not only between rail and water, but within the water industry between common carriers and exempt carriers.

"Although the record of the last 4 years' Commission action indicates a strong inclination to give the railroad the 'benefit of the doubt' in meeting exempt competition, there still remain powerful handicaps to the efforts of the common carrier, by rail and water, to meet exempt competition:

"The exempt carrier's rate is secret.

"He may change it at will.

"He may discriminate.

"He may rebate.

"He may make term contracts for exclusive patronage.

"His secret rate is doubly attractive to his shipper who enjoys an advantage thereby under the Robinson-Patman Act over the shipper who must use regulated transport.

"These advantages enjoyed by the exempt carrier distort the competition and weaken the common carrier system on which the country must mainly rely for the efficient and dependable transportation service so necessary to a highly developed economy.

"This inequality should be cured.

"What cure do we suggest?

"Last year, and for 15 years, we urged repeal of the bulk exemptions, one of the alternative solutions recommended by the President.

"But the fear has been expressed that under regulation, rates would go up. This view is sometimes based on the anticipation that under regulation, and enjoying the privilege of legal price fixing, the carriers would get together and raise rates.

"Here again it is worthwhile to look at the record. Common carrier bargelines' average revenue per ton-mile is the same now as it was in the 1920's, during a period when average rail revenue increased 50 percent. We believe our record is good, and we deny that any rise in rates would occur if regulation were extended.

"We have studied this problem long and hard, and we think we have the answer. We now urge you to consider applying rate regulation to competitive bulk traffic, while maintaining the present freedom of anyone to engage in bulk transportation by water.

"This would solve the problem of equality as far as the raliroads are concerned. The unfair advantages now enjoyed by exempt transport would be gone. "The shipper's interests would be protected.

"Leaving entry into bulk water transport as wide open as it is today would assure full competition as a guarantee of low rates. If the existing carriers should get together under the antitrust immunity of the Bulwinkle Act and agree to raise rates, the door would be wide open for new entries to come into the business with competitive rates without having to prove public convenience and necessity.

"The exempt water carriers have a legitimate interest in this problem. Their right to continue 'for hire' transport of bulk commodities and to expand their operations would be assured by the maintenance of the present right of anyone to engage in bulk transport by water anywhere."

Now this solution to the problem of the bulk exemptions is not a perfect one. We offered it-and we stand on our recommendations-because we believe it is a reasonable solution to a difficult problem. As to such regulations of bulk traffic without entry control we contemplate that ICC would apply such housekeeping rules as would assure responsibility and continuity of operation and that reasonable ratemaking would be assured by subjecting all rates to suspension and investigation procedures in cases of probable unlawfulness. It should also be mentioned that there are no such vested interests, lawfully acquired, in bulk transport certificates as there are today in regulated transport certificates.

By contrast, this new proposal to open up part of nonbulk traffic to uncertificated operators is addressed to no visible problem. Meanwhile, through a quarter century the regulated carriers have developed and perfected their operations in good faith, based on a congressional establishment in the Transportation Act of 1940, of a franchise system. Substantial property rights have been established in these franchises. In the absence of evidence of abuse of the franchise privilege the carriers are entitled to the continued protection of this right to serve the public, provided the public is served, and we have seen no testimony of dissatis

faction with the franchise system by any of the interested shipper groups involved in the matter.

This "open entry" proposals as to ports where no certificates apply is full of uncertainties and hazards to the common carriers and to the public to whom they have a service obligation.

To and from newly established ports it would appear that the bill would let anyone operate. If the Silver Bay taconite plant on Lake Superior in Minnesota were to have opened up after this bill, would anyone be giving service, the same as those who had given faithful service on the lakes for a century?

When the new Burns Harbor is completed east of Gary in Indiana, would anyone and everyone be clamoring to provide common carrier service there, while Gary, a few miles west, continued to be served by the established common carriers?

To and from new waterways apparently a host of newcomers would be operating and appearing and disappearing, according to the fortunes of the "law of the jungle," while service to adjacent established ports would be by experienced carriers with established shipper relations.

A feature of the proposal that must not have been intended is that between many pairs of ports in the United States no single certificate is in effect. Service is provided by joint line service between connecting water carriers. Would this new proposal open up all such interline traffic to the unproven operator?

But the worst feature of the "open entry" proposal is the provision that the uncertificated operator's initial rates would not be subject to suspension. The combination of open entry to anyone with freedom from suspension would open the door to "suitcase" operations and all kinds of hanky-panky by big shippers and private carriers out to disrupt the common carrier system and the service to smaller shippers who depend on regular dependable common carrier service. The "suitcase" operator would set himself up in a new port and publish a cutthroat rate schedule to all principal ports. Protests from all directions would be unavailing; no suspension could result. While the rates were being investigated, the operator "skims the cream" of the business. And when his rates are finally found unlawful, he just folds up that corporation, starts a new one, and does it all over again, and again, and again. The demoralizing effects on all competitive regulated transportation can readily be seen.

And if a big shipper operating a private carrier fleet wanted a backhaul of regulated traffic and there didn't happen to be a new port in the area the private carrier wanted to serve, he could make one just by dredging a channel a half mile up some creek.

The possibilities are endless, and they all add up to a disruption of common carrier water transportation and the regular dependable service in which the public has a vested interest.

Last week Deputy Under Secretary of Commerce Bridwell spoke on this subject before this committee. He said:

"It is therefore my feeling that on any waterway where there now is no carriage that the operators who have the potential of operating on such a waterway as a part of a related system should have that opportunity. However, in the event that after a reasonable period of time such service is not afforded and there is no valid attempt by an operator to provide such service, then I believe that it is reasonable to throw open for free entry the opportunity for any carrier to provide such service."

This sounds like a reasonable proposal. On the face of it, it sounds like the present law in action. Under present law common carriers with rights on waterways adjacent to new waterways may extend their operations up the new channels just by making application. And if they don't do so, and no one is serving the new waterway, the ICC will invariably grant a certificate to any responsible applicant.

However, we would like the privilege of commenting on the Department of Commerce language when it is submitted.

In closing, we believe section 8 of H.R. 5401, which would set up a new set of standards on regulated water transport without any support, would be inconsistent with the national transportation policy. It would strengthen private carriage and weaken common carriage in domestic water transport to the detriment of the shipping public.

The effect of this proposal to "de-regulate" the entry into regulated water transport can be better appreciated if you imagine the effect of doing the same thing on the highways. Can you imagine the chaos in truck transport and the

effect on the shippers they serve if all new Federal highways were thrown open to any operator? The "gray area" that H.R. 5401 is designed to correct would become a "black area" indeed.

Or imagine what would happen to the regulated air transport industry and the service the public depends on if anybody could start an airline from any new Federal airport to anyplace else in the country?

The Federal highways and the Federal airports, like the rivers and harbors, are improved with Federal funds, but public transportation by air and highway— and by water-can best serve the public under a system of fair and impartial regulation.

Summing up the basis of our opposition to section 8 of H.R. 5401(1) There is no evidence of abuse of the certificate privilege.

(2) There is no evidence of substantial shipper dissatisfaction with the existing certificate system.

(3) The Commission has never denied a certificate to a qualified carrier who wished to serve a shipper who could not get service elsewhere.

We respectfully urge that the committee not approve section 8 of H.R. 5401, but report out S. 1143, amended to provide for revocation of water carrier certificates, after affording an opportunity to cure, in cases of total dormancy.

APPENDIX VIII

STATEMENT OF JOHN A. O'CONNOR, CHAIRMAN, TRANSPORTATION COMMITTEE, NATIONAL RETAIL MERCHANTS ASSOCIATION

My name is John A. O'Connor, general traffic manager for the J. C. Penney Co., Inc., and also, chairman of the transportation committee of the National Retail Merchants Association. I would like to thank you for giving us time this morning to submit our views relative to Senate bill S. 1727.

The J. C. Penney Co. is a national department store organization operating retail stores in all sections of the country and is a member of the National Retail Merchants Association.

The National Retail Merchants Association is a nonprofit membership corporation under New York State laws, comprising approximately 2,400 corporations and partnerships operating about 14,000 department and specialty stores located in every State and in the District of Columbia. This 54-year-old organization, hereinafter called NRMA, is the trade association for these types of stores and in 1964 its members had a combined annual sales volume approximating $21 billion. About two-thirds of these stores are considered small stores, according to the standard established by the Small Business Administration, having sales volume less than $2 million a year. Incidentally, our stores employ about 800,000 people.

NRMA members, including the J. C. Penney Co., use all kinds of transportation to bring goods from manufacturers' plants to their stores. We are deeply interested in strengthening and improving the national transportation system due to our dependence upon its efficient and economical functioning and, therefore, we appear this morning to submit our views on S. 1727 which was designed for such purpose.

We feel strongly that illegal activities in the transportation field are injurious to the national transportation system and the economy as a whole and should be eliminated. We are very concerned, however, that in the congressional attempt to eliminate the evils of illegal transport, innocent parties could be injured in irreparable fashion.

What we are specifically referring to is the possibility of S. 1727 being amended to include an amendment similar to the one adopted by the House in H.R. 5401, which bill we understand is also before you for consideration.

House Report No. 253 of April 22, 1965, line 20, page 15 through line 2, page 17, carries the text of the amendment referred to above, which is as follows: "(b) Subsection (b) of section 417 of the Interstate Commerce Act (49 U.S.C. 1017 (b)) is amended by inserting '(1)' immediately after ‘(b)' and by adding at the end thereof the following new paragraph:

"(2) If any person operates in clear and patent violation of section 410 of this part, or any rule, regulation, requirement, or order thereunder, any person injured thereby may apply to the district court of the United States for any district where such person so violating operates, for the enforcement of such section, or of such rule, regulation, requirement or order. The court shall have jurisdiction to enforce obedience thereto by a writ of injunction or by other process, mandatory or otherwise, restraining such person, his or its officers, agents, employees and representatives from further violation of such section or of such rule, regulation, requirement, or order; and enjoining upon it or them obedience thereto. A copy of any application for relief filed pursuant to this paragraph shall be served upon the Commission and a certificate of such service shall appear in such application. The party who or which prevails in any such action, in the discretion of the court, recover reasonable attorneys fees to be fixed by the court, in addition to any costs allowable under the Federal Rules of Civil Procedure, and the plaintiff instituting such action shall be required to give security, in such sum as the court deems proper, to protect the interests of the party or parties against whom any temporary restraining order, temporary injunctive or other process is issued should it later prove unwarranted by the

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facts and circumstances. Nothing in this paragraph shall be construed to deprive the Commission of its jurisdiction to interpret or construe permits or rules and regulations issued by the Commission."

This permits any person to apply to any district court for an injunction against any other person operating in clear and patent violation of section 410, part IV of the Interstate Commerce Act. This was additionally amended on the floor of the House through adding the following language:

"(2) In any action brought under section (b)(2) of this section, the Commission may notify the district court of the United States in which such action is pending that it intends to consider the matter in a proceeding before the Commission. Upon the filing of such a notice, the court shall stay further action pending disposal of the proceeding before the Commission."

With all due deference to the very able chairman of the House Interstate and Foreign Commerce Committee who sponsored this further amendment, it does not prevent the possibility of injury to a perfectly bona fide shipping association.

We are very apprehensive and concerned about this injunctive provision and do not feel that it should be permitted to be part of this transportation legislation. This provision makes it possible for a nonprofit shippers association, exempted from regulation under section 402(c)(1) of the Interstate Commerce Act, to be prevented from operating if, in the opinion of a district court the association was in clear and patent violation of the Interstate Commerce Act. The Senate considered similar legislation in 1962 under S. 2560. At that time the Interstate Commerce Commission commented upon the injunctive provision and did not recommend its adoption. The Commission specifically referred to the difficulty of defining "clear and patent" violations under part IV of the act when they stated:

"One of the most difficult enforcement problems with which the Commission is faced under part IV of the act is that of coping with groups and organizations which engage in freight forwarder operations illegally under the guise of an exempt shipper association. Such operations are usually extremely complex and are rarely of such a nature that they could be characterized as 'clear and patent' violations under proposed new paragraph 417(b) (2)." This was taken from hearings before the Surface Transportation Subcommittee, U.S. Senate, 87th Congress, 2d session, on S. 2560 and S. 2764, page 102.

The situation is still basically the same today as it was then with respect to clear guidelines. In a case decided subsequent to 1962; namely, Atlanta Shippers Association, Inc.,-Atlanta, Ga.-Investigation of Operations 322 ICC 273, the Commission stated that "whether any particular transportation function is, in substance, a forwarding service, the unauthorized sale of which is prohibited by the statute, can be determined only after careful and complete analysis of all the facts and circumstances surrounding the performance of such transportation."

At the present time the Interstate Commerce Commission has at least 45 cases before it affecting shippers associations. Certainly it is premature to offer an injunctive process at this time when the Interstate Commerce Commission has yet to decide what constitutes violations. If they cannot clearly define guidelines how can we expect a district court to decide what constitutes a clear and patent violation. It seems to us that the very complexity of a part IV violation makes the provision unwise since we are asking a district court to decide that which the Interstate Commerce Commission is striving hard to adjudicate in at least 45 cases now before it.

Under existing laws both the Interstate Commerce Commission and Attorney General have the power to file for an injunction. We strongly support the continuance of such a procedure.

NRMA members participate in nonprofit shipping associations exempted from Interstate Commerce Commission regulation through section 402 (c) (1) of the Interstate Commerce Act. These shipping associations are usually used for merchandise procured from large markets such as New York City, Philadelphia, Chicago, Los Angeles, St. Louis, and some others. The members of these associations instruct their manufacturers to deliver the merchandise to an agent of the shipping association who, in turn, forwards the merchandise via railroad or motor carrier service. Thus, all of the shipments for our member stores forwarded through the instrumentality of shipping associations are transported either in rail or truck service by common carriers. At destination the shipping association employs a distribution agent who breaks up the carload or truck