the evils toward which the antitrust laws are aimed than can be found in any unregulated industries. That protection is in no way weakened or impaired by the Reed-Bulwinkle Act.

If the Reed-Bulwinkle Act deprived any interests of needed protection, obviously those interests would be the ones which are concerned in and with transportation; that is to say, shippers, carriers, and governmental bodies charged with responsibilities with respect to transportion. It can be taken for granted that these interests are the best judges of what protection they need.

Do the shippers think that they are deprived of any needed protection by the Reed-Bulwinkle Act? The answer is, of course, "No." The shippers are virtually unanimous in supporting the act.

Are the trucks fearful that they might be deprived of needed protection by agreements authorized by the act? It is clear that they are not because they also are unanimously in favor of the act.

Are some railroads fearful that the Reed-Bulwinkle Act would open the door to their injury through agreements between other railroads? Again the answer is "No," because all railroads, large and small, are in favor of the act.

The CHAIRMAN. Is the Chesapeake & Ohio in favor of it?

Mr. FORT. Yes. I cannot speak for the Chesapeake & Ohio Railroad. That is a class 1 railroad I cannot speak for, but they have signed the agreement.

The CHAIRMAN. Which agreement?

Mr. FORT. The agreement which is before the Commission for approval under the Reed-Bulwinkle Act, and I find here in a publication called Railway Progress of June 1948, which is published by the Federation for Railway Progress, Robert R. Young, chairman, Cleveland, Ohio-that is the same Young who was the chairman of the board of the C. & O.-and in that publication I find this statement:

The revised and improved Bulwinkle bill which passed the House last month was approved and endorsed by the executive council of the federation at a meeting held in Cleveland in May 1948.

The CHAIRMAN. What is the federation that you refer to?

Mr. FORT. This is the Federation for Railway Progress, of which Robert R. Young is shown as chairman. Robert R. Young was the chairman of the C. & O. also.

Mr. KEATING. Is the C. & O. a member of your association?

Mr. FORT. Well, it is and it is not. It participates in most of our activities, but not in all. It does not participate in our advertising activities. It does not participate in the activites of our law department. There may be some others in which it does not participate, but very generally it does.

The CHAIRMAN. The Chesapeake & Ohio withdrew from your association in 1946; did it not?

Mr. FORT. In the same sense that I just explained to Mr. Keating. It withdrew from some of our activities, Mr. Chairman, but not from all. It withdrew from the activities of our advertising people and from certain others.

The CHAIRMAN. Does it pay dues?

Mr. FORT. Well, it pays about, as I recall, something like 85 percent of the full amount that it would pay if it participated in all of the activities.

The CHAIRMAN. Is Nickel Plate a member of your association? Mr. FORT. At one time it withdrew from certain activities the same way as the C. & O. Whether this situation has changed, I do not know at the moment.

The CHAIRMAN. The Pere Marquette?

Mr. FORT. That is part of the C. & O.; is it not? It is now a part of the C. & O.

The CHAIRMAN. Did not those three railroads-Pere Marquette may be a part of the C. & O., I do not know-withdraw from your association in 1936? They charged:

The association has now lobbied for 3 years for legislation to exempt it from the antitrust laws, when its money and energies might better have gone to improve equipment and service, to fight for the bills in rail securities which are being unjustifiably squeezed out in reorganizations, and to preserve a fair balance between wages and rates.

Bluntly, we think the quarter of a million dollars a year we have been paying in Association of American Railroads dues can be better spent by ourselves.

Mr. FORT. Well, I think the story is not quite all there. As a matter of fact, the Bulwinkle bill, or the so-called Bulwinkle bill as it was being considered at that time, went beyond the scope of the bill as finally enacted, and had to do with certain matters of service as well as matters of rates. The C. & O. took the position that the bill went too far.

Now, as the bill was finally adopted, I gather from this article that I read to you, and from the fact that the C. & O. has joined in an application, that they think it is good law the way it was passed. Moreover, their general counsel appeared on the Senate side at a hearing at one time; and, if I remember correctly what he said, he said he thought that rate conferences were absolutely necessary and, if the bill was restricted in that way, that it would be all right. Now, on the matter of the three railroads drawing out of the association, I do not know whether I made myself clear or not.

They never drew out of the association. We have many activities, such as car-service activities, accounting activities, research activities, and they continued their participation in all the activities except the advertising that we carried on, and representation through the law department and perhaps certain others. They continued to pay in money. I do not remember exactly what it was, but I think it was 85 percent of what they would have paid in if they had not withdrawn from those activities to which I have referred.

Now, that was true of the Pere Marquette and the C. & O. I do not recall about the Nickel Plate, and I do not know whether the Nickel Plate is now a full member in every respect or not. I do not know about that, but my understanding is that the C. & O. and the Pere Marquette is a part of it, still pays only about 85 percent of what it would pay if it were what you might call a complete member in every respect.

Mr. BRYSON. They have limited membership?

Mr. FORT. Yes; in that sense of the word. That is about the way that stands.

Mr. KEATING. Are there other class-1 railroads that are limited members that way?

Mr. FORT. Not any that I recall now. I will be glad to look into it. I do not think there are any more; no, sir.

I ask the question: Do governmental regulatory bodies, Federal or State, fear that the Reed-Bulwinkle Act will weaken the effective regulation of transportation? On the contrary, they think such regulation would be more effective. They are strongly in favor of the act. To bring this branch of the discussion to a conclusion, it might be asked, "Who is injured by the Reed-Bulwinkle Act?" There can be only one answer, I think, "No one."

No suggestion can seriously be put forward that the conference method of considering rates which the Commission is authorized to approve under the Reed-Bulwinkle Act tends to bring about excessive rates. If any such suggestion should be made, the factual reply is unmistakable and conclusive. The conference method has been in effect, as I have repeatedly said, for a great many years, including the entire period subsequent to the First World War. Have railroad earnings been excessive during the period since the First World War? Let us examine them:

Rate of return on net investment on railways of class 1 in the United States

The railroad rate of return for the year 1949, as nearly as we can estimate it at this time-and we think we can estimate pretty nearlywill not exceed 22 percent. Assuredly, the earnings to which I have called attention do not reflect excessive or monopolistic rates.

The difficulties with which the railroad industry is now confronted are too well known to require comment. They are due, among other things, to the tremendous increases in the cost of railroad operation, and to the widespread and ever-growing competition from other forms of transportation, some of which at least are heavily subsidized. It is true that the public may well find cause for serious concern in the level of railroad earnings-not, however, because it is too high but because it is too low. Fair and reasonable earnings in the railroad industry are essential to the preservation of a healthy national transportation system adequate to meet the needs of commerce and the requirements of national defense. The vital part which the railroad system plays in our national life was well stated in the report (1933) of the National Transportation Committee, composed of Calvin Coolidge, Chairman; Bernard M. Baruch, Alfred E. Smith, Alexander Legge, and Clark Howell. I quote from that report:

At the foundation of our system of communication is the railroad web. It is the most important single element in our social and economic life. * Both security and material welfare are involved in its continued efficient existThe public interest is deeper than its investment or its need of good service. We are addressing a matter of national concern of the first magnitude. The railroad system must be continued and its efficiency preserved because of national necessity-economic, social, and defensive.

ence.

6. The act does not establish a precedent which weakens the antitrust laws; it follows well-established precedent which recognizes the special situation of regulated carriers.

In some quarters it has been suggested that the Reed-Bulwinkle Act established a precedent which might weaken enforcement of the antitrust laws.

It is perfectly clear that such a suggestion will not bear examination and investigation. The fact is the act does not set a precedent but follows one already well established which recognizes the special situation of regulated transportation insofar as the antitrust laws are concerned. The authority which is given to the Interstate Commerce Commission under the Reed-Bulwinkle Act with respect to railroads and other carriers subject to that act is similar to but much less in extent than, that which has long been given to Civil Aeronautics Board concerning air carriers and to the Maritime Commission with respect to water carriers.

I refer your committee to section 412 of the Civil Aeronautics Act of 1938, authorizing the Civil Aeronautics Board to approve agreements between air carriers which are found by the Board to be "not inconsistent with the public interest" and not in conflict with the Civil Aeronautics Act. Section 414 of that act provides that such agreements shall not be regarded as violative of the antitrust laws. The agreements covered by the Civil Aeronautics Act are much broader in scope than those covered by the Reed-Bulwinkle Act. The Civil Aeronautics Act covers agreements

for pooling or apportioning earnings, losses, traffic, service or equipment, or relating to the establishment of transportation rates, fares, charges, or classifications, or for preserving and improving safety, economy, and efficiency of operation, or for controlling, regulating, preventing, or otherwise eliminating destructive, oppressive, or wasteful competition, or for regulating stops, schedules, and character of service, or for other cooperative working arrangements. You will notice how much broader that is than the Reed-Bulwinkle Act.

I also refer your committee to section 15 of the Shipping Act of 1916 which provides for approval by the Maritime Commission of agreements between carriers subject to that act and provides further that such approved agreements are not subject to the antitrust laws. As in the case of Civil Aeronautics Act, the provisions of the Shipping Act cover a much wider range of agreements than those covered by the Reed-Bulwinkle Act. The agreements covered by the Shipping Act are described as those

fixing or regulating transportation rates or fares; giving or receiving special rates, accommodations, or other special privileges or advantages; controlling, regulating, preventing or destroying competition; pooling or apportioning earnings, losses, or traffic; allotting ports or restricting or otherwise regulating the number and character of sailings between ports; limiting or regulating in any way the volume or character of freight or passenger traffic to be carried; or in any manner providing for an exclusive, preferential, or cooperative working arrangement.

As explained by Commissioner Aitchison of the Interstate Commerce Commission at the hearings before the Senate Committee on Interstate and Foreign Commerce on H. R. 2536, at page 1212, section 15 of the Shipping Act was effective not only with respect to water carriers engaged in foreign commerce but also to many engaged in

domestic commerce. He stated that a great many contracts between domestic water carriers which had been approved by the Maritime Commission were still in effect.

Mr. KEATING. Of course, we have had some testimony here in opposition to the Shipping Act, saying that it should be amended, taking out some of the abuses which were claimed to exist under that act.

Mr. FORT. I understood that testimony was directed to the foreign conferences; was it not?

The CHAIRMAN. No. It went further. The counsel for the Isbrandtsen, whose testimony I have before me, says:

Such immunity, undoubtedly intended by Congress to be quite limited, has been exploited by the so-called steamship "conference," which is in reality "international cartels."

Another section of his testimony reads as follows:

You and your committee are undoubtedly aware that some of the practices of these cartels, especially the exclusive patronage contract-rate system

and in that he referred to the fact that, if you are a shipper and make a contract with one of the lines to carry your goods, you are precluded from making any other agreement with any other line.

Mr. KEATING. It does not have to do with domestic shippers.

The CHAIRMAN. Well, it would not refer to coastwise shipping. It would refer to oceanic transportation.

Mr. FORT. Mr. Chairman, I had a notion that that criticism was directed largely to the domination of those conferences by foreign interests in foreign shipping, but however that might be, I hold no brief for the breadth of that language in the Shipping Act. It may be too broad. The practices under it may be too broad.

As I say, the Bulwinkle Act has no such breadth as that. I would be glad to read that testimony though, and I will. I want to call your attention to another precedent, however.

Your committee will not overlook the fact that another important precedent for the Reed-Bulwinkle Act is to be found in the Interstate Commerce Act itself. Section 5 of that act gives to the Interstate Commerce Commission authority to approve railroad consolidations and mergers, as well as the pooling of traffic, service and earnings, upon a finding in accordance with the standards there stated; and provides further that the approved transactions shall not be subject to the prohibitions of the antitrust laws. Thus, before the enactment of the Reed-Bulwinkle Act, the Interstate Commerce Commission was already entrusted with much more far-reaching powers concerning application of the antitrust laws to railroads than those given to it by that act, and I do not believe there has ever been any dissatisfaction with those merger and pooling provisions of the Interstate Commerce Act. If there has been any, I never have heard it.

Coming to the next point:

7. Developments since the enactment of the statute: Applications filed with the Commnission and the decision of the Commission under the so-called Western Application.

As I stated at the outset of my testimony, there has been no development or experience under the Reed-Bulwinkle Act which would tend to throw the slightest doubt upon the soundness or wisdom of that legislation. In fact, such experience as is available emphasizes the necessity for the legislation.