On sheet 14 of the premier case the Commission, quoting from United States Cast Iron Co. v. Director General, said:

Switching allowances to large industries have developed in certain parts of the country until in many instances they are little better than undue preferences, and represent service which we would, ab initio, long hesitate to direct a carrier to render in effecting delivery of carload freight. They are, without doubt, frequently compelled by the fear of loss of large tonnage

Fear of loss of large tonnage

They deplete unnecessarily the revenues of the carriers and thus tend to shift the burden of paying for such expensive deliveries from the shoulders of the recipients, where it belongs, to the shoulders of other shippers who receive only average delivery service.

The most astonishing thing about some of these practices is that after the Commission had condemned the practice and pointed out the evils thereof and found that the results were the depletion of the carriers' revenues, they persist in going on in the same old way.

Many indictments were obtained against the carriers and shippers and many fines paid for continuing wasteful practices after such practices had been condemned by the Commission. Following, I quote from a memorandum obtained from the files of the Commission:

MEMORANDUM

The reports of the Commission in the cases mentioned below reflect wasteful practices on the part of the carriers which the Commission has condemned:

1. Ex parte 104, Part 6: Warehousing and Storage of Property by Carriers at Port of New York, N. Y. (198 I. C. C. 134).

2. Ex parte 109: Duplication of Produce Terminals (188 I. C. C. 323), wherein serious wastes arising from the construction of unnecessary produce terminals were in issue. Of interest, also, are the statements under the caption Other Competition for Traffic, beginning on page 335 of the report.

3. Ex parte 104, Part 2: Terminal Services (report dated May 14, 1935), wherein the wide-spread practices of the carriers of making allowances to industries for services which are not contemplated by line-haul rates were dealt with at length and declared to be unlawful.

PROSECUTIONS ARISING OUT OF WAREHOUSE AND STORAGE PRACTICES

The following prosecutions have been instituted since the report of the Commission in the warehouse investigation:

1. U. S. v. B. & O. R. R. Co.: 15 counts charging violations of the Elkins Act through granting concessions to the Goodyear Tire & Rubber Co. in connection with the storage in transit and handling of crude rubber, the indictment alleging that a commercial warehouse and storage service was rendered to the shipper at less than the cost thereof to the carrier. (Case still pending.)

2. U. S. v. B. & O. R. R. Co.: 15 counts charging violations of the Elkins Act through granting concessions by means of insuring burlap bagging for Bemis Bros. Bag Co. at less than the cost of such insurance to the carrier. (Case still pending.)

3. U. S. v. Bemis Bros. Bag Co.: 15 counts alleging acceptance of concessions mentioned in no. 2 above.

4. U. S. v. New York Central R. R. Co.: 15 counts. This indictment is similar to no. 2 above, the difference being that shipments were insured for the Columbian Rope Co. (Case still pending.)

5. U. S. v. Lehigh Valley R. R. Co.: 15 counts. This indictment is similar to nos. 2 and 4 above, except that shipments were insured for Goodyear Tire & Rubber Co. (Case still pending.)

6. U. S. v. D., L. & W. R. R. Co.: 20 counts. Indictment charged violations of Elkins Act by granting concessions on flour shipments stored on carrier's Hoboken and New York City piers, by leasing space at nominal rates to circumvent published storage rates.

7. U. S. v. Lehigh Valley R. R. Co.-Twenty counts charging failure to collect published storage rates on flour stored outside of leased space on piers. Plea of guilty entered and fine of $10,000 imposed.

All of the above prosecutions except nos. 6 and 7 above were brought in the district of New Jersey. Those two cases were brought in the southern district of New York (New York City).

In addition to the cases mentioned above, 9 others (5 against carriers and 4 against shippers) were based upon storage practices. These nine indictments charged the carriers and shippers with having granted and accepted, respectively, concessions resulting from the failure of the carriers to collect published storage charges on flour which had been stored on pier space other than that which the shippers had leased from the carriers.

The carrier defendants were the New York Central, the Erie, and the Baltimore & Ohio in three cases. The shippers were F. W. Huber, who accepted concessions from the Erie; and Kellogg Sales Co., Joseph Moskowitz, and Harry Kulla, who accepted concessions from the Baltimore & Ohio.

Pleas of guilty were entered to all nine indictments, and the following fines were imposed:

All of these indictments, with the exception of those against the Erie and F. W. Huber, were returned in the southern district of New York. The Erie and Huber parties were indicted in the district of New Jersey.

No indictments based directly on the wasteful practices mentioned in the Commission's report in the Buffalo Terminals case were obtained. However, a number of indictments against shippers for filing false claims for damage to shipments, which were discovered by us during our investigation at Buffalo of the terminals matter, were secured.

Mr. REECE. If water-transportation companies had done the same things for which the railroads were indicted, would they have violated the law?

Mr. CAMPBELL. I do not know.

Mr. REECE. What would be the justification, in a spirit of fairness, to have a system whereby one transportation company would be subjected to these fines, while a competing transportation company would be free to engage in the same practices with complete immunity?

Mr. CAMPBELL. I have answered that by saying that no carrier should be allowed to do those things, or to give rebates. When you come to regulate other carriers, I presume you will take care of that. I am simply trying to show you that because of the unrestrained competition of these carriers, they have brought all this upon themselves. Now, they propose to throw down the bars with regard to the fourth section, and do as they please. As Judge Fletcher said the other day, they think they ought not to be in a worse condition than any other line of business, but how can any business stand that sort of thing? Why should they bring it on themselves? Why should they do those wasteful things? Why submit to the club of shippers in the large cities? As you know, one of the greatest economic questions that we have to deal with today is the congestion of the large cities. The people have been going away from the rural districts and flocking to the large cities to such an extent that there is no living in them. great centers in the east, I would say, are responsible for this condition of the railroads.

The

Mr. REECE. You would' not say that the railroads are responsible for New York City, would you?

Mr. CAMPBELL. They are responsible for this kind of condition, where they have allowed these centers to take millions of dollars of their revenue. They are responsible for those things.

For violations of the Elkins Act growing out of the failure of shippers of vegetable oils to pay published pumping charges from tank barges to tank cars in New York harbor, 24 indictments were returned in the district of New Jersey. All of these still are pending. Two of these indictments were against barge companies (Manhattan Lighterage Corporation and New York Tank Barge Co., Inc.) and seven against carriers (Lehigh Valley, D. L. & W., Pennsylvania, Erie, New York, Susquehanna & Western, New York Central, and Jersey Central); and they charged the granting of concessions. The remaining 15 indictments were against shippers and charged the acceptance of concessions.

It seems doubtful that the practices upon which these indictments were based can be said to constitute a wasteful practice or to result in dissipation of the carriers' revenues for the reason that although the shippers did not pay the 2-cent pumping charge, the carriers did receive that charge from the barge companies.

It is a significant fact that the carriers prior to 1910 as a consequence of the decision in the Alabama Midland case were able to charge more for the short haul than for the long without asking any one and yet the records of the Interstate Commerce Commission show that in the 20-year period prior to 1910 the ratio of dividends paid to all stock outstanding was 2.92 percent and during the 20-year period beginning with 1910 the rate was 4.50 percent.

One of the evils of the times as expressed by the economists of the day is the concentration of great populations in our terminal cities. Every day we hear of plans to scatter the populations to the rural sections. The rail carriers more than any other agency are responsible for the congestion of our great industrial centers and yet they are now before you asking that they be given the most powerful of all weapons with which to make the big center bigger and the small center smaller. They are supported in this request by the large shippers, many of whom drained the carriers of their much-needed revenues by demanding and receiving allowances and other favors to which they were not entitled.

Mr. REECE. I do not want to take up any more of your time, but, in connection with your suggestion that the railroads are responsible for the concentration of people in the metropolitan centers, the water transportation agencies serve in most of those centers, do they not? Mr. CAMPBELL. Yes; they do.

Mr. REECE. Insofar as traffic is diverted from railroads to other transportation agencies, particularly water transportation agencies, it would not help to remedy the evil of which you complain.

Mr. CAMPBELL. I presume when the water carriers come before you they will be able to give you all those details. When you get those tonnages, you will be astonished at the small tonnage handled by the water lines as compared with that handled by the rail lines. I would prefer not to go into that.

Last year the Interstate Commerce Commission, reporting to this honorable committee said:

We are of the opinion that the record of the carriers with respect to the establishment of higher rates for shorter than for longer distances, during the nearly

half a century since the enactment of the original act has fully demonstrated the need for further protection of the shipping public against the kind of discrimination and prejudice resulting from the establishment of higher rates for shorter than for longer distances than that afforded generally by those sections of the act other than section 4 and it is our view that the long-and-short-haul provision of that section should be continued in force to insure this protection.

The Intermediate Rate Association is opposed to the Pettengill bill, H. R. 3263.

The Intermediate Rate Association is opposed to any change in the fourth section and thinks it should remain as it now is. Therefore it is opposed to the Dirksen bill, H. R. 3610.

The Intermediate Rate Association is opposed to the Rayburn bill, H. R. 5362.

If there is to be any change then the Intermediate Rate Association wishes to go on record as supporting the Driver bill, H. R. 8364.

Now, if I might say just one word, I am through: Coordinator Eastman has made a report-I intended at one time to quote quite extensively from that report-but I thought it unnecessary because you all have access to it. He has reported that his investigation up to the present, and it is not yet complete, indicates that the carriers, by cooperating and cutting out waste, can save at least $25,000,000 a year, and he says he thinks that it will readily reach $50,000,000 a year, and he cites there such situations as in Chicago.

That great Chicago terminal, where I do not know what the rate is now, but at one time they moved traffic the entire distance of the Chicago switching district for 21⁄2 cents a hundred, for some forty-odd miles, when on iron and steel the rate for the first 10 miles, if my recollection is correct, was 11 cents for 10 miles.

Now, those are the things, gentlemen, and do not let this issue be clouded. This is the issue. It is not the long-and-short-haul clause. This is the issue, and you must not allow yourselves to be diverted from it. The issue is: Shall we throw down the bars to these carriers and let them go on in their unrestrained way, as they went until 1886, which brought on the Interstate Commerce Act, because they had destroyed themselves, unrestrained as they are doing now, and just now going to be restrained in these great centers by throwing away millions every year by free services and rebates. to these large shippers, members of the National Industrial Traffic League, some of them located in Chicago, who are here pleading for preferential rates.

Now, that is the issue.

Now, do not do this thing. If you do, you will go back to the horse and buggy age, as the President of the United States said. while ago.

Mr. EICHER. Mr. Campbell, just one or two short questions You referred to decisions by the Interstate Commerce Commission in 1922 and 1926, I believe.

Mr. CAMPBELL. Yes.

Mr. EICHER. Which denied applications for long-haul rates to coastal points.

Mr. CAMPBELL. Yes.

Mr. EICHER. Were you a member of the Commission at that time?

Mr. CAMPBELL. I was.

Mr. EICHER. Did you take part in those cases?

Mr. CAMPBELL. I did, and dissented in the 1922 decision with this definition of what is reasonably compensatory. Yes, sir; I took part in those decisions.

Mr. EICHER. I am told by the clerk of our committee that there will probably be a roll call between now and 2 o'clock, but it is probable that it will be concluded before then, so we will meet at 2 o'clock, and I understand that Mr. Charles will go on at that time.

(Thereupon, at 12:15 p. m., the committee took a recess until 2 p. m., of the same day.)

AFTER RECESS

The committee reassembled, pursuant to the taking of the recess, at 2 p. m.

Mr. MARTIN. The committee will please be in order. The next witness will be Mr. C. E. Childe, chairman of the traffic committee of the Mississippi Valley Association.

STATEMENT OF C. E. CHILDE, CHAIRMAN OF THE TRAFFIC COMMITTEE OF THE MISSISSIPPI VALLEY ASSOCIATION, OMAHA, NEBR.

Mr. CHILDE. Mr. Chairman: I live at Omaha, Nebr., and all of my life I have been a resident of the Middle West. I have had something over 30 years' experience in transportation matters and since 1906 I have acted as representative of shippers, chambers of commerce, and other associations in proceedings before the Interstate Commerce Commission and other bodies considering transportation matters. I have practiced before the Commission for something over 25 years and have participated in most of the important rate proceedings before that body which affected the Middle West, representing Midwestern communities and industrial interests, largely.

I was president of the National Industrial Traffic League in 1928 and 1929, although I do not appear here as representing that body. I have been chairman of the traffic committee of the Mississippi Valley Association since 1930.

I cite this experience, briefly, just to indicate that out of it I have acquired some knowledge of transportation conditions in the United States and the railroad rate structure as it has developed under our regulatory laws.

I have observed and taken part in the revival and growth of inland waterway transportation and highway transportation, in the period since the war, and I think I am familiar with the ensuing struggle which is still going on as between the railroads and these other forms of transportation, of which these bills that are now before your committee are just one phase, and I shall try to discuss the bills, as they may affect the transportation situation, from the standpoint of the public interest.

The Mississippi Valley Association is a nonprofit association of citizens, firms, and organizations in the Mississippi Valley States, which takes in broadly the territory between the Allegheny and Rocky Mountains and between Canada and the Gulf, and its objective is to promote the economic welfare of the territory by developing its

commerce.