10772 Federal Register / Vol. 60, No. 38 / Monday, February 27, 1995 / Notices

DEPARTMENT OF TRANSPORTATION

Office of the Secretary

Study on Interstate Commerce

Commission Functions

AGENCY: Department of Transportation.

ACTION: Notice.

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-intime 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,
Federal Register / Vol. 60, No. 38 / Monday, February 27, 1995 / Notices 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.
10774 Federal Register / Vol. 60, No. 38 / Monday, February 27, 1995 / Notices

• 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, feederline 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 owneroperators. 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
Federal Register / Vol. 60, No. 38 / Monday, February 27, 1995 / Notices 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