issuance of securities or assumption of others' obligations or liabilities. While the railroads are subject to accounting regulations, such outside companies are not. The Commission may deny an application of a carrier for the issuance of securities for acquiring nontransport enterprises. As a general rule use of the proceeds from such issuances are authorized only if they benefit transportation. The issuance should be for some lawful object within the carrier's corporate powers, compatible with the public interest and not impair the carrier's ability, financially or otherwise, to perform its service to the public as a common carrier. Ordinarily the problems posed by conglomerate mergers arise more frequently in the context of an acquisition where two or more carriers would be controlled by the holding company. The Commission's authorization is required in this situation and when the authorization is granted, the Commission is empowered to designate the noncarrier as a carrier subject to regulations relating to reports, accounts, etc., issuance of securities and assumptions of obligation or liability with respect to securities. The problem of a noncarrier acquisition of multi-unit integrated rail systems is receiving continuous study by the Commission.

It is significant that the Commission's power under section 20(5) of the Act to inspect records of a party controlling a carrier, controlled by a carrier or under common control with a carrier (unless themselves held to be a carrier under the provisions of section 5(3) of the Act, extends only to records relevant to such person's relationships to or transaction with such carrier. Section 12(1) of the Act twice similarly limits the Commission's right to inspect noncommon carrier records of such situated parties to matters related to the management of the business of one or more such carriers. While Congress has not granted carte blanche entry to the records of a holding company not itself held to be a carrier under section 5(3) of the Act, the Commission believes that it may look at such records as it deems relevant to the specific purpose of the investigation. These principles apply to all Commission-regulated carriers.

The holding company device, which has long been used to extend or restructure railroad systems, is now being used to join railroads, financially with other types of industries. Subject to some reservations, we are reasonably convinced that this conglomerate approach can be attributed to a desire to improve earnings through diversification. And, it may be argued that this policy could possibly result in revitalization of the railroads, and, consequently, improved railroad transportation for the public. We are equally convinced, however, that the conglomerate restructuring of the railroad industry could pose a threat to the public's interest in an adequate rail transportation system and complicate the Commission's regulatory and enforcement problems.

(b) Motor Carriers. Two significant motor transportation trends today are diversifications by motor carriers and the purchase of trucking firms by companies outside the industry. Although both trends are relatively recent, prevailing economic conditions indicate that they will continue at an accelerated rate in the future.

Diversification by the motor carriers appears to have been directed principally to the entering of new markets which are basically transport oriented. However a few motor carriers have by diversifying into nontransportation activities taken on the characteristics of "conglomerates.'

Trucking diversifications are presently being financed with cash, stock, or a combination of both, with the transactions being facilitated in many instances by holding companies. Although the use of the holding company as a tool for expansion is not a new concept, its use by the motor carrier industry has been increasing rapidly, as indicated herein in Table 2. The fluidity of the situation is indicated by the fact that a number of changes have occurred in the past few months which are not reflected in the table.

Of all the changes transpiring in the trucking industry, our greatest concern, in terms of economic consequences, is the trend toward the purchase of motor transport companies by primarily investment holding companies, conglomerates or nontransportation firms. Although this change is in such a state of flux, thereby making it extremely difficult to make a firm appraisal of the entire scope and scale of the movement, a review of Table 3 does show a fairly comprehensive sample of the more recent transactions.

TABLE 2.-NET OPERATING REVENUES REPORTED IN THE 1967 ICC ANNUAL REPORTS BY MOTOR CARRIER HOLDING COMPANIES

TABLE 3 RECENT PURCHASE OF REGULATED MOTOR CARRIERS BY NONTRANSPORTATION COMPANIES !

4. Woods Corp. (Oklahoma City, Okla.). Manufacturing.. 5. U.S. Industries, Inc..

An international manufacturing and marketing organization.

6. Novo Industrial Corp. (New York A diversified manufacturing and service comCity).

7. Essex Wire Corp..

pany.

Manufacturer of products used in the production, transmission, and control of electric current; and a manufacturer of plastics, aluminum extensions, and gas controls.

Consolidated
income 2
1967

(million) Motor carrier

6 National City Lines, Inc. also controls local bus lines and an auto distribution carrier.