tUr'.i^rU 
 

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Cornell University Library 
 KF 2355.C6K46 
 
 The Commodities' clause :a treatise on t 
 
 3 1924 019 308 794 
 
Cornell University 
 Library 
 
 The original of tiiis book is in 
 tine Cornell University Library. 
 
 There are no known copyright restrictions in 
 the United States on the use of the text. 
 
 http://www.archive.org/details/cu31 92401 9308794 
 
THE 
 COMMODITIES' CLAUSE 
 
 A TREATISE 
 
 ON THE 
 
 DEVELOPMENT AND ENACTMENT OF THE COM- 
 MODITIES' CLAUSE AND ITS CONSTRUCTION 
 WHEN APPLIED TO INTER-STATE RAIL- 
 ROADS ENGAGED IN THE COAL 
 INDUSTRY 
 
 By 
 THOMAS LATIMER KIBLER, M.A., Ph.D. 
 
 Professor of Economics, A. and M. CoUege of Texas 
 
 Washington, D. C. 
 
 JOHN BYRNE & COMPANY 
 
 1916 
 
Copyrighted 1916 
 
 by 
 
 Thomas I<atimer Kibler. 
 

 MY PARENTS 
 JAMES LATIMER AND ANGELICA REBECCA KIBLER 
 
Erratnim, page 3, line 23, substitute "Louisiana' 
 for "Mississippi." 
 
PREFACE. 
 
 In presenting this treatise to the public, the author wishes to 
 acknowledge his indebtedness to the many, who, through aid in 
 securing access to material, or suggestion, or criticism, have con- 
 tribution to its preparation. He would make special mention of 
 his obligation to Mr. Blackburn Esterline, Special Assistant to 
 the Attorney General of the United States, for his invaluable as- 
 sistance in the final work upon the manuscript. The lengthy dis- 
 cussions entered into developed points of view that had not oc- 
 curred to the author, and the association contributed new interest 
 and inspiration to the work. Mr. Esterline's searching criticisms 
 and his keen insight into the broader questions of economic policy 
 and legal propriety, have given a poise and consistency to the 
 treatise that it must otherwise have lacked. In the initial con- 
 sideration of subject matter, scope of the work, and method of ap- 
 proach, the author is indebted to Dr. Henry Parker Willis, at 
 that time associated with the George Washington University and 
 the New York Journal of Commerce, for valuable suggestion, 
 broad-minded criticism, and a deeper conception of the function 
 and responsibility of the investigator. Much appreciation is felt 
 for the services rendered by Mr. Martin A. Knapp, the Presiding 
 Judge of the United States Court of Commerce, Mr. John H. 
 Marble, late member of the Interstate Commerce Commission, 
 and Mr. Robert F. Broussard, United States Senator from Mis- 
 sissippi, for time given in conducting the public disputation in ac- 
 cord with the custom of the George Washington University in 
 considering theses submitted in candidature for the Doctorate, 
 and for their kind expressions in commendation of the work. 
 Mention should also be made of the courtesies shown by Messrs. 
 Edwin P. Grosvenor and George Carrol Todd, Assistants to the 
 Attorney General of the United States ; Dr. Frank Dixon, of the 
 Bureau of Railway Economics ; and Dr. Francis Walker, of the 
 federal Bureau of Corporations. The author remembers with 
 sincere appreciation the courteous assistance of the officials of the 
 libraries of, Congress, the Interstate Commerce Commission, the 
 Department of Commerce, the Geological Survey, the Department 
 of Justice, and the Bureau of Railway Economics. He is espe- 
 cially indebted to Mr. L. S. Boyd, Librarian to the Interstate Com- 
 merce Commission, for his efficiency and unvarying courtesy and 
 
 3 
 
4 Preface. 
 
 patience in placing the resources of the library at the writer's dis- 
 posal. 
 
 Since the completion of this work more than two years ago, a 
 number of suits have been brought by the Department of Justice 
 against the coal-carrying roads, several decisions have been ren- 
 dered by the courts, and important investigations have been car- 
 ried on, and reports made, by the Interstate Commerce Commis- 
 sion. This new material has received careful attention in the 
 proper connection and has necessitated a number of changes in the 
 original. The conclusions, however, have not been changed ; on 
 the other hand they have in many cases been materially strength- 
 ened as a result of the additional data developed by the Govern- 
 ment and the Interstate Commerce Commission. 
 
 T. h. KiBi,ER. 
 
 College Station, Texas, October i, 1915. 
 
TABLE OF CONTENTS. 
 
 PAGE. 
 
 Introduction— The Problem Stated, 9 
 
 CHAPTER I. 
 
 The Status of Railway and Coal-Mining Relationships in Europe. 
 
 I. The State and the Coal Industry 11 
 
 II. European Railways and the Coal Industry, 13 
 
 III. Conditions in Europe Restraining Joint Operation, 16 
 
 1. Waterways, 16 
 
 2. State Railway Policies 18 
 
 a. English Railways and the State, 19 
 
 b. German Railways and the State, 20 
 
 c. French Railways and the State, 21 
 
 d. Austro-Hungarian Railways and the State, 2S 
 
 e. Belgian Railways and the State 26 
 
 f . Dutch and Danish Railways and the State 27 
 
 g. Italian Railways and the State, 27 
 
 h. Other European Railways and the State, 27 
 
 i. Summary, ... _ 29 
 
 CHAPTER II. 
 
 The Status of Railway and Coal-Mining Relationships in the United 
 
 States. 
 
 I. Earlier Railway Legislation, „ 30 
 
 II. Development of the Coal Problem, 33 
 
 IIL The Anthracite Fields 35 
 
 1. The Delaware, Lackawanna and Western Railroad 36 
 
 2. The Lehigh Valley Railroad 37 
 
 3. The Erie Railroad, 38 
 
 4. The Central Railroad of New Jersey, 38 
 
 5. The Delaware and Hudson Company, 39 
 
 6. The Philadelphia and Reading Company, 40 
 
 7. Inter-Railway Relations in the Anthracite Fields, 42 
 
 IV. The eastern Bituminous Fields 45 
 
 1. The Norfolk and Western Railway 46 
 
 2. The Western Maryland Railway, — 47 
 
 3. The Chesapeake and Ohio Railway, 48 
 
6 TabIvE oi Contents. 
 
 FAGC. 
 
 4. The Baltirnore and Ohio Railroad 49 
 
 5. The New York Central and Hudson River Railroad, S3 
 
 6. The Buffalo and Susquehanna Railroad , 55 
 
 7. The Buffalo, Rochester and Pittsburgh Railway S6 
 
 8. The Pittsburgh, Shawmut and Northern Railroad 57 
 
 9. The Pennsylvania Railroad 57 
 
 10. Inter-Railway Relations in the Bituminous Fields 61 
 
 V. The Western Bituminous Fields 63 
 
 1. The Rio Grande Western Railway, 64 
 
 2. The Colorado and Wyoming Railway, 65 
 
 3. The Railways of Oklahoma 66 
 
 4. The Union Pacific Railroad 67 
 
 VI. Survey of Relationships Disclosed, - 6g 
 
 1. Effect on Independent Coal Operator, 69 
 
 2. Effect on Prices to Consumer, 70 
 
 3. Recommendations of Inter-State Commerce Commission, .. 71 
 
 CHAPTER HI. 
 
 Legislative History of the Commodities' Clause. 
 
 I. Preliminary Considerations, 74 
 
 II. Proposals in the House of Representatives, 77 
 
 III. Senate Discussion and Action 80 
 
 IV. House Amends and Accepts Senate Resolution, 83 
 
 V. The Commodities' Amendment to Pending Rate Bill 86 
 
 VI. Consideration in Conference 93 
 
 VII. Final Form of Commodities' Clause, 95 
 
 VIII. Attempts to Postpone Effectiveness of Law, 95 
 
 CHAPTER IV. 
 
 Operation of the Law — Court Interpretation. 
 
 I. Extent of Compliance with Statute, 98 
 
 II. Civil Action of Government in Circuit Court, 99 
 
 III. The Commodities' Clause Before the Supreme Court, 102 
 
 IV. Adjudication in the Circuit Court, 112 
 
 V. Application of the Sherman Anti-Trust Law to the Anthracite 
 
 Combine, 113 
 
 VI. Effect of Decisions upon Railway and Coal-Mining Relation- 
 
 ships 117 
 
 VII. Further Adjudication Involving Anthracite Combines, 121 
 
 1. The Delaware, Lackawanna and Western Interests, 121 
 
 2. The Reading Interests, - 125 
 
 a. Application of Sherman Anti-Trust Law, 126 
 
 b. Application of Commodities' Clause, 131 
 
 3. The Lehigh Valley Interests, 133 
 
TabIvE of Contents. 
 
 CHAPTER V. 
 
 Inadequacy of the Commodities' Clause — Proposals. 
 
 I. Deficiencies of Existing Statutes, , 137 
 
 II. Proposals Considered, 139 
 
 1. The Leasing System as Applied to Coal Lands Owned by the 
 
 State, 139 
 
 2. The Federal Commission Plan, 143 
 
 3. Amendments Necessary to Render Act Effective 147 
 
 CHAPTER VI. 
 
 Conclusion. 
 
 [. Practical Applications, , isi 
 
 1. New York Insurance Companies and Banking Interests, ... . 151 
 
 2. Texas Cotton Oil Mills and Banking Interests, 157 
 
 3. The New Haven System: Trolley Lines, Steamship Lines, 
 
 and Other Railways, 158 
 
 4. The American Telegraph and Telephone Company, and the 
 
 Western Union i6i 
 
 5. Withdrawal of Individual Members of Morgan Firm from 
 
 Directorships, 161 
 
 II. Conclusions, i6i 
 
 Index, , . 163 
 
 Bibliography, 170 
 
THE COMMODITIES' CLAUSE 
 
 INTRODUCTION— THE PROBLEM STATED. 
 
 The marvelous capitalistic growth of the last two decades in 
 the United States, the accumulation of vast fortunes, and the 
 many evidences of concerted action and common motive among 
 the financial interests, have aroused a spirit of unrest and dis- 
 trust of a governmental regime under which such an unequal 
 distribution of the profits of industry could be effected. This 
 situation is the inevitable result of our sudden and marvelous in- 
 dustrial development. Legislative bodies do not generally antici- 
 pate because their constituents do not: They do not enact re- 
 medial laws until they are confronted by a condition that is in- 
 sistently burdensome to the public. Then the evil is rooted, and 
 vested interests must sometimes be rudely disturbed in order to 
 eradicate it. 
 
 One of the most serious forms of abuse has resulted from 
 the entrance of certain transportation companies into the busi- 
 nesses of manufacturing, producing, buying and selling. This 
 practice became very common among transportation companies 
 operating in those regions where valuable mineral properties 
 joined their lines. Such a practice could not have immediately 
 serious results where the interests involved extended over such 
 wide areas as to render the concerted action of carriers, looking 
 to monopoly control, impossible. The timber interests furnish 
 such an illustration. The reverse situation is presented in the 
 bituminous and anthracite industries, especially the latter, owing 
 to the restricted area of the deposits and the dependence of car- 
 riers upon this class of traffic for the larger part of their tonnage. 
 Such a situation renders railway control of the output of mines 
 extremely profitable, and any affiliation between carriers and ad- 
 joining coal mines invariably results to the disadvantage of mines 
 not so related. The simple extension of special rates and serv- 
 ices to affiliated mines has generally been sufficient to force in- 
 dependents out of the business. Partial railway control of coal 
 mines thus leads to the gradual absorption of independents, and, 
 ultimately, to a railway monopoly of the coal industry. 
 
 9 
 
lo The Commodities' Clause 
 
 The largest and only important anthracite coal deposits in the 
 country are found in the eastern part of Pennsylvania and are 
 confined to a very limited area. Certain railways operating in 
 this region have acquired practical control of the production, as 
 well as the transportation and sale, of the output of these mines. 
 This result was accomplished through, the direct ownership and 
 operation of coal mines ; the ownership of stock in such mines ; 
 the creation and control of corporations through which the rail- 
 way exerting such control might carry on operations in virtual 
 violation of the law ; the maintenance of perpetual contracts with 
 coal companies ; the interchange of officials and directors for the 
 purpose of establishing a community of interests as a bar to 
 competition ; and the various forms of discrimination and favor- 
 itism regarding rates and services which have resulted from these 
 relationships. The inevitable result of such monopoly control has 
 been to choke out the independent operator, to eliminate competi- 
 tion, and, consequently to secure practical monopoly upon the 
 production and marketing of coal. 
 
 The situation in the bituminous fields is in many respects sim- 
 ilar. Such complete control, however, as exists in the anthra- 
 cite fields has been rendered impossible by the wide extent of 
 the bituminous deposits and the presence of other tonnage as a 
 source of revenue. 
 
 There exists at present no authoritative treatment upon the 
 conditions prevailing in the coal regions, or upon the attempts of 
 the government to remedy or ameliorate these conditions. I have 
 attempted to cover this field in the consideration of the following 
 subjects: (i) The status of railway and coal-mining relation- 
 ships; (2) the intent of Congress as expressed in Congressional 
 discussion and action; (3) the application of the statute enacted 
 and its effect upon the relationships found to exist ; (4) the funda- 
 mental weakness of the Commodities' Clause ; (S) an estimate of 
 the feasibility and efficacy of the government ownership and 
 leasing system, and the federal commission plan ; and (6) amend- 
 atory legislation necessary to render the law effective. 
 
 In developing these themes, it has been thought well to bring 
 to bear the experience of European governments with respect to 
 their attitude toward the transportation and mining industries. 
 
CHAPTER I 
 
 THE STATUS OF RAILWAY AND COAL-MINING RE- 
 LATIONSHIPS IN EUROPE 
 
 I. The State and The Coal Industry. 
 
 The European and American governmental policies toward 
 railways appear in striking contrast. From the very inception of 
 railway systems in Europe, they have been consistently regarded 
 as fulfilling primarily a public function. Evils consequent upon 
 our failure to so regard common carriers during the earlier period 
 of their development could never arise in Europe either under 
 private or public ownership. It is of immediate interest to know 
 if the problem of joint ownership and operation of transportation 
 facilities and coal mines has arisen there ; if so, its effect ; and if 
 not, why not ? Furthermore what are the reasons for the present 
 tendency among European states toward government ownership ? 
 Has this trend resulted from any objectionable relations between 
 railways and other industries? Finally, what lessons may be 
 learned from European experience? 
 
 We are here primarily concerned with the great coal producing 
 countries since the temptation for railways to enter into the coal 
 business is manifestly greater than that offered by any other in- 
 dustry. The United States, Great Britain, and Germany, are 
 the great coal producing countries of the world. Together they 
 produce about 85 per cent of the world's supply.^ Austria-Hun- 
 gary, France, and Belgium, produce nearly 10 per cent of the 
 remainder. The entire production of Russia is little more than 
 half that of Belgium, while the output of Spain, Italy, Holland, 
 Switzerland, and the Balkan States, is a negligible quantity. 
 
 Nearly all the coal mines of Europe have always been operated 
 by private corporations, independent alike of the state and of the 
 railway. Holland has undertaken the operation of several small 
 mines where the expense of excavating under the water is too 
 great to attract private capital. Proposals for nationalization in 
 
 I United States, 40 per cent (480,000,000 tons) ; Great Britain, 25 per 
 cent (300,000,000 tons) ; and Germany, 19 per cent (227,000,000 tons). 
 Mineral Resources of the United States, 1907. 
 
 2 II 
 
12 The Commodities' Clause 
 
 England and France have been rejected without serious considera- 
 tion. A bill introduced in the British House of Commons in 1893, 
 providing for the state ownership of coal mines, did not come to 
 a vote.^ A similar bill, extended to include railways and canals, 
 was introduced in 1907, but met the same fate.^ Similar bills have 
 been proposed by the Socialistic faction of the French Popular 
 Assembly, with the same result. 
 
 Germany alone has adopted a definite policy of state control and 
 ownership of certain important coal mines. For the most part 
 such mines are confined to the state of Prussia. For many years 
 small mines in the Saar District and in Upper Silesia have been 
 owned and operated by this state. In 1902, extensive holdings 
 were acquired in the Ruhr District. The professed object of the 
 latter acquisitions has been, first, to break up the monopoly of coal 
 by the great coal syndicate of Western Prussia;* secondly, to 
 lower the price of coial to the consumer ; and thirdly, to assure an 
 adequate supply for state railroads. Military considerations, the 
 conservation of coal deposits, and labor conditions, have also had 
 some influence in determining the Prussian policy. 
 
 The "Rhenish- Westphalian Coal Syndicate in Germany is one 
 of the most powerful, if not the most powerful, of the monopolistic 
 combinations of Europe."" The Mining Administration of Prus- 
 sia, in an attempt to exert an influence upon the price of coal, has 
 recently become a member of the syndicate, with voting privilege. 
 It now sells its own surplus from the Westphalian mines through 
 the syndicate's selling agencies.' It is too early to predict the 
 effect of this experiment upon the coal monopoly and the price of 
 coal to the consumer. 
 
 The entrance of the government into the coal business has had 
 no appreciable effect upon the price of coal. In fact, state coal 
 observed the same price level as that of the syndicate until 1909 
 when the former was slightly reduced.^ The output was not suf- 
 
 2 The International, Feb., 1909 (Paris and London), p. 213. 
 
 3 State Railways, E. A. Pratt (London), p. i. 
 
 4 The Rhenish-Westphalian Coal Syndicate. 
 
 5 Statement to writer by Dr. Francis Walker, of the Bureau of Cor- 
 porations. 
 
 6 Monopolistic Combinations in the German Coal Industry, Francis 
 Walker, Publications of the American Economic Association, Third Series, 
 Vol. V, pp. 188, 189. The writer is much indebted to Dr. Walker for this 
 critical study of the situation in Germany. 
 
 7 Do. 
 
European Railroads and Coal MiNfis. 13 
 
 ficient, however, materially to aflfect the retail price of coal. The 
 German government has also endeavored, through publicity and 
 the supervision of financial operations, to relieve the consumer 
 from oppressive charges ; but with little success. Foreign coal has 
 from time to time been admitted at exceptionally low tariff rates 
 and the Empire has received bids for naval supplies from English 
 operators, in order to force down the price demanded by local 
 dealers.® These activities on the part of the state seem to have 
 had very little effect upon the price level maintained by the syn- 
 dicate. 
 
 The city of Vienna, Austria, has made a somewhat similar ex- 
 periment in the operation of coal mines in order to have its own 
 --ource of supplies for its municipal gas works. In 1909, the city 
 paid $2,500,000 for collieries at Ostrau, on the Austro-Prussian 
 frontier. It has recently been proposed that the city enter into a 
 partnership with a private concern in order that it may more ad- 
 vantageously dispose of the surplus not consumed in the manu- 
 facture of gas.^ It is clear in this case that there was no desire on 
 the part of the municipality to enter into the general business of 
 mining and selling coal. 
 
 With the above exceptions, the business of mining and selling 
 coal in Europe is carried on by private companies. 
 
 II. European Railways and the Coal Industry. 
 
 No case has arisen in Europe of the actual ownership and oper- 
 ation of coal mines by railroad companies. A single case has ap- 
 peared in England where a railroad acquired a virtual monopoly 
 upon the purchase and sale of the output of certain coal mines. 
 The situation presented is little less serious than that resulting 
 from actual ownership and operation. In 1854, by special Act of 
 Parliament, the Great Northern Railway secured control of a 
 short line of the Abergate Company, which latter extended into 
 the Nottingham coal fields.^" No sooner had this been accom- 
 plished than the railroad set about securing a monopoly upon the 
 purchase and sale of the output of mines served by the Abergate 
 line. This was effected through the control of local purchasing 
 agencies and the creation of selling agencies in the London mar- 
 
 8 Monopolistic Combinations in the German Coal Industry, Francis 
 Walker, Publications of the American Economic Association, Third Series, 
 Vol. V, pp. 188, 189. 
 
 9 The International (Paris and London), p. 213, Feb., 1909. 
 
 10 History of the Great Northern, Chas. H. Grinling, pp. 143, 144. 
 
14 The Commodities' Ci,ause 
 
 kets to receive and dispose of all shipments from these mines. By 
 1857, the scheme had worked so effectively that the coal operator 
 was unable to' dispose of his output except through the railway's 
 agencies. At 'this time about 96 per cent of the entire output was 
 sold to the Great Northern prior to shipment. In December, 1857, 
 upwards of 700,000 tons were so purchased, transported, and sold 
 by the railway; whereas but 28,000 tons were received and trans- 
 ported for the coal companies.^^ It further appeared that one 
 man, acting as agent for the railway, controlled the purchase of 
 the output of the Nottingham mines and that operators were com- 
 pelled to part with their coal at the agent's prices, or else they 
 were unable to secure transportation facilities.^* 
 
 Various subterfuges were employed to mislead the public as to 
 the real purport of these transactions. The railway maintained 
 that it was not purchasing the coal prior to receiving same for 
 shipment but that the agents in London and intermediate points 
 were in fact representing the operators. It was shown, however, 
 that certain mining operators had been required to go through the 
 form of appointing an agent to market their products although 
 such "agents" were in fact acting under specific direction from the 
 railway company, occupying the latter's ofSces, and otherwise iden- 
 tifying themselves with the railway management. In many cases 
 where it was attempted to establish the bona fide nature of these 
 arrangements, it was clearly proved that the railway had bought 
 outright the shipments in question before they were transported to 
 market.^^ 
 
 The government contended that the act creating the Great 
 Northern Railway did not empower it to trade in coal or employ 
 its funds in any other manner than for "ordinary purposes of 
 making and maintaining the railway, that is, the ordinary power 
 
 of a railway company, and no other; that the com- 
 
 pay had applied and was applying the funds of the company, to a 
 large amount, in purchasing coal from coal owners and selling it 
 at London and at intermediate stations on account of the (r. r.) 
 
 company as coal merchants with a view to profit, on a most 
 
 extensive scale, in competition with the coal merchants whose coal 
 
 11 The Attorney General vs. The Great Northern Railway Co., Law 
 Journal Reports 38, Pt. i, New Series 29 (Equity) i860, pp. 794, 795. 
 
 12 Same as (10), p. 143. 
 
 13 Same as (11), pp. 794, 795. 
 
European Railroads and Coai, Mines. 15 
 
 they carried under agreements still in force."" The government 
 declared that "the effect was to enable the company to monopolize 
 the market for sales ; that their cost of carriage was a very large 
 element in their favor charged to the consumer of coals ; and the 
 discretion the company had of varying such cost, and the facilities 
 of station accommodation at their command, had placed freights 
 at so great a disadvantage as, practically, to exclude them from 
 the market."^^ 
 
 Vice Chancellor Kindersley, delivering the opinion of the court, 
 granted the prayer of the government for an injunction forbid- 
 ding the railroad company to continue the business of buying and 
 selling coal. The Vice Chancellor said : 
 
 "I observe that in the eight years from 1850 to 1857 in- 
 clusive, the amount of their coal business has increased 
 from 73,000 tons to 794,000 tons ; and there is no reason, 
 as the affidavits show, why they should not — there is great 
 danger that they may — ^get into their hands the entire busi- 
 ness in the coal of that district of the country. If they 
 can do this with regard to coal, what is to prevent their 
 doing it with regard to every species of agricultural pro- 
 duce all along the line ? Why should they not become pur- 
 chasers of com, of all kinds of beasts, and of sheep, and 
 every species of agricultural produce, and become great 
 dealers in the supply of edibles to the markets of London ; 
 and why not every other species of commodity that is pro- 
 duced in every part of the country from which or to which 
 their railway runs. I do not know where it is to stop, if 
 the argument of the company is to prevail. There is there- 
 fore great detriment to the interests of the public, for this 
 
 reason, taking merely the article of coal The whole 
 
 question is involved in this : That by reason of the monop- 
 oly the mischief to the public arises, and from that 
 
 species of monopoly which is attempted to be acquired by 
 this company. The reason why it is unlawful to do it 
 is, the danger of monopoly."^* 
 
 The government therefore succeeded in establishing, (i) that 
 the road in question was dealing in coal for a profit; (2) that 
 such transactions were illegal because the act creating the rail- 
 way corporation did not authorize the road to enter into the pur- 
 
 14 Attorney General vs. Great Northern Railway Co., Law Journal Re- 
 ports, 38, Pt. I, New Series 29 (Equity), i860, pp. 794, 795. 
 
 15 Do. p. 795- 
 
 16 Do pp. 801, 802. 
 
i6 The Commodities' Clause 
 
 chase and sale of commodities, the court maintaining that a pro- 
 hibitive statute was not necessary to render such operations il- 
 legal; and (3) that the Attorney General may on his own initia- 
 tive or at the instance of an individual file an information to re- 
 strain such proceedings on the part of any common carrier, no 
 particular act of Parliament being necessary .^^ 
 
 The issue in the Great Northern case was so clearly presented 
 and so squarely met that we do not find the recurrence of a sim- 
 ilar attempt on the part of any English railway to control the coal 
 business. England has always allowed greater freedom to her 
 railways than any other continental country.^* This may explain 
 in a measure the early aggressions of the Great Northern. The 
 same situation could not have arisen on the continent on account 
 of the very intimate relation that has always existed between the 
 state and the railway; nor is it likely to recur in Great Britain 
 owing to the effect of this decision in defining and limiting the 
 privileges of a common carrier, or of any corporation, to the spe- 
 cific purpose for which it was chartered. 
 
 III. Conditions in Europe Restraining Joint Operation. 
 
 I. Waterways. — ^The mining industry in all the European states 
 became very thoroughly established before railways entered the 
 field. It was never necessary for operators of coal mines to build 
 railroads in order to market their product, since practically all the 
 great coal mines of Germany, France, England, and Belgium, are 
 located on navigable rivers.^^ As early as 1875, Germany carried 
 19,600,000 tons of freight upon her 5,625 miles of navigable 
 water. By 1900 this traffic had grown to 72,200,000 tons, exclu- 
 sive of ocean-bound traffic.^" 
 
 The great coal mines of western Germany are conveniently lo- 
 cated on the Rhine, the Moselle and the Saar Rivers. Other 
 smaller mines in central Prussia have natural or artificial water 
 courses connecting with greater water-highways ; and the valu- 
 able state mines of eastern Prussia are on the Oder River. 
 
 Furthermore the great manufacturing centres of Germany are 
 
 17 Attorney General vs. Great Northern Railway Co., Law Journal Re- 
 ports 38, Ft. I, New Series 29 (Equity), i860, pp. 798-800. 
 
 18 Moody's Magazine, Vol. 7, p. 337. 
 
 19 Canals and Navigable Rivers of Germany, Doc. I, 1909, National 
 Waterways Commission. 
 
 20 Do. pp. I, 2. 
 
European Railroads and Coai, Mines. 17 
 
 connected with each other or the sea by navigable rivers or canals. 
 The Weichsel flows from Warsaw to the Baltic reaching the sea- 
 ports of Konigsberg and Danzig; the Oder with its numerous 
 tributaries navigable from southern Silesia, and even Austria, ex- 
 tends to the harbor of Stettin on the Baltic; the Spree and Havel, 
 connected by canals with the Elbe and Oder, furnish Berlin and 
 the outlying populous manufacturing districts with adequate facil- 
 ities for the transportation of heavy freight; the Elbe flows di- 
 rectly through the entire German Empire, and, with its several 
 branches, unites the commercial interests of Saxony, Magdeburg, 
 Dessau, Dresden and Leipsic, affording each an adequate outlet 
 to the Baltic by way of Hamburg ; the Weser, with its branches, 
 the Aller, Leine, Werra and Fulda, connect all of west central 
 Germany with the port of Bremen ; and the Rhine, with its 
 branches, the Main, Ems and Mosel, extending from the northern 
 border of Switzerland to the port of Rotterdam, completes the 
 marvelous system of navigable rivers with which this country is 
 supplied.^^ 
 
 France is not quite so well supplied with rivers as Germany, but 
 what is lacking in natural facilities has been supplied by an ex- 
 tensive system of canals and highways reaching every part of 
 the country. This policy was inaugurated by Louis XIV, and 
 was developed so rapidly that almost a perfect system of lines of 
 communication was established long before the introduction of 
 railways.^^ 
 
 The railways of Belgium and Holland, for freight purposes at 
 least, are even to-day considered as mere auxiliaries to the canals. 
 The water routes of Holland now carry about 90 per cent of the 
 traffic. Steamers from Amsterdam deliver freight to all the lead- 
 ing Dutch cities in twenty-four hours, or less.^' The water facil- 
 ities of Belgium are almost equally good. 
 
 The valuable coal fields of England in the counties of Derby, 
 York, Durham, New Castle, and Nottingham, as well as those in 
 Southern England and Wales have ready access to the sea by way 
 of the Trent, Humer and Severn Rivers, and to London, Liver- 
 pool and other great manufacturing centres, by sea routes. 
 
 21 Canals and Navigable Rivers of Germany, Doc. I, igog, National 
 Waterways Commission. 
 23 Railways of Europe, Moody's Magazine, Vol. 7, p. 260. 
 23 Do. Vol. 9, pp. 47-50- 
 
1 8 Thb Commodities* Clause 
 
 The situation throughout all the European states is very sim- 
 ilar. If they do not possess sufficient natural water systems they 
 have in the course of centuries before the introduction of rail- 
 ways perfected their systems of canals and public highways. 
 Through one means or another it is a fact that nearly all the great 
 coal mines of Europe had easy access to local manufacturing 
 towns and to the great sea highway, connecting them with all the 
 centres of Europe, long before railways were introduced. 
 
 In the earlier development of the systems of transportation 
 in Europe, the rivers usually afforded through routes; where- 
 as state highway lines, whether privately or publicly owned, 
 were generally limited by state borders. This advantage together 
 with the smaller cost of operation rendered water routes less ex- 
 pensive and more convenient. The force of this reasoning is all 
 the more apparent when the comparatively small area of Euro- 
 pean countries is considered. 
 
 As a result of these conditions, the transportation of heavy, 
 low-priced freight by water is so much cheaper and more con- 
 venient that the bulk of such freight has always reached its des- 
 tination by this means in spite of the highly developed railway 
 systems now in operation. Railways were, therefore, not neces- 
 sary to the early development of coal mines and the necessity, or 
 even the temptation, of uniting the interests in order to develop 
 the one or the other, did not exist. 
 
 2. State Railv^ay Policies. — ^We have presented above the na- 
 tural forces which rendered the development of the coal industry 
 practically independent of the railway. We come now to the de- 
 clared policy of the European states toward the construction and 
 operation of railways, a policy that has operated powerfully to 
 confine transportation facilities to the business of common ear- 
 ners. The European governments from the beginning have taken 
 a strong hand in the administration of their railway systems. The 
 theory that common carriers are creatures of the state and sub- 
 servient to the 'uterests of the public, has been at the bottom of all 
 railway legislation. This attitude may be partially explained by 
 the fact that the railway has always been regarded, not as a sub- 
 stitute for the canal and public highway but merely as supple- 
 mentary thereto. In general, therefore, the laws applying to the 
 old public highway were adjusted to the administration of rail- 
 ways. 
 
European Railroads and Coai, Mines. 19 
 
 a. English Railways and the State. — English railways, as 
 has already appeared, enjoyed much greater freedom than those 
 of the continent. Construction and operation were carried on 
 independently of the state, the only restrictions being such as the 
 common law applied to all corporations and to all common car- 
 riers. 
 
 The larger part of railway mileage in Great Britain has been 
 laid by local promoters without any state aid whatsoever. For 
 the most part the original lines were very short and controlled by 
 as many different financial interests. The Great Western, for in- 
 stance, is composed of what were originally nearly two hundred 
 smaller companies, yet its total length is but 2,736 miles. Even 
 to-day the railway mileage of the country is controlled by about 
 250 separate and independent companies, although there is a total 
 of only 22,600 miles of railway in the islands.^* About twenty 
 companies, however, control the larger part of this mileage.^° 
 
 During the earliest development of English railways the policy 
 of the government was very clearly defined and incorporated into 
 law. The state did not interfere with free and unhampered de- 
 velopment so long as railways confined themselves to the opera- 
 tions of common carriers and served the public with proper equip- 
 ment and at fair and reasonable charges. As far back as 1842 
 there was a strong sentiment for public ownership but this agita- 
 tion appears to have arisen on account of the unusually large num- 
 ber of accidents that had recently occurred,^* and was of short 
 duration. About 1845 there was much criticism on acount of the 
 alleged high charges for transportation. At this time a very 
 stringent statute was enacted giving the Board of Trade the most 
 arbitrary power respecting rates, services, and profits. This body 
 might reduce the rates designated by Parliament, but could not 
 raise them; might restrict profits to ten per cent by reducing 
 rates, and, at the end of fifteen years, might actually purchase all 
 railways if such procedure were deemed advisable.^' This lat- 
 
 24 The Ways of Our Railways (London), Chas. H. Grinling, p. 2. 
 
 25 Do. p. 4. 
 
 26 History of (English) Railways, 1820-184S, J. Francis, Vol. 2, pp. 
 36-40. 
 
 27 "If after 15 years any new railway shall yield 10 per cent for three 
 years, the Board of Trade may, on one month's notice, reduce the tolls 
 and fares, according to their judgment so as to keep the profits at 10 per 
 cent." J. Francis, Vol. 2, p. 99. The board was also authorized to lower 
 
20 The Commodities' Clause 
 
 ter provision was amended to apply only to future railway con- 
 struction. 
 
 All charters issued to railway corporations confined their oper- 
 ations specifically to service as common carriers. The attempt on 
 the part of the Great Northern to branch out into the mercantile 
 business was checked immediately and on account of England's 
 general policy and its rigid application in this case, her railways 
 have made no further attempt to enter into other lines of busi- 
 ness. 
 
 b. German Railways and the State. — From the period of early 
 railway construction in Germany the states took an active part 
 in their establishment and regulation. Although concessions were 
 first granted to private companies, it was always clearly specified 
 that the state might take over such roads if it saw fit. We may 
 pass over the period from 1838 to 1847 when the larger part of 
 the German railway system was in the hands of private compa- 
 nies, and when no aid was given by the state to encourage railway 
 construction.^^ In the latter year the Prussian Diet inaugurated 
 the policy of guaranteeing 3j4 per cent interest on capital in- 
 vested, provided that profits in excess of 5 per cent should be dis- 
 tributed as follows: (i) to repay the state for guarantees ad- 
 vanced; (2) to create a fund from which further advances might 
 be made when earnings fell short; and (3) to purchase shares of 
 railway stock for the state. During this period the state also 
 bought shares of stock outright in order to stimulate develop- 
 ment.^" 
 
 From 1848 Prussia exercised exceedingly strict supervision over 
 railway time tables, tariffs, and even the appointment of certain 
 officials. The state also reserved the right to take over any lines 
 which had required the guarantee three years in succession. Prac- 
 tically the same conditions existed in other German states.^" 
 
 A distinct policy of nationalization was not inaugurated until 
 after the Franco-Prussian Wa". Under Bismarck's influence, a 
 comprehensive plan for uniting the interests of all the German 
 states was inaugurated. He proposed nationalizing all railways 
 
 rates below those authorized by act of Parliament but "in no case to raise 
 them," and the board at the end of 15 years might, "if they think fit, pur- 
 chase the railway." Statute of 1845. 
 
 28 Moody's Magazine, June, 1909, p. 429. 
 
 29 (English) Railways and their Rates, E. A. Pratt, p. 243. 
 
 30 Moody's Magazine, Vol. 7, p. 429. 
 
European Raii^roads and Coai, Mines. 21 
 
 throughout the Empire,' whether such railways were owned by 
 private corporations or German states. This plan had for its 
 prime object the uniting of all the states in order to establish a 
 powerful, aggressive and harmonious nation.^^ The policy con- 
 templated uniformity of rates, reduction of rates, adjustment of 
 equipment to military needs, and fostering of native industries 
 by giving the Empire control of export and import tariffs. 
 
 The constitution under Prussian influence, authorized the Em- 
 pire to require all the German states to construct lines where 
 strategic conditions demanded it, and to control rates on such 
 lines. To facilitate administration the Empire created the Reichs- 
 Eisenbahn-Amt, — an executive council to bring under central 
 control all questions regarding transportation affecting the Em- 
 pire, and to secure, as far as possible, uniformity in state railway 
 legislation and administration. The government, however, did 
 not possess power to make this policy effective.^^ It failed be- 
 cause the other German states were too fearful of Prussian dom- 
 ination to become parties to the Bismarckian policy. 
 
 Prussia then proceeded to apply the policy locally, taking over 
 practically all the remaining private lines in her own state and 
 such adjacent lines as she could secure. In 1896 all the Hessian 
 lines were brought under Prussian influence. By 1899 the nation- 
 alization of the German roads was complete, Baden, Saxony, 
 Bavaria, and Wiirtenburg, following the Prussian policy in order 
 to prevent further Prussian aggressions.^^ By 1900 Prussia 
 owned and operated 16,725 miles of railway in her own borders 
 and 2,127 outside, the total constituting about two-thirds of all 
 German railway mileage. 
 
 In considering the German poUcy it must be remembered that 
 the railroad is primarily military in character, and secondarily, 
 an instrument in the hands of the state for the building up of in- 
 ternal industries. These considerations render it entirely differ- 
 ent from the principles governing railway construction and oper- 
 ation in the United States ; hence the absolute lack of certain pe- 
 culiar evils growing out of the nature of our own system. 
 
 c. French Railways and the State. — The French railway sys- 
 tem may be regarded merely as an extension of her highway and 
 
 31 Moody's Magazine, Vol. 7, pp. 429, 430. 
 
 32 Do. p. 430. 
 
 33 Do, Vol. 8, p. 29. 
 
22 The Commodities' Ci,ause 
 
 canal system. The same system of strict control and supervision 
 has been applied. It has been against the French policy, how- 
 ever, to own and operate railways as state institutions. In this 
 respect the French system stands midway between the inde- 
 pendent railway of Great Britain and the state railway of Ger- 
 many. 
 
 From the very beginning of railway construction in France we 
 may discern the strong supervising hand of the government. The 
 entire railway plan for the country was originally worked out by 
 state engineers to supplement other methods of transportation. 
 This was before it was decided whether the roads were to be 
 publicly or privately owned.^* It was then thought advisable to 
 permit them to be owned and operated by private interests, the 
 state agreeing to pay liberal subsidies as an inducement to the in- 
 vestment of private capital. 
 
 The first actual attempt at railway construction was a private 
 line from Paris to Orleans. Work was begun in 1839 but the 
 company was unable to raise sufficient funds to complete the 
 project. The state then came to its aid, offering to guarantee in- 
 terest on all capital invested, and the road was completed without 
 further difficulty.^^ The state then adopted the policy of ad- 
 vancing one-third of the capital for approved undertakings for 
 which three per cent interest was charged. 
 
 In 1842 an extensive policy of state construction was agreed 
 upon, the state undertaking to build earth works, bridges, and 
 stations, while the companies receiving concessions laid the rails 
 and provided the rolling stock. The road so constructed was ulti- 
 mately to revert to the state, in which event the equipment would 
 be purchased at a reasonable valuation.'* 
 
 From 1842 to 1852 a number of small lines were built on this 
 plan. By 1857 all the railway mileage had been consolidated into 
 six big systems. At this time so much public criticism was elicited 
 on account of the state's expenditures in the construction of ex- 
 tensive branch lines that the state policy was changed from that 
 of subsidizing to the guaranteeing of interest on capital invested 
 for new Hnes.*^ 
 
 34 The Railways of France, Moody's Magazine, Vol. 7, p. 260. 
 
 35 L,'Economiste, Leroy-Beaulieu, Dec 2, 191 1. 
 
 36 Report to (English) Board of Trade on Railways in France, 1910, 
 p. "5. 
 
 37 Do. p. 116. 
 
European Railroads and Coal Mines. 23 
 
 From 1859 to 1883 the state guaranteed 4.65 per cent on private 
 investments.'* During the latter four years of this period the 
 state expended about three and one-half milliards of francs in 
 new railway construction. This policy was discontinued in 1883 
 on account of the stringency in state finances.'* The state then 
 entered into an agreement with the six great systems of the coun- 
 try. This compact provided "that the state should confine its own 
 railway operations to the small district in the southwest occu- 
 pied by what is known as the state line, and that isolated lines 
 which the state owned in various parts of the country should be 
 taken over by that one of the six great companies in whose terri- 
 tory it lay;*" secondly, that additional lines as needed should in 
 the future be constructed only by the companies in whose districts 
 they lay ; thirdly, that the state should guarantee each company 
 a minimum dividend and that when the amount available for divi- 
 dends exceeded a certain percentage — ^the rate differing for each 
 line — tSvo-thirds of the excess should go to the state." It was 
 further agreed that the state should bear any expense incident to 
 special modification of structure for military purposes. The 
 agreement was signed by the State Minister of Public Works, 
 and the six companies, respectively.*^ It simply extends, and 
 more clearly defines, the French policy of granting railways a 
 monopoly in their respective districts ; and shifts the policy of a 
 guarantee of interest on capital expended, and the financing of 
 railway construction, to that of a guarantee of dividends with 
 the reservation of a portion of the excess to the state. 
 
 From the earliest railway construction in France, that govern- 
 ment has uniformly contended that railways should be operated 
 under non-competitive conditions but under strict state super- 
 vision. This policy is well illustrated in the experiment of 1865, 
 giving municipalities the power to grant subsidies to local roads 
 which were to be operated independently of the six great com- 
 
 38 Report to (English) Board of Trade on Railways in France, 1910, p. 
 116. 
 
 39 Do., pp. 116, 117. 
 
 40 The total extent of such lines was about 1,860 miles. This mileage 
 represents the accumulation of state constructed roads, that were not 
 taken over by private companies, from 1876-1911. Leroy-Beaulieu, Rail- 
 way Age Gazette, May 10, 1912, pp. 1047-1049. 
 
 41 The French Railway System, Moody's Magazine, Vol. 7, p. 261 ; also 
 Report to (English) Board of Trade, 1910, p. 144. 
 
24 The Commodities' Clause 
 
 panics. It was clearly stipulated that the roads constructed under 
 this arrangement were to be feeders, and not competitors.*^ Later 
 the lines combined in certain sections of the state and entered 
 into competition with the great systems. The government took 
 the matter in hand and empowered the systems, whose monopoly 
 rights were regarded as being infringed upon, to buy out all such 
 municipal enterprises. 
 
 As in England and Germany, parallai lines have never been 
 permitted in France, nor have any conditions tending to compe- 
 tition been encouraged. The six railway systems of France have 
 always maintained a complete monopoly of traffic in their re- 
 spective territories. The government has reserved the right, how- 
 ever, to grant concessions to rival enterprises if conditions in any 
 section seem to justify it.*^ This policy has resulted in the elim- 
 ination of rate wars, as well as improperly considered lines for 
 speculative purposes. 
 
 There appears to have been no significant agitation in France 
 for the state ownership of railways. This is probably due to the 
 fact that the very close relations sustained by the state to rail- 
 way construction and administration have enabled the government 
 to exert about as much control over transportation as if it owned 
 and operated the system throughout. The recent purchase by 
 the state (1908) of the Western Railway, extending from Paris 
 to Dieppe, L,e Havre, Brest, and St. Nazaire — a distance of 3,730 
 miles — is not regarded by the leading authorities as indicating a 
 change in the state policy towards railways. Messrs. Rejmtiens 
 and Chute, who have made a very careful investigation at the in- 
 stance of the British Board of Trade, state that the Western was 
 taken over by the French government because the former became 
 so deeply indebted to the state for advances that there was no 
 hope of its ever paying out.** It is maintained by some investi- 
 gators, however, that the Socialists regarded the Western as the 
 best prospect for the introduction of their policy of state owner- 
 ship and operation, and that the government was forced to yield 
 to the pressure brought by this faction for the purchase of the 
 road.*" This addition to the short lines hitherto operated by the 
 
 42 The French Railway System, Moody's Magazine, Vol. 7, p. 261. 
 
 43 Do. Vol. 7, p. 261. 
 
 44 Report to (English) Board of Trade, 1910, pp. 136-140. 
 
 45 Same as (42), Vol. 7, p. 265. 
 
European Railroads and Coal Mines. 25 
 
 government brings the state mileage up to a total of 5,600 miles, 
 about 8 per cent of the total railway mileage of France.*' 
 
 d. Austro-Hungarian Railways and the State. — The first 
 Austrian railway law provided for concessions to private com- 
 panies and guarantee of interest on capital invested. As appears 
 to have been the case in other European countries, this method 
 of guarantee was necessary in order to draw out private capital. 
 Early railway laws likewise limited dividends and prohibited the 
 construction of parallel lines.*^ 
 
 The plan of guaranteeing dividends was not entirely satisfac- 
 tory and the state was compelled to build a number of lines where 
 private capital would not undertake it. About 1865 the financial 
 condition of the Empire became so critical that it was compelled 
 to dispose of a large part of its railway properties to private cap- 
 italists, the important lines extending from the centre of Austria 
 to Hungary, and another from the centre to Bohemia and Mora- 
 via, going to French capitalists. British and French interests se- 
 cured control of the Southern Railway, a line extending about 
 1,000 miles, with an annual revenue of over $9,000,000. This 
 gave French and English capital control of the three leading lines 
 of the Austrian Empire at a time when they were most necessary 
 in the plan to unite the diversified commercial interests of that 
 country.*^ When the financial stress was removed the Empire 
 began buying in shares until a sufficient number were secured to 
 control the policy of the road in question. It is understood, how- 
 ever, that full control of the Southern has not yet been secured. 
 
 Private railway enterprise continued until 1873. At this time 
 a very complicated situation had developed. Many lines had been 
 built purely for speculative purposes; intense antagonism had 
 developed between private and state systems; and bitter com- 
 petition arose between the Danube River and canals on the one 
 hand, and railways on the other. The Empire determined upon a 
 policy of nationalization as the only means of removing these un- 
 wholesome conditions. Liber, in summing up the reasons for this 
 action, says : "Nationalization is intended to bring the financial 
 
 46 Calculated from tables appearing in Railway Age Gazette, May lo, 
 1912, pp. 1047-1049, Article by Leroy-Beaulieu; also Report to (English) 
 Board of Trade, igio, p. 141. 
 
 47 (a) The International (Paris), Vol. 4, p. no; (b) The Railways of 
 Austria-Hungary, Moody's Magazine, Vol. 8, pp. 291-297. 
 
 48 The International (Paris), Vol. 4, p. in. 
 
26 The Com MODiTiBs' CLAUSE 
 
 views of the State Railway administration into harmony with 
 the commercial needs of the population; further, to provide in 
 case of necessity for an adjustible offset to tariff charges; and 
 finally to remove serious technical difficulties of management 
 and traffic resulting from the simultaneous existence of private 
 and state lines."*^ He adds, however, that state administration 
 is not designed to reduce charges but that it will result in in- 
 creasing wages and shortening working hours ; that consequently 
 rates may be somewhat increased though made more uniform. 
 
 The policy of nationalization proceeded slowly in Austria, but 
 more rapidly in Hungary. By 1898 about half of all the rail- 
 ways in Austria were owned and operated by the state; and 
 about two-thirds of those in Hungary.^" By 1909 more than 82 
 per cent of all the railway mileage in the Empire had been taken 
 over for operation by the state. 
 
 e. Belgian Railways and the State. — In the absence of private 
 initiative, Belgium inaugurated a system of state roads in 1834. 
 The principal motive seems to have been the hope of securing to 
 Belgium a portion of the transrcontinental traffic that had been 
 moving through the rivers and canals of Holland. State con- 
 struction, however, moved very slowly, owing to the vigorous 
 competition of the Dutch and Belgian waterways. By 1840, but 
 two hundred miles had been completed.'^ The state then held 
 up further construction on account of inability to compete with 
 the waterways."^ 
 
 Private capital began to be invested in railways in 1842, some 
 of the lines being operated by the private companies building 
 them, and others by the state. By 1870 private railway mileage 
 had reached 1,510 miles, whereas state roads had little more 
 than one-third as much. Rate wars soon began between the two 
 systems. The situation was further complicated by the fear 
 that foreign capitalists, especially those of Germany, were getting 
 a hold upon the Belgian railway system. For the purpose of 
 securing uniformity of rates and of eliminating possible foreign 
 control, the government resumed its former policy of state own- 
 ership and operation in 1870. By 1905, it had secured absolute 
 
 49 The International (Paris), Vol. 4, pp. 112-114. 
 
 50 The Austria-Hungarian Railway System, Vol. 8, p. 291 ; Vol. 7, pp. 
 259-270. 
 
 51 State Railways (London), E. A. Pratt, p. 287. 
 
 52 Report to (English) Board of Trade, Mervyn L. Chute, 1910. 
 
European Railroads and Coal Mines. 27 
 
 control of over 2,500 miles, the remaining 280 miles being still 
 owned and operated by private companies.^* It is understood that 
 the entire mileage has now come under state control. 
 
 f. Dutch and Danish Railways and the State. — The railways 
 of Holland and Denmark have had practically the same history 
 as those of Belgium. The situation with respect to water com- 
 petition, the lack of private initiative, trans-continental traffic, 
 and the fear of foreign control, was comparable to that in Bel- 
 gium. Holland now operates 940 of her 1,600 miles of railway, 
 the remaining 660 miles being privately operated. The state, 
 however, owns 205 miles of the latter lines, for which it receives 
 a rental, and a division of all profits over five per cent.'* 
 
 g. Italian Railways and the State. — Prior to 1870, Italian rail- 
 ways were operated by private companies. At this time, as an 
 aid to the unification of Italy and for the more specific purpose of 
 shutting out Austrian capitalists, the government began buying 
 up certain northern lines. By 1885 a majority of all Italian 
 roads had been so taken over. Dissatisfaction led the state to 
 charter four private companies to take over the entire rolling 
 stock upon an agreed valuation, the state retaining title to the 
 lines, and to divide the revenues accruing with the government. 
 The state reserved the power to fix rates and supervise the sys- 
 tem. Leases were granted for sixty years, either party having 
 power to terminate the same after twenty or forty years.'" 
 
 In 1905, marking the close of the first twenty-year period, a 
 bill was passed by which all the railroads of the state were nation- 
 alized. This action appears to have been based on the allegation 
 that the modern social and industrial conditions demanded that 
 the state administer the entire railway system. The movement 
 was fostered by the socialists on the ground that labor conditions 
 would be improved under state control.'* 
 
 h. Other European Railways and the State. — ^The state rail- 
 ways of Russia now constitute about three-fourths of the mile- 
 age of that country. Owing to the vast distances, navigable rivers 
 and good systems of canals connecting rivers with each other and 
 
 53 State Railways (London), E. A. Pratt, pp. 287-289. 
 
 54 (a) The Railways of Holland, Moody's Magazine, Vol. 9, pp. 47-50. 
 (b) State Railways, E. A. Pratt, p. 22. 
 
 55 (a) Report to (English) Board of Trade; 1910, pp. 220-258. (b) The 
 Italian Railway System, Moody's Magazine, Vol. 8, pp. 189-196. 
 
 56 The Italian Railway System, Mood/s Magazine, Vol. 8, pp. 195-196. 
 
 3 
 
28 The Commodities' Clause 
 
 with the sea, extremes of climate rendering railways inoperative 
 in some sections at certain seasons of the year, and formidable 
 engineering obstacles, private capital has never entered largely 
 into the building of railways in Russia. For these reasons and 
 for military purposes, the government has undertaken the larger 
 part of the work, the trans-Siberian line alone, opened in 1905, 
 extending over 6,177 miles. The state seldom realizes a sufficient 
 amount to cover cost of operation and interest on capital in- 
 vested.*^ 
 
 All the railways in Spain are owned and operated by private 
 companies. The government maintains about the same relation 
 to such enterprises as we have shown to exist in France. The 
 roads are to revert to the state after 99 years.'* 
 
 About two-thirds of the railways in Portugal are owned and 
 operated by private companies, the remaining one-third, about 
 500 miles, being owned and operated by the state. With respect 
 to water competition, the situation in Portugal is very similar to 
 that in Holland, Belgium and Denmark.*' 
 
 The Swiss system was taken over by the state in 1898 on a 
 referendum by the people."" The arguments advanced by the 
 Federal council for public ownership as quoted from the Bot- 
 schaft des Bundesrates an die Bundesversammung vetreffend den 
 Riickkauf der Eisenbahnen vom 25 Marz 1897, are as follows : 
 
 1. To consolidate the independent railway lines of 
 Switzerland, (a) to save expense of so many company 
 and managers' offices ; (b) to secure advantages of mo- 
 nopoly and organization on a larger scale in equipment 
 and maintenance of way, in operation and security of 
 traffic; and (c) to improve local service by utilizing a 
 larger part of the profits from certain sections of the 
 state for the development of the less prosperous sections ; 
 
 2. To reduce fixed charges by substituting the credit 
 of the government for that of the private companies ; 
 
 3. To apply profits to the amortization of capital until 
 the entire original system should be owned clear of debt ; 
 
 4. To abolish all kinds of discrimination; 
 
 5. To more effectively represent the interests of ship- 
 pers and the travelling public ; 
 
 6. To improve the condition of employees ; 
 
 57 The Russian Railway System, Moody's Magazine, Vol. 8, pp. 105-112. 
 
 58 The Spanish Railway System, Moody's Magazine, Vol. 9, pp. 133-134. 
 
 59 The Portugese Railway System, Moody's Magazine, Vol. 9, p. 207. 
 
 60 The Railway Library (London) 191 1, W. M. Ackworth, p. 167. 
 
European Raii,roads and Coai, Mines. 29 
 
 7. To eliminate foreign influence as dangerous to the 
 political interests of the state."^ 
 
 Switzerland has combined the economic, the social, and the 
 political, in her scheme of nationalization. This policy is in 
 harmony with the ambitious policy of that country to place all 
 public service corporations of whatever description under strict 
 state control and operation. 
 
 i. Summary. — Briefly summarizing the above, it appears, (i) 
 that, with the exception of certain state mines in Germany and 
 Holland, and municipal mines in Vienna, all coal mines in Europe 
 are now under private control; (2) that there is now no af- 
 filiation between European railways and coal mines, nor has 
 there ever been with the exception of the isolated case of the 
 Great Northern in England; (3) that the peculiar conditions in 
 the United States tending to joint operation have not existed in 
 Europe, and that any tendency in this direction has been offset 
 (i) by a well developed system of natural and artificial water- 
 ways, which are more convenient and economical for transport- 
 ing heavy freight, and which were in successful operation long 
 before the introduction of railroads; (2) the clear and tacit 
 understanding that the operations of railways be confined to the 
 business of common carriers; and (3) the very close relation 
 existing between the state and all railway enterprises, such as 
 the guaranteeing of interest paid in construction, close super- 
 vision of operations, and the reserved power to take over at any 
 time, or on the expiration of concessions. In no case does it 
 appear that the trend towards public ownership bears any rela- 
 tion to the possible activity of railways in other industries; so 
 also the problem of joint ownership has been just as effectually 
 avoided by the European governments under periods of private 
 ownership as under public ownership. 
 
 61 Abstracted from translation in Quarterly Journal of Economics, 
 Feb., 1912, pp. 343-345- 
 
CHAPTER II. 
 
 THE STATUS OF RAILWAY AND COAL-MINING RE- 
 LATIONSHIPS IN THE UNITED STATES. 
 
 I. Earlier Railway Legislation. 
 
 It is not within the scope of this treatise to go into earlier legis- 
 lation dealing with alleged corporate abuses further than to es- 
 tablish a proper basis for considering the problems immediately 
 before us. State legislation on this subject preceded that of 
 the federal government. This naturally resulted from the local 
 nature of the evils to be remedied. The development of com- 
 merce between the states turned these local problems into na- 
 tional problems beyond the reach of state laws. Then it was 
 that the federal government entered the field of regulation. 
 
 A brief resume of state and federal laws prior to the enact- 
 ment of the Commodities' Clause will suffice: The so-called 
 Granger states^ first enacted positive laws against the various 
 forms of discrimination alleged to exist. None of these restric- 
 tive statutes, however, were aimed directly at the evils growing 
 out of the entrance of railways into other lines of business. 
 
 During the period when the agitation in the Granger states was 
 at its height, the State of Pennsylvania incorporated into its 
 constitution a section designed to confine the operations of rail- 
 way corporations to the business of common carriers. It pro- 
 vided that, 
 
 "No incorporated company doing the business of a 
 common carrier shall, directly or indirectly, prosecute or 
 engage in mining or manufacturing articles for trans- 
 portation over its works; nor shall such company, di- 
 rectly or indirectly, engage in any other business than 
 that of common carriers, or hold or acquire lands, free- 
 hold or leasehold, directly or indirectly, except such as 
 shall be necessary for carrying on its business ; but any 
 
 I Illinois, Wisconsin, Iowa, Minnesota, and Nebraska, a. Constitution 
 of 111., 1870, Art. 11; and statutes, 1871-1872. b. Potter Law of Wis., 
 Laws of Wis., 1874, p. 599 (compilation), c. Laws of la., 1874, p. 26; 
 1878, p. 33 (compilations), d. Laws of Minn., 1871, p. 89 (compilation). 
 e. Constitution of Neb., 1875, Art. 12, p. 620. 
 
 30 
 
American Rahroads and Coai, Mines. 31 
 
 mining or manufacturing company may carry the prod- 
 ucts of its mines and manufactories on its railroad or 
 canal not exceeding fifty miles in length."^ 
 
 The courts of Pennsylvania, unfortunately, construed this 
 clause as applying only to future acquisitions ; and even as thus 
 interpreted it was not rigidly enforced as will later appear. 
 
 The legislature of the State of West Virginia, a number of 
 years later, enacted a similar measure, though somewhat nar- 
 rower in its scope, presumably designed to effect a separation of 
 the business of transportation from that of buying and selling 
 coal. The statute declared it unlawful, 
 
 "for any railroad company to engage directly or indirectly 
 in the business of buying or selling coal or coke, or to 
 promise, pledge or lend its credit money or other property 
 or thing of value to another, either natural or corporate, 
 engaged in such business; but nothing herein shall pre- 
 vent such corporation, when it is the owner of any 
 
 such commodities, from selling and shipping the same."^ 
 
 It may be very clearly seen that the latter clause negatives, in 
 large degree, the prohibitive force of the statute. 
 
 This agitation and the resulting statutes and constitutional 
 amendments to meet the purely local problems were reflected in 
 the National House of Representatives, and later in the Senate, 
 by resolutions and bills designed to extend the principles locally 
 applied to commerce between the states. None of these propo- 
 sals, however, were directed against the entrance of transporta- 
 tion companies into other businesses. 
 
 The situation with regard to the regulation of inter-state com- 
 merce reached a critical point in 1886 when the Supreme Court 
 rendered a decision confining the jurisdiction of state legislatures 
 to the limits of the respective states.* The rapid development 
 of our railway policy is indicated by the fact that this decision 
 reversed the attitude of the Supreme Court as expressed in a 
 
 2 Constitution of Penn., Art. XVII, Sec. 5, adopted Nov. 3, 1873 ; effec- 
 tive Jan., 1874. 
 
 3 Statutes of W. Va., Sec. 66b, Chap. 54, Code of 1899. 
 
 4 Wabash R. R. Co. vs. III., 118 U. S. 557 (1886). Here the Supreme 
 Court said, "If the Illinois statute could be construed to apply exclusively 
 to contracts for a carriage which begins and ends within the state, dis- 
 connected from a continuous transportation through or into other states, 
 there does not seem to be any difficulty in holding it to be valid." 
 
32 The Commodities' Ci<ausE 
 
 leading case ten years earlier. The latter decision laid down, 
 for the first time, not only that a state is supreme regarding the 
 regulation of public service corporations wholly within the state, 
 but that such legislation may also affect inter-state commerce as 
 respects the particular state involved and other states in the ab- 
 sence of federal legislation.^ The opinion expressed in the later 
 case, however, has now become firmly established as the law of 
 the land, and has been confirmed and extended by later decisions.* 
 
 The day was thus fairly cleared for federal action, and the lim- 
 itation placed by the courts upon the power of states to regulate 
 commerce, rendered such action imperative. Congress responded 
 promptly in the enactment of the interstate commerce statute of 
 1887. This measure was comprehensive as regards rates, dis- 
 criminations, and services, but did not attempt to settle the 
 question of the ownership and operation of the sources of raw 
 materials by common carriers. As a matter of fact the question 
 was barely touched upon in the elaborate investigation and report 
 of the Senate Committee prior to the enactment of the statute.' 
 
 A number of amendments were subsequently made to the 
 original federal inter-state commerce law, but the issue presented, 
 on account of the ownership by railways of vast mining proper- 
 ties, was not fairly faced prior to the consideration given it pend- 
 ing the enactment of the Hepburn Law of 1906.^ Perhaps the 
 federal law of 1890, known as the Sherman Anti-trust Law, 
 would have been more effective in restraining railway-coal com- 
 bines if it had been applied before the railroad monopoly had be- 
 come so firmly intrenched ; but a decision of the Interstate Com- 
 merce Commission in the so-called Haddock and Coxe cases es- 
 
 5 Munn vs. 111., 94 U. S. 113 (1876). 
 
 6 Ex parte Young, 209 U. S. 123. The court here held that the federal 
 government may regulate rates wholly within the state to insure the rights 
 of property; and, "Minn. Rate Case," S Fed. Rep. 184 (Concurred in by 
 S. C), where it was held that the federal government may not only so 
 regulate intrastate rates under the 14th Amendment, but may also regu- 
 late such rates if they interfere in any way with the federal regulation of 
 interstate commerce. 
 
 7 Report of the Senate Committee on Interstate Commerce, submitted 
 January 18, 1886, p. 180. 
 
 8 A bill was introduced by G. D. Tillman (H. R. 12654, 49th Cong., 2d 
 Sess.) "to prevent the combination of carrying interstate commerce with 
 
 other business and to prohibit the consolidation of parallel or com- 
 
 oeting lines of interstate commerce carriers." No action was taken. 
 
American Raii,roads and Coai< Mines. 33 
 
 tablished an unfortunate precedent by recognizing the railways 
 involved as "possessing the commingled attributes of carrier and 
 producer."^ This assumption seems to have been considered by 
 the courts as barring action against such relationships pending 
 more specific legislation.^" The tacit consent and approval of the 
 Inter-state Commerce Commission to the relation existing be- 
 tween certain carriers and coal mines was regarded as practically 
 estopping the application of the Sherman Anti-trust Law, not 
 only to restraints of inter-state trade on account of agreements 
 between railways but also as between railways and other pro- 
 ducing concerns. 
 
 II. Development of the Coal Problem. 
 
 A careful study of the situation leads to the belief that re- 
 medial legislation was so long delayed on account of the very 
 complexity of the relationships involved and the fear that really 
 effective laws would lead to widespread disaster. Then, too, the 
 very interests themselves were bringing strong pressure against 
 any such legislation. Industrial panics were held up as a threat 
 to prevent the enactment of laws that would cut asunder rela- 
 tionships so strongly intrenched in our industrial system. 
 
 It may also be said that the harmful results of railway control 
 of adjacent producing concerns was not fully grasped by the 
 public at large. It is especially true that the mining industry in 
 this country grew up hand in hand with the transportation in- 
 dustry. Whenever large mining properties were acquired, the 
 financial interests making such acquisitions were compelled to 
 hold out special inducements to secure railway facilities to market 
 the product, or else construct their own railroads. So also, the 
 struggle for traffic led the early railways to acquire mining prop- 
 erties and to prosecute the two interests jointly. 
 
 The rapid industrial development of the country and the con- 
 centration of population and manufactures in great cities, neces- 
 sitated a vast increase in the consumption of coal for heat and 
 power purposes. The production, transportation, and sale of 
 coal, each became immensely profitable as separate industries. 
 The combination of these transactions under a single financial 
 
 9 Lehigh Valley R. R. vs. Coxe, 3 I. C. R. 460 (i8gi) ; D., L. & W. vs. 
 Haddock, 3 I. C. R. 302 (1890). 
 
 10 N. Y., N. H. & H. vs. I. C. C, 200 U. S. 361 (1906). 
 
34 Thb Commodities' Clause 
 
 administration produced greater profits on account of the eco- 
 nomic savings effected and the tendency of such combinations to 
 give a monopoly control of prices by controlling all the processes. 
 
 The early policy of the local and federal governments fostered 
 joint holdings and operations. In 1875, the railroads of the 
 Pacific Coast possessed 168.57 square miles of territory for each 
 mile of track,^^ this land being granted in large part by the fed- 
 eral government as an inducement to railway construction. At 
 this time the Middle States owned 5.7 square miles, and the 
 Southern States, 49.67 square miles, of land for each mile of 
 track.^^ By 1871, Congress had granted 187,785,850 acres of 
 land for railway purposes, over 150,000,000 of this going to the 
 Pacific roads.^^ Much of this land contained valuable stands of 
 timber and extensive mineral deposits. 
 
 States and counties, in their zeal to secure railway facilities, 
 gave similar inducements. The early charters of Pennsylvania 
 and New York stipulated that railways might purchase, own, and 
 operate coal mines, and market the product thereof. Coal com- 
 panies were likewise empowered to enter the transportation busi- 
 ness. 
 
 The custom of the joint operation of such industries became 
 so early engrafted into our industrial system that little popular 
 criticism was aroused. Where the interests worked harmoni- 
 ously, there was development and prosperity; but neither ap- 
 peared to thrive under independent control, especially when either 
 had to compete with similar industries having complementary 
 railway, or coal-mining, affiliations. These conditions, doubtless, 
 were responsible for the long and bitter wrangles in our state 
 and federal legislatures and courts as to the nature of the com- 
 mon carrier and its responsibilities to the public. Only in very 
 recent years has the public service of the railway and the coal- 
 mining corporation been clearly recognized by the interests in- 
 volved, or even by our legislatures and courts. In the meantime 
 a situation has developed which would have been impossible had 
 the European system of a strict supervision of all public service 
 corporations been applied to our transportation facilities. 
 
 11 First Annual Report of the Internal Commerce of the U. S. for the 
 Fiscal Year Ending June 30, 1876, Appendix 33, p. 243. 
 
 12 Do. p. 243. 
 
 13 Do. pp. 239, 240. 
 
American Railroads and Coal Mini;s. 35 
 
 The facts bearing upon the relations maintained by railways 
 to adjacent coal-mining operations were not fully disclosed until 
 after the passage of the Commodities' Clause, although investi- 
 gations were set on foot by special Act of Congress prior to the 
 enactment of the statute.^* Data first presented by the Interstate 
 Commerce Commission, in response to a House resolution as to 
 agreements among the coal roads, did not go beyond those facts 
 already brought out in the annual reports of the roads, and in 
 testimony from time to time before the Commission.^'' In view 
 of the failure of this resolution to produce the desired informa- 
 tion another resolution of very broad scope was passed by both 
 Houses of Congress.^^ It authorized the Interstate Commerce 
 Commission to make an exhaustive investigation of the relations 
 of interstate railways to coal and oil properties on their lines. 
 This work was at once taken up by the Commission and reports 
 were made to Congress from time to time as the investigation 
 proceeded.^^ 
 
 III. The Anthracite Fields. 
 
 The situation in the anthracite fields presents by far the most 
 complex and baffling problems. The difficulty lies in the fact 
 that the entire deposits (and this constitutes practically all the 
 anthracite deposits in the United States) lie within a compara- 
 tively small area, the coal region covering only 1,700 square miles 
 and the actual deposits, only 484 square miles. The anthracite 
 region lies in Eastern Pennsylvania and embraces the following 
 counties: Suquehanna, Luzerne, Lackawanna, Dauphin, Nor- 
 thumberland, Carbon, Schuylkill and Columbia. For convenience 
 the coal fields are divided into three regions, the Wyoming, em- 
 bracing about 176 square miles of the northern section ; the Le- 
 high, embracing about 45 square miles ; and the Schuylkill, em- 
 bracing 263 square miles in the south.^^ 
 
 14 H. Res. 4, 59th Cong., ist Sess. ; Joint Res. 32, sgth Cong., ist Sess. 
 
 15 H. Doc's. 475, spth Cong., ist Sess., Feb., 1906. 
 
 16 Joint Res. 32, 59th Cong., ist Sess. 
 
 17 Appearance of First Report, Jan., 1907, S9th Cong., 2d Sess., H. Doc. 
 561. Exhaustive hearings were taken throughout the country, the result 
 appearing in seventeen volumes of typewritten matter, infra p. 
 
 18 (a) The Anthracite Coal Industry, Peter Roberts, pp. 5 and 6. (b) 
 Bulletin Department of Labor 46, p. 444. (c) The Penn. Anthracite Coal 
 Field, U. S. Geological Survey, p. 61. 
 
36 The Commodities' Ci,ause 
 
 This small area contains the most valuable anthracite deposits 
 in the world. The value of the annual output is surpassed in 
 value by only two other mineral products, iron ore and bitum- 
 inous coal.^' 
 
 Prior to 1830- 1840, the product was carried to the Eastern 
 markets by wagons, canals, and in one case partly by a gravity 
 road.^" As the demand and the production increased, and the 
 power of steam came to be applied to transportation, capital was 
 attracted by the great possibilities of this region. The first 
 railroad was constructed in the coal fields in 1832 by the Lehigh 
 Navigation Company. By 1846, 436 miles had been completed 
 representing a capitalization of $18,000,000. Twenty-six years 
 later the combined lines of "anthracite" roads had attained an 
 extent of over 2,000 miles, the interests being capitalized at 
 $128,000,000, the number of separate railway corporations being 
 reduced from twenty, in 1846, to six in 1872, and practically to 
 four in 1902.^^ 
 
 Carriers early began acquiring mining properties by purchase 
 outright, by purchase of controlling stock in independent coal 
 companies, or by establishing such companies as subsidiary to 
 their railway interests. Many such properties were owned in tfie 
 name of the railroad prior to 1874, when a provision was in- 
 corporated into the state constitution of Pennsylvania prohibit- 
 ing such direct control and operation,^^ the clause being con- 
 strued, however, to apply to future acquisitions. Since there was 
 no provision prohibiting control through stock ownership or sub- 
 sidiary companies, the situation was not materially changed in 
 subsequent years. 
 
 I. The Delaware, Lackawanna and Western Railroad. — ^The 
 Delaware, Lackawanna and Western was among the earliest 
 roads to enter the anthracite fields, being chartered under the 
 laws of Pennsylvania in 1849. The first important consolidation 
 was effected by it in 1881, whereby it secured control of about 
 900 miles of track, thus bringing under its influence about 15,000 
 acres of coal properties lying in the Wyoming and Lackawanna 
 
 19 The Production of Coal in the United States, Geological Survey, 
 1907, p. 17s; also Mineral Products of the U. S., 1898-1908, United States 
 Geological Survey, 1907. 
 
 20 The Anthracite Coal Industry, Peter Roberts, pp. 61-62. 
 
 21 Do. pp. 65-66. 
 
 22 Article 17, State Constitution, Sec. 5, effective January i, 1874. 
 
American Railroads and Coai, Mines. 37 
 
 Valleys.^* All the lines actually owned by it are in the State 
 of Pennsylvania ; although it operates leased lines extending into 
 the states of New Jersey and New York. About half of its 
 coal properties were acquired directly or through lease prior to 
 the adoption of the state constitutional provision prohibiting 
 such acquisitions.^* These coal properties constitute about 5.6 
 per cent of the total deposits of anthracite.^' Practically all the 
 tonnage of this road, amounting in 1907 to 13.56 per cent (9,249,- 
 692 tons) of the total output of the Pennsylvania fields, enters 
 into inter-state commerce.^* Of this amount, 1,159,655 tons were 
 purchased from producers not affiliated with the railway. The 
 larger part of this was received subject to the 65 per cent con- 
 tracts.^^ 
 
 2. The Lehigh Valley Railroad. — The Lehigh Valley, incor- 
 porated under the laws of Pennsylvania in 1847, effected con- 
 solidations with coal companies about the same time as the Dela- 
 ware, Lackawanna and Western. Its properties were frequently 
 extended until, in 1907, it controlled through subsidiary corpora- 
 tions over 37,000 acres of coal lands.^^ Nearly three-fourths of 
 this property was acquired subsequent to the enactment of the 
 prohibitive statute of 1874, the larger part being secured from 
 the Lehigh Valley Coal Company. The capitaUzation of the Le- 
 high Valley coal properties is now something over $8,000,000. 
 This includes the valuable properties of Coxe Brothers and Com- 
 pany, Inc., capitalized at $2,910,150; the New York and Middle 
 Coal Field Railroad and Coal Company, capitalized at $1,500,000; 
 and the Wyoming Valley Coal Company, capitalized at $1,300,- 
 000.^* Through these subsidiaries, the Lehigh Valley Railroad 
 was estimated, in 1907, to control about 13.8 per cent of the 
 
 23 Anthracite Coal Industry, Peter Roberts, p. 6. 
 
 24 U. S. vs. Reading Co. et al, S. C. of U. S., Oct. Term 1910, Gov't 
 Exhibit No. 70, Rec. Vol. 3. 
 
 25 Do. calculation based on table showing distribution of anthracite coal 
 lands among principal holders, Vol. 3, p. 328. 
 
 26 Table showing total output of anthracite coal in igo7 and the pro- 
 portion marketed by the principal operators, Brief for U. S. in U. S. vs. 
 Reading Co. et al., Oct. Term, 1912, p. 29. 
 
 27 Same as (24), Gov't Exhibit, Nos. ^2, p. 170, and 75, p. 166. 
 
 28 Do. No. 57. PP- 134 136. 
 
 29 U. S. vs. Reading Co. et al., S. C. of U. S., Oct. Term, 1910, Gov't 
 Exhibit No. 57, Rec. Vol. 3, p. 134 
 
38 The Commodities' Clause 
 
 anthracite deposits*" and to produce annually something over 
 8,000,000 tons, or 10.51 per cent of the total annual production 
 of anthracite coal.'^ In addition to this amount from her own 
 mines, the Lehigh Valley contracted annually for about 4,000,000 
 tons from independents on the basis of the 65 per cent, con- 
 tracts.*^ 
 
 3. The Erie Railroad Company. — The Erie Railroad, incor- 
 porated in 1832 under the laws of New York, controls about 
 2,100 miles of track.** It does not own any coal property in its 
 own name but controls through stock ownership about 27,000 
 acres of valuable coal fields in the Wyoming region. These 
 holdings include the entire capital stock of the Hillside Coal and 
 Iron Company, capitalized at $1,000,000, and possessing 13,466 
 acres of coal lands;** and that of the Pennsylvania Coal Com- 
 pany, capitalized at $5,000,000, and possessing 13,900 acres.*^ 
 These acquisitions bring under the control of the Erie Railroad 
 about two and one-half per cent of the entire area of anthra- 
 cite deposits.*^ This area, however, produces about 5,800,000 
 long tons of coal annually, or about 7.6 per cent of the total 
 production of anthracite.*' The influence of the Erie has been 
 extended through the purchase, in 1907, by the Hillside Coal and 
 Iron Company and the Pennsylvania Coal Company, of over 
 3,000,000 long tons from other operators, the larger part hav- 
 ing been purchased under standing 65 per cent contracts.** Al- 
 though that portion purchased by the Pennsylvania Coal Com- 
 pany was shown to have been received on the same price basis, 
 evidence was submitted to show that the contracts were not 
 permanent.** 
 
 4. The Central Railroad Company, of New Jersey. — The 
 Central entered the Pennsylvania coal fields in 1869. Two years 
 later, it secured a perpetual lease upon the Lehigh and Susque- 
 
 30 U. S. vs. Reading Co., et al., S. C. of U. S., Oct. Term, 1910, Gov't 
 Exhibit No. 169, Rec. Vol. 3, p. 416. 
 
 31 Do. Gov't Exhibit No. 55, Vol. 3, p. 132. 
 
 32 Do. Calculation based on table, Gov't Exhibit No. 63, Vol. 3, p. 140. 
 
 33 Annual Report of the Erie R. R. for 1910. 
 
 34 Same as (30), Gov't Exhibit No. 82, Rec. Vol. 3, p. 171. 
 
 35 Do. Gov't Exhibit No. 84, Rec. Vol. 3, p. 172. 
 
 36 Do. Calculation based on table, Gov't Exhibit No. 157, Vol. 3, p. 328. 
 
 37 Do. Gov't Exhibit No. i6g. Vol. 3, p. 416. 
 
 38 Do. Gov't Exhibit No. 88, Vol. 3, p. 176. 
 
 39 Do. Gov't Exhibit No. 91, p. 180. 
 
American Railroads and Coal Mines. 39 
 
 hanna Railroad, a corporation controlled by the Lehigh Valley 
 Coal and Navigation Company and chartered by the laws of 
 Pennsylvania.*" The 160 miles of track thus acquired furnishes 
 all the coal tonnage received by the Central Railroad, from which 
 accrues about half the freight receipts of the latter.*^ Thfe Le- 
 high Coal and Navigation Company controls 13,783 acres of coal 
 property,*^ and produces over 1,000,000 tons annually.*' The 
 agreement entered into with the Central calls for at least three- 
 fourths of this tonnage.** The Central also owns more than 
 nine-tenths of the entire capital stock of the Lehigh and Wilkes- 
 Barre Coal Company, a corporation capitalized at $10,000,000, 
 operating on the lines of the Susquehanna Railroad.*^ This 
 company controls 15,650 acres of coal property** and produces 
 over 2,000,000 tons of coal annually.*^ The Central controls 
 the entire output of these mines, which, together with the product 
 controlled by lease and contract, constitutes about 10 per cent 
 of the entire anthracite deposits.*^ The annual production bears 
 about the same ratio to the total.** The Lehigh and Wilkes- 
 Barre Coal Company, purchases annually, a large amount of 
 coal from other operators. In 1907, 971,502 tons were so pur- 
 chased, 938,594, tons of which were received subject to standing 
 65 per cent agreements."" 
 
 5. The Delaware and Hudson Company. — The Delaware and 
 Hudson owns directly and through subsidiary companies about 
 35,000 acres of coal lands in the northern and southern sections 
 of the anthracite fields.'^ These holdings constitute about 2.29 
 per cent of the entire deposits."^ This was one of the early roads 
 to enter into the business of producing coal. It acquired, in 1869, 
 
 40 U. S. vs. Reading Co., et al., S. C. of U. S., Oct. Term, 1910, Rec VoL 
 2, p. 628. 
 
 41 Do. Vol. 3, p. 117. 
 
 42 Do. Gov't Exhibit No. i, Vol. 3. 
 
 43 Do. Vol. 3, p. 30. 
 
 44 Do. Gov't Exhibit, No. 2, (lease agreement), Vol. 3, pp. 2-8, 10, 11. 
 
 45 Do. Gov't Exhibit, No. 169, Vol. 3, p. 416; also No. 43, p. 118. 
 
 46 Do. Vol. 3, Gov't Exhibit No. 44, p. 119. 
 
 47 Do. Gov't Exhibit No. 51, Vol. 3, p. 128. 
 
 48 Do. Gov't Exhibit No. 157, Vol. 3, p. 329 (calculation). 
 
 49 Do. Vol. 3, p. 416 (calculation). 
 
 50 Do. Gov't Exhibit No. 48, Rec, Vol. 3, p. 122. 
 
 51 Do. Gov't Exhibit No. 124, Vol. 3, p. 210. 
 
 52 Do. Vol. 3, p. 537 (quoted from the Bond Record, June, 1896). 
 
40 The Commodities' Clause 
 
 the entire capital stock of the Northern Coal and Iron Company, 
 a corporation capitalized at $1,500,000; and later, several minor 
 concerns, having a total capitalization of something over $200,- 
 000.''^ In 1907, this road hauled about 10,000,000 tons of anthra- 
 cite coal, practically all of which was owned directly or through 
 control of the stock of constituent companies."* 
 
 6. The Philadelphia and Reading Railway Company. — The 
 Philadelphia and Reading seems to have been the most success- 
 ful of the anthracite group in securing control of valuable coal 
 properties, in working out plans for the successful operation of 
 such properties in connection with its own railway, and in bring- 
 ing about uniformity of action among the roads of this group. 
 The Reading was one of the earliest roads to enter the coal fields. 
 By 1873 it was capitalized at $80,000,000, possessed about 500 
 miles of trackage, and carried six and a half million tons of coal 
 annually, from which it realized nearly $10,000,000 gross revenue. 
 In little more than twenty, years, its capitalization had reached 
 $144,000,000, its tracks, 1,159 miles, with proportional increase 
 in its tonnage and annual revenues ; and by 1907 it was carrying 
 over 13,000,000 tons of its own coal from which it received the 
 gross revenue of $13,088,020.^' During this period it extended 
 the value of its coal holdings from $54,000,000 to $100,000,000; 
 and this, in spite of the fact that it had mined about 200,000,000 
 tons."* At present the Reading Coal properties cover 92,569 
 acres,"' about one-half of which was acquired subsequent to the 
 prohibitory legislation of 1874."* 
 
 The position of the Reading interests was further strengthened 
 by the re-organization in 1896, when the Reading Company, a 
 holding company, acquired all the stock of the Philadelphia Coal 
 and Iron Company and the Philadelphia and Reading Railroad. 
 
 The Interstate Commerce Commission, in its recent report, 
 summarized the result of the unique combination of mining, 
 transportation, and speculative interests, as follows : 
 
 "The situation here presented is that this shipper, the 
 
 53 U. S. vs. Reading Co., et al., S. C. of U. S., Oct. Term, 1910, Rec, 
 Vol. 3, pp. 208, 209. 
 
 54 Do. Vol. 3, p. 207. 
 
 55 Do. Vol. 3, p. 91. 
 
 56 Do. Vol. 3, p. 328. 
 
 57 Do. Gov't Exhibit No. 231, Vol. 3, p. 328. 
 
 58 Do. p. 103. 
 
American Railroads and Coai< Mines. 41 
 
 coal and iron company, ships approximately 10,000,000 
 tons of anthracite coal annually over the Reading lines. 
 Presumably it pays the tariff rates on this product. The 
 carrier and the coal company are but the subsidiary cor- 
 porate hands of the holding company, in as much as the 
 same interests direct and administer the affairs of the 
 three corporations. By the aid of the railway earnings 
 that are paid into its treasury, the holding company fur- 
 nishes the coal and iron company with its working capital. 
 The holding company also assumes the burden of the 
 interest charges on the capital invested in the proper- 
 ties of the coal and iron company, and the railway earn- 
 ings enable it to do so. These facts constitute an unlaw- 
 ful discrimination against other shippers who are the 
 
 competitors of the Coal and Iron Company 
 
 "Published tariff rates are of no significance to this 
 shipper, the Philadelphia and Reading Coal and Iron 
 Company, under such circumstances. The same execu- 
 tive officials control and administer the affairs of the 
 railway company, the coal apd iron company, and the 
 holding company; therefore the coal and iron company 
 receives offsets, against such published rates in the form 
 of interest charges which are waived by the same parties 
 who are charged with the duty of collecting and retaining 
 the full published tariff rates on all shipments.""* 
 
 The Reading first attempted to secure control of the tonnage 
 of independents by the so-called "percentage agreements." It 
 appeared that a large number of such contracts were made in 
 1891 and 1892 when the Reading launched her ambitious plans 
 for increasing her influence over the coal industry.®" Independ- 
 ents were practically forced into such agreements since they 
 amounted to a virtual reduction of actual freight rates from the 
 published tariffs,*^ in effect a rebate to the shipper. The majority 
 of such agreements were entered into for seven years and seem 
 to have been on the sixty per cent basis, that is, turning over to 
 the operator sixty per cent of the market price at tide-water. 
 
 59 Report of I. C. C. No. 4914 July 30, 191S, PP- 240, 241. 
 
 60 U. S. vs. Reading Co., et al., S. C. of U. S., Oct Term, 1910, Rec, Vol. 
 2, pp. 481, 482. 
 
 61 The government annexed to its Brief as an exhibit elaborate tables 
 drawn from authoritative sources showing that the amount accruing to the 
 carrier on the percentage plan had not been sufficient to cover published 
 rates — the deficit being indicated over a period of years (1892-1899). 
 Appendix to Brief in cases before S. C, Oct. Term, 1912, Nos. 477, 485, 
 504, also do. Vol. 2, p. 472. 
 
42 ThB COMMODITIBS' Cl<AUS^ 
 
 About the time these contracts were maturing ( 1899) , there was 
 a very stubborn strike among employees and a ten per cent in- 
 crease jn wages had to be agreed to before they would resume 
 work. Independent operators endeavored to shift a portion of 
 this added expense upon the roads and demanded that they re- 
 ceive on future contracts sixty-five per cent, instead of sixty per 
 cent, of the market price of coal. This the railway refused. 
 The independents then set about the construction of a new line 
 to be known as the New York, Wyoming, and Western Railroad, 
 which was to be capitalized at $1,000,000. This led the carriers, 
 under the leadership of the Reading, to effect a scheme by which 
 practically all of the output of independent mines was bound 
 over in perpetuity to the roads participating.'^ 
 
 7. Inter-Railway Relations in the Anthracite Fields. — ^We 
 are now to consider the agreements among the carriers them- 
 selves by which they have been able to force independent opera- 
 tors into contracts involving their entire output. In 1892, as a 
 part of the program outlined in the preceding paragraph, the 
 Reading secured a lease on the Lehigh Valley and the New 
 Jersey Central railroads for 999 years.*^ It appears from a table 
 compiled by the well-known mining engineer, Griffith, that this 
 arrangement gave the Reading full control of over seventy-five 
 per cent of all the anthracite coal deposits.^* The Reading's own 
 estimates place it at sixty-three per cent.'® The lease and hold- 
 ings thereunder were, however, destined to be short-lived. In 
 less than two years, the New Jersey courts had invalidated the 
 lease of the New Jersey Central,®' a New Jersey corporation; 
 and when the Chancellor of New Jersey held that the lease of the 
 Lehigh Valley was illegal, it was forthwith dissolved through 
 
 62 U. S. vs. Reading Co., et al., S. C. of U. S., Oct. Term, 1910, Rec., Vol. 
 2, pp. 474-480. 
 
 63 Through such an arrangement the Reading was able to contract for 
 the product of the I<ehigh Valley Coal Co., and the Lehigh and Wilkes- 
 Barre Coal Co., hitherto controlled by the railroads, respectively (U. S. 
 vs. Reading Co., et al., S. C. of U. S., Oct Term, 1910, Rec. Vol. 2, pp. 
 192, 196, 197). The lease of the Central Railroad of New Jersey was ef- 
 fected through the Port Reading Railroad, the entire capital stock of the 
 latter being owned by the P. & R. (Do. pp. 192, 196). 
 
 64 Do. Vol. 2, p. 537. 
 
 65 Annual report P. & R., 19DI. 
 
 66 Stockton vs. Central Railroad (50 N. J. Eq., 52, 84, 491). 
 
American Railroads and Coai, Mines. 43 
 
 statutory procedure in Pennsylvania.'^ It was estimated by the 
 Department of Labor that this compact had raised the price of 
 anthracite coal about seven per cent.'* 
 
 From the time of the invalidation of these leases until 1896 
 there was a degree of competition among the anthracite roads. 
 In that year the presidents of the six leading companies came to 
 an understanding as to the proportional tonnage which each road 
 should have. Twenty and five-tenth per cent was allotted to the 
 Reading; 15.65, to the Lehigh Valley; 11. 7 to the Central of 
 New Jersey; 13.35, to the Delaware, Lackawanna and Western; 
 9.6 to the Delaware and Hudson; 11.4, to the Pennsylvania; 
 1 1.2, to the Erie; and small amounts to others.'^ This agree- 
 ment was not generally carried out to the letter, but it was an 
 important factor in the distribution of tonnage for several years 
 thereafter. It impressed the railroads, too, with the advantages 
 and the possibilities of cooperation ; and they were about to have 
 an opportunity to demonstrate the efficacy of such agreements. 
 
 Reference has already been made to the conditions causing 
 the independents to request a larger part of the proceeds from 
 sales than the seven year contracts, now maturing, had provided.'"* 
 On the carriers' refusal, the plan of the independents was 
 launched. Messrs. Simpson and Watkins, owners of large private 
 interests, with the cooperation of the Pennsylvania Coal Com- 
 pany, made agreements with a large number of independent 
 operators to take their entire shipments on a sixty-five per cent 
 basis, which the latter had demanded as the condition upon which 
 expiring contracts would be renewed. The New York, Wyoming 
 and Western, the projected road, was to connect coal fields of 
 the Northern section with the Delaware River where juncture 
 was to be made with lines leading to eastern distributive points.^^ 
 
 The project was fairly under way, but a plan was evolved by 
 the roads, through the agency of J. P. Morgan and Company, for 
 frustrating it. This plan, in short, involved the elevation of an 
 
 67 U. S. vs. Reading Co., et al., S. C. of U. S., Oct. Term, 1910, Rec, Vol. 
 2, p. 196. 
 
 68 Bulletin 39, March, 1902, pp. 348-386. t 
 
 69 Do. pp. 26^8, 58, 59, 88, loi; also Rec. Vol. 3, p. 34. This table is 
 misleading unless studied in connection with testimony in Vol. 2, pp. 88, 89. 
 
 70 Supra, pp. 41, 42. 
 
 71 Same as 67, Articles of Association of the New York, Wyoming and 
 Western R. R. Co., Vol. 6, p. 46- 
 
 4 
 
44 The Commodities' Clause 
 
 hitherto minor corporation, The Temple Iron Company/* en- 
 gaged in the manufacture of iron, to a corporation having suf- 
 ficient capital stock to be distributed among all the independents 
 involved in the transaction, in exchange for the stock of the 
 latter. The controlling interest in the Temple Iron Company 
 was then bought over by a trust company, the stock then being 
 distributed among the railways in the following ratio : The Phil- 
 adelphia and Reading, 29.96; Central of New Jersey, 17.12; Le- 
 high Valley, 22.88; Delaware, Lackawanna and Western, 19.52; 
 Erie, 5.84 ; and the New York, Susquehanna and Western, 4.68.'' 
 The output of the mines involved is about 2,000,000 tons an- 
 nually, all of which enters into inter-state commerce.''* 
 
 The Temple Iron Company entered into perpetual contracts 
 with practically all the independents, except the Pennsylvania 
 Coal Company,^^ for the output of their mines. These agree- 
 ments bound the operators to turn over the entire output (until 
 extinct) of the mines they were then operating as well as any 
 new ones they might open up in the future, in consideration of 
 which the railroads through their medium. The Temple Iron 
 Company, allowed sixty-five per cent of the market price of 
 coal at New York harbor.'* By this means the carriers prevented 
 the construction of a new line into the coal fields ; and not only 
 this, but they tied up the future output of practically all the in- 
 dependents in such a way that rival lines could secure no tonnage 
 
 72 The Temple Iron Company, a corporation controlled by the Reading 
 and capitalized at $240,000, was recapitalized at $2,500,000 and bonded at 
 $3>5oo.ooo. Simpson and Watkins, acting for the independents, turned 
 over to this corporation all the capital stock of the latter, for which they 
 received $2,260,000 stock and $3,500,000 bonds of the Iron Co. All the stock 
 and $2,100,000 of the bonds were turned over to a trust company in exchange 
 for $3,238,296.66 in cash and a stock interest valued at $1,000,000. The 
 Trust Co., also secured at something under par the $240,000 stock from 
 President Baer, of the Reading. This represented the original capitaliza- 
 tion of the Iron Company. (Contract shown in Gov't Exhibit No. 165, 
 Rec. Vol. 3, p. 403, 404.) 
 
 73 U. S. vs. Reading Co., et al., S. C. of U. S., Oct. Term, 1910, Gov't 
 Exhibit No. 163, Rec. Vol. 3, p. 393-398; and No. 164, 398-403, Rec. Vol. 2. 
 
 74 Do. Vol. 2, p. 335. 
 
 75 Do. Gov't Exhibit 107, 108, Vol. 3, p. 194. This company refused to 
 enter into the agreement above described. 
 
 76 Do. Vol. 2, pp. 488, 490. The percentage here given applies only 
 to specially prepared coal; operators receive lower percentages on lower 
 grade varieties. 
 
American Raii<roads and Coai, Mines. 45 
 
 as an inducement to enter the anthracite fields. It gave the rail- 
 roads a monopoly so long as the contracts could be enforced. 
 
 In a similar way, the Erie Railroad alone bought over the 
 entire capital stock of the Pennsylvania Coal Company to prevent 
 the latter from extending a private line to tide-water connec- 
 tions.^^ 
 
 This left the anthracite roads in complete possession of the 
 field. Through the leadership of the Reading, moreover, the 
 "community of interests" has been extended into other fields. 
 This railway has not only acquired large holdings in the New 
 Jersey Central and Lehigh Valley, but has formed alliances with 
 the Harriman and Vanderbilt interests through stock ownership 
 in the Lake Shore and Michigan Southern and the Baltimore and 
 Ohio.'^ It seems now to have taken its place as a forceful unit 
 in the great railroad systems of the country. Through the sixty- 
 five per cent contracts,^' the ownership of mining stock, directl> 
 or through subsidiary companies, and the "community-of-in- 
 terest" principle, the railways in the anthracite region may thus 
 be seen to have evolved a unique monopolistic condition without 
 parallel. 
 
 IV. The Eastern Bituminous Fields. 
 
 The situation in the great bituminous fields of Pennsylvania, 
 Virginia, West Virginia, and Ohio, is similar in many respects 
 to that in the anthracite territory. The great and somewhat ir- 
 regular extent of the fields, and the heavy tonnage in other com- 
 modities, however, renders, such complete railway control of the 
 bituminous coal mines impossible. It was in fact this very partial 
 control by the railroads that led to so much complaint on the 
 part of independent operators, of whom there were many, in the 
 bituminous region. Protests from this source,*" rather than from 
 the comparatively few independent operators of the almost hope- 
 lessly monopolized anthracite mines, first led to Congressional 
 investigation. 
 
 "jj J. P. Morgan & Co. also acted as agent for this transaction, buying 
 the entire capital stock of the Penn. Coal Co., the railroad already 
 owned by the latter, as well as the projected road, for $28,000,000. All the 
 stock of the three concerns was turned over to the Erie Railroad. Do. 
 Rec. Vol. 2, pp. 488-490. 
 
 78 Moody's Magazine, January, 1908, p. 103. 
 
 79 See Decision of the Supreme Court, re 65 per cent contracts, infra pp. 
 114, 115. 
 
 80 Cong. Rec., sgth Cong., ist Sess., pp. 1671-1672, 2198. 
 
46 The Commodities' Ci^ause 
 
 The investigation made by the Commission showed that prac- 
 tically all the bituminous coal traffic originated on the lines of the 
 following railways; The Norfolk and Western; The Western 
 Maryland; The Chesapeake and Ohio; the Baltimore and Ohio; 
 the New York Central and Hudson River ; the Buffalo and Sus- 
 quehanna; the Buffalo, Rochester, and Pittsburgh; The Pitts- 
 burgh, Shawmut and Northern; and the Pennsylvania.*^ The 
 Pennsylvania Railroad Company appears to be the directing 
 force in a combination designed to control the situation in the 
 bituminous fields. 
 
 1. The Norfolk and Western Railway. — ^The Norfolk and 
 Western Railway at the time of this investigation appeared to 
 have no other mining interests than resulted from its stock 
 ownership.*^ It owned, however, the entire capital stock of the 
 Pocahontas Coal and Coke Company, which possessed mineral 
 rights in 300,000 acres of coal lands in Virginia and West Vir- 
 ginia.** This was a land-holding company which leased large 
 parts of its holdings to individual operators.** The coal pro- 
 duced from these holdings amounted to about 35 per cent of the 
 entire coal tonnage of the Norfolk and Western Railway. 
 
 Practically no criticism of the company's plan of distributing 
 cars was brought out before the Commission, but there was gen- 
 eral and wide-spread complaint of the scarcity of cars. This 
 was frankly recognized by the railway officials.** Mines re- 
 ceived a certain allotment of cars according to their producing 
 capacity, this being measured by the average output for a given 
 period when the mines in question had a "fair working run of 
 equipment."** The several mines within each region, with the 
 exception of the Pocahontas region, where the number of coke 
 ovens operated was the criterion, received cars on the percentage 
 basis, the capacity of each mine to the total capacity of the mine 
 in a given district determining the number assigned.*'^ The 
 
 81 H. Doc. 516, pp. 2-3, S9th Cong., 2d Sess. (Digest of Testimony sub- 
 mitted to Congress by the Commission). 
 
 82 Testimony before the Commission re coal and oil under authority 
 of Joint Res. 32 (spth Cong., ist Sess.; appears only in typewritten form 
 —17 Vols.), Vol. 5, pp. 2397. 2444- 
 
 83 Do. Vol. 5, pp. 2442, 2443. 
 
 84 Do. p. 2443. 
 
 85 Do. p. 2468. 
 
 86 Do. p. 2465. 
 
 87 Do. pp. 2451, 2453, 2465. 
 
American Raii<roads and Coai, Mines. 47 
 
 United States Coal and Coke Company was not included in this 
 allotment scheme because most of its output was consumed by it. 
 Cars were simply supplied this company as they were needed.** 
 Cars assigned for fuel purposes were not included in the regular 
 number alloted.** In addition there were "arbitrary" cars dis- 
 tributed by special agreement between the operators and the 
 railway company. These constituted about six per cent of the 
 totd number available"" and appear to have been granted as an 
 aid to mines in their early development.*^ From the testimony 
 of ofBcials, and this was not controverted, the policy of the rail- 
 road was to oppose stock ownership or other interests by of- 
 ficials and employees along the lines of the railroad.*^ It ap- 
 peared, also, that due encouragement was given to prospective 
 shippers with respect to connections, switches and other con- 
 veniences.** 
 
 2. The Western Maryland Railway. — ^The Western Mary- 
 land owned all the stock of the Davis Coal and Coke Company, 
 one of the largest coal-mining concerns in the State of West 
 Virginia; and all the stock of the Maryland Smokeless Coal 
 Company.** The entire tonnage of these mines was handled by 
 it. 
 
 In addition to 100,000 acres of coal lands in its own right, the 
 Davis Coal and Coke Company owned sixteen concerns along the 
 lines of the Western Maryland.*" There are forty independent 
 mines in the same section.** It appeared from evidence that the 
 independent mines received 36 i-io per cent of the total number 
 of cars distributed, the remaining 63 9-10 per cent going to the 
 mines operated by the Davis Coal and Coke Company.*' The 
 evidence does not state the relative capacity of the independent 
 mines and those under the control of the Western Maryland 
 
 88 Testimony before the Commission re coal and oil under authority of 
 Joint Res. 32 (SQth Cong., ist Sess., appears only in typewritten form — 
 17 Vols.), Vol. 5, pp. 2458, 2459. 
 
 89 Do. pp. 2472, 2473. 
 go Do. p. 2455. 
 
 91 Do. pp. 2454-2458. 
 
 92 Do. pp. 2432, 2433. 
 
 93 Do. p. 2464, 2465. 
 
 94 Do. pp. 6252, 6253. 
 
 95 Do. Vol. 12, p. &52. 
 
 96 Do. p. 6253. 
 
 97 Do. p. 6252. 
 
48 The Commodities' Clause 
 
 through the Davis Coal and Coke Company. It is impossible to 
 state accurately, therefore, whether 36 i-io per cent constitutes 
 a fair allotment of available cars. The representatives claimed 
 that car distribution was based on tonnage. It appeared, how- 
 ever, from testimony of the independents that the operator's 
 (that is, of affiliated mines) own estimate was accepted without 
 question and that no railway official ever made a personal in- 
 vestigation to determine the proper percentage to be allowed. 
 The evidence demonstrated conclusively that no real system of 
 car distribution existed, and that the loose practice in this regard 
 gave many opportunities for discrimination against the independ- 
 ent operator.'^ The road purchased all its own fuel from the 
 Davis Coal and Coke Company, but claimed that all cars, with an 
 insignificant exception,^^ were accredited to the mines and were 
 not considered as an extra allowance.^"" No direct testimony was 
 submitted to show that operators or prospective operators were 
 unable to get the facilities which their business required, and 
 the testimony of the general manager that it was the policy of the 
 Western Maryland "to encourage and develop independent 
 mines,"^ was not controverted. 
 
 3. The Chesapeake and Ohio Railroad. — The Chesapeake 
 and Ohio owned about 28,000 acres of coal land in its own right. 
 These lands were secured from the Western and Pocahontas 
 Coal and Lumber Company at a foreclosure sale.^ The Chesa- 
 peake and Ohio had failed to keep its agreement to construct a 
 branch line for the benefit of this concern, the latter being forced 
 to sell out because transportation facilities were not available.' 
 At the time of this investigation such facilities had not yet been 
 constructed. 
 
 The Chesapeake and Ohio was not shown to control any 
 subsidiary companies through stock-ownership; nor was there 
 any evidence that the officers or employees had any such in- 
 terests.* 
 
 98 Testimony before the Commission re coal and oil under authority of 
 Joint Res. 32 (spth Cong., ist Sess., appears only in typewritten form), 
 — ^Vol. 12, pp. 6242-6244, 6273. 
 
 99 Do. p. 6273, The Buffalo Creek Coal Co. 
 
 100 Do. p. 6255. 
 
 1 Do. p. 6253. 
 
 2 Do. Vol. 8, p. 4364. 
 
 3 Do. pp. 4364, 4365. 
 
 4 Note insignificant exception, Do. Vol. 8, pp. 4363, 4364. 
 
American Raii,roads and Coai, Mines. 49 
 
 The principle of assigning cars according to the capacity and 
 equipment of mines appeared to be carefully enforced."* A single 
 exception was noted in the case of the Stevens Coal Company 
 which received twenty-two cars for a specific purpose.^ There 
 were no individual or privately owned cars/ but it was shown 
 that arbitrary allotments had been made to the Kanawha Fuel 
 Company and the Carbon Fuel Company for the railroad's fuel 
 supply.^ 
 
 4. The Baltimore and Ohio Railroad. — The Baltimore and 
 Ohio was found to be concerned with coal interests in Southern 
 Pennsylvania, Western Maryland, and Northern West Virginia. 
 With the single exception of the Connellsville mines, the coal 
 carried from mines in which this road was interested, was far in 
 excess of that carried in which it had no interest. This control 
 of coal tonnage was made possible through its control of the 
 majority of the capital stock of the Consolidation Coal Company, 
 a corporation capitalized at $10,250,000 and producing about 
 2,000,000 tons of coal annually.' 
 
 In 1903, the Baltimore and Ohio further extended its holdings 
 by the acquisition of the Fairmount Coal Company, and several 
 smaller concerns.^" The former was capitalized at $12,000,000,^^ 
 owned 33,000 acres of coal lands and controlled by lease about 
 25,000 additional acres.^^ From these combined interests the 
 Baltimore and Ohio secured the larger part of its tonnage. 
 
 At the time of the investigation (1906) the Baltimore and 
 Ohio sold her interest in the Consolidation Company to a syndi- 
 cate representing this railroad and other interests.^* The trans- 
 action was claimed to have been made in good faith although the 
 details as to payment and transportation of coal from mines 
 controlled by the Consolidation, raise some doubt as to whether 
 
 5 Testimony before the Commission re coal and oil under authority of 
 Joint Res. 32 (spth Cong., ist Sess., appears only in typewritten form — 
 17 Vols.), Vol. S, pp. 2548, 2459. 
 
 6 Do. Vol. S. p. 2244. 
 
 7 Do. p. 2244. 
 
 8 Do. p. 2252. 
 
 9 Do. pp. 2177-2179. 
 
 10 Do. pp. 2176, 2177. 
 
 11 Do. p. 2172. 
 
 12 Cramp, Mitchell, and Serrill's Manual of Statistics, pp. 444-4SS. 
 
 13 Same as (s), Vol. S, P- 2175; Vol. 6, pp. 2781-2782. 
 
50 The Commodities' Clause 
 
 the result, aimed at in the law, was thereby attained. The sale 
 was arranged for in deferred notes extending over a period of 
 thirty years, the stock representing the interest sold, being placed 
 in the hands of a trustee as security until the entire payment 
 shall have been made.^* The second vice-president testified that 
 notwithstanding the long period for which the loan was to run, 
 that the stock had passed entirely out of the control of the Balti- 
 more and Ohio.^^ The relinquishment of the right to control the 
 vote, however, would not seem seriously to affect the railroad's 
 control of the situation, at least for thirty years, since it was 
 written into the agreement that the railroad should have a 
 monopoly of all the shipments of the Consolidation and its sub- 
 ordinates until all the notes were fully paid.^^ We would, there- 
 fore, expect little difference in the policy of the railroad toward 
 these interests and those of the independent operators, especially 
 since the railroad will feel bound to maintain the value of the 
 securities accepted in lieu of payment for the stock sold. 
 
 The Baltimore and Ohio also entered the business of marketing 
 its product. This was effected through the agency of the Metro- 
 politan Coal Company, operating as a retailer of coal in Boston; 
 and the Northwestern Fuel Company, operating in the territory 
 of the Great Lakes. Through these and other similar agencies, 
 the Baltimore and Ohio controlled not only the production and 
 transportation of most of the coal in this region, but the retailing 
 of it as well. This was practically acknowledged by authoritative 
 testimony before the Commission. The superintendent of trans- 
 portation for the Baltimore and Ohio was asked if his railroad 
 did not carry on these additional activities. He answered, "I 
 would not challenge that statement."^' 
 
 It was further disclosed in the hearing that ten officials owned 
 an aggregate of 717,800 shares of stock in certain coal compa- 
 nies on the lines of the Baltimore and Ohio. In some cases these 
 stocks were secured by straight-out purchase, in others as a 
 bonus for the purchase of bonds, and in a few instances as gifts 
 
 14 Testimony before the Commission re coal and oil under authority of 
 Joint Res. 32 (spth Cong., ist Sess., appears only in typewritten form-- 
 17 Vols.), Vol. S, 2178. 
 
 15 Do. Vol. s, 2178. 
 
 16 Do. Vol. 5, p. 2183. 
 
 17 Do. Vol. I, p. 369. 
 
American Railroads and Coal Mines. 51 
 
 with the probable expectation of receiving consideration in the 
 distribution of cars and handling of traffic.^^ 
 
 The method of car distribution employed resulted in favoritism 
 for mines in which the carrier was interested, although railroad 
 officials claimed that the distribution was based on the capacity 
 of mines and the amount of shipments.^* The estimates were 
 supposed to be made annually by a mine inspector^" but it ap- 
 peared that they were secretly made, one operator not being per- 
 mitted to see the quota assigned another. There were, more- 
 over, any number of individual, and arbitrarily assigned, cars. 
 Individual, or privately owned cars, were first placed at the 
 mines of the owners of such cars,^^ then special assignments were 
 made for "Baltimore and Ohio fuel, foreign fuel and foreign 
 cars".^^ The greatest confusion leading to severe discrimination 
 against the small operator resulted from this system.^^ Only 
 the large operators, generally shown to be those having railway 
 affiliations, could afford to construct and maintain such an elabor- 
 ate system of private cars; and of course, all special cars for 
 Baltimore and Ohio fuel coal were assigned to mines controlled 
 by the railway. It appeared in most cases that the Consolida- 
 tion and affiliated mines controlled these extra supplies.^* 
 
 The individual car was not included in the regular assignment 
 of cars to give operators. The extra tonnage, however, which 
 a given mine would produce on account of such increased facili- 
 ties, was considered in estimating the output of such mine in 
 making further apportionment. This was doubly discriminative 
 against the small, independent operator. Sufficient facilities were 
 not supplied him ; whereas the owner of private cars might keep 
 his mines running at their capacity, all the while increasing his 
 
 18 H. Doc. 561, p. 28, 59th Cong., 2d Session. 
 
 19 Testimony before the Commission re coal and oil under authority of 
 Joint Res. 32 (spth Cong., ist Sess., appears only in typewritten form — 
 17 Vols.), Vol. I, pp. 427, 428. 
 
 20 Do. Vol. 2, p. 552. 
 
 21 Do. Vol. I, p. 387. 
 92. Do. p. 388. 
 
 23 Do. The policy is well illustrated by the following conversation be- 
 tween the General Superintendent of Transportation and the Commission : 
 Quest. "Do you haul individual cars for anybody who wants to get them ?" 
 
 Ans. "I do not think I can answer that question Just what the policy 
 
 of the road is, I do not know." Vol. I, pp. 372, 373. 
 
 24 Do. Vol. 2, p. 625. 
 
52 The Commodities' Clause 
 
 supply of cars by increasing his output. The custom of credit- 
 ing the amount shipped, two points, and physical capacity, only 
 one point, was, in the nature of the case, a discrimination against 
 such small operators as were unable to increase their shipments 
 by the use of private cars. 
 
 A striking case of discrimination was shown in the case of 
 the Fairmont Coal Company, a subsidiary of the Consolidation 
 Coal Company. A large part of Fairmont Coal lands lies along 
 the Monongahela River Railroad Company. The Baltimore and 
 Ohio took over this railroad and with it 2,500 private cars. It 
 was specifically agreed that all these cars should be assigned the 
 Fairmont Coal Company, and, furthermore, that they were to be 
 considered "individual" cars, and not charged against the Fair- 
 mont in making allotments.^^ This and other similar practices 
 wrought serious hardships upon independents. The President of 
 the Monongahela River Coal and Coke Company, an independent 
 operator in this section, declared that, "The shortage of coal 
 cars has seriously curtailed our production and increased our 
 costs. The Company purchased six hundred cars during the past 
 year and but for the use of these cars would not have been 
 able to fill contracts".^^ Numerous similar cases appeared in the 
 testimony, certain operators being compelled to discontinue oper- 
 ations and sell their plants at a sacrifice because adequate ship- 
 ping facilities were not provided.^' 
 
 The private car system appeared in many cases to have the 
 encouragement of railway officials. The vice-president defended 
 this system on the ground of his inability to furnish the supplies 
 demanded by the rapid development of some of the mines.^' In 
 accord with this view the Baltimore and Ohio had bought sup- 
 plies for certain shippers with funds supplied by the latter. It 
 was understood that such cars would be supplied to the mines 
 furnishing credit and that the railroad would later take them 
 over, it being agreed, however, that the shipper in question would 
 
 25 Testimony before the Commission re coal and oil under authority of 
 Joint Res. 32 (Spth Cong., ist Sess., appears only in typewritten form— 
 17 Vols.), Vol. 6, pp. 2960, 2961. 
 
 26 Annual report of Monongahela River Coal and Coke Co., January, 
 1906. 
 
 27 Same as 25, Vol. 2, pp. 701-707, Vol. 6, pp. 2810-2812. 
 
 28 Do. Vol. S, pp. 2184, 2185. 
 
American Rahroads and Coai, Minbs. 53 
 
 have exclusive use of the cars for a number of years thereafter. 
 All the while such cars were to be regarded as "extras."^* 
 
 It was the policy of the Baltimore and Ohio to discourage and 
 even prevent independent operators from entering the field in 
 competition with mines in which the railway was interested.'" 
 It was brought out very clearly in the testimony that the mines 
 connected with the railway received the equipment necessary to 
 their development. They were able to maintain regular annual 
 contracts, to keep an adequate force at work throughout the year, 
 and to place shipments promptly at their destination,'^ Independ- 
 ent operators were not so fortunate. "We were discouraging," 
 testified the Vice-President, "the opening of coal mines all 
 through the district, and if we had not had that provision in the 
 contract" (referring to an agreement with the Cook Company 
 whereby a switch was to be put in with the understanding that 
 coal could not be shipped)", "they might have claimed the right 
 to ship coal when at the same time we had declined connections 
 with other coal operators."'^ 
 
 The Baltimore and Ohio, together with the Philadelphia and 
 Reading, had devised a plan for securing orders for foreign fuel 
 coal in the interest of their own mines, or mines with which 
 they were affiliated. This was effected by quoting a joint rate 
 with the foreign road equal to, or less than, the local rate, each 
 road receiving its proportion of the joint rate.'' The rates ac- 
 cruing to the roads participating in this transaction were, here- 
 fore, less than the published tariffs. This arrangement amounted 
 to a rebate in favor of the foreign road purchasing the fuel coal. 
 
 5. The New York Central and Hudson River Railroad Com- 
 pany. — ^The New York Central and Hudson River, like the Bal- 
 timore and Ohio, did not own directly any coal mines. In- 
 dividual stock interests (that is, of officials and employees) were 
 found to be insignificant, including only small holdings by certain 
 officials in the Beach Creek Coal and Coke Company and the 
 Clearfield Company. The railway as a corporation held a large 
 
 29 Testimony before the Commission re coal and oil under authority of 
 Joint Res. 32 (spth Cong., ist Sess., appears only in typewritten form— 
 17 Vols.), Vol. S, PP- 2184, 2185, 2191, 219s, 2200. 
 
 30 Do. Vol. 2, p. 701. 
 
 31 Do. pp. 62s, 626, 631, 632. 
 
 32 Do. pp. 62s, 626. 
 
 33 Do. Vol. 4, pp. 2052, 2060, 2063, 2072. 
 
54 The Commodities' Clause 
 
 stock interest in these companies and the officials held a certain 
 amount of stock in their own name. The latter was claimed to 
 be solely for the purpose of qualifying such officials for director- 
 ships in the coal company. The railway owned the remainder 
 of the stock in the Clearfield Company but claimed that the entire 
 output was consumed for its own purposes.^* 
 
 In 1910, the Beech Creek Coal and Coke Company, a cor- 
 poration organized under the laws of Pennsylvania, gave 5,000 
 shares of its capital stock to the New York Central with the un- 
 derstanding that the latter would furnish annually a sufficient 
 number of cars to transport 1,000,000 tons of coal, the mining 
 company agreeing to furnish at least this amount. The contract 
 further prohibited the railroad from going into the coal business 
 and obligated it to purchase annually at least 500,000 tons of fuel 
 coal from the Beech Creek Coal and Coke Company, an excep- 
 tion being made in the case of the Clearfield Bituminous Coal 
 Company. Since this agreement the New York Central, accord- 
 ing to the testimony of the coal company, had invested, by the 
 close of 1906, about one and one-half million dollars in develop- 
 ing the territory of the Beech Creek Coal Company, making 
 tracks, sidings, etc.°* 
 
 In 1906, the Beech Creek Coal Company was taken over by 
 the Pennsylvania Coal and Coke Company, a concern on the 
 Pennsylvania Division of the New York Central and Hudson 
 River Railroad.'* The New York Central, in exchange for its 
 5,000 shares of stock in the Beech Creek, received a similar num- 
 ber of shares of preferred stock, and in addition 5,000 shares of 
 common stock. The New York Central also secured $500,000 of 
 bonds of the Pennsylvania Coal and Coke Company.*' This ac- 
 quisition by the Pennsylvania Coal and Coke Company meant the 
 increase of the latter's coal fields by nearly 30,000 acres'^ and 
 apparently strengthened the control of the New York Central 
 over the coal properties. 
 
 It further appeared that the New York Central owned the en- 
 
 34 Testimony before the Commission re coal and oil under authority of 
 Joint Res. 32 (sgth Cong., ist Sess., appears only in typewritten form— 
 17 Vols.). Vol. 10, p. 4499. 
 
 35 Do. Vol. 9, p. 4691. 
 
 36 Do. p. 4634. 
 
 37 Do. p. 4649. 
 
 38 Do. p. 4652. 
 
American Raii^roads and Coai, Mines. 55 
 
 tire capital stock of the Gallitizin Coal Company and a majority 
 interest in the West Branch Coal Company, both corporations 
 being capitalized at $50,000 each.'^ 
 
 The method of car distribution, while not so arbitrary as on 
 the lines of the Baltimore and Ohio, was not entirely satisfactory. 
 In general, cars were distributed on a tonnage basis, ratings being 
 made, however, by railway employees, many of whom were de- 
 clared to be inefficient and inaccurate.*" The distribution was not 
 posted and was subject to change at any time.*^ It appeared, 
 however, that all cars received, except in the case of the Clearfield 
 Coal Corporation, were properly charged against the mine re- 
 ceiving them. The reservation applied to cars delivered to the 
 Clearfield Coal Corporation for the railroad's fuel coal.*^ A de- 
 gree of discrimination necessarily arose from the custom of 
 crediting Icirge operators with the full capacity of all the mines 
 under their control whether all were actively operated or not. 
 This enabled large shippers to concentrate their entire quota of 
 cars at a few mines. The custom resulted in giving the big 
 operators a larger proportion of available cars than their actual 
 tonnage merited.*^ Prospective operators, however, appeared to 
 receive a fair degree of encouragement to enter the field. No 
 fixed policy appeared but all the facts were apparently considered 
 and cars supplied and connections made, if the case seemed to 
 merit it.** 
 
 6. The Buffalo and Susquehanna Railroad Company. — The 
 Buffalo and Susquehanna was likewise found to be interested in 
 coal mines through control of their stock, no mines being operated 
 directly.*" No ownerships of stock by officials or employees ap- 
 peared, if we except such holdings as railway officials possessed to 
 qualify them to be directors in the coal companies.*" Through 
 ownership of all the stock in the Buffalo and Susquehanna Coal 
 and Coke Company, this railway controlled the entire coal min- 
 
 39 Testimony before the Commission re coal and oil under authority of 
 Joint Res. 32 (sgth Cong., ist Sess., appears only in typewritten form— 
 17 Vols.), pp. 4504 4S00, 4SI7, 4882. 
 
 40 Do. pp. 4545, 4546- 
 
 41 Do. Vol. 9, P- 45SO. 
 43 Do. p. 4S7I. 
 
 43 Do. Vol. I, pp. 53. 54- 
 
 44 H. D. 561, P- 6s, SPth Cong., ist Sess. 
 
 45 Same as (39). Vol. 12, p. 6298. 
 
 46 Do. Vol, 12, p. 6298. 
 
56 The Commodities' Clause 
 
 ing situation on its own lines. A part of the property owned by 
 the coal company was operated by the Buffalo and Susquehanna 
 Coal Mining Company, all the latter's stock being owned by the 
 former.*^ Another concern, the Powhatan Coal and Coke Com- 
 pany, capitalized at $100,000 and operating on the lines of the 
 Buffalo and Susquehanna railroad was found to be controlled 
 by the coal company of the same name.** 
 
 No independent lines were operated on the lines of the Buffalo 
 and Susquehanna Railroad, although individuals not connected 
 with the railroad owned large acres of undeveloped coal lands." 
 It did not appear that these owners were refused facilities. The 
 road was comparatively new, having been completed in July, 
 1905,^° and officials testified that no application by independents 
 had been received. They declared their willingness, however, to 
 provide proper transportation facilities for independents on ap- 
 plication."^ 
 
 7. The Buffalo, Rochester and Pittsburgh Railway Com- 
 pany. — ^The Buffalo, Rochester, and Pittsburgh likewise posses- 
 sed large stock interests in certain coal mines. The only private 
 holdings of railway officials were those of President A. C. Yates, 
 who held stock in the Pittsburgh Gas and Coal Company.'^ The 
 railway owned practically all of the 4,000,000 shares of the 
 Rochester and Pittsburgh Coal and Iron Company,^^ and through 
 this ownership controlled a majority of the stock of the Jefferson 
 and Clearfield Coal and Iron Company. These two companies 
 produced practically all the coal that was mined on the lines of 
 the railroad. It amounted to something over 16,500 car loads per 
 year out of a total of 18,400 produced in this region."* 
 
 There appeared to be no set system of mine rating or car dis- 
 tribution"" and there was much complaint on the part of inde- 
 
 47 Testimony before the Commission re coal and oil under authority of 
 Joint Res. 32 (spth Cong., ist Sess., appears only in typewritten form— 
 17 Vols.), Vol. 12, p. 6298. 
 
 48 Do. p. 6298. 
 
 49 Do. p. 6294. 
 
 50 Do. p. 6290. 
 
 51 Do. p. 6296. 
 
 52 Do. p. 1695. 
 
 53 Do. p. 1684. 
 
 54 Do. p. 549. 
 
 55 Do. Vol. 4, pp. 1679, 1691. 
 
American Railroads and Coal Mines. 57 
 
 pendent shippers that they were unable to secure a sufficient num- 
 ber of cars to handle their coal.^^ It was also clear that the open- 
 ing of new mines by independents was discouraged.'^ The rail- 
 road had a practical monopoly of the coal situation on its lines 
 and frankly managed its equipment for the best interests of the 
 mines which it controlled through its stockholdings. 
 
 8. The Pittsburgh, Shawmut and Northern Railroad Com- 
 pany. — The Pittsburgh, Shawmut, and Northern owned no coal 
 mines directly but possessed large stock interests. No evidence 
 was adduced showing that stock ownership in mines was prac- 
 ticed by railway officials or employees. The railroad had 209 
 miles of track extending from Whalen (on the Delaware, Lack- 
 awanna and Western Railroad), New York, to the Elk County 
 Coal fields.^* It owned all the capital stock of the Kersey Min- 
 ing Company, a corporation which controlled 15,000 acres of 
 coal land, and likewise all the capital of the Shawmut Mining 
 Company, the latter controlling about the same acreage of coal 
 lands.'® This road seems to have been constructed for the spe- 
 cific purpose of operating the coal mines in this territory, prac- 
 tically all of which were completely under its control. 
 
 9. The Pennsylvania Railroad Company. — The facts brought 
 out with reference to the Pennsylvania Railroad were in general 
 very similar to those above concerning the Baltimore and Ohio 
 and other bituminous roads. No cases of direct ownership of 
 coal mines were found, but very close relations with certain min- 
 ing concerns existed on account of stock control. It was further 
 shown that many officials and employees had acquired more or 
 less extensive interest in mining concerns on the lines of the 
 railway.*" 
 
 Interests through stock ownership included, the entire capital 
 stock of the Manor Real Estate and Trust Company, a corpora- 
 tion owning about 9,000 acres of coal lands in Pennsylvania ; the 
 entire capital stock of the Susquehanna Coal Company, a cor- 
 poration capitalized at $2,136,800, and operating in the anthra- 
 
 56 Testimony before the Commission re coal and oil under authority of 
 Joint Res. 32 (spth Cong., ist Sess., appears only in typewritten form— 
 17 Vols.), Vol. S, p. 2634. 
 
 57 Do. Vol. 5, pp. 2612-2625, 2608. 
 
 58 Do. Vol. 9, p. 4878. 
 
 59 Do. p. 4878. 
 
 60 Do. Vol. 10, p. 5306. 
 
S8 The Commodities' Ci<ause 
 
 cite region of Pennsylvania, thus affording the Pennsylvania Rail- 
 road an important connection with the anthracite group ;*^ and 
 the entire capital stock of the Summit Branch Mining Company; 
 and a controlling interest in the Mineral Railroad and Mining 
 Company.^^ 
 
 The Commission classified employees' interests as follows: (i) 
 Such as have been acquired by officers or employees by purchase, 
 full purchase price being paid for stock or property; (2) shares 
 secured very cheaply with the understanding that the names of 
 purchasers were to be used in floating the companies; and (3) 
 shares given to officers and employees outright for the purpose of 
 uniting the interests of the railroad with those of the coal mines.^' 
 
 The first vice-president testified before the Commission that it 
 had been the policy of the Pennsylvania since about 1874 to en- 
 courage officers and employees to invest their surplus funds in in- 
 terests along their lines."* Coal mine operators, noting the effect 
 of such interests, sought to place shares of stock, gratis, or at 
 very low cost, in the hands of railway men. Promoters would cast 
 around, from high officials to local car distributors, picking out 
 those whose favor would probably be of greatest assistance in 
 floating the undertaking and, later, in transporting the product." 
 It soon came to be recognized among independent operators that 
 stock so disributed was not in vain ; and that coal companies fol- 
 lowing this policy prospered to a greater degree than competitors 
 not having these associations.*' 
 
 Specific incidents developed in which coal companies gave stock 
 outright to railway men. One, John Lloyd, an independent oper- 
 ator, in his testimony before the Commission regarding a gift of 
 a block of stock valued at $25,000 to a superintendent of the 
 Pennsylvania Railroad, said, "I thought it was a good business 
 move," and, answered in the affirmative a further inquiry as to 
 whether such a motive was the moving sentiment in the distribu- 
 tion of such favors among officers of the Pennsylvania Railroad 
 
 61 Testimony before the Commission re coal and oil under authority of 
 Joint Res. 32 (spth Cong., ist Sess., appears only in typewritten form— 
 17 Vols.), Vol. 9, p. 4892; Vol. 10, p. 5305. 
 
 62 Do. Vol. 6, p. 3149. 
 
 63 H. Doc. s6i, pp. 21-23, 59-2. 
 
 64 Same as (61), Vol. 8, p. 3950. 
 
 65 Do. Vol. 7, p. 3626. 
 
 66 Do. Vol. 8, p. 3752. 
 
American Raimoads and Coai, Mines. 59 
 
 Company.'' Other similar cases came out in the testimony.*' In 
 some cases money was given outright for this influence.'* In the 
 particular case here cited, it appeared, however, that the employee 
 was summarily discharged ; but other flagrant cases occurred. 
 
 In some of the departments having to do with the placing of 
 cars, the purchasing of railway fuel supplies, etc., a regular sys- 
 tem of fees seems to have become established. One employee, 
 having in charge the purchase of fuel supplies, testified that he 
 had received from fuel companies during three years about $11,- 
 000 in stock, and over $46,000 in money. It appeared from his 
 testimony that a rate ranging from three to five cents per ton had 
 frequently been given by certain coal operators favored by his 
 orders for the railroad. He testified that he had refused these 
 gifts for a time but they seemed to be jcustomary and he finally 
 decided to accept them.''" 
 
 In June, 1906, while the Commission was carrying on this in- 
 vestigation, the board of directors of the Pennsylvania appointed 
 a committee to investigate conditions to which objection had been 
 raised, declaring that "the keen competition of to-day requires 
 every officer and employee of the railroad company, to part with 
 any investment which he had in the shares of any coal-producing 
 company and also to part with any interest which he has in or 
 with any firm, or individual, mining coal on any of the lines of 
 the Pennsylvania Railroad system; and every officer and em- 
 ployee should be required to refrain from any investments what- 
 soever which may possibly prejudice or aflfect the interests of the 
 company or interfere with the company's full discharge of its duty 
 to the public."'^ 
 
 A short time after the action of the board of directors the pres- 
 ident issued an executive order prohibiting the acquiring or hold- 
 ing of such interests; adding, however, "when the holding of 
 such interest might in any way conflict with their duty to the 
 company or the company's duty to the public." This proviso, of 
 course, took much of the force from the order.''^ Very few would 
 
 (/} Testimony before the Commission re coal and oil under authority of 
 Joint Res. 32 (sgth Cong., ist Sess., appears only in typewritten form— 
 17 Vols.), Vol. 8, p. 4184. 
 
 68 Do. Vol. 6, p. 3242; Vol. 9, pp. 4907-4911. 
 
 ff^ Do. Vol. 9, pp. 4969. 4784. 
 
 70 Do. pp. 4798, 4799- 
 
 71 Annual Report of the Pennsylvania Railroad for year ending June, 
 1906; also H. Doc. 561, 59th Cong., 2d Sess. 
 
 72 H. Doc. 561, 59th Cong., 2d Sess. 
 
 5 
 
6o The Commodities' Clause 
 
 acknowledge or even believe that their holdings would interfere 
 with a proper performance of their duties. It is probable, there- 
 fore, that it made little or no difference in the attitude of offi- 
 cials and employees toward the acquisition and holding of coal 
 stock. 
 
 The individual car abuse was found to have reached greater 
 development on the Pennsylvania than on any other roads here 
 considered. Over 26,000 such cars were found to be in opera- 
 tion, and in addition, about 1,400 cars were owned by the Susque- 
 hanna Coal Company, which not only mined but marketed its own 
 coal.''^ It will be remembered that this road was nothing more 
 than a creature of the Pennsylvania. Outside of abuses resulting 
 from the use of private cars, the general system of car distribu- 
 tion was very unsatisfactory and unfair. Officials claimed that 
 the system had been revised in May, 1906, allotments being there- 
 after based largely on shippers' claims as revised after examina- 
 tion by a railroad engineer. A committee of railroad officials was 
 claimed to consider the data thus supplied and make the assign- 
 ments.'* 
 
 Testimony before the Commission brought out numerous ex- 
 amples of positive refusal to supply a fair proportion of cars ; and 
 imder certain circumstances failure to supply any at all. A typical 
 case was cited when there was an unusually heavy demand for 
 cars. The available supply on the lines of the Pennsylvavnia was 
 restricted absolutely to 122 mines owned by 42 operating com- 
 panies. For six weeks 379 mines received no cars. It was 
 brought out in testimony before the Commission that no mines in 
 which the railway or its officers were interested lacked cars during 
 the six weeks. During this period, 2,200 cars were sold or leased 
 to three mining companies to be used as individual cars. The 
 Keystone Coal and Coke Company received an allotment of these 
 cars. Investigation demonstrated that large amounts of its 
 stock had been placed in the hands of railway officials.'" During 
 this period all attempts of private operators to secure equipment 
 
 / 
 
 73 Testimony before the Commission re coal and oil under authority of 
 Joint Res. 32 (59th Cong., ist Sess., appears only in typewritten form— 
 17 Vols.), Vol. 8, p. 3949. 
 
 74 Do. Vol. 7, p. 3347; Vol. 12, p. 6401. 
 
 75 Do. Vol. 8, pp. 3852, 4409. 
 
American Railroads and Coai, Mines. 6i 
 
 failed absolutely.''^ Some of them were forced to sell some of 
 their plants to meet maturing obligations ; others closed down.'' 
 
 The attitude of the Pennsylvania with regard to sidings and 
 switches was about the same as that of the Baltimore and Ohio. 
 The second vice-president testified that prospective operators re- 
 questing sidings had been "discouraged as far as possi- 
 ble."'* In some cases sidings were positively refused. Evidence 
 was not submitted, however, to show that a siding was ever re- 
 fused to a mining concern in which railway officials or employees 
 held stock. Cases were cited where expensive sidings (in one 
 case costing $16,600) were constructed for mines in which of- 
 ficials were interested.'^ 
 
 10. Inter-Railway Relations in the Bituminous Fields. — ^As 
 already indicated the Pennsylvania was the controlling factor in 
 bringing about harmonious relations among these roads in order 
 to eliminate competition and the consequent cutting of rates. 
 With this expressed object it set about the purchase of shares of 
 stock in competitive roads and an interchange of directors.*" 
 
 An investigation of the actual results of this plan disclosed the 
 following facts : The Pennsylvania and its subsidiary companies 
 had secured control of 338,500 shares, or 38 per cent, of the cap- 
 ital stock of the Norfolk and Western; 156,000 shares, or 25 per 
 cent, of the Chesapeake and Ohio ; and 696,994 shares, or 37.6 
 per cent, of the Baltimore and Ohio.*^ 
 
 The New York Central and Hudson River Railroad Company 
 and its subsidiaries owned 125,000 shares, or 20 per cent, of the 
 capital stock of the Chesapeake and Ohio ; and 606,650 shares, 
 or 22 per cent, of the Reading. The Baltimore and Ohio owned 
 a similar amount of Reading stock.*' 
 
 From consideration of the above it appears that the Pennsyl- 
 vania and the New York Centra,l acquired a very powerful influ- 
 ence in the bituminous field, the Pennsylvania owning 38 per 
 cent interest in the stock of the Norfolk and Western and the 
 
 76 Testimony before the Commission re coal and oil under authority of 
 Joint Res. 33 (S9th Cong., ist Sess. appears only in typewritten form — 
 17 Vols.), President of the Penn. Coal & Coke Co., Vol. 9, pp. 4410-4412. 
 
 77 Do. Vol. 8, pp. 4179. 4209-4216. 
 
 78 Do. Second Vice-President, Vol. 7, p. 3383. 
 
 79 H. Doc. s6i, p. 67, S9th Cong., 2d Sess. 
 
 80 Do. pp. 43, 44. 
 
 81 Do. p. 46. 
 
 82 Do. 
 
62 The CoMMODiTiBs' Clause 
 
 same amount in the Baltimore and Ohio; the New York Central 
 and Baltimore and Ohio owning about 43 per cent of the capital 
 stock of the Reading; and the Pennsylvania and New York Cen- 
 tral together owning about 45 per cent of the capital stock of the 
 Chesapeake and Ohio. 
 
 All the great bituminous roads under the leadership of the 
 Pennsylvania, in order to secure a firmer grasp upon the situa- 
 tion and especially to control coal rates to the Atlantic seaboard, 
 joined together in the so-called Tidewater Bituminous Coal Traf- 
 fic Association.^' The agreement apportioned to each carrier a 
 certain percentage of soft coal tonnage and there appeared to be 
 an effectual understanding as to rates to tidewater,** Rates were 
 shown to have increased about one-half cent per ton under the 
 operation of this association. The agreements have so far been 
 permitted to exist although the actual result accomplished would 
 seem to establish the relationship as in restraint of trade. 
 
 Regarding the interchange of directors, it was found that four 
 directors of the Pennsylvania Railroad were directors in the 
 Baltimore and Ohio ; two directors in the latter were officers in 
 the former; two officers of the New York Central and Hudson 
 River Company were directors in the Baltimore and Ohio; and 
 the remaining two directors of the Baltimore and Ohio were pres- 
 ident and vice-president, respectively, of the Chesapeake and 
 Ohio. It further appeared that three of the five members of the 
 executive committee of the Norfolk and Western were officials 
 in the Pennsylvania.*' 
 
 This seemed to leave the Pennsylvania the dominant factor in 
 the coal situation in Pennsylvania, Western Maryland and North- 
 ern West Virginia. Specific evidence was not adduced to show 
 that the Pennsylvania was able, through its stock holdings or the 
 relationship indicated above, absolutely to dominate the coal sit- 
 
 83 This association was organized in 1896 and included the following 
 lines; the Pennsylvania, the Philadelphia and Reading, the Beech Creek 
 Division of the New York Central, the Baltimore and Ohio, the Chesa- 
 peake and Ohio, and the Norfolk and Western; Testimony before the 
 Commission re coal and oil, under authority of Joint Res. 32 (sgth Cong., 
 1st Sess., appears only in typewritten form — 17 Vols.). Vol. i, pp. 2-4. 
 
 84 Testimony before the Commission re coal and oil under authority of 
 Joint Res. 32 (S9th Cong., ist Sess., appears only in typewritten form — 
 17 Vols.), Statistician of the Tidewater Bituminous Coal TraflSc Associa- 
 tion, Gen'l Manager of the Penna. R. R., TraflSc Manager of the Penna. 
 R. R., and Vice-Pres. of the Reading Co., Vol. i, pp. 2, 90, 43, 82, 210. 
 
 8s H. Doc. 561, pp. 44, 45, S9th Cong., 2d Sess. 
 
American Railroads and Coai, Mines. 63 
 
 uation to the extent of preventing the product of certain mines in 
 West Virginia or other sections from coming into competition 
 with that produced on its own lines ; nor was it shown that the 
 combination was able to control rates and services to anything 
 like that degree prevailing in the anthracite fields. It will be re- 
 membered that the former charge was brought by certain West 
 Virginia operators.^^ 
 
 Although positive evidence of monopoly control by any one or 
 two of these railroads was not shown, it did appear very evident 
 that the common carriers controlled the coal situation in their 
 respective territories. Furthermore the degree of harmony re- 
 sulting from interholdings of stock, interchange of directors and 
 officials, and the formation of traffic associations, all binding the 
 railways together in community of interests, was sufficient to pre- 
 vent anything like rate wars or even active competition. The 
 combination headed by the Pennsylvania Railroad was operated, 
 in the opinion of the Commission, to increase freight rates to in- 
 dependents, and the price of the product to the consumer.*' It 
 was further demonstrated that mining concerns out of harmony 
 with the railways and having no affiliations with them, did not 
 prosper, and in some cases were forced to discontinue operations 
 because facilities were not available. 
 
 V. The Western Bituminous Fields. 
 
 We may now give brief consideration to the relation of the 
 railways west of the Mississippi to coal mining interests along 
 their lines. The system of federal and state distribution of 
 lands, including land grants for railway construction, complicates 
 the situation in this territory. Section 2347 of the Revised Stat-" 
 utes of the United States provides that any citizen or prospective 
 citizen above 21 years of age, or any association duly qualified, 
 may enter upon vacant coal lands, not otherwise reserved; that 
 entries for each individual shall not exceed 160 acres, and for 
 each association, 320 acres ; and that such parties shall pay not 
 less than $10.00 per acre for land over fifteen miles from a rail- 
 road, and not less than $20.00 for lands within fifteen miles. 
 
 Unless very strictly administered there are many possibilities 
 
 86 Chapter III, Section 3, also Cong. Rec., 59th Cong., ist Sess., pp. 
 1671-1672, 2198. 
 
 87 H. Doc. 561, p. 48. 59th Cong., 2d Sess. 
 
64 The Commodities' Ci<ause 
 
 of fraud in the distribution of lands under this statute. Inter- 
 state Commerce Commissioner Clark testified before the House 
 Committee on Public Lands that thousands of acres of coal land, 
 known to be such, had been entered on declaratory statements by 
 young women and others having no intention to occupy them, and 
 that such entries had been made at the instance of certain com- 
 panies.*^ He further declared that large areas of coal land had 
 been allotted under state distributive laws on affidavits to the ef- 
 fect that such lands were valuable only for agricultural and graz- 
 ing purposes, and that in practically all such cases, railway inter- 
 ests were primarily concerned in the coal mines charged with this 
 fraudulent practice. 
 
 I. The Rio Grande Western Railway. — ^The Rio Grande 
 Western was found to be controlled by the Denver and Rio 
 Grande Railway Company, the latter being a part of the Gould 
 system. The Rio Grande Western owned the entire capital stock 
 ($10,000,000) of the Utah Fuel Company, a coal mining concern 
 in Utah holding its charter from the State of New Jersey.'" This 
 company, through fraudulent methods, secured over 1,200 acres 
 of coal lands around its mines at Sunnyside, Utah.'" It appears 
 in evidence that this land was secured through false entries made 
 by parties at the instance of the fuel company only to be deeded 
 over to the latter. Those making such entries filed affidavits to 
 the effect that the lands contained no coal and were valuable only 
 for grazing and agricultural purposes."^ Officials of the Denver 
 and Rio Grande testified that they were accustomed to grant 
 special rates to the Utah Fuel Company on the ground that this 
 company was owned by the railway and deserved special consid- 
 eration. 
 
 The Pleasant Valley Coal Company was a corporation sub- 
 sidiary to the Utah Fuel Company, the latter owning its entire 
 capital stock. This, of course, placed it under the domination of 
 
 88 Addresses, Papers, etc., Coal Lands and Coal Land Laws of the U. 
 S., Vol. 2, Sec. 28, p. 2. 
 
 89 S. Doc. 450, p. 4, 60th Cong., 1st Sess., re S. Joint Res. 32, Submitted 
 April 28, 1908. 
 
 90 Do. 
 
 91 Testimony of Commissioner Clark before House Committee on Pub- 
 lic Lands, Dec. 17, 1906, Vol. 2, Sec. 28, Addresses, Papers, etc. ; also H. 
 Doc. 1450, p. 3, 6oth Cong., ist Sess. 
 
American Rahroads and CoaIv Mines. 65 
 
 the Rio Grande Western Railway Company through the latter's 
 ownership of the entire capital stock of the Utah Fuel Company, 
 The Pleasant Valley Coal Company employed methods similar to 
 those practiced by the Utah Fuel Company in the acquisition of 
 coal properties. It was testified before the Commission that one, 
 Robert Forrester, an official in the Pleasant Valley Coal Com- 
 pany, had, in less than three years, acted as attorney for seventy- 
 seven parties entering application for lands, and that twenty- 
 eight of these claims were shortly thereafter turned over to the 
 Pleasant Valley Coal Company. In addition it was shown that 
 over 5,500 acres were fraudulently secured around its mines at 
 Cattle Gate, Utah.®^ Various underhanded methods were re- 
 sorted to in order to evade state and federal checks upon illegal 
 entries. 
 
 The Calumet Fuel Company was found to be closely affiliated 
 with the Utah Fuel Company, although the exact relation does not 
 appear.'^ The Wasatch Stone Company was one of the sub- 
 sidiaries of the Utah and was thus brought under the control of 
 the Rio Grande. All the stock of the Halladay Coal Company 
 was owned by the railway. This means that all coal mining con- 
 cerns in Utah of any importance were under the absolute control 
 of the Denver and Rio Grande Railroad Company through its 
 subsidiary, the Rio Grande Western.** 
 
 The entrance of independents into this territory was openly 
 opposed and the situation was so completely dominated that the 
 former were frequently not permitted to run switches or connec- 
 tions over the company's coal properties to adjoining independent 
 mines.^" 
 
 a. The Colorado and Wyoming Railway Company. — ^The 
 Colorado and Wyoming is a short road about 105 miles in length, 
 running to the central plant of the Colorado Fuel and Iron Com- 
 pany at Pueblo. It was ostensibly constructed for the purpose 
 of hauling the raw and finished products of this plant, and such 
 products constituting practically all its tonnage. The steel plant 
 is capitalized at $50,000,000, all the securities being owned by 
 the Colorado and Wyoming Railway. As a further indication of 
 
 92 S. Doc. 450, p. 3, 60th Cong., 1st Sess. 
 
 93 Do. p. 4- 
 
 94 Testimony of Commissioner Clark before House Committee on Pub- 
 lic Lands, Dec. 17, 1906, Vol. 2, Sec. 28, p. 9, Addresses, Papers, etc. 
 
 95 S. Doc. 450, pp. 3, 4, 6oth Cong., ist Sess., Do. 
 
66 The Commodities* Clause 
 
 the relation between the railway and the Fuel Company it was 
 found that all the leading officers of the former held similar posi- 
 tions in the latter.'^ 
 
 It was shown in the evidence that the Atchison, Topeka and 
 Santa Fe, the Colorado and Southern, and the Denver and Rio 
 Grande, by special agreement with the Colorado and Wyoming, 
 and the Colorado Fuel and Iron Company, charged but six mills 
 per ton mile on all coal and coke for the fuel company from the 
 mines of the latter to Pueblo. By agreement the minimum rate 
 was placed at -37/^, and the maximum at .56. To all other con- 
 sumers in Pueblo the minimum and maximum rates from the 
 same points on the lines of these railways were .75 and $1.50 re- 
 spectively.^^ It was through this advantage that the Colorado 
 Fuel and Iron Company had acquired a monopoly of the steel 
 industry of the state. 
 
 The relationship of the several railways entering into this 
 agreement, to the Fuel Company was not fully disclosed in the 
 evidence. It was shown, however, that the president of the fuel 
 company was a director in the Denver and Rio Grande Railroad 
 Company.'^ This community of interests extended at least to 
 the point of cooperation with the fuel company to prevent the 
 extension of railway facilities to independent operators.^' 
 
 3. The Railways of Oklahoma. — Practically all the coal lands 
 in Oklahoma belong to the Indians and are operated on lease. 
 According to an act of Congress not over 960 acres may be leased 
 to one party. At the time of the investigation by the Commis- 
 sion, 109 leases had been executed, 58 being made or later turned 
 over to railroad companies. For the most part the coal mining 
 situation in Oklahoma was found to be dominated by the Rock 
 Island, the Missouri, Kansas and Texas, and the Missouri Pa- 
 cific, railways.^"" 
 
 About 45 per cent of the coal produced from Oklahoma mines 
 was distributed through the McAlester Fuel Company, a selling 
 agency.^ This concern had great influence in determining the 
 price of all coal produced in this territory. Evidence was intro- 
 
 96 S. Doc. 450, pp. 4 5, 60th Cong., 1st Sess. 
 
 97 Do. pp. 5, 6. 
 
 98 Do. p. 7. 
 
 99 Do. p. 6. 
 
 100 Do. pp. 7, 8. 
 1 Do. p. 10 
 
American Raii,roads and Coai. Mines. 67 
 
 duced to show that the price of coal was materially raised after 
 this selling agency came into the field; It was not proved, how- 
 ever, that the McAlester Fuel Company was actually affiliated 
 with any railways or was able to secure better facilities than pri- 
 vate operators. There was in fact very little complaint on the 
 part of independent operators on account of lack of sufficient cars 
 to handle the output of their mines. 
 
 4. The Union Pacific Railroad Company. — The Union Pacific 
 was found to have entered into the business of producing and 
 marketing coal to a greater extent than any western road. The 
 Commission in its report to Congress declared that this railroad 
 absolutely dominated the mining, transportation, and selling of 
 all coal produced on its lines. It appeared in evidence that it, 
 like other western railways, had pursued fraudulent practices in 
 securing much of its coal lands. In 1906 valuable coal deposits 
 were found in Colorado about eight miles from the main line of 
 the Union Pacific and eighteen miles east of Rock Springs. From 
 federal grants the railroad owned large sections of this land. In 
 spite of federal laws limiting the number of acres of coal lands 
 which individuals or associations might receive, the railway by 
 false declaratory statements, signed by parties for a consideration 
 and released to railway officials at the same time or shortly there- 
 after, secured practically all the additional coal lands of value in 
 this section.* 
 
 In addition to large direct interests in coal properties, the 
 Union Pacific Railroad Company owned all the capital stock of 
 the Union Pacific Coal Company, a corporation capitalized at 
 $10,000,000, and handled its entire output.* 
 
 For a number of years the railroad company had secured its 
 fuel from its own mines at Hanna, about 650 miles west of 
 Omaha, and Rock Springs, about 150 miles further west. It also 
 sold a considerable amount of coal from both mines for commer- 
 cial purposes.* About a third of its tonnage came from three 
 independents located at Rock Springs. The Colorado Fuel and 
 Iron Company conceived the plan of exterding its holdings to 
 include the three independents. The Union Pacific at once re- 
 duced rates from Hanna to eastern distributive points, increasing 
 
 2 S. Doc. 450, pp. 17, 21, 60th Cong., 1st Sess. 
 
 3 Do. p. 14- 
 
 4 Do. p. IS. 
 
68 The Commodities' Clause 
 
 at the same time the output of its mines there in order to place 
 the product in the eastern market at a price that could not be 
 met by the Colorado Fuel Company on coal 150 miles further 
 west. Meanwhile rates from Rock Springs, eastward, remained 
 the same, the Union Pacific getting most of its own fuel supply 
 from these mines rather than from Hanna. This forced the Col- 
 orado Fuel Company to withdraw, and the owners of the inde- 
 pendents finally to sell out to the Union Pacific Coal Company. 
 Officials of this road frankly testified that this had been done at 
 the instance of Union Pacific railway officials to kill out inde- 
 pendents on their lines.° 
 
 These independents were later merged into the Central Coal 
 and Coke Company which has borne varying relations to the 
 Union Pacific, but the dependent operators fearing a protest 
 would make matters worse, did the best they could with the 
 facilities available. After the merger, the Union Pacific first sup- 
 plied cars to its own mines for fuel purposes ; then gave 28 per 
 cent of the remaining cars to the three independent mines, and 72 
 per cent to the mines of the Union Pacific Coal Company. The 
 railroad seemed satisfied to permit the independents to control 
 these mines on this basis but it was manifestly the policy of the 
 road to discourage and prevent similar acquisitions by other inde- 
 pendents.^ 
 
 The condition in the West was found on the whole to be not 
 materially different from that in the East. The railroads in Colo- 
 rado, Wyoming, Oklahoma, and Utah, which states include the 
 most valuable coal fields, had practically absolute control of the 
 coal mines in these states. They maintained agencies for the min- 
 ing as well as the marketing of their product, controlling both 
 wholesale and retail prices.' The Union Pacific was the largest 
 single owner and operator, and appears to have been more suc- 
 cessful in extending its interests. The wide extent of the western 
 coal deposits, the large acreage controlled by the federal and state 
 governments and private individuals have rendered it difficult for 
 any single financial interests to secure control of the situation. 
 
 5 S. Doc. 450, pp. 14, IS, 60th Cong., ist Sess. 
 
 6 Testimony of Superintendents of Union Pacific Coal Company; also 
 attempt of the Sioux City and Rock Spring Company, pp. 17, 18; S. Doc. 
 450. 
 
 7 Testimony of Commissioner Clark before House Committee on Pub- 
 lic Lands, Dec. 17, 1906, Vol. 2, Sec. 28, p. 9, Addresses, Papers, etc.; also 
 S. Doc. 450, pp. 20, 21 ; 6oth Cong., ist Sess. 
 
American Railroads and Coai, Mines. 69 
 
 VI. Survey of Relationships Disclosed. 
 
 I. Effect on Independent Coal Operator. — ^As we have attempt- 
 ed to show above, the most serious forms of discrimination arose 
 on account of affiliations between railways and mining concerns. 
 These relations forced the independent operator out of the busi- 
 ness, ( I ) by charging him high rates and giving inefficient service, 
 or refusing to furnish any facilities at all ; (2) by showing favor- 
 itism to affiliated mining interests in regularity and sufficiency of 
 car supplies, appropriation of special or individual cars, better 
 switching connections, lower rates for transportation, standing 
 agreements with affiliated carriers for fuel supplies, and expen- 
 sively equipped distributive agencies controlled by joint mining 
 and transportation interests, such agencies having peculiar ad- 
 vantages in securing permanent contracts with retail agencies, 
 manufacturing establishments, and so-called "foreign" roads on 
 account, either of certain inter-corporate relations, or the recog- 
 nition of a "community of interests."^ 
 
 The result of such conditions may very readily be apprehended. 
 The small independent had no chance. Even the well-financed 
 independent had to bid for favor by tpng up his output in agree- 
 ments unfavorable to his interests;^ or selling stock to railway 
 officials on special terms ;^" and even bribing employees and of- 
 ficials by actual gifts of stock or money.^^ The inevitable result 
 was to force the private operator to the terms of the railway. He 
 was frequently compelled to sell out to the latter in order to meet 
 maturing obligations incurred in his purchase of mining prop- 
 erties and equipment, or else yield a sufficient stock interest to 
 the railway to insure facilities for marketing his product. 
 
 The railway's hold on mining properties has, therefore, become 
 stronger and stronger until practically the entire coal interests 
 in the great bituminous and anthracite fields of the producing 
 states have come to be in large measure dominated by the rail- 
 ways serving them. This control was exerted through direct own- 
 ership, stock ownership in affiliated coal companies, or favorable 
 agreements with independents for their product. Under such a 
 
 8 Such as form junctures with the mineral roads although having no 
 direct connection with coal properties. 
 
 9 e. g., contracts of Temple Iron Co. with independents, supra pp. 41, 44, 
 
 45, 49, SO. 
 
 10 Supra p. 58. 
 
 11 Supra p. 54, S8, 59- 
 
70 Thb Commodities' Clause 
 
 regime, a railway may develop those mines or sections of states 
 that appear to its advantage to develop, or withhold such devel- 
 opment, as it may choose. The great bituminous and anthracite 
 railways operating in their respective territories under the mas- 
 terful unifying forces of the Pennsylvania, the Reading, and the 
 Union Pacific will, unless more effectually restrained than by 
 any existing statutes, dominate the coal business throughout the 
 country. There is little or no competition in many fields. The 
 maximum price that the carriers believe will furnish the greatest 
 net profit may now be demanded with impunity, especially for the 
 product of the anthracite fields where complete monopoly has 
 been more nearly established. 
 
 2. Effect on Prices to the Consumer. — In a recent report of 
 the Senate Committee on Interstate and Foreign Commerce it is 
 stated that, whereas the increase in wage in the anthracite fields 
 since the Reading combine was but five per cent the retail price of 
 anthracite coal has gone up twenty-five per cent.^' 
 
 The report further submitted an estimate of the various ele- 
 ments of cost entering into the preparation of anthracite coal for 
 the market. Labor cost of mining was placed at $i.io per ton; 
 other expenses on account of administration, maintenance of 
 equipment, six per cent interest on capital employed, sinking fund, 
 etc., $1.50 per ton ; transportation, $0.97 per ton ; making a total 
 of $3.57 for placing one ton of coal on the market for the retail 
 trade.^* If the retailer sell at one dollar advance the total cost to 
 the consumer should not be more than $4.57, instead of the pre- 
 vailing price of $6.50 to $9.00. It is estimated that 70,000,000 
 tons of anthracite coal are consumed annually. On this basis, 
 using the smaller figure, it may be seen that the consumer pays 
 each year about $135,000,000 more for hard coal than he should 
 pay, making reasonable allowance for labor costs, interest on cap- 
 ital, transportation, and retailer's profit. 
 
 It should be noted, furthermore, that transportation charges on 
 anthracite coal are much higher in proportion than the charge on 
 similar commodities. The tariff on bituminous coal, for instance, 
 from the mines of the Clearfield Company, to Perth Amboy— a 
 distance of 346 miles — is $1.70; although the tariff on anthracite 
 
 13 Report submitted June 18, 1912, re S. Res. 98, Cong. Rec, p. 617, 
 6ist Cong., 2d Sess. 
 
 14 Report Senate Committee on Interstate and Foreign Commerce, June 
 18, 1912, pp. 6, 7, 6ist Cong., 2d Sess. 
 
American Railroads and Coai, Mines. ^\ 
 
 coal from the Schuylkill County mines, to Philadelphia, — a dis- 
 tance of 125 miles — is the same. Similarly, anthracite coal is 
 given a higher commodity rate from the mine to distributive 
 points than other commodities which require much more care in 
 handling and which, in other sections of the country, receive the 
 same commodity rate.^" 
 
 The high tariff on anthracite coal acquires especial significance 
 when considered in connection with the sixty-five per cent con- 
 tracts. As has already been shown, such contracts amount to a 
 very substantial rebate to all operators entering into them. The 
 independent has been practically forced to become a party to such 
 agreements if he would successfully compete with the railway. 
 
 3. Recommendations of the Commission. — One of the most 
 reprehensible abuses found to exist in the eyes of the Commis- 
 sion appeared to be the assignment of special and "individual" 
 cars. Many of the above forms of discrimination could not 
 exist under a fair and equable apportionment of cars. Notwith- 
 standing the prohibitive executive order of the president of the 
 Pennsylvania, the greatest offender in this regard, it was evident 
 to the Commission from the testimony adduced that the abuse 
 continued.^* This system was fostered by the custom of grant- 
 ing extra cars for the carrier's own supply of fuel coal. All the 
 railroads above, except the Western Maryland and the New York 
 Central (the latter no exception with regard to the Clearfield 
 Bituminous Coal Corporation) appear to have given extra allot- 
 ments to companies furnishing railway fuel. This plan, by leav- 
 ing the usual allowance of cars for the general commercial needs 
 of these mines, was an important consideration in contracting for 
 fuel coal. Whether or not the interests of the carrier and coal 
 producer were mutual, the latter would feel justified in giving 
 cheaper rates if the usual quota of cars could be reserved for 
 carrying coal to its general trade. Back of much of this kind of 
 discrimination, if not all of it, seemed to be the railway's interest 
 in certain coal mines. 
 
 In the hope of relieving some of the unwholesome conditions as 
 described above, the Commission recommended that every rail- 
 road publish its system of car distribution, as well as car allot- 
 ments, from time to time ; that a just estimate be made of capac- 
 
 15 Report of Senate Committee on Interstate and Foreign Commerce 
 re S. Res. 98, June 18, 1912, pp. 7, 8. 
 
 16 H. Doc. 561, p. 80, 59th Cong., 2d Sess. 
 
72 
 
 The Commodities' Clause 
 
 ity, where it is used as the basis, by an independent party and that 
 this investigation be made in the presence of representatives of 
 the mine in question; that individual cars be absolutely elim- 
 inated, and that all others be distributed according to clearly de- 
 fined rules; that carriers or officers or employees be positively 
 forbidden to have any interest whatsoever in any coal properties 
 except such as are maintained solely for the purpose of supplying 
 the railroad in question with fuel.^^ 
 
 These recommendations did not include a specific recommenda- 
 tion that railroad corporations be not allowed to hold stock in 
 mining concerns, although on a number of occasions throughout 
 the report it did so express itself.^* It doubtless regarded it as 
 unnecessary to reiterate in the form of a recommendation what 
 was believed to exist in the law as a positive prohibition. 
 
 On July 30, 1915, just as this document goes to press, the Inter- 
 state Commerce Commission in accord with an order of Congress 
 of June 10, 1912, submitted a report regarding the "rates, prac- 
 tices, rules, and regulations governing the transportation of an- 
 thracite coal" from the Wyoming, Lehigh, and Schuylkill regions 
 in the State of Pennsylvania to tidewater. In this report the re- 
 lationship of the anthracite roads to the coal companies was suc- 
 cinctly summarized in the following table :^* 
 
 Coal Company. 
 
 Owner of Stock of Coal 
 Company, 
 
 O 
 
 I^high & Wilkes-Bane Co 
 
 Philadelphia & Reading Coal & 
 
 Iron Co„ 
 
 Hillside Coal & Iron Co. 
 
 Pennsylvania Coal Co 
 
 Lehigh Valley Coal Co. 
 
 Coxe Bros. & Co., Inc. 
 
 Scranton Coal Co 
 
 Elk Hill Coal & Iron Co 
 
 Susquehanna Coal Co 
 
 Mineral R. R. & Mining Co 
 
 Summit Branch Mining Co., . . . . 
 
 Mineral R. R. & Mining Co., 
 
 Hudson Coal Co., 
 
 C. R. R. Co. of N. J.,. 
 Reading Co., a holdmg 
 
 Co., 
 
 Erie R. R. Co 
 
 Erie R. R. Co^ 
 
 L. V. R. R. Co 
 
 L. V. R. R. Co 
 
 K. Y. O. & Ry Co., . . . . 
 
 N. Y. O. & Ry. Co 
 
 P. R. R. Co 
 
 P. R. R. Co 
 
 P. R. R. Co 
 
 N. C. Ry. Co., 
 
 D. &H. Co., 
 
 $8,491,150 
 8,000,000 
 
 1,000,000 
 
 5,000,000 
 1,965,000 
 3,910,150 
 
 200,000 
 
 60,000 
 
 3,136,800 
 
 100,003 
 
 25,060 
 
 199,998 
 
 2,400,000 
 
 •3 
 
 CDS 
 
 1874-1909 
 
 Dec. 1, 1896 
 Dec., 1895 
 Mar., 1901 
 1875-1908 
 ZQ06 
 
 Feb. 2, 1899 
 Mar. I, 1899 
 1873-1886 
 1877-1891 
 Mar. 13, 1902 
 1887-1891 
 1901-1911 
 
 17 H. Doc. 56r, pp. 80, 81, 59th Cong., 2d Sess. 
 
 18 Do. p. 76- 
 
 19 Report of I. C. C. No. 4914, decided July 30, 191S, P- 226. 
 
American Railroads and Coal, Mines. 73 
 
 In all cases except the first^" the carriers as above indicated 
 own the entire outstanding stock of the several coal companies. 
 The Commission summarized its findings as follows : 
 
 "That the rates on anthracite coal, prepared and pea and 
 smaller sizes, in carloads, applicable from producing dis- 
 tricts in the Wyoming, Lehigh and Schuylkill regions in the 
 State of Pennsylvania to tidewater ports and certain east- 
 ern interior points are unreasonable, and the rates on 
 anthracite coal, prepared and pea sizes, from said districts 
 to other interior points are unreasonable, and reasonable 
 rates fixed for the future. 
 
 "That the respondents by means of trackage arrange- 
 ments and the free transportation to junction points in the 
 mining regions of coal exchanged by their allied coal com- 
 panies, have extended the advantages of interline transpor- 
 tation to their coal companies to the prejudice of other coal 
 shippers to whom interline transportation at joint rates has 
 been denied. Respondents required to establish through 
 routes and publish joint through rates applicable thereto. 
 
 "That anthracite coal is a low-grade commodity which 
 is transported in vast quantities in trains of maximum ton- 
 nage. The tonnage loaded in each car is much greater 
 than the loading of most other classes of traffic. Most of 
 the anthracite tonnage is shipped from collieries whose 
 daily production, measured in carloads, is very large. These 
 conditions tend toward lower operating costs. 
 
 "That concessions and offsets granted by respondents 
 to their allied coal companies in the form of interest 
 charges, royalty earnings, the use of valuable property at 
 inadequate rentals, the free use of the carriers' funds and 
 credit, or by other means are as pernicious as direct cash 
 rebates. Such concessions and offsets are unlawful. 
 
 "That lateral allowances paid to a coal shipper in ac- 
 cordance with an agreement, alleged to be additional com- 
 pensation for the use of a facility furnished by the ship- 
 per, are unlawful rebates."^^ 
 
 In view of the facts shown above the Commission prescribed 
 reductions in rates of all the anthracite roads, such reductions 
 ranging from 6 to 25 per cent.^^ 
 
 20 The Central owns $8,491,150 of the $9,210,000 stock of the Lehigh & 
 Wilkes-Barre Coal Co. 
 
 21 Report of I. C. C. No. 4914, rendered July 30, 1915, p. 220. 
 
 22 Do. pp. 285-289. 
 
CHAPTER III. 
 
 LEGISLATIVE HISTORY OF THE COMMODITIES' 
 
 CLAUSE. 
 
 I. Preliminary Considerations. 
 
 In the enactment of the Hepburn Law of 1906, the last thing 
 seriously considered was the provision now known as the Com- 
 modities' Clause. There was little serious discussion in Congress 
 or in the press, or among independent operators, as to the advisa- 
 bility and feasibility of dissociating common carriers from their 
 mining interests. The debates for the most part were taken up 
 with the "maximum rate" proposal, the judicial review of orders 
 of the Commission, the pipe line provision, and the "private car 
 abuse." 
 
 It was slow to dawn on Congress that it probably possessed 
 the power to eliminate the vast majority of existing abuses by sim- 
 ply enacting a law dissociating all common carriers, doing an in- 
 ter-state business, from their mining interests. Early attempts 
 on the part of states to prevent railway absorption of coal de- 
 posits availed little.^ 
 
 These statutes were enacted prior to the development of the 
 great transcontinental systems operating in inter-state commerce. 
 Railways were then local concerns and the businesses of mining 
 and transportation were regarded as amenable only to state con- 
 trol. The appearance of inter-state railways removed a part of 
 the problem of regulation from the state and placed it upon the 
 federal government.^ It was some time, however, before the lat- 
 ter was sure of its authority to enter the field of general regula- 
 tion ; then it did not understand the complexity of the situation, 
 and great pressure from the interests involved discouraged the 
 enactment of such corrective measures as would vitally affect in- 
 dustrial and property relations. 
 
 The real problem of these inter-corporate relations is, in fact, 
 so complex that improperly considered legislation might precipi- 
 
 1 Penn. Const., Art. 17, Sect, s ; Revised Statutes of W. Va., Code of 
 1899, Chapter 54, Sec. 66b. 
 
 2 U. S. Const., Art. i, Sec. 8, giving Congress power to regulate com- 
 merce between the states.' 
 
 74 
 
History of Legislation. 75 
 
 tate such disorganization and panic as would threaten our very 
 industrial existence. An evil of more than a half century's 
 growth, ingrained in the very warp and woof of our commercial 
 and industrial fabric can not be summarily eradicated by hasty 
 legislation. It was a serious and comprehensive issue that faced 
 Congress in the spring of 1906 when public sentiment demanded 
 action. 
 
 From 1887 to 1906 the Commission made no specific recom- 
 mendation to Congress for legislation forbidding carriers from 
 engaging in industries entirely apart from their transportation 
 functions.* On the opening of the session witnessing the passage 
 of the Hepburn Law, of which the clause in question was a part, 
 the Commission, in answer to a request from the Senate Com- 
 mittee on Interstate Commerce, drafted a number of amendments, 
 which in the opinion of the former should be passed. The letter 
 of transmittal made no reference to legislation to prevent car- 
 riers from engaging in other lines of business.* 
 
 None of the commissioners in their testimony before the Senate 
 Committee on Interstate Commerce, prior to the enactment of the 
 inter-state commerce law, introduced the question. Commissioner 
 Prouty, in answer to a question put by Senator J. P. Dolliver, said, 
 "No, I do not much think that it is (right) ; but they are in a 
 great many cases, not only in the anthracite coal roads in Penn- 
 sylvania, but it is the case with the bituminous roads out West 
 and in a great many places."^ 
 
 It must be said in behalf of the Commission that it was not 
 clothed with authority to investigate matters pertaining to the 
 monopolization of an industry or to restraint of trade ; nor did it 
 possess adequate authority to require railroads to submit data 
 touching upon contracts and agreements which might exist be- 
 tween railroads and other concerns having nothing to do with 
 transportation. It can not be doubted, however, that sufficient 
 evidence had been adduced before the Commission from time to 
 time to raise strong suspicion if not positive conviction in the 
 
 3 Annual Reports of the Commission, 1887-1906. 
 
 4 General Letter Book of the Commission, No. SS, 1905, p. 52. This 
 letter does not appear among congressional documents and may be found 
 only at the Interstate Commerce Library. 
 
 5 Hearings before Commission on Interstate Commerce, re S. Res. 288, 
 concerning the regulation of railway rates, Vol. 4, P- 2883, s8th Cong., 
 3d Sess. 
 
 
 
76 The Commodities' Clause 
 
 minds of the Commissioners that the carrier's interest in mining 
 concerns frequently lay at the bottom of unfair car distribution 
 and discrimination in rates. 
 
 In the case of the Atchison, Topeka and Santa Fe Railway 
 Company before the Commission, on charges made by the Cale- 
 donian Coal Company, such discriminations were shown in favor 
 of the Colorado Fuel and Iron Co., that the railroad's financial in- 
 terest in the latter company could not but be detected.^ The cases 
 of the Red Rock Fuel Company against the Baltimore and Ohio 
 Railroad;' the New York, New Haven and Hartford against the 
 Chesapeake and Ohio,* and the earlier Haddock and Coxe cases,' 
 must have impressed the Commission with the fundamental rea- 
 son for the abuses charged. The last two cases named arose in 
 1890 and 1891, respectively, and were concerned with abuses 
 arising out of the mineral interests of the Lehigh Valley and the 
 Delaware and Lackawanna Railways in the anthracite fields. The 
 facts were very clearly brought out before the Commission but 
 the latter waived the power it might otherwise very properly have 
 claimed to have been conferred by the original Interstate Com- 
 merce Act and simply recognized as lawful "the commingled at- 
 tributes of carrier and producer," as existing in railroads. This 
 was taken by carriers as a license to continue this practice, and 
 by the courts as a construction of the law by an administrative 
 body which should be given a degree of respect.^" 
 
 Prominent railway officials of important roads not closely con- 
 nected, however, with large mining interests, were very positive 
 in their disapproval of such joint interests. One said, "I think 
 that every railway official in this country should be disqualified 
 from having any interest, directly or indirectly, in any large pro- 
 ducer of traffic, whether it be a coal mine or a factory or a mill 
 or anything else, on a line of railway, where he is on the pay 
 roll."^^ Another believed that the distribution of products should 
 be separated; "that it is the business of the railroad to carry 
 
 6 Opinions of the Commission, Vol. 11, No. 789. 
 
 7 Do. Opinion 812. 
 
 8 200 U. S., p. 361. 
 
 9 3 I. C. R. 302; Do. 460. 
 
 10 Opinion of Supreme Court in N. Y. and H. R. R., 200 U. S. 361. 
 
 11 J. J. Hill, before Senate Committee on Interstate Commerce re S. 
 Res. 288, concerning the regulation of railway rates, Hearings Vol. 2, p. 
 152, s8th Cong., 3d Sess. 
 
History oif Legislation. 77 
 
 other people's goods and not to engage in competition with those 
 producers in the production."" Another testified before the 
 Senate committee: "My personal opinion always has been that 
 the attention of everybody on the railroad should be kept prac- 
 tically confined to the two rails, and to do nothing else. I have 
 always discouraged the railroad going into anything but the prac- 
 tical transportation of freight."^^ 
 
 II. Proposals in the House of Representatives. 
 
 The situation^* as above presented was regarded as sufficiently 
 serious to cause a resolution to be introduced in the House of Rep- 
 resentatives requesting the Attorney General of the United States 
 to furnish information concerning certain coal roads.^° This reso- 
 lution was promptly referred to the Committee on Interstate and 
 Foreign Commerce from which it was not reported. Twelve days 
 later Mr. Gillespie attempted to present a privileged resolution to 
 the same effect. As such it was ruled out of order because, in the 
 opinion of the chair, it called upon the Attorney General for the 
 expression of an opinion.^* Later in the day it was presented in 
 regular order and was again referred to the committee. Impatient 
 at the delay, Mr. Gillespie slightly modified the measure to avoid 
 the objection before raised by the chair, and again submitted it, 
 this time as a privileged resolution addressed to the President and 
 simply calling for a report as to an alleged merger of the Penn- 
 sylvania and other bituminous roads. It was passed without roll 
 call on the same date.*' 
 
 12 Lucius Tuttle, Pres., Boston and Maine R. R., Main Central R. R., 
 and Washington County Ry. and others, p. 958, s8th Cong., 3d Sess., Sen- 
 ate Hearings. 
 
 13 Kruttschnitt, Vice-Pres., Southern Pacific, Senate Hearings, Vol. 4, 
 P- 31 IS, S8th Cong., 3d Sess. 
 
 14 Several unsuccessful attempts have been made to secure additional 
 and more immediate facts as to the introduction of this resolution at this 
 time. They do not appear in any of the records and those who should 
 know are not disposed to disclose the information. Conditions alleged to 
 exist in the West Virginia coal fields and partially substantiated in the 
 opinion of the Commission rendered Nov. 25, 1905, in the Red Rock Fuel 
 case (infra p. 81) are doubtless partially responsible for this awakening. 
 
 15 H. Res. 125; S9th Cong., ist Sess.; Cong. Rec. p. 779, presented by 
 O. W. Gillespie. 
 
 16 Cong. Rec. S9th Cong., 1st Sess., p. 1240. 
 
 17 H. Res. 4, Cong. Rec. p, 1701, S9th Cong., ist Sess. 
 
78 The Commodities' Clause 
 
 Representative W. P. Hepburn, in defense of the refusal of the 
 committee to report the resolutions referred to it, said, "It (the 
 
 committee) has been engaged upon public matters perhaps 
 
 of superior importance, and the chairman of that committee did 
 
 not regard the matter as important that is, in the sense of 
 
 hurried action on the question."^^ 
 
 A very determined effort was made to secure a reconsideration 
 of the vote, but without avail.^^ 
 
 This resolution, although rather indefinite as to the character of 
 information desired, aroused much interest in Congress, and inci- 
 dentally received some attention in financial circles. A sharp de- 
 cline was at once felt in railroad stocks obviously interested in 
 the resolution. Reading stock dropped six and one-fourth points ; 
 Lehigh Valley, $2.00 per share ; and Pennsylvania two points.^" 
 The financial interests were evidently ag'tated. One of the most 
 prominent organs of these interests referred in very bitter terms 
 to the action of the House in passing the resolution. "Such 
 wholesale hazarding of vast invested and property rights," it said, 
 "threw a sense of violence and trickery over the whole transac- 
 tion, as if instigated by a bearish clique intent chiefly on breaking 
 the stock market, which of course it did. Then too, the resolution 
 coupled the President's name with the attack, as if he had insti- 
 gated it — an ingenious device for redoubling the force of the 
 blow. This haste and manner of proceeding took away from the 
 accused every opportunity of self protection, violated every ves- 
 tige of justice due any company or individual whatever be the 
 charge."^^ 
 
 Such an attitude is significant, especially when the resolution 
 simply presented a request for information concerning the rela- 
 tions among certain bituminous roads. 
 
 On the following day, Mr. Gillespie introduced another resolu- 
 tion calling for more specific data. This resolution authorized the 
 President of the United States to direct the Interstate Commerce 
 Commission to discover whether common carriers doing an inter- 
 state business, or officers or employees of such carriers, own or 
 have any interest in the bituminous coal mines producing the coal 
 
 18 Cong. Rec, spth Cong., 1st Sess., p. 1702. 
 
 19 Journal of Commerce and Commercial Bulletin, January 30, 1906. 
 
 20 Commercial and Financial Chronicle, Feb. 3, 1906, p. 238. 
 
 21 The Commercial and Financial Chronicle, Feb. 3, 1906. 
 
History of L,i{Gisi<ation, 79 
 
 carried over their lines.^^ This resolution was at once referred to 
 the Committee on Interstate and Foreign Affairs, and was like- 
 wise not reported.^* 
 
 Other resolutions of like tenor followed in quick succession. 
 An element in the lower House was certainly aroused. Represen- 
 tative P. P. Campbell, of Kansas, presented a resolution applying 
 to the bituminous roads, somewhat similar to the Gillespie reso- 
 lution though broader in its scope. It found its way at once to 
 the Committee on Interstate and Foreign Commerce and did not 
 again see the light.^* Representative W. S. McNary, of Massa- 
 chusetts, appeared with an even more direct resolution addressed 
 to the President and requesting him to direct the Interstate Com- 
 merce Commission to ascertain whether the anthracite coal-carry- 
 ing roads controlled the production of anthracite coal by direct or 
 indirect ownership or control of coal mines or coal-mining com- 
 panies. The resolution requested specific information as to 
 whether such ownership or control, if found to exist, did not lead 
 to discrimination in the manner of car distribution, and ultimately 
 to forcing independent operators out of business.^' This was the 
 first resolution applying specifically to the anthracite roads and it 
 was the most direct and business-like of any of this series. It 
 was, however, lost in committee. 
 
 An amendment was introduced, several days before the passage 
 of the general rate measure then before the House. It simply pro- 
 vided that no railway official or employee should be "interested 
 directly or indirectly in the furnishing of material or supplies to 
 such (mining) company."^^ It was at once blocked, Mr. Hep- 
 burn, chairman of the Committee on Interstate and Foreign Com- 
 merce, explaining that it was agreed by the committee that no 
 amendments were to be permitted. He stated that he approved 
 of the purpose of the amendment "as an original proposition, 
 but," he added, "I know (it) will secure dissent somewhere and 
 create opposition against the bill."^^ The amendment was there- 
 fore withdrawn without coming to a vote and the general rate 
 
 22 H. Res. 260, S9th Cong., ist Sess. 
 
 23 Cong. Rec, SQth Cong., ist Sess., p. 2198. 
 
 24 H. Joint Res., loi, S9th Cong., ist Sess., p. 2705. 
 
 25 H. Res. 276, S9th Cong., ist Sess. 
 
 26 Cong. Rec, 59th Cong., 1st Sess., p. 2090. 
 
 27 Do. pp. 2256, 2257. 
 
8o The Commodities' Ci,ause 
 
 bill then pending, known as the Hepburn Bill, was passed by the 
 House without the Commodities' Clause.^* 
 
 III. Senate Discussion and Action. 
 
 The railway bill was reported out of the Senate Committee on 
 Interstate and Foreign Commerce without amendment. Senators 
 B. F. Tillman and Stephen B. Elkins, members of the committee, 
 in reporting the measure to the Senate, gave their views as to addi- 
 tional legislation necessary. The former declared that "there 
 
 should be a provision to divorce absolutely the business of 
 
 transporting freight as a public carrier and the business of pro- 
 ducing freight to be transported No public carrier engaged 
 
 in interstate commerce should be allowed to produce and trans- 
 port any article for sale," beyond such supplies as were necessary 
 for its own consumption.^* 
 
 Senator Elkins, in submitting the views of the majority of the 
 committee, declared that "The bill should compel the separation 
 of the business of railway transportation from the business of 
 manufacturing or otherwise producing the article transported." 
 The report further recommended amendments to "divorce trans- 
 portation and production by restricting public railway carriers to 
 the performance of their functions as such and restraining them 
 from entering the fields of mining and manufacturing, or in any 
 other way becoming competitors with those to whom their serv- 
 ices are offered and sold."^" 
 
 It would seem somewhat surprising in view of these expressions 
 from the two factions in the committee, that resolutions calling 
 for investigation and bills designed to accomplish the separation 
 of the business of common carriers from that of producers, should 
 be so diflficult of passage. The events of the several weeks pre- 
 ceding and the manifestations of interest discussed below, are, 
 doubtless, of importance in inducing both parties to commit 
 themselves to legislation designed to alleviate certain abuses aris- 
 ing from this joint ownership and operation. 
 
 28 Cong. Rec, SPth Cong., ist Sess., pp. 2303, 2304. 
 
 29 S. Res. 1242, Part i, p. 11, spth Cong., ist Sess. 
 
 30 S. R. 1242, 59th Cong., 1st Sess., Part 2, pp. 3-10. It should be stated 
 that the Elkins minority report was not actually presented to the Senate 
 until June 28, 1906, just one day before the final passage of the Hepburn 
 Bill (p. 9505, June 28, 1906). The report bears date of Feb. 27. 
 
History of Legislation. 8i 
 
 Some weeks after the discussion started in the House, Senator 
 Tillman presented a letter from the president of the Red Rock 
 Fuel Company, of Upshur County, West Virginia, which charged 
 that the company was unable to develop its 4,000 acres of coal 
 lands on account of the refusal of the Baltimore and Ohio Rail- 
 road to make proper connections between the tracks of the rail- 
 road and the private switches of the mining company, even though 
 the latter had agreed to pay the entire cost of making such con- 
 nections; that the Baltimore and Ohio "owned a controlling in- 
 terest in various coal companies along its line of railroad;" and 
 this railroad was engaged in marketing its own product.^^ 
 
 The Red Rock Fuel Company case had already been before the 
 Interstate Commerce Commission. The latter made an order re- 
 quiring the railway to discontinue such discriminations, allowing 
 the former one month in which to furnish the connection re- 
 quested.'^ Proceedings before the Commission in this case indi- 
 cated that the Baltimore and Ohio was controlled by the Pennsyl- 
 vania, and that the policy of the latter was to prevent competition 
 with coal mines on its own road.'^ This contention is only par- 
 tially substantiated by the report of the Commission to the Presi- 
 dent in answer to the Gillespie resolution in which it appeared 
 that the Pennsylvania System owned about $70,000,000 of the 
 $183,000,000 stock outstanding.'* 
 
 Agitation on account of the Red Rock Fuel Company letter led 
 the Governor of West Virginia to declare with reference to the 
 general situation in his state, 
 
 "that an investigation would show that the Baltimore and 
 Ohio Railroad Company is interested in the production of 
 
 coal It may be that the Pennsylvania does not legally 
 
 own a controlling part of the stock of the Baltimore and 
 Ohio Railroad Company, or the C. & O. Ry. Co., or the N. 
 & W. Ry. Co., but I have no doubt that an investigation 
 will show that the Pennsylvania Railroad Company practi- 
 cally controls these three great trunk lines which traverse 
 
 West Virginia Hence it is a fact that West Virginia 
 
 is to-day in the grasp of a railroad trust which practically 
 says what part of the state shall be developed, and what 
 shall not be developed, how much coal shall be shipped out 
 
 31 Cong. Rec, 59th Cong., ist Sess., pp. 1671-1672. 
 
 32 Decision No. 812, Vol. 11, Nov. 25, 1905. 
 
 33 Cong. Rec, 59th Cong., ist Sess., p. 1672. 
 
 34 H. Doc. 475, 59th Cong., ist Sess. 
 
82 The Commodities' Ci^ausE 
 
 of the state, to what points it shall be shipped, and 
 
 when "'= 
 
 In view of the conditions alleged to exist in West Virginia, 
 Senator Tillman stated that he would move for a Senate, or a 
 joint, investigation, if the House should fail to order the investi- 
 gation called for in the Gillespie resolution. When it appeared 
 that the House would not pass a comprehensive measure for an 
 investigation, the Tillman resolution was offered in the Senate. 
 It was a far-reaching provision, ordering an elaborate and de- 
 tailed investigation into all forms of alleged relationships sus- 
 tained by railways and railway officials toward mining interests, 
 all agreements or conspiracies among any roads looking to the 
 monopolization or the control of coal mines or coal or any other 
 traffic, and all customs and practices of granting transportation 
 facilities that appeared to be unfair or discriminatory in their 
 nature.'* 
 
 35 Letter to Sen. Tillman, Cong. Rec, 59th Cong., ist Sess., p. 2276. 
 
 36 This resolution authorized the Commission to ascertain, "First, 
 
 whether any common carrier subject to the act own or 
 
 have any interest, by means of stock ownership or otherwise in other cor- 
 porations, or in any of the coal or other products which they carry 
 
 over their. .... .lines. 
 
 "Second, whether the officers or any of the carriers or any person 
 
 charged with the duty of furnishing facilities to shippers, are 
 
 interested, by means of stock ownership or otherwise, in corpora- 
 tions, owning, operating, leasing or otherwise interested in any coal 
 
 mines or other traffic over the railroads with which they 
 
 are connected. 
 
 "Third, whether there is any contract, or conspiracy in restraint 
 
 of trade or commerce among the several states, in which any common 
 carrier engaged in the transportation of bituminous coal or other pro- 
 ducts is interested ; and whether any such common carrier monop- 
 olizes or attempts to monopolize any part of the trade or commerce 
 
 in bituminous coal, or other traffic, among the several states, or with for- 
 eign nations and if so, to what extent such carriers limit or 
 
 control directly or indirectly the output of coal mines or the price of coal. 
 
 "Fourth, If the Interstate Commerce Commission shall find that the 
 
 above facts, do exist that it report as to the effect of such 
 
 relationship upon such person or persons as may be engaged inde- 
 pendently of any other person in mining coal and shipping the same 
 
 or upon the general public. 
 
 "Fifth, That said Commission be also required to investigate and re- 
 port the system of car distribution in effect upon the several railway lines 
 engaged in the transportation of bituminous coal or other products 
 
History of Legisi^ation. 83 
 
 The Senate proceeded at once to the consideration of this reso- 
 lution. It was somewhat similar to the House resolution intro- 
 duced by Mr. Gillespie, though more specific and far broader in 
 its scope. After a brief discussion, it passed the Senate.^' 
 
 IV. House Amends and Accepts Senate Resolution. 
 
 The House Committee on Interstate and Foreign Commerce, 
 notwithstanding its record in refusing to report resolutions of this 
 nature, could not lag behind the Senate. It accordingly took an 
 advanced position by extending the general expression, "other 
 traffic," employed in the Senate draft, to include specifically "oil 
 and oil properties."^^ As thus amended it passed the House and 
 was duly concurred in by the Senate.^' 
 
 It is not improbable that the decision of the Supreme Court, 
 several days prior to this action of the House, in the case of the 
 New York, New Haven and Hartford Railroad Company against 
 the Interstate Commerce Commission, influenced the House to 
 pass a more sweeping resolution for investigation than that de- 
 manded by the Senate resolution. This case had to do with the 
 validity of a contract between the Chesapeake and Ohio, and the 
 New York, New Haven and Hartford Railroads, by which the 
 former was to sell and deliver to the latter 60,000 tons of coal at 
 $2.75 per ton from the coal mines in the Kanawha district. It 
 appears from the evidence in the case that the purchase price of 
 the coal at the mines, plus the cost of hauling from Newport 
 News to the point of delivery in Connecticut was $2.47. The 
 difference between this and the selling price left but $0.28 per ton 
 to apply to transportation charges from the mines to Newport 
 News; whereas the published tariffs called for $1.45. The court 
 would not go further than to base its decision entirely upon the 
 departure from the published rates, recognizing, however, that 
 
 and whether said carriers discriminate against shippers," or pros- 
 pective shippers" either in the matter of distribution of cars or in furnish- 
 ing facilities connected with the transportation of coal. 
 
 "Sixth, That said Commission report as to what remedy it can sug- 
 gest to cure the evils if they exist." (S. Joint Res., 32-S9th Cong., 1st 
 Sess., Cong. Rec, p. 2424, Feb. 12, 1906.) 
 
 37 Cong. Rec, spth Cong., ist Sess., p. 2431 (Feb. 12, 1906). 
 
 38 Do. p. 288s. 
 
 39 Do. pp. 2886-2888. 
 
84 The Commodities' Clause 
 
 such a construction might "render it difficult, if not impossible, 
 for a carrier to deal in commodities."*" 
 
 It was clearly demonstrated in the House debate, first that the 
 resolution was not designed to go into the coal and oil business 
 except in so far as such business entered into interstate commerce ; 
 secondly, that it was not directed against the operation of coal 
 and oil properties by carriers in so far as such operation had to do 
 with supplying fuel for the sole use of carriers engaged in such 
 operations; and thirdly, that it called for a more extensive and 
 special investigation than that employed by the Commission in 
 the usual exercise of its functions.*^ The question was not raised, 
 however, as to whether the Commission should be clothed with 
 additional powers in order to enable it to carry out a line of in- 
 vestigation understood to be more extensive than that contem- 
 plated by the original act. It seemed to be understood that a 
 more extensive use of powers already delegated could be properly 
 authorized by Congress and would not require an additional spe- 
 cial delegation of authority. 
 
 The President of the United States, in his letter of approval ex- 
 pressed in his characteristic manner very serious doubt as to the 
 efficacy of the resolution. "I have," said he, "signed it with hesi- 
 tation, because in the form in which it was passed it achieves very 
 little and may achieve nothing, and it is highly undesirable that a 
 resolution of this kind shall become law in such form as to give 
 the impression of insincerity — that is, of pretending to do some- 
 thing which really is not done." He objected first, that a part of 
 the investigation requested by the House in a resolution of Feb. 
 15, 1905, regarding the oil industry, and a further part regarding 
 the anthracite coal industry, were then under investigation by the 
 Department of Commerce and Labor, and that the results would 
 soon be ready for publication ; that the Commission would there- 
 fore not feel free on account of possible conflict in findings to 
 carry forward such investigation until after the Department of 
 Commerce and Labor should have made its report ; that such an 
 investigation as that demanded in the resolution would give "im- 
 munity from criminal prosecution to all persons who are called, 
 sworn or constrained by compulsory process of law to testify as 
 
 40 N. Y., N. H. & H. R. R. Co. vs. I. C. C, 200 U. S. 361 ; rendered 
 Feb. 19, 1906. 
 
 41 Chas. E. Townsend, Cong. Rec, spth Cong., ist Sess., pp. 2886-2888. 
 
History op Legislation. 85 
 
 witnesses;" that additional authority to administer oaths and 
 compel the attendance of witnesses should be given to the Com- 
 mission; and that a specific appropriation should be made to 
 enable the Commission to perform additional functions not con- 
 templated in the original grant/" 
 
 Congress at once set about complying with the President's 
 wishes by the introduction of a joint resolution in both the 
 House*^ and Senate.** It appeared to the leaders, however, that 
 a special appropriation was wholly unnecessary, especially in view 
 of the fact that the Commission was in communication with the 
 Committee on Appropriations with a view to submitting to Con- 
 gress an estimate of funds required together with the request that 
 such funds be provided. This seems to have been the usual pro- 
 cedure and it appeared to be the opinion of the best authorities 
 in the Senate,*^ and of the critics at large.*' This portion of the 
 resolution was, therefore, stricken out. Congress did not concur 
 with the President's views regarding special provisions in the 
 resolution to empower the Commission to enforce the attendance 
 of witnesses, to administer oaths, etc. Out of consideration for 
 him, however, and the prestige which his views would have if 
 raised in defense of a refusal to testify before the Commission, 
 Congress, after striking out the suggestion regarding a special 
 appropriation, embodied in a joint resolution the President's 
 recommendations.*' As finally agreed upon the resolution con- 
 ferred upon the Commission "the same power and authority to 
 administer oaths, to subpoena and compel the attendance of wit- 
 nesses and the production of documentary evidence, and to obtain 
 full information, which said Commission now has under the act 
 to regulate commerce" as amended by other acts including "an 
 act in relation to testimony before the Interstate Commerce Com- 
 mission."** 
 
 The popular press, of course, approved of this action. The 
 
 42 S. Doc. 256, p. 3440, SPth Cong., ist Sess. 
 
 43 H. Joint Res. 115, S9th Cong., ist Sess., Cong. Rec, p. 3655, March 9, 
 1906. 
 
 44 Cong. Rec, spth Cong., 1st Sess., p. 3669. 
 
 45 Do. pp. 3669-3674, 3851, 3852. 
 
 46 Journal of Commerce and Commercial Bulletin, March 9, 1905. 
 
 47 Cong. Rec, S9th Cong., ist Sess., pp. 387S-3876 (House) ; p. 3852 
 (Senate). 
 
 48 Cong. Rec, sgth Cong., ist Sess., p. 3875. 
 
86 The Commodities' Clause 
 
 President, by his shrewd move and bold insinuations had with 
 probable intention, given a thrust to Congress that centered the 
 attention of the entire country upon it. His vigorous language 
 was doubtless prompted by a desire to line up popular sentiment 
 behind the administration in the whole pending rate discussion, 
 with the additional reason, perhaps, of aligning himself with a 
 legislative program that might grow out of this very resolution. 
 
 Some of those who had followed closely the progress of the 
 general rate measure in the House had not noted the evolution of 
 that agitation which forced the passage of this resolution. "The 
 
 resolution was hastily compounded," said one, "and put 
 
 through both houses with little deliberation as a votive offering 
 to the bugbear of popular clamor."*^ The first part of this criti- 
 cism, at least, appears hardly justified although it expresses well 
 the popular attitude at that time. As a matter of fact it required 
 at least two months to get the measure into form and arouse public 
 and congressional interest sufficiently to pass it. The data pro- 
 duced is sufficient evidence of the eifectiveness of the resolution. 
 The only indication of haste in drafting the resolution is to be 
 found in the House amendments adding oil to the list of interests 
 to be investigated, whereas the Bureau of Corporations had al- 
 ready undertaken such an investigation. It appeared to be gen- 
 erally understood, however, that the latter investigation had more 
 special reference to discrimination in service on account of the 
 private tank cars and pipe lines owned by the Standard Oil Com- 
 pany and the special agreements maintained with railways, than 
 the direct ownership and control of oil fields or railways. 
 
 V. The Commodities' Amendment to the Pending Rate Bill. 
 
 The minority in the Senate, unwilling to await the Commis- 
 sion's report, submitted a proposal for amending the rate bill 
 pending so as to restrain any common carrier engaged in inter- 
 state commerce from engaging "directly or indirectly in the busi- 
 ness of buying and selling coal or coke, oil or oil properties, or to 
 promise, pledge, or lend its credit, or other property or thing of 
 value to another, either natural or corporate, engaged in such 
 business" or "to in any manner own, control or have any interest 
 in coal lands or properties or oil lands or properties; or to 
 monopolize any part of the trade or commerce in coal or oil, or 
 
 49 Journal of Commerce and Commercial Bulletin, March 9, 1906. 
 
History of Legislation. 87 
 
 traffic therein among the several states, or with foreign nations, or 
 to limit or attempt to control, directly or indirectly, the output of 
 coal mines or oil fields or the price of coal or the price of oil." 
 The amendment also forbade "discriminations against shippers, 
 
 or parties wishing to become shippers either in the matter 
 
 of the distribution of cars or in furnishing facilities or instru- 
 mentalities connected with receiving, forwarding, or carrying coal 
 or oil." An exception, which characterized all subsequent pro- 
 posals, was made to enable carriers to purchase and handle arti- 
 cles for their own consumption. The prohibitions were intended 
 to apply not only to the railroad as a corporation, but to any of- 
 ficers or employees of the railroad as well. Violations of these 
 prohibitions were made punishable by imprisonment from one to 
 three years.^" The proposal was laid upon the table on motion of 
 the author and was slightly amended and informally presented 
 several months later.^^ 
 
 The Clay proposals were the most drastic of any considered at 
 this time. Later amendments covered practically all these provi- 
 sions except those forbidding carriers from lending "credit or 
 other property or thing of value to another engaged in such busi- 
 ness," and the penalty of imprisonment for violation. The former 
 of these two provisions was taken verbatim from the West Vir- 
 ginia statutes.^^ 
 
 The desire of the leaders to head off serious consideration of 
 such radical proposals as were contained in the Clay amendment, 
 probably led Senator Stephen B. Elkins, Chairman of the Com- 
 mittee on Interstate Commerce, to present an amendment contain- 
 ing much more moderate prohibitions. This amendment was de- 
 signed to prevent common carriers subject to the Interstate Com- 
 merce Act from producing, manufacturing, buying, furnishing or 
 selling of coal, or coke, or any other commodity in competi- 
 tion with any shipper or producer on its line." It was tempo- 
 rarily laid on the table and reintroduced later with the modification 
 "unless authorized by its charter to do so," and presented for 
 formal discussion on May 7th.^^ 
 
 so Cong. Rec, ssrth Cong., ist Sess., p. 3038. (Submitted Feb. 27, 1906, 
 by A. S. Clay, of Georgia.) 
 
 51 Do. p. 6461 (May 7, 1906). 
 
 52 Revised Statutes of West Va., Chapter S4, Sec. 66b, Code of 1899. 
 
 53 Cong. Rec, 59th Cong., ist Sess., pp. 4375 (March 28, igo6) 645S' 
 6456 (May 7, 1906). 
 
88 Thb Commodities' Ci,ause 
 
 The author justified this modification on the ground that a law 
 calling for dissociation should not apply where carriers were 
 specifically authorized by state charters to own and operate coal 
 properties. He advanced the very serious suggestion that vested 
 interests had been created by the legalization of such joint hold- 
 ings, especially since many railroads had been incorporated for 
 the specific purpose of mining and selling coal.^* 
 
 It would appear, however, that such a condition would abso- 
 lutely nullify the prohibitions contained in the amendment in all 
 states granting such charters. Not only so, but it would have been 
 manifestly unfair to subject carriers operating in other states to a 
 federal law from which certain other states were exempt on ac- 
 count of local statutes. Such a law would undoubtedly be held 
 unconstitutional by the Supreme Court."" 
 
 The issue thus raised justified very serious consideration of 
 the practicability, the necessity, and the constitutionality of such 
 a law. The attitude of the Supreme Court in the Addyston Pipe 
 and the New York, New Haven and Hartford cases, already cited, 
 leaves little doubt as to the power of Congress to so amend an ex- 
 isting statute as to render it effectual even if such an amendment 
 should require the separation of the business of production from 
 that of transportation. Any other position would mean the sub- 
 ordinating of the power of Congress to control commerce between 
 the states, to state laws, which latter cannot be operative beyond 
 the limits of the states which enacted them. 
 
 The great extent of the joint operation of mining and transpor- 
 tation companies by railways was the very problem to be met. 
 Prohibitory laws striking at such local relationships were not 
 only advisable, but absolutely imperative, if the most flagrant 
 sort of discrimination was to be prevented. State statutes or 
 charters, permitting the local development of these abuses and 
 their extension into interstate relations, could not be held to re- 
 strain federal legislation to control abuses resulting from such 
 extension. This principle had by this time been very clearly es- 
 tablished by decisions of both federal courts and the United 
 States Supreme Court."^ 
 
 54 Cong. Rec, spth Cong., ist Sess., pp. 64SS-64S7- 
 
 55 Supra p. 
 
 56 a. Reading R. R. Co. vs. State of Penn., 15 Wallace 232, that trans- 
 portation of traffic between states is subject only to federal supervision 
 (1872). b. Wabash Ry. vs. 111., 118 U. S. SS7, that federal power extended 
 
History of Legislation. 89 
 
 Senator Elkins finally agreed to strike out the provisions ex- 
 empting interests acquired under state lawsj although he con- 
 tended for it again in subsequent debates upon his amendment.^^ 
 The Elkins amendment was further modified by a substitute 
 changing the form to meet a constitutional objection that the orig- 
 inal amendment prohibited interstate carriers from engaging in 
 certain industries, whereas it should forbid carriers which pro- 
 duce certain commodities from entering into interstate com- 
 merce.'^ 
 
 A great array of amendments and substitutes followed'' until 
 the situation became so confused that nobody, not even the secre- 
 tary, was able to state what the pending amendment was. Sena- 
 tor Tillman, in referring to the situation, said, "I found we had 
 
 reached a point where we were balled up We apparently 
 
 had got to a point where we could not do anything but talk."^" In 
 view of this confusion resulting from the multiplicity of amend- 
 ments suggested, amendments to amendments, and substitutes, 
 Senator Tillman moved to lay everything on the table, giving no- 
 tice that he would then submit an amendment.** By a vote of 
 
 to commerce within a state when that commerce effects interstate com- 
 merce (1886). c. "Minnesota Rate Case," Fed. Rep., Vol. 5, 184, estab- 
 lished limit to state jurisdiction over railways (1911). 
 
 57 Cong. Rec, 59th Cong., ist Sess., pp. 6456, 6457, 6510. 
 
 58 The amendment then read: "It shall be unlawful for any common 
 
 carrier engaged in producing, etc to engage in interstate commerce." 
 
 (Coiig. Rec, SQth Cong., ist Sess., p. 6457). Senator Elkins later dis- 
 claimed having accepted this substitute which was proposed by Senator 
 Moses P. Clapp, but the Senate thereafter regarded the Clapp substitute 
 as the Elkins amendment. (Cong. Rec, 59th Cong., ist Sess., p. 6510). 
 
 59 Some of them would specifically limit the application of the law to 
 such products as passed directly from the hand of carriers into interstate 
 commerce, thus permitting holdings and the operation of such holdings 
 by interstate carriers so long as the transactions arising therefrom are 
 confined to the state in which the shipments originate (McLaurin, Cong. 
 Rec, SQth Cong., ist Sess., pp. 6457-6459; McCumber, p. 6497, Daniels, pp. 
 6461, 6503) ; others would postpone the effectiveness of the law, the 
 periods suggested ranging from two to five years (Dryden, p. 6506; Mc- 
 Laurin, p. 6507; Dick, Gallinger, p. 7016); others would postpone any 
 action until the Interstate Commerce Commission should have made its 
 report (Dick, Bacon, Aldrich, Simmons; pp. 6405, 6498, 6499); and 
 others would reject all amendments and call upon the Committee on Inter- 
 state Commerce to formulate a bill (Overman, Tillman, Aldrich, Hopkins; 
 pp. 6500, 6512, 6552, 6558). 
 
 60 Cong. Rec, spth Cong., 1st Sess., p. 6512. 
 
 61 Do. 
 
90 The Commodities' Clause 
 
 51 to 29 the motion was declared in order. The motion to 
 table, however, was lost by a vote of 49 to 29. 
 
 On the resumption of consideration of the general rate bill, the 
 chair ruled that the Dryden amendment, placing July i, 191 1, as 
 the effective date of the Commodities' Clause, was before the 
 House. The question was put and, amidst some confusion, the 
 amendment was passed. On call for the yeas and nays. Senator 
 Dryden, anticipating objection to the long postponement carried 
 by his amendment, modified it to July i, 1909. As thus modified 
 the amendment was agreed to.*^ 
 
 This left the McLaurin substitute, as accepted by Senator El- 
 kins, before the Senate. Senator McLaurin at once withdrew the 
 proposal previously submitted and offered in its place a substi- 
 tute carrying the effective date of May i, 1908. This substitute 
 went back to the original form of the Elkins amendment in that 
 it prohibited a common carrier engaged in interstate commerce 
 from engaging in other businesses.. It was worded so as to 
 permit carriers to own and operate coal mines within states so 
 long as the products of such mines were not placed in interstate 
 transportation by sale or otherwise.*' 
 
 After somewhat lengthy parliamentary maneuvering and 
 numerous proposals, and finally the withdrawal of the McLaurin 
 substitute,®* Senator Elkins, at the instance of Senator Aldrich, 
 decided to accept the McLaurin proposal in lieu of his own 
 amendment (that is, the Clapp substitute).®" He was evidently 
 dissatisfied with the latter which he had accepted but had again 
 and again disclaimed.*® This proceeding resulted in securing the 
 support of a substantial part of the minority for the Elkins 
 amendment. 
 
 The Elkins amendment — ^that is, the McLaurin substitute, as 
 accepted and reintroduced by Senator Elkins — was then put and 
 agreed to by a vote of 67 to 6, the vote indicating the large Demo- 
 cratic support gained for the original Elkins proposal by the ac- 
 
 62 Cong. Rec, sgth Cong., ist Sess., p. 6SS2. It is interesting to note 
 that Whereas Elkins disclaimed having accepted the Clapp substitute, this 
 amendment was attached to the latter, although it was referred to con 
 tinuously as the Elkins Amendment. 
 
 63 Do. pp. 6497-6498. 
 
 64 Foot notes, 58, S9, supra p. 89. 
 
 65 Same as (63}, p. 6559-6561. 
 
 66 Do. pp. 6456, 6451, 6510. 
 
History of Legisi,ation. 91 
 
 ceptance of the McLaurin substitute.*^ Prior to the vote on 
 this measure, Senator C. A. Culberson gave expression to the 
 views of a small faction of the minority in a substitute which 
 was defeated by a large vote.*' Elaborate arguments were also 
 interposed by those concerned as to the effect of the proposed 
 measure on mineral and timber property rights.*' 
 
 After this disposition of the matter Senator Elkins presented 
 an amendment requiring railways to make adequate switching 
 connections where "reasonably practicable" with private side 
 tracks.'" This provision has some good features but leads to 
 rate complications on joint rates established between private lines 
 affecting jimctures with common carriers. We are not, however, 
 concerned with this feature but the enactment is closely connected 
 with the Commodities' Clause in that it requires certain facili- 
 ties to be provided if a reasonable amount of tonnage can be 
 furnished. 
 
 The Commodities' Clause, as agreed to in Committee of the 
 Whole, was taken up in regular order for final passage on May 
 17th. Senator Tillman introduced a letter from one, D. J. Rob- 
 erts, a coal operator, designed to show that the amendment as 
 
 67 Same as (63), p. 6570. Sen. Jos. Bailey later claimed to be the author 
 of the McLaurin Substitute, Cong. Rec, 6ist Cong., 2d Sess., p. 7211 (June 
 I, 1912). 
 
 68 This substitute made it unlawful for any carrier engaged in inter- 
 state commerce to engage directly, or indirectly, either as a corporation 
 or through officials or employees, in the production or selling of coal 
 or other commodity; and provided for a penalty of $500 per day for the 
 violation of any provision of the law. It was a more direct and far- 
 reaching measure than the Elkins amendment (Cong. Rec, SQth Cong., 
 1st Sess., pp. 6563, 6564). 
 
 69 Senators Clark and Carter, in behalf of the exclusion of copper and 
 coal (Cong. Rec, sgth Cong., ist Sess., pp. 6562-6565) ; and by Senator 
 Fulton and others in behalf pf the timber interests (Cong. Rec, sgth Cong., 
 1st Sess., pp. 6567-6568). 
 
 70 The amendment required that "any common carrier subject to the 
 provisions of this act shall promptly, upon application of any shipper ten- 
 dering interstate traffic for transportation, construct, maintain, and operate 
 upon reasonable terms a switch connection with any private sidetrack 
 which may be constructed to connect with its railroad, where such con- 
 nection is reasonably practicable, and can be put in with safety and will 
 furnish sufficient business to justify the construction and maintenance of 
 the same; and shall furnish cars for the movement of such traffic to the 
 best of its ability, without discrimination in favor or against any such 
 shipper (Cong. Rec, 59th Cong., ist Sess., p. 6570). 
 
 7 
 
92 The Commodities' Clause 
 
 it stood would not prevent railroads from controlling coal prop- 
 erties by the ownership of stock in such companies; that it 
 would not prevent officials of railways from owning and con- 
 trolling mining concerns; that it would not prevent ownership 
 of railroads by coal companies, or common ownership and 
 operation of common carriers and mining concerns. A railroad 
 under the law might very well organize a coal company under 
 another name. The latter might lease the land and pay royalty 
 on coal mined and receive preference in allotment of cars. The 
 writer suggested that the amendment should require "railroads 
 to pro-rate cars in proportion to the capacity of the operating 
 coal companies," requiring the car accountant "to keep a separate 
 
 set of books for coal cars, which shall be open to.... the 
 
 public," holding railroads responsible for any errors committed 
 by car accountants or other employees.'^ This is the best analysis 
 of the situation that appears and, as will be seen, it accurately 
 anticipates the attitude taken by the courts on the clause as en- 
 acted. 
 
 In an effort to reach the cases above suggested, Senator Till- 
 man presented an elaborate substitute. It was designed to pre- 
 vent any interstate carrier from owning the product carried;" 
 from having an interest, directly or indirectly, in the production 
 of commodities carried f^' from buying or selling such commodi- 
 ties f* from permitting more than ten per cent of its stock from 
 being owned by those interested in the buying or selling or mining 
 of such articles. This appears to be the most practical amend- 
 ment presented. It is specific and definite. It does not leave the 
 question of stock ownership in doubt. It was on this point un- 
 doubtedly too sweeping to be accepted by the Senate, and it failed 
 of passage. 
 
 The same author then proposed to amend the bill by adding, 
 "by partnership, stock ownership, or any arrangement whatso- 
 ever." This was likewise defeated. It is very significant that 
 a direct proposal to prevent railroads from owning stock in 
 mining concerns should be voted down; but this was a more 
 radical measure than that immediately preceding, and it was 
 further complicated by the expression "or any arrangement what- 
 
 71 Cong. Rec, sgth Cong., ist Sess., pp. 7011-7012. 
 
 72 Do. p. 7012. 
 
 73 Do. p. 7012. 
 
 74 Do. p. 7014. 
 
History ot Legislation. 93 
 
 soever." Since the provision permitting carriers to own ten per 
 cent stock in mining concerns could not be put through, a less 
 radical, rather than a more radical, proposal should have been 
 made. This action was referred to in the decision of the Supreme 
 Court which denied the claim of the government that stock own- 
 ership constituted such an interest as was contemplated in the 
 law.^' 
 
 An urgent effort to limit the application of the law to carriers 
 "whose principal business is that of a common carrier," was un- 
 successful.''* With little objection, however, an amendment to 
 exclude "timber and the manufactured products thereof," was 
 accepted." This modification was permitted on the plea that 
 many lines had been constructed for the specific purpose of 
 hauling timber to connecting points. The same argument of 
 course could be applied to many coal or other mineral roads. 
 
 The entire clause, as thus amended, and the order otherwise 
 slightly changed, was now agreed to.''' As passed by the Senate, 
 the amendment read as follows : 
 
 "From and after May first, nineteen hundred and eight, 
 it shall be unlawful for any common carrier to transport 
 from any state, territory, or district of the United States, 
 or to any foreign country, any article or commodity, other 
 than timber and the manufactured products thereof, man- 
 ufactured, mined, or produced by it, or under its authority, 
 or which it may own in whole, or in part, or in which it 
 may have any interest direct or indirect except such arti- 
 cles or commodities as may be necessary and intended for 
 its use in the conduct of its business as a common car- 
 rier."'» 
 
 VI. Consideration in Conference. 
 
 The bill as passed by the Senate now went to the House. All 
 the Senate amendments were promptly disagreed to and a con- 
 ference ordered.*" The conference was returned a third time be- 
 fore an agreement could be reached. 
 
 75 213 U. S., p. 414. 
 
 76 S. H. Piles, S9th Cong., ist Sess., pp. 7015, 7016, 7017. 
 
 77 Cong. Rec, spth Cong., ist Sess., pp. 7012, 7015. 
 
 78 Do. p. 7017. 
 
 79 Paragraph S, print of May 21, igo6, containing Senate Amendments. 
 
 80 Cong. Rec, Spth Cong., ist Sess., pp. 7187, 7428, 7433. House con- 
 ferees, Hepburn, Sherman, and Richardson, were appointed to confer with 
 Senate conferees, Tillman, Elkins and Cullom (House, Cong. Rec, spth 
 Cong., 1st Sess., p. 7433; Senate, pp. 7528-7S29). 
 
94 The CoMMODitiEs' Ci,ause 
 
 The House majority would not permit a lengthy discussion on 
 the several conference reports. The Senate discussion, however, 
 was lengthy and was concerned for the most part with the Com- 
 modities' and Pass clauses. No other single feature of the bill 
 evoked so much feeling toward the closing days and so many 
 charges of improper influences as the question of separating the 
 business of production from that of consumption. 
 
 After the amendment and passage of the bill by the Senate and 
 the first conference report, the discussion centered very largely 
 around the propriety of including pipe lines carrying oil from 
 one state into another, under the provisions of the Commodities' 
 Clause. This was one of the general provisions of the rate bill.*^ 
 Those opposing such inclusion represented themselves in every 
 case as being concerned about the independent producer ; so also 
 those favoring such treatment of pipe lines claimed to be repre- 
 senting the independents. It is impossible from evidence con- 
 tained in the Congressional Record to determine the true at- 
 titude of independent oil producers and refiners toward this 
 question. 
 
 Senator Tilhnan submitted a large number of letters from in- 
 dependent refiners urging that pipe lines be required to carry 
 crude oil for hire; declaring that they were forced to sell their 
 crude oil at very low rates to the Standard, and in many cases 
 had to go out of the business. Senator Long presented just 
 as many from independents claiming exactly the opposite. It 
 was charged by Senators and in letters from other independents 
 that the Standard was at the back of practically all those let- 
 ters and telegrams purporting to represent independents as op- 
 posed to including pipe lines in the Commodities' Clause. Evi- 
 dence at hand, as brought out in the report of the Commission and 
 that of the Department of Commerce and Labor, indicates very 
 strongly that the independents preferred regarding pipe lines as 
 
 8i The amendment as accepted by the Senate was as follows : That the 
 provisions of this act shall apply to "Any corporation or any person or 
 persons engaged in the transportation of oil or other commodity, except 
 water, and except natural or artificial gas, by means of pipe lines and 
 partly by railroad, or partly by pipe line and partly water, who shall be 
 considered and held to be common carriers within the meaning and pur- 
 pose of this act and to " any common carrier or carriers, etc. (Para- 
 graph I, Print of May 21, igo6, containing Senate Amendments; discus- 
 sion, Cong. Rec, 59th Cong., ist Sess., pp. 6363-6373; 6998-7009). 
 
History oi L,egisi,ation. 95 
 
 common carriers and bringing them under the law.'* These re- 
 ports demonstrate conclusively that the monopoly of a large part 
 of the oil business was maintained by the Standard Oil through 
 the ownership of pipe lines. 
 
 VII. Final Form of the Commodities' Clause. 
 
 Senator Tillman, one of the Senate conferees, was unable to 
 secure the retention of pipe lines under the provisions of the 
 Commodities' Clause. The exclusion was accomplished by chang- 
 ing the words "common carrier" to "railroad," so that the clause, 
 as finally agreed upon in conference and concurred in by the 
 two Houses, read as follows : 
 
 "From and after May first, nineteen hundred and eight, 
 it shall be unlawful for any railroad company to transport 
 from any state, territory, or the District of Columbia, to any 
 other state, territory, or the District of Columbia, or to any 
 foreign country, any article or commodity other than tim- 
 ber and the manufactured products thereof, manufactured, 
 mined or produced by it, or under its authority, or which 
 it may own in whole or in part, or in which it may have an 
 interest, direct or indirect, except such articles or commodi- 
 ties as may be necessary and intended for its use in the 
 conduct of its business as a common carrier."'* 
 
 It may be seen that the clause as finally enacted is somewhat 
 inconsistent with the general provisions of the new law since 
 the latter held pipe lines to be common carriers, and as such, 
 subject to the provisions of the Act. 
 
 VIII. Attempts to Postpone the Effectiveness of the Law. 
 
 The time approached for the law to go into effect, but none of 
 the roads appeared to have taken steps to bring their operations 
 into harmony with its provisions. No official notice of im- 
 munity from penalties had been held out so far as appears from 
 the records. With a single exception, there seems to have been 
 a feeling, however, that the roads would be given an opportunity 
 to adjust their affairs in accord with the statute if the latter 
 
 82 R. R. Doc. 814, SQth Cong., ist Sess. (Report of Commissioner of 
 Corporations) ; also H. R. Doc. 606, spth Cong., ist Sess. (Report of In- 
 terstate Commerce Commission on Oil). 
 
 83 Final Print of H. R. 12987, Sec. i, Paragraph S, 59th Cong., ist Sess. 
 
96. The Commodities' Ci,ause 
 
 should be upheld by the courts. The Attorney General seems to 
 have permitted this view to be held without challenging the cor- 
 rectness of it. 
 
 There was also a very decided sentiment among the Commis- 
 sioners, Congressmen, and others, favoring a postponement of the 
 application of the statute. On March 31st, 1908, Senator Elkins, 
 in behalf of the Committee on Commerce, introduced a joint res- 
 olution suspending the effectiveness of the law until May ist, 
 1910, that is, so far as the penalty was concerned.** He received 
 a request from the Attorney General, however, to so modify 
 the proviso as to confer specific authority upon the Department 
 of Justice to institute civil suit to enforce the law, reserving the 
 right of the parties to the suit to appeal from any decision that 
 might be rendered. This modification to the Committee's resolu- 
 tion was accepted by the Senate.*" 
 
 Much influence was brought to bear to secure the passage of 
 this resolution. The Interstate Commerce Commission urgently 
 recommended it.** In a letter of March 12th, in answer to an 
 inquiry from the President, Chairman Knapp stated for the 
 Commission that few railroads had disposed of their mining in- 
 terests; that the panic from which the country. was just begin; 
 ning to recover had made it extremely difficult to sell such proper- 
 ties advantageously, especially in view of certain technicalities 
 arising with respect to those properties secured many years be- 
 
 84 The Committee on Interstate Commerce, in reporting the resolution, 
 changed the efifective date in one place from May i, 1910, to Jan. i, 1910, 
 thus causing ambiguity by failing to make the change in both places where 
 the date occurred. The resolution as presented by the committee to the 
 Senate read as follows: "Resolved that the failure of any railroad com- 
 pany, prior to May i, 1910, to comply with that provision of Sec. i, com- 
 monly known as the Commodities' Clause, shall not be held to subject the 
 railroad company so violating said provision prior to Jan. i, 1910, to the 
 
 penalties, etc ..now provided by law for violation of said act or 
 
 any act amendatory thereof Provided, that nothing in this resolution 
 
 shall be construed to prevent the bringing of any civil suit or proceeding 
 for the enforcement of said provision or the prevention of violation 
 thereof." (S. Joint Res. 74, 6oth Cong., ist Sess., pp. 41, 43, 48, 95.) The 
 ambiguity in dates was remedied by amendment, Cong. Rec, p. 5537 ; and 
 the proposal was further amended to limit its application to the Com- 
 modities' Clause, Cong. Rec. 9, pp. 5533, 6194. 
 
 85 Cong. Rec, 6oth Cong., ist Sess., p. 5538. 
 
 86 Do. p. SS33 (lyctter appeared in Sen., May 8, 1908; S. Doc. 465). 
 
History o? Legislation. 97 
 
 fore the passage of the law. He believed, therefore, that the time 
 should be extended, but not longer than January i, 1910.*^ 
 
 The opinion of Mr. Glasgow, formerly attorney for the Com; 
 mission, was doubtless responsible for this attitude on the part 
 of the Commission. Early in March he had informed members 
 of the Commission that it would be very disastrous to many of 
 the railroads of the country if the law should go into effect at the 
 time designated, giving practically the same reasons later given 
 by the Commission in answer to the President's inquiry.*^ 
 
 Mr. Glasgow was, at this time, attorney for most of the coal 
 mines in the Pocahontas Flat Top Coal Field in West Virginia. 
 These mines, he stated, were operated under lease from the 
 Pocahontas Coal and Coke Company. The entire capital stock 
 of the coal company was owned by the Norfolk and Western 
 Railway. He maintained that these mines, and a large number 
 of independent mines, were absolutely dependent upon the Nor- 
 folk and Western to market their coal, and the enforcement of 
 the law at this time would be so disastrous to the Norfolk and 
 Western as to disrupt it, thus depriving the mines of transporta- 
 tion facilities.** 
 
 In the Senate, Senator Elkins stated substantially the same 
 reasons in support of his resolution to postpone as were advanced 
 by Mr. Glasgow and repeated by the Commission.®" 
 
 The same resolution was introduced in the House on April 
 30th, by Representative Hubbard, of West Virginia. It was 
 referred to the Committee on Interstate and Foreign Commerce.*^ 
 For reasons not appearing in the record, the resolution did not 
 come to a vote in either the Senate or the House.'^ No further 
 action was taken for postponement. 
 
 87 S. Doc. 465, 60th Cong., 1st Sess. 
 
 88 Do. 
 
 89 Glasgow favored postponing the effectiveness of the law until May 
 I, 1910, with the proviso, "if the public interest demanded it, the limit 
 might be further extended to May i, 1912," S. Doc. 465, p. S, 6oth Cong., 
 1st Sess. 
 
 90 Cong. Rec, 60th Cong., ist Sess., pp. 5534, 5535. 
 
 91 H. Joint Res. 175, 6oth Cong., ist Sess. 
 
 92 An unsuccessful effort has been made to ascertain reasons for the 
 refusal to permit this proposal to be voted upon. 
 
CHAPTER IV. 
 
 OPERATION OF THE LAW— COURT INTERPRETA- 
 TION. 
 
 I. Extent of Compliance with the Statute. 
 
 The Senate passed a resolution on May 6, 1908, calling upon 
 the Commission for information as to whether roads were obey- 
 ing the Commodities' Clause, specific reference being made to 
 the Western Maryland.^ It will be remembered that the law 
 went into effect May i, 1908. The Commission replied that it 
 had no official knowledge, but it did not believe, except in a few 
 cases, that railway corporations had disposed of their properties. 
 The Commission had communicated by 'phone with the Western 
 Maryland officials and understood from the conversation that this 
 railway had not complied with the law, and so informed the 
 Senate.^ 
 
 Several days later, the Commission sent another communica- 
 tion to the Senate, including a letter from B. F. Bush, receiver 
 for the Western Maryland. The letter stated that the Commis- 
 sion was in error in understanding that the Western Maryland 
 was not complying with the law, and proceeded to explain in 
 great detail the conditions forcing the Western Maryland into 
 receivership and the resulting action of the court in setting aside 
 revenues from the coal properties to meet the mortgage indebted- 
 ness. The court had, accordingly, placed the properties in the 
 hands of a trust company as security for the mortgage and had 
 ordered that the accounting system of the coal companies be kept 
 separate and apart from that of the railroad.* In a letter from 
 the President of the road to the directors, recommending the 
 receivership, it was declared that "the preservation of the coal 
 revenues of the company from the adverse conditions of the 
 commodity clause of the rate bill, was of the utmost importance 
 to the interests of the railway."* The receivership was recom- 
 
 1 S. Res. 177, 60th Cong., ist Sess. 
 
 2 S. Doc. 46s, 60th Cong., 1st Sess. 
 
 3 S. Doc. 478, 60th Cong., 1st Sess. 
 
 4 Do. p. 3. I 
 
 98 
 
Operation ot the Law. 99 
 
 mended primarily to evade the effects of the law, "pending a 
 test of the constitutionality of the law,"" and it specifically ar- 
 ranged for the return of the properties if the law should be held 
 unconstitutional. 
 
 The Bowling Green Trust Company, which had been appointed 
 as trustee, declared as a basis for its application to the courts 
 the necessity of "preserving the integrity" of such of the rail- 
 road's properties as were covered by the mortgage. It requested 
 the court to issue an injunction to prevent the railroad from 
 transferring or selling any of the property covered by the mort- 
 gage. The receivership was ordered and the receiver authorized 
 "to prosecute or defend in any case pending before any court or 
 commission involving the securities of the corporation."' By this 
 action, the Western Maryland effectually shut off immediate pro- 
 ceedings in the court on account of its coal interests. 
 
 II. Civil Action of Government in the Circuit Court. 
 
 On the refusal of Congress to postpone the effectiveness of 
 the law the Department of Justice brought suit against certain 
 of those carriers that appeared to be violating it. Bills in equity 
 were filed (June 5, 1908) in the Circuit Court for the Eastern 
 District of Pennsylvania to enjoin the so-called anthracite coal 
 roads from carrying in interstate commerce coal produced by 
 <^hem.^ At the same time petitions for mandamus were filed pray- 
 ing for an order to require these railways to desist from certain 
 practices and comply with the Commodities' Clause. 
 
 In the bills in equity and the petitions for mandamus, specific 
 allegations were made regarding the six railway corporations 
 charged with violating the Commodities' Clause. For the most 
 part, these were similar to the facts already presented regarding 
 the several carriers alleged to have other than traffic interests.' 
 We shall here present a brief summary of the charges upon 
 which the Government's claim rested.* 
 
 5 S. Doc. 478, 60th Cong., I Sess., p. 5. 
 
 6 S. Doc. 46s, 60th Cong., ist Sess., p. 23. 
 
 7 The roads against which this action was taken were as follows : The 
 Pennsylvania, the Delaware, Lackawanna and Western, the Central of 
 New Jersey, the Lehigh Valley, the Erie, and the Delaware and Hudson. 
 
 8 Chapter IL Sections 3, 4, and 5. 
 
 9 Relations charged appear as footnotes 213 U. S. 391-398. 
 
100 The Commodities' Clause 
 
 The Pennsylvania,^" Delaware and Hudson,^^ Erie,^^ Central, 
 of New Jersey,^^ and Lehigh Valley,^* were alleged to control 
 large mining interests through the ownership of all or a majority 
 of the stock of certain mining corporations. It was declared that 
 these roads controlled the election of all the directors and man- 
 agers in such mining companies ; that the officials were also of- 
 ficers in the said railway companies respectively; that all the 
 mines (see footnotes lo, ii, 12, 13, 14, appended) were producing 
 anthracite coal which was carried for sale and delivery by the 
 said railways into interstate commerce; that the railways were 
 therefore virtually miners and carriers and sellers of coal in 
 interstate commerce; and that such mining and selling consti- 
 tuted such an interest, "direct or indirect," in mining operations 
 as the Commodities' Clause was designed to prohibit; and that 
 the carriers were therefore operating in violation of the law. 
 The Government brought special charges against the Delaware, 
 Lackawanna and Western,^' and the Delaware and Hudson" on 
 account of the alleged direct holding and operation of certain 
 coal mines in violation of the Commodities' Statute. 
 
 In answer, the railroads replied, that the property interests in- 
 volved and the acts growing out of such acquisitions had been 
 properly authorized through state charters granted prior to 1869 
 and later; that the ownership of stock or other relationships 
 charged were not equivalent to owning coal lands or mines, but 
 that the titles remained in the companies respectively in their 
 corporate capacity; that the interests resulting did not there- 
 fore constitute such a legal interest, "direct or indirect," as the 
 statute was designed to prevent. The defendants frankly ad- 
 mitted that officers and directors of railways frequently held or 
 
 10 Summit Branch Mining Co., Susquehanna Coal Co., Mineral R. R. 
 and Mining Co. 
 
 11 Hudson Coal Co., Northern Coal and Iron Co., and the Jackson Coal 
 Co. 
 
 12 Pennsylvania Coal Co., Hillside Coal and Iron Co. 
 
 13 Lehigh and Wilkes-Barre Coal Co. 
 
 14 New York & Middle Coal Field R. R. and Coal Co. of Pennsylvania ; 
 Coxa Bros. & Co., Locust Mountain Coal and Iron Co., minority interest 
 in Highland Coal Co., and the Packer Coal Co. 
 
 15 About 15,000 acres owned directly in Wyoming and Lackawanna Val- 
 leys. 
 
 16 Holdings in counties of Luzerne, Lackawanna, Susquehanna and 
 Wayne. 
 
Operation op the hAVf}:, \ '•^'' ^''H0t 
 
 \. '—- "", v -^ 
 
 had held official positions in mining companies wmi^-itiia^was 
 
 the property of the railway in question. Chief reliance, however, 
 
 was placed upon the plea that the statute was unconstitutional in 
 
 that, ( I ) it was a prohibition, and not a regulation, of commerce ; 
 
 (2) that it took property without due process of law and was 
 
 contrary to the Fifth Amendment; (3) that it was a case of 
 
 class legislation in that it excluded timber and its products ; and 
 
 (4) that the penalty for violation was so heavy as to destroy 
 
 property and franchises which had been created through many 
 
 years under the law. The Delaware and Hudson presented the 
 
 additional argument that even if it were primarily a railway 
 
 subject to the interstate commerce law, it could not be affected 
 
 by the statute in question because all its coal was sold before 
 
 transportation began.^^ 
 
 The Circuit Court dismissed the bills in equity and denied 
 the petitions for mandamus. In taking this action the court 
 held, first, that the clause was unconstitutional and in violation 
 of the Fifth Amendment ; secondly, that it does not come proper- 
 ly within the commerce clause of the constitution since it abso- 
 lutely excludes certain parties from participating in interstate 
 commerce, and to this extent surpasses the power of Congress 
 to regulate; thirdly, that many railways acting under state au- 
 thority had become owners and operators of coal properties, and 
 that the Commodities' Clause interfered with the vested rights 
 so established; and fourthly, that the power granted under the 
 commerce clause of the Constitution is a limited power and does 
 not extend to policing the state.^^ 
 
 The problem of vested rights seems to have been at the bot- 
 tom of the decision of the Circuit Court. The leading query set 
 up for answer was as to the constitutionality of the clause in mew 
 of its destructive effect upon property-rights under state lams. 
 Little attention was given to the power of Congress to enact such 
 a statute as a regulation of commerce; at least it made the con- 
 stitutionality of such action rest almost entirely upon the inter- 
 ference of the law enacted with certain property rights existent 
 at the time of the passage of the law. 
 
 The opinion was dissented from by Judge Buffington on the 
 ground "that the divorce of the dual relation of public carrier 
 
 17 213 U. S. 393- 
 
 18 164 Fed. Rep., 213-251. 
 
102 The Commodities' Ct,AusE 
 
 and private transporter is a regulation of commerce," and there- 
 fore within the power of Congress to enact.^" The dissenting 
 opinion put aside the court's view of the prior act of a state in 
 authorizing carriers to engage in certain other activities as re- 
 stricting the power of Congress to regulate such carriers in so 
 far as they entered into interstate commerce. "In effect," said 
 Judge Buffington, "it would place in each state a veto on the 
 power to regulate conferred on the United States."' 
 
 "20 
 
 III. The Commodities' Clause Before the Supreme Court. 
 
 From the judgment of the Circuit Court in dismissing the bill 
 in each of the six cases, the Government appealed to the Supreme 
 Court, assigning certain errors in each case."^ The six cases 
 were argued together before the Supreme Court on January 
 19-20, 1909. The following facts were recognized by the counsel 
 for both sides: (i) That certain of the railways owned mines 
 outright, operated them and transported the product in inter- 
 state commerce; (2) that others owned, as well as leased, coal 
 mines ; and (3) that others owned stock in coal mines, but did 
 not operate them directly. As in the other cases, however, the 
 carrier owning the stock controlled the transportation and sale 
 of the product.^^ 
 
 Perhaps the Government contended for a more radical inter- 
 pretation of the law than the apparent intent of Congress justi- 
 fied. It not only insisted that the transportation in interstate 
 commerce of coal produced directly or by authority of the rail- 
 way in question was in violation of the law, but also that the law 
 forbade any interstate carrier to transport in interstate commerce 
 a commodity produced by a concern in which the railroad held 
 stock without any regard to the extent of such holdings^ The 
 
 19 164 Fed. Rep., 251-259. 
 
 20 Do. 252. 
 
 21 Transcript of Record (Print) : S. C. of the U. S., Oct. Term, 1908; 
 re Penn. R. B. No. 563, pp. 18-19, and No. 56ft pp. 15-16; re Del. & Hud- 
 son, No. 559, pp. 74-75, and 565, pp. 70-71 ; re Erie Railroad, No. 560, pp. 
 204-205 and 566, p. 200; re Central of New Jersey, No. 561, pp. 84-85 and 
 567, pp. 80-81 ; Delaware and Lackawanna and Western, No. 562, pp. 74- 
 75 and 568, pp. 24-25 ; re Lehigh Valley, No. 564, pp. 94-9S, and 570, pp. 
 89-90. 
 
 22 213 u. s., 392-399. 
 
 23 Do. 406. 
 
Operation of the Law. 103 
 
 Government therefore contended that all such coal properties 
 or stock in coal companies should be disposed of. 
 
 The Supreme Court put aside the claim that one road (the 
 Delaware and Hudson) was primarily a coal company.^* It also 
 put aside the leading contention of the lower court as to "inter- 
 ference" with "vested" rights, maintaining that the power of 
 Congress to regulate commerce is "ever enduring" and that 
 this power "must remain free from restrictions and limitations 
 arising or asserted to arise by state laws," since any other con- 
 struction would subject federal acts of regulation to the veto of 
 the states. The Supreme Court also conceded that the require- 
 ment of dissociation might very properly be regarded as an 
 act of regulation,^^ but that such an issue did not seem to be pre- 
 sented by the cases in hand. It declared, however, that the 
 construction demanded by the Government would necessitate the 
 consideration of the following "grave" constitutional questions: 
 
 "(i) Whether the power of Congress to regulate com- 
 merce embraces the authority to control or prohibit the 
 mining, manufacturing, production or ownership of an 
 article or commodity, not because of some inherent quality 
 of the commodity, but simply because it may become the 
 subject of interstate commerce. (2) If the right to regu- 
 late commerce does not thus extend, can it be impliedly 
 made to embrace subjects which it does not control, by for- 
 bidding a railroad company engaged in interstate com- 
 merce from carrying lawful articles or commodities, be- 
 cause at some time it had manufactured, mined, produced, 
 or owned them ?" 
 
 It may properly be inquired in this connection as to whether 
 the power to regulate embraces the authority to prohibit such 
 antecedent mining, manufacturing, production or ownership of 
 an article or commodity "simply because it may become the sub- 
 ject of interstate commerce," or because such manufacturing, 
 producing, etc., in conjunction with the function of interstate 
 transportation, tends to the creation of a monopoly of a com- 
 modity or commodities entering into interstate commerce. The 
 answer to this inquiry seems clearly implied in the words of the 
 court, "the power to regulate commerce possessed by Congress 
 is in the nature of things ever enduring, and therefore the right 
 
 24 213 U. S. 392-399, 418. 
 35 Do. 405-406 . 
 
I04 Tne Commodities' Clause 
 
 to exert it to-day, to-morrow and at all times in its plenitude 
 must remain free from restrictions and limitations arising or as- 
 serted to arise by state laws, whether enacted before or after 
 Congress has chosen to exert and apply its lawful power to 
 regulate."^* 
 
 The second inquiry, involving the constitutionality of the 
 Government's claim assumes an answer to the first in the negative 
 although the court conceded for the purpose of this discussion 
 "that the power of Congress to regulate commerce can be con- 
 stitutionally so exerted as to compel a railroad company engaged 
 in interstate commerce to dissociate itself in interest from the 
 commodities which it transports in interstate commerce, even 
 although by existing state laws the railroad company may have a 
 lawful right of ownership or association with the commodity 
 which the regulation affects.^^ 
 
 The Supreme Court decided to waive consideration of these 
 questions and confine its attention to such a reconciliation of the 
 several features of the statute as would not necessitate passing 
 upon those constitutional phases involved in the Government's 
 contention. It then turned its attention to the two separate 
 classes of prohibitions: (i) the transportation of a commodity 
 which the carrier has produced or which has been produced under 
 its authority; and (2) the transportation of a commodity which 
 the carrier owns in whole or in part, or in which it has an in- 
 terest, direct or indirect. The first class of prohibitions, if ac- 
 cepted as the meaning of the law, would prevent carriage whether 
 the article in question is owned or not at time of carriage ; where- 
 as the second class would prevent carriage if the article in ques- 
 tion is owned by the carrier or possesses interest for the car- 
 rier. The court in proceeding deduced the "less radical of the 
 two prohibitions" as attaining the result intended by Congress. 
 
 Let us look more closely into this method of interpretation. 
 The first and second prohibitions forbid a railroad to transport 
 in interstate commerce "any article or commodity, other than 
 timber. . . .manufactured, mined, or produced by it, or under its 
 authority" without regard to its ownership at the time they are 
 presented for carriage; and the second, forbids such railroad 
 from transporting any commodity which it "may own in whole 
 
 26 213 U. S. 404. 
 
 27 Do. 
 
Operation ot the Law. 105 
 
 or in part, or in which it may have an interest, direct or indirect" 
 without regard to the origin of such commodity prior to its pre- 
 sentation for carriage. 
 The court very properly declared that the first two 
 
 "are, if literally construed, not confined to the time when 
 a carrier transports the commodities with which the pro- 
 hibitions are concerned, and hence the prohibitions attach 
 and operate upon the right to transport the commodity 
 because of the antecedent acts of manufacture, mining, 
 or production. Certain also is it," said the court, "that 
 the two prohibitions concerning ownership, in whole or 
 in part and interest, direct or indirect, speak in the pres- 
 ent and not in the past; that is, they refer to the time 
 of the transportation of the commodities. These last 
 prohibitions, therefore, differing from the first two, do 
 not control the commodities if at the time of the trans- 
 portation they are not owned in whole or in part by the 
 transporting carrier, or if it then has no interest, direct or 
 indirect, in them."^' 
 
 The court follows this very accurate exposition of the statute 
 with an argument to prove that the provisions are self-annihi- 
 lative : 
 
 "If the first two classes. . . .be given their literal mean- 
 ing, and therefore be held to prohibit, irrespective of the 
 relation of the carrier to the commodity at the time of 
 transportation, and a literal interpretation be applied to 
 the remaining propositions .... thus causing them only 
 to apply if such ownership and interest exist at the time 
 of transportation, the result would be to give the statute 
 a self-annihilative meaning."^' 
 
 The court declares that the situation presents a dilemma, (i) 
 in prohibiting the carriage of commodities manufactured, mined, 
 or produced by the carrier, and (2) permitting the carriage if 
 the commodities presented were sold by the carrier, before their 
 actual receipt for transportation: "The consequence, therefore, 
 would be that the statute, because of an immaterial distinction be- 
 tween the sources from which ownership arose, would prohibit 
 transportation in one case and would permit it in another like 
 case." 
 
 The construction of the statute giving rise to this interpreta- 
 
 28 213 U. S. 408, 409. 
 
 29 Do. 409, 410. 
 
io6 The Commodities' Clause 
 
 tion was strongly defended in the Senate by those who were re- 
 sponsible for drafting it. It was maintained that the two sets 
 ol prohibitions were not contradictory since the statute did not 
 commission the carrier to do one thing that it forbade in another 
 part of the same instrument. Senator Bailey declared that the 
 so-called defect "was nothing more than a failure to include a 
 certain class of cases within the prohibitions of the statute," and 
 that such cases were not included because it was not the custom 
 of railways to enter into the open market and buy coal and then 
 sell it prior to receiving it for transportation.*' 
 
 The explanation given by Senate leaders appears very reason- 
 able since the problem of the railway monopoly of the coal trade 
 has been threatened, not through the purchase and sale of coal 
 by railways prior to the act of transportation, but through the 
 joining of the functions of producer, transporter and seller under 
 a single directive policy. As already shown, by far the larger 
 part of coal tonnage in the anthracite fields accrues, not from 
 such coal as is bought and sold prior to the act of transportation, 
 but from mines in which the carrier has an interest. For this 
 reason it is difficult to understand why the court selected that 
 portion of the clause which might be interpreted to apply only to 
 exceptional cases in preference to that portion covering those cus- 
 tomary practices and relationships which were held to be so rep- 
 rehensible and which it was the spirit of the law to prohibit 
 
 When the court had settled upon the so-called latter prohibi- 
 tions of the clause as expressing the real intent of Congress it 
 proceeded to interpret the meaning of the key words "any inter- 
 est, direct or indirect." 
 
 "The contention of the Government," said the court, 
 "that the clause forbids a railroad company to transport 
 any commodity manufactured, mined or produced, or 
 owned in whole or in part, etc., by a bona fide corpora- 
 tion in which the transporting carrier holds a stock in- 
 terest, however small, is based upon the assumption that 
 such prohibition is embraced in the words we are con- 
 sidering. The opposing contention, however, is that in- 
 terest, direct or indirect, includes only commodities in 
 which a carrier has a legal interest, and therefore does 
 not exclude the right to carry commodities which have 
 
 30 6ist Cong., 2d Sess., pp. 7211-7218. In our discussion of this point 
 we acknowledge our indebtedness to the able argument made in the Sen- 
 ate in defense of the wording of the clause. 
 
Operation of the Law. 107 
 
 been manufactured, mined, produced, or owned by a 
 separate and distinct corporation, simply because the 
 transporting carrier may be interested in the producing, 
 etc., corporation as an owner of stock therein. If the 
 words in question," reasoned the court, "are to be taken 
 as embracing only a legal or equitable interest in the 
 commodities to which they refer they can not be held to 
 include commodities manufactured, mined, produced, or 
 owned, etc., by a distinct corporation merely because of 
 a stock ownership of the carrier. . , . .The contention of 
 the government substantially rests upon the assumption 
 that unless the words 'directly or indirectly' be given the 
 meaning contended for, they are without significance."*^ 
 The Supreme Court concluded, therefore, "It may well 
 be that the very object of the provision was to reach and 
 render impossible the successful emplo3mient of meth- 
 ods of the character referred to," but that they were 
 constrained to conclude that such was not the case in view 
 of the action of the Senate, where the amendment origi- 
 nated, in rejecting specific proposals that the clause em- 
 brace stock ownership, and likewise an amendment "de- 
 claring that interest, direct or indirect, was intended. . . . 
 to embrace the prohibition of carrying a commodity man- 
 ufactured, mined, produced, or owned by a corporation in 
 which a railroad company was interested as a stock- 
 holder."^^ 
 
 The court did not consider that an interest expressed by stock 
 ownership constituted such a legal interest as was intended to be 
 prohibited by words "any interest, direct or indirect," thus prac- 
 tically invalidating that portion of the clause selected as repre- 
 senting the true intent of Congress. 
 
 The Attorney General suggested that the "radical effect of the 
 law could be assuaged by limiting its prohibitions so as to cause 
 them to apply only so long as the commodities are in the hands 
 of the carrier or its first vendee." The court replied, however, 
 that "no such limitation is expressed in the statute and to engraft 
 it would be an act of pure judicial legislation."^' 
 
 Notwithstanding the court's rejection of a proposal limiting 
 the prohibitions of the statute to the carrier and first vendee, the 
 purport of the final interpretation was to modify the effect of the 
 statute still further than counsel suggested, by applying the pro- 
 
 31 213 U. S. 413- 
 
 32 spth Cong., 1st Sess., pp. 7012-7014; 213 U. S. 413. 414. 
 
 33 213 U. S. 406. 
 
 8 
 
io8 The Commodities' Ci:,ausB 
 
 hibitions only to such commodities as are owned by the carrier 
 at the time of carriage. This is clearly brought out in the court's 
 final interpretation of the entire statute. In summing up, the 
 court said: 
 
 "We then construe the statute as prohibiting a rail- 
 road company engaged in interstate commerce from car- 
 rying articles or commodities under the following cir- 
 cumstances and conditions : (a) when the article or com- 
 modity has been manufactured, mined, or produced by 
 a carrier or under its authority, and at the time of trans- 
 portation the carrier has not, in good faith before the 
 act of transportation, dissociated itself from such article 
 or commodity; (b) When the carrier owns the article 
 or commodity to be transported in whole or in part ; (c) 
 When the carrier at the time of transportation has an 
 interest, direct or indirect in a legal or equitable sense in 
 the article or commodity, not including therefore, articles 
 or commodities manufactured, mined, produced or own- 
 ed, etc., by a bona fide corporation in which the railroad 
 is a stockholder."^* 
 
 As thus construed the statute was held to be constitutional. It 
 may readily be seen that this interpretation goes beyond the limi- 
 tation of the prohibitions of the law to the carrier and its first 
 vendee as suggested by the Attorney General in that such pro- 
 hibitions are held to apply only to the carrier's actual ownership 
 of commodities in process of transportation. The Supreme Court 
 accordingly reversed the decree of the Circuit Court and re- 
 manded the case for further proceedings in accord with its in- 
 terpretation.*" 
 
 Justice Harlan, in a brief dissenting opinion declared that the 
 Act included in its prohibitions 
 
 "a railroad company transporting coal, if, at the time, it is 
 the owner, legally or equitably, of stock — certainly, if it 
 owns a majority or all the stock — in the company which 
 mined, manufactured, or produced, and then owns, the 
 coal which is being transported by such railroad company. 
 Any other view of the act will enable the transporting 
 company, by one device or another, to defeat altogether 
 the purpose which was to divorce, in a real substantial 
 sense, production and transportation, and thereby to pre- 
 vent the transporting company from doing injustice to 
 other owners of coal."" 
 
 34 213 U. S. 415, 416. 
 
 35 Do. 41a 
 
 36 Do. 419. 
 
Operation oi the Law. 109 
 
 It may very readily be seen that the dissenting opinion ap- 
 proached the application of the statute from a different angle. 
 The majority opinion was based upon the assumption that the 
 mining corporations were in fact bona fide and that therefore 
 stock owned in such corporations by railways would not con- 
 stitute such a legal or equitable interest as the law was designed 
 to prohibit ; thus leaving the question entirely open as to whether 
 the relationships precedent to and resulting from such holdings 
 warranted the conclusion that the mining corporations were or 
 were not bona fide. 
 
 The dissenting opinion attempted to go behind the whole re- 
 lationship by declaring that the law was intended to apply where 
 the railroad was the owner, "legally or equitably, of stock — cer- 
 tainly, if it owns a majority of all the stock^ — in the company 
 which mined, manufactured, or produced, and then owns, the 
 coal which is being transported by such railway company." 
 
 In the light of the refusal of the Senate specifically to forbid 
 railways from owning mining stock, the contention of the Gov- 
 ernment that the Act should be construed to cover such holdings, 
 irrespective of their extent, was doubtless not fully justified. A 
 more moderate charge alleging that, in specific cases, stock hold- 
 ings established relationships which were covered by the pro- 
 hibitive measures of the statute, might have brought better re- 
 sults. It is clear, at any rate, that the mere prohibition of stock 
 ownership, irrespective of extent, should not have been set up as 
 fundamental to the effectiveness of the law and as the ground- 
 work for building up the Government's case. 
 
 A careful reading of the debates in Congress leads us to be- 
 lieve that the central object of the legislation was to separate 
 the business of transportation from industrial interests inimical 
 to the proper performance of duty as a common carrier. This 
 view is brought out clearly in the reports of Senators Tillman, 
 Newlands, and Elkins, in submitting the bill to the Senate ; and 
 it was brought out again and again in the debates."^ It was clearly 
 assumed in the consideration of resolutions looking to a post- 
 ponement of the effective date of the law.** At this time the 
 Commission, the Attorney General, with the apparent approval 
 
 37 Supra pp. 80-95. 
 
 38 Cong. Rec, spth Cong., ist Sess., pp. 7012-7014; also 60th Cong., 2d 
 Sess., pp. 7211-7218. 
 
no Ths Commodities' Ci,ausb 
 
 of the President, and the active support of leading authorities, 
 urged upon Congress the passage of such a measure.^^ A leading 
 organ of the financial interests had stated, "its object and purpose 
 was to force the coal carriers, both anthracite and bituminous, to 
 dispose of their holdings in connection with the coal mining busi- 
 ness ;*" and again, the statute was designed "to make it impossible 
 for a company to engage at the same time in the carrying and 
 mining of coal."*^ The lower court held similar views, saying 
 "the legislative will could not be expressed more unequivocally. 
 There is no room for doubt as to the meaning and practical effect 
 of the clause in question."*^ 
 
 The construction given permits the carriage of an article where 
 a bona fide sale has taken place prior to the act of carriage, that 
 is, barring the consideration regarding valuable concessions re- 
 sulting from the peculiar position of the carrier as a party to a 
 sale of a product owned by it — a consideration not entering into 
 this decision. Accepting the construction of the court, the sale 
 of the commodity in question before transportation began, might 
 reasonably be held to constitute interest if the purchaser was 
 given any inducement whatsoever arising from the peculiar asso- 
 ciation of the carrier with the commodity at the time of purchase, 
 or with the act of transportation to follow. 
 
 As will appear, so far as the immediate effect of the court's 
 interpretation was concerned, the anthracite roads experienced 
 little difficulty in adjusting their relation to the coal business, so 
 as technically to avoid a violation of the statute. It must not be 
 forgotten, however, that the relationship acceped by the court 
 as permissible under the statute was such as the railroad might 
 sustain toward "bona fide manufacturing, mining or producing 
 corporations";*^ although the court did not attempt to construe 
 the expression bona fide beyond the construction given in former 
 cases** and that implied in accepting the construction of the rail- 
 ways that "interest, direct or indirect," includes only commodi- 
 ties in which a carrier has a legal interest, and therefore does 
 not exclude the right to carry commodities which have been man- 
 
 39 6oth Cong., 1st Sess., S. Doc. 406; also supra p. 
 
 40 Commercial and Financial Chronicle, Sept. 12, 1908. 
 
 41 Do. July 14, 1906. 
 
 42 164 Fed. 215. 
 
 43 213 U. S. 413- 
 
 44 Pullman Palace Car Co. vs. Mo. Pac. R. R., 115 U. S. 587. 
 
Operation ot the Law. hi 
 
 ufactured, mined, produced, or owned by a separate and distinct 
 corporation, simply because the transporting carrier may be in- 
 terested in the producing, manufacturing or mining corporation 
 as an owner of stock therein ; and again that "a legal or equitable 
 interest. .. .can not be held to" have reference to "commodities 
 manufactured, mined, produced or owned. . . .by a distinct cor- 
 poration merely because of a stock ownership of the carrier."*" 
 Throughout the entire decision of the Supreme Court it is clearly 
 assumed that the interest permitted is bona fide and that it is 
 such a legal or equitable interest which one corporation as a dis- 
 tinct entity may properly maintain in another corporation, unless 
 such holdings should be specifically forbidden by Act of Con- 
 gress. 
 
 It is difficult, however, to draw any valuable inference from 
 this assumption since it appears in the face of evidence showing 
 very conclusively that the relation assumed to be bona fide 
 amounted to a virtual merging of railway and coal-mining in- 
 terests under a single controlling power. Perhaps we may fairly 
 conclude that the Court, realizing the far reaching effect of a 
 rigid interpretation of the statute, proposed to leave this ques- 
 tion open for a more definite development and expression of pub- 
 lic opinion. 
 
 The decision may not be held, however, as without conse- 
 quence in the regulation of relationships between railways and 
 industrial concerns. A very distinct advance was made by the 
 declaration that Congress had the power to prohibit an inter- 
 state carrier from transporting in interstate commerce an article 
 which it owned at the time of receipt for carriage or in the course 
 of carriage.** Such a conclusion may be far reaching in its 
 effect upon further legislation. If Congress may prohibit car- 
 riage under such conditions, why may it not also prohibit car- 
 riage if the commodity presented has been manufactured, mined 
 or produced by such carrier ? Refusal to permit ownership dur- 
 ing carriage when such ownership appeared in the eyes of Con- 
 gress prejudicial to the proper performance of the carrier's duty 
 toward all shippers or as tending to monopolize the commodity 
 involved would seem to imply power to prohibit ownership pre- 
 vious to the act of carriage when such ownership appeared like- 
 wise prejudicial. 
 
 45 213 U. S. 413, 414. 
 
 46 Do. 404. 
 
112 The Commodities' Clause 
 
 The government may, therefore, be said to have failed to se- 
 cure the immediate and fundamental readjustment of the rela- 
 tion between railways and the coal industry for which it con- 
 tended, but to have succeeded in establishing the power of Con- 
 gress to dissociate ownership of traffic from the act of trans- 
 portation, and to have reserved for further adjudication the le- 
 gality of these stockholdings and other relationships which 
 amounted to a virtual control of the operation of the coal com- 
 panies by the railroads so holding. 
 
 Furthermore, as has been indicated, the court left the ques- 
 tion entirely open for further adjudication as to whether the re- 
 lation sustained by railways to coal companies through stock 
 ownership was in fact bona fide. The Court forebore expressing 
 any opinion as to the legitimacy of this relationship, simply re- 
 manding to the Circuit Court without "particular directions" be- 
 yond an order "for such further proceedings as may be necessary 
 to apply and enforce the statute as we have interpreted it."*' 
 
 IV. Adjudication in the Circuit Court. 
 
 In the light of the construction of the Act as above set forth, 
 the Government filed an amended bill in the Circuit Court of the 
 Eastern District of Pennsylvania charging that all the stock of 
 the Lehigh Valley Coal Company was not only owned by the 
 railroad, but that the latter "used the power thus resulting from 
 its stock ownership so as to deprive the coal company of all 
 real independent existence and to make it virtually but an agency 
 or dependency or department of the railroad company," the coal 
 company being used by the railroad "as a mere device to enable 
 the railroad company to violate the provisions of the Commodi- 
 ties' Clause." The Government charged, therefore, that the coal 
 company was not in fact a bona fide mining company, but "merely 
 an adjunct or instnmientality of the defendant;" that "the pro- 
 duction, shipment, and sale of all the coal within the territory 
 served by the railroad was brought within the dominion of that 
 company practically to the same extent as if it were the absolute 
 owner of the same." 
 
 On objection by the railway, the court denied the request of 
 the government to file an amended bill.*^ The Supreme Court in 
 
 47 213 U. S., 419, 420. 
 
 48 220 U. S., 268, 269. 
 
Operation o? the Law. 113 
 
 reviewing this decision declared that the refusal of the court be- 
 low to permit the filing of such a bill was "an absolute abuse of 
 discretion."** It declared that the facts on the amended bill 
 
 "tended to show an actual control by the railroad company 
 over the property of the coal company and an actual in- 
 terest in such property beyond the mere interest which the 
 railroad company would have had as a holder of stock in 
 the coal company. It must be held that, while the right of 
 a railroad company as a stockholder to use its stock-owner- 
 ship for the purpose of a bona fide separate administration 
 of the affairs of a corporation, in which it has a stock in- 
 terest, may not be denied, the use of such stock-ownership 
 in substance for the purpose of destroying the entity of a 
 producing, etc., corporation and of commingling its affairs 
 in administration with the aff^rs of a railroad company so 
 as to make the two corporations virtually one, bring the 
 railroad company so voluntarily acting. . . .within the pro- 
 hibitions of the Commodities' Clause."'" 
 
 The Supreme Court decided, therefore, that error was com- 
 mitted in denying leave to file the amended bill, reversed the de- 
 cree of the lower court, and remanded the cause with directions 
 for further proceedings in conformity with its ruling.'^ Before 
 the case came up, however, the Lehigh Valley Coal Sales Com- 
 pany was formed and, in view of this new feature, the Depart- 
 ment of Justice obtained a decree dismissing the petition with- 
 out prejudice so that a new petition, taking cognizance of the 
 existence of the Sales Company, might be prepared."^ This was 
 accordingly done and a decision has been rendered.'* 
 
 V. Application of the Sherman Anti-Trust Law to the An- 
 thracite Combines. 
 
 In 1907 the Department of Justice filed suit in the Circuit 
 Court for the Eastern District of Pennsylvania against the six 
 
 49 220 U. S. 271. 
 so Do. 274. 
 
 51 Do. 273, 274. The court at the same time aflSrmed the dismissal by 
 the circuit court of cases against the Erie, the Central, the Pennsylvania, 
 and the Delaware and Hudson, notwithstanding the fact that the inter- 
 corporate relations of some of these roads rendered them proper subjects 
 for further proceedings as in the Lehigh case. The court refused to dis- 
 miss these cases "without prejudice" as requested by the Attorney General. 
 
 52 Decree of District Court of U. S., E. D. of Penna., U. S. vs. l,ehigh 
 Valley R. R. Co., No. 97 in Equity, filed Jan. 27, 1913. 
 
 53 Chapter IV, Section 7, Sub-section 3- 
 
114 Thb Commodities' Clause 
 
 anthracite roads, alleging a conspiracy to control the output, 
 transportation, and sale of anthracite coal. The government 
 charged; (i) the existence of a general combination for the 
 purpose of controlling the transportation and sale of anthracite 
 coal in violation of the Sherman Anti-Trust Law; and (2) Spe- 
 cific combinations within the general combination, also violative 
 of this statute."* The government further alleged that the rail- 
 ways were then carrying "jy per cent of all hard coal deposits; 
 that they themselves produced 60 per cent and actually marketed, 
 70 per cent, of the entire annual output. The so-called 65 per 
 cent contracts, which we have considered,"" and which were made 
 effective through the medium of the Temple Iron Company," 
 were objected to by the government as a part of the general plot 
 to restrain trade and eliminate possible competition. 
 
 The government lost in the lower court on all the charges ex- 
 cept that regarding the Temple Iron Company."' This corpora- 
 tion was declared to be in violation of the Sherman Anti-trust 
 Law. 
 
 The case was at once appealed to the Supreme Court of the 
 United States and a decision has recently been rendered."' Jus- 
 tice Lurton, in delivering the opinion of the court, said, "Aside 
 from the particular transactions averred as 'steps' or 'acts in 
 furtherance' of a pre-supposed general combination, the charge 
 of such a combination is general and indefinite. The case is 
 barren of documentary evidence of solidarity ;" if the conditions 
 charged, exist, they must be "deduced from specific acts" char- 
 acterizing the relations of companies. In this respect the court 
 concurred with the lower court in finding "no contract or agree- 
 ment" amounting actually to the apportionment of tonnage. 
 
 With regard to the Temple Iron Company, the court accepted 
 the facts as they have been above outlined"* and concurred in the 
 decision of the lower court declaring such company to be in viola- 
 
 54 We are passing over the specific averments against the Reading and 
 Erie respectively as to separate railway combinations as these averments 
 were put aside by the court as outside of the government's allegation of a 
 general combination. 
 
 55 Chapter II, Sub-section 6. 
 
 56 Chapter II, Sub-section 6, and footnote On Temple Iron Co. 
 
 57 Justice Buifington dissented in construing the 65 per cent contracts. 
 
 58 The U. S. vs. The Reading Company, a Holding Co., et al. (not yet 
 reported). 
 
 59 Supra pp. 44 (and foot note 72). 
 
Operation op the Law. 115 
 
 tion of the law.*" The court said, "If the carriers did, as we 
 have found to be the fact, combine to restrict the freedom of in- 
 terstate commerce either in the transportation or the sale of an- 
 thracite coal in the markets of other states, and adopted as a 
 means for that purpose the Temple Iron Company, and through it, 
 the control of the great Simpson and Watkins' collieries, the parts 
 of the general scheme, however lawful considered alone, become 
 parts of an illegal combination under the Federal Statute which 
 it is the duty of the court to dissolve, irrespective of how the 
 legal title to the shares is held."®^ 
 
 Much emphasis was given to the throttling of an independent 
 line by the creation of the Temple Iron Company, the court rec- 
 ognizing in the latter a power effective enough to throttle any 
 similar attempt that might be made. "Its board of directors," 
 said the court, "composed as it is of men representing the de- 
 fendants, supplies time, place, and occasion for the expression of 
 plans or combinations requiring or inviting concert of action."*^ 
 
 In considering the 65 per cent contracts, the court declared 
 
 that, "considered singly" they might be "wholly innocent But 
 
 a series of such contracts, if the result of a concerted plan or 
 plot between the defendants to secure the control of the sale of 
 the independent coal in the markets of other states, and thereby 
 suppress competition in prices between their own output and that 
 of the independent operators, would come plainly within the 
 terms of the statute, and as parts of the scheme or plot would be 
 unlawful."** In this respect the higher court's interpretation 
 concurred with that of the dissenting Judge BufSngton, in the 
 circuit court, who recognized such contracts as effectually con- 
 trolling the situation at that time and at all future times, so long 
 as they could be maintained.** 
 
 The Supreme Court then put aside all consideration of the 
 "minor combinations" as not involved, and as not properly to be 
 considered together with the charge of a general combination. 
 These so-called "minor combinations" that were alleged to be in- 
 volved in the general plan for the control of the coal trade had 
 
 60 U. S. vs. The Reading Co., a Holding Co., et al. (not yet reported). 
 
 61 Do. p. 12. 
 
 62 Do. p. 12. 
 
 63 U. S. vs. Defendant Railways, Docket Nos. 198, 206, 217 (combined 
 decisions), p. 23. 
 
 64 Do. p. 23. 
 
ii6 The Commodities' Clause 
 
 to do, (i) with the purchase in 1898 of the capital stock of the 
 New York, Susquehanna and Western Railroad by the Erie; 
 (2) in 1899 of the Pennsylvania Coal Company, the Erie and 
 Spring Valley Coal Company, and the Delaware and Kingston 
 Railroad Company, by the Erie Railroad; (3) the acquisition in 
 1901 of a majority stock interest in the Central Railroad of New 
 Jersey by the Philadelphia and Reading Company, a holding com- 
 pany ; and (4) the purchase and sale agreements between the Elk 
 Hill Coal and Iron Company and the Pennsylvania Coal Com- 
 pany. No opinion was expressed as to the legality of these com- 
 binations, the court simply directing that the bill, in so far as 
 it sought relief against the minor combinations, be dismissed 
 without prejudice. 
 
 The District Court, in conformity with the decision of the Su- 
 preme Court, entered a decree dissolving the Temple Iron Com- 
 pany and enjoining the anthracite roads, with several exceptions 
 dismissed without prejudice for further litigation,^^ from further 
 operations under the so-called 65 per cent contracts.^^ The so- 
 called minor combinations according to the higher court's in- 
 structions were dismissed without prejudice. The Department 
 of Justice is now preparing special bills for further injunctions in 
 some, or all, of these cases. 
 
 It is too early to say what effect the decree of the Court dis- 
 solving the Temple Iron Company and enjoining operations un- 
 der the 65 per cent contracts, will have upon railway domina- 
 tion of the anthracite fields. The decree does not forbid in- 
 dividual roads from entering into such contracts; on the other 
 hand it is declared in the decision of the higher court that "con- 
 sidered singly" the contracts may be "wholly innocent." It is 
 only the "series of such contracts, if the result of a concerted 
 plan or plot between the defendants," etc., to which objection 
 is made. It remains to be seen whether the community of in- 
 terests established by the creation and successful operation of 
 the Temple Iron Company and the recognition of the efficacy of 
 the 65 per cent contracts, have not made such an impression upon 
 
 6s Re agreements between the Penn. Coal Co., and the Elk Hill Coal 
 Co. ; the New York, Susquehanna Western Coal Co., and John and Joseph 
 Jermyn; the Hillside Coal and Iron Co., and the Lackawanna Coal Co.; 
 and the D. Iv. & W. R. R., and the People's and George F. I<ee Coal Com- 
 panies. 
 
 66 Decree entered in District Court of Eastern Penna., May 26, 1913. 
 
Operation of the Law. 117 
 
 the interests involved as to enable them to accomplish, through 
 informal understandings and individual contracts and agreements 
 to the extent to which they are permissible, as much as they have 
 hitherto accomplished through the instrumentality of the Tem- 
 ple Iron Company and the uniform contracts. 
 
 So far as outward expressions may indicate, the decision did 
 not seriously disturb the anthracite coal roads. There was an im- 
 mediate advance in stock.*^ The President of the Reading Co. 
 said, on being advised of the decision, "I have always been indif- 
 ferent as to the 65 per cent contracts. They were made with the 
 operators to induce them to join in the settlement of the strike of 
 1902." Other operators expressed similar views. The Attorney 
 General, however, declared that the decision would "so com- 
 pletely destroy the combination which now controls the price of 
 our coal that it must result in a distinct measure of relief to the 
 public."88 
 
 VI. Effect of Decision Upon Railway and Coal Mining 
 Relationships. 
 
 After the general decision of the Supreme Court interpreting 
 the Commodities' Clause, some of the roads immediately took 
 steps to adjust their relationship with coal mines so as to avoid 
 a violation of the statute as construed. The plan almost uni- 
 formly adopted involved the creation of so-called sales com- 
 panies whose function should be the purchase of coal from the 
 railways creating them prior to offering the same for transporta- 
 tion and sale. 
 
 The Delaware, Lackawanna and Western was the first to effect 
 a sales corporation.'* The manner of organization is well set 
 forth in a statement sent to all stockholders as follows : "In con- 
 formance with the decision recently rendered, declaring that this 
 company can not lawfully transport in interstate commerce coal 
 owned by it, a coal-selling company has been organized under 
 the laws of the State of New Jersey, under the name of the Dela- 
 
 67 On day of decision, Reading stock sold nearly ten points higher; 
 Lackawanna twenty-six; Central, ten; Lehigh Valley, four and one-half; 
 others also advanced Journal of Commerce & Commercial Bulletin, Dec. 
 18, 1912. 
 
 68 World's Work, December 28, 1912. 
 
 69 Plan explained in Annual Report D. L. & W. 1909, also quoted in 
 government's brief, pp. 12-14. 
 
ii8 The Commodities' Clause 
 
 ware, Lackawanna and Western Coal Company, the capital stock 
 of which will be $6,800,000.00, divided into 136,000 shares of 
 $50.00 each par value."'" It was further provided that the rail- 
 way, "as seller, shall contract with said coal company, as the 
 buyer, to sell and deliver the coal mined and purchased by the 
 railroad company to the coal company at the mines." 
 
 In order to apportion the capital stock of the coal company 
 among stockholders of the railway it was provided that the latter 
 might subscribe for one share of the mining stock for each four 
 shares of railway stock then held. As a part of the plan the 
 company declared a fifty per cent dividend on capital stock, one- 
 half of which was exchangeable for an equivalent proportion of 
 stock in the new coal company, the other half being paid in cash. 
 With an insignificant exception,'^ all the railway stockholders 
 availed themselves of this offer. 
 
 Notwithstanding the creation of a separate corporation, the 
 same financial interests remained in control of the railway and 
 the coal company. William H. Truesdale and Edward E. Loom- 
 is, President and Vice-President respectively of the railroad, 
 were appointed to two of the seven directorships. Mr. Loomis 
 became President of the new company. 
 
 As a further means of insuring continuous and harmonious re- 
 lations, a contract was entered into with the following specifica- 
 tions : 
 
 "That the railroad company would sell to the coal 
 company all mined, marketable coal then owned, except 
 such as it should elect to retain for use in its business 
 as a common carrier, to be paid within thirty days at 
 prices designated ; that the railroad company would lease 
 to the coal company certain storage and stocking plants, 
 trestles, and docks, and accept in payment 5 per cent per 
 annum on a valuation to be agreed upon ; that the coal 
 company would take over the sales' agency contracts 
 theretofore made by the railroad company; that the rail- 
 road company would sell and deliver to the coal company 
 f. o. b. cars at the breakers, all coal purchased by it, the 
 amount to be so sold and delivered to be at the absolute 
 option of the seller and without liability upon its part for 
 failure to supply. The coal company, however, agreed 
 to purchase all coal offered by the railroad company, and 
 
 70 July I, igop. 
 
 71 Only about $30,000 of stock was not so exchanged. 
 
Operation o? the Law. 119 
 
 no other, unless necessary to comply with contracts then 
 outstanding."" 
 
 It was further agreed that the coal company would 
 "purchase from the railroad company all coal delivered 
 on cars at the breakers, and pay for all sizes above pea 
 65 per cent of the general average f . o. b. prices at tide 
 points at or near New York between Perth Amboy and 
 Edgewater, and for the smaller sizes specified portions 
 of such general average prices; that the coal company 
 would conduct the business of selling so as best to con- 
 serve the interest of and preserve the good will and 
 markets of the coal mined by the railroad company; that 
 any disputes which might arise between the parties should 
 be settled through a board of arbitration, made up as 
 specified; and that the terms of the agreement itself 
 might also be modified by arbitration if conditions justi- 
 fied ;"" that the contract should continue to be operative 
 until six months after either party shall notify the other 
 in writing of its intention to cancel the same, and that 
 upon its expiration the coal company would sell to the 
 railroad company and the latter would buy all coal then 
 stored or in transit, the price to be agreed upon or fixed 
 by arbitration." 
 
 It may readily be seen that such an agreement preserves the 
 railway's control of all properties formerly controlled. It is 
 significant (i) that the coal company is always required to buy 
 all coal offered by the railroad but the sale and delivery are to 
 be at the absolute option of the latter; (2) that the coal com- 
 pany may buy no other coal unless it is necessary to fill out- 
 standing contracts that can not be met by supplies available; (3) 
 that the sixty-five per cent contracts, the operation of which we 
 have described, should govern all shipments of coal ; (4) that a 
 continuation of the contract is at the option of the railway ; and 
 (5) that the business of the coal company should be conducted 
 so as best to conserve the interest of and preserve the good will 
 and the markets hitherto enjoyed by the railway. What more 
 eflfectual plan could be conceived for preserving intact the rail- 
 ways interest in the mining industry ! 
 
 The remaining anthracite roads, with the exception of the 
 
 72 Italics do not appear in original. 
 
 73 Exhibit A to original petition in Circuit Court, appearing in govern- 
 ment's brief in appeal to the Supreme Court, and as an appendix to brief 
 (in full pp. 25-34), Trans, of S. C. Rec, Oct. Term, 1910, The U. S. vs. 
 D. U & W., and D. L. & W. Coal Co. 
 
120 The Commodities' Clause 
 
 Reading have followed this general plan of organization. The 
 plan as adopted by the Lehigh Valley, in the creation of the Le- 
 high Valley Coal Sales Company, is practically identical.''* The 
 Delaware and Hudson employed its subsidiary, The Hudson 
 Coal Company, for this purpose, simply stating in its annual re- 
 port that on and after June i, 1909, all coal produced by that 
 railway was sold to the coal Company.'" The railway company, 
 however, always gives space to the "Coal Mining Department" in 
 subsequent Railway reports. The Central of New Jersey and 
 the Erie are operating through their own coal companies, al- 
 though the plan of operation is not fully disclosed. It is under- 
 stood, however, to be similar to that employed by the Delaware 
 and Hudson. 
 
 The situation confronting the Reading Company is most intri- 
 cate. This company is a holding company for the stock of the 
 Reading Railway and the Reading Coal Company. The obliga- 
 tions of the old Reading Railroad and of the Coal and Iron Com- 
 pany, amounting in 1896 to about $100,000,000 were taken over 
 by the Holding Company, and blanket bonds were issued on the 
 combined properties of the railroad and the coal company, the 
 Holding Company, however, paying all the interest on the 
 bonds.'^' It would be necessary either to redeem these bonds if 
 the existing coal company is to be utilized as a sales' agency, or 
 else to create a separate and distinct corporation as was done by 
 the Lehigh and the Lackawanna. 
 
 The bituminous roads have not yet announced any specific plan. 
 It is understood, however, that they are avoiding a technical vio- 
 lation of the law by carrying on their coal business through their 
 subsidiary companies. It appears from the annual reports of 
 the Union Pacific that that railroad is disposing yearly of large 
 areas of its properties,'^ and it is also stated that valuable coal 
 lands claimed by this railroad have been voluntarily returned to 
 the federal government without testing title in the courts.'* It 
 also appears that the Louisville and Nashville has apportioned 
 among its stockholders practically all the stock of its subsidiary 
 
 74 Annual Report 1912, pp. 7, 13. 
 
 75 Annual Reports 1909, 1910, pp. 10, 11 in both reports. 
 
 76 Brief for government, filed May, 1914, pp. 46-49. 
 ']^ Annual Reports, 1910-12. 
 
 78 Rates and Regulation, by W. Z. Ripley, pp. 554, SSS- 
 
Operation o^ the Law. 121 
 
 coal company, the Louisville Properties' Company, retaining only 
 about $35,000 of stock in trust for stockholders/' 
 
 VII. Further Adjudication Involving Anthracite Combines. 
 
 I. The Delaware, Lackawanna and Western Interests. — ■ 
 About the last of February, 1913, the Department of Justice, act- 
 ing on authority of the decision of the Supreme Court in the com- 
 modities' cases and the more recent decision in the suit to break 
 up the combination centering in the Temple Iron Company,'" 
 brought suit in the District Court for the District of New Jersey 
 against the Delaware, Lackawanna and Western Railroad and 
 the Delaware, Lackawanna and Western Coal Company. Coun- 
 sel for the government alleged those relationships which we have 
 described above, and petitioned the court to enjoin the railroad 
 from 
 
 "shipping, transporting, or causing to be transported any 
 anthracite coal, the product of mines owned by defendant 
 railroad company or purchased by it from others and sold, 
 transferred, or delivered to defendant coal company in pur- 
 suance of the above-described agreement or arrangement 
 between them or any'similar one ; 
 
 "That the court adjudge the existing arrangements and 
 agreements between the defendants to constitute a contract 
 and combination in restraint of trade and commerce among 
 the states and an attempt to monopolize a part of such 
 trade and commerce contrary to the provisions of the Act 
 of July 2, 1890, and that further violations of said act in 
 the ways specified or any similar ones, be enjoined ; 
 
 "That the court adjudge the purchase of coal by the de- 
 fendant railroad company from others and the sale or 
 transfer of the same to the defendant coal company, or any 
 other party, to be unlawful, and enjoin any such future ac- 
 tion."8i 
 
 As may be seen from the government's demands, both the Com- 
 modities' Clause and the Sherman Anti-trust Law are here relied 
 on to force the railroad to discontinue the very ingenious device 
 to which it had resorted in order to evade a technical violation of 
 the law. This device, as shown above, consisted in the organiza- 
 
 79 Annual Report Table 3. 
 
 80 Chapter IV, Section 5. 
 
 81 U. S. vs. D. L. & W. R. R. Co. et al., filed Feb., 1913. 
 
122 The Commodities' Ci,ause 
 
 tion of a coal company which should purchase the output of the 
 railway's mines prior to the act of shipment.*'^ 
 
 The district court, in an opinion rendered April 7, 1914, ad- 
 hered to the technical ruling that the railroad and the coal com- 
 pany were separate and distinct entities and that the former did 
 not own the coal during transit but had in good faith transferred 
 it to the latter before the act of transportation began. The court 
 refused to interfere with the 65 per cent contracts, regarding them 
 merely as "a convenient basis for calculating the price to be paid 
 for future deliveries" — as "simply an interest in the price" and 
 not "an interest in the coal"; that the coal, after it had been 
 loaded on the cars, became the property of the coal company 
 which had full power to determine where it should be shipped 
 and what prices should be asked. Little attention was given to 
 the allegations brought under the Anti-trust act, because, said the 
 court, "the oral argument left us under the impression that this 
 
 charge was not much insisted on If we are mistaken in this 
 
 supposition the error can easily be corrected." The petition was 
 accordingly dismissed and the government appealed the case.'* 
 
 The Supreme Court first considered the position taken by the 
 lower court, viz : "that it was not illegal for the same person to 
 own a majority of the stock in the two corporations and that their 
 contract of sale was lawful."** 
 
 "It would not necessarily be illegal," said the court, "for 
 the road to transport coal belonging to a corporation whose 
 stock was held by those who owned the stock of the rail- 
 road company , but mere stock-ownership by a rail- 
 road, or by its stockholders in a producing company can- 
 not be used as a test by which to determine the legality of 
 the transportation of such company's coal by the interstate 
 carrier."*' 
 
 In order to substantiate this statement, the court cited the re- 
 fusal of Congress to amend the Commodities' Clause by making it 
 unlawful for any railroad to transport coal belonging to a com- 
 pany in which the said railroad owned stock.** It declared, how- 
 ever, that 
 
 82 Chapter IV, Section 6. 
 
 83 213 Fed. 240, 260-263. 
 
 84 U. S. vs. D. L. & W., June 21, 1915 (not yet reported). 
 8s Do. 
 
 86 Cong. Rec, 59th Cong., ist Sess., pp. 701 1, 7012. 
 
' "■ Operation of the Law. 123 
 
 "whenever two such companies, thus owned or managed, 
 make contracts which affect the interests of minority stock- 
 holders, or of third persons, or of the public, the fact of 
 their unity of management must be considered in testing 
 the validity and bona fides of the contracts under review."*' 
 
 In the case in hand the coal company was created, said the 
 court, 
 
 "with the express purpose that, with stockholders in com- 
 mon, it should be a party to a contract intended to enable 
 the railroad company to meet the requirements of the Com- 
 modity Clause and at the same time continue the business 
 of buying, mining, selling and transporting coal."'* 
 
 Here the railroad did not relinquish its title to the coal lands; 
 whereas in the Delaware and Hudson case above cited, 
 
 "the ownership of the mines had passed completely from 
 the railroads to the producing companies and the coal prop- 
 erty was no longer subject to the debts of the railroad com- 
 panies The fact that the railroad (Delaware and 
 
 Hudson) held stock in the producing company, and re- 
 ceived dividends thereon, did not give to the railroad com- 
 pany, any more than to any other stockholder in any other 
 corporation, a legal interest in the property of the coal 
 company."*® 
 
 The court recognized, however, that "by means of stock-owner- 
 ship one of such companies may be converted into a mere agent 
 or instrumentality of the other," as had been clearly implied in a 
 previous decision.*' It held, however, that such relationship need 
 not necessarily result from stock-ownership but may result from 
 "any contract which in its practical operation gives to the rail- 
 road company a control or an 'interest, direct or indirect' in the 
 coal sold, at the mouth of the mines."®^ 
 
 "If the contract amounted to a sales agency," said the 
 court, "the transportation was illegal because the railroad 
 company could not haul coal which it was to sell in its own 
 name or through an agent. If the contract was in restraint 
 of trade it was void because in violation of the Sherman 
 Anti-trust Law. The validity of the contract cannot be 
 
 87 U. S. vs. D. L. & W., June 21, igis, (not yet reported). 
 
 88 Do. 
 
 89 Do. ; also 213 U. S. 413. 
 
 90 U. S. vs. Lehigh Valley R. R., 220 U. S. 257, 273. 
 
 91 Same as (87). 
 
 9 
 
124 The Commodities' Clause 
 
 determined by consideration of the single fact that it did 
 provide for a sale. It must be considered as a whole and 
 in the light of the fact that the sale at the mine was but one 
 link in the business of a railroad engaged in buying, min- 
 ing selling and transporting coal."*^ 
 
 Much significance was attached to the fact that the railroad re- 
 served the power to limit deliveries "as its interests may deter- 
 mine," to prevent the coal company from purchasing coal else- 
 where without the written consent of the railroad, and to require 
 the coal company to fill the orders of the railroad's customers 
 "even though as to some of such customers the sales may be un- 
 profitable."'* In the opinion of the court such provisions clearly 
 indicated that "the railroad had an interest in the coal and used 
 the coal company to preserve and secure that interest after trans- 
 portation began.""* The coal company was clearly under unlim- 
 ited obligations to the railroad, the latter in turn incurring no ob- 
 ligation whatsoever to the coal company. In this manner the 
 railroad had eliminated the coal company as a competitive pur- 
 chaser of coal other than that offered by the railroad. 
 
 "Such a provision," said the court, "may not have actu- 
 ally effected a monopoly; but considering the financial 
 strength of the carrier ; its control of the means of trans- 
 portation ; its power to fix the time when the transporta- 
 tion of the very coal sold should begin ; its power in fur- 
 nishing cars to favor those from whom it bought or to 
 whom it sold — such a contract would undoubtedly have 
 that tendency. In that respect it was opposed to that pol- 
 icy of the law, which was the underlying reason for the 
 adoption of the Commodity Clause."®* 
 
 In view of the facts above summarized the court concluded that 
 the "coal company was neither an independent buyer nor a free 
 agent" f that the contract was in violation of both statutes ; and 
 that the railroad must therefore 
 
 "absolutely dissociate itself from the coal before the trans- 
 
 porta.tion begins It cannot," said the court, "retain 
 
 the title nor can it sell through an agent. It cannot call 
 that agent a buyer while so hampering and restricting such 
 alleged buyer as to make him a puppet subject to the con- 
 
 92 U. S. vs. D. L. & W., June 21, 1915 (not yet reported). 
 
 93 Do. 
 
 94 Do. 
 
 95 Do. 
 
 96 Do. . . 
 
Operation o? the Law. 125 
 
 trpl of the railroad company."*' The decree of the lower 
 court was accordingly reversed with directions "to enter 
 a decree enjoining the railroad from further transporting 
 coal sold under the provisions of the contract of August 
 2, 1909 "»« 
 
 a. The Reading Interests. — The action involving the Reading 
 interests was' brought in the District Court for the Eastern Dis- 
 trict of Pennsylvania and the decision rendered prior to the deci- 
 sion of the Supreme Court in the Lackawanna case.*' The gov- 
 ernment filed a petition for an injunction to prohibit the Reading 
 Company, the Philadelphia and Reading Railway Company, and 
 the Philadelphia and Reading Coal Company, and their officers 
 "from further carrying out or maintaining such conspiracies, 
 combinations, attempts to monopolize, and monopolizations," and 
 to prohibit the railway in question from the carrying in inter- 
 state commerce "of anthracite mined or purchased and at the time 
 of transportation owned" by those coal companies which it dom- 
 inated.^"" The wording of the petition included the so-called 
 minor combinations referred to above and dismissed by the court, 
 without prejudice, for further action.^ 
 
 The Reading Company, it will be remembered, is a holding com- 
 pany, owning all the stock of the Reading Railway and the Read- 
 ing Coal Company. In addition, the Reading Company owns the 
 stock of the Wilmington and Northern Railroad, the Schuylkill 
 Navigation Company, and the Central Railroad. The last named 
 company owns all the stock of the Wilkes-Barre Coal Company, 
 part of the stock of the Hudson River Railway, and controls 
 through lease the Lehigh and Susquehanna Railroad. The Le- 
 high Navigation Company owns the stock of the Lehigh and Sus- 
 quehanna Railroad and part of the stock of the Hudson River 
 Railway, and is therefore linked to the Reading interests through 
 the Central Railroad. The Navigation Company, furthermore, 
 owns the stock of the New England Railroad.^ The government 
 
 97 U. S. vs. D. L. & W., June 21, 1915 (not yet reported). 
 ^ Do. 
 
 99 Chapter IV, Section 7. 
 
 100 Petition in D. C. of U. S., E. D. of Penna. of Gov't in U. S. vs. 
 Reading Co., P. & R. R. Co., P. & R. Coal & Iron Co., Central R. R. of 
 N. J., the L. & W.-B. Coal Co., et al., and Geo. F. Baer, Geo. F. Baker, 
 et al., p. 70. 
 
 1 Supra p. 115. 
 
 2 Petition in D. C. of U. S., E. D. of Penn'a of Gov't in U. S. vs. Read- 
 ing Co., et al., pp. 69-75. 
 
126 The Commodities' Clause 
 
 prayed for a decree requiring these corporations to dispose of 
 such capital stock, under the supervision and direction of the 
 court, to persons not their stockholders or to agents not otherwise 
 under their control or influence, and that "pending such disposi- 
 tion the holding corporation be enjoined from voting or receiving 
 dividends in respect to any part of said stock."^ The court was 
 further petitioned to restrain the Reading Railway, the Central 
 Railroad, and the Lehigh and Susquehanna Railroad, from the 
 transportation of coal mined or produced and at the time of trans- 
 portation owned by them.* 
 
 a. Application of the Shermaui Anti-Trust Lavir. — That part 
 of the bill involving the Wilmington and Northern Railroad was 
 dismissed at once because it appeared that the coal transported by 
 this road constituted a negligible part of its tonnage.' The court 
 likewise dismissed the charge that the Navigation Company and 
 the Central Railroad owned stock in the Alliance Coal Company 
 and the Wilkes-Barre Coal Company. In putting this part of 
 the bill aside the court said that the evidence did not show that 
 the holdings in question had been "unlawfully used in combina- 
 tion or otherwise," but that "the Navigation Company and the 
 Wilkes-Barre Coal Company have been active competitors for the 
 sale of coal." It is probable that the stock held by the Central 
 Railroad in the Alliance Coal Company and by the Navigation 
 Company in the Wilkes-Barre Coal Company, are scarcely suffi- 
 cient in themselves to eliminate competition between the Naviga- 
 tion Company and the Central Railroad although very strong evi- 
 dence was introduced by the government to show that an effective 
 agreement existed between these interests.' 
 
 In order to understand the relationship existing between the 
 Reading and the navigation groups we must examine the agree- 
 ment by which the Lehigh and Susquehanna Railroad, a sub- 
 sidiary of the Navigation Company, was leased to the Central 
 
 3 Petition in D. C. of U. S., E. D. of Penn'a of Gov't in U. S. vs. Read- 
 ing Co., et al., p. 70. 
 
 4 Do. pp. 73-75. 
 
 5 U. S. vs. Reading Co. et al., June 3, 1915 (not yet reported). 
 
 6 The Central owned only 6,000 shares in the Alliance Coal Co. out of a 
 total of 90,000 shares, 80 per cent of the balance being owned by the 
 Navigation Co. The latter owned only 500 shares in the Wilkes-Barre 
 Coal Co., out of a total of 184,250 shares, all but 13,927 of the balance 
 being owned by the Central. U. S. vs. Reading Co. et al,. June 3, 191S 
 (not yet reported). 
 
Operation op the Law. 127 
 
 Railroad, a subsidiary of the Reading Company. The original 
 agreement, dating back to 1871, stipulates that the Navigation 
 Company should receive one-third of the gross receipts arising 
 from the operation of the railroad, in return for which the entire 
 output of the mines, with several insignificant exceptions, was to 
 be shipped over the leased railroad or other roads controlled by 
 the Central.'' The lease was at one time transferred to the Read- 
 ing with a proviso that the Central would require its subsidiary, 
 the Wilkes-Barre Coal Company, to ship its output over the Le- 
 high and Susquehanna, and, if the one-third of the gross receipts 
 as stipulated in the original lease, should fall below $1,114,400, 
 the Reading would supply the deficit ; whereas if they should go 
 beyond $2,043,000, the surplus would be turned over to the Read- 
 ing.* 
 
 The government maintained that in practice "the Navigation 
 Company can not avoid shipping over the leased railroad and over 
 the Central Railroad by consigning its output to points not on, or 
 reached via those lines, but is bound absolutely to ship over such 
 lines three-fourths of its output excepting coal shipped over its 
 canal"* (only about six per cent in 1912).^" As a result the Cen- 
 tral Railroad had absolute control of at least three-fourths of the 
 entire coal output arising from the properties of the Navigation 
 Company. This was clearly affirmed by President Warriner, of 
 the latter company, in his testimony.^^ 
 
 In 1887 an agreement very similar to the above was entered 
 into between the Central and the Navigation Company affecting 
 the output of the Wilkes-Barre Coal Company." In 1892 the 
 agreement was further strengthened and in 1897 and 1908 its 
 force was clearly recognized by the Coal Company and the Navi- 
 gation Company.^* In 1913 over 5,000,000 tons were shipped 
 over the lines of the Central, leaving but 367 tons to be distributed 
 among other routes.^* In view of this evidence of the Central's 
 monopoly upon the output of the Wilkes-Barre Coal Company^ 
 
 7 Brief for Gov't filed May, 1914, pp. 181, 182. 
 
 8 Do. pp. 182, 183. 
 
 9 Do. p. 185. 
 ID Do. 
 
 11 Do. p. 186. 
 
 12 Do. pp. 186-188. 
 
 13 Do. 188-190. 
 
 14 Do. p. 189. 
 
128 The Commodities' Clause 
 
 the government charged an unreasonable restraint of trade in 
 anthracite coal by which competition between the Navigation 
 Company and the Wilkes-Barre Coal Company in the production 
 and marketing of coal was virtually eliminated. The government 
 prayed for a decree dissolving the leases and agreements or else 
 for such modifications as would restore competitive conditions.^' 
 
 In considering the petition the court said, "If the lease is not 
 in violation of the law, the navigation group drops out of this liti- 
 gation."^* Little weight was given the government's contention 
 and the evidence submitted regarding the suppression of competi- 
 tion between the Navigation Company and the Wilkes-Barre Coal 
 Company. On the other hand, "the lease fostered competition," 
 said the court, meaning, as later explained that the Navigation 
 Company was thereby able to place its coal on the market to com- 
 pete with that of other companies and the Central was thus en- 
 abled to enter the anthracite fields.^^ In further explanation the 
 court said, 
 
 "It should be distinctly noted that with rare exceptions 
 competition for the carriage of the same anthracite coal 
 does not exist. Each carrying company has its own tribu- 
 tary lines, and (largely by reason of topographical condi- 
 tions) these are not reached, and are not likely to be 
 
 reached, by any other carrier The competition is in 
 
 the markets, and it would be idle for one carrier to attempt 
 to interfere with the other's traffic."^' 
 
 As if not fully satisfied with the explanation given, the court 
 calls attention to the fact that industrial and financial conditions 
 in 1870 and 1871 necessitated the arrangement. In the latter 
 year the Board of Managers of the Navigation Company declared 
 that the Lehigh and Susquehanna Railroad lacked terminal and 
 ti-ack facilities which it was unable to supply. It was said that 
 the lease would enable it to place its output in the New York 
 markets and would also 
 
 "leave it (the Navigation Company) a coal and navigation 
 company, with its canal and valuable Lehigh coal property, 
 its large amount of real estate, and in addition the 
 
 15 Brief for Gov't filed May, 1914, PP. 201, 202. 
 
 16 U. S. vs. Reading Co. et al., D. C. of U. S., E. D. of Penna., July, 
 191S (not yet reported). 
 
 17 Do. 
 
 18 Do. 
 
Operation o? the Law. 129 
 
 recently acquired tracts of first class coal lands in the Wy- 
 oming region which promise in the future to be a large and 
 increasing source of revenue; also the control of the 
 transportation of the product of other tracts equally large 
 and more fully developed."^* 
 
 The Sherman Anti-trust Law of 1890 was designed primarily 
 to break up just such alliances as resulted from the leasing of 
 the Lehigh and Susquehanna Railroad to the Central. Even al- 
 though conditions at that time may have justified the lease, the 
 federal statute rendered the action unlawful. If there is justifica- 
 tion now it must be found elsewhere than in an emergency aris- 
 ing many years before the enactment of the law. The lease, judg- 
 ing from the whole trend of the evidence submitted by the gov- 
 ernment, undoubtedly gave the Reading Railroad through its sub- 
 sidiary, the Central, a stronger grip on the situation in the anthra- 
 cite fields. It may truly be said that the Reading Holding Com- 
 pany was thereby better able to compete with large and small 
 operators, but it may be pertinent to inquire as to whether this 
 company has not now become so powerful as to be able to hold 
 its own without such agreements and even so to dominate the sit- 
 uation in the anthracite fields as to render the successful opera- 
 tion of private concerns extremely difficult if not impossible. The 
 court also followed out the operation of the agreement by which 
 the Central was entitled to receive for transportation three- 
 fourths of the entire output of the coal properties of the Naviga- 
 tion Company. Although the testimony of officials^" indicated be- 
 yond question that the agreement was absolutely binding, it was 
 pointed out that there were years when the percentage fell a little 
 below the three-quarter mark. The court attached much im- 
 portance to this. It was concluded that the government had failed 
 to prove the unlawful restraint of trade charged to exist as a 
 result of the relationship between the two groups, and that part of 
 the bill referring to the Navigation Company was dismissed."^ 
 
 In considering the combination resulting from the Holding 
 Company's ownership of the stock of the Reading Railway and 
 
 19 U. S. vs. Reading Co. et al., D. C. of U. S., E. D. of Penn'a, July, 
 1915 (not yet reported). 
 
 20 Testimony of President Warriner, Brief for Gov't, filed May, 1914, 
 p. 186. 
 
 21 Same as (19). 
 
130 The Commodities' Clause 
 
 the Reading Coal Company, the court propounded and attempted 
 to answer the following questions : "Is the combination unlaw- 
 ful ? Does it unreasonably restrain trade in anthracite coal ?"** 
 
 The government had made the point that the Reading Coal 
 Company and its lessees were required to ship their entire product 
 over the lines of the Reading System or over such lines as the 
 Reading might dictate. This position was sustained by the court 
 although its importance was discounted since most of the lessees 
 "have no other railroad available."^' 
 
 It was charged in the government's brief, that the old Reading 
 Railroad Company had supplied the Coal Company with money 
 and credit (amounting by 1896 to about $81,000,000) to enable 
 the latter to acquire vast areas of land in order "to prevent their 
 acquisition by others" ;^* and that the holding of these lands in 
 an unproductive state was a serious financial burden upon the 
 railroad since the loans were granted without interest.^' The 
 court said in answer to these allegations that it was quite natural 
 and normal for the Coal Company to increase its holdings even 
 "beyond its present needs,"^* and refused to go into the admitted- 
 ly improper acts of the parties prior to the reorganization of 1896. 
 
 The government's charge affecting the group of interests cen- 
 tering in the Reading Holding Company, was sustained by the 
 court."^ The latter called attention to the fact, however, that the 
 severing of the relationship between the Holding Company and 
 the Central would injuriously affect the traffic in other materials 
 not objected to in the government's bill, and 
 
 "unless the friendly and mutually advantageous alliance of 
 the two railroads in this particular must be destroyed in 
 order to reach an unlawful combination in another par- 
 ticular that would otherwise escape, we are not disposed 
 to disturb the ownership of the Holding Company in the 
 
 Central Railroad's stock The two coal companies 
 
 must also be taken into account, and in our opinion it is 
 their union that lends most force to the government's com- 
 plaint. As we understand the facts, if the Central Rail- 
 road were divorced from the Wilkes-Barre Coal Com- 
 
 22 U. S. vs. Reading Co., et al., D. C. of U. S., E. D. of Penn'a, July, 
 191S (not yet reported). 
 
 23 Do. 
 
 24 Do. Brief for Gov't, filed May, 1914, pp. 52-55. 
 35 Do. p. S3. 
 
 26 Same as (21). 
 
 27 Do. 
 
Operation of the Law. 131 
 
 pany, the object of the bill would in this respect be sub- 
 stantially attained, and (as this particular matter was not 
 argued by counsel) we suggest it for their consideration 
 when the scope of the decree comes to be determined."^* 
 
 The court clearly recognized the presence of an unlawful com- 
 bination but, as shown above, did not commit itself specifically 
 and finally as to the exact nature of the illegality or the remedy 
 that should be employed. 
 
 b. Application of the Commodities' Clause. — In passing upon 
 that feature of the case involving the Commodities' Clause, the 
 court brought out nothing new, considering itself restricted to 
 the findings of the Supreme Court in earlier cases. It refused to 
 apply the findings in the Lackawanna case^* to the case in hand 
 because in the latter "there has been no change or attempted 
 change of ownership or interest in the coal — the railway has never 
 owned it," said the court, "or had any legal interest therein."*" 
 As in former cases it was considered that the holding of stock 
 did not in itself constitute such an interest as the law was de- 
 signed to prohibit, and that the further evidences submitted by 
 the government that the Coal Company was merely a department 
 or agency of the Holding Company were not sufficient "to de- 
 stroy the entity of the producing or owning corporation."*^ It 
 was concluded therefore "that the Commodities' Clause has not 
 been violated by the Reading Companies."** 
 
 The opinion gave much attention to the fact that most of the 
 relations complained of were freely permitted under state char- 
 ters long prior to the enactment of the Commodities' Clause. Al- 
 though this should undoubtedly be taken into consideration in ef- 
 fecting the adjustment of the affairs of the several companies, it 
 would seem to be irrelevant to endeavor to justify the virtual vio- 
 lation of a federal statute by showing that the acts complained of 
 were freely permitted under state law prior to federal legislation 
 rendering such acts unlawful in so far as they bore directly or in- 
 directly upon interstate commerce. Indeed this point has been 
 
 28 U. S. vs. Reading Co. et al, D. C. of U. S., E. D. of Penn'a, July, 
 191S (not yet reported). 
 
 29 U. S. vs. D. L. & W. et al., S. C. of U. S., June 21, 1915 (not yet re- 
 ported). 
 
 30 Same as (28). 
 
 31 Do. 
 
 32 Do. 
 
132 The Commodities' Clause 
 
 passed upon again and again by the Supreme Court until it has 
 become clearly established that the acts of Congress, as affecting 
 interstate commerce, take precedence over any state laws not in 
 harmony with such acts.** 
 
 The government offered what appears to be very conclusive 
 evidence that the Reading Coal Company was originally created 
 to own and operate anthracite coal mines** which could not be 
 so owned or operated directly by the railroad both because of 
 limitations in the charter of the latter*^ and an amendment to the 
 Constitution of Pennsylvania prohibiting a common carrier from 
 engaging directly or indirectly "in mining or manufacturing arti- 
 cles for transportation over its works."** The arrangement with 
 the Coal Company, however, enabled the Reading interests to ab- 
 sorb virtually all the coal lands hitherto held by rival interests,*^ 
 such lands comprising "over 60 per cent of all the coal lands in 
 the Schuylkill region" and between 40 and 50 per cent of all the 
 unmined anthracite in Pennsylvania."** 
 
 Very conclusive evidence was likewise submitted to show that 
 rebates had long been granted to the Reading Coal Company, and, 
 when such outright rebates became unlawful, the Holding Com- 
 pany made advances at unreasonably low interest rates, such rates 
 ranging from i to 2j^ per cent.*' In this manner, as stated in 
 the report of the Interstate Commerce Commission rendered July 
 30, 191 5, "the burden of interest charges on capital invested in 
 coal-mining operations is thus lifted from those operations and is 
 cast upon the Reading Railway rates and earnings."*" 
 
 As a result, said the Commission, "Published rates are 
 of no significance to this shipper, the Philadelphia and 
 Reading Coal and Iron Company, under such circum- 
 stances. The same executive officials control and admin- 
 ister the affairs of the railway company, the coal and iron 
 company, and the holding company ; therefore the coal and 
 
 33 U. S. vs. Trans-Mo. Frt. Assoc, 166 U. S. 290, 342; Armour Pckg. 
 Co. vs. U. S., 209 U. S. s6; U. S. vs. D. & H. Co., 213 U. S. 366. 
 
 34 Brief for Gov't, U. S. vs. Reading Co. et al., D. C. of U. S., E. D. 
 of Penn'a, filed May, 1914, pp. 37, 38. 
 
 35 Penn'a Laws, 1833, Section 2, p. 146. 
 
 36 Penn'a Const., Art. XVII, Section 5. 
 
 37 Same as (34), PP- 39, 40. 
 
 38 Annual Reports Reading R. R., 1880, 1881, 1891. 
 
 39 Same as (34), PP- SS-S7. 
 
 40 Report I. C. C. No. 4914, pp. 240, 241. 
 
Operation op the Law. 133 
 
 iron company receives offsets, against such published rates, 
 in the form of interest charges which are waived by the 
 same parties who are charged with the duty of collecting 
 and retaining the full published tariff rates on all ship- 
 ments."" 
 
 The Commission had not rendered the report above referred to 
 at the time of the decision in the Reading case, but the govern- 
 ment in its brief presented very conclusive evidence that the Coal 
 Company was, and is at this time, nothing more than a depart- 
 ment of the railway. The fundamental facts as found by the gov- 
 ernment were strongly substantiated by the exhaustive report of 
 the Commission, which summed up the situation in the declara- 
 tion that, "The carrier and the coal company are but the subsidiary 
 corporate hands of the holding company, in as much as the same 
 interests direct and administer the affairs of the three corpora- 
 tions."« 
 
 It is understood that the Department of Justice is preparing 
 an appeal of the case to the Supreme Court. 
 
 3. The Lehigh Valley Interests. — In the spring of 1914, the 
 government filed its revised petition** against the Lehigh Valley 
 Railroad Company in the District Court of the United States for 
 the Southern District of New York. The suit was based on the 
 alleged violation both of the Sherman Anti-trust Law and the 
 Commodities' Clause, although argument was directed primarily 
 toward the latter charge. In that part of the bill alleging viola- 
 tion of the Commodities' Clause, it is declared that the Lehigh 
 Valley Coal Sales Company was formed for the specific purpose 
 of evading the prohibitions of the law ; that over 80 per cent of 
 the capital stock of this company were owned by the majority 
 stockholders of the Lehigh Railroad; and that the monopoly 
 privileges thus accruing have enabled the Coal Sales Company to 
 turn over large dividends to its stockholders (for the most part 
 the same as the railroad's), amounting to 2j^ per cent quarterly, 
 in addition to an extra cash dividend of 25 per cent and what 
 amounted to a stock dividend of 25 per cent, both having been 
 declared in November, 1913, after twenty-one months of opera- 
 tion of the Coal Sales Company; that the company, after turn- 
 ing over such large profits to stockholders, possessed a surplus of 
 
 41 Report I. C. C. No. 4014, p. 241. 
 
 42 Do. p. 240. 
 
 43 Supra p. 113. 
 
134 The Commodities' Ci,ause 
 
 over a million and a quarter dollars ; and that the contracts of 
 the Lehigh Valley Railroad and the Lehigh Valley Coal Com- 
 pany with the Coal Sales Company (here the bill gave details of 
 the agreement entered into with the Sales Company. The facts 
 are very similar to those given above with reference to the Dela- 
 ware, Lackawanna and Western) are not such bona fide transac- 
 tions as take place between separate corporations.** 
 
 The decision in this case was rendered December 21, 1914, 
 prior to the decision of the Supreme Court in the Lackawanna 
 case.*' The court dismissed the case "so far as the Com- 
 modities' Clause is concerned with the statement that there 
 
 is no great difference between what the Lackawanna Railway did 
 and was upheld in doing by all the circuit judges of the third cir- 
 cuit"** and what the Lehigh Valley Railroad has been doing as 
 shown in this case. Doubtless the decision would have been dif- 
 ferent had it followed, instead of preceded, the decision of the 
 higher tribunal in the Lackawanna case. "Without further dis- 
 cussion," concluded the court, "it is held that nothing in the bill 
 charged constitutes a violation of the Commodities' Clause if the 
 decision in the Lackawanna Coal Sales case is right." The court 
 then attempted to sum up the whole situation in the following 
 language : 
 
 "The coal lands are lawfully owned ; the coal therefrom 
 is lawfully carried ; there is an actual and honest dissocia- 
 tion of interests between coal owned and coal carried; 
 
 no monopoly of interstate commerce is shown nor 
 
 any attempt to monopolize. For the proof of the pudding 
 is in the eating thereof, and it is impossible to find any of 
 the normal results of monopoly without also finding viola- 
 tions of the Commodities' Clause — ^and none is discov- 
 ered."*^ 
 
 In charging monopoly and restraint of trade the complaint al- 
 leges that the road 
 
 "completely dominates the market at all points thereon not 
 reached by another railroad and has the power to fix, has 
 fixed and does fix, without the check of competition, the 
 
 44 Petition of Gov't, U. S. vs. Lehigh Valley R. R. Co. et al., D. C. of 
 U. S., S. D. of N. Y., filed March, 1914. 
 
 45 Supra pp. 121-124. 
 
 46 Do. 
 
 47 U. S. vs. Uhigh Valley R. R. et al., D. S. of U. S., S. D. of N. Y., 
 July 21, 1914. 
 
■ Operation of the Law. 135 
 
 prices at which anthracite is sold at such points that 
 
 it has prevented the building of any new railroad into the 
 anthracite region served by it and has kept the independent 
 producers under the disadvantage of having to ship over 
 a railroad also engaged in the coal business." 
 
 It is further claimed that the railroad controls, through the Le- 
 high Valley Coal Company and affiliated companies, more than 80 
 per cent of the gross tonnage of the railroad in anthracite coal, 
 such tonnage amounting annually to about 14,000,000 tons, and 
 that the Coal Company is nothing more than "a mere adjunct, de- 
 partment or instrumentality of the Lehigh Valley Railroad."*^ 
 
 In reply to the government's allegations, the court said, "there 
 can be no restraint without control, and since the railroad does 
 not control the coal it carries, it has no means of restraint."*' 
 With this statement the bill was dismissed. 
 
 It is difficult to reconcile the sweeping nature of the court's 
 conclusions with the evidence as presented by the government 
 and substantiated by the report of the Interstate Commission 
 which has just appeared. The Commission found that the entire 
 capital stock of the Coal Company was owned by the railroad; 
 that large sums of money for operating expenses had been ad- 
 vanced to the Coal Company by the carrier and charged off by 
 the latter to its profit and loss and income accounts; that, in 
 1905, the carrier transferred securities to the Coal Company rep- 
 resenting coal-mining properties valued at more than $10,000,000 ; 
 that the Coal Company settled for the property by giving its own 
 certificates of indebtedness upon which, prior to 1912, no inter- 
 est was paid ; that the Coal Sales Company, according to a writ- 
 ten contract, ships and markets all coal mined or purchased by 
 the Coal Company; that the stockholders of the railroad own 
 virtually all the stock of the Coal Sales Company, such stock 
 having been bought by the former with extra dividends declared 
 by the railroad for this specific purpose ; and that the railroad is 
 guarantor of $11,500,000 bonds issued by the Lehigh Valley Coal 
 Company.'" In this summary we have introduced only such facts 
 as were borne out by the investigation of the Interstate Commerce 
 Commission, although a vast amount of additional evidence was 
 
 48 Petition of Gov't, U. S. vs. Lehigh Valley R. R. et al., D. C. of U. S., 
 S. D. of N. Y., filed March, 1914. 
 
 49 Same as (47). 
 
 50 Report I. C. C. 4914. PP- 24S, 246, 225, 252, 284, respectively. 
 
136 The Commodities' Ci,ause 
 
 submitted by the government in support of its contentions. This 
 has been omitted because it is quite similar to that found in other 
 cases and treated at length above. 
 
 The Department of Justice is likewise understood to be pre- 
 paring an appeal. It may be fairly assumed that the principles of 
 law applied in the Lackawanna case above discussed will likewise 
 be applied in the Lehigh Valley case. 
 
CHAPTER V. 
 
 INADEQUACY OF THE COMMODITIES' CLAUSE- 
 PROPOSALS CONSIDERED. 
 
 I. Deficiencies of Existing Statutes. 
 
 The decision in the Lackawanna case will, of course, necessi- 
 tate the abolishment of the coal sales company as an actual de- 
 partment and agent of the railway but it will not affect coal com- 
 panies bearing a lesser relationship although such relationship 
 might be sufficiently effectual; nor will it have any bearing upon 
 the railroad as a producer and seller of coal further than to en- 
 join the carriage of coal produced by the railroad and sold before, 
 ca/rriage to a coal company wholly dominated by the former. 
 This leaves the railroad free to own and operate coal mines and 
 any producing and manufacturing concerns which it may desire 
 to own and operate; and permits the sale of coal to companies all 
 but dominated by railway interests. In other words, even assum- 
 ing decisions in the other anthracite cases similar to that in the 
 Lackawanna case, an interstate railway may still engage in any 
 line of business formerly permitted, provided it does not carry the 
 merchantable product resulting therefrom while it is the owner 
 thereof, or receive for carriage a product which it has "sold" to 
 an agency or corporation wholly dominated by it. 
 
 A very similar issue is presented where railway officials or em- 
 ployees own stock in adjacent coal mines. The extent and effect 
 of such holdings have already been fully discussed.^ The courts 
 have not yet met this issue squarely, and, in view of the construc- 
 tion placed upon the words "directly or indirectly," it is assumed 
 that existing statutes will not be construed to affect such holdings. 
 Nor have the courts passed upon the specific issue presented by 
 the interlocking of directorates. It is difficult to consider this 
 feature apart from the present relations existing between the coal 
 roads and the coal sales' corporations since their interests appear 
 entirely merged not only through common directors but through 
 common officials and stockholders and financial interests. The 
 interlocking of directorates, however, may be regarded as a dis- 
 
 I Chapter II, Sections 3, 4, and S- 
 
 137 
 
138 The Commodities' Clause 
 
 tinct problem, since entirely diverse financial interests may very 
 readily eliminate competition and foster monopoly control by be- 
 coming parties to such relationships. 
 
 Again the selection of officials in one corporation for similar 
 offices in another, whose policy it is to the interest of the former 
 to control, renders impossible a separate and distinct existence. 
 In fact the extent of the influence of the officials-in-common to 
 control the policy of the company which the original corporation 
 has created or desires to control is measured only by the power 
 of such officials to make the subordinate corporation a mere in- 
 strumentality of the principal. Where the board of directors is 
 entirely different the power of the officials-in-common to mark out 
 and advantageously correlate the policies and operations of the 
 concerns in question is undoubtedly great; where such officials 
 may control all, or a majority, of the directors in both corpora- 
 tions that power is absolute. Where interests supplementary in 
 their nature, such as the businesses of production and of trans* 
 portation, are so correlated, independent industries can not thrive ; 
 not only so but they must inevitably yield themselves to similar 
 joint operators or withdraw from the field after disposing of 
 their plants to those concerns engaged in both producing and 
 transporting. Amendments looking to a severance of the business 
 of production, mining and manufacturing, from that of transpor- 
 tation should therefore include provisions restricting or regulating 
 both the interchange of directorates and the selection of officials 
 in common. 
 
 Again the matter of the origin of commodities presented for 
 transportation is of fundamental importance. It has been clearly 
 decided that Congress may prohibit an interstate railway from 
 receiving and transporting commodities in interstate commerce 
 which it owns at the time of such reception and transportation ; 
 but it remains to be ascertained as to whether Congress may like- 
 wise prohibit, if the carrier in question has itself manufactured, 
 mined or produced the commodity but has sold it prior to receiv- 
 ing it for transportation. In the light of the court's interpretation 
 which has been presented above, this issue will not be met until 
 the existing statute has been so amended by Congress as to raise 
 the specific question of the power of Congress to so legislate. In 
 the light of the principle laid down by the Supreme Court that 
 Congress may prohibit railways from transporting in interstate 
 commerce commodities owned by it, it is believed that Congress 
 
Rembdiai, Legisi<ation. 139 
 
 likewise has power to establish similar prohibitions affecting the 
 manufacture, mining and producing of such commodities where 
 it clearly appears that the result attained in the latter case is sim- 
 ilar to that in the former. This contention is substantiated in an 
 earlier decision of the Supreme Court where it was laid down that 
 even "if the result of applying the prohibitions as we have inter- 
 preted them will be practically to render it difficult, if not impos- 
 sible, for a carrier to deal in commodities, this affords no ground 
 for relieving us of the plain duty of enforcing the provisions of 
 the statute as they exist. This conclusion follows since the power 
 of Congress to subject every carrier engaged in interstate com- 
 merce to the regulations which it has adopted is undoubted."^ 
 
 Briefly summarizing the above observations, it appears that the 
 present law as construed is deficient in that it permits a railway 
 to own and operate mining, manufacturing, or producing con- 
 cerns, and transport the products thereof, provided only that such 
 products be sold prior to presentation for shipment ; and to main- 
 tain relations with mining, manufacturing, or producing concerns, 
 through stock ownership, or interchange of directors or officials, 
 or otherwise, which enable such railway to carry on operations in 
 virtual violation of the law. 
 
 II. Proposals Considered. 
 
 I. The Leasing System as Applied to Coal Lands Owned by 
 the State. We are of the opinion that vested property rights 
 should not be interfered with by the state so long as such rights 
 are administered with proper regard for the interest which so- 
 ciety may maintain in them ; but the state, the creator, should 
 ever regard the public interest as paramount and should hold 
 corporations, enjoying valuable franchises to a strict account. 
 This is especially true with regard to our coal deposits. They 
 are limited ; they can not be replaced ; they are necessary for our 
 present and future comfort and our economic development. Any 
 corporation or individual owning these our most valuable mineral 
 deposits is therefore responsible for the proper administration of 
 them. The state which grants the right should see to it that the 
 properties are economically operated and the product supplied to 
 consumers at reasonable prices. 
 
 2 N. Y., N. H. and H. vs. C. and O. R. R., 200 U. S. 361. 
 10 
 
140 Thk Commodities' Ci^ause 
 
 It is not such a difficult matter to settle upon a satisfactory 
 method of operating coal mines now owned by the federal or 
 state governments. The leading authorities seem to agree that 
 the ideal plan would consist in the state's retaining the title to all 
 such properties and leasing them to private corporations or in- 
 dividuals upon clearly stated principles of operation. This plan 
 is especially advisable from the standpoint of conservation. It 
 would also serve as a valuable regulator of conditions of opera- 
 tion as well as the price of the product, especially in those regions 
 where state mines are of sufficient importance to oflfer substantial 
 competition to private interests. 
 
 The federal government still retains title to a very large area 
 containing valuable coal deposits. During the two previous ad- 
 ministrations about 90,000,000 acres of coal lands were withdraw 
 from entry in the United States ; and, in 1906, all the workable 
 anthracite and bituminous coal fields in Alaska, not yet occupied, 
 were likewise withdrawn from entry. The latter action affected 
 800,000 acres of valuable coal lands and in addition a vast area 
 containing coal-bearing rock. 
 
 Several of the western states, notably Wyoming and Colorado, 
 have introduced the leasing system as the basis of operating pub- 
 lic coal lands.^ 
 
 The Wyoming system was inaugurated in 1907. It provides, 
 that the lessee begin prospecting within sixty days after securing 
 the lease, and undertake actual mining operations within six 
 months if workable deposits are found ; that the work be carried 
 on economically and efficiently; that a certain minimiun royalty 
 be paid when the lease is granted, this amount being credited to 
 the lessee on total royalties due, payments being made monthly; 
 that privileges under the lease extend only to coal deposits, the 
 surface being reserved for other purposes ; that lessee render an 
 accurate record of all coal mined, submitting the same to the 
 State Board of Land Commissioners, the latter having access to 
 all the books and accounts of the operator and employing other 
 means of checking up reports ; that a royalty of ten cents be paid 
 on each short ton less one-twelfth of the minimum annual royalty 
 mentioned above ; that the superintendent of the mineral depart- 
 ment of the state board have supervision over all mining oper- 
 ations; that the lessee may not assign or sublet his privileges 
 
 3 Geo. H. Ashley, Bulletin 425, U. S. Geological Survey, p. 43. 
 
REMEDIAL LEGISIvATION. I4I 
 
 without the permission of the state board; and that failure to 
 obey these regulations shall lead to a termination of the lease.* 
 It is stated that the total cost of collecting royalties due does not 
 exceed five per cent of the amount accruing to the state." 
 
 A system similar to that of Wyoming is in operation in Colo- 
 rado, the only important difference being a descending scale of 
 royalties, ranging from six to three cents as the output increases. 
 This is, of course, a strong incentive to carry on active operations 
 although it would work a hardship to lessees of mines of small 
 capacity. 
 
 Shortly after the Wyoming and Colorado plans went into effect, 
 the then Secretary of the Interior, in his annual report, gave very 
 decided approval to the leasing principle. He recommended that 
 some similar method be employed with regard to the federal coal 
 lands. He declared that the "chief object to be attained in any 
 such legislation is to conserve the coal deposits as a public utility 
 and to prevent monopoly or extortion in their disposition" ; that 
 the right to mining privileges should be distinct from title to the 
 soil; that the public mines would be best conserved and most 
 equitably administered if the government would retain title and 
 lease to individuals or associations "with restrictions on their 
 mining and use which would control the minimum output and 
 conserve the deposits."* The proposals of the department were 
 not presented in detail but the general method suggested was 
 very similar to that employed by Colorado and Wyoming. 
 
 The leasing system possesses two fundamental possibilities : 
 (i) the proper conservation of our coal resources; and (2) the 
 sale of coal to the consumer at a fair and reasonable price. The 
 first result may be secured by maintaining strict supervision over 
 all mining processes so as to avoid waste, or scraping or any care- 
 less method of operation. Such supervision should not only apply 
 to individual mines but to the entire area of public coal lands. 
 Leases should be granted annually only to such a proportion of 
 the mines as the demand and total available supply justify, due re- 
 gard being given to the output of privately owned mines as well 
 as the conservation of the entire public deposits. Furthermore, 
 the capacity of properties should be carefully ascertained by min- 
 
 4 Geo. H. Ashley, Bulletin 425, U. S. Geological Survey, pp. 45-47. 
 
 5 Do. p. 47. 
 
 6 Annual Report of Secretary of Interior, 1900. 
 
142 The Commodities' CtAusE 
 
 ing engineers and a proper apportionment made among individuals 
 and associations taking out leases. Every party receiving a grant 
 should be required to show his financial and mechanical ability to 
 carry out the provisions of the lease. The government itself 
 should do the prospecting and the lessee should be prepared to 
 enter upon actual operation within a reasonable time. 
 
 The second object, the maintaining of a fair price level, may be 
 attained by writing into the lease as a condition precedent to 
 operation under it, such requirements as are in accord with the 
 government policy. It would be necessary in developing the prop- 
 erties as a public utility to have control of the price of the product. 
 In order to ascertain what this should be, the workable value 
 (considering the cubic content, character of seam, and general 
 conditions existing) would have to be carefully estimated. The 
 government's mining experts and accountants should estimate 
 cost of equipment, overhead expenses, interest charges on capital 
 invested by lessee, and the sinking fund necessary to meet de- 
 preciation of the plant. On this basis the operator could be per- 
 mitted a reasonable per cent profit. It would be necessary, of 
 course, to grant leases for a given period of years in order to 
 justify the investment of capital by the lessee. It seems gener- 
 ally agreed that a period of fifteen or twenty years would be 
 adequate, the government reserving the privilege of withholding 
 extensions or of changing the conditions.' 
 
 The financial terms of the lease should require a royalty on 
 each ton taken out of the mines. This amount should be gauged 
 by the quality of coal and the expense of operation. The royalties 
 suggested range from three to ten cents per ton. The royalty 
 plan employed by the State of Wyoming has a descending scale 
 as output increases.^ Such a system if properly supervised might 
 be advantageous; ordinarily it would seem to place the smaller 
 producer at a disadvantage. 
 
 Allotments should be of such extent as to justify the introduc- 
 tion of modern equipment, thus enabling operators to carry on 
 the work efiiciently and economically, and to compete with pri- 
 vately owned mines. Care should be observed, however, that no 
 
 7 Chas. R. Van Hise, The Conservation of Natural Resources, pp. 43, 
 44; also Wharton Barker before Senate Committee on Interstate Com- 
 merce, fed Cong., Hearings, pp. 60s, fe?- 
 
 8 Geo. H. Ashley, Bulletin 425, U. S. Geological Survey, p. 46. 
 
Rbmediai, Legislation. 143 
 
 particular interest or set of interests could acquire control of an 
 undue proportion of the coal lands. 
 
 Under the leasing plan the government would maintain contin- 
 ual supervision not only over the method of operation and the 
 sale of the product, but also of conditions of employment, wages, 
 hours, and other details of practical operation. It would appear 
 necessary, however, to place the leasing system in operation on 
 the basis of a broad, well-defined principle of public policy and 
 let modifications be made as experience justifies. For the pres- 
 ent the federal government and the states should retain posses- 
 sion of their respective properties. Experience might show it to 
 be advisable for the states themselves to administer the affairs of 
 public coal lands within their borders, the federal government, 
 however, retaining title in all land under territorial rule. 
 
 The above principle is the ideal one with respect to our public 
 coal lands. Dr. Van Hise states it as his opinion that the govern- 
 ment should never have disposed of any of its coal lands but 
 should have operated them on the lease and royalty basis; he 
 adds, however, "that is a question which it is useless now to dis- 
 cuss."* 
 
 2, The Federal Commission Plan. — ^A plan now being fa- 
 vored by a very respectable contingency for handling the great 
 industrial corporations involves a federal commission having gen- 
 eral supervisory functions without arbitrary power; or else a 
 commission having a greater or less degree of authority to regu- 
 late capitalization, prices and operations. 
 
 We are concerned with such proposals only in so far as they 
 affect the situation in hand. Would it be feasible to apply the 
 commission idea to the railway and coal combine as it now exists f 
 Passing over the confusion that would result from having a dis- 
 tinct federal commission supervise the operations of a combina- 
 tion one of whose factors is already subject to an interstate com- 
 mission, it is believed that the commission would not only fail to 
 solve the problem but would accentuate the evil by legalizing re- 
 lationships that are responsible for the condition now existing, 
 thus making the government a party to a scheme which would 
 ultimately lead to absolute railway monopoly and the destruction 
 of independent coal industry. 
 
 We do not hesitate to set up that no plan of regulation can be 
 
 9 Chas. R. Van Hise, The Conservation of Natural Resources, p. 42. 
 
144 The Commodities' Ci,ause 
 
 effective until the railways have been separated from the mining 
 industry. It is contrary to public policy to place in the hands of 
 a private corporation such a valuable franchise as that held by 
 common carriers and at the same time attach to such fran- 
 chise the ownership and operation of the most valuable mineral 
 resources the country possesses — ^legalizing such joint monopoly 
 by assuming the propriety of its existence in the very laws pro- 
 posed. The profits accruing to interests which control the raw 
 materials of a country are sufficiently great to attract capital and 
 energy, and the profits from transportation, as apart from the 
 business of producing or manufacturing, are likewise great. It 
 would be a most unjust policy for a government to pass laws 
 recognizing and permitting the combination in single heads of 
 such vast and profitable interests as are involved in the control 
 of our raw materials and our transportation franchises. It would 
 mean the building up, under governmental sanction, of joint in- 
 terests that would dominate our entire industrial system and 
 would ultimately sweep every independent railway or mining con- 
 cern into the business of joint operation. 
 
 We are to apply the proposal especially to the coal industry. 
 Let us consider again the situation in the anthracite fields. About 
 eighty per cent of the mines are controlled directly or indirectly 
 by railway interests. The special advantages accruing to mines 
 so controlled have enabled railways to extend their mining inter- 
 ests by absorbing properties not so related. It requires no argu- 
 ment to show that a railway-mining corporation will and does 
 carry on the joint business of mining and transporting in a man- 
 ner prejudicial to independent industry. The latter must join the 
 monopoly or withdraw from the field. The plan in fact presup- 
 poses such joint monopoly and would operate to give legal sanc- 
 tion to a condition under which the independent could not exist. 
 Railways, instead of controlling seventy or eighty per cent of the 
 anthracite industry, would soon acquire one hundred per cent 
 control, and would be protected by the government in such acqui- 
 sitions as well as in profits accruing therefrom. 
 
 From these considerations it is very clear that the government 
 could not consider the application of the commission plan to the 
 situation as it now exists. Dissociation is fundamental ; it must 
 come first, and must be included in any wise program looking to 
 the solution of the difficulty. In the past railway capital and rail- 
 way energy and foresight have created the condition. We would 
 
Remedial Legislation. 145 
 
 favor the absolute elimination of the railway as a direct or an in- 
 direct factor in the mining or the purchase and sale of coal and 
 would give such administrative supervision to the redistribution 
 and the continued operation of coal properties as would prevent 
 the recurrence of such a contingency. 
 
 It is very improbable, if restrictive legislation be properly sup- 
 plemented, that coal properties would again fall under monopoly 
 control. The great industrial corporations became thoroughly 
 established before the country was fairly aware of their existence 
 and their plan of operation ; before public sentiment had created 
 a governmental policy ; and before the government had perfected 
 her machinery for dealing with them. It is very doubtful if any 
 such illegitimate manipulations as characterized the earlier oper- 
 ations of corporations, could be repeated in an effort to evolve 
 additional combinations. In the case of the coal industry it may 
 be said that the proposed dissolution once effected, the govern- 
 ment could restrain in its inception any scheme looking to the il- 
 legal combination of financial interests controlling the deposits. 
 
 If it is desired to assume that the government is incompetent 
 to effect a bona fide dissolution, or to prevent such concerted ac- 
 tion, of which we can not conceive but which has been assumed by 
 some, we would seriously question the advisability of permitting 
 the interests, guilty of operations and policies in contempt of the 
 law, to continue ownership, under a commission or otherwise, of 
 the natural resources affected. Especially would we oppose the 
 adoption of a policy that would place the government in the atti- 
 tude of succumbing to interests guilty of such violation, and of 
 guaranteeing to such interests perpetual and monopoly profits 
 from valuable franchises and natural resources which concern so 
 vitally the industrial development of the country and the well- 
 being of all citizens. Rather than submit to such a humiliating 
 proposal and thus recognize the existence of a power superior to 
 that of the government itself, it would be better for the state to 
 condemn all coal properties and operate them on the lease and 
 royalty basis as has been above suggested as the best method of 
 handling state-owned coal properties. 
 
 It is another question as to whether the commission would be 
 helpful in regulating the coal industry after the dissolution shall 
 have been effected. The policy would then be purely one of ad- 
 ministrative detail, and experience would doubtless demonstrate 
 the advisability of an industrial commission one of whose func- 
 
146 Thu Commodities' Ci,ause 
 
 tions might be the supervision of the business of mining and 
 dealing in coal. This duty could well be performed by a general 
 commission exerting similar supervision over other industrial con- 
 cerns. 
 
 President Charles R. Van Hise, of the University of Wisconsin, 
 in an address before the American Mining Congress (Philadel- 
 phia, Oct. 22, 1913), looking at the question from the standpoint 
 of the conservation of our coal supplies, favored an interstate 
 trade commission equipped with broad powers similar to those 
 possessed by the Interstate Commerce Commission, whose func- 
 tion it shall be to "regulate cooperation." 
 
 "Under the Sherman Act," said Dr. Van Hise, "there is no op- 
 portunity to limit output, divide territory, or regulate prices 
 
 If the operators could agree upon limitation on output, and divi- 
 sion of market so as to reduce freights, and could arrange for rea- 
 sonable prices which would give them no more than their present 
 profits, they would then be able to follow these principles (those 
 of conservation) in mining their coal My proposal to rem- 
 edy these conditions is neither regulated competition nor regu- 
 lated monopoly, but retention of competition, prohibition of 
 monopoly, permission of co-operation and regulation of the lat- 
 ter."" 
 
 Dr. Van Hise is doubtless correct in charging wasteful methods 
 in the mining of coal, but the extent to which railroads and mine 
 operators have already combined in the matter of the apportion- 
 ment of tonnage, the allotment of facilities, and the setting of 
 prices, indicates that the cause is not to be found in the ability 
 of operators "to limit output, divide territory, or regulate prices." 
 In fact, Dr. Van Hise recognizes the existence of cooperation 
 when he says later in the same address, "Does it make any dif- 
 ference here in Philadelphia, the home of the anthracite, whether 
 one buys coal of one dealer or another? It doesn't make any dif- 
 ference in the country cross roads either. The price is just the 
 same from all dealers in the same locality." So far as the anthra- 
 cite fields are concerned, railway control has been all-powerful, 
 and the interests controlling the mines have worked so harmoni- 
 ously that they have enjoyed most of the privileges that abso- 
 lutely unlimited cooperation could afford. If this be true, some 
 
 10 The Dallas Morning News, Oct. 23, 1913; also The Conservation of 
 Our Natural Resources, Chas. R. Van Hise, pp. 26-29. 
 
Remedial Legislation. 147 
 
 other reason must be found for the wasteful methods employed 
 in the mining of coal. 
 
 We are inclined to attribute the careless and wasteful methods 
 to the simple economic principle that intensive methods, requiring 
 a larger outlay for capital and labor, will not be employed so long 
 as the cheaper method returns a larger profit than the more ex- 
 pensive method. When coal becomes less plentiful and the de- 
 mand increases accordingly, the higher price paid will justify 
 greater outlay for the re-opening of mines that have simply been 
 skimmed of the surface deposits. It is doubtful if "regulated co- 
 operation," which would appear to have the same meaning as 
 "regulated competition," or "regulated monopoly," depending on 
 the view point, would solve the problem of wastefulness. Unless 
 direct legislation were feasible, it is a question that can not well be 
 solved except through the natural operation of the law of supply 
 and demand. The same problem is confronted in the wasteful 
 methods employed in the cutting of timber, and even in the culti- 
 vation of the soil. Direct legislation would doubtless be helpful, 
 but very hard to enforce ; but indirect legislation, designed to ef- 
 fect savings in methods by regulating cooperation, or competi- 
 tion, would probably accomplish very little so long as the interests 
 are in private hands and operated on the competitive principle. 
 
 3. Amendments Necessary to Render Act Effective. — In the 
 light of the facts above set forth and the defects of the present 
 statute as drawn and construed by the courts, it is apparent that 
 amendatory legislation is necessary if the principle of dissociation 
 is to be made effectual. To accomplish this result a statute should 
 be enacted which will not only prohibit railways from the actual 
 ownership and operation of coal mines, but which will effectually 
 eliminate all the numerous devices to which railways have re- 
 sorted in order to secure control of the coal industry. In order, 
 therefore, to destroy the railway monopoly of the coal industry 
 and to restore competitive conditions in this industry, it is pro- 
 posed that the act entitled, "An act to regulate commerce," ap- 
 proved February fourth, eighteen hundred and eighty-seven, as 
 heretofore amended, be amended, so as to contain, at an appro- 
 priate place, the following provisions, viz : 
 
 I. That it shall be unlawful for any common carrier 
 railroad company, subject to the provisions of this act, to 
 own, control, or operate any coal lands or coal mines in 
 
148 The Commodities' Clause 
 
 the territory served by it or connected directly or indirect- 
 ly with its operations, except for its own fuel purposes ; 
 
 II. That no officer, director, manager, trustee, em- 
 ployee, or receiver of any corporation, owning, controlling, 
 or operating any coal lands or coal mines, or engaged in 
 the business of producing, mining, or shipping coal, shall, 
 while acting as such, act as an officer, director, manager, 
 trustee, employee or receiver of any common carrier rail- 
 road company subject to the provisions of this act; pro- 
 vided that this section shall not be construed to apply to in- 
 terests so far removed as to render any form of discrim- 
 ination impossible ;^^ 
 
 III. That no person, firm, or corporation, owning or 
 holding, either directly or indirectly, the stock, bonds, or 
 other evidences of indebtedness of any common carrier 
 subject to the provisions of this act, shall, at the same time, 
 own or hold, either directly or indirectly, any of the stock, 
 bonds, or other evidences of indebtedness of any firm or 
 corporation, owning, controlling, or operating any coal 
 lands or coal mines, or engaged in the business of mining, 
 producing, or shipping coal ;^^ 
 
 IV. That no person, firm, or corporation, owning, con- 
 trolling, or operating, any coal lands or coal mines, or en- 
 gaged in the business of mining, producing, or shipping 
 coal, shall, at the same time, own or hold any of the stock, 
 bonds, or other evidences of indebtedness of any common 
 carrier subject to the provisions of this act ;^^ 
 
 V. That no common carrier railroad company, subject 
 to the provisions of this act, shall expend any money, or 
 incur any liability, or acquire any property, not in the 
 operation of its railroad, or in the legitimate improvement, 
 extension, or development, of its railroad;^* 
 
 VI. That the preceding five sections shall be in force 
 and effect from and after }^ 
 
 11 This proviso might well be omitted since, on authority of Holy 
 Church vs. U. S., 143 U. S. 457, the statute would not be construed to pro- 
 hibit relationships from which no discrimination could possibly arise. 
 
 12 The same proviso appended to Section 2 may be here inserted. 
 
 13 Do. 
 
 14 Do. 
 
 15 The period for adjustment should be at least five years. 
 
Remediai< Legislation. 149 
 
 It is a question as to whether common carriers should be per- 
 mitted to own and operate coal mines anywhere (except for their 
 own fuel purposes), or hold stock in such mines, or indentify 
 themselves in any way with any industry which does not con- 
 tribute directly to their efficiency as common carriers. It is very 
 clear that such relationships should not be permitted in the terri- 
 tory served by the railroad in question. It is equally clear that a 
 railroad should not divert the stockholder's funds into any purely 
 speculative enterprise either in its own territory or in any other. 
 Such procedure would not only be unfair to stockholders but, 
 which concerns our discussion more directly, would work a detri- 
 ment to the railway by alienating financial support. Still another 
 case might arise if a railroad should desire to make investments 
 or assume obligations in sections of the country or in industries 
 or securities over which its influence as a common carrier does 
 not extend. How far may a railway properly go in investing 
 funds held as a surplus or intended to be distributed in due time 
 as dividends? Good financing requires that a corporation retain 
 no "uninvested" funds beyond such as are necessary to meet cur- 
 rent expenses and maintain the replacement fund and a sufficient 
 reserve against emergencies. 
 
 The whole field of municipal, state, and federal securities 
 should be open to railway investment. Under proper regulations, 
 loans might safely be granted on the basis of real estate mort- 
 gages secured by property removed from the railway's region of 
 influence. Other securities for railway investment could be des- 
 ignated, conditions being laid down under which certain industrial 
 securities representing properties or interests not affected by the 
 railway's favor or disfavor might be acquired. Such investments 
 should be in accord with approved methods of railway financier- 
 ing and should in no case be for the purpose of acquiring influence 
 or control. As an additional safeguard, the privilege of voting 
 stock should be withheld. 
 
 In order to make the statute logically applicable to the condi- 
 tions which have appeared as well as to save it from being dis- 
 counted before the courts in a possible test case representing in 
 no sense the character of relationship which it is designed to pro- 
 hibit, we have drawn the statute so as to restrict the prohibitory 
 effect to "territory served" by it and to interests over which the 
 railway has an influence on account of its function as a common 
 carrier. 
 
ISO The Commodities' Clause 
 
 The reasons for the remaining sections appear on their face 
 and are designed to remedy those defects in the existing statute 
 which we have pointed out above.^* 
 
 It is not maintained that railways and coal companies would not 
 sufifer some hardships in adjusting their affairs to this statute. It 
 is believed, however, that a period of five years would be ample 
 time for the railways to dispose of their coal properties on rea- 
 sonable terms, and make such other adjustments as the situation 
 would require. The term suggested may very reasonably be 
 granted in view of the complexity of the relationships involved 
 and the conditions under which they have been permitted to de- 
 velop. In reply to those who prophesy disruptions and receiver- 
 ships, we may refer briefly to other industries in which the prin- 
 ciple of dissociation has been insisted upon and to the difificulties 
 that have resulted in certain other fields from attempts to merge 
 diverse interests and make them subject to a single directive head. 
 
 i6 Chapter V, Section i. 
 
CHAPTER VI. 
 CONCLUSION. 
 
 I. Practical Applications. 
 
 I. New York Insurance Companies and Banking Interests. 
 — The report of the Joint Committee of the Senate and the As- 
 sembly of the State of New York, appointed to investigate the 
 affairs of life insurance companies, brought out the following 
 facts: (i) That insurance companies were carrying on various 
 businesses "foreign to the purposes of their organizations;"^ (2) 
 that some "have practically transacted the business of banks 
 
 and trust companies," and in one case a restaurant, 
 
 "through the control of subsidiary companies by means of stock 
 ownership;"* (3) that they "have placed millions of dollars at 
 the disposal of other companies through the maintenance of in- 
 active deposit accounts at low rates of interest;"^ (4) that the 
 "large companies have freely furnished their support to numerous 
 financial adventures through participation in the underwritings of 
 syndicates;* and (s) that such participation was "given" (that 
 is, the insurance companies would agree to take certain blocks of 
 stock at the same rate paid by the syndicate manager if such 
 stock could not be disposed of at the higher and regular price, it 
 being understood, however, that all profits accruing from sales to 
 others of the amount of stock so tentatively subscribed for by the 
 corporations so favored, should be divided between the syndicate 
 manager and the corporation) insurance companies, and under 
 such circumstances "the dominant motive is to secure the good 
 will and the favor of the company as a purchaser of securities 
 rather than to get the protection of the company as an under- 
 writer."* 
 
 1 Report of New York Committee (Assembly Report No. 41), appointed 
 to investigate life insurance companies (submitted Feb. 22, 1906), p. 361. 
 
 2 Do. p. 381. 
 
 3 Do. pp. 381-382. 
 
 4 Do. pp. 382-383. 
 
 5 Do. pp. 382, 383. 
 
152 The Commodities' Clause 
 
 The report also said that the testimony disclosed "flagrant 
 abuses in connection with investments in real estate," many such 
 purchases having been made "under the guise of procuring suit- 
 able accommodations for the transaction of business," and that 
 such purchases were "not necessary in any proper sense for the 
 use of the corporation."^ 
 
 The conclusions of the committee are so pertinent to our sub- 
 ject that we can not do better than quote freely from them : 
 
 "The dangerous tendencies," it declared, "of these prac- 
 tices are obvious. They have brought insurance companies 
 into close relations with railroads, banks, trust companies, 
 banking houses and the flotation of new enterprises, thus 
 involving them in the manifold transactions of the finan- 
 cial world, not in their normal relation as creditors through 
 suitable investments, but as co-owners of the corporations 
 and promoters of the undertakings to which they have thus 
 become allied. They have weakened the sense of official 
 responsibility, multiplying the opportunity for gains, both 
 direct and indirect, to officers and directors through the 
 use of the companies' funds, and making easy the exercise 
 of official discretion at the promptings of self-interest. 
 
 "They were not incorporated to make money by specu- 
 lation, by barter, by purchase or resale or by the develop- 
 ment of industry. They should not attempt, and should 
 not be permitted to attempt, to undertake by indirection 
 that which may not be done directly under the provisions 
 of their charter. 
 
 "Investments in stock should be prohibited. They are 
 fundamentally objectionable, as the corporation, instead of 
 holding a secured obligation, acquires a proprietary inter- 
 est in another business, with rights subject to all indebted- 
 ness which may be created in the conduct of it and often 
 direct liabilities as stockholders. 
 
 "If the stock holdings constitute a small minority, the 
 investment is at the mercy of administrators chosen by the 
 majority stockholders. If the stock interest be a large one, 
 it is frequently found advisable to increase it until a sub- 
 stantial control is effected, and the insurance corporation 
 is not only engaged in a different enterprise but directly 
 
 undertakes its management Long ago the Prussian 
 
 government refused admission to its jurisdiction of any in- 
 surance company investing in stocks, and the restriction 
 has been found salutary and not burdensome. The Ger- 
 
 6 Report of New York Committee (Assembly Report No. 41), appointed 
 to investigate life insurance companies (submitted Feb. 22, 1906), p. 379. 
 A New York statute, Art I, Sec. 20, forbade such acquisitions except "such 
 as shall be required for the accommodation of its business." 
 
Peacticai, Appucation. 153 
 
 mania, doing a large business in Prussia, has readily com- 
 plied with its laws and the New York Life, which, with 
 some reservations not publicly proclaimed, has professed 
 compliance with the Prussian rule, has not been embar- 
 rassed in making its investments. 
 
 "It is entirely indefensible," continued the committee, 
 "to permit one to act as the trustee of an insurance cor- 
 poration in a transaction in which he may benefit, apart 
 from his interest in the corporation, by the exercise of his 
 discretion Whatever the immediate result of the pro- 
 posed changes in their loss or gain, it is essential to their 
 maintenance upon a sound basis that they should be freed 
 from the alliance and practices which the testimony before 
 your court has disclosed."' 
 
 The committee included in its report the following recommen- 
 dations : 
 
 "(i) That no investment in the stock of any corporation 
 shall be permitted, except in public stocks of municipal cor- 
 porations. 
 
 "(2) That investments in bonds secured to the extent of 
 more than one-third the value of the entire security there- 
 for by the hypothecation of corporation stocks shall be 
 prohibited. 
 
 "(3) That no loans shall be made upon stocks and bonds 
 which are not the subject of purchase under the above pro- 
 visions. 
 
 "(4) That every company now owning stocks or bonds 
 of the prohibited classes shall be required to dispose of 
 the same within five years from December 31, 1906, and 
 each year prior thereto shall make a reduction of the 
 amount of such investments to an extent approved by the 
 Superintendent of Insurance. 
 
 "(S) The statute should also forbid all syndicate par- 
 ticipations, transactions for purchase and sale on joint ac- 
 count, and the making of any agreement providing that 
 the company shall withhold from sale for any time, or sub- 
 ject to the discretion of others, any securities which it may 
 own or acquire. 
 
 "(6) It should also be provided that no officer or direc- 
 tor should be pecuniarily interested either as principal, co- 
 principal, agent or beneficiary in any purchase, sale or 
 loan made by the corporation, except in case of a loan 
 upon his policy."* 
 
 7 Report of New York Committee (Assembly Report No. 41), appointed 
 to investigate life insurance companies (submitted Feb. 22, 1906), pp. 
 383-387. 
 
 8 Do. pp. 387. 388. 
 
154 The Commodities' Ci,ause 
 
 As a result of this report and the recommendations of the com- 
 mittee the legislature enacted the following amendment : 
 
 "No domestic life insurance company shall after 
 
 the 1st day of June, 1906, invest in or loan upon any shares 
 of stock of any corporation, other than a municipal cor- 
 poration, nor, excepting government, state or municipal se- 
 curities, shall it invest in, or loan upon, any bonds or obli- 
 gations which shall not be secured by adequate collateral 
 security or where more than one-third of the total value 
 of the collateral security therefor shall consist of shares 
 of stock. Every such corporation which, on the first day 
 of June, 1906, shall own any shares of stock other than 
 public stock of municipal corporations whenever the same 
 shall have been acquired, or any bonds or obligations of 
 the kinds above described where said bonds or obligations 
 shall have been acquired after the first day of March, 1906, 
 shall dispose of the said shares of stock and of said bonds 
 and obligations within five years from the thirty-first day 
 of December, 1906, and in each year prior to the expira- 
 tion of said five years shall make such reduction of its 
 holdings of said securities as may be approved in writing 
 by the Superintendent of Insurance. No investment or 
 loan shall be made by a -y such life insurance corporation 
 unless the same shall first have been authorized by the 
 board of directors or by a committee thereof charged with 
 the duty of supervising such investment or loan. No such 
 corporation shall subscribe to or participate in any under- 
 writing of the purchase or sale of securities or property, 
 or enter into any transaction for such purchase or sale on 
 account of said corporation jointly with any other person, 
 firm or corporation ; nor shall any such corporation enter 
 into any agreement to withhold from sale any of its prop- 
 erty, but the disposition of its property shall be at all times 
 within the control of its board of directors. Any such cor- 
 poration, in addition to other investments allowed by law, 
 may invest any of its funds in any duly authorized bonds 
 or evidences of debt of any city, county, town, village, 
 school district, municipality, or other civil division of any 
 state and may loan upon the security of improved unin- 
 cumbered real property in any state worth fifty per centum 
 more than the amount loaned thereon."* 
 
 Effect of New York Statute. — ^After a period of five years 
 during which the law has been in operation, we may draw some 
 conclusion as to the feasibility of this character of legislation. At 
 
 9 Amendment, 1906, Art. 2, Sec. 100, Laws of New York, Acts of Leg- 
 islature, 129 Sess., Vol. I, pp. 797, 798. 
 
Pkacticai, Application. 155 
 
 the time of this investigation, the Mutual Insurance Company 
 owned $16,234,000 shares (par value) of railway stock,*' and se- 
 curities of various other concerns. Stock holdings constituted 
 15.69 per cent, and real estate holdings, 6.59 per cent of the entire 
 assets. 
 
 For the same period (1905) the business of the company was 
 as follows: Assets, $470,861,166; premiums, $62,978,216; num- 
 ber of policies (new business), 88,971, amounting in premiums to 
 $183,265,162; number of policies outstanding, 689,321 ; accruing 
 from all policies, $1,589,549,468; expenses, $15,506,146; surplus, 
 $78,267,607." 
 
 For the calendar year 1911, after the statute had been in opera- 
 tion for five years, the financial status and business of the Mutual 
 Life Insurance Company were as follows : Assets, $587,130,263 
 ($116,269,097 increase over 1905) ; premiums, $55,042,999 ($7,- 
 935,217 decrease) ; number of policies (new business) 55,678 
 (33.293 decrease), amounting in premiums to $139,534,566 ($43.- 
 730,957 decrease) ; number of policies outstanding, 671,053 
 (18,268 decrease) ; accruing from all policies, $1,504,974,662 
 ($84,574,806 decrease) ; expenses, $10,590,036 ($4,916,110 de- 
 crease) ; surplus, $102,059,174 ($23,791,567 increase)." 
 
 At the close of the calendar year 191 1, the stock held by the 
 Mutual had declined from 15.69 per cent of the assets, to 6.61 
 per cent; and the real estate, from 6.59 per cent of the assets, to 
 4.03 per cent. 
 
 Special attention need be called to but three items : first, the 
 decrease in expense of operation by about 33 1-3 per cent, and 
 only a slightly larger proportional decrease in new business ; sec- 
 ondly, a substantial decrease in stock, and real estate holdings; 
 thirdly, an increase in assets of 22.5 per cent; and fourthly, an 
 increase in surplus of 34 per cent. 
 
 These facts furnish sufficient evidence that the insurance com- 
 panies of New York are not hurt. Investigation of the other two 
 great companies of New York, the Equitable and the New York 
 Life, lead to practically the same conclusions: the companies are 
 disposing of their stock interests and they are doing it without ap- 
 
 10 Report of New York Committee (Assembly Report No. 41), appoint- 
 ed to investigate life insurance companies (submitted Feb. 22, 1906), p. 3a 
 
 11 Compendia of OflScial Life Insurance Reports, compiled by the Spec- 
 tator Co., New York (1905-1912), 1906 tables, pp. 14-17. 
 
 12 Do. calculated from tables, 1912, pp. 21-24. 
 
 II 
 
156 The Commodities' Clause 
 
 parent sacrifice. In some respects their business has fallen off 
 but the expense of operation has also been decreased, a condition 
 indicating safer and saner methods of seeking new business^* and 
 greater economy in administration. Finally the continually in- 
 creasing surplus insures a prosperous financial condition. 
 
 In spite of this showing, fearful prophecies were made as to the 
 effect of requiring insurance companies to dispose of their stock. 
 Paul Morton, referring especially to this proposal, stated before 
 the legislative committee that it was the consensus of opinion 
 among the great insurance authorities that, "if the bills to amend 
 the General Insurance Law are enacted without certain changes, 
 the interests of the insurance companies and policy holders of this 
 state will suffer serious injury. Not only will the insurance com- 
 panies be unable to conduct their business in such a manner as 
 to produce fair returns to their policy holders, but the conserva- 
 tive insurance companies of other states will be forced to discon- 
 tinue business in this state."^* 
 
 The above testimony is typical of a large part of that presented 
 before the committee; but the great insurance companies have 
 continued in business and have prospered. Furthermore, insur- 
 ance companies from other states have not been deterred from 
 doing business in New York, twenty-three such "foreign" com- 
 panies being now listed and competing with the eleven domestic 
 companies." 
 
 It should be emphasized that the plan of dissociation does not 
 involve confiscation of property but simply a limitation pf the 
 field of business activity to that for which the corporation was 
 organized. The field for legitimate work in the insurance busi- 
 ness is just as large as it ever was. No prospects have been legis- 
 lated out of existence. On the other hand an ever increasing 
 number in New York and the entire country will look with more 
 favor on the New York insurance companies now that safer and 
 saner and more honest methods of doing business are being in- 
 sisted upon. So also with the transportation companies and the 
 
 13 Note severe criticism of Commi'ttee of Investigration (Assembly Doc. 
 41, filed Feb. 22, 1906, pp. 34, 35, 80), of vast expenditures ($11,116,864 in 
 1904) and improper methods of publicity. 
 
 14 Hearings before legislative committee appointed to investigate the 
 life insurance companies of Nev York, 1906, Vol. I, pp. 7a-7d. 
 
 15 54th Annual Report, Feb. IS, 1913 (Preliminary), Sup't of Insurance 
 of New York, Table B, p. 47. 
 
Practicai, Appwcation. 157 
 
 coal mines: The franchise rights and the property rights in- 
 volved are not to be set aside ; they are simply to be more clearly 
 identified. The coal will remain in the mines under private con- 
 trol until the normal demand of the country justifies the operators 
 in digging it out, and the same transportation companies will carry 
 approximately the amount they are now carrying. The rebate, 
 involved in the 65 per cent contract, would be eliminated; and 
 the actual freight revenue from coal tonnage would, under the 
 competitive system, be fully as large as under the present system 
 where the carrier has frequently reduced transportation rates to 
 affiliated mines in order to strengthen its monopoly of the coal 
 trade and increase its profits in the coal business. 
 
 The plan which we have presented for dissolution is therefore 
 not so radical as may appear on first consideration. It simply 
 means that corporations engaged in the coal business must confine 
 themselves to mining coal, and that corporations holding railway 
 franchises must confine themselves to the railway business. This 
 is no more than a return to the common law attitude toward all 
 corporations as expressed above in the leading English case" on 
 this subject. The courts in fact have seldom departed from this 
 principle where the issue has been clearly presented. 
 
 2. Texas Cotton-Seed Oil Mills and Cotton Gins. — Our leg- 
 islatures and departments of justice are coming to recognize the 
 importance of limiting all corporations to certain functions clearly 
 specified in their charters, and to discontinue the issuance of such 
 charters as confer general authority to do a number of things, or 
 specific authority to carry on several distinct lines of business. 
 This is well illustrated in the position recently taken by Attorney 
 General Looney, of Texas, relative to the entrance of cotton seed 
 oil mills into the ginning business. In a letter to all oil mills so 
 engaged, the Attorney General said : 
 
 "We find that a number of charters for oil mills, here- 
 tofore filed, included as one of the purposes the ownership 
 and operation of gins as well as the manufacture of oil. 
 This, in our opinion, was unauthorized and these charters 
 expressing a dual purpose should never have been filed, 
 but having been filed without authority of law, will not 
 legalize that which was wholly unauthorized by any statute. 
 
 "We also understand that the custom has grown up 
 generally among cotton oil mills to own and operate gins 
 as a means doubtless of controlling the seed supply. 
 
 16 Chapter I, Section 2, European Railways and the Coal Industry. 
 
158 The Commodities' Clause 
 
 "As it is our opinion that the ownership and operation of 
 gins and ginning for the public by cotton-seed-mill cor- 
 porations constitute a misuse of the means and assets of 
 such corporations, it becomes our duty to insist that cotton- 
 seed-oil mills, incorporated as such, shall divorce them- 
 selves from the ownership and operation of the ginning 
 business, otherwise this department will be forced to seek 
 a forfeiture of the charters of any such that do not, within 
 a reasonable time, strip themselves of this class of prop- 
 erty. 
 
 "Recent investigation made by this department reveals 
 the fact that a great number of cotton-seed-oil corporations 
 are dealing in bagging and ties; that is to say, they are 
 buying and selling bagging and ties as merchants. For 
 the same reason as stated above, oil-mill corporations are 
 not authorized by law to engage in the mercantile busi- 
 ness 
 
 "Another complaint that comes to this department is 
 that, in many localities, there exist arrangements between 
 the cotton-seed-oil mills and the ginners or buyers where- 
 by the ginners or buyers are to purchase cotton seed from 
 the farmers at prices named by the mill man (the mill 
 prices to be maintained) , the mill paying the ginner a cer- 
 tain commission or a margin or compensation, the net re- 
 sult being that competition is destroyed and the market 
 price of cotton seed in the respective communities con- 
 trolled."" 
 
 In the Texas case the situation is very similar to that presented 
 by the railway-coal combine. Where the mills are not able to 
 secure absolute control of the gins, numerous cases have appeared 
 where virtual control has been acquired by agreements under 
 which the latter turn over to the former the cotton seed at prices 
 set by the mills, the ginner simply receiving a commission for 
 this service. This scheme seems comparable to the 65 per cent 
 contracts by which railways acquired dominant influence over 
 such coal mines as could not be controlled through stock oAvner- 
 ship. 
 
 3. The New Haven System: Trolley Lines, Steamship 
 Lines, and Other Railways. — It is not only that such joint oper- 
 ation of diverse interests tends to monopoly by a process of elim- 
 ination of concerns acting independently, but that, where two 
 different industries are under a single administrative policy, the 
 
 17 Letter of Attorney General of State of Texas, Nov. S, 1913. 
 
Practical Application. 159 
 
 development of one at the expense of the other, or else the fail- 
 ure to properly administer the diverse interests involved, is very 
 apt to result. This has been shown to be true in the railway-coal 
 combines, and again in the case of the New York, New Haven 
 and Hartford Railway. The Interstate Commerce Commission, 
 after making very careful investigation into the financial opera- 
 tions of the New Haven and its relation to the transportation 
 system of New England, said, "No student of the railway prob- 
 lem can doubt that a most prolific source of financial disaster and 
 compUcation to railroads in the past has been the desire and abil- 
 ity of railroad managers to engage in enterprises outside the legit- 
 imate operation of their railroads." The Commission recom- 
 mended, therefore, that "every interstate railroad should be pro- 
 hibited from expending money or incurring liability or acquiring 
 property not in the operation of its railroad or in the legitimate 
 improvement, extension, or development of that railroad."** 
 
 The Commission also took the position that the New Haven 
 should divest itself of all trolley-line affiliations, since the control 
 of such lines in cities served by the railway "effectively prevents 
 
 the construction of other lines which would produce a 
 
 competing system, Public interest requires that these three 
 
 forms of transportation (railways, trolleys and steamships) 
 should be kept distinct, so that each may operate in its own 
 sphere."*' 
 
 On the day following the publication of this report. Interstate 
 Commerce Commissioner McChord, who had in charge the inves- 
 tigation of the wreck on the New Haven lines, attributed the dis- 
 aster to faulty management, faulty equipment, and an inexperi- 
 enced engineer.^" Throughout the Commission's report of this 
 disaster there are intimations that such a condition has been per- 
 mitted to exist because the officials were so overburdened with a 
 complexity of interests that they were unable to administer any 
 one with a clear vision.''* 
 
 Commissioners Clements and Marble, in concurring in the first 
 report above mentioned, said, relative to the evils of combining 
 separate and distinct systems (Boston and Maine and the New 
 Haven), "They are not one system, but two systems under one 
 
 18 27 I. C. C. 6i6. 
 
 19 Do. 619. 
 
 20 June 12, at Stamford, Conn., Preliminaiy Report, June 13, 1913- 
 
 21 Full Report of I. C. C, July 7, I9i3- 
 
i6o The Commodities' Ci,ausE 
 
 management We would give weight to the suggestion that 
 
 the merger has so overloaded the executive heads of the entire 
 aggregation as to impair, not only correct and economical finan- 
 cial administration, but also efficiency and safety of operation. 
 
 Therefore closer superintendence with corresponding gains 
 
 in efficiency and safety, might be expected from a dissolution of 
 the merger."^* 
 
 Although this particular part of the report has to do with two 
 railroads, it is made very clear that the interests of the two roads 
 and the conditions of operation are so different that successful 
 management of both could not be centered in a single admin- 
 istrative head. The first year of New Haven management was 
 said by the Conmiission to have been "the most disastrous in the 
 history of the road" (that is, the Boston and Maine), the latter 
 having degenerated from the most successfully operated road in 
 New England, both with respect to services and the payment of 
 dividends, to the verge of insolvency.^* 
 
 The New Haven seems to have made a very earnest effort to 
 restore the efficiency and the financial status of the Boston and 
 Maine, but with only partial success. The policy toward em- 
 ployees, improvements, and other matters of detail, on the Bos- 
 ton aiid Maine, although having some admirable features, was in 
 many respects misdirected owing to a failure to understand ex- 
 isting conditions.^* A policy which may give entire satisfaction 
 under certain conditions may fail absolutely when applied to a 
 similar industry under different conditions. If the interests are 
 utterly diverse, however, it is much more difficult for a single 
 management to develop to the best advantage the individual in- 
 terests so joined. 
 
 As a result of conferences between the Attorney General of 
 the United States and President Elliott of the New Haven, it is 
 announced in the current press that the New Haven will relin- 
 quish control of the Boston and Maine, all its trolley lines, the 
 Merchant's and Miner's Transportation Company, the Eastern 
 Steamship Company, and the Maine Steamship Company.''" It is 
 understood that the Department of Justice was prepared to bring 
 
 22 27 I. C. C. 617. 
 
 23 Do. S9S. 
 
 24 Do. 594-597- 
 
 25 Literary Digest, Jan. 24, 1914. 
 
Peacticai< Application. i6i 
 
 suit under the Sherman Law if some satisfactory adjustment 
 could not be reached. In a similar manner other interests that 
 have long been merged are effecting dissolutions without the ne- 
 cessity of court procedure. 
 
 4. The American Telegraph and Telephone Company and 
 the Western Union. — ^As given out in a public statement, "(i) 
 The American Telegraph and Telephone Company will dispose 
 of its entire holdings of stock in the Western Union Telegraph 
 Company in such a way that the control and management of the 
 latter will be entirely independent of the former and of any other 
 company in the Bell system. 
 
 "(2) Neither the American Telegraph and Telephone Com- 
 pany nor any other company in the Bell system will hereafter 
 acquire control over any other competitive line of exchange."^* 
 
 This announcement followed very closely upon the recommen- 
 dations of the Postmaster General advising the nationalization of 
 these facilities as a part of the postal system. This, together with 
 the activity of the Department of Justice, is doubtless largely re- 
 sponsible for the act of dissociation, 
 
 5. Withdrawal of Individual Members of Morgan Firm from 
 Directorships. — ^Early in January it became known that indi- 
 vidual members of the firm of J. P. Morgan and Company were 
 planning to withdraw their membership from a number of im- 
 portant directorships. It was later announced that either J. P. 
 Morgan or some individual member of the firm had withdrawn 
 from the New York Central, the New York, New Haven and 
 Hartford, the United States Steel Corporation, the American 
 Telegraph and Telephone Company ,and the Western Union Tel- 
 egraph Company. The current press states, however, that all di- 
 rectorships in the First National Bank and the National City Bank 
 of New York have been retained, and that the community of in- 
 terests between these two banks, the Morgan banking house, and 
 the great banking house of Kuhn, Loeb and Company, remains 
 unimpaired."' It is understood that other withdrawals are to 
 come in the near future. 
 
 II. Conclusions. 
 
 Although a public demand for the dissociation of diverse in- 
 
 26 Literary Digest, Jan. 3, 1914. 
 
 27 Do. Jan. 17, 1914- 
 
l62 The Commodities' CtAUSfi 
 
 terests has only arisen in very recent years, it has already extend- 
 ed to a large number of industries, including insurance companies 
 and numerous other industrial concerns and banking interests; 
 cotton-seed-oil mills and cotton gins ; railways and steamship and 
 trolley lines; telegraph and telephone companies; and railways 
 and coal mines. Our state and federal authorities are turning 
 to the principle of dissociation as the most effectual means of re- 
 storing competitive conditions among the interests involved. The 
 philosophy is sound and the legal authority is absolutely unques- 
 tioned. The situation resolves itself into this : The merging of 
 diverse interests, whether railroad and coal mine, or other, will 
 invariably place at a disadvantage those interests that are not so 
 joined, and this will enable the former to undersell and, ultimate- 
 ly, to force out the latter. This tends ultimately to monopoly 
 control by the corporation possessing the advantage. The prin- 
 ciple is true with respect to any two industries that are comple- 
 mentary in their nature. It is doubly true where one of the fac- 
 tors of the merger is a transportation company and the other pro- 
 duces goods to be shipped. The situation which the merger of the 
 transportation industry and the coal industry has produced, pre- 
 sents in its most aggravated form the injustice and danger of 
 permitting diverse yet dependent interests to unite. It is only 
 through the absolute dissociation of such interests that we may 
 reasonably hope to give independent industry a fair opportunity 
 for development and prevent the ultimate railway monopolization 
 of those industries into which the railway may choose to enter. 
 
INDEX. 
 
 American Telegraph and Telephone Company, , 
 
 relation to Western Union, i6i. 
 Attorney General of the United States, 
 
 asked by House of Representative to furnish information about cer- 
 tain coal roads, 77. 
 
 suggestion for assuaging "the radical effect of the law," 107. 
 Baltimore and Ohio Railroad, 49. 
 Boston and Maine, 
 
 relation to the New Haven Railroad, 160. 
 Bowling Green Trust Company, 
 
 receiver for the Western Maryland, 99. 
 Bismarck, railroad policy of, 20. 
 Buffalo and Susquehanna Railroad Company, 55. 
 BufFalo, Rochester and Pittsburgh Railroad, 56. 
 BuiEngton, Justice of Circuit Court of the Eastern District of Pennsylvania, 
 
 dissenting opinion, loi. 
 Campbell, Representative P. P., of Kansas, 
 
 introduces resolution in the House, 79. 
 Central Railroad of New Jersey, 38. 
 
 action brought by the Department of Justice to enjoin, 99. 
 
 action dismissed by Circuit Court, loi. 
 
 case before Supreme Court, 102. 
 
 connection with Reading interests, 125. 
 
 relation to Wilkes-Barre Coal Company, 125. 
 
 petition of Government to restrain transportation of coal in interstate 
 commerce, 126. 
 
 secures lease on Lehigh and Susquehanna Railroad, 126. 
 
 decision of court concerning, 128. 
 Chesapeake and Ohio Railroad, 48. 
 Coal industry, 
 
 relationship to railroads in the United States, 9; in Europe, 29; in 
 England, 13. 
 
 development, 33. 
 
 anthracite fields, 35. 
 
 tonnage covered by each railroad, 43. 
 
 eastern bituminous fields, 45. 
 
 independent operators discriminated against, 51, 53, 56, 60, 63, 65, 66, 68. 
 
 western bituminous fields, 63. 
 
 coal lands secured by fraudulent means, 64, 67. 
 
 leasing system applied to coal lands owned by state, 139. 
 
 attitude of Federal Government toward public coal-bearing lands, 140; 
 of Wyoming, 140; of Colorado, 141. 
 
 attitude 'of Secretary of Interior, 141. 
 
 advantages of leasing system, 141. 
 Colorado and Wyoming Railroad Company, 65. 
 
 163 
 
164 Indbx. 
 
 Commodities' Clause, 
 
 passes House, 80. • 
 
 in Senate, 80. 
 
 passage of Tillman Resolution concerning, 83. 
 
 amended and passed by House, 83. 
 
 opinion of President concerning, 84. 
 
 joint resolution concerning, 85. 
 
 amendments offered in Senate, 86. 
 
 Elkins' Amendment accepted, 90. 
 
 consideration for final passage, 91. 
 
 Tillman substitute, 93. 
 
 consideration in conference, 93. 
 
 final form of, 95. 
 
 Elkins' resolution to postpone effectiveness of, 96. 
 
 postponement of effectiveness considered, 96. 
 
 action brought to test constitutionality of, 99. 
 
 Supreme Court interprets, 108. 
 
 Harlan, Mr. Justice, dissenting opinion, 108. 
 
 observations as to purport of decision, 109-112. 
 
 amended bill filed in Circuit Court, 112. 
 
 opinion rendered, 131. 
 
 action involving Lehigh Valley interests, 133. 
 
 court dismisses part of action, 134. 
 
 deficiencies considered, 137, 139. 
 
 amendments necessary, 147, 148. 
 Cotton-seed oil mills and cotton gins, Texas, 
 
 opinion of Attorney General Looney concerning joint operation, 157, 
 IS8. 
 Delaware and Hudson Company, 39. 
 
 action brought by department of Justice to enjoin, 99, 100. 
 
 action dismissed by Circuit Court, 102. 
 
 Supreme Court interprets lavy, 108. 
 
 relation of, to Hudson Coal Company, 120. 
 Delaware, Lackawanna and Western Coal Company, 117. 
 
 organization of, 118; 
 
 effect on railway control, 119. 
 
 action under Sherman Anti-Trust and Commodities' statutes to dis- 
 solve relationship between railroad and coal company, 121. 
 
 decision of Supreme Court concerning, 122, 123, 124. 
 Delaware, Lackawanna and Western Railroad, 36. 
 
 action brought by Department of Justice to enjoin, 99. 
 
 action dismissed by Circuit Court, loi. 
 
 case before Supreme Court, 102. 
 
 Supreme Court interprets law, 108. 
 
 the coal sales company, 117. 
 
 action brought under Sherman Anti-Trust and Commodities' statutes 
 
 to dissolve relationship between railroad and coal company, 121. 
 decision of Supreme Court concemfhg, 122, 123, 124. 
 
IndBx. 165 
 
 Elkins, Senator Stephen B. 
 
 view concerning Hepburn bill, 80. 
 
 offers amendment to bill, 87. 
 
 introduces joint resolution postponing effectiveness of Commodities' 
 Clause, 96, 97. 
 Erie Railroad Company, 38. 
 
 action brought by Department of Justice to enjoin, 99. 
 
 action dismissed by Circuit Court, loi. 
 
 case before Supreme Court, 102. 
 
 Supreme Court interprets law, 108. 
 Fairmont Coal Company, 52. 
 Federal Commission, 143. 
 
 impracticability of application to railroad-coal combine, 143, 144, 145. 
 
 application of after dissolution, 145, 146. 
 
 views of Charles R. Van Hise concerning, 146. 
 Gillespie, Representative. 
 
 introduces resolution in House of Representatives concerning certain 
 coal roads, 'jy. 
 
 introduces second resolution, 78. 
 Glasgow, Mr., Attorney for the Interstate Commerce Commission. 
 
 opinion concerning postponement of application of Commodities' 
 Clause, 97. 
 Great Northern Railway, England, 
 
 coal mine monopoly, 13. 
 Harlan, Mr. Justice. 
 
 dissenting opinion in leading case involving Commodities' law, 108. 
 Hepburn Bill. 
 
 passes House, 80. 
 
 in Senate, 80. 
 
 Tillman resolution concerning, 83. 
 
 amended and passed by House, 83. 
 
 opinion of President concerning, 84. 
 
 joint resolution concerning Commodities' Clause, 85. 
 
 amendments offered in Senate, 86. 
 
 Elkins' amendment, 87. 
 
 Dryden amendment, 90. 
 
 Elkins' amendment accepted, 90. 
 
 Commodities' Clause considered in Senate for final passage, 91. 
 
 Tillman's substitute for Commodities' Clause pending, 92. 
 
 text of Clause as passed by Senate, 93. 
 
 conference ordered, 93. 
 
 final form of Commodities' Clause, 95. 
 
 Elkins' resolution to postpone effectiveness of Commodities' Clause, 96. 
 Haddock and Coxa cases, 32, 76. 
 Hepburn, Representative W. P. 
 
 statement concerning House resolution, 78. 
 
 statement concerning Commodities' amendment to rate measure, 79. 
 House of Representatives. 
 
 resolution concerning information about certain coal roads, ^^. 
 
 second resolution introduced, 78. 
 
 other resolutions considered, 79. 
 
i66 Index. 
 
 Hubbard, Congressman, 
 
 joint resolution to postpone effectiveness of Commodities' Clause, 97. 
 Hudson Coal Company, 120. 
 Independent coal operators, 
 
 discrimination against, 51, 53, 56, 60, 63, 65, 66, 68. 
 
 effect of discrimination, 69. 
 
 effect on prices to consumer, 70. 
 Interstate Commerce Commission. 
 
 recommendations of, 71. 
 
 findings, 73. 
 
 attitude of Commission, 75. 
 
 case vs. New York, New Haven and Hartford Railroad Company, 83. 
 
 additional power recommended by President, 84. 
 
 joint resolution concerning, 85. 
 
 recommends passage of Elkins' resolution to postpone effectiveness of 
 Clause, 96. 
 
 reply to Senate resolution calling for information concerning Western 
 Maryland Railway, 98. 
 
 report concerning Philadelphia and Reading interests, 132. 
 Justice, Department of, 
 
 action brought against Pennsylvania; Delaware, Lackawanna, and 
 Western; Central of New Jersey; Lehigh Valley; and the Erie, to 
 enjoin, 99. 
 
 appeals case to Supreme Court, 102. 
 
 amends petition re Lehigh Valley and files in Circuit Court, 112. 
 
 Court dismisses petition, 112. 
 
 Supreme Court reverses, 113. 
 
 decree dismissing petition without prejudice, 113. 
 
 files suit in Circuit Court against the six anthracite carriers under 
 Sherman Anti-Tijist law, 113. 
 
 appeals case to Supreme Court, 114. 
 
 files suit to dissolve relationship between the Delaware, Lackawanna 
 and Western Railroad, and the coal company of the same name, 121. 
 
 appeals case to Supreme Court, 122. 
 
 files petition for injunction to prohibit Reading interests from con- 
 spiracies, etc., 125. 
 
 files suit to enjoin Lehigh Valley Railroad from controlling the Coal 
 Sales Company, 133. 
 Kindersley, Vice Chancellor (England), 
 
 opinion concerning coal monopoly maintained by Great Northern Rail- 
 way, IS. 
 Knapp, Mr. Martin A. 
 
 letters to President favoring postponement of effectiveness of Com- 
 modities' Clause, 96. 
 Leasing Systems, 139. 
 
 attitude of Federal Government toward public coal lands, 140. 
 
 Wyoming system, 140. 
 
 Colorado system, 141. 
 
 attitude of former Secretary of Interior, 141. 
 
 consideration of system, 141, 142, 143. ' 
 
 limitations, 143. 1 
 
Ind^x. 167 
 
 I<ehigh and Susquehanna Railroad. 
 
 leased to Central Railroad of New Jersey, 126. 
 Lehigh Navigation Company. 
 
 relation to Reading interests, Central Railroad of New Jersey, the 
 
 Wilkes-Barre Coal Company, and the Alliance Coal Company, 12S, 
 
 126. 
 decision of court concerning, 128. 
 Lehigh Valley Coal Company. 
 
 relation to Railroad and Coal Sales Company, 134, 135. 
 court's action affecting, 135. 
 Lehigh Valley Coal Sales Company, 120. 
 
 action brought to dissociate from railway interests, 133. 
 decision of court concerning, 134, 135. 
 
 report of Interstate Commerce Commission concerning relation to 
 Lehigh Valley Railroad, 135. 
 Lehigh Valley Railroad, 37. 
 
 action brought by Department of Justice to enjoin, 99. 
 
 action dismissed by Circuit Court, loi. 
 
 case before Supreme Court, 102. 
 
 decision of Supreme Court interpreting law, 108. 
 
 amended petition before Circuit Court, 112. 
 
 petition dismissed, 112. 
 
 Supreme Court reverses decree of lower court, 113. 
 
 Government obtains decree dismissing bill without prejudice, 113. 
 
 the Coal Sales Company, 120. 
 
 action brought to dissociate from Coal Company, 133. 
 
 decision of court concerning, 134, 135. 
 
 report of Interstate Commerce Commission concerning relation to the 
 
 Coal Company, 135. 
 Life Insurance Companies, New York. 
 
 report of joint committee of Senate and Assembly concerning activi- 
 ties of, 151, 152. 
 interests involved, 152, 153. 
 recommendations of committee, 153. 
 restrictions placed by legislature upon extension of interests in other 
 
 fields, 154- 
 effect of statute, 154 IS5, IS6. 
 Louisville and Nashville Railway. 
 
 disposition of coal property, 121. 
 McNay, Representative W. S., of Mass. 
 introduces resolution in House, 79- 
 Morgan, J. P., & C. 
 
 withdrawal of members from directorships in railroads and industrial 
 
 corporations, 161. 
 New Haven System. 
 
 diverse interests included, 158. 
 
 report and recommendations of Interstate Commerce Commission 
 
 concerning, IS9. 160. 
 adjustment agreed upon with the United States Department of Justice, 
 
 160, 161. 
 
i68 Index, 
 
 New York Central and Hudson River Railroad Company, 53. 
 
 New York, New Haven and Hartford Railway Company, case against 
 
 Interstate Commerce Commission, 83. 
 New York, Wyoming and Western Railway, 43, 43. 
 Norfolk and Western Railway, 46. 
 Oklahoma Railway, 66. 
 Pennsylvania Coal Company, 43, 44, 45, 116. 
 Pennsylvania Railroad Company, 57. 
 
 action brought by Department of Justice to enjoin, 99. 
 
 action dismissed, by Circuit Court, loi. 
 
 case before Supreme Court, 102. 
 
 Supreme Court interprets law, 108. 
 Philadelphia and Reading Coal Company, 120. 
 
 action to dissociate Reading interests, 125. 
 
 opinion of court concerning, 130. 
 
 nature of favors granted by railroad, 132. 
 
 report of Interstate Commerce Commission concerning, 132. 
 Philadelphia and Reading Railway Company, 40, 42, 45. 
 
 organization of coal interests, 120. 
 
 action to dissolve Reading interests, 125. 
 
 interests affected, 125. 
 
 leasing of Lehigh and Susquehanna Railroad to Central strengthens 
 power of Reading interests, 129. 
 
 decision of court affecting combine, 121, 130. 
 
 application of Commodities' Clause, 131, 132. 
 Pittsburgh, Shawmut and Northern Railroad Company, 57. 
 President of the United States, 
 
 opinion concerning Hepburn Bill, 84. 
 Private car system, 51, 60. 
 
 defended by railroads, 52. 
 
 Interstate Commerce Commission concerning, 71. 
 Railroads. 1 
 
 United States, 9. 
 
 England, 13, 19. 
 
 Germany, 20. 
 
 France, 21. 
 
 Austria-Hungary, 25. 
 
 Belgium, 26. 
 
 Holland and Denmark, 2^. 
 
 Italy, 27. 
 
 Other European countries, 27. 
 
 state and federal legislation, 30, 34. 
 
 in anthracite fields, 36. 
 
 ^reements between, 42, 61, (&. 
 
 in eastern bituminous fields, 45. 
 
 in western bituminous fields, 63. 
 
 lands obtained by fraudulent means, 64, 67. 
 
 drop in stock, 78. 
 
Index. 169 
 
 Railway officials. 
 
 opinions concerning joint interests, 76. 
 Reading Company, (see the Philadelphia and Reading Railroad). 
 Red Rock Fuel Company. 
 
 letter from the Governor of West Virginia concerning, 81. 
 
 Rio Grande Western Railway, 64. 
 Sherman Anti-Trust Law. 
 
 application to anthracite combines, 113. 
 
 decision of court concerning, 114. 
 
 the 65 per cent contracts, 116. 
 
 effect of court's decision, 117. 
 
 action involving Lehigh Valley interests, 133. 
 Temple Iron Company, 44. 
 
 declared by court in violation of Sherman Anti-Trust Law, 114. 
 
 dissolution of, 116. 
 Tidewater Bituminous Coal Traffic Association, 62. 
 Tillman, Senator B. F. 
 
 view concerning the entrance of common carriers into other businesses, 
 80. 
 
 introduces letter from President of the Red Rock Fuel Company, 81. 
 
 introduces letter from the Governor of West Virginia, 81. 
 
 resolution calling for joint investigation, 82. 
 
 resolution passed, 82. 
 
 amendment offered, 89. 
 
 letter from D. J. Roberts, gi. 
 
 introduces substitute to Commodities' Clause, 92. 
 
 letters introduced from oil refiners, 94. 
 Union Pacific Railway Company, 67. 
 
 disposition of coal properties, 120. 
 Van Hise, Charles R. 
 
 views concerning Sherman Act as applied to coal combines, 146. 
 Waterways, European, 16. 
 West Virginia, Governor of, (Wm. M. O. Dawson). 
 
 statement concerning coal roads, 81. 
 Western Maryland Railway, 47. 
 
 resolution passed by House of Representatives concerning obedience 
 to Commodities' Clause, 98. 
 
 action of, to preserve properties from effect of Commodities' Clause, 
 
 99. 
 Western Union Telegraph Company. 
 
 relation to American Telegraph and Telephone Company, 161. 
 Wilkes-Barre Coal Company. 
 
 relation to Central Railroad, and Navigation Company, 126, 127. 
 
 decision of court concerning, 128. 
 
BIBLIOGRAPHY. 
 
 Official Documents. 
 A. Reports. 
 
 1. Annual Railway Reports. 
 Reading, 1899-1901; 1905-1912. 
 Pennsylvania, 1905-1912. 
 Lehigh Valley, 1905-1912. 
 Lehigh Valley Coal Co., 1912. 
 
 Delaware, Lackawanna and Western, 1899-1911. 
 
 Union Pacific, 1905-1912. 
 
 Erie, 1905-1911. 
 
 Baltimore and Ohio, 1906-1912. 
 
 Chesapeake and Ohio, 1906-1912. 
 
 Louisville and Nashville, 1906-1912. 
 
 2. Area Anthracite Coal Deposits, Bulletin 46, Department of 
 
 Labor, p. 444. 
 
 3. Annual Report, Sec'y Interior, June 30, 1909, re leasing of gov- 
 
 ernment coal properties. 
 
 4. Annual Reports (Preliminary) 48-50, 541, the Sup't of Insur- 
 
 ance of N. Y. 
 
 5. The Compendia of Official Life Insurance Reports, 1905-1912, 
 
 compiled by the Spectator Co., N. Y. 
 
 6. Annual Report of the Internal Commerce of the U. S., 1876, 
 
 Part II, Appendix 33, p. 243, re Pacific railroads. 
 
 7. Annual Reports of the Interstate Commerce Commission, 1887- 
 
 1912. 
 
 8. Monthly Summary Commerce and Finance, New Series, Vol. 
 
 10, pp. 663, 757, U. S. Bureau Statistics. 
 
 9. Production of Coal in the U. S., Report Geolog^ical Survey, 
 
 1907, p. 175, re value anthracite deposits. 
 
 10. Report, House Committee, Investigation into the high price of 
 
 anthracite coal, in answer to H. Res. 578 (Includes lengthy 
 statement of Wharton Barker, authority on cost of operation 
 of coal mines, extent of deposits, etc.), submitted June 18, 
 1912. 
 
 11. Report of I. C. C. on coal situation in Eastern Bituminous 
 
 Fields, H. R. Doc, No. 561, S9th Cong., 2d Sess. 
 
 12. Report of I. C. C. on oil situation, H. R. Doc, No. 606, S9th 
 
 Cong., 2d Sess. 
 
 13. Report of I. C. C. re rates, practices, etc., governing the trans- 
 
 portation of anthracite coal, No. 4914, July 30, 1915. 
 
 14. Report of Commissioner of Corporations on Oil, H. R. Doc. 
 
 814, 59th Cong., 1st Sess. 
 
 15. Report of Joint Committee of Senate and General Assembly, 
 
 of State of New York, appointed to investigate Life Insur- 
 ance Companies, Assembly Report 41, J29 Sess. 
 
 170 
 
Bibliography. 171 
 
 16. Report of Senate Select Committee on Interstate Commerce, 
 
 S. Report 46, 49th Cong., 1st Sess. (This report led up to 
 original I. C. I<aw.) 
 
 17. Report No. I (Special) of I. C. C. re "Intercorporate Relations 
 
 of Railways in the U. S. as of June 30, 1906." 
 
 18. Report of I. C. C. on coal situation in Western Bituminous 
 
 Fields, S. Doc. 450, 60th Cong., ist Sess. 
 
 19. Report of I. C. C. on the receivership of Western Maryland, 
 
 S. Doc. 465. 
 
 20. Report of Senate Committee on Interstate and Foreign Com- 
 
 merce, re S. Res. 98, 62d Cong., ad Sess. 
 B. Senate Resolutions, Bills, etc. 
 
 1. S. Res. March 18, 1885, 48th Cong., Spec. Sess., to appoint Se- 
 
 lect Committee to investigate subject of regulation of trans- 
 portation, etc. 
 
 2. S. 1093 and 1532, 49th Cong., ist Sess., the Cullom bills, the 
 
 second of which became original I. C. Law. 
 
 3. S. Res. 72, S9th Cong., ist Sess., fixing the date to vote upon 
 
 act to amend an act to regelate commerce and all acts amend- 
 atory thereof, and to enlarge the powers of the I. C. C. 
 
 4. S. Res., S9th Cong., ist Sess., by R. M. Lafolette, that Presi- 
 
 dent request the I. C. C. to investigate the elevator and grain 
 buying and forwarding business to determine to what extent 
 favors have been granted, etc. 
 
 5. S. Res., 48, 6oth Cong., ist Sess., by B. R. Tillman, instructing 
 
 Att'y Gen'l to institute certain suits in equity and law re- 
 garding the conveyance and title of lands granted in aid of 
 railroad and telegraph construction, etc. Amended and 
 passed. 
 
 6. S. Joint Res. 32 (Public Res. 8), sgth Cong., 1st Sess., instruct- 
 
 ing the I. C. C. to make examination into the subject of 
 railroad discriminations and monopolies in coal and oil, and 
 report on the same from time to time. Approved March 7, 
 1906. 
 
 7. Public Res. 11, 59th Cong., ist Sess., J. Res., amending joint 
 
 resolution instructing I. C. C. to make examination into the 
 subject of railroad discriminations and monopolies. Ap- 
 proved March 21, 1906. 
 
 8. S. 1242, Individual Reports re railways and the coal business of 
 
 members of I. C. Committee in reporting Hepburn Rate Bill 
 to Senate. 
 
 9. S. Doc. 256, S9th Cong., ist Sess., Message from the President 
 
 of the U. S. relative to the J. Res. instructing the I. C. C. to 
 make examination into the subject of railroad discriminations 
 and monopolies in coal and oil. 
 10. S. Doc. 522, S9th Cong., ist Sess., stating in response to S. 
 Res. 128, that a Detailed Report on Findings of Fact and its 
 conclusions thereon in regard to the subject now under in- 
 vestigation or already investigated under J. Res. 32, etc, for 
 12 
 
172 BlBUOGRAPHY. 
 
 reasons set forth, can not now be made, but will be prepared 
 and submitted without any unnecessary delay. 
 
 11. S. Doc. 46s, 60th Cong., 1st Sess., Letter of Chairman of Com- 
 
 mission re postponement of effectiveness of Commodities' 
 Clause. 
 
 12. S. J. Res. 74, 6oth Cong., ist Sess., to postpone effectiveness of 
 
 statute. 
 
 13. S. 3625, 6ist Cong., 2d Sess., by Francis G. Newlands, provid- 
 
 ing for the appointment of an Inland Waterways Commis- 
 sion, and for the improvement and development of the inland 
 waterways of the country, etc 
 
 14. S. 3720, 6ist Cong., 2d Sess., by Francis G. Newlands, for the 
 
 formation of national corporations for railroads and naviga- 
 tion lines engaged in interstate commerce. 
 
 15. S. Res. 177, 6oth Cong., ist Sess., by J. B. Foraker, that the I. 
 
 C. C. inform the Senate whether the railroads engaged in 
 interstate commerce have, since May i, 1908, complied with 
 the Commodities' Clause. Res. agreed to. 
 C. House Resolutions, Bills, etc. 
 
 1. H. R. 12654, SOth Cong., 2d Sess., to prevent the combination 
 
 of carrying interstate commerce with other business (re- 
 ferred to labor troubles in Penn.). 
 
 2. H. R. ^^, S9th Cong., ist Sess., declaring certain cars used in 
 
 the transportation of articles of interstate and foreign com- 
 merce carriers, and prohibiting an ownership in or control 
 over them by shippers. 
 
 3. H. R. 216 and 254, 59th Cong., ist Sess., declaring all persons 
 
 or associations of persons, joint stock companies or corpora- 
 tions owning or operating private cars in interstate commerce 
 to be common carriers subject to the act to regulate com- 
 merce. 
 
 4. H. R, 12987 (the original Hepburn Bill), to amend the act to 
 
 regulate commerce, sgth Cong., ist Sess. 
 
 5. H. R. 15262, 59th Cong., 1st Sess., to prevent common carriers 
 
 engaged in interstate commerce, or any director, oflScer, 
 agent, receiver or operating trustee thereof, directly or in- 
 directly from having any control or part ownership or inter- 
 est in, or prosecuting or engaging in the business of mining 
 or manufacturing or trading in any commodity transported 
 by such carriers. 
 
 6. H. Res. 125 and 157, S9th Cong., ist Sess., both relative to com- 
 
 binations between the Penn. and other coal roads. 
 
 7. H. J. Res. IIS, S9th Cong., ist Sess., amending joint resolution 
 
 32, re investigation coal, by including oil. Passed. 
 
 8. H. Res. 260, 59th Cong., ist Sess., re certain coal carrying 
 
 roads. 
 0. H. Res. 644, 59th Cong., 2d Sess., directing the Secretary of 
 Commerce and Labor to report to the House certain informa- 
 
Bibliography. 173 
 
 tion relative to the operating of railways by the governments 
 of France, Switzerland, and Belgium. 
 
 D. Congressional Records, 1870-1912; Congressional Globe, 1869- 
 
 1870, pp. 234, 868. 
 
 E. Cases Cited. 
 
 1. Att'y Gen'l vs. Great Northern R. R. Co., Law Journal Reports, 
 
 38, Part I, New Series, 29 (Equity), re English case involv- 
 ing purchase and sale of coal by a railroad (i860). 
 
 2. D. L. & W. R. R. vs. Haddock, 3 I. C. R. 302 (1890). 
 
 3. Lehigh Valley R. R. vs. Coxe, 3 I. C. R. 460 (1891). 
 
 4. "Minnesota Rate Case," S Fed. Rep. 184. 
 
 5. Munn vs. 111., 94 U. S. 113, re federal and state jurisdiction. 
 
 6. N. Y., N. H. & H. vs. C. & O. R. R., 200 U. S. 361, re railway 
 
 transar 'ons in coal. 
 
 7. Pullman Palace Car Co. vs. Mb. Pac R. R., 115 U. S. 587, re 
 
 bona fide relationship. 
 
 8. Reading R. R. Co. vs. State of Penn., 15 Wal. 232. 
 
 9. Red Rock Fuel Co. vs. B. & O. R. R., 2 I. C. R. 812. 
 
 10. Stockton, Attorney General vs. Central R. R. of N. J. et al., 50 
 
 N. J. Eq. S2. 
 
 11. Wabash Railway vs. 111., 118 U. S. SS7, re federal and state 
 
 jurisdiction. 
 
 12. U. S. vs. D. & L. Co., Erie R. R. Co., Central R. R. Co. of N. J., 
 
 Penn. R. R. Co., Lehigh Valley R. R. Co., 213 U. S. 257, 
 leading case on Commodities' Clause. 
 . 13. U. S. vs. D. L. & W. R. R., pending. 
 
 14. U. S. vs. Lehigh Valley R. R. Co., 220 U. S. 257, reversing 
 
 judgment of Circuit Court for E. D. of Penn., re filing 
 amended bill. 
 
 15. U. S. vs. Reading Co. et al., pending. 
 
 16. U. S. vs. D. & H., for hauling hay for own use; pending. 
 
 17. U. S. vs. D. L. & W., do., pending. 
 
 F. Court Documents. 
 
 1. Record in U. S. vs. P. R. R. R. Co. et al., Ct. E. D. Pa., Apr. 
 
 Sess., 1907, filed in S. C, Oct. Term, 1910 (Nos. 198, 206, 
 217). 
 
 2. Brief for the U. S. in cases (Docket numbers 198, 206, 217), 
 
 Oct. Term, 1912, in U. S. vs. Reading Co. et al. ; Temple Iron 
 Co. vs. U. S.; and Reading Co., et al. vs. U. S. 
 
 3. Briefs for Erie; Central; D. L. & W.; D. H.; Temple Iron 
 
 Co.; Reading, in U. S. vs. Reading Co. et al., Oct. Term, 
 S. C. 1912 (Nos. 198, 206, 217). 
 
 4. Decree of Circuit Court the U. S. of the Eastern Dist. of 
 
 Penn., U. S. vs. The Reading Co. et al.. No. 27, Apr. Sess., 
 1907. In Equity, Final Decree Filed Dec. 20, 1910. 
 
 5. Motion to advance, in S. C. of U. S. in U. S. vs. Reading Co., 
 
 et al., Oct. Term, 1912 (Nos. 198, 206, 217). 
 
 6. Petitions of Penn. Coal Co., and D. L. & W. Co., No. 198, Oct. 
 
 Term, S. C. 1912. 
 
174 BlBUOGRAPHY. 
 
 7. Decree of District Court of the U. S., Eastern Dist. of Penn., 
 
 U. S. vs. Lehigh Valley Railroad Co., No. 97, In Equity, De- 
 cree Filed Jan. 27, 1913. 
 
 8. Decree of S. C. in 198, 206, 217, Oct. Term, 1912, re separate pe- 
 
 titions of coal companies, rendered April 7, 1913. 
 g. Decree of District Court of the U. S., Eastern Dist. of Penn., 
 U. S. vs. Philadelphia and Reading Co. et al.. No. 93, Apr. 
 Sess., 1908, In Equity, Decree Filed Feb. 19, 1913. 
 G. Coal Cases before the Commission. 
 
 1. Vol. I, pp. 273, 594, 608; Vol. IV, p. S3S; Vol. V, p. 466; Vol. 
 
 VII, pp. 3S4, 412; Vol. VIII, p. 630; Vol. X, pp. 226, 337; 
 Vol. XI, pp. 371, 67s; Vol. XII, pp. 27, 73, 156, 223, 434, 481, 
 53°, 538; Vol. XIII, pp. 214, 240, 357, 383; Vol. XIV, pp. 75, 
 216, 516. 
 H. Public Hearing. 
 
 t. Before Senate Committee on Interstate Commerce, 59th Cong., 
 Vols. I-IX. 
 
 2. Before Senate Select Committee on Interstate Commerce, 1886. 
 
 3. Before House Committee on Interstate and Foreign Commerce, 
 
 H. R. 4072, 58-2; Si-i, 4095. 
 
 4. Before Interstate Commerce Commission (complete record of 
 
 hearings in response to J. Res. 32, covers 17 volumes of type- 
 written matter) ; also digest and report of the Commission. 
 
 5. Before Commission re purchase and sale of commodities by ex- 
 
 press companies. 
 
 6. Before House Committee on Public Lands, 1906, Vol. 2, Sec. 
 
 iS, Addresses, Papers, etc., under subject. Coal Lands and 
 Coal Land Laws of the United States. 
 
 7. Before Joint Committee of Senate and Assembly of the State 
 
 of New York, appointed to investigate affairs of Life Insur- 
 ance Companies, 1906, Vols. I and II, 129 Sess. 
 
 8. Hearings before Senate Committee on Interstate Commerce in 
 
 response to S. Res. 98, 62 Cong. Contains statement of Geo. 
 W. Perkins (pp. 1098-1145) and Wharton Barker (pp. 605- 
 627), as to most feasible solution of so-called "Trust prob- 
 lem." Barker made practically same statement before House 
 Committee in response to H. Res. 578, 62-2; Report 911. 
 
 9. Hearings before Senate Committee on Territories, Apr., 1912, 
 
 re Railroads for Alaska. 
 
 10. Hearings before Legislative Committee of State of N. Y., ap- 
 
 pointed to investigate Life Insurance Companies, 1905, 128 
 Sess. 
 
 11. Summary of Testimony Before New York Legislative Insur- 
 
 ance Investigation Committee, Sept. 6-Dec. 30, 1905. Com- 
 piled by the Spectator Co. 
 I. Statutes. 
 
 1. 34 Stat. U. S. 585, the Hepburn Law of 1906, which includes 
 
 the Commodities' Clause. 
 
 2. Pennsylvania Constitution, Art. XVII, Sec. 5. 
 
Bibliography. 175 
 
 3. West Virginia Stat., Chap. 54, Sec. 66b, Code of 1899. 
 
 4. Illinois Stat., 1871-1872J Const., Art. II. 
 
 5. Wisconsin Stat, "Potter Law" of 1874, Laws of Wis., Com- 
 
 pilation, p. 599. 
 
 6. Iowa Stat., Laws of 1874, Compilation, pp. 26, 33- 
 
 7. Minnesota Stat., Laws of 1871, Compilation, p. 89. 
 
 8. Nebraska Stat, Constitution, Art. XI. 
 
 9. New York Stat, Art II, Sec. 100; also Acts of Legislature, 
 
 129 Sess., Vol. I, pp. 797, 798. 
 II. Secondary Literature. 
 
 A. Treatises and Current Publications^Local. 
 
 1. The Anthracite Coal Combination in the United States, Eliot 
 
 Jones. 
 
 2. Anthracite Coal Fields, Extent, Capacity, and Value, J. F. 
 
 Jones. 
 
 3. Anthracite Coal industry, Peter Robert 
 
 4. Anthracite Coal Operators' Letters (Compilation) 1899-1902. 
 
 5. Boston Morning Herald, Feb. 12, 1912. 
 
 6. Coal Mines and the Public, H. W. Chapin. 
 
 7. Central Law Journal, Vol. 57, pp. 25-228, July 10, 1903. Article 
 
 by T. A. Sherwood — Power of states to operate coal mines 
 when necessary to avert a public calamity. 
 
 8. Colliers, Oct. 7, 191 1, Coal Crisis in Alaska, F. H. Chase. 
 
 9. Concentration and Control, Chas. R. Van Hise. 
 
 10. Commercial and Financial Chronicle, Nov., 1905, Jan., 1913. 
 
 11. Congressional History of Railways, Haney. 
 
 12. Conservation of Natural Resources, Chas. R. Van Hise. 
 
 13. Editorial Review, Vol. S (1911), pp. 1010-1021, Article by Geo. 
 
 W. Perkins. 
 
 14. Everybody's Magazine, Dec, 1912, p. 736. 
 
 15. Federal Power over Carriers and Corporations, E. P. Prentice. 
 
 16. Forum, Vol. 13, Article by J. S. Harris and A. A. McLeod. 
 
 17. Literary Digest, Dec. 28, 1912. 
 
 18. Moody's Magazine, Dec, 1907-June, 1908, special contribution 
 
 on growth of Reading. 
 
 19. New York Herald, July 21, 1912. 
 
 20. New York Journal of Commerce and Commercial Bulletin, 
 
 Nov., 190S, to February, 1913. 
 
 21. Philadelphia Inquirer, May 17, 1906, re Pennsylvania R. R. and 
 
 car distribution. 
 
 22. Railway World, June, I9i3- 
 
 23. World's Work, Dec, 1912, p. 736. 
 
 24. Reading and Segregation; also Lehigh Valley Coal Sales Co. 
 
 a pamphlet; both published by Eastman, Dillon and Co., 
 Bankers, N. Y. 
 
 25. Reading Railroad, a history of resources and connections prior 
 
 to 1880 (Author not given; probably issued by the Reading 
 R. R.). 
 
 26. Rates and Regulation, Ripley. 
 
 27. Trust Control, John Bates Clark. 
 
176 BiBWOGRAPHY. 
 
 B. Treatises, Current Publications and Reports* — Fore^n. 
 
 1. Belgian Railways, M. Marcel Peschaud in Revue Politique et 
 
 Parlementarie (Translation appears in E. A. Pratt's book on 
 State Railways). 
 
 2. Coal Fields of Great Britain, E. A. Hull, London, 190S (in- 
 
 cludes treatment of coal fields in Europe, India, China, Aus- 
 tralia, and Africa). 
 
 3. Coal Mines Act of 1911 and Other Acts Affecting Mines, Rob- 
 
 ert F. MacSwinney, London. 
 
 4. Der Deutsche Kohlenhandel in seiner Entwicklung von 1880- 
 
 1907, Georg Ebner. 
 
 5. Die jungste Eisenbahnverstaatlichung in Oesterreich, by H. 
 
 Von Wittek, Oesterreichische Rundschau. Vol. 19, 247-259. 
 
 6. Economic Studies, American Economic Asso., State Purchase 
 
 of Railways in Switzerland, by Horace Micheli. 
 
 7. Du rachat des chemins de fer et ses consequences. (Paris) 
 
 Robert Deubel. 
 
 8. Evidence Digest of. Before British Royal Commission on Coal 
 
 Supplies, 3 Vols., 190S-1907. 
 
 9. First Decade of Swiss Federal Railways, Quarterly Journal of 
 
 Economics, Feb., 1912, A. N. Holcombe. 
 
 10. German vs. English Railroads, 1907, F. A. Pratt. 
 
 11. Government Ownership in Canada, Review of Reviews, Nov., 
 
 1912, A. J. Beveridge. 
 
 12. Government Ownership in France, Railway World, April 21, 
 
 1911, p. 306. 
 
 13. History of the Great Northern Railway and its struggle for 
 
 Coal Traffic, 1845-1895, Chas. H. Grinling (contains descrip- 
 tion of conditions leading up to the famous coal case, Atfy 
 General vs. Great Northern Railway (England) ; pp. 143, 
 188, 189, 117, 14s. 195, 205, 236-255). 
 
 14. History of (English) Railways, 1820-1845, 2 Vols., John Fran- 
 
 cis. 
 
 15. La question de la situation financiere des chemins de fer de 
 
 I'etat beige (Bruxelles) 1911, Leon de Litwinski. 
 
 16. Mines Fiscales de la Prusse et Regime Miner Francais, par 
 
 Paul Weiss, Paris, 1901, L'Exploitation des Mines par L'Etat. 
 
 17. Monopolistic Combinations in the German Coal Industry, by 
 
 Francis Walker, Publications of the American Economic 
 Association, Third Series, Vol. V, No. 3, Aug., 1904. 
 
 18. Nation, Vol. 79, p. 233, Prussian Ownership of Coal Mines, 
 
 Re Failure to acquire Hibernian Mines. 
 
 19. Nationalization of Mines in France, Commercial Intelligence, 
 
 London, July 4, 1906. 
 
 20. Organization der Kohleinindustrie und des Kohlenhandels in 
 
 Deutschland, Valentin Forstreuter. 
 21 Our Iron Roads, History English Roads up to 1852, F. S. Wil- 
 liams. 
 
 •Including some EngUsb Official Reports. 
 
Bibliography. 177 
 
 22. Policies of England, Germany, Canada and the United States 
 
 Toward Combinations ; Francis Walker, American Academy 
 of Political and Social Science, Publication No. 68t. 
 
 23. Railroads and Reports, Analysis of, on roads projected in Eng- 
 land and Wales by 1837, Francis Whishaw, London. 
 
 24. Railways and Their Rates (London), E. A. Pratt. 
 
 25. Railway Age Gazette, May 10, 1912, Original in The Econo- 
 
 mists, Paris, Dec. 2, 191 1, Paul Leroy Beaulieu. 
 
 26. Railway News (London), Jan. 26, 1907, p. 159. 
 
 27. Railways and their rates, E. A. Pratt (Treatment of conditions 
 
 in England and the continent). 
 
 28. Railway Library (London), 1911, p. 167, Article by W. M. 
 
 Ackworth. 
 29 Railway Nationalization in France, Carl S. Vrooman, Arena, 
 Vol. 40, pp. 156, 163. 
 
 30. Railway News (London), Apr. 6, 1906, p. 667 — ^The National- 
 
 ization of Railways, Mines and Canals, Article by D. H. 
 Davies. 
 
 31. Railways of Europe, a series of Articles on All European Rail- 
 
 ways, by Chas. F. Beachm and Henri Segnitz, Moody's Maga- 
 zine, Vols. 7, 8, 9. 
 
 32. Railway Nationalization, Clement Edwards, London, 1898. 
 
 33. State Railways, E. A. Pratt, London. 
 
 34. Statistical Tables Relating to the Production, Consumption, 
 
 and Importation and Exportation of coal for all coal-produc- 
 ing countries, prepared for British Board of Trade. 
 
 35. The International (Paris), Vol. 4, pp. 110-115, 213, Nationaliza- 
 
 tion of Railways in Austria. 
 
 36. The Ways of our Railways (London), Chas. H. Grinling. 
 
 37. Railway News, London, Feb. 16, 1907, pp. 320-322 (includes 
 
 Severe Criticism of German Railway System, and valuable 
 table of comparisons between augmentation of railway cap- 
 ital in Great Britain and Germany) ; also April 6, also 
 April 20, 27, 1907 (bill proposed by Mr. Thorne in House of 
 Commons for the Nationalization of Railways, Mines and 
 Canals) . 
 
 38. Report to Board of Trade (London), 1910, Nicholas S. Reyn- 
 
 tiens and Merwyn L. Chute. 
 
 39. Reports of English Railway and Canal Commission, 189S, 1907. 
 
 40. Reports of English Railway Commission, 1875-86. 
 
 41. Report Board of Trade (Great Britain) on Railways in Aus- 
 
 tria and Hungary, by C. H. Peardon and N. S. Reyntiens 
 (1909), Sessional Papers. 
 
 42. Reports to the English Board of Trade on Railways in Bel- 
 
 gium, France and Italy, London, 1910. 
 
 43. Report of the Select Committee on Coal, English House of 
 
 Commons, re high price and scarcity, London, 1873. 
 
 44. Report of U. S. Consulate, Berlin, Doc. 1909, of the National 
 
 Waterways Commission. 
 
178 Bibliography. 
 
 45. Ueber die Konzentration im deutschen Kohlenbergbau, Curt 
 Goldschmid, 1912. 
 III. Miscellaneous. 
 
 1. General Letter Book of the Commission No. 55, 1905 (contains 
 
 important letter (p. 52) which does not appear among Con- 
 gressional Documents or elsewhere). 
 
 2. Opinions of Attorney General re Commodities' Clause, ren- 
 
 dered to Sec'y Interior, Nov. 29, 1912, pp. 587-592 (1912), 
 Opinions of Att'y Gen'l.