Now I will tell you what I think about it: I think the Commission has gone way beyond anything that was contemplated when they wrote the Shreveport provision into the Interstate Commerce Act. There you had a case where you had discrimination as between localities and persons within the State, on the basis of intrastate rates, and outside the State as to interstate rates.

That ought to be in the act, but when you wrote this nebulous clause in there that refers to discrimination or preference against interstate commerce, the thing has been stretched until it is, as I told you a while ago, almost automatic. The State commissions have requested Congressman Flynt to introduce a bill that would strike that provision of section 13 and that bill, H. R. 7672, is before your committee now. We were hoping you would hold hearings on that instead of taking more powers away from us.

So we certainly vigorously opposed any further invasion under section 13 of State regulatory power.

I hope I have not taken too much time, gentlemen, but I appreciate this opportunity to come before you and present the position of the State commissions and my own opinion too where I have so indicated. Thank you, sir.

Mr. ROBERTS. Thank you, Mr. McDonald.

The Chair appreciates your statement.

I think it has been very enlightening to the committee and it has been well presented.

The Chair would defer to the gentleman from Georgia, Mr. Flynt. Mr. FLYNT. Thank you, Mr. Chairman.

Mr. McDonald, a few moments ago you inquired about the Utah case, a synopsis memorandum of it has been handed to me, and if there is no objection I would like to incorporate these few remarks about it into the record.

Mr. ROBERTS. Without objection, so ordered.

Mr. FLYNT (reading):

In the Utah rate case, the Court majority in a 5 to 4 decision found there was no positive evidence to back up the ICC's conclusion that prevailing intrastate rates were abnormally low and should be raised.

The Interstate Commerce Commission had allowed the higher Utah rates to go into effect 2 years ago so that they would be in line with a 15-percent general freight rate increase granted railroads on interstate traffic in 1952.

The Commission has the power to order new intrastate rates when it finds they unjustly discriminate against interstate commerce.

The Utah Public Service Commission challenged the Interstate Commerce Commission's ruling but lost in Federal district court.

The 3-judge court had ruled that 9 railroads serving Utah were losing nearly $1.9 billion a year because of inadequate rates.

In a 5 to 4 decision the Supreme Court struck down this ruling and sent the case back to the Interstate Commerce Commission.

Justices Frankfurter, Burton, Harlan, and Whittaker dissented.

In the Minnesota case however, the Supreme Court unanimously affirmed the legality of higher rates charged by railroads for hauling soft coal within the State's borders.

There was no written opinion in the Minnesota case.

Apparently the court found the Minnesota rate raise was justified by the evidence whereas the increased rates in Utah were not justified by the evidence. Mr. McDONALD. Mr. Flynt, let me just say this: I am not familiar with that case. Obviously from what you have said there it involved only certain commodities.

It has been a very rare thing that the State commission has refused to go along with the Interstate Commerce Commission on practically all of its orders.

But what they do, they have some commodity, we have had in Georgia, some commodity that we felt we knew more about than the Interstate Commerce Commission and we have exempted that particular commodity from the increases that have been allowed by the Interstate Commerce Commission.

The Commission itself, the Interstate Commerce Commission, picks out certain commodities and exempts them. Then when they pass the order the railroads come along, as I told you a while ago the railroads are the people who make the rates in this country-they come along and exempt certain commodities. But if we have a commodity, for instance, shale in Georgia that moves to a local clay pit, and we exempt that, they file a 13th section case against us, and say "No, you cannot do that, that is a burden on interstate commerce." That is what you have got there, is is just some local commodity and I think some discretion should be left to the State commissions.

That is why I think our bill, H. R. 7672, ought to be passed.

If there is any discrimination as between individuals in this State or individuals in that State or another State or communities in one and communities in another, then that should be corrected.

But just to say because we exempt a commodity within our State for some good local reason that it should be knocked out as a burden, is not right.

Mr. FLYNT. Mr. McDonald, you have expressed today the opposition of the National Association of Railroads and Utilities Commissioners to the proposition that the Interstate Commerce Commission has authority over train service abandonment.

Mr. McDONALD. Yes, sir; just as vigorously as I know how.

Mr. FLYNT. Is your opposition equally vigorous regarding the proposal that the Interstate Commerce Commission investigate intrastate rates and pass on them at the same time as it passes on interstate? Mr. McDONALD. Just as vigorous, sir.

Mr. FLYNT. That speaks not only for you but also for your National Association of Railroad and Utilities Commissioners?

Mr. McDONALD. That is so; every State regulatory commission in this country.

Sections 3 and 4 that amend section 13 of the act.

Mr. FLYNT. Sections 3 and 4?

Mr. McDONALD. Yes.

Mr. FLYNT. Thank you, Mr. Chairman.

Mr. ROBERTS. The gentleman from Maine.

The gentleman from California.

The gentleman from Kansas.

Mr. AVERY. Mr. Chairman, I would like to ask just one question of Mr. McDonald and also to congratulate him on the very fine presentation he has made to the committee.

I noticed that you made some reference to the policy of the Post Office Department in taking mail contracts away from railroads. Has it been your observation, Mr. McDonald, that the railroads very vigorously objected to the removal of mail contracts from their line? Mr. McDONALD. Well, we hope they have. We have sort of sus

pected them in instances. But we have had a terrible experience with the Post Office.

We had conferences with Mr. Siedle representing the Postmaster General, and we presented these things to him. They told us they were going to treat the Post Office just like any other business and wherever they could save a dollar they were going to save it, regardless of its effect upon the railroads. Although we pointed out instances where he was not helping the mail or getting it there any quicker or saving any money, yet, as you know, it has been their policy to turn it over to unregulated carriers at a given rate and then before you know it they are back up to renegotiate the rate and get it up to where it is costing them just as much to haul it anyway. That is why I say of course, these other bills are not before your committee, but these postal bills that would force them to put it back on regulated carriers and then would provide a method for the publishing of mail rates ought to be passed.

Mr. AVERY. I am not suggesting there has been any collusion on the part of the Post Office and the railroads on this matter but it has been my observation, I am from Kansas, that there has been a very definite pattern that first, we remove the mail contracts and then, subsequently, not too much subsequently, comes an application for reduction of service. I am just trying to think back in my own mind after you made that statement, and I do not remember hearing the railroads protest very vigorously when they have lost a mail contract.

Mr. McDONALD. Well, in fairness to the railroads they have been very vigorous in appearances before the committee and in appearances before Congress and their participation in this passenger deficit committee in an effort to hang on to the mail.

When I answered you a while ago, I said we had occasion to suspect them, one particular railroad. One time in Georgia, we thought they did not run as fast as they could have run in hanging on to the mail contract but generally that is not true.

The railroads have suffered greatly by reason of this mail withdrawal and they have tried to hang on to it.

Mr. ROBERTS. Thank you, Mr. McDonald.

Mr. McDONALD. Mr. Chairman, before I leave, you heard Mr. Harris speak of a group that he met with last week in Arkansas, the Midwest Association of Railroad and Utilities Commissioners. They adopted a resolution in opposition to sections 3 and 4 of this proposed Smathers Act, or your bill H. R. 12488, and I would like to file this as an exhibit if I may, this resolution of the Midwest Association in opposition.

Mr. ROBERTS. It will be included in the record.

Mr. McDONALD. Thank you very much.

Mr. ROBERTS. Thank you, sir.

(The document is as follows:)

The Midwest Association of Railroad and Utilities Commissioners, embracing the regulatory commissions of the States of Arkansas, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota, and Wisconsin, on May 16, 1958, in convention assembled at Little Rock, Ark., adopted the following resolution:

"RESOLUTION OPPOSING EXTENSION OF SECTION 13 OF THE INTERSTATE COMMERCE

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"Whereas there has been introduced in the Congress S. 3778, a bill to amend the Interstate Commerce Act; and

"Whereas S. 3778 proposes to extend section 13 of the act so as to make more complete the Interstate Commerce Commission's authority over intrastate rates and to broaden section 13 to give the ICC jurisdiction over intrastate passenger train service; and

"Whereas these proposed amendments relate to matters primarily of local interest and concern which should be left with the State regulatory commissions; and

"Whereas the State commissions over the country have been alert and active to discontinue unneeded and unused services and have, in the period 1951-56, inclusive, approved 86.6 percent of the railroad applications for reductions in passenger trains service and 86.9 percent of the applications for station agency discontinuances: Now, therefore, be it

"Resolved, That the Midwest Association of Railroad and Utilities Commissioners commends the Committees on Interstate and Foreign Commerce of the Senate and House for their prompt and thorough study of the current railroad situation and further commends the committee for aggressively seeking legislative assistance to remedy the problems facing the railroads; but "Resolved further, That the Midwest Association feels the committees have overlooked the record of the State commissions on train and station discontinuances and therefore the association opposes the enactment of sections 3 and 4 of S. 3778, or similar provisions of any like bill, which would further usurp and invade the jurisdiction of the State commissions by extending the provisions of section 13 of the Interstate Commerce Act; and

"Resolved further, That the secretary of the Midwest Association is hereby authorized and directed to send a copy of this resolution to the chairman of the Senate and House Committees on Interstate and Foreign Commerce, to the president and general solicitor of the National Association of Railroad and Utilities Commissioners, and otherwise to transmit to Congress the intent of this resolution."

Mr. ROBERTS. The next witness is Mr. A. C. Ingersoll, Jr., American Waterways Operators, Inc.

Mr. Ingersoll?

Mr. INGERSOLL. Thank you, Mr. Chairman.

Mr. ROBERTS. You may proceed, sir.

STATEMENT OF A. C. INGERSOLL, JR., CHAIRMAN OF THE BOARD, THE AMERICAN WATERWAYS OPERATORS, INC., WASHINGTON, D. C.

Mr. INGERSOLL. Mr. Chairman, my name is A. C. Ingersoll, Jr. I am appearing here today as chairman of the board of directors of the American Waterways Operators, Inc., an educational nonprofit trade association representing operators of barges and towboats, tugs and shallow-draft tankers, on the rivers, canals, intracoastal waterways, and in the harbors of the United States, the builders and repairers of this equipment, and terminal operators along the inland waterways.

More than 200 companies have membership in the association, which has its principal offices located at 1025 Connecticut Avenue in Washington, D. C., and which has field offices in New York and New Orleans.

I would like to submit my statement for the record, if I may, and with the chairman's permission, try my hand at summarizing verbally the current issues in transportation affecting our organization.

Mr. ROBERTS. The Chair would be very grateful to you, Mr. Ingersoll, for handling your presentation in this manner. Your statement will be incorporated in the record.

(The statement is as follows:)

STATEMENT OF A. C. INGERSOLL, JR., CHAIRMAN OF THE BOARD, THE AMERICAN WATERWAYS OPERATORS, INC., WASHINGTON, D. C., ON COMPETITIVE RATE

MAKING

My name is A. C. Ingersoll, Jr. I am chairman of the board of directors of the American Waterways Operators, Inc., which is an educational, nonprofit trade association representing operators of barges and towboats, tugs and shallow-draft tankers on the rivers, canals, intracoastal waterways, and in the harbors of the United States, the builders and repairers of this equipment, and terminal operators along the inland waterways. More than 200 companies have membership in the association, which has its principal offices located at 1025 Connecticut Avenue in Washington, D. C., and which has field offices in New York and New Orleans. (For full statement on my qualifications and a background statement on the inland waterways industry see appendix A.)

Transportation rates are now regulated within the framework of the Interstate Commerce Act, which is administered with a view to carrying out the national transportation policy, written into the law in 1940. As a standard of Government policy, this language could hardly be improved upon. Any proper complaint or criticism of the regulation of competitive ratemaking should be directed at the administration of the law, the way it works out in practice, rather than at the congressional purposes set forth in the national transportation policy.

The railroad industry has complained that it is unduly restrained in its ratemaking by the Interstate Commerce Commission and that such restraint is largely responsible for its being in financial difficulties. The railroads propose that the statutes be amended to end any consideration of the effect of their ratemaking on other forms of transportation.

At this point let me say that we in the barge industry sympathize with the plight of the railroad industry, confronted as they are with the terrific problems of reduced passenger service, and carrying a tax burden so heavy as to make almost insoluble their problems of equipment replacement. We hope they may be afforded constructive assistance.

I should like to point out to this subcommittee that right now our industry is probably suffering more acutely from the business recession than any other form of transportation. Made up as it is generally of small, individual operating units which compete aggressively among themselves for business, a dropoff in our business is more quickly reflected in our industry with more drastic financial effect than in other transportation forms which carry more diversified cargoes than we do. We are quite restricted in our cargoes which are limited to only a relatively few commodities that can be moved in bulk by our inferior type service. To add to our industry's problems, our operators have small reserve funds to cushion them in a recession such as we now have. Actually, some of our operators are threatened-not with bankruptcy alone-but with actual extinction if this recession continues. Their trouble is that they are small businesss and cannot command or demand congressional relief as the railroads are doing. But I suggest to this subcommittee that these barge operators deserve enough attention from this Congress to spare them from cutthroat competitive practices the same as other small businesss are so protected under the antitrust laws.

We do not, however, believe that constructive assistance for the railroads should include a license to engage in destructive competition, and this, we fear, is exactly what the railroads want.

Small business in other industries today is protected by the antitrust laws from the misuse of economic power by their bigger competitors. In the transportation industry, this protection has been provided instead by the Interstate Commerce Act. The repeated railroad proposal is to emasculate the Interstate Commerce Act so that railroads may engage in destructive competition with other forms of transportation at their option and without restraint. In such a contest between the railroad industry and the barge industry, the latter enjoying revenues about 3 percent as great as the former, can anyone doubt the ability of the railroad industry to wipe out whole segments of the barge industry?