AMEND FOURTH SECTION INTERSTATE COMMERCE ACT TUESDAY, JUNE 25, 1925 HOUSE OF REPRESENTATIVES, INTERSTATE AND FOREIGN COMMERCE, Washington, D. C. The subcommittee met, pursuant to adjournment in room 1501, New House Office Building, at 10 a. m., Hon. Samuel B. Pettengill presiding. Mr. MARTIN. The committee will come to order. STATEMENT OF MAJ. GEN. THOMAS QUINN ASHBURN, UNITED STATES ARMY, PRESIDENT OF THE INLAND WATERWAYS CORPORATION; PRESIDENT AND CHAIRMAN OF THE BOARD OF MANAGERS, INLAND WATERWAYS CORPORATION; PRESIDENT OF THE WATER RIVER TERMINAL CO.; CHAIRMAN OF THE AMERICAN WATERWAYS ASSOCIATION General ASHBURN. My name is Thomas Quinn Ashburn, Major General, United States Army; president of the Inland Waterways Corporation; chairman of the board of managers, Inland Waterways Corporation; president of the Water River Terminal Co.; chairman of the American Waterways Association. I have been connected with the Inland Waterways Corporation since its inception in 1924 and have been the officer serving directly under every Secretary of War, since Secretary Baker to the present time, in charge of carrying into effect the policy of Congress to promote, encourage, and develop waterways, and to foster and preserve in full vigor both rail and water transportation. Mr. MARTIN. Are you still in the active service, General? In carrying into effect the policy of Congress for promotion, encouraging, fostering, and preserving of water and rail transportation, the most difficult thing that I have had to do is to bring before the people of the United States the idea that the development of a coordinated cooperative form of transportation is not for the purpose of beating down any one particular form of transportation, but rather for the purpose of giving to the people of the United States the benefit of all forms of transportation under equal competitive conditions, to which they are entitled. For years there has been the policy of the opponents of waterways to endeavor to create the idea that this was a national fight between the railways and the waterways, in which the public had a minor interest. As a matter of fact, every form of transportation has been subsidized, is presently being subsidized, and will probably continue to be subsidized, to the end that the public may have the best and cheapest form of transportation available. In the various controversies which have arisen before the Interstate Commerce Commission with regard to the propriety of certain rates, the long- and short-haul clause has been the one factor which has enabled the people of the United States to have a reasonable chance of getting proper rates. Mr. MARTIN. Will you just repeat that statement, General? General ASHBURN. In all of the controversies before the Interstate Commerce Commission, there has been a difference of opinion between the rail lines and the water lines as to the proper rates to give the public the benefit of cheaper transportation, the biggest protection that the people have had has been the present fourth section of the Interstate Commerce Act. In this bill, H. R. 3263, now before Congress, there is a provision made for the elimination of the long- and short-haul clause, paragraph 1 of section 4, of the Interstate Commerce Act, and it differs somewhat from the bill proposed by the Federal Coordinator. In many cases the Commission exercises its authority to prevent the railroads from departing from the general rule that they cannot charge less for a longer than for a shorter distance over the same line or route in the same direction and forbidding particularly any common carrier within the terms of the act to charge or receive as great compensation for a shorter as for a longer distance, under the provision That upon application to the Commission such common carrier may in special cases, after investigation, be authorized by the Commission to charge less for longer than for shorter distances for the transportation of property. The law provides that the lower charge for a longer than a shorter haul shall be "reasonably compensatory." The proposed bill provides only that it shall be unlawful for any common carrier subject to the provisions of this act to charge or receive any greater compensation as a through rate than the aggregate of the intermediate rates subject to this act: Provided, That the Commission may from time to time prescribe the extent to which common carriers may be relieved from the operation of this section. Certainly the present act is clarified, because of the simplicity of the proposed act. It definitely forbids one thing, and one thing only, that common carriers shall not receive any greater compensation as a through rate than the aggregate of the intermediate rates subject to the provisions of this act, except upon authority of the Commission, and it holds intact all the great injustices now being perpetrated under existing law, of which I shall give you a few examples. Mr. Eastman, in his report to the President on his proposed bill, gives the history of the fourth-section relief, which I condense for your benefit: Federal regulation of the railroads was precipitated in 1887 primarily by the then wide-spread and flagrant discriminations in rates and charges. Prominent among these discriminations which had created intense public dissatisfaction was the common practice of charging less for long hauls than for shorter hauls to or from intermediate points on the same line or route, even where the route was direct. Section 4 of the Act was designed to subject such long- and short-haul rate discrimination to regulation by the Commission and to confine them within reasonable limits. The difference between the original purpose of Congress and the purpose of this act is that, if this act is passed, there will be no power of the Commission to confine long- and short-haul rates and discrimination, within reasonable limits. I now quote again from Mr. Eastman: The long- and short-haul clause was designed to eliminate the pernicious practice of charging higher rates for shorter than for longer hauls which had become widely prevalent prior to 1887 as a result of unrestrained resort to competitive rate making. While the prohibition, as defined in the statute, was applicable only where the higher and lower rates were charged "under substantially similar circumstances and conditions", this qualifying phrase was assumed in the beginning, by the carriers as well as the Commission, to have reference to the transportation itself, rather than to the conditions surrounding the transportation service rendered at the nearer and at the more distant point. "The competition with each other of the railroads which are subject to the Federal law", said the Commission, "can seldom * * * make out a case of dissimilar circumstances and conditions within the meaning of the statute, because it must be seldom that it would be reasonable for their competition at points of contact to be pressed to an extent that would create the disparity of rates on their lines which the statute seeks to prevent." However, in the Troy case, which was carried up to the Supreme Court in 1897, the issue was decided by the Supreme Court adversely to the Commission's interpretation. As an immediate consequence of the Supreme Court's decision numerous new schedules were filed with the Commission, especially for western territory, advancing the rates to intermediate points; and after 1897 the Commission proceeded, for the most part, as if the fourth section had been completely eliminated from the act. It was because of these decisions of the Supreme Court, which reduced the original section 4 practically to a nullity, that the words "under substantially similar circumstances and conditions" stricken by the Mann-Elkins Act of 1910, in response to public agitation. The limitations on the granting of fourth-section relief which were added by the Transportation Act, 1920, are as follows: (a) That 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. (b) The noninclusion of intermediate points in fourth section granted through circuitous rail line or route. (c) That no fourth section authorization shall be granted on account of merely potential water competition not actually in existence. The difficulty with respect to (a) has been chiefly one of interpretation. The words "reasonably compensatory" are not defined in the statute, and there has been continual controversy as to their meaning. In this connection, I would like to quote the testimony of Mr. L. W. Childress on S. 3612. Mr. Childress is president of the Mississippi Barge Line Co. In discussing sugar rates, he said: Under the decision sugar traffic yields the railroads 4 mills per ton-mile in one case and 4.4 cents per ton-mile in another. The former figure is pronounced reasonably compensatory; the latter not unreasonably high. Whether rates of this character are in conflict with section 3 of the Interstate Commerce Act, which provides that rates must be reasonably compensatory, is a matter into which the Interstate and Foreign Commerce Committee may wish to inquire. 635-35-58 The CHAIRMAN. Did the same man give the same testimony? Mr. CHILDRESS. The same testimony; but they never use the same figures. So we never know just how they get at them. Senator SHIPSTEAD. And does the Interstate Commerce Commission accept both? Mr. CHILDRESS. They will accept any figures you submit, or I mean any figure the railroads submit. I think the main difficulty under the present act could be obviated if the controversy as to the meaning of the words "reasonably compensatory" could be settled. Believing that such a clause should remain under section 4, I think a more specific indication by Congress of the meaning which those words were intended to convey would be desirable. Now, I am speaking from the viewpoint of a man who has been working on the subject, and studying it, for 15 years. I think, if I gave you a little example of what we have been doing, it might, perhaps, carry more weight. A few years ago, the Southern Railroad owned what was then known as Ensley Southern Railroad, which was a small branch line connecting with Warrior River at the port of Birmingham, and Ensley. Ensley, as you know, is a large steel center in the South. It was the only connection that the waterways had with the other railroads within 16 miles, and with the city of Birmingham. Mr. MARTIN. This branch line was? General ASHBURN. Yes, sir. With the sole purpose of killing this waterway, the Southern Railroad threw the Ensley Southern into the hands of a receiver, and, after a certain length of time, they appealed to the district courts to have the railroad abandoned. If the railroad had been abandoned, then all connections between the Warrior River, upon which the Government had spent several million dollars, and the city of Birmingham would have been destroyed. Rather than let this branch line be discontinued, the Inland Waterways Corporation, this agency of the Government, asked the court to set a price upon that railroad. It did set a price upon that railroad of $500,000. The entire stock of the railroad was bought by the Inland Waterways Corporation. They again rehabilitated that railroad. At the end of the first year, its profits were so great that the Interstate Commerce Commission called upon it to refund several thousands of excess profits under the recapture clause. The railroad is now valued by the Interstate Commerce Commission at almost one million and a half dollars, and it is paying a reasonable return. I do not know of any railroad in the United States that pays a better return. When the Panama Canal was built, of course, the rates through the Panama Canal, from coast to coast, by water, became considerably cheaper than they were clear across the continent by rail. In the endeavor to meet this competition of the Panama Canal, the railroads asked for and were granted permission to disregard the fourth section. The result of that has been that today there are such exceptions that, unless it has been changed within the last week, you can ship a carload of sugar from San Francisco into St. Louis and to Chicago for the same rate today; unless it has been changed within the past week, it is quite possible, and it happens to the beet sugar people in the West and the northwestern beet sugar growers that if the growers want to get their product upon the market at Kansas |