fornia Shippers Associates, which are two nonprofit associations which do a great deal of their work together.

Los Angeles Wholesale Institute, California Shippers Associates, Piggy-Back Shippers Association and Manufacturers Shippers Associates are each separately California based, nonprofit shippers associations, each of which is composed of between 80 and 115 company members, both large and small, incorporated both within the State of California and other States of the Union and doing business both in California and throughout the Nation. These associations have as their principal activity the shipment of consolidated and 1.t.l. freight of their hundreds of members and annually ship many millions of dollars of commodities throughout the United States.

The Los Angeles Wholesale Institute has been operating for over 30 years and the other associations have been operating for many

years.

Each of these associations oppose the adoption of H.R. 10831, and particularly its adoption as that bill is presently written. Each believes, based upon its experience in the transportation field, that there is no justification for the proposed legislation, that it would be detrimental to the free flow of commerce, and that it would be contrary to the national transportation policy as repeatedly enunciated by Čongress, the courts and the Interstate Commerce Commission. The adoption of the proposed legislation in its present form would spell the death knell to the very existence of these associations and certainly to their continued usefulness.

Congress, through the adoption of 49 U.S.C. 1002 (c) has shown that it desires to promote the continuation of nonprofit shippers associations. The proposed legislation is anathema to that intent. The courts have long recognized the importance of nonprofit shippers associations to interstate commerce and have recognized that any discrimination against nonprofit shippers associations in favor of freight forwarders cannot be justified in that each of these type shippers perform nearly identical functions. As a recent three-judge District court stated in a case involving some of these very associations, Baltimore Shippers & Receivers Association, Inc., etc. (C. J. Worth Drayage Company, Los Angeles Wholesale Institute v. Public Utilities Commission of the State of California, et al., 268 F. Supp. 836 (1967)):

Freight forwarders and nonprofit shippers' associations perform nearly identical functions, except for the fact that the freight forwarders hold themselves out to do business with the public, rather than providing services only for members of an association, and they operate at a profit rather than as a nonprofit service to members. Each handles the consolidation, shipment and distribution of goods, attempting to take advantage of bulk rates and the maximum efficiencies in assembly, distribution and routing techniques.

...

Were it not for this distinction recognized in 49 U.S.C. 1002 (c) (1), nonprofit shippers' associations would be treated as freight forwarders.

The Supreme Court of the United States on January 15, 1968, affirmed this decision which precluded discriminatory action against nonprofit shippers associations. The present legislation would likewise discriminate against these associations and their memberships. The courts have recognized that:

The Freight Forwarder Act . . . (section 49 U.S.C.A. 1002 (c)) clearly evinces a strong congressional policy that the regulation envisioned by the Freight

Forwarder Act not encroach upon or restrict the right of shippers to join together to enjou for themselves the savings of volume transportation rates. (Freight Consolidators Cooperative, Inc. v. United States, 230 F. Supp. 692, 695 (1964).)

See also Pacific Coast Wholesalers Association v. United States, 81 F. Supp. 991 (S.D. Calif. 1949) and Atlantic Shippers Association, Inc., 322 I.C.C. 273 (1964).

The proposed legislation, it is submitted, is against the public interest in that it gives to one classification of shippers undue advantage over another class similarly situated. This legislation would permit. and promote a distinct, though unwarranted, advantage to a body of shippers engaged in a like activity and especially as against numerous bona fide nonprofit shippers associations throughout the country. Such discrimination has no justification, is totally arbitrary, and, indeed, capricious. The freight forwarders, to our knowledge, have shown no economic evidence justifying a change from the present method of rate determination, much less justification for the adoption of a discriminatory policy.

Ratemaking procedures historically require, indeed demand, full public participation and scrutiny. Rates are made by and through the established common carrier ratemaking bodies and the public is afforded full knowledge of the subject matter to be discussed and full opportunity to appear, present evidence and arguments. This practice will, without justification whatever, disappear if the instant litigation in its present form is approved.

What is the true reason that the freight forwarder is seeking the proposed legislation? In our opinion, it has but one aim: to effect rail charges or to gain additional services not now available to it as a public buyer of rail transportation service. It follows then that existing rail charges applied to freight forwarders are unreasonably high, or the services accorded freight forwarders by railroads are unreasonably restrictive or deficient. Possibly so. But if so, these charges or services are equally unreasonable or restrictive or deficient as to any other buyer of the same services, including shipper associations or consolidators or any shipper whatever. If a remedy is due, it is due the freight, not the buyer of the service, and if given it should be given the freight, not the buyer.

The freight forwarder proponents of this bill portray themselves as carriers. Indeed, they stand before the public in all the trappings of a carrier with all a carrier's responsibilities and prerogatives. They are so defined by the Congress for appropriate and abundant reasons. However, as a practical matter we urge that a freight forwarder is no more a carrier than any other carload shipper as to railroads. A carrier is one who commits substantial capital and resources to the physical carriage of goods for hire. A forwarder or association or other consolidator-does nothing more, after all, than arrange things before and after such carriage. Special privilege for freight forwarders, then, is illogical. A discriminatory privilege is indefensible.

The discrimination will manifest itself against thousands of businesses who operate through nonprofit shippers associations in an attempt to minimize their costs and maximize the use of railroad facilities. If freight forwarders are accorded the unbridled prerogative accorded them under the present language of H.R. 10831, they will be able and be sure to exercise the right of picking and choosing favorable

and advantageous rates on certain commodities or traffic so as to leave the nonprofit shippers associations in an untenable operational position. Freight forwarders will then be in a position to undermine, certainly temporarily and possibly permanently, rate structures that presently exist which, due to the absence of the profit motive on the part of bona fide nonprofit shippers associations, enable these associations, to save tremendous amounts in shipping costs for their members. Special secret deals between freight forwarders and railroads can, and unquestionably will, undercut this advantage, destroy the existence of nonprofit shippers associations and then enable these forwarders to subsequently make adjustments so as to insure a high rate of compensation to them. So long as a "reasonable rate" is merely a rate within a broad zone which has both a floor and a ceiling, there is no legal means available to the public to insure that all freight forwarders' rates do not come to rest at the ceiling after temporarily being on the floor. On the other hand, association rates perforce must remain always on the floor, absent the profit factor.

In the final analysis, however, if any advantage is accorded the freight forwarder, there is no cogent reason whatever, under the national transportation policy, for not according that same advantage to nonprofit shippers associations. To discriminate at this time-and any legislation to favor one group over another would be undue discrimination would be a major and unheralded departure from longstanding congressional policy. It would, in effect, be a congressional dictate that Congress does not favor, indeed opposes, the continual existence of nonprofit shippers associations. This broad statement is made not based upon a theory but based upon the day-to-day operations and problems of these and other nonprofit shippers associations who constantly must deal on the same terms and under the same conditions of freight forwarders-save only the absence of the profit motive in regard to the former.

Thank you, Mr. Chairman.

Mr. FRIEDEL. Thank you, Mr. Lincoln.

In other words, you oppose the bill if the amendment proposed by the American Institute is not accepted. If that amendment is incorporated in the bill, it will be all right with you?

Mr. LINCOLN. That amendment makes the bill more palatable. I think we are opposed to any opportunity for freight forwarders or anyone else to begin to engage in secret contract negotiations for services that are identical to others who are not involved in these negotiations.

The amendment certainly makes the bill more palatable and, as I stated here, without profit motive. If Shippers Associates are likewise entitled to contract with railroads for special rates and services at least that part of the public who are members of those associations are bound to accrue 100 percent of the benefits of such contracts. Mr. FRIEDEL. Thank you. Are there any questions?

Mr. DEVINE. No questions.

Mr. FRIEDEL. Mr. Kuykendall.

Mr. KUYKENDALL. Mr. Lincoln, you have made a very good case. I am afraid you severely weaken the case by saying, "but if you include me in on it, go ahead and do it."

Mr. TOBIN. Our board of directors paid our expense to come out here on the basis, which is a natural one, that their interests particularly be protected. They have expressed to us individually that they do not like the present bill. We are being sent here to express the particular ache and pain where it hurts the most.

Mr. KUYKENDALL. Thank you for your candor. That is a very straightforward point you make.

May I explore a couple of points here. One of the things that I fear here in this overall picture of more shuffling, you might say, and this is what I am afraid it always amounts to, just more shuffling, the pendulum appears to swing from one end to the other, may not theoretically a railroad pick a freight forwarder or a group of freight forwarders in a certain area for piggyback service and so cut their cost to the freight forwarder as to create very unfair competition for a regular truckline? Theoretically, could this not happen under this bill?

Mr. LINCOLN. For a regular truckline?

Mr. KUYKENDALL. In other words, the freight forwarder, for instance, obviously cannot take a full truckload or more. I haven't been able to get a clear answer what a truckload is. Let us talk about 20,000 pounds.

Mr. LINCOLN. I would have to include myself out on that because a truckload to me is a full truck of freight. It might weigh 8,000 or 45,000 pounds.

Mr. KUYKENDALL. Most of the motor freight lines love to have a half truckload and most freight forwarders certainly would love to have a half truckload. So a motor freight line puts together two half truckloads and he has to haul it from one point to another on a published regulated rate; is that correct?

Mr. LINCOLN. That is correct.

Mr. KUYKENDALL. A freight forwarder does not have to haul from one point to another on a published regulated rate. Published but not regulated.

Mr. LINCOLN. Which rate are you referring to?

Mr. KUYKENDALL. I am talking about what a freight forwarderlet me make something clear. They have to publish but they are not regulated. In other words, one freight forwarder can charge me a different amount of money to haul from one part to another; is that not correct?

Mr. LINCOLN. No, sir.

Mr. KUYKENDALL. Can he charge you less than a regulated truckline for the same haul?

Mr. LINCOLN. He has to charge whatever his published rate is.

Mr. KUYKENDALL. The trucker has to go to the ICC to get his rate? Mr. LINCOLN. No, sir; the trucker makes his rate and it is subject. to the Commission's approval and review.

Mr. KUYKENDALL. Can it not be a lesser rate for the same haul, the same amount of goods?

Mr. LINCOLN. The freight forwarder could publish a lesser rate than the truckline if he can defend such a rate and it is a reasonable rate. Mr. KUYKENDALL. If the railroad wants to cut his price down, down, down, can he give you a lower rate if he wants to?

Mr. LINCOLN. Yes, sir; theoretically, he can give any shipper as low a rate as he can over within the compensatory structure. The lower his basic purchase charge goes, theoretically, the lower his rate to the shipper.

Mr. KUYKENDALL. The last car on a long line of railcars is almost impossible to figure. So, he can give a freight forwarder, or anyone else he wants to, he can give a piggyback operator if he wants to an almost unbelievably low rate if he so chooses and probably get by; is this not true?

Mr. LINCOLN. To an extent, yes.

Mr. KUYKENDALL. So, are we not, if we pass this type of legislation, setting up a vehicle to create unfair competition?

Mr. LINCOLN. Yes, I agree with that.

Mr. KUYKENDALL. This is what bothers me about this package and really the only thing that does. What is good for the goose is good for the gander. I agree with you.

Mr. LINCOLN. There is only so much in the basket by way of profit for the movement of the goods. Now, our business is handbags, shoes, pots and pans, foodstuffs and the other goods that make up our world of commerce.

I am not in the freight business. I happen to work for a sort of do-it-yourself freight forwarder. My motive is to reduce this cost to the absolute minimum, not to try to make a profit out of the freight operation. As I said, he makes his profit selling shoes. If lower charges can be derived, can be gotten in any way from the railroad for a movement of the carload of mixed freight, then I believe our people are entitled to have that lower charge reflected in the price of the shoes laid down in the marketplace where they are going to sell them. It should not be reflected in an enhanced profit structure for one group such as the freight forwarder group.

Mr. FRIEDEL. Thank you.

Mr. LINCOLN. Thank you, Mr. Chairman.

Mr. FRIEDEL. Our next witness is Mr. Charles H. Sturgeon, general traffic manager, the B. F. Goodrich Co., Akron, Ohio.

(No response.)

Mr. FRIEDEL. Mr. R. L. Drake, traffic manager, Kayser-Roth Hosiery Co., Inc., Burlington, N.C.

STATEMENT OF R. L. DRAKE, TRAFFIC MANAGER, KAYSER-ROTH HOSIERY CO., INC., BURLINGTON, N.C.

Mr. DRAKE. Mr. Chairman, we would like to submit our prepared testimony for the record and make a few remarks.

We have shown in our prepared testimony various points of interest for our company. I would like to point out that we are not a member of any association. We are speaking strictly for ourselves as a manufacturer. We are concerned primarily with one point that I would like to make and this has been brought up in the so-called selectivity of the motor carriers.

The motor carriers are becoming more selective in the type of freight. that they want to accept from shippers. They are becoming more selective especially in the transcontinental freight which we are particu