district. In 1899 part of its capital stock was acquired by the Pittsburgh Coal Company, which later acquired additional stock and obtained control. From time to time the Montour extended its service to new or additional mines to meet the needs of coal-land owners and mine operators. The Pittsburgh Coal Company gave direct financial aid to its subsidiary railroad in the period 1913-15 by financing an extension of the Montour from North Star to Mifflin Junction, Pa., 33 miles, which cost $2,935,000. The Montour increased its capital stock in January 1913 to $1,500,000, and this additional stock was acquired by the Pittsburgh Coal Company, and it also issued first-mortgage bonds, guaranteed by the coal company, in the amount of $2,750,000. The extension was put in operation in February 1915. Eight newly constructed coal-mining plants, five of which were established by the Pittsburgh Coal Company, were served by this extension. In 1918 a branch called the Library branch was constructed to serve a coal mine of the Pittsburgh Coal Company. At the time of these extensions the president and the vice president of the Montour were the chairman of the board of directors and the president, respectively, of the Pittsburgh Coal Company, and the two companies had certain directors in common. From 1920 to 1926, spurs and short extensions also were built to reach certain mines and plants of companies other than those of the Pittsburgh Coal Company. One such spur to a steam-coal mine was built at a cost of $67,000.

The importance of the Montour to the Pittsburgh Coal Company is shown by the fact that the railroad has received the greater part of its traffic from the coal company. In 1920, for example, the coal company had 10 mines along the line of the Montour. In that year the total freight traffic of the Montour amounted to 4,365,763 tons, of which the coal company supplied about 59 percent. In 1931 the total was 5,785,589 tons, of which the coal company supplied 64 percent. The corresponding figures for the year 1935 were 5,130,848 tons and 70 percent respectively. This increase in the tonnage received from the Pittsburgh Coal Company in relation to the total is attributed, in part, to the gradual withdrawal of small operators from coal production, and also, in part, to the diversion of coal shipments from the Montour to the trunk-line carriers by the Carnegie Coal Company, one of the larger operators in the district and a competitor of the Pittsburgh Coal Company.

There is evidence also that the Montour in recognition of the importance of the traffic of the Pittsburgh Coal Company gave greater consideration to needs of the latter in the matter of extensions of line to reach its coal operations than to those of other coal producers. The Carnegie Coal Company made a request in 1920 for construction by

the Montour of short spurs to serve two of its mines which were also served by the Pennsylvania Railroad, but the Montour declined the request upon the ground that the mines would be jointly served by two competing railroads and the business could be diverted from one to the other at the will of the coal company. The Carnegie Coal Company built a connection from one of the mines to the Montour at a cost of $15,000 and spent some $35,000 upon the other connection, but did not complete it. In 1928 the Pittsburgh Coal Company opened a new mine called the Westland about 3.75 miles off the line of the Montour. The old mine at Westland had been served by the Pennsylvania Railroad and, according to that carrier, it could have built a spur to connect with the new mine at a cost of about $44,500. The Montour constructed a coal-mine spur to this new Westland mine at a cost of $405,000.

In 1928 six of the seven directors of the Montour were officers or directors of the Pittsburgh Coal Company. The other director was president of the Montour. One vice president of the railroad was president of the coal company; and the chairman of the board of directors, the treasurer, the general counsel, and the secretary of the Montour held the same offices, respectively, with the coal company.

Another transaction which shows the close relation between the Montour and the Pittsburgh Coal Company occurred on October 6, 1931. On that date, the Montour advanced the coal company $300,000 in anticipation of the declaration of a 6-percent dividend by the Montour. This transaction was evidenced by a demand note, without interest, which was canceled when the Montour, on November 24, 1931, declared the dividend. The president of the Montour states that he had intended to recommend the declaration of the dividend by the board of directors at a meeting on September 4, 1931, but had forgotten to do so and, being confident that the board would approve his action at a later date, he directed the advance payment to be made to the coal company. At the time, six of the eight directors of the Montour were officers or directors of the coal company.

Relation of Pittsburgh Coal Company and Montour to the Lisbon and the Suburban.-The advantages possessed by the Pittsburgh Coal Company through its ownership of control of the Montour would have been considerably enhanced had a project originally planned by the Montour been undertaken and completed. This was to extend the Montour northward to and across the Ohio River to Smiths Ferry, Pa. The matters under investigation in the instant proceeding may be said to have grown out of that original plan, the first steps in which appear to have been taken in 1916. In that year a company named the Northern Montour Railroad, all of whose stock was owned by the Montour, was incorporated in Pennsylvania. The location of its proposed line

was to be from a point on the Montour to a point about 1 mile from Smiths Ferry at or near the Pennsylvania-Ohio State line. This company, however, never owned any physical property nor performed any construction work and in August 1936 its stockholders decided to surrender its charter.

Although the Northern Montour project, as such, was not carried out, the plan to reach Youngstown by means of rail transportation facilities from the Ohio River was not abandoned. In lieu of transportation by rail to the south bank of the Ohio, which would have been afforded by the construction originally contemplated when the Northern Montour was incorporated, there was available transportation by water on the Monongahela and the Ohio. By this means coal could be transported by water to Smiths Ferry on the north bank of the Ohio and there transferred to a connection with a new rail line included in the plan. Such a route would have many opportunities to obtain traffic, inasmuch as industries at Youngstown were particularly interested in obtaining a direct outlet by rail to the Ohio River independent of the trunk lines. In fact, the Youngstown Sheet & Tube Company, a large consumer of coal at Youngstown, had for a long time been anticipating the construction of a line of railroad to the Ohio River at Smiths Ferry, and in 1917 and 1918, one and two years after the incorporation of the Northern Montour, it acquired 110 acres of land at or near that point for the installation of river and rail terminal facilities. See Pittsburgh, L. & W. R. Co. Construction, 150 I. C. C. 43, 48.

Little appears to have been done upon the project for a new rail route to the Ohio River until 1927. In that year the Pittsburgh Coal Company purchased the outstanding stock of the Lisbon for $425,000. The Lisbon was and is a common-carrier short-line railroad, 23.3 miles in length, extending from a connection with the Pennsylvania Railroad at New Galilee, Pa., to a connection with the Erie Railroad at Lisbon, Ohio. At Negley, Ohio, connection could be made with any line of railroad that might be built from Smiths Ferry up the valley of Little Beaver River, a distance of about 13.3 miles, which was the only practicable route for such a line. Officials of the Montour had previously made an investigation of the physical property of the Lisbon to see how it might fit into their plan for establishing the through rail route from the Ohio River to Youngstown. The acquisition, as stated by the president of the Montour, was made to carry out a project of the Montour Railroad. The stock of the Lisbon was bought by the Pittsburgh Coal Company because the owners refused to sell to the Montour contingent upon our approval.

After purchase of the stock of the Lisbon the Pittsburgh Coal Company sold it to the Montour on November 3, 1927, at the same

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price and the latter applied to us in February 1928 for authority to acquire control through such purchase. Following purchase by the Pittsburgh Coal Company a new board was elected. The president, the vice president and treasurer, and the secretary of the Montour were elected to like offices of the Lisbon. Of the eight members of the new board of directors of the Lisbon, five were officers or directors of the Pittsburgh Coal Company and seven were officers or directors of the Montour.

The Lisbon in February 1928 filed an application with us for a certificate of public convenience and necessity for the construction of branch lines or extensions of its line, one extending northward to Youngstown and the other southward from a point near Negley to Smiths Ferry. These two branches, with a short section of the existing line, would have provided a through route from Smiths Ferry to Youngstown. This application and that of the Montour for authority to control the Lisbon by purchase of its stock from the Pittsburgh Coal Company were heard together. Two months after the Lisbon's application was filed, the Pittsburgh Coal Company secured options on 15.5 acres of land at Smiths Ferry on the Ohio River. The Montour had an understanding with that company that the Montour would have its share of the land, so that it might be placed at the disposal of the Lisbon for its common-carrier purposes in connection with the proposed Lisbon extensions. The Pittsburgh Coal Company would have had use for some of the land for unloading and plant facilities if the extensions had been constructed. The Pittsburgh Coal Company carried its option on the land until April 24, 1930, when the Montour bought it. The latter held it until June 8, 1934, and then sold it back to the coal company. These transactions again serve to show the close relations and cooperation in business transactions between the two corporations.

On December 8, 1928, in Pittsburgh, L. & W. R. Co. Construction, supra, we found that it was practicable and desirable that the Youngstown district should have access to the Ohio River by a rail line or lines which would afford it substantially the transportation advantages, including rates, proposed by the applicants. It was further found, however, that the construction of the new lines proposed would result in unnecessary duplication of facilities if it were possible to make use of the existing lines of the Pennsylvania Railroad and the Pittsburgh & Lake Erie Railroad to accomplish the same result. We also found that the use of those trunk lines between the Ohio River and the Youngstown district at reasonable rates would reduce traffic losses that probably would result if the new line were constructed. The two trunk lines have direct routes from the Pittsburgh coal district to Youngstown along the Monongahela

and the Beaver Rivers. At the time of the hearing upon the Lisbon application it appeared they had land available for construction of river terminals for ex-river coal northbound and manufactured products southbound, and that, if such terminals were built, the existing rail lines had ample capacity to handle the traffic to and from Youngstown. We decided to withhold a certificate of public convenience and necessity from the Lisbon for the new branch lines until further evidence was produced that use of existing rail routes from the Ohio River was impracticable. The proceeding was held for further hearing. On further hearing, we found on March 16, 1929, in Pittsburgh, L. & W. R. Co. Construction, 150 I. C. C. 619, that the Pennsylvania Railroad was prepared to furnish terminal facilities for handling ex-river coal from barges to cars and finished steel products from cars to barges at Conway, Pa., a point on its line 43.8 miles from Youngstown, and that the Pittsburgh & Lake Erie Railroad would provide similar facilities at Colona, Pa., a point on its line about 40 miles from Youngstown. The cost of providing these facilities was much less than the cost of constructing the new branches proposed by the Lisbon. Location of the transfer facilities at the two points named would reduce the length of haul by water by more than 15 miles, as compared with the haul to Smiths Ferry, and would avoid passage through several locks. We found, upon the further hearing, that public convenience and necessity did not require the construction of branch lines by the Lisbon as proposed, and the application was denied. We also found that no substantial public interest would be served by the control of the Lisbon by the Montour, and the application to permit such control was denied.

In the period between the first decision and the second hearing, the Lisbon, on January 7, 1929, upon approval of its board of directors at a meeting held December 31, 1928, acquired control of the Suburban, an interstate common carrier, by purchase of the outstanding stock for $70,000. No application was made to us for authorization of this acquisition under section 5 (2) of the act then in effect and therefore a question has been raised as to its lawfulness. In Pittsburgh & W. V. Ry. Co. Securities, 70 I. C. C. 682, decided December 10, 1921, we had held that that paragraph was not merely permissive in nature and that the acquisition of control of one carrier by another by purchase of stock could not lawfully be made without our authorization. We said that the provisions of the statute did not merely afford a means of escaping the restraints of the antitrust laws, as argued on brief in the instant proceeding, but that they were enacted in connection with the statutory provisions for a plan of consolidation of the railroads and embodied a policy