INVESTIGATION AND SUSPENSION DOCKET No. M-21541 MINIMUM RATE RESTRICTIONS TO, FROM, AND WITHIN THE SOUTHWEST

Submitted December 1, 1943. Decided February 17, 1944

1. Increases in minimum class rates of motor common carriers between certain areas in western trunk-line territory and between Illinois territory and certain areas in western trunk-line territory found not shown to be just and reasonable.

2. Rule for the determination of minimum weights on shipments moving at twofactor rates between Illinois territory and certain areas in western trunk-line territory found reasonable.

3. Establishment by an individual motor carrier of minimum class rates on local and joint traffic found unreasonable.

4. Increase in commodity rates between certain points in western trunk-line territory and between certain points in Illinois territory and western trunk-line territory, and proposed cancelation of certain exception ratings from Chicago, Ill., to certain areas in the Southwest found not shown to be just and reasonable.

5. Cancelation of exception rating on net cotton bags between points in Kansas and between certain Missouri points and points in Kansas found reasonable.

6. Proposed schedules ordered canceled, except to the extent found reasonable, and proceedings discontinued.

J. Maurice Andren, William L. Bridges, Carl E. Bingham, L. E. Tomlinson, L. E. Wells, P. Fairchild, L. M. Dean, and Everett W. Wheelock, Jr., for respondents.

Chester A. Bowles, David F. Cavers, George J. Burke, Warren Price, Jr., Haskell Donoho, M. D. Miller, and Charles T. Given for Director of Economic Stabilization and Officer of Price Administration.

Major General Myron C. Cramer, Colonel Mastin G. White, and Captain Edward H. Cox for the Secretary of War.

F. P. Aughnay, William Williamson, and C. A. Carr for Public Utilities Commission of the State of South Dakota.

1 This report also embraces I. & S. No. M-2158, Class Rate Minima in Central and Western States; I. & S. No. M-2168, Ratings, Rates, Exceptions to or from Kans. or Mo. Points; I. & S. No. M-2182, Class Rates and Restrictions to or from Western States; L. & S. No. M-2188, Dairy Products-Rates and Restrictions in Western States; and I. & S. No. M-2218, Rate Restrictions in Midwest.

REPORT OF THE COMMISSION

DIVISION 2, COMMISSIONERS MAHAFFIE, SPLAWN, AND ALLDREDGE

BY DIVISION 2:

Exceptions to the recommended order and report of the examiner were filed by the Price Administrator, the War Department, and the Public Utilities Commission of South Dakota, and the parties were heard in oral argument. Our conclusions differ in many respects from those recommended by the examiner.

This report deals with six proceedings in which similar issues are presented and which were heard on a consolidated record. A number of schedules proposing changes in rates, charges, and exception ratings were filed by the respondents. Upon the protest of the Price Administrator, operation of the proposed schedules was suspended until July 26, 1943, and later dates. Many of the proposed schedules have been withdrawn. Some of the rates which respondents proposed to increase or to cancel were changed during the suspension period, and others thereafter, and the effective dates of the remainder have been idefinitely postponed. This report will deal only with those schedules which are still on file. The Price Administrator, the Director of Economic Stabilization, the Secretary of War, and the Public Utilities Commission of South Dakota are protestants in the proceedings and were represented at the hearing.

Wheelock Bros., Inc., Riss & Company, Inc., Yellow Cab Transit Company, J. W. Healzer, Toedebusch Transfer, Inc., and Adams Transfer & Storage Company participated in the hearing and offered evidence with respect to their operations.

The rates referred to in this report are stated in amounts per 100 pounds and include the general increase of 6 percent.

In general, the issues presented in these proceedings are the lawfulness of (1) proposed minimum class rates for general application by motor common carriers parties to agency tariffs of the Middlewest Motor Freight Bureau, (2) a rule for the determination of minimum weights on shipments moving at two-factor rates, (3) minimum class rates proposed for application over routes in which Healzer is a participating carrier, and (4) a proposed cancelation of commodity rates and exception ratings.

Minimum class rates.-Between points in western trunk-line territory, respondents' class rates are subject to the "west" ratings in the national motor-freight classification, hereinafter called the national classification, and between western trunk-line and points herein east of the Mississippi River respondents' single-factor class rates are also subject to the "west" ratings. Respondents also maintain rates between

"Riss" as used herein includes Riss & Company, Inc., operator of Monark Motor Freight System, Inc., and the combined operation is referred to herein as a single line.

certain areas in western trunk-line territory and Illinois territory composed of two factors. The eastern factors of these two-factor class rates are subject to the "east" ratings, and the western factors, to the "west" ratings. If the freight charges under the two-factor rates are less than under the single-factor rates, the two-factor rates apply.

The lowest "west" rating in the national classification is fifth class, and the fifth-class rates are generally 37.5 percent of first class. The lowest "east" rating in the national classification is sixth class, and the sixth-class rates are generally 27.5 percent of first class. The respondents, however, by exceptions to the classification have provided many ratings other than those in the national classification, and some of these ratings between the points herein are as low as 20 percent of first class.

When their class rates were originally filed with us, the respondents copied the tariffs of the rail carriers. The class rates at present maintained by the railroads are those prescribed in the western class rate revision subject to the general changes approved by the Commission. The present motor carrier class rates are the same as the railroad class rates, except that the motor carriers did not reduce their rates at the time the effectiveness of the 6-percent increase in rail rates was suspended.

The respondents believe that the railroad class rates for the lower classes, especially for the longer distances, are not reasonably compensatory for motor-carrier operation. In an endeavor to obtain what they considered to be adequate revenues on the lower-rated classrate traffic, the motor common carriers from time to time established minimum class rates between certain areas in western trunk-line territory and between certain areas in western trunk-line and Illinois territories. These minimum class rates were not protested and became effective. By the suspended schedules, the respondents propose to establish minimum class rates between those points between which minimum class rates are not now maintained. In general, only truckload shipments would be affected by these proposals.

In arriving at the proposed minimum rates, the respondents computed the rate necessary to return 20 cents a truck-mile on loads of 20,000 pounds, to which they added a terminal charge of 5 cents per 100 pounds, and increased the sum of these factors by 6 percent. The ratios of the minimum class rates under this formula to the first-class rates for the short-line rail distances in western trunk-line zone I were then determined, and minimum class rates based on the ratios thus obtained were proposed between all points regardless of the zone in which the points are located. For example, the present zone I first-class rate for 200 miles is $1.03, and the proposed minimum class rate is 27 cents between all points in zones I, II, and III where the

first-class rate is $1.03. This minimum rate of 27 cents was determined by adding a line-haul factor of 20 cents per 100 pounds, which would return 20 cents a truck-mile, and a terminal factor of 5 cents per 100 pounds, and increasing the result by 6 percent. The minimum rates under the formula for various short-line railroad distances in zone I are shown in the following table:

The railroad rates to and from points in zones II and III are higher mile-for-mile than those between points in zone I because of the addition of the authorized arbitraries. For that reason the respondents' class rates to and from points in zones II and III are also higher mile-for-mile than between points in zone I. The effect of the respondents' proposal on their rates and revenues can be determined by a comparison between the present and proposed rates between typical points in the area for various distances. This comparison is made in appendix I. As this appendix shows, the respondents' proposed minimum class rates bear little relation to distance. For example, between Chicago, Ill., and Jefferson City, Mo., 391 miles, the proposed minimum class rate of 47 cents would return truck-mile earnings of 24 cents whereas between Minneapolis, Minn., and Pierre, S. Dak., the proposed minimum class rate for 394 miles of 65 cents would return truck-mile earnings of 33 cents. Between Milwaukee, Wis., and Jefferson City, Mo., 465 miles, the proposed minimum class rate of 52 cents would return truck-mile earnings of 22.3 cents, whereas between St. Louis, Mo., and Wichita, Kans., 474 miles, the proposed minimum class rate of 67 cents would return truck-mile earnings of 28.3 cents. Respondents propose to maintain the same minimum class rates in connection with the western factor of two-factor rates as they propose with respect to single-factor rates, but they propose to increase all eastern factors to a minimum of class 37.5 which is generally 37.5 percent of first class.

The following table sets forth typical examples of the effect of respondents' proposals respecting rates on shipments at two-factor class rates:

Little evidence was introduced by the respondents in support of the level of the proposed minimum class rates. It was pointed out that minimum class rates on similar bases are now maintained by the respondents between certain areas of western trunk-line territory, and that some respondents participate in minimum class rates between the southern portion of western trunk-line territory, on the one hand, and points in central territory, on the other hand, which produce revenues of 22 cents a truck-mile plus 5 cents per 100 pounds for terminal expenses.

Respondents contend that they are justified in maintaining higher minimum class rates from and to points in zones II and III because transportation conditions in zones II and III are less favorable to motor carriers than those in zone I. No proof was offered by the respondents in support of this contention. Some general statistics were introduced showing that the costs of operation per truck-mile for class I carriers in 1942 were 23.6 cents for carriers having their principal operations in Iowa, Kansas, Missouri, and Nebraska and 30.5 cents per truck-mile for carriers having their principal operations in the Upper Peninsula of Michigan, Minnesota, North Dakota, South Dakota, and Wisconsin. These costs of operation are the average costs for all traffic transported by the carriers and include the cost of transporting less-than-truckload as well as truck-load shipments. They are of little value in determining reasonable minimum class rates on truckload traffic.

The South Dakota commission opposes the proposed minimum class rates on the grounds that they would exceed a maximum reasonable basis and if established would disrupt the present rate relations between the rates from the Twin Cities and other points of supply to jobbing points in South Dakota.

The present truckload ratings between the Twin Cities and South Dakota points provided in respondents' exceptions to the classification on canned goods, soap, and iron and steel articles are classes 28, 30,