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Next we have a panel of independent businessmen under ICC regulation. They have all had firsthand experience with the types of regulation which S. 382 addresses.
With us also is Jack Pearce, who will introduce the witnesses and give a brief overview.
PANEL OF INDEPENDENT BUSINESSMEN UNDER ICC REGULATION: STATEMENTS OF JACK PEARCE, PARTNER, PEARCE & BRAND; DON CHICHILLA, PRESIDENT, NATIONAL AGRICULTURAL TRANSPORTATION ASSOCIATION; THOMAS LIVINGSTON, REPRESENTATIVE, LIVINGSTON STORAGE & TRANSFER CO.; TIMOTHY PERSON, OWNER, ALL-STATES TRANSCONTINENTAL VAN LINES; ARNOLD PEVNA, PRESIDENT, HAVERHILL LAWRENCE TRANSPORTATION CO., AND ALFRED RAPPEPORT, PRESIDENT, GENERAL AMERICAN SHIPPERS, INC.
Mr. PEARCE. Mr. Chairman, the panel which is before you is composed of small business people who found that the existing regulatory system in the trucking industry imposes major costs and difficulties for them in trying to serve the public. Some of them have asked me to point out that they regret having to take your time on these issues and would have greatly preferred that they had nothing to say on the issues addressed by S. 382. Three of these companies have cases pending before the Interstate Commerce Commission. They are not here today to ask the committee to intervene in those proceedings; they all hope and expect that eventually they will get some or all of the operating authority they seek. They all believe that they have met and/or can or will meet all the existing tests that have been administered by the ICC, and they are not here to condemn the Commission's personnel.
The issues which they address are questions relating to overall structure and operation of the regulatory system as it has affected them.
They are here to illustrate the costs and impediments which small firms and exempt firms encounter in dealing with the system as it now exists after numerous court decisions to the effect that the Commission should accommodate the policies of the antitrust laws. They hope to assist the committee in its consideration of this bill.
If I may take just a moment briefly to submit that the testimony will show a need for new legislative direction from the Congress to the Commission, and, by analogy, to other regulatory agencies at three levels.
The first level may relate to the large general issues related to, let us say, entry and collective pricing, which may be addressed in specific regulatory reform bills not here today before this committee. In some respects that level may be the most important.
The second level concerns a layer of regulation which does not often attract public attention, but does affect industry performance. Particulars of industry operation, such as, in trucking, the way vehicles
may be leased, the number of companies which a local agent can represent, and the like, are often reached by rulemakings, sometimes by agency policies which are not in the form of rules.
If I may, I would submit that this level of Commission regulatory activity may be thought of as having the level of significance of, let us say, Federal Trade Commission trade regulation rules. That obviously can be of substantial significance.
The third level is particular adjudications under whatever statutory standards may exist. Here, too, this group would suggest a directive to an agency such as the ICC, to achieve procompetitive results, and this can be of some substantial consequence. Any agency and particular adjudications, and each adjudication, must be guided by a structure of guidelines, lawyers often say principles, and this bill would make procompetitive principles explicit.
If an agency finds that in its adjudication it is repeatingly running into conflict between its existing standards and the procompetitive principles, that may be a very important signal that it ought to rethink the existing standards. If it repeatedly finds that it is simply executing a procompetitive mandate, it may find that it should not have as many detailed adjudications and should cut down its regulatory reach.
Thank you for your indulgence in that introduction.
If I may, I will introduce the members in the order of the panel. First will be Mr. Arnold Pevna, president, Haverhill & Lawrence Transportation Co. in New England.
Then Mr. Chichilla of the National Agricultural Transportation Association.
Mr. Person from Allstates Transcontinental Van Lines.
Mr. Livingston, from Livingston Storage & Transfer Co. in Columbus, Ga.
Mr. Rappeport, with the General American Shippers Inc. in New York.
First will be Mr. Pevna.
Senator KENNEDY. Mr. Pevna, we are glad to have you here from Massachusetts.
Mr. PEVNA. It is nice to be here, sir.
Senator KENNEDY. I was up in Haverhill recently, and know the Souliotis family.
Mr. PEVNA. Very close friend.
Senator KENNEDY. Barbara has worked for me for 20 years now. Mr. PEVNA. I have known the family for a good number of years. Senator KENNEDY. She is probably the best Red Sox fan in Massachusetts.
We are glad to have you here, and look forward to your testimony. Mr. PEVNA. I am Arnold Pevna, president of Haverhill & Lawrence Transportation Co. in Haverhill, Mass.
I understand that S. 382 is aimed at making agencies like the ICC stop, look, and listen before they eliminate or diminish competition. I also understand that this bill is not a substitute for bills to deregulate trucking.
I think encouraging an open, competitive economy is great. But as soon as Congress starts telling agencies to promote competition, the people who come before the agencies will start justifying everything from birth control to breeder reactors-and some say they are
the same thing-in terms of promoting competition. You had better also tell the agencies something about what you mean when you say you want to promote competition.
Take the ICC. Some ICC-regulated truckers go around telling everyone that the regulatory system protects small business, and promotes competition. Let me tell you what I have observed.
We have seen large trucking companies come in and buy up small companies, with ICC approval, in order to get a route segment, and then drop most of the service which the small company performed.
We have seen Roadway Express buy two small companies in our area, the New England area. One was very close to us, also located in Haverhill, Mass.: the Hub Transportation Co. Hub served over all of Massachusetts, particularly eastern Massachusetts. Roadway apparently bought Hub in order to get service into the Boston metropolitan area. Our observation is that Roadway then just did not bother to solicit or service most of the non-Boston traffic which Hub had serviced.
Also, in 1972, Roadway bought Atlas Transportation Co., of Kennebunk, Maine. I had been dickering with the company over the price for buying it, so I was fairly closely acquainted with it. Again the same thing happened; Roadway dumped all the service except for a few route segments.
As we see it, the reason Roadway or other large firms do this is very simple. They are geared for relatively long-haul traffic. They do not handle the local, short-haul, pickup-and-delivery runs efficiently. In fact, most of this business is done by small firms like mine. But because it has been so expensive and difficult to get new authority by the direct method of applying for it, truck companies, even such large ones as Roadway, have been encouraged to buy authorities, by buying up companies having authorities.
I can understand why a large company such as Roadway does this, under the existing regulatory system. But the system is producing just the opposite effect claimed for it. Smalltown service tends to get cut down, rather than promoted.
While the large carriers may buy out small ones, and drop smalltown service, the small carrier providing LTL service to small towns faces major obstacles to growth. The small carrier is less able than the large one to cover the costs of hearings to get a certificate, and has no large cash flow with which to buy out neighbors.
If you can figure out how the small shipper, small community, and small carrier come out ahead in that game, I wish you would let me
We have spent the last 30 years in a bottle. We have been in the role of the small carrier-limited in hopes of expansion by the ICC certification system. We would like to find our way out of this bottle. We believe that if we could get an interstate authority for LTL service, we could provide more service at lower rates than existing certificated ICC carriers.
I am told there is a lot of talk about "deregulation" harming LTL service to small towns. I have a message for you and the Nation at large. There are some small LTL companies around the country who would be perfectly capable of expanding their services, if all they had
to do was prove their ability, and attract the capital to undertake the service. The Interstate Commerce Commission ought to be given that message. If Yellow Freight or PIE says it is not so, I, Arnold Pevna, say: Open the door and we will show you.
If Congress enacts S. 382, I hope it will make clear to the regulatory agencies what it means when it is talking about lessening or promoting competition. If you mean to say that things like price fixing, dividing up markets, limiting new business enterprises, and allowing big firms to buy up little firms fall in the anticompetitive category, you had better say that. That may seem elementary even to a small businessman like myself, and even more so to you.
But these agencies face hoards of people with a vested interest in their license telling them the opposite. If you mean licenses should be easy to get for the small, but willing and able firm, you had better say that. If you mean that regulators better learn the antitrust laws, why not say that? We must find some way to get away from a system which doles out the opportunity to serve the public as if it were toxic in large doses.
I hope my brief testimony has been of some value to this committee. Senator KENNEDY. It has been very helpful. I just have a few questions, if I may.
Are you organized by the Teamsters?
Mr. PEVNA. Yes.
Senator KENNEDY. During the Teamsters strike, was your company struck as well?
Mr. PEVNA. No; we operated. During this particular period we were allowed by the Interstate Commerce Commission to operate areas on an emergency basis, that we were not allowed to operate before, mainly New Hampshire and Maine in that particular situation.
Senator KENNEDY. You did not participate in the lockout?
Senator KENNEDY. During the strike, you expanded your service in the Merrimac Valley and into Maine, serving the shoe industry among others. What was their reaction to your rates and service?
Mr. PEVNA. They were very receptive. As a matter of fact, many of them in the New Hampshire and Maine areas that I serviced during this labor problem asked me if I could make some attempts at getting authority so I could service them on a regular and permanent basis. They were so delighted with the service that I did provide them with.
Senator KENNEDY. As I understand, in some instances about 20 percent less for the LTL; is that correct?
Mr. PEVNA. Yes.
Senator KENNEDY. How can you serve the small communities more cheaply?
Mr. PEVNA. Because our traffic lanes are geared for this, where our particular flow of traffic goes into these particular small communities. This is our market. Therefore, we already have the lanes established. It becomes a question then of putting more dollars on the same vehicle, delivery and, or pickup vehicle, depending on what the situation. is.
Senator KENNEDY. We are told that the smaller communities will be the big losers if we eliminate collective ratemaking and facilitate entry.
Mr. PEVNA. I disagree with this. I do not think that the small communities will be any more at a loss than they are at the moment, because most of these bigger carriers are not serving the small communities on a daily basis-even though they hold themselves out to be. In many instances they are turning this freight over to a small interline carrier such as myself to deliver for them, because it is economical and feasible.
Senator KENNEDY. Mr. Chichilla, we welcome you.
Mr. CHICHILLA. My name is Donald R. Chichilla. My business address is 1717 Penn Avenue, suite 900, Pittsburgh, Pa. I am president of the National Agricultural Transportation Association, NÁTA.
I am also president of the A.C.R. Inc., a broker of truck transportation for agricultural cooperatives exempt from economic regulation under the Interstate Commerce Act. I have been engaged in various phases of transportation-industrial traffic, private and for-hire carriage, fleet owner, and agricultural cooperative transportation broker— for over 26 years.
NATA's purpose is to promote the public interest in the safe, efficient and economic transportation of agricultural products from farm to market and consumer.
Senate bill 382, the proposed Competition Improvement Act, represents one way, but not the only or most important way, to improve the administration of the Interstate Commerce Act. We think specific amendment of that act, to free up backhauls for agricultural carriers, is needed.
The transportation of farm products including fresh fruits and vegetables from the farm to market and consumer is a major concern of the Nation. The Interstate Commerce Act exempts the truck transportation of farm products from the economic regulation of the ICC. It also exempts an agricultural cooperative hauling the farm products of its members and, on the return trip, ICC regulated freight for nonmembers of the cooperatives, provided the return regulated freight does not exceed 15 percent of the cooperative's fiscal year freight, measured in tons.
This means that of 10 trucks coming in to the East with member tonnage, 7 must return empty or be leased to an authorized carrier, under unfavorable terms.
Following its long-time policy of protecting regulated carriers, the ICC has been hostile to all the exempt status of carriers which it does not regulate, including those hauling farm products and in need of a return haul.
The hostility of a regulatory agency to competition with its regulated charges from outside the regulated arena may be one of the more important issues addressed by S. 382. This hostility can result in use of Government resources to suppress economic activity by people whose major crime is to provide a better service at a lower price.
The committee will find in my statement the proof of the ICC's hostility. What really matters is that the exempt carriers are now handling over 80 percent of the fresh fruits and vegetables to the eastern markets. The railroads and the regulated carriers are not interested in this perishable traffic, particularly since the price for hauling such traffic is determined by the marketplace and is not subject to any antitrust exemption.