: Mr. ESCH. On a single rate on a single commodity I very much doubt whether the commission would institute a proceeding on its own motion. We do that only where there are many rates and interests involved and a wide territory affected. many Mr. NEWTON. Assuming that here was "a hole" that everybody had gotten into, there is a way out; that is what I am getting at. Mr. Escн. If you make it as broad as that, I suppose the commission would probably do that. The CHAIRMAN. How many members are there at present serving on the commission? Mr. Escн. Eleven. The CHAIRMAN. Am I correct in understanding from what you have said that out of the 11 only one has seen fit to register any expression favorable to the Gooding bill? Mr. Escн. He is the only one who has presented a statement. Mr. SHALLENBERGER. Mr. Commissioner, this bill, as I understand it, is advocated largely by the proponents because it is supposed to protect the users of railway transportation in the interior from this situation which might arise if the commission ordered too low a rate to the coast, under the requirements of section 15a, whereby you are required to allow the railroads to earn a fair return, and you might have to make a rate to the interior too high, on account of the possible loss of this coast trade. Are there any instances now where you have had to raise rates to the interior points to make good the losses, where you have given them low rates because of water competition? Mr. Escн. We have not since the transportation act was passed authorizing higher rates to intermediate points than to the terminals, so far as transcontinental traffic is concerned. Mr. SHALLENBERGER. It is only due to fear of the future rather than on account of something that is existing now? Mr. Escн. I do not think we have considered it even in other cases. The CHAIRMAN. If there are no further questions, the hearing will now be considered closed. FROM WISCONSIN TRAFFIC ASSOCIATION EXHIBIT "1" Before the Interstate Commerce Commission.-Reduced rates on commodities from originating territories west of the Indiana State line to Pacific coast terminals.—Fourth-section application No. 12436. Exceptions to report proposed by M. A. Pattison, attorney-examiner.— By J. E. Bryan, traffic manager, Wisconsin Traffic Association; C. R. Hillyer, attorney; 28 East Jackson Boulevard, Chicago, Ill.; dated at Chicago, Ill., September 14, 1924: I. STATEMENT The Wisconsin Traffic Association, representing paper manufacturers in the States of Wisconsin and upper Michigan, offers herein exceptions to the conclusions reached by Attorney-Examiner M. A. Pattison, and to the proposed denial of fourth-section relief based thereon. The attorney-examiner has very properly found that the carriers have successfully met all of the conditions precedent to the establishment of their right to relief from a strict application of the fourth section of the act to regulate com merce. We do not concur in his finding that a favorable decision would be a disregard of the policies of Congress as set forth in section 500 of the transportation act. Neither do we concur in the thought that the record warrants a conclusion that there would be violations of section 3 of the act to regulate commerce. As to fourth section violations not covered by the application we, as shippers, are not prepared to discuss that feature and assume that the interested railroads will satisfactorily answer the charges with respect thereto. The record in this case amply supports the statement of the examiner that the carriers have successfully met the necessary conditions under section 4 to permit the commission to grant the relief sought, and it will not be necessary to discuss herein the facts of record that support the conclusion of the examiner in that respect. It might well be added here that there are additional facts not touched upon in the report which strengthen the finding that the carriers have proved their case under the fourth section. II. EXCEPTION Formal exception is taken in the recommendation that fourth-section relief be denied as to rates on paper. III. ARGUMENT The question of public policy and also of statute law presented in the proposed report are vast in scope and are ably presented by the examiner. His recommendation that fourth-section relief be not granted rests upon certain errors or rather misconceptions, that we shall point out and that when considered by the commission will lead to a different conclusion from that recommended. The discretion reposed by Congress in the commission is somewhat circumscribed as to fourth-section relief and the commission has itself enumerated the criteria in a former case (74 I. C. C. 48) as follows, quoting from sheet 12 of the proposed report: "The proposed rates must cover and more than cover the extra or additional expenses incurred in handling the traffic to which they would apply, that they are no lower than necessary to meet existing competition, not so low as to threaten the extinction of legitimate competition by water carriers, and will not impose an undue burden on other traffic or jeopardize the return on the value of carrier property generally. The finding of the examiner as to these requirements is stated on sheet 22 as follows: "The record indicates that the proposed rates more than cover the additional expense of handling the traffic, are not as a rule lower than necessary to meet from Chicago territory the competition by the water route from eastern points of origin, and are not so low as to threaten the extinction of legitimate water competition. Nor does it seem probable that they would impose an undue burden on other traffic or jeopardize the return on the value of carrier property generally, If there were nothing further to consider it could be said that the applicants had met all the requirements of the law and were entitled to fourthsection relief. But there are other phases to this question which must be given careful consideration. Before fourth-section relief may be granted this commission must be satisfied that there would not thereby be created infractions of other provisions of the act, particularly those of section 3 prohibiting undue or unreasonable preference or advantage, or prejudice or disadvantage to persons or localities." The foregoing would seem to insure a granting of the application, but the report then adds additional requirements which the commission should not indorse upon the record before it. NO VIOLATIONS OF SECTION 3 PROVEN The recommendation of the examiner rests almost entirely upon alleged infractions of section 3 of the act. He instances Pittsburgh as one of the sufferers under section 3 if the application under the fourth section is granted. But the movement of steel westbound from Chicago over carriers terminating at Chicago can not violate section 3 as to a movement eastbound from Pittsburgh over entirely different rail and water carriers. The cases in the Supreme Court which uphold our statement of the law as to section 3 are too numerous and too *་ well known to need discussion here. (See 257 U.-S. 247, and cases there eited.) The circumstances and conditions surrounding the two movements are so dissimilar as to clearly distinguish this application from any contact whatever with section 3 of the act. In thus departing from the requirements laid down for fourth-section relief by the commission itself the examiner is in error. If any of said criteria were violated as to the Pittsburgh competition there might be a violation of section 4 but the examiner finds that there is no such violation. We have shown also that section 3 is not violated. There is therefore nothing before the commission under either section 3 or section 4 that will justify a denial of the application. The illustration of Pittsburgh as a competitive point and iron as a commodity applies with greater force to paper as a commodity and an eastern point of competitive paper production. At page 24 of the report, in discussing the objections raised by the Pacific coast dealers and intermountain interests, direct reference is made to the possibility of further infractions to the provisions of section 3. It is stated that at the present time the dealers and consumers in the intermountain States are on an equality with the Pacific coast dealer and consumer in purchasing in the Central West. The testimony of the witnesses for the Wisconsin paper mills was that they did very little, if any, business in the intermountain States. But be that as it may the fact remains that the change in the situation would be in the point of origin of the paper. If the relief sought is granted it is hoped that Wisconsin paper may displace some eastern paper in the coast cities and comparatively there would be no change as far as competition between dealers or consumers in the two territories is concerned. As a matter of fact the intermountain dealers would actually be benefited, for it is shown of record that paper can be shipped from the eastern seaboard to Pacific coast ports at rates less than the rate herein asked for from Wisconsin. In the testimony of Witness Bryan, as referred to at page 23 of our brief, it appears that Wisconsin mills must meet the competition of paper paying from 75 cents to $1.01 per 100 pounds with weighted average rate of about 90 cents. The examiner, at sheet 19, finds the through charge from the eastern mills will range from 85 to 96 cents. The fears of the examiner that the intermountain points will be discriminated against are unsound. As shown herein the intermountain interests would actually be benefited by the change, for it will be easier for them to compete with paper from Wisconsin which has paid a rate of $1, than it would to compete with eastern paper at rates ranging from 75 cents to 96 cents. The result will not be discrimination as feared but equality, and instead of equality being minimized as the examiner fears it will actually be increased. The foregoing considerations incline us to say that the welfare of the shippers and carriers behind this application may have been lost sight of. That granting them the same or even a modicum of the rights claimed for the water carriers and for our eastern seaboard competitors will insure the granting of the pending application. WATERWAYS V. RAILROADS The The examiner refers to the policy of Congress in promoting both water and rail transportation. (Sec. 500, transportation act.) His report, however, mistakingly leans strongly in favor of water transportation, as we shall point out. He refers to the comparatively narrow area along the Atlantic seaboard open to water carriers. But this record shows that as to paper traffic the water carriers are in effect reaching clear to Wisconsin. The paper they are taking from our eastern competitors is taking the place of Wisconsin paper on the Pacific coast. It is not the width of the strip they reach, but the effect of the competition. The welfare of this great country in its entirety must be considered. "inherent disadvantages of shipping by water," referred to by the examiner, are proven on this record to be so offset by inherent advantages as to have increased the water-borne traffic over 200 per cent in two years. That this increase has just started is plainly evidenced by the record. The question at the present moment is therefore not pregnant with fears as to the welfare of water traffic through the canal, but is one of doing something to aid rail transportation west of Chicago to the Pacific coast. The statistics of prosperity on canal traffic are matched against the depression of the rail carriers filing the application here at issue. These carriers are in receipt of the lowest net earnings of any trunk lines in the country. It is apparent that in endeavoring to protect water transportation "in full vigor" rail transportation which the law also protects has been somewhat neglected in this report. It is the general impression that Congress, in declaring its policy with respect to transportation, had in mind transportation by water as paramount to that by rail in the adjustment of rates where the two met in competition. But this is an erroneous assumption. The statute is plain that in just such cases as the instant one, Congress is mindful of the welfare of the rail lines and protects their earnings from the inroads of competitive carriers, either water or rail, that might at any time and at their own free will retire from the very service they are now fighting to enlarge. The people of the Middle West, including the carriers now before you seeking relief, paid their full and proportionate share of the cost of building the Panama Canal. We can not use the canal to the same extent as our more favorably situated eastern competitors can, but we should not be further penalized when there is open to us a reasonable and legitimate means of meeting those competitors on an equal footing. After using the rates on iron and steel from Pittsburgh, as an example, the report states, at page 23: "Thus the natural advantage of location near the Atlantic seaboard which Pittsburgh enjoys is to be neutralized by extending it to points from 500 to 1,500 miles farther away. Manufacturers of other commodities in the Central West would likewise be accorded a basis of rates to which they are not entitled by any natural advantage which they possess, whereas the manufacturers of the same commodities on the seaboard would have their advantage taken from them or diminished." Let us ask a most natural question: What is the advantage the Atlantic seaboard manufacturer has that is not available to the Middle West? The answer is plainly-the waterway through the Panama Canal. And another question: Who built the Panama Canal and for whom was it built? It was not built for the benefit of the boat lines alone, nor should it be used to hamstring that portion of the country that does not have access to its use. As shown in the above quotation the examiner feels that by granting the application the "natural advantage of location" of seaboard shippers will be neutralized. If we are entitled to share in the benefit to be derived from that to which we have contributed we should now be "neutralized" to the extent of granting this application. On page 23 of the report the attorney examiner says: "While the manufacturers of the Central West would' d thus have accorded to them the advantage of proximity to water transportation to which they are not geographically entitled, and would be placed more nearly on an equality with the eastern manufacturer nearer the seaboard with respect to shipments of the latter moving to the Pacific coast cities through the canal, they would not only continue to enjoy the advantage of their more westerly location on traffic moving all rail from the East, but this advantage would be increased." Here it is admitted that to grant the application of the carriers would put the Middle West more nearly on an equality with the East. Certainly in equality there can be no prejudice or preference. In equality there is justice. We agree that under ordinary circumstances and conditions it is not within the province of the commission to so adjust rates as to take from a shipper the benefit of his natural location with respect to a given market for his products. It is not the geographical location of the eastern manufacturers that gives them their advantage. It is the building of the canal in which all participated. Surely Congress never intended that that wonderful achievement should accrue to the sole benefit of a fraction of this great country, and to the utter disadvantage of those not located in seaboard territory. A rate of $1 per 100 pounds on paper and paper articles involved in this proceeding will permit our mills to compete on a more nearly equal basis and may restore in measure the benefit of our natural location that was destroyed by the building of and shipping through the Panama Canal. At that rate we can and will, as testified to by the several witnesses for the paper industry, withdraw our surplus tonnage from eastern markets thus permitting mills adjacent to those markets to economically and efficiently supply them. The result will be equaliza tion and not discrimination. The building of the Panama Canal and the resumption of shipping by vessel from coast to coast has resulted in conditions radically different from what they were when this commission considered and denied the carriers relief in Transcontinental Cases of 1922, 74 I. C. C. 48. The present situation shown of record warrants a favorable decision now. CONCLUSION The strongest reason confronting the commission and compelling a granting of this application as to paper rates is its exceptional reasonableness. The rate proposed from Wisconsin to the coast is $1 per 100 pounds, and there is no similarity between such a rate and the old rates that were published in contravention of the fourth-section principle 10 years ago. As shown by the examiner all the criteria laid down by the commission upon which fourth-section relief will be predicated are observed as to this rate. It does not violate the third or fourth or any other section of the statute, nor does it contravene section 500 of the transportation act. We ask the commission to bear in mind and carry out in passing upon this application as to paper the doctrine announced in its decision in 46 I. C. C. 236 as follows: "It is not our purpose to put upon these carriers any undue hardship in their attempt to meet such competition as the future holds for them. Such fourthsection application as they may find it necessary to make with reference to this traffic will be disposed of with such celerity as the circumstances may permit. Neither is it our purpose to permit the maintenance of rates to or from the Pacific coast points at a level that will render this service unattractice to the boat lines." We have been accorded an opportunity to review the exceptions filed in this case by Mr. J. P. Haynes for the Chicago Association of Commerce and others, and wish to record our concurrence in the exceptions there made to the report of the attorney-examiner. We respectfully submit that the carriers and the commercial and shipping interests have conclusively shown the necessity for favorable consideration, that no section of law is violated and the relief prayed for should be granted, J. E. BRYAN, Traffic Manager, Wisconsin Traffic Association. |