Tiven of the Budget has advised that there is no objection to the subfla report to your committee and that the enactment of H.R. 4701 es rd with the program of the President. *AR ME HAR's Your committee has requested this Department's report 47a balTo exempt certain carriers from minimum rate regulation portation of bulk commodities, agricultural and fishery products, gs and for other purposes." We urge the enactment of this legisa des gned to implement the President's policy on transportation. HR 4700 would amend section 1 of the Interstate Commerce **ded (4) USC sec 1) to provide that the Interstate Commerce Comanding any other provisions of the act, supra, is not author*essered to determine if the rates, fares, or charges for the interstate of certain bulk commodities, including coal, oil, and gas, and and fil-bery commodities are lower than a reasonable minimum r Surge The Commission will, however, retain all currently effec var ! power to determine if a rate, fare, or charge is in violation of 21st unjust discriminatio, or undue or unreasonable preference Provision is also made to prohibit any carrier or carriers exchill from engaging in any act, practice, or conduct or being a party ent, contract, combination, or conspiracy contrary to the provirust laws However, this would rot prohibit a common carrier zutto agreements in accordance with section 5a of the Interstate ax vr ended 149 T S C., sec, 5b). 1% of HR 4700 would amend section 5a of the act, supra, to provide *** any agreement approved by the Commission under section 5a of ther persons, are relieved from the operation of the antitrust laws "le making of, and the carrying out of, such agreements in accordProvisions and those of the Commission, except that such relief ed to any party to an agreement with respect to any rate, charge, or **** **** rting agricultural, fishery, or bulk commodities or passengers. ***** **tion 303 b) of the Interstate Commerce Act, as amended (49 *-bi) exempts common water carriers from regulation in the n of bulk commodities when the cargo space of the transporting ed to carry not more than three such commodities. Thus, in the bulk water transportation rates for such mineral commodities as and sard and gravel are determined by competitive factors. 2 of HR 4700 amends section 303(b) of the act, supra, by removing that a transporting vessel may carry not more than three bulk The effect of this to place all common water carriers of bulk commore competitive position. We believe that this is desirable. HR 4700 would amend section 418 of the Interstate Commerce ded (49 USC, see 1018) so as to authorize freight forwarders to of con mon carriers engaged in the transportation of bulk comagren'tural and fishery commodities exempted under the provi 1:23) or 303(b) of the Interstate Commerce Act. 1 effect of section 4 of HR 4700 is that it would amend the Interng Act, 1933, as amended (46 T' S C. sec. $43 et seq) by inserting , which would provide that the Federal Maritime Commission shall anthority or power to regulate minimum rates and charges of docarners in the transportation of commodities in bulk and agriculfstery commodities and passengers. tion 5 of the bill would amend section 1002 of the Federal Aviation 149 USC sec. 142) to provide that the Federal Aviation Agency have the authority or the power to regulate minimum rates and charges of air carriers transporting commodities in bulk and agricultural and fishery commodities. In his transportation message to the Congress on April 5, 1962 (see H. Doc. 384 87th Cong., 2d sess.), President Kennedy stated in part: "At present, the transportation of bulk commodities by water carriers i exempt from all rate regulation under the Interstate Commerce Act, including the approval of minimum rates; but this exemption is denied to all other modes of transportation. This is clearly inequitable both to the latter and to shipper and it is an inequity which should be removed. Extending to all other carrier the exemption from the approval or prescription of minimum rates would permi the forces of competition and equal opportunity to replace cumbersome regulation for these commodities, while protecting the public interest by leaving intact the ICC's control over maximum railroad rates and other safeguards (such as the prohibition against discrimination, and requirements on car service and common carrier responsibility). "An exemption similar to that described above, and now available only to moto carriers and freight forwarders, relates to agricultural and fishery productThis exemption from minimum rates should also be extended to all carrier Here, too, the ICC should retain control of maximum railroad rates and certain other controls, to protect the public interest in those areas where there is n effective truck or water carrier competition to keep rates down. "The combined effect of extending these bulk and agricultural exemptions wil be to reduce drastically and equalize fairly the regulation of freight rates in thi country. Freed to exercise normal managerial initiative, carriers will be abl to rationalize their operations and reduce costs; and shippers should consequentl enjoy a wider choice, improved service and lower rates." These points were reiterated in the President's message to the Congress o transportation on March 5, 1963. In this massage he transmitted legislation de signed to eliminate the existing inequality, although he also suggested an alterna tive that "* Congress could elect to place all carriers on an equal footing b repealing the existing exemption***". H.R. 4700 is designed to carry ou the President's first approach by extending the exemption to all carriers. The effects on the fishing industry of removing minimum rate regulations a provided in H.R. 4700 are likely to be insignificant, although the railroads ma be benefited. We believe, however, that the alternative approach of removin the motor carrier exemption of fishery products is generally undesirable, esp cially to the commercial fishing industry. Adequate service to the fishing indu try is available only through motor carrier service exempt from regulation. Fish are landed at many points not served by regulated carriers, and there some question whether these points could attract regulated carriers. A definit requirement exists for direct service as the highly perishable product will n usually withstand transshipment. Because of the variations in weather and th natural habits of fish, production cannot be scheduled as to exact times an places. Therefore, a flexible transportation system is needed. This flexibili may include the offering of more stopoff's enroute tham are allowed in the ca of the regulated carriage, in order to facilitate rapid distribution of fisher products. To require regulated carriers to provide service where there are u predictable peaks and valleys of traffic movement could cause such carriers maintain unprofitable services during the low periods. Accordingly, we aga urge the enactment of H.R. 4700. The enactment of this legislation will involve no additional costs to this I partment. The Bureau of the Budget has advised that there is no objection to the prese tation of this report from the standpoint of the administration's program. Sincerely yours, STEWART L. UDALL, Secretary of the Interior. INTERSTATE COMMERCE COMMISSION, The Honorable OREN HARRIS, Chairman, Committee on Interstate and Foreign Commerce, DEAR CHAIRMAN HARRIS: This is in response to your request for a report ai comments on H.R. 4700 which would repeal the Commission's minimum ra 27 far as it applies to the transportation of bulk commodities and Grai and fishery products. This matter has been considered by the 2. and I am authorized to submit the following comments on its behalf: iss instantially the same as H.R. 11553, introduced by you in the ress to implement, in part, the proposals contained in the President's st, lutusage to Congress on April 5, 1962, except that certain language vissed has been added. ng at the hearings on HR. 11583 before your committee on July 10, Chairman Rupert L. Murphy staged that the Commission favored e water carrier bulk commodities exemption in section 303(b) of the ernative approach proposed by the President and that the motorrutural commodities exemption in section 203(b)(6) should be *ra: «portation from the farm to local markets. Similar recommendaLade in the Commission's 76th Annual Report (legislative recomross 7 and 14), and bills implementing those recommendations were vyou as HR 5201 and HR. 5549, respectively. The language of the President, we wholeheartedly agree that "The e of our Nation's transportation system must be to assure the the fast, safe, and economical transportation services needed g and changing economy to move people and goods, without waste a'ala in response to private and public demands at the lowest cost w.'h health, convenience, national security, and other broad public We are also in complete accord with the view that "This basic an and must be achieved primaily by continued reliance on unsubte vytris owned facilities, operating under the incentives of private ! the checks of competition to the maximum extent practicable • "le role of publie policy should be to provide a consistent and comve f amework of equal competitive opportunity that will achieve this at the lowest economic and social cost to the Nation." voirs, we have endeavored to achieve these objectives by impartially The various modes of transportation under existing provisions of the Commerce Act, but there can be little doubt that our efforts have been red by the existence of the bulk and agricultural commodity - which we consider to be the Achilles heel of sound economic regulause miatutory exemptions undoubtedly place regulated common carriers, the railroads, at a disadvantage in competing with unregulated motor arers in the transportation of bulk and agricultural commodities. reasons for favoring repeal of the bulk commodities exemption ition of a reasonable limitation on the agricultural products exere set forth in some detail by former Chairman Murphy in his testize your coni tee inst year, and which we now reaffirm, it may be Detational discussion of certain aspects of that testimony pertaining sed repeal of the Commission's power to prescribe reasonable miniwnld be helpful to the committee in its consideration of H.R. 4700, of some controversy and no little confusion, particularly among P'eres's, involves the extent of the Commission's authority to prerate on bulk and agricultural commodities under other sections of the l'e toommerce Act, in the event those commodities are totally exempted um rate regulation. In other words, can the Commission require tenance of a stable and nondiscriminatory rate structure under exist is of the net in the absence of the minimum rate power? That to this question is not clear to some may account for the addition wing language to HR. 4700 which was not a part of H R. 11583; car.mission, however, shall retain all currently effective authority and tastetermine that such a rate, fare, or charge is in violation of applitagvinst unjust discrimination, or undue or unreasonable prefadvantage *** * fering the Commission's power under sections 3(1) and 15(1) it must entered that, generally, the prohibition against undue prejudice there.n #appy unless both the prejudiced and preferred transportation services of cued under substantially similar circumstances and conditions. Thus in would not apply in the following two highly important situa- ir fom other consideratiors, we have serious debt that the added language Cam mplish its stated purpose stree power to determine is tot sy aa wet du sequite ampliance with such a determination participate in the rates on both the prejudiced traffic and the preferred traffic, and (2) when the rate prejudice in question results from carrier competition at one point and the absence of such competition at another point. In the first situation, when a railroad or railroads moving bulk or agricultural commodities from preferred origins to particular destinations are different from those transporting these commodities from the prejudiced origins to the same destinations, the shippers at the latter origins could not obtain any relief under the law of undue prejudice in sections 3(1) and 15(1) of the act. This is true under the Commission's current power to correct prejudicial rate adjustments, and it follows that the retention of that same power would still leave the prejudiced shipper without remedy under the law of undue prejudice of the act. Under its minimum rate power the Commission could, on an adequate record, alleviate the situation to the extent of prescribing reasonable minimum rates. The Commission in the preceding instance would, of course, be without power to take effective action if the minimum rate power was repealed. Thus if H.R. 4700 is enacted, rates on bulk or agricultural commodities from the preferred origins to certain destinations could be substantially reducedeven below out-of-pocket costs and a higher reasonable level continued in effect from the prejudiced origins to the same destinations. These situations have frequently occurred in the past and there is every reason to believe that they will occur with increasing frequency in the event the minimum-rate power, which has served as a deterrent to such action, is repealed. It is equally well established that the existence of carrier competition at one point and its absence at another point creates a dissimilarity of circumstances and conditions which generally renders inapplicable the prohibition against undue prejudice within the meaning of sections 3(1) and 15(1). To put it another way: Where such dissimilarities occur, the resulting shipper rate prej udice is not undue within the meaning of the present law. The result is that the Commission today generally has no effective control under sections 3(1) and 15(1) over rate disadvantages and preferences resulting from rate relationships as between depressed carrier-competitive rates and noncompetitive normal rates. This does not necessarily mean, of course, that special and unusual conditions may not justify special treatment in particular cases, but the principal concern here is with the well-established general rules under the law of undue prejudice. The Commission's minimum-rate power under sections 1 and 15(1) is used frequently in controlling destructive and damaging rate wars and in preventing “unfair or destructive competitive practices" within the meaning of the national transportation policy declared in the Interstate Commerce Act. The repeal of the minimum-rate power would allow carriers on the exempted traffic to lower their rates below their out-of-pocket costs for performing the service. This in turn, unquestionably would result in a greater spread between carrier competitive and noncompetitive rates in many situations-a principal cause of economic regulation initially. Another area of some possible misunderstanding is that in addition to exempt. ing the transportation of bulk and agricultural commodities from the minimum rate power, H.R. 4700 provides that the exempted carriers shall be subject to the provisions of the antitrust laws, the implication being that the latter would at least tend to serve the same purpose. We seriously question whether the antitrust laws can provide adequate safeguards in intermodal competitive cases where the low-cost mode, for example, is deprived of its inherent advantage by destructive competition in the form of rate reductions by the high-cost mode resulting in rates that are less than the latter's out-of-pocket costs for per forming the service involved. Intermodal competitive cases are, generally speaking, by far the most complex, most bitterly contested, and in some instance the most perplexing proceedings which this Commission is called upon to decide Technical matter such as cost exhibits, traffic studies, etc., are frequently exter sive and there can be little doubt but that a great burden would be placed or the courts, whose dockets we understand are already crowded. The following excerpt from the testimony of former Chairman Murphy, at page 125 in the printed report of the committee hearings last year, is illustrative of the problem which we fear will occur under the antitrust laws: "Without the minimum rate powers now possessed by the Commission, we di not believe that reliance upon the antitrust laws to prevent or stop destructiv rate wars and to protect shippers and localities against unjust discrimination and undue prejudice and preference is adequate. With the hundreds of thou sands of rate adjustments made each year, irreparable damage might be suffered ngwrs carriers, and localities before corrective steps could be taken under ist laws. It is true that injunctive relief might be available. How-re not aware of any present proposals to establish a means of screening 28*1, ents preiminary to bringing suits for an injunction whenever and wyer Beveled The action under those laws might be too late. Before such rel,of could be obtained, there would have to be a determination that ef was justified, and that determination would have to be made upon n gathered from carrier or shipper sources How such information drained is not entirely clear. We urge the committee to take into conthe serions consequences which could flow from this portion of the prices reliance upon the antitrust laws. We believe that the potential ar be injury, together with the overriding necessity for protecting the rest strongly indicates the need for the availability of a special proassures relief before, rather than after, injury has occurred." e Commission's functions do not qualify it to express an authoritative the mpplicability of the antitrust laws as such, the proposal to subLaws in place of minimum-rate regulation raises many problems in wung rate reductions on bulk and agricultural commodities. For exgenüt has been made that a carrier fearing injury by a competitor's rate reduction has the right under 15 USC. 26 to sue for injunctive rereal protection such a plaintiff would need a temporary injunction pendon on the merits, for which a bond would usually be required. Be ause - «ns of money at stake in important adjustments, the size of the bond es presje ndingly large and might well be beyond the reach of smaller cherwise, the remedy under the antitrust laws would be of questionBeyond this burden-which could be overcome by a suit by ***ent on behalf of the aggrieved carrier or carriers-lie other familiar has primary jurisdiction and proof of the noncompensatory nature ¡ ged reduced rate. It seems likely that in such a lawsuit some of ... would tread so closely upon matters left to the jurisdiction of this n that the courts will desire to stay their hands until the Commission mare! „ts views thereon. Moreover, cost finding in the field of rate regu an inside with which courts are equipped to deal. In such cases some ister would be necessary, and, if so, the logical master would appear to terstate Commerce Commission. If that procedure became a reality, I agar that very little would have been accomplished by the change in pengmitin, Pl};!{es of the Commission and the courts. ever, as a practical matter, there is the further question of just how ***st law* Wonid operate to control rate wars between carriers. ConDiese struggles would continue until carriers involved were prostrated 3. resting in bankruptcy proceedings and, possibly, Government And finally, is the proviso to the proposed new paragraph (23) the situation where a through route and joint rate is proposed petitive connecting carriers? Because of the nature of the railiamtry, through routes and joint rates have, from the earliest days, zade collectively. If the proviso contemplates that only noncompetitive ay deal with one another, it would appear to be impractical. her hand, if its purpose is to allow competing carriers to act in connestablishing through routes and joint rates, and yet preserve to such immunity from the antitrust laws, then it raises important questions - If the Commission is to be deprived of its minimum-rate power, tection remains to the public in the event that monopolistic and predafers should occur? nave, for the sake of brevity, restricted our comments on HR. 4700 to itters which, in our opinion, deserve emphasis or elaboration. As y infeated, other consequences which we believe would follow the - HR. 4700 were set forth in some detail by former Chairman Murphy ermittee bearings on HR. 11583. Assuming this record is available to -mittee, no purpose would be served by a repetitive discussion of those Le convenience of the committee, we have included in an attached x certain comments on HR 4700 which are of a more technical nature. " that you will find the foregoing views helpful in your study and our transportation system. We stand ready to cooperate in the d any other, or modified, approaches to achievement of equality of comortunity. As indicated, we believe that the President's emphasis as the basic objective to be achieved, is absolutely sound, and that |