Senator HARTKE. All right. Thank you, sir. That is all.
Senator THURMOND. Thank you very much, Mr. Triggs.

Our next witness is Mr. Angus McDonald, assistant director of the Legislative Services Division, National Farmers Union.

STATEMENT OF ANGUS MCDONALD, ASSISTANT DIRECTOR, LEGISLATIVE SERVICES, NATIONAL FARMERS UNION

Mr. McDONALD. Mr. Chairman, members of the committee: My name is Angus McDonald. I am assistant director of the National Farmers Union. I live here in Washington.

The National Farmers Union appreciates the opportunity of appearing before this committee. It will be recalled that we have appeared here a number of times in regard to proposed changes in legíslation affecting the regulation of agricultural commodities by the Interstate Commerce Commission. As a representative of a farm organization, I wish to point out the great interest which agriculture has in transportation legislation. According to the Department of Agriculture, costs of transporting agricultural products to the ultimate consumer amounts to about $4 billion a year.

Agriculture is in a somewhat unique position in our economic system in regard to transportation charges. The farmer must pay all costs of transportation on commodities he sells from the farm to the major distribution point or major consumption point. The price of wheat, for example, is determined not on the farm but in the great grain trading centers of the world. It follows, therefore, that the amount the farmer receives for a bushel of wheat sold in Chicago is reduced by the amount of transportation charges from the farm to Chicago. The farmer also pays transportation costs on items necessary for family living and farm production. Manufacturers normally add the transportation cost to the f.o.b. price so that the final price paid by the farmer includes all transportation costs.

Over a period of years we have attempted to bring about the passage of legislation which would be beneficial to agriculture. We have also appeared in opposition, a number of times, to proposals which would not be in the interest of agriculture. Specifically, the Farmers Union has opposed and will oppose any legislation which would weaken the agricultural exemption as set forth in section 203 (b) 4(a), 5, and 6 of the Interstate Commerce Act.

We feel strongly that the nature of agricultural production and distribution demands a flexible system of transportation. We also are strongly in favor of the so-called bulk exemption which allows competitive rates to be set on commodities transported in bulk. The proposals as set forth in this bill would extend the principle of the agricultural and bulk exemptions to another mode of transportation. The railroads have complained that their competitors enjoy certain privileges under transportation laws which handicap them in providing services to shippers at the lowest possible cost. This bill would extend the exemptions and in part remedy this inequity.

Historically, motor carriers because of certain factors have attracted a large amount of traffic which was previously carried by rail. The railroad industry, blind to its own interest, has persuaded the Interstate Commerce Commission to fix rates at an artificially high

99-564-64-pt. 1-9

level. Over a period of years, particularly since World War II the Commission has approved one rate increase after another. One result of these rate increases has been to drive traffic from the rails to trucks. During the period 1939-59 truck traffic increased by 466.2 percent and rail traffic by only 71.9 percent.

During the last few years the railroads have seen the error of their ways. They are attempting to compete in the market place and not rely on Congress and Government agencies for relief. But even when the railroads have petitioned for decreases, rates were not lowered if at all within a reasonable time. Thus the benefits of competitive and technological efficiency to farmers, shippers, and the public have been postponed even if finally received.

Although our transportation system is of such a nature, we must exercise our power to protect the public and all interested groups, we must rely, unless it is to be Government owned and operated, on the mainspring of competition. Competition is the only device which will, in the long run, determine whether or not a service or a product or a business is to survive in a limited free enterprise economy. Every new invention and every technological advance has been followed by economic hazards and often bankruptcy of groups which depended on the old commodities or the old techniques of manufacturing and distribution. This principle can be applied to the transportation industry as well as to other industries.

This does not mean that unfair and cut-throat competition should be used to destroy a portion of our transportation system. The railroads, for example, should be checked if they slash rates so low as to unfairly cause a competing mode to be forced into bankruptcy. The measure should be whether or not the railroads can, over a long period of time, operate at a profit after rates are reduced. Under the act the ICC retains, under this bill, its power to approve or disapprove rates increases in areas where the railroads have put into effect rate reductions. Provisions in the bill provide for another safeguard. The railroad industry, under this legislation would be subjected to antitrust laws as are other modes of transportation.

Attention is called to section (5) (a) of the Interstate Commerce Act, an amendment which exempted the railroads in large part from the antitrust laws. Under this law railroads may collectively agree on rates and other matters provided the Interstate Commerce Commission approves the agreement. Deregulating the railroads would. of necessity, substitute to some extent the Department of Justice and the Federal Trade Commission for the Interstate Commerce Commission as a regulatory agency. We would be opposed to any amendment to this bill which would weaken, in any way, the authority of the antitrust agencies to police any part of the transportation in violation of the antitrust laws. The railroads must not be allowed to run rampant in rate cutting and must be left open to suits by the Department of Justice and to triple damage suits if they engage in practices in violation of the antitrust laws.

Leaving section (5) (a) in force, and at the same time passing legislation which would not subject the railroads to the antitrust laws would provide, we fear, a legal anomaly. Under section (5) (a) the ICC would have the power to approve agreements and at the same time have no power to consider the effect of minimum rates. An indi

vidual coming into court or an antitrust enforcement agency would be severely handicapped in obtaining relief in a situation which was consistent with the action of the ICC in approving a collective agreeSection (5) (a) must be, in effect, repealed if the antitrust agencies and individuals are free to seek remedies in the courts in situations where the railroads have acted to unfairly restrain competition or bring about a monopoly.

We emphasize the point that the railroads should be commended for instituting rate reductions and are now aggressively seeking to recapture some of the traffic they have lost. According to our information certain economies and technological improvements have been made in the Southeast which enable the railroads to reduce rates. I quote from testimony which this witness presented to this committee on August 10, 1961:

It appears that the railroads at last have seen the error of their ways and are seeking to recapture some of the traffic which they lost. According to our information, certain economies have been affected which enable them to carry certain items by "piggyback." I call attention to an advertisement published in the Wall Street Journal, August 4, 1961, and the Minneapolis Morning Tribune, Wednesday, August 2, 1961. This advertisement by the Southern Railway System of Washington, D.C., points out that the railroads are seeking to reduce rates on grain. I quote from the advertisement:

"For years the railroads have failed to recognize in their rate structure that grain can and does move in large volumes. Our grain freight rates have been based on loading 50 tons or less per car, shipped in single car lots. We are hauling very little grain. Unregulated barges and trucks are hauling the bulk of the grain. Our rates were simply too high to meet the prices set by these privately owned barges and trucks."

The advertisement goes on to say that the railroads have now brought about certain efficiencies which enable them to reduce rates on grain. It is my understanding that these proposed reduced rates have recently gone into effect.

Mr. Chairman, I was told a few moments ago by one of the gentlemen in this room that the rates had been suspended and that they would have prolonged hearings, probably. Apparently from this information the rates have not gone into effect.

Nearly 2 years have passed since we commented on the attempt of the railroads to pass on to consumers and farmers the benefits of technological progress. There has been much litigation. There have been volumes of information and voluminous testimony presented to the Interstate Commerce Commission and the courts. Yet these rates have not been finally approved by the Commission. We submit that farmers should not have to wait 2 years before benefiting from reduced rates.

Perhaps it is pertinent in connection with hearings on this bill to call attention to a recent court decision which indicates that the ICC is rejecting petitions for rate decreases without even bothering to present evidence to the courts proving that such rate reductions are a threat to national defense or to another mode of transportation. I refer to the case of the ICC v. The New York, New Haven and Hartford Railroad Company in which the Supreme Court of the United States ruled unanimously that the ICC had not proved to the satisfaction of the Court its case for the denial of rate increases.

We urge that the committee approve this bill. While rate reductions on agricultural commodities is not our sole criterion in evaluating transportation legislation they perforce must be a major factor in determining our position. We believe enactment of this bill, con

sistent with the recommendations of the President, will benefit agricultural producers and consumers, provide greater competitive freedom and permit the common carrier industry to become a greater dynamic force in the Nation's growth and economy.

(Attachment to prepared text follows:)

AGREEMENTS BETWEEN CARRIERS

SEC. 5a [June 17, 1948] [49 U.S.C., sec. 5b]. (1) For purposes of this section— (A) The term "carrier" means any common carrier subject to part I, II, or III, or any freight forwarder subject to part IV, of this Act; and

(B) The term "antitrust laws" has the meaning assigned to such term in section 1 of the Act entitled "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes," approved October 15, 1914.

(2) Any carrier party to an agreement between or among two or more carriers relating to rates, fares, classifications, divisions, allowances, or charges (including charges between carriers and compensation paid or received for the use of facilities and equipment), or rules and regulations pertaining thereto, or procedures for the joint consideration, initiation or establishment thereof, may, under such rules and regulations as the Commission may prescribe, apply to the Commission for approval of the agreement, and the Commission shall by order approve any such agreement (if approval thereof is not prohibited by paragraph (4), (5), or (6) if it finds that, by reason of furtherance of the national transportation policy declared in this Act, the relief provided in paragraph (9) should apply with respect to the making and carrying out of such agreement; otherwise the application shall be denied. The approval of the Commission shall be granted only upon such terms and conditions as the Commission may prescribe as necessary to enable it to grant its approval in accordance with the standard above set forth in this paragraph.

(3) Each conference, bureau, committee, or other organization established or continued pursuant to any agreement approved by the Commission under the provisions of this section shall maintain such accounts, records, files, and memoranda and shall submit to the Commission such reports, as may be prescribed by the Commission, and all such accounts, records, files, and memoranda shall be subject to inspection by the Commission or its duly authorized representative.

(4) The Commission shall not approve under this section any agreement between or among carriers of different classes unless it finds that such agreement is of the character described in paragraph (2) of this section and is limited to matters relating to transportation under joint rates or over through routes; and for purposes of this paragraph carriers by railroad, express companies, and sleeping-car companies are carriers of one class; pipeline companies are carriers of one class; carriers by water are carriers of one class; and freight forwarders are carriers of one class; carriers by motor vehicle are carriers of one class.

(5) The Commission shall not approve under this section any agreement which it finds is an agreement with respect to a pooling, division, or other matter or transaction, to which section 5 of this Act is applicable.

(6) The Commission shall not approve under this section any agreement which established a procedure for the determination of any matter through joint consideration unless it finds that under the agreement there is accorded to each party the free and unrestrained right to take independent action either before or after any determination arrived at through such procedure.

(7) The Commission is authorized, upon complaint, or upon its own initiative without complaint, to investigate and determine whether any agreement previously approved by it under this section, or terms and conditions upon which such approval was granted, is not or are not in conformity with the standard set forth in paragraph (2), or whether any such terms and conditions are not necessary for purposes of conformity with such standard, and, after such investigation, the Commission shall by order terminate or modify its approval of such agreement if it finds such action necessary to insure conformity with such standard, and shall modify the terms and conditions upon which such approval was granted to the extent it finds necessary to insure conformity with such standard or to the extent to which it finds such terms and conditions not necessary to insure such conformity. The effective date of any order terminating or modifying ap

proval, or modifying terms and conditions, shall be postponed for such period as the Commission determines to be reasonably necessary to avoid undue hardship. (8) No order shall be entered under this section except after interested parties have been afforded reasonable opportunity for hearing.

(9) Parties to any agreement approved by the Commission under this section and other persons are, if the approval of such agreement is not prohibited by paragraph (4), (5) or (6), hereby relieved from the operation of the antitrust laws with respect to the making of such agreement, and with respect to the carrying out of such agreement in conformity with its provisions and in conformity with the terms and conditions prescribed by the Commission.

(10) Any action of the Commission under this section in approving an agreement, or in denying an application for such approval, or in terminating or modifying its approval of an agreement, or in prescribing the terms and conditions upon which its approval is to be granted, or in modifying such terms and conditions, shall be construed as having effect solely with reference to the applicability of the relief provisions of paragraph (9).

Mr. McDONALD. Thank you, Mr. Chairman.

Senator THURMOND. Mr. McDonald, are you in a position to state whether or not the savings in transportation costs which would result from approval of this legislation, would be passed on to the consuming public?

Mr. McDONALD. I think, Mr. Chairman, in areas of distribution where you have competition the saving would inevitably be passed on. In regard to the farmer, I can see a direct benefit to him in regard to purchase of agricultural supplies; for example, fertilizer, and other bulk commodities.

It would appear, in competitive industries, the farmers would benefit directly and the consumer, where the market is competitive, would benefit in food distribution.

Senator THURMOND. It is your feeling that this legislation would decrease consumer costs and also improve farm income, as I understand it; is that right?

Mr. McDONALD. That is our feeling; yes, sir.

Senator THURMOND. As Senator Magnuson brought out with the last witness, there is an agricultural exemption at the present time, but only for truckers. Is it your position that the extension of this exemption to all modes of transportation would be only equitable, and benefit the public generally?

Mr. McDONALD. Yes, sir.

We think a very good case can be made for this bill on that point, in that it treats all modes of transportation on an equal basis in regard to these two groups.

Senator THURMOND. Do you feel the present wording of the bill adequately protects the public in its antitrust provisions?

Mr. McDONALD. As far as I can see, Mr. Chairman, it does. It may be that there are some points that I have overlooked, or am unaware of. But it would appear that the bill does cover all of the sections of the antitrust laws mentioned in section 1, I believe, of the Clayton Act, which is set forth in the bill. And that is rather broad.

Senator THURMOND. Do you have any questions?

Mr. GRINSTEIN. Yes, sir.

You would depart, then, from the testimony of Mr. Seals, and you would recommend that 5(a) not be allowed to apply to agricultural and bulk commodities?

Mr. McDONALD. We disagree completely on that point, as well as the suggestion of the previous witness, the American Farm Bureau