That language, as you will recognize, is copied directly out of the new automobiles case. The reason why I have suggested that, gentlemen, is this: I don't pretent to come here as a public defender. I am here as an advocate for my company. But we are dependent for our continued existence on Seatrain Lines remaining in, because they accounted for $1,200,000 last year in the revenue that we derived from our interchange with them.

Our railroad was in bankruptcy for 15 years. The ICC, with proper drastic recapitalization, reduced our capitalization from $44 million to $16 million, and our fixed-interest debt from $12 million to $4 million.

Despite that reduction, we failed to earn fixed charges in 1957 by $150,000. So if there should be any impairment of the Seatrain business, we would soon be back in bankruptcy again. That would be the price we would have to pay if this legislation, as drafted by your committee, is necessary in order to save the railroad industry. We would have to give way to the greatest good of the greatest number. But I believe that the freedom of action that the railroads say they need can be accomplished just as effectively under the amendment which I have proposed here, and I fear, and I say this as a railroad man, and with a lot of experience with the railroads, that the amendment, as drafted, would be subject to great abuse at the hands-I mean the amendment as originally drafted would be subject to great abuse at the hands of the railroads.

In saying that, I mean no reflection on your very able staff, Mr. Chairman. But the railroads, unfortunately, have shown a very very strong tendency to unfair competition.

Now, I am not going back to 1887 for my illustration of that. I am going to the year 1956, when the United States Supreme Court decided the case of Dixie Carriers against U. S., in 351 United States.

In that case sulfur was moving from Galveston to East St. Louis by barge, and then to Danville by rail. The barge-rail rate in effect was $9.77. The aggregate of the rail rates, there were 4 railroads involved, was $11.68, or almost $2 more than the rail-barge rate.

The railroads then established a joint all-rail rate of $9.18, which was less than the barge-rail rate.

The barge companies sought a barge-rail rate of $9.17, which was 1 cent less. They were willing to give the Wabash, which was the railroad operating between East St. Louis and Danville, the same division as the Wabash was getting out of the through-rail rate.

The railroads refused to put the rate into effect.

The barge carriers-I don't hold a brief for them necessarily, but the problem is the same-they went before the Commission and the Commission refused to prescribe the rate.

They went to a statutory court, which set aside the Commission's order, and prescribed the rate for them, and that was affirmed in the United States Supreme Court.

Mr. Justice Douglas pointed out that it was recognized in the debates preceding the Transportation Act of 1940, that manipulation of rail rates downward might deprive water carriers of their inherent advantages, and therefore violate the act.

It was emphasized that one of the evils to be remedied was cutthroat competition.

Now, gentlemen, if you please, this is Mr. Justice Douglas' language, not mine. I will try not to interpolate any of my own adjectives:

Whereby, strong rail carriers would reduce their rates, putting water carriers out of business: in absence of the joint all-rail rate, the rail-barge combination for sulfur would be $1.91 per ton less than the all-rail combination between the same points. The differential reflects the lower cost of the barge segment of the journey. It is at once lost to shippers when joint rates are allowed rail carriers and withheld from the water carriers. To hold otherwise would be to sanction a rate structure which, through the use of discriminatory joint rates, denies shippers the inherent advantages of water transportation.

That was 16 years after the passage of the Transportation Act of 1940, and Senator Wheeler eloquently described the background of it yesterday, and despite that fact, you still had this instance of cutthroat competition which had to be taken to the United Staes Supreme Court in order to be rectified. And in the Interstate Commerce Commission, apparently read the statute in such a way that it found its power less to remedy the situation.

Now, you gentlemen may say, well, we have this decision in the Dixie carriers, henceforth water carriers will not have the same trouble. But I am afraid that that hope is not too well-founded, because 10 years prior to that, the water carriers had the same trouble in this Mechling case, which Mr. Barton has cited several times.

In that case, grain was being moved to Chicago from the western origins by three different methods; rail, lake steamer, and barge.

The reshipping rates from Chicago east-because grain takes a proportion that has various transit privileges, and so forth-the reshipping rates were identical, regardless of how the grain came into Chicago.

This was prior to 1939.

In 1939, the eastern railroads filed schedules with the Commission which imposed on ex-barge grain the local rate from Chicago, east, which was 812 cents higher than the proportional rate that they gave to the grain coming on the lakes and on the rails.

I think Senator Schoeppel is well aware of how much difference that would make to a grain shipper.

One of the carriers' witnesses testified before the Interstate Commerce Commission that the whole purpose of that rate was to drive the rails out of business. He said, "We want to get this business back on-the barges out of the business." He said, "We want to get this busines back on the rails where it belongs."

That was taken to the Interstate Commerce Commission, and the Commission felt it was powerless to interfere.

It was taken to a statutory court, which set aside the Commission's order, and then went up to the United States Supreme Court, which reversed the statutory court on a technicality. Then it went back to the Commission, and the Commission held that 812 cents was too high a differential; they could put in a lesser differential.

They put in a differential of 3 cents, which was still a burden on the grain shippers.

That was taken to a statutory court, which refused to set aside the Commission's order. And that was then taken up to the United States Supreme Court in the Mechling case, which reversed the statutory court, and said that those grain rates that the grain com

ing ex-barge should not be treated any differently than the grain coming ex-lake or ex-rail.

Now, gentlemen, bear in mind that the eastern railroads who put in this rate, it makes no substantial difference to them how the grain came into Chicago. Their costs substantially were the same. They made some claim about extra costs, but it wasn't supported by the testimony.

What they were doing was trying to help their western brethren by forcing grain people to ship on the barge. If they had not had the protection of the Bullwinkle Act, that is the type of concerted action which would have had the Federal Trade Commission breathing down their necks in 24 hours. They weren't concerned with that. That is the way they were playing the game, gentlemen. That is why we fear, representing a small railroad, that depends on Seatrain, that that is what they are going to try to do once they get an unlimited power to compete destructively with the water carriers.

Now, you say the Court rectified that situation. True. Let me give you the chronology of that grain litigation.

The original schedules were filed in October 1939. After the Transportation Act became effective, the Inland Waterways Corporation, which was owned by the Government, and this Mechling Co., asked the Commission to consider it in the light of the Transportation Act of 1940.

In July 1941, division 2 found the rates not unlawful and vacated the suspension, allowed them to go into effect.

In December 1941 that was affirmed by the full Commission.

In April 1942, the Commission's order was enjoined by a statutory

court.

In June 1943, it was reversed by the Supreme Court on the technicality I mentioned.

In February 1945, the ICC authorized the filing of the 3-cent differential, and in March 1947, 8 years after this fight started, the Supreme Court finally said that the railroads were doing something that was prohibited by the Transportation Act of 1940.

I venture to say that if the Inland Waterways hadn't been interested in that picture, the litigation would never have been continued, because no private company would afford a litigation of that magnitude, and they could very well go broke while the litigation was going through the courts.

Senator MONRONEY. Could you tell me, were the high rates in effect during all the court litigation?

Mr. LEIGHTON. During a good deal of it, Senator Monroney.

After the Supreme Court reversed, in 1943, the ICC authorized the filing of the 3-cent differential in 1945, and I don't recall-I think they probably weren't able to put it into effect during that period and the statutory court apparently enjoined it reasonably soon thereafter.

But you see what a disruption this is to shippers? They don't know where they stand. They can't make arrangements to use the barges when they fear that they may have to pay a higher rate for reshipping their grain east of Chicago.

Now, in that case-I started to say in the Dixie Carriers case, the complaint in that case was filed in December 1950, and the reversal by the United States Supreme Court didn't happen until April 23,

1956. So that it was nearly 6 years that these barge companies were deprived of the business.

An interesting sidelight in that Dixie Carriers case is this: The railroads have pleaded with you that they need this freedom to make rates competitively because it will give them so much additional revenue that they would like to have.

Well, you would think in this barge case, since it went up to the United States Supreme Court, that they would have selected an item which would have meant something very substantial to them. It actually involved a movement of 20,000 tons a year, and at the rate that these three railroads got, they got $140,000 a year. The three participating railroads were the Texas & New Orleans, Texas & Pacific, and Missouri Pacific.

Senator SMATHERS. We are letting you on as sort of an extra witness, Mr. Leighton.

Mr. LEIGHTON. I am sorry.

Senator SMATHERS. We are delighted to hear you.

You have been very helpful to us in your recommendations. But we have got a whole list of witnesses that we had invited informally. So you are sort of the Seatrain man-you are the caboose on the Seatrain. So see if you can't wind this up, please, sir.

Mr. LEIGHTON. I would do either of two things, Mr. Chairman, I would be glad to suspend and let the other witnesses come, or if you want me

Senator SMATHERS. No; you go right ahead. You weren't on our list to start with.

Mr. LEIGHTON. I understand. I appreciate your courtesy.

Senator SMATHERS. We said we were going to have a representative from each group.

Now, you are the third one on your group. We are delighted to have you. Because we are accommodating ourselves to you. We want you, in turn, to accommodate yourselves to us.

Mr. LEIGHTON. I will make it very, very brief.

I just wanted to point out that the revenue the railroads would derive from this cutthroat competition was about $45,000 a year each for these 3 years, whose revenues run into the millions, which is an indication that they go out after every piece of traffic which they think they can get and regardless of the damage they do to the other carriers. Now, when this Mechling case and Mr. Justice Black's dissent in the previous ICC Inland Water case, (319 U. S.), is studied with reference to the Congressional Record, which shows that it was the distinct understanding of everyone, when the Transportation Act of 1940 was passed, that the differential of cost inherent in water transportation should be recognized and observed; in fact, it was stated three times in the act in those sections I have incorporated in this proposed bill. And if, despite that clear affirmation of congressional intention, the Interstate Commerce Commission found itself powerless to enforce it, imagine the problem they will face if you write this bill, putting no restrictions at all on them. That is why in the draft I suggested I thought you should put in exact language of those sections of the act are still binding upon them when they review these rates. I do want to discuss this new automobiles case

Senator SMATHERS. Mr. Leighton, I don't think it is fair to the other witnesses

Mr. LEIGHTON. Let me suspend, then. If you have time when they get through

Senator SMATHERS. We appreciate this suggestion that you have made. I think it is constructive.

Mr. LEIGHTON. Thank you.

I will be glad to answer any questions when I appear again.
Senator SMATHERS. All right.

Leighty, are you in a hurry?

We had scheduled here-Mr.

Mr. LEIGHTY. If you have a witness that won't take too long, I will wait around a little while.

Senator SMATHERS. How about Mr. Langdon; how long are you going to take? Are you here?

Mr. LANGDON. Yes, sir.

Senator SMATHERS. Let's take Mr. Leighty first, then, and then we will take Mr. Langdon and then we will end up with the Commission. We have to spend a lot of time with the Commission.

STATEMENT OF G. E. LEIGHTY, CHAIRMAN, RAILWAY LABOR EXECUTIVES ASSOCIATION, WASHINGTON, D. C.

Mr. LEIGHTY. Mr. Chairman, and other members of the committee, I appreciate the opportunity of appearing before you again. But the time has been so short I must apologize that I haven't had an opportunity to prepare a mimeographed statement for distribution. I have jotted down a few notes that I would like to give to the committee on this question.

Senator SMATHERS. Fine. We will be delighted to hear you.

I think it would be well if you would identify yourself, first, sir, with respect to for whom you speak.

Mr. LEIGHTY. My name is G. E. Leighty, president of the Brotherhood of Railroad Telegraphers and chairman of the Railway Labor Executives Association. That association is comprised of all of the standard railroad labor organizations. And these unions represent all of the employees on the railroads, with the exception of the management and the supervisory employees. In other words, we speak for at least 95 percent of the total employment on the railroads.

As the distinguished chairman of the Transportation Subcommittee knows, the railway labor organizations do not favor all of the proposals which his subcommittee has advocated with respect to the present railroad situation. I refer, of course, to the provision with respect to the Interstate Commerce Commission taking over jurisdiction from the State utility commissions. We feel that it is essential that the State commissions retain that jurisdiction. However, I have presented our position on that previously. I don't want to dwell on it here now.

I just wanted to make it clear that we didn't approve everything in the committee's report, and we also feel that on the construction reserve, the majority of the money should be spent by the railroads on their own properties, utilizing their own forces to take care of the terrible unemployment situation on the railroads.

It is because we believe the railroad industry ought to stay in the transportation business that we appear here today to support the position taken by the Transportation Subcommittee with respect to transportation rates.