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addition of the toll cost to the three added costs already discussed would probably destroy the use of the rivers, and we are constrained to believe that this is the result most tenaciously sought by the railroads.

That concludes my discussion of tolls.

The CHAIRMAN. Very well. You will return tomorrow morning! Mr. BARRETT. Yes, Mr. Chairman.

The CHAIRMAN. The committee will stand adjourned until 10 o'clock tomorrow morning.

(Thereupon, at 11:55 a. m., the committee adjourned to meet at 10 a. m. the following morning, Friday, March 10, 1939.)

TO REDISTRIBUTE THE FUNCTIONS OF THE INTERSTATE

COMMERCE COMMISSION

FRIDAY, MARCH 10, 1939

HOUSE OF REPRESENTATIVES,

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D. C.

The committee met at 10 a. m., in the hearing room, New House Office Building, Hon. Clarence F. Lea (chairman) presiding.

The CHAIRMAN. The committee will please be in order. Without objection we will let Mr. Barrett proceed without interruption until he has completed his main statement. Mr. Barrett advises me that it is agreeable to him for the committee to ask him questions, but believes that he could proceed in a more orderly manner if he is permitted to complete his statement.

STATEMENT OF 0. S. BARRETT-Resumed

Mr. BARRETT. I thank you, Mr. Chairman.

Mr. Chairman and gentlemen of the committee: Yesterday the burden of my statement had to do with the cost that would be added to the carriers on the Mississippi River system by virtue of the regulations suggested in the Lea bill, and the Committee of Six's bill, and, adding thereto, the costs suggested by the imposition of tolls on the Mississippi River system operations.

ADDED COSTS WILL LIMIT AND DESTROY CARRIERS' BUSINESS

Added costs will put the carrier on the horns of a dilemma. Naturally, he will attempt to pass them on to the shipper, thus largely destroying the economy of cheap water transportation. On the other hand, the raising of rates to cover costs will, in most cases, deprive the carrier of his freight and the revenue derived therefrom, and the shipper of the opportunity of using the water services.

Thus under the proposed regulation the water carrier faces destruction of his business.

Mr. Eastman admitted that rate increase would result.
In his report, Mr. Eastman said:

The control exercised over the common and contract carriers will no doubt mean the stabilization of rates on a somewhat higher level than has obtained, on an average, in recent years.

Joint rail and water rates have been under the Interstate Commerce Commission for 20 years. By Commission orders they have been stabilized at from 80 to 95 percent of the applicable rail rates.

The differentially constructed rates have no relation whatever to the costs of the water movement which are much less, their relation being only to the rail rates.

The proposed regulation would place under the Commission authority the port-to-port water rates. It seems reasonable to expect that the time-honored formula for constructing joint rates would be used as a precedent, and that port-to-port rates would be related to rail rates, perhaps on an 80 to 95 percent basis. This expectation is emphasized by Judge Fletcher's advocacy, on February 23, before this committee, that water rates be related to rail rates.

Better comprehension of the probable effect on rates of this regulation may be had by a close examination of Commission rulings under the Motor Carrier Act, the provisions of which are substantially the same as that of the Committee of Six bill.

A perusal of these reports would lead to the supposition that the shipper existed for the benefit of the carrier rather than that the carrier existed to serve the shipper.

Higher rates will be necessitated-among other causes-by the high costs of operation which must be passed on to the shipper, thus largely destroying the economy of water transportation. The higher rates, in turn, set up a chain of results beginning with higher prices to consumers, resulting in less goods being bought, resulting further in less goods being produced and transported, which again results in higher unit costs, and the spiral starts over again.

The higher costs and higher rates resulting from this regulatory legislation, should it be enacted, will therefore harm

(1) The consumer because of higher costs of materials.

(2) The transporter because of higher costs divided over less traffic.

(3) The producer because of smaller markets and less to produce. The net effect appears to be that no public good will be served, but that all elements of the population will be injured or penalized.

PUTS WATER CARRIERS IN UNCERTAIN POSITION

One provision of the Committee of Six Bill (sec. 43 (3)) would grant the Commission almost unlimited discretion, including the power from time to time to amend the terms, conditions, and limitations of certificates of common carriers after the certificate had been issued. This provision is also included in the Lea bill in section 27 (a). Another provision (sec. 43 (2)) would grant substantially similar powers over issued permits of contract carriers. Thus no carrier could feel secure and no shipper by water could predi cate sales or purchases on water transportation without reasonable doubts that the traffic might be precluded by some order of the Commission. Is it reasonable to conclude that business could be transacted under such insecure conditions?

POWER TO REVOKE CERTIFICATES

In the Eastman bills prior to S. 1400 (which was the WheelerRamspeck bill of the 75th Cong.), there was a provision authoriz ing the Commission to suspend or revoke certificates and permits for

willful failure to comply with any provision of the legislation or with any lawful order, and so forth, of the Commission. Those provisions were eliminated from S. 1400.

In the Lea bill we find section 28 setting up the same authority to suspend or revoke certificates. In effect this provision would indicate a possible distrust in the ability of the courts to punish recreant carriers. It is certainly unwise to authorize the Commission administering such legislation to use such great power in enforcing its orders. That power would place the destiny of the carriers completely in the hands of the Commission, and his business on too tenuous a thread to attract patronage of shippers. It gives point to the belief that the final result of the legislation would be the complete destruction of water carriers.

While in theory it seems reasonable, in practice the filing of schedules of minimum rates and charges by contract carriers is impossible to most of them since they operate on an anywhere-for-hire basis in response to the demands of shippers and have no such schedules. It would be practically impossible to formulate them.

Last night we canvassed the situation and arrived at an estimate that the for-hire services are approximately 80 percent of the services on the Mississippi River system.

The provision of the Committee of Six bill dealing with this matter, section 8, would give the Commission the option of compelling the filing of "complete and exact copies of every contract, charter agreement, or undertaking" which must also be kept open for public inspection. On the other hand another section of the bill, section 15, in specific, exact, and tiresome detail, makes it unlawful for a carrier to disclose or permit to be disclosed any information prejudicial to shippers. Thus, for the protection of the public, a given action is made unlawful for a carrier in one section of the bill, and, in another section of the same bill, the same action by all contract carriers may be required by the Commission. It needs no extended discourse to make it apparent that informed shippers would not deal with contract carriers while such a threat hangs over them.

This much is clear in reference to the water carrier provisions of the Lea bill and the bill proposed by the Committee of Six: (1) that the costs of the water carriers would be greatly increased, (2) that the increased costs would necessitate higher rates, (3) that the administration of the legislation by the Interstate Commerce Commission would cause further increases in rates which would very likely be differentially construed on the basis of railroad rates, and (4) that the higher rates together with the delays and uncertainties involved would drive business away from the water carriers, thus depriving them of revenue to meet the higher costs.

The outcome of the matter would be that all of the water carriers would be injured, many of them driven from business, and the public would be deprived of the presently useful and beneficial services now rendered by these carriers. As a matter of fact, it has been freely said, even in the Halls of this Congress, that this legislation is designed to crush and destroy carriers by water and by highway. Whether that is the design of the sponsors or not, we believe sincerely that our destruction would result from the enactment of this legislation. It is significant that the transportation conference of the

United States Chamber of Commerce did not recommend this regulation or tolls, although it considered the subjects. We therefore call upon you to defeat it here in committee.

THE RAILROAD SITUATION IS NO REASON FOR WATER CARRIER REGULATION

Mr. Eastman, when he was Federal Coordinator of Transportation, laid down this principle: "It is clear that no regulation or restric tions should be imposed upon any form of transportation merely for the purpose of benefiting some other form of transportation;" and "We cannot properly help the railroads by depriving others of their just dues." These were not given in extemporaneous oral statements, but were stated and restated in his reports, therefore must be believed to have been very carefully weighed and considered. They enunciate a fair policy from which the Coordinator and the Commission immediately departed by advocating the regulation of water carriers on the sole excuse that the railroads were in a bad way and needed help.

In July of 1935, when the Water Carrier bill was being debated on the floor of the United States Senate, the only reason advanced for the enactment of the legislation was the fact that the railroads were regulated. There is, and can be, no other reason for the imposition of this limiting and restrictive legislation on the commerce, industry, and agriculture of the Mississippi Valley. Although it is neither a logical, just, nor convincing reason, that proposition should be examined, because this committee is the one having jurisdiction over the railroads, and is in a position for constructive action.

According to the best estimate obtainable, the inland rivers and canals transport about 3.2 percent of the ton-mile traffic of the country, nearly all of it being low-tariff freight. As against 3.2 percent of the traffic carried by boat lines, private, contract or common, the railroads are suffering from a 30 to 50 percent decrease in their traffic due to the depression. Elementary arithmetic produces the conclusion that the water carriers are not the cause of the railroad problem, and that their destruction would add much less than 3.2 percent to the revenues of the railroads.

The answer to the railroad situation is not regulation and restric tion of water carriers, but a house cleaning inside of the railroads themselves. They resent the accusation that a top-heavy, fundeddebt structure is one of their big troubles, but it is true that the roads now in default of their obligations labor under funded debts substantially larger in proportion to total capital than the average of all roads. It is likewise true that Mr. Eastman stated to the Senate Committee on Interstate Commerce when hearings were first started on these regulatory bills that the Commission did not think it was proper and that the Commission had not required the roads to set up sinking funds to retire their funded bebts. In view of the fact that this particular policy has been reversed, it may be concluded that the former policy was a mistake, and that the error is to no small degree responsible for the inability of many of the roads to meet fixed charges in a depression.

We are told by the railroads that they have to earn 2 percent on their entire investment in order to be able to pay interest charges. I submit that this is too large to be depended upon. Certainly indus

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