for the purpose of protecting forms of transportation which use public facilities, often at no charge.

Nor does the ICC save the point when it says in its statement of July 20 that "within reason, other carriers should be permitted to meet the rates of the lowcost carrier."

In the example cited above this would presumably mean that, if the competing water carrier had a lower "full" cost of, say $3.75 and fixed its rate at that level, the "higher cost" railroad could name a rate of $3.75. But that does not solve the problem even if the railroad could publish a $3.75 rate-which it could not under present ICC practice. In the first place, it is the $3.50 rate, not the $3.75 rate, which will produce the lowest unit costs for the railroad and increase its net revenues the most. In the second place, the chances are that the ICC would not authorize a $3.75 railroad rate.

Repeatedly has the ICC condemned as unreasonably low compensatory railroad rates which failed to reflect an adequate differential over the full costs to the shipper of using competing water services." In fact, the railroads are supposed to hold an umbrella over subsidized inland water carriage at whatever rate levels that subsidized form of transportation may name and the suggestion that the ICC "within reason" will permit the "high cost" carrier to meet the rates of the "low cost" carrier is hardly correct-even when the competitor is low cost because of subsidy.

It is not to be inferred from the foregoing that, when compared with the costs of forms of transportation which employ public rights-of-way, railroad "full" costs are always higher. Quite the contrary is true, particularly when such costs are compared with those of motor carriers for distances beyond 150 to 200 miles.15 Nor is it to be inferred that if competitive rates proposed by railroads cover their "full" costs they will necessarily be allowed. In a fairly recent case, proposed rates were shown by the evidence to be 146 percent of "full" railroad costs, and yet the ICC turned them down because of an adverse effect upon competing motor carriers." Railroad rates to meet highway competition have been increased by the ICC although they reflected much higher than average car-mile

revenues.

17

Every time the ICC reflects rates of the character of the $3.50 rate above mentioned, it increases transportation costs as a whole, imposes a special penalty on the railroads which have proportionately high constant expenses because they provide, maintain, and pay taxes on their own rights-of-way, and interferes with the development of the kind of national transportation system which the Congress intended with its 1940 policy declaration. The "shall nots" are thus required to restore a degree of fairness in the regulatory process and to instill some economic sense.

Point 3. Instead of causing the deterioration of motor and water services, the "shall nots" would help all forms of transportation find their true economic places in a sound and efficient transportation system

The next reason for ICC opposition to the "shall nots" is the assumption that they would cause deterioration of motor and water carrier service.

Such services, it says, cannot be dispensed with unless the public interest is to be sacrificed. The ICC observes:

"There has been an express intention of Congress, shown by provisions of the Interstate Commerce Act, and by public expenditures on waterways and highways, in the encouragement and preservation of other forms of transportation. Needless to say, motor transportation would not have developed as it has, and inland water transportation would not have recovered as it has since 1920 if the legislation now proposed had been in effect at an earlier date."

This ICC statement borders upon saying that the motor and water carriers come first-irrespective.

14 A late example is the decision of division 2 on reconsideration in Pig Iron-Rockwood, Tenn.. to Chicago and Joliet, I. and S. docket 6388, dated May 23, 1956.

15 Since 1948 the ICC's Cost Section has been making a series of territorial studies showing the development of unit costs, operating performance factors, and cost scales for motor carriers operating in the several regions of the country. E. g., ICC Statement No. 2-56. Cost of Transporting Freight by Class 1 Motor Common Carriers of General Commodities Performing Transcontinental Service. The conclusion stated in the text is the result of a comparison of such cost scales with the average rail costs arrived at under form A for the comparable region, or the area including the region.

10 Alcoholic Liquors in Official Territory, 283 I. C. C. 219 (1951), at p. 223.

17 Southwestern Tank Truck Carriers Committee et al. v. Abilene & Southern Railway Company et al., 284 I. C. C. 75 (1952), at p. 84.

We do not attribute such a position to the ICC, but we do say that its practice of disallowing $3.50 rates in circumstances such as those related above will ultimately have the result of guaranteeing first place for the motor and water carriers. No form of transportation such as the railroads, depending solely upon Lass movement over privately owned but publicly taxed rights-of-way, can possibly survive such a practice-in the long run.

It has generally been understood that the national transportation policy is applicable to each form of transportation alike and that, in the public interest, its uniform provisions do not prefer one form over the other. In construing this policy, the ICC now says that it is important for the public to continue to have motor and water services, and the implication is that this should be without regard to economic costs. Accepting this position for the moment, it follows that the public should also continue to have railroad service without regard to economic costs. It is simple enough for the ICC, by disallowing rates of the $3.50 kind referred to above, to protect motor and water carriers from railroad competition. The principal advantage the railroads appear to possess in the competitive race, particularly with the motor carriers, is the advantage of low unit costs based on volume, and when the ICC interferes with the assertion of this advantage for the purpose of protecting competing forms, it can render the railroads as competitors largely impotent.

But if the country should also continue to have railroads, how is the ICC going to protect them from the motor carriers? Motor carriers obtain most of their traffic because of faster and more flexible service. In order to assure the continuance of railroad service, is the ICC in a position to make motor carrier competition less effective by requiring 3-day service between stations A and B instead of the 36-hour service which controls the traffic? And how can competitive motor service be made less flexible to help the railroads stay in business? Many hundreds of miles of railroad line serving agricultural areas in this country have been abandoned since the enactment of the national transportation policy of 1940, and if the continuance of railroad service is regarded as important in the public interest, the ICC is of course powerless to protect it from the competition of the exempt and private transportation, both on the highways and waterways. Attent on is invited to appendix B which is recent evidence of the truly astounding growth of water transportation on the inland rivers during recent years a growth which is confirmed by the evidence submitted during the course of the hearings in H. R. 6141 by Witness Chester C. Thompson of the American Waterways Operators, Inc. Whether palatable or not to the many special interests which sponsor it, the truth is that inland water transportation is inherently discriminatory. Its "benefits"-to which all of the taxpayers of the country contribute are available to certain areas of the country only, and even then, they are largely limited to shippers who can accumulate minimum shipments of no less than 500 to 1,500 tons. And what can the ICC do to protect smaller and less fortunately located shippers from such discrimination, let alone insure the continuance of railroad service in the face of such competition? The ICC has said that it can do nothing, and this has been emphasized by the Supreme Court." The ICC has helped the development of this inherently discriminatory form of transportation by requiring that railroad rates reflect adequate umbrellas over the full costs to the shipper of using the water service-whatever those costs may be.20

18

The point of course is this: In protecting motor and water carriers against railroad competition, the ICC has no problem. To the extent that railroad has an advantage, it takes the form of lower rates reflecting lower unit costs, and that is an advantage which the ICC can make ineffective, and even destroy, in the interest of protecting the other forms of transportation. But when the shoe is on the other foot, the ICC is completely and hopelessly impotent. It cannot protect the railroads against the competition of either the motor or water carriers. The charges of most of these competing carriers are not even known to the ICC, let along under its control. And so far as the regulated water carriers are concerned, their principal advantage of faster and more flexible service is not subject to the restraining hand of regulation. The rates

Cotton from Memphis and Helena to New Orleans, 273 I. C. C. 337 (1948), at pp. 365-366. Interstate Commerce Commission v. Mechling, 330 U. S. 567 (1947). Note 14, supra.

of the relatively few barges under ICC control cannot be touched in the interest of preserving railroad service.21

Since the ICC is powerless to protect the railroads from the competition of the other forms, it is grossly unfair to protect the other forms from compensatory and nondiscriminatory railroad rates.

The only practical means of bringing about some degree of consistency in the application of the national transportation policy—a policy which is neither national nor consistent as presently applied-is to permit each form of transportation, in dealing with the competition of another form, to assert its inherent competitive advantages. That is what the three "shall nots" would accomplish. The fact that the "shall nots" would give the railroads the same rights as now possessed by every other form of transportation is no reason for ICC condemnation.

Point 4. ICC fear that the "shall nots" would open up means for discriminating against the public is baseless and reflects a fundamental error of law The ICC observes that it "is required to take into account many factors in passing upon rate adjustments which involve more than the interests of the carriers alone," and in this connection it says that its power to remove discrimination "would become ineffectual *** if the three 'shall nots' were adopted."

The ICC recognizes that there is no proposal to change in any way either section 2 or section 3, but it observes:

"Overlooked *** is the fact that sections 2 and 3 are not self-executing; they merely declare unlawful, unjust discrimination and undue prejudice and preference. These sections are given force and effect through section 15 (1) of the act which authorizes the Commission to prescribe just and reasonable rates to remove any unlawfulness, including undue prejudice and preference as between shippers and localities, by prescribing, if necessary, the precise rates that will accomplish that purpose. Our powers under section 15 (1) would become ineffectual in this respect, if the three "shall nots" were adopted, regardless of whether section 15 (1) is amended."

It will be recalled that, in the view of the railroads, the power of the ICC to fix precise rates under section 15 (1) need not be withdrawn in order to accomplish the purpose of the three "shall nots," and accordingly, their proposal does not contemplate any change in section 15 (1). The only reason assigned by the ICC in now saying that, even if section 15 (1) is left unchanged, its power to cure discrimination under sections 2 and 3 would be "ineffectual" is set forth as follows:

"If section 15 (1) is left unchanged, the Commission still would be prohibited by the new section 15a (3) from considering the relationship between rates of different modes of transportation. This analysis is supported by the fact that the railroads are now of the view that the power of the Commission to prescribe precise rates need not be restricted. This concession significantly, is made contingent upon the adoption of a new paragraph 3 to the present section 15a containing the three 'shall nots.'"

If this is meant to suggest that section 15 (1) is another means for apportioning traffic-under the guise of "considering the relationship between rates of different modes of transportation"-the ICC's power to act would certainly be curbed by the enactment of the "shall nots." But we submit that section 15 (1) would not be properly resorted to in this connection. In its disallowances of compensatory rates because of their effect upon other forms of transportation, the ICC has not employed its power under section 15 (1) to prescribe the precise rate; on the contrary, it has employed its minimum rate power but with the use of faulty standards. Accordingly, if the faulty standards for reasonable minimum rates are eliminated, as the three "shall nots" would do, the ICC's power under section 15 (1) to fix precise rates would remain, but it would not be exercisable in a manner to defeat the objective of the three "shall nots." That is the reason the railroads believe it unnecessary to amend section 15 (1). But the principal question here is, how would the enactment of the "shall nots" affect the ICC's power to cure discrimination against shippers, localities, regions, ports, and the other public interests which are protected by section 2 or 3?

21 Notes 18 and 19, supra.

While not self-executing, section 2 which prohibits discrimination among shippers at the same locality and section 3 which prohibits discrimination among all who depend upon transportation generally (with the express proviso, however, that it does not apply to discrimination against the traffic of any other carrier) would remain unchanged. And so would section 15 (1) remain unchanged-the provision which, as stated by the ICC, gives force and effect to sections 2 and 3. What more is required to continue full power in the ICC to protect the shipping public from discriminatory rate practices?

No one is suggesting that ICC power to cure discrimination against the shipping public be curtailed.

The ICC cites its denial of a competitive railroad rate designed to meet the competition of unregulated water transportation in Blackstrap Molasses from Louisiana to Twin Cities (292 I. C. C. 573 (1954)) and outlines at some length the protection which this denial afforded to various protesting shipping interests. The ICC says:

"This protection to the public would have been impossible under the proposed revised rule of ratemaking in section 15a (1) or the proposed new paragraph 3 to the present section 15a."

We do not accept this conclusion.

The case in question involved an application for relief from both the longand-short-haul clause and the aggregate-of-intermediates rule of section 4, and even if the three "shall nots" had then been in effect, they could not have affected the result. The reason is that the ICC can grant relief from the provisions of section 4 in special cases only, and its discretion to determine what is and is not a special case is broad. Consequently, believing the protesting shippers would be hurt by the special case for fourth section relief advanced by the applicant railroads in the cited proceeding, the ICC did not grant the application. It could continue to refuse similar applications under the three "shall nots." In addition, so far as the ICC found the requested fourth section relief rate from New Orleans to the Twin Cities "to be lower than necessary" to meet the unregulated water competition, it would continue to have such jurisdiction. The "shall nots" would eliminate only the faulty standards which the ICC has been using in its review of reasonable minimum rates under section 1; they would not modify the standards which are used when the railroads require relief from the provisions of section 4. To be more explicit the ICC accepts the existence of competition as one type of "special case" which may justify fourth section relief, but it limits the measure of the relief which it grants in order to protect its basis, i. e., the existence of the competition itself. The ICC's power so to limit the character of fourth section relief would continue under the three "shall nots."

Therefore, in suggesting that the three "shall nots" would limit its ability to protect the shipping public from discrimination, the ICC appears to have erred in its presentation of the law. We repeat that no one wants to reduce the ICC's present powers in this respect, and if through some technicality, such a reduction can be spelled out-something which the ICC does not do in its statement of July 20-a revision of language should be possible.

CONCLUSION

In its "final observations" on the three "shall nots" the ICC suggests that they attempt "to treat symptoms and not the fundamental ills." The ICC goes on to mention "the constant erosion of traffic which properly should be handled by common carriers or regulated carriers" as constituting "the major source of the problems of public transportation." And then it proceeds to refer to several influences upon transportation which it deprecates including "the continual expansion of exempt commodities and exempt carriers, and the growth of private transportation."

And the ICC observes:

"The less traffic handled by public transportation the higher the rates will go and the less efficient for-hire service will become. *** The overwhelming majority of people still must rely on public transportation. In their interest and for the national security it must be kept sound."

We know of no more effective argument for the prompt enactment of the three "shall nots." For they would permit the one form of public transportation which is often disabled from asserting its competitive capabilities affirmatively to deal with the character of competition referred to by the ICC. If they are to survive,

every form of regulated transportation including the railroads must have this right.

The ICC may regard the existence of exempt and private transportation as the fundamental problem. This may or may not be true. But the railroads doubt that these conditions will soon change, and in the meantime they, as a leading form of public transportation, must have a chance to assert their competitive capabilities before it is too late. It is one thing for the railroads to go down after having had a chance to compete; it is another thing for them to go down with their hands tied.

APPENDIX A

That railroad rates were not to be regulated in the interest of water carriers or motor carriers-any more than water-carrier rates or motor-carrier rates were to be regulated in the interest of the railroads-is made clearer when statements made during the course of the debate in the Congress are recalled.

In its report on S. 2009 (which later became the Transportation Act of 1940) the Senate committee said (S. Rept. 433, 76th Cong., 1st sess., May 16, 1939, at pp. 2, 3):

"The ratemaking rule has been amended to expressly provide adequate safeguards for the public, and at the same time the Commission is directed in prescribing a rate to consider its effect on the movement of traffic only by the partic ular type of carrier for which the rate is prescribed. That is, in prescribing a rate for water carriers the Commission will not consider the effect of that rate on the movement of traffic by either rail or motor carriers *

"For many years it has been the view of keen students of the transportation problem that there has been no consistent national policy with respect thereto. One reason urged in support of that view is that while the principal haulers of traffic and passengers, the railroads, have long been strictly regulated-as have, since 1935, motor-trucks and buses engaged in interstate transportation-other forms of transportation are developed at public expense and without supervisory regulation. The net result of such a policy is inequality between various forms of transportation. *** It may be safely said that neither the strictly regulated railroads nor the motor-carrier operators favor the elimination of all regulation. Consequently the remaining remedy is to so extend regulation to competing forms of transportation, other than air, which only recently was placed under the Civil Aeronautics Authority, and retaining to each such lawful advantages as are inherent therein, so as to, as nearly as possible, equalize them and put them on a common footing, at least from a regulation standpoint. This is not for the purpose of favoring one form of transportation over another or seeking to put any form of transportation out of business; it is, as stated, simply to put them all on a common basis or common starting point in their sharp struggle for business. S. 2009 seeks to do this also. If one or more forms of transportation cannot survive under equality of regulation, they are not entitled to survive. This is not railroad philosophy; it is transportation philosophy. The problem is not a railroad problem, but is, as the Interstate Commerce Commission has said, a transportation problem."

In the course of the Senate debate the following colloquy took place between Senator Austin and Senator Wheeler, chairman of the Senate Committee on Interstate Commerce and manager of the bill:

"Mr. AUSTIN. So, if there is one type of common carrier which has a natural facility or a natural advantage over another, the bill does not require, indeed, I understand it not to permit, the extinguishment of the natural advantage in competition for the benefit of the competitor which has not the advantage. Am I correct in that interpretation?

"Mr. WHEELER. The Senator is entirely correct, and I thank him for his statement. In the ratemaking provision, and in three different places in the bill, we wrote in such a provision specifically so as to protect them" (84 Congressional Record 5883).

The following further statements made during the course of the debate in the Senate are enlightening:

"Mr. TRUMAN. Mr. President, the reason the discussion always gets back to the railroads is that the railroads handle about 67 percent of all the traffic. In 1926 they handled 75 percent of all the traffic. The present condition of the railroads is due to a great many things which are not necessary to be considered at this time. The railroads are absolutely essential to the welfare of the country, and they should not be discriminated against any more than any other method