By cooperative action the motors carriers and railroads have sought to nullify the competitive relation between those forms of transportation.

An instance of joint action between the American Trucking Associations and the railroad rate bureaus in getting "bothersome" rates established through competitive influences reclassified to a higher level is shown by an exchange of correspondence between those organizations in 1937.

On February 15, C. F. Jackson, manager, rates and tariffs division, American Trucking Associations, wrote R. C. Fyfe, chairman, western classification committee:

"Supplementing my letter of February 5, advice has just been received from the Middle Atlantic States Motor Carrier Conference, Inc., which as you doubtless know has headquarters in the Earle Building here in Washington and publishes tariffs and exceptions for a substantial number of motor carriers and is the principal motor-tariff organization in this area, that at a meeting held on January 27 of their executive rate committee, the following was adopted:

"That the executive rate committee of the M. A. S. M. C. C. is in accord with the suggestion that drugs and chemicals be restored to the classification bases, and the conference is willing to cooperate with the railroads to attain this end. "They also state that at the same meeting it was recommended that ratings on toys published in Agent Waring s exceptions, MF-ICC No 1, items 740, 745, 750, and 755 be entirely canceled.

"This action on their part ties in with our previous discussion. Will you kindly advise what moves you feel now can be made to handle further to the desired end?

Mr. Fyfe replied on February 17:

"Referring to your letter of February 15, regarding exceptions on drugs and chemicals:

"I mailed you copies of letter to Mr. Cleveland showing a few examples of what is moving at the drug and chemical ratings. Suggest you contact the central, midwest, southern, and other motor-freight bureaus and endeavor to secure their cooperation along lines of action of Middle Atlantic States motor carriers. If favorable responses are received, we can then work the question out through Mr. Cleveland of the Association of American Railways and put up a united front in dealing with the large drug interests. We all need revenue and it is a crime to be transporting this class of traffic at thir class.

That progress has been made in increasing rates by joint efforts of railroads and trucks was frankly admitted by the chairman of the traffic advisory committee of the Association of American Railroads at the committee's meeting of January 27, 1937.

As recorded in the minutes:

"The chairman stated that this subject was brought up at the request of the president of the American Trucking Associations, who felt that if he were furnished with examples of unduly low rates which had been made by the railroads to meet truck competition which by joint efforts of the rails and trucks were increased, it would be helpful to him in his efforts to secure a better cooperation between the trucks and the railroads.

The business of equalizing competitive rates embarked upon by the railroad and truck associations appealed to the steamship lines which suggested that they be invited into the "cooperative conference held by the motor carriers and railroads.

On June 1, 1937, Edward K. Laux, freight traffic manager, Eastern Steamship Lines, wrote Mr. Kerr, chairman, Southern Freight Association:

"Your joint letter of March 31, addressed to rail executives, and accompanying copy of memorandum of conference as per caption: Conferences such as covered by the memorandum between the motor-carrier industry and the rails, should ultimately result in a clearer and more cooperative exchange of views between these classes of carriers and if further conferences of this nature are to be arranged, I would like to suggest that the water-line representatives be invited to attend. "As you probably know, in many cases, the rates of the motor carriers, or alltruck rates, between North Atlantic ports and southern points, are predicated on the water-rail rate levels, although it has been proven repeatedly that the alltruck service is far superior to all-rail or rail-water. Consequently, it is my thought that the water lines and the southern rail carriers might approach the southern truck industry with a view of having that class of carrier adopt the allrail level in their rate structures between the North Atlantic ports on the one hand and Southern Freight Association territory on the other."

Progress in getting the St. Lawrence waterway lines to increase rates to the rail level was reported to Mr. Cleveland by D. T. Lawrence, chairman of the

Traffic Executive Association, Eastern territory. Mr. Lawrence wrote (September 12, 1938):

"I think that Mr. Kerr (chairman, Southern Freight Association) and I now understand each other in the matter and what I am writing to say is that we have an intimation that the steamship lines operating through the St. Lawrence waterway are getting tired of the situation and are willing to increase their rates if the rail rates from the Atlantic ports are increased. Of course, such a suggestion will have a long way to go but it may be that material reform can be effected."

(Hearings before the Senate Committee on Interstate Commerce, 79th Cong., 2d sess., on H. R. 2536, pp. 788-789 and exhibit 45, p. 1758, et seq.)

It hardly seems necessary to advise you the very great disappointment resulting from the failure of the Commission to grant in full the proposal of the railroads. The Ex parte 123 traffic executive committee fully appreciates the serious situation created by this decision and its utter insufficiency under the existing serious decline in traffic. At the meeting last Thursday there was discussed at considerable length the obligation which rests on the railroads' individual traffic organizations as well as in their rate committees to assist management to the very fullest extent possible in obtaining increases in revenues over and above those which the Commission authorized and the imperative necessity of taking advantage of the possibilities under this decision for further increases in competitive rates and low spots wherever they may be found.

I sincerely hope that each and every chief traffic officer of the member lines fully appreciates the desperate situation that confronts railroad management and that each one will actively support and not only personally cooperate but in addition thereto see that his entire staff cooperates in a way to accomplish the best results as rapidly as conditions may warrant. In this connection I call your attention to the fact that I believe that with proper cooperation with truckers, with barge lines, with the coastal and intercoastal and Great Lakes steamship lines, that their officials will assure you, if they are properly approached and encouraged, that they will be very glad to proceed along similar lines and to make the same increases in cents per hundred pounds that you may determine upon.. I therefore urge that every effort be made to work with your competitors to the end that there may be less hesitancy in proposing advances than there might be if competing agencies were not going to make similar increases.

In the Ex parte 123 decision, the Commission authorized a 5 percent increase on oranges and of course the basis authorized should be made effective. These rates are on a subnormal basis and no reason exists why there should not be filed with the Commission, to take effect not much more than 30.days after the Ex parte 123 tariffs become effective, the proposal that was presented in Ex parte 123 or even something higher if the steamship companies will make similar increases in their rates.

There are possibilities of readjusting the Lake Cargo rates on coal from the inner and outer crescent. Insofar as this situation is concerned it is well known that the Commission believes the present spread between the Lake Cargo rates and the local rates is greater than it should be. There are other good, compelling reasons at this particular time why a further increase in these rates on statutory notice would be helpful to the railroad industry. This, of course, I appreciate is a matter to be handled exclusively by the origin roads that are involved.

The copper adjustment from Intermountain Territory contains great possibilities if proper cooperation is shown by all of the origin lines.

That insofar as the low spots are concerned, which to a very considerable extent are truck or water compelled rates, that these rates may be advanced to 5 or 10 percent, depending upon the commodity, above the maximum rate orders that are outstanding against such rates.

Further, that all adjustments which may be controlled by section 3 orders may be advanced to the extent desired, providing the required relationship is maintained. There are, I believe, great opportunities available in connection with the potato adjustment in Western territory. Hearsay information would indicate that there exists—and apparently the Commission from expressions made from the bench is of the opinion also-that a considerable amount of money could be picked up in connection with the anthracite adjustment where for competitive reasons under different conditions rates materially lower than maximum rates have been established. In several of the territories there are rates on wood pulp that could reasonably stand additional increases. This is likewise true of the furniture adjustment from Illinois producing points, from Western Trunk Line producing points and from southwestern producing points.

The suggestions that have been made herein are not intended to be conclusive, they are only illustrative (hearings before the Senate Interstate Commerce Committee, 79th Congress, 2d sess. on H. R. 2536, pp. 1765-1767).

(Concerning the suggested increase in wood-pulp rates, J. A. Farmar, chairman, Western Traffic Executive Committee, wrote Mr. Cleveland (October 6, 1938):) "Wood pulp moving from pulp mills to paper-producing points in Wisconsin, Minnesota, and the Upper Peninsula of Michigan involves short hauls, and our lines doubt very much if we could increase the rail rates without providing an opportunity for shippers to move their tonnage by motortrucks. We receive at Lake Michigan and Lake Superior docks import pulp which also moves to paper mills in short-haul shipments. This latter tonnage is also subject to intensive motortruck competition. Our lines are not favorable to a proposal to attempt any increase in these rates until there is some understanding that like increases will be made via motortrucks."

The freight forwarders, also falling in line, reached an understanding not only to equalize rates at the higher rate level but to withdraw commodity rates and exception ratings where the rail lines and motor carriers take similar action. J. V. Bugliari, vice president, Acme Fast-Freight Lines, confirmed this understanding in a letter of December 12, 1939, to W. N. Miller, chairman, standing rate committee, Southern Motor Carriers Rate Conference:

"This will refer to your letter November 21 to which you attach copy of letter November 21 to Mr. J. G. Kerr, Southern Freight Association, Atlanta, Ga., dealing with the matter of equalization of charges by motor carriers and freight forwarders. The policy of our company in line with understanding reached in Atlanta in September briefly is that we are of the definite disposition to adjust any rates that are of a subnormal level and to withdraw any commodity rates or exception ratings provided the rail lines and the motor carriers take similar action. "I think it well at our next meeting in Atlanta, which is scheduled for December 13, that a committee representing the motor carriers, freight forwarders, and Southern Freight Association meet and endeavor to formulate a policy that will provide for the adjustment of existing differences and future procedure. We are preparing supplements in line with our understanding, placing rates in many points in the South on the basis of rail level. In a few days we will meet with Universal and National and decide the effective date.

"After the passage of the Motor Carrier Act in 1935, it was apparent to the Association of American Railroads that there would be 'most hearty cooperation from the truckers in an effort to keep their rates on the same basis as the railroads' and in view of this circumstance the association's vice president of traffic, on February 6, 1936, advised the Traffic Executive Association-Eastern Territory, the Traffic Executive Association-Southern Territory, and the Western Traffic Executive Committee that 'each rate organization ought to work toward setting up some machinery in each rate subdivision for contacts between small committees of the railroads on the one hand and small committees of truckers on the other, so that each can be kept informed as to changes in rates, rules, and regulations contemplated by either group, with the purpose in view of endeavoring to keep harmonized to the fullest extent possible the rate adjustments of the two classes of carriers.' However, it was recognized by the traffic advisory committee of the Association of American Railroads that 'it would be futile to enter into any agreement' with the truckers 'until such time as the trucking industry is so organized as to make possible the enforcement of any joint understanding to as great an extent as would be the case in connection with the railroad industry'" (hearings before the Senate Interstate Commerce Committee, 79th Cong., 2d sess., on H. R. 2536, pp. 793-797).

The following documentary evidence is submitted in regard to the control exercised by the Association of American Railroads over the settlement of claimsas illustrative of how far the AAR goes in exercising control over the affairs that should be left to the discretion of individual railroads. This documentary evidence is taken from the brief of the United States in Civil No. 246, In the District Court of the United States for District of Nebraska, Lincoln Division, in United States of America v. The Association of American Railroads, The Western Association of Railway Executives, et al., part II, pp. 190-196 and Government exhibits 263, 246, 264, 265, 266, 267, and 268. This case is known as the Lincoln case or the Western case.

Exhibit G-263: Principles and practices for the investigation and disposition of freight claims, effective September 10, 1933, on all traffic shipped on and after that date. (Authorized by action of board of directors, American Railway Association, at meeting April 27, 1933, and by freight claim division at its fortysecond annual session, Louisville, Ky., June 6-8, 1933; formulated by the general

committee and advisory committee of railway counsel, concurred in by freight claim division at forty-third annual session, New York, N. Y., May 22-24, 1934, and duly approved by board of directors.)

REVISED TO JUNE 1936

The purposes of these principles and practices are, so far as lawfully may be accomplished:

(a) To obtain uniformity on the part of all carriers and uniform treatment of all claimants in the disposition of claims of like nature.

(b) To secure and preserve harmonious relationships in claim matters among carriers, and between carriers and their patrons.

(c) To effect and maintain a prompt and efficient service to the public in connection with the investigation and disposition of freight claims.

The principles and practices set forth herein shall be observed by all member carriers in the investigation and disposition of freight claims, local and interline. No claim shall be paid contrary to these principles and practices, except on the written advice of the general solicitor (or other law officer of equivalent or higher rank) of the paying carrier to the effect that, for the reasons stated therein, claim cannot be successfully defended, or as result of a judgment on the claim by a court of competent jurisdiction.

Exhibit G-246

Meeting of executive committee, Association of American Railroads, March 26, 1936. Present: Messrs. Pelley, Clement, Downs, Willard, and Williamson.

DOCKET No. 3

LOSS AND DAMAGE CLAIM "RACKETS" ON PERISHABLE FREIGHT

Report of Vice President Symes (attached).

The President reported that Commissioner Porter, of the Interstate Commerce Commission, in response to his letter transmitting the Bonneville report on this subject, has been advised that the association is actively handling the matter and hopes to make a definite report to him on the subject within a reasonable time.

After discussion of his report, Vice President Symes was requested to arrange to have the former special committee, which made a study of freight claim adjustment bureaus at the direction of the committee on preventable waste in the Eastern territory, review the subject and submit a report for consideration at the next meeting of the board of directors, at which time it is also expected to have the suggestions of Vice Chairman Shoup of the Southern Pacific Co. as to further recommendations in connection with the Bonneville plan in the light of the freight claim division's reconsideration of the matter in which they reiterate their four previous recommendations, ie:

1. That the major inspection agencies be consolidated and operated under the exclusive direction of the association.

2. The Freight Claim Division be given authority to prescribe and enforce practices and arrangements affecting loss and damage at destination, and the disposition of salvage.

3. Action by the board of directors with chief executives of member lines directed toward the support of the Freight Claim Division regulation to assure the adjustment of claims without considering other than the legal liabilities of carriers and their responsibility to the shipping public.

4. That the Freight Claim Division make a study of additional plans of organization, including the suggestion of a central claim bureau."

Exhibit G-264

Circular No. FCD-706, July 12, 1937, from operations and maintenance department, Association of American Railroads:

SUPPLEMENT TO PRINCIPLES AND PRACTICES FOR INVESTIGATION AND DISPOSITION OF FREIGHT CLAIMS EFFECTIVE JULY 15, 1937

In that section of its regular report to the 1937 annual session of the Freight Claim Division relating to "Uniformity in Claim Settlements" under principles and practices, there was again dealt with the problem involved in the payment

of certain classes of claims in violation of the provisions of principles and practices under the exception provided in the third paragraph of the preamble of the principles and practices. The subject was given further attention of the general committee, in conference with the Advisory Committee of Railway Counsel, at meeting held July 8-9, 1937, and the following resolution was adopted:

"The provision in principles and practices as to payment of claims contrary to the established principles and practices on advice of designated counsel has become the subject of such misuse that it is the duty of the general committee under its emergency powers at this time to so amend principles and practices that the third paragraph of the preamble thereof shall hereafter be as follows:

"No claim shall be paid contrary to these principles and practices, except on the written advice of the general solicitor (or other law officer of equivalent or higher rank) of the paying carrier to the effect that, for the reasons stated therein, claim cannot be successfully defended; but any such claim so paid otherwise than under a judgment rendered by a court of competent jurisdiction, after adequate defense made, shall not be prorated by such paying carrier with any other carrier or carriers, nor shall any such other carrier participate in any such prorate.'

Exhibit G-265

Letter February 22, 1945, from C. L. Dautrich, general freight claim agent, Southern Railway System, to J. B. Sutton, vice president, Georgia Fruit Exchange, Inc.

Your claim No. 54, amount $646,25, in connection with WFE car 61081, peaches from Cochran, Ga., to New York, June 8, 1944. I have just completed additional investigation of this claim with the following results.

With reference to consignee's letter of November 6, wherein they state "we further find that this was not protested, but still feel that the Government inspection overrules the RPIA report at any time." This opinion does not alter the fact that the established practice requires protest to the RPIA and inspection by them for the purpose of a railroad claim and the carriers have no choice but to abide by the rules laid down to them in this connection. Therefore, if this receiver wishes to protect his interest, so far as a loss or damage claim is concerned, I would suggest that he register protest with the RPIA in the future.

Exhibit G-266

Letter March 1, 1945 from W. C. Bewley, president, Georgia Fruit Exchange, to C. L. Dautrich, general freight claim agent, Southern Railway System:

It hsa been our policy for many years to require Government inspection, when it is available, so that we may have expert and impartial reports as to condition of our peach shipments at both ends of the line. When we sell a car of peaches on f. o. b. shipping point basis we expect the buyer to take them at invoice price upon arrival at destination, unless satisfactory proof is furnished that the shipment was not what it was represented to be as to quality, pack, or condition. Our experience is that the Government inspectors are better trained technically and better qualified to render a correct and reliable report, therefore, we prefer it to RPIA or any other private inspection service. Government inspection certificates, as you know are accepted in all United States courts and the courts of most of the States as prima facie evidence, whereas the reports of the other inspection agencies are not so accepted. In cases where Government inspection is performed and a certificate is issued, we do not think if its necessary to also have RPIA or any other inspection. Since the Government inspection does not cost the carriers anything, it seems to me it should be acceptable in lieu that arrives at destination in bad condition, does not, in our judgment, invalidate claim for damages against the carriers. Conditions in the New York market are such that it is not always convenient or practicable to have RPIA inspection and to undertake to have it in every instance might result in further delay and loss.

Exhibit G 267

Letter, March 6, 1945, from C. L. Dautrich, general freight claim agent, Southern Railway System, to William C. Bewley, president, Georgia Fruit Exchange, Inc. Receipt is acknowledged of your personal letter of March 1, 1945, which responds to mine of February 22, addressed to Mr. Sutton, regarding G. F. E. claim No. 54, amount $646.25, alleged loss account deterioration to peaches which moved in WFE car 61081, from Cochran, Ga., to New York, June 7, 1944.