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Our application for permanent authority is pending. In that proceeding, the administrative law judge issued an opinion to the effect that he did not need to look at the question of whether there was a need for our service. He said that our nonconformance with Commission regulations, prior to our applying for authority, disqualified us, or made us "unfit" for service as a carrier.
This has caused great consternation to us. The administrative law judge could not and did not say that we were not financially responsible. We have been a financially sound, though small, company. We borrowed about $400,000 from the Small Business Administration in the early sixties and paid off our loans 2 years ahead of time.
The administrative law judge could not and did not say that we had ever mistreated customers, because customers who testified in our behalf were very satisfied with our service. There has been no showing of any customer abuse of any kind.
Nor did anyone say that we had been unsafe in our operations. We've never had a Department of Transportation safety inspection, audit, or warning of any kind. We carry more insurance than is required under the law.
The administrative law judge deemed us "unfit" because we had, he said (1) leased trucks for outbound movement to Ryder, using our own man for a safety inspection, and then leased the same truck to another carrier for a movement back in our direction (back-to-back trip leases); (2) on two occasions, out of 250, may have carried shipments which may have been overweight;1 (3) and on some occasions carried some items "bundled", or aggregated for the convenience of the shipper, such as steel tubing and 5,000 pound bundles of scrap radiators which weighted about 18 pounds each (under the impression that this sort of thing was heavy and fell within the definition of "heavy and specialized" hauling).
We had, at the hearing, tried to make clear that if any of these practices were not in accordance with ICC regulations, we would amend them. When we got the emergency temporary authority, we put in our own tariff allowance for extra detention time for loading in some circumstances, and we started using a standard lease form for shipper-owned trailers. When we read the administrative law judge's opinion, we stopped all trip lease arrangements with Ryder. We had made an effort to conform our lease arrangement with Heavy & Specialized Haulers only to get that cut off entirely by Heavy & Specialized Haulers. We make every effort we can to prevent any loads heavier than the weight laws allow. Sometimes drivers don't follow your instructions; but we have kept this down to a very low percentage.
What puzzles us about this administrative law judges findings, which is on appeal to the Commission, is that everything we did unknowingly was in the nature of extending ourselves to the shippers more than Commission regulations apparently will allow us to extend ourselves.
When I say this, I don't want anyone to have the impression that we will not abide by the regulations. We want to be licensed by the ICC. We will abide by whatever regulations exist. But we have difficulty in understanding why we are in any way "unfit" to serve the public when we have apparently been more willing and eager to serve the public than other carriers have, and such violations of regulations as we unknowingly committed did not disadvantage the shippers.
We are not here to ask this committee to interject itself in a case pending at the ICC. The more general question is whether the Commission's regulations might be improved by a directive to foster competition, such as is contained in S. 382.
Let us start with the temporary authority statute. As we read this statute, as an ordinary layman, it would seem to allow a broad range of interpretation. It just says that a temporary authority can issue if there are no carriers able to meet the immediate needs of a place or area. But we can see from the experience we have gone through that this statute can be given a very restrictive interpretation. If the Commission took the view that all a carrier has to do is show that he has a large equipment list, then people in the market can just about block any new entry.
This statute can be interpreted in a way which either allows competition or blockades new competition. People at the Commission may differ about how to interpret. The existing Commission is relatively liberal, as a whole, but the Commission is always changing. You can expect people who have certificates to encourage the Commission to take a restrictive approach. We understand this. I
1 Actually, the record did not show conclusively that any shipments were overweight. In one instance, there was a typographical error, and the shipment was not actually overweight. In one instance, I must admit, though the hearings record does not prove the fact, the shipment was overweight.
can tell you that we'd feel a little safer now if this bill had been enacted a year ago! There are other regulations which seem to us to be restrictive of competition. For example, if you apply for a temporary authority, you must not change any price below the lowest price of someone already in the market. This automatically restrains price competition. That rule is not required by the statute, but we are advised that the Commission has had it in effect for decades.
There are other Commission regulations which aren't so visible that they might get involved in a national debate over regulatory reform, but do appear to restrict competition. For example, shippers bundle of aggregate items for economy and convenience. We will follow the Commission's rules, but it appears to us that the only reason for this rule is to limit competition between the common carriers and the specialized carriers.
The rule which forbids trip leases of less than 30 days, or back-to-back trip leases, is another puzzling rule. We can certainly understand rules requiring inspections from a competent mechanic or repair person, before a piece of equipment goes into the service of a new carrier. We've always tried to make sure our equipment is in working condition, and we've had a very good safety record. Also, we have no quarrel with regulations designed to be sure the licensed carrier is responsible for the transportation performed. We've always assumed responsibility; not ducked it.
We have stopped all trip leases of any kind with Ryder. But why in the world do regulations exist which, generally, prevent trip leases of less than 30 days? At least in some circumstances, trip leases of less than 30 days can bring about a very efficient use of trucking equipment. As far as we can see, highly restrictive trip leasing rules hurt the shipper. Instead of just getting available equipment and making sure it is safe, you have to watch out for the 30 day limit, in what direction the equipment is going, and so forth.
Why isn't back-to-back trip leasing efficient, providing you have safe equipment? In these days when people are lining up at gas pumps, and truckers in California are complaining that they can't get enough diesel fuel, we think that we ought to be doing everything we possibly can to make the most efficient use of trucking equipment.
It may be difficult for the Congress and the general public to see regulations buried way down in the depths of some agency. We do figure that some kind of directive from Congress which would require the Interstate Commerce Commission to reassess its way of doing business would be healthy.
Also, legislation like this might not be an imposition on many people at the Commission. There are fine people at the Commission. Giving them a clear directive to further competition could help them make their jobs productive, and support them when they feel they wish to authorize needed services.
We suppose that many of the people who come before this Congress appeal for sympathy on the basis that they are small, or that they serve small towns, or that they serve small businesses, or the like. We are a small company. We do serve a relatively small town. We do serve a number of small businesses.
We are not here to ask for sympathy. We are here to urge very strongly that our Federal Government could serve us best by letting us compete. We believe our service could help the small businesses in our area be more competitive with the other larger businesses in Atlanta, Birmingham, and elsewhere, as well as the smaller businesses in other territories.
We can see the Federal Government helping small business by making available information on business practices, common market opportunities, export market opportunities, Federal Government regulations, perhaps, by tax incentives and the like. But making it difficult for small businesses to serve small towns is the kind of help we would be much better off without. If S. 382 would make it easier to serve the public, we support it.
PREPARED STATEMENT OF TIMOTHY PERSON
I am Timothy Person, owner of Allstates Transcontinental Van Lines, a household goods moving firm in St. Louis, Mo. I am the second generation of our family in household goods service. I recently applied for nationwide operating authority, with the support of over 40 other minority household goods movers located all over the United States. We have been through hearings before the ICC, and my case is now with Administrative Law Judge White. My testimony today is not
focused primarily on my own situation, though my situation can be used to illustrate the position of minorities in intercity trucking in the United States. Rather, I want to talk with you today about what I've learned in over 30 years of traveling around the United States and dealing with minority truckers, and over 30 years of dealing with the Interstate Commerce Act.
First: Let me put a couple of qualifiers on my testimony. It may be a little difficult to separate out the particular effects of the Interstate Commerce Act and the ICC regulation from the general effects of the overall position of minorities in the United States. The results of our ancestors coming from Africa to a more developed country, and the pervasive and systematic segregation they eventually encountered here, are widespread and numerous, affecting all aspects of the economic life of black people. Similar effects from similar circumstances can be seen in the lives of Mexican-Americans, and families from China.
Second: We have learned, 125 years after Emancipation, 25 years after the Brown v. Board of Education death knell for segregation, and over 10 years after the riots, that closing the economic gap separating blacks from others in America is a long and laborious process. We must build skills of many kinds. Trainingeducation of all kinds-comes first. We need more opportunity. We need more capital. But all factors-training, opportunity, and capital-must be fitted together into a growth process. With a seed must go soil, water, sunshine, and, for best results, fertilizer. All must be in proportion, and combined at the right times. You don't gro a grove of redwoods in one human lifetime.
So it is in trucking. If the barriers to opportunity come down, we think the "minorities" may make a major contribution. But we will have to grow into it. What we need is a reduction in regulatory barriers, assistance in training, modest assistance in funding, a willingness at the traffic manager's table to give us a shot, and time.
As I understand it, S. 382 would require agencies such as the ICC to give more weight in setting up and administering their regulations to achieving a generally open and competitive system. Senate bill 382 is not designed to make unnecessary changes in particular regulatory statutes. It is intended, I am advised, to limit the extent to which regulators interpret the statutes which now are on the books so as to hold down competition, and to encourage regulators to interpret any revised statutes so as to encourage open, generally competitive industries.
There are two sides to this coin. I think both sides are needed, from the minorities' standpoint.
Let me tell you what I found, traveling over the countryside hunting minority truckers these last 30 years.
I found that there actually were a few black truckers in operation in 1935, when the "grandfather" rights were given out by the ICC. But the black grandfathers' share in trucking was maybe 20 or 30 very small authorities out of over 10,000 grandfather rights.
When I started, I found that there was no black trucker in interstate commerce with revenues as much as $500,000 per year. Today the largest black trucker, Leamon McCoy, grosses about $8 million. The largest firms in the trucking industry gross over $300 million.
I found that in my field, household goods, there were a few black businessmen with interstate authority; but no one had been able to gather a widespread network of local black companies. Less than 10 local black household goods companies, out of thousands of local household goods companies in the Nation, were affiliated with major interstate van lines. The black-owned businesses were for the most part small, isolated from one another, and undercapitalized.
But what did the ICC have to do with this, and what would S. 382 do about it? Let me put it this way.
The ICC has administered its licensing authority so as to give each carrier which has an authority a right to protest any new entrant. Any would-be entrant has the burden of proof in showing there is a need for his services.
If you watch sports on TV, you will have noticed that a substantial portion of the NFL and NBA players are black. We are over-represented there. Much of our talent is channeled into professional sports.
How many black players do you think there would be in the major leagues if, before a kid could set foot on the field in high school, college, and the pros, he had to go through a formal hearing, and prove on paper that the people on the squad were not as good as they might be?
To shift the analogy slightly, it is as if all the players on the court were allowed to form a wall at the edge of the court, and you could play only if you could find a
way through it, and then, if the game were administered by the ICC's rules, you could only play along the baseline, or outside the foul circle, until you had proved somebody elsewhere on the court had tripped over his feet and fallen on his face.
In my case, applying for nationwide household goods authority, I have spent over 20 years gathering support among black truckers, and then could not have proceeded had not OMBE financed a part of the costs of the application process. I want to express my appreciation to OMBE and those in Congress who have taken an interest in my case. Without you we wouldn't be here today. But we can't have a system in which every ambitious entrepreneur requires special funding merely to present his case to the relevant Government agency. We must find a way to reduce the Government-composed hurdles put in front of new entrants, and the costs of getting over those hurdles.
I understand that Congress may revise the Interstate Commerce Act to reduce the barriers to entry, and diminish the price-fixing among the carriers. This is needed. But I doubt that Congress or the American public have any idea about how many ways the ICC limits competitive enterprise.
For example, in household goods moving, a local company can represent only one major carrier, by ICC regulation. A local insurance agent can represent several insurance companies, if he and they agree. A regulated carrier can interchange with several carriers. But an agent is restricted to one carrier. There are many smaller carriers and many smaller household goods agents who could improve their competitive abilities if this rule were lifted.
Carrier certificates are usually geographically restricted. Most carriers cannot venture into the national level.
Household goods carriers have "peak load" problems-a heavy summer peak and slow business in the winter months. But mixing a U-haul type of service, use of vehicles in services other than household goods in off-peak periods, auto transportation, and use of flexible rate devices would run into many regulatory problems.
I believe that there is no one thing which Congress can do which would take care of all the problems in regulated trucking, and, of course, minority enterprise. Probably of greatest importance is taking away from regulatory bodies such as the ICC the ability to do harm. That is, their ability to restrict entry, except on fitness grounds, and to authorize collusion on prices and service, should be eliminated or cut back substantially by specific legislation.
But the ICC will probably be left with some regulatory functions. Whatever authority the ICC keeps should be exercised according to the guidelines set out in S. 382. I sincerely hope the people appointed to the Commission understand transportation, economics, and the society in which we live.
I want to make it clear that in suggesting that the Congress should give the Commission new direction, I am not intending to be critical of the people at the Commission. There are many fine, conscientious people there. But the Commission must respond to whatever the Congress directs. The Congress gave it a very restrictive statute in the thirties. Things have changed. That statutory design has big errors in it. If someone like the current Chairman wants to update and liberalize regulation, he comes under fire from all directions. He is like a ship trying to get underway with its statutory anchor firmly stuck in the mud of 40 years ago. In our application, I think and we hope that the administrative law judge grasped much of what we put before him, and we think we must meet all the burdens on us or hurdles put in our way. But we could not avoid this enormously expensive hearing process, or its dealing with the barriers to enterprise built up in ICC precedent. New statutory directions are needed not only to direct the Agency in the way the Nation needs it to go, but also to support quicker, more thorough action by those who want to go in that direction of their own volition.
Let me generalize a little bit from my area and my experience. I know that, even as representative of minorities, I am limited by my own background. But I can suggest some thoughts which may apply to how this bill might help achieve economic goals for the nation as a whole, and social justice, insofar as it affects "minorities".
I do not hold myself above or opposed to using the levers of government to manipulate economic situations to improve the situations of minorities. In more plain language, if all we can get from the government is quotas, I'll support quotas. We need to do something to offset historic imbalances and injustices.
But as a small, minority businessman, I really prefer a different way. I would prefer that the government opened the doors to opportunity, and that society
invested some of its resources in training and money capital to help those who are making an effort to help themselves meet those opportunities.
The name of the game is success in a competitive field. If we are given a national operating authority, our objective is a profitable, self-sustaining enterprise. If we create such an enterprise, that operation will show trained minority talent many paths in the transportation industry. You can learn from failures. But success is the most rewarding school. We will take advantage of every bit of manpower training and financial assistance we can find. But we don't want to be dependent. Our aim will be to provide a return on not only our own investment, and society's investment.
More generally, I believe I am not stretching the point too much in saying that reducing barriers to minority enterprise will make our Nation more competitive more just, and more stable. Here is an avenue for realizing the social goals of the Nation while also serving our economic goals.
If there are other industries where there are unnecessary regulatory barriers to enterprise, I wouldn't be surprised to find blacks and other minorities among the chief victims of those barriers. If S. 382 can make any contribution to reducing those barriers, then I support it, and I would commend it to the Congress.
In order to make clearer what I am trying to say on this matter, I am attaching a copy of testimony in our hearing of Margaret Bush Wilson, head of the NAACP, and David Vann, the mayor of Birmingham. Also, to give you just a little bit of an impression of the pent-up energy seeking an outlet to perform interstate service, I enclose summaries of the support which was available for our own application for interstate service.
[See appendix for additional material submitted by Mr. Person.]
PREPARED STATEMENT OF ARNOLD PEVNA
I am Arnold Pevna, President of Haverill Lawrence Transportation Co., Inc. 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'd 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've 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 Haverill, 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 didn't 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 Ỉ 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 companies, do this is very simple. They are geared for relatively long haul traffic. They don't handle the local, short haul, pick up and delivery runs especially 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. Small town service tends to get cut down, rather than promoted.