I cooperated with the Intermountain people as far as possible in securing an amendment of the fourth section in the 1920 transportation act.

This section was so amended as to forbid in plain words the granting of fourtnsection relief on account of potential water competition.

Then the Interstate Commerce Commission knew that it had to do something that would cause the removal of fourth-section violations in the South and instructed the railroads to prepare and submit a system of rates that would clear the fourth section.

CLASS-RATE ADJUSTMENTS

Because of the complaints on the part of the interior people, the Federal Administration of Railroads had previously appointed a committee to iron out these rates and they had gone so far as to construct and propose a class-rate scale and were making some effort to arrive at a proper rate structure in the south, but all that work has been stopped on the idea that they did not have a long enough time to complete it before the railroads would be turned back to their corporate owners.

After the passage of the 1920 act, the fourth-section committee was organized by the carriers, some members of which had been members of the former committee of the Federal Administration, and under the order of the commission this committee formulated rates and submitted a definite proposition to the shippers of the Mississippi Valley territory which it was thought by the carriers would establish a system of class rates that would be nondiscriminatory and remove all fourth-section departures. Mr. Longstreet; general freight agent of the I. C. R. R., was the chairman of that committee.

Now the Mississippi Valley territory extends from the Mississippi River eastward to the M. & O. Railroad and does not include anything in the Southeast. This proposition did not go to the Southeast. They submitted to the representatives of the shippers a grouping of the Mississippi Valley territory and proposed definite class rates that would remove all these fourth-section violations. The rates were proposed for the interior the same as to the river points. For instance, the first was the Memphis group, following the Southern Railway, leading from Memphis out to Grand Junction and Corinth. All rates from points north of that were suggested the same as to Memphis, putting the interior on an equality with Memphis. But the southeastern lines were there, who said, "You must make those rates high enough to protect us over in the Southeast." The western lines were there, and they said, "You must make those rates high enough to protect us in the Southwest."

So the conference that was held in Chicago in April, 1920, was not a simple conference between the carriers and shippers of the Mississippi Valley, but just a big fight extending all over the Southeast and Southwest.

The railroads on each side of us contended that the rates down the valley must be made high enough to protect them from brankruptcy, and the shippers on each side warned that if the rates in the valley were made lower theirs must be lowered too.

A permanent committee of shippers in the valley was formed to study the proposal of the carriers and to submit counter proposals to such parts as they were not willing to accept.

We worked about a year, holding many conferences with the carriers, but could not arrive at a full agreement, so that the whole matter was submitted to the commission in a joint conference over which Mr. Pitt, of the fourth section board, presided, and he submitted a compromise proposal which the shippers and the I. C. R. R. and M. & O. R. R. accepted, but the other carriers refused to be bound by it. Thus, after more than a year, a partial class rate structure was made effective in the valley from a limited territory north of us.

COMMODITY RATE ADJUSTMENTS

In April, 1921, a hearing was conducted in Memphis and St. Louis under Interstate Commerce Commission Docket No. 1303, which involved the commodity rates which the carriers had published to all points in the valley, removing fourth section violations from Ohio River crossings, Illinois territory, Chicago, and parts of the Northwest.

The grouping of territory and the general principles of rate making prescribed in the Pitt adjustment of class rates were followed in this case. The exceedingly low rates to the river and coast points were raised to a level that would give the carriers a fair profit, and the exceedingly high rates to the interior points were reduced to the same level for equal distances as was given the water points.

This was a large record requiring a long time to be digested by the examiner so that he could make the proper report to the commission. The commission confirmed the report and equalized rates on many commodities from the small territories above, became effective in the valley in April, 1922, four years after we began to fight for equalization of rates.

THE SOUTHEASTERN CLASS-RATE INVESTIGATION

In 1922 a conference was held in Washington between members of the Interstate Commerce Commission, the fourth section committee of the carriers, and certain representatives of shippers at which it was determined that the commission would of its own motion conduct a general investigation of the class rates in the whole southern territory for the purpose of prescribing an equitable and just rate structure that would eliminate fourth-section violations and remove discriminations from all communities, The carriers were instructed to submit a system of rates which, in their opinion, would accomplish these ends for application both intraterritorially, between all points in Southern territory, and interterritorially, between the Southern territory and all territories north of the Ohio River and east of the Mississippi River.

This investigation was designated as Interstate Commerce Commission Docket No. 13494. Commissioner Eastman, a member of the Interstate Commerce Commission, presided over the hearings and the several State commissions were invited to send one of their number to sit in counsel with him with the hope that a system of interstate rates might be established that would be adopted by the State commissioners, and thus a uniform structure for both intrastate and interstate traffic could be made to become effective. Several State commissions accepted this invitation and sent members to the hearings.

The first session of hearings under Docket No. 13494 was held in Atlanta, beginning in May, 1922, and three others were held there, the last one in February, 1923, while in the meantime other long sessions were held, namely, one in Asheville, N. C., one in New Orleans, one in Cincinnati, and one in New York City. This is by far the largest case ever tried by the commission. The record contains 15,045 pages of testimony while there were over 2,100 exhibits filed ranging from 1 to 100 pages each.

Briefs were filed on July 1, 1923, and Mr. Eastman submitted his tentative report to the commission in March, 1924.

Voluminous exceptions to this report were filed, especially by the carriers, who claimed that the rates proposed by this report are so low that they would bankrupt all of the railroads and they were permitted to make and submit a revenue test which included all business done under class rates for the full month of April, 1924. The report on this test was set for hearing in Atlanta on December 15, 1924. This test consumed eight months in time, and cost the carriers $250,000, and in spite of this cost of time and money is of very doubtful value, if indeed any at all, in settling the issues of this case. The commission fixed January 14, 1925, for oral argument before the full commission, and it was completed January 17, 1925.

It will doubtless be January, 1926, before any rates can become effective under the final decision of the commission in this case. Three years have gone by and the end can not yet be prophesied by any of the parties to it. In the meantime all important adjustments of rates on carload traffic are held in abeyance because it is assumed that grouping of territories and rules of rate making will be prescribed in this case that will apply to commodity, or carload traffic. During all of these years the interior people have been suffering the burdens of discriminations in rates because of the thousands of fourth section violations and will continue to thus suffer, for who knows how long, certainly so long as Congress permits the railroads to violate the fourth section of the commerce act.

My railroad friends object to my persistence in calling these departures from the fourth section "violations. They insist that I should say departures" which does not sound so harsh and has in it the idea of being excusable under the law and altogether more respectful, but I have seen so much of the evil consequences of such rates that I have no respect for them and insist that they are indeed violations, not only of the fourth section, but of the first, second, third, and 15a of the transportation act and are absolutely subversive of the Golden Rule.

Thus you will see, gentlemen of the committee, that although the people of the interior south have been fighting for their simple rights through every known channel of relief for seven long years, earnestly beseeching Congress to give us laws that will protect us, urging the Interstate Commerce Commission to prop

erly interpret and enforce the act as it was amended five years ago, requesting and demanding the railroads to give us reasonable, fair, and nondiscriminatory rates, we have but little relief yet and the prospects are not very bright for the coming years under the present laws and methods of procedure.

This is the reason that we are here urging you to give us the Gooding bill as passed by the Senate, known as S. 2327.

The reason why such wickedly discriminating rate structure ever came into existence and why it requires so much energy, time, and expense to overthrow it is found only in the unmitigated selfishness of human nature together with the

INEXPERTNESS OF THE LAW AND THE EXPERTNESS OF LAWYERS

I am fully aware that I have now named a class to which nearly every member of this committee belongs and in which I plead guilty of being a member, being clearly convicted by the evidence of an aged and now yellow certificate, but this discussion must proceed even if we have to invoke the ever handy rule that present company is always excepted.

Those of us who are spending so much effort to throw off the discriminatory rates under which our clients are burdened believed that when the transportation act of 1920 amended the fourth section with a proviso that "the commission shall not permit the establishment of any charge to or from the more distant points that is not reasonably compensatory for the service performed," and the further amendment, "and no such authority shall be granted on account of merely potential water competition not actually in existence"; we then had a fourth section that would be construed as being so nearly absolute that the greater part of the fourth-section violations in our rates would be removed in a very short time, and that the carriers would not continue to harrass us by filing new applications for fourth-section relief except in "very special cases.

I really believe that the members of this committee who considered and voted for these amendments believed that such would be the results, but expert lawyers soon found the inexpertness of the fourth section of the 1920 act, and have filed the records of cases before the Interstate Commerce Commission with the persistent argument that "reasonably compensatory" does not in fact mean compensatory at all. Indeed, the majority of the Interstate Commerce Commission seems to take this view, as indicated by the granting recently of certain application for fourth-section relief-carrying rates, that it seemed to us but little effort was made by the carriers to prove that they were reasonably compensatory, or that they were not in violation of other sections of the act.

In the hearing of the Gooding bill before the Interstate Commerce Committee of the Senate, Commissioner Hall was asked if the commission took the view of this question, stated by Mr. Justice Brewer in the Morgan grain case, that "Compensation implies three things: Payment of cost of service, interest on bonds, and then some dividends." Commissioner Hall answered: Mr. Justice Brewer was not dealing with that kind of a phrase or that kind of a situation. It was a question of what was compensation, wasn't it, that he was discussing? We have here a phrase that a rate which may be more or less water-compelledis that reasonably compensatory or not? How is that to be interpreted? The common-sense interpretation would seem to be—I am speaking simply for myself now-one that was reasonably compensatory under the circumstances, and one of those circumstances would be that the carrier could not get any more. (See p. 480, Senate hearing.)

I am forced to exclaim with Senator Pittman, "That would be very fine if the word 'compensation' did not have any meaning."

We of the interior have been thinking that common English words do have some meaning even when used in the laws passed by Congress, and that if a railroad in an application for fourth-section relief could prove to the satisfaction of a majority of the Interstate Commerce Commission that a rate on newspaper print from International Falls to New Orleans, a distance of 1,649 miles, of 53 cents per hundred pounds, would yield a reasonably compensatory revenue to the carriers, than a rate of that same 53 cents would be sufficiently compensatory to the carriers at a point on its main line some 200 miles north of New Orleans. The majority of the commission does not agree with us on this subject. Under fourth-section application 12278, submitted October 11, 1923, decided March 11, 1924, reported in 88 I. C. C., page 345, the commission granted the carriers fourth section relief on newspaper print and wrapping paper from International Falls and other northern mills to New Orleans without requiring them to observe 30420-25-9

the fourth section to points north of same for the purpose of enabling these mills to meet the competition in rates from eastern mills to New Orleans, by way of the Morgan lines.

I am filing with my testimony a copy, marked "Exhibit A," of the decision of the commission in that case and request that it be made a part of the record, but ask the privilege of here reading the dissenting opinion of Commissioner Eastman, in which Commissioners Campbell and McManany concur. Eastman, Commissioner, dissenting:

"Fourth section relief is granted in this case so that newspaper publishers and jobbers in New Orleans, who 'prefer American newsprint paper' and who are 'moved by patriotic motives to patronize home industry', may have opportunity to buy American instead of Scandinavian paper. It appears, however, that the 'proposed rates, if permitted to become effective, would place the Fox River group and International Falls on a substantial parity with corresponding eastern groups on newsprint paper.' In other words, the freight rates from the northwestern mills are to be equalized, not with the rates from Scandinavia, but with the rates from eastern United States.

"If protection against the competition of foreign paper manufactures is the issue here, it seems a matter which might more approximately be considered by the Tariff Commission and by Congress than by us. However, the general principle which underlies the report is what I wish more particularly to discuss, rather than its special application in this case.

"The relief here granted is based upon what is called market competition. There is no carrier competition between the northwestern mills and New Orleans which makes it necessary to depress the rate, but other producing sections can reach the New Orleans 'market at less cost, and therefore it is proposed to reduce the rates from the northwestern mills so that they, too, can sell in this market. These rates can now be reduced, provided no higher rates are charged to intermediate points, but this would sacrifice too much revenue to suit the lines which serve the northwestern mills. To limit the sacrifice they ask fourth section relief, so that they may vault over higher rates at the intermediate points and confine the reduction of New Orleans. We have discretion to grant or deny this relief and in my opinion it ought to be denied. Indeed, I think that we ought in all cases to deny relief where market competition is offered as the justification.

"The difficulty with market competition is its too pervasive character. It rarely is the case that a consuming market can be reached at equal cost from all points of production. Hence this excuse for fourth section relief may be invoked almost at will. Take these paper producing points as an illustration. If the carriers serving the northwestern mills are entitled to relief in order that those mills may sell to better advantage in New Orleans, other carriers are equally entitled to relief in order that the eastern mills may sell to better advantage at such points as Chicago, St. Louis, or Kansas City. Nor need the ⚫ carriers serving the northwestern mills stop with New Orleans. Doubtless they can find similar "market competition' at Mobile, Atlanta, and Savannah, or in northern territory at such points as Cincinnati and Pittsburgh. So long as the customs tariff makes possible the entry of Scandinavian paper, even the importers at New Orleans might reasonably ask the carriers to seek fourth section relief in order that this paper may be sold at Memphis or St. Louis, and I question whether either the carriers or we could lawfully stand in the way of such a request so long as relief is granted in the opposite direction for the benefit of the competing northwestern mills. Certainly the rule must in all fairness work both ways if it is to work at all.

"There is one qualification to this line of thought, but it only serves to point the moral. Assume a point of consumption, which I shall call C, and two points of production, A and B, one 200 miles and the other 400 miles from C. If the same carrier operates between A and C and between B and C, it certainly would not be granted fourth section relief for the purpose of equalizing the rates from A and B at C, and it probably would not be permitted to equalize them at all. If different carriers, however, serve A and B, the theory of market competition comes into play and relief would be granted. Obviously unequal marketing conditions will prevail at various points of consumption, dependent upon the extent to which the carriers that serve them have been consolidated. "Subject to this qualification, which results in discrimination, the theory of market competition, if followed consistently, will inevitably lead to all manner of cross-hauling and wasteful transportation for which the country must in the end pay. As a rule, in fourth section cases it is urged that relief will make

it possible to load cars which would otherwise move empty; but there are nowhere near enough empty car movements to support the relief to which the theory of market competition will lead, and I call attention to the fact that in this present case it is not alleged that there is here such a movement.

"Moreover, it is the larger cities which will gain whatever marketing advantage will accrue from such relief. Market competition may, and undoubtedly does, exist at small towns as well as at large cities, but the carriers' interest in it only awakens when traffic in large volume is involved. The only thing that the smaller communities are likely to gain from this form of fourth section relief is the opportunity to bear a share of the burden of wasteful transportation. "It is natural that carriers should desire to further the interests of large producers or large consumers from whom they receive much traffic, but I am persuaded that fourth section relief on the ground of market competition will not in the long run be beneficial to the country and that we ought to deny such relief."

Commissioner Eastman is an expert lawyer who devotes his talents to the good of the whole people as against special privileges to the few. His arguments in this case are convincing, his conclusions correct, and I think should have been followed by the commission.

It seems that the majority of the commission followed the line of reasoning of one of its other expert lawyers, Commissioner Hall, and construed the fourth section of the 1920 act as meaning that when the railroads ask for fourth section relief the reasonably compensatory rate for the service performed means only such rate as the railroad is able to get in competition with water carriers, or in meeting market competition.

If this case is to be made a precedent by the commission, and no doubt it will be, then, unless this session of Congress passes the Gooding bill the whole southern territory will be flooded with applications for fourth-section relief in rates on all important commodities from Chicago, St. Louis, Louisville, Cincinnati, and all similar points to New Orleans, Mobile, and other coast points, and the interior people will be driven right back to where we were seven years ago and will be forced to merely exist under the iniquitous discriminatory system of rates which has cursed us so long, but which we are determined to throw off if America, God, and justice survive in the coming years. We demand that Congress help us to

do it now.

In fact, in December, 1922, a few months after the rates became effective under Docket 1303, such an application was filed by the Illinois Central Railroad and a favorable action by the fourth-section committee was secured. Then in February, 1924, it was renewed and in March, 1924, other applications were filed by other lines and these applications were set for hearing in Memphis on May 2, 1924. Fighting men from the interior were there ready for trial and anxious to do battle for their industrial existence, but the railroads asked permission to withdraw their applications in order that they might amend them to comply with the new order of the commission issued on March, 1924, and further plead not ready for trial because the great cities of Chicago and New Orleans had not furnished the testimony which they had promised and which it was alleged was necessary to win the cases. We insisted that they should be forced to a show-down and not be allowed to withdraw these applications unless they would pledge not to file others, because it was detrimental to the business interests of the interior to be always threatened and bulldozed by the railroads and big cities, while they played hot and cold with the commission.

The examiner took notes of the pleas of both sides and passed the matter up to the commission for settlement. We have heard nothing from these applications since, but soon afterwards the Senate passed the Gooding bill and they are only waiting to see if they can not kill that bill in this committee and if they do new applications will be filed and the commission has already bound itself to grant the relief by its position taken in the above case.

I here file copies of two of these applications, marked "Exhibit B" and "Exhibit C" to my testimony.

The rates here proposed violate the fourth section at intermediate points back into the interior for some 300 miles and will enrage several million people against the railroads and thus revive all of the old ill feeling between the carriers and shippers which we had hoped was at an end: Can this committee afford to take any part of the blame on its own shoulders for the continuance of such conditions in the South by refusing to amend the present law in such manner as to prevent them?

The inexpertness of the present fourth section is clearly and painfully demonstrated by fourth section order No. 8900, issued by the commission on March 4,