properties involved. The price was arrived at by arm's-length bargaining between the joint applicants and Pennco; another prospective purchaser, Southern, offered to pay the same amount should the joint application be withdrawn or denied.

The joint applicants have questioned GTW's financial strength. We note that underlying any financing and successful consummation of the proposed inconsistent transaction is GTC, which exhibits a good record of earnings. GTC has averaged $8.8 million of net income annually for the 1974-78 period, with a net income of $13.6 million for 1978. In 1978 GTC increased its working capital by $4.4 million. The increase in subsequent years should be greater. GTC would have about $20-25 million in cash to devote to the acquisition by January 1980.

GTW has secured a $20 million line of credit at an attractive rate which does not appear to interfere with future long-term capital acquisitions. GTC and its profitable subsidiary Duluth, Winnipeg & Pacific Railway (DW&P), have guaranteed the credit agreement. GTW has also been strengthened as a result of a corporate reorganization, resulting in the forgiveness of approximately $260 million of debt, and capital contributions resulting in the forgiveness of approximately $198 million debt.

The inconsistent applicants submitted calculations of coverage ratios for 1978-83 under the assumption that the full $20 million could be borrowed by the terms of the loan agreement. Although these calculations could be considered somewhat optimistic, no consideration was given to any of the benefits to accrue from the proposed transaction. Yet the results indicated a good fixed charge coverage of 2.51 for the period 1978-83.

GTW does not have a definitive purchase agreement with Pennco but has indicated its ability to pay the amount agreed to by the joint applicants. It was found in the initial decision that the recent and controlling financial history of both GTW and GTC show a successful and stable viability that provides acceptable financial resources for consummation of the proposed transactions.

The price agreed to by the joint applicants has been found to be just and reasonable for the parties involved. We recognize that it is necessary for the inconsistent applicants and Pennco to come together and negotiate in good faith to arrive at a purchase price which reflects any modifications to, and any intrinsic value flowing from the transaction.

Therefore, we will require GTW-GTC and Pennco to return to the Commission within 6 months from the effective date of this decision

and submit for our consideration the agreed purchase price. At that time we will determine whether the price and any fixed charges. created under it are consistent with the public interest, as required by 49 U.S.C. 11344. Also, we will require that, within 30 days from the submission of the purchase price to this Commission that the necessary parties submit their application under 49 U.S.C. 11301, if so required, for the issuance of securities or the assumption of any obligation or liability.

GENERAL TRAFFIC PROTECTIVE CONDITIONS

The Administrative Law Judge imposed certain traffic protective conditions which have been imposed as a matter of course in previous rail consolidation proceedings. They were formulated and first appeared in Detroit, T. & I. R. Co., Control, supra at page 492, and are referred to as "DTI conditions." The record reveals little, if any, testimony on the need for or effect of these conditions. Therefore, we directed the parties to address this issue at the oral argument.

Although the GTW operating plan may cause some diversions, it will not disturb trade or market patterns. The new integrated system will be much smaller in scale than those of N&W, Chessie, CP, Conrail and Southern. Opportunities for harmful activities are not great. Because there will not be a reduction in the number of healthy carriers in the Detroit-Cincinnati or Detroit-Chicago corridors, competition should be stimulated. Also, there are economic incentives for the proposed new system to maintain and improve the present service.

Although DTSL would suffer large diversions from the GTW-DTI consolidation, it may be included in that system. GTW must make its best effort to purchase DTSL and if unsuccessful in acquiring the sole interest, it would then be required to divest itself of any interest in DTSL. As part of the new GTW system or wholly affiliated with N&W or some other party, DTSL will be adequately prepared for the new competitive consequences that will arise from the inconsistent applicants' proposal.

We see no need to impose traffic protective conditions on small and geographically limited carriers here for the protection of large, operationally competitive, and financially healthy carriers. Diversions that may occur could lead to a loss of revenue, but it is not our responsibility to insulate carriers from competition. Harm to a particular carrier becomes relevant only if there is a

corresponding impact on the public interest by impairing a carrier's ability to provide essential service. Even though Congress has adopted government regulation as the primary device for protecting the public interest, it has expressed a policy of facilitating competitive market structure and performance. Cf. Bowman Transp. Inc. v. Ark.-Best Freight Sys. Inc., 419 U.S. 281 (174); Gulf States Utilities Co. v. FPC, 411 U.S. 747 (1973); and Liberty Trucking Co., Ext.-General Commodities, 130 M.C.C. 243 (1978), affirmed at 131 M.C.C. 573 (1979).

We are mindful that the DTI conditions, beside insulating carriers from certain competitive effects of rail consolidation, provides safeguards for protection of shippers' existing service alternatives, routes, channels of trade, and ability to route traffic. The record, however, does not demonstrate how the added protections afforded by the DTI conditions are necessary over and above statutory protections provided by other provisions of subtitle IV.

To foster rail competition unencumbered by artificial restraints or burdensome regulations we have determined not to impose traffic protective conditions here. This change in policy will allow rail carriers to compete more freely in the marketplace with other railroads and other modes of transportation. Commonwealth of Pennsylvania v. I.C.C., 561 F. 2d 278 (1977), and American Trucking v. A., T. & S. F. R. Co., 387 U.S. 397 (1967).

Similarly, we find that the traffic protective conditions agreed upon between the inconsistent applicants and Southern are not in the public interest because there is no evidence of serious harm to Southern's ability to provide essential rail services.

In the future, it should be clear that the standard DTI traffic conditions will be imposed only where it is shown that harm may befall shippers and carriers who are not adequately protected by other provisions of title 49, subtitle IV. These traffic conditions may also be imposed upon a clear showing by (1) a carrier that the consolidation will cause traffic diversions sufficiently serious to harm its ability to provide essential rail services to the public, or (2) a shipper that the result of the consolidation will be to deprive it of adequate transportation service.

OTHER TRAFFIC CONDITIONS

The Michigan DOT and MI argue that specific traffic protective conditions are needed for MI. MI is attempting to restore its railroad to economic self-sufficiency by 1981. More than one-third

of its traffic is derived from interchange with the DTI. MI asserts that, except for a small portion of traffic originating or terminating on line, all this traffic is divertible to other routes by a DTI committed to a Chicago gateway.

The evidence shows that if GTW gains control of DTI, MI would experience a gross revenue loss of $383,000. Its net loss would be substantially less.

MI has stated four traffic protective conditions in its exceptions as the "minimum" protection necessary for its survival. The Administrative Law Judge saw fit to impose one of these conditions in the initial decision. This provided for the establishment of rates and routes on sand from Yuma-Harlan, MI, area via established interchanges to Flint and Saginaw on the same basis as those in effect from Muskegon, MI, divisions to be established upon reasonable and customary bases. Michigan DOT has joined with MI in supporting the request for one of the additional four involved conditions. This request amounts to the granting of trackage rights. In a decision served February 20, 1979, in these proceedings we granted certain waiver requests by MI in contemplation of the filing of a trackage rights application. MI was given 30 days to file its application. No application was forthcoming. The Administrative Law Judge noted that MI had ample time to prepare its application. It is apparent that MI has had its fair chance to file any trackage rights proposal that it felt was necessary. No new facts have been. brought to light in its exceptions which warrant a different conclusion.

Of the other conditions, one calls for GTW to convey to MI or the State of Michigan certain tracks purchased from the trustee of the Ann Arbor Railroad. MI has not shown how this condition is necessary to protect it and how this protection would be essential to its providing service.

MI has also called for the reestablishment of competitive unittrain coal rates, routes and service from all origins to Dow Chemical Company at Midland, MI, and Consumers Power Company at Essexville, MI. Similarly, MI has not demonstrated the necessity for this condition.

MI has stated that its concern is less with the immediate diversions it may experience than the fear that it may be prevented from increasing its traffic enough to restore the Ann Arbor to financial health. We cannot condition every transaction sufficiently

The record further indicates that if DTI were controlled by N&W and Chessie, MI would have a gross revenue loss amounting to $527,000.

for carriers to increase traffic to the extent they feel necessary to meet their business goals. The traffic protective conditions sought by MI must be denied. This includes the condition imposed by the Administrative Law Judge relating to sand rates. GTW may decide, on its own, to equalize rates concerning this and other commodities for its own business reasons but it has not been shown by MI why such protective conditions are necessary.

The Administrative Law Judge also required the maintenance of the present puller service from and to CP at Windsor, Ontario. GTW did not object to this condition. However, there is little. evidence of record demonstrating the necessity for this condition. CP has alternative routes and connections available to it. Therefore, this condition will not be imposed either.

Certain conditions were also imposed in an attempt to assure the continued activity of Chessie's Toledo interchange and the route that it supports. As we will deny the joint application there is no need for these conditions.

PUBLIC-PRIVATE INITIATIVE

The joint applicants and CP have argued that the inconsistent proposal is violative of the purpose and policy set out at section 101 of the 4R Act. The section states that, "It is the purpose of the Congress to promote the revitalization of such railway system, so that this mode of transportation will remain viable in the private sector of the economy ***." The objecting parties note that GTW and GTC are ultimately owned by the Canadian Government and this ownership takes the transaction out of the private sector. This governmental ownership is said to add distortions to the workings of the marketplace and interfere with prudent management decisionmaking.

CN has replied that the statutory language was not intended to preclude foreign investment in the United States rail system. It also states that its ownership of railroads in this country benefits both itself and the United States without creating any distortions.

The resolution to this dilemma deals with statutory construction. The critical language mentioning private sector concerns "the economy." It relates to the dichotomy between the public and private sector of the national economy. Certainly if the language was meant to retard foreign investment in American railroads a clear articulation would be necessary. Usually such a prohibition on foreign investment is reserved for issues relating to national