continuous transportation from virtually every point in the United States to every other point. In most instances there are a large number of different railroad routes between the same points and in many instances there are hundreds of such routes. By a single transaction a shipper arranges for the handling of his shipment for any distance, by any number of railroad lines, to any destination, on a single contract and without transfer of lading en route. The shipment ordinarily moves on a single rate in which more than one railroad, and often a large number of railroads, participate. Arrangements must be made for the common or joint use of cars, terminals, and other facilities, for schedules of movement, and innumerable other matters.

Rates are interdependent and related to a degree not generally understood by those who are not called upon to deal with them.

It is manifest that railroad transportation of this character can be accomplished only by cooperation of the highest degree between the carriers. I would be entirely unrealistic to regard one railroad as a separate entity for all purposes. In a very real sense, for the purposes of a coordinated service to the shipping public, the railroads of the country make up a single system. The late Joseph B. Eastman, a distinguished authority in the field of transportation, and a member of the Interstate Commerce Commission, said on this point:

No railroad can live unto itself. It must work closely with its neighbors, interchange cars and participate in a multitude of through routes and joint rates. What we actually have is a single transportation system made up of a large number of parts separately owned by individual companies.

The general rate structure of the country is made up of innumerable rates which must be properly related to each other. This is a requirement of the law. Rates must be reasonable and nondiscriminatory. As the Interstate Commerce Commission said, in one of its recent cases (Class Rate Investigation, 262 I. C. C. 447, 690), a rate structure is not a "loose aggregation of separately established rates, but a single entity composed of interrelated rates."

In Summer v. Erie, 262 I. C. C. 43, 49, the Commission said:

The rates here in issue, like all other individual rates, are parts of an integral whole. A change in one rate frequently necessitates like changes in competitive rates in order to avoid the unjust discrimination and undue prejudice and preference which are forbidden by sections 2, 3, 216 (4), 305 (e), and 404 (f) of the act.

Professor Ripley, an outstanding student of transportation, in his book Railroads-Rates and Regulations, put it this way

Railway rates * * * are not a set of independent threads; they form a fabric. They are so interwoven everywhere that if one thread be shortened, it will cause a kink in the fabric that may run almost anywhere.

In view of what has been said, it is self-evident that the railroads cannot institute rates which are reasonable and nondiscriminatory, as they are required to do by the Interstate Commerce Act, without conference and consultation among themselves and with interested shippers.

This has been repeatedly recognized and stated by the Interstate Commerce Commission. As far back as the twelfth annual report of the Commission for the year 1898 it was stated:

* to one familiar with actual conditions it seems practically out of the question to establish rates that are relatively just without conference and agreement.

The testimony before your committee in the Seventy-ninth Congress leaves no doubt that the shippers of the country are a unit in their agreement with the view of the Commission as above quoted.

Commissioner Eastman had this to say in his testimony before the Senate Committee on Interstate Commerce during the hearing on S. 942, Seventy-eighth Congress:

It must be clear to any reasonable man that a carrier cannot respond to all the duties imposed by law if the individual carrier acts in a vacuum. It is a situation which, under all the conditions, plainly calls for consultation, conference and organization and for many acts of a joint or cooperative character

* * *

I am wholly convinced that if the carriers of the country are to respond to the duties and obligations imposed upon them by the Interstate Commerce Act, and if the rate structure is to be reasonable, free from unjust discrimination or undue preference and prejudice, as simple and consistent as may be, reasonably stable, and sufficient for the financial needs of private ownership and operation, the carriers must be in a position to consult, confer, and deal collectively with many phases of the matter.

* * *

It will not be overlooked that railroads are bound by the same standards in initiating rates that bind the Commission in reviewing them. If that were not so the situation would be an absurd one indeed. In other words, the railroads are required to initiate reasonable and nondiscriminatory rates and the Commission is empowered to fix reasonable and nondiscriminatory rates. (See Anadarko Cɔtton Oil Co. v. Santa Fe, 20 I. C. C. 43.) When the Commission is called upon to fix a rate which meets the requirements of the law, does it look at that rate alone and hear only the railroad publishing the particular rate and the shippers using the particular rate? We all know that it does not. It considers the entire rate structure of which the particular rate is an integral part and it hears all of the railroads and shippers interested in the particular rate and all related rates. This is the only way the Commission can perform its duties and determine whether a particular rate is reasonable and nondiscriminatory. The railroads in performing their duty of initiating reasonable and nondiscriminatory rates must follow a similar course. This demands an opportunity for consultation and conference between interested railroads and shippers.

When we speak of the requirements of the regulatory law, we can never lose sight of the national transportation policy as expressly declared by Congress in 1940. That policy cannot be effectuated without cooperation between the railroads and without the utilization of rate conferences.

The national transportation policy has for its primary purpose the development and maintenance of a national transportation system adequate to meet the requirements of commerce and of the national defense, a transportation system which will provide safe, economical, and efficient service to the public, with reasonable charges and without unjust discrimination or "unfair or destructive competitive practices." There can be no national transportation system in any proper sense if each railroad is to be considered in a vacuum without regard to other railroads, or if each rate is to be made without consideration of other rates. There cannot be safe, efficient, and economical operation of the national transportation system without a wide range of cooperation between the railroads both with respect to rates and service.

Fourth: What is the occasion and need for legislation?

For a great many years, the railroads have maintained joint organizations and arrangements for the collaboration and collective action necessary to meet the practical demands of commerce and the requirements of the law. They would have been derelict in their duty if they had failed to do so. Of the various kinds of joint activities which are carried on, the so-called rate bureaus or rate conferences are the ones which received the greatest attention at the hearings which were held during the last Congress. For a very long time these bureaus or conferences have been maintained and have functioned openly with the full knowledge of all of those interested in transportation, including the shippers and all branches of the Government. In fact, the governmental regulating bodies, including the Interstate Commerce Commission, have approved and encouraged the rate conferences. Such conferences have also received the widespread approbation of shippers. Shippers participate in the conferences and various departments and agencies of the Government, in the capacity of shippers, have utilized the conferences to advantage.

Until 1941, no serious question had been raised for more than 40 years concerning the propriety of these rate conferences. Back in 1897, it is true that the Supreme Court in the Trans-Missouri Freight Association case (166 U. S. 290), held in a five to four decision, that the rate association there involved was in violation of the antitrust laws. But that rate association was wholly different from those which have been maintained in modern times. That association had power to make rates and impose sanctions or fines on railroads which failed to comply with its decision. No railroad had the right of independent action. The rate conferences and bureaus established subsequent to the decision in the Trans-Missouri case, and which have been in operation since then have no power to make rates or impose sanctions and express provisions is made for the right of independent action on the part of each railroad.

Even more important, however, is the fact that when the TransMissouri case was decided, there was no effective Federal regulation of railroads. The Interstate Commerce Commission had no power to fix rates. Since then the Commission has been given the most comprehensive power over rates. It has authority to fix reasonable rates, maximum and minimum, and to grant reparation or damages with respect to shipments which moved on unreasonable or discriminatory rates in the past. A complete and self contained remedial system of regulation has been set up.

So, until 1941, there was no thought on the part of those concerned with transportation that rate conferences could be regarded as in contravention of the antitrust laws. As late as 1940, the antitrust Division believed that the regulation of carriers provided for in the Interstate Commerce Act protected the public interest, for it then said in a brief filed in the Supreme Court of the United States in Federal Communications Commission v. Sanders Brothers Radio Station (309 U. S. 470):

In other words, in the case of railroads, there has been a substitution of Government regulation for competition as a means of protecting the public interest. Shortly thereafter, however, new views began to develop among certain of the lawyers who were then employed in the Antitrust Division of the Department of Justice. Subsequently, a criminal pro

ceeding was brought in the United States District Court at Denver against certain trucking companies. It resulted in a verdict of "not guilty." Grand-jury proceedings were instituted in Chicago against certain railroads but were discontinued at the instance of the Office of Defense Transportation, the War Department, and other Government agencies because of the adverse effect upon the war effort. Later, a civil case was brought by the Antitrust Division at Lincoln, Nebr., against many western railroads and others, and the State of Georgia filed an original suit in the Supreme Court of the United States against certain eastern and southern railroads.

This threat of demoralization in time-tested, satisfactory, and essential practices in the transportation industry was the cause of grave concern among shippers, carriers, and governmental agencies responsible for efficient transportation and for an orderly rate structure. A strong demand developed for a practical, common-sense remedy through legislation which would bring an end to confusion and uncertainty.

The widespread and far-reaching character of that demand is unmistakably shown by the hearings during the last Congress.

The situation presented is very clearly stated in the report of the House committee on H. R. 2536, from which I would like to quote the following:

The situation is one which clearly calls for prompt action by Congress. The problem involved is one of reconciling and harmonizing two great principles of public policy which have been declared by Congress. One of these principles is embodied in the antitrust laws. These laws, which are enforced by the Department of Justice, apply broadly for the purpose of preventing unlawful restraints upon competition in all fields of interstate trade and commerce. The other principle, applicable in the relatively limited field of transportation in interstate commerce by carriers subject to the Interstate Commerce Act, is found in the national transportation policy declared in the Interstate Commerce Act, 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 subject to the provisions of this act, 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; to cooperate with the several States and the duly authorized officials thereof; and to encourage fair wages and equitable working conditions; 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. All of the provisions of this act shall be administered and enforced, with a view to carrying out the above declaration of policy.

The Interstate Commerce Commission, in administering the regulatory laws applicable to common carriers engaged in interstate commerce, is under the duty to see to it that the principles of the national transportation policy are carried out. It is obvious that confusion and uncertainty are inevitable where these two principles of public policy, administered and enforced by different agencies, are applied in such a way that there is conflict between them. It is obvious that the Congress cannot itself, by legislation, deal with each instance of joint action by carriers to resolve whatever conflict may exist between the principles of the antitrust laws and the national transportation policy.

The only practical approach to the problem is to grant to a competent administrative agency, as is proposed in the bill, the authority to resolve the conflict in specific instances of proposed joint action by carriers. Since this problem arises in the relatively circumscribed field of transportation, the agency which is peculiarly well qualified to exercise this authority is the Interstate Commerce Commission. The bill here reported, therefore, places this responsibility upon that Commission."

Fifth. Would the bill deprive any interest of needed protection? To begin with, it will not be forgotten that, in the field of transportation, important objectives of the antitrust laws are achieved by means of governmental regulation. The antitrust laws are designed, for example, to protect the public from excessive prices, but in the case of common carriers, reasonable prices are achieved by other means; that is, by granting to a governmental agency the authority to fix reasonable rates and charges.

I think it can be taken for granted that those concerned in and with transportation, the shippers, carriers, and the governmental bodies charged with responsibilities with respect to transportation, are the best judges of what protection they need.

Are the trucks feaful that they might be injured by agreements between the railroads if this bill should be passed? They are not. They are strongly in favor of the bill.

Do the railroads or the water carriers have any such fear concerning other forms of transportation? Again the answer is "No." Carriers engaged in all forms of transportation are in favor of the bill.

Do the governmental regulatory bodies, Federal or State, fear that effective regulation of transportation would be weakened by the passage of the bill? On the contrary, they think it would be strengthened. They also are strongly in favor of the bill.

Do the shippers fear that their interest would be adversely affected? That they would not have protection against unreasonable and discriminatory rates? Still again the answer is "No." The shippers are virtually unanimous in favoring the bill. Under the Interstate Commerce Act, they now have, and will continue to have, after this bill is passed, complete protection against unreasonable or discriminatory

rates.

As a part of the propaganda against this bill, it has been charged that the conference method of considering rates results in a high rate level. If this were so, is it to be supposed that the bill would have the unanimous shipper endorsement which it has? There is another answer which is purely factual. The conference method of making rates has been in effect for a great many years including the entire period subsequent to the First World War. We have prepared a statement which I would like to offer for the record headed "Revenue per tonmile and per passenger mile versus wage rates and material prices, railways of class I in the United States, calendar years 1921-46, inclusive."

From this statement it appears that in 1921 the average ton-mile revenue of the railroads was about 14 cents, to be exact 1.275 cents. In 1946, it was less than 1 cent, to be exact 0.978 cent. There was a reduction during the period of about 25 percent of the general rate level.

The statement shows an even greater reduction in the average revenue per passenger-mile. In 1921, that figure was more than 3 cents, to be exact, 3.086 cents whereas in 1946 it was less than 2 cents, or to be exact 1.946 cents. The passenger rates have declined during the period more than 35 percent. The reductions in freight and passenger rates and fares during the period, and as I have already said the conference method of making rates was in effect throughout, was more striking when it was remembered that the average wage rate paid by the railroads increased by leaps and bounds.