[Federal Register Volume 60, Number 38 (Monday, February 27, 1995)]
[Notices]
[Pages 10772-10775]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-4834]
[[Page 10771]]
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Part XI
Department of Transportation
_______________________________________________________________________
Office of the Secretary
_______________________________________________________________________
Study on Interstate Commerce Commission Functions; Notice
Federal Register / Vol. 60, No. 38 / Monday, February 27, 1995 /
Notices
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[[Page 10772]]
DEPARTMENT OF TRANSPORTATION
Office of the Secretary
Study on Interstate Commerce Commission Functions
AGENCY: Department of Transportation.
ACTION: Notice.
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SUMMARY: Section 210(b) of the ``Trucking Industry Regulatory Reform
Act of 1994,'' (Act) requires the Secretary of Transportation to study
possible organizational changes to the Interstate Commerce Commission
(ICC), including some specified in the Act, that lead to government,
transportation, or public interest efficiencies. A draft report to the
Congress on this matter has been completed and the Department is
presently seeking public comment on its recommendations.
DATES: Comments are due by March 13, 1995.
ADDRESSES: Comments may be mailed to Docket 49848, Office of
Documentary Services (C-55), U.S. Department of Transportation, Plaza
Level, 400 Seventh Street, S.W., Washington, D.C. 20590-0001. To
expedite consideration of the Docket, please submit an original and
five copies. The DOT study of ICC functions referenced in this notice
may be obtained from the Documentary Services Division, U.S. Department
of Transportation, Room PL-401, 400 7th Street, S.W., Washington, D.C.
20590, 202-366-9322. The Report is available on the World Wide Web
Server as gopher.dot.gov/11/general/iccreprt.wp5. For the convenience
of those without access to the computer network, the executive summary
of the report is included herein.
FOR FURTHER INFORMATION CONTACT:
Edward Rastatter, 202-366-4420; Robert Stein, 202-366-4846; or Paul
Smith, 202-366-9285.
SUPPLEMENTARY INFORMATION: Section 210(b) of the Act requires DOT to
study the feasibility and efficiency of merging the ICC into the DOT as
an independent agency, combining it with other Federal agencies,
retaining the ICC in its present form, eliminating the agency and
transferring all or some of its functions to DOT or other Federal
agencies, and other organizational changes that lead to government,
transportation, or public interest efficiencies. DOT has already
conducted extensive outreach effort beginning with a Federal Register
notice of November 1, 1994, seeking comment on the ICC's report,
required in Section 210(a) of the Act, and continuing with numerous
meetings with carriers, shippers, and trade associations. This study by
DOT considers the cost savings that might be achieved, the efficient
allocation of resources, the elimination of unnecessary functions, and
responsibility for regulatory functions. DOT must submit its findings
for public comments, and then submit the results of its study, together
with any recommendations to the Congress. Consequently, the Department
is presently seeking public comment on its draft recommendations.
In order to make sure our report is most useful to the
Congressional Committees, we expect to make a legislative proposal
available to them on an expedited basis. Any changes resulting from the
public comment period would be incorporated in our final report and
modifications to our legislative proposal.
Executive Summary
Background
This report examines a range of policy issues dealing with the
economic regulation of surface transportation service (primarily
freight) in the United States.
Freight transportation represents a core element of our national
economy. It provides U.S. manufacturers and consumers with access to
domestic as well as global markets and has a dramatic impact on
economic growth and on our international competitiveness.
The surface freight transportation industry includes many different
sectors--trucking, railroads, barges, pipelines, buses, and
intermediaries such as freight forwarders and brokers. The structure
and performance of each sector have been considered in discussing
options for economic regulation.
The industry has changed dramatically in the past several decades.
Regulatory policy has both led and responded to these changes. A new
regulatory principle, recognizing competition as the best regulator of
transportation, has been embodied in bipartisan legislation enacted in
each of the past three decades. Federal economic regulation has
increasingly been reserved for glaring instances of market failure or
as a tool to pursue broader social purposes.
Deregulation has resulted in more efficient operations for carriers
and better service at lower rates for shippers. As a result of the
Staggers Rail Act of 1980, the railroad industry--which teetered on the
brink of financial failure in the late 1970's--has been revitalized and
is now a viable competitive sector of the economy. Deregulation of air
cargo, trucking, and ``piggyback'' traffic has led to spectacular
growth in intermodal traffic.
The trucking industry has also been transformed. Many new firms
have entered the industry, and both new and existing carriers have been
given greater flexibility to meet customers' needs. Improvements in the
reliability of trucking service have enabled manufacturers to enhance
productivity by placing greater reliance on just-in-time manufacturing
techniques.
The principal rationale for the remaining regulatory structure is
to protect competition and the interests of shippers. However, ongoing
changes in the nature of the transportation industry clearly indicate
that the current level of Federal economic regulation of surface
freight transportation burdens the public interest. Further reductions
in regulation are needed.
The Process
This report is mandated by the Trucking Industry Regulatory Reform
Act of 1994, P.L. 103-311 (TIRRA), which requires that the Interstate
Commerce Commission (ICC) and the Department of Transportation (DOT)
conduct studies to be used as the basis for considering further policy
changes related to the regulation of surface transportation.
Section 210(a) of TIRRA requires the ICC to examine its functions
and responsibilities and to report within 60 days of enactment
recommendations on which of these functions should be continued,
modified, or eliminated. The ICC report (completed on October 25,
1994), provides a detailed treatment and analysis of the full panoply
of existing functions and responsibilities of the agency. Section
210(b) requires DOT to study the feasibility and efficiency of merging
the ICC into DOT as an independent agency, combining it with other
Federal agencies, retaining the ICC in its present form, eliminating
the agency and transferring all or some of its functions to DOT or
other Federal agencies, and other organizational changes that would be
expected to lead to government, transportation, or public interest
efficiencies.
The Department has given serious consideration to the
recommendations of the Commission in assessing the merits of
eliminating or restructuring the current functions and responsibilities
of the ICC. This report reflects a different view from that taken by
the ICC and generally concludes that government should retain fewer
functions.
DOT's approach to conducting this study ensured full participation
by all affected parties including carriers, [[Page 10773]] shippers,
intermediaries, labor, the insurance industry, and government agencies
identified as potential locations for necessary ICC functions. The
Department solicited comment from the public on the ICC's study and
held outreach meetings with all sectors of the industry, as well as
government agencies.
DOT also sponsored a conference on the transportation industry of
the future. The focus of this conference, which was open to the public,
was to discuss the likely evolution of the transportation industry over
the next fifteen years (1995-2010) and to identify and evaluate options
for regulatory policies that would enable the industry to operate
efficiently, as well as provide sufficient protection to the shipping
public.
DOT Recommendations
Antitrust Immunity
Federal economic regulation of transportation predates the
antitrust laws and has its roots in the late nineteenth century, when
railroads had a virtual monopoly for most freight. Although the
``public utility'' model of regulation was subsequently applied to all
of the other modes subject to the Interstate Commerce Commission's
jurisdiction, it is now limited primarily to regulation of ``captive''
rail traffic.
The trucking, rail freight, household goods, intercity bus, water
carrier, and other surface transportation industries still subject to
economic regulation by the ICC and FMC are competitive (either entirely
or with respect to most of the markets they serve). Over the past two
decades, recognition of the intrinsic competitive nature of these
industries has resulted in bipartisan legislative efforts to reduce
regulation of surface transportation, including the number of
activities that are accorded immunity from the antitrust laws by the
ICC.
Because of the existence of competition between and within these
industries, they bear little resemblance to utilities having local
franchise monopolies. Even the freight railroads face vigorous
competition, often from other modes, in the majority of the markets
they serve. Accordingly, it is appropriate to rely on the antitrust
laws rather than burdensome and unnecessary regulation to police these
industries.
There are two categories of arrangements among firms to which the
antitrust laws normally apply. The first is the cartel-type arrangement
to fix prices or allocate markets, which has no redeeming value. Such
activity should never be permitted to occur. The second category
includes arrangements that can have beneficial aspects that may enhance
competition. The legality of the latter type is evaluated under a
``Rule of Reason'' inquiry that weighs all its relevant effects. If the
activity is, on balance, beneficial, it is not illegal and does not
need immunity from the antitrust laws; if it is, on balance,
beneficial, the antitrust laws will not prohibit it. Accordingly, we
recommend eliminating all antitrust immunity for these industries.
Following are some examples of how certain types of transportation
activities would be analyzed under the antitrust laws.
Rate setting. A rate bureau agreement to impose a general
rate increase on shippers is a classic horizontal price-fixing
arrangement, a ``naked restraint'' on competition. There is no
legitimate reason to continue to permit such per se unlawful collective
activity.
Joint ventures. Joint rate agreements between two or more
firms providing similar services in different geographic markets do not
generally, if ever, violate the antitrust laws; antitrust immunity is
not needed in order for the activity to occur. As far as household
goods van lines and their agents are concerned, as long as there are a
sufficient number of other firms capable of performing the services in
question, joint ventures between the van lines and their agents should
not significantly lessen competition and should not violate the
antitrust laws. Therefore their agreements do not need antitrust
immunity.
Other joint operating activity. The ``Rule of Reason''
standard used by the Department of Justice in analyzing most kinds of
joint activity under the antitrust laws is not significantly different
from the ``public interest'' standard used by the ICC. For example, the
Commission may approve pooling arrangements among common carriers only
where they are demonstrated to promote better service or efficiencies
and will not ``unreasonably'' or ``unduly'' restrain competition.
Arrangements that meet this test do not need antitrust immunity.
Industry guides and standards. Compilations such as
mileage guides can provide useful information to both shippers and
carriers. On the other hand, collective agreement to adhere to such
schedules could have anticompetitive effects. Such arrangements should
be subject to the antitrust laws and deemed unlawful if their
beneficial effects are outweighed by any anticompetitive effects.
Activities that are no more restrictive than necessary to achieve the
desired results are not likely to be challenged by the Department of
Justice under the antitrust laws.
Information gathering and dissemination. Carriers can use
common entities to gather and publish information about demand,
capacity, and unilaterally-established rates, without competitors
agreeing on specific actions that would violate the antitrust laws.
Railroads
The Staggers Act of 1980 has transformed the railroads from a
declining industry poised on the brink of financial ruin to a healthy
one that provides excellent service to shippers at rates that are, on
average, well below those of 25 years ago. The legislation introduced
significant rate deregulation, allowing pricing flexibility where
competition is effective to protect shippers from abuse. It also
retained significant protections for shippers in situations where
competition is either absent or weak. The critical freedoms of the
Staggers Act must be maintained if the rail industry is to remain
financially successful. Equally important, the basic shipper
protections that were incorporated in 1980 are still needed today to
ensure that rates and services for captive traffic are reasonable.
However, there are many aspects of the rail regulatory system that can
be revised, modified or even eliminated in light of today's, and
tomorrow's, competitive realities. DOT believes that the following
regulations are either outdated or unnecessary to accomplish the
Staggers Act's objectives, and should be eliminated:
Antitrust immunity for industry agreements. The antitrust
laws provide sufficient flexibility to ensure smooth and efficient
intercarrier operations.
Rail-shipper contract requirements. Rail contracts should
be treated in the same manner as contracts for other modes of
transportation.
Rate discrimination regulation. These restrictions are a
holdover from the era of collective ratemaking, and are no longer
necessary in today's competitive market.
Commodities clause. This prohibition on carriers
transporting their own commodities is an impediment to shipper
ownership of short line carriers.
Rail car supply and interchange practices. These practices
can be established without antitrust immunity. However, the existing
rules phasing-in car hire deregulation should be continued until
deregulation is complete.
[[Page 10774]]
Oversight of rail financial practices such as interlocking
directorates, issuance of securities, etc. Regulations covering
financial practices of railroads should be the same as those applied to
other industries.
Rate caps on recyclables. It is not equitable to require
special treatment for particular classes of shippers.
Rail merger standards, line sales, transfers and trackage
rights under the Interstate Commerce Act. As with transactions in other
US industries, these rail-related consolidations and sales should be
reviewed by the Department of Justice, under the Standards of the
Clayton Act.
The following rail function would, unless otherwise noted, be
retained and transferred to DOT:
Maximum rate regulation as provided by the Staggers Act.
Exemption authority has been extremely useful for removing
rail traffic from regulation.
Line construction authority for new lines crossing another
railroad.
Competitive access provisions for captive shippers.
Labor protection provisions would be administered by the
Department of Labor.
Line sales of non-carriers (determination of carrier/
noncarrier status).
Reasonable practices in cases where rate regulation is
retained.
Abandonment regulations, feeder-line development program,
and financial assistance to facilitate purchases or subsidy agreements
for lines proposed for abandonment.
Dispute resolution between passenger and freight
railroads.
Rails-to-trails program for abandoned rail lines.
Preemption of state regulation of rail rates, routes, and
services.
Recordation of liens would be continued, but administered
differently.
Motor Carriers
Trucking. The interstate trucking reforms of 1980 have provided
billions of dollars in annual savings and enhanced U.S. competitiveness
in world markets. Another significant barrier to further efficiencies
in the trucking industry was removed beginning in January 1995, as a
result of Public Law 103-305, which prohibits the states from imposing
economic regulation on trucking.
Most of the remaining trucking regulations administered by the ICC
are needless and burdensome requirements that have no place in today's
competitive, cost-conscious environment. Although TIRRA substantially
reduced the requirements for entry into the business of hauling
regulated commodities and removed the requirement that motor common
carriers file their independently-set rates with the ICC, it stopped
short of doing away with these requirements altogether.
Our reviews have found no useful function served by the remaining
economic regulation of trucking by the ICC, and we recommend that it
all be eliminated, except for those functions enumerated below. In
particular, we recommend an end to all antitrust immunity, all filing
of tariffs and rate regulation, all distinctions between common and
contract carriers, and control over mergers and transfers.
We recommend that only the following regulations be retained:
Motor carrier licensing. All interstate private and for-
hire carriers would be subject to the same safety and insurance
requirements, administered by DOT/FHWA.
Mexican carriers. DOT, in conjunction with the states,
would monitor Mexican carriers' safety and insurance compliance, as
well as their access to U.S. markets, as NAFTA is phased in.
Undercharge resolution. Adjudication of existing
undercharge claims under the Negotiated Rates Act of 1993 (NRA) would
be continued over a transition period until the issue ceases to exist.
We also recommend that the NRA be amended to designate claims for
undercharging as an ``unreasonable practice,'' as long as any tariff
filing is required.
Household goods, household goods freight forwarders, and
transporters of personally-owned automobiles. Existing ICC consumer
protection authority would be transferred to the Federal Trade
Commission (FTC). FTC would not become involved routinely in individual
cases, but would be able to monitor the industry and take action if
there should be a pattern of abuses, as it does in other industries.
Owner-operator leasing rules. These rules would also be
transferred to the FTC, but there would be no agency involvement in
adjudicating individual claims between carriers and owner-operators.
There would be general FTC oversight, and owner operators would be
given a right of private action to enforce the rules and the
opportunity to collect treble damages in case of violations.
Loss and damage claims. Convert the Carmack amendment into
a Federal liability regime with a statutory liability limit, and
eliminate ICC dispute settlement functions. Issues would be resolved
privately, as with any other contract dispute.
Intercity Buses. Although the charter and tour sector of the bus
industry has grown, the financial condition of the regular route
carriers is marginal, reflecting intense competition with the airlines,
the private automobile, and Amtrak. Continued regulation by either the
ICC or state regulatory bodies can hurt, but cannot help this industry.
We recommend that all ICC economic regulation of the intercity bus
industry be eliminated. DOT/FHWA would be responsible for monitoring
bus safety and insurance (with state enforcement authority), and the
existing procedure for ICC preemption of state bus regulation would be
amended to provide outright preemption, such as that provided for motor
carriers of property by P.L. 103-305.
Transportation Intermediaries
Freight forwarders and brokers are only two types of a wide panoply
of transportation intermediaries, including ocean freight forwarders
and non-vessel operating common carriers (NVOCCs). This is an important
segment of the industry that creates value for both shippers and
carriers. The rather minimal regulation of all types of transportation
intermediaries should be harmonized. We recommend that all regulation
of surface freight forwarders and brokers be eliminated and that they
be treated the same as air freight forwarders, which are free of any
regulation of their rates, routes, or services, subject only to cargo
liability rules--to the extent they are considered carriers.
Pipelines
ICC has authority to regulate transportation by pipelines of
commodities such as coal and fertilizer. However, there is significant
intermodal competition for such traffic and there have been virtually
no complaints concerning competitive problems. We recommend that ICC
regulation of pipelines be eliminated and any competitive problems be
handled under the antitrust laws.
Intermodal Transportation
The ICC has the authority to prohibit the acquisition of a water
carrier or a motor carrier by a rail carrier. ICC may also prescribe
joint rates and through routes on intermodal rail-water movements. The
deregulation legislation of 1977-80 has resulted in an enormous
increase in intermodal traffic. However, there are still some remaining
hindrances that could impede intermodal acquisitions. There is no
[[Page 10775]] longer any economic rationale for these restrictions. We
recommend elimination of all restrictions against intermodal ownership
and removal of Federal jurisdiction over intermodal rates, routes, and
practices.
Domestic Water Carriers
The ICC has authority to regulate water carriage both within the
contiguous states and between the continental U.S. and its possessions
(the domestic offshore trades). Most of the water traffic within the
contiguous states is already exempt from regulation, and competition is
sufficient to prevent abuses. We recommend an end to all ICC regulation
of such traffic.
Regulatory authority over the domestic offshore trades is already
shared between the ICC and the Federal Maritime Commission (FMC). When
an offshore movement is intermodal and employs a joint through rate,
ICC regulation applies, but is minimal. Other types of movements are
regulated by the FMC. This bifurcation makes no sense. We recommend
eliminating all economic regulation (including tariff filing) by both
the ICC and the FMC in the contiguous states and in the domestic
offshore trades. The provisions of the Intercoastal Shipping Act, 1933,
should also be repealed. Any continuing jurisdiction over non-tariff-
related malpractices in the domestic trades, such as boycotts of
shippers by carriers, would be transferred to DOT.
Federal vs. State Interests
Surface transportation in the U.S. is a national system. The
``Commerce Clause'' of the Constitution of the United States (Article
1, Section 8, Paragraph 3) grants the power to Congress ``to regulate
commerce with foreign nations and among the several States.'' This
provisions allows Congress to regulate a huge volume of trade moved via
land, water, and air. The recommendations outlined above would reduce
or eliminate Federal oversight by repealing Federal laws that constrict
the efficient and competitive operation of the surface freight
transportation system. It is also essential to preclude conflicting
state laws or procedures that could overturn the benefits of Federal
deregulation, as has been done in previous legislation affecting the
airline industry in 1978 and the trucking industry in 1994.
Administration of Remaining ICC Functions
TIRRA identified a wide range of organizational choices for
relocating ICC functions. These included retaining the ICC in its
current form, merging the ICC into DOT as an independent agency,
merging ICC into DOT but not as an independent agency, eliminating the
ICC and transferring all or some of its functions to DOT or other
Federal agencies, and combining the ICC with other Federal agencies
(e.g., the Federal Maritime Commission). Each of these alternatives was
extensively examined in the Department's study.
Given the dramatic reductions in regulatory authority recommended
in this report, it is clear that there is no longer any need to
maintain the ICC as an independent agency. Further, given that the
functions to be retained are quite diverse (e.g., motor carrier
leasing, railroad rate oversight), we do not believe that it makes
sense to consolidate these functions, either in a separate agency or in
a discrete agency within DOT. It may be appropriate to house them in a
new rail regulatory unit within the organizational structure of DOT,
with labor protection at the Department of Labor.
However, there is no need for such an office to remain completely
independent. Most of the remnant regulatory functions are similar to
activities currently administered by DOT (or other agencies) without
any independent or insulated staff. For those few functions where there
is a special need for ``insulated'' decision-making (such as resolution
of disputes between passenger and freight railroads), administrative
procedures can be readily established.
Careful planning of the transition of functions is important. This
includes examination of staffing requirements, workload and workflow,
space and other physical resources, and processes for performing
specific functions within the new organizational framework. It is
critical to the transportation industry, shippers, and the economy that
transition plans maintain continuity and integrity for any remaining
regulatory functions. The Administration proposes that the transition
occur during FY 1996.
Dated: February 22, 1995.
John N. Lieber,
Deputy Assistant Secretary for Transportation Policy.
[FR Doc. 95-4834 Filed 2-24-95; 8:45 am]
BILLING CODE 4910-62-M