The second area concerns the requirement that a motor common carrier be fit, willing, and able to provide the service it proposes. Today, the ICC makes no meaningful effort to determine if the carriers to which it so liberally grants broad, unrestricted authority will act toward the shipping public in a responsible manner. The third area concerns the ICC's failure to regulate rates in a manner which will restrain unreasonable and discriminatory, as well as predatory, pricing.

THE COMMON-CARRIER DUTY TO SERVE

Under common law, a common carrier is obliged to serve without discrimination all shippers (or passengers) within the area of its holding out. The common law remains in effect. It was not repealed or replaced by the Motor Carrier Act of 1935 or the Motor Carrier Act of 1980. Since passage of the 1935 Act, the ICC and the courts have measured a common carrier's holding out-its common law duty to serve the public—by the certificates of public convenience and necessity which are the statement of the carrier's lawful authority. In 1970, the ICC affirmed that measure and found that an interstate motor common carrier could not reduce its holding out through restrictive tariffs.2

It is essential to recognize that the 1980 Act did nothing to alter the equation between a motor carriers' certificates and its duty to serve the public with an even hand. Section 11101(a) of 49 U.S.C. states:

A common carrier providing transportation or service subject to the jurisdiction of the Interstate Commerce Commission under Chapter 105 of this Title shall provide the transportation or service on reasonable request. In addition, a motor carrier shall provide safe and adequate service, equipment, and facilities.

Section 10922 requires that the grant of a certificate be based on both evidence of the applicant's fitness, willingness, and ability to perform the proposed service and "evidence presented by persons supporting the issuance of the certificate, that the service proposed will serve a useful public purpose, responsive to a public demand or need."

Any doubt that the 1980 Act retained the common carrier's duty to serve fully and fairly all shippers within its certificated authority was laid to rest by Congressman Shuster of Pennsylvania, a member of the House Committee on Public Works and Transportation, when he spoke to the House about the new legislation as floor leader of that bill:

We were very mindful of this problem and for that reason this bill does not go the whole way with regard to deregulation. This bill does provide, and this is an extremely important point, this bill continued to provide for the common carrier obligation. If a common carrier today has a certificate requiring him to provide service to a particular area, be it rural or urban, he has the obligation under this legislation and that obligation continues. That is an important aspect of the legislation before us. (126 Cong. Rec. 5351 (1980))

Despite this explicit directive, the ICC, in a January 1981, warned that it was ready to accept limitations on a common carrier's certificate as the measure of the service it was required to provide. In a notice of a rulemaking proceeding,3 the ICC proposes to allow carriers to limit their duty through advertising tariff publication. The ICC argues that the new Act forces it to issue certificates which are broader in scope than the applicant's "immediately proposed operations." Thus, according to the ICC's reasoning, if the carrier were obligated to provide service throughtout its cerfificated area, it faced potential violations of its common carrier duty for failure to do so. The ICC referred to this alleged conflict between the scope of a carrier's certificate and the scope of its holding out as a “Catch 22 of unusual proportions." Rather than conform the certificate to the public need demonstrated by the carrier applicant, the ICC proposes a solution in direct contravention of the law: It remains then only to disconnect the issue of holding out from the issuance of certificate authority, which requires foremost the designation of an acceptable substitute for the certificate.4

In his August 1981 position paper, at page 9, Chairman Taylor summarized his attitude toward the common-carrier duty to serve. He stated:

In oversight hearings held by Congress during June of 1981, the Commission was roundly chastized for its practice of giving motor carriers much greater authority than they had sought. Congress made clear that while it did not want the Commis

2 Restrictions on Service by Motor Common Carriers, 111 M.C.C. 151 (1970).

3 Ex Parte No. 3, MC-77 (Sub-No. 3), Elimination of Certificates as the Measure of Holding Out, 46 Fed. Reg. 8604.

4 Supra, note 3.

sion arbitrarily to restrict grants of authority, it certainly did not want the Commission unilaterally to grant substantially more authority than requested by an applicant or warranted by his supporting evidence. As previously pointed out, Congress made it abundantly clear the common carrier obligation was not to be eliminated or diluted.5

Chairman Taylor went on to cite examples of ICC authority grants which were broader than the authority requestd by the carrier. He then stated, still at page 9: These decisions have certainly made it difficult for the Commission to enforce the common carrier obligation-an important cornerstone of the Commission's responsibility to protect the public interest.

MCLA was heartened by those remarks of Chairman Taylor. Unfortunately, he appears to have shifted his position. In a letter of June 24, 1982, Congressman Shuster posed to Chairman Taylor as a followup to his oversight testimony in the House seven questions dealing with the Motor Carrier Act of 1980. The first question was: (1) Congress made it clear in enacting the Motor Carrier Act that the common carrier service obligation was to be observed and enforced. What enforcement program is the Commission progressing to assure that motor carriers are meeting their service obligations to the full extent of their authority?

Chairman Taylor's answer was contained in his letter of August 4, 1982, to Congressman Shuster. In essence, Chairman Taylor argues that the ICC need do nothing to enforce the common carrier duty because service levels are satisfactorily high. He refers to the still-pending rulemaking proceeding and now endorses the ICC's position. We do not know what has caused Chairman Taylor to retreat from his unequivocal support of the common-carrier duty. His answer to Congressman Shuster strongly suggests that when the ICC issues its decision in the rulemaking proceeding it will curtail the common-carrier duty.

Even today, the ICC impedes that duty by issuing grants of authority broader than the authority sought by the applicant. This procedure virtually assures that it will be impossible for the applicant to serve, adequately and without prejudice or discrimination, shippers located within the scope of the certificate but beyond the applicant's operating proposal. Congressman Shuster addressed this problem specifically in his second question:

(2) The Motor Carrier Act requires an applicant to demonstrate that it is fit, willing and able to provide a proposed service. Can you tell my why the Commission persists in requiring carriers to accept certificates substantially broader in scope than the authority they request?

Once the Commission has granted authority to a carrier broader in dimension than demonstrable need for service or a carrier's fitness, do you require that carrier to provide responsive service to the full extent of the authority?

Chairman Taylor's answer begins by assuring Congressman Shuster that the ICC no longer grants authority broader than that sought by the applicant. However, this is not the case, and there are, almost every day, examples of this practice, which other Commissioners readily concede. Chairman Taylor goes on to admit that it is impossible to require a carrier to serve the full scope of its certificate, if the carrier "was compelled to accept authority broader than requested. . ." Thus, we have a problem of the ICC's own creation, coupled with a refusal to deal with that problem. The answer is straight-forward. This Committee should demand that the ICC grant certificates which are strictly commensurate with the demonstrated public need and that thereafter the ICC strictly enforce the carrier's duty to serve fairly and without discrimination all shippers within the range of that certificate.

Any limitation by the ICC of the common-carrier obligation to serve would violate the Motor Carrier Act of 1980. Chairman Taylor's answer to Congressman Shuster is unsatisfactory. MCLA urges that there should be no diminution of that obligation-through rulemaking or otherwise.

5 Id.

6 Commissioner Heather Gradison publicly condemned this common practice in speeches before ATA conferences on October 18 and 19, 1982. First confirming Commission commitment to freer entry, she then noted that, "however, in some cases, the Commission has granted an applicant more authority than it requested." "I disagree with this," she said. She registered her official opposition to the practice in her dissenting opinion issued this month in Docket No. MC158286 (Sub-No. 8), M. T. Truck Line, Inc.-Substituted Motor-For-Rail Service, one of many recent cases in which the Commission has elected to grant authority broader than that requested. In one case, Docket No. MC-159474, U.S. Express, Inc., the Commission, on June 24, 1982, unilaterally expanded applicant's request to serve the facilities of one shipper, Ralston Purina, to a nationwide unrestricted grant of general commodity authority to serve the public generally on a non-radial basis.

The pendency of the rulemaking proceeding has not influenced the astonishing rate at which the ICC grants authority. Virtually 100 percent of the applications for motor carrier authority filed with the ICC are approved in whole or in substantial part. Since a large number of these authorities are very broad, the applicants are likely to assume they are free to serve only such portions of them as they choose to

serve.

At part of MCLA's 1981 oversight hearings, we stated, quoting Commission sources, that of the more than 7,000 applications which became administratively final during the period July 1, 1980 through March 31, 1981, not one was denied in whole or in part because an opposing carrier had demonstrated a grant would result in harm to existing carriers contrary to the public interest. Despite the fact that thousands of additional applications have been processed by the Commission since March of 1981, the statement is still true. MCLA does not believe Congress intended the Commisison to adopt an entry policy which in reality gives protestants no chance to prove their case. An unequivocal statement by this Committee is needed: the ICC must be instructed to follow sections 11101(a) and 10922 of 49 U.S.C. as plainly written and require both reasonable and nondiscriminatory service throughout the scope of a common carrier's existing authority and a showing of fitness and public need for any new authority granted.

The ICC's current policy to ignore the common carrier duty to serve inevitably results in loss of services to small communities. If carriers are free to pick and choose the freight they are willing to handle and the towns they are willing to serve, the small shippers and out-of-the-way towns will either lose service or pay an exorbitant premium for any service offered. It is anticipated that witnesses for the Teamsters Union will provide a long list of Colorado towns that have been left without any general freight service. The ICC's so-called "study" of small community service suffers from the statistical insignificance of its sample size and from the failure to contact shippers who had been relying on one or more of the dozen or so major LTL general commodity carriers to have shut down those operations since July 1980. That consumer complaints about motor carrier service were allegedly down in 1981 should be of no surprise. The ICC terminated its consumer "hot line" in 1981 and does little or nothing about those complaints that are received.

The courts have already recognized in several instances that the ICC's grants of authority are too liberal. But a case-by-case review in the courts of hundreds of misdirected ICC decisions is a poor substitute-expensive, time-consuming, and impractical-for the ICC doing its job in the first instance. This Committee should see that the common carrier duty is recognized and not diminished by the new Act and that the Act is followed as written not as the Commission might wish it to be.

FIT, WILLING, AND ABLE

The Motor Carrier Act of 1980 modified section 10922 of 49 U.S.C. so that it now requires the ICC to find that an applicant for motor common carrier authority is "fit, willing, and able—(A) to provide the transportation to be authorized by the certificate; and (B) to comply with this subtitle and regulations of the commission." Today, the ICC requires no showing of willingness and only a pro forma indication of ability.

In the area of fitness the situation is even more serious. Fitness measures the carrier's responsibility toward the public it serves. A finding of fitness should reflect the carrier's demonstrated capacity to operate in a manner which does not jeopardize the public-financially, from a safety standpoint, or otherwise. The present law requires no less.

Nonetheless, the ICC has issued a series of decisions which eliminate financial fitness as a requirement, thus abandoning a critical element of fitness which the courts and the ICC have demanded since passage of the Motor Carrier Act of 1935. All the ICC requires of an applicant for new or expanded authority to prove fitness is an absence of safety violations and no showing the applicant is likely to engage in persistent and flagrant violations of the law and the ICC's reglations. In lieu of a showing of financial fitness, the ICC adheres to the dubious economic

7 Associate Director Richard Lewis of the ICC's Office of Proceedings placed the ICC's entry policy in perspective during a speech to a meeting of the Association of ICC Practitioners on September 14, 1982: Today you have a more difficult time getting a driver's license than an ICC certificate. There has been a lot of talk about what our grant rate is, but I think it is really 100 percent. It seems to me that the only people not getting their rights forgot to sign their name on the form or didn't include their check.

8 See, e.g., No. MC-135070 (Sub-No. 182), Jay Lines, Inc., extension-General Commodities, Nationwide (September 28, 1981).

9

theory that competition will prove an adequate substitute, because there will be other carriers eager to fill in for a carrier which fails financially. This is small comfort to a shipper whose freight was in the carrier's hands at the time of failure, or which has valid claims for loss or damage pending against the failed carrier.

The ICC's view of the reality of the marketplace as a panacea for all disruptive effects of its blind deregulatory policy is erroneous. It cannot be assumed another carrier is or will be fit, willing, and able to take the place of a carrier that fails because of inadequate finances or for any other reason. A carrier and the shippers and consignees it serves over the years build up a relationship. It is destroyed when the carrier goes out of business. It is often expensive and difficult for shippers and consignees to find a replacement. With general freight carriers it may be impossible. What new carriers have come in to replace Spector-Red ball, TIME-DC, Johnson Motor Lines, and Wilson Freight? The ICC's attitude ignores the important carriershipper relationship and thus ignores a basic need of the shipping public: consistent, dependable motor carrier service.

The ICC also ignores the impact on the carrier employees, who lose their jobs when carriers fail. What will "the marketplace" do for these people? Rather than foisting financially unit carriers on the public-a public which rightfully should be able to assume the carrier's certificate indicates a fitness to serve the ICC should assure itself of the carrier's financial ability before it finds the carrier fit, willing, and able to provide the proposed service.

The ICC's determination to do away with financial fitness and operational feasibility finds no support in the new Act. In the frequently mentioned 1981 ATA case, 10 the Fifth Circuit noted the statement of the House of Representatives that broad policy determinations respecting entry standards "should be made by Congress and should not be left to the discretion of the Commission." 11 The Court pointed out that the new Act eases entry standards, but then stated, unequivocally: The statute retains, however, the "traditional test" that a certificate shall be issued "if the Commission finds" that the person is fit, willing, and able to provide the transportation to be authorized by the certificate. The retention of this standard, tested by forty-five years of interpretation, was deliberate. Entry was eased by revising only the "public convenience and necessity" requirement to reduce the burden of proof on persons supporting the application.

The ICC has chosen to obey the Fifth Circuit only in connection with finding a carrier applicant fit to transport household goods and bulk commodities as a prerequisite to granting such authorities. It continues to disregard financial fitness in all cases and operational feasibility in all other areas of motor carrier transportation. The ICC needs another pointed reminder: Congress should reiterate that the Act means what it says. Aggrieved parties before the ICC can ask the courts, in case after case, to reestablish these elements, but where the ICC's error is so patent and so pervasive, adherence to the statute and the intention of Congress is a far better solution. The ICC chooses to construe court decisions-including that in the ATA case-as narrowly as possible and to avoid, wherever possible, allowing those decisions to interfere with its predetermined course of rewriting the Act to suit itself. One of Congressman Shuster's post-oversight hearing questions to Chairman Taylor dealt with financial fitness:

(7) How can you justify failing to require every applicant for operating authority to demonstrate its financial fitness, especially in difficult economic times such as these? Don't you think that financial data is now critical for the Commission to obtain?

Chairman Taylor has answered that he is concerned about granting authority to carriers known to be financially unfit. On the other hand, he wonders if there is an effective procedure for flagging any but a handful of truly unfit applicants and concludes that it may be best to leave it to protesting carriers to raise the question of fitness. Chairman Taylor's reasoning is faulty. First, the ICC can detect financially unfit carriers if it requires financial data. It is not burdensome to determine if an applicant has the financial resources to implement its proposed operation and to meet its obligations to the shipping public. It should not be forgotten that today the ICC requires no financial information and thus has totally abandoned its responsibility, and also deprived protesting carriers of vital evidence necessary to challenge fitness even if it were to entertain such challenges. Second, Chairman Taylor's statement that present ICC procedure leaves it up to protesting carriers to protest

9 No. MC-152180 (Sub-No. 2), Container Express, Inc., Extension-Southern United States (September 22, 1981). 10 American Trucking Ass'ns v. ICC, 659 F.2d 452 (5th Cir. 1981).

11 H.R. Rep. No. 1069, 96th Cong., 2d Sess. 13 (1980), quoted at 659 F.2d, at 469.

fitness is patently incorrect. The ICC will not entertain the issue of financial fitness, no matter by whom it is raised. Even if it were left up to protestants, the safeguard would be worthless, since almost all applicants are unopposed.

We urge the Committee to act. The ICC should be required to test an applicant's fitness, willingness, and ability. There is no excuse for the ICC's shortcomings in this area.

UNREASONABLE, DISCRIMINATORY, AND PREDATORY PRICING

The ICC ignores the impact of unreasonable, predatory, and discriminatory pricing of motor common carrier services, a trend highlighted in the testimony of the ATA and the Teamsters. The ICC has abandoned its responsibilities in this area, again in favor of what it perceives as market forces.

Under the dual pressures of the recession and the excessive competition fostered by the ICC's implementation of the Motor Carrier Act of 1980, motor common carriers are engaging in a series of new pricing techniques. These include volume discounts, multiple shipment doscounts, shipper allowances, and aggregate-tender discounts. MCLA squarely supports creative pricing as consistent with a competitive system. But such pricing must not be allowed to violate the minimum standards of lawfulness provided in the 1980 Act nor to threaten the financial stability of the motor carrier industry.

Section 10101(a) of the 1980 Act includes as part of the transportation policy of the United States the establishment and maintenance of "reasonable rates for transportation without unreasonable discrimination or unfair or destructive competitive practices." Subsection 10708(d) establishes a zone of rate freedom in which rates are not subject to suspension, investigation, or revision on the grounds of reasonableness. However, the subsection provides: Nothing in this subsection shall limit the Commission's authority to suspend and investigate proposed rates on the basis that such rates may violate the provisions of section 10741 of this title or constitute predatory practices in contravention of the transportation policy set forth in section 10101(a) of this title.

Section 10741, in turn, prohibits discrimination in the pricing of motor carrier services.

The ICC has responded to the flood of price innovations by an "anything goes" policy. It resists laying down guidelines to assist carriers in conforming their pricing practices to the requirements of the 1980 Act. Recently, the ICC denied a petition by a group of motor carriers seeking from the ICC a declaratory order which would set standards to goven freight rate discounts given for volume and aggregate tenders. 12 The petitioners argues that current discount programs violated the standards governing reasonableness, predation, and discrimination.

The ICC refused to provide the requested guidelines on the grounds that a rulemaking proceeding could stifle legitimate competitive pricing and went on to reject the contention that prices not related to cost savings were predatory. The ICC found little likelihood that in today's marketplace carriers would, or could, engage in such pricing: For such a strategy to succeed, sufficient entry barriers must be present to prevent competitors from reentering the market once the predator attempts to raise its price to monopolistic levels. However, as regulatory barriers are reduced, predation by motor carriers becomes uneconomic, since entry costs are so low that a predator could never enjoy its monopoly price. 365 I.C.C., at 714.

We are confident that this philosophy is not what Congress had in mind when it passed the 1980 Act. What the ICC posts is the continual rise and fall of carrier entities as each struggles to claim a share of the market sufficient to allow it to continue operations. This proposition assumes the economic cost of entry will not prevent replacement- -an assumption which is not totally valid. The declining volume of freight caused by unfettered competition and the recession vitually assure that carriers will price their services below cost simply to maintain a share of the traffic without regard to future profitability. This survival of the fittest, the big will outlast the small, means shippers in less-favored locations will be bypassed. Yet the ICC is able to say: A new carriers or revitalized incumbents become more efficient, there will be some losers, but the redistribution of market shares is often a necessary component of competition. 365 I.C.C., at 715.

12 Ex Parte No. MC-166, Petition for Declaratory Order-Lawfulness of Volume Discount Rates by Moter Common Carriers of Property, 365 I.Č.C. 711 (1982). However, in a later decision in the same proceeding, a bare majority of the ICC has called for "comments" on the pricing practices of motor carriers of property. 47 F.R. 49481-2 (1982). Its very failure to indicate an intention to issue standards or guidelines prompted sharp dissenting opinions from several Commissioners.