I know of no product in the United States-and transportation service is a product that is sold on that kind of a basis and I think that is what Mr. Sullivan had in mind, sir.

It was my intention originally to cover in great detail the bills here under consideration, with particular emphasis on those sections which, if enacted into law, would most adversely affect the welfare of the members of the Great Lakes Ship Owners Association. As a matter of fact, the membership believes that many of the provisions of these bills would, if enacted, bring about a discontinuance of the service now offered by these carriers. Since the preparation of the original draft of my statement, several factors have intervened which have somewhat changed my presentation. The first of these was the statement by Mr. Jervis Langdon, Jr., on behalf of the railroad industry. At the first reading of Mr. Langdon's statement, it appeared that the railroads had entirely abandoned H. R. 6141 and were suggesting in lieu thereof the enactment of three apparently simple "shall nots" and an innocuous-appearing amendment to section 4 of the Interstate Commerce Act (H. R. 6208). A rereading of Mr. Langdon's statement, however, shows clearly that I was mistaken. This gentleman referred at length to the statement made by the late Mr. Carter Fort before this committee in September of 1955, on the Presidential Advisory Committee Report on Transportation Policy and Organization. This, as you know, is the organic work from which has sprung H. R. 6141 and 6142. A thorough reading of Mr. Langdon's statement shows he reiterates the position taken by Mr. Fort in September of last year and readopts the position taken by the railroads at that time. He suggests, however, that the situation might be cured insofar as the railroads are concerned, probably temporarily, by the simple expedient of amending the Interstate Commerce Act by adding the now well-known three "shall nots" and appending thereto H. R. 6208. The second intervening factor is the announcement by the chairman of this committee about 2 weeks ago that because of the fact that the instant hearings had consumed such a large amount of the committee's time, and since many other most-important matters had to be considered by the committee before adjournment this season, it would be necessary to terminate the hearings at the close of business on June 15, 1956. In view of the large number of witnesses then scheduled to appear, it was obvious that curtailment would have to be made by all parties to bring about the result desired by the chairman. In view of the railroad position, I feel it necessary to present a full statement on this subject to the committee. Also, I believe it necessary to have officials of the common water carriers operating on the Great Lakes present statements in order to place on the record practical operating conditions including competitive conditions, which the industry is forced to meet now, and those which it can be expected they will have to meet if H. R. 4161 is enacted, or in the alternative, if H. R. 6208 and the three "shall nots" become law.

I am most appreciative, therefore, of the opportunity given to Mr. Sullivan and myself to appear before this committee to present orally the views of the industry, I would like at this time to ask permission, as I mentioned this morning, to file two additional industry statements at a later date and also to augment by another late-filed statement the abbreviated statement I am now about to give.

The committee has heard Mr. Arthur Sullivan, president of the Gartland Steamship Co., briefly outline the views of the industry. It will be my purpose to deal with the more technical features of the legislation. Before proceeding to this, it might be of some interest for the record for me to outline briefly my personal experience in the field of regulation. In 1934 I became a junior examiner for the United States Shipping Board and continued with its successor organizations as a trial examiner, administering the regulatory statutes then applicable to carriers by water until the enactment of part III of the Interstate Commerce Act, at which time I transferred to the Interstate Commerce Commission as a trial examiner. Subsequently, I became Transportation Counsel of OPA, in which capacity I set up a rather extensive Transportation Division for Leon Henderson, the first Administrator of that agency. Subsequently, during World War II, I became assistant to the late Hon. Joseph B. Eastman, at that time Director of the Office of Defense Transportation. In addition, I have done a great deal of research work in regulation, having written several articles and books on the subject. In short, I have been engaged in this business as my principal livelihood for some 22 years. I have, somewhat like Mr. Knudson, spent my life in regulation.

I have heard it said at several of the sessions of this committee that many of the statements in connection with the bills have been cumulative. While it is true that this type of thing makes for a voluminous and sometimes cumbersome record, it is by the same token most persuasive. Leaning on the old adage that where there is so much smoke there must be fire, it has become apparent, I think, that there is something drastically wrong with the bills here under consideration, since practically everyone appearing has been opposed to them in whole or in part.

This committee has heard from outstanding men in the field of transportation. Each of them has presented different though in many cases overlapping thoughts as to the impact of the bills on their particular industries. While many of the adverse effects they have described would fall upon the common water carrier industry on the Great Lakes, it is felt that the industry I represent has additional problems. It is these that I wish to emphasize, but before doing so permit me to lay a brief foundation.

The hearings now being conducted, and those which were conducted by this committee in September of last year on the Cabinet committee report, all stem, of course, from that report, which in turn came about as a result of railroad agitation to do something for the sorry plight of that industry. To say that the railroad industry is in a sorry condition is not a fact. Therefore, the fundamental premise is an error and naturally the conceptions that arise therefrom must be fraught with such error. The Cabinet committee report in the first instance centers around the change in transportation policy and recommends that Federal regulation be changed from control by the Government, to free enterprise. The term used throughout the report and which you have heard here "ad nauseam" is dynamic competition. The Interstate Commerce Commission has come up with the best translation of this phrase that I have heard. Its report to you on H. R. 6141 suggests that this bill will return transportation in this

country to the law of the jungle. I would like to go one step further with this. It is in fact an invitation to the railroad industry to use its still present economic monopoly to throttle its competitors.

I might say, parenthetically, that the people I represent are opposed to the bill in toto.

The Cabinet committee premises its recommendation on the theory that railroad monopoly has now disappeared because they find that today the field is highly competitive due to the existence of trucks, buses, airlines, and water carriers. This is only a half-truth and like such things is really more dangerous than an outright error. It is true these other forms of transportation exist, but economically they could not last 6 months in an all-out rate war with our powerful friends in the railroad business. In short, the effectiveness of the "old" railroad monopoly still exists. Only the form has changed. Now it is basically economic.

I don't think there has been a single instance where the railroads have gone out to make an "honest effort" to eliminate us by competitive rate reductions that they have been unsuccessful. Curtailment or elimination of water-carrier service has followed railroad rate reductions as night follows day.

Mr. Wildman presented certain statistics to you which showed without any question that under present regulation the rail carriers were doing better than good. Specifically, his batting average on protests prior to last fall was 50 percent. Since that time, or coincidental with the rise to prominence of the Cabinet committee report and the legislation here under consideration, his protest batting average fell to about 16 percent. This simply means that his people were able to get to bat, that is, even be heard, in about only 16 percent of the reduced rail rate cases. While he wasn't able to give you the outcome of the 16 percent since many of the matters are still pending, based on experience only about half, or roughly 8 percent of the railroad rate reductions would be disallowed and then generally not in toto. What has been the experience on the Great Lakes? In the last 6 months, about 15 protests have been filed against competitive railrate reductions, allegedly to meet water competition on the Great Lakes. These I have personally filed. Most of these reductions were not to meet competition, as I shall demonstrate specifically in a moment, but were to drive water carriers out of existence. The astounding thing is that not one of these reductions was suspended. As a result the water carriers have lost the traffic. Prior to last fall the average number of suspensions granted, in terms of the protests filed on the Great Lakes, was about 50 percent and in about 25 percent of these cases the suspended rates were found unlawful in whole or in part. The experience of the water-carrier industry throughout the Nation seems therefore to be cut according to the same pattern. As you can see, my batting average of late has been substantially below Mr. Wildman's lately. I cannot explain this phenomenon. The fact remains that for a water carrier to obtain a suspension of a competitive rail reduction from the Suspension Board of the Interstate Commerce Commission seems to be an extremely difficult if not impossible job, even under the present law as now administered. In view of this fact I don't understand the railroads' position with respect to their requiring more "managerial discretion" and less

regulation, which I understand is the purport of this bill from their standpoint. It seems to me that any less regulation would be no regulation. The simple truth of the matter seems to be that the railroads are asking this Congress to direct the Commission, by means of this legislation, to guarantee the railroads a complete monopoly. When this comes about-and I hope it doesn't-the water-carrier interests which I represent will very quickly cease to exist. They will then be in no position to aid the country in the event of another national emergency or in a war state, a task which they so ably performed in World War II, as mentioned by Mr. Sullivan.

As typical of what I am talking about, let me briefly detail for you the facts in an actual situation. There is and has been for some time a substantial movement of "skelp"-I found out that skelp is sheet steel and used for the rolling of pipe-from Youngstown, Ohio, and Trenton, and Detroit, Mich., to Welland, Ontario. This has in the past moved via rail-water from Youngstown, and water direct from Trenton and Detroit. In the case of the Youngstown movement, it was rail to Cleveland and vessel beyond. The rail lines, however, decided to eliminate the water carriers so they made a 25-percent reduction in their rail rate direct from Youngstown to Welland. At the same time they held their proportional rate, which is used in connection with transshipment by water, on the old basis. Also at the same time they had in effect two other rates from Youngstown to Cleveland. The reduction in the through rate was protested and the Commission refused to suspend. When the reduced rail rate went in the water carriers lost the tonnage and the rate situation was precisely this:

All-rail rate, Youngstown to Welland.

Proportional rate, Youngstown to Cleveland, for use in connection with water carriers__

Interstate rate from Youngstown to Cleveland, not usable via water carriers --

$6.63

4. 12

3.02

Intrastate rate, not usable via water carriers, Youngstown to Cleveland__ 2.76 In short, the railroads had the water carriers completely boxed and, contrary to usual ratemaking practices, had a proportional rate approximately 35 percent higher than the local rate. Despite this, the Commission did not suspend or even investigate. Subsequently, in April of this year the rail carriers proposed a reduction in the skelp rate from Trenton and Detroit, Mich., to Welland, thus spreading their competitive rate structure, which incidentally is the pattern usually followed by the rail lines. In this case the rate from Detroit was reduced from $10.05 to $3.26, or a reduction of $6.79-approximately 70 percent. In the case of Trenton, the rate was reduced from $12.56 to $3.46, a reduction of $9.10 or in the neighborhood of 75 percent. What were the water carriers costs at this time?

From Youngstown to Welland via the rail-water route, the charges were $6.88, which was 25 cents a ton above the reduced all-rail rate. In the case of Trenton the water costs were $4.09 a ton, and from Detroit $4.88 a ton. Therefore, in each of these instances the reduced rail rate which the Suspension Board refused to suspend, even though protests were filed in each instance, was substantially below the water costs. How much more managerial discretion is possible? How could a rate reduction be more destructive?

As to how much freedom the rail carriers now enjoy, so far as managerial discretion is concerned, can be more fully appreciated by looking at a speech made by one of the Commissioners. Commissioner Owen Clarke, speaking in Lancaster, Pa., on March 12, 1956, on the Cabinet Committee report, specifically referred to the tariff filing situation in the Commission and set forth certain figures in connection therewith, detailing the action taken by the Commission with respect thereto. He stated that during the year ended October 31, 1955, there were filed with the Commission 148,654 new or changed rates, fares, or charges, 98 percent of which tariffs became effective without suspension. Commisisoner Clarke then pointed out that during the same period a total of 1,421 applications were filed, seeking relief from the fourth section of the Interstate Commerce Act. Of these, 1,235 were granted automatically, and he concluded with stating that with respect to these applications only 18 formal reports were issued, the remainder being considered without formal pleadings. To me this is the utopia of managerial discretion.

I might add there, Mr. Chairman, that most people do not understand the rate situation at the Commission. As a matter of fact, rates are filed and nothing is done with the tariffs except that they are examined by a tariff examiner for the purpose of seeing if they comply with the technical rules as to the form of the tariff, proper designation, tariff numbers, and so forth. They are immediately passed to the file unless somebody digs them out, so those rates are not necessarily blessed by anybody. They are purely railroad-created competitive rates as a result of the exercise of the rail's own managerial discretion. The Commission does not interfere one bit.

In the transmitting memorandum from the Commission to the Congress in connection with H. R. 6141, the Commission said:

It seems appropriate to emphasize what we have already suggested, that in the main the indicated objectives of the advisory committee may be effectuated within the framework of the present statutes.

I am not exactly clear as to what the Commission meant by this statement but from what I have just said I believe it could be reasonably interpreted to mean that they can probably take care of the railroad complaints about restrictions on their "managerial discretion" under the terms of the present law. If this is so and it is to be carried out as I have indicated, then what happens to the water carriers?

Now what is there to say about H. R. 6141 itself? The first item to consider is the proposed policy. This, to my way of thinking, is nothing more than a disjointed collection of words, without meaning, impossible to interpret. The first paragraph of the section is a wellmeant and nicely phrased statement of intention. Difficulty is encountered, however, when one tries to work out the balance of the policy. Paragraph 2 states that its primary purpose is to promote full competition-translation, "dynamic competition," "law of the jungle," or, as I have said, give the railroads back their compete monopoly.

Of more significance is the fact that this part of the policy is without definite standards. Consequently, any decision rendered by the Commission on the basis of this section must surely fall when tested by the courts. Furthermore, there is absolutely no connection, and there can be none, between "full competition" and the encouragement