And then, what is the test for "the number of persons participating in or benefiting from the activities." Is it 2 persons, or 5; or 50? Will it vary from industry to industry?

We find that our manufacturers pool cars may have from 2 to 20 or more ultimate consignees to make the necessary weight for a carload shipment. Will manufacturers pool cars be exempted under this provision? Unfortunately for my firm in San Francisco, and for the west coast retail industry, the major portion of our tonnage originates in territories served by the freight forwarders. So our pool cars and shipper association cars operate principally from these points, in direct competition with the freight forwarders. Is it any wonder why I am here in opposition to this proposed law?

I am, of course, aware that the Interstate Commerce Commission has requested clarification of the provisions of exemption from regulation in part IV of the act, specifically in connection with section 402 (c). The Commission had good grounds probably for asking for clarification. I find it hard to believe that they had in mind such broad legislation which is singularly lacking in setting up clear-cut definitions of exemption.

Further, I refuse to believe that the Commission had in mind having to administer a law, the wording of which was drawn by an industry it must, to a large extent, govern.

Throughout its entire existence we know, and indeed the very purpose for which it was created, the Commission has striven to protect the shipping public. But this bill does not protect the shipping public. It protects only the freight forwarders. If this bill becomes law we will expect the Commission to act fairly and protect the shipping public. Possibly it could, if all action were left to the Commission on its own motion. Certainly, open and flagrant violations should be prosecuted on the Commission's own motion, and in this we are in sympathy. But the Commission will be forced to act also on complaint against any pooling or shipping group. charge that the freight forwarders will waste no time in filing such complaints. Once a complaint is filed, the Commission can do nothing but consider whether or not a shipping association is competitive, how many persons in the group is too many, whether or not a single or homogeneous commodities are involved-without a single clue in the act to govern its decisions.

And I

We believe that the elimination of the shipper association and pooled shipments will have the effect of creating a monopoly for the handling of small shipments, that is, less carload freight. This monopoly will be confined to a few large forwarders now in existence, and we believe that it will force many small consolidators and pool-car distributors out of business. Every day we hear of action taken by the Government to break up monopolies, yet we see in this bill a real effort on the part of a few freight forwarders to establish one. We ask the committee to consider whether or not they are putting the burden of creating monopoly upon the Interstate Commerce Commission with the provisions of this bill. We think that this bill, should it become law, will create a transportation juggernaut which will monopolize the transportation of the Nation's small shipments, something which is entirely repugnant to our much publicized American way of life and business.

I want to repeat, no group or association of shippers can live under such abortive legislation. It appears to be discrimination and class legislation. It will, at one stroke, do away with the rights of shippers to forward their freight as they wish, utilizing the mode of transportation which best suits their needs.

Please consider also the effects on American business if this bill should become law.

For many years American industry has depended on its traffic managers to pool its freight to take advantage of the lowest possible transportation charges. To take away this privilege will be devastating. Is the traffic manager in American industry to be in constant fear of violating the law if he pools his small shipments with those of others, denying it to the freight forwarders who are in a position to handle it? My own company, Macy's San Francisco, instructs me to make special efforts to pool our shipments with those of others. In nearly every instance, due to the location of resources, this traffic could be handled by any one of 8 to 10 freight forwarders. Through these pooling arrangements we save substantial sums in freight charges. Macy's San Francisco are also members in several shippers associations now exempt under section 402 (c), and move millions of pounds of freight through them at costs substantially lower than we would incur by the use of freight forwarders.

In our own shipping associations we pay only for the cost of the transportation rendered. The service is good, in some instances. better than that of the forwarders. If these associations fold up, as I believe they will, what can the forwarders offer that we did not have before, other than higher costs.

Shippers pool cars and association cars have saved millions of dollars in freight charges for western shippers and receivers, as they have throughout the Nation. I estimate that the passage of this bill will ultimately cost the Nation's industries millions of dollars in increased freight charges, that the profits will go into the hands of a small group of freight forwarders, with no increase in revenue to the underlying rail carriers who so desperately need it.

We estimate that the increased cost to the R. H. Macy Co., Inc.and that is through six stores, by the way-will be in excess of $150,000 per year; the cost to our San Francisco store, $25,000.

Please consider for a moment what such increases in freight rates will mean to firms which are operating under the regulations laid down by the Office of Price Stabilization. Our base prices were calculated while we were using shipper association and pool cars. While we do not think we can absorb the increased costs we will be faced with if our pooling arrangements and association cars are destroyed, we have been advised by the OPS that we can expect no relief from increased freight charges in the foreseeable future.

I have noted that Mr. Giles Morrow, representing the freight forwarder industry has stated that the freight forwarding industry does not advocate the regulation of any bona fide shipper, or shipper group, or shippers' agent; that if the bill is not clear in that respect it should be made clear, either in the bill, or the committee report, or both. It is his contention that the bill sets up standards for determining who is entitled to the exemption.

Close study of Senate bill 2713 is, however, so loosely drawn and vague that there is nothing specific in it. Mr. Morrow further states

that it should go without saying that no law should contain within its terms the means for its own destruction. We believe that this bill has those qualifications.

I said in my opening remarks that I believed the Interstate Commerce Commission had ample authority to remove illegally operating shippers associations. I think that its action in the Hopke case (FF 200), will prove this point. Furthermore, I think that if the Interstate Commerce Commission had adequate funds and personnel it could do the job it should in policing this field of exemption.

We fear that the freight forwarders, in spite of their protests through their spokesmen, Mr. Morrow, that there is no attempt to do away with legally operating associations, will move rapidly toward the destruction of all shipping groups, under the catch-all provisions of this proposed bill. I have just seen a copy-which was yesterday of a bill which is proposed for a substitute for the one under consideration. While I have not yet had time to make a thorough study of this bill, or to discuss it with others of the groups which I represent, I do not believe that it will set up the standards which the Commission should have to guide it. Additional time should be granted for study and consideration of this substitute bill before it is reported, should your committee put it on the docket for consideration.

In conclusion I submit to you that the bill, Senate bill 2713, is designed to do nothing to protect the shipping public, and those who ultimately pay those charges, and by that I am speaking of the people who finally purchase the merchandise; that it is discrimination and class legislation; that it will tend to, if not actually create a transportation monopoly.

I urge this committee to disapprove this bill.

The CHAIRMAN. We thank you, Mr. Cheatham.

(The following statement was submitted for the record by Mr. Ellsworth of the Utah Citizens' Rate Association during the course of the day's hearings:)


Senate bill 2713 is entitled "A bill to amend the Interstate Commerce Act, as amended, to provide more definite standards for determining who is entitled to exemption from part IV of said act as an association of shippers or a shippers' agent." This bill might better have been entitled "A bill to prohibit any shipper or group of shippers from consolidating his or their own freight so that freight costs to the shippers will be as high as possible and profits to the freight forwarders as great as possible."

This bill was sponsored by the Freight Forwarder Institute, and has for its purpose, not the clarification of the status of shipper associations, but the elimination of shipper associations. It represents a further encroachment upon small business in its constant struggle to reduce costs and increase efficiency.

There is no need for any further legislation to accomplish what is set forth as the object and intent of this bill. The general structure of shipper associations has been thoroughly investigated as a result of the proceeding of the Interstate Commerce Commission known as Ex parte 160. This investigation, together with its subsequent court test before the Supreme Court of the United States, was concluded less than 3 years ago. The Commission presently has the power to investigate shipper associations from the standpoint of determining whether they come within the exemption presently granted in subsection (c), section 402 of the

Interstate Commerce Act, and has for its guidance the standards set forth in the Ex parte 160 investigation and the subsequent court decisions.

An analysis of the accomplishments of the association of which we are a member reveals a great many benefits therefrom, both to the transportation systems and the shippers of this country. The Utah Freight Association has paid very substantial amounts in freight charges to the railroads of the United States. This revenue contribution, in a large part, is not revenue which would have otherwise accrued to the railroad carriers through the operations of freight forwarders. A majority of the freight presently moving in the consolidated cars of our association would otherwise move via truck carrier. We as shippers who pay the bill when rail freight rates are increased, feel very strongly that in times such as these when rail carrier revenues are constantly being dissipated through inroads by the motor carriers and increasing operating costs, anything which can be done by the shippers to bolster the financial position of the railroads is of the utmost importance to the economy and security of this country. The railroads themselves fostered the establishment of our association through the publication of mixed carload privileges and all commodity rates which can be used readily in this area only by such associations. The success of this attempt on the part of these railroads to return traffic to the rails can be readily observed by looking at present rail freight payments from our association.

Another benefit realized by the shippers in our association through consolidating our own freight with our own organization lies in the great flexibility available for according special handling to any or all shipments from the standpoint of preventing damage and loss and rendering special handling and services to ourselves not available from common carriers. Certainly, in a period of critical shortages of vital materials, any effort to lessen loss through freight damage is commendable. In our association, we as individual members can control our own freight and its handling very nearly as closely as we can control it in our own warehouses.

Additionally, we most certainly do not want to overlook the very real benefit to ourselves in reduced freight costs. This is especially significant to shippers in Utah. We have long been on the highest freight-rate peak in the United States. This fact coupled with successive percentage increases with their resultant penalty to the long-haul shippers has resulted in a level of freight rates which is almost prohibitive. Our association has succeeded in substantially reducing the costs on less-than-carload-lot shipments to the members. Certainly it is not just to remove the means whereby small business can compete with large chain organizations in reducing freight costs through the moving of merchandise at carload rates. The association of shippers only does for its members what the large shipper can do for himself. It permits the individual member to consolidate his freight in conjunction with other small shippers to secure the benefits of carload rail rates.

In the case of the Utah Freight Association, we must remember that the economy of the intermountain empire is basically one dependent on wholesalers distributing from central points such as Salt Lake City through the surrounding area. Prior to the organization of the Utah Freight Association, increased transportation costs were making it more and more difficult for ourselves and other wholesalers to compete with eastern manufacturers, who by employing a manufacturer's representative, could accumulate many small orders to be shipped into this area as a carload which are subsequently distributed to the individual purchasers. This program completely by passes the wholesale organizations so vital to this


The Utah Freight Association, in essence, does this in reverse for its members accumulating many small orders in the East for consolidation into carloads. The resulting reduced costs have enabled us more successfully to compete with the larger eastern suppliers and manufacturers who are invading our trade area. It is manifestly unjust to penalize the consolidated or pool cars of small firms through legislation while the large firm can continue to secure the benefits of individually consolidated cars. We do not ask the committee or the ICC to attack the operations of the larger firms; we merely ask that the small firm be permitted to meet on an equal footing, so far as freight costs are concerned, the consolidation efforts of the large business.

We should like also to point out that on May 30, 1952, the scale of rates prescribed by the Interstate Commerce Commission in Docket 28300 becomes effective within the entire area, Denver, Colo., and East. This uniform scale of class rates is very substantially lower than that previously applicable and, since the benefits therefrom do not extend to Utah, will permit firms located in Denver

to further invade our trade area. Our association affords that only means whereby we can meet this competition and protect our industry. The savings in freight costs which we now realize will tend to offset the freight-rate discrimination produced by the Docket 28300 adjustment.

There is no doubt that if our association were forced to stop operating we would be seriously hurt in our efforts to continue in business through these periods of increased costs. The members of this association ask no special favors but wish only to be permitted to continue handling their own merchandise in the most economical manner possible.

The sponsorship of this bill by the Freight Forwarder Institute, in and of itself, is indicative of the results which the freight forwarders hope to obtain through its


If we are now to inspect the wording used in this bill we can readily see that the standards which are supposedly set forth in determining who is entitled to exemption from part IV regulation freight forwarders, are so loosely defined that the filing of complaints by the freight forwarders would almost certainly result in the elimination of all shippers associations. There is no doubt that passage of this bill would immediately result in the filing by the freight forwarders of formal complaints against every shipper association in the country with irreparable damage to these organizations and their members.

To illustrate, the proposed bill states "In the administration of this paragraph the Commission shall consider, among other things, the nature and scope of the activities in question; their effect upon the operations of regulated freight forwarders; and whether or not the activities are conducted in good faith." We submit that this terminology is so broad that its interpretation depends only upon the whim of the Interstate Commerce Commission. For example, we might say that any shipment moving in our association pool car would have an effect upon the freight forwarders since theoretically all such freight could be handled by freight forwarders in absence of our association. Thus, the mere fact that the association is in existence and does consolidate freight for its own members could, within the terms of this bill, be construed as a sufficient reason for denying the exemption presently accorded by the Interstate Commerce Act.

The bill continues as follows: "As bearing on the foregoing considerations, (1) due weight shall be given to the question of whether or not the involved activities are actually and substantially competitive with the operations of regulated freight forwarders (2) whether they are limited to the handling of a single commodity or of homogeneous commodities (3) whether or not the number of persons participating in or benefiting from the activities in question is such as to justify removal of the exemption." The numbering is our own, and not part of

the bill.

If we consider (1), we again come to the conclusion that any freight moving in our pool car is competitive with freight forwarders. No statement is made as to how much or how little freight will be considered competitive with freight forwarders from a quantitative standpoint.

Restriction (2) deals with the type of freight handled in pool cars. The implication is that associations might be treated more favorably if they handled only a single commodity rather than several commodities or many commodities.

Again the associations are not given any standard to meet but are left at the discretion of the examiner. In an economy such as that existent in the State of Utah, it is an impossibility for a shipper to consolidate only a single commodity. We are essentially a jobbing area with wholesale houses as the principal members of our association. Any one of these wholesalers may handle several thousand different items. Are we then to say that this member can consolidate only one of these items in a pool car, or only 5 or only 500 of these items? It is obvious that as a practical matter our association must not be limited in the different types of merchandise which can be consolidated.

Restriction (3) deals with the number of persons participating in or benefiting from such activities. Again no standard is set forth but merely that consideration must be given to the number of persons participating. The implication here is that the fewer members participating the better the freight forwarders like it. What, in the light of this restriction, is the proper number of members for such associations? An association of the two largest shippers in the United States could handle many, many times as much freight as an association of 500 small shippers. Obviously, in order to consolidate carloads of freight, enough shippers must associate themselves to produce carloads of freight. Our own association is limited by our bylaws to only 50 members. Again, it is an impractical viewpoint to limit such memberships to the point that the consolidation itself is

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