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first commitment to our company to lend $1,500,000 of working capital in 1947, we had been unable to obtain such a commitment from banking sources, but before we actually accepted the RFC loan the Dallas bankers agreed to start our needs. Again in our recent financing program involving $7,000,000 we bad pending a loan application to the RFC for $5,000,000 of this money. The amacation had made considerable progress in the RFC. We feel that the practical avail
bility of that source of financing inspired in the private bankers the confidence which we needed in obtaining the $7,000,000 of financing. Also, the mere fact that the RFC was originally willing to lend us 112 million dollars after a careful check, proved to our private bankers the essential solvency of the loan. Personally, I feel that in providing potential credit of this kind for our new industry the RFC has performed and is performing a substantial publie service without interfering with the injection of money from private sources when money from that source becomes available.
Furthermore, I feel that the continuing effectiveness of the RFC's larger commitment to this company will make possible, in an orderly manner, the financing of an integrated steel mill at the very site of an orę supply sufficient for 100 years of operation. We feel that the operation of a steel mill at the site of its self-owned ore supply is unique in this country and is in the public interest. Very truly yours,
E. B. GERMANY, President. STATEMENT FOR THE AMERICAN SHORT LINE RAILROAD ASSOCIATION BY C. 4
MILLER, VICE PRESIDENT AND GENERAL COUNSEL For the record, my name is C. A. Miller. I am vice president and general counsel of the American Short Line Railroad Association, with offices at 2010 Massachusetts Avenue, NW., Washington 6, D. C. This statement is submitted in behalf of that association and its members. The opportunity to present the views of that association, and its members, is greatly appreciated.
The American Short Line Railroad Association is a voluntary, nonprofit, moperative association, organized more than 36 years ago for the purpose of cooperative action in the consideration and solution of problems of management and policy affecting the operation or welfare of short-line' railroads, and the promotion of harmonious and friendly cooperation between all classes of railroads. The association now has 317 members.
I make a particular point of the fact that all the members of our associa. tion are common carriers, and all but two of them are engaged in interstate commerce, and, therefore, subject to and regulated by the Interstate Com. merce Commission. The other two members are engaged wholly in intrastate commerce, and are subject to the regulation of the States in which they operate.
By way of explanation, I think I should say that a short line, generally speaking, is a railroad less than 100 miles in length and having gross revenues amounting to less than $1,000,000 per year. As classified by the Interstate Commerce Commission, these carriers are known as class II and class III carriers. A few of them are classified as electric lines. More than 80 percent of the members of our association fall in that group. We do have, however, some 68 railroads with gross annual revenues in excess of $1,000,000 each, and we have several members with lines of railroad more than 100 miles in length. However, regardless of length, and regardless of revenues, all of the members of our association have the same common problems.
Our association, and its members, are greatly interested in the so-called commodities clause of the Interstate Commerce Act, and its proper interpre tation and application. Consequently, during the more than 19 years that I have had the privilege of serving the association, I have participated in a number of proceedings wherein the commodities clause was involved.
In the case of U. 8. v. Elgin, Joliet & Eastern Ry. Co., decided by the Supreme Court of the United States on May 25, 1936, and reported at 298 United States Reports 492, I filed a brief as amicus curiae for the association. I also filed a brief amicus curiae for the association in that case in the District Court of the United States for the Northern District of Illinois. The opinion of the court in that case is reported at 11 Federal Supplement 435. That case is hereinafter referred to as the Elgin case.
In the case of U. S. of America v. South Buffalo Ry. Co., et al., I submitted a brief amicus curiae for the association, both in the District Court of
the United States for the Western District of New York and in the Supreme Court of the United States. That case is reported at 333 United States Report 771, and was decided on April 26, 1948. The opinion of the district court is reported in 69 Federal Supplement 456. That case is hereinafter referred to as the South Buffalo case.
I also participated in the proceedings before the Interstate Commerce Commission known as Ex Parte 128–Investigation of South Buffalo Ry, Co., behalf of our association. In that case I submitted a brief amicus curiae with respect to the reports proposed by the examiners, and participated in the oral arguments of that proceeding before the entire Interstate Commerce Commission.
This recital is made for the purpose of showing the long-continued interest which the members of our association have had in proceedings relating to the commodities clause. Perhaps I should also say that our association very strongly opposed certain proposed amendments of the commodities clause when the Transportation Act of 1920 was under consideration by the Senate Committee on Interstate Commerce. I shall, a little later on, discuss all of these proceedings.
The subject of the commodities clause having been interjected into this committee's study of monopoly power, the chairman invited certain testimony with respect to it. Consequently, on April 19, 1950, your committee heard the testimony of a witness who had had charge of the preparation of the South Buffalo case for the Department of Justice. His testimony appears at pages 452 to 495 of the stenographic report of the proceedings before this committee. Again, on May 5, 1950, your committee heard the testimony presented on behalf of the Interstate Commerce Commission. That testimony appears at pages 1349 to 1418 of the proceedings.
So much by way of introduction.
The commodities clause of the Interstate Commerce Act is section 1 (8) of that act. It was originally enacted by section 1 of the Hepburn Act of 1906 (34 Stat. L. 585), and was amended as it now reads, by section 7 of the MannElkins Act of 1910 (36 Stat. L. 547). Presently, section 1 (8) of the Interstate Commerce Act reads as follows:
“(8) Transportation of commodity manufactured or produced by railroad for. bidden.-From and after May first, nineteen hundred and eight, it shall be unlawful for any railroad company to transport from any State, Territory, or the District of Columbia, to any other State, Territory, or the District of Columbia, or to any foreign country, any article or commodity, other than timber and the manufactured products thereof, manufactured, mined, or produced by it, or under its authority, or which it may own in whole or in part, or in which it may have any interest, direct or indirect, except such articles or commodities as may be necessary and intended for its use in the conduct of its business as a common carrier."
The amendment of the act in 1910 made no change in the purpose and intent of the statute. So, for all practical purposes, the statute has been in effect since 1906.
Correlative with the commodities clause is section 15 (13) of the Interstate Commerce Act, which we generally refer to as the Shippers' allowances clause, That clause was also first enacted by the Hepburn Act of 1906 and amended by the Mann-Elkins Act of 1910, to which references have heretofore been made. Section 15 (13) of the Interstate Commerce Act, now reads as follows:
“(13) Allowance for service or facilities furnished by shipper.-If the owner of property transported under this act, directly or indirectly, renders any service connected with such transportation, or furnishes any instrumentality used therein, the charge and allowance therefor shall be no more than is just and reasonable, and the Commission may, after hearing on a complaint or on its own initiative, determine what is a reasonable charge as the maximum to be paid by the carrier or carriers for the services so rendered or for the use of the instrumentality so furnished, and fix the same by appropriate order, which order shall have the same force and effect and be enforced in like manner as the orders above provided for under this section.”
Any consideration of this subject must necessarily include both the legislative history and the judicial history of the commodities clause, and I hope I may be pardoned, therefore, for going into these phases of the subject in as much detail as I have. But, I do think it is important that I do so.
It has come to be recognized as axiomatic that legislation may begin where the evils begin. So far as the commodities clause is concerned, the "evils" were first brought to the attention of the Congress on December 5, 1905, by President
Theodore Roosevelt in his message to the first session of the Fifty-ninth Congress which had convened on the preceding day. In that message, President Theodore Roosevelt said :
"All private-car lines, industrial roads, refrigerator charges, and the like should be expressly put under the supervision of the Interstate Commerce Commiswa or some similar body so far as rates, and agreements practically affecting rates, are concerned. The private-car owners and the owners of industrial railroads are entitled to a fair and reasonable compensation on their investment, bi neither private cars nor industrial railroads nor spur tracks should be utilized as devices for securing preferential rates. A rebate in icing charges, or in mileage or in a division of the rate for refrigerating charges is just as pernicious as a rebate in any other way."
That statement is found in volume 40 of the Congressional Record, at page 92.
It is clear from the foregoing message, that the “evil" complained of was the use of industrial railroads was devices for securing preferential rates," a species of "rebates."
Many Members of the House of Representatives introduced bills to carry into effect the suggestion of the President. During the first session of the Fiftyninth Congress there were at least 18 such bills introduced. All of them were referred to the House Committee on Interstate and Foreign Commerce. All of them received consideration by that committee, but only one was considered at length. That was the bill introduced by the chairman of the Committee, known as H.R. 11488, Fifty-ninth Congress, first session. After consideration by the committee, the chairman was requested to introduce a "clean" bill as a substitute for H. R. 11488, and to include in it the amendments which had been agreed to by the committee. The new bill, which was H.R. 11488 was amended by the committee, was inroduced as H.R. 12987, Fifty-ninth Congress, first session. The report accompanying that bill was House Report No. 591, Fifty-ninth Congress, first session.
Perhaps it may be well, in the interest of accuracy and clarity, to call attention to certain events which had preceded the submission of President Theodore Roosevelt's message to the Congress on December 5, 1905. These events will be reviewed as briefly as possible.
During the third session of the Fifty-eighth Congress, on December 16, 1904, the Senate Committee on Interstate Commerce began hearings on bills to amend the Interstate Commerce Act. These hearings had not been concluded when the Congress adjourned on March 4, 1905. The Senate, on March 2, 1905, had adopted Senate Resolution 288, Fifty-eighth Congress, third session, authorizing and directing the Committee on Interstate Commerce, or any subcommittee thereof, to sit during the recess of the Senate to consider the question of adit tional legislation to regulate interstate commerce and to authorize the Interstate Commerce Commission to fix rates, fares, etc. The committee was also instrue ted to investigate violations or evasions of the antirebate law and the methods by which such evasions were accomplished. The record of this resolution will be found in 39 Congressional Record 3857. To carry out the terms of this resolution, the Senate Committee on Interstate Commerce held further hearings be tween April 17 and May 23, 1905, during which 3,795 printed pages of testimony and argument were heard. These hearings are generally referred to as the Hepburn Act hearings.
One of the witnesses who testified at length before the Senate Committee on Interstate Commerce was Commissioner Clements of the Interstate Commerce Commission. Commissioner Prouty of the Interstate Commerce Commission also testified before the committee.
The Interstate Commerce Commission made no recommendations for legislation forbidding carriers to engage in other than their transportation activities and functions. This is demonstrated by the first 19 annual reports of the Inter state Commerce Commission to the Congress.
When Commissioner Prouty was testifying, Senator Doliver put to him this question :
“But do you think it is proper for railroads to be interested in manufacturing or mining against their competitors on their lines?"
To this question, Commissioner Prouty replied:
"That is an economic proposition. No; I do not much think that it is; but there are a good many cases, not only in the case of anthracite coal roads in Pennsylvania, but it is the case with the bituminous coals out West and in a great many places."
This colloquy is to be found at page 2883 of the Hepburn Act hearings. In the light of what had preceded Commissioner Prouty's appearance before the Senate Committee on Interstate Commerce, this language becomes very important. It is specially so when it is recognized that this is the only comment on the subject made by any member of the Interstate Commerce Commission. Here Commissioner Prouty was referring only to coal-carrying railroads, which the Commission had, after a comprehensive investigation, recognized as possessing the "commingled attributes of carrier and producer.” See the cases of Haddock v. Delaware, L. & W. R. Co. (3 I. O. R. 302) and Coxe Bros. & Co. v. Lehigh Valley R. R. CO. (3 I. C. R. 460). Even then the Interstate Commerce Commission did not recommend the prohibition of industrially owned railroads. See House Document No. 561, Fifty-ninth Congress, second session, and the letter to Chairman Elkins of the Senate Committee on Interstate Commerce dated November 28, 1905, in ICC General Letter Book, volume 55, page 52.
With its letter of November 28, 1905, the Interstate Commerce Commission transmitted the draft of a bill which would carry into effect the Commission's recommendations. This bill is printed in full as an appendix to the Commission's nineteenth annual report, at pages 177-183 (1905). So far as we are here concerned, that bill contained this provision:
"If the owner of property transported under this act directly or indirectly renders any service connected with such transportation, or furnishes any instrumentality used therein, the Commission may, after full hearing of a complaint, determine what is a reasonable charge to be paid by the carrier for the service so rendered for the use of the instrumentality so furnished, and fix the same by appropriate order, which order shall have the same force and effect and be enforced in like manner as the orders above provided for in this section.”
The Hepburn bill, H. R. 12987, Fifty-ninth Congress, first session, when reported, as before noted, had the favorable action of the 18 members of the House Committee on Interstate and Foreign Commerce then, as now, a rather unusual situation.
The debate on H. R. 12987 in the House of Representatives is found in volume 40 of the Congressional Record, beginning at page 1763 and continuing, intermittently, to page 2270. I have no desire to belabor the point, but it is a short and accurate summary of that debate to say that it was clearly indicated that the objective of the bill, and of the House of Representatives also, was to prevent indirect rebates by means of inclusive payments by railroads to private car lines, industrial railroads, etc., for services of a minor character. Ther, were, of course, other objectives of the bill, but I am not referring to them because they have no relation to the subject which is before this committee. However, during the course of that debate, Mr. Campbell offered an amendment which would have required the so-called trunk-line railroads to own all special types of cars used in transportation and would have prevented their leasing or using cars owned by private interests. But his amendment was rejected, as is shown at 40 Congressional Record 1828. The discussion of the Campbell amendment demonstrated that it was the will of the House of Representatives that shippers be not forbidden the right to own facilities or to provide services. But, at the same time, it was demonstrated that the payments to be made for the use of such facilities or the furnishing of such services should be under the jurisdiction and regulation of the Interstate Commerce Commission, as is now provided by section 15 (13) of the Interstate Commerce Act.
H. R. 12987 was passed by the House of Representatives on February 8, 1906, by a vote of 346 to 7, with 10 members “present," and 29 members not voting, as shown by 40 Congressional Record 2303. The bill as passed by the House contained no commodities clause. The only proposal relating in even the slightest way to such a provision was an amendment which would have provided that no railway official or employee should be interested directly or indirectly in the furnishing of material or supplies to a inining company. This amendment, however, was withdrawn. See 40 Congressional Record 2090, 2256–2257.
Since the Interstate Commerce Commisison had, after several investigations of the coal-carrying railroads, made but limited remedial recommendations, several resolutions were introduced in the first session of the Fifty-ninth Congress proposing that the Commisison be directed to discover whether common carriers doing an interstate business, or officers or employees of such carriers, owned or had any interest in the bituminous coal mines producing the coal carried over
ir lines of railroad. However, none of these resolutions was reported by the
House Committee on Interstate and Foreign Commerce. See 40 Congressional Record 1702.
The House of Representatives having failed to provide for a comprehensive investigation, Senator Tillman, on February 12, 1906, introduced Senate Joint Resolution 32, Fifty-ninth Congress, first session, authorizing the Interstate Commerce Commisison to conduct an elaborate and detailed investigation into all forms of alleged relationships sustained by railways and railway officials toward mining interests, etc. This resolution was passed by the Senate on the same day as introduced. See 40 Congressional Record 2431. For reasons which need not here be discussed, a superseding resolution was passed by the Senate giving the Interstate Commerce Commisison ample authority to make the contemplated investigation. See 40 Congressional Record 3852, 3875-3876.
The Hepburn bill, after passage by the House, was referred to the Senate Committee on Interstate Commerce, and reported by thắt committee on February 26, 1906, without amendment. See 40 Congressional Record 2303, 2968. Senators Elkins and Tillman dissented from the views of the majority of the Senate Committee on Interstate Commerce. In Senate Report No. 1242, Fifty-ninth Congress, first session, part 1, page 11, Senator Tillman said: “Ther should be a provision
to divorce absolutely the business of transporting freight as a public carrier and the business of producing freight to be transported.
No public carrier engaged in interstate commerce should be allowed to produce and transport any article for sale beyond such as are necessary for its own consumption."
Senator Tillman's views were also expressed in the Congressional Record of March 15, 1906. See 40 Congressional Record 3834_3837.
Senator Elkins, the chairman of the Committee on Interstate Commercé, submitting the views of the majority of that committee, said, in his own behalf, that.
“The bill should compel the separation of the business of railway transportation from the business of manufacturing or otherwise, producing the article transported” (Senate Rept. 1242, 59th Cong., 1st sess. pt. 2, pp. 3-10; 40 Congresisonal Record 9505).
Later, Chairman Elkins, in discussing the Hepburn bill, ás reported by bis committee, pointed out that the bill made no provision “to prevent interstate carriers producing, mining, and selling coal, iron ore, and other products which they transported in competition with shippers" (40 Congressional Record 48324835).
It was about this time that the commodities clause was first proposed. On May 7, 1906, Chairman Elkins proposed that there be added at the end of section 1 of the Interstate Commerce Act the following:
“It shall be unlawful for any common carrier subject to the provisions of this act, unless authorized by its charter to do so, to engage directly or indirectly, in the production, manufacture, buying, furnishing, or selling of coal or coke or any other commodity or commodities of commerce in competition with any shipper or producer on its line or lines
(40 Congressional Record 6455). Senator Elkins explained the purpose of his proposal by saying, "I want to get this amendment in such shape that it will stop an evil or an abuse that obtains in West Virginia, Pennsylvania, and other coal-mining States' (18 Congressional Record, 6456-6457).
However, Senator Elkins modified his original amendment and submitted a new proposal reading as follows:
“It shall be unlawful for any common carrier engaged in the production, manufacture, buying, furnishing, or selling, directly or indirectly, of coal, coke, or any other commodity of commerce to engage in interstate commerce."
Senator Spooner, discussing the modified Elkins amendment, explained that it had relation principally to the mining of coal (48 Congressional Record 6459). Senator Elkins, speaking with respect to his own modified amendment, said that the purpose of introducing this amendment was "to correct an abuse and eril growing up in the State of West Virginia and in other mining States, owing to the fact that the railroads engaged in competition with producers on their lines" (40 Congressional Record 61:96). After much debate, and in view of a parliamentary tangle, Senator Elkins modified his previously proposed amendment to read:
“From and after May 1, 1908, it shall be unlawful for any common carrier to transport from any State, Territory, or district of the United States to any other State, Territory, or district of the United States, or to any foreign