AGREEMENTS BETWEEN CARRIERS

MONDAY, JUNE 30, 1947

HOUSE OF REPRESENTATIVES,

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D. C.

The committee met at 10 a. m., pursuant to adjournment, in room 1334, New House Office Building, Hon. Charles A. Wolverton (chairman) presiding.

Mr. HINSHAW. The committee will come to order.
Mr. WIPRUD.

STATEMENT OF ARNE C. WIPRUD-Resumed

Mr. WIPRUD. Mr. Chairman, at the conclusion of the hearings on Friday, in pursuance to a question, I had begun to explain the suit of the United States Government against the Association of American Railroads and 47 railroads west of the Mississippi River, J. P. Morgan & Co., and Kuhn, Leob & Co.

Now, to point up this fact, if the committee please, I would like first to make a very brief reference

Mr. HINSHAW. Will you hold up a minute until we get the record? Mr. BULWINKLE. Mr. Chairman, while we are waiting, I wish to insert in the record a list of organizations supporting S. 110, and also a letter from Sidney L. Miller, of the University of Pennsylvania, at Pittsburgh, and also copy of a telegram from Minneapolis, Minn., dated June 19, 1947, from representatives of the industry in transportation assembled in a meeting at Minneapolis.

Also I ask permission that Mr. Harris, of Arkansas, who is not here this morning, be permitted to file a statement.

Mr. HINSHAW. Without objection the request will be complied with and the letters and other material will be included in the record at the conclusion of the testimony of the present witness.

Mr. BULWINKLE. The question asked by Mr. Carson was:

What I am saying is that you are not losing that right at any time under these bills.

The witness replied as to that and then at that time Mr. Hale asked him if it would be convenient for him to come in Monday at 10 o'clock. The witness said, "Yes."

Mr. WIPRUD. I might explain, Mr. Chairman, that Mr. Carson in that last question referred back to his prior question which was preceded by a statement at that time that the antitrust laws would apply to the transportation industry despite this bill and as a result of that question and the first question which Congressman Bulwinkle read, I had begun to explain the United States Government case against the

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Association of American Railroads and the Western railroads, and if I may proceed on that, I would like to answer that question.

Mr. HINSHAW. You may proceed.

Mr. WIPRUD. To further point up the point I make, namely, that this legislation would render moot the Western case, I would like briefly, if I may, to refer to another principal argument made by the proponents of this bill, namely, that this legislation finds a precedent in the Shipping Act of 1916 and the Civil Aeronautics Act of 1938.

Now, it is true that the Shipping Act of 1916 contains a provision which authorizes agreements among shipping lines, that is, ocean lines, in the event that the Maritime Commission approves, but it should be noted that that act applies to the ocean trade only. It does not apply to domestic trade, except the intercoastal trade, which is also of course ocean trade.

So, there are some critical differences between the ocean traffic and the domestic traffic with which this legislation deals.

The Maritime Commission, for instance, does not have, in the sense that the Interstate Commerce Commission has, jurisdiction over the rates of foreign lines and, of course, any steamship company can enter into world trade, operate between ports, without a certificate of convenience and necessity.

So, there is not the control over foreign shipping and so Congress in its wisdom provided for these conferences among the shipping lines operating in the foreign trade.

Now, the Maritime Commission has approved a number of these so-called conference agreements which are basic agreements in the same sense that the agreements provided for in the Bulwinkle bill would be.

The Commission in other words approves the basic agreements of these conferences in the foreign shipping field.

How has that worked? I think in view of the reliance upon this act as a precedent, the committee would be interested to know exactly how that has worked.

We might take as an illustration: Two different conferences, one of the Pacific coast and one on the Atlantic seaboard.

Some 18 carriers operating from the Pacific coast, in the European trade, which is one of the richest trades in the world formed in 1926, the Pacific Coast-European Conference.

Since the formation of that conference there has been no nonconference carriers established in the service.

I said there were 18 carriers. There are 19 carriers members of that conference. Eighteen of those conference members are foreign lines. Only one carrier is an American carrier and that is the steamship line owned by the United States Steel Corp.

Now, under this conference agreement there has been established perhaps one of the greatest maritime monopolies that has ever been devised, and that is the exclusive contract arrangement which the conference has forced upon the shippers of this country under which a shipper which signs the contract gets a rate 15 cents per 100 pounds less than a shipper who does not sign the contract.

This is accomplished by the filing of a tariff with the Commission which provides for rates for so-called contract shippers and rates for so-called noncontract shippers.

To tighten the monopoly hold, under the provisions of this contract, the shipper is bound, for the period of the contract, and if he should fail to ship his merchandise by a conference line, there is a very severe penalty and the penalty is that he must pay them the noncontract rate on all of the goods shipped from the beginning of the contract.

There are certain powerful shippers on the Pacific coast that can say to these conference lines that they will not go along, but they have entered into "gentlemen's" agreements with the conference lines to ship only by the conference lines.

It is rather difficult to imagine any more effective instrumentality of monopoly than has been established by that conference and it has been very effective and it has kept out all competition in that trade. So we need not speculate here as to why there has been no new American lines established on the Pacific coast in the European trade. That has been effectively taken care of by the exclusive contract system.

If we turn to the Atlantic seaboard, the Maritime Commission has approved a conference of carriers operating from the Atlantic seaboard to the Far East. That conference is composed of both United States lines and also foreign lines, and while that conference has a provision somewhat different from the conference on the Pacific coast, in that they permit a majority of the vote to rule, I should have added that the Pacific Coast-European Conference acts by unanimous vote; one carrier can veto an action of the conference-the Far East Conference does have a majority vote, but the number of foreign lines in the conference insures that the foreign lines could veto any proposal of the United States lines if they so desired.

But, they do have the exclusive contract. In other words, a shipper that signs an agreement with the conference to ship only by conference lines gets a rate 15 cents per 100 pounds less than a shipper who refuses to ship via the conference lines.

Now, these are the joint actions that have been taken under the basic agreements which have been approved by the Maritime Commission under the Shipping Act of 1916.

There is no warrant in law for these coercive, monopolistic practices. Indeed the Shipping Act specifically prohibits any discrimination between shippers, between carriers, and between ports, yet they persist in the trade and the question is, why? Are there no American shipping lines that are willing to compete? There are-and the committee may be interested to know that of the American shipping lines. operating out of this country, there are a number that operate without a subsidy, and they operate very efficiently. One is the Isbrandtsen, Co., Inc., and the other is the United States Navigation Co. Yet these carriers will not long survive if this monopolistic set-up is perpetuated in the conference system in the shipping field in the foreign trade.

Now, if we turn to the Civil Aeronautics Board under the act, what has been the action of the Civil Aeronautics Board under the provisions which the proponents of this bill say is a precedent for the Bulwinkle bill? In February 1946 the Civil Aeronautics Board approved an agreement among international air carriers, on the insistence of the British that it was necessary as set forth in their report, establishing an international air transport cartel whereby the world was divided into nine regions. Former Senator Josh Lee, who is now on the

Board, wrote a very strong dissenting opinion on that international cartel, and I commend it to the committee.

As I say, the world was divided into nine regions and the conference in each region acted by unanimous vote on all matters relating to rates or international air lines.

Now, the rates of those conferences, to which United States air carriers are members, are subject to review by the Board; but it is a strange thing that in that decision of the Civil Aeronautics Board they gave as a precedent for their action not only the Shipping Act, but the fact that the House of Representatives had passed the Bulwinkle bill at the last session of Congress.

Now, in turn, the proponents of the Reed-Bulwinkle bill cite the Civil Aeronautics Act and the Shipping Act as precedent for passage of the legislation. If this be so, Congress should be under no misapprehension as to where we are going, for as I will show the organizational set-up in our domestic transportation industry and its practices under the Association of American Railroads, which the Reed-Bulwinkle bill would in my opinion make legal, would establish an airtight domestic cartel in the transportation field.

As I have testified heretofore, the State Department and the Justice Department have sent representatives abroad to break up cartels and monopolies in the conquered countries of Germany and Japan. Indeed they have set up an Antitrust Division in Germany; they have set up an Antitrust Division in Japan, to bring to those countries our concept of free competitive enterprise. Furthermore, our courts, the Supreme Court of the United States, has very recently struck down two cartels and a Nation-wide monopoly in this country. The Supreme Court unanimously struck down a monopoly in the tobacco case and in the National Lead case, the Supreme Court struck down an international cartel in titanium to which large American concerns were parties. Yet here we are considering a bill to legalize one of the greatest domestic cartels in the world.

Mr. CARSON. We have to go to another session in a few moments, so I want to say that I appreciate that all this relates to different types of industries. The question that I was trying to get an answer to from you and which I asked you the other day when we had to adjourn in answer to a quorum call was:

Have you, or anyone else in the Attorney General's office ever suggested a different type of program than what has been outlined by the Interstate Commerce Commission at this time?

And, you started in to tell us about these different things. Well, now, you said, I believe, this is not a good bill; or it is a bad bill. I have forgotten the exact language you used.

And I asked you the question if it did not leave the antitrust laws in exactly the same position that they always have been except as to those agreements which have been entered into by shippers and carriers with the approval of the Interstate Commerce Commission. Now, if you will turn to page 2, on which you comment on the four ways that we attempt to correct anything that may have been in the minds of these different departments, and if you will go down to line 18 you will see that the first thing we try to do is to see that "the object of the agreement is appropriate for the proper performance by the carriers of service to the public."

Now, what is wrong with that?

Mr. WIPRUD. That standard, Mr. Congressman, and the other standards that are referred to in there, namely, agreements shall not be discriminatory and shall not unduly restrain competition, and so on and so forth, are standards which apply to the basic agreement, and as I have testified, as testified on Friday, no body of men no matter how competent or how conscientious they are, no body of men, no matter how efficient and no matter how conscientious they are could possibly pass on literally hundreds of millions of transactions which the carriers of this country engage in every year.

So what do those standards apply to, just in the maritime situation, as I tried to explain?

Mr. CARSON. What is wrong with that? Is it too broad, too vague, or what is the matter with it?

Mr. WIPRUD. I think it is one of those general propositions which applies to a basic agreement where nobody can foresee what the parties to that agreement would do in the future. In other words, there would be nothing in the basic agreement that would show that any action they take in the future would unduly restrain competition, or, that any action would be unduly discriminatory.

Take the maritime situation. The maritime situation does not approve of a basic agreement with the privilege of charging two different sets of rates, one exclusively to contract shippers, and one to noncontract shippers; a higher one. That is discrimination of itself. -Mr. CARSON. Well, you say that it is discriminatory in that it is too general. Is that what I gather from you?

Mr. WIPRUD. No; I say it applies only to the basic agreement. It applies those tests to the basic agreement then the actions which are taken under the basic agreement are actions which no body of men could possibly police.

Mr. CARSON. All right. Let us go to the next, "that the agreement is not unjustly discriminatory as between shippers or geographical regions or areas."

What is wrong with that?

Mr. WIPRUD. Well, again, we have to turn to experience. I think that is the only way we can judge anything of this nature.

Mr. CARSON. What I asked

Mr. O'HARA. Let the witness answer the question.

Mr. CARSON. All right. It is all right for him to answer, but I do not want him to go into a long discourse. I want to get an answer to this question here. Here is the fact, that this has been going on for 60 years

Mr. WIPRUD (interposing). Well, do you want to preserve a monopoly that has been going on for 60 years?

Mr. CARSON. And it has been

Mr. WIPRUD. That does not justify it.

Mr. CARSON. And it has been successfully operated for nearly 60 years so far, has it not?

Mr. WIPRUD. Your Government and mine have charged in the Federal courts of this country that these railroads have conspired against the shippers, and utilized these rate bureaus

Mr. CARSON. Let us stop right there now. That is the statement that I wanted you to make here in this hearing because there have been over 1,200 shippers and carriers of every description appear before this committee in favor of this legislation.