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This file contains material relating to the Domestic Council Review Group on Regulatory Reform and President Ford's meetings with regulatory commissioners.
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Regulatory Reform (5)
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Regulatory Reform (5)
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This file contains material relating to the Domestic Council Review Group on Regulatory Reform and President Ford's meetings with regulatory commissioners.
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James M. Cannon Files (Ford Administration)
James Cannon's Issues Files
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Aeronautics, Commercial
Antitrust law
Government regulation
Independent regulatory commissions
Intergovernmental relations
Legislation
Regulatory reform
Trucking
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1976
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1975
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The original documents are located in Box 29, folder "Regulatory Reform (5)" of the James
M. Cannon Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 29 of the James M. Cannon Files at the Gerald R. Ford Presidential Library AIRLINE REGULATORY REFORM
THE WHITE HOUSE
WASHINGTON
July 16, 1975
MEMORANDUM FOR :
DICK DUNHAN
FROM :
SUBJECT :
JIM Kennedy CANNON Jun Letter
1.
Mike's letter doesn't really answer Kennedy's
question.
2.
I understand John Barnum made this commitment
for DOT in February.
Who FOR CEA?
Who for Justice?
Can we get their testimony and see what they
promised?
3.
What is status of our airline regulatory
reform proposals?
Is this taken care of ?
of
FORD is LIBRARY GERALD
to
July 7. 1975
How P for up 7/21
MEMORANDUM FOR:
JIM CANNON
follow
FROM:
JACK MARSH
SUBJECT:
Kennedy Letter
Please note the attached incoming letter from Senator Kennedy inquiring
about the status of proposed legislation on airline regulatory reform,
which the Senator states we had indicated would be going to Congress in
March. The President would like for us to check on this and see what
the status is and whether the observations in the letter are valid.
For your information, I have sent copies of this memo to both Don
Rumsfeld and Max Friedersdorf.
Many thanks.
JOM/dl
FORD & LIBRARY
July 3, 1975
Dear Senator:
Thank 70% fox your June 25 letter to
the President concerning discussions
of proposed regulatory reform. I
know the President will be pleased
to receive your evaluation of the
problem and the initial steps which
are being taken.
Please be assured that I shall call
your letter to his attention at the
earliest opportunity. I an certain
your comments concerning proposals
DA airline regulatory reform will
be given prompt attention.
With kind ragards,
Sincerely,
William I. Kendall
Deputy Assistant
to the President
The Nonorable Edward M. Kennedy
United States Senate
Washington, D.C. 20510
bec: w/incoming to Roderick Hills for approgriate
handling.
bcc: w/incoming to James Cannon - FYI
WTK:VO:jsb
FORD & 038830 LIBRARY
MASSACHUSETTS
United States Senate
WASHINGTON, D.C. 20310
June 26, 1975
?
Honorable Gerald R. Ford
The White House
Washington, D.C. 20500
Dear Mr. President:
I believe that yesterday's discussion on regulatory reform
was extremely useful in opening the channels of communica-
tion and in providing for an airing of perspectives for
both Congress and the Administration. As I have indicated,
I certainly share your views on the need for lessening the
restraints of federal regulation on the competitive forces
in various markets.
As you know, the Congress .is still awaiting your proposals
on airline regulatory reform, which is an area of special
interest to me. At our Subcommittee hearings in February
representatives from the Justice Department, Department of
Transportation, and Council of Economic Advisors appeared
in substantial agreement as to the general form of such
legislation and indicated that a bill would be forwarded
to Congress in March. The delay, I am afraid, suggests to
some a lessening of the Administration's commitment to
genuine reform, making it correspondingly more difficult
for me to maintain the same momentum on the congressional
front.
I I was pleased to participate in Wednesday's meeting and
BERALD FORD LIBRARY
Honorable Gerald R. Ford
June 26, 1975
Page 2
look forward to working with you towards substantial
changes in the nature of federal economic regulation
on many fronts.
Sincerely,
M. led Kennedy
Edward
FORD & GERALD LIBRARY
THE WHITE HOUSE
WASHINGTON
DATE: July 7, 1975
TO:
MIKE DUVAL
FROM: JIM CAVANAUGH
R
Jaken care of?
SUBJ: Kennedy Letter
FYI
Action X
Where are we on this?
THE WHITE HOUSE
WASHINGTON
DATE: July 7, 1975
TO:
JIM CANNON
FROM: JIM CAVANAUGH
SUBJ: Kennedy Letter
FYI
Action
We've asked Duval for
a status report on this.
GEBALD B FORD LIBRABI
THE WHITE HOUSE
WASHINGTON
July 7, 1975
MEMORANDUM FOR:
JIM CANNON
FROM:
JACK MARSH
SUBJECT:
Kennedy Letter
Please note the attached incoming letter from Senator Kennedy inquiring
about the status of proposed legislation on airline regulatory reform,
which the Senator states we had indicated would be going to Congress in
March. The President would like for us to check on this and see what
the status is and whether the observations in the letter are valid.
For your information, I have sent copies of this memo to both Don
Rumsfeld and Max Friedersdorf.
Many thanks.
United States Senate
WASHINGTON, D.C. 20510
June 26, 1975
Honorable Gerald R. Ford
The White House
Washington, D.C. 20500
Dear Mr. President:
I believe that yesterday's discussion on regulatory reform
was extremely useful in opening the channels of communica-
tion and in providing for an airing of perspectives for
both Congress and the Administration. As I have indicated,
I certainly share your views on the need for lessening the
restraints of federal regulation on the competitive forces
in various markets.
As you know, the Congress is still awaiting your proposals
on airline regulatory reform, which is an area of special
interest to me. At our Subcommittee hearings in February
representatives from the Justice Department, Department of
Transportation, and Council of Economic Advisors appeared
in substantial agreement as to the general form of such
legislation and indicated that a bill would be forwarded
to Congress in March. The delay, I am afraid, suggests to
some a lessening of the Administration's commitment to
genuine reform, making it correspondingly more difficult
for me to maintain the same momentum on the congressional
front.
1 I was pleased to participate in Wednesday's meeting and
LIBRAST GERALD FORD.
Honorable Gerald i.. Ford
June 26, 1975
Page 2
look forward to working with you towards substantial
changes in the nature of federal economic regulation
on many fronts.
Sincerely,
Edward M. Kennedy Renny
FORD & GERALD LIBRARY
- 2 -
#272-7/16
Q
They are expecting them to be there
through the winter?
MR. NESSEN: Well, at this rate I think some
would be left by the wintertime.
Reporton moved from Guam?
Q
What about on Guam, Ron? Have all been
MR. NESSEN: Guam is closed.
Then the President said he wanted to give a
little report on his meeting with the regulatory
agencies. He called the meeting beneficial. He asked
Jim Cannon to give a report, and Jim said that the
reform is moving ahead.
He called the meeting a milestone, said it
shows that the President means business about regulatory
reform. He said that the White House is now preparing
the next step in regulatory reform, which is the regu-
lations within the departments and agencies as opposed
to the independent regulatory agencies.
He said the purpose of this whole plan of the
President's is, one, to promote competition; two, to let
the Antitrust Division of the Justice Department handle
many of these areas now handled by the regulatory agencies;
and to have the regulatory agencies, as well as the
Executive Branch departments and agencies, rethink
their role to make sure they are really doing what they
are supposed to do, which is to serve the public interest.
He said that there has been a large degree of
cooperation within the regulatory agencies with the
White House.
The President closed that portion of the
meeting by saying that the atmosphere he has found
surrounding this issue is constructive to getting some-
thing done, and that the Domestic Council will be
continuing to pursue this.
Finally, there was the discussion of the
energy program and the President said that he would send
up his phased reasonable compromise decontrol program
late this afternoon, to the Congress.
Q
He calls it that -- a phased reasonable
compromise?
MR. NESSEN: He does. He believes that is an
accurate description of the program and he uses it when
he speaks of it.
MORE
#272
GERALD FORD LIBRARY
THE WHITE HOUSE
WASHINGION
July 17, 1975
MEMORANDUM FOR:
THE PRESIDENT
THROUGH:
JIM CANNON and JIM LYNN
FROM:
ROD HILLS RH
SUBJECT:
Robinson-Patman Repeal or
Revision as Part of Regulatory
Reform
The Robinson-Patman question is being treated in the larger
context of regulatory reform. The Domestic Council Review
Group on Regulatory Reform has this on its agenda for
discussion Friday, July 18.
Tab A provides a memorandum outlining the composition of the
Domestic Council Review Group on Regulatory Reform and the
agenda.
Robinson-Patman is an area where your advisers are in general
agreement that something must be done. Over the next two or
three weeks, the Review Group will discuss Robinson-Patman
(and other regulatory subjects) with the appropriate people
in Congress. We will focus on which substantive option might
be acceptable, and then present you with a decision memo.
Tab B contains a memorandum outlining the three substantive
options available.
THE WHITE HOUSE
WASHING TON
File
July 16, 1975
MEMORANDUM FOR:
ECONOMIC POLICY BOARD
FROM:
ROD IILLS
SUBJECT:
Domestic Council Review
Group on Regulatory Reform
The President has given the Domestic Council responsibility
for coordination of his regulatory reform effort. To this
end, the Domestic Council has established a Review Group on
Regulatory Reform to serve in the coordinating role. Included
in this Review Group are:
Member
Working Representatives
Counsel's Office
Rod Hills
Domestic Council
Paul Leach
Lynn May
Council of Economic
Paul MacAvoy
Advisers
Office of Management
Cal Collier
and Budget
Stan Morris
Department of Justice
Jon Rose
Council on Wage and
George Eads
Price Stability
Jim Cannon has designated me as Executive Director of this
Group and Paul MacAvoy and 1 will serve as principal spokesmen.
Paul Leach is the Domestic Council staff person with primary
responsibility for staff coordination.
Where appropriate, other Executive departments and agencies
and White House staff will be involved. Major economic
regulation initiatives will be presented to the Economic
Policy Board.
It is anticipated that all staff resources necessary to achieve
the President's regulatory reform objectives will be provided
by the White House staff groups and Executive departments and
agencies.
FORD & LIBRARY CERALD
-2-
The principal goal of the Group is to achieve tangible retorm
in the next year --- reduction of Commission activities where
unnecessary and improvements in the efficiency of operation
where there is a strong rationale for continued regulation.
To deliver on the President's goals, We must have concrete
results this year. A secondary goal for 1975 is to have
results and a second year program by the time of the State
of the Union Address.
The attached draft of an Agenda for the July 18 Review Group
meeting provides a brief picture of where this effort is
going during 1975.
FORD i 07V839 LIBRARY
DRAFT 7-17-75
DOMESTIC COUNCIL REVIEW GROUP ON REGULATORY REFORM
Meeting Agenda - July 18, 1975
I.
Legislative Activity (with primary responsibility)
A. Legislation Before the Congress
1. Railroad Revitalization Legislation submitted. House
Commerce Committee is holding
hearings. Some legislation
possible this session.
OMB & DOT
2. Natural Gas
Continue to push for de-
regulation of natural gas.
Speedy congressional action
unlikely. OMB & FEA
3. Financial Institutions
Legislation submitted, but
some legislative action likely
in this Congress. OMB &
Treasury
4. Fair Trade
Legislation submitted. Push
for repeal, which should
happen in 1975, and take
credit with signing ceremony.
OMB & Justice
B. Legislation Being Developed
1. Trucking
Send bill to Congress by
August with Presidential
message and press briefings.
OMB & DOT
2. Airlines
Send bill to Congress by
September with Presidential
message and press briefings.
OMB & DOT
3. Robinson-Patman
Finish proposed bill by
August. Send to Hill with
Presidential message and
press briefings. OMB &
Justice
FORD & GERALD LIBRARY
-2-
4. Cable T.V.
Develop and consider Leg-
islation by September.
Domestic Council & OTP
C. New Areas to be Considered
There are a variety of new areas where a policy review
might be undertaken. These range from (a) a major over-
haul or abolition of existing agencies, e.g., the FMC,
(b) determination of the long-term regulatory role of
FEA, (c) development of effective anti-trust policy
particularly with respect to the Clayton and Federal
Trade Commission Acts to (d) creation of incentives
rather than use of the rule-making approach to health,
safety and environmental regulations.
II.
Follow-Up to the Regulatory Summit
1. Presidential letter to Commissioners sending transcript
of July 10 meeting and asking for:
- Specific plan to reduce delays
- Description of economic analysis activities
2. Follow-up with continual contacts at both Commissioner
and staff levels to see that internal reform effort
continues.
3. Encourage Congressional committees to hold oversight
hearings on delays in each Agency.
4. With Justice making major contribution, set up group
to propose changes in the procedures of the Agencies.
Changes can be internal or legislated.
5. Closely control Commission appointments. Develop list
of acceptable candidates and committed deregulators.
6. Establish group to work with Independent Agencies in
improving economic analysis.
7. Push FPC to allow interstate shipment of natural gas
which is purchased by industrial firms in the intrastate
(untegulated) market.
LIBRARY GERALD ? FORD
-3-
III. Regulation by Executive Departments and Agencies
1. Presidential effort to get Cabinet (and other) officers
committed to reform. Announce meetings between Review
Group and Cabinet officers to obtain specific 1975
reform objectives.
2. Develop a full catalog of agencies: Their respon-
sibilities, weaknesses and opportunities for improve-
ment.
3. Target several "dependent" agencies where the Review
Group can concentrate its efforts.
4. Examine and assist FEA task force efforts to remove
bottlenecks in development of new energy projects.
IV.
Congress
1. Presidentia letter to 24 Members to report on Independent
Commissions meeting. Draft completed.
2. Continue contacts with Congressional regulatory reform
group and their staff.
3. Schedule another meeting with Members after Labor Day.
4. Closely monitor legislative strategy on all regulatory
reform bills to insure White House coordination.
V.
Speeches and Other Events
1. Develop speech for President to give consumers on the
impact of regulation on consumer costs, then schedule.
2. Develop speech for President to give to a "special
interest group" in which he talks tough on the need for
regulatory reform, then schedule.
3. See that Paul Theis has materials necessary to keep
regulatory reform in a variety of Presidential speeches.
4. See that a group of spokesmen for the Administration
begin to emphasize regulatory reform in speeches.
FORD & UERALD LIBRARY
-1-
VI.
Press
1. See that President is continually briefed on status
of regulatory reform and has talking points for
interviews.
2. Work with Press Office to educate general and
specialized press about the Presidential effort.
3. Monitor press reports and editorials. Reply where
necessary.
VII. State and Local Regulatory Reform
1. Finalize State and local task force on regulatory
reform.
2. Articulate Presidential interest in this area.
VIII. Organization and Management of Effort
1. Set priorities for activities and assign responsibilities.
2. Insure availability of staff resources needed to achieve
President's objectives.
3. Provide for regular coordinating meeting.
4. Develop routine status report.
FORD is 07V870 LIBRARY
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
JUL 17 1975
MEMORANDUM FOR:
THE PRESIDENT
FROM:
JAMES T. LYNN
SUBJECT:
Status Report on Robinson-Patman
Act Reform
In March you announced your intention to seek legislation
to reform the Robinson-Patman Act.
Since then, concerned agencies (Justice, Commerce, SBA, HEW,
CEA, CWPS, and OMB) have explored several alternatives and
three substantive options have emerged. The purpose of this
memorandum is to provide you a status report.
The Robinson-Patman Act (RP-A) was enacted in 1936, in the
midst of the Depression, essentially to help the small local
grocers hold their position against the then emerging chain
supermarkets. The RP-A has two main provisions: One is a
civil prohibition on discriminating between different customers
unless the manufacturer can show that his lower price is cost
justified or is meeting the legitimate competition of another
manufacturer. Persons injured by prohibited conduct are
entitled to recover treble damages in private suits. The
second is a criminal prohibition against charging "unreason-
ably low prices."
The statute is unusual. No other country except France has
anything similar, and in France, the government refuses to
enforce it.
The RP-A has not achieved its objective of heading off the
creation of chain stores. In addition to this failure, it
has reduced price competition and spawned a great deal of
litigation.
Also, it has permitted in some manufacturing industries, a
few firms to dominate the industry by encouraging parallel
pricing practices and, occasionally, by outright conspiracy.
The RP-A makes it harder for aggressive buyers to break these
FORD & GERALD LIBRARY
2
pricing patterns and thus helps to prevent competitive pricing.
Moreover, the Justice Department's experience in prosecuting
criminal price fixing cases suggests that manufacturers, in
satisfying the RP-A, have used that occasion to swap pricing
information, thus further preventing competitive pricing.
Therefore, the need for reform is clear. If reform is success-
ful, it would contribute significantly to your overall
regulatory reform program which is aimed at eliminating costly
government restrictive practices that tend to eliminate a
healthy competitive market place. However, achieving reform
will be difficult. The options that have been considered have
been viewed primarily as ways to head off the inevitable oppo-
sition of those businesses who want to avoid effective price
competition by relying on the civil aspects of the RP-A.
The following options have been considered.
OPTIONS
1. Outright repeal. All agencies, except the SBA, believe
that outright repeal of the Act is -- on the merits -
from Robinson-Patman can be more rationally achieved
from preserving the Sherman Act's prohibition on
"attempts to monopolize." Some of your advisors
believe that outright repeal has the added virtue of
demonstrating the depth of your commitment to regulatory
reform. However, repeal will be vigorously opposed by
small business groups and has the least prospect of
success in Congress. Moreover, a repeal proposal will
be viewed by opponents as a pro-big business move to
unleash corporate bullies to prey upon smaller firms
through abuses of market power. It would be argued --
but not demonstrably -- that this could lead to more
industry concentration.
2. Predatory pricing substitute. The Justice Department
has drafted a legislative substitute for Robinson-
Patman that would outlaw: overt threats by businesses
to force certain pricing practices on their competitors;
and sales below out-of-pocket costs (except to meet
competition or to enter new markets). This substitute
would significantly narrow the Robinson-Patman Act,
minimizing or eliminating its use to restrain hard
competition. It would provide some answer to critics
of reform, including small business groups. However,
FORD & GERALD LIBRARY
3
sophisticated observers would realize that the pro-
tections afforded to small business are illusory
because violations would be virtually imposșible to
prove. Accordingly, critics would charge that the
proposal favors big business and will also lead to
increased concentration. Again, Congressional
sponsors will be difficult to attract.
3. Revision coupled with predatory pricing prohibition.
The final option builds upon the predatory pricing
substitute and also outlaws sustained price
discriminations that systematically favor larger
buyers or are likely to eliminate competitively
significant firms from a market. This alternative
would constitute a major improvement over the status
quo, making it quite difficult to prove a violation.
It might be more acceptable to members of Congress,
However, the modification approach is not favored
on simple economic grounds (it does not go far
enough toward repeal), will not satisfy small
business, and may be viewed as inconsistent with a
real commitment to regulatory reform.
Because the public has a poor understanding of the costs
imposed by the Robinson-Patman Act, because the small business
community is deeply concerned, and because Congressional
interest is low, we are proceeding as follows:
--- The lead responsibility on this issue has been
assigned to the newly established Domestic Council
Task Force on Regulatory Reform.
-- The Task Force will begin working with staff members
representing the newly established group of 24
Congressmen and Senators with whom you recently met
on regulatory reform.
-- Hopefully, we can look to this group to provide a
Congressional constituency for reform of the Robinson-
Patman Act.
-- A decision on which legislative solution to propose
will be recommended after these consultations by the
end of August.
FORD & GERALD LIBRARY
THE WHITE HOUSE
WASHINGTON
July 29, 1975
MEMORANDUM FOR:
JIM CANNON
THROUGH:
DICK DUNHAM
FROM:
PAUL LEACH Parl
SUBJECT:
Regulatory Reform
Per your instructions of two weeks ago, the Regulatory Reform
Review Group has assumed primary responsibility for coordinating
the President's regulatory reform effort in the approved areas.
Where appropriate, economic regulation initiatives are being
presented to the EPB. The memorandum at Tab A outlines the
composition and mission of the Review Group.
To facilitate communication and to assure deadlines are met,
the Review Group is now meeting every Wednesday at 5:00 p.m.
in the Roosevelt Room. You have received the agendas for the
first two meetings.
Also, we are distributing from time to time a Status Report on
Regulatory Reform. You have already been provided with the
latest one, dated July 23.
In order to provide coordination for the effort in the fullest
sense, the Review Group (or various members) has:
1. Met with Paul Theis to discuss regulatory reform
speeches. We will work with Theis to develop a
speech for the President to the Hardware Industry
Convention in Chicago in late August. Also, we
are working on the draft of a speech dealing with
the positive effect of regulatory reform for the
consumer. This coordination with Theis will be
ongoing.
FORD & LIBRARY GERALD
-2-
2. Established liaison with the Press Office through
John Carlson. We will work with them to sustain
the dialogue with the media and will try to stage
a major discussion of regulatory reform at the
next appropriate event, e.g., when a Trucking Bill
is submitted.
3. Discussed the major importance of Commission
appointments with Doug Bennett. We will attempt
to supply him with names of strong candidates who
could further the objectives of regulatory reform.
4. Scheduled a meeting with Virginia Knauer to assure
that the President's announced goal of improved
representation for valid consumer concerns in
regulatory proceedings is achieved.
5. Discussed the effort with the Public Liaison
office (Bill Baroody's shop) to assure that the
Review Group can be exposed to the flow of interest
groups and individuals coming through the White
House system.
Very shortly, we will arrange a meeting to discuss scheduling
of regulatory reform speeches and events with Warren Rustand
(and maybe Jim Connor and/or Jerry Jones).
As a follow-up to the Congressional and Commissioner meetings,
the Review Group has sent -- or drafted -- letters to the
twenty-four Congressional members, the Congressional staff
group members, the Independent Regulatory Commissioners and
the Counsels of the Commissions. Rod Hill has -- or will
have -- cleared these with you.
In response to the President's directive to his Cabinet
officers and Agency heads, a letter has been drafted to the
six primary regulators (EPA, FEA, DOT, DOL, USDA and HEW)
The Regulatory Reform Review Group will meet with the heads
of these departments and agencies during August to develop
firm objectives for regulatory reform achievements by the
end of 1975. OMB and Domestic Council staff will be
involved in this process, as appropriate.
-3-
To reduce Independent Agency regulatory delays, a Task Force
of the Justice Department, the Administrative Conference of
the U.S. and others led by Cal Collier (Associate Director
of OMB and formerly Counsel of FTC) will begin to work on
ways to speed up the proceedings. This is a long and arduous
challenge.
On the legislative front, the Review Group will begin to work
with the relevant parties in order to insure Congressional
action on legislation already submitted. The legislation
and the lead agencies:
1. Fair Trade Law Repeal
Justice
2. Energy (Oil and Gas Deregulation)
FEA
3. Financial Institutions Act
Treasury
4. Railroad Revitalization Act
DOT
5. Increased Resources and Certain New Authority
for Antitrust Division and FTC
Justice & OMB
6. State Utility Procedures Reform
FEA
Obviously, the Review Group will have to determine where its
limited resources might do some good.
In addition, the Review Group is working with the ad hoc
task forces finalizing three pieces of new legislation:
1. Truck Bill. A final decision paper has been
submitted by Jim Lynn to the President and
legislation should soon be ready. See Tab B.
2. Airline Bill. The Review Group is working to
see that a bill is swiftly finalized. A decision
paper is going to the EPB, hopefully, on Wednesday
or Thursday of this week. See Tab C for draft.
Soon thereafter it should be ready for a final
Presidential decision.
3. Robinson-Patman. Justice is taking the lead in
testing the Congressional waters. Once that is
completed, Presidential decision on the options
and the strategy will be sought. See Tab D for
latest draft of Status Report with Options.
-4- -
Finally, some work is being done -- or monitored -- on
various other initiatives:
1. Cable TV Bill (Domestic Council: (Lynn May)
2. Insurance Antitrust Immunities (Antitrust
Immunities Task Force)
3. Federal Maritime Commission Reform or Repeal
(Council of Economic Advisers)
4. Tax Incentives Approach to Environmental
Safety Legislation (OMB and Treasury).
5. Insurance Antitrust Immunities (Justice)
6. Inflation Impact Analysis (OMB)
7. Agricultural Cooperatives Antitrust Immunities (Justice)
8. State and Local Regulatory Reform (OMB)
THE WHITE HOUSE
WASHINGTON
July 16, 1975
MEMORANDUM FOR:
ECONOMIC POLICY BOARD
FROM:
ROD HILLS RH
SUBJECT:
Domestic Council Review
Group on Regulatory Reform
The President has given the Domestic Council responsibility
for coordination of his regulatory reform effort. To this
end, the Domestic Council has established a Review Group on
Regulatory Reform to serve in the coordinating role. Included
in this Review Group are:
Member
Working Representatives
Counsel's Office
Rod Hills
Domestic Council
Paul Leach
Lynn May
Council of Economic
Paul MacAvoy
Advisers
Office of Management
Cal Collier
and Budget
Stan Morris
Department of Justice
Jon Rose
Council on Wage and
George Eads
Price Stability
Jim Cannon has designated me as Executive Director of this
Group and Paul MacAvoy and I will serve as principal spokesmen.
Paul Leach is the Domestic Council staff person with primary
responsibility for staff coordination.
Where appropriate, other Executive departments and agencies
and White House staff will be involved. Major economic
regulation initiatives will be presented to the Economic
Policy Board.
It is anticipated that all staff resources necessary to achieve
the President's regulatory reform objectives will be provided
by the White House staff groups and Executive departments and
agencies.
-2-
The principal goal of the Group is to achieve tangible reform
in the next year ----- reduction of Commission activities where
unnecessary and improvements in the efficiency of operation
where there is a strong rationale for continued regulation.
To deliver on the President's goals, we must have concrete
results this year. A secondary goal for 1975 is to have
results and a second year program by the time of the State
of the Union Address.
The attached draft of an Agenda for the July 18 Review Group
meeting provides a brief picture of where this effort is
going during 1975.
DRAFT 7-17-75
DOMESTIC COUNCIL REVIEW GROUP ON REGULATORY REFORM
Meeting Agenda - July 18, 1975
I.
Legislative Activity (with primary responsibility)
A. Legislation Before the Congress
1. Railroad Revitalization Legislation submitted. House
Commerce Committee is holding
hearings. Some legislation
possible this session.
OMB & DOT
2. Natural Gas
Continue to push for de-
regulation of natural gas.
Speedy congressional action
unlikely. OMB & FEA
3. Financial Institutions
Legislation submitted, but
some legislative action likely
in this Congress. OMB &
Treasury
4. Fair Trade
Legislation submitted. Push
for repeal, which should
happen in 1975, and take
credit with signing ceremony.
OMB & Justice
B. Legislation Being Developed
1. Trucking
Send bill to Congress by
August with Presidential
message and press briefings.
OMB & DOT
2. Airlines
Send bill to Congress by
September with Presidential
message and press briefings.
OMB & DOT
3. Robinson-Patman
Finish proposed bill by
August. Send to Hill with
Presidential message and
press briefings. OMB &
Justice
LIBRARY GERALD R. FORD
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4. Cable T.V.
Develop and consider leg-
islation by September.
Domestic Council & OTP
C. New Areas to be Considered
There are a variety of new areas where a policy review
might be undertaken. These range from (a) a major over-
haul or abolition of existing agencies, e.g., the FMC,
(b) determination of the long-term regulatory role of
FEA, (c) development of effective anti-trust policy
particularly with respect to the Clayton and Federal
Trade Commission Acts to (d) creation of incentives
rather than use of the rule-making approach to health,
safety and environmental regulations.
II.
Follow-Up to the Regulatory Summit
1. Presidential letter to Commissioners sending transcript
of July 10 meeting and asking for:
- Specific plan to reduce delays
- Description of economic analysis activities
2. Follow-up with continual contacts at both Commissioner
and staff levels to see that internal reform effort
continues.
3. Encourage Congressional committees to hold oversight
hearings on delays in each Agency.
4. With Justice making major contribution, set up group
to propose changes in the procedures of the Agencies.
Changes can be internal or legislated.
5. Closely control Commission appointments. Develop list
of acceptable candidates and committed deregulators.
6. Establish group to work with Independent Agencies in
improving economic analysis.
7. Push FPC to allow interstate shipment of natural gas
which is purchased by industrial firms in the intrastate
(unregulated) market.
FORD & GERALD LIBRARY
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III.
Regulation by Executive Departments and Agencies
1. Presidential effort to get Cabinet (and other) officers
committed to reform. Announce meetings between Review
Group and Cabinet officers to obtain specific 1975
reform objectives.
2. Develop a full catalog of agencies: Their respon-
sibilities, weaknesses and opportunities for improve-
ment.
3. Target several "dependent" agencies where the Review
Group can concentrate its efforts.
4. Examine and assist FEA task force efforts to remove
bottlenecks in development of new energy projects.
IV.
Congress
1. Presidential letter to 24 Members to report on Independent
Commissions meeting. Draft completed.
2. Continue contacts with Congressional regulatory reform
group and their staff.
3. Schedule another meeting with Members after Labor Day.
4. Closely monitor legislative strategy on all regulatory
reform bills to insure White House coordination.
V.
Speeches and Other Events
1. Develop speech for President to give consumers on the
impact of regulation on consumer costs, then schedule.
2. Develop speech for President to give to a "special
interest group" in which he talks tough on the need for
regulatory reform, then schedule.
3. See that Paul Theis has materials necessary to keep
regulatory reform in a variety of Presidential speeches.
4. See that a group of spokesmen for the Administration
begin to emphasize regulatory reform in speeches.
FORD i GERALD LIBRARY
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VI.
Press
1. See that President is continually briefed on status
of regulatory reform and has talking points for
interviews.
2. Work with Press Office to educate general and
specialized press about the Presidential effort.
3. Monitor press reports and editorials. Reply where
necessary.
VII.
State and Local Regulatory Reform
1. Finalize State and local task force on regulatory
reform.
2. Articulate Presidential interest in this area.
VIII. Organization and Management of Effort
1. Set priorities for activities and assign responsibilities.
2. Insure availability of staff resources needed to achieve
President's objectives.
3. Provide for regular coordinating meeting.
4. Develop routine status report.
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1
MEMORANDUM FOR:
THE PRESIDENT
FROM:
JAMES T. LYNN
SUBJECT:
Reform of Truck Regulation
On May 19, you sent the Railroad Revitalization Act to
Congress with a message stating that it was to be the first in
a series of transportation regulatory reform bills and that
truck and airline legislation. would follow shortly.
An Executive Branch task force comprised of the Departments
of Transportation and Justice, CEA, CWPS, and OMB has now
completed the drafting of a truck bill. This bill is
specifically designed to enhance competition in the trucking
industry by providing increased pricing flexibility, permitting
greater ease of entry, and eliminating antitrust immunities for
most rate agreements. We expect such action to result in
reduced rates and improved trucking services. A more detailed
summary of the bill's provisions is provided at attachment A.
There are, however, two major issues that have not been
completely resolved: (1) Should the Administration propose
the elimination of all economic entry restrictions or do we
stop short of free entry; and (2) what legal standards should
be used to judge truck mergers?
Under Rod Hills' leadership the group has spent the last week
attempting to reach a compromise. These negotiations are
now to a point where, although the Justice Department is still
of the firm opinion that a good case can be made for proposing
a gradual phasing to free entry, in the interest of getting
a truck bill to Congress before the recess, they are willing
to compromise and stop short of complete decontrol. They do,
however, feel very strongly about the need to subject truck
merger cases to normal antitrust law. Accordingly, this
issue is presented for your decision.
Background of Merger Issue
At present, the ICC has authority to approve truck mergers
FORD i GERALD LIBRAR
2
and thus exempt such transactions from the antitrust laws.
In the past, truck mergers and the ICC processes for dealing
with them have not presented a particular problem. However,
consistent with the Administration's announced goals of
removing unnecessary antitrust immunities and increasing
reliance on the antitrust laws, the Justice Department feels
that ICC truck merger approval authority should be rescinded
and that proposed mergers should be subject to the same
competitive standards as other industries, i.e., Section 7
of the Clayton Act (as amended). This statute forbids
mergers that may substantially lessen competition or tend
to create a monopoly "in any line of commerce in any section
of the country." It is the traditional antitrust standard
applied to merger transactions.
DOT is opposed to the use of Section 7 as the standard for
truck mergers because they feel it is too stringent and will
prevent many beneficial mergers from taking place. They
point out that in an industry of some 15,000 regulated firms,
there is little danger of monopoly and are reluctant to change
present ICC merger procedures which in the past have worked
well. However, if a change is to be made, they feel the
Administration should propose a standard which will take
into account the "special characteristics" of the trucking
industry. Put simply, their concern is that Clayton Section 7
will be mechanically applied as a "litmus test" of per se
illegality. For example, if a proposed merger were shown
to produce a beneficial or a neutral effect on competition in
10 markets but would have an adverse effect on the 11th
market, DOT fears it will automatically be declared unlawful
under Section 7.
In addition, DOT suggests that the ICC has created a highly
complicated patchwork system of commodity and routing
restrictions. Therefore, they are concerned that determination
of a merger's anticompetitive effects under Section 7 will
necessitate lengthy litigation.
Justice, on the other hand, points out that a number of
recent merger cases clearly demonstrate that courts do take
into account special characteristics of the industry in
question as well as the particular economics of the market
in which the merger is proposed. They contend that a prima
facie case of illegality can be rebutted by a proper showing
that anticompetitive effects will not occur and cite bank
merger cases as evidence of how competitive conditions and
GERALD FORD LIBRARA
3
special circumstances involved in an individual merger are
considered in a court decision. Furthermore, Justice points
out that the courts do recognize that a merger can have anti-
competitive effects in only some of the markets served by
merging firms. In such cases, the court decision can be and
frequently is structured so as to prevent the anticompetitive
reshlts while allowing the merger to occur.
Alternatives
Alternative 1. Include in the bill a provision to subject
truck mercers to normal antitrust proceedings
under Section 7 of the Clayton Act.
Pro
-- This provision recognizes a growing concern in the
Congress and various parts of the Administration
over the need for a strong antitrust policy to
accompany the regulatory reform effort.
-- It eliminates special antitrust treatment for the
trucking industry which Justice feels is indefensible
in light of the economics of the industry and the fact
that unregulated trucking is already subject to Section
7.
-- Legislative language to substitute Section 7 for ICC
consideration has been drafted and could be added to
the bill.
Con
-- DOT feels Section 7 is too stringent a test for
truck mergers.
-- They feel it will not consider the special character-
istics of the trucking industry, i.e., how under Clayton
does one weigh a merger's beneficial effects in some
markets against the anticompetitive effects in others?
Alternative 2. Include in the bill a special merger standard
to be used by the courts to test proposed
truck mergers.
Pro
-- This approach is specifically designed to take into
account the special needs of the truck industry.
FORD i 07V830 LIBRARY
4
-- It would be written to specifically allow mergers
that would produce improved trucking services while
maintaining protection against anticompetitive effects.
Con
-- This approach sets a bad precedent for resolving
Section 7 problems by writing new standards for each
industry thought to have "special" characteristics.
-- It would delay submission of the truck bill until
the task force drafts and agrees on the new standard.
This means at least a two-week delay; therefore, we
could not submit the bill before the August recess.
Because the decision centers on differing legal interpretations
of a statute, White House counsel was asked to provide a
separate opinion. It is their feeling that we should not be
attempting to solve problems caused by the Section 7 standard
by writing new merger tests to fit the "special" character-
istics of each industry. If Section 7 is a problem, the
Justice Department should undertake to examine the standard
as a separate issue and propose appropriate changes.
Accordingly, they support Alternative one.
Decision
Alternative 1
(Supported by: Justice,
CEA, CWPS, OMB)
Alternative 2
(Supported by: DOT)
Attachments
1. Summary of the Bill's Provisions
2. Background of ICC Regulation of the Trucking Industry
3. Analysis of Need for the Bill
4. Draft Presidential Message
CC:
DO Records
Director
Director's Chron
Deputy Director
Mr. Collier
Mr. Morris
EG/MD: Return; Chron
EG/MD: DSteed kml 24 Jul retyped 28 Jul 75
FORD & 078870 LIBRARY LIBRARI
TRUCKING REGULATORY REFORM ACT
SUMMARY OF PROVISIONS
I. Improvements in ratemaking
Pricing flexibility. The bill would create a no-suspend
zone, to be phased in over a three-year period, to per-
mit truckers to adjust rates up or down within certain
percentage limits without ICC interference. (Phasing of
the zone corresponds to that proposed in the Railroad
Revitalization Act (RRA) -- 7% first year, 12% second
year, and 15% third year.) After three years, the ICC
would be prohibited from suspending any rate decreases
so long as variable costs are covered, and carriers
would be able to raise rates 15% per year without
suspension.
Expediting Hearings. The bill provides that all but
exceptional rate hearings must be completed in seven
months (similar to RRA).
Discrimination. The bill clarifies present law regarding
the use of discrimination as a reason for protesting
rates. Under new provisions, only shippers directly
affected by the rate change may allege discrimination.
Impact Study. The bill directs the Secretary of Trans-
portation and the ICC to study the effects of the pro-
posed changes in ratemaking to be completed in thirty
months.
II. Restrictions on Anticompetitive Practices of Rate Bureaus
Discussions and Agreements on Rates. The bill prohibits
rate bureaus from voting on rates involving single line
movements -- that is, where one carrier provides the com-
plete service. Discussion and voting on joint and through
rates where more than one carrier is involved will be
limited to those carriers which hold themselves out
to participate in the movement.
Rate Bureau Protest of Rates. The bill prohibits rate
bureaus from protesting or seeking to suspend rate pro-
posals.
General Rate Increases. Three years after enactment,
the bill would prohibit the use of across-the-board
changes in freight rates. This goes further than the
RRA which permits continued use of such increases when
fuel or labor cost increases are involved.
LIBRARY GERALD ? FORD
2
Expediting Procedures. The bill requires rate bureaus
to dispose of proposed rate changes within 120 days of
filing. It also requires that the bureaus maintain and
make available for public inspection voting records of
its members.
Administrative Services. Like the RRA, the truck bill
proposed no change in the administrative services pro-
vided by rate bureaus, e.g., publishing rates, collecting
statistics, etc.
III. Increased Ease of Entry
The bill proposes to ease entry restrictions in several
ways:
-- It narrows current ICC entry standards by directing
the ICC to consider the positive effects of the pro-
posed entry, e.g., lower operating costs, improved
service, etc. and prohibits it from considering
the negative effects of entry on existing carriers.
-- It directs the ICC to grant entry to an applicant
demonstrating he is fit, willing and able to provide
a service at a rate which covers his actual costs.
-- It directs the Secretary of Transportation to prom-
ulgate methods to calculate actual costs and subjects
these methods to expeditious review by the District
Court of Appeals so as to eliminate lengthy litigation
over cost on each and every entry proposal.
-- It calls for a three-year DOT/ICC study of the
effects of the new standards on the quantity and
quality of truck transportation services, on the
financial condition of the industry, and on rates.
At the end of the study, the Secretary could pro-
pose. new legislation seeking further liberalization
of entry in order to realize the full benefits of
competition in the industry.
-- In cases where entry is protested and ultimately
granted in spite of the protest, it would place the
burden of litigative costs on the protestant rather
than the applicant, thus encouraging entry attempts.
-- It proposes expansion of a number of areas of unreg-
ulated trucking, e.g., to permit free entry to serve
new plants, to remove restrictions now placed on
private carriers, to exempt small owner-operators
from ICC regulation, etc.
IV. Revisions in Merger Provisions
The specific provisions to be included in the bill will
be determined once a Presidential decision is made on
Administration policy in this area.
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3
V.
Other Provisions
A. Aircraft Exemption. The bill expands the current ex-
emption for trucking service incident to air trans-
portation from 25 to 100 miles.
B. Private Carriage. The bill would remove unnecessary
restrictions on firms who operate their own trucks in
furtherance of their principal business. Specifically,
it would permit them to carry goods for their affiliates
and allow them to lease their vehicles and drivers for
short periods of time.
C. New Plant Service. The bill would exempt carriers from
obtaining ICC approval to serve a new plant in order
to facilitate a new firm's ability to secure truck
service. A new plant is defined as any plant less than
five years old or which is shipping and receiving new
products.
D. Contract Carriers. The bill would remove unnecessary
restrictions on carriers which operate dedicated
service to individual customers by allowing these
carriers to hold both common carrier and contract
authority over the same routes, and by specifying
what factors the ICC may or may not consider in
granting contract certificates.
E. Commercial Zones. The bill directs a DOT study of
the present system governing metropolitan transportation
zones to determine whether legislative change is
required.
F. Backhaul Authority and Commodity and Routing Revisions
The bill would allow small owner-operator truckers to
carry regulated commodities on their backhaul trips
without seeking specific ICC authority. In addition,
the bill directs the ICC to take all steps necessary
to remove unnecessary commodity and routing restrictions.
FORD j GERALD LIBRARY
TRUCKING REGULATORY REFORM ACT
BACKGROUND OF ICC REGULATION OF THE TRUCKING INDUSTRY
In 1935, Congress passed the Motor Carrier Act which extended
regulatory authority of the ICC to cover motor carriers as well
as railroads. (In 1940, this Act became Part II of the
Interstate Commerce Act). This Act gives the ICC authority
to regulate basic economic activities of the trucking industry--
rates, entry, and financial transactions including merger. In
general, the ICC has the power to dictate what markets a carrier
can serve, what commodities he can transport over what routes,
and what price he can charge.
Over the years, a number of trucking activities have been
granted exemptions from economic regulation from the ICC. For
example, carriers of raw agricultural products are not bound by
ICC regulation. Trucking services performed incident to railroad,
watercarrier, and air transportation are exempt as are carriers
exclusively engaged in the transportation of newspapers.
Intrastate carriers are exempt from ICC regulation. As a result,
the ICC presently regulates, from an economic standpoint, only
about 50% of the trucking industry.
From the beginning, trucking regulation was heavily patterned
after ICC regulation of the railroad industry, with the ICC
having considerable discretion over the precise application of
their very broad and general statutory mandate. Accordingly,
decisions have been made on a case-by-case basis and the ICC
has historically become a protector of the regulated industry--
minimizing competition, holding rates at higher levels than
necessary, and discouraging new service innovations which might
better respond to consumer needs.
While this finite regulation and control of common carriers
has resulted in numerous inefficiencies, studies of unregulated
truck transportation have shown that this sector tends to be
efficient and economical and to provide good service to its
customers--often better service than is found in regulated
trucking. However, the different systems of rules governing
regulated and unregulated trucking currently only serve to
compound the problem.
For example, while unregulated agricultural carriers enjoy the
freedom to set their own rates and select their own routes,
they are limited to carriage of agricultural products only
and are not authorized to carry processed food products or any
GERALD ? FORD
other type of non-agricultural comnodities on return trips.
Often unregulated carriers simply break the law and carry
illegal commodities so that they can spread their costs over the
whole trip, providing more economical service. However, by
restricting entry, the ICC is creating costly inefficiencies
and indirectly encouraging violation of their own rules. As
some economists have pointed out, there would appear to be no
reason why regulated and unregulated carriers should not be
allowed to compete for service, thus providing more efficient,
less expensive transportation services for all shippers.
The Administration's proposed bill has been designed to gradually
reduce or eliminate excessive ICC regulation. The reforms
included in the proposed Trucking Regulation Reform Act have
been carefully drafted to complement reform provisions of the
Railroad Revitalization Act. These provisions provide for
increased pricing flexibility, elimination of antitrust immunities
for most rate agreements, liberalization of carrier entry re-
quirements, and an expansion of existing exemptions applicable
to unregulated trucking. In general, these proposals are
designed to increase the efficiency of the industry as a whole
in order to provide the customer with the best possible trucking
service at the lowest possible cost.
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2
TRUCKING REFORM ACT
DRAFT
ANALYSIS OF THE NEED FOR THE BILL
Earlier this year, the Administration proposed the Railroad
Revitalization Act (RRA) designed to improve the economic regulation
of the railroad industry. Like the RRA, the basic thrust of the
Trucking Reform Act (TRA) is to improve the economic use of
resources, to save fuel and to eliminate unnecessary regulation.
A discussion of the major problems of the trucking industry
which the bill addresses, along with an analysis of the effect of the
bill in redressing these problems follows.
Improvements in Ratemaking
The current system of motor carrier rate regulation severely
limits the ability of individual motor carriers to establish new rates
and innovative services. Current ICC ratemaking rules prevent an
efficient use of resources in several ways:
(1) Rates are higher, on average, than adequate to
attract the resources necessary for an efficient
motor carrier industry. There is excess investment,
too much fuel is used, and the general level of prices
is inflated.
FORD & GERALD LIBRARY
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(2) Regulated rates do not allow shippers choice between
alternate levels of service and price.
(3) Regulated rates
sufficiently related to the
costs of providing
the
ific ti ansportation to which
each rate applies.
esent, rates which are below
variable cost are
S
times not allowed to be raised,
other rates which are well above variable cost are not
allowed to be reduced. Consequently, distortion between
different classes of shippers, different regions and urban
and rural areas occurs.
As a consequence of the rate structure described above, carriers
compete on the basis of the service they provide. For example, in
order to attract customers, a carrier may increase pickup frequency,
and reduce transit time. To provide this "improved" service, the carrier
must increase his costs and operate with vehicles that are not as fully
loaded as they should be. The customer, however, might prefer a
lower "quality" less costly service, but has no way to opt for such an
alternative within the common carrier system. Shippers have had to
switch to private carriagé, adjust inventories, and even their locational
decisions have been affected by their inability to secure price and
service combinations needed to stay competitive.
LIBRARY GERALD R. FORD
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The basic thrust of the TRA is to place greater reliance on
competitive forces in ratemaking while preserving the protection of
appropriate regulatory supervision. for shippers and carriers. Giving
greater scope to individual carrier initiative in rate setting will result
in a more economic distribution of traffic among the modes, a greater
variety of service alternatives, and a lower and more equitable overall
freight bill. It does this in the following way:
(a) The bill provides that a carrier's rate may not be found
unlawfully low provided it is above the carrier's variable cost for
the specific transportation in question. In addition, the ICC would be
prohibited from approving rates which are below variable cost and
from disallowing a rate increase which brought the rate up to variable
cost. This provision would encourage price competition and move
the rate structure closer to cost-based rates. It would also enable
carriers to innovate with a wider range of price/service combinations.
(b) The bill also creates a no-suspend zone in which increases
or decreases, other than general rate changes, could not be suspended
pending investigation for being too high or too low, although they still
could be suspended for violating sections 2, 3, or 4 of the Interstate
Commerce Act, which are the basic sections prohibiting discrimination
and prejudice to either an individual shipper or community.
The no-suspend zone would be phased in over a three-year period
(up to seven percent rate increases or decreases
in
first
year;
FORD i GERALD LIBRARY
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12 percent in the second year; 15 percent in the third year; and
thereafter 15 percent for increases and unlimited decreases). This
no-suspend zone is a refinement. of the approach proposed in the
Transportation Improvement Act which did not include a provision
for phasing. It is similar to, but of longer duration than, the provision
in the House-passed Surface Transportation Act of 1974. It is
identical to the no-suspend zone in the proposed Railroad Revitalization
Act.
The no-suspend zone will allow carriers to respond repidly to
market conditions and will improve the rate decision making process.
Today, rate cases are often decided in a world of hypotheticals and
"maybes. " When rate proposals are suspended by the ICC, the
hearing on the lawfulness of the rate is without the benefit of real
world experience regarding the effect of the rate. The no-suspend
provision will change this process, and allow rates within the zone
to go into effect prior to hearing, thus providing concrete facts
for the decision maker.
The three year phasing of the no-suspend zone will give carriers
time to adjust their fleets because trucks have a short working life.
The bill will also provide that the ICC must make findings similar
to those required in temporary restraining orders before ordering
a suspension.
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(c) To expedite the hearing process, the bill will require
the Commission to complete its rate hearings and render a final
judgment within seven months of the time the rate was scheduled
to go into effect. This time limit could be extended an additional
three months if the Commission made a written report to Congress
explaining the need for the delay. At present, there is no time
limit and the average motor carrier rate case requires more than a
rate
year. The time limit should greatly expedite Commission/proceedings.
(d) Carriers will be required to refund, with interest, that
portion of the increased rate or charge found not to be justified
by the Commission. This will discourage carriers from submitting
rate increases which are within the "no-suspend" zone yet are not
expected to be justified.
(e) The TRA also clarifies present law regarding the standing
to raise the question of discrimination between various shippers.
Because the possible discrimination is against a shipper, it should
be raised by the shipper and this amendment prohibits carriers
from raising the issue of discrimination. In addition, this amendment
would restrict the standing of shippers to allege discrimination to
those shippers directly affected by the rate change. A shipper may
not protest a rate change on the basis of discrimination unless the
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protesting shipper is also being served by the motor carrier in
question and that motor carrier is transporting for the protesting
shipper the commodity which is the subject of the rate change.
(f) In addition, the Secretary of Transportation shall, in con-
sultation with the Commission, study the effects of these changes
in rate making. The study shall be completed within 30 months.
Restriction on Anticompetitive Practices of Rate Bureaus
To assure that rate flexibility is not used anticompetitively and
results in more competitive pricing practices, the TRA proposes
significant changes to the provisions in the Interstate Commerce Act
pertaining to rate bureaus. Section 5 (a) of the Interstate Commerce
Act permits carriers subject to the Commission's jurisdiction to act
collectively and collusively in establishing rates
When such action is taken pursuant to an
agreement approved by the Commission, it is immune from the
antitrust laws which apply to the rest of American business. Rate
bureaus or carrier associations have been established pursuant to
carrier agreements approved by the ICC. These rate bureaus are the
vehicles through which carriers make decisions regarding the rates
which the member lines shall charge.
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Although rate bureaus provide a number of valuable services to
their members and to the shipping public, they also dampen competitive
forces in the rate making process and discourage pricing flexibility
and service innovation. Rate bureaus discourage the establishment
of rates based on the costs of the most efficient carrier and prvide a
mechanism through which carriers can set and keep rates above
competitive levels.
Rate bureaus do provide a number of administrative services
to carrier members, such as arranging for the interchange and
facilitation of traffic moving via two or more carriers, the publication
of rates, and the collection of statistics on traffic movements, rates
charged, and related costs. The bill would not affect these admin-
istrative activities. It is addressed only to those activities of the
rate bureaus which result in the establishment of non-competitive
levels of rates.
The Commission has recently issued an order in Ex Parte Number
297, Rate Bureau Investigation, taking some of the corrective action
needed. The Commission's order included a flat prohibition on rate
bureau protests against members' independent rate proposals and
establishes a 120-day maximum period for processing proposals.
These changes will not eliminate the anticompetitive influence of rate
bureaus.
-8-
The following provisions in TRA apply to rate bureaus.
(1) On single line rates, individual motor carriers will have
complete freedom to propose rates, while on joint rates the influence
of carriers not participating in the joint movement will be reduced.
The bill prohibits motor carrier rate bureaus from voting on single
line movements and limits consideration of joint line rates to those
carriers which hold themselves out to participate in the joint move-
ment. The bill also prohibits motor carrier rate bureaus from taking
any action to suspend or protest independent rate proposals by
members or non-members.
The proposed legislative change with respect to single line
rate agreements would exert a competitive influence upon joint rates
because carrier territories overlap and single line rates are often
competitive with joint line rates. A single line carrier will often
be in competition with two or more carriers offering a joint rate and
through route. Nothing in this proposal would prohibit a single line
carrier from individually establishing a rate competitive with a joint
rate established through the rate bureau mechanism.
The bill does not preclude discussions or agreements relating
to across-the-board percentage changes in freight rates during the
first three years after enactment. But after that time they would
not be allowed.
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(2) Like the Commission's order. the bill requires all rate
within
bureaus to dispose of proposed rate changes /
120 days from
the time they are filed. However, unlike that order, it requires all
rate bureaus to maintain and make available for public inspection
the records of the votes of members. These provisions are designed
to bring about speedier rate bureau treatment of proposed rate
changes and to encourage initiative by individual carriers in making
rate changes.
The Commission retains its present authority to review and
approve all rate bureau agreements and to impose such additional
limitations and conditions on the activities of rate bureaus as it
believes are reasonable and necessary.
Relaxation of Overly Restrictive Barriers to Entry
At present, entry into individual trucking markets is restricted.
The concept of "public convenience and necessity" has been inter-
preted by the ICC to require that carriers already operating in a
market be allowed to carry all the traffic they can handle before
another carrier is allowed to enter. The present entry restrictions
are directed principally towards the well-being of existing firms and
not enough at the interests of shippers and consumers as a whole.
Hence consumers have suffered.
-10
The Commission's entry policy has forced new entrants to
narrow their applications to avoid markets where service is already
provided. The resultant certificates restrict both routes served and
commodities carried. An example of the artificially restricted certificates
consider a regular route carrier with certification to service Baltimore,
Philadelphia, and the towns in between, but without authority to
carry goods between these two cities. Many irregular route carriers
operate with certificates which narrowly specify commodities which
may be carried from one part of the country to another. These
certificates also often provide only one-way authority. Such restricted
authority exacerbates the empty backhaul problem by reducing or
eliminating the natural flexibility of operations essential to obtain
efficient capacity utilization.
Taken together, the entry provisions of the TRA would sub-
stantially reform present entry procedure and allow entry as well as
potential entry to play a much greater role in the natural regulation
of market efficiency. Many of the inefficiencies which have crept into
the industry during 40 years of regulation would be reduced or eliminated.
The following changes in entry requirements are proposed.
(a) The TRA entry section broadens the focus of entry
hearings which are conducted by ICC to include consideration of
the shipper's preference for combinations of services
rates other
FORD & 971839 LIBRARY
-11-
than those available from currently certificated carriers.
(b) Timeliness is an esstenial ingredient in any successful
entry attempt. But in fiscal 1974, the average motor carrier operating
authority case required over 10 months to resolve. This figure
includes cases that are trivial route extensions that require little time.
Controversial entry attempts can be expected to require even longer.
Delays and their associated expense constitute a barrier to entry which
does not discriminate between undesirable and desirable entry.
A simplified entry test is proposed which would reduce regulatory
delay for those entry cases which have the potential for quick disposition.
The TRA proposes to put a time limit on the consideration of such
entry cases. In recognition of the backlog which now exists, a full
year would be allowed for the consideration of applications which
are submitted within the first 18 months after passage of this provision.
After this transitional period, a maximum of 90 days would be allowed.
Under the proposed simplified entry test, the Commission would
be required to issue a certificate: 1) if the applicant demonstrates
that he is "fit, willing, and able"; 2) if the revenue derived from
the proposed service will cover the "actual costs" of the service; and
3) if no protestant proves that the proposed rate is discriminatory.
The Commission would be specifically prohibited from considering
the adequacy of existing service or the effects of the proposed entry
upon competitors.
-12-
In some cases, where information on the proposed service is
difficult to project, the applicant may wish to utilize the cost of
existing similar services as evidence of what the fully distributed
cost on the proposed service will be. Provision for this has been made
in the TRA. As an option, this provision will give carriers additional
flexibility. But as a requirement, it would tend to frustrate any
carrier which was more efficient than average or which proposed an
innovation which lowered cost. Hence, the Commission would be
prohibited from requiring industry-wide or system-wide information
on cost or revenue.
(c) To insure that the proposed rate schedule used for entry is
meaningful and relatively permanent, the bill provides that the
Commission may require that it be put into effect for a period of up
to one year. During that time, it could be lowered only in response to
competitive rate reductions. On the other hand, to prevent harrassment,
the rate schedule may not be suspended or set aside as being unlawful
for a period of two years.
(d) In addition, the Secretary, with the cooperation of the
Commission, is required to conduct a study of the effects of the
entry standards on the performance of the trucking industry. This
study shall be completed and submitted to the Congress by the end
of the third year following enactment of the bill.
-13-
(e) The TRA also provides for improvements to the flexibility
of contract carriers. The Interstate Commerce Act defines contract
carrier by motor vehicle as one which operates "under continuing
contracts with one person or a limited number of persons either
(a) for the furnishing of transportation services through the assighment
of motor vehicles for a continuing period of time to the exclusive use
of each person served or (b) for the furnishing of transportation
services designed to meet the distinct need of each individual customer. "
Historically, the Commission has favored common carriers over
contract carriers. The Commission has done this by restrictively
interpreting the public interest to favor existing carriers and by
arbitrarily imposing a rule of seven: even though an applicant satisfies
all of the tests necessary for the granting of the certificate, he will
be denied the certificate if he already serves seven shippers under
contract. The effect of the Commission's interpretation has been
to impede the growth of contract carriers and to deny the specialized
services and expertise of the contract carriers to the shipping
community and to the public at large.
The TRA removes these unnecessary restrictions on contract
carriers by changing the entry test which the Commission presently
applies to contract carriers.
FORD & GERALD LIBRARY
-14-
1. The Commission would no longer be authorized to consider
the effect upon other carriers when deciding contract
carrier applications.
2. The Commission would be prohibited from considering
the number of shippers a carrier provides service to
when deciding an application where facilities are dedicated
to the shipper.
3. Where facilities are not dedicated, the Commission may
consider the number of shippers, but any group or
association of shippers must be counted as one shipper.
4. Carriers would be permitted to hold both common and
contract authority over the same route provided that the
contract carriage rates are above variable cost.
Due to the inherent imbalance of agricultural commodity flows,
carriers of exempt commodities are forced to run empty a substantial
portion of their mileage. They typically carry exempt agricultural
commodities from rural to urban areas and find it difficult to secure
loads in the return direction due to their lack of authority to carry
other commodities.
An additional section would, therefore, allow carriers to haul
regulated commodities on their backhauls without specific authority
provided that:
1. The backhaul is subsequent to the movement of an
exempt commodity..
2. The carrier owns or leases three or few trucks.
3. The backhaul is in the general direction of the area in
which the vehicle is housed.
FORD & GERALD LIBRARY
-15-
4.
Revenue under this provision is not more than 100
percent of revenue from the carriage of exempt commodities.
5. The rate charged is contained in an approved tariff which
has been published by (or for) an ICC regulated carrier.
A carrier operating under this provision would have no
ability to set rates but would be allowed to use any approved
tariff.
This provision will save fuel and other scare economic resources
by improving the efficiency of the many thousands of small exempt
carriers and owner-operators.
The Facilitation of Truck Movements Which Are Incidental to Air
Freight Service
The Interstate CommerceAct exempts from economic regulations
transportation of persons or property by motor vehicle "when in-
cidental to transportation by aircraft. " The Commission by rulemaking
has determined that to be within the exemption, the transportation must
be (1) within the "terminal area" of the air carrier; (2) part of a
continuous movement received from or delivered to an air carrier;
and (3) on a through air bill of lading. The size of the "terminal area"
as determined by the ICC has been too restricted, resulting in some
truck movements being regulated even though they are incidental to
air freight. The TRA therefore, extends the size of the exempt
zone to the area within 100 miles of the airport.
FORD i GERALD LIBRARY
-16-
Facilitation of Motor Freight Services to New Plants
Under the present regulatory system, service to a new plant
must be approved by the Commission, unless the commodities being
shipped are exempt or the movement is entirely within one State.
As a result, securing new service can be a problem for any firm
contemplating the establishment of a new plant.
The TRA provides an exemption from this requirement for any
plant which is less than five years old or which is shipping and receiving
new products. In addition, any motor carrier which serves under
this exemption for two years shall be granted authority to continue
serving permanently.
Removal of Unnecessary Certificate Restrictions
The ICC has imposed restrictions on operating certificates
that unnecessarily restrict the yypes of commodities that carriers
may transport and that require carriers to follow unnecessarily
circuitous routes. These restrictions have resulted in inefficient
use of the nation's motor transportation capacity and in waste of fuel.
The TRA directs-the Commission to take all steps necessary to
broaden the categories of commodities that may be carried and to
remove all restrictions requiring wasteful and circuitous routes.
As a part of this relaxation, two specific steps are required. First,
LIBRARY GERALD R. FORD
-17-
the ICC is required to allow any carrier to offer direct service,
by-passing any present gateways, provided that the carrier had
previously been providing a significant amount of transportation
via the circuitous route. Second, the ICC must broaden the present
deviation rules and increase the maximum deviation to 25 percent.
These provisions would apply to both regular route and irregular route
carriers.
A Study of the Need for Change in Commercial Zone Legislation
Local motor freight transportation is unregulated. The
zones within which transportation is considered local (commercial
zones) are generally larger than the central city but smaller than
the metropolitan area. Changes in the boundaries of the zone can
have a major impact since firms which are included in the zone
have a wider choice of transportation services.
The TRA directs the Secretary of Transportation, in consultation
with the Commission, to undertake a comprehensive study of the
present regulatory system relating to commercial zones, to determine
if this present regulatory system is consistent with present economic
realities, and whether there is need for regulatory or legislative
change. The study shall be completed and submitted to the Congress
within two years.
FORD
ALD
-18-
Provisions Allowing More Efficient Utilization by Private Carriers
Private carriers are firms whose main business is outside.
of transportation but who operate trucks in furtherance of their main
business. Presently, they are allowed to carry their own or exempt
commodities but are prohibited from carrying goods for their
affiliates on a for-hire basis, and are specifically forbidden to
lease their trucks to regulated carriers for periods shorter than
30 days. Both of these restrictions make it unnecessarily difficult
for private carriers to utilize their vehicles on backhauls (return
trips).
The TRA would permit private carriers to carry freight
on a for-hire basis for affiliates. Two firms are regarded as
affiliates if either firm owns 51 percent of the stock of the other, or
if a third firm owns 51 percent of both. This will improve the
efficiency of any firm where affiliates have freight which is moving
in opposite directions. Savings of several kinds will result. For
example, a recent study of 14 private carriers by the Department
found that relaxing this one restriction could save 1.9 million miles
and 480, gallons of fuel annually for these carriers alone.
The TRA would also permit private carriers to lease their
vehicles and drivers to regulated carriers for short periods of time
This would enable the private carrier to utilize an otherwise empty
backhaul by "trip leasing" equipment and drivers to a regulated carrier.
9/29/
75
DRAFT PRESIDENTIAL MESSAGE
TRUCKING REGULATORY REFORM ACT
TO THE CONCRESS OF THE UNITED STATES:
I am, today, sending to the Congress the Trucking Regulatory
Reform Act as part of the overall program of my Administration
to strengthen our system of free enterprise. In recent
weeks, I have observed a growing concern both in the Congress
and the public at large for the need to take a fundamental
look at our regulatory system and insist on some much needed
modernization. This legislation responds to that concern in
one major sector of the transportation industry.
This Act is the second in a series of legislative initiatives
in our effort to achieve fundamental reform of transportation
regulation. The Railroad Revitalization Act is already before
the Congress. In the next few weeks, I will submit my
proposals for the modernization of airline regulation.
Together these proposals represent the most comprehensive
set of reforms in the long history of economic regulation of
the transportation industry.
Like the Railrond Mvitalization Act, the basic thrust of
this bill is to improve the economic use of valuable
transportation resources, to conserve fuel, and to eliminate
antiquated and unnecessary regulation. It is specifically
LIBRARY GERALD R. FORD
2
designed to enable trucking firms to carry a greater variety
of goods by Wely of more direct rontes at lower costs to our
nation's consumers.
To achieve these goals, the bill proposes a number of amend-
ments to the Interstate Commerce not to remove the artificial
barriers which today impose costly operating restrictions
on the industry. Specifically, it provides trucking firms
greater freedom to adjust prices to meet market conditions.
It will permit greater case of entry and place greater reliance
on the natural forces of competition to improve efficiency.
It will outlaw collective ratemaking activities of rate bureaus
which currently stifle competition and discourage service
innovation. In addition, the bill will subject merger
transaction to court review under normal antitrust proceedings.
Such action eliminates special treatment for the, trucking
industry whose economines and competitive characteristics
do not justify an exception to traditional antitrust
practices. In short, it will reduce or eliminate many of
the inefficiencios which have crept into the industry during
40 years of regulatory control.
Currently, not all trucking firms are subject to economic
regulation. Since 1935 when the Motor Carrier Act was passed,
extending ICC authority to regulate trucks as well as
railroads, a number of trucking activities have been granted
exemptions from ICC control. For instance, carriers of raw
FORD & 937839 LIBRARY
3
agricultural products are not bound by economic regulatory
constraints. Trucking firms engaged in intrastate operations
and those involved in transporting their own goods are exempt.
Studies of unregulated trucking indicate that these carriers
provide efficient and economical transportation services -----
often better service than is provided by regulated carriers.
However, even these octivities are in part affected by the
intricacies of our current regulatory system. For example,
while agricultural carriers are free to set their own rates
and select their own rotues, they are limited to the carriage
of agricultural products only. Thus, after delivering their
goods, they are not allowed to transport processed food or
non-agricultural commodities on their return trips. As a
result, they are often faced with a choice of carrying un-
authorized goods, thereby breaking the law, or returning home
empty, thus wasting fuel and raising the cost of their services.
The proposed bill includes a number of changes which would
expand areas of unregulated trucking and reduce the backhaul
problem by calling for a gradual abandomment of restrictive
commodity and route regulations.
The importance of regulatory reform in OUT eliort to improve
the efficiency of our transportation system nmot be over-
emphasized. Therefore, I urge the Congrame
this
measure serious consideration at the em
ible date.
FORD & LIBRAR
1
The special interests will undoubtedly oppose these changes
which must be made if the American public is to receive the
full benefits of a more competitive, more efficient trans-
portation system. But I am confident that the public benefits
that will flow from the proposed reforms are so clear and so
great that the Congress will act quickly to achieve them
without delay.
FORD is LIBRARY 938870
The Airline Bill Memo is still being drafted and I will supply
it to you when it is ready.
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF management AND BUDGET
WASHINGTON, D.C. 20503
JUL 17 1975
MEMORANDUM FOR:
THE PRESIDENT
FROM:
JAMES T. LYNN
SUBJECT:
Status Report on Robinson-Patman
Act Reform
In March you announced your intention to seek legislation
to reform the Robinson-Patman Act.
Since then, concerned agencies (Justice, Commerce, SBA, HEW,
CEA, CWPS, and OMB) have explored several alternatives and
three substantive options have emerged. The purpose of this
memorandum is to provide you a status report.
The Robinson-Patman Act (RP-A) was enacted in 1936, in the
midst of the Depression, essentially to help the small local
grocers hold their position against the then emerging chain
supermarkets. The RP-A has two main provisions: One is a
civil prohibition on discriminating between different customers
unless the manufacturer can show that his lower price is cost
justified or is meeting the legitimate competition of another
manufacturer. Persons injured by prohibited conduct are
entitled to recover treble damages in private suits. The
second is a criminal prohibition against charging "unreason-
ably low prices."
The statute is unusual. No other country except France has
anything similar, and in France, the government refuses to
enforce it.
The RP-A has not achieved its objective of heading off the
creation of chain stores. In addition to this failure, it
has reduced price competition and spawned a great deal of
litigation.
Also, it has permitted in some manufacturing industries, a
few firms to dominate the industry by encouraging parallel
pricing practices and, occasionally, by outright conspiracy.
The RP-A makes it harder for aggressive buyers to break these
2
pricing patterns and thus helps to prevent competitive pricing.
Moreover, the Justice Department's experience in prosecuting
criminal price fixing cases suggests that manufacturers, in
satisfying the RP-A, have used that occasion to swap pricing
information, thus further preventing competitive pricing.
Therefore, the need for reform is clear. If reform is success-
ful, it would contribute significantly to your overall
regulatory reform program which is aimed at eliminating costly
government restrictive practices that tend to eliminate a
healthy competitive market place. However, achieving reform
will be difficult. The options that have been considered have
been viewed primarily as ways to head off the inevitable oppo-
sition of those businesses who want to avoid effective price
competition by relying on the civil aspects of the RP-A.
The following options have been considered.
OPTIONS
1. Outright repeal. All agencies, except the SBA, believe
that outright repeal of the Act is -- on the merits --
from Robinson-Patman can be more rationally achieved
from preserving the Sherman Act's prohibition on
"attempts to monopolize." Some of your advisors
believe that outright repeal has the added virtue of
demonstrating the depth of your commitment to regulatory
reform. However, repeal will be vigorously opposed by
small business groups and has the least prospect of
success in Congress. Moreover, a repeal proposal will
be viewed by opponents as a pro-big business move to
unleash corporate bullies to prey upon smaller firms
through abuses of market power. It would be argued --
but not demonstrably -- that this could lead to more
industry concentration.
2. Predatory pricing substitute. The Justice Department
has drafted a legislative substitute for Robinson-
Patman that would outlaw: overt threats by businesses
to force certain pricing practices on their competitors;
and sales below out-of-pocket costs (except to meet
competition or to enter new markets). This substitute
would significantly narrow the Robinson-Patman Act,
minimizing or eliminating its use to restrain hard
competition. It would provide some answer to critics
of reform, including small business groups. However,
3
sophisticated observers would realize that the pro-
tections afforded to small business are illusory
because violations would be virtually impossible to
prove. Accordingly, critics would charge that the
proposal favors big business and will also lead to
increased concentration. Again, Congressional
sponsors will be difficult to attract.
3. Revision coupled with predatory pricing prohibition.
The final option builds upon the predatory pricing
substitute and also outlaws sustained price
discriminations that systematically favor larger
buyers or are likely to eliminate competitively
significant firms from a market. This alternative
would constitute a major improvement over the status
quo, making it quite difficult to prove a violation.
It might be more acceptable to members of Congress.
However, the modification approach is not favored
on simple economic grounds (it does not go far
enough toward repeal), will not satisfy small
business, and may be viewed as inconsistent with a
real commitment to regulatory reform.
Because the public has a poor understanding of the costs
imposed by the Robinson-Patman Act, because the small business
community is deeply concerned, and because Congressional
interest is low, we are proceeding as follows:
-- The lead responsibility on this issue has been
assigned to the newly established Domestic Council
Task Force on Regulatory Reform.
-- The Task Force will begin working with staff members
representing the newly established group of 24
Congressmen and Senators with whom you recently met
on regulatory reform.
Hopefully, we can look to this group to provide a
Congressional constituency for reform of the Robinson-
Patman Act.
-- A decision on which legislative solution to propose
will be recommended after these consultations by the
end of August.
LIBRARY GERALD R. FORD
file
Reg perform
AGENDA FOR
DOMESTIC COUNCIL REVIEW GROUP MEETING
JULY 30, 975 5:00 p.m.
THE ROOSEVELT ROOM
1. Follow-up items from 7/12/75 meeting (Leach)
a. Summary of last meeting-clarifications (attached)
b. Need to develop work plans for items assigned
at last meeting.
C. Comments on Status report and other organizational
matters.
d. Result of White House meetings (press, speech, etc.)
2. Status of Air and Truck Reform Legislation (Collier/Steed)
3. Results of ETIP meeting on Regulatory Lag (MacAvoy)
4. Results of Congressional Meetings on Robinson-Patman
(Sims/May)
5. Ocean Rate Bureau Situation (MacAvoy)
6. Proposal for Inflation Impact Analysis Workshop (Collier)
7. Status of FPC - Intrastate Gas Purchase Rulemaking (MacAvoy)
8. Assignments/Follow-up
FORD & LIBRARY GERALD
SUMMARY OF DOMESTIC COUNCIL REVIEW GROUP MEETING
WEDNESDAY, JULY 23, 1975
THE ROOSEVELT ROOM
I. Several items were followed up from last week's meeting:
a. The status of the 121 brake standard.
b. The progress on allowing industry purchase of
natural gas in intra-State markets.
c. Need to schedule meetings with six department
heads following the President's remarks at the
Cabinet meeting.
2. Establishment of Priorities for DCRG - there was general
agreement on the following priorities and assignments:
a. Continue efforts to achieve enactment of re-
pealing fair trade laws, enactment of Financial
Institutions Act and the Railroad Revitilization
Act.
b. Complete legislative drafting and submit legis-
lation on:
Truck Reform - OMB lead (Morris)
Airline Reform - OMB lead (Morris)
Robinson-Patman Reform - Justice lead (Sims)
C. Develop issues and seek Presidential decisions
on legislation for:
Cable Television - Domestic Council (May)
Insurance - Justice (Sims)
Ocean Rate Bureaus - CEA (MacAvoy)
d. Ensure that the following Presidential directives
are fully implemented:
Inflation Impact Analysis - OMB lead (Morris)
Concentrate on Six Agencies to Reform
Existing Regulations - Domestic Council (Leach)
e. Monitor activity but do not concentrate effort on
the following areas:
Capper-Volsted - Agricultural Cooperatives -
FORD : LIBRARY GERALD
awaiting FTC report - Justice (Sims)
Improve Consumer Representation - Hills
Implement State and Local Task Force on
Regulatory Reform - OMB (Morris)
2
f. There was no resolution as to what efforts should
be undertaken in the areas of Antitrust or what
should be the next steps with Independent Regula-
tory Commissions. Follow-up meetings with ETIP,
Administrative Conference and Justice should re-
sult in a plan for the Commissions.
3. A bi-weekly status report was distributed with responses
requested as to whether it was useful.
4. Robinson-Patman - Justice agreed to meet with House and
Senate staff members in the next week and come back with
recommendations for next steps.
5. Mr. Hills asked what assistance Ed Berger of NSF and his
staff might provide to the effort. Some agreement that
we might want to involve them in some long term reviews
at a later point in time.
6. There was an assignment to prepare a concept paper on a
tax incentives approach to Environmental Safety Regulations.
A paper will be prepared for discussion at the August 13
meeting of the DCRG. - OMB/Treasury lead (Morris/Clarke)
&
FORD
GERALD
LIBRARY
THE WHITE HOUSE
WASHINGTON
July 28
TO:
Jim Cannon
FROM: PAUL LEACH
FYI