STUDY OF MONOPOLY POWER

FRIDAY, MAY 5, 1950

HOUSE OF REPRESENTATIVES,

SPECIAL SUBCOMMITTEE ON THE STUDY OF

MONOPOLY POWER OF THE COMMITTEE ON THE JUDICIARY,

Washington, D. C. The special subcommittee met, pursuant to adjournment, at 10 a. m., in room 346, Old House Office Building, Hon. Emanuel Celler (chairman) presiding.

Present: Representatives Celler (chairman), Michener, McCulloch, Bryson, Lane, Willis, and Denton.

Also present: Edward H. Levi, counsel to the subcommittee.

The CHAIRMAN. This session will come to order. Our first witness this morning is a member of the Interstate Commerce Commission, a distinguished gentleman who has been on that Commission for many years, the Honorable Clyde B. Aitchison.

Commissioner Aitchison, we have two statements, one from you and one from Mr. J. Stanley Payne. Do you wish to put Mr. Payne's statement in the record, or do you want him to testify?

Mr. AITCHISON. I was going to come to that, may it please the chairman of the committee.

The CHAIRMAN. I just want to state also there is with us the chairman of the Interstate Commerce Commission, a very distinguished member thereof, Colonel Johnson.

Mr. BRYSON. Let the record show that Colonel Johnson is from South Carolina.

The CHAIRMAN. Mr. Bryson has requested that the record show that Colonel Johnson is also from South Carolina.

Mr. MICHENER. You mean, notwithstanding the fact that he is from there, he is a good man?

Mr. LANE. Mr. Chairman, I hope that will not be used against them. The CHAIRMAN. Commissioner, you may proceed.

Mr. AITCHISON. Mr. Chairman, after that I feel at a disadvantage, because my home is just as far away from South Carolina as it is possible to get, and that is the State of Oregon. [Laughter.]

STATEMENT OF CLYDE B. AITCHISON, COMMISSIONER, INTERSTATE COMMERCE COMMISSION, ACCOMPANIED BY J. STANLEY PAYNE, GENERAL COUNSEL

My name is Clyde B. Aitchison. I have been with the Interstate Commerce Commission since October 1917. I have prepared a statement to submit, which has received unanimous approval on the Com

mission. I have also two statements prepared by the Commission's Bureau of Transport Economics and Statistics, and an analysis by the Commission's associate chief counsel, Mr. J. Stanley Payne, of the decisions of the Supreme Court bearing upon the so-called commodities clause of the Interstate Commerce Act. All these I submit in response to the request of the chairman of this committee.

I will summarize my statement, which is too long to be read in its entirety. The omitted detail will, I trust, be of assistance to the committee and its staff.

The CHAIRMAN. Do you want those statements placed in the record? Mr. AITCHISON. I should like to have my statement and that of Mr. Payne, and the two tables which I have submitted, incorporated into the record.

The CHAIRMAN. That shall be done.

(The statements referred to will be found at the conclusion of Mr. Aitchison's testimony, infra, p. 875. The tables appear as exhibits S-329 and S-330 in Steel Exhibits, pp. 684-689.)

Mr. AITCHISON. If I can be heard better, I will be glad to stand. Mr. MICHENER. We can hear you all right, Mr. Commissioner. Mr. AITCHISON. The commodities clause of the Interstate Commerce Act was enacted as part of the Hepburn Act, approved June 29, 1906. The clause since has remained wholly unchanged except as to punctuation and numbering. The clause, as it stands, has already been read into the record, and I will not repeat it.

The Interstate Commerce Act and jurisdiction of the Commission have been enlarged in late years by the addition of three additional parts, the Motor Carrier Act, 1935, the Transportation Act of 1940, concerning water carriers; and part IV, 1942, which brought in freight forwarders. In none of these later parts of the act is there a provision similar to the commodities clause in section 1 of part I, but in the Freight Forwarders Act there is a commodities clause in reverse, a prohibition of certain shippers engaging in business as freight forwarders. The omission with respect to motor carriers and water carriers was intentional, after inclusion of such provisions had been considered by the committees. The commodities clause applies only to railroad companies and not to other types of carriers, such as pipelines and express companies. It applies only to carriage that crosses a State line.

The Hepburn Act, which originated in the House, was preceded by long hearings and a draft of bill suggested by the Commission. As passed by the House it contained no commodities clause. In reports made to Congress the Commission had directed attention to the special problems as to preferences and prejudice, and undue advantages in cases in which the owner of the property transported performed a part of the transportation service or furnished a facility and in return was securing undue advantages.

In the Senate, Senator Elkins, of West Virginia, introduced an amendment which, much modified as subsequently amended in the Senate, and then by the conference committee, became the commodities clause. As originally drafted, it was to apply to any common carrier, and would have applied to pipelines as well as railroads. Then exemption of timber and its manufactured products was made. The Senate defeated an attempt to widen the scope of the draft so as to

prohibit specifically control of subsidiary industrial companies through stock ownership.

The debates show that the outstanding evils cited to the attention of Congress were certain practices of the anthracite-carrying and mining railroads, and the monopolistic occupancy of certain bituminous-coal fields by trunk-line railroads, with resulting preferences and prejudice in rates and car service to independent owners and operators.

In the few years following enactment of the Hepburn Act, there was considerable interest in Congress as to the working of the clause, particularly while the constitutionality of the clause was challenged, and when ownership of the commodity as of the time of movement became a test. That is covered by the Delaware & Hudson case referred to in some detail in the statement of Mr. Payne, which I have submitted. Then, along came the Mann-Elkins Act of 1910, which was supplemental to the Hepburn Act of 1906, and made certain amendments, among others, which the Commission in its report to Congress said it had a "conviction" were necessary to enable it to "more fully accomplish the purposes of the act." Repeating its former recommendation, the Commission said:

It becomes increasingly clear that complete freedom from discrimination can be secured only by a complete separation of the business of transportation from all other businesses.

The CHAIRMAN. When did the Commission say that? When was that statement made?

Mr. AITCHISON. In its report of 1909, at pages 18 and 19.

The two evils most difficult to detect and prove were those arising from the identification of ownership of carriers and shippers, and the pretense that "services performed by shippers for themselves are in reality services for the carriers, to be paid for by the latter."

Now, these observations were not included in the portion of the Commission's annual report devoted to subjects under the heading "Amendments to the act," but were in the portion of the report dealing with the work of the Commission's Division of Prosecutions.

I may say in passing that Mr. Payne, whose statement is here, was, before he became connected with the law department of the Commission, the Assistant Chief of the Division of Inquiry or Division of Prosecutions of the Commission.

Neither the House bill No. 17536, the Mann bill, nor the Senate bill No. S. 6737, Sixty-first Congress, second session, the Elkins bill as introduced, undertook to amend the commodities clause. But during the prolonged debates in 1910 there were five different proposals for amendment of the commodities clause. Four were voted down, and the fifth did not get out of committee. In the statement I have prepared I review these attempts at amendment.

I suggest, if you have time, you would be very much interested in the debate participated in by Senators Borah, Bailey, and Sutherland which is cited in my statement. That was a masterly debate on a very high level, involving constitutional questions.

Significantly, these proposed modifications all seem to proceed on the basis of interest from the railroad company downward, and it is doubtful if any of them would have reached the holding-company ownership that exists in the Elgin, South Buffalo, and other cases, which I understand are of chief interest to this committee.

The CHAIRMAN. The Elgin Railroad is the one owned by United States Steel Corp.?

Mr. AITCHISON. Yes; and the South Buffalo and by the Bethlehem. Mr. BRYSON. We have had reference to those.

Mr. AITCHISON. Yes, sir. Mr. Wiprud reviewed those in very great detail the other day in his statement, and it will save me much time if you can recall his statements, and those cases are pretty well analyzed in Mr. Payne's statement, but if you only have time to examine one of them you will find the whole history thrashed out and thought out in the opinion of the South Buffalo case.

Four years later, the last day of December 1914, Mr. Adamson introduced a bill, 20470, Sixty-third Congress, third session, which I think will be of interest to your committee. It evidently was drafted to carry forward the recommendation of the Attorney General made December 7, 1914, for amendment of the commodities clause. The title of the bill indicates its object: "To divorce transportation in interstate and foreign commerce from manufacture, mining, production, and dealing, and for other purposes." Sweeping as the bill was, it seems to have not closed the loophole of a stockholding that was sufficient for control but where the evidence, as in the South Buffalo case, did not show exercise of such control.

There was a hearing on the bill before the House committee at which the attorney for the Department of Justice who was handling the proceedings under the clause appeared as the only witness. Later it will appear that the bill was too sweeping to be practical, and it was not reported by the committee.

The chairman has asked for the experience which the Commission has had in the courts with the enforcement of the commodities clause. The Commission's experience has been in the investigation of facts relating to supposed violations, and aiding in the preparation of the cases for the courts, rather than in the conduct of litigation. The commodities clause carries a criminal penalty. It is a part of the Interstate Commerce Act as to which the Commission is charged with the duty to execute and enforce, and the district attorney of the United States prosecutes under the direction of the Attorney General of the United States all necessary proceedings for the enforcement of provisions of the act and punishment of all violations thereof. Now, that statutory course has been followed in a spirit of harmony and cooperation between the Department of Justice and the Commission. Mr. WILLIS. Off the record a moment.

(There was a discussion off the record.)

Mr. WILLIS. What is that section of the act and what does it provide?

Mr. AITCHISON. It makes it unlawful for any railroad company to transport from any State, Territory, or District of Columbia to any other State, Territory, or District of Columbia or any foreign country any article or commodity, other than timber and the manufactured products thereof, manufactured, mined, or produced by or under the authority of such carrier or any subsidiary, affiliate, or controlling person of such carrier, or any such article or commodity in which such carrier, subsidiary, affiliate, or controlling person has any interest, direct or indiect, legal or equitable, except such articles or commodities as may be necessary or intended for use in the conduct of the

carrier business of such carrier.