JANUARY 25, 1935. Hon. SAM RAYBURN, MY DEAR MR. CHAIRMAN: The Chairman of the Commission has referred to our legislative committee your request of the 16th instant for a report on H. R. 3610, introduced by Representative Dirksen, and entitled "A bill to amend paragraph (1) of section 4 of the Interstate Commerce Act, as amended February 28, 1920 (U. S. C., title 49, sec. 4). This bill has been given careful consideration by our legislative committee and it has authorized me to submit the following report: H. R. 3610 proposes to repeal the so-called "long-and-short-haul provision" in section 4 of the Interstate Commerce Act. This bill is identical with H. R. 3263, introduced by Representative Pettengill in the present Congress. Under date of January 21, 1935, our legislative committee submitted a report to you on H. R. 3263, to which were attached copies of a report on H. R. 8100, also introduced by Representative Pettengill in the Seventy-third Congress. As H. R. 3263 is also identical with H. R. 8100, we enclose copies of our report thereon as a part of this report. As indicated in the enclosed report, the Federal Coordinator of Transportation has also made a study of the possible changes in the fourth section. In his report transmitted to Congress March 10, 1934, and printed as Senate Document No. 152 in the Seventy-third Congress, he recommended against legislation such as proposed in this bill and that recommendation was unanimously approved by the Commission. We have nothing to add to the enclosed report and adhere to its recommendation that the bill be not passed for the reasons therein stated. Respectfully submitted. FRANK MCMANAMY, Chairman Legislative Committee. Hon. SAM RAYBURN, MARCH 15, 1935. Chairman Committee on Interstate and Foreign Commerce, House of Representatives, Washington, D. C. MY DEAR MR. CHAIRMAN: Pursuant to your request of February 7, the Commission's legislative committee has carefully considered and authorized me to submit this report on H. R. 5362, introduced by yourself, and entitled "A bill to amend the Interstate Commerce Act, as amended, and for other purposes." H. R. 5362 proposes to amend paragraph (1) of section 4 of the Interstate Commerce Act in the manner recommended by the Federal Coordinator of Transportation in his report of March 10, 1934, published as Senate Document No. 152 in the Seventy-third Congress, and repeated in his report of January 21, 1935, published as House Document No. 89 in the Seventy-fourth Congress. In transmitting the first-mentioned report of the Coordinator to the President and Congress, the Commission approved his recommendations, except Commissioners McManamy and Lee did not concur in the proposed amendment to the fourth section. In transmitting the last-mentioned report, the Commission stated that "Our views as to the desirability of such changes remain unchanged." This bill would eliminate the limitations imposed by the Transportation Act, 1920, upon the Commission's authority to grant relief from the fourth section, and that section would then read as it did before 1920. The limitations referred to 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) 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 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; and (c) No such authorization shall be granted on account of merely potential water competition not actually in existence. The reasons for the proposed amendment are stated in the Coordinator's report of March 10, 1934, at pages 66 to 72 of Senate Document No. 152, and they are repeated in an appendix to his report of January 21, 1935, at pages 169 to 173 of House Document No. 89. There is nothing further that we could add to what was said in the Coordinator's reports. The Commission has twice approved the Coordinator's recommendation that the fourth section be amended by eliminating the above-described limitations, and this bill appears to be properly drawn to carry out that recommendation. Respectfully submitted. FRANK MCMANAMY, Chairman of Legislative Committee. JUNE 10, 1935. Hon. SAM RAYBURN, Chairman Committee on Interstate and Foreign Commerce, House of Representatives, Washington, D. C. MY DEAR MR. CHAIRMAN: This is written in response to your request of the 7th instant for a prompt report by the Commission's legislative committee on H. R. 8364, introduced by Representative Driver, and entitled "A bill to amend section 4 of the Interstate Commerce Act, as amended", which bill we understand is under consideration by your subcommittee of the House Committee on Interstate and Foreign Commerce. This bill has had the careful consideration of our legislative committee, and it has authorized me to submit the following report thereon: H. R. 8364 would amend the fourth section by striking out the proviso reading "and no such authorization shall be granted on account of merely potential water competition not actually in existence" and substituting in lieu thereof the following: "and no such authorization shall be granted on account of water competition either potential or actually in existence." The effect of this amendment would be to prohibit the Commission from granting fourth-section relief on account of water competition. Somewhat similar bills have been introduced in previous Congresses and reported on by the Commission. In connection with S. 575 in the Sixty-ninth Congress on January 18, 1926, former Commissioner Esch who was then Chairman of the Commission, submitted a statement on behalf of a majority of the Commission to the Senate Committee on Interstate Commerce, which statement concluded as follows: "We can see no necessity for the passage of a bill which will have the effect of eliminating to a considerable degree if not entirely the competition between rail and water carriers between points between which both forms of transportation are now in operation, nor can we see any reason why producers and manufac turers at interior points should be excluded from water-competitive points where carriers would be willing under proper fourth-section relief to establish rates without unjust discrimination or undue prejudice that would enable the interior producer and manufacturer to engage in business at such points. There is no proposal in the amendment to prohibit the granting of fourth-section relief to meet competitive conditions created by rail carriers, and in our opinion there should not be. We believe there is no more reason for an absolute prohibition against the granting of relief to meet competition created by the movement of traffic by water than where such competition is created by the movement of traffic by rail and are unable, therefore, to give our approval to the proposed amendment." Adverse reports have also been made by a majority of the Commission on S. 207 and H. R. 2743 in the Seventy-first Congress under date of November 4, 1927, and on S. 5071 in the Seventy-second Congress under date December 31. 1931. Those bills differed in some respects from the present bill, but were similar in that they proposed to eliminate water competition as a ground for fourth-seetion relief, either generally or as to such competition through the Panama Canal. In transmitting the report of the Federal Coordinator of Transportation unde date of March 10, 1934 (S. Doc. No. 152, 73d Cong., 2d sess.), a majority of the Commission approved the Coordinator's recommendations with respect to gending the fourth section. That included a recommendation that the clause gre hibiting the granting of relief on account of potential water competition be eliminated from the fourth section. In transmitting the Coordinator's report of January 21, 1935 (H. Doc. No. 89, 74th Cong., 1st sess.), the Commission stated that the views of its members remained the same with respect to amending the fourth section. It is clear from the foregoing that a majority of the Commission has been ard still is opposed to legislation of the character proposed in H. R. 8364 Our legislative committee is, of course, bound by the views of the majority of the Commission, and for that reason, regardless of our individual views, we are unable to recommend the passage of this bill. Respectfully submitted. FRANK MCMANAMY, Chairman of Legislative Committee. SOUTHERN PACIFIC CO., DEAR MR. PETTENGILL: In connection with abandonment of domestic service by water carriers to engage in more profitable foreign trade during the World War and prior to the entrance of the United States, certain intimations were made by opponents of H. R. 3263 respecting the performance of the Morgan Line, being the trade name of the steamship line operated between certain North Atlantic and Gulf ports by the Southern Pacific Co. under authority of the Interstate Commerce Commission. I enclose a brief statement on this subject which it would be greatly appreciated if you will have incorporated in the record. Very truly yours, PAUL SHOUp. STATEMENT OF PAUL SHOUP, VICE CHAIRMAN, SOUTHERN PACIFIC CO. In the closing statements of certain opponents of H. R. 3263 reference was made to the discontinuance of intercoastal service during the World War prior to the entrance of the United States therein. It was then stated by one of such opponents that the Morgan Line operated by the Southern Pacific Co. between certain North Atlantic and Gulf ports curtailed or abandoned domestic service for more profitable foreign trade but this statement was withdrawn. The concluding opponent then said that the Morgan Line did not do this because it was prohibited by law from so doing. This operation of the Morgan Line is specifically authorized by the Interstate Commerce Commission. The following is a complete answer to these assertions or intimations. In Southern Pacific Company Ownership of Atlantic Steamship Lines, decided January 9, 1923 (77 I. C. C. 124) the following is stated in the report of the Commission at page 131: During the Spanish-American War, and later during the World War, its fleet (referring to the fleet of the Morgan Line operating between North Atlantic and Gulf ports) continued to perform its duty to the public by maintaining regular coastwise service while the service of other coastwise lines was either discontinued or curtailed to engage in more profitable business. There was nothing in the law that would have prevented the drastic curtailment of this service or its abandonment for more profitable foreign business. SOUTHERN PACIFIC CO., Washington, D. C., June 23, 1935. Hon. SAMUEL B. PETTENGILL, House of Representatives, Washington, D. C. DEAR MR. PETTENGILL: Referring to my statement that I would furnish comment upon the cost of operations west of Ogden, I beg to quote from our engineer in charge of analyses of operating expenses, Mr. C. E. Day, as follows: "The expenses Mr. Salm referred to in connection with Salt Lake trestle and Sierra route are concededly large but of a character not in any way to be affected by the handling of added traffic. As to the Salt Lake trestle, the extraordinary maintenance expense accumulated for the period 1909 to 1924 amounted to about $100,000 a year. This expense was made account protection and repairing damage caused by storms throughout the years requiring riprapping the banks of the fill. Clearly the handling of additional traffic would in no wise result in additional cost of this character. In this connection one-half million dollars were expended in 1922 to 1924 for renewing the deck of the trestle, which is largely due to the elements and would not be affected by additional traffic. "The high cost of operating expenses over the Sierra are made up in large part by extraordinary expense of snowshed maintenance and protection against fire and snow and storm damage, the average cost for representative number of years being $300,000 a year. Here, again, the handling of additional traffic would not affect expense of this character. Snowsheds must be maintained and renewed and protected against fire regardless of the amount of traffic that is handled under them. Opposed to these higher elements of cost on the limited portion of the line which are not related to added traffic handled is the striking fact that in the territory, Truckee to Salt Lake, generally, we have the most favorable operating conditions, with the attendant lowest operating unit cost, of any district on the Pacific Lines. It is in this territory, generally, that the average cars per train, both east and west, are far in excess of that obtained on any part of the Pacific Lines." Yours truly, Hon. SAMUEL B. PETTENGILL, PAUL SHOUP. HOUSE OF REPRESENTATIVES, Chairman Subcommittee of the Committee on Interstate and Foreign Commerce, House of Representatives. DEAR MR. CHAIRMAN: I enclose herewith letter, dated June 19, 1935, addressed to me by Mr. C. F. Reynolds, traffic manager, harbor department, city of San Diego, Calif., together with certain attached statements, and request that same be given consideration by your subcommittee and also by the full committee, in your hearings on the bills H. R. 3263, H. R. 3610, H. R. 5362, and H. R. 8364, to amend the fourth section of the Interstate Commerce Act. I naturally assume that the enclosed letter and the papers attached thereto will be made a part of the record in the said hearings. Respectfully submitted. Hon. GEORGE BURNHAM, House Office Building, Washington, D. C. GEO. BURNHAM CITY OF SAN DIEGO, DEAR MR. BURNHAM: In my letter of May 2, in regard to amendments desired to the water-carrier act, H. R. 5379 and S. 1632, I also advised you of the position of the harbor commission on H. R. 3263, H. R. 3610, and H. R. 5362, all proposing to amend the fourth section of the Interstate Commerce Act. They The harbor commission vigorously opposes H. R. 3263 and H. R. 3610. favor H. R. 5362, provided, however, and only if it is amended to include the following two clauses in the present fourth section of the Interstate Commerce Act: "1. 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. "2. That no such authorization shall be granted on account of merely potential water competition not actually in existence." I understand that hearings on these bills are now being held. I urge you to present our position to the main committee, as well as the subcommittee now conducting the hearing. Our opposition to the first two mentioned bills and the latter in its present form is supported by the following facts: As stated in the report of the Federal Coordinator of Transportation, Federal regulation of railroads was precipitated in 1887, primarily by the then widespread and flagrant discriminations in rates and charges. Prominent among these which had created intense public dissatisfaction, was the common practice of charging less to a more distant point that to an intermediate point. The Pettengill-Dirksen bills (H. R. 3263 and H. R. 3610) will permit return of the practice. The Rayburn Coordinator bill (H. R. 5362) allows almost as much freedom in return of the practice by the rail lines. There is no requirement in the Rayburn-Coordinator bill that rates shall be compensatory nor that they shall not be established to meet merely potential water competition. This means that any rate the carriers want to establish can be established. The only recourse is section 3, and its value is doubtful. Section 3 of the Interstate Commerce Act prohibits undue or unreasonable preference or advantage, undue or unreasonable prejudice or disadvantage. In my opinion, with amendments proposed this affords no protection against discrimination and prejudice that might result from meeting water, truck, or market competition. Recourse to and protection of section 15 of the act would be nullified without the compensatory clause in section 4, for the rail lines would undoubtedly be able to justify the rates they propose, since there would be no requirement in the law to meet other than a possible rule of the Interstate Commerce Commission that water competition, truck competition, or market competition actually exists. This existing, the proposed rates would probably be satisfactory to the Commission. The Commission has authority to prescribe minimum rates as well as maximum. In my opinion, the minimum-rate provision would be used very little when the only requirement to establish lower rates for longer distances would possibly be a rule of the Commission to meet water competition, truck competition, and market competition. The minimum rate provision of section 15 would be unworkable in connection with section 4 as proposed amended. In history, fourth-section departure rates have had no consideration in the establishment of the measure of a reasonable rate; consequently, an unreasonable allegation against a higher intermediate rate would have to be sustained on the basis of comparison of other non-fourth-section rates under substantially similar conditions. The rail carriers may now establish lower rates for longer distances than the shorter-distance intermediate points, provided the rates they propose are proven to the Commission to be compensatory. There are thousands of such rates throughout the country. Here on the Pacific coast the rail carriers now maintain lower rates to meet water competition between Seattle, Portland, San Francisco, Los Angeles, and San Diego than they do at intermediate points. The fact they have been able to establish rates to meet water competition that are compensatory is evidence there is no need for elimination of the compensatory clause from the fourth section. In this case the Commission even permitted a mobile rate structure, provided the rail rates produced a certain minimum per car revenue. As water rates go down rail rates go down until they reach the minimum; and as water rates go up, the rail rates go up. The trouble has been that the carriers have been unable to prove the compensatory nature of rates they propose on transcontinental traffic. They have tried three times since 1922. The Commission has held that a compensatory rate implies a rate to cover, and more than cover, the extra or additional expense incurred in handling the traffic to which it applies; be no lower than necessary to meet existing competition; not be so low as to threaten the extension of legitimate competition by water carriers; and not impose an undue burden on other traffic, or jeopardize the appropriate return on the value of carrier property generally. The carriers now propose to eliminate this rule by eliminating the long-andshort-haul provision from the fourth section. Section 500 of the Transportation Act of 1920 would be of no use, as the proposed amendments to section 4 take away the only opportunity of Congress to promote, encourage, and develop water transportation, service, and facilities in connection with the commerce of the United States. Nothing would be left with which to preserve in full vigor water transportation. Section 500 declares it to be the policy of Congress to promote, encourage, and develop water transportation and to foster and preserve in full vigor both rail and water transportation. The policy has been applied for the most part to inland waterways, particularly as the Commission has concerned itself. Without retention of the present compensatory-rate clause and the potential water-competition clause in section 4, section 500 would be of little importance. Prior to the passage of the Interstate Commerce Act of 1887, the Southern Pacific-Sunset Gulf Route maintained rates as low as 25 cents per 100 pounds between the Pacific coast and New York. They handled 75 percent to 90 percent of all traffic between the Atlantic and Pacific seaboards. The balance of the business moved by all-rail. They eliminated the potential water competition by the Panama-rail route. The Santa Fe started market competition between Chicago and the Pacific coast, quoting the same rates as the Southern Pacific from the Atlantic Seaboard. This competition between railroads could happen again with enactments proposed. Long-and-short-haul discrimination was usually an outgrowth of competition with water lines, although the practice has been extended far beyond such competition. |