The act which established the Civil Aeronautics Administration and Civil Aeronautics Board might well be considered an act of God by private pilots, of such great benefit has it been to aviation. Can anyone seriously be considering going backward on that subject? Our thoughts are in exactly the opposite direction. We wish to see not only uniform licensing and navigation regulations throughout the United States, but international agreements whereby a pilot with no serious inconvenience can fly through a series of foreign countries. This was well worked out in Europe before the war for a pilot holding a foreign pilot's license. But the pilot holding a United States of America license only was out of luck. Under title 2, section 202, of H. R. 1012, appears a regulation concerning passenger liability. If this covers passengers carried free of charge by private pilots it assuredly should be altered. The majority of expansion in private flying is due to the kindness of pilots who take friends up for short and long trips. We think this method of inoculation should be encouraged. Liability for each passenger would discourage it and in addition we believe would be unfair. Aircraft Owners and Pilots Association would like to see a congressional standing committee that is devoted to and continuously specializes in aviation. We would like to see one member of that committee devoted to looking after the interests of private flying. Regardless of whether this aviation committee is a subcommittee of the Interstate Commerce Committee or is an independent committee, we think it should be composed of men vitally interested in, and thoroughly instructed in aeronautical matters, so much so that they are constantly on watch for methods to assist aviation and always ready to fight any move that would unjustly hamper aviation. The private flying representative on that committee should, we believe, be in like manner always watching over the interests of private flying. There is at the moment a strong move to ground all private flying for the duration. We can, we believe, demonstrate that this would be a short-sighted policy. The savings will be insignificant, the war effort will be hampered, and the afterthe-war effort will be crippled. We should be happy to give our reasoning behind these statements. At the moment we are merely attempting to indicate the necessity of someone in Congress who will be constantly armed to fight for the rights of private flying. Otherwise those rights will be violated merely for lack of a champion. Light plane flying has been the backbone of the industry with 100 times as many pilots as the air lines, 100 times as many airplanes, and 10 times as many airports. Surely private flying rates at least one especially wellinformed champion on an especially well-informed aviation committee in Congress. We shall be happy to be of service to your committee if it lies within our power. Sincerely yours, L. P. SHARPLES, Chairman, Executive Committee. Hon. CLARENCE F. LEA, AVIATION MAGAZINE, Chairman, Committee on Interstate and Foreign Commerce, House of Representatives, Washington, D. C. DEAR CONGRESSMAN LEA: Your bill (H. R. 1012), providing for comprehensive amendments to the Civil Aeronautics Act, is a forward-looking and constructive measure. As publisher of the McGraw-Hill transportation publication, Aviation, the oldest American aeronautical magazine, and Bus Transportation, I have closely watched developments in the field of transportation generally and especially in the field of air transportation for many years. Nothing has impressed me more than the need for avoiding, for the future of air transportation, conflicts between 49 different regulating agencies. The problem of Government regulation of civil aviation is at best a very complicated one. It would hardly be short of a major disaster were this matter to be further complicated and confused by the sort of overlapping and conflicting State-Federal regulation which has been experienced in the case of surface transportation. The economic characteristics of aviation make it, in our judgment, quite impractical ever to attempt regulation except through a single Federal agency possessing exclusive jurisdiction. Other phases of H. R. 1012 are of equal importance. The zoning provision meets a problem which, if not anticipated, would in a very few years present an almost insurmountable barrier to the probable development of both our military and civil aviation. The proposed regulation of contract carriers is likewise eminently desirable at this time in order to prepare for a sound postwar aviation world. And the provisions of the bill, indicating a renewed appreciation of the importance of fostering a greater development of private flying and civil aviation education activities, should be welcomed by the entire country. I trust that the Congress will see fit to concur in these statesmanlike proposals which you and your committee have made. Your bill is another evidence of your committee's foresight in the field of aviation legislation. Sincerely yours, GEORGE W. PFEIL, Publisher. MEMORANDUM ON THE REGULATION OF CONTRACT CARRIERS UNDER THE INTERSTATE COMMERCE ACT Submitted by: S. G. Tipton, Assistant General Counsel, Civil Aeronautics Board; H. D. Reynolds, Attorney, Civil Aeronautics Board I. MOTOR CARRIER ACT REGULATION OF CONTRACT CARRIERS A. LEGISLATIVE HISTORY After the need for Federal regulation of motor carriers became evident, some 9 years were allowed to elapse before the Motor Carrier Act of 19351 finally became law. During this interim, bills substantially similar to the act as passed had been introduced in each succeeding Congress, all with the recommendations of the Interstate Commerce Commission, the State commissions, and various special interest groups. "The most important difficulty in the way of legislation was the absence of comprehensive data concerning the industry and the lack of sufficient information with respect to the details of legislation required by the public interest." 1 2 Investigation by the Interstate Commerce Commerce Commission and reports of the Federal Coordinator of Transportation served to furnish great assistance and efforts of Joseph B. Eastman, Federal Coordinator, in behalf of the final bill undoubtedly carried considerable weight. Since, by the provisions of the act as originally passed, both common carriers and contract carriers were regulated, the economic considerations requiring legislation do not too definitely distinguish between the two; general conditions prevailing throughout the industry were advanced not only for regulation of both types of carriers but of brokerage activities as well. As the Senate Committee on Interstate Commerce reported: "In recent years there has been an extraordinary growth of highway transportation. Thousands of miles of hard-surface highways have been developed and are teeming with millions of automotive vehicles. Motor carriers for hire penetrate everywhere and are engaged in intensive competition with each other and with railroads and water carriers. This competition has been carried to an extreme which tends to undermine the financial stability of the carriers and jeopardizes the maintenance of transportation facilities and service appropriate to the needs of commerce and required in the public interest. The present chaotic transportation conditions are not satisfactory to investors, labor, shippers, or the carriers themselves. The competitive struggle is to a large extent unequal and unfair, inasmuch as the railroads are comprehensively regulated, the water carriers are regulated in lesser degree, and the interstate motor carriers are scarcely regulated at all." ' Also, 7 1 Act of Aug. 9, 1935; 49 Stat. 543; 49 U. S. C., sec. 301 et sea. 2 Wagner, A Legislative History of the Motor Carrier Act, 1935, Introduction. 3 Regulation of Railroads, S. Doc. 119, 73d Cong., 2d sess. Regulation of Transportation Agencies, S. Doc. 152. 73d Cong., 2d sess.; Report of Federal Coordinator of Transportation, 1934, H. Doc. 89, 74th Cong., 1st sess. 4 Appointed by the President pursuant to the Emergency Railroad Transportation Act, 1933, 49 TT. S. C., Sec. 250 et seq. 5 S. 1629, 74th Cong.. 1st sess. "Voluminous reliable data from testimony has been recently compiled on the subject of highway-carrier regulation by the Congressional committees. It seems the more information obtained, the more apparent is the need for motor-carrier regulation in the public interest to preserve and develop a healthy, adequate, coordinated sytsem of transportation." House Committee Report No. 1645. 74th Cong., 1st sess.. p. 3. Senate Committee Report No. 482, 74th Cong., 1st sess., p. 2. "This bill is a part of a complete and coordinated program of legislation touching all forms of transportation recommended by the Federal Coordinator of Transportation. The ultimate objective of the entire program is a system of coordinated transportation for the Nation which will supply the most efficient means of transport and furnish service as cheaply as is consistent with fair treatment of labor and with earnings which will support adequate credit and the ability to expand as need develops and to take advantage of all improvements in the art. All parts of such a system of transportation should be in the hands of reliable and responsible operators whose charges for service will be known, dependable, and reasonable and free from unjust discrimination." That the line of demarcation as between common and contract carriers might be somewhat obscure, was recognized even in Commissioner Eastman's testimony before the House committee. "The contract carrier operates in much the same way as a tramp vessel on the ocean. It makes a separate contract with each particular shipper; that is the theory of it. The contract may be for a period of time. For example, a contract may be made with a large organization like the Atlantic & Pacific Tea Co. to furnish trucking service throughout the year; or contracts may be made for separate shipments. There are many so-called transportation brokers who undertake to secure such contracts and then they parcel them out among truckers, taking a commission for their services. There are many of the so-called contract carriers, in my opinion, who come pretty close to being common carriers. It is doubtful whether many of them are properly defined as contract carriers. But the distinction is between those who hold themselves out to serve the public and those who do not, but undertake to bargain and deal with individual shippers.' Before the Senate committee he stated: "A common carrier, under the law as I understand it, holds himself out to serve all shippers of the kind that he undertakes to serve within his territory, who may wish to be served by him. He cannot pick or choose, He has to take them as they come along, provided he has the facilities for them. A contract carrier does not undertake to do that at all. He does not hold himself out to carry for all alike. He is just a trader. He goes out and makes bargains with particular individuals or concerns. Those bargains may be long-term contracts. Some of the large industries employ contract truckers on a long-term basis. Or he may undertake to deal with individuals with respect to specific shipments, making contracts for specific shipments. As a matter of fact, the distinction between contract carriers and common carriers may get to be a very tenuous and doubtful distinction, and it has been found, in the case of States which undertook to regulate common carriers alone in the case of trucking, that the contract operations were used to evade the regulations of common carriers, and it was found necessary to have regulation of contract carriers as well as common carriers, in order to cover the field adequately and protect the common carrier operations.' 9 10 Testimony adduced in the hearings before the Senate and House committees. respectively, related, among other things— (1) An oversupply of transportation service. (2) Economic chaos from lack of rate uniformity in the trucking industry. (3) Destructive competition resulting from unsound business practices by individual truckers. (4) Impairment of common-carrier service by unregulated contract-carrier competition. (5) Interference with economic stability in railroad transportation. (6) Disruption of stability of markets. (7) The advent of the "shyster" in the motor-transportation field. (8) Ineffectiveness of State regulation. (9) Undesirable labor practices (with which this memorandum is not concerned, since such problems have been or effectively may be met by specific labor legislation.) Commissioner Eastman testified: "Since 1920, we estimate that the amount of capital which has gone into transportation facilities-which are in any way or another competitive with the railroads--is about equal to the investment in the railroads at that time, and in the 8 Id., at 3. Hearing Before a Subcommittee of The Committee on Interstate and Foreign Commerce, House of Representatives, 74th Cong., 1st sess., on H. R. 5262 and H. R. 6016, p. 41-2. 10 Hearing Before The Committee on Interstate Commerce, United States Senate, 74th Cong., 1st sess., on S. 1629, S. 1632, and S. 1635, part 1, p. 69. same period of time since 1920 the railroad investment itself has increased nearly $6,000,000,000. "Of course, that brought about a great change in the transportation situation, and you are fully aware of what that change has been. It is chiefly conspicuous in the case of highway motor carriers, because paved highways have been constructed in every part of the country, and on those are now operated millions of vehicles which compete in one way or another with the railroads. The railroads are feeling competition in places which for many years were regarded as wholly immune to the competition of other agencies. "Water competition has increased, owing to the construction of the Panama Canal and improvement of inland watherways and the expenditure by the Government during the war upon shipping facilities. "Pipe-line competition has tremendously increased. The pipe lines are now carrying not only practically all the crude oil but also large volumes of refined oil and natural gas. The airplane has come into the situation; and there is a rapid development of electric transmission lines, which indirectly compete with the railroad lines by supplying a form of power which takes the place of coal and curtails the movement of coal. "The result of these changed conditions very naturally has been that there is now a tremendous oversupply of transportation facilities and there has been an extraordinary increase in transportation competition.” He stated, as the first specific objective of the bill, the guarding against a further oversupply of transportation service. In the statement of Robert H. Dunn, member of Michigan Public Utilities Commission, there was included: "One of the most lamentable things that has occurred in connection with interstate transportation-it was born in Michigan-has been connected with so-called 'brokerage' operations: Recaptured trucks, taken by finance companies, and an overzealous salesmanship during the depression on the part of some sales organizations or some automobile concerns, resulting in the selling on false statements of fact, of many trucks to operators on the statement that money could be earned and the so-called 'independent' owner and operator now have several thousand vehicles. I have talked to a number of them connected with interstate transportation, and we caused last summer an investigation to be made, and the result of that information is that we find that many of these people know nothing about transportation at all. They happened to have a little money, say a hundred or two hundred dollars to make the down payment and they went into this transportation business without any knowledge of it whatever. There was not as many as 100 who knew anything about transportation, and there were not 2 out of the hundred who made any money out of it, who have gotten anything out of it. That was the general complaint that has been made to us, and to the Governor of Michigan, and others. "This system has spread quite suddenly through the Central West. I do not know that it is now spreading. The hearings of last spring will have the effect, or a tendency, to check such operations, as it curtailed transportation over lines running 286 miles from Detroit to Chicago. We have had people operating vehicles on a 15-hour schedule who spent about 11⁄2 hours in picking up and about 11⁄2 hours unloading, which means 17 or 18 hours for that transportation operation. It involves the service of the operator, the use of the highway, and danger to the operator and to the private motor-vehicle operator. If that is the motor-vehicle service that we are getting, I think it is time that we should be giving some consideration to what is the need for such transportation.” 12 Further along this line was the testimony of C. E. Jones, representing the Traffic Association and the Chamber of Commerce of Birmingham, Ala., and also various trade associations. "Now, we have had considerable trouble, Mr. Chairman, right in Birmingham, respecting these truck lines taking our goods and promising to protect one rate; but the connecting carrier refusing to deliver the traffic unless he gets just what he wants. Just 2 or 3 weeks ago we had a movement of furnaces out of the Alabama district going into Ohio, where the origin carrier quoted us the commodity rail rates. The origin carrier assured us that we would be protected. He brought the shipment to Cincinnati. There it was to be turned over to a connecting line. The connecting line was to take it to its Ohio destination, and they insisted that the full class rate level be paid them before delivering that shipment." 99.13 11 Supra note 9 at 23. 12 Id. at 54. 18 Id. at 81. Commissioner Eastman also observed: "I state the ultimate objective is, of course, a system of transportation for the Nation which will supply the most efficient means of transport and furnish service as cheaply as is consistent with fair treatment of labor and with earnings which will support adequate credit and the ability to expand as need develops and to take advantage of all improvements in the art. This system of transportation must be in the hands of reliable and responsible operators whose charges for service will be known, dependable, and reasonable and free from unjust discrimination.' 66* * * Private enterprise cannot be expected to operate successfully without profit, and it has been found by experience that an impecunious carrier is usually an unsatisfactory public servant, not only in the matter of rates, but also in service and the proper treatment of labor and safety conditions." "4 * * When we come to the field of transportation performed by motor vehicles, we encounter conditions which do not exist to any extent in the case of the railroads. In addition to the common carrier, those carriers who hold themselves out to serve all of the public along a particular route or in a particular district, you have the contract carriers, who do not hold themselves out to serve the public in that way but merely bargain and deal with individual shippers. And you also have many private carriers; that is to say, trucks owned by individuals or business concerns which transport their own goods and do not carry for others. "So far as the regulation of these private and contract carriers is concerned, it seems to me that the important principle which should govern and which justifies any such regulation is the need for protecting the common carrier who undertakes to serve all the public. The common carrier is the one, it seems to me, that the Government ought, particularly, to foster and protect. Now the contract carrier or private carrier can operate in such a way as to be detrimental, unfairly or improperly, to the interests of the common carrier. To the extent that such conditions exist, the Government is justified in interfering for the sake of protecting the common carrier; and it is on that principle that the regulation of the contract carrier in this bill very largely rests." 99 15 Mr. K. L. Clardy, attorney for truck operators in the State of Michigan, suggested: 66* * * If you do not at the same time see to it that the contract carrier's minimum rates are also regulated, then you might as well forget rate regulation, because the common carrier today, without any rate regulation, gets the business that the 'contract carrier,' so-called, finds unprofitable, or perhaps I should not state it that way, because the contract carrier really knows nothing about whether it is profitable or not. I should say that what he thinks is profitable. "I think the statistics will-even those of Mr. Eastman's report-bear me out that they come today and go tomorrow; that one dies today and two spring up to take his place. Perhaps that may be all right to furnish a few fellows with work to do, but I think we should look at transportation in a larger sense and as a public service rather than the means of finding jobs. That may be granted for a few fellows who want work, but they chisel the rates down so that those who must stay in the business, if the business is to be served lives. If we are going to handle it on that basis, then we had better forget all attempts to regulate." 16 In the Senate hearings Commissioner Eastman stated: 66* * * I believe that this legislation will have the effect of strengthening the position of the common carrier. Certainly I think it should have that effect, because I think it is the common carrier, who undertakes to serve all alike, upon equal terms, upon which the greatest stress should be laid in the planning of motor transportation, and I should like to see it developed and be strengthened. "So far as the private carrier is concerned, at the present time, in interstate commerce, there is no restraint upon his hauling the goods of others. He can haul his own property, and, on a return trip, in order to balance the load, he can move the property of others, and at whatever rates he sees fit to make." 17 Further testimony of Mr. Dunn illustrated the inequities existing between the two types of carriers: * * The contract carrier gets the cream of the business because he goes to the plant, for example, of a large industry and he can make a contract to haul the business of that industry and he makes the contract only if he gets a sufficient |