Since its organization October 27, 1887, the Tennessee, Alabama & Georgia Railway has suffered three receiverships. Since the last receivership the property has undergone reconstruction to bring it up to the standards required to operate an efficient railroad largely due to its increased participation in through traffic.

Although this overhead traffic is of relatively little importance to the Southern Railway, it is needed by this protestant to maintain its good service to its local territory, and in order to provide the public with effective competition on through traffic.

HISTORICAL BACKGROUND

If the present atavistic policy of the Southern Railway System sets an example which other systems would follow Congress may be again confronted with the same sort of cannibalistic conditions which endangered the public interest served by short-line railroads, which it sought to curb by the Transportation Act of 1920. Therefore, it will be appropriate to take a look at that background:

In the earliest period of railroad development the railroads were generally all short lines and the general traffic volume was light and largely of a local character.

The development of most of the larger railroad systems has been by a process of combining together a considerable number of short lines. The Pennsylvania Railroad is said to be made up of a combination of some 500 smaller railroads, and the largest system in the South, the Southern Railway, was also formed from a combination of several hundred smaller railroads. All short-line railroads, however, have not been included in large systems.

The particular type of short line with which this is illustrated in this statement is concerned are the so-called short-line general purpose community railroads of varying lengths, most under 100 miles.

At the outset of the First World War the condition of the railroad industry had become so difficult that it became necessary for the Government to take same over for operation by the United States Railroad Administration. At that period the position of the independent short-line general-purpose community railroads also was precarious. While some trunk lines cherished some of these short lines for their "feeder" value, there also developed an adverse school of thought among some efficiency theorists that trunk roads would be better off economically if short lines had never been built. On that theory most short lines were abandoned by the Railroad Administration to "swim or sink" alone as best they could. That cavalier treatment by the United States Railroad Administration was supported by assertions that to retain them would be like "taking cripples into the Army," and that their rails could now be taken up and be sent to France to help win the war.

That theory led to so many overt acts detrimental to short-line general-purpose community railroads by trunk roads officials in the Railroad Administration that the welfare of the public served by them was seriously threatened. That situation was made known to Congress when Congress had under consideration the return of railroads to private ownership, and the problem of the weak and short-line railroads was uppermost in the enactment of the Transportation Act of 1920, by which Congress initiated a new policy of fostering care and guardianship for the railroad industry.

Among other things the Transportation Act of 1920 by section 208 (a) put a summary stop to some of the same sort of abuse then being perpetrated against the short lines as is now being attempted by the Southern Railway by the fol lowing provisions:

"(a) All rates, fares, and charges, and all classifications, regulations, and practices, in any wise changing, affecting, or determining, any part of the aggregate of rates, fares, or charges, or the value of the service rendered, which on February 29, 1920, are in effect on the lines of carriers subject to the Interstate Commerce Act, shall continue in force and effect until thereafter changed by State or Federal authority, respectively, or pursuant to authority of law; but prior to September 1, 1920, no such rate, fare, or charge shall be reduced, and no such classification, regulation, or practice shall be reduced, and no such classi fication, regulation, or practice shall be changed in such manner as to reduce any such rate, fare, or charge, unless such reduction or change is approved by the Commission.

"(b) All divisions of joint rates, fares, or charges, which on February 29, 1920, are in effect between the lines of carriers subject to the Interstate Commerce

Act, shall continue in force and effect until thereafter changed by mutual agreement between the interested carriers or by State or Federal authorities, respectively."

It also took other constructive measures, prominent among which were the two following:

First: In order for needy lines to get a larger share of the railroad revenue a "rule for divisions" was incorporated by the underscored words in paragraph 6 of section 15 of the Interstate Commerce Act, reading as follows:

"Whenever, after full hearing upon complaint or upon its own initiative, the Commission is of opinion that the divisions of joint rates, fares, or charges, applicable to the transportation of passengers or property, are or will be unjust, unreasonable, inequitable, or unduly preferential or prejudicial as between the carriers parties thereto (whether agreed upon by such carriers, or any of them, or otherwise established), the Commission shall by order prescribe the just, reasonable, and equitable divisions thereof to be received by the several carriers, and in cases where the joint rates, fare, or charge was established pursuant to a finding or order of the Commission and the divisions thereof are found by it to have been unjust, unreasonable, or inequitable, or unduly preferential or prejudicial, the Commission may also by order determine what (for the period subsequent to the filing of the complaint or petition or the making of the order of investigation) would have been the just, reasonable, and equitable divisions thereof to be received by the several carriers, and require adjustment to be made in accordance therewith. In so prescribing and determining the divisions of joint rates, fares, and charges, the Commission shall give due consideration, among other things, to the efficiency with which the carriers concerned are operated, the amount of revenue required to pay their respective operating expenses, taxes, and a fair return on their railway property held for and used in the service of transportation, and the importance to the public of the transportation services of such carriers; and also whether any particular participating carrier is an originating, intermediate, or delivering line, and any other fact or circumstance which would ordinarily, without regard to the mileage haul, entitle one carrier to a greater or less proportion than another carrier of the joint rate, fare or charge." [Italics supplied.]

Second. In order that there might be more joint rates to divide under the new rule for divisions the Transportation Act of 1920 amended paragraph 4 of section 1 to read as follows:

"THE DUTY OF THE CARRIERS

"It shall be the duty of every common carrier subject to this act engaged in the transportation of passengers or property to provide and furnish such transportation upon reasonable request therefor, and to establish through routes and just and reasonable rates, fares, and charges applicable thereto, and to provide reasonable facilities for operating through routes and to make reasonable rules and regulations with respect to the operation of through routes, and providing for reasonable compensation to those entitled thereto; and in case of joint rates, fares, or charges, to establish just, reasonable, and equitable divisions thereof as between the carriers subject to this act participating therein which shall not unduly prefer or prejudice any of such participating carriers." Also, it amended paragraph 3 of section 15 to read as follows:

"THE POWER OF THE COMMISSION

"The Commission may, and it shall whenever deemed by it to be necessary or desirable in the public interest, after full hearing upon complaint or upon its own initiative without a complaint, establish through routes, joint classifications, and joint rates, fares, or charges, applicable to the transportation of passengers or property, or the maxima or minima, or maxima and minima, to be charged (or, in the case of a through route where one of the carriers is a water line, the maximum rates, fares, and charges applicable thereto), and the divisions of such rates, fares, or charges as hereinafter provided, and the terms and conditions under which such through routes shall be operated; ***”

Congress might well have stopped with said paragraph 3 of section 15, but, nevertheless, it added, in paragraph 4 of said section 15, a limitation on the power of the Commission as follows:

"In establishing any such through route the Commission shall not (except as provided in section 3, and except where one of the carriers is a water line),

require any carrier by railroad, without its consent, to embrace in such route substantially less than the entire length of its railroad and of any intermediate railroad operated in conjunction and under a common management or control therewith, which lies between the termini of such proposed through route, unless such inclusion of lines would make the through route unreasonably long as compared with another practicable through route which would otherwise be established: * * *."

This litigation has been the source of such subsequent litigation and has so interfered with the broader intent of Congress to foster the weaker carriers that both the Interstate Commerce Commission, repeatedly, and the Federal Coordinator of Transportation recommended its repeal.

Notwithstanding those recommendations when the Transportation Act of 1940 was under consideration the opposition of the trunk roads and the Association of American Railroads was so effective that not only was the limitation of the Commission's power retained, but there was added (in conference) an ill-conceived further limitation that "No through route and joint rates applicable thereto shall be established for the purpose of assisting any carrier that would participate therein to meet its financial needs."

It may be appropriate in this connection to refer to the fact that the Association of American Railroads in a statement dated June 14, 1956, opposed as follows the changes recommended by the American Short Line Railroad Association:

First. With respect to changes in paragraph 3 of section 15 (4) :

"The proposal contained in section 7 (b) of H. R. 6141 would terminate the Commission's authority to consider proposed cancellations on its suspension docket and to decide whether hearings are necessary or not. A hearing in every case would be mandatory. This would logjam the whole procedure.

"Many tariffs and tariff supplements are being filed, almost daily, in which through routes are canceled, but seldom is this done with the consent of all participating carriers. In many cases consent to cancel is withheld as a matter of routine for reasons which may or may not relate to the public interest. Under the present law, whether a hearing is justified or not can be decided when the Commission considers whether to suspend the tariff, and it may of course decide against suspension but institute an investigation. Under the proposed change this flexible procedure for protecting the public interest would be eliminated and a rigid requirement for hearings would be substituted in every case where there is lack of agreement on the part of all of the participating carriers.

"The Association of American Railroads is strongly opposed to this suggested change in procedure for determining whether or not the cancellation of through routes is 'consistent with the public interest.'"

If there are some so-called "paper" or merely theoretical routes which could be closed off without substantial injury, consent of all the carriers participating therein doubtless can be readily and easily obtained, and no logjam, would be involved.

Where any participating carrier would refuses its consent in any "border line" case it would have good reasons which certainly should be heard before rather than after new restrictions have been filed. The number of such instances will not be sufficient to produce a logjam. On the other hand, however, if there should be a logjam that would show there is need for the Commission to be empowered to protect the public interest as is well illustrated by the examples I have given.

Second. With respect to the proposed excision from paragraph 4 of section 15 (4):

"Mr. Hood also suggested far-reaching amendment of section 15 (4) of the Interstate Commerce Act. That section sets forth limiting conditions for the prescription of through routes by the Interstate Commerce Commission. No amendment of section 15 (4) was suggested in the report of the Presidential Advisory Committee on Transport Policy and Organization, or is any amendment thereof contemplated by the pending bills in their present form.

"Thus there would be removed from section 15 (4) all the presently effective limitations on the Commission's power to prescribe through routes, limitations that have a long history of careful consideration on the part of Congress. There would be left in force only the provisions of that section which empower the Commission to establish temporary through routes in times of emergency.

"The Association of American Railroads opposes this proposed change in the law." It will be noted that no other reasons are given to support the opposition of the Association of American Railroads. Certainly the recommendations of the late Federal Coordinator of Transportation and the Interstate Commerce Commission should carry more weight.

DOCUMENTARY SUBSTANTIATION

Substantiation in more comprehensive detail will be found in the following documents:

In connection with the Gainesville Midland (I. and S. Docket 6415): 1. Copy of protest of the Gainesville Midland (May 19, 1955).

2. Copy of the Southern Railway's Statement of Facts and Argument (September 2, 1955).

3. Copy of the Gainesville Midland's Answering Statement of Facts and Argument (November 14, 1955).

4. Copy of intervening statement of Facts and Argument by Georgia Public Service Commission (November 2, 1955).

5. Copy of decision of Interstate Commerce Commission (March 5, 1956). 6. Copy of Reply of Gainesville Midland in Opposition to Southern Railway's Petition for Reconsideration (May 29, 1956).

COMMENT

As one of its grounds of claimed justification (Document 2, p. 4) the Southern Railway asserts it is making a diligent effort to improve its efficiency by expenditures for "modern pushbutton yards" at various strategic points. In the Gainesville Midland's Answering Statement of Facts and Argument (Document 3, pp. 18, 19, and 20) it is shown how this ground is irrelevant and immaterial.

As another ground of claimed justification the Southern asserts (Document 2, p. 3) that its average haul is too low. In the Gainesville Midland's Answering Statement of Facts and Argument (Document 3, pp. 11, 12, 13, 14, and 15) the lack of merit in this contention is shown beyond successful contradiction.

As still another ground of claimed justification the Southern asserts (Document 2, pp. 22, 23, 24, 25, 26, 27, 28, 29, 30) that the Commission has no power in a suspension proceeding to order restrictions canceled via routes which it could not have required to be established in the first instance. In the Gainesville Midland's Reply of Protestant to Respondents' Petition for Reconsideration (Document 3, p. 1, et seq. of the foreword, and p. 18 et seq. under the heading "National Transportation Policy" the Southern Railway's contention is completely refuted, especially by references to the decision of the Supreme Court in U. S. v. Great Northern (343 U. S. 562, 576)).

Also, the Southern seems to contend that the result of its action is a de minimis proposition anyhow. Discussing a movement of 14 cars in the first 5 months of 1955 (Document 2, pp. 13 and 14) it argues that the Gainesville Midland would have earned only $480.20 thereon, and the Southern only $1,362.20. But the Southern could have earned $3,645.60 if that traffic had moved via its long haul. In the Gainesville Midland's Answering Statement of Facts and Argument (Document 3, pp. 20, 21, 22) it is clearly shown that not only the Southern's contention is wholly "iffy" but as a practical proposition it would lose this revenue entirely.

In connection with Georgia and Florida (I. and S. Docket 6392, Salt Cake from Bessemer City, N. C., to Foley, Fla.) :

7. Copy of Georgia & Florida's protest (April 22, 1955).

8. Copy of Georgia & Florida's answer (August 18, 1955).

9. Copy of the decision of the Interstate Commerce Commission (June 4, 1956). In connection with the Tennessee, Alabama & Georgia Railway (I. & S. 6413, cancellation of routing):

10. Copy of TA and G protest (May 6, 1955).

In connection with the history of sections 15 (3) and 15 (4):

11. Testimony of short line railroads before the House committee preceding the Transportation Act of 1920.

12. Copy of the Transportation Act of 1920 with interpolations demonstrating the intent of Congress with respect to the national policy respecting short line railroads.

13. Copy of extracts from report in 1937 of the section of research to the Federal Coordinator of Transportation on the problem of short line railroads. 14. Copy of the testimony of the late Joseph B. Eastman, on December 16, 1937, for the Interstate Commerce Commission on Short Hauls and Through Routes before a subcommittee of the House Committee on Interstate and Foreign Commerce.

15. Copy of extracts showing recommendation by the Interstate Commerce Commission to Congress in its annual reports of 1929, 1930, 1931, 1932, 1933, 1934, 1935, 1936, and 1937, with respect to the removal of limitations on the establishment of through routes.

(The documents referred to have been placed in the committee files.)