statutory fares is a question I think it has. I think the attorney general down there thinks it has. At any rate, however, they declined to advance the State fares.

The Interstate Commerce Commission fixed a rate of 3.6 cents. They found that to be a reasonable interstate rate for travel across the State of Louisiana. Now, before that this 3-cent rate, which represented the prewar level of rates, had been applied uniformly on State and interstate travel; every traveler in Louisiana paid 3 cents a mãe, whether a State or an interstate traveler. They sold him a ticket for a mode of travel in the State, whether a State traveler or interstate traveler, for 3 cents, with this exception, which is inherent in other situations, that where there were two lines of railroads between the same points, and those points were of considerable size, and one line of railroad was longer than the other, they had to make the same rate between those two points. They had to make the rate the same, or they would not have any business. So as between the two points on the longer line of railroad, a mile of passenger service was sold at something less than 3 cents before the decision in Ex parte 74

Now, when Ex parte 74 came along and those rates were advanced to 3.6 cents per mile interstate the State of Louisiana declined to advance the State fares. The result was that for every mile traveled in the State of Louisiana by a man on a ticket sold for points within the State he paid 3 cents per mile. Another man traveling on the same train, and perhaps in the same car, on an interstate ticket paid 3.6 cents per mile.

Now, first we showed the history of those fares. We showed the fact, for whatever it might be worth, that they had previously been on a parity. We thought that carried with it at least some presumption

Senator POMERENE (interposing). For how many years?

Mr. Wood. For 25 years-for 30 years, from 1890 to 1920. We thought that where the Interstate Commerce Commission and the State commission without any complaint or action maintained a parity of charge for travel in the State of Louisiana for a period of 30 years, there was at least some presumption that it was a proper relation. But we did not stop there. We showed that these pasengers rode in the same train, and in the same cars, and frequently in the same seats. We stated affirmatively by our own evidence that the circumstances and conditions under which these State and interstate passengers traveled were identical. with this exception. that, if anything, the cost of carrying the State passenger 1 mile was somewhat greater than the cost of carrying the interstate passenger 1 mile. And we showed that that greater cost. State than interstate, grew out of two facts which were offered of record: First, that the State business was shorter-haul business than interstate business; and, secondly, that the terminal expense represented a larger expense than it did on interstate business.

And then we showed this: We showed, from an examination of the ticket sales of local stations in the State of Louisiana, that with the exception of the chief commercial centers, the ticket sales from those local stations of which, of course, there were scores. for State travel, very greatly exceeded the ticket sales for interstate travel; that those local stations were maintained largely, so far as passenger business was concerned. for State travel, and that the maintenance of those stations was one of the heaviest items of expense incident to the passenger travel in that State. And we also showed that the greater proportion of that expense was directly assignable to State, rather than to interstate business. And, as I say, we showed that the transportation furnished was on the same kind of trains; the thing that we did and for which we charged the State and interstate passengers was the same in every case.

Then we showed that the Interstate Commerce Commission found that that rate ought to be advanced to 3.6 cents, and that the rate, thus advanced, would be a reasonable rate. And we offered some further evidence in addition to that.

Now, in addition to all this showing of our own, as to the conditions under which these passengers. State and interstate, respectively, were sold a mile of transportation in Louisiana, we offered the opinion of the Louisiana State commission itself, in which it decided this case, and in which it denied the passenger fare advances, but granted the freight advances, and in that opinion the State commission of Louisiana said this:

"We have given due consideration to the applications of the carriers, and we are of the opinion that the situation in the State of Louisiana is not different from that which prevails elsewhere in the United States.”

We said that for 30 years this State commission in Louisiana, and the Interstate Commerce Commission have maintained this parity of rates. The Interstate Commerce Commission has said that in order to make a reasonable charge that the rate must go up 0.6 of a cent. You have said that there is no difference in conditions that distinguishes the State of Louisiana from those on which the Interstate Commerce Commission acted. But, nevertheless, you say that this passenger fare must be maintained at 3 cents, and it follows, as a necessary conclusion, that you are maintaining there a rate that is not only unduly low, from the standpoint of the carrier, but which results in favoritism to every man in Louisiana that travels on a State ticket.

Now, we had other evidence, dealing with specific localities, to which I will subsequently refer.

The CHAIRMAN. Just pause a moment there.

Mr. WOOD. Yes.

The CHAIRMAN. I want you to get my state of mind.
Mr. WOOD. Yes.

DISCRIMINATION AGAINST PERSONS THROUGH UNEQUAL FARES FOR SAME SERVICE.

The CHAIRMAN. Now, the circumstances you have presented might be entirely satisfactory in establishing the fact that the rate established by the Louisiana statute was unreasonably low, and, therefore, the act was void as being confiscatory. But when you come to assert that because the State man travels through Louisiana at 3 cents per mile, and that the interstate traveler travels through the State of Louisiana at 3.6 cents per mile, and that that is a discrimination, I am not persuaded of that, any more than I am that if a tourist traveling at 1 cent a mile passes from New York through Louisiana to California he is discriminating, or that the railroad is discriminating against the State man that has to pay 3 cents a mile. That is the point in my mind. Simply because one man has to pay more for a thing than another does not prove discrimination in a transportation sense, as I understand it.

Mr. WOOD. Let me try to point out the significance which I attach to that situation. That was not all of that Louisiana situation. We offered evidence dealing with specific localities, and everything of that sort.

But I want to address myself to the chairman's question, because personally I think it goes to the very heart of this case, so far as the question of public policy is concerned. And whether that which I describe results in undue discrimination, or not, under the existing statute, if it does not, I think it ought to. I think your question, as I say, is not only a searching one, but it goes to the fundamentals of the problem, whether we consider it in conjunction with the law as it now exists, or whether we consider it as a matter of public policy. That evidence was offered for two purposes: It was offered to show that the interstate rate of 3.6 cents would be a reasonable rate as applied to the State business. It was not offered primarily for that purpose, but it was offered for that, because, as the Senator will remember, under the law as it now stands, when the Interstate Commerce Commission finds that discrimination exists, it must say what rate should be established, and we took it that that meant that it must say would be a reasonable rate for State and interstate travel. So we said, just as the Senator has said, that that evidence, to our minds, is conclusive of the fact that the State rate is unreasonably low. and that the application of a 3.6-cent rate would produce a reasonable rate, both State and interstate.

But we offered it primarily for the purpose of establishing undue discrimination against persons and descriptions of traffic, which was afterwards supplemented by other evidence.

Now, my thought about that-and I hope I can make it plain-is this: We start out with the proposition that we are selling to two men identically the same article under identically the same circumstances and conditions. That is what we proved. There is no question of an excursion rate, as compared with the standard passenger fare, because there the sale of passenger transportation is not under the same circumstances and conditions. It is not a round-trip rate, as compared with a standard passenger fare, because there the circumstances and conditions are not the same.

We are dealing with two men who are traveling at standard passenger fares; that is, at full-rate tickets within the State of Louisana. We are selling to each one identically the same thing-a mile of transportation in identically the same train, in identically the same car, and perhaps on identically the same

seat, at least within the same train, and we are selling them the same thing under the same circumstances and conditions. There is no differentiation between them, as both the evidence and the decision of the Louisiana State commission discloses, and yet we are charging one of those men 3 cents a mile, and the other one of 3.6 a mile.

We certainly have treated them differently, and the dictionary definition of discrimination is a difference of treatment. Nobody can deny, I believe, or will deny, that there is a discrimination between those two men that have been charged different rates for the sale of identically the same thing. Whether that discrimination is undue or unlawful remains to be seen. But it is a discrimination. And my definition of undue discrimination is a discrimination or difference in treatment which is not justified by the circumstances; which has no rational or reasonable justification; that is purely arbitrary; that is extended as a result of favoritism or favor. If that is not a proper definition of undue discrimination, then I am unable to define it, and I may be wrong in presenting that as a definition of undue discrimination.

But let us get away for a moment from the transportation business. Let us go to the ordinary affairs of life, and say that two of us who are here present go to the same grocery store on the same day to buy a dozen eggs, and the grocer charges me 50 cents per dozen and he charges one of you gentlemen 70 cents for a dozen eggs on the same day, of the same quality, bought in the same quantity. Now, there isn't any question but that that grocer has wrongfully discriminated against you and in my favor. There isn't any justification for his act. It is a discrimination, and it is an undue discrimination.

Are we going to say that it is not an undue discrimination in a case of that sort unless we are in competition with each other? Are we going to say that if one of these men that goes in and buys a dozen eggs is a baker, and the other is buying them for consumption in his own kitchen, that the householder has not been discriminated against on that account? If the baker is buying in wholesale quantities, he may have a wholesale price, and that is not discrimination.

And when you come to the transportation business, if he is buying in wholesale quantities, such as shipping in carload lots in freight traffic, or is buying a mileage book in passenger traffic, that is a circumstance which may justify a difference in charge. But to charge two men on the same day for the same identical thing a different price without any justification for it is a wrong which damages the man who pays the higher price, whether he is in competition with the other man or not.

And let us push the analogy a little further and get out of the realm of private business for an illustration, but not taking a railroad company. But, take the case of a gas company, or an electric light compny, which is subject to State or municipal regulation. These companies must not discriminate in their charges. These gas companies or electric light companies can not, without being guilty of undue discrimination, make different rates to private consumers. They may make a different rate to a wholesale consumer, and for perfectly sound and legitimate reasons; they may give to the wholesale consumer a special rate, because there may be a different charge per thousand feet of gas or per kilowatt hour for electricity for those who use large quantities. But take two householders who are living side by side, and if the gas company or the electric-light company sells to one cheaper than to the other it is undue discrimination. If the gas company should sell to one of those men his gas at 80 cents per thousand and to the other one at a dollar, there can not be any doubt in my mind that that results in undue discrimination against the man who pays the dollar and in favor of the man who pays 80 cents. And they do not have to be in competition. And the same thing, it seems to me, applies to the railroad business.

The CHAIRMAN. Mr, Wood, there is a sense in which that is discrimination, of course. It is different treatment. But Congress has power only to regulate commerce among the States. It has no other power than that, and the only way in which we can reach into a State and attempt to affect or regulate or fix a State rate is because it is shown in a particular case that the action of the State in fixing its rate so affects and is so unjustifiable, in connection with interstate commerce, that in order to regulate interstate commerce we must also seize the State rate. Something more than mere favoritism is required; something more than mere discrimination in the sense in which you use it. It is a question of authority on the part of Congress, and as the Supreme Court

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has said many, many times, the State rate must do something against interstate commerce. It is not enough that it merely may interfere with the individual. That is the way I understand the law.

Mr. Wood. You have, of course, the effect upon interstate commerce as such. I have not reached that part of the discussion yet. In its effect upon the interstate rates themselves we showed in every one of these cases that the State and interstate fares were so related and so intermingled that the interstate fares could not be maintained if the State fares remained in effect. We showed that in Louisiana.

But I am dealing now, Senator, with the prohibition in the old act prohibiting discrimination against persons. The Supreme Court in the Shreveport case said that applied equally to a discrimination in favor of persons in State commerce and against persons in interstate commerce as it did to two persons interested in interstate commerce only. I am taking those two persons only. I have reduced it to its lowest unit.

The CHAIRMAN. The effect of that is that the Interstate Commerce Commission must be given power to fix all rates, passenger and freight.

Mr. WOOD, No, sir; because the strict mileage basis does not apply anywhere that I know of except in your passenger rates.

The CHAIRMAN. Well, I am not speaking of the mileage basis.

Mr. WOOD. Your freight rates involve a consideration of a vast number of things. And right at this point, although it is a digression, I want to answer the suggestion that the State rates are frozen or that the natural conclusion of the suggestions which I have made to the committee are to transfer all power over rates to the Interstate Commerce Commission.

The CHAIRMAN. We will have to suspend at this time, gentlemen. We have been a little over two hours and I am compelled to go now. We will take a recess until 9 o'clock to-morrow morning.

(Whereupon, at 11.40 a. m., the committee adjourned until Wednesday, November 16, 1921, at 9 o'clock a. m.)

MODIFICATION OF TRANSPORTATION ACT.

THURSDAY, NOVEMBER 17, 1921.

UNITED STATES SENATE, COMMITTEE ON INTERSTATE COMMERCE, Washington, D. C.

The committee met, pursuant to adjournment, at 9 o'clock a. m., in the committee room in the Capitol, Senator Albert B. Cummins (chairman) presiding. The CHAIRMAN. The committee will be in order. We will hear Mr. Scandrett at this time.

Mr. Scandrett, you may state your name and residence and your general relation to this subject.

STATEMENT OF MR. H. A. SCANDRETT, VALUATION COUNSEL AND COMMERCE COUNSEL OF THE UNION PACIFIC RAILWAY SYSTEM, OMAHA, NEBR.

Mr. SCANDRETT. My name is H. A. Scandrett; I am valuation counsel and commerce counsel of the Union Pacific System, and I live at Omaha, Nebr. I have been connected with the Union Pacific for about 20 years. During the past 11 years the major portion of my time has been devoted to interstate commerce matters, including practice before the Interstate Commerce Commission. My service with the Union Pacific has been continuous except for a brief period during Federal control, when I was in traffic work, or at least essayed the rôle of a traffic man in the Central Western region of the United States Railroad Administration.

I have, of course, come very closely in contact with the work of the Interstate Commerce Commission during the past 11 years, and I think I am reasonably familiar with the interstate commerce act, and I know that I have endeavored to be a conscientious student of the transportation problems.

I am exceedingly sorry that the exigencies of the situation forced Mr. Wood to go to Chicago, thereby interrupting his statement.

In what I have to say I will endeavor to avoid any repetition in my own statement and endeavor to avoid covering the ground that he has covered or that he will cover when he resumes his statement.

UNFAIR CRITICISM OF THE TRANSPORTATION ACT.

So far as I can recall the transportation act of 1920 has been subjected to more severe and more unfair criticism than any other legislation of Congress. I say the criticism has been unfair, because there have been charged to that act many of the difficulties which were the necessary aftermaths of the Great War from which we had so recently emerged at the time of its passage.

The transportation act, as I view it, was not a temporary remedial measure, but was, rather, the seasoned judgment of Congress as to the policy best adapted to aid in the solution of what is known as the transportation problem. It has been condemned by its critics without a fair trial, and I think I may truthfully say without any trial, because in the very brief period which has elapsed since its passage, we have been passing from a war to a peace footing, with all of the tremendous readjustments in every field of industry which are the necessary concomitants of that situation. While it would not be surprising if men who have not given close study to this question should indulge in this criticism, it does come as a shock when men who specialize in this field