by the railroads operating in Southern Territory, four of which are controlled by railroads operating in Northern or Official Territory, and two of which are controlled by railroads operating in Western Territory. In this conference the North has absolute power to coerce decisions affecting freight rates to, from, and within the States of the West and the South in whatever fashion the conspirators determine.

Again plans of the bureaus and the Association, taken together, further provide for an appeal to the Association of American Railroads in the event that some one or more of the interested carriers should desire to take such a course. Here again the voting privileges are so distributed that the South is completely dominated by the carriers in Official Territory. The articles of the Association of American Railroads provide that a majority vote of the board of directors is required for decision. Any member of the board, however, may declare a question controversial, in which case a vote of three-fourths of the board is necessary for a decision. Of 18 votes on the board of directors, only 4, less than one-fourth, are controlled by the South, although the rate may be applicable within the South alone.

The members of the Association have further agreed that in any controversy over which the board of directors has assumed jurisdiction and which it has decided by the affirmative vote of three-fourths or more of its members, they will accept and carry out such decision or, within 20 days, institute arbitration proceedings.

The articles of association further provide that the Association of American Railroads shall establish the practice and procedure, and determine the admissibility of evidence, in such arbitration proceeding. The award made by the arbitrators "shall be conclusive and binding upon the parties to the controversy."

Specifically, the joint conference of contact committees has not been the sole mechanism for the determination of interterritorial North-South, South-North, West-North, and North-West rates. That function has been performed through a system wherein, for instance, on a proposed rate from the South to a point in one of the constituent Official or Northern Territories, all three Official or Northern Territories were accorded the right of saying "yea" or "nay" even though only a small number of lines in one of the three Official or Northern Territories had a direct interest.

Again, these interterritorial functions have been handled through the traffic advisory committee, an arm of the Association of American Railroads, and through the joint meetings of chief traffic officers, another arm of the association. In each of these bodies representatives of not only all three constituent territories in the Northern or Official Territory but also representatives of the Western and Southern Territories had a voice and vote. Implicit in each of these arms of the association was the factor that strong and important lines in the North and West were many times voting "no" on North-South and South-North proposals in which they had no direct interest.

Documents show that the Northern or Official lines favor the East-West traffic and the West-East traffic over the North-South and South-North traffic. Implicit in this is the patent fact that in these two arms of the association in which lines in all regions are voting on North-South and South-North traffic, the South is subject to a potential and actual disadvantage.

The West itself, especially the Midwest, suffers in these all-region interterritorial rate-adjustment bodies which are affiliated with the association. Documents show that the big Western transcontinental lines join the big Northern lines as against the Midwestern lines when all meet together in the association in which the South does not even hold enough strength to be the balance of power.

Mr. HALL. The committee is now adjourned and we will meet again at 2 o'clock tomorrow afternoon.

(Thereupon, at 4:20 p. m., the committee went into executive session for the consideration of other business.)

AGREEMENTS BETWEEN CARRIERS

FRIDAY, JUNE 27, 1947

HOUSE OF REPRESENTATIVES,

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D. C.

The committee met at 2 p. m., pursuant to adjournment, in room 1334, New House Office Building, Hon. Robert Hale, presiding. The CHAIRMAN. The committee will come to order.

We will continue the hearings on S. 110 and H. R. 221. I will ask Mr. Hale to preside.

Mr. HALE (presiding). Colonel Johnson?

STATEMENT OF COL. J. MONROE JOHNSON, DIRECTOR, OFFICE OF DEFENSE TRANSPORTATION, WASHINGTON, D. C.

Colonel JOHNSON. Mr. Chairman, my name is J. M. Johnson. I am Director of the Office of Defense Transportation, a war agency created by Executive Order 8989, dated December 18, 1941. I am also a member of the Interstate Commerce Commission.

In October 1945 I appeared before a subcommittee of the House Committee of the 79th Congress (1st. sess.) and testified in support of H. R. 2536, the Bulwinkle bill. My testimony is in the printed record of that hearing on pages 390 to 397, inclusive. I also appeared before the Senate Committee on Interstate and Foreign Commerce on January 21, 1947, in support of S. 110, introduced by Senator Reed, which recently passed the Senate with amendments and which, I understand, is also under consideration by this committee.

The unanimity of those interested in and with knowledge of transportation in favor of this legislation is perhaps unprecedented. The remarkably small minority of record opposed to this bill apparently has no real interest in or familiarity with transportation.

In my former testimony I had much to say concerning Certificate No. 44, issued by the War Production Board at the request of the Office of Defense Transportation and other governmental agencies interested in and dependent upon transportation for the performance of their war tasks. This certificate gave immunity for any technical infraction of the antitrust law on account of conference rates or other conference action of transportation agencies, provided the conference methods and procedures were in conformity with regulations promulgated by the Interstate Commerce Commission.

At the time of my former appearance before the House subcommittee it was then necessary on account of the expiration date to extend certificate No. 44. It was extended. Since that time, because of the approach of another expiration date, there was much

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discussion and many conferences on the subject of extension. The certificate was allowed to expire on the condition that the Department of Justice would institute no action against conference procedures by the transportation agencies. This immunity theretofore incorporated in the certificate was expressed in a letter dated November 25, 1946, from the Department of Justice to Mr. Steelman, reading in part as follows:

In the view of the Department of Justice, practices exist in the rate bureaus, rate conferences, and similar organizations which violate the antitrust laws. Two cases are now pending in the courts to enjoin these practices. One case, pending in the Supreme Court, was instituted by the State of Georgia; another case, pending in the District Court at Lincoln, Nebr., was instituted by the United States. The Department does not plan, in the absence of unusual circumstances, to institute additional antitrust suits based on the same issues presented in the Georgia and Lincoln cases and involving only actions occurring prior to the time when the issues have been adjudicated in one of those cases.

The national transportation policy set forth in the act of 1940 reads in part as follows:

It is hereby declared to be the national transportation policy of the Congress to provide for fair and impartial regulation of all modes of transportation * * * so administered as to recognize and preserve the inherent advantages of each; to promote safe, adequate, economical, and efficient service and foster sound economic conditions in transportation and among the several carriers; to encourage the establishment and maintenance of reasonable charges for transportation services, without unjust discriminations, undue preferences or advantages, or unfair or destructive competitive practices; * all to the end of developing, coordinating, and preserving a national transportation system by water, highway, and rail, as well as other means, adequate to meet the needs of the commerce of the United States of the Postal Service, and of the national defense.

* *

This mandate of Congress may not be approximated, save by conference. Every word and syllable of this policy necessitates conference and consideration, not only among the carriers but among the carriers, shippers, State commissions, and the Interstate Commerce Commission and all others affected by transportation.

Yesterday I heard much discussion as to the vagueness of undue competition. And other words of that nature which were enumerated and read out of that policy. The Congress has never directed the Interstate Commerce Commission, save in those terms.

The Insterstate Commerce Commission itself, in deciding cases, uses those terms. One of the witnesses before this committee appears to have been of the opinion that the word "unduly" appearing in one of the standards set forth in section 2 of S. 110 namely "That the agreement will not unduly restrain competition" is too general, or too vague or too indefinite. In this connection, it is of interest to observe that in the Interstate Commerce Act as amended, the terminology "unduly restrain competition" appears three timestwice in section 5 (1) and once in section 5 (2) (b). The word "unduly" appears 19 times and the word "undue" occurs 21 times.

The Interstate Commerce Commission, I believe informally is termed an institution of quasi judicial, quasi legislative powers. The Congress of the United States sets the limits within which the Interstate Commerce Commission functions judicially and legislatively, and if it does not go beyond those bounds the court considers the opinion of the Interstate Commerce Commission as correct. The court decides whether it transcends or goes out of the bounds or

not, and until they do, in the opinion of the court, the opinion of the Commission stands.

And under those terms uttered by the Congress, the Commission can arrive at and prescribe the maximum rate, the minimum rate, and at times the precise rate.

So much has already been said in these hearings in full explanation of conference rates, how and where originated and how controlled and regulated by the Interstate Commerce Commission, it seems superfluous to devote any of your or my time to further explanation, except perhaps, to say that the genesis of conference rates was contemporaneous with the advent of the railroads and the early idea of continuous passage over more than one line. Conference rates antedate the adoption of a common gage for rails of 4 feet, 81⁄2 inches for American railroads.

Conference rates were in existence when many trunk lines still had a 60-inch gage at which time cargo was transferred at interchange points between lines of different gages.

The continuous passage of cargo and passenger over various lines composing a route is so emphasized in American transportation until a shipper or passenger so far as he knows is physically dealing with one railroad, although he may originate his shipment on some short spur line to whom he pays his rate or fare as agent of all the lines rendering service. When damages occur, he collects the same way.

The rate-making conference bureaus have kept pace with these developments and made it possible-without them it would have been impossible and American transportation could not have developed to its present high state.

Our tariffs today originating in rate bureaus and filed with the Interstate Commerce Commission allow the shipper or passenger to originate on the Atlantic seaboard destined to the Pacific coast over any one of many routes, while the shipper or passenger deals with one line only. Or, it will permit a shipper or passenger to originate in Guatemala and pass over any one of many routes proceeding through the United States to the Dominion of Canada-the transaction being completely between the shipper or passenger and one railroad agent. In the rate bureau or conference considering proposed rates there are many railroad representatives, shippers, and others interested in the rates where consideration is given to the proposed rate and its relation to other rates and routes. Their decisions having been concluded the rate is submitted to the Interstate Commerce Commission where, if only one protest is filed, the rate may be suspended for hearing and decision. Any carrier who is party to a conference is free, no matter what may have been decided, to act independently regardless of the decision reached. Such independent action likewise is subject to the review of the Interstate Commerce Commission. The conference method of making rates has grown up simultaneously with the marvelous transportation system of the United States and is now an integral part thereof.

In filing the rate with the Interstate Commerce Commission I say if one protest is filed the rate may be suspended, and hearings and other procedures held. The same will happen if, in the opinion of the Interstate Commerce Commission, on its own motion, the rate is in need of due consideration.

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