Mr. LANGDON. Yes, sir. You used the word "consistently", and in fairness to the commission I should indicate that there have been some exceptions to that rule. In other words, there have been certain decisions wherein the commission has rejected that approach to the making of competitive rates, and pointed out in a few decisions, particularly those which followed the Transportation Act of 1940, that the effect of competitive rates of one mode upon another mode was immaterial and of no legal consequence.

But since 1950 that sound approach to the review of competitive rates has been largely forgotten, and we have, as you indicated, sir, the type of approach in the review of competitive rates such as I have outlined here.

Mr. DOLLIVER. Would you go a step further with that and say that as between rail competitors the effect of the rate as to a competing rail carrier should not be taken into consideration? For example, I am thinking of very strong competition, let us say, between Chicago and the Pacific Northwest. There are a number of great railroads out there, and some of them have better and more economical routes than others and probably can move their traffic at considerably less expense than others.

Does it follow from your argument as to competing forms of carriers that you would apply that same principle to competing carriers within the railroad industry?

Mr. LANGDON. I think, sir, that the answer to that question-and it is a good question-is that so far as competition between the railroads is concerned, we ought to continue to have the ICC control over minimum rates such as was given to it back in 1920. That is when one railroad, for instance, wants to break a rate structure, or needlessly throws revenues away, there ought to be in the ICC power to restrain that. That power was given to the ICC back in 1920, and insofar as railroad rates are concerned I suppose it has not been used on more than perhaps 20 or 30 occasions since 1920.

But that same rule in our judgment is not applicable when you are dealing with competing modes of transportation, because the competing modes have such vastly different service characteristics, vastly different cost characteristics.

Mr. DOLLIVER. Before you get into that phase of it, let me interject this: Is it not true that the reason your association favors what you just said, namely the power of the Commission to restrain unduly low rates within the railroad industry itself, is that not for the self-protection of the industry to avoid what we used to call rate wars, where one railroad conceivably might put another competing railroad out of business or throw it into bankruptcy? Is that not the reasoning behind that attitude you have?

Mr. LANGDON. I think it is, sir, with this understanding: Railroad rates, by necessity, to avoid discrimination to the public, the shipping public, have to be made on the basis of average conditions. If you in a special circumstance should find a railroad that wanted to cut loose, you might say, and act, ratewise, without regard to other shipping interests located on other railroads, I think that the Commission should continue to have the same, as I said before, the same type of minimum rate power that it was given in 1920. When you do thatlet us look at it from a selfishly railroad point of view-when you restrain the railroad, the railroad industry, let us say, that is competing

with the truck industry, you are restraining us in the exercise of the one competitive advantage that we have with these other modes. The trucks, on the other hand, when you restrain them, or when they are restrained, they are not being restrained with what is their ace card in competing with us. Their ace card is their better service.

So you have the railroads on the one hand competing, and if they have a competitive advantage it is in a lower cost, and you have the trucks over here competing with higher costs but with better service.

If we the railroads-move in this competitive struggle, we move in a direction that is subject to restraint by the Interstate Commerce Commission. But if the trucks move with the fine service of theirs, no one, including the ICC, can make them haul their stuff in 48 hours when they are taking the business away from us by 36-hour service, if you know what I mean.

Another thing, sir, when we are competing with the barges, we again are exercising our advantage, if it exists at all, as a low-cost operator in those special circumstances where the traffic has to move not only on the river but also it has to go inland, because we do not regard ourselves as potential competitors with the barge lines on the traffic that they handle port to port. They-the barges-handle that traffic at such low rates and they have a monopoly on it; we cannot touch that type of traffic.

Mr. DOLLIVER. For instance, oil?

Mr. LANGDON. Oil. Around Pittsburgh is an example. There are 35 million to 40 million tons of coal that are moving on the river. We see it go by, but to try to get that traffic back on the railroad would be hopeless. That, of course, is a very important part of the barges' whole business. All the iron and steel traffic that moves down from Pittsburgh, including pipe, to the gulf, most of that traffic, and crude sulfur, is beyond our reach.

How is it in this competitive situation between the barges and the rails?

When they reduce a rate, or when they make a rate, in an attempt to get traffic that moves on the land as well as on the water, we cannot say that that rate is going to have an adverse effect on the all-rail route.

Why?

Because the Supreme Court, construing this section 305c, said the water carriers could make any rates they want insofar as it affects the railroad traffic. That is not a ground to set aside any water

rates.

Mr. DOLLIVER. In other words, they have a special protection under the statute at the present time?

Mr. LANGDON. Absolutely.

Mr. DOLLINGER. To project our thinking into the future, I am thinking of the road bill that was passed in the House of Representatives recently. Within 10 years it is projected that there will be a network of 4-lane highways clear across the United States. If this proposal that you are advocating here goes into effect, it will put you in a position of not being able to protest the truck rate, which may be lower than you can offer. Will that not be true?

Mr. LANGDON. That is true. We are perfectly willing.
Mr. DOLLIVER. You are willing to take that chance?

Mr. LANGDON. Yes, sir. It may very well mean that in those areas where the trucks have the economic advantage, of course, they will go ahead and we will not be able to protest, except on the grounds that their rates, in certain circumstances, may be noncompensatory, we think. That will furnish us a ground to protest. But that will be the only ground.

We are perfectly willing to have them operate in those fields where they are economically the best if they will only let us operate in those areas where we are economically better equipped.

Mr. DOLLIVER. In other words, you recognize the hazard that may come in the future and you are willing to accept the hazard at the present time?

Mr. LANGDON. Absolutely, sir.

Mr. DOLLIVER. I have one other brief line of questioning and that is with respect to the proposal that you make for changing the long and short haul phraseology. As I understand it, you do not propose the elimination of the principle that is laid out in the statute, but merely a change to enable the administration of it to be less complicated. Is that a fair statement of what you have in mind?

Mr. LANGDON. Sir, at this time we hope that the Congress will look favorably on H. R. 6208. That is the ICC bill which would allow a circuitous rail line to meet the competition of a direct rail line, and without any special authority under section 4 from the ICC.

Mr. DOLLIVER. And without regard to the 133 percent distance limitation?

Mr. LANGDON. Yes, sir, or any other distance limitation. It would encourage intra railroad competition. Everybody thinks it is a fine idea. So far as I know, with the possible exception of the water carriers, there has been no opposition to it.

Mr. DOLLIVER. Would that in any way affect this situation? We had last week a witness from Spokane, Wash. Would that in any way affect a situation so far as an inland point was concerned with respect to rates beyond?

Mr. LANGDON. No, sir. It would not in any way affect the administration to the fourth section as that is generally known. The inland empire would not be affected one way or another on this. The only change would be, for instance, if Great Northern should get relief from the Commission to publish a fourth section relief rate from Chicago to Seattle, and fight it out and actually get the authority, then the other lines could come in. But the issue would be decided in the application of the direct lines as to whether or not relief was justified.

Mr. DOLLIVER. Thank you very much.

Mr. HARRIS. Mr. Rogers?

Mr. ROGERS. I think Mr. Langdon has made a very definitive statement of the railroad's position in this. I appreciate it very much. I do not know of any particular questions I have in mind except that which was raised by Mr. Dolliver at the end of his questioning.

In view of your recommendations, Mr. Langdon, suppose they were all followed out insofar as your competitive rate between a railroad operated on a circuitous route and a railroad operated on a direct route. The railroad operating on a circuitous route would be relieved of any requirement insofar as a compensatory rate is concerned, would it not?

Mr. LANGDON. No. sir. The Commission would still have jurisdiction to determine whether that rate over the circuitous line, as well as any other rate, was reasonably compensatory. As a matter of fact, there has been some point made that maybe, in order to achieve the principal objective of the Commission in H. R. 6208, it is not necessary to eliminate this special requirement that a relief rate be reasonably compensatory; that that elimination is something that is not necessary in order to achieve the prime objective of this circuity bill. Whether that is so or not-I happen to personally think the elimination is not necessary-the rate would still have to be reasonably compensatory, even though not specifically so provided in section 4.

The rate would still have to be reasonably compensatory, whether over a circuitous route or over a direct route. The rates are subject to all of the provisions of the act including section 1, section 3, section 2. Frankly, I do not think it makes much difference in the prime objectives of the ICC bill whether that provision about the rates being reasonably compensatory is in there or not.

Mr. ROGERS. What I am thinking about, Mr. Langdon, is this: The Commission in fixing the rate on the direct shipper, according to your recommendations, would not be permitted to take into consideration the relationship to the other rates insofar as the circuitous route would be concerned, would it?

Mr. LANGDON. I think in the practical application of section 4 the Commission would have to take a look at the effect of the rate over all of the direct routes, and then judge whether or not over those direct tariff routes the provisions of section 4 could be departed from with justice, with justice to the intermediate points, with justice to the competitors.

If they reached an affirmative answer on that, then the circuitous lines, to the extent they thought they could participate in the business, would have the right to come in and file their concurrences in those rates, again subject to suspension, though. If somebody objected on the ground that over the circuitous line, as an example, the rate was noncompensatory, or the earnings were too thin, there still would be the right of suspension and the commission then would have a separate proceeding, it seems to me, under section 1.

Mr. ROGERS. What I am thinking about, Mr. Langdon, is your recommendation on page 28, where the carrier on the circuitous route would have, without further authorization, the right to meet the competition on the direct shipment.

Mr. LANGDON. Without any further authorization under section 4, that is right. They would then come along and file their rates which meet the rate already authorized by the Commission over the direct routes. But as I understand the procedure, those rates, as they applied over the circuitous routes, would still be subject to suspension and still have to satisfy the requirements of the law, if challenged. We could not automatically put those rates in without further opportunity for protest.

Mr. ROGERS. Thank you, sir.

That is all, Mr. Chairman.

Mr. HARRIS. Do I understand, Mr. Langdon, that your statement and other statements that we have had regarding the effect of the rate on other modes of transportation are based on section 305c?

Mr. LANGDON. That is the special provision, sir, that, in effect, exempts the water carriers from any obligation to share their traffic with the railroads.

Mr. HARRIS. Are there any other provisions of the Interstate Commerce Act which gives the Commission the authority to make a decision based on the contentions that we have had before the committee? Mr. LANGDON. No, sir; and I do not think that does, except in the case of water-carrier rates.

Mr. HARRIS. That is what I was getting at. You have quoted a number of examples here. What authority does the Interstate Commerce Commission have, then, in making a determination, say, with reference to trucks as to the economic effect that they would have on another mode of transportation?

Mr. LANGDON. They cite the provision in the policy, sir, against unfair and destructive competitive practices.

Mr. HARRIS. You just said in your statement that you did not think it was necessary to change that policy.

Mr. LANGDON. That is right, sir, if there is a substantive provision in the law which tells the Commission that it cannot take into account the effect of railroad rates, compensatory railroad rates, on truck traffic or barge traffic. If there is that affirmative provision in the form of the three "shall-nots" put into the law, we believe that the Commission then will have to construe unfair and destructive competitive practices as limited to noncompensatory rates. You see, what has been happening is this: In this Sugar case that I mentioned as an example, where we wanted to reduce the rates on sugar to Cincinnati from New Orleans, we wanted to put in, if you will recall, a rate of 58 cents, and the Commission found that that 58-cent rate was a reasonably compensatory rate but the conclusion was that it could not be published because to do so would be, in effect, an unfair and competitive pratice against the barge lines, because it was loweractually, in that case, it was on the same level-as the cost to the shipper of using the barge service. So it was, as the Commission by implication found, an unfair and destructive competitive practice for us to make a compensatory rate which had an adverse effect on the barge line.

Under this proposal of ours, the Commission could not take into account the effect of that 58-cent rate proposed in the Sugar case on the barge lines. It would be limited, in effect, to determining whether or not that rate was a compensatory rate, and once it reached that conclusion, then it would have to allow that rate.

We think that in those circumstances it could not and would not construe the present provision in the national transportation policy against unfair and destructive competitive practices as disallowing that 58-cent rate. We think the substantive provision that we suggest here would override that policy provision and tell the Commission to construe that provision as limited to rates which are noncompensatory. We are perfectly willing to agree that a noncompensatory rate is an unfair and destructive competitive practice, but we do not agree and protest strongly the notion that a compensatory rate is an unfair and destructive competitive practice. That is what it amounts to, sir.

Mr. HARRIS. In other words, then, the only authority that the ICC has in carrying out the policy is with reference to the transportation