The total tonnage of the deep-water coastal shipping lines in 1957 amounted to only about eight one-hundredths of 1 percent of the tonnage handled by class I railroads. The total revenues of Pan-American and Seatrain combined last year from regulated freight were about $24 million as compared with $9 billion for the railroads. Surely Congress does not wish to destroy our small and struggling industry, so vital to the national defense, even if that would benefit the railroads. From the figures I have just given you, it obviously would not be the answer to any real solution of the railroad problem.

In conclusion, gentlemen, unless it is the purpose of this committee and of the Congress to make it possible for the railroads to destroy other modes of transportation, and particularly the much diminished coastal shipping industry, for which I am speaking, then, for the reasons I have above mentioned, section 5 of S. 3778, or the House bill, should be eliminated.

Thank you.

The CHAIRMAN. Thank you very much, Mr. Weller.

Mr. Rogers, have you any questions?

Mr. ROGERS. I have no questions, Mr. Chairman.

The CHAIRMAN. Mr. O'Hara?

Mr. O'HARA. I have no questions, but I would like to express to Mr. Weller my appreciation for having the views of the coastal shipping people on this matter.

The CHAIRMAN. Mr. Flynt?

Mr. FLYNT. No question, Mr. Chairman.

The CHAIRMAN. Mr. Hale?

Mr. HALE. I am sorry I did not hear all of your statement, Mr. Weller. However, I notice that you refer to the Atlantic-gulf. You are not referring to the old Atlantic-Gulf West Indies Corp. are you? Mr. WELLER. No, sir; I was speaking of area. Mr. Parish's company and my own both serve Atlantic and gulf ports.

Mr. HALE. The Seatrain Lines has no corporate relationship to those old steamship lines which have ceased to operate, has it?

Mr. WELLER. No, sir.

Mr. HALE. You talk about coastal business. Are these two companies about the only companies left in the coast wise traffic?

Mr. WELLER. They are the only ones. You will remember, Congressman, that there were a great many. You probably remember the old Fall River Line.

Mr. HALE. I used to serve on the Committee on Merchant Marine and Fisheries. That committee used to mourn, and I think rightly, the loss of all the coastal shipping which we had in this country.

Mr. WELLER. Mr. Parish and I are jointly the last of the Mohi

cans.

Mr. HALE. I am sure this committee does not want to put you out of business.

Mr. WELLER. I hope not.

The CHAIRMAN. Mr. Younger?

Mr. YOUNGER. I have no questions.

The CHAIRMAN. Mr. Weller, do you subscribe to the statement that each form of transportation should have opportunity to make rates reflecting the difference inherent advantages each has to offer? Mr. WELLER. Yes, sir. I think the present law does that.

The CHAIRMAN. And that the public may have opportunity to exercise its choice, costs, and service?

Mr. WELLER. Yes, sir. I think the present law gives the public that choice.

The CHAIRMAN. Do you think that ratemaking should be regulated by the Commission to prevent unfair destructive practice on the part of any carrier group?

Mr. WELLER. I most certainly do. I don't see how they can do it under this rate proposal if they are told to only listen to the evidence from one side of the argument.

The CHAIRMAN. Do you think the Interstate Commerce Commission has consistently followed the principle of allowing each mode of transportation to assert itself inherent advantages?

Mr. WELLER. I think, sir, that the Commission, by and large, has followed that principle. I think that the Commission has slipped in its decisions either by inadvertence or misunderstanding from time to time. The rate situations I mentioned to you in this presentation are cases in which the Commission has not, in my opinion, carried out the policy as it is now stated.

The CHAIRMAN. Are you familiar with the new automobiles in the Interstate Commerce case in 1945?

Mr. WELLER. No, sir; I am not.

The CHAIRMAN. We will forgo any discussion of it, then, since you are not familiar with it.

Mr. WELLER. I am not an attorney, sir. I am an engineer.

The CHAIRMAN. How long have you been in this business?

Mr. WELLER. In Seatrain, sir?

The CHAIRMAN. Yes.

Mr. WELLER. You are asking me an embarrassing question. I am a veteran of about 8 months.

The CHAIRMAN. You said something about your having experience in the railroad business.

Mr. WELLER. Yes, sir; I started in the railroad business in 1925, and I spent a good many years in the railroad business. I have spent the last 12 years in the airline business. I was a vice president of Trans World Airlines for that period. So, I feel myself fairly generally qualified in transportation, even though I am not a lawyer, sir. The CHAIRMAN. I want to ask you this policy question: If a particular carrier can provide a service to the public at a rate which is fully compensatory and nondiscriminatory, should the Commission require a higher rate solely because another carrier cannot meet that competition?

Mr. WELLER. No, sir, and I don't believe the Commission does, if the rate is as you described it, fully compensatory and otherwise nondiscriminatory.

The CHAIRMAN. In other words, if a mode-and we are talking about a carrier-can provide a rate to the public that is fully compensatory, then the public should not be required to use another carrier who must have a higher rate just because that carrier must stay in business, whether he is operating efficiently or inefficiently; is that right?

Mr. WELLER. No, sir; I wouldn't argue for that.

The CHAIRMAN. Then if that is true, and as some of the others have also said that they would support and do support such a policy, I do not see why there could not be some way to settle this knotty problem. Mr. WELLER. I think there could be. If that is the intent, I think it would be a very simple matter to solve the problem, Congressman. I have been assured by my railroad friends, however, that that is not what they desire.

The CHAIRMAN. They tell us differently.

Mr. WELLER. That could be. I make no comment.

The CHAIRMAN. We are going to have them here before us, so they will have a chance to speak out in public on the subject. I was going to ask you something about this language in the Senate bill, but, since you are not a lawyer, and that is no reflection, we will forgo that at this time.

On behalf of the committee, let me thank you very much for your appearance here, on behalf of your company and Mr. Parish, your associate with you.

Mr. WELLER. Thank you very much.

(The following letter was later received from Mr. Weller :)

Hon. OREN HARRIS,

SEATRAIN LINES, INC.,

New York, N. Y., May 28, 1958.

Chairman, Committee on Interstate and Foreign Commerce,
House of Representatives, Washington, D. C.

DEAR MR. HARRIS: Although I have not yet seen the report of the Senate Committee on Interstate and Foreign Commerce, I understand that that committee revised the proposed ratemaking rule in section 5 of S. 3778 to read as follows: "In a proceeding involving competition between carriers of different modes of transportation subject to this Act, the Commission, in determining whether a rate is lower than a reasonable minimum rate, shall consider the facts and circumstances attending the movement of the traffic by the carrier or carriers to which the rate is applicable. Rates of a carrier shall not be held up to a particular level to protect the traffic of any other mode of transportation, giving due consideration to the objectives of the national transportation policy declared in his Act."

I also understand that your committee desires comments from the interested carriers and groups with respect to this language. My view, after listening to the testimony last week before your committee and the Senate committee, is that no change should be made in the ratemaking provisions of the Interstate Commerce Act. If any change were to be made, it should be directed toward reinforcing the power of the ICC to restrain destructive ratemaking practices. These destructive rate practices not only injure such nonsubsidized carriers as the costal waterlines, the continued existence of which it vital to the Nation's welfare and national defense, but, also, undermine the financial health of the railroads, causing them recurrently to call upon Congress and the taxpayers for financial relief.

The Congress should avoid passage of new legislation which might be susceptible to varied interpretations and thus make more difficult the task of the Commission in administering the national transportation policy while subjecting the carriers to a burden of uncertainly and continuous litigation. The language quoted above is subject to this weakness and, almost certainly, would result in litigation as between the various carriers and the Commission. Such uncertainty and litigation, particularly in a time of financial stress, would be certain to have unfavorble effects on the financial health of all the carriers involved.

Therefore, I suggest that the Congress make no change in the ratemaking rule. If, however, your committee feels some legislation is imperative, the following language is suggested as being less subject to misinterpretation than that quoted above:

"(3) In a proceeding involving competition between carriers, the Commission, in determining whether a proposed rate is lower than a reasonable minimum rate, shall consider the facts and circumstances attending the movement of the traffic. Rates of a carrrier shll not be held up to a particular level to protect the traffic of a less economic carrier, giving due consideration to the inherent cost and

service advantages of the respective carriers and to the national transportation policy declared in this Act."

May I repeat my appreciation for the opportunity to appear before your committee last week, and for the intelligent and searching interest of yourself and your committee members in the problems of the transportation industry.

Sincerely yours,

JOHN L. WELLER.

The CHAIRMAN. Mr. Leon Leighton will be the next witness. Mr. Leighton is vice president of the New York, Susquehanna & Western Railroad.

STATEMENT OF LEON LEIGHTON, VICE PRESIDENT, NEW YORK, SUSQUEHANNA & WESTERN RAILROAD, PATERSON, N. J.

Mr. LEIGHTON. Mr. Chairman and gentlemen of the committee, our railroad is a small railroad in north Jersey, whose gross revenues last year were $4.4 million. So, we are not in the class of those railroads that Mr. Leighty was speaking of.

The CHAIRMAN. In other words, he wasn't talking about your railroad?

Mr. LEIGHTON. No, sir.

Our railroad was in bankruptcy for 16 years and went through a rather drastic reorganization. The Interstate Commerce Commission reduced our capitalization from $42 million to $16 million, and reduced our fixed interest debt from $12 million to $4 million.

Despite that terrific reduction in 1957 we were not able to earn fixed charges. We failed to earn fixed charges by $150,000, and in 1958, so far, our gross revenues are 20 percent under what they were in 1957. So regardless of what the situation may be for railroads in the aggregate, we are in real trouble.

Our interest in this section 5, which Mr. Weller discussed with you, arises from the fact that Seatrain accounts for 25 percent of our business. We happen to be the railroad that interchanges with them in Edgewater, N. J., which is their New York City port.

In 1957 they accounted for $1.2 million of our revenues. So any serious impairmanet of Seatrain's revenue, which would result if this bill were enacted into law, would certainly put us right into bankruptcy again. That is a fate which we may have to suffer if it were necessary for the railroad industry as a whole. But the significant thing about these hearings before Senator Smather's subcommittee, which I read, is that none of the railroad presidents who testified there indicated that any of their troubles stemmed from this Seatrain competition, or that any of their problems would be solved by eliminating the Seatrain or the Pan-Atlantic competition. Their complaints were directed against two other forms of competition. One was the barge movement on the inland waterways, and the second was the truckmen who, they claimed want the railroads to hold an umbrella over them to protect the higher rates of the trucks.

I don't want to get into the controversy with the inland waterways and with the truckmen because I know too little about it to be of any real value. But I would like to point out to you gentlemen that Seatrain is not subject to either of those complaints. It does not operate on waterways that are built at Government expense or get any other consideration from the Government, and it does not seek

to protect higher rates by having the railroads, as you indicated, Mr. Chairman, in effect protect their higher rates.

Seatrain can afford to operate at much lower costs than the railroads do, and does make lower rates. What vice is in section 5 is that it gives the railroads opportunity by selective competition to reduce the rates that are competitive with Seatrain, to use a loss leader, let's say, in order to drive Seatrain and Pan-Atlantic out of business. We are not concerned about Pan-Atlantic, but I use them for an illustration.

The CHAIRMAN. Where do Seatrain and Pan-Atlantic operate?

Mr. LEIGHTON. Seatrain operates from Edgewater, where we serve them, a small town just north of Weehawken, right across the George Washington Bridge, to Savannah where they connect with the Central of Georgia Railroad; to Texas City where they connect with four railroads, comprising the Texas Terminal Railway, and to New Orleans, where they connect with the New Orleans & Lower Coast.

Incidentally, all the railroads that they connect with have all been once in bankruptcy and have been reorganized. All of them need Seatrain business as we do. The vice is that the railroads would use the selective rate cutting to get rid of their competition and then having gotten rid of it they would be able to do what they please. That is just the vice which the Robinson-Patman Act was designed

to avoid.

In answer to your question to Mr. Weller, Mr. Chairman, I would be very glad to sit down with your committee staff, and if the railroads really do not wish to use this selective rate cutting, we can work out language similar to the Robinson-Patman Act which will protect Seatrain, Susquehanna, and other railroads dependent on it. Unfortunately, the history of the railroads has indicated they will do just the sort of thing that we fear.

For example, there was one case which came up before the United States Supreme Court, the Dixie Carrier's case, where railroads made lower rates against barge competition than they would against anybody else. A similar case came up earlier before the United States Supreme Court, the Interstate Commerce Commission against Meckling, where the railroads on taking grain, which came on barges across the Great Lakes, taking it to Chicago, wanted to charge them more than for grain which they got from railroads in Chicago or grain which they got from the lake steamers, although they conceded it didn't cost any more to carry the grain by barge, in fact probably costing less, but their excuse was they wanted to equalize the rates so that they could take the grain away from the barges and haul it by rail.

This is an indication of the destructive rate practices, which, unfortunately, is a carryover of the old monopolistic tradition of the railroads. A traffic man sees a particular bit of business, and he is anxious to get it to impress the traffic vice president, and the traffic vice president wants to show the president that he is on the ball and wants to get this increased business.

It doesn't mean much to them revenuewise, but means a terrific blow to Seatrain and Susquehannah.

That is our interest in the matter. As I say, if the railroads want to avoid the evil that we fear, they could very easily cover it by amendatory language in the act.