As to my personal qualifications to testify with regard to the fourth section, I do not claim to be any expert on the fourth section. I perhaps do not thoroughly understand all of the ramifications and niceties of distinctions which are indulged in in the administration of the fourth section by the Commission. I have never particularly attempted to make myself an expert in that line. I have, however, had more or less contact with the fourth section for a period of 25 years, and I think that I have had a fair opportunity to judge of the practical effect of the fourth section on freight rates in the United States and in the movement of traffic, and it is with that particular angle of the case that I desire to deal in the testimony which I desire to give.

In theory, the long-and-short-haul section of the act might be defined as a sound piece of legislation. In practical effect it has proved decidedly otherwise.

Some may question why a piece of legislation that has been in effect for so many years has now become so obnoxious. I think there are various contributing reasons for the critical attitude of shippers against the fourth section of the act, and I mean by the fourth section, the long-and-short-haul clause of the fourth section; but one of the principal, or, in my judgment, what is the most important in policy by the Interstate Commerce Commission about 1924 with regard to the administration of the fourth section.

From 1910 on to approximately 1924 the commission administered the fourth section of the act much in the same manner that it did other sections of the Interstate Commerce Act, in much the same manner that it invokes other sections of the act today. In other words, if a complaint were filed with the Commission bringing in either section 4 of the act or a complaint was filed involving rates and section 4 had to be recognized collaterally in the fixation of those rates, the Commission would make findings under the fourth section and require rates to be made in conformity with the fourth section. It did not, however, generally speaking, initiate any procedure under the fourth section, or force adjustments of rates under the fourth section where there were no complaints by shippers or by railroads. About 1924, if my memory serves me right, that condition began to change. There was at that time rather vigorous efforts in certain quarters to have established or enacted into law a rigid long-and-shorthaul clause and there was some criticism, I might say, if my memory again serves me right, by Representatives in Congress, of the attitude of the Commission toward the fourth section, and the fact that the Commission had not more vigorously enforced the fourth section.

At any rate, the Commission began a new policy about that time with regard to the fourth section and began to prod the railroads to bring their rates into conformity with the fourth section.

Up to that time shippers outside of what we might say a restricted area in the United States had paid very little attention to the fourth section. It was not a disturbing factor so far as their rates were concerned, and generally speaking, the wars that raged over the transcontinental rates and in the intermountain territory were not of particular interest to shippers in other sections of the country, at least so far as local rates within those sections were concerned.

But, with this change in policy, a different situation was created. We had the rates in the Southwest; the Southeast; in official terri

tory; the class rates, particularly, adjusted, I think primarily because of the fourth section, on a strictly mileage basis, and since those class rates were in effect, the Commission has been active in forcing the railroads to revise their commodity rates to comply with the fourth section.

I would, like Mr. Hastings, want it understood that I am not here criticizing the Commission for the policy it is pursuing or has pursued. I am merely reciting the facts in showing how that policy has affected shippers.

I assume that the Commission feels that so long as the long-andshort-haul clause of the fourth section is a part of the act, it is up to them to enforce it and they intend to enforce it.

As I stated, the Commission has called upon the railroads to revise their commodity rates to conform to the long-and-short-haul clause of the fourth section. Take, for example, in northern territory, a committee has been set up in Buffalo, N. Y., for many months, conducting hearings with regard to rates that the railroads have been called upon to revise, and I want particularly to mention in connection with these rates, that the carriers have under revision at the present time these commodity rates, the commodity lumber.

In 1933-I do not know the exact date-but, the Commission notified the railroads that they had to bring their lumber rates in northern territory into compliance with the fourth section. The carriers notified the shippers that they had a revision of these lumber rates in contemplation, and called a hearing at Buffalo in October, in 1933. At that hearing there were forty-some representatives of lumber shippers in other territories, and of that forty-some shippers, all but two were opposed to a revision of the lumber rates in official territory on any strictly mileage basis, and particularly on any percentage of the first-class rates.

The carriers having suggested that the rate be revised on the basis of sixth-class rate.

The carriers at that hearing, and our own individual carriers, over which we ship, assured us that there was no desire on their part to force an adjustment of those lumber rates, but they had no alternative but to do something about it, because the Commission had set a certain date by which time the rates must be adjusted.

Well, we presented our objections to the carriers. We objected to rates made on any mileage scale. We objected particularly to any adjustment on any percentage of first-class rates. And we asked these carriers to let the matter stand in status quo. Later the carriers presented to the Commission a petition covering lumber and various other commodities in which they pointed out that adjustments were being forced in northern territory and in other territories on commodities where neither the shippers nor the carriers wanted any adjustment, or general adjustment at least, and they asked the Commission to, as I recall, indefinitely postpone the fourth-section orders that had been entered requiring these various adjustments.

The Commission conceded some additional time, but they did not indefinitely postpone the orders as it was hoped by both the railroads and the shippers they would do. As a consequence the carriers are under obligation, speaking now particularly of the lumber rates, as I recall it, to adjust those rates by December of this year, and as a consequence the carriers filed their tariff with the Commission carry

ing the sixth-class basis on lumber, and those rates were protested to the Commission, and extensive hearings have been held thereon.

I mention lumber particularly, because that is an issue that is very live at the present time, and very vital to the lumber interests in the official territory and those that are shipping into that territory from other territories.

Mr. MARTIN. What is the official territory?

Mr. KEELER. How is that?

Mr. MARTIN. What is the official territory?

Mr. KEELER. That is the territory generally north of the Potomac River and Ohio River, and east of the Mississippi River, including the southern section of Wisconsin and on up through and including New England. Generally, that is known as official territory as defined by those referring to it.

Mr. MARTIN. Now, is this mileage basis, mileage rate, as applied, applied on a mile-to-mile scale, or is some long measure of distance involved in that?

Mr. KEELER. Well, the Commission has prescribed class rates and various columns of first-class rates, and the carriers have selected one of those columns to apply on lumber. Now, if the Commission approves the basis of rates which the carriers have suggested, we will have on lumber in the official territory a straight fixed class basis of rates.

Now, the carriers have got certain relief in connection with the class rates, certain reliefs under the fourth section, in connection with the class rates, and that relief will carry for instance to these new lumber rates if and when the Commission approves them, and they become effective. Does that answer the question?

Mr. MARTIN. My question referred especially, and specifically, to the mileage basis which seems to be on the increase as a method of rate fixing.

Mr. KEELER. It is on the increase.

Mr. MARTIN. Mr. Haynes mentioned that a good many times, about an increase in the use of the mileage basis.

Mr. KEELER. Well, formerly rates were made to meet competitive conditions, carrier-competitive conditions, commercial-competitive conditions. They did not conform strictly to mileage.

Mr. Haynes, in his testimony, cited some instances of that kind. Now, we have growing up more and more a regulated-mileage basis.

These class rates, they started out, as I understand it, as I understand the construction of the class rates, they started out with a certain less-than-car-lot terminal expense and then they assigned that to the first block of the scale, we will say, and then they filled up in mileage-block rates, progressing from that terminal expense.

Now, there is no such terminal expense on lumber and various other low-grade commodities, but we are coming more and more to the forcing of these low-grade commodities on a class basis, because the carriers have got relief under the fourth section in connection with their class rates and they find it a difficult matter to work out and secure relief with specific or other bases of commodity rates. So, they are more and more being forced, as we see it, to take these class rates and apply them on low-grade commodities.

I might say also that the railroads, as a usual thing, select a scale high enough so that if, there is certain to be no reduction in their revenues as a result of applying these scales, and also I assume, to allow for some trimming by the Commission if the Commission decides to cut down what they are suggesting. As a result, in many instances, shippers come out of these adjustments that are forced by the Commission, requiring the fourth section to be observed, with a higher basis of rates, or higher general level of rates, than they had before the Commission interfered in the situation.

Now, we are confronted in the southern territory with much the same situation with regard to lumber. The Commission there has entered fourth-section orders requiring rates to be adjusted by a certain date.

We have had certain conferences with the people in southern territory, and while no definite conclusions have yet been reached, I think that the indications now point to probably some sort of a mileage basis being established in southern territory and then, of course, we have the question of interterritorial rates from the southern to the northern and many of us fear that if we get a mileage scale in the northern lumber, we will get a like scale on the lumber from the South, and it is only a matter of time when something is going to happen to force in a mileage scale in interterritory shipments, so the action of the Commission in forcing these adjustments of rates spreads on and on until we are getting, as you stated, Mr. Chairman, more and more a strict mileage basis of rates in this country, which I think the shipping interests of the whole country are generally opposed to.

I think Mr. Haynes has covered the situation so thoroughly that there is no necessity for me to take any more time of the committee, except I want to say our interest and the other interests for which ĺ have spoken are in favor of the passage of the Pettengill bill.

Mr. MARTIN. Thank you, Mr. Keeler, for your statement.
Mr. KEELER. Thank you.

STATEMENT OF S. O. LAMPMAN, REPRESENTING THE IOWANEBRASKA CANNERS' ASSOCIATION

Mr. MARTIN. Mr. Lampman has told me that he has to leave after this afternoon's session and it will be a convenience to him if he could come on now. He has 15 minutes. Unless there is objection on the part of someone ahead of him on the list, we will hear Mr. Lampman first. You may proceed, Mr. Lampman.

Mr. LAMPMAN. Mr. Chairman, my name is S. O. Lampman, representing the Iowa-Nebraska Canners' Association, as chairman of their traffic committee. The Iowa-Nebraska Canners' Association have as members 54 canneries in Iowa and 8 in Nebraska. I also represent the Western Grocer Co. and am employed as their traffic manager. I have been with the Western Grocer Co. since 1913, as assistant traffic manager until 1923, since 1923 as traffic manager in charge of all matters pertaining to transportation. The Western Grocer Co. have 14 jobbing houses located in Iowa, Minnesota, Missouri, and Kansas. The Western Grocer Co. also own and operate the Marshall Canning Co., who have 8 canneries in Iowa and 1 in Indiana.

During the period July 1, 1933, to June 30, 1934, the Western Grocer Co. and Marshall Canning Co. received a total of 3,365 carloads inbound and shipped outbound 841 cars to 167 cities in 32 different States.

The estimated pack of the Iowa-Nebraska Canners for 1935 is 5,146,000 cases, made from reports to the National Canners' Association.

The same situation exists, so far as the fourth section of the act is concerned, in other central States, as exists in Iowa and Nebraska -meaning the States of Minnesota, Wisconsin, Illinois, Indiana, Missouri, Arkansas, and Colorado.

At recent hearings before the southwestern lines, representatives from these States have concurred in our views.

I wish to quote from my letter of June 4 to Hon. Edward C. Eicher: The principal cause for the revolution in transportation conditions that has occurred since 1920 has been the great increase in the competition of rail carriers by water and highway with the railways since then. These other carriers are free to make and change their rates as they see fit. The railways, by existing law, and especially by the long-and-short-haul provision, are denied similar freedom. Competition in rate-making is, in consequence, one-sided, and because it is so onesided the railways in all parts of the country have lost, and are still losing, to the carriers, by water and highways large amounts of traffic which they greatly need, and of which they can be deprived only because of governmental restrictions that are imposed upon them and not upon their competitors.

The present method of rate-making places the jobbers in the interior territory at a disadvantage with their competitors located adjacent to water transportation and the amendment of the act as prayed for in this bill will to a great extent relieve that condition.

We understand that some interior jobbers are now purchasing goods from the manufacturers and packers located along the Atlantic seaboard, warehousing such goods at Houston and then distributing them into Texas by motor truck. While these jobbers can through this arrangement continue in the business and hold some of their customers, it certainly deprives the western canner and farmers of an opportunity to sell their goods and meet that kind of competition.

Allow me to say here, a jobber in our territory who must purchase his supplies of canned vegetables, instead of purchasing in the territory where he is located, he can go to the Atlantic seaboard, purchase them and ship them to Houston, Tex., and distribute them from there, and deprive the grower and canner in the territory where he is located of participating in that business.

Some months ago the carriers in western trunk line territory approved a rate reduction to southwest territory, however, competition within the western trunk line territory did not demand that the carriers reduce their rates within such western trunk line territory. On account of the fourth section as it now reads, the carriers have been unable to publish these rates without violating that section, while if the fourth section was amended as prayed for in the Pettengill bill, the carriers could go ahead without delay and publish these approved rates and allow us to meet our competition into the southwest territory.

I might say, in this connection, we have expended a lot of money going to hearings, and rates were approved for publication over a year ago. We were hoping then that they would be published in time to take care of our 1934 pack. Unless something is done, it is doubtful whether we will get them prepared and approved in time for the 1935 pack.

Recently the Colorado shippers petitioned the southwestern carriers for a special rate to the Gulf ports, to allow them to meet competition from coast ports. However, the carriers realizing the complications that would arise on account of the fourth section apparently felt that it was hopeless.