lem requiring rectification. When transportation costs of goods, both rail and vessel, are lowered, the cost of commodities at retail outlets will decrease. The law of economics tells us that the quantity of goods sold will thus increase, as will the profit to manufacturers in other States.

What is good for Alaska is good for the other 49 States.

I had hoped that my introduction last year of S. 1723 would remedy the existing situation. But many months have elapsed since that time and the overall situation remains the same. I had hoped that by calling this situation to the attention of the railroads involved that they voluntarily would have moved long before this to rectify completely this longstanding injustice. In the half century since these rates were initiated, the cost to the consumer of Alaska has totaled many millions of dollars.

That the railroads have not responded as I had hoped is evident. But we are either a united nation of equal states or we are not. If the power granted to the Congress is yet another clause of the Constitution (art. I, sec. 8, cl. 3) "to regulate commerce *** among the several states * * *" are to be so misused as to impose burdens upon a particular State, who among us can say where this discrimination will end?

Only a few weeks ago, I directed a letter to Mr. M. F. Edibrooke, chairman, Transcontinental Freight Bureau, Chicago, Ill., requesting voluntary action on the part of the railroad in equalizing the freight rates on goods destined for Alaska with those destined for Hawaii. A meeting has been scheduled for this coming Friday and I hope soon we shall have an opportunity to hear an affirmative response.

In closing, Mr. Chairman, I request permission to place in the hearing record an up-to-date listing of a few of the railroad freight rates approved by the Interstate Commerce Commissions for various commodities from several different parts of the United States. The difference in the rate charges on whether the destination is the State of Hawaii or the State of Alaska is revealing.

Thank you, Mr. Chairman, for permitting me to testify before you today on behalf of S. 1723, which we have jointly sponsored.

Senator BARTLETT. Senator Yarborough had to leave for another meeting of overriding importance. Before he left he asked me to convey to you, Senator Gruening, his commendation for a very excellent statement. I join in that expression.

Off the record.

(Discussion off the record.)

Senator BARTLETT. Senator Gruening, on the second page of your statement, you quoted the railroad freight rate on automobiles bound for Hawaii from Pontiac, Mich., as $7.83 a hundred pounds, and from Pontiac to Seward, $10. Let me ask you this: Is the water haul from Seattle shorter or farther than to Honolulu ?

Senator GRUENING. It is substantially shorter.

Senator BARTLETT. On the order, perhaps, of 700 miles?

Senator GRUENING. Some 700 miles shorter as against 2,100 miles. Senator BARTLETT. 1,500 and 2,100?

Senator GRUENING. Yes, sir.

Senator BARTLETT. 600 miles difference.

I will ask you, Mr. Grinstein, referring to Senator Gruening's statement on page 3, to inquire of the General Services Administration as to what savings would accrue to the Federal Government if these lower rates were in effect.

Senator Gruening, if this bill were to become law, what would follow as a result, in your opinion?

Senator GRUENING. Well, I would hope that the cost of living in Alaska, which is now excessive and the highest under the flag, would be substantially reduced because at present, with these discriminatory rail rates, there is an added burden on every commodity shipped to Alaska by rail and water and as we, who have wrestled with Alaska's problems for many years know, our high cost of living is one of the greatest handicaps to develop the progress that we need. That is due to the fact that Alaska is economically, although not physically, an island, and that we are dependent almost wholly on marine transportation for our freight.

Now, the thing that stands out so conspicuously in our effort to get this legislation enacted is that the price is different for exactly the same service. If two automobiles, side by side, in the same freight car, were to travel, let us say, from Pontiac or Flint, Mich., or Detroit to Seattle, but one of them had a tag on it which said Fairbanks, Alaska, Anchorage, Alaska, or Juneau, Alaska, and the other had a tag on it marked Hawaii, for the same service there would be this substantial difference in price, which seems like one of the most anomolous and improper situations imaginable. It is to correct that discrimination that this legislation is proposed.

Senator BARTLETT. Well, the bill only declares this to be congressional policy. Would it be your hope that once this declaration were made that the railroads would institute the lower rates without any compulsion?

Senator GRUENING. I would hope so. I think they are responsible people. They naturally have to protect their own financial interests, but I think they would in time, after this testimony, recognize the need of removing this injustice, and in view of the fact that the situation has changed since Alaska became a State, acceed to this indication of congressional will. I hope they will do so without this legislation.

Senator BARTLETT. Either way, this would provide them with a very effective instrument, would it not, in forestalling and warding off possible competition from the Canadians?

Senator GRUENING. It certainly would-which is imminent.

Senator BARTLETT. Senator Gruening, did Mr. Edibrooke reply to

your letter?

Senator GRUENING. Not as yet. The letter was acknowledged.
Senator BARTLETT. Mr. Grinstein, do you have any questions?
Mr. GRINSTEIN. No, sir.

Senator BARTLETT. Thank you very much for a comprehensive and useful statement, Senator Gruening.

The next witness is Chairman Murphy of the Interstate Commerce Commission.

Glad to have you here, Mr. Chairman.

STATEMENT OF HON. RUPERT L. MURPHY, CHAIRMAN, INTERSTATE COMMERCE COMMISSION; ACCOMPANIED BY DONALD P. MCPHERSON, JR., COMMISSIONER; ROBERT NEWEL, ASSISTANT DIRECTOR, BUREAU OF TRAFFIC; AND IRVING L. KOCH, ASSISTANT DIRECTOR, BUREAU OF RATES AND PRACTICES

Mr. MURPHY. Thank you.

Senator BARTLETT. Proceed as you desire.

Mr. MURPHY. Mr. Chairman, before I begin, may I introduce Commissioner McPherson, of Pennsylvania, who is here.

Senator BARTLETT. Won't you come forward, Mr. Commissioner? Mr. MURPHY. And Mr. Koch, Assistant Director, Bureau of Rates and Practices; and Mr. Newell, Assistant Director, Bureau of Traffic. Senator BARTLETT. Would you care to have them all?

Mr. MURPHY. If I may, it might expedite some of the questions.
Senator BARTLETT. As you please.

Mr. MURPHY. Mr. Chairman, and members of the subcommittee, my name is Rupert L. Murphy. I am the present Chairman of the Interstate Commerce Commission, and have served in that capacity since January 1 of this year. I am appearing today on the Commission's behalf to testify on S. 1723.

The proposed measure would amend section 3 of the Interstate Commerce Act by adding a new subsection (1b), establishing a policy with respect to rates within the continental United States which would be applicable to traffic shipped to and from the State of Alaska. The stated purpose of S. 1723 is "To establish equitable railroad freight rates."

Section 3 of the act prohibits rail and certain water carriers, subject to part I, from making, giving, or causing any undue or unreasonable preference or disadvantage. Subsection (1a) contains a declaration of policy by Congress with respect to export rates on wheat and other farm commodities.

At the present time, and for many years past, rail carriers operating within the 48 contiguous States maintain export and import rates on certain traffic which are lower than domestic rates to and from Pacific coast ports. Such rates are restricted in their application to traffic which moves to or from certain geographical areas. Virtually all lands touching the Pacific Ocean, except Canada and the State of Alaska, are covered by export or import rates to some degree. However, on traffic to or from Alaska, domestic rates are applicable. This very situation became the subject of a complaint filed by the General Services Administration in March 1955. After a final investigation, the Commission found that the element of competition which

caused the establishment of export-import rates to Hawaii and the Far East was not present on Alaska traffic. The decision in that case was based on the record then made which, in the Commission's opinion, was inadequate to support a finding either that the assailed rates were unreasonably high, or that they were unduly prejudicial to Alaskan shippers or receivers and preferential of Hawaiian shippers or receivers. An undue prejudice and preference finding must be based in part upon a definite showing of competition between those prejudiced and those preferred. No such showing was made in that proceeding as between those paying the higher freight charges on Alaskan traffic and those paying the lower charges on Hawaiian traffic. Docket No. 31755 United States of America v. Great Northern Railroad Co., et al., 301 I.C.C. 21, decided June 6, 1957.

S. 1723 apparently is designed to alter this situation by declaring specifically, as a policy of Congress, that rates applying to and from Pacific coast ports, on traffic destined to or originating in Alaska, are not to be higher than export and import rates applying on traffic destined to or originating in any area adjacent to or in the Pacific Ocean. By thus declaring any such higher rates "to be undue and unreasonable prejudice and disadvantage" to the State of Alaska, S. 1723 would bring such rates within the prohibitions of section 3 of the act.

Section 3 of the act, however, is not self-enforcing. It contemplates an adminstrative proceeding before the Commission. Under section 15(1) the Commission is empowered, after a full hearing, to determine whether rates are unduly preferential or prejudicial, or otherwise in violation of part I of the Act "* ** and to make an order that the carrier or carriers shall cease and desist from such violation to the extent to which the Commission finds that same does or will exist * * *”

It is not clear from S. 1723 whether proposed new subsection (1b) would require any administrative action by the Commission. The first sentence is in the form of a declaration of policy. Standing alone, this sentence might be understood as intending to guide the Commission in passing upon a complaint involving the State of Alaska. However, the second sentence declares flatly that "any greater charges for such services" are "undue and unreasonable prejudice and disadvantage to the State of Alaska." If this means that no administrative finding would be necessary, the enforcement thereof would apparently require a writ of mandamus under section 20(9) of the act.

Under section 3(1) of the act, the Commission has consistently held and the courts have affirmed, as a principle fundamental to ratemaking, that a mere difference in rates does not constitute undue preference and prejudice. In order to overcome the Commission's decision in Docket No. 31755, the proposed legislation would enact a completely opposite rule as to Alaska. Should this principle be enacted, it might be extremely difficult, if not impossible, to rationalize any similar section 3(1) situation so as not to find undue preference and prejudice. The proposed legislation could well be taken as a guide in every section 3(1) proceeding. No longer would a showing be required that the difference in rates is not justified by the cost of the respective services, by their values, or by other transporta

tion conditions. Nor would there be required a showing that there be a carrier or group of carriers which is the common source of the rate prejudice and which effectively participates in both the prejudiced traffic and the preferred traffic. In addition, it would be unnecessary to show that the prejudiced party suffers injury or harm, actual or potential, which will cease if the preference is removed. The very basic element of competition would be eliminated as a factor justifying different treatment.

The Commission is keenly aware of its duty to administer the Interstate Commerce Act in a manner which will be fair to all, including the people of both Alaska and Hawaii. Under the bill as written, however, we believe it would be difficult to determine what rates should be applied on traffic from or to Alaska. Different rates are frequently maintained on traffic to and from locations in or adjacent to the Pacific Ocean, depending on the location.

The people of Alaska may, of course, petition the Commission for reopening of the 1957 proceeding for further hearing if they believe that important changes have taken place since the record in that proceeding was closed. Such a petition would have to recite sufficient changes in circumstances to afford support for any claim that the prior record is not representative of present conditions and that, if afforded opportunity to do so at a further hearing, the additional evidence to be presented would provide stronger support for a finding of unlawfulness than would the prior record.

We understand that some of the rates on Alaskan traffic have re

cently been voluntarily reduced by the railroads. It may be that additional action by the railroads along this line will follow.

The Commisson is of the view that under the circumstances at least two other avenues of approach are still available without resort to the enactment of legislation.

As to the subject legislation, we recommend against enactment for the reasons stated.

We appreciate this opportunity to appear and express our views on this subject, and if there are any questions I will do my best to answer them.

Senator BARTLETT. Thank you, Mr. Chairman. What are these two other avenues of approach?

Mr. MURPHY. One would be to file a petition to reopen the record for further hearing and reconsideration. The other would be to file a new complaint, alleging unlawful rates and charges in violation of one or more parts of the act.

Senator BARTLETT. I might add, too, as I mentioned, the carriers under their right of managerial discretion could, themselves, make changes.

There are three ways.

Mr. MURPHY. Yes, sir, actually three.

Senator BARTLETT. In the next to last page of your statement, you said the people of Alaska may, of course, petition the Commission for reopening of the 1957 proceeding for further hearing if they believe that important changes have taken place.

I want to understand this. Is it essential that they cite in this petition that important changes have taken place? Is there any other way they could have the case reopened?

87008- -62- -3