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These adherents to the status quo attempt to portray alarming scenarios of what might happen if the existing regulatory system were modified in any way. They predict cutthroat and predatory competition, chaos, and instability. But almost no responsible advocates for change including the Ford Administration-are seeking total deregulation. Instead, they are seeking regulatory reform or regulatory modernization. IBP agrees that certain features of our regulatory system are badly in need of improvement.
We will group what we perceive as the major impediments to greater transportation efficiency into two major categories: (1) Undue barriers to competition; and (2) excessive red tape and bureaucratic delay.
Regarding barriers to competition, to transport goods in interstate commerce, other than unprocessed agricultural commodities as we have heard here, carriers must hold operating authority from the ICC. These government franchises come to assume great monetary value in and of themselves. They are bought and sold by carriers; they are carried on their books as assets; they are the key to a carrier's success. Each year the Nation's carriers spend millions of dollars in attempting to expand their authority into new areas or new commodities, while other millions are spent by some of these same carriers in seeking to prevent such new competition. In some cases, a carrier's operating authority may be worth several times as much as the value of his entire physical plant and equipment.
It follows that over time these high costs of entry tend to become embedded in the cost structure and factored into the pricing system. Thus, shippers, and ultimately consumers, pay more for less. For these unreasonable barriers to entry not only increase costs, but can also result in inadequate service for shippers.
A case in point is IBP's new facility at Amarillo, Tex., the world's largest and most modern meat slaughter and processing facility. As is often the case when a major new facility is constructed, the existing group of carriers holding authority to serve the plant were inadequate to meet the plant's long-term needs. For the past 2 years we have devoted considerable time, energy, and legal expense to obtaining adequate motor carrier authority. While the existing carriers clearly cannot handle all of the business themselves, they have vigorously protested any new competition.
The new authority applications which we have supported were first filed almost 2 years ago and are probably another year away from final adjudication. The plant recently added a second carcass production shift which will bring the plant to full capacity by September 1st.
Unless temporary authority is soon granted by the Commission, the success of the plant will be threatened by a lack of outbound transportation. In our opinion, the Commission should not require the existence of a transportation crisis before granting relief.
The existing regulations serve to protect the established carriers by placing the burden upon the new applicant and supporting shipper to prove that existing service is inadequate. In protesting new applications, carriers often make grandiose and ridiculous claims about their ability to supply equipment and service to the shipper. The Commission must decide whom to believe.
In our opinion, less emphasis should be placed upon the claims of the existing carriers, and more emphasis placed upon the expressed needs of the shipper. Once the shipper has testified to the need for additional service, and the new applicant has proved to the Commission's satisfaction that he is fit, willing, and able, then the burden of proof should rest heavily upon the protesting carriers to prove otherwise.
In our opinion, if motor carrier authority procedures were streamlined and liberalized, many of the problems of the owner-operator would disappear. The great barriers to new entry and their producthighly valued operating rights—give the certificated trucklines undue leverage over the owner-operators.
We believe that too little of the freight revenue currently goes to the owner-operator-and we have heard some pretty wide ranges here. Our own estimate is 60–75 percent-for his services and too much goes to the holder of the certificate. The solution to this problem is not more regulation. The ICC should not be called upon to divide the revenue between the two parties, thereby creating further reporting requirements, procedural delays, and regulatory rigidity. Instead of treating symptoms, we should attempt to go to the root of the problem. If new oprating authority was not so difficult to obtain, carriers could not demand such a premium for its use. If these authority procedures were improved, the free market mechanism would insure that the owneroperator received reasonable compensation for his services.
Regarding regulatory delay and redtape, the time frame within which the Commission acts must be compressed. Part of the delay sometimes results from the delaying tactics by parties to the cases and by a limited ICC budget. Nevertheless, existing delays are intolerable as illustrated by the example of our new Amarillo facility discussed above. To require 2 to 3 years to decide a motor carrier authority case is absurd. Similarly, the handling of rate and merger proceedings must also be accelerated.
Federal regulation is not the only area needing reform. The Statesin their efforts to derive revenue from every truck which travels their highways—currently have a labyrinth of filing, reporting, and registration requirements which almost defy comprehension, and we have heard a lot of that earlier. These requirements vary widely from State to State and include various equipment licensing and registration fees, fuel taxes, special diesel taxes, permits, and mileage or ton-mile taxes. In some cases the cost of reporting and administering these taxes exceed the revenue generated.
To avoid costly and time-consuming reporting to each individual State, efforts must continue for the various States to work out reciprocal agreements, such as the International Registration Plan, allowing a carrier to make only a single report to his home base State, with the revenue then being apportioned to other States by the home base State. Greater uniformity is also needed in State requirements covering vehicle weights and lengths. The Federal Government can play an important role in helping bring about greater cooperation and uniformity among the States. Federal control of highway funds as it has been suggested here earlier can provide the necessary vehicle to influence the States to take action.
We believe the changes outlined above could increase the efficiency and flexibility of our national transportation system to the ultimate benefit of the entire consuming public.
Mr. HUNGATE. Thank you very much. You stayed within your time frame, thank you. Mr. Bedell.
Mr. BEDELL. Thank you very much, Mr. Ratledge. You indicated in your testimony, you said that for the last 2 years you have been devoting considerable time, energy, and legal expense to obtaining adequate motor carrier authority. Is that to say that
you have tried to help some of the operators get authority from the ICC for the transportation of your meat for the Amarillo plant !
Mr. RATLEDGE. Right. And basically without such support from the shipper, the new applicant's probability of getting any kind of new authority is almost nil.
Mr. BEDELL. Would you expand upon that because that's the issue, may be the main issue that we are addressing here.
Mr. RATLEDGE. But what I am saying, even with our best efforts and considerable time, research, and legal expense on our part, it sometimes is still difficult for us to help these carriers who are fitting, willing, and able to serve us to help them get the necessary authority to do
Mr. BEDELL. If I were an independent operator and I had my own truck and trailer only and I wanted to try to get ICC authority to haul your meat to the New York market, do you have an estimate of what it would probably cost me in terms of dollars and time to attempt to get that?
Mr. RATLEDGE. Well, you have a choice. You can either go for it from
appear more practical to him, is to actually buy an existing authority. Now, whichever avenue he is going to take, there is still a high cost of entry. In our opinion that represents an artificial cost of regulation. And it follows, he has received a fair return on that cost just as he does upon any other costs, the cost of his equipment, labor, whatever.
Mr. BEDELL. Do you have any information available as to what it would probably cost if he could buy such authority that had already been granted ? Have you experienced this where people have purchased authorities in order to haul your products as to what they paid for those authorities?
Mr. RATLEDGE. I couldn't really document any precise figures. You know, we have numbers. It depends obviously upon the scope of the authority, the number of origin points, the number of destination points. There are no simplistic answers to it.
Mr. HUNGATE. Pardon me. Do you have a comment to make ?
Mr. FREYMILLER. Yes. My name is Don Freymiller of Freymiller Trucking. I have just purchased a piece of packinghouse authority that will take me from Dubuque, Iowa, to Milwaukee, Wis. I paid the people that I bought it from $25,000 which is 150 miles to haul meat from the Dubuque beef packing company to Milwaukee.
Mr. RATLEDGE. That's a pretty healthy piece of authority, of course. Mr. HUNGATE. Mr. Lynch?
Mr. LYNCH. In addition, Mr. Chairman, in our last hearing we had, I believe it was the Colorado Meat Packers Association, they gave us an example in those areas where someone bought rights for, I believe, a quarter of a million dollars and 6 years later sold it for $800,000. Do you recall those figures, Mr. Jensen ?
Mr. JENSEN. Yes.
Mr. BEDELL. If they were to exempt the hauling of meat products such as you sell as they do now, agricultural—the nonprocessed agricultural products, what do you believe would be the effect of such exemptions if it were to be done!
Mr. RATLEDGE. I am not sure that's the panacea.
Mr. RATLEDGE. I think earlier that we had some sectors of transportation that are already exempt, some pretty important sectors. And what typically is involved there
Mr. BEDELL. I don't mean to imply that it would be good. I would like to know for the subcommittee. It would help us to know what would be the result.
Mr. RATLEDGE. My opinion is you would probably tend to see the evolution of a broker system somewhat akin to what you have in the exempt sector now.
Mr. BEDELL. Instead of dealing directly with the truckers, you would tend to deal with a broker rather than directly with the trucker?
Mr. RATLEDGE. We would probably do both. It becomes logistically difficult to match a large number of small single vehicle owner-operators, you know, with the matrix of shippers who had something going where he wants to go.
That's the role made by the brokers. I think significantly we seemed to have assumed that even under the broker system their share of the revenue tends to be less than under a regulated system.
Mr. BEDELL. Does it tend to be less even when you deduct the cost of the certificated carrier in terms of insurance and all those things? Is it still less than that differential in your opinion?
Mr. RATLEDGE. Yes. I think in any event in the exempt area the brokers, their share of the revenue tends to be far less than that of the certificated carrier.
Mr. HUNGATE. Mr. Jensen!
Mr. JENSEN. OK. Back to our issue then. I think the answer to it is that the 4,700 figure that was quoted, where 82 percent were granted certificates is, as the gentleman said, for carriers already certificated.
The figures we had are for new carriers only. So if one could say 82 percent of 4,700 is roughly 3,900, then only about 500 of those are absolutely new.
Mr. RATLEDGE. I think that 4,700 figure could also be inflated by a lot of pretty simple type proceedings such as elimination of gateways, attacking rights, this sort of thing, which really don't represent basic new grants of authority,
Mr. JENSEN. When I say 500, that includes a number of things. Such as single destination point only accounts for 200 of the 500. In the area of general commodities only, 31 new certificates were granted.
Mr. RATLEDGE. In our opinion the type of fleet operator who appeared here earlier with 28 and 30 trucks of his own should have a reasonable opportunity if he chose to do so to obtain his own authority and become a full-fledged carrier on his own. I think that the present system tends to weigh pretty heavily against his doing so.
Mr. HUNGATE. Thank you, Mr. Ratledge, for some helpful testimony here. I want to ask on this various competition, you say in some cases that carrier's operating authority may be worth several times the value of the physical plant and equipment. I think we had testimony this morning of folks who didn't have any plant or equipment.
Does the Interstate Commerce Commission have any voice in the sale of a certificate ? In other words, do they have to approve the buy or approve the sale ?
Mr. RATLEDGE. Yes; they do.
Mr. HUNGATE. Will they approve the sale apparently of nothing but the certificate? In other words, I am going to keep my trucks but I am going to sell you the certificate.
Mr. RATLEDGE. It's my understanding they approve the transfer of such authority. I don't think they get involved in the financial amounts of change.
Mr. HUNGATE. You don't think they are involved in the price? Mr. RATLEDGE. Yes.
Mr. HUNGATE. It seems to me that if you overpriced it enough, that would even be a burden. In other words, if they approved a man buying a load that he really shouldn't ever carry, if you knew anything about the trucking business, then maybe they should use some discretion but you don't think they do in that area?
Mr. RATLEDGE. I am not aware that they currently get into the pricing of such changes.
Mr. HUXGATE. Yes, sir.
Mr. King. George King, King Transfer, Onawa, Iowa. I have had application with the Interstate Commerce in October, 1974, for the purchase of some authority from a large truck line. That's a modified procedure. To this date there has been no action on it.
But when you make an application to the Interstate Commerce Commission, you must state the price of the sale and the terms and conditions of the sale goes on the application.
Mr. HUNGATE. So they have the information before them?
Mr. HUNGATE. Thank you. And if they are not going to use discretion, they can just cut the form that much shorter or less longer.
Well, I found interesting, Mr. Ratledge, your statement on page 3, the suggestion as to burden of proof. The shipper has testified that he needs the additional service and the applicant can show that he could offer that service. Then at that point the burden of proof should shift to the existing certificated carrier to disprove that, to carry the load from that.
Mr. RATLEDGE. Yes, I think that should really be a prima facie case.