength of for-hire carriers. In so doing they injure the public which is largely dependent upon forhire carriage for its transportation requirements.

The need of taking some steps to curb pseudoprivate carriage in the interest of preventing further erosion of traffic from the for-hire regulated carriers has long been recognized.

Senate Report No. 1039, 82d Congress, 1st session (1951), progress report of the Senate Committee on Interstate and Foreign Commerce by its Domestic Land and Water Transportation Subcommittee pursuant to Senate Resolution 50 (81st Cong.) noted the problem in these words:

"However, the record is clear that private carriers have engaged and are increasingly engaging in direct competition with regulated carriers. Their freedom from published tariffs and accounting to the Commission, together with the fact that the private carrier looks on return loads as purely extra compensation, has led to serious rate cutting. The effect on common carriers, particularly common motor carriers, is extremely damaging.

"*** Primarily, Congress must insure that private carriers which invade the fields of contract or common carriers be regulated in strict accordance with the true nature of their operations."

The Interstate Commerce Commission in its 67th annual report advised the Congress that investigation of complaints of buy-and-sell arrangements "rarely produce evidence that would establish in a formal proceeding before the Commission or the courts that the present provisions of the Interstate Commerce Act are being violated."