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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 Í 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.
Many of these local companies felt they could not go back to the certificated three, or would rather quit the business than do so. (Just the fact that they felt this, alone, should tell you something about the sad state of the industry, with just three dominant companies.) The local companies which joined AAS served many customers who were very unhappy with the service of the three nationally certificated carriers or had never been served by them. They also believed that if they went out of business their customers would lose service for which there was a substantial, immediate, and continuing need.
Two companies, my son's and a firm owned by the Weiner family, Driveaway Service, Inc., in New York, formed a partnership and asked these local businesses and as many customers as could be reached on an emergency basis to file statements with the Commission. The Commission issued an emergency temporary authority. Then a single Commissioner revoked it, on grounds that the certificated three (primarily) could provide the service which the company provided. After an extraordinary appeal to the Commission as a whole, the full Commission reinstated the ETA. AAS has been operating under an ETA, with successive 30 day extensions, while awaiting a decision on a temporary authority. AAS has been operating on the most tenuous of leases, with life given it in 30 day doses. Even on this basis, I am advised, it has gotten many calls from local driveaway firms wanting to join it, in preference to others.
If AAS is given a temporary authority, it can live until there is a hearing on a permanent authority application. However, AAS and over 20 local businesses around the country could be cut off tomorrow if the ICC does not issue a "temporary authority" pending the hearing on permanent authority. We really do believe that this would do a great disservice to many car shippers around the United States. My son and Mrs. Weiner advise that in 6 months of operation people have called on AAS to move over 2,000 cars.
AAS has estimated that it will have to spend over $50,000 to get a permanent authority. Fortunately, its revenues are supporting it-even though it is taking less from its own affiliates than the other companies are taking from theirs. But our family and the Weiner family would never, never have undertaken the burden of establishing a new interstate carrier-a desperately needed new interstate carrier-except under threat of immediate extinction, or being forced to submit to people who have been sucking the life out of the local driveaway companies and their customers.
I have seen defenders of the existing system, in effect, suggest that you need only have a few hundred dollars to apply for an ICC authority. Insofar as the mechanical act of applying is concerned, this can be close to correct. But if you apply for any substantial operation, where you would offer substantial competition to people already in the field, you then need enough money to fight a war with the already-established industry.
I give you my own view. Something must be done about the ICC regulations. Minor and cosmetic changes are not enough. The whole certificate system must be drastically streamlined. I believe that all that need be shown is a fitness, willing ness, and ability to serve, and people who want your services. In no way should people who now have certificates be allowed to make a Federal case out of the simple act of entering a business. When people get a lock on the business, they become monsters. It is as if they owned the business, the public exists to feed them, and a new entrant is an alien and subversive influence. Those backing AAS want it to operate, but it shouldn't have this power over other people any more than the ones now having ICC certificates. The system should be opened up for all qualified companies, by law.
How can S. 382 help? To be truthful, I would think it might help very little unless the Commission is directed, very clearly, in this bill or another, that fostering competition means opening the door to qualified entrants, and that this means a major change in the way the ICC does business. Otherwise, the best you can hope for is a very slow ebbing of restrictive policies, at best; and a return to old patterns of operation with lipservice to your bill, at worst.
A short recess was taken.]
Senator KENNEDY. We will come to order.
Our final panel consists of three attorneys from the American Bar Association: Mr. Ernest Gellhorn, professor of law and dean of the
University of Washington Law School, whose main areas of teaching and scholarship are administrative and antitrust law; Richard Pogue, who is a partner in the law firm of Jones, Day, Reavis & Pogue in Cleveland, Ohio, a substantial portion of whose practice for the past 22 years has been in antitrust law; and Mr. Bert Rein, who is a partner in the firm of Kirkland & Ellis, Washington, D.C., and chairman of the Antitrust and Environmental Committee of the American Bar Association.
We will start off with Mr. Pogue.
PANEL OF ATTORNEYS FROM THE AMERICAN BAR ASSOCIATION: STATEMENTS OF ERNEST GELLHORN, DEAN AND PROFESSOR OF LAW, UNIVERSITY OF WASHINGTON LAW SCHOOL; RICHARD W. POGUE, AND BERT W. REIN, ATTORNEY
Mr. POGUE. Thank you, Mr. Chairman.
As to the part of my background that is useful, I am a public member of the Administrative Conference of the United States and, since 1977, I have served as a member of the council of the antitrust section of the American Bar Association.
As I believe you know, in 1976 the house of delegates of the American Bar Association adopted a resolution that related to S. 2028 which was the predecessor to S. 382. I was very deeply involved in the American Bar Association's consideration of that bill and I am familiar with it. However, I do want to emphasize that I am appearing today in my individual capacity and in no way should my testimony be regarded as stating American Bar Association policy.
I basically am here to say that I think the proposed modifications in S. 382 represent a very substantial improvement over the old S. 2028 nd I would like to explain briefly how I believe the proposed modifications in this bill meet a number of major objections that the American Bar Association found with the prior bill.
The 1976 American Bar Association resolution was affirmative on the proposition that additional means should be found to increase the role of competitive considerations in Federal regulatory agency proceedings where consistent to the statutory mandates of the agency involved. Then, further, that the agencies should be directed to develop recommendations toward that end. However, the American Bar Association took very serious issues with the means to achieve this desirable end of S. 2028 and basically I think there were two fundamental concerns that the American Bar Association had to S. 2028 which are relevant to our deliberations on S. 382.
First: Today almost all of us-at least those of us who are in the antitrust field-agree that competition is clearly a very important national policy, but the problem is that there are a number of other important national policies as well, and the agencies which have been directed, often by specific statute, to carry out these other policies, often could be put in a paralyzing situation if they were felt constrained from carrying out their responsibilities under their organic act because of a broad competition standard indiscriminately applied to them.