THE-a ORNEY GxNERAL
OFTEXAS
Railroad CommissSon Opinion No. O-2867
of Texas
Austin, Texas Re : Whe.ther fact that applicant
for
motor bus certificate oper-
proposes to
ate at lower fares than existing car-
riers, may be considered as evl.dence nn
the, 1~ssue of convenl,enca and neeessl*,y;
Gentlemen : and other ,re.lated issues.
In your Petter of October 21, 19klp you submit tc us,
the following request for an opinion:
“There is now pending before the Motor Transporta-
tion Dfvisfon of the Railroad Commission of Texas an ap-
plication filed by a common carrier motor bus carrier,
which is now authorized to transport, and is transpor%inr;_ ,*
interstate passengers for hire9 for a cer’?:.If,lea,te of ::c‘n~=
venience and necessi t.y, aut,horizir;g i t to I.r-anspor% ant- :;,
&ate passengers Sipon !.he Same buses that the bus carrl.cr
is now usi.ng Ir, its lr;tesstate ‘7~s cpera~!:;;.~ri.
‘Pin the pending applicatlan, and a,? a hearing that
““(9) That the type of sffvfce offered by th? appli-
cant is dlsti,nctive
a se~vicx b,y reason of the ‘Low ,cos’l
of its transportation services te its passengere, :%t ‘be-
fng asserted In the application that the rates of ,fare
would be approximately %went”y,-,five oerczns (25%) lawer
than the rates of f,sse offered by ,the ex:isLinlg bw:; facllf-
ties serving ,the sa.me terri,tory, and by reapon, n,f o-ther
advantages offered the trave:lLng pubile, ineL.wdl,ng free
meals, are elements bearing upon, and having relati.un to,
pu.bli c convenience and necessity and the adeq,uacy ,OS”4n-
adequacy of existing carTier service, which would support
an application for the certificate of conven.ience and
necessity such as the appifcant is applying fo?,
“(21 That Sn view of the existing interstate opera-
tion:; by the appliear:t and fts proposal ,Lo appl,y to fts
proposed intrastate opera,tions for which a certificate of
. .
Railroad Commission of Texas, page 2 (O-2867)
convenience and necessity is sought, the same rates which
it now carries, is an element and factor bearing upon,
and having relation to, public convenience and necessity
and the adequacy or Inadequacy of existing carrier service
which would support an application for the certificate of
convenience and necessity such as the applicant Is apply-
ing for.
“(3) That the granting of an application for the ln-
auguration of the service will create a competitive sltua-
tion which Is highly desirable in the public Interest,
which Is material to, and a proper element and factor of,
public convenience and necessity, which would support an
application for certificate of public convenience and ne-
cessity such as applicant is now applying for.
“(4) That applicant’s proposed bus service will not
affect other intrastate carriers serving the same terrf-
tory, routes, and points, adversely, is material to, and a
proper element of, public convenience and necessfty, and
the adequacy or inadequacy of existing carrier facilities
which would support an application for a certificate of
convenience and necessity such as the applicant is now
applying for O
“(5) That by the application of lower rates to intra-
state motor carrier bus fares, a new s&&a of bus traffic
will be reached and opened up by reason thereof, whfch
traffic is now moving either through the use of prtvate
transportation facilities, travel bureaus, hitch hfking,
other facilities, or not moving at all, due to the exfst-
ing higher rates of fares, which new strata of bus traffic
applicant is seeking to reach, and from which it proposes
to obtain its bus traffic, in the event the application is
granted 9 all of which are elements and factors of conven-
ience and necessity and adequacy or inadequacy of exist-
ing carrier facilitfes which would support an application
for a certificate of public convenience and necessity such
as the applicant is now applying for.
“(6) That the sleeper coach servfce, with facflitfes
equivalent to that of a Pullman passenger train coach,
and free meals to its passengers, which applicantproposes
to furnish are factors and elements of public convenfence
and necessity and the adequacy or inadequacy of existing
carrier facilities which would support an application for
a certificate of convenience and necessity such as the
applicant is now applying for.
“In presenting’such contentions the applicant urges
same as elements of public convenience and necessity and
Railroad Commission of Texas, page 3 (O-2867)
the adequacy or inadequacy of existing carrier facilities
whether considered separately, or in conjunction with
each other, as well as other and USUAL proper constituent
elements and factors of public convenience and necessity
and adequacy or inadequacy of existing carrier facilities.
wQuaere - Please give me your legal opinion as to
whether or not the Railroad Commission of Texas should per-
mit and consider allegations and proof In support of the
UNUSUALelements and factors herein above outlined in
paragraphs numbered one to six, inclusive, and in d etermln-
lng such application, consider same as elements and factors
of9 and as bearing upon, and having relation to, public
convenience and necessity and the adequacy or Inadequacy
of existing passenger carrier facilitiesOn
As we understand, a hearing was commenced on the appli-
cation filed by All-American Bus Lines, Inc,, and was recessed
in order to obtain an opinion for the Railroad CommissionUs
guidance in conducting the hearing. In order to better understand
these questions we obtained from you andhave read the application
for certificate. You do not ask our opinion concerning the suf-
ficiency of the application as respects any of the questions
submitted by you and nothing herein said by us should be con-
strued as touching upon the sufficiency or insufficiency of the
application on any question. You specifically say in the seoond
paragraph of your letter that the applicant offered the proof
and contentions under “proper allegations,” and we assume that
if the application does not now or is not made to contain proper
allegations upon which to base the evidence that it will be re-
jected.
We will first dispose of the types of evidence and con-
tentions suggested in subdivisions numbered (2) and (3) of your
letter in that order.
If we understand contention No. (2) correctly, it seems
that some advantage is claimed on account of the fact that All-
American already holds authority from the Interstate Commerce
Commission to carry on an interstate business over the same
route O It is our opinion that such fact is not involved in the
question of inadequacy of existing intrastate services nor of
the need of additional facilities to serve intrastate. The
holder of an interstate certificate stands in no better light
when applying for Intrastate rights than does one who has no cer-
tificate authorizing him to handle interstate traffic. He must
establish the inadequacy of existing services and the need of
Railroad Commission of Texas, page 4 (O-2867)
additional facilities under the same rules, whether he already
holds an interstate certificate or not. In the first place,
the statute (Article qlla, Vernon's Civil Statutes) provides
for no difference. And In the second place, the need of addi-
tional intrastate services had not entered into the action of
the Interstate Commerce Commission. Purely Intrastate carriers
would not have been prejudiced in the granting of interstate
rights by the Interstate Commerce Commission and could hardly
have protested the same. When an interstate carrier applies
to the Railroad Commission for an intrastate certificate, it
would seem that to indulge any presumptions in his favor on
the issue of convenience and necessity, or to lighten the bur-
&n on him, would be depriving existing carriers, in a measure9
of the right to defend their services and prove the adequacy
thereof. From the opinion of the Supreme Court of Ohio, in
Canton v.. Public Utilities Commission, 174 N.E. 244, we quote:
"An operator of an interstate motor transportation
service, seeking a certificate of convenience and neces-
sity to operate an intrastate motor transportation service,
stands in no more favorable position by reason of his pas,-
session of an interstate certificate than he woukd without
such certificate, since his possession of such certificate
Is not predicated upon the existence of a convenience and
necessity. The burden upon such applicant of showing
convenience and necessity is the same as though he were
making his initial appearance in the motor transportation
world. +**088
"We can not escape the conclusion that the fact that
the applicant possessed an interstate certificate over the
same route, and by its application for an intrastate cer-
tificate simply sought permission to supplement its inter-
state service by an intrastate service, without either in-
creasing its equipment or changing its schedule, was the
controlling consideration in the minds of the commission
in the finding and order made. on affirmance of such
finding and order would but indicate a convenient and ef-
fective way to secure a certificate of convenience and
necessity to operate a motor transportation company within
the state wherever and whenever an applicant has estab-
lished an interstate route, the establishment of which the
commission was without power to prevent." "
In so far as contention No. (2) concerns the offer of a
lower fare, our discussion of contention No. (1) will be appli-
cable.
. .
Railroad Commission of Texas, page 5 (O-2867)
Regarding contention No. (31, it seems to us that
whether competition is desirable is largely the ultimate ques-
tion depending upon the adequacy or inadequacy of existing
facilities and whether additional services are needed, There
should be no assumption that another carrier should be in the
field. It must be remembered that the burden Is on the appli-
cant to plead and show by evidence that existing services are
inadequate and that additional facilities or services are needed.
Section 8 of Article qlla* Railroad Commission v. Shupee, 57
S.W. (26) 295, 73 S.W. (2dj 505. The mere fact that competition
would be introduced by the granting of a certificate should not
be considered as having met to any extent whatsoever this bur-
den upon the applicant.
We now refer to contention No. ‘(l), which essentially
resolves itself into the question as to whether the proposal
to operate at substantially lower fares--attended we presume
with proof to show that such operation is feasible and possible
--may be shown and considered on the issue of convenience and
necessity. A reading of the opinion of the Interstate Commerce
Commission discloses that in granting All-American’s application
for interstate rights that body received and considered such
offer and evidence in support thereof on such issue.
Section 3, and subsections (a) and (b) of Section 4,
Article 911a, Vernon’s Civil Statutes, read:
llSec. 3. It is hereby declared that when existing
transportation facilities on any highway in this State
do not provide passenger service which the Commission shall
deem adequate to provide for public convenience on such
highway, then such inadequacy of service shall be consid-
ered as creating a condition wherein the public convenience
and necessity require the designation of, and provision
for9 additional service on such highway, and it shall be
the duty of the Commission to issue certificate or certifi-
cates as herein provided, if in the opinion of said Commis-
sion the issuance of such certificate will promote the
public welfare.
llSec. 4. (a) The Commission is hereby vested with
power and authority, and it is hereby made its duty to su-
pervise and regulate the public service rendered by every
motor bus company operating over the highways in this
State p to fix or approve the maximum, or minimum, or maxi-
mum and minimum, fares, rates or charges of, and to pre-
scribe all rules and regulations necessary for the govern-
ment of, each motor bus company; to prescribe the routes,
schedules, service, and safety of operations of each such
motor bus company; to acquire the filing of such annual or
Railroad Commission of Texas, page 6 (o-2867)
other reports and of such other data by such motor bus
company as the Commission may deem necessary.
"(b) The Commission is hereby vested with authority
to supervise, control and regulate all terminals of motor
bus companies, including the location of facilities and
charges to be made motor bus companies for the use of such
terminal, or termini; provided' that the Commission shall
have no authority to interfere.in any way with valid con-
tracts existing between motor bus companies and the owner
or owners of motor bus terminals at the time of the pass-
age of this Act."
In Fornarotto v. Board of Public Utility Com'rs., 143
Atl. 4509 Supreme Court of New Jersey, it was held that an of-
fer to operate at lower fare does not alone establish necessity
and convenience, authorizing the grant of a public utility fran-
chise to a bus company. In Seaboard Air Line Ry, Co. v. Wells,
130 So. 587? it was observed that "a cheaper rate, as we have
seen, does not of itself authorize the granting of a certificate."
While we are convinced that the mere offer to render
the service at lower fares, standing alone, would not be a suf-
ficient showing of public convenience and necessity to sustain
a certificate., we have concluded that in a proper case such an
offer -- especially when supported with proof tending to show
that operations could be conducted successfully under the re-
duced fare -- may be considered by the Commission for what it
is worth on the issue of convenience and necessity. In fact,
as we understand the opinion in Southland Greyhound Lines v.
Railroad Commission, 73 S.W. (2) 604, by the Austin Court of
Civil Appeals, the lower fare proposed by the applicant was con-
sidered by the Court as evidence of public convenience and ne-
cessity in affirming the trial court's judgment sustaining a
certificate. From that opinion we quote excerpts as follows:
1' ***, Appellant contacted members of the board and
offered to establish additional bus services, and submitted
in writing its tentative or proposed bus schedules and
rates or fares. Appellee likewise submitted proposed sched-
ules and rates or fares. A comparison of thetwo propos-
als revealed that appellee's proposed services were better
adapted to the needs of Randolph Field and provided for
lower rates or fares. The concessions board recommended
that appellee's proposal be accepted; and the contract at-
tached to appellee's application for the permit was enter-
ed into between appellee and the War Department. A com-
parison of the bus services provided by the contract with
those proposed by appellant reveals that they are better
adapted to the needs of Randolph Field, as follows: (a)
r~ailroad Commission of Texas, page 7 (O-2867)
Appellee's services offered better schedules as to hours
of operation; (b) more schedules; (c) appellee's services
were not burdened with transporting the general traveling
public between San Antonio and Rouston, thereby rendering
practically exclusive services for the personnel of Ran-
dolph Field: (d) appellee's contract gave it the exclusive
right to enter into the post or private government property
for the purpose of picking up and discharging passengers,
and appellee was required to post schedules and provide for
sale of tickets at the Army Y.M.C.A. under the terms of his
contract, and ,these privileges and services were shown to
be much more convenient for the porscnnel of Randolph Field
than the proposed services of appellant, which required
them to go off the government post or property, and to board
and leave buses on the public highway passing by or through
a portion of Randolph Field; (a) appellee's rates or fares
were lower; and (f) appellee unconditionally contracted to
furnish a school bus for transporting the children of the
enlisted men and officers to and from school in San Antonio.
"The evidence showed that while appellant may have
been able to render the additional services, it was neither
ready nor willing to do so. At Least appellant was given
the opportunity by the Randolph Field authorities to pro-
pose schedules and rates; but it only proposed tentative
and unsatisfactory schedules and rates. As a competitor
for the additional services, appellee proposed schedules
better adapted to the needs of Randolph Field and lower as
to rates or fares; and proposed to operate a school bus,
which appellant did not propose to do unless there should
be such a number of school children as would be satisfac-
tory to appellant. In determining the adequacy of the addi-
tional services demanded by Randolph Pield, the Railroad
Commission was also authorized to consider the fact that
the War Department had investiga,ted and selected appelllee
and had by contract clearly defined and prescribed the char-
acter of services desired, with special privileges granted
appellee to enter on government properly in order that he
might better serve the trafficen
We regard the proposal to furnish free meals as being
a part of the offer to operate at lower fares,
We will not consider contention No. (5j, urging that
applicant should be~permitted to show that a new strata of traf-
fic will be reached, that is, a field composed of poor people
unable to pay present fares and who now travel through travel
bureal arrangements, as hitch-hikers, etc., and others who are
Railroad Commission of Texas, page 8 (o-2867)
now unable to travel at all on account of high fares.
From Railway Co. v. State, et al, 25.2 Pac. 849s by
the Supreme Court of Oklahoma, we quoter
"It is held in Choate et al. v. Ill. Commerce Commis-
sion, 309 Ill. 248, 141 M.E. 12:
"'That a proposed bus line, serving the same territory
as an established interurban line, may accommodate a few
individuals, does not justify a certificate permitting it
to operate; the convenience and the necessity which the
law requires being the convenience and necessity of the pub-
lic,as distinguished from that of an individual, or any
number of individuals."'
To similar effect, see also Lake Shore Electric Co. v.
Public Utilities Commission, 1% M.E.,239, Ohio Supreme Court;
West Suburban Transp. Co. v. Chicago & W.T. Ry. Co., 140 M.E.
56, Illinois Supreme Court.
Nevertheless, until it hears the evidence the Railroad
Commission cannot tell the extent to which it may go. The tes-
timony which may be adduced in support of these allegations may
prove to be trivial and may not even tend to show a public need
for the new service. However, it is at least conceivable that
substantial evidence of this nature may be offered showing a
substantial public need. The Commission may hear this evidence
and consider the same for what, if anything, it may be worth.
It is thought that the showing sought to be made in contention
MO. (4) is supplemental to that involved in No. (511 discussed
immediately above, and our answer is the same as to it.
We now address ourselves to contention MO. (6). We
have already considered the matter of free meals. Whether there
is actually a need for sleeper coach service over this route,
and if so, the extent thereof, can be told only after hearing
the evidence. The proposal to furnish overnight sleeping serv-
ice between Dallas and Fort Worth on the one hand, and El Paso
on the other, coupled with allegations that there is a public
need and demand for it, and that such is not now available, to
our minds presents a proper inquiry involving convenience and
necessity. Whether such allegations may be properly sustained
is another question. In our opinion the evidence should be and-
mitted for whatever, if anything, it may prove to be worth to
the Commission.
Railroad Commission of Texas, page 9 (O-2867)
This answers your questions as best we can consider-
ing the form of their submission.
Yours very truly
ATTORNEYGENERALOF TEXAS
By /s/ Glenn R. Lewis
Glenn R. Lewis, Assistant
APPROVEDDEC 5, 1940
/s/ Gerald C. Mann
ATTORNEYGENERALOF TEXAS
APPROVED: OPINION COMMITTEE
BY: BWB, CHAIRMAN
GRL:RSrwb