IF EVER there was an example of America's vaunted free enterprise system it is William J. Niskanen.
The son of Finnish immigrants to Oregon, Bill Niskanen, in the 1920s, tried his hand at logging, commercial fishing, farming and boxing at barroom smokers before struggling through business school while holding down two jobs. He became an auditor, and one of his first clients was a tiny bus line called Mt. Hood Stages in Bend, Ore. He liked the bus business so much that in 1931 he bought a one-third interest in the line (he would later buy out his two partners).
The three partners drove and maintained the buses, which serviced the little towns across Oregon's rugged countryside, while back in Bend their wives did the paperwork. During the depths of the Depression, Mt. Hood grew by acquiring rights to routes abandoned as unprofitable by Greyhound Bus Lines, among others.
From Portland and The Dalles and Columbia River in the north, the Mt. Hood bus network stretched south to Klamath Falls just above the California border; from Springfield, Eugene and Albany in western Oregon, the line spread eastward into Idaho and down through Boise to Salt Lake City, Utah.
Much of this area was sparsely settled, and as a result very little of Mt. Hood's traffic originated along its routes. The line became a "bridge carrier" that had to be fed with passengers passing through and by far the most important feeder of Mt. Hood was Greyhound.
But in the late 1940s something strange happened to Bill Niskanen's bus business. He suddenly began losing customers. People stopped riding his buses. What made this really perplexing was that Mt. Hood Stages was the only line licensed to serve the most direct north-south, east-west routes through the state. It appeared as though people mysteriously had stopped riding buses through Oregon, and as the years passed Niskanen found himself on the brink of bankruptcy.
Not until the late 1960s, after nearly two decades of barely surviving, did Niskanen finally begin to learn what happened to his business. What he learned, after two years of court-ordered discovery, was that giant Greyhound had carried out a covert campaign aimed at destroying Mr. Hood Stages so that it could take over the business.
Simply put, Greyhound acquired bus lines that fed into Mt. Hood, upon which Mt. Hood depended for its survival. Then, Greyhound routed unknowing passengers around the Oregon line, often taking them hundreds of miles out of their way - and changing as much as $40 a person for the detour.
Mt. Hood schedules were not carried at terminals controlled by Greyhound. So passengers never learned that, for example, on a bus trip northward from San Francisco to Seattle, they could save hours and dollars simply by switching from Greyhound to Mt. Hood at Klamath Falls, then back to Greyhound at The Dalles.
In fact, Greyhound made sure that travelers never even knew there was such a thing as Mt. Hood stages.
Just one month ago, on June 9, Niskanen, who is now 70, won what could be the last round of his long, lonely fight against Greyhound. The U.S. 5th Circuit Court of Appeals in San Francisco upheld a 1973 lower court decision that granted Mt. Hood $13.2 million in damages plus legal fees and interest that now make the total more than $18 million.
Greyhound had argued that it was exempt from anti-trust litigation because the Interstate Commerce Commission had allowed it to acquire eight bus lines surrounding Mt. Hood's routes and thus it was free to use the acquired routes as it pleased.
But Mt. Hood contended that, while the acquisitions themselves might have been exempt from antitrust because they had the ICC's approval. Greyhound had used the acquired lines to attempt to destroy a competitor and had lied to the ICC to get its approval.
"Other small bus line owners all told me I couldn't win against Greyhound," Niskanen said during a recent interview. "But I'd have been out of business years ago if I didn't fight. What it took was a tough Finlander from a small town to beat one of the biggest companies in the U.S."
Because he fought and won against all odds, Niskanen is able to fulfill his dream of passing the bus business on to his three sons. It has become a thriving business, with 50 buses and annual revenues of $4 million. "It gives you confidence in the system," he says with obvious pride, "even if it does move slow." Carrier of the Poor
FOR MANY Americans with average or better incomes, big intercity buses are simply those frightening vehicles that must be treated with the deference accorded trucks. Buses are for people who don't have cars and who can't afford to travel by train or plane.
The last 5-year census of transportation by the Commerce Department, published in 1972, made the point that intercity buses are used by the young, the old and the poor. The median income of bus riders was $8,157 compared with $11,652 for all travelers.
What this means, of course, is that intercity bus travelers have less clout on Capitol Hill than probably any other moving objects. It is impossible to imagine, for example, that politicians and regulators would stand by indifferent if rail or air transporation between New York and Washington were disrupted by a strike lasting more than two years. Senators and congressmen ride trains and airliners, and so do their more powerful constituents.
Yet just such a strike took place a few years ago, and many rural areas between the two cities lost their only means of public transportation. Continental Trailways terminated service altogether for nine months, and curtailed it drastically for nearly two years more in a successful battle with the United Transportation Union.
This general indifference to the industry by politicians and regulators alike made Niskanen's lonely fight against the vast resources of Greyhound all the more impressive. He was facing up to a giant and, for a long time, nobody paid much attention.
Two diversified companies earn 82 per cent of the revenues from intercity bus transportation. Continental Trailways, owned by Holiday Inns, earns about 21 per cent. But the granddaddy of the intercity bus business, with 61 per cent, is Greyhound. Its parent company in Phoenix earned revenues last year of $3.8 billion from such diverse interests as meat packing (it owns Armour & Co.), restaurants, soap products and insurance. Up From Mesabi
TO APPRECIATE the odds against his succeeding three decades ago when Niskanen first took on Greyhound, it helps to know something of the rough-and-tumble history of the world's premier bus line.
In the August, 1934, issue of Fortune magazine there was a story titled "Jitney to Giant," one of the rare long articles over the years dealing with the bus industry. In breathless, rags-to-riches prose, the Fortune writer described how Greyhound was started in 1914 by an out-of-work diamond drill operator on the Mesabi iron range in Minnesota.
The then Mesabi Transportation Co. of Hibbing, Minn., consisted of a Hupmobile that sold rides to miners moving across the range. The article described the "exciting" expansion of Greyhound in the 1920s and 1930s as it acquired smaller lines, "gobbling up such linguistic morsels as the Blue Goose, the Sunny South Lines, the Royal Rapid, the Purple Swan."
Fortune also described the unlikely liaison between Greyhound buses and the railroads: "Today the roads that have married into the Greyhound family are proud of their consorts and use them chiefly as substitutes for branchline trains, and as feeders to bring life back to the trunk routes."
A less glowing review of the growth of Greyhound was presented in February, 1974, by Bradford C. Snell, then staff counsel of the Senate subcommittee on antitrust and monopoly, who wrote a proposal for restructuring ground transport in the United States.
Using court documents, Snell tied Greyhound's ascendancy to its close ties with General Motors Corp., going back to 1925. At that time, GM got into bus production by acquiring Yellow Coach, then the nation's biggest manufacturer of city and intercity buses.GM interests then joined with Greyhound in 1926, a combination Snell says was formed by GM to replace urban and intercity rail service with motorized buses produced by GM.
"By mutual arrangement," Snell wrote, "Greyhound agreed to purchase virtually all of its buses from GM, which agreed in turn to refrain from selling intercity buses to any of Greyhound's bus operating competitors."
By 1939, six commuter railroads had agreed to abandon much of their commuter service to Greyhound. By 1948, GM had become the biggest single shareholder in Greyhound. And by 1950, Greyhound carried about half as many intercity passengers as all the nation's railroads combined, according to Snell.
Beginning in 1936, GM Greyhound Standard Oil of California, Phillips Petroleum and Firestone Tire & Rubber Co. began a campaign to replace electric city rail systems with GM diesel buses. Snell found that "dozens of cities" were converted, and court testimony later showed that GM got local transit companies to agree not to purchase "any new equipment using any fuel or means of propulsion other than gas."
By 1949, when a Chicago federal grand jury convicted GM of criminally conspiring with Standard, Firestone and others to replace electric transport with gas or diesel buses and to monopolize the sale of buses, most of the damage had already been done.
Under terms of a 1957 consent decree, in which the Justice Department charged GM with monopolizing bus manufacturing and restricting distribution, GM can no longer build the entire bus. Nevertheless, today some 95 per cent of U.S. intercity buses are still powered by drivetrains manufactured by GM.
Beginning in 1936, meanwhile, a few small bus companies in the Southwest, where Greyhound was weak, joined together in an association called the Trailways System. By the mid-1940s they had organized a holding company, Cotinental Trailways, and launched an acquisitions binge against little bus companies that rivaled Greyhound's own acquisitive way. But it was not until the late 1960s that Continental bought up the final links of its national bus chain.
The ICC has done little over the years to challenge the means of acquisition practiced first by Greyhound, then by Continental. Indeed, in rubber-stamping acquisitions by the companies it has fostered a virtual duopoly. At least in the case of Greyhound, this indifference by its regulators apparently caused the company's management to feel it was above authority.
If the government did not understand the power wielded by Greyhound, the small bus owners whose lines were vulnerable to takeover were well aware of it. That's why they told Bill Niskanen he could never succeed in blocking Greyhoud's prolonged effort to put him out of business.
A through review of the court record in the Mt. Hood antitrust suit against Greyhound offers a rare glimpse at business practices that usually can be found only in novels dealing with machinations in the executive suite. Indeed, the all-war against tiny Mt. Hood Stages was led by no less than the late chairman of the board of Greyhound, F.W. Ackerman.
But much of this was unknown to Niskanen before 1968, when he filled his antitrust suit. He and his attorneys, Board, Khourie and Schulz of San Francisco, began a two-year transcontinental paper chase that took them to Greyhound's warehouses ("It was 10 degrees in that Evanston warehouse," Niskanen remembers) and row after row of file cabinets. High-Level Intrigue
WhAT THEY they found among the hundreds of thousands of documents reviewed was a touch of irony: that Mt. Hood's troubles with Greyhound were precipated by an event in 1947, a development which Niskanen thought at the time was going to help his business.
In September of that year Justice sued Pacific Greyhound Lines for restricting bus traffic on the coast by means of exclusive "closed door" arrangements with other carriers. Greyhound signed a consent decree, agreeing to stop routing traffic over friendly lines. Mt. Hood was one of the victims, and Niskanen recalls thinking at the time, "Now we'll get some benefits."
But no sooner had it signed the consent decree than Greyhound began acquiring the very lines with which it had routing agreements. Between 1947 and 1954, Greyhound took over eight smaller lines, completely surrounding Mt. Hood's routes and deeply troubling Niskanen, who had no interest in being taken over.
Niskanen protested to the ICC, and a hearing examiner agreed with him, recommending that two of the eight acquisitions be disapproved by the ICC because they were not in the public interest.But what Niskanen did not know was that Ackerman, then president of Western Greyhound, was meeting secretly in Los Angeles with then ICC Chairman William E. Lee even as the commission was considering the acquisitions. When the ICC gave its approval, Ackerman got the news directly from Lee. And that same day in an interoffice memo he boasted: "This is tangible evidence of quick action and getting results when you make a call upon the right people."
Greyhound did make some written commitments to the ICC and Niskanen, based on which he withdrew his oppositon. Greyhound promised that it would "maintain a policy of open gateways" between itself and Mt. Hood, that it would never "longhaul" passengers around Mt. Hood, and that it would always inform the traveler of the alternate routes so that "he can make his own choice of the route."
But memos marked "personal and confidential" show that Greyhound immediately launched a campaign to destroy Mt. Hood. Allegedly independent sales agents were ordered not to sell tickets on Mt. Hood buses. Ackerman told one of his executives to have a "quiet talk" with a couple of reluctant agents, while another agent was "terminated" for informing travelers of Mt. Hood's schedule.
The unknowing passengers were being routed over Greyhound's less direct north-south route. One travel agent told Ackerman that "there is a saving of 4 hours and 10 minutes" taking Mt. Hood rather than Greyhound. But Ackerman wanted no excuses. "There is no use in telling me that these people demand that they be routed over [Mt. Hood] . . . I believe with a little sales effort at least half of these people could have been routed . . . over Greyhound."
Every effort was made to isolate Mt. Hood. For example, in 1947 Ackerman learned that Niskanen might want to buy a small bus line that branched off one of his routes. Ackerman pondered a way to scuttle Mt. Hood's planned acquisition yet "keep Greyhound Lines completely out of the picture."
His solution was to have his daughter and son-in-law advance $30,000 to a buyer, who just happened to be a retired Greyhound executive. Then the buyer shifted the IOU note on the $30,000 to Greyhound. Thus, Greyhound was able to avoid ICC scrutiny.
In June, 1957, Greyhound was hit by Justice with its second consent decree in 10 years. This time it agreed to refrain from discriminating against bus lines using terminals it owned or controlled. This applied to "the sale and issue of tickets, the routing of passengers and the dissemination of travel information." But as court exhibits show, Greyhound ignored the consent decree, which it had signed, and went right on discriminating against Mt. Hood.
By 1961, Greyhound was getting increasingly frustrated with Mt. Hood's ability to survive. A top executive of Greyhound went to Niskanen with an offer to buy the north-south route, but learned to his dismay that Niskanen had expansion plans.Immediately, Greyhound got rights of first refusal from the lines Niskanen was eyeing, which caused the executive to boast in a memo that Mt. Hood had been "blocked" from breaking through Greyhound's encirclement.
In 1963, Niskanen went to Oklahoma City to testify at an ICC hearing on behalf of a few small carriers that were protesting a Greyhound acquisition effort in the Southwest. Niskanen warned that the same thing could happen there as took place when Greyhound got into the Northwest. The ICC denied Greyhound's acquisition filing, which further aggravated the big line's feelings toward Niskanen.
By this time, Greyhound began more overt actions against Mt. Hood. Memos circulated calling for intensified "longhauling" around Mt. Hood and timetables were altered to remove any mention of connecting service.
To Greyhound, one of the most troubling parts of the 1947 agreement with the ICC and Niskanen was its pledge to maintain a joint through bus with Mt. Hood running between San Francisco and Spokane. This joint arrangement, which is described in Greyhound's own correspondence as "popular," "needed," "well patronized" and "profitable," provided a large percentage of Mt. Hood's revenues. If they could end this joint bus, Greyhound executives figured, Mt. Hood would be finished.
"If the through bus from San Francisco to Spokane were set to leave San Francisco early in the morning instead of in the evening," suggested the San Francisco traffic manager, "it would be impossible or extemely difficult for many of these passengers to make connections - and [they] would be diverted over our route."
In a 1963, letter to Greyhound general counsel Gerald Troutman, now the company's chairman, an executive asked him to help find a way to drop the San Francisco-Spokane bus. Warning that "it is exceedingly important that the contents of this letter not leak out," he wrote: "As you know, [Mt. Hood] and particularly Mt. Niskanen have been in Greyhound's hair for many years."
Greyhound came up with a plan to seek union help in dropping the through bus. "The timing is vitally important," a San Francisco executive wrote, suggesting the most propitious moment to drop it would be immediately after Mt. Hood's labor negotiations in May, 1964. Ineeed, as a part, of its campaign against Mt. Hood, Greyhound had been pressing the union that represented the two lines' workers, the Amalgamated Associations, to be tougher on Mt. Hood.
For example, in one letter Ackerman wrote" . . . it is an outrage for the Amalgamated to let this company [Mt. Hood] have lower wages than [Greyhound]."
Court records show that union officials were pressured, and in 1964, for the first time ever, the Amalgamated refused Mt. Hood's request to arbitrate. A brief strike followed, and immediately Greyhound made plans to drop the through bus "for reasons beyond our control," wrote Ackerman.
The effect on Mt. Hood was dramatic. North-south business was wiped out overnight as the number of passengers carried along that route plunged from 5,000 a year to less than 1,000.
Niskanen went to the ICC and demanded that Greyhound's eight Northwest acquisitions be reconsidered. He also stopped by the U.S. Attorney's office in San Francisco. And with the Justice Department intervening on behalf of Mt. Hood, the ICC in 1964 found Greyhound guilty of "destructive competitive."
Niskanen expected that Greyhound would mend its ways as a result of the ICC's censure, especially since the commission's action was backed by Justice. But once again the government failed to sway Greyhound. Back to Back
IN 1968, AT THE annual meeting in Washington of the National Association of Motor Bus Operators, Niskanen testified, he approached Troutman and asked the Greyhound chairman if he knew what his West Coast employees were doing to Mt. Hood. "He said he was handling it himself and he said Greyhound would never quote [Mt. Hood's schedule]." Niskanen said. "That's when I decided to file my antitrust case."
Later, in an affidavit, Troutman denied saying this, claiming that Niskanen was so drunk during the Washington meeting that he could not be understood. Niskanen heatedly denies the allegation, adding incredulously. "He put an affidavit like that with the court?"
Niskanen says the last time he saw Ackerman was at Greyhound's San Francisco office. He walked into a room and Ackerman had his back to him, looking out the window. "I wasn't going to let him get away with that," recalls Niskanen, who says he turned his chair around and the two held their discussion, back to back.
Greyhound challenged the ICC's authority to force it to restore the through bus. In 1969, five years after it ended the joint bus and with Mt. Hood on the verge of bankruptcy. Greyhound entered federal court in Chicago seeking a restraining order against the ICC. But the judge denied the petition saying: "It is this court's opinion that the delay should end here."
In February, 1970, a federal district court in Chicago not only affirmed the ICC's right to order restoration of the through bus, it also handed down a sweeping 10-point injunction against Greyhound. Among other things, Greyhound was ordered to restore the San Francisco-Spokane bus, list Mt. Hood on its schedules and stop detouring passengers around Niskanen's line.
In May, 1973, Niskanen and his attorneys waited in a Portland hotel room for five tension-filled days while a jury weighed the merits of his antitrust suit. Eugene Crew, one of the attorneys recalls that, when word came that the jury was returning. Niskanen strolled over to a couch, lay down and sang the Finnish national anthem. Then he told the lawyers, "Let's go get teh news."
As it turned out, the jury awarded Mt. Hood triple damages, plus legal fees. And that decision was unpheld just a month ago by the U.S. Court of Appeals in San Francisco.
In June, 1973, just a month after the Portland decision, the Chicago court that issued the 1970 injunction found Greyhound in "willful" violation of its order. The court found the company and three of its executives guilty of criminal contempt and fined Greyhound $600,000.
Greyhound has asked the appeals court to reconsider the antitrust decision and, if that fails, could take the case to the Supreme Court.
It actually pays Greyhound to delay paying Mt. Hood as long as possible. Oregon law hold that only 6 per cent interest need be paid on monetary judgments during appeals, and Greyhound might be able to earn as much as 12 or 13 per cent from its money.
As for Niskanen, the self-described "tough Finlander," after being up against Greyhound for about 30 years he says he can wait a little longer.