Chicago, the Illinois Waterway, Mississippi River, and the Gulf Intracoastal Waterway, through New Orleans to as far west as Brownsville, Tex. This route includes several important intermediate ports, some of which are St. Louis, Memphis, New Orleans, Houston, and Corpus Christi, Tex.

My period of connection with John I. Hay Co. has permitted me to see it grow from the owner of 2 small river steamers to its present fleet of some seventyodd modern steel barges and 6 modern steel diesel towboats. It could at the present time be characterized as a medium-size barge line operation in the freight service of the general public.

During this period of some twenty-odd years, particularly since 1946, a great deal of my own time and effort has had to be devoted to hearings and procedures before the Interstate Commerce Commission. I am not an attorney nor a licensed practitioner before the ICC, but I have formed opinions as a layman through this experience which I would like to record for the consideration of your committee.

I am familiar with the testimony of Mr. W. Y. Wildman who appeared here earlier describing the activities of the Waterways Freight Bureau and its member common carrier barge lines before the ICC in numerous rate cases. I appeared as a witness for the John I. Hay Co. in a great many of these cases and followed nearly all of them with keen interest because of their effect on my company and upon the barging industry generally.

Throughout this 10-year history, there was never any doubt in my mind of the ability of the rail carriers to meet our competition wherever and whenever they had a mind to do it, subject only to the restraints placed upon them by the Interstate Commerce Commission. A recent study which I made reflects that our company served only 49 different ports last year whereas the rail carriers with which we compete would have literally hundreds or even thousands of times more this number of points or origin and destination. In meeting our rates, usually it has been necessary for the railroad to meet our competition only at 1 or 2 points on any particular commodity. The sacrifice of their revenues required to do this could be easily recovered through the increases which have been made in rates from and to points where we were not competitive. Since June 30, 1946, as a result of permissive action on the part of the Commission in 10 separate proceedings, rail freight rates, generally, have gone up between SO percent and 90 percent which has permitted them to build up a tremendous reservoir that enables the rail lines to cut their rates to the bone where competition exists without impairing their financial status.

In this competition as a water carrier we were particularly vulnerable because very few of our shippers or receivers have their plants located directly on the waterway, and in nearly every case it is necessary for the traffic, which moves by barge, to reach the barge by some means of land transportation-either rail or truck, and there be handled into our equipment and again lifted out at destination and dispatched to ultimate point of delivery by similar rail or truck service. While the service which we are able to offer through the modernization and improvement of our fleet is efficient for a water carrier, it is not nearly as fast as that offered by rail or highway service, so that we are only able to secure traffic by according the shipper some differential under land transportation costs reflecting this speed disability and 500 versus 40 to 50 tons minimum.

I am extremely apprehensive about a recent trend on the part of the railroads to establish their rates on a basis of exact equality, with the overall costs of bandling by water. Because of the disadvantages of water service, the larger unit of transportation, the slower transit time, the lesser frequency of operation and the additional handling in transit with attendant greater risk of loss and damage-freight just will not move by water where such an equality has been established. I regret to state that, although this is a well-recognized fact, the Commission in several recent cases has permitted rates on such an equality basis to take effect.

In my experience in rate litigation, I have seen rail rates reduced to meet our competition on traffic where we were carrying as little as 5,200 net tons of freight per year. This was on beer from Milwaukee, Wis., to Houston, Tex. To meet our competition at this one destination, our rail competitors willingly proposed to further reduce their already greatly depressed rates not only from Milwaukee but from Chicago, St. Louis, Peoria, and Omaha, Nebr., to accomplish this end. There is but little of the tonnage which we handle that the railroads have not sought to deprive us of through the making of radical reductions in their

rates.

I have participated in at least two cases involving the adjustment of rates on sugar from Louisiana origins to Chicago wherein efforts were made to reduce rail rates in the movement of this commodity to Chicago which has largely been developed by barge transportation resulting from the growth of Chicago as a sugar-consuming center. Transporation of sugar by barge at the time of these hearings was largely in lots of 1,000 tons, equivalent to approximately 20 railroad carloads. One-thousand-ton units are onerous to most receivers of sugar who do not consume it in this quantity and storage and extra handling are required to receive it by barge as compared to carload lots by rail. These reductions in rates on refined sugar were proposed even though reductions were thereby required from Louisiana origins to destinations where there was no water competition whatsoever.

Expensive and time-consuming though all of these rate litigations were, especially for a small carrier such as John I. Hay Co., nevertheless I was impressed that we were able to survive by the reasonably fair and impartial administration of the present law by the Interstate Commerce Commission. In the proposed legislation in H. R. 6141 and H. R. 6142 all of the protections, which permitted us to compete in but a very limited fashion and on limited commodities with the rail carriers, are eliminated. I refer especially to the emasculation of the national transportation policy and the removal of the mandate it presently contains to the ICC to provide for fair and impartial regulation of all modes of transportation, to prohibit unfair and distructive competitive practices, to recognize and preserve the inherent advantages of each, and to test competitive rates in part as to their effect on the elimination of competition. I refer also to changes in the long and short haul provisions of the present law, the so-called fourth section, which during the past 10 years has to come extent restrained the rail carriers in making the point-to-point reductions in rates necessary to eliminate water competition. As I read the proposed bills, there is little or no control on such rates other than the vague requirement that they be "reasonable." In fact, there is almost a mandate to the rail carriers to eliminate our service as rapidly as possible.

I know it would not be the intention of the railroads to maintain depressed water-compelled rates, under the provisions of the legislation you are here considering, for any unnecessarily long period, as there would be nothing to prohibit their increasing them, once their competition has been eliminated. The danger of such a program is recognized in section 4 (2) of the present act which provides that whenever a railroad shall reduce a rate thereunder in competition with a water route, it shall not be permitted to increase such rate unless after hearing by the Commission it is proved that such proposed increase rests upon changed conditions other than the elimination of water competition. All such safeguards are eliminated in the bills here under consideration. There are very few barge carriers who could withstand this unregulated competition more than 6 months. Water transportation is not something that can be turned on and off like a water faucet. Very few, if any of these river common carriers have substantial financial backing. In a very short period of nonoperation their equipment would be in forced liquidation, probably as junk. At this point a general adjustment in rail rates might be expected to take place back to well above present levels, if the bills before you become law.

The development of a barge line, with which I am intimately acquainted, is not an undertaking for this year-to be abandoned next, and resumed in the third. Previously in this Nation's history freight traffic was driven from the Mississippi River system by the tactics in selective rate cutting which this proposed legislation permits. If it occurs again, it will be many decades before inland water service is available, if ever. The question might well be askedhow "dynamic competition" acts as a regulating force if competition of the other forms of transportation has ceased to exist? History of rail transportation less than 50 years ago will indicate that competition, free and uncontrolled, cannot be a regulatory force where the units in the transportation industry are of uch widely divergent size and nature as that of the rail carriers and the barge lines.

STATEMENT OF J. HADEN ALLDREDGE

My name is J. Haden Alldredge. My residence is Washington, D. C.

I have spent more than 45 years in activities connected with some phase of transportation and am familiar not only with the development of regulation but with its administration.

For 16 years (from May 1, 1939, to November 1, 1955) I served as a member of the Interstate Commerce Commission, filling the office of Chairman for two terms. I was Chairman of Division 2 of the Commission-the principal rate division—when I resigned from the Commission in the latter part of 1955. My previous experience included work with the Tennessee Valley Authority and the Alabama Public Service Commission. I am now in private life and maintain an office in Washington, D. C., and am associated with a law firm in Montgomery, Ala.

This statement is filed on behalf of Commercial Barge Lines, Inc., Commercial Transport Corp., Inc., American Barge Lines, Inc., and Union Barge Line Corp., all of which are barge lines operating for hire on the inland waterways system. The proposed legislation embodied in these bills challenges the basic theory and philosophy of transportation regulation as it has gradually evolved over the last 69 years in this country. The statements made on behalf of the advocates of this legislation leave no doubt of that fact.

The first authoritative pronouncement on this subject came from the President's Advisory Committee in a White House press release dated April 18, 1955. Four major objectives were listed as desirable accomplishments through suitable amendments to the Interstate Commerce Act. It will be helpful to keep these in mind in analyzing the bills now pending before the House. They are: 1. Increased reliance on the forces of competition in ratemaking;

2. Maintenance of a modernized and financially strong system of commoncarier transportation:

3. Encouragement of increased efficiency and economy in the management of all transportation services in order to give the ultimate consumer the benefit of the lowest possible transportation costs; and

4. Development of an efficient transportation system for defense mobilization

or war.

Close examination of these stated objectives in the light of the legislation which has been drafted for consideration by the Congress, and with the lessons of experience in mind, will disclose some self-contradictions. With control by the regulatory agency of the Government over the rate structures of common carriers relaxed and restricted as contemplated by the pending bill, the second objective the maintenance of a modernized and financially strong system of common-carrier transportation-would be unattainable. A few well-situated individual carriers, particularly among the railroads, might possibly benefit from greater freedom in ratemaking; but it would be totally unrealistic to assume that the transportation system of the country as a whole, composed, as it is, of all modern types of transportation agencies, would remain financially strong. The history of transportation in the United States forecasts this eventuality, and it would be dangerous to disregard it.

There are other contradictions in the Cabinet committee's statement of objectives. It does not necessarily follow, for instance, that objectives Nos. 2 and 3 could be achieved if the proposed relaxation of controls over competitive ratemaking were approved.

Textual comparisons between the existing law and the proposed amendments have been made. It is not necessary to repeat those comparisons here. This discussion, therefore, will be confined and limited to the major changes in the law contemplated by the pending bills. An attempt will be made to appraise the probable effect of these proposed changes.

First, however, it is important to go back to the beginning of transportation regulation in the United States, trace its gradual development, and evaluate its principal accomplishments before taking up the changes that are now sought to be made.

Some of the States, as is well known, preceded the Federal Government in railroad regulation; but by the 1880's abuses had grown up to such proportions that public sentiment induced the Congress to give serious attention to the subject. Committees conducted extensive investigations, finally culminating in what is commonly known as the Cullom report. That report specified the abuses which the members of the committee deemed to be of sufficient importance to justify the Congress in enacting the original act to regulate commerce in 1887. An inspection of this summary of abuses indicates that most of them actually grew out of too much freedom of competition among railroads and between railroads and water carriers. Naturally and logically, the first act was designed to correct and prevent the abuses found to exist as a result of the investigations. Discriminations of various kinds constituted the predominant abuses, and these were the principal things aimed at in the original statute.

Criticism has been leveled at the philosophy which permeated the original act to regulate commerce on the ground that it was designed primarily as a restraint upon managerial discretion. No restraints would have been necessary, however, if public abuses had not arisen as a result of the free exercise of such discretion. That the inhibitions which were incorporated in the original statute succeeded in correcting the abuses found to exist there can be no serious dispute. One of these abuses concerned the use of free passes on the railroads for political and freight-solicitation purposes. If this practice had not been effectively prohibited when it was, it would have wrecked the passenger service of the railroads from a revenue standpoint long ago.

It is a mistake, however, to say that Congress did not respond to the needs of commerce as time passed and modify the regulatory policy of the Government. It made an important change in policy in 1920 after the close of the First World War. Major amendments of the law were passed in that year. The Supreme Court, in the first cases to come before it thereafter, recognized and interpreted these changes. For one thing, an attempt was made to assure adequate earnings for the rail carriers. While some of this legislation was later abandoned, the principal modifications made in regulatory policy in that year still remain. Extensions of governmental control over transportation agencies and service were made in 1935 with the passage of the Motor Carrier Act, now part II of the Interstate Commerce Act. Later still other amendatory legislation was enacted, featured by the passage of the Transportation Act of 1940. The regulation of water carriers was included in this act. In 1942, another amendment brought freight forwarders under regulation.

While it is difficult to summarize in a few sentences the meaning, purpose. and effect of the regulatory laws as they now relate to the function of transportation in the American economy, it is fairly accurate to say that it is designed to provide an adequate system of transportation under private ownership and operation to meet the needs of an expanding commerce and of the national defense; to protect the legitimate interests of the investors in the various transportation enterprises; to assure labor of fair treatment, and to distribute the burden of support of the agencies engaged in rendering transportation services fairly and reasonably, not only among the individual users of the services, but also among the communities, sections, regions, and territories affected. It has taken a long time to bring about, on the whole, a fair distribution of the burden of transportation. The original law was addressed primarily to the prevention of discriminations between individuals, descriptions of traffic, and places or communities. Not until 1940 was the law expanded to prohibit unjust discrimination among sections, regions, and territories. The first major attempt to accomplish the latter purpose under regulatory supervision and direction, after running the gamut of attacks in the courts, became effective in the spring of 1952.

There were other features of regulation as originally conceived that have been overlooked in recent times. One of the most important of these was to remove all obstacles (and there were many of them) against the continuous movement of freight over connecting lines of railroad. These obstacles, in the beginning constituted serious barriers against the freedom of commerce. Step by step through congressional action, court decision, and Commission action, it has been made possible for a shipper, under a single contract with the initial carrier, to make shipment with full protection of the law against loss, damage, interruption of service, and unreasonable delay from any railroad station to any other railroad station in the United States. That has been not only a remarkable, but a definitely constructive, achievement. The same results are being accomplished in connection with other modes of transportation. But rates must be kept adjusted to correspond with this integration of service. Any serious relaxation of rate controls would jeopardize this achievement.

The present system of regulation has been tried in the crucible of experience and has performed well. It has functioned through 2 world wars and other lesser conflicts, 2 or 3 major business depressions, 2 pronounced inflationary periods, and a few intervening seasons of comparative normaley. Through all of these economic fluctuations the agencies of public transportation have re mained in private hands in the United States-the only country in the world where this has happened; they have grown, expanded, and prospered, being stronger now-physically and financially-than ever before; new modes of transportation have appeared upon the scene and the resurgence of another has occurred during this stretch of time and have taken their places in the general transportation system without destroying the existing agencies; commerce, as

represented by the production and distribution of commodities, has enlarged and spread; regions that had been long retarded in their development have been able gradually to improve their economic positions; and, with it all, the rates and charges for transportation services have not been increased on the average more substantially than have the prices for commodities and services generally. In brief words, this is the record of performance of the present scheme of regulation. This record speaks well for the wisdom of Congress in discharging its responsibilities under the commerce clause of the Constitution.

The proposal now is radically to change the law and the policy behind the law with the expectation and hope, as expressed by the advocates of the changes, that better results will be accomplished in the future than if the present statutes are allowed to remain in effect.

Disregarding details, the major changes contemplated by the bills now pending before Congress may be described and discussed under certain topics.

The first major departure from present regulatory policy occurs in the declaration of national policy preceding and introducing the Interstate Commerce Act. A new idea. or new theory, is proposed to be injected into this prologue of regulation. This new concept represents a drastic step toward the commitment of the Government to reliance upon competition to protect the public interest rather than upon regulation. If this philosophy had not been tried in the past and found wanting it might have more appeal than it does now. It has been amply demonstrated, however, that competition is not an adequate protector of the public interest in the field of transportation-in fact, it has some destructive potentialities, not only for the carriers themselves but for various segments of the public which must use transportation, as well as for communities, sections, and regions directly and indirectly affected by transportation practices.

The present statement of policy commits the Government to "fair and impartial regulation of all modes of transportation subject to the provisions of the act." The new concept of policy as expressed in the pending bills would trust the "free-enterprise system of dynamic competition" to accomplish the desired results. Encouragement is to be given to the promotion of "full competition between modes of transportation." The standard of reasonableness of charges is to be changed to "not less than reasonable minimum charges, or more than reasonable maximum charges." The zone between these two extremes is to be left primarily to the exercise of managerial discretion. It should be remembered, however, that managerial judgments of individual carriers frequently differ and there must be an umpire clothed with Government power to settle the conflicts.

While it is commonly accepted that a declaration of policy does not carry with it an affirmative grant of power, it nevertheless has an influence-and properly so—over the interpretation and application of the substantive provisions of the law. It is so intended by Congress. Gradually, through administrative and judicial construction, the present declaration of policy has had an effectand on the whole a constructive effect-upon the regulation of the function of transportation in the United States. Carefully worded to preserve a balance of opportunity for all components of the existing transportation system to serve the public interest, the prevailing declaration of policy has been and is serving its purpose well. If the new version should be adopted by Congress, the prior Commission and court precedents will be nullified or seriously impaired and perhaps a decade of litigation will ensue before the administrative agency can get its bearings.

All this means uncertainty, instability, and-as some have expressed it-chaos in the field of transportation.

Further discussion of the implications of this proposed change in governmental policy will be reserved for succeeding topics.

The next important changes in the existing law which have been embodied in the pending bills relate to rates and charges. This is where the most radical changes occur in the proposed legislation. The purpose, as explained by its advocate, is clearly to relax the controls over rates and ratemaking. Greater freedom is to be accorded management to charge rates to meet what it may deem to be compelling competition. This would be, for all practical purposes, a reversion to the conditions which prevailed in preregulation days. The preservation of the authority and power of the regulatory agency to prescribe minimum reasonable rates obviously is intended as a protection for the carriers themselves with the public interest in the maintenance of an adequate transportation system lurking in the background. To one familiar with the problems of regu

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