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will go as far as California. Our coke at times has taken a broad market, going as far as Butte, Mont., on the north and Chihuahua, Mexico, on the south. Our local market for the coal is practically nil.

The CHAIRMAN. How large a place is Raton!

Mr. HARLAN. About 8,000. But on the commercial business coming into Raton and points west where there are no connections, there was a little competition.

The CHAIRMAN. So that if your road was connected with the Colorado & Southern it would be competitive so far as Raton is concerned, with the Atchison, Topeka & Santa Fe, in commerce of Raton with Denver ?

Mr. HARLAN. Yes.

The CHAIRMAN. What you propose to do is to turn over that road to the Atchison, Topeka & Santa Fe, and you say to that extent it may affect competition?

Mr. HARLAN. Yes; about 5 per cent of its business at Raton. It is almost nothing, and yet it was sufficient for use to give it very careful consideration, and that question was considered carefully by the legal department of the Atchison and by our office, and finally we came to the conclusion that this contract could be safely entered into so far as the present law is concerned; that is, the antitrust law.

The CHAIRMAN. Your mining company owns the stocks and bonds of the railroad ?

Mr. HARLAN. Yes,

The CHAIRMAN. And you have made an arrangement with the Atchison for the latter to take over these stocks and bonds!

Mr. HARLAN. Yes, şir. But in order to make the title I will say this: This is an executory contract, entered into last July. In order to make title we had to get the consent of the bondholders of the coal company, whose bonds are secured in part by the stocks and bonds of this railway company. We are now getting that consent, and at present about 90 per cent of the entire outstanding issue, which in round numbers is a little more than $7,500,000, have consented, and we are getting those consents with rapidity, and believe that within probably three or four months we shall be able to have them all in and then we can make this title.

It is necessary for the Santa Fe to maintain a subsidiary company to operate this railroad, whether it be the present corporation or whether it be another, because our consideration for the railroad is not money altogether; we can not sell that railroad for cash. The purchase price that we get is $50,000, in round figures, in cash, and $3,000,000 of Atchison bonds, which are to be secured by a first lien on this St. Louis, Rocky Mountain & Pacific Railroad property. If we transfer this property direct to the Atchison the two general mortgages, the so-called general four's and the 4 per cent adjustment bonds, those mortgages have afteracquired property clauses in them, and if we transfer the property of course the road would immediately go under the lien of both of those mortgages, and we could not get a first mortgage on this property. So it becomes necessary to work it out through a subsidiary, and that was the plan that we worked out in the beginning.

Without calling particular attention to your bill, because you gentlemen are familiar with it, I think the mere statement of our

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case will indicate to you wherein the bill as drawn immediately gets us into trouble in that the Atchison will have to own all of the stock of this subsidiary company, and to that extent, being the owner, this slight competition at Raton would be destroyed, and the word destroyed, as used in the bill, would therefore be applicable, under the words “to any degree."' If the word “substantial” is left unqualified we shall feel we were quite safe, because the competition is so slight that we believe no reasonable person would regard it as substantial.

Senator CUMMINS. Our bill does not make any degree the test; it is "to any degree competitive," whether substantial, and so on.

Senator POMERENE. “Destroys or impairs substantially.”

Mr. HARLAN. The way the language appears here, whatever competition there is would be destroyed, but it is so slight that its destruction does not hurt anybody. On the contrary, we have never been able to use this railroad to better the public service. It does not pay. We can not make it pay. But the Atehison, who can operate this railroad without increasing their overhead charges, can give service that we can not afford to give.

Senator CUMMINS. Section 10 provides that the corporation which holds the stock of a competitive corporation shall file with the Interstate Commerce Commission a petition alleging the business of the corporation, whose stock or other means of control is owned, and that it is not competitive, or that if competitive in any degree, such ownership, holding, or control does not destroy or impair substantially competitive conditions in such corporation. Your idea is, that while there is a very small degree of competition, yet such as it is, would be entirely destroyed?

Mr. HARLAN. By acquisition of the property by the Atchison, though the public service actually would be promoted.

The CHAIRMAN. That question arises, of course, with reference to a great many other roads, where the consolidation has already been accomplished.

Mr. HARLAN. Yes; we appeared before the Judiciary Committee of the House of Representatives, and were given a hearing, and went into these matters at some length, and in following those hearings I have noticed that there have been a number of instances called to the attention of that committee, particularly of roads in Oklahoma, where they can not sustain themselves and where they can not give them away because nobody will have them, and their only hope is to sell to one of the trunk lines, and the result of which hearing and consideration is that in House bill 15657

The CHAIRMAN. That is the Clayton bill.

Mr. HARLAN. That is the Clayton bill. They have made a specific exception in favor of short-line roads.

The CHAIRMAN. Will you read that exception; where does it occur? Mr. HARLAN. On page 8.

Senator CUMMINS. In the first place there, section 20 applies to future acquisitions of property. If yours is already acquired by the Santa Fe the section in the House bill would not apply to it at all.

Mr. HARLAN. They have not yet acquired it, Senator; it is an executory contract.

Senator Cummins. You have made a contract for its acquisition ! Mr. HARLAN. Yes.

Senator CUMMINS. I assume that that would be legally in the same position as though the stock had actually been transferred.

Mr. HARLAN. Their attention was called to that. They went one step farther and made a provision that nothing provided therein should affect any existing rights.

Senator CUMMINS. The rest of it does not amount to anything; that is the substance.

The CHAIRMAN. Will you refer to that provision in the House bill which you say makes an exception?

Mr. HARLAN. Yes, sir; on page 8, beginning at line 12.

The CHAIRMAN. Give me the section. I want it to appear in the record.

Mr. HARLAN. It is section 8.
The CHAIRMAN. Now, read the words in section 8 that you refer to.

Mr. HARLAN. It begins on line 12, page 8, of the print of May 2, 1914, and is as follows:

Nor shall anything herein continell be construed to prohibit any railroad corporation from aiding in the construction of branch or short line railroads so located as to become feeders to the main line of the company so aiding in such construction, or from acquiring or owning all or any part of the stock of such branch line, nor to prevent any railroad corporation from acquiring and owning all or any part of the stock of the branch or short line railroad con. structed by an independent company, where there is no substantial competition between the company owning the branch line so constructed and the company owning the main line acquiring the property or an interest therein, nor to prevent any railroad company from extending any of its lines through the medium of the acquisition of stock or otherwise of any other railroad company, where there is no substantial competition between the company extending its lines and the company whose stock, property, or an interest therein is so acquired.

That, gentlemen, we feel protects our contract, and if you were to give us some such consideration it would certainly be very much appreciated. We are trying our best to work out a real problem. We started when we were under no control; when the Hepburn Act was passed we escaped merely through the wording of the statute. Undoubtedly the time will come when as a coal company we can not operate this railroad. We do not want to keep the railroad; we want to get out of the transportation business, and we have this opportunity; it is the only opportunity, and this railroad in the hands of the Santa Fe will serve the public much better than we can ever hope to serve it. We have no hope of financing any extensions; we can not do it. It is the only solution of this problem, so far as we are concerned.

The CHAIRMAN. You say the Atchison, Topeka & Santa Fe can not acquire it directly without subjecting it to the existing mortgage which covers after-acquired property?

Mr. Harlan. Yes, sir. There are two mortgages, both of which have the after-acquired property clauses, and that necessitates working this out through a subsidiary company. That is the only machinery that we can devise.

Senator CUMMINS. I do not understand, though, Mr. Harlan, how it can be said that the business is only competitive at Raton or to the extent of only 5 per cent. As your road is built there, all its business is competitive with the Santa Fe; that is, the Santa Fe and the Colorado & Southern are outlets for your road, both of them. You can deliver ever particle of freight that originates on your road and destined for any point to the Colorado & Southern if you wanted to. Mr. HARLAN. Well, that would be a very impracticable proposition.

Senator CUMMINS. You would have to carry your freight out to this point-Des Moines and there deliver to the Colorado & Southern, and then the Colorado & Southern would take it wherever its lines reach or any of its connections will reach. Or you can deliver it to the Santa Fe at Raton, and that line will take it wherever its road reaches or any of its connections reach. It seems to me, as you are now placed, the two lines—the Colorado & Southern and the Atchison, Topeka & Santa Fe—are competitive for all your business.

Mr. HARLAN. No; most of the business on this line is coal. That coal is under the control of the coal company or the shipper. While it is on the lines of the St. Louis, Rocky Mountain & Pacific Railway it is under the control of the coal company.

Senator CUMMINS. Why can not you deliver every particle of your coal to the Colorado & Southern if you wanted to?

Mr. HARLAN. As far as physical conditions are concerned, we could.

Senator CUMMINS. I mean so far as expense is concerned, or anything else.

Mr. HARLAN. Most of our coal goes south, and on the Colorado & Southern it reaches very little common territory with the Atchison, Topeka & Santa Fe. It may at Fort Worth, Tex., I believe.

Senator Cummins. You mean you would not, through the Colorado & Southern, have as wide a field of distribution as if you sent it over the Atchison, Topeka & Santa Fe

Mr. HARLAN. We have a very limited field over the Colorado & Southern. The most of this coal goes over the Atchison.

Senator CUMMINS. That may be true under present conditions, but I suppose that the territory along the Colorado & Southern 'into. which that road reaches uses coal, and it reaches Denver, does it not, through its connections?

Mr. HARLAN. Yes, sir.

Senator CummINS. And reaches points east through its connections?

Mr. HARLAN. Yes, sir.

Senator CUMMINS. Well, then, it could compete with the Atchison, Topeka & Santa Fe for all your coal, and if you found it more profitable to sell to these localities instead of the localities along the Atchison, Topeka & Santa Fe, I can not see, as your relations are now established, but what you might deliver most of your freight, practically all of it, to the Colorado & Southern. There is nothing to prevent the building up of markets along the line of the Colorado & Southern and delivering that coal to that company instead of the Santa Fe.

Mr. HARLAN. That is true, Senator, but I take it the problem we have to deal with is not the possible but the actual competition. By reason of rates, by reason of the Colorado & Southern favoring the mines in the Trinidad district, where it gets all of the railroad haul, and the fact that it does not reach the principal points that we want to put our coal into the actual business there is not competitive.

Senator CUMMINS. I think that may be so as it is now, on account of the rates that may be established, but just the hasty glance that I have taken of the matter and I have no sort of conviction about it-is this, that the Santa Fe would be in much more peril under the antitrust law in acquiring that piece of property than it would be from this law. When the Santa Fe acquires that property it cuts off the Colorado & Southern entirely and leaves your road with simply one outlet, and it would if the roads are large enough and occupied a territory that was important enough, fall within the clause; it would be pretty nearly parallel with the holding of the stock of the Southern Pacific by the Union Pacific.

Mr. HARLAN. On those questions of routing and the physical conditions, Mr. van Houten is better informed than I am, and with your permission I would like to have him explain it.

STATEMENT OF MR. J. VAN HOUTEN, PRESIDENT ST. LOUIS,

ROCKY MOUNTAIN & PACIFIC RAILWAY CO.

Mr. van HOUTEN. The St. Louis, Rocky Mountain & Pacific Railway has three connections. One is the Colorado & Southern, the second is the Atchison, and the third is the El Paso & Southwestern, the road marked in green on the map. The shipper or the buyer of coal has the routing. He can buy coal from our company, and he says, “I want my coal routed by the C. S.” We will assume that he lives in El Paso. All three of these companies reach El Paso, either directly or through connections. He has the right to say, “ Í will take so much coal," and it will be routed over the El Paso & Southwestern, or by the Santa Fe or by the Colorado & Southern. The rates are all established, and those rates can not be changed except with the consent of the Interstate Commerce Commission. The rates are all the same. There is no difference at all. There is no competition between the Santa Fe and the St. Louis, Rocky Mountain & Pacific Railway on their own rails; they do not touch at two points, they simply cross, and there is only the point of crossing where there is competition, as I understand it. The competition is very slight. Mr. Harlan said that the town of Raton has 8,000 people; it is a town of 5,000. The natural trade route into the town is via the Santa Fe. We have been able by hard work to get some of that business for the Rocky Mountain Railway. By way of the Colorado & Southern the distance is longer, and there are a good many difficulties. The competitive business only amounted to less than 5 per cent of the total tonnage of the St. Louis, Rocky Mountain & Pacific Railroad. I think, if you will look, you will see that the Colorado & Southern and Atchison are not competitive in that respect. It is true they touch, for instance, at Fort Worth, Tex.; but the shipper in Fort Worth, Tex., will have the right to say as to how he wants his freight handled; how he wants it to go. The rates are the same. So I do not see there is any competition or can be any competition.

Senator CUMMINS. I do not believe you get my idea. The competition between the A., T. & S. F. and your road, just considered at a segregated affair, I think, is nothing. I believe there is no competition there at all, legally speaking, between them, or could not be. "But suppose that the Colorado & Southern owned your road, and suppose it was a part of the Colorado & Southern and the Atchison, Topeka & Santa Fe had the parallel line with it, the business would be all competitive. That is to say, as it is now every pound of your freight could be delivered to the Colorado & Southern so far as that road could reach the destination ?

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