STATEMENT OF WILLIAM B. GROSSMAN, PRESIDENT, NATIONAL TOUR BROKERS

ASSOCIATION

Mr. Chairman and members of the subcommittee, I am William B. Grossman, President of the National Tour Brokers Association. NTBA is the national trade association of passenger tour brokers-the individuals and firms licensed by the Interstate Commerce Commission to arrange and conduct passenger tours by bus or motorcoach. I appreciate this opportunity to describe the position of our Association with respect to the reform of federal regulation of the passenger motor carrier industry, and in particular, our support, in conjunction with the American Bus Association, of the Bus Regulatory Reform Act of 1981 (H.R. 3663) as passed by the House and introduced in the Senate on November 19, 1981.

PASSENGER BROKERS AND THE NATIONAL TOUR BROKERS ASSOCIATION

NTBA is the non-profit trade organization of and for brokers of passenger transportation licensed by the ICC. It is one of the largest travel industry organizations in North America. Its membership consists of over 300 tour brokers across the country and an allied membership of over 1,600 firms associated with the travel and tourism industry, including airlines, hotels, convention bureaus, resorts, and bus companies as well as state travel and tourism departments.

Passenger brokers are persons or firms which arrange for and carry out interstate motorcoach tours for compensation. As such they are neither bus companies, nor agents of bus companies; they are independent entrepreneurs. The tour broker puts together and then carries out a tour package for customers which will include not only arrangements for transportation, but also selection of hotel accommodations, restaurants, travel routes, entertainment, and all the other aspects of comprehensive tour vacations. Such tours range from one-day visits to nearby points of interest to multi-day long distance motorcoach tours.

Recent years have seen great expansion in the quality and variety of offerings for the American and foreign tourist. Tour brokers now utilize a mix of transportation modes in any combination-bus, train, plane, ship, helicopter. This availability of intermodal tours has added an exciting new dimension to tour packaging by our membership. The possibilities of intermodal tours have become endless; the preparation of tour offerings today requires even more expertise than in the past.

Since its establishment in the early 1950's, NTBA's membership tour broker industry has evolved with—and indeed pioneered—many of these new trends in the travel and tourism industry. Today, the American tour passenger is the beneficiary of a wide array of NTBA's membership programs, including its annual "Marketplace" of tour brokers and allied members, associated businesses such as airlines, hotels, convention bureaus, resorts, bus companies and state travel agencies, during which new tour packages are discussed. In addition, the Association and its members have been active in developing public awareness of the energy and cost efficiencies of motorcoach travel during these times of fuel scarcity and inflation. NTBA and its members have been at the forefront in developing awareness of travel and tourism issues generally, and in this regard have been active supporters of the travel and tourism caucuses recently organized in both Houses of Congress. ICC regulation of passenger tour brokers

Section 10924 of the Interstate Commerce Act requires applicants desiring to operate as passenger brokers to obtain a license by meeting two conjunctive requirements. First, the applicant must demonstrate that it is fit, willing and able to perform the proposed service and, second, that the transportation to be offered will be consistent with the public interest and the national transportation policy. This statutory scheme has been in existence since the original act in 1935, and under such entry requirements the tour broker industry has developed into a highly competitive one with an excellent record of consumer satisfaction. Unlike some other portions of the travel industry, defaults and bankrupticies by licensed tour brokers are simply non-existent. You do not read today about tour strandings in our industry. We are proud of our record; not one NTBA member holding an ICC broker's license has ever defaulted on its ICC-required surety bond.

In 1976, the ICC initiated proceedings to consider the advisability of changing the regulatory licensing of passenger brokers. After two administrative proceedings and two appeals to the U.S. Court of Appeals for the District of Columbia Circuit, the Commission's new rules have been upheld and the agency is now in a position to move forward with their implementation. Their primary thrust is the removal of the public interest or need test. As a result, the Commission will henceforth examine only an applicant's fitness and require the posting of the surety bond. This has

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brought legal recognition to the fact that the Commission already has opened entry into the broker industry in recent years through the administrative licensing of virtually all broker applications filed at the Commission. This makes the Commission's fitness inquiry all the more inportant from the consumer protection standpoint. The Bus Regulatory Reform Act of 1981 (H.R. 3663)

As this Subcommittee is undoubtedly aware, the legislation passed by the House was the outcome of very extensive dialogue and discussion by the House Public Works and Transportation Committee with industry groups, state regulators, and consumer groups representing virtually all points of view on the question of bus reform. For our part, NTBA did not obtain all that we had hoped in the Bus Regulatory Reform Act, but we recognize that this is an inevitable result under our legislative process. We join the American Bus Association and other groups in support of H.R. 3663 in its present form as a composite result of various points of view and as a sensible modernization of the Act to provide for a healthy, competitive motor carrier industry in a consumer protective manner.

Focusing on specifics, NTBA is committed to five particular features of the House

bill.

First, NTBA supports the definition of fitness for broker licensing which encompasses financial, operational and safety fitness. Applicants would show that they are able to plan and conduct proposed services in a satisfactory manner within or between geographic areas proposed to be served and at locations where business operations are to be conducted. This fitness inquiry in the licensing process is not designed to constitute a barrier to entry, but instead to protect the traveling public from aborted tours and other adverse consequences to the consumer.

Second, NTBA supports the provision in H.R. 3663 proscribing master licensing of passenger brokers, that is, the use of prospective general findings which would be applicable in each and every individual licensing proceeding. If the fitness inquiry is to have any efficacy, it will have to be applied in each licensing proceeding.

Third, we support the declaration of a specific duty by regulated bus common and contract carriers to charter only to parties acting as brokers that hold ICC licenses. It is noted that the Interstate Commerce Act already expresses the converse, namely, that a broker must use a licensed carrier.

Fourth, NTBA supports the requirement in H.R. 3663 that there continue to be a 30-day notice period for any charter or special operations rate change increases, but a 10-day notice period for rate change decreases.

Fifth, NTBA is increasingly concerned about the licensing of publicly funded tour brokers by the ICC. The Commission has granted licenses to broker applicants which directly or indirectly receive public funds-federal, state or local-from governmental agencies or instrumentalities and thereby enjoy an undue advantage over private brokers doing business in the marketplace. As a matter of public policy, we believe that applicants with federal or state public support should not be using public funds to compete against private brokers in the marketplace. The Committee Report of the House Public Works Committee expresses a concern about this development, and we believe this problem is sufficiently important to merit adoption of specific legislative language in the statute. We will submit specific draft language for consideration by the Subcommittee.

In conclusion, NTBA strongly urges that H.R. 3663 be reported out by the Subcommittee to the full Committee for passage by the Senate and enactment into law. H.R. 3663 represents the hard work of many different constituencies. It will allow the motor carrier industry of which we are a part to function in the public interest.

STATEMENT OF WAYNE J. SMITH, EXECUTIVE DIRECTOR, UNITED BUS OWNERS OF

AMERICA

Mr. Chairman and members of the subcommittee, my name is Wayne J. Smith. I am executive director of the United Bus Owners of America (UBOA), a trade association representing 1,000 intercity bus companies. We appear before you, this morning, in support of H.R. 3663, the Bus Regulatory Act of 1981.

We come before you, not to recommend extensive change in the bill as it passed the House of Representatives. Rather, we urge that the version before you be left substantially intact. That is not to say, Mr. Chairman, that our members are free of apprehension over what impacts the bill would have on their businesses, were the House-passed version to become law.

Mr. Chairman, UBOA believes that the fit, willing and able provisions, Section 6(c)(1), would make it possible for existing carriers to continue to operate. That will be true, however, only if there is enlightened administration of the accompanying

provision authorizing carriers to demonstrate that, "the transportation to be authorized by issuance of the certificate is not consistent with the public interest."

Existing carriers, we believe, would be protected, also, by the provisions of Section 6(c)(3) to the effect that the public interest would not be served if grant of the authority would diminish the ability of any other carrier, "to provide a substantial portion of the regular-route passenger service which such carrier provides."

UBOA is less than serenely certain that charter operators would have their interests weighed properly, were H.R. 3663 to become law in its present form. We do look approvingly on the requirement in Section 6(c)(1)(D) that the Commission weigh the cumulative effects its awards would have on other carriers. What's more, Section 6(c)(1)(C) directs attention to the impact which would result, were authority to be awarded to a recipient of "transportation-related, financial assistance." Historically, we have been sensitive to incursions of Federally funded transit authorities into charter operations. We believe the cited language would enable the Commission to look favorably upon protests by unassisted carriers against probable injury at the hands of Federally funded operators.

We strongly support the provisions of Section 12(a) which would permit the Commission, "to suspend and investigate proposed rates on the basis that such rates may...constitute predatory practices." Only a few days ago, we were told by The Commission that we could do nothing to inhibit a carrier from operating under a predatory tariff. The Commission official was not the least bit hesitant to concede that the rate in question was, in fact, predatory.

One of the most controversial aspects of common carrier deregulation is the termination of anti-trust immunity in the development of joint-line or through rates. To be mobile, the traveling public needs access to readily available through rates to any conceivable destination. We believe H.R. 3663 would enable such through rates to continue to be available. Section 10(a)(4)(E) limits joint ratemaking to carriers which, “can practicably participate in such movement." We believe the provisions are broad enough to provide protections to interlining carriers who seek to work out bona fide through rates on particular routes.

UBOA believes the operational, safety and financial stipulations in H.R. 3663 provide important criteria to the Commission as it wrestles with increasingly numerous applications for authority. We applaud, especially, the stipulations that fines are to be imposed for each day of illegal operations, as provided in Section 23.

With regard to fitness only criteria (Section 6), it was gratifying to note that, in its report accompanying H.R. 3663 (House Report 97-334) wrote legislative history which should make it difficult to distort the fitness-only standards for purposes other than those for which they are intended.

Finally, UBOA hopes, Mr. Chairman, that the bill which, ultimately, is reported, will include provisions pre-empting State practices which would thwart the proper functioning of entry, exit or other pertinent provisions currently appearing in H.R. 3663.

In sum, Mr. Chairman, UBOA is certain that the bill before you is, in no way, a cure-all for ills affecting the private, intercity bus industry. We do believe it has much to commend itself to your favorable attention. Accordingly, UBOA pleads for an early, favorable report.

STATEMENT OF JOHN A. GRADY, PRESIDENT, NATIONAL BUS TRAFFIC ASSOCIATION, INC.

Mr. Chairman and members of the subcommittee, my name is John A. Grady. I am President and Chief Executive Officer of the National Bus Traffic Association Inc. ("NBTA"). Prior to becoming President of NBTA, I was the Director of the Bureau of Accounts of the Interstate Commerce Commission. I am a member of the American Institute of Certified Public Accountants, American Association of Government Accountants, and have been a past member of the Financial Accounting Standards Advisory Council.

NBTA is the rate bureau for the intercity bus industry and has been in existence since 1933. The Association operates pursuant to the terms of a collective ratemaking agreement approved by the Interstate Commerce Commission.1 At the present time there are about 350 regular-route carriers of passengers who are parties to the agreement and who participate in the joint initiation, consideration, and establishment of interstate passenger fares and express rates. Since the ratemaking agreement has been approved by the Commission as being in furtherance of the na

1 Section 5a Application No. 9. Approval was originally granted at 278 I.C.C. 147. Subsequent amendments were approved at 308 I.C.C. 33 and in numerous unprinted orders.

tional transportation policy, participation therein by member carriers is insulated from antitrust liability. (49 U.S.C. § 10706(c)).

Our Association is most appreciative of the interest shown by this Subcommittee in bus regulatory reform. NBTA is primarily interested in the rate bureau, rule of ratemaking, and zone of rate freedom provisions of the proposed Bus Regulatory Reform Act. The following addresses NBTA's position on these provisions.

RATE BUREAU PROVISIONS

Collective ratemaking safeguards

Carrier activities pursuant to collective ratemaking agreements have been closely scrutinized by the Commission since 1948 when the Congress immunized actions pursuant to such agreements from liability under the antitrust laws. In keeping with the policy of closely monitoring exemptions from the antitrust laws, the proposed Bus Regulatory Reform Act (H.R. 3663) provides for the following safeguards on the collective ratemaking of motor carriers of passengers: (1) The right of independent action would be affirmed by prohibiting the rate bureau from changing or canceling any rate established by independent action; (2) The rate bureau could not permit any of its employees or any employee committee to act upon any proposal effecting a change in any tariff item published by or for the account of any of its member carriers; (3) All rate bureau meetings must be open to the public; the name of the proponent of a rule or rate change must be divulged upon request; and the vote cast by any member must be disclosed; and (4) Final action on any proposal must be taken by the rate bureau within 120 days after it is docketed.

For the most part, the proposed statutory safeguards merely ratify the practices followed by Congress, the ICC, and NBTA for many years. For example, the right of independent action was guaranteed by the Reed-Bulwinkle Act of 1948, has always been required by the ICC, and is specifically provided in the rate agreement among bus carriers. The ICC already imposes strict limitations against rate bureau attempts to change independently established rates. 49 CFR 1331.6. All intercity bus carriers establish their own passenger fares and express rates. NBTA has never changed or canceled any independently established fare or rate. NBTA does not permit its employees to act on any proposal which affects or changes any tariff item published by or for the account of any member carrier except upon specific instructions of the carrier. Finally, NBTA has never had an employee committee and does not plan to have one.

Other than the collective ratemaking safeguards, the principal features of Section 10 of H.R. 3663 are as follows: (1) The Commission would be prohibited from approving any rate agreement providing for discussion of or voting on any rate applicable to charter or special transportation; (2) Discussion of and voting on single-line fares would not be permitted on and after January 1, 1984; (3) A showing of parallel behavior would not be adequate evidence that two or more carriers unlawfully discussed or agreed upon a rate; (4) On and after January 1, 1984, discussion of or voting on joint-line fares would be unlawful "unless the carrier can practicably participate in such movement"; and (5) The prohibitions against joint consideration of single-line and joint-line fare proposals would not apply to general increases or decreases in fares or to broad tariff changes.

NBTA's positions on the above features of section 10 of H.R. 3663 are as follows: Prohibition against joint consideration of rates applicable to charter and special transportation

NBTA has no objection to this prohibition. NBTA has not collectively considered rates for charter or special transportation for several years.

Prohibition against discussing and voting on single-line fares

The prohibition against discussing and voting on single-line fares on and after January 1, 1984, may dissuade carriers, especially the larger ones, from participating in the collective ratemaking process. Although NBTA is opposed to the post-1983 single-line fare prohibition, we are not proposing an amendment to Section 10 of the bill. We are willing to present our case to the Motor Carrier Ratemaking Study Commission which will recommend whether, and to what extent, collective ratemaking should be permitted subsequent to January 1, 1984.

One effect of the ban on joint consideration of single-line fares, coupled with the "practicably participate" requirement, would be to outlaw all unlimited travel fares. H.R. 3663, however, excludes from the prohibition against discussing and voting on single-line fares those rates for unlimited passenger travel. Unlimited travel fares represent an agreement by participating carriers to provide both single-line and joint-line service at a bargain price for a specified period. Without special treatment

for unlimited travel, neither Greyhound nor Trailways, for example, could participate in these special fare arrangements for foreign and domestic travelers because the fares, to the extent that only Greyhound's or only Trailways' service would be used, would be unlawfully negotiated single-line fares. Yet, without Greyhound and Trailways participation, no such special fares for unlimited travel could be offered. Greyhound and Trailways could publish such fares but only for travel on their own lines, which would make them much less attractive and which would foreclose participation in that type of travel by smaller bus operators.

If the unlimited travel and reduced fares were limited to travel over the lines of two or more specified carriers, i.e., “practical participants", they would be less attractive to foreign visitors, senior citizens and other passengers. While the House bill excludes from the single-line and joint-line prohibitions "discussions of and voting on rates for unlimited passenger travel", the exception is sound but, in our opinion, not broad enough. The unlimited travel exception should be broadened so that the post-1983 restrictions on collective consideration of single-line and joint-line fares would not apply to-discussion and voting on fares for unlimited passenger travel, excursion fares, senior citizens' fares and such other promotional and innovative fares, applicable to interline movements, as may be specified by the Commission.

Parallel behavior would not be proof of an antitrust violation

There are hundreds of joint-line rates in which one of the participating carriers has a directly competitive single-line rate. The rates for single-line and joint-line service necessarily will be the same in most cases. The single-line carrier will not undercut its single-line fare and that carrier is not permitted to close commercially the joint-line route by insisting that the joint-line fare be higher. For this reason, any prohibition against discussing or voting upon single-line fares must be accompanied by a parallel behavior provision to preclude the drawing of any inference of unlawful action from the identity of single-line and joint-line fares. This provision is included in the House Bill and is essential.

Discussion of and voting on joint-line fares should not be restricted

The House Bill contains the same prohibitions for joint-line fares as for single-line fares except for the concept of "practicable participation". By contrast, the Motor Carrier Act of 1980 imposed no limit on discussion of joint-line fares, and voting was only limited to carriers with "authority to participate" in the movement. NBTA believes there are stronger reasons for encouraging the convenient interchange of passengers than for facilitating the interlining of freight. The requirement of H.R. 3663 that carriers be able to "practicably participate" in joint-line movements is unduly restrictive and should be eliminated.

The phrase, “practicably participate," as a limitation on joint-line ratemaking first appeared in Section 208 of the Railroad Revitalization and Regulatory Reform Act of 1976, 49 U.S.C. § 10706(a)(3)(A)(ii). The phrase was interpreted as follows in Western Railroads-Agreement, 364 I.C.C. 1, 17: "We believe that practical participants in an interline movement are only those carriers who are direct connectors to a specific joint-line movement

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Under that definition, every joint-line fare would have to be set on a route-byroute basis as well as on a carrier-by-carrier basis. The intent of the “practicably participate" requirement was explained as follows in the report of the House Committee on Public Works and Transportation:

"The statutory limitation with regard to joint-line rates is included because it is the Committee's view that a carrier should not be able to discuss or vote on every joint rate proposal. *** if carriers G and H serve Los Angeles and Portland over a different and more circuitous route, the Committee does not intend that these carriers be considered as able to 'practicably participate' in such route. Similarly, if a carrier can participate in a Los Angeles-Portland movement from a different origin, for instance, Dallas, Texas, it is not the Committee's intent that the carrier be considered a practicable participant in the movement for the purposes of this section." (H. Rep. No. 97-334, 97th Cong., 1st Sess. (1981) 39).

The House Committee recognized, however, that a strict interpretation of the route-by-route and carrier-by-carrier requirement for joint-line ratemaking would disrupt passenger travel. Accordingly, the House Committe report at page 39 placed the following gloss on the meaning of "practicably participate":

"However, it is our intent that motor common carriers of passengers should be able to discuss and vote upon joint rates if such rates are applicable to substantially similar through routes which have the same points of origin and termination and provide service generally to the same intermediate points. For example, if carriers A, B, and C and carriers D, E, and F maintain joint rates between Los Angeles and