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Senator HARTKE. Let's discuss for a moment the one most controversial merger, the Penn Central.

Commissioner TUGGLE. May I add one thing before you go on to that? There is a popular impression-we read in the paper that such and such carriers filed a merger application, and there are notices from time to time that hearings are in progress.

After 2 or 3 years it comes out that the merger has been approved. Now that is only partially true. In no case within my experience has a merger ever been approved that resembles the one originally submitted by the applicants.

If we take, for example, the Penn Central merger, those applicants didn't contemplate taking in the bankrupt New Haven Railroad, but as a condition to the accomplishment of that merger we required them to take in, lock, stock, and barrel, the bankrupt New Haven Railroad and preserve that transportation facility for the people of New England.

In the Norfolk & Western merger they didn't contemplate we would make them take in the Erie-Lackawanna or the Delaware & Hudson, but we didn't approve the mergers until we had imposed those as conditions before it could be consummated.

The Congress has wisely given us authority to attach conditions to these proposals so that we can shape them to conform to where the interests of the public lie.

Senator HARTKE. Do you review the mergers afterwards to see whether the result which you were seeking was reached? That is, a cost saving? Whether or not the competitive effects of the merger are still maintained and whether or not there is a better system which takes care not alone of the strong ones but also the weak lines?

Commissioner TUGGLE. We retain control of these merger cases for at least 5 years after they are consummated, and we can review them.

Now, as a matter of fact, most of them have been accomplished so recently that all the objectives or most of the objectives of the merger in the first place have not yet been attained.

It is stated when they are filed that it will take 5 or 6 or 7 years before all these things can be accomplished. It isn't done overnight.

Senator HARTKE. I do think when you have a merger of two lines you ought not have less service than before.

Commissioner TUGGLE. You are right. There should be better service.

Senator HARTKE. We get a lot of complaints along those lines. You do too, don't you?

Commissioner TUGGLE. Not as many as you might think, unless we are talking about a shortage of freight cars; that is one thing. That exists regardless of the merger. It would probably be worse without the merger. I am not quite sure what deficiencies in service you are speaking of.

Senator HARTKE. Just as an aside on that, in my absence again from the Finance Committee executive sessions unfortunately, over my objections and with my vote in opposition when I arrived, I want you to know that today the investment credit was disapproved by the committee without hearings.

I want you to know that I am not very happy about it but I thought you ought to be aware of that the next time we have a freight car shortamo. If you are expecting cars to be built and if that credit is incentive

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for building, I would hope maybe you could put some people on that.

Commissioner Bush. No exemptions granted at all?

Senator HARTKE. No. Anybody watching this can tell you the only thing they will exempt is some type of thing down in Georgia and I don't know why.

Commissioner MURPHY. It is a mighty good section of the country. [Laughter.

Senator HARTKE. Well, anyway, let me come back to these mergers. You expressed your concern about the conglomerates.

What is your concern about conglomerates?

Commissioner TUGGLE. Well, our concern is one of guarded apprehension, I would say. It is an economic development of the last 2 or 3 years and from our point of view we cannot tell just where it will end. We don't look at them as evil, per se, but we see some possibilities there it could impair the transportation system.

Senator HARTKE. Do you see any possibility this will lead to a disinvestment in carrier equipment?

Commissioner TUGGLE. That is a possibility that is present.
Senator HARTKE. What do we do about it? Sit and wring our hands!

Commissioner TUGGLE. Well, it is hard to look into the future. You can say for nearly all the railroads they certainly wouldn't, about this disinvesting. It is too great an organization. There is too much money invested in it. There should be a certain amount of disinvestment by railroads and other enterprises. That has been a condition for decades. If it hadn't been for the investment of some of the major railroads in this country in other interests many would be in bankruptcy.

The earnings now of the strongest railroads in the country don't come exclusively from hauling freight. They come from other investments.

Senator HARTKE. Are you saying conglomerates are good ?

Commissioner TUGGLE. I don't want to give them a label like that. They can be good but have possibilities for bad effects.

Senator HARTKE. Who is making a study on this? Do you have somebody assigned to this?

Commissioner TUGGLE. We have a staff study on this.
Senator HARTKE. On that exclusively?
Commissioner TUGGLE. Yes.
Senator HARTKE. What is the anticipated date of completion?
Commissioner TUGGLE. The one on railroads has been completed.
The one on motor carriers is not completed.

Senator HARTKE. Is there a report written?
Commissioner TUGGLE. Well, there is a rough draft report.

Senator HARTKE. I will be interested in that, not in a formal manner but I would be interested in seeing that if possible. I would be interested in what date you set for completion of the motor carrier study. On passenger service, I have some questions here. I would like to

go into this in more detail later. I want to submit questions to you. I hope I don't get institutional responses. Do you understand what I mean by that?

I will ask the staff to give these to you. We will come back on that at a later time.

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FREIGHT CAR SHORTAGES

Let's discuss freight car shortages for a moment. We had some hearings the other day.

Can you tell the committee when the incentive per diem provision will be put into effect? Are you going to hold hearings on it? What is your intention?

Mrs. BROWN. Just 1 second, please.

Senator HARTKE. Let me say to you while you are contemplating this that Chairman Magnuson and I both were a little disturbed at the report which you filed on June 1, that it didn't have more informa

1 tion than it had about the incentive per diem provisions.

Do you have any answer to this? Do you plan to put the law into effect? What will happen here?

Mrs. Brown. Senator, it sounds very much like we haven't worked and been extremely concerned over this, especially since the law has been passed for 3 years and especially since the hearing we had the other day. I do want you to know that we have gone back and we are right now exploring further and as a result of what you said at the hearings in regard to the part which was brought up about under section 115 which there was a comparison drawn between how demurrage was handled and how we handle the other situation.

Senator HARTKE. You are not really prepared to give an answer on that. Is that what you are saying?

Mrs. Brown. That is right. I, along with others on the Commission and on the staff level too, we have and the General Counsel—have been working in this area in trying to draw up an order that we could work with to see if we could work with it under this part, and right now I don't have a report for you. It is an exploratory proposition, but it is certainly an endeavor to try along those lines which came out of the hearing in May. Senator

HARTKE. If there is demurrage, to whom is it paid ? To the carrier which provides the service? Is that right?

Mrs. Brown. To the carrier that delivers the car to the shipper.
Commissioner MURPHY. I believe you mean per diem.
Senator HARTKE. I am talking about demurrage now.
Commissioner MURPHY. A carrier paying demurrage ?
Senator HARTKE. To whom is the demurrage paid?
Mrs. BROWN. To the carrier.

Senator HARTKE. Many times the shipper feels that he is paying demurrage to a carrier which has not supplied them the service they should have had, and who has contributed to the freight car shortage problem.

Mrs. BROWN. That is true.

Senator HARTKE. Did you ever consider making that demurrage payable to the Government?

Commissioner MURPHY. Yes.
Senator HARTKE. What—did you decide against it?

Commissioner MURPHY. Haven't decided either way other than it has been a thought in my mind, working on the freight car situation, I think perhaps it might be worth thinking about. As a matter of fact, I mentioned to you one day that that might be the way to put

it and let it come into the Federal Government Treasury rather than benefiting the carrier that is receiving it.

Senator HARTKE. What about the military! Who do they pay it to? [Laughter.]

Commissioner Bush. I would like to make one comment. I was not up here when you had the hearing on the interim per diem and basic per diem, but I did have a good bit to do with it.

The basic per diem case was on my docket. To me this observation would make sense. I think we are as distressed, in our own way at least, as the Congress is in its way about the long delay on the arrival at a figure for interim per diem charge. But I think that the two are so closely tied together that a realistic, honest proper interim per diem has to be tied some way properly to a basic per diem case.

We worked—I am not a lawyer. My background is accounting. But I worked with the examiner, Mr. Banford, and others until we finally came up with what the railroads had not been able to come up with for many years, but the court asked us to tell them what we thought the basic per diem formula should be, and we did that.

Of course, knowing that would go to court no matter what, so it did go to court. It went to a New England court, and it also went to a western court, a Nebraska court, and finally, fairly recently, the second court—the first court in New England upheld our formula.

Finally, even the western court did. So you can see the interests of the parties who filed in those two courts were probably and obviously different. That has happened since your hearing. We are now upheld in both courts.

I suppose we will go to the Supreme Court, but I hopefully feel and honestly feel the Supreme Court can dispatch it pretty rapidly. And I think it would go a long way–in my arithmetic type of thinking, I think it would go a long way toward enabling us to decide on what is a fair interim or incentive per diem—if I said interim before, I mean incentive but to add an incentive on to something that you don't know what you are adding it on to has been to me one of the big stumbling blocks in the delay in arriving at what you wanted to have, an incentive per diem figure.

Senator HARTKE. We will submit some more questions on this. We will move along here. This one question I would like to have answered. Will the Interstate Commerce Commission need additional appropriations to effect the organizational changes proposed in your June 1 report! Mrs. BROWN. Yes. Senator HARTKE. You will ? Mrs. BROWN. Yes. Senator HARTKE. How much! Have you requested these funds? Mrs. Brown. No. We have not requested the funds.

Senator HARTKE. Will that have to be a supplemental appropriation ! Mrs. BROWN. I trust it will. Senator HARTKE. Or a regular appropriation ?

Mrs. Brown. It depends on when it goes in. If it went in right now, it would have to be supplemental.

Senator HARTKE. How much do you anticipate this will be? Do you have any idea! Has that been calculated?

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Commissioner MURPHY. We didn't calculate the total cost of it at the time we made the report, Senator.

Commissioner WALRATH. It can be done very quickly.
Commissioner MURPHY. Oh, sure.

Commissioner JACKSON. It was put in terms of personnel and grades.

Commissioner MURPHY. That is right. It would be very easy:

Mrs. BROWN. There were three Commissioners that worked in this area and they didn't use the dollar figure, but it can be supplied.

Senator HARTKE. I am going to submit some questions on small shipments and intermodel transportation. I am going to ask also, in a letter which I will direct to you, that the subcommittee be provided with individual comments from the Commissioners rather than just a blanket one.

Mrs. Brown. We will be happy to respond like you want us to.

Senator HARTKE. I am going to recess these hearings at this time. Let me say that I am going to the floor to make a speech on a different matter, but I have enjoyed visiting with you. I hope to see a lot more of

you, and we will be. Let me say, what we are interested in is trying to make sure the Interstate Commerce Commission, as I said, is a very effective, fine organization.

I know that you are striving for that too. And to the extent that I am around, I hope that you will consider whatever questions we have asked to be of a helpful nature.

Let me say on tħe other hand, if they come with a bit of a bash to them, it probably was intended. [Laughter.]

I want to go deeper. I want you to think with me. The mere fact that you have differences of opinion among the Commission I don't think should be looked upon as anything disrespectful of any people in the Commission.

I think you ought to have individual views. I hope you will keep on having them.

We will recess at this time.

Mrs. Brown. I want to say on behalf of the Commission that I am sure that we have benefited by it. I want you to know that the spirit in which we met here has been a great help to me and I am sure to every member. We will strive to answer the questions that are in writing by the individual members of the Commission in any way you want us to respond.

(Whereupon, at 4 p.m., the subcommittee was adjourned.)

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Thank you.

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