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B. SMALL SHIPMENTS

One of the most serious problems confronting the Commission is the maintaining of adequate service to shippers and receivers of small quantities of freight, particularly where such freight is not profitable to handle or moves to or from outlying locations. With most of the railroads not rendering any or very little less-than-carload service, the burden of supplying this service has fallen principally upon the motor common carriers, either alone or in conjunction with freight forwarders which are traditionally transporters of small shipments. A staff study by the Commission's Bureau of Economics, issued in 1967, shows that while a few motor carriers have responded to the small shipment challenge with new emphasis upon specialized equipment and service features, many carriers have reacted to this burden by instigating service curtailments or complete abandonment. Embargoes, rate increases, packaging and tariff restrictions, and other devices are employed by the motor carriers as an answer to their individual small shipment problems. However, the most serious threat to the maintenance of adequate small shipment service has been the increasing tendency of interline carriers to cancel their through route and joint rate agreements with other motor carriers and their refusal to participate in new agreements. The result has been that the number of informal shipper complaints concerning the deterioration of such service has been increasng sharply in the past year or two. 1. Ad Hoc Committee on the Small Shipment Problem.

In an effort to resolve the issues surrounding the small shipment problem, an Ad Hoc Committee, composed of three members of the Commission, was appointed to study the situation. In November 1967, the Committee issued its report entitled, Šmall Shipments Problem, which listed as critical areas of concern: (1) The avoidance by the carriers of shipments of commodities considered undesirable traffic for such reasons as physical characteristics or volume, (2) the carriers inability to interline freight in certain circumstances, thereby preventing the through-movement of certain shipments, (3) the inability of shippers to obtain service from or to small cities or areas which do not generate large amounts of traffic, (4) the withdrawal of service from low density traffic points following the consummation of a merger, and (5) the bypassing of communities not served by the new interstate highway system.

The Committee, recognizing that there is no single answer to all of the existing problems surrounding the transportation of small shipments, made the following recommendations for a continuing action program:

1. Legislation authorizing the Commission to require the establishment of motor carrier joint rates and through routes on an intramodal and intermodal basis.

2. Additional stress on service fitness and a greater participation by the Bureau of Enforcement in Commission proceedings. This would aid the Commission in obtaining precise and complete hearing records in relation to service failures, and the Bureau could also secure commitments from applicants establishing the character and quantity of service that they will render if a certificate is granted.

3. Increased efforts to obtain appropriate cost and traffic data in rate proceedings in order to assure profitable operations for carriers and more equitable rates for shippers.

4. Institution of appropriate court actions, in which selected cases involving service failures, both penalties and injunction relief would be sought.

5. Designation of the Chairman of Division 1 (Operating Rights) to deal with service complaints. As they are filed, investigation of these complaints are coordinated between the Commission's field staff and its

headquarters. Although the Committee's report acknowledged that the small shipments problem had many aspects beyond the field of transportation, the Committee recognized the primary role of the motor carrier industry in handling small shipments. For this reason, the Committee concentrated on finding solutions for those problem areas which related directly to the regulated motor carrier industry. 2. Recent Commission Action on the Small Shipment Problem.

Since the issuance of its report, we have taken several positive steps to implement the Committee's recommendations.

(a) Legislation. -Legislation authorizing the Commission to require the establishment of joint rates and through routes by motor common carriers of property on an intramodal and an intermodal basis was recommended by the Commission to the 90th Congress where it was introduced as S. 751 and H.R. 6533. Although your Committee held hearings on S. 751 and, subsequently, issued a Subcommittee Print on this proposal, no further Congressional action was taken on this recommendation. This recommendation has been renewed in the 91st Congress as S. 2245 and H.R. 10853.

The importance of this recommendation cannot be stressed too strongly. Where shipments can move from origin to destination by a single carrier, the Commission's present powers are generally adequate to cope with the problem. However, where the services of two or more motor carriers are required to effect delivery, the carriers may lawfully refuse to join their services since the Commission now has no power to compel motor carriers to establish through routes and joint rates. Shippers need motor carrier service between widely-scattered points, and must rely to a great extent upon the coordinated services of two or more carriers for the movement of any given shipment. Refusals on the part of motor carriers to handle shipments originating on the lines of other carriers are being brought to our attention with increasing frequency. We are convinced that if adequate motor carriers service is to be made available to the Nation's small towns and businesses, we must be in a position to require carriers to enter into through route arrangements where there is a public need for such service. We therefore hope that this proposal will receive early favorable action by the Congress.

(0) Applications for Operating Authority Involving Smaủ Shipments.-Another aspect of the small shipment problem is the increasingly common situation where shippers who have satisfactory service to some points, but not to others, will support an application for an entirely new operation which covers not only the areas where the shipper lacks service, but those that are served satisfactorily, as well. Often times the carrier after obtaining the necessary authority to serve the supporting shipper fails to provide service on the small shipments. Because of the increasing magnitude of this type of problem, the Commission has found it necessary to satisfy the need for additional service by a grant of unrestricted authority coupled with an order requiring the carrier to furnish certain data as to what type of service is actually being provided when such unrestricted authority is granted. In Bilyeu Refrigerated Transp. Corp. Ext.-Missouri Origins, 106 M.C.C. 692, applicant was required to submit an annual report for a period of three years showing its actual performance pertaining to multiple deliveries under the authorized certificate. The Commission also reserved the right to impose future limitations that might later be found desirable.

In No. MC-75320 (Sub-No. 106), Campbell Sixty-Six Express, Ext.— Atlanta, 108 M.C.C. 80, the Commission, in granting authority to transport general commodities between Birmingham and Atlanta limited the certificate to be issued to a term of 3 years. The applicant was also required to submit an annual performance report to the Commission's Bureau of Economics during that period with respect to the operations conducted in order to determine if a complete and expeditious service is being performed. Similar performance report requirements have been imposed in several other grants of operating rights authority so that the Commission can determine if the additional service authorized will alleviate difficulties in obtaining service in the so-called “small shipment” area.3

Recently, in an application case Docket No. MC-22229 (Sub-No. 39), Terminal Transport Company, Inc., Extension-Michigan Points, a hearing examiner has recommended that applicant be granted common carrier general-commodity regular route authority, over 15 routes between Atlanta and Detroit, between Indianapolis and Detroit, between certain other points for connecting route purposes, and between a number of Michigan points. Generally, the authority is restricted so as to limit service over such routes to the transportation of traffic moving between the newly authorized Michigan points, on the one hand, and, on the other, points presently served by applicant primarily south of the Ohio River. This application was filed because applicant for several years had experienced difficulty in getting its connecting line carriers to accept at Indianapolis and Chicago (northern termini of applicant's presently-authorized regular routes), traffic

destined to Michigan points which it had moved from southern origins. This was primarily less-than-truckload traffic and the commodities were principally furniture and textile products. Difficulties also were experienced by shippers located at Michigan origins in obtaining pick-ups and joint-line service to southern points. The application was supported by 144 shipper and receiver witnesses and 11 motor common carriers. The Bureau of Enforcement participated to develop the record and presented evidence through three of the Commission's district supervisors, which evidence generally supported the allegations of applicant, shippers, and receivers as to the need for the service because of the failure of existing carriers to render a joint-line service.

3 For a further discussion of these and other issues involving both small shipments and restrictions on motor carrier authority, see Chapter III, Section B (Operating Rights Restrictions), pp. 119–123 infra.

In another effort in this area, a rulemaking proceeding presently pending before the Commission, Ex Parte No. MC-72, Motor Service on Shipments of New Furniture, represents a major attempt to deal with the serious transportation problems encountered by the furniture industry. Recognizing that the availability of motor carrier service has become a key factor in the distribution of this industry's products, the Commission instituted this proceeding to determine whether the public convenience and necessity, considered on a national scale, require the authorization by a general rule of (1) all motor common carriers of household goods, as defined by the Commission, to transport also shipments of new furniture within the territorial scope of their existing operating rights, (2) all motor common carriers already specifically authorized to transport new furniture also to handle general commodities either in mixed loads with new furniture or on reciprocal movements (either outbound or inbound) of new furniture, in order to enable such carriers to balance their overall operations physically and economically and to improve service to the public, or (3) both, some reasonable modification of these approaches, or such other further action as may be deemed necessary or appropriate to alleviate the problems disclosed by this proceeding. Representations have been filed by numerous interested parties, and the case now is awaiting a decision by the Commission.

(c) Carrier Rates, Tariffs and Practices Involving Small Shipments.—The Commission has been aware for some time of the transportation problems confronting shippers in instances where motor carriers have cancelled or restricted the application of their tariffs on certain commodities such as furniture. The issue of whether a motor common carrier of general commodities may lawfully refuse to participate in through routes, joint rates, and interchange agreements with respect to some authorized commodities and, at the same time, hold itself out to provide such service with respect to other authorized commodities was presented to the Commission in National Furniture Traffic Conference, Inc., v. Associated Truck Lines, Inc., 332 I.C.C. 802. There, the entire Commission found that the selective restriction by defendant motor common carrier of its participation in through routes and joint rates on furniture while at the same time holding out to provide through service on other commodities is unlawful. The report notes that it is the carrier's duty to observe reasonable practices under section 216(b); such duty not being relieved by section 216(c), dealing with the voluntary establishment of through routes and joint rates by motor common carriers; and that such restriction disadvantages furniture traffic in relation to other commodities in violation of section 216(d).

In those instances where motor carriers have sought to cancel their participation in through routes and joint rates and the tariff publication effecting the cancellation was not protested, the Commission has suspended the proposal on its own motion and ordered the Bureau of Enforcement to participate in the proceeding in order to develop the record. In most of these proceedings the carrier has not defended the proposal, and has either voluntarily canceled its tariff, or the Commission has ordered it canceled for failure of the carrier to sustain its burden of proof.

Because of the numerous tariffs on file with this Commission which contain restrictions on service which, in effect, embargo the movement of small shipments, the Commission, on March 12, 1969, instituted a rulemaking proceeding entitled Ex Parte MC-77, Restrictions on Service by Motor Common Carriers. This proceeding was instituted to determine whether an appropriate tariff rule should be adopted forbidding the filing of a tariff restricting the scope of the carriers, authorized operations.

The upward trend in motor carrier freight rates on small shipments is continuing. Several increases were allowed to become effective during the past year, although some increases were found not shown to be just and reasonable and ordered canceled because of the carriers' failure to show a revenue need.

A new approach to making rates on small shipments has been proposed by motor carrier members of the Eastern Central Motor Carriers Association. This proposal is actually a restructuring of the existing rates and charges applying on less-thantruckload shipments moving between all points in Eastern Central territory. Although the revision results in both increases and reductions, the proposal is not intended to produce any additional revenue for the carriers. Its stated purpose is to modernize the carriers' rate structure so as to insure the movement of all small shipments at the carriers' cost of rendering the service. The adjustment will result generally in increased rates and charges on shipments under 500 pounds, in reduced rates, ranging from 2 to 7 percent, on shipments of 1,000 pounds or more, and no change in rates on shipments ranging from 500 to 999 pounds or on truckload shipments. The schedules were suspended and the proceeding is now in the process of being heard. We understand that the other rate bureaus are watching this proceeding with care for use as a guideline in anticipation of their taking similar action.

(d) Enforcement Action Involving Small Shipments.-Criminal prosecution of motor carriers who fail to provide adequate service to shippers and small communities was one of the recommendations of the Commission's Ad Hoc Committee. In developing the comprehensive enforcement program, the first “small shipment” fine was levied on October 3, 1968, against Herrin Transportation Company of Houston, Texas. The fine was imposed after Herrin pleaded guilty to a criminal information charging it with failing to provide adequate service, equipment and facilities for the transportation of property in interstate commerce and thereby violating the Interstate Commerce Act and the conditions of its certificates.

The penalty was for its refusal to transport an interline truckload shipment weighing 8,219 pounds, moving from Philadelphia, Pennsylvania, to Port Arthur, Texas, which was tendered to it at Macon, Georgia, by a connecting carrier. The refusal was based upon Herrin's opinion that its share of the through revenue would not be sufficient.

Aside from this case, the following "small shipments” cases have been referred to the appropriate United States Attorneys for action in various United States district courts:

“On January 9, 1969, an information was filed in the Western District of North Carolina charging a motor carrier with refusing, without justification, to receive, transport and deliver cotton knit underwear in accordance with the terms and conditions of its certificates. This case is awaiting arraignment and trial.”

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“On February 3, 1969, an information was filed in the Northern District of Georgia, Atlanta Division, charging a motor carrier with refusing, without justification, to receive, transport and deliver a taping machine in accordance with the terms and conditions of its certificate. On May 3, 1969, the defendant entered a plea of nolo contendere to one count and it was accepted by the Court. This case is awaiting sentence by the Court.”

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“On February 7, 1969, an information was presented in the Eastern District of New York charging a motor carrier with refusal, without justification, to receive, transport and deliver an auto fender in accordance with the terms and conditions of its certificate. This information is awaiting filing with the Court.”'

“On April 2, 1969, an information was filed in the Eastern District of Virginia charging a motor carrier with refusal, without justification, to receive, transport and deliver aluminum Christmas trees in accordance with the terms and conditions of its certificates. On May 26, 1969, an arraignment was held at Norfolk and the defendant entered a plea of not guilty. This case is awaiting trial.”

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“On April 11, 1969, an information was presented in the Eastern District of New York charging a motor carrier with refusal, without justification, to receive, transport and deliver electric lamps in accordance with the terms and conditions of its certificate. This case is awaiting filing with the Court.”

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"On April 30, 1969, an information was filed in the Northern District of Alabama, Southern Division, charging a motor carrier with refusal, without justification, to receive, transport and deliver a coil of copper wire in accordance with the terms and conditions of its certificates. This case is awaiting arraignment"

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"On May 9, 1969, an information was filed in the Middle District of North Carolina charging a motor carrier with refusal, without justification, to receive, transport and deliver cotton piece goods in accordance with the terms and conditions of its certificate. This case is scheduled for arraignment on June 2, 1969.”

C. PASSENGER SERVICE This section deals with basic policy issues involving the transportation of passengers. The principal emphasis concerns the present state of railroad passenger service; our administration of section 13a of the Act, dealing with the Commission's authority over discontinuances of railroad passenger service, and other regulatory laws involving rail passenger service; and our recommendations for Congressional action in this area. Our discussion also summarizes the status of our study on the cost of railroad passenger service. 1. Railroad Passenger Service

(a) Commission Regulation of Passenger Service-Section 13a.–Since section 13a of the Act was enacted in 1958, the Commission has permitted the discontinuance of 725 interstate passenger trains and 335 intrastate passenger trains and required the continuance of 455 interstate trains and 46 intrastate trains. About an equal number of trains have been discontinued by authority of the individual State commissions.

During the fiscal year ending June 30, 1968, the Commission received 73 notices to discontinue interstate trains; this more than doubled the number of notices filed in any year since 1958. It appears at this time that the total number of filings during fiscal 1969 will be considerably fewer in number than in fiscal 1968 but somewhat higher than in other fiscal years. As of May 31, 1969, a total of 44 notices have been filed to discontinue interstate trains. Attached as Appendix E is a summary of our proceedings under section 13a.

The Commission's jurisdiction over rail passenger service is limited. Enactment of section 13a in 1958 provided the first specific power enabling the Commission to decide whether certain trains should not be discontinued. Since the function of approving the elimination of trains was retained by State agencies, carriers have the option of proceeding before this Commission or the appropriate State agency. No promotional powers were conveyed by section 13a and it confines the Commission's jurisdiction only to cases where the carriers invoke Federal jurisdiction by the filing of an appropriate notice pursuant to the provisions of section 13a.

In the past, the Commission has not exercised jurisdiction over the quality of rail passenger service. The question as to whether the Act provides us with authority over the quality of passenger service is, however, now under consideration. In several proceedings, the Commission has found that the carriers have purposefully downgraded some of their service to the public. In view of such downgrading by the carriers, the Commission refused to permit the discontinuance of the trains involved and admonished the carrier to refrain from such practices.

The continued practice of Southern Pacific Company of downgrading its service caused several state regulatory agencies to petition the Commission to institute an investigation under section 12(1) of the Act into the adequacy of passenger service provided by that carrier between New Orleans and Los Angeles. We instituted such an investigation in Docket No. 34733. Hearings in the proceeding have been held and in his recommended report the presiding hearing examiner found that the Commission did have jurisdiction over the quality of passenger service and that it should promulgate national standards of service. In view of the critical importance of this proceeding to the traveling public, oral argument was held by the entire Commission on the following matters: (1) the extent of the Commission's jurisdiction over railroad passenger service; (2) whether minimum operating standards for interstate passenger trains should be vested in the Commission, and the type of such standards to be promulgated; and (3) the merits of the instant proceeding.

A decision in the proceeding should be forthcoming shortly.

(6) Recommendations by the Commission for Action in this Area.–Over the years the Commission has expressed concern over deteriorating rail passenger service, and in order to improve the situation, we have made numerous recommendations. One of the first was in 1959 in the Railroad Passenger Train Deficit case, 306 1.C.C. 417, in which we outlined a nine-point program for the rehabilitation of the national rail passenger service. The recommendations are briefly summarized below:

1. That the 10-percent Federal excise tax on passenger fares be repealed.

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