mission, and that the commission may grant it, subject to such terms and such modification as the commission shall find to be just and reasonable. Then it proceeds to say, first, that a corporation or individual who cares to invest in railroad securities in more than one corporation may do so if, in the opinion of the commission, it shall be in the public interest; and, second, that it shall be in furtherance of the plan for the consolidation of railroad properties, or shall be pursuant to paragraph 3.

In that connection, I ask the committee to remember that what Congress authorized the commission to do was to formulate a tentative plan for the consolidation of the railroads of this country into a number of systems. It was never intended to be compulsory or mandatory. In my opinion, and I think in the opinion of most constitutional lawyers in this country, as the owners of the railroads are individuals, and as nearly all of them are incorporated by the States, Congress has no power to compel consolidation. It might have power to negative a consolidation, if, in the judgment of the Congress, or of its delegated authority, the commission, the consolidation would affect the free flow of commerce by the destruction · of competitive conditions.

Now, having thus provided that the commission shall have such power to say that no person or corporation-and I say "person because, as you see, it is broad enough to include persons-shall acquire stocks in more than two carriers, even if noncompetitive, except by the gracious permission of the commission, it further provides

It shall be unlawful for any person, except as provided in paragraph (4) to accomplish or effectuate, or to participate in accomplishing or effectuating, the control or management in a common interest of any two or more carriersAnd so forth.

Further it provides that—

It shall be unlawful to continue to maintain control or management accomplished or effectuated in violation of this paragraph. As used in this paragraph, the words "control or management" shall be construed to include the power to exercise control or management.

Mr. O'CONNOR. May I interrupt you there, Mr. Beck?

Mr. BECK. Certainly.

Mr. O'CONNOR. Is that the only definition of "control" in the

bill?

Mr. BECK. NO. It proceeds to give a rather vague description of control, and the drafter of the bill could scarcely hope to do better, because the courts themselves have not been able to say what is control, unless it is a majority. Unquestionably, less than a majority can be control, as a practical and purely relative question, as to a particular condition. You will observe that it says that it shall be unlawful for any person or corporation to maintain control or management. Whether that would be construed as retroactive, I do not know.

It seems to me that if power be given the Interstate Commerce Commission to determine what, in the last analysis, is a question of who shall own railroad stocks in this country, without respect to any question of competition between carriers, and without respect to any obstruction of commerce, that is such a delegation of power

that the commission might rule, whenever they find that there has been, even in the past, an acquisition of stocks in two or more carriers, that it is not in the public interest. If, for instance, Mr. Baker, or Arthur Curtis Jones, or an investment company, or an insurance company, owns stock in two or more carriers, the commission could rule that it was not in the public interest. The bill provides further

The commission is hereby authorized, upon complaint or upon its own initiative without complaint, but after notice and hearing, to investigate and determine whether any person is violating the provisions of paragraph (6). If the commission finds after such investigation that such person is violating the provisions of said paragraph, it shall by order require such person to take such action as may be necessary in the opinion of the commission, to prevent continuance of such violation.

In other words, sweeping and unprecedented power is given the commission to make any order it pleases in respect of holdings by a person or corporation, whether it be an insurance company, an investment company, or one of the so-called railroad affiliates. It is given power to do anything it finds necessary in the public interest, which, of course, would mean power to require the divestiture of the stock and the throwing of the stock holdings upon the market. Mr. BANKHEAD. In that connection, let me ask whether that control or that decision by the commission would be subject to any review by the courts.

Mr. BECK. It would be as to questions of law, but as to questions of fact, the courts always refrain from interfering. In four cases out of five the questions are largely those of fact. Undoubtedly, the unconstitutionality of the whole thing would be the subject of review by the courts.

Mr. BANKHEAD. If it were a question of whether or not the conditions complained of were confiscatory, the court would review the determination of those facts.

Mr. BECK. If it were a confiscatory matter; yes. They would then review questions of fact.

Mr. O'CONNOR. Does not the commission have power to go into the district court for the enforcement of its orders?

Mr. BECK. The commission applies to the district court for a process to enforce its orders, and the court then determines whether the commission is acting within the scope of its authority; always excepting that if there is any evidence supporting their findings of facts, the commission is generally upheld.

Now, in the next paragraph of the bill we find this provision:

For the proper protection and in furtherance of the plan for the consolidation of railway properties established pursuant to paragraph (3) and the regulation of interstate commerce in accordance therewith, the commission is hereby authorized, upon complaint or upon its own initiative without complaint, but after notice and hearing, to investigate and determine whether the holding by any person of stock or other share capital of any carrier (unless acquired with the approval of the commission) has the effect (a) of subjecting such carrier to the control of another carrier or to common control with another carrier

And so forth. Then it says:

If the commission finds after such investigation that such holding has the effects described-

that is, that it is not in harmony with their plan of consolidation, or does not serve the public interest

it shall by order provide for restricting the exercise of the voting power of such person with respect to such stock or other share capital (by requiring the deposit thereof with a trustee, or by other appropriate means) to the extent necessary to prevent such holding from continuing to have such effects.

In other words, stockholders, even if they be individuals, are stripped of the most essential right of property, namely, the right to vote it. That provision is wholly unnecessary, as you will agree when you recall the present section of the law which provides that the commission can by order require such a person to take such action as may be necessary in the opinion of the commission to pre-vent such violation. This prevents the holding of stock by a corporation or individual contrary to the views of the commission, as to whether it is in harmony with their plan of consolidation or otherwise in the public interest.

Mr. GREENWOOD. Would that be interpreted to mean that an arrangement could be made by the commission pending the disposition of the stock, that is, to simply provide for the holding of it by a trustee to prevent the voting of the stock?

Mr. BECK. That construction of it had not occurred to me, but it is possible that the two things would be so construed. It is not only a question of giving them power to deprive a man of the right to vote his stock, but my point is that they are given unlimited power to say what shall be done with respect to the holding of stock in this country.

Now, gentlemen, you have not the time nor the patience to listen to any discussion of the constitutional powers of Congress. I have tried in my minority report to give some views, but rather inadequately on that subject. In that connection, however, let me remind you of the case of Adair v. United States, in which the Supreme Court held that a statute of Congress which attempted to prohibit a railroad carrier, which was an interstate carrier, from discharging a man because he was a member of a labor union, was beyond the power of Congress, even though these railroad employees personally operated the trains over the tracks, and even though it could be plausibly suggested that the efficiency of labor upon an interstate road would be affected by the fact that they were or were not members of a union.

In other words, the Supreme Court laid down the rule that the power to regulate commerce was the power to control the conditions of transportation from the initial step where the traffic commences to move to its ultimate destination, where it is ended, and it held that there was no power beyond that except in the States which created the corporation; that it was a regulation of interstate commerce, and that nothing could be justified under the Constitution that has not some direct and substantial relation to freight and passenger traffic in interstate commerce.

Now, of course, that does give Congress the power to properly delegate to the commission the supervision of a great number of antecedent conditions which bear upon rates, which bear upon competitive conditions, which bear upon the monopolization of traffic,

120292-32

which bear upon safety appliances, which bear upon capital structure, which bear upon financing through bonds and other securities, and a thousand other subjects, even down to the control of a wheel. All of those things are properly within the constitutional power of Congress, because they have a direct and substantial relation to the carrying of freight in interstate traffic.

Mr. O'CONNOR. Do you mean to say that it means that if there is an element of competition involved, it would not justify some of these provisions with respect to divesting ownership?

Mr. BECK. On the contrary, in the committee hearings I tried to introduce an amendment along that line. I do not know whether I offered it formally, or simply made it by way of argument, but it presented my point, and I want to make that perfectly clear to the committee. My suggestion was that if they would have such a qualifying clause prohibiting the acquisition by a person or corporation of stock in more than one carrier, the effect of which would be the destruction of competitive conditions or the obstruction of the free flow of commerce, and so forth, that then I would have no objection to the bill.

Mr. BANKHEAD. Do you not think that the commission would construe these powers in line with the decision that you referred to, and that they would not feel justified in going beyond the legitimate powers of the commission?'

Mr. BECK. No; and I will tell you why. This is done to give the commission the right to say who shall own the railroad stocks in this country, with a view to the ultimate plans that the commission may finally formulate for the consolidation of carriers. They have the power to formulate, but not to complete the consolidations, unless the ownership of the properties accept them.

Mr. PURNELL. Do you see anything in that program that might tend toward Government ownership and operation of the railroads? Mr. BECK. This is the last step toward Government ownership. The proponent of this legislation, Commissioner Eastman, of the Interstate Commerce Commission, with singular ability and great intensity of purpose, is aiming towards Government ownership, and the last step towards Government ownership would be to give this commission, already drunk with power, the right to say who shall own railroad stocks in this country. That is what it means-that is actually what it means, and I am glad my colleague has brought up that point.

Now, the point I was going to make is this, and please do not understand that I hold that any holding company is sacrosanct, or that they can do what others can not do. Holding companies are just as much amenable to the just powers of Congress or to the existing laws as any other company. I can not say anything else than that. I argued the case in which that principle was decided, and that was the famous Northern Securities case. That was when I was a comparatively young man. That case was argued in the court at St. Louis.

It was contended in that case that the ownership of stock was not a question of interstate commerce, and that it was beyond the power of the Federal Government. To that contention I said "no." As Assistant Attorney General, I said "no," that no corporations or

individuals could combine their stock so as to eliminate competition between competing carriers. The fact that they sought to do so by the device of a holding company-in that case it was the Northern Securities Co.-I argued that it did not make them exempt from the law. I remember arguing more or less clamorously in that court, in the course of a 4-hour argument, that the State of New Jersey, which chartered the Northern Securities Co., could not issue letters of marque and reprisal, to obstruct the free flow of commerce. In the course of that case, neither in the statutory court at St. Louis nor in the Supreme Court was it ever argued or suggested that the ownership of stock of a railroad company was, as such, within the Federal power. No one would have had the audacity to have made such a suggestion; but I want to say this, that when the owners of stock combined to destroy competition between two competitive carriers-and in that case it was the gigantic railroad interests of that time, the great Union Pacific interests, under Harriman, and the Great Northern interests, under Morgan and Hill-as I say, when those interests combined to destroy competition, they were within the power of Congress. There was an attempt to abolish competition and make a great monopoly of transcontinental traffic into the northern half of the country.

In that case the Supreme Court sustained the proposition that a holding company, if it obstructed the free flow of commerce, and if it had any direct connection with or actual relation to the interstate regulation of commerce, came within the Federal power. However, that is not this case before you. Now, if they were to say here that the Interstate Commerce Commission might investigate holding companies and determine whether a holding company is obstructing the free flow of commerce by the elimination of competition, that would not only be a reaffirmation of the existing law, but, as a matter of fact, it would be well within the constitutional powers of Congress as defined in the Northern Securities case. There is no doubt about that.

If the Penn-Road Co. were obstructing the free flow of commerce-although the facts show it has acquired an interest in New England railroads with which the Pennsylvania system is not in any sense competing-but if the Penn-Road Co., or the Van Sweringen interests. of which I know nothing, are obstructing the free flow of commerce, or monopolizing interstate transportation, or eliminating competition, which is the same thing, the Department of Justice could proceed against them to-morrow under the Sherman

Act.

Mr. BANKHEAD. In order to get your argument clearly in my mind, as I understand it, you affirm that the Interstate Commerce Commission under existing law has the right to do all the things you have just suggested.

Mr. BECK. Yes.

Mr. BANKHEAD. This bill will extend its power to what extent? Mr. BECK. This bill extends its powers to carriers that are noncompetitive, and as to which no suggestion can be made of interference with the free flow of commerce, or that they are in any way impeding or obstructing commerce. In other words, this suggestion goes purely to the right of making investments. It gives them the right to determine who should own shares of railroad stock in this