[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





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Office of the Secretary



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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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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:
    <bullet> Antitrust immunity for industry agreements. The antitrust 
laws provide sufficient flexibility to ensure smooth and efficient 
intercarrier operations.
    <bullet> Rail-shipper contract requirements. Rail contracts should 
be treated in the same manner as contracts for other modes of 
transportation.
    <bullet> Rate discrimination regulation. These restrictions are a 
holdover from the era of collective ratemaking, and are no longer 
necessary in today's competitive market.
    <bullet> Commodities clause. This prohibition on carriers 
transporting their own commodities is an impediment to shipper 
ownership of short line carriers.
    <bullet> 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]]

    <bullet> 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.
    <bullet> Rate caps on recyclables. It is not equitable to require 
special treatment for particular classes of shippers.
    <bullet> 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:
    <bullet> Maximum rate regulation as provided by the Staggers Act.
    <bullet> Exemption authority has been extremely useful for removing 
rail traffic from regulation.
    <bullet> Line construction authority for new lines crossing another 
railroad.
    <bullet> Competitive access provisions for captive shippers.
    <bullet> Labor protection provisions would be administered by the 
Department of Labor.
    <bullet> Line sales of non-carriers (determination of carrier/
noncarrier status).
    <bullet> Reasonable practices in cases where rate regulation is 
retained.
    <bullet> Abandonment regulations, feeder-line development program, 
and financial assistance to facilitate purchases or subsidy agreements 
for lines proposed for abandonment.
    <bullet> Dispute resolution between passenger and freight 
railroads.
    <bullet> Rails-to-trails program for abandoned rail lines.
    <bullet> Preemption of state regulation of rail rates, routes, and 
services.
    <bullet> 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:
    <bullet> Motor carrier licensing. All interstate private and for-
hire carriers would be subject to the same safety and insurance 
requirements, administered by DOT/FHWA.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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