GEORGIA FREIGHT BUREAU, INC., Senator ROBERT PACKWOOD, Senate Commerce Committee, U.S. Senate, Washington, D.C. DEAR SENATOR PACKWOOD: The Georgia Freight Bureau will not be able to be in Washington December 14 to present its views at your oversight hearing on the Motor Carrier Act of 1980. You will find enclosed an article we wrote for the December 6 issue of Traffic World expressing our views on the Motor Carrier Act. Please enter these views of the Georgia Freight Bureau in the public record. Enclosure. NAT WELCH, Executive Vice President. SOUTHEAST SHIPPERS' REACTIONS TO 1980 CARRIER DEREGULATION LAWS DISCUSSED Much has been written about the opinions of motor carriers and railroads about deregulation, but little about what shippers and receivers of freight-the people who pay the bills-think about it. The Georgia Freight Bureau serves 435 southeastern shippers and receivers and has its hand on the pulse of shipper reaction to deregulation. The freight transportation industry is the oldest regulated sector of the American economy. This dates from the passage of the Interstate Commerce Act of 1887. The industry received a jolt when Congress two years ago passed the Staggers Rail Act and the Motor Carrier Act of 1980, the two most important transportation laws passed by Congress in a single year in this country. This legislation partially deregulated both the motor carrier and the rail industries. What has been the effect? From the shippers' viewpoint, there have been pluses and minuses. Shipper benefits from the Motor Carrier Act of 1980 stem largely from one word-competition. The Motor Carrier Act of 1935 established very tight entry requirements, franchising specific routes to carriers. Consequently, truckers completed in service but not on rates. In fact, the Interstate Commerce Commission prohibited discussion of lower rates in entry cases. Rate competition and ease of entry are two hallmarks of the Motor Carrier Act of 1980. Eighteen months ago, some truckers in the Southern Motor Carriers Rate Conference began offering 10-per-cent discounts off class rates for freight moving in single line service. Recently, one carrier offered a sizable 26 per cent off class rates between Atlanta-Birmingham and Atlanta-Memphis. Other discounts are offered for multiple pickups and for delivery to a carrier's dock. Discounts have been a big benefit to shippers! Congress had concerns about antitrust immunity granted motor carriers to meet in rate bureaus to establish rates_collectively and consequently established the Motor Carrier Rate Making Study Commission to report to Congress next year on the future of rate bureaus. The Georgia Freight Bureau filed testimony with the Motor Carrier Rate Study Commission supporting the continuating of rate bureaus. "Collective ratemaking under the Motor Carrier Act of 1980," the Georgian Bureau said, "has not inhibited competitive pricing, which has actually accelerated under current conditions. One need only look at the plethora of rate discount plans to find that this is true. This explosion of price reductions has occurred through rate bureaus under the existing collective ratemaking process.' Shippers have also benefited from the relaxation of entry controls, Prior to 1980, motor carrier operating rights were very valuable commodities with one carrier paying big money for the rights of another. This practice reached its ridiculous extreme when the operating rights of a bankrupt carrier, Associated Transport, sold for $21 million five years ago. a grossly unfair burden to be paid for by the shippers and ultimately the public. The Motor Carrier Act of 1980 substantially opened up entry which multiplied competition and reduced the value of operating rights to zero. Many carriers aggressively expanded their scope of operations opening new terminals and going for the heavy freight corridors. This meant two big benefits for shippers: (1) More competitive options and (2) freight could move on long hauls over one carrier instead on two or three-hence a more efficient freight system. During the congressional hearings leading up to the Motor Carrier Act of 1980, motor carriers put great emphasis on their obligation to serve small communities as part of their responsibility under the ICC franchise system. Congress was very concerned about the small town service issue and will conduct oversight hearings to monitor this area. The Georgia Freight Bureau has had no complaints from members on small town service so far. With the recession, traffic is down and carriers are scrambling for business, even the small town sector. We will have to wait until business picks up substantially to evaluate this issue. The recession and dergulation have hit the motor carriers very hard. Four out of five general-commodity motor carriers lost money the first quarter of 1982. The figures were slightly better in the South where the Southern Motor Carriers Rate Conference, which tracks statistics on 81 southern “frame” carriers, reported that 42 to 50 per cent of SMCRC carriers lost money the first six months this year. In some cases the losses have forced the shut-down of national and regional carriers. Barnes Freight Line of Carrollton, GA., a primary Georgia intrastate feeded carrier since 1930, closes its doors in June. The common carriers have lost a sizable portion of their freight, especially truckloads, to private, contract, irregular route carriers and to rail piggyback. The common carrier system is a national asset in the U.S. How much more freight erosion from commom carriers can take place without irreparably harming our common carrier system is a serious question the nation must fact up to. While shippers have fared well under the Motor Carrier Act of 1980, benefits have been severely restricted under the Staggers Rail Act. The prime purpose of that act was to remove the heavy hand of regulation from the backs of the railroads so they could compete. Congress was tired of financing bankrupt railroads like Conrail. Conrail management aggressively used the pricing freedoms of the Staggers Act. This was an important reason for Conrail making a profit in 1981, its first in seven years. The biggest benefit to shippers under the Staggers act has been much lower rates on piggyback traffic. In March, 1981, the ICC completely deregulated piggyback rates. Using this price flexibility, the railroad aggressively went after highway truckload traffic especially on the long-haul, heavy traffic corridors like Atlanta to Chicago. In the last 18 months, general rail rates have advanced 13 percent and piggyback rates have deceased a conservative 12 percent-a net saving of 25 percent. A big factor producing lower rates has been the favorable volume contracts shippers agents, freight forwarders, and consolidators have been able to negotiate with railroads. There has been little reduction in piggyback rates on short hauls, like Savannah to Atlanta, simply because the margins are thin. Big shippers have been able to negotiate contract rates with the railroads under the Staggers Act but this has been of practically no benefit to the small shipper. The Staggers Act accelerated the merger procedures before the ICC. In late 1980, the Family Lines and the Chessie System were merged, creating a giant north-south rail system, the CSX. The Southern and the Norfolk and Western countered by creating the Norfolk Southern Corporation (NS) which came into being on June 1. The Georgia Freight Bureau is bullish about the long-run benefits of these two big mergers but is anxious to see these railroads move forward with promised benefits such as North-South run-through trains and lower freight rates on grain from the midwest to Georgia poultry and cattle farmers made possible by consolidation economies. NS and CSX need to improve TOFC and COFC service between South Atlantic ports and the mid-South and mid-West. While practically all sectors of the economy are suffering from the recession, profits are up sharply for Norfolk Southern which earned $269 million the first half of 1982, up 25 per cent from the same period in 1981. CSX's first half earnings were $118 million, down 5.6 per cent from 1981. The recession caught up with these two railroads, who experienced a profit drop in the third quarter. The biggest drawback shippers have experienced with the Staggers Act is the lack of protection for captive shippers (e.g. coal, grain, pulpwood, lumber, fertilizer and kaolin), who have no viable transportation alternatives, against unreasonable rail rates. Shippers fought hard for protections against railroad monopoly pricing. But Staggers safeguards have proven to be a mirage. The ICC has set such tight guidelines for determining who is a captive shipper, a shipper has yet to prove before the Commission he's captive, a prerequisite in any rate investigation. In the meantime, profits of the Southern carriers continue to be healthy. The National Industrial Transportation League spells out other shipper complaints with the Staggers Act. These are: (1) Cancellation of joint routes through competitive and economically viable gateways; (2) Failure of the railroads to implement Staggers reforms on reciprocal switching and trackage rights; (3) No provision for downside adjustment in quarterly rate change in times of recession and falling prices; and (4) no pass-through or productivity improvements made by railroads until "we get as healthy as we want do be." State regulatory bodies, such as the Georgia Public Service Commission, were virtually stripped of all their powers over railroads. The Staggers Act mandated the ICC to take over intrastate rate control another shipper loss. After the passage of the Staggers Act, the Southern Freight Association discontinued all shipper hearings-an additional loss under the Act. A recent ICC decision has forced the SFA to reinstitute shipper hearings under tight guidelines. What is the future role of the Interstate Commerce Commission in this modified deregulated environment? Some advocate abolishing the ICC. With the accelerated movement of rail mergers in the last three years, we could well end up with only four or five railroads in the next few years. This results in monopoly power! The Georgia Freight Bureau advocates continuation of the ICC as the "commerce court" of the nation to balance the needs of shippers and the public against that of the railroads. Although the ICC has virtually abandoned the need for proving "public convenience and necessity" in motor carrier entry cases, the Georgia Freight Bureau believes the ICC has an important role to play in making sure that motor carriers are "fit, willing and able" and have the equipment, experience and proper insurance to do the job the ICC certificates each carrier to perform. How has all this change affected the Georgia Freight Bureau? The bureau, which celebrated its 80th birthday this spring, represents 435 shippers and receivers in Georgia. Two indices of the bureau's effectiveness are new members signed and overcharges collected from railroads and motor carriers. In the last 18 months, the bureau has added 78 new members and has recovered $740,657 in overcharges. Collections for 1981 were 56 per cent over 1980. June, 1982, broke all bureau records with $114,682 collected. Changes are taking place so rapidly as a result of the partial deregulation of the motor carrier and rail industries, shippers and receivers of freight need a professional organization to turn to hence the Freight Bureau is busier than ever. The cornerstone is a strong staff of ten professionals with 264 years of transportation experience. Our present staff includes Traffic Manager Henry Moyers (six years with the bureau and 18 years with motor carriers); Bill Fuller (12 years with the bureau), Vinson Wall (seven years with SMCRC and 10 years with the bureau), Sam Graham (47 years with the Central of Georgia and the Southern Railway and five years with the bureau), John Youngbeck (Union Pacific Railroad and 3 years with the bureau), Laura Howell (37 years with motor carriers and three years with the Bureau), J. W. Dunn (38 years experience with motor carriers), Stew Gibson (45 years with the Norfolk and Southern and the Southern Railway), and Stan Eddy (25 years' experience with motor carriers and the SMCRC). Another source of strength is a strong board of directors. The bureau was called the Atlanta Freight Bureau from 1902-1976 but changed its name six years ago to the Georgia Freight Bureau. This past year Arthur Gignilliat, president of the Savannah Electric & Power Co., and Frank Dennis, president of the Augusta Iron & Steel Works, were elected to the board for stronger state-wide representation. Rapid rate and service changes are increasing members' needs for fast, accurate freight rates and technical transportation advice. The largest tariff library in the Southeast gives the bureau staff the capability of quoting rail and truck rates on almost any commodity moving by regular route common carrier nationwide and to and from Canada. To stay abreast of tariff changes, the bureau substantially increased its tariff budget and doubled its tariff filing personnel. Another of the bureau's keystone services is the representation of shipper members before rate bureaus and regulatory bodies such as the Georgia Public Service Commission and the Interstate Commerce Commission. The bureau saves Georgia shippers millions of dollars each year in contested cases on rates. Following the bureau's protest, the Southern Motor Carrier Rate Conference cut back by $55,440,000 its April, 1981, rate increase. MacFarlane & Co., management consultants, recently completed a three- to fiveyear strategic plan for the bureau. MacFarlane surveyed members by mail and conducted 99 personal interviews with members, carriers, organizations, and government executives. They recommended that the bureau continue its present successful course, provide services in import/export and small package transportation and pursue adding a small computer for rate statements and office administration. The Airline Deregulation Act was passed by Congress in 1978. On his retirement as vice-chairman of Delta Airlines, Richard Maurer recently observed that the airline industry will probably have to go through two complete business cycles before an accurate appraisal can be made of airline deregulation. The Georgia Freight Bureau believes that this is probably true of the freight busi ness. TURNEY & TURNEY, Washington, D.C., December 16, 1982. Hon. JOHN C. DANFORTH, Chairman, Subcommittee on Surface Transportation, Committee on Commerce, Science, and Transportation, United States Senate, Washington, D.C. DEAR SENATOr Danforth: Mr. Reese Taylor, Chairman of the Interstate Commerce Commission, testified December 14, 1982 during oversight hearings before the Surface Transportation Subcommittee. His statement regarding a decline in the number of consumer complaints the ICC has received prompted a number of questions and comments from the Subcommittee members. The Motor Carrier Lawyers Association believes Mr. Taylor's remarks merit careful examination in light of certain facts not brought out during his testimony. As Chairman of MCLA's Legislative Committee, I would like to highlight the extenuating circumstances not mentioned. As discussed on page 12 of MCLA's enclosed written statement, the decline in the number of consumer complaints about motor carrier service is attributable, at least in part, to two obvious factors the ICC chooses to ignore: it has closed off a major avenue of communications with the public, terminating its 800-number "Hot Line" service in 1981; and it now discourages consumer complaints by refusing to investigate and resolve the vast majority of those it does receive. There are two additional reasons for this decline. First, according to ICC statistics, a large number (if not most) of the consumer complaints about motor carrier service had been directed at household goods carriers. Congress, itself, has had a hand in dramatically reducing these complaints. The Household Goods Transportation Act of 1980 and the ICC's subsequent regulations adopted in 1981 and 1982 to implement that Act impose stricter obligations on household goods carriers in dealing with the public and ended many motor carrier practices that had led to consumer abuses. The Act also puts in place voluntary dispute settlement programs that obviate ICC involvement in handling consumer/carrier conflicts. Second, the economic conditions of the country during the past 18 months have left the motor carrier industry with far less traffic to handle; reduced service produces fewer complaints. The raw figures to which Mr. Taylor alludes in his testimony may show a decline in the overall number of consumer complaints about motor carrier service generally for the reasons explained above. At the same time, we have reason to believe the number of complaints about the service of non-household goods motor carriers of property remains very high. The ICC itself reports that recent complaints of this nature have gotten so out of hand they have virtually swamped one of its Regional Offices where the brunt of the consumer complaints are now lodged. This phenomena is graphically demonstrated by an article entitled "A Field Day!" appearing in the November 1982 issue of Insights, the Commission's internal communications publication. A copy of this issue is attached for your information. See particularly page 7. MCLA urges the Surface Transportation Subcommittee not to accept the ICC's citation to declining complaint figures at face value. Given careful scrutiny, they will not, we submit, substantiate greater public satisfaction with the workings of the Motor Carrier Act of 1980. Sincerely, Enclosure. KIM D. MANN, Chairman, Legislative Committee. STATEMENT OF JOHN S. FESSENDEN, PRESIDENT, MOTOR Carrier LAWYERS ASSOCIATION The Motor Carrier Lawyers Association (MCLA) welcomes this opportunity to address the Senate Commerce Committee in its continuing oversight of the Motor Carrier Act of 1980. At the time of last year's oversight hearing, we submitted written testimony in which we cited severe shortcomings in the ICC's administration of the new Act. We regret to say that the situation at the ICC has not improved in the year that has passed. Our Association is made up of several hundred lawyers who practice before the Interstate Commerce Commission, other government agencies, and state and federal courts, representing motor carriers, as well as shippers and receivers of freight. The nature of our practice makes it mandatory for us to keep up to date on legislative developments and, just as importantly, on the way in which the ICC is administering, or failing to administer, the law. Our clients must be advised how best to proceed in these difficult times of recession and deregulation. The point we wish to make to this Committee is that in several critical areas the ICC has gone far beyond the Congressional mandate of the Motor Carrier Act of 1980 and has opted for virtually total deregulation, an option Congress considered and rejected when it passed the Act. We urge the Committee to remind the ICC that, although the purpose of the Act is to ease entry and to place greater emphasis on competition, it is not intended as a signal to the ICC to surrender its regulatory responsibilities in reliance upon economic theories the ICC styles as "marketplace forces." The need for the ICC to restrain further deregulatory efforts and to function in strict compliance with the law and with the intent of Congress is particularly important now when the economic picture in the trucking industry is so bleak. Every day, motor carriers are closing their doors or severely curtailing service. In particular, many carriers have been forced to abandon their transportation of smaller shipments-less-then-truckload freight-an action which penalizes small shippers and forces trucking employees out of work. A list of some motor carriers which have entered bankruptcy or have abandoned or sharply curtailed service since passage of the 1980 Act will, we understand, be attached to the prepared Statement of Bennett Whitlock, President of the American Trucking Associations. A list of additional motor carriers that, as of the date of the compilation of the corresponding ATA list, June 23, 1982, fall within one of these categories in attached to this statement. At this critical juncture the ICC should be administering the Act in a manner which fulfills the requirements of the national transportation policy, including "the development, coordination, and preservation of a transportation system that meets the transportation needs of the United States. . ." The ICC's reliance on competition alone and for its own sake is an abondoment of its responsibility under the Act. In advising carrier and shipper clients, lawyers are guided by the Act and its legislative history. In many instances, the Act says one thing, while the ICC's pronouncements and apparent policies point toward a different conclusion. The client must ponder this disparity and must decide whether to follow ICC policy and thus risk violating the Act. There should be no such conflict. The ICC should stick to the law as it was written and leave policy making to Congress. Our sentiments were expressed succinctly by Chairman Taylor of the ICC in a position paper he issued in August, 1981: the Commission has strayed from the Congressional intent of the Motor Carrier Act of 1980. In its effort to implement quickly the provisions of the new legislation, the Commission embarked on a course which would ultimately lead to total deregulation contrary to the express prohibition of Congress.1 The conflict between the Act and the ICC's interpretation of it is both real and serious. It presents to attorneys attempting to give clients sound legal and practical advice an impossible dilemma and places clients in a worse situation, if that is possible. Where the ICC grants at least tacit approval to an action which appears contrary to the express language of the law, and where a carrier is under stong competitive pressure to take the action, the conflict is clear. No lawyer ethically may advise the client to violate the law, yet the lawyer is faced with advising the client of the practical reality: since the ICC is the primary interpretive authority, the violation will not be so characterized by the ICC. Obviously, a rational regulatory system should not leave the attorney and his client confronted with the problem of a government agency refusing to adhere to the provisions of the statute which it has the duty to administer. Our written testimony before this Committee a year ago describes the ICC's sweeping efforts to effect unlimited entry into the motor carrier field and its refusal to consider whether potential entrants were fit to serve the public and threatened the stability of the motor carrier industry. Today we must report that things are no better. We would like to focus on three areas in which the ICC has failed to adhere to Congressional policy-areas we believe require this Committee's attention. The first area concerns the duty of a motor common carrier to serve on a common basis all members of the public it is authorized to serve, a duty that is not fulfilled if a common carrier-with the ICC's blessing-may pick and chose among shippers and receivers. The testimony of the ATA and the Teamsters before this Committee will touch upon this critical area. Significantly, the testimony of the ICC and other federal agencies will, we believe, avoid it. 1 Position Paper of Chairman Reese H. Taylor, Jr., Regarding Implementation of the Motor Carrier Act of 1980, at 10. |