Similarly, this federal regulation of railroads authorized implementation details for Conrail, the new northeastern railroad system. Rails could establish rates except where the ICC determined there was no competition. Railroads could also create contracts without ICC oversight. This similarly flooded the rail market with too much competition to be effective.
After the popular Penn Central Transportation Company filed for bankruptcy, alongside other railroads, this reform established mass deregulation to provide funding to failing transportation industries. It was the first deregulation law in America for transportation followed shortly by more specific deregulations for airlines (Airline Deregulation Act of 1978) railroads (Staggers Rail Act of 1980) and all truckers (Motor Carrier Act of 1980).
Jurisdiction: Inside the Reed-Bullwinkle Act of 1948
The Reed-Bulwinkle Act of 1948 set a new standard in low and egregious behavior. The Motor Carrier Act of 1935 certainly achieved its goal of suppressing the trucking industry while at the same time ensuring that the railroads could thrive. One major failure of the Act was that it forced trucking companies to breach the Sherman Antitrust Act of 1890, and so rather than repealing the Act and risk never passing a new effectively restrictive act, they simply sought to indemnify trucking companies from going to jail and placing additional controls over the trucking industry and its success or failure in the hands of the railroads.
In spite of the tumultuous history, and multiple attempts by the President to veto the bill, and testimonies in Congress against the act, it persevered.
President Truman vetoed the bill, nevertheless, in June of 1948 the Senate passed it 63 to 25, with four more votes than required. This wasn’t the first time the president vetoed the bill and the Senate overrode nor would it be the last. June 14th was a historical Day by Congressional standards which represented 3 vetoes in the span of four days which, resulted in the passing of the Reed-Bulwinkle Bill. Until that time there had never been so many vetoes overridden by the senate in such a short amount of time. House majority leader Rep. Charles A Halleck said that the president was simply “not in tune with the will of the people”, once more charging that support of the railroads and their rate-making process was in the interest and desire of the general public.
It was stated that the railroad Industries had specific carrier problems, like the problems of the trucking industry eating away at their profits by simply offering a more competitive shipping solution but these problems needed to be fixed by the government because a vital rail system was “in the interest of the nation’s economy”.
Approval of the Reed-Bulwinkle Act, vetoed by the then president but enacted by Congress in direct defiance to the president’s opposition, meant that railroads could adhere to any position taken by the Interstate Commerce Commission without fear of the courts challenging those decisions.
Part of this bill made adjustments to the taxes levied against railroad companies on payrolls for unemployment and sickness benefits. The bill would provide a reduction to the current taxes on wages and salaries for unemployment. It stood at 3% but the provision dropped it to two and a half percent as long as the railroads maintained a Surplus Reserve Fund of $450,000,000 or more. The provision noted that in the event this Reserve Fund should fall below that amount, the taxes levied would increase by 1% until that figure was met again. When passed, it was projected that the railroads wouldn’t have to face an increase in taxes for at least 7 years because of their Reserve Fund.
It was estimated that this would save the railroads nearly $100,000,000 while simultaneously reducing the amount of tax paid income circulating into the treasury and subsequently into the American economy. Such a move does not corroborate these sentiments that the rail system in its existing form was in the interest of the nation’s economy.
As part of the Motor Carrier Act of 1935, the government still offered subsidies or stipends under specific circumstances for the railroads. This was, once more, touted as an attempt to keep the railroad strong for the sake of the American economy. American railroads were given favorable legislation and a great deal of financial relief under the guise that it was the government’s job to prevent competitive capitalism from eating away at railroad profit margins.
The Interstate Commerce Commission continued to bully the government into further aid. On one occasion they levied threats against the government. J. Hayden Allredge, a member of that same committee, told Congress that the railroads were soon to lose passenger Revenue because they were approaching passenger Transportation charge limits and if they did so, the Interstate Commerce Commission would demand Federal subsidies to compensate for these losses. in a somewhat ominous tone he added that these are “ most serious problems… and one that ultimately may be serious Congress.”
Having sat before Congress in one form or another for several years, the recently passed Reed-Bulwinkle Act stopped the Saint Lawrence River Waterway project, another move advantageous to railroads. This proposed Waterway would have permitted ocean-going vessels to travel through the Great Lakes and in so doing take considerable traffic from railroads in the northeastern regions. It was argued that even though this Waterway would only be functional half of the year, icebound the other half, this introduction of part-time traffic would have offered lower rates than railroads, further interfering with their profits.
A provision in the Reed-Bulwinkle Trust Act enabled the Interstate Commerce Commission, and by extension the figureheads for many prominent railroads the freedom to hold railroad rate conference agreements and similar rate making agreements for the trucking industry. This was attacked as a “highly sinister lobby” by many.
With rates for trucks now firmly under their control the rail right industry continued its present practices. On January 10th 1949, William T. Faricy, president of the Association of American Railroads filed a petition for 337 railroads which in total represented 3/4 of all freight cars across the United States. The petition was submitted to the Interstate Commerce Commission for approval of interchanging freight cars. Interchanging freight cars allowed the monopolistic railroad companies to increase profits by changing cars from one company to another during transport in order to avoid higher costs, circuitous routes, or bringing cars to areas where they currently did not exist.
This request was yet another example of a provision provided for the railroad industry on Reed-Bulwinkle Act, otherwise considered illegal and a violation of anti-trust laws by many politicians and yet given an exemption.
The control given to the railroad industry and the Interstate Commerce Commission to set rates for all types of transport did not just impact the trucking industry although the trucking industry was its primary target. Railroads were also allowed to set rates for themselves, and in so doing set them higher than the rates any trucking company could charge for the same distance traveled or the same service. Groups like Southern Railroads would submit petitions to the Interstate Commerce Commission asking for approval of ratemaking for specific railroad companies like the Southern Freight Association, solidifying higher profit margins than comparable shipping methods.
The following month, over 150 Interstate bus companies, all members of the National Bus Traffic Association, submitted a plea to the government for their own ratemaking and operational control. The same petition was submitted to the Interstate Commerce Commission in 1948 under the Reed-Bulwinkle Act where it was vetoed.
Lawsuits were brought against the Reed-Bulwinkle Trust Act in 1950 by the government in short spurts, but they amounted to nothing. In one such claim, 47 railroads were the subject of a 6 year long antitrust lawsuit by the government. Federal District Judge John Elephant noted that it was not the “proper function” of railroads to control the rate making process. These suits, however, were fought diligently by the Interstate Commerce Commission and amounted to nothing.
Continued attempts at lawsuits fell on deaf ears. The interstate industry remained firmly under control of the railroads and the Interstate Commerce Commission thereafter. Things did not improve in 1980 with the subsequent passage of yet another Motor Carrier Act.