              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
