mediate rate provisions of section 4 of the act, except (1) proceedings made the subject of formal hearing, (2) matters prompted by an order or requirement of the Commission or a division thereof, or (3) matters arising from general increase proceedings. These exceptions are reserved for consideration by Division 2. The Board may, and does, certify to Division 2 any matter which in the Board's judgment should be passed upon by that Division or the Commission.

Orders of the Fourth Section Board indicating the action taken on applications for fourth section relief are entered and are effective on the same day on which the Board acts in the matter, and no provision is made, therefore, for emergency appeals such as exists in connection with the "no suspend" actions of the Board of Suspension. However, petitions for reconsideration of (to vacate, modify, or change) orders of the Fourth Section Board may be filed by any interested party, and the procedure is the same as already described in regard to orders of the Board of Suspension, that is, the petition must be filed within 20 days after the date of service of the order, and replies are due 20 days after the petition is filed with the Commission. Division 2, acting as an appellate division, is assigned the consideration of these petitions.

When the Appellate Division has denied a petition seeking a reversal, change, or modification of an original determination by the Fourth Section Board, the procedure is the same as related in connection with the Board of Suspension, that is, further petitions by the same party upon substantially the same grounds will not be entertained, but if the Appellate Division has reversed, changed, or modified the previous determination of the Board, a further petition may be filed by any party to the proceeding adversely affected by the decision of the Appellate Division within 30 days after the service of the Appellate Division's decision or order. Such further petition will be considered and disposed of by the same Appellate Division which passed upon the original petition.

COORDINATED ACTIONS

When, in respect of the same tariff provisions, petitions for suspension and applications for fourth section relief are being considered by the Board of Suspension and the Fourth Section Board, respectively, the actions of the two Boards are coordinated and the decisions of both Boards are released simultaneously. If the rate adjustment is suspended by the Board of Suspension, the Fourth Section Board withholds relief, and the fourth section application is assigned for hearing along with the investigation and suspension proceeding. In a few instances, however, it has happened that rates have been suspended for which fourth section relief has been granted. This has occurred because the granting of fourth section relief was coordinated with the Board of Suspension's action in declining to suspend the protested schedules, whereas the suspension of the schedules resulted from the subsequent reversal by appellate division 2, on appeal, of the original action of the Board of Suspension.

If both Boards are considering the same tariff provisions, and either Board concludes that the matter is one that is reserved to or should be certified to division 2 for action then the other Board also will reserve or certify its matter for action by the division.

INITIAL ACTION BY DIVISION 2

In those instances where petitions or requests for suspension relates to (1) general increases in a rate territory or region, or of wider scope, or (2) where the schedules or tariffs were filed in purported compliance with a division or Commission order, or (3) where the Board of Suspension has certified the matter to the division, division 2 has been delegated the authority either (1) to decline to suspend, (2) to enter an order of investigation, or (3) to enter an order of investigation and suspension, either on its own motion or on petition. It also has authority to institute rate investigations ancillary to such investigations or such investigtaion and suspension proceedings. Further, division 2 has authority to vacate or discontinue orders in proceedings instituted by division 2, division 2 acting as an appellate division, or the Board of Suspension, wherein respondents have canceled the matter under investigation or suspension, except in those instances where authority has been delegated to the Board of Suspension. When the protested matter is such that under the rules it is reserved to or certified to division 2 for initial consideration, and the division declines to suspend, appeals have been considered by the entire Commission if time per

mitted before the effective date of the tariff. If in initial consideration division 2 has suspended the schedules, petitions for reconsideration of its order are, unless considered and granted by the Division, considered by the Commission.

CRITERIA IN CONSIDERING SUSPENSION

The principal allegations advanced in petitions for suspension are that the protested provisions are unjust and unreasonable, unjustly discriminatory, unduly preferential or prejudicial, violate the long-and-short-haul or aggregate-ofintermediate provisions of section 4 of part I, or will constitute a destructive competitive practice. All of these, of course, relate to the prohibitions in the act or the national transportation policy.

In all cases full and careful consideration is given to all of the representations of the protestants, whether they are competing modes of transportation, shippers, receivers, or other parties claiming to be adversely affected. Similar consideration is also given to the statements submitted by the proponent carriers, and any supporting interests in justification of the proposal. The complexities involved in these situations make it impossible to devise any fixed, general formula for determining whether any particular protested schedules are lawful.

Although there are many factors to be considered, it does not necessarily follow taht all of the factors are essential to the disposition of each and every case. For example, in connection with motor carriers it is at times (but not generally) necessary to give consideration to whether they hold the necessary authority to perform the service covered by the protested adjustment. If authority is lacking, the schedules are suspended. Similarly, schedules are suspended if they are violative of a Commission order or decision.

Where increased rates are involved a predominant element is whether the rates are too high as measured by earnings and other factors. In connection with general increases the financial condition and needs of the carriers, as a group, are given considerable weight. As to rates protested by shipping interests it is often necessary, in addition to the measure of the rate, to give careful consideration to allegations of undue discrimination, preference, and prejudice. Since the war, most of the changes in freight rates and charges, except for general increases, have been reductions. The great majority of the protests against rate reductions come from the carriers. Practically all of such protests allege that the reduced rates are unjust and unreasonable in that they are below a compensatory level, but not infrequently they also allege that the proposal is not compelled by competition and would constitute a destructive competitive practice.

One of the most important factors, and one that is applied in almost every case where reduced rates are under consideration, is whether or not the proposed rates are compensatory. At one extreme, the proponent may propose so-called back-haul rates unrelated to costs on the theory that any rate is compensatory which contributes some revenue toward defraying the expense of what otherwise would be an empty return movement. On the other hand, protestants or others may rely upon average costs of transporting all traffic in a territory or region to establish that a proposed rate is unprofitable, whereas the assailed rate may apply on particular traffic, or between points, or over routes, for which it is shown, or for which we know from long experience, that the costs are well below the general average. In reaching a conclusion concerning the compensatory nature of reduced rates, consideration also is given to car-mile, truck-mile, and ton-mile earnings.

However, the compensatory nature of rates is not the sole test of their lawfulness. If it were, the Commission would be unable to consider the relationship of rates, not only between competing carriers, but also between competing shippers and localities, to prevent undue discrimination, or preference and prejudice, which otherwise may result.

Frequently, a protesting carrier attempts to support an allegation that reduced rates proposed by a competitor constitute a destructive competitive practice by merely comparing the proposed rates with its own. The possible diversion of some traffic from protestant does not necessarily establish that the practice would be destructive. On the other hand, apart from the possible diversion of traffic from protestant, consideration must be given to the possibility that such proposals might result in destruction of a service contrary to the provisions of the national transportation policy.

Consideration also is given to many additional factors, including but not limited to the transportation characteristics of the commodity under consid

eration; the effect of the proposed rates upon the rate structure in the same general territorv, and whether the rates are designed to regain traffic from, or forestall diversion of traffic to, private carriage, bearing in mind at all times the declared policy of the Congress as expressed in the act and the national transportation policy. The ultimate purpose of such consideration, of course, is to determine, based upon the presentation made in each particular case, whether or not the operation of the schedules should be suspended pending investigation upon a formal record.

In this regard, it is important to note that suspension of proposed schedules is not a decision that they are unlawful; it is, in substance, merely an indication that we are sufficiently in doubt concerning the lawfulness of the schedules that we believe their operation should be deferred until their lawfulness has been determined in a formal investigation of the matter.

DISCUSSION OF INVESTIGATION AND SUSPENSION No. 6752, NEWSPRINT PAPER— BRITISH COLUMBIA TO PACIFIC COAST POINTS AND FOURTH SECTION ORDER NO. 18667, NEWSPRINT PAPER FROM BRITISH COLUMBIA TO CALIFORNIA

This statement is submitted in response to inquiries relating to the manner in which the Commission disposed of investigation and suspension No. 6752 and a related fourth section proceeding.

On March 22, 1957, rail carriers filed with the Commission reduced rates on newsprint paper from Duncan Bay and Powell River, British Columbia, Canada, to destinations in California. These rates were scheduled to become effective May 1, 1957, and were to apply over a route which embraced the lines of the Great Northern Railway Co., the Western Pacific Railroad Co., the Atchison, Topeka & Santa Fe Railway Co., and connecting lines. At the same time the carriers sought fourth section relief to maintain the existing higher rates from intermediate origins in Washington and Oregon. The route over which these rates were to apply will be designated as the Bieber route.

On April 2, 1957, another group of rail carriers filed reduced rates on the same commodity from and to the same points. These rates were scheduled to become effective May 5, 1957, and were to apply over the lines of the Great Northren, the Southern Pacific Co., Union Pacific Railroad Co., the Santa Fe, and connecting lines. This group of carriers also sought fourth section relief to maintain higher rates from intermediate origins in Washington and Oregon. This route will be referred to as the Black Butte route.

Also on April 2, 1957, still another group of carriers filed reduced rates on this commodity from and to the same points, as well as from intermediate origins in Washington and Oregon. These rates were to become effective May 5, 1957. They were to apply over the lines of the Northern Pacific Railway Co., and the Southern Pacific. This route will be called the Portland route. Carrier parties to this adjustment did not seek fourth section relief as they intended to apply the reduced rates from intermediate origins in Washington and Oregon. The proposed rates from and to specific points, regardless of which of the three routes via which a shipment might move, were all on the same level. As noted, the rates applied for a joint water-rail movement. Movement from the points of origin in Canada to Vancouver, British Columbia, was to be via a foreign barge line. From Vancouver shipments were to move by rail carrier over any of the three routes described above.

The proposed rates were protested by various port interests, a trucking concern, and two water carriers-Coastwise Line and Olympic-Griffiths Lines, Inc. Of the water carriers, the former assumed a more active participation in the subsequent proceedings before the Commission and the courts.

The rail carriers disclosed that appreciable quantities of newsprint were moving by foreign water carriers from points in Canada to California destinations. It was also developed that Coastwise's participation in the movement of this traffic from Canadian points was limited. It appeared, however, that the protecting water carriers handled substantial quantities of newsprint from points in Washington and Oregon destined to California points. It was apparent that the main threat to the protesting water carriers was the reduced rates over the Portland route since over this route the rail carriers did not seek fourth section relief to maintain higher rates from intermediate origins in Washington and Oregon. As indicated, it was from the latter origins that Coastwise and Olympic

hauled substantial tonnages. Nevertheless, both carriers protested the reduced rates over all three routes.

The petitions for suspension and the related fourth section applications were referred by the Board of Suspension and the Fourth Section Board to Division 2 for disposition. This procedure permits appeal to the entire Commission, and is generally followed when the issues are of general transportation importance. Cost data indicated that all the reduced rates exceeded out-of-pocket costs. To San Francisco from Portland and Seattle the reduced rates exceeded fully distributed costs, but not from Vancouver. To Los Angeles the reduced rates from Portland exceeded fully distributed costs, but not from Seattle and Vancouver.

No shipper objected to the proposed reduced rates.

Division 2, on April 30, 1957, declined to suspend the proposed rates and granted fourth section relief. Coastwise and Olympic appealed, and the entire Commission on April 30, 1957, upheld the Division. The same carriers petitioned for reconsideration of the failure to suspend, but the petition was denied by the Commission on May 2, 1957.

Also on April 30, 1957, Coastwise secured a temporary restraining order against the Division's order granting fourth section relief. The court order had no effect on the rates over the Portland route since these rates conformed to the fourth section. The Commission, by Chairman Clarke, on May 6, 1957, in deference to the court order, suspended the grant of fourth section relief. In the meantime, on May 4, 1957, Coastwise secured a second temporary restraining order directing the Commission to suspend the rates over the Portland route, which rates conformed to the fourth section. The Commission, by an order issued by Chairman Clarke on May 5, 1957, complied with the court's directive. The latter order carried an expiration date of May 7, 1957, and accordingly, on May 6, 1957, the entire Commission suspended these rates for the duration of the temporary restraining order.

The rail carriers on May 6, 1957, filed reduced rates from intermediate origins on the Bieber and Black Butte routes in order to remove the unauthorized fourth section departures created when the Commission by its order of May 6, 1957, issued in obedience to the court order of April 30, 1957, suspended the grant of fourth section relief. These rates were scheduled to become effective June 5, 1957. However, on May 8, 1957, the rail carriers sought special permission to publish the rates on 1 day's notice. The Commission, by Commissioner Tuggle, on May 9, 1957, granted special permission to make the rates effective on not less than 3 days' notice, but not earlier than May 15, 1957. On May 10, 1957, Coastwise petitioned for reconsideration of Commissioner Tuggle's order. The request was denied by Division 2 on the same day.

On May 13, 1957, protestants filed petitions urging that the Commission suspend the rates which had been filed to clear the fourth section over the Bieber and Black Butte routes. The entire Commission concluded not to suspend on May 13, 1957. Protestants' petition for reconsideration was denied May 14, 1957. Also on May 14, 1957, Coastwise secured a third restraining order. The same day the Commission, in deference to the directive of the court, ordered that the schedules cited in the court order be suspended. It was subsequently determined that the Commission's order of May 14, 1957, which was issued to comply with the court order and which suspended only the tariff items listed in that order, failed to specify the correct tariff items so as to bring about suspension of the reduced rates from intermediate origin points on the Bieber route. Subsequently. however, the rail carriers agreed to cancel the rates from intermediate origins over this route.

As a result of the court orders and the suspension orders issued pursuant thereto by the Commission, and the cancellation by the rail carriers of the rates from intermediate origins on the Bieber route, the following rate situation developed: (1) Rates over the Portland route which contained no fourth section departures were completely suspended and (2) rates from the British Columbia origins over the Bieber and Black Butte routes were in effect, but the rates from intermediate origins over those routes were suspended.

On July 11, 1957, the U.S. District Court for the Northern District of California, Southern Division, dismissed the temporary restraining orders. The court held that it was without jurisdiction to review the discretionary action of the Commission under section 15(7) in declining to suspend carrier made rates since the plaintiff had not exhausted its administrative remedies. It was further held that on the evidence presented there was no reason to conclude

that the Commission's decisions were other than an informed and well-founded exercise of discretion. Thereafter, on July 17, 1957, the Commission vacated the suspension orders and the rates became effective from British Columbia origins over the Portland route and from intermediate origins over all routes. The power to suspend reduced rates is a discretionary administative power, not unlike the power of a court to issue temporary injunctions. Here, the proposed rates did not appear to the Commission as being unlawful in any respect, and accordingly they were not suspended. This, however, in no way prejudices the right of any party who feels himself aggrieved to file a formal complaint with the Commission and have his rights adjudged after a full and complete hearing. (Whereupon, at 5:25, the subcommittee adjourned to reconvene at 9:30 a.m., Monday, June 22, 1959.)