The CHAIRMAN. I do not want to argue the matter.

Mr. LYON. No; but I can not give you a yes or no answer

The CHAIRMAN. I am trying to get information, through you. Is the investment of any company fairly well operated in this coastwise trade through the canal impaired by reason of the operation of the existing law?

Mr. LYON. I can not answer that question.

The CHAIRMAN. So you can not tell me whether they are earning as much as they ought to earn in order to return a fair dividend to the investors and provide for the upkeep of their business and pay dividends?

Mr. LYON. All I can tell you is that some are in the hands of receivers.

The CHAIRMAN. But would you want to say that it is due to the operation of the existing law?

Mr. LYON. No, not entirely. It may be due to incompetency in operating boats. I would say that in my opinion.

The CHAIRMAN. Can we agree, for instance, that there are two great considerations involved; one, the well-being, and proper wellbeing, of invested capital in legitimate business, and the other, closely tied into it, the fair interest of the people of the country? Mr. LYON. Is that the question before Congress?

The CHAIRMAN. Yes; I think so.

Mr. LYON. I think you ought to consider the question of the country

The CHAIRMAN (interposing). Would you agree with me that the well-being of the people of the country is one of the important elements in this consideration as affected by rates, of course?

Mr. LYON. I cannot answer your question.

The CHAIRMAN. I beg your pardon?

Mr. LYON. I cannot answer your question.

The CHAIRMAN. Well, what are we here for?

Mr. LYON. I do not know. I am here to advocate

The CHAIRMAN (interposing). Well, of course, if you do not know, I need not ask you any questions.

Mr. LYON. I am here to advocate this bill, and I make this statement in answer to your questions relating to the well being of the people of this country that it is against the interests of the country, in my opinion, to give the Interstate Commerce Commission the authority to allow less than reasonable rates by the railroads for the purpose of taking in part or in whole the business from the steamship companies, or of preventing them from securing new business, which they would do if railroad rates are reasonable.

The CHAIRMAN. We have had that argument, but that is not what I am after. I want to be clear about it. It seems to me that the contention here was that a considerable number of localities, and maybe the whole country, were suffering commercially by virtue of some pressure which was exerted under the law now in force, and to make it more immediate I was led to believe, and I do believe, that the well-being of the institutions and the establishments that are operating ships must be considered at the same time, that it is not the convenience of the people so much as it is the dollars and cents feature. If the companies which are operating are able to operate and pay a fair return on their capital and make proper provision

for maintenance and sinking fund, etc., and are increasing their fleet, and a number of companies are organized and a number of new ships are put in service, I would like to have somebody show me. how there is any oppression coming to them in respect to the present day law. Now, as to expansion, that is another matter.

Mr. LYON. I am trying to be perfectly frank with you. I think that the Interstate Commerce Commission, if they were to give effect to the fourth section as they have in most of these transcontinental cases, the exception being the Southern Pacific, the Pacific coast case, and the New England paper case, I think there would be no occasion for the passage of this amendment by Congress. The commission makes various exceptions to that, and every time it makes an exception it injures the water lines.

The CHAIRMAN. Wherein does the injury break out?

Mr. LYON. In the loss of business.

The CHAIRMAN. But are they suffering in a financial way, which we ought to look at when we consider loss of business?

Mr. LYON. I would say so.

The CHAIRMAN. You think so?

Mr. LYON. Yes, sir.

The CHAIRMAN. You do not know whether the financial statements of the companies would bear that out or not?

Mr. LYON. I have only told you that some of them are in bankruptcy. I heard one of the companies state that they had been in the red for two or three years, and that the last year they had not been. I do not know the inner workings of the accounts of the steamship companies; they are not apt to advertise it.

The CHAIRMAN. You do not hold out for your own company, which you feel you are responsible for, that the company has had any injustice put upon it in respect of being driven into a state of unfair competition as affecting earnings? I know you can not answer it, because you did not hear it.

STATEMENT OF HON. JAMES H. SINCLAIR, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH DAKOTA

Mr. FRENCH. Mr. Chairman, Representative Sinclair, from North Dakota, wants to enter his appearance and make a statement.

Mr. SINCLAIR. Mr. Chairman and gentlemen of the committee, I do not want to take up the time of the committee. I will merely appear for the Hon. Frank Milhollan, chairman of the board of railway commissioners in my State, who has made an exhaustive study of this subject and has presented an argument which I wish permission to file. He is heartily in favor of the passage of this pending legislation, and I would like to have it printed in the record.

Mr. NEWTON. As I recall it, Mr. Sinclair, Mr. Milhollan is an advocate of the rigid long and short haul provision, is he not?

Mr. SINCLAIR. Well, on the general principle, I think he believes that the fourth section of the transportation act should be interpreted practically literally; that a greater compensation should not be charged for the shorter haul, or an equal compensation should not be charged for the shorter haul. I think as a general proposition that would be stating his position fairly.

Mr. NEWTON. That is the way I understood it.

Mr. SINCLAIR. Mr. Milhollan, who is president of the North Dakota Board of Railroad Commissioners, had expected to be in Washington and to appear personally before the committee in support of this bill. He has written me that it is impossible for him to come at this time, and has asked me to present a statement of the views of the commission, which I am very glad to do. In submitting the argument of the North Dakota Railroad Commissioners, I want to express my unqualified approval of the measure before you.

My State is situated on the eastern front of the great intermountain territory which is especially affected by this legislation. We have suffered from exorbitant railroad rates in the past. Much of this burden has been due to discriminations in the application of short-and-long-haul tariffs. The result has been to retard the development of our towns and cities, and has given an advantage to business men in the coast cities over the inland merchants, jobbers, and bankers. As a general proposition, all are agreed that discriminatory rates are unfair and should not be tolerated. The Congress recognized this principle when it passed the transportation act in 1920. Section 4 of the act expressly prohibits the charging of a greater compensation for the transportation of property for a shorter than for a longer distance. It is true that the act does provide for some exceptions to this rule, but this has been the policy and the law for a great many years. As I view it, the Gooding bill will make clear the application of the law generally and in the exceptions thereto. It is legislation that will give justice in freight rates to a large section of our country, and can in no way injure any section. It will simply put all on the same footing without giving any an unfair advantage. (The statement of Mr. Milhollan is as follows:)

ARGUMENT IN SUPPORT OF THE GOODING BILL, BY HON. FRANK MILHOLLAN, PRESIDENT OF THE NORTH DAKOTA BOARD OF RAILROAD COMMISSIONERS

Probably no section of the Federal law with respect to freight transportation has caused more complaint and more dissatisfaction than the fourth section of the interstate commerce act.

The fourth section as now in effect reads:

"SEC. 4 (as amended June 18, 1910 and February 28, 1920). (1) That it shall be unlawful for any common carrier subject to the provisions of this act to charge or receive any greater compensation in the aggregate for the transportation of passengers, or of like kind of property, for a shorter than for a longer distance over the same line or route in the same direction, the shorter being included within the longer distance, or to charge any greater compensation as a through rate than the aggregate of the intermediate rates subject to the provisions of this act, but this shall not be construed as authorizing any common carrier within the terms of this act to charge or receive as great compensation for a shorter as for a longer distance: Provided, That upon application to the commission such common carrier may in special cases, after investigation, be authorized by the commission to charge less for longer than for shorter distances for the transportation of passengers or property; and the commission may from time to time prescribe the extent to which such designated common carrier may be relieved from the operation of this section; but in exercising the authority conferred upon it in this proviso the commission shall not permit the establishment of any charge to or from the more distant point that is not reasonably compensatory for the service performed; and if a circuitous rail line or route is, because of such circuity, granted authority to meet the charges of a more direct line or route to or from competitive points and to maintain higher charges to or from intermediate points on its line, the authority shall not include intermediate points as to which the haul of the petitioning line or route is not longer than that of the direct line or route between the competitive points; and no

such authorization shall be granted on account of merely potential water competition not actually in existence: And provided further, That rates, fares, or charges existing at the time of the passage of this amendatory act by virtue of orders of the commission or as to which application has theretofore been filed with the commission, and not yet acted upon, shall not be required to be changed by reason of the provisions of this section until the further order of a determination by the commission.

"(2) Wherever a carrier by railroad shall in competition with a water route or routes reduce the rates on the carriage of any species of freight to or from competitive points it shall not be permitted to increase such rates unless after hearing by the commission it shall be found that such proposed increase rests upon changed conditions other than the elimination of water competition." Section 500 of the Federal transportation act of 1920 reads:

"SEC. 500. It is hereby declared to be the policy of Congress to promote, encourage, and develop water transportation, service, and facilities in connection with the commerce of the United States, and to foster and preserve in full vigor both rail and water transportation.

"It shall be the duty of the Secretary of War, with the object of promoting, encouraging, and developing inland waterway transportation facilities in connection with the commerce of the United States, to investigate the appropriate types of boats suitable for different classes of such waterways; to investigate the subject of water terminals, both for inland waterway traffic and for through traffic by water and rail, including the necessary docks, warehouses, apparatus, equipment and appliances in connection therewith, and also railroad spurs and switches connecting with such terminals with a view to devising the types most appropriate for different locations, and for the more expeditious and economical transfer or interchange of passengers or property between carriers by water and carriers by rail; to advise with communities, cities and towns regarding the appropriate location of such terminals, and to cooperate with them in the preparation of plans for suitable terminal facilities; to investigate the existing status of water transportation upon the different inland waterways of the country, with a view to determining whether such waterways are being utilized to the extent of their capacity, and to what extent they are meeting the demands of traffic, and whether the water carriers utilizing such waterways are interchanging traffic with the railroads; and to investigate any other matter that may tend to promote and encourage inland water transportation. It shall also be the province and duty of the Secretary of War to compile, publish, and distribute, from time to time, such useful statistics, data, and information, concerning transportation on inland waterways as he may deem to be of value to the commercial interests of the country.

"The words 'inland waterway' as used in this section shall be construed to include the Great Lakes."

It has long been contended that the freedom with which the Interstate Commerce Commission exercises its discretion in authorizing violations of the fourth section is unwarranted; that it violates the spirit of the whole interstate commerce act; that it actually violates section 3 of the act, the first paragraph of which reads:

"SEC. 3. (1) That it shall be unlawful for any common carrier subject to the provisions of this act to make or give any undue or unreasonable preference or advantage to any particular person, company, firm, corporation, or locality, or any particular description of traffic, in any respect whatsoever, or to subject any particular person, company, firm, corporation, or locality, or any particular description of traffic, to any undue or unreasonable prejudice or disadvantage in any respect whatsoever."

That it actually violates section 500 of the transportation act, recited above; that the thousands upon thousands of fourth section violations permitted by the Interstate Commerce Commission are in and of themselves evidence that the purpose and intent of the act is completely nullified and set aside and that the will and interests of the poeple are being shamefully disregarded and ignored. Under cover of the so-called fourth section authorities the carriers have been permitted to "meet" competitive rates without making these rates the maximum at intermediate points. They have been allowed to meet water rates from coast to coast, which so far have been applied as maximum at intermediate points, which means, for example, that the all-rail rates from New York to Seattle, for a distance of over 3,000 miles, also apply to intermediate points in North Dakota, Montana, and other States, where the haul is not half so great.

The carriers are now engaged in proceedings before the Interstate Commerce Commission to further reduce the rates on many commodities to the Pacific coast

to meet the water rate, but without making such rates as maximum at intermediate points. The examiner who heard the case, in a very comprehensive proposed report, has recommended that the carriers' application be denied. The examiner says that granting of the application would discriminate against intermountain dealers and consumers, it would disregard the provisions of section 500 of the transportation act, and that any advantage that might possibly accrue to the western carriers would be obtained at the expense of water carriers.

The people of North Dakota were taxed to build the Panama Canal and are now being taxed to maintain it. Should they also now be called upon to pay a further tax in the form of exorbitant and discriminatory freight rates for the purpose of permitting the railroads to try to destroy water competition? There are certainly no grounds upon which freight rates from New York or other eastern points to North Dakota, higher than to the west coast can be justified. Surely if a rate, for example, of $1 from New York to Seattle, is a reasonable and compensatory rate, a higher rate to a point in North Dakota involving a 1,500 mile less haul is clearly unreasonable and unjust and an unwarranted burden upon our State. If a rate of $1 from New York to Seattle is not compensatory, then the rates to North Dakota must be exorbitant in order that the carrier may continue in business and make a profit. In either case we are made the goat. The carriers arguments in favor of such a situation are many and ingenious. They argue that they must run their trains to the coast, that the coast already has the rates via water lines, and that if they are not allowed to meet these water rates without making them maximum at intermediate points the rates at intermediate points will have to be further increased to make up for the business lost at coast points. to the water lines.

A moment's reflection, however, will establish the fallacy of such an argument. If the rates they propose to the coast points pay out of pocket cost of the service, they certainly should make a reasonable profit for a haul of 1,500 miles less. If the rates do not pay out of pocket cost, the carriers should not be allowed to establish them at the expense of the intermediate points, merely for the purpose of diverting traffic from the boat lines.

The Gooding bill does not seek to prevent the Interstate Commerce Commission from authorizing the railroads to meet competitive rates, but it does seek to prevent the carriers from exceeding such rates at intermediate points. Right in our own State we have situations which have caused more or less complaint.. The Great Northern meets rates at Aberdeen, S. Dak., established by the short lines from Illinois and Iowa points without making these rates applicable at intermediate points in North Dakota. Under the Gooding bill the Great Northern could still meet the short line rates at Aberdeen, but could not exceed such rates at intermediate points.

Viewing the situation as a whole and in the light of public interest, we are convinced that the Gooding bill should become a law and urge that you give it your unqualified support and vote for it when it comes up for vote.

STATEMENT OF MR. ROLAND JOHNSTON, PHOENIX, ARIZ.

Mr. FRENCH. Then I next have Mr. Roland Johnston, of Phoenix, Ariz., traffic manager of the Phoenix Chamber of Commerce, who will enter his appearance and submit his statement.

Mr. JOHNSTON. I appear here for the proponents of this bill and I have a statement here which I wish to file and have printed. In that statement I set forth the various organizations that I am authorized to represent.

My name is Roland Johnston; residence, Phoenix, Ariz. I am vice president of the Intermediate Rate Association and traffic manager of the traffic bureau of the Phoenix Chamber of Commerce. I will state that I first went into railroad employ in 1881. About half the time since then I have been in the employ of carriers; at other times as traffic manager and sales manager for manufacturers. I am authorized to appear at the hearing and to support Senate bill No. 2327 by the following: Salt River Valley Water Users' Association, membership of more than 6,000 members; Maricopa County