Page images

of value in respect of negotiations, hypothecation, or sale of any securities issued or to be issued by such carrier, or to share in any of the proceeds thereof.

"(c) It shall be unlawful for any air carrier to enter into or continue a contract, agreement, understanding, or arrangement, affecting interstate, overseas, or foreign air transportation, with any other air carrier or other carrier for pooling or apportioning earnings, losses, traffic, service, or equipment, or relating to the establishment of transportation rates, fares, charges, or classifications, unless and until such contract, agreement, understanding, or arrangement has been filed with and approved by the Commission: Provided, That each air carrier party to any such contract, agreement, understanding, or arrangement in effect at the time this section shall take effect shall file with the Commission within thirty days thereafter a true copy thereof (or a true, full, and complete memorandum of the terms and conditions of any such agreement, understanding, or arrangement which is not evidenced by a formal contract), and any contract, agreement, understanding, or arrangement so filed shall be lawful until disapproved by the Commission and thereafter shall be unlawful. The Commission may disapprove, cancel, or modify any such contract, agreement, understanding, or arrangement, in whole or in part, or any modification or cancelation thereof, whether or not previously approved by it, which it finds will violate any provision of this part or will be contrary to the public interest. An air carrier likewise may make and maintain contracts, agreements, understandings, or arrangements, affecting interstate, overseas, or foreign air transportation, with any other air carrier or other carrier, for preserving and impoving safety, economy, and efficiency of operation; for controlling, regulating, preventing, or otherwise eliminating destructive, oppressive, or wasteful competition; for regulating stops, schedules, and character of service; or for other cooperative working arrangements; such contracts, agreements, understandings, or arrangements shall be promptly filed with the Commission, which shall by order disapprove, whether or not previously approved by it, any such contract, agreement, understanding, or arrangement which it finds to be unfair, or unjustly discriminatory, as between carriers, passengers, or shippers or to be in violation of this part, and all others it shall order approved. The Commission may at any time make such investigations, entertain such protests, and hold such hearings as it may deem proper with respect to any contract, agreement, understanding, or arrangement filed with it pursuant to this paragraph.

“(d) Air carriers and any person affected by any order made under this section shall be, and they are hereby, relieved from the operations of the ‘antitrust laws', as designated in section 1 of the Act entitled 'An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes', approved October 15, 1914, and of all other restraints or prohibitions by or imposed under authority of law, State or Federal, insofar as may be necessary to enable them to do anything authorized, approved, or required by each order.


"SEC. 312. (a) Air carriers, persons about to engage in transportation as air carriers, and persons authorized by order entered under this part to acquire control of any air carrier or of two or more air carriers shall be subject to the provisions of paragraphs (2) to .(5), inclusive, and (7) to (11), inclusive, of section 20a of part I (including penalties applicable in cases of violations thereof).

“(b) Upon receipt of any application for authority under this section to issue securities, the Commission shall cause notice thereof to be given by posting a copy in the office of the secretary of the Commission and in such other manner as the Commission deems necessary or appropriate, and the Commission may hold hearings upon such applications.

“(c) The provision of this section shall not apply to any securities of an air carrier subject to this part, in respect of which a registration statement under the Securities Act of 1933, as amended, is in effect at the date of the passage of this part and continues in effect with respect to such securities at the time of the issuance thereof.


"SEC. 313. (a) Upon complaint by any interested air carrier, or upon the Commission's own motion, after reasonable notice and hearing of interested marties, the Commission may order that an air carrier cease and desist from

using unfair methods of competition in interstate, overseas, or foreign commerce. The Commission shall promulgate rules and regulations to assure adequate notice and fair hearing. Orders hereunder shall set forth the reasons therefor and findings of fact in connection therewith. Such orders may at any time be modified or set aside by the Commission upon such notice and in such manner as it shall deem proper.

“(b) Orders under this section may be enforced or set aside in the same manner and before the same courts as is provided for orders of the Federal Trade Commission by the fourth, fifth, and sixth paragraphs of section 5 of the Act of September 26, 1914, entitled 'An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes', as amended.


"SEC. 314. (a) Each air carrier shall file with the Commission a designation in writing of the name and post-office address of an agent upon whom service of notices or orders may be made under this part. Such designation may be changed from time to time by like writing similarly filed. Service of such notices or orders may be made by personal service upon an air carrier or its agents so designated, or by registered mail addressed to it or to such agent and, in default of such designation, service of any notice or order may be made by posting in the office of the secretary of the Commission. Whenever notices or orders are served by mail, the date of mailing shall be considered as the time when service is made.

"(b) Except as otherwise provided in this part, all orders of the Commission shall take effect within such reasonable time, not less than thirty days, as the Commission may prescribe and shall continue in force until its further order, or for a specified period of time, as shall be prescribed in the order, unless they shall be suspended or modified or set aside by the Commission, or be suspended or set aside by a court of competent jurisdiction.


"Sec. 315. (a) The provisions of section 12, section 14, section 16 (6), (7), (12), and (13), section 16a, and section 17 of part I hereof, and the Compulsory Testimony Act (27 Stat. 443), and the Immunity of Witnesses Act (34 Stat. 798; 32 Stat. 904, ch. 755, sec. 1), and the Urgent Deficiency Appropriations Act of October 22, 1913 (36 Stat. 219), shall apply with full force and effect in the administration of this part.

“(b) Operation by an air carrier in violation of section 305 of this part may be enjoined by any court of competent jurisdiction at the suit of the United States, the Commission, or any party in interest.


"SEC. 316. (a) Any person who knowingly and willfully violates any provision of this part, or any rule, regulation, requirement, certificate, or order thereunder, for which no penalty is otherwise herein provided, shall, upon conviction thereof, be fined not more than $100 for the first offense and not more than $500 for any subsequent offense. Each day of such violation shall constitute a separate offense.

“(b) Any person, whether carrier, shipper, or consignee, or any officer, employee, agent, or representative thereof, who shall knowingly offer, grant, or solicit, accept, or receive any rebate, concession, or discrimination in violation of any provision of this part, or who, by any device or means shall knowingly assist, and willfully suffer, or permit, any person to obtain transportation of passengers or property subject to this part for less than the applicable rate, fare, or charge, shall be deemed guilty of a misdemeanor and upon conviction thereof be fined not more than $500 for the first offense and not more than $2,000 for any subsequent offense.

"(c) Any air carrier, or any officer, agent, employee, or representative thereof, who shall willfully fail or refuse to make a report to the Commission as required by this part, or to keep accounts, records, and memoranda in the form and manner prescribed or approved by the Commission, or shall knowingly and willfully falsify, destroy, mutilate, or alter any such report, account, record, or memorandum, or shall knowingly and willfully file any false report, account,


record, or memorandum, shall be deemed guilty of a misdemeanor and, upon conviction thereof be subject for each offense to a fine of not less than $100 and not more than $5,000.

“(d) Any special agent or examiner who divulges any fact or information which may come to his knowledge during the course of the examination of the accounts, records, and memoranda of air carriers as provided in paragraph (c) of section 306 except as he may be directed by the Commission, or by a court of competent jurisdiction or judge thereof, shall be subject, upon conviction in any court of the United States of competent jurisdiction, to a fine of not more than $5,000 or imprisonment for a term not exceeding two years, or both.

"(e) It shall be unlawful for any air carrier, or any officer, receiver, trustee, lessee, agent, or employee of such carrier, or for any other person authorized by such carrier to receive information, knowingly to disclose, to, or permit to be acquired by, any person other than the shipper or consignee, without the consent of such shipper or consignee, any information concerning the nature, kind, quantity, destination, consignee, or routing of any property moving in interstate, overseas, or foreign air transportation, which information may be used to the detriment or prejudice of such shipper or consignee, or which may improperly disclose his business transactions to a competitor; and it shall also be unlawful for any person to solicit or knowingly receive any such information which may be so used. Nothing in this part shall be construed to prevent the giving of such information in response to any legal process issued under the authority of any court, or to any officer or agent of the Government of the United States or of any State, Territory, possession, or district thereof, in the exercise of his powers, or to any officer or other duly authorized person seeking such information for the prosecution of persons charged with or suspected of crimes, or to another carrier, or its duly authorized agent, for the purpose of adjusting mutual traffic accounts in the ordinary course of business of such carriers.


"SEC. 317. (a) The Commission (1) shall establish a Bureau of Air Transport; (2) shall execute and administer the provisions of this part through such Bureau; and (3) is authorized to employ, and to fix the compensation of, such experts, assistants, special agents, examiners, attorneys, and other employees as in its judgment may be necessary or advisable for the effective administration of this part, and the expenses of such employment shall be paid out of the appropriation for the administration of this part.

“(b) No member or employee of the Commission shall hold any official relation to or own any securities of or be in any manner pecuniarily interested in any air carrier.


"Sec. 318. Section 3964 of the Revised Statutes (U. S. C., title 39, sec. 481) is hereby amended by adding 'and all air carriers', after the words ‘or parts of railroads.'


"SEC. 319. Sections 2 (b) (2) and (3), 3, 4, 5, 6, 7, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, and 21, and so much of section 8 as reads: '; and any person not ineligible under the terms of this Act who qualified under the other requirements of this Act, shall be eligible to contract for carrying air mail, notwithstanding the provisions of section 3950 of the Revised Statutes (Act of June 8, 1872)' of the Act of June 12, 1934 (48 Stat. 933), as amended by the Act of August 14, 1935 (49 Stat. 614); the joint resolution of June 26, 1934 (48 Stat. 1243); the Art of February 21, 1935 (49 Stat. 30); the Act of March 8, 1928 (45 Stat. 248), as amended by the Act of March 2, 1929 (45 Stat. 1449); and all other Acts or parts of Acts inconsistent with any provision of this part are hereby repealed.


[ocr errors]

"SEC. 320. Nothing herein contained shall be construed in any way to impair or affect the jurisdiction exercised by the Secretary of Commerce relative to the safety of operation of aircraft.


"SEC. 321. If any provision of this part, or the application thereof to any person or circumstance, is held invalid, neither the remainder of this part nor the application of such provision to other persons or circumstances shall be affected thereby.


“SEC. 322. This part shall be effective and in force from and after its passage: Provided, That the Commission shall, if found by it necessary or desirable in the public interest, by general or special order, postpone the taking effect of any provision of this part to such time as the Commission shall prescribe, but not beyond the 1st day of the third month following the passage of this part.”

The CHAIRMAN. A general regulatory air bill was filed in the House (H. R. 4600) on the 10th of February by Mr. Ellenbogen; and a bill (H. R. 4652) by Mr. Crosser, a bill to promote the safety of scheduled air transportation, relating to safety matters, was filed in the House on February 11, 1937.

There is a bill in the Senate (S. 2), introduced by Senator McCarran, and a bill similar to 5234 has been introduced as an amendmenti by way of a substitute to S. 2. I am advised by Senate authorities that the bill we are considering this morning will be substituted for the McCarran bill and will be the bill upon which the Senate will act, which is now under consideration by the Senate committee.

Hearings were held on S. 2 on the 8th and 11th of March and, it is expected, will shortly be completed, as soon as the chairman of the subcommittee having the matter in charge will have an opportunity to complete the hearings.

We have asked the Interstate Commerce Commission to be represented at this hearing this morning, and Commissioner Eastman will appear for that purpose.

At this point we will place in the record a report from the Interstate Commerce Commission, which discusses this bill somewhat at length. It is a favorable report but makes some suggestions as to changes in the text of the bill and one or two suggestions for the consideration of the committee as to the policy to follow. (The report referred to is as follows:)


March 29, 1937. Hon. CLARENCE F. LEA, Chairman, Committee on Interstate and Foreign Commerce,

House of Representatives. DEAR MR. LEA: The Chairman of the Commission has referred to our legislative committee your request of March 3, 1937, for a report on your bill (H. R. 5234) introduced “To amend the Interstate Commerce Act, as amended, by providing for the regulation of the transportation of passengers and property by air carriers in interstate, overseas, and foreign commerce, and for other purposes." This bill has had the careful consideration of the legislative committee, and I am authorized to submit the following comments in its behalf.

H. R. 5234 provides comprehensive regulation in the public interest of air transportation in “interstate", "overseas”, and “foreign" commerce, similar in scope to parts I and II of the Interstate Commerce Act, governing, respectively, the regulation of railway and highway carriers.

Present regulation of air transportation is provided by three acts, namely, the Air Commerce Act, 1926, as amended; the Air Mail Act, 1934, as amended; and the Foreign Air Mail Art. 1929. The first of these has to do with safety standards, and aids to navigation, and is administered by the Department of Commerce. The second deals chiefly, directly or indirectly, with the carriage of domestic air mail, and in that connection is administered partly by the Post Office Department and partly by this Commission. The third is administered

by the Post Office Department. In various respects there is a somewhat confusing division of authority, and over certain important matters there is an entire absence of authority. The Commission commented on this situation in its recent fiftieth annual report for the year ended November 1, 1936, as follows:

“In the part of this report dealing with the Bureau of Air Mail reference is made to our special report to the Congress pursuant to the provisions of section 6 (e) of the Air Mail Act of 1934 as amended by the act of August 14, 1935.

"In the outline of controlling provisions of law and of our views as to important principles involved in their application, which preceded our findings in that report, we called attention to certain situations needing correction.

"Divided authority over air-mail compensation.--In the chapter dealing with weight credit schedules we showed that prior to our initial investigation into the general rate structure part of the contract air-mail service had been operated without payments for the mileage flown under an informal arrangement whereby, in lieu of such payments, the weights of mail so flown were credited to certain mail-pay schedules without increasing the compensation to the carriers unless the monthly average weight of mail over their routes thereby exceeded the weight specified in their contracts and the act and then only at a fraction of the base rate named in the contracts. We also showed that the rates of compensation prescribed by us were applicable to all airplane-miles flown with mail on the theory that the act contemplated that whatever rate was found by us to be fair and reasonable for any carrier should apply alike to all mail service rendered under its contract. We further pointed out that by the amendments of August 14, 1935, a provision was added to section 3 (f) specifically authorizing this free or reduced-rate service in the discretion of the Postmaster General, which had been barred by our decision. It is apparent that rates prescribed by us could not insure fair and reasonable compensation to the carriers when applied in conjunction with a system of free service and negotiated rates exclusively under the control and authorization of another agency of the Government burdened with the cost of the service. The amendment creates divided authority over the compensation to be paid for the transportation of air mail.

The system of accounts.—Under the caption the System of Accounts, we discussed the amendment to section 10 which now requires that the system of accounts for air-mail carriers be promulgated by the Postmaster General. The original act, prior to the amendments, gave us equal powers with the Postmaster General in respect of the keeping, examining, and auditing of the carriers' books, records, and accounts. By still other provisions of the original act, very materially broadened by the amendments, we are directed to make an exhaustive examination and audit of the accounts of the carriers, to scrutinize carefully their purchases and rents, and to investigate the relation of their stockholders and employees to their vendors. A situation is now presented where one agency of the Government is required to police the carriers' accounts and business transactions recorded under rules and regulations prescribed by another. This division of responsibility should be resolved by the Congress.

"Postal revenue limitation on rates.-Under the caption Postal Revenue Limitation, we discussed the provision of the original act requiring that rates fixed and established by us for all routes shall be designed to keep the aggregate cost of the transportation of air mail, on and after July 1, 1938, within the limits of the anticipated postal revenue therefrom. For reasons stated in the report it is quite apparent that, unless a phenomenal increase occurs in the revenue from air-mail postage by 1938, compensation measured by rates confined to such revenue would not enable the carriers to operate the present class of mail service, if it would permit them to operate at all.

Control over rates for nonmail services.-We wish to call attention to the fact that while in the determination of air-mail rates we are directed to take into consideration revenues and profits from all sources, control over the rates, fares, charges, and practices of the carriers for the transportation of persons and property, other than mail, is withheld from our jurisdiction.

"Control over new service.-While under the provisions of amended section 15 we are given limited jurisdiction over the establishment of new service by air-mail carriers, that jurisdiction does not extend to any carrier which does not hold a mail contract, such carriers not being subject to the air-mail acts. While practically all scheduled air-transport operators carry mail, a situation might suddenly arise where the inauguration of unregulated nonmail services

« PreviousContinue »