The rules of the federal regulation game are about to change for the nation's trucking industry.
Regardless of the outcome of the current legislative effort to deregulate the industry, the Interstate Commerce Commission appears determined to make it more competitive.
The commission's success in changing the rules of the game is fast shaping up as one of the major consumer issues of the day, according to its opponents. The ICC's regulation of the multi-billion-dollar insterstate transportation industry, and barges, affects the availability and price of most consumer goods.
"You've heard the motto, 'If you bought it, a truck brought it'," Esther Peterson, the special assistant to the president for consumer affairs, told a symposium on trucking reform last month. "We cannot forget that consumers pay the ultimate freight bill."
Interstate trucking has been regulated since 1935, partly at the urging of the railroads, which had been regulated since 1887 and which saw their business slipping away to the faster, more convenient trucks, and partly at the urging of the trucking industry itself. The Depression had caused a decline in overall freight traffic, and an increase in unemployment led large numbers of people to begin to acquire a used truck or two and set themselves up in business, according to Alfred E. Kahn, special assistant to the president on inflation and chairman of the Council on Wage and Price Stability.
"This persuaded the larger established trucking companies to join with the railroads in calling for congressional action to bring the industry under the regulatory authority of the ICC -- in order to restrain competition," he said.
Regulations as practiced by the ICC has met that goal. It has been protective of the existing industry members, doling out certificates for new authority sparingly and only after lengthy and costly proceedings. The grants most often came with restrictions on what commodities the company could carry, what routes could be taken and what geographic areas could be served in order to protect existing companies that claimed they would be hurt otherwise.
As a result, trucking regulation is a patchwork of thousands and thousands of operating certificates, all with their own circuitous routings, one-way authorities, commodities restrictions and bans on stops along the way. That regulation has created these distinctions, limitations and "perversions" is inherent in the nature of regulation, Kahn contends, especially regulation that has to keep static a growing, dynamic and essentially competitive business.
Congress already has begun work on major legislation to deregulate the trucking industry -- the Senate Commerce Committee last week reported out a major deregulation plan -- but the ICC itself is also taking major steps toward changing the nature of industry regulation.
The changes began under the stewardship f A. Daniel O'Neal and are expected to continue in an even more forceful and broadened way under newly installed Chairman Darius W. Gaskins Jr. Gaskins, who has been chief economist at the Civil Aeronautics Board and the Federal Trade Commission, served as deputy assistant secretary of Energy for policy analysis immediately before joining the ICC last July.
However, ICC insiders give some credit for recent liberalization of trucking entry policies to ICC member Robert C. Gresham, who has served on the commission since 1969.
"I was the first commissioner who felt there was a need for some relaxation of motor carrier entry rules," he said in an interview. Gresham was the author of a couple of the commission's forward-looking decisions, but he insists he's "not for change for change's sake.
"But I do believe the commission has to recognize the facts of life out there. As conditions in the country change, there will be a need for additional services to meet changing transportation needs," he says.
Apparently the only commission member with that viewpoint at first, Gresham now finds himself in the majority more often with Gaskins and two other recent Carter appointments: Thomas A. Trantum, a New York securities analyst who specialized in regulated transportation; and Marcus Alexis, who was chairman of the economist department of Northwestern University. Alexis became the first black on the ICC. All three share -- even advocate -- the viewpoint that changes must be made in the traditional role of the ICC. Although Gresham says Gaskins is "not philosophically together all the time," he calls him "a breath of fresh air" at the 93-year-old agency.
There are currently six members of the ICC, with one nominee awaiting Senate hearing and confirmation: Reginald Gilliam, legislative assistant to Sen. John Glenn, who would be the first lawyer on the current commisson. Two commissioners' terms expire at the end of the year; one of them, George M. Stafford, dissents from most of the liberalizing moves, while the other is Charles L. Clapps, whose votes can't be pegged.
Although the changed policies have yet to be implemented fully and haven't made a really discernible impact on the industry's functioning, Gaskins indicates that the industry is right to perceive that ICC policies will alter the traditional industry structure substantially. "I think the significant thing is not so much were we are today; more significant is where we're going," said Gaskins.
The ICC is overwhelmed by new applications because implementation of administrative reforms to reduce delays hasn't kept up with the new policies, he said. But once the glitches are fixed, the policies will have a "profound influence," Gaskins predicts. "It will be gradual -- but over time we will grant more and more authority" to trucking companies.
The new policies will result in a greater variety of available services and prices, his colleague Alexis said. "While it might be rough on the nervous system, there is some evidence that competition provides new goods and services at a price level that is not exorbitant," he said.
That's not just textbook theorizing, it's pragmatic, he added. "Look around the world and you see that competition produces dynamism." When there are opportunities and incentives to take risks -- when rewards come to those who are successful -- people are constantly trying to invent "a better mousetrap," and the public benefits, he said.
Until now, carriers, have competed on a nonprice basis. Although there may have been no incentive to offer anything different under the traditional regime -- with competition circumscribed -- a more open will produce "gradations in service levels that ought to be reflected in price," Alexis said. For instance, a trucking firm may offer shippers less-frequent service for 30 percent less than they have been paying. "Some people may be willing to forego daily delivery to save 30 percent," he said.
"The logic behind entry is to give shippers or users a choice. Those responsive to shippers' needs will be rewarded; those not will be penalized," Alexis added.
Past policies denied these benefits to the companies willing to take risks as well as to the public, Alexis contends. Now that will be provided even if existing carriers claim new businesses would divert traffic from them. "Our obligation is to provide the service and convenience of the public, not to protect people in the business from competition," he said.
Alexis, Gaskins, Trantum and Gresham all see a continued role for regulation, at the least, to make sure trucking companies meet financial fitness standards, insurance and liability requirements and safety provisions.
Although the ICC has continued to unveil new proposals in recent months, it hasn't moved to implement the most significant of the following an admonition last fall from Sen. Howard W. Cannon (D-Nev.), chairman of the Senate Commerce Committee.
In a speech to members and staff of the ICC attending a federal-state workshop on regulation, Cannon warned them not to take any major policy actions that would alter in a fundamental way the structure of the trucking industry until Congress itself has a chance to act.
Although he said it was "totally unrealistic to assume that a 1935 congressional statement of policy can be applied to 1979 transportation problems," Cannon said the ICC shouldn't act unilaterally to redefine national policies.
Cannon, and an ICC appropriations bill that cleared Congress soon after, set June 1 as the target to get a piece of legislation on President Carter's desk.
It was a move then-chairman O'Neal and Chairman-designate Gaskins were only too happy to go along with. Just as there was controversy about how far the Civil Aeronautics Board could go on its own to alter traditional airline regulation, so too there is a good deal of dispute about how far the ICC could go on its own.
The ICChas told Congress it supports a new mandate placing more emphasis on the benefits of competition and less on protecting the existing industry, an emphasis that many think the current statute requires. Without new legislation, the ICC's recent and certain future actions will be in the courts for years.
Should Congress fail to enact new legislaton, however, the industry is on notice that the commission will go ahead administratively to advance the procompetition goals that are outlined both the kennedy-carter trucking legislation and a joint bill introduced last month by Cannon and Sen. Bob Packwood (R-Ore.), the ranking minority member of the Senate Commerce Committee.
"Our understanding is that since Congress has agreed to get a bill to the president and demonstrate what they want, if they don't do that -- if we don't get a bill signed into law -- we'll be free to carry out our own adjustments to the regulatory regime through the administrative process," Chairman 'gaskins said. "And you see pretty well what the pattern is . . ."
It's a viewpoint Cannon shares. "...I would say that if Congress can't enact legislation saying that the law shold be intrpreted differently than it is now . . . I would assume that the ICC would go merrily along their way of carrying out what they perceive to be the intent of the law," he said.
In an interview, Cannon said his "go slow" speech to the ICC was not meant to signify a dispute with the agency on the merits of its new policies.
"The dispute I had with the ICC was with respect to the procedures they wre following rather than anything else," he said.
The Cannon-Packwood bill, in fact, incorporates many new ICC proposals and policies, although it specifically bars the ICC from carrying out the "master certification" approach to industry segments. If the rest of the measure gets through, however, the same liberal entry represented by proposal would be accomplished easily by other means, Hill and ICC sources say.
Cannon thinks it would behoove the industry to go along with a new procompetitive mandate; should Congress fail to act, the ICC might be "much tougher" on it than Congress might be overall, he noted.
Indeed, Gaskins and Trantum have been urging members of the trucking industry to weigh carefully whether they would rather be even freer of the ICC than current legislative proposals would have them. Accepting the "favors" that regulation bestows means accepting the ICC as "silent partner," Gaskins pointed out recently in a speech to a group of major trucking executives. "But your silent partner is charged with guarding the public's interest, not yours," he told them.
Both Gaskins and Trantum have told the industry it would be better off lobbying for greater freedom in trucking legislation rather than being subject to uncertain, unpredictable federal regulation.
"Uncertainty is inherent in trucking regulation," Trantum told the California Trucking Association this month. "Will a route extension be approved? Will a deviation request be denied? Will a rate increase be cut back?
"Generally, there are few things more predictable than the unpredictability of a regulatory agency," he said. Contrasting the ICC's ever-changing membership of the ICC to the certainty of the marketplace, he argued, "The rules of the market never change.
"The quality of the balance sheet and the quality of the management, not the quality of the attorney or the disposition of the bureaucracy, determine success or failure of firms in freer markets,"he said.
Trantum was particularly blunt about what the industry could expect if Congress directs the commission to emphasize regulaion in the trucking industry: the settng of an appropriate rate of return and some formal efficiency standards. If an industry is to enjoy the benefits of continued entry restrictions and collective price-fixing, the public must be protected from paying excessively high rates, with the resulting monopoly profits going to the protected firms, he argues.
Although neither standard has been applied in trucking, they are tools of the other regulated industries and public utilities, In a similar fashion, the CAB used both when closely regulating the airlines before the deregulation measure was passed. Under the CAB's formula, higher fares were approved if they yielded the industry a 12 percent rate of return on investment above costs of operations. For the purpose of setting these returns, the CAB assumed that planes were 55 percent full and were carrying the number of seats they were designed to carry.
No such standards have been applied by the ICC to the trucking industry, where rate of return on equity hovers in the 20 percent range. The ICC has opened a proceeding, however, to determine an appropriate rate of return, and in recent votes on whether to allow freight rate increases, Trantum has been applying a 12 percent standard.
He noted that efficientcy standards for motor carriers could involve such measures as minimum pounds per man-hour and average trailer loads.
"In a truly regulated industry, you must insure that the cost base has not been inflated," he explained in an interview.
So whether Congress acts or not, the ICC is going to make sure the rules of the game change. And the trucking industry could be faced with what it might come to believe is the worst of all worlds: more competition as a result of recent entry liberalizations that are sure to continue, and more regulation as well through efficiency and rate-of-return standards.