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Mr. ANDERSON. Please proceed. TESTIMONY OF WALTER J. SHEA, EXECUTIVE ASSISTANT TO

GENERAL PRESIDENT, INTERNATIONAL BROTHERHOOD OF TEAMSTERS, ACCOMPANIED BY JAMES JESINSKI, SECRETARY. TREASURER, TEAMSTERS LOCAL UNION NO. 200, MILWAUKEE, WIS.; WILLIAM F. LYDEN, VICE PRESIDENT AND ORGANIZER, TEAMSTERS LOCAL UNION NO. 25, BOSTON, MASS.; GEORGE T. MUELLER, SECRETARY-TREASURER, TEAMSTERS LOCAL UNION NO. 43, RACINE, WIS.; GEORGE T. ROHRER, INTERNATIONAL REPRESENTATIVE, WESTERN CONFERENCE OF TEAMSTERS, LOS ANGELES, CALIF.; W. C. SMITH, INTERNATIONAL REPRESENTATIVE, SOUTHERN CONFERENCE OF TEAMSTERS, HALLANDALE, FLA.; NORMAN WEINTRAUB, CHIEF ECONOMIST, WASHINGTON, D.C.

Mr. SHEA. I am Walter Shea, an executive assistant to the general president of the Teamsters Union, Mr. Roy Williams. I am here today on his behalf since he was unable to be here, unfortunately, to present to you a brief of the statement that we have already submitted to you.

As you indicated, we have several persons here from the various regions of our international union whom you have already enumerated that are prepared to submit brief statements to the committee concerning the issue that we are here to discuss with you today.

As you indicated also, the chief economist, Norman Weintraub, is here to discuss in some detail the surveys that you I believe have already received from the GAO as well as a recent survey that we have just completed relative to the effects of deregulation in the trucking industry as we know it today.

In June 1980, the Congress passed the Motor Carrier Act after extensive hearings and conferences with representatives of the industry, labor, the Commission, DOT, and, finally, between the House and the Senate. The Senate bill provided for substantial deregulation. The House bill called for regulatory reform. It was designed to avoid radical and destructive changes. It directed the Commission to implement the act with the least amount of disruption to the transportation system.

The compromise which became the Motor Carrier Act of 1980 was based on the House version. It contained a balanced entry provision requiring applicants to demonstrate the ability to provide a useful public purpose responsive to a public demand or need.

The act continued in effect the same requirement that the applicant demonstrate fitness that has been the law since 1935. The Motor Carrier Transportation Policy added to the act contains very specific standards to be observed by the ICC, including meeting the needs of small shippers and small communities; enabling carriers to earn adequate profits and to maintain fair wages and working conditions; and improving a sound, safe, and competitive motor carrier system. It specifically admonishes the Commission not to exceed the authority granted by Congress.

The Commission has largely ignored these restraints in the act and has embarked on decisions, policy statements, rules, and failure of enforcement that are destructive to our motor carrier system and its ability to pay fair wages and maintain reasonable stability for employees.

Specifically, the Commission has adopted a policy and practice or rubber stamping applications for new or extended operating authority. Since the act was passed, it has granted over 23,000 applications; 96 percent of all applications are summarily approved. The other 4 percent must have been lost somewhere in the mailroom.

No effort is made to see if there is a public demand or need or to determine the impact on the profitability of the carriers that serve our shippers. The standards of the act and the transportation policy are totally ignored. The Commission states that since the applicant will increase competition, no other factors need to be considered. The Commission continues to approve automatically applications for new or extended authority despite a decrease in the volume of traffic resulting from the recession. It does not require a showing of need or impose an obligation to serve.

An applicant is assured of a certificate and he can serve only those he chooses. This deregulation policy is thus severely aggravating the normal effects of a recession. The result is too many companies or owner-operators chasing too little traffic.

In the long run, we will have too few carriers offering general freight service. Trucking companies, both large and small with long and efficient records of serving the public, are going broke as never before in history. The ATA figure for carriers that have gone bankrupt or out of business which I believe they tendered to you this morning is now 183 since the act was passed.

Others have higher figures. But that is only the tip of the iceberg. For every carrier that has gone broke, there are more that have stopped serving the general public. Many of our major carriers have closed their terminals, laid off most of their employees, and have discontinued service to small shippers. In a desperate move to survive, they now haul only truckload quantities for larger shippers between major points.

The growing loss of service to less than truckload shippers is alarming and it is the result of the Commission's open entry policy. It is no wonder that our most recent survey of our members working in general freight shows a layoff rate of over 28 percent. This means that approximately 85,000 are on layoff.

I might say that just this year our union recognized and sought to alleviate the serious financial problems of this industry, and just by way of background, if I might digress for a moment, shortly after the enactment of the act in 1980, I believe it was in the late summer or early fall, the major trucking associations that we enter into agreements with served a notice on us to reopen our contract prematurely after approximately 1 year and several months of its inception because of what they felt were effects on this industry attributed to deregulation.

We felt at that time during the course of our discussions with the industry that they didn't make their case. We thought it was premature and did not agree to the reopening of the contract.

However, subsequently, under the direction of our international office, our chief economist, Norm Weintraub, conducted our first layoff survey to try to establish truly the effects of the allegations that the industry had posed to us during the course of the meetings we had with them when they originally requested we reopen the agreement.

As a result of that survey, we felt that-we have come to the conclusion that there were in fact dramatic changes coming about in this industry attributed to deregulation. I have to agree. I cannot say it is solely attributable to deregulation, but surely in a great part to deregulation.

As a result of that, we did reopen the contract in late 1981 and concluded a new contract ahead of schedule early this year. We acceded to the wishes of the carriers and did not insist on an increase in wages other than to offset inflation. This was the first National Master Freight Agreement that failed to include periodic wage increases throughout its 3-year term, in addition to those covering the cost of living. We also agreed to important changes in work rules.

Despite this great effort to help the general freight industry, many companies continue to fail because of the ICC's policies. These include one of the top 10 truck lines in America, Spector-Red Ball, which provided general freight service to much of our Nation and employed more than 7,500 of our members. Relative to the size of carriers in its industry, Spector-Red Ball was larger than Braniff Airlines numerically.

As I stated, many other major carriers have stopped serving the small shippers and the small communities, limiting their operations to truckload traffic. The Commission's open entry policy, while it is increasing competition for truckload traffic in major traffic lanes, is forcing out of business many general freight carriers and thereby decreasing the competitive service that has been available to small shippers and small communities.

The Commission's open entry thus is contrary to congressional policy and the union's effort to improve the profitability of the general freight carriers. The Commission's policy also is contrary to the policy reiterated by President Reagan against actions destructive of the industry.

Cutthroat rate cutting permitted by ICC is bankrupting more and more carriers as we sit here today. Another consequence of the Commission's open entry policy is the severe rate cutting and discounting that threatens the survival of all but those companies with large financial resources.

Some companies, with big bankrolls, which were given nationwide authority by the Commission, decided to buy their way into the new markets with rate discounts ranging up to 50 percent. Competing carriers sought a hearing before the Commission to establish whether below cost and discriminatory rates would be permitted. The Commission, in a highhanded decision, refused to even hear the evidence. I will not dwell further on this vital issue because I was told earlier that the ATA and several of the carrier witnesses earlier today set forth this problem very, very clearly and completely.

The Commission has refused to enforce the obligation of a carrier to provide service to all shippers covered by its operating authority. In fact, the Commission has insisted on granting carriers authority where applicants did not ask for and which they do not have the ability or intention to serve. If you want service-particularly competitive service for the shippers and communities in your district, you had better tell the ICC to enforce the common carrier obligation. Otherwise, the carriers will provide only that service that is the most profitable.

In passing the 1980 act, you did not change the fitness test. You did not change the common carrier obligation. But the ICC, nevertheless has ignored both. It has not been making and doesn't intend to make carriers provide service to all who reasonably demand it.

Our union is convinced that the 10 actions set forth below are required to comply with the letter and the spirit of the Motor Carrier Act of 1980. The first eight points are to be taken by the Commission; the ninth must be taken by the Secretary of Transportation; and the tenth by Congress.

With your permission, Mr. Chairman, I don't think it is necessary to reiterate those points unless you feel I should do so. I will be happy to.

Mr. ANDERSON. At this time we will have to recess to vote. We will resume in about 15 minutes.

[Recess.)

Mrs. KENNELLY (presiding]. I would like to reconvene the subcommittee meeting of surface transportation.

I believe, Mr. Shea, you have finished?
Mr. SHEA. No; I am about to.

I stated before the interruption that we did have 10 points that we have tendered to you, and I don't think it is necessary for us to read them unless you want me to.

For the sake of brevity, we can just

Mrs. KENNELLY. Mr. Shea, we have the 10 points and the committee will review these. Feel free to read them, but if you want to just leave them in the record, fine. Why don't you comment on them?

Mr. SHEA. You want me to go forward with them?
Mrs. KENNELLY. Sure.

Mr. SHEA. The first point-I am glad you said that, because I think this is the most significant part of our testimony. I would just as soon have them on the record orally.

First, before issuing a certificate authorizing motor carrier service, the Commission should be certain that the applicant is physically and financially able to provide service coextensive with the certificate of authority and has not violated the Commission's rules or DOT's safety and insurance regulations. The Commission should also require evidence that the proposed service will serve a useful public service responsive to a public demand or need.

In all of its actions, the Commission should comply with the National Transportation Policy, section 10101, including its requirements to encourage fair wages and working conditions; to enable carriers to earn adequate profits, attract capital and maintain fair wages and working conditions.

Second, the Commission should adopt a policy that carriers shall be required to provide service on demand, coextensive with their certificate. As a corollary, the Commission should not issue a certificate to a carrier which exceeds the scope of that applied for or which exceeds the applicant's ability to serve within 90 days after issuance of the certificate.

Third, the Commission should commence and continue to monitor the operations of carriers to make certain they are fulfilling their common carrier obligation and are providing service to small shippers and small communities in their service areas. Enforcement proceedings are needed as sanctions.

Fourth, the Commission should adopt a policy statement requiring that rates published by carriers (a) must be at or above fully distributed costs; and (b) shall not discriminate against any shipper within the scope of the carriers' certificate by affording shippers in one area lower rates than those available to shippers in another area.

Fifth, every decision of the Commission implementing the Motor Carrier Act of 1980 explicitly shall consider and comply with the admonition in section 3(a) that the act is to be implemented with the least amount of disruption to the transportation system.

Sixth, the Commission should promptly ascertain and maintain on a current basis the total costs of owner-operators whose services are used by regulated carriers in providing service to shippers. These costs are required by section 10701 to be included by the Commission in determining adequate revenue levels and by the National Transportation Policy, section 10101. The Department of Agriculture publishes such costs on a monthly basis for owner-operators engaged in hauling agricultural commodities.

Seventh, the Commission should implement section 10527 by requiring written contracts for the movement of exempt commodities. The Commission has declined to require such contracts even though it has recognized in its fuel reimbursement program program that owner-operators are in a weak financial position and lack the bargaining power to improve this position. It was congressional recognition of owner-operators' weak bargaining position that led to the enactment of section 10527.

Eighth, the ICC and the Supreme Court held for more than 20 years that single source leasing of an owner-operator and his equipment constituted for-hire transportation requiring ICC authorization. By a policy statement in February 1982, the Commission overturned these decisions, stating that single source leasing is now private carriage.

It assigned the Motor Carrier Act of 1980 as the reason for this radical departure from historic practice, despite the fact that the 1980 Act did not change the definition of private and for-hire carriage. The act thus provides no authority for single source leasing.

The Commission action transforming for-hire carriage to private carriage is contrary to the congressional findings-section 3(a) of the 1980 Act—which direct the ICC not to exceed the power vested in it by the Interstate Commerce Act and to implement the act with the least amount of disruption to the industry.

At a minimum, consistent with its findings regarding the lack of bargaining power of owner-operators, the Commission should have required that single source leasing contracts should be in writing so that shippers' ability to exploit the weak financial position of owner-operators would be thereby reduced.

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