My next table, attachment 5, shows that the railroads are not interested in the fresh fruits/vegetables traffic. The table shows the railroad ownership of refrigerator cars, the serviceable ownership and turnaround time (time from one load to the next) for the years 1957, 1962, 1967, and 1973 to 1977, inclusive. The ownership of the class I railroads has declined almost 30 percent from 103,347 cars in 1967 to 73,531 cars in 1977. The poor utilization of refrigerator cars appears in the column of the table headed Turnaround Time. In 1976, a railroad refrigerator car had a turnaround time of 35.58 days between loads.

I go back to my prior statement that the ICC is hostile to exempt carriers including agricultural cooperatives and those carriers hauling agricultural products. In the Motor Carrier Act, 1935, specific exemptions were included for agricultural haulers and agricultural cooperatives organized under the Agricultural Marketing Act (12 U.S.C. 141 et seq.) (the Marketing Act). Early in its administration of motor carrier regulation, the ICC began a long and arduous battle attempting to limit the scope of transportation operations conducted under the agricultural exemptions. I will use as illustrative of the battle, the Commission's efforts to confine agricultural cooperatives.

The Marketing Act limits the business that an agricultural cooperative may do with nonmembers to the amount of business in dollars that the cooperative does with its members. The ICC, however, lobbied to restrict the kind of transportation services that an agricultural cooperative may provide through legislation. Concurrently, the ICC, in administrative and in judicial proceedings, attempted to restrict transportation operations of agricultural cooperatives. The Commission met with little success in the courts.

Finally, in 1966, the Commission was dealt its most serious setback in Northwest Agricultural Cooperative Association v. Interstate Commerce Commission, 350 F. 2d 252 (C. A. 9, 1965), cert. denied, 382 U.S. 1011, 86 S. Ct. 620, 15 L. Ed. 2d 526 (1966). In that case, the court specifically noted that the Commission had, through lobbying efforts and administrative means, attempted to limit the true scope of the transportation exemption for agricultural cooperatives. The court found that the Commission's interpretation and subsequent attempts at restriction were not justified in view of the clear statutory language of the Marketing Act. The court found that the cooperatives were free to pursue incidental and necessary activities so long as such "incidental" activities did not become primary activities, that is, to the extent that the cooperative pursued these activities without generating revenues from nonmember business exceeding the value of the total business transacted for its members.

As a practical matter, this meant that cooperatives could make transportation a viable economic venture. Transporting member freight to market could now be economically balanced with transportation of nonmember traffic in the reverse direction, as long as the primary business of the cooperative remained the providing of service for its members, and as long as 50 percent or more of its revenue was earned by providing service for members.

The Commission, having lost its argument in judicial proceedings, now proceeded to intensify its lobbying efforts in order to secure an amendment to the Interstate Commerce Act specifically restricting the amount of nonmember freight to be legally handled by an agricultural cooperative. The Commission originally asked the Congress for an amendment to the Interstate Commerce Act which would have restricted the agricultural cooperatives to the transportation of farm items only for nonmembers. The amendment finally passed is not as restrictive as the Commission desired, but does drastically reduce the amount of nonmember freight that a cooperative can handle. Following the rule of Northwest, the amendment limits transportation to that which is "incidental and necessary", but adds the further proviso that such transportation for nonmembers should in no event exceed 15 percent of the total interstate transportation rendered in any fiscal year, measured in tonnage.

I have previously commented about how the 15 percent limitation was arbitrarily derived from a provision in the Internal Revenue Code.

* The railroad's lack of interest in produce traffic, on the one hand, and on the other, the Nation's dependence on trucks to move fresh fruit and vegetables are reflected in my attachments 6 and 7. Attachment 6 tabulates total unloads of fresh fruit and vegetables at 11 major Eastern cities for the even numbered years in the period 1960–1976 and 1977. The rail unloads have dropped from 252,833 or 53.5 percent of the total in 1960 to 62,515 or 20 percent of the total in 1977 Truck unloads went up from 219, 915 or 46.5 percent of the total in 1960 to 219, 420 or 80 percent of the total in 1977. I should point cut that these statistics are based on USDA. reports and the reports are adjusted to make the rail and truck loads comparable.

My attachment 7 portrays by a line graph the dramatic reversal of the rail truck unloads at the 11 cities.

The Commission's hostility has continued in 1969, shortly after the 15 percent amendment, in ex parte No. MC-75, Implementation of Public Law 90-433Agricultural Cooperative Exemption, 108 M.C.C. 799 (1969), the Commission promptly acted to issue rules directed to limiting backhaul movements to a specific vehicle which would otherwise move empty after moving agricultural commodities.

In 1977, the Commission reopened ex parte MC-75, with a group of proposed rules which would have severely constricted agricultural cooperative transport. Upon a host of objections from the agricultural community, it retreated to an extension of its recordkeeping requirement and a ban on one-way trip leases for nonfarm commodities-that is, a ban on the cooperatives use of an owner-operator to keep happy a shipper of backhaul traffic when the cooperative does not have a truck in the area, even though the cooperative is within the 15 percent limitation. Why this long history of attempted limitations and extensions of agency control?

There may be more than one reason for an agency to seek to extend its reach. None of us is exempt from the tendency to build empires. But even if the empire building were all that were at stake, an agency might well ask itself whether in extending its reach it is unintentionally or intentionally eliminating competition, and whether this is necessary.

This might be a very healthy exercise for an agency such as the ICC. If an agency were to feel that competition from unregulated entities is making it difficult for regulated carriers to shoulder "regulatory burdens" thought necessary for national goals, before suppressing the competition of the exempt entities, the agency should assess whether all those "burdens" are essential.

In the case of an agency such as the ICC, such an examination, if made objectively, is likely to reveal that the high sounding goals of the regulation can be achieved, for the most part, more readily by competitive markets. Essential regulation, we submit, relates primarily to truthfulness in representations and integrity in business dealings generally. The economic substance of what the Commission is doing is maintenance of a loose cartel.

The history of the ICC indicates that at least some agencies may find it extremely difficult to face a mirror which reflects an image of the agency's actions and predispositions such as we reflect. Thus, S. 382 may be most effective if there is specific legislation which removes authority to undertake or approve restrictive agency actions. We have some comments on this. Congress must be clear about the kinds of actions which it generally wishes agencies to avoid. In addition, critical reviews of the agency's action, oriented to the general public welfare, outside the agency play a role in assessing the agency's conduct.

What we are talking about here is very important to agricultural trucking, to the Nation's consumers, and to our national effort to control inflation.

To be more specific, we are talking about, among other things, getting the trucks which move farm freight back home both efficiently and economically.

If we could solve this one problem created by ICC regulation, we could save the consumer, and the country, large sums of money.

Frankly, we think specific legislation will be needed to bring this about. But we do believe that S. 382 is directed toward real problems and that a regulatory agency's hostility to sources of competition for the regulated entities is one of the major problems which it addresses.

[Additional material submitted by Mr. Chichilla follows:]


In 1944, in ICC v. Jamestown Farmers Union Federated Cooperative Transportation, 57 F. Supp. 749 (D. Minn. 1944) the agency sought to prevent a coop performing truck service for individual farmer members or a coop, or for coops which are members of a coop.

As noted above, in 1955, 1956, and 1957, the ICC asked Congress for more authority to deal with exempt farm coops; and in 1961, 1962, 1963, and 1964 asked for authority to issue "certification of exemption".

In 1961, in Machinery Haulers Association et al. v. Agricultural Commodity Service, 86 M.C.C. 5 (1961), the Commission sought to prevent a farm coop from moving nonfarm, backhaul traffic-in order to prevent competition with the regulated carriers. The Commission alsc attempted to close off access to the vitally

important pool of owner-operators by asserting that the driver of a truck operated for the cooperative had to be an employee rather than an independent contractor. No such restriction applied to regulated carriers, of course.

In 1964, the Commission took another step to close off backhaul traffic for exempt carriers, by denying cooperatives nonfarm backhaul traffic, only to be reversed by the ninth circuit, court of appeals in Northwest Agricultural Cooperative Association, Inc. v. ICC, 350 F. 2d 252 (9th Cir. 1965).

In 1968, the Commission supported regulated carrier efforts to block off from cooperatives the back hauling of Government munitions, Munitions Carriers Conference, Inc. v. American Farm Links, Inc., 303 F. Supp. 1078 (W. D. Okla. 1968).

The Commission joined in the legislative effort to repeal the Northwest case, which resulted in the existing 15 percent of tonnage limitation in nonfarm traffic, in 1968.

In 1969, in ex parte MC 75, 108 M.C.C. 799 (1969), the Commission promptly acted to issue rules directed toward limiting backhaul movements to a specific vehicle which would otherwise move empty after moving agricultural commodities.

In 1977, the Commission reopened ex parte MC-75, with a group of proposed rules which would have severely constricted coop transport. Upon a host of objections from the agricultural community, it retreated to an extension of its recordkeeping requirements and a ban on one-way trip leases for nonfarm commodities— that is, a ban on the coop's use of an owner-operator to keep happy a source of backhaul traffic when the coop doesn't have a truck in the area (within the 15 percent limitation).1


Our understanding is that this committee, in considering S. 382, is considering the desirability of directing agencies such as the Interstate Commerce Commission to give greater weight in all their deliberations to the value of "competition" in the economy.

We do not advance ourselves as knowledgeable in all matters of national economic policy. We are generally in favor of having an open economic system, in which any responsible person can participate. Perhaps our experiences with the Interstate Commerce Commission may shed some light on the subject which you are addressing.

We do have some reason to think the ICC should be directed to take a more procompetitive stance, in many ways.

First, let us put on the record something about our company, and our arca in Georgia.

The Livingston Transfer & Storage Co., founded by Cliff Livingston, Sr., has been in business in the Columbus, Ga. area, doing interstate household goods business as an agent for Allied Van Lines since 1949. We have been engaged primarily in household goods moving. We now have over 50 pieces of equipment engaged in household goods service.

We believe we have a good record in household goods moving. We've never received a citation of any kind for unsafe operations. Our household goods business has grown steadily, leading us to believe the people of the Columbus, Ga. area have some confidence in us.

In the seventies we began to see that there were, at least in our opinion, substantial transport needs in our local area which were not met, or could be met better by a carrier based in Columbus.

The Columbus, Ga. area, with a population of about 175,000, has a number of metalworking, heavy equipment, and similar businesses. There is opportunity for a significant commerce with the Birmingham, Ala., and Atlanta, Ga. area, as well as the entire Southeastern United States.

1 The ICC says “sham" coops use the one-way trip lease to haul "regulated" freight without either having an ICC certificate or being a legitimate farmer coop. We have to grant that this has happened on occas, on The cartelizing effect of ICC regulation is to enhance costs and prices in the regulated sector, and create a grey market on its fringes. That is, truckers have an incentive to go after price-enhanced “regulate: 1" freight. without getting a license. We don't condone the violations of federal law involved in doing this. But we cannot avoid observing that the effect of federal law is to make illicit the performance of socially useful acts-providing efficient, economical transport. The law has been turned on its head.

Our view is that the law should be changed to eliminate the excess costs and enhanced prices, and the opportunities for exempt transport should be opened wider. If these things are done, the grey market with disappear.

We found that there appeared to us to be very little interest in scrap metals hauling in our area. In addition, the Columbus area companies appeared to be disadvantaged vis-a-vis companies in other areas when it came to getting specialized equipment for oversized or heavy items.

Of course, these were just our unproved impressions until we could offer services and see if they were used.

We obtained a Georgia intrastate scrap and heavy hauling authority. We found that the shippers patronized our services. Then we decided to move into interstate hauling.

In going to interstate hauling, we followed the pattern we had observed in the household goods area. That is, we sought to become an agent for other carriers who had operating authorities. We thought we could gain experience in the business as an agent, and then, if our perception of the needs was accurate and the business developed, perhaps get our own authority. In September of 1976 we entered into an agency arrangements with the Ryder Ranger division of Ryder Trucking. Under the Ryder arrangement we were a booking agent in most cases. In September of 1976 we entered into what we believed was an agency arrangement with Heavy & Specialized Haulers, a company based in Nashville, Tenn., and committed our equipment on permanent lease to the Heavy & Specialized Haulers service.

We hauled heavy and specialized materials pursuant to these arrangements from late 1976 for a year or so before we applied for our own authority. We could see that shippers in the Columbus area, and across the river in the adjacent Alabama area, and other shippers in Macon and elsewhere, seemed to feel that we were affording them service which other trucking lines were not. The other truck lines had equipment based at other areas, and as far as the shippers who used us were concerned, seemed not to have equipment available with anything like the rapidity or frequency which we could make available.

At least, that is what our shippers told us, and they gave us a substantial amount of business. In addition, we found that people who had been using their own trucks began to turn to us to handle a substantial portion of their movement. They apparently had been buying and using their own trucks because they could not get quick and closely tailored service from other for-hire carriers.

Under our arrangement with Heavy & Specialized Haulers, we paid them 10 percent. Actually, we assumed most of the responsibility for the transportation. We contacted the shippers, determined their needs, provided the equipment, and billed the shippers (though we always used Heavy & Specialized Haulers' delivery freight bills), bought our own liability and cargo insurance and the like.

We accumulated over 20 pieces of equipment to meet the shippers' needs. We had nine different types of specialized trailers. We also bought 31⁄2 acres of land to set up the heavy and specialized hauling operation. We found considerable demand for our service, and made a substantial investment in responding to that demand.

Before applying for substantial interstate authority in our own name in 1977, we made a couple of relatively small attempts to get limited ICC authority for service to the port of Savannah. We ran into vigorous protests, and our applications were rejected.

As said before, we applied for interstate authority in our own name to replace the Heavy & Specialized Haulers arrangement in January 1978. The application wasn't set for hearing until November 1978. We had 13 shippers who supported our application, going to the hearing in Atlanta to do so. Three carriers protested the "size and weight" authority. No one protested the application for scrap metals hauling authority.

The protesting carriers let us know on the morning of the second day of hearings that if we were willing to drop service to Savannah from our application, they would withdraw their protests. They told us that if we did not cut back our application, they would use records of service with Heavy & Specialized Haulers and Ryder which we had provided for the hearing to show that we were doing certain things wrong, and this would make things hard for us.

I was not aware that we were doing anything "wrong", and felt this was a bluff. We believe we were providing a good service, and were not aware of being outside regulations in anyway.

Protestants alleged, at the close of the hearing, that the arrangements under which we had been functioning with Heavy & Specialized Haulers were not in accordance with ICC regulations. In substance, we were assuming more of the

responsibility to shippers than we were supposed to assume under ICC regulations. After the hearing we traveled to Nashville to discuss this question with one of the owners of Heavy & Specialized Haulers. He told us he believed these were minor problems, could easily be straightened out, and we could amend the arrangement to take care of any objections raised. Then, apparently, one or more of the protesting carriers went to Heavy & Specialized Haulers, told that company that the agency arrangement didn't conform with ICC regulations, and told the company that if they did not sever relationships with us, they would get the ICC to investigate Heavy & Specialized Haulers. Heavy & Specialized Haulers then sent us a letter terminating the agreement with us, effective December 31, 1978. They explained why in a telephone conversation, referring to a threatening phone call by a protesting carrier.

This left us without any interstate authority, except for Ryder's. We could not haul a great deal of our product out of the Columbus area under arrangements with Ryder, because of limited territorial and commodity authority. Therefore, we applied for an emergency temporary authority, giving as justification that shippers in the Columbus, Macon, and Atlanta, Ga. areas, and shippers in the Alabama area, had been unable to secure timely service until we began operations, and would lose needed service if we stopped operations. We introduced statements by 13 of these shippers in support of this request. We followed this with an application for temporary authority supported by 21 shippers. We don't want to duplicate here, before this committee, the file before the Commission, but I have attached some of the excerpts from those statements so that you can get at least some idea of the nature of the representations made by these people who wanted to use our service.

An employee board of the Commission, the Motor Carrier Board, issued us the emergency temporary authority on the recommendation of the Atlanta regional office of the Interstate Commerce Commission, on January 5. The carriers which had protested our application for permanent authority also protested the grant of any form of temporary authority. As a result of these protests, a single Commissioner, Commissioner Gresham, revoked our emergency temporary authority by order served on April 30. Duirng the January-April period, we had transported about 175 shipments. We find it hard to believe there was no need for our service.

The protestant carriers had put material on record to the effect that they had equipment based in various portions of the Southeast: Birmingham, Atlanta, Marietta, Charlotte, and a few other places. None of them showed they had equipment based in the Columbus-Opelika area. Also, none of them showed any detailed information to offset the statements of the people who supported us to the effect that these shippers had not been able to get service on a timely basis, according to what they needed in their particular lines of business. As we read the opposing submissions, a carrier just came in and said they had a large amount of equipment available, in generalized terms, without being able to show that this equipment was actually available at the time, in the place, and on the terms needed by the people who were supporting out application. In fact, we found that not one of the protesting carriers directly solicited the shippers supporting an order to offer service while we had the temporary authority.

We appealed this decision to a division of the Commission, but it did not reverse the order. We were put out of interstate business on April 30. We then applied for two more narrowly limited authorities-scrap from a broad geographic area and "heavy and specialized" items from the Columbus-Opelika origin area only. This narrowed scope of authority for heavy and specialized items did not take care of all the shippers who had used our services, and would not allow operating flexibility which we believe important over the long run. We were told on May 16 that the Motor Carrier Board of the Commission approved these two emergency temporary authorities. We don't know whether other carriers will protest these grants of temporary authority or not. If they do, we don't know whether a single Commissioner will reverse the Motor Carrier Board or not.

They forced layoff from May 1 through May 16, during which period we did not know when, if ever, we could operate again, cost us four valuable, trained drivers, in addition to the financial loss from idled equipment and no revenues.

We don't know exactly what considerations the Motor Carrier Board took into account in reinstating the authority, but we do know that on two occasions known to us, shippers called carriers which had protested our authority and could not get any service. At least one of these shippers called the ICC to tell them about this. So our shippers, as well as ourselves, suffered from this break in our service.

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