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(The following letters and statements were inserted in the record following the conclusion of the hearings, April 9:)

STATEMENT OF CARSON L. TAYLOR ON BEHALF OF CERTAIN WESTERN

RAILROADS

This statement is submitted in opposition to S. 2782 by the following western railroads:

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The opposition of these railroads to S. 2782 is based primarily on the fact that this bill would leave intact the power of the Commission to prescribe through routes but would establish no guides and no definition by Congress as to what is in the public interest in the establishment of such through routes. These railroads think it is important for the committee to understand that this proposed legislation is not designed to further in any substantial degree the interest of any shipper. The present act, in paragraph (3) of section 15, gives the Commission complete authority to establish all through routes necessary or desirable in the public interest, and paragraph (4) contains no limitations on that power which override the interest of shippers.

Paragraph (4) embodies congressional recognition of the fact that no carrier should be required without its consent to participate in a route that short-hauls it, but the recognition of that right is not unqualified. Paragraph (4) expressly provides that no carrier shall be protected in its long haul if the route formed thereby is unreasonably long as compared with another practicable through route which could otherwise be established, or if the Commission finds that a proposed through route is needed in order to provide adequate, more efficient or more economic transportation.

Where the occasion has arisen for the establishment of through routes to meet the commercial needs of individual shippers or regions of the country, the Commission has utilized its present powers to give appropriate relief. Such situations are illustrated by the Stickel case (323 U. S. 588), and California Milling Corpora tion v. A. T. & S. F. (276 I. C. C. 531). There are many instances where the carriers, recognizing the needs of the shippers, have voluntarily established additional routes embracing less than their entire lines between termini or junctions. There are other instances where the carriers have refused and, on complaint. the Commission has refused to require establishment of additional routes of such nature, the Commission believing the record did not justify such routes. Such s case was Adrian Grain Co. v. Ann Arbor R. Co. (276 I. C. C. 331 (decided October 1949)), where the Commission said (p. 333):

"Section 15 (4) of the act has been in its present form since September 18, 1940. In several proceedings since then, reasonable through routes which short-haul one or more carriers have been prescribed. (See D. A. Stickell & Sons, Inc. v. Alton R. Co., 255 I. C. C. 333 (sustained in Pennsylvania R. Co. v. United States, 323 U. S. 588); Allied Mills, Inc., of Virginia v. Alton R. Co., 272 I. C. C. 49: California Milling Corp. v. Atchison, T. & S. F. Ry. Co., 269 I. C. C. 725 and 274 I. C. C 120.) In the first two of those proceedings it appeared that the routes required to be established eliminated expensive out-of-line hauls, and in the latter proceeding the routes required were shown to be shorter in many instances than those which had existed. In all of those proceedings the routes required were at least as economical, from the standpoint of the carriers as well as of the shippers, as were most of the existing routes.

"The instant situation differs. All of the routes sought are substantially longer than the present routes, and their establishment would appear to encourage wasteful and uneconomic transportation."

Congress has traditionally and historically recognized the propriety and economic soundness of permitting each participating carrier in a through route to enjoy the longest haul consistent with standards of reasonableness and efficiency.

Long before the enactment in 1887 of the act to regulate commerce, it was quite common practice for connecting railroads voluntarily to enter into arrangements with one another for the establishment of joint through routes. The act, as originally enacted, contained no provision authorizing the Commission to establish through routes. Its only provision with respect to the matter was one requiring all carriers subject to the act to afford all reasonable, proper, and equal facilities for the interchange of traffic between their respective lines and prohibiting them from discriminating in their rates and charges between such connecting lines. It was not until 1906 that the Commission, as the result of one of the amendments made by the Hepburn Act, was given any authority to establish through routes. That authority was limited to the establishment of a through route where no reasonable or satisfactory through route was already in effect. This limitation, however, did not remain in effect very long. The Commission became dissatisfied with it as the result of a decision by the Supreme Court holding that a finding by the Commission that an existing through route was not a reasonable or satisfactory one was subject to review by the courts (I. C. C. v. Northern Pacific, 216 U. S. 538). Accordingly, the Commission recommended that this limitation on its authority to establish through routes be removed, and this was done in 1910 by the Mann-Elkins Act.

The 1910 amendment substituted a provision prohibiting the Commission from establishing any through route which would require any railroad, without its consent, to embrace in such through route substantially less than the entire line of its railroad lying between the termini of the proposed through route. Senator Elkins said in explanation of this substitute provision that it had always been the practice in the transportation business to recognize that the carrier originating the traffic had the right to the long haul-that is, the right to handle the traffic over its own line as far as it could in the direction of movement before turning it over to a connecting line. This recognition of the right of the originating carrier to the long haul was not only based upon the equities of the situation, but it was also based upon sound public policy.

During the period 1910 to 1929 there see us to have been no serious diss tisfaction with the provisions of the act on the part of the Commission and no particular complaint against it from other sources. Thus, in 1920 the only change made in the through-route provision was the addition of a parenthetical clause making it inapplicable where one of the carriers involved was a water line or where the establishment of a route was necessary to avoid a discrimination under section 3 of the act-that is, to prevent a railroad from discriminating between different connection in the establishment of through routes and joint rates. The 1920 amendment also added a provision giving the Commission unqualified authority to establish through routes temporarily to meet an emergency without the necessity of giving notice or holding a hearing. This is the only part of section 15 (4) that would be preserved by S. 2782.

Up until about 1937 the Commission apparently agreed with the congressional policy of permitting a carrier in possession of traffic to retain the longest haul consistent with the public interest. In fact, in its 1936 annual report to Congress the Commission renewed the recommendation which it made in 1931 that section 15 (4) "be amended so as to restrict the so-called 'long-haul right' to originating carriers, or subsequent carriers after they secure possession of the traffic."

It was not until 1937 that the Commission recommended to Congress that it be authorized to prescribe through routes "where deemed necessary to the public interest regardless of the 'short-hauling' of any carrier." Congress did not respond to that request. Again in 1940, the Commission asked Congress for complete authority to prescribe through routes with no limitation except its own conception of the "public interest." Congress again rejected the recommendation but, at that time, amended the statute by the insertion of the italicized portions which follow, so that section 15 (4) in effect now provides: "The ICC, in prescribing through routes 'shall not * require any carrier * * * to embrace in such through route substantially less than the entire length of its railroad'

But

* *

* *

(a) unless this 'would make the through route unreasonably long,' or "(b) unless the proposed through route is 'needed to provide adequate, and more efficient or more economic transportation.'

"The Commission shall 'give reasonable preference to the carrier by railroad which originates the traffic,' and

"No through route * *

assisting any carrier

*

shall be established * * * for the purpose of

* *

*

to meet its financial needs."

Thus it will be seen that despite the requests of the Commission for authority to prescribe through routes, Congress continued to recognize that considerations of equity and sound public policy entitled a carrier to its long haul so far as the interests of shippers would allow, in furtherance of which right it expressly ordered the Commission to "give reasonable preference" to originating carriers in fixing future through routes.

It should be emphasized again, in connection with this legislative history, that repeal of the provisions contained in section 15 (4) limiting the Commission in prescribing through routes is wholly unnecessary from a shipper's standpoint because the Commission already has ample power to protect a shipper's interest in through routes. This is shown by decisions of the Commission itself mentioned above which indicate that the limitations of section 15 (4) are of no consequence where the Commission finds that "adequate" transportation requires a new through route for the benefit of a shipper.

The equitable and economic justification for the present provisions of section 15 (4) are plain. To originate traffic, particularly such traffic as fruits and vegetables, and other agricultural products, lumber, products of mines and many of the other commodities handled by the western carriers, it has been necessary to make large outlays for appropriate originating facilities, including branch lines. These investments have been made with the expectation of securing the outbound haul on such traffic for such distances as the originating carrier's line may run in the direction of ultimate destination. If the railroads are to be deprived of their long haul after originating the traffic, the inducements to provide the special facilities and branch lines will be greatly reduced. Similarly, the delivery of traffic at important consuming markets or ports for transshipment requires the railroads to provide themselves with costly terminal facilities. Except for the prospect of obtaining a long haul on such traffic, the delivering line would have little interest in providing the facilities and making such substantial outlay. It would be most unjust to such railroads to deprive them of the longest haul on traffic which they originate and terminate that is consistent with the providing of reasonable, adequate, and economic through routes for shippers.

The repeal of all restrictions upon the establishment of through routes would not create any new traffic. It would merely result in the diversion of traffic from the present routes to other routes for which there may be little or no transportation or economic justification. It may be represented to the committee that the inclusion of certain lines in existing routes would shorten such routes, and the representation may be made, or the implication sought to be left, that such shortening of existing routes is of itself of sufficient justification for the establishment of such route. The committee should not overlook the fact that interchange services are time consuming and costly and that in many instances the shortening of a through route by the insertion of another carrier is at the sacrifice of time in transit and economy of operation. Of course, there are many instances in which through routes, advocated by certain carriers that have sponsored or supported legislation of this character in prior years, would result not only in the multiplication of lines but in the establishment of longer and more circuitous routes. Here the adverse effect of the establishment of such through routes would be compounded.

The present statute permits the Commission to consider all of these factors in determining the adequacy of present routes and the necessity of additional routes. The amendment proposed by S. 2782 would open the statute to the imposition of immeasurable hardship to many carriers who can ill afford it. Fairness and justice do not support it. The welfare of shippers does not require it. It is in no

sense in the public interest.

The railroads in whose behalf this statement is presented respectfully urge that the committee report this bill do not pass.

CARSON L. TAYLOR,
On behalf of the named railroads.

LETTER FROM NYE F. MOREHOUSE, VICE PRESIDENT AND GENERAL COUNSEL, CHICAGO & NORTH WESTERN RAILWAY SYSTEM

CHICAGO, ILL., April 10, 1952.

Re S. 2782.

Hon. EDWIN C. JOHNSON,

United States Senate, Senate Office Building,

Washington, D. C.

DEAR SENATOR JOHNSON: Thank you very much for your good letter of the 7th instant, received this morning.

Having previously been advised that the hearings would close April 9, I collaborated with representatives of several other western railroads in formulating a statement which was forwarded to you on the 7th instant by Mr. Carson L. Taylor, general solicitor of the Milwaukee Road. Accordingly, this letter may be filed with that statement and Mr. Taylor's letter as recording my concurrence in the statement. I would appreciate having this done if permissible under the committee's rules.

Sincerely yours,

NYE F. MOREHOUSE.

STATEMENT OF the Department OF COMMERCE, CHARLES SAWYER, SECRETARY

Views of the Department of Commerce concerning S. 2782, a bill to amend paragraph (4) of section 15 of the Interstate Commerce Act, and S. 2901, a bill to amend the Interstate Commerce Act to alleviate shortages in railroad freight cars and other vehicles during periods of emergency, and for other purposes.

The Department of Commerce recommends against enactment of both these bills.

S. 2782 would repeal that part of the Interstate Commerce Act empowering the Commission under specified conditions in normal times "to short-haul" a railroad, but would not affect emergency routing powers, or the general routing provisions contained in section 15 (3) of the act. It is claimed that constitutional considerations, together with the proviso of section 3 removing the relevance of discrimination against carriers, reduce the effectiveness of the repealed provision. Since, however, the Interstate Commerce Commission as matter of principle should have reasonable discretionary authority over normal-time routing at least in respect of discrimination, preference, and prejudice, this paragraph should not be repealed but rather made more effective by appropriate clarification of the antidiscrimination section in connection with maintenance of through routes.

LETTER FROM WALTER M. W. SPLAWN, CHAIRMAN, LEGISLATIVE COMMITTEE, INTERSTATE COMMERCE COMMISSION

Hon. EDWIN C. JOHNSON,

WASHINGTON, D. C., April 21, 1952.

Chairman, Committee on Interstate and Foreign Commerce,

United States Senate, Washington, D. C.

MY DEAR CHAIRMAN JOHNSON: Your letter of March 5, 1952, addressed to the Chairman of the Commission and requesting comments on a bill (S. 2782) introduced by you to amend paragraph (4) of section 13 of the Interstate Commerce Act, has been referred to our Legislative Committee. After careful consideration by that Committee, I am authorized to submit the following comments:

This bill would strike from paragraph (4) of section 15 the first two sentences, which restrict the power of the Commission to prescribe through routes which short-haul a railroad, leaving only the last sentence thereof, which reads as follows:

"In time of shortage of equipment, congestion of traffic, or other emergency declared by the Commission it may (either upon complaint or upon its own initiative without complaint, at once, if it so orders, without answer or other formal pleadings by the interested carrier or carriers, and with or without notice, hearing, or the making or filing of a report, according as the Commission may determine) establish temporarily such through routes as in its opinion are necessary or desirable in the public interest."

The original act to regulate commerce, of 1887, did not contain any specific provision for the establishment of through routes and joint rates. Under section 3,

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connecting railroads were required to afford reasonable facilities for the interchange of traffic and were forbidden to discriminate unjustly in rates and charges between their connections, but they were not required to make arrangements for through carriage. The establishment of through routes and joint rates was entirely a matter of contract between the carriers, and the Commission had no authority to compel a railroad to enter into such a contract.

In 1906, the Hepburn Act for the first time made it the duty of the carriers to establish through routes and just and reasonable rates applicable thereto, and gave the Commission power to establish such through routes and joint rates, provided no reasonable or satisfactory through route existed. This limitation made the power ineffective after the decision of the Supreme Court in Interstate Commerce Commission v. Northern Pacific Railway Co. (216 U. S. 538), where it was held that the existence of a reasonable or satisfactory through route might be inquired into by the courts, notwithstanding a finding by the Commission, and that the existence of such a route precluded the establishment of any other by the Commission, even though desirable in the public interest. This decision led to the elimination of the limitation by the Mann-Elkins Act of 1910. This act, however, contained a proviso, now a part of section 15 (4), limiting the power of the Commission to short-haul a railroad in establishing such a through route. This proviso was opposed by the Commission, but it was inserted in the Senate, with an explanation by Senator Elkins to the effect that the road which initiates the freight should not be required, where it is a line not unreasonably long, to transfer its business from its own road to that of a competitor, especially when the traffic initiated by it can be transported as promptly and as safely from the point of origin to the point of destination by its road as by the line of its competitor. (See Congressional Record, 61st Cong., 2d sess., pp. 3475-3476.)

In the Transportation Act of 1920, the proviso was qualified by making it inapplicable except as provided in section 3 and except where one of the carriers is a water line. A provision was also added authorizing the Commission to establish temporarily, in emergencies, such through routes as in its opinion are necessary or desirable in the public interest. It is this provision which S. 2782 would retain, while striking the rest of paragraph (4) of section 15.

Prior to 1929, in line with the explanation of the intent expressed by Senator Elkins and mentioned above, the Commission interpreted the proviso against short-hauling a carrier as protecting the long haul of the originating carrier or of a subsequent carrier after it had obtained possession of the traffic. Such an interpretation also seemed warranted as being the only way of giving reasonable effect to the statute, for otherwise there would be innumerable instances where the conflicting long-haul interests of the participating carriers would wholly prevent the establishment of any through route.

In 1929, however, the Supreme Court held in United States v. Missouri Pacific Railway Co. (278 U. S. 269) that the Commission had been wrong in this practical interpretation of the proviso, and that it could not require a through route to be established which would short-haul any carrier. This construction by the Court made it impossible in many instances for the Commission to establish through routes, as authorized under section 15 (3).

In 1940, section 15 (4) was amended to limit the prohibition against shorthauling a railroad where the through route proposed to be established is needed in order to provide adequate and more efficient or more economic transportation, but provided that reasonable preference should be given to the originating railroad, so far as is consistent with the public interest and subject to the limitations set forth in that paragraph.

The right of a railroad to a long-haul is not a constitutional right but one conferred by Congress. It exists only as to all-rail routes and does not apply to rail-water routes. Although our power under section 15 (3) to establish through routes extends to all carriers subject to part I, which would include express companies, pipeline companies, and others as well as railroads, the restriction against short-hauling in section 15 (4) applies only to railroads. Railroads have no private or proprietary rights with respect to the traffic which they originate. These lines ought to be used to the best possible advantage, in the public interest, and the Commission ought to have full power to require their joint use with that end in view.

We recommend that S. 2782 be enacted.
Respectfully submitted.

WALTER M. W. SPLAWN,
Chairman, Legislative Committee.
CHARLES D. MAHAFFIE.
JOHN L. ROGERS.

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