In the first few cases from the Interstate Commerce Commission along this line, they placed it on this ground, that a new power, as I understand it, had been given them in the transportation act, because they had to fix rates in accordance with section 15(a) to give a certain amount of return to the carriers, That they could not do that unless they could fix all State rates too, and therefore, in spite of the express exclusion of their jurisdiction in section 1 of the act to fix the reasonableness of State rates, they are going ahead and assume because this 15(a) exists there-that that has enlarged, increased, and given them complete jurisdiction over all State rates.

There is one other thing in connection with it. In fixing these rates, Senators, this is what happens very often: A large part of the rates which are made by the Interstate Commerce Commission are not fixed so much by the determination of the reasonableness of the rates as upon a determination— and this applies to their own rates as well as where the Shreveport case exists— upon a determination that the rates between certain points are discriminatory, and then the usual order is-and this has been quite a growing practice, as I look at it-to say that rates between points which differ from each other by more than a certain amount are discriminatory, and, in so far as they do differ from each other by more than a certain amount, that discrimination must be removed, and then they go ahead and the mandate is that the carrier must remove it.

Now, in many cases you can not tell until after the carriers have filed their tariffs how that discrimination is going to be removed. You do not know whether they are going to lower the rate between A and B or raise the rate between C and D, and you can not tell-of course, most of us know how it will be done. We do not have to worry about how it will eventually be done; but so far as the interstate commerce act is concerned they can do it in either one of several ways. We have a case of our own in which you could not tell until the tariffs were filed. It has not yet become very serious in the State. But what is the net result?

The carriers are given this right to remove discrimination by doing one of two things, or several things, and they may change both rates involved in the discrimination, or lower one rate or raise the other rate wholly to make up any difference, and that rate then becomes the State rate whichever way they take it. In other words, through this interpretation of the act and through the form of the order issued by the Interstate Commerce Commission, the Interstate Commerce Commission has delegated to the carriers themselves in many cases the right to determine the State rate as they see fit. And no tribunal anywhere has power to go into the question of the reasonableness of the rates themselves.

Very often interstate-commerce rates, purely interstate commerce, differ from each other in level in sections close to each other. Sometimes the Interstate Commerce Commission finds that the rates are discriminatory because of this difference in levels. Very often they find that that difference in level does not constitute an unreasonable discrimination, and I want to say that very often a difference in level does not constitute a discrimination, and especially so if you take into consideration the local conditions which exist.

I can illustrate that by two classes of rates in my own State. For instance, we have lower rates on sand and gravel for the first hundred miles, probably, than exist in any of our surrounding States. Nobody claims that that is discrimination. The reason for that is this, in part: You can open a gravel pit anywhere in the State of Wisconsin, in any 15 miles, except in a certain section, and can begin hauling gravel, and begin doing it by automobile. Now, either those rates had to be lowered-and it would be a benefit if they were lowered so as to use the developed pits, or there would not be any movement. So we changed those rates there. I am informed by the carriers themselves that the change was beneficial and they did not object to it and that it has produced a large volume of movement, which was compensatory, and has been a benefit to them. It has been a benefit to the building trade, because they got a higher grade of material than they would otherwise get. So, although those sand and gravel rates are lower for those mileages than they are in the surrounding States, on the whole they are not discriminatory.

On the other hand, our coal rates are higher and the rates to many destinations the same, no matter from which port they come. These ports are as sumed by the Interstate Commerce Commission to be more or less mines, and the level of those rates is probably higher than in Iowa, Senator, or than in Illinois. That particular fact does not of itself constitute discrimination. One has to know the local conditions and the reasons for the thing. Just the mere

statement that a rate is so-and-so in Iowa, so-and-so in Minnesota, or so-and-so in Illinois, does not make the rates in and of themselves discriminatory. My theory of discrimination is this-much along the line of Senator Nicholson's bill-that the doctrine of discrimination as applied to States should be confined to those situations where the difference in the level is such as to affect the volume and the flow of traffic. If it does actually materially affect the volume and flow of traffic it will affect persons and localities. And my belief is this, that if this doctrine of discrimination is to be stretched clear out so that the question depends on how the Interstate Commerce Commission shall look at a revenue question and practically nothing else, that you have practically destroyed State regulation, and that the Interstate Commerce Commission has substituted an entirely new rule of rate making, has taken upon itself an impossible burden of making State rates, and is going to make them, if it makes them at all, regardless of local conditions, which are so important, and that it is simply beyond them to do this to the satisfaction of the people or the best interests either of the carriers or the shipping public.

You can not have knowledge in a tribunal here in Washington, no matter how great the ability of those who are administering the law, that can understand all local situations.

My time is about up, but I want to state to you what I think is really, after all-I did not think so at first-about the most practical system of rate making. I believe that system of rate making is best which takes into Consideration the condition of the carriers, business, trade and all that. I believe it is best, as it functions quickest, and with the least red tape. I believe our system in Wiscons'n, where we can make a rate by telegraph in 20 minutes, which we have done many and many a time, to permit shipments, and to meet conditions which have existed, with our knowledge of what we were doing, and with our knowledge of whether it was just or right, has been for the benefit of the shippers and the carriers. There is no Shreveport case at present against Wisconsin, and we are free there. It has been for the benefit of the shippers and carriers. 'We are changing rates all the while.

If we have to come down to Washington every time we wanted a rate changed, and we had our rates frozen in the State of Wisconsin as the great State of Illinois has its rates frozen, with no tribunal to which you can go to change a State rate alone, if every time you wanted to change a State rate in the State of Wisconsin for the benefit of everybody you had to come to the great capital here at Washington and go through the forms which are very Flaborate for changing even a simple rate, why, then, you simply have enforced anonelestic, impossible system of rate making which is not for the benefit of the shippers, the State, or the carriers. I can not believe that it is.

I want to state one other thing right here, if I may, so that there may not be any misinterpretation of the position of those who come here. The men who Come here, Senators, are men who mostly represent public utilities commissions, well as railroad commissions, from all over the United States. They are men who have been through the fire, who have carried public utilities through alive all over this country, have taken the public blame, where it was unreasonable very often, who have done their duty, and have done justice to the utilities and saved them and brought them through all of these crises. They are not men who are just coming down here through some spirit of jealousy. They are not actuated by any propaganda against carriers. We all appreciate that the arriers, if they are going to perform the service properly, must have rates which will allow them to perform their service properly. But we do think that This tendency, which has unconsciously been gowing up, to take control of the mense, intricate rates all over the United States, either freeze them up or hange them without knowing why they are changing them, is not in the public nterest, is not in the interest of the shipper, and is not in the interest of the arriers.

I thank you, gentlemen.

The CHAIRMAN. I may say to those members who have come in since the statement was made that there are certain of the commissioners from outside Aho can not remain over the day, and therefore it has been the sense of the tmbers who have been here that we allow them to go on and make their stateDents without interruption, so far as that seems possible.

Who will be your next witness, Mr. Benton?

Mr. BENTON. Judge Hale, of New York, Senator.

STATEMENT OF HON. LEDYARD P. HALE, COUNSEL TO THE PUBLIC SERVICE COMMISSION OF THE STATE OF NEW YORK.

The CHAIRMAN. Will you state your name?

Mr. HALE. Ledyard P. Hale.

The CHAIRMAN. And your relation to this subject?

Mr. HALE. I am counsel to the Public Service Commission of the State of New York.

I will take very little time indeed. All I want is to present, Senator, the facts of the New York case, and how it was presented to the New York commission. Senator POMERENE. That is the case that is now in the Supreme Court? Mr. HALE. That is now in the Supreme Court. It has been argued, but not decided, and I assume that a decision will await reargument in the Wisconsin

case.

Now, I have here the original complaint made on the 4th day of August, 1920, and there is no word in it except that on account of the recent order of the Interstate Commerce Commission in Ex parte 74 there was thereby created a discrimination between the interstate and State rates.

The CHAIRMAN. That is, a difference?

Mr. HALE. A difference. And therefore the State rate must be advanced so that there should not be any discrimination. There was no fault found with any rate, not even with the 2-cent rate of the New York Central Railroad between Albany and Buffalo, which is as old as the railroads composing the original New York Central, which ran only between Albany and Buffalo, did not communicate with New York directly. That, even, was not alleged to be confiscatory or unreasonable, but it was simply alleged that inasmuch as the order of the Interstate Commerce Commission increased the rate from 3 cents a mile, as fixed by the Federal administration during the war, to 3.6 cents. that all our local rates, without any regard to the character of the service or its value or to the value of the property, or otherwise, should be advanced to the same figure.

I have here a copy of the complaint which I will file with the committee. It is very brief and very much to the point.

The CHAIRMAN, That will be inserted in the record.

(The complaint is as follows:)

In the matter of advances in railroad rates.

The PUBLIC SERVICE COMMISSION,

State of New York, Second District:

The steam railroad companies of the State of New York represent to your honorable commission as follows:

That heretofore and beginning upon the 24th day of May, 1920, the Interstate Commerce Commission, in accordance with the directions of section 15 (a) of the interstate commerce act, as inserted by the transportation act of 1920, held hearings, took the testimony of many witnesses, and received numerous exhibits relating to the facts as to the railroads of the continental United States with a view to determining whether, under the provisions of the said section 15 (a) and under the facts as presented to them, increased rates should be granted to the carriers in order that the rate of return prescribed by said section 15 (a) should be received by the carriers. It is understood that a copy of the record in this proceeding has been lodged with your honorable body.

That on the 20th day of July, 1920, the United States Railroad Labor Board, a board duly appointed in pursuance of the provisions of the transportation act, handed down a decision in a controversy then pending before it, relative to the compensation of the employees of carriers by railroad in the United States, among others carriers by railroad in the State of New York, whereunder and whereby large additional increases in operating expenses resulted to said railroads, and that thereupon the steam railroad companies filed with the Interstate Commerce Commission supplementary suggestions relative to additional revenue, which would be needed in order to meet the additional expenses contributable to the decision of the Labor Board.

That on the 31st day of July, 1920, the Interstate Commerce Commission handed down its decision in the above matter with an opinion, a copy of which is hereto attached, granting increases in freight rates, in passenger rates, and in charges for certain incidental services detailed in the opinion. The increases authorized by the Interstate Commerce Commission are, as appears

in the said report, permitted to become effective on five days' notice to the public.

The carriers by railroad in the State of New York are in that rate district which is, in the opinion of the commission, denominated the "eastern district," and the increase in freight rates which is authorized to be made by these carriers is 40 per cent above the rates now in force. The increase in the incidental services mentioned in the opinion is also 40 per cent. The increase in passenger rates is 20 per cent, such passenger rates includ ng standard local or interline fares, excursion, convention, and other fares for special occasions; commutation and other multiple forms of tickets; extra fares on limited trains; club-car charges. An increase of 20 per cent is granted on rates upon milk and cream and an increase is granted upon excess-baggage rates. A surcharge is granted upon passengers in sleeping or parlor cars.

To the end that undue and unreasonable discrimination may be avoided and that the increases in transportation charges may be fairly nd equitably distributed throughout eastern territory, advances should be made in the transportation charges applicable to intrastate traffic in conformity with and to the extent of those authorized by the Interstate Commerce Commission on interstate traffic. The advances in the intrastate transportation charges should be made effective on the same date as the advances in the interstate transportation charges. The advances in the interstate transportation charges are proposed to be shown by brief supplements to existing tariffs.

The steam railroad companies of the State of New York therefore respectfully request that this honorable commission, in pursuance with the power vested in it by the public service commissions law of the State of New York, permit these carriers, by brief supplements to existing tariffs, to make advances on all the transportation charges applicable to intrastate traffic, including freight rates, passenger fares, charges for the transportation of baggage, milk and cream rates, and the other miscellaneous services specifically mentioned in the decision of the Interstate Commerce Commission in conformity with and to the extent of the advances authorized by the Interstate Commerce Commission on interstate transportation charges applicable to intrastate traffic, and to make such advances effective on five days' notice to the public.

If it should seem best to your honorable body that a hearing should be had respecting the tariffs as to freight rates or as to passenger rates, or as to both, it is respectfully requested that a date for such hearing be set as early as is convenient to the commission, as the supplements referred to above will be filed with the Interstate Commerce Commission and the effective date therein named within a very short time and uniform action is highly desirable.

CHARLES C. PAULDING,

On behalf of steam railroads in the State of New York.
DELAWARE, LACKAWANNA & WESTERN RAILROAD Co.,
By P. J. FLYNN, Vice President.

LEHIGH VALLEY RAILROAD CO.,

By C. A. BLOOD, Traffic Manager.

Dated August 4, 1920.

Mr. HALE. I wish to call attention to this language in the complaint: "To the end that undue and unreasonable discrimination may be avoided find that the increases in transportation charges may be fairly and equitably distributed throughout eastern territory, advances should be made in the transportation charges applicable to intrastate traffic in conformity with and to the extent of those authorized by the Interstate Commerce Commission on interstate traffic."

I do not need to enlarge. That is the whole of it.

Now, the order entered on that particular petition was that the case be dismissed, because on a later petition, which I will hand in to the committee, the whole matter of freight rates was taken care of by another order.

(The opinions of the New York commission referred to are on file with the committee.)

Senator POMERENE. You mean the order issued by your New York State Commission, do you?

Mr. HALE. Yes; but so far as as the passenger rate was concerned, that was a denial of the advance asked for, because the advance asked for was not pur pon any basis that the present rate was too low. I have the order and I have the opinion of the commission, which I will file with the committee.

The CHAIRMAN. They will both be inserted in the record. (The order is as follows:)

Case No. 7704. In the matter of the petition (or complaint) of the New York Central Railroad Co., the Delaware, Lackawanna & Western Railroad Co., the Lehigh Valley Railroad Co., and other steam railroad companies in respect to proposed higher passenger fares.

At a session of the Public Service Commission, second district, held in the city of Albany, State of New York, on the 19th day of August, 1920.

Present: Charles B. Hill (chairman), Frank Irvine, John A. Barhite, Joseph A. Kellogg, George R. Van Namee, commissioners.

Upon the facts found and for the reasons stated in the accompanying opinion, it is

Ordered, That the petition herein be, and the same hereby is, denied, save in so far as it relates to freight rates, and as to such freight rates, that it be dismissed because the subject matter has been determined in case No. 7693.

By the commission. [SEAL.]

FRANCIS E. ROBERTS,
Acting Scretary.

Mr. HALE. So far as that case is concerned, that is all there was to it. Now, that complaint was dated August 4, 1920. On August 10 came an application for increase in the freight rates, separate and apart from the other, and in that case the order of the commission was that they be permitted to file on short notice their tariffs, which included these advanced rates, but the commission reserved the right to examine any of the rates if complaints were made.

Senator TOWNSEND, What commission are you now talking about--the Interstate Commerce Commission?

Mr. HALE. No; I am talking about the New York State commission's order. Senator TOWNSEND. All right.

Mr. HALE. There were subsequently a few applications made-sand and gravel particularly-on account of contractors for the State highways, and those rates were lowered without any objection particularly on the part of the carriers.

I have here the petition, the order of the commission, and the opinion of the commission, which I will file with the committee.

The CHAIRMAN. They may be inserted in the record.

Before the Public Service Commission, second district, State of New York. Petition of carriers for author.ty to increase freight rates on less than statutory notice.

THE PUBLIC SERVICE COMMISSION,

State of New York, Second District.

GENTLEMEN: The steam railroad carriers subject to the commission's jurlsdiction hereby petition, by and through the undersigned committee, that the commission issue a special permission order authorizing such carriers to issue and file with the commission, effective August 26, 1920, on not less than five days' notice to the commission and the public, tariffs or supplements to tariffs providing for an increase of 40 per cent in all existing freight rates, except rates on fluid milk, cream, and articles taking same rates, whether transported in ordinary freight trains or special milk trains; an increase of 20 per cent in rates on fluid milk, cream, and articles taking same rates, and an increase of 40 per cent in charges for switching, transit, weighing, diversion, reconsignment, lighterage, floatage, storage (not including track storage), and transfer, where the carriers provide separate charges against shippers for such services, also the revision of switching absorption tariffs so as to provide for the revision of switching absorptions in accordance with the increased switching charges herein petitioned for, subject to the rules and conditions prescribed by the Interstate Commerce Commission as to interstate rates and charges contained in its oponion in the matter of the application of carriers in official, southern, and western classification territories for authority to increase rates (Ex parte No. 74) dated July 29, 1920.

Your petitioners respectfully invite your attention to the statements filed with the Interstate Commerce Commission on behalf of carriers in official