Nader's Raiders Strike Again

Regulatory bodies, like the people who comprise them, have a marked life cycle. In youth, they are vigorous, aggressive, evangelistic and even intolerant. Later they mellow, and in old age--after a matter of ten or 15 years--they become, with some exceptions, either an arm of the industry they are regulating or senile.

--John Kenneth Galbraith

Critics of the Interstate Commerce Commission have long argued that it manages to be captive and senile at the same time. Last year seven law students, directed by Consumer Advocate Ralph Nader, delved deep into the ICC's record and conducted more than 500 interviews, mail surveys and statistical analyses. Last week they issued a 1,200-page draft report, devastating in detail, which argues persuasively that the public good would best be served if the ICC were abolished altogether.

The essence of their report, hardly news to official Washington, is that the 83-year-old ICC does not exactly regulate the 17,000 railway, trucking, shipping and pipeline companies under its jurisdiction. Rather, it operates a cartel on their behalf. According to the report, the commission in effect presides over thousands of local transport monopolies, protecting inefficient carriers from competition at the expense of the public. It permits massive discrimination in rates, a practice that it was expressly set up to forbid. Where railways have no water-borne competition they have charged shippers five times as much, computed on a cents per ton-mile basis, as they charged in areas where they had to compete. That sort of practice, the report argues, has caused consumers to pay an incalculable amount in excess charges and has led to severe distortions in the economy. In addition, carriers charge more per pound for high-value, mostly finished items than for bulk cargo. The pricing structure tends to make it more economical for manufacturers to locate their plants close to their markets instead of near their sources of raw materials--with a resulting contribution to urban congestion and pollution.

Meccas of Transportation. The students documented a close relationship between the ICC commissioners and the industries they regulate. Industry groups paid for luncheons and hotel rooms for commissioners who frequently found it necessary to examine personally such "surface transportation meccas as Hawaii, Puerto Rico and the Bahamas." The report says that an industry group even once paid for a hairdresser for Virginia Mae Brown, who chaired the commission until Dec. 31. Mrs. Brown, who last summer announced that members of the commission could not accept any money from regulated industries, says that "to the best of my knowledge it is not true" that she got free beauty treatment. The report adds that eleven out of twelve commissioners in the past dozen years accepted high posts with industry after they left, or appeared as lawyers arguing cases before the ICC.

The commission, said Nader's investigators, never cracked down on moving companies for the common practice of "bumping" the weight of goods--for example, by putting two loads on the same van, and charging twice for the combined weight, or adding up to 600 Ibs. by filling the gas tank just before the loaded van was weighed. The report cites the estimate of a former manager of a moving company that at least half of the people who moved in 1969 were overcharged. Similarly, the commission disregarded travelers' interests by "presiding over the funeral" of the passenger train. When three Southwestern states protested the downgrading of service on the Southern Pacific's Sunset Limited, the commission mulled over the question for 41 months, then decided, against the judgment of most outside experts, that it had no power to do anything.

Don't Panic. The report recommends the abolition of the ICC, as well as the Civil Aeronautics Board and the Federal Maritime Commission, so that all three can be replaced by a single agency. Such an agency would be able to set a coherent national transportation policy, relying less on regulation and more on the free market to set rates. It would sharpen competition among companies in all forms of transport.

What will happen to the report? The students presented their findings to a Senate subcommittee last week, and the Senators invited the ICC to reply. Said an ICC spokesman: "I think I'd say, don't panic. If it just dies down, forget it." The last time that Nader's Raiders documented the failings of a regulatory agency, the Federal Trade Commission, their report led to a study by the American Bar Association, which essentially backed their findings, but recommended that the FTC be given another chance. The FTC has indeed been improved since then. At the least, the students have provided an inexhaustible supply of tinder for any politician who wants to light a match under the ICC.

Ralph Nader's power to sway--and shake--Government and corporate institutions was demonstrated again last week. In February, he and some associates made nine proposals to General Motors--on desegregation, pollution and auto safety--and asked that shareholders be allowed to vote on them. G.M. refused. Last week the Securities and Exchange Commission ordered the company to include two of the proposals in its 1970 proxy statement, to be voted on by shareholders. One would enlarge the G.M. board of directors from 24 to 27, bringing in three consumer representatives. The other would set up a committee for corporate responsibility, funded by G.M., to press consumer interests. No doubt the proposals will be defeated. Even so, the SEC ruling set a precedent, opening a way for shareholders of other corporations to have a say on consumer issues.

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