The Commission therefore recommends enactment of the provisions in the attached draft bill which will make the present mandatory oath requirements discretionary with the Commission. Retention of discretionary authority would enable the Commission to require an oath should the need arise.

Recommendation No. 21

S. 1728

This proposed bill would give effect to legislative recommendation No. 21 of the Interstate Commerce Commission as set forth on page 74 of its 78th annual report as follows:

"We recommend that section 222(b) be amended to enable the Commission in enforcement proceedings to obtain service of process upon motor carriers and to permit the joining of any other necessary party without regard to where the carrier or other party may be served."

JUSTIFICATION

The attached draft bill would provide the Interstate Commerce Commission with a more effective means of enforcing the motor carrier provisions of the Interstate Commerce Act.

Under section 222(b) of the act the Commission is authorized to institute proceedings to enjoin unlawful motor carrier or broker operations or practices in the U.S. district court of any district in which the carrier or broker operates. Rule 4(f) of the Federal Rules of Civil Procedure, however, limits the service of process in such proceedings to the territorial limits of the State in which the court sits.

In many instances the carriers against whom it is necessary to seek injunctions do not hold operating authority from the Commission and they have not, of course, designated an agent for the service of process as provided in section 221 (c) of the act. The operations of such carriers are frequently widespread and it is often desirable to institute the court action in the State where most of their services are performed. This is usually the most convenient place for the majority of persons involved, including necessary witnesses. The illegal operator, himself, however, may avoid service of process by remaining outside of the State and by not stationing within its borders anyone qualified to receive service on his behalf.

Coping with the problem of unlawful operations is further complicated when a large shipper is involved. An injunction against one or several relatively small carriers without the shipper being named permits the shipper to continue his unlawful activities by using individual truckers or small carriers against whom no previous action has been taken. It is therefore frequently desirable and often critically important, that such shipper, as well as the carriers, be enjoined from participating in further violation of the law or the Commission's rules and regulations thereunder. In some instances, however, the Commission has been unable to obtain service of process upon both the carriers and the shipper because they were not located within the territorial limits of the same State.

The decision of the court in Interstate Commerce Commission v. Blue Diamond Products Company, 192 F. 2d 43, precludes the Commission from proceeding against a shipper without proceeding against the carrier. The Commission does not disagree with the principle of that case. However, it is of the view, and the draft bill would so provide, that it should be able to institute a civil action against a carrier in any State in which the carrier operates and to enjoin in such action any shipper, or any other person participating in the violation, without regard to where the carrier or the shipper or such other person may be served.

The problem presented has been particularly troublesome in the efforts of the Commission to control so-called pseudoprivate carriage; i.e., for-hire carriers claiming, without basis, to be engaged in private transportation for the purpose of evading the economic regulation to which common and contract carriers are subject. The seriousness of these unlawful operations was recognized by the Congress when, as a part of the Transportation Act of 1958, it amended section 203 (c) of the Interstate Commerce Act so as to more clearly define what constitutes bona fide private carriage. However, because of the inability of the Commission, under present law, to get both the responsible shipper and the carrier before the court, its efforts at effective enforcement is, in many cases, thwarted. The proposed amendment would make more effective the original intent of the Congress in enacting section 222(b) and would aid the Commission substantially in its efforts to administer and enforce the act.

In order to make the provisions of section 222(b) harmonize with changes recommended by the Commission in section 212 (a) of the act (see legislative recommendation No. 25, 78th annual report), the draft bill further provides that section 222(b) shall apply to any lawful rule, regulation, requirement, or order promulgated by the Commission. At present, the pertinent provision of section 222(b) refers only to rules, regulations, requirements, or orders promulgated under part II of the act.

Recommendation No. 25

S. 1731

This proposed bill would give effect to legislative recommendation No. 25 of the Interstate Commerce Commission as set forth on page 77 of its 78th annual report to Congress as follows:

"We recommend that section 212 (a) be amended in the following respects: (1) To make motor carrier operating authorities subject to suspension, change, or revocation for willful failure to comply with any rule or regulation lawfully promulgated by the Commission; (2) to make the revocation procedure therein prescribed conform to the procedure provided in section 410 (f) of the act by eliminating the term 'willfully" in the first proviso; and (3) to provide that the Commission may, upon reasonable notice, suspend motor carrier operating authorities for failure to comply with insurance regulations issued by it pursuant to section 215 thereof."

JUSTIFICATION

The purpose of the attached draft bill is to subject motor carrier operating authorities to suspension, change, or revocation for willful failure to comply with any rule or regulation lawfully prescribed by the Commission and to provide uniformity between parts II and IV of the Interstate Commerce Act with respect to revocation procedure. It is also designed to permit suspension of motor carrier operating rights, upon notice, for failure to comply with the Commission's insurance regulations.

As section 212(a) of the act now reads the Commission cannot suspend or revoke a certificate except for failure to comply with the provisions of part II "or with any *** regulation of the Commission promulgated thereunder * (emphasis supplied). The Commission has found this language to be unduly restrictive upon its enforcement powers. For example, regulations prescribed under the Transportation of Explosives Act do not come within the category of regulations promulgated under any provision of part II of the Interstate Commerce Act. The Commission is therefore powerless to suspend or revoke the certificate of any carrier for violations of the Explosives Act or any regulations prescribed thereunder, irrespective of how willful such violations may have been. However, by simply changing the words "of the Commission promulgated thereunder" to "promulgated by the Commission", as proposed in the attached draft bill, the Commission would be able to revoke or suspend certificates for willful or continued noncompliance with any of its lawful rules and regulations. Enactment of this recommended amendment would thus enable the Commission to cope more effectively in the public interest, with serious violations of any of its applicable rules or regulations and not only those promulgated under part II of the Interstate Commerce Act.

Under the first proviso of section 410 (f) of the act, a freight forwarder's permit may be revoked if the holder thereof fails to comply with an order of the Commission commanding compliance with the provisions of part IV, a rule or regulation issued by the Commission thereunder. or the terms, conditions, or limitations of the permit. Under the corresponding provisions in section 212 (a), however, the failure of a motor carrier to obey a similar compliance must be shown to have been willful before the carrier's certificate or permit may be revoked. Once disobedience of a compliance order is established, an additional showing of willfullness should not be required. Proof of disobedience should be sufficient. The proposed change in the quantum of proof would make motor carrier operating rights revocable in the same manner as freight forwarder operating rights under section 410 (f).

The second proviso in section 212 (a) provides for the suspension, upon notice, but without hearing, of motor carriers' and brokers' operating authorities for failure to comply with brokerage bond regulations and tariff publishing rules. It does not, however, provide for suspension on short notice for failure to maintain proof of cargo, public liability, and property-damage insurance under section 215. As previously indicated, section 410 (f) is a counterpart of section

212(a) and contains a provision similar to the second proviso of section 212(a). The second proviso in section 410(f), however, provides for suspension on short notice of freight forwarded permits for failure to comply with the cargo insurance provisions under section 403 (c) and the public-liability and propertydamage insurance provisions under section 403 (d). The draft bill would bring section 212 (a) into further conformity with section 410 (f) by removing this distinction.

From the standpoint of the traveling and shipping public there is as much reason to require motor carriers to keep their cargo and public-liability and property-damage insurance in force as there is to require freight forwarders to keep their insurance in effect. It is therefore desirable in the public interest that the Commission have the authority to suspend motor carrier rights, on short notice, when insurance lapses, or is canceled without replacement, until compliance is effected. The prospect of such action by the Commission should act as a deterrent to violations of this nature. An investigation under section 204 (c) is not a satisfactory answer to the problem since such a proceeding may be somewhat lengthy and the public may be adversely affected should losses occur while it is pending.

The proposed change in section 204 (c), which relates to investigations and the issuance of compliance orders, would bring that section into conformity with the suggested amendment to section 212(a) by similarly removing the restrictive nature of the present wording.

The amendments proposed in this draft bill would enable the Commission to administer the enforcement provisions of part II of the act more effectively.

Recommendation No. 15

S. 1732

This proposed bill would give effect to legislative recommendation No. 15 of the Interstate Commerce Commission as set forth on page 70 of its 78th Annual Report as follows:

"We recommend that sections 204a and 406a be amended to make common carriers by motor vehicle and freight forwarders, respectively, liable for the payment of damages in reparation awards to persons injured by them through violations of the act."

JUSTIFICATION

The attached draft bill would amend sections 204a and 406a of the Interstate Commerce Act, which relate to actions at law for the recovery of charges by or against common carriers by motor vehicle and freight forwarders, so as to make such carriers liable for the payment of damages to persons, including the United States as a shipper, injured by them as a result of unreasonable charges on past shipments. It would give to an injured party the choice of pursuing his remedy either before the Commission or in any court of competent jurisdiction. Appropriate periods of limitation are provided with respect to the commencement of such actions or proceedings.

At present, liability for an unreasonable rate exists, and a remedy is provided, only with respect to violations by railroads and other carriers subject to part I and by water carriers subject to part III of the act. Prior to the decision of the Supreme Court in T.I.M.E. Inc. v. United States, 359 U.S. 464, May 18, 1959, the Commission, upon petition, made determinations of the reasonableness of past motor carrier rates on the assumption that the petitioner was entitled to maintain an action in court for reparations based upon the unreasonableness of such rates. However, in that case, the Court ruled that a shipper by a motor common carrier subject to part II cannot challenge in postshipment litigation the reasonableness of the carrier's past charges made in accordance with applicable tariffs filed with the Commission. A shipper, therefore, is without remedy for injury arising from the application of an unreasonable rate. Since the pertinent provisions of part IV are similar to those under part II, a shipper by freight forwarder subject to part IV appears to be in the same plight.

The motor carrier industry has attained stature and stability as one of the chief agencies of public transportation, handling a substantial volume of the Nation's traffic. It seems appropriate, therefore, that shippers should have the same rights of recovery against motor carriers as they have against rail and water carriers for violations of the act.

The need for the relief proposed is evidenced by the number of proceedings instituted by shippers for redress against motor common carriers prior to the decision in the T.I.M.E. case. During the years ended June 30, 1958 and 1959,

for example, 20 and 14 formal complaints or petitions, respectively, were filed to secure the Commission's determination of the reasonableness of established motor carrier rates ancillary to court actions for the recovery of reparations. During the calendar year 1958, a total of 101 informal complaints were filed against motor carriers claiming damages for unreasonable rates and practices. In 1950 only 10 such complaints were handled by the Commission, but by 1954 the number had risen to 110. Prior to the decision in the T.I.M.E. case, adjustments of such complaints were negotiated, in appropriate cases, by an informal and inexpensive procedure involving informal conferences and correspondence with the parties. Many informal complaints, however, were found not to be susceptible of adjustment by such means. If the Commission had then been vested with the requisite authority, the filing of formal complaints seeking awards of reparations probably would have followed, as is now the practice under parts I and III of the act. In this connection it should be noted that reparation procedures before the Commission are more simple and less expensive than actions in court to attain the same end. It may be anticipated, therefore, that although both the courts and the Commission would be authorized under the proposed amendments to award reparations, shippers would prefer resort to the Commission since the reasonableness of the rates involved would, under the provisions of the act, have to be determined by it upon referral of the question by the court. Although the need for a provision authorizing awards of reparations against freight forwarders is not as pressing as in the case of motor carriers, it is equitable, logical, and desirable that all four parts of the act be uniform and that shippers by different modes be treated in similar fashion. Appropriate amendments to section 406 (a) are therefore included in the draft bill.

For the reasons set forth above, the Commission recommends early consideration and enactment by the Congress of this proposed measure.

Recommendation No. 22

S. 1733

This proposed bill would give effect to legislative recommendation No. 22 of the Interstate Commerce Commission as set forth on page 75 of its 78th annual report as follows:

"We recommend that section 222(h) be amended so as to (a) extend the civil forfeiture provisions therein to unlawful operations and safety violations by motor carriers, (b) permit the Commission to institute forfeiture actions directly in the courts, and (c) increase, substantially, the amount of the forfeitures prescribed."

JUSTIFICATION

The purpose of the attached draft bill is to provide the Interstate Commerce Commission with a more effective means of coping with the spread of illegal and so-called gray area motor carrier operations which are undermining the strength of the Nation's regulated common carrier system. It is also designed to buttress the Commission's intensified motor carrier safety enforcement program.

Under existing law, procedures for dealing with certain motor carrier violations are often slow and cumbersome, and frequently ineffective. Criminal prosecutions, for example, must be brought in the district in which the violations occurred. Thus, in the case of multiple violations by a carrier with extensive territorial operations it may be necessary to institute separate actions in several district courts if all of the violations are to be covered. Civil forfeiture proceedings, on the other hand, may be instituted in the district in which the carrier maintains its principal office, where it is authorized to operate, or where it can be found. Moreover, less time is needed for investigating violations because of the difference in quantum of proof required in such proceedings.

Under the proposed amendment a civil forfeiture action could be brought against a for-hire motor carrier for transporting property without a required certificate or permit. Such action would be available whether or not the carrier had taken steps to give the operation an appearance of legality, but the principal enforcement advantage that would accrue would be when the operator, by means of an alleged vehicle lease or an alleged purchase of the commodity hauled, has attempted to give the operation an appearance of private carriage. More specifically, an owner of a vehicle may enter into a vehicle leave arrangement with a manufacturer under which the manufacturer alledegdly uses the vehicle in private carrier operations. Such arrangements range all the way from a bona fide lease of a vehicle, at one extreme, to an obvious sham at the other. No

enforcement action is, of course, involved in the case of a bona fide lease. The obvious shams, however, are the subject of criminal prosecution.

While there are a number of vehicle arrangements which the Commission believes to be illegal for-hire carriage by the vehicle owner, it is doubtful that a criminal conviction could be secured because of the necessity of showing knowledge and willfulness and proving guilt beyond a reasonable doubt. In addition, in a criminal proceeding there can be no appeal from an acquittal. Such cases are now handled in the civil courts, but an injunction against such operations in the future is all that can be secured. The possibility of a civil injunction action, where there is no pecuniary penalty or criminal stigma involved, has very little effect as a deterrent to would-be violators. A civil forfeiture action, such as that proposed, carrying with it substantial monetary penalties should, on the other hand, have a strong deterrent effect against questionable leasing arrangements. Operations sometimes referred to as "buy and sell" operations are very similiar in effect. By allegedly purchasing merchandise the transporter represents the operation to be private carriage. As in the case of leasing arrangements these operations have many variations, some of which present close questions as to whether the operation constitutes for-hire carriage. Some are obviously illegal for-hire operations and are handled as criminal cases. Others, however, are not so clearly unwalful as to warrant criminal action for the reasons stated above in connection with questionable leasing arrangements, but which, in the Commission's views, are nevertheless unlawful. Such operations may be continued for substantial periods during the pendency of a civil injunction proceeding and before a cease and desist order is issued by the court. If the proposed amendment were enacted a number of these cases could be made the subject of a civil forfeiture action in which, if successful, the operator would suffer a money judgment or forfeiture.

Enactment of the proposed legislation would also greatly facilitate the Commission's enforcement activities in the important area of motor carrier safety. Although a very high percentage of cases involving violations of the Commisson's safety regulations are disposed of by pleas of guilty or nolo contendere, investigations looking toward such prosecutions are nevertheless extremely time consuming because of the necessity of proving to the court every element of the alleged criminal offense. Since the quantum of proof required in a civil forfeiture proceeding is not as great as that required in a criminal action, a substantial amount of the time that must now be spent in preparing for criminal prosecutions in such cases could be devoted to handling a larger number of civil forfeiture proceedings.

The Commission's efforts at more effective and expeditious enforcement would also be greatly enhanced if it were authorized to institute forfeiture proceedings directly in the courts instead of proceeding through the Department of Justice as it is now required to do. Delays would be avoided not only by eliminating the mechanics involved in taking the extra step, but also by the elimination of such delays as may be caused by the time consumed in convincing the U.S. attorney that an action should be field.

These proposed amendments, coupled with a substantial increase in the amount of the forfeitures prescribed, would strengthen the Commission's hand considerably in dealing with some of the principal factors contributing to the decline of regulated common carriers.

COMPTROLLER GENERAL OF THE UNITED STATES,
Washington, D.C., May 6, 1965.

Hon. WARREN G. MAGNUSON,
Chairman, Committee on Commerce,

U.S. Senate.

DEAR MR. CHAIRMAN: We have your letter of April 19, 1965, asking for our comments on S. 1727.

S. 1727 contains (1) provisions designed to afford the Interstate Commerce Commission additional authority and power to reduce illegal carriage, and (2) provisions for the recovery of reparations from motor carriers and freight forwarders.

The provisions to aid in combating illegal transportation would not, if enacted, materially affect the functions and operations of our office. Since they seem to be in the public interest, we have no objection to their receiving favorable consideration by your committee. Several of these provisions have already been proposed in substantially similar form: for example, the proposal to