GROUP 3.-Intercoastal trades of American Steamship Owners' Association

TO AMEND SECTION 4 OF THE INTERSTATE COMMERCE ACT (LONG- AND SHORTHAUL RULE)

Mr. Gooding, from the Committee on Interstate Commerce, submitted the following report to accompany S. 2327.

The Committee on Interstate Commerce, to which was referred the bill (S. 2327) to amend section 4 of the Interstate Commerce Act (long- and short-haul rule), conducted public hearings on this bill, and having considered same, report favorably thereon with an amendment, and, as amended, recommend that the bill do pass.

The amendment is as follows:

On page 3 strike out all after the word "distance" on line 2, and insert the following:

"Provided further, That where a carrier by rail now has in effect any rate, fare, or charge which is less for the longer than for the shorter distance between two points (the shorter being included within the longer distance), and which has been authorized by the commission or as to which application has been filed with the Commission and not yet acted upon, it shall not be required to change such rate, fare, or charge within twelve months after the passage of this amendatory Act, or thereafter if either before the commencement of or within the said twelve months' period such rate, fare, or charge shall have been authorized by order of the Commission, after hearing, and entered in compliance with the provisions of this Act as hereby amended, and such order shall not be temporary in character, for the purpose of allowing such carrier by rail to meet the competition of another carrier by rail whose route is shorter between said points: And provided further, That nothing in this section contained shall prevent the Commission from authorizing or approving departures from the provisions of this section insofar as applicable to import or export rates, or to a block system of express rates established by order or with the approval of the Commission, or permitted by it to be filed."

EXPLANATION OF AMENDED BILL S. 2327

The present amended fourth section, as amended by Senate bill 2327, is as follows:

That it shall be unlawful for any common carrier subject to the provisions of this act to charge or receive any greater compensation in the aggregate for the transportation of passengers, or of a like kind of property, for a shorter than for a longer distance over the line or route in the same direction, the shorter being included within the longer distance, or to charge any greater compensation as a through rate than the aggregate of the intermediate rates subject to the provisions of this act; but this shall not be construed as authorizing any common carrier within the terms of this act to charge or receive as great compensation for a shorter as for a longer distance: Provided, That upon application to the commission a common carrier by rail may, after public hearing, be authorized by the commission to charge less for longer than for shorter distances for the transportation of passengers or property only in a case where the route via the applicant rail carrier or rail carriers is longer than via the route of some other rail carrier or rail carriers between the same points; but in exercising the authority

conferred upon it in this proviso the commission shall not permit the establishment of any charge to or from the more distant point that is not reasonably compensatory for the service performed; and if a circuitous rail line or route is granted authority to meet the charges of a more direct rail line or rail route to or from competitive points and to maintain higher charges to or from intermediate points on its line, the authority shall not include intermediate points as to which the haul of the petitioning line or route is not longer than that of the direct line or route between the competitive points: Provided further, That the commission may, with or without hearings, upon its own motion or upon application of carriers or shippers, in cases of emergency such as drought or disaster, authorize during the continuance of said emergency any common carrier or carriers to charge or receive a greater compensation for a shorter than for a longer distance: Provided further, That where a carrier by rail now has in effect any rate, fare, or charge which is less for the longer than for the shorter distance between two points (the shorter being included within the longer distance), and which has been authorized by the commission or as to which application has been filed with the commission and not yet acted upon, it shall not be required to change such rate, fare, or charge within twelve months after the passage of this amendatory act nor thereafter if either before the commencement of or within the said twelve months' period such rate, fare, or charge shall have been authorized by order of the commission, after hearing, and entered in compliance with the provisions of this act as hereby amended, and such order shall not be temporary in character for the purpose of allowing such carrier by rail to meet the competition of another carrier by rail whose route is shorter between said points: Provided further, That nothing in this section contained shall prevent the commission from authorizing or approving departures from the provisions of this section insofar as applicable to import or export rates or to a block system of express rates established by order or with the approval of the commission, or permitted by it to be filed.

Hearings before this committee commenced February 18 and continued daily, closing March 6, 1924. A great many witnesses appeared before it and submitted testimony and from the testimony it appears that

The present and past long-and-short-haul clause of section 4 of the Interstate Commerce Act, and as administered by the Interstate Commerce Commission, has worked a great hardship on the intermediate, or less distant, points of the South and West.

That due to the uncertainty of the freight rate structure, capital has not and will not invest in the interior, with the result that there can be no manufacture of the raw products of which the interior abounds; further, the interior is being exploited by being compelled to ship raw products, leaving nothing at the point of production after the transportation charges are paid.

That distributing territory of the interior jobber is reduced to practically nothing, thereby diverting interior business to a few favored points, resulting in fewer mercantile etsablishments, less pay rolls, and loss of capital invested, which has a disastrous effect upon banks, business, and the general prosperity of the communities.

That people are leaving the interior to locate at points with more favorable freight rates, resulting in a centralization of oppulation and industry at a few congested points, which in turn deprives the interior of a home market and causes the products to move long distances to market at high freight rates, leaving nothing for the producer and causing great waste of transportation.

That the present law, as administered, results in rank and un-American discrimination by imposing on the interior unjust, unreasonable, and prejudicial rates, compels the interior to pay the transportation cost of the more-favored points, and in doing so assists the more favored points in meeting the competition of the people who pay a large portion of their transportation costs, with the result that the interior business man is overwhelmed and forced out of business. That this subject has been one of constant litigation between the interior, the more favored points, and the railroads; vast sums of money and time have been expended by the interior to protect their interests; that the money expended for this purpose by the railroads is charged to the operating costs and is paid by the shippers through higher freight rates; thus the interior not only has to expend large sums to protect herself but must furnish the railroads with money to fight the interior's interest.

That the West and South are treated differently than the East in the matter of fourth-section application; in the East no fourth-section relief is granted on account of water competition, notwithstanding in the East there are great water

ways and intense water competition. In the West there are practically no inland waterways, and the railroads of the West always have been permitted to charge more for the short than for the long haul to meet water competition. That the carriers now have an application before the commission asking for permission to establish rates to the Pacific coast from Chicago, the Missouri River, and Colorado cities lower than to the interior, and if the lower rates to the Pacific coast are applied to intermediate points the rates would be cut back to Scranton, Iowa, some 400 miles west of Chicago. In other words, the railroads are now proposing to put into effect from Chicago a scale of rates to the Pacific coast that are lower than to Scranton, Iowa, which is less than 400 miles west of Chicago and 1,800 miles less distance than to the coast.

For example, the rate covering the movement of dry goods in carloads from Chicago to San Francisco is $1.58 per 100 pounds. It is proposed to reduce the rate to $1.10 at San Francisco, while maintaining higher rates for the shorter haul points, to wit, $1.58 at Spokane, Boise, Reno, and Phoenix (as illustrative), and these higher rates for shorter hauls obtain in diminishing degree until, for a shorter haul inland, 1,800 miles from San Francisco to Scranton, Iowa, which is but 375 miles west of Chicago, at which point the rate is $1.11.

That, as to points of origin, at present there is a spread between New York and Chicago on dry goods of 291⁄2 cents per 100. It is proposed to increase that spread to 771⁄2 cents, an increase of 172 percent. The present spread between Pittsburgh and Chicago is 15 cents, and it is proposed to increase it to 63 cents, an increase of 320 percent. The present spread between Cincinnati-Detroit territory and Chicago is 7 cents, and it is proposed to increase it to 55 cents, an increase of 680 percent.

That on eastbound business the West is treated differently than the East, in that as to points of destination there never have been any fourth-section violations. Chicago has never been asked to pay a higher rate than New York, while on westbound traffic all States west of and including North and South Dakota, Nebraska, Kansas, Oklahoma, Texas, and now points in Iowa, are asked to pay a higher rate than to the Pacific coast.

That, if a rate at the more distant point is reasonably compensatory, a higher rate at the less distant point is grossly excessive, unjust, and unreasonable; that the Committee of the Senate on Interstate Commerce expressed the thought on the floor of the Senate at the time of the passage of the 1920 amendment that under the "reasonably compensatory" feature fourth-section violations would be impossible; but that under the Interstate Commerce Commission's criteria those features have been rendered practically null and void.

That through the violation of the fourth section, permitted by the Interstate Commerce Commission, the boats have been driven off the rivers of the South, and a reduction in freight rates to the West has reduced the number of ships through the canal, and the granting of lower rates to the coast than to the interior will result in removing at least 50 percent of the boats now in operation through the canal, which is directly in opposition to Congress's declared policy in section 500 of the transportation act "to promote, encourage, and develop water transportation, service, and facilities in connection with the commerce of the United States, and to foster and preserve in full vigor both rail and water transportation." That it is the policy of the railroads to drive all water transportation out of business.

That the Panama Canal was built by all of the people of the United States, and the interior was taxed its full proportion and has received no benefit therefrom; in fact, the interior has been irreparably damaged through a system of freight rates fostered by the railroads and the Interstate Commerce Commission.

That the traffic through the canal constitutes less than 1 percent of the traffic handled by the transcontinental carriers, and the loss of any traffic to the railroads will not be felt by reason that the traffic for the year 1923 was the greatest in their history, and that traffic doubles every 12 or 15 years, and that with the present facilities the carriers will not be able to handle the traffic offered; in fact, very serious congestion and car shortages causing tremendous losses to proucers have recently taken place.

That lower rates to the more distant points deplete the revenue of the carriers, which under section 15a must be made up from the rates to the less distant points.

That if the rates are maintained on a uniform level, the rail lines will not be required to forego any substantial amount of business that they would not otherwise secure, for the reason that by tipping the rates down to the water ports from distances inland, ranging anywhere from 150 to 1,800 miles, has the necessary

effect of causing such a substantial loss in the rail revenues that would otherwise be gained on a uniform rate level as to more than offset the increased revenues which might be gained by taking some of the traffic away from the water lines; and in this connection it is impossible to state just how low the rail rates might have to be reduced at the water ports, because it is obvious that the water carriers with a large investment involved are not going to forego the traffic which they have without a fight, and this means a substantial lowering of the present water rates and a further lowering of the rail rates if the railroads are to secure any substantial volume of tonnage.

That under the present and past long-and-short-haul rule of section 4 of the interstate commerce act, the commission was authorized to grant relief in special cases after investigation (meaning, of course, a public hearing). Since 1910, there have been filed with the commission 12,513 applications for relief, involving many millions of rates, and out of 5,579 applications granted, only 303 applications were heard and 5,279 applications were granted without a hearing, and of the 5,031 applications filed prior to February 17, 1911, 1,329 applications have been permitted by the Interstate Commerce Commission to continue in effect for 13 years without a hearing as to their reasonableness, or as to whether or not the rates thereunder were compensatory, or as to the hardships placed on the intermediate points. Adding these later applications (1,329) to those granted without a hearing (5,279), there are in existence 6,605 applications permitted by the Interstate Commerce Commission without a hearing, which involves many millions of rates; and that the continuance of such policy on the part of the Interstate Commerce Commission can only be stopped by a strict prohibition. That pressure is brought to bear on the railroads to make fourth-section relief applications by the larger cities and shippers without regard to the hardship put on the smaller intermediate points. As an illustration, in the now pending application before the commission on August 4, 1923, the director of traffic of the Chicago Association of Commerce addressed a peremptory telegram to the traffic vice presidents of the various western roads, reading as follows:

"Please advise why fourth-section application is not filed with commission. After many conferences with shippers, certain commodities and rates were agreed on to which relief was found necessary, and the subject has been dragging since February last. If more prompt action is not taken, shippers will make other arrangements and will not be interested. Necessity for fourth-section relief was mainfested in your annual report to stockholders. Wire answer."

The railroads' position was made clear in their reply to that telegram, which was as follows:

"Fourth-section application all ready for presentation to commission, but lines think should be personally presented by committee of executives. Feel it would have more weight with the commission if presented in this manner. Will probably be disposed of in a few days."

On the same subject, the Transcontinental Freight Bureau, the filing agent for the transcontinental lines, wired the Chicago Chamber of Commerce as follows: "Your B 16, 4th instant, fourth-section application all ready for presentation to commission, but several lines think it should be personally presented by committee of executives. Understand Santa Fe and Northern Pacific are in correspondence with other executives on this point. California lines had originally suggested personal presentation by me, but such presentation would not carry much weight with the commission."

That the recent application filed with the commission for permission to establish lower rates to the coast than to the interior on something like 43 commodities -the list was purposely made small, to make it easy to get by the commission, and if successful other applications would be made.

That the Supreme Court of the United States in Louisville & Nashville Railroad Co. v. Kentucky (183 U. S. 503) held that the enactment of a long and short haul clause was not repugnant to the Constitution of the United States.

That he fourth section as amended will not interfere with present import, export, block system of express rates, or circuitous line competition.

It was the position of the witnesses from the interior that all they are seeking is a squ: le deal; to be placed on the same level with other people of the United States. They desire to accord to the cities on the rivers and coasts any benefit to be de red from their location on the water, but in turn desire the benefit of their ge phical location of being anywhere from a few to 1,800 miles less.

STATEMENT OF J. B. SWEENY, VICE PRESIDENT AND TRAFFIC MANAGER OF THE MERCHANTS & MINERS TRANSPORTATION CO., BALTIMORE, MD., REPRESENTING THE AMERICAN STEAMSHIP OWNER'S ASSOCIATION

Mr. PETTENGILL. We will hear Mr. Sweeny.

Mr. SWEENY. My name is J. B. Sweeny. I am vice president and traffic manager of the Merchants & Miners Transportation Co., Baltimore, Md.; and I am appearing here on behalf of the American Steamship Owners' Association before this subcommittee, on these House bills.

Speaking as to the Pettengill bill, H. R. 3263, and the Dirksen bill, H. R. 3610, these bills propose to amend the fourth section of the Interstate Commerce Act, as amended, and so change and modify the fourth section to eliminate one of the fundamental principles which is now and was originally in the act, which is that it shall be unlawful for any common carrier subject to the provisions of the act to charge or receive any greater compensation in the aggregate for the transportation of passengers or of like kind of property for a shorter than for a longer distance over the same line or route in the same direction, the shorter being included within the longer distance.

It also eliminates from section 4 the power of the Interstate Commerce Commission to prohibit the establishment of any charge to or from the more distant point that is not reasonably compensatory for the service performed. It also eliminates from the present section 4 that "if a circuitous rail line or route is, because of such circuity, granted authority to meet the charges of a more direct line or route to or from competitive points and to maintain higher charges to or from intermediate points on its line, the authority shall not include intermediatde points as to which the haul of the petitioning line or route is not longer than that of the direct line or route between the competitive points."

It also eliminates from the present section 4 "and no such authorization shall be granted on account of merely potential water competition not actually in existence." It is the desire of the companies that I represent, to hereby express themselves just as forcibly as they possibly can in opposition to any change in the fourth section of the act as now constituted. We believe that the changes proposed are unfair to the water lines, and are not in the public interest. In the Transportation Act, 1920, Congress enacted the following specific declaration of policy:

SEC. 500. It is hereby declared to be the policy of Congress to promote encourage, and develop water transportation, service, and facilities in connection with the commerce of the United States, and to foster and preserve in full vigor both rail and water transportation.

Should these bills be enacted into law it would substantially sound the death knell of coastwise and intercoastal shipping, and all domestic steamship or steamboat services. There is now, always has been, and rightfully must always be, the most active competition for traffic between the railroads on the one hand and the water lines on the other. Congress from time to time has recognized this keen competition and has not only passed legislation that was helpful to the merchant marine, such as protecting the coastwise traffic from foreign competition by prohibiting foreign vessels from engaging