same is true of shippers. Under such a concept, which is the congressional concept embodied in the Interstate Commerce Act, the Commission would be passing on the rates with the benefit of all the facts before it, instead of upon the product of whatever the rate bureaus and conferences permit to come through to the Commission.

History records that a regulatory body hesitates to initiate rate proceedingsthat a rate situation must become very bad before it acts. As the committee will recall it was just such a situation that brought about the passage of the Hoch-Smith resolution by Congress. Congress believed that the condition of the shippers, in this instance the farmers, and their access to markets, had not had appropriate consideration in the making of rates. In any event, I believe that individual carriers, freed from the monopolistic features of the organized rate bureaus and rate conferences of the transportation industries, would take the initiative in rate making because of their concern about their traffic, and that the Commission could and would again function under the Interstate Commerce Act as Congress intended.

Regulation is not without its dangers. As we shall see, the type of regulation which has been imposed by Congress and the States upon motor and water carriers, coupled with the restrictive practices of such carriers which were patterned after those in the rail field, have discouraged new enterprises and otherwise adversely affected small business.

Let us first consider the effect upon any citizen of this country who now wishes to enter into the motor- or water-carrier business.

By legislation passed in 1935 relating to motor carriers and in 1940 to water carriers, no person can operate a motor or water common-carrier service without a certificate of public convenience and necessity. The railroads were the principal proponents of this legislation. Their plea was that the motor and water carriers should be regulated as the railroads are regulated. The type of legislation proposed and adopted was patterned after the Interstate Commerce Act which had been developed over a period of 50 years to curb abuses in the rail field that bore heavily on the public. The fact that no such abuses existed in the newer motor- and water-carrier fields was ignored. This legislation has proven burdensome and restrictive. It was like placing the harness of a horse on a rabbit and a turtle. The effect has been to limit the number of carriers and the amount of transportation service, to protect carriers already in the field against new competition, and to stabilize rates at high levels. This was a complete reversal of the American policy of keeping the public highways and waterways open for whomever desired to use them, subject only to considerations of safety.

As might be expected, the interpretation of these acts tightened up the situation, for any newcomer was required to prove that the type of service he proposed to render was not adequately being performed by existing carriers. The fact that he was willing to charge a less rate than existing carriers was not considered a good reason for his going into business. If the newcomer should by chance obtain a certificate, it was generally so conditioned and limited as to the commodities he could haul, the parts of routes over which he could operate, the customers he could serve, and the rates he could charge, that the possibility of success was, to say the least, reduced to a minimum.

But that is only half the story. The newcomers, or those who wanted to become newcomers, in these newer fields of public transportation had the well-established carriers to contend with. The railroads pooled their vast resources for the purpose of opposing new motor-carrier services. Through the Traffic Executive Association, Eastern Territory, they organized the Motor Carriers' Committee of Official (Eastern) Territory, with the chairman of the Trunk Line Committee having general supervision of the other committees. A staff is maintained in Washington, D. C., which checks every motor-carrier application to the Commission for a certificate of public convenience and necessity. Abstracts of all such applications are sent to the railroads' Motor Carrier Committee at New York. A protest is then filed with the Commission in the names of all the railroads of Eastern Territory, and a representative appears at the hearings before the Commission for the purpose of obtaining a denial of applications which the railroads oppose. Similar motor-carrier committees were set up by the railroads in the West through the Western Association of Railway Executives, and in the South through the Southern Freight Association. Thus the combined treasuries of the railroads have been used to fight the issuance of certificates of public convenience and necessity to a small enterpriser who seeks to enter the motor-carrier field.

Of course, carriers already in the motor- and water-carrier fields always appear at hearings in opposition to newcomers in their respective fields and insist that they are already rendering all the service needed.

It is obvious that under such regulatory laws and rulings, and the mass opposition of other carriers, hearings are protracted and expensive. It has become well-nigh impossible for a new operator, especially a small one, to start or remain in business as a for-hire carrier by motor vehicle, boat, barge, bus, or airplane.

Further, the railroad industry has successfully invaded the motor carrier field to an appreciable extent either directly or throught a corporate agency. It is already in or seeking to enter the water- and air-carrier fields. The firm stand of the Civil Aeronautics Board against surface control of air transport has thus far prevented railroad control of the transportation of passengers by air, but the railroads maintained exclusive control of the carriage of air cargo for many years through the Railway Express Agency. Recent action by the Board, however, lessened control by the Agency over air cargo rates.

The organized railroad industry has further supported a program looking toward the development of regional transportation systems which would control and operate all rail, motor, water, and air transport facilities throughout large geographic areas. Congress has thus far refused to seriously consider this proposal which would of course bring to an end all prospects of competition within the transportation industries of the United States. I have stated before and I state again that this is a plan for the seizure by private interests of monopoly power over the public domain, with the result that all benefits, from past and future public expenditures for highways, airways, and waterways would accrue solely to these monopolistic systems. I say further that the economic and political power of such monopolistic integrated transportation systems would compel our country to adopt outright public ownership and operation of all transportation facilities unless we are prepared to accept the full equivalent of a Fascist organization in what must continue to be a basic industry.

To anyone concerned with maintaining private enterprise in public transportation, the railroads' program is highly destructive. It is even destructive of their own interests.

Regulatory laws, and their interpretation, have worked in other ways against the interests of small business. Take the provision that gives the Commission power to fix minimum rates. Despite the protest of shippers and small-business men, the Commission used that power to foster agreements for concerted action between organized motor carriers and rail carriers. The success of such a plan eliminating competition in rate-making between these different modes of transportation was dependent upon raising the floor under motor carrier rates to a still higher level. This method of control of motor-rail competition, through combined action of motor and rail carriers, encouraged by regulation, is illustrated by the decision of the Commission by Rates Between Arizona, California, New Mexico, and Texas (3 M. C. C. 505). The Commission outlined the agreement as follows:

"At about that time [October 1936] a conference of representatives of the rail carriers and certain truck operators in this territory was arranged so that they might consider their mutual problems with a view to eliminating destructive competition and checking a rate war which was already in progress. At this conference, general principles were discussed by the carriers and a basic understanding reached that the rates would be revised and placed on a uniform basis for rail and motor carriers. Subsequently, at various informal conferences of the two groups, the motor carriers informed the rail carriers of the progress made in the determination of the revised rates and the dates on which they would become effective.”

Despite the vigorous protest of shippers and small-business men against this restoration of monopoly price-fixing in the transportation field, the Commission found the rates "not unreasonable."

In another proceeding, Rates Over Freight Forwarders, Inc. (4 M. C. C. 68), the Commission held that tariffs published by rate bureaus were entitled to protection against "disrupting attacks," and that rates established by a motor carrier who had been a party to a rate bureau tariff and withdrew were not fair and reasonable rates to the extent that such a carrier's rates were lower than those established by the rate bureau. Thus, the Commission completely ignored the right and duty of the carrier to initiate and establish its own rates, and denied to the individual shipper or small-business man the benefit of rates lower than those agreed to by the combination.

96347-50-ser. 14, pt. 4a-19

The next and final step in the regulatory process of eliminating individual rate making by motor carriers through the exercise by the Commission of its minimum rate power was to adopt, by order, the rates published in tariffs of rate bureaus as minimum rates. By this action, belatedly rescinded, the Commission forced motor carrier bureaus to adhere to rates fixed by private rate-making couferences. Requests by individual carriers for modification of these minimum rate orders were refused. Thus, the Commission fostered the efforts of the motortruck industry to organize itself for private group action in rate making.

Other means by which regulation in action has denied to the people the benefits of low-cost transportation is illustrated in the following cases.

Proponents of regulation of water lines by the Interstate Commerce Commission, as provided in the Transportation Act of 1940, stated that safeguards were provided in the act whereby such regulation would not permit railroads to again destroy water transportation. After the water carriers were placed under the Commission's jurisdiction, the Commission rendered a decision involving the movement of grain by barge on the Illinois waterways to the Chicago market, wherein it permitted the railroads to cancel their low "proportional" rates from Chicago eastbound as applied to the barge movement, while permitting these low rates to continue to apply on grain moving into Chicago by lake and rail. A railroad witness admitted that the purpose was to force the tonnage back to the rails. Of course, such rate discrimination would nullify the public value of the waterway movement of grain.

The Commission's decision was appealed. The three-judge Federal court, in setting aside the Commission's order, found that the savings from the low-cost river transportation were reflected in the prices received by the farmers and that the effect of the Commission's order would be "to bring about a cartelization of barge and rail transportation, which, if consummated, would destroy competition between these two means of transportation." The Supreme Court reversed the lower court, holding that the Commission had not acted arbitrarily and that discrimination, if any, could be removed by further proceeding before the Commission. In a vigorous dissent, Mr. Justice Black, joined by Mr. Justice Douglas and Mr. Justice Murphy, held:

"The issue in this case is whether the farmers and shippers of the Middle West can be compelled by the Interstate Commerce Commission and the railroads to use high-priced rail instead of low-priced barge transportation for the shipping of grain to the east

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"Senators, particularly those from the Midwestern States where the barge lines involved here were operating, were especially fearful that the Commission would do substantially what is has done in this case. They required repeated assurance by the chairman of the Senate Commission on Interstate Commerce that the bill was written in such manner that the Commission could not if it desired permit discrimination against water carriers. At great length the chairman of that committee explained to apprehensive Senators that the bill contained provisions in three different places which imposed upon the Commission the imperative duty of standing in constant opposition to discrimination against shippers by water.

"House Members shared the same fears

"At some future day the Commission may correct this discrimination. But the day for Commission action was the day this case was decided, and the day for action by this Court is now

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"Congressman Bland, who opposed the 1940 act on the ground that it lacked sufficient safeguards to prevent action by the Commission hostile to water transportation, called attention to the procedural delays in rate cases before that body, delays which he declared would be used to strangle financially weak water carriers, forcing them to 'yield or transfer their operation to other streams.' He pointed out this 'would mean the death of water carriers'; that the railroads knew how to obtain delays and knew the disastrous consequences that would follow to their competitors; that the railroad 'seek to profit' by procedural delays; and that the diversity of their interests and extent of their revenues was so great that they could survive delays which would be unendurable for competitors. The Congressman was a good observer and a sound prophet."

The Commission, upon reconsideration of the matter, adhered to its position. The case again reached the Supreme Court, 3 years later, and this time Mr. Justice Black wrote the majority opinion that reversed the Commission. In this case, the will of Congress finally prevailed.

Another governmental agency went far toward impairing the value of water transportation to the public. The National Bituminous Coal Division of the

Department of Interior, by an interpretation of the National Bituminous Coal Act, required coal operators having access to river transportation to fix two prices on coal at the mine. If the coal moved by rail, it bore a low price. If it moved by water, it was, with exceptions mostly in favor of the power companies, sold at a higher price. By this device it was sought, so it was said, to equalize the competitive advantages of coal operators having access to water transportation and those not so situated. The difference between the lower and the higher price, by the way, was just the amount of the savings which the public would realize from the water movement.

From the foregoing it is clear that through practices of the industry and policies and decisions of the Government, contrary to every principle of the American system of private enterprise, new competitors have been discouraged from entering the motor and water carrier fields, monopoly and monopoly pricefixing has been greatly encouraged in all fields of public transportation, and the small-business man has been denied the benefits of competitive rates essential to his existence.

EFFORTS BY THE FEDERAL GOVERNMENT TO PRESERVE PRIVATE ENTERPRISE IN PUBLIC TRANSPORTATION

The question naturally arises: Have any efforts been made by Government to preserve the private enterprise system in transportation, and thus protect the public interest? The answer is in the affirmative. I shall refer to the more important cases. There are many others.

In 1944, two antitrust suits were instituted which are of historical significance. One is the antitrust suit instituted by the United States Government at Lincoln, Nebr., against the Association of American Railroads, the Western Association of Railway Executives, Western railroads and their officials, J. P. Morgan & Co., Kuhn, Loeb, & Co., and others, charging, among other things, a far-flung conspiracy to fix rates in the western United States higher than for comparable services in the east in the interest of eastern financial houses and businesses of related interests. The other is an antitrust suit instituted by the State of Georgia as an original action in the Supreme Court of the United States charging a like conspiracy by the eastern and southern railroads which it is alleged has retarded the economic growth of Georgia and the South. By these two suits the entire price-fixing machinery of the railroad industry is under attack as being in violation of the Sherman Antitrust Act.

The Government's suit at Lincoln, Nebr., involves not only price-fixing, but services and facilities. Specifically, the charge is that under the now notorious western agreement the parties agree:

(1) To determine collectively all matters of railroad policy from the point of view of all the railroads together, rather than from the point of view of what might be best for an individual carrier.

(2) To advance collectively rail interests over those of competing types of transportation, such as motor and water carriers.

(3) To determine collectively freight and passenger rates, rules, practices, train schedules, types of service rendered, the institution of technological improvements, and the establishment and use of terminal and accessorial facilities and accommodations.

It is alleged that this agreement was entered into in 1932. This, the committee will recall, was during the depression. It has been stated that by this agreement eastern financial interests sought to protect their stake in the railroads. In this connection it is of interest to note that a few months after the western agreement was signed, Congress passed the Federal Coordinator Act. That act provided for lawfully constituted railroad committees in each region of the United States, under the Federal coordinator, to deal with depression problems. The record shows that this was not satisfactory to the eastern financial interests so they continued their own private government of the industry under the western agreement and the Association of American Railroads. It is also of interest to note that the Interstate Commerce Act provides for heavy fines and severe penalties for failure to file an agreement such as the western agreement with the Commission. That agreement, however, was never filed with the Commission and continued in force at least until 1943 when it was discovered by the Department of Justice. Then it was reputedly canceled, although the Department of Justice alleges that the practices continue. I recall that when I testified before the Senate Interstate Commerce Committee on these matters in 1943, the chairman of the committee stated the Department of Justice

would be derelict in its duty if it did not prosecute the parties to the western agreement.

The Georgia suit is unique in that it was brought as an original suit in the Supreme Court of the United States. Under the procedure of that Court a motion was made by the State for leave to file its complaint. This motion, after briefs and argument, was granted. The Court in its opinion laid down the law of the case which of course also governs the Government's western suit. One of the railroads' contentions was that the antitrust laws do not apply to transportation because of the many changes in the Interstate Commerce Act since the early Supreme Court decisions under the Sherman Antitrust Act in the TransMissouri and Joint Traffic Association cases outlawing rate-making conferences. The Supreme Court, however, in its decision rendered March 26, 1945, in the Georgia case, took the other view and, as I have stated, held that the antitrust laws still apply to transportation and that conspiracies among carriers to fix rates are still included within the broad sweep of the Sherman Act.

It should be noted that the Government's antitrust suit at Lincoln, Nebr., related to services and facilities in addition to rates. I shall not discuss the evidence on these matters in that case. But in this relation I want to call the committee's attention to the testimony of an official of an eastern railroad before the Senate Interstate Commerce Committee in the hearings on S. 110, regulation of rate bureaus, Eightieth Congress, first session. In the course of his testimony, he referred to one of the topics for discussion on the agenda of the Southeastern President's Conference held September 22, 1938, as follows:

"Streamline passenger trains in the Southeast have not been adopted by any of the major lines. The adoption of these trains in competitive territory will perhaps lead to a similar competitive effort on the part of other large lines and ultimately the earnings of no line would be substantially increased. It is naturally the part of wisdom for major lines to consider the ultimate effect of the adoption of new competitive practices before they are undertaken.”

The action taken by the Southeastern President's Conference is recorded, so this railroad official testified, in the minutes of that meeting, as follows:

"After discussion of the subject in general, motion was made and seconded that before making any major changes in competitive freight and/or passenger service in which substantial capital and expenditures are involved, the roads proposing such changes give sufficient notice to their competitors to allow them to meet the situation if they desire to do so. Motion unanimously carried, with exception of Chesapeake and Ohio reported as 'not voting'."

Against the background of this and similar instances, this railroad official stated that "as far as our philosophy is concerned, agreements on services and facilities which are competitive in nature are against the public interest. They are things that bring the railroad industry down to the level of the poorest and the lowest, and which are simply against the public interest. * I believe

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if those agreements are entered into which are unreasonable restraints that the antitrust laws should apply and that if agreements are entered into which are not unreasonable restraints of trade, the antitrust laws do not apply. I do not understand that the antitrust laws prohibit carriers from discussing and considering their operating, engineering, and other problems or from entering into agreements or taking other joint action respecting such matters which do not restrain trade or commerce." While this railroad official took the view that rate making presented a problem peculiar to the industry, it would seem that he has stated the basis upon which private operation of public transportation services can be justified in the public interest.

CONGRESS YIELDS TO THE MONOPOLISTS IN PUBLIC TRANSPORTATION

Under heavy attack in the courts for widespread, monopolistic practices, the transportation industry turned to Congress for relief. I shall not review the struggle over the so-called Reed-Bulwinkle bill. I am sure that the members of this committee are familiar with the contentions for and against that legislation. Whatever individual views may be held, it is clear that for the first time in history, a regulated industry has been provided the means of securing exemp tion from the antitrust laws in the most important of its activities from the standpoint of free enterprise, namely, price fixing. This legislation is, of course, a complete denial of every principle of the American system. Indeed, it provides the means of legalizing the most gigantic price-fixing cartel the world has ever known.

In view of this action of Congress, it is difficult to understand by what process of reasoning similar exemptions can be denied to other regulated industries, such