route, scheduled service; regular route, nonscheduled service; irregular route, radial service; irregular route, nonradial service; and local cartage service carriers. These divisions were in turn grouped into 17 separate commodity carriers as follows: (1) Carriers of general freight (4) Carriers of liquid petroleum products (10) Carriers engaged in armored truck service (12) Carriers of films and associated commodities (14) Carriers of mine ores not including coal (15) Carriers engaged in retail store delivery service (16) Carriers of explosives or dangerous articles (17) Carriers of specific commodities, not subgrouped All of these carriers as I read the list try and in part lived the history of their coming into being might be said originally to have fallen in the category of small business. Now originally most of the trucklines in this country began with the ownership and operation of but one or a few vehicles, and most of them were family concerns. Father got the business and drove the truck; mother kept the books; and son or son-in-law became a helper. There were, of course, exceptions to this generalization for some local cartage companies and some venturesome operators who were then moving across State lines moving traffic did have sizable organizations, but for the most part the units were small, nonstockholding, family concerns. They still carry similar surface identities except that many of them have in the meantime grown large and influential. The vitality and the great necessity of the motor-carrier industry as it exists today is in part identified by its having arisen out of these family units instead of big sprawling stockholding companies. The Commission further classified carriers in terms of their gross income. A class 1 carrier of property, for instance, was declared to be one that had a gross revenue of $200,000 or more, annually. Class 2 and class 3 carriers of property were those respectively who grossed $100,000 in revenue or who grossed a figure below that amount. By the time the Commission got around to assembling data on the number of class 1 carriers in 1939, keep in mind (if my figures supplied me are correct) there were 1,153 class 1 carriers of property, regular and irregular route carriers listed. This number increased to 1,190 in 1940, and by 1953 or 1954, it had increased to 2,606, and by 1955 to 2,836. Keep in mind these are the class 1 carriers. The Commission has never had all of the data it could use on the class 2 and class 3 carriers. It has had some of it submitted by request but it has not had the staff to compile it and the consequence is, as I observed when I was there, that we did not know a great deal about these so-called smaller carriers. But in 1948 it was ascertained that there were 18,200 such carriers, most of them carriers of property. In this listing there were some passenger carriers too. In 1954 this number had dropped to 15,710. It is thus apparent that whereas the larger carriers that is, those grossing revenues in excess of $200,000 a year-have increased in number, the small carriers have decreased. It is difficult to ascertain-and I don't pretend to sit before you and so state with incontrovertible proof, that there is any relationship between these two happenings. My personal opinion is that it could be demonstrated that many of the smaller carriers have been purchased, taken over by, or merged with the large carriers. And by the terms "large" and "small" I do not mean to imply that one class of carriers constitutes big business and the other small business. These terms in themselves, as I am sure the committee will discover, are inadequate to define some of the larger carriers that is, the class 1 carriers that gross in excess of $200,000 a year-may be earning net revenues of a fraction of that amount. I know one carrier, for instance who, 2 years ago, on a $3 million gross realized but a $45,000 net. It is a fact also, that many carriers, large and small, from time to time have an operating ratio slip by over 100 percent so that they are actually operating, so to speak, in the red. The more significant thing in my humble opinion insofar as this committee is concerned, I venture, is that through the years from 1935, a considerable number of the larger carriers have become what might be defined, I think, without equivocation, as big business. A goodly number of them, for instance, gross more revenue than do some class 1 railroads and many exceed the revenues of the short-line railroads. May I mention, without any implications whatever being conveyed, some of the carriers who have grown to very sizable proportions: Associated Transport, Consolidated Freightways, Pacific Intermountain Express Co., Allied Van Lines, Great Southern Trucking Co., North American Van Line, the Greyhound System, McLean Trucking Co., Roadway Express, Decatur Cartage Co., and there are many others. Now, how have these and other companies become what might be said to be under certain assumed definitions, big business-pretty largely by the rendering of superior service and by observing all of the best traditions in the scheme of American private enterprise. But there is another element of growth in which doubtless this honorable committee is interested, and that is the extent to which these companies and others like them have displaced, bought out, or in various ways subordinated the smaller carriers. One of the means by which this has been accomplished is a means authorized by the Interstate Commerce Act itself. Under the terms of that act, a carrier with the permission of the Interstate Commerce Commission, may sell its operating rights and equipment to another carrier. One carrier may merge with another carrier and a noncarrier may, without Commission authorization, purchase and continue the operations of a carrier in its corporate identity or otherwise. There has been a great deal of activity in the section 5 field. That is the section of the act under which these mergers are accomplished in the last few years. For instance, just to glean a few facts from the Interstate Commerce Commission records, which I attempted to do in a very causal way at least because of limitations on my time in practicing law, the larger carriers have been back to the Commission time after time for permission either to extend their operations, to acquire temporary operating authorities or to add to their operation rights by their purchase and/or merger privileges accorded by the act itself. Each time that a carrier comes back to the Commission to have an adjustment made in its operating authority, a new subnumber is assigned to the docket. As indicative of the trend in this direction, I offer for your consideration the following docket numbers and the latest subnumbers associated therewith. These items were gleaned at random from the Commission's reports, and meant to be nothing more than a sample. MC-95540 (Sub-No. 268 TA), Watkins M Lines Inc. MC-42487 (Sub-No. 299), Consolidated Freightways, Inc., the second biggest carrier in the country. MC-107515 (Sub-No. 177), Refrigerated Transport Co. MC-107496 (Sub-No. 58), Ruan Transport Corp., Des Moines, Iowa. MC-102567 (Sub-No. 42), E. Gibbon, Bossier City, La. MC-3566 (Sub-No. 34), General Exp Ways Inc. (formerly Keeshin Motor Lines). I am sure that if you examined the coming before the Commission of a lot of the small carriers, you would find no such large number of appearances. Now by way of translating these recordings, it is apparent that Consolidated Freightways, that is really a great fine company, I don't want any implications whatever to be drawn from the testimony, for instance, has been back to the Commission 299 times for various adjustments in its operating authorities. By some terms of measurement this company may now be said to be the largest trucking company in the country. Now, I am unable today to prove this point, but I think it can be pretty well safely asserted that there has been a pretty accelerated trend toward mergers, consolidations, and purchases of the small carriers by the larger ones during the last few years, and particularly during the past 2 years. A representative of the great Pacific Intermountain Express Co. declared last week in Boston before the Society of Security Analysts that: The year 1955 has been the most active year for trucking mergers in the history of the trucking industry. There are a number of reasons. One is the vital statistics of truckline owners. The industry got going about 30 years ago. Many companies have attained stature in it by plowing back earnings and without public financing. A typical man who once had 1 truck is now the head of a $5 million or $10 million business. He is now 30 years older. He has no son to succeed him, or perhaps he has been too busy running his truckline to make a trucker out of his son. There is no quoted market on his stock. If he dies in harness, the inheritance tax appraisers will take an optimistic view of the value of his business. Where will his widow get the money to pay them? He is ripe for a sellout, while he is still here to do the trading, and before the going-concern value of his business can deteriorate from lack of competent management. The merger climate is favorable down in Washington, much more favorable than when we got slapped down on our Keeshin acquisition application 5 years ago. The resistance is less. Most of the expanding trucklines have decided that it is an unnecessary waste of time and money to oppose a competitor's merger application if the competitor will also get the idea And many of the railroads have come to the conclusion that it would be better to have a few strong lawabiding trucklines to compete with, than to cope with the ICC's financial inability to keep 2,000 little ones in line. Questioned as to the present attitude of the ICC toward the trucking industry and its future, this representative said he had already mentioned that "the merger climate is more favorable than it was a few years ago." He added that in all my contacts with the Commissioners and Commission personnel, and these contacts have been numerous, I have never found them anything but friendly, cooperative, and helpful * * * The fact that I quote this individual does not mean that I agree with him. As a matter of fact, I guess it can be said that once precisely the opposite is true, in view of the dissent that I registered while a member of the Interstate Commerce Commission in the famous P. I. E. Keeshin case a few years ago. I venture to read that dissent into this statement in order to sharpen the issue and make compelling comment thereon. There was an attempt in that case by the Pacific Intermountain Express to purchase the then bankrupt Keeshin Trucking System, the operating rights of which fanned out throughout the Northeastern part of the United States east of Chicago. The majority of the Commission failed to find the merger consistent with the public interest, largely because a considerable number of interline carriers operating east of Chicago who had theretofore received the benefits of the interlining of PIE traffic to destinations east of Ohio would have lost that business if PIE had succeeded in obtaining operating rights all the way to the east coast. In other words, a considerable number of smaller carriers would have been hurt. I ventured the following expression in that case, in part-a concurring expression: I am also disturbed by the implied effect of applicant's proposal upon certain well-developed American concepts, which I conceive to be in the public interest, relating to so-called antitrust policies and to considerations relating to the preservation of small businesses. The unification of some of the transportation facilities of this country doubtlessly would be in the public interest, but here we have the possibility of one of the Nation's largest and most powerful motor carriers diluting the traffic, of a number of smaller carriers in the East which presently interchange traffic, and of said applicant become so powerful in its own right as a transcontinental carrier as to affect the structure of transportation generally in the area it would serve. Our endorsement of this possibility would imply that we favor, as a matter of policy, the establishment of competing carriers with the same broad territorial scope of operation. Here again, it could be argued that we would be venturing into fields uncharted by present legislation. Until these basic considerations of policy are determined, I should hesitate to view favorably such proposals as the applicant's, however progressive they may otherwise be. Now, there have been no mergers or consolidations since that case was decided that would allow the creation of a transcontinental truck system so far as I know, no merger, at least, that would allow it in one fell swoop. But a new technique has developed among the carriers interested in acquiring systematized operating rights-and here again I make no implications as to the virtues or vices of such systematizing and that is, to acquire such rights on a piecemeal basis, by picking up a carrier here, merging one there, getting an extension of operating rights here, acquiring an alternate route there, and taking any other steps that will enable the stretching fingers of rights to reach out even further in the direction desired. I am told, for instance, that one large carrier that used to terminate in Chicago now has acquired rights that will take the carrier into Cincinnati (all the way from the west coast), and that its ambitions are to acquire additional rights that will enable the carrier to reach from coast to coast in its services. I am informed that another carrier encircles the United States from Boston to somewhere in Texas, and and that if the future is favorable, this carrier aspires to get to the Pacific coast in that direction. I am of the certain impression that a number of other large carriers in this country have similar inclinations and aspirations. Some informed prognosticators of the future of the motor-carrier industry in this country foresee the eventual formation of about 200 common-carrier trucking systems and the elimination of most of the present 2,600 individual motor carriers in the carrier field. I certainly envision a strong trend in that direction. The extent to which the trend is being encouraged or discouraged by the administration of the Interstate Commerce Act, particularly section 5 thereof, can only be determined by an exhaustive and objective analysis of the reports and orders. I shall be surprised, however, if my personal evaluation of the trend is not borne out thereby. Now, this trend is not altogether a recent one. It had its genesis in the now famous case of McLean Trucking Co. v. the United States. In that case, the United States Supreme Court, speaking through Mr. Justice Rutledge-and I am perhaps presuming upon your time and good nature to quote this, but this is basic, because it will indicate to the committee on the record why the Commission has to act as it sometimes does. Mr. Justice Rutledge put the imprimatur of the Court on the authority of the ICC in that case to allow eight trucking companies to merge and become a great system. Let me read briefly, 2 or 3 excerpts from the Court's decision: As a result of the proposed merger of these eight big trucking companies— a gentleman who preceded me on the witness stand spoke about two of them-McLean and one other-I forget which it was. * Associated will be the largest single motor carrier in the United States, at least in terms of its estimated revenues, and no other single motor carrier will compete with it throughout its service area. Nevertheless, after careful consideration and on evidence clearly sufficient to sustain it, the Commission found that on completion of the merger, "there would remain ample competitive motor carrier service throughout the territory involved," and that, in addition, that one or more rail carriers would offer sufficient competition to associate at all principal points. It also found that would result in improved service. The chief attack on the order is that the Commission improperly construed the standards by which Congress intended it to determine the propriety of a consolidation, and the burden of this complaint is that it did so "by failing to consider and give due weight to the antitrust and other laws of the United States." This argument seems to be that the merger, notwithstanding the Commission's approval, violates the Sherman Antitrust. Hence, the Commission is without power to approve the merger. This presupposes that Congress did not intend by enacting the specific exemption of 511 to give the Commission leeway to approve any merger, but for the exemption and the Commission's approval, would run afoul of the antitrust laws. |