FTC Staff Comment to the Hon. Frank Sawyer Concerning Ohio H.B. 658 to Repeal the Regulation of Contract Carrier Motor Freight Rates

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JOHN tot MENDENH"'LL
AetlDl Ita,loa.! Direc:'lOf
FEDERAL TRADE COMMISSION
CLEVm. ... NP IlWION ...t Of'PlCE
COMMISSION 	AUTHORIZED
February 17) 1988
The Honorable Frank Sa wver
Ohio House of Representatives
State Capitol
Columbus, Ohio 43215
Dear 	Representative Sawyer:
The stnff of 	the· Federal Trade Commission1 is pleased to respond 	to your
request 	for 	comments 	on 	Ohio 	House 	Bill 	658. 	This 	bill, 	if 	enacted) 	would
repeal 	the Public 	Utilities Commission's authority 	to set contract carrier motor
freight 	rates. 	It 	also 	would 	facilitate 	new 	entry 	into 	the 	industry 	while
maintaining a standard that all entrants must be "fit, willing and able" to serve
the shipping public. 	Under House Bill 658, highway contract carriers would be
allowea to charge any rate they choose, but would be required to maintain safe
and solvent operations.
This bill is a significant step toward bringing to consumers the bc?~fits of
price 	competition 	in 	Ohio's 	contract 	motor 	freight 	industry. 	In 	addItIOn, 	by
requiring 	that 	applicants 	for 	operating 	authority 	demonstrate 	familiarity 	with
the 	Utihties 	Commission's 	safety 	rules, 	HB 658 directly 	addresses 	the 	issue 	of
safety 	and 	serves 	the 	state)s 	interest 	in 	protecting 	the 	health 	and 	welfa.re 	of
its citizens.
1 	These 	comments 	represent 	the 	views 	of 	the 	Cleveland 	Regional 	Office and
the 	Bureaus 	of 	Competition) 	Consumer 	Protection, 	and 	Economics 	of 	the
Federal 	Trade 	Commission, 	and 	do 	not 	necessarily 	represent 	the 	views 	of 	the
Commission 	itself 	or 	any 	individual 	Commissioner. 	The 	Commission 	has,
however, voted to authorize the staff to submit these comments .to you.

Th~ Honorabie Frank. ~wytr
OUT 	interest in 	thi~ lqn~l~tinn pi~c~ fraIT. :hc F"tocr .. ] TTbdt Commlb:,lcr;':.,
m<lT.d<ltt' 	to 	?TC!\eT\f 	cumpt:llllOTI 	tnc: 	rlolec~ 	COTl!\umcn 	horrJ 	ot"ceptlvt 	tnC
un~(jlf 	bU$mcs~ 	prbctH.:e,: 	JUTlTlf 	rtCtn~ :-,eG:-~.• !It: 	C()r;iml.s~lor,\ 	sa-if 	liil£'
nuol{'d 	~b~ 	o~Tq-,uibtICJn (If 	trucklL!: 	tTlC 	hl::~, i:dVOCblt'.G 	:nc:-::t1l-cG 	lC:,lll:lIJC:: 	I,IT.
market 	force~ at 	both 	the 	fedeThP bIld 6tate 	le\'el~.~ 	Our hctivitie~ in 	thi~ arCl::
and 	in 	matter6 	of 	competition 	policy 	generally 	have 	provided 	us 	with
substantial 	experience 	in 	analyzing 	the 	potential 	competitive 	consequences 	of
truckinc 	deregulation. 	While 	we 	have 	not 	done 	a specific empirical study 	on
trucking deregulation in Ohio, we are familiar with the literature examining the
experience nationally and 	in other states. 	The weight of that 	literature favors
what 	we 	believe will 	be the 	impact of House Bill 658.
! ,
I. 	ARGUMENTS ADVANCED I?' SUPPORT OF CONTI~VED REGULATION.
Trucking 	regulation 	originally 	was 	intended 	to 	help protect 	the 	regula~ed
railroads 	from 	competition 	from 	the 	then-unregulated 	and 	expanding 	trucklng
industry. 	It 	also 	was 	designed, 	in 	part, 	to 	support 	the 	trucking 	in~ustry by
restrictIng 	compe.titioD 	dUrIng 	the· depression 	of 	the 	193O's.s 	We 	belleve 	that
neither r::J.tionafe has any valIdity now.
2 	See 15 V.S.c. S 41 tl seq.
3 	See 	Comments 	of 	the 	Federa! 	Trade 	Commission 	on 	Pricing 	Practice~ of
Motor 	Common 	Carriers of 	Property Since 	the 	Motor 	Carrier 	Act of 1980, Ex
Parte 	No. 	Mc-l66, 	Before 	the 	Interstate 	Commerce 	Commission 	(Jan. 	1983);
Supplementary Comments of the Bureaus of Competition. Consumer Protection
and Economics, Federal Trade Commission on the Exemp~ior. of Motor Cont:ac:
Carriers 	from 	Tariff 	Filing 	Requirements, 	Ex 	Parte 	No. 	Mc-165, 	Before 	the
Interstate 	Commerce Commission (1983); D. Breen, Bureau of Economics of the
Federal Trade Commission, Regulatof" 	Reform and 	the TrucbD~ Indu:'!!;:: 	An
Evaluation 	of 	the 	Motor 	Carrier 	her 	of 	1980, 	Submined 	to 	Motor 	....... arrier
Rat~making Sway Commission (Moren 1982).
4 	See 	Comments 	of 	the 	Federal 	Trade 	Commission 	S .. af[ 	to 	California 	Sen.
Rebecca 	Morgan, 	on 	legislation 	to 	repeal 	the 	Public 	Utilities 	Commission's
authori~' to set contract car.rier 	motor 	frei~ht rati?s (pee. 31, ~98i~ 	C<:>rn mer: ts
of the redcraI T:-ade Commls~:on Staff 	to tne Legls1atlve Auda CounCil of tne
State of South 	Carolina on 	Possible Restrictive 	or 	AnticoffiPetitive 	Practices ir:
South 	Carolina's 	Public 	Service 	Commission 	S .. atutes 	(Sept. '29, 	19S7~ Statement
of 	the 	Staff 	of 	the 	Federal 	Trade 	Commission 	on 	Sconomic 	DeregulatIon 	0:
Trucking 	to 	House 	and 	Senate 	T:-ar.spor:2.:ion 	Committees, 	V\:?shington 	Stf.te
Lefis~ature (March 7, 1985).
5 	!'ielson, 	'r'b~ Ch(u;~jn~ ;:: ::OTl01T1;C 	C::::;;~ fo; 	Surf3c~ T~8nSD87't Re1:V 12 tjo~., In
Perspe.ctive£ on 	Federa1 	i'ransponatior. 	Poiicy (J2mes C 	Miller Ill, ed. 19:5>

~: 	0~:· 	~·':~'f· j~'~,~'~ 	~.:')~.~' 	\,.I ~ •.: 	~~:~'T"'~~ ::-:"~.::~ .;:.:' 	~ 	T_~~t':: 	r"'1.)!.:1:- 	C'~·~r:~·~f
;~ru~".~IUt L~..... ~;:~ r.:-·\·;.~,:'~ 	~:.:~'~ ::1,.1,:'- ~::F,-r:;~~;~~·· 	~:~\~L:,~.r r~:{·~'·1()7\ ~);l~··:·f
L:'JresthlllnF, oe~tructlV(; C()mj>~'l'lOr:. <lnQ P.JhlIlU;'lfllrlf-. 5 .. it:'~' 	A~ CJ~"u..,~C;G t>l!C, .....
however, 	a 	Dumber 	of 	emplricaJ 	studle~ have 	concluded 	that 	none 	of 	Ihe~t
rationales supports 	the 	contention 	that 	continued 	regulation 	of 	contract 	motor
carriers is eithcr 	necessary 	or desir&blt.'
A. 	Predatory Pracing.
I ,
A 	primary 	argument 	advanced 	in 	support 	of 	continued 	regulation 	is 	the
prevention 	of 	predatOry 	pricing. 	The 	frinclp<il 	thrust of 	this argument 	is that
larger. 	better 	financed 	companies 	wil 	attempt 	to 	drive 	out 	compe.titors 	by
selling 	trucking 	services 	below cost. 	The surviving 	firms 	will 	then 	raise 	their
prices 	above 	the 	compctitive 	level, 	eventually 	recouping 	their 	losses 	and
Increasing 	their 	profits.
One 	condition 	necessarv 	for 	successful 	predator\' 	pricing 	is 	high 	entry
barriers. 	High 	entry 	barriers 	prevent 	2 	return 	of 	competitors 	when 	the
predatory 	firm 	raises 	prices 	<lbove 	the 	competitive, 	level 	to 	recoup 	its 	losses.
We 	believe 	that 	this 	condition 	does 	not 	exist 	in 	the 	trucking 	indust;"y 	today.8
Currently, 	there 	are 	no 	significant 	regulatory 	barriers 	to 	entry_ 	In 	addition,
because 	truck~ 	are 	highly 	mobile 	and 	can 	be 	transf.erred 	quickly 	t~ 	n~w
markets, 	phySIcal 	entry 	barriers 	are 	low. 	If 	the 	predator 	tned 	to 	raIse 	lIS
prices 	to 	noncompetitive 	levcis, 	other 	fir!!:: 	should 	enter 	or 	re-enter 	the
market, 	taking 	business 	away 	from 	the 	prcd210r 	and 	lorcing 	prices 	back 	to
competitive 	levels. 	Because 	predation 	is unlikely 	to 	be 	profitable, carriers are
not 1ikely to ettempt 	i~.
6 	Contract 	motor 	carriers 	are 	trucking 	firms 	that 	operate 	under 	contract 	to
specific 	shippers. 	Contrac:s 	can 	be 	shon 	term 	(single 	trip 	up 	to 	30 	days) 	or
long term (30 days to 12 months). 	Ea:h 	contract is nel!otiated, after which 	the
rates are 	published. 	-
': 	7hese 	2.r1!L:rrler:~!: neve 	b~t:-. discussed 	~rlc d:s:r::ssec 	i~ c: 	number 	0: sLucles.
Sa 	generalt"y 	~'einsteir, 	&. 	G:OS&. 	T;-?T'\fDQ;-:G~i:); e;.,C 	=,~orJo""":i;- 	D~v>.10r"'er.::
T.r 	~!" fo!" ~>for""" 	~ ;~~c.f:jr(" 	-." 	uj'atio, iT. -;- 	)·c.5 Center fa: £nte;-p::-lslDg,
Southern Methodist Un;versi:y (Feb. 19R7): :J. B:-eeL, supra note 3.
f 	2. 	C. 	h~il}er 	:II, 	;:..;0nGr:1i2 	Fe-[uJ<:tior. 	OF 	T-\Jcb!1~. 	!!"; 	Report 	of 	the
=.cono:r.i: 	Adviso:-\' ?z.:1el 	:c :ht 	>~2tjOr:2J Ccr;;:T,;S~iaD fa;- 	:~e Review of f~!1:i·
-:-;-~st Laws and 	Procedurcs (?'io\'. 9, 1978).
- - . . -;--	
1'_ • _ '

t"''''''''''''r''j\ 	,p.-,... 	"';, .... ,..."t.: 	t .. f- '\'r"~f 	,-,,-( ·'t 	-,. 	F-"o. 	't 	~r~t"(l.'.6o! ,-C)rrr.-"r ,..	r, ... ~... I. " 	., h 	",.) ....... , 	.• '•• l... . .... t 	~,., I. 	,I., • l;. '" 	.. l t 	,,, 	" .• L" 	~ 	I ..... , 	..
.-n ..... "'!'·"'J'j .. 	, 	\1,-"('" 	'-<"l~' 	r··,. .... ··l·' .. r 	(,'l('\ 	r'nT"I"!"Cr 	·r~· 	..	'_ 	•••• ~. ....... .~ ... , 	1 " 	• I,,'. . • 	... I- •. .... 	. . 4:. •• j. 1 ~.' •. , 	.. I. J 	,,-. ...' ., ..' J I 	C \ " 	•• , \
: ~~. :. (. : " :":1 ~ r~! 	(..l:' 	.: '-,! ~ 1 ~ ~ 	j 1. 	::-!:-, .. I ;..J ~ ; !, F 	. ..... 	r' ~ t' 	;. ~ J (J r. 	l.l 	U 1: ; ~ ;. C " 	~ t J 	l t:' r 'v ~ C ~ l
.) .. ~ "-uDor-c 	,~ .. 	, 	,.'1-[ 	.,,.-··fC-" 	'h", .. ~ '. 	t".·,·'lr.\ •. ; 	. 	""7". I'f'-, 1(' 	"tt 	t"pI"'rr"	, ...... ::-.'": 	",I~ 	v, 	•. " 	f., . ....... ,~t- ... ... l ••. 	~ •• 	,',\-,or"hllS- 	\ 	,=,1.1 ... , 	,.I 	...h .. 	",IlL
Court 	stated 	that 	"precatory 	PrJcinf 	~chcmes are 	rareiy 	tried, 	and 	even 	mOTe
rarely 	successful."ll 	In 	any 	event, 	firms 	that 	attempt 	to 	engage 	in 	predatory
pricing 	also 	would 	be 	subject 	to 	public 	cnd 	priv&te 	antItrust 	enforcement
actlons,
Proponents of regUlation have argued that settinfI up an extensive terminal
network, as 	required 	In 	the 	less-than-truckload (L TL) segment 	of 	the 	industry,
is a barrier 	to entry that 	raises the attractiveness 	of predation. 	An 	ITC staff
study 	of 	the 	impact 	of 	the 	Federal 	Motor 	Carrier 	Act 	of 	1980, 	however".
indicates that competition 	along routes increased 	with 	deregulation 	as scores of'"
efficient 	L TL 	competitors expanded 	route 	networks. 	Examining 248 	city-pairs,
the 	study 	found 	that 	"the 	number 	of competitors 	per 	route 	increased 	between
1979 	and 	1981 	for 	179 	of 	the 	248 	major 	routes" 	despite 	the 	absence 	of
significant de novo entry 	into L TL trucking. 12
9 	United 	States 	General 	Accounting 	Office, 	T;uc};;jn~ 	Rej;:ulsrion: 	Price
Carope-tiljn!! 	2nd 	l\1ad:;ft 	Stru::ture 	if: 	the 	T;uckin~ Inciust!"\', 	8-10 	(Feb, 	19&7).
The positions of 	the ICC, MCRSC, ",no DOl 	are 	dis::ussed 	in ~he GAO :-eport.
10 	105 S. Ct. 1348 (l986),
11 	Ie. 	at 	1357·58, 	citing 	R. 	Bark, 	The 	Antitrust 	Paradox, 	149-56 	(l97E~
Areeda & Turner, Pred2~o;\' P!'icin~ 2nd 	Re.)2ted 	Pr?ctice~ UT1der S:ctiOD 2 of
tne 	SherID2D 	Ac:, 	88 	Harv. 	L. 	Re\'. 	697, 	699 	(1975): 	.easterbrook, 	predatorv
<"'~',r~('>',,,,c: I)~;; rn\lT"\r"''''C::~-~·'''O"J·''c 4>: r- 	Ch; 	-:- 	-;; .. " 	Jh'=.. 	'),;.~ ( 10 8"" 	Koller 	,D"	b) (..'b. X' 	k· ..... 	'>" 	~. »,' ') 'kt>- •• >Y. 	-' 	"-'. 	• •. 	- 	............. 	_v ...... _V.....J '.- .... --r 	.. 	~ ~
''\i v ''''' 	",(" ~T"pn"""'!'"" 	P .... l,..~!i~ _ 	.t. ~ :::""'!"".~~-i,....,:~ 	~!"I";\' 	:. 	A n·i""!""'l'S· 	r 	l: =~Q~- 	f\.e,\'	e_ 	b'·'. 	,>-,_(.)"J 	'x't. 	.. _ 	. Xx 	b')lri'+;. 	.. .. l ..... ~ .. "- ... Ja,..I. 	...-- ...... 	•
10~ (1C"'~\· \1.~'~"'e 	I;.~P·;-'C-\' -::'~l~oC rt.;~~'nr· 	.~.c. 	C.-and-~d 	(j:1 	('1<..·7·) 	r:2SC 	1 	J.
t-i-E;~n.· j{(19sS~ Y~~'~c;C~, -P:-;.d8~');-~~"F~j~:f'~io~~;\:i;it:¢, :3 J. L. '& ~.80r.~ 289,
292-94 (1980).
\Vo:-bnr
~'- - :: _:-; .;. ,:;.. - -
- --

J'10pOllnjl~ o! 	lIUCk.1Ilf It"fUl<.JilUr. <:'I:>U ~!fut ~t;(:; CH.::quJ"tJ(IL .... di 1(.<1(. t:.
"destructlve 	competition." 	Destructive 	competition 	mBy 	occur 	in 	industries
characterized 	by 	declinin~ demand, 	sunk 	costs, 	and 	a 	high 	ratio 	of 	fixed 	to
total. 	costs. 	These 	conditions 	are 	likely 	to 	create 	excess 	capacity 	end
co~slderable pressure 	to 	cut 	prices. 	If 	price 	competition 	occurs, 	however.
pnces 	may 	persist 	below 	the 	total 	cost 	of 	providing services 	because 	the sunk
nature 	of 	costs 	makes 	exit 	difficult 	Firms 	facing 	chronic 	losses 	may, 	as 	a
result, 	try 	to 	reduce 	costs 	by 	skimping 	on 	service, 	to 	the· detriment 	of
customers,
Conditions conducive 	for 	destructive competitIOn are 	not 	likely to exist in (.
the 	Ohio 	trucking 	industry. 	Fixed 	costs 	comprise only 	a small 	percentage of
total 	COSTS, 	which 	include 	such 	variable 	cost!; 	as 	labor 	and 	fuel 	expenses.
Trucks also are highly mobile assets which may readil\' and c<lsilv be transferred
from 	less 	profit<lble 	to 	more 	profitable 	markets 	in 	response 	to" fluctuations 	in
demand, 	or 	sold 	or 	leased 	to 	other 	operators. 	There.ore, 	it 	is 	unlikely 	that
destructive competition of this sort win occurP
C. 	Snfet~'.
Another 	argument 	that 	has 	bccn advan(:ed 	ajZainst 	deregulation 	is 	that 	it
will 	have 	an 	adverse eriec: 	on safety in the 	trud:lr:.g industry. because c2.rricrs
facing stiff competition will neglect maintenance, deia)' replacement of vchicles,
and 	overwork 	drivers. 	v,'e. 	believe 	that 	reduced 	safetv 	is 	DOt 	a 	necessary
conseauence of economic deregulation. 	In 	fact, 2. 	recent· stud\' 	of 	truck 	safety
in 	Ca.lifornia, 	conducted 	jointjv 	by 	tht 	CaiiforniG 	Fubli::: 	Utilities 	Commissio:J.
ond 	the 	C<llifornia 	Highway 	Patrol 	was 	"unable 	to 	prove 	the 	hypothesis 	that
CPUC economic 	regulation of trucking is significantly and 	positively 	hnke:: to
improved highw~y safety."l<
11 	See 	..;.. 	K(.!:r~ 	:::, 	• 	E;~r0mi;: 	n" 	Re~1;la:jQ;~, 	:78 	(29~:) 	.~ 	vl'r~i:r~ 	:ne
"::~."'o~ ~t~~_.. s, 	'~I·r')O ....",~ 	t",.,,_~L-l·n" 	n' ~,.~. ~'ne 	~~OPloml'c ~"·~;hut"'~ ....,~ -r, 	;no·"5 .... \'	Q_ • .J. 	_,_, 	J-';" 	... "" 	e 	_v_~, 	...... J 	,I 	C.""l 	_.:> 	v. 	a ........ ' •.
sub.ieet 	te 	destructive 	competition? 	It 	would 	be 	difficult 	to 	find 	one 	less
qua:ifiec.'
l' 	C<:li~o:-r:~<, P:Jbl)c T.)~iii:ic~. (:oZ":"l:!:issior: &. '::~d::o:--r:ic:. ;-:i~h~'2\' ?z.:rol . .t... E
FinrJ 	Repo:-: or; 	Trud: Safety, Join: 	L.q;isl~:ive Repo:-~, :~. (!"o\'.19S7).
~
- - - 	___ '_ 7""'-:-"_' 	. -- ---	-'- - . - _.=. 	• ~ ".J'; . -= :', ~ - - 	-
- --

, ~ .. t 	;f"' r ;~',; c. : ,,: j ~ r. u;.. 	c 	•~ •. : n. c. ~ : 	;~. : t' ; ~ ~. '. 	.1. 	~ <: ':;-; :':" .i j ; . r 	~. CI : t' ~ .' 	{ ) L 	~.~ ) :. I ~ :
:.j~':\4'.\'~ 	,-~,\...~,,,':.'~ 	:~.::;~: 	::.c:. 	~:,~~·~·::;!t 	:" 	~.;~, 	:.;.'c.'., 	"I~., : ...... > ::·:·· ... ·1;
~()/d~)~~~ 	;~;~:~~~.~;' l~ 1I~or·1Sj~~~~):~· ~·~tr: ~~ ~~h6SS~: t~':bi~h,u~a~~~'~:~;: t~'~ ~; .•~~\~~
carriers 	demonstrate 	a 	familiaTlIV 	with 	the 	Utilities 	Commission's safety 	rules)
and 	th&t 	those carriers provide fInancial stCi.tements showing that 	they have the
financial 	cBpahilit~, to mClintoin safe 	equipment.
II. 	BENEFITS OF DEREGULATION.
Evidence 	of 	the 	benefits 	to 	consumers 	Clno 	competltion 	produced 	by
trucking 	deregulation 	can 	be 	gleaned 	from 	the 	experiences 	of 	other 	states.
California. 	for 	cX::lmple. 	expcnmented 	with 	partial 	economic 	deregulation 	of
trucking 	from 	1980 	to 	1986. 	During 	that 	time 	entry 	was 	virtually 	free, 	and
rates. 	though 	regulated, 	were 	flexib1c.1.5 	The 	result 	was 	lower 	rates 	with 	no
loss in service. 16
Experiences 	of 	o::lcr 	states 	also 	attest 	to 	the 	economic 	benefits 	of
intrastate 	trucking 	deregulation. 	A 	study 	of 	trucking 	in 	J:'lew 	Jersey, 	f~~
example, 	concluded 	that 	deregulation 	has 	worked 	well 	lD 	that 	state"')
According 	to 	a 	study 	by 	·W. Bruce 	Allen, 	shippers 	were 	satisfied 	with 	the
available service. rates were about ten percent lower than they would have been
UDder regulation, and intrastate carriers h~ve prospcrcd. 18
pe:ioc,
V.'c.i ::Uf.
wai:ing
""'3$ 	no
l:: 	C2.rrie:-~ 	were 	Dermitted 	to 	cr.znge 	:-c.!.es: 	Ef:e: 	2. 	short
without 	hc .... ing 	to' show 	th~ ~h2~ge \l'<?~ cost-jusri:leG..
pe:iod 	to 	match 	a competito:-'s r~:e.
16 	M. 	Simme:-sou) 	"Analysis 	of 	The 	Impe:::: 	of 	Dere£"ula ~ior: 	of 	the 	General
Freilrhr 	Trucking 	Industry," 	Investit:ation 	~c. 	SLQ:,-04S, 	C2.lifornic 	Public
Utilri.ieE 	Comrnissior.. 20-~: (\uf. 10, ~9~) (b~sed 	UDO~ 	st.::-vey 	b:' 	Cpr...;C of :39
p n ~ -,.., , 	:. - 	. . ~ ,.... ') __ . D _ 	,.. 'P-. r 	...., (:\ \. 	\' 	r " i ~ ; f""! ... 't""\ : r # r .. ", t tL 	1 -:- T"" ~ \r,o - S ~ ... , 	:-- r- " I y...'''' - rf-';"J,~ .... Gl 	t ... CJt , ... 	"",,",.~1_ ... $ .,:u\..:, 	SL..\;:.~ 	<# 	'-c..J..1J....,.~.Ic.,.._~ ... '-.l.':. 	_,l. • ..:'\~ .... ~ ... "- ..\~ 	~~c: ..~ 	c;:._,-~
' .... <::~'T'lltC. Of "n "'S"''''''''r. 	!'. 	-"'C·.., 	S~ I 1.e-'·"'C?mPn~ 0- , 	~ '~l",np-c i	.~._ 	_~. 	!. ~_ 	«. 	#' u.- ~~ 	_ 	-.; ...,_~ s 	.. """ 	~ •. Jl 1~.!'-#-''''''~.
17 	'W. 	Bruce 	Allen, 	S. 	Lonergan & 	D. 	Plane, EX2,min2tiQi' 	Q: 	:he- 	lJnref'ul<~ted
7~\l,..t·i"C' -'::-vDor,'ou"p 	; .... 	",'pv,' j/·~So,· V, <:; 	DA.p. 	0: T~~nspor~"·l·on iju·"" 1 979)..	}'.. •• 	H .....'. y' x 	y> 	4 	> 	y.. > ..... 	._. 	..... \.~ .. 	... .. _ 	4..0... 	\ 	#. 	...
If. 	\\!. B:-uce P:..J)Cfl, ;:~2t?7~~: :;efo."~ :h~ 't\T2~1~P4c~ (:o!::mi~~jo;;, f0: 	:h~ ?~,.~~v.!
r.f 	L r:;; .. Tr~ls~ 	T 2\1.'5 £~(. ~r()~.~ct;~:<' fjGrl~Gr: 	::. ~~·'77).
. '-,":"- -:--:--
~'- -" -'--= - 	.. - -	":' .to;::-
. - 	---

'--L.. 	.. _ ._.~
...
. i~ L ....... { i - 	. ., - ( .
TJ::": 	:);':·'\.\~~L:~~·.·· 	-. 	~~~~~.;:~ 	."'\~::'~,:::~, 	(.~=·~·.-·\·::'t -.f 	'~I~ 	"~I..\.\, ( 	\':'i'
after 	dcregulbtlOn 'Db 'rc:r~er;t 	uf 	shIppen, 	(:II, 	,,"ciJ 	,11, 	il 	W;P;l!::L~). r.·~i. ~:,
percent 	of 	trucken., 	~upportcd it. 	Most 	!>hlppers 	thout;ht 	~h8.t 	se.rvlce 	levels
remained 	constant and 	that ratc 	fluctulltiom had 	posed 	no dIffIcultIes. 	Only 8
few shippers convened 	to prjvat~. carriage; many more suer: shipper conversions
mi~ht have 	been 	expected 	if 	"destructive 	competition" 	had 	resulted 	in 	b 	laq:c
reauction 	in 	the 	number 	of 	truckcrs. 19 	Like.wil>c, 	a 	later 	Department 	of
Transportation stud y20 found 	that 	90 percent of 	Florida 	shippers 	believed 	that
post-deregulation 	service 	was 	at 	least 	as 	good 	as 	service 	before 	deregulation,
and 	30 	percent 	reponed 	improvement!>. 	A 	majority 	of 	these 	shippers 	(58
percent) 	perccived 	that 	deregulation 	had 	held 	down 	rnteli. 	Finally, economists J
Blair, 	J(ascrman, 	and 	McClave 	found 	that 	Florida.'s 	deregulation 	of 	intrastate:'
trucking led to a 15 percent BverClge reduction 	in 	motor carrier ratcs. 21
The 	cxp~rjencc uf 	other 	stales 	is consistent 	with 	that 	of 	California, New
Jersey 	and 	Florida. 	For 	example. 	in 	Wisconsin, 	6i 	percent 	of 	shippers 	were
satisficd 	with 	deregulation, 	and 	only 	six 	percent 	were 	dissatisfied. 	Seventy-
three 	percent 	said 	that 	rate: 	information 	was 	as 	readily 	available 	after
deregulation 	as 	before. 	Carriers 	were 	eveni)' 	divided 	on 	the 	question 	of
deregulation. 	Those 	with 	increased 	profits 	tended to favor 	deregulation, while
some of those opposinp: deregulation 	were concerned about the loss of the. asset
value of 	their certificates of convenience and necessity.2~
I
In 	Maryland, 	intrastate 	household 	goods 	movers 	were 	not 	regulated. 	A
study 	conducted 	in 	that 	state 	in 	19i3-i4 	revcaled 	that 	the 	formeriy 	reguiated
interstate 	hou~ehold gooos cEirriers cbarred :'7 per~~.nt 	to 67 percen: 	mo;-e ~har:
unrc~ulated intrastate carriers ror comparable moves.;;;:;
1~ 	Freeman, 	A. 	S\.1;Ve V 	0: 	h.'JOiQf 	Cf:Trje~ D>r;~uiatiop. in 	FJo;-io2: 	nne 	Ye?r's
EC:Pt;jfTl:::~. ICC P~actitio.:Je:-s Journcl. 51 	C'o\'.-Dec. 1.9S2).
Ui 	State.men:
International
Subcommittee
(June 20, 1984).
of 	M:hanew 	v. 	Scoco:.::.:t:'., 	.L..ssis:c..n: 	Se~r::Gr\' 	fo:- 	?olIcy 	and
Affairs, 	U.S. 	Department 	of 	Transportation. 	Befo~e 	the
on 	Surface 	Transportation. 	C.S. 	House 	of 	Representa:ivcl>
z: 	\Visconsin 	Office 	o~ 	~he 	Commit'sioner 	of 	l"ransponc:tion, 	.L)erq:u;2:i?7"' 	~
"~;::$cQnsin Moto;- 	Ca";-ie.~~ (.T ulv 	19£3). 	Thcre 	1':12 ;', 'however, 	be 	othei 	c2pital
losses. 	-
:: 	31<..::-. 	f'::asc~~lozr; 	& 	1\1':<:12ve~ 	~\~070~ 	C2--;~"" 	D?-er\~l?:-ior;:
S'~'j')~~:T:1e~:. 6f~ F~e.\'. E~8;:.. &. S:e:.. l5S :)95-5>

... -. ~. ~. .. ~ :~.::- .~. 	:. ~ ... ~' ;... r . I ~ ~ .•• ~ T 	.', ~ "'~: or. ~. ~11' \ r r i ~. ; ~ . ~, : C) :.:'
~::--~~::i. _,.:" 	'.~.:: (.,':.'r. 	v.'~'-~ :).:: '~J~:' .: 	'.v.~ 	't"lt.~t~{ 	r~·\·~_\·~ r\~ 	'.:~ ~ ~~.~~ r~ 0','
Rc:se;;rcb 	0il1ce 	0:' 	tbe 	U!t"guL 	Lq,:n,JGlurt,J' 	hi] 	IH.JiI~~ ~Uj,,('yt'c G~:t.ec i;,c.;
deregulation increased 	the 	numoer of carrier!> in the rn8r~ct. 	~ccorciJng t.o one
survey. 	almost 	all 	shippers 	and 	most 	of 	the 	truckeff> 	wlth 	prlOr 	authonty 	10
carn 	these. 	products 	believed 	that 	trucking 	rates 	had 	decrcascd, 	None 	of 	the
groups 	surveyed 	believed 	that 	general 	rete 	levels 	had 	increased 	as 	a result 	of
dcrcgula tion.
Consumer 	benefits 	of 	the 	type 	associated 	with 	derefulation 	at 	the 	state
level 	have 	also 	been 	realized 	at 	the 	national 	levcl. 	Under 	partial 	federal
deregulation, 	the 	Dumber 	of 	grants 	of 	operating 	authority 	to 	carrien.
quadrupled, 	irnpJving 	that 	entry 	into 	the 	trucking 	husiness 	has 	heen 	greatly
eased. 25 	There 	81S0 	has 	been 	an 	increase at 	the 	national 	lcvcl 	in 	the 	numher
of 	independent 	:cte 	changes, 	with 	the 	vast 	numher 	of 	observed 	change~' being
rate 	decreases.2b 	Between 	19ii 	and 	1982, 	inter~:ate 	truckload 	rates 	fell 	about
25 percent and LTL rates fell about l~ percent. 	These declines occurred during
8 	period 	of 	rising 	fuel 	costs 	and 	before 	the 	recessions 	of 	1979-80 	and
1980-81. 2' 	A 	recent 	federal 	study 	likewise 	found 	that 	regul21ed 	rates 	are
higher than competitive 	rlites for 	general freight 	trucl:ing. 2B
').1. 	Un~ubijshed 	su!,vt".\'S 	conduc:ted 	by 	the 	Oregon 	St2te 	Legislature's
Legislitive Research O[fic:e (1%4).
The 	~e·cDrd 	SCI 	Fa;, 	Rerulatior., 	39
C.:);r"_:TI :55: ~L.
2.S 	Office of 	Policy 	and 	Analysi~, Interstate Commerce Commission, The Effect
of 	Regula ro:-y 	Reform 	on 	the 	Tru~bD.& Industry: 	Structure, 	Conduct. 	enG
Performcn:~ (June. 1981). 	See also Stztement of 	Rec:s('. H. ':"2.\'10:- .•::-_ ChE.i:-:r.en	" 	, 	.. 	.
of 	lnters:o.i:c 	Comrnei-ce 	COffiITllSSlOI:, 	B~:ore 	-ehe 	Sur~ace 	• i2.D.s,:\onG.::20I:
Sub:::ommi:;:ee 0: the House Corurnli:;:c:e' or, Pl;hiic \;'o:-1:s and Tra::,sP0rIz:ior, on
Implementation of the Motor Cz.rrier Act of 1980 (No\', 7. 1985). 	.
26 	Statement 	of 	Reese 	H. 	Taylor, 	Jr~ 	Chairma.n 	of 	Intentate 	Commerce
Commission, 	Before 	the 	Senate 	Committee 	on 	Commerce, 	Sc-ience, 	and
7:aI:~D0:-:2~ior: {S~~:)~. ::, 	~9S3'~. 	St! 	a.lS(; 	S:c~: 	ReDo:-:~ 	In:er~:c..te 	CD~::l~:"':e
Co~:riissi8:".. 	:-::;:hr~~!"'~~' n: 	~:::'\'::\' ::-: 	:~;~' 	?~:1~f-;'\' 	t~1():o~ 	Cc.~:-j~·:- 	.~.";~.:~"\'
(l\~Grcr~ 19S5~

· .	,f"'"10~O:-b:";:
_~,,:-)~ ;'r"."\ 	r.... \··~ 	(.~·~r 	.c' 	c:·:\~·".: 	:~~~~~ 	,,(·.:·r~ 	.~;: 	.,
:::)~~)~:';I'I:•. ,_ 	: '"I!,:,"' 	';", 	... 	: 	~" . • :t~,·:-;~~ 	i·~ 	.;,.~.\ 	:(' 	l)~ 	~·l.~.~::. 	b: 	\4.~ ••
!,:·.C;ZJlG:~.r :C L;.t 	L~:IIO:::). :'1);i'PtI~ ....... ho liblppt:d 	small 	quan\ltle!> 	w::rl' 	forced
eIther 	to pay 	exorbitant 	rates 	or 	to seek 	alternatives 	to the 	regulated 	carriers
prior 	to 	oereguletion.2~ 	With 	the 	advent 	of 	deregulation, 	shippers 	no 	longer
must 	avoid 	the 	inefficiencies 	of 	regulate.d 	trucking 	by 	building 	up 	shipping
inventoriefi and 	raw 	materials, or by Investing in their own trucks to assure· the
service 	the~ 	require. 	The 	need 	for 	under-utilized 	private 	trucking 	fleets 	or
expensive 	lDventory 	buildups 	i" 	reduced 	when 	truckers 	can 	offer 	innovative
responses 	to shippers' service needs.. 	.
{ .'
III. 	CONCLUSION.
A 	significlmt 	body 	of evidence suggests 	thet 	dercguhnion 	lowers trucking
rates 	and 	improves 	service. 	\Ve 	believe 	that 	HE 658 	is 	an 	important 	step 	in
moving to a more competitive motor carrier inaustr\' in 	Ohio. 	It 	will 	result 	in
significant benefits for consumers and comp~tition. Contract trucking firms will
be 	f:-ee 	to 	odd 	needed 	service 	and 	to 	compete 	on 	rates 	without 	waiting 	long
periods of time for Utilities Commission approval. 	Thi~ freedom should improve
the 	competitiveness 	of 	Ohio's 	manufacturmg 	community 	and 	result 	in 	lower
shipping 	rates.
We appreciate this opportunity tc present our views. \Ve. would be hzT'PY to
supp}" coP, ie!; of the S~UC1es :-ef c:-:-e.d tC in 	this 	ieacr.	•• 	.I