"The record is persuasive that if the respondents are to participate in the movement of this traffic their rates must be on a level which will furnish some inducement to the shippers to use the rail services as compared with the more advantageous motor-carrier services. The rates here proopsed, however, clearly are lower than necessary to meet the competition. The establishment of rates on such low levels would invite further reductions by the motor carriers leading to a possible rate war, with serious adverse effects upon the revenues of both respondents and the motor carriers. Moreover, the proposed rates, in our opinion, do not properly reflect the relatively high value of this traffic, its classification ratings, nor the fact that it embraces articles in the luxury class. Considering these factors, the traffic would not bear its fair share of the transportation burden under the proposed rates, and, therefore, such rates have not been shown to be just and reasonable” (p. 229).

Scrap rails from southern ports to Chicago (283 I. C. C. 357 (1951; Div. 2)): Railroads proposed to establish reduced rates on scrap iron and steel rails from Gulf of Mexico and South Atlantic ports to Chicago. Barge lines protested.

No question was raised as to the compensatory character of the proposed rates. No reduction was allowed. The proposed rail rates were found to exceed by only about 30 cents per ton the lowest cost by barge, and the I. C. C. said: "The record is convincing that such a narrow differential would effectively eliminate water competition” (p. 361).

The Commission cited as controlling the following language from an earlier decision:

"While the suspended rates have been shown to be reasonably compensatory, there is still a question as to whether they may be regarded as unreasonably low, in violation of section 1, construed in the light of the national transportation policy declared by the Congress. All Freight from Eastern Ports to the South (245 I. C. C. 207, 251 I. C. C. 361). In the proceeding cited the Commission said: "The Transportation Act of 1940 imposes on us the duty to scrutinize rates purportedly made on the out-of-pocket cost or minimum-rate theory to meet alleged competition and to reject them even if they yield something above all costs when they are less than prevailing reasonable rates prescribed by us, in the absence of proof that they are required to meet the compelling competition, and that they will not foster unsound economic conditions in transportation among the several carriers or otherwise contravene the policy declared by the Congress in the national transportation policy. In the absence of convincing evidence that special rates are justified by the facts and circumstances in particular situations, every rate should bear its fair share of the transportation burden'" (p. 361). Southwestern Tank Truck Carriers Committee et al. v. Abilene & Southern Railway Company et al. (284 I. C. C. 75 (1952; Div. 3)) :

Truckers complained that railroad rates on petroleum products from points in Illinois, Missouri, Tennessee, Arkansas, Louisiana, Texas, New Mexico, Oklahoma, and Kansas to destinations in the Southwest were unreasonably low, and sought to have the ICC prescribe higher rail rates.

The Commission prescribed higher rates despite its findings that:

"These and numerous other comparisons of record indicate that the assailed rates are compensatory" (p. 83); and "The car-mile revenues under the assailed scale are substantially higher than the average for all carload traffic" (p. 84). It gave as its reasons:

"It seems clear that the needs of the national defense require adequate and efficient truck transportation to airfields and for industrial, agricultural, and domestic users (p. 84).

"The assailed scale *** appears to be unduly low in view of the competitive situation.

"Where two of several modes of transportation are competing strongly for the same traffic and both are necessary to meet the needs of shippers and of the national defense, rates of both modes must be reasonably compensatory and so related that they will not be unreasonable, unfair, or destructive, but will promote adequate, economical, and efficient service by both modes of transportation and preserve their inherent advantages" (p. 85).

Petroleum Products in California and Oregon, 284 I. C. C. 287 (1952; entire Commission):

Railroads proposed to establish reduced rates on petroleum products from San Francisco Bay area points and from Portland and other ports to destinations in southern Oregon. Motor and barge carriers and others protested.

As to the compensatory character of the rates, the Commission said: "*** the conclusion is warranted that the proposed rates will meet the respondents' direct costs of operation from the San Francisco Bay area, and will contribute substantially to the overhead burden and profits" (p. 304).

The ICC authorized rates 22 cents higher than proposed from the San Francisco Bay area; and declined to authorize any reduction at all in the rates from Portland. Its reasons:

(a) Higher rates from San Francisco.-

"Costs are not ***the sole criterion. An important consideration is whether the proposed reduced rates are lower than necessary to meet the competition encountered. No justification appears for the establishment of levels of rates lower than the total expenses to shippers incurred in the transportation over the competitive routes" (p. 304, 305).

(b) No reductions from Portland.-"There is no showing of a competitive necessity for the reductions made or proposed to be made in the Portland rates. The rail and motor rates from Portland had been on a parity for some time. There is no showing that the respondents suffered a loss of traffic by reason of such a parity. That the rates proposed would in fact alter the competitive situation in favor of the respondents is shown by the almost complete cessation of movement from Portland by the motortrucks, except to points not served by rail, since the effective dates of the reduced intrastate and the related interstate rates. * * * The reduced rates proposed would affect adversely the maintenance of competitive motor-carrier transportation from the Oregon points. Such consequences to the transportation in Oregon would not be in consonance with the national transportation policy, which contemplates the maintenance of reasonable transportation charges without unfair or destructive competitive practices" (p. 306).

Coffee from California to Utah and Idaho (289 I. C. C. 93 (1953; Division 3)) : Railroads proposed reduced rates on green and roasted coffee from California points to points in northern Utah and southern Idaho. Motor carriers protested. There was no discussion of the compensatory character of the proposed rates, but no reduction was authorized. The Commission said:

"From the evidence before us, we are convinced that the resulting charges under the proposed rates would be lower than necessary to meet the competition, and that the establishment thereof would constitute an unfair competitive practice" (p. 96).

Magazines from Darby and Philadelphia, Pa. to Texas (292 I. C. C. 493 (1954; Division 3)):

Railroads proposed to establish a reduced rate on magazines and periodicals from Pennsylvania points to destinations in Oklahoma and Texas. Water carriers protested.

The Commission said: "It thus appears that the proposed rate would be compensatory" (p. 496); but it nevertheless permitted no reduction. If found: "The record is convincing that the proposed rail rates are lower than necessary to meet the presently ineffective competition over the water, water-rail, or watertruck routes, and that the proposed rates would result in a needless sacirfice of carrier revenue and in unfair or destructive competitive practices, in contravention of the national transportation policy" (p. 496).

Pig lead from Texas to East St. Louis and St. Louis (292 I. C. C. 797 (1954; Division 3)):

Railroads proposed to establish a multiple-car rate on pig and slab lead from certain Texas points to St. Louis and East St. Louis. Barge interests protested. There was no discussion whatsoever of the compensatory character of the rate proposed; but the Commission said:

"The paramount question to be decided is whether or not the proposed rate is lower than necessary to meet the competition offered by barge service from Brownsville" (p. 799).

It found:

"Establishment of a reduced rate as proposed by the respondents is thus indicated to be lower than necessary to meet the existing barge competition, and would constitute an unfair competitive practice inconsistent with the national transportation policy" (p. 800).

Aluminum articles from Texas to Illinois and Iowa (293 I. C. C. 467 (1954; Division 2)):

Railroads proposed to establish a reduced all-rail rate on aluminum billets, blooms, ingots, pigs, and slabs from Gregory and Point Comfort, Tex., to Riverdale, Iowa.

This was the second attempt to establish a competitive all-rail rate for these commodities over this route. In Aluminum, Point Comfort Tex., to East Davenport (283 I. C. C. 85 (1951)), the railroads had sought in vain to establish a reduced rate, but the I. C. C. held that it was lower than necessary to meet the competition. Now, in the instant proceeding, as stated in the ICC report: "The respondents point out that the situation which they anticipated when they made the previous attempt to reduce their rates on this traffic has developed and that the major portion, if not all, of the traffic, during the period in which there is open navigation on the upper Mississippi River, has been shifted to barge lines" (p. 469).

Despite this background and despite the absence of any question with regard to the compensatory nature of the rate now proposed, the Commission authorized a rate 47 cents higher than that proposed by the railroads. It said:

"Considering the values of the commodities, their physical characteristics, the additional difficulties which are involved in a truck movement in making delivery at destination, the substantially longer transit time by water, the movement by rail during periods of closed navigation, and also the economies which could result from more efficient methods of handling in connection with the movement by water, we conclude that a greater spread between the rail and water transportation costs than would result from the rate proposed is necessary for competition that is not unfair or destructive, as required for consistency with the national transportation policy" (p. 472).

Tinplate from Fairfield, Ala., to New Orleans, 294 I. C. C. 397 (1955; Division 2)):

Railroads proposed to establish a reduced rate on tinplate and related commodities from Fairfield, Ala., to New Orleans. Motor carriers and barge lines protested.

The ICC said: "The evidence indicates that, at least over the more direct routes, the proposed rate would be reasonably compensatory" (p. 400); but the motor carriers urged: "*** that the purpose of the proposed reduction is to deprive them of their present share of the traffic rather than to meet barge-line transportation" (p. 400).

Authorizing a rate higher than that proposed by the railroads, the Commission

said:

"The evidence is convincing *** that the proposed rate of 36 cents would be lower than necessary to afford the carriers concerned a fair opportunity to compete for this traffic, and that a rate of 40 cents, minimum 80,000 pounds, would be just and reasonable, and competitively fair to all carriers competing for the traffic" (pp. 403–404).

Sugar from Atlantic and gulf ports to Ohio River crossings (296 I. C. C. 121 (1955; division 2)) :

Railroads proposed reduced rates on sugar from New Orleans and other sugar originating points on the South and North Atlantic coast to Ohio River crossings (Cincinnati, Louisville, and Evansville) and certain other points in Indiana, Kentucky, Ohio, and Tennessee. Barge lines and other water-carrier interests protested.

The Commission found:

"The earnings resulting from the proposed rates would compare favorably with those for comparable hauls on various other commodities * * * the evidence is convincing that the proposed rates would be reasonably compensatory" (p. 125).

It nevertheless held that the proposed reduced rates were not shown to be just and reasonable, and said:

"In determining the amounts by which the rail carriers should be permitted to reduce their normal rates to meet water competition, cost of service is not the only consideration. It is obvious that, to some extent at least, the rail carriers provide a service superior to that of barge-line transportation, a factor which the Commission has recognized in past proceedings of this character. *** In these and similar proceedings the rail carriers have been limited to rates approximately 10 percent higher than the overall water costs" (p. 135).

Incidentally, in connection with the foregoing finding of "obvious" superiority in rail service, the only testimony on this point referred to in the ICC report was therein summarized as follows:

"A witness for this shipper [Savannah Sugar Refining Corp.] testified that the relative slowness of barge transportation was not to its disadvantage because the purchaser is not required to pay for the sugar until it is received and, in the meantime, is protected in the event of a fluctuation in price; and that, on the con

trary the slowness of barge transportation is often advantageous to the shipper where storage space may not be available." [Emphasis supplied.] (P. 126.) Sulfur from Louisiana, Texas, and Wyoming, to Illinois, Iowa, Michigan, Minnesota, Nebraska, and Wisconsin (297 I. C. C. 1 (1955; division 2)) :

Railroads proposed reduced rates on crude sulfur from origins in Louisiana, Texas, and Wyoming to certain destinations in Wisconsin, the Upper Peninsula of Michigan, Minnesota, Illinois, Iowa, and Nebraska. Barges protested.

The matter of the compensatory character of the proposed rates was not mentioned in the ICC report. The proposal contemplated all-rail rates which would be 12 cents to $2.20 per gross ton greater than water-truck costs to shipper.

The Commission authorized no deduction, finding "that the reduced rates proposed are not shown to be necessary to meet existing water and potential water-truck competition" (p. 5). It said:

"How much of a rate spread, water under rail, or water-truck under rail, would make feasible a diversion from rail transportation to water transportation to these destinations is uncertain. There are a number of unfavorable factors present in the transportation by water which are not encountered in the transportation by rail that militate against the use of barge-lake or barge-lake-truck service. *** All of these factors are considerations in the determination of the mode of transportation" (p. 4).

Timing gear chains from Ithaca to Cleveland (297 I. C. C. 208 (1955; division 2)):

Railroads proposed to establish a reduced rate on timing gear chains, from Ithaca, N. Y., to Cleveland, Ohio. Motor carriers protested.

As to the compensatory character of the proposed rate, the Commission said: "The compensatory nature of the proposed rate is supported by a comparison with earnings of the two carriers which participate in the movement” (p. 209). Actually, the proposed rate would have produced ton-mile revenues three times greater than system averages of the rail carriers.

The ICC did not authorize any reduction in the rail rate. It said: "The burden of proving the justness and reasonableness of the proposed change is upon the proponent carriers. Although the proposed rate appears to be compensatory, this in itself is not enough where, as here, the rate is not shown to be on a maximum reasonable basis. In such circumstances the rate must be shown also to be no lower than necessary to meet the competition of other carriers. The only justification advanced by the respondents for the proposed reduction, and the only yardstick offered to measure the resultant differential, rail under motor, is the additional cost that is alleged to be incurred by the shipper in shipping by rail. There is no convincing evidence that such additional cost exists or, if it does exist, how much it is. Thus, the respondents have not sustained their statutory burden.

"From the evidence before us, we conclude that the proposed rate is lower than necessary to meet competition, and that the prospective establishment thereof constitutes an unfair competitive practice in contravention of the national transportation policy" (pp. 209–210).

Pig Iron from Rockwood, Tenn., to Chicago and Joliet (298 ICC 430 (1956; division 2) (report on reconsideration):

Railroads proposed to establish a reduced rate on pig iron from Rockwood, Tenn., to Chicago and Joliet, Ill. Barges protested.

The ICC found that "the rate proposed appears to be compensatory" (p. 431), but held:

"Upon further consideration of the record, we are persuaded that the inferior barge-rail service and much higher minimum which exist here necessitate a rate materially lower than that over competing all-rail routes if any substantial portion of this traffic is to move over the water route. It follows that the proposed rate is lower than necessary to meet the competition, and constitutes an unfair and destructive practice, in contravention of the national transportation policy" (p. 432).

Gasoline and Fuel Oil from Friendship to Virginia and West Virginia (299 ICC 609 (1957; division 3):

2

Railroads proposed a reduction of 1.5 cents generally in their rates on gasoline and other petroleum products from Friendship, N. C., to numerous destinations in Virginia and West Virginia. This would have brought the rail rates 1.5 cents below truck rates. The motor carriers protested.

2 This case was reopened for further hearing during January 1958.

The ICC found that the proposed rates would be compensatory:

"Thus, the proposed rail rates would in all instances, as did the prior rates, contribute substantially to the overhead burden from all carload traffic. * ** We conclude that both the rail and the motor rates from Friendship are and would be reasonably compensatory" (p. 617).

The Commission found further:

"It thus appears that for the rail hauls here concerned, the rail carriers have an inherent advantage in cost over the motor carriers for distances of about 75 miles or more" (p. 619).

The rates authorized, however, were only 1 cent less than the truck rates. The ICC gave as its reason:

"The evidence before us is persuasive that under an equal basis of rates in this area the tank trucks would carry most of this traffic, and also that under a spread of 1.5 cents, rail under motor, the great bulk of the traffic would be carried by the railroads. It indicates, in addition, that a spread of about 1 cent, rail under motor, for distances of 75 miles or more from origin would give full recognition to the inherent advantages of each mode of transportation and afford both modes a fair opportunity to compete for the traffic" (pp. 620-621).

Senator SMATHERS. All right, Mr. G. C. Taylor, of the Mississippi Valley Barge Line Co.

All right, Mr. Taylor, we are glad to have you back for your second turn at bat. We have a second go-around for some of these people. We are glad to hear you again on this specific section.

STATEMENT OF G. C. TAYLOR, PRESIDENT, MISSISSIPPI VALLEY BARGE LINE CO., OF ST. LOUIS, MO., ACCOMPANIED BY HARRY C. AMES, ATTORNEY

Mr. TAYLOR. I have with me Mr. Harry C. Ames, who has a long history as a commerce attorney, has been an examiner with the Commission, and has been commerce attorney for our company since its inception. I suspect that there will be, perhaps, questions that I am incompetent to answer, technically, and I hope it will be permissible for me to refer such as I don't feel competent on to him.

Senator SMATHERS. He is competent; I have had several meetings with him, myself.

Mr. TAYLOR. My name is G. C. Taylor. I am president of the Mississippi Valley Barge Line Co. with headquarters in St. Louis, Mo. The statement I am about to make is presented on behalf of the Inland Waterways Common Carriers Association, of which my company is a founding member.

The Inland Waterways Common Carriers Association is composed of most of the common carrier barge lines on the inland waterways of mid-America. We serve 21 States along 6,500 miles of navigable rivers and canals.

We appear here today in opposition to section 5 of S. 3778. This is the controversial section that would change the rules of railroad ratemaking by adding a third subparagraph to section 15 (a) as follows:

In a proceeding involving competition with another mode of transportation, the Commission, in determining whether a rail rate is lower than a reasonable minimum rate, shall consider the facts and circumstances attending the movement of the traffic by railroad and not by such other mode.

We do not oppose the other seven sections of this bill. We are genuinely anxious to see the railroads recover full economic health. It is our position, however, that the changes in the rules of railroad ratemaking proposed in this section could result in the elimination of