Second: Perhaps even more serious, is that the American Bar Association was deeply concerned with the regulatory overkill which it felt S. 2028 reflect. The American Bar Association saw some procedural nightmares which seemed inevitable under S. 2028, and it was concerned if this bill were enacted it would lead to much more litigation, and substantial delays in agency decisionmaking; so I believe personally that both these problems have been improved substantially in the proposed modifications of the S. 382.

With regard to the first problem, section 3(a) of S. 382 is a great improvement in two respects. First, of course, it limits drastically the application of the statutes to the four categories that you mentioned at the start of the hearing this morning. Second, the obligation it imposes now on an agency is only to consider the competitive effects of the agency's action and then the agency must conclude that the action it is taking is the least anticompetitive alternative legally and practically available to achieve statutory goals, their recognition of these other national policies reflected in other legislation. So that with regard to this, the second problem, the procedural morass problem, I think the proposed modifications of S. 382 are also a very welcome follow-on or aftermath of S. 2028. The worst feature is the one which would have permitted the Attorney General to force hearings to be held whenever he felt the standards of the act were not being met. That is being deleted in the proposed modifications of S. 382.

Another bad feature of S. 2028 which would have provided for independent judicial review of agency actions, the burden would have been on the agency or someone supporting the agency's action to prove that it met the standards of the bill. That has also been deleted in these proposed modifications, and I think those changes should reduce a very severe major problem that the prior bill had.

So my basic view, having gone through the history of this legislation, is that the proposed modifications of S. 382 have solved some of the serious flaws in the original statute which the American Bar Association recognized in 1976.

I have some other minor suggestions which are in my prepared statement for the consideration of you and your staff. I would like to make one point: While I think that this legislation has been dramatically improved from a technical standpoint, you still have the question of whether the best approach to the problem that we are wrestling with here is not individual agency-by-agency legislation.

The Securities Reform Act of 1975, the Airline Deregulation Act of 1978 are examples, I think, of outstanding congressional attention to the specific problems that individual agencies have and I think that that is a superior way to approach this problem. On the other hand, obviously it recognizes the impatience that many of us feel in the desire to get more competition into agency decisionmaking.

I thank you for the opportunity to be here and I do urge that the proposed modifications in S. 382 remain part of the legislation.

Mr. KENNEDY. Thank you very much. Mr. Gellhorn.

Mr. GELLHORN. Thank you, Mr. Chairman. I also am appearing in an individual capacity, not as a representative of the American Bar Association. I endorse Mr. Pogue's comments on the specifics of S. 382. In terms of the basic thrust of the legislation, however, I take

a somewhat ambivalent position. I have submitted a prepared statement, so I will merely comment here on a couple of items.

On the one hand, the concept of bringing competitive factors to the fore before the agencies has considerable appeal to me even on the generic industrywide basis. Senate bill 382 builds on the findings and reasons requirements of the Administrative Procedures Act. These, in turn, rely on the presumption that reasoned elaboration for agency decisions will result in better decisions and in checking arbitrariness.

It also builds on the NEPA "impact statement" approach. That statute applied an action-forcing mechanism requiring agencies to consider a new and different factor. In fact, S. 382 would be an inferential step beyond the cost-benefit analysis suggested first by the Ford Executive order applicable to the executive department agencies in 1974 and President Carter's cost-benefit order, Executive Order 12044, of March of 1978.

So S. 382 is a tool, perhaps, for a more alert, careful, and responsible agency analysis to take account of competitive factors. Yet, because of the way the bill is now drafted and limited, focusing solely on economic regulatory agencies, I wonder whether it is really going to have any effect. Certainly those of us who have looked at the Ford Executive order on inflation impact and the Carter order during this past year, have been unable to discern any significant or even perceptible change in agency considerations. If one stops for a moment and asks why, I think the reason is apparent. For example, look at the Interstate Commerce Commission. Since 1936 it has articulated competitive factors as a basis for consideration in its decisions, in addition to impairment of service and viability of the competitive entry or competitive components.

What would happen here if S. 382 were adopted and the ICC were now specifically directed to take a look at competitive factors? Would its decisions be changed? I would suggest the Commissioners would say we have already considered that as part of our mandate under the public convenience and necessity standard. Certainly by S. 382 the Congress is not telling the ICC that competitive factors shall now override and eliminate from consideration factors such as quality of service, ability of firms to compete within the regulated market. So I don't see S. 382 as changing the basic interpretation and understanding of the Commissioners of the Interstate Commerce Commission or any of the other economic regulatory agencies.

The next question is what would be the effect of S. 382. Does this mean that instead of focusing solely on the regulated trucking firms, for example, the ICC should now look at what is the impact of a licensed application on nonregulated trucking. If it is obliged to look at nonregulated trucking, what you have adopted is a bill which, in essence, overtakes the hearing which Senator Cannon is planning to hold on truck deregulation. I frankly do not read this legislation so broadly and I do not think a fair reading permits that understanding. That also raises one additional consideration and question for me.

If by competitive factors, does S. 382 mean that the ICC should also consider the impact of licensing restrictions on airline freight? On barge freight? On railroad freight? In other words, as the legislation is written, it does not identify the meaning of the competitive effects standard.

We immediately filed for emergency temporary authority, which was granted on January 5. During this time, after this, the same three carriers protested this application. Based on this protest, a single Commissioner revoked the ETA on April 30. We then filed a second application which contained a more condensed territory, and this application was granted on May 16. During this time we were shut down for 2 weeks waiting for this final decision. It was a costly shutdown, loss of revenue as well as several trained drivers that we lost as well.

While we were struggling to maintain our service pending the decision of the permanent authority, the administrative law judge issued a decision that he did not feel that it was necessary to question the need for service, but recommended that the Commission find us unfit because of some of the regulations that we did not follow. While under our temporary authority we made steps to correct these changes in our operation.

We are not here to ask the committee to intervene in our case. We hope and believe that the Commission will take a more balanced view in our appeal. We bring these points out here to point out that unless Congress directs agents to favor competition, that some of these agents could possibly construe these in many ways, and possibly suppress competition.

If S. 382 would have this effect for more opportunity for competition, then we support the bill.

Thank you.

Senator KENNEDY. It seems to me that you were found to be unfit because you tried to provide something extra to the shippers; is that part of the testimony?

Mr. LIVINGSTON. Yes, sir. As I indicated, prior to the hearing we felt like we were within the guidance of the regulations. In some cases that were indicated, we had possibly extended some additional loading or unloading times that were not offered in the tariff. We feel like some of these things were blown out of proportion. We feel ike we operated in the interest of the customer. We are there to provide the service, and we try to operate under the guidance of these carriers.

Senator KENNEDY. Do you think that the ICC's fitness criteria. themselves may be anticompetitive? Certainly it would appear that you were trying to provide the kind of additional services which would be respected and would be the usual way of doing business in other industries in order to retain customers and attract shippers. Yet, because you were doing these kinds of things, you were found unfit. It does not seem to me to make a lot of sense.

Mr. LIVINGSTON. This was not a common practice. We did not mean to operate in this manner in order to bring about new customers. We felt like we were fit, due to our being financially able, and able to provide the service to the customer.

Senator KENNEDY. Thank you very much.

Mr. Rappeport, president, General American Shippers.

Mr. RAPPEPORT. Thank you, Mr. Chairman, for your time. We favor S. 382, but also more broadly for the entire range of initiatives to reform the Interstate Commerce Commission.

In my opinion auto driveaway is a classic example of how anticompetitive practices developed within the last 15 years, mainly because of ICC regulations.

I am president of General American Shippers, Inc., an automobile freight forwarder in New York. The auto driveaway business in integral to our import-export business.

My son, Jeffrey Rappeport, and his partner, Bonnie Weiner, have formed a company called American Auto Shippers, and they received an emergency temporary authority from the Interstate Commerce Commission, being required to extend it every 30 days. We have been familiar with the auto driveaway business since 1954. As an individual citizen, related to my son, of course, and vitally concerned with the operation which he heads, I would like to reflect to you the effects of Interstate Commerce Act regulation of the auto driveaway business, as I have observed it.

Briefly, my position is that most ICC-type regulation has limited service to the public, and led to public abuse which would not exist in an "unregulated" regime. If any regulation is needed, it would be rules requiring sellers to be financially responsible and truthful in dealing with consumers.

If S. 382 were enacted, and if its reasoning were followed through throughly by the Commission, in the spirit intended, the Commission could do little harm. The Commission would have little left to do other than prevent consumer abuse. But I fear that the Commission would not understand clearly what a competitive market requires. Probably Congress must just tell the ICC not to impose barriers to entry into interstate transportation other than fitness tests, and not to allow carriers price fixing.

In my opinion, ICC regulation has been a curse on the auto driveaway business. I know most people at the Commission never have intended that. When the auto driveaway business was unregulated, there were many people spread all over the country, working with each other for interstate moves when necessary. When ICC regulation came into effect, a few people got national authority, a few more got limited interstate authority, and most of the remainder became subservient to the principal firms. Though I cannot prove it, I believe find fear that there may have been collusion on the part of the few licensed companies concerning their prices to the public and their priorities as to "agents." With entry at the national level limited, the licensed companies squeezed more and more out of the local companies which do most of the work involved in moving cars, leaving those companies barely enough to survive. The insurance claims policies of at least one company came to be of serious concern.

If the people at the Commission-and there are good people at the Commission-had had a different set of directives, this need not have happened.

Let me tell you about the auto driveaway business. The local auto driveaway company matches the people who want to go somewhere without paying common carrier fare with a carowner who wants the car moved but does not want to drive it. The local auto driveaway businesses are usually small, locally owned businesses of a "mom and pop" sort. Such a local business could, but for ICC regulation, just move cars from its city to various distant points. But there are advantages to the various local companies working together. One can call on another to pick up a car owned by a customer located in a distant city. This is especially useful in dealing with corporate cus

tomers-auto dealerships, car leasing companies, companies with salesmen needing cars, and so forth.

There is no trucking involved in the auto driveaway business. It could hardly have been in the mind of Congress when the 1935 Motor Carrier Act was passed. For over 20 years, it was not regulated by the ICC. Then, in the sixties the ICC decided it wanted to regulate auto driveaway services. Appeals to the courts did not work. Regulation descended.

Every local company had to get an ICC certificate or become an "agent" for someone who had a certificate. Well, you can imagine that very few of these local "mon and pop" companies could take on the burden of showing a public need for their service over a large area. They could provide the service, but launching a Federal case to prove it was just beyond their means.

A few people did get certificates. The number with certificates narrowed down to three. After a few people got entrenched, trying to get a certificate became not just a logistical exercise, but a war. Any new application was greeted by an all-out attack by those who sat astride the business. Funds milked from over a hundred local driveaway businesses around the country were turned against the one or two which wanted to venture into the interstate field.

The Commission had made some effort to protect consumers. It requires that certain disclosures be made, that a business to keep a car tied up indefinitely, and that insurance or some substitute therefor be carried.

But, overall, the deck has been stacked against the buyer. There really is no effective control over what kinds of drivers are used. We could leave this to competitive prices, if those forces were not suppressed. But they are. With only three national companies, there was little or no price competition. That has to hurt the consumer.

If a local driveaway business ran afoul of one licensed company, it just might not be accepted by another. A pending antitrust suit filed by one local company, one of American Auto Shippers' affiliates, alleges that the three certificated companies conspired to limit the ability of local companies to move between the certificated companies. This would, of course, limit the local companies' ability to seek a better deal for their customers.

The limited certificate system may have turned this market on its head. Instead of the interstate company being a servant of the local companies and their customers, they have tended to become masters, and hard ones.

Even though we believe there is a major need for a new, fourth national carrier, and maybe for other national firms as well, American Auto Shippers would not be in existence today but for an historical fluke.

A company called the Sober Co. started to operate a nationwide. driveaway service in 1977, thus making a fourth company. Many local driveaway companies, dissatisfied with the other three companies affiliated with the new company, U.S. Driveaway. They relied on the Sober Co.'s assurance that it had ICC authority, and attorneys' reports that an apparently valid authority existed. These local companies had a significant business operating under the U.S. Driveaway


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