protest of rates and require rate bureaus to take final action within 120 days on any matter docketed for consideration, and require records of the individual votes of the bureau members, with such records open to Commission inspection and to public inspection through the Commission. The rate bureaus exert a significant anticompetitive influence in the motor carrier industry, although they do provide certain necessary functions. This amendment, similar to the amendment proposed in the Railroad Revitalization Act would restrict the anticompetitive activities of the rate bureaus while enabling them to continue their beneficial activities such as considering joint line rates and tariff publishing. AIRCRAFT EXEMPTION SEC. 3. Section 203(b) (7a) of the Interstate Commerce Act exempts from economic regulations transportation of persons or property by motor vehicle "when incidental to transportation by aircraft." The legislative history of this section provides virtually no assistance in interpreting it, but the Commission by rulemaking has determined that to be within the exemption, the transportation must be (1) within the "terminal area" of the air carrier, and that terminal area is described in a tariff filed with the CAB; (2) part of a continuous movement received from or delivered to an air carrier; and (3) on a through air bill of lading. (See 49 CFR 210.40). The CAB at first accepted a radius of 25 miles as a rule of thumb in determining what is a terminal area, and this holding has been codified. (See 14 CFR 222). Although the Commission retains the authority to modify the 25-mile rule, it has been hesitant to do so. The 25-mile restriction has little relationship to economic reality and it has been subject of complaint by air cargo shippers. The amendment would extend the radius to 100 miles, while retaining the other tests for exemption. PRIVATE AND CONTRACT CARRIERS SEC. 4. This section eases the restrictions now imposed upon private and contract carriers. PRIVATE CARRIERS The IC Act now allows a non-transportation concern to transport its goods within the scope of its own nontransportation business without obtaining a certificate of public convenience and necessity from the Commission. Essentially, this is the concept of a "private carrier" as defined in section 203 (17). Private carriers may not, however, transport goods of others "for compensation" because they would then fall under the definition of a common carrier, or contract carrier (Section 203 (15)) and they would have to obtain a certificate or permit from the Commission. Furthermore, the Commission has held in a decision affirmed by the Supreme Court, Schenley Distilleries Motor Division, Inc., Contract Carrier Application, 44 M.C.C. 1717 (1944), aff'd. 326 U.S. 432 (1946), that a private carrier may not carry the goods of corporate affiliates or subsidiaries. This amendment will eliminate this artificial restriction and the discrimination it causes, and allow affiliates to move the goods of other affilates without losing their private carrier status. CONTRACT CARRIERS Section 203 (a) (15) of the Interstate Commerce Act defines contract carrier by motor vehicle as one which operates "under continuing contracts with one person or a limited number of persons either (a) for the furnishing of transportation services through the assignment of motor vehicles for a continuing period of time to the primary use of each person served or (b) for the furnishing of transportation services designed to meet the distinct need of each individual customer". This section is in turn affected by section 209 (b) which requires the Commission to issue a certificate to a contract carrier if that carrier is "fit, willing, and able" and if the proposed operation is "consistent with the public interest and the national transportation policy". That section then goes on to describe five factors to be considered with respect to each application. Historically, the Commission has favored common carriers over contract carriers. The Commission has done this by restrictively interpreting the public interest test of section 209 (b) to favor existing carriers and by arbitrarily im posing a rule of seven: even though an applicant satisfies one of the tests of section 203 and can meet the other tests of section 209, the applicant will be denied a permit if the applicant already serves seven shippers under contract. (Umthun Trucking Co. Ext.-Phosphatic Feed Supplements, 91 M.C.C. 691). AIRCRAFT EXEMPTION SEC. 3. (a) Section 203(b) (7a) is amended by deleting the words, "the transportation of persons or property by motor vehicle when incidental to transportation by aircraft" and inserting the following in substitution: "the transportation by motor vehicle in a radius of 100 miles or less of an airport of persons or property from or to a carrier subject to regulation under the Federal Aviation Act of 1958 as part of a continuous movement under a through-ticket or through-air bill of lading, covering in addition to the line-haul movement by air, the collection, delivery, or transfer service performed by a motor carrier." (b) Section 403 (a) of the Federal Aviation Act of 1958 is amended by inserting the following words immediately prior to the period in the first sentence: "provided such service is performed within a radius of 100 miles or less of the airport." PRIVATE AND CONTRACT CARRIERS SEC. 4. (a) Section 203 (a) (1) is amended by adding the following sentence: "For the purpose of sections 203 (a) (17) and 203(c), a group of corporations consisting of a parent corporation and all subsidiary corporations in which the parent controls, directly or through another subsidiary, more than 50 percent of the voting stock shall be considered a single person.") (b) Section 203 (a) (14) is amended by inserting after "except" the following: "transportation referred to in clause (b) of paragraph (17) or". (b) Section 203 (a) is amended by striking paragraph (15) and inserting the following in substitution: "The term 'contract carrier by motor vehicle' means any person who engages in transportation by motor vehicle of passengers or property in interstate or foreign commerce, for compensation (other than transportation referred to in paragraph (14) of this subsection and the exception therein under continuing contracts with one or more persons either (a) for the furnishing of transportation services through the assignment of motor vehicles for a continuing period of time to the exclusive use of each person served or (b) for the furnishing of transportation services designed. NEW PLANT SEC. 6. New plants have particular difficulty in anticipating transportation requirements, and therefore, need more flexibility in choosing carriers than existing plants. In addition, carriers are not anxious to undergo a long and costly certification process where the transportation needs are not well-defined. This section would amend section 203 (c) and exempt from economic regulations for a period of two years transportation to new plants, as long as that plant did not replace an existing plant. The second part of this amendment would then allow carriers to have "grandfather" rights to continue serving the plant after the initial two-year period if certain conditions are met. This exemption would simplify the administraton of the Interstate Commerce Act and reduce the costs of obtaining certificates. SECTION-BY-SECTION ANALYSIS Private Carrier-Leases to Common Carriers SEC. 7. Section 204 (e) of the Interstate Commerce Act provides the Commission with authority to regulate the leasing of vehicles to carriers. The leasing regulations prescribed by the Commission in general provide that the leasing parties must enter into a written contract: that the equipment must be in the exclusive possession and control of lessee; that the compensation must be specified in the contract; and if the arrangement includes the driver, that the contract must be for a minimum of 30 days. The reason for these regulations was to prevent certain abuses of the motor carrier safety regulations and also to prevent carriers who could lease vehicles from obtaining an unfair advantage over carriers who could not lease. In 1956, the Congress passed an amendment to the Act which withdrew from the Commission the power to regulate the duration of leases with respect to most vehicles used for the hauling of agricultural products. Our proposed amendment would expand that exemption to apply to all vehicle leasing whether by a common or private carrier. This would mean an expansion of capacity available to common carriers without the need to buy expensive equipment. For the private carriers, it would create an opportunity to obtain backhauls which they don't have today. This amendment would not withdraw the Commission's authority to require written leases and other matters. It would also not affect the present requirement that the leased motor vehicles to be used by the motor carrier in a single movement or as one or more of a series of movements, loaded or empty, in the general direction of the general area in which such motor vehicle is based. The Commission itself has recognized the problems associated with the trip leasing and recently in Ex Parte M.C. 43 (Sub. No. 3), Lease to Regulated Motor Carriers of Vehicles with Drivers by Private Carriers, proposed a rulemaking to relax the 30-day rule. This rulemaking, however, has not been completed, and even if the rulemaking is completed as proposed, the Commission in its notice indicated that the relaxation would only be "temporary" and apply only to equipment in existence prior to March 7, 1970, or replacements thereof. ENTRY SEC. 8. For most goods and services the buyer has a wide variety of choices ranging from high quality and high cost items to low quality and low cost items. He is able to select that combination of cost and quality which best suits his purposes and wants. For trucking services, however, the range of choices is limited. Early decisions of the Commission recognized an obligation to protect existing carriers. In these cases, the Commission declared that new certificates should not be issued if the existing carriers could handle the traffic. Many of these decisions held that the existing service had to be inadequate to justify the entry of a new carrier. While later decisions have modified this position, adequacy of the present service is still of critical importance to the Commission. The amendment proposed in this section would open up the range of options available to the purchaser of trucking services and encourage innovation. This amendment would substantially change the requirements for entry by broadening the focus of the present entry test and by providing a new alternative test for entry. Subsection (a) of this amendment requires the Commission to weigh in favor of an application if the new service would result in lower costs, greater efficiency (including fuel), better service, satisfy the shipper's preference for a different combination of services and rates, or would generally improve competition. This new provision would apply to any entry petition except one from a private carrier. The Commission has taken a dim view of allowing private carriers to become for-hire carriers. The amendment specifically provides that private carriers, who intend to remain private carriers, may not use the new standards and procedures to become common carriers. The second part of the proposed amendment is a technical amendment. In the proposed subsection (b), the Commission would be required to issue a certificate if the applicant demonstrates that it is "fit, willing, and able" and if the revenue derived from the proposed service will cover the "actual costs" of the service unless a protestant proved that the proposed rate was discretionary. The Commission would be specifically prohibited from considering the adequacy of existing service or the effects of the proposed entry upon competitors. In other words, the Commission would have to issue an applicant a certificate if (1) the applicant were "fit, willing, and able"; (2) the rate was compensatory; and (3) the rate was not discriminatory. The proposed subsection (c) would allow the Commission to require the proposed rate to be put into effect for up to one year as a condition for granting the certificate. The proposed subsection (d) would define "actual costs" to include only those costs which are directly associated with the particular service. In order to expedite such proceedings and to ensure that the Commission does not consider adequacy of service in an indirect manner, the Commission in the proposed subsection (e) could not require industry or system-wide data. Industry-wide data could be introduced at the option of the applicant, however. As a further safeguard, proposed subsection (f) would authorize the Secretary to enact cost and revenue standards, which the Commission must follow. Subsection (g) provides that the rate authorized for a certificate may not be suspended or set aside for a period of two years. This amendment is intended to consolidate the various rate and entry questions in one hearing and relieve an applicant of the burden of defending a series of charges. Subsection (h) would also expedite the consideration of entry hearings by requiring decisions to be rendered within one year of application for those applications filed within the first year of enactment. The one-year period for decision is still excessively long, but it recognizes that the Commission has a certain backload. After the first year, the decision period is limited to 90 days which is an adequate period in consideration of the prohibitions or the scope of the Commission's hearing. The proposed subsection (i) would require the payment of an applicant's defense costs by protestants if the protest against entry fails. This provision is intended to discourage frivolous protests. The foregoing amendments will substantially reform the present entry procedure, and allow entry as well as potential entry to play a much greater role as the natural regulator of market efficiency. The last part of the amendment requires the secretary to study the effects of these amendments and the other amendments in the Act to determine whether they have satisfied the purposes of the Act, and to recommend any changes he thinks necessary to ease entry further, to produce more price flexibility, and in general, to meet the purpose of the Act by the third year following enactment. CONTRACT CARRIERS: DUAL OPERATIONS Sec. 9. Section 210 of the Interstate Commerce Act prohibits a single or related entity from holding both common and contract authority over the same route or within the same territory unless the Commission has affirmatively found that such authorities can be held consistent with the public interest and the National Transportation Policy. The purpose of this provision is to preclude a carrier which serves a shipper both as a contract and common carrier from in effect giving a rebate on the common carriage rates by charging artificially low contract rates. The Commission has consistently taken the position that to permit dual operations it must find that there is not even the remotest possibility of a rebate. This policy of not granting authority where there is just a theoretical possibility of rebate constitutes another unreasonable bar to entry and competition and is unnecessarily restrictive in light of the Commission's power to review carriers' operations and to revoke authorities under section 212. The amendment proposed in this section would limit the application of section 210 and provide that the restriction regarding dual operations would not apply if the contract carrier established that its contract rates were compensatory. This requirement for a compensatory rate is consistent with other sections of this bill, and would also protect against the possibility of a carrier charging an unreasonably low contract rate as a form of rebate. SECTION-BY-SECTION ANALYSIS Suspension of Common Carrier Motor Rates SEC. 10. At present, the Commission has the authority to determine if a rate filed by a motor carrier is lawful, and while it is making that determination, it may suspend that new rate for up to seven months. However, since there is no limit upon the time for hearing, the ultimate decision may not be made until long after the expiration of the suspension period. The present procedure is often lengthy and the cost, uncertainty and delay associated with it limit the ability of a carrier to respond to the changing conditions of the market place. The present procedure also causes the hearing to focus upon "maybe's" and hypothetical arguments. A carrier proposes a rate; it is commonly suspended; and the hearing revolves around extensive testimony of what "might happen" if the rate would go into effect. This amendment would expedite the hearing process by (i) providing that in all but exceptional cases rate hearings must be completed within 7 months and (ii) restricting the right of the Commission to suspend a rate increase or decrease if the increase or decrease is within certain percentages of prior rates. If the Commission failed to reach a decision within the required time, the rate would go into effect, subject to later complaint. The no-suspend zone would initially be phased in over a three-year period (7 percent, year 1; 12 percent, year 2; 15 percent, year 3). After this three-year period, there would be a permanent prohibition against suspending any rate decreases and carriers could raise rates annually 15 percent without suspension. Within these limits, the only exception to the prohibition against suspension would be a charge of discrimination. In all cases where suspension is sought the protestant would be required to satisfy the standard used by Courts in applications for temporary restraining orders: the protestant would be required to establish immediate and irreparable injury, likelihood of success; and satisfaction of the public interest. To protect against unjust enrichment in cases where a rate increase is not suspended but is later found to be unreasonable, the amendment would require reimbursement of the difference between the initial rate and the rate ultimately allowed, with interest, to the concerned shippers. For carriers of passengers, since it would be very difficult to make such a refund to individual travelers, the bill provides that the carrier reduce its future fares in an appropriate amount. With respect to rate decreases that were suspended and later found justified, the amendment would allow payment of the difference to the shippers. The no-suspend zone would not apply to any general rate increase of any type. COMMON CARRIER COMPENSATORY RATES SEC. 11. At present, the Act allows a rate to be found to be too low even though it covers the variable costs of the applicant. The present law discourages price decreases, interferes with efficient resource allocation, and is anticompetitive. This section would amend the Interstate Commerce Act to provide that a carrier's rate which is above the carrier's variable cost for the specific transportation in question may not be found to be unjust or unreasonably low. At the same time, in its study of the surface transportation industry, the Department has found that certain carriers-contrary to economic sense-have sought to decrease rates below variable costs. This section would also prohibit the Commission upon complaint from allowing rate decreases which are not compensatory. To provide for past rates which are not compensatory, this section would also prohibit the Commission from disallowing any rate increase which raises the level of a rate to a compensatory level. SECTION-BY-SECTION ANALYSIS Contract Carrier Compensatory Rates SEC. 12. Under the Interstate Commerce Act, the Commission only has authority over minimum rates for contract carriers. This amendment-similar to the amendment in section 10-provides that the Commission may not find unreasonable a contract carrier rate which is compensatory. SECTION-BY-SECTION ANALYSIS Commodity and Route Restrictions SEC. 13. The Commission in its administration of part II has imposed many arbitrary and unnecessary commodity and route restrictions in its certificates. This section would require the Commission in general to take all necessary steps to remove these wasteful and inefficient restrictions and to report to Congress within one year of enactment the specific steps it has taken pursuant to this directive. In addition to this general change, this amendment would also reduce circuity of route in two specific ways. First, if a carrier was required to operate through a particular gateway city to serve any two points for six months or more and was providing a significant amount of service between these two points, the Commission shall, upon application of the carrier, remove the gateway requirement. Second, the Commission must broaden the present deviation rules to 25 percent. This provision does not apply to bus routes. |