Notice, Your Honors, how the expression "other mode" pervades all three of those. What do we gather from that? Do we gather that the Commission is powerless, in questions of competition, where a different agency is involved, but the railroads want the protection of the Commission for their competitive efforts against each other? Is that the significance of that wording "other mode"?

Under such a statute neither the Commission nor the courts could consider those safeguards as carefully written into the act in 1920. Any aggrieved party would be remanded to the impossible task of proving that the proposed rate is less than minimum, And if any of you are lawyers, I commend to you the difficulty of making any such proof as that. Considering the fact that a minimum rate need yield only the direct ascertainable costs of performing the service the chance of success in such an undertaking would be dim indeed. And I think that that is what the bill contains.

The railroads continually complain that their managerial discretion with respect to the publication of water-competitive rates is not respected as it should be. In this connection the committee should consider very carefully the makeup of these so-called competitive rates on both sides of the equation. The rate of the water carrier between its ports must be a complete rate. That is, it must reflect in full the cost of operation, the investment in equipment, taxes, and a profit. That is because the water carrier has no other rates except the rates between its ports. The water carrier, unlike the rail carrier, has no reservoir of noncompetitive traffic out of which it can build up a war chest to use in competition. In every respect its rates are its normal rates and they are completely compensatory.

By way of contrast, the so-called rates which rail carriers ordinarily propose to meet the rates of the water carriers are not normal rates in any sense of the word. They are depressed rates, they need only cover the "direct ascertainable cost of producing the service." If these words mean anything they mean bare out-of-pocket costs. They allow nothing for fixed charges, profit, or return on investment. In other words the Utopian field of competition which the rail carriers picture is one where they may maintain a rate returning bare out-ofpocket costs while the water carriers are obliged to maintain fully compensatory or maximum rates, and the Interstate Commerce Commission can do nothing about it.

The water carriers, as stated, have no avenue of escape from this situation. The rail carriers, by way of contrast, are not only able to draw upon noncompetitive traffic in order to recoup revenue lost at the ports, but on no fewer than 10 occasions since the close of the war they have secured permission to put into effect increased rates on their entire body of traffic, thus giving them further revenues which counteract reductions made at the ports.

There was a period in the Federal regulation of transportation during which the rail carriers exercised the initiative in connection with the long- and short-haul clause. That was the period prior to the amendment of June 18, 1910. The situation that existed at that time was explained by the Commission in its decision in Administration of Fourth Section (87 I. C. C. 564, 566), where it said-and, incidentally, I commend that decision to your Honors, if you want a complete his

tory of the operation of the fourth section of the Interstate Commerce Act.

Here is what the Commission said in that case:

In section 4 of the original act the prohibition of a greater charge for a shorter than for a longer distance over the same line was qualified by the words "under substantially similar circumstances and conditions." The Supreme Court in construing this language held that if there was a dissimilarity of circumstances and conditions the rule of the fourth section did not apply, and that it was for the carriers themselves to determine in the first instance whether that dissimilarity existed.

The Court held, in other words, that since the prohibition against charging the higher rate to the lesser distant point applied only "under substantially similar circumstances and conditions" the existence of competition only at the terminal or greater distant point set up a dissimilarity which made the prohibition inoperative.

The Supreme Court decision I have just referred to was the Alabama Midland case (168 U. S. 144). When Congress, on June 18, 1910, removed the words "under substantially similar circumstances and conditions" from the act the initiative in fourth-section situations passed from the carriers to the Commission. As explained by the Supreme Court in the Intermountain rate cases-United States v. Atchison, T. & S. F. R. Co. (234 U. S. 478, 485), the amendment of June 18, 1910

simply shifts the powers conferred by the section as it originally stood; that is, it takes from the carriers the deposit of public interest previously lodged in them and vests it in the Commission as a primary instead of a reviewing function. One of the arguments made by the railroads in the Intermountain rate cases was that the amendment of June 18, 1910, amounted to an unlawful delegation of power. The Court very quickly smothered that contention by pointing out that it was tantamount to an argument— that the authority in question was validly delegated so long as it was lodged in carriers, but ceased to be susceptible of delegation the instant it was taken from the carriers for the purpose of being lodged in a public administrative body (p. 486),

all of which pointed to the plain non sequitur in the carrier argument amounting to

an effort to sustain the right to delegate a power by contending that the power is not capable of being delegated.

But it was the discussion by the Court of the grave public questions involved in the fourth section and its administration which should give this committee pause before restoring to the railroads the initiative which they enjoyed prior to June 18, 1910. At page 487, the Court said:

As the power of carriers to meet competition, and the relation of that right to noncompetitive places, may concern the fortunes of numberless individuals and the progress and development of many communities, it is said, to permit authority to be exerted concerning the subject without definite rules for its exercise will be to destroy the rights of persons and communities. This danger, the argument proceeds, is not obviated by declaring that the provision of the second and third sections as to undue preference and discrimination apply to the fourth section, since, without a definition of what constitutes undue preference and discrimination, no definite rule of law is established, but whim, caprice, or favor will, in the nature of things, control the power exerted.

The comments thus made are just as pertinent today.

The Commission's report to Chairman Magnuson contains some very interesting comments on this proposed amendment. It points out that even under the proposed amendment the statute would contain a prohibition against departures from the general rule. Consequently such departures would make it possible to levy fines up to $5,000 for each violation. Since the Commission is deprived even of reviewing power it would be for courts or juries to determine whether conditions justifying the exceptions actually exist. To allow questions concerning transportation charges and the uniformity thereof to be determined by court proceedings has been held undesirable throughout the history of transportation regulation. Texas & P. Ry. Co. v. Abilene Cotton Oil Co. (204 U. S. 426).

We most earnestly submit that to lodge the power suggested in these amendments in the carrier would completely emasculate the fourth section and would return regulation to the unsatisfactory state of things which existed prior to June 18, 1910.

THE PROPOSALS GOVERNING THE SUSPENSION OF RATES BY THE

COMMISSION

Since June 18, 1910, the Commission in section 15 (7) has been given the power temporarily to suspend newly proposed rates or changes in rates pending an investigation as to their lawfulness. While the statute has never specifically so stated it has always been assumed that this power would not be exercised by the Commission in the absence of probable cause.

The proposed legislation would make three drastic changes in the law as follows:

(1) It would theoretically leave the existence of "probable cause" to the discretion of the Commission but would spell it out by a statement of specific standards.

(2) It would shorten the period of suspension from 7 months to 3 months.

(3) It would transfer the burden of proof from the proponent in any case where the complainant or protestant is a carrier.

The reasons underlying the original enactment of the suspension power are set forth as follows in I. C. C. Acts Annotated, page 1958:

Prior to the Mann-Elkins Act of June 18, 1910, there was no provision for investigation or hearing as to the lawfulness of increased rates before they became effective, although the courts in some instances enjoined collection of such rates. This lack of hearing was of serious consequences to shippers in many instances and the injunctions of the courts resulted in confusion and seemed likely to bring about the very discriminations the law was designed to prevent.

While the foregoing comments mentioned only "increased" rates the Commission has long held that the suspension power applied equally to "reduced" rates. Switching at Galesburg, Ill. (31 I. C. C. 294) and in Transportation Act, 1940, the law was specifically amended so as to apply to all changes in rates.

The amendment proposed here tacitly admits that the power to suspend should be continued but it would materially curtail not only the discretion of the Commission but the efficacy of the section as a workable feature of the law.

Dealing first with the matter of spelling out the standards by which the Commission is to be governed: The new bills limit the power to suspend to those cases in which the Commission

determines on the basis of factual information by sworn complaint, affidavit, or other evidence furnished by the complainant, or as a result of its own investigation, (a) that the rate, etc., would probably be unlawful, and (b) that making such rate, etc., effective would result in injury to complainant, and (c) that remedies available to the complainant would, in the absence of suspension, be inadequate.

First of all, the specific standards set forth run counter to the recognized theory that in statutes of this character it is far better to set forth standards in general terms, leaving to the administrative body of experts informed by experience the elaboration necessary to fit the needs of commerce and changing conditions. For example, nothing could be more important from the standpoint of regulation than the strictures laid upon the Commission as to the reasonableness of freight rates. Yet, since 1887, the only standard accompanying the delegation of power to the Commission has been that rates shall be "just and reasonable." Without saying another word, everything is left to the Commission.

The first two strictures laid upon the Commission amount to nothing more than an attempt to define "probable cause" in specific terms. Whether "probable cause" exists should be left to the Commission's discretion. The third condition is merely a restatement of the theory of irreparable damage.

In considering the merits of this proposed amendment the committee should bear in mind the matter of time. Changes in rates are ordinarily published to become effective in 30 days. Even if interested parties had immediate notice, the rules require that their complaint or protest be filed within 18 days. Obviously, in such a short time a case cannot be built up with the completeness contemplated by this amendment.

The proposal to shorten the period of suspension from 7 months to 3 months is ridiculous. In the original act the suspension period. provided was 120 days, and it was found too short. If that was true then, when regulation was confined to virtually one type of carrier, how could a shorter period possibly suffice in the present atmosphere where the problems of regulation have been increased a hundred fold? It is no answer to say that the Commission may require the carriers to impound amounts sufficient to represent the differences in the rates. Such action might afford some semblance of relief in connection with proposed increases. It would be wholly innocuous in respect of proposed reductions so far as water carriers are concerned.

The third proposal has to do with the burden of proof. That burden would be shifted from the proponent or publishing carrier in any case where the protestant is a carrier. It is well settled that the burden of proof is on the proponent of any proposition. This rule is based, not upon the identity of the proponent or any peculiar status he may occupy. It is based upon the theory that he who advances a proposal should be prepared to justify it. There is no good reason why the well-established rule should not continue to apply.

THE RATE MAKING PROVISIONS

Several sections of the act are affected by the proposed rules of rate making but it seems fair to state that virtually all of them revolve around and implement the proposals to eliminate (a) the power of the Commission to prescribe exact (or maximum and minimum) rates, and (b) the concluding sentence of paragraph (c) of section 305 which reads:

Differences in the classifications, rates, fares, charges, rules, regulations, and practices of a water carrier in respect to water transportation from those in effect by a rail carrier with respect to rail transportation shall not be deemed to constitute unjust discrimination, prejudice, or disadvantage, or an unfair or destructive competitive practice, within the meaning of any provision of this Act.

The restrictions against exact (or maximum and minimum) rates are first set forth in paragraphs 4 and 5 of section 1 and in paragraph (1) of section 15, but it is in section 15a that the proposed changes reach full development.

Mr. HALE. May I interrupt you again?

Mr. AMES. Yes, sir.

Mr. HALE. You are talking about the bill?

Mr. AMES. The bill; yes, sir. That section, meaning 15a of the act as now written, will be completely rewritten and will be replaced by an entirely new matter in paragraphs (1) to (5) inclusive.

The paragraphs which bear upon the interplay of competition in its relation to rate making and which are plainly designed to free the rail carriers from all existing restraints in their competition with water carriers are numbered (1), (3), and (4). We shall consider them in that order. Paragraph (1) reads as follows

This, I believe, is the crux of the new bills, so far as water competition is concerned. I quote from the proposed bills.

In determining whether a rate, fare, or charge, or classification, regulation, or practice to be applied in connection therewith, results in a charge which is less than a reasonable minimum charge, as used in this Act, the Commission shall not consider the effect of such charge on the traffic of any other mode of transportation

there is that wording "other mode" again

or the relation of such charge to the charge of any other mode of transportation; or whether such charge is lower than necessary to meet the competition of any other mode of transpo.tation: Provided, however, That the provisions of this paragraph shall not be construed to prohibit any carrier subject to this Act from protesting or complaining in the event that a rate, fare, or charge is filed or made effective which it believes to be less than a reasonable minimum charge.

We have pointed out that in Transcontinental Rates (1922, 74 I. C. C. 48, 71), 2 of the 4 elements which the Commission set up as conditions precedent to a "reasonably compensatory" rate were:

(1) That such rate must not be lower than necessary to meet existing competition by water, and

(2) Must not be low enough to threaten the extinction of legitimate water competition.

If those conditions precedent are not obliterated by the proposed emasculation of section 4, the job, as we have stated, is completed in this section. The Commission will be precluded from considering the effect of reduced rates on any other mode of transportation, or whether they are lower than necessary to meet the alleged competition. In