In what it described as a precedent-setting decision, the Interstate Commerce Commission yesterday established a new standard for evaluating requests from the trucking industry for freight rate increases.
Discarding a profit margain standard that had been abandoned by other regulatory bodies some time ago, the ICC said yesterday it will now use the rate of return on stockholders equity in determining the industry's revenue needs. It decided the ROE for the trucking companies should be no higher than 14 percent, the current ROE for all manufacturing industries.
The ICC's new policy was enunciated in a unanimous decision forcing more than 1,100 trucking companies operating in the southern states to roll back within 30 days freight rate increases that have been in effect since April. The 6.2 percent increase the Southern Motor Carriers Rate Conference had asked for and put into effect pending this decision would have mean a rate of return of nearly 24 percent, the ICC said yesterday. It said it would allow the conference to file for a 3.5 percent increase which would provide the carrier members with adequate revenues and "is within the price standards" established by the President's anti-inflation program.
One of the major issues in the proceeding was whether labor costs incurred by carriers under new wage contracts could be passed through to shippers on a dollar-for-dollar basis. The conference had filed for the increases to offset expenses incurred under a contract with the International Brotherhood of Teamsters. The ICC said yesterday it would permit provide costs to be passed on "only to the extent that increased revenues are needed to permit the carriers to earn an adequate rate of return."