IDS' lis CORNELL UNIVERSITY LIBRARY FROM 3 1924 095 660 878 Cornell University Library The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924095660878 57tli COISTG-RESS. 1st SESSION. "MILWAY FREIGHT RATES AND POOLING." HEARIN^GS BFFOKE THE COMMITTEE ON INTERSTATE COMMERCE, TJI^ITED STATES SEI^ATE, HAVING UNDER CONSIDERATION THE BILLS (S, 3521) "TO ENLARGE THE JURISDICTION AND POWERS OF THE INTERSTATE COMMERCE COMMISSION," INTRODUCED IN THE SENATE FEBRUARY 4, 1902, BY MR, ELKINS; AND (S. 3675) "TO AMEND AN ACT ENTITLED 'AN ACT TO REGULATE COMMERCE,' APPROVED FEBRUARY 4, 1887, AND ALL ACTS AMENDATORY THEREOF," INTRODUCED FEBRUARY 5, 1902, BY MR. NELSON. VOLUME I. WASHINGTON: GOVERNMENT PRINTING aFPICE. 1902. ^5 ^ STtb COXQBESS. INTERSTATE COMMERCE COMMITTEE. SENATE or THE TJNITED STATES. STEPHEN B. ELKINS, of West Virginia. SHELBY M. CULLOM, of Illinois. NELSON W. ALDRICH, of Ehode Island. JOHN KEAN, of New Jersey. JONATHAN P. DOLLIVER, of Iowa. JOSEPH B. FOEAKEB, of Oliio. MOSES E. CLAPP, of Minnesota. JOSEPH H. MILLARD, of Nebraska. BENJAMIN R. TILLMAN, of South Carolina. ANSELM J. McLAURIN, of Mississippi. EDWARD W. OARMAOK, of Tennessee. MURPHY J. FOSTER, of Louisiana. THOMAS M. PATTERSON, of Colorado. II X l.i .HiVMi) ■> TABLE O^ CONTENTS. Page. Senate bill 3521 (the Elkins bill) in Senate bill 3521 (the Elkins bill) with proposed amendments ix Senate bill 3575 (the Nelson bill) xv Freight ratea on lumber 1 Statement of — E. M. Adams 1' J. E. Evans , 9 E. P. Bacon '.. i.. 14 List of organizations endorsing Senate bill 3575 15 Statement of — Bernard A. Eckhart 28 Aaron Jones 34 George F. Mead 38 Power of Congress over interstate commerce 47 Additional statement of E. P. Bacon 52 Extracts from the press 54 Statement of — William E. Corwine 75 Robert W. Higbie : 86 Freight rates on lumber 88 David Bingham 96 ^amuelT. Hubbard 99 E. S.Lyon 99 Charles N. Chadwick 103 William H. Chadwick 104 Eailroad combinations, mileage, etc 107 Statement of — T. W. Tomlinson 121 JohnD. Keman 124 H. H.Porter ---- 133 The Hon. Martin A. Knapp... 137 Joseph Nimmo, jr ■..:... 140 The political aspects of governmental regulations 156 Commissioner Clement's iySUfeJiOfl-T!. 161 Predictions as to exorbitant rates in the future 161 The evolution of the American railroad systems 162 petitions, memorials, and resolutions endorsing S. 3521 and S. 3575 175 APPENDIX. The act to regulate commerce as amended, together with acts supplementary thereto 1-28 III THE ELKINS BILL AS ORIGINALLY INTRODUCED. [S. 3521, Fifty-seventli Congress, first session.] A BILL To enlarge the jurisdiction and powers of the Interstate Commerce Commission. 1 Be it enacted by the Senate and House of Representatives of the United States of 2 America in Congress assembled, That any definite order made by the Interstate S Commerce Commission after hearing and determination had on any petition 4 hereafter presented pursuant to section thirteen of an act entitled "An act to 5 regulate commerce," approved February fourth, eighteen hundred and eighty- 6 seven, declaring any existing rate or rates in said petition complained of, for the 7 carriage of any given article or articles, person or persons, or any regulation or 8 practice affecting such rates, to be unjustly discriminative or unreasonable, 9 and declaring what rate, regulation, or practice affecting such rate for the 10 future, in substitution, would be just and reasonable, shall become operative 11 and be observed by the party or parties against whom the same shall be 12 made, within thirty days after notice; or in case of proceeding for review as 13 hereinafter provided, then within forty days after notice; but the same may 14 at any time be modified, suspended, or revoked by the Commission, but shall 15 in no case continue in force and be obeyed beyond the period of one year 16 from the day the same becomes originally operative and is observed. If 17 such substituted rate shall be a joint one, and the carriers parties to that rate 18 shall be unable to agree upon the apportionment thereof among themselves 19 within ten days after any such order shall become operative, then the Oom- 20 mission may declare as part of its order what would be a just and reason- 21 able proportion of such rate to be received by each carrier. Such order 22 as to its justness, reasonableness, and lawfulness, whether in respect to the rate, 23 regulation of practice complained of, or that prescribed in substitution therefor, 24 or the apportionment of a joint rate, or otherwise, shall be reviewable by any 25 circuit court of the United States for any district through which any portion of 26 the road of the carrier shall run, to which a petition filed on its equity side shall 27 be first presented by any party interested. Pending such review the said order 28 shall be suspended unless upon application to and hearing by said court it shall 29 be otherwise ordered; said court and the Supreme Court in case of appeal may, 80 at any time, upon application and notice, suspend or rgvoke the said order. The 31 several circuit courts of the United States a.re hereby invested with full jurisdic- 32 tion and powers in the premises, including the issuance and pursuit of the neces- 33 sary process to secure appearance of the parties. The court shall also direct 34 notice to the Commission of the filing of said petition; whereupon it shall be the 35 duty of the Commission, within ten days after the receipt thereof, to cause to be filed VI RAILWAY FREIGHT RATES AND POOLING. 1 in said court, duly certified, a complete copy of its entire record, including peti- 2 tions, answers, testimony, report, and opinion of the Commission, order, and all 3 other papers whatsoever in connection therewith. The court shall thereupon 4 proceed to hear the same either upon the petition, record, and testimony returned 5 by the Commission; or, in its discretion, may, upon the application of either 6 party, and in such manner as it shall direct, cause additional testimony to be 7 taken; and thereupon if said court shall be of the opinion that said order was 8 made under some error of law, or is, upon the facts, unjust or unreasonable, it 9 shall suspend or revoke the same by appropriate decree; otherwise said order 10 shall be aflBrmed. Any party to the cause may appeal to the Supreme Court of 11 the United States within thirty days of the rendition of any final decree of said 12 court, which court shall proceed to hear and determine the same in due course 13 without regard to whether the one year hereinbefore limited for the continu- 14 ance of said order shall have expired or not. 15 Sec. 2. That it shall be lawful for any two or more common carriers to 16 arrange between and among themselves for the establishment or maintenance of 17 rates. It shall also be lawful for such carriers to agree, by contract in writing, 18 filed with the Interstate Commerce Commission, upon the- division of their 19 traffic or earnings, or both; and upon the complaint by petition or any party 20 interested that any such contract so filed unjustly and unlawfully affects any 21 person or persons, community or communities, it shall be the duty of the Com- 22 mission to promptly investigate the matters so complained of in such manner 23 and by such means as it shall deem proper, and make report in writing with 24 respect thereto, which report shall include the findings of fact upon which the 25' conclusions of the Commission are based, and be entered of record. If such 26 findings sustain in any material particular the allegations of said petition, then it 27 shall be the duty of said Commission to make an order either annulling said 28 contract after thirty days' notice, or directing that the said contract and the 29 practices thereunder, in the respects found to be unjust and unlawful, shall be 30 changed in the manner prescribed in the order. Should such requirements of 31 the Commission as to changes be not observed by the carriers, and written 32 acceptance thereof be not filed with the Commission within thirty days after 33 notice, then said contract filed as aforesaid shall be annulled. Any such order 34 shall be subject to all the provisions of section one of this act with respect to 35 definitive orders made upon petitions presented pursuant to section thirteen of 36 an act entitled "An act to regulate commerce," approved February fourth, 37 eighteen hundred and eighty-seven. 38 Sec. 3. That if any party bound thereby shall refuse or neglect to obey or per- 39 form any order of the Commission mentioned in section one or secton two of this 40 act at any time while the same is in force as provided by said section, obedience 41 and performance thereof shall be summarily enforced by writ of injunction or 42 other proper process, mandatory or otherwise, which shall be issued by any cir- 43 cuit court of the United States upon petition of said Commission, accompanied by a 44 certified copy of the order alleged to be violated, and evidence oi the violation 45 alleged; and in addition thereto the offending party shall be subject to a penalty RAILWAY FREIGHT RATES AND POOLING. VH 1 of ten thousand dollars, which, together with costs of suit, shall be recoverable 2 by said Commission by action of debt in any circuit court of the United States, 3 and when so recovered shall be for the use of the United States. Where, how- 4 ever, any order made by the Commission shall involve the rate on traffic passing 5 in part over the line or lines of any railroad company operating in any foreign 6 country, and passing in part over lines of railroad companies operating within 7 the United States, or shall involve the usages of such foreign road with respect 8 to such traffic, then in case such order shall not be observed it shall be lawful 9 for the Commission, or the court having jurisdiction, in addition to the other 10 remedies herein provided, to enforce the order against the traffic so passing in 11 part through a foreign country and in part through the United States, by suspen- 12 sion of the movement thereof within the United States, save upon the condition 13 that the terms of the order shall be complied with. 14 Sec. 4. That anything done or omitted to be done by a corporation common 15 carrier, subject to the act to regulate commerce, which, if done or omitted by 16 any lessee, trustee, receiver, officer, agent, or representative of such corporation, 17 would constitute a misdemeanor under said act, shall be held to be a misde- 18 meanor by such corporation, and upon conviction thereof it shall be subject to 19 like penalties as are prescribed in said act with reference to individuals, except 20 as such penalties are herein changed. The willful failure upon the part of any 21 carrier subject to said act to file and publish the tariffs of rates and charges as 22 required by said act, or strictly to observe such tariffs until changed according 23 to law, shall be a misdemeanor, and upon conviction thereof the individual or 24 corporation offending shall be subject to a fine not less than one thousand dol- 25 lars nor more than twenty thousand dollars for each offense; and the willful 26 complicity upon the part of any person owning or interested in the traffic to 27 which any other rate shall be given than those prescribed in said tariffs shall 28 likewise constitute a misdemeanor, and, upon conviction, shall subject the 29 offender to the like penalties last hereinbefore prescribed with reference to the 30 carrier. In all convictions occurring after the passage of this act, for offenses 31 under said act to regulate commerce (whether committed before or after the 32 passage of this act), or for offenses under this section, no penalty shall be 33- imposed on the convicted party other than the fine prescribed by law, imprison- 34 ment wherever now prescribed as part of the penalty being hereby abolished. 35 Sec. 5. That in any proceeding for the enforcement of the provisions of the 36 statutes relating to interstate commerce, whether such proceedings be instituted 37 before the Interstate Commerce Commission or be commenced originally in any 38 circuit court of the United States, it shall be lawful to include as parties all per- 39 sons, in addition to the carrier interested in or affected by the rate, regulation, 40 or practice under consideration, and inquiries, investigations, orders, and decrees 41 may be made with reference to and against such additional parties in the same 42 manner, to the same extent and subject to the same provisions, as is or shall be 43 authorized by law with respect to carriers. 44 Sec. 6. That whenever the Interstate Commerce Commission shall have reason- 45 able ground for belief that any common carrier is engaged in the carriage of VIII EAILWAY FEEIGHT BATES AND POOLING. 1 passenger or freight traffic between given points at less than the published rates 2 on file, it shall be authorized to present a petition to the circuit court of the 3 United States having jurisdiction of the parties, alleging such practice ; where- 4 upon it shall be the duty of the court to summarily inquire into the circum- 5 stances, and, upon being satisfied of the truth of the allegation, to enforce an 6 observance of the published tariffs by proper orders and process, which said 7 orders and process may be enforceable as well against the parties interested in 8 the traffic as against the carrier. 9 Sec. 7. That all acts and parts of acts in conflict with the provisions of this 10 act are hereby repealed, but such repeal shall not affect causes now pending nor 11 rights which have already accrued, but such causes shall be prosecuted to a con- 12 elusion and such rights enforced in a manner heretofore provided by law. 13 Sec. 8. That this act shall take effect from its passage. THE ELKINS BILL WITH PROPOSED AMENDMENTS PENDING BEFORE THE COMMITTEE. [S. 3521, Fifty-seventh Congress, first session. (Committee print.)] [Proposed amendments printed in italics. Omit the words in brackets.]' A BILL To enlarge the jurisdiction and powers of the Interstate Commerce Commission. 1 Be it enacted by the Senate and House of Representatives of the United Stales of 2 America in Congress asse-iabled, Tliat any definite order made by tlie Interstate 3 Commerce Comrrission after hearing and determination had on any petition here- 4 after presented pursuant to section thirteen of an act entitled ' ' An act to regulate 5 commerce," approved February fourth, eighteen hundred and eighty-seven, 6 declaring any existing rate or rates in said petition complained of, for the carriage 7 of any given article or articles, person or persons, or any regulation or practice 8 affecting such rates facilities afforded in connection thereiuith, to be unjustly discrimi- 9 native or unreasonable, and declaring what rate or rates, regulation, or practice 10 affecting such rate or rates for the future, in substitution, would be just and rea- 11 sonable, shall become operative and be observed by the party or parties against 12 whom the same shall be made within thirty days after notice, or in case of 13 proceedmg for review as hereinafter provided, then within forty days after 14 notice; but the same may at any time be modified, suspended, or revoked by 15 the Commission, but shall in no case continue in force [and be obeyed] beyond 16 the period of one year from the day the same becomes originally operative and 17 is observed[. If such substitute rate shall be a joint one, and the carriers 18 parties to that rate shall be unable to agree upon the apportionment thereof 19 among themselves within ten days after any such order shall become operative, 20 then the Commission may declare as part of its order what would be a just and 21 reasonable proportion of such rate to be received by each carrier.]; Provided, 22 however. That if any carrier shall thereafter see fit. to increase the rale or rates {or change 23 the regulation w practice) established by such order, it shall fUe thirty days' previous 24 notice thereof vnth the Commission in the manner provided by law. When the rate 25 suhstituted by the Commission as hereinbefore provided is a joint rate, and the carriers 26 parties thereto fail to agree upon the apportionment thereof among themselves within 27 twenty days after notice of such order, the Commission may issue a supplemental order 28 declaring the portion of such joint rate to be received by each carrier party thereto, 29 which order shall be observed by such carriers. When the order of the Commission 30 prescribes the just relation of rates, to or from common points on the lines of the several 31 carriers parties to the proceeding, and such carriers fail to notify the Commission within 32 twenty days after notice of such order that they have agreed among themselves as to the IX X RAILWAY FREIGHT RATES AND POOLING. 1 changes to be made to effect compliance therewith, the Commission may issue a supple- 2 mental order prescribing the rates to he charged, to or from such common points, by 3 either or all the parties to the proceeding, which order shall be observed by the carriers 4 concerned. fSuchJ Every order as to its justness, reasonableness, and lawful- 5 ness, whether m respect to the rate or rates, regulation [of] or practice com- 6 plained of, or that prescribed in substitution therefor, or the apportionment of a 7 joint rate or the relation of rates, or otherwise, shall be reviewable by any circuit 8 court of the United States for any district through which any portion of the road 9 of the carrier shall run, to which a petition filed on its equity side shall be first 10 presented by any party interested. [Pending such review the said order shall 11 be suspended unless upon application to and hearing by said court it shall be 12 otherwise ordered; said court and the Supreme Court in case of appeal may, at 13 any time, upon application and notice, suspend or revoke the said order. The sev- 14 eral circuit courts of the United States are hereby invested with full jurisdiction 15 and powers in the premises, including the issuance and pursuit of the necessary 16 process to secure appearance of the^ parties. The court shall also direct notice to 17 the Commission of the filing of said petition; whereupon it shall be the duty of 18 the Commission, within ten days after the receipt thereof, to cause to be filed in 19 said court, duly certified, a complete copy of its entire record, including peti- 20 tions, answers, testimony, report, and opinion of the Commission, order, and all 21 other papers whatsoever in connection therewith. J It shall be the duty of the 22 Commission, vnthin ten days after notice, to cause to be filed in any court to which such 23 petition shall have been presented a duly certified copy of its entire record in connection 24 tvith the order to be reviewed, including petition, answers, testimony, report and 25 opinion of the Commission, order, and all other papers whatsoever in connection there- 26 with. The court shall thereupon proceed to hear the same either upon the peti- 27 tion, record, and testimony returned by the Commission; or, in its discretion, 28 may, upon the application of either party, and in such manner as it shall direct, 29 cause additional testimony to be taken; and thereupon if after hearing said court 30 shall be of the opinion that said order was made under some error of law, or is, 31 upon the facts, unjust or unreasonable, it shall suspend or revoke the same by 32 appropriate decree; otherwise said order shall be affirmed. Pending such review, 33 however, the court may, upon application and hearing, suspend said order. Any party 34 to the cause may [appeal to the Supreme Court of the United StatesJ within 35 thirty days of the rendition of any final decree of said court appeal to the Supreme 36 Court of the United States, which court shall proceed to hear and determine [the 37 same in due course without regard to whether the one year hereinbefore limited 38 for the continuance of said order shall have expired or not. J such appeal. The 39 said several courts of the United States shall be and are vested unthfulljurisdictim and 40 all necessary powers in thepremises. The case in both the cirauU caurt and the Supreme 41 CouH shall have precedence over all except criminal cases. But such appeal shall not 42 operate to stay or supersede the order of the drcuU court, or the execution of any writ 43 or process thereon. 44 The defense in all such proceedings for review shall be undertaken by the United 45 States district attorney for the district wherein the action is brought, under the direction EAILWAT PEEIGHT EATES AND POOLINO. XI 1 of the Attorney-General of the United States, and the costs and expenses of meh defense 2 shaU be paid out of the appropriation for the expenses of the courts of the United States. 3 The Commission may, with the consent of the A ttomey- General, employ special counsel 4 in any proceeding under this Act, paying the expense of such employmeni out of its own 5 appropriation. 6 Sec. 2. That it shall be lawful for any two or more common carriers to arrange 7 between and among themselves for the establishment or maintenance oijust and 8 reasonable rates. It shall also be lawful for such carriers to [agree, byj make 9 [contract! contracts in writing to be filed with the Interstate Commerce Com- 10 mission, [upon] for the division of their traffic or earnings, or both thereof; and 11 [upon] for the formation of traffic associations; [the complaint by petition or any 12 party interested that any such contract so filed unjustly and unlawfully affects 13 any person or persons, community or communities, it shall be the duty of the 14 Commission to promptly investigate the matters so complained of in such manner 15 and by such means as it shall deem proper, and make report in writing with 16 respect thereto, which report shall include the findings of fact upon which the 17 conclusions of the Commission are based, and be entered of record. If such 18 findings sustain in any material particular the allegations of said petition, then 19 it shall be the duty of said Commission to make an order either annulling said 20 contract after thirty days' notice, or directing that the said contract and the 21 practices thereunder, in the respects found to be unjust and unlawful, shall be 22 changed in the manner prescribed in the order. Should such requirements of the 23 Commission as to changes be not observed by the carriers, and written acceptance 24 thereof be not filed with the Commission within thirty days after notice, then said 25 contract filed as aforesaid shall be annulled. Any such order shall be subject 26 to all the provisions of section one of this act with respect to definitive orders 27 made upon petitions presented pursuant to section thirteen of an act entitled ' ' An 28 act to regulate commerce," approved February fourth, eighteen hundred and 29 eighty-seven,] and said Commission shall have the right to examine by its duly 30 authorized agents, and may require to be filed with it from time to time copies of the 31 proceedings taken or decisions promulgated or other papers received or issued under, or 32 pursuant to, or in the execution of any such contracts in writing. After any such con- 33 tract in writing shall have gone into operation, the Commission may, either upon its 34 own motion or upon complaint of any party interested, inquire into the actual effect 35 thereof, and if it shall be of opinion that such contract results in unreasonable rates, 36 unjust discrimination, inadequate service, or is in any respect in contravention of said ZT act to regulate commerce it may enter an order annulling said contract on a date 38 named, which shall not be less than ten days from notice of said order, and thereupon 39 said contract shall cease and determine, or it may enter, an order directing that said 40 contract and the practices thereunder shall be changed in the manner prescribed in 41 such order; and if all parties to such contract shall within fifteen days after notice of 42 such order file with the Commission written acceptances of such order, said contract shall 43 he held to be re-formed and thereafter be maintained accordingly; otherwise said con- 44 tract, shall cease and determine. XII E AIL WAT FEEIGHT BATES AND POOLING. 1 Sec. 3. That if any party bound thereby shall refuse or neglect to obey or per- 2 form any order of the Commission mentioned in section one or section two of 3 this act at any time while the same is in force as provided by said section, obedi- 4 ence and performance thereof shall be summarily enforced by writ of injunction 5 or other proper process, mandatory or otherwise, which shall be issued by any 6 circuit court of the United States upon petition of said Commission, accompanied 7 by a certified copy of the order alleged to be violated, and evidence of the violation 8 alleged; and in addition thereto the offending party shall be subject to a penalty 9 of [ten] not less than five thousand dollars for each day of the continuance thereof, 10 which, together with costs of suit, shall be recoverable by said Commission 11 by action of debt in any circuit court of the United States, and when so recov- 12 ered shall be for the use of the United States. Where, however, any order made 13 by the Commission shall involve the rate on traffic passing in part over the line 14 or lines of any railroad company operating in any foreign country, and passing in 15 part over lines of railroad companies operating within the United States, or shall 16 involve the usages of such foreisn road with respect to such traffic, then in 17 case such an order shall not be observed it shall be lawful for the Commission, 18 or the court having jurisdiction, in addition to the other remedies herein pro- 19 vided, to enforce the order against the traffic so passing in part through a foreign 20 country and in part through the United States, by suspension of the movement 21 thereof within the United States, save upon the condition that the terms of the 22 order shall be complied with. 23 Sec 4. That anything done or omitted to be done by a corporation common 24 carrier, subject to the act to regulate commerce, which, if done or omitted by 25 any lessee, trustee, receiver, officer, agent, or representative of such corporation, 26 would constitute a misdemeanor under said act, shall be held to be a misdemeanor 27 by such corporation, and upon conviction thereof it shall be subject to like pen- 28 alties.as are prescribed in said act with reference to individuals, except as such 29 penalties are herein changed. The willful failure upon the part of any carrier 30 subject to said act to file and publish the tariffs of rates and charges as required 31 by said act, or strictly to observe such tariffs until changed according to law, or 32 any departure therefrom by such carrier by means of the payment of a rebate or other- 33 wise, shall be a misdemeanor, and upon conviction thereof the individual or cor- 34 poration offending shall be subject to a fine not less than one thousand dollars S5 nor more than twenty thousand dollars for each offense; and the willful com- 36 plicity upon the part of any person owning or interested in the traffic to which 37 any other rate or rates shall be given than those prescribed in said tariffs shall 38 likewise constitute a misdemeanor, and, upon conviction, shall subject the 39 offender to the like penalties last hereinbefore prescribed with reference to the 40 carrier. In all convictions occurring after the passage of this act, for offenses 41 under said act to regulate commerce (whether committed before or after the 42 passage of this act ) , or for offenses under this section, no penalty shall be imn^Bed 43 on the convicted party other than the fine prescribed by law, imprigpjijnent 44 wherever now prescribed as part of the penalty being hereby aboliehed. SATjrvraT~FirEJATffj--EATES AND POOLING. XIII 1 Sec. 5. That in any proceeding for the enforcement of the provisions of the 2 statutes relating to interstate commerce, whether such proceedings be instituted 3 before the Interstate Commerce Commission or be commenced originally in any 4 circuit court of the United States, it shall be lawful to include as parties all per- 5 sons, in addition to the carrier interested in or affected by the rate, regulation, 6 or practice under consideration, and inquiries, investigations, orders, and decrees 7 may be made with reference to and against such additional parties in the same 8 manner, to the same extent and subject to the same provisions, as is or shall 9 be authorized by law with respect to carriers. 10 Sec. 6. That whenever the Interstate Commerce Commission shall have rea- 11 sonable ground for belief that any common carrier is engaged in the carriage of 12 passenger or freight traffic between given points at less than the published rates 13 on file, or is rendering any addUional service in any iixiy beyond what is specified in 14 its published tariffs, it shall be authorized to present a petition to the circuit 15 court of the United States having jurisdiction of the parties, alleging such prac- 16 tice, whereupon it shall be the duty of the court to summarily inquire into the 17 circumstances, and, upon being satisfied of the truth of the allegation, to enforce 18 an observance of the published tariffs by proper orders and process, which said 19 orders and process may be enforceable as well against the parties interested in 20 the traffic as against the carrier. 21 Sec. 7. That all acts and parts of acts in conflict with the provisions of this 22 act are hereby repealed, but such repeal shall not affect causes now pending 23 nor rights which have asready accrued, but such causes shall be prosecuted to a 24 conclusion and such rights enforced in a manner heretofore provided by law. 25 And all existing laws rdaiive to testimony in cases or proceedings under or connect^ 26 with the act to regulate commerce shall also apply to any case or proceeding authorized 27 by this act. 28 Sec. 8. That this act shall take effect from its passage. THE NELSON BILL AS OEIGINALLT INTRODUCED. [S. 3575, Fifty-seventli Congreaa, first session.] A BILL to amend an act entitled "An act to regulate commerce," approved February fourth, eighteen hundred and eighty-seven, and all acts amendatory thereof. 1 Be it enacted by the Senate and Howe of Representatives of the United States of 2 America in Congress assembled, That section ten of an act entitled "An act to 3 regulate commeree," as amended March second, eighteen hundred and eighty- 4 nine, be amended so as to read as follows: 5 "Sec. 10. Every carrier, every lessee, trustee, receiver, oflBicer, agent, or rep- 6 resentative of a carrier who shall transport or offer to transport traffic subject 7 to this act at any other rate or upon any other terms and conditions than are 8 duly published in accordance with the provisions of the act, or who by the pay- 9 ment of any rebate, or by any other device, departs from such published rate 10 in the transportation of such traffic, or who transports such traffic-without having 11 first published a tariff applicable to the same, agreeably to the provisions of the 12 act, and any person who procures, or solicits to be done, or assists, aids, or abets 13 in the doing of any one of the aforesaid acts, shall be deemed guilty of a misde- 14 meanor and shall, upon conviction thereof, be subject to a fine of not less than 15 five thousand dollars nor more than twenty thousand dollars for each such offense. 16 "Any person, whether an employee or a principal, or a member of a firm or 17 company, or an employee, agent, or officer of a corporation, for any of whom as 18 consignor or consignee any carrier subject to the provisions of this act shall 19 transport property, who shall knowingly, by false description, false weight, or 20 false representation of the contents of any package, or by any other fraudulent 21 means, obtain or attempt to obtain the transportation of property, with or with- 22 out the collusion of the carrier or any of its employees, agents, or representa- 23 tives, for a less compensation than that prescribed by the published tariffs or 24 schedules of rates in force at the time shall be deemed guilty of a misdemeanor 25 and shafl, upon conviction thereof, be subject to a fine of not less than one thou- 26 sand dollars nor more than five thousand dollars for each such offense. 27 " Every carrier, every lessee, trustee, receiver, officer, agent, or representative 28 of a carrier who knowingly violates any j)ro vision of this act, or fails to perform 29 any requirement thereof, for which no penalty is otherwise expressly provided, 30 shall be deemed guilty of a misdemeanor, and upon conviction thereof shall be 31 subject to a fine of not less than one thousand dollars nor more than five thou- 32 sand dollars for each such offense. Every corporation which shall be guilty of r^ XVI RAILWAY FEEIGHT BATES AND POOLING. 1 any act or omission which if done by an individual would be a misdemeanor 2 under the provisions of this act shall be deemed guilty of such misdemeanor 3 and shall be subject to the same penalty which is provided against the individual. 4 "Every violation of this act shall be prosecuted in any court of the United 5 States having jurisdiction of crimes within the district in which such viola- 6 tion was committed; and whenever the offense is begun in one jurisdiction 7 and completed in another, it may be dealt with, inquired of, tried, determined, 8 and punished in either jurisdiction in the same manner as if the offense had 9 been actually and wholly committed therein. , 10 "In construing and enforcing the provisions of this section, the act, omission, 11 or failure of any officer, agent, or other person acting for or employed by any 12 common carrier shall, in every case, be also deemed to be the act, omission, or 13 failure of such carrier as well as that of the person. 14 "All offenses heretofore committed shall be prosecuted and punished as pro- 15 vided for by the laws existing at the time such offenses were committed, for 16 which purpose all acts or parts thereof inconsistent with this act are continued 17 in force." 18 Sbc. 2. That section fifteen of said act is hereby amended by adding the fol- 19 lowing words thereto: 20 " If the Commission, after full hearing had upon any petition hereafter pre- 21 sented, determines that the defendant or defendants are in violation of any of 22 the provisions of the act, in respect to any rate, relation of rates, whether 23 between localities or commodities, classification of freight, or other practice, it 24 shall be its duty to determine what rate, relation of rates, classification, or other 25 practice should be observed for the future in order to correct the wrong found 26 to exist, and it shall order said defendants to observe the same. In case of 27 ordering a change in the relation of rates, if it shall become necessary, in order 28 to establish or maintain a just relation thereof, to prescribe the rate or rates to 29 be observed by either or all of the parties concerned therein, it shall be its duty 30 so to do; and when a rate involved in any case is a joint rate, it shall further 31 determine the proportions in which the rate shall be shared by the several 32 carriers,' if they fail to agree among themselves in respect thereto. In either of 33 these cases, if the several defendants shall not have notified the Commission 34 within ten days from the service of the order that they have come to an agree- 35 ment in respect to the relative rates in question, or in respect to the division df 36 the joint rate prescribed, the Commission shall thereupon fix the rates or 37 proportions to be observed for the future, in the' case in question, as above 38 provided. « 39 "Any such order shall be termed a 'definitive order,' and shall specify the 40 time when the same is to take effect, which shall in no case be less than twenty 41 days after service of said order upon defendant. Any defendant may review 42 said order by filing, within twenty days from tl^e service thereof, with the cir- 43 cuit court of the United States for that district in which its principal office is 44 situated, a bill in equity for that purpose, and where there are several defend- RAILWAY FREIGHT HATES AND POOLING. XVII 1 ants, that court shall have jurisdiction in which such petition is first filed. The 2 United States shall be made the defendant in such proceeding and the Commis- 3 sion shall be forthwith notified of the pendency thereof. Within fifteen days 4 from receiving such notice the Commission shall file in such court a complete 5 certified copy of the entire record in such case, and the court shall thereupon 6 proceed to hear the same upon such record; but it may also, in case either party 7 desires to submit further testimony, and such testimony could not reasonably 8 have been produced before the Commission, instruct the Commission to take 9 and certify up such testimony. If upon hearing the court shall be of the opinion 10 that the order of the Commission is not a lawful, just, and reasonable one, it 11 shall vacate the order; otherwise, it shall dismiss the proceedings in review. In 12 either case the court shall file with its decision a statement of the reasons upon 13 which such decision is based, a copy of which shall be certified forthwith to the 14 Commission. If the order of the Commission is vacated and no appeal is taken, 15 the Commission may reopen the case for further hearing and order, or it may 16 make a new order without further hearing; but such subsequent order shall be 17 subject to the same right of review as above provided. 18 "The filing of a petition to review an order shall of itself suspend the effect 19 of such order for thirty days, and the court before which the same is pending 20 may also, if upon an inspection of the record it plainly appears that the order 21 proceeds upon some error of law, or is unjust and unreasonable upon the facts, 22 and not otherwise, suspend the operation of the order during the pendency of 23 the proceedings in review, or until further order of the court. 24 "Either party may, within thirty days, appeal from the judgment or decree 25 of the circuit court to the Supreme Court of the United States; but such appeal 26 shall not operate to stay or supersede the order of the circuit court. 27 "The defense in all such proceedings for review shall be undertaken by the 28 United States district attorney for the district wherein the action is brought, 29 under the direction of the Attorney-General of the United States, and the costs 30 and expenses of such defense shall be paid out of the appropriation for the 31 expenses of the courts of the United States. 32 "The Commission may, with the consent of the Attorney-General, employ 33 special counsel in any proceeding under this act, paying the expenses of such 34 employment out of its own appropriation." 35 Sec. 3. That section sixteen of said act as amended March second, eighteen 36 hundred and eighty-nine, is hereby amended by striking out all of the first para- 37 graph down to and including the words "and the costs and expenses of such 38 prosecution shall be paid out of the appropriation for the expenses of the courts 39 of the United States," and inserting in lieu thereof the following: 40 "A definitive order which has become operative by its terms and has not been 41 suspended or vacated in the manner specified in the preceding section shall be 42 obligatory upon and observed by the defendant carrier or carriers against whom 43. it is made : Provided, That when a carrier has actually observed said order for F K P II XVIII RAILWAY FBEIGHT RATES AND POOLING. 1 the space of two years it shall no longer be binding upon said carrier: And pro- 2 vided further,' That the Commission may at any time rescind or modify such 3 order. 4 "If, however, the carrier, after the expiration of that period, shall make any 5 change from the rate or other practice directed by the Commission, any party 6 interested may file with the Commission his objection to such change within 7 sixty days, and the Commission may thereupon order the carrier to restore and 8 maintain the rate or practice required by the original order pending its investi- 9 gation as to the lawfulness or reasonableness of such change. The order of the 10 Commission directing a restoration of the rate originally required shall not be 11 subject to review, but its final order, issued pursuant to such investigation, shall 12 be subject to the same right of review as is provided in the preceding section of 13 this act. 14 "If a carrier neglects or refuses to obey an order which is obligatory upon it 15 as above, the circuit court of the United States for any district through which 16 any portion of the road of such carrier runs shall, upon petition of the complain- 17 ant in the original suit, or of the Commission, or of any party interested, enforce 18 obedience to such order by mandamus, injunction, or other summary process of 19 said court, and the circuit courts of the United States are hereby invested with 20 the necessary powers thereto. Every carrier, or the receiver, lessee, trustee, oflH- 21 cer, or agent of such carrier, neglecting or refusing to obey such order shall also 22 be subject to a penalty of ten thousand dollars for each and every day which 23 he or it is in default, said penalty to be recovered for the use of the United 24 States in an appropriate suit brought in the name of the United States in the 25 circuit court for any district through which any portion of the road of the car- 26 rier runs. 27 "Any circuit court of the United States for a district through which any por- 28 tion of the road of a carrier runs shall, upon petition of the Commission or of 29 any party interested, enjoin such carrier or its receivers, lessees, trustees, officers, 30 or agents from giving, and a shipper from receiving, with respect to interstate 31 transportation of persons or property subject to the provisions of this act, any 32 concession from the lawfully published rate, or from accepting persons or prop- 33 erty for such transportation if a rate has not been lawfully published; and by 34 ' concession ' is meant the giving of any rebate or drawback, the rendering of 35 any additional service, or the practicing of any device or contrivance by which 36 a less compensation than that prescribed by the published tariffs is ultimately 37 received, or by which a greater service in any respect than that stated in 38 such tariffs is rendered. And In proceedings of this nature said court shall 39 have power to compel the attendance of witnesses, both upon the part of the 40 carrier and of the shipper, who shall be required to answer on all subjects relat- 41 ing directly or indirectly to the matter in controversy, and to compel the pro- 42 duction.of all books and papers, both of the carrier and of the shipper, which 43 relate directly or indirectly to such transaction; but all persons so required io 44 testify shall have the same immunity from prosecution and punishment as is BAIL WAT FREIGHT RATES AND POOLING. XIX 1 provided in an act approved February eleventh, eighteen hundred and ninety- 2 three, entitled 'Aji act in relation to testimony before the Interstate Com- 3 merce Commission, and in cases or proceedings under ok connected with an 4 act entitled, "An act to regulate commerce," approved February fourth, 5 eighteen hundred and eighty-seven, and amendments thereto.' " 6 Sec. 4. That all acts and parts of acts .in conflict with the provisions of this 7 act are hereby repealed, but such repeal shall not affect causes now pending nor 8 rights which have already accrued, and such causes shall be prosecuted to a 9 conclusion and such rights enforced in the manner heretofore provided by law. 10 Sec. 5. That this act shall take effect from its passage. HEARINGS. FEEIGHT RATES ON LUMBER. United States Senate Committee ON Interstate Commerce, February 7, 1902. A committee (composed of Messrs. E. M. Adams, E. R. Burkholder, E. S. Miner, J. E. Evans, and Harry A. Gorsuch) representing the Missouri, Kansas and Oklahoma Association of Lumber Dealers, appeared before the Committee on Interstate Commerce. The Chairman (Mr. Elkins, of West Virginia). This meeting has been called for the purpose of hearing the gentlemen present, who represent the lumber interests of Kansas and the West, and who desire, as I understand, some amendment of the interstate-commerce law. Gentlemen, we have just an hour in which to hear you, and you can parcel out the time among yourselves. STATEMENT OF E. M. ADAMS. Mr. E. M. Adams (of Mound City, Kans.). Mr. Chairman and gentle- men of the committee, this committee represents the Missouri, Kan- sas and Oklahoma Lumber Dealers' Association; also that association represents the Southern manufacturers' interests, and behind that are the great interests of the people, and they are really the most interested of all parties concerned — more so than even, the association we particu- • larly represent, because they receive the ultimate benefits of anything that may be done by Congress in the way of strengthening the inter- state-commerce law, which is, after all, what we are here for. We in the West, Mr. Chairman, have suffered a great many griev- ances, among which are the excessive and unjust rates of freight charged by the railroads, and unjust discrimination in rates. We had intended to give you some facts and figures, having a prepared state- ment of that kind, but unfortunately that is not at this moment in our hands. Perhaps I ought to apologize, but the fact is that Mr. Burk- holder, a member of our committee, who has possession of that state- ment, was detained so that he has not been able to arrive here from. New York in time for this hearing. Consequently, while we are with- out data, yet we can briefly state our points. It might seem an unu- sual, almost an improper, thing if I should state to you the full extent of the discriminations practiced against us by the railroads; it is cer- tainly astonishing. We appealed to the railroad authorities in regard to it, asked them to reduce the discriminations; in fact, to reduce the rates that they had advanced arbitrarily about a year ago. The com- mittee of railroad freight agents, to whom we made representations, stated to us that they did not consider that they had had their share 3 4 RAILWAY FEEIGHT BATES AND POOLING. of the Republican prosperity, of which we had boasted, and as a con- sequence the rates were arbitrarily advanced. The Chairman. By what railroads ? Mr. Adams. By all the railroads that carry lumber in our section, west of the Mississippi River; perhaps our secretary can give you their names. Mr. GoRSUCH. The Iron Mountain, the Santa Fe, the Rock Island, the Union Pacific, the Cotton Belt, the Kansas City Southern, the 'Frisco — in fact, every road that runs into Kansas City; there are 23 distinct lines. The Chairman. You may proceed, Mr. Adams. Mr. Adams. We complain that these roads arbitrarily advanced their rates from 1 to 5 cents per hundred. Senator Foraker. Did you state when that advance was made? Mr. Adams. A little over a year ago. Perhaps our secretary can give you the exact date. Senator Foraker. That is not important. Mr. Adams. We made a showing of facts and figures, that on general averages the rate on lumber per ton per mile was a great deal more than the average rate on all other commodities per ton per mile; that lumber, being a nonperishable commodity, should have a low rate; it is always used as ballast in freight matters, and whenever there is any- thing to be thrown out of a freight train on account of overloading, or for any other cause, a car of lumber is side tracked; so that, in addi- tion to the discrimination against us in rates, they also discriminate against us in the matter of carrying our lumber promptly and quickly to its destination. The railroads in our section, west of the Missis- sippi River, carry an unusually large share of the lumber, and it pays, too, large a share of the whole sum paid for freights. That is the claim we make. Senator Cullom. Allow me to ask where this lumber comes from. Mr. Adams. Mostly from Arkansas, Texas, and Louisiana, going north. Senator Cullom. Not from the North? Mr. Adams. Going north. The Chairman. Going where ? Mr. Adams. Going to all points through Oklahoma, Kansas, Ne- braska, Illinois, Indiana, Missouri, and to Chicago. The Chairman. You do not have any export lumber? Mr. Adams. No. The Chairman. Your complaint is as to freight rates in those States ? Mr. Adams. Yes, sir. The Chairman. You say they advanced the rates how much? Mr. Adams. From 1 to 5 cents a hundred. ^ Senator Kean. Did the price of lumber advance also ? Mr. Adams. The price of lumber advanced also very largely, which made it very hard on the consumers. It is really in the interest of the consumers — the general public — that we are here now. Senator Clapp, This bill that Senator Nelson introduced he told me was introduced at the request of the lumbermen. Was it upon your request? Mr. Adams. It was not at the request of this committee as a com- mittee. I will say, however, that, as I understand that bill, it largely corrects the difficulties of which we are complaining. RAILWAY FREIGHT RATES AND POOLING. 5 Senator Clapp. Are there any northwestern lumbermen here, as far as you know? Mr. Adams. I do not know of any other lumbermen's association that is represented here except our own. The Chairman. No; they were heard the other day by the Commit- tee on Commerce. The basis of their complaint was largely the export trade to Europe. Senator Clapp. But Senator Nelson told me he prepared and intro- duced his bill at the request of some lumbermen, and 1 think there were some northwestern lumbermen in it. The Chairman. Mr. Adams, you say that they advanced the rate from 1 to 5 cents per hundred. What is the ordinary rate, say, from Little Rock, Ark., to St. Louis or Chicago, on a carload? Mr. Adams. It is 23 cents a hundred to St. Louis from all points. The Chairman. How much is that a carload? Mr. Adams. A carload is usually about 40,000 pounds. Senator Foraker. What did you say was the rate from all points to St. Louis? Mr. Adams. I said it was 23 cents per hundred. I was wrong about that; it is 25 cents to Kansas City, and only 15 cents to St. Louis. The Chairman. What is that per carload? Mr. Adams. A carload is about 40,000 pounds. The Chairman. How many feet to the hundred ? Mr. Adams. About 16,000 feet of lumber in an average carload; about 16 tons to the carload. The Chairman. What would be the through rate per carload from Arkansas ? Would that be $60 ? Mr. Adams. I pay on a carload from |80 to |90per car, and from that up to over |100. The Chairman. You are a shipper or consumer? Mr. Adams. I am a retailer. ^ The Chairman. You are not a shipper? Mr. Adams. No. There are no shippers present. The Chairman. You are consumers? Mr. Adams. We are retailers who sell directly. The Chairman. I had received the impression that you were ship- pers, and were complaining of excessive rates from the shippers' standpoint. Mr. Adams. No, sir; though at the same time we are representing them, in a way, simply because their interests and ours run on the same lines. The Chairman. Do you have any complaint to make on behalf of the people who sell the lumber, or on behalf of the mill men, the manufacturers ? Mr. Adams. No; although they are interested just as much as we are so far as rates are concerned. Senator Foraker. What is your business? Mr. Adams. Retailer of lumber. Senator Foraker. Where are you located? Mr. Adams. At Mound City, Kans. The Chairman. I interrupted you, Mr. Adams; proceed. Mr. Adams. Now, gentlemen, in order to make it impressive and to particularize in regard to the difficulties we have suffered in rates, I will say that a year ago we appointed a committee to meet the Gen- 6 RAILWAY FREIGHT RATES AND POOLING. eral TrafSc Association and try to arrange rates, but utterly failed to do so. We told them that if they ga.ve us no relief we should be obliged to proceed to extreme measures in that respect, and in carry- ing out that idea a committee was appointed, with authority to draw upon the treasurer for any necessary expenses, to procure the best counsel that we were able to obtain in Kansas, and we employed the ex-chief justice of the supreme court of Kansas, a former justice, and also the attorney-general of the State of Kansas. After lookmg the interstate-commerce law over thoroughly they informed us that the remedy we had anticipated taking — going before the Interstate Com- merce Commission— would fail us; that the best remedy, in their judgment, that we could find — and, of course, we deferred to their judgment, because it was the best we could buy — that in their judg- ment there was more chance for relief under the old common law in the courts of the justices of the peace of the State than we had under the interstate-commerce .aw in going before the Interstate Commerce Commission, because they said there was not vitality enough in the interstate-commerce law to enable us to obtain the relief we sought unless we should be very long lived, and some of us have not a great while to stay, I am sorry to say. Therefore we proceeded to have prepared a large number of suits to be brought before justices' courts in the State of Kansas in order to relieve us from this diiBculty. We did not actually commence any suits, but we prepared a large number of cases based upon excessive charges to individuals. At first we declined to pay those charges, but in order to make a foundation for a suit we paid under protest, ten- dering the exact amount of money we were willing to pay as a just and equitable rate, and took two receipts, one for the first lot of freight and the other for the excess. Then we went before the justices' courts to recover our money. That has been our method. The Traffic Asso- ciation found that we were putting them to a large amount of trouble; that, although they might win out hereafter, they had a large num- ber of suits to defend. We told them that we intended to call for juries in each case — juries of our own citizens; that we were sure of a verdict, and that that verdict would be carried into effect, so that they would have to fight against an adverse verdict in each case in every county in the State of Kansas. The result of that action is what I want to call your attention to. When they realized the difficulties they were going to have to con- tend with from this course of action >they proposed a compromise with our committee, which was finally accepted, although it did not come up to what we thought was right. We told them, however, that it would be only temporary. Yet I may say that these terms, effected on this compromise, accepted and adopted by our committee, have saved the western half of the State of Kansas over $75,000 a year on freights. I take that to be a conclusive admission on the part of the railroads that they were wrong; they never would have yielded that amount if they had not been wrong and known it themselves. In fact, some of their agents told us privately that they knew those rates were excessive, and that if they had the power they would be willing to grant what we asked, on the ground taken in our complaints, but that if they should undertake to do so it would cost them their positions. That is what the general freight agent of one of the greatest railroad systems in the United States stated to us. BAIL WAT FREIGHT RATES AND POOLING. 7 Now, gentlemen, it is these difficulties we complain of. In the first place, excessive rates are charged arbitrarily, and in the next place there is discrimination. The Interstate Commerce Commission have informed us that on our bare statement of the facts and figures to them we had a good case, a strong case, and they advised us to proceed before them; but, as I said before, our term of life as individuals is limited. Senator Forakek. What is the difficulty about getting a hearing before the Interstate Commerce Commission? Mr. Adams. There is no difficulty whatever. Senator Foeaker. Unless I have been wrongly informed, you can have a hearing there very expeditiously? Mr. Adams. At once. In fact, they invited us to bring our case before them; but they say the remedy is not perfect. I wish I had here the. facts and figures that I handed to our Mr. Burkholder, but he has been detained. Senator Forakee. 1 am only trying to get at your idea, not for any controversial purposes, but simply to suggest. Mr. Adams. Allow me to state one siase in which I think I am entirely accurate, and I know if I am wrong the secretary can correct me. As one instance, I wish to cite a certain rate of freight on lumber, 300 miles for 29 cents per hundred, on practically the same line, with a little deviation (another branch of the same line), when the rate to Chicago, 1,100 miles, was 24 cents per hundred; 300 miles for 29 cents; 1,100 miles over practically the same line for 24 cents. We claim that that is an unjust and unreasonable discrimination. It does not give people the same opportunities to engage in the same kind of business and in the same way at equal rates with others. Senator Cullom. You say you got relief by going into the courts of the State, and they finally compromised ? Mr. Adams. We think we forced them to make that concession; and it was a great concession. Senator CnixoM. If you can scare them, as you seem to have done in that case, why can you not keep on doing the same thing? Mr. Adams. I do not know. But, gentlemen, you are here for the purpose of legislation; and we look to you to give us a better remedy. Senator Ctjixom. We want to see whether we need to legislate. That is the main thing. Senator Foraker. As I understand the interstate-commerce law, the action of the railroads, of which you complain here, is just what is positively prohibited by that law. Mr. Adams. It is. Senator Forakee. There is no question about that, is there? Mr. Adams. No; no question. Senator Foraker. And there is no question but that the Interstate Commerce Commissioners are empowered to correct that violation of law? Mr. Adams. That is correct. Senator Forakee. They can do it summarily — a great deal more expeditiously than the Congress of the United States can act. Senator Cux,lom. I wish to ask whether 'the Interstate Commerce Commissioners advised you to proceed before justices of the peace, or whether they advised you to come before them and make your case? 8 EAILWAT FREIGHT RATES AND POOLING. Mr. Adams. Our emploj^ed attorneys advised us to go to the justices' courts. Mr. Evans. May I correct you, Mr. Adams? Mr. Adams. Yes. Mr. Evans. In regard to bringing these suits before justices, we were advised that every individual who had a case for $20 or less could bring such a suit before a justice of the peace; that while that would involve the necessity of every party aggrieved bringing his individual claim before a justice (which would be very burdensome to individuals), yet at the same time we would succeed. They also advised us that we would not succeed before the Interstate Commerce Commission because of its lack of power to enforce its orders or decisions. Senator Fokakee. If the Interstate Comm^erce Commission is em- powered to adjudicate your complaint, what do you want with any- thing more? Mr. Adams. I think I can explain that point. Senator Foraker. That is what I want to know — whether it is because they have not power to enforce their judgments, and you want additional legislation on that point. Mr. Adams. Our point is just this: We would have to bring each individual case before the Commission. For instance, in order to have judgment for an overcharge or discrimination against me, I should have to bring a case for each act of discrimination; that case would be adjudicated and an order issued. That order could be appealed to the courts, from one court to another, until it was taken to the Supreme Court of the United States, and the very next case would have to take the same course. It does not give us any relief for the future. Senator Cullom. I take it that this is the point that the gentleman wishes to make — and it is the real point of the case — that if the Com- mission should render a verdict (if you choose to call it a verdict) or make an order, under the present decisions of the Supreme Court as to the power of the Commission, that would not be effective until it is passed upon or approved hj the courts of the country. Mr. Adams. That is it exactly. Senator Cullom. What they want is power to make an order which shall stand as a determination of the case until it is set aside by the courts ? Mr. Adams. That is it. We want that made immediately effective until set aside by the courts. Another thing. Senator: We want it forbidden that the railroads shall charge excessive rates on that same line, if you please, and under the same circumstances or under similar circumstances in the future. We want that decision to cover future transactions. Senator Cullom. The court says that under the present law that can not be done. Mr. Adams. No, sir. We think that is a lameness of the present law. We think it is weak; that it lacks vitality, virility, if you please. As we understand it, those are the particular points wherein the pres- ent law is weak, though I will say that we did not come here prepared, and I doubt whether it is within our proyince as a matter of propriety to formulate legislation for you. The Chairman. You can suggest. RAILWAY FREIGHT RATES AND POOLING. 9 Mr. Adams. We can make suggestions, of course; but our inten- tion was to tell you the difficulties we labor under, how the whole of the great West is complaining of it among the people, where the real interest is. We look to you to find a remedy, to find the best way out That is the purpose of this committee coming here. Senator Cullom. What you state is the complaint of your people that you are discriminated against and overcharged in freight rates ? Mr. Adams. Yes, sir. c^ Senator Cullom. As matters of fact? Mr. Adams. Yes, sir. If we can say anything that will throw new light on the circumstances connected with" this problem, or in regard to the difficulties that we run against, and that will aid in securing new remedial legislation, we shall be only too glad that we have come. I do not know that there is anything further I care to say. Mr. Evans, would you like to make any additional statement? STATEMENT OF J. E. EVANS. Mr. J. E. Evans (of Emporia, Kans., a retail dealer in lumber, and a vice-president and director of the Missouri, Kansas and Oklahoma Association of Lumber Dealers). The rate on lumber from any point in the southwest — Arkansas, Louisiana, or Texas — to Kansas City is 23 cents a hundred; it was 22, but now it is 23. Understand, the rate to Topeka and other points closer to the shipping point is 26 cents; at Emporia, which is still closer, the rate is 28 cents; Chicago gets her yellowpine from the same points at 24; Indiana at 38; and Cotton- wood Falls, only 30 miles west of Emporia, gets the rate of 30 cents. Mr. Adams. I might state, in this connection, that not only are localities discriminated against, but certain States are discriminated against. It is the habit of the railroads to make a blanket rate, cover- ing a large section of country. At important points I get lumber from Texas, Indian Territory, Louisiana, and Arkansas, all at the same rate. Any yellow-pine lumber from the South comes to me at 23 cents per hundred, no matter where it comes from. Senator Cullom. Do you complain of that? Mr. Adams. Oh, no; but the State of Kansas pays a relatively higher rate of freight than Missouri, Illinois, or even Nebraska. Mr. Evans. There is no doubt about that. Senator Foeakek. The gist of the whole matter, then, is that you contend that there are discriminations in violation of the interstate- commerce law, and that the Interstate Commerce Commissioners are not empowered by the statute, as it now stands, to give you the remedy you desire, viz, to prevent these discriminations ? Mr. Adams. That is it. Senator Forakek. You want such an amendment to the interstate- commerce law as may ^iye them that authority ? Mr. Adams. That is it exactly. Senator FoRAKER. So as to save you from the necessity of going into the courts to work out your remedy ? Mr. Adams. Yes, sir. The Chairman. Does any other gentleman wish to be heard ? [A pause.] If not, you gentlemen can now be excused while the com- mittee holds a meeting for other matters. 10 BAIL WAY FREIGHT RATES AND POOLtNG. Mr. Adams. Gentlemen, we thank you for your attention to this hearing. Mr. Evans. I should like to have it understood that we may leave here the written statement made by Mr. Burkholder, who is absent now, as Mr. Adams has stated. The Chairman. There is no objection to that. You may have it sent to the committee, and it will be filed with your testimony as part of the testimony. * Senator Kean. And let it be printed. The Chairman. Yes, and it will be printed with the other. The statement above referred to was submitted to the committee during its sitting on April 11, 1902, by Mr. Frank Barry, of Milwau- kee, when the following occurred: Mr. Barry. Mr. Chairman, I have here a communication from the Missouri, Kansas, and Oklahoma association of lumber dealers, which they desire to submit. A committee representing that association, I understand, appeared before your committee some time ago and were then given permission to submit this paper. The Chairman. Have you read it, Mr. Barry? Mr. Barry. Yes. The Chairman. You vouch for it as being a proper and respectful paper, do you? Mr. Barry. Yes. I simply submit it for them, at their_ request. If it contains anything that is objectionable, you can change it. The Chairman. We will accept it, Mr. Barry, if you say it is all right, because I know who you are, and I know you would not ask us to embody anything in this testimony that is not right and proper. Mr. Barry. It is all right, Mr. Chairman. The Chairman. We are so busy and pressed that we can not read all these documents, before they are printed, in order to ascertain whether they are in proper shape. Mr. Barry. I may have some other documents to submit, and so I shall be very careful about them. Following is the paper referred to: To the Interstate Commerce Committee, Washington, D. C: The undersigned, representatives of the Missouri, Kansas, and Oklahoma Associa- tion of Lumber Dealers, having been assured that their views in writing, in refer- ence to the needed legislation in the interest of interstate commercej would be considered, beg leave to submit the following: The interstate commerce law enacted by Congress in 1887 was the outcome of con- stant public demand for at least ten years. The conditions existing at that time, and which ^ave rise to this demand, confront the public to-day in more aggravated form. President Arthur, in his message of December 4, 1882, recommends to Con- gress the regulation of interstate commerce, arraigns the corporations which own or control the railroads of adopting such measures as tend to impair the advantages of healthful competition, and to make hurtful discriminations in the adjustment of freightage. He points out the fact that these inequalities have been corrected in several of the States by appropriate legislation, but so far as such mischiefs affect commerce between the States, they are subjects of national concern, and Congress alone can afford relief. In his message in December, 1883, he points out the relations that ought to exist between the public carriers and their patrons, and lays upon Congress the responsi- bility of granting relief and protection to the general public in the following language: "While we can not fail to recognize the importance of the vast railway systems of the country, and their great and beneficent influences upon the development of our material wealth, we should, on the other hand, remember that no individual and no corporation ought to be invested with absolute power over the interest of any other citizen or class of citizens. The right of these railway corporations to a fair and prof- RAILWAY FREIGHT RATES. AHD POOLING. 11 itable return ujjon their investments and to reasonable freedom in their regulations must be recognized; but it seems only just that, so far as its constitutional authority will permit, Congress should protect the people at large in their interstate traffic against acts of injustice which the State governments are powerless to prevent." I desire to draw your attention, to the time when these messages were delivered; this was prior to the birth of populism; also to the fact that they come from a Repub- lican President of the United States, who gives authoritative expression of existing facts and of a universal demand for needed legislation. The charge has been made that this demand for the amendment of the interstate-commerce law is populistic in its origin and character. It is no more popuUstic than the origin of the law, and no law has ever been placed on our statute books which gave greater satisfaction to the general manufacturing and commercial public. The necessity of this law is made apparent by the study of the number and the variety of cases tried and decided by the Commission before its authority was ques- tioned and denied by the courts. In his message of December, 1896, President Cleveland says: "The justice and equity of the principles embodied in the existing (interstate commerce) law passed for the purpose of regulating transportation charges are everywhere conceded, and there appears to be no question that the policy thus entered upon has a permanent place in our legislation." He states further that tjie wholesome effects of this law are manifest and have amply justified its enactment and expresses the hope "that the recommendations of the Commission upon, this subject will be promptly and favorably considered by Congress." Instead of Congress heeding the advice of the nation's Chief Executive, and the nation's spokesman, and carrying out the nation's wishes in this matter, the Supreme Court acted in 1897 and most effectually deprived the Commission of the power necessary to enforce its findings. The immediate result of this decision was the inauguration of a period of extortionate rates, rank discrimination, and a general hold-up of a forbearing, but a determined and outraged public. President Roosevelt, voicing the sentiment of the general public, again calls the attention of Congress to the need of legislation along this line. He states "that the cardinal provisions of the interstate-commerce act were.that railway rates shoiJd be just and reasonable, and that all shippers, localities, and commodities should be accorded equal treatment." That "experience has shown the wisdom of its pur- poses, but has also shown, possibly, that some of its requirements are wrong, certainly that the means devised for the enforcement of its provisions are defective." He con- cludes by saying that "the act should be amended. The railway is a public servant. Its rates should be just to and open to all shippers alike. The Government should see to it that within its jurisdiction this is so, and should provide a speedy, inexpen- sive, and effective remedy to that end. Nothing could be more foolish than the enactment of legislation which would unnecessarily interfere with the development and operation of these commercial agencies. The subject is one of great importance and calls for the earnest attention of Congress. The observation of these three Presidents covers a period of twenty years. They agree that an adequate interstate-commerce law is a necessity, that it is indispensable to the administration of justice, and that the responsibility for the enactment of such a law rests with Congress. For twenty years and more the general public has demanded this law. In 1887 the Commission was created, as was then supposed, with power to stop and correct abuses; in 1897 the Supreme Court held that their powers were purely advisory. Since then the Commission is practically powerless; it is, perhaps, a little better than no Commission, but so far as granting practical relief is concerned the country would be just as well off without any Commission. It is contended by representatives of the railways that the granting of power to the Commission to substitute a just for an unjust rate, or an equitable for a discriminative rate, is equivalent to depriving the roads from the management of their property and investing the Commission with power to make rates. This was not the intention of ■ the law of 1887, nor the practice of the Commission under that law, neither is it the wish of the business men of to-day; what we contend for is a law which will give the Commission power, after a full, fair, and impartial hearing of both parties in interest to put into effect a just and equitable rate, and this rate to be observed by the roads in question until the decision of the Commission is reversed by the Federal courts. The prosperity of the railways depends on the traffic given them by the public, just as the success of a bank depends on the deposits and business of its patrons. There is no public institution in the land which is administered more autocratically than our national banks by the Comptroller of the Currency. Yet the only bankers that kick against this supervision are those who are determined to do an illegitimate business. The same is true of railroads. Honest railroad men have nothing to fear; 12 BAIL WAY FREIGHT EATE8 AND POOLING. they know that the public does not want to rob them, and that the law as it now stands affords them ample protection; they also know that it is the inalienable right of their patrons to be protected by law against the unjust methods of unscrupulous railroad managers. The lumbermen of Kansas and Oklahoma, and the wholesalers shipping to these points have had special experiences with the railroads on the question of lumber rates. The lumber rates to Kansas and to Oklahoma have not only been arbitrarily high but have been in direct violation of the interstate-commerce law, which pro- vides that a greater charge shall not be made for a short haul than for a long haul, under similar conditions. It is a general rule in both passenger and freight traffic that the company having the shortest and most direct route dictates the rate. This is one of the reasons offered by the railroads why Missouri, Illinois, Indiana, and other States have a much lower average rate on lumber than Kansas and Oklahoma, although the distance from the center of production in the Southern forests to the center of consumption is much shorter, and in many instances the lumber passes through Oklahoma and Kansas to reach these more distant points. The argument advanced has been that some railroad having a direct route to some point in the lumber dis- trict makes the rate for all roads to these centers. We do not object to this rule, but we do object to railroads using one method of procedure or one law to make rates to one State and another law to make rates to another State. The rates from the central points of production to the central points of consump- tion in the various States are as follows: Average distance. Average rate. Miles. 350 600 600 1,000 1,300 1,600 Cents. 29i Missouri 23 Illinois 24 Indiana .■ 254 28 Ohio This discrimination in rates greatly retards building in this territory; it deprives us of all the natural advantages of location in close proximity to the southern forests. This territory has to pay an excessively high rate to enable the roads to give an extremely low rate to more remote points, in order to get into the territory of roads hauling lumber from Northern forests. The Kansas rate, established more than fifteen years ago, was made via Kansas City. The rate established then to the central Kansas points was 27^ cents per 100 pounds. This rate was made to conform to the existing white-pine rate from the North. Since then white pine has gone out of use, and yellow pine is used almost wholly; in addition diagonal roads were built, running south through Kansas and Oklahoma direct to the forests of Texas, Arkansas, and Louisiana, shortening the distance of the lumber haul 200 miles or more. The route for carrying the Southern lumber product has been changed; the lumber comes no longer by way of Kansas City; and yet these old Kansas City rates are steadiljf maintained. Kansas City lies 40 miles north of the center of the State, and the opening of the diagonal roads to the south has moved the center of lumber production 80 miles west. Tnis new condition saves to the center of Kansas consumption a haul of over 200 miles, or about 33 per cent of the entire distance. This shortened haul entitles us to a proportionate reduc- tion in rates. But instead of reducing rates, in December, 1899, the roads advanced the rate 10 per cent to this territory, on the plea that they were entitled to share in the general prosperity of the country. Through the efforts of the attorney-general of the State and the political situation in reference to State railroad legislation we succeeded in getting the advance changed from 2J cents to 1 cent per hundred pounds. But still there was an advance instead of a reduction. Another reason why lumber rates should be less than local rates per ton per mile— and unfortunately they are higher in the State of Kansas and the Territory of Okla- homa — lies in the fact that the kind of service required to haul lumber is less expen- sive than that required for most other commodities. The roads can use a cattle car a box car, a flat car, or any other kind of car that may be to them convenient- the lumber is moved whenever it suits the road, without any loss to them except their own delay; the cost of loading and unloading is borne by the consignor and the con- signee; the payment of freight is in large amounts and is always cash; the risk is the mmimum as compared with the hauling of other commodities, such as live stock grain and other commodities even more perishable; no suits confront the roads in the adjust^ i-TES AND POOLING. 13 ment of losBes; besides the distribution of the Southern lumbertrade extends over the entire year and over the entire territory traversed north and south; the Southern lum- bermen are not dependent on winter snows for logging purposes; their stocks are always full, unless depleted through the channels of trade. The territory intervening between Kansas and the Southern forests is rich in natural resources; every foot of it affords a large amount of traffic in both directions. These considerations ought to be strong factors in determining the rates on lumber. But I shall give you a prac- tical idea of the existing conditions. Let us suppose a train load of lumber originates at Conroe, Tex., on the Atchison, Topekaand Santa Fe Eailroad, and let us suppose that this lumber is distributed along its line to Chicago, the distances and rates will be as follows: Rate per 100 pounds. Gainesville, Tex Aidmore, Okla.. PurceU.Okla ... Guthrie, Okla . . . Wichita, Kans . . Topeka, Kans... Lawrence, Kans Kansas City, Mo Chicago, 111 And all points between Carrollton, Mo., and Chicago on this line get a 24-cent rate. You will notice that the rate from Gainesville, Tex., to Ardmore, Okla., jumps up 6} cents per 100 pounds in a distance of 40 miles, or 30} mills per ton per mile, whereas the through rate to Chicago is 3.6 mills per ton per mile. The rate increases in inverse ratio to the distance the lumber is carried. This is not an isolated case, but is a fair sample of the lumber rates adopted by all the roads operating in the State of Kansas and in Oklahoma. Texas originates lumber within its own State, and has a stringent State railroad law; this accounts for the advance in freight as soon as the road strikes Oklahoma, and also emphasizes the necessity of an interstate railroad law. The distance from Conroe to Chicago is more than twice the distance from Conroe to Wichita, and yet the rate to Chicago is 24 cents, while the rate to Wichita over the same road under precisely similar conditions is 28J cents per 100 pounds. Under the existing interstate-commerce law the Commission is powerless. We employed the best legal talent obtainable, and were advised by them that the Com- mission can only advise and intercede with the railroads to do the right thing by its patrons, but has no power to enforce its findings. They can not inaugurate a fail and reasonable rate; neither can we obtain redress in any court of the land, except in so far that we can bring suit for recovery in individual cases where the roads have made excessive and unreasonable charges; but to prosecute a suit of this nature takes years under our present system, while in the meantime the excessive charges are carried on by the roads. With these facts and conditions confronting us and affecting all lines of trade throughout the nation, and presented constantly and persistently by the Presidents of the United States to Congress for the last twenty years for favorable action, it seems unnecessary for business men to plead with Congress to do what seems to them their plain duty. The men who are pleading with you to place on our statutes (Federal) such a law as is suggested in President Koosevelt's message are not wild- eyed Populists. They are men who own and represent capital. They are men who by brain and brawn develop the varied industries of the nation. They are men who produce the business which makes the railroads a public necessity and a paying investment, men who understand the laws of business, men who realize the cost and appreciate good railroad service and are willing to pay for it. We d€sire to draw your attention to the fact that the owners and operators of our great public railroads are men subject to like passions as other men. The fact is that men at the heads of the various departments are able men in the prime of hfe who have an ambition to make a financial record for their respective departments. To gain their ambition they very often resort to means which are neither just nor legal, and we look to you, the only body of men in the nation who have power to give protection, to pass a law which makes justice available and easy and speedy to the humblest citizen of our land. We know that the interests of the railroads do not weigh heavier with you than the interests of the public, and that you will not by inaction make it possible for unscrupulous railroad men to rob an unprotected public. 14 KAIL WAY FREIGHT RATES AND POOLING. I know that factitious and misleading arguments are made by the representatives of the railroads, claiming that this legislation would place the rate-making power in the hands of five inexperienced men, and would deprive them of the management of their business. We do not aak for any such law. We would ask you to pass a law which, while it protects the pubHc, also protects the railroads. Any other law would be unconstitutional. The proposed Nelson bill gives ample protection to both parties in interest, and does not deprive the railroads any more of the management of their business than the rulings of the Comptroller of the Currency deprives national banks of the management of their business, or the rulings of the Treasury Depart- ment, in administering the revenue, deprives importers or merchants of the manage- ment of their business. These departments see that these lines of business are con- ducted in a lawful and legitimate way, and the only parties that suffer are those who are guilty of fraudulent methods. The railroads are amply protected in this measure against any mistake made by the Commission, intentionally or otherwise, and can get speedy action in any of the Federal courts. In conclusion we desire to state that we come not to ask a favor, but simple jus- tice. We do not desire to arraign class against class. We ask you as our represent- atives and lawmakers to place upon our statute book a law which will prevent this. If in your judgment the general public is to be left to the mercy of conscienceless railroad magnates, either repeal the interstate-commerce law or let it stand in its present worthless form. Their practices of extortion and discrimination turn good and able citizens into anarchists. "Patriotism lives and grows on what it feeds upon." Create or tolerate a condition which deprives A of an equal chance with B, which will build up one man by pulling down another, or build up one city, com- munity, or State by tearing down another, and let this condition continue for years against the protest of the greatest and most responsible men of the nation, including our Presidents, and you will create a condition of distrust, dissatisfaction, disaster, and political disaffection. All of which is respectfully submitted. E. M. Adams, E. S. MiNEK, E. E. BUKKHOLDEK, Committee. (Dictated by E. E. Burkholder, Hillsboro, Kans.) April 5, 1902. At the sitting of the committee on Friday, April 11, 1902, the fol- lowing-named gentlemen appeared: E. P. Bacon, of Milwaukee, chair- man of the executive committee of the Interstate Commerce Law Convention, held in St. Louis in November, 1900; Bernard A. Eckhart, of Chicago, representing the Chicago Board of Trade and the Illinois Manufacturers' Association; Hon. Blan chard Randall, of Baltimore, president of the National Board of Trade; Charles England, of Balti- more, grain commissioner; George F. Mead, representing the Boston Chamber of Commerce and the New England Manufacturers' Associa- tion; J. B. Daish, representing the National Hay Association; Aaron Jones, grand master of the National Grange, Patrons of Husbandry and Frank Barry, of Milwaukee. ' STATEMENT OF E. P. BACON. The Chairman. Gentlemen, Mr. Bacon is here and wishes to be heard on what are called the Nelson bill and the Elkins bill He de- sires to present the whole question. He has given it a great deal of thought, and I understand, represents the Interstate Commerce Law Convention that was held in St. Louis some time ago. Mr. Bacon. Consisting of delegates from various commercial organizations. The Chairman. Before you proceed with your statement Mr Bacon, give us your place of residence and vour business. ' Mr. Bacon. My place of residence is Milwaukee; my business is that of grain commission merchant. ~~£i3TiTT¥"ai~TriETCrHT~SSTES AND POOLING. 15 The Chairman. You can proceed. Mr. Bacon. Mr. Chairman, the convention I represent is termed the Interstate Commerce Law Convention, which was held at St. Louis in November, 1900, consisting of delegates from 41 commercial organ- izations of various kinds. That convention was called for promoting the passage of the Cullom bill, which was then pending in the Senate, but which, as you all know, failed of passage. That convention appointed a committee, which, in consequence of the failure of the passage of the Cullom bill, proceeded to frame a new bill, removing the objections which had been urged to the Cullom bill but retaining the principal features of that bUl, or at least what were considered the most important and vital features of it, only two or three in num- ber, omitting the other provisions, some of which had been objected to in dififerent quarters, the object being to have the intei'state-com- merce act so amended as to give it greater effectiveness, and it was desired that the committee should concentrate its efforts upon these two or three vital provisions. I will state that the committee, after framing a new bill, which was introduced in the House by Mr. Corliss, and by Mr. Nelson in the Senate, proceeded to communicate with the various commercial organ- izations of the country in order to secure their opinions of the pro- visions of the bill. em.).— The Democratic party is to be con- gratulated on its square stand for giving the Interstate Commerce Commission power to enforce its rulings. All the trusts have profited by this abuse, and many of them owe their very existence to it. It was railway favors more than anything else that built up the Standard Oil monopoly, the beef trust, and other of the most odious of the combines. ILLINOIS. Chicago (III.) Jowrnal. — ^The Interstate Commerce Commission is popularly supposed to be a national board that in a great measure controls the railroads of the country and protects the people from unjust oppression on the part of the roads. This undoubtedly was the original object of the law, which was passed by Congress in 1887, but year after year since then the lawyers of the railroads have torn wider and wider holes in it through which they have not only driven the traditional "coach and six," but great railway trains as well, with the result that nobody now precisely knows what the Interstate Commerce Commission is, or its powers and duties. Congress seems to be pow- erless, or else unwilling, to patch up the law thus rent in fragments. Every session of the Commission simply adds to the demonstration of its impotence. Congress should mend it or end it. Chicago Chronicle. — It is enough to know that the Commission is practically powerless, and that the law under which it acts is not much better than a dead letter. The real question is whether the law ought to be changed so that it will have some effect to protect the public against the abuses of corporate power against which it purports to be aimed. If not the law may about as well be wiped clean off the statute books and the Commission abolished as a useless and expensive excres- cence upon our governmental establishment. There can not be much doubt that public sentiment is overwhelmingly in favor of such action as will make the law of some effect. The wild and eccentric competition between railroads, by which rates for freight and passengers are indiscriminately cut to meet the rates of some rival bankrupt or reckless line, is the worst evil of railroad commerce. It demoralizes all business of the country which is regu- lated by the prices for transportation. Under intelligent supervision by proper authority pooling contracts would be equitable to every interest, and would give to railroad commerce a stability of rates with BAIL W^ AY FREIGHT RATES AND POOLING. 59 other such other fair regulations as would constitute a substantial reform in the business methods, of the country. Chicago Post. — One thing is certain, unregulated monopoly the peo- ple will not endure. The corollary of mergers, consolidation, and pooling is systematic and rigid control by a court, commission, or any other agency representing the interests of the people. Transportation will not be allowed to regulate itself. The advocates of the let-alone policy are playing into the hands of those who favor Government own- ership. The law should permit consolidation and pooling, but it should also guarantee equal and fair rates. This is the position of the Presi- dent and the Commission. Chicago Post. — The people of the United States will not tolerate favoritism, discrimination, and abuse of monopolistic power by the railroad corporations. In the words of Chairman Knapp, of the Inter- state Commerce Commission, "No service which the Government undertakes can be more useful, and no duty which rests upon it more imperative than to secure for the public always and everywhere equal treatment by every railway carrier. " The ' ' let- well-enough-alone " cry is absurd, for the situation is not satisfactory to the majority of ship- pers. Wherever there is monopoly there must be supervision and regulation in the public interest. The only possible alternative to regulation is Government ownership. " Enligihtened self-interest" is a broken reed to lean on where competition fails or finds itself barred by the nature of the industry. Mr. Roosevelt's policy is fair and reasonable. He offers to aid the railroads in obtaining better and more modern legislation, but present abuses he insists on suppressing. It is idle to threaten him with with- drawal of support. The railroads will not stand together in the con- test outlined, and they could not win if they did stand together. The people would be on Mr. Roosevelt's side, and thev are more powerful than the railroads. The truth is mighty, especially the truth about the evils of discrimination and favoritism in rate making. The rail- roads will not carry out the threats they are alleged to have made. The railroad corporations are not by any means satisfied with the status quo and they have a programme of their own to promote. While, they have crippled the Commission, the necessity of resorting to secret rate cutting, rebates and other violations of the law is painful to some of them. Other things equal, they would rather obey the law and adhere to published rates. Unfair competition drives them into practices they can not wish to continue indefinitely. What they want is reasonable freedom of contract and pooling, of association for the regulation and equitable distribution of traffic. Chicago Inter- Ocean. — The agitation against railway consolidation and the demand for equity in railway rates do not arise from a desire to injure anyone. They arise from the perception that transporta- tion has become such a commercial and industrial necessity to the people that equality in charges is almost as vital as equality before the laws. . , ., , , To many citizens the only safe alternative m the railway problem seems to be Government control of the rate-making power.^ For many reasons the vast majority of Americans do not desire Government ownership. Yet equality in railway rates they must have, and this equality the railway managers have practically confessed their inability to attain. All their traffic agreements, pools, etc., in the last analysis are no bar to discrimination. 60 EAILWAY FREIGHT RATES AND POOIilNG. Hence Mr. Cassatt is wise if he supports the plan of effective Gov- ernment supervision over the rate-making power. Those who oppose such supervision but strengthen the hands of the confiscators. Chicago News. — How serious is the need of a revision of the law is shown in the annual report of the Interstate Commerce Commission, which does not mince words in denouncing the present evasions of the measure as "surprising and offensive to all right-minded persons. "- The Commission declare that the criminal provisions of the law need reenforcemeTit. Unless Congress is disposed wholly to discredit the Commission's report, it can hardly ignore these recommendations, unless it proposes to repudiate the principle of Government supervision of railways. Chicago Drovers' Journal. — ^As the matter now stands, the Commis- sion can do nothing except to investigate and make a report. The railroads are said to violate agreements and rules with impunity, be- cause they know that it is highly improbable that a fine will have to be paid. Chicago Standard. — The difficulty with the work of the Interstate Commerce Commission is that it has no power to enforce its mandates. It is to be hoped that Congress will soon come to the relief of the Commission and, disregarding the formidable opposition by the rail- road lobby that is certain to be organized, will amend the law in such a way as to give the Commission power to fix at least maximum rates, and to enforce its decisions by direct judicial process under proper limitations. Chicago {III.) Railway Age. — Railway legislation is a fact, and, in the absence of Government ownership, will continue to be a fact. The principal thing just now is to relieve the present intolerable situation,, and the El kins bill as presented seems to fairly promise to do this. Sjjringfield (III.) News. — The Interstate Commerce Commission has shown manv abuses which need correction, but which it -is powerless to correct. Congress will be supported by public sentiment in any extension of power given the Commission. Pekin {III.) Times. — The interstate-commerce law should be amended or repealed. As a joke it has been carried too far. Springfield {III.) Journal. — The CuUom bill has now been replaced by a shorter and simpler one, which will accomplish all that is really necessary and which stands a much better chance of being enacted into law. These simple amendments will be effective if adopted, because they will close up the loopholes through which the railroads evade compliance with the orders of the Commission. If they are compelled to observe the orders of that body until the courts reverse them, they will not violate the law with impunity as they have done for years past, and there will be an immediate change in their methods. Examiner, Mount Sterlmig., III. — It is enough to know that the Com- mission is in fact practically powerless and the law under which it acts is not much better than a dead letter. There can not be much doubt that public sentiment is overwhelmingly in favor of such action as will make the law of some effect. BloomiAwion {III.) Pantagraph.—K representative of the Chicago Board of Trade and the Illinois Manufacturers' Association has made some important statements before the House Interstate Committee with reference to rate discrimination by the railroads. He told the committee that the roads made a cheaper rate on wheat from Chicago RAILWAY FREIGHT RATES AND POOLING. 61 to New York for wheat than they did on flour. There is a measure under consideration that will correct the evil if it is adopted. It pro- vides that when the Commission after investigation finds that a rate is unreasonable and a reasonable rate is fixed this rate will remain efl'ect- ive until the question is passed on by the courts. Unless some authority like this is given the Commission, the railroads will laugh at its decrees and continue the unjust practice of giving rebates to favored shippers. It is up against this Congress to pass some legisla- tion that will insure fair dealing among shippers, great and small, and if it is not done the country will be disposed to bring to account those responsible for the failure. The matter has been talked up as a cam- paign issue and staved off at Washington until the people are begin- ning to see through the scheme and are demanding action as well as words. Rock Island Argv^s. — Until a bill to strengthen the Interstate Com- merce Commission is passed the war against trusts is useless. Springfield {III.) News. — There is certainly added force to the movement for more power for the Interstate Commerce Commission in the report of the Commission just made public. At all events it is plain that, if the Commission is not to be given enlarged powers, some method should be devised by which such orders as can be made may be enforced within a reasonable time. The fact is that the Government can exert a proper control over the railroads of the country only through some such a commission as the Interstate Commerce Commis- sion, and since this organization is in existence, and is composed of men whose abilities, integrity, and good common sense are unques- tioned. Congress can reasonably do nothing else but extend the pow- ers of the Commission to the extent that they ought to be. That Congress fails to do its duty in this connection is a matter which the people of the country are coming to regard with suspicion. PENNSYLVANIA. Philadelphia Worth American.— The obvious remedy is that pro- posed by the commissioners — first of all to require the publication of tariff rates, then their uniform application to all shippers, and finally to permit the inspection of company books by Grovernment agents. Doubtless traffic managers who prefer the lax system under which they now ply trade will find nothing to commend in the commis- sioners' plan. 1 . 1 . , Philadelphia (Pa.) Press.— The most important reform which the Interstate Commerce Commission urges in its report is the demand that the act of 1887 "should be amended so as to open the books of the carriers to the inspection of the Commission or its agents." Con- gress ought to pass this law, and pass it at once. There is everything to be said in its favor. There is nothing to be said against it. A railroad corporation is a public carrier. A public carrier is a public servant. Its books ought always to be open for inspection. If it is keeping its rates published, there is nothing to conceal. If it is not keeping these rates, it is committing a crime. In either case puhlic policy requires publicity. Congress would pass this act in a week if members were not influenced in a score of sinister ways by the influ- ence of great railroads which mesh them about with gifts and political aids. 62 RAILWAY FREIGHT RATES AND POOLING. Scranton {Pa.) liepvblican. — The Interstate Commerce law should be amended. There can be no question about that. The act as it now stands is more or less purposeless. A determined effort is being made to amend the law so as to restore full power to the Commission. The Corliss bill should be passed, but it is by no means certain that it will be. The railroads maintain a powerful lobby at Washington, and can make very hard sledding for any measure they may set about to oppose in earnest. The Corliss bill authorizes the Commission to correct rates that may be regarded as unjust and discriminating but does not abolish the right of appeal, and is regarded as a very mild measure by the shippers, who really think they are entitled to far more substantial protection than the bill as it now stands can afford them. Scranton {Pa.) Tribune. — For years there has been a well-founded complaint at the inadequacy of the power vested in the Interstate Conmierce Commission to enforce equality among shippers. A bill to supply the deficiency in this direction is now pendingJn the House, having been introduced by Representative Corliss, of Michigan. The law is to be put into enforcible shape. This should be done or the law repealed. In its present shape it is merely a travesty. IOWA. Sioux City {Iowa) Tribune. — Chairman Knapp is trying to get Con- gress to at least amend the interstate commerce law so the Commis- sion can prevent secret rate cutting and the practice of giving rebates to big shippers. The transportation situation will never be satisfac- tory till this reform is effected, and as uniformity of rates would be beneficial to the railroads as well as to the public, the former ought to encourage Mr. Knapp. Marshalltown {Iov>d) Herald. — The people of this country are prac- tically unanimous that the powers of the Interstate Commerce Com- mission should be so enlarged that it shall have the power to prevent combinations which may be made to the detriment of the people and to business generally, and that it is the duty of Congress to take prompt and decisive action in this matter, that the relief demanded may not be delayed because of the nonaction of Congress. Des Moines Leader. — That some law along the lines of the Nelson- Corliss bill should be passed under which a board, combining execu- tive and judicial functions, shall have authority, in the name of the nation, to prescribe reasonable rates, is now generally admitted. The principle may' be said now to be almost universally admitted. With the elimination of competition in the railroad business, a condition whose coming is clearly foreshadowed, it will become a public neces- sity to establish public regulation of transportation rates. Other- wise power would be in the hands of a few persons to apply to a degree most oppressive the principle of making the rate all traffic will bear. Des Moines Register. — The Interstate Commerce Commission's rec- ommendation that the law under which it has been attempting to work be amended in such a manner as to give the Commission power to accomplish something will be a great benefit to Iowa if it is heeded by Congress and given recognition in the statutes. A proportionate car load freight rate is just what is needed to build up all the home markets of Iowa— that fact is true as to the home markets of all the RAILWAY FREIGHT RATES AND POOLING. 63 other States— and all the people of the nation should steadily labor until that long-needed measure of justice for all has been gained and enforced. Des Moines Leader. — ^There can hardly be serious disagreement with the opinion that if Senator DoUiver shall decide to introduce in the upper house of Congress the Corliss bill relating to the powers of the Interstate Commerce Commission, he will be acting in line with the sentiment of the State which he represents. The great business inter- ests of the country that are directly dependent for their prosperity on transportation are more nearly aroused than ever before to the neces- sity of making the (Commission a real power instead of a shadow with- out the substance. It is to be hoped Senator Dolliver will accept the opportunity to do a great service. His public career will lose nothing by it. He will, indeed, find himself one of the central figures in a great fight in which the most powerful special and private interests of the country will be arrayed against him, but he will have the people of Iowa and the business men of the country with him, and in the end he will win. The measure is one that, when properly presented, will conmiand the support of the country. Duhuque {Iowa) Times. — The Nelson-Corliss bill now pending in Congress gives the Interstate Commerce Commission the power to revise tariffs. The objections made to it are more technical than sub- stantial. The bill should become a law at the present session. Dvbuque {Iowa) Journal. — Why has Senator Elkins united a pooling proposition with his bill authorizing the Interstate Commerce Com- mission to make rates on interstate traffic? The question of whether rate cutting could be prevented in the absence of a pool is quite dis- tinct from the question of whether the Commission can be trusted to revise the rates on interstate business. The States successfully regu- late rates on business wholly within their own borders without exempt- ing railway companies from the operation of the antitrust laws. The question should be divided. The Commission should be given power to revise rates, and the question of whether pooling must be sanctioned in order to prevent discrimination in favor of big shippers or shipping centers should be left for future determination. Dubuque {Iowa) Tvmes. — Our delegation in Congress may accept the legislature's indorsement of this measure (the Corliss bill) as a faith- ful reflection of Iowa sentiment respecting the need for legislation that will serve the original purpose of the interstate-commerce law. Clinton {Iowa) Herald. — Under existing circumstances the Commis- sion, which stands in the attitude of the representative of the United States as between carrier and shipper, is absolutely without power to give any utterance of opinion, or to lay down any binding rule. The Commissioners themselves have repeatedly stated this fact. The right of the Commission to prescribe a remedy, subject to appeal to the courts, is fair to shipper and carrier, and would be effective. It is undoubtedly necessary for the proper conduct of the commerce of the United States that there should be some intelligent and responsible body empowered to fix, adjust, and decide rates and all questions aris- ing on complaint between railroad carriers and the shippers. At the time of the passage of the interstate-commerce act the uni- versal belief was that Congress intended to give the Commission such power. But the act having been construed otherwise by the courts, it now devolves upon the Congress to remodel the law so as to give it 64 RAILWAY FREIGHT RATES AND POOLING. the force orig^inally intended. The rehabilitation of the commission has already been too long delayed, and it is not too much to say th^t the people of this country begin td feel that their patience has been abused. For the safety of the railroads, as well as the good of the country, there must be some tribunal to which appeal can be made, and which has the power to render quick and full justice and enforce its mandaites without delay. The prompt passage of the pending bill would do injustice to no one and give the shipper what he has long sought and waited for — a chance for fair and uniform rates, fair treatment, and a stable and uniform classification. WEST VIRGINIA. WheeUng Begister.— The Interstate Commerce Commission is after a few of the railroads not respecting the law of the land, and is evidently disposed to do the best it can with these notorious violators of the interstate-commerce laws and the Sherman antitrust law. The whole procedure savors of the ridiculous. A simple bill passed by Congress, regulating rates and providing ample penalties, would be sufficient. The present situation savors largely of farce comedy, and is so esteemed by the public. It is high time that Congress was supplementing the powers of the Interstate Commerce Commission, which i's now without the ability to practically reform railroad abuses. In short the interstate commerce law is a farce and a dead letter, so far as regulating the railroads or rail- road rates are concerned, and the amendments proposed by the Corliss bill, prepared under the direction of the Interstate Commerce Law Convention, should receive the attention of Congress. Wheeling ( W. Ya.) Intelligencer. — Recent developments have been such as to make it incumbent upon Congress to act. The time is opportune, and further delay would arouse such a feeling of resent- ment in commercial circles as to render possible serious agitation for radical measures against the carriers. Public opinion is in sympathy with the present movement. This is apparent from expressions by frominent statesmen and business men, Ijy testimony submitted to the ndustrial Commission on the subject of transportation, and in the known desire of certain representative railroad men to meet the friends of the proposed legislation in a spirit of compromise. Attention should also be directed to the action of the legislatures of Michigan, Kansas, Wis- consin, and other States, in passing joint resolutions urging upon Con- gress the necessity for prompt remedial legislation. The firm attitude taken by President Roosevelt in his recent message in discussing this subject is of the deepest significance, and is indicative of the vast change that has taken place in high quarters within recent years. Some relief is demanded, and some must come from the present Congress. WASHINGTON. Spohcme {Wash.) Chronicle. — ^If the voters of Washington really want to secure better rates from the railroads, let them do their share to secure laws that will give the people of this nation genuine control of interstate commerce by means of duly appointed commissions. To begin the good work, let them see that no candidate for. Congress is BAILWAr FREIGHT RATES AND POOLING. 65 nominated next summer who is not pledged to support such legislation as is needed to enable the Interstate Commerce Commission to enforce just freight rates from every State or Territory to every other State. Spokane ( Wash.) Spokesman. — The present law is sadly in need of mending, if the Commission is to perform the work expected of it in the matter of regulating rates. The Commission has had the power to investigate railway abuses and to issue orders, but it has been pow- erless to enforce them. In several instances it has found rates to be unreasonable, and has ordered that new tariffs be established, but the roads have laughed at the Commission and have ignored its mandates as completely as if it never existed. TEXAS. Houston {Tex.) Post. — The Interstate Commerce Commission is an institution that is surely calculated to impress not only the political philosopher but the ordinary business man with the folly of a bureau or department without power. What is the Commission for? What does it do ? What good is accomplished by what it does ? For years the Interstate Commerce Commission has reported that the law is constantly violated by railroad corporations. The cardinal provisions of the interstate-commerce act are that railway rates should be just and reasonable, and that all shippers, localities, and commodi- ties should be accorded equal treatment. There is no doubt as to the duty of Congress. It should give the Commission the power to compel the railroads to disclose all the facts in their possession that would bear on suspected violations of the act. Not only should the legal remedy and punishment for such violations of the law be adequate, but the hands of the Commission should not be tied in making the investigations that the law imposes upon it. Houston (Tex.) Post. — As to the benefit that would result to the people from an interstate-commerce act that could be enforced, it would be enormous. Congress should take up the question of amend- ing the interstate-commerce act and give it immediate and earnest attention. MISSOURI. St. Louis {Mo.) RepvhliG.—9>o practical are the arguments in favor of an amendment to the interstate-commerce act with a view to effect- ively empower the Interstate Commerce Commission to punish all railroads violating the law against discrimination between shippers that the favorable action of Congress should be certain. The proposed amendment is urged by all the leading commercial organizations in the United States. The point at issue is a plain business proposition, remote from politics, and the public sentiment of the Union, supported by the commercial bodies and the Interstate Commerce Commission, itself should prevail for the general good. The amending of the interstate-commerce act will constitute early action, unless the rail- road influence in Congress is too strong to be resisted. Every Congressman should be made to realize that public sentiment demands the amending of the interstate-commerce act as now contem- plated. The time to relax such effort will not have arrived until the interstate-commerce act has been definitely amended. Kansas City {Mo.) Star.—ThQve is evidently need of legislation to F K P 5 66 RAILWAY FREIGHT RATES AND POOLING. make the Commission an efficient body. It must liave power to give speedy relief to shippers, and to enforce its rulings without the inter- minable delays which now make its work futile. If its hands are not strengthened, it might as well disband. Joplin Globe. — It is an absurdity to protest hostility to the beef trust, which confessedly has been able to control markets by rebates on freights from railroad companies, and at the same time i-efuse to pass the bill for which the Interstate Commerce Commission has for years been begging, to give it adequate powers to compel rail- roads to make equal rates. If the Commission had that power and exercised it, the ability of the beef trust to control markets would be largely curtailed. MASSACHUSETTS. Boston Record. — The Interstate Commerce Commission would assume the position of some dignity if, following the recommenda- tions of the Industrial Commission, Congress should decide to make a definite grant of power to the Commission, never on its own initiative, but onlj^ on formal complaint, to pass upon the reasonable- ness of freight and passenger rates or charges; also-definite power to declare given rates unreasonable. Christian World {Boston, Mass.). — The American public has few more burning domestic questions before it now than giving to the Interstate Commerce Commission, or some other body of Federal offi- cials, authority to deal with and punish the railroad corporation officials and captains of industry who violate the laws governing uniformity of rates to shippers. Boston {Mass.) Journal. — The bill has for its single purpose the amendment of the existing act in such a manner as to make it actually eflfective for the purposes for which it was framed. It is intended, in other words, to confer upon the Interstate Commerce Commission the powers which it was clearly the mind of Congress should be exer- cised by it, but which have been taken from it by the rulings of the courts. Boston Transcript. — Revision of the Interstate Commerce act is urgently needed. The purpose of the act — to put a stop to discrimina- tions — has not been attained; the evils against which it was directed still flourish. The situation clearly needs amending legislation which shall make the system of public control of the railroads through the Interstate Commerce Commission really effective. CALIFORNIA. San Jose {Col.) Mercury. — During the present session of Congress there should be enacted a Federal law which will have the effect of so strengthening the Interstate Commerce Commission as to make it effi- cient or should abolish it altogether. For the past several years the cry of its members has been expressed in every annual report for legis- lation that would enable it to enforce its decisions against carriers who have been treating them with a scornful disregard. There is no question that the necessity of such legislation is urgent. The Commis- sion is at present an expensive and a useless body. Congress has no longer the right to disregard the crv of the Commission and the inter- RAILWAY FREIGHT RATES AND POOLING. 67 ests of the public. Better no commission than an impotent one. Let it either be made efficient or wiped out of existence. San Francisco {Oal.) Call. — Unfair and illegal discrimination is one of the greatest evils that now afflict the industries and the com- merce of the people. Some method must be devised for protecting the industries of the country from such evils, and no better plan is at present in sight than that of strengthening the power of the Commis- sion and holding it responsible for the enforcement of the law. Los Angeles {Col.) Journal. — Not until the powers of the Interstate Commerce Commission to enforce its rulings are made plenary can the public expect a substantial measure of protection against extortion, discrimination, and oppression practiced by common carriers. San Francisco {Col.) Call. — It would be well for merchants, manu- facturers, and other large shippers of the country to unite in a con- certed movement to bring pressure to bear upon Congress in favor of the measure to enlarge the powers of the Interstate Commerce Com- mission. It is clearl}^ the duty of Congress to act, but of course Congress is not going to act unless the shippers of the country demand it. So long as the railroads can keep the people divided just so long .can they keep Congress quiet and the Commission and the courts powerless. VIRGINIA. Norfolk ( Va.) Pilot. — There is, undoubtedly^, a large sentiment in the country in favor of giving the Interstate Commerce Commission more power. The bill generally favored was introduced by Represent- ative Corliss, of Michigan. We believe that the Commission should be given the power to make rates outright, but, failing that, the power to correct rates that will enable it to supply a remedy in case of dis- criminations. If the published tariff is too high, however, and exces- sive, the Commission, under this bill, can afford no relief as long as all are treated alike. Norfolk ( Va.) Pilot. — The interstate-commerce law as it exists to-day is the mere headless body of a statute decapitated by the United States Supreme Court. NORTH CAROLINA. Raleigh {N. C.) Nms.—ThQ present Congress ought not to adjourn until it gives the Interstate Commerce Commission power to regulate rates. The rapid consolidation and mergers of great railway systems has made it vital to give this power to the Commission for the protec- tion of the public. Raleigh Ohservei\ — Full of railroad owners and railroad attorneys, Congress will do nothing toward proper regulation until the people emphatically demand positive action, and back up their demand by a threat to send members of Congress into retirement. That is not now in sight and therefore no remedial legislation may be expected at this session. COLORADO. Penver {Colo.) Republican.— The Interstate Commerce Commission has been deprived of the requisite power to make its decrees effective. It has been necessary for it to appeal to the courts to compel the rail- 68 RAILWAY FREIGHT RATES AND POOLING. road companies to obey its orders. Thus it has been almost powerless to achieve the things which were hoped for when it was organized. Denver {Colo.) News.—Qi-Q. the Commission itself there have been many eminent lawyers, and since their experience with the Federal courts they are all agreed that the Commission has been shorn of all practical power to name and enforce equitable rates. Denver Post. — The Interstate Commerce Commission was orignally formulated and created for the purpose of standing between the public and the railroads, to prevent extortion, to insist upon certain equities, to have the country as a whole treated equally by the corporations, to give the small shipper the same advantages as the large, and stop rail- way combinations from imposing upon the powerless public. The Commission has not accomplished this purpose because it has not had the power to do so. Now it it suggested that it be given the power to fix rates upon a basis so fair that the railroads can always make money and still serve the public wisely and well. Of course, the railroads object. They want to fix their own rates, although they ask from Congress and the State and communities gen- erally all manner of benefits. The rate-making power should not be in the hands of the railroads. It really belongs to Congress. Origi- ' nally it was in the hands of that body, and when railways were organ- nized and given vast grants and powers by the National Government, the National Government usually fixed charges, features, and tariffs. To-day the railroads are exercising a public function, but they have gone far beyond their rights and privileges. The time seems to have aiTived for the Government to exercise the power, which no one ques- tions it has, to supervise and control when necessary the acts of rail- road officials. If Congress delegates this power to half a dozen capable, compe- tent, just, and fair men, giving them the right to act in the inter- est of the public and to treat the railroads fairly, these great commer- cial arteries should not object. If they do object it should make no difference. • Denver {Colo.) Tiines. — President Roosevelt, the greatest of the servants of the people of America, and his Attorney -General will wot fail the nation — that is absolutely certain. But they are alone and can do comparatively little. The time has come for the most radical and sweeping extensions of the power of control and supervision of the Interstate Commerce Commission. Congress can hardly go too far to meet popular approval. But will it rise to the occasion with broadest statesmanship ? OHIO. Colwnbus {Ohio) Journal. — Recent developments have been such as to make it incumbent upon Congress to act. The time is opportune, and further delay would arouse such a feeling of resentment in commer- cial circles as to render possible serious agitation for radical measures against the carriers. Public opinion is in sympathy with the present movement. This is apparent from expressions by prominent states- men and business men, by the testimony submitted to the Interstate Commission, and in the known desire of certain representatives in a spirit of compromise. RAILWAY FREIGHT RATES AND POOLING. 69 Cincinnati {Ohio) Commercial Tribune. — The result of the ruling of the Supreme Court is to put complainants to heavy expense for wit- nesses and for counsel, merely to find the losing party refusing to delay in going down to the tavern to swear at the court,' but enabling him to begin, at once and defiantly, to ask the Commission what it is going to do about it. The Commission exists to-day merely as a gath- erer of statistics of no particular value, unless the complainant before it selects to take the record into some court and, after going over the whole case again, asks the justice which was denied him before the Commissioners. Even if justice had been awarded him it would be of no avail, for the reason that the Commission is without power to com pel the losing party to respect its decrees. LOUISIANA. Nexo Orleans {La.) Times-Democrat. — The Interstate Commerce Commission, which did an immense amount of good for the first few years after its creation in the way of obtaining justice for the shipper of goods by railroad and generally in the way of regulating rates, has now for several years had its efforts frustrated by the Federal courts, which in many cases have rendered decisions in favor of the railroad corporations in litigation with the Commission. The Commission is, in fact, now almost entirely shorn of its powers, and unless it obtain rehabilitation from Congress through either of the two bills now before that body, it might as well close up its affairs and go out of business, for all the use of which it has recently been, and is. Unless some legislation is enacted this session to strengthen the hands of the Commission in its continuous fight with the corporations, it is not unlikely that the Commission will go by the board. There is no use for its decisions if its decisions be not backed up by the law. JVew Orleans Item. — Congress must strengthen the hands of the Inter- state Commerce Commission. The railroads see that legislation will soon compel them to do away with their devices of favoritism, and are resorting to the only possible method of defense, that of universal con- solidation. But a complete consolidation will never come until the Government assumes charge, and hence it is imperative that Congress shall act and act promptly. ■ New Orleans {La.) Ltein.— Congress should not delay to clothe the Interstate Commerce Commission with the powers they ask, powers that were intended to be by the original act, but which were wiped away b}' the Supreme Court. NEBRASKA. Omaha {Weir.) Twentieth Century Tarmer.—FiMic sentiment is rapidly crystallizing in favor of the supervision of corporations engaged in interstate commerce. The demand of the hour is for the fullest publicity in corporate management, and especially in the man- agement of colossal corporations, whether organized as trusts or under cooperative control. , ,. , ^ ^, j The demand for publicity is no longer confined to the press and public officers holding executive position in the State and nation. It has at last dawned upon the corporation managers and trust attorneys that the well-defined business sentiment against everything resem- 70 BAILWAY FKEIG^HT KATES AND POOLING. bling a blind pool and in favor of the fullest publicity must be respected and complied with. Omaha Bee. — It would seem that Congress should need no more enlightenment in regard to public sentiment in this matter; that in view of the disclosures of the last three months regarding the wide- spread and persistent violations of the interstate-commerce law Con- gress can require nothing more to convince it of the necessity for so amending the act as to make it more effective. Omaha Twentieth Centwry Farmer. — The advocates of strengthen- ing the law should not weaken or abate their efforts so long as there appears to be a chance of getting what they believe to be essential. They should find encouragement in the fact that they are supported by a stronger public sentiment than ever befoi'e since the policy of railway regulation was instituted. Omaha Bee. — The demand for strengthening the Interstate Com- merce Commission has an overwhelming public support, and the neces- sity for it has been most conclusively demonstrated. * * * Con- Sress ought to have the courage to meet this question squarely and etermine it as the public interests clearly require. MICHIGAN. Grand JRapids Post. — The failure of Congress to act on the pro- posed amendments to the interstate-commerce law would be a serious blunder, involving dire consequences; and it is not likely that the people of the United States can be induced to demonstrate to the world that democratic governement is incapable of profiting in the dear school of experience. In view of the future magnitude of the trans- " portation interests the importance of placing its control upon sound principles should not be underestimated. Oramd Rapids Herald. — Of course the great transportation com- panies will be on hand with powerful lobbies to oppose; but the friends of the amendment are better organized and more thoroughly in earnest than ever before, and the indications are that the enemies of the change will not be allowed to shelve the measure as they did during the last session. Jackson Patriot. — It is claimed the Commission should be given greater powers. That body should be given authority to determine as to the reasonableness of the rate, and it should have the power to fix rates and put them in operation at once. Grand Rapids Press. — It is going to be Government regulation or Government ownership, and by too strenuously opposing the one the railroads invite the other. WISCONSIN. Superior ( Wis.) Telegram. — Without discussing the merits of the Elkins bill, or the probability of its passage, it is proper to notice that it is a step in the direction asked by the Commission. Now that the railroad officials have admitted the charges of rate cutting, and pleaded necessity in extenuation, then it seems as if the time had come when the Commission should be given more power or less. If it is desirable to have a Commission possessed with powers of investigation and determination as to conditions, then it follows as KAll^WAY jJKJiitUlT itATES AND POOLING. 71 a natural conclusion that the power to rectify the unfair conditions should be lodged somewhere. It is more natural that it should be with the Commission which is charged with the general consideration of transportation matters. In the past the Interstate Commerce Com- mission has been more or less of a farce because of its lack of power. This condition was recognized by the President in his message to Con- gress, and, now that there is such indubitable proof as to this matter, it should be enough to convince even Congress that immediate action should be taken one way or the other. Haeine (Wis.) Journal. — The Nelson bill, amending the interstate- commerce law, prepared in the interest of the people, seems to fit the case. It is plain enough that if the people are not to be further con- firmed in their impression that the Commission is but a plaything — an excuse for a number of estimable citizens to draw commodious sal- aries — it will be necessary that Congress take some action and endow its measures with the life qualities that will take the dead wood out of it. The Nelson bill proposes to make a distinctive advance, and, if Congress pleases, it can give the Interstate Commission a new lease of life and dress it up with the garment of legal respectability that will bring to it that measure of respect from the transportation companies they have hitherto denied it. OsKkosh ( Wis.) Times. — With all its defects the interstate- commerce act has accomplished much good. In the first place it has been con- strued by the Supreme Court of the United States, and the powers of the Interstate Commerce Commission under the act are beginning to be known. The railroads and big corporations under the law. Congress has no more important and urgent duty before it, in the interest of the great majority of the shippers of the country, than that of amending the interstate-commerce act so as to rendered it more effective. The demand for this is so over^^helming that it would seem hardly possible that Congress can fail to heed it. There is no other ques- tion affecting our domestic affairs as to which the commercial interests of the country are so -nearly unanimous. Whatever diversity of opinion there may be as to particular propositions, there is a very general agreement that the law should be strengthened and that the Interstate Commerce Commission should have its powers enlarged. Yet there appears to be doubt whether anything will be done, at least at the present session. Mihoaiikee (Wis.) Free Press. — If it is the purpose of the railway companies to create a sentiment of opposition to the enactment of the proposed amendment of the interstate-commerce laA^, their action seems singularly shortsighted, for the effect is likely to be exactly the opposite, and to lead to a keener realization of the absoliite necessity of some Government department or commission standing between the railways and the people to see that exact justice is done. Some of the more progressive railway officials, like those of the Pennsylvania Company, recognize the growing demand for equality in railway rates, the justice of such a demand, and the certainty that a much longer continued policy of opposition may result in the over- throw of the party in power, and will probably lead to the adoption of much 'more severe measures than are now proposed. Milwaukee ( Wis.) News. — The conviction that the only solution of the transportation problem lies in Government ownership and opera- tion is rapidly growing, having received a strong impetus from the 72 RAILWAY PKEIGHT EATBS AND POOLING. recent merging of vast railway interests. With the immense power possessed by the railwa}" corporations, they are enabled to control legislation. They have their representatives in the legislatures. Mihocmkee ( Wis.) Sentinel. — The Interstate Commerce Commission merely secures under this act (the Corliss bill) the power which, for instance, is possessed by the Treasury Department, whos^ orders and decisions are upheld and enforced until decided by the courts to be unlawful or erroneous. In the case of the railroads they would have opportunity to present evidence on their side and to facilitate action of the courts instead of putting obstacles in their way, as heretofore. MilwoMikee ( Wis.) Evening Wis'consin. — Here is another demonstra- tion of the necessity of clothing the Interstate Commerce Commission with power to enforce its decisions. It is intolerable that boards of railway directors should be permitted to arbitrarily build up one localitj'^ and tear down another, to line their own pockets at the expense of the public which gave them their charters and patronage. There is at the present time, and there will be hereafter, greater necessity than in the past for the existence of a body like the Inter- state Commerce Commission, clothed with full powers to protect the people from injustice at the hands of the common carriers. This necessity is the outcome of the consolidation of railway interests.. Consolidation and merging and community of interest arrangements, which tend to unite all the railway interests of the country under a common management, tend also to abolish competition. The decisions of the Interstate Commerce Commission should be made immediately operative and continue in force until suspended or overruled by the courts. Congress should cloth the Commission with the powers proposed to be conferred upon it by the Nelson bill. Mihoaukee (Wis.) Sentinel. — One of the results of the recent investigations of the Interstate Commerce Commission has been to develop a respect for the interstate commerce law that has lain dor- mant for several years in the minds of traffic men; and local repre- sentatives of Eastern railroads have recently been cautioned by the traffic officials that the law with its severe penalties for violation is still on the statute books and that infractions are very likely to be fol- lowed by punishment. Milwamkee Free Press. — The plan of having an impartial adminis- trative board like the Interstate Commerce Commission, composed of experts in matters of transportation and vested with sufficient power to enforce its findings, seems so reasonable as to lead to the hope that the railway companies will not succeed in defeating the bill to be introduced covering the case. Atlanta {Ga.) Journal. — There is a bill now before Congress to do something that will give the Commission the power to do something. Everybody who can vote for Federal legislation in Georgia's name is for this bill, and we hope it will be passed. Unless Congress shall amend the interstate-commerce act and give the Commission power to enforce it, it had better be repealed. Bi/rmingham {Ala.) News. — The Interstate Commerce Commission can not enforce its orders with sufficient celerity or completeness to do any good, and, for that reason, it is largely an ornamental body. Congress should by all means so enlarge its scope as to give it such RAILWAY FEEIGHT RATES AND POOLING; 73 authority that the edicts which it has been designated to issue can be carried to effect. Eeally Congress has no very intricate proposition before it in the double plea of the Commission. Give the Commission, to start with, such scope of authority (and no more) as is proper, then clothe it with power to enforce the orders made within its lawful territory and, finally, open the books of the corporations to the public at such periods and within such lunitations, just alike to both sides, and the problem has been solved. Willimantic {Conn.) Chronicle. — The amendment but gives the Com- mission those powers which the f ramers of the original interstate-com- merce law meant to confer and thought they were conferring, and which the railroad companies accepted as within the jurisdiction of the Commission, until about three years ago, when the Supreme Court made a decision which had the effect of rendering the Commission impotent. Wichita {Kans.) Eagle. — The only way to satisfy the people is an amendment to the law insuring prompt relief from discriminations. This can only be done by strict control through the Interstate Com- merce Commission, and our Senators and Congressmen can do no less for their constituents than to support the Nelson-Corliss bill. Jackson {Miss.) Cla/rion-Ledger. — No question to be considered at this session of Congress is of so much importance to the commercial welfare of the country and to the people generally as that embodied in the bill proposing to strengthen the interstate commerce act so as to make the rulings of the Commission binding and effective until reversed by the courts. Newark {N. J.) News. — Failure in practical power to enforce its own decisions has been, the crying defect in the operations of the Interstate Commerce Commission. What good is there in jurisdiction if manda- tory power exists ovAj in name? There is a strenuous demand for some effective revision of methods of procedure over the whole country, and the strong pleas of commercial bodies have been affirmed by resolutions of a number of State legislatures. Under the present conditions it is generally known that the decisions of the Interstate Commerce Commission are little more than a dead letter when rail- roads care to ignore them, which is more often than not. Oramd Foi'ks {N. Dak.) Herald. — The present session of Congress should be marked by some action that will increase the powers of the Commission to something like what they ought to be. Should Con- gress expire without something done we may look for the greatest railroad war in history. Some of the railroad men profess to desire the extension of the powers of the Commission, but the fact is on rec- ord that the Commission, even with the powers that it does possess, was only created after twenty.years of the most active opposition that the railroads could give it. Sioux Falls {S. Dak.) Argus-Zeadet\ — Ever since the passage of the CuUom law, in 1887, efforts have been made to so amend the law as to make it effective. These all have failed. The railroad companies have been able to control a sufficient number of Congressmen to block any effort to make the law effective. It would now appear, however, that either the big lines have concluded to obey the law themselves and help make the weaker ones do it, or that certain of the Congres- sional strength has turned against them. 74 EAILWAY FREIGHT RATES AND POOLING. Sioux Falls {8. Dak.) Argiis-Zeader.— The railroads have admitted that they pay rebates to favored shippers; that some men get much lower rates than others, and are thus assisted in driving the others out of business. This being so, any right-minded person will join in the demand that the laws be so reconstructed that this sort of thing will be made impossible, or, when it is committed, the offenders will be brought summarily to justice. ' Mennphis {Tenn.) Appeal. — It is clear that the work of the Commis- sion as now constitutedi is rather futile. It has not been able to pre- vent discriminations. It, has not been able to have its recommenda- tions respected or its decrees enforced. Now, the objection that the gentlemen composing the Commission are not qualified to fix rates is hardly valid, in view of the fact that a circuit judge might exercise that power. The only question involved is the most practical way of correcting rate discriminations, which are violations of the law. If this is too delicate a matter for the five eminent lawyers to decide, it is too delicate a matter for a circuit judge, or indeed for any legal tribunal, to decide. We shall either have to conclude that there is no practical remedy for rate cutting and unjust rates, and that the Interstate Commerce Com- mission ought to be abolished, or the power lodged in that tribunal to enforce its judgments as any other court can do. Salt Lake (tftah) Herald. — If Congress, in spite of the railroad lobby, which may be depended upon to make a hard fight against it, should pass the Corliss bill, a long step would be taken in the direction of proper Government supervision of the railroads of the country. The present powers of the Commission consist mainly of the right to use moral suasion — that is, if it finds that a railroad conipany is. giving heavy rebates to large shippers, as was freely admitted at the Chicago hearing, all it can do is to beg the magnates to be good. Of course, the Commissioners are laughed at. Railroad companies, as a rule, don't treat all men alike, unless they are made to do so. The purpose of the Corliss law is to put all on an equal footing, and it should be passed. Washington, D. C, May 27, 1902. Hon. S. B. Elkins, Chairman Committee on Interstate Commerce, United States Senate, Washington, 1). C. Sir: The following organizations have indorsed Senate bill 3575, to amend the act to regulate commerce, and have adopted resolutions requesting the Senators and Representatives from their respective States and districts to give the same their active support, in addition to the organizations mentioned in the testimony given by me before your honorable committee on the 9th day of April last, making an aggregate of 94 organizations located in 29 different States. NATIONAL AND STATE OBGANIZATIONS. Indiana Grain Dealers' Association; Massachusetts State Board of Trade; National Grange, Patrons of Husbandry; National Association of Railway Commissionera; Southern Hardware Jobbers' Association; Utah Wool Growers' Association; West- ern South Dakota Stock Growers' Association. EAILWAT FREIGHT EATES AND POOLING. 75 LOCAL ORGANIZATIONS. Colorado. — Lincoln County Cattle Growers' Association. Connecticut. — ^Waterbury Business Men's Association. New Haven Chamber of Comnjerce. Georg;ia. — Atlanta Chamber of Commerce. lUiciois. — Chicago Merchants' Association. Indiana. — Indianapolis Furniture Manufacturers' Association. Kansas. — Kansas City Board of Trade. Missouri. — St. Louis Millers' Club. New Jersey. — Jersey City Board of Trade. Ohio. — Columbus Board of Trade. Cleveland Retail Coal Dealers' Association. Pennsylvania. — Philadelphia Commercial Exchange. Wisconsin. — Muscoda Dairy Board. > Very respectfully, Edward P. Bacon, Chai/rman JExecutive Committee, Interstate Commerce Law Conwention. Thursday, April 17, 1902. At the sitting of the committee on Thursday, April 17, 1902, the following-named gentlemen appeared: William R. Corwine, repre- senting the Merchants' Association of New York; John V. Barnes, president of the New York Produce Exchange; Samuel T. Hubbard, president of the New York Cotton Exchange; Robert W. Higbie, rep- resenting the National Lumber Dealers' Association and the New York Lumber Dealers' Association; John D. Kernan, representing the New York Produce Exchange; David Bingham, chairman of the committee on freight rates and differentials, of the New York Produce Exchange; Charles N. Chad wick, representing the Manufacturers' Association of New York; Mr. Clapp, representing the New York Produce Exchange; T. W. Tomlinson, representing the National Live Stock Exchange and the Chicago Live Stock Exchange; R. S. Lyon, representing the Chicago Board of Trade; Frank Barry, of Milwaukee; N. B. Kelly, secretary of the Trades League of Philadelphia; George F. Mead, rep- resenting the Boston Chamber of Commerce and the New England Manufacturers' Association; and J. B. Daish, representing the National Hay Association. STATEMENT OF WILLIAM E. CORWINE. The Chairman. Please state your residence, business, and whom you represent. Mr. Corwine. I represent the Merchants' Association of New York, under instructions from its officers to attend these hearings here. I am also a member of the executive committee appointed by the Inter- state Commerce Law Convention, held at St. Louis in November, 1900, which committee prepared the bill now before Congress known as the Nelson-Corliss bill. The Merchants' Association of New York, which 76 EAILWAY FREIGHT RATES AND POOLING. has instructed me to appear here, is a commercial body composed of merchants, manufacturers, bankers, brokers, and business men gener- ally, of nearly, all lines of business, aggregating about a thousand members in New York City, ajid with a large nonresident membership throughout the United States footing up to something like thirty -five thousand merchants, each having what is known as a credit rating. Let me say here that the affairs of the association are controlledby the usual executive officers — a president, first and second vice-presidents, secretary, treasurer, and board of directors. The nonresident mem- bers have no voice in the management of the association, but are kept in touch with its work. The subject of this bill came before the board of directors at its meeting in December, and the board adopted a series of resolutions indorsing the Nelson-Corliss bill, a certified copy of which I ask leave to file. Besolutions, etc., Interstate Commerce Act. Whereas a bill known as the Cullom bill was pending in the last Congress, but failed of passage, the purpose of which was to restore to the Interstate Commerce Commission certain of its powers which, by the decisions of various courts, had been taken from it; and Whereas a large number of commercial bodies throughout the United States, over 40 in number, among which was the Merchants' Association, advocated the passage of this bill, the position of the Merchants' Association having been set forth in an argument prepared by William B. Corwine, of the office staff, in which, while the passage of the bill was advocated, certain suggestions were made which, in the opin- ion of the officers of the association, ought to be incorporated therein in the shape of amendments; and Whereas the commercial bodies which were in favor of the measure held a con- vention at St. Louis in November, 1900, at which an executive committee was appointed to take charge of the matters connected with the bill; and Whereas Mr. William B. Corwine was recently elected by the members of the committee to fill a vacancy thereon, and, with the consent of the officers of the asso- ciation, accepted that election and is now a member of that executive committee, the full title of the committee being the "Executive Committee of the Interstate Commerce Law Convention, held at St. Louis, Mo., November 20, 1900," of which Mr. E. P. Bacon, of Milwaukee, Wis. , is chairman, on which are a number of promi- nent gentlemen throughout the country representing large commercial and shipping interests; and Whereas the bill proposed to be introduced in the current session of Congress differs in certain respects from the Cullom bill of last session, and some of the ideas advanced by the Merchants' Association, through its representative, referred to above, have been incorporated in the new bill; and Whereas the bill as now drawn has been approved by the members of the execu- tive committee above mentioned, and has received, as we understand it, the approval of the Interstate Commerce Commissioners, and we are informed is accepted by many railway officials as being reasonably fair in its provisions; and Whereas President Boosevelt, in his annual message to the current Congress, has referred to this subject, and in connection therewith has said: "The act should be amended. The railway is a public servant. Its rates should be just to and open to all shippers alike. The Government should see to it that within its jurisdiction this is so, and should provide a speedy, inexpensive, and effective remedy to that end. At the same time it must not be forgotten that our railways are the arteries through which the commercial lifeblood of this nation flows. Nothing could be more foolish than the enactment of legislation which would unnec- essarily interfere with the development and operation of these commercial agencies. The subject is one of great importance and calls for the earnest attention of the Congress;" and Whereas the principal provisions of the bill are: First. That the Commission be invested with power when it is found, after a full hearing of all parties in interest, that an existing rate or differential in rates is unreasonable or unjust, to prescribe the necessary change to be made therein to RAILWAY FREIGHT RATES AND POOLING. 77 bring them into conformity with the provisions of the interstate commerce act. The Commission is to have the same power in relation to the classification of freight articles. Second. That the rulings of the Commission, issued in pursuance of such hearing, shall be operative twenty days from the service thereof upon the defendant carriers, subject to appeal on the part of the carriers to a circuit court of the United States, these courts being empowered to suspend the operation of the order of the commis- sion, pending the hearing of the appeal, and it is made the duty of the court to vacate such order if found to be illegal or unreasonable upon the facts of the case. Either party may appeal to the Supreme Court. Third. That imprisonment penalties be done away with, and proper fines sub- stituted therefor, in case of violation of the act. It is believed that this will facilitate the obtaining of evidence necessary for the conviction of guilty parties, which the severe penalties of the present act strongly operate against. The act provides penal- ties for shippers as well as for carriers: Now, therefore, be it Resolved, That in view of the position already taken by the Merchants' Association, based upon the foregoing statement, the directors of the Merchants' Association hereby approve the general terms of the bill referred to, and ask for its careful con- sideration and passage by Congress, and indorse the appointment of Mr. William R. Corwine upon the ' ' executive committee of the Interstate Commerce Law Conven- tion, held at St. Louis, Mo., November 20, 1900," and request him and the ofiicers of the association to cooperate as fully as possible in obtaining 'the passage of this bill or of such amended bill as may finally be agreed upon, if amendments be found necessary, as will insure the end desired. I hereby certify that the foregoing is a correct copy of the preambles and resolu- tion unanimously adopted by the board of directors of the Merchants' Association of New York at a meeting on the 5th day of December, 1901. Dated New York, April 14, 1902. [seal.] S. C. Mead, Assistant Secretary, the Merchants' Association of New York. These resolutions, in substance, set forth that in the opinion of the directors something ought to be done by which the decisions or rulings made by the Interstate Commerce Commission may be made effective; that in the judgment of the directors the provisions of the bill which had been submitted to them — they having considerable knowledge of the general subject^would produce the results desired by shippers without undue hardships to the carriers. The question seemed to us to resolve itself into the very simple one of whether or not the Interstate Commerce Commission should be given powers which it seems to the shippers they ought to have, or whether or not the Commission should be abolished. As the Interstate Commerce Commission stands now, it seems to be nothing more than a statistical bureau, composed of very estimable gentlemen, in whose integrity and abilitv the public have confidence, but whose powers seem to be limited to the issuing of statistical information and propa- ganda at various times, which people read, but to which they payno attention. It seems to us that, owing to the changed conditions exist- ing throughout the country, to the community of interest chiefly, which is bringing the great railway systems into closer harmony, it would be wise, in fact, is necessary, that something be done which, on the one hand, will not be too harsh against the railroad interests, which we recognize as being a very important interest in the country, but which, on the other hand, will conserve the interests of the shippers. How far it is wise to go is of course a question which Congress must determine. I am not here for the purpose of voicing any specific com- plaints of shippers just at this particular moment. We have had a number of such complaints, and, in fact, our position in this matter grew almost entirely out of the very numerous complaints which were 78, EAILWAY FREIGHT Eatj^h ajnu Ji-uui^unu. filed with us and which we were asked to consider at the time the rail- roads, in the latter part of 1899 and in the early part of 1900, arbitra- rily and without any hearings or conferences with shippers, attempted to obtain a larger revenue, not by an increase of rates — to which 1 think as a rule shippers would not have objected, owing to the pros- perous condition of the country — but to a very violent change in the method of classification. It is not necessary to go into the details of that subject. These details were fully laid before you at the last session, when the CuUom bill was being considered. Mr. J. M. Langley, representing our association, testified before this committee, and went into a very thorough analysis of the changes made by the different railways of the country in regard to classifications and the percentages of increase in items, showing the effect of those percentages upon the rates and the average increase of rates which resulted from that change of classi- fication. We felt then and we feel now that the method pursued was not a fair or an equitable method ; that it did result and has con- tinued to result in a very serious detriment to many lines of industry, more particularly on account of the arbitrary change which the rail- roads made in what maj' be called the widening of the difference between the carload lot and less than carload lot. I am not an expert on the subject of rates, Mr. Chairman, but there are a few general principles which we all understand fully. In the particular changes I have in mind, where carload lots were classed, say,, fifth class, and less than carload lots were classified in the fourth class, the railroads in the new classification of 1900 kept the carload in the class in which it had stood for many years, and advanced the less than carload lots to a higher classification, for instance, the third class, thereby making the difference of two classes between the car- load and less than carload lots. This served to advance the rate charged for less than carload lots. We claim, without going into the details as to the effect of this change upon the rate, that it has necessarily worked injuriously to the small shipper through lessening the area of his distribution. The tendency of the times is toward concentration in commercial industries and transportation. There is a very serious endeavor on the part of thinking men of the country to ascertain how far this concentration is being brought about by natural conditions, and how far it is artificial. Monopolies are not desired by the people, but how far legislative bodies ought to go in an endeavor so to regulate the results of conditions as to minimize the evils complained of is a serious problem. These changed conditions, whether due to natural causes — to the growth of business resulting in the creation of great industries through- out the world — tend to drive the small man out of business or to force him to combine with the larger organizations. We ought not unduly or arbitrarily make it harder for him to live. The narrowing of the area of distribution, whether it be of New York, of Chicago, of St. Louis, of Minneapolis, of Atlanta, or of New Orleans, or any other distributing center, is certain to contract the business of the small man. By widening the difference between carload and the less than carload lots, you make it harder for him to compete with the men who get the carload rate. That is so plain that it seems to me to need no explana- tion. BAIL WAY FREIGHT KATES ANX) POOLING. 79 As I said, I think, at the outset, there is no disposition on the part of our people to harass the railways. The consideration, originally by the Merchants' Association, of the question under discussion was due to the fact that there were in effect certain discriminations as between localities, which operated unfavorably as against other local- ities; and as those discriminations operated against us locally, self- preservation forced the organization of this institution, for the purpose of seeing if it were not possible to place New York upon a parity with .other localities by doing away with the discriminating rates in freight and passenger business which were being practiced. I am frank to say, and am very glad to be able to say, that in all the relations which we have had with the railways the latter have been fair with us. They have lived up always, not only to the letter, but to the spirit of the agreements which they have made with us. And I am glad and proud to say that on our part we have done the same. Mr. Blanchard, whom you knew, and who is now dead, put himself on record in writing as to the fairness of the dealings on the part of the Mer- chants' Association of New York with the great railway interests of the country. We feel, as I have said, that there ought to be some power some- where, either in the present Interstate Commerce Commission or in some other body to be created, if need be, by or through which these two great interests of shipper and carrier, which are very largely the bone and sinew of the country, may be conserved fairly and equitably to all. So far as we have been able to study the subject, it seems to us that the provisions of the so-called Nelson-Corliss bill meet the situation as the conditions are to-day. Several criticisms have been made by those opposed to that bill. One that I have in mind, that has been urged quite strenously, is that its operations will be unfair to the railroads, because under it the decisions of the Interstate Commerce Commission would go into effect practi- cally immediately, and remain in effect for two years, even though the railroads had the right of appeal to the circuit court, but that, notwithstanding the appeal, the decision of the Commission would remain in force and effect while the appeal was pending. In other words, it is claimed by the legal fraternity, who are investigating the bill from the railroad point of view, that this is a reversal of general legal proceedings, where an appeal from the decision of a lower court stays the effect of the decision which has been rendered until such time as the appeal may have been determined. It seems to me that those who are making that criticism are looking from the wrong point of view. I do not want to be unfair or unjust or appear to be put in the position of asking for that which is harsh or arbitrary. But I do not view the Interstate Commerce Commission quite in that light. It seems to me— if I may use a phrase which does not, perhaps, exactly fit the situation, but which, in general, describes it---that we may look upon that Commission more as a legislative than as a judicial body. It is not a body appointed, as are the judges of the Supreme Court of the United States and its subordinate branches, with general powers to interpret the laws that are upon the statute books, but is a body of men, five in number, appointed to determine certain minor— or great, if you like— questions of fact raised by the specific act under which that body has been created, and their jurisdiction goes no farther. 80 RAILWAY FREIGHT RATES AND POOLJ-JNU. In other words, it seems to me that we might better make a com- parison of that body with the Treasury Department or any department of the Government which has powers of that kind. The Treasury Department, for instance, has charge of the customs, in which an enormous amount of money is involved and where there are very important questions, in the solution of which there is a great deal of friction. The decision of the Department becomes, as I understand it, binding, although the person against whom the decision is ren- dered has the right of appeal — a right which the law gives him. But, that decision is binding not only as against him, but as against all others under like conditions, until the courts have determined that the original decision was wrong or unconstitutional, or not in accordance with the law, as you care to put it. That is the way I think you will find we look at this matter, and it occurs to me that that is the solu- tion, from our point of view. There is another criticism that has been made. Senator Tillman. Mr. Chairman, before the gentleman leaves that point I should like to ask him a question. The Chairman. Certainly. Senator Tillman. As I understand your contention, or the conten- tion of the association which you represent, it is that the Interstate Commerce Commission, composed of men who devote, or are supposed to devote, their whole study and time to questions of transportation and railroad matters, are fully competent to make the first decision as to what would be a just and equitable rate; whereas the judges of the courts, who are engaged in the study and determination of questions of 'law not specifically connected with those matters, and have made no study of them and can not make them a study, but must determine them from the showing made before them, and are not calculated to have any special understanding of railroad matters, are more compe- tent to decide these questions equitably than the Interstate Commerce Commission. Is that your contention ? Mr. CoEWiNE. Practically, yes. We believe that the Interstate Com- merce Commission is thoroughly capable of reaching a determination as to the reasonableness or the unreasonableness, the fairness or un- fairness, of a rate, certainly as well as and possibly better than the determination of that question could be reached by a court. Senator Tillman. Has it occurred to you that the judges of the United States courts are selected by the President and confirmed by the Senate, just as the members of the- Interstate Commerce Commis- sion are selected b^ the President and confirmed by the Senate; that, while they had their appointments from practically the same source, they are _ in effect chosen for supposed fitness and qualifications, and that choice is ratified by the Senate? Would you not, therefore, imagine that the object to be accomplished through their appoint- ments for the specific work that each is to do would be all equally well performed ? Mr. CoEWiNE. Yes. I think the appointment of the Interstate Commerce Commission is thoroughly safe-guarded, and we may rest assured that this conservative body, the Senate, will pass upon the appointments which the President has made and may make from time to time, so that it is reasonably sure that good men will get in. We are not at all afraid of the contrary of that proposition any more than we are afraid of our courts, of which we are proud. KAILWAY FREIGHT BATES AND POOLING. 81 Senator Tillman. Then why would you have any appeal to the courts at all, other than probably for the rectification of some error that might be shown by argument that the Commission had made in a case where the Commission might not have had the advantage of listening to that argument? Is that the reason ? Mr. CoKWiNE. Do you think it wise, Mr. Senator, that there should be given to any one body the absolute power to determine arbitrarily any point without giving the citizen or corporation the right of appeal that exists in all other actions that are taken ? If the question is broad and important enough it goes to the Supreme Court of the United States. Senator Tillman. Primarily I would not think it wise to make an arbitrary tribunal. But considering the specific scope of their duties it would appear to me, at least to the extent to which you contend, that their action should be final until reversed — in other words, that it should go into effect. You are arguing, as I understand, for the immediate results to follow the decision of the Interstate Commerce Commission. Mr. CoRwiNE. Yes. Senator Tillman. And the opponents of that view hold that they ought not to go into effpct, but that the appeal ought to obtain at once. Mr. Cokwinb. The right of appeal ought to obtain at once, it seems to me, and their rulings ought to be like the rulings of the Treasury Department, which become operative as soon as made and remain operative until reversed by the courts. Senator Tillman. I should be glad to have you file with the com- mittee a list of the membership of your association, so that we may form some idea of its scope and the qualifications, respectability, and character of its membership, taking it for granted, of course, that the members are all highly respectable. Still we would like to know the source whence these propositions come. Mr. CoRWiNE. I will do that with very great pleasure. The resi- dent membership is about one thousand. The Chairman. We can put it on file. It need not be put in the record. Mr. Cokwine. I will submit such a list with this understanding: A resolution was adopted by the board, at the time the organization was formed, that we would not publish a list of our membership, because it was determined that we did not want it used in any way for adver- tising purposes. But for the benefit of the committee I will file such a list, with the understanding that it is not to be published. Senator Tillman. My object in trying to get at the source of these propositions is this: As I understand, we are confronted in the Senate, or are likely to be, with the suggestion that we have been considering arguments and statements in this committee from those who are more deeply interested in protecting the railroads than in protecting the people. If this committee should succeed in agreeing upon a bill involving the principle you have just set forth, of lodging the power somewhere to obtain redress for shipper^ and to have the decision go into effect immediately, when we come to present the case before the Senate we are likely to be met by some suggestion of the kind I have mentioned. We have had a great many petitions and communications of one kind and another urging this action; at least they have for years F K p 6 82 RAILWAY FEEIGHT KATES AND POOLING. been coming to me as a member of this committee, and I presume they have to you, Mr. Chairman. The Chairman. Yes. Senator Tillman. There have also come very urgent appeals from apparently a great many sources, but appeals so similar in character that it has occurred to me that they must have originated from one source, in regard to this 20 per cent reduction of sugar bounty, and 1 have been skeptical as to the necessity of that reduction and as to the responsibility of the parties who have signed those petitions. I should like to have as good evidence as possible to prove that there is a real demand from the citizens of this country for this proposed legislation. I believe there is, and I sympathize with it, and therefore I should like to be able to show that the merchants, manufacturers, and other parties interested would be glad to have Congress give them relief from present unbearable conditions, or abolish the commission and let us quit fooling with it. Mr. Corwine. All right; I will arrange that for you. Will you let me put into the record the names of the officers? Senator Tillman. It is not the names of the officers at all that we want. Mr. Corwine. The membership has changed very much. Senator Tillman. Why should there be any desire for secrecy on the part of this association in regard to its membership? Are they afraid that the railroads will discriminate against them in business? Mr. Corwine. No; thej^ are not afraid of anything on God's foot- stool. Senator Tillman. Then we ought to have their names. Mr. Corwine. They have simply considered it as good business judgment not to publish such a list. That resolution was- adopted in 1897, when certain members tried to do certain things not necessary to be disclosed here for the purpose of advertising themselves through their connection with the institution, and it was then determined that it would be best and wisest to keep its membership from being pub- lished, and also for the reason that it would keep the members from being subjected to bothersome solicitation. Senator Tillman. Do your members meet in convention, or how do they formulate and prosecute their work? How did they send you here, for instance ? Mr. Corwine. I was about to explain that 'when you interrupted me. I was about to offer to furnish the names of the officers when you said you did not care for them. Senator Tillman. I would like to have the whole thing. Mr. Corwine. 1 will say that the Merchants' Association holds its election annually in January of each year, at which the directors are elected. There are fifteen of them, and to them are given the power and authority, under the constitution and by-laws, to manage the affairs of the association. They have the power to do anything they like within the scope of their authority. If any person not a member of the board has at any time a grievance, and thinks the board has managed unfairly or does not fairly represent the sense of the associa- tion, that person has the power, under our rules, to have a special meeting of the members called and to protest, and the members have the power to oust the directors at the next election if they conclude that the affairs of the association have not been properly managed. RAILWAY FREIGHT EATES AND POOLING. 83 Senator Tillman. You mean the association has that power? Mr. CoEWiNE. The members can do it. Senator Tillman. That is a strange power to be lodged in the hands of one member. Mr. CoEWiNE. I will here give the names of the officers and direct- ors who are still holding office and will continue in office until the next annual meeting in January, 1903, so far as 1 am able to refresh my memory from an old letter head which 1 happen to have with me: Mr. D. Leroy Dresser, the president, is the head of the dr^- goods commission house of Dresser & Co., which he started himself when comparatively a young man. Mr. John C. Juhring, first vice-president, is a member of the whole- sale grocery house of Francis H. Leggett& Co. , in which he has grown up from boyhood. Mr. John C. Eames, is second Adce-president now. He is the second vice-president and general manager of the H. B. Claflin Company, which concern I take it you all know as being a very large dry goods house in New York. Mr. Charles H. Webb, treasurer, is a member of the firn of J. H. Dunham & Co. , a large dry goods jobbing house in Nbw York, in which he has grown up from boyhood. Mr. William F. King, who was the founder of the Merchants' Asso- ciation and its first president, is a member of the dry goods house of Calhoun, Robins & Co., in which he has grown up from boA'hood. Mr. George F. Crane, of Baring, Magoun & Co., bankers; he worked his way up into the firm from a boy. Mr. Adolph Openhym is a member of the firm of William Open- ^ hym & Sons, a dry goods commission house dealing principally in silks * and located in New York. That firm was founded by his father, I think. Mr. George L. Duval is the resident member in the United States of the firm of Beeche, Duval & Co. And, by the way, he worked his way up from boyhood. Mr. Gustav HL Schwab, the general manager of the North German Lloyd Steamship Company, in New York, with which he has been connected ever since he was a boy. Mr. Frank Squier, a member of the firm of Perkins, Goodwin & Co., wholesale paper manufacturing and jobbing house. I do not know his history, whether he has been there all his life or not. In addition, there were elected at the last meeting Mr. William Edmond Curtis, who was formerly Assistant Secretary of the Treasury under Secretarv Carlisle during Mr. Cleveland's last Administration; Mr. Herbert L. Satterlee, lawyer, at 120 Broadway, and Mr. Henry R. Towne, the president of the Yale and Towne Manufacturing Com- pany, of New York, with headquarters in New York City. Those three' gentlemen were elected last January to take the places made vacant by the retirement of Mr. Alvah Trowbridge, who had been president of the Ninth National Bank; Mr. Corcellus H. Hackett, who is a manufacturer, and of Mr, John H. Starin, of the Starin Trans- portation Company, of New York. As I say, those three gentlemen's terms expired, and as they did not want to be reelected, the three ffentlemen I have named were elected to take their places. The directors subsequently elected officers, as follows: Mr. D. Leroy 84 RAILWAY FREIGHT RATES AND POOLING. Dresser, president; Mr. John C. Juhring, first vice-president; Mr. John C. Eames, second vice-president; Mr. Charles H. Webb, treas- urer, and Mr. W. A. Marble, secretary. Mr. Marble went into the board to fill a vacancy. He is the vice-president of the R. & G. Cor- set Manufacturing Company. None of the officers or directors draw any salary or compensation of any kind. I will also say that Mr. James" B. Dill had served without charge as counsel for the association from the time of its organization ;_ but, feeling that he could not attend to the work any longer, he resigned in January, when the Hon. John G. Carlisle, formerly Secretary of the Treasury, was unanimously elected by the board as counsel of the association. That, Mr. Senator, represents the working force of the Merchants' Association. Senator Tillman. I take it that the rank and file are very eminently respectable merchants and manufacturers. Why not send their names also? ~ • _ _ Mr. CoKWiNE. I have no objection tp sending you the list, if you really want it. We keep it on a card index, and it will only take a few days to prepare it. Senator Tillman. I hope you do not understand that I have even suspected for a moment that yours is not a bona fide association of very great proportions, and of wealth and respectability. I simply want to have the proof, because when we get this bill before the Sen- ate for consideration, if we ever do, we are going to be met with the charge that this bill emanated from the Interstate Commerce Commis- sion or from those who have been working in its interest. Something like that has been the cry that has been heard ever since this subjec^ was first agitated. Mr. CoRWiNE. 1 think 1 can get the list for the committee, although in saying that 1 may be assuming more than I shall have the power to perform. The Chairman. All right. Mr. CoRWiNE. I have nothing more to say to the committee, I believe. Senator Foster. Before you give way to the next gentleman, I should like to put a question. 1 understand that you consider that the Commission has been practically shorn, by the decisions of the Supreme Court, of all authority and power; that now it is but little more than a bureau of statistical information, rather than a body armed with the power of control over the subject matter, for which it was originally created. In your opinion, should that Commission be continued unless there be legislation giving it greater power and greater authority for carrying out what we generally believe to have been the objects and purposes of that Commission. Mr. CoRWiNE. I do not quite catch your idea, Senator. If 1 may, I will answer it in this way: I, for one, as a humble layman, believe that when the interstate-commerce law was enacted in 1887 — that is the year, if my memory serves me rightly — it was intended that there should be somebody with such powers as are now sought to be embod- ied in the bill before the committee. That is the impression that I, as a layman, have always had. Not being a lawyer I may not be able to determine the nice distinctions of language, as a court can do. But RAILWAY FKEIGHT RATES AND POOLING. 85 by the decisions rendered by the Supreme Court, in some cases from New York and elsewhere, it was determined, as 1 understand it, not that they were shorn of any power, but that they never had had the power. This decision was rendered as a result of the judicial inter- pretation of the statute which came before the court in these various cases that were carried to the Supreme Court. Therefore, the Com- mission seems to me to be nothing more nor less than a statistical bureau, and it does not seem to me to be necessary to keep a body of that kind in existence, eminently respectable though its membership be, unless it should be given more power than it now has. Senator Foster. I used the word "shorn." Probably you are right in saying that the Supreme Court decided that it never had the power. But once the Supreme Court has denied the existence of this power, is it useless to continue this Commission ? Mr. CoRWiNE. As a Commission, I should say no. It seems to me that it would be beneficial for the Government always to maintain some kind of a bureau, perhaps not so expensive and elaborate a bureau as this, in which there can be collated the railroad statistics of the country, which are very useful and serve a most excellent purpose, both for action by Congress and for discussion by the public as to the conditions existing among railroads. They are gotten up in better shape there than anywhere else in the country. They are far better than Poor's Manual, which it would require a I'ailroad expert to under- stand. They are better than the data furnished by the financial papers of New York and Chicago. But, as a Commission, that body of five members it seems to me ought to go out of existence if they can not serve more useful purposes; and it seems to me, also, that they do not serve thosepurposes now. Senator Foster. You believe in giving them additional power? Mr. CoRwiNE. I do. Senator Foster. That is, your association believes that ? Mr. CoRwiNE. They do. Senator Foster. That the good of the country will be better sub sei'ved by conferring this additional power upon the Interstate Com- merce Commission? Mr. CoRWiNE. I think it will. I think it will work out great ben- efit all round. Senator Foster. Have you read the Elkins bill? Mr. CoRWiNE. I saw the Elkins bill as it was published in the press at the time it came out. I have understood that there have been some changes made in it or that some are about to be made. I have not seen it in its present printed form, and 1 should very much like to have a copy of it while I am here. I bad intended to get one. The Chairman. I hand you a copy of the bill (S. 3521). Mr. Corwine. I only saw the substance of it as published in the papers. The Chairman. We are very much obliged to you, Mr. Corwine. Mr. Corwine. I am very much obliged to you for your courtesy, also. 86 RAILWAY FREIGHT KATES AND POOLING. STATEMENT OF ROBERT W. HIGBIE. The Chairman. Please give your business address and whom you represent. Mr. HiGBiB. I represent the committee on legislation of the National Wholesale Lumber Dealers' Association. My business address is 45 Broadway, New York. I am also a manufacturer of lumber in the State of West Virginia. This association which I have the honor to represent before this committee is composed of several hundred of the representative lum- ber dealers of the United States, with a membership extending from Maine to Minnesota on the north, to the south and southwest, Alabama and Arkansas, and thence across to the Atlantic seaboard. This association has indorsed the principles of the Nelson bill and also certain features of the Elkins bill for two or three successive years in their annual conventions. The board of trustees of our asso- ciation appointed a small committee to represent the association before Congress in the advocacy, in a general way, of these two bills, more particularly the Nelson bill. We feel, Senators, that the necessity exists for some additional legis- lation by way of amendment to the interstate-commerce act, and the necessity for that is so apparent that it is not necessary for me to take up your valuable time in making any extended argument along that line, but rather to suggest our thought as to how the act should be amended and in what respect the powers of the Commission should be increased. There are four things, particularly, in which our association is very much interested. In the first place, we think the railroads should be placed in the position where they should treat all shippers alike; that they should charge like pay for like service under similar conditions. In the second place, we feel that when an important case has been brought before the Interstate Commerce Commission and they have carefully investigated it and decided as to what is a proper rate or proper adjustment between railroads and shippers, of course conserv- ingthe interests of both, that they should have the power to say what is rightj and, having said it, that they should have the power to enforce it. This covers the second and third of the additional powers for which we are asking. In the next and last place, we think that these orders, when once entered, should be made effective within a reasonable time. The act as originally passed, and as interpreted by the Commission itself, practically covered most of these points which we are now ask- ing. I am not undertaking to say whether the original law actually conferred these powers or not. I simply say that the interpretation of that act by the Commission itself was that they had, and as a matter of fact they used, most of these powers for sevei-al years. The courts have, however, in various decisions in cases coming before them under this act, held that the Commission did not possess certain of the powers which "they had been exercising and which they thought the act conferred upon them, and as a result of these decisions the Commission has been compelled to desist from the exercise of those powers. RAILWAST FREIGHT BATES AND POOLING. 87 For instance, one, which is the only one I shall speak of, is tnat part of the act which is known as the long and short haul clause. As I understand it, this clause was put in the act for the benefit of small individual shippers, whose shipments were made at noncompetitive points. The courts have held, however, that the conditions under . which shipments were made by the railroads were such that the rail- roads in certain cases were justified in charging a less rate for a long haul than for a short haul. The result is that the individual shipper from what we term wslj stations is left high and dry and is compelled to pay whatever the railroad sees fit to charge him from that particular point, because he has no other way of getting his property to the markets. I know of no case which better illustrates the necessity of some change in that particular than a case which the association I am rep- resenting here at one time brought before the Interstate Commerce Commission. I will very briefly state the case and the developments arising therefrom. The National Wholesale Lumber Dealers' Associa- tion lodged a complaint against the Pennsylvania Railroad, the Balti- more and Ohio, and the Norfolk and Western railroads. The basis of that complaint was that shippers on the Norfolk and Western were discriminated against in comparison with shippers from the Chesa- peake and Ohio and from the Baltimore and Ohio, and that the rates were very much higher to them than were given to their competitors on other lines, and that those rates were unreasonable, unjust, and dis- criminative. The testimony in that case brought out these facts: That the three railroads named were under the practical control of the Pennsylvania Eailroad and to all intents and purposes were one sys- tem. It also brought out this fact: That the three roads had connec- tions with and entrances into the city of Cincinnati; that the rate on lumber from Cincinnati to New York was 21^ cents per hundred pounds; that all of these roads were parallel and shipments were made from all of them to the New York market; and this additional fact, that two of these roads gave to points east of Cincinnati the benefit of the Cincinnati rate. But the Norfolk and Western in their wisdom saw fit to refuse to give-the 21i-cent rate to its shippers east of Cin- cinnati, but charged such shippers an average rate of 37^ cents, and the result was that such shippers on the Norfolk and Western were compelled to pay from 30 to 35 per cent more than the shippers on the two parallel roads. The Commission, in writing the decision in that case, closed by say • ing that inasmuch as these three roads were under the control of the Pennsylvania system, they saw no reason why all the shippers on the three lines should not be treated alike. The order that finally came in reference to this matter from the Commission, instead of reducing the rate, as the opinion would seem to have indicated we had reason to expect, only reduced the rate 10 per cent, still leaving us 15 or 20 per cent above the rates for shippers from the other two roads. I infer and assume, although I have no authority for the assumption, that the reason why the larger reduction was not ordered was because the rail- roads might not have been willing to obey it. But they did obey the order of the Commission. If, however, the Commission had the power which we are asking now to be conferred upon them and had followed logically the line of the opinion in that case, the shippers on those three roads would have been placed upon an equal footing. As it is. 88 RAILWAY FREIGHT RATES AND POOLING. the shippers on the Norfolk and Western, of whom I happen to be one, are still at the disadvantage of at least |1 per thousand. The Chairman. On the rate to New York? Mr. HiGBiE. Yes. I have had prepared a table which I will file with the committee, showing the distances, the rate in cents per hun- dred, per ton per mile, on lumber from some 25 or 30 different points to New York City. These points cover twelve to fifteen States and fairly represent the shippers of lumber from inland points to New York City. In selecting these various points 1 wanted to be fair, and so I showed no preference at all and made no selection except the natural one. I had no fore- knowledge of what the result would show when tabulated in this form. The result is as follows: The point enjoying the most favorable rate to New York City is Menommee, Mich., which has a rate of 0.423 cent per ton per mile, this distance being 1,182 miles and the rate being 25 cents per hundred. The point which is compelled to pay the highest rate is Elizabethton, Tenn. The distance from that point to New York is barely more than half the distance of Menominee from New York, being but 628 miles. The rate per hundred is 28 cents, or three cents per hundred more for practically half the dis- tance, while this rate per ton per mile is 0.892 cent, or more than double. The intermediate points on the table vary. The Chairman. Does your table show what lines those points are on? Mr. HiGBiE. It does not. The Chairman. That would add a valuable feature if you would show the lines. Mr. HiGBiE. I will be glad to make that addition. The Chairman. If it will not interrupt you, and with the consent of the committee, I suggest that you put in an additional column to your table showing, for instance, that lumber from Menominee to New York passes over the following lines, and from Elizabethton to New York over the following lines. Mr. HiGBiE. I shall be very glad to do that, Senator. The Chairman. I think that would look well and would be valuable information. Following is the amended statement here referred to: Statement shomng the distance, rate in cents per 100 pounds, and rate per ton per mile on lumber from points shown below to New York, N. Y- Dis- tance. 1,182 1,388 1,348 1,209 818 915 1,097 757 980 865 715 709 702 1,273 685 683 411 671 Menominee, Mich Duluth, Minn Ashland, Wis Memphis, Tenn . . Indianapolis, Ind Chicago, 111 Appleton, Wis Cincinnati, Ohio . Petoskey, Mich... Louisville, Ky.^.. Bay City, Mich... Dayton, Ohio Saginaw. Mich . . . Helena, Ark Ironton, Ohio Ashland, Ky Buffalo, N.Y Kenova, W. Va... Rate per )0 pounds. Rate per ton per mile. Cents. Cents. 26 0.423 33 .476 33 .489 31 .512 22 .638 25 .646 31 .665 21j .568 28 .571 25 .578 21 .688 21 .692 21 .589 40 .628 2U .628 2U .629 13 .632 214 .641 KAlliWAY FREIGHT KATES AND POOLING. 89 Statement showing the distance, rate in cents per 100 pounds, and rate per ton per mile on lumber from points shown below to New York, N. N. — Continued. Dis- tance. Rate per 100 pounds. Bate pei ton per per mile. 667 479 830 899 615 717 604 584 788 316 1,050 680 705 392 492 Huntington, W. Va Grafton, W.Va Murphey, N. C Chattanooga, Tenn Charleston, W.Va Norton, W. Va , Camden-on-Gauley, W. Va Wilmington, N. C , Knoxville, Tenn Oswego, N. Y Nashville, Tenn Panther, W. Va Asheville, N. C Elizabeth Citv, N. C. ..... . Elkins, W. Va Elizabethton, Tenn Centa. 21i 16 28 31 21i 25i 21i 21 28i. Hi 38i 25i 27 15i 21i 28 Cents, 0.645 .668 .675 .689 .699 .711 .712 .719 .723 .728 .733 .750 .766 .791 .874 MENOMINEE, MICH. C., M. & St. P. Ey., or 0. & N. W. Ry. to Chic^o, and via any line east of Chicago DULUTH, MINN. C. & N. W. By. , or Wisconsin Central Ry. , to Chicago; via any line east of Chicago, 111. D., S. S. & A. Ey. Canadian Pacific Ey. N. Y. 0. & H. E. R. E. ASHLAND, WIS. C. & N. W. Ry., or "Wisconsin Central Ey., to Chicago, and any line east of Chi» cago. 111. MEMPHIS, TENN. Southern Ey. Penna. E. E. L. & N. E. R. C. & O. Ey. Penna. E. R. L. & N. R. R. B. & O. R. R. P. & R. Ry. 0. R. R. of N. J. K. C, M. & B. R. R. Southern Ry. Penna. R. R. K. C, H. & B. R. R. SouflFin Ey. gf ard Air Line E. E. ■ , E. & P. E. R. , ^.-'enna. E. E. INDIANAPOLIS, IND. C, C, C. & St. L. Ey. L. S. & M. S. Ry. N. Y.,C. &St. L. E. E. L. E. & W. R. R. L. S. &. M. S. Ey. Co. N. Y., C. & St. L. E. E. Penna. Co. Penna. E. E. to Buffalo. to Buffalo East of Buffalo: West Shore E. E. D., L. & W. E. E. N. Y. C. & H. E. E. E. L. Valley R. E. R., W. & 0. R. R. N. Y., O. & W. Ry. 90 RAILWAY FREIGHT KATES AND POOLING. CHICAGO, ILL. B. & O. R. R. P. & R. Ry. C. R. R. of N. J. P., C, C. & St. L. Ry. Penna. R. R. C, C, C. & St. R. Ry. L. S. & M. S. Ry. • N. Y. C. & H. R. R. R. P., Ft. W. &C Ry. Penna. R. R. L. S. & M. S. Ry. N. Y. C. & H. R. R. R. Mich. Cent. R. R. N. Y. 0. & H. R. R. R. N. Y., C. & St. L. R. R. to Buffalo. West Shore R. R. D., L. &W. R. R. Lehigh Valley Ry. Grand Trunk Ry. and all lines east of Buffalo. east of Buffalo. Wabash R. R. and all lines east of Buffalo. APPLETON, WIS. 0., M. & St. P. Ry. or 0. & N. W. Ry. to Chicago, 111., and any lines east of Chicago CINCINNATI, OHIO. B. & 0. So. W. Ry. B. & O. R. R. P. & R. Ry. 0. R. R. of N. J. N. &. W. R. R. Cumb. Valley R. R. Penna. R. R. C. & O. Ry. Penna R. R. N. & W. R. R. N. Y., P. & N. R. R. Penna. R. R. C, C, C. &St. L.-Ry. 1t,„ L. S. & M. S. Ry. ^i°ff„i„ N. Y., S. & St. L. R. Kj-tsunaio Erie R. R. West Shore R. R. N. Y. 0. &H. R. R. R. D., L. & W. R. R. Lehigh Valley R. R. R., W. & 0. R. R. N. Y., 0. &W. Ry. .East of 'Buffalo PETOSKEY, MICH. Grand Rapids & Indiana Ry. Penna Co. Penna. R. R. LOUISVILLE, KY. B. & 0. So. W. R. R. B. & O. R. R. P. & R. Ry. C. R. R. of N. J. C, C, C. &St. L. Ry. L. S. & M. S. Ry. N. Y., C. & St. L. R. R. West Shore R. E. N. Y. C. & H. R. R. R. D., L. & W. R. R. Erie R. R. L. Valley R. R. R., W. & O. R. R. N. Y., 0. & W. R. R. C. & OjiRy. * Penna^'iHk R. C. & 0. Ry. N. Y., P. & N. R. R. Penna. R. R. ■To Buffalo. "S East of Buffalo. L. &. N. R. R. ' Ti. & 0. So. W. R. R r- & O. R. R. P. & R. Ry. C.R. R. of N. J. Southern Ry. Pennsylvania R. R. P., C, C. & St. L. Ry Penna. R. R. EAILWAY PKEIGHT RATES AND POOLING. 91 BAY CITY, MICH. •East of Buffalo. Michigan Central E. R. to Buffalo. West Shore R. R. N. Y. 0. & H. R. R. R. D., L. & W. R. R. Erie R. R. L. Valley R. R. R., W. & O. R. R. N. Y., O. &W. Ry. Pere Marquette R. R. . Grand Trunk Ry. to Buffalo. "West Shore R. R. N. Y. C. & H. R. R. R. D., L. & W. E. R. Erie R. R. L. Valley R. R. R., W. &0. R. R. N. Y., O. & W. Ry. Pere Marquette R. R. Grand Trunk Ry. L. S. & M. S. Ry. Mich. Cent. R. E. West Shore R. R. N. Y. C. & H. R. R. R. D., L. & W. E. E. Erie E. E. L. Valley R. R. R., W. & O. R. R. N. Y., 0. & W. R. R. To Buffalo. East of Buffalo. East of Buffalo. DAYTON, OHIO. O. C. C. & St. L. Ry. L. E. &. W. R. R. L. S. & M. S. Ry. or N. Y. C. & St. L. R. R. West Shore R. R. D. L. & W. R. R. N. Y. C. & H. R. R. R. Erie E. R. L. VaUey R. E. E. W. & O. R. R. N. Y. O. & W. R. R. to Buffalo. East of Buffalo. Erie R. R. Penna. Co. Penna. E. E. SAGINAW, MICH. Michigan Central E. R. to Buffalo. Pere Marquette E. R. Grand Trunk Ry.l L. S. & M. S. Ry. ho Buffalo. Mich. Cent. R. R.J Pere Marquette E. E. Grand Trunk Ey. to Buffalo. West Shore E. E. N. Y. C. & H. E. E. E. Erie E. E. D. L. & W. E. E. Lehigh Valley E. E. R. W. & O. E. E. N. Y. 0. & W. Ey. 111. Cent. E. R. Southern Ry. Penna. R. R. 111. Cent. E. E. K. C, M. & B. R. E. S A. Line E. E. E. F. & P. R. R. Penna. R. R- East of Buffalo. HELENA, ABK, 111. Cent. R. R. K. G, M. & B. E. E. Southern Ey. Penna. E. E. 111. Cent. E. E. B. & O. So. W. E. R. B. & O. R. R. P. & R. Ry. C. R. R. of N. J. 111. Cent. E. E. L. & N. R. R. C. & O. Ry. Penna. E. R. 111. Cent. R. R- K. C, M. & B. R. R. Georgia R. R. A. C. Line R. E. E. F. &. P. E. R. Penna. R. R. 92 RAILWAY FREIGHT EATES AND POOLING. HELENA, ARK. — continued. 111. Cent. R. E. St. L. I. M. & Co. , Mo. Pac. N. C. & St. L. Ey. to East St. Louis, and L. & N. E. R. any lines east of East St. Ches. & Ohio Ey. Louis. Penna. E. R. ASHLAND, KY. ; KENOVA, W. VA.; HUNTINGTON, W. VA. ; PANTHER, VA., AND IRONTON, OHIO. Via Ches. & Ohio Ey. B. & 0. E. E. P. & E. Ey. 0. E. E. of N. J. West Shore E. E. N. Y. C. & H. R. R. R. Erie E. R. D., L. & W. R. R. Lehigh Valley R. R. R. W. & O. R. R. N. Y., 0. & W. Rwy. Southern Rwy. Penna. R. R. Southern Rwy. 0. D. S. S. Co. Southern Rwy. Penna. R. E. Southern Ewy. O. D. S. S. Co. Ches. & Ohio Ry. Penna. R. R. BUFFALO, N. Y. CHATTANOOGA, TENN. Southern Rwy. N. & W. Rwy. Penna. R. R. KNOXVILLE, TENN. Southern Ewy. N. & W. Ewy. Penna. E. E. OSWEGO, N. Y. D., L. & W. E. E. N. Y. C. & H. E. E. E. N. Y., 0. & W. Ewy. L. & N. E. E. Penna. E. E. N. C. & St. L. Ry. Georgia R. R. Atlantic Coast Line. E., F. & P. E. R. Penna. R. R. Southern Ry. Penna. R. R. NASHVILLE, TENN. N. C. & St. L. Ry. Southern Ry. Penna. R. R. ASHEVILLE, N. C. Southern Ry. N. Y., P. & N. R. R. Penna. R. R. N. C. & St. L. Ry. S. A. Line R. R. R., F. & P. R. R. Penna. R. E. Southern Ry. 0. D. S. S. Co. A. C. Line. Penna. R. R. WILMINGTON, N. C. A. C. Line. N. Y., P. & N. R. R. Penna. E. E. S. A. Line. Penna. E. E. A. C. Line. O. D. S. S. Co. S. A. Line. O. D. S. S. Co. S. A. Line. N. Y., P. & N. E. E. Penna. E. E. RAILWAY FREIGHT RATES AND POOLING. 93 EastTenn. & W. N. C. R. R. N. & W. Ry. Cum. Valley R. R. Peima. R. R. ELIZABETHTON, TENN. E. T. & W. N. 0. R. R. ■N. & W. Ry. W. Md. R. R. P. & R. Ry. C. R. R. of N. J., orL. V. R. R. E. T. & W. N. C. R. R. N. & W. Ry. B. & 0. R. R. P. & R. Ry. 0. R. R. of N. J. B. & 0. R. R. P. & R. Ry. C. R. R. of N. J. Southern By. Penna. R. R. QEAFTON, W. VA. MUEPHY, N. C. Southern Ry. N.Y. P. & N. R. R. Penna. R. R. Southern Ry. O. D. S. S. Co. N. & W. Ry. Cumb. V. R. R. Penna. R. R. N. & W. Ry. B. & O. R. R. P. & R. Ry. C. R. R. of N. J. B. & 0. R. R. P. & R. Ry. 0. R. R. of N. J. Nor. & So. Ry. N. Y. P. & N. Ry. Penna. R. B. W. Va. Cent. & Pgh. Ry. B. & O. R. R. P. & R. Ry. C. R. R. of N. J. NORTON, W. VA. N. & W. Ry. •W. Md. R. R. P. & R. Ry. L. Valley R. R. N & W. Ry. O. D. S. S. Co. N. & W. Ry. W. Md. R. R. P. & R. Ry. C. R. R. of N. J. N. & W. Ry. Southern Ry. Penna R. R. CAMDEN ON GAULEY, W. VA. ELIZABETH CITY, N. 0. Norfolk & So. Ry. 0. D. S. S. Co. ELKINS, W. VA. W. Va. Cent. & Pgh. R. R. Penna. R. R. Senator Tillman. Mr. Chairman, my understanding has been that the long and short haul clause had reference to shipments by a given road, not over any general railroad system of the country. The Chaikman. That was my understanding of it. Senator Tillman. I should think that the information which you are seeking to get, and which we all want, would be fuller if points with- out competitive water rates were named. For instance, Menominee is on the river leading into Lake Michigan. Mr. HiGBiE. It is right at the mouth of that river. Senator Tillman. So there is really entire water transportation if you choose to bring it through the lakes, down the Erie Canal, and into the Hudson to New York City. Do you not suppose that that accounts for the extremely low rate ? Mr. HiGBiE. It is more than probable. Senator Tillman. Still there must be other points connected with New York by all-rail routes that have no advantage of that kind. Mr. HiGBiE. Yes; there is Memphis, Tenn. Senator Tillman. That also has an entire water route down the 94 BAILWAY FREIGHT RATEiS AND fUUljiJN I*. . Mississippi and by the Gulf and Atlantic to New York, but this route is not used at all. Take some point that has no water connection with New York. Mr. HiGBiE. Indianapolis, Ind. Senator Tillman. Indianapolis and Elizabethton, I should suppose, are practically the same distance from New York. Mr. HiGBiE. Indianapolis is a trifle farther; it is 818 miles from New York, and Elizabethton is 628 miles from New York. But Eliz- abethton, which has the shorter distance, has to pay a greater rate. Senator Tillman. Such information is valuable. Mr. HiGBiE. 1 thank you for calling my attention to it, Senator. The Chaikman. I know that Menominee has a water route, but I would like Mr. Higbie to show what roads his land freights would' travel over. An additional column can be made to show that. Mr. Higbie. Oh, yes; it will take only very little trouble. In reply to what the Senator has said about the long and short haul clause, I will say that I know it to be the fact that this movement of freight over the Norfolk and Western road from Cincinnati has to pass these same points in going to New York, and which points are compelled to pay a much higher rate than what is known as the Cincinnati rate. Senator Tillman. That would come under the interpretation, as we understand, of the long and short haul clause. My understanding of that clause of the original act is that no given railroad should charge a greater rate to a place 300 miles from a competitive point than to a place 500 miles from such a point. The Chairman. The statute states further that the freight must move in the same direction over the same road. Mr. Higbie, if you will add that column to j^our table, as suggested by me, it will be very valuable to us. Mr. Higbie. I shall be glad to do so, and will mail it to you as soon as I can get it prepared. Another thing that has changed the conditions since the time when the present act was passed, is competition among the railroads them- selves. At that time there was great competition, and that, in many cases, regulated the rates charged and the rates made. But in the change of the method of doing business different systems have been consolidated into one system, and they have entered into what we call a community of interest plan, gentlemen, " agreements and other such arrangements. " Senator Tillman. What is understood by the general term pooling. Mr. Higbie. Yes. The Chairman. It has gone further, it is absolute ownership. Senator Tillman. Of course; but it is said that they have also com- bined where ownership does not exist. The Chairman. They can not combine now. ■ Senator Tillman. You mean they can not lawfully combine; but still some of us feel pretty thoroughly satisfied that they have com- bined and are now combining. The Chairman. By actual purchase, but not in violation of the Sherman antitrust law. If so, they ought to be prosecuted. Now, Mr. Higbie, I will ask you this question: Have you observed in the last two yeai's, since these consolidations have gone into eflect, that the rates are perceptibly higher than they were before? Mr. Higbie. It has not been my experience in the lumber business — I know of no case where the lumber business has been affected in that RAILWAY FREIGHT RATES AND" POOLING. 95 way. I understand that some other kinds of business have been very largely affected by these consolidations, more particularly in the mat- ter of classifications. The Chairman. Then I understand you to say that within the last two years, or since these consolidations, the rates on lumber have not perceptibly advanced? Mr. HiGBiE. The}' have not. It seems to me, Mr. Chairman, that the railroads in setting forth their side of the case in the public prints and otherwise, have rather sought to create the impression that the Interstate Commerce Com- mission was intended more particularly to represent the shippers, and not the railroads. Mj'^ understanding is that the Interstate Commerce Commission was created for the express purpose of representing both sides of the question, so that when complaint is made, or when objec- tion is made to an order of the Commission, each side shall have an equal chance to prove its side of the case before the Commission, just as they would in a court of law. The impression has been abroad that in case these additional powers are conferred upon the Commission the Commission will be dangerous, and many other adjectives are used which I will not specify. I can not understand that. They lose sight of the fact that somebody has to make these railroad rates. While we do not intend to ask that the Interstate Commerce Commission should be given the power to take initial action to make a rate — that being left entirely to the railroads, as it always has been — we do feel that in view of the discriminations and secret rate cutting and unrea- sonable rates that some of the railroads have been charging, the power to regulate and to determine what is reasonable rate should be given to the Commission, and then it should have the power of seeing that that reasonable rate is put into eilect. I think, gentlemen, I will not take any more of your time. Senator Tillman. Before the gentleman closes, I should like to ask him, if he is willing, or is authorized, to give us a list of the mem- bership of his association ? Mr. HiGBiE. I will also mail that with the other statement. Senator Tillman. As I have said, we want to have as much light as possible upon the character, respectabilitj', and wealth of the business interests involved in those who come here appealing for legislation. Mr. HiGBiE. I will be ver}'^ glad, indeed, to mail that. Senator Foster. Is it your opinion that the decision of the Cqm- mission as to rates should go into operation and effect immediately, or should it be open to appeal to the courts before it becomes effective? Mr. HiGBiE. In reply to that question. Senator, it seems to me that the rate should go into effect within a reasonable time, say twenty or thirty days. I think the Nelson bill provides that. The trouble has been heretofore that when the decision of the Interstate Commerce Commission has been rendered, the matter has been allowed to take its course through the United States courts, thus consuming much time, until final detex-mination has been had in the Supreme Court. Senator Foster. An instance of the law's delays. Mr. HiGBiE. Yes. Senator Tillman. It tends to prevent appeal to the courts. Mr. Higbie. And not only that, but it also tends to prevent lodg- ment of complaint with the Commission in the first instance. The expense of preparing the complaint and the conditions of delay are such that in a great many cases no action is taken at all. 96 EAILWAT'FEEIGHT BATES AiSTD POOLING. STATEMENT OF DAVID BINGHAM. The Chairman. Please state whom you represent. Mr. Bingham. I am chairman of the board of discrimination of the New York Produce Exchange. We have a membership of between 2,900 and 3,000. We are an incorporated body, and I think we are the largest exchange in the United States or perhaps in the world. The president of the exchange is here to give countenance to what I say; I am to do the talking. I suppose our business in extent comes next to the Chicago Exchange, which 1 think does a little more busi- ness than we do. We are very anxious to have some legislation which will give to somebody the power to decide questions. It took us nearly ten years to get the first Interstate Commerce Commission appointed. For ten years after that we thought we had something that would give us relief from the discriminations of the railroads, only to find out, when it came to the test, that it was a delusion and a snare, and, so far as the business interests of the country are concerned that we represent, we do not think it is of any particular use. We want particularly to have a body that will give us a decision, and a decision before we die. Cur business is prompt. If we are shipping grain from Chicago to New York, of what earthly use is it to us to get a decision at the end of twelve months that the railroad companies were charging too much? We want a decision at once, even if it be against us. If we are to be hung, we want to know it right away. That is the reason why we are very much more favorably impressed with the Corliss bill than we are with the Elkins bill, as regards that particular point. The Chairman. You want the order of the Commission made opera- tive at once ? Mr. Bingham. Yes. It looks to us, Mr. Chairman and gentlemen, as if the Interstate Commerce Commission ought to occupy very much the position of the jury while the legal fraternity could retain the !)osition of judge. We are perfectly willing to have the questions of aw go to the judges, but when it comes to questions of fact, then we want them to go to the jury, to men who are familiar with the facts. The New York Produce Exchange has an agreement with the trunk lines for arbitration which works very satisfactorily. We get along with our disputes with that association fairly well. The president . of the exchange appoints one arbitrator and the trunk line appoints one; and they two appoint a third, and those three settle any question given to them not involving a large amount. We are not here complaining particularly of the railroads, so far as New York is concerned. We are here to urge that we may have some- body whose decisions shall carry weight. It seems ridiculous to us that such a great body of men as the Interstate Commerce Commission should be created and given no power at all. The idea among the rail- road people of the West when this Commission was created was that it had power to settle questions. Now we find that we want you gen- tlemen to give them power. We are not very particular about that power, except that we want to have it promptly applied. New York stands a little differently in that respect, I presume, from almost every- body here. The produce exchange is not opposed to railroads making proper combinations. We would rather do our business with a combination KA1L,WAY tREIGHT BATES AKD POOLING. 97 of railroads than with this road, that road, and the other. When we get a number of gentlemen together we can agree upon some tribunal to which we may refer our differences, and in that way we can keep transportation matters in good shape. The Chairman. In other words, you think there may be pooling by way of agreements between railroads, subject to the supervision of the Commission? Mr. Bingham. I wish you would change that word "pooling," Mr. President. We think there ought to be an agreement. We do not believe in pooling. The Chairman. Well, qall it an agreement. Senator Tillman. Why should we beat the devil around the bush in that way ? If there is an effective agreement, that is pooling. Mr. Bingham. You have stated it. But a pooling arrangement may be made which will allow one road to be idle. Your grain may be shipped under a pooling arrangement over the Canadian Pacific when you do not want it to go over that road at all. What we want is to have the right of selecting the railroad to carry our grain. Let the best road have the most freight. We have no objection to these roads getting together and making agreements, such as they have in regard to passenger rates. For example, we go from New York to Chicago over the Delaware, Lackawanna and Western and we pay $18. We travel over the New York Central and we pay $20. Let the roads make the same sort of an arrangement in regard to freight, always provided that this arrangement is safeguarded by a competent body. We believe that the Interstate Commerce Commission is a competent body. Senator Tillman. You are not, then, in favor of pooling, as it is usually understood? Mr. Bingham. No, sir. Senator Tillman. You do not believe it is for the best interests of the country ? Mr. Bingham. I do not. Senator Tillman. But you do believe that it would be permissible for the roads to agree to give a rate of freight on each line from a given point? Mr. Bingham. Yes, sir. Senator Tillman. What is the use of any agreement at all? Why not let the Commission determine the rate over any given line, pro- vided it shall be reasonably remunerative? It is not proposed any- where, I believe, to confiscate property by compelling a railroad to haul at a loss. If one line, by reason of its heavy grades or other con- ditions, can not haul as cheaply as the New York Central can haul along the almost absolute level of the Hudson River from Albany down, where it can haul a hundred cars with one engine, why not give the Interstate Commerce Commission the power to fix rates on each line according to the conditions of that line, instead of letting the lines themselves fix them? Mr. Bingham. Well, Mr. Senator, we believe we are doing that. The lines in the first instance settle the rate, but that rate does not go into effect until the Commission passes upon it. If it is not satis- factory, they throw it back, so you have got to make these rates sub- ject to the approval of the Commission. Senator Foster. Your idea, then, is that this agreement shall be subject to the approval of the Commission ? F r p 7 98 RAILWAY FKEIGHT RATES AND J^OUtilJNW. Mr. Bingham. That is my idea. In point of fact, if you care for it, I am willing to read what we would be willing to accept. Senator Tillman. Let it go in your testimony. The Chairman. Let it go in as part of your testimony. Mr. BiNGH-AM. Very well. Carriers subject to the provisions of this act, with respect to traffic subject to the act, may form associations to secure the establishment and maintenance of just, rea- sonable, nonpreferential, uniform, and stable rates, and for the promulgation and enforcement of reasonable and just rules and regulations as to the interchange of interstate traffic aiid the conduct of interstate business upon the following conditions: (a) Articles of agreement shall be subscribed by the parties thereto stating, among other things, that they are entered into subject to the, provisions of this section; the terms upon which new parties may come in; how the decisions of the association are to be made and enforced, and the length of time for which the association shall con- tinue, which shall not be more than ten years. Such articles, when subscribed and in effect agreeably to the provisions of this section, shall be legally binding upon the parties thereto and be legally enforcible between them. (i) The articles of association shall be filed with the Commission at least twenty days before they take effect. If the Commission, upon inspection of the same, is of the opinion that their operation would result in unreasonable rates, unjust discrimi- nations, insufficient service to the public, or would in any manner contravene the provisions of this act, it phall enter an order disapproving the same. In connection with such order the Commission shall file a statement of its reasons for its disap- proval. Said order shall be final and conclusive. (c) If the Commission, upon inquiry into the actual operation of the association after the same has gone into effect, is of the opinion that it results in unreasonable rates, unjust discriminations, inadequate service, or is in any respect in contravention of this act it may enter an order requiring the same to be terminated on a date named, which shall not be less than ten days from the making of the order. Such order shall be final, and the effect of it shall be to render such articles of agreement null and void from and after date named, except as to claims between the parties arising prior to that date. {d) The Commission shall have the right to examine, by its duly authorized agents, the files and proceedings of such association, including all contracts, records, documents, and other papers; and it may require said association to file with it, from time to time, copies of decisions promulgated by it o. of other papers received or issued. All orders issued by associations thus formed that in anywise affect rates shall be filed with the Commission, as provided in the original act in relation to the filing of tariffs. Every agreement for the establishment and maintenance of rates or for the forma- tion of such associations as are authorized by this section is prohibited, except as hereby authorized, and every carrier or representative of a carrier acting as a mem- ber of such an association or committee, whether the same exists by virtue of a definite agreement or not, is made subject to a penalty of 15,000 for each day he so acts or continues a member thereof, which penalty shall be enforced in the manner provided for the enforcement of those penalties imposed by the tenth section of said act. Senator Tillman. Are you willing to give the names of your mem- bership? ♦ Mr. Bingham. That is a big book, containing some 23,000 names; but we will give it to the committee. Senator Tillman. I have been twitted time and again in conversa- tions with the fact that nobody reads these statements; that people are satisfied with present conditions; that nobody wants legislation; that nobody appears here but interested parties, and that they get their inspiration from the Interstate Commission itself, which is clam- oring for more power; that it has sent out circulars and solicitations to this man and to that association begging them to come here in the interest of that Commission. Mr. Bingham. Here is a man interested in cotton. That comes in his line. RAILWAY FREIGHT RATES AND POOLING. 99 STATEMENT OF SAMUEL T. HUBBARD. The Chairman. Whom do you represent? Mr. Hubbard. I am president of the Cotton Exchange of New York. I am authorized by that bodj^ to appear and advocate the passage of the Corliss bill. We simply ask that more power be given to the Interstate Commerce Commission; that the orders which they issue may be carried into effect. There is no need of detaining the committee with any extended remarks. That is the position we feel should be taken in regard to the Interstate Commerce Commission. I shall not detain the com- mittee any longer, unless they desire to interrogate me. Senator Tillman. Is }'our association in favor of pooling ? Mr. Hubbard. I do not think we are. The question has not been discussed before it. The Chairman. Were you authorized to make any statement in regard to that? Mr. Hubbard. No. sir. Senator Tillman. Will j^ou give us your individual opinion in regard to pooling? Mr. Hubbard. 1 do not think pooling would be for the best interests of the country. One road might be eliminated from operation by the payment to it of a certain sum of money, and freight would be lost to it which would otherwise come to it. This would tend to destroy the industries along that road. For instance, you might ship a thousand car loads over the Negsv York Central which would more properly go over the Lehigh Valley; but instead of sending it by the Lehigh Val- ley road, that road is given $10,000 in cash. The Chairman. You think the Interstate Commerce Commission ■would not agree to anything like that? Mr. Hubbard. That is the question of pooling. The Chairman. But if you had pooling under the absolute super- vision of the Commission, with full power to set aside any pooling contract in whole or in part, what would you sa}' ? Mr. Hubbard. That is a question which I have not considered, Mr. Chairman. Senator Tillman. You would not be willing to commit yourself personally, and you are not authorized to commit your association to an indorsement of pooling? * Mr. Hubbard. No, sir; I am not. STATEMENT OF R. S. LYON. The Chairman. Please give us your residence and your oflBcial position. Mr. Lyon. I reside in the city of Chicago. I am a layman now; I have heretofore been president of the Chicago Board of Trade; I was in 1899. I am a member of the transportation committee of that board now. The Chairman. And authorized to appear here? Mr. Lyon. My credentials are here. The Chairman. That is sufficient. You appear here on behalf of your board of trade ? Mr. Lyon. Yes, sir. The Chairman. Please make your statement. 100 BAILWAT FREIGHT KATES AND POOLING. Mr. Lyon. It would seem possibly a little superflous to one at this day to appear before a committee of Congress and show that the inter- state-commerce law had been violated, or to bring any evidence to that end. You have had abundant evidence and are surfeited no doubt with facts showing this to be the case; consequently I will notattemp^ to take up any of your valuable time to that end. Representing, as I have the honor at this time, the great grain and shipping trade of the board of trade of the city of Chicago, I come before you to urge some change in the interstate-commerce law that will give to us equal, stable, and uniform rates to and from all points. The Chicago Board of Trade, handling as it does the greatest bulk of grain of any market in the world, reaching out in all directions, west, northwest, and southwest, to bring this grain to the market, and in turn supplying the markets of the world, both domestic and foreign, must of necessity be the barometer of prices. So that any deviation from tarifif rates, known always, whether made in the country west, tributary to Chicago, whereby grain is diverted from its natural chan- nel, or even by our own members, competitors with one another, is immediately felt, and the market price of commodities dealt in on the Chicago market is influenced to a greater or less degree. Transportation is necessary to the people. It is as absolutely a neces- sity to the prosperity of our nation as the air we breathe. Every one should be treated alike, whether a large shipper supplying the wants of foreign countries or a small shipper taking care of the needs of this country. All sorts of devices known to shippers and railroads should be open, and the great transportation lines of this country should treat each and every one alike. To use the language* of one of our learned judges, "Freight rates should be as stable as postage rates, to every- where and from everywhere alike." This is all we ask, and for such a law properly carried out we are willing to stand, to survive or fall. I am a member of a grain firm and have been for the past twenty- four years. Formerly we belonged to that coterie of grain shippers designated as "small shippers." Previous to and about 1890 we sought to supply the wants of grain men in New England, New York, Pennsylvania, and Ohio, and throughout the Southern States, doing nothing but a domestic trade, and did exclusively a shipping business. We were, in fact, distributers of grain and its products from the West to that class of smaller merchants and mills throughout the above ter- ritory, who in their turn filled the wants of the farmers for these com- modities; generally merchants who purchased in small quantities, single car lots, whose capital often prevented their carrying large lines, or who did not have extensive storehouses to care for the same. Nor did they seek to use the cars of the various railroads to store their grain in. As fast as their single car lots were disposed of they were in the market for further supplies. We did strictly a domestic shipping business, and were not of that class of grain dealers who sought an export trade, shipping in large quantities by water and rail to the seaboard and solely to supply the wants of the export trade. I speak of our own firm merely as an example, but our own experience is that of many. Gradually this trade became smaller by reason of the encroachment of larger shippers, more favored by rates; and we were at last driven almost entirely out of the shipping business and obliged to take up other branches of the grain business. There are combinations of Western elevator compa- RAILWAY FREIGHT RATES AND POOLING. 101 nies with railway managers on different lines of roads, and all more or less competitors. Each railway wants the business. They are secret and powerful combinations, with mirtual desires for securing traffic. The rates and devices known only to railroad men are mere playthings. The act to regulate commerce was passed solely to secure'an equable distribution of the benefits of transportation and to correct abuses which had imperceptibly and gradually crept into the administration of the vast powers conferred upon railroad corporations, not for the corporations alone, but for the people in the prosecution of their busi- ness enterprises. This Interstate Commerce Commission was not framed to impair business interests, but to conserve and protect. In the words of the Interstate Commerce Commission, "It had for its object to regulate a vast business to the requirements of justice, and was not passed for a day or a year; it had permanent benefits in view, and to accomplish these with the least possible disturbance to the immense interests involved." But, as the years since the enactment of the law have gone on and law itself tried, it seems to-day as if the Commission (without reflecting in any manner upon the character and ability of its members) has signally failed in the exeicise of controlling power; its mandates have either been supinely forced or altogether evaded. The great complaint against the law and the Commission to-day is that it is a creation powerless to enforce its decrees. I am of the opinion that the bill now before the committee, and known as Senate bill No. 3575, will meet the requirements and give to the interstate-commerce law greater effectiveness. I believe the interstate-commerce law should be so amended as a whole that under the light of experience and decisions of the courts of the United States the rights and interests of the people in general should be properly safeguarded under it, and defined by it, and the responsi- bility of carriers carefully fixed and defined in it, and the power and scope of the Interstate Commerce Commission, including the right to fix rates and enforce their decisions, properly established by it. I am not wise enough nor am I lawyer enough to go into the details of this bill. Its common sense appeals to me, and I leave it to others, and no doubt you have heard them, to argue out the amendments pro- posed in the bill now before you. My own experience in freight mat- ters makes me believe that such portions of the bill now before you as relate to the imprisonment clause in the original law should be drop- ped and that fines against corporations violating the law be imposed. Eailroad officials and agents hold social positions among themselves and in the community; different shippers are personal friends of one another; to complain one of the other, and send them to imprison- ment for violating a law which we know emanates from corporations themselves, goes against our best feeling. But if a fine could be imposed on corporations, who are in reality above agents and general managers, and in fact the real offenders, our courts would now be full of violators of the law. The temper, if not the spirit of railway managers, toward the suc- cessful administration of the interstate-commerce law has become more hurtful to the railways than to the public. But these corpora- tions are in no sense exempt from public opinion because of the nearly universal, if not organized, opposition to laws enacted for the purpose of regulating their relations with the people. It is not too much to assume that the people hold these laws in higher and higher esteem to 102 EAILWAY FREIGHT KATES AND POOLING. the ratio of contempt for them and the constant violation of their terms by the railways. This conflict between the railways and the interstate-commerce enactment has well-nigh exhausted the patience of the people and those who are appointed to execute its provisions. That the law itself has demonstrated that it needs some changes to make it more applicable to present needs, none will deny. The public demands at the hands of Congress some radical improvements. What we need in reference to the Interstate Commerce Commission is that its powers shall be more definitely specified; that it shall have greater powers to enforce its orders. We need an interstate-commerce law, and that the powers of its commission be defined. I believe that there is but one way to maintain reasonable, fair, and just rates, and that is by giving the railways the right to establish a rate, and then go to the Commission and have that rate indorsed, publish the rate, and live up to it. In a word, be honest. Heretofore Congress has seemed slow and apparently indifferent, but we believe needed changes in the law will be obtained and justice be done to all. Senator Tillman. Will you please tell us what your association thinks of pooling? Mr. Lton. I can not tell you. I do not believe our association has put itself on record one way or the other as an association. Our direct- ors have from time to time opposed it, and they are the controlling power. Senator Tillman. What is your individual opinion ? Mr. Lyon. My own opinion is decidedly against it — always has been and always will be — because it smothers competition. Senator Tillman. Will you leave with us a list of the membership of your association ? Mr. Lyon. We have a book that should be on file in Congress, cer- tainly, in the form of our board of trade reports from 1870. Those are now on file in the library. We send them every year. Senator Tillman. You know what I want, from what 1 said to the other gentlemen. Mr. Lyon. We will send them, and will be glad to do so. Senator Tillman. I want some testimony as to the character and respectability of the men who are asking relief. Mr. Lyon. Many members of the New York Produce Exchange are members of our board of trade, and many of the members of our board of trade are members of the New York Board of Trade. W^e also have members in Europe, and one, I believe, in Australia. Senator Foster. Do you believe that the railroads should establish a rate, submit that to the Commission, and then that the Commission should either ratify or reject it? Mr. Lyon. 1 think the Commission should have power to say whether a rate is reasonable or not, and then should also have the power to compel the railroads to live up to it. Senator Tillman. You mean that after they have establsihed it they should not change it without the permission of the Interstate Com- merce Commission ? Mr. Lyon. Yes, sir. Senator Tillman. And have no secret rebates? Mr. Lyon. No, sir; not at all. Senator Foster. Suppose the Commission should establish unjust rates ? RAILWAY FREIGHT RATES AND POOLING. 103 Mr. Lyon. The Nelson bill provides for that. We indorse the Nelson bill, that the rates be in force for two years. Senator Tillman. You mean that the Commission should be given the power to fix what it decides to be just rates, with right of appeal? Mr. Lyon. With right of appeal to the courts. Let that power be enforced. > Senator Tillman. While litigation is going on ? Mr. Lyon. Yes, sir. STATEMENT OF CHAELES N. CHALWICK. Washington, D. C, April 16, 1902. TJie Honorable Oonimittee on Interstate Commerce, United States Senate. Gentlemen: At a meeting of , the Manufacturers' Association of New York, on the I7th day of February, 1902, the following resolution was unanimously adopted: Resolved, That this Association favors the enactment of H. R. bill No. 8337, and urges upon our representatives in Congress to use their best endeavors to secure passage of said bill. The undersigned was appointed a delegate to appear at Wash- ington as a representative of the association to advocate the enactment of the above measure and for the following reasons: First, under the interstate-commerce act, as it now exists, orders of the Commission can only be made effective by judgment of the courts. The pending amendment provides for a remedy to give effect to the orders of the Commission while securing to the defendants the right of appeal. This appears to us to be eminently just and fair. Second. These amendments do not confer upon the Commission any general rate- making power. This power is still left with the common carriers. It seeks to give the Commission power to correct rates which have been shown by judicial investiga- tion to be unreasonable, unlawful, and discriminative, and the orders of the Com- mission to be obligatory only for a period of two years. Inasmuch as common carriers are recipients of favored legislation, it is but right they should be subjected to governmental control. Under the circumstances it is not a dangerous precedent, and if wrong be done remedy lies with the courts. It reverses present conditions and makes the railroads the defendants rather than the public. Because of the vary- ing conditions, the impUed contract between the public and the common carrier must be, to a great extent, a matter of continuous interpretation. Common sense a.nd fair dealing would seem to point to some authority with full power to enforce the needed remedy. Third. To leave the jurisdiction of conflicting interests to the courts provides only a remedy and compensation for the particular question under consideration. The con- dition still remains unchanged unless power lodges with some body to rule effectively upon the question and make the needed change, which shall be continuous. Fourth. The added powers and penalties provided for in these amendments seem to meet the situation and make the interstate-commerce act a mandatory rather than an advisory measure. As an advisory measure it is an absurdity, because it can com- pel no action. As a mandatory measure it places control over the common carrier, where it belongs, with the Government as a rejpresentative of the people, and insures, so far as human limitations admit, substantial justice to all. For these and other reasons, would respectfully urge that these amendments be enacted into law. I have the honor to be, Respectfully, yours, Charles N. Chadwick, Delegate of the Manufacturers' Association of New York. The committee adjourned to 10 a. m. to morrow. 104 Railway freight rates and pooling. Fkidat, April 18, 1902. At the sitting of the committee on Friday, April 18, 1902, the fol- lowing-named gentlemen appeared: William H. Chadwick, represent- ing the Chicago Board of Trade; T. W, Tomlinson, representing the Chicago Live Stock Exchange; J. B. Daish, representing the National Hay Association; F. B. Thurber, representing the United States Export Association; and John D. Kernan, counsel for the New York Produce Exchange. STATEMENT OF WILLIAM H. CHADWICK. The Chairman. Please state whom you represent. Mr. Chadwick. I will read my credentials first; and in fact I will read the whole of what I shall say, with the permission of the com- mittee. I think that is the better way. I will now read my creden- tials, so that you can see the charter I have. Board of Trade of the City of Chicago, Chicago, April 9, J90B. Mr. William H. Chadwick, Chairman Transportation Committee. Dear Sir: I have the honor to inform you that I have appointed you to represent the Board of Trade of the city of Chicago at hearings in Washington before the committees of the Senate and House upon the subject of granting additional powers to the Interstate Commerce Commission. While the association has indorsed the Ifelson-Corliss bill, and you are to use your endeavors toward the passage of that bill, you are granted discretion to agree to such compromise as may seem necessary in your judgment to secure the relief sought. Kespectfully, Wm. S. Warren, President. If the committee wish any information in regard to the Chicago Board of Trade, I shall be pleased to furnish it. To draw our attention to conditions which formerly prevailed and which led to the enactment of the act to regulate commerce, I now quote, from the proceedings of the National Board of Trade in Wash- ington, December 15, 1897, the statement of Hon. George F. Stone, secretary of the Board of Trade of the city of Chicago, as follows: The proposition to establish pooling is not by any means new, and we are there- fore not left in doubt as to its effecli upon the business interests of the country. The first prominent pool was the Chicago-Omaha, and was formed in 1870, and was found in its operation immensely profitable to railroads, so that in the year 1887 practically all competitive traffic was pooled. During those years business suffered, localities and shippers were discriminated against, secret rebates to a greater extent than before or since were granted. Dis- crimination in favor of industries in which some of the parties to the pool were financially interested placed other industries under great and sometimes' fatal disadvantages. One of the most mischievous and demoralizing pools that were established about this time was the Southwestern Bailway Association, a vampire which for a decade sucked the life-blood of the commerce of the Missouri Valley. The Southwestern Eailway Association solved the problem of how to get rid of competition and to rob the people within the letter of the law. Kansas City built a line to the South and thought she had a line that could be used to fight this pool. It had not been in operation a year before this association, with subsidies, had it bound hand and foot. Another outlet to the East, via Omaha and Council Bluffs, was also shut up, leaving the Missouri River country absolutely at the mercy of the pooling lines. At every acquisition of competing lines, rates were moved up a notch, until they reached an appalling figure. When this association was organized, in 1876, the rate on first-class matter between Missouri River Valley and Chicago was 60 cents. It KAlLiWAY FKEIGHT KATES AND POOLING-. 105 was at once advanced several centa, and in 1880 had reached 75 cents on east bound «,nd 85 cents on west bound. In a few months it was moved up to 90 cents. When the association was organized, it included the Burlington, Chicago and Alton, Mis- souri Pacific, Rock Island, and Wabash. The system was soon found incomplete, in that there were several loopholes by which the people were enabled to avoid the association's higher tariff. One of these was the Missouri Pacific in Kansas. The business of ten points on the Gould system — Parsons, Ohanute, Garnett, Ottawa, Humboldt, Fort Scott, Paola, Burlington, Emporia, and Junction Oity, since known as the ten junction points — was sent to St. Louis over Gould's southern line, avoiding the pool points. In order to divert this traffic through the pool, by which means alone the higher rates could be maintained, the association entered into an agreement to pay the Missouri Pacific a liberal percentage of the gross earnings of the pool, on condition that this business be sent via pool points. The amount paid the Missouri Pacific in 1885, on account of the ten junction points, was $660,000, the agreed percentage of the receipts of the ^sociation, which amounted to 111,000,000. During several years of the existence of this pool the shippers of the Missouri Val- ley had occasionally taken advantage of the rates offered by the Milwaukee and St. Paul Railroad to ship via Omaha and Council Bluffs. The pool, in order to prevent this, found it necessary to bind the Missouri Pacific and Council Bluffs Railroad from making special rates to Omaha and Council Bluffs. Here again a money plaster was applied, the pool agreeing to pay the two lines a percentage of the gross earnings, amounting to $75,000 a year; the lines on their part to charge the full local rates between the pool points and Omaha and Council Bluffs. The object of this was to make the rate via the northern roads the same as that via the association or pool roads, in order to keep all the business in the pool, as shippers would not use the Milwaukee'or Northwestern at the same rates, owing to the greater length of those lines. The Burlington and Missouri River coming into competition with the central branch of the Union Pacific (a pool line), the associa- tion, in order to maintain rates and have the business pooled, subsidized the compet- ing line to the amount of $250,000 a year; the same principle was applied to the St. Louis, Fort Scott and Wichita after its extension into southern Kansas. The Fort Scott and Wichita, in consideration of the maintenance of rates and pooling business of its lines, received of the association a percentage of the gross earnings of the pool amounting to $225,000 a year. All the competitors who could be taken into the pools were thus brought in. The commissioner in the meantime turned his atten- tion in other directions. Immediately upon the completion of the Kansas City, Springfield and Memphis, in 1883, the Fort Scott began to compete for the St. Louis business in conjunction with the St. Louis and San Francisco; by its connection with the latter at Springfield it was enabled to cut the association rate to St. Louis and still get a fair remuneration. In order to stop this, the association entered into an agreement with the Fort Scott and Frisco roads by which the latter were paid $8,000 a month on condition that they keep out of the St. Louis business. Such instances and similar combinations might be multiplied almo'St indefinitely, but sufficient is shown to indicate the nature of railway pools; they are inimical to the public interests; they are in restraint of trade; they prevent competition; they are monopolistic in purpose and effect; they are odious in law; they are subversive of the very interests which railways were created to conserve, viz, the general wel- fare, in so far as that welfare relates to the functions and obligations of a common carrier. I have read this simply to take your minds back to the reason -why there ever was created an interstate commerce commission, and why the law was ever framed to bring about that result, to get a body of men who could do the things that were apparently intended by the authors of the law to be done; but I have always thought that if able men had written that law with the contrary intent it could not have been found more fatally weak. Year after year we plain people have been coming to committees of the Senate and the House seeking and asking relief from conditions which are a disgrace to the Republic and which never should have been tolerated in this country. The people have long known and testified what the conditions have been, and their statements have had such full corroboration recently that their case is completely established beyond refutation. 106 RAILWAY FREIGHT RATES AND POOLING. 1 think that we may fairly assume, without argument or dispute, that discrimination, rate cutting, and rebate granting have been common and widespread practices for a number of years. These are the chief causes of complaint, and I have never heard them defended as just, fair, or right. The complaint is that discrimination has been practiced for the ben- efit of some to the injury of others, and to the complete destruction of the business and substance of not a few. The general public appears to be well represented in asking that the powers of the Interstate Commerce Commission be enlarged so that certain conditions which are represented as evils may be properly and justly regulated. The end thereby sought appears to be that the common interstate carrier must perform every service, to all patrons, without any dis- crimination whatever — the same price to each for an identical service. New conditions are now fast making, and with the control of vast systems vested in the hands of a few men, the problem is likely to become more complex through a return to the practices of the old pooling days. The great danger threatened in this country is railroad monopoly, which will produce an extortionate rate. Five syndicates, in each one of which some one man is the dominat- ing spirit, control more than 100,000 miles of railroad. If you add to each one of these systems one of five lines which are still independent, and which will not aggregate over 25,000 miles, making 126,000 miles in all, you have railroad monopoly. There are 75,000 miles left, but those railroads are absolutely dependent on the others. The effect of this is already to be seen. Rates are advancing. The grain rate is an illustration. In 1890 the Commission held that 23 cents was a reason- able rate from the Mississippi River to New York; in the winter of 1892 the published rate was 29 cents; in the winter of 1899 the pub- lished rate was 131 cents, and later 12 cents from the Mississippi River to New York. That was due to competition between carriers. That rate is to-day 18i cents. lu other words, while it was a few days ago 12 cents per hundred, on Monday of the current week it was increased to 18i cents, which is an increase of more than 50 per cent. The higher rate has been made possible Dy the combinations of lines between Chicago and the seaboard. The Pennsylvania has acquired the Baltimore and Ohio, the Norfolk and Western, the Chesapeake and Ohio, and lines north of the Pennsylvania have come mainly under the control of the New York Central and Mr. Morgan. A year ago the published rate on grain from Chicago to New York was reduced from 16 cents to 13^ cents. At the same time the rail- roads agreed to charge a secret rate of 11 cents. Aprilli. 1902, the published rate was advanced from 13 cents to 16 cents. The Chairman. That is the rebate. Mr. Chadwick. Secret rebates, of course. I do not know that I ought to say that it is always in the way of rebate. The Chairman. That is th^ effect of it? Mr. Chadwick. That is your deduction. This rate they must expect to maintain, for certain of the moet important lines are under injunction to maintain the published rate. Apparently it is the intention to maintain a rate 5 cents higher this season than last season between Chicago and the seaboard. RAILWAY FREIGHT RATES AND POOLING. 107 When five or six men can sit down in New York and determine what the grain rate shall be from Kansas City to the Atlantic seaboard, from the Mississippi Eiver to the Atlantic seaboard, and from the grain fields to St. Louis, Chicago, and Duluth, there is really no longer any com- petition in the transportation of grain, and that condition is practically here. Senator Kean. Is not that exactly what you are asking to have done ? Mr. Chadwick.^ I will come to that later, Mr. Kean. I think it is better to state definitely what we do ask than to make deductions, so far as individual statements go, if that is agreeable to you. Mr. Kean. Certainly. Mr. Chad WICK. To return to this matter about the railroads : Miles. The "Vanderbilt system 20, 000 Pennsylvania system 18, 000 Gould system 16^ 000 Morgan-Hill (including Southern Railway, controlled by Mr. Morgan) 37,' 000 Harriman system 17, OOO Total 108,000 In the Harriman system I leave out all reference, for good reasons, to the Illinois Central. The five combinations which are now independent and which have to-day 108,000 miles under the control of five men are: IMPOKTANT INDEPENDENT SYSTEMS. Mileage. Atchison, Topeka and Santa Fe 7,481 Chicago, Eock Island and Pacific 3,818 St. Louis and San Francisco 2, 887 Colorado and Southern 1, 142 Chicago, Milwaukee and St. Paul 6,461 Pere Marquette 1,747 Atlantic Coast Line 2,177 Seaboard Air Line 2, 600 Plant System 2,207 New York, New Haven and Hartford 2,038 Boston and Maine 3,338 Total mileage 35,896 Illinois Central 5,000 VANDERBILT SYSTEM. New York Central System (including the main line, the Beech Creek, the Fall Brook, the Mohawk and Malone, the New York and Harlem, the Rome, Watertown and Ogdensburg, the West Shore, and many others) 3, 107 Lake Shore and Michigan Southern 2, 084 Michigan Central ( including the Canadian Southern) 1, 635 New York, Chicago and St. Louis (Nickel Plate) (including the Pittsburg and Lake Erie ) 523 Chicago and Northwestern (including the Chicago, St. Paul, Minneapolis and Omaha, and the Fremont, Elkhorn and Missouri Valley) 8, 769 Cleveland, Cincinnati, Chicago and St. Louis (Big Four) 2, 287 Boston and Albany 394 Lake Erie and Western '^^ Total mileage 1^; 524 108 RAILWAY FKEIGHT RATES AND POOLING. PENNSYLVANIA SYSTEM. Mileage. Pennsylvania R. E. (east of Pittsburg and Erie) (including the New Jersey lines, the Allegheny Valley R. R., the Philadelphia and Erie, the North- ern Central, and many others) 5, 530 Pennsylvania E. R. (west of Pittsburg and Erie) (including the Pennsylvania Company, the Peoria and Western, the St. Louis, Vandalia and Terre Haute, the Pittsburg, Chicago, Cincinnati, and St. Louis, the Cleveland, Akron and Columbus, the Grand Rapids and Indiana, and others) 4, 405 Long Island 391 Baltimore and Ohio (including the Cleveland, Lorain and Wheeling, the Baltimore and Ohio Southwestern, and others) 4, 025 Total 14,351 GOULD SYSTEM. Controlled by the Gould-Sage interests: Missouri Pacific and Iron Mountain 5,372 International and Great Northern 891 Wabash '(including the Wheeling and Lake Erie and the Omaha and St. Louis) 2,968 St. Louis and Southwestern ■. 1,293 Texas and Pacific 1,619 Rockefeller and Gould interests: Missouri, Kansas and Texas 2,480 Denver and Rio Grande (including the Rio Grande Western) 2, 301 Total mileage 16,924 MOKGAN-HILL SYSTEM. Controlled jointly: Northern Pacific (which owns 23,000,000 acres of land) 5, 487 Great Northern 5, 417 Chicago, Burlington and Quincy 8, 171 Erie 2,605 Lehigh Valley , 2,178 Controlled by Mr. Morgan: Philadelphia and Reading (including the Central of New Jersey) 1, 677 Hocking Valley (including the Toledo and Ohio Central and the Ka- nawha and Michigan) 882 Chicago, Indianapolis and Louisville 546 Southern Railway (including the Central of Georgia, the Alabama Great Southern, the Cincinnati, New Orleans and Texas Pacific, and the Mobile and Ohio) 10,627 Total mileage 37, 590 HARBIMAN SYSTEM. Union Pacific (including the Southern Pacific, the Oregon Railroad and Navigation Company, and the Oregon Short Line) 15, 163 Chicago and Alton 918 Kansas City Southern 873 Total mileage 16,954 It is true, it is forceful, for a man to sit down and look at this mat- ter dispassionately. A man not interested in railroads and being put in possession of these facts would throw up his hands in holy horror. 1 really do not believe that those who have not studied the question thoroughly can realize it at all. While the powers of the judiciary should not be conferred on the Commission, it may safely be granted the right to arbitrate. We consider another provision absolutely essential to reasonably RAILWAY FBEIGHT BATES AND POOLING. 109 safeguard the interest of the public if this bill shall pass; namely, that as the Interstate Commerce Commission is composed of men who can have no personal interest in the matters brought before them under the provisions of this bill, the order of the Commission should stand, unless and until it be suspended or revoked by the circuit or other court or judge, as may be provided. The powers of the Commission are now simply advisory. For the first ten years the Commission exercised the power of revis- ing rates, which proved quite satisfactory to the country. The decisions of the Supreme Court about 1897 terminated that power. The consequences have been most serious during the succeed- ing five years. Of about 135 orders made by the Commission, I think that 68 of them dealt with unjust and unreasonable rates; and for the correction of such wrongs I have not been able to learn of a single instance where the remedy sought has been obtained. If the Nelson bill is to become substantially the law, we earnestly hope and recommend that it be amended, so that any definite order made by the Commission, as provided in the bill as printed, shall be reviewable by but one particularly designated court of the United States, which shall have jurisdiction in all parts of the United States and Territories, or shall be reviewable by one particularly designated judge of some court of the United States, who shall have the same jurisdiction, for the reviewing and passing upon such orders, so that all causes which may be heard under the act may have the benefit of expert service of the highest order. Is there any argument in that particular suggestion? Here is a board, the Interstate Commerce Commission; they and their agents are experts. A case is taken to them, they are expert in their judg- ment of the matter; that is, they apply to the case the results of all the researches and study they have given to former cases and decisions and to such new ones as are necessary, and they come to a decision based upon that expert investigation. The case is then thrown by appeal into the courts. It comes before good lawyers, true; before good judges, true; is argued by able attorneys, true. But it is to be considered by men who never before have had such a case before them and may never have another. They have to decide the case without previous experience in such cases. Whereas if the case were to be considered by experts all the way through, would not that be ideal? And when the ideal is obtainable why not have it? The Chairman. Is it your idea that such cases should be taken before the courts of the District of Columbia, or some other court specially designated? Mr. Chadwick. They should go to some court somewhere, it might be a loafing court. It is for you to formulate these things. I think it is possibly one of the wisest suggestions that could possibly be made for your consideration, that if you are going to have these matters go ultimately to a court it should be a court that shall have, per se and de facto, expert knowledge. It must be so. It can not be otherwise than expert. . .-l 4. The railroads ask for protection agamst each other. Are they not willing that the public be granted similar protection agamst the rail- roads themselves? "Why not? , 1 j ^ 1 r My personal experience with railroad managers has led me to believe that individually they are the peers of any class in the Republic. 110 RAILWAY FREIGHT RATES AND POOLING. Evidence was recently made public showing the following state of affairs: That Kichardson of Chicago, operating grain elevators and doing a grain business on the Santa ¥e system, and Hall & Robinson of Kan- sas City, operating in grain on the Missouri Pacific, partially in com- mon territory, each received from their respective railroads a private, and to all intents aind purposes a secret, rebate of 6 cents per hundred; and that the Santa Fe authorized and employed the Richardson con- cern to purchase the grain at certain stations, paying to them a stipu- lated commission of one-fourth of a cent per bushel for handling the grain for the account and risk of the Santa Fe, which thus departed apparently from its proper functions as a common carrier, and thereby instead of performing its duty as the servant of the public, became the competitor of those legitimately so trading, engrossing their business. Why should they collectively take any different course than each would follow of his own volition individually ? I am not willing to concede that the tariff rates of freight on grain of late have been, or now are, top high, nor do I complain that the dif- ferent railroads, even in this period of great commercial activity and admitted prosperity, are collecting more pay for their services than honestly may be defended as fair and reasonable; for surely profits may be had more easily and paid with better grace in prosperous than in pinching times. A crying and annoying evil which works hardship in many cases, and seems to be indefensible, is the irregular, heterogeneous classifi- cation of freight; and in this day of organization and method it seems strange that it has not heretofore been regulated. Whenever any bill is passed it should provide protection for the carrier and the public by making it a misdemeanor, punishable by an exemplary fine, for any person, acting either as principal or other- wise, to obtain transportation at less than tariff, by misrepresentation of classification, weight, character, or any other fraudulent means. As stability of rates, when fair, is a great desideratum, the orders of the Interstate Commerce Commission should be continued in force and obeyed for two years from the time they become originally operative and observed. Of course, you know the vexing delays that have occurred all along the line. You know that has been one of the reasons why no one tries to do anything now. How can a man with a small fortune bet it all as against a tremendous corporation loaded with millions and hundreds of millions ? The people are here again with a bill — those same people who have been here time and again — seeking relief from evils which are now un denied and undeniable. It may seem strange that they continue to come again and again, but as you well know, they have no other hope save in you — you who stand morally pledged to do the fair thing, the reasonable, the proper, the possible thing, the thing that is right for the whole community of interests — trade, producer, consumer, shipper, carrier. Devices for evading the interstate-commerce law have been abundant in the past, and as fast as one is uncovered and corrected, wholly or in part, a new device has been found, and who can say when and where the end will be ? RAILWAY FEEIGHT BATES AND POOLING. Ill Probably you — each of you — know much more than I do about this question of the regulation of common carriers, and I do not doubt that you knov.' that the abuses which exist ought to be abated, and that we ought to obtain from you at the earliest day possible a full measure of relief from discrimination. I am not prepared to indorse any proposition to confer upon any commission whatever the power to primarily institute and make a "just and reasonable rate." It seems, however, that it is entirely proper and right that the Com- mission may examine into all the conditions surrounding, pertaining to, affecting, or affected by any rates or practices which may be estab- lished by carriers, and if after a full hearing the Commission finds grounds on which they consider an order justifiable, then, as arbitra- • tors, the order of the Commission should stand until and unless revoked by the court of review, for the making of the rate or the practice by the railroads is necessarily in the first instance ex parte and should not stand unless confirmed by the arbitrator, the Commission. Relief from the evils of discrimination of every kind and degree, relief from the evils of unreasonably high rates, and to secure the benefits of uniform rates are what we intend to seek through the Nelson bill. This is our charter to-day, and we think that the bill will accomplish the end sought, but if it will not accomplish that, show us how to amend it, so that justice may be done the public and the railroads alike, and you will confer an inestimable boon on millions who are affected by the matters under discussion. I have the honor to represent before you the most important com- mercial organization of the world — -an organization comprised of busi- ness men, merchants in and about Chicago and in q,ll parts of the country, and also in those countries which are in close commercial touch with the United States. The vessel and the railroad interests are strongly represented in our membership, as well as all the important banks and kindred interests. We are in close touch with all tne agricultural interests of the conti- nent, and may fairly claim to know and reflect the crying needs of the people, and this we intend to do, and believe we are now doing. Year in and year out for more than — think of the time the country has suffered! — more than thirty years, for the Chicago-Omaha pool was formed in 1870, and was grinding on like the car of Juggernaut in full vigor thirty years ago. The public has carried this Old Man of the Sea on its shoulders through a generation. This is no dream, for the vast volume of evidence given before the committees of Congress, before the Commission, before the courts, is perhaps so small in pro- portion to the amount that would be forthcoming should every man tell what be knew about railroad discriminations, as to constitute but an insignificant per cent of the whole; and yet what a mass of testi- mony has been printed upon these subjects! Our prayer is before you. You are the only people who can assist us in this stage of the proceedings. You are the people on whom rests the responsibility for withholding from the people their rights and from granting the railroads the privileges which they deserve to enjoy. Few if any, wiU complain that the people have not done their duty fuUy'. 112 RAILWAY FEEIGHT BATES AND POOLING. Two bills have been introduced in this session to amend the " Act tO' regulate commerce," and they are quite dissimilar in scope and in character. I have been in hopes that some action would be taken whereby the members of the Interstate Commerce Commission would not be left subject to the political fortunes of party, but that their tenure of office would be certain and assured and their income comport with their position. Give us the best courts possible, give Congress a fair bill, and prac- tically what the railroads honestly know they need and what the pub- lic has a right to demand — reasonable safeguards; and, I am convinced, a large part of the present opposition will disappear, and 1 see now no good reason why the dijfferent interests should not come together, and, fairlj' safeguarding every interest, unite upon a fair, reasonable bill, • and this we respectfully and earnestly petition you to do, and lift the traffic of the country out of the slough of despond in which you now see it. In support of this statement I ask permission to file with this com- ■ mittee a document or report of the Interstate Commerce Commission printed in 1901 and denominated "In the matter of rates, facilities and practices applied in the transportation, haindling, and storage of grain and grain products carried from western points to Atlantic sea- board and other Eastern destinations." Senator Kean. That is that Chicago case, is it? The Chairman. Do you wish this document to go into the recordy or is it accessible? Senator Tillman. Is it a Government document? Mr. Chadwick. Yes. The Chairman. Then we do not want to print it. Mr. Chadwick. I am going to put it in here if you will permit. The Chairman. If it is a Government document and accessible, we do not need to reprint it. Mr. Chadwick. You can refer to it, of course. The Chairman. Is it to be filled with your testimony ? Mr. Chadwick. Yes. Senator Tillman. I suggest to Mr. Chadwick that he will better accomplish his purpose if ne will designate in specific terms just what portion of the document he refers to, so that anyone, in the extreme pressure of work here, can get it at once. Senator Kean. It is page 279. Senator Tillman. Mr. Chadwick has not said anything about page 279. I suggest to him to designate what portion of that document bears out the statement he made a few moments ago. Mr. Chadwick. You get this matter on page 279. The Chairman. You say the matter you refer to appears on page 279 in the document mentioned, and let that go in your testimony. Mr. Chadwick. If you so instruct me. The Chairman. I make that suggestion, thinking it will reach what Senator Tillman wants. Mr. Chadwick. I shall finish in a moment. This seems to me one of the most flagrant of all the numerous instances of wrongdoing on the part of the railroad fraternity which recently has come to my attention. KAILWAY FREIGHT BATES AND POOLING. 113 It seems to me that if we do not promptly enact a law which will not onlj^ check but abate such practices by the common carriers, we may expect them to encroach more and more on the province of the legit- imate merchant in all directions, which can not fail to lead to and produce most deplorable results. What will happen if the railroads go on and engross the business of the lumbermen, the iron dealer, the miller, the merchant, and so on, as they, in the instance cited, have treated the grain men in the terri- tory named? What can the answer be but anarchy? Now, Senator Tillman, 1 am at your disposal. Senator Tillman. What 1 wanted was to have you designate spe- citically, so that it would be of easy reference to any Senator who may send for the document if this matter should come up in the Senate for consideration. If you understood the immense pressure that is on even the laziest of us here to try to keep in touch with what is going on, you would understand the value of such specific statements and references to data that can be secured in a moment. It will not do to proceed upon the assumption that men will read it, for they will not. But I want you to specify in as condensed shape as possible just what portion of that document bears out the statement you have just made as to the Santa Fe going into the grain business and hiring agents to monopolize the grain trade on the line of its road. The Chairman. How recently was that? What year? Mr. Chadwick. It was recent enough. It is hard to find, because these hearings are printed without any proper heading or reference. Senator Tillman. 1 suggest that we allow the stenographer to put it in when Mr. Chadwick finds it. Mr. Chadwick. I will try to help you. It was notably the testi- mony of one Robinson, of the firm of Ball & Robinson, and of Paul Morton, vice-president of the Atchison, Topeka and Santa Fe. The Chairman. What year was that? Mr. Chadwick. Perhaps it was last year. The Chairman. It must have been last fall. Mr. Chadwick. I see the date here " Washington, January 9" for one of them. The Chairman. Last year was when it happened, I think. May I suggest that you fix this with the stenographer to give this data as Senator Tillman suggests. Is that all you have to submit? Mr. Chadwick. Yes, unless I am asked questions. The Chairman. Does any member of the committee desire to ask any questions ? Senator Tillman. I did not hear all of Mr. Chadwick's statement or evidence or argument. I would like to ask him whether he thinks that the business interests of the country could stand a pooling arrano-ement among railroads? He may have answere:d that question in his" statement, but I want to know specifically. One of these bills provides for pooling, subject to ratification by the Interstate Com- mence Comm^sion. I want his opinion or that of those whom he represents as to that matter. , ^, a j. Mr. Chadwick. I will say in reply to the question oi the benator that it is generally understood that railroad men are better able to understand all the elements involved in the law granting to the Com- mission the power to make rates; that railroad men are probably better experts to judge of what are proper rates, and therefore railroad men F R P 8 114 RAILWAY FREIGHT RATES AND POOLING. feel as they say they do, and consequently seek a' bill providing for pooling by the railroads. If we once admit that they are the best judges in this matter, it seems to me, if you heard the premise that the railroad people are so Senator Tillman. So expert and honest? Mr. Chadwick. No; but so free from suggestion of self-seeking that they are really and trulj' experts, experts who will do justice in any case that comes before them, then your question is answered. , On the other hand, while the people are complaining against railroad practices, the railroads themselves have their own troubles, and one special feature before this Congress is the production of a bill to pro- tect the railroads against each other. This confession^for it seems to be such — should appeal to the honest man in whatever walk of life, and should influence him to urge speedy action for the solution of the problem. As pooling was practiced in the past it seemed to make rates unduly high and onerous. One great desideratum with us is uniform rates. We seek to escape discrimination. That is the greatest evil, as we con- sider. The great desideratum is to have uniform and steady rates, rates that are not changed by mere whim, but when made shall be made on somC' proper basis, and not as in the old pooling times, when the railroads skinned each other. Instead of having pooling based on net earnings, we think pooling should be based on other considerations, namely, that they should take into consideration the equipment and the opportunities of earning money. They should take into consideration whether the equipment has been allowed to deteriorate, because I take it if the spirit of emu- lation is removed— which, of course, is a good spirit, needing onlj' to be properly safeguarded — we shall have a drop, and equipment and service will deteriorate. I never heard anyone suggest that it would not, if let alone. Pooling, pure and simple, would be something, of course, that would be a disgrace to the country, and not up to the times. So, when you ask me that question, I would answer by asking you another, seeking to get light before I give an answer: Would not pooling tend to stifle competition and lead to deterioration in service and equipment? If the spirit of emulation be removed, will not the whole railroad service deteriorate in all these features and become inadequate to the needs of the country ? Could not the individual lines evade their responsibilities ? Senator Tillman. Are you through with 3'our question ? Mr. Chadwick. No; I want to answer your question. Senator, honestly, if you want me to. You do not want to cut me oft', do you? Senator Tillman. Not at all. Mr. Chadwick. The Board of Trade of the city of Chicago repre- sents a great number of people — has a tremendous clientele. Repre- senting that great number of people, they are in favor of having relief. We pray for relief. We want relief. But we want all ponditions safeguarded on both sides of this controversy — I take it that it is called a controversy. We want everything safeguarded fairly. If there is any person living who can formulate the terms under which poolipg can be permitted I wish that person would give you the bene- tit of his suggestions. There is notning wicked, per se, in pooling. The wickedness in any of these things is the result to the person who is outside of the control and also outside the benefits of the pool. The KAlLiWAr FREIGHT KATES AND POOLING. 115 railroads have heretofore had vast benefits from pools, but the people have suffered. If there is such deterioration of service and equipment, can all be cared for under a pooling bill ? What difference does it make ? Every- body is served alike. It is the very thing we ask for. If we have good service under proper conditions the railroads will not become a laughing stock, but will be as they are now, a thing in which we take great pride. It seems to me that the people have suffered so long that we can not do otherwise than to take the best we can get. But we ought to insist upon having the best obtainable. Therefore, Governor Tillman, I will say that in the matter of pooling I am on the fence. I do not care a fig if we do have pooling, provided it is surrounded with proper safe- guards. My people do not care, and the people at large do not caxe. You did not hear the first of my statement. Senator Tillman. No. Mr. Chadwick. I wish you had, because I showed the horrors of the pooling arrangements in the West and Southwest, and I think I gave a very fair statement in regard to it; don't you, Mr. Chairman? The Chairman. Yes. Senator Tillman. Now, can I ask a question ? Mr. Chadwick. Certainly. Senator Tillman. In asking your questions a moment ago you said your answers were given in some measure by interrogatories ? Mr. Chadwick. I was merely endeavoring to attract your attention to the point. Senator Tillman. Then, instead of making a direct statement, with your opinion, you merely asked some questions, from which you drew deductions. Those deductions, to my mind, seemed to show that you were in favor of pooling, provided it should be safe-guarded by impos- sible conditions. In other words, you do not regard it as possible, do you, that human nature will lose its selfishness or that unlimited power will ever restrain itself so as to protect the masses against monopoly ? Did I understand you correctly 'i Mr. Chadwick. I certainly would not have the safe-guards against pooling tied with a rope of sand. Senator Tillman. What I was after was to get your opinion, as a business man representing businessmen, as to the feasibility, the prac- ticability, the desirability, of some compromise arrangement, if that be possible, that would give relief from the present unbearable conditions, and at the same time not jeopardize the great interests of transporta- tion. I do not think any reasonable person wants to ruin the railroads or unduly to hamper them or destroy their profit-earning capacity. The real question, after all, is to give the business interests of the country proper transportation facilities, to guard against discrimina- tions, and you want a uniform, steady, and just rate — the justice being the most essential of those three features of the rate. You do not want any secret rebate given to competitors who are getting advantages from the railroads. Those are the elements. Mr. Chadwick. Certainly. Senator Tillman. Do you believe that human nature can stand the strain of being allowed a rope and not using it? In other words, if you give the railroads the power to pool, if you do not hold the club over their heads by some statutory provision, will they not abuse it? 116 RAILWAY FREIGHT BATES AND POOLING. Mr. Chadwiok. The real thought that is in my rmnd. Governor, and which has crystallized itself from all the conferences in which I have participated, is that another bill should be drawn and perhaps adopted as a substitute by the committee for both these bills. 1 am chairman of the transportation committee of the Chicago Board of Trade, and all these matters come under my administration. I go before our local body there, the board of railroad and warehouse commissioners, and I am pretty well versed in all these things pertaining to trans- portation, as well versed as many laymen; and I know that if a proper bill is drawn, and honestly drawn, that will do all it pretends to do — which the original bill did not,, because it was deftly drawn, in my opinion — then that bill ought to be submitted to this committee. Now, I say if an honest bill is drawn, by honest men, and submitted to a jury of their peers, and subjected to scrutiny on the floor of the Senate and of the House, and then if you will have another meeting of the committee while it is under your consideration, so that people can come here and criticize it and tell you where the loopholes are, it is my belief that you can get a bill which will better serve your pur- poses than these bills. But if you Senators try to deal with this ques- tion on the floor of the Senate with only such information as is brought before the committee without dispute, then the case is hopeless, and must be. I wish to say to you now that what I have said, if you will permit me, by way of a partial answer to the questions that have been asked me, is exemplified by the testimony of Mr. Counselman, of Chicago, a brainy millionaire broker, a broad man, who knows all about this subject, as printed in Senate Document 39, Fifty-fifth Con- gress, first session. Mr. Foraker presented the report to the Senate, and it was ordered to be printed April 15, 1897. fife testifies here The Chairman. Give us a reference to the page, if you please. Mr. Chadwick. He testifies on page 25 as follows: Senator Chandler. Do I understand Mr. Counaelman, as a shipper of grain, to say- that the reduction of rates from Chicago to New York made last fall, which Mr. Blanchard has described, was an injury to the people of the United States? Mr. Counselman. I believe that the reduction made in the way it was, day by day, rapid as it was, was an injury to the people of the whole Western country. I do not know whether it was an injury to the consumer. He got some benefit from it. Senator Chandler. But to the producer you think it was an injury? Mr. Counselman. Yes, sir. Senator Chandler. Please explain that a little more fully. Mr. Counselman. As the rates went down the prices at the seaboard declined. We therefore had to make our buying price accordmgly as the rate went down. Senator Chandler. Did that reduction grow out of the manipulation of the market? Mr. Counselman. No; but of the rates. Senator Chandler. It did not necessarily or logically grow out of the reduction of rates? Mr. Counselman. Necessarily, and, I think, logically. Senator Chandler. Logically the reduction of freight rates from Chicago to New Y'ork is an injury to the farmer who produces the corn? Mr. Counselman. In this way: We will saj; 25 cents is the market price, and that there is a reduction of 5 cents a hundred, if you choose. You reduce that rate 5 cents per hundred and he can reduce his price 2.80 per bushel, because you can get corn in Chicago and ship it to New York for 5 cents per 100 pounds less than he used to, or 2.80 per bushel less. "I am not going to pay 40 cents when I can get it for 2.80 less," he says. The rate from the West to Chicago is not changed in this trouble. It is the same. How is the Chicago shipper to protect himself unless he buys that grain just in proportion as the eastern rate is reduced? Senator Chandler. It seems to me to be a paradox — I may be able to work it out — that the reduction of rates from Chicago to New York hurts the producer, the farmer. Mr. Counselman. Just remember in your reflections on the subject, and it may not RAILWAY FREIGHT RATES AND POOLING. 117 appear so paradoxical, that the freight rate from the West to Chicago is undisturbed, and that the disturbance in this instance was from Chicago East. It cost just as much to get the grain to Chicago, but the rate was reduced from Chicago eastward. There- fore, way back West we look finally where we are going to land, as the Chicago 'price is reduced in proportion to the reduction in freight eastward. Senator Chandler. If the rate from Chicago to New York were suddenly put up from 25 cents to 30 cents the farmer would gain? Mr. CouNSBLMAN. He would. Senator Chandler. He would get a higher price for his product? Mr. CoHNSELMAN. Ves, sir. The freight makes the price at the seaboard. The purport of that testimony is that an advance in the rate of freight is a benefit to the farmer. That does not require any argu- ment at my hand, does it? Senator Tillman. Is it not so absurd on its face that nobody would swallow it? Mr. Chadwick. 1 am only showing what comes before committees, and that when such testimony comes to be considered on the floor of - the Senate or the House, upon the strength of which you make such and such assertions, I think you will then see that you have not secured the evidence j^ou ought to have. If you are going to try to amend any of these bills now pending, I think you should have the proper kind of testimony before your report is made to the Senate. In order to secure this testimony you should allow the people to appear before 3^ou and criticize the proposed amendments and the bill as a whole. Senator Clapp. I think you have struck a practical keynote. There are two bills here, one of which provides for pooling. Have you examined that? Mr. Chadwick. Yes. Senator Clapp. If there could be a proper provision made for pool- ing which you would indorse, what suggestion have you to make as to the improvement of that provision ? Mr. Chadwick. I could not answer you offhand in this way. Senator Clapp. But you say that we ought to get the opinions of people as to the defects of the bills. That is what we want, as I understand. Mr. Chadwick. But being called upon suddenly I can not give an offhand opinion that would be of value. Senator Clapp. We do not ask it off'hand. Take that bill and study it, and give us your views. Senator Tillman. That bill has not been reported to the Senate yet, and therefore it is not a matter that would meet his requirements. Senator Clapp. It is a tentative proposition upon which we should have the opinions of just such men as Mr. Chadwick. First, is it advisable to admit pooling under all circumstances ? If so, then does this bill properly safeguard it? I would like his suggestions. Senator Tillman. I want an answer from anybody who can give it. The Chairman. Mr. Chadwick is a very intelligent gentleman. He has read the pooling clause of what is known as the Elkins bill, and I will state to Mr. Chadwick, as I have stated before, that I propose to make that as strong as it can be made by the help of intelligent men, leaving it :svithin the power and jurisdiction of the Interstate Com- merce Commission to approve or to disapprove in whole or in part of any pooling contract, agreement, or arrangement between railroads, this action to be taken by the Commission before such pooling arrange- ment shall become effective, so that no pooling agreement can go into effect without the consent of the Commission. Section 2 of that bill is 118 RAILWAY FREIGHT RATES AND POOLING. strong as it stands, but I will state that I have on my table a proposed amendment which will make it still stronger. That proposed amend- ment I shall submit to the committee, and when we come to its consideration we shall be glad to have the testimony of so intelligent a witness as Mr. Chadwick, who has evidently given the subject much thought. The question has been put by Senator Clapp and Senator Tillman in the best possible way: First, is it desirable? secondly, if so, what would you suggest? The law says the railroads must fix freight rates and publish them. The Supreme Court of the United States says that the railroads shall not make agreements as to rates, because that would be a violation of the Sherman Act. The railroads must be given some latitude, but how are they to make any agreement, fixing rates? As it is, three or four railroad men are afraid now to get together in a room. Mr. Chabwick. The last utterances of the legislature would control, would they not? The Chairman. Of Congress, you mean ? Mr. Chadwick. Yes; any legislative body. The last utterances of any legislative body control. Is not that a principle of law ? The Chairman. Until something else is enacted. Mr. Chadwick. That controls, 1 say. Senator Clapp. There is no question about that. Mr. Chadwick. The last utterance of Congress on this subject, I think, was the Sherman antitrust law, and your bill might deal with that in plain English. But that law was drawn with great care, and it might seem presumptuous for a layman to make any suggestion in regard to your action m reference to that law. Senator Clapp. Do not understand us as expecting you to commit yourself oflfhand to anything in this bill. Mr. Chadwick. If it be the pleasure of the committee, I will appear before it at a later day, after I shall have had more time to- think about this. Senator Clapp. But you said that the proper way to deal with this; is for a bill to be prepared, and then let men who are familiar with the subject come before us and point out its defects. Mr. Chadwick. Yes. Senator Clapp. For one, I will say that I should like to have meni of experience, like yourself, point out the defects of these bills and suggest improvements; and I think the committee agrees with me in that. The Chairman. Certainly I do. Senator Tillman. If 1 may be permitted, some of those gentlemen, who were here yesterday appeared to me, while stating their griev- ances, to be liberal in their desire to safeguard the railroads. 1 make the suggestion that it might facilitate our work as a committee if these various boards of trade and chambers of commerce, through their representatives, would ta.ke these two bills as a basis, and from them prepare a bill; then after they have exhausted their ingenuity, ability, and experience in fixing up what they want, let us nave a hearing from the railroads to show us wherein their opponents are wrong. I am willing to work a reasonable amount of time two or three days in a week at hearings of an hour or two each day. If we should request that, and ask them to act promptly in taking up these two bills as a basis for the preparation of another bill, I think something practical JttAILiWAY FREIGHT BATES AND POOLING. 119 might result. The railroad people would in that way have a chance to show us wherein these merchants and business men are trying to tam- f)er with, injure, or destroy the railroad interests by this proposed egislation. Then we wcfuld get into a practical situation, from which could possibly be evolved some valuable legislation. Senator Clapp. I want to make an additional suggestion, Mr. Chair- man, and which I can not help but think would be a better one. If these gentlemen should formulate a bill it would necessarily be, as between themselves, a compromise, and the views of the different men, which might be of great value to the committee, would be lost so far as they were swallowed up in the compromise bill. Now, my idea would be for these men to take these bills, which are purely tentative; Mr. Chadwick may have one view, and some one else may have another. I say, let these men get together and present their views on these distinct propositions, and then let us have the benefit of the views that they entertain, which would otherwise be lost in a compromise bill from them. The Chairman. That is a- very good suggestion. Mr. Chadwick. I will say that we have been over these bills time and again; we have discussed them line upon line and precept upon precept. But it would be unfair to ask me to get up here and state a definite conclusion without time for consideration, and if I did so per- haps it would not be heard. A bill of this character should have the most careful consideration and scrunity — every word of it. I will state to the committee that I expect to leave the city this afternoon for New York State, and on Monday I expect to be in Baltimore, on this business. Quite recently I have interviewed some of the greatest men in the country; the last man I left was Mr. MacVeagh, yesterday, I think. We are working along on the lines not for compromise. The people will never compromise a hair in this matter. We will fight to the last fasp but what we will have the law properly safeguarded this time, 'he only place where we can not be heard is when you get into action. That is the time when the men who are in the ranks are set aside, and the journals get together and fight it out among themselves; but they do not know what they are about, and that is the great trouble. Senator Foster. Let me make a suggestion: Here are two bills before the committee now, both more in a tentative shape than other- wise. The principal object of these hearings is to get views and opinions as to the merits and demerits of these bills. Then the com- mittee, after hearing parties favorable to or opposed to these measures, will probably shape the bill to be reported to the Senate. Mr. Chadwick. Here is where it ought to be done. Senator Foster. We have heard j^our evidence and the evidence of others for and against the propositions. When the bill shall be pre- sented to the Senate those favoring or opposing the bill will be armed with full information of all the facts that you gentlemen can give to us. That is what we are trying to reach now. The Chairman. I suggest that when you return next week or the week following, Mr. Chadwick, you appear again and give us the result of your conferences. Senator Foster. The suggestion of Senator Clapp strikes me as pre- eminently practical, that you gentlemen take these two bills, examine them thoroughly, analyze every provision in both of them, and then come before the committee to-morrow, or next day, or next week. 120 BAIL WAY FREIGHT BAxJiD Ji.i^u ruujuiJNi*. Mr. Chadwick. How do we know when we can get before the com- mittee ? The Chairman. I will let you know. Mr. Chadwick. We will do what you want us to. But here is the point. You are now hearing one side of the. case. Heretofore there has been delay by the railroad people putting things off forever and a day. If you will fix a day when both sides can be heard then we shall all be on a fair footing. But there is no use for us to try to patch up bills, and then have the railroad people come in here and deftly sug- gest some law that will have the effect of skinning us alive. The Chairman. Do you not think it would be fair to suggest, for our guidance, just what you think would be a proper remedy? Mr. Chadwick. Why in the meantime can you not hear the rail- road people, and get the thing to a focus? Senator Tillman. I will tell you why: The railroads do not want anything; they are not taking steps to facilitate legislation; they are obstructing that, so far as I can understand the situation, and they will never move until you have lined up in battle array and moved forward to give battle. Mr. Chadwick. The point I am trying to make, Governor Tillman, is that the railroads shall not be heard except purely in rebuttal; then if they do not come in here and take a stand, they will be out of the fight. Set a day beyond which they shall not come in, and give them plenty of time and opportunity. The Chairman. We are going to hear the railroad people, and I hope you will find it consistent to act upon the suggestion of these Senators, and perhaps come in here next week with your suggestions embodied in a paper, so as to be able to say to us that if you were drawing the bill you would make it that way, or suggest this amend- ment or that provision. We will hear you with pleasure. I will call a special meeting for that purpose. You shall not go without a hear- ing and you shall be facilitated. Senator Foster. Please impress upon Mr. Chadwick, Mr. Chairman, the advisability and importance of his people discussing among them- selves and suggesting legislation or no legislation upon this question of pooling. Senator Tillman. Pooling, on the one hand, with its benefits to the railroads, and, on the other, giving the Interstate Commerce Commis- sion the power to fix rates to go into effect immediately and stay in efi'ect until reversed. Those are the two issues. Senator Foster. Those are the two preliminary issues before the committee. April 18, 1902. Senator Elkins, Chairman. Sir: Aa I am obliged to go to Chicago to-day, may I ask you to kindly permit the following suggestions to go to the Committee on Interstate Commerce: . The rate, or relation of rates, being fixed primarily by the carrier, is, therefore, ex parte. Objection being raised by any party in interest, both sides are heard by the Com- mission, which, acting as arbitrator in the hearing, determines what is proper and necessary to correct any wrong which may be found to exist, and issues an order as provided. An appeal may be taken from the decision of the Commission. Thus far the question has been treated by experts — carrier, shipper. Commission. That all the proceedings may continue to enjoy the benefits of expert treatment, why may not the Attorney-General of the United States be vested with power to. RAILWAY FREIGHT RATES AND POOLING. 121 name any three judges of the United States district courts to constitute a special court with jurisdiction in all the States and Territories to review all causes which may arise under the provisions of the act to regulate commerce, and to administer all receiverships, etc. , in common carrier causes? From the findings of such court appeal to be only to the Supreme Court. The creation of the court of appeals since the act to regulate commerce became a law has increased considerably the time and expense of reaching the final decision. England, through the Parliament, has created a court composed of one judge, one railroad man, and one business man. The findings of that court are, I understand, conclusive except on questions of law. They make the rates, which, however, are commonly said to be very high on freights. They provide that there shall be no discrimination between parties and places. If this country forms some such court as I have suggested to administer railroad receiverships the effect would seem to be beneficial to vested interests. The bankrupt road could not be used as a club, as formerly, to distress solvent and prosperous roads who would have to pay interest, dividends, etc. I hope I have been able to partly outline this subject and regret having to annoy you with so much manuscript. I am, sir, with high respect, your obedient servant, Wm. H. Chadwick, Chairman Transportation Committee, Board of Trade of Chicago. STATEMENT OF T. W. TOMLINSON. The Chairman. Please state whom you represent here. Mr. ToMLiNSON. 1 am the railway representative of the Chicago Live Stock Exchange. I have the honor to represent not only that exchange, but the Cattle Raising Association of Texas, and cojointly with Judge Springer I have also the honor to represent the National Live Stock Association. That association comprehends practically all the live stock associations in this country, and I believe you can safely say that I represent the live stock industry of this country — a very poor representative it is true, but at least I have that honor. The Chairman. We shall be glad to hear you. There are just two points here that give us concern, and we must settle them. Can you give us light on the point of giving power to the Interstate Commerce Commission to change rates and the power to pool under proper restriction? Mr. ToMLiNSON. The live stock industry objects to any poohng bill. The railroads indorse that, and want pooling for no other purpose than to increase their rates. We believe that in the aggregate the earnings of the railroads to-day give them a very fair return upon their investment. We will not indorse any machinery that will enable them to extract any more money without some absolute assurance that if they get more of this competitive traffic affected by the pool that additional traffic will be handled at lesser rates. As to the making of the orders of the Interstate Commerce Com- mission effective immediately, the bill which we indorse, the Nelson bill gives, as I read it, fifty days practically for the court to pass upon the order of the Commission. We think that is ample and long enough. The bill of your honorable chairman recognizes at least that the rates of the Commission ought to be in effect a year. As a matter of fact, if you can not get some immediate results from the order ot the Com- mission the conditions will doubtless change in the course of a year so that it will be of no benefit to anybody at the end of that time. Further than that, you must always bear in mind that there are many people interested in rates other than those who actually pay the freight. In other words, the producer and consumer may be indirectly affected, 122 RAILWAY FEEIGHT RATJSB AND POOLING. and yet not .be the ones who actually pay the freight. Hence those people would have no redress in a court from unreasonable charges. We are certain of our position on those two points. I trust I have made it plain to you, and I shall now be very glad to answer any ques- tions. Senator Tillman. You are very strenuous in your statement. The matter has gone beyond a plea, as I understand, for action by Congress in restraint of the condition of confusion worse confounded in which the roads are left practically free to do as they please. Mr. ToMLiNSON. Yes; that is the condition. The situation has been very serious. There have been very portentious changes in the rail- road situation, but every change has been such as to strengthen their grasp upon the country. There used to be competition, but that is now a word almost without meaning as regards the railroad transpor- tation facilities of the countrJ^ It is a very, very serious matter. The public should be safeguarded better than is even provided in the Nelson bill. While we indorse the Nelson bill, I feel personally that legislation ought to go farther. Senator Clapp. What would you suggest in addition to the Nelson bill? Mr. ToMLiNSON. I do not know that I could suggest anything except to make the decision of the Commission absolutely final. Senator Clapp. Without appeal to the courts? Mr. ToMLiNSON. Yes. I do not know why we can not rely upon the Commission as well as upon the courts. If the members of that Commission are not to be relied upon, they ought not to be there. Senator Clapp. Have you ever thought of the proposition that an action which involves property rights must have its day in court some- where ? Mr. ToMLiNSON. Yes. I have thought the matter over very care- fully, and 1 am quite satisfied in my own mind that the interests of the entire country would be just as well safeguarded by having the Com- mission's decision final. Senator Clapp. I think you do not understand my question, which was as to the validity of a law which affects property rights without giving the partieis their day in court. Mr. ToMLiNSON. I assume that they fully have their day in court when they appear before the Commission. Senator Tillman. In other words, Mr. Tomlinson, you consider that as the court itself is an appointive one, created by the President with the consent of the Senate, the Interstate Commerce Commission, getting its authority from the same source, backed by act of Congress, ought to be fully as able to render a final decision as a court devoted to ordinary legal matters ? Mr. Tomlinson. You have stated my view practically. Senator Clapp. That is not the question. The question I asked is whether, under our Constitution, we can delegate authority to a tri- bunal to make an order which affects property rights without giving the owners an opportunity to appeal to the courts. Have vou ever given that point consideration ? Mr. Tomlinson. I do not believe I can make any further answer than I did a moment ago. I am not a lawyer and I have not paid very much attention to it from a legal standpoint. I am only expressing my views as to the equity and fairness of the matter as they occur to me. BAIL WAT FREIGHT KATES AND POOLING. 123 The Chaieman. In expressing your views about pooling, do you express the views of all tne parties you represent? Mr. ToMLiNSON. Yes. The Chairman. They have had that matter under consideration? Mr. ToMLiNSON. They have. The Chairman. And authorized you to make this statement? Mr. ToMLiNSON, Yes. Senator Clapp. That is, the statement that there should be no appeal from the order of the Commission ? Mr. ToMLiNSON. That there should be no appeal? Senator Clapp. That is what the chairman meant. Senator Tillman. No. He was speaking of pooling. He said he was not entirely satisfied with the Nelson bill; that he thought it did not go far enough; and that personally he was in favor of going to the point of leaving no appeal. Senator Clapp. I understood the chairman's question to go to that point, but he did not so understand it. The Chairman. It covered both points. Ml'. ToMLiNSON. The association which I have the honor to repre- sent indorses and supports the Nelson bill. Senator Tillman. And that gives the right of appeal. Mr. Tomlinson. Mr. Chairman, before I leave the stand I wish to say that Mr. Barry asked me in his absence to file with you a peti- tion from merchants, members of the Baltimore Chamber of Com- merce, in support of this Nelson bill, and with your permission I. will file it for the purpose of having it appear in the record. The Chairman. Very well. The petition referred to is as follows: Baltimore, Md., April 1; 190S. The Interstate Commerce Committee op the House op Representatives, Washington, D. C. Gentlemen: The undersigned merchants, members of the chamber of commerce, Baltunore, respectfully petition your honorable body to. favor the adoption of the interstate commerce legislation now before you, embodied in a bill known as H. R. 8337, amending the interstate commerce law and giving it authority and force. It is plain to all men that a few more years of discrimination and favoritism on the part of the railroads in the interest of the few shippers as against the many, will make business, except for the very wealthy, an impossibility. Already we have seen our fellow-merchant shrivel up and drop out by the wayside, ourselves have suffered and must in turn be driven from the marts of trade, if this unfair favorit- ism is continued. All we ask is a fair field and no favor, and this we hope is found in H. R. 8337, which we pray you will speedily enact into law. W. G. Bishop & Co., George Frame, James J. Comer & Co., W. M. Knight, Frank Kraft, H. A. Lederer, H. C. Wright, The Baltimore Pearl Hominy Co., H. D. Eidman & Bro., J. A. Loane & Co., Andrew W. Woodall, C. Bosley Littig & Co., John R. Hudgens & Co., I. K. B. Emory & Co., Dudley & Carpenter, Edelen Bros., Wm. G. Scarlett & Co., C. S. Schermerhorn, Robert Marye, John S. Smith & Co., Geo. P. Williar & Son, Pitt Bros. Co., John S. Hayes & Co., Frank Mudge, W. Riihl & Sons, W. A. Simpson & Co., D. C. Timanua & Bro., Frank M. Cline & Co., J. H. Sherbert, F. Megenhardt, Rich'd S. Wells, Saml. J. Diggs & Son, J. A. Manger & Co., John C. Leg§ & Co., Wm., Simpson, R. L. Burwell, J. Oliver Neal, J. H. Maynadier, Robinson & Jackson, James Lake, J. M. Wharton, Loney & Co., James J. Swaine, Wm. H. Spedden & Brol, Thos. M. Dinsmore & Co., Daniel Rider, Seaton Bros. & Co., H. 8. Belt, O'Neill & Co., Charles C. Gorsch, Jas. T. Clendenin, Chas. England & Co., S. M. Lyell & Co., Jo's. T. Flautt, sr., Fahey & Ryley, Chas. H. Gibbs, Stagle & Myers, C. B. Watkins, Hilldorfer & Schuchhardt, E. Stern & Bro., E. B. Owens & Co. 124 RAILWAY FREIGHT RATES AND POOLING. Senator Clapp. Is this Judge Springer you speak of, ex-Congress- man Springer? Mr. ToMLiNSON. Yes. Senator Clapp. He was also a judge in Oklahoma Territory; is that the man ? Mr. ToMLiNSON. Yes. I said that cojointly with him I have the honor to represent the National Livestock Association, whose head- quarters are in Denver. Senator Tillman. I should like to ask you, if you are willing to express an opinion oflfhand, ad to what effect the Nelson bill, for in- stance, would have in giving protection to the shippers, provided that the railroad consolidation has been effected, such as we were told this week had taken place, and we do not know but that it is true, by which every road from here to Texas, south of the Potomac and Ohio rivers, comes under one management. Would not that be a railroad pool that would practically leave the roads in absolute possession of the field, and we should have no protection whatever unless Congress specifically regulates the rates? Mr. ToMLiNSON. With the passage of the Nelson bill, the public would be at least assured of a tribunal who would have the power, after hearing, to say what was a reasonable rate. No tribunal has that power now. Senator Tillman. Then you think that it is absolutely essential to the business interests of the country that Congress should do some- thing by way of protection against this absorption or consolidation of the roads which tends toward making all roads practically one road throughout the United States? Mr. ToMLiNSON. I think that is absolutely necessary. STATEMENT OF JOHN D. KERNAN. The Chairman. Please state your name, business or occupation, and whom you represent. Mr. Kernan. My name is John D. Kernan ; my office is at 39 Lib- erty street. New York City. I appear here as counsel for the New York Produce Exchange. The Chairman. Proceed with your statement. We shall be very glad to hear you. Mr. Kernan. You know this subject is one to which a man may devote a good deal of his time, day and night, and then feel that he has not very greatly succeeded; but 1 shall endeavor to be brief. I am here to say that since the passage of the interstate-commerce act I have given much thought and study to the operations of that law. I was the first chairman of the New York State railroad commission, serving in that capacity from 1873 to 1877, when I resigned. Since then I have been engaged in a great many cases brought before the Interstate Commerce Commission, representing the produce exchange and others, and that duty has led me to give thought, study, and investigation to the question. We think that the Nelson -Corliss bill, with some amendments and perhaps additions, is one that meets the recognized necessities of the situation, that something should be done. If the interstate-commerce law is to be continued as the policy of the Government for the purpose of regulating the relations between the carriers and the people, some- RAILWAY FREIGHT RATES AND POOLING. 125 thing must be done to increase thie efficiency of the orders made by the Commission after investigation, and to facilitate and hasten the remedy when rates are found to be unjust and unreasonable. I may say at the outset that I think you will lind 99 per cent of the complaints made before the Commission since its organization have not been upon the subject of the rates being too high. I do not think to-day that that is of any material importance. While there was an increase in rates of 35 per cent on the 1st of January, 1900, yet that was no more, I thought, than the increase ought to be in fairness, in view of the long period of disaster through which the railroads had passed and the reduction of rates that nad occurred during that period. It is not the matter of high rates. The difficulty we have got to think about and the difficulty that this bill needs to remedy is the i-elation of rates to the competition between business men. 1 do not care whether the rate from New York City to Chicago on my freight is 60 cents per hundred, 60 cents, or 75 cents. But I do very much care that upon my freight reaching my customer in Chicago the relation of my competitors' rights to mine shall be relatively fair, that one man shall have no more advantage in Chicago than I have. This can only be secured by a body having the power to take in hand the actual situation and investigate in reference to it. The remedies proposed by this individual man or that individual man have ceased to be of use, as applied to this situation, whisre the great ques- tion between all the manufacturers and business men of the country is not as to just how much they pay, but that their relations to their competitors in reaching common markets shall all be fair and just. I must first say that that bill, with some additions, would, in my opinion, be all right. In the first place, the most important amend- ment to be suggested, to my mind, is that on page 6. The filing of a petition to review an order shall of itself suspend the effect of such order for thirty days. 1 think that ought to be sixty days. And the couit before which the same is pending may also, if upon an inspection of the record it plainly appears that the order proceeds upon some error of law, or is unjust and unreasonable upon the facts, and not otherwise, suspend the operation of the order during the pendency of the proceedings in review, or until the further order of the court. These words ought also to be stricken out — they have no business in the law — from the word "also" down to the word "suspend ;" so that if both these amendments be adopted, it will read: The filing of a petition to review an order shall of itself suspend the effect of such order for sixty days, and the court before which the same is pending may suspend the operation of the order during the pendency of the proceedings in review, or until the further order of the court, etc. You can not undertake to break down the jurisdiction of the courts of the United States in that way. A railroad comes before the court and says, "Here is an order of the Interstate Commerce Commission that is unjust; we want to appeal; we want a stay pending appeal." The court says, "Under the ordinary equity jurisdiction of a United States court you should present a case where it is justifiable for us to suspend the operation of an order pending appeal; but we find that Congress in this new act has stated that it must plainly appear to us— that is, it must more plainly appear to the court than in an ordinary 126 RAILWAY FREIGHT BATES AND POOLING. case — that it has jurisdiction — before we could grant the petition." I think that would be unconstitutional. You can not enact worse legislation than that. I think, also, when you enter upon legislation in regard to this railroad question you can not accomplish anything good by any law or device unless it is absolutely right. Otherwise it does more harm than good. Then, on page 8: If a carrier neglects or refuses to obey an order which is obligatory upon it as above — 1 think that would be made clearer by saying, "obey a lawful order." Nobody is obliged in this country to obey any order unless it is a law- ful order. Sol suggest that after the word you strike out "an" and insert "a lawful" in line 10. If those two changes be made I think there is no danger whatever in this bill of the railroads, through this power vested in this Commis- sion, being injuriously affected in any way by any order. They are not obliged to obey anj'^ order but a lawful order. The remedies of the United States courts, through injunction proceedings, etc., with tb'.s power to suspend the application of the order and to remain sus- pended pending appeal, should all be left just exactly as now, without any attempt in this bill to change the powers of the court. I think those are two important changes that ought to be made. I can not go through the bill in detail, but I will refer to one other matter. It provides that corporations shall be punishable by fine. That is right. Under the present law you can not punish a corpora- tion, which is the only one that ought to be liable to punishment. It removes imprisonment, which is all wrong. You can not accomplish anything by a provision to imprison the officers of a corporation. That provision only embarrasses the application of the law. It drops imprisonment and provides penalties only. One of the bills that has been introduced provides that pooling may be authorized. I want to state briefly the objections to that, and I shall not state them in my own language, but in the language of the ablest railroad man this country has ever produced. I think he was recognized by railroads as having the ablest mind on this traffic ques- tion of an}' man who ever held a position in railroad management in this country. I refer to Mr. Alfred Fink. His training began in this business bj^ employment on some of the railroad systems of the coun- try when he was 45 or 50 years old, at first being traffic manager of the Louisville and Nashville. "VS'hen the Interstate Commission was oi'ganized he was recognized by the Commission as the ablest man in the countrj^ upon questions the Commission had to meet. I examined him at great length on the pooling question. I may say here that I appeared before the Interstate Commerce Com- mittee at one time when it held sessions in New York City, when I talked two or three days as a witness, and as a result of my testimony there I was requested to communicate with the committee and assist in drawing a bill. The suggestions I made, and which were^ adopted, were based upon the English act of 1854 in all provisions, except as to the appointment of the Commission, and the bill is substantially to-day as I drew it. I advised against the prohibition of pooling. I thought it wise to leave pooling as it was under the common law, which pro- hibited carriers from enforcing pooling agreements among themselves. RAILWAY FREIGHT RATES AND POOLING. 127 Leaving it in that way I thought they would work out the problem so that in the end it would lead to something in that line which would be a public advantage. But the House, you know, put thai; provision in there, through Mr. Eeagan. A pool is only possible in two ways, as Mr. Fink said when I exam- ined him upon the question, and Mr. Fink's strong point was this: He knew everything upon this question from the railroad standpoint, but he was the only railroad man 1 ever knew who could get up and state the people's side of the question as well as the railroad side. He knew the whole subject on both sides, and he could reach as just conclusions as any man 1 ever heard talk upon the question. For instance, as regards legislation by Congress, many of his railroads kicked against it; but he always insisted that it was a matter of safety and protec- tion to have an interstate-commerce law which should protect the railroads as well as protect the people. He was always right. He was a German, of philosophic mind, and could take in all the bearings of the whole question. There are two kinds of pooling and only two kinds that have ever been practiced: One is a money pool. For instance, there are two lines between New York and Chicago competing for business as between themselves. They- agree that one company shall take 75 per cent of the traffic and the other 25 per cent. I asked Mr. Fink, " How about a money pool ? " A money pool would be one where, if the line entitled to the 25 per cent found at the end of its traffic period that it had only received 10 per cent, the other line would pay the remaining. 15 per cent in money. Some agreements are to repay the differ- ence in money. Mr. Fink said the difficulty about a money pool was this: That it had been found impracticable, because a road can not live without traffic. He said that many of the big lines in competition with the 25 per cent road would be perfectly willing to take the whole 100 per cent of its traffic for one or two years and pay it three times the money that it would have earned if it had carried its portion of the traffic. But that was impossible. Why ? Because it wiped out that road in the end. A road can not live without traffic. It has its equip- ment to keep up, its employees to pay, and it must have trafficto keep going. A money pool, therefore, simply means the extinction and wiping out of the small members of the pool in the course of two or three or four years. What is the other kind of pooling? That is traffic pooling. That is where they agree that each of the lines in the pool gets its percent- age of the traffic. Mr. Fink always maintained that that was the only practical way of pooling. But the inherent difficulty about that, the difficulty for which no remedy has been proposed — and I think the gentlemen who are in favor of pooling will have great difficult}^ in proposing an adequate remedy — is that it can not be maintained with- out violating the inherent right of every shipper to route his own traffic. You are at Chicago, and you want to ship grain to New York; vou want your grain to go by the Penusylvania road, not by the New York Central, because the Pennsylvania is the shortest, quickest, and best equipped. But that being so, if 25 per cent of your traffic, under a pooling arrangement, has got to go around three or four hundred miles farther by the Canadian Pacific or the Grand Trunk, then your right to route "your traffic has got to be violated by the sending of your 128 RAILWAY FREIGHT RATES AND POOLING. traffic by the longer and poorer line. That is the difficulty about traffic pooling that has never been answered, so far as I know. I think it interferes with the inalienable right, which must be protected, of every shipper to route his traffic as he pleases, and that you can not justly compel shippers to put their traffic in the hands of railroads, to be routed by the poorer and slower routes, without violating that right. I do not think that any such proposition can be considered. Senator Tillman. Right there, I should like to ask you if the remedy for that would not be to allow the longer and poorer road a higher rate, supposing pooling were granted, or a lower rate to get more traffic. In other words, does not pooling destroy competition, and is it not, therefore, in itself bad? Are you opposed to pooling or not? Mr. Kernan. I am not opposed to pooling in a certain way. I have never changed my idea from what I originally said about that, that it was unwise to put a provision in the interstate-commerce law about pooling. There are good things about it, and the railroads were working it out under the simple, common-law disability. Leave it there. I think they have worked it out through the joint-owner- ship proposition. The Chairman. You know there are a great many railroads opposed to pooling. Mr. Kernan. I know it. The Chairman. I think that is one of our troubles. Mr. Kernan. I think that the prohibition of pooling has led to the joint ownership of competing lines, and that is much better. It is a great deal easier for Congress and the courts and the Commission to deal with a single one of half a dozen competing lines than it is to deal with a pool of those lines. Why? For this reason: Here are a weak road and a strong road in a pool. You have constantly to be yielding to the weak line what it does not deserve in order that it may live, so that you are constantly forced to do something which, under the laws of trade, is wrong in order to maintain the pool and keep it going. But if the small Tine and the big line come to be owned by one man, then don't j^ou see that the revenues of both roads go into one pool, and then the question always is simply whether the earnings of the entire system are sufficient to permit this, that, or the other road to live. You do not have to keep dealing with exceptional con- ditions, which are always forcing you to do something wrong, under the requirements of trade, in order to keep a certain road alive. Senator Tillman. 1 would like to ask you, Mr. Kernan, whether you can conceive of competing lines coming under one ownership? They would be natural competitors if they were owned bj;^ different people, but if owned by one person can there be competition? Mr. Kernan. Why, no. Senator Tillman. You said a while ago that this condition was bring- ing about single ownership of competing lines. Mr. Kernan. Certainly. Senator Tillman. Then they are no longer competitors? Mr. Kernan. Certainly, there is no competition left. Where asso- ciation is possible competition is no longer possible. That is an old axiom that is being worked out. Competition has been diminished. That is what we relied upon when railroads were started — that compe- tition would protect the public. But that has all been wiped out. That is the way thej' have accomplished pooling. I think it is safer to BAIL WAT PKEIGHT KATES AND POOLING. 129 have all roads under one ownership, where they can all be dealt with as a single system, than where you have a half a dozen in a pool. I think the tendency of legislation has been in that direction. Senator Tillman. Can you explain the difference between a pool of different owners and a combination with one owner? Mr. Kernan. Suppose here are two systems of six railr9ads, each competing. If those six roads are put into one ownership, that elimi- nates competition between those six roads. If the other six are put into one ownership, that eliminates competition among those six roads. Then you still have left competition between the two systems. Bring them into one ownership and then competition is entirely eliminated. One ownership of the whole business will finally be brought about. It is steadily progressing. Senator Tillman. But that creates monopoly and' leaves us at the mercy of monopoly. Mr. Keenan. No, sir; I think Congress can deal more easily with single ownership of lines than it can with competing ownership, because, don't you see, in every pool the entire pressure is to give tp the xeak line something to which it is not entitled? The Chairman. Is it your judgment that pooling has always pro- tected the weaker and smaller line? Mr. Kernan. I think that every pool that was ever formed was forced into existence through some bankrupt corporation. A corpora- tion in the hands of a receiver can ultimately force a pool. The Chairman. That is my idea. Mr. Kernan. No pool was ever made except through the action of some bankrupt corporation. The Chairman. As a general proposition, were not the larger roads opposed to pooling? Mr. Keenan. x es. That is a matter of simple observation. Take the New York Central ; it does a great business and gets great returns. Then there enters into the problem a competing line, which goes into the hands of a receiver. It does not have to earn fixed charges or pay interest on bonds. It pays nothing except operating expenses. If that road has an entrance into Chicago, and has 5 per cent of the Chi- cago business, it can cut the rates on the entire 95 per cent that goes by the other lines. Railroads do not want pooling unless they are forced into it. Senator Tillman. Are not such bankrupt railroads subject to the orders of the court? Is not the receiver the servant of the court? "What right has the receiver to cut under the rates fixed by business interests or by the Interstate Commerce Commission ? Mr. Keenan. It is because his road must have traffic; otherwise he can not pay expenses, and it is his business to do that. Therefore he is justified in taking such measures as will at any rate prevent his dis- charge from his receivership. He must discharge his duties as receiver. He does not have to pay any interest on bonds; he does not have to pay dividends on stock. All he has to do is to operate his road, pay operating expenses, and show a good balance sheet at the end of the business. The Chairman. When he is out of the pool that is what he says. When he is in the pool he says, "Go ahead, and we will treat you fairly." Mr. Kernan. That involves a commission or something he is not entitled to under the ordinary laws of trade. Tf r p 9 130 RAILWAY FREIGHT RATES AND POOLING. I want to submit to the committee a suggestion, that there be added to the bill a provision which I think would substantially- accomplish all that is aimed at in the direction of giving the railroads the right to pool. You want to draw the distinction between pooling and what I suggest. Senator Tillman. May I ask what are your relations to the Pro- duce Exchange? ■ Mr. Keenan. I am its counsel. Senator Tillman. Do they instruct you to appear here? . Mr. Keenan. I am employed by them as counsel. Senator Tillman. Were you sent here specifically to appear before this committee? Mr. Keenan. 1 came over with a committee, but the other members of that committee had to go back. They did all the talking first. I appeared before the House committee this morning, and have just come from there. The Chairman. You stated a moment ago that you have a remedy of some importance that you want to suggest. Mr. Keenan. Yes, sir. I think it is not wise to eliminate pooling, because it violates rights, as I have said. 1 think it is wise to provide that carriers subject to the provisions of this act shall have the right to form associations to secure the establishment and maintenance of just, reasonable, nonpreferential, uniform, and stable rates, to be pro- mulgated and enforced under reasonable rules and regulations as to interstate traffic, those rates to be filed with the Commission, subject to their approval or disapproval. The Interstate Commerce Commission is not to be authorized to take the initiative, however. The railroads are the ones to take the initiative, and they should be allowed to make agreements as they please. ^ All that the Government should do in the matter through any of its agencies is to inspect the provisions of such agreements and see whether there be anything in them which violates public rights. This is not pooling. This is to authorize the association of railroads so that they may agree upon rates, fix tariffs, uniform tariffs throughout the United States as to rates, and to impose penalties to be recovered of each other in case they fail to maintain the tariff rates. There you see the beauty of it is that they fix their own penalties for their own violations of their contracts. Therefore there is no injustice done in leaving them to recover from each other whatever they can. They should also agree upon a uniform classification throughout the United States, which is a very important subject. 1 think that is all right. I think that is giving the railroads a great deal — all they need and all they ought to have. They ought to be authorized to form traffic associations by which they can keep, by agreement among themselves, jurisdiction over these subjects as to the establishment and mainte- nance of rates, as to penalties for rate cutting, and as to uniform classifications. They can not do that now, because there is no author- ity for it. The Chairman. The decision of the Supreme Court of the trans- Missouri case says that they can not agree now. Mr. Kernan. Yes. That removes the difficulty really as to the pro- hibition against pooling. But it tends to prohibit the formation of such associations for the purpose of doing what is entirely right and just. BAIL WAY FREIGHT BATES AND POOLING. 131 The Chairman. Will you leave that language in your testimony ? Mr. Kernan. I think the Corliss bill should be amended in the par- ticulars I suggest, and in one other particular. It provides that ' ' every violation of this act shall be prosecuted," etc. I think that should read: "Every willful violation of this act." An innocent violation ought not to be punished. The Chairman. That word "willful" ought to go in there. Mr. Kernan. And I think the word "lawful" should be inserted before the word "order" in line 10 on page 8, as I have already sug- gested. Then I think those words "also, if upon an inspection of the record it plainly appears that the order proceeds upon some error of law, or is unjust and unreasonable upon the facts, and not otherwise," as they appear in lines 11 to 1-1 on page 6, should be stricken out. Whatever power is to be given to the United States courts, under their ordinary constitutional jurisdiction to suspend the operation of the Commission's orders issued in their discretion, I think no new rule of that kind would be justifiable, and I do not think it would be con- stitutional. The Chairman. Will you give us that memorandum which you have on the subject of pooling? Mr. Kernan. With pleasure. . Carriers subject to the provisions of this act, with respect to traffic subject to the act, may form associations to secure the establishment and maintenance of just, reasonable, nonpreferential,. Uniform, and stable rates, and for the promulgation and enforcement of reasonable and just rules and regulations as to the interchange of interstate traffic and the conduct of interstate business upon the following conditions: (a) Articles of agreement shall be subscribed by the parties thereto, stating, among other things, that they are entered into subject to the provisions of this section; the terms upon which new parties may come in; how the decisions of the association are to be made and enforced; and the length of time for which the association shall continue, which shall not be more than ten years. Such articles when subscribed and in effect agreeably to the provisions of this section shall be legally binding upon the parties thereto, and be legally enforceable between them. (6) The articles of association shall be filed with the Commission at least twenty days before they take effect. If the Commission upon inspection of the same is of the opinion that their operation would result in unreasonable rates, unjust discrimi- nations, insufficient service to the public, or would in any manner contravene the provisions of this act, it shall enter an order disapproving the same. In connection with such order the Commission shall file a statenaent of its reasons for its disap- proval. Said order shall be final and conclusive. (c) If the Commission, upon inquiry into the actual operation of the association after the same has gone into effect, is of the opinion that it results in unreasonable rates, unj\^todiscriminations, inadequate service, or is in any respect in contravention of this act, it may enter an order requiring the same to be terminated on the date named, which shall not be less than ten days from the making of the order. Such order shall be final and the effect of it shall be to render such articles of agreement jiull and void from and after the date named, except as to claims between the parties arising prior to that date. (d) The Commission shall have the right to examine by its duly authorized agents the files and proceedings of such association, including all contracts, records, docu- ments, and other papers, and it may require said association to file with it from time to time copies of decisions promulgated by it and of its minutes of proceedings or of other papers received or issued. All orders issued by associations thus formed that in any wise affect rates shall be filed with the Commission as provided in the original act in relation to the filing of tariffs. Every agreement for the formation of such associations as are authorized by this section is prohibited except as hereby authorized, and every carrier or representa- tive of a carrier, acting as a member of such an association, or acting for a member of such association, whether the same exists by virtue of a definite agreement or not, shall be deemed guilty of a misdemeanor and shall, upon conviction thereof, be subject to a penalty of 15,000 for eash day said carrier or representative continues a 132 RAILWAY FREIGHT BATES AND POOLING. member thereof or so acts, which penalty shall be enforced in the manner provided for the enforcement of those penalties imposed by the tenth ?ection of said act. The Chairman. Section 16 of the law of 1887, the original interstate- commerce act, formerly overlooked, has been interpreted by Judge Groscup, where they were unable to punish shippers and carriers for violating the law as to rebates or discriminations. Mr. Kernan. Under that act the shippers could not be punished at all, whereas they ought to be punished just as well as the railroads. The Chairman. The present law is: That whenever any common carrier, as defined in and subject to the provisions of this act, shall violate, or refuse or neglect to obey or perform, any lawful order or requirement of the Commission created by this act, not founded upon a controversy requiring a trial by jury, as provided by the seventh amendment to the Constitution of the United States, it shall be lawful for the Commission, or for any company or person interested in such order or requirement, to apply in a summary way, by peti- tion, to the circuit court of the United States. I want to draw your attention to that. It seems now that the pro- visions of section 16 had been overlooked, limiting the power to com- pel all railroads, whether in associations or not, to observe the fixed rates and maintain them, bj' injunction on petition to the circuit court of the United States in equity. Has your attention been drawn to that decision ? Mr. Kernan. 1 know that decision. The Chairman. Have you anything to say on that point? Mr. Kernan. As to whether that gives us a sufficient remedy ? It is partial only. You will find that this is the present condition and difficulty: That owing to the methods of United States courts, the delays, the waiting, practically you can not get anything decided in time to be of use. Take, for instance, the import-rate case that I carried through for the New York Board of Trade and Transportation before the Interstate Commerce . Commission, involving a very important question, the question whether the rate upon imports should be the same as the domestic rate between the seaboard and interior points or whether it should be lower. It also involved the same question as to exports, whether there could be a lower export rate than the domestic rate to the seaboard, in order to meet the conditions of foreign markets. All the trunk lines made defense before the Commission. It took a year and a half to get that case through the Interstate Commerce Commis- sion. We took a great deal of testimony and heard everyb#&y. The Commission finally made an order in our favor, and eighteen railroads, including the great trunk lines, obeyed the order; one or two disobeyed it. Then 1 took the case to the United States court in 1892; it was expedited and carried through the circuit court of appeals, and then to the Supreme Court. After the first argument before the Supreme Court they ordered a reargument. It was reargued, and then decision was delayed for sixteen months. It actually took four years and a half to get a decision of that question. This shows that this question of whether the original act is in force is a very serious one. The Commission itself, all the railroads, and all the shippers supposed for ten years, until that decision was rendered, that Congress had given the Commission all the power asked for. In that import -rate case, how was it decided against us? I had "Wal- lace, circuit judge; I had the three judges unanimously in the circuit RAILWAY FREIGHT RATES AND POOLING. 133 court of appeals; I had Harlan, Brown, and the Chief Justice in the Supreme Court. In other words, I had seven out of the twelve judges who passed upon the question holding- that the power was given. But five happened to be in the court of last resort, where they could finish me, and so it was decided that the interstate-commerce act could not be construed as containing any of these powers. So you see it has been a pretty close question among lawyers and judges whether this act did not originally give the power which ought to have been given. Another thing I want the committee to remember, bearing upon the danger of giving to a commission the power sought here. There has oeypr been a decision of any United States court, where the question was made, that the order of the Commission was not decided to be intrinsically fair and just, so far as the amount, the rate, or the dis- crimination was concerned. It has all finally turned simply on the question whether the Commission had the power. I thank you, gentlemen, for your attention. The committee adjourned. At the sitting of the committee on Friday, May 23, 1902, the fol- lowing-named gentlemen appeared: H. H. Porter, of New York; Albert W. Sullivan, of Chicago, assistant second vice-president of the Illinois Central Kailroad Company; H. R. Fuller, representing the Brotherhood of Locomotive Engineers and other organizations of rail- road employees; Hon. C. J. Faulkner, representing the Southern Railway Company; Hon. Martin A. Knapp and Hon. James D. Yeo- mans, members of the Interstate Commerce Commission; Edward A. Moseley, secretary of the Interstate Commerce Commission; Col. John Cassells, representing the Pennsylvania Railroad Company; W. B. Thompson, of Thompson & Slater, Washington, D. C. ; A. B. Browne (of Britton & Gray, Washington, D. C), representing the Atchison, Topeka and Santa Fe Railroad Company; and F. G. Gannon, third vice-president of the Southern Railway Company. STATEMENT OF H. H. PORTER. The Chairman. Please state your name, present place of residence, and your business. Mr. PoKTEE. H. H. Porter; now resident in New York; con- nected with railroads. The Chairman. I sent you copies of the three bills under consider- ation by this committee, and we should be glad to have a full and free expression of your views as to wfiat ought to be done by this Congress. Mr. Porter. From having been connected more or less with rail- road operations under the interstate-commerce law, my conclusion is that the first thing to do is to repeal that law from beginning to end. By that I do not mean that it has been entirely a mistake, for the peo- ple have learned something, and the railroad officials have learned something since that law was originally enacted; and I think there is a general desire on all sides to have the present law repealed and a new and simplified law enacted in its place. There is in the present law too much detail, so that I think the best thing to do is just what a new management in a corporation often has to do when starting out under 134 RAILWAY FREIGHT RATES AND POOMKG. old by-laws, and that is to repeal them and begin again at the founda- tion. I believe the public have learned that there is a great deal in the present law that is worse than useless, and is destructive to the interests of both the public and the railroads. The public want steady- rates; they want fair rates between people and places all over the United States; and then they want those fair rates enforced. They do not want on the statute book a set of arbitrary laws, or laws full of arbitrary details, to which it is impossible to conform. The suggestion I have to make is very simple. It is that the law be simplified down to a declaration in the plainest language that the rates shall be stable, that they shall be fair, and that they shall be just between people and places. That is a very easy statement to make, but it is much harder to enforce, because there is a quality in railroad rates, just as there is in almost everything else. There is quality in sugar, in silk, in wheat, corn, etc., and so there is quality in railroad rates; and if you enforce the same rates for good railroad transportation and financial respon- sibility that you enforce on poor roads with poor equipment and facilities, j'ou are going to have chaos. My idea is that railroad companies should have the privilege of mak- ing any agreements that they choose between themselves; that they should be held responsible for violating those agreements; and then, they having made those agreements, I would give the courts the abso- lute power to enforce them. And 1 would give the Interstate Com- merce Commission just the same power of temporary injunction that the courts now have, subject, of course, to approval or disapproval upon review by the courts. This would make it simple, and the rail- roads could attend to the pooling question to suit themselves within the principle of the law. Leave out all possible details in the law, and let the railroads in their own way, from their own experience, correct the evils which have grown up, but make them absolutely responsible. Let them make any tariffs or anj'^ arrangements with each other consistent with the la^W that they choose, because that is absolutely necessarj'^ in order to have steady rates where some railroads have inferior lines as against better ones. The first pool I ever knew to be made was the most successful and long-enduring one that was ever made in my opinion. The Rock Island and the Northwestern railroads, both entering Omaha, got into a quarrel, and they were carrying freights at all kinds of rates. The same man was elected president of both roads, and, of course, he wanted that quarrel stopped. Just at that time the Burlington Rail- road opened its line into Omaha, and thereupon a third element came into the problem. At that time I was in the directorate of both the Northwestern and Rock Island railroads, aiid we finally agreed that there was no solution of this difficulty except through pooling, and we made a verbal pool. We knew there was nothing in the law authorizing a pool. (When I speak now of railroads being allowed to pool, I wint the pool to be legal and to hold. I do not want verbal pools. I want the law to provide for their enforcement.) Mr. Harris was president of the Burlington, and we sent for him. He came and said, "Well, we are just opened; we do not know exactly how the business is, and we have got to have our chance to test how much business we can get." After discussing the matter for half an hour, Mr. Harris said, "Mr. Tracey RAILWAY FREIGHT RATES AND POOLING. • 135 what proportion of the business are you going to give us if we go into this ? " Mr. Tracey said, very emphatically, You will fight until you get it. We will each take one-third." And thereupon the pool was made. Senator Millakd. I remember that was a strong pool. Mr. Porter. Railroads will fight to get their share of the business. Self -protection, the first law of nature, demands this. Let this simple principle be-at the foundation: That the railroads can have all freedom to agree with each other if they can, within the principle of the law. If they can not, of course that is the end of it, and they must fight until they can. If they make any particular rate or rates in their tarifi's that the Interstate Commerce Commission thinks wrong, let the Commission stop the particular item or items; those rates not objected to to continue in effect. If they went into court, the court would grant a temporary injunction. Give the Interstate Commei'ce Commission power to grant the same temporary injunction. Until we have a law of that kind we shall have to continue under the present demoralizing conditions, which involve disrespect of law, and, on the part of the railroad companies, disrespect of each other. I think we have demonstrated thoroughly in the United States to-day that the putting together of properties is to the benefit of all interests. I think some of you gentlemen will bear me out in the assertion that more than twenty-five years ago Jay Gould was called the most unpopular monopolist in the United States. W. H. Vander- bilt and others then controlled the Western Union Telegraph, arid Gould was building telegraph lines here and there and cutting into the telegraph business everywhere he could. The Western Union nec- essarily followed him in the competition by cutting the rates in two, and then cutting them again. Every legislature was trying some legislative cure for that unstable transportation diflSculty. The telegraph lines were all broken up and values chaotic, and then Jay Gould conceived the idea of putting telegraph properties together. He did it, and he did it so quickly that the legislatures could not act in time to stop him. Every newspaper and the whole public senti- ment was opposed to it on the ground that they were not going to be able to secure freedom of information, and cost would be increased; that Jay Gould would be able to secure information for personal spec- ulation to individual and public injury. Notwithstanding that oppo- sition on .the part of the newspapers and public, however, there has not been for years a serious complaint against the telegraph. His remedy was perfect and the public's fears found groundless. If you analyze it there are three kinds of transportation — transpor- tation of people, transportation of property, and transportation of thought. The transportation of thought by the Western Union was on the same right of way and on lines parallel with the rails of the railroad lines used for the transportation of people and of property. The delivery is the same; the classification is the same. If you travel on a limited express you have to pay an extra price. If you send a banker's message you have to pay an extra price. If you send a package by express or by fast freight you have to pay an extra price. Ordinary passage and freight are the same as ordinary day messages. Cheap passage and coarse freight are the same as night messages. But whatever you do you will be criticised. I Ijave been connected with railroads since 1853, and I never yet made a tariff that some one 136 . RAILWAY FREIGHT RATES AND POOLIKG. could not show me some rate in it that it would be better to change in all interests. Give the railroads full freedom. If they quarrel among themselves let them fight it out within the principles of the law. If they fight over stable rates they will get over it. They can gain nothing. They must consider quality as an element as well as quantity' in transporta- tion. Make the law constitutional and make it short. When a man takes an employee into his service he gives him power and discretion. He does not supervise everything that the employee does; but if the employee does something the employer does not like, he disapproves of it and takes such measures as he thinks proper to see that it does not occur again. Senator Millard. Your idea is that the present law should be repealed and begin again ? Mr. Porter. Yes; entirely repeal the old laws and begin again. Make the new law constitutional. Give the railroads the power to make agreements, and give the Commission the authority to disapprove and stop the operation of any particular items in such agreements until the courts say what is right and what is wrong. This 5'^ou can do under the Constitution. 1 do not know whether I have made myself under- stood, but I have tried to do so. The Chairman. What you have stated is very much to the point. Is there anything else you want to state ? Mr. Porter. I came here after the original law had been enacted, and had conversations with Judge Cooley, a very able man, the first chairman of the Interstate Commerce Commission, who came here full of hope and died disappointed because people would not do what he expected, without regard to their moneyed interest. I think some one should be appointed on that Commission who has had experience in railroad transportation. The responsibility of dis- approval of a railroad agreement being upon the Commission, the members of that Commission should have among them one who has had sufficient railroad experience to help the Commission judge whether the agreement is wise or not. Senator Foster. Do you believe that the Elkins bill provides for pooling? Mr. Porter. I do not like the word pooling. But I believe that it is within the power of Congress to enact a law providing that rates shall be stable, and that is one of the most important elements. I have seen merchants ruined by over-buying goods in order to get them shipped at low rates, and later in consequence having to sell them at a sacrifice. The rates ought to be stable, and should be just between filaces and peoplfe. Of course there should be no favored shippers, t costs the railroad just as much to carry freights when the rates are cut as it does when they are carried at stable tarift' rates. I would give to the railroads just the same freedom I would give to anyone — to make any kind of_ a legal agreement among themselves, and have that agi-eement enforceable. Take the Wisconsin lumber trade when I operated there. The lumbermen used to pile the lumber at their mills. I used to go to them and say, "Let me haul it down to your yards in Kansas and Nebraska when I want to, and I will give you a 10 or 15 per cent lower tariff." Why did I do that? Because I could do that at a time when grain was going eastward very heavily, and if I took the lumber west- RAILWAY FREIGHT RATES AND POOLING. 137 ward it would save hauling empty cars one way. It was a commercial transaction. I -would have made more money, the lumbermen could save money, and the consumer in Kansas and Nebraska would have had to pay no more for his lumber. I grant you that can not be done now. People could not understand it. But I saved thousands of miles of empty-car mileage in that way, and without that right it must cost railroads more to do transportation. STATEMENT OF HON. MARTIN A. KNAPP. The Chairman. Do you want to make a statement this morninsr, Mr. Knapp? Mr. Knapp. I am entirely at the service of the committee. The Chairman. The committee wanted to hear some of these other gentlemen on the automatic-coupler bill, but we will hear you now. Mr. Knapp. Mr. Chairman and gentlemen, it was my misfortune not to arrive here in time to hear Mr. Porter's entire statement, but 1 think perliaps I got the drift of it from his closing remarks. So much may be said upon the subject embraced in the pending bills that I hardly know where to begin or how, in a brief statement, to say any- thing which is likely to aid your consideration. For ten years and more I have endeavored to make this question a subject of conscientious study, with the result of having some rather definite convictions. My observation and experience lead me to be very conservative. 1 certainly would not advocate any radical change in the existing laws, except in one respect, to which I shall presently allude, with your permission. Nor do 1 think it necessary to go fur- ther, for the present at least, than to give the regulating statute that degree of efficiency which it was supposed to have at the time of its passage. The bill introduced by Senator Nelson, as you doubtless know, embraces, so far as it goes, some of the specific recommendations of the Commission. With reference to the subject-matter of that meas- ure I need only say that it meets the approval, I think I am warranted in saying, of the entire Commission. I mean by that, as to its general aims and purposes. Jt has some minor provisions which I think of doubtful validity and which 1 should not be prepared to indorse. The bill introduced by the chairman — a revised edition, if I may so characterize it, of which has been introduced in the House and is known there as the Wanger bill — apparently aims at the same pur- poses and is designed to accomplish substantially the same results as the Nelson bill by way of amending the law. It differs in form materially, however, because it is in form an independent measure, whereas the Nelson bill in form is an amendment of specific sections of the present act. But the subjects which are in a way covered or treated by the Nelson bill and the corresponding provisions of the Elkins and the Wanger bills are not essentially dissimilar. While, as I said, there are some things in the Nelson bill which 1 am not prepared to indorse, there are some things also in the Elkins bill which I think might be modified to advantage, not in essential respects, but with reference to making its meaning more certain and relieving it from possible ambiguity, because we all concede that it is desirable in legislation to avoid the necessity of resorting to the courts for judicial interpretation, so far 138 RAILWAY FKEIGHT RATES AND POOLING. as possible, and to enact such amendments as shall be plain, simple, and readily comprehended. The two measures differ, however, in one veiy material respect. The Elkins bill confers upon carriers, subject to the provisions^ of the act, rights of association and contract with each other, which rights existing laws deny. The Nelson bill is entirely silent on that subject. Speaking for myself, and not undertaking to voice the united opinion of the Commission, I am very much in favor of changing the law in that respect. My study of this question, Mr. Chairman, led me quite early to perceive the fundamental incoiisistency between the aims and purposes of the "act to regulate commerce" and the pro- hibition of pooling contained in its fifth section. To my mind the idea that all rates shall be just and reasonable, that there shall be no discrimination between persons or localities — in other words, that the announced tariff shall furnish a standard of compensation binding upon the carriers and the public, and to be invariably observed in all cases — is a rule practically inconsistent with competitive relations. There can be no actual competition in railway rates, as the term "com- petition " is ordinarily understood, and at the same time an actual observance of published tariffs. I think it is the misfortune of this law that a provision inconsistent with its general purpose was incorporated in it, and a still greater mis- fortune, because of its far wider application, was the so-called Sher- man antitrust law, which the Supreme Court has said applies in all its provisions to railway operations. It might be, if we had the choice between large numbers of actually separate and independent railroads and the legalized association of those roads, that we should hesitate to confer a right of association which is now denied and which is con- trary, in a general way, at least, to the trend of judicial utterance for more than two hundred years. But we have not any such choice, and 1 think the right of contracting, which the Elkins bill confers, could be defended, if upon no other ground, for the reason that it is desir- able to preserve as much railway competition as you can. So the practical choice, in my judgment, is between a degree of independence (the preservation of a considerable autonomy) and some check upon the tendency to railway combination — the choice between that and practically universal consolidation of our American railways — which shall eliminate their competition with each other. You can not have continued competition that is legitimate, that is honest, of which everybody has the advantage; you can not have that without permitting the roads, by amendment of this law, to put some sanctioned restraint upon competition with each other; and 1 regard a measure which embodies that principle as not only in harmony with the aims and purposes of public regulation, but practically essen- tial to the realization of those purposes. The very obvious fact to my mind is that railway competition, what- ever may have been its effects years ago in breaking down railway rates, has not in recent years, broadly speaking, had much influence in reducing published tariffs. That competition has found expression, and does find expression to-day, mainly in secret arrangements and prefer- ential bargains by which the larger shippers profit. It is very difficult for me to see where the ordinary man of affairs — the farmer, the crossroads country dealer, or the wage-earner of any BAIL WAY FREIGHT RATES AND POOLING. 139 class or description — gets any benefit from the policy of railway com- petition which we have endeavored to enforce. Practically speaking, that policy has powerfully aided the great combinations of this country, because it has resulted in giving influential shippers of large tonnage an advantage which the smaller dealers have not been able to secure. 1 think it not too much to say, Mr. Chairman, that the evils of present railway management and operation are mainly described by the single word "discrimination." That discrimination takes a twofold form. It may manifest itself in the secret rate by which a large ship- per or combination of shippers gets a secret advantage, or it may manifest itself in such an adjustment of rates as between difl'erent localities and different articles of traffic as to prejudice the one and unduly favor the other. Those evils and both those forms of discrimi- nation are mainly caused by what we call railroad competition. I am not optimistic enough to expect tlfat those evils will be removed so long as the cause is perpetuated, but I think the time has come when we should recognize the origin of these evils and endeavor to get at the root of the difficulty and correct it from the bottom. Therefore it seems to me that the amendments of this law which are most needful are those amendments which are most likely to secure the absolute preservation of tariff rates. 1 say that not only because of its abstract justice, and not only for the reasons 1 have already suggested, but for another reason, which to my mind is even more convincing, whatever may be said to the contrary — and I cer- tainly express no opinion as to the merits of any particular case — and that is, that there are a great many complaints at the present time that rates are too high. Those complaints, I may say, are mainly, if not altogether, confined to the advances in rates affecting several hundred articles which were affected two years ago by a simple change in clas- sification. Aside from those advances so brought about, nearly every complaint which has reached the Commission has, in its final anal3rsis, resolved itself into a complaint of discrimination. The most offensive and demoralizing of all evils connected with rail- road operation is the giving of a rebate, and I think the first duty of Congress is to provide a legislative remedy against that evil. As I have already said, I think no remedy is adequate which does not include in its provisions the right of association and contract between railroads, which present laws forbid. I say that for another reason. If it be true that tariff' rates are in any case excessive, if it be true that in any community a commodity is burdened with an unjust transportation tax, 1 believe there is no influ- ence so powerful to bring about a reduction of that burden as to com- pel everybody to share it equally. Just so long as the carrier, by yieldingto the pressure of some great shipper or combination of ship- pers, by giving to some interest a private and preferential rate, can hold lip its tariffs as to everybody else, it is perfectly natural that that should occur. The carrier is aided to that result by its own interest and by the implied demand of the powerful shipper who gets the preferential rates. So if the question of the reasonableness of railway charges is a question between the public on one side and the carrier on the other, you have, under conditions of actual railway competition — conditions which are enforced by our present legislative policy — you have a divi- 140 RAILWAY B'REIGHT RATES AND POOLING. sion of the public, its most powerful members in a particular locality being ranged on the side of the carrier; and just so long as the interest on one side is divided and* the powerful shipper is allied with the car- rier, just so long it is natural, if not inevitable, that the tariff rates will be disregarded and the great majority of men be required to pay a high rate and their more important and influential rival allowed a lower rate. I believe there is no influence which will be so powerful, no authority which you can confer upon the Commission which will be so effective, to bring down rates which are too high as to compel the absolute observance of tariff rates under all circumstances and to all shippers. For when it comes to pass that an Armour or a Havemeyer or a Counselman can not get a carload of freight carried for one mill less than the weakest and least consequential competitor, then 3'ou will have the entire influence of large shippers and small concentrated in an effort to bring about a reductioil of rates, and that effort will ordi- narily succeed, because, as a general proposition, I do not believe that any railroad or combination of railroads can long maintain a rate which is demonstrably excessive or unreasonable against the united demands and the united insistence of the community or the dealers in the com- modity to which those rates apply. Therefore I believe that the most wholesome and powerful agency which can be introduced to bring about the purposes for which this law was enacted is that which shall secure to every shipper, large and small, precisely the same charge; and that, as I have already said, I do not believe, as a practical matter, can be accomplished without allowing the railroads the right of association with each other. The Chaikman. We shall be pleased, Judge Knapp, if you will con- tinue these remarks at our next meeting. Mr. Knapp. That, Mr. Chairman, covers all I want to say. Committee on Interstate Commerce, United States Senate, June 6, 1902. At the regular weekly meeting of the committee (present. Senators Elkins (chairman), Kean, Dolliver, Millard, Foster, Carmack, and McLaurin), Mr. Joseph Nimmo, jr., made a statement on the bills before the committee to amend the interstate-commerce act as follows: STATEMENT OF JOSEPH NIMMO, JR. THE CIVIL REMEDY PROVIDED BY SECTION 16 OF THE ACT TO REGULATE COMMERCE. Mr. Nimmo. Mr. Chairman, since bills were introduced in both branches of Congress at its present session for the amendment of the act to regulate commerce, the whole situation has been changed by judicial procedure instituted by the Interstate Commerce Commission at Chicago. After fifteen years of efforts by the Commission to enforce the criminal provisions of sections 10 and 12 of the act to regulate commerce, recourse was had during the month of March last to the civil remedy provided in section 16 of that act. It is yet too soon to predict what may come of the attempt to enforce this provision of the statute. The only information of value upon the subject is contained RAILWAY FREIGHT RATES AND POOLING. 141 in the remarks of Judge Grosscup just before issuing his order for a temporary injunction on March 24 last. The language of the learned judge upon that occasion is as follows: The question presented by this application is a new one and a very great one, and I will not pass upon it finally until there have been elaborate arguments on each side. If the United States courts sitting in equity have the power called for, it will make them master of the whole rate situation, for an inquiry instituted by them to inquire whether the injunction has been violated or not will, much more readily than criminal proceedings, probe to the bottom of the railroad's doings. For my own part, I believe that railroad rates ought to be as stable as postage rates, so that every shipper would know, as certainly as the sender of a letter, how much it would cost him, and the fact that no one else could send it for less. An injunction some- thing like this has been granted in other cases, notably in the Debs case, but an important distinction between that case and this is that in the Debs case the things complained of were in their nature temporary, while in this case the injunction will be against conduct running continuously into the future. The interstate-commerce act has hitherto been ineffectively executed, but the taking of such power by the courts, as this injunction implies, might turn out to be the vitalizing of the act. This is a mere forecast by Judge Grosscup, but it contains a word of hopefulness. It tells the important fact that the appeal of the Com- mission to section 16 is a new one — so new indeed that the court will require elaborate argument of the question on both sides before decid- ing it. It declares further that if the courts have the power called for "it will make them master of the whole rate situation." It next states the opinion of the learned judge that the new or civil process "will much more readily than criminal proceedings probe to the bottom of the railroad's doings," that "the injunction will be against conduct running continuously into the future " and thus exercise a deterent influence, the finest expression of governmental power, and that while criminal procedure has proved ineffectual, the taking of power under section 16 "might prove to be the vitalizing of the act." This, Mr. Chairman, is the opinion of a learned and astute judge concerning a possible remedy for the specific difficulties which have been made the occasion for the introduction of the various bills now before Congress for the amendment of the act to regulate commerce. So the fact appears at this late day that the interstate-commerce act has two arms — the right arm of civil remedy and the left arm of crim- inal remedy. Hitherto the interstate commerce has confined its attempts at regulation to the left arm of criminal remedy, but it has at last had recourse to the right arm of civil remedy provided in sec- tion 16 of the act. After waiting fifteen years to inaugurate such action, why not, I ask, postpone legislation ujjon the subject until it can be ascertained what will become of this injunction proceeding, which, as Judge Gresham observes, is not only promising of good results with respect to rate cutting, but also to the whole broad sub- ject of railroad regulation. The motion was set down for hearing on June 9, but I think it has been postponed to a later date in order that .similar procedure before a United States judge at Kansas City may be taken under consideration at the same time. There is another matter which I would refer to, and that is that sec- tion 3 of the Corliss bill proposes to take the vital principle out of this vitalizing section 16 of the act. I need not attempt to explain the phraseology which makes this change, for it is evident upon the read- ing of the act and of the bill, but will simply say that the bill proposes to repeal all of section 16 on pages 15 and 16 of the act to regulate coni- merce, as printed, and to substitutein lieu thereof obedience to defini- 142 RAILWAT FREIGHT RATES AND POOLING. tive orders of the Commission with respect to prescribing rates for the future, a matter which has no place in the law as it stands. In the opinion of an able lawyer "it would seem to have the effect of estab- lishing the Commission as the sole tribunal to deal with the subject and ousting the courts of their important jurisdiction." For this reason above all others, I would say postpone action on this Corliss bill or any other bill involving an attempt to paralyze section 16 of the act to regulate commerce, at least until after the courts have had a chance to decide upon its efficacy for the abatement of the evils on account of which it has been invoked. STATEMENT OF THE QUESTION AT ISSUE. I invite your attention next to the various attempts of the Interstate Commerce Commission to acquire both judicial and legislative power. 1. The Commission at first assumed that it was invested with dis- pensing power in the matter of granting relief from the provisions of section 4, the long and short haul provision, but it was soon over- whelmed with applications for relief and reversed its policy, declaring that the companies must first decide for themselves whether they are or are Aot authorized by the law to charge more for the shorter than for the longer haul, and that in case of complaint the Commission would hear and determine each case upon its merits. The latter method of procedure has been found to be entirely adequate to the prevention of unjust discriminations of this particular character. It is the legal method of procedure in regard to controversies in contradistinction to the American and autocratic method of exercising dispensing powers not subject to judicial review. 2. The Commission having assumed to exercise the judicial function in the case of the Kentucky and Indiana Bridge Company v. Louisville and Nashville Railroad Company, Judge Jackson, in the United States circuit court for the district of Kentucky, decided in the month of Januaiy, 1889, that the Commission is not a court, and that Congress has no power to invest an administrative body with the judicial function. (37Fed. Kep., 613.) In its annual report submitted November 29, 1890, the Commission denied the doctrine of constitutional law announced by the court and stoutly maintained that with respect to administrative questions its " conclusions should be a finality even though their enforcement might require judicial aid." (4. I. C. C. R., p. 13.) A bill expressive of its peculiar ideas was then drawn by .the Com- mission, and at its instance was introduced in the Senate on December 15, 1891. (Senate bill 892, Fifty-second Congress, first session.) At hearings before the Senate Committee on Interstate Commerce from February 3 to February 24, 1892, the proposition was strenuously opposed by eminent counsel, mainly upon the elementary principle of constitutional law and of rational government that it is absurd to attempt to invest a single governmental agency with the functions of detective, witness, party complainant, prosecutor, and judge in the same proceeding. That savored too much of the Pooh Bah style of government. The attempt of the Commission to secure the desired power was dis- regarded by the Senate Committee on Interstate Commerce before which the hearings took place. RAILWAY FREIGHT RATES AND POOLING. 143 3. In the maximum-rate case the Commission assumed, by an order dated May 29, 1894, that by necessary implication the act to regulate commerce conferred upon it the power to prescribe the relation of the rates which should prevail as between points north of the Ohio River and points in the South Atlantic and Gulf States with reference to rates from points in the North Atlantic States to the same southern points. The result of this order of the Commission, if it had been allowed to take effect, would have been to endow the Commission with absolute control not only over the transportation interests but also of the commercial interests of the country, thereby eliminating the courts from any power to restrain the action of the Commission in the issu- ance of such orders. But the Supreme Court of the United States in its decision rendered May 27, 1897 (167 U. S.), overruled the order of the Commission. At every subsequent Congress, however, the Com- mission has been a somewhat importunate claimant before Congress for the powers which the Supreme Court of the United States declared were not conferred upon it by the act to regulate commerce. Furthermore, the Supreme Court ruled, in the maximum-rate case, that if such power over rates as that claimed bj'^ the Commission were conferred upon it by Congress it would be in the nature of a delega- tion of legislative power, and as such be exempt from all judicial con- trol or modification, and therefore constitute practically a grant of absolute or autocratic power. This conclusion of the Supreme Court of the United States was also strenuously denied by the Commission, and ever since the Commission and its coadjutors have been strenuously engaged in the attempt to secure the power to prescribe absolute and relative rates for the future. The present contention before the two committees of Con- gress grows out of this struggle for power. THE JUDICIAL VIEW OF THE PROPOSITION TO GRANT TO THE COMMIS- SION THE RIGHT TO PRESCRIBE RATES FOR THE FUTURE. In the course of the controversies upon the general quescion of grant- ing to the Commission the power to prescribe rates for the future, the advocates of the measure have had much to say to the effect that such power if granted would be subject to judicial review. This is strenu- ously denied. The question being vital to the whole subject of gov- ernmental regulation of the railroads, it seems proper to consider it upon its merits. The Supreme Court of the United States, in the maximum- rate case, already cited, announced the following rule of constitutional law: It is one thing to inquire whether the rates which have been charged and collected are reasonable— that is a judicial act; but an entirely different thing to prescribe rates which shall be charged for the future — that is a legislative act. And again: i The power to prescribe a tariff of rates for carriage by a common carrier is a legis- lative and not an administrative or judicial function. (167 IT. S., 479. ) ' In a word, the Supreme Court has declared that it will have nothing to do with a rate for the future made under legislative authority. The business of the judiciary relates to legally contested cases. Its normal expression is the lawsuit — not the administration of the affairs of the busy world. It looks to the past and not to the present or the 144 RAILWAY FREIGHT RATES AND POOLING. future. This constitutional view was accepted and has been clearly expressed by members of the Interstate Commerce Commission. In commenting upon these and related judicial utterances, _ Hon. Martin A. Knapp, chairman of the Interstate Commerce Commission, made the following statement on March 10, 1898, before the Senate Committee on Interstate Commerce (page 9): One doctrine is now settled — that whereas the investigation of the question whether an existing rate is a reasonable and lawful one or not is a judicial question, the deter- mination of what the rate shall be in the future is a legislative or administrative question with which the courts can have nothing to do. Again, on page 26 of the same hearing, Mr. Knapp said: This is the theory of it: This Commission, for the purpose we are now discussing, represents the Congress of the United States, and when it has made an order, in a certain sense it is like an act of Congress. On page 118 of Hearings before the Committee on Interstate Com- merce of the United States Senate, February 20, 1900, Hon. Charles A. Proutj^, Interstate Commerce Commissioner, also an attorney at law, said: The prescribing of a rate is, under the decisions of the Supreme Court, a legisla- tive, not a judicial function, and for that reason the courts could not, even if Con- gress so elected, be invested with that authority. At a recent heaxing in another place Mr. Knapp said, on page 296: While the determination whether a given rate is — that is, has been — reasonable or not, is a judicial question, the determination of the rate to be substituted in the future is not a judicial question, can not be made a judicial question, and that author- ity, if exercised at all under the circumstances, must be exercised either by the leg- islative body itself or by an administrative tribunal to which some portion of the legislative power is delegated. Now, that being so, of course you must bear this in mmd, that it is incorrect and misleading to speik of an appeal from the order of the Commission. In the recent case of Louisville and Nashville Railroad Company v. Kentucky, decided January 6, 1902, the Supreme Court said: It is scarcely necessary to say that courts do not sit in judgment upon the wisdom of legislative or constitutional enactments. In the case of San Diego Land Company v. National City, the Supreme Court of the United States held as follows (174 U. S., 739-754): Judicial interference should never occur unless the case presents clearly and beyond all doubt such a flagrant attack upon the rights of property under the guise of regulation as to necessarily have the effect to deny just compensation for private property taken for public use. Similar judicial opinions are abundant and need not be cited here. An exceedingly able and distinguished lawyer, who has given prac- tically his entire time to the study of transportation questions since the act to regulate Congress was passed, has recently expressed the following opinion upon this vitally important point: As the power to make future rates is a legislative power. Congress can not, in my opinion, constitutionally confer upon the judicial department any power to review or reverse the action of the Commission in making future rates. The only power that would be left to the judiciary or that could be conferred upon the judiciary by Congress would be the ijower to decide whether those rates (made by the Commis- sion) were confiscatory in character. And again: No court can detennine whether an act of Congress is upon the facts unjust or unreasonable or whether an act has been passed under some error of law. RAILWAY FREIGHT RATES AND POOLING. 145 While it is unquestioned constitutional law that no carrier can be compelled to carry freights at rates which are in effect confiscatory, yet a broad line of distinction lies between remunerative and confisca- tory rates, which in practice excludes the courts from the power to condemn any rate made in pursuance of legislative enactment upon the ground that it is unjust or unreasonable. Without dOubt the discre- tionary power proposed embraces the entire range of commercial profits wnich in practice justifies both the construction and the opera- tion of railroads. In a word, it is an absolute and practically autocratic power. The idea that the Federal judiciary will ever allow itself to be used for the purpose of eliminating its own authority in the realm of justice seems too preposterous for serious consideration. It can be safely predicted that in reply to any such proposition the judiciary would again be forced to the indignant exclamation, " Could anything be more absurd?" I think, Mr. Chairman, that certain members of the Interstate Commerce Commission are fully aware of the import of the bill now before you as I have stated it, namely, that it eliminates the judiciary and confers upon the Commission practicalh^ autocratic powers, and have been forced to the conclusion that it is impracticable. In an address delivered before the Illinois Manufacturers' Association on April 2, 1902, Mr. Commissioner Prouty said: Personally I have for a long time insisted that these questions could only be prop- erly dealt with by the creation of a new and special tribunal for that purpose. And on page 238 of the hearings, in another place, Mr. Prouty said on April 22: I think if you could create a special court which dealt with these questions alone, which was chargeable in the public mind with the proper disposition of these ques- tions, and which would speedily become an expert body, you would solve that diflBculty. Governor Fif er, also an Interstate Commerce Commissioner, indicated the same purpose, and pointed to the deterrent influence of judicial procedure, an expression of governmental authority which does not attach to mere administrative authority. The same idea was expressed to me several years ago by another member of the Commission. In a word, too, the Commission appear already to see the absurdity involved in the autocratic control of the commercial and transportation interests of this country freed from all judicial restraint. There is no intimation of any such grant of power in the act to reg- ulate commerce. This was emphatically declared by the Supreme Court of the United States in the Maximum Rate Case (167 U. S.) and the fact that ample remedy for all the evils complained of is afforded by section 16 of the interstate-commerce act is indicated by Judge Grrosscup in his recent judicial utterance at Chicago. MERITS OF THE QUESTION INVOLVED. And now I come to the merits of the whole contention, namely, the question as to whether the grounds of complaint are of such a charac- ter and are sufficient in importance to justify the action proposed in the Corliss bill. The question at issue relates to three causes of com- plaint, namely: (1) Discriminating rates; (2) exorbitant rates, and (3) violations of published or legal rates. F K p 10 14:6 KAIL WAY FREIGHT RATES AND POOLING. First I invite your attention to the subject of DISCRIMINATING BATES. On April 16, 1900, Senator Elkins, then a member, and now chair- man, of this committee, introduced in the Senate a resolution calling upon the Commission for the following information; The total number of cases heard and determined by the Commission during the last ten years, the number of such cases which have been appealed to the courts, the number of such cases in which the decisions of the Commission have been sustained, the number of such cases inwhich the decisions of the Commission have been reversed, and the number of such cases which have not been determined. This resolution was at once considered and agreed to. It is known as Senate resolution No. 267, Fifty-sixth Congress, first session. On the 28th of April the Interstate Commerce Commission transmitted its reply to the Senate (Senate Doc. No. 319, Fifty-sixth Congress, first session). From this answer the history of the cases decided from April 16, 1890, to April 16, 1900, appeared to have been, summatily, as follows: Total number of cases decided by the Commission -i 180 Number appealed to the courts 35 This showed that in the millions of freight transactions in the United States during the ten years from April 16, 1890, to April 16, 1900, only 180 cases, or 18 a year, came to a hearing, and that of these only 35, or 3i a year, were appealed to the courts, of which in only i cases in ten years was the Commission sustained by the courts. The 35 cases appealed to the courts during the ten years were dis- posed of as follows: Commission sustained 4 Commission reversed 17 Cases pending 12 Cases \vithdrawn 2 Total 35 The above result showed that of the 21 cases appealed from the decision of the Commission to the courts and decided, the Commission was overruled in over four-fifths of those cases. This, in connection with the fact as to the small amount of litigation involved, was exceed- ingly detrimental to the claim of the Commission. The bill (S. 1439, Fifty-sixth Congress, first session) was reported adversely from the Senate Committee on Interstate Commerce and failed of consideration in the Senate. In its last annual report the Commission says, "The great mass of complaints are handled and disposed of by the Commission by prelimi- nary investigation and correspondence. The total number of proceed- ings brought before the Commission during the year were 340, but only 19 formal proceedings were instituted before the Commission, or only one in 18 of the complaints preferred. There were only ten cases decided by the Commission during the year, or one in 34 of the nn^,fe entertained. Of the ten cases decided seven were cases of ofTpvW?^^'"''*il-°,: .J^^^.fdmirable result indicates the high degree of perfection to which the railroad system of the country has attained. It IS also creditable to the cct to regulate commerce and to its admin KAILWAY FKEIGHT KATES AND POOLING. 147 In an argument which I had the honor to make before the Senate Committee on Interstate Commerce on April 3, 1894:, 1 was able to present the following statement: In the exercise of its function of preventing unjust discriminations and exorbitant charges the work of the Interstate Commerce Commission has been crowned with abundant success. Although several hundred complaints as to alleged violations of the act to regulate commerce were made during the year ending December 1, 1893, only sixteen cases came to a formal consideration and hearing, all the rest having been settled by the mediatorial offices of the Commission. In only one of the cases decided was the reasonableness of rates called in question, and in that single instance the claim was decided to be not well founded. One of the Commissioners has informed me that only about two-thirds of the cases decided sustain the charges pre- ferred. This indicates that the actual number of proven cases of unjust discrimi- nation did not exceed eleven and constitutes a most gratifying proof of the success of this nonjudicial tribunal in the exercise of its appointed function. Mr. Chairman, I venture the assertion that no court in this country inferior to the Supreme Court of the United States has had so few cases appealed from its decision in a single year. All this proves beyond question that unjust discriminations and preferences of all sorts have been reduced to a minimum, and that they furnish no reason whatever in justification of the appeal of the Commission for more power. This the Commission practically con- cedes. Accordingly it has abandoned unjust discriminations in rates as a basis for its demand for autocratic powers, and now bases such claims almost, if not exclusively, upon rate cutting. EXORBITANT KATES. In its seventh annual report, submitted December 1, 1893, the Com- mission said at page 12: " To-day extortionate charges are seldom the subject of complaint." In its twelfth annual report, submitted Jan- uary 9, 1899, at page 27, the Commission said: "It is true, as often asserted, that comparatively few of our railway rates are unreason- able." From time to time the Commission has had quite a good deal to say about " unreasonably low rates." In its last annual report the Interstate Commerce Commission stated that " the total number of proceedings brought before the Commission during the year was 340. These include formal as well as informal complaints. But only ten decisions were rendered by the Commission during the year, all of which were on formal complaints. Of these, however, only two involved unreasonable or exorbitant rates, or one in 170 complaints. On March 18, 1898, Hon. Martin A. Knapp, the present chairman of the Interstate Commerce Commission, stated before the Senate Committee on Interstate Commerce that " the question of excessive rates — that is to say, railroad charges — which in and of themselves are extortionate, is pretty much an obsolete question." The Supreme Court has in no case decided that a rate charged was in itself exorbitant, and I think I am not mistaken in saying that the question as to the reasonableness of any rate per se has never been presented to that court. I think also that I am not in error in stating that no rate has ever yet been proven to be unreasonable in the lower Federal courts. The record of constantly reduced freight charges in this country since the year 1870, as published by the Interstate Commerce Com- mission and by the Bureau of Statistics of the Treasury Department, affords overwhelming proof not only of the fact that rates are not 148 RAILWAY FREIGHT RATES AND POOLING. excessive, but also that they are very low. During the last thirty years rates have steadily declined in every section of the country. This is shown on page 397 of the Statistical Abstracts for 1901 as follows: The average receipls per ton per mile on railroads of the United States during the years 1870, 1890, and 1900. Eailroad lines. 1870. 1890. 1900. Cents. 1.61 2.61 2.95 2.39 4.50 Cmte. 0.63 1 1.11 .80 1.50 Cent. Western and Northwestern lines ... . . 89 Southern lines 63 .93 Average 1.99 .91 70 The average charge per ton per mile for the United States fell from 1.99 cents in 1870 to 0.70 cent, or 7 mills per ton per mile in 1900. This shows that the average rate in 1900 was only a little more than one-third of the average rate in 1870 — thirty years ago. At the same time the facilities for railroad transportation have been enormously increased and wonderfully improved. The service during the year 1900 was very much more eificient than in 1870. The following table compiled from the data of the Interstate Com- merce Commission for the years 1890 and 1900 indicates the fall in rates by groups and for the whole country. It closely verifies the statement made by the Bureau of Statistics: Revenue per tonper mile charged by railroads of the United States according to statistics of the Interstate Commerce Commission. [Data from page 72 ol report £or 1890 and from page 95 of the report of the Commission for 1900.] 1890. 1900. Eedue- tion. Cents. 1.373 .828 .695 .844 1.061 .961 1.360 1.152 1.303 1.651 Cents. 1.152 .613 .546 .595 .808 .806 1.064 .964 .938 1.067 Per cent. 16 li::::::::::":::" Ill 21 IV V VI 16 VII VIII 16 28 35 IX X United states .941 .729 The facts thus stated prove beyond all doubt that in all our splendid American railroad system embracing about 200,000 miles of road, over which moves about 125,000,000,000 worth of merchandise annu- ally or more than twice the value of the entire railroad system of the country, and involving millions of transactions every year, only 3i cases a year of unjust discriminations were proven in formal hearings before the Commission during the ten years from April 16, 1890, to April 16, 1900, a fact stated by the Interstate Commerce Commission in Senate Document No. 319 of the Fifty-sixth Congress, first session. Of this small number less than one case a year of unjust discrimina- RAILWAY FKEIGHT KATES AND POOLING. 149 tions was sustained by the courts. Furthermore, not a single case of unreasonable or exorbitant rates has been sustained by the Federal courts during the fifteen years since the Interstate Commerce Com- mission was organized. Mr. Commissioner Knapp has attempted to overcome the effect of the foregoing official record showing the general . and very marked reduction in rates by asserting that the apparent reduction in rates is the result of a disproportionate increase in the quantity of low-grade freights, such as iron ore and coal transported during the last ten years. This statement is without any foundation in fact, the tonnage of merchandise transported other than coal and iron ore having increased faster from 1890 to 1900 than did the tonnage of coal and iron ore transported. But this assumption has no foundation what- ever in the facts of experience. This is clearly indicated by the fol- lowing table, which shows the tons carried 1 mile on railroads, the tons of coal marketed, and the tons of iron ore produced in the United States in 1890 and in 1900: 1890. Tons carried one mile". Coal marketed i> Iron ore produced" Tms. 76,207,047,298 U4, 628, 266 16,036,043 Tms. 141,699,167,270 199,977,768 27, 653, 161 Per cent. 0.86 .74 a Interstate Commerce Commission statistics. ' Statistical Abstract of the United States. » Mineral Resources of the United States, 1900, Geological Survey, pp. 43-44. From this table it appears that the increase of railroad traffic, as expressed by tons of freight cai'ried 1 mile, according to the statistics published by the Interstate Commerce Commission, exhibited an increase of 86 per cent during the ten years 1890 to 1900, whereas the coal marketed and iron ore produced in, the United States during the same period showed together an increase of only 74 per cent, so that the attempted argument that the apparent reduction in the average rate per ton per mile during the ten years from 1890 to 1900 is due to the enormous increase in the tonnage of coal and ores transported is seen to be utterly fallacious. The contention that rates have not been greatly reduced during the last ten years is as glaringly untrue in detail as in the general expres- sion already given for the whole country. For example, the tons of freight transported 1 ton a mile over the lines embraced in Group II of the Interstate Commerce Commission's subdivision, including the States of New York, New Jersey, Pennsylvania, Maryland, and Delaware, increased from 23,236,827,478 in 1890 to 41,275,547,319 in 1900, an increase of 77. 63 per cent, while the coal produced in the States of Pennsylvania, Maryland and West Virginia exhibited during the same period of ten years an increase of only 65 per cent, viz, from 88,860,072 tons in 1890 to 146,323,336 tons in 1900. It also appears from the statistics of the Interstate Commerce Com- mission that the average rate charged on the lines of Group II fell from 0.828 of a cent in 1890, to 0.613 of a cent in 1900, a reduction of 26 per cent, thus clearly indicating a large and important reduction in the rates charged on the four leading trunk lines of the East — the New York Central, the Erie, the Pennsylvania, and the Baltimore and Ohio, together with their branches and connections in Group II. 150 EAILWAY FEEIGHT BATES AND POOLING. SECEET VIOLATIONS OF RATES. And now, Mr. Chairman, I come to the ground upon which, at the present time, the Commission bases its demands for practically auto- cratic power over the commercial and transportation interests of this country. SECRET VIOLATIONS OF PUBLISHING RATES. Having been forced to abandon all other reasons for its. persistent claim to autocratic power, the Commission has had recourse to secret rate cutting as the gravamen of its complaint. Here again facts are against the Commission. (1) It has steadfastly denied that it is in any especial manner responsible for the prevention of rate cutting. (2) It has opposed any amendment to the act to regulate commerce designed to afford to the Commission greater facility for the enforce- ment of the penal provisions of the statute. (3) It has been derelict in the discharge of its duties with respect to the prevention of rate cutting. (4) The remedy proposed by the Commission is not applicable to the cure of the evil complained of, and (5) The remedy proposed by the Commission is misdirected. These points will be considered in the order stated. THE COMMISSION HAS STRENUOUSLY MAINTAINED THAT IT IS NOT KESPONSIBLB FOR THE PHEVENTION OF EATE CUTTING. By the second section of the act to regulate commerce every depart- ure from tariff rates is expressly forbidden and is declared to be illegal. By section 6 it is provided that in order to compel every common car- rier to publish and file with the Commission its tariff rates, fares, and charges the " writ of mandamus shall issue in the name of the people of the United States at the relation of the Commissioners," and section 12 provides that " the Commission is hereby authorized and required to execute and enforce the provisions of this act;" for which purpose the Commission is given the widest possible powers of investigation, including the power to require by subpcEna the attendance and testi- mony of witnesses and the production of all books, papers, contracts, and agreements and documents relating to any matter under investi- gation. The law distinctly provides that it may by one or more of its members prosecute any inquiry necessary to the discharge of its duties in any part of the United States. It has also the power to require every district attorney in the United States to prosecute all necessary proceedings for the punishment of violations of the act, and its find- ings in all judicial proceedings are made prima facie evidence as to each and every fact found. Furthermore, it is provided by section 16 of the act to regulate commerce that if it is made to appear to any United States court ' ' that the lawful order or requirement of said Commission drawn in question has been violated or disobeyed it shall be lawful for such court to issue a writ of injunction or other proper process, mandatory or other- wise, to restrain such common carrier from further continuing such violation or disobedience of such order or requirement of said com- mission and enjoining obedience to the same." Notwithstanding these clearly-prescribed powers and duties, the Commission has, from the beginning, sought to repel the idea that by RAILWAY FREIGHT RATES AND POOLING. 151 the act to regulate commerce it is especially charged with the duty of enforcing the provisions of theact againstsecret rate cutting — the par- amount purpose of the act. In proof of the correctness of this asser- tion the following facts of record are adduced: In its annual report to Congress for the year 1893, at page 7, the Commission declared that it "Is wholly without authority as respects those discriminations between individuals which are made misdemeanors by that enactment," that "it is endowed with none of the functions pertaining to the detection and punishment of delinquents except such functions as may be exercised by private citizens," and (on page 8) it deprecated the idea that it has anything to do with " uncovering the guilty transaction and bringing to justice those who engage in it." In a letter addressed to Hon. William E. Chandler, a Senator of the United States from New Hampshire, under date of October 17, 1895, Hon. Martin A. Knapp, then an Interstate Commerce Commissioner and now chairman of the Commission, strenuously maintained that the prevention of the crime of rate cutting is a thing "with which the Commission has no power to deal." (Senate Doc. 39, Fifty -fourth Congress, first session, p. 14.) For this and other declarations of similar import Senator Chandler administered to Mr. Knapp and to the Commission a sharp rebuke. Mr. Knapp appears to have been then, as he has been ever since, laboring under the delusion that the duty of preventing rate cutting and other penal offenses denounced by the act to regulate commerce is incompatible with and beneath the function of revising all the freight tariff of the country, of prescribing rates for the future, and of deter- mining the relative advantages to be enjoyed by competing towns, cities, and sections, and by competing industries througnout this vast country, a conception which he described in his letter to Senator Chandler as "my high ideal of the work in which the Commission is engaged," an idea which as I have endeavored to show is expressive of a malignant form of bureaucratic government, and as such utterly inconsistent with the governmental institutions of this country. In its persistent denial of the fact that it is explicitly charged by the act to regulate commerce with the duty of preventing rate cutting the Commission flatly opposes its opinion to that of the Supreme Court of the United States. In the Maximum Rate Case (167 U. S., 479) the court said: "It (the Commission) is charged with the duty of seeing that there is no violation of the long and short haul clause; that there is no dis- crimination between individual shippers, and that nothing is done by rebate or any other device to give preference to one against another; that no undue preferences are given to one place or places or individ- ual or classes of individuals, but that in all things that equality of right, which is the great purpose of the interstate-commerce act, shall be secured to all shippers." But, as before stated, in this as in other respects the Commission has not and does not to-day hesitate to oppose its opinion to that of the Supreme Court of the United States regarding the interpretation of the statutory or constitutional law of the land. THE COMMISSION HAS REPELLED ANY ATTEMPT TO GIVE IT GREATER POWER IN ENFORC- ING THE PENAL PROVISIONS OP THE ACT TO REGULATE COMMERCE. Not content with a denfal of its duty to prevent rate cutting the Commission has deprecated the idea of increasing its power to prevent 152 RAILWAY FREIGHT RATES AND POOLING. the commission of misdemeanors, particular reference being had to rate cutting. On page 7 of the seventh annual report of the Commis- sion is found the following declaration : But the main point to be considered is that Congress has no power to clothe the Commission, or any similar tribunal, with authority to execute the penal provisions of this statute other than to aid prosecuting officers in procuring evidence against suspected parties. And, again, at page 8: No amendment of this statute, therefore, is necessary or suitable with the view of giving greater power to the Commission in enforcing its penal provisions. But when driven from the charges of exorbitant rates and unjustly discriminating rates, as possible excuses for demanding of Congress autocratic power, the Commission glaringly stultifies itself by seeking to secure amendment to the act to regulate commerce for the purpose of preventing rate cutting through an expedient which, as herein shown, is not only out of all proportion to but totally inapplicable to the offense, besides being essentially revolutionary. The repudiation by the Commission of responsibility for the preven- tion of rate cutting, and its simultaneous effort to prevent any strength- ening of its powers for that purpose, which would be subject to judicial review, clearly indicates its fixed purpose and desire to free itself of any sort of cooperation with or dependence upon the judiciary in the discharge of its official function. THE COMMISSION HAS BEEN DERELICT IN THE DISCHARGE OF ITS DUTY WITH RESPECT TO THE PREVENTION OF RATE CUTTING. The Commission has neglected the duty of using its best efforts to aid in detecting and in bringing to punishment persons who have beej guilty of the offense of rate cutting and other misdemeanors, a duty plainly incumbent upon it under the provisions of sections 2, 6, 10, 12, and 16 of the act to regulate commerce. This seems to be the result of the extreme aversion entertained by the Commission toward that class of duties. In the fifteenth annual report of the Commission, submitted January 17, 1902, at page 8, appears the following: To convict for unjust discrimination it is necessary to show not merely that the railway company paid a rebate to a particular shipper, but it must also be shown that it did not pay the same rebate to some other shipper with respect to the same kind of traffic moving at the same time under similar conditions. As a practical matter this is almost always impossible. The rule of law here stated bjr the Commission was announced by Judge Grosscup, of the northern district of Illinois, in a decision ren- dered June 20, 1896, in the case of United States v. Hawley, 71 Fed. Rep. , 672, with which case the Commission had nothing to do. It is as follows: This case illustrates that whatever difficulties there are in the enforcement of this act are not so much due to the law itself as to the failure of the prosecution to gather up and lay before the grand jury the essential facta of a case. The facts difficult to obtain — the transaction between the carrier and the favored shipper — are fully spread upon this indictment. The facts not difficult to obtain— the identity of the ship- per discriminated against— constitute the fatal omission. Ordinary alertness and intelligence would have avoided this pitfall. Herein the court declared that the facts as to the identity of the shipper discriminated against are "not difficult to obtain" and sharply RAILWAY FREIGHT RATES ANB POOLING. 153 animadverted upon the failure to obtain them, whereas the Commission in its annual report dated January 17, 1902, has declared that the dis- covery of such facts "is almost always impossible." Jn this the Commission flatly opposes its opinion to that of the judi- ciary and of every freight-traffic manager in the country. I mention this contrariety of opinion upon a matter easily susceptible of proof as one worthy of Congressional inquiry. The judicial opinion just cited relates particularly to the offense of unjust discrimination. But in the same case the court stated the fact that it is a violation of the law to charge less than the tariff' rate. Even this offense, not involving any charge of unjust discrimination, the Commission seeks to ignore, declaring that the law "does not punish (it) otherwise than by a possible nominal fine." The law, however, explicitly prescribes for this particular offense a fine of "not to exceed 15,000." The declaration of the Commission that the act to regulate com- merce does not confer upon it ample power to prevent rate cutting is strenuously denied by able lawyers and jurists who hold that sections 2, 6, 10, 12, and 16 of the act gives it ample power to correct and pre- vent such offenses. If, however, the law is in this respect defective, by all means let it be amended so that the procedure may be freed from any practical difficulty. Differences of opinion prevail as to the nature of the remedy which should be adopted for the prevention of rate cutting. In its fifteenth annual report, submitted January 17, 1902, the Commission suggests as a remedy for rate cutting that the corporation as well as its officers should be subject to the penalty prescribed in the act. The general solicitor of one of the great trunk lines of the countrj^ suggests that the corporation alone ought to be subject to the penalty. The question is one to be determined by Congress and is worthy of careful con- sideration. It is believed that any proper amendment to the act in regard to rate cutting would be cheerfully accepted by the principal railroad managers of the country, and that they would cordially cooperate in the enforcement of the law. The public attitude assumed by the lead- ing railroad officials of the country toward this subject seem fully to sanction this statement. In this connection it is worthy of observation that the Commission fails to show in how many cases it has given the courts a chance to consider rate cutting upon evidence which the court declares not diffi- cult to obtain, or to adduce evidence upon which the courts may impose what the Commission calls "a possible nominal fine," but which may amount to $5,000, and which with ordinary diligence can be imposed. It is believed that if the Commission had been half as earnest in the attempt to prevent rate cutting as it had been in its efforts to secure autocratic power, the misdemeanor complained of would now be very much less the subject of complaint. It is believed also that a thorough Congressional investigation of this particular subject would clearly expose a manifest dereliction of duty on the part of the Commission. The history of the case exposes the aversion of the Commission to a duty clearly imposed upon it by the interstate- commerce act, and this is exhibited nowhere so glaringly as in the oft- repeated assertion of the Commission that it has been deprived of the power to afford relief to complainants against wrongs incident to infractions of the law, and that it is not responsible for the prosecution of specific violations of the 154 RAILWAY FREIGHT RATES AND POOLING. provisions of the act to regulate commerce, both of which statements are strenuously denied. A recent news item indicates that at last the Commission has awak- ened to a realization of the fact that the law imposes upon it a duty with respect to the suppression of rate cutting, and that it is disposed to try to set in motion the means for accomplishing that object before the courts as provided in the act to regulate commerce. THE REMEDY PROPOSED BY THE COMMISSION IS NOT APPLICABLE TO THE CURB OF THE EVIL COMPLAINED OF. The plan of conferring upon the Commission the power to prescribe rates is totally inapplicable to the offense of rate cutting. It has no relation to such offenses as of means to an end. The Commission has never sought to show that it has such relation. There is not the slight- est reason to believe that rates made by the Commission would be any more exempt from rate cutting than are rates made by the companies. The true remedy pointed out by the judiciary and by the lessons of experience lies in a faithful enforcement of existing laws, which the Commission has spurned and neglected to enforce. Such laws, how- ever, may be amended or supplemented by others which would facili- tate the administrative work of the Commission, for the question is one of procedure, and not one as to the power to act. The history of the course pursued by the Commission in this matter clearly indicates that the idea of asking Congress for autocratic power over the commercial, industrial, and transportation interests of this country in order to suppress rate cutting is an afterthought. Eate cutting is now brought to the front apparently from the fact that the Commission sees no other means of advancing its claim to the exercise of autocratic power either in exorbitant rates or in unjustly discrim- inating published rates. Secret violations of published rates have their origin in the competi- tion of rival commercial forces and are expressions of such struggles. This is apparent to merchants and to railroad managers throughout the country, and as such is deprecated by them. The fact is also clearly perceived that the remedy for such evils lies primarily in railroad self- government dictated by enlightened views of self-interest, the inspir- ing motive of all wholesome statutory enactments. Unfortunately the Commission has frowned upon such self-restraint and sought to substi- tute therefor its claim to the exercise of arbitrary power. The question is one of vast political import and should not be left to the discretion of any administrative body — certainly not to any bureau of the Government bent upon the acquisition of autocratiroflt. Kindly give this matter your careful consideration, and, if possible, assist in giving us the help we pray for. Yours, most truly, R. C. Wallace. RAILWAY FREIGHT EATES AND POOLING. 193 Winter Wheat Millbks' League, Indianapolis, Ind., March IB, 190S. Hon. 0. W. Fairbanks, Washington, D. C. Dear Sir: In the name of the millers of the United States, I beg to call your atten- tion to Senate bill 3575. Newspaper dispatches announce that a very strong railroad lobby is now in Wash- ington, and that one of the representatives of that interest has announced that they did not purpose that any legislation along the lines proposed in bill No. 3575 should pass. As secretary of the Winter Wheat Millers' League, I am constrained to write you frankly as to the situation the miller is in, and to say that politically the Republican party, if relief is not afforded our industry, will feel its efiect. The millers of this country have sufficient capacity to grind into flour every bushel of wheat grown in this country and with proper treatment at the hands of the trans- portation companies could export all of any surplus in the form of the manufactured product. By this I mean the same rate as is accorded to wheat. At present the shippers of wheat are receiving a discriminating rate which means a difference of 5 cents to 10 cents a barrel against flour. Any of our large mills would be glad to run night and day on a margin of 10 cents a barrel or less. As it is they are not able to export any at a profit. Further, if this wheat was ground by our own mills, instead of sending it abroad to be ground, it would mean from $8,000,000 to $10,000,000 addi- tional wages for our own laborers. Again, under such conditions the farmer would get his mill feed much cheaper, and it would yield them a saving of several million dollars per annum. The present unfavorable condition of our flour mills is the result of this discrimination, and the transportation companies have gone the limit, in my judgment, and unless relief is given by this Congress the second largest industry in our country will be practically ruined. Politically fully 90 per cent of our millers are Republicans; but there will be formed an organization among the millers, who number over 16,000, who will act independent in politics. Every mill, nearly, in the country is a political headquar- ters, and their influence on their own and with the farmers will mean enough votes to hold the balance of power in a large number of Western States. I am writing you frankly, for I am certain that you are not fully informed as to the situation, and it is, in my judgment, to your interest to know it. I shall ask that you give these po"'nts the consideration the^ deserve, and that you aid us in getting a hearing from the committee having the bill in charge, and that you also give it your unqualified support. Thanking you in advance for your support and trusting to be honored with a reply, I am, sir, yours, respectfully, E. E. Pbery, Secretary. 22. Petition of the Merchants and Manufacturers' Assodation of Milwaukee, Wis., and others, praying for the passage of the so-called Nelson-Corliss bill to amend the interstate- commerce law. [Presented by Mr. Quarles, Marcli" 26, 1902.] MiiiWAUKBB, Wis., March 17, 190^. Hon. J. V. QuAKLES, Wt^hinglon, D. C: Dear Sir: At a meeting of the board of directors of the Merchants and Manufac- turers' Association held on Friday, the 14th instant, the following preamble and reso- lution were unanimously adopted: " Whereas recent decisions of the Federal courts have rendered the interstate- commerce law ineffective in the protection of the public from unreasonable and dis- criminative rates imposed by the common carriers of the country, which was the purpose of its enactment; and "Whereas a bill has been introduced in Congress, prepared under the direction of the executive committee of the interstate-commerce law convention, known as the Nelson-Corliss bill, designated as House bill 8337 and Senate bill 3575, intended to remedy the defects found to exist in the present law: Therefore, Resolved, That the Merchants and Manufacturers' Association of Milwaukee hereby F R P 13 194 KAILWAY FREIGHT BATES A-ND POOLING. indorses said bill and respectfully requests the Senators and Eepresentatives in Con- gress from this State to exert their influence in every prober way to secure its enact- ment into law, and to obtain such precedence for its consideration over other pend- ing measures as its great importance demands. Kindly give this matter your careful consideration, and oblige. Yours, very sincerely, L. 0. Whitney, Secretary. 23. Petition of the Wisconsin Retail Lumber Dealers' Association, praying for the passage of the so-called Nelson- Corliss bill to amend the interstate-commerce law. rpresented by Mr. Quarles, March 25, 1902.] Sauk City, Wis., March 13, 190S. Senator Joseph V. Qdarles, Washington, D. C. Deak Sie: At the annual meeting of the Wisconsin Retail Lumber Dealers' Association, held in the city. of Milwaukee February 19, 1902, the following preamble and resolution was unanimously adopted: ' ' Whereas a bill, prepared under the direction of the executive committee of the interstate-commerce law convention held in St. Louis November 20, 1900, has been introduced in both Houses of the Congress of the United States, designated as House bill 8337 and Senate bill 3575, and known as the Nelson-Corliss bill, to so amend the interstate-commerce act as to give it the effectiveness which characterized its opera- tion until the Commission was divested of the authority which it was understood to possess by recent decisions of the Federal courts: Therefore, "Resolved, That the Wisconsin Retail Lumber Dealers' Association, in convention assembled at the city of Milwaukee, February 19, 1902, does hereby indorse the said bill and respectfully request the honorable Senators and Representatives in Congress from this State to give it their support and exert their influence to the utmost, in every proper way, to insure its early enactment." Hoping that your personal views are in accord with the above resolution and request of your constituents, I remain. Yours, respectfully, Paul Lachmund, Secretary- 24. Memorial of the legislature of the State of Minnesota, urging the passage of S. S575. [Presented by Mr. Nelson, April 1, 1902; also by Mr. Clapp.] Whereas the power and right to "regulate commerce among the several States," given by the Constitution to Congress, has, by repeated decisions of the Supreme Court, been held to include the ri^nt to fix reasonable maximum rates for common carriers engaged in the transportation of such commerce; and Whereas the Congress attempted to delegate its power in this regard to the Inter- state Commerce Commission, and attempted to give said Commission the necessary authority for that purpose; and Whereas the Supreme Court of the United States has recently decided that the act creating the said Interstate Commerce Commission is seriously defective and incom- plete, and that while said act confers on said Commission the power to declare exist- ing rates unreasonable, it does not give said Commission the power to prescribe a tariff of reasonable rates to replace those found to be unreasonable; and Whereas since said decision there is no tribunal having the power to correct any unreasonable rates or classifications of freights in the domain of interstate com- merce; and Whereas one of the most important functions of the Government is thus suspended, and immediate legislation is imperatively necessary to clothe said Interstate Com- merce Commission with adequate power to regulate interstate commerce and to prescribe reasonable maximum rates for the transportation thereof, and the State of RAILWAY FREIGHT RATES AND POOLING. 195 Minnesota aa well as the entire Northwest is vitally interested in the enactment of such a law; and Whereas the bill (S. 3575) introduced February 5, 1902, in the Senate of the United States by Senator Knute Nelson, contains all or the provisions necessary to invest said Interstate Commerce Commission with the powers needed for the purposes afore- said, and said bill is therefore one of the most important bills now before Congress; Therefore, be it Resolved by the legisUUure of the State of Minnesota, That we heartily indorse said bill (S. 3575) and respectfully urge the early passage of the same by the Congress of the United States; and be it . Further resolved, That we indorse and approve the action of Senator Nelson in introducing and advocating said bill. Resolved further, That a copy of this memorial be sent by the secretary of state to each member of Congress from Minnesota and to the President of the Senate of the United States. Approved March 10, 1902. State op Minnesota, Department of State: I, P. E. Hanson, secretary of state of the State of Minnesota, do hereby certify that the above and foregoing is a true and correct copy of S. F. No. 54, adopted at the extra session of the legislature, 1902. In witness whereof I have hereunto set my hand and caused the great seal of the State to be affixed, at the capitol in St. Paul, this 27th day of March, A. D. 1902. [seal.] p. E. Hanson, Secretary of State. 25. Petitions of the National Hay Association, of Winchester; of Hydraulic Roller Mills, of Milton; of W. H. Small & Co., of Evansville; of City Roller Mills, of Jeffersonville, praying for certain amendments to the interstate-commerce law. [Presented by Mr. Fairbanks, April 4, 1902.] Winchester, Ind., Marches, 190S. To the Members of Congress: I am directed by the board of directors of the National Hay Association, an organi- zation composed of about seven hundred shippers and receivers, doing business in various parts of the country, to direct your attention to the present ineffectiveness of the decrees of the Interstate Commerce Commission; and also, the chaotic state of the railroad situation, by reason of the judicial interpretation which has been placed upon the interstate-commerce act of 1887. There is now pending in the House a bill which was introduced by Eepresentative Corliss, and a like bill m the Senate, introduced by Senator Nelson, the provisions of which appear to the directors of this association to be fair and reasonable, not prejudicial to the interests of the carriers, but advantageous to shippers and receivers. As an association we indorse this act, and desire to urge upon you the necessity of a prompt amendment, either by means of the bill referred to or in some other man- ner of the interstate-commerce act. I have the honor to remain, Very respectfully, yours, P. E. Goodrich, Secretary-Treasurer. Evansville, Ind., March SB, 190S. Hon. Chas. M. Fairbanks, Washington, D. C. Dear Sir: We wish to earnestly request you to give your full support to the Corliss bill, recently introduced into the House of Representatives by Eepresentative Corliss, of Michigan. Yours, truly, W. H. S.mall & Co. 196 RAILWAY FREIGHT BATES AND roOLilJNW. Jbffersonvillb, Ind., March 16, 190S. Hon. 0. W. Fairbanks, Washington, D. C. Dear Sir: There has been introduced in the Senate a bill designated as Senate bill 3575. We ask you to kindly support this bill, as it is of the highest importance to millers in the way of again securing fair profits on flour. The discrimination of freight rates has been a very hard proposition for millers to overcome, and we therefore ask you to kindly support bill. Thanking you in advance, we are. Yours, truly, Eberts & Bko. Milton, Ind., March S7, 190S. Senator Fairbanks, Washington, D. C. Dear Sir: All millers operating in the State of Indiana are aware of the serious effect of discrimination in freight rates against flour offered for export; therefore the milling has suffered greatly in the past. We note that a bill has been introduced in the Senate as S. 3575 which we believe will correct the evil of discriminating against flour offered as export. We believe it is a question of life and death to the milling interest if the above is not passed. We trust, therefore, that you can and will give the bill your hearty support. We remain, yours, very truly, J. North & Son, D. B. N. 26. Papers pertaining to S. 357S, being an act to amend an. act entitled "An act to regulate commerce." [All presented by Mr. Burrows, April 7, 1902.] Grand Rapids, Mich., February 25, 1902. Mr. Julius C. Burrows, Washington, D. C. Dear Sir: There is a bill before Congress to amend the interstate-commerce act so as to enable the commissioners to enforce their decisions. It is House bill No. 8337. The purpose of said bill is to confer upon the Commission such authority as it actually exercised in enforcing its decisions, until the Supreme Court held that no such authority was conferred by the interstate-commerce act. The bill does not impose any hardship upon the carrier nor enlarge the powers of the Commission with respect to rate changing, but simply gives the Commission power to enforce decisions, which, although generally respected by the railway companies, may in certain cases under the present provisions of the act be disregarded. We believe this bill is worthy of your support and should be passed. Yours, very truly. Fuller & Bice Lumber and Manupactukinq Company, A. P. Irish, Vice-President. Detroit, Mich., March 27, 1902. Hon. J. C. Burrows, Washington, D. C. My Dear Sir: As large shippers of hay, we are very much interested in the bill of Representative Corliss to amend the interstate-commerce act, so that the decrees of the Commission may be made effective, and we earnestly hope you will use your efforts favorably toward this act. Yours, truly, John L. Dexter & Co. Holly, Mich., March 13, 1902. Hon. J. C. Burrows, United States Senate, Washington D. C. Dear Sir: We write to request that you lend your aid in the support of bill (S.3575) to correct the evil of discrimination in freight rates against flour for export. This is such a serious question to all small mills in the country that we hone RAILWAY PEEIGHT BATES AND POOLING. 197 will take it upon yourself to help in every way to have this bill enacted into a law. Unless this happens it will be necessary very soon for all small millers to get out of the business. We feel sure that you are interested and that we may depend upon you in this hour for final action. Trusting that this bill will have your careful personal atten- tion, we are. Yours, truly, Holly Milling Company, Chas. H. S. Poole. Gbebnville, Mich., March IS, 190S. Hon. J. 0. Burrows, Washington, D. C. Dear Sir: We write to ask you if you can not, in the interest of the milling busi- ness in the United States, especially in Michigan, give your earnest support to the bill known as the Nelson-Corliss bill (S. 3575), which is proposed to amend the interstate-commerce law. At the present time there is a great discrimination in the freight rates between wheat and flour for export, in favor of the wheat and detrimental to the flour and the milling interest. The milling interest in this country has been badly handi- capped for the last few years by reason of the great difference in the rates of freight between wheat and flour, and it has nearly killed the milling business in Michigan, as well as in the other States, and if the present condition continues it will be a great loss to the country at large, as now the advantage is all in favor of the foreign millers and against the American millers. The bill mentioned above is to correct this evU, and we wish you would do all you can to get it enacted, and greatly oblige. Yours, truly, E. Middlbton & Sons. Harbor Beach, Mich., March 18, 1902. Hon. Julius C. Burrows, Senate Chamber, Washington. Dear Sir: We are very much interested in the bill S. 3575, and would be very much pleased to have you vote for it and do what you can for its passage. Yours, truly, . The Huron Milling Company, Bela W. Jenks, Secretary. Grand Eapids, Mich., March 15, 1902. Mr. J. 0. Burrows, Senate Chamber, Washington, D. C. Dear Sir: I have previously written you as regards to the dullness in the milling trade all over the United States, especially in Michigan. In this regard I would call your attention to a bill which has been introduced as Senate bill No. 3575, and House bill 8337, also known as the Nelson-Corliss bill. It is certainly of the greatest importance that this bill be enacted into a law and see if the milling interest can not be benefited. It is a bill to amend the interstate-commerce law, giving the Com- mission power to enforce its findings. Hope that you will not only see your way clear to vote for this bill, but that you will give it your moral influence. We know if you and Senator McMillan will put your shoulders to the wheel the bill will pass. Kindly do the best you can for it, and oblige. Very respectfully, C. G. A. Voiqt. Alma, Mich., March 22, 1902. Hon. Julius C. Burrows, Washington, D. C. Dear Sir: I wish to call your attention to a bill which I understand is now before the Senate, known as S. 3575, which, if passed, will enlarge the powers of the Inter- state Commerce Commission. It is a well-known fact that the railroads are dis- 198 RAILWAY FREIGHT BATES AND POOLING. criminating in their freight rates against mill products and against products in the line of agriculture — that this condition of affairs tends to restrict the trade of mill- ing institutions, both large and small. I hope that you will work and vote for this bill, as its passage will materially help the milling interests in this State. I remain, respectfully, yours, Alma Rolling Mills. F. G. Scott. Albion, March 14, 190$. Hon. Julius C. Bderows: At the meeting of the Albion Farmers' Club on the above-mentioned date the follow- ing resolution was passed: "Resolved, That as a club we approve the Nelson-Corliss bill and desire you, as our Representative in Congress, to use all proper means to secure its passage to the end that it shall become the law of the land." Jacob Waetman, President. Mks. S. a. Bascom, Secretary. White Pigeon, Mich., March IS, 1908. Hon. J. 0. BuKKOws, Washington, D. C. Dbae Sir: It is generally supposed, and undoubtedly a fact, the manufacturing industries of our country never were as prosperous and making the money they are at present. All are prosperous with one great exception. This one exception men- tioned, "the flour-milling industry," with the greatest investment in plants and working capital, giving employment to more labor than any single manufacturing industry in the United States, does not share in the general prosperity. It has made no money for some years past, matters are growing worse, and it is now nearing the point where it is a struggle for existence. It is hardly necessary to call your attention to this fact. Your knowledge of the industries of the country and their condition will tell you this, but with a slight investigation of the condition of the mills in your own State, nay, not necessary to go beyond the limits of your own town, to have this assertion verified. There is a cause for all this, and it rests in the discrimination in freight rates against flour for export. Wheat, our raw material, is carried on the same trains for the same vessels for export, always for less and often for less than one-half the amount which mills are compelled to pay on the manufactured product. For the purposes of correcting this evil it is proposed to amend the interstate-com- merce law, giving the Commission power to enforce its findings. To this end there has been introduced in the Senate a bill designated as S. 3575, which I trust you will find consistent to give your earnest support and best efforts to become a law. Very respectfully, yours, R. J. Hamilton. The Merchants and Manufacturers' Exchange, Detroit, April 5, 190$. Whereas there is an extensive demand on the part of the public for some legisla- tion which shall regulate the rates of freight and classification of merchandise charged by the transportation companies of the country, and which shall clothe the Inter- state Commerce Commission with the power to enforce its decisions and to make such regulations as shall protect the shippers from extortion at any time; and Whereas we believe that competition among the railroads of the United States has practically ceased, by reason of consolidations and agreements among themselves, and so destroyed the hope of relief by that means; Therefore, be it Resolved, By the board of directors of the Merchants' aud Manufacturers' Exchange of Detroit, Mich., representing nearly 200 of the largest shippers in our city, that we indorse the bill introduced by the Hon. John B. Corliss, member of Congress of this district, known as H. R. 8337, and the one introduced by Senator Nelson, known as S. 3675, and respectfully request all the Senators and Representatives from Michi- gan to support the passage of same at the proper time. Jas. Inglis, President. Walter S. Campbell, Secretary. RAILWAY FREIGHT RATES AND POOLING. 199 27. Resolution adopted by the Commercial Club of Selleville, 111., favoring the enactment of legislation to regulate interstate commerce. [Presented by Mr. CuUom, April 23, 1902.] Belleville, III., April 9, 190S. Hon. S. H. CuLLOM, Washington, D. C. Deab Sir : The following resolution will explain itself: "Resolved by the Belleville Commercial Club, of the city of BellevUle, ML, That in our judgment the present interstate commerce law, as interpreted by the Supreme Court, is insuflficient and practically inoperative for the purpose for which it was framed. We therefore urge upon our Senators and Representatives the importance of doing everything in their power to further the passage of H. E. 8337, 8. 3575, to amend the act to regulate commerce. Belleville, 111., April 7, 1902." Please give this a part of your valuable time and attention. Very respectfully, W. F. KiKCHEE, Secretary. 28. Resolution of Business Men's Association of Davenport, Iowa, favoring passage ofS. S575. [Presented by Mr. DoUiver, April 9, 1902.] Davbnpokt, Iowa, March IS, 190$. Hon. J. P. DoLLiVEE, Washington, D. C. Sir: The following resolution, passed at our last meeting, is explanatory of itself: Resolved, That the Davenport Business Men's Association heartily indorse the bill known as S. 3575 and H. E. 8337, an act to regulate commerce; and request our representatives to use their best endeavors to have the bill passed. Any consider- ation you may give the matter will greatly oblige. Yours, respectfully, Davenport Business Men's Association, M. Bunker, Secretary. 29. Petition by the Boston Fruit and Produce Exchange, of Boston, Mass., praying that Con- gress shall enact sach legislation as will enable the Interstate Commerce Commission to enforce their findings. [Presented by Senator Hoar, April 10, 1902.] At a meeting of the board of directors of the Boston Fruit and Produce Exchange held Tuesday, April 8, 1902, it was voted: "That the board respectfully petition the Congress of the United States to enact such legislation as will enable the Interstate Commerce Commission to enforce their findings, and that a copy of this,resolution be sent to each of our Senators and Repre- sentatives in Congress." A true copy. „ „ „ ,. . j^ttggt; ' B. F. Southwick, iS&relary. Hon. George Fkisbib Hoar, Washington, D. C. 200 BAILWAT FREIGHT RATES AND POOLING. 30. PetUiom of Pwntan Bed Spring Company et al., praying for certain amendments to the interstate commerce law. [Presented by Mr. Fairbanks, April 10, 1902.] Indianapolis, Ind., Marches, 1902. The Furniture Manufacturers' Association of Indianapolis, Ind., at its last regular meeting, held March 10, 1902, adopted the following resolution: ,. -, j "Resolved, That we, the Furniture Manufacturers' Association of Indianapolis, Ind., do heartily indorse the provisions of House bill 8337 and Senate bill 3575, known as the "Nelson-Corliss bill," and we do hereby urge our representatives in Congress to use theii best endeavors to promote this bill and to secure its passage." PuBiTAN Bed Spbing Company, , Per M. F. Shaw, Treasurer, Bass & Woodwokth, Per W. H. Bass, .Western Furniture Company, W. L. Haqedon, President, Committee. Hon. Jesse Ovebstkeet, Representative Seventh District. Hon. C. W. Fairbanks, Senaior from Indiana. Hon. A. J. Bkveridge, Senaiovfrom Indiana. 31. Memorial of the Board of Trade of Qrand Rapids, Mich., and Merchants and Manufac- turers' Exchange of Detroit, Mich., praying for the passage of the so-called Nelson- Corliss interstate-commerce bill. [Presented by Mr. McMillan, April 14, 1902.] Detroit, April 5, 190S. Whereas there is an extensive demand on the part of the public for some legisla- tion which shall regulate the rates ol the freight and classification of merchandise charged by the transportation companies of the country and whichshall clothe the Interstate Commerce Commission with the power to enforce its decisions and to make such regulations as shall protect the shippers from extortion at any time; and Whereas we believe that competition among the railroads of the United States has practically ceased by reason of consolidations and agreements among themselves and so destroyed the hope of relief by that means: Therefore, be it Resolved by the board of directors of the Merchants and Manufaclurers' Exchange of Detroit, Mich, (representing nearly 200 of the largest shippers in our city) , That we indorse the bill introduced by the Hon. John B. Corliss, M. C, of this district, known as H. K. No. 8337, and the one introduced by Senator Nelson, known as S. No. 3575, and respectfully request all the Senators and Eepresentatives from Michigan to sup- ort the passage of same at the proper time. Jas. Inglis, President. Walter S. Campbell, Secretary. Whereas it is believed the interests of all shippers and of all communities, except perhaps a favored few, will be promoted by equal freight charges and privileges to all; and Whereas the Interstate Commerce Commission has been deprived, by judicial interpretations, of the authority to regulate rates and to enforce its decisions which it originally exercised as intended by the framers of the act creating it: Therefore, Resolved by the Orand Rapids Board of Trade, That we hereby indorse and approve the so-called Corliss-Nelson bill, now pending in Congress, the purpose of which is to restore to the Commission such authority as it actually exercised from the time of its organization until the Supreme Court denied that such authority was conferred upon it. Particularly do we indorse these sections of the bill intended to make the orders RAILWAY FREIGHT BATES AND POOLING. 201 of the Commission immediately operative and to provide for tlie enforcement of obedience to the orders of the Commissioners. Resolved further, That copies of this resolution be forwarded to Senators James McMillan and J. C. Burrows and to each Representative from Michigan in the National Congress. I hereby certify that the foregoing is a true and correct copy of preamble and res- olutions duly adopted by the board of directors of the Grand Rapids Board of Trade this 8th day of April, 1902. [seal.] H. D. C. Van Asmus, Secretary. 32. Resolution of the Merchants' Exchange of the cUy of Buffalo, State of New York, favoring the passage of Senate bill No. S575 and House hill No. 8SS7. [Presented by Mr. Piatt, of New York, April 14, 1902.] The original interstate-commerce act has been interpreted by the Untied States Supreme Court in various cases, so as to greatly restrict the powers of the Commis- sion to effectively accomplish the results intended by such act. Bills have been introduced in the Senate and House, known as Senate bill No. 3575 and House bill No. 8337, which are identical, and having for their object to confer upon the Inter- state Commerce Commission authority to make effective its administrative orders and giving to the defendants the right of appeal to the United States courts, and which continue to limit the authority of the Commission to the correction of rates when it appears after investigation that such rates are unreasonable and discrimina- tive; and these bills also repeal the provision of the present interstate-commerce act relating to imprisonment for violation of said act, and in place thereof providing for fines to be imposed for violations thereof; these amendments we believe to be essen- tial for the proper administration of the duties and purposes of the Interstate Com- merce Commission: Now, therefore, The Buffalo Merchants' Exchange urges upon the Interstate Commerce Committee of th 3 Senate favorable corsideration of Senate bill No. 3575, and upon the Interstate and Foreign Commerce Committee of the House favorable consideration of House bill No. 8337, having for their purpose the amendment of the interstate-commerce act, to the end that favorable action may be taken thereon at this session of Con- gress; and that the Secretary be directed to transmit a copy of this resolution to the respective committees of the Senate and House of Representatives, the Senators from the State of New York and the Representatives in Congress from the county of Erie, requesting their cooperation in securing such legislation. A true copy. F. Howard Mason, Secretary. 33. Resolution adopted by the Utah Wool Cfrowers' Association, indorsing amendment to the interstate-commerce act proposed by Congressman J. B. Corliss. [Presented by Senator Rawlins April 15, 1902.] ' Whereas the operations of the Interstate Commerce Commission under the present law are absolutely worthless, for the reason that they have no power to enforce their decisions; and Whereas there has been introduced in the House of Representatives of the Fifty- seventh Congress by Congressman J. B. Corliss, of Michigan, a bill amending the interstate-commerce act, correcting the evils, and giving the Commission power to enforce its rulings, which has the unqualified indorsement of the Interstate Com- merce Commission and shippers at large throughout the country; and Whereas the live-stock interests of the United States are heavy shippers and there- fore interested in anything pertaining to or governing transportation: Therefore, be it Resolved, That the Utah Wool Growers' Association in convention assembled urge 202 EAILWAr FREIGHT KATES AND POOLING. the members of Congress to vote for the passage of this amendment to the interstate- commerce act: And be it further Resolved, That the secretary of this association is hereby instructed to send copies of this resolution to the Committee on Interstate Commerce of the House, and also to write personal letters to the members of Congress and Senators from this State urging that they work for the passage of this measure. E. H. Callbstek, (Secretarj/. Jesse M. Smith. 34. Resolution adopted by the Utah Cattle Orowers' Association, indorsing the amendment to the interstate-commerce act proposed by Congressman J. B. Corliss. [Presented by Senator Rawlins, of Utah, April 15, 1902.] Whereas the operations of the Interstate Commerce Commission under the present law are absolutely worthless, for the reason that they have no power to enforce their decisions; and Whereas there has been introduced in the House of Representatives of the Fifty- seventh Congress by Congressman J. B. Corliss, of Michigan, a bill amending- the interstate-commerce act, correcting the evils, and giving the Commission power to enforce its rulings, which has the unqualified indorsement of the Interstate-Commerce Commission and shippers at large throughout the country; and Wheseas the live stock-interests of the United States are heavy shippers and there- fore interested in anything pertaining to or governing transportation: Therefore, be it Resolved, That the Utah Cattle Growers' Association in convention assembled urge the members of Congress to vote for the passage of this amendment to the interstate- commerce act; and, be it further Resolved, That the secretary of this association is hereby instructed to send copies of this resolution to the Committee on Interstate Commerce of the House, and also to write personal letters to the members of Congress and Senators from this State urging that they work for the passage of this measure. President Utah Cattle Growers' Association. ■> Wesley K. Walton, Secretary. 35. Petition of lumber manufacturers for the enlargement of the power of the Interstate Commerce Commission. [Presented by Mr. Clapp April 28, 1902, also by Mr. Elkins, also by Mr. Cookrell.] Resolution to members of Congress from board of directors of the Missouri, Kansas, and Oklahoma Association of Lumber Dealers: At the fourteenth annual convention of the Missouri, Kansas, and Oklahoma Asso- ciation of Lumber Dealers, held at Kansas City, Mo., January 28-29, 1902, the fol- lowing resolution was unanimously adopted: Resolved, That the Missouri, Kansas, and Oklahoma Association of Lumber Dealers hereby invokes the aid of Senators and Representatives in Congress in securing the passage of laws enlarging the powers of the Interstate Commerce Commission so as to give that body increased powers. The Missouri, Kansas, and Oklahoma Association of Lumber Dealers has a mem- bership of 1,500, and represents in this matter the interests of the legitimate lumber trade of the Southwest. The lumber dealers of this territory have suffered from unjust discriminations on the part of the railroad companies at various times, and have been unable to secure any redress through the Interstate Commerce Commis- sion owing to its present limited powers to enforce its rulings. They, the lumber dealers represented by this association, feel that in justice to the business interests of the country in general, and to the interests of the lumber trade in particular, action should be taken at the present session of Congress to give the Interstate Commerce Commission increased powers, and, further, thatH. E. 8337 and KAILWAT FEEiaHT BATES AND POOLING. 203 S. 3575, known as the " Nelson-Corlisa bill," will, if passed, give the Interstate Com- merce Commission the necessary power to enforce its rulings. Therefore the board of directors of this association, acting for and in behalf of the lumber trade of the Southwest, does hereby earnestly and heartily indorse the "Nelson-Corliss bill," and requests that the Senators and Eepresentatives repre- senting the Southwest will use their best endeavors and influence in assisting in the passage at the present session of Congress of the bill above referred to. The president and secretary of the Missouri, Kansas, and Oklahoma Association of Lumber Dealers are hereby authorized and instructed to affix their signatures to this document, and the secretary is hereby instructed to forward a copy of same to each Sepator and Eepresentative from Missouri and Kansas, and to such other Senators and Eepresentatives as the executive committee of this association may deem advisable. E. S. Miner, A. A. White, e. c. eobinson, Egbert Pierce, J. E. Evans, J. E. MOOHEHEAD, E. E. BUHKHOLDEE, F. L. Adams, Geo. D. Hope, James Costello, Jess E. Lasswell, h. b. bullen, L. F. Miller, A. L. Taylor, Paui, Klein, Board of Directors. E. S. Miner, President. By Harry A. Gorsuch, Secretary. 36. Petitions for Nelson- Corliss bill by Grand Rapids Board of Trade et al. [Presented by Mr. Burrows, April 29, 1902.] Whereas it is believed the interests of all shippers and of all communities, except perhaps a favored few, will be promoted by equal freight charges and privileges to all; and. Whereas the Interstate Commerce Commission has been deprived by judicial interpretations of the authority to regulate rates and to enforce its decisions which it originally exercised, as intended by the framers of the act creating it: Therefore, ' Resolved by the Grand Rapids Board of Trade, That we hereby indorse and approve the so-called Corliss-Nelson bill, now pending in Congress, the purpose of which is to restore to the Commission such authority as it actually exercised from the time of its organization until the Supreme Court denied that such authority was conferred upon it. Particularly do we indorse these sections of the bill intended to make the orders of the Commission immediately operative, and to provide for the inforcement of obedience to the orders of the Commissioners. Resolved further, That copies of this resolution be forwarded to Senators James McMillan and J. C. Burrows and to each Eepresentative from Michigan in the National Congress. I hereby certify that the foregoing is a true and correct copy of preamble and res- olutions duly adopted by the board of directors of the Grand Eapids Board of Trade this 8th day of April, 1902. [seal.] H. D. 0. Van Armus, Secretary. Saginaw, Mich., February H, 190S. Hon. J. C. BuEKOws, Washington, D. C. Dear Sir- At a recent meeting of the trustees of the National Wholesale Lumber Dealers' Association, heid in New York City, the trustees of this association were 204 RAILWAY FREIGHT KATES AND POOLING. unanimous in their opinion that some legislation tending to amend the interstate- commerce act so as to enable the Commissioners to enforce their decisions was most desirable, and that some legislation looking toward the above end should be passed. A committee was appointed at that meeting, of which the Hon. Charles M. Betts, of Philadelphia, was chairman, and the committee has made a report that after a careful examination of House bill No. 8337 they believe that said bill is entitled to the active support of every member of the National Wholesale Lumber Dealers' Association. We accordingly write you to use your influence in favor of the passage of this act. A recent decision of the Interstate Commerce Commission in favor of the National Wholesale Lumber Dealers' Association, in a matter brought before the Commission by the association on behalf of members interested, brings home to the lumbermen the importance to their business of the interstate-commerce law, and we are anxious to impress upon you gentlemen representing us in Congress the necessity to encour- age such legislation as will enable the provisions of the law to be more effectively carried out. It is of vital importance to our business interests that some such legis- lation should be enacted. We therefore call the matter to your attention and earnestly request that you give this matter due consideration, advising us of any suggestions you may have in regard to the best method of our cooperating with you in this important matter. Very truly, yours, Meeshon, Schdette, Pabker & Co., By F. E. Parker, Treasurer. 37. Letter from Hon. Martin A. Knapp, chairman of Interstate Commerce Commission. Washington, D. C, May 9, 190^. Hon. Stephen B. Elkins, Chairman Committee on Interstate Commerce, Washington, D. C. Dear Sir: The Interstate Commerce Commission responds as follows to your request for a report on Senate bill 3521 and Senate bill 3575, which were referred to the Commission for that purpose. The bill No. 3575, known as the Nelson bill, contains substantially some of the specific recommendations of the Commission in its report to the Congress for 1898. As to subjects covered by this bill, it is identical in scope, and nearly identical in phraseology, with the measures then proposed. This bill is approved by the Com- mission for the reasons stated in said report and other reports to the Congress. This does not imply that the Commission would insist upon everything contained in this measure or object to its modification in some particulars. For example, the Commission is not strenuous about the minimum fine provided in the first section, which amends section 10 of the present law, or the number of days within which certain things are required to be done by section 2, which amends section 15 of the act, or the limitation upon the suspension by the court of the operation of an order made by the Commission during the pendency of proceedings in review, as provided in another part of said second section. What is ineant is that the Commission approves the substantial provisions of this bill and would not favor changing them in important respects. Nor is this bill recommended as a complete and suflBcient measure. It would not cover the changes that ought to be made nor fully adapt the law to existing condi- tions. It would, however, in the judgment of the Commission, be a great improve- ment upon the present statute and distinctly aid the purposes for which the law was enacted. The bill. No. 3521, though differing materially in form and excepting the second section, appears to have substantially the same purpose and to accomplish substan- tially the same changes in the present law as the Nelson bill. If this assumption is correct, the bill 3521, with some modifications, which would doubtless be acceptable to its author, would meet the approval of the Commission, except the second section, though the form of the Nelson bill is preferred. That is to say, it seems on the whole better to amend specifically certain sections of the present law than to enact an inde- pendent measure, although the same results were contemplated in one case as in the other. As to the second section, which confers rights of contract between competing roada RAILWAY FBEIGHT RATES AND POOLING. 205 not now allowed, the Commission is not agreed. A majority of its members believe that amendments of this kind, with proper restrictions and connected with other needed legislation and not otherwise, should be adopted and would aid the success of public regulation.' One member of the Commission, however, is unwilling to recom- mend any legislation which would legalize the combination of competing carriers. Those who favor the general principle and purpose of this second section are not satisfied that the restrictions and safeguards now contained in that section are ade- quate to prevent an abuse of the privileges proposed to be granted. This statement is designed to show the general attitude of the Commission as nearly as may be to the bills in question. Individual members may supplement this with the expression of their personal views either in written communications or in oral statements before the committee, if the latter course is preferred. Very respectfully, Martin A. Knapp, Chairman. Concurrent resolviion of the twenty-ninth general assembly of Iowa relative to the Nelson- Corliss bill. [Presented by Mr. Allison, May, 10, 1902.] I, W. B. Martin, secretary of state of the State of Iowa, do hereby certify that the attached instrument of writing is a true and correct copy of a concurrent resolution passed by the legislature of the State of Iowa in relation to the Nelson-Corliss bill as the same appears of record in this office. In testimony whereof I have hereunto set my hand and affixed the seal of the sec- retary of state of the State of Iowa. Done at Des Moines, the capital of the State, April 30, 1902. [seal.] W. B. Martin, Secretary of State, By D. A. HiTES, Deputy. No. — . PREAMBLE AND CONCTJKBENT RESOLUTION IN RELATION TO THE INTERSTATE-COMMERCE LAW. "Whereas it is generally believed that the effectiveness of the interstate-commerce law has been seriously impaired by certain decisions of the Federal courts, and that the law in its present state is practically inoperative in remedying the evils of the transportation service of the country, which was the purpose of its enactment; and Whereas a bill designated as H. E. 8337 and S. 3575, known as the Nelson-Corliss bill, is now pending in the two Houses of Congress to amend the interstate-commerce act by conferring upon the Commission created thereby additional powers for the purpose of enabling it to enforce the provisions of the act and giving its rulings immediate effect pending review by the courts: Therefore, be it Resolved by the senate (the hcmse concurring), That the Senators and Eepresentatives in Congress from this State be, and are hereby, respectfully requested to give said measure careful consideration and to use their efiorts in every proper way to secure its early enactment or the enactment of some other measure which will afford the relief sought. [Adopted April 9, 1902.] 39. Besolution of the Chamber of Commerce of New Haven, Conn., favoring S. S576, an act to regulate commerce. [Presented by Mr. Piatt, of Connecticut, May 23, 1902.1 New Haven, Conn., May 16, 1903. Hon. 0. H. Platt, TJhited Stales Senate, Washington, D. C. Dear Sir: At the meeting of the chamber last evening the following preambles and resolutions, upon the recommendation of the committee on railroads and trans- portation, to whom the subject had been referred, were unanimously adopted:. "Whereas there is now pending before the United States Senate and House of 206 RAILWAY FREIGHT RATES AND POOLING. Representatives an act to regulate commerce, generally known as the interstate- commerce act, as more fully set forth in Senate bill No. 3575 and House of Repre- sentatives bill No. 8337; and "Whereaa a careful investigation of these bills prove to the satisfaction of the members of this chamber that their passage would result in great benefit to the entire community at large: It is therefore "Resolved, That the Senators and Representatives from this State be earnestly requested to give the above-mentioned bill their active support and to exert their influence in every proper way to secure its enactment; and be it further "Resolved, That copies of these resolutions be forwarded to our Senators and Rep- resentatives immediately upon their adoption." Yours, very truly, John Cukrin Gallagher, Secretary. 40. Resolution of the Commercial Exchange of Philadelphia, Pa., favoring legislation promd- ingfor uniform inland rates of transportation. [Presented by Mr. Quay Muy 31, 1902.] Philadelphia, April S9, 1902. Hon. Matthew Stanley Quay, Washington, D. C. Sir: At a meeting of the transportation committee of the Commercial Exchange of Philadelphia held Tuesday, April 29, 1902, the following preambles and resolution were unanimously adopted: "The Committee on Interstate and Foreign Commerce, " House of Representatives, Washington, D. C: " Whereas the necessity for such legislation as will give uniform inland freight rates to all shippers of like commodities, and provide such penalty as will insure a full observance of the interstate-commerce laws, has long been apparent to every com- mercial locality; and "Whereas there are now pending before the Congress several bills of amendments, each possessing its respective merite: Therefore, "Resolved, that we hereby respectfully petition the present Congress to pass such legislation as will bring to the commercial interests of this country the much needed uniform inland rates and provide effective penalties against all violations of the laws, thus guaranteeing stability of rates to those whose business is dependent upon inland transportation." Respectfully, yours, Armon. D. Acheson, Secretary. Resolution adopted by board of directors of Illinois Manufacturers' Assodaiton of Chicago, praying for the passage of House bill 8S37. [Presented by Mr. Mason, June 4, 1902.] Whereas it is almost the unanimous opinion of men competent to judge, aa expressed in private conversation, in public speeches, in carefully prepared newspaper and magazine articles, and in testimony given before Congressional and other com- mittees of inquiry, that no combination of capital, whether in the hands of individ- uals, firms, or corporations, is dangerous to the public welfare unless the parties controlling such capital are given an undue advantage over others by means of rail- road rates or special transportation facilities which are denied to their competitors and the general public; and Whereas this opinion finds voice and echo in the heart of the average American citizen, since he asks for nothing in the conflicts of business life but "a fair field and no favor;" and Whereas the Constitution of the United States, as interpreted by the decisions of the Supreme Court, gives Congress Complete control over interstate commerce, to the extent, if need be, of passing upon their tariffs for the railroad corporations, subject only to the limitation that such tariffs shall be just and reasonable; and RAILWAY FREIGHT RATES AND POOLING. "Mt Whereas it is competent for Congress to exercise this power; it is competent for them to delegate it to a body established by themselves for the express purpose and charged with the sole duty of exercising it; and Whereas when the interstate commerce law was enacted it was supposed to be stringent enough to remedy the abuses in transportation matters which had even then grown unbearable, but this opinion has been shown by the experience of the past fourteen years to have not been well founded; and Whereas there is now pending in Congress a bill known as H. R. 8337, introduced in the House of Representatives January 9, 1902, by the Hon. John B. Corliss, of Michigan, amending the interstate-commerce law, and which has been so carefully drawn, under the light of the decisions of the United States courts, that if enacted into law it is confidently expected will so strengthen the interstate-commerce law tliat it will fulfill the purposes for which it was originally intended, and that the Interstate Commerce Commission, acting under it, will be able to protect the honest railroad corporations from the cut-throat rates of unscrupulous competitors, as well as from the rapacity and greed of hitherto " favored shippers," and at the same time will be able to secure to the general public the same fair and equal treatment at the railroad ticket and freight offices of the country which they now receive at its post- offices and custom-houses, and to which by law they are entitled: Therefore, be it Resolved by the board of directors of the Illinois Manufacturers' Association, That the speedy enactment into law of H. R. 8337 is demanded by every consideration of the public welfare; and we do therefore respectfully and earnestly urge the Congress of the United States to enact this bill into law during the present session of Congress. And be it further resolved. That copies of the foregoing preamble and resolutions be forwarded to the Senators and Representatives of the United States Congress from the State of Illinois. 42. Memorial to the Senate of the United States, by the Commercial Club of Dululh, Minn. , in favor of the Nelson- Corliss bill. [Presented by Mr. Clapp, June 6, 1902.] DuLUTH, May SI, 190Z. Hon. Moses E. Clapp, Vniied States Senator, Washington, D. C. Dear Sir: At a regular meeting of the members of the Commercial Club of Duluth, held in the clubrooms Wednesday evening. May 21, 1902, the following resolution was adopted: "Resolved, That the Commercial Club of Duluth, Duluth, Minn., hereby approves of the bill introduced in Congress known as the Nelson-Corliss bill, and requests the Representatives of the State of Minnesota in the Senate and the House of Repre- sentatives to give said bill their active support, and exert their influence in every proper way to secure its enactment. "Resolved further. That a copy of this resolution be sent by the secretary of the club to the Representatives of the State of Minnesota in the Senate and the House of Representatives." Yours, very truly, Albert L. Preston, Secretary. 43. Memorial opposing the passage of the Elkins bill, legalizing pooling, by the Atlanta Freight Bureau. [Presented by Mr. Clay, June 16, 1902.] Whereas our attention having been called to a bill now pending in the United States Senate, known as the Elkins bill, the purpose of which being to legalize pool- ing of freight by the railroads of this country, which we believe would be greatly to the disadvantage of both shippers and producers: Therefore, be it Resolved, That the Atlanta Freight Bureau is opposed to the passage of said bill, and that its traffic manager is hereby instructed to write Senators A. 0. Bacon and A. S. Clay and Congressman L. F. Livingston, requesting them to use their best efforts toward the defeat of said bill. aUS BAILWAY FBEIGHT RATES AND POOLING. 44. Memorial against the passage of the Elkins bill, by the directors of the Atlanta Chamber of Commerce. [Presented by Mr. Clay, June 16, 1902.] Whereas Senator Elkins has introduced in the United States Senate a bill which legalizes pooling of freight by the railroads of this country, which we believe would be greatly to the disadvantage of both shippers and producers: Therefore, be it Resolved, That the directors of the Atlanta Chamber of Commerce are opposed to the passage of said bill, and the secretary is instructed to write our Senators and Represenatives in Congress, asking them to use their best efforts for the defeat of ^e measure. Resolved further, That the secretary be instructed to communicate this action of the directors to other boards of trade and commercial bodies in this section, and request them to take the same action. 45. Resolution of Buffalo Merchants' Exchange, praying for favorable action on Senate bill 3575. [Presented by Mr. Elkins.] Buffalo, N. Y., April XS, 190^. Hon. Stephen B. Elkins, Chairman Committee on Interstate Commerce, Washington, D. C. IMy Dear Sir: I inclose herewith copy of resolutions adopted by the Buffalo Merchants' Exchange relating to bill which has been referred to your committee. On behalf of the Buffalo Merchants' Exchange I beg to express the wish that the bill referred to in these resolutions may receive the careful and favorable considera- tion of your committee. I am, very respectfully, yours, F. Howard Mason, Secretary. The original interstate-commerce act has been interpreted by the United States Supreme Court in various cases so as to greatly restrict the powers of the Commission to effectively accomplish the results intended by such act. Bills have been intro- duced in the Senate and House — known as Senate bill No. 3575 and House bill No. 8337 — which are identical, and having for their object to confer upon the Interstate Commerce Commission authority to make effective its administrative orders, and giving to the defendants the right of appeal to the United States courts, and which continue to limit the authority of the Commission to the correction of rates when it appears, after investigation, that such rates are unreasonable and discriminative; and these bills also repeal the provision of the present interstate-commerce act relating to Imprisonment for violation of said act, and in place .thereof providing for fines to be imposed for violations thereof. These amendments we believe to be essential for the proper administration of the duties and purposes of the Interstate Commerce Commission: Now, therefore. The Buffalo Merchants' Exchange urges upon the Interstate Commerce Committee of the Senate favorable consideration of Senate bill No. 3575, and upon the Interstate and Foreign Commerce Committee of the House favorable consideration of House bill No. 8337, having for their purpose the amendment of the interstate-commerce act, to the end that favorable action may be taken thereon at this session of Congress, and that the secretary be directed to transmit a copy of this resolution to the respec- tive committees of the Senate and House of Representatives, the Senators from the State of New York, and the Representatives in Congress from the county of Erie, requesting the cooperation in securing such legislation. A true copy. F. Huvan Mason, Secretary. RAILWAY FREIGHT BATES AND POOLING. 209 46. Resolution of the Atlanta (Ga.) Freight Bureau favoring passage of S. S675. [Presented by Mr. Nelson, June 19, 1902.] Whereas our attention having been called to a bill now pending before Congress known, as the Nelson-Corliss bill, the purpose of which is to enlarge the jurisdiction and powers of the Interstate Commerce Commission; and Whereas we believe that the public interests would be better subserved by grant- ing the Interstate Commerce Commission full power to adjudicate all rate differences, to name just and reasonable rates, and to enforce its decrees: Therefore, be it Resolved, That the Atlanta Freight Bureau indorses the Nelson-Corliss bill, and the traffic manager is instructed to forward copies of this resolution to Senators A. S. Clay and A. O. Bacon and Congressman L. F. Livingston with the request that they use their best efforts toward the passage of said bill. 47. Resolution of the Atlanta ( Oa. ) Freight Bureau opposing passage of S. 3SS1. [Preaented by Mr. Nelson, June 19, 1902.] Whereas our attention having been called to a bill now pending in the United States Senate known as the Elkins bill, the purpose of which being to legalize pool- ing of freight by the railroads of this country, which we believe would be greatly to the disadvantage of both shippers and producers: Therefore, be it Resolved, That the Atlanta Freight Bureau is opposed to the passage of said bill, and its traffic manager is hereby instructed to write Senators A. 0. Bacon and A. S. Clay and Congressman L. F. Livingston requesting them to use their best efforts toward the defeat of said bill. 48. ResolvMcm directing the Interstate Commerce Commission to investigate rates filed with said Commission by common carriers, etc. Mr. Carmack submitted the following resolution: " Resolved, That the Interstate Commerce Commission be, and is hereby, directed to investigate and report to the Senate during the month of December next, in such form and to such extent as may be practicable — 1. The rates filed with said Commission by common carriers subject to the act to regulate commerce and now in force on import and domestic traffic of like kind car- ried from ports of entry in the United States to interior points of destination which show material differences, in favor of through shipments of imported articles and against shipments of imported articles and against shipments of like articles originat- ing at such ports of entry. , 2. What, if any, kinds or classes of imported articles have actually been trans- ported at any time between January I and .Tuly 1 of the present year by common carriers subject to the act to regulate commerce at rates from ports of entry in the United States to interior points of destination materially less than the rates con- temporaneously charged by such carriers upon the same kinds or classes of articles as domestic shipments from such ports of entry to the same interior points of desti- nation; and whether, if it can be ascertained, the rates actually charged upon both the import and domestic traffic were in conformity with the rates in effect thereon as shown in rate schedules filed with said Commission. 3. Show in said report in connection with any such differences in schedule rates in favor of import and against domestic shipments the tariff or customs duties in force under the laws of Congress upon such import traffic carried at any time during the six months' period above specified; and to enable compUance with this requirement F K P 14 210 BAILWAY FREIGHT RATES AND POOLING. the Secretary of the Treasury is hereby directed to furnish the said Commission, upon its application, a statement showing the tariff Or customs duties applicable to such import traffic. 4. Whether in the opinion of said Commission any such differences in rates in favor of import and against domestic shipments operate to produce discriminations and preferences in favor of foreign manufacturers and shippers and against American manufacturers and shippers which ought to be removed, but which can not be reme- died by proceedings under the act to regulate commerce; and if so, in what manner that statute should be amended to prevent such discriminations and preferences. APPENDIX 211 THE ACT TO REGULATE COMMERCE AS A :y: E N^ ID E D, TOGETHXB WITH ACTS SUPPLEMENTARY THERETO. WASHINGTON: GOVEENMBNT PRINTING OFFICE. 1895. ORIGINAL AND AMENDING ACTS. Public No. 41, approved February 4, 1887, and in effect April 5, 1887 (U. S. Stat, at Large, Vol. 24, p. 379; Sup. to Eev. Stat., Vol. 1, p. 529). Public No. 125, approved and in eflFect March 2, 1889 (U. S. Stat, at Large, Vol. 25, p. 855; Sup. to Eev. Stat., Vol. 1, p. 684). Public No. 72, approved and in effect February 10, 1891 (U. S. Stat, at Large, Vol. 26, p. 743; Sup. to Rev. Stat., Vol. 1, p. 891). Public No. 38, approved and in effect February 8, 1895 (U. S. Stat, at Large, VoL 28, p. — ). SUPPLEMENTARY ACTS. Public No. 54, approved and in effect February 11, 1893 (TI. 8. Stat, at Large, Vol. 27, p. 443). Public No. 113, approved and in effect March 2, 1893 (U. S. Stat, at Large, Vol. 27, p. 531). Public No. 237, approved and in effect August 7, 1888 (U. S. Stat, at Large, Vol. 25, p. 382; Sup. to Bev. Stat., Vol. 1, p. 602). THE ACT TO REGULATE COMMERCE. Be it enacted hy the Senate and House of Representativeg of the United States of America in Congress assembled, That the provisions of this act shall apply to any common carrier or carriers engaged in the transportation of passengers or property wholly by railroad, or partly by railroad and partly by water when both are used, under a common con- trol, management, or arrangement, for a continuous car- riage or shipment, from one State or Territory of the United States, or. the District of Columbia, to any other State or Territory of the United States, or the District of Columbia, or from any place in the United States to an adjacent for- eign country, or from any place in the United States cairiora and through a foreign country to any other place in the United su^Sjeot'to'tbe States, and also to the transportation in like manner of*"*' property shipped from any place in the United States to a foreign country and carried from such place to a port of trans- shipment, or shipped from a foreign country to any place in the United States and carried to such place from a port of entry either in the United States or an adjacent foreign country : Provided, however. That the provisions of this act shall not apply to the transportation of passengers orappi^ to* trails' property, or to the receiving, delivering, storage, or han- Sr'ttoonJstaS dling of property, wholly within one State, and not shipped to or from a foreign country from or to any State or Terri- tory as aforesaid. The term "railroad" as used in this act shall include all bridges and ferries used or operated in connection with any railroad, and also all the road in use by any corporation operating a railroad, whether owned or operated under a contract, agreement, or lease; and the term "transportation" "rauJoS"**™.' shall include all instrumentalities of shipment or carriage. J^'oSr*""™ All charges made for any service rendered or to be ren- dered in the transportation of passengers or property as aforesaid, or in connection therewith, or for the receiving, delivering, storage, or handling of such property, shall be reasonable and just; and every unjust and unreasonable ^ charges mnst *'' " ' jji-ii.''® reasonable charge for such service is prohibited and declared to beandjnst. unlawful. S Seo. 2. That if any common carrier subject to the provi- sions of this act shall, directly or indirectly, by any special rate, rebate, drawback, or other device, charge, demand, col- lect, or receive from any person or persons a greater or less compensation for any service rendered, or to be rendered, in the transportation of passengers or property, subject to the provisions of this act, than it charges, demands, collects, or receives from any other person or persons for doing for him crimination de- or them a like and contemporaneous service in the trans- uned aud forbid- den. portation of a like kind of traffic under substantially similar circumstances and conditions, such common carrier shall be deemed guilty of unjust discrimination, which is hereby prohibited and declared to be unlawful. Sbo. 3. That it shall be unlawful for any common carrier subject to the provisions of this act to make or give any undue or unreasonable preference or advantage to any par- ticular person, company,-firm, corporation, or locality, or any reSraabie^praf- particular description of traffic, in any respect whatsoever, t^e forbidde™"' °^ ^ subjcct any particular person, company, firm, corpora- tion, or locality, or any particular description of traffic, to any undue or unreasonable prejudice or disadvantage in any respect whatsoever. Every common carrier subject to the provisions of tiiis act shall, according to their respective powers, afford all F»ciiities for reasonable, proper, and equal facilities for the interchange traffic. of traffic between their respective lines, and for the receiv- ing, forwarding, and delivering of passengers and property to and from their several lines and those connecting there- Disorimination with, aud Shall uot discriminate in their rates and charges in'g^iiSeg" forbid- between such connecting lines; but this shall not be con- "* strued as requiring any such common carrier to give the use of its tracks or terminal facilities to another carrier engaged in like business. Sbo. 4. That it shall be unlawful for any common carrier subject to the provisions of this act to charge or receive any greater compensation in the aggregate for the transportation u«^ MoJ^iM™* ^^ passengers or of like kind of property, under substan- tially similar circumstances and conditions, for a shorter than for a longer distance over the same line, in the same direction, the shorter being included within the longer dis- tance; but this shall not be construed as authorizing any common carrier within the terms of this act to charge and receive as great compensation for a shorter as for a longer distance : Provided, however, That upon application to the hu anthority to Oommissiou appointed under the provisions of this act, such relievo carriers _ _ • . . ■, /.j^ . ...,., from the opera- commou carrier may, w special cases, after investigation by toS. ** *°° the Commission, be authorized to charge less for longer than for shorter distances for the transportation of passengers or property; and the Commission may from time to time pre- scribe the extent to which such designated common carrier may be relieved from the operation of this section of this act. Sbo. 5. That it shall be unlawful for any common carrier subject to the provisions of this act to enter into any con- tract, agreement, or combination with any other common carrier or carriers for the pooling of freights of different and competingrailroads,ortodivide between them the aggregate PooUng of or netproceeds of the earnings of such railroads, or any por- vUifS* Vea^- tion thereof; and in any case of an agreement for the pool- "^^ '"rbidden. ing of freights as aforesaid, each day of its continuance shall be deemed a separate offense. Sec. 6. {As amended March 3, 1889.) That every common carrier subject to the provisions of this act shall print and keep open to public inspection schedules showing the rates and fares and charges for the transportation of passengers and property which any such common carrier has estab- lished and which are in force at the time upon its route. The schedules printed as aforesaid by any such common carrier shall plainly state the places upon its railroad be- tween which property and passengers will be carried, and shall contain the classification of freight in force, and shall also state separately the terminal charges and any rules or regulations which in any wise change, affect, or determine any part or the aggregate of su(jh aforesaid rates and fares and charges. Such schedules shall be plainly printed in large type, and copies for the use of the public shall be printiug md posted in two public and conspicuous places, in every depot, ^Is'of "rrtel' station, or ofiace of such carrier where passengers or freight, 'hargls inciSd- respectively, are received for transportation, in such form refuMons '"f^ that they shall be accessible to the public and can be con- te™?#ai*'"h™?: veniently inspected. SitoSf" Any common carrier subject to the provisions of this act receiving freight in the United States to be carried through a foreign country to any place in the United States shall also in like manner print and keep open to public inspection, at every depot or ofBce where such freight is received for ship- ^^f^f^,^^. ment, schedules showing the through rates established and ^^ «[ '"■^^^ charged by such common carrier to all points in the United through aforeigp States beyond the foreign country to which it accepts freight for shipment; and any freight shipped from the United States through a foreign country into the United States, the through rate on which shall not have been made public as Freight •nb- , . .-..,,/. -i- T -xj. J • J. j.1. Joot *o customs required by this act, shall, before it is admitted into the duties in case of United States from said foreign country, be subject to cus- ti^'o^h'rates.' toms duties as if said freight were of foreign production ; and any law in conflict with this section is hereby repealed. No advance shall be made in the rates, fares, and charges which have been established and published as aforesaid by any common carrier in compliance with the requirements of Ten days' pub- this sectiou, except after ten days' public notice, which shall v'ances"ta "rates plainly State the changes proposed to be made in the sched- mua e given, ^j^ then in forcc, and the time when the increased rates, fares, or charges will go into effect ; and the proposed changes shall be shown by printing new schedules, or shall be plainly indicated upon the schedules in force at the time and kept open to public inspection. Eeductions in such published rates, fares, or charges shall only be made after three days' Three days' previous public noticc, to be given in the same manner that public notice of , . i ■, • reduction in notice of an advance m rates must be given, Eiven. And when any such common carrier shall have estab- lished and published its rates, fares, and charges in com- Pubiishedrates pHaucc With the provlsious of this section, it shall be un- todfromf ^*"*' lawful for such common carrier to charge, demand, collect, or receive from any person or persons a greater or less compensation for the transportation of passengers or prop- erty, or for any services in connection therewith, than is specified in such published schedule of rates, fares, and charges as may at the time be in force. Every common carrier subject to the provisions of this act shall file with the Commission hereinafter provided for Copies of sched- copies of Its schcdules of rates, fares, and charges which fares, and char- have becu established and published in compliance with ges must be filed .. . j»jt. ,. ,,,, ^ ^.^ with commis- the requirements of this section, and shall promptly notify said Commission of all changes made in the same. Every such common carrier shall also file with said Commission Copies of con- copics of all coutracts, agreements, or arrangements with mrats!'and^'Sother coiumon carriers in relation to any trafldc affected by rang^ements^ttijg provisions of this act to wMch it may be a party. And conunisaion. jq cascs where passeugcrs and freight pass over continuous lines or routes operated by more than one common carrier, and the several common carriers operating such lines or routes establish joint tariffs of rates or fares or charges for such continuous lines or routes, copies of such joint tariffs mn8tbefi*iedwuh ^^^^^ ^^®^' ^ ^^^® manner, be filed with said Commission. commiflBion. Such joiut ratcs, farcs, and charges on such continuous lines so filed as aforesaid shall be made public by such Power of Com- ... mission to pre- conunon Carriers when directed by said Commission, in so ■ far as may, in the judgment of the Commission, be deemed practicable; and said Commission shall from time to time prescribe the measure of publicity which shall be given to such rates, fares, and charges, or to such part of tliem as it may deem it practicable for such common carriers to publish, and the places in which they shall be published. No advance shall be made in joint rates, fares, and charges, shown upon joint tariffs, except after ten days' notice to the Commission, which shall plainly state the changes proposed to be made in the schedule then in force. Ten d»y»' n» and the time when the increased rates, fares, or charges siOTofadv^TOfB will go into' effect. No reduction shall be made in joint SlhwgM^"**" rates, fares, and charges, except after three days' notice. Three day«' to be given to the Commission as is above provided in theSSgg^n ^rS°^ case of an advance of joint rates. The Commission may *'a™3*f",.4°'»Sd make public such proposed advances, or such reductions, m'^'^'e^- such manner as may, in its judgment, be deemed prac-j^2^J*'^'^»2J; ticable, and may prescribe from time to time the measure 5^^^"^*/ °l^ of publicity which common carriers shall give to advances or reductions in joint tariffs. It shall be unlawful for any common carrier, party to any joint tariff, to charge, demand, collect, or receive from any person or persons a greater or less compensation for Joint rat**, the transportation of persons or property, or for any serv- m^t'SothJ^ ices in connection therewith, between any points as to^'* '""' which a joint rate, fare, or charge is named thereon than is specified in the schedule filed with the Commission in force at the time. The Commission may determine and prescribe the form^co™™^^»»^»» in which the schedules required by this section to be kept fo™' of sohed- open to public inspection shall be prepared and arranged, fares, ami and may change the form from time to time as shall be found expedient. If any such common carrier shall neglect or refuse to file or publish its schedules or tariffs of rates, fares, and charges as provided in this section, or any part of the same, such common carrier shall, in addition to other penalties herein „g-^f"of JJ.* ^ '3°^ prescribed, be subject to a writ of mandamus, to be issued tolie "^pjI'J^J by any circuit court of the United States in the judicial oh»rge». district wherein the principal office of said common carrier is situated, or wherein such offense may be committed, and if such common carrier be a foreign corporation in the judicial circuit wherein such common carrier accepts traffic and has an agent to perform such service, to compel com- pliance with the aforesaid provisions of this section ; and such writ shall issue in the name of the people of the United States, at the relation of the Commissioners appointed under the provisions of this act ; and the failure to comply with its requirements shaJl be punishable as and for a con- 8 tempt; and the said Commissioners, as complainants, may also apply, in any such circuit court of the United States, for a writ of injunction against such common carrier, to re- strain such common carrier from receiving or transporting property among the several States and Territories of the United States, or between the United States and adjacent foreign countries, or between ports of transshipment and of entry and the several States and Territories of the United States, as mentioned in the first section of this act, until such common carrier shall have complied with the afore- said provisions of this section of this act, Seo. 7. That it shall be unlawful for any common carrier subject to the provisions of this act to enter into any com- bination, contract, or agreement, expressed or implied, to prevent, by change of time schedule, carriage in different cars, or by other means or devices, the carriage of freights from being continuous from the place of shipment to the place of destination; and no break of bulk, stoppage, or in- terruption made by such common carrier shall prevent the carriage of freights from being and being treated as one con- oiiViVg ""oftinuous carriage from the place of shipment to the place of S^'ihhipmeS destination, unless such break, stoppage, or interruption M^Jf "' ***'' ^*s made in good faith for some necessary purpose, and without any intent to avoid or unnecessarily interrupt such continuous carriage or to evade any of the provisions of this act. Seo. 8. That in case any common carrier subject to the provisions of this act shall do, cause to be done, or permit to be done any act, matter, or thing in this act prohibited or declared to be unlawful, or shall omit to do any act, matter, or thing in this act required to be done, such common car- Liabiuty of rier Shall be liable to the person or persons injured thereby to"^LfiL. "" for the full amount of damages sustained in consequence of any such violation of the provisions of this act, together with a reasonable counsel or attorney's fee, to be fixed by the court in every case of recovery, which attorney's fee shall be taxed and collected as part of the costs in the case. Sec. 9. That any person or persons claiming to be dam- aged by any common carrier subject to the provisions of this act may either make complaint to the Commission as Perioiii oiuim- hereinafter provided for, or may bring suit in his or their Lmd'^may e*^t owu behalf for the recovery of the damages for which such pUtato'tucZ; common carrier may be liable under the provisions of this brtal'snl "in°i act, in any district or circuit court of the United States of ^tod state* (jompgtgQ^ jurisdiction; but such person or persons shall not have the right to pursue both of said remedies, and must in each case elect which one of the two methods of procedure herein provided for he or they will adopt. In any such action brought for the recovery of damages the court before which the same shall be pending may compel office™, &o.,«f any director, ofBcer, receiver, trustee, or agent of the cor- i>e conTpeUea'to poration or company defendant in such suit to attend, ap- '''*'' pear, and testify in such case, and may compel the produc- tion of the books and papers of such corporation or com- pany party to any such suit; the claim that any such testi- mony or evidence may tend to criminate the person giving such evidence shall not excuse such witness from testify- ing, but such evidence or testimony shall not be used against such person on the trial of any criminal proceeding. Seo. 10. (As amended March 2. 1889.) That anv common Penalties for , . ... Tiolations of act earner subject to the provisions of this act, or, whenever by carriore, or , . . , . , . . when the carrier such common earner is a corporation, any director ori? a corpora- ofScer thereof, or any receiver, trustee, lessee, agent, or agents, or em- person, acting for or employed by such corporation, who, Sn^rJinmSnfc' alone or with any other corporation, company, person, or party, shall wiUfuUy do or cause to be done, or shall willingly suffer or permit to be done, any act, matter, or thing in this act prohibited or declared to be unlawftil, or who shall aid or abet therein, or shall wiUfuUy omit or fail to do any act, matter, or thing in this act required to be done, or shall cause or willingly suffer or permit any act, matter, or thing so directed or required by this act to be done not to be so done, or shall aid or abet any such omission or failure, or shaU be guilty of any infraction of this act, or shall aid or abet therein, shall be deemed guilty of a misdemeanor, and shall, upon conviction thereof in any district court of the United States within the jurisdiction of which such offense was committed, be subject to a fine of not to exceed five thousand dollars for each offense : Provided, That if the offense for which any person shall be convicted as aforesaid shall be an unlawful discrimination in rates, fares, or charges, for the transportation of passengers or property, such person shall, in addition to the fine herein- before provided for, be liable to imprisonment in the peni- tentiary for a term of not exceeding two years, or both such fine and imprisonment, in the discretion of the court. Any common carrier subject to the provisions of this act, f ^1™*'" biiiin" or. whenever such common carrier is a corporation, any oflS- etc., by carriers; ' , ' " their offloera or cer or agent thereof, or any person acting for or employed agenta: rineand . ' , , „ « 1 -I .-I,. j,\ imprisonment. by such corporation, who, by means of false billing, false classification, false weighing, or false report of weight, or by any other device or means, shall knowingly and will- 10 fally assist, or shall willingly suffer or permit, any person or persons to obtain transportation for property at less than the regular rates then established and in force on the line of transportation of such common carrier, shall be deemed guilty of a misdemeanor, and shall, upon conviction thereof in any court of the United States of competent jurisdiction within the district in which such offense was committed, be subject to a fine of not exceeding five thousand dollars, or imprisonment in the penitentiary for a term of not exceed- ing two years, or both, in the discretion of the court, for each offense, FenftiMeB for An y persou and any officer or agent of any corporation ito.'by8hip^?8or company who shall deliver property for transportation Mn»:°*iSe md to any common carrier, subject to the provisions of this act, imprinonment. ^^ ^^^ whom as cousiguor Or cousignce any such carrier shall transport property, who shall knowingly and will- fully, by false billing, false classification, false weighing, false representation of the contents of the package, or false report of weight, or by any other device or means, whether with or without the consent or connivance of the carrier, its agent or agents, obtain transportation for such prop- erty at less than the regular rates then established and in force on the line of transportation, shall be deemed guilty of fraud, which is hereby declared to be a misdemeanor, and shall, upon conviction thereof in any court of the United States of competent jurisdiction within the district in which such offense was committed, be subject for each offense to a fine of not exceeding five thousand dollars or imprison- ment in the penitentiary for a term of not exceeding two years, or both, in the discretion of the court. Penalties for If auy suoh persou, or any officer or agent of any such moB^carriera to Corporation or company, shall, by payment of money or discriminate un- .- ... « i t -^ j.- ^i • • -i jnstiy: fine and other thing of valuc, solicitatiou, or Otherwise, induce any Join t°uS)iiity common carrier subject to the provisions of this act, or any SSkg™" ^" of its officers or agents, to discriminate unjustly in his, its, or their favor as against any other consignor or consignee in the transportation of property, or shall aid or abet any common carrier in any such unjust discrimination, such person or 'such officer or agent of such corporation or com- pany shall be deemed guilty of a misdemeanor, and shall, upon conviction thereof in any court of the United States of competent jurisdiction within the district in which such offense was committed, be subject to a fine of not exceeding five thousand dollars, or imprisonment in the penitentiary for a term of not exceeding two years, or both, in the dia- 11 cretion of the court, for each offense; and snch person, cor- poration, or company shall also, together with said common carrier, be liable, jointly or severally, in an action on the case to be brought by any consignor or consignee discrimi- nated against in any court of the United States of com- petent jurisdiction for all damages caused by or resulting therefrom. Sec. 11. That a Commission is hereby created and estab- „ i n t e r s t a t « Tx.jj.T-1 j^-iT r-i Commerce Com- lisned. to be known as the Inter-State Commerce Commis- missioners— how sion, which shall be composed of five Commissioners, who *^*°"' shaU be appointed by the President, by and with the advice and consent of the Senate. The Commissioners first ap- pointed under this act shall continue in office for the term of two, three, four, five, and six years, respectively, from the first day of January, anno Domini eighteen hundred and eighty-seven, the term of each to be designated bv the Terms of Com- "'. ,,, missioners. President; but their successors shall be appointed for terms of six years, except that any person chosen to fill a vacancy shall be appointed only for the unexpired time of the Com- missioner whom he shall succeed. Any Commissioner may be removed by the President for inefficiency, neglect of duty, or malfeasance in office. Not more than three of the Commissioners shall be appointed from the same political party. K"o person in the employ of or holding any official relation to any common carrier subject to the provisions of this act, or owning stock or bonds thereof, or who is in any manner pecuniarily interested therein, shall enter upon the duties of or hold such office. Said Commissioners shall not engage in any other business, vocation, or employment, No vacancy in the Commission shall impair the right of the remaining Commissioners to exercise all the powers of the Commission. " Sec. 12. {As amended March 3, 1889, and February 10, d„^y ^'comm'is^- 1891.) That the Commission hereby created shall have ?'™ *" .'"i"'™ ' '^ into business of authority to inquire into the management of the business of ?,a™o™/°*''f?P *^ ^ ^ itselfinformedin all common carriers subject to the provisions of this act, and regard thereto. shall keep itself informed as to the manner and method in which the same is conducted, and shall have the right to obtain from such common carriers full and complete informa- commissionre- -*^ quired to execute tion necessary to enable the Commission to perform the duties ^?g^io„g'''J,f* ^j and carry out the objects for which it was created; and the act- Commission is hereby authorized and required to execute and enforce the provisions of this act; and, upon the re- quest of the Commission, it shall be the duty of any district triS"lttome^ attorney of the United States to whom the Commission S™ecuS^o?°it may apply to institute in the proper court and to prosecute *°"'*y'°™"''' 12 nnder the direction of the Attorney-General of the United States all necessary proceedings for the enforcement of the provisions of this act and for the punishment of all viola- coBtB and ex- tions thereof, and the costs and expenses of such prosecu- mtton to hl^vaii tion Shall be paid out of the appropriation for the expenses ton"fo? OTuS*' of the courts of the United States; and for the purposes muJioV't o™; of this act the Commission shall have power to require, by 2njfte3tiZn''y of subposna, the attendance and testimony of witnesses and prodnotion^of the production of all books, papers, tariffs, contracts, agree- deS™**^*^' ments, and documents relating to any matter under inves- tigation. Commission "Such attendance of witnesses, and the production of S OTiSrtVco^ such documentary evidence, may be required from any place SttoJ!d*mTtM? in tlie United States, at any designated place of hearing. *^^^- And in case of disobedience to a subpoena the Commission, or any party to a proceeding before the Commission, may invoke the aid of any court of the United States in requir- ing the attendance and testimony of witnesses and the pro- duction of books, papers, and documents under the provi- sions of this section. Penalty fordie- < 4And anv of the circuit courts of the United States within obedience to or- *' der of the court, the jurisdiction of which such inquiry is carried on may, in case of contumacy or refusal to obey a subpoena issued to any common carrier subject to the provisions of this act, or other person, issue an order requiring such common carrier or other person to appear before said Commission (and pro- duce books and papers if so ordered) and give evidence touching the matter in question; and any failure to obey such order of the court may be punished by such court as Claim that tos- a coutempt thereof. The claim that any such testimony or timouy or evi- ■*■ ./ ./ dence will tend evidencc may tend to criminate the person giving such to criminate will ■. ii ■« . Z, ./. . i i not eicuse wit- evidcncc Shall not excuse such witness from testifying; but such evidence or testimony shall not be used against such person on the trial of any criminal proceeding. Testimony "The testimony of any witness may be taken, at the dep^osition.™ ^instance of a party in any proceeding or investigation depending before the Commission, by deposition, at any time after a cause or proceeding is at issue on petition and Commission answer. The Qommission may also order testimony to be mony°tob6tSrat^^®° ^^ deposition in any proceeding or investigation by deposition, pending before it, at any stage of such proceeding or inves- tigation. Such depositions may be taken before any judge of any court of the United States, or any commissioner of a circuit, or any clerk of a district or circuit court, or any chancellor, justice, or judge of a supreme or superior court, mayor or chief magistrate of a city, judge of a county court. J.D or court of common pleas of any of the TTnited States, or any notary public, not being of counsel or attorney to either of the parties, nor interested in the event of the proceeding or investigation. Eeasonable notice must first be given in Eeasonsbie writing by the party or his attorney proposing to take such given. deposition to the opposite party or his attorney of record, as either may be nearest, which notice shall state the name of the witness and the time and place of the taking of his deposition. Any person may be compelled to appear and deposttiSn°may depose, and to produce documentary evidence, in the same 5? oompeiisd in ■*■ ' -^ . «* 7 tne Bame manner manner as witnesses may be compelled to appear and testify Jl^*^"^* 'i'®'''' and produce documentary evidence before the Commission as hereinbefore provided. " Every person deposing as herein provided shall be can- Manner of tak- tioned and sworn (or affirm, if he so request) to testify the ™^ *^°°' "'"'' whole truth, and shall be carefully examined. His testi- mony shall be reduced to writing by the magistrate taking the deposition, or under his direction, and shall, after it has been reduced to writing, be subscribed by the deponent, " If a witness whose testimony may be desired to betaken when witness by deposition be in a foreign country, the deposition may jfo^t^f"'*'^" be taken before an ofl&cer or person designated by the Com- mission, or agreed upon by the parties by stipulation in Depoeitions writing to be filed with the Commission. All depositions "Ji^ tjj'e® com^ must be promptly filed with the Commission." mission. Witnesses whose depositions are taken pursuant to this rees of wit- act, and the magistrate or other offtcer taking the same, Stlsf"* '""^" shall severally be entitled to the same fees as are paid for like services in the courts of the United States. Sec. 13. That any person, firm, corporation, or associa- Complaints to tion, or any mercantile, agricultural, or manufacturing Ho'^™an'd "by society, or any body politic or municipal organization com- How^rrSSpon plaining of anything done or omitted to be done by any """""■■ common carrier subject to the provisions of this act in con- travention of the provisions thereof, may apply to said Commission by petition, which shall briefly state the facts; • whereupon a statement of the charges thus made shall be forwarded by the Commission to such common carrier, who shall be called upon to satisfy the complaint or to answer the same in writing within a reasonable time, to be speci- fied by the Commission. If such common carrier, within Eeparation by the time specified, shall make reparation for the injury Sradgation.''" alleged to have been done, said carrier shall be relieved of liability to the complainant only for the particular violation of law thus complained of. If such carrier shall not satisfy inTestigaUons the complaint within the time specified, or there shall the'coSi^'iMionf F B P -15 14 appear to be any reasonable ground for investigating said complaint, it shall be the duty of the Commission to inves- tigate the matters complained of in such manner and by such means as it shall deem proper. Complaints for- Said Oommissiou shaU in like manner investigate any Rliiroad'com-complaint forwarded by the railroad commissioner or rail- mieaioiiB. ^^^^ commission of any State or Territory, at the request of Institution of such Commissioner or commission, and may institute any co'mmissio''/ *on iuquipy ou its own motion in the same manner and to the its own motion, gj^^^ ^^g^^ ^^ though complaiut had been made. Complainant ^o compMut Shall at any time be dismlsscd because of recuy°d™aged?" ^^^ abseucc of direct damage to the complainant. Commission Sec. 14. {As amended March 3, 1889.) That whenever portofSveltiga an investigation shall be made by said Commission, it shall tiona. jjg -^g duty to make a report in writing in respect thereto, which shall include the findings of fact upon which the con- clusions of the Commission are based, together with itsrec- Eeparation. ommeudation as to what reparation, if any, should be made ,bv the common carrier to any party or parties who may be Findings of ^^ , , . . ,,,„,. , , „ commissionfound to havc bccu injured; and such findings so made shall dence in judical thereafter, in all judicial proceedings, be deemed prima facie procee gs. gyj^ence ag to each and every fact found. Beports of in- All rcports of investigations made by the Commission must bl Entered Shall bc entered of record, and a copy thereof shall be far- •f record. nishcd to the party who may have complained, and to any copies on parties, commou Carrier that may have been complained of. Ecports and Tjie Commission may provide for the publication of its decisions. An- or r thorized pubii- rcports and decisions in such form and manner as may be cation to be com- ^ " petent evidence, bcst adapted for publlc information and use, and such au- thorized publications shall be competent evidence of there- ports and decisions of the Commission therein contained, in aU courts of the United States, and of the several States, and "distribution ^^^''^^ ^^y^ ^'^^*'^®'^ P^®'*^ *^^ authentication thereof. The of annual reports Commissiou may also cause to be printed for early distri- of Commission. *' r o button its annual reports. Sec. 15. That if in any case in which an investigation shall be made by said Commission it shall be made to ap- pear to the satisfaction of the Commission, either by the testimony of witnesses or other evidence, that anything has been done or omitted to be done in violation of the provisions of this act, or of any law cognizable by said Commission, by any common carrier, or that any injury or damage has been sustained by the party or parties complaining, or by other parties aggrieved in consequence of any such violation, it shall be the duty of the Commission to forthwith cause a copy of its report in respect thereto to be delivered to such 15 common carrier, together with a notice to said common car- rier to cease and desist from such violation, or to make Kotioe to com. reparation for the injury so found to have been done, or both, ^™g from^vio]* within a reasonable time, to be specified by the Commission ; *'°" °^ ■"'• and if, within the time specified, it shall be made to appear to the Commission that such common carrrier has ceased from such violation of law, and has made reparation for the „ . . ' ^ Compliance injury found to have been done, in compliance with the re- with notice u, 1 ,. /. .1 ^1 . . . ,-. .. « .. „ cease from viol*. port and notice of the Commission, or to the satisfaction oftionofaot. Eep- the party complaining, a statement to that effect shall be entered of record by the Commission, and the said common carrier shall thereupon be relieved from further liability or penalty for such particular violation of law. Seo. 16. {As amended March 2, 1889.) That whenever any common carrier, as defined in and subject to the provi- Petition to sions of this act, shall violate, or refuse or neglect to obey 00°'^ to* cLm or perform any lawful order or requirement of the Commis- toorfer of^cw sion created by this act, not founded upon a controversy ™""'"'" requiring a trial by jury, as provided by the seventh amendment to the Constitution of the United States, it shall be lawful for the Commission or for any company or person interested in such order or requirement, to apply in a sum- mary way, by petition, to the circuit court of the United States sitting in equity in the judicial district in which the common carrier complained of has its principal office, or in which the violation or disobedience of such order or require- ment shall happen, alleging such violation or disobedience, as the case may be ; and the said court shall have power to hear and determine the matter, on such short notice to the common carrier complained of as the court shall deem reasonable ; and such notice may be served on such common carrier, his or its officers, agents, or servants in such manner as the court „^ » ^ '' ?* J *=* f United States shall direct; and said court shall proceed to hear and de- conrts to hear ' « . *"o detenmne termine the matter speedily as a court of equity, and with- cases of digobedi. out the formal pleadings and proceedings applicable to ordinary suits in equity, but in such manner as to do justice in the premises ; and to this end such court shall have power, if it think fit, to direct and prosecute in such mode and by such persons as it may appoint, all such inquiries as the courtmay think needful to enable it to form a just judgment o/the'Xmmie Findings of fact f the Commis- sion shall be in the matter of such petition; and on such hearing the "rj^a "fJ5"eTi findings of fact in the report of said Commission shaU be "*""* prima facie evidence of the matters therein stated ; and if it be made to appear to such court, on such hearing or on re- port of any such person or persons, that the lawful order or requirement of said Commission drawn in question 16 has been violated or disobeyed, it shall- be lawful for Writs of In- such court to issue a writ of injunction or other proper jnncUon or other ii ■ j. • i. process against process, mandatory or otherwise, to restrain such com- oarrlers in cases . „ o ^t j.- ■ t_ • i i- j- of disobadienoe. mon Carrier from further continuing such violation or dis- obedience of such order or requirement of said Commission, and enjoining obedience to the same; and in case of any disobedience of any such writ of injunction or other proper process, mandatory or otherwise, it shall be lawful for such court to issue writs of attachment, or any other process of said court incident or applicable to writs of injunction or other proper process, mandatory or otherwise, against such common carrier, andif a corporation, againstone ormoreof the directors, officers, or agents of the same, or against any owner, lessee, trustee, receiver, or other person failing to obey such writ of injunction, or other proper process, man- datory or otherwise; and said court may, if it shall think fit, make an order directing such common carrier or other Pnnishmontfor persou 80 disobcyiug such writ of injunction or other proper TO°to of in,iun^ proccss, mandatory or otherwise, to pay such sum of money, pi^er Voces" not exceeding for each carrier or person in default the sum •■ of five hundred dollars for every day, after a day to be named in the order, that such carrier or other person shall fail to obey such injunction or other proper process, man- datory or otherwise; and such moneys shall be payable as the court shall direct, either to the party complaining or into court, to abide the ultimate decision of the court, or into the Treasury; and payment thereof may, without prejudice to any other mode of recovering the same, be en- forced by attachment or order in the nature of a writ of execution, in like manner as if the same had been recovered by a final decree in personam in such court. When the subject in dispute shaU be of the value of two thousand dollars or more, eitherparty to such proceeding beforesaid Appeals to sn- court may appeal to the Supreme Court of the United ^^■J^s^,."^ States, under the same regulations now provided by law in respect of security for such appeal; but such appeal shall Appeals shau uot Operate to stay or supersede the order of the court or auj o'/de? ^Jthe cxccution of any writ or process thereon; and such tte Milrt."*'* ^^ court may, in every such matter, order the payment of such costsandconn- costs and couuscl fces as shall be deemed reasonable. "Whenever any such petition shall be filed or presented by atto^ysto'prM**^® Commissiou it shall be the duty of the district attorney, ?^ttonTt*Att^r: under the direction of the Attorney-General of the United °*^to'mJd ex- States, to prosccute the same; and the costs and expenses onttonstobe^d"^ ^^^^ prosccution Shall be paid out of the appropriation 2JJ,J',^P^PJJ2; for the expenses of the courts of the United States. 17 If the matters involved in any such order or requirement of said Commission are founded upon a controversy requir- ing a trial by jury, as provided by the seventh amendment to the Constitution of the United States, and any such com- mon carrier shall violate or refuse or neglect to obey or per- form the same, after notice given by said Commission as provided in the fifteenth section of this act, it shaU be law- ful for any company or person interested in such order or requirement to apply in a summary way by petition to the uJjte"*!""^*, circuit court of the United States sitting as a court of law""""? >no.a«o8o« . disobedieu oe in the judicial district m which the carrier complained of yhen trial by has its principal office, or in which the violation or disobe-i^. dience of such order or requirement shall happen, alleging such violation or disobedience as the case may be; and said court shall by its order then fix a time and place for the trial of said cause, which shall not be less than twenty nor more than forty days from the time said order is made, and it shaU be the duty of the marshal of the district in which said proceeding is pending to forthwith serve a copy of said petition, and of said order, upon each of the defend- ants, and it shall be the duty of the defendants to file their answers to said petition within ten days after the service of the same upon them as aforesaid. At the trial the find- ^^^**^J|J,^Jj« ings of fact of said Commission as set forth in its report ™i?*'"°8'?*" ^? o ->■ prima zaoie evi- shall be prima facie evidence of the matters therein stated, aeno*- and if either party shall demand a jury or shall omit to waive a jury the court shall, by its order, direct the mar- shal forthwith to summon a jury to try the cause; but if Trial by jnry. all the parties shall waive a jury in writing then the court shall try the issues in said cause and render its judgment Trial by court. thereon. If the subject in dispute shaU be of the value of two thousand dollars or more either party may appeal to Appeals to su- the Supreme Court of the United States under the same ^S st^ea. " regulations now provided by law in respect to security for such appeal; but such appeal must be taken within twenty days from the day of the rendition of the judgment of said circuit court. If the judgment of the circuit court shall be in favor of the party complaining he or they shall be en- titled to recover a reasonable counsel or attorney's fee, to j^^^J^^^ ■* be fixed by the court, which shall be collected as part of the costs in the case. For the purposes of this act, except- ing its penal provisions, the circuit courts of the United States shall be deemed to be always in session. Seo. 17. (As ammded March 2, 1889.) That the CommiB- sion may conduct its proceedings in such manner as will best conduce to the proper dispatch of business and to the 18 interstatecom- ends of iustice. A maioritv of the Commission shall con- merce Coiuiuia- •' j ./ •ion. Form ofgtitute a ouorum for the transaction of business, but no procedm*. Commissioner shall participate in any hearing or proceed- ing in which he has any pecuniary interest. Said Commis- sion may, from time to time, make or amend such general rules or orders as may be requisite for the order and regu- lation of proceedings before it, including forms of notices and the service thereof, which shall conform, as nearly as may be^ to those in use in the courts of the United States. ParMMmayap- Any party may appear before said Commission and be 8ommilsTon*?n heard, in person or by attorney. Every vote and official tomey. *" ^^ *'' act of the Oommissiou shall be entered of record, and its proceedings shall be public upon the request of either party Official leaL interested. Said Commission shall have an official seal, which shall be judicially noticed. Either of the members of the Commission may administer oaths and affirmations and sign subpoenas. Sec. 18. {As amended.) That each Commissioner shall Salaries of Com- receive an annual salary of seven thousand five hundred Dusaionera. ^ dollars, payable in the same manner as the judges of the courts of the United States. The Commission shall ap- seoretary— how point a Secretary, who shall receive an annual salary of ftppointou ; sal- »ry. three thousand five hundred dollars, payable in like manner. The Commission shall have authority to employ and fix the Employees, compensation of such other employees as it may find nec- essary to the proper performance of its duties. Until Offices and sup- otherwise provided by law, the Commission may hire suit- able offices for its use, and shall have authority to procure Witnesses' fees, all neccssary office supplies. Witnesses summoned before the Commission shall be paid the same fees and mileage that are paid witnesses in the courts of the United States, the^&l^mfslion ^^^ ^^ *^® cxpcnses of the Commission, including all -how paid. neccssary expenses for transportation incurred by the Com- missioners, or by their employees under their orders, in making any investigation, or upon official business in any other places than in the city of Washington, shall be al- lowed and paid on the presentation of itemized vouchea:s therefor approved by the chairman of the Commission. Principal office Sbc. 19. That the principal office of the Commission shall Bion. " ° ° be in the city of Washington, where its general sessions shaU be held ; but whenever the convenience of the public or the parties may be promoted or delay or expense pre- co^i^ion'*''* vented thereby, the Commission may hold special sessions Commission ^^ '^^^7 P^^* of ^^^ United States. It may, by one or more taq^ieYby°onl<** *^® Oommissioners, prosecute any inquiry necessary to m«iS2r"to ^y ^*^ duties, in any part of the United States, into any mat- 19 ter or question of fact pertaiiling to the business of any ^^*^ stot^'' * common carrier subject to the provisions of this act. Sec. 20. That the Commission is hereby authorized to re- c«rriers sub- quire annual reports from all common carriers subject to the mSst render full provisions of this act, to fix the time and prescribe the man- co^ilSiMio«f.***° ner in which such reports shall be made, and to require from such carriers specific answers to all questions upon which the Commission may need information. Such annualreports shall show in detail the amount of capital stock issued, the amounts paid therefor, and the manner of payment for the same; the dividends paid, the surplus fund, if any, and the y^^^ report. number of stockholders; the funded and floating debts and ^n^J^*" "''*" the interest paid thereon ; the cost and value of the carrier's property, franchises, and equipments; the number of em- ployees and the salaries paid each class; the amounts expended for improvements each year, how expended, and the character of such improvements; the earnings and re- ceipts from each branch of business and from all sources; the operating and other expenses ; the balances of profit and loss; and a complete exhibit of the financial operations of the carrier each year, including an annual balance-sheet. Such reports shall also contain such information in relation to rates or regulations concerning fares or freights, or agree- ments, arrangements, or contracts with other common car- riers, as the Commission may require; and the said Com- mission may, within its discretion, for the purpose of en abling c om m i « s i on it the better to carry out the purposes of this act, prescribe " "iodJ"™ ke'e^ (if in the opinion of the Commission it is practicable to pre- '"s ao«o"nt8. scribe such uniformity and methods of keeping accounts) a period of time within which all common carriers subject to the provisions of this act shall have, as near as may be, a uniform system of accounts, and the manner in which such accounts shall be kept. Sec. 21. (As amended March 3, 1889.) That the Oommis- Annnai reports -irt/-. /.-r^ 1 • 1**^ *^® Commis- sion shall, on or before the first day of December m each 8ioutoCongre»». year, make a report, which shall be transmitted to Con- gress, and copies of wMch shall be distributed as are the other reports transmitted to Congress. This report shall contain such information and data collected by the Com- mission as may be considered of value in the determination of questions connected with the regulation of commerce, together with such recommendations as to additional legis- lation relating thereto as the Commission may deem neces- sary; and the names and compensation of the persons em- ployed by said Commission. 20 Sec. 22. {As amended March 2, 1889, and February 8, 1895.) That nothing in this act shall prevent the carriage, storage, Peraom sudor handling of property free or at reduced rates for the may^be Lrried United States, State, or municipal governments, or for rates" " ""^ charitable purposes, or to or from fairs and expositions for exhibition thereat, or the free carriage of destitute and homeless persons transported by charitable societies, and Mileage, ex the iiecessary agents employed in such transportation, or onrsion, or com- . „ ., • i j.- matationpassen- the issuauce of mileage, excursion, or commutation passeu- **' '" ^ • ger tickets; nothing in this act shall be construed to pro- hibit any common carrier from giving reduced rates to ministers of religion, or to municipal governments for the transportation of indigent persons, or to inmates of the National Homes or State Homes for Disabled Volunteer Soldiers, and of Soldiers' and Sailors' Orphan Homes, in- cluding those about to enter and those returning home after discharge, under arrangements with the boards of managers of said homes ; nothing in this act shall be con- PasBes and free strued to prcvcnt railroads from giving free carriage to transportation to . -^ i j.r. • • officers and em- their own oflttcers and employees, or to prevent the pnnci- roaJ^'mpanSs. pal ofBcers of auy railroad company or companies from exchanging passes or tickets with other railroad companies for their officers and employees; and nothing in this act ProviBions of contained shall in anyway abridge or alter the remedies tion to remedies now cxistiug at common law or by statute, but the pro- mm law* Pen™' visions of this act are in addition to such remedies: Pro- aflotof by*«'™ vidsd, That no pending litigation shall in any way be affected by this act: Provided further, That nothing in /°*°Mbie" flTfr *^® ^*^^ shall prevent the issuance of joint interchange- thpuaand-miieable fivc-thousand mile tickets, with special privileges as tickets. Amount ' ,.,, of free baggage, to the amount of free baggage that may be carried under mileage tickets of one thousand or more miles. But before any common carrier, subject to the provisions of this act, shall issue any such joint interchangeable mileage tickets with special privileges, as aforesaid, it shall file with the Interstate Commerce Commission copies of the joint tariffs of rates, fares, or charges on which such joint interchange- able mileage tickets are to be based, together with specifica- tions of the amount of free baggage permitted to be carried under such tickets, in the same manner as common carriers are required to do with regard to other joint rates by sec- tion six of this act; and all the provisions of said section Publication of six relating to joint rates, fares, and charges shall be observed by said common carriers and enforced by the Interstate Commerce Commission as fully with regard to such joint interchangeable mileage tickets aa with regard 21 to other joint rates, fares, and charges referred to in said section six. It shall be unlawful for any common carrier that has issued or authorized to be issued any such joint interchangeable mileage tickets to demand, collect, or re- 8«i»af Hekeu. ceive from any person or persons a greater or less compen- sation for transportation of persons or baggage under such joint interchangeable mileage tickets than that required by the rate, fare, or charge specified in the copies of the joint tariff of rates, fares, or charges filed with the Commission in force at the time. The provisions of section ten of this PenaitiM. act' shall apply to any violation of the requirements of this proviso. NEW SBGTION (Added March 2, 1889). That the circuit Jnrisdiotioii of ' ' United States and district courts of the United States shall have jurisdic- courts to issna .. ^T 1 X- ^ ^ -writa of peremp- tion upon the relation of any person or persons, firm, or cor- tory mandamns poration, alleging such violation by a common carrier, of m"ement°of in* any of the provisions of the act to which this is a supple- th^fSmUhineof ment and all acts amendatory thereof, as prevents the transportation relator from having interstate traffic moved by said com- ^''"^''**- mon carrier at the same rates as are charged, or upon terms or conditions as favorable as those given by said common carrier for like traffic under similar conditions to any other shipper, to issue a writ or writs of mandamus against said common carrier, commanding such common carrier to move and transport the traffic, or to furnish cars or other facili- ties for transportation for the party appljdng for the writ: Provided, That if any question of fact as to the proper J^^^^i^^J^ compensation to the common carrier for the service to be lta„dSig"pro^r enforced by the writ is raised by the pleadings, the writ of ^^JJ^^'JJJ™ ^ peremptory mandamus may issue, notwithstanding such ""*«*•"»'»•*■ question of fact is undetermined, upon such terms as to security, payment of money into the court, or otherwise, as the court may think proper, pending the determination of the question of fact: Provided, That the remedy hereby ,^B«m«jj^enm^ given by writ of mandamus shall be cumulative, and shall ^thoth"™".' not be held to exclude or interfere with other remedies pro- Ji*»JJJ^^^^ ^ vided by this act or the act to which it is a supplement. Public No. 41, approved February 4, 1887, as amended by Public No. 125, approved March 2, 1889, and Public No. 72, approved February 10, 1891. Public No. 38, approved Feb- ruary 8, 1896. 22 Ad act in relation to testimony before the Interstate Commerce Com- 111 ission, and in cases or proceedings under or connected with an act entitled "An act to regulate commerce," approved February fourth, eighteen hundred and eighty-seven, and amendments thereto. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That and te8*t?mon'"'of ^^ persoii Shall be excused from attending and testifying "roT'oti n'^of '''^ from producing books, papers, tariffs, contracts, agree- aocumentaX ments and documents before the Interstate Commerce Com- evadencecorapul- sory before the mission, or in obedicnce to the subpoena of the Oommis- CommisaioD, and , ,,, 11 ,.,. ,, inanycase.crim- sion, whether such subpoBua be signed or issued by one or inal OT' otlier- ,, . . . ,. . . - wise, ia the more Commissioners, or in any cause or proceeding, criminal or otherwise, based upon or growing out of any alleged violation of the act of Congress, entitled "An act to regu- late commerce," approved i'ebruary fourth, eighteen hun- dred and eighty-seven, or of any amendment thereof on the ground or for the reason that the testimony or evidence, documentary or otherwise, required of him, may tend to criminate him or subject him to a penalty or forfeiture. But no person shall be prosecuted or subjected to any pen- alty or forfeiture for or on account of any transaction, mat- ter or thing, concerning which he may testify, or produce evidence, documentary or otherwise, before said Commis- sion, or in obedience to its subpoena, or the subpoena of either of them, or in any such case or proceeding: Provided, That no person so testifying shall be exempt from prosecu- tion and punishment for perjury committed in so testifying. Any person who shall neglect or refuse to attend and orhmriVonmeDt testify, or to auswcr any lawful inquiry, or to produce or both. books, papcrs, tariffs, contracts, agreements and documents, if in his power to do so, in obedience to the subpoena or lawful requirement of the Commission shall be guilty of an offense and upon conviction thereof by a court of compe- tent jurisdiction shall be punished by fine not less than one hundred dollars nor more than five thousand dollars, or by imprisonment for not more than one year or by both such fine and imprisonment. Public No. 54, approved, February 11, 1893. Antomatio '' couplers. 2B An act to promote the safety of employees and travelers upon lailroads by compelling common carriers engaged in interstate commerce to eqnip their cars with auti>niatic couplers and continuous brakes and their locomotives with driving-wheel brakes, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled. That Drivine-wheei " and train orake*. from and after the first day of January, eighteen hundred and ninety-eight, it shall be unlawful for any common carrier engaged in interstate commerce by railroad to use on its line any locomotive engine in moving interstate traffic not equipped with a power driving-wheel brake and appliances for operating the train-brake system, or to run any train in such traffic after said date that has not a sufficient number of cars in it so equipped with power or train brakes that the engineer on the locomotive drawing such train can con- trol its speed without requiring brakemen to use the common hand brake for that purpose. Seo. 2. Thaton and after the first day of January, eighteen hundred and ninety-eight, it shall be unlawful for any such common carrier to haul or permit to be hauled or used on its line any car used in moving interstate traffic not equipped with couplers coupling automatically by impact, and which can be uncoupled without the necessity of men going be- tween the ends of the cars. Seo. 3. That when any person, firm, company, or corpora- ^^'^wfSr'r? tion engaged in interstate commerce by railroad shall have 'use to receive " *^ •' care from con- equipped a sufficient number of its cars so as to comply necting linea or - , shippers. with the provisions of section one of this act, it may lawfully refuse to receive from connecting lines of road or shippers any cars not equipped sufficiently, in accordance with the first section of this act, with such power or train brakes as will work and readily interchange with the brakes in nse on its own cars, as required by this act. Seo. 4. That from and after the first day of July, eighteen or»»> iwns and handnolus. hundred any ninety-five, until otherwise ordered by the Interstate Commerce Commission, it shall be unlawful for any railroad company to use any car in interstate commerce that is not provided with secure grab irons or handholds in the ends and sides of each car for greater security to men in coupling and uncoupling cars. Seo. 5. That within ninety days from the passage of this ^efgh ■?Araw^ act the American Eailway Association is authorized hereby ^a™ ^""^ *'6>gi»' to designate to the Interstate Commerce Commission the standard height of drawbars for freight cars, measured per- pendicular from the level of the tops of the rails to the cen- ters of the drawbars, for each of the several gauges of rail- 24 roads in use in the United States, and shall fix a maziniam variation from such standard height to be allowed between the drawbars of empty and loaded cars. Upon their deter- mination being certified to the Interstate Commerce Com- mission, said Commission shall at once give notice of the standard fixed upon to all common carriers, owners, or les- sees engaged in interstate commerce in the United States by such means as the Commission may deem proper. But should said association fail to determine a standard as above provided. It shall be the duty of the Interstate Commerce Commission to do so, before July first, eighteen hundred and ninety-four, and immediately to give notice thereof as aforesaid. And after July first, eighteen hundred and ninety-five, no cars, either loaded or unloaded, shall be used in interstate traffic which do not comply with the standard above provided for. . Pma^foTTio- Sbo. 6. That any such common carrier using any locomo- lation of the pro- ■' ■, visioDB of thistive engm^f, running any train, or hauling or permitting to be hauled or used on its line any car in violation of any of the provisions of this act, shall be liable to a penalty of one hundred dollars for each and every such violation, to be re- covered in a suit or suits to be brought by the United States district attorney in the district court of the United States having jurisdiction in the locality where such violation shall Dnty of United have been committed, and it shall be the duty of such dis- torney. trict attorney to bring such suits upon duly verified infor- mation being lodged with him of such violation having oc- 8tSS%SmwM *''^^'"®^* ^^^ ^* shall also be the duty of the Interstate Commission. Commcrce Commission to lodge with the proper district attorneys information of any such violations as may come BxoeptionB toto its knowledge: Provided, That nothing in this act con- tained shall apply to trains composed of four-wheel cars or to locomotives used in hauling such trains. Powerof Inter- Sbo. 7. That the Interstate Commerce Commission may state Commerce *' Commission tofrom time to time upon full hearing and for good cause ex- eztend time of . , . , . . carriers to com- tend the period within which any common earner shall com- ply witiitus act. , ..■,., . . J. J., • i ply with the provisions of this act. Sec. 8. That any employee of any such common carrier who may be injured by any locomotive, car, or train in use Employes not contrary to the provision of this act shall not be deemed CI O G Uk & Q. XO ttS" »nme risk of em- thereby to have assumed the risk thereby occasioned, ploymenu although continuing in the employment of such carrier after the unlawful use of such locomotive, car, or train had been brought to his knowledge. Public No. 113, approved, March 2, 1893. An act snppleraentary to the act of July first, eighteen hundred and sixty-two, entitled "An act to aid in the construction of a railroad and telegraph line from the Missouri River to the Pacific Ocean, and to secnie to the Government the use of the same for postal, military, and other purposes," and also of the act of July second, eighteen hundred and sixty-four, and other acts amendatory of said first- named act. ' Be it enacted by the Senate and Mouse of Representatives of the United States of America in Congress assembled, That all railroad and telegraph companies to which the United States has granted any subsidy in lands or bonds or loan of credit for the construction of either railroad or telegraph eoTemmBnt lines, which, by the acts incorporatiag them, or by any act^*j«'^j/j»*'j;°*2 amendatory or supplementary thereto, are required to con* ^'^ ™ mlintaTn struct, maintain, or operate telegraph lines, and all com- 1™* operat* panics engaged ia operating said railroad or telegraph lines shall forthwith and henceforward, by and through their own respective corporate oflBcers and employees, maintain, and operate, for railroad, Governmental, commercial, and all other purposes, telegraph lines, and exercise by themselves alone all the telegraph franchises conferred upon them and obligations assumed by them under the acts making the grants as aforesaid. Sec. 2. Thatwhenever any telegraph company which shall have accepted the provisions of title sixty-five of the Eevised Statutes shall extend its line to any station or ofiSce of a telegraph line belonging to any one of said railroad or tele- graph companies, referred to in the first section of this act, e^T^m^*^' said telegraph company so extending its line shall have the right and said railroad or telegraph company shall allow the line of said telegraph company so extending its line to connect with the telegraph line of said railroad or telegraph company to which it is extended at the place where their lines may meet, for the prompt and convenient interchange of telegraph business between said companies; and such raUroad and telegraph companies, referred to in the first sec- tion of this act, shall so operate their respective telegraph lines as to afford equal facilities to all, without discrimina- tion in favor of or against any person, company, or corpo- Bqnni facuiu.. ration whatever, and shall receive, deliver, and exchange "'^""' business 'with connecting telegraph lines on equal terms, and affording equal facilities, and without discrimination for or against any one of such connecting lines; and such exchange of business shall be on terms just and equitable. Seo. 3. That if any such railroad or telegraph company referred to in the first section of this act, or company oper- ating such railroad or telegraph line shall refuse or fail, 26 in whole or in part, to maintain, and operate a telegraph line as provided in this act and acts to which this is sup- intoSi're°com° plcmentary, for the use of the Government or the public, merce Commis- for Commercial and other purposes, without discrimination, or shall refuse or fail to make or continue such arrange- ments for the interchange of'business with any connecting telegraph company, then any i)erson, company, corporation, or connecting telegraph company may apply for relief to the Interstate Commerce Commission, whose duty it shall thereupon be, under such rules and regulations as said Dnttei of the Commission may prescribe, to ascertain the facts, and de- where™ompiai'Dt termiue and order what arrangement is proper to be made u mad». jjj ^jjg particular case, and the railroad or telegraph com- pany concerned shall abide by and perform such order; and it shall be the duty of the Interstate Commerce Commission, when such determination and order are made, to notify the parties concerned, and, if necessary, enforce the same by writ of mandamus in the courts of the United States, in the name of the United States, at the relation of either of said Interstate Commerce Commissioners: Provided, That the may iS"i'tiite?n" Said Commlssloncrs may institute any inquiry, upon their o^'motioS. '*' ^^^ motion, in the same manner and to the same effect as though complaint had been made. Duty of theAt- Sbc. 4. That In order to secure and preserve to the United ondar thi* act. States the fuU value and benefit of its liens upon all the telegraph lines required to be constructed by and lawfully belonging to said railroad and telegraph companies referred to in the first section of this act, and to have the same possessed, used, and operated in conformity with the pro- visions of this act and of the several acts to which this act is supplementary, it is hereby made the duty of the Attor- ney-General of the United States, by proper proceedings, to prevent any unlawful interference with the rights and equities of the United States under this act, and under the acts hereinbefore mentioned, and under all acts of Congress relating to such railroads and telegraph lines, and to have legally ascertained and finally adjudicated all alleged rights of all persons and corporations whatever claiming in any manner any control or interest of any kind in any telegraph lines or property, or exclusive rights of way upon the lands of said railroad companies, or any of them, and to have all contracts and provisions of contracts set aside and annulled which have been unlawfully and beyond their powers entered into by said railroad or telegraph companies, or any of them, with any other person, company, or corporation. Sec, 5. That any ofBcer or agent of said railroad or tele- Penalties tor , . „ J.- J.T -T -1 failure to comply graph companies, or of any company operating the railroads with the provis- -,.■■ 11* I* • 1 • t-iifii ions of thisactor and telegraph lines of said companies, who shall refuse or the orders of the fail to operate the telegraph lines of said railroad or telegraph merlfo *''&>mmi^ companies under his control, or which he is engaged in oper- *'°"" ating, in the manner directed in this act and by the acts to which it is supplementary, or who shall refase or fail, in such operation and use, to afford and secure to the Government and the public equal facilities, or to secure to each of said connecting telegraph lines equal advantages and facilities in the interchange of business, as herein provided for, with- out any discrimination whatever for or adverse to the tele- graph line of any or either of said connecting companies, or shall refuse to abide by, or perform and carry out within a reasonable time the order or orders of the Interstate Com- merce Commission, shall in every such case of refusal or fail- ure be guilty of a misdemeanor, and, on conviction thereof, shall in every such case be fined in a sum not exceeding one thousand dollars, and may be imprisoned not less than six months ; and in every such case of refusal or failu re the party aggrieved may not only cause the officer or agent guilty thereof to be prosecuted under the provisions of this section, but may also bring an action for the damages sustained Motions for thereby against the company whose officer or agent may be ^,3"^ s^' ™^/ guilty thereof, in the circuit or district court of the United States in any State or Territory in which any portion of the road or telegraph line of said company may be situated; and in case of suit process may be served upon any agent of the company found in such State or Territory, and such service shall be held by the court good and sufficient. Seo. 6. That it shall be the duty of each and every one Dnty of laii- of the atbresaid railroad and telegraph companies, within gragh unes snb^ sixty days from and after the passage of this act, to filei^ie'ijopies'of'ion" with the Interstate Commerce Commission copies of all ^rt\ith "t h^ contracts and agreements of every description existing ^°™"""''"- between it and every other person or corporation whatso- ever in reference to the ownership, possession, maintenance, control, use, or operation of any telegraph lines, or prop- erty over or upon its rights of way, and also a report describing with sufficient certainty the telegraph lines and property belonging to it, and the manner in which the same are being then used and operated by it, and the telegraph lines and property upon its right of way in which any other person or corporation claims to have a title or interest, and setting forth the grounds of such 28 Annnai roports claim, and the manner in which the same are being then to the Cuiumis- ' "<». used and operated; and it shall be the duty of each and every one of said railroad and telegraph companies an- nually hereafter to report to the Interstate Commerce Com- mission, with reasonable fullness and certainty, the nature, extent, value, and condition of the telegraph lines and property then belonging to it, the gross earnings, and all expenses of maintenance, use, and operation thereof, and Penatties for its relation and business with all connecting telegraph refnaal to make .-..ji t , -i^- -, • reports to Com- Companies during the preceding year, at such time and m mugian. svLch manner as may be required by a system of reports which said Commission shall prescribe; and if any of said railroad or telegraph companies shall refuse or fail to make such reports or any report as may be called for by said Commission, or refuse to submit its books and records for inspection, such neglect or refusal shall operate as a for- Dnty of Attor- feiturc, iu cach case of such neglect or refusal, of a sum Froseouto™ not less than one thousand dollars nor more than five thousand dollars, to be recovered by the Attorney-General of the United States, in the name and for the use and benefit of the United States; and it shall be the duty of the Interstate Commerce Commission to inform the Attor- ney-General of all such cases of neglect or refusal, whose duty it shall be to proceed at once to judicially enforce the forfeitures hereinbefore provided. ^llt^t^ ^te?; Sec, 7, That nothing in this act shall be construed to amend or repeal, affect or impair the right of Congress, at any time here- after, to alter, amend, or repeal\the said acts hereinbefore mentioned; andthisact shallbe subject to alteration, amend- ment, or repeal as, in the opinion of Congress, justice or the public welfare may require; and nothing herein con- tained shall be held to deny, exclude, or impair any right or remedy iu the premises now existing in the United States, or any authority that the Postmaster-General now of the Govern- has Under title sixty -five of the Eevised Statutes to fix men preeerv . ^^^^^ ^^^ ^j ^j^^ Govcmment, to puTchase liucs as provided under said title, or to have its messages given precedeuoe in transmission. Public No. 237, approved, August 7, 1888. HEARIN^GS BEFORE THE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE OF THE "^ HOUSE OF REPRESENTATIVES , ON THE BILLS TO AMEND T-HE INTERSTATE COMMERCE LAW (H. R. 146, 273, 2040, 5775, U337, AND 10930). WASHINGTON: GOVERNMENT PRINTING OFFICE. 1^02. INTERSTATE-COMMERCE LAW. Tuesday, April 8, 1902. The committee met at 10.30 o'clock a. m., Hon. William P. Hepburn in the chair. The Chaikman. It has taken some time to dispose of these other matters, but we will now take up the subject of interstate and foreign commerce, and if any gentleman here desires to be heard we will hear him on these bills. STATEMENT OF MR. E. P. BACON. The Chairman. Now, Mr. Bacon, we want to get some idea about the time that will be consumed, and the number of gentlemen who will appear before us, so far as you know. Will you favor the committee with your ideas on that point? Mr. Bacon. I can only give you an indefinite idea with regard to it. There are, perhaps, in all a dozen men, from different parts of the country, whom the committee which I represent expects to be present at these hearings. The Chaieman. What committee do you represent? Mr. Bacon. I represent the executive committee of the interstate- commerce law convention, which was held at St. Louis on the 20th of November, 1900. That convention was called for the purpose of pro- moting the passage of the Cullom bill, which was then pending in the Senate, and that bill having failed, this committee prepared a substi- tute bill, which has been introduced in the House by Representative Corliss and in the Senate by Senator Nelson. I appear in behalf of the committee to advocate the reporting of the bill. The committee have been in communication with a number of the commercial organizations of the country, and have furnished them with copies of the bill and with a synopsis thereof, with arguments in favor of its passage, and have received responses from a large number of the associations favoring its passage, indorsing the bill and stating that their several associations have adopted resolutions requesting the members of Congress representing their respective districts to give it their support. I have a list of the organizations, which I will give to the reporter, but I will state that it comprises eight national organiza- tions, consisting of grain dealers, millers, manufacturers, and mercan- tile organizations, the National Lumber Dealers' Association, and, among others, the National Board of Trade. Also 17 State organiza- tions of various States, Illinois, Indiana, Kansas, Michigan, Minne- sota, Missouri; the New England Granite Manufacturers Association, the New England Shoe Dealers' Association, the Ohio Grain Dealers, the National Millers, the Texas Cattle Raisers Association, the Texas 3 4 rNTJEBSTATE-COMMEBCE LAW. Millers, the Wisconsin Cheese Makers, the Wisconsin Retail Hard- ware Dealers, and the Wisconsin Lumber Dealers. These organizations represent, as you will observe, nearly all of the various branches of trade and manufactures. Of the local organizations in the various States there are 49, cover- ing 21 States, the States being California, Colorado, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Minnesota, Missis- sippi, Missouri, Nebraska, and New York, with about 10 associations. North Carolina, Ohio, Oregon, Pennsylvania, Washington, and Wis- consin. There are numerous organizations which have passed similar reso- lutions, of which, as chairman of the committee, I have heard inci- dentally but have not been officially informed, in addition to these that are mentioned, which aggregate in all 74. I will say, also, that the States of Minnesota and Iowa have passed resolutions recommending the passage of the bill during the past winter, and during the previous winter the States of Michigan, Wis- consin, Kansas, Louisiana, and South Dakota — the legislatures of those States — passed resolutions recommending the passage of the Cullom bill, then pending in the Senate, the principal provisions of which coincide with those contained in this bill. The Chairman. Now, what is the objection that you find in the present legislation, and what are the remedies which you propose? State them briefly to the committee, if you please. Mr. Bacon. The brief time which remains this morning will hardly afford opportunity to go into the merits of the bill. The Chairman. We propose to continue these hearings right along, every day, and that will give you an opportunity to finish. Mr. Bacon. It will be very difficult, in the fifteen minutes now remaining, to give even a comprehensive idea of the difficulties and the reasons for the enactment of this bill. I, however, at a subsequent meeting, will take that up definitely and concisely with the committee. At this time I think that I will only present the public demand which exists for this legislation. The convention of which I speak appointed this committee for the purpose of promoting this legislation, or, originally, promoting the passage of the Cullom bill. That bill was far more comprehensive, far more drastic, than the bill which has been framed by. this committee. The committee in considering and framing a new bill aimed to provide only for two or three vital matters that are necessary to give effective- ness to the present act, leaving minor details to future action, and concentrating all ettbrts upon these two or three vital provisions, with- out which, in the opinion of the committee, the present act is almost worthless. The provisions which are referred to are, in the first place, the giving of the Commission specific authority to prescribe the proper rate to be enforced in the future, when, after full investigation, upon a formal complaint, it finds, after hearing all parties in interest, the existing rate or practice is unjust or unreasonable. That is the primary pro- vision of this bill. And the second provision, which is considered of equal importaince, however, is that the rulings and decisions of the Commission shall be immediately operative, and shall so continue until overruled by the courts, or at least that they shall be operative at a time fixed in the HrrEKSTSTE^CDSrMERCE LAW. 5 order of the Commission unless appeal is taken to the courts, and in that case their operation is suspended for thirty days, and if, upon examination of the record, the court is satisfied that the decision of the commissioner proceeds upon an error of law, or is unreasonable upon the facts, it may suspend the operation of such decision during the pendency of the proceedings. In any case, however, the order of the Commission, it is intended, shall be immediately operative. The reason, the necessity for that, arises from the fact that under the present law the operation of the order of the Commission is sus- pended until it has passed through various stages of litigation which, according to the statements of the Interstate Commerce Commission, has averaged in the various cases which have been taken before the courts a period of four years. It is evident to anyone familiar with traffic affairs that when a rate or practice has been found unjust or unreasonable by a competent body, such as we believe the Interstate Commerce Commission to be, if that action has to be suspended for a period of four years, or even for a period of two years or one year, the occasion has passed by for deriving any benefit from the action of the Commission, and it practically nullifies whatever action the Commis- . sion may take. It suspends its action for such a period of time that it is entirely valueless. Mr. Adamson. You wish to authorize and require the Commission at a certain stage of the investigation to prescribe rates ? Mr. Bacon. Yes, sir; and that stage is after a complete investigation. Mr. Adamson. At some point you want them to fix rates ? Mr. Bacon. Yes, sir. The term "fix rates," however, is hardly correct. We should say to revise the rates, to correct the rates, to prescribe the rate in a particular case which is to be enforced in the future. Mr. Adamson. You want to fix the rates which they agree upon and conclude this rate? Mr. Bacon. Yes, sir; to be sure, in that particular case. Their authority in this bill in that direction is limited to the particular case in question, and can only be exercised in case of a formal complaint having been filed. Mr. Adamson. Do you think that the Government of its own motion, arbitrarily, without requests from railroad companies, can justly fix rates and still escape responsibility for any results, for any loss that results? Mr. Bacon. I do not quite catch your question. Mr. Adamson. If the Government arbitrarily assumes to fix the rates of the railroad corporations, quasi public corporations, do you think the Government can do that and still escape the responsibility if a loss results to the companj'^ ? Mr. Bacon. We do not propose to have the Government fix the rate arbitrarily. We propose simply to have that provision in regard to the rates in the case of a complaint by the injured party. It is put before the Commission and the case considered. The testimony of both sides is taken, and they pass upon that rate as to whether it is reasonable and just or not, and, having passed upon it in respect to the past, then they shall proceed further and say what would be in their judgment a reasonable and just rate for the future. Mr. Adamson. If the parties do not request it or consent to it, then would not the action of the Government be arbitrary 6 INTEESTATE-COMMifiK(JJ« 1.AW. Mr. Bacon. Not at all; any further than it might be said that the action of any court is arbitrary. The Commission is a tribunal before which both parties appear, each presenting its own case. The shipper Mr. Adamson. It is not unusual in any court of this country, is it, for the court to undertake to decide what rates shall prevail with any company or private party for the use of their property ? Mr. Bacon. The court, as I understand, has not the power to pre- scribe a rate for the future. The power of determining the rate is lodged in the legislative body. The Commission is a body organized bj' the legislative body for the purpose of exercising that function. It is beyond the power of the court to fix a rate. Mr. Adamson. You have no trouble about the proposition as to the power to clothe the Commission with judicial powers ? You are willing to that? Mr. Bacon. It can hardly be called a judicial power. Judicial power does not permit of the fixing of a rate in the future. The power to fix a rate is a legislative power, and the only remedy Mr. Adamson. The Commission would have to exercise judicial power in the precedent investigation before fixing the rate? Mr. Bacon. Not judicial power. It comes through the investiga- tion in a judicial manner and in judicial form, but the Commission is not a judicial body and has no judicial powers conferred upon it, and we do not propose to confer any upon it. We propose, simply, to clothe it witn power which will enable it to protect the public in the case of the rates being found unreasonable or discriminative, not only against the continuance of that rate, but also to prescribe what rate shall be substituted for it in the future. That is a legislative act, or an administrative act, I should say. Mr. Mann. Now, on that point, your idea is that the Commission should have the power to fix a rate which should be enforced until the courts determined otherwise? Mr. Bacon. That is the proposition. Mr. Mann. Do you think the legislature anywhere has that power to prescribe a rate for railroads which must be accepted by the rail- roads until the courts determine it is illegal? Mr. Bacon. That right has been affirmed repeatedly by the courts within the last twenty years. Mr. Mann. I think to the contrary. Mr. Bacon. Yes, sir; according to my information. Mr. Mann. They can fix the rates, but the railroads have a right to appeal to the courts at once. Mr. Bacon. They have a right to appeal to the courts, and so they have under our proposition. Mr. Mann. TJnder your proposition they have got to accept the decision of the Interstate Commerce Commission. Mr. Bacon. Temporally, while it is pending. Mr. Mann. You say it makes it of effect. They have to accept the decision of the Interstate Commerce Commission for, say, four years time. Mr. Bacon. No, sir. The carrier has a right to proceed imme- diately to obtain a reversal of the Commission. Mr. Mann. Through the Supreme Court of the United States, which you say requires on the average about four years' time to obtain a decision from. INTBRSTATE-COMMEECE LAW. 7 Mr. Bacon. Yes, sir; that has been the case heretofore; but it is generally understood that those oases have been delayed purposely by the carriers, for the reason that as long as they could continue the existing rates in force, the act of the Commission being inoperative, they could derive the benefits as long as they could keep the case in the court. Now, under the proposed amendments it would be to the interest of the carriers to expedite the adjudication of the case, and it is alto- gether probable that it would not take so long a time, four years, and probably not more than one year, to reach a result. Mr. Adamson. What procedure do you suggest in case of an erro- neous rate? Do you propose the other courts attacking this Commis- sion, or do you propose an appellate jurisdiction ? Mr. Bacon. It is an appellate procedure. That is, the carrier if it is dissatisfied with the rates shall appeal it to the circuit court. Mr. Adamson. From the Commission to the circuit court? Mr. Bacon. From the Commission to the circuit court. Mr. Coombs. Now, let me ask you this question: Supposing, for the sake of argument, that the Commission promulgated an order of some kind, and- supposing that it was radically wrong. Now, the railroads would have to abide by that until they could get a judicial determina- tion of it. Now, would that not, conceding that it was wrong, and conceding that they were compelled to do it, pending the decision of court, would that not be an invasion of their rights under the Consti- tution and under the laws of this country? Mr. Bacon. The presumption is altogether in favor of the correct- ness of the decision of the Commission. Mr. Coombs. No; I am not talking about the presumption. I am talking about this Mr. Bacon. Excuse me. 1 will lead up to the reply to that question. Mr. Coombs. Yes. Mr. Bacon. The Commission consists of men who are expert in traffic matters — men who have become expert from experience. The members are appointed for the period of six years, but the practice has been to reappoint them from term to term, so that the body becomes practically as permanent a one as the Supreme Court of the United States, or very nearly so. And it requires such knowledge, intimate knowledge, of traffic affairs and the intricacies of rate making, that after it has given a hearing to both parties, and that hearing, by the way, is always a protracted one and every one appears who is in any way interested in the question, and the rate is investigated in every way, in its relation to other points, and everything related, to it in any way is investigated, and, as I say, the presumption is ten to one that the decision is correct; and while there may appear to be a little injustice in making that decision immediately operative, while its correctness is pending in the courts, on the other side, you can see that the injury or wrong coming from the suspension of the orders of the Commission is infinitely greater than any wrong that can be sustained from any probable error of the Commission in fixing the rates. There is a balance, a' balance of results, and it is fair to the public and fair to the railway company that that balance should be considered and the preponderating wrong and injustice which is continued and enforced while these cases are held in court is infinitely greater than 8 INTEK9TATE-C0MMBECE LAW. the slight loss which may, in one case in a hundred, possibly^ result from the orders on the part of the Commission. Mr. Richardson. You admit that the rule which it prescribes reverses the rule which prevails in all the courts of this country? Mr. Bacon. I admit that, and I will say in reply to that, that the circumstances are entirely different. Mr. Mann. Before you are through with your argument I hope you will address yourself to the power of the legislative body to say that the court shall not exercise its authority at a preliminary hearing — as to whether the legislative body has the power to fix a rate and to say that rate shall be observed until the final decision of the Supreme Court of the United States overrules entirely the theory of the judicial power that has the right to issue an injunction against an improper rate. Mr. Bacon. I can cite you decisions showing beyond doubt that the power rests with the legislative body; but, as you suggest, there is opportunity of appeal from one court to another until it is finally decided by the Supreme Court. Mr. Mann. If you can find any decision to the effect that tlie legisla- ture of a State can fix a rate, and that that must be observed until the Supreme Court of the United States says otherwise, I would be very glad to see it. Mr. Bacon. There is a question of the rights of the people Mr. Coombs. One individual is the people. Now, you take judg- ment against John Doe. John Doe appeals, and that judgment is challenged. Now, are you going to provide a law for the execution of that judgment pending the appeal which he may take? Mr. Bacon. That brings me to the question which this gentleman put. In case of business transactions which come before the court there are two parties to the transaction, and those two parties are the only ones interested, and each may protect himself in the case of an appeal by filing a proper bond, and the final decision of the court wiU be carried out in that individual case. Mr. Adamson. You propose to carry it out pending the appeal? Mr. Bacon. Excuse me, it will be carried out in that particular case, and the two parties, who are the only ones interested^ will get justice. In the case of the railroads the party, the man, who bears the freight ultimately is not the one who pays it. The one who pays it is a middle man, and he distributes that between forty or fifty or one hundred individuals who are not known and who can not be reached, and who are really the parties in interest. That fact renders it neces- sary that there shall be special legislation protecting these parties who are the real sufferers and can not protect themselves, who have no standing in court, and must continue paying these excessive charges, charges found to be excessive by a competent body, from year to year, until the final result is reached. The Chairman. The time for adjournment of the committee has arrived. Mr. Bacon. I should be very glad to continue at the next hearing. The Chairman. Very well. Thereupon, at 12 o'clock meridian, the committee adjourned until to-morrow, Wednesday, April 9, 1902, at 10.30 o'clock a. m. INTERSTATE-COMMERCE LAW. Wednesday, April 9, 1902. The committee met at 10.30 o'clock a. m., Hon. William P. Hep- burn in the chair. STATEMENT OF MR. E. P. BACON— Continued. ■ The Chairman. The committee will be glad to have you proceed, Mr. Bacon. Mr. Bacon. Mr. Chairman, I wish to state before proceeding that the convention which I have the honor to represent consisted or dele- gates from various commercial organizations from different parts of the country — 41 in number — business men representing various branches of business; and I will state, also, as to my personal position, that I am simply a business man and was a delegate at that convention, representing the Milwaukee Chamber of Commerce. I endeavored yesterday to answer a few questions of a legal nature, which I did from the information which I have obtained from a some- what careful obsei'vation of the workings of the interstate-commerce act since its enactment and some of the important cases that have been adjudicated under that act. I will say that the constitutional questions which have been brought up were treated at some length before the Senate committee two years ago, when the (^uUom bill was before that committee, by Judge Cowan, from Texas, and his discussion of the matter will be found in the report of the hearings before that committee, which I will file for the infor- mation of this committee. The question that was asked, and not fuUj"^ answered at the time of my closing yesterday, was in relation to a legislative act being effective in relation to rates prior to its confirmation by the courts. I person- ally answered the question, but wish further to say in connection with it that, as I understand, the State laws in relation to transportation and the fixing of rates are immediately effective, as I believe all legis- lative acts are; the carriers, however, having the privilege, having the right, of suspending the operation of the law by obtaining a writ of injunction and proceeding in the courts to test its constitutionality. That, I think, is very similar to the position in the matter of the fixing of rates by the Interstate Commerce Commission, as proposed in the bill which has been introduced tbi-ough the instrumentality of the committee which I represent, called the Corliss bill, in the House. Although in terms the rulings of the Commission are made effective, as I stated yesterday, except as being suspended for thirty days in case of review by the circuit court, yet the carriers would have the same privilege under that provision of instituting legal proceedings in their behalf and suspending the operation of the ruling of the Com- mission by means of an injunction in the same manner in which the carriers in the individual States under the laws relating to the State commissions proceed. I wish to call the attention of the committee to the report of the industrial Commission on transportation, which was presented in the month of February, I believe, a Commission which, as you all know, was organized by Congress, consisting of four members of the two Houses of Congress and ten citizens who were appointed by the Presi- dent to complete the Commission, making a Commission of eighteen in 10 INTERSTATE-COMMEECB LAW. number. That Commission has been between three and four years engaged in a thorough investigation . i. j.u + The Chairman. The committee are familiar with tbat. Mr. Bacon. Yes, sir. And the report which it made was signea Dy 16 of the 18 members of the Commission; and 1 would like, irom ine fact that its recommendations made to the committee comciae to a large extent with the provisions of the bill which is under considera- tion, to read the recommendations made by the Commission m relation thereto. It states in its report on transportation: To the end that discrimination and inequality as between shippers, and maladjust- ment of freight rates between competing markets and trade centers may be abolished or minimized; that the public may be assured of reasonable and stable freight lates, which will at the same time afford fair returns upon capital invested, etc., we recommend; 1. That the policy of governmental supervision and control of railroads as origi- nally laid down in the Senate committee report of 1886, and embodied the following year in the interstate-commerce act, be revived and strengthened; that the authority of the Interstate Commerce Commission necessary for the adequate protection of shippers, and clearly intended b^ the framers of the law, be restored, etc. Specific- ally, such legislation should provide — That strict adherence to published tariffs be required and rebates or discriminar tiona prevented by an increase of the penalties therefor. These penalties should be not onljr against the person who gives but also against the one who accepla discrim- ination in any form whatsoever. Corporations should be made liable, the same as individuals. Provision^ for imprisonment in the present law should be repealed. For the definite grant of power to the Interstate Commerce Commission, never on its own initiative, but only on formal complaint, to pass upon the reasonableness of freight and passenger rates or charges; also the definite grant of power to declare given rates unreasonable, as at present, together with power to prescribe reasonable rates in substitution. Appeal from an administrative order of the Commission should not vacate or sus- pend an order unless it plainly appears that such order proceeds upon some error of ' law or is unjust or unreaaonable on the facts, in which case, and not otherwise, the court may suspend its operation during the pendency of proceedings in review. All findings of fact by the Commission, when properly certified, should be received as prima facie evidence in subsequent proceedings in the case. New testimony offered by either p-arty, when it appears that such testimony is material and could not have been taken in the first instance, should be taken by the Interstate Commerce Com- mission on order from the court. The time in which an appeal to the Supreme Court of the United States may be taken should be limited to thirty days, but such appeal should not vacate or suspend the order appealed from. Those provisions are precisely as contained in our bill. In connection with the subject that was brought up yesterday, in regard to giving the Commission power to prescribe a rate to be sub- stituted for one which is found tofbe unreasonable or unjust, I would like to cite further from the report of the Industrial Commission, under the head of "Effect of maximum freight- rate decision," theSupreme Court decision in which the power to prescribe rates was denied to the Commission, although it had been exercised during ten years prior thereto. The Industrial Commission says: The immediate effect of this decision was to prevent any enforcement of orders relative to rates by the Commission. The carriers immediately refused to obey any hppn , '^^;j° the Commission issued for the redress of grievances. This policy has deciHio^ rf 1? T'*^ increasmg clearness during the five years subsequent to the only to na™,,!^^^ become more and more certain that the denial of the right, not should suTCrsidTit^r'*^°*T''^?'^?^ °^ a particular rate, but to prescribe what rate quacy of Sfn„ 4e re^°w- ^ abolition of^all control whatever. "^The entire inade- applied in the pa^t wTtlont v»"f! '^'^P'^^^ent upon the mere determination of rates as apparent on all sides Mo™ ?w'V'if- *° l^^^^ ^^'ch shall prevail in the future is the burden of an unreasonable raJ^'^' f} '■^^edy for the parties who have borne reasonabJe rate would seem to have been removed. * * * rNTEBSTATE-COMMEECE LAW. 11 Experience shovs that almost no shippers or other parties injured actually attempt to secure the restitution of moneys already paid for unreasonable charges. In only 5 out of 225 cases down to 1897 was a rebate actually sought, and in these cases |10b was the maximum sought to be recovered. As a matter of fact, the damage inflicted by the existence of an unreasonable rate could not be measured by hundreds or per- haps by hundreds of thousands of dollars. The bearing of this citation is to show that any effectual protection to the shipper must proceed from adjudication of the reasonableness of rates before and not after they have been paid; that is to say, in advance of their exaction by the carrier. Power to pass upon the reasonableness of such rates prior to their enforcement as a consequence constitutes practically the only safeguard which the shipping public may enjoy. In that connection I wish to introduce an interview, published in the Railway World of March 22 last, with Judge James A. Logan, general solicitor of the Pennsylvania Railroad, in discussing this ques- tion. I will read these extracts from it: Fortunately, as the law came to be framed — Referring to the interstate-commerce law — it was recognized to be experimental and was conservatively expressed, its method of enforcement being left to depend upon the constraint of penalties named for its violation. The result was that, like all efforts to enforce business propositions by penal consequences, as an aggressive agency it was not a great success. Conservative action, however, on the part of the Interstate Commerce Commission, controlled by the guiding and restraining hand of the courts, coupled with the disposition of the railroad managers who recognized that having large gifts from the people, in the pos- session of their franchises to construct and operate railroads and in the possession of the power of eminent domain, and having much occasion to rely upon Government support in operation, and above and overruling all, the American instinct of recog- nizing the importance of the observance of existing laws, the whole tendency was that of gradual conformity to the law and a recognition of the right of reasonable governmental supervision. The result has been that latterly, whatever may have been the facts as to previous periods, the act to regulate commerce has been fairly well observed by the larger railroad interests; and being well observed, the crudities of the law as existing have been discovered and the necessity of a more direct means of enforcement of the powers of the Government recognized. That an unjustly discriminative or unreasonable rate is wrong goes without saying. That when a given rate has been found to be mijust and unreasonable, after a full hearing of the parties by a disinterested administrative tribunal appointed by the Government, and another rate suggested as fair and just by the same tribunal, it must be manifest that the old rate ought to go out and the new rate come in, subject, of course, to review by the courts. Further, he says, after having made a particular statement: It may generally be stated otherwise as a provision authorizing the Interstate Com- merce Commission to put in force a rate found by them to be just, subject only to the supervision of the courts; whereas now the Commission has no power at all to make an order as to a rate for the future, and its orders, even as to the past, can not go into force until after full hearing in the courts on new testimony; and the observation has been that such hearings are capable of indefinite prolongation. For my part, I have faith in the integrity of governmental agencies, especially those of the dignity of the Interstate Commerce Commission. I believe not only the shipper but the carrier needs governmental help. In short, it seems to me the time has come when the Government should reassume the right of a moderate control and supervision over the carriers occupying the Government's highways and that this, in its operation, should reach forward as well as backward — the carrier to have a reasonable return for his investment in the agencies of carriers, and the shipper the assurance of a prompt service and a reasonable rate, and the public to be protected by stability and uniformity in all charges. One further extract: Another marked feature of the proposed legislation is that it makes the shipper who is a party with the railroad in violation of the law — that is to say, the shipper who accepts rebates and preferences — subject to the same penalties for this violation of the law as are imposed upon the carrier for such violation. Moreover, it allows the power of the court to toe invoked against both shipper and carrier against the 12 INTEESTATE-OOMMJSKUJfi JjAW. allowance of continuance of preferences on the complaint of the Comtnission, its decrees in this respect to be enforced by prompt injunction processes. If thisact is passed railroads can no longer be, as thej; are sometimes said to have been in the past, subject to the dictation of the great shippers both as to rates and facilities. Mr. RiCHAEDSON. If it does not interrupt your argument— — Mr. Bacon. No, sir; it does not. Mr. Richardson. I would like to hear you define just what authority and what power the Interstate Commerce Commission has now. I catch the drift of what you think it ought to have in addition, but what can it do now ? Mr. Bacon. It has now the power of investigation and recommenda- tion. Its orders have no effect until enforced by the court upon the application of the Commission. That is, if the order is not volun- tarily obeyed by the railroad company the Commission is required to go before the circuit court and have the case reviewed and obtain from the circuit court, if the court finds it proper, an order for the enforcement of the ruling of the Commission. Mr. Richardson. Now, your policy is, instead of going before that circuit court, it is to give the Commission the power to enforce its own order and allow the railroad, in the meantime, to take an appeal ? Mr. Bacon. That is it exactly; making the orders of the Commis- sion immediately effective, subject to appeal by the carriers, placing the carriers in the position of complainants in that case, instead of defendants, as is now the case. Mr. Richardson. You would make the Interstate Commerce Com- mission take the place of the court? Mr. Bacon. That is it. Mr. Richardson. And give it judicial powers? Mr. Bacon. The Commission would occupy the position of defend- ant in the case, whereas now it is the complainant. The Commission now comes before the court as complainant to secure an order for the enforcement of its rulings. Mr. Mann. That is not the real gist of what you are after. The Interstate Commerce Commission now has only authority as to rates to declare what is an unreasonable rate; it has not authoritj'' to declare what a reasonable rate is. You want to confer upon them the power to declare what a reasonable rate is and to enforce it. Mr. Bacon. The decision of the Supreme Court has placed the Com- mission in that position. Mr. Mann. That is the law as it stands. Mr. Bacon. Yes; but, as I said a few moments ago, the Commission proceeded on the presumption that after finding a rate to be unreason- able it had a right to prescribe a reasonable rate for application in the future, which it did without question for ten years, and the object of this proposed amendment is to confer that power on the Commission, which it was supposed to possess, but which has been denied, and to enable it to resume its operations in the same manner it proceeded in the preceding ten years referred to. The Chairman. During that period of ten years that you have spoken of was the administration of the interstate commerce law more effective, in your judgment? Mr. Bacon. It was far more effective. The Chairman. Was it satisfactory at that time? Mr. Bacon. It was highly satisfactory, and I will say that as a close observer of transportation operations for the past thirty-five years or INTBKSTATE-COMMEBOB LAW. 13 more, and a pretty intimate knowledge of the workings of transporta- tion affairs in connection witii important business, that during that ten years the condition of transportation throughout the country was better than it ever was previously or than it has ever since been since this power was denied by the Supreme Court; and our desire is to restore that condition which existed during those ten years. . Mr. Mann. Do you know how many cases there were during those ten years where the Interstate Commerce Commission declared and enforced a reasonable rate ? Mr. Bacon. I could not say the precise number; I know that there was a large number of such cases. Among its first cases — in fact, within three months after its organization — a case of that kind was determined and was complied with on the part of the railroad, as, in fact, all of their rulings were during that period that I have referred to. Mr. Mann. I may be mistaken, but my recollection is that Judge Cooley, who was one of the first Commissioners, decided, in an opinion he rendered, that the Commission had no such power within the first year after it was inaugurated. Mr. Richakdson. Had no power to declare what a reasonable rate was? Mr. Mann. Yes; that is as I understand it. Mr. Bacon. The decision was, as I understand it, as rendered by Judge Cooley, that the Commission had no right to fix a rate primarily, but it did exercise the power, and exerted it continuously, to prescribe a rate to be substituted for one that was found to be unjust or unreasonable. Mr. Richardson. That is, you mean to revise a rate? Mr. Bacon. Yes. Mr. Richardson. Or change it? Mr. Bacon. Order a change, and such orders were complied with universally. Mr. Richardson. You say that existed during the period of ten years and that there was no trouble about it? Mr. Bacon. During the latter part of the ten years the question began to be raised whether this authority was specifically conferred by the interstate-commerce act upon the Interstate Commerce Commission. Mr. Richardson. To revise a rate? Mr. Bacon. To revise a rate, and under that questioning the Supreme Court sustained the position taken by the railroad interests. Mr. Richardson. That the Commission could not do it? Mr. Bacon. That they could not do it. Mr. Richardson. And you want, by this law, to be reinstated Mr. Bacon. Yes, sir. Mr. Richardson. Put back in that condition which you say proved entirely satisfactory, and under which things went along all rignt? Mr. Bacon. Yes; it gave general satisfaction throughout the country. Mr. Mann. Whatever may be the contention on the two sides, by the actual jurisdiction exercised during that ten years, you say that the enforcement of the law during those ten years was satisfactory to the shippers ? Mr. Bacon. It was entirely satisfactory to the country at large. Mr. Mann. And that any authority which they did exercise would be sufficient to be conferred upon them ? 14 IHTERSTATB-COMMEKOE LAW. Mr. Bacon. That is it exactly. Mr. EicHAEDSON. But it seems to me now, if you will allow me to say so, if I understand your position, that the desire you now have is to permit the Commission to render an absolute judgment, to go along and enforce it, and then let the railroad companies take an appeal? In other words, to hang a man and try him afterwards. Mr. Bacon. Not by any means; no. The Commission fixes its rate and the railroad complies with it, if it considers it reasonable and right. Mr. KiOHARDSON. But the railroad does not consider it reasonable and right, then they have to take an appeal after you have enforced the judgment? Mr. Bacon. Exactly; but while there is an apparent inconsistency there, the actual practical working of it would involve very rare and exceptional instances of injustice. As I said yesterday, they are so slight that when they occur they would affect such a small interest as compared with the interests of the public at large, which is held in abeyance and'which is subject to the continuance of the wrong rate, that it is hardly worthy of consideration. Mr. Coombs. But here is the proposition, assuming that they had a right to the last resort, a resort to the highest court of the country; assuming that, then, do you not abridge that right by enforcing an intermediate judgment? How about that constitutional proposition? Mr. Bacon. You will observe that it is not an inflexible thing that any carrier considering itself wronged may by appeal to the courts have the order suspended during the pendency of the proceedings if the court, on an inspection of the record, is of the opinion that the action of the Commission is wrong; that it proceeds either upon an error of law or is unreasonable upon the facts of the case. It is made the duty of the court by this bill in such cases as that to suspend the operation of the law until the question is adjudicated. Mr. Richardson. By injunction? Mr. Bacon. The bill does not prescribe that it shall be done by injunction. It makes it the duty of the circuit court if, on an inspec- tion of the record, it is clearly of the opinion that the order is illegal or is unreasonable to suspend the order pending the proceedings. Let me read a copy of that Mr. Richardson. What is the difference, then, between that and the original plan of letting it first go to the United States circuit court and let them settle the question ? If they have that right to revise at once, wliat is the difference in the position you take and the condition existing before, in allowing it primarily to go to the United States circuit court and let it be settled there? Mr. Bacon. To leave it to the judgment of the circuit court as to whether that ruling shall be suspended or not? At present it is not enforcible until the validity of the order has been passed upon by the court. Mr. Mann. That is not the only change you make. Mr. Bacon. In this connection allow me to read you the precise provision of the bill, > The filing of a petition to review an order shall of itself suspend the effect of such order for thirty days, and the court before which the same is pending may also, if upon an inspection of the record it plainly appears that the order proceeds upon some error of law, or is unjust and unreasonable upon the facts, and not otherwise, suspend the operation of the order during the pendency of the proceedings in review, or until further order of the court. INTEBSTATE-OOMMEECE LAW. 15 Mr. RiCHAEDSON. Then if the railroads want to take an appeal from that court it would have to go to the Supreme Court, but in the mean- time the law will be enforced ? Mr. Bacon. If it has not been suspended by the circuit court. Mr. RiCHAEDSON. Suppose the Federal circuit court sustains the order of the Interstate Commerce Commission and says it is a reason- able rate, and still the railroad is not satisfied and wants to take it to a court of last resort — that is, the. Supreme Court of the United States. While they were doing that your order would be enforced, of course? Mr. Bacon. That is true. Mr. Mann. The bill specifically provides for that. Mr. Bacon. The pui-pose of that is to expedite proceedings. As you will see, in the present condition of affairs it is to the interest of the carriers to prolong proceedings to the utmost possible extent, and that has been their course right along. There are cases now before the courts that have been pending for nine years. There are numer- ous cases that have been pending for from five to seven years, and the railroads have pursued that course purposely. Mr. RiCHAEDSON. That would apply to all courts throughout this country, to complainants and defendants throughout the country in general. There is a general tendency on the part of a good many parties to delay. Mr. Bacon. That is true; but it is greatly to the interest of the rail- road companies to prolong this litigation, because during the pendency of the proceedings it is reaping the benefit of the rates which have been declared unreasonable and unjust. It has every incentive to prolong the proceedings. That is a condition from which relief must be obtained in some way or other, and it seems to this committee which I represent that the only way it can be obtained is by the course pre- scribed in this provision, which makes it to the interest of the carrier to expedite proceedings. Mr. Mann. You say a case is pending now between the railroad company and the Commission which has been pending for nine years ? Mr. Bacon. There is one case which has been pending for nine years; yes. Mr. Mann. I should think that was a serious reflection upon the Commission. Mr. Bacon. What the cause may be I am unable to say. Mr. Mann. That is, if there is any reason for trying the case at all. Mr. Bacon. But from my observation of the proceedings of the Commission I have never seen any reason or had any reason to suspect them of negligence or of want of proper care and proper exertion to bring their cases to settlement; but you who are lawyers on this com- mittee know very well how easy it is for a party to postpone the trial of a case. Mr. Mann. We know that one party alone can not postpone a case forever. Mr. Bacon. I will have to refer you to the reports of the Commis- sion. The report for 1897 discusses it very fully, and the committee can obtain valuable information from that report. Mr. RiCHAEDSON. I do not see why the same complaint does not apply to all other cases in life. My observation is that there is delay on both sides, and if you would apply that drastic rule to all the inter- ests of life there would be a great upheaval. 16 INTEESTATE-COMMEBOE LAW. Mr. Bacon. The difference lies in the fact that in these cases before the courts of the country it is to the interest of both parties to secure an early decision, but in these cases I have been referring to it is to the interest of one party to delay the proceedings as long as possible. Mr. EiCHAKDSON. I do not know that I agree with you that it is to the interests-of both parties in cases in the ordinary courts to have a settlement, to conclude the cases. I do not think that is the case as a matter of fact. Mr. Bacon. It is a question of pursuing the course that will result -in the less evil to all pai'ties concerned, ana when you balance the prob- abilities and the injustice imposed upon one party or the other, you can not fail to see that the injustice to the public is at least a hundred times greater than any possible injustice that may result to the rail- road company. In the first place, the case of the railroad company has been considered by expert and skillful men in that particular sub- ject, and their decision is pi'esumptively correct. The instances in which it would be found to be incorrect would be exceedingly small. They have been exceedingly, small in the past. In fact the cases in which the Commission has been reversed have been almost entirely upon the construction of the law in reference to the power it confers upon the Commission and not upon the merits of the decision of the Commission itself, with the exception of the cases c oming under what is known as the long and short haul section of tte law, which has been construed by the courts differently from the way it was construed by the Commission. That, however, relates simply to the extent to which the section was intended to control the deter- mination of rates in relation to longer and shorter hauls; but as to the merits of a case^ the actual merits of a case in which the Commission has fixed any rate or prescribed any differential, as it is termed, between two competing rates, the Commission has never been overruled. It has never been overruled on a point of right, on a matter of equity- Mr. Mann. Do you propose any amendment to the long and short haul in this ? Mr. Bacon. No amendment to that. That has been purposely left out in order to have this particular point determined by itself by Con- gress without being complicated with any other point in connection with the law. Mr. Mann. The Interstate Commerce Commission makes one of the strongest complaints against the defect in that provision of the law. Mr. Bacon. There have been several cases adjudicated under this section which have practically nullified that section of the law, and that needs attention, needs remedy; but so far as the convention which I represent is concerned we do not propose to do everything at once. We want to have this question settled in the ^rst place as to whether the Commission shall prescribe the rate to be substituted when it finds the existing rate wrong, as it did during the ten years of its existence which I have referred to. Mr. Richardson. That is, in effect, that the judgments of the Inter- state Commerce Commission are presumptively correct? Mr. Bacon. That is it; yes. Mr. EiCHABDSON. You reverse the order of things; that a man is supposed to be innocent until he is proven guilty. Mr. Bacon. It is hardly a question of guilt. Mr. Richardson. Yes; it is parallel. INTBBSTATE-OOMMEBOB LAW. 17 Mr. Bacon. It is a question of dollars and cents. Mr. Richardson. I understand; but the principle is the same, the ruling of all other courts is against that presumption that you are ask- ing for, until the final court passes upon it. It strikes me that way. Mr. Bacon. But you must observe the distinction between the enforcement of freight rates and the enforcement of contracts between individuals. The individual can be protected while his case is pending by the filing of a bond, and finally obtain justice and lose nothing by the long continuance of the case in the courts; but in the case of the enforcement of freight rates the public has got to suffer continuously while these cases are being determined, unless some relief is provided, ■ and that burden has become to be so great and so extensive and so general throughout the entire country that it certainly should receive the attention of Congress, and relief should be provided if there is a possible way for it to be obtained. Mr. Mann. Do you expect to give us a lot of testimony showing that this present condition is very hard upon shippers? Mr. Bacon. We do not propose to present very much testimony of that character, although we will present some; but on that point we will depend upon the hearings that were held before the Senate com- mittee on the CuUom bill. These principal provisions of our bill are substantially the same as the provisions in the Cullom bill. That case was exhaustively heard by the Senate committee two years ago, although action was not reached. I will proceed further with a quotation from the report of the Indus- trial Commission on " The objections to power to fix rates in advance," the very question that is before us. That report says: I would like right here to read a brief extract from an editorial which appeared in the Railroad Review of January 18, a leading rail- way journal, on amending the interstate-commerce law, which is as follows: Elsewhere in this issue will be found a protest written by Mr. Walker D. Hines, vice-president of the Louisville and Nashville Railroad, against the proposed legisla- tion to amend the act to regulate commerce so as to give to the Interstate Commerce Commission authority to determine rates. Mr. Hines, as a lawyer, perceives great danger in transferring from the owners of the property to the Interstate Commerce Commission or to any other outside authority the power of rate making, but it is altogether possible that he is not as thoroughly posted as to the danger to railroad revenues which attaches to the present method. This is of course a railroad view of the subject. If any tribunal to which such authority should be committed should be one-half as reckless with rates as are the individuals at the present in control, there would be such a protest throughout the length and breadth of the land as has never yet been heard. If the only question at issue was the simple one of rate making by the Interstate Commerce dommission, there would be little difference of opinion on the subject. It is a mistake to suppose that the Commission desires this power sinjply as a question of authority. It is only fair to say that so far as they advocate the amendment of the law in this particular it is for the purpose of making possible the administration of the law in accordance with the design thereof. No denial whatever of the arbitrary and enormous power which the right to make freight rates imposes can be entertained for a moment. A pertinent question, how- ever, is as to whether the exercise of such power by irresponsible railroad managers, as at present, is reasonable. If, according to the statement of the railroad interests themselves, the power to make freight rates involves the right to niake or break men, industries, and even the prosperity of entire States, how great is the necessity for adequate supervision, subject to appeal to the courts. This is apparently recognized I-C L 2 18 IWTERSTATE-OOMMERCB LAW. by the more conservative representatives of the carriers themselves, as evidenced by testimony before the Industrial Commission. Under the circumstances at present prevalent this arbitrary power is exercised by one party, namely, the traffic managers of the railroads in interest, without any appeal whatever. * * * As against the claim that the exercise by the Commission of the right to prescribe rates involves the transfer of all rate-makiug power for the roads of the country to an administrative commission, it may be urged that during the ten years that this power was supposed to exist no such revolutionary effect was discernable. So long as the Commission is restricted to issuing orders only upon complaint and after investigation, it is scarcely to be said that the roads will be deprived of their right to promulgate rates in first instance for themselves. * * * The burden of complaint is at the present time that the railroads are the sole arbiters as to reasonable rates, and it seems illogical, therefore, however expedient aa a matter of policy it may be for them, to allege the injustice of such a situation as a ground for objection to conferring rate-making supervision upon a Government com- mission. The regulation of commerce is a large question. It requires among other things that rates shall be equitable both to the railroads and -to the people. It also includes the adjustment of rates as between localities. It may fairly be doubted if in the absence of the power to say upon investigation what the rate should be there is any hope of accomplishing these things. That the law needs amending is admitted. How it shall be amended is a ques- tion on which there are many divergent views, and in this respect railroad men differ as much as others. I would say in this connection that the matter of prescribing the proper rate, when the existing rate is foand to be wrong, is the only practical method of correcting a discrimination that is found to exist between two different competing localities. Unless, when the Com- mission has investigated a case and found that the rate is discrimina- tive, it can state what change shall be made in the rate by the defend- ants — in those cases, of course, there will be two or more defendants — unless it can prescribe what rate shall be put in force by both defend- ants or all of the defendants in relation to these two particular points in question there can be no remedy provided whatever. If it simply declares that it finds the existing rate to be wrong and orders a discontinuance, the discontinuance of the existing rate may be made by a very slight change in either one rate or the other, which will afford practically no relief. To give relief the Commission must go further and say just what rate is requisite to be made to place the two competing points on an equality. A case of that kind came up five or six years ago, called the Eau Claire case, which resulted in just that way. It was a case of dis- crimination in rates on lumber from Eau Claire, Wis., and from Winona and La Crosse to the same points, those two places being points on the Mississippi River somewhat nearer — 100 miles or there- abouts nearer — to the points of destination than Eau Claire. ' The Commission heard the case and decided that the existing differential in rates, which was, I think, 5 cents a hundred pounds, if I remember rightly, was too large, was an unreasonable difference, and that it discriminated against the product of lumber in the region of Eau Claire; and the Commission declared that a reasonable difference in the rates between the points in question would be not to exceed 2 cents a hundred pounds. One of the railroad companies, the railroad company taking the business from Eau Claire, immediately reduced its rates and made its differential 2 cents a hundred pounds instead of 5 cents a hundred pounds, as compared with the rates from Winona and La Crosse. The railroads taking the business from Winona and La Crosse immediately INTEKSTATE-OOMMEROE LAW. 19 reduced their rates the same. A further attempt was made^an attempt at negotiation was made — to agree on a differential to approach the decision of the Commission, if not to comply with it entirely; but the lines from La Crosse and Winona refused utterly to make any change in their rates which would produce a differential of less than 6 cents a hundred pounds from Eau Claire. And that case stands in the same way to-day, and that country, that lumber country, is subjected to that disadvantage of 3 cents a hundred pounds on its lumber as compared with the competing lumber section around Winona and Lg, Crosse. The Chairman. They got a lower rate, did they not? Mr. Bacon. They got a lower rate, but nevertheless it was just as largely discriminative; there was just as much discrimination in the second case as in the former. The Chairman. Was the general shipper hurt by that or the locality ? Mr. Bacon. The lumber-producing interest in that locality was subjected to that disadvantage unjustly as compared with the lumber interests in another locality. The cases that come before the Com- mission are largely of that character — cases of discrimination between sections. Mr. Mann. This bill then would give to the Interstate Commerce Commission the right to keep up or raise rates? Mr. Bacon. It has not worked out in that way. Mr. Mann. It worked that way in that case. Mr. Bacon. No; in this case there would have been no change in the rate whatever if the case had not come before the Commission, and the ruling of the Commission would have been to put the rate down from Eau Claire and not down from La Crosse or Winona. Mr. Mann. If the Company had attempted to put it down at the other place, then the Commission would have ordered them to raise it. Would not that have followed? Mr. Bacon. Yes. Mr. Mann. How long would an order of that sort remain in exist- ence; how long a time must elapse before a railroad company can reduce its rates after the Interstate Commerce Commission has decided what is the reasonable rate at a particular time under this bill? Mr. Bacon. I will state that the provision of our bill is that an order of the Commission shall continue in force two years, and if the rate is then changed by the carrier the public has the right to present its objections to the Commission and have the case considered by the Commission, and pending its consideration the previous rate shall con- tinue in force. Mr. Mann. During that time, then, the railroad company would not be permitted to reduce its rates ? Mr. Bacon. Well, sir, the operation of the proceedings of the Com- mission has always been in the direction of reducing rates. Mr. Mann. That is not the case, Mr. Bacon, before us. It is a question of power here. We know that the railroad company changes its rates on grain from the West several times a year. Mr. Bacon. Yes. Mr. Mann. Necessarily the rates are lower, 1 suppose, in the sum- mer time, when they have la^e competition. At any rate, they are changed. Possibly the Commission would not require so low a rate in the winter time. Do you say that the railroad companies rfnder this bill could not change their rate ? 20 INTBESTATE-COMMBKOE LAW. Mr. Bacon. It would not affect that. Mr. Mann. Why not? It fixes a reasonable rate. Mr. Bacon. It fixes a reasonable rate that may not be exceeded. Mr. Mann. Is that your bill, "That it may not be exceeded?" That would not change the power now of discriminating rates. Mr. Bacon. The cases brought before the Commission are always those of being too high or discriminating. Mr. Mann. I think sometimes the rates are too low; that that is the trouble; that they are too low from another point. Very often one city claims the rates are too low to another city. Mr. Bacon. In these cases one has been too high or the other too low; but as a general thing it has been the former, and the actual fact has been that in every case of that kind the rate has been reduced; the higher rate has been reduced. Mr. Mann. Under this bill, when the Interstate Commerce Commis- sion fixes a rate, can the railroad company change that rate within two years' time? Mr. Bacon. There is nothing to prevent its reducing it except in case of relative rates. In cases of rates between two competing points, if one railroad reduces the other must reduce correspondingly and preserve the differential which has been prescribed by the Com- mission. In relation to the question of reducing rates I would say, however, that it is no benefit to the public to have rates unreasonably low; it is no benefit to the public to have rates so low that the rail- roads can not furnish proper service and can not be of the value to the public that they would be otherwise; and the purpose of this bill is not to reduce rates; it is to produce equality, equity, and rectitude. Mr. Mann. In the language of the bill " to establish or maintain " Mr. Bacon. Bead a little further, please. Mr. Mann (reading): The relation and to prescribe a rate or rates to be observed. Mr. Bacon. And to prescribe rates in order to maintain the relation. Mr. Mann. That would be prescribing a rate which could neither bechanged nor reduced, because if they could reduce it that would not maintain the relation. I do not take any side on the thing; I simply call attention to this. Mr. Bacon. I beg to say that it seems to me to be a far-fetched con- clusion. Mr. Mann. The Commission, under this provision, then, could not be effective, if they can reduce ad libitum. Mr. Bacon. Yes. Mr. Mann. That would not affect at all, then, discriminations between two points? Mr. Bacon. If the Commission has decided that discrimination between two points must be stopped by observance of a certain rela- tive difference in rates, that relative difference must be maintained. Mr. Mann. But you would confer power to prescribe rates. Mr. Bacon. That is the one means by which the differential can be determined. Mr. Mann. They do not say what the differential shall be. Mr. Bacon. They say what the rates shall be. Mr. Mann. If they can reduce rates from one point, there is no way of preventing discrimination. INTERSTATE COMMERCE LAW. 21 Mr. Bacon. The party injured in such case can bring a second com- plaint and obtain a reduction at the competing point. Mr. Mann. Not unless it is more than a reasonable rate. Mr. Bacon. It is not only a question of reasonableness but of jus- tice. The bill all through proceeds upon enforcing reasonable and just rates, just rates being those that are just with relation to each other. That is one of the fixed principles of the present interstate- commerce act — that the rates shall be reasonable and just. The word "just" means just with relation to each other. Mr. Mann. No; the word just, I think, means just in itself. Mr. Bacon. Just is one word and reasonable is another. The pro- ceedings of the Commission have regarded the term " just" in that sec- tion of the bill as relating to the justice of relative rates, and the term has always been used in that sense in its opinions. Mr. Adamson. Do you- think that what is a just rate is not always a reasonable rate ? Mr. Bacon. Just in relation to other rates; that is the meaning of the word "just." Mr. Adamson. It would be reasonable in regard to other rates also ? Mr. Bacon. No; reasonable in itself. The rate must be reasonable in itself and it must be just in relation to other existing rates. That is the construction that the Interstate Commerce Commission has given to it in all its cases in its decisions and opinions. I wish to call the attention of the committee to another provision, which has been incidentally referred to a little more specifically, and that is the one by which the evidence before the Commission in any case is to be treated as evidence in the review of the case before the circuit court, and also to the fact that any additional evidence that either party may desire to introduce must be taken before the Inter- state Commerce Commission, the case being referred back to the Interstate Commerce Commission to receive the -additional testimony, and certified up to the court; the object of this being the necessity that the full case shall be developed before the Interstate Commerce Com- mission, instead of a large portion of it being left to be developed before the court. Heretofore the carriers have often only presented a part of their testimony before the Commission, and the Commission has decided the case on that testimony, and then the case has gone up to a court and the court has taken additional testimony and the case decided by the court has been, consequently, an entirely diiferent case from the one decided by the Commission. This provision in the bill renders it essential for the parties to produce all their testimony before the Com- mission, and the court must pass upon the case under that testimony as certified by the Commission. The Chairman. Why should you make an innovation of that kind? Ordinarily, in criminal affairs in the preliminary investigation I think the defendant is not required to develop his case at all; neither is he before a grand jury; and yet when it comes to the trial no one would say, it seems to me, that -he should be prohibited from making a defense. He may have waived an examination and not inti'oduced any testimony in the preliminary hearing. The same way before a Federal commissioner in all criminal matters. Mr. Bacon. The particular reason for that is that the decision of the Commission should be given upon full possession of the facts. 22 INTEKSTATE-COMMEKCE LAW. The Chaieman. Facts that they have? _Mr. Bacon. The full facts of the case. The Commission is clothed with authority to make its investigation and receive the testimony of both parties. The Chaieman. Yes; but, after all, it is only preliminary. Under the provisions of the bill the action of the court is confirmatory. Mr. Bacon. The principal object of that is to obviate delay. That has been one of the means that has been made use of by the carriers for producing delay in the courts, and to expedite these cases and bring them to a conclusion at the earliest possible moment, it has been deemed wise by all who have given study to the subject to require the entire testimony to be taken before the Commission. Mr. Mann. There is one Interstate Commerce Commission and there are quite a number of circuit courts and quite a number of dis- trict judges who hold circuit courts. Now, you propose that all testimony throughout the United States shall be taken before one commission. Mr. Bacon. Yes. Mr. Mann. Instead of permitting it to be taken before any of the courts, on the ground that it will expedite matters to take it before one commission. If you want to take testimony relating to California the Commission has to go out there and take the testimony. Mr. Bacon. That is the course pursued by the Commission. It proceeds to the most convenient point for all parties concerned to take the testimony. Mr. Mann. It never goes where a Federal court sits. Mr. Bacon. Yes; but when evidence is taken before the Commis- sion and the case is appealed to the Federal court and additional testi- mony taken, it occasions additional delay in determination of the case. Mr. Mann. That would not cause any delay by the Commission; that is the charge against the court. I do not suppose it causes any additional delay. Mr. Bacon. It affords an opportunity to the carrier who is desirous of promoting delay to accomplish that purpose. Mr. Mann. Do you think it would permit any more delay than to permit the defendant, after a case has been heard, to file an affidavit saying he had more testimony to take, and then after the circuit court had certified to the Commission that it needed this testimony and directed the Commission to take it, wait for the Commission to go to California to take that testimony? Which would create the most delay; to do that, or to allow the court to take the testimony? Mr. Bacon. I do not think there would be any material difference in such a case as that; but if this was the law, the actual working of it would be that the carrier would present all his testimony before the Interstate Commerce Commission. Mr. Mann. If he wanted to delay, why should he? Mr. Bacon. Especially it would be his object, if the order of the Commission is to be immediately' effective. It would then be to the interest of the railroad company to expedite it as much as it is to the interest of the public to do so. Let me read you what the Indus- trial Commission says under the head of "Delay and appeals to courts." It says: Inasmuch as the final decision in any important case can not be rendered until the courts have passed upon the case, and since the courts will not accept the find- INTEBSTATE-OOMMEECE LAW 23 ngs or evidence before the Commission as final, it has become more and more com- mon for tbe carriers to refuse to open their cases in full before the Commission at all. * * * The Commission thus is compelled to issue its orders not upon a full and complete hearing of the case, and is obliged, moreover, to have its findings reviewed by the courts upon the basis of entirely new considerations. The cases passed upon originally by the Commission, and later by appeal, by the courts, may be, and often are, essentially different. * * * The entire history of proceedings before the Interstate Commerce Commission is one of delay and inefficiency in the equitable settlement of grievances by reason of the facts above enumerated." That is the opinion of the Industrial Commission after a thorough investigation of the subject. Mr. Mann. May I ask — I do not ask for an answer now, however — for the authority of Congress to confer upon the Commission this power of taking testimony ? Mr. Bacon. 1 think you are a better judge of the authority of Con- gress than I am. Mr. Mann. I respectfully direct your attention to that. You pro- pose here that a court trying an original case shall not take any testi- mony, it being admitted that the Interstate Commerce Commission is not a court, and can Congress clothe it with judicial power? Mr. Bacon. Not being a lawyer I can not answer that question. You understand such a question as that far better than I do. Mr. Coombs. Does the idea that a court can review a commission of this kind presuppose that it can go into a trial de novo ? Mr. Bacon. I do not understand your question. Mr. Coombs. Does not the very jurisdiction of the court, the very idea that the court has the power to review the case of the Commission, suppose it goes into facts; is not that inherent? Mr. Bacon. The court is to review the case that has been under consideration by ttie Commission. The Commission, it seems to me, is entitled to have all the evidence before it renders its ruling, which is to be reviewed, and it is unfair to the Commission, it is unfair to the complainant, it is unfair to the public, that part of the evidence shall be given to the Commission on which its ruling is to be based and then that other evidence shall be submitted to the court. Mr. Mann. The review imposed in a judicial body over commissions of this kind is for the ascertainment of facts, to ascertain whether jus- tice has been done, to ascertain whether rates have been fixed com- mensurate to the amounts invested, and all of those questions, and it is held, as I understand it, that that is inherent in the courts. So when you deprive it of its jurisdiction, the right of review, the facts,- the right of a trial de novo, it seems to me you get away from the fun- damental idea that the court has jurisdiction at all. Mr. Bacon. No; it still has the power to review the case de novo, but under evidence which has been produced before the Commission. Mr. Coombs. That is not de novo, though. Mr. Mann. Here is an authority conferred upon courts by the con- stitution, practically, a separate branch of the Government, the courts, a power which the Congress can not take away from them. The Inter- state Commerce Commission says a railroad has fixed a rate in viola- tion of the act to regulate commerce. You say, that question being presented to the court, the court can not take evidence. Mr. Bacon. The court is particularly instructed by the provisions of this bill, if further testimony is offered by either party and it con- siders that evidence important, to instruct the Commission to take that additional evidence and pass it up to them. 24 IKl'EEaTATE-COMMEROE LAW. Mr. Mann. But you say the court can not take the evidence. Mr. Baco]?. That is the provision of the bill as it stands. It must be referred back to the Commission for its taking of the evidence, and the Commission may give an entirely different decision on the receiv- ing of the entire evidence. Mr. Mann. There is no authority for it in the bill ; there is no author- ity for it to give any different opinion at all. Mr. Bacon. The bill certainly provides that after hearing the testi- mony it shall give its opinion on the case. Mr. Mann. Not after the second decree. Mr. Bacon. I so understand it. Mr. Tompkins. It must necessarily follow or else that provision would be void. Mr. Mann. There is no such provision in the bill whatever, but if there were it would not affect the question of the constitutional power of the legislature to say that the court shall not take testimony. Mr. Bacon. Well, that may be easily remedied, if it is erroneous in point of law. I wish to read further the statement of the Industrial Commission on "Remedies in procedure suggested," in connection with this point. The report says: What are the remedies proposed for the defects in procedure which have been above described and which are responsible for much of^ the dissatisfaction with the interstate-commerce act as it stands? * * * In the first place, that the burden of appeal to the courts from orders or findings of the Commission shall rest upon the carriers rather than upon the Commission itself. In other words, the Commission having promulgated its order, the same shall become effective and binding unless the carriers shall bring suit in a United States court within thirty days to compel a review of the case. This, it is alleged, will operate to give finality to the larger proportion of the proceedings of the Commission, making them effective at once. * * * And secondly, that the evidence, pleadings, papers, and exhibits taken before the Com- mission and certified by its secretary shall be filed with the court and received in evidence. The court may render its decision upon the basis of this evidence, if it please, or it may require that the Commission secure additional testimony. In any event, however, such testimony or papers submitted by the Commission shall be regarded as competent. I will give way at this point, Mr. Chairman, in order that another gentleman who is here from abroad may present his testimony. The Chaikman. Before that 1 would like to ask you a question. You speak of your experience as a business man. In this connection let me ask you what is your business ? Mr. Bacon. I am engaged in the grain commission business in the city of Milwaukee, and have been for thirty -live years. The Chairman. Now, will you not explain to the committee, if you please, some of the hardships; give us some idea of the wrongs that, in your judgment, are to be remedied by this bill? Of course, you understand, Mr. Bacon, in the line of questions that are asked, that members ask you simply seeking light and in no other spirit. We want gentlemen who have studied this question and understand it in all of its bearings to enlighten us, and especially with regard to cer- tain particular matters that we have less information about, perhaps, than others. So I wish you would give the committee some idea of the character of wrongs and of the remedies.. Mr. Bacon. The wrongs are of two kipds. In the first place, the wrongs of discrimination. These pertain particularly to business men — -- INTEESTATE-COMMERCE LAW. 25 The Chairman. Right there. All discriminations are prohibited under existing law, are they not? Mr. Bacon. They are prohibited. The Chairman. And there are penalties that may be urged against those who indulge in them under existing law? Mr. Bacon. They are in the case of rebates; but in the case of pub- lished rates which are discriminative, the only remedy is by means of complaint before the Interstate Commerce Commission and showing the Commission the fact of the discrimination in those published rates. The Chairman. The more serious and frequent complaint in regard to discriminations are complaints of rebates? Mr. Bacon. They are not the more serious in their effects; they ai'e serious as between individuals onlj'. But the other class of discrimi- nations is serious between communities. Thej'^ debar certain commu- nities from a share in the trade to which they are naturally entitled. The direction of trade is controlled by the rates prescribed by the rail- road companies. The Chairman. Take the large interests from a city like Milwau- kee, in the grain trade. They are there in the nature of rebates, are they not? Mr. Bacon. No; they are more in the nature of discriminations against localities. The Milwaukee Chamber of Commerce brought a case before the Commission on the ground The Chairman. I was asking you the discriminations on these rates on traffic originating at Milwaukee. What is the character of those discriminations — rebates? Mr. Bacon. There are discriminations in rebates on business origi- nating in Milwaukee. The Chairman. Are those discriminations that the community of Milwaukee would complain of ? Mr. Bacon. Yes, a pai-t of them; not neai'ly so much as in the dis- criminations in the published rates, more especially from points in the West from which Milwaukee derives its business, and to points in the West to which its merchandise is shipped. The Chairman. You mean discriminating published rates that would favor, for instance, Chicago rather than Milwaukee ? Mr. Bacon. More particularly Minneapolis. The rates to and from Milwaukee and Chicago between the points in the West and those places are uniform, though the distance to Milwaukee is less than to Chicago. It is a well-established policy of the railroads to make the rates uniform to those two places, and there are certain circumstances which prevent its operating unjustly toward Milwaukee; but the injustice Milwaukee suffers from is the disproportionate rate charged from points in the extreme West, where grain is produced largely, to Milwaukee as compared with Minneapolis. The Chairman. Minneapolis gets the better rates? Mr. Bacon. Minneapolis gets the better rates, and we brought a case, which I spoke of a moment ago, before the Interstate Commerce Commission, and the Commission decided in our favor and declared that the rates to Milwaukee were, from certain territory, from 2 to 3 cents too high as compared with the rates existing at the same time from the same territory to Minneapolis. But Milwaukee got no benefit from this decision, because it was given out just about the time that this decision of the Supreme Court was given which declared that 26 INTERSTATE-COMMERCE LAW. the Commission had no power to prescribe what change should be inade in rates when it found that existing rates were unreasonable or discriminating. The railroad companies declined to obey the order, and the Milwaukee Chamber of Commerce summoned the railroad companies to appear before the Commission and show cause why they should not comply, but their simple defense was that they were unable to agree among themselves upon a less differential in rates than already existed. That injustice and that burden has been borne up to the present time, and will always have to be borne unless some change is made in this law. And that is only one case of a score of them that have come to my personal knowledge during the last few years. The Chairman. On those products that go from Minneapolis east- ward is there any rate that is compensative or that evens up the general charge that Milwaukee merchants would have to suffer from? Mr. Bacon. That question was considered by the Commission in the determination of the case, and it was decided to the contrary. It was decided that in order to place Milwaukee on an equality this difference which it prescribed should be made, and it reaffirmed this order when this second hearing was held, but no attention was paid to it. 1 will not say no attention, because a very slight reduction in the rate to Milwaukee was made by the several companies at that time, varying from a cent to a cent and a half a hundred pounds; whereas the difference should be 2 to 3 cents to place Milwaukee on an equality. ■ And the effect of that was practically nothing, for the reason that the difference prescribed by the Commission was barely sufficient to place the two markets on an equality, and the result was that Milwaukee suffered just as much after the partial reduction as before any reduction was made, and the tendency in favor of Minne- apolis continued just as great as before, because the difference made was insufficient to affect the route or the destination of the grain from the point of origin as between these two competing markets. Mr. Mann. Is it not a fact that nearly every large city of the coun- try claims that the railroads ranning into it discriminate against them? Mr. Bacon. A great many of them do, and that is what the Com- mission is for — to determine such questions, to hear the evidence of the parties who complain of discrimination and determine whether it exists or not. Mr. Coombs. What has been the effect of the action of the Commis- sion upon freight and bringing about a better condition for shippers, generally speaking? Has it been an instrument? Mr. Bacon. During the period when it exercised its authority of prescribing a rate to be substituted it was thoroughly satisfactory. Mr. Coombs. But I am speaking about the general results that have been brought about since this came into existence. Mr. Bacon. That is what I refer to. The results were ver}' satis- factory during the ten years I have referred to, but since then they have been very unsatisfactory. Mr. Adamson. I take it that if one point is charged a little higher than another point for the same distance it is claimed as a discrimina- . tion unless justified by some local condition. Mr. Bacon. As a general thing, yes. Mr. Adamson. What conditions justify such a differential, aside from competition and the bulk of the business ? Mr. Bacon. Distance is taken into consideration for one thing. INTEBSTATE-OOMMBRCE LAW. 27 Mr. Adamson. But I say the same distance. Mr. Bacon. The rates are so intertwined with each other from one part of the country to another that they all have to be taken into consideration. Mr. Adamson. That is what I am trying to find out. Mr. Bacon. Take shipping grain from me country I refer to to Mil- waukee and Minneapolis. The rates to Milwaukee and Minneapolis have a certain difference one over the other. The rates to the sea- board from Milwaukee and Minneapolis, which is the final destination of most of the grain, have a certain diflerence. That difference should be equal in each case — that is, the rate on grain to Milwaukee and from Milwaukee to the seaboard should be equal to the rate on grain from the same point of origin to Minneapolis, added to the rate from Minneapolis to the seaboard. Mr. Mann. You entirely eliminate Lalie Superior. Mr. Bacon. No; Minneapolis uses Lake Superior. Mr. Mann. But you are simply speaking of the railroad rates; you should remember that Minneapolis has a longer route. Mr. Bacon. 1 know that. The water rates really control the rate by the railroad. Mr. Adamson. If the two points you mentioned are practically equal distances from the coast, I would like to know what all the reasons are that could be urged to justify a discrimination against one or in favor of the other? Mr. Bacon. Where the distance is practically equal I could not give you any good reason why discrimination should exist. Mr. Adamson. The great trouble, I think, that people complain of is about rates. I do not know whether your new plan of letting the Commission fix rates would remed}'^ it; I want to ask you about it. When I practiced law in the South, south of the Potomac and south of the Ohio had what they called basic points. I do not know whether they have the same plan now or not, but in effect I think it is the same. Mr. Bacon. Largely the same, yes. Mr. Adamson. There are certain cities that have the same rate from either point in that territory, whether their trade goes backward or forward from one to the other, and some of mj^ constituents have made cases and laid them before the Commission and they have died before they were adjusted in the courts. They present this: They say, You start in Washington with a rate the same as New Orleans, and you climb uphill until you get halfway to Charlottesville, or Danville, or whatever town it may be, when you go down again until you reach that point; and then after reaching Charlottesville or Danville you climb up again until you get halfway to Greeneville, or Atlanta, or whatever place it is, and then you go down again until you reach Atlanta and strike the same rate of freight; and then you climb up until you get halfway to Montgomery or Opelika; and then you climb over another mountain of rates between Montgomery and Mobile; and then another one between Mobile and New Orleans, and vice versa, back again. That may be an exaggerated statement, but I understand cases like that are in the books. Mr. Bacon. It is precisely cases like that that the committee is Intended to remedy, that they are to hear, and they are to decide and determine and prescribe what change shall be made in the rate in order to make them ]ust and equitable. 28 rNTEESTATE-COMMEEOE LAW. Mr. Adamson. The business men in those cities that call themselves competitive or basic points say they are distributing points, say they do a great deal of business, and they say the circumstance justifies them in having a better rate than the little towns along the line. I want to know in the first place what you think about a condition of that kind, and in the second place if your plan provides how that can be remedied, Mr. Bacon. It can only be remedied in that way. The railroads have various interests of their own to serve, and in fixing rates between competitive points they are governed more by the probable distribution of business than they are by questions of equity and right. Hence the necessity of bringing these cases before a competent tribunal that can consider all the circumstances in relation thereto and settle them upon principles of equity. ■ Mr. Adamson. Is it practical and desirable for the general good that there should be a literal enforcement of the long and short naul idea as to these cities and as to these little towns in between ? Mr. Bacon. That is too large a question. Mr. Adamson. It is one you ought to think about, and one the people are thinking about. Mr. Bacon. It has been one, as you know, that has received a great deal of attention during the past fourteen years, and one on which there has never been any substantial agreement reached. Mr. Adamson. I supposed you were conversant on all those things? Mr. Bacon. I have studied that question and have a settled opinion in regard to it. Mr. Adamson. What is it? Mr. Bacon. It is that the principle as laid down in the interstate- commerce act should be carried out. Mr. Adamson. As to the little towns? Mr. Bacon. Yes; but that has been overturned by the Supreme Court upon the ground that elements of competition change the cir- cumstances and the conditions, using the term of the section itself, which are to be considered, whereas the Commission has determined that railroad competition should not be considered; that water compe- tition alone is the one that changes the conditions and circumstances under which that section of the law can be overruled. Mr. Adamson. Then, your opinion of the other question I asked. In the event that the Commission should be given the power with which you think it ought to be vested, will the complainant whom I described have any more hope of relief than they now have? Mr. Bacon. I think not, on this particular point, because this bill does not propose to make a change in the long and short haul section, the long and short haul clause. The Chairman. Does it not make a change? Suppose the Commis- sion should adopt this idea with regard to the long and short haul clause, would it not result in an entire change of our business system; would it not do away with distributing points, say, like Milwaukee, and would not the merchandise go directly, say, from the great center, a center like Chicago or New York, to the villege, and not to Milwau- kee at all ? Mr. Bacon. I think not, sir. The long and short haul provision simply prevents intermediate points from being charged a greater rate than the terminal point. Business is naturally concentrated at great INTEESTATE-OOMMEBOB LAW. 29 centers, and the application of the long and short haul principle never can overcome that natural law, that natural tendency. The Chaikman. The hour for adjournment has arrived and the committee will be in recess until to-morrow morning at 10.30. Adjourned. Thursday, April 10, 1902. The committee met at 10.30 o'clock a. m., Hon. William P. Hepburn in the chair. STATEMENT OF MR. E. P. BACON— Continued. Mr. Bacon. Mr. Chairman, following up a question which was asked yesterday in regard to the matter of requiring full testimony in cases brought before the Interstate Commerce Commission and appealed to the circuit court to be laid before the Commission, I have taken pains to get a legal opinion upon that question, which I wish to submit. It reads as follows: The ordinary rule is that when a case is appealed from a lower court no testimony whatever can be taken in the higher court. This is universally true of appeals from the circuit court of the United States to the circuit court of appeals or to the Supreme Court of the United States. It is also true of all admiralty cases. If the record in the court below is used at all in the appellate court, that record can neither be added to nor subtracted from. If testimony has been improperly excluded in the court below, the case is remanded to that court for further hearing. The provision in this bill as to the taking of additional testimony was drawn in analogy to the practice before the General Appraisers. Whenever a question arises as to the rate of duty to be imposed, the importer can file a protest, and the Board of General Appraisers then takes testimony and passes upon the protest. If the ship- per or the Government desires to question the correctness of the decision of the Board of Appraisers, an appeal is taken to the circuit court. If now either party wishes to take additional testimony, this must be taken before one of the appraisers. 1 also wish, in confirmation of a statement I made yesterday that there was a case pending in the Supreme Court that has been pending foi'a period of nine years, to cite the case referred to. It is the case of the United States v. The Missouri Pacific Railway Company, begun in the United States circuit court in 1893. It is still pending in the United States Supreme Court. That was begun nine years ago. It was brought by the Attorney-General upon request of the Interstate Commerce Commission on complaint of Wichita, Kans. , shippers. The Chairman. Do you know anything about the history of that case; do you know who is responsible for that astonishing delay? Mr. Bacon. I am not familiar with the details of that case. Mr. Mann. 1 think that case is not reported by the Commission as a pending case in their last few annual reports. Mr. Bacon. The case was not heard before the Commission. It was carried directly to the circuit court, taken directly into the circuit court, at the request of the complainants, who made their complaint to the Commission, it being the desire of the complainants that it should be tried in the court rather than before the Commission, and, in accord- ance with the provisions of the interstate-commerce act, the Com- mission undertook the prosecution of the case through the Attorney- General. What the status to-day is I am unaware. 30 INTEESTATE-OOMMEBCE LAW. Mr. Mann. They purport to give a list every year of the civil cases that are pending. Is that one in that list? Mr. Bacon. 1 could not say whether it was on the list. Mr. Mann. They reported last year that they had 11 civil cases pending throughout the United States. That is this year; the report is in January. Mr. Bacon. I have a memorandum of two cases .that had been eight years in the courts which have been decided. One is the case of the Intei'state Commerce Commission v. The East Tennessee, Virginia and Georgia Railway Company et al., begun in the United States circuit court in April, 1893, and decided by the Supreme Court in April, 1901. That is known as the Chattanooga case. The Chaieman. Are you familiar with the history of that case? Do you know the reason for the delay there ? Mr. Bacon. That case, I believe, involved the question of the con- struction of the fourth section of the law which is commonly termed the "long and short haul" section. There has been a difference of opinion between the Commission and the courts as to the construction of that section, arising from the question as to what constitutes a dif- ference in circumstances and conditions under which, b};^ that section, the Commission is authorized to suspend the operation of the rule. The Commission in this case did not consider that the competition involved was such as to change the circumstances and conditions suf- ficiently to require the suspension of the operation of that section. There was one other case before the court at the same time, involv- ing the same question in another court — a United States court — and the two cases were somewhat dependent upon each other, which is a partial reason for the long continuance of that case. Another case which occupied eight years was The United States Interstate Com- merce Commission v. The Clyde Steamship Company et al. , begun in the United States circuit court in May, 1893, and decided by the United States Supreme Court in 1901, called the Georgia commission case; I wish also to refer to the illustration which was used yesterday, which seems to be rather a misleading one in relation to the putting into effect of the decision of the Commission before the case has been • adjudicated before the courts, the illustration being that it was prac- tically hanging a man and then trying him afterwards. Now, while apparently there is some analogy, that will not bear analysis. The fact is that the defendant in this case is deprived of his liberty while the case is being adjudicated in the same manner that a criminal is deprived of his liberty while his trial is in progress. Now, I will yield the floor to the representative of the National Hay Association, asking the privilege at a later time to conclude my remarks on the subject. STATEMENT OF MR. JOHN B. DAISH, OF WASHINGTON, D. C. Mr. Daish. Mr. Chairman and gentlemen, I represent, as chairman of a special committee to appear before you, the National Hay Asso- ciation. This association is an organization of shippers, some 700 in number, resident in the various portions of the United States, with a membership extending from Massachusetts to the Indian Territory and from Virginia to California. This committee consists of the following members: John B. Daish, INTERSTATE-COMMERCE LAW. 31 Washington, D. C. ; George C. Warren, Saginaw, Mich. ; J. W. Sale, Bluffton, Ind. ; C. S. Bosh, Fort Wayne, Ind. ; Charles England, Balti- more, Md. Owing to business reasons, Mr. England is the only mem- ber able to be present on this occasion, although others may appear before you later. These hay people — and I am one of them, for the reason that I have an interest in a concern in this city which handles hay — have had a peculiar experience under this interstate-commerce law. Before going into that experience I wish to answer, if possible, a couple of ques- tions which were asked on yesterday and the day before with regard to certain matters. If I understand the question correctly asked by one of the gentlemen, it was in this shape: Taking the first ten years of the history of the Interstate Commerce Commission, how many of their decisions dealt with the question of the reasonableness of rates in proportion to the entire number? It is reported, on page 16 of the eleventh annual report, which is the report for 1897, referring to unreasonable and unjust rates, that "of the 135 formal orders made in suits actually heard from the date of its institution until 1897, 68 have prescribed a change in rates for the future," making about one-half of the number of all the cases at that time dealing with unreasonable and unjust rates. Our experience is now in the state of going on. It is not a past experience, and it was indicated by one of the members yesterday that the committee wanted the actual observation and experience of work- ing under this act. I trust it will not be tedious to review shortly the history of hay as a transportation feature. I do not care to go into it fully at all, but simply enough to give you an outline of what we have been through from 1887 until the present time. In conformity with the act the carriers have put forth what is called a classification ; that is, certain articles go first class, or double first class, and others go second class and third class, and so on all the way down to the lowest class, which is the sixth class. From 1887 to 1900, with a short period intervening of about six weeks in 1894, hay was transported at this lowest or sixth class rate, 25 cents per 100 pounds from Chicago to New York. Shortly prior to January 1, 1900, for the various railroads in the territory south of the Great Lakes and extending from the Mississippi River to the Atlantic Ocean on the east, this committee determined that it was for the best interests — I suppose of the carriers — I do not know — to place hay in the fifth class, and that rate is 30 cents per 100 pounds from Chicago to New York. Not only was a change made at that time in the rate of transportation of hay, but I think also of some 800 other articles. This was felt to be an injustice. This advance from 25 cents to 30 cents was felt to be an injustice and a discrimination against hay as a shipping commodity. The chairmen of our various committees appeared before the oflScial classification committee and protested. They said: "You are wrong; you will not have hay moved" — but all without avail. The matter subsequently was taken up with the Interstate Commerce Commission and a petition very like a bill in equity was presented to the Commission and filed on the 6th of last August. Issues were joined and testimony was taken on behalf of the complainants about the middle of November. Testimony for the carriers was given in this city in 32 INTERSTATE-COMMERCE LAW. December. The case was argued commencing on the lith of February, and of course the decision in that case is not yet rendered. What I have already stated is practically the history leading up to the present tinje. I take it that now it becomes reasonable and right that we should spec- ulate on first, what would be our position as complainants in this case were it not for the decisions of the Supreme Court in 1897 — what would be our position presuming that we had a decree in our favor at this time — and then what would be our position, and all the way along, in the position of carriers under the proposed amendment to this act? Suppose, now, that we have a decree or order in our favor, and that the year instead of being 1902 is 1896. The Commission, in accord- ance with the statute, orders the several carriers to cease and desist from charging the unlawful rate on hay. The carriers naturally would say — it is their side of the case: "The Commission are wrong; hay is not being discriminated against. If we see fit to carry grain from Chicago to New York for 15 cents or 17i cents per hundred pounds, that is our business, and we can carry hay for 25 cents or 30 cents, and that is also our business; and, gentlemen of the Commis- sion, while we respect your views, you are seriously in error, first upon the facts and secondly upon the law; therefore we will see you enforce this." They retain the rate at 30 cents per 100 pounds on hay between Chicago and New York. The Commission think they are right tod they proceed to the circuit court, and the case is entitled "The Inter- state Commerce Commission v. The Lake Shore and Michigan South- ern and other railroads." The object of proceeding there is to compel in some way, shape, or form obedience to that order. There it hes for such length of time as the counsel can prevail upon the court to stay matters. We all know how that can be done, on plea of illness of counsel, or other reasons can be given. Now, presume that the ruling of the circuit court is that the Inter- state Commerce Commission is right; but right or wrong, it is imma- terial for the sake of this illustration. The case goes to the court of appeals and from there to the Supreme Court of the United States, and it is immaterial for this illustration whether the contention of the Interstate Commerce Commission on the petition of the hay associa- tion is correct or not. Considerable time has elapsed pending these sevei'al appeals and reports. In the meantime hay has been carried, and the freight has been exacted at the rate of 30 cents per 100 pounds from Chicago to New York, and from points east of Chicago it takes a proportionate rate. Of course there is this chance as well, that the carrier may have said, "We were not justified in advancing this rate." Mr. KicHARDSoN. Does not the railroad give a bond when it takes that appeal ? Mr. Daish. No, sir. Mr. Richardson. To the circuit court? Mr. Daish. No, sir; I understand not. Mr. Richardson. The rule is different there, then, from all other rules in appeals taken to the courts of appeals. Every one of them requires a bond. Mr. Daish. I so understand, Mr. Richardson. How do they get up there? Do they not give some security for costs ? Mr. Daish. I think not. They may give a security for costs, but certainly no security to indemnify any shipper on the excess chars-ed. INTEESTATE-OOMMERCE LAW. 33 Now, then, presume that the upper court should determine that we were right in our contentions. Suppose now, and it is possible as I was about to state, that the company had thought the judgment of the Interstate Commerce (Commission correct, and that the contention of the original complaint was right. Under those circumstances they would obey the order of the Commission, and hay would be transported at 25 cents per 100 pounds. I am not familiar with statistics showing the number of orders which the carriers have refused to obey. I have heard it stated, however, on fairly good authority, that between 1887 and 1900 there had been issued against carriers 22 formal orders or decrees, and that of those 22 orders but 7 had been obeyed by the rail- road companies. Now, let us transfer the case to another period of time, and instead of considering 1896 consider what might be done now. The carrier knows, as we know, that the Supreme Court of the United States has said that the Interstate Commerce Commission can say to Mr. Rail- road: "You have done wrong in the past, but neither we as a Com- mission nor any other body outside of Congress can prescribe the rate for the future. No court can say anj'thing to you about what rates you shall charge on or after this or any subsequent date. You have taken from the pockets of the people an unjust and unreasonable charge, but we can not prohibit you from doing it in the future, because the Supreme Court of the United States has said that we can only determine what was wrong in the past; and while we strongly recommend to you, and in fact order and decree you, to cease and desist from charging this unreasonable rate, yet we can not compel you to do it." Well, what would we all do under those circumstances? The father says to his little boy: "Boy, you were wrong in telling that story." The boy tells another one; and I don't know how it is with most boys, but I know that what I got for doing that when I was a child was 1 got whaled. The Interstate Commerce Commission can say to the carriers, "You are wrong, but we can not whale you. You can keep on and do as you please. I will endeavor to use my best arguments to show you that you are wrong. We have been all through this case, and we have heard testimony for two or three weeks, and we have weighed carefully all the interests involved. We know there is a large stretch of country to be considered and that the amount of the traiBc is enormous, and we have weighed all that, and we do not think that the circumstances and conditions to-day justify your charges in this particular case." But the carrier, or any one of us, would simply say, "If I can get 30 cents I am not going to take 25 cents." It is a business proposi- tion. In fact this entire subject of interstate commerce is more a busi- ness proposition, it seems to me, than it is a legal one. I will agree with anyone that there are certain legal features connected with it, certain matters that constitute a law to be considered,^ but it is a straightforward business proposition, with an eye to the interests not only of the public but to the interests of the carriers. Mr. EichaeOson. Will you allow me to interrupt you there for a moment? Mr. Daish. Certainly. Mr. RiOHAEDSON. According to your theory that you have just been i-c L 3 34 INTERSTATE-COMMERCE LAW. advancing about hay, supposing that you had>the authority, as you ai-e contending now, to have a summary judgment and execution; that is what you are contending for? Mr. Daish. Yes, sir. Mr. Richardson. And then let the appeal go along outside of that. Suppose you had that, and the Commission had fixed the rate at 30 cents, and the railroad were to take an appeal and finally get up to the Supreme Court of the United States, and the Supreme Court of the United States should say that the Commission was wrong. You would have gone on in the meantime, and you had fixed the rate at 25 cents. What would you do in the matter of your error, in case the court was right? Mr. Daish. There is no provision in the fourth amendment for a case of that kind. Mr. Richardson. But common justice would Mr. Daish. 1 am coming to that point. The common justice of the hay case is this, that for thirteen years hay was carried at 25 cents per 100 pounds, and that was one of the arguments advanced before the the Commission, that if it could have been carried for thirteen years for 25 cents it can be continued to be carried at that price. There is no provision, as I take it, in the proposed amendment to provide for the case which you have cited. Mr. Richardson. Then would it not mean this, that you had improperly and utterly without law made that railroad take rates that you could not possibly refund? Mr. Daish. That is right. Mr. Richardson. I thought so. Mr. Daish. But at the present time the law is such that they make us pay rates that they can not possibly refund. Mr. Richardson. One wrong does-not justify another. Mr. Daish. Yes, that is true; but in the case cited it is our ox which is being gored and in the other case it would be their ox that was being gored. The Chairman. Before you leave that illustration you gave, 1 want to ask you what would be ithe difference in the compensation for haul- ing a carload of hay or grain at the rate of 25 cents and at the rate of 30 cents; or 17 cents and 25 cents? Mr. Daish. The minimum weight of a carload of hay is 20 tons, though the maximum is much more; but the average weight is 22,000 pounds, or 11 tons. Figuring, however, on the minimum weight, the freight charge from Chicago to New York would be |60 for a car of hay or straw. The maximum weight for a carload of grain, the aver- age 36-foot car, is 40,000 pounds. At 17i cents that would be |70. At the time the petition was filed the rate was 15 cents, making the rate per car from Chicago to New York on either grain or hay about |60. Mr. Corliss. "What is it now? Mr. Daish. Now it is 17i cents. Mr. Corliss. And that corresponds with the increase made in the rate on hay? Mr. Daish. No; that is, I take it, a winter rate. It was put into effect about October 21. Mr. Eckhart. A published rate? Mr. Daish. Yes, a published rate. Mr. Mann. That is not the rate that they charge. IWTBBSTATE-COMMBRCB LAW. 35 Mr. Daish. "We had something to say on that, subject in the hay case, namely, that the rates on grain were not according to the pub- lished tariff, but less, and I would not want to stand here and say that we proved it conclusively, but from some developments since our hear- ing it has been shown, I think, that certain parties are accorded special rates on grain. Mr. Mann. It w^as admitted in the Chicago hearings recently that everybody was accorded special rates. Mr. Daish. That, I think, refers to certain cities. I doubt seriously if there are, and, in fact, I will state from what I know of the grain business of this city that no cut rates are in force in Washington, nor have there been in five or six years, at least. Now, to come back to this supposed order and decree in favor of the Hay Association at the present time. As I said, the carrier feels that he is not compelled to do a certain thing — namely, to transport hay from Chicago to New York for 26 cents — and just as naturally as he feels that he is not compelled to do it, just so naturally is it human nature — and I do not blame him for it — not to do it. If the merchant can sell his goods for $1.60, he will not sell them for $1.40. If the street cars could get 10 cents. per passenger, they would not sell six tickets for a quarter. There are certain things that dominate busi- ness, and one of those things, aside from what my neighbor may do, aside from straight competition, is some rule of law or action which may compel me to do a certain thing. Now, transfer, by way of supposition again, this decree in favor of the complainants, and presume that this bill which we have been con- sidering has become a law. The order in that case is slightly different, bears at least a different name, from what it would bear to-day, and it takes effect on a particular day, not less than twenty days beyond the time that the order is promulgated. The Interstate Commerce Com- mission, we will suppose, enters its decree and serves it upon the 10th of a given month, and so it will go into force and effect on the 1st of the succeeding month. Presume, now, two things: Either that the judgment of the Commission is radically wrong, that so seriously are they wrong that he who runs, and he who looks over the record, could see that, or that it would not take an attorney or a man of any par- ticular ability at all, but it would take merely a business man, and suppose they are almost absolutely wrong, and ought to know it them- selves, what may the carrier do under this act? He proceeds to the circuit court, shows to the circuit court that this decree is not in accordance with the facts; that it is diametrically oppo- site to what was shown by both parties, to the original proceeding, and that it is utterly and absolutely contrary to the law. Thirty days then intervene, and if it appears to the circuit court within that thirty days that the Commission is absolutely wrong, that the case is anything that I suppose it to be, the circuit court may suspend the operation of that order. Furthermore, suppose some serious change happens, as it may happen, in the shipment of a single article. Take some article that does not move in large quantities, and suppose there was some new method of transporting that, some new way of getting more into a car, the carrier has a right under this act at any time to come for- ward, not only within the twenty days or thirty days succeeding, but fully to the extent of the three years' time for which the order shall be in force and effect, and ask the Commission to suspend or modify 36 INTERSTATE-OOMMEBOB LAW, their decree in a certain case rendered on, say, the lOth day of this month that I have supposed. Suppose,' however, that instead of its appearing that the Commission is radically wrong, that it is a close case, that it is a case about which honest and upright men would differ; suppose it is more a question of judgment, or more a question of belief in witnesses who are very close together, and yet there is a little line, a fine line of division,- and one man will say, "I believe that Smith told the truth," and another will say, "I believe that Jones is talking more honest" — suppose it is a close case. The circuit court would have jurisdiction first, and it would be heard there and then go on up through to the Supreme Court of the United States. Right here, as a broad line of demarcation between the law as it exists to-day and the law as it exists under this method, it will be recalled that it was asked, or practically asked, what would be the status of a charge under the present act. At the present time this status would be 3U cents, because the carrier says, " I refuse to do it at 25 cents." Under the act, presuming, as I have presumed all along, a decree in favor of the complainants, tlie charge must of necessity be 25 cents. Suppose, upon the other hand, that the decree of the Com- mission after the passage of this act is a correct one and in favor of the complainants. The carrier may again go into the circuit court and follow the same line of procedure. There is a third horn to this dilemma, and it prevails all the way through, not only in 1896, but as well at the present time, and would also if the present proposed amendment should become a law. If the shipper proceeds upon complaint before the Interstate Com- merce Commission, and it is decided there by reason of the facts or law that the complaint is not well founded, the shipper has absolutely no remedy before the court in that case. The fact was referred to yesterday that almost all of the cities complain of discrimination against that particular city. There have been quite a number of such cases. Baltimore fears that New York has a better rate. Some of the Southern cities, cities farther south, think that Baltimore has a better rate than they do. Boston thinks that New York is not entitled to her present low rate on grain, because it cuts the Boston people out of the export business. But suppose a case of that kind, suppose the Boston people, for example, say, "We are being discriminated against," and suppose that after a complaint and hearing, extending over f I'om three to five or six months, the Commission should determine that the Boston people are wrong. It is the highest place to which the Boston people can go. They can not appeal to the circuit court, nor the court of appeals, nor the Supreme Court of the United States, nor any other place. It is a peculiar thing that the original act provided for appeals on behalf of the carrier alone, probably a wise provision. But suppose that the Commission should decide in favor of the complainant — and I have considered the term "complainant" all along to refer to the shipper or dealer and not to a railroad, although fliere are cases, you will recollect, before the Commission where one carrier. has brought suit against another — it seems to me that unless the Commission should be radically wrong it would be to the best interests of all of the parties concerned. It was asked what has been the effect of the present interstate-com- INTERSTATE-COMMERCE LAW. 37 merce apt. On behalf of the National Haj^ Association— and the board of dii-ectors are well aware of about what I shall present to this com- mittee on this occasion, and the greater portion of the membership have also been notified, scattered though they be — we consider the present interstate-commerce act one of the best acts on the statute books. For the ten ji^ears immediately preceding 1897 there was peace and harmony, but it seems to us that since 1897 there has been more cutting of .rates and, I personally believe, more underbilling, and that the conditions extant to-day in the general shipping world are worse than they were prior to the enactment of this statute simply because of the want of enforcement of the statute. Mr. Coombs. In what way does the cutting of rates hurt the shipper? Mr. Daish. It does not hurt the man who has the rate, but it hurts his competitor. Mr. Coombs. How? Mr. Daish. Suppose, for example, Mr. Bacon to be a shipper from Chicago, and myself to be his confrere or brother on the board of trade. Suppose Mr. Smith in New York desires a little grain — 50 or 100 cars. The published tarifl" is 17i cents. Then suppose that a special rate, for example, be made to Mr. Bacon at 14i cents. Mr. Smith can buy the grain of Bacon, Mr. Bacon can, as we say, split the freight rate, give Smith a cent and a half per 100 pounds advantage, keep a cent and a half for himself, and I can not deal with him. Mr. Coombs. You mean with reference to competition between mid- dlemen that one would have an advantage over another ? Mr. Daish. That is one result. Mr. Coombs. That is about the substance of it. Mr. Daish. That is one result. Mr. Coombs. I asked you because I do not understand these ques- tions much. Mr. Daish. Well, the question of cut rates and advantages comes entirely, or largely, under the head of discrimination. Now, discrimination, as I understand it, in interstate-commerce business is of three kinds: First, a discrimination against a particular article of traffic; second, the discrimination against a particular local- ity, and, third, a discrimination against individuals. To illustrate: I have been referring in this hay case to a discrimina- tion against a particular commodity. Suppose, for example, that the rate on sixth-class commodities from Cleveland to New York is 21^ cents. Suppose the rate on second-class commodities from Saginaw, Mich., to New York is 27i cents. Now, the distance, if I recollect the mileage correctly, from Cleveland to New York is 593 miles, and from Saginaw to New York is 702 miles. It may be — I do not say that it is, though it would seem — that the 6 cents additional for that 108 or 109 miles is a pretty heavy charge; and presuming that one of those charges is too heavy, the other is too light in comparison with the former. That would constitute a discrimination against a locality. The man who had grain or hay or some other commodity at Cleveland for shipment to New York would be enabled to put his commodity in the market at a relatively, less basis, a very much less basis, than a party who had his commodity in Saginaw and wished to have it deliv- ered in New York. ■As for discrimination between persons, which is the third class of 38 INTERSTATE-COMMERCE LAW. discriminations as I have mentioned them, that would be where two parties, to use the language of the act, "under substantially similar circumstances and conditions," two persons in the same town, engage practically in the same class of business, one of them receiving a rate to a certain town of, say, 20 cents, and the other being compelled to pay a rate of 25 cents. The former, as we would say in business, would have the bulge on his competitor. The former would be buy- ing all the grain at this little crossroads because he could pay to his farmer friends a quarter of a cent or a half a cent or a cent a bushel more. The latter, the man who would have to pay the higher rate had better close up his place and go out of business, because he would not be on an equal footing. I do not mean in regard to his talents and his ability to do business, but because of his inability to compete with the other merchant, whether on goods coming out from the city or going into the city. Suppose the case of a dry -goods merchant. Freight is an inconsid- erable thing with dry goods, but suppose that one merchant should be compelled to pay 30 cents a hundred pounds to bring dry goods to his place, and his neighbor, bringing a greater number of carloads than the first man, would be allowed to have it come through at 15 cents per hundred pounds. Manifestly there is an injustice to the first party. The Chairman. Now, suppose the larger rate is a fair rate. Sup- pose that 30 cents is a fair rate to the carrier. The other man gets his goods shipped at 15 cents. He is able to sell that much more, and the public, his customers, get that benefit. Who should complain? Mr. Daish. There is nothing wrong with that, Mr. Chairman, I take it, except the last few words of what you have said, "The public gets the benefit." They do not. My experience is that they d!o not. _ The Chairman. You say the customers of a man doing business get- ting a 15-cent rate do not get the benefit? Mr. Daish. The party who pays the 15-cent rate gets the benefit, as a rule. The Chairman. Do not his customers get it? Mr. Daish. No, sir; I think not. The Chairman. Then, there is no harm done, is there, in the com- petition, or to the competition, of the second man? Mr. Daish. There is no harm to the man who receives the 15-cent rate, but the man who pays the 30 cents must go out of business sooner or later. The Chairman. But if this man who gets the lower rate does not give an advantage to his customers — he sells to his customers just as though he was paying 30 cents — and how does that affect their relative or respective businesses? Mr. Daish. I perhaps should change my remark a little. I do not mean to say that he does not give any of it to the public; but he does not give much. There is just a quarter of a cent or an eighth of a cent or a sixteenth of a cent which may be necessary to split a cargo of grain, and a sixteenth of a cent per bushel is a comparatively small portion of the cargo, and it has been stated by the public press that comparatively a small proportion of the grain goes at the published rates, and so far as I know Mr. Mann. It is openly conceded that the grain rate from Chicago for the last year has not been the published rate, but that evervbody has shipped grain at a less rate than the published rate. There was no preference given to anyone. INTERSTATE-COMMERCE LAW. 39 Mr. Daish. Well, I will say this, that I know shippers in Chicago who are to-day paying the published rates. Mr._ Mann. They may be to-day; they were not yesterday. They have just had an exhaustive hearing on this subject in Chicago, and the Interstate Commerce Commission reported that the special rates were given to anybody and everybody without any preference. Mr. Coombs. I confess my ignorance about these things. Suppos- ing, as you say, for certain things that one man was paying 20 cents for 100 pounds for certain shipments to certain places. Now, there is a discrimination made in favor of some one, and a rate is given to him of 16 cents. Now, if that is put into operation and practiced, as it must be, does not that in itself have a tendency to reduce freights generally all along the line on those particular things, and all along the line would not that naturally be the tendency? Mr. Daish. I think it would, in a measure. There is a general tendency, and has been for a number of years, for freight rates to be reduced. Freight rates, generally speaking, are probably less to-day than they have been for a number of years. There has been a gradual decline. This is shown, in a way, by the decrease of the ton-per-mile rate. Now, this question of cut rates I have referred to The Chairman. If it will not disturb you, I would like for you to make, for the purposes of our record here and for the benefit of the members of the committee, your argument in behalf of your complaint with regard to the hay, as shown by the illustration of the hay and the grain. As 1 understood you, you paid — I say you- Mr. Daish. That is right. The Chairman. You paid $60 per car for your hay ? Mr. Daish. Yes, sir. The Chairman. The grain dealer paid $70 for his car. Now, what is the complaint? Mr. Daish. I argued that case quite fully before the Interstate Commerce Commission. I understand that my argument leading up to that, and the entire case, has not 3'^et been transcribed by the reporter. I can submit that as an entirety or go into the figures at the present time, as the committee may wish. The Chairman. You will have it in a few days? Mr. Daish. I do not care to juggle with figures unless I know posi- tively the basic figures upon which I argue. I might make a mistake with respect to the facts, and I would prefer to submit that in writing, or at least to get some data which I have in my ofiice on that matter. I shall be pleased to submit to-day or to-morrow a written statement covering that subject. I will, however, say this, that while it appears that $60 is the rate for a carload of hay from Chicago to New York, and $70 is the rate for a carload of grain, the carrier transports twice as much grain as hay. That calls for some increased cost. Then when you ascertain the num- ber of cars which will make up a train load, and figure the value of car- rying a train of hay or a train of grain from Chicago to New York, the figures are practically these, that the revenue derived from a train load of grain is about $3,200, while the revenue derived from a train load of hay is $4,100. Just one word- more, if you please, at this time, and then I shall ask to give way to a gentleman here from outside of the city. I wish to 40 INTERSTATE-COMMEEOB LAW. say this in regard to cut rates; cut rates not only affect the individual, not only affect Smith and Jones, competing parties in Chicago, but suppose that the rates from Joilet to Kankakee are practically the same as from Chicago to the seaboard. Suppose, then, that instead of the 17i-cent rate from Chicago to New xork it is made 15 cents, an ele- vator at Joilet and Kankakee and other places paying 17^ cents, the grain will go by Chicago, and these smaller places, even though they may have large elevators, will not do any business. Mr. Mann. Does not the present law absolutely cover the question of cut rates? Mr. Daish. Yes, sir; but it is on the question of enforcement of that, 1 take it Mr. Mann. We have nothing to do with the enforcement of the law. You should address yourself to the Interstate Commerce Commission, which has full authority now to pursue all inquiries in reference to cut rates. Mr. Daish. If you will refer to the recent proceedings in Chicago, in Kansas City Mr. Mann. I refer to the law. You are not asking any change here with reference to cut rates, as I understand. Mr. Daish. I was simply answering the question asked me. The bill does not deal with cut rates. _Mr. Richardson. Let me ask you about the legal procedure under this bill that you are advocating. I think it is important in this mat- ter as to how you proceed in court. Mr. Daish. Yes, sir. Mr. Richardson. As to the rights of plaintiff and defendant. Now, as I undei'stand from you, when the Commission certifies to the civil courts its decision and the rate that it has fixed for the railroads to comply with, the Federal circuit court, if it supposes that the Com- mission was wrong in that thing, I understand that j'our i'^ea is, and the law is, as I understand it, that the Commission can go afterwards and take additional proof, reopen that case, and, if it does not want to take additional proof, then it can right there, on the facts and the evi- dence that it had before, make another order without any additional proof? Mr. Daish. Without any additional proof there may be a modifica- tion of the decree Mr. Richardson. Hold on a minute. It can make another order, and if that order is certified to the Federal court and is vacated it can make another, and so on, and it is ad libitum to annoy that railroad conopany. Ml-. Daish. It is ad libitum to annoy the company, but Mr. Heins, in his I'ecent monograph on that subject, called attention to the slack- ness of the Interstate Commerce Commission in not taking a similar decision before every circuit court in the United States. Suppose that one court has determined that it is wrong, why not submit it to some other circuit court and get another decision, and not abide by the decision of this one man? Mr. Richardson. There is no end to the power of- the Commission to review an order. Mr. Daish. No end of it. Mr. LovERiNG. Are carload rates given on hay? • Mr. Daish. Yes; it is all by the hundred pounds, you understand. Mr. LovERiNG. By the 100 pounds? INTERSTATE-COMMERCE LAW. 41 Mr. Daish. Yes, sir. Mr. LovERiNG. And does it make any difference whether it is in ordinary packed bales or highly packed bales ? Mr. Daish. There is no difference in the rate, whether by the ordi- nary bale, or the so-called Lowry bale, which is used for export. Mr. LovEKiNG. It is so much per 100 pounds? Mr. Daish. Yes, sir; 30 cents. Mr. LoYEEiNG. And how much is the Lowry bale? Mr. Daish. That runs, I believe, 45,000 to 60,000 pounds. It is being used, I believe, in the army service in Cuba and the Philippines, but Qie fiber of the bale is badly torn in the process, I believe. Mr. LovERiNG. The rate of freight is the same? Mr. Daish. Yes, sir. Mr. LovERiNG. You do not get any advantage by its being close packed? . , Mr. Daish. No, sir. I will now yield to Mr. Eckhart, Mr. Chair- man, with the privilege of touching hereafter not only upon the matters that the Chairman has just referred to but also upon some of the constitutional features at a subsequent meeting of the committee. STATEMENT OF MR. B. A. ECKHART, OF CHICAGO, ILL. Mr. Eckhart. Mr. Chairman, I represent the Chicago Board of Trade and the Illinois Manufacturers' Association. I will not attempt to discuss the different features of the bill or whether, if it become a law, it would conflict with the Constitution. I shall assume that the bill as presented, and which is now pending before your committee, has been carefully prepared and, if enacted into law, would be constitutional. That question, I presume, has been fully discussed by the gentlemen who have preceded me and who have given that feature of the subject careful consideration. I will confine my remarks briefly to the evil that the milling industry of this country has been suffering under. I am engaged in the milling business at Chicago. Our complaint is substantially this: The transportation companies for a number of j'ears have been practicing rate discrimination against flour for export in favor of wheat for export. There are about 9,000 mills in this country, scattered over 33 differ- ent States. I believe, according to the United States census of 1900, our industry stands fifth in the value of product, amounting to about $550,000,000 to 1600,000,000 per annum. The transportation companies for the last five or six years have carried wheat from the West to the seaboard very often at an abnor- mally low rate of freight, or, in other words, a secret cut rate. They have carried it at such a low rate of freight that the foreign millers were able to manufacture flour on the other side for a great deal less money than we could afford to lay it down for there. The American miller can hold his own against the world if he is on an equal footing, notwithstanding the fact that we pay higher wages than any other country to our employees; we have never asked for any protection on the part of our Government or any special privi- leges, and we enjoy none. Unlike many other manufacturing interests of this country, we are not protected, and we do not need protection providing our own trans- portation companies, the common carriers or this country, will treat 42 INTERSTATE-COMMERCE LAW. US fairly and put us on an equal footing with the buyers of wheat on the other side. We are also unlike the French millers, who are protected by the French Government to the extent that they are paid a bounty or draw- back for every barrel of flour that they ship out of France, which equalizes practically the tariff that is imposed by the French Govern- ment on the importation of wheat to that country. The Chairman. What is that tariff rate? Mr. EcKHAKT. I do not know that I am prepared now to give you the exact rate, but approximately it is 36 cents a bushel. I expected to look up the correct data before I appeared before your committee to-morrow morning. The Chairman. What is the bounty ? Mr. EcKHART. 1 do not know that I can say definitely, but it is about equal to the amount of the tariff that is put on wheat, Mr. LovERiNG. Is that called a bounty.? Mr. EcKHART. It is a bounty or drawback. Mr. Mann. It is the same as our drawback? Mr. EcKHART. It is the same as a drawback. Mr. LovERiNG. The same as our drawback. But why is it a bounty if it is an amount that has been previously paid ? Mr. EcKHART. Well, I do not know that there is any difference between a drawback and a bounty, because the result is the same. Mr. LovERiNG. A bounty is a free gift out of the treasury of the government, for which it has received nothing in the first place. Mr. EcKHART. Yes, sir; but the effect is just the same on the mill- ing business. Mr. Mann. I beg to differ with you. They pay on flour exported, whether it is made of American wheat or French wheat. Mr. LovERiNG. I understand that, but they can not receive a single franc bounty in excess of the duties which they have paid. Mr. Eckhart. No. Mr. LovERiNG. And they have a system of certification of the pay- ment of that duty, and they can draw against that in making their exports. Mr. Eckhart. That is correct. It is just the same as the iniporta- tion of jute bagging to this country. When we ship out flour in jute bags, exporting it, we get a certain amount of the value of the bag in rebate. Mr. LovERiNG. If we can identify it? Mr. Eckhart. If we can identify it; yes, sir. Now, the evil, as I stated in the outset, that we are laboring under is the discrimination, not so much in the published rate, as in the cut rate, which is given the shipper from time to time, and which is_ in many instances abnormally low, far below what the transportation companies receive for carrying flour, and in effect it practically pre- vents the millers of this country from exporting flour unless they are willing to do so at a loss, and that has been the practice largely for the last two or three years. Many of the millers who have had a trade established on the other side and desire to hold the trade against any competition sell flour at a loss. I have done so myself. I have exported many thousands of barrels at a loss of from 6 to 7 cents a barrel rather than let my trade get away. INTERSTATE-COMMERCE LAW. 43 Mr. LovBEiNG. You consider 5 cents a barrel a good profit? Mr. EoKHAKT. Less than that. Mr. LovERiNG. Four cents? Mr. EcKHAET. We consider 2^ cents a good profit for export flour. The Chairman. Practically, the remedy which you seek' is to require ap additional charge to be made by the railways, by the transporta- tion companies, on wheat? Mr. EcKHART. We desire them to make a reasonable differential between flour and wheat. The Chairman. You said their present rate was abnormally low? Mr. EcKHART. The cut rate. The Chairman. And less than it ought to be carried for? Mr. Eckhart. Yes, sir; less than it ought to be carried for. The Chairman. Now, in order to benefit your industry, you want to compel the railways to charge the wheat shippers a large sum? Mr. Eckhart. Well, no. The Chairman. That is practically what you want? Mr. Eckhart. Not at all. We want them to charge a reasonable differential — that is to say, if transportation companies, by reason of the fact that the cars are much larger to-day, so that they can load 80,000 or 100,000 pounds in a car, where the maximum capacity used to be 30,000 to 40,000 pounds, and because of the fact that the rolling stock is much heavier and their engines larger, they can afford to make a lower rate than they formerly did in transporting the products from the producer to the consumer and to the markets of the world. We desire to have them treat us equitably and fairly as to the differential between flour and wheat. The Chairman. These facilities for movement apply to both classes of shipments? Mr. Eckhart. Yes, sir; to both wheat and flour. The Chairman. How, then, does that answer the question which I put to you ? Mr. Eckhart. It answers it in this way: That it is unfair and unjust to a great industry of this country to compel us to pay a tariff rate of ni cents a hundred on flour from Chicago, for instance, and at the same time to carry wheat on a secret cut rate of 8 or 10 cents per 100 pounds. It practically means confiscation of so much milling prop- erty. We do not care what the rate is, any rate, if it is equal and just, will be acceptable. The average American citizen and manufacturer in the conflict of business life is always willing to run his chances with his competitors on an equal footing, but can not hope to do so when his competitor has been granted a special privilege. The Chairman. Well now. there must be some reason for this remarkable differential that you have spoken of — 17^ cents as against 8 or 10 cents. What is that reason ? Mr. Eckhart. Well, the railroad companies and transportation companies and their agents tell us that it costs a little more to carry flour than to carry wheat. The question was fully gone into a few years ago before the Interstate Commerce Commission at Chicago, and after the evidence was heard on both sides the Interstate Commerce Commission finally concluded that it possibly did cost a little more, but the differential was nominal. While it is true that it costs a little more to discharge or unload a car of flour in New York than a car of wheat, because the wheat is sometimes unloaded into an elevator from the car, there is a lighterage charge which practically equalizes it. 44 INTERSTATE-COMMERCE LAW. Then the railroad companies also contend that the millers do not load the cars as heavily as they would load them with wheat. That question we controverted, and showed conclusively that when they fur- nish us large cars we load them, as a rule, to the maximum capacity, for it is cheaper for the miller to load a large car than a small one, as a shipper invariably fixes up his own car, cleans it out and places it on the track, and loads it; whereas, in case of wheat shipment, the rail- way company is obliged to furnish inside car doors and clean it and fix up its own cars. The Interstate Commerce Commission, after considering the question at the hearing at Chicago, determined that the railway companies were justified in making a slight differential between the shipment of flour for export and wheat for export, and they made such a recommenda- tion, but the transportation companies paid but very little attention to the recommendation, and continue to make cut rates to shippers of wheat. The Chairman. Is there not some other reason, must there not be some other reason, where these slight differences of cost exist, and where you find such an extraordinary differential as you have spoken of? Mr. EcKHART. Yes sir; but we have no specific information upon that point, except a general idea. The Chairman. What is your opinion? Mr. EcKHAET. I have an opinion, derived from information furnished by the transportation companies themselves, when they were asked why they made such a difference. The information was invariably this: "Our competitor has taken 100 or 150 carloads of wheat to transport to New York, Baltimore, or Philadelphia. We know that he has got that wheat, and we know that he did not get the tariff rate. We are not going to let our competitor transport all of this merchan- dise to the seabord; we are going to get some of it," and invariably they would meet their competitor, and they would usually say, "If we were not obliged to make this cut rate in order to get a portion of this merchandise to carry we would not make this low rate." The Chairman. Does not that reasoning apply to the flour as well as to the wheat? Would not the same inducements operate upon the railway in the transportation of one kind of freights as well as that of the othpr? Mr. Eckhart. That has not been our experience. •The Chairman. What is the reason of that? What is your idea of the reason? Mr. Eckhart. The reason of that, so the transportation companies tell us, is that they can get a large volume of wheat to transport — say 100,000 or 150,000 bushels, which is a large tonnage— and their agents are after large tonnage; they want to make a showing for their several companies. That is the argument they advance. ; The Chairman. Now, while that argument might apply to Chicago, it certainly would not apply to Minneapolis, would it? Mr. Eckhart. Well, yes. The Chairman. Because undoubtedly there is a great deal more flour to ship from Minneapolis than wheat to ship out. Mr. Eckhart. Yes; but Minneapolis has suffered in common with all the other sections of the country from that very same cause. They have been cut out as well as the mills in Iowa, Illinois, Nebraska, and INTEESTATE-COMMEROE LAW. 45 Kansas, or any other wheat-growing State. They have the same com- plaint to make in that respect. Mr. LovERiNG. Is there any difference in the hazard attending the shipment of flour and wheat? Mr. EcKHART. No; I think not. 1 think the loss in transit of flour is less than of wheat, because there is no leakage. . There is some little loss in transporting wheat because of the leaky cars, which does not apply to flour. Mr. Mann. Can you tell us what is the relative cost of transporting wheat and flour by lake from Chicago east? Mr. EoKHART. What do you mean, the tariff? Mr. Mann. Yes; the relative cost. What is their rate from Chicago by lake? Mr. EcKHART. The rate on wheat I think they have fixed at 15^ cents. Mr. Mann. By lake? Mr. Eckhart. By lake and rail; and 17i cents all rail, to take efl'ect on April 15. Mi". Mann. What has been the usual cost of transporting wheat by lake from Chicago to Bufi'alo ? Mr. Eckhart. That has varied from 1^ cents per bushel to 4 cents. Mr. Mann. How about flour ? That is what I want to get at, the pro- portionate cost. Mr. Eckhart. Flour has been a little higher. It has been probably one-half to one and a half cents a hundred higher. Mr. Coombs. Does the valuation make any difference ? Mr. Eckhart. No, sir; I think not. There is not much difference between the finished product and the raw material; that is, the mate- rial of the class of flour that we usually export. Mr. Mann. I had a letter from Mr. Purdy the other day on another matter. He was the manager of the steamhip company who endeav- ored to open a steamship line from Chicago to Europe. In that letter he stated to me that it was not an uncommon practice now for ocean vessels to carry wheat as ballast, and carry it over and back, and they were glad to carry it, because if they did not they would have to go to the trouble of putting ballast in their boats. Does that affect the freight rates? Mr. Eckhart. I presume there have been instances and that there was a time last year when they carried wheat across for a nominal freight rate, equal to about a penny a bushel. Mr. Mann. Would that have any influence upon this abnormally low freight rate ? That is what I want to get at. Mr. Eckhart. I do not know. That would, of course, affect us in a measure, but that can only happen once in a great while. It is not a general practice at all. Conditions may be abnormal, and in the course of four or five years such a thing as that may transpire. Mr. Coombs. Now, is this true that a disadvantage to the miller would be a proportionate advantage to the wheat raiser ? Mr. Eckhart. No; I think not. The ordinary wheat raiser, the farmer, as a rule, likes competition in the purchase of grain, like everybody else. The flour mills are scattered throughout 30 different States of the Union where wheat is raised, and they are bidding against each other for this wheat. Mr. Coombs. Apropos of that, he, by getting cheap rates, gets into 46 INTEBSTATE-OOMMEECE LAW. the European markets and gets a better market there, because you complain that you have to compete with the millers in Europe. Mr. EoKHAET. Yes. It is also true that the American miller can manufacture all of the surplus wheat of our country into flour and export it to Europe in the shape of flour. In fact, the milling capac- ity is large enough to grind up all of the wheat that we raise in five months of the year if the mills are all run to their full capacity. The foreign buyers must necessarily have either our flour or our wheat to mix. The wheat that they receive from India is somewhat of an infe- rior quality and often is very dirty. It requires to be washed before it can be ground into flour. It is not so glutenous as our own wheat. It contains more starchy substance. The wheat that they get from the Argentine is of a similar character, and that from Russia is also much inferior to our own. They must, therefore, of necessity have either our wheat to mix with their wheat in grinding it or our flour to mix with their flour in order to get good results; and the practice has been heretofore, until the transportation companies took it into their heads to carry wheat much cheaper than flour for export, for the foreigner to buy our flour and mix it with their flour in order to give it strength, and as I started to say, they will take our surplus and enable us to grind it into flour here, so that we can afford to pay the transportation companies a reasonable freight rate for transporting it, and also enabling the transportation companies to get the carriage to the mills scattered all over this country — coal, fuel, oil, cooper stock, and bagging and other material necessary for the manufacture of this great volume of flour. They would also have the carriage of the ofi'al which is cai;ted by the railways from the West to the East and distributed all over the United States. All these things inure, not only to the benefit of the American miller, but the American laborer, American capital, and to the transportation companies. Every dollar's worth of merchandise that we manufacture is of course an advantage to our citizens. Now, we are perfectly willing that the transportation companies shall have a reasonable rate of freight, and we fully agree with them that there should be some properly constituted tribunal to protect themselves against each other; and we also believe that where the con- ditions are such that a great industry like ours is affected by reason of the practice of discriminating freight rates there ought to be some impartial supervision exercised over these rates, and some one who has power to enforce its finding, after hearing the facts on both sides, should determine what a just and equal rate between the shipper and carrier shall be. The Chaieman. Can you give the committee the difference in the selling price of wheat in France — American wheat — as compared with the India wheat? You have spoken of the India wheat as inferior. Mr. EcKHAKT. Yes, sir; approximately. The Chairman. How much more does our wheat bring in the markets of France, approximately ? Mr. EcKHART. I do not know as to France, but our No. 1 Northern American wheat commands in the United Kingdom usually a price higher by two to three cents a bushel. Of course, it depends upon the condition of the market in Liverpool. That is, the supply and demand of the two varieties of wheat. INTEESTATE-COMMEBCE LAW. 47 The Chairman. You have spoken of the competition of the French miller with yourselves. Mr. EcKHAKT. I simply did that as an illustration as to how France protects its milling industry. The Chaikman. We had a gentleman here before us the other day upon another subject who made the statement that there was practi- cally no French flour made from American wheat in the London market. Mr. EcKHAKT. In the London market? The Chairman. Yes. Mr. EcKHART. Well, I do not know as to that. I am not sure; but I am quite sure that a great deal of their flour goes into Holland, and Holland is one of our markets. The Chairman. I want to pursue that matter a little further. What is the difference in value between American wheat and Russian wheat? Mr. Eokhart. The American wheat commands a higher price than Russian wheat. The Chairman. Can you give us the figures on that? Mr. Eckhart. I should say, approximately, from li cents to 2 cents a bushel. The Chairman. The Argentina and India wheat is lower ? Mr. Eckhart. Yes, sir; they are lower. The Chairman. Than the American wheat? Mr. Eckhart. l'"es, sir; they are lower. I do not know what the difference is between India and Argentina wheat. I think the India wheat is perhaps a little better. The Chairman. Those are the three countries that are our principal competitors in wheat ? Mr. Eckhart. Yes, sir. Mr. LovERiNG. Do you know if the Canadians import any of our wheat? Mr. Eckhart. From this country to Canada? Mr. LovERiNG. Yes. Mr. Eckhart. No, sir. Mr. LovERiNG. None at all? Mr. Eckhart. No, sir. Mr. LovERiNG. They do not grind it? Mr. Eckhart. No, sir. The Chairman. The hour of adjournment has arrived. You will have the floor to-morrow morning if you would like to continue. Mr. Eckhart. Thank you. Thereupon, at 12 o'clock m., the committee adjourned until to-mor- row, April 11, 1902, at 10.30 o'clock a. m. Friday, April 11, 1902. The committee met at 10.30 o'clock a. m., Hon. William P. Hepburn in the chair. The Chairman. If it is the pleasure of the committee at half past 11 we will go into executive session to take up some matters that are waiting, if we have a quorum here at that time. Mr. Daish. I would like to inquire, Mr, Chairman, if the matter regularly set for this morning, continued from Tuesday, would be 48 INTERSTATE-COMMERCE LAW. likely to take precedence— whether the Mobile matter would care to take precedence — in this matter? The Chairman. No; we will take that up later. ^ Mr. Daish. Then I will yield the floor for the time being to Mr. Charles England, the Baltimore representative of the National Hay Association, and one of the committee to whom I referred yesterday, Mr. LovEEiNG. There is one gentleman here who would like to get away and would like to be heard now. Mr. Mead, of Boston, is here and if there is no objection — — Mr. Daish. We have no objection whatever to his being heard now. The Chairman. How long a time would you desire? Mr. Mead. Not more than ten or fifteen minutes. The Chairman. Very well; I will call your attention to the time in ten minutes. Mr. Mead. I think that will be sufficient. STATEMENT OF MR. GEORGE F. MEAD, OF BOSTON. Mr. Mead. Mr. Chairman and gentlemen of the committee, upon the bill to amend the interstate-commerce law 1 appear before you as representing three business bodies— representing city, State, and national organizations. The national organization is the National Com- mission Merchants' League of the United States. That is composed of constituent bodies from 23 or 24 of the largest cities of the country. At their convention at I'hiladelphia in January they passed and adopted resolutions asking this committee to grant to the Interstate Commerce Commission such power as might enable them to enforce their findings. The second body is the Boston Fruit and Produce Exchange, with 350 members, who have also asked, by a petition to their Senators and Representatives here, that requisite power may be given to this Com- mission that they may be able to enfore their findings against these unjust and exorbitant charges. The Massachusetts Board of Trade, which is made up of 41 different ' boards of trade in the State of Massachusetts, also favors this measure, believing that the question is a vital one to all. The National Commission Merchants' League and the Boston Fruit and Produce Exchange are made up of men who deal largely in food products and perisTiable products, and there is no class of merchants in the country to whom this matter of rates appeals more, and to no class of merchants in the country is the right decision of the question so vital and all important to the successful prosecution of their busi- ness. The Interstate Commerce Commission stated recently that the freight rate determined to a great extent who shall transact the business, and where it shall be done, and who shall handle the goods. So it is important to this line of business, and we feel that at the present time, without the power to enforce their findings, they can not be of substantial benefit to the business community. We realize that since 1886 that Commission has been of benefit, and during its first years was of great benefit to the commercial' interests, but since the decision was given that they have not the power to enforce their findings we find that the help rendered to the busi- ness community is small indeed. We had a concrete example of that in Massachusetts in 1890, when rNTEESTATE-OOMMEBCE LAW. 49 the Boston Fruit and Produce Exchange brought a suit before the Interstate Commerce Cfommission, and the hearings were thorough and the subject was gone into very carefully, and the findings of the Commission were to the effect that "the gist of the present complaint is that the rate on peaches from the Delaware district to Boston is unreasonably high and oppressive, and the fact being so found a reduction is ordered." There was no question about the high charges and the poor service given to us at that time, but the result was that the railroad paid no attention to it whatever, and, although the decision was in our favor, it was a fruitless victory. That was in 1890. There were three com- missioners at that time— Veasy, Morrison, and one other whose name I do not recollect at the present time. The Chaikman. You say that no attention was paid to that decision ? Mr. Mead. No, sir; no reduction was made, and they practically ignored the findings of the Commission. Under those circumstances, Mr. Chairman, we find that the business men are loth to prepare a case and bring it before the Interstate Commerce Commission, feeling that whatever the decision may be, even if it is in their favor, no dis- tinct advantage or gain can come to them unless the railroads choose to follow out the findings of the Commission. The Chairman. What was the rate complained of? Mr. Mead. The rate was excessive and the service poor. The Chaiejian. What was the rate complained of ? Mr. Mead. The rate was on carloads of peaches coming from the Delaware peninsula to Boston. Do you mean the amount? The Chairman. Yes. Mr. Mead. That I do not remember. The Chairman. Is the rate the same now? Mr. Mead. No, sir; the rate has been lowered since. . The Chairman. It has been lowered ? Mr. Mead. Yes, sir. The Chairman. What was the defective service complained of? Mr. Mead. It was delay in taking the fruit from the New England Kailroad and bringing it to Boston over the New Haven road instead of giving us New York and New England delivery. After that the legislature made an investigation as to the New York and New Haven Railroad. The Chairman. Has the complaint been reinoved since? Mr. Mead. To a certain extent, but not to the extent of the findings of the Commission. We have in Massachusetts a railroad commission which has simply the power to recommend, but its recommendations are not mandatory, but it so happens that in the State of Massachu- setts I think that has always been equivalent to a mandator}' order, and that in no case have the findings of the State railroad commission- ers been ignored by the railroads; but we do not find that outside of Massachusetts, and recently the State of New York, as I think you know, has been considering that mandatory powers be given their rail road commission. We feel that at the present time the distinctions and the rebates that are given to these larger bodies act as a very unjust and very unfair handicap to the business men at large. The case that we brought before the Commission was fully heard and the final hearings were here in Washington, and the Pennsylvania Eailroad was the line upon which most of that freight originated and i-c L i 50 INTEESTATE-OOMMBKCE LAW. they decline, as the result of that finding, to make any reduction what- ever. We feel that Congress, having passed the interstate-commerce act, thereby created this Interstate Commerce Commission, has exer- cised a limited supervision over the railroads of the country, and we feel that that ought to be carried to its conclusion, that is to get any real practical benefit from it. In other words, the railroads are pub- lic-service corporations. We realize that there are only two ways to control public-service corporations, either by competition or by supervision, and as you gen- tlemen well know, the matter of competition would not obtain in the railroad circles, that while in competition outside of that, when one or the other company is driven to the wall, that ends it; but not so with the railroads, because under the guise of a receivership they can go on and inflict incalculable injury upon the other lines, and we feel that the Government is the proper power to exercise supervision over these public-service corporations. Of course, you are familiar with the findings and the reports of the Interstate Commerce Commis- sion. Railroad managers have made no attempt to conform their practice to the spirit of the law. In the report for 1890 it says: It is universal experience that capital takes advantage of competition, and if public transportation can be bought and sold like a commodity, the largest purchaser will some of the time, if not all .of the time, get the bfest terms; while the smaller dealer, and the man of moderate means, will find that he is being discriminated against, and what is most unfortunate of all, these discriminations favor the few and oppress the many. We know, Mr. Chairman, that through the rebates given to large corporations, they are enabled to diive out the men of smaller means. Something is being said just at the present time, and I believe that a Massachusetts man has introduced something along that line, of investigation of the beef trust, so called. Now, they have for years confined their business largely to the beef business, but at the present time they are going outside of that and taking in food commodities of diiferent kinds, butter, cheese, eggs, poultry, so that they propose to get, as it wei-e, a monopoly of the food products. They make their own prices in the West, and I know from a bit of personal experience that I had last vear they go into Western cities where a man has built up a trade in the last fifteen years, they go in there and say to that man, "We want your business. We will give you a certain amount of money to work for us, and if that is not agreeable to you we will put a man here and drive you out of business;" so that they control the products there. The Chairman. That is a very astonishing statement to make in a free country in regard to free white men. What evidence have you to substantiate that statement? Mr. Mead. When I was in the West in January last I went in towns there where they simply stated to me that those men come in there and make that statement to them. The Chaikman. Will you give us the names, so that we can pursue that investigation ? Mr. Mead. I can give you names. The Chairman. We hear a great many similar charges of a similar character to that. If they are true — and of course I do not mean to intimate that you do not regard them as true — the public ought to rNTEKSTATB-COMMEECE LAW. 51 know it, and somebody ought to take the responsibility of making the statement in such a way that we can secure a public knowledge of the facts, and the matter be brought, if nothing else, to the attention of the grand jury. Mr. Mead. I realize, Mr. Chairman, that you desire specific The Chairman. Of course I do not want to embarrass you, but if you can do that without any detriment to yourself, if you are willing to take the responsibility of it, we will investigate a matter of that kind. I know there is not a member of this committee who would not insist upon following up a statement of that kind, and on putting the responsibility upon the men who have attempted to use a statute of the Federal Government for such oppressive and tyrannous purposes. Mr. Mead. I will endeavor to give you specific cases. I have been through the Western States where that method of getting control of the products is used, and, of course, they will endeavor to cover it up as well as possible; but what I say is this, that they go there and secure control of these products, and then their rebates and their discriminiS^ tions — their goods being carried in their own refrigerating cars^give them a distinct advantage over an ordinary business man. In talking with the trafiic agent of a railroad a short time ago he said, "We have 450 cars a week from such and such a company, and even if their requests to us are somewhat unreasonable we simply have to acquiesce, because of the amount of business that they do." The Chairman. Will you give us the name of that railroad ofiicial ? Mr. Mead. The official I do not know that 1 ought to name to you. I do not know that I ought to give you the name. The Chairman. You see what the difficulty is. There are many men who give attention to the subject who believe that the law is ample for effecting a remedy to every evil that you complain of as it is now; that the law is ample, and that gentlemen like yourself, who have a knowledge of the facts, will not give the information to those whose duty it is to enforce the law. The law can not enforce itself. It must be done through the medium of the courts, and if you gentle- men who know of these infractions, who have the proof in your own hands, refuse to use it, " What better," many people say, "will be the conditions if additions are made to the law?" Somebody has got to execute the law. Of course, I do not want to embarrass you, if you do not desire to give the names of these persons, but if you will give them I think this committee will see that proper j)ublicity is given. Mr. Mead. You see this specific charge that I have mentioned was made in conversation with this traffic manager when we were complain- ing of existing evils, and in the course of conversation he said, " We have to extend courtesies, and you can readily see how. that would be, with this company giving us 450 cars a week, that, figured into a year, is a very large amount of business.*' The Chairman. Did you understand from his use of the word— he used the word "courtesies" or "favors," did you say? Mr. Mead. I could not recollect his exact language, but what he sought to convey to me was that a company giving them 450 cars a week; could insist that they should give them some accommodations and some favors that would not be accorded to the ordinary shipper. The Chairman. Did you understand that they gave their favors or 52 INTEKSTATE-COMMEBOE LAW. discriminations in the way of rebates from tiie charges which they made to other people ? Mr. Mead. No, sir; we were not discussing then the matter of rebates. It seems to me that has been thoroughly covered by the recent reports of the Interstate Commerce Commission. They reported that discriminations were made in favor of these refrigerator- car companies. We think that the amendment which is before you should give to the Interstate Commerce Commission proper authority, not to fix rates primarily, but after a fair and impartial investigation has been had, and it is shown that unjust conditions exist and that rebates have been given, under those conditions we feel as though some authority should be given to the Commission to enforce their findings. Of course, that matter can be covered entirely by published tariffs. If they are published and lived up to, the business community is placed upon a level. But, going back to what I was speaking of before, the getting control of the products of the West, they have an opportunity to brmg them here in their refrigerator cars, and poultry can be brought in the beef cars. It was stated to me last week in Boston that where they had a large shipment of poultry that it was sold inadvertently to a dealer on the market who went out and bought it, 50 or 100 boxes of poultry, at the market price,' and the manager seemed very much wrought up over it, and said that he would rather that it had been sold at half a cent less to a retailer than that it should have been sold to another dealer; which shows that they are seeking to build up a business with the retailers and the hotels. So that we feel that the business men are being at the present time subjected to unfair conditions, and we hope that relief may be given to us, because if those great corporations who have these rebates can buy their goods in the West and ship them to the East and sell them prac- tically at cost, and make a profit that the local man can not, he will be driven out of business. They simply want you to make the interstate- commerce law so that it will give them the power so that all the business men and dealers of the country will be placed upon a level. We do not feel that it is the case to-day. Whether by the Corliss bill, or whether under a bill that shall be drawn by this committee, we simply ask for that power. The board of trade indorsed specifically the Cor- liss bill. The other parties to which I have alluded did not. They simply prayed Congress to pass special legislation such as might be necessary to give the Interstate Commerce Commission power to enforce their findings. Mr. Mann. You say that the refrigerator people, Swift & Co. , aad Armour & Co., and Hammond & Co., are shipping large quantities of poultry? Mr. Mead. Yes, sir; this year they have done so. They have taken on the poultry, egg, and butter business and have put vast quantities into storage in the West. They control, as you know, refrigerator plants all over the West, and also have put large quantities into storage in the West — cold storage. Mr. Mann. Where do they get the poultry and eggs? Mr. Mead. They have gotten them from the West by making con- tracts with some shippers— shippers who ship the highest grades of Eoultry; they would endeavor to get them to work for them. They ave bought out their business or taken over their business wherever INTEESTATE-OOMMEEOE LAW. 53 fchey could, and induced the man carrying on the business to go to work for them. In other cases, with some of my own shippers, they make a contract with the man who has a business there, agreeing to pay hiin half a cent a pound advance on all poultry he takes in. They adopt different methods to meet the different conditions at the different cities and towns. Mr. Mann. They pay a little higher price than an ordinary com- mission man does? Mr. Mead. Yes, sir. Mr. Mann. And they put these things in cold storage and keep them until the proper time for shipment? ■ Mr. Mead. Yes, sir; and it is a profitable business. Poultry is higher this year than for many years before, and eggs the same way. Mr. Mann. And when they take it east to Boston and Massachu- setts they want to sell it directly to the consumer? . Mr. Mead. Yes, sir; they are seeking to push aside what we call the ordinary commission man, the middleman. We thought that it was a strange statement for a man to make, that he would rather sell his poultry at half a cent less to retailers than for a fair price to a man who would buy 60 or 100 boxes at a time, and that illustrates the conditions. Mr. Mann. They are endeavoring to eliminate the cost of com- mission ? Mr. Mead. Yes, sir; and las you know, they have houses in all the larger cities throughout the country. Mr. Mann. You think the interstate-commerce law ought to be amended so that the commission men would be- protected against them ? Mr. Mead. Yes, sir; that is the pith of what we desire to accomplish. We think that running their refrigerator cars and lines as they do, they have a great advantage. Mr. LovEEiNG. Who owns those cars? Mr. Mead. Swift & Co., Armour & Co., Nelson Morris & Co. Mr. LovERiNG. Are the railroads obliged to carry those cars whether they want to or not? Mr. Mead. Yes, sir; thej' are. That saves them the cost of equip- ment, and they pay those car companies three-quarters of a cent mile- age, I understand. I have not any definite knowledge as to that. Mr. LovEKiNG. Do you understand that any man can put on a refrigerator car and compel it to be carried ? Mr. Mead. A great many are to-day, and many of the smaller con cerns are doing that. You frequently see in going through these smaller towns packing houses who have their own cars of various kinds. They get a mileage from the railroad. I understand that the Santa Fe Railroad this year is taking steps to provide its own cars and thereby throw out of service the 6,000 cars now running on that road. Mr. LovEBiNG. Will they throw them out when they get their own service ? Mr. Mead. That is the statement in the papers. Of course, in the California orange trade there are thousands of cars. I understand that lately Swift & Co. bought out the C, F. and D. Company, and that is now merged into Swift & Co., or it may be Armour & Co. Mr. LovEKiNG. Would not the railroads carry cheaper in those cars than in their own cars ? Mr. Mead. I do not know but what that is true. ^^ INTEESTATE-OOMMEECE LAW. Mr. LovEEiNG. Is it not reasonable to suppose that that would be Mr. Mead. Yes; they would save the cost of the cars and the main- tenance, and that is why they can pay them three-quarters of a cent. Mr. LovEKiNG. Is not that a sufficient reason why they make lower terms and rates with those people? Mr. Mead. Yes, sir; but at the same time the rate ought to be made the same. They cap pay the car company a rate of three-quarters of a cent a mile; but whatever mileage they do pay them, that will save them building the cars and save them some cost; but the open rate should be the same to all shippers. Mr. Mann. Is it not a fact that the open freight rate, eliminating' any special rate, is the same to the shippers in cars owned by them^ selves as it is to anyone else, and the only difference is that the rail- road pays to the owner of the cars the mileage for the use of the cars and that is all ? ' Mr. Mead. Yes, sir. Mr. Mann. That is the way the operation is carried on? Mr. Mead. Yes, sir; although I know in some cases they pay the icing charges direct to the car company. I think in the peach busi- ness they pay the freight to the railroad and the icing charges to the car company, but sometimes the railroad collects both charges. Mr. Coombs. In reference to the shipment of California fruit, is there that rebate of which you have spoken which pertains to the shipment of poultry and beef in the West? Mr. Mead. I am not familiar with that, because we do not handle any California fruit. Mr. Coombs. You do not know about that? Mr. Mead. No, sir. Mr. Coombs. Do you know what cars they are shipping now — who own those cars? Mr. Mead. The C. F. and D., Nelson, the Armour Company, and the Swift Company. I think that the Swift Company has recently acquired the C. F. and D. The papers have stated recently that the Santa Fe road was building a number of thousand refrigerator cars, and that another year they would carry the freight in their own cars and do away with the cars belonging to these private individuals and companies. I think, Mr. Chairman, that covers the ground that I had in mind — the fact that as public-service corporations these railroads should be subjected to supervision, and that will control where competition will not. We would not think in any one of our cities where we had street railways and electric lighting service of letting another company come in except under proper regulations, and it must be shown in a case of that kind that the public convenience requires another company. We do not want poles duplicated, and streets dug up, and things of that kind unless the other company is needed, because otherwise it will be the two competing companies, and one would buy up the other, and the company would have to pay an increased cost on account of the plant taken over and new securities issued, and it seems to me that should be the attitude of Congress toward the raUroads. I thank you very much, gentlemen. INTEE8TATE-C0MMEBCE LAW. 55 STATEMENT OF MB. CHARLES ENGLAND. Mr. England. I am here as a representative, with Mr. Daish, chairman of the committee of the National Hay Association, to advo- cate the present bill, which you are now considering. The National Hay Association is distinctively a business men's organization. It is more national in scope, perhaps, than any other organization in this country. Its membership amounts to between 750 and 800, residing in all the principal producing States of the Union. The production of hay, its value, its importance, is very generally overlooked, and I have only to remind you that the production of hay in the United States in 1900 was about 56,000,000 tons, and the value about $450,000",000. Those are figures from the Department of Agri- culture. It is of more value than the wheat crop, the oat crop, or the rye crop, and is second only to the corn crop. The crop of corn in 1900, which was a phenomenal crop, was about 58,000,000 tons. The same year there were over 50,000,000 tons of hay produced. We have been discriminated against, and the point which I want to make now is that hay has been discriminated against as in favor of other articles, other commodities; that because, of the recent classification, known as No. 20, issued by the classification committee of the railroads, which went into effect on January 21, 1900, hay was changed from sixth to fifth class. It had been in the sixth class, with the exception of 'a few months for, I think, ten or twelve years. There had been no complaint as to the fairness of that rate. The railroads had been glad to carry it and glad to receive it. But most arbitrarily and, we think, in a most unfair manner, the notice not being sufficient for any man to adapt his business to changed conditions, that rate was changed. The National Hay Association protested, but without effect, and after it had been given six months' trial the association again went before the classification committee and showed this discrimination and its bad effect, and that it was injuring the business, and we were received almost with indifference. Since that time the matter has been taken before the Interstate Com- merce Commission, and the case is now pending before them, but we fear that under the decision of the Supreme Court of the United States they will not be able to effect any remedy for us, although we think we have shown them the fairness of our contention. Mr. Chairman, the question was raised here yesterday, or the day before, as to whether these rates, these discriminations, affected the farmer. I think I can show you in regard to hay that they do. Out of our crop of hay of 56,000,000 tons the States west of the Mississippi River, including Wisconsin, produced about 26,000,000 tons, very nearly one-half of the hay crop. Wisconsin, Minnesota, Iowa, Mis- souri, Nebraska, South Dakota; Iowa leading with a crop of about 6,000,000 tons. Those are figures from the Department of Agricul- ture. They do not refer to wild grasses or pasturage, and to remind you of that, the great State of Texas is only credited with a hay crop of 480,000 tons, while the small State of Maryland is given a crop of 380,000 tons. „ , o. . ^ t The Chairman. How much of that hay from the State of Iowa goes to markets outside of the lines of the State? 56 _ INTERSTATE-COMMBBOB LAW. Mr. England. We have not those figures. Those would be impos sible to obtain, as to exactly the disposition of the crop. The Chairman. Take the 26,000,000 tons that are produced west of the Mississippi River, including Wisconsin, as you say^what has gone East orgone to those markets of all of that quantity? Mr. England. I think in the last two years not one ton of that hay has come East. When I say East I mean the Easter© seaboard markets. That is what I was coming to. Taking this hay from the sixth class and putting it in the fifth class increases the freight on hay from $1 to $2.60 a ton, according to the distance of the haul and the location. Prior to that we in Baltimore frequently brought hay from west of the Ohio River. We shipped hay from Ohio and Illinois and Wis- consin, and all the Western States. 1 have been in the hay business for well on to twenty years, and prior to this time we considered lUi- nois and eastern Iowa our best sources of supply, but in the last two years I have not handled a carload of hay from Illinois, and very little from Indiana, and our sources of supply are Ohio and southern Indiana. The Chairman. Is that the result of the increased railroad rates, or is it the result of the higher price of beef cattle which induces the farmer to put all of his hay into his cattle on his farm? Mr. England. Well, I believe that it is the result of these high rates. The Chairman. Is it not true that with cattle at 5 cents and 5^ cents a pound on the farm that hay is worth on the farm from $16 to $17 a ton to the farmer. Mr. England. That is a question I could not go into, not knowing anything about that business. But we all know that there has been a great increase in the cattle raising all through the country. At the same time, we know that, taking the prices of hay in the State of Iowa — perhaps not to-day — this nas been a peculiar year because of the drought through the South and West, when there has been an increased demand for hay — but had the old rate been maintained we could have brought hay from those States under many conditions. Hay is being exported to-day from our ports to Europe. There has been a better demand for our hay this year than for many years before. Owing to the war in South Africa the English army has been obliged to carry hay from Liverpool and Belfast and Cardiff to meet the demand, and if we had had the old rates to-day, which, as I say, were %\ to $1.50 less than those of to-day, we could have exported much more hay than we have been doing, and in that way the farmer has not been able to market his hay and get a price for it, and we have been cut out of that business. Mr. Mann. Has not there been a shortage of hay in Illinois and Iowa during the past two years ? Mr. England. I do not know about that exactly, except for the crop of 1901, and the crop that Illinois raised in the year before. The figures of the crop of 1901 were 63,000,000 tons, according to the original estimate. The crop preceding that, on which I am basing my statement, was 56,000,000 tons. Mr. Mann. How was it three or four or five years ago ? Mr. England. Why, it has ranged from 45,000,000 tons up to, I think, about 56,000,000 or 57,000,000 tons. That is going back to a time of ten years ago. The crop of Illinois in 1900 was 2,350,000 tons. INTEESTATE-COMMEKCE LAW. 57 Mr. Mann. How has the price been on hay for the last three or four yQars ? Mr. England. With the ordinary market fluctuations from time to time, it has averaged probably a dollar and a half a ton, in the last two years, higher than it was, taking the average of fifteen years before that. The price has been a little better. It has had to be • better at the seaboard to meet this advance in rates. Mr. Mann. Take the Chicago market. That is not aflPeeted by these conditions ? Mr. England. I have not those figures definitely. I would not like to express merely my opinion, but we have watched the Chicago mar- ket from time to time and we have not had any opportunity in the last two years to buy hay there and bring it here. Heretofore we have been able to do it, but lately we have not. Mr. Mann. This rate that you speak of is from Chicago and points east Mr. England. Yes, sir; this rate refers to all points in that terri- tory that I have mentioned. Mr. Mann. I say the Chicago basic points. In what class is hay in the Western classification? Mr. England. I do not know as to that. Mr. Mann. You say that hay now is in the fifth class in what is known as the official classification; that is, east of the Mississippi River? Mr. England. Yes, sir. Mr. Mann. How is it in the Southern classification? Mr. England. We do no business in the South. We do not know about that. This refers to the classification north of the Ohio and Potomac rivers. But, Mr. Chairman, we have stated that discriminated against in favor of other commodities. The question was raised here about the capacity of the cars having some effect on the question. Now, I have brought with me to-day two freight bills, which will probably better illustrate it than any other matter, one for a car of hay and the other a car of oats, shipped from the same point by the same shipper in Michigan to the same party in Baltimore, coming into Baltimore over the Pennsyl- vania line, one of the carloads delivered to a local elevator, and the hay delivered to the terminal warehouse, the hay warehouse of the railroad, situated within 250 yards of the elevator. This is under clas- sification No. 20, which we complain of. The car of hay was 21,190 pounds. It paid a rate of 24^ cents, and the freight paid was 151.92. The car of oats from the same party, shipped to the same point, con- tained 33,000 pounds, at a rate of lOi cents, and the freight paid was $34.65. In other words, the railroad company hauled 33,000 pounds of oats from the same point to the same point for about fl7 less than they charged for this very much smaller amount of hay. Now, 1 will say that since that time there has been an advance of 8 cents per 100 pounds on grain more than it is on hay. Therefore it does not make my argument quite as strong. Mr. Mann. What is the date of those bills? Mr. JEngland. Those bills are about two years old. Mr. Mann. What is the date of them? Mr. England. They were selected because it is but seldom that you 58 INTEESTATE-COMMEKOE LAW. can find two cars shipped from the same parties to the same parties of different commodities. Mr. Mann. W hat is the date of the bills ? Mr. England. April, 1900. Mr. Mann. That is after the lake traffic is over? Mr. England. Since that time there has been a change on grain of 3 cents per 100 pounds, making the rate 13^ cents per 100 pounds which would make that cost of transportation about $9 more. The rate on hay remains the same, and to-day this would show up in this Avay. The present freight rate on grain from Durand to Baltimore is 13^ cents; the present rate on hay from Durand to Baltimore is 22^ cents. Upon this basis the cost of transportation of 21,190 pounds of hay at 24^ cents is $51.92; the cost of transportation of 33,000 pounds of oats "at 13i cents is $44.55. So that even to-day the railroad com- pany would haul 22,000 pounds of hay and charge more for it than they would for half as much again of oats, showing that the capacity of hauling of hay does not enter into Mr. Richardson. Is there not something in the question of the commodity to be handled and the facility and ease with which it can be handled? Mr. England. I do not think that at terminal points it takes any longer to load a carload of hay than it does a carload of oats; that is, at the terminal house; they both go to the public warehouse. Mr. Wangek. How about the matter of space taken in shipping? Mr. England. They take the same space. That is the point that I wish to make. Mr. Ryan. It is of less weight. Mr. Richardson. Who is complaining about that? Mr. England. The National Hay Association is complaining that hay has been disci'iminated against. Mr. Richardson. Why? Mr. England. By this unjust classification. Hay has been put in the fifth class from the sixth class, whereas it used to be uniformly in the sixth class, and that has prevented business to that extent. The Chairman. What is the reason given by the carriers? Mr. England. They have never given us any real reasons. The Chairman. Did they make no argument at all because of this seeming unjust discrimination ? Mr. England. I have not heard of any, sir. I have not heard of any arguments they , have made. They heard our arguments and simply ignored them. Thereupon, at 11.45 a. m. , the committee adjourned until to-morrow, Saturday, April 12, 1902, at 10.30 o'clock a. m. Saturday, April m, im. The committee met at 10.30 o'clock a. m., Hon. WUliam P. Hep- burn in the chair. STATEMENT OF MR. E. P. BACON— Continued. Mr. Bacon. Mr. Chairman, J would like to present in connection with the subject that was discussed the other day, in regard to the powers of the Commission, a statement which appears in the Interstate INTEESTATE-OOMMEECE LAW. 59 Commerce Comtaission's report for 1897, the eleventh annual report, which is as follows: But it (the Commission) further understood that when, as in this case, the rates had been established by the carriers and afterwards challenged or complained of as unreasonable and the question of unreasonableness had been tried, the Commission could declare not only what rate was wrong, but what would be right. That is to say, when a rate had been established by the carriers, challenged by or on behalf of the shippers, and tried by the Commission in a proceeding ordered and regulated as near as it may be in conformity with United States court proceedings, the Commis- sion had a right, and it became its duty, when justified by the facts, to declare the rate wrong, decide what rate would be right, and through the judgment of the court compel the carrier to perform its legal duty to receive and carry property at rates which are reasonable and just. The Commission exercised this power in a case commenced in the second month after its organization and continued to exercise it for a period of more than ten years, during which time no member of the Commission ever officially questioned the exist- ence of such authority or failed to join in its exercise. As already stated, the authority of the Commission to modify and reduce an established rate and to enforce a reasonable rate for the future was not questioned in the answer of the defendant in the Atlanta rate case, decided March 30, 1896, nor had it ever been denied in any of the answers made to more than four hundred cases previously commenced, many of them alleging unreasonable and unjust charges and praying the Commission to enforce a reduction and lower rates in the future. I wish to state that the power which has been exercised by the Com- mission during the ten years referred to in these extracts, and the existence of which was denied by the Supreme Court, was not denied on account of any question as to the constitutional right of Congress to confer that power, but simply on account of the point that the act itself did not express it specifically. And I wish to say further that during that period while that power was exercised no complaint was ever made by. any of the carriers of a rate that had been substituted or ordered by the Commission as being unjust or as inflicting any hard- ship upon the carriers. But the validity of the order was questioned only on the point as to whether the Commission actually possessed the power to make such an order. One question that was asked the other day I would like to say a few words in relation to, and that is as to the rightfulness or the legality of requiring the Commission to take all of the testimony in case of an appeal, to take any additional testimony which might be desired to be offered by either of the parties to the "^case. It seems to me that the apparent difficulties which exist in relation to the rightfulness of this arise from the fact that the Commission has been regarded as a judicial body; That is not the case. It acts as an agent of Congress in exer- cising legislative functions of making a rate, of prescribing a rate, after finding that the existing rate is unjust or discriminating, and that as an administrative or legislative act it should and must necessarily, and ought in fact, to go into immediate effect as any legislative act does; and parties who question its rightfulness have their remedy in an appeal to the courts for a review of the question as is provided in the Corliss bill. My idea is simply this, that an act of the Commission, not being a judicial act, there is no reason why it. should not go into immediate effect, being a legislative or administrative act instead of a judicial one. . , • The Chairman. You regard the fixing of a rate as a legislative act^ Mr. Bacon. As legislative, yes, sir; and as all legislative acts must necessarily go into immediate effect, and then parties who object to the effect of that act have their remedy in the courts, and while it is being tested in the court it is in operation and effect, and any loss 60 INTERSTATE-COMMEEOE LAW. which may be sustained by it by anybody is one of those contingent results which can not be provided for. But in point of fact, during the ten years when this authority was exercised, no railroad company ever claimed that it experienced any hardship or suflfered any wrong in consequence of the acts of the Commission. Experience is far better than theory. The Chairman. Have we had any experience in procedure such aa is now proposed during the ten years you speak of? Mr. Bacon. Yes; we have had continuous experience on that direct line. Numerous cases have been decided by the Commission in which a rate has been fixed. The Chairman. Yes; but when they fixed a rate they did not at- tempt to enforce that rate. If it was to be enforced, if it needed any further power, they had to go to the court. Mr. Baoon. They had to go to the court. The Chairman. The court then rendered its judgment. Mr. Bacon. They had to go to the court if the railroad did not obey the order. The Chairman. If they did not obey it. Mr. Bacon. So that during the ten years of that time, or most of that time, eight or nine years, the railroads almost universally com- plied with the rates of the Commission and the rates it prescribed were promptly observed, it being regarded by the railroads at that time as a proper function of the Commission and the orders were obeyed and the rates put into effect which the Commission prescribed; and as I say, no one ever claimed them as being wrong and no railroad ever suffered from that practice on the part of the Commission, and that practice, I say, is far better than any theory. We may theorize as to what possible results may be and yet when we have had ten years of experience it is worth far more to us than any theorizing of what may occur to us in the future, and having had that experience — and it having resulted satisfactorily, not only to the public but to the carriers themselves — that is the best warrant in the world for reinvest- ing the Commission with that particular power. The question was asked the other day if bonds should be given between those two parties, the complainants on the one hand and the railroads on the other; but that is utterly impracticable from the nature of the case. The party who pays the freight is very rarely the one who bears it ultimately. He is the middleman. The great bulk of transportation of the country is carried on by middlemen, and freight paid by them is immediately added to the cost of the goods, and fol- lows the goods, and is paid by the consumer in case pi merchandise, and in case of agricultural products the freight to be paid is deducted from the value of the product at the point of production, and is borne in advance by the producer. . Consequently there are no parties who can give bond dunng the pendency of the case who are the real sufferers, and the man who has paid the freight is not a sufferer at all, although the rate may be exces- sive and exorbitant and unjust in other respects; yet he has paid it, and has recouped himself by charging it on the goods, and he has actually recovered it in that way, and there is no remaining direct or personal interest in it whatever. Hence, the impracticability of pro- viding bonds as has been suggested, and hence the necessity of provid- ing an entirely different method of treatment for cases relating to the INTERSTATE-OOMMEROE LAW. 61 freight to that relating to claims between individuals. It is absolutely essential that they should be treated in an entirely different manner, because of the difference in the nature of the case. This treatment can only be provided by carrying into effect the rate prescribed by the Commission, when, upon full investigation, the rate is found to be unjust or unreasonable. Upon the question of the fconstitutionality of some of the provisions of the bill I would like to file a pamphlet entitled " Power of Congress over Interstate Commerce," which cites numerous cases which have been decided by the Supreme Court in relation to the governmental supervision over rates of freight and passage. It is an able legal document. I will give way here to Mr. Jones, the chairman of the National Grange. April 4, 1902. national and state organizations. Grain Dealers' National Association, Indiana State Board of Com- merce, Illinois Manufacturers' Association, Kansas Millers' Associa- tion, Michigan State Millers' Association, Millers' National Association, Millers' National Federation, Minnesota Retail Grocers and General Merchants' Association, Missouri, Kansas and Oklahoma Lumber Association, National Board of Trade, National Dining Table Associa- tion, National Wholesale Druggists' Association, National Live Stock Association, National League of Commission Merchants, National Retail Grocers' Association, National Hay Association, National Wholesale Lumber Dealers' Association, Nebraska Retail Grocers and General Merchants' Association, New England Shoe and Leather Association. New England Granite Manufacturers' Association, Ohio Grain Dealers' Association, Ohio State Association Patrons of Industry, Oklahoma Millers' Association, Texas Cattle Raisers' Association, Texas Millers' Association, Utah Live Stock Association, Winter Wheat Millers' League, Wisconsin Cheese Makers' Association, Wisconsin Retail Hardware Dealers' Association, Wisconsin Retail Lumber Dealers' Association, LOCAL ORGANIZATIONS. Calif ornm. — Claremont Citrus Union; Coltbn, San Bernardino County Fruit Exchange; Los Angeles Chamber of Commerce; Los Angeles, Southern California Fruit Exchange; North Pomona, Indian Hill Citrus Union; Pomona Fruit Growers' Exchange; Pomona, San Antonio Fruit Exchange; Porterville Board of Trade; Porterville, Tulare County Citrus Fruit Exchange; San Diego Chamber of Com- merce; Santa Barbara Lemon Growers' Exchange; Santa Barbara, Santa Barbara County Chamber of Commerce. Colorado.— Qioloxmo Springs Chamlier of Commerce. J^Zmow.— Chicago Board of Trade. ^cZj'ana.— Indianapolis Board of Trade, Indianapolis Commercial Club. Iowa. — Davenport Business Men's Association. ^2 INTEBSTATE-COMMEBOE LAW. Xanscfs.— Topeka Commercial Club. Louisiana.— ]^Qyi Orleans Board of Trade. Maryland.~B2i\i\moxe. Lumber Exchange. Massachusetts.— Bvoc\.tQn Board of Trade, Fitchburg Merchants' Association, Worcester Board of Trade. Michiga/tv. — Detroit Merchants and Manufacturers' Exchange. Minnesota. — Duluth Produce and Fruit Exchange. J^ssm^j. —Westpoint, Aberdeen Group Commercial Association. Jfissowi.— Kansas City Board of Trade, St. Louis Builders' Ex- change. Nmrasha. — Lincoln, Eetail Grocers' Association; South Omaha Liv.e- stock Exchange. ISfew Tor^.— Brooklyn, United Eetail Grocers' Association; Buffalo Lumber Exchange; Buffalo Merchants' Exchange; Middletown, Busi- ness Men's Association; New York Lumber Trade Association; New York Manufacturers' Association; New York Merchants' Association; New York Produce Exchange; New York Stationers' Board of Trade. North CaroUma. — Wilmington Chamber of Commerce. Ohio. — Cincinnati Chamber of Commerce, Toledo Produce Ex change; Newark Board of Trade. Oregon. — Portland Chamber of Commerce. Pennsyl/vamia. — Pittsburg Chamber of Commerce. Wash^ngton. — Spokane Chamber of Commerce. Wisconsin. — Milwaukee Chamber of Commerce; Milwaukee Mer- chants' and Manufacturers' Association; Milwaukee Association of Master Steam and Hot Water Heating Engineers. Wyomi/ng. — Muscoda Dairy Board. STATEMENT OF MR. AARON JONES, GRAND MASTER OF THE NATIONAL GRANGE, PATRONS OF HUSBANDRY. Mr. Jones. Mr. Chairman, 1 will not detain your committee with any extended remarks upon these questions. Representing the agri- cultural interests of the United States as presented by our order, we are very much concerned to have an equitable law upon transporta- tion. It is a question that more vitally affects the producing classes than any other classes in our country, as the statistics show that 60 per cent of the freights carried upon our vast railway systems are paid upon the products of agriculture. Hence, an unjust or unfair or inequitable freight rate is very detrimental to us. As has been remarked by Mr. Bacon the cost of the freight is immaterial to the freighter, because he takes it out in the purchase of his product and the cost falls upon the farmers. I want to say that the farmers are not antagonistic to the railway interests. They do not desire legislation that will cripple or hinder the progress of the railroad development of this countr}'^; neither do they want to prevent them from making a reasonable and fair profit for the money and the energies engaged in transportation. But upon the lands in which these railways acquire their rights to build their roads over our property, where a difference arises between the owner of landsand the company seeking a right of way, where those differ- ences exist, all the States have provided that a disinterested tribunal, not interested in the lands or in the company, shall sit and determine ivhat are the damages to the individual for dispossession of this prop- INTEESTATE-COMMEECE LAW. 63 erty, and that we esteem to be right and proper. It is in the interest of the progress of our nation. Now, after a railroad has acquired its right to build its road, if there should any contention arise as to the equity of transportation of any of the products which grow upon this or any other farm in that com- munity, certainly it would be but just and fair that where that conten- tion arises some commission should be able to examine this contention and determine, as in the one case, also in the second case, what would be right and fair, and then we would be placed upon an equality. The management of railroads has been in the past, in some respects, regardless of the interests of the producer or the interests of the farmer. In the classification of freight they have made it prohibitory to market some products, so that they are absolutely worthless, because the producers are unable to pay the freight charges upon them. These charges are not in proportion to the cost of carriage, as we understand it. In cases of that kind it seems to me that the farmers ought to have a remedy, and that remedy ought to be provided by the National Congress. For many, many years our organization, in its subordinate granges scattered through 41 States of this Union, have met in our State assemblages, our national assemblages, and have con- tinually presented this claim and pressed it upon Congress to give us a remedy. We have carefully examined the Nelson-Corliss bill, and we believe its amendments to the original interstate-commerce act are just, fair, and equitable, and that they will provide the remedy that we have sought. That remedy is that when the Commission has examined a case clearly and fully, and determined, whatever their finding may be, the railroad companies must obey, that finding, and thereafter carry the product at the rate of the finding of the Commission until it has been reviewed and set aside by the courts. There is not any other protection that the farming interests of this country can secure. We are handicapped. The value of our lands all depends upon the management of the railroad corporations. The rapid combination and consolidation of -these roads under a single man- agement makes it more imperative at this time, and more and more forcibly is the necessity felt that we should have legislation, such as we ask now, than in any other period in our country's history, because we are absolutely at the mercy of the transportation interests of the country. I believe that the loyalty of the farming population to our country is unquestioned. They are willing to pay their proportion of the country's expenses, and they are also willing to stand for its defense, and this is the only remedy we have for our protection. As isolated individual farmers they are unable to make any contention or go into the courts to seek a remedy. They are unable to pay for it. They are absolutely shut out. It would seem to me that the Congress ought to provide this remedy for us and protect its weakest citizen as well as its strongest corpora- tion. I believe the safety, I believe the liberty, and I believe the loyalty of all the people of this country depend upon laws which shall fall justly upon all its respective classes. If the farmers of this country become thoroughly impressed with the idea that the Congress that they have elected does not take cognizance of their necessities, and 64 INTERSTATE-COMMERCE LAW. will not protect their rights, you will find that they will become a very dissatisfied class, which they should not be. Naturally, they stand by the Government and stand by its laws, and they wish that Congress would pass a law that will compel every other class of citizens to abide by them. This consolidation of transportation interests that is taking place absolutely prohibits, or absolutely takes away, all the possibihties of freight rates being regulated by competition. If competition is left free to act and let money be invested in building roads^ and then roads act independently.of each other and competition rules and regulates the prices, we have nothing to say. But such is not the fact. In vieiw of the action of the railroad companies themselves, in placing under a single management over half of the railroads of this country, it seems to us that we have got to look for the remedy to Congress. As to the bill that is now before your committee under consideration, we believe that this bill, if reported, by the authority and force that will be given to it by this committee, will probably become the law of this country, and it will do no injustice to any railroad or transporta- tion interests of the country. It will mete out justice to the farming population. Sixty per cent of the freights of these roads are the freights of the American farmer, and according to published statistics— and you are familiar with them — a large proportion of our export trade — between 60 and 70 per cent — is also the product of these same farmers. We know that evidence to substantiate our claim has been submitted in detail, or will be, by the Interstate Commerce Commission, which has been taking evidence regarding the wonderful discriminations that the railroad companies have seen proper to practice between different localities and different shippers. Now, this affects^ injuriously, very injuriously, the value of fai'ms along the roads. Last winter I had occasion to look up the matter, and I found that wheat was being car- ried right through my town for 4 cents a bushel less than we could ship it for from my town, or from Chicago to New York. That was very injurious and very detrimental to every bushel of wheat that was in my granary. It lowered the value by three or four cents a bushel of every bushel of wheat I had and absolutely prohibited me from shipping it; and I only speak of myself because it is a common case with all the farmers of our country. These matters are important to us, and while the farmers are not able to complain in the same way that others may, they have not the money to come before your committee in large numbers individually, because they are not a moneyed class of men, they are depending on the wisdom, the justice, the fairness of the men they have sent to Con- gress to see that their interests shall be protected. In 1887 this interstate-commerce bill was passed, as I understand it, in the first place. It acted very smoothly, very satisfactorily, and the saving of freights at the'rates that dominated in 1887, if those freights had been continued through the entire ten years in which this law was in practical operation — the difference in the saving that would haVe been procured would have amounted to $529,000,000. Of that |529,- 000,000, 60 per cent was saved to the farming population. Now, I want to say, as a farmer, that grain growing has ceased to be profitable from the fact of the excessive freights that are charged to us. I operate something of a farm, but I have absolutely quit grow- INTEBSTATE-COMMEECE LAW. 65 ing grain, because I can not afford to pay the freights. And so it is with all the grain-raising farmers of Indiana. We are going out of it as fast as we can change our methods of farming. Now, we do not think that it is right that the Congress of the United States should allow any class of people to so conduct their business as to drive us out of our business. Mr. Davis. How do the freight rates now on grain compare with the freight rates in 1887? Mr. tfoNES. They are 25 per cent higher, and that is a very serious embargo. Mr. Coombs. Is that confined to the railroads, or does it take in the ocean carriers? Mr. JoiSTES. That goes to the seaboard. 1 understand there are rates fixed for the export trade which make it very much cheaper. That is the reason why I speak of this particular instance. Contracts, 1 am informed, were made about a year ago three to four cents cheaper because it was export grain. And then 1 understand that some of this export grain is taken off in New York and sold in the market there instead of being taken abroad. Mr. Coombs. Then when you say that wheat Went" through your town at three to four cents cheaper that difference was in the way of a rebate. Mr. Jones. That was in the way of rebate; yes, sir. Now, this law provides that these rebates shall cease, and they ought to cease. There is no justice, there is no fairness, in one shipper having a different rate from another shipper. Every solitary man who handles a commodity ought to have the use of these public highways on fair and equitable terms. Nothing else will give to the seller a fair opportunity of selling hisproducts or to the buyer of buying them. This bill provides for this also, and that is a very important matter, and I believe to-day that the American farmer feels the necessity of this kind of legislation, and protection from these abuses, more than he does the necessity of any other legislation that can possibly be passed by the American Congress. I know that there are a great many questions affecting other matters that seem to dominate now in the minds of the American people, but I want to say to the American Congress that if you will look at the condition of the farming classes of this country you will find that they need your guardian care just as well as any other people on God's green earth. There is no question about that in my mind, because the products of these men who are engaged in grain .growing are so handi- capped that they are unable to provide their children with the neces- sary amount of education so as to give thenl an equal show in the race of life. This is a condition that has been brought about by the unfair- ness, it seems to me, in the management of affairs, by combinations and trusts which have come into force with such power as to fix the rates, or practically so, both of the product of the farnler and that which he consumes, and he stands between the two stones which are crushing out the very life of his business, hfe needs protection. 1 believe, on that basis, that the strongest law that could be passed against combinations and trusts would be diie to the effiect that every pl?oduct, when it is shipped into the market, shall bear its just propor- tion of the freight, and no reb'ates should be allowed. I believe that if this law was enacted and was enforced it would regulate to-day i-c L 5 66 INTEESTATE-COMMEKOE LAW. evei-y trust there is in America, without any other legislation upon that point, because if they did not get these advantages which they receive from the transportation interests they would be unable to be of any serious danger or damage to this country. Now, the farmers are in danger, and I want, in my position as the master of the national grange, as chairman of the legislative com- mittee of the national grange, having communication with our 500,000 members weekly or monthly, as the case may be, to say that I believe I know the sentiment of the faririers upon this proposition, and it is unanimous. I care not what political party they may affiliate with, or what party they may sustain, upon this proposition they are united. They are looking to you, and as this pending bill is now before you for your consideration, I want favorable action on your part, and an urgent and persistent effort to carry it through both Houses of Congress would to-day be hailed by the farmers as the greatest act of deliverance to them, of them, that could possibly be had at your hands. It would not be expected of me that I should go into the legal phases of this bill, which you are able, fully competent, to take charge of. The propositions that we want embodied into law are those that would bring about justice between the business interests of the country. I was in the committee room yesterday when a gentleman from Baltimore was speaking upon the hay problem, and speaking upon the wheat problem. Now, the discrimination of the different classi- fications of freights, taking a certain product out of one class and putting it into another, and raising the price, has been prohibitory of trade — in some ways absolutely prohibitory, and that should not exist, should not be permitted to continue. As to the difference between the freight on flour and that on wheat, I want to say that it would be to the best interests of the American farmer to have American wheat floured by American mills. We think it is to our interests to have it so floured, because then we have a con- tinuous market. We do not ask any advantage for the American miller; we do not ask that his flour be shipped for one farthing per 100 pounds less than the wheat is shipped over these railroads for. That will place both these great interests in competition with each other, the shipper and the miller, and I say for the farming population it is to our interests to have all of our grain floured here, because it gives us a more regular market than the other would, and for the further reason, and tne more important reason, that the by-products of the mill are absolutely needed by the farmers in America for fattening their stock, so as to keep the fertilization on our lands. I want to say that the practice of the American farmer in shipping away his products to a foreign country and having them there milled and the by-products there used by the European farmer has been depleting the fertility of the American farms more than those who have not given attention to these matters would think, and it is an important matter — a very important matter. This is an agricultural country, and an agricultural country, in order to maintain its position, has necessarily got to keep up the highest standard of the fertility of its soil, and that never can be done when you ship the raw material to some foreign country and let the foreign lands be enriched with our by-products. INTERSTATE-COMMERCE LAW. 67 rio that all this would be changed to the largest degree by an equit- able and fair rate of transportation. I am no particular friend of the members of the Interstate Com- merce Commission. I only believe that they are able, wise, and dis- creet men. Their long experience in the examination of railroads and freights gives them an opportunity to know what is right and what is fair. I believe that to till a position upon that Commission requires the highest standard of honesty and intelligence. Now, I know that if they should be wrong, either in judgment or honesty, they have got a tremendous power, and in exercising that power they could do immense wrong to the shipper and immense wrong to the producer, as well as serious damage to the railroads of this country, but I believe that we have got to trust these matters somewhere, and I believe that these men are more liable to reach a fair and just conclusion than men who are engaged alone on the side of and in the interests of trans- portation. As a farmer I have a few thousand bushels now in my granary that I wish to sell. If the matter was left entirely to me, and I should fix the freight rate for the shipment of that grain, you can very well believe that an Indiana farmer would not put that rate too high; in nine cases out of ten he would put it too low; because of the very selfishness and grasping disposition to get all that he could he would probably put it too low. Now, it would be unfair and unjust to place the vast sums of money invested in the building and management of railroads at the dictation of myself as a shipper, and to make the i%il- roads accept the rates that I might see proper to offer them. That is unfair, and it would be unjust,- and it would destroy the value of their property. Turn the case over and let a railroad man, who has not a dollar's worth of interest in my farm or the farm of any other man who is a shipper — let him fix the rate. I do not believe, although I have a high respect for those mfen who build and manage the railroads and fix the rates, that they are more likely to fix a fair rate than I would be in their place. They would act and do act just as I would. I believe that they are as apt to fix a little too high a rate as I would be to fix too low a rate. Therefore we would lock horns with each other. Now, we ought to have some fellow who is not a shipper; some good, broad- minded, honest man, with a full knowledge of the case, and with a proper regard to the rights of citizenship in this Republic, who ought to have the case turned over to him and let him hear the evidence, let him decide what is right and fair and just between us. I want to say to you, my friends, that the future destinies and the future prosperity of this country rest upon Congress seeing that jus- tice is done along the line of these rate questions; and this question underlies to-day the destiny of more of the important industries of the nation than any other question that has occupied the attention of the American Congress for this year or any other year. All I have to say is this, in conclusion: I am not going to argue the merits of this case. You can get the facts; they are before you on every hand. The Interstate Commerce Commission's books and reports, and their findings and investigations, have all developed the practices of the roads as they are conducted now. The fact that the roads have increased their tariffs about 25 per cent -all this is before you. What we ask, gentlemen, and what we hope and what we believe 68 INTERSTATE-OOMMEECE LAW. that you, as honest men representing your constituents— not the farm- ers who live in your districts, but every business man, every con- sumer, in your district interested in having fairness meted out to them— the poor citizen who buys his groceries is interested in a fair rate as well as the greatest shippers — what we believe that you will do is to fix proper legislation and establish it so that to a large degree trans- portation rates will be permanent and stable. Then you will encourage men to go out and endeavor to make their farms more productive, and grow still more of the products of the soil for the benefit of the American people, and to relieve the starving people abroad. You can give great encouragement all along the line. I want to say that the man who owns his farm here near the seaboard, near where he can get to tide water to ship abroad, is entitled to his relative advan- tage in position. We of the Central West, we in Indiana — and 1 am sure my good brother here from Wisconsin will back me in this state- ment — do not want to take away from these men of Pennsylvania and these men of New York their advantages of location. All we ask is equity and fairness. We do not want the bi"oad and rich and fertile plains of the Dakotas to take away the advantages in position of the farmer who lives in the Central West. We are all entitled to our respective positions. We have bought our lands, and we have paid for them, and we have paid our taxes, and we have stood by this gTand Republic in its wonderful progress and in its success all the waj' through, and now we want the Congress of the United States, the men of the Congress, and this committee, which is charged with the great responsibility of passing upon this most important measure, to stand by us and help to see that fairness, just- ness, and equity is measured out to all these large corporations, as well as to the citizens of this Eepublic. 1 was going to conclude, but I will say one word more. For years the national grange has petitioned, has urged, and has asked this leg- islation. Last year 1 was here in the interest of the CuUom bill. That bill was a little more drastic than this is, but this bill covers the same ground, although not quite so forcibly. Year after year we have been asking this legislation. Now we insist, and we hope, and we are confident that you are going to give us this relief in the present Con- gress. STATEMENT OF MR. F. H. MAGDEBURG. Mr. Magdeburg. Mr. chairman, I represent here to-day the Millers' National Association of the United States, the Chamber of Commerce of Milwaukee, Wis., and the Merchants and Manufacturers' Associa- tion of Milwaukee, Wis. The Millers' National Association of the United States is an organi- zation which comprises a membership scattered throughout twenty States in this Union and having an aggregate dailj' output of about 100,000 barrels of flour, the Chamber of Commerce of Milwaukee comprises a membership of over 620 of the most prominent business men of Milwaukee, and the Merchants and Manufacturers' Association is an organization of about the same number, engaged mostly in mer- cantile and manufacturing lines and general trade. The bill which is before you (H. R. 8337) is one the purpose of which is to amend the act to regulate commerce, which was passed in INTERSTATE-COMMERCE LAW. 69 1887, after very deliberate action, by ttie Congress of the United States, its passage being brought about by the then chaotic conditions of transportation rates existing during the years from 1880 to 1887. It then became evident that it was necessary to pass an act regulating interstate commerce and regulating the carrying corporations of the country. The discriminations then existing were ruinous to almost all lines of industry. This act was not the resutt of a hasty conclusion, but Congress, through committees, informed itself of the necessity of such legisla- tion. Hearings were had throughout the country and information gathered, and the outcome of all that information was the interstate- commerce act passed in 1887. It was the judgment of the gentlemen who passed that act that it covered the ground fairly and squarely, without injury to the railroads or to the carrying corporations of the country, and without injury to any of the shippers of the different localities interested. The underlying principle of the act was, as I understand it, equality in the use of the transportation facilities of the country; no discrim- ination as against persons or places in any of the commercial com- modities. The act, as I understand it, has been fairly administered; the Com- missioners who were appointed under its. provisions were men of eminently fair disposition and fair reputation. There is not a single exception to be made, as far as I am informed on the subject. They were all able, capable men, selected irrespective of political affiliation. The railways, or the carrying corporations of the country, submitted with grace to all the decisions made by that Commission for quite a period of years. While there were violations and discriminations going on, possibly, they were of an inconsequential nature, and were promptly adjusted upon complaint and the ruling of the Commission thereon," so that the act was fairly operative until 1897, when a deci- sion of the Supreme Court of the United States put an end to the authority of the Commission's rulings and the placing of those rulings in force. The proposition is a plain one, that if the Commission has not the power to enforce its rulings, it has practically no value. No shipper, no receiver, no man in trade, and nqne with whom I a;m connected, seeks an unduly low rate. All we desire is an equitably adjusted rate for all concerned, and that rate to be paid without dis- crimation by all who ship the same commodity. No discrimination to be ])racticed as against localities. We have on several occasions come in vain to Congress for relief. Last year we commended to your consideration the Cullom bill, which, though it was reported, was never acted upon. We now come to you again with this bill seeking relief, asking you to make the interstate-conmierce act as operative as it was supposed to have been at its creation, and to endow the Commission with that power which the Supreme (]ourt holds it does not possess under the present act. We think the enforcement of a ruling of the Commission after a hearing, its immediate enforcement until revoked by a court, will give us the relief sought for. The other matter, relating to the man- ner of how this is all to be done, is a question for lawyers, which I will not touch upon. But I find- that the milling industry of this country has been seriously injured by the discriminations which have been 70 INTERSTATE-COMMERCE LAW. practiced between the raw material — wheat— and flour, the product of that material. The result is self-evident, because the discriminative rates have buUt up the milling industry of Europe at the expense of the milling indus- try of this country. An extract from a paper, which I have here, published in Dubuque, Iowa, refers to the matter briefly, and I will, with the permission of the chairman, file this with the committee as a part of my remarks. The article referred to is as follows: A MENACE TO THE MILLING INDUSTRY. A writer in a recent issue of the Saturday Evening Post calls attention to the potent influence which the railroads of this country exercise over its industries, According to the Government reports, the exports of wheat in June of this year were in round numbers 13,000,000 bushels, which was 50 per cent more than for the same month last year. In July there were 18,000,000 bushels exported, nearly three times as much as in July, 1900. For the seven months ending with July the amount of wheat exported was over 95,000,000 bushels, or 45,000,000 bushels greater than in the first seven months of 1900. The first thought is likely to be that this is an excel- lent showing for this country, yet the contrary is the case. In fact, it is the poorest showing the country has ever made in the way of exports, for these enormous for- eign shipments point to a commercial calamity which is sure to overtake a great industry — that of flour milling — unless it is averted by prompt action on the part of those who have it in their power. The situation is so simple that anyone may see it. The milling capacity of this country has increased so rapidly in the last ten years that a foreign outlet for a part of the flour is an absolute necessity to keep the mills running. In fact the capacity of many of the mills has been increased by reason of the export business they have built up. The Minneapolis mills exported for the crop years ending with August, 1899 and 1900, nearly' one-third of their output, or about 5,000,000 barrels each year. How- ever, for two years the export trade has steadily fallen away; first in loss of profit, though the volume of shipments was maintained. The mills kept their brands in the foreign market, although it was impossible to sell at a profit owing to the low prices made by the European millers. This year American millers have been unable to sell their flour in Europe except at a loss most of the time, and as a result the voulme of flour exports has fallen off heavily. The cause of this falling off of the flour export business is discrimination in freight rates whereby wheat, the raw material, may be shipped from the West to Europe at a lower rate of freight than flour, the manufactured product. The millers of Great Britain and of the Continent are thereby enabled to secure American wheat and to make flour which can be sold cheaper in London, say, than American-made flour can be sold. This discrimination in freight favoring wheat as against flour means, unless relief be given to the miller, practically the ruin of the great industry, and. a return — a retrograde step — of this country from being a shipper of a manufactured article to becoming an exporter of raw material. In August the published tariff on wheat and flour, all rail from Minneapolis to New York, was 22} cents per hundredweight, but the actual rate obtainable on wheat was 16 cents. No reduction in rates was obtainable on flour. Adding to this heavy dis- crimination against flour the fact that the steamship companies made a rate of 1 cent a bushel on wheat from Boston and Philadelphia to London and Liverpool, but that flour paid from three to five times that rate, under the circumstances it is not surprising that the export flour trade has been paralyzed. That the reader may fully comprehend the magnitude of the industrial tragedy that is in sight, the importance of the flour-milling industry must be understood. In round numbers the capital invested in milling plants is $250,000,000, which is only exceeded by iron, steel, and foundry works, and cotton-goods factories. Take away from these mills their export trade, and they must flnd an additional domestic market for their surplus or close down. The Minneapolis milling companies would be forced to sell 5,000,000 barrels of flour in American markets more than, they have been doing or close their mills one-third of the time. The latter is impos- sible. Owing to their wealth and strength, they might be able to sell their entire output in the domestic market, but this means that much less flour sold by other mills. At the same time, there would also be other exporting mills endeavoring to INTERSTATE-COMMEECE LAW. 71 dispose of their surplus output in an already overstocked market. The final result would be the wiping out of all but a few small mills with a' local trade, and a giant corporation or two that would control the trade of the cities. The trouble may be traced to the big elevator companies of the West and North- west. To illustrate — and this can not be successfully denied — an elevator manager at Kansas City, Omaha, Minneapolis, or Chicago has an accumulation of wheat which he wishes to get out of the country. He goes to the several traffic managers, saying, "I have a million bushels of wheat to move, and the road making the best rate gets the business." The traffic managers want the business, and one of them gets it. Here is wuere this policy is shortsighted. A road may several times a year get a few million bushels of wheat to haul, and it can run solid trains to move it. Then the movement stops for a time and part of the road's equipment is idle, whereas it has been crowded and other traffic has been inconvenienced for a time. The eleva- tor man has little further use for. the road until he can get another cut rate. ' With the miller it is different. Every town of any size has a mill, in which a number of men are employed. Shipments of flour continue evenly and uninterruptedly through- out the year. Coal, cooperage stock, bags, and machinery are shipped in, and, in the aggregate, form an immense amount of business. As wheat exporting countries Russia and Argentina are almost as important as the United States. As milling and manufacturing nations they are insignificant. Their grain goes from the producer to the exporter at a fraction of its worth, and the peasantry of those countries are as far below the American farmer as the handmills^ of our ancestors were below the roller mills of to-day. Yet let the manufacturer and' all that comes with him step in between the peasants of those countries and the grain exporters, and the importance of those nations will steadily increase. Remove the manufacturer of flour in this country, and the other industries that go with him, from the place he occupies between the farmer and the exporter of wheat, giving the farmer over into the hands of the few large elevator companies and a milling corpo- ration or two, and the great agricultural manufacturing States will crumble back to pastoral primitiveness, and the great flour milling industry and the hum of wheels in thousands of villages and towns will be a thing of the past. The mills of- this country, as must be known by you, have largely been engaged for some years in export trade, and all of them have increased their milling capacity as their export trade increased. Since the discrimination practiced between wheat- and flour it has become apparent that the milling capacity is beyond our domestic wants, and the result of crowding all the capacity of our mills for the production of flour for consumption in this country alone has been ruinous to the trade. About four weeks ago an arrangement was arrived at with the railroads by which they gave us what they called an export rate on flour, which was based upon the export rate in force upon wheat. We all felt that there was now a chance to do something, but that rate was hardly in existence before it was recalled and the old con- ditions that existed prior to the 17th of March again prevailed, wheat being exported at a lower tariff rate than flour. Mr. Fletcher. Will you please tell us about what is the relative difference between wheat and.flour in the export rate? Mr. Magdebueg. The rate which they made us was 2^ cents per 100 pounds lower than the domestic rate, which was supposed to fairly equalize matters and to give us a chance to do some export business. Mr. Fletcher. Two and one-half cents a hundred pounds? Mr. Magdeburg. Yes, sir; 2i cents a hundred on flour. Mr. Wangee. What was the rate on wheat? Mr. Magdebxjrg. The rate on wheat has been varying all the way from 2i cents to 6 cents per hundred. It has been at times absolutely suicidal to grind for the export market. Mr. Bacon. Two and one-half to 6 cents a hundred less than flour i Mr! Magdeburg. Yes, sir; 2i cents to 6 cents a hundred pounds less than flour. . . i.- i- ^.u <. Now, gentlemen, it has been shown by Government statistics that "rS IKTERSTATE-COMMEBCE LAW. in 1900 the aggregate of flour exported was 96 per cent of the entire export of wheat and flour reduced to wheat, while in X901 it had dropped from 96 per cent to 55 per cent, owing to the discrimination practiced. For 1899 the percentage was 86 per cent, so that in 1901 it was really 10 per cent more than the previous year,. while the sub- sequent year it was 41 per cent less. As to why this is done I think the Industrial Commission, which has been appointed by Congress, has not been able to elicit from the railway interests any answer. It is inexplicable to me, and to many of the men in the trade, because the products of the farm will certainly go forward some time, and there is no reason why after it has reached somebody's elevator that particular grain that is in that elevator, even if it is a very large amount, should be rushed to market at a discriminative rate against flour. It would go forward as wheat in its due course or it would be ground by the mills and would then go forward as flour in due course of time. As Mr. Jones stated, the by-products would remain here; they would be fed to the stock on the farm, the sheep or hogs and the cattle, and. in this way would help to keep up the condition of the faVm to a higher standard. We seek no relief from you at the expense of the carrying interests of the country. All we ask is that we be treated on a parity with everybody else. It seems to me self-evident that if I am milling in Milwaukee and am shipping my flour to the East or to Europe for sale — even if I am at a disadvantage of but 2^ cents per 100 pounds against my neighbor, who is perhaps better acquainted with the railroad man than I am — it is impossible for me to do business, because 6 cents on a barrel of flour is considered a good milling profit nowadays, and it would be useless for me to attempt to" do business on such an inequality. Therefore, in fairness and on correct business principles, it is neces- sary that all shippers stand alike with the railroads, and that no rebates or discriminations be made as against shippers or as against localities. This is all that we asii, and we do not think that asking this imposes any hardship to the railroads; none whatever. We are not asking for a particular tariff, we are not asking for a particular rate upon our flour; we are simply asking that the discriminations which have been practiced as against individual commodities and locations shall be discontinued by this bill being passed, giving the Commission more power, or giving it the power which it was supposed to have when the Commission was created. It seems to me, a layman, that the railroads should join hands with us, and insist that all should be treated alike. I can see no reason why a railroad or'a carrying -corporation should favor A as against B, so long as A ships the same product and in the same quantity. There is no reason why a railway or a carrying cor- poration should favor one locality at the expense of and to the detri- ment of another. They should not. They are public highways and those public highways "should be for the use and at the disposal upon equal terms of all who wish to use them, and we come to you for that relief which we think we are entitled to. Mr. Fletcher. Will you please tell us where these discriminations against localities come in; what are the localities which are discrimi- nated against? Mr. Magdeburg. I can not now name any particular locality, but at times wheat from beyond the Missouri Kiver and Northwestern INTERSTATE-COMMEKCE LAW. 73 points is carried through Chicago at a very much less percentage of rate than it is from Chicago or Milwaukee or Minneapolis. There are times when these discriminations take place. They are not always in vogue, but they are spasmodic, so to speak. When somebody has got a big lot to move, they want to move it, and they go to the freight agent and they say, "I have a lot of wheat to move," and they get a special rate. That does not benefit anybody only that particular indi- vidual, but it is hard on others who are not getting the same rate. Mr, Coombs. Let me ask you, Supposing you ship your flour to Europe, do you get any rebate because of the export shipments; is there any such thing as that coming to you as there is coming to the wheatman ? Mr. Magdeburg. I stated here a while ago that the railroads made an open rate which was 2^ cents a hundred less on flour which was exported as against flour for domestic use. Mr. Coombs. 1 did not understand that. Mr. Magdebueg. That rate went into effect on the 17th of March, but it had hardly gone into effect when it was rescinded. There was one condition attached to that, and that condition was that the mini- mum shipment should be 35,000 pounds, and that should be the mini- mum carload or the minimum contract made, while there was another stipulation which compelled the shipper to load the cars to their full capacity. That was an arrangement arrived at between the milling interests and the carriers of the country to go into effect on the 17th of March. We all, as I stated, went to work and changed our codes. We noti- fied our correspondents that after this no proposition would be enter- tained for any shipment under 35,000 pounds. We changed the codes and the quantities in the codes, and got them out all ready to go into operation. But hardly had this been done when this very arrangement which had been entered into by the milling industry of the country and the shippers was recalled, and the rate which will go into effect on Monday, the 14th of April, will be precisely the same rate on flour for export as for domestic purposes. The rate will be precisely the same, while between the 17th of March and the 14th of April the rate was 2i cents differential. It was not in the nature of a rebate or a remis- sion or in the manner of an allowance in favor of one shipper against another, but it was an open, published rate. Mr. Fletcher. Have they changed the rate on export wheat to cor- respond with that change? Mr. Magdeburg. No, sir; they have not. Mr. Fletcher. They simply went back to the old rate. Mr. Magdeburg. Simply went back to the old rate. And this has disconcerted all of us and put us in a very awkward position. Now, we, as shippers, as I said before, can not see why it is going to be an injury to the railway interests of the country to insist that they shall treat all alike. We can not see why A should have a better rate than B, or why at times a locality should have an advantage over another locality. All we ask is fair treatment, and then if competition wipes out a mill or another industry here and there that must be ascribed to other causes than the question of transportation. We are willing as a people and as producers to take our chances; but none of us are able to cope with one who is favored in the matter of freight rates, and I fully coincide with Mr. Jones, who preceded 74 INTEBSTATE-OOMMEBOE LAW. me, in the proposition that there has been nothing that has tended to build up in this country what is popularly called the "trust" more than this discrimination between individuals and places. If I have an equal rate with my neighbor I am not afraid of him. I can mill just as well as he can if I have got the wheat, and if I have the pnoney and can get the wheat, and in open competition I am willing to take my chances, and if I am not as smart as my neighbor, I am willing to lay down and quit. But I can not cope with him if he has an advantage in freights of 5 cents a barrel, or even more, over me, because 5 cents a barrel is absolutely the profit to-day. All we ask is for you to put the interstate-commerce law back where it was supposed to be before the Supreme Court of the United States riddled it, and put holes in it like a sieve. There is no use in that law if it can not be enforced. We have found out that it is impracti- cable to have open competition between the railroads. I do not think they want it themselves. I do not think they want the chaotic condi- tions that existed in the eighties back again. I think there were more railroads in the hands of receivers then than there have been since the passage of the interstate-commerce act. All that we want is for this Congress to give us that relief which we are entitled to as law-abiding and taxpaying citizens of this country. We ask you to put the law back where it was supposed to be in 1887, and then let the railroads, if they find that it is not complete, exercise their ingenuity to help perfect it — instead of tearing it down, as they have been doing for the last ten years. I can not understand why the railway corporations, who hire the best counsel in the country, when they found that there was a defect — as they claim there is a defect— in the interstate-commerce act, should not have exercised that great ingenuity ' and ability which they had at their command to perfect that act, which certainly was a beneficial one to them just as much as it was to the indus- tries of the country; why they did not go to work and say to the Inter- state Commerce Commission, "Here, gentlemen, we point out the defect, and we will go hand in hand with you . before the Congress of the United States and ask it to put this right, as it should be, so that another railroad, or one which is willing and anxious to break the law, shall not be able to break the law." It looks to me as though that would have been much more honest than what they have been doing for the past ten years. They have been lawbreakers all the way through, from beginning to end. They have not helped to sustain the law; they have helped to tear it down, and they have been lawbreakers ever since that law has been put in force, instead of putting their shoulders to the wheel and perfecting it, as they should have done as good and law-abiding citizens. I am not decrying the railroads, mind jou. I think that there is no one I rep- resent here to-day who wishes any wrong to be done to them; no one whom I represent asks that they be harmed. But we do insist that they shall be compelled to do riglit by all shippers and by the producers of the country. We feel that we are entitled to redress from this Congress. We feel that the carrying corporations are amenable to the laws that have given them their corporate existence, and while, perhaps, there are no carriers which have their corporate existence from the Congress of the United States, as soon as they get into interstate com- merce they are amenable to the Congress of the United States, just as INTERSTATE-COMMERCE LAW. 75 much as any other corporation that does any interstate business, and being amenable to the Congress of the United States, the Congress of the United States, I claim, has the right, and not only the right but it has the duty, to see to it that the transportation and carrying com- panies of the country are held to a strict enforcement of the letter and spirit of the law as it exists, and if that law is not sufficient as it has been interpreted by the Supreme Court of the United States, then it is the duty of Congress to make that law so that equal justice shall be meted out to all shippers and communities. Gentlemen, I am very much obliged to you for your kind consider- ation and your attention. ^Now, if there are any questions that you wish to propound to me I will, if possible, answer them to your satis- faction. Mr. Coombs. I would like to ask you if discriminations in favor of exporting wheat enable the European millers to compete with the American millers? Mr. Magdeburg. In what respect; in buying wheat? Mr. Coombs. No; they buy the wheat Mr. Magdeburg. They buy the wheat here. Mr. Coombs'. Then can they export their flour to this country and compete with the American miller? Mr. Magdeburg. No, sir. Mr. Coombs. Not flour? Mr. Magdeburg. No, sir; they can not. Mr. Coombs. It does not operate ? Mr. Magdeburg. It does not operate backward. It operates bad enough the other way. Mr. Coombs. Yes; I understand that proposition. They compete with you in the European markets ? Mr. Magdeburg. Yes, sir; and they wipe us out absolutely. There are lots of us who are hanging on by the teeth thinking that Congress will do something for us. We do not want our brands to be extin- guished over there, and we have been hanging on looking for and hoping that some change would come, and we did feel that it had come on the 17th of March. Mr. Coombs. I was wondering if they could compete with you over here. Mr. Magdeburg. No, sir; they could not bring the flour back here and compete in our American markets with the American miller. Mr. Coombs. There is not any such thing as competition in the Ameri- can market with the American miller? Mr. Magdeburg. No, sir; there is not. There is enough of that now among ourselves without calling in any other fellows. But it has been a very detrimental business from the fact that our competitors in Europe have crowded us out of the English markets. Wheat has been exported to France, for instance, and there manufactured into flour, they of course paying the duty as it goes into France on the wheat, but immediately receiving back that duty when they show that they export a certain amount of flour, and with our own wheat these French millers have competed with us as against the flour made out of the same wheat in this country, in the London markets particularly, and in the Irish markets, as against our American flour, and we have not been able to cope with them. Of course you must understand , that the by-products of wheat are 76 INTEESTATE-OOMMEBCE LAW. worth, to start with, much more money in Europe than they are here for feeding purposes. And wheat going in such quantities as it has in the past year has absolutely made it impossible for us to compete, and it has compelled some of the mills to ship the by-products back into the country at a disadvantage in order mat the farmers living back in the country might have their necessities met. For example, from Milwaukee we have been shipping by-products as far as. 100 and 150 miles into the country backward, lor the sake of furnishing the farmers with food for their cows or their other stock, which should not be. The local interests, the local mills, should furnish that. The Chairman. A few days ago, in a committee hearing, some gen- tleman representing the millers insisted that the successful competition of the French miller with the American miller in the London market was due to certain dock charges in the port of London. Mr. Magdeburg. I think I was here at that hearing. The Chairman. Yes, sir. At that time he stated that the inability of the American miller to meet the French competition was caused by the onerous dock charges against the American shipper in that port which the French shipper was not subjected to. Mr. Magdeburg. I brought that question up myself,! believe, Mr. Chairman. The Chairman. Yes, sir. Mr. Magdeburg. That is an additional burden. That is an addi- tional burden to the burden that, I have already spoken of. It is not only the discrimination favoring wheat that is at fault, but there is the discriminative charge that is levied upon the flour coming direct from our ports or from our mills as against the French millers' flour that comes from Marseille or Havre. That is an additional charge upon the flour that is made against the American miller of Is. 9d. per ton, which the French miller does not have to pay when he delivers flour in London. It is an additional hardship and burden that is placed upon us aside from the difference in the rates on wheat and flour. The Chairman. Some gentleman during that investigation, repre- senting the millers, made the statement that if that Is. 9d. charge was abrogated, the American miller then could successfully compete with his French rival in that market. Mr. Magdeburg. I presume that he made that statement upon the supposition that, all things being equal, the wheat and flour rate being the same, he woixld be able to do that; but with the differential between the wheat and flour rate we are absolutely unable to do so, because the difference is too great. Mr. Fletcher. This London dock charge is an additional burden? Mr. Madgeburg. An additional burden to the difference in rates between wheat and flour. Mr. Jones. Practically this bill would have no effect on that? Mr. Madgeburg. No; but that, Mr. Chairman, related to the hear- ing on the London dock charge, and I think I was the man that brought that very question up, if I remember correctly. The Chairman. Two or three gentlemen spoke about it. Mr. Magdeburg. And then afterwards, I believe, one of the steam- ship gentlemen pooh-poohed the idea, claiming that the i-ate to Mar- seille and Havre was quite different from the rate to London, and in that way tried to explain the matter away, but 1 stated in my state- mant that all things being equal INTEESTATE-OOMMEKCB LAW. 77 The Chairman. One or more of those gentlemen, you will remem- ber, said that there was no French flour in the London market. Mr. Magdeburg. In the London market? The Chairman. That there was no French flour in the London market. Mr. Magdeburg.. Then he was talking about something that he did not know anything about, because I know that a great deal of French flour goes into the United Kingdom markets, not only London alone, but all the United Kingdom markets, and while I do not say that he intentionally stated anything wrong, I do say that is not the fact. The fact is that a great deal of flour that is manufactured in France out of American wheat, particularly out of the Kansas variety, goes into the United Kingdom in all the ports, and particularly into London. My own correspondents called my attention to it at one time, that they preferred to buy American flour coming from France, because they were always sure to get it on a certain day, while we are not in the position to deliver it with that promptness. If we sell a man to-day 500 sacks of flour, it is quite problematic when that flour will reach the buyer. Sometimes it gets to the sea- board in ten days, and then it may lie at the seaboard for fifteen days or thirty days or forty days or even sixty days. I have known of flour lying there for three months. So that the buyer has no benefit of it; so that if a man in London to-day buys from Marseille or Havre he stipu- lates that the flour shall leave Marseille, for instance, on a certain day. Mr. Coombs. That is a natural advantage. Mr. Magdeburg. Yes; a natural advantage. Mr. Coombs. It can not be overcome. Mr. Magdeburg: No, sir. STATEMENT OF MR. FRANK BARRY. Mr. Barry. Mr. Chairman, I have here a brief submitted by the representatives of the Missouri, Kansas, and Oklahoma Association of Lumber Dealers, which they ask that the committee shall receive and consider. It is pertinent to this question. The Chairman. Hand it to the stenographer and it will be inserted in the hearings. (Thereupon, at 11.55 a. m., the committee adjourned until Monday, April 14, 1902, at 10.30 o'clock a. m.) The Interstate Commerce Committee, Washington, D. C: The undersigned, representatives of the Missouri, Kansas, and Oklahoma Associa- tion of Lumber Dealers, having been assured that their views in writing in reference to the needed legislation in the interest of interstate commerce would be considered, beg leave to submit the following: The interstate-commerce law enacted by Congress in 1887 was the outcome of constant public demand for at least ten years. The conditions existing at that time, and which gave rise to this demand, confront the public to-day in more aggravated form. President Arthur, in his message of December 4, 1882, recommends to Congress the regulation of interstate commerce, arraigns the corporations which own or con- trol the railroads of adopting such measures as tend to impair the advantages of healthful competition and to malie hurtful discriminations in the adjustment of freightage. He points out the fact that these inequalities have been corrected in 78 INTERSTATB-COMMKRCE LAW. several of the States by appropriate legislation, but so far as such mischiefs affect commerce between the States they are subjects of national concern, and Congress alone can afford relief. In his message in December, 1883, he points out the relations that ou^ht to exist between the public carriers and their patrons, and lays upon Congress the responsi- bility of granting relief and protection to the general public in the followmg lan- guage: " While we can not fail to recognize the importance of the vast railway system of the country and their great and beneficent influences upon the development of our material wealth, we should, on the other hand, remember that no individual and no corporation ought to be invested with absolute power over the interest of any other citizen or class of citizens. The right of these railway corporations to a fair and profit- able return upon their investments and to reasonable freedom in their regulations must be recognized; but it seems only just that, so far as its constitutional authority will permit, Congress should protect the people at large in their interstate traffic against acts of injustice which the State governments are powerless to prevent." I desire to draw your attention to the time when these messages were delivered— this was prior to the birth of Populism ; also to the fact that they come from a Repub- lican President of the United States, who gives authoritative expression of existing facts and of a universal demand for needed legislation. The charge has been made that this demand for the amendment of the interstate-commerce law is Populistic in its origin and character. It is no more Populistic than the origin of the law, and no law has ever been jilaced on our statute books which gave greater satisfaction to the general manufacturing and commercial public. The necessity of this law is made apparent by the study of the number and the variety of cases tried and decided by the Commission before its authority was ques- tioned and denied by the courts. In his message of December, 1896, President Cleveland says: "The justice and equity of the principles embodied in the existing (interstate-commerce) law, passed for the purpose of regulating transportation charges, are everywhere conceded, and there appears to be no question that the policy thus entered upon has a permanent place in our legislation." He states further that the wholesome effects of this law are manifest and have amply justified its enactment, and expresses the hope "that the recommendations of the Commission upon this subject will be promptly and favorably considered by Congress." Instead of Congress heeding the advice of the nation's Chief Executive, and the nation's spokesman, and carrying out the nation's wishes in this matter, the Supreme Court acted in 1897 and most effectually deprived the Commission of the power necessary to enforce its findings. The immediate result of this decision was the inauguration of a period of extortionate rates, rank discrim- ination, and a general hold-up of a forbearing but a determined and outraged public. President Roosevelt, voicing the sentiment of the general public, again calls the attention of Congress to the need of legislation along this line. He states "that the cardinal provisions of the interstate-commerce act were that railway rates should be just and reasonable and that all shippers, localities, and commodities should be accorded equal treatment;" that "experience has shown the wisdom of its jjurposes, but has also shown, possibly, that some of its requirements are wrong, certainly that the means devised for the enforcement of its provisions are defective." He concludes by saying that " the act should be amended. The railway is a public servant. Its rates should be just to and open to all shippers alike. The Government should see to it that within its jurisdiction this is so, and should provide a speedy, inexpensive, and effective remedy to that end. Nothing could be more foolish than the enact- ment of legislation which would unnecessarily interfere with the development and operation of these commercial agencies. The subject is one of great importance and calls for the earnest attention of Congress." The observation of these three Presidents covers a period of twenty years. They agree that an adequate interstate-commerce law is a necessity, that it is indispensable to the administration of justice, and that the responsibility for the enactment of such a law rests with Congress. For twenty years and more the general public has demanded this law. In 1887 the Conmiission was created, as was then supposed, with power to stop and correct abuses. In 1897 the Supreme Court held that their pow- ers were pureh' advisory. Since then the Commission is practically powerless. It IS perhaps alittle better than no Commission, but so far as granting practical relief IS concerned the country would be just as well off without any Commission. It is contended by representatives of the railways that the granting of power to the Com- mission to substitute a just for an unjust rate or an equitable for a discriminative rate IS equivalent to depriving the roads from the management of their property and investing the Commission with power to make rates. This Vas not the intention of INTERSTATE-COMMERCE LAW. 79 the law of 1887, nor the practice of the Commission under that law; neither is it the wish of the business men of to-day. What we contend for is a law which will give the Commission power, after a full, fair, and impartial hearing of both parties in interest, to put into effect a just and equitable rate, and this rate to be observed by the roads in question until the decision of the Commission is reversed by the Federal courts. The prosperity of the railways depends on the traffic given them by the public, just as the success of a bank depends on the deposits and business of its patrons. There is no public institution in the land which is administered more autocratically than our national banks by the Comptroller of the Currency. Yet the only bankers that kick against this supervision are those who are determined to do an illegitimate business. The same is true of railroads. Honest railroad men have nothing to fear. They know that the pubhc does not want to rob them, and that the law as it now stands affcTrds them ample protection. They also know that it is the inalienable right of their patrons to be protected by law against the unjust methods of unscrupulous railroad managers. The lumbermen of Kansas and Oklahoma, and the wholesalers shipping to these points, have had special experiences with the railroads on the question of lumber rates. The lumber rates to Kansas and to Oklahoma have not only been arbitrarily high, but have been in direct violation of the interstate-commerce law, which pro- vides that a greater charge shall not be made for a short haul than for a long haul under similar conditions. It is a general rule in both passenger and freight trafl&c that the company having the shortest and most direct route dictates the rate. This is one of the reasons offered by the railroads why Missouri, Illinois, and Indiana and other States have a much lower average rate on lumber than Kansas and Oklahoma, although the distance from the center of production in the Southern forests to the center of consumption is much shorter, and in many_ instances the lumber passes through Oklahoma and Kansas to reach these more distant points. The argument advanced has been that some railroad having a direct route to some point in the lumber district makes the rate for all roads to these centers. We do not object to this rule but we do object to railroads using one method of procedure or one law to make rates to one State and another law to make rates to another State. The rates from the central points of production to the central points of consump- tion in the various States are as follows: State or Territory. Average distance. Average rate. Oklahoma Miles. 350 600 600 1,000 1,300 1,500 Cents. 291 29 Missouri . 23 24 25i 28 Ohio . .. - This discrimination in rates greatly retards building in this Territory; it deprives us of all the natural advantages of location in close proximity to the Southern for- ests. This Territorj' has to pay an excessively high rate to enable the roads to give an extremely low rate to more remote points, in order to get into the Territory of roads hauling lumber from Northern forests. The Kansas rate, established more than fifteen years ago, was made via Kansas City. The rate established then to the central Kansas points was 27J cents per 100 pounds. This rate was made to conform to the existing white-pine rate from the North. Since then white pine has gone out of use, and yellow pine is used almost ■wholly; in addition diagonal roads were built, running south through Kansas and Oklahoma direct to the forests of Texas, Arkansas, and Louisiana, shortening the distance of the lumber haul 200 miles or more. The route for carrying the southern lumber product has been changed; the lumber comes no longer by way of Kansas City, and yet these old Kansas City rates are steadily maintained. Kansas City lies 40 miles north of the center of the State, and the opening of the diagonal roads to the south has moved the center of lumber production 80 miles west. This new con- dition saves to the center of Kansas consumption a haul of over 200 miles, or about 33 per cent of the entire distance. This shortened haul entitles us to a proportion- ate reduction in rates. But instead of reducing rates, in December, 1899, the roads advanced the rate 10 per cent to this territory, on the plea that they were entitled to share im the general prosperity of the country. Through the efforts of the attorney- general of the State and the political situation in reference to State railroad legisla- 80 INTERSTATE-COMMERCE LAW. tioii, we succeeded in getting the advance changed from 2J cents to 1 cent per 100 pounds. But still there was an advance instead of a reduction. Another reason why lumber rates should be less than local rates per ton per mile— and unfortunately they are higher in the State of "Kansas and the Territory of Okla- homa—lies in the fact that the kind of service required to haul lumber is less expensive than that required for most other commodities. The roads can use a cat- tle car, a box car, a flat car, or any other kind of car that may be to them convenient; the lumber is moved whenever it suits the road, without any loss to them except their own delay, the cost of loading and unloading is borne by the consignor and consignee; the payment of freight is in large amounts and is always cash; the risk is the minimum as compared with the hauling of other commodities, such as live stock, grain, and other commodities even more perishable; no suits confront the roads in the adjustment of losses; besides, the distribution of the Southern luijiber trade extends over the entire year and over the entire territory traversed north and southi. The Southern lumbermen are not dependent on winter snows for logging purposes; their stocks are always full, unless depleted through the channels of trade. The territory intervening between Kansas and the Southern forests is rich in natu- ral resources. Every foot of it affords a large amount of traffic in both directiona. These considerations ought to be strong factors in determining the rates on lumber. But I shall give you a practical idea of the existing conditions. Let us suppose a train load of lumber originates at Oonroe, Tex., on the Atchison, Topeka and Santa Fe Railroad, and let us suppose that this lumber is distributed along its line to Chi- cago, the distances and rates will be as follows: Gainesville, Tex Ardmore, Okla... Purcell.Okla Guthrie, Okla Wichita, Kans.., 1'opeka, Kana Lawrence, Kans Kansas City, Mo. Chicago, III Rate per Distance. 100 pounds. Maes. Cmte. 342 181 382 26 449 261 613 28 653 28 816 26 842 24 882 23 1,340 24 And all points between Carrollton, Mo., and Chicago on this line get a 24-cent rate. You will notice that the rate from Gainesville, Tex., to Ardmore, Okla., jumps up 6} cents per 100 pounds in a distance of 40 miles, or 30i mills per ton per mile, whereas the through rate toChicago is3.6 mills per ton per mile. The rate increases in inverse ratio to the distance the lumber is carried. This is not an isolated case, but this is a fair sample of the lumber rates adopted by all the roads operating in the State of Kansas and in Oklahoma. Texas originates lumber within its own State, and has a stringent State railroad law. This accounts for the advance in freight as soon as the road strikes Oklahoma, and also emphasizes the necessity of an interstate railroad law. The distance from Conroe to Chicago is more than twice the distance from Oonroe to Wichita, and yet the rate to Chicago is 24 cents, while the rate to Wichita, over the same road, under precisely similar conditions, is 28J cents per 100 pounds. Under the existing interstate commerce law the Commission is powerless. We employed the best legal talent obtainable and were advised by them that the Com- mission can only advise and intercede with the railroads to do the right thing by its patrons, but has no power to enforce its findings; they can not inaugurate a fair and reasonable rate, neither can we obtain redress in any court of the land except in so far that we can bring suit for recovery in individual cases where the roads liave made excessive and unreasonable charges. But to prosecute a suit of tnis nature takes years under our present system, while in the meantime the excessive charges are carried on by the roads. With these facts and conditions confronting us and affecting all lines of trade throughout the nation and presented constantly and persistently by the Presidents of the United States to Congress for the last twenty years for favorable action, it seems unnecessary for business men to plead with Congress to do what seems to them their plain duty. The men who are pleading with you to place on our statutes (Federal) such a law as is suggested in President Roosevelt's message are not wild-eyed Popu- lists; they are men who own and represent capital; they are men who by brain and brawn develop the varied industries of the nation; they are men who produce the INTERSTATE-COMMEEOE LAW. 81 business which makes the railroads a public necessity and a paying investment, men who understand the laws of business, men who realize the cost and appreciate good railroad service and are willing to pay for it. We desire to draw your attention to the fact that the owners and operators of our great public railroads are men subject to like passions as other men. The fact is that the men at the heads of the various departments are able men, in the prime of life, who have an ambition to make a financial record for their respective departments. To gain their ambition they very often resort to means which are neither just nor legal, and we look to you, the only body of men in the nation who have power to give protection, to pass a law which makes justice available and easy and speedy to the humblest citizen of our land. We know that the interests of the railroads do not weigh heavier with you than the interests of the public, and that you will not by inaction make it possible for unscrupulous railroad men to rob an unprotected public. I know that facetious and misleading arguments are made by the representatives of the railroads, claiming that this legislation would place the rate-makmg power in the hands of five inexperienced men, and would deprive them of the management of their business. We do not ask for any such a law; we would ask you to pass a law which while it protects the public also protects the railroads. Any other law would be unconstitutional. The proposed Nelson bill gives ample protection to both par- ties in interest, and does not deprive the railroads any more of the management of business than the rulings of the Comptroller of the Currency deprives national banks of the management of their business, or the rulings of the Treasury Department in administering the revenue deprives importers or merchants of the management of their business. These departments see that these lines of business are conducted in a lawful and legitimate way, and the only parties that suffer are those who are guilty of fraudulent methods. The railroads are amply protected in this measure against any mistake made by the Commission, intentionally or otherwise, and can get speedy action in any of the Federal courts. In conclusion we desire to state that we come not to ask a favor, but simple justice. We do not desire to arraign class against class. We ask you as our representative? and lawmakers to place upon our statute book a law which will prevent this. If, in your judgment, the general public is to be left to the mercy of conscienceless rail- road magnates, either repeal the interstate commerce law or let it stand in its present worthless form. Their practices of extortion and discrimination turn good and able citizens into anarchists. "Patriotism lives and grows on what it feeds upon." Create or tolerate a condition which deprives A of an equal chance with B, which will build up one man by pulling down another, or build up one city, community, or State by tearing down another, and let this condition continue for years against the protest of the greatest and most responsible men of the nation, including our Presidents, and you will create a condition of distrust, dissatisfaction, disaster, and political disaffection. All of which is respectfully submitted. E. M. Adams, E. S. MiNEE, £. B. BUBKHOLDER, Committee. (Dictated by E. E. Burkholder, Hillsboro, Kans.) Apbil5, 1902. POWBK OP CONGKESS OVER INTERSTATE COMMERCE. Congress has power to constitute tribunals inferior to the Supreme Court. ({Cons. TJ. S., section 8, clause 9.) To regulate commerce with foreign nations and among the several States and with the Indian tribes. (Cons. U. S., section 8, clauses, Article I.) The making and fixing of rates is a legislative, and not a judicial, function; and the decisions are uniform in declaring that statutes creating railroad commissions, and giving them the power to make and fix rates, are not unconstitutional as dele- fating a legislative power which belongs only to the legislature itself. (8 Am. and ;ng. Ency. of Law, 911; Chicago & N. W. E. Co. v. Dey, 4 Ey. & Corp. L. J., 465; 35 Fed. Eep., 866; 2 Inters. Com. Eep., 325; 1 L. E. A., 744. Granger Cases, 94 U. S., 113-187; 24 L. ed., 77-97. State ex rel. Eailroad & Warehouse Commission v. Chicago, M. & St. P. E. Co., 38 Minn., 281; 37 N. W., 782. State ex rel. Board of Transpor- tation V. Fremont, E. & M. Valley E. Co., 22 Neb., 313; 35 N. W., 118; 23 Neb., 117; I-O L- 6 V 82 INTERSTATB-COMMEEOE LAW. 36 N. W., 308. Tilley v. Savannah, F. & W. E. Co., 5 Fed. Kep., 641. Georgia R. Co. V. Smith, 70 Ga., 694. New York & N. E. E. Co. v. Bristol, 151 TJ. S., 556; 38 L. ed., 269. Eeagan «. Farmers' Loan & T. Co., 154 U. S., 362; 38 L. ed., 1014; 4 Inters. Com. Eep., 560, and cases quoted. Ames v. Union P. E. Co., 64 Fed. Eep., 165; 4 Inters. Com. Eep., 835. Interstate Commerce Commission ti. Cincinnati, N. O. & T. P. E. Co., 167 U. S., 479; 42 L. ed., 243. Texas & P. E. Co. v. Interstate Commerce Commission, 162 U. S., 197; 40 L. ed., 940. Smyth v. Ames, 169 U. S., 466; 42 L. ed., 819.) When the law has confided to a special tribunal the authority to hear and deter- mine certain matters arising in the course of its duties, the decision of that tribunal, within the scope of its authrity, is conclusive upon all others. (Johnson v. Towsley, 13 Wall, 72; 20 L. ed. 485.) The legislature's determination, either directly or indirectly, of what is reasonable, is conclusive, subject only to charter rights and to tha fact that the rates established will give gome compensation to the carrier. (Atty. Gen. v. Old Colony R. Co., 160 Mass., 62; 22 L. E. A., 112. Chicago & N. W. E. Co. v. Dey, 35 Fed. Eep., 866; 2 Inters. Com. Eep., 325; 1 L. E. A., 744.) The power to regulate is to prescribe the rule by which the commerce is to be gov- erned. This power, like all others vested in Congress, is complete in itself, may be exercised to its utmost extent, and acknowledges no limitations other than are pre- scribed in the Constitution. If, as has already been understood, the sovereignty of Congress, though limited to specified objects, is plenary as to those objects, the power over commerce with foreign nations and among the several States is vested in Con- gress as absolutely as it would be in a single government having in its constitution the same restrictions in the exercise of the power as are found in the Constitution of the United States. (Gibbons v. Ogden, 9 Wheat., 1, 197; 6 L. ed., 23, 70.) It is obvious that the Government, in regulating commerce with foreign nations and among the States, may use means that may also be employed by a Steite in the exercise of its acknowledged powers — that, for example, of regulating commerce within a State. (Gibbons v. Ogden, 9 Wheat., 204; 6 L. ed., 72.) The power to regulate commerce * * * amounts to nothing more than a power to limit and restrain it at pleasure. (Gibbons v. Odgen, 9 Wheat., 227; 6 L. ed., 77.) It tnay be doubted whether any of the evils proceeding from the feebleness of the Federal Government contributed more to that great revolution which induced tlie present system than the deep and general conviction that commerce ought to be regulated by Congress. It is not, therefore, matter of surprise that the grant should be as extensive as the mischief, and should comprehend all foreign commerce and all commerce arising among the States. (Brown v. Maryland, 12 Wheat, 446; 6 L. ed., 688. ) The power to regulate commerce includes that of punishing all offenses against commerce. (United States v. Coombs, 12 Pet., 72; 9 L. ed., 1004.) The design and object of that power, as evinced in the history of the Constitution, was to establish a perfect equality amongst the several States as to commercial rights, and to prevent unjust and invidious distinctions which local jealousies or local and partial interests might be disposed to introduce and maintain. (Veazie v. Moor, 14 How., 574; 14 L. ed., 547.) Commerce is a term of- the largest import. * * * The power to regulate it embraces all the instruments by which such commerce may be conducted. (Welton V. Missouri, 91 U. S., 280; 23 L. ed., 349.) The power conferred upon Congress to regulate commerce with foreign nations and among- the several States is not confined to the instrumentalities of commerce known or in use when the Constitution was adopted, but keeps pace with the prog- ress of the country, and adapts itself to the new developments of time and of cir- cumstances. It was intended for the government of the business to which it relates at all times and under all circumstances; and it is not only the right, but the duty, of Congress to take care that intercourse among the States and the transmission of intelligence are not obstructed or unnecessarily encumbered by State legislation. (Pensacola Teleg. Co. v. Western U. Teleg. Co., 96 U. S., 9; 24 L. ed., 710.) The power t« regulate that commerce, * * * vested in Congress, is the power to prescribe the rules by which it shall be governed— that is, the conditions upon which it shall be conducted. * * * The power also embraces within its control all the instrumentalities by which that commerce may be carried on, and the means by which it may be aided and encouraged. (Gloucester Ferry Co. v. Pennsylvania, 114 U. S., 203; 29 L. ed., 161; 1 Inters. Com. Eep., 382.) When a commodity has begun, to move as an article of trade from one State to another, commerce in that commodity between the States has commenced. (The Daniel Ball, 10 Wall., 565; sub nom. The Daniel Ball v. The Unif«d States, 19 L. ed., INTEK8TATE-00MMEE0E LAW. 83 But this movement does not begin until the articles have been shipped or started for transportation from the one State to the other. (Coe v. En'ol, 116 U. S., 517; 29 L.ed., 715.). This species of legislation is one which must be, if established at all, of a general and national character. (Wabash, St. L. & P. E. Co. v. Illinois, 118 U. S., 577; 30 L. ed., 251.) For the regulation of commerce as thus defined there can be only one system of rules applicable alike to the whole country; and the authority which can act for the whole country can alone adopt such a system. (Mobile County v. Kimball, 102 TJ. S., 691; 26 L. ed., 238.) The power to regulate commerce embraces a vast field, containing not only many but exceedingly various subjects quite unlike in their nature. (Cooley v. Philadel- phia Port Wardens, 12 How. , 299 ; ' 13 L. ed . , 996. ) The power to regulate commerce among the several States is granted to Congress in terms as absolute as is the power to regulate commerce with foreign nations. (Brown v. Houston, 114 U. S., 622; 29 L. ed., 257.) The uses of railroad corporations are public, and therefore they are subject to leg- islative control in all respects necessary to protect the public against danger, injustice, and oppression. (New York & N. E. R. Co. v. Bristol, 151 U. S., 556; 38 L. ed., 269. ) Congress has plenary power, subject to the limitations imposed by the Constitution, to prescribe the rule by which commerce among the several States is to be governed, and may, in its discretion, employ any appropriate means, not forbidden by the Constitution, to carry into effect and accomplish the objects of a power given to it by the Constitution. (Interstate CoEjmerce Commission v. Brimson, 154 tJ. S., 447; 38 L. ed., 1047; 4 Inters. Com. Rep., 545.) The making and fixing of rates by either a legislature directly or by a commission / y do not work a deprivation of property without due process of law. (Munn v. Illinois, // 94 U. S., 113; 24 L. ed., 77. Davidson v. New Orleans, 96 U. S., 97; 24 L. ed., 616. Stone V. Farmers' Loan & T. Co., 116 U. S., 307; 29 L. ed., 636. Dow v. Beidelman, 125 U. S., 680; 31 L. ed., 841; 2 Inters. Com. Kep., 56. Minneapolis & St. L. B. Co. V. Beckwith, 129 TJ. S., 26; 32 L. ed., 585, and cases cited. Budd v. New York, 143 U. S., 517; 36 L. ed., 247; 4 Inters. Com. Rep., 45. New York & N. E. R. Co. v. Bristol, 151 U. S., 556; 38 L. ed., 269. Reagan v. Farmers' Loan & T. Co., 154 U. S., 362; 38 L. ed., 1014; 4 Inters. Com. Rep., 560.) - The State does not lose the right to fix the price because an individual voluntarily undertakes to do the (public) work. (Budd v. New York, 143 U. S., 517; 36 L. ed., 247; 4 Inters. Com. Rep., 45.) The Nebraska statute fixing maximum rates- is not obnoxious to the fourteenth amendment. (Amesf. Union P. R. Co., 64Fed. Rep., 165; 4Inters. Com. Rep., 835.) The compelling of railway companies to comply with the order of railroad com- missioners regulating rates is due process of law. (8 Am. & Eng. Enc. of Law, 911. Chicago, M. & St. P. R. Co. v. Becker, 32 Fed. Rep., 849. Louisville & N. R. Co. v. Railroad Commission, 19 Fed. Rep., 679; 16 Am. &Eng. R. Cas., 1. Railroad Comrs. V. Oregon R. &. Nav. Co., 17 Or., 65; 2 L. R. A., 195; 35 Am. & Eng. R. Cas., 542. State ex rel. Railroad & Warehouse Commission j;. Chicago, M. & St. P. R. Co., 38 Minn,, 28l; 37 N. W., 782. Stone v. Natchez, J. & C. R. Co., 62 Miss., 646. Stone V. Farmers' Loan & T. Co., 116 U. S., 307; 29" L. ed., 636. State ex rel. Board of Transportation v. Fremont, E. & M. Valley R. Co., 22 Neb., 313; 32 Am. & Eng. R. Cas., 426. People v. New York, L. E. & W. R. Co., 104 N. Y., 58. State v. New Haven & N. Ry. Co., 37 Conn., 153.) The principal objects of the interstate-commerce act were to secure just and rea- sonable charges for transportation. * * * (Interstate Commerce Commission v. Baltimore & O. E. Co., 145 U. S., 263; 36 L. ed., 699; 4 Inters. Com. Rep., 92.) It is difficult to perceive how the power to fix and regulate the charges for such transportation can be considered in any other light than that of a power to regulate commerce. (Illinois C. R. Co. v. Stone, 20 Fed. Rep;, 468.) It is not doubted that Congress has the power to go beyond the general regula- tions of commerce which it is accustomed to establish, and to descend to the most minute directions if it shall be deemed advisable. (Cooley, Const. Lim., 732, quoted with approval by Mr. Justice Field in the case of Gloucester Ferry Co. v. Pennsylvania, 114 U. 8., 196; 29 L. ed., 158; 1 Inters. Com. Rep., 382.) That this power to regulate by fixing charges for interstate transportation is vested solely in Congress by Article I, section 8, paragraph 3, of the Constitution of the United States, is, in my opinion, equally well settled by numerous decisions of the Supreme Court of the United States. (Mobile & O. E. Co. v. Sessions, 28 Fed. Rep., 592.) ., . , Several of the State statutes, under State constitutions, containing nearly identical 84 INTERSTATE-COMMBEOE LAW. provisions on the subject as the Federal Constitution, allowing State railroad com- missions to make and fix railway rates for such States, which said rates were to be operative until set aside by the courts, have been upheld as valid and constitutional by the United States Supreme Court. (See Pensacola & A. E. Co. v. State (Fla.), 3 L. E. A., 661, with extensive notes to that case and notes to Winchester & L. Tump. Eoad Co. V. Croxton (Ky.), 33 L. E. A., 177.) This Federal Commission has assigned to it the duties and.performs for the United States in respect to that interstate commerce committed by the Constitution to the exclusive care and jurisdiction of Congress the same functions which State commis- sioners exercise in respect to local or purely internal commerce over which the State appointing them have exclusive control. Their validitjr in their respective spheres of operation stands upon the same footing. The validity of State commis- sions invested with powers as ample aiid large as those conferred upon the Federal Commission has not been successfully questioned when limited to that local or inter- nal commerce over which the States have exclusive jurisdiction; and no valid reason is seen for doubting or questioning the authority of Congress, under its sovereign and exclusive power to regulate commerce among the several States, to create like commissions for the purpose of supervising, investigating, and reporting upon mat- ters or complaints connected with or growing out of interstate commerce. What one sovereign may do in respect to matters within its exclusive control the other may certainly do in respect to matters over which it has exclusive authority. (Kentucky & I. Bridge Co. v. Louisville & N. E. Co., 37 Fed. Eep., 567; 2 Inters. Com. Eep., 380; 2. L. E. A., 289.) The power granted to Congress to regulate commerce is necessarily exclusive whenever the subjects of it are national or admit only of one uniform system or plan of regulation throughout the country. * * * In the matter of interstate com- merce the United States are but one country, and are and must be subject to one system of regulation and not to a multitude of systems. (Eobbins v. Shelby County Taxing Dist., 120 U. S., 489; 30 L. ed., 694; 1 Inters. Com. Eep., 45. Stoutenburgh v. Hennick, 129 U. S., 141; 32 L. ed., 637.) Congress may, under certain conditions, reduce the rates of fare on the Union Pacific Eailroad, if unreasonable, and fix and establish the same by law. (12 Stat. L., 497, chap. 120, sec. 18. ) This statute is discussed by Mr. Justice Brewer in Ames V. Union P. E. Co., 64 Fed Eep., 165; 4 Inters. Com. Eep., 835, and held not to con- clude the State of Nebraska from fixing rates until Congress takes action. This act (of Colorado) was intended to apply to intrastate traffic the same whole- some rules and regulations which Congress two years thereafter applied to commerce between the States. (Union P. E: Co. v. Goodridge, 149 U. S., 680; 37 L. ed., 896.) The'Interstate Commerce Commission is an administrative board, and the courts are only to be resorted to when the Commission prefers to enforce the provisions of the statute by a direct proceeding in the court, or when the orders of the Commis- sion have been disregarded. (Interstate Commerce Commission v. Cincinnati, N. 0. & T. P. E. Co., 162 U. S., 184; 40 L. ed., 935; 5 Inters. Com. Eep., 391.) The entire commerce of the United States, foreign and interstate, is subject to the provisions of the act of Congress to regulate commerce. (Texas & P. E. Co. v. Inter- state Commerce Commission, 162 U. S., 197; 40 L. ed., 940; 5 Inters. Com. Eep., 405.) Upon the power of legislatures to fix tolls, rates, or prices, see note to case of Win- chester & L. Tump. Eoad Co. v. Croxton (Ky.), 33 L. E. A., 177. A statute imposing a penalty for charging more than just and reasonable compen- sation for the services of a carrier, without fixing any standard to determine what is just and reasonable, thus leaving the criminality of the carrier's act to depend on the jury's view of the reasonableness of a rate charged, is in violation of the consti- tutional provision against taking property without due process of law. (Louisville & N. E. Co. V. Com., 99 Ky., 132; 33 L. E. A., 209.) Penalties can not be thus inflicted at the discretion of a jury. * * * The legis- lature can not delegate this power to a jury. If it can declare it a criminal act for a railroad corporation to take more than a "fair and just return" on its investments, it must, in order to maintain the validity of the law, define with reasonable certainty what would constitute such "fair and just return." (Louisville & N. E. Co. v. Rail- road Commission, 19 Fed. Eep., 679.) The Supreme Court of the United States, in Eailroad Commission Cases, 116 U. S., 336, sub nom. Stone v. Farmers' Loan & T. Co., 29 L. ed., 646, refers to the last- named case and substantially approves it. Although a statute has been held to be unconstitutional which left it to the jury to determine whether or not a charge was excessive and unreasonable in order ta a8(«rtain whether a penalty is recoverable, yet, where the action is merely for recov- ery of the illegal excess over reasonable rates, this is a question which is a proper one for a jury. (8 Am. & Eng. Ency. of Law, 935.) INTERSTATE-COMMERCE LAW. 85 it did not prescribe what should constitute a reasonable rate; but as the statute declared that the rate fixed by the commission should be prima facie evidence that it was reasonable, although the accused could show in defense that it was not reason- able, the supreme court of the State held that the statute was sufficiently definite, since the rate was fixed, although it was subject to attack in the courts. To the claim that the commissioners' rate would not secure the accused from conviction if it was excessive, the court declared that the State was precluded from denying that the commissioners' rate was a reasonable one. (Burlington, C. K. & N. R. Co. v. Dey, 82 Iowa, 312; 3 Inters. Com. Rep., 584; 12 L. R. A., 436.) The same decision in substance was made on this question by Judge Brewer, then of the United States circuit court, in the case of Chicago & N. W. R. Co. v. Dey, 35 Fed. Rep., 866; 2 Inters. Com. Rep., 325; 1 L. R. A., 744. The lUinoie act, providing that a charge by a railroad company of more than rea- sonable rates shall constitute extortion, is held to be sufficiently definite when con- strued with another section which provides that the railroad commission shall make a schedule of reasonable maximum rates. Chicago, B. & Q. R. Co. v. People, 77 111., 443. And the validity of this provision of the Illinois statute has been further estab- lished by the Illinois supreme court. See Chicago, B. & Q. R. Co. v. Jones, 149 111., 361; 4 Inters. Com. Rep., 683; 24 L. R. A., 141; Stone i). Farmers' Loan&T. Co., 116 U. S., 307; 29 L. ed., 636, deciding the same way the Mississippi statute. The Georgia statute is not violated unless the rates charged exceed those fixed by the Commission. Sorrell v. Central R. Co., 75 (ia., 509. But in order to constitute a crime the act must be one which the party is able to know in advance whether it is criminal or not. The criminality of an act can not depend upon whether a jury may think it reasonable or unreasonable. Tozer v. United States, 52 Fed. Rep., 917; 4 Inters. Com. Rep., 245. An inquiry whether rates of carriers are reasonable or not is a judicial act; but to prescribe rates for the future is a legislative act. That Congress has transferred to any administrative body the power to prescribe a tariff of rates for carriage by a common carrier is not to be presumed or implied from any doubtful and uncertain language. If Congress had intended to grant such a power to the Interstate Com- merce Commission, it can not be doubted that it would have used language open to no misconstruction, but clear and direct. Interstate Commerce Commission v. Cin- cinnati, N. 0. & T. P. R. Co., 167 U. S., 479; 42 L. ed., 243. In the case of Munn v. Illinois, 94 U. S., 113, 24 L. ed., 77, the Supreme Court of the United States, after a thorough review of the American and English authorities, has laid down the following fundamental principles governing public carriers and other quasi-public institutions: 1. Under the powers inherent in every sovereignty, a government may regulate the conduct of its citizens toward each other, and, when necessary for the public good, the manner in which each shall use his own property. 2. It has, in the exercise of these powers, been customary in England from time immemorial, ^nd in this country from the first colonization, to regulate ferries, com- mon carriers, hackmen, bakers, millers, wharfingers, auctioneers, innkeepers, and many other matters of like quality, and in so doing to fix a maximum charge to be made for services rendered, accommodations furnished, and articles sold. 3. The fourteenth amendment to the United States Constitution does not in any wise amend the law in this particular. 4. When the owner of property devotes it to a use in which the public has an interest, he in effect grants to the public an interest in such use, and must to the extent of that interest submit to be controlled by the public. 5. The limitation by legislative enactment of the rate of charges for services ren- dered in an employment of a public nature, or for the use of property in which the pubhc has an interest, establishes no new principle in the law, but only gives a new effect to an old one. Thus the highest court has permanently established the broad principle that the public have the right to regulate charges in all enterprises affected with a public use. To this doctrine all the courts have steadfastly adhered. In this leading case it was also held that the courts had no right to interfere with the rates fixed by the law- making power. This doctrine, however, has been since somewhat qualified in the case of Reagan v. Farmers' Loan & T. Co., 154 U. S., 412, 38 L. ed., 1028; 4 Inters. Com. Eep., 1028, and other cases there cited, where it is held that when rates are . confiscatory the courts may so declare and relegate the matter back to the lawmak- ing power for new rates, by which a reasonable profit is left to the carrier. But the principle that the legislative power, either directly or indirectly through a commission, can fix rates of freight and passenger traffic within this constitutional limitation, has been miiformly upheld in all the decisions of the United States Supreme Court upon this subject. 86 INTERSTATE-COMMERCE LA."W. MoNDAT, April H, 1902. The committee met at 10.30 o'clock a. m., Hon. William P. Hepburn in the chair. i i. j The Chairman. Gentlemen, the committee is ready to proceed. STATEMENT OE MR. B. S. LYON. Mr. Lton. Mr. Chairman, I represent the Chicago Board of Trade, in part. Some gentlemen here will follow me who also represent that body. What 1 have to say will not take up very much of your time. The Chairman. Let me ask you: A number of gentlemen have said that they represent this body and that body and the other. Please explain to the committee how, as a representative, you come here. Of course you have a perfect right to appear on your own personal account, and we are very glad to see you, but when a man comes in a represent- ative way it is always desirable to know how anxious those wliom he represents were to have him come. Mr. Lyon. Perhaps my credentials here would do if I should read them. The Chairman. That will do. (Mr. Lyon here read a letter from Mr. Warren, the president of the Board of Trade of Chicago, notifying him of his appointment to appear before the committees of Congress in regard to the pending bill.) The Chairman. That was the action Mr. Lton. Of the board of directors. The Chairman. Yes. Mr. Lyon. Of course the board of directors have only powers to take action by the particular committees The Chairman. What I want to get at is, I want to know how far there is a sentiment in that board of trade that authoritatively has asked gentlemen to come here, because that indicates the sentiment. A complimentary request from the president of the board asking some gentleman to appear here who is traveling in this part of the country does not mean much, but if the board of trade, by their own action, had a meeting and thought this a matter of sufficient importance to have a gentleman come here specially to represent them, that means one thing Mr. Lyon. Without flattering myself, Mr. Chairman, and without any egotism, I would say that in 1899 I was the president of that organization, and consequently I know a little somethmg of the powers delegated to the directors. The board of directors are elected from that board of trade, 1,700 in number, to regulate its afl'airs. We have our committeesj whose special duty it is to deal with these subjects, governing particular subjects that come from outside matters up to this board of directors. Those matters are never referred to the board as a whole, consequently the directors act in everything for the board. Now, this board indorse, I believe— although I am not a member now, I know they indorse— the Corliss bill, and they are anxious to have those recommendations carried out, and they have asked Mr. Chad- wick to come here, and myself, and he will follow me after a while, and perhaps go into it a little more than I. INTERSTATE-COMMERCE LAW. 87 The Chairman. When was this legislation as embodied in the Cor- liss bill considered by the board of trade of Chicago? Mr. Lton. By the directors of the board of trade? The Chairman. No; by the board of trade. Mr. Lyon. It never was. The Chairman. It never was ? Mr. Lyon. No, sir. As I explained it awhile ago, the board of trade as a corporate body delegates to the directors its powers to do anything in a matter. Of course the individual members of the board, some 1,800, may have divergent views. The Chairman. When was the subject considered by the board by directors ? Mr. Lyon. I think some time since the first of January. I am not positive, but I think that is it. It is recently, since the bill has been before you. The Chairman. Were the provisions of the bill discussed by the directory ? Mr. Lyon. I think so; I was not there. The Chairman. They had copies of the bill? Mr. Lyon. Yes, sir; Mr. Barry corrects me. He says that there was a copy of a resolution adopted b}!^ the board of directors iiled with this committee. The Chairman. Very well, I do not want to be unduly inquisitive, but I simply want to know how far this subject had been a matter of discussion, and how far there was a public opinion on the part of the board of trade of Chicago upon the subject. Mr. Lyon. Yes, sir. The Chairman. And whether that had been Mr. Lyon. Possibly I can, in what I am going to say to you here, fo into that sufficiently. Mr. Chadwick, who is to follow me, is a irector, and may answer you more fully. I have been out of office for two years. It would seem possibly a little superfluous to one at this day to appear before a committee of Congress and show that the interstate- commerce law had been violated or to bring any evidence to that end. You have had abundant evidence and are surfeited, no doubt, with facts showing this to be the case; consequently I will not attempt to take up any of your valuable time to that end. Representing, as I have the honor to at this time, the great grain and shipping trade of the Board of Trade of the city of Chicago, I come before you to urge some change in the interstate-commerce law that will give us equal, stable, and uniform rates to and from all points. The Chairman. Let me interrupt you there just a moment. If these interruptions are embarrassing to you, however Mr. Lyon. As far as I can answer you, I will be glad to do so. I am not a lawyer at all. The Chairman. You have spoken of the grain shippers of Chicago ? Mr. Lyo». Yes. The Chairman. Now, we have heard from many gentlemen here who represent the flour interests Mr. Lyon. Yes, sir. The Chairman (continuing). Who complain of you gentlemen ship- ping grain, and especially the shippers of wheat, of the very unusual facilities that you gentlemen have 88 IlTTEBSTATE-COMMBEOB LAW. Mr. Lyon. As I proceed you will perceive that I am a very small item. I am what is called a small shipper. The Chaieman. But you are conversant with the subject somewhat? Mr. Lyon. Yes, sir; I am, a little. The Chairman. Now, if you will explain to us how this discrepancy of opinion arises between these gentlemen who are making complaint of the undue advantages that you nave Mr. Lyon. You are speaking of the millers? The Chairman. Of the millers. Mr. Lyon. That I can not say. I am absolutely powerless to do that. I can not do that. You have had gentlemen here who can explain that to you. I am not a miller, but simply a small shipper. The Chairman. It is from the fact that you are not a miller, but a shipper of grain, that 1 have come to you for information. Ml". Lyon. I do not know as to that. The Chicago Board of Trade, handling as it does the greatest bulk of grain of any market in the world, reaching out in all directions, West, Northwest, and Southwest, to bring this grain to market, and in turn supplying the markets of the world, both domestic and foreign, must of necessity be the barom- eter of prices and feel any and all outside influences that affect its prices. So that any deviation from tariff rates, known always, whether made in the country west, tributary to Chicago, whereby grain is diverted from its natural channel, or even by our own members, competitors with one another, is immediately felt and the market price of commod- ities dealt in on the Chicago market is influenced to a greater or less degree. The Chairman. May 1 interrupt you again ? What do you mean by grain being diverted from its natural channels? Mr. Lyon. Well, grain that is naturally — I will assume that-^nat- urally tributary to Chicago, by reason of its lake advantages, is bought by Eastern parties, or perhaps parties on our own board, which is not sent through Chicago, but which reaches its destination by being sent around to outside junction points east of the river, or per- haps to St. Louis; and that we feel very much in that way. The Chairman. Give us an illustration, if you please, of that diver- sion; some instance of a diversion froin a natural channel. Mr. Lyon. Well, we will call the natural channel, for instance, Chi- cago. Now, our merchants in Chicago know where all this grain in Iowa lies, and in Nebraska, and in the Northwest and Southwest, and possibly through capital or some way else control it. The Chairman. Grive us an illustration of where it goes at times. Mr. Lyon. It goes to the seaboard. The Chairman. By what routes ? Mr. Lyon. Routes that are around Chicago, by belt lines, by junc- tion points that do not bring it to Chicago at all. The Chairman. That is, that do not bring it to Chicago elevators? Mr. Lyon. That does not bring it to Chicago. Yes; to Chicago elevators, if you choose to use that expression. Chicago elevators are where they take the lake route. But the first thing we know some- body is bujring a lot of grain and taking it off to Baltimore and New York by a junction route and we do not get the benefit of that. Mr. Corliss. What harm does this diversion do ? Mr. Lyon. By its going by a route different from that we have. For instance, the grain might be worth more in Chicago. Two and INTERSTATE-COMMERCE LAW. 89 two make four; it does not make three. We know that if it goes to Chicago it would make a better price than if it goes around. Mi-. Corliss. Then you claim that these diversions are in consequence of a rate that is unlawful ? Mr. Lyon. Yes, sir. Mr. Tompkins. A discriminating rate? Mr. Lyon. A discriminating rate; yes, sir. The Chairman. Suppose that is done, suppose the rate is discrimi- nating against Chicago, or against this natural route that you speak of, it must be a lower rate ? Mr. Lyon. Yes, sir. The Chairman. Then it would inure to the benefit of the peopl.e at some other point than Chicago ? Mr. Lyon. Yes, sir. The Chairman. That, then, is the burden of your complaint? Mr. Lyon. Yes, sir. Well _ The Chairman. That under this rate, whatever it is, the commis- sion merchants at some other place would have the benefit, rather than Chicago. Mr. Lyon. Presumably so. The Chairman. Then your complaint is a local one and a personal one? Mr. Lyon. Possibly. Yes; yes, it is. Mr. Corliss. If you had the same rate as the other party, could you control the freight? Mr. Lyon. To a greater or less degree, because we own the property. Transportation is necessary to the people. It is as absolutely a necessity to the prosperity of our nation as the air we breathe. Everyone should be treated alike, whether a large shipper, supplying the wants of foreign countries, or a small shipper, taking care of the needs of this country. All sorts of devices known to shippers and railroads should be open, and the great transportation lines of this country should treat each and every one alike. To use the language of one of our learned judges, " Freight rates should be as stable as postage rates, to everywhere and from everywhere alike." This is all we ask, and for such a law properly carried out we are willing to stand, to survive or fall. I am a member of a grain firm and have been for the past twenty- four years. Formerly we belonged to that coterie of grain shippers designated as " small shippers." Previous to and about 1890 we sought to supply the wants of grain men in New England, New York, Penn- sylvania, and Ohio, and throughout the Southern States, doing nothing but a domestic trade, and did excluisively a shipping business. Grad- ually this trade became smaller by reason of encroachments of larger shippers more favored by rates, and we were at last driven almost entirely out of the shipping business and obliged to take up other branches of the grain business. There are combinations of Western elevator companies with railway managers on different lines of roads, and all more or less competitors. Each railway wants the business. They are secret and powerful combinations with mutual desires for securing traffic. The rates and devices known only to railway men are never playthings. The act to regulate commerce was passed solely to secure an equal distribution of the benefits of transportation, and to correct abuses 90 INTERSTATE- COMMERCE LAW. which had imperceptibly and gradually crept into the administration of the vast powers conferred upon railroad corporations. The Chairman. Let me interrupt you there. I wish you would explain a little further the result of these combinations that you have referred to between the elevators along a given line of railway and the carrier; how do they operate? How do they operate upon the grain raiser; for his benefit or against him? Mr. Lyon. You are talking about the farmer? The Chairman. Yes, sir. Mr. Lyon. Well, I am not one of the people who think that a high rate will give the farmer more for his grain. The Chairman. No; these rates are evidently lower rates, because they have the potency that diverts this commerce from natural channels. Mr. Lyon. Yes, sir. The Chairman. Now, if that is true — — Mr. Lyon. Yes, sir. The Chairman (continuing). And I assume that you know about it, the rate must be lower? Mr. Lyon. Yes, sir. The Chairman. Now, if the rate is lower, who is the beneficiary? Mr. Lyon. Both the railroads and the elevators, in combination together. The Chairman. The grain raiser is not a participator in that? Mr. Lyon. I do not know that he would be. I can not see that he would. The Chairman. Ordinarily the shipper who has an advantage with a carrier has more of means with which to increase his business? Mr. Lyon. Yes, sir. The great elevator people of Chicago are con- nected with the railroads. The Chairman. But I am not speaking now of great elevators in Chicago, because the traffic is diverted from them — — Mr. Lyon. From whom? The Chairman. The great grain elevators in Chicago? Mr. Lyon. No; I said they were combinations with the railroads. The Chairman. I thought you spoke of. the elevators along the lines of the railways. Mr. Lyon. I meant at junction points. I said the combination of Western railway companies with the railroad managers on the differ- ent lines of roads. See ? The railroads themselves. The Chairman. You will not understand, now, that the query I am making is a criticism or anything that is to be construed that way. We want to get some of the detailed information that you gentlemen have. When you talk about the generalities of this subject we have some ideas about that subject, and we can get that sort of information for ourselves. Mr. Lyon. I presume so. The Chairman. But you have peculiar knowledge from your business relations, and that is what we want, to see what things the carriers do do in violation of the law, and what we can do, if anything, to correct that. Mr. Lyon. We know that the railways themselves — I say we know; now, I can not prove it to you by any evidence that might go in a court, but we know intuitively that the rates from Iowa, Nebraska, INTERSTATE-COMMERCE LAW. 91 and the west are. cut to Chicago, and we know they are cut out of Chicago east. The Chairman. Now, let us stop right there and find out who is the beneficiary of that cut. Mr. Lton. The grain raisers themselves are not. The Chairman. Not the raisers themselves? Mr. Lyon. Not the farmer, in my judgment. The Chairman. The benefit begins, then, after the grain has accumu- lated in the local elevator, and the grain raiser, you think, has no participation in that benefit? Mr. Lyon. I can not reason it out in my mind that the farmer gets any benefit of any lower rate than he does from a higher rate. The Chairman. Then in this particular case the local competition — the influence of that is suspended as concerns the farmer? Mr. Lyon. Possibly so. Of course, temporarily the farmer, if he has not sold his grain, might get a little benefit from a higher market or a cheaper freight rate; it might bring a little higher price to him for his grain temporarily, but these things regulate themselves after a while. I do not want now to go into the question of the speculative part of it, because I am not in that business — about the hidden grain that you have all heard so much of. I will not go into that. It is not here at all. But that very question might enter somewhat into the discussion here as to the railroad rates. Mr. Adamson. Do they make these combinations at certain seasons, after the farmer has sold out his crop? Mr. Lyon. Yes, sir; to a great degree they do. The farmer gen- erally sells his crop in the fall. The Chairman. You say the farmer sells his grain in the fall? Mr. Lyon. As a general rule. The Chairman. Does not that depend upon circumstances? Where there is great poverty in the country it is sold early; and we have great famines, and all that sort of thing. Mr. Lyon. Yes; but generally the farmer has sold the grain to the small elevator dealer at his station in advance. The Chairman. If he has money in bank he does not do it. Mr. Lyon. I would ask these gentlemen who are here before the committee this morning to correct me if I am wrong on any of these points. Mr. Adamson. Do you not suppose this idea has something to do with the variation of rates — that in the crop season, when the crop is mov- ing, the railroads have more than they can haul ? I want to know what the reason is. Is it not that they make cheaper rates later in the season in order to get what hauling they can? Mr. Lyon. Not necessarily. The supply and demand would cover that, sir. Mr. Adamson. Is not that a part of the variation of supply and demand? Mr. Lyon. Possibly so. Mr. Adamson. And while the crop is moving the railroads have all they can do, and they cut rates later on to get more business? Mr. Lyon. But what I am after is, I do not want the railroads to give a rate to one man and deny it to me; that is the whole meat in the cocoanut on that. 92 INTEESTATE-COMMEKOB LAW. Mr. Adamson. If they give you one rate and then, under later con- ditions, give a lower rate to meet that change Mr. Mann. Your theory is that if they all had the same rate theria would be more competition in purchasing from the farmer? Mr. Lyon. Yes, sir. Mr. Mann. And if they can afford to give a low rate to one, they can afford to give it to everybody ? Mr. Lyon. Yes, sir; that is the meat in the cocoanut. This Interstate Commerce Commission was not framed to impair business interests, but to conserve and protect. In the words of the Interstate Commerce Commission: It had for its object to regulate a vast business to the requirements of justice, and was not passed for a day or a year; it had permanent benefits in view, and to accom- plish these with the least possible disturbance to the immense interests involved. But as the years since the enactment of the law have gone on and the law itself has been tried, it seems to-day as if the Commission (with- out reflecting in any manner upon the character and ability of its members) has signally failed in the exercise of controlling power; its mandates have either been supinely enforced or altogether evaded. The great complaint against the law and the Commission to-day is that it is a creation powerless to enforce its decrees. I am of the opinion that the bill now before the committee, and known as " H. R. No. 8337," will meet the requirements and give to the interstate commerce law greater effectiveness. I believe the interstate commerce law should be so amended as a whole that under the light of experience and decisions of the courts of the United States the rights and interests of the people in general should be properly safeguarded under it and defined by it, and the responsibility of carriers carefully fixed and defined in it; and the power and scope of the Interstate Commerce Commission, including the right to fix rates and enforce their decisions, properly established by it. I am not wise enough, nor am I laM^yer enough to go into the details of this bill, its common sense appeals to me and I leave to others, and without doubt you have heard them, to argue out the amendments proposed in the bill now before you. My own experience in freight matters makes me believe that such portions of the bill now before you as relate to the imprisonment clause in the original law should be dropped and that fines against corporations violating the law be imposed. Railroad officials and agents hold The Chairman. Now, let me ask you why would you change that feature of the law? Mr. Lyon. Let me continue. Railroad officials and agents hold social positions among themselves and in the community; different shippers are personal friends of one another; for one to complain of another and send him to imprisonment for violating a law wnich we know emanates from corpoi'ations themselves goes against our best feeling. But if a fine could be imposed on corporations, who are in reality above agents and general managers, and in fact the real offenders, our courts would now be full of violators of the law. Do you see the point now? Mr. Adamson. We can not get the people who come here to give us the names of these men. Mr. Lyon. Of course not. You do not suppose I would tell you. Mr. Adamson. What is the use of enacting more penal laws, then? INTERSTATE-OOMMEBCE LAW. 93 Mr. Lton. Fine the corporations. Fine the thing that does the wrong. Mr. Adamson. How can we fine it. If we could get a reporter and get some evidence Mr. Lyon. I believe, gentlemen, that I would not be here to-day asking you for relief if this law was in the original act; and if so, I do not believe there would be many railroads paying dividends, and many would be in bankruptcy, that is my belief. The Chairman. Your argument^ if I understand it, is about this: Here is a violator of the law. I know of his violations of the law ; they are harmful to my interests. Yet that man is my personal friend, he is my familiar associate, and therefore because he would be imprisoned I will not complain of him. I will not set the machinery of the law at work against him because it would disturb my sensibili- ties in some way or interrupt friendly relations that exist between me and my friend. Mr. Lton. We will go further than that The Chairman. Therefore you desire the law to be changed so that it will strike some other person Mr. Lyon. Not "person." The Chairman. Well, an artificial person Mr. EiYON. Yes, sir. The Chairman (continuing). That is, above my friend and the employer of my friend? Mr. Lyon. That is right. The Chairman. Is that right? Mr. Lyon. Yes, sir. The Chairman. In other words, you, in conjunction with the other gentlemen who are in with this man, have the power in conjunction with the other gentlemen who are informed to bring about punishments, and you do not use that power? Mr. Lyon. 1 suppose we have, but it is bard work; it is a very difficult matter. Mr. Adamson. The same difficulty exists in other connections, does it not, except in criminal cases, where there are authorities who bring you up and make you swear? Mr. Lyon. Let me say this: I believe that if the Interstate Com- merce Commission had agents in the markets of the West, in Omaha and Kansas City, and also in the markets of the East, they could find out the violators of the law in every case; I mean men who were in touch with them, men whom they could go to. Do you see? Mr. Corliss. Do I understand you to state that if this act, this bill now under consideration, were enacted into law and enforced it would bankrupt the railroads ? Mr. Lyon. No; I believe that — yes, pretty near. Some of the rail- roads. Not all. Mr. Tompkins. That is, if the offenses were as frequent as they are now? Mr. Lyon. I would have every carload that was shipped on a road Mr. Adamson. You do not mean that these roads would be bankrupt from the reduction in rates, from the rates they would have to receive, but from the fines they would have to pay? Mr. Lyon. Yes, sir; from the fines. 94 IWTEKSTATE-COMMBECE LAW. Mr. CoKLiss. Oh, you left the impression that it would ruin the railroads Mr. L-s^ON. No, sir; I did not mean that. Mr. Adamson. If they quit bucking up against the offenses and observed the law, you do not mean to say that it would affect them? Mr. Lyon. No, sir. Mr. Corliss. It would not affect the railroads if they observed the law ? Mr. Lyon. No, sir. I do not care what the rates would be. Mr. Corliss. But whatever anybody else pays Mr. Lyon. Whatever the railroads say is to be the rate. Let them be honest and 1 will be honest, and let everybody else be honest; that is the common sense of it. The temper, if not the spirit, of railway managers toward the suc- cessful administration of the interstate-commerce law has become more hurtful to the railways than to the public. But these corpora- tions are in no sense exempt from public opinion because of the nearly universal, if not organized, opposition to laws enacted for the purpose of regulating their relations with the people. It is not too much to assume that the people hold these laws in higher and higher esteem to the ratio of contempt for them and the constant violation of their terms by the railways. This conflict between the railways and the interstate-commerce enactment has well-nigh exhausted the patience of the people and those who are appointed to execute its provisions. That the law itself has demonstrated that it needs some changes to make it more applicable to present needs none will deny. The public demands at the hands of Congress some radical improvements. What we need, in reference to the Interstate Commerce Commission, is that its powers shall be more definitely specified; that it shall have greater powers to enforce its orders. We need an interstate-commerce law, and that the powers of its Commission be defined. I believe there is but one way to maintain reasonable, fair, and just rates, and that is by giving the railways the right to establish a rate and then go to the Commission and have that rate indorsed; publish the rate and live up to it. In a word, be honest. Heretofore Congress has seemed slow and apparently indifferent, but we believe needed changes in the law will be obtained and justice be done to all. The Chairman. Let me revert to that subject which you were speaking of a while ago. Suppose the stockholders of the different carrying corporations turn over their powers to the board of direct- ors; they in their turn turn over their powers to the general man- ager; the general manager abdicates in favor of the traffic manager; the traflic manager turns over the subject to the solicitors, to the rate solicitors, and they are the men who primarily make these illegal arrangements. Mr. Lyon. You mean the subagents? The Chairman. Yes, sir. Mr. Lyon. No, sir; I do not believe that. I do not believe there was ever an agent on the line who voluntarily made a rate contrary to the powers over him. That is my experience in railroad matters, in shipping matters. The Chairman. At all events, these gentlemen who have this, in charge have upon them the duty of securing returns' that will pay dividends on the stock. INTERSTATE-COMMERCE LAW. 95 Mr. Lyon. I hope so. The Chairman. Now, it is your opinion that if large fines against the corporations should be levied Mr. Lyon. Yes, sir; for each offense. The Chairman (continuing). So that these possible dividends would be diminished Mr. Lyon. No, sir. The Chairman (continuing). That then the stockholders would have an interest^ — Mr. Lyon. No, sir; I think the whole business would stop if they had a few fines to pay. The Chairman. The stockholders would be the men who would be hurt? Mr. Lyon. Yes, sir. The Chairman. Through the payment of these fines? Mr. Lyon. No, no; they would not pay the fines. The Chairman. They would pay them until they learned the lesson. Mr. Lyon. That would be a very short time. If you would put a sufficient fine on everj"^ car that went through from Chicago to New York on a cut rate, one offense would end it. The Chairman. That would be enough? Mr. Lyon. Yes, sir. The Chairman. I am inclined to think you are right. Mr. Fletcher. What has been the rate on Chicago in the last year? Mr. Lyon. On wheat? Mr. Fletcher. Yes, sir. Mr. Lyon. We do not handle the wheat that they do in Duluth. We do not handle so much as they do in Duluth. Mr. Fletcher. Take all the grain in that way, and how much is the grain they handle there? Mr. Lyon. 1 can't tell you that. There are books here on file which show it. The Chairman. I want to get your idea a little further about this diversion. Do you regard the shipments through Duluth as a diversion from Chicago — the natural channel? Mr. Lyon. No, sir; the Lake route is a natural channel. The Chairman. Is the use of the Mississippi to New Orleans a diver- sion from natural channels ? Mr. Lyon. I think not. Yes; it might be if it reached into the State of Illinois. I assume that. There is a lot of territory there that might ship to Chicago or the other way, which is just on the dividing line; but there is a point called Monmouth Junction, just near Bur- lington, where we have a lot of stuff billed to the Mississippi River, and then it goes to New York by Monmouth Junction. That is one of the places. I do not remember the other point. The Chairman. Trace out the course of that route. Where does it generally go? What is its route to the seaboard? Mr. Lyon. It would be by the way of Monmouth Junction and Burlington to the Chesapeake and Ohio. I do not remember the route. It goes to Newport News and Baltimore. The Chairman. It avoids Chicago. Mr. Lyon. Yes, sir; a gentleman said to me the other day that it does not make any difference what rate of freight I have I am always afraid that the man next to me has a better rate than I have," 96 IWTEKSTATE-OOMMEBCB LAW. STATEMENT OF ME. T. W. TOMLINSON. Mr. ToMLiNSON. I am the railway representative of the Chicago Live Stock Exchange, whom I represent before your honorable-body. The live stock exchange last week considered the Corliss bill and directed me to come on here and express their views. I might also add that the Cattle Raisers' Association of Texas, with headquarters at Forth Worth, Tex. , at its last annual meeting also had under con- sideration the so-called Corliss bill and adopted resolutions indorsing it, which mention that bill, and which are of course the best evidence that the bill was before them. I present these to you. KESOLUTION UNANIMOUSLY ADOPTED BY THE CATTLE EAISEBs' ASSOCIATION OF TEXAS AT ITS ANNUAL MEETING HELD AT POET WORTH, TEX., MARCH 12, 1902. Whereas the operations of the Interstate Commerce Commission under the pres- ent law are absolutely worthless, for the reason that they have no power to enforce their decisions; and Whereas there has been introduced in the House of Representatives of the Fifty- seventh Congress, by Congressman J. B. Corliss, of Michigan, a bill amending the interstate-commerce act, correcting the evils, and giving the Commission power to enforce its rulings, which has the unqualified indorsement of the Interstate Com- merce Commission and shippers at large throughout the country; and Whereas the live-stock interests of the United States are heavy shippers and therefore interested in anything pertaining to governing transportation: Therefore, be it Resolved, That the Cattle Raisers' Association of Texas urge the members of Con- gress to vote for the passage of this amendment to the interstate-commerce act, and be it further Resolved, That the secretary of this association is hereby instructed to send certi- fied copies of this resolution to the Committee on Interstate Commerce of the House, and also to write personal letters to the members of Congress and Senators from Texas urging work for the passage of this measure. NATIONAL LIVE STOCK ASSOCIATION, DENVER, COLO. The following memorial was unanimously adopted by the fifth annual convention of the National Live Stock Association, held in Chicago, 111. , December 3,4,5,6, 1901 ; To the horwrable President, the Senate, and the House of Representatives of the United Staies: The National Live Stock Association respectfully represents that it is an organization composed of over 150 of the principal stock raisers, feeders' and breeders' organizar tions, Uve-stock exchanges, stock-yards companies, and various commercial organiza- tions of the United States, whose names we append hereto; that it represents more than 14,000,000,000 of invested capital, and that it was organized for the purpose of promoting the best interests of the live-stock industry of this country. This association, in behalf of its constituency, earnestly urges upon Congress the great importance and increasing need of Federal legislation, which will give to the Interstate Commerce Commission adequate power to correct discrimination, remove preferences, abate unreasonable rates, and where necessary, to prescribe the maximum and minimum rates, making its decision effective pending any appeal to the courts. When the present interstate-commerce law was enacted in 1887 it was at least pop- ularly supposed, and we believe clearly intended, that it gave to the Interstate Com- merce Commission, after due -hearing and investigation, the power to say what was a reasonable or unreasonable rate and to enforce its decisions. Court decisions have since declared that the Interstate Commerce Commission does not have the power to fix rates for the future, either directly or by indirection. As substantially every complaint that has been, or would be, brought before the Commission involves the question of the reasonableness of rates, it can be readily seen that these court decisions practically wipe out the only real power the Commission was supposed to have, and limits its usefulness to the collection and promulgation of statistics. INTEESTATE-OOMMERCE LAW. 97 While governmental control over railroad charges through the medium of the Interstate Commerce Commission has been gradually fading away, the general railroad eituation has undergone portentous changes. Little independent carriers have been forced to the wall and absorbed by their larger competitors, which in turn have com- bined with or sold out to other larger competing systems, until to-day, by this cen- tralization, the rail transportation facilities of this country are practically controlled by scarce half a dozen different interests. By these transitions, reorganizations, and combinations, added burdens have not only been placed upon the man who pays the freight by reason of increases in the fixed charges or indebtedness of the rail- roads, but his sole remaining safeguard by free competition has been virtually elim- inated, so that the public, which now has greater need of intelligent and effective Federal supervision and regulation of railroad charges, has less protection to-day than previous to the enactment of the present inter.state-commerce law. The general and marked advance in rates during- the past three years of unex- ampled prosperity to the railroads were apparently unnecessary and seemingly unwarranted upon any other theory than the intent of the railroads to exact all they could. The multiple economies of railroad operation, together with the enormous increase in the volume of the traffic, would seem to logically suggest a reduction instead of an advance. Their action, however, enables us to unmistakably forecast what they would do, unrestrained by Federal control, when by further consolida- tions or by other agencies competition becomes entirely stifled. The members of the National Live Stock Association recognize that the railroads are powerful agencies of progress, and that more than any other factor, they have contributed to the development of the country. The superb service they perform merits our commendation. ' We expect to pay the railroads the cost of the service they render, together with a reasonable profit on their investment; we do not want the service for any less, nor ought we to be compelled to pay more. We are not presuming to say what are or may be reasonable and fair rates, but we do emphatic- ally protest against the railroads being the sole arbiters of their charges and exact- ing what they think the traffic will stand, or, in plainer language, all they can get. If railroad rates are fair and reasonable the railroads should not fear any investi- gation of them by an impartial tribunal. The objections they make against the proper Federal supervision of rates by an expert commission confirms the suspicion that railroad rates need regulating. Either the Government must assume at once an intelligent and comprehensive con- trol over railroad charges or prepare for absolute ownership of the transportation facilities of this country. For these, among many other patent reasons, the members of the National Live Stock Association respectfully request Congress to give early attention to this much- needed legislation, which has already been too long delayed. Attest: John W. Spbingbr, President. Chas. F. Martin, Secretary. The Chairman. I might say to you here that these hearings are for the purpose of discussing all of the subjects that relate to transporta- tion, and there is another one that members of the association con- nected with the Cattle Dealers' Association have some interest in, namely, that of increasing the number of hours that animals may be retained on cars. I simply mention this to say that if it is your pleas- ure at this time to discuss that it will be entirely proper to do so. Mr. ToMLiNSON. I thank you for your suggestion, and in line with that, when I have finished, I will be very much pleased to say what the live stock people feel in respect to that bill. The National Live Stock Association, with headquarters at Denver, Colo. , and which includes in its membership practically all the live stock organizations of this country, with a membership of about 120, have also, at different and numerous times, passed resolutions recommending to Congress the advisability and necessity of the proposed changes in this present interstate-commerce law, and I would like, with your per- mission, to file as a part of my remarks the resolutions of both the National Live Stock Association and of the Cattle Raisers' Association. Cojointly with Judge Springer I am directed to represent the National i-c X. — -7 98 IWTERSTATE-OOMMEROE LAW. Live Stock Association in addition to my representation of the Chicago Live Stock Exchange and the Cattle Raisers' Association and the National Live Stock Exchange. These organizations practically cover the entire live stock interests of the country. The Live Stock Exchange was a participant in the interstate law convention, held a short time ago, which framed the present Corliss bill, in a measure, and we feel it due to ourselves and your committee and to the public and to the railroads, that we come here and at least express our views upon this bill. The live stock industry supplies a very great traffic for the railroads. On some Western railroads it is as high as 12 per cent, averaging per- haps a little under that. When you consider the vast number of other articles incidental to the operations of the packing houses you will see what a great volume of traffic really arises from the live stock industry. This industry is interested not only in the relative equality of rates, but is deeply interested in their inherent reasonableness. We do not want our traffic transported at anything less than the cost of the serv- ice together with a fair added profit, and we also wish other classes of freight handled on the same basis. We protest against discrimina- tions, and preferences, and against the carriage of some freight at less than the cost of service, thus placing added burdens on other articles. We believe that such is the wish of your committee. The Chaikman. Will it embarrass you at all to ask j'ou questions? Mr. ToMLiNSON. Not in the slightest. I will probably make a very poor attempt at answering them, but I shall try. The Chairman. You have made reference to articles that are carried below cost? Mr. ToMLiNSON. Yes, sir. The Chairman. Give this committee some illustration of that. Let me say to you — you are a practical man, I think — that we have our own theories with regard to general legislation, but we have not the prac- tical knowledge that you have. Now, what we want to get at is what you can give us — illustrations of the case that you have generally referred to. Mr. Tgmlinson. I believe the railroads continually say their export rates on grain are too low. As to the rates that come particularly under my observation, I might say that the present rates on fresh meat, say from some of the Western markets to the Mississippi River, or to their eastern junc- tion, via Chicago, are too low. Take, for instance, the through rates on fresh meats from St. Paul, through to the seabord,_or to the East- ern points. The proportion accruing west of Chicago is IBi cents per 100 pounds, with a minimum of 20,000 pounds per car, or |27 per car. The live-stock rate is twice that. Now one of those is wrong. Mr. Mann. You say the rate on dressed beef is too low. What is the rate on dressed beef from Chicago to New York, now? Mr. ToMLiNSON. Forty cents. Mr. Mann. Is that less than cost? Mr. ToMLiNSON. No, sir. Mr. Mann. That is undoubtedly above the cost? Mr. ToMLiNSON. I think it is, probably, about a fair rate. Mr. Mann. I am not speaking about whether it is a fair rate, but the cost. Is it not above the cost? INTEBSTATE-COMMEKOE LAW. 99 Mr. ToMLiNSON. Yes, sir. Mr. Mann. Forty cents a hundred. Certainly that ought to be above the cost, if they can afford to carry grain for 13 cents. Mr. ToMLiNSON. Yes, sir; that is above cost. Mr. Mann. Then that is not an illustration of a commodity carried below cost? Mr. ToBiLiNSON. You did not understand niy statement. I used as an illustration the rate on fresh meat from St. Paul through to the seaboard. The Chairman. That is 2Y cents? Mr. ToMLiNSON. No. Out of the through rate from St. Paul to the seaboard the line west of Chicago gets 13^ cents. That is, for their haul to Chicago they get 131 cents on 20,000 pounds, netting them $27 a car. The Chaieman. From Minneapolis or St. Paul to Chicago? Mr. ToMLiNSON. Yes, sir. Now, I say 1 think that is too low. Mr. RiCHAEDSON. On through freight? Mr. ToMLiNSON. Yes, sir. Mr. Mann. What is it on grain for the same haul? Mr. TOMLINSON. 1 could not tell you that. Mr. Mann. What would it be on the same amount of live stock? Mr. ToMLiNSON. Twenty-seven cents. Mr. Mann. That is not a comparison of rates. Mr. ToMLiNSON. The honorable chairman asked me a question, and I answered it. Mr, Mann. 1 asked for rate that you thought was less than cost. Mr. ToMLiNSON. I think that is less than cost. Mr. CoELiss. Do you know of any rebates on beef shipments ? Mr. ToMLiNSON. Personally, I know of them only through reading the testimony of the railroads before the Interstate Commerce Com- mission at the last hearing regarding the rates on packing-house prod- ucts and fresh meats in Chicago. That was published in a rather voluminous document, and 1 think all the roads admitted that they had been and were then paying rebates on shipments of fresh meats and packing-house products. Mr. RiOHAEDSON. How do you explain the difference? Why is it that a railroad makes that difference between live stpck and the beef which you have been talking about? I would like to understand why they make those differences and what influences them. Mr. ToMLiNSON. I think all railroads will agree with me that fresh meat ought to be charged higher than live stock and that what are known as packing-house products should take about the same rate as live stock. The Interstate Commerce Commission in 1890 considered a case which was known as the case of The Chicago Board of Trade y. Various Western Railroads, wherein the question involved was the rela tive rates on hogs and hog products from the Missouri River and intermediate points in Iowa compared with the rates on hogs. The Commission decided that the rate on products should not be greater than upon the live animal. Another decision of the Commission, rendered about a year after- wards, in the case of John P. Squire & Co. v. The Michigan Central Railroad, involved the same point, excej)t that it related to live eattle as compared with fresh meats, Mr. Squire alleging that the rates on the live article were too high compared with the rates on the fresh- 100 INTBRSTATB-OOMMEROE LAW. killed product. The decision of the Commission in that case was to the effect that they thought the rates on the fresh meats should be about 50 per cent higher than on the live cattle — on the live article. Those two decisions have not been observed. . They are not observed to-day west of Chicago. East of Chicago they are well observed, I may say. Mr. RiCHAiiDSON. That is east of Chicago. Mr. ToMiiiNSON. Yes, sir. Mr. Richardson. That is where they only get 13 cents, you say? Mr. ToMLiNSON. No, no. West of Chicago is where they get 13 cents as their proportion of the rates. The railroads recently reduced the fresh-meat rates from the Missouri River to Chicago, and the Mis- sissippi River about 5 cents per 100 pounds. Mr. Richardson. How do you propose to amend the present inter- state-commerce law to remedy this? Mr. ToMLiNSON. I think the most satisfactory remedy for cut rates would be to give the Interstate Commerce Commission reasonable power over rates. For example, if, when the Commission were abso- lutely certain that fresh-meat rates, or packing-house rates, were being cut from any market, they had the authority to order down the rates on live stock, there would not be any cut rates on the product. Mr. Fletcher. Will you please tell us why there should be 50 per cent more for carrying fresh -meat products than on live stock? Mr. ToMLiNSON. Well, fresh meat requires first a heavier car. You have to haul free a large quantity of ice; the service must be first class. And the mileage on refrigerator cars which are owned by the IDackers is a very heavy one. And finally, the value of the article is more than that of the live products. A Member. Does not the shipper furnish the ice? Mr. ToMLiNSON. Yes; but the railroad has to haul it, is what I say. Mr. Coombs. I should think that you could haul so much more that the rates would equalize. Mr. ToMLiNSON. But they haul less. A car of fresh meat rarely loads over 20,000 pounds, while live stock has a minimum weight of 22,000 pounds. Mr. Coombs. Why is that? Mr. ToMLiNSON. They can only load that much in a car. Mr. Coombs. I do not understand. Why do they haul less of fresh meat than of live stock ? Mr. Tomlinson. Because they can not load any more. It is hung up in the cars on hooks, and you can not get much more than 20,000 pounds in a car. Ml-. ('ooMBs. I see. They do not pack it in? Mr. Tomlinson. No, sir. Mr. Richardson. I have not got your idea about the remedy. If I understand, the authority of the railroad commission at the 'present time is simply advisory ? Mr. Tomlinson. Yes, sir; perhaps it goes to that extent. Mr. Richardson. It is merely a suggestion, and then an appeal can be taken by the railroad to the Federal court? Mr. Tomlinson. Yes, sir. Mr. Richardson. And there the question is passed on? Mr. Tomlinson. Yes, sir. Mr. Richardson. Now, instead of making the power of the Inter- INTEESTATE-COMMEHOE LAW. 101 state Commerce Commission advisory merely, you want to make it arbitrary and have them enforce it right away — at once? Mr. ToMLiNSON. No, sir; I do not go quite that far. Mr. Richardson. That is what I want to get at— your views on that question. Mr. ToMLiNSON. I think the provisions of the Corliss bill providing for a twenty and thirty day stay of the order pending the Mr. Richardson. A twenty -day stay. Mr. ToMLiNSON (continuing). Yes, sir; that is fair and reasonable to both parties in interest. Mr. Richardson. Then, all that you ask is that there shall not be any discrimination ? Mr. ToMLiNSON. Yes, sir. Mr. Richardson. Do you not think that you are making a discrim- ination in that kind of waj^ of making an arbitrary rule that the judg- ments of that Interstate Commerce Commission shall be enforced, and after they are enforced the railroad companies shall have an appeal; and do you not think if the higher court should happen to determine that the Interstate Commerce Commission was wrong, that its verdict was wrong in fixing the rate, that that would be a discrimination ? Mr. ToMLiNSON. I do not. Mr. Richardson. You do not? Is there any such rule in any other court that has ever been established in a civilized country ? Mr. ToMLiNSON. I beg the question with you on that. 1 am not a lawyer. Mr. Corliss. This is such a case as would occur in a patent case, where a preliminary injunction is obtained and then set aside, which repeatedly occurs. Mr. ToMLiNSON. As a point of equity I can not conceive what objec tion thei'e is to it. It seems to me that it is entirely fair. Mr. Adamson. If a man was under sentence to be hung, and took an appeal, the appeal would not do him much good after he was hung? Mr. ToMLiNSON. That is an exaggerated case. Mr. Adamson. It may be an exaggerated case, but it illustrates the principle. Mr. Richardson. Your presumption is that the action of the Inter- state Commerce Commission is presumptively right. Mr. ToMLiNSON. If we can not rely on a Commission of that kind, I do not know what we ought to expect from anyone, either the courts or Congress, for that matter. The Chairman. Do you know of any other commission that was ever created to which such an extraordinary and immense power was given as has been proposed here? Mr. Tomlinson. I think all the State railroad commissions. The Chairman. The railroad interests of the United States repre- sent possibly ten billions of dollars. The value of that railroad prop- erty is dependent upon its earning capacity. Its earning capacity must be dependent upon the rates it charges. Now, where has any like power to this ever been conferred upon three men; that is, if you have any illustration to give us? Mr. Tomlinson. I do not wish to be understood as saying that I believe that the Commission ought primarily to make rates. I do not. It should only be done upon proper complaint and after investigation. 102 INTEBSTATE-COMMERCB LAtV. As to your question, I have always understood that the State railroad commissions have that power. Mr. Richardson. The State railroad commissions ? Mr. ToMLiNSON. I think our Illinois commission pretty nearly has that power. Mr. Adamson. You do not mean that it has power that if the decree goes into operation, notwithstanding other litigation Mr. ToMLiNSON. I do not know that I quite understand you. The CiiAiKMAN. The point that we make is that all other courts which have similar power have it with this incident, that if a party be desirous to appeal you shall not put a judgment into execution but once, but have it await the final judgment on appeal. Do you say that your State commission has power to fix rates that go into effect immediately, although an appeal is taken, or does the judgment stand suspended until the appeal is determined? Mr. ToMLiNSON. I could not answer you on that point. I will reserve my reply until I can look into the matter further. Mr. ManN: You stated your opinion on the question as far as the Illinois commission is concerned. I think there is no appeal from the railroad and warehouse commissioners there. Mr. ToMLiNSON. Yes, sir. Mr. Mann. But any railroad can enjoin in any action, without question, in any court. Mr. Coombs. Take the railroad commission of California; it is created by the organic law, by the constitution of the State itself. It is vested with judicial powers. It is not provided that any appeal shall lie upon its adjudication. However, courts can review the deter- mination of the commission, can enjoin the commission, or can treat it like any other body that has purely administrative powers. Mr. ToMLiNSON. So far as the present bill is concerned, I think it is perfectly fair in its provisions regarding an appeal. The court, if I understand the bill properly, is granted the privilege of staying the order, or suspending tne order of the Commission, if any error appears in it. That is equivalent to saying that if they do not rescind the order, the two, the court and the Commission, have passed upon it and think it fair. It seems to me that it having gone that far there is no good reason why it should not go into effect. You must understand, gentlemen, that a great many people who may not be exactly directly interested in any particular rate, yet are vitally affected by it, and if an order of the Commission would have to be held in abeyance until the final decision of the Supreme Court a vast number of people who have absolutely no redress at law will be seriously injured by it. Mr. Mann. Is not every interest in this country held in abeyance in exactly that way? Can you name any interest in this country that is not held in that way, subject to the right of every man to take an appeal and go to a higher court? Mr. ToMLiNSON. Thatis true; yes, sir; but the transportation facili- ties of our country are of such a nature that they require different treatment. Otherwise, you will get no satisfaction at all. Mr. Mann. If I understand, your special complaint is that dressed meats are given too low a freight rate in comparison with live stock? Mr. ToMLiNSON. Pardon me, Mr. Mann; I came here not with a view of injecting anything regarding fresh-meat rates into my testi- INTERSTATE-OOMMEEOE LAW. 103 mom^. Your honorable chairman simply asked me about it, and I cited him one instance where I thought the rate was too low. Mr. Mann, What is the special complaint of the live-stock board or the live-stock men ? Mr. ToMLiNSON. Our plea is for fair, reasonable, and stable rates. Mr. Mann. Everyone wants that; but what is the special complaint of the live-stock people at Chicago, or elsewhere? Mr. Shacklefoed. Is it a discrimination that you complain against? Mr. ToMLiNSON. No, sir. We want the law amended so that the Interstate Commerce Commission will have the power to investigate and seewhat rates are reasonable and just, and we want more legal effect given to their decisions. Mr. Mann. I know; but we are trying to ascertain what the com- plaints of the shippers and other people are. Mr. ToMLiNSON. I can cite several instances, if you wish me to. Mr. Mann. Generally, if you please. Mr. ToMLiNSON. Do you wish me to cite an instance of where we think we have a grievance ? Mr. Mann. If it does not take up too much time. Mr. Richardson. Not a single instance, but the general principle. Where is the complaint ? Mr. Shacklefoed. Give us an instance which would illustrate the general complaint. Mr. ToMLiNSON. I will give you an instance first of the operation of the present law, so far as the enforcement of an order of the Commis- sion is concerned. The Interstate Commerce Commission rendered a decision in a cause known as the "Two Dollar Terminal Case." After that decision was made, an order was issued; the railroads appealed from that order, or applied for a rehearing, which is granted, and that resulted in a stay of the order. After rehearing the Commission reaf- firmed its previous decision and put the order into effect at a date about a month later. The railroads ignored that order; we had to go into the courts and endeavor to enforce it; we went into the courts, but before we got a decision it was fourteen months after the order of the Commission was rendered. We had exercised every reasonable precaution to hurry this case along, and that was the best that we could do. Judging from that, it is pretty safe to say Mr. Mann. You ought not to stop there; you ought to say that the court decided against you. Mr. ToMLiNSON. Yes, sir; but that makes no difference. I am simply referring to the delay in getting a decision from the court. Mr. Mann. That decision you speak of involved a large amount of money to the railroads? Mr. ToMLiNSON. Yes, sir; and it is now pending in the Supreme Court. Mr. Mann. It is pending in the Supreme Court, and it was decided against you in the court of appeals. Mr. TOMLINSON. Yes, sir; with a divided court. Mr. Mann. And yet you think that the railroad companies ought to have been deprived of that money pending the decision of the court, which was against your contention? Mr. ToMLiNSON. No, sir; I do not. I cited that to show this: That it was about fourteen months under the present method of procedure 104 INTERSTATE-COMMERCE LAW. , before you could get any action from the courts, regardless of what the action of the court was. But, under this present bill, fifty days is the limit within which you must at least secure from the courts some announcement as to the legality of the decision of the Commission. Mr. Mann. Just take that case. The railroad companies or the stock-yards companies, I do not know which it is, had always charged $2 a car for terminal shipping freight. Now, you wished to eliminate that charge. The Interstate Commerce Commission decided in your favor. The courts, as far as they have gotten, have decided against you'^ Mr. ToMLiNSON. Yes, sir. Mr. Mann. And yet you think before the court had a chance to decide it that the change ought to have been made, and the railroad companies should have been deprived of that money, although the courts afterwards decided, and the Supreme Court of the United States may decide, that they were entitled to it? Do you not think that is a rather hasty action, taking a man's property, if he is entitled to it, before he has a chance to have a decision by the court? • Mr. ToMLiNSON. I think this fifty days would have given any court ample time to have decided that case. Mr. Mann. Well, of course, on that point the board had the same opportunity to decide within fifty days— and, by the way, there is no fifty-day provision in this bill — it had it before just as it would if this bill became a law. Mr. ToMLiNSON. They have to say within fifty days whether the order shall go in effect. Mr. Mann. Is there a thirty-day provision in the bill ? Mr. ToMLiNSON. Twenty days and thirty days. Mr. Mann. And if the court says plainly that there is an error of law, or plainly that there is a misunderstanding or an error of fact, then the court shall give a stop order; but that must be a plain opinion on the court's part. That is not an illustration of your complaint against the present sys; tern of the railroads. What is the general complaint of the stock-yards people or the live-stock people now as to their treatment by the rail- roads? Mr. ToMLiNSON. Well, I might cite that the present complaint is that the rates on live stock from Western points is relatively too high compared with the rates on the products. That is one incident. Mr. Mann. You mean compared with the rates on meat products? Mr. ToMLiNSON. From the West; yes, sir. Mr. Mann. Now, the railroad companies have given a good deal of attention to that subject, I suppose. They are endeavoring to make money and to foster business along their lines? Mr. Tojai-iNSON. Yes, sir. Mr. Mann. Do you think that the Interstate Commerce Commission, after a short hearing on the complaint, ought to be permitted to decide that question, on the theory that they know more about it than all the railroad officials combined through all the years have learned? Mr. ToMLiNSON. That is upon the assumption that the rates a;re made by the i-ailroads upon careful consideration, which is not a cor- rect premise to start upon. Mr. Mann. I expect that is true. Mr. ToMLiNSON. I think any disinterested party, the Interstate INTEBSTATE-COMMEROE LAW. 105 Commerce Commission, or the court, or this committee, is much mof e competent to make these railroad rates, after a thorough investi- gation, than are the railroads when they are mfluenced by competition and by selfish motives of one kind or another. The Chairman. I do not know that we could do that if all the gen- tlemen who come before us are as chary about giving us information as those have been who have come before us so far. Mr. ToMLiNSON. I trust that you. will not apply that to me. The_ Chairman. We have had no specific information since this investigation began. A ^reat many generalities are indulged in, but when we ask for specific instances we do not get them. Mr. ToMLiNSON. I will go on with a few other instances. The Chairman. Now, we want to know the actual operation of this law and the conduct of the people under it. Now, if you will give us that information, any of you gentkmen, we will be very glad. Do not be at all alarmed about taking up our time. Mr. ToMLiNSON. The Cattle Raisers' Association of Texas about two years ago, after the rates from Texas on live stock had been advanced about 5 cents a hundred, arranged for a conference with all the rail- roads leading from Texas with a view of showing that the advance was unreasonable and unwarranted and unjust and having it with- drawn. They met with all the railroads in St. Louis, and from what the railroads said at and shortly after this conference they led the representatives of the Cattle Raisers' Association to believe that there was great merit in their- complaint and that the rate would undoubtedly be. put back to the old basis. About a month afterwards the Cattle Raisers' Association was informed, through the secretary of the South- western Traflic Association, that after due consideration they did not think the rates were unfair and they would not make any change. The Chairman. "What was the old rate? Mr. ToMLiNSON. Forty-four and three-fourths cents. Now, I just mention that as one incident. The rate from Fort Worth to Chicago was 44f cents, and -it was advanced to 491 cents. Of course, all rates differ down in that country, but that rate covers as a sort of a blanket rate all of the northwestern part of Texas. ♦ Just at the time that the railroads announced that they would not grant any reduction every large cattleman in Texas had a cut rate, in no instance more than, and in many instances less than, the advance that had been made. In other words, they cut the rate from $10 to $15 a car right after an advance. The only people who did not get that rate The Chairman. That was a secret cut? Mr. ToMLiNSON. A secret cut. The only people who did not get that rate were the small shippers. The Chairman. Is there anything in this bill that will correct that? Mr. ToMLiNSON. I think it would go a long ways toward doing it. Mr. Mann. Fixing the rate would not do it? Mr. ToMLiNSON. Yes, sir; if the railroads are able to pay to these large shippers such an immense amount of rebates, I believe they are able to haul the small shippers' freight on that basis. If the Commis- sion would so order the rates to be fixed, I believe the shipper would have protection. Mr. Mann. Your theory is that every time the railroads cut a rate 106 INTERSTATE-COMMEEOE LA"W. the Interstate Commerce Commission ought to reduce the scheduled rate to the cut rate? Mr. ToMLiNSON. I think there would be no more cut rates, and I think the position is absolutely sound, for precisely the same reason that Mr. Lyon stated. If you fined the railroads there would not be any more cut rates. If the Commission had the power, when the rail- roads put in these secret cut rates, to say what the rate should be on any other classes of traffic that were discriminated against and subjected to an undue prejudice The Chaikman. You think this cutting of rates has been going on probably ever since the enactment of the law? Mr. ToMLiNSON. No doubt, and long before. The Chairman. But the discovery of them was in the proceedings in Chicago quite recently, was it not? Mr. ToMLiNSON. Well, it has been current knowledge with, I think, everybody who has been at all in touch with the rate situation, for a long time. It has only been given current publicity in this last investigation— — The Chairman. People have had a sort of inchoate belief that this was going on? Mr. ToMLiNSON. Yes, sir. The Chairman. And has there been any public knowledge of it that could be used in courts as evidence? Mr. Tomlinson. There have been a number of times when the pub- lic tariffs have been reduced down to a basis considerably less than the one previously in effect, and then there has been a reinstatement shortly afterwards. The Chairman. What would that prove? Mr. Tomlinson. It would prove that the railroads got into a fight among themselves, and The Chairman. What would it prove on this question of cut rates or secret rates being given to individuals? Mr. Tomlinson. It would prove conclusively to my mind that there had been cut rates, and that this was the result of it, that this published low.rate was the result of it. Mr. Coombs. You think the producers of wheat, the wheat raisers, will agree with you in the position that you take in reference to that question ? Mr. Tomlinson. The wheat men? Mr. Coombs. The wheat men; the producer; the farmer himself? Mr. Tomlinson. I do not believe I quite catch your (Question. Mr. Coombs. In your position about cut rates, do you think the producer, the wheat raiser, is in accord with your views? Mr. Tomlinson. The live-stock man is. I will not speak for the wheat man. Mr. Coombs. Now, of course, the reason I ask is that I like to get the views of everybody and of every interest. The wheat-raising interest is a considerable interest in this country. Mr. Tomlinson. Yes, sir. Mr. Coombs. And they need the advantages that they naturally get, as a rule. Mr. Shackleford. Would the same advantages be beneficial to any other industry ? INTERSTATE-COMMERCE LAW. 107 Mr. Coombs. I am speaking now of the wheat industry; do you think you can speak for them ? Mr. TomlinSon. J would not assume to speak for them as long as they h&ve other and abler representatives. I speak simply for the live-stock people. The Chairman. The time for adjournment has arrived, and if you will resume to-morrow at half past 10, we will be glad to have you do so. Mr. ToMLiNSON. I will be very pleased to. Thereupon, at 11.45 a. m., the committee adjourned until to-morrow, Tuesday, April 16, at 10.30 o'clock a. m. Tuesday, April 15, 1902. The coinmittee met at 10. 30 o'clock a. m., Hon. William P. Hepburn in the chair. The Chairman. The committee will be in order. Mr. Tomlinson will you proceed? STATEMENT OF MR. T. W. TOMLINSON— Continued. Mr. Tomlinson. At the conclusion of my remarks yesterday, I was talking about violations of the act, and at the same time it seems eminently proper that I should file with this committee for informa- tion, but not to appear as a matter of record, the testimony in the matter of the transportation of dressed meats and packing-house prod- ucts taken at a hearing of the Interstate Commerce Commission in Chicago in March, 1901. The Chairman. Let me say, Mr. Tomlinson, that that is not satis- factory to the committee. That is accessible to us as it is to you. You come here and make charges against the operations of the law. Now, we want to know from you what you know. Mr. Tomlinson. My purpose in filing this was simply to show vio- lations of the act, and in support of what I have already stated. The Chairman. Yes. That, of course, we could obtain without troubling you for it. Mr. Tomlinson. I thought that I was perhaps serving the conven- ience of the committee. The Chairman. We are grateful for that, of course, so far as it goes. Now, if you have any knowledge, we would like to know it; or, if you have not any knowledge, of course, you can say so. Mr. Tomlinson. I have knowledge to this extent. The rates on fresh meats and packing-house products are continually cut from the West through to the seaboard. The Chairman. How do you know that? Mr. Tomlinson. Because 1 have heard the admissions of the rail- roads before the Interstate Commerce Commission. The Chairman. Which railroads? Mr. Tomlinson. Every one of them. The Chairman. Who was speaking for them? Mr. Tomlinson. The traffic managers. The Chairman. Will you give us their names? Mr. Tomlinson. Paul Morton of the Santa Fe, Mr. J. M. Johnson 108 INTEESTATE-COMMERCE LAW. of the Rock Island, Mr. T. T. Storer of the Great Western, Mr. Hol- land, I think, of the St. Paul, Mr. Thomas Miller of the G. B. and Q., Mr. Drias Miller, who is in charge of the traflSc of the reorganized Burlington system, and several others. The Chaieman. Now, commencing with Mr. Paul Morton, what admissions did you hear him make? Mr. ToMLiNSON. 1 heard him say that the Santa Fe was unable to get what they considered was their fair share of the fresh meat and pack- ing-house products out of St. Joe and Kansas City, and on that account they were compelled to make a secret contract with one large shipper at 5 cents less than what was then the published tariff. The Chairman. Who was that shipper? Mr. ToMLiNSON. Schwarzchild and bulzburger. The Chairman. When was that contract made? Mr. ToMLiNSON. Some time in June of last year. The Chairman. How long did it endure? Mr. Tomlinson. Until June 1, 1902. The Chairman. Under that contract what sums were paid to the other party ? Mr. Tomlinson. I can not tell the exact sums. The Chairman. Can you approximate it? Mr. Tomlinson. I believe Mr. Morton said in effect that it mounted into the hundreds of thousands of dollars. The Chairman. Who was the next gentleman that you named? Mr. Tomlinson. I think the Rock Island shipper, Mr. J. M. Johnson. The Chairman. What did you hear Mr. Johnson admit in this direction ? Mr. Tomlinson. He admitted that it was necessary to meet the Santa Fe secret rate, which they did by rebates, or by vouchers, whichever way you care to put it. The Chairman. To whom was that rebate given, did you hear him say? Mr. Tomlinson. It was generally given to the various traffic people representing the packing concerns. The Chairman. All of them alike? Mr. Tomlinson. Yes, sir. The Chairman. Did he state what those rebates amounted to in their aggregate which had been paid? Mr. Tomlinson. I believe he did not state exactly, but left the impression on my mind, at least, that it amounted to a vast sum of money, as did all the other gentlemen who appeared before that Com- mission. The Chairman. They all made substantially the same confession? Mr. Tomlinson. Yes, sir. The Chairman. With regard to the operation of their roads? Mr. Tomlinson. Yes, sir. The Chairman. And the violation of this statute? Mr. Tomlinson. Yes, sir. My purpose, Mr. Chairman, in referring to that is this, the existence of these low-product rates to the river markets, as against what we consider high rates on live stock from intermediate points in Iowa and Missouri, works seriously to the detriment and the prejudice of the live-stock men located, for example, in Iowa. It puts tne live stock which may be raised upon ground less valuable than is the territory east of the Missouri River in direct USTEBSTATE-OOMMSBCE LAW. 109 competition with that stock which is raised upon ground perhaps — undoubtedly — more valuable. And in that respect I would like further to say that the operation of these rates is not only a serious disadvantage to the live stock people in Iowa, Missouri, or Minnesota, but it is also a decided prejudice to the people who operate at Chicago. With that in view 1 have filed a formal complaint before the Interstate Commerce Commission, asking for an investigation of the entire situation relative to the rates on live stock and on these products, and have asked them to enforce the orders rendered some ten years ago. In filing this complaint before the Com- mission we are aware fully that the Commission has no power to fix rates. We are further aware, even though we got an order from the (/om- mission directing the roads to cease and desist to certain of their prac- tices which may be found to be unlawful, that there would be little benefit to accrue to the interests which I represent from their decision if favorable to us, and I would like to ask you if you gentlemen can suggest to us any remedy we can pursue under the present law or through the courts that will enable us to get what we consider fair and • reasonable rates? We know of none except through the Commission, which can not fix a rate. The courts have not the power to fix the rates, it being a legislative function. If we get an order from the Commission it may be two years before we can enforce it. By that time the situation may be changed, changed materially. The people who are hurt have no remedy. The people who are injured frequently, generally, are not the people who pay the rate. In summarizing the views of the live stock industry upon the pro- posed bill, I might briefly say that we believe legislation ought to go further than this proposed bill. We are not willing to give our assent to anything less. I have heard it said and I believe there is a bill before the Senate which permits pooling. While pooling might result in more stable rates, while it might prohibit rebates and discrimina- tions and undue preferences, and while it might help some small mid- dlemen who at present suffer by reason of not getting the rates accorded to their larger competitors, while it might aid certain indi- viduals who had suffered from certain prejudices, yet the live stock industry is not prepared to indorse the pooling feature, and our reason is this: The railroads desire a pool or a pooling privilege; for what? We do not think it is from any charitable motive, to prevent dis- criminations, or to correct undue prejudices. It is from the very selfish motive that it would give them more revenue. We can not consent to the granting to the railroads of any machinery which will give them the power to extract any more money from either the producer or the consumer for the service they render. We believe that the railroads are to-day earning fully all they are entitled to. If by reason of the pooling bill they might be able to get greater returns on some highly competitive trafiBic, we want some absolute assurance that other traffic will be handled for proportionately less. At the hearing in Chicago on what is known as the community or interest plan, Mv. James J. Hill and Mr. Harriman stated in effect that the railroads could be relied upon to always charge reasonable rates: that the interests of the railroads in the country which they traversed was such that on a natural and proper amount ot traffic reasonable rates were necessary, and therefore they drew the con- 110 1NTER8TATE-C0MMBBCE LAW. elusion that -the railroads would only charge reasonable rates. They ask us, in effect, to take their word for it. They do not believe each other, and yet they ask the public to believe them. Mr. Hill stated further that the Great Northern Company could not "with a good face" (those were his words) charge more than 7 per cent on its stock. It earns more than that. What is to prevent the Great Northern or its affiliated interests from buying some other property at perhaps a ridiculously high price and then being compelled to earn on the Great Northern stock considerably more than 7 per cent. Every tendency in the past five years has been to strengthen the con- dition of the railroads so far as their rates were concerned. Consoli- dation after consolidation has been made; fixed charges have been increased; competition has been almost eliminated. As a matter of fact, the necessity for a pool is past and over. The great railroad interests of the West are controlled by scarcely five people. We do not feel that we can safely depend upon the confidence and generosity and fairness of these people to charge what is only fair and reasonable. We feel that the Commission should be put upon a plane much higher than it is to-day; that it should be given power far greater than is contemplated in this act. If we can not rely upon the Commission giving reasonable rates, I do not know why we should believe that the courts would do any better. No court, so far as I am advised, has ever decided that the decisions of the Commission were unreasonable. The Supreme Court of the United States, where it has reversed the Commission on any of its decisions, has not decided upon that point, but upon the point that they have not the power to make rates. Yesterday the question was asked me as to whether any commission in any part of the country had as great a power as was asked for the Interstate Commerce Commission by the proposed Corliss bill. I have looked over many of the railroad laws of the different States, and I can not find any of them make any provision for review in the courts. There is a review, of course. There is a review should the commis- sion attempt to enforce their order by penalty, but the roads could apply for an injunction in some United States courts, and on account, for example, of the rate being confiscatory. The Illinois law, as Mr. Mann stated yesterday, does not make any provision for review. Of course, in a suit to enforce the penalty naturally the case would come up for review before the State courts. In a majority of the States the laws of which I have read there is no provision for any kind of review. There is this fundamental differ- ence between the State railroad commissions and the Interstate Com- merce Commission to-day: All the railroad commissions have power to primarily fix rates. The present interstate-commerce law does not give the power to the Interstate Commerce Commission to fix any rates. We do not ask for the privilege, for the power, to be given them to fix rates as a primary matter, but only upon investigation and after due hearing. Once more referring to what we believe is very important, if any legislation is made by this present Congress, we feel that it should give more legal effect to the orders of the Commission. We can not support any bill that leaves indefinite for an indeterminate period the remedy which the Interstate Commerce Commission may seek to INTERSTATE-COMMERCE LAW. Ill give the public. Railroad rates to-day are higher than they have been for ten years. This is not a statement made unsupported. The abso- lute evidence is obtainable. While it may be said by the railroads that the rate per ton per mile has been decreasing, which is true in some instances, that does not mean that the rates are lower. It might mean, and it does mean, that a greater volume of low-class traffic moves on low rates than previously moved on the same rates. The Department of Agriculture published recently— and I wish to refer to it in order that the committee may, if they so desire, exam- ine it — a bulletin (No. 16, revised, miscellaneous series) which gives the changes in the rates charged for railway and other transportation services. It goes back as far as the records were obtainable and gives concisely the rates in effect upon various commodities. This amply supports what I have said. The live-stock industry is vitally interested in this legislation. We feel there ought to be no question in according to the public what we think is reasonable, and our views are " expressed in this bill, the Corliss bill. I thank you very kindly for your attention. If there are any ques- tions, I will be glad to answer them. The Chairman. Before you take your seat, just a word more. You have said that this bill, in the power that it gave to the Commission, did not meet your views and those of your confreres, for the reason that it did not go far enough. Now, will you give us your opinion as to what should be done further than what is provided for in this bill? Mr. ToMLiNSON. I touched briefly on that yesterday when I said that the Commission ought to have absolute power over rates. In other wqrds, without an investigation and without a hearing upon the case which might be in point — not, however, without due previous knowl- edge, acquired through their hearings or elsewhere — that the Commis- sion might have the power to order down or up any rates which, by reason of some cut rates or rebate, might prove to be unreasonable. That would, more than any other thing, prevent these cut rates. I said yesterday, in support of what Mr. Lyon said, that this was substantially equivalent to the fine provisions of the present bill. I think it is a little more potent. The Chairman. What would be your idea of the permanency of the rate thus established, and what provisions would you make for altera- tion, if any? Mr. ToMLiNSON. I think that, as provided in the present bill, two years is a proper figure. The Chairman. What would be your policy then — to allow the com- pany to fix its own rate ? Mr. ToMLiNSON. Certainly. The Chairman. Or to go back to the disturbed rates ? Mr. ToMLiNSON. To leave it entirely to the discretion and judgment of the railroad unless the Commission saw fit to make a subsequent order. The Chairman. Now,, would that involve, in your judgment, the necessity for exercising a power over classification? Mr. ToMLiNSON. I think so; yes, sir. The Chairman. Would you favor a uniform classification for all portions of the United States? Mr, ToittlNSON. I would hardly favor it. I might also say that the 112 INTERSTATE-COMMERCE LAW. interests which I represent are only slightly concerned in classifica- tion, but from a theoretical and practical standpoint I think there are no two sides to that question. _ . , , • ^ , The Chairman. Well, of course you have given attention to the question of classification? . „ n i-j. Mr. ToMLiNSON. Yes, sir; practically all my lite. The Chairman. What would you do in reference to the foreign com- merce and the through rate; how would you control that, or would you attempt to control it beyond the shippers? Mr. ToMLiNSON. Yes, sir; I think so. I think the export rates ought to be under the jurisdiction of the Commission. They are not to-day. Unless you have got some provision for the control of the export rate, it means that there are no domestic rates to the shipper. That may not be an unmitigated evil to the consumer or the producer. The Chairman. What would you do with those roads that partici- pate in our interstate commerce, and yet are beyond the jurisdiction of our courts? Mr. ToMLiNSON. You mean foreign roads? The Chairman. Canadian roads — foreign roads. Mr. ToMLiNSON. I have not given the matter enough attention, Mr. Chairman, to talk intelligently on that thing. There have been a number of cases before the Commission, and I think the United States roads have been usually able to bring the Canadian roads to "time," if I may use that word. In such cases as have been before them they have carried their point. There is a comity of interest even between roads of foreign countries and this country that compels them to rec- ognize certain rates among themselves. Mr. Corliss. I would like to ask you a question: Do you not think the present rebates and discriminations in rates are the greatest evil that now affects the business interests of our country? Mr. ToMLiNSON. 1 think they are; yes, sir. And I would like to add to that statement the further belief that in the future there will be more complaint against the inherent unreasonableness of rates than there will be against discriminations and preferences; this by reason of the consolidations and the multiple machineries that the railroads are adopting to regulate these rates. They will, I think, in time do away with the discriminations and undue preferences, but to-day that is the great evil. Mr. Corliss. If effective legislation was secured providing proper punishment in case of discriminations and rebates, do you not think that the traffic would be justly regulated thereby — the rate? Mr. ToMLiNSON. Do I not think that the result would be that the rates would be reasonable? Mr. Corliss. Yes. Mr. ToMLiNSON. I can not say Mr. Corliss. And uniform? Mr. ToMLiNsoN. It would be uniform, and that would be a decided advantage. Mr. Corliss. Well, with reference to different shippers, if all had to pay the same rate there would be no advantage to one over the other. Mr. ToMLiNSON. No. I say it would be a decided advantage to all concerned. Mr. Corliss. Do you not think there would be some danger in plac- INTEESTATE-COMMEECE LAW. 113 ing arbitrarily in one board of iiye men the power to arbitrarily fix T ^i"- TosiLiNsoN. I do not think so. In the past decisions of the Interstate Commerce Commission there have been no instances which have been declared unreasonable, which would lead me to believe that we can safely rely upon them. I do not know why we can not as safely rely upon them as upon the courts. It is incomprehensible to me, gentlemen, although I am a layman in this matter. " The Chairman. Has no method suggested itself to your mind whereby through simplifying methods by which a suitor could recover for excessive charges and by multiplying his damages that the same result could be accomplished as by giving this power to fix rates to the Commission? Mr. ToMLiNSON. I think not, sir, and for this reason that I have already stated; it is not the man who pays the freight who may be injured. It may be some consumer, some producer. It is unquestion- ably one or the other of those two gentlemen. They have no recourse. The middleman who pays the freight may have recourse, but not those men. The Chaieman. That will be upon the supposition that the members of the cattle raisers association did not ship their own products ? Mr. ToMLiNsoN. Yes sir. The Chaieman. But they do very frequently, do they not? Mr. ToMLiNSON. As far as the Texas Cattle Raisers' Association is concerned, they ship their own live stock generally. So far as the native live stock is concerned, and I might say fully 60, and perhaps 75 per cent of the receipts at any of the large markets, the stuff is bought by a buyer at the point of shipment and sent into the neigh- boring town. It is not quite the same, as far as the live stock is concerned, as it is in the grain situation, but to the extent of the percentages that I have mentioned it is true. Take the State of Iowa. I suppose that 75 per cent of the live-stock shipments out of that State are purchased by buyers located at the different points. The farmer does not have any interest in it after he has sold tne shipment to the buyer. Mr. Davis. It affects his price; the price he gets for his cattle? Mr. ToMLiNSON. Decidedly. Mr. Davis. He has it then; if it is indirect it is equally effective as if it was direct. Mr. ToMLiNSON. How is that? Mr. Davis. The buyer in Texas calculates the amount of freight he has to pay when he pays the cattle man for his cattle, does he not? Mr. ToMLiNSON. You have lost the thread of the chairman's ques- tion. He asked me if the remedy for the recovery of unjust rate would not answer as well as the first law. , I do not think any of these buyers would take into consideration the hypothetical point that they might recover from any reasonable rates on live stock. Mr. Davis. I based my question upon the remark that you made in your reply, when you said that the cattleman, the man who sold the cattle to the buyer, had no interest in the freight rates. Mr. Mann. No interest after the cattle were sold. Mr- ToMLiNSON. That was in connection with the previous remark, and should not be considered alone, sir. The Chairman. A gentleman testifying here on a previous day i-o L- 8 114 INTEESTATB-COMMEKCE LAW. made the statement that the remedy of recovery was entirely elusive; that through the delay of the law, through the difficulties of court procedures and the expenses that wronged men who were deterred from bringing actions. My question was suggested to you with a view of eliciting your opinion as to whether or not, if those difficulties of litigation were re- moved — for instance, if a commission— the commission — was instructed among its other duties to ascertain what the fair rate would be, and then some preference was given in regard to a hearing in cases of this kind with a provision for the recovery of counsel fees and multiple damages, if that would not be a safer remedy than the one of giving power to a small commission over this great interest. Mr. ToMLiNSON. No; I can not agree with you, Mr. Chairman, on that. I do not think so. Mr. RiOHAEDSON. Why not? Mr. ToMLiNSON. For the reasons I have just stated. The Chairman. Would not the certainty or the probability of speedy recovery, with the aids of the Commission and of counsel pro- vided bj"^ the public, would that stimulate men who had been over- charged to ask proper recovery ? Mr. ToMLiNSON. We think the essence of the act should be to pro- cure for the public, for the consumer, just and reasonable rates, and as quickly as possible. We do not believe that a remedy such as you suggest would be at all adequate. It would be effective, no doubt, but it would not accomplish the purpose. The small shippers have no time to enter the courts. You doubtless know better than I do the difficulty of defeating the railroads in any kind of a case. The Chairman. Well, I presume that one of the difficulties in liti- gation of this kind would be the difficulty of establishing on the part of a nonprofessional railroad man what was a just rate. 1 think that for myself I would have very little idea what a just rate was. But if there was a commission charged with the duty of studying that ques- tion and familiarizing itself with all the elements that constitute the cost of railway carriage I think that the matter would be infinitely simplified. Mr. ToMLiNSON. Yes, I think so; and I can see no reason, as I have already stated, after the Commission has done that, why it should not go into efi'ect. The Chairman. Then the Commission would simply go before a jury as any other witness Mr. Adamson. Do you think rates made by a commission would never be violated ? Mr. ToMiiiNSON. No, sir; 1 do not look for that ecstatic state of afl'airs. Mr. Adamson. Would not litigation then, by reason Mr. ToMLiNSON. I think I have repeatedly said that there would be less violations if the Commission was granted the power asked for in the present bill. Mr. Adamson. How could there be less violations under one general blanket system of conditions than there are under the present condi- tions? Mr. ToMLiNSON. Because the Commission would then have the power to fix rates, and as they have not that power at present, and there IHTEKSTATE-OOMMEROE LAW. 115 would be some legal effect given to their decisions, and there is not to-day. Mr. Adamson. You do not expect the Commission to deal summarilv with violations ? -^ Mr. ToMLiNSON. No, sir. Mr. Adamson. Then the same courts would have to be resorted to? Mr. ToMLiNsoN. It is put in a different position. It makes the dutv ot the railroads the affirmative duty of proving the order of the Com- mission unreasonable, and the complainant has to do that. To-day if we get an order of the Commission we have to go into the courts. Testimony of the Commission is not admissible before a court to-day. That is a startling statement, but it is nevertheless true. Mr. Adamson. The chairman was suggesting a method of liti- gation Mr. ToMLiNSON. The method was suggested by your honorable chairman, and he asked my opinion, and I said I did not think it went far enough, and I have stated the reasons why. Mr. Richardson. You really believe that the decision of the Com- mission, under the position you advocate, would be, in effect, final? Mr. ToMLiNSON. How is that? Mr. KiCHAEDSON. The decision of the Commission under the policy that you now advocate would be, in effect, final ? Mr. ToMLiNSON. No, sir. Mr. Richardson. Why would it not? Mr. ToMLiNSON. 1 am advocating the bill, and the bill speaks for itself, I believe. Mr. Richardson. I am talking about your views. Mr. ToMLiNSON. I gave some of my views personally. Mr. Richardson. I did not hear them. Mr. ToMLiNSON. Pardon me. Mr. Adamson. Where there was a multitude of carriers, do you not believe that the secret discriminations and rebates would be worse than now, under the rates fixed by the Commission? Mr. ToMLiNSON. Where there were a multitude of carriers ? Mr. Adamson. You say that consolidation is rapidly going on Mr. ToMLiNSON. Yes, sir. Mr. Adamson. If there were a large number of carriers still in oper- ation, then under ' your proposed fixing of rate by the Commission would not these secret discriminations or system of rebates be prob- ably as bad as now, or worse? Mr. ToMLiNSON. There is, of course, a greater likelihood of discrim- ination and secret rate and evasions where there is a multitude of carriers, than where there are only one or two. Mr. Adamson. Under the other system of rates? Mr. Tomlinson. 1 have no doubt that there would be some discrim- ination. There is this condition which has entered into the field, gen- tlemen, and which is a marked departure in railroad matters. You doubtless know that injunctions have been issued for some of the rail- roads between Chicago and Kansas City. For instance, the railroads must not charge anything less than their published tariffs. Similar injunctions have been asked for and granted temporarily against several eastern lines. The injunctions which have been granted so far against eastern and western lines have been only temporary. The bill filed, I believe, by the Commission will be 11& INTERSTATE-COMMERCE LAW. argued some time in June. The court in Chicago, sitting there, granted temporary injunctions. The roads did not oppose them,., They did not oppose them, I personally believe, because they believed that it would result in a greater revenue to them. Mr. Adamson. I will state my question in this way. Grive the Commission power to fix the rates as suggested, then retain sub- stantially the present number of competing carriers. What reason would you have, or do you have, to believe that there would be fewer discriminations secretly than now? Mr. ToMLiNSON. The provision of the bill provides for money pen- alties for rebates and evasions. Mr. Adamson. How do you get them — through the courts ? Mr. ToMLiNSON. Yes, sir. Mr. Adamson. Then this litigation is not shortened any, is not lessened any ? Mr. ToMLiNSON. How is that? Mr. Adamson. The end of your litigation is just as far off as now. Mr. ToMLiNSON. Yes, sir; but I think there is no doubt, if the road is fined once or twice, it will let up. Mr. Adamson. There is no doubt that it will pay the lawyers better, but the question is, Will you scare the railroads worse and reduce the temptation of violation ? Mr. TomlinsoN. 1 think so. I think the point that you are discuss- ing is very ably met in the provision for the proper penalties against carriers instead of against individuals, as in the present law. Mr. Mann. If the courts retain jurisdiction over these injunction bills, it will end all this^ — -^ Mr. ToMLiNSON. I think so. Mr. Mann (continuing). Form of trying to reach discriminations? Mr. ToMLiNSON. Yes, sir; and competition will be a word and not a reality. Gentlemen, this is a serious matter to the public. Mr. Chairman, you reminded me yesterday that we were pei'haps interested in a bill introduced by Mr. Stevens, of Texas, regarding the extension of time a little for the detention of live stock in cars in transit from twenty- eight to forty hours. The Chairman. Yes, sir. Mr. Tomlinson. We are interested in this legislation, because we are interested in the wishes of the live-stock men. We know the operations of the present law. We know what the proposed law would effect. Briefly stated, it may be said that the only live stock affected either by the present law or the proposed amendment is range stock in the Northwest — stock in Texas. The bill emanated from Texas people. They are the best judges of the condition of their live stock. They have a greater interest in its reaching market in good condition than anybody else. Inhumanity to live stock prevents results by depreciation of appear- ance, and -a consequent loss of price, and we think the owners can be safely relied upon to know when they want their stock unloaded in transit. We heartily indorse this bill, and think it should be put into effect. The railroads are not prepared to unload the stock at any stated periods, and it frequently results that the stock has to be unloaded, say, every ten or twelve hours, to meet the necessities of the railroad. INTERSTATE-0OMMEE':!E LAW. 117 on account of the absence of frequent unloading stations, while by the retention of the stock for a few hours longer in the cars it would avoid that unnecessary unloading. 1 do not think there is any objection— I know there is not any objection— against this bill on the part of any practical live-stock man in the country. 1 am told there is an objection bv certain humane societies. I dislike to question the experience or intelligence of these people, but I do not believe they understand the situation. We heartily, thoroughly, indorse the bill of Mr. Stevens, and every live stock organization of the countrv has favored it repeatedly, and I believe it ought to be enacted. 1 thank you, gentlemen. Ml-. Mann. I remember, if I remember correctly, that last year the president of the Chicago Humane Society sent a protest against the passage of a similar bill that was then pending, and I wish, if you will, that you might submit a written statement in reference to this bill which may be inserted in the record for our future consideration. Mr. ToMLiNSON. I shall be very much pleased to do so. I thank you very much, gentlemen, for your attention. STATEMENT OF MR. WILLIAM H. CHADWICK, CHAIRMAN OF THE TRANSPORTATION COMMITTEE OF THE BOARD OF TRADE OF THE CITY OF CHICAGO. Mr. Chadwick. With your permission, Mr. Chairman, I will read the instruction which I hold in my hand from the Board of Trade of Chicago: BoAKD OF TbADE OF THE OlTY OF CHICAGO, Chicago, April 9, 1902. Mr. William H. Chadwick, Chairman Transportation Cormniltet. Deak Sir: I have the honor to inform you that I have appointed you to represent the Board of Trade of the City of Chicago, at hearings in Washington, before the committees of the Senate and House on the subject of granting additional powers to the Interstate Commerce Commission. While this association has indorsed the Nelson-Corliss bill, and you are to use your endeavors toward the passage of that bill, you are granted discretion to agree to such compromise as may be necessary in your judgment to secure the release sought. Respectfully, William S. Warren, President. It seems to me that I may, in view of what has transpired in hear- ings of this committee since yesterday, draw your attention to the con- ditions which led to the enactment of the first act to regulate commerce. I now quote from the proceedings of the National Board of Trade in Washington, December 15, 1897, the statement of Hon. George F. Stone, secretary of the board of trade in the city of Chicago, as follows: The proposition to establish pooling is not by any means new, and we are therefore not left in doubt as to its effects upon the business interests of the country. The first prominent pool was the Chicago-Omaha, and was formed in 1870, and was found in its operation immensely profitable to railroads, so that in the year 1887 practically all competitive traffic was pooled. During those years business suffered, localities and shippers were discriminated against, secret rebates, to a greater extent than before or since were granted. Discrimination in favor of industries in which some of the parties to the pool were financially interested placed other industries under great and sometimes fatal disadvantages. One of the -most mischievous and demor- alizing pools that were established about this. time was the Southwestern Railway Association, a vampire which for a decade sucked the lifeblood of the commerce of the Missouri Valley. 118 INTEESTATE-CCnaMEKOE LAW. The Southwestern Railway Association solved the problem of how to get rid of competition and to rob the people within the letter of the law. Kansas City built a line to the South, and thought she had a line which could be used to fight this pool. It had not been in operation a year before this association, with subsidies, had it bound hand and foot. Another outlet to the East, by way of Omaha and Council Bluffs, was also shut up, leaving the Missouri River country absolutely at the mercy of the pooling lines. At every acquisition of competing lines rates were moved up a notch, until they reached an appalling figure. When this association was organized, in 1876, the rate on first-claas matter between Missouri River Valley and Chicago was .50 cents. It was at once advanced several cents, and in 1880 it had reached 75 cents on east bound and 85 cents on west bound. In a few months it was moved up to 90 cents. When the association was organized, it included the Burlington, Chicago and Alton, Missouri Pacific, Rock Island, and Wabash. The system was soon found incomplete in that there were several loopholes by which people were enabled to avoid the association's higher carriage. One of these was the Missouri Pacific in Kansas. The business of ten points on the Gould system — Parsons, Chanute, Garnett, Ottawa, Humboldt, FortScott, Paola, Bur- lington, Emporia, and Junction City, since known as the ten junction points — was sent to St. Louis over Gould's southern line, avoiding the pool point. In order to divert this traffic through the pool, by which means alone the higher rates could be maintained, the association entered into an agreement to pay the Missouri Pacific a liberal percentage of the gross earnings of the pool on condition that this be sent via pool points. The amount paid the Missouri Pacific in 1885 on account of the ten junction points was 1660,000, the agreed percentage of the receipts of the associa- tion, which amounted to $11,000,000. During several years of the existence of this pool the shippers of the Missouri Valley had occasionally taken advantage of the rate offered by the Milwaukee and St. Paul Railroad to ship via Omaha and Council Bluffs. The pool, in order to pre- vent this, found it necessary to bind the Missouri Pacific and Council Bluffs Railroad from making special rates to Omaha and Council Bluffs. Here again a money plaster was applied, the pool agreeing to pay the two hues a percentage of the gross earnings, amounting to $75,000 a year. The lines on their part charged the full local rates between the pool points and Omaha and Council Bluffs. The object of this was to make the rate via the Northern roads the same as that via the association or pool Toads in order to keep all the business in the pool, as shippers would not use the Milwaukee or Northwestern at the same rate, owing to the great length of those lines. The Burlington and Missouri River coming into competition with the Central Branch. of the Union Pacific (a pool line), the association, in order to maintain rates and have the business pooled, subsidized the competing line to the amount of $250,000 a year. The sanie principle was applied to the St. Louis, Fort Scott and Wichita after its extension into southern Kansas. The Fort Scott and Wichita, in consideration of the maintenance of rates and pooling business of its lines, received of the association a percentage of the gross earnings of the pool amounting to $225,000 a year. All the competitors who could be taken into the pools were thus brought in. The commissioner in the meantime turned his attention in other directions. Immediately upon the completion of the Kansas City, Springfield and Memphis, in 1883, the Fort Scott began to compete for the St. Louis business in conjunction with the St. Louis and San Francisco. By its connection with the latter at Springfield it was enabled to cut the association rate to St. Louis and still get a fair remuneration. In order to stop this, the association entered into an agreement with the Fort Scott and 'Frisco roads, by which the latter were paid $8,000 a month on condition that they keep out of the St. Louis business. Such instances and similar combinations might be multi- plied almost indefinitely, but sufficient is shown to indicate the nature of railway pools. They are inimical to the public interests. They are in restraint of trade, they prevent competition, they are monopolistic in purpose and effect, they are odious in law, they are subversive of the very interests which railways were created to conserve — that is, the general welfare in so far as that welfare relates to the functions and obligations of a coitnmon carrier. Now, this is a quotation from an article that was isubmitted in the year 1897, and it was well supported at that time, and has been since confirmed by historj', ag the history became public, and as the story was told more fi-eely about the great success of those pools. After they were abolished, the men who were engaged in t£em and had IJNTJSKSTATJS-OOMMEBCE LAW. 119 benefited by them had no further reasons for not letting the story come out publicly. Year after year we plain people have been coming to committees of the Senate and House asking relief from conditions which are a dis- grace to the Republic and which never should have been tolerated in this country. The people have long known and testified what the con- ditions have been, and their statements have had such full corrobora- tion recently that their case is completelv established beyond refuta- tion. The Commission held that 23 cents was a reasonable rate from Chicago to New York. In 1892 the published rate was 29 cents. In 1889 the published rate was 13|^ cents, and later 12 cents, from the Mississippi River to New York. That was caused by competition between carriers. That rate is to-day 18^ cents. Now, we have here an instance that when the rate was 12 cents and was advanced to eighteen and a half cents the advance was greater than shown in the great pools to which I have referred, in which the advance was only 50 per cent, which seemed, at first sight, something that no traffic could bear and that no people, no committee, no Con- gress could indorse, and yet here is to-day, just instituted yesterday, a rate more than 50 per cent higher than the rate which had thereto- fore prevailed. The Chairman. What did you say was the rate fixed by the Com mission as a reasonable rate? Mr. Chadwick. That was long ago, many years ago. The Chairman. In 1890? Mr. Chadwick. Yes, sir; in 1890. The Chairman. What was that rate? I did not catch it. Mr. Chabwick. That rate was 23 cents. Mr. Mann. Is the rate of eighteen and a half cents a reasonably high rate? Mr. Chadwick. If you will pardon me, Mr. Mann, I am not going to say anything about unreasonably high rates. Mr. Mann. We have had the complaint made to us here that the grain rate was too low. Mr. Chadwick. Those men who say that may discuss it with you, if you please. The higher rate has been made possible by the combination of lines between Chicago and the seaboard. The Pennsylvania has acquired the Baltimore and Ohio, the Norfolk and Western, the Chesapeake and Ohio, and lines north of the Pennsylvania have come mainly under control of the New York Central and Mr. Morgan. A year ago the published rate on grain from Chicago to New York was reduced from 16 cents to 13i cents. At the same time the rail- roads agreed to charge a secret rate of 11 cents. April 14, 1902, the published rate was advanced from 13 cents to 16 cents. This rate they must expect to maintain, for certain of the most important lines are under injunction to maintain the published rate. Apparently it is the intention to maintain a rate 5 cents higher this season than last season between Chicago and the seaboard. When five or six men can sit down in New York and determine what the freight rate shall be from Kansas City to the Atlantic seaboard, from the Mississippi River to the Atlantic seaboard, and from the grainfields to St. Louis, Chicago, and Duluth, there is really no longer any competition in the transportation of grain, and that condition is practically here. 120 INTERSTATE-COMMEEOE LAW. The Vanderbilt system, although not here in detail, the Pennsyl- vania system, as I term it one system, the Gould system, the Mor- gan-Hill system, and the Harriman system 1 have here. These are the important independent systems which constitute in themselves — these five lines or five combinations^all the railroad lines in the country which it would be necessary to acquire to have absolute, complete control, and a monopoly of the railroads of the country. Those outside are the following: The Atchison, Topeka and Santa Fe, with 7,481 miles; the Chicago, Rock Island and Pacific, with 3,818 miles; the St. Louis and San Fran- cisco, with 2,887 miles; the Chicago, Milwaukee and St. Paul, with 6,451 miles, and the Illinois Central, with approximately 5,000 miles. I wiU file all these papers with the committee, and you will see that the round figures which I assume of 100,000 miles now controlled by 5 men, the Vanderbilt line, comprising about 20,000 miles; the Penn- sylvania system, with about 18,000 miles; the Gould system of about 16,000 miles; the Morgan-Hill system, including the Southern Rail- way, with about 37,000 miles, and the Harriman system, with about 16,000 miles, makes up this total, unless the Illinois Central was included in it, which I prefer not to include, in order not to obfus- cate things too much: Miles. The Vanderbilt system , 20,000 Pennsylvania system 18, 000 Gould system 16,000 Morgan-Hill (including Southern Railway, controlled by Mr. Morgan) 37, 000 Harriman system 17,000 Total 108,000 IMPORTANT INDEPENDENT SYSTEMS. Atchison, Topeka and Santa Fe 7,481 Chicago, Rock Island and Pacific 3, 818 St. Louis and San Francisco 2, 887 Colorado and Southern 1, 142 Chicago, Milwaukee and St. Paul 6, 461 Pere Marquette 1,747 Atlantic Coast Line : 2,177 Seaboard Air Line 2, 600 Plant system '. 2,207 New York, New Haven and Hartford 2,038 Boston and Maine 3, 338 IlUnois Central 5,000 Total mileage 40,896 VANDERBILT SYSTEM. New York Central system (including the rnain line, the Beach Creek, the Fall Brook, the Mohawk and Malone, the New York and Harlem, the Roome, Watertown and Ogdensburg, the West Shore, and many others) . 3, 107 Lake Shore and Michigan Southern 2,084 Michigan Central (including the Canadian Southern) 1, 635 New York, Chicago and St. Louis (Nickel Plate, including the Pittsburg and Lake Erie) 523 Chicago and Northwestern (including the Chicago, St. Paul, Minneapolis and Omaha, and the Fremont, Elkhorn and Missouri Valley ) 8, 769 Cleveland, Cincinnati, Chicago and St. Louis (Big Four) 2, 287 Boston and Albany 394 Lake Erie and Western 725 Total mileage 19,524 INTERSTATE-COMMERCE LAW. 121 PENNSYLVANIA SYSTEM. Pennsylvania Railroad (east of Pittsburg and Erie, including the New Jersev ™^^' Imes, the Allegheny Valley Railroad, the Philadelphia and Erie, the Northern Central, and many others) 5 539 Pennsylvania Railroad (west of Pittsburg and Erie, including the'Pennsyl- ' vania Company, the Peoria and Western, the St. Louis, Vandalia and Terre Haute, the Pittsburg, Chicago, Cincinnati, and St. Louis, the Cleve- land, Akron and Columbus, the Grand Rapids and Indiana, and others) 4, 405 Long Island 39j^ Baltimore and Ohio (including the Cleveland, Lorain" and Wheeling, the Baltimore and Ohio Southwestern, and others) 4 025 Total mileage : _ I4 351 GOULD SYSTEM. Controlled by the Gould-Sage interests: Missouri Pacific and Iron Mountain 5,372 International and Great Northern " ' 891 Wabash (including the Wheeling and Lake Erie, and the Omaha and St. Louis) 2,968 St. Louis and Southwestern 1,293 Texas and Pacific 1, 619 Rockefeller and Gould interests: Missouri, Kansas and Texas 2, 480 Denver and Rio Grande (including the Rio Grande Western) 2,301 Total mileage 16,924 MOEGAN-HILL SYSTEM. Controlled jointly: Northern Pacific (which owns 23,000,000 acres of land) 5,487 Great Northern 5, 417 Chicago, BurUngton and Quincy 8, 171 Erie 2,605 Lehigh Valley 2,178 Controlled by Mr. Morgan: Philadelphia and Reading (including the Central of New Jersey) 1, 677 Hocking Valley (including the Toledo and Ohio Central, and the Kanawha and Michigan) 882 Chicago, Indianapolis and Louisville 546 Southern Railway (including the Central of Georgia, the Alabama, Great Southern, the Cincinnati, New Orleans and Texas Pacific, and the Mobile and Ohio 10,627 Total mileage 37,590 HARRIMAN SYSTEM. Union Pacific (including the Southern Pacific, the Oregon Railroad and Navigation Company, and the Oregon Short Line ) 15,163 Chicago and Alton - 918 Kansas City Southern 873 Total mileage -^ 16,954 While the powers of the judiciary should not be conferred on the Commission, it may safely be granted the right to arbitrate. We consider another provision absolutely essential to reasonably safe- guard the interests of the public if this bill shall pass, namely, that as the Interstate Commerce Commission is composed of men who can have no personal interests in the matters brought before them under the provisions of this bill, the order of the Commission should stand 122 INTEEST ATir^OUHHEIUIErTTSW; unless and until it be suspended or revoked by the circuit or other court or judge, as may be provided. The powers of the Commission are now simply advisory. For the first ten years the Commission exercised the power of revis- ing rates, which proved quite satisfactory to the country. The deci- sions of the Supreme Court, about 1897, terminated that power. The consequences have been most serious during the succeeding five years. Of about 135 orders made by the Commission, I think that 68 of them dealt with unjust and unreasonable rates, and for the coi'rection of such wrongs I have not been able to learn of a single instance where the remedy sought has been obtained. If bill 8337 is to become substantially the law, we earnestly hope and recommend that it be amended so that any definite order made by the Commission, and provided in the bill as printed, shall be review- able by but one particularl3r designated court of the United States, which shall have jurisdiction in all parts of the United States and Ter- ritories, or shall be reviewable by one particularly designated judge of some court of the United States, who shall have the same jurisdic- tion, for the reviewing and passing on such orders, so that all causes which shall be heard under the act may have the benefit of expert service of the highest order. The railroads ask for protection against each other. Are they not willing that the public be granted a similar protection against the rail- roads themseves? Wh}^ not? My personal experience with railroad managers has led me to believe that individually they are the peers of any class in the Republic. Why should they collectively take any dif- ferent course than each would pursue of his own volition individually 1 I am not willing to concede that the tariff rates of freight on grain of late have been or now ai'e too high, nor do I complain that the differ- ent railroads, even in this period of commercial activity and admitted prosperity, are collecting more pay for their services than honestly may be defended as fair and reasonable; for surely profits may be had more easily and paid with better grace in prosperous than in pinching times. A crying and annoying evil, which works hardship in many cases and seems to be indefensible, is the irregular, heterogeneous classifica- tion of freight, and in this day of organization and method it seems strange that it has not heretofore been regulated. Whenever any bill is passed, it should provide protection for the carriers and the public by making it a misdemeanor, punishable by an exemplary fine, for any person acting as principal or otherwise to obtain transportation at less than tariff by misrepresentation of classi- fication, weight, character, or any other fraudulent means. As stability of rates, when fair, is a great desideratum, the orders of the Interstate Commerce Commission should be continued in force and obeyed for two years from the time they become originally operative and observed. The people are here again with a bill — those same peo- ple who have been here time and again — seeking relief of evils which are now undenied and undeniable. It may seem strange that they con- tinue to come again and again, but, as you well know, they have no hope save in you, you who stand morally pledged to do the fair thing, the reasonable, the proper, the possible thing; the thing that is right for the whole community of interests — trade, producer, consumer, shippers, carriers. INTEBSTATE-COMMEEOE LAW. 123 I now wish to say a word on recent conditions in the Southwest T- °''^i.'^rj''?®°*i^y ^^^^ P'^^l'^ showing the following state of affairs: Ihat Richardson, of Chicago, operating grain elevators and doing a grain business on the Santa Fe system, and Robinson, of Kansas City;, operating in grain on the Missouri system, partially in the same territory, each received from their respective railroads a private, and to all intents and purposes a secret, rebate of 5 cents per hundred, and that the banta Fe authorized and employed the register of concerns to purchase the grain at certain stations, paying to them a stipulated brokerage for handling the grain for the account of the Santa Fe, which thus departed from its proper functions as a common carrier and thereby, instead of performing its duty as a servant of the public' became the competitor of those legitimately so trading, engrossing their business. This seems to me one of the most flagrant of all the numerous instances of- wrongdoing on the part of the railroad fraternity which has come to my attention. It is of little use to bring to your notice any facts whatever, unless this one case makes upon you the impression that it should. Your honorable chairman asked yesterday that some facts be laid before this committee in lieu of argument, and I therefore take an early opportunity to apprize you of this one fact, which, it seems to me, unless promptly checked by legislation which will check, foreshadows practices by the common carriers which can not fail to produce the most deplorable results. What will happen if the railroads go on and engross the business of the iron dealer, the coal dealer, the lumber dealer, and so on, as they, in the instance cited, have treated the grain men in the territory named ? Anarchy is the answer. In support of what I have said here I will say that this evidence was taken by the Interstate Commerce Commission in public hearing at St. Louis, Chicago, and Kansas City, within the past few months, and can be learned from their reports or theii- notes. Devices for evading the interstate-commerce law have been abundant in the past, and as fast as one is uncovered and corrected, wholly or in part, a new device has been found, and who can say when and where the end will be ? Probably you, each of you, know more than I do of this question of the regulation of common carriers, and I do not doubt that you know that the abuses of this ought to be evaded, and that we ought to obtain from you at the earliest possible day a full measure of relief from discrimination. I am not prepared to indorse any propo- sition to confer upon any commission whatever the power to primarily institute and make "just and reasonable rates." It seems to me, however, that it is entirely proper and right that the Commission may examine into all the conditions surrounding, per- taining to, affecting, or affected by any rates or practices which may be established by carriers, and if after a full hearing the Commission finds grounds on which they consider an order justifiable, then, as arbitrators, the order of the Commission- should stand until or unless revoked by the court of review, for the making of a rate or the prac- tice by the railroads is necessarily in the first instance ex parte and should not stand, unless confirmed by the arbitrator, the Commission. Relief from the evils of discrimination of every kind and degree, relief from the evils of unreasonably high rates, and to secure the benefits 124 IWTEESTATE-COMMEROE LAW. of uniform rates are wbat we intend to seek through the Nelson- Corliss bill. This is our charter to-day, and we think that the bill will accomplish the end sought, but if it will not accomplish that, show us how to amend it, so that justice may be done the public and the railroads alike, and you will confer an inestimable boon on millions who are affected by the matters under discussion. I have the honor to represent before you the most important com- mercial organization in the world; an organization comprised of busi- ness men, merchants in and about Chicago, and in all parts of the country, and also in those countries which are in close commercial touch with the United States. The vessel and the railroad interests are strongly represented in our membership, as well as all the impor- tant banks and kindred interests. We are in close touch with all the agricultural interests of the continent, and may fairly claim to know and reflect the crying needs of the people, and this we intend to do, and believe we are now doing. Year in and year out, for more than —think of the time the country has suffered — more than thirty years, for the Chicago-Omaha pool was formed in 1870, and was grinding on like the car of Juggernaut in full vigor thirty years ago. The public has carried this old man of the sea on its shoulders through a generation. This is no dream, for the vast volume of evidence given before the committees of Congress, before the Commission, before the courts, is perhaps so small in proportion to the amount that would be forthcoming should every man tell what he knew about railroad discrimination, as to constitute but an insig- nificant per cent of the whole, but yet what a mass of testimony has been printed upon these subjects. Our prayer is before you. You are the only pfeople who can assist us at this stage of the proceedings; you are the people on whom rests the responsibility for withholding from the people their rights and granting to the railroads the privileges which they deserve to enjoy. Few, if any, will complain that the people have not done their duty fully. Of the bills proposed, of the three or four which have been intro- duced, we indorse the Corliss bill. We have been in hopes that some action would be taken by which the members of the Interstate Com- merce Commission would not be left dependent upon the fortune of political parties. Give us the best courts possible, give Congress a fair bill, practicallj' what the railroads honestl}" know they need, and what the public has a right to regard as reasonable safeguards. I have not anything further to say, Mr. Chairman, but I am ready to answer any questions I can answer, and those that I can not answer at present without having additional information or without giving the matter' particular thought I will not try to answer. I will be here in town a day or two, and if you choose to hear me again I will try to answer them then. STATEMENT OF MR. CHARLES NOYES CHADWICK. Mr. Chadwiok. Mr. Chairman, I want just one word. I represent the Manufacturers' Association of New York. The Manufacturers' Association of New York, Mr. Chairman, is a representative body of a very large number of industries, as you are aware. We have regu- IKTBBSTATE-COMMEECE LAW. 125 lar montbl}' heai'ings, and all matters of importance that relate to the interest of thecountry come to our organization through its committee. This bill which is before you was referred to the committee on legis- lation and_ reported favorably to the Manufacturers' Association, and by a unaninaous vote was approyed, and I was appointed as a delegate from that organization to appear before you in the interests of that bill. I do not think it is necessary for me to enter into any argument in favor of it. All possible arguments have been presented to you here this morning very fully, and I presume that you have heard them before, and it, is simply in the interest of common sense and fair deal- ing, it seems to us, that this bill should be passed. We feel that there should be some organization with power, not an advisory board, but an organization with power, to give immediate relief when the necessity arises. The delay arising from litigation, as you know, covers a period of sometimes a number of years. Conditions change, and it is very nec- essary that when a particular condition arises it should be met at that time, and in the interest of the community at large should be adjudi- cated upon; and if the body, the organization which has this power, fails or does wrongly, as we understand under the provisions of this bill, the remedy is had through the court. The bill seems to us eminently fair. It is to the interest of every person in the community. We feel that all should be treated alike — the small town, the large town; the small dealer, the large dealer. In our business interests, which spread all over the United States, we have come into contact time and time again with great injustices. We feel that this bill will meet those injustices and, so far as it is pos- sible within the limits of human nature, settle them satisfactorily and wisely and intelligently. I do not know that I need to say anything further except to inform you, as I have, that that is the feeling of our organization and that we hope the bill will pass. The Chairman. We can give you more time to-morrow, if you so desire. Mr. Chadwick. Thank you. Thereupon the committee adjourned until to-morrow, April 16, 1902, at 10.30 o'clock a. m. Washington, D. C, April 16, 190%. STATEMENT OF MR. C. N. CHADWICK, OF NEW YORK— Continued. Mr. Chadwick. Mr. Chairman and gentlemen of the committee, this bill appeals to our organization for the reason that it seems an intent to perfect the original measure which was intended to clothe the Inter- state Commerce Commission with mandatory powers. As we under- stand it the decision of the Supreme Court of the United States found that the' law was not far-reaching in that direction, and this amendment seems to me to be intended to cover the defects of the law. It would seem to me that if a commission is to be of any beneljt whatever, it should have a certain amount of power. A coramis«iu!i 126 INTERSTATE- COMMERCE LAW. which is ajivisory in its character, and which is supposedto regulate such vast interests as the interstate commerce of the United States, should not be limited, and we have felt that for that reason it was very wise to amend the law. In Brooklyn we have had some bitter experiences in regard to transportation. We have in that city a rapid transit company con- trolling the entire service of the city, having a population of over 1,000,000 and that, in connection with the congestion upon the bridge, has developed in the borough of Brooklyn a committee of 50, which has endeavored for the last two years, as far as possible, to regulate the bad conditions existing there. We have an advisory commission, but it has no power whatever, and we have a bridge commissioner, and we have had him appear before us and before the city authorities for the last two years. We have been working along that line, but have accomplished nothing. The conditions there are intolerable. In the development of the resources of the country there come times when capital will be invested in certain localities and vested interests will be developed. People will gather together in places for the pur- pose, perhaps, of operating factories, and flourishing villages may be constructed, depending, of course, upon the transportation facilities that are afforded for the incoming and outgoing products of such fac- tories. Then a time comes when, for reasons that appeal to the rail- roads, a change is made. Trains are taken off and other things are done to injure such a village, and it has practically no redress. Of course we can, as has been stated, go to the courts and ask for relief; but that takes time, and this relief is sought to cure conditions which exist now. That seems to me to be vital. It is a relief which gives damage for injury done for the time being, but it does not provide for con- tinuous relief. This Interstate Commerce Commission was organized for the pur- pose of changing the conditions which have arisen, after having inves- tigated the subject thoroughly and having the evidence before it, and to thus be enabled to provide relief which shall be continuous and upon which all can depend. It seems to me that that is the vital point in the whole thing. Of course we will have the right to bring suit against individuals, and in such cases we can get certain relief, but it is a relief in dollars and cents for past damages. The vital point is to get justice and have fair play for all parties interested, in order that we can depend upon certain conditions and have those conditions remain practically unchanged. We have on our rivers large boats and small boats, schooners and sailboats, and they have a right of way. There is an opportunity for each boat to avail itself of the use of that river and to know what it can depend upon. A common carrier should be placed in that cate- gory, and we who have been coming before this committee for so long feel that we ought to have a regular and fair rate of service on the railroads and that there should be no discrimination in favor of one party against the other. That, it seems to me, is the vital point in this matter; and for that reason we feel that it would be but common sense, fair and equitable, that we should have it. Mr. Richardson. Is it not a fact that the main complaint you have against the railroads is the matter of injustice on rebates? Mr. Chadwick. That is one of them. IHTERSTATE-COMMEECB LAW. 127 Mr. KiCHAEDSON Is it not true that that is the principal discrimi- nation that is made? Mr. Chadwick. That is one of them, and it may be that the maior complaints come from that cause. Mr. Richardson. That being secret, are you going to reach that by law? Mr. Chadwick. If you have an organization with power to enact penalties, you are in a better position to reach them. Mr. Eichaedson. And why ? Mr. Chadwick. You will have to depend upon the general situation and the character of the men; their intelligence, ability, etc. You are always working against the limitations of human nature; and the main point is to secure that particular measure which will under all the cir- cumstances give the best result. I do not think that even this measure will be an entire cure for all our troubles, because we all have a desire for riches, And. we have favoritism to contend with. The Chaieman. Have you given any thought to the effect that it might have on the future construction of railroads? Would you go into the business of putting large amounts of capital into them when you knew that there was a commission whose action might be detri- mental to them, and which might arbitrarily say whether or not they should be profitable ? Mr. Chadwick. I think so. I think we invest in bad bank stocks and a number of things where we depend upon the good sense and ability of the directors. The Chaieman. Those are parties in interest. They are identical with you. Mr. Chadwick. That is true. The Chairman. Would you be willing to establish a private business which would be subject to the arbitrary decision of a commission ? Mr. Chadwick. We have done that already in our courts. They have no interest whatever in our affairs; and men do not hesitate to enter into all sorts of business engagements knowing that many of them will be subjected to the adjudication of the courts. The Chairman. That is true; but you have the power to go to the court of last resort, and to have complete investigation, and no judg- ment is made effective until after trial is had. Mr. Chadwick. Is not that provision in this bill? Mr. RiCHAEDSON. No, no. The Chaieman. No. Under the terms of this bill, the judgment would go into effect while the trial is going on. Mr. Chadwick. Yes; but there would be appeal to the circuit court. The Chairman. But in the meantime the judgment is going to be executed. - Mr. Chadwick. That is only temporary. We have that condition now. If I engage a carpenter to do work on my house and through forgetfulness or neglect or for any other reason I fail to meet nis bill when it becomes due he can get a lien upon my property. Mr. Davis. But you can suspend that judgment by going into court. Mr. Chadwick. But I have got to fight it. Mr. Adamson. Would you put the power into the law to say what that carpenter should charge you? Mr. Chadwick. I think the conditions are a little different in the two cases. 128 INTBUSTATE-COMMEKCB LAW. The Chairman. We will be glad to hear you upon that point. Mr. Chadwick. What I am saying are simply the points which come to my mind. The only thing that I would like to say upon that pojnt is that it seems to me a common carrier is different from a man who is engaged in the ordinary business affairs of life. The common carrier has had conferred upon it -certain peculiar rights. In New York we have given certain corporations franchises which give those corpora- tions opportunities to earn immense sums of money, and we have been making an effort, which finally culminated in law, that those franchises should be taxed. That is right along this line, and I contend that the common carrier is contradistinguished from a man in ordinary business affairs. I do not know that that is true, and I do not know how it may strike you, but it is the best answer I can give you. Mr. Richardson. Your idea is that the railroad is performing a governmental service? Mr. Chapwigk. Yes. More than that, it is performing a special function for the public. Mr. Richardson. And you think it ought to be held up to some standard for such service, just as if the Government were rendering the service? Mr. Chadwick. Substantially. Their situation is a peculiar one, and it is different from the ordinary business. That is a point which it seems to me is important. STATEMENT OP MR. DAVID BINGHAM, CHAIRMAN OF THE DIS- CRIMINATION COMMITTEE OF THE NEW YORK PRODUCE EXCHANGE. Mr. Bingham. Mr. Chairman and gentlemen of the committee, the chairman of our produce exchange has just come out of a fight before the New York legislature, which affects us a little more than the Inter- state Commerce Commission does, because the great bulk of our grain comes from Buffalo. New York State has grown by reason of the building of the Erie Canal, and if it is to retain its supremacy it will be by the enlargement of that canal and not by appealing to the legis- lature, as we think, because the rapacity of the railroads will all the time crowd us in regard to rates so that we can not live. I am specially charged to present this memorial to this committee, and as it is quite short, I will read it: The provisions of thiese bills are identical, and their object is to confer upon the Interstate Commerce Commission powers which will make operative the interstate- commerce act as originally enacted by Congress and to make effective the orders of the Commission for the correction of abuses which exist in interstate commerce, espe- cially unjust diwcrimination against individuals, firms, corporations, and localities. The phraseology of the original interstate-commerce act, as interpreted by the Supreme Court of the United States in various decisions, has been found insufficient to give effect to its purpose. Under the act as it now exists the orders of the Commission can only be rendered effective by a judgment of the United States courts, and when application for such judgment is made the findings and decisions of the Commission are prima facie only and the railroad companies have the right to offer testimony de novo upon the sub- ject. The result of this condition of the law is that important evidence is often with- held from the Commission and reserved to be offered for the first time in court. The pending amendments provide a carefully drawn remedy, which gives effect to the administrative orders of the Commission while securing to the defendants the right of appeal to the United States circuit court and the Supreme Court. The bill pro- vides that the orders of the Commission shall be reviewed upon the evideii^e upon INTEKSTATE-OOMMEKOE LAW. 129 which the Commission acted, except that in certain circmnstancea additional evidence may be taken, but this right is so guarded as to prevent its becoming ariabuse. These amendments do not confer upon the Commission any general rate-making power; this power is still left with the common carriers. The pending bills seek to give the Commission power to correct rates when they have been shown by judicial mvestigation to be unreasonable, unlawful, or discriminative, the orders of the Com- mission to be obligatory only for a period of two years. As a substitute for the imprisonment penalties of the existing act, fines are pre- scribed varying from $1,000 to $20,000, with the view of facilitating the production of evidence and the more effective enforcement of the penal provisions of the act. That, in substance, is all the Produce Exchange desires specially to present to this committee. As you know, in New York, as I said before, we get a very large amount of our produce by water. What we get by rail comes very largely from Buffalo, and there we have what is known as the Trunk Line Association. The Trunk Line Asso- ciation, gentlemen, get together and they apportion the amount of traf- fic each railroad is allowed to carry from Buffalo to New York. For example, they say the Lackawanna Road will carry 6^ per cent; the Lehigh Valley Eairoad will carry, say, 15 per cent; the New York Central Railroad so much, and so they divide it all out. When a rail- road reaches its percentage it has got to stop and carry no more until some railroad which is behind, has caught up. For example, along in November, just a little while before the clos- ing of the canal, a friend of mine had some Indian corn in Buffalo. He wanted to bring it down to New York. The, agent of the Trunk Line Association said to him: "You must bring that over the New York Central Railroad." He went to the New York Central and he said: " Can we have cars to move that corn ?" They said: "Yes; but it will be two or three weeks before we can give them to you." He said: "I want to move it for a steamer going in November." "Well," said the New York Central man, "You will have to take your chance." He went to the Lehigh Valley Railroad; he asked them whether they had any cars. "Yes," they replied, "We have plenty of cars." " Will you take that grain ?" said my friend. "We can not, unless you get permission from the association." He could not get permission from the association to allow the Lehigh Valley Railroad to carry that grain, although that railroad had the cars. The New York Central Railroad was playing the dog in the manger, and the result of it was that he had to get that grain brought by canal and take the chances of its arriving in time. Those are the conditions which we find to be almost intolerable. The Chairman. Would not that be a subject for regulation by the legislature of New York? Both points — the point of shipment and the point of destination — were in New York in that case. Mr. Bingham. That is why we went to the State of New York, Mr. Chairman; but the fact being that the railroads from Buffalo to New York, with one exception, pass through New Jersey, the Interstate Commerce Commission claim that this is interstate commerce. In New York they claim it is not interstate commerce when it suits them, and in most cases it suits them that way. They say, "We will not file our tariffs," and I believe they do not file them. But make an arrangement with the New York Central for grain from Buffalo to New York. They may send it by the Central. In that case it is New York State traffic. But if they send it by the Western route, then is interstate traflSic, as it suits them. i-oi/-^9 130 INTEESTATE-COMMEROE LAW. Those are the conditions under which we are seeking to get a rem- edy. We do not think ourselves that if this bill is passed we will have the commercial millennium right away, and we do not think if it is defeated the United States is going to the dogs at once, but we think it would afford a substantial relief to have it passed. We have not, either, the same great objection to what is known as pooling that has been developed before this committee. We think that some arrangement might fairly be reached which would permit the railroads to go into some kind of an agreement to regulate rates. You heard yesterday that five men — they are not Chicago men, by the way, but New York men — control practically all the railroads in the United States. As those railroads are consolidated into large companies you can readily understand that this question of individual discriminations will rapidly be eliminated. Competition is all very well where this little railroad is run in com- petition with that little railroad and the competition exists largely by giving rebates; but destroy that competition and the little man who was a very important man in the little railroad ceases to have the importance in the big combination. The Senator from Rhode Island is a very big man in Rhode Island, but spread him over the United States and he is very thin. This man down here who now gets these favors from the little railroad when it is absorbed in the big railroad won't be able to get them. Mr. Richardson. The combination, then, is the manner in which you reach the trouble of rebate? Mr. Bingham. As between individuals, we think. Mr. Richardson. Individual rebates ? The Chairman. In your judgment that would obliterate discrimina- tions as to localities as well as individuals ? Mr. Bingham. No, sir; that is as to individuals. New York does not come now with any particular complaint of discriminations against individuals. We are treated pretty much alike there, because the rail- roads are pretty large corporations and nobody has got the pull. It is the pull everywhere that brings the rebate. A man who has a pull goes to a small railroad. He gets a pass and gets all sorts of favors. But when it comes to a large combination, such as the Pennsylvania Railroad Company, I do not think anyone would charge the Pennsyl- vania Railroad Company with discriminating in favor of individuals. We complain, of course, as to discriminations as regard localities. That has been our fight before the New York State legislature. And, by the way, it may be a matter of interest to this committee to know that the bill which we introduced into the New York legislature con- tains certain provisions, and that with one exception every provision that we asked for in that bill was granted to us by the Trunk Line Association. They conceded all our requests, so that as it stands to-day these arrangements with the railroad are very fair. But we would like to have that fixed. You do not know when they will go back on you. Every country in the world, including this one, has found it neces- sary for the supreme power to regulate railways — extending from Austria, which owns its railroads, to Great Britain, which simply uses some regulation. The principle for which we are contending to-day is one for which we contended for ten years, and which brought the original interstate-commerce law. When we got that law and got that INTERSTATE-COMMERCE LAW. 131 Commission we thought that we got everything we wanted. It has taken us fifteen years to find out that we got nothing. The railroads have found a hole in this law through which they can drive their coach and four. We find it is of no practical benefit to us. The New York Produce Exchange has spent about $10,000 to have the Interstate Commerce Commission investigate a case. We would not spend 7,000 cents now to bring any complaint before them; it would not be of any use. They have no au hority to enforce their decisions. That is the weak point of the law. What is the use of giving a commission power to investigate and then not give it any power to enforce? Mr. Richardson. You make the Commission, then, supreme and arbitrary, give it an arbitrary power to render a judgment at once? Mr. Bingham. Yes. Mr. Richardson. And enforce it? Mr. Bingham. Yes. Mr. Richardson. And then afterwards try the case in the higher court ? Mr. Bingham. Yes, sir. Then we put the railroad companies in this position; that they will have to do the running before this body. Mr. Richardson. What would be your remedy ? . Suppose the Com- mission were to fix the rate and require the railroad people to pay that rate; the railroad has to take the appeal to the circuit court. Sup- pose the circuit court decides against the railroad and sustains the decision of the Commission. Then the railroad takes it up to the last court, the Supreme Court of the United States, and the Supreme Court holds that the judgment of the Commission was wrong, and that you have been imposing a burden on the railroads during those two years, that you have been unjust and unfair to the railroads, and that they have been losing a large amount of money thereby. What would be the remedy for the railroad? Mr. Bingham. Then the railroads would be getting some of their own medicine. They would be suffering the loss which we now have to suffer. They would have the remedy which we now have. The only remedy which we have is to appeal to you. Mr. Mann. You want to shift the burden on the other shoulder? Mr. Bingham. Yes. Mr. Mann. Put the burden on somebody else's shoulder? Mr. Bingham. We have been paying for years too much. I will illustrate the point. Mr. Coombs. You want to get back some of your money by that? Mr. Bingham. We can not get back our money. Mr. Richardson. One wrong does not justify another, not according to morals ? Mr. Bingham. Sometimes it does. If a man hits me in the street, I will be apt to knock him down. We are tired of being too easy with the railroads. We have spent some twenty years, more or less, fight- ing these railroads, and they walk over us unless we threaten them with the legislature. It is the only body they care anything about— the only body that they fear. Let me give you an illustration. We have a State commerce commission in New York State — a board of railroad commissioners. Twenty years ago, more or less, we made a complaint to them in regard to the charge there for spouting grain from an elevator into a ship alongside. It exists to-day, by the way. 132 INTBBSTATE-COMMERCB LAW. If I send to the railroad company and say I want that grain taken out of that elevator and send my ship alongside, they will put it into a lighter and tow it alongside my ship and charge me nothing; but if I say, "I will save you that lighterage," that I will send up my ship and put it alongside of that elevator, then they charge a cent a bushel. What is that for? That is clear plunder. One year, twenty years ago, the New York Central elevator loaded 270 ships, and from that day to this they have only loaded one ship, because they put that 1 cent a bushel on to prevent the loading of ships at their elevatoi'S. Our railroad commission recommended — and they have the same power as the Interstate Commerce Commission — that that charge be taken off. That is all that ever came of it. It is there and will stay there until somebody has some greater power than simply to recommend. The Chairman. What are the charges? What does it "cost now to take a bushel of wheat that goes down on the New York Central road from the vicinity of Harlem River and put it on board of an outgoing steamer? I have heard it said, and have heard it said in this room here by a New York witness, that it costs 3 cents a bushel to pass the water front of New York. Mr. Bingham. The charge is three-quarters of a cent a bushel. The Chairman. These gentlemen made this charge before this com- mittee — that the New York Central had a rate of $20 a car from Buffalo to New York; that $2 of that went to the railroad company and $18 of it went to some transportation company, some scow company. Mr. Bingham. Lighterage company. The Chairman. A lighterage company; $18 went to that company for transporting it across the water front of New York. Mr. Bingham. I give that up. I never heard of an arrangement of that kind. I am fairly familiar with the arrangements in New York and I can tell you about that; these hypothetical arrangements I do not know about. The Chairman. I think he did not regard that as hypothetical. Mr. Bingham. The elevating charge in New York is three-quarters of a cent; that is, it is a cent and an eighth, and they rebate three- eighths. Why they do it that way of course I am not here to defend. All the grain coming from the West to New York is subject to a charge when they come to divide up among the various railroads, in the first instance of 3 cents a hundred for lighterage. The Chairman. Was that 3 cents a hundred or 3 cents a bushel? It was probably 3 cents a hundred. Mr. Bingham. I think that is probably what you are thinking about. That is a question between the railroads. If the rate west of the Mis- sissippi River to New Y ork was 27 cents before the carriage is prorated, they will take off' 3 cents a hundred at that rate for the terminal charges in New York. Then they will prorate the balance.' That 3 cents goes to the railroad company that does this lighterage business, and that charge of a cent a bushel from the elevator I speak of is charged • because they wish to retain that 3 cents a hundred. If I should send my vessel up to the elevator, you could see they would not spend a frac- tion of that 3 cents. They would save that entire amount; but if they did that the western road would want to add it on to the rate of freight they got. That is the 3 cents I think the gentlemen referred to. That is between the railroads; that does not effect the merchants, tNTERSTATE-COMMEROE LAW. 133 Mr. Corliss. Will you state what the lighterage charges are in New York on a carload of grain from Buffalo to any point beyond New York going through New York? Mr. Bingham. There are two items. The lighterage charge is a half cent a bushel. The elevator charge is three-fourths of a cent. The lighterage charge is distinct entirely from an elevator charge. A lighter simply takes the grain from the rail or store to the steamer or whatever the destination is. That charge is half a cent a bushel, on which they pay shortage. They guarantee the weight. Mr. Corliss. Is it not true that in all carload lots that enter New York they have to pay a lighterage charge of about $18 a car ? Mr. Bingham. Who has to pay that? Mr. Corliss. Either the consignee or consignor. Mr. Bingham. No; we do not pay any charge. That charge is a charge which is adjusted between the railroads. We bring our grain there, and we pay a flat rate, such and such freight, and it comes with a bill of lading to New York, and that bill of lading provides for free lighterage; that is, the grain is to be delivered free alongside the outgoing ship. A Bystander. It is $18. Mr. Bingham. But we do not pay that; we have no charge to pay after we make the contract. Mr. Corliss. Is it not true that there is a charge on all such ship- ments for lighterage fees, an average of 116 to. |18 a car, that some- body pays ? Mr. Bingham. The Western road pays its share of it, that is all. Mr. Corliss. Do you know what the lighterage charge on a carload of produce going into New York is ? Mr. Bingham. I have stated what the lighterage charge is where it is lightered independently. That 3 cents a hundred is known as a ter- minal charge. Mr. Corliss. Does that include lighterage? Mr. Bingham. Yes; but not elevating. Mr. Mann. You mean the division between the railroad companies is taken out and the rest is the freight divided between the two or three lines that run through; that is, on the Michigan Central and the New York Central there would be the division of the balance of freight between those roads. Mr. Bingham. Precisely. The first charge is 3 cents a hundred, which is practically clean profit to the New York road. Mr. Mann. That is retained by the New York roads? Mr. Bingham. Yes, sir. Mr. Corliss. Does the New York Central, for instance, if it is brought over the New York Central, get that 3 cents a hundred, or does it go to the lighterage company? Mr. Bingham. It goes to the New York Central Eailroad Company now. The railroads now, practically all of them, I think, own their own lighterage companies. In olden times, when I was first acquainted with me trade, the lighterage company was a wheel within a wheel. They had the fast-freight lines. These lighterage companies were com- panies formed by the directors in nice little places where surplus profits could be put, and they made favorable contracts with the railroad, the same as the fast-freight lines, but now the railroads run the whole machine. 134 INTEESTATE-COMMEECE LAW. Mr. Mann. "What is the actual cost of lighterage? Mr. Bingham. I stated half a cent a bushel. Mr. Mann. I do not mean the charge; I mean the actual cost. Where they figure on 3 cents a hundred to the consignor what is the actual cost to the railroads? Mr. Bingham. About three-eights of a cent a bushel. Mr. Mann. So, if they only charge the actual cost of lighterage it would reduce the freight rate on grain from Chicago to New York, or from any other points, that much ? Mr. Bingham. Yes, sir. Mr. Mann. It would make a reduction of over 2 cents a hundred. Mr. Bingham. Yes, sir. The Chairman. Let me see if I have a correct understanding of what 1 think you said. There is a lighterage charge of half a cent in New York; there is an elevator charge of three-quarters of a cent; that is a cent and a quarter. Now, does all the grain going east — going through New York — that is lightered have to pay that charge ? Mr. Bingham. Practically; yes, sir. The Chairman. Is there any other charge of any kind that is local in its character? Mr. Bingham. Only some very slight charge. There is an inspec- tion charge. The Chairman. What is that? Mr. Bingham. That is a charge of about 25 cents a car for inspect- ing the, grain and saying what grade it is. The Chairman. Give me as nearly as you can the cost to the Western shipper of getting a bushel of grain through New York. We have it now up to a cent and a quarter a hundred, besides these minor charges. Now, can you aggregate them, so we can get some idea of what it costs the producer of that grain to get it through New York City ? Mr. Bingham. Yes. The Chairman. What is it? Mr. Bingham. The railroad company owns its own lighters and it owns its own steamboats, and that lighterage which you are speaking of is included in the freight charge, for which I say it is 3 cents a hun- dred. That will not cost the railroad company much over a quarter of a cent a bushel. You might say three- eights of a cent a bushel. Then the charge of taking it from the barge and putting it on board the steamer is three-quarters of a cent a bushel. That is the charge of the steamer for taking it on board. It costs the steamer |2 a thou- sand bushels to take it when it is spouted in through the steamer and shoved back. I suppose you would hardly want to include that. The Chairman. You know better than I what would be included in this cost. What I want to get at is the cost to the people of the West. Mr. Bingham. I think we had better exclude that, because that is simply stowing their ships. If you put cotton aboard you have to have men shove it into the wings and so on, and wheat has to be treated the same way. That charge it is hardly fair to say the grain incurs. Then the total charge for grain is not to exceed a cent and a quarter a bushel. If your western shippers want to make a contract at a cent and a quarter a bushel for a year I can complete it for them, lighterage and all. The Chairman. Then that is about the cost of the regular shipments from Chicago to Buffalo ? IWTEESTATE-COMMEEOE LAW. 135 Mr. Bingham. That varies according to the demand. That is about as low as it ever goes down. The general rate of freight from Chicago to Buffalo is about one cent and a half to two and one-half, 1 think. The Buffalo charge is half a cent a bushel, to take it out of the lake vessel and put it on board of the cars, which charge The Chairman. Are wheat and corn ever sent from your port to European ports as ballast? Mr. Bingham. Well, 1 have heard that question over and over again. The Chairman. I mean without charge or with a ii\ere nominal ocean charge? Mr. Bingham. It has been done. I have been paid to ship grain. I have been paid to put grain on board ship and send it across the ocean because the vessel needed ballast. 1 have seen grain taken over and brought back again because it was cheaper to bring it back than to take it out. But modern steamships are built with water ballast, and they are independent of this ballast question. But within a few months perhaps you have seen that the steamship lines have combined, decided that they would not carry any grain across the ocean for less than 3 cents a bushel, and we are working under that combination now. Everything is combination. Railroads are combining and the steamship men are combining, and I do not know who is going to combine next. Mr. EiOHARDSON. Does the lighterage charge depend upon the man- ner in which you make the bill out? Is not the lighterage excluded if you bill it in a certain way ? Mr. Bingham. Everything comes to New York now lighterage free — that is, the charge is in the freight. A Bystander. The charge includes delivery at any point in the harbor. Mr. Bingham. That is the ordinary way of making the contract; and so a rate given by the railroad from Buffalo to New York would include half a cent a bushel paid to the elevator in Buffalo; the railroad would pay that to one of the elevators which is in the combination. There is a combination up there of elevators. Mr. Adamson. You represent a combination yourself, I believe you say? Mr. Bingham. No; I was a director in the International Elevating Company, but they put me out. Mr. Adamson. What did you say you represent? Mr. Bingham. The New York Produce Exchange. Mr. Adamson. That is an association ? Mr. Bingham. Yes; it is an association. Mr. Adamson. I suppose the object of it is to promote the interests of the people who go into it? Mr. Bin«ham. We are not in business altogether for our health. Mr. Mann. You limit your membership? Mr. Bingham. Our membership is limited to 3,000, and our mem- berships were selling down about $75, because we have a great many too many members. The exchange is now engaged in buying up the surplus members to get less of them. Chicago has a membership of 1,800, and their membership is worth $4,500. I am a member of it. Mr. Adamson. You would not object to combination so much if your crowd could always keep ahead, 1 suppose? Mr. Bingham. Oh, no; we are only opposed to combinations when we are not in them. [Laughter.] 136 tNTBKSTATE-COMMBRCE tAW.. Mr. Corliss. That is the prevailing spirit of New York City? Mr. Bingham. Yes, sir. Mr. Mann. You spoke of the matter of pooling a while ago, and said you had no great objection to that. Let me ask you this question: If the law would be amended so that the Interstate Commerce Com- mission or the courts might decide speedily what is a reasonable freight rate, what would be the objection then to permitting the rail- road companies to pool? Mr. Bingham. None that I know of. I have in my hand here a proposition which I do not bring out oflBcially, but which we at any rate think would be a perfectly fair one. We think the railroads would accept this proposition. We would be willing to accept it* We do not want to harass the railroads, because we require their serv- ices. We do not want them to harass us. Now, if you do not mind, I will read this without recommending it, simply reading it as a suggestion. It runs this way: Carriers subject to the provisions of this act, with respect to traffic subject to the act, may form associations to secure the establishment and maintenance of just, reasonable, nonpreferential, uniform, and stable rates, and for the promulgation and enforcement of reasonable aud just rules and regulations as to the interchange of interstate traffic and the conduct of interstate business upon the following conditions: (a) Articles of agreement shall be subscribed by the parties thereto, stating, among other things, that they are entered into subject to the provisions of this section, the terms upon which new parties may come in, how the decisions of the association are to be made and enforced, and the length of time for which the association shall con- tinue, which shall not be more than ten years. Such articles when subscribed and in effect agreeably to the provisions of this section shall be legally binding upon the parties thereto and be legally enforcible between them. (6) The articles of association shall be filed with the Commission at least twenty days before they take effect. If the Commission, upon inspection of the same, is of the opinion that their operation would result in unreasonable rates, unjust discrimi- nations, insufficient service to the public, or would in any manner contravene the provisions of this act, it shall enter an order disapproving the same. In connection with such order the Commission shall file a statement of its reasons for its disap- proval. Said order shall be final .and conclusive. (c) If the Commission, upon inquiry into the actual operation of the association after the same has gone into effect, is of the opinion that it results in unreasonable rates, unjust discriminations, inadequate service, or is in any respect in contraven- tion of this act, it may enter an order requiring the same to be terminated on the date-, named, which shall not be less than ten days from the making of the order. Such order shall be final, and the effect of it shall be to render such articles of agree- ment null and void from and after the date named, except as to claims between the parties arising prior to that date. (d) The Commission shall have the right to examine, by its duly authorized agents, the files and proceedings of such association, including all contracts, records, docu- ments, and other papers; and it may require said association to file with it, from time to time, copies of decisions promulgated by it, and of its minutes of proceedings, or of other papers received or issued. All orders issued by associations thus formed that in anywise affect rates shall be filed with the Commission, as provided in the original act in relation to the filing of tariffs. Everjr agreement for the formation of such associations as are authorized by this section is prohibited except as hereby authorized, and every carrier, or representa- tive of a carrier, acting as a member of such an association or acting for a member of such association, whether the same exists by virtue of a definite agreement or not, shall be deemed guilty of a misdemeanor and shall, upon conviction thereof, be sub- ject to a penalty of $5,000 for each day said carrier or representative continues a member thereof or so acts, which penalty shall be enforced in the manner provided for the enforcement of those penalties imposed by the tenth section of said act. Mr. Mann. It does not require the combination or pool or whatever you call it to fix and file the rates at the time it files the agreement with the Commission? mTEESTATE-COMMEBOE LAW. 137 Mr. Bingham. What is that? Mr. Mann. I did not notice that your article or charter or whatever it is requires that the j)ool or combination shall file its rates also when it files ita agreement with the Commission in the first instance. Mr. Bingham. No; so Mr. Kernan says. He has studied it from its legal point more than I have done. Mr. Mann. Do you think it would be better to do that — let the Com- mission know what it is doing? Mr. Bingham. Would you mind having Mr. Kernan answer that? Mr. Mann. 1 will withdraw it for the present; I suppose he will take the floor later on. Mr. Bingham. He has gone into the legal aspects of it. This has been prepared with considerable care, and I think we would have sub- mitted it to the railroads if we could have gotten a meeting of them before coming here. The Chairman. Is not that proposition embodied in the bill that was before this committee, recommended by the Interstate Commerce Commission, two or three years ago? Mr. Bingham. There was some such clause, but it was not identical with, this one. The Interstate Commerce Commission, as I understand it, are not opposed to combinations amongst railroads. We have those combinations, and it is a great deal better, it seems to us, to have legal combinations than illegal ones. You can do something with a legal com- bination, but when they get behind your back and make illegal combi- nations, or combinations outside of law, you can not reach them; you can not negotiate with them. Mr. Adamson. The bill that the Commission recommended was one so that the Commission could manipulate instead of allowing the rail- roads to manipulate. Mr. Bingham. We hope to have a law so that neither could manip- ulate. Mr. Adamson. Well, I will say operate it, then. Mr. Bingham. We want this thing to operate fairly between indi- viduals and between localities. The Chairman. Let me ask you this question; do you apprehend that there would be any danger to the shipping community in investing a commission with so great a power as that of fixing rates on trans- portation; that is, without any criticism at all or anything invidious to the gentlemen who are on the Commission, would not that be a great power and a dangerous power to put in the hands of three men who have to deal wim the great combinations of capital and the great interests at stake that would be represented by the railways ? In other words, is there not a danger that a rate in the interest of the railways would be made too great? Mr. Bingham. There is some danger there. There is a danger, on the other hand, that they might buy up the whole business. They might in some future years get a Commission that they could buy, and decide everything in the favor of the railroads. As far as the danger is concerned, perhaps you may notice that it does not produce the slightest effect on New York speculation whether you pass this bill or not. It would not affect stocks one-sixteenth of a per cent. The rail- roads are not worried about this legislation; they are not afraid of the United States Congress. They might be afraid of some of the western congresses, some of the State legislatures, but they are getting friendly 138 INTEBSTATE-OOMMBKOE LAW. with them now. There is always the court of last resort which we will come to, and that is the United States Congress. If you pass a law inimical to the railroads, they can come before you and worry the life out of you getting you to repeal it. But it can not last long. The legislature is always ready to remedy evils clearly brought before them. It may take time, but they will do it. The question is, who is to suffer in the interim? We say let the railroads take their turn; we have suffered long enough. The Chairman. You have made a suggestion there that is in point. There seems to be in your mind the opinion that the railroads by wor- rying them, as you have expressed it, can control the action of the 357 men that compose this body and the 90 men that compose the Senate. If that is true, is it not quite as probable, or more probable, that, by the same process of worrying, 3 men might be influenced and influenced in their interest? A Bystander. Five men. Mr. Bingham. Well, yes; I think it very likely. In New York State our State commissioners are paid by the railroads, so they have it conveniently in their own power; and, by the way, they are paid $8,000, and you pay them $6,000. If you are going to invest these men with more power you ought to give them more pay. Mr. Adamson. Don?t you think, in other words, it would be easier for the railroads to get three commissioners than 400 members of the United States Congress? Mr. Bingham. Yes, sir. Mr. Davis. There is a President also, whose veto power is equal to two-thirds of Congress. You have to include him. Mr. Bingham. 1 was not suggesting that there was anybody in Con- gress who could be influenced; but you never saw a body of men in this world yet where there were not some black sheep. Out of twelve men composing a commission, the best chosen men that I have known, one turned out to be a devil. So I suppose there are men even in Con- gress who are bad. The Chairman. As you business men would say, that was a little more than 8 per cent? Mr. Bingham. That is about as good a percentage as the best social body of men you ever got. Mr. Adamson. Do you think New York and Chicago would agree to operate under the provisions of the same bill, or would we have to have separate bills for the two cities ? Mr. Bingham. I think they can get along very well together. There are a great many members. We are out to get all the plunder we can. STATEMENT OF MR. S. T. HUBBARD. Mr. Hubbard. Mr. Chairman and gentlemen, I am authorized by the association of which I have the honor of being president to appear here to-day to advocate the passage of a bill which will carry into effect the decisions of the Interstate Commerce Commission without delay. It makes little difference to anyone who has a question with a railway corporation if it can only be decided after the crop or two crops or three crops in which he is interested are moved to market and!^ have passed out of existence. We feel that the cotton trade of the United States would be very much benefited if the question of INTERSTATE-COMMERCE LAW. 189 rebates and the question of discriminations could be promptly settled. We at times suffer very much from those discriminations, not only in New York, but also in New England, and also in Georgia. It is true that the Interstate Commerce Commission, by one of its early rulings, decided that the waterways did not come under its control, and there- fore they have given less attention to the complaints of cotton people than they have to those of the grain people, because they held that the Atlantic Ocean is quite free to everyone who wishes to place a vessel upon it to transport cotton from a Southern port to the Northern ports of the United States, a proposition which is true in theory but not true in fact, because in the course of time the railroads have ceased to ter- minate their lines upon the shores of the ocean. A railroad corporation at the present time in the South owns the American Steamship Line out of New Orleans, which is the property of the Southern Pacific Railroad; they own the Ocean Steamship Line out of Savannah, which is the property of the Central Railroad of Georgia; ■ they own the Old Dominion Steamship Line out of Norfolk and Rich- mond, which is the property of the Southern Railway; they control the Mallory Steamship Line out of Galveston. The result is that cot- ton which is shipped in bulk or from Texas to New England or to New York is as much on the railway car after it leaves either New Orleans or Galveston as it was the day it was put upon the car at Houston or Waco. The same is true also of cotton shipped from Atlanta or Augusta, in Georgia. As an illustration of this proposition I would cite the fact that last June a consignment of 1,100 bales from Tyler, Tex., was shipped by the way of Galveston to Cohoes, N. Y., at a freight rate of 88 cents a hundred pounds. When that cotton reached New York it was stopped in New York by order of the consignors and I paid a rate of freight of 93 cents a hundred pounds; that was on cotton from Tyler, Tex., to the port of New York. In other words, the freight rate to New York was 5 cents a hundred pounds greater than the rate to Cohoes, which, as you know, is about 150 miles north of New York City, on the Hud- son and Mohawk rivers. In a similar way this season the rate of freight from Memphis, Tenn. , to Lowell, Mass. , is greater than the rate of freight from Memphis, .Tenn. , to Manchester, England. The rate of freight from New Orleans, La., to Fall River, Mass., on the 8th of March, this season, was 38 cents a hundred pounds. On the same day in the same steamship the rate of freight to Manchester, England, via New York, was 32 cents a hundred pounds. I might continue with many of these illustrations. I will cite but one more. It will interest my friend from Georgia. In December the price of cotton in New York was relatively below the price of cot- ton in the Southern ports. I could not bring it from the South to New York. Believing it to be a profitable business operation we decided to receive 50,000 bales of cotton in New York. We bought the contracts for that purpose — I and my associates. The cotton was delivered ^:o us. We could not buy it in the South. A large portion of it was delivered to us by the firm of Inman & Co., of Augusta, and also by the firm — I have forgotten the name, but one of the Texas firms. We found after we had received the cotton that they had secured from the railroads the privilege of delivering the cotton in New York on aii export bill of lading, which gave them the benefit 140 tNTEfiSl^ATE-OOMMERCB LAW. of about 20 cents a hundred pounds, or a dollar a bale. We could not secure that export bill of lading because we were merchants in New York. Mr. Adamson. They can ship as though they were going to export it and then stop it? Mr. Hubbard. Yes, sir. I state the rate was 20 cents a hundred — that is, to the best of my knowledge and belief. Mr. McKenna, of Inman & Co. , was very frank about it and said that they had to have a rebate. Of course he did not tell me what the rebate was. In a similar way I had a thousand bales shipped from Galveston on an export bill of lading, and I stopped that in New York. These are illustrations from my own business, which 1 cite to show the point. What we ask is simply that the decisions of the Interstate Conmierce Commission may be rendered quickly, with the possibility that the merchants may derive some benefits from the decisions. For a merchant to have a decision in his favor after four years is of littla benefit to him and of no benefit to the remainder of the trade. He may obtain a certain sum of money in return for a rebate, or a discrimination which he asserts has been made to another man, by the decision of the courts, but the rest of the trade must suffer, because he has simply made an individual case. As regard all the others in the trade, they have not filed complaints, and they have not got the decision. They have paid out their freight on the cotton, the cotton has gone into consumption — it has passed away — three or four years have elapsed, and the decision is not retroactive, excepting as to the case of the man who makes the particular claim. His case is decided. That is the process, as I understand it, of law. The case only applies to the man who makes the complaint. They consider that. As I have said before, that it is exceedingly important to the mer- chants of the United States, to the spinners of the country, and to the agriculturists that the Interstate Commerce Commission, which was originally instituted for the purpose of preventing discrimination and for the purpose of giving to each locality such rates as would appear to be not discriminating against other points, should have the power to carry out the purposes for which it was constituted. Mr. Coombs. You speak of the agriculturists. From the evidence here it seems to me that the discriminations are all in their favor. Mr- Hubbard. The discriminations are all in favor of agriculturists ? Mr. Coombs. Yes. I do not see where that comes in. 1 would like to have you tell me where they are discriminated against. I know that a number of witnesses who have appeared here have complained that discriminations were in their favor. I am simply asking you to explain that. Mr. Hubbard. Take the case of the planter who raises his crop and who sells it on the basis of the freight rate that conveys it to Man- chester, England — and they are buying practically two-thir(te of the cotton crop of the United States. It is a less rate than the rate to Fall River. I think his price is to some extent fixed by the fact that the rate of freight is less to Manchester. Mr. Mann. You said a while ago that the rate was 93 cents from Galveston to New York? Mr. Hubbard. From Tyler, Tex., to New York I paid 93 cents a hundred, and the rate to Cohoes, N. Y., on the same bill of lading was 88 cents. INTEKSTATE-OOMMEROE LAW. 141 Mr. Mann. Now the rate is less than 40 cents. Is that a reasonable rate? Mr. Htjbbakd. The rate is less than 40 cents ? Mr. Mann. That is the rate now. Mr. Htjbbaed. You are misapplying two places. Tyler, Tex. , lies about 300 miles north Mr. Mann. You gave the rate from Galveston. Mr. HuBBAKD. Yes. Mr. Mann. A little less than 90 cents. Mr. HuBBAKD. Did I say Galveston Mr. Adamson. Your rate to Cohoes was 88 cents. Mr. HuBBAKD. The rate from Tyler, in the northern part of Texas, south to Galveston and then to New York and then from New York to Cohoes was on the bill of lading 88 cents. The rate from Tyler, Tex. , to Galveston and then to New York was 93 cents. Mr. Mann. Is the present rate a reasonable freight rate? Mr. Hubbard. The present rate a reasonable freight rate? Mr. Mann. Yes. Mr. Hubbard. The freight rate is decided by a question of supply. Mr. Mann. But to answer the question, is not the present freight rate from Galveston to New York about 30 cents ? Mr. Hubbard. Yes, sir. Mr. Mann. Is not that a reasonable rate? Mr. Hubbard. I can not say it is a reasonable rate or not; that is, the rate of freight. It has been that rate for a number of years. It may be 28 cents or 32 cents. Mr. Coombs. Is it a burdensome rate? Mr. Hubbard. No, sir. Mr. Mann. If thej' give a similar rate or lower rate to England, does not that have a tendency to increase the price of cotton ? Mr. Hubbard. How? Mr. Mann. It gives them competition. Mr. Hubbakd. If the spinner in England can get his cotton at a less rate than the spinner in the United States can get his cotton, and he buys two-thirds of it, does that give the agriculturist a higher price for his cotton ? Mr. Mann. If you put the rate up to fl.30 instead of 30 cents, and two-thirds of it had to be sold abroad, would not that have a tendency to lower the price of cotton here? Mr. Hubbard. I do not think so; not if the people abroad have to buy the cotton. It is not like the case of wheat. You can not buy all the wheat Mr. Coombs. It gives him a more extended market, does it not? Mr. HxJBBARD. How? Mr. Coombs. Oh, well Mr. Hubbard. I would be glad to answer your question, but I do not understand it. Mr. Coombs. If it renders better facilities for selling in Europe, it takes his cotton there, and it extends his market there — from one hem- isphere to another— does it not? And it brings more buyers to him. He invades other markets. Mr. Hubbard. The cotton crop of the United States occupies the unique position of being required all over the world, It is not in the 142 INTERSTATE- COMMERCE LAW. same position as wheat. It lacks the competition that wheat has. It is needed; it has to be bought. Mr. Mann. Does lowering the freight rate on cotton from this country to England enhance the price of cotton? Mr. Htjbbard. I hardly think so. Mr. Mann. Does raising the freight? Mr. Hubbard. It makes little difference. Mr. Mann. Then cotton raisers are not interested in this question at all. It does not make any difference to them what the freight rate is. Mr. Hubbard. It makes some difference. Mr. Mann. If lowering the freight does not raise it and if raising the freight does not depress it, how does it make any difference ? Mr. Hubbard. It is a matter of slight moment. Mr. Coombs. Then the agriculturists are not interested in this ques- tion, according to your statement, now. Mr. Hubbard. I should think the agriculturist is interested in hav- ing an equitable adjustment of rates of f i-eight. Mr. Coombs. You do not seem to meet this question. You said one thing a while ago, when I asked you why the agriculturist was interested in doing away with the discrimination. You said he was interested; and now, asking you why he is interested, you seem to have arrived at an opposite conclusion, and say that he is not specially interested in it. Mr. Hubbard'. 1 am sorry if I have conveyed that impression. It certainly piakes a difference to the agriculturist on the railroad from Augusta to Savannah if he is obliged to pay very high rate of freight, and a little further on less rate of freight; it makes a difference to him. Mr. Coombs. We do not wish to misunderstand you. Upon the question as to the effect upon the producer, whether in the South or the West, we would like to have some clear definite statement. Mr. Hubbard. I believe that the agriculturist in the South is bene- fited by the establishment of an even rate of freight. The Chairman. The time for adjournment has arrived. You may continue in the morning, Mr. Hubbard. (Adjourned.) Thursday, April 17, 1902. The committee met at 10.30 o'clock a. m., Hon. WiUiam P. Hep- burn in the chair. Mr. Hubbard. Mr. Chairman, Mr. Higbee is here this morning and is obliged to leave town, and he would like to present his case, and I will yield to him. STATEMENT OF MR. ROBERT W. HIGBEE. Mr. Higbee. Mr. Chairman and gentlemen of the committee, I am a member of the committee on legislation of the National Wholesale Lumber Dealers' Association, and for the purpose of getting it on the record only I would like to state that I am a member of the New York Lumber Trade Association, which is a local association. INTEK8TATB-0OMMEE0E LAW. 143 They have also indorsed this bill, but I simply want to state that as a fact, not that I have any authority to represent them, although I am a member of the association. Mr. Chairman, 1 take it, from having listened to the proceedings before this committee for the past two days, that it is not worth while to take up your time w;ith any argument in favor of the necessity of some amendment to the present interstate-commerce act. All of the parties in interest, the railroad interests and the shippers, are both dissatisfied with the present conditions, and what we are trying and hope to accomplish is a just and equitable settlement of the vexed question by an amendment to the present act, and to do justice to both sides. The four things which the shippers are greatly in need of are: First, that all shippers shall be treated alike; in other words, that the rail- roads shall charge a like amount for like services under similar condi- tions to everybody. Second, that additional power be given to the Interstate Commerce Commission, when an injustice is being done either to the railroads or to the shippers, to say what would be right in the case in hand, and to enter an order stating what is right and reasonable as between the two parties; third, that after this order has been made they shall have the power to enforce the order, and fourth, that pending the appeal, the order of the Commission shall be in effect. I have had prepared a table showing the distances from New York of some 25 or 30 places which ship lumber into New York, which is as follows: Statement shomng the distance, rate in cents per 100 pounds, and rate per temper mile on Iwmber from points shown below to New York, N. Y. Distance, From— Rate per 100 pounds. Rate per ton per mile. Miles. 1,182 1,388 1,348 1,209 818 915 1,097 757 980 865 715 709 702 1,273 686 683 411 671 667 479 615 717 604 584 788 316 1,050 680 705 .392 492 628 Menominee, Micli Duluth,Minn Ashland, Wis Memphis, Tenn Indianapolis, Ind Chicago, 111 Appleton, Wis Cincinnati, Ohio Petoskey, Mich Louisville, Ky Bay City, Mich Dayton, Ohio Saginaw, Mich H^ena, ArK Ironton, Ohio Ashland, Ky Buffalo, N.Y Kenova, W. Va Huntington, W. Va Grafton, W.Va Murphey, N. C Chattanooga, Tenn Charleston, W. Va Norton, W. Va Camden-on-Gauley, W. Va Wilmington, N. C Knoxville, Tenn Oswego, N. Y Nashville, Tenn Panther, W. Va Asheville, N. C Elizabeth City, N. C Elkins, W. Va Elizabethton, Tenn Cents. 25 33 33 31 22 25 31 2U 28 25 21 21 21 40 21i 2H 13 21i 214 16 28 81 2U 26i 21J 21 28i lU 384 254 27 164 214 2« 0.423 .476 .489 .512 .538 .546 .665 .568 .571 .678 .588 .592 .599 .628 .628 .629 .632 .641 .646 .668 .675 .711 .712 f719 .723 .728 .733 .760 .766 .791 .874 .892 144 INTERSTATB-OOMMBROE LAW. This table shows not only the distances, but the receipts in cents per hundred pounds, and also the rate per ton per mile, the rate per ton per mile beinga constant factor' in all railroad computations. This table covers twelve or fifteen different States. They are selected with- out any regard as to what the result would be, so that the outcome of this table is a perfectly fair result. The point charging the most favorable rate to New York City on lumber in carload lots is Menominee, Mich. , 0.423. The point suffering the greatest charge is Elizabethton, Tenn. , 0. 892 of 1 per cent per mile. In other words, the shipper of lumber in the State of Michigan pays less than one-half of what the shipper of lumber from the State of Tennessee pays. The other twenty-five or thirty places vary from the 0.423 up to 0.892. I will file this paper with the committee so that it may come before you in a regular manner. Now, gentlemen, it ought not to take very much time to prove that there is no reason on earth why the shipper from Tennessee should pay more than twice as much as the shipper from Michigan. The cost of operating the railroads is about the same. The Chairman. Is the cost the same? Mr. HiGBEE. Practically. Some railroads have greater grades than others and some have greater curves, but the cost of the rails and the stock is the same. It may be a little different, but certainly there is not enough difference to warrant one railroad in charging more than twice as much as another railroad. The Chairman. Are you familiar with the factors that enter into the cost of transportation in each case, or are you just stating this from published details? Mr. HiGBEE. No, sir; I am not making this statement from their standpoint. I am not an expert in railroad matters. The Chairman. I did not know but what you might know Mr. HiGBEE. I have been studying this subject for the last five yeai's, and presently I .will state why I took this question up. Mr. Coombs. Now, I do not understand this subject as well as I would like to. You would abolish the difference of rates between dif- ferent points? What effect will that have upon competition ? That is, you make a systematic scale with reference to prices pertaining to all things about these differentials and all else, and make some arbi- trary rule; what effect will that have on the competition — that is, if you regulate prices arbitrarily by a fixed rule, will that have a tend- ency to do away with competition ? 1 would like to have you pay some attention to that subject. " Mr. HiGBEE. I would like to ask a question, if I may. Do you mean competition as between the railroads or competition as between the shippers? Mr. (Toombs. As between the railroads. Mr. HiGBEE. The abolishment of competition as between the rail- roads without any regulation would be a very serious matter, but if we abolish competition as between railroads and have some competent practical power to fix the railroad rates, I can not see any reason for not abolisning the competition between the railroads, but the two must go together. A few years ago the association which I have the honor to represent here lodged a complaint before the Interstate Commerce Commission - INTEKSTATE-OOMMEEOE LA"W. 145 against the Pennsylvania Railroad, the Norfolk and Western Railroad, and the Baltimore and Ohio Railroad, the basis of the complaint being that the rates to New York from points on the Norfolk and Western Railroad were unreasonable and discriminating against shippers from that road. Mr. Adamson. I wanted to ask you one or two questions about those railroad rates and distances. The pointyou speak of in Michigan, is that in northwestern Michigan? Mr. HiGBEE. Menominee, Mich. , is in the southern part, just over the Wisconsin line. They come together at the river. Mr. Adamson. Is it any longer haul in Tennessee? Mr. HiGBEE. Yes, sir; but the rate per ton per mile is a constant factor. Mr. Adamson. I understand that, but I want to know whether the factors that make it are constant or not. The distance from Menom- inee, Mich., to New York is what? Mr. HiGBEE. That is 1,182 miles and the rate is 25 cents per 100 pounds. Mr. Adamson. What is the other distance? Mr. HiGBEE. The distance from Elizabethton, Tenn., to New York is 628 miles, a trifle more than half the other distance, while the rate is 28 cents per 100 pounds. In other words, the rate per 100 pounds is greater for half the distance. ,Mr. Adamson. Now, if a point twice as far away were to pay the same rate on lumber, it would shut that point out of the New York market entirely, would it not? Mr. HiGBEE. That would depend on conditions. Mr. Adamson. It might do it? Mr. HiGBEE. Supposing the Tennessee rate was down on a par with the Michigan rate? Mr. Adamson. Another question. Of course I do not mean to be exact as to the figures, but it is a fact that all railroads and all trans- portation companies are compelled to haul some commodities at a less rate per mile in order to allow them to get into the market at all? Mr. HiGBBE. That is true. But these rates are on the same com- modity. _,, Mr. Adamson. Let us see about the railroads. Through that country up there the railroads, on account of the character of the country, have very small curvatures, and a very small degree of grade? Mr. HiGBEB. Yes, sir. . • n Mr. Adamson. And they have a tremendous volume of business all the time? Mr. HiGBEE. Yes, sir; that is true. Mr. Adamson. A railroad in that condition has fewer accidents and wrecks, has it not? Mr. HiGBEE. That may be so, and it may not be so. Mr. Adamson. The point that I am driving at is, considering all those things, with the further fact that down in the South and South- west the railroads are newer, and on this range of mountains the rail- roads are newer, do not those things furnish some justification for this higher rate? . .„ . , j_ , . u Mr. HiGBEE. They do furnish some justification, but that would hardly be sufficient to warrant them in charging twice as much for half the distance. i-c L 10 146 INTERSTATE-OOMMEEOE LA"W. As I was saying, this association which 1 represent brought this complaint, the basis of which was that the shippers over the Norfolk and Western road were discriminated against. The testimony in the case — and I will be very brief — disclosed these facts: that the Pennsyl- vania Railroad controlled the Baltimore and Ohio, the Chesapeake and Ohio, the Norfolk and Western— three parallel roads. These roads all had an interest in Cincinnati. The Baltimore and Ohio road and the Chesapeake road and the Norfolk and Western road all had the same rate from Cincinnati to New York. Two of the roads, the Balti- more and Ohio and the Chesapeake and Ohio, allowed the shippers east of Cincinnati the benetit of the Cincinnati rate, but the Norfolk and Western road, while using the Cincinnati rate for the long haul up to Cincinnati, east of there ran upon the local basis, and the result was that we were paying about 30 per cent more. Because of the decision the United States Supreme Court, which has held that competition renders the circumstances under which freight is moved sufficiently dissimilar to warrant a railroad in charging less money for a long haul than a short haul, we were barred under that clause of the present interstate-commerce act. Now, the point which I want to make is this: That is all right so far as the railroad is con- cerned. But the shippers of the Norfolk and Western road came into direct competition with the shippers from the other two roads in the New York market and had to pay 11.50 and $2 a thousand feet, to get their lumber into New York, more than their competitors, the cost of the lumber at the shipping points being to all intents and purposes the same. We feel that in view of that decision we are justified in asking that increased power be given to the Interstate Commerce Commission. There is one point which has come up in the discussion of the last few days which I would like briefly to touch upon. There seems to be an impression made upon some of the railroad interests, and how far that impression goes 1 am not able to say, that this Interstate Commerce Commission, if these additional powers were conferred, would represent the shippers alone. 1 fail to understand why the Interstate Commerce Commission would not represent the railroad interests just as much, and iusfc as thoroughly, as they would represent the shipping interests. They are appointed for that purpose; their powers could be used for the benefit of the railroads, if they heeded the benefit of those powers, just as well as they could be used for the benefit of the shippers. Mr. Adamson. What fix would you be in if the railroads should happen to secure the appointment on the Commission of three men of strong railroad predilections? Mr. HiGBEE. Well, we would have to stand it, that is all. Mr. RioHAKDSON. The condition then would be worse than in the beginning? Mr. HiGBEE. The condition would be very bad. Mr. RiCHAEDSON. Like that of that house in the Bible? Mr. HiGBEE. Yes, sir. However, we believe that a commission appointed by the President and confirmed by the Senate would be scrutinized very closely, and the g-entlemen appointed to that commit! sion very carefully considered before th&y were, confirmed ^ believe that we are perfectly safe in trusting- our interests in f f,*'}, ^A INTERSTATE-COMMEKOE LAW. 147 of the President and the Senate of the United States, and we are ready to take that risk. And there is another point. The railroad interests have dissemi- nated The Chairman. Let me ask you before you leave that point — you say that you are willing to take that risk. This commission would not in any event have the power to regulate your charges or your profits. Would you be content — as content — if there was a proposi- tion to supervise your business and your charges? Would you then be as content? Mr. HiGBEE. If there were conferred upon me the same privileges that the railroad has I would say yes. The railroad can go in and exercise the right of eminent domain, and take my house if they render Mr. Adamson. They can not take your house without making com- pensation. Mr. HiGBEE. That is true, but there are instances where a man's propertj' is worth more than market value. The Chairman. How many instances have you known where they got less than market value where their property was taken ? Mr. HiGBEE. My experience is not sufficient, perhaps _ Mr. Adamson. If you know anybody that has that amount of expe- rience, ask them. The Chairman. You think that the right of eminent domain would compensate for the taking away from him of the right of regulating his own business and taking from him the power to regulate tne price for which he would sell? Mr. HiGBEE. If that right was conferred upon citizens everybody would have that right. Mr. Coombs. It is for the benefit of citizens that the right of emi nent domain exists. Mr. HiGBEE. I think that right is very broad, and if I was ever in Congress I would come here and oppose it. I think the railroads have very great powers and very great privi- leges, which are very valuable. Mr. Adamson. How many of them are chartered by the United States? Mr. HiGBEE. As a direct charter, I do not know that any were. The Pacific Railroad, of course, has some legislation which allowed them to complete their road through to the coast. Most of the other railroads get their charters through the States, 1 think. That is a question which I do not feel competent to answer, because I have not looked it up. Mr. Coombs. I think the State governments do usually supervise. They have a railroad commission, just as they have examiners for the State banks and loan associations. Mr. Richardson. In my State, Alabama, the railroads pay the sal- aries of the railroad commission. Mr. HiGBEE. I think that is true of the State of New York. Mr. Richardson. And we never have any trouble there with them. Mr. Adamson. But the Federal Government has not undertaken to fix the charges. Mr. HiGBBE. The Federal Government would have no right to fix the charges on anything except interstate commerce. Mr. EiOHABDSON. We have no trouble with the railroads in Ala- 148 IITTEESTATE-OOMMERCE LAW. bama. The salaries are paid by the railroads, and they relieve the people of that burden, small as it is. Mr. HiGBEE. I have never heard of any trouble. Mr. RiCHAKDSON. The power of the Commission is advisory, and there is never any complaint of any kind. We go along with them mighty smoothly and easily. Mr. HiGBEE. We have had the same experience. Mr. Richardson. Then what are you complaining of? Mr. HiGBEE. The interstate-commerce business. Mr. Richardson. Discrimination? Mr. HiGBEE. Yes, sir; between localities. In this case it was fully 30 per cent. Mr. Richardson. The legislation which you propose is quite drastic. Do you think it would reach the rebate system? Mr. HiGBEE. I think the rebate system should be treated in the same way as a physician treats a disease; the cause should be remedied, and then the rebates and cut rates would be removed. Mr. Richardson. How would this proposed Corliss bill relieve the railroads of that rebate system, which is a hidden affair? Mr. HiGBEE. I will be very frank with you. I think the Corliss bill would not relieve it. The Chairman. I did not catch that. Mr. HiGBEE. 1 said that the Corliss bill will not reach the rebating or cutting of rates. Mr. Richardson. That is the chief complaint? Mr. HiGBEE. Yes; that is the chief complaint. There are others. Mr. Richardson. And you think the bill before us would not reach that complaint and remedy it? Mr. HiGBBB. I individually say so. Mr. Richardson. 1 mean you. Mr. HiGBEE. Yes, sir. I am not speaking for my association or any other gentlemen on that. Mr. Richardson. You seem to be informed on the subject and I want to get your opinion. Mr. HiGBEE. I am very glad to give you my opinion. Mr. Richardson. I know that. What we want to get is the very best thing for the railroads and the people. Mr. HiGBEE. I think we all have the same object, and if there is anything that I can state I would be very glad to do it. Mr. Richardson. But the way I look at it, in my humble view of the matter, considering what I have heard here, from the variety of arguments we have had, very able and very instructive, the rebate, which isamere matter of private arrangement, applicable to most of the localities, is one of the most serious charges that is made against the railroads. Now, the proposition in my mind is, how are you going to reach that? Mr. HiGBEE. The only remedy that I could suggest is the srfcmedy of allowing the railroad interests to make some arrangement among them- selves, subject to the supervision and control of this Commission. For instance, if there were 10,000 carloads of lumber to be moved from Chicago to New York, if therate was reasonable, just, and satis- factory, I can not see the slightest objection to apportioning those 10,000 carloads between the competing lines between Chicago and New York. inteestate-commeeoe law. 149 What diflPerence does it make if the railroads can agree as to how many trains of cars each line would haul; they haul at the same rates, and no shipper is placed at a disadvantage to any other shipper, and I can not see any disadvantage as to that. In conclusion, gentlemen, the lumbermen do not expect that the millenium is going to dawn when this bill is passed. We believe that so long as men are human and corporations are without souls they will all be trying to get the best of each other; but the passage of a right and proper interstate-commerce act is that for which we are striving and which we are asking at your hands, and the passage of the Corliss' bill in its present form, or in some amended form, would be a long step in the right direction. There is a demand for this legislation, and I think the necessity has been clearly shown. I leave it in your hands with the greatest confidence that you will do what is for the best. The Chairman. Let me ask you; suppose that the law was so changed as to make it obligatory upon the Interstate Commei-ce Commission, whenever a complaint was made, to thoroughly investigate that com- plaint, to ascertain the facts, to find out -where proofs could be had for further procedure in court; and suppose it was then made theirduty, after they had made a case and briefed it as a lawyer would brief his case of facts, to turn that over to the proper prosecuting officer; and that that made it obligatory upon him at once to put the law in force, either by an injunction or by a prosecution to punish the offender, providing the Commission had found the evidence; and that the court was then obliged to expedite by all proper means the immediate adjudi- cation of that matter; why is not that a renledy? Mr. HiGBEE. That is a remedy, but it is simply transferring the power we are asking for the Interstate Commerce Commission to the courts. Somebody has to decide what is right and reasonable, and when that question is decided no one would be in a position The Chairman. While the court would aid it in the process of adjudicating the fact whether the rate was a reasonable one or not and by the proper punishment of the freight agent who gave to you an unreasonable rate, compelled you to accept an unreasonable rate, let the Government prosecute this case; let it be done expeditiously; let you, as an individual, in compensation for the trouble that you have been to in making the complaint, recover your damages, or whatever damages have been authorized; would not the railroads desist very quickly from conduct that would be met in that way ? Now, I have thought that the difficulty was in securing the testimony upon which a successful prosecution could be based. I believe now that there is the difficulty, and I believe that if our Commission, instead of desiring the anomalous condition of being executive officers and judicial officers, and now legislative officers, would content themselves with helping the shipper to secure the proof that would give him f)roper standing in court, this whole difficulty would have been adjusted ong ago, and m my judgment the mistake that has been made has been made by the Commission in supposing itself to be a court instead of recognizing its real duty as that of discovering offenses and aiding in their correction. I have heard gentlemen say frequently here that this law was satisfactory up to ten years ago, and at that time the courts decided that the Commission did not have the power to fix a 150 INTEESTATE-OOMMEEOE LAW. rate. I do not understand that the Commission ever arrogated to itself that right in the early days. I do not believe there was a man who voted for the bill — and I was one of them— who ever thought that they had the power under that bill to establish a rate. They did have the power, it was supposed, and no one doubts it now, to say that a rate was unreasonable, and to enjoin its correction. But the trouble has been that when the matter comes to the courts the evidence is in the hands, largely, of a class of gentlemen who will not expose it. It is in possession, first, of the railroad companies, and then, as one gentleman here explained the other day, it is in the hands of shippers who have kindly and pleasant relations with the agents they would punish if they divulged what they knew, and hence these gentlemen simply, say that they will not do it. Suppose, now, that we should remedy that difficulty; give us your opinion, if you please, as to whether or not that w;ould be effective ? Mr. HiGBEE, 1 think it would be effective, but I think it would be very much more cumbersome than the plan which we are proposing, because it would impose upon individuals the trouble of bringing individual suits at law. The Chaieman. Every man has that to-day, now, when he is aggrieved, and there would be this condition which would make it unusual that there would be this favoritism to the class of aggrieved citizens that the Government would hunt out their proof for them, whereas in the case of an ordinary grievance you have to hunt up your proofs for yourself. Mr. HiGBEE. Would it not necessitate the bringing of a great many suits for the same purpose? The Chaieman. I should think not. I do not think that usually happens. The whole human family who live within the limits of the United States may violate the law. If an occasional punishment of one man deters hundreds of men from the like offense, why would it not in this case? Mr. HiGBEE. I assure 3rou, sir, that 1 have no pet scheme. I simply want the evil remedied. The Chaieman. I simply wanted to get your opinion as to that scheme, if it would accomplish the purpose. I do not know that it will work well, but you gentlemen who are practically engaged in this matter I think should know. Mr. HiGBEE. My impression is that it would not be as effective as the one we are speaking of. The Chaieman. It would avoid some dangers that beset the remedy you advocate, of putting the immense power, for instance, of control- ling this ten or eleven billions of wealth into the hands of a very few persons. Mr. HiGBEE. Even placing that power there. Congress has still the power at any time, if this power is abused, to remedy that. The President has the power of removal, and we have put great power into the hands of a few men occasionally. The President has power in his one hand which is beyond and awaj^ above the power that we are asking for these five men, and he is in for four years. The Chaieman. No; the President has the power of removal in case of misconduct. Mr. HiGBEE. Congress has the power to repeal the law, and the INTEESTATE-OOMMEEOB LAW. 151 President has power to call Congress in extra session within a very few days. "We think that it would be perfectly safe. We are simply striving for the best that we can get. We do not expect ever to reach a perfect condition. _ The Chairman. I do not assume that that would be a remedy, but I simply suggested it to you. Mr. HiGBEE. I have tried to answer your questions to the best of my ability, and if there are no further questions, I thank you, gentle- men, for your kindness in giving me this time. The Chairman. We are certainly very glad to have heard you. STATEMENT OF MR. S. T. HUBBARD. The Chairman. You heard the question which I just asked your predecessor? Mr. Hubbard. Yes, sir. The Chairman. Will you answer that question? Mr. Hubbard. I would like to have it, the substance of it, reread, as it is a pretty long question, Mr. Hepburn, and involves a good many points. I think that all I have heard of all the questions that have been asked by the committee were very interesting and instruct- ive to me, and they have been no doubt answered and thrashed over in the adoption of this interstate-commerce law. The question you asked first, as to whether a man would be willing to invest his money in an enterprise which falls under the laws of the United States or States which regulate the traffic can be answered simply by experience. The different States have railway commissions which have fixed rates on the goods transported over the lines; the other States granted charters, and that has not prevented railroad building in those States. I do not know whether the State of Ohio has such a commission. Mr. Tompkins. The State of Ohio has a statute fixing the maximum charges for freight and passengers and also has a commission. Mr. Hubbard. Since that time 1 have myself invested a sum of money in Ohio, from Sandusky down to Zanesville. I have lost it, of course Mr. Mann. But that is all subject to correction by the courts before the rates are put into effect. Mr. Hubbard. The rates are put into effect, as I understand the decisions of the railroad commissions, and they have gone into effect, and the shippers have paid them and have appealed — or the railroads have appealed — to the State courts for decisions on those points. If my memory serves me correctly, that has been done in Texas, and the Nebraska rate case is a decision in that line, if 1 am not mistaken. Mr. Mann. In every one of those States the railroad companies can file a bill for injunction in the United States courts and enjoin the putting into effect of these rates until the courts have passed upon the reasonableness of the rates. This bill that you propose — whether that is constitutional or not is another question — provides that rates shall be put into effect before the court has an opportunity of passing upon them. Mr. Hubbard. My understanding of this bill is that it gives the Interstate Commerce Commission the power to carry out the purposes of the interstate-commerce act and enforce their rulings at the start. 152 INTBBSTATB-OOMMBEOE LAW. Then, if a ruling is wrong, it is carried into the courts, but it maintains its position as a legislative enactment, as you might term it, until it is decided by the court. At the present time the rate is made and the shipper objects to it, but he pays it and carries it into the court for a decision Is not that the difference? Mr. Mann. At the present time a rate, of course, does not go into effect until the court says so, if the carrier appeals to the court. Let me understand. Under this bill it is my understanding that the Inter- state Commerce Commission, upon complaint, makes an investigation and decides what the rate ought to be, and thereupon the railroad company may appeal to the courts, but meanwhile the rate shall go into effect, unless the court, by special order, finds that there is a plain mistake. Pending the appeal to the court the rate shall be in force and effect. Mr. HuBBAED. Yes,, sir. Mr. Mann. It takes about how long for a case to go through the Supreme Court of the United States ? Mr. HuBBAED. I do not know, sir. Mr. Mann. Most of the gentlemen who have appeared before us have assumed to know, and assume that it takes three or four years. Mr. HuBBAED. I have never had a case in the Supreme Court of the United States. Mr. Mann. It is quite certain that under ordinary circumstances the Supreme Court of the United States would not pass upon a question short of two years, and by that time the order would have expired; and thereupon the Interstate Commerce Commission, before the first case is disposed of, can make a new order, which can stand in force pending an appeal, and through that process they can go on making rates forever, notwithstanding any appeals to the courts. Mr. HuBBAED. 1 understand that this bill would make the rulings of the Interstate Commerce Commission of the same weight as a rul- ing of the Treasury Department. If I am an importer, and import goods and pay the duty on them, I protest to the Treasury Depart- ment, and the Treasury Department states that that is a ruling, that that is the rate Mr. Mann. Yes. Mr. HuBBAED (continuing). And I pay that money, that duty, and then I appeal to the courts, and until the case is decided the Treasury Department retains that money. Mr. Mann. And if the case is decided against the Government, you get the money back. Mr. HuBBAED. Yes, sir. Mr. Mann. But if this other case is decided against the Interstate Commerce Commission, the railways are out the money. They do not get it back. Mr. HuBBAED. That is true, but that is a matter which is not impos- sible of remedy. Mr. Mann. How would you remedy it ? Mr. HuBBAED. If the decision of the Interstate Commerce Commis- sion was appealed from by the railroads, it is perfectly possible to provide that the rate of freight shall be paid and the money shall remain — I do not know the legal term, in trusteeship or custody — until the question is decided. INTEKSTATE-OOMMEEOE LAW. 153 The Chairman. In order to be just you would have to apply that payment to every other transaction of like kind. Mr. Hubbard. Yes, sir. The Chairman. Then, what would be the benefit to the shipper. He is out his money. Mr. Hubbard. Very true, he is out his money. The Chairman. And you have got to burden both with this double system of accounts. Mr. Hubbard. 1 say it is not impossible of remedy, and 1 simply suggest this in an offhand manner. The question the gentleman asked me was, that the Treasury of the United States was always here, and the importer could recover the money from the Treasury of the United States the moment he got his decision, but the railroad did not know that the shipper would always be there, and therefore did not know if the money could be returned. That was the point the gentleman wanted to make. Mr. Mann. What would you think of it if the importer should fix the rate upon the goods and then give the importer an opportunity to appeal to the Supreme Court of the United States — to the courts — and have it passed upon in four or five years; but meanwhile the importer must pay the duty upon the goods, with no possibility of ever recover- ing it back. That would be exactly analogous to the proposition you have made in regard to the railroads. Mr. Hubbard. I hardly think so. The rates are fixed by legisla- tive enactment. Mr. Mann. They probably do not know any more about their rates than the Treasury does about import business. • Mr. Hubbard. That is true; but the power has already been dele- gated, as I understand it, to the commissioners in the different States to fix the rate, and the States have not found that it is highly objec- tionable. Mr. Mann. But in every case where it is fixed by the State, it is subject now to the correction of the courts. Nobody questions it. Mr. Hubbard. Would not these rates be subject to final correction by the courts ? Mr. Mann. After the-shippers had obtained the benefit of the rates, the court might decide that those /I'ates were not proper rates, but meanwhile one of the parties is absolutely out. Mr. Hubbard. Yes, sir. At the present time the shipper pays the rate, and he sues under the interstate commerce law, and he carries that onus. Mr. Coombs. You would like to vest the Commission with judicial functions, would you not? Mr. Hubbard. Subject to revision, as provided for in the bill. Mr. Coombs. I understand in fixing these rates they would go into effect immediately, pending the appeal. Would that be by reason of the exercise of a judicial function or an executive function on the part of the Commission? Mr. Hubbard. I should think that would be in the nature of an executive function rather than a judicial one. It has both bearings, but I should judge so. .Mr. Coombs. Have you ever studied the constitutional feature of that provision ? 154 INTERSTATE-COMMEKOB LAW. Mr. HuBBAKD. The rates are fixed by the legislature, as I have just said; it it a legislative function. Mr. Coombs. The legislature, though, can fix an unreasonable rate< Mr. HuBBAED. I beg your pardon. They have the power to fix^ Mr. Adamson. Fixing rates would be really a legislative function? Mr. Hubbard. Yes, sir. Mr. Adamson. Delegating the power of legislation to the Commis- sion when we justify them in prescribing rates which the railroads are bound to conform to. Mr. Coombs. Inherently it is a legislative power; however, you want to vest the Commission with judicial functions? Now, do you propose to invoke one of those judicial functions in promulgating these orders and fixing the rates, after determining by the evidence what the rate should be? Would you do that in a judicial proceeding or just simply a summary matter ? Mr. Hubbard. I think that, of course, is a matter which the com- mission would have to Mr. Coombs. That is an executive act? Mr. Hubbard. Yes, sir. Mr. Coombs. Now, if you could do that, why would you want to vest the Commission with judicial functions? Mr. Hubbard. Why? In order to carry out an executive act there must be some power to carry it out. Mr. Coombs. If you wanted to carry out an executive order you would have to go and get a judgment on it. I do not imagine that any court would get out an execution on some executive order of some- body. Mr. Hubbard. No, but I think the order of the Commission Mr. Coombs. I would like to get a clear understanding as to what the idea is as to the power of this Commission. Mr. Hubbard. The Commission has, under the present ruling of the Supreme Court, the right to fix a rate, as the chairman says. Mr. Coombs. I understand. Mr. Hubbard. The questions which you are asking me 1 think have been ably answered before, before Senator Cullom's committee, which sat for years, and .drew the original Interstate -Commerce act. Mr. Mann. Which, by the way, does not anywhere purport to give the Interstate Commerce Commission the power to fix rates. Mr. Hubbard. No, sir; I do not think it does; but it was the belief — I am quite at variance with the chairman on that point — that the purpose of the interstate-commerce act as originally adopted was to accomplish what the granger legislation of the West had attempted to accomplish, namely, the avoidance of discrimination between local- ities and individuals. Mr. Mann. That still remains untouched in the law. Mr. Hubbard. If that remains untouched in the law, how are you going to rectify discriminations between individuals and between localities, unless you give the power to some one to do it? Mr. Adamson. If we do summarily assume here to delegate to the Commission the executive function of fixing rates and the judicial function of hearing and determining causes, and delegate the legisla- tive function of enforcing rates, thus violating the Constitution, which says that the three departments shall stand separate INTBE8TATE-COMMEECE LAW. 155 Mr. Coombs. And that you can not take a man's property without due process of law ? Mr. Adamson. That is another provision. Mr. Mann. What is there in this bill which shall prevent discrimi- nations between individuals in rates ? Mr. Hubbard. I believe this bill gives the power to the Interstate Commerce Commission, after investigation and decision, to issue an order that the rate from a certain place to a certain place shall be so and so. Mr. Mann. That would be simply to make a schedule rate? Mr. Hubbard. Yes, sir. Mr. Mann. What is there in this bill that has a tendency to punish the giving of rebates or the giving of a lower rate to someone? Mr. HuBBAKD. There is an express provision in the bill for that purpose. Mr. Mann. I have not seen it; I have not seen any provision in the bill which Mr. Kernan. Yes, sir; that which forbids the shipper from ship- ping at any except the regular rate. That is one of the provisions in this bill which is new. The carrier can be prosecuted and punished, but the shipper never has been liable to any punishment or penalty for shipping or attempting to ship at less than the published rate. That is provided for in this bill and is one of the essential things in it. We want to stop shippers from cheating as well as the railroads. Mr. Mann. You want to stop the briber as well as the bribed ? Mr. Kernan. That is a provision in this bill, to punish the man who attempts to, or who does, ship at a rate less than the published rate, just as it punishes the carrier for doing the same thing. The Chaerman. Does not that simply add another incentive to secretiveness? As it is now, the shipper can not be punished. There- fore there is no reason for his not divulging the information against the carrier, except his own personal interest. Now, by making it an offense on his part, you put an incentive in the minds of the two persons who must know about the violations of the law to shield one another. Mr. Mann. And you give each an opportunity to decline to testify for fear of incriminating himself. The Chairman. I wish you would tell us, if you have studied this bill, how the railroad, under this bill, would protect itself against con- fiscation of its property if the Interstate Commerce Commission chose to make rates so low that it would be a confiscation of its property ? Mr. Hubbard. That is a question which is beyond my capacity to answer. I think you had better ask my friend, Mr. Kernan here, as to that. He has been upon the New York State commission, and his recommendations werje largely adopted by Senator Cullom's committee on that question. If there are no further questions, Mr. Chairman, I thank you for your courtesy. STATEMENT OF MR. JOHN D. KERNAN. Mr. Kernan. Mr. Chairman, the gentleman has referred to the fact that I had some experience of these questions. From 1883 to 1887 I was the chairman of the New York State commission, a commission 156 INTEBSTATE-OOMMEBOE LAW. that acted under the Massachusetts idea of having power to investi- gate and ascertain the facts and spread them before the public, and by giving to the injured party possession of the proof and by invoking the aid of public opinion upon situations where the railroads were doing wrong, seeking in that way to accomplish, without the exercise of arbitrary power, a regulation, a real and fair adjustment of disputed questions between railroads and shippers. And during those four years — the time when I resigned was in 1897 — this question of the interstate-commerce bill and the interstate-com- merce law was constantly obtruding itself upon the attention of every commission throughout the country, and the necessity of some Con- gressional legislation to reach that vast mass of commerce which could not be reached by the States was a subject of constant study and investi- gation and talk and pooling, and all these questions were at that time being investigated and thought about as remedies for the acknowledged evils which arose in the interests of railroads, seeking, of course, opportunities to make what they could, and the shippers seeking advantages at all points, low rates and just rates. At the time Senator CuUom's committee was appointed it opened its sessions at New York City, and then went all over the United States and spent the entire vacation season in hearing these questions, such as are before you, discussed. They honored me by asking me to come before that body, and I think I appeared as the first witness and talked for two or three days, after having studied these matters as well as I could. At the close of the hearing, and subsequently. Senator Cullom wrote me asking me to draw a bill in accordance with the ideas dis- cussed, and I drew the bill which the Senate virtually adopted. I did not believe that it was wise to legislate at all upon the pooling question at that time. Pooling was under common-law prohibition to such an extent that the railroads could not enforce pooling agreements in the courts between themselves; and I believed they were working toward what is now being accomplished in another way, that is, work- ing toward some sort of arrangement among themselves which should prevent competition which impaired their usefulness and depleted their revenues beyond the point which they ought to receive, and they were working toward a uniform classification throughout the United States, and toward rules and regulations as to the interchange of interstate traffic which were desirable. And on the other hand the far-reaching effects of pooling appeared to me to be so great as at that time not to justify with the experience that there was in this country anything which went to the extent of legalizing the authorized pooling. My opinion was that they ought not to do anything in regard to that at that time, but of course to take the safeguards which would be best upon experience, and as to which we had some experience to know what we were doing, and so to follow the English acts as to the requirement of reasonable rates and the pro- hibition of unjust discriminations; and the third section, which pro- vided that localities and individuals should not be favored in any way by special rates. The Senate adopted that bill virtually in that form as being the law which affected the situation, and beyond that appointed a commission for the purpose of investigating and determining, as I believe, at that time, the subjects before the courts for legislation. Now, the House, you know, under the leadership of Mr. Reagan inserted it in this bill. Without going into any details about rates, and INTEESTATE-OOMMEKOE LA"W. 157 all that, the situation about rates was disposed of in many respects by the interstate-commerce law. I think much of the discussion here was forecast by them upon many questions, and I think if you gentlemen will take the reports of the Cullom committee you will see that many of these questions which we are now discussing were at that time sup- posed to be settled, and it was believed that there was no remedy left for the purpose of correcting the evils that existed, and these questions between shippers and the carriers, except the passage of the interstate- commerce law and the creation of the Commission as a special tribunal for the purpose of hearing and deciding these questions, and to a cer- tain extent—I will point out afterwards how far — as to rates. Now, I will not go into the question of the courts further than to say, the Interstate Commerce Commission — ^the representative of that Commission — pointed out that the courts and the remedies of courts, open and available to shippers or to localities that were suffering from unjust discriminations in rates, or from too high rates, had ceased to be a practical source of relief, owing to the vast growth of the railroads, and owing to the vastly changed complicated situation which arose in refer- ence to these questions. The procedure of all of our courts, mind you, was based upon the questions which arose when the stage coach was the great means of transportation in England and this country, and those methods of procedure are, therefore, as far behind the pres- ent necessities of the tribunal to pass upon them as the locomotive and its train to-day, and its capacity of moving freight in vast quanti- ties at a time, is beyond the conditions that existed when the stage coach flourished. So that in many of these questions, I say, you can regard the inter- state-commerce act as deciding that the time had come when the com- mon-law remedies of the courts had ceased to be sufficient for the protection of the public against railroads upon these questions — for the speedy decision of these questions between the railroads and the public — and that the experience of 20 or 30 States up to that time had been virtually adding to the conclusions and had finally reached that as a conclusion; that it was necessary to have some special tribunal of men whose time was devoted to the study of these questions, in order to have anything practical in the way of a body that could reach a speedy conclusion. Now, I have had a good many experiences before the Interstate Commerce Commission. I have been employed by boards of trade and many bodies of that kind. I have never been for the railroads, but always on the other side of the question. But in all of those cases, up to the time that the Supreme Court of the United States made the decision — which was against the unanimous opinions of the courts below, mind you — in 1897, ten years after the act was passed, neither the Commission nor the railroads, nor anybody else, took the position that they did not have the power to fix rates to the extent that we now ask that it be given to them. The orders of the Commission all ran in that way, that they found that the rate complained of was unreasonable to such an extent, and that the carriers should cease and desist from charging said rate, and should thenceforth cease from charging the said rate. That was never questioned until the case which I carried there to the Supreme Court of the United States, and argued there twice, "The import rate case," and then also in the "Social circle case;" and right 158 INTEESTATB-OOMMEROE LAW. here I may say that that jncludes the question whether the inquiry whether rates are reasonable or not is a judicial act. That is, whether the inquiry before the Interstate Commerce Commission, whether a rate is or is not reasonable, is a judicial act, and the Supreme Court says, "But to prescribe rates for the future is a legislative act." So that you have m this Commission a combination of the duty of say- ing, first, whether the rate is fair and reasonable, and then, second, as a part of their order, what the rate shall be for the future. So, under the United States Supreme Court's decision, you have a delegation of the sole legislative power of letting that Commission say what for the future shall be the rate; and whether that is a danger- ous grant of power, whether it exists, whether it was originally designed by the interstate-commerce act, is a question. The act has failed for the lack of that power up to the present time to accomplish the result intended. Mr. Adamson. Do you think that Congress can delegate that power? Mr. Kernan. The Supreme Court holds that they can. Mr. Adamson. That Congress can delegate it? Mr. Kernan. Yes, sir; they hold it in all its fullness in reference to all these laws, in reference to Texas and these other States. The laws have been brought up, for instance, in the Texas case, where the order of the Texas commission was appealed to the Supreme Court of the United States and they reversed the order and held that it violated the Constitution in taking property from the railroads. That is, it was decided in that case that the commission under its power to fix rates could not confiscate; they can not fix a rate that is lower than affords a railroad a reasonable return. Mr. Adamson. That was a State commission? Mr. Kernan. Yes, sir. In that case, however. Congress, with- out Mr. Adamson. Most of these States have a constitutional provision authorizing the railroad commission Mr. Kernan. Yes, sir; but they hold that it is a legislative function that can be delegated. The Supreme Court of the United States has held that proposition, and the interstate-commerce act has never been questioned by the Supreme Court. They simply say that Congress has not given the Interstate Commerce Commission that power, but it has been held positively that the Congress, or the legislature of a State, can delegate that portion of its power which authorizes it to fix rates for the future. Mr. Adamson. Congress can fix rates for the future? Mr. Kernan. The Supreme Court of the United States has held that Congress itself, and no other power, can fix a rate for railroads which is not subject to judicial review. In order to ascertain whether it violates the Constitution in putting a rate so low as to mean a con- fiscation of property Mr. Coombs. Here is the question: Supposing we give the Commis- sion judicial functions, would those judicial functions conferred meet the requirements of the law, and permit that Commission to determine those questions in a manner from which there would be no appeal to other courts ? Mr. Kernan. I have said that Congress itself can not fix a rate which is not subject to judicial review. Congress can not delegate any power which it has not itself. It can delegate to the Commission INTEESTATE-OOMMEEOE LAW. 159 the judicial power to determine whether a rate complained of is fair or not, but it will be subject to a review and decision by the courts. Mr. Coombs. It is a quasi judicial power. Mr. Keknan. Is not that quasi judicial? Mr. Coombs. It is a judicial power which pertains to it. It does not make a court of them. Mr. Kern AN. Not in that sense. The Supreme Court says: "Con- gress has said that the Commission's power is in the nature of a judicial power" — quasi judicial. Mr. Coombs. Yes, sir. Mr. Keknan. And if you go further the Commission is authorized to prescribe rates for the future. There you are delegating to the Commission a part of the legislative power that you exercise, but you can not delegate it to be exercised by the Commission in any other way than you would exercise it yourselves, and necessarily its exercise will be' always subject to judicial review. Whether a rate fixed is right or not it is always to be subject to review. Mr. Mann. This bill, of course, provides for a judicial review, or rather method of review, of the action fixing rates. Mr. Kernan. Yes, sir. Mr. Mann. Now, these gentlemen coming here representing busi- ness and shipping interests have the impression that that is the only method of reviewing the rate fixed by the Interstate Commerce Com- mission, and until the courts in that method may have decided that those rates are unreasonable the rates shall remain in force. What do you say about that? Mr. Kernan. Why, I understand the Nelson-Corliss bill to prescribe that a rate fixed by the Commission shall be fixed as though it had been done by yourselves Mr. Mann. Yes. Mr. Kernan (continuing). Subject to the right of the railroad to adopt the legal method provided in this bill for reviewing, or subject to any other common-law method that exists. Mr. Mann. That is what I wanted to get. Has Congress the power to say that the courts shall not entertain original jurisdiction of a suit for injunction? Mr. Kernan. An act of Congress of itself in that regard is never con- strued as depriving the courts of any jurisdiction inferentially. Now, there is nothing in this except an inference that it is the only method. There is nothing in this bill to the effect that this shall be the only method. I think this bill leaves it open to the railroads to say upon attack by a decision that a certain rate is unjust; that they can pursue this method for obtaining obedience to it or any other common-law remedy of the United States court for that purpose. Mr. Mann. So that, as a matter of fact, in your judgment, if this bill became a law, the railroad companies would have the same rights in court to prevent the putting into operation of tariff rates fixed by the Interstate Commerce Commission that they now have to prevent the putting into operation of rates fixed by a State commission ? Mr. Kernan. Yes, sir; they would do exactly as they have done. As I told you, during the ten years during which I was engaged in these questions under the first law, the railroads never questioned the fact that the order of the Commission was just what we ask that it shall be under this law. 160 INTBRSTATE-OOMMEEOE LAW. Mr. Richardson. Is not the effect of that bill this, that while the courts are reviewing the question of the reasonableness or unreason- ableness of a rate fixed by the Commission the railroad is losing rev- enue while the order of the Commission is in effect? Mr. Keenan. Yes, sir; they are losing revenue wrongly. Mr. Richardson. Because ultimately the court hold that a rate is just? Mr. Keenan. Yes, sir. Mr. Adamson. Don't you think, as a lawyer, that we could render the public a greater service in any other way by facilitating and expediting hearings regarding the questions growing out of transpor- tation? Mr. Keenan. That was all gone into by the Cullom committee. Are the remedies in the courts sufficient to protect the people? Now, the reason for the establishment of the Interstate Commerce Commission was because after investigation that able committee reached the conclusion, and so reported, giving their reasons at great length in the report, that the remedies in the courts had become so obsolete and difficult of enforcement that there was no protection for the shippers in that direction. Mr. Adamson. Can not the law provide for expediting the cases ? Mr. Keenan. I will give you an instance of an expedited case, beginning and going clear through to the Supreme Court of the United States, the "import-rate case," a very important case. The case was brought by the board of trade, the transportation and com- mercial exchange, and the Philadelphia Chamber of Commerce, of Philadelphia, against 28 railroads, the Pennsylvania Central, and all these lines to the West. That was begun in 1898. In the first place, it was begun against about 15 railroads, and then these additional parties were added because it was found that the connections with the others were affected, and they came in as parties, and then the Commission itself found that any order they might carry would reach out and affect other railroads; so we had to wait until we got the defendants all in and got their defense in. Now, I got a decision in favor of my company in that case. I need not go into what it was, but it was to the effect that inland rates betweijn the seaboard and the interior should be the same for foreign and domestic traffic. We found that the Texas Pacific took dry goods, if you please, on a through bill of lading_ from Liver- pool to San Francisco at 80 cents a hundred and on their inland bill from New Orleans to San Francisco their tariff rate was $1.20 for the same service for goods shipped at New Orleans. Our contention was that the inland traffic must be charged the same — that they must make the same tariff' for inland as well as domestic traffic. In the first place, that was designed to protect the manufacturer of American goods. If the foreign manufacturer could ship his goods on a through bill of lading at that much lower rate, his goods would come in, and the manufacturer, for instance, of clothing in New York City would be at that much disadvantage, and the difference in rate would be in many cases sufficient to practically wipe out the tariff laws. That was the point I was fighting f or^ — the same rates for inland traffic between the seaboard and the interior for like service. The Commis- sion decided in my favor. Mr. Mann. How long was that pending before the Commissioa? INTERSTATE- COMMERCE LAW. 161 Mr. Keknan. That took the Gommission from December 5, 189,9, to January 29, 1891. They held hearings all over the country and took an immense amount of testimony, and you, gentlemen, if you will go through a series of hearings of that kind, could imagine what it is to go into that question of rates. Mr. Adamson. That was fourteen months. Mr. Kernan. Yes, sir. Now, it was before the Commission, and we had hearings and pushed it all the time, and we had San Francisco in, and New York, and Philadelphia in; and all their different conflicting interests upon that subject had to be heard and reconciled in order to fix rates. Mr. Adamson. In that case ? Mr. Kebnan. Yes, sir; in a case involving that. You can imagine in a case involving the import business of the United States and involv- ing a thorough investigation of conditions in respect to it, that it would take a great amount of time. Mr. Adamson. That probably is the most important case that has ever been decided relating to the interstate-commerce traffic. Mr. Kernan. I should imagine it may be. Some of the railroads did not obey the decision of the Commission. Eighteen of these roads obeyed the orders of the Commission at once, including all the systems running from New York west. They all said that the decision was right, and they obeyed it. Ten of the roads, however, kicked, and of those that refused to obey the decision the Texas and Pacific was the principal one. Then the Commission employed me to bring an action and push it as hard as I could, and get a decision against the Texas and Pacific, and those roads who refused to obey their order, and that matter was begun. I began that action for the Interstate Commerce Commission, mind you, on January 19, 1892. A plea to jurisdiction was first inserted, before they answered. That was overruled and decided in favor of the Commission. A motion for argument was made and denied. Then, after the hearing of November 26, 1892, it was dicided again in my favor, and an injunction was granted against the railroad compelling them to comply; and then in December, 1892, the same judge granted an appeal. That is a remedy which is open to all of them Mr. Adamson. That is the very point that I was making to you, that unless we do provide for expediting the matter in the courts Mr. Kernan. This was all expedited. There was ho trifling. There was no trouble in getting hearings as soon as there was a session of the court, but you know how it is with the United States circuit and district courts. In the State of New York we have two sessions a year of the circuit court, and that does not afford any opportunity for speedy hearings even there. I imagine that in other parts of the United States hearings of the circuit and district courts are much more rare. And you go to the southern part of the State of New York and look at their calendars — 10,000 cases on there, I think, of revenue cases alone. You can not get a revenue case heard under five years. But we got it expedited, this case being important. Then they granted a motion staying the order pending the appeal, and I think that is an ample protectiou tp the railroads always, in any close case, in any case where there seems to be doubt about the justice I-C L 11 162 INTEBSTATB-COMMBKCE LAW. of an order made by this Commission. The circuit courts of the United States and the district courts always stay pending an appeal. Mr. Mann. That is not a provision of this bill. Mr. Keenan. It is a provision of this bill substantially; yes, siri The Chairmat^. Oh, no. Mr. Keknan. That is, the order shall go into effect unless a stay be Mt. Mann. No question of doubt be raised in it. In any doubtful case Mr. Kernan. I am coming to that. The Chairman (reading); Either party may, within thirty days, appeal from the judgment or decree of the circuit court to the Supreme Court of the United States; but such appeal shall not operate to stay or supersede the order of the circuit court. There is the same provision with regard to an appeal from the Commission. Mr. Kernan. No appeal does stay, your honor, in all our legal pro- ceedings; the appeal does not stay proceedings. You have to get a stay in one of two ways The Chairman. That evidently means that there shall be no stay, in any way. Mr. Kernan (continuing). By supersedeas bonds Mr. Mann. An appeal, then. Mr. Kernan. No, sir. In New York City" no appeal stays a pro- ceeding except in one of two ways — in money cases a bond and in equity cases an injunction. You can get it upon application to the court, tlowever Mr. Mann. I practice law in a common-law State — of course no one can keep up with a code State — where an appeal always stays pro- ceedings, if you get the appeal. Mr. Kernan. Now, I want to say that there is one place in this bill The Chairman. Before you pass from that, you say there are in New York two methods of procuring a stay. One is by the filing of a supersedeas bond and the other is by the process of an order of the court. Now, does not this language cover both of these methods? But such an appeal shall not operate to stay or supersede the order of the circuit court. Is not that a prohibition upon any court, so far as you can prohibit the court, to grant a suspension of that order in any way, either by a writ of injunction or by the filing of a supersedeas bond? Mr. Kernan. I do not think I understand the act, your honor, if that is so. The filing of a petition to review an order — The Chairman. You have explained to us that in New York there are two methods of procuring a stay. Mr. Kernan. Yes, sir. The Chairman. One is by the injunction and the other by the filing of a supersedeas bond. The filing of a supersedeas bond can not be done under this act at all. Mr. Kernan. Then there is no remedy of that kind to the railroad at all. The Chairman. If those are the two methods now by which super- INTEKSTATE-COMMEROE LAW. 163 sedeas results are obtained, if they now exist and those are the two, are not both of them superseded by this act ? Mr. Kern AN. What do you do with the language, "The filing of a petition to renew an order shall of itself suspend the effects of such order for thirty days ? " The Chairman. Yes, sir. Mr. Keknan (reading): And the court before which the same is pending may also, if upon an inspection of the record it plainly appears that the order proceeds upon some error of law, or is unjust and unreasonable upon the facts, and not otherwise, suspend the operation of the order during the pendency of the proceedings in review, or until further order of the court. Does not that leave any remedy open? The Chairman (reading): If upon an inspection of the record it plainly appears that the order proceeds upon some error of law, or is unjust and unreasonable upon the facts, and not otherwise. • Mr. Kernan (handing copy of Corliss bill to Mr. Richardson). I want the committee to see that I have marked those words to be stricken out. In other words, I do not think that the eminent juiisdiction of the United States courts to grant stays pending appeals should be interfered with by language which requires, as this does, that they can not exercise their well-known power of staying during appeals unless it "plainly appears," and so forth. That would be changing the whole method of proceeding in the United States courts. That would be, in effect, prohibiting that court from protecting the railroads under the ordinary circumstances under which they would protect a suitor. I do not think those words ought to be put in. Mr. Mann. How much have you marked there to be stricken out? Mr. Coombs. All the witnesses who have appeared before us have proposed that that should be put in there. That has been the burden of the song of all of them — that that is the remedy that has been sought. Mr. Kernan. I do not know; they were laymen. I am a lawyer. I do not know that my opinion is any the better for that. Mr. Richardson. That has been the chief objection that the com- mittee has been finding with this bill. Mr. Mann. What would you strike out? Mr. Kernan. I would strike out from the word " also," in line 11, on page 6 of the Corliss bill, down to the word " suspend," in line 14. Then it would read: The filing of a petition to review an order shall of itself suspend the effect of such order for thirty days, and the court before which the same is pending shall suspend the operation of the order during the pendency of the proceedings in review, or until further order of the court. The court keeps its ordinary jurisdiction to protect a suitor who makes any complaint against a decision of the Commission, with its ordinary power of protecting him by a stay. Mr. Coombs. That removes one of the difficulties before the coin- mittee. The Chairman. Then you would have to modify in some way the language, beginning with the word "but," in line 19. You certainly would have to modify that language. 164 IJSTERSTATE-OOMMBRCE LAW. Mr. Kernan. I think not (reading): Either party may, within thirty days, appeal from the judgnlent or decree of the circuit court to the Supreme Court of the United States; but such appeal shall not operate to stay or supersede the order of the circuit court. I do not propose that an appeal shall stay proceedings but for thirty days, and I propose to leave the circuit court with its power to pro- tect suitors in all cases of appeals by granting a stay pending appeal whenever the appellant requires it. Mr. Mann. You mean a man to have a right of filing a petition for a writ of error in the supreme courts in order to stay tha operation of a writ? Mr. Kernan. Yes, sir. Mr. Mann. And olstain an order from the court? Mr. Kbknan. Yes, sir. Mr. Mann. So that this order, the judgment of the circuit court- it just goes directly from the circuit court to the Supreme Court? Mr. Kernan. Yes, sir. Mr. Mann. If the order of the circuit court happens to be entered in June of a year, there would be no chance for a stay of proceed- ings for some time, unless the Chief Justice, as a matter of form, pro- vided for a stay of proceedings in all cases. Mr. Kernan. That is true in all cases of appeal in equity cases to the Supreme Court of the United States. Mr. Mann. I know; but the custom is in every case for the court below to stay the operation of the judgment in order to give the parties an opportunity of getting a stay of proceedings from the Supreme Court of the United States if they are entitled to it. 1 do not think you will find in any court, under any circumstances, the pro- vision that the appeal of the court below shall take effect within thirty days unless a party gets a supersedeas from the Supreme Court of the United States within that time. Mr. Kernan. Yes. Well, 1 will say in reference to that, without spending time as to how far that changes this rule, that I do not think this bill in any respect ought to put a railroad before the courts in any other position than a suitor always is in against whom a judgment has been rendered, and who wants it reviewed before it goes into effect. He may ask the granting of a stay, and a court may pass upon that. That is the rule we should have here, and we should be careful in legislation never to go into language which changes the fundamental practice of administration of justice in the courts, otherwise you are making a very dangerous change. The Chairman. The hour for adjournment has arrived, and if you will now suspend you will have the stand at 10.30 to-morrow morning. STATEMENT OF MR. WILLIAM R. CORWINE, OF NEW YORK CITY. Mr. CoRWiNE. Mr. Chairman, I desire to leave the city, and I would like to have the privilege of going home and sending you what I have to say in written form on behalf of the organization which I represent. The Chairman. Very well. How soon can you have it here ? Mr. CoRWiNE. I will try and dictate it to-morrow. I would like to have it noted on the record that I was here representing the Mer- chants' Association of New York City, also as a member of the com- mittee advocating the passage of the Corliss bill. INTEESTATE-COMMERCE LAW. 165 The Chairman, Very well; your brief, when filed, will be inserted in the heai-ings. Thereupon (at 12 o'clock m.) the committee adjourned until to-morrow, April 18, 1902, at 10.30 o'clock a. m. Friday, April 18, 190^. The committee met at 10.30 o'clock a. m., Hon. William P. Hep- burn in the chair. The Chairman. I desire to lay before the committee this morning a letter, addressed to the chairman of the committee, from Hon. Mar- tin A. Knapp, chairman of the Interstate Commerce Commission, which is as follows: Interstate Commerce Commission, Washin0on, April 17, 1902. Hon. William P. Hepburn, Chairman Committee on interstate and Foreign Commerce, House of Representatives, Washington, D. C. Sir: I beg to acknowledge receipt of your letter of the 16th Instant, requesting my associates and myself to present to your committee their views respecting proposed legislation, and to say that some or all the members of the commission will be pleased to appear before your committee on Monday next, the 21st instant, the date sug- gested in your communication. Thanking you in behalf of the Commission for the courtesy extended, I remain. Very respectfully, yours, Martin A. Knapp, Chairman. STATEMENT OF MR. JOHN P. KERNAN— Continued. Mr. Kernan. Mr. Chairman, I endeavored yesterday to state that certain propositions seem to me to have been settled with respect to the interstate-commerce law; that the express determination of the courts with respect to the traffic and freight rates must now be regu- lated by statute so as to protect the carrier in all of its just rights and furnish it with sufficient revenue from its business to give it a proper income on the money and labor invested, and also so as to protect the people against unjust discrimination and too high rates. And the rea- son of this, briefly, was because the law and its remedies had been found to be unequal to meet the necessities of present business conditions. The Chairman. May 1 interrupt you there? Mr. Kernan. Certainly, sir. The Chairman. If it is going to take you oflf from the thread of your argument, I will not do so. Mr. Kernan. 1 think perhaps I may cover the things which you desire to mention, if you will allow me to proceed. The Chairman. This was a matter that you would not cover, because I was going to ask you if you bad given attention to the subject you there refer to, a reasonable return on capital invested, and had any information as to what that probably should be, or if there was any way of ascertaining, in the aggregate. Mr. Kernan. I do not know but you might take perhaps the pro- vision in our New York railroad law, which has been there since the general act in 1850. That provision is that the legislature can reduce 166 INTEE8TATE-COMMBR0B LAW. its rates when the clear income of a corporation is 10 per cent on the capital invested. That is our rule there and has been applied in the various investigations we had. For instance, the 5-cent fare on the elevated railroad was a matter that President Cleveland, when gov- ernor, refused to approve, although it was approved by the legisla- ture, and we had to have an investigation of the elevated railroad under the statute, to ascertain whether they were earning 10 per cent on the capital, it being recognized that they were entitled to earnings to that extent, and there should be a reduction in the rates. The Chairman. Would that be your own judgment from your own observation as to the measure of profits that might be just. Mr. Kernan. Well, no, sir. You know that has stood since 1850, and I should think now that the rate of earnings on capital which would be recognized as fair and reasonable under modern conditions would be 6 per cent on the common stock, aside from the fixed charges and bonded indebtedness. Of course that question is always complicated by the question of how much the capital actually is. Where it has been vastly watered, and where its construction account represents but a small percentage of the outstanding stocks and bonds, there always comes in the question as to whether a lower rate of remuneration would not be fair. But I think in all investigations by bodies and commissions they seldom go back of the proposition as to the fact of what the outstand- ing issue of stocks and bonds is, and they usually make that the basis of the determination as to whether their rates should be reduced or not, permitting an earning on that of a reasonable amount. That becomes necessary, because if the bonds and stocks of a corporation that has been watered remained in the hands of the original holders, you might in justice reduce the earnings, but where they become scattered all through the country, in the hands of many purchasers, they lose the taint of the original wrong in the watering, and then you have another problem there; you begin then attacking innocent holders of the securities; and therefore I think that you can not do otherwise as a rule than to take the outstanding issues of stocks and bonds as a basis upon which you are to permit them to earn a return. The Chairman. Has your investigation of this matter given you any opinion as to who is the owner of what is known as the unearned increment? Does that belong to the public or the corporation? Mr. Keknan. No, sir; I never have gone into that. I have always assumed, as I say, and there was great difficulty in assuming any other basis than that unearned increment represented in stocks and bonds, inasmuch as the issue of stocks and bonds have been under the authority of the people and its statutes, and that therefore you can not deprive the railroad and the railroad shareholders of the stocks and bonds of their road, and what may be called that unearned increment. It would ' kind of seem to me that the people had abdicated their rights to assail the issues of stocks and bonds which they themselves, under the authority of their statutes, have permitted to be made, and they have got them- selves into that position where 1 do not think you can ever deal with the question upon any other basis than that the revenue must be per- mitted to be earned upon the outstanding stocks and bonds that have been authorized by the statutes. The reasons for this legislation were because the common law and its courts and remedies were inadequate to afford the protection that INTEK8TATE-00MMEB0E LAW. 167 the shippers ought to have against these railroads; second, because State legislation could not reach the subject, and in the third place because competition was no longer a sufficient protection against undue preferences and high rates. It is_ an old saying that competition is impossible, and can not be maintained, where combination is possible, and that has been working itself out ever since until we now see that wherever competition form- erly existed it has been eliminated for the people as protection against the competing lines by the merging of securities and ownership of each other's stocks, and in other ways. Now this act, I want to state, as you may know, was based on the English act of 1854, which was very wise in its provisions against unjust discriminations and preferences. That was very wise because it gave us for our initial legislation a guide in the construction of that act which had taken place by the English courts from 1851 down, and I always insisted that that was the only safe way to start, because if we adopted new language, we did not know where it would land us upon its construction by the courts. We took that act as a guide. Then there was the appointment of the Commission, which all supposed to have the power, which it exercised for the first ten years, to fix future rates after an investigation and full hearing given to the parties, which was accepted by the railroads and the Commission and by evevy one that I know of until the Supreme Court finally decided that Congress had the right to confer the judicial power on the Commission and had the right to confer upon the Commission the power to fix rates, which is a power of legislation, yet it simply had not done so in this act, and while it might be inferred from the provisions of the act, for instance the pro- vision of the act that the Commission should investigate and if it reached the conclusion that the rates were too high should direct the carrier by an order to cease and desist from charging the rate that was found to be wrong — that while the inference might be drawn to that effect, yet the power was too great to be given by implication, and that the court would only recognize it when Congress expressly in an act conferred the power. Now, this act was found defective in the matter of getting testimony. In the first place, after the Supreme Court of the United States held that the railroad and traffic managers who appeared before the Com- mission, and others, could not be compelled to testify to the facts, because they might subject themselves to punishment, it was found impossible to get them to testify, and so Congress amended the act to provide that any testimony given before the Commission by any wit- ness should not subject that witness in any way to criminal prosecu- tion, thus removing that obstacle from the path of the Commission; and 1 do not think that the Commission now needs any more power in ascertaining all the facts. That has remedied the defect of the origi- nal law, and I think that meets the suggestion which the gentleman from Alabama has frequently made, as to how you are going to find out about the secret rates. The Commission has not any difficulty in finding out about the rate. The railroads and the shipper watch these matters very closely, and they watch each other, and they always know when a competitor is getting more allowance from a railroad than they are getting, and then, as in the case recently where the rates in the meat business were shown, they have no difficulty in acquiring all the information that is 168 INTERSTATE- COMMERCE EAW. necessary. Next came the decision of the Supreme Court holding that the Commission has not this power. The Chairman. This move in regard to securing testimony was effected in the amendment of 1893. It is referred to in the bills here — in this last bill, which says: But all persons so required to testify shall have the same immunity from prosecu- tion and punishment as is provided in an act approved February eleventh, eighteen hundred and ninety-three, entitled "An act in relation to testimony before the Inter- state Commerce Commission, and in cases of proceedings under or connected with an act entitled 'An act to regulate commerce,' approved February fourth, eighteen hundred and eighty-seven, and amendments thereto." Now, we come to this next difEculty, that there is no power in the Commission to prescribe a rate for the future, although the Commis- sion find that a rate which is testified to before it in hearings is unjust and for some reason wrong, and that is the reason that a second appeal to Congress is necessary to remove that defect in the law. if it be a defect; or at least if it is not a defect, it was not intended by the Congress in the original act. I have always supposed that it was intended that that additional power should be conferred upon the Commission, if it can be safely done with due regard to all the parties to be affected by it. There is another thing which I want to suggest to the committee and which they should bring up before the members of the Commission when they see them. I do not think this power of the Commission was ever questioned until it came up in the import-rate case and the social-circle case, which were decided in the Supreme Court of the United States. And, again, there is not any trouble about high rates. The Commis- sion never had any difficulty about lowering rates. The shippers do not care what rates are charged. It is the relation of rates between competitors; that is the thing they want fixed. I will give you an illustration : I bought a furnace and had it sent up to my country house, 5 miles from Utica. The freight rate was 28 cents per hundred; that, on 400 pounds, was fl.12. Now, some- body asked me, "Was that high ? " Why, taken by itself, I would not say that ^1.12 was too much to pay for bringing that furnace up there, but the rate for that furnace, at the same time, from iTtica to Minne- apolis was 25 cents a hundred, or 3 cents less for 1,000 miles than it was on that 5 miles. Now, you say that that does not make much dif- ference to me, as a consumer, on one furnace. That is true. But sup- pose I was a furnace manufacturer at my station, trying to compete with the Utica manufacturer in supplying the Minneapolis market, I would pay from Forestport to Utica— 4 miles — 28 cents per hundred, and then 1 would have to pay the additional 25 cents per hundred to reach the Minneapolis market from there. Why, as business is done in these days, that wipes out me as a fur- nace manufacturer at that point, and the result is that upon the entire line of that railroad from Utica up there was not a single furnace manufacturer. The "arbitrary," as it is called, which is the rate from a station on a single line to a competing point, was so great as to abso- lutely preclude men from doing business. If I was a manufacturer at Forestport I would not care whether the rate was 50 cents to Minne- apolis or 25 cents; but what I would want to have established would be the relation which my rate would bear to my competitor's at Utica. If I should be charged 3 or 4 cents a hundred miles, that is all right; liSTTERStATte-COMMEBOE LAW. 169 but if T should be required to pay 3 or 4 cents for tbat short baul to reach the customer, that, of course, wipes me out. You will find in 99 cases out bf 100 that the complaint before the Commissioners has not been that the rates are too high. It is all a question of the relation of the rates to be established, and not only between all sorts of competitors reaching common markets in this country, but also abroad. That is the question, and that is why you have got to have a commission, and that is why it has to have power. You can see how diiEcult it is for courts to deal with that question. There are but six classes of freights. Mr. Mann. In the case that you stated how would you remedy that? Increase the rate from Utica to Minneapolis and make it 25 cents higher, or make the rate from Forestport 2 or 3 cents a hundred? Mr. Keenan. I think it should be both ways there. I think the rate frotii Utica ought to be higher, and the other- way lower. Mr. Mann. You think that is to the interest of the people of Min- neapolis, to increase the rate ? Mr. Kernan. I do not think the combined rate ought to be very much greater, and I think railroads ought to pay and I think it is good business, and I think if you will listen to some suggestions which I have to make that joa will see why 1 think that an extraordinarily low rate, although it is presumed to be an advantage, if it is not remunerative to the railroad is not a benefit to any consumer or producer. Mr. Mann. That is a matter of argument. Take the case j^ou cited; how would you remedy that? You have given that a great deal of study; what rate would you make to remedy that? Mr. Kernan. I would make the Forestport rate — if the railroad maintained the rate of 26 cents around as ite rate — I would add to the Forestport rate a fair addition for the 29-mile haul, comparatively speaking; not pro rata, but a fair addition. Mr. Mann. Well, that is fair; but tell us how much. Mr. Kernan. Now, that is just the difficulty. Mr. Mann. That is just what I am getting at; what would be the rate that you would make, the local rate, between Forestport and Utica, on furnaces? Mr. Keenan. I should want to hear all the railroad traffic managers had to say, and to take into consideration the capitalization, the busi- ness and earnings of that line, and in that way reach a conclusion which -would afford the railroad a fair return for the service rendered, but it would involve so many elements before the question could be consid- ered that no man could possibly Mr. Mann. But you think that the Interstate Commerce Commis- sion, with the consideration of a few days' hearings, would be able to tell better than the railroads, after fifty years' experience, what the rate should be? Mr. Keenan. I do not say that. It would be better done by the railroad company if the railroad company acted judicially in the matter; but every man acts for his own intereste in the matter, and therefore the railroad manager, in considering the question, does like a great many of us. He looks at one side. And I never knew but one rail- road man in this country who was able to take in both sides of the question. 170 INTEESTATE-COMMEECE LAW. Mr. Mann. Is it not to the interest of the railroad companies to increase the manufacturing interests on their lines ? Mr. Kernan. You would suppose so. Mr. Mann. Is it not? Mr. Keenan. Yes, sir, it is; and it is bad policy if they do not do it; and yet you would be surprised to go up and down lines which I could point out in New York State to see how absolutely blind they are to that. Mr. Mann. With all your knowledge of railroad rates — and you have given more study than anybody on the Interstate Commerce Commission to them Mr. Keenan. Oh, no, sir. Mr. Mann (continuing). Or any man in the country Mr. Keenan. I do not think so. Mr. Mann (continuing). I will ask you, leaving out Forestport altogether, you are not able to tell what would be the proper rate from Minneapolis to Utica? Mr. Keenan. Not unless I had all the facts. I have not got them. I never bothered about my little rate. This is just an illustration of the difficulties, and one of those relative things that has got to be con- sidered and determined. For instance, you take the question of two farmers living 100 miles from Chicago, one on one railroad and one on another. They are both competitors for the foreign and domestic market. They are on dif- ferent lines, and those lines are in different States. Now, the farmer at one point is charged for carrying grain to Chicago 3 cents a bushel. The farmer on the other road is charged 1^^ cents a bushel. Now, that difference of 1^ cents a bushel, you see, wipes out to a certain extent ' the business of the fai'mer who has to pay 3 cents. You can not deal with that situation any way except through the interstate-commerce law, which can bring both of these rates before it and enter into a con- sideration of these relative rates, and fix them in the proper relations toward each other. It may be that the interests of one road, and the form of business of one road, may permit a higher rate. If that is so it will have to stand. But it may be that of these rates one is higher and the other lower than it ought to be. Those things have to be met by the power of somebody who has power to fix relative rates, and it is relative rates in this country that are troublesome. Of course, on the 1st of January, 1900, the railroads changed rates on 854 different articles, and they lowered them on 6 and raised them on the rest of the articles. The increases were from 100 per cent down to 15 per cent. The average was 26 per cent. Now, after the long period of depression that the railroads have been suffering from I do not think that was an excessive rise in the rates, and the only thing in those rates is that it should be considered by somebody with authority and ability and training to go into the con- sideration of the relative fairness as between competitors at different points and upon different roads. In this bill the first section seems to be all right, and there certainly can not be any objection to it. It provides that any carrier who departs from the published rate, or any person who procures or solicits any such departure from the published retes, shall be deemed guilty of a misdemeanor and fined. I want to say here that this act remedies INTEESTATE-OOMMERCB LAW. l7l one thing in the interstate-commerce act which has been a serious obstruction to the carrying out of the provisions of the act, and which meets something which was suggested here the other day. It removes the punishment penalty. If you have a punishment penalty you can not get any information; it is utterly futile. All you get in this act is a money fine, and I think that is a vast improvement in the act. The Chairman. What would you say to this remedy for that evil: In case of a secret rate or of a rebate, to compel the company to con- tinue that rate to all other shippers on its line for twelve months? Mr. Keknan. It might bankrupt the company. You see you have got to remember The Chairman. It would operate as a fine, and it would operate to give a great many men an incentive to enforce the law and to discover offenses. Mr. Keenan. That is true, but everything tends to show me that no remedy is wise in the public interest which would tend to deprive a railroad of sufficient revenue to maintain itself, and to make a fair earning. That is the best public policy for this country. The Chairman. Yes, sir; but would not this result: All of these violations of the law are through human agencies, appointed ultimately by the board of directors. Would any man commit this offense where such a penalty was staring his company in the face? He would not last a minute with that directory. He would know that he lost his job instantly. Mr. Kernan. Well, I do not know. We find the policy of agents and subordinates taking business at any rate they (san — — The Chairman. Now, there would be some reason for this. They are required to establish a just rate. The very fact that they have established this rate would operate as an estoppel against the complaint; that it is just and right; that they are right. Mr. Kernan. I do not believe it is good policy to adopt any remedy that compels railroads to do service for nothing or without remunera- tion. I do not think it is good policy. The Chairman. You are not compelling them to do it. It is of their own volition? Mr. Kernan. It is not good policy to permit it, from a public stand- point, without any regard to their pocketbooks. A railroad, to be prosperous and successful, to keep up to the times, and give its ship- pers facilities, must have earnings to pay its fixed charges and afford a return on its capital. The Chairman. Yes. Mr. Kernan. And any penalty which would continue to give a cut rate, which would involve a loss to the road, would be bad public policy, even if the railroad would be willing to do it. I think all legislation should be directed to preventing cut rates, not only from the standpoint of the people, but from the point of the benefit of the railroad, looking at it from the standpoint of the public interests. I believe that is sound policy and have always believed it. Every effort should be made to prevent railroads cutting below the rates at all. I do not believe there is any benefit in cut rates. Mr. Mann. If you will permit me, I asked one of these other wit- nesses yesterday a question which I should like to ask you. You state that this bill provides for the punishment of any shipper who would maintain cut rates. I have not been able to find that. 172 IKTERSTATE-OOitfMEiEtOE LAW. Mr. Kernan. It is on page 2: Any person, whether an employee or a principal, or a member of a firm or company, or ah employee, agent, or officer of a corporation, for any of whom, as consignor t)r consignee, any carrier subject to the provisions of this act shall transport property, who shall knowingly, by false description, false weight, or false representation of the contents of any package, or by any other fraudulent means obtain or attempt to obtain the transportation of property, with or without the collusion of the carrier, or any of its employees, agents, or representatives for a less compefisation than that prescribed by the published tariffs or schedules of rates in force at the time shall be deemed guilty of a misdemeanor. Mr. Mann. That does not answer my question at all. That only applies to people who obtain lower rates by false representations; for instance, as to what the property is, or as to classification. Mr. Keenan (reading): "^Or any other fraudulent means." Mr. Mann. This would not apply at all. Mr. Keenan. You give a different construction to it. I assume that that does reach the case of cutting rates, any device or attempt to secure a rate lower than the published rate. Mr. Mann. Do you think that would cover the case of a shipper who obtains by crime, without any fraud so far as the representations are concerned, a lower rate than the schedule rate ? Mr. Keenan. I have not given that construction to it. Mr. Mann. I do not believe j^ou would, if you were on the bench. That section will cov«r a case where a man brings a box of goods and represents them as being in one classification wnen they are another thing and in another classification, which is in fraud of the law. Mr. Coombs. No, sir; it is a violation of the law whether it is a fraud or not. It does not say misrepresentations. Mr. Keenan. It is against and in fraud of the law for the carrier to take business below the published tariiSf, is it not? Mr. Coombs. Fraud has a penal significance. Mr. Mann. Obtaining a rate by fraudulent means does not apply to a violation of the law. Mr. Keenan. Take the first section: Every carrier, every lessee, trustee, receiver, officer, agent, or representative of a carrier who shall transport or offer to transport traffic subject to this act at any other rate or upon any other terms and conditions than are duly published in accordance with the provisions of the act, or who, by the payment of any rebate or by any other device, departs from such published rate in the transportation of such traffic, or who transports such traffic without having first published a tariff applicable to the same, agreeably to the provisions of the act, and any person who procures or solicits to be done, or assists, aids, or abets in the doing of any one of the aforesaid acits shall be deemed guilty of a misdemeanor. How about that reaching the shipper who asks for a cut rate? That is the first section, right at the top of the page. The Chairman. How would that apply to this condition? Suppose I go and take a box to a station agent in my town. I do not know anything about the rate, and I say "what will it cost me to ship this to Chicago ? " He gives me the rate, and I pay the freight. I do not know anything about the relation of that rate to the published rate. Now, suppose that rate is below the published rate Mr. Keenan. Oh, I think the ordinary rule as to criminal prosecu- tions would apply there. Violations of any act that imposes a penalty must be willful acts, and done with knowledge, and that would be an exception. This act says: Any person who procures or solicits to be done, or iissists, aids, or abets in the doing of a,nv OTift nf the aforesaid acta, sbn,!] he^. rlpprnfiH o-iiiltv nf « mia(^oivioQTirt>. INTBESTATE-COMMEROE LAW 173 It seems to me that covers the question. Mr. Coombs. Then everybody is chairged with a knowledge of what the tariff is ? Mr. KERfTAN. You mean that in a criminal action every man who commits an act is. guilty ? Mr. Coombs. Yes, sir. Mr. Keenan. That does not apply in a criminal case. There must be a willful violation. Mr. Coombs. I know; but he is charged, and ignorance is no excuse under the law. Mr. Keenan. We would all of us he jailed every day if that were not so. Mr. Coombs. You can not plead ignorance of the law, and that principle is applied every day in the law, Mr. Keenan. I think that ignorance of the law is always a defense in a criminal action. I think it is never a defense in civil actions or where remedies are involved. Mr. Coombs. You are mistaken about that. Before a jury it might be something in extenuation, something that they might take into consideration, but that is never an excuse or a justification. In criminal cases as in civil cases a man is charged with the knowledge of the existing law. Mr. Keenan. That may be true, but my understanding of the law is that a man is never punishable for the violation of a criminal statute unless it is done willfully; and if it is done in ignorance of the law, the act is not criminal. Mr. Mann. Take the case of the transportation from Utica to Forestport of that furnace. Mr. Keenan. Yes, sir. Mr. Mann. Suppose you had thought that rate was a little high, and you had asked the railroad company if it could not charge a lower rate, and the agent had given you a lower rate, a little below the schedule, for instance, a dollar instead of a dollar and a half. Under this section you would have been fined f5,000; because there is no fine less than |5,000. Mr. Keenan, If it had been shown that 1 did that with full knowl- knowledge of the law and its provisions Mr. IS^NN. You do not think Mr. Keenan (continuing). Then I think I would be liable. Mr. Mann. But you do not think it would be necessary to show that you had full knowledge of the law ? Of course there is not a railroad agent in the world who has full knowledge of the law. The courts even do not have that. Mr. Keenan. Then when prosecutions took place they would be discharged. It is only for willful violations of the act. Mr. Mann. You kick on the rate of fl.l2 and get a rate of $1, and thereupon you are prosecuted under this section. If it applies to that case, they must fine you $5,000; no less fine can be imposed. Is not that rather hard ? Mr. Keenan. If you are right and I am wrong in the application of criminal statutes, that is hard. You are mistaken about that. I do not think the violation of a criminal statute is ever punishable unless : it is willful. i Mr. Mann. Then you think that in order to convict a man under 174 INTBESTATE-OOMMERCE LAW. this provision the prosecuting officer must show that the man had knowledge of the law before he committed the offense ? Mr. Keenan. No, sir; I think the prisoner is presumed in the first instance to have had knowledge of the law; every man is presumed to have that, but I think he may show in defense his ignorance of it. That is a matter of defense. The onus is not on the district attorney to show that the man knew the law. The onus is upon the prisoner to show that it was done in ignorance. The Chaieman. That is only in mitigation of the punishment. That would be after the trial. Mr. Krenan. No, sir; that is on the trial. The Chairman. It would mitigate matters after the trial. Mr. Adamson. Ignorance of the law can not acquit a man. Mr. Keenan. Ignorance of the law or the statute will acquit a man in a criminal prosecution. Mr. Adamson. That is a new law. Mr. Keenan. I maintain that is the law. Mr. Coombs. In what State is that in vogue? Mr. Tompkins. How can a man have ignorance of the law when he is assumed to have knowledge of it? Mr. Keui; -». Take the milk case Mr. Mann. Nobody could know whether he had knowledge of the law except the man himself, and all he would have to do would be to come in and swear that he did not have it, and he would go free. Mr. Keenan. In the milk case, the Muitagh case, of the Verona cheese factory, there was a penalty for watering milk, and I was employed in bringing the action of the Verona cheese factory against thitS man, and we proved our case and he proved that the water was put in in his absence by his wife and his children, and that he drew the pay for it from the factory, and we claimed that he was liable under the statute, inasmuch as the act of the agent in charge of the business is the act of the principal, and therefore he was liable individually under the act. The case went to the court of appeals, and they reversed it on the ground that under the statute, notwithstanding he was responsible for the acts done in that case by the agents of the business, he could only be charged by showing his actual knowledge of the violation. Mr. Mann. Of the fact? Mr. Coombs. Not of the law. Mr. Keenan. Actual knowledge of the violation. Mr. Coombs. That would make him an accessory. ' He had to have a knowledge of the offense and not of the law. Mr. Keenan. It goes to show that he had to "have not only knowl- edge of the fact and the statute, but even on proof of a violation of the statute absence of intent is an excuse in a criminal prosecution. Mr. Coombs. The intent goes to the ingredients of the defense. Mr. Keenan. If it goes to the ingredients of the offense, then I think it ought to go to the extent of knowledge and willfulness of the violation. I notice here you might amend that section in that way. It might be provided that the carrier can not be punished unless he willfully violates the law. Mr. Coombs. Strike out "willfully" and put in "unlawfully." Mr. Keenan. In this first section you can put in there "Any per- INTERSTATE-COMMEBOE LAW. 175 son who -willfully" commits these acts. That would remedy that defect, if 1 am wrong and you are right, and I presume you are, about this other proposition. Now, the other thing that I want to call attention to which is a very serious defect in the original act, is remedied here. The provision is: Every corporation which shall be guilty of any act or omission, w-hich if done by an individual would be a misdemeanor under the provisions of this act, shall be deemed guilty of such misdemeanor and shall be subject to the same penalty which is provided against the individual. Under the present interstate-commerce act the corporation goes scot free. It is not indictable for the offense, and the result is that all the efforts of the Commission have to be directed toward the subagents and employees who do these acts which, under the interstate-commerce act, are punishable. That has always been a defect in the law, and this amendment pro- vides that corporations should be the ones responsible for the acts, where the acts are done by them or their agents; that they should be made liable and no protection given them. The result of that is that you can not convict the agent before a jury. He can turn around and swear that the corporation did it under its directions and rules, and so forth, and it reaped all the benefit. Now, that is a good provision, and the next which is proposed, the last to be considered, is giving the Commission the power — to determine what rate, relation of rates, classification, or other practice should be observed in the future in order to correct the wrong found to exist, and it shall order said defendants to observe the same. That is to be after a full hearing; "after full hearing had." Of course that should be so. That is rigl»t. The hearing should be full and complete before there should be any order entered by which anj' rate should be changed for the future. And I intend to say more than I have about that; I think that was the original intention of the original act. I know that our Commissioners who appeared before Senator Cullom's committee, and who had been serving for years before State boards who had recommendatory powers, pointed out that our experience had been such as to show that at first, when a commission is new, or in a small State where there is not too much vast railroad business for it to consider, so that its action is lost sight of, these recommendations have power. In Massachusetts they had force for a number of years, and when I was on the New York com- mission as the first chairman, the first four years of its existence, the first question which came up and which we decided about rates, and in which we reduced the rate to some extent, the newspapers were full of it. It was a new body, and its decisions were watched and given prom- inence, and talked about, and there was a focus of public interest upon the railroads upon that subject — as to whether they observed or did not observe the findings of the Commission. If the finding was right the public sustained it, and the railroad was under that kind of bias of public opinion that made them observe it. But after a time we found that the Commission ceased to be an object of much interest in regard to this question; that its recommendations lost power, and now Siey do not amount to anything there or anywhere else. There is no regard paid to them whatever. Mr. ToMPKJNg, Are you through on that point? 176 INTEESTATE-COMMEKCB LAW. Mr. Keknan. Yes, sir. Mr. Tompkins. Inasmuch as the general debate must be closed on the floor of the House in a very short time on an important measure, I move that we now go into recess until to morrow morning at half past 10 at this point. (The motion was seconded, put by the chaii'man, and carried.) Thereupon, at 11.10 a. m. , the committee adjourned until to-morrow, April 19, 1902, at 10.30 o'clock a. m. Saturday, April 19, 1902. The committee met at 10.30 o'clock, a. m., Hon. William P. Hep- burn in the chair. STATEMENT OF MR. JOHN D. KERNAN— Continued. Mr. Chairman, I want to say that I have looked at the question of law raised by Mr. Adamson yesterday, and he is right about that; that mistake of law does not excuse the doing of a prohibited act. 1 ought to have said that I have had nothing to do in my life with criminal law and I do not pretend to be an expert on that question. But the dis- tinction in our New York courts seems to be this — and there are a good many decisions on this. In the case of Gardner v. the People (62 Court of Appeals), the court uses this language: The defendants made a mistake of law. Such mistakes do not excuse the com- mission of prohibited acts. The rule on the subject appears to he that in acts mala in se the intent governed; but in those mala prohibite the only inquiry is, Has the law been violated? The act prohibited must be intentionally done. A mistake as to the fact of doing the act will excuse the party; but if the act is intentionally done the statute declares it a misdemeanor, irrespective of the motive or intent. I had in my mind that in some instances there were prosecutions of crime where the knowledge of the la^ had been a question found to be necessary in order to constitute the offense; but those apply only to offenses that are offenses per se and not statutory. Where there is a statute on the subject the rule seems to be that knowledge of that statute is presumed and the violation of it, regard- less of knowledge of the statute, is an offense. Now, that leads me to suggest that in that first clause there it would be wise to provide that that penalty of not less than $5,000 or more than $10,000 should only be imposed on the corporation, and that that should be amended so as to provide that any agent of a carrier or any shipper; that the penalty upon him should be only within the discretion of the court, not exceeding a certain amount, not requiring the court to impose any definite amount. That, you see, would permit a court in all cases of that character to take into consideration all circum- stances that went to mitigate the offense, and to show that the party violated the statute, perhaps, inadvertently, and thus to graduate the fine down to a nominal matter. It seems to me with that amendment to this section it would be all right, and would meet the difficulty anol objection presented by Mr. Mann to the ©•ffect that the imposition of that penalty of $5,0Q0, it being fixed, as inexorable, either upon an innocent freight agent, per- haps, or an innocent shipper, or one where the circumstances show no INTERSTATE-COMMERCE LAW. 177 particular intent to violate the law, that that would be right and make it perfectly fair. Another thing. Your honor suggested yesterday that perhaps a remedy might be secured by requiring the carrier to continue the cut rate as a public rate, and if that could be confined in its operations to results to the offending eari-ier, it might, perhaps, afford a remedy; but the difficulty about that is that the cut rate imposed upon one competing railroad requires all of its competitors to make the same rate. The result would be you would be compelling innocent parties in that case to conform to the cut rate for which they were in no way responsible. Now, another thing in this bill which is very important The Chairman. How is that operated ? I supposed that all carriers from common points do substantially agree upon a rate? Mr. Keknan. Yes, sir. The Chairman. I think they must do that — — Mr. Kernan. Yes, sir. The Chairman (continuing). In making up their rate tables? Mr. Kernan. Yes, sir. The Chairman. Are there cases in your judgment where any given company would prefer a lower rate than that and, preferring it, obtain it under tnis method? If they were content with a cut rate that would be imposed upon them perpetually by the statute, if they would be willing to cut the rate for the purpose of getting that par- ticular rate, why not agree to it in the first instance? Mr. Kernan. What is that, sir ? The Chairman. Why not agree to it with their competitors in the first instance? Mr. Kernan. There would be no object in doing that, because then the cut rate being on all of the lines would afford no advantage to one over the other. The Chairman. That was what I thought. Mr. Kernan. The object of the cut rate made by a road is always to get under its competitors and get business, and if the cut rate was agreed upon by all the roads there would be no advantage in it, jrou see. The Chairman. Do you suppose in the ordinary practice of cutting rates, the cut rate is one that the company could afford to maintain for all of its business? Mr. Kernan. As a rule the cut rate is not regarded as remunera- tive in itself. That is the general railroad custom about it. It is not regarded that rates cut for the purpose of getting business are remu- nerative, it is not regarded that they will be; it is simply to get the traffic, and having got it hoping to maintain it and then eventually get something out of it. I want to say another thing about the first section in reference to these offenses, there on page 2, line 2, you might insert "knowingly and willfully," so it will read, "Any person who knowingly and will- fully procures or solicits to be done," etc. That would perhaps pre- vent that section from punishing innocent persons. That might be a suggestion you might think about; whether it might not be well to insert "knowingly and willfully." Another very important provision of this act is this: The Commis- sion is now authorized to take testimony, and its findings are prima i-c L 12 178 INTERSTATE-COMMBEOE LAW. facie evidence in a court, but invariably when you go into a court with the testimony before the Commission, and the findings of the Commission— I have had it myself a half a dozen times in my own experience— the railroad apparently pays no attention to the fact that the testimony has been taken before the Commission on the part of the complainant. It withholds its testimony before the Commission and does not give any, in the hopes the Commission will make some mistake of facts or will not get at the facts and that this order will not be of any use. The Supreme Court of the United States has commented upon it in one of its decisions, and has said that that is a very serious evil, and that in some way the railroads ought to be compelled to display their full hand before the Commission. At present when you go into court with the findings of the Commission and the testimony of the railroad company comes in and tries to fight the case on affidavits, which is the most unsatisfactory way of trying one of those issues; you get into conflicts of affidavits you can not have an opportunity to cross-examine the affiant, and thus all sorts of difficulties as to the evidence arise. In one case I had the most voluminous affidavits come in on behalf of the railroad as to facts, none of which had been presented before the Commission at all. We were in a position where we had to make affidavits, and thus the case became a fight over affidavits, which is an unsatisfactory way to try a case. This provides that in case of the railroad appearing before the court and desiring more testimony, that then it shall be sent back to the Commission to complete the record. In other words, the place where part of the testimony is taken is the place where the entire testimony should be completed in order that the sequence of facts and the omis- sion of things that have been already allowed, and all that, may be somewhat controlled. The Chairman. Right there, if you will allow me. In the proced- ure, in order to bring about that order to the Commission for addi- tional testimony, you would require the defaulting party or the railroad to make such a showing as the court would require in a motion for a new trial on newly discovered testimony ? You would require some such procedure as that? Mr. Kernan. I do not think I would make the rule as stringent as that. The Chairman. What procedure would be necessary in order to secure the taking of additional testimony ? Mr. Kernan. Nothing, except a mere desire to take further testi- mony. I would not make it the rule that applies to cases as to newly discovered testimony. The rule there is that the party must not only show that the testimony has been newly discovered, but that with ordinary diligence it could not be produced in the first instance. If you apply that rule here, railroads might be shut out because— well, they might not choose to attend the hearing of the Commission and put in testimony. I would not for that reason cut them off. We will not accomplish anything in the end of value unless we have all of the facts presented before the Commission and the court to get at what is right about it. An order based upon personal testimony, an order which is, there- fore, wrong in not being comprehensive enough to cover the situation, could not do anybody any good, even although it be one giving a lower INTEESTATB-COMMBBCE LAW. 179 rate or something of the kind. You can not make laws of that kind that operate to control the great laws of supply and demand in trade and rates unless they are based absolutely on all the facts and are right. And therefore there is no advantage in prescribing a rule of procedure which shall cut anybody off anywhere. Let me call your attention to the language of this: "In case either party desires to- submit further testimony," and such testimony could reasonably have been perfected before the Commission, it may instruct the Commission then to certif j^ up that testimony. So it leaves it, if the railroad desires to present more testimony; they do not have to make a case out except to show it is desired. The Chairman. In the taking of the testimony before the Commis- sion, would you give them the powers of a court, or simply of a com- mission taking depositions? Mr. Kernan. I would not change the law in that respect as it now exists. The Chairman. But what I want to get at is, in your opinion, whether it is given functions in the taking of testimony that a court has — which may exclude, which may pass upon the competency, and all such ques- tions as that — while a commissioner would not; he would simply have to record what was proposed, with the objections. Mr. Keknan. Yes; in other words, would you make the Commission simply in the position of a master, without power to rule ? The Chairman. Yes. Mr. Kernan. "W ithout power to report up. No, you can not practi- cally do that. The Commission must have the power to determine as to the competency of testimony. Otherwise do you not see that the con- clusion of the Commission would be based upon testimony which might thereafter, you know, be struck out by the court, and you would have no basis for your findings of the Commission. But, of course, in this method suggested and under the interstate- commerce act I assume that the testimdny must be competent; it must conform to the rules of law; and in the review by the court if it is found that the Commission has erred in those respects, that destroys the efficiency of the order that the Commission has made, of course, and there are other questions; the question, for instance, of contempt and the refusal to answer questions, and such things, that the Commission has no power to punish under the present procedure. The question had to be referred to the court, and the court has to determine whether or not the testimony shall be given or be excluded. It determines whether the witness shall be compelled to answer. The Chairman. Would you change that? Mr. Kernan. No, sir; I do not think so. I do not think it is neces- sary to change the rule. I think the punishment The Chairman. Is it possible now for any tribunal to secure that full amount of testimony that enables them to act in important mat- ters without they have the power to compel the attendance of witnesses and to punish them? Mr. Kernan. They have the power now to compel the attendance of witnesses under the amendment to the act of 1893. The Commis- sion has the power to compel the attendance of witnesses and compel the answering of questions. That is in the way I suggest. In case of refusal, appealing to the court and getting the process of the court to compel it. It would not do to invest the Commission with powers 180 INTERSTATE-COMMERCE LAW. of the court to punish for contempt or to exercise those powers of compelling the attendance of witnesses, punishing them for not com- ing or refusing to answer questions; but whenever a situation of that kind arises under the interstate-commerce act, that question is properly referred to the court, and the court determines it; so it does not leave the Commission to act in those respects as a court. I do not think that would do. The Chairman. In the procurement of that testimony what power would you give to the Commission ? What power would you give as to the payment of costs of witness fees? Mr. Kbrnan. That is provided for under the present act. The Commission has the power to have subpoenas issued and witnesses sub- poenaed, I presume, out of its appropriations. I know, as a rule, that in the summoning of witnesses— I know it has been so in the cases I have had before the Commission — no process is required; it is simply on request of the Commission that the witnesses have attended. And coun- sel for railroads secure an attendance of such witnesses as they desire. So in that respect I do not think there is any difficulty. Now, with reference to the next section. There is one thing there, the filing of a petition for review. The Chairman. Where do you read from? Mr. Kernan. On page 6. This filing of a petition to review an order shall of itself suspend the effect of such order for thirty days. I would suggest that you strike out the rest of the language there, which might interfere with the ordinary jurisdiction of the court. I should be inclined to put that sixty days instead of thirty days. I think in those respects the act should be liberal; that if the Commis- sion has the power to make this order, the mere filing of the petition should suspend it at least sixty days, to give the railroad an opportu- nity to determine whether to conform or apply to the court for a stay or whatever else it might think proper to do. 1 think the proceedings then of ordinary jurisdiction courts of the United States and their right to grant a stay pending appeal where there is a question of any importance involved in the matter presented before them is_ all the ample and full protection against any order of this Commission that ever could be made, and might be perhaps unjust to the railroads. 1 do not know that I want to go further than that. Going through the details of this act it does not seem to me to need any amendment or changes except those 1 have suggested. There is one thing that might be thought about; that is on page 8, line 10: If a carrier refuse to obey an order which is obligatory upon it as above. The query in my mind as to that is this: At the time that an order is made, that in the end it turns out to be an unlawful order, does that language impose upon the carrier obedience to the order between the time it is made and the time it is declared to be illegal, or does that imply that it is the duty of the carrier to obey that order in case it is a lawful order? I assume that it means a lawful order; but if not, 1 suggest to the committee whether that ought to be made clear by putting that word in there, so it will read "a lawful order." Now, for instance, take in our ordinary court practice. A man pro- cures an injunction. It is well settled, I think, that it is the duty of the party against whom it is issued to obey it, even though in the end it may turn out to be unlawful and reversed upon appeal. Under our INTERSTATTO-COMMERCE LAW. 181 court practice in New York an injunction has to be obeyed while it stands, until it is reversed. And I suggest in reference to this matter whether that language should read in that way. I do not think myself there is any particular occasion for changing the language of the act, because it seems to me all the time as though if there be in an order made by a commission any element of reasonable doubt, even as to its validity, that if you leave the protection of the United States court unimpaired, and thejr are right to suspend a stay pending appeal, first limiting the time to sixty days before it takes effect, that then you put the carriers in a position where they will be abundantly pro- tected against the error of any order that may be made by the Com- mission. Mr. Mann. I do not quite understand the distinction you make between a lawful order and an illegal order in reference to this. Mr. Kernan. The distinction? It is this: The Commission makes an order. Suppose the carrier believes, and ultimately establishes in the courts, that that order is an unlawful order made without jurisdic- tion; if you please, without sufficient facts to sustain it. Under the language here, would the carrier be obliged to obey it between the time it is made by the Commission and the time it is declared to he illegal by the court? Mr. Mann. But it says an order which is obligatory upon it as above. Mr. Kernan. Does that imply all through a lawful order? Mr. Mann. It implies an order which is not stayed by the court. Mr. Kernan. Exactly. Then it would be true that even although the order turned out in the end to be unlawful that between the time it is made and the time the court declares it to be illegal, unless stated by the court, the carrier would have to obey it. Mr. Mann. You mean if the order is made and the railroads do not appeal to the court for review Mr. Kernan. That they must obey it, even although it turned out in the end to be unlawful. Mr. Mann. Under your idea they would have the right not to file a bill to review but simply take the position that it is unlawful and refuse to obey it? Mr. Kernan. Until proceedings were taken to punish them, and then go into court and make their defense. Mr. Mann. How would those proceedings be taken? Mr. Kernan. The Commission would apply to the court for a man- damus to compel the railroad to obey the order. The railroad would come and say, " We concede the order was made, but we claim it was unlawful." Mr. Mann. That would be the case under this section. If it is an unlawful order it is not obligatory Mr. Kernan. If that implies a lawful order, as I think it does, then that is true. Mr. Mann. Undoubtedly if the court did not have jurisdiction and has not made a lawful order it has not made an order that is obligatory. Mr. Kernan. That is generally true, you know. I think it is gen- erally true that a man can refuse to obey an order of the court and defend himself in the end when he is brought up on it upon the ground that it is not lawful. The Chairma*. Tteat would change the entire prescribed procedure 182 INTERSTATE-COMMERCE LAW. of this act. The act provides that it shall go into force at once or within thirty days. Then if there is no appeal it is enforced for two years. The railroad company has the power to have that reviewed, however the law provides for that; it makes provision as to the testimony and all of that. Now, if this procedure is admissible that you are now speaking of it gives them a second remedy. They will 'just stand pat, refuse obedience; then when the Commission takes the initiative and goes to the court asking to have this order enforced, they come up and raise the whole question by asserting that the order is illegal. Mr. Keenan. Yes. Well, I only make this suggestion because it was suggested to me by a railroad gentleman, and I said " I am perfectly willing to suggest anything that occurs on this question." I do not think myself the language of the act needs to be changed. I think that even although the order be unlawful the remedy provided is sufficient. The permitting of the filing of a bill in equity and permit- ting the court to protect the railroad by granting a stay in case there be a doubt about the question. That is all the remedy the railroad needs to protect it against the defect of any error in these orders. • Mr. Mann. Can you imagine a case where under the powers granted to this Commission under this bill an order issued by them would be unlawful, in the sense they did not have the jurisdiction. _Mr. Kernan. I can imagine that a commission might give an order without giving a hearing. Some commission might do that. This bill says they can not give an order until after a full hearing. Sup- pose they should make an ordew without a full hearing; I do not think that would be lawful under this act. Mr. Mann. But the railroad comes, after an order is issued, and raises the question as to whether the court had had a full hearing when it decided in its order that they had had a full hearing. Mr. Keenan. That is, whether the recital in the order is conclusive proof of the fact of the hearing. I think they could raise that ques- tion of fact, sir. I do not think recitals in an order are conclusive. Recitals in a judgment of jurisdiction are not conclusive. That comes up in all these questions as to the validity of divorces. The recitals in them are usually sufficient, and that is presumtive of the fact; but I do not understand in attacking the validity of a judgment of that kind that you can not always raise the question of whether, while the facts recited, are presumably true, they are true in faet. I want to say, Mr. Mann, that I have already referred to that ques- tion that you suggested yesterday about a mistake of law, and you are right about it. 1 want to excuse myself, however, by saying that I have had nothing to do with criminal law and I do not know anything about it. I would also say that I suggested, in connection with the subject of the mistake of law, that it might be well to amend that iSirst section, because of the fact that you suggested, so as to provide, in line 2, page 2, that any person who "willfully and knowingly" procures, etc., and also to provide that that minimum penalty of $5,000 should only be imposable upon the corporation, and as to the agent or as to the per- son — the shipper — the penalty should be entirely within the discretion of the court, not to exceed a certain amount. That you see would permit the court to take into consideration the circumstances in mitigation of the offense, such as the fact that the party was innocent and did not know and did not intend to offend, in INTERSTATE-COMMERCE LAW. 183 such case to impose nothing over a nominal fine, from $1 up to the maximum amount. Mr. Adamson. I want to ask you one question before you retire. Mr. Kernan. All right, sir. Mr. Adamson. It is no theory or hobby of mine that I advance; but as a lawyer I ask you this question. Most of the gentlemen appear- ing before us have been laymen, and they say that the great trouble is not that they are dissatisfied with the fairness and judgment of the Commission; but the law's delays are such that they can not get the benefit of an adjudication for years and years after the findings have been had. I want to ask you if you had thought any on the feasi- bility of this suggestion, and what you think of it: That when the Commission has investigated and made a finding, that that finding be certified to the convenient Federal court, and such proceedings as the party wants to have go right on without any further ti'ouble or delay. If there is to be any resistance on the part of the road, that it be made the judgment of the court, and enforced, and executed; if the roads want to carry it further, let them proceed. What do you think of that suggestion? Mr. Kernan. I am not prepared at the moment to say that might not be a vast improvement over the present situation and condition. Mr. Adamson. Are there any constitutional difficulties in the way of that idea, first? Mr. Kernan. I do not at the moment think of any. I do not see that there would be any constitutional or other objection to permitting the certification to the court of the proceedings before the Commis- sion — the testimony and order of the Commission — and then permitting the court to render a judgment upon it, either adopting the conclusions of the Commission and entering an absolute order of judgment, or else of not doing so in case it found error. The only thing I can say about that is that the vast amount of business that would be thrown upon the court in that way would Mr. Adamson. My question is when a report is certified from the Commission it is a preferred case and it has to be put at the head of the calendar of the court. Mr. Tompkins. It would still do what he said — increase the volume of business in the court very materially. Mr. Kernan. Of course I think, as a practical question, the circuit courts of the United States would not do any other business except to spend their time on these cases. Mr. Adamson. Other gentlemen who have been here have prophe- sied that if the remedy could be made easier the business would decrease instead of increase; that if you foand you had power to bring cases to trial it would lessen the number of cases. Mr. Kernan. Your courts, of course, might be open all the time for the hearing of that kind of questions, the matter would be pre- sented immediately to the circuit court for hearing; but everybody who knows anything about United States courts knows how behind they are and how long it takes to get anything through. Mr. Adamson. There is an easy remedy for congestion in the courts. It is the duty of every civilized country to establish courts enough to do the business. Mr. Kernan. In New York City this winter the Bar Association and the judiciary committee of the legislature have been working on the 184 INTERSTATE-COMMERCE LAW. question of how to clear the calendars of the court; what devices to adopt; whether to create more judges or let the governor send country judges to the city, or let our county judges be sent to the city to dis- charge the duties of circuit court judges, or what to do. So far no available method has been found either by the courts, by the lawyers, or by the legislature. It seems to me what you suggest may be. to some extent practicable and would be an improvement over present conditions. Yet when you come to consider that in the vast majority of decisions made by the Commission the order is promulgated and accepted and put into effect, and that must require that before that is done it must go to the court, and then, of course, jurisdiction must be acquired by the court by the issuance of process or notice of some kind Mr. Adamson. Oh, no; my suggestion is that you might carry it there and make it the j udgment of the court ; that the court might accept the procedure of the Commission. Mr. Kernan. Of course you could not do that without giving every- body concerned a hearing in the court. You would have to take time enough to get everybody in. The Chairman. Suppose that there has been a full hearing before the Commission and parties have been there; why could you not by law authorize the court to file that within so many days, and that within so many days after that filing — that is on a day, the tenth day after that filing, the court shall proceed; let that serve as notice and if any- body wants to appear let them appear. Mr. Adamson. There is an analogy of that, Mr. Chairman, in almost every case in the State court where a commission is appointed for any purpose. Such commissions go out and investigate and report, and if the court pleases it makes the judgment of the commission the judg- ment of the court. That is so in cases of alimony and dower and land lines and all that, and many other pases. Mr.. Kernan. You would make this Commission, then, something like a master in chancery, who takes the testimony, and reports the testimony to the court, and sometimes his conclusions. The Chairman. The hearing before the Commission in such a case implies the idea of notice to everybody, and a fair chance to every- body to be heard. Mr. Mann. The kind of a commission that has been referred to, appointed by a State court, such as a master in chancery, or anything of that sort, is appointed by the court, and such a commissioner is an officer of the court who proceeds by direction of the court. _ It is an elementary proposition that every court must have jurisdiction of the parties first, and to confer upon this interstate commerce nisi prius the power of a court is beyond the power of Congress. Mr. Kernan. Yes; the suggestion is to treat it somewhat in the nature of the report of a master in chancery. Mr. Adamson. You think Congress can not provide to give jurisdic tion to a Federal court? Mr. Kernan. That is a question I want to look at. I know so little about questions involving as much change as that that I would not want to say whether it would be constitutional to permit a court of the United States to render a judgment of that character upon the findings of a body — the taking of testimony and reporting conclusions — that INTEK8TATE-00MMEECE LAW. 185 was not part of the court itself or not appointed under the order of the court itself. I should doubt whether you could do that. Mr. Shacklefoed. Unless it was made an annex of the court by enactment here? Mr. Kernan. That ought not to be done. I do not think we ought to contemplate anything that involves changing the jurisdiction, the procedure, the methods of the United States courts. It seems to me you might find considerable difficulty in enacting the provisions such as you suggest, although it might be an improvement over the present situation in effect. Mr. Adamson. May I ask you a question concerning the language on page 5 ? It provides there twenty days. Is not that a very short time? Mr. Mann. He suggested sixty days. Mr. AUAMsON. No; it was in another place he suggested sixty days. Mr. Keknan. I think that should be in accordance with that other section. I have suggested that that section, page 6, should be changed so that it would read sixty days instead of thirty days. I think the filing of a decision ought to have the effect of a stay for sixty days. Now, in reference to this other, all through the bill the provision as to the number of days in which they may file a petition for review and other things should be made liberal in the matter of time. Mr. Mann. That is, twenty days; and then the requirements that the Commission shall file a certified copy of the record within fifteen days Mr. Keknan. Pretty short Mr. Mann. Which, if the record was long, if it was like one of these cases like the Social Circle case, it would be impossible. Mr. Kernan. Yes, sir. I think all through the bill in those matters of the time in which things are to be done that the bill should be scrutinized, and such experience as you have about that would tell you that twenty days is too short. Mr. Richardson. Would that operate as superseding the judgment of that Commission when that is filed within the fifteen days, or the thirty days, or whatever it is ? Mr. Kernan. Does it? Mr. Richardson. Yes. Mr. Kernan. I do not understand it does. Mr. Richardson. And you do. not think it ought to operate? Mr. Kernan. I do not think so. The railroad, upon having filed iYi the court the record of the testimony taken below by the Commission upon which an order has been made against the railroad, can always say to the court there is a question- of law here, it is doubtful whether this order is fair and just, and the jurisdiction of the court is ample then to say. Now, for instance, a court might do this ■_ Mr. Richardson. Now, that is going upon the presumption that the decree of the Commission is absolutely correct. Now, is not that, from the standpoint of a lawyer, a very dangerous power to put in the hands of three men ? Mr. Kernan. You see, you favor a practical remedy. We are after a practical remedy because we have found under the act now that there is such delay that it does not accomplish anything. We have to get a line somewhere which is fair between the delay that now exists and an arbitrary exercise of power by the Commission against railroads. 186 INTERSTATE-COMMERCE LAW. It seems to me we reached that mean line of safety by providing that the United States courts shall have the absolute power to suspend the operation of that order upon the application of the railroad. I think all the experience of those who have had practice in the United States court is that the court is most liberal in the matter of staying proceed- ings where a question of doubt exists as to the validity of the order that is to be questioned before it. Mr. EiCHAHDSON. Yet, if the Federal and circuit court refuse to do that and the railroad would still carry on their case to the last court, the Supreme Court of the United States, and that court would hold that the original order was absolutely wrong, then what remedy has the railroad company ? Mr. Keenan. That is one of the incidents of the administration of justice. Mr. Richardson. What instance can you give in life that is equally as bad as that? Mr. Kernan. I do not know Mr. Richardson. Equally as dangerous and obstructive? Mr. Kernan. 1 had an order made the other day in a divorce case to pay $500 counsel fee, $50 a week alimony. I am entirely satisfied that we will reverse that on appeal, but I have to pay that $500 in five days and that $50 a week right straight along, and I can never get that back when I reverse that. But that is one of the inslances of the administration of justice. Mr. Mann. That is one of the instances that comes from getting married. Mr. Kernan. Too much; yes. Mr. Shackleford. Would not this be a fair illustration of the diffi- culty Mr. Richardson suggests ? Suppose a lot of shippers in this country were oppressed by unfair rates, and that went on for two years without their waiting for the action of the court, and they had to pay unjust and illegal rates to get their commerce to market; would not that be equally as bad? Mr. Kernan. Of course; everybody recognizes that, of course. Mr. Mann. 1 would like to direct your attention to an idea there— — Mr. Kernan. I think very likely that the result of this would be that the court would secure justice in this way; here comes, for instance, the decision of the Commission which requires the railroad to do something or other. For instance, it refuses, if you please, to sustain a decision of the Commission lowering a rate. Why can not the court, upon appeal in a question of the amount involved, order a railroad company to keep an account of transactions and of the amounts received, so that in the end reparation may be done? It has occurred to me that probably something of that kind would be worked out in the practical results when the act was applied to any cases of this kind. The Chairman. Let me suggest a point I would like to have you elucidate. Suppose a railroad company strikes an adverse circuit judge somewhere — and there have been such in the United States. Mr. Kernan. Rare instances; yes, sir. The Chairman. And the judge refuses to stay the order of the Com- mission, which has fixed, for instances, a rate of $1 where the rate properly should be $2. Thatorder of $1 goes into effect. They appeal to the circuit court, which refuses to stay the order. They appeal to the Supreme Court of the United States, which finally passes upon the INTEESTATE-COMMERCE LAW. 187 question and decides that order is illegal. It goes back through the circuit court. In the meanwhile the $1 rate is being collected. It goes back to the Commission, which thereupon jfixes the rate of |1 and 1 cent, and that goes into effect, and the court refuses to stay the order and they go to the Supreme Court again. They do not have to have a hearing the second time to fix the second order. Why could not the Commission maintain a low rate, an absurdly low rate, if you choose, for all time in that way ? How under this bill is there any power to correct an evil of this sort, if one should arise ? Mr. Keknan. I do not know that there is any. That assumes, of course, that a commission really acts in violation of all principles of justice and right about it. The Chairman. It assumes that there is a difference of opinion between the Commissioner and the railroad, as there invarably will be, and as there is between the shippers and the railroads, as to what is a reasonable rate. Mr. Kernan. I think it is impossible to frame a bill so that it may not be assumed that there may be difficulties arising under it on both sides. The Chairman. This is not a difficulty. The question is whether there is any way of correcting a possible injustice, and you must pre- sume that such a case may arise, because that is exactly the case you claim as arising on the other side. When the court of last resort has settled it, whatever may be its decision, it is settled for all time. That is the only basis upon which we proceed. But here you can assume a case where the court of last resort decides in favor of the railroad company and still is without power to enforce its decision. Mr. Kernan. In view of the injustice that may be done on the other side to shippers it has got to be a question of where one side or the other is going to suffer, and should we not adopt the best method we can of simply having it determined what the right rate is, and then in case it is reversed, so that the rate is found to be unjust to tlie railroad, then that is one of the dangers and one of the incidental things that a railroad has got to expect to suffer from the administration of the law, because I think on the other hand in most cases it is true that the maintenance of the rate in the end is found to be an injustice to the shipper. Mr. Mann. The objection made to the present interstate-commerce law, as I understand it, is that while the Commission has the authority to decide that a rate is unreasonable, and that can be carried into effect, it has not the authority at the same time to decide what is a reasonable rate. Mr. Keknan. For the future? Mr. Mann. For the future. Now, in this bill, as far as I gather, it gives the courts power to say whether the rate fixed by the Commis- sion is reasonable or not. Mr. Kernan. Yes, sir; that must be open to reform. Mr. Mann. But it has not given the courts authority to decide what is a reasonable rate, and under this bill as I understand it — that is the reason I am asking you, I may be mistaken — if the courts decide that the rate fixed by the Commission is not reasonable the courts can not decide what is a reasonable rate. Thej- refer it back to the Commission, which may incidentally say, without a hearing, that a rate of a quarter of a 188 INTEE9TATE-0OMMBRCE LAW. cent or any fraction of the above rate that they previously decided upon shall be a reasonable rate. Mr. Keenan. Are you sure about that? Mr. Mann. I am not sure about anything. Mr. Kernan. Are you sure that the court has not jurisdiction in all cases of review to reverse, or to affirm, or modify ? Mr. Mann. 1 don't know. Mr. Kernan. I think that jurisdiction exists. I know in all of our State courts where a judgment comes up that is wrong it can reduce it. Mr. Mann. The courts hold now that they do not have the power to decide what is a reasonable rate under the interstate-commerce law. All they have the power to do is to decide Whether it is unreasonable. Mr. Kernan. The courts hold that the power of the Commission is to saJ^ That question has not been raised. I understand that the courts have power in every case of appeal on a question of rates to say • what a reasonable rate is. Mr. Coombs. Not to fix it, though. Mr. Kernan. Not to fix it except in a way that it would be sub- stantially binding on the Commission thereafter. It can say, for instance, this rate fixed by the Commission was unreasonable, being fixed at a dollar, upon the evidence that it ought not to fix it for more than 50 cents. Mr. Mann. That is the very complaint by the shippers, that that is not binding on the railroad company, and the complaint is that if a reasonable rate is 50 cents and the railroad has fixed it at $1 and the Commission finds it unreasonable and the courts say 50 cents is a rea- sonable rate the railroad comes again the next day and makes a rate of 99 cents or -99.9 cents. Mr. Kernan. Now, this is designed to enable the Commission to fix the reasonable rate for the future. I think in reviewing that the court has a right to affirm it or reverse it in whole, or to say that the Commission instead of fixing that at 50 cents ought to fix it at 25 cents. Mr. Shackleford. Would there be any objection to putting that in the law? Mr. Kernan. 1 think that would be binding thereafter upon the Commission under the same set of circumstances. Mr. Mann. Let me read you what the bill says: If upon hearing, the court shall be of the opinion that the order of the Commission is not a lawful, just, and reasonable one, it shall vacate the order. Mr. Kernan. What page is that? Mr. Mann. Page 5 [reading] : Otherwise it shall dismiss the proceedings in review. " Mr. Adamson. You do not think the lawyers and litigants in the country would consent, do you, Mr. Kernan, to have the entire time of Federal courts devoted to fixing rates. Mr. Kernan. That is one of the difficulties we were trying to get away from. . , , Mr. Adamson. Under the idea you enunciate it looks to me like Mr. Kernan. I said it was only a question of power. I have not said whether I thought it was practicable to do it. I think courts have power to modify it or affirm it or reverse it; but INTBBSTATE-OOMMBBOE LAW. 189 I have not said I thought it was good policy to put them in the posi- tion of doing it. Mr. Adamson. And just make the order final in the other case; say what it ought to be- — ^ Mr. Mann. But it seems to me that the evil which the shippers now coniplain of would then fall upon the railroad companies absolutely. Mr. Kernan.. It might be true in some cases. Mr. Mann. Because this bill does not purport to give the courts power certainly to say what a reasonable rate is, but only to jpass upon the question as to whether the rate fixed is reasonable, and that power they now have. Mr. Kernan. It might be true that in some cases that would result; but it is impossible to frame a law, 1 think, where there is no possibility that there may not be injustice done for a time. There is no method of procedure where something of that kind may not happen. Mr. Shacklefokd. Why might not that power conferred by that section be conferred upon the court upon review of anj' court, if the rate is found unreasonably high or unreasonably low it shall be within the power of the court to establish such a rate as will be reasonable? Mr. Kernan. Why not adopt the methods of our appellate courts in New York? The appellate courts there are authorized to affirm or reverse or modify. The difficulty here seems to be that there is no authority in the United States court under this section to modify. Mr. Shackleford. Why not confer it by this section ? Mr. Kernan. I see no objection to it. I think it would be a good thing to do. Mr. Coombs. Would not that interfere with the legislative function ? Mr. Kernan. This whole business Mr. Coombs. You have the power to establish a rate Mr. Kernan. This whole thing is an interference with the legisla- tive function. In passing the interstate-commerce law whatever power you conferred upon the Commission the Supreme Court has said was legislative; and this is simply conferring more legislative power. Mr. Mann. As I understand it, the court always has provided, as a matter of judicial determination, what is an unreasonable railroad rate. The only question is in determining it in such a way that it can be enforced through the Commission. Mr. Kernan. I think this would be very well amended as suggested, so that the court would have a right to modify; so instead of compel- ling the railroad to reduce their rate 10 or 50 cents a hundred that the law should provide that it might be only one-half of that reduction, and as so modified the order of the Commission is affirmed. Mr. Coombs. Do you think that would be constitutional? ' Mr. Kernan, Now, when you ask a question like that 1 do not answer it without looldng at it. I do not see now any constitutional difficulty in permitting courts of the United States to affirm or reverse. or modify, and 1 think they do exercise that power. I know all appel- late courts in our State exercise the power of modifying. They say this judgment for 110,000 is reversed!^ unless the respondent consents to reduce it to $5,000. Mr. Coombs. But that is a body to which has been delegated legis- lative authority. Mr. Kernan; If the court has the power of modifying as I suggest, 190 INTERSTATE-COMMERCE LAW. then when an appeal is made on review for the stay and they having that power of modifying, the railroad says the order is that we shall make a reduction of 10 cents, whereas they ought not to have ordered us to reduce more than 5 cents, and because of that apparent order, or because we can satisfy your honor upon the papers here presented which come from the Commission that the Commission probably, or perhaps reasonably, made a mistake; we therefore stay the proceedings. That covers the ground. You extend the jurisdiction of the court, then, to grant a stay where it seems that there is probable reason that, in the final judgment of the court, they may to some extent modify the decision of the Commission. I think it could be modified in that way. Mr. Mann. Now, one other question in reference to sending back to the Commission to take testimony. Mr. Kernan. I have said something about that, and I would repeat that that is a very material feature, as any lawyer appreciates. For instance, I have gone before that Commission with a window-shade case. We took an immense amount of testimony. The Commission rendered a decision in my favor as to the classification. Then I went before Judgfe Wallace to compel them to obey that order. Before 1 come to that — this is a curious instance to show you how these things operate. After 1 got that decision against the New York Central, and the Delaware, Lackawanna and Western, to place window shades in a new classification, a week or two after the decision I wrote the New York Central and asked them what they were going to do about complying with that decision. The traffic manager wrote back to me that they had concluded that the decision was just, and that they would accept it and put that classification in force. I have that letter. Mr. Haggeman of the Delaware, Lackawanna and Western did the same thing. They said they agreed to accept the decision of that Commission, and the classification went into eifect, and we shipped under it for four or five weeks. The first thing we knew it was changed back to the old classification. I wrote again to the traffic man- agers and asked them what they meant. They said that while they themselves were quite willing to conform to the decision, that their associates in the traffic association objected, and therefore they would be obliged not to comply. ,., ^. -it You see the position we are in. When great systems like the Van- derbilt system do not dare to stand up and accept an order which they themselves concede to be just, because of the pressure brought to bear upon them by their associates in an association of that kind, you see what a question this is. It is not a question of whether half a dozen— or 50 roads sometimes— want to do a thing. The weakest hne in the combination can force the strongest line to rebel even against a deci- sion which the strongest lines admit to be just. That is one of the difficulties of the situation. In the case I have referred to, I went before Judge Wallace when thev refused to obey the order and asked that they be compelled to obey that order. They treated that whole proceeding before the Com- mission as though there had not been any testimony for findings at all. ' They came in with stacks of affidavits, all complicated and twisted \ip and I had to reply by affidavit, and the result was that we had before the court the testimony taken before the Commission and the testimony taken before the court and stacks of affidavits. Every law- INTBBSTATE-COMMEROB LAW. 191 yer knows what it is to try a case of that kind on affidavits. There is no opportunity of cross-examination, no opportunity for either side to cross-examine the affiants. And so, no matter about the history of that case further, but that is the way we had to try that case finally. Although we had the findings and the decision of the Commission, they were treated by the railroads as absolutely useless. That has been the practice of the railroads. They do not present their case before the Commission, because they hope by not presenting it the Commission will make some mistake, will leave some loophole for them, and that they, if they try the case at all, can try it de novo. The Supreme Court of the United States has commented on that and said that is a practice of the railroads which is a very wrong one and which ought to be corrected. It has said that they ought not to be allowed to present their cases piecemeal before a commission and then come into court and treat the case de novo. Mr. Mann. Who takes the evidence before the Commission ? Mr. Kernan. The Commissioners. Mr. Mann. They sit as a commission ? Mr. Kernan. They have in every case I have known of. A major- ity of the Commission sit. Mr. Mann. Do you think they could take evidence enough to expe- dite the trial of all these cases, if this act goes into effect? Mr. Kernan. Within the limits of human endurance. If yon take a body of five men who are trained on this question and have nothing else to do they can accomplish a great deal. They do not have to txy trespass cases and negligence cases and damage cases; l;)ut simply devote themselves to one thing. Mr. Mann. They have to decide cases. That is a good deal besides trying cases. There are only three hundred and sixty-five days in the year and practically onlj^ one court sitting taking testimony. Mr. Kernan. There are limitations on it, of course. Mr. Mann. How will it be possible for one commission to take all of the testimony in all of the cases which would be brought under this act, involving railroad rates all over the country, in addition to trying cases ? Mr. Kernan. You must remember one thing, and it has been true in the cases we have tried there. The Commission keeps accumulating facts, testimony, and so when you come to a hearing upon almost any question you find a vast number of your facts already covered, covered by previous decisions, covered by the filed tariffs, covered by previous findings, and that the additional testimony is not as extensive as it is where you have to go before a court in each case, or a different court in each case, and go over the whole thing. The Commission accepts accumulated facts. Mr. Mann. Would they not have to go over the whole thing in each case? Mr. Kernan. They might, but practically it results in this: You are one side for a railroad, and I am on the other side, and we go before the Commission, and as to the tariffs and the vast number of facts, the Commission having already possession of them, we consent that that become part of the record in our case. That is always done. Mr. Mann. That is done to a certain extent in courts just the same; but here is a railroad case that will arise in New England, and another one in California, and another one in New Orleans, and forty in Chi- 192 INTERSTATE-COMMBBCB LAW. cago, not to mention those in other parts of the country. Now, how is the Commission going to be able after hearing the case, the court requires new evidence, to trot around and take that new evidence and ever get the matter disposed of? Mr. Kern AN. 1 think as the Commission proceeds it keeps, as I say, eliminating the necessity of doing that work all over again in each case, and it keeps accumulating tariffs, and regulations, and facts, and argreements between railroads, so that it has almost alwaj^s in every case presented all the fundamental foundation facts or many of theta. It has the experience acquired in other investigations, which perhaps require in the present investigation only that it be supplemented by some new facts covering the situation. Take, for instance, a hearing on the question of an Atlanta rate. Very likely the Commission has been through the question of the competition that applies to rates generally, from Atlanta to New York City, and therefore it does not have to spend time in going through again and acquiring information as to the situation that Atlanta occu- pies as to similar competition points. Mr. Mann. It would serve that evidence up to the court? Mr. Kernan. Yes. Mr. Mann. It would have to take this evidence over again, would it not, if it was going to certify to a circuit court? Mr. Kernan. It would if a railroad insisted Mr. Mann. If the railroad's policy was to delay it would insist, would it not? Mr. Kernan. Oh, no; I have never had any practical difficulty with the railroads in that regard. Mr. Mann. But you have never had. this act in eiiect. Mr. Kernan. Under the old act the parties always agreed upon such fact without difficulty; they agreed as to a vast number of things. Mr. Mann. But the difficulty is under the present law Mr. Kernan. Now, I will admit, Mr. Mann, if every railroad every time a complaint is made wants to come before the Commission and put it through the proof from A to Z, and delay it and bother it, it can do it; but that is not the practical way that they treat the ques- tion or that anybody does. Mr. Mann. It has never been treated that way before because the Commission has never had the power to settle the rates. Mr. Kernan. For ten years the railroads thought the Commission had all the power. ■ Mr. Mann. That is your claim, but the railroads do not say so. Mr. Kernan. There are no decisions to show to the contrary that I know of. Perhaps I make a somewhat extravagant statement; per- haps there were some, but, as I say, the vast majority of them— take my export and import rate case. I will tell you that eighteen out ot twenty-eight accepted the decision, and sent word to the Commission that they would' obey it and change their rates accordingly. The question of power in the Commission has been one that is a difficult question, and it is a question whether they have not that power already. Mr. Mann. Has not the Commission the power to delegate anybody else to take testimony? vi i.i. i t Mr. Kernan. I have never known them to do anything lilte that; 1 have never known testimony to be taken except by the Commission. TTSTTEESTATE-COMMBBCIi! LAW. 193 Mr. Mann. There are five members of the Commission, Can each one of them hold court and take testimony at the same time? Mr. Keknan. In all of the cases I have been in there have always been a majority, at least three members, when testimony is taken. Mr. Mann. The bill says, "The Commission." Mr. Keknan. 1 have taken testimony before three of them, but I have never known the taking of testimony except before a majority of the board. Now, I want to say another word about this pooling question in the other bill, and about something we have to suggest in reference to that which we think goes as far as the legislature should go, as far as Congress ought to go. 1 always thought it was a mistake to prohibit pooling in the inter- state-commerce bill originally. I think they ought to leave it under the common law of limitations, which prevented the parties to pool from recovering against each other anj;^ agreed penalties or aiw dam- ages. They go into court and the court says. Your pool is a vrolation of the comraon law, and we will not help either-party, and we will not render any judgment in favor of either party. I thought it was very desirable that through something like pooling destructive disastrous competition should be regulated and restrained. The difficulty about authorizing pooling is this: Pooling practically involves a destruction of the right of the shipper to route his traffic, and that is the fundamental difficulty that they have never been able to get over. I examined Mr. Albert Fink on the pooling question, and his examination lasted a number of days. Mr. Albert Fink is the ablest railroad man on the subject of transportation questions that I have ever met. He was brought up as the traffic agent and manager of great systems like the Louisville and Nashville and others, and finally, because of the fact that he knew the business from A to Z, and because he was one of those great, big, broad-minded Germans that could take in all sides of all questions, he was chosen by the railroad as the joint traffic manager of the Trunk Line Association, and held that position until he resigned it and would not work any longer; because he was a man who could take all the claims of conflicting railroads in that association and pass upon them with a just conception of what was due to each, and how to get at what was right about it. I never knew a man who could get up a statement on the popular side of the transportation question as well as he could. He covered the whole ground. He saw it all. He was in favor of the interstate-commerce law; he always favored reg- ulations of railroads by law. He stated that it must come — that the only way to ultimately reach the control of rate-cutting lines that were cutting into and destroying the revenues of the strong lines — that the only way was ultimately through regulation by law, which they would have to comply with. Now, upon pooling; I asked him about pooling. He said pooling was of two kinds; either a money pool or a traffic pool. He said the Trunk Line Association had practiced to a more or less extent the money pool, but said it was utterly impracticable. Here are two lines rurming from Chicago to New York that are competitive. Now, then, one of them, the Canadian Pacific, is a weak line. It is a line 1,200 miles long. The Pennsylvania Railroad is a strong line. It does business, and has a vast volume of business, at a low rate per i-c L 13 194 INTEESTATE-COMMEBOJi; LAW. ton mile, and can afford to do business at that rate and give first-class That road is 832 miles, against 1,200 miles for the CanadiaiB service. Pacific. You get those two railroads into a pool, and what is the result? To preserve business, and carry out the object of the pool, you have to give to the Canadian Pacific 25 per cent. We propose to give it to it in a money pool, and that means that at the end of the year we will see it has carried only 10 per cent of the traffic. Every- body wanting to send traffic wants to send it by the best line, not by the long-around line. i • . • Mr. Fink said there was not a strong line m the combination that would not be willing to pay three times every year in money the entire amount of the value of the percentage of traffic to the weak line to it, because at the end of two, or three, or four, or five years the weak line would have to go out of business entirely because it would not have any traffic. A railroad can not live on a money pool. The weak line can not stand it. Its rails rust, its force is not occupied, and it has nothing to do, and it can not stay still and let its road lie idle. So a money pool, he said, was not practicable. That brings us to the necessity of having a traffic pool. It must have its 25 per cent of the traffic. How is it going to get it? It can only get it by taking it from you and me against our protest. You are in Chicago; I am jn Chicago. You are in grain. Modern conditions require that trans- portation shall allow us to reach our markets quickly. If you can get your grain to New York in five or six days that becomes an essential element, a part of your business, and you want the Pennsylvania or the New York Central to take your grain because the conditions of business require that you get it there as quickly as possible, and you do not send your grain around 1,200 miles by the Canadian Pacific, delaying it from two to four days. But to maintain the pool some of your grain, 25 per cent of your grain, has to go by the Canadian Pacific. Therefore you have to invest in a pool and try to route traffic, so as to destroy the right of the shipper to route his own traffic, and you can not maintain it in any other way. And this objection to pooling, which nobody has ever been able to suggest any remedy for — they try to remedy it in this way: They try to remedy it by giving a differential from the interior to Europe; and if they make that differential low enough to overcome the objection of the shipper shipping that way, then it is so low it does not pay and it is a losing rate; and if you make the differential high enough to permit a profit, it is so high the traffic will not go that way. That is the difficulty about pooling. Therefore I do not think there is any serious question that nobody would for those reasons favor a pooling bill. 1 thought they would work it out in some way, and they are doing so. A better way— they are Working out the elimination of competition by consolidation of competing lines. I think that is a safer and better way. For instance, you have a half dozen roads in a pool and you as a body are sitting here to determine the questions arising in that pool as to division of traffic, and all that kind of thing, and as to rates. The weak line in the pool constantly forces the situation. You have to finally render a judgment which does injustice to the strong line because you give to the weak line something that is a matter of ordinary competitive condition that it can not get. That is the diffi- culty with dealing with the situation in a pool either by the legislature INTERSTATE- COMMEKCE LAW. 195 or by any other body. If you permit the pool to regulate its rates, your rates have always got to be based upon the interests of the weak lines in the pool, which involves a concession to them of something which under the laws of supply and demand and transportation they could not get. And, secondly, you are knocking your heads against a principle which is right and which in the end has got to prevail. Now, then, under this modern concentrated ownership of a half dozen lines you deal with them as one entity. For instance, a com- plaint comes before you that the rates upon a certain part of one of their lines, upon one system, are wrong. Now, if that is a weak line you have that difficulty in dealing with it by itself —don't you see ? — that you can not cut its rates to what they ought to be because you bank- rupt it. That is the only reason why you do not do it. But when it becomes a part of a great system then, in considering all questions of rates and their relations upon aU of the parts of the system, you only take into consideration the gross earnings for the whole system, th^ expense of the whole system, and, treating it upon that basis, you can fix your rates — do you not see ? — relatively fairly. It does not become so important then whether you cut the rate or raise rates on a part of the system so long as you do not affect the revenues of the whole system injuriously. I want to suggest this view ; to add to this that associations can be formed among me railroads for the establishment and maintenance of just, reasonable, preferential, uniform, and stable rates, and for the promulgation and enforcement of reasonable and just rules and regu- lations as to the interchange of interstate traffic and conduct of inter- state business among each other. That will lead to the railroads agreeing on uniform classification legally. It will lead to the maii - tenance of rates. They can provide their penalties among themselves for breaking their agreement. Those penalties will be just, because they will be agreed upon by the railroads themselves, not imposed by Congress. They will agree that if they break the agreement they will Say to each other such and such penalties, and this will authorize what oes not exist owing to the common-law prohibition — the right among those railroads to recover those penalties from each other. Mr. RiCHAKDSON. Would that suppress rebates? Mr. Keknan. Yes; it would tend to, because they can put penalties on each other. Mr. RiCHAKDSON. A rebate is a secret matter. Mr. Keenan. But railroads know what they are doing; they can tell by the way traffic starts and runs in increased quantities whether it is because of some rebate given. They can readily find out each other's wrongdoings and a good deal quicker than outsiders can. If they, among themselves, agree upon rates and classifications and on penalties for violations of the agreement, and if by act of Congress that is made a legal agreement, so it can be enforced by the railroads, I think it is a great step, anda concession that railroads ought to have. That agreement is to be filed with the Interstate Commerce Commis- sion. If they disapprove it it does not go into effect. If they find it is against public interest they can disapprove if, stating their reasons, and then that leaves the railroad in a position to renew the agreement, eliminating from it these things which have been found by the. Com- mission to be unjust. I think with that addition, Mr, Chairman, this bill will go very far 196 INTERSTATE-COMMERCE LAW. toward perfecting and carrying out the system, the method that Congress had in its mind. I do not think we ought to abandon the interstate-commerce law now. Having started upon that as a direc- tion in which we might ultimately hope, through its operation, through the ascertainment of its defects, through their corrections and amend- ment and changes, in time reach a satisfactory regulation of these questions between the public and the railroads. I do not think we ought to stop now. I think the effort of every legislature and every man that talks to them ought to be to try to per- fect that law, so we may at least in the end have the law as it ought to be, as perfect as it can be; and then, having given it a trial, we will know whether regulation by law and by statute of these great ques- tions between the carriers and the people is a practical solution of the difficulty. But until we have an amendment of the law, reasonable and just to the end of correcting its defects, we never can know really whether the interstate-commerce law is or is not going to be a solution of these transportation difficulties. (Adjourned.) MoNDAT, April 21, 1902. The Committee met at 10. 30 o'clock a. m. , Hon. William P. Hepburn in the chair. The Chairman. The committee will be in order. Judge Knapp, will you give your views to the committee this morning? I will say that for two weeks this committee has been considering and taking statements upon the general subject of interstate transportation. We have heard from a good many gentlemen, and the committee deter- mined finally that they would be glad to give the views of the Interstate Commerce Commissioners, commencing to-day and taking such time as you and the other gentlemen of the Commission desire, and I would say that while we have a number of bills before us we have not been especially considering any one of them, but the entire subject, although House bill 8337 has been to a considerable extent discussed by gentlemen appearing before us; and if you have a copy of it, or we will furnish you a copy if you desire to discuss that, we will be very glad if you will pursue that course, or otherwise any course that is agreeable to yourself. STATEMENT OF HON. MARTIN A. KNAPP, CHAIRMAN OF THE UNITED STATES INTERSTATE COMMERCE COMMISSION. Mr. Knapp. Mr. Chairman and gentlemen of the committee, I am very much obliged to you, as are my associates, for giving us this opportunity to express our views respecting the various legislative proposals which are before you. So much may be said on this subject that I hardly know where to begin or what comments of my own will likely be of most service to the committee. One thing, however, I am disposed to say at the outset. Those who do not want the Government regulation of railways to succeed, those who do not want and do not intend that railways shall be subjected to any actual and effective control, are just now very bold and eager in INTEESTATE-COMMBKOE LAW. 197 declaring that this law needs no amendment, that the law is all right as it is, and all that is necessary is for the Commission to go on and enforce it just as it stands. Now, of course talk of that sort deceives no one who is familiar with the facts or has any knowledge of the actual situation. This law is defective. In some important respects it is practically unworkable. The great principles which are embodied in it are sound.- Its pur- poses are wholesome and beneficent, but the machinery provided for enforcing those principles and realizing these purposes was never suf- ficient; some of it has broken down, and it is sadly in need of renewal and repairs. Now, to present my personal views in the briefest way I ask your attention to some observations of this sort. I suppose that any scheme of public regulation will provide, as the present law provides, that all carriers subject to its provisions shall publish the rates which they expect to charge the public. In other words, that there shall be an announcement, through duly published tariffs, of the rates which the public will be required to pay. Under the present law the carriers exercise without restraint the initiative in rate making. They are free to put in just such tariffs as they see fit. They are under no legal restraint whatever in that regard, and there is no proposition to change the law in that respect. I do not advocate, and so far as I am aware no member of the Com- mission has ever advocated, that the initiative in rate making should be taken away from the carriers and given to the Commission or any other tribunal. So we assume that whatever is done in the way of amending the present law will not in any respect change this provision in that regard, and that carriers will continue to be free to exercise entirely the initiative in rate making. They will be free to put in just such tariffs as accord with their judgment or their interests. That being so, two difficulties at once arise, and those difficulties I beg to submit to you are of very different character and require very different treatment. The first difficulty is, how are you going to com- pel the observance of these tariffs when they are once published; that is, how are you going to stop rebating and rate cutting and all those different devices by which one shipper in a given locality gets better rates than his business rivals? The way the present law undertakes to prevent that kind of evil is to say that rebates and rate cutting and all secret arrangements which are preferential in their character are misde- meanors and are to be punished as such, and I do not know any other way to treat that class of difficulties. Of course, 1 think there is, per- haps, something to be said in favor of supplementing that treatment with one which should subject the carriers engaging in such practices to a forfeiture to be recovered in a civil action; but aside from those two remedies I know of no other which can be applied to this class of misdemeanors or offenses. Now, there are two respects in which the present law, in its attempt to reach and prevent and punish those who permit these practices, has proven to be entirely inadequate. The first of these is that the cor- poration carrier is not liable, but only the officer, the agent or repre- sentative. That is to say,' the real offender, the corporation, which is the beneficiary of the illegal arrangement, is not under any liability. Now, that has two very unfortunate results. One is that you can not obtain voluntary testimony under such circumstances. Offenses of 198 INTERSTATE-COMMERCE LAW. this kind are not like those against rights of property, which are sought to be prevented by general laws, because in those cases there is always somebody who is injured, there is somebody who is in the attitude of prosecutor, there is somebody who is not only willing, but . desires to bring the offending party to justice. But when a railroad officer makes a secret compact with a shipper which gives him a lower rate than the public are required to pay, both parties are presumably benefited by the transaction; neither wants to expose it and ordinarily neither of them will disclose it; certainly not by any voluntary action. Railroad officials of that grade which participates actually in transac- tions of this kind are a sort of fraternity; they are like lawyers and are personally intimate with each other, and over and over again they tell us that they will not under any circumstances give evidence or be in any way connected with the effort to disclose the truth of those transactions when the result of that disclosure might be to inflict pun- ishment and suffering upon some friend or send some associate to jail. Now, directly connected with that is the further fact that the shipper is not directly benefited by this rate at all, unless the secret rate gives him an actual discrimination against some other shipper, but that is something that very rarely happens, because these rebates and secret arrangements are not ordinarily made with the isolated individual shipper, but they are made with great combinations of shippers, they are made ordinarily under circumstances such that the transaction covers practically all the traffic that moves from a given point. Con- sequently there is no actual discrimination between the shippers. Take the well-known and notorious case of the recent investigations of the Commission respecting rates on dressed beef and packing-house products. Here railroad officials for the first time admitted that for years they had constantly and habitually disregarded their published tariffs and had carried at rates below the published tariff an amount of traffic so great that the difference between the published rate and the actual rate amounts to billions of dollars a year, and yet it was the unanimous testimony that all the shippers who were interested in those rates got practically the same rate. There was no discrimination between Armour and Swift and between Hammond and Sulzburger. They all got the same rate, and I undertake to say — and I do not think it can be successfully controverted — ^that upon the facts in that case, showing a most extensive and, as it seems to me, alarming dis- regard of legal duty, not one of the shippers is amenable under any process, either civil or criminal. No indictment will lie against those shippers, and no prosecution can be carried out and no punishment can be inflicted upon any of them, because you can not prove that there is any actual discrimination between them; they all got the same rate. And that is only typical of what will be ordinarily the case, and that is particularly true under our modern methods of competition, and due to the fact that great business enterprises are centering in a few hands. It is not any longer the case of some individual getting a preference or a discrimination through the secret practice, but it is the case of great aggregations of shippers controlling enormous amounts of traffic which succeed in getting it carried entirely at rates below those which the general public have to pay, and in such cases they can not be reached at all. So I say there are two respects in which this law is in urgent need of amendment. INTEESTATE-iOOMMEKCE LAW. 199 _ Mr, CoELlss. I would like to ask you, if I will not interrupt j^ou, right there if in that case it was developed that there were small ship- pers who at the same time and over the same lines shipped beef at a higher rate than the larger shippers paid? Mr, Knapp. It was not developed, but that I do not think was the fact. Mr. RiCHAEDSON. Where, then, was the injury which was done to the general public? Mr. Knapp. That I am not arguing. Mr. Richardson. Who was complaining, if there was no discrimi- nation ? Mr. Knapp. If no injury results from the fact that the men who produce in such enormous quantities dressed meats and packing-house products get these preferences, then there is no occasion for requiring the performance of the published tariffs, and not much to be accom- plished Mr. Coombs. If other shippers are supposed to rely upon the pub- lished tariffs they may be greatly injured by the secret cuts upon their product and not others. Mr. Knapp. That is true. There might be some small shippers in certain localities'; and one reason, and I think it comes pretty near explaining the situation, why this business is all in the hands of four or five great concerns, is because their preferential rates, although uniform between themselves, have driven all the small concerns out of the field. Mr. Richardson. The actual complaint, then, is that the railroads publish one rate and take another. Mr. Knapp. That is it. Mr. Richardson. When there is nobody injured by it? Mr. Knapp. I do not say that. I say there is great injury in it. If all the packers in Kansas City get the same rates — that is, all these large packers, and there are not any small ones left in Kansas City — if all the large ones get the same rate, they are not indictable, no pro- ceeding can be taken against them ; and the smaller concerns in the other places, and nearer to markets, are put at a disadvantage which drives them out of the business. Mr. Stewart. Would you not suggest right there that it should be made a penal offense to make any departure from the published rates, whether there be a discrimination or not? Mr. Knapp. That is exactly what I am here to favor, and what the pending bill favors. I want two things; I want the corporation carrier made liable, and I want the shipper made liable when he accepts a preference or secret rate, whether there is discrimination or not. Mr. Stewart. Would it not be a good idea, when they publish their rates, to have them make an affidavit that no discrimination is intended or will be made in variance with the published rates? Mr. Knapp. I do not think that is necessary. Mr. Adamson. Would you not better go further and punish the shipper for attempting to secure a lower rate, whether he did or not? Mr. Knapp. Yes, sir; and I think one of the pending bills here does make the shipper liable who solicits a preferential rate. Mr. Mann. You think that the shipper ought not to have an oppor- 200 INTERSTATE-COMMERCE LAW. tunity to try to get lower rates except through the Interstate Com- merce Commission? Mr. Knapp. Or through such influence as would tend to bring about a lower rate of freight to everybody. Mr. Mann. He can not go to the railroad company if it is a penal offense to solicit a lower rate Mr. Knapp. He has no right to solicit a lower rate for himself alone. He may solicit and urge the carrier to reduce his published tariff to everybody, which will be open; but he has not any right to go to them and ask for it for himself alone. Mr. Mann. Is it not a fact that where railroad rates have been reduced it has only been, and invariably, by the competition, and shippers in one case obtaining lower rates that the published rates, and then the company being obliged to come down to that special rate, which then becomes the published rate? Mr. Knapp. There are some instances of that kind. Mr. Mann. D.o you know of any other instance, where it has not been done in that way, where it has been accomplished? Mr. Knapp. " I think there are many instances. Mr. Mann. Where, without the competition, the rates have been reduced? Mr. Knapp. Put it in this way. I think you will be surprised — ^and I speak from my own personal point of view and not for my associates in any way — I think you will be surprised to see how slight and incon- sequential have been the reductions in the published tariff rates which are due to railroad competition. That competition has brought down rates is beyond question, but it has brought them down under secret agreements by which a few have profited. Mr. Mann. Take the case you cited a while ago. Mr. Knapp. A few have not profited there. Mr. Mann. Everybody in the business has profited? Mr. Knapp. Everybody in the business at that place. Mr. Mann. Yes. Mr. Knapp (continuing). But if dressed meats and packing-house products are carried out of Kansas City for 5 or 10 cents cheaper than from Indianapolis and other places, how is the man in Indianapolis going to stay in the business against such competition as that? He can not do it. Mr. Mann. Probably not, but the consumer will eat dressed beef just the same Mr. Knapp. But if it is for the interest of the consuming public that there shall be secret rates and bargains between the shipper and car- rier, what is the use of having any public regulation ? Mr. Mann. These rates were not secret; they were known. Mr. Knapp. Certainly they were secret. Mr. Mann. Were they not known ? Mr. Knapp. It was known in a general way. It was a moral cer- tainty that the tariff rate was not applied, but the extent of the reduc- tion, and the way in which the reduction was effected, the amount of the reduction, was not known until we got at it in this case. Mr. Mann. There was no discrimination at Kansas City? Mr. Tompkins. He said not at that point. Mr. Mann. Not at that point, between individuals? Mr. Knapp. Apparently not. INTERSTATE-COMMERCE LAW. . 201 Mr. Mann. There was nothing to prevent the railroad company from making an open rate from that point as low as they made the secret rate? Mr. Knapp. Apparently not. The Chairman. Except the long and short haul clause. Mr. Knapp. As my brother Prouty observed, we began this investi- gation a year ago, and we had a session in Kansas Citv, and we examined before the Commission every local traffic manager of the lines leading out of that city, and not one of them admitted that there was any reduction. They all testified that there was not, and that the published rates were observed. Mr. Mann. Why were they not punished for perjury? I should think the Interstate Commerce Commission would find a useful field for its activities in that direction, if they all lied before you. Mr. Knapp. 1 do not think they did know, in many cases. The vice-president of one of the leading lines, who testified before us in Chicago and who admitted what had been done, said that none of his subordinates knew anything about it. He said that that matter was arranged solely by himself and was entirely in his own hands. Mr. Prouty. And that all papers were destroyed. Mr. Corliss. I would like to ask you, in this investigation, which I have not read, was it developed over what period of time these rebates had been permitted, had existed — how many years ? Mr. Knapp. The order under which the investigation was made lim- ited in terms the inquiry to the calendar year 1901, but it cropped out in the course of the examination of witnesses that what occurred in this year had occurred during previous years, and that practically for many years, one might almost say from the origin of the industry in large volume at Kansas City, it had been the practice. Mr. Corliss. I wanted to know whether it was prior to 1880. Mr. Knapp. They had had these reduced tariffs. Mr. Corliss. Do you not think that, as a matter of fact, that rebate, running back for twenty -five years with the beef industry, has had the effect of driving out of existence all these small competitors? Mr. Knapp. I firmly believe that. Not only in this case, but in many other cases. Mr. Mann. Do you know of any competitors who have been driven out? Mr. Corliss. I can tell you of a lot of them. Mr. Mann. If you have that information, Mr. Corliss, you ought to furnish it to the Commission. I should think it would be in viola- tion of the law. Mr. Knapp. Of course, I have no personal knowledge except as statements have been made to me by those who were trying to do business as against this large combine. Mr. Mann. The law absolutely forbids discriminations, as I under- stand it. Mr. Knapp. Yes, sir Mr. Mann. Now, if anybody has been discriminated against, and these men openly admit the discriminations in their favor, 1 can not understand why they are not punished and why no effort is made to punish them. Mr. Knapp. There are two reasons for that. This Commission has repeatedly held investigations of this kind when there was information 202 INTERSTATE-COMMERCE LAW. or circumstances which warranted the inference that the rates were cut. They have gone to the locality and summoned the railroad man- agers and subordinates and put them on the stand and examined them under oath, and every one of them have sworn that they knew nothing about rate cutting whatever. Mr. Mann. But in this case they admitted it. Mr. Knapp. Yes. Now, another answer. Of course we can not tell what the Supreme Court will decide upon any question, but my own judgment is that the discrimination which is referred to in the sixth section, and which must be shown in order to convict the ship- per, is a discrimination between individuals under the second section of this law, and not the discrimination between localities under the third section of the law. Mr. Mann. The law has been in force for many years, and I should think it would be about time to get it decided by the Supreme Court; there have been so many discriminations. Mr. Knapp. Now, I want to go a step further and say that, not- withstanding the numerous persistent attempts which the Commission has made to get the testimony which shows the existence of these practices, this inquiry in January in Chicago is the first instance in which we ever got any, and we have done everything with that testi- mony which it is possible to do. _ Mr. Mann. Do you think if it has been so hard to get evidence of . discrimination when only one of the parties is to be punished that it will be easier when both of them will be punished under the law? Mr. Knapp. No, sir; I do not. Mr. Mann. Then why will such a proposition as you make aid, if you punish both shipper and shippeef Mr. Knapp. I am free to confess that as a practical method of enforcing this law there is much to be said in favor of not making the shipper liable at all. That is the way the law was originally. Then it was changed, presumably to take in the shipper, but did not take him in unless you could show the actual discrimination. I want to answer Mr. Mann a little further. 1 said what I did about the testimony for the reason that the Supreme Court, in deciding the White case, said that similar circumstances and conditions under the second section was a very different thing from similar circumstances and conditions under the third and fourth sections; and I do not believe you could show that the actual rate which the packers got from Kansas City was a discrimination under the third section as against a packer at Cincinnati, and that the Kansas City packer could be indicted. If you could show that Armour got a lower rate than Swift, or somebody else at the same time, then you would have a discrimination under the second section and Ai'mour could be indicted; but that is not the fact. Mr. Mann. I quite agree with that position as far as I am personally concerned. I do not think a discrimination at Kansas City is a dis- crimination against Cincinnati within the meaning of the law. Mr. RicHAKDSON. Right there you said that you called in certain of these railroad officials and they all denied the fact of any discrimination. Mr. Knapp. That has happened more than once. Mr. Richardson. Did you find out the fact of the discrimination existing from the beneficiaries of these rates? Mr. Knapp. No, sir. INTERSTATE-COMMERCE LAW. 203 Mr. Richardson. How did you get the information ? Mr. Knapp. Because in this one instance the railroad presidents or heir chief executive officers — the men who onght to be held responsible 'or those things — were examined, and they told the truth. Mr. Adamson. I understand Mr. Mann suggested this trouble, vhich has been heretofore discussed before the committee, that when Ton multiply the class of criminals all might claim exemption under .he law, and nobody could be forced to testify against anybody else. ; wanted to ask you this, if we had not better provide against this )ffense — as, for instance, it is provided against gambling in the State iourts — that no man should be subject to the result of incriminating limself if he testified against the other party. Mr. Knapp. That is in the law now, and that I want to call atten- lion to. Now, the difficulty The Chairman. Before you begin on that, will you tell us what dif- ferences in conditions existed at this last inquiry, where you were suc- sessful in getting this testimony, from the conditions on previous )ccasions, where you were unsuccessful in eliciting testimony? Mr. Knapp. I do not know. The Chairman. Were there any differences in conditions? Mr. Knapp. I think there was just the difference which I have lamed, that we went to Kansas City, where the traffic originated, and ^here presumably these offenses were committed or arranged for, md we called the representatives of the different roads who were ocated there and in charge of that traffic. They were subordinate )fficials and they all denied it, and it is not inconceivable that they were truthful in their denials. They might have had the same knowl- edge that others have, that men in that business had, that there was a liscrepancy between the price at which the goods were shipped and .he published tariffs, which could not be explained; but that they had my personal knowledge or had any incriminating connection with the llegal transaction was very likely not the case. Mr. Richardson. They got no benefit from it? Mr. Knapp. No, sir; no benefit. That is, when the market price of m article in Chicago is not as great as the market price of the same irticle in Kansas City, plus the published tariff from Kansas City to Chicago, one is disposed, at least, to suppose that the traffic gets there ,t a secret rate. Now, let me speak further of the difficulties — let me go one step ui-ther — the difficulties growing out of the fact that the corporation s not itself liable. In the first place, the Commission conceivably can ake up an instance and keep calling witnesses and forcing them to estify until they have narrowed the question down to just some few, ir perhaps one, of the officials of the company. Then what have you ound? Some subordinates, some assistant traffic manager, most likely ome clerk, who actually did the thing. Who wants to indict him, a subordinate, a clerk carrying out the tnplied if not the expressed orders of his superiors, a man whose losition depended on his doing what he did ? Nobodj^ wants to send uch a man as that to jail or to mulct him with a fine that he could not lossibly pay, and it is anomalous, and it does not satisfy one's sense f justice to say that the corporation, the real beneficiary of the trans- ction, should go scot free, and that the only person who can be 204 INTEESTATE-COMMEEOE LAW. reached is some subordinate agent who is merely in charge of this operation. . . Another thing right in that connection. Under the Constitution every man who is examined before the Commission or before any court, and compelled to testify, thereby secures perfect immunity for himself. He can not be prosecuted for that; so that the further the Commission goes in ferreting out the details, the further it goes in let- ting loose the very men who are guilty. Every man We call is granted absolute immunity. Now, what happens? This illustrates another phase of this same question; men high up in railroad circles, men known to you all by name, and many of them personally, came before us in Chicago and admitted exactly what they did, and said that they were personally responsible for it. They were perfectly safe in doing that. Every one of them thereby secured absolute immunity. But when you asked one of those men what par- ticular shipper he paid money to, and on what day, he would refuse to tell. He will say that he does not know, and generally he does not know. What happens, apparently, is this: The president or some executive officer in charge of traffic makes the bargain; he does not attend to the details; he does not know about a particular shipment or a particular paj'ment; and also whatever record there may be made at any time in connection with the transaction, so that the understanding- may be known to the parties, is immediately destroyed. In every instance they testified that no records remained, that their books would show nothing, and they themselves, although they admitted the re- sponsibility for what was done, had no knowledge of any particular transaction. It is idle to suppose that you can apply criminal remedies in the state of the criminal law for the correction of such abuses. It does not happen; it will not happen. But I believe that if the corporation could be indicted, if the officials, the subordinate officials, the compet- itors, or their representatives, or anybody having knowledge of the transaction could be examined before the Commission and compelled to disclose the facts on which the corporation was liable, then the cor- poration could be indicted and mulcted with a fine. Until that can be done, and corporation carriers be subjected to large pecuniary losses as a result of these offenses, not much will happen to correct them in the way of criminal remedies. Mr. Stewart. Do you not think that imprisonment in addition to a fine would have a good effect? Mr. Knapp. No, Mr. Stewart, I do not. While I regard these offenses as involving, in many cases, -a very high degree of moral turpitude, and I think there are more serious wrongs against order and the inalienable rights of the citizen than burglary or larceny, still we have to take the facts as they are and public sentiment as it exists, and in view of that it is my judgment that punishment by imprison- ment instead of being an aid is a hindrance. It is a thing which oper- ates against getting information necessary to convict. Mr Stewart. Do you think a fine, however large, would deter these large corporations? Mr. Knapp. Yes; and then there is another reason. You can not do anything to a corporation except fine it, and it does not quite satisfv the sense of justice to say that the real offender shall only be fined INTEESTATE-OOMMBEOE LAW. 205 while some paid subordinate in lesser degree may possibly go to jail. Now, 1 believe that if we could get this law in shape where it would be practically feasible, and in many cases comparatively easy to prove the offense against the corporation, and that corporation could be held to pay a large fine, it would not be simply the pecuniary loss, but the publicity — the fact that the railroad has been indicted and compelled to pay a large fine — would operate as a powerful deterrent, and I do not think we shall get along very far in preventing rate cutting by criminal methods until you gentlemen change the law in that regard. And still further on that point, as far as 1 am aware, nobody opposes changing the law in that respect which I refer to. J have not heard an objection to it. I do not know of a railroad man, I do not know a member of the Commission now or heretofore, I do not know an honest business man, who does not agree with everything I have tried to say, and who would not tell you that law ought to be changed so that the coi'poration should be amenable. It may be that some of these great combines who get these enormous sums in rebates, and who are not now amenable to the law, would oppose the amendment which I advocate, but I do not think that they will come here and tell you that they oppose it. Mr. Corliss. What information have you upon the subject with reference to the railroad corporations themselves — the ofiicers of the railroads — as to their position upon that question ? Mr. Knapp. All that I know about that, Mr. Corliss, is what they tell us. Over and over again railroad officials have said to me, " You can not expect — it is against human nature; appeal to your own experience, your own feelings — you can not expect that 1 will give testimony that may possibly result in the fining of my associate and friend over here who occupies a similar relation to another railroad to that which I occupy to mine. I am not going to become an informer against him." But they all say that if the result of the disclosure and prosecu- tion would be a fine against the other man's corporation they would not hesitate to furnish the proof and would actively engage in the prosecution. That is the statement made to us. You can judge of the truth of it and the probabilities as well as I can. Mr. Coombs. Do you not think it would be a great relief and benefit to the railroad corporations if such a law was enacted ? Mr. Knapp. I surely do. There is no reason why it should not be. And these two amendments, the one which would make the corpora- tions themselves liable, and the one which would make the shipper liable, without the necessity of proving absolute discrimination — these two amendments ought to be made at once, at this session, if no others are made. Mr. Richardson. If you made a fine upon the corporations, you would have to rely upon the railroads to get the proof. Mr. Knapp. Not necessarily. I would call the shipper. Mr. Richardson. Would it not operate against him and influence him not to tell? Mr. Knapp. No, sir; not to the same extent. Mr. Richardson. Is it not the same thing that you find noM- in bringing a suit for damages against a railroad? An employee does not like to testify 206 INTERSTATE- OOMMEBCB LAW. Mr. Knapp. That may be true; but I think it would be immeasura- bly easier than it is now. If its agent makes a rebate or makes a secret rate much lower than the pulilished tariff, why shouldn't the corporation be hable^ Can anyone furnish a reasonable answer? I have never heard of any. And bear in mind another thing, which is that the two amendments which I am speaking of now would not increase the power of the Interstate Commerce Commission one iota. • Mr. Mann. If a man wanted to ship a carload of furniture from Georgetown to, say, Albuquerque, N. Mex., could he get a special rate, or would it be local rate all the way ? Mr. Knapp. That would depend upon whether there were joint through rates from Washington to Albuquerque. If not, he would have to ship at the sum of the locals. Mr. Mann. Is it a common practice, or is it not, among the railroads in a case of that sort to make a through rate? Mr. Knapp. Yes, sir. Mr. Mann. Where there are no published through rates ? Mr. Knapp. No, sir; I think not. They have no right to do that. The statute prohibits it, and they would offend the law if they did it, and I do not think it happens. Mr. Mann. So that where there are no published joint rates it must be the sum of the local rates under the Jaw ? Mr. Knapp. It must be the sum of the local rates under the law. But, in point of fact, there has come to be such an enormous inter- change of traffic, the movement of products is so extensive and so generally distributed, that there are joint through rates applying to pretty much everything, and between all the important places in the United States, or if there are not, then a joint through rate will apply between large centers, and the actual through rate would be made up of the local rate up to the point where the through rate commences. For instance, there might be a joint through rate from Washinglpn to Albuquerque, and not a joint through rate from Alexandria, say. In that case the rate from Alexandria to Albuquerque would be made up of the local rate from Alexandria to Washington and the joint through rate from Washington to Albuquerque. Mr. Mann. I understood that it was not an uncommon practice, and under this section of the bill the shipper would be liable to a $5,000 fine. Mr. Knapp. All I can say is from my general information. From what I have observed and learned, I do not believe there is any such practice. Mr. Mann. I thought you would know Mr. Knapp. I do not believe that secret rates, or special bargains, take that form. I do not think it very often happens that the equiv- alent of the joint through rate is given when there is no joint through rate, because, as I said, there are joint through rates pretty much everywhere, and if there is any considerable amount of traffic the rail- roads are generally willing, and it is to their interest, to make a joint through rate. I was saying a moment ago that the passage of these amendments would not enlarge the powers of the Commission at all, not in the slightest. When you make a transaction a misdemeanor, you practi- cally remove it from the authority of the Commission. What I am INTEESTATE-COMMBKOE LAW. 207 asking is that the Federal courts and the Federal district attorneys be furnished with the laws under which they can act. True, of course, the (^onmiission in that case might be able to assist the prosecuting authorities in getting evidence, and might aid them by its agents in conducting trials, but the authority of the Commission is not increased a particle by these amendments. We can not make any order not to pay a rebate. The statute says that it is a misdemeanor to do it. Of course an act of Congress is a good deal more powerful thing than an order of the Interstate Commerce Commission. Mr. Mann. A year or two ago 1 had occasion to ship some freight from this city through Chicago to Grand Crossing. The rate given me here was |25. When it got to South Chicago, it was about $60, and when it got to Grand Crossing it was about $70. I paid the freight. I never found out which was the right freight; but the company rebated to me the amount over the rate which they gave to me. Now, possibly under this law I would be liable to a $5,000 penalty. Mr. Knapp. That is conceivable. Mr. Mann. How could I know; how could I tell in advance? I go to the proper authority and obtain a freight rate. Mr. Knapp. I have not had anything personally to do with the prepa- ration of any particular bill. I do not know what you refer to; but I assume Mr. Mann. I supposed that you knew that the Nelson-Corliss bill is the one that we are speaking of. Mr. Knapp. I assume, of course, that the shipper is not liable unless he knowingly gets a preferential rate. I certainly am not here asking nor advocating that if a shipper goes to a freight agent and asks what the rate is and is told and pays that rate, honestly supposing that to be the lawful rate, that he could be indicted and fined if it turned out afterwards that that was not a legal rate. Mr. Davis. Would the case that Mr. Mann suggests be a rebate in that sense of which we are speaking? Would not that be rather a refund ? Mr. Mann. It would depend upon what was the proper rate. I do not know and never did know. I know that I made a kick. Mr. Davis. Would that not be giving back a part of the original rate, what was originally charged, while this would be refunding merely the excess over the original charge? Mr. Knapp. It would be refunding the excess over the tariff rate. Mr. Mann. Perhaps 1 got the wrong rate here. Perhaps the rate that I paid was actually the tariff rate. I never made any further inquiry. Mr. Knapp. It was very likely an overcharge. We correct those matters every week in the year. Mr. Adamson. That is what the innocent would have to depend on. He is presumed to know the law, but not the fact. Mr. Knapp. It is perhaps not an inapt way of putting it. Mr. Stewart. Would not Mr. Mann be affirmatively guilty, having accepted this rebate ? Mr. Knapp. No, sir; I do not think that, because I think it would have to be alleged and proved on the trial that he knew what was the rate. Mr. Stbwaet. Would not the fact of his receiving the rebate be suf- ficient to go to the jury, unless he rebutted the presumption of guilt? 208 INTBBSTATE-COMMEKCE LAW. ■ Mr. Knapp. That would have to be proved on the trial. _ _ Mr. Stewaet. I mean if they had that proof alone would it not be sufficient for the prosecution to go to the jury with if Mr. Mann offered no defense? Mr. Knapp. Possibly it would. Mr. Mann. Clearly, in that case, if the railroad company was guUty I was guilty, under the provisions of this Corliss bill. Mr. Knapp. Yes, sir, I think — I do not know — that might not be so, Mr. Mann. That is to say, the railroad agent might know that the rate he gave you was not the published rate, and you might honestly think that it was. Mr. Mann. Anyhow, you think that whatever bill is passed should so provide that the shipper should not be punished unless he intends to offend? Mr. Knapp. Certainly not. As a matter of practice there are a great many shippers — particularly the smaller shippers, the infre- quent shippers — who do not know what the published rates are. Mr. Adamson. 1 do not think that language only would change the situation at all, because that is common law. He is presumed to know what the law is, and if your Commission is ever autnorized by law to make rates, then rates are laws, and not facts, because it is legislative. Mr. Knapp. That is another question. We may come to that later. I am not prepared to accept that proposition. Mr. Adamson. He says that it does not add anything to the law as it exists now; that a man can not be convicted under the existing law unless he has the intention to do wrong. Mr. Knapp. Yes, sir; certainly not. Mr. Shackleford. What you say is that the presumption of the law to-day is such that it throws the negative upon the shipper — puts the burden on the shipper to prove that he is not guilty ? Mr. Knapp. All I can say is that I am not advocating the proposi- tion that a shipper is liable to be fined, not knowing what the rate is, who pays a rate that is asked, honestly believing at the time that it is the proper rate. Mr. Mann. The difficulty we find is in providing some means by which the guilty should be punished and the innocent not be punished under the law. Mr. Knapp. It seems to me if the language is, as I assumed, of course, that it was, that the shipper who knowingly aids or abets the carrier in making a secret rate shall be punished — it seems to me that is the situation Mr. Adamson. If you are going to regulate rates by law, do you not think it is better for the shipper to look to constituted authority for rates and not to the railroads ? Mr. Knapp. That would be impracticable. The shipper would not want to send to the office of the Interstate Commerce Commission to find out what the rate is before he ships. Mr. Adamson. Do you not think it would be to his interest to do it, or very wise to do it? Mr. Knapp. Of course the present law is, and there is no proposi- tion to change it, that the carrier shall post in two conspicuous places in every one of its stations the tariff, so that the shipper has an oppor- tunity to ascertain what the rates are. INTJEBSTATE-COMMEROE LAW. 209 Mr. Adamson. Yes; that is giving them their constituted authority in that way. Mr. Knapp. Yes, sir; in the manner that the law provides it shall be furnished him for that purpose. But what I would say is that in the ordinary course of business the large shipper knows exactly what the rates are between all points, and he knows to the last cent what the rates are and the route and the combination which will give him the lowest possible rate under the tariff. But the occasional shipper may be a man who, if he consulted the tariflp schedule, would have difficulty in knowing what the rate would be on a cargo of furniture, for instance, and he would naturally ask the agent what it was. Now, if he takes in good faith what he is told and pays what he ought to pay certainly he ought not to be indicted. Mr. Mann. 1 do not see how putting the word " knowingly " in there would help that man out. The guilty action lies in avoiding the tariff. Now, the language of the Corliss bill is: Any person who procures, or solicits to be done, or assists, aids, or abets in the doing of any of the aforesaid acts — If a man gets a rate, he assists in doing the act which is declared illegal. It does not make any difference if he knows it is illegal or not. He knows that he does the act, and he does that part of it knowingly. That is all your "knowingly" refers to. Mr. Knapp. He knows the rate he gets, but he may not know it is or is not the published rate and the rate that he ought to pay. That is what "knowingly" means. Mr. Mann. Putting "knowingly" in there would not affect it any. Under the bill we have been discussing, and in a case of that sort, the court has no judgment in the matter except finding the man guilty and ordering him to pay a fine of $5,000. Mr. Stewart. In the Corliss bill it does not say that the shipper must "knowingly" violate the published rate. Mr. Knapp. I supposed that it was there, as 1 say. It is in the present law. The word "knowingly" is used in the present law, and I suppose with that meaning and for that purpose. Mr. Mann. I suppose you would not say that the traffic manager of that railroad company could escape. He said that he gave me the rate. I did not know what the published rate was. Mr. Knapp. The individual might. Mr. Mann. Oh, no. Mr. Knapp. I do not know; he might do so; but query: Whether the corporation could escape? Mr. Richaedson. Would not Mr. Mann, in the case he has used as an illustration, where he accepted that rate, where that rebate was given him and he accepted that, make himself a conspirator and jointly liable with the company ? Mr. Shacklefqkd. Not if he received back an overcharge. Mr. Knapp. Perhaps I do not quite appreciate your question. Mr. Richaedson. Would not he be an accessory after the fact if he participated in it, and now when he received it back if it was an illegal charge, an unjust one, would he not make himself liable? Mr. Knapp. The offense is not in doing the thing, but in "know- ingly " doing it. Mr. Richaedson. Then when he accepted the rate would he not . i-c li 14 210 INTERSTATB-OOMMBBCE LAW. Mr Knapp No, sir; he could not be made an accessory after the fact after the offense was committed, because he did not know at the time that the rate he paid at the time was not the published ra,te._ Mr. Wangee. As I understand it, the rebate may be perfectly justi- fiable and proper to correct an improper charge «_ Mr. Knapp. Yes, sir; and it is often our experience, inese matters are adjusted very frequently through our oflace, where there has been an overcharge. , . n n i ^ o Mr. Adamson. But that is not what you technically call a rebate i Mr. Knapp. We look it up, and if it appears that there is an over- charge the matter is always adjusted. Mr. Adamson. That is more a matter of mistake? Mr. Knapp. Yes, sir; that is an entirely different question. Mr. Adamson. If you are going to invoke the pains and penalties of the criminal law and quasi-criminal law, do you not think you had better go at it under the rules of criminal law, and not be too squeamish about what you do ? People are convicted every day under laws they never heard and did not know existed because they do things, and if you are going at this to remedy crying evils, had you not better make it to the interest of ever3'^body to look and find out what the laws provide ? Mr. Knapp. I am obliged to you for asking that question. It reminds me of what I had in my mind, but had overlooked so far. In a sense you can, of course, test the propriety or value of a law by what could possibly be done under it; but ordinarily when you are' dealing with a subject of this kind, or legislation of this kind, yoii take into account the ordinary experience of men. Put it exactly in the form, suppose, that you read in the Corliss bill, and the actual taking of a less rate, although innocently done, would subject a shipper to an indictment and fine; but do you think it would ever happen that such a man would be indicted as a matter of actual experience ? Mr. Mann. It has happened that innocent men have been indicted and found guilty. Mr. Knapp. Yes, sir; and as Mr. Adamson remarked, if you have an emergency to deal with, a permanent and distressful situation of affairs to deal with, perhaps you ought not to be too squeamish in applying the remedy, because occasionally an innocent man would be punished. Mr. Mann. You know what the old maxim is? Mr. Shaoklefoed. Could you not obtain your remedies more easily if everyone was exempt except the corporation itself? Would not that promote the obtaining of testimony ? Let the shipper be free, and then there is no reason why he should not disclose any transaction regarding an illegal rate, if nobody except the corporation itself, the carrier itself, were made amenable to the penalties. In our State we have a law against bribery, and the man who gives the bribe and the man who takes the bribe are both amenable under the law, and neither one has any motive for telling what has been done. In this matter you say that both sides shall be punished, and you shut up both sides, and you have no means for getting the testimony of either; but if the shipper shall be liable, but the carrier alone, you will arrive at some way of meting out the punishment. Mr. Knapp. I do not care to take the time of the committee with any extended argument on that question. INTBBSTATB-COMMEKOE LAW. 211 Mr. Wangee. Do you think the remedy by indictment is the most expeditious and ejffective? Suppose a corporation was made liable to pay, say, at least the sum of f6,000 for each offense, and suppose two or three times the amount of the preference, the rebate or the refund granted to be recovered in an action at law, would not that be a far greater deterrent; would not the proposition come right home to the officers of the corporation, " We may have to pay several hundreds of thousands of dollars if this thing is discovered?" Mr. Knapp. I think so. Mr. Adamson. Do you think, under Judge Shackleford's idea, that it is all right to make it criminal for the corporations to do a thing and then offer inducements to all the balance of mankind to induce them to do it? Would not that be the Judge's idea? Mr. Knapp. I must say that such a proposition does not at the first blush strike one as fair, where t^- o parties are engaged in a transac- tion and one of them is held to conmiit a crime and the other not. Mr. Adamson. If a thing is wrong, ought not everybody who has anything to do with it be subject to prosecution? Mr. Knapp. Certainlj'^, .that is true. But on the other hand, the wrongdoing is of such a nature that the most effective and useful method of correcting it or preventing it ought to be adopted. That method may be by allowing one of the parties to escape. Now, if that is the proposition, I am not here to oppose it by any means. Mr. Shackleford. Not to punish crime, but to relieve the shipping public from these evils; that is the thing that you are trying to do. Mr. Adamson. You are talking about making criminal law, though? Mr. EjsfAPP. Yes, sir. Mr. Adamson. It ought to be made with equality, justice, and in accordance with the time-honored rules of criminal law. Mr. Knapp. I have assumed, as I .say, that the law would remain as it is, making the shipper liable as well as the carrier; but if it is to remain in that way, then I want the shipper liable for departing from the rate without being obliged to show that an actual discrimination in his favor resulted. Mr. Adamson. It should result, then, in making the shipper liable, given this view of it, that where you go and induce the carrier to give a reduced rate you injure me, and I have just as much fault to find with you as I have with the corporation, and you are just as guilty as the corporation. Mr. Knapp. Yes, sir; because the man who pays the higher rate suff^ers from the fact that his business rival has the same service at a lower rate. He, in a sense, is the real beneficiary. The railroad simply loses so much revenue; but it accepts the lower rates in order to get the business at all. Of course a railroad is not going to give a reduction and suffer under a cut rate if it is sure to get 9ie traffic anyway. It makes that secret bargain in order to get the business from some other road. The revenue of the railroad is depleted, and the man who really profits is the shipper who gets the cut rate, and I think in many cir cumstances the moral turpitude of the shipper is greater than that of the carrier. And it does not exactly satisfy me, speaking for myself alone, to say that in such a situation some subordinate traffic mana- gers can be fined, and the men who have put hundreds of thousands of dollars in rebates into their pockets can not be reached. That may 212 INTEBSTATE-COMMEKGE LAW. be the most effective way to deal with the evil, but I am not here to advocate it. The Chairman. Suppose a case of a conviction against the corpora- tion, would you levy the punishment against the corporation or against the agent of a corporation ? Mr. Knapp. I would do just as they do on the other side. I would make the corporation liable, and also its officers and agents, and also the shipper liable, and also his officers and agents. But I think there is much in keeping them both in from this point of view. Now, see what the actual situation is. Remedies of this kind must be applied by the Federal courts and the Federal district attorneys. All that the Commission can ever do is to furnish information on which they shall proceed. Now, each situation therefore ought to be inquired of and dealt with in reference to its peculiar circumstances, and when a case of extensive rebates or cut rates is brought to the attention of the Federal authorities, it might be a case where, in their judgment, the more guilty party was the shipper and the one more easily convicted the carrier, or it might happen that the more guilty was the carrier and the one more easily convicted was the shipper, and it seems to me that those who are charged with the responsibility of enforcing the law oiaght to have the opportunity, as they practically would under this proposed law, of deciding against which one of the parties they would proceed. Mr. Wangek. I imagine it would not be very appropriate to pro- ceed against both. Mr. Knapp. Yes, sir; ordinarily you have probably got to call only one to prove the case against the other, and when you call one and compel him to testify, he goes scot free. Mr. Wangek. He could refuse to answer on the ground that he would incriminate himself. Mr. Knapp. No; he can be forced to testify, and being forced to testify, he is granted immunity. That has been taken up to the Supreme Court of the United States twice, and we have got that settled. The Commission can subpoena any person supposed to have knowledge of a wrongful transaction of the kind we are now discuss- ing and compel him to testify, and if he refuses to answer we can go to a Federal judge and get an order compelling him to testify, and if he still refuses he may be sent to jail; he can not excuse himself anj' longer, because the statute which it was held gives him absolute immunity secures him his constitutional rights, so that he can be com- pelled to testify. And, as I have explained, of course everybody we call is granted immunity, and it is a practical question whether in a case of this kind the Commission ought to go on Mr. Adamson. Do you mean that he is entirely relieved from all danger of being tried and from the penalties in that case, or do you mean simply that that testimony shall not be used against him? Mr. Knapp. That was the law originally. That was no part of the interstate-commerce law, but it was a law that had been on the statute books for many years, that his testimony could not be used against him. The Supreme Court of the United States held that it was uncon- stitutional, that part of that statute did not secure to him the immunity which the Constitution provided for. If he was compelled to testify, that the knowledge hereby obtained might furnish clues which would lead to his conviction later on without the use of that testimony and INTEESTATE-COMMEECE LAW. 213 that in order to secure him his constitutional right the offense whicli is committed must be considered to be condoned by the fact that he is called. Mr. Adamson. I do not remember the case, but I would like to know if it was taken into consideration the fact that his testimony might tend to blacken his character Mr. Knapp. If you will read the decision of the Supreme Court on that question you will find that veiy fully discussed. They said that society does not owe the duty to a man, who, under the Constitution, refuses to testify and confesses that he is a criminal, to protect his reputation. If it protects his person and his pocketbook he has had his personal immunity. That is all settled. Now, gentlemen, that is all I care to say upon that branch of the case, upon the defective and unworkable condition of those provisions in the law which seek to prevent rate cutting and secret contracts. And those are two changes which, in my judgment, ought to be promptly made. This Commission called the attention of Congress to this defect in the law directly that it was ascertained; pointed it out fully in its reports to Congress, and has repeatedly done so since, and yet, now, for more than ten years we have been waiting for Congress to so change this law that the corporation, the carrier, could be indicted and punished. And the failure, as a practical question, of efforts to enforce the criminal law is largely because the corporation carrier is not liable, and the failure, the inevitable failure, to convict the shipper results from the fact that he is not liable unless you can show not only that he got the lower rate, but that that lower rate operated as a discrimi- nation in his favor and against somebodj'^ else in the same place and at the same time. And that, practically, you can not show. You can not show it certainly in the worst class of cases, where great aggrega- tions and combinations of shippers use their influence to get secret rates and preferential rates, for there they all get about the same thing. Now, I say do one of two things; either leave the shipper out entirely, or else make him liable, the same as the carrier, if he know- ingly takes a rate. Mr. Davis. I was going to say, from, my limited idea of the crim- inal law, I understand that it requires a good healthy condition of public sentiment in order to make a criminal law operative. Now, do you not think that if you undertake to make the shipper a criminal because he has done the best he could, that you are putting some- thing in the law that will not stand; that evidently they must do the best they can with the railroad, and that you will never get that law enforced? Mr. Knapp. No, sir; because you assume that the shipper has done the best he could, and that is the case of the infrequent shipper. The thousands and millions of dollars paid in rebates are paid to men who do not need it and ought not to have it, and know perfectly well that they are violating the law. Mr. Davis. Suppose some infrequent shipper, who rarely ships and does very little business that requires shipping, gets the best rates that he can. Suppose I want to ship some books and furniture from Wash- ington and I go and get the best rate that I can, and I can not study 214 INTERSTATE-COMMBEOE LAW. these things, I am made a criminal because I have gotten a rate less than the published rate. , . j t j j. Mr. Knapp. I have said that I do not advocate that, and i do not think it is the intention of the legislative proposal. Mr. Davis. Would it not make that statute practically inoperative? Mr. Knapp. No, sir; I do not think it would make it inoperative. Mr. Davis. I do not think anybody would be proceeded against. I do not think you could find a district attorney who would prosecute a man who he knew had innocently and unintentionally gotten a rate less than the published rate. Mr. Shackleford. He was not supposing that that rate he spoke of had been gotten innocently. Mr. Knapp. That is what I understood. Mr. Davis. No, sir. Suppose I knew that the rate that I was get- ting from Washington to my home was not the published rate, and I should go and get the best rate that I could. Now, as the law stands I would not be a criminal; per se that would not be a criminal act. But you are going to make it criminal by enactment, and the Ameri- can people have always supposed that the individual not only ought to make the best terms that he could with the railroad, but that it would be shrewd for him to do it. Now, you are going to make that per se a crime which is not per se a crime, and therefore it would make the law very unpopular. Mr. Knapp. I do not think so. I think nine hundred and ninety- nine business men out of a thousand do not want anybody to be able to get a secret or preferential rate. Mr. Davis. One other question. You are going to use the word ' ' knowingly. " He must knowingly violate this law. The shipper must do it. Now, if that word were not there, the law, as I understand it to exist, would require it to be done knowingly ? Mr. Knapp. I do not understand that to be the law. Mr. Davis. How are you going to define the requisite knowledge and the means by which he must derive his knowledge? Mr. Knapp. That is a question of fact for the jury. This man knows that he got a rate not authorized by the tariff. Mr. Davis. In order to make that operative at all, you. would have to do it in this way: The rate must be prescribed and published, and if the rates were prescribed and published everyone would be charged with knowledge of them. Would you not have to do it that way; and if you did, would you not make the law unpopular? Mr. Knapp. No, sir; I do not think so. I think a large majority of the business men of the. country are in favor of it, in favor of just what I am advocating. I think there are a few, and they are the men who least need the favor, and ought not to get it, who do not want it that way. _ They want to pocket the rebates. It is not the rebates, gentle- men; it is not simply the thousands and hundreds of thousands and millions of dollars which certain concerns get out of the public tariff; that is not what they are after. Of course whatever comes in that way comes in handy, and it amounts to a vast balance; but it is the com- mand of the markets which they get, because their traffic is carried lower than that of other persons, which is valuable to them. Mr. Davis. It is the large shipper you have in your mind? Mr. Knapp. Yes, sir. The small shipper to-day does not get any rebates. INTEBSTATE-COMMEBCE LAW. 215 Mr. Davis. Suppose he did get them? Mr. Knapp. He can not. Mr. Davis. Suppose he got a less rate at the Mr. Knapp. He can not do it. Mr. Davis. Do you not make the entire shipping public uneasy, do you not create in them a sort of uneasiness, which if you put them all Mr. Knapp. The uneasiness arises from the suspicion that the larger and the more powerful rival is getting a rate which the smaller man can not obtain. You let the business men of this country understand that no combination of shippers, no matter how powerful or how immense their business may be, can get one mill off the published tariff, and you will give a satisfaction and an assurance to the business world that nothing else can assure. Mr. Coombs. Is there any section of the country that is benefited over another by the rebate? Mr. Knapp. That is not easy to answer. If you will put a concrete question Mr. Coombs. I want to ask you questions which are hard. We want the knowledge that you have, and I want to ask you just as hard ques- tions as I can. Mr. Knapp. Very well. We were discussing this question before you came in, and we were mentioning the case where it appeared that habitually, for years, the packing houses on the Missouri River and at Chicago got very much lower rates than the published tariff'. Now, what is a small concern at Indianapolis and Cincinnati or Des Moines or Davenport trying to do a little packing-house business against these packing houses that have 10 cents off on the tariff? They have to pay the published tariff. Railroad men do not give rebates to the little fellow. Mr. Stewart. As a matter of fact, under the new law the district attorney would only look after the occasional shipper? Mr. Knapp. I said in answer to Mr. Mann's question that I did not think the district attorney would ever try to indict an incidental and occasional shipper who honestly and inadvertently got a rate which proved to be lower than the published tariff. Mr. Stewakt. It is only the large and continual — professional — ship- pers who affect this tariff? Mr. Knapp. Yes, sir. Mr. Coombs. What has the district attorney to do with it? Mr. Knapp. As a matter of fact he has not had much to do hereto- fore, because he could not get any facts on which to proceed. Mr. Coombs. You are going into facts now and not into the law. What would he have to do with it provided the law was amended as you want to have it amended? Mr. Knapp. If he had information leading him to believe that a given carrier had granted rebates to a shipper he would go to work and investigate to prove that fact. Mr. Coombs. If he was left to his own judgment he would be affected by the sentiment of the particular community? Mr. Knapp. Very likely; I thmk that might happen. Mr. Stewart. Might he not be affected by the charge of the judge and the judgment of that particular court? 216 INTBBSTATE-OOMMERCE LAW. Mr. Knapp. This gentleman refers to whom he should select for indictment. , . _, Mr. Coombs. These things would be done in this way. -brom your body you would bring such information before the Department of Justice as would result in instructions to the district attorney of some other place to bring proceedings. Is not that about the way it would be done? Mr. Knapp. Yes, sir; I suppose practically it would work out that way. Mr. Coombs. That is the general routine; that is the way the dis- trict attorneys bring indictments? Mr. Knapp. Certainly. Mr. Coombs. Where there is a central body which has supervision of matters the information upon which the district attorneys act comes before that body. Is not that the rule? Mr. Knapp. I suppose it is. Mr. Coombs. The district attorney never brings originally a case relating to a violation of the internal-revenue law, for instance; he goes by instructions to bring certain indictments ? Mr. Knapp. No; if the postal laws or the import laws are violated I assume that some Government official having charge of the adminis- tration of those laws gets hold of the facts and goes to the district attorney, and he becomes the prosecutor. Mr. Richardson. Is it not your observation that under the opera- tions of the interstate-commerce law for the past few years there has been a greater improvement in the conditions between the railroads and the shipping public? Mr. Knapp. In what way? Mr. RiCHAEDSON. In all respects, in regard to rebates and every- thing else, is it not in a better condition to-day than ten years ago? Under the conservative policy which has been pursued, is not the relation of the railroads with the public far better than it was ten years ago? Mr. Knapp. 1 wish I could affirm your view, but I can not. Mr. Richardson. Then the Commission has accomplished very little good during the last ten years? Mr. Knapp. That does not follow. Mr. Richardson. Is there not an improvement? Mr. Knapp. I think the condition is very much better than it would be if there was not any law nor any Commission. The Chairman. The hour for adjournment has arrived, Mr. Knapp and if you will now suspend you will have the stand when we resume to-morrow. Mr. Knapp. Very well. Thereupon, at 12 o'clock m., the committee adjourned until to-mor- row, April 21, 1902, at 10.30 o'clock a. m. Washington, D. C, April 22, 1902. Mr. Knapp. Some little time ago the Commission arranged for tak- ing the testimony in certain cases at St. Louis and elsewhere, begin- ning on Friday of this week. Two of my associates, Mr. Prouty and Mr. Fifer, are going to attend to that duty. They will be absent for INTERSTATE-COMMERCE LAW. 217 at least a week for that reason, and to accommodate them 1 respectfully ask that they may be heard this morning and that I may be permitted to defer any remarks of my own until a subsequent meeting of the committee. The Chairman. That arrangement will be satisfactory to the com- mittee. STATEMENT OF HON. CHARLES A. PROUTY, INTERSTATE COMMERCE COMMISSIONER. Mr. Chairman and gentlemen of the committee, as Chairman Knapp has stated, GovernorFifer and 1 are obliged to leave Washington to- morrow, and if we say anything we will be compelled to say it now. I had no desire, and have no desire, to address the committee; but there is one phase of this question that my associates think ought to be pre- sented to the attention of the committee, and they desire me to present it. I wish to say, before I begin that, a single word in reference to the matter which Mr. Knapp discussed yesterday, and that is the prevent- ing of the payment of rebates. He called your attention to necessary amendments to the act in order to secure that end by criminal enact- ment. That is not to my mind the only way in which tlie payment of rebates can be prevented, nor is it the only way in which the bill that you have before you, which is called the Corliss bill, will effect that object. Certain injunctions have been asked for and a restraining order has been granted to compel carriers between Chicago and Kansas City to observe the published rates. The effect of that injunction, if it is made properly and can be enforced against the carriers, is simply to raise the tariff rate, which the packer pays from Kansas City to Chi- cago 5 cents. I believe that a more just way to reach that proposition is not to compel the carrier to maintain his published tariff, but to compel the carrier to publish and to accord to all the world the lower tariff which it has accorded to the favored shipper. In other words, the only effective remedy, or one of the most effect- ive remedies, which can be applied to prevent the payment of the rebate is to invest some tribunal in some way with the power to com- pel the carrier to put into effect and maintain in effect, under certain circumstances and for a certain time, the secret rate, the lower rate, which it has accorded to the preferred shipper. Any other remedy simply results in making the rate so much higher to the general public. Mr. Coombs. Excuse me; but the constitution of California estab- lished a railroad commission, and one of the provisions of the consti- tution is that that should be done. This commission is a judicial body or a quasi judicial body, has judicial functions under the constitution. Now one of the propositions in that was this: That whenever the rail- roads gave a rebate or lowered the rate with reference to any person and with reference to any points that that should become the basis of all future regulations and they never could thereafter raise those rates. You know the history of that? Mr. Peouty. I should suppose that provision would clearly be unconstitutional. Mr. Coombs. You think what? Mr. Peoutt. I should suppose that that provision would probably be unconstitutional. 218 INTEKSTATE-COMMEROE LAW. Mr. Coombs. Do you know what the result of that was? Mr. Proutt. No, sir; that is not my proposition. Mr. Coombs. You say that is not your proposition? Mr. PROtTTT. No; it is not my proposition at all. Mr. Coombs. I understood it was; 1 misunderstood you. Mr. Prouty. No; as you stated, the law of California provides that if a railroad allows a lower rate than the published rate, that that shall be the basis for all future time. Mr. Coombs. I do not mean to state it that way exactly; but I mean to say that they shall not raise the rate. Mr. Prouty. A provision of that sort might bankrupt every carrier in California; it might deprive every carrier in California of his prop- erty without due process of law, and I say that that is clearly in viola- tion of the fourteenth amendment to the Constitution of the United States. The Chairman. Would it be, if they had voluntarily fixed that rate themselves? Would there not be a distinction between a rate made permanent — simply a rate that they had fixed and made permanent — and an arbitrary fixing of a rate by any other tribunal that would be confiscatory in its nature ? Mr. Prouty. With respect to that particular tribunal, that might be so and might not be so held; but you must remember that the rates of one carrier necessarily fix the rates of every other carrier in competi- tion with that carrier. If one line makes a rate from Chicago to New York, every other line makes a corresponding rate from Chicago to the Atlantic seaboard. Mr. Richardson. You say you think it is unconstitutional. That would deprive him of his property, would it not? Mr. Prouty. My own impression is it would be confiscatory, but whether confiscatory or not it would be unjust. But it is not unjust to apply the remedy within certain limits, because the railroads must take their chances on their competitors, and this is the only remedy that the railroads themselves have not applied with any degree of eifectiveness to stop rate cutting. Take the Joint Traffic Association. It embraces all the lines which operate between Chicago and the Atlantic seaboard. It was managed by a board of managers. One of the things which that board of managers had power to do was to put in the rate over all those lines, and every line was obliged to observe that rate until it was taken out. When rates became demoralized the only way the traffic association had of stopping that demoralization was to reduce the rate, and that was what they mvariably did. And Mr. Callaway, of the New York Central Railroad, once said to me — I think it was in the presence of all the Commission — that that was the remedy; that no rate could be maintained that was radically too high, and that you had to reduce a rate to its proper basis or below its proper basis before you could secure its maintenance. Mr. Richardson. Would it not have this eflfect, also, if I catch your meaning correctly ? As I understand it, a railroad that negotiates for a rebate of course does that secretly, that is a secret matter; it is prompted by the desire to take the freight from some other railroad. Mr. Prouty. Yes, sir; to get that traffic. Mr. Richardson. Now, it intends to make up what it loses by that rebate by charging somewhere eke. So, if you were to establish the INTEESTATE-COMMEBCE LAW. 219 rebate as a standard by which the railroad was to be governed, you would right it? Mr. Proutt. 1 think that is the most effective way of righting it. I do not think a criminal act can altogether right it, but T do not think there is anything that comes nearer to it than the power to make a railroad charge during such time as may be right and reasonable, and under such circumstances as may seem right and reasonable, the rate which it has accorded to the favored customer. Mr. Richardson. Does that not lead to the fact that you must make rates in some manner elastic? Mr. Prouty. What do you mean by the term "elastic? " Mr. Richardson. Between two given points, a maximum and a minimum. Mr. Prouty. Do you mean you should have one rate by one road and another rate by another road? Mr. Richardson. No. Mr. Prouty. One rate for one shipper and another rate for another shipper at the same time ? Mr. Richardson. Yes; that is what I mean. Mr. Prouty. That is entirely foreign to the principle of the act regulating commerce. The English court has held that under the pro- visions of their act, which is similar to ours, you may accord to a shipper with a hundred cars a day a better rate than that accorded to a shipper with only one car of traffic a day. We hold in the United States that that matter can not be taken into account; that the little shipper, the little producer of dressed beef, who produces one car of traffic a day, or one car a month, is entitled to exactly the same rate on that car at the time he ships it that is accorded to the great packing house that gives a hundred cars a day. There is an inconsistency, and if you regard a railroad as a business proposition simply, which goes into the market and buys and sells its products, you can not defend that provision of the law. But the theory of this is that the railroad is a public servant, and it ought to accord to all shippers alike the same rates. Mr. Richardson. Can not you go a step further and say it performs a Government function ? Mr. Prouty. I think so. Mr. Richardson. And it must be held to perform those functions just as the Government does? Mr. Prouty. I think so. Everybody does not agree with me there, but that is my idea. Now, one thing in reference to one question asked Mr. Knapp yes- terday, and that question was this: Mr. Knapp stated that the Inter- state Commerce Commission had obtained testimony in Chicago last January, and I think last December, showing that rebates had been paid by certain railroads and to certain shippers, and the question was, Why had not these railroads been punished, and why had not these shippers been punished? 1 want you gentlemen to distinctly understand what the Commission can do in that case and exactly what it can not do. All the Commission can do under the law as it stands is to employ an attorney and request the Attorney-General and the district attor- neys in the different districts of the United States to prosecute these otfenses. We took this testimony; we employed an attorney whom 220 INTEESTATE-COMMERCE LAW. we believed to be a very competent one; we sent the testimony to the district attorneys in various districts where the offenses were committed, and we sent it to the Attorney-General of the United States. . . Now, that, gentlemen, is all the Interstate Commerce Commission can do. I do not know who will be convicted, I do not know whether anybody will be convicted, I doubt very much whether anybody under this law as it stands can be convicted, but that is all that the Inter- state Commerce Commission can do in the premises. Mr. Mann. Has that matter been taken up before the Federal grand jury at Chicago or elsewhere? Mr. Peouty. I do not think it has yet; but, as I have said, that is a thing we have no control or jurisdiction over. We have instructed our attorney to proceed with all possible diligence and I suppose he will do so. But he is subject to the control of the Attorney-General of the Uiiited States. Mr. Mann. Do you think they would proceed with any more dili- gence if you would give them a little more law? Mr. PEOUTy. No, 1 do not; but I think the amendment Mr. Knapp spoke for yesterday would be a little different kind of law which could be used to prevent the payment of those rebates. We can prove that every railroad operating between Kansas City and Chicago has paid those rebates. . We can show, and the testimony shows, that in certain cases they paid, I will say for a case, 500 different shipments. That can be proven. If this law absolutely provides that the corpo- ration is subject to a fine of not less than $500 for the forfeiture for every shipment made at the reduced rate, if that was the law, I do not think the shipment would ever be made at the reduced rate, because I do not think the railroad would dare take this chance; and if it did take this chance I think it could be fined in a substantial way and that the thing could be stopped, at least in a measure. Mr. Mann. Your position, then, is that if a rate is fixed by the Com mission, say, for two years, that a railroad company which is willing to make a lower rate shall not be permitted to do so at the risk of a penalty of $5,000 for each time it transports at the lower rate? Mr. Peoutt. My position is this: The law requires every carrier to publish whatever rate it makes. If the Santa Fe Company desires to make a lower rate than 23^ cents, it can publish that rate and put it into effect. This law says it shall not put that rate into effect unless it does publish it. My position is that it should simply be compelled to comply with this law or that the law should be amended. Mr. Mann. This bill provides that the Commission shall fix the rate and that that rate shall remain operative for two years. Mr. Peoutt. This bill — I have not read the bill, so it is a little reckless for me to say what it provides Mr. Mann. Then it seems the Interstate Commerce Commissioners have not taken the opportunity to read the bill Mr. Peouty. Ordinarily when a bill has been referred to this com- mittee a copy of it has been sent to the Interstate Commerce Commis- sion with the request that the Commission read it and with the request that it (the Commission) come before this committee and present its views on the measure. That was not done in this case. We were invited the other morning to appear here, and we came here in obedi- INTEKSTATE-COMMEBCE LAW. 221 ence to that invitation. The chairman said yesterday that you had several bills before you for consideration. I do not know that we are speaking to any particular bill. We are speaking to the general proposition of railroad regulation, as I under- stand it. ButI supposeldo know, in a general way, what the Corliss bill is, because I suspect that 1 did read the bill upon which it is founded. 1 do not think the Corliss bill does exactly what you said. I think the Corliss bill does this: If a rnan claims a rate is high, or is wrong, he makeshiscomplainttotheCommission. If the Commission, afterahear- ing of that case, after taking testimony and hearing all that is to be said in the case, sitting as a board of arbitration, comes to the conclusion that that rate is high, then it may order the carriers to make a lower rate for the future, which shall be operative for two years, or not to exceed two years. That order of the Commission is subject in all cases to review in Federal courts. Mr. Richardson. The order is not suspended, however, while you are taking it to the Federal courts for review? The Chairman. I want to interrupt you one moment, right here. Mr. PEOurr. Certainly. The Chaikman. I think the statement you have just made is an unfair one. Some days ago I directed the clerk of this committee in person to go to the chairman of your Commission and present the compliments of this committee and suggest that these hearings were in progress and that we would be glad to hear from the Commission. I learned afterwards, incidentally, from a member of the committee, that that had been regarded as ofl'ensive to the Commission. 1 then wrote to the Commission as politely as I knew how, asking that they would appear here. The reason why no bill was sent was because of the supposition, I suppose in the minds of every member of this com- mittee, given to us through the newspapers and otherwise, that this was a bill prepared by the Commission. It was certainly not for any purpose of affronting the gentlemen that compose that Commission, for whom I have, for whom every one of us have, I think, the highest respect. I know I speals for myself in that way; and for some of the mem- bers of the Commission, those I know, I have the warmest friendship, and I can not but think that your remark was a gratuitous one and entirely undeserved by this committee. Mr. Pkouty. I intended that remark in no spirit of criticism to the committee or to any member of the committee. I was asked by a member of this committee if I had read this Corliss bill, and I told him I had not, and 1 told him why. The Chairman. As I understand it, inferring that the reason why you had not done it was because an indignity had been put on the Commission. Mr. Peoutt. No; I do not so intend to say and I do not so think. I simply stated the fact that hitherto — before this session — whenever bills of this kind have been introduced, either in the House or in the Senate, it has been the uniform custom to refer those bills to the Inter- state Commerce Commission. This year that has not been done. Now, why it has not been done I do not know. The Chairman. I think there are three members of that Commission that would not accuse me of any disrespect. Two of the gentlemen 222 INTERSTATE-OOMMEBCB LAW, on that Commission I have not the honor of the intimate acquaintance with that I have with the other three. Mr. Pkouty. I certainly should not, for I have no reason to. I stated the fact as it existed, for the reason of another fact which Mr. Mann seemed to think as improper on my part. Mr. Mann. I do not think anything you have said is improper. Mr. Richardson. Now, the last question I asked you. Mr. Peoutt. I have forgotten what it was. Mr. RiCHAEDSON. The question was: When the Commission fixed the rate and the railroad wanted it reviewed by the Federal court, that your order fixing the rate was not suspended at all but continued to go on. You favor that, do you? Mr. Pkouty. I do not know what the provision in that respect in the Corliss bill is. Mr. RicHAEDSON. That is the provision in the Corliss bill. Mr. Pkoutt. You say pending the review of the court the order is enforced ? Mr. RiCHAEDSON. That the order is enforced pending the review of the court, yes; and then if the railroad takes it to the Supreme Court of the United States, the order still goes on for two years ;_ the two years may expire before the Supreme Court passes on it; that is the effect of the Corliss bill. Mr. Peouty. 1 had expected that any bill which passes would con- tain the provision allowing the court in its discretion in all cases to suspend the effect of the order pending proceedings in review. Now, just what the provision of this bill may be I do not know. Mr. Richardson. That is different from the Corliss bill. Mr. Peouty. That is the provision that I have expected would be incorporated in any bill that might be reported by this committee or that might be passed by Congress. Mr. Richardson. In other words, the effect of your position, if I understand it, is to give full effect to the appeal; that is, while the appeal is pending your order fixing the rate is suspended too? Mr. Peouty. Not necessarily; it rests in the discretion of the court to say whether it shall or whether it shall not be suspended. That is a matter which I did not intend to speak about this morning, and which more properly falls within the province of somebody else, probably. But it is here, That the only way shippers can obtain relief ordinarily is by putting in effect the order of the Commission. Now, if a community comes to the Commission and makes its com- plaint, and that complaint is heard and the Commission decides that it is well taken and that community is wronged, one of two things must happen. Unless that order goes into effect the community continues to be wronged and it has no redress. If it goes into effect and is wrong, the railroad is wronged and it has no redress. In other words, somebody must suffer. And the question is, if a competent tribunal has heard the case as an arbitrator and decided that question, why the decision of that tribunal ought not to remain effective pending a review of that question in a court. That is the proposition. Mr. Mann. Would it be competent for the Chicago Board of Trade, for instance, to file a complaint under a provision of this sort, alleging that the freight rates between Chicago and the seaboard are too high, and have the Commission fix freight rates on everything? Can that be done, if it had the power, under one complaint? INTERSTATE-COMMERCE LAW. 223 Mr. Pboutt. I suppose if all freight rates were involved in one complaint, that the Commission might fix the freight rates on every- thing as you suggest. Mr. Mann. Then under this section of the bill making a provision for a cutting of the rates it would be impossible for a railroad com- pany, without permission of the Commission, to make a lower rate until two years had elapsed ? Mr. Proutt. No; the railroad company is at liberty to reduce the rate at any time. Mr. Mann. If the Commission can fix a rate and order the railroad company to adopt that for two years, how can the railroad company reduce the rate in the meantime ? Mr. Peouty. The rate which the Commission fixes is exactly like the rate the Illinois commission fixes or the Iowa commission fixes. It is a maximum rate. Mr. Mann. Ah, no; but that is exactly what we want to find out. In considering the bills we have had before we have questioned ship- pers, and they have not talked about a maximum rate; they have talked about fixing a rate in order to prevent the cutting of the rate. What is the idea of the Commission, that you would fix a maximum rate? Mr. Peouty. Yes. Mr. Mann. And that the railroad can make a rate below that ? Mr. Peouty. Yes; if they will publish the rate. Mr. Coombs. That is, it must be uniform ? Mr. Proutt. Yes; uniform to everybody. Mr. Mann. Then you do not think you ought to have the power to say what is a reasonable rate and determine that that rate shall be enforced, but simply that you shall have power to say what shall be a reasonable maximum rate? Mr. Peouty. When the reasonableness of the rate is called in ques- tion, that is the only power the Commission should have. There al-e certain cases where discilmination is alleged where it might be neces- sary to determine maximum and minimum rates. Mr. Mann. Discrimination is alleged everywhere. Mr. Peouty. Not that kind of discrimination. The Commission .should have power, might have power, or would have power under this bill, to determine the differential between New York and Phila- delphia, and that differential must be observed. Mr. Mann. The only way you could determine that under any bill we have had here is by fixing the rate absolutely. Here are Chicago and Kansas City, for instance. You are not permitted under this bill to say what the differential shall be. Mr. Peouty. That is what we say. Mr. Mann. But I say that' you are not permitted under any bill that we have had here to say what the differential shall be, but you must say what the rate shall be. Mr. Peouty. As I have said, 1 have not read that bill. I know gen- erally aljout a great many bills which the Commission would favor. I have never favored a bill, and I do not think it true of this bill, which does not permit the Commission to fix a differential, because that is the only thing the Commission is called upon to do Mr. Mann. I say the only way you can fix the differential is by fixing the rate. 224 IHTERSTATE-COMMEROE LAW. Mr. Peouty. i understand that we might fix the differential directly, just as we would fix classification, and let the railroads fix the rates. There was a great discussion between New York and Philadelphia and Boston some years ago as to what the differential between those three cities should be. The railroad referred that to a board of arbitration, of which Mr. Thurman was one member, and I think the chairman was a member; and that board of arbitrators fixed the_ differential between those places. Under this bill, as I understand it, the Com- mission would act in exactly that way; it would fix the differential and the railroad would fix the rates. Mr. CoKLiss: And the railroad has an immediate relief by applying to the court to prevent enforcements of the order of the Cfommission under this bill. Mr. Peouty. Certainly. Mr. CoELiss. So it is not an arbitrary adjudication of the Commis- sion for two years without power to immediately appeal to the courts? Mr. Peouty. I have never advocated giving to the Commission any power over a rate which could not be reviewed in the Federal court; in the circuit court first, in the circuit court of appeals next, and the Supreme Court of the United States finally. And my position is that if those tribunals all affirm that the rate is unreasonable it ought to be made right. Mr. Mann. The bill here says that you should have the power to fix the relation of rates. Mr. Peouty. That is a differential. Mr. Mann. That is what you mean by a differential? Mr. Peouty. Certainly. Mr. Mann (reading) : In case of ordering a change in the relation of rates, if it shall become necessary, in order to establish or maintain a just relation thereof, to prescribe the rate or rat«s to be observed by either or all of the parties concerned therein, it shall be its duty so to do; and when a rate involved in any case is a joint rate it shall further deter- mine the proportions, etc. You think that would give you the power to say how much more should be charged from Chicago to New York than from Kansas City to New York? Mr. Peouty. Yes; it might. Mr. Mann. How much less? Mr. Peouty. It might. Mr. Mann. "It might;" of course it might. But would it? Mr. Peouty. Yes; I think it would. That power has to be exer- cised by somebody. As I say, it is now exercised by boards of arbi- trators selected by the railroads. Mr. Mann. Then, if the railroad companies concluded that they ought to reduce the rate from Kansas City they would not have the power to do so at all? Mr. Peouty. They must reduce the rate from Kansas City and Chi- cago at the same time, and that is done now; that is done to-day. The rate to-day between New York and Kansas City and Chicago and St. Louis were all made on a certain differential basis. When that rate to one point is reduced, the rate to every other point is correspond- ingly reduced. Mr. Mann. Then you think the Commission should be authorized to determine absolutely how much more in every case shall be charged IWTBiJSTATB-UOMMEEOE LAW. 225 from Kansas City than from Chicago, or from Minneapolis than from Chicago, or from Ogden than from Chicago ? Mr. Prouty. I think that some public tribunal, to whom the people can apply as well as the railroads, should determine that question, which is now determined by boards of arbitration selected exclusively by the railroads. In other words, I think the Government should create a board of arbitration instead of the railroads creating that board to determine those questions. ■ Mr. Stewart. Do you not think the difficulty would be this: That the Commission should take the initiative and relegate the railroads to the courts for revision? Mr. Proutt. No, sir; I do not think so. My own view is that the rates should be fixed in all cases by the railroad company. Mr. Stewart. Are you not begging the question when you say that the rates should be fixed by the railroad company, and that when they make the rebate that should be fixed; are not they always escaping those propositions and making a secret rate? Mr. Protjtt. The secret rate and the published rate are two differ- ent things. Mr. Stewart. You want them to publish their secret rates? Mr. Pkoutt. We want them to publish any favored rate they give anybody. Mr. Stewart. Is not that the thing they are avoiding; is not that the vice in the whole proposition ? How are you going to force them to publish those preferred rates they give to individuals? That is the vice of the whole proposition. Mr. Proutt. They publish between Chicago and Kansas City a rate of 22i cents on dressed meats. They give to some favored shipper a rate of 18i cents. Now, then, I would have somebody invested with power to order them to publish a rate of 18i cents. Mr. Stewart. That is the proposition they are dodging and wiU continue to dodge. Mr. Proutt. Suppose you publish a rate of 18^ cents, will they reduce that? Mr. Stewart. In secret, yes. Mr. Proutt. They will soon come to a point where they won't do it. Mr. Stewart. How are you going to force them to that low point? Mr. Proutt. They force themselves; they select the rates. If a railroad company publishes a rate of 22 cents and makes a rate of 18 centB to a favored shipper, let them publish the 18-ccnt rate. If they publish 18 cents as a rate and then make a rate of 15 cents to a favored shipper, let them publish 15 cents as a rate. Mr. Stewart. Suppose they do not do it. Mr. Proutt. How are you going to compel them to, you mean? Mr. Stewart. Yes; that is the idea. Mr. Proutt. If this Commission makes an order to the railroad company that it publish a rate of 15 cents, it can be enforced in two ways. Mr. Stewart. How are you going to find out that they are giving this secret rate of 15 cents ? Mr. Proutt. Well, that is the difficult proposition Mr. Stewart. That is the proposition we have to meet. Mr. Proutt. But you can find it out with sufficient certainty for this purpose, although you might not be able to find it out with sufficient i-o li 15 226 INTEESTATE-COMMEECE LAW. certainty to convict somebody under a criminal act. The attorney of one of the great railroad systems of the United States said to me the other day: "I have about got around to a point where I want the Commission to make the rates." 1 said, "Why?" He said, "Because if you did 1 think they would be better observed by the railroads than when made by the railroads themselves." But while there is consid- erable to be said on that proposition, while a majority of the States from which this committee coriie do substantially prescribe railroad rates, I can not believe that in those States the Interstate Commerce Commission ought to be charged with the duty of fixing the rates. Although the carrier is a quasi-public corporation it is a private cor- poration. Mr. Stewart. But when we have ascertained by experience that they will not do it fairly then ought there not to be a power that will force them to fairness ? Mr. Peotjty. I have given my opinion on that. The Chairman. You were about to give the two remedies. Mr. Proutt. The first remedy is to provide a penalty, as you do in Illinois. If the railroad does not observe the order it is subject to a penalty, and that penalty is made large enough so that rather than incur the penalty the railroad will observe the order. The second remedy is by an application to the, court allowing the court to enforce the order by a mandatory remedy. Mr. Stewart. Do you think a railroad company would care a con- tinental for a fine of $6,000; would that deter them? Mr. Protjtt. A fine of $5,000 against a railroad company amounts to nothing; but a fine of 15,000 imposed against each ofiense amounts to a good deal. Mr. Adamson. Suppose you also provide that from the day the published rate goes into effect each shipper may for all time recover from the railroad company for the expenses charged over the lowest rate charged for the day he ships ? . Mr. Prouty. Well, Mr. Eepresentative, that remedy has been con- sidered. There are a great many other remedies of that sort. I do not think any of them are entirely fair. I do not think any of them are entirely adequate. I think there is an adequate remedy and a fair remedy, and that that ought to be applied. Mr. Adamson. They might help a little? Mr. Prouty. Possible those would help. Mr. Corliss. It would be a good thing for the lawyers? Mr. Prouty. Yes. Mr. Adamson. If a man thinks enough of a case to pay a lawyer to go after it he can find him if it is meritorious. Mr. Prouty. I wanted to say one thing more in reference to the chairman's testimony, and that was this: The statement has been made a great many times that this law is all right enough as it stands; that the Interstate Commerce Commission is to blame for not having enforced this law Now, it is the privilege of every American citizen when he is accused of a crime or dereliction of duty to be confronted with the specifications of the charge and with the witnesses to prove it, and, as a member of the Interstate Commerce Commission — my associates can say what they want to— if the charge is made here that the Commission has not done its duty in enforcing this law, I hope you will ask of the witnesses in what respect; and I hope you will rNTERSTATE-OOMMEEOB LAW. 227 allow me to come here and show you what I can in respect to any transaction that may be referred to. I am not conscious, since I have been on the Interstate Commerce Commerce, in the five years 1 have been there, that I have ever omitted to do anything in my power to enforce the act to regulate commerce; arid you gentlemen can not give this country a better service than to give attention to the powers of the Interstate Commerce Commission in that respect. This law has been in effect over fifteen years, and it has produced in no material degree the thing which it was intended to produce. If the fault is with the Commission who are administrating that law the people ought to know it. The law provides that a Commissioner may be removed for incompetency, and I am inclined to think that we have somebody at the White House now who would enforce that part of the law. If this Commission is incompetent, it should be removed. If the trouble is with this law, if no commission, competent or incom- petent, can enforce this law, then the law should be amended; and it is your duty to find out whether the Commission is or is not compe- tent, whether it has or has not neglected to enforce the provisions of this law. Now, when somebody appears here and says that the Interstate Commerce Commission has not done its duty, he ought to be required in public — not in private — to say in what respect is the shortage of duty, and then allow us to meet that claim. Now, I have already taken up so much time in answering these ques- tions that I do not know that I ought to undertake to saj;^ what I intended to this morning. There are certain questions of evils which this bill seeks to remedy. One evil is the payment of the rebate, the departure from the published rates. Another evil is discrimination in the published rates. There are to-day the grossest discriminations in the published rates in favor of the Standard Oil Company. Another eivil is of too high a rate. My own belief is, and has been, that the great danger is a rate absolutely too high. I do not want to belittle the evil. of discrimination; it is the sore spot, it is the thing. which hurts to-day, but it is tempora-ry in its effects and the other thing is permanent in its effect, and if you will indulge me for fifteen minutes I want to present, rather tha« discuss the details of this bill, my idea on that subject. • In order to do that, I want you gentlemen to consider for half a minute what railroad competition is. You are told that we ought to rely on railroad competition to regulate the rates of this country or to secure a sufficiently low rate. What is railroad competition under the act to regulate commerce? I will take two points that you gentlemen are all familiar with. Mr. Mann seems to be very much interested in this subject, and so we will take Chicago as one point and Omaha as another point. We will say there are three (as a matter of fact, I think there are four lines now) railroads competing for business from Omaha to Chicago. The act regulating commerce provides that the rate, those companies charge shall be a published rate open to all shippers alike. These three rail- roads all have business. How do they compete for it? One railroad may offer a better facility than another railroad, but the practical way, the only way in actual railroad competition, is to offer to one shipper a lower rate than is offered by his competitor. Suppose the railroad 228 IWTEKSTATE-COMMBECB LAW. competes under the law — not secretly and in violation of the law, as they do to-day, but competes openly— it observes this law, and puts in effect a published rate by one of those lines between Chicago and Omaha. What happens? Every other line has to meet that; the pub- lished rate must be the same between all three lines. And what effect does that produce on these three railroad companies? Have you increased the business? Very little, if at all. I do not mean to say that a special rate may not build up some industry. I do not mean to say that railroad rates may not contribute to the general prosperity and in this way add to the traffic of the rail- roads; but the mere reduction of a rate between Chicago and Omaha does not materially increase the traffic over those lines. It does not make practically any difference with the quantity of corn raised west of the Missouri River whether the rate from the Missouri River to Chicago is 12 cents or 18 cents a hundred. So the only effect is this: You have reduced the revenue to every single line, you have injured every single line, and you have not benefited the lines. _ Mr. Adamson. You do not think rate wars are beneficial to business? Mr. Pkouty. No; 1 do not think rate wars are beneficial to business. Rate wars sometimes reduce rates Mr. Adamson. I want to ask you, then, if one line makes alow rate, legally publishing it, and forcing other rates down, and other railroads then meeting that cut, and then the first railroad publishing a lower rate and the other roads meeting that, thus inaugurating a rate war, would it not be necessary and right that the Commission should be invested with power to make a minimum rate; in other words, is it not right to do something to protect the railroad in such cases as well as the people in other cases ? Mr. Pkoutt. That question came before the Commission early in its history, and Judge Coolidge said that the Commission had not such power. Mr. Adamson. Ought it to have it, in order to meet such emergen- cies as that? Mr. Pkoutt. That is for you gentlemen; I do not think there are, or will not be in a short time, any emergencies of that sort. No; I do not think it is necessary for the Commission to have that power, but I do think it would be just to the railroads to give somebody that power. 1 think you ought io aim to protect and conserve the interests of the public. They are a great part of the public, and you can not have general prosperity without they are prosperous, and their interests should be considered by you. Mr. Adamson. If we are going to take charge of the subject and do such regulation as the balance of the public want, ought we not to legislate in the interests of the railroads to prevent their destruction ? Mr. Peotjtt. Perhaps so. I would not dissent from that. This thing that you call railroad competition hurts every railroad and does no railroad any good. That is a proposition which you gentle- men must consider as the basis of all these investigations. It is not like competition in some other business. Your railroad is there and it has got to be used there; it has a certain business and that business must be done there and can not be done anywhere else. If you own a factory that does not pay, you can move it somewhere else, possibly; if you do not like one market, you can go into another market; but that is not so with the railroads. INTEESTATE-COMMEECE t,AW. 229 It must be used there, to do that business there, and it soon becomes evident to every man who investigates this question at all that railroad competition, while it may add immediately to the traffic of a business, is suicidal in the end. Every railroad manager sees it. The first thing he tries to do is to make a traffic agreement — to agree on what these rates shall be. That does not amount to much, because it will not be observed. Then comes the following arrangement: He says that there is so much traffic; he says, " We will divide it between these three rail- roads." Then Congress passes a law and says, "You shall not pool." Then comes the traffic association. They say, "We will agree on some rate." And then comes the antitrust law and says, "You shall not maintain your traffic association." Then, gentlemen, this thing finally gets back to the owners of this property, and they say, "We are paying for this nonsense. We, the owners of these three roads, are the sufferers," and the thing which can not be controlled through the traffic department, and never is, is controlled through the medium of ownership. In some way or other those three roads are bound to get together. The owners of those three roads are bound to get together to eliminate that competition, which does not do anybody any good and which does everybody — from a railroad standpoint — harm. Now, I said when the joint-traffic decision was made that that deci- sion did more to eliminate railroad competition in the United States than any other thing which had happened for years. I believed it would. I said five years ago, when I first investigated this question, that there was but one possible outcome, and that was the consolidation of the railroads of the United States. My opinion would not be worth anything, and it was not worth anything then, but conditions to-day have verified that judgment. You, gentlemen, have seen from the newspapers from time to time the extent to which these consolidations have proceeded. 1 doubt if you realize it fully, and I want to call your attention to it as an important phase of this problem, and one which has to be reckoned with in disposing of this subject. I have in my hand here an article written by a gentleman named Kuneth. I do not know him, but I have taken this from the World's Work for February, 1902. I say I do not know him, and I attach no jjarticular importance to his opinion, but I use these tables merely for the sake of reference. What do these show? Here we have, first, the Vanderbilt system, which embraces 19,500 miles of railroad. I do not take Mr. Kuneth's opinion for that; that fact is shown by the records of the Interstate Commerce Commission — with this exception: The Northwestern Railroad is reckoned as a part of that system, and while everybody understands that the Northwestern Railroad is a part of the Vanderbilt system, the records of our office would not demon- strate that fact. But you can safely say to-day that the Vanderbilt system embraces 19,600 miles. Next we have the Pennsylvania system. That system is set down here as embracing 14,350 miles; but that computation includes the Baltimore and Ohio Railroad. The Chesapeake and Ohio Railroad and the Norfolk and Western Railroad are treated as controlled jointly by the New York Central and the Pennsylvania. I think, in fact, they are controlled by the Pennsylvania Railroad and should be added to 230 INTEESTATE-OOMMEBCE LAWi the Pennsylvania system; making that system 18,000 miles, in round numbers. We know that from the records of the Interstate Commerce Com- mission. We have next here the Morgan-Hill system, which embraces roads in which Mr. Morgan is most prominently interested and which he controls, and they aggregate here 37,500 miles. Now, with respect to that, we know from the sworn testimony before the Commission that Mr. Morgan and Mr. Hill control the 18,000 miles of road embraced in the Northwestern merger. It is known and assumed b f everybody that Morgan controls the Southern Railroad. Since this article was written I have added 6,000 miles to the mile age given here, because Mr. Morgan to-day controls the Louisville and Nashville. It is somewhat remarkable how these things happen up in New York. There is a flurry in the stock market and something has been done, and nobody knows exactly what. Somebody says Mr. Gates has it, and another man says Mr. Rock Island Road has it; but in two or three days Mr. Morgan says, in reply to an inquiry, "I own it." Mr. Gates says, "I thought I did, but I didn't," and Mr. Belmont says, "1 did, but I don't. Mr. Morgan owns the Louisville and Nashville." Add that to this statement here and you have 43,000 miles of road which Mr. Morgan controls to-day. I think I can say in respect to that, taking this transaction in Louisville and Nashville, that the tes- timony given before the Commission, and from the records of the Commission, that that statement is correct. We have here now the Gould system, of which the Missouri Pacific is the nucleus, and about which I do not pretend to know so much, and I do not know whether the records of tne Commission would show it or not. I have to take that system alone, as Mr. Kunith gives it, at 16,000 miles. The chairman suggests that when the reports for this year are in they will probably show that fact. That leaves the Harriman system, which is set down here at 21,000 miles; and in respect to that I will say we know that from sworn testimony given by Mr. Harriman before our Commission. Now, gentlemen, what is the grand total? One hundred and four- teen thousand miles of railroad controlled by five different systems, or five different persons. You have left the Acheson system, the Rock Island system, the San Francisco, and the Milwaukee, and those are the only important independent systems there are. Those aggregate 21,000 miles. When you have added, gentlemen, to the 114,000 miles that 1 have stated the 21,000 miles now independent you have a monopoly of the railroads of this country in the hands of five men. You say there are 200,000 miles of railroad. That is right; there are 200,000 miles of railroad. " There are 70,000 miles of railroad left. But what railroad ? Seventy thousand miles of railroad that does not begin anywhere and does not go anywhere; 70,000 miles of railroad that is absolutely dependent for its existence upon these five great systems. Now, gentlemen, you may talk about railroad competition, you may rely upon railroad competition to reduce rates or to regulate rates, but there is no railroad competition. When five men seated around a INTERSTATE-COMMEEOE LAW. 231 table in the city of New York can say what the rate on grain shall be from Kansas City to the Gulf and from Kansas City to the seaboard, from the Missouri River to the seaboard, and from the grain fields to Chicago and Duluth, you have not any more competition in the move- ment of grain. When five men can sit down around a table in the city of New York and say the rates shall be so and so, " if at the end of the year this thing does not pan out to be as we think it ought to we will make it right," you have a pooling arrangement that can never be reached by any law. One of two things has got to result. Either these five men will agree upon some modus vivendi, upon some appor- tionment of the territory of this country, as they have done in England to-day, with the result that they have the highest freight rate there in the world, or they will become partners, or one man wiU buy out the other four. Now, gentlemen, when you have a condition in this country where one man virtually controls its railroads, what are you going to say about it? We asked Mr. Harriman that question, and we asked Mr. Hill that question, and Mr. Harriman and Mr. Hill both said: "You need not be at all alarmed; we will take care of the public; we will reduce freight rates." Gentlemen, I want to read to you, for 1 drew it up, a statement showing the appreciation of the properties embraced in the Northwestern Securities Merger for five years. I compare March in 1897 with March in 1902, and with this result: Northern Pacific common, in 1897, was worth 12. To-day it is worth a trifle above par. A gain on $80,000,000 of 172,000,000. Northern Pacific preferred was worth 36. It is worth par to-day. A gain on 175,000,000 of $50,000,000. Burlington was worth 72. It has been retired on the basis of 200. Converted into bonds on that basis. A gain of $128,000,000. The capital stock of the Great Northern was then $40,000,000, and it sold on the market for 120. The capital stock to-day is $100,000,000, and it sells on the market for 180. A gain of $132,000,000. This makes in all a net gain on the market value of those stocks of $382,000,000 in five years. Money enough to build and equip two lines of railroads from the head of Lake Superior to the Pacific coast. What is a freight rate? A freight rate is a tax on everything which enters into the life and commerce of this country. You have not got a stitch of clothes on you which has not borne that tax. You do not eat a single thing which does not bear that tax, unless you dig it in your own garden or buy it from some laborer who digs it in his garden. And to say that one man shall determine what every other species of property shall pay to his property is a thing which I do not believe the people of the United States will submit to. Mr. Hill says in his sworn testimony that a man who charges too high a rate is a pirate. I do not think that. The question of the rate, a reasonable rate, is a matter of opinion. Mr. Hill's opinion might be one way and your opinion might be the other way. So I do not think that, at all. But I do think this: The history of all time has shown that when you give a single- individual power over the property or the liberty of his fellow-man and do not restrain or control that power, he abuses it. If the railroad property of this company has the right, without control, to say what tribute other property shall pay to it, it will abuse that power. Now, you say that is a theory. You say your rates are still falling. 232 INTERSTATE-COMMEEOE LAW. These operations began, you see, years ago. I say to you that rates are not still falling; I say to you that rates are advancing— that there is a steady advance of rates in all parts of this country to-day. This is shown by the published schedules on file with the Interstate Com- merce Commission. It is shown even by the rates per ton per mile, which is a poor indication of the actual rate, but which has advanced for the last two years, and undoubtedly, when our computations are completed, they will show a higher rate per ton per mile for the year ending June 30, 1901, than for the previous year. If you could sit in an office, as I do, receiving complaints from all parts of the country of advances here and advances there, you would understand in a way that you can not understand how this process goes on. If one man owned all the railroads of this country he could not charge what rate he wanted to; he would not be fool enough to make any sudden or marked advance. What he would do would be to maintain rates. What does that mean? To just maintain the present published rate? Mr. Morton, of the Atchison Railroad, in testifying before the Commission some time ago, said that departures from the published rates cost his railroad between $500,000 and $1,000,000 a year. His revenues are about one-fortieth of the entire revenues of the railroads of the United States. Now, assume that every other railroad exceeds the rate to the same extent that the Atchison Railroad does, neither more nor less. What does it mean? It means this: That a simple maintenance of the published rates adds to the net rev- enues of the railroads of this country 120,000,000 a year. On a 4 per cent basis it adds to the capitalization of this country $500,000,000; it puts into the pockets of somebody $500,000,000 — the owners of these stocks and securities. There is another thing. I am sorry I have not time to elaborate more, and I know it is rather uninteresting testimony, but it is impor- tant that you gentlemen should have these things in mind, because they go to the basis of this whole question. The cost of transporting traffic is decreasing every day. Grades are reduced, curves are cut out, the power of locomotives is increased, and the result is to reduce the cost of transportation. The sworn testimony of the manager of the Lake Shore Railroad before the Interstate Com- merce Commission not long ago showed the average carload of grain from Chicago to New York was 60,000 pounds. Fifteen years ago that was probably 30,000. He said that the carload of the future would be nearer 100,000. He further said that one engine would draw 50 cars from Chicago to Bufi'alo, and doubtless the same engine would draw the same number of cars from Buffalo to New York. Now, observe for a minute what that means. In 1885 the average carload was 30,000 pounds, and the cost at the present rate from Chicago ITi cents. The railroad would receive for hauling that train load $2,625. To-day the average carload is 60,000 pounds, and the railroad would receive for hauling it, gross, $5,250. When the average load is 100,000 pounds the railroad will receive for hauling those 50 cars $8,725. Captain Granner testified that on his line 50 cents a train mile would probably cover the cost of movement. Taking out the cost of movement, $2,100 in 1885; $4,700 in 1900; $8,200 in 1901. There is another thing. The traffic on these railroads is increasing, and as you increase the density of traffic you can move it cheaper; the INTEESTATE-COMMEEOE LAW. 233 rate ought to decline. These gentlemen say that the cost of their sup- plies is increasing, and perhaps they are; but statistics just published by Bradstreet show that for the year ending December 31, 1901, the gross revenues of the railroads increased 12 per cent and the net reve- nues increased 16 per cent. Now, why is it? When the cost of moving traffic is increasing, when the density of traffic is increasing, when gross revenues are increasing, and net revenues increasing still more rapidly, why is it that the freight rate also is increasing? It is because you are remov- ing railroad competition. Now, they say that there is no such thing as railroad competition. At the risk of wearying you I will cite one instance, because it arises in the sworn testimony taken by this Commission. The rate from the Missouri River to New York on grain used to be 29 cents a hundred pounds. I think it was about that in 1892. In 1899 that rate had fallen to 12 cents a hundred pounds. The Commis- sion had investigated that question and had declared that 23 cents was a reasonable rate. We thought we would investigate it again and find out what it was that occasioned this low rate from the Missouri River to the seaboard. We summoned before us all the traffic managers of the leading rail- roads, and they all testified, without one single exception (this was in the winter and there was no water competition), that the cause of that low rate was railroad competition between the carriers themselves. What is the rate to-day from the Missouri River to New York? I think it is 18i cents; and why is it 18^ cents to-day as against 12 cents three years ago? For this reason: You have eliminated the most troublesome factors in that competition situation. The Balti- more and Ohio and the Norfolk and Western and the Chesapeake and Ohio are to-day controlled by the Pennsylvania. The lines north of Pennsylvania are controlled by not over two men. That is the reason that the farmer west of the Missouri River pays to-day 5 cents a hundred pounds more — yes, 6 cents a hundred pounds more — than he did three years ago for the transportation of his grain. I do not say, gentlemen, that the rate is too high now. I am not discussing that question at all; but I am only saying to you that this competition which has been relied upon in the past is a thing of the past and that you have to put something else in the place of it. Now, what are you going to do ? What is the remedy ? The obvious answer is, Compel competition by law. That is what Governor Van Sant says. Dissolve the Northern Securities Company. That is what the Attorney -General says. Enforce the law against trusts and monopolies. Now, the law ought to be enforced. But suppose you dissolve the Northern Securities Company, what have you gained? Those rail- roads are still owned by the same men, they are still friendly, you can not by any possibility compel them to be enemies and to compete as enemies. Take all these other mergers. Mr. Morgan has bougnt this stock in the open market. Can you deprive him of it? And suppose you could. Suppose you could break up every railroad combination that has been formed in the past five years in the United States or in the last ten years. Suppose you could destroy the New York Central system and the Pennsylvania system and the Harriman system and the Goiild system. Suppose you could enforce the antitrust law and prevent all com- 234 IKTERSTATE-OOMMEECB LAW. binatioD between railroads and all agreeing as between railroads. What then? My friends, you would have in this country, in my judgment, a state of chaos, a universal bankruptcy in the railroad world. You can not apply that remedy, and you do not want to apply that remedy. Now, there is a remedy which you can apply. There is a remedy which is perfectly just to everybody, and that is the remedy which we ought to apply. If you ask me what the remedy is for the steel trust, I will say I do not know. I do not know. I am told that trust charges to-day $14 more for rails than a ton of steel rails cost. Now, I do not know how we are going to prevent it. But if you ask me what the remedy is for railroad monopoly, I have no difficulty, and you have no difficulty, in answering that question. The courts in every State of the Union have decided, the Supreme Court of the United States has decided, that the railroad is a public servant, that its rate is subject to public supervision, and the only way in which you can correct these evils is to exercise in some form, in some proper form, some supervision over the railroad rate. In closing what I have to say I will take a particular case. In 1900 the railroads operating in official classification territory advanced the rate on hay from sixth class to fifth class. They tried to do it for ten years, but had been unable to do so. Certain shippers of hay brought a complaint before the Interstate Commerce Commission complaining that that advance was unreasonable- and asked an investigation, and we have been investigating at great length that question. It was said in the argument, and perhaps appears in the brief, that the average advance on all hay shipped in official classification territory would be about 2 cents a hundred pounds only, a thing so insignificant, said the attorneys for the railroads, that no shipper who pays it could realize it. This classification does not apply to all the hay shipped in the United States. It applies, however, to perhaps one-half, perhaps two-thirds of it. But suppose for one minute it applied to all the hay shipped in the United States. What does it mean? We raised last year 50,000,000 tons of hay in the United States. Of that 50,000,000 tons, we shipped by rail 7,000,000 tons. This is an advance of 40 cents on every ton, or of nearly 13,000,000 on all the hay shipped in this country— $3,000,000 taken out of the pockets of somebody and put into the pockets of the owners of our railroad properties. Now, gentlemen, if that is right, it ought to be done, and I want to say to you that I do not know, although I have heard all this testi- mony, whether I think it is right or wrong; yet I do not want to be understood as expressing any opinion about it, for I have not done it. I say. If it is right, it ought to be done; if it is wrong, there ought to be some way in which the people of this country who are interested in that matter can obtain relief. Now, there is no way in which they can obtain relief unless you provide some tribunal which has power to inquire into the reasonable- ness of that rate and, if it finds the rate unreasonable, to make it right. That is the sum total of my proposition. I do not care to discuss to-day the ways or the means of doing it. It is said. Let him bring a suit. Mr. Hill said in his testimony before the Commission, "Let him bring suit." Who is going to bring Suit? Somebody who is damaged to the extent of |25— and no one person may INTEKSTATE-COMMEEOE LAW. 235 be damaged more? Mr. Harriman said in his testimony, "Let him brinff a suit." I said "Please cite the Commission one instance in which a court has ever rendered final judgment granting relief in a case like that." He said, " I am not a lawyer." 1 said, "You have money enough to hire a lawyer; get the best counsel you can, try and furnish this Commission with a memorandum showing one single case in which it has ever happened that a court of final resort has given damages for a thing of that sort." He has never furnished that memo- randum, and my belief is that no such case can be found. While the unreasonable rates and the unreasonable exactions of railroad companies have elected legislatures, abolished courts, and led to the most violent political convulsions, no ease, no relief, has ever been obtained from the courts. And that is the reason why the States have exercised that power. The members of this committee come from 16 different States. Of those 16 States, 10 either make or supervise the rates. I include in that the State of Michigan. The State of Michigan has never made or supervised the freight rates. It has made the passenger rates, and . its commissioner has some power over the passenger' rates. But in the other 9 States they make the rates direct. Illinois does, Iowa does, Missouri does, Alabama does. As I have said to you, I do not advocate that; I think the ratlroad companies should make their rates first. But when those rates have been made, in some way or other they must be supervised. Now, a rate is profit. You have to deal with that rate in the most delicate manner. You have to be extremely careful that you do not do any injustice to the railroads. You can not protect the public unless in some way or other you do it. Now, there is just one other observation, and that is that you must not only do it, but you must do it now. Said a Senator of the United States to me the other day, "We can control these rates." "Yes," said 1. Said the Senator, " We can control them whenever we see fit." "No, Senator," said I, "you can not." The Supreme Court of the United States has declared in the most positive terms that the legisla- ture may either directly or through a commission control the rates, with this limitation, that it must allow to the railway company a rea- sonable compensation for the service performed, and unless it does that the rate established is an illegal rate. Take the Northern Securities Company once more. Saying nothing about the appreciation of values, Mr. Hill has added to the capitaliza- tion of those companies $150,000,000, and that stock has gone onto the market. If I am called upon to fix a rate over those roads I must take that into account. You have bought that stock and you have paid f 100 a share for it. It would be in my opinion, illegal and, whether it is illegal or not, it would be an act of the rankest injustice if I fix a rate on that system which deprived you, an innocent purchaser, of your property. You have got to deal with this question finally, and you ought to deal with this question immediately. Now, I will not undertake any further than I have in answer to your questions to discuss the details of this bill or the method of getting at fliis thing. I would be glad to answer any further questions that I can in reference to matters about which I have testified, and I cer- tainly want to renew the assurance which I gave before that I have 236 INTEBSTATE-OOMMERCE LAW. myself no feeling that the Commission has not been treated with proper respect. A man who has served for five years on the Interstate Com- merce Commission gets that idea pretty thoroughly knocked out of him, if he does not entirely. And 1 wish to assure the chairman and the members of the committee that I have no such feeling and did not intend to convey any such feeling. Mr. Adamson. You think the Corliss bill meets your view and would be satisfactory ? Mr. ProxjtV. No; the Corliss bill does not meet my views. I do not think it is the best way to deal with it; but perhaps it is the best way and only way we can deal with it now. I think the only proper way and only possible way to deal with it is to create a special court which shall revise and enforce the orders of some commission. The Inter- state Commerce Commission to-day is a political body in a sense; it is a partisan body in a sense. I do not think its orders ought to be put into effect unless the railroad company has some protection in the way of review, and looking at this thing, practically you have to create a ■ court which becomes an expert court. They have been through this thing in England. In 1850, or somewhere along there, it was proposed to devise some scheme for the regulation of their railways, and the House of Commons inquired of the superior judgesatthat time whether, in their judgment, the courts were competent to undertake that work. As I remember. Lord Campbell was lord chancellor, and he stated that of his associates but one, thought the court, was competent to do that work. Nevertheless, Parliament did delegate that power to the court, and from that time to 1875 it was discharged by the court. Mr. Adamson. Have you not in mind any constitutional scheme by which you could utilize any existing court to give prompt effect to this ? Mr. Pkoutt. It does not make any difference how you create that court; you may do it by creating a court from judges already on the bench. Mr. Stewart. You said the court acted in that way in England until 1875? Mr. Pkouty. They pursued that course until 1875 in England; then they created a railroad commission. It is made up of two persons who are supposed to be experts. One is a business man and one is a rail- road man. There is also delegated to serve on that commission one judge of the higher courts, and the three constitute the commission. The findings of fact of that commission are conclusive; they can not be reviewed in the courts or anywhere else; but the findings of law can be reviewed by appeal in the higher courts. That is the commis- sion to-day which England employs. Mr. Stewart. You said also that the rates in England are higher than in any other country of the civilized world. Mr. Prouty. They are, I think. In England the commission does not make maximum rates; it declares some through rates, but the maximum rates are made by direct act of Parliament. The board of trade, which corresponds somewhat to the Interstate Commerce Com- mission here, considers this question and reports to Parliament a schedule of rates for a particular railroad which are deemed to be fair and just, and Parliament enacts them into a law, and those rates are the maximum rates which the railroads can charge. INTBESTATE-OOMMEKOE LAW. 237 Mr. Stewart. Then the English railroads commission has only jurisdiction over secret rates or rebates ? Mr. Pkoutt. The English law is the foundation of our law. It pro- vides that there shall be no discrimination between shippers and no discrimination between places, and it also provides that where rail- roads refuse or neglect to make proper through rates the commission shall have power to deal with that question. Those are the questions, as I understand- it, which are principally dealt with by the English commission. The Chairman. I would like to ask you in regard to a matter which you have only incidentally referred to. I wish you would give us your views with reference to the matter of classifications. There are, I think, three classifications now? Mr. Peouty. Three principal classifications. The Chairman. What objection is there to a uniform classification throughout the entire territory of the United States ? Mr. Prouty. To my mind there is no objection. The Chairman. What is the objection that is urged? Mr. Peouty. The objection urged by the railroads is that condi- tions diflPer in difl'erent parts of the United States and that a fair classi- fication in California might not be a fair classification in Vermont. That is what the objection comes to. But in answer to that you may say that the Western classification obtains in California, and the West- ern classification also obtains from Chicago west to the Mississippi River. This matter of classification has been pretty well gone into and pretty well thrashed out several times. The railroads came very near agreeing once on a uniform classification, and while I do not know it from personal knowledge, it is said that such a classification would have been adopted but for the persistent objection of one single line of railroad. Of course if one railroad stood out it naturally over- turned the scheme. The Chairman. Would it be wise to invest the Commission, in your judgment, with power over classification? Mr. Prouty. The Commission must necessarily have a certain power over classification if it has the power over the rate, because the rate can be advanced or diminished by simple changes in classification. On the 1st day of January, 1900, the railroads in official classification territory advanced the rates on 800 and some different articles by a simple change in classification. The Chairman. As this bill is interpreted by certain gentlemen who have discussed the subject here, the rate that would be authorized under the provisions of this bill to be established by a commission would at once become operative without any power on the part of the courts, except where it was manifestly unjust, to interrupt it or to sus- pend it during further legal procedure. What is your view in regard to that matter? Mr. Prouty. Well, Mr. Chairman, I am inclined to think that the language incorporated in this bill was originally sent to Congress by the Commission, and that it was originally suggested by me; but I am bound to say that a consideration of the subject before and since has convinced me that the only workable thing to do is to permit the court, in its discretion, to suspend or enforce the order of the Commis- sion. I think that in a great majority of the cases, if any reasonable 238 INTEESTATB-COMMEECE LAW. expedition could be secured in dealing with the orders of the Commis- sion, they ought perhaps not to go into effect until they had been passed upon by the court. The Chairman. Suppose, in lieu of that provision which makes them at once operative, there was a provision in the law requiring the utmost practical expedition in the disposal of the cases. Mr. Peouty. There is that provision now, and I have known some- thing about the operation of the provision, and it has taken on an average four years to obtain a final decision in one of our cases. These cases of ours, while they are law questions, are properly traffic ques- tions. The courts do not like to bother with them. They will not deal with them unless they are obliged to, and every sort of obstacle seems to be interposed to prevent a speedy hearing of the cases. I think if you could create a special court which dealt with these ques- tions alone, which was chargeable in the public mind with the proper disposition of these questions, and which would speedily become an expert body, you would solve that difficulty, and I think you would meet tiie objection urged by the railroads, which I am perfectly frank to confess is to my mind of great force — that the orders of a body partly political and to an extent partisan ought not to go into effect, under any circumstances, until there has been an opportunity offered for their review. The Chairman. Suppose you had a tribunal, say, detailed — made by the Supreme Court — of one member from each circuit in the United Slates, to serve as this tribunalj what portion of its time would prob- ably be occupied in the disposition of transportation business? Mr. Froutt. I think that a court of that kind would be invested in addition with some duties besides simply enforcing the orders of the Commission. In enforcing those orders it ought to have charge of inj unctions like those that are pending in the West, and I think it should have charge of Federal receiverships of railroads. I should imagine that finally the greater part of the time of such a court would be occu- pied in hearing and disposing of these cases. But that might not be true. It would depend on how many appeals were taken by the rail- roads and how many complaints were made. There is one thing more I want to say. It is said that there is no complaint to-day of too high a rate. I had that looked up the other day, and in the last three years there had been filed with the Interstate Commerce Commission 807 complaints against advances in rates or against rates which are alleged to be too high. Although the Com- mission has no power to grant any relief there are pending before it now for investigation that number of cases. All it can do is to investi- gate and recommend. There are pending before it for investigation cases which involve to the shippers and the railroads millions of dollars annually. Mr. Mann. You have the power to declare that the rate is unrea- sonably high? Mr. Prouty. What good does that do? Mr. Mann. You have the power. How many times have you exer- cised it in reference to these 800 complaints? Mr. Prouty. Those 800 complaints have not been brought before us in a way that that question could be raised. Mr. Mann. How could it be raised if not in that way? Mr. Peouty. The 800 complaints have been informal complaints. INTEESTATE-OOMMBROE LAW. 239 They have asked the Interstate Commerce Commission what could be done, and the reply has been that the Commission can investigate, and would be glad to investigate, at the expense of the Government, any questions of that sort that the complainants desired, and would make what order it could; but that there is no way at the present time in which that order can be enforced. The almost invariable reply is — and I have received in the last few days and have now on my desk some of those letters — that unless we can do something for them and are cer- tain of it that they do not want the railroad to know that they have complained. Mr. Mann. You say that you have notified them that you can not enforce that order? Mr. Prouty. We do. Mr. Mann. Can not you enforce an order that a rate is unreasonably high? Mr. Proutt. I do not understand we can. We have never been able to do so. Mr. Mann. The law does not provide any method by which you can put in force an order saying that a rate is unreasonably high ? Mr. Prouty. I do not so understand it. We are at the present time attempting to enforce in one or two cases that kind of an order. Mr. Mann. You have attempted to enforce it in cases where the Supreme Court held that you went beyond your jurisdiction? Mr. Prouty. The Supreme Court held that we had no power to determine what rate should be charged for the future. Mr. Mann. But it said you could say a rate was unreasonable. Mr. Prouty. No; you are mistaken. Mr. Mann. That is my interpretation. Mr. Prouty. No; you are mistaken; you must be misinformed. Mr. Mann. I have read it. Mr. Prouty. You do not read it right, then. Mr. Mann. That nlay be. Mr. Prouty. Only the other day in an article before the Interstate Commerce Commission as good a lawyer as Mr. Machen, of Cincinnati, took the ground, not that the Supreme Court had not decided it, but that the Commission had no such power. We have decided in one or two cases we would exercise that power and find it out. Mr. Mann. You say the Supreme Court has never decided that under the law you can declare that the rate is unreasonably high ? Mr. Prouty. It had decided this: That a man can bring a com- plaint before the Commission, alleging that he has been charged an unreasonable rate, and that the Commission may award him damages. In determining whether or not he is entitled to damages we must decide whether or not the rate is unreasonably high, and of course I think they have said — although that is denied — that we have that power; but they have declared that we have no power to pass upon a rate for the future — as to its reasonableness, one way or the other. We can declare its r.easonableness to-day; we can not declare whether it is a reason- able rate to-morrow. Mr. Mann. That is another proposition. Then they have to make a change. But I understand you to say that the court has not decided that you can declare a rate unreasonable ? Mr. Prouty. In the way I have indicated. Mr. Mann. As I have read the law it plainly gives you the power 240 IWTERSTATE-COMMEBCB LAW. to declare a rate unreasonable, and criticism has been made upon the Commission that it does not attempt to exercise that power. Mr. Peotjty. What we have advised complainants is this, although we do not really think it is so: That we had the power to investigate their case and make a report stating, in our opinion, whether or not the rate was reasonable, and if found unreasonable stating what rate ought to be charged for the future. We had power to order the car- rier to cease and desist from the present rate. Now, we have advised complainants that we could do that, and I want to say that in every case Mr. Mann. On what ground; on the ground that it is unreasonable? Mr. Peoutt. Yes, sir. Mr. Mann. You just declared that you did not have that power. Mr. Peoutt. No; I declared that the Supreme Court had never said we had it. Mr. Mann. And you declared that the law did not confer it upon you. Mr. Peoutt. No; 1 did not intend to say that. I was speaking of the Supreme Court. The Commission has held that power, because there is no other way in which the case can be settled. But if that is decided in favor of the Commission it amounts to nothing. Mr. Stewaet. Have you awarded damages? Mr. Peoutt. Yes ; we have awarded damages. W e sent out a couple of opinions to-day in which we awarded damages for failure to fur- nish cars, but the entire amount of damages awarded since the Com- mission has become a Commission is utterly insignificant. I do not remember how much it is. Mr. Mann. That is just it. Why, if the railroad rates have been so unreasonably high, have not the awards been high ? There has been a chance to act under the law. Mr. Peoutt. Because the complainant does not usually care much about his damages in the past. He very often makes no claim for damages in the past, and because in a great many instances where we hold the rate too high we do not feel we ought to go back and compel a railroad to refund. Take a case that came up from Iowa, in which I wrote the opinion. The complaint was as to the charge on grain from the vicinity of Sioux City. The rate was about 19 cents to 20 cents a hundred. The carriers that carried that had been carrying grain last year from Kansas City for 7 cents; the carriers who have carried that grain have carried grain from Buffalo to New York for 5 cents. They have been carrying grain from Chicago to New York for 11 cents. We held that this Iowa rate was too high, and that it ought to be reduced from 1 to 3 cents a hundred pounds. It never has been reduced. In fact in that case there was a claim for reparation, but we said we can hardly award reparation in this case. These carriers we think have acted in good faith. While we think the rates ought to be otherwise for the future — ^there have been pretty hard times in the past, and there are pretty good times now — we d.o not hardly feel we ought to award damages for the past. I do not think the Commission should have any power to award damages. Mr. Mann. And having that power you have not chosen to exercise INTEKSTATE-OOMMEKCB LAW. 241 Mr. Peouty. We have passed on every question of that kind where the complainant has asked for damages. Take another case. Take the case of the city of Danville, which is QQ miles south of Lynchburg. The Southern Railroad serves both those places. Danville claims it is discriminated against. We held that there was discrimination, and that the rates from Danville ought to be reduced; but what damages could we allow? You can not award damages to the city of Danville, in that instance; that does not amount to anything. They say their industries have been driven away. The complaints we deal with are not from individuals; they are from localities. They are from State railroad commissions sometimes, and sometimes from boards of trade. This complaint in Iowa was by the Northwestern Grain Shippers' Association. Mr. Mann. It seems evident, then, that where the law gives author- ity to the individual shipper to discriminate against or pay too high a rate to come before you that they do not choose to avail themselves of that opportunity at all. Mr. Pkoutt. Not ordinarily, Mr. Mann. They ordinarily say this, that unless we can get some speedy and immediate relief do not say anything to the railroad about it. Mr. Mann. They could get speedy and immediate relief individually, so far as you are concerned, in the way of damages? Mr. Pkoutt. Damages do not amount to anything. Mr. Mann. You sue a street-railway company for charging 10 cents fare, and if the court holds they have to refund the 5 cents it will stop it. Mr. Protjtt. If you are a philanthropist enough to carry it to the Supreme Court for the beneiit of your fellow-men, all right. Mr. Mann. We are philanthropists enough to provide a Commis- sion to carry it there; that is the point. Mr. Pkotjty. Then provide the Commission with some authority to do it. I want to say this, that this Commission has said uniformly to complainants within the last three years, I think, if you want your complaints investigated and steps taken that can be taken to give relief it shall be done, and all we ask you to do is to sign a complaint. That has been the rule of the Commission. I am sorry, gentlemen, that I have been obliged to weary you with such lengthy remarks. The Chairman. You have not wearied us and we have been very glad indeed to hear you. (Adjourned.) Afternoon Session, April 83, 1902. STATEMENT OF HON. JOSEPH W. FIFER, A COMMISSIONER OF THE UNITED STATES INTERSTATE COMMERCE COMMISSION. Mr. FiFBR. Mr. Chairman and gentlemen of the committee, the very full and complete discussion of this question made b> my col- leagues makes it unnecessary for me to detain the committee very long. Now, we have heard from Judge Prouty in regard to the great com- binations that have taken place in this country in railroads and the combinations that are now going on. I think all men of reflection will agree that that practically obliterates railroad competition on which i-o L 16 242 INTEESTATE-COMMEBCE LAW. the peole could rely in the past for a reasonable rate and that another remedy must be pursued, and that is the remedy of control. Gentlemen, railroads are not engaged m business, for their health. They have money invested in those properties in order to make a profit, and the fruitage of railroading is the price that they get for the car- riage of persons and property. When that is understood you can very well understand the further fact why' it is that railroads refuse to yield the smallest fraction of their right to fix the rate and to control it, as far as they may, after it is fixed. Now, it is easy enough to say that the railroads must be controlled. It is quite a different question to say how they shall be controlled. When 3"0u touch the right of railroads to fix their rates or to control their rates, you touch the tenderest nerve in their whole anatomy. They will yield that right very reluctantly. The question is for this committee and for Congress to say whether there shall be control. If railroads are to fix their rates in the first instance and then make changes at their pleasure — if that is the deci- sion of the committee and of Congress — that is the end of the contro- versy. But if you say there shall be control, then who shall do the controlling? Who are you going to make the depository of the power to control railroads? It must be done by some human agency. Who shall be that agency and how shall it be done? is the question, it seems to me. for the decision of the committee; and when you approach that question you have your knife on the nerve of the whole situation, because railroads have no other means of bringing money into their treasuries except the price they get for carrying persons and property. Now, I think everybody will agree, outside of a few railroad men, that there must be this control; that it will not do to constitute the railroads the judges in their own case; and this is conceded by some railroad men, that as long as human nature remains in its present imperfect moral condition, if they are to exercise that power that power will be abused, and I do not say that in order to disparage rail- road men, for I think, on the average, they are just as good and as honest as other people. It has been frequently said in some newspapers and periodicals, and by people in conversation, that the Commission desires to fix these rates in the first instance, in order to get great power in their own hands and to make big men of themselves. Now, gentlemen, that is a mistake. The Commission has at no time asked that power to be conferred upon them. They do not believe that it is proper or expedient; but they do believe that the Interstate Commerce Commission or some other body ought to exercise the power to regulate and adjust rates after they are made. The question is, shall it be the Commission or shall it be the courts ? Somebody, in the end, must decide these questions. We have said that the railroads ought to fix these rates in the first instance. There are 200,000 miles of railroads in the United States, speaking in round numbers. It would be impractical and inexpedient for a commission of five persons to fix those rates in the first instance. But we do say that some body — the Commission or some other body- should have the right of control and supervision over those rates, and when you approach that question you are confronted with a very diflS- cult problem, I am willing to admit. INTERSTATE-COMMEECE LAW. 243 A question comes before the Commission in regard to an excessive rate. Great injustice may have been done, and the Commission so find. Under the present law the railroad company can take an appeal to the courts, and on the statement of Judge Prouty on an average it takes four years to secure a final decision by the courts. In the mean- time the evil is continued. That, gentlemen, is one of the difiiculties. The question is as to whether the order of the Commission shall go in force at once or whether the railroads shall be permitted to open up the whole question by going into the courts and taking an appeal. Now, the Corliss bill provides that even when the Commission makes that order that it shall not continue to exceed two years. Why is that? Conditions may change. Competition grows up. The necessity of the rate may not exist two years from now that prevails at this time._ It may be that a languishing industry needs to be fostered and sustained. And so the bill proceeds upon the theory that conditions may change. Conditions will also change when an appeal is taken, and a final decision is not had within less than four years; and so the litigant comes out of his law suit about as empty-handed as he went in. Now, gentlemen, some provision ought to be made by Congress for a speedy hearing upon the decisions of the Commission. There is one of the great troubles. It discourages men from coming before the Commission and incurring expense in these hearings, when the case, if they get a decision in their favor, will go into the courts and remain buried there, as it has been, in some instances, I believe, for a period of six years; and when it comes out there must be a reexamination of the whole question over again to see whether conditions have changed, and there is a necessity of making a change in the rate as originally decided by the Comniission. Mr. Mann. Will you let me ask you a practical question there ? Mr. FiFER. Certainly, any question. Mr. Mann. Suppose a case where the Interstate Commerce Com- mission should fix a rate, which in the end should be found to be too low; that order is appealed from in the way prescribed by the statute, but is not stayed by the court. The order, therefore, goes into effect before the matter could be passed upon by the courts in the ordinary course of time, and the two years may have expired, and thereupon, if the railroad under this bill changes its schedule of rates, the Com- mission, without a new hearing at all, can put another order into effect, ordering the rates back into existence at once, without hearing. How would that Mr. FiFER. Now, Mr. Mann, that is one of the difficulties in thi^ situation. I think the lawyers will agree that the common law says that the common carrier shall not charge more than a reasonable rate for the carriage of persons and freight. Nobody will dispute now but what there have been excessive charges. Persons who travel and per- sons who ship freight have been injured, and yet in the whole United States there ihas not been a single case decided by a court of final juris- diction awarding $1 or 1 cent of damages. Now, the courts, by reason of the progress and inventions that we are constantly making, are constantly fighting on the skirmish line, trying always to extend the provisions of the common law to meet the changed condition of affairs; but when they got down to this question of railroad traflSc, it seemed necessary to supplement the common law 244 IWTEESTATE-COMMEEOB LA"W. by an enactment of Congress, and that gave us the present interstate- commerce act. Now, it is said if the Commission decides that a rate is unreasonably high in itself, and it is buried in the courts for years, that these ship- pers have a remedy to recover from the railroad the amounts of their damage, provided the finding of the Commission is sustained by the court. Gentlemen, that is simply remanding the people back to the rights already granted them by the common law. They have that right already. But when a man is injured to the extent of f 100 or $500, or it may be only |25, he can not afford to, and he never will, sue a railroad company to recover his damages. When a complaint is made before the Commission and a man has the courage to make that complaint, it is not only on his own behalf, but if he wins out and gets a decision in his favor by the Commission, and finally by the courts, that is a benefit to the whole community, because these rates are to be general and universal; and that was one object in the passage of this act, to afford a remedjr that the common law, however much the coui'ts might try to expand its provisions and apply it to the new conditions, did not give. No>v, there is a great difficulty just at that point. The Commission decides that a rate is excessive in itself. If that is to be binding on the railroads, and take effect at once or within a few days, giving them a reasonable time to comply with the order of the Commission, then it is said on the part of the railroads, if the order of the Commission is finally reversed by the courts, that they have paid out money that they should not have been required to pay, or carried this freight at a less rate than they were entitled to have. On the other hand, if the case, after it is decided in favor of the shippers by the Commission, can be buried in the courts, then the shippers, the whole community, possibly half a State, must suffer, and they come out of the litigation and the controversy just as empty handed as thej' go in, after the lapse of four j'ears, and after they have incurred expense and the expenditure of much time. Mr. Stewart. Judge Prouty has said very well that these corpora- tions are public servants. Mr. FiFEK. Yes, sir. Mr. Stewart. Their status is established by State and Federal legis- lation, and the tariff charges are a tax upon all species of property in the United States. Mr. FiEER. Yes, sir. Mr. Stewart. Why should they fix these taxes, they being public servants ? If you are a member of a municipality and own a residence there, a house, you do not fix your taxes? Mr. FiEER. But he did not mean it as a tax in the ordinary sense. Mr. Stewart. You have said that the railroad companies ought not to be judges in their own cases? Mr. Fifer. Yes, sir. Mr. Stewart. Now, whj^ should they, being public servants, their very life being due to their taking a tax from all property of the United States — why should they have the establishing of that tax in the first instance? Mr. Fifer. That is a question for this committee and Congress to determine. The courts have already decided that the original power INTEESTATE-OOMMEEOE LAW. 245 of controlling the railroads resides in the Congress of the United States, and I take it that Congress can pass an arbitrary law that shall be rea- sonable and shall not be confiscatory and fix these rates primarily and originally. I do not know why that could not be done. The courts have said further that Congress has the power to delegate this power to the Interstate Commerce Commission. Mr. Stewart. Yes; but since the combination that Judge Prouty spoke of in the Northwest, what would have been confiscatory before that combination would not be confiscatory now on account of the great increase in the capital stock, and so on? Mr. FiFER. That is a question of fact and not a question of law, and must be decided after a thorough investigation. Mr. Stewart. Is it not thoroughly apparent what would not be confiscatory now would have been before the combination? Mr. FiFER. I think that is so. Of course, a railroad passing through a sparsely settled country where the freights are very high — these railroads must live, they can not run at a loss, and rates will differ in different communities, owing to the cost of carriage; as in the Rocky Mountains, over those great mountains and through the tunnels, and where the snow interferes, and where fuel is dear and water is scarce, it all comes into the question of the rates that the railroad is entitled to have for its services. Mr. Stewart. Is not this tremendous increase of capital stock since the combination speculative and sentimental rather than real ? Mr. Fifee; Well, of course, different men will have different opin- ions in regard to that. That is a question of fact which it seems to me does not properly belong to the consideration of this case, and yet I might say that my own views are that the stocks are very largely inflated. It seems to me that this is one of the vital questions that will con- front this Commission and confront Congress if yon decide that there must be control, and that is, What kind of control. How are you going to apply the remedy ? You say that the Commission shall have the right to decide these questions. Well, when they decide, their decision practically amounts to noth- ing if it can be set aside by an appeal. I have heard it suggested that a good remedy would be that when the Commission decides that a rate is too high, or that it discriminates in favor of one community against another, the railroad company should have the right to an appeal, and that that appeal should suspend the order of the Commission until it is finally decided by the courts; but that in the meantime the railroad should keep a strict account of all freights that are shipped from the point where the complaint originates, and if the decision of the Com- mission is sustained, then they should make restitution to the parties from whom they have collected freight. Some means, gentlemen — ^if these railroads are to be controlled in regard to these rates — some means should be adopted whereby a speedy hearing shall be had by some court or some tribunal of final jurisdiction in the case. For myself , I think that a court with all the powers of a court, appointed by the President under some act of Congress, would be a proper tribunal, and they should be men of experience in regard to the transportation problem. Now, it is no disparagement to the pro- fession, the legal profession, for me to say that a lawyer in ordinary practice does not understand thoroughly this transportation problem; 246 INTEESTATE-OOMMEEOE lATV. that the Federal courts of the country do not like this kind of litiga- tion. There ought to be men of experience, men trained in these questions, possibly a court of three, whose sole business should be to pass upon these matters; one of them, at least, should be a good law- yer, and perhaps two business men; any way to create a competent tribunal, to pass speedily and intelligently upon the decisions of the Commission after they have been made. There is the crying evil. Mr. Mann. Do you think that a court sitting at Chicago all the time, limited to that kind of inquiry, could transact all the business that would be brought before it at that one point? Mr. FiFEE. Well, I have not thought into the question closely enough to know. Possibly there might be different courts, something after the fashion of our appellate courts in our own State. Possibly a court of three, sitting at Washington, would be sufficient to pass upon those questions. After they become f amUiar with the transportation problem they can dispatch their business very rapidly. In our own State we have a court of claims originally composed of three members of our supreme court. There are seven members in all, and. the court was to designate three members to act as a court of claims. That has all been changed. Experience has shown that it is wiser to have the governor appoint a court of three members, constituting a court of claims. We have a Court of Claims here in Washington under the acts of Congress. Something of that kind should be created here, so that these decisions of the Commission can be 'speedily and intelligently passed upon. Mr. Mann. Is it not a matter of practical experience, and can you remember any exceptions, that when a court of any kind, of claims or otherwise, is constituted to pass upon a particular class of cases, that it gets away behind in its calendar by practicallj' encouraging the bringing of litigation of that sort? Can you name an exception to that proposition? Mr. FiFER. You say where a court is constituted to pass upon a certain class of business Mr. Mann. Yes, sir. Can you name an instance where such a court is not behind in its calendar? Mr. FiFEE. I would say that I can not speak intelligently on that question. About the only experience I have is in regard to the court of claims of our State, and I think thej^ keep right up with the docket all the time. I think a case that is bi'ought there and submitted for trial, according to my recollection, is decided within a very few months. There is no court in the State of Illinois where the docket is so little clogged to-day and burdened with cases as our court of claims. Mr. Mann. It may be true, but I can not imagine it. Mr. FiFEE. Now, I am not speaking in regard to the National Court of Claims. I believe they are somewhat behind, but it is not strange that they are. Mr. Stewaet. Your Commission is not behind? Mr. FiFEE. Sir? Mr. Stewaet. Your Commission has kept up with its business? Mr. FiFEE. Yes, sir; fairly. We have had a good deal of running around to do, you know Mr. Mann. You do not have the business that you would have under this bill, and you are still pretty busy ? INTEE8TATE-00MMEK0E LAW. 247 Mr. FiFEE. Yes, sir; we would have to take the evidence. But an appellate court that would pass upon the evidence simply after it is collected and the whole thing is crystallized and put into a nut shell by a previous decision, their minds come at once to the point Mr. Mann. Your idea is to have one appellate court to pass upon the orders issued by the Commission? Mr. FiFEE. Well, I do not know; but I think that would aflford a remedy. Mr. Mann. Or Mr. FiFEE. You must reach a final jurisdiction at some time and in some place. Mr. Mann. Do you think we could limit that so that you could con- fiscate railroad property without going to the Hupreme Court of the United States and having them pass upon it? Mr. FiFEE. Possibly you might allow an appeal to the Supreme Court of the United States; but surely it would not be a very great hardship or anything unreasonable to say in regard to railroads that after they have had a hearing before the Interstate Commerce Com- mission, and that a court has reviewed the decision of the Commission, that the decision should stand until it should be heard in a higher court. Mr. Mann. I was not referring to that. 1 was referring to. the expediency and the practicability of expediting matters in passing them through this court of three members for the whole United States; whether that could be done without getting behind with the calendar. Mr. FiFER. Those things can only be determined after a long expe- rience. Mr. Stewaet. Do you not believe, from your experience on your Commission, that if your Commission was vested with the power you speak of you could keep abreast of the business ? Suppose you were invested with the power of this tribunal Mr. FiPEE. The final tribunal ? Mr. Stewaet. Yes, sir. Mr. FiFBE. And let the decision of the Commission be final? Mr. Stewart. Yes, sir. Mr. FiFEE. I do not know that that would involve any more work nnd labor than we are doing now. Mr. Mann. It would involve a great many more cases than now ? Mr. FiFEE. I could not say as to that. Possiby if we had that power it might encourage litigation. Mr. StewAet. If you established a precedent, would it not lessen litigation ? Mr. FiFER. Yes, sir; cases would be settled, and railroads and ship- pers and everybody else would comply. Mr. Stewart. Would be guided by the precedent? Mr. FiFEE. Yes, sir; by the precedent. Mr. Stewart. Yoar decisions would be published just the same as the decisions of the courts ? Mr. FiFEE. Yes; they are now. Mr. Mann. How long do you think it would take your Commission to say what should be the rate from Chicago to New York and from Kansas City or Louisville* or Minneapolis to New York, not to men- tion Baltimore and Norfolk and Boston ? Mr. FiFEE. That is a very wide question. Mr. Mann. That is what I thought. 248 INTEESTATE-OOMMBECE LAW. Mr. FiFEE. It is an open door, that leads into a very wide field. We have a case now before the Commission of the middle West ship- pers against the transcontinental line and the shippers of the Pacific coast. It grew out of a differential between a car and a carload rate. The wholesale jobbers of the middle West complained that that differ- ential was too high, and that it shut them out of the jobbing business on the Pacific coast. They sold to the man who retails, and therefore were compelled to ship in less than a carload rate, and that is higher than a carload, whereas the Pacific-coast jobber ships always in a car- load, and puts it right in his storehouse and redistributes it from there. Now, in that case there was that complaint, and we allowed the law- yers and the litigants to take their own time, and I think we were over one year in taking the testimony before it was finally argued and submitted to the Commission. Mr. Mann. Can you give me any idea — I do not know anything about it, and you are on the Commission — as to how long it will take to pass upon a question like that? Mr. FiFEE. I just cited that instance to show you. Sometimes we can determine those questions in less time than we suppose we can when we enter upon an investigation. I could not say, Mr. Mann. Mr. Mann. Of course I do not mean to give the number of days or weeks or months, but whether it would be an easy matter or not. Mr. FiFEE. You would have to go to the different localities. The law under which we are now acting authorizes the Commission to go to different localities, and that is done for the purpose of affording liti- gants an opportunity to be heard without incurring a great expense. We go to Chicago and San Francisco and Boston and New York and all around, because if there is a complaint on the part of merchants in any of these localities it would be impossible, and a very great hard- ship upon them, for them to come to Washington with a great cloud of witnesses, incurring a great loss of time and great expense, and it would be a practical denial of justice; so the law has wisely provided that the Commission, or any member of it — one — can go out and take this testimony in different localities. Much would depend on how much traveling we would have to do and the number of witnesses we would have to examine. You are a practical man and a lawyer; you ought to be able to give as good an opinion on that as I could. Mr. Mann. My information is that under this law you would be fifteen years behind your docket inside of three years. Mr. FiFEE. Oh no, ray brother; Judge Prouty here suggests that for the first ten years — no, not that long — the first six years, I think, of the existence of this Commission, it was supposed that really they did have this power, and they exercised this power, and the railroads and the litigants submitted to the power, and finally the railroads raised an objection Mr. Mann. They never claimed to have any such power as is referred to in this bill. Mr. FiFEE. (continuing). And the court overruled the objection. Now, the courts have said that when we investigate the case all the power delegated to the Commission by the law is to enter an order that the offending company shall cease and desist from charging the illegal rate, and there we must stop. Anything beyond that is unwarranted, INTERSTATE- OOMMEEOE LAW. 249 and is illegal and void. In two cases I believe the courts have so decided. I think, and I believe it is the opinion of my colleagues, that when a complakit is made and the Commission has taken testimony bearing upon the issues made, the arguments have been had, and the Commission is fully advised, that they should have the right not only to eay that the oifending company shall cease and desist, but to indi- cate what would be a reasonable rate, because the very mental opera- tion of determining that a rate is too high, and that the company must cease and desist therefrom, involves a knowledge of about what it ought to be. Now, if we enter an oi"der that they shall cease and desist from charging what we have determined to be an illegal rate, and go fur- ther and indicate or fix what shall be a legal rate, that part of the finding is illegal. One more word and I am through. This law has its civil and its criminal aspects, and it seems to me that if the committee will keep separate those different provisions they will be enabled to deal with this question more intelligently. There are certain cases which are declared criminal by the act. What are they ? It is not every act. When a rate has been fixed and published, as required by law, and a secret rebate, or any trick, subterfuge, or device is adopted wherebj^ the rate shall be deviated from, that is made a criminal offense. There should be no mistake, if a railroad fixes a rate and advertises it and sticks it up in the station house, and then that railroad departs from that rate, there can be no question that they did so with their eyes open, and the act is made criminal. It is made criminal to under- bill; false billing and false weighing are made criminal. And both parties — both the shipper and the railroad — are amenable to a criminal indictment for that practice. All this freight is classified, classes 1, 2, 3, 4, 5, and 6, as the case may be. No one takes a higher rate. They may describe the prop- erty as property that properly belongs to the fifth or sixth class, the lower class, whereas it properly belongs to class 1 or class 2. They may give a false weight, and thereby defeat the objects of the law. The railroad and the shipper may combine upon those questions, and by some trick or subterfuge they can place it in a false class, or they may falsely weigh it, and place it in a wrong class. Things of that kind are done purposely, and they are done know- ingly, and the law visits upon that offense a criminal penalty. But there are a large class of cases that are not made criminal. Take the question as to what the rates should be from New York to Chicago or from Chicago to the Pacific coast, what human sagacity can deteiinine to the cent what the railroad is entitled to. Somebody must determine the differential to be charged between a carload and less than a carload, between the points that I have named. What human wisdom can say to the cent what shall be charged ? Those are questions about which honest men may honestly differ, and they never can be made to agree exactly. The long and short haul provision, the fourth section, says that you shall not cnarge more for a short haul than for a long haul over the same road, the shorter being included in the greater, when the circum- stances and conditions are substantially the same. Well, who is to determine, now, when the circumstances and conditions are substan- tially the same? Those are questions that do not involve any crim- 250 INTEBSTATE-COMMBKCE LAW. inality. You take the question of shipments from the Mississippi River east and to the Pacific coast, and it costs more from New York to Phoenix, Ariz., than from New York to Los Angeles; and why? That is the shorter haul included in the greater, but the circum- stances and conditions are not substantially the same; and why? Water transportation comes in. Commercially speaking. New York is nearer to San Francisco than is Chicago, but there is a great deal of freight, more formerly, per- haps, than now, that used to go, and some goes to-day, from St. Louis and Chicago to the Atlantic coast, and then goes around the Horn and the Isthmus of Panama and reaches the Pacific coast. Now, the rail- roads say that that is not a case of substantially the same circumstances and conditions, and that the railroads at the Pacific coast terminals have the right under the law to meet the water competition at those points. Those questions can never be made criminal. Thej'' are questions upon which persons may honestly disagree; and when a complaint of that kind is brought before the Commission, it is decided that there is no criminality. And, gentlemen, this constitutes, in my judgment, possibly the most important part of this law. Now, how are you going to prevent, how are you going to stop, these violations of the act which are made criminal ? You have been told by my colleagues that there is no penalty denounced against the carrier by the law, and that is true. Gentlemen, these violations are what the law calls malum prohibita, and I care not what certain individuals may think of it, mankind generally hold that the same moral turpitude does not attach to an act of that kind as does to a crime, which is malum in se, such as burglary and larceny, crimes in the absence of all law. And you can see, bearing that in mind, what a great difficulty con- fronts the Commission when it undertakes to enforce the criminal fea- tures of the act. Many statutory prohibitions, acts that are made misdemeanors by a statute, a short time ago were no offenses at all. Yesterday the act violated no law; to-day it is made a penal offense, and the offender is subject to a heavy fine, and a term in the penitentiary. Now, it is my experience that railroads — and I have no quarrel with them at all — have influence; they have always managed to take care of themselves pretty well, and when a rate has been violated, and some- body has subjected himself to the criminal part of this act, and you undertake to secure an indictment and conviction, you have got a great big job on your hands. These men have friends; they have standing in the community. The whole community may know that they have at different times violated the law, but they have just as many friends as they had before. They are not ostracised in society; and you undertake to convict one of them and you meet great difficulties. Now, what should be done? Judge Knapp has told you, and in that I agree with him, that the cor- poration itself should be made subject to indictment, and upon con- viction it should be punished; of course, it can not be impiisonod; it loses no cast in society, and every person who is cognizant of the facts can be compelled to testify and there is no immunity; and you know, as practical men, under those circumstances you can get testimony and you can get conviction, and if the penalty is large enough, fixed INTEESTATE-COMMEECE LAW. 251 by the law, it will be just as much of a deterrent as the other, and the testimony will be easily acquired. I have been on the Commission for a little over two years; I have heard many railroad men testify, and I do not recollect that in any instance we ever secured testimony that would justify an indictment until the hearing in Chicago last January. We have probed that ques- tion, at least in some cases. In this very case we went, in the first instance, to Kansas Cit}'. We got nothing. We followed it up and went to Chicago, and a clean 'breast was made of the whole thing. They testified that there was a secret cut, and I think some of them, at least, testified that only one man would know of it; in most instances papers were destroyed bearing the evidences of the violation; no books were kept. How are you going to dig out and get hold of any par- ticular individual? And when you get him you put him on the stand and he has immunity from punishment. How are you going to deal with that'^ Mr. Stewart. Adultery and gambling are not malum in se ■ Mr. FiFEK. No, sir. Mr. Stewart. But malum prohibita. Do you not think that in the form of malum prohibita these railroad corporations commit greater offenses than highway robbery, which, 3'ou say, is malum in se? Mr. FiFER. I do not know about that. There is another feature of the Corliss bill, as to whether the word "knowingly" or "willfully" should be inserted. Now, of course, we have cases all the time where there are honest mistakes made as to the rates charged, and there is no pretense that there is any criminality; no pretense whatever. In regard to the question which you called my attention to, suppose there was a statute against a person being an inmate of a gambling house and no scienter required, but simply the broad statement that there is a penalty upon him if he is an inmate of a gambling house. Now, suppose he wanders in there through mistake. It might be close to a hotel and he might think he was going to the hotel — they are very closely connected sometimes Mr. Stewart. It has been decided time and time again that if a man enters a bagnio the presumption is that he goes there for the purpose of adultery. Mr. FiFER. Yes, sir. Mr. Stewart. And you have to destroy that presumption by testi- mony." Mr. Fifer, that is certainly correct. Mr. FiFEE. Take the case of a man who enters a gambling house Mr. Stewart. Yes; you would say that the presumption is that he is guilty. And that is the presumption in regard to the railroad com- pany. And the railroad company ought to have to rebut that pre- sumption. Mr. Fifer. The onus is on that man, but the practice is always to allow him to show that he was there by mistake. Mr. Stewart. Now, the railroad company, the onus is upon the part of the railroad company, and the presumption is that they are guilty of this offense, and the burden should be thrown upon them to show that they are innocent. Now, if a party goes to a gambling house through mistake, knowing that it is a gambling house, he can not plead that he did not know it was any offense under the law when he entered there knowing it was a 252 INTEBSTATE-OOMMEKCE LAW. gambling house. That would be a mistake as to law. He can not be heard to say that he did not know there was any law against it. Mr. Adamson. Take the statute against selling liquor to minors. Mr. FiFER. Yes, sir. Mr. Adamson. 1 think the court generally holds the law to be that the onus is upon the seller to know how old the boy is. Mr. FiFER. Yes, sir; unless there is a statement in the law that he must commit the act knowingly, and knowingly sell to minors. I am glad that you called that up. Mr. Adamson. I have known many a clerk in a barroom to be con- victed under that statute without knowing about the boy. Mr. FiFER. So have I; and in my State we have a statute against the sale of liquor to a person in the habit of becoming intoxicated, or to minors. Now, the supreme court of our State holds that the saloon keeper sells at his peril, and it makes no difference whether the minor is 7 feet .tall and has the beard of a Hercules. As I say, coming back to the illustration that I have given, I do not believe that where a clerk in a railroad office in figuring up makes a mistake in his figures and sends in a bill for a carload of freight, where it is purely a mistake, I do not think there is any criminality there. The law generally places whisky sellers on a different basis, for that business must be licensed in the first place, and the law distinguishes it from all other business in that way. Mr. Stewart. In Massachusetts the presumption is that every tes- tator is insane when he makes a will, and that presumption must be rebutted by proof. Mr. FiFBR. Yes, sir. Mr. Stewart. Don't you think that that rule should be applied to the railroad corporations, and that the rates should be presumed to be unfair, and that they must prove the fairness of the rates? Mr. Fifer. 1 hardly agree with that. I think that if the rates are unfair it can be shown, fliat fact can be shown and some competent tiibunal can correct it. There is another provision of the criminal law that I think ought to be amended, and that is to make the departure from a published rate punishable and treated as an unjust discrimination. My friend, Mr. Mann, asked a very pertinent question yesterday in regard to these packing-house rates from the Missouri River to Chicago. There are only a few great packing houses, and I believe — and I think that is the opinion of all my colleagues — ^that there was no unjust discrimi- nation in that instance. Although a departure from a published rate, and although in a sense a secret rate, all the persons or corporations who could avail themselves of that cut rate knew of it in some way. The rate on packing-house products from the Missouri River points, the published rate, was 23^ cents. They were actually carrying the goods for 18i cents, 5 cents less. Now, the query comes up, if there was no discrimination, then who was injured? And why should that be made a penal offense ? Gentlemen, in considering that question I ask you to go back of the shipper and look to the producer. It is true that the man who raises cattle and grain on the Western farm is not financially interested in the warehouseman or the packing-house man who does the shipping, but what he is afraid of and the way in which he may be injured is this: INTEBSTATB-OOMMEEOE LAW. 253 By the secret rate to the large shipper the smaller ones are driven out of business, and the whole thing is confined and placed into the hands of a few men. Now, that narrows the market in which the producer may sell; it lessens the number of men that will purchase his products, and they claim that it enables a few men by that means to fix the price paid the producer and to fix also, in some measure, the price at which the goods are sold to the consumer. It was suggested by some one on yesterday, I think, that these con- ditions had already driven out the smaller man. Well, if the condi- tions have already driven out the smaller men, if they continue will it not keep them out? That is the question. I submit to the committee, is it not better that there be a published rate stuck up in the station house, so that everybody may know, and if that rate be adhered to it will widen the market of the producer, it will increase the number of men to whom he may sell. The tendency of the other policy is to narrow the market. • I have detained you longer than I had intended, gentlemen. There are other phases of this question that I would like to speak of, but these are the main features. If there are any questions that any members of the committee desire to ask, I will answer them to the best of my ability. Mr. Stewart. You say that the consolidation in the hands of a few large dealers would narrow the sale by the producer. It would per- haps aflfect the price, but it would not narrow the sale. Supply and demand would control that, entirely. You said it narrowed the mar- ket; it might fix the price to the producer. Mr. FiPEK. What I meant by that was the different individuals to whom he might sell. Mr. Stbwakt. But in the aggregate it would not reduce the sale? Mr. FiFEE. I suppose if one man only in Chicago could buy grain that would certainly place great powers in the hands of that individual. Mr. Stewart. It would not narrow the sale of the producer. The supply and demand would control that. Mr. FiFER. No, sir; he would always sell. Mr. Knapp. He would not get so much. Mr. FiPER. The plea they make, and I am only making the plea that is made by the producer ' Mr. Stewart. He could not get so much for it? Mr. Ftfer. Yes, sir; he narrows, he limits, his opportunity to sell. One man does not give a good price. There is competition in the pur- chase of grain where everybody has a fair show and an equal chance, and one man will overbid another, and in that way the producer, it is supposed at least, secures a better price for his product. Mr. Stewart. Then you agree with Mr. Prouty that the two rem- edies to be adopted are, first, to punish the corporation, to punish any departure from the published rates Mr. FiFER. I think that a departure from the published rate should be made a discrimination, and treated as a discrimination. Now, in one case an indictment was secured and there was a depar- ' ture from the published rate, and the evidence was positive, but the court held (the indictment charged an unjust discrimination), and the court said, " Why you have not brought in others to show here tha*^^ somebody was charged a greater rate and therefore there is no dis- crimination." The simple act of departing from the rate was not held 254 INTEBSTATE-OOMMEROE LAW. to be enough. The departing from the published rate the court held was necessarily discrimination. I feel that 1 ought to say, in that connection, that that offense, as I remember it, is punished by both fine and imprisonment. That is discrimination. There is another drag-net provision in the law which does impose a fine for any violation, but that is a much less penalty. Now, I do not know why those two provisions of the criminal law should not be amended. I do not know of anybody who would say that they should not be amended. Mr. Mann. Will you answer me a practical question ? Mr. FiFEE. Yes, sir. Mr. Mann. This Nelson-Corliss bill provides that testimony shall be taken in the first instance before the Commission in fixing a rate, and the transcript of that testimony certified to the court, where the court is appealed to, and then i^ the court desires other testimony, or decides to have other testimony, that it shall be certified to the Com- mission, and the Commission shall take that new testimony. I under- stand the reasons for all that, but do you think it would be practicable or not for the Commission, as a matter of fact, to take all the testi- mony, in addition to deciding all the cases which would be brought before it? Mr. FiFER. That is to provide that no further testimony shall be taken ? Mr. Mann. That law provides that if the court concludes to permit other testimony to be offered, then that fact shall be certified to the Commission, which shall take the testimony. Of course I understand the reasons for that, in order to make them make their case before the Commission; but as a practical question, the purpose of this legis- lation is to expedite the decision of these cases. Mr.' FiFEE. Yes, sir. Mr. Mann. Will it be practicable for the Commission, in addition to its other duties, to take all of the testimony which might be required to dispose of these cases ? Mr. Knapp. Yes; certainly. Mr. FiFEK. I do not know, Mr. Mann, why that should not be done. It is done in all the nisi prius courts of the country. They hear the testimony Mr. Mann. I think in every case, in every big chancery case, the testimony is always taken before a master in chancery. Mr. FiFEK. Yes, sir. Mr. Mann. And as I understand, you do not have that authority to have that done? Mr. FiFEK. Yes, sir; the courts, I think, in several instances have referred cases back to the Commission and directed them to take further testimony. The Chairman. What is your practice as a commission; to take tes- timony as such before the Commission or before a member of the Commission? Mr. FiFEE. That has not occurred in my time. I will refer to Mr. Frouty to answer that question. Mr. Proutt. '^e can do either thing, Mr. Chairman, but as a matter of practice one or more members of the Commission take the testi- INTERSTATE-COMMERCE LAW. 255 mony in a case unless the case is of very considerable importance, in which event we usually go as a com mission. The Chairman. Do you ever depute anybody else to take testimony ? Mr. Proutt. That can be done. The Chairman. You have that authority? Mr. Prouty. Yes, sir; that is, testimony can be taken before a notary public. Mr. FiFjER. A deposition. Mr. Mann. Have you authority to appoint a commissioner to take testimony? Mr. Prouty. In a foreign country, but not in this country. Mr. FiFER. It is the same law in regard to taking depositions. Mr. Mann. If a law like this was passed, would it not be necessary for you to have authority to appoint a commissioner to take testimonj^; in other words, would you not be swamped? Mr. Prouty. I do not think so, but that could only be tested by a practical trial. As Governor Fif er has said, this Commission for the first ten years of its existence supposed that it had and exercised every power provided in the Corliss bill. I will undertake to point out to you a case where it did exercise every power which is given in this bill, and it was not swamped with business. Now, you were speaking of differentials. The differentials for Bos- ton, Baltimore, New York, and Philadelphia were decided in 1875 by the Thurman committee, and that differential has remained in effect ever since. The differentials were decided a number of years ago for Chicago, and Kansas City, and Minneapolis, and they have remained in effect ever since. When one of those things is once decided, it goes on year after year, so that the business is less than might naturally be expected. Mr. FiFEE. This matter of referring cases back to the Commission occurred before I became a member, and consequently I know nothing personally about it. I knew that there were cases of that kind in the past, but the modus operandi of getting them back into the hands of the Commission! was not familiar with. Now, gentlemen, I believe I have said all that I have to say. The Chairman. WiU it suit your convenience, Judge Knapp, to go on to-morrow morning at half past 10 o'clock? Mr. Knapp. It will, Mr. Chairman. The Chairman. Very well. (Thereupon, at 3.45 p. m., the committee adjourned until Wednes- day, April 23, 1902, at 10.80 o'clock a. m.) Wednesday, April 23, 1902. The committee met at 10.30 o'clock a. m., Hon. James F. Stewart, acting chairman. STATEMENT OF MARTIN A. KNAPP, CHAIRMAN OF THE INTER- STATE COMMERCE COMMISSION— Continued. Mr. Chairman, it was very gratifying to me on Monday, when your chairman suggested that your committee was more concerned just at present considering principles of railway regulations than in discuss- 256 intekstate-coMmeeob law. ing details of particular measures. That seems to be a very wise atti- tude. We should at first decide what we should attempt to accomplish, and when we have decided that we are prepared to examine the partic- ular methods proposed for realizing our purpose. At the same time the discussion may be so discursive as to be unprofitable, and if we get very far beyond the range of any legislative proposal we are liable to indulge in more or less idle speculation. So, with your permission, this morning I shall try to bring the dis- cussion to a somewhat more definite and practical basis. In the ten years and more during which I have been a member of the Interstate Commerce Commission I have endeavored to give careful and conscientious study to the problem of railway legislation. I appreciate its difficulty; I think I understand how serious the question is in its various aspects. My experience and reflection leads me to be very conservative. I think our legislative policy should be developed by evolution and not by revolution, and I am not at all disposed to advocate any very radical or novel additions to the present laws upon this subject. Indeed, I think all the Commission has ever recommended to Congress is that such changes be made in the present act as will enable its purpose to be accomplished and will permit it to effect the results upon railway operations which its framers obviously intended. We are not prepared, in my judgment, to enter upon novel fields of legislation, and we may wisely, for the time being at least, confine our efforts to such amendments that will give the law the strength and effi- ciency which it was supposed to have when it was adopted. Nor am I aware of any measure pending before this committee which goes any farther than that. Now, the while I ask you, gentlemen, to keep in mind the distinction which I endeavored to point out on Mondaj'', for 1 regard that as fun- damental; and clearness of thought at the very foundation of this sub- ject will aid us to intelligent conclusions. There is a radical difference, fundamental in its nature, between measures which are devised to secure the observance of railway tariffs and measures which are designed to correct those tariffs when they are found to be in violation of the principle of this law. You can only correct that class of evils which .results from depart- ure from the public tariff'; that class of evils of which rebates and rate cutting and similar devices are types, you can only deal with them by making them, as the present law makes them, misdemeanors and seek- ing to punish them as such. Of course all those evils, all evils of this class, have their origin in the competition between carriers, and I do not hesitate to express my own conclusion, at least, after very careful examination and reflection, that so long as that competition remains unrestrained and unregulated, just so long evils of this kind will inev- itably recur. When 1 ask your committee to amend the criminal provisions of this law, which are found in the tenth section, 1 do not wish to be under- stood as implying a belief that those amendments will be a panacea for the evils against which they are directed. 1 perfectly agree with Com- missioner Prouty that railway competition, as it has existed in this country, is gradually and surely disappearing. I do not think it can be relied upon in the future as the agency which shall secure reason- able rates; nor do I believe that it ought to be relied upon. My own judgment is that to secure reasonable rates of transportation and jus- INTEESTATE-COMMEROE LAW. 257 tice to the shipper as well as the carrier, our legislative policy should, in some respects, be materially altered; that we should recognize the ten- dency, and in many respects the desirability, of railway association, and devise such measures as will secure the benefits of that association without subjecting the public to the dangers of excessive and unreason- able charges. But 1 should not be justified, 1 think, in discussing that aspect of the general question at this session of the committee. If it should be your pleasure later on to desire my personal views respecting this whole question of railway competition and railway cooperation 1 shall be very glad to furnish them; but I do not under- stand that any project of that kind is pending before this committee, and 1 think I will be likely to serve you best if I confine my remarks to the questions which are involved in pending measures. So I say that on the theory which now obtains in our statute laws, both State and national, that railroad competition is to be encouraged and enforced so far as possible, and that no form of railroad associa- tion is to be legalized; on that theory I say that the amendments to the tenth section, substantially as they appear in the Corliss bill, are of urgent importance and ought to be adopted. I do not know of any person who hesitates to say that the carrier corporation should be made liable for the transactions which are of the character now under consideration. Mr. Stewart. Before you get through will you suggest any amend- ments to the Corliss bill which you think would be agreeable to the Commission, if you have any ? Mr. Knapp. Later on, in another connection. I want to repeat that there are two changes in the law relating. to the enforcement of criminal remedies which are important, against which there is no reasonable objection, against which I venture to say no one wUl come here and interpose opposition. They are that the corporation carrier shall be made liable, and not simply its agent and representative, and that the shipper shall be made liable who know- ingly accepts a lower rate than that provided by the published tariff without being obliged to show that he thereby secured a discrimina- tion in favor of himself and against his business rivals. Those two changes in the tenth section would greatly aid, in my judgment, the practical administration of the criminal machinery devised for preventing rebates and compelling carriers to observe their published schedules. Mr. Mann. In your opinion, would it be sufficient to provide a pen- alty against a shipper who knowingly received a reduced tariff, or fol- low a provision of the Corliss bill and provide a penalty against the man who does receives a reduced tariff? Mr. Knapp. As I said on Monday, I had not supposed that this bill was so framed as to make an innocent shipper liable. 1 assumed that he would be indictable only in a case where he knew what the pub- lished rate was that other people had to pay and secured by arrange- ment with the carrier a preferential rate for himself. If that distinction can not be made in the law, nevertheless I think the change should be made, because I do not think instances would ever occur where a man actually innocent, acting in good faith, would be made the subject of prosecution. Mr. Mann. I should think you would find loopholes enough in this i-o L 17 258 IHTEESTATE-OOMMERCE LAW. law to lead you to think that it was quite necessary to guard against such things in making a new law. Mr. Fletcher. Would not that be extraordinary legislation, rather unusual in this country, to legislate against a man making a good bargain and shipping his merchandise, his stock, or whatever he has to ship, making him liable for taking a less rate, if he could get it; is that not rather an extraordinary provision? Mr. Knapp. Mr. Fletcher, I think not. Now, it all de^jends, gen- tlemen, upon the point of view. If you say that the railroad is a private industry, just like a farm or a factory, then everj man should be free to make the best bargain he can with the carrier whose serv- ices he desires. If you take that position, then this entire act to regu- late commerce should be repealed and the whole effort at railroad regulation should be abandoned. Leave it a matter of purely private arrangement, that every man and any man might make his own bargain with the carrier, just as he now makes it with his shoemaker or his grocer. But if you regard the railways as performing a public service, discharging a function of the State, doing a thing which the State is bound to do except it abstains from motives of expediency, then I think you must reach the conclu- sion that our laws should be aimed to secure precisely equal treatment to all shippers under like circumstances. And, to my mind, it is just as wrong — I mean wrong against social order and the rights of the citizen — to permit one shipper to get his traffic carried at less rates than his rivals pay as it would be to let one man buy postage stamps cheaper than his business rivals or get his imported goods through the custom-house at less rates than other people are compelled to pay. Mr. Mann. There is no law against a man buying postage stamps as cheap as he can buy them. Mr. Knapp. No; but no man can buy them, in the first instance, for any less than a fixed sum, which everybody must pay. Mr. Coombs. Here is a distinction, it seems to me, you fail to make. In regulating freight you fix the maximum to be charged. You do not intend to fix the rate, but you fix the maximum, as I understand it. Now, coming within a maximum under the maximum, is not the person permitted by right to engage in whatever arrangement he might make? Mr. Knapp. Absolutely not. Mr. Coombs. Do you think he ought to be cut off from any field of legitimate arrangement — I mean legitimate on his part — simply because the Government has the right to say to the raili'oad, as a common car- rier, what their maximum charges shall be? Mr. Knapp. Yes. If 1 perfectly apprehend your question, I will answer it this way: The Commission or any other agent of the Gov- ernment charged with the administration of its laws in this regard should be authorised in certain cases, which I shall come to presently, to prescribe the maximum rate; but the carriers who have the complete initiative in rate making should be at liberty at any time to publish and apply a lower rate than that which has been prescribed. But that lower rate should be open and available to everybody. Mr. Coombs. That may be true in theory, but do you seem to go that far when you regulate the maximum rate ? Should you go farther than that, into the business of concerns and into the business of indi- viduals who have dealings with the concerns? Mr. Knapp. Mr. Representative, the present law goes to that extent. INTER8TATE-0OMMER0E LAW. 259 Mr. Coombs. I am asking for information; you have studied these questions, and so I am asking you about them. That is my only motive. Mr. Knapp. What little knowledge I have gained from experience ought to be at your service, and very cheerfully is at your service. 1 will be very pleased to answer to the best of my ability any questions you or any other member of the committee may propound. Mr. Coombs. 1 simply wanted to ask the question as to how far you can regulate the common carrier after you have fixed the maximum rates he is permitted to charge, how far then beyond can you go into the business of his concern and the minutia of it and regulate it. That is what I would like you to discuss. Mr. Knapp. There is no question about the power of Congress, and, in my opinion, not the slightest question about its duty. No proposi- tion is more intolerable to my mind under modern business conditions than to say that one shipper under present circumstances should be' able to make and carry out a private bargain with the carrier as the result of which he secures the benefits of a public service for less than his business rivals pay, and thereby not only get cheaper transporta- tion, but through that transportation get command of the market which enables him to undersell all his rivals. Mr. Mann. In that connection 1 would like to ask a question. Mr. Knapp. Certainly. Mr. Mann. You have had recently an investigation of the dressed- beef shipping. Suppose, for instance, that one of the concerns ship- ping dressed beef after a law like this goes into effect does make an agreement with one of the railroads, which is secret and very difficult to obtain knowledge of, and gets a preferential rate considerably below the published rate. His rival shipper has reason to believe that that is the case, is morally certain that that is the case. What is he to do? Go out of business, or put his time in in endeavoring to enforce the criminal law or in endeavoring to secure a lower rate himself? Mr. Knapp. That he will do the latter as a matter of practical conduct I have not the slightest doubt. That is just what happens everywhere. Mr. Mann. But what would you have him do? You want to have him punished with the $5,000 fine for every time he does that? Mr. Knapp. No; not the man who does not get it, but the man who does. Mr. Mann. But what is he to do? Go out of business or seek to obtain it himself? Mr. Knapp. Well, that, of course, is the hardship which every busi- ness man must encounter under possible circumstances. Mr. Mann. I know of no other case in business where a man is punished for doing that thing. Mr. Knapp. Now, let us see. Suppose you are an importer, and you know to an almost certainty that your rival gets his goods through the custom-house on an undervaluation. Are you going to try and do the same thing? Mr. Mann. We say in Chicago that we will have to go out of busi- ness because they do that in New York, and we are malung a dreadful kick about it. Mr. Knapp. And you ought to. Mr. Mann. This matter of a duty to the Government, and this mat- 260 INTEESTATB-OOMMEECE LAW. ter, of interfering with a private contract are two diflferent things; and if you can name any other case where that is done I think it would be very valuable. Mr. Knapp. You see I differ from you on a fundamental idea. Mr. Mann. You do not differ with me on anything; 1 am seeidng information and not expressing an opinion. Mr. Knapp. That is not a matter of private contract Mr. Mann. Let us get through the other first. That is purely a matter of argument. That is not a matter of information. What would you have the man do in a case of that sort? Mr. Knapp. I can not be made the custodian of that man's con- science or undertake to say what he ought to do. Mr. Mann. Well, what can he do under a law like this? Mr. Knapp. He can lend himself actively to the effort to prevent a recurrence of the wrong by which he is defrauded. Mr. Mann. Oh, he might constitute himself into a detective or a criminal bureau and lose his business while he was prosecuting his case up through the courts, if he could obtain information at all, which he could not do by himself. Mr. Knapp. I grant all that. I think I appreciate its difficulties. If a strong and powerful shipper can bring pressure to bear on a railroad carrier which gives him a lower rate, he drives his rivals out of the field, and right thei'e Mr. Mann. According to the theory we have got so far if we passed this law he would drive his rivals out of the field. Mr. Knapp. Not at all. Mr. Mann. Well, what will the rival do now who can not get the lower rate, knowing morally that his rival has a lower rate; what is he to do? Mr. Knapp. I say he should do exactly in principle what a business man would do who found himself undersold by a rival whom he believed had stolen the goods. Mr. Mann. Well, what would he do? Mr. Knapp. He does not go and steal some goods himself. Mr. Mann. No; but he meets the cut right along; he either meets the cut or goes out of business. Mr. Knapp. 1 want to make two brief observations on that point. I see exactly where there may be a divergence of view. As I say, I maintain that these are not matters of contract at all. I do not ride on the cars or have my traffic carried by virtue of a contract with a carrier, but in the exercise of my political rights. A merchant may stand at his door and say I shall not enter. He may refuse to sell me his goods even if I offer him cash for them. He is free to sell to me at one price and to you at another price. All the transactions between men which involve the change of property are contract relations, but the relations between the public and a public carrier are not contract relations, and the rights of the public grow out of their inherent political rights as citizens. The railroad manager can not stand at his station and say that I shall not enter. He is performing a public service; he furnishes the facilities of that public service under condi- tions which require him to offer them to everybody and on equul terms. That is one observation. The other is, if you take the contrary view, you simply turn over the commerce and business of this country to a few multimillionaires; IirrEHSTATE-OOMMEEOE LAW. 261 and kindred to that I beg to make this observation, and I think it is worth a moment's attention : I believe that independent of the exercise of public authority there is no agency which will operate so forcefully to bring down published rates as to see to it that they are absolutely observed in all cases. And why 'i Railroads are sensitive to public opinion and they yield to public pressure. The man that presses them hardest is the man that has got the largest shipments to offer, and if a carrier in a given situation, by yielding to the importunity and pressure of one or more Eowerf ul shippers, can thereby hold up his rates as to everybody else, e is not going to reduce them. When it gets to the point where the biggest shipper can get.no better rate than the smallest shipper, where the published tariff is applied without variation or exception to every- body, you will have the united pressure of the entire business com- munity demanding a reduction of rates, and you will not get it in any other way. Mr. Mann. And the millennium ? Mr. Knapp. No; not the millenium. Mr. Mann. You will have the millenium before you get to the point where nobody will make a bargain if he can which will be to the disadvantage of somebody else. Mr. Adamson. I understand you to say as to whether a merchant will trade with you is a matter of his own business; but as to whether you ride on a railroad train or not, no matter what your condition or circumstances, is a political right which nobody can gainsay. I understand that few of the railroads are chartered by the Federal Government; that they are chartered by the States. Is that true? Mr. Knapp. That is quite true. Mr. Adamson. Do you derive your jurisdiction and authority for the Interstate Commerce Commission anywhere except from the clause authorizing Congress to regulate interstate commerce and commerce with the Indian tribes? Mr. Knapp. That is the principal source of authority. Mr. Adamson. Is not that the only thing in the Constitution giving you authority ? Mr. Knapp. Well, Mr. Representative, we do not any of us know how far our Supreme Court would go in a direction of this kind under the general-welfare clause of the Constitution. I agree with you that the only specific authority for railroad regulation is found in the clause you have referred to. Mr. Adamson. When it can not be stretched any further we go to the welfare clause as more elastic. Now, does the commerce clause recognize any such distinction as you make between public or quasi public institutions and private institutions? Mr. Knapp. In that clause. Mr. Adamson. What clause does? Mr. Knapp. By giving the Congress the right to regulate commerce. It is not the right to regulate private business. Mr. Adamson. In regulating commerce, interstate and foreign, and commerce with the Indian tribes, does that clause make any distinction as to the business which corporations do and the business which private individuals do? Do we not under that clause legislate on every con- ceivable subject about what individuals do and what mercantile firms do, and everything like that? 262 rNTERSTATE-COMMEEOE LAW. Mr. Knapp. You have legislated on some things of that kind which the Supreme Court has said are unconstitutional. Mr. Adamson. We have spent six or eight weeks here in legislating as to what men should eat and wear, and whether one firm should sell certain things or not in competition with other firms. That is all under this clause. Mr. Knapp. So far as legislation can be sustained under the com- merce clause you have a right to enact it. Mr. Adamson. What is in it to justify such a distinction as you make? Private men, merchants, all sorts of shippers and manufac- turers, and everybody else deal in interstate commerce. That clause gives us the right to regulate that. Mr. Knapp. Surely. Mr. Adamson. Then why is not the question Mr. Mann asked you entirely pertinent? Mr. Knapp. I admit its pertinency. Mr. Adamson. And you did not think they were on a parity at all; you said we had a right to deal with the railroad question because they were quasi public institutions. Mr. Knapp. That is quite right. Mr. Adamson. When the Government that is dealing with them has not chartered a single line, and yet all the' authority you have is from that clause which gives us the authority to regulate commerce between the States without regard to corporations or private individuals, one business or another business. Mr. Knapp. I think this is getting very far away Mr. Adamson. I do not ca,re how far it is leading; 1 wish everybody would see how far it is leading. Mr. Knapp. There was a law before the Federal Constitution and before any Congress was created. There is no rule of social order, there is no public regulation which has governed the aflfairs of men more ancient, more unquestioned Mr. Adamson. There was not any railroad ahead of the Federal Government. Mr. Knapp. Pardon me (continuing) — than the common highway. Now, in the very constitution of society the means of communication must be provided. Mr. Adamson. By somebody. Mr. Knapp. It must be provided by the State, and there is no State in modern history — and you can go very far back in ancient history to find an exception — that has not provided the public highway. And this is the point of importance, MLr. Representative. Take all history that you can find on the subject and you find there is no exception to the rule that in the use of the public highway one man had exactly the same right as another; and such a thing as preferences in the way of the public highway has never been tolerated in any civilized country, and when all our inland commerce was carried over the ordinary high- way, when all our distribution was by animal power, every individual had exactly the same right as any other individual in the use of the only agency which then existed. A Membee. How about turnpike roads? Mr. Knapp. Turnpikes are no exception, because the tolls were always the same. INTEKSrATE-COMMEKOE LAW. 263 Mr. Adamson. Will you give me an instance where the Federal Government has fooled with turnpike roads? Mr. Knapp. No, sir. Mr. Adamson. The Federal Government has nothing to do with matters of that kind. Mr. Knapp. If you will read the Kentucky bridge case, and one or two other cases that I might be able to cite you, you will find the sub- ject fully discussed. So I start, gentlemen, with the proposition that the right to use the highway on equal terms with every other man is an inherent and inalienable right. Mr. Adamson. I understand the theory, and have long understood it, that if you do not find the authority in the Constitution which you want you can get around it by saying that the law would have been so if we did not have the Constitution; but in reference to the subject under discussion the only authority you have at all under the Consti- tution, as I understand it, is the authority given you in that one clause in reference to commerce. Mr. Knapp. The distinction I made has been drawn by the United States Supreme Court, drawn plainly and repeatedly drawn, with such clearness of definition that no man who reads can misunderstand. Take a familiar illustration. Congress enacted what is known as the antitrust law. I venture to say at the time it was passed not one man out of ten believed that it had any application to railroads; but it has been so construed by the Supreme Court that it does not apply to anything else; and if you will take the trouble to read what the Supreme Court said in the sugar case under the antitrust law and what it said in the trans-Missouri case and in the Joint Traffic Association case you will see exactly the distinction I make and you will see it verified with citation of authority which puts it beyond-doubt. Mr. Mann. Do you say the antitrust law does not apply to any- thing but railroads? Mr. Knapp. I say practically it does not apply to much else. Mr. Mann. Do you say that? Mr. Knapp. I do not care to discuss the antitrust law. I say broadly that the construction which the Supreme Court has given it does not give it much field for application except as to railroads. Mr. Coombs. Speaking of the penal clause, putting a penal clause in the bill which would render liable the railroad companies and the shippers foo for making any combination or entering into any con- spiracy to cut rates that is in the nature of a conspiracy between the shipper and the railroad to destroy other shippers, could there possibly be such a thing as prescribing punishment for one without prescribing an equal punishment for the other? Mr. Knapp. Undoubtedly. Mr. Coombs. How could you do that. Could you constitutionally say that one of the conspirators was guilty — that is, the railroad — and not sav that the other was equally guilty? Mr." Knapp. Oh, yes. Take the most familiar illustration: Laws in many States regulate the sale of intoxicating drinks, making a viola- tion of that law punishable Mr. Coombs. But that is not a conspiracy against some one else who wants to drink or wants to sell. Mr. Knapp. I will not undertake to say that; but the point is now 264 INTEE8TATE-C0MMEE0B LAW. that there may be two parties to a given transaction, one of whom is liable for indictment and punishment for his participation in it, and the other not liable. As I said on Monday, gentlemen, if in your judgment no shipper should be liable at all, I am perfectly content with that view. Mr. Coombs. You think that would be constitutional, do you? Mr. Knapp. I think there is a good deal to be said in its favor; that as a practical method of giving efficiency to this law it might be wise to say that the shipper is not liable at all. Let him be free to get the best bargain he can and put the liability, the criminality, solely on the carrier. But I have assumed that you were not disposed to make so radical a change as that in the law. Mr. Adamson. That makes the inducement to harrow the railroad companies to try to induce them to do wrong. Mr. Knapp. I do not say I favor it. It does not appeal to my sense of justice. But as the present law stands you attempt to reach the shipper and you should have a provision which would enable you to actually reach him, and if you can reach the shipper Only when he gets a discrimination in favor of himself you defeat the purpose of the law, which is to include the shipper. If you are going to make the shipper liable at all, make him liable whether there is a discrimination or not. Mr. Adamson. Make him liable for attempting it? Mr. Knapp. Yes; for attempting it. If you think best to leave the shipper out altogether and subject only the carrier to the criminal remedy, very well; I have no quarrel with that position. So, to put it together for a moment, I am only suggesting that, so far as you are to rely on the use of criminal remedies to prevent such offenses as rate cutting and rebates and other secret practices, you ought to amend the law in the two respects I have pointed out. They would not increase the authority -of the Commission in the slightest degree. When you make a given transaction a misdemeanor, you thereby remove it from the control of any administrative bod3^ A misde- meanor under the act to regulate commerce is exactly the same sort of thing as a misdemeanor under the postal laws or the revenue laws or the tariff laws; and in every case when you make a given transac- tion a misdemeanor you can only proceed, having regard to constitu- tional rights, by indictment and trial before a petit jury, and you can not have one system for misdemeanors under the act to regulate com- merce and another system for misdemeanors created by other laws. But I do say that the two changes suggested in the present law will very freatly aid, in my judgment, the prosecuting authorities and the ederal courts in their efforts to prevent these offenses. And, as I have already said, I have not yet heard anybody make objection to them, and I venture to say that no man interested in railroads or other- wise will come before this committee and indicate the slightest objec- tion to the two changes in the law which I have now referred to. Now, unless you desire to ask some questions upon that branch of the case, I will, with your permission, proceed to the other one. Bearing in mind that the railroads exercise the initiative in rate making; that they are free in the first instance to put in just such tariffs as they see fit; that they are under no legal restraint in that regard, the question comes. What will you do or undertake to do in providing methods by which that tariff rate itself can be changed if it INTERSTATE- COMMERCE LAW. 265 is found to be excessive or unfairly adjusted as between diflFerent com- munities or different articles of traffic? That is the question. And I beg to say, gentlemen, that that is the great question, because as anyone must see, following out the sugges- tion made by Commissioner Prouty yesterday, the railroai competi- tion which has produced all these secret arrangements, the competition without which these secret practices would not occur, is a thing that is not much longer to remain; whether restraint is put upon that com- petition or permitted by legislation in that regard, or whether in default of such legislation and induced powerfully by the existing legislative policy of the country, or whether, as the result of the natu- ral and inevitable tendency there is to be a very complete railway combination, and I do not believe there is any earthly power to pre- vent it. Competition between different lines of railway which has existed and which has had its influence upon rates, will, to a very great extent, disappear. And in that connection, 1 need not enlarge upon the very suggestive statements of Commissioner Prouty yesterday. I may, however, if you will bear with me, allude to one matter that is very important in that connection. I said on Monday that I thought you would be surprised upon examination to find how slight and incon- sequential has been the reduction in tariff rates in this country, say in the last ten years, which can be attributed to railway competition. There is a form of competition, however, which has a verj- powerful influence upon tariff' rates and upon attainable rates, and that com- petition will continue for a long time to come. That is the compe- tition of the markets. Chicago originates an immense tariff; so does St. Louis. The carriers leading from Chicago need that traffic for the revenue it secures. The carriers from Chicago therefore have got to make a rate as compared with rates from St. Louis which will enable the Chicago man to do business, for the railroads are just as anxious to get the traffic as the merchant is to sell his goods, and that is a thing that is going on all over the country. New York and Philadelphia and other cities on the Atlantic seaboard are competing for the enlarging market south of the Ohio and Potomac rivers, and Chicago and Milwaukee and other cities in the Middle West are also eager to secure the trade of that same territory, and the lines which lead from one section of the country in that consuming territory and from the other section of the country are not likely to be con- federated, and if they could be it would not be of any advantage to either of them; and the pressure of the producing public to sell the foods and the competition between sellers in the consuming markets as a very powerful control upon obtainable rates. That influence of course is to remain with us. But the influence of mere railway com- petition, the mere rivalry of the carriers themselves, is a thing we can no longer rely upon. Now, I say the carriers are to go on as now exercising the initiative of rate making, and whether separate and independent or combined and confederated, whether controlled by different boards of manage- ment dr practically dominated by one or two men, they will still be •under no legal restraint, in the first instance, to establish and impose just such tariff rates as are induced by their interest. And in that state of things the question comes — gentlemen, it is a question for you a great deal more than it is for me, vastly more for you; your responsi- bility far exceeds mine — the question for you is: Will j'ou provide 266 INTERSTATE-OOMMBROE LAW. any way by which when the combined railroads of the country pub- lish a tariff and impose it upon all shippers the question of the reason- ableness of that tariff will be open to consideration, and if it is found to be excessive or to be unfairly adjusted as between different com- munities tiiat there shall be some way by which the injustice can be corrected? That is your question, gentlemen. For myself, so far from coveting authority, 1 should shrink from the responsibility involved in its exercise. So far as my personal effort is concerned, if I shall remain a member of the body to which I belong, I should feel much less strain under the law as it now is than under one which added to the actual authority of the Commission; because it is a very great responsibility to assume. But it is a ques- tion of the most vital public interest. It is a question which comes directly to the lawmaking branch of the Government. It is for you to say, gentlemen, not for me. It is for you to say whether the tariff rates which the combined railway interests of this country see fit to publish and impose upon the public shall be subjected to any actual control. If not, leave the law as it is; if otherwise, then you must make some change in it. That brings me to speak briefly about the changes proposed in this regard by the bill before us. Let me say again that I am not advo- cating any radical alteration in our laws, any great reach of authority by the Commission. I undertake to say that the changes which would be effected by the adoption of the Corliss bill, as far as it relates to the matter I am now discussing, would only put the law just where everybody supposed it was when passed. For ten years the Commis- sion charged with the administration of this law — fi'om 1887 to 1897 — assumed that it had authority to do everything which this Corliss bill would permit it to do. And there are two things I might say in that connection. When everybody believed that there was no such outcry against the danger of giving the Commission authority, and when everybody believed that — and I venture to address this particularly to Mr. Mann — the Commission was not overwhelmed with a vast number of com- plaints; they did not exceed in number the ability of the Commission to dispose of; nor do I believe that the changes proposed by this bill would result in flooding the Commission with a vast number of com- plaints. Mr. Mann. It would if we can take any criterion from the state- ments made by the witnesses we have had before us. Mr. Knapp. I would answer that in this way, Mr. Mann. If you reason from the answers of the witnesses before the CuUom commit- tee in 1886, before this law was passed, you would have been equally warranted in saying that when -that law was passed the Commission should be flooded with complaint; but the law was passed and the flood did not come. There are complaints, quite numerous complaints, and many of them are important, but I do not think it is at all beyond the ability of a capable Commission to dispose of every complaint which would come up, with reasonable promptness. Mr. Mann. Of course, I have heard the statement made a great many times that for the first ten years everybody believed that the Commission had power to fix rates. My recollection is that the Con- gress that passed the act did not believe they were giving such INTEKSTATE-OOMMBBOE LAW. 267 authority. The act does not confer any such authority, and the rail- roads have generally denied that any such authority existed. What the fact may be I do not know; I question very much whether every- body believes it. Mr. Knapp. I think I was careful not to say that everybody believed it. 1 spoke of the general popular understanding. And let me say now, in support of that, that in the complaints which were filed before the Commission — I am speaking now of formal complaints which under this law may be served on the carrier and which can only be investi- gated after notice and full hearing — and which they were required to answer, not one of them in answering &et up the want of authority on the part of the Commission to grant the relief which they complained of. Mr. Mann. Did not those petitions invariably declare that the rate was unreasonable? Mr. KJSAPP. Yes; and in many cases asked for a specific reduction. More than that, Mr. Mann. When the Commission took proceedings in the courts to enforce orders which had been disregarded in the respect I am now considering, which is, as you know, by suit brought for that purpose, based on the Commission's findings, and the carriers answered this, they did not then set up the want of authority on the part of the Comission to enforce the 6rder which was sought to be enforced by the proceedings, and the question was not raised until nearly ten years after the Commission was organized, and was not decided until along in the year 1897, and then in a case which involved other questions and in an opinion which left much room for doubt as to what the Supreme Court would say when the precise question came before them. That is the actual history of the thing. Let me say further, Mr. Mann, in the first eight months after the Commission was organized, then one of the most eminent jurists this country ever produced, Judge Cooley, was its chairman, the Commis- sion made orders which in principle and in terms covered every order which the Commission could make under this Corliss bill. Mr. Mann. It has been stated that Judge Cooley did not believe that the Commission had authority to make rates. Mr. Knapp. I know it has been. Mr. Mann. I said did not " believe." I should have said " decided" that the Commission did not have authority to make rates. Mr. Knapp. I do not think Judge Cooley is on record as saying that. I had the honor to be associated with him, to my great advan- tage, for some months upon the Commission— in my first service with the Commission — and I never heard him say that. I know he joined in decisions where that authority was exercised, Mr. Mann. You know that claim is made? Mr. Knapp. Oh, yes; do not misunderstand me; I am not for a moment pretending that the law was clear in that respect, and I am not implying the slightest criticism upon the Supreme Court of the United States. Mr. Mann. I understand; it is a question of what the Commission actually did. Mr. Knapp. On the contrary, I think the Supreme Court has cor- rectly construed the law as a matter of statutory provision. There are one or two questions not relating to the question I am now discuss- ing on which I am not able to bring my mind into harmony with the decision of the court; but so far as its decisions affect the question I 268 INTEB8TATE-00MMEE0E LAW; am now discussing I am bound to say that as interpretations of the statute the decisions are well grounded. And I am only suggesting, not that the Supreme Court is wrong, but that this law ought to be corrected— can wisely be corrected so far as to give the authority which was popularly supposed to be invested in the Commission. 1 will add, Mr. Mann, that while the statute is vague and uncertain and had to be settled by the Supreme Court, some of the ablest law- yers in the country are on record in written opinion aiSrming that the Commission had the authority which it attempted to exercise during that period. Mr. Mann. You know a lawyer will give an opinion on any subject or any side of any subject if you get the right one. Mr. Knapp. I have no doubt you are as familiar with that question as I am, Mr. Mann. Now, let us see for a moment just what it is pro- posed to do. Let me put it in this way. The Congress has absolute power. The Supreme Court, as far back as 1825, gave to the com- merce clause of the Constitution the broadest possible construction. It affirmed on that early date, and has repeated the affirmation many times since, that the power given to Congress by the commerce clause is plenary and exclusive, and that it is subject to no limitations whatever except such as are found in the Constitution itself. And they decided, further, away back in that early day, that that power extends not only to the subjects of commerce but to all agencies and instrumentalities by which that commerce is carried on. So that not onlj' the things shipped but every applicance which is used for that transportation is completely and absolutely in the control of the Federal Congress. Now, no one is proposing that the legislative power of Congress shall be transferred to the Interstate Commerce Commission, That would be an absurdity. Now, what is it that is proposed? That some portion of that authority be delegated, and under specific conditions. For example, the Commission can to-day make no order which even condemns an existing rate until a complaint has been filed, until a complaint has been served on the carrier, until there has been an inves- tigation upon notice with full opportunity to disclose all the reasons for maintaining that rate. If the Commission should to-morrow make an order declaring any railroad rate to be unreasonable without such a petition and without such an investigation, the courts of course would refuse to enforce it, and say that the Commission had not any author- ity to make it. That is too obvious for discussion. Mr. Richardson. Eight there; you say you can not now institute any proceedings without a complaint. Do you propose to give author- ity to the Commission to go forward and institute proceedings without a complaint? Mr. Knapp. No. On the contrary, 1 am very much opposed to that. While some States have gone to that extent, I think it would be very unwise for the Congress to undertake that by direct legisla- tion or by any power to delegate that to the Commission. Mr. Mann. I have wanted to ask you a question in reference to that. If a petition is presented under your practice complaining of a particular rate, what do you do if you find that you want to extend yom- order further than is suggested in the petition? Suppose a complaint is m^e by one city against a rate, and that is all that is referred to; but that involves the rate to another city. INTEESTATT?- COMMERCE LAW. 269 Mr. Knapp. Perhaps I can best answer that, most intelligently answer it, by describing briefly what actually happens. Now, in" many cases where a community feels aggrieved, either because it says that all the rates it pays are too high or because it conceives itself to be prejudiced because some rival community gets more favored rates, frequently a competent lawyer is employed in the first instance who prepares a petition, such as is contemplated under the present law, a petition which is ample in all respects, which sets forth the facts, gives the nature of the grievance, the relief which is demanded, and which is believed by them to be justified. In such a case as that the Com- mission on receiving the complaint files it, and thereupon serves a copy to the carriers, which are made defendants in the proceedings, and requires them to answer ordinarily within twenty days, and when their answers have come in, then the case is at issue; it is like any suit in equity. And then the time and place is fixed for hearing. Then the parties appear, produce their witnesses, and they are some- times cross-examined, and the fullest opportunity given to both sides to disclose all the facts which bear upon the particular grievance pre- sented by the complaint; and then the Commission decides. That is a very common thing. But it very often happens that complaints come to us in the form of letters, or they are drawn by some business man or some lawyer who is not familiar with this law, and they are inartificially drawn. The facts are not properly stated. They fail to allege, perhaps, the juris- dictional facts; they may fail to make all the carriers who are inter- ested in the rate parties in the case. Now, when a complaint of that kind is received we do not file it as a matter of course. We take it up with the parties by correspondence, and explain that if they wish to present the grievance their complaint needs to be amended, and pos- sibly other railroads brought it. In other words, we aim to avoid all technicalities and not hear a case by testimony and documentary proofs until there is a complaint served upon the carriers which apprises them fully and fairly and gives them every opportunity to suspend a rate which is assailed. Mr. Richardson. Do you not think it would be a better plan, accord- ing to the rule in all courts, to let them get up their whole case, instead of the judges helping them? Mr. Knapp. Well, Mr. Representative, these are not complaints of individuals, and you must bear in mind all the while that any order that is made affects everybody as well as the complaining party. Mr. Richardson. But bear in mind this, also, that a judge who fixes up the amendment and so on is likely to sustain it. Mr. Knapp. Judges are holding court to settle disputes between individuals. The Commission is not a court. It is an administrative body. It is charged with the administration of a law. It is the duty of the Commission to use every proper method of realizing as far as possible the purposes of that law and administering it in the interests of justice and not in the interest of individuals, and I do not think the plan which the Commission adopts is open to any criticism. I think it is a fair and honest one. Mr. Richardson. Then it would be equally fair to give the railroad the opportunity of any suggestion in their answer? Mr. Knapp. Oh, they have the opportunity. 270 ENTEKSTATB-COMMEKCE LAW. Mr. Richardson. You make the same suggestions to the railroads? • Mr. Knapp. They make their answer, of course. Mr. RiCHAKDSON. They generally have competent and able lawyers; there is no trouble about that. Mr. Knapp. Surely. Now, not only can the Commission make no order until such a com- plaint has been filed, served on the can-iers, answered by them, and the issue tried, but it can only make such an order as is justified by the facts proven. The Commission has no arbitrary power to make rates. It can not act in any ex parte or ex cathedra manner. You gentlemen can pass a law and fix the rates on grain from Chicago to New York without giving anybody a hearing; it becomes the law of the land. We are not proposing that the Commission shall do any- thing of that kind, and it is assumed that all the safeguards which are now provided shall be continued and that the Commission shall have ■no authority to even condemn the rates which carriers themselves establish, except upon a complaint investigated after the necessary and full hearing. That is all that is proposed. Now you come to the crucial question : Shall the Commission have any more authority in such a case than simply to say this rate that is complained of is wrong and you must stop charging it, or shall the Commission in such case have authority to name the rate which it thinks should be substituted in the future for the one thus condemned? That is all there is of it. Now, at present, since the decision of the Supreme Court, of course our decisions have conformed to that con- struction of the statute; and when a complaint is made that a rate is excessive, and that has been served on the carriers, and that has been answered, there has been a trial of the whole question, with every facility and opportunity to show all the facts which bear upon the question. All the Commission can do now is to say if it so finds upon the facts, if it is warranted in so finding, "This thing you are doing is wrong, and you must stop it." That is all we can say. And I am assuming in that, Mr. Mann, that the Supreme Court will sustain that authority whenever the precise question comes before it. It has not done so yet, but I assume, because I firmly believe that if the rate complained of is a dollar and the Commission after this inquiry in the way I have described says a dollar is unreasonable and therefore violates the first section of the law and makes an order requiring the carrier to cease and desist from thereafter charging that rate — I believe the Supreme Court will affirm the authoritj' of the Commission to make such an order. Mr. Mann. I should say that the opinions of the Supreme Court on other cases left that as clear as daylight could possibly leave it. Mr. Knapp. I had not supposed that there was any doubt about that. Mr. Mann. They have said so repeatedly. Mr. Knapp. The result, of course, is that after all this elaborate investigation, which may consume considerable time and involve con- siderable expense to the parties, the Commission can go no further than to condemn the particular thing complained of without being able to order something to be put in substitution which shall remove the grievance; and of course, in such a case as I have named, if we could condemn a rate of a dollar, the order of the Commission could be com- plied with by making that rate 99^ cents. INTERSTATE-COMMBROE LAW. 271 Now, all that is proposed is that in such a case as I have named, in order to give the Commission jurisdiction at all, there must be a formal complaint served on the carriers, opportunity for them to answer, and a full hearing conducted with all the formality of a judicial inquiry. Then if the Commission in such case and upon the facts thus disclosed reaches the conclusion that the rate in question is wrong, it shall have authority to name the rate which it thinks would be right, to be put in place of the one in controversy. The Chairman. Under the practice of the Commission and under the law, how comprehensive might that question be; could more than one rate — that is, one rate on one article between two places — be con- sidered at the same time under this procedure? Mr. Knapp. Undoubtedly. The Chairman. Or could there be grouped many ? Mr. Knapp. Undoubtedly. All the rates could be assailed in one procedure. It is within the scope of the bill. The Chairman. Then there may be more than one party? Mr. Knapp. Surely. It is ordinarily the case that a complaint is against more than one carrier. The Chairman. Then in that event in one action and as the result of one hearing under this section the Commission would be authorized to fix the entire rates of a State, possibly, or of a number of States, a group of States? Is that your judgment? Mr. Knapp. I think I may say that that would be within the possible scope of the measure, but I do not see how that could practically occur, because no The Chairman. Give us some idea of the extent to which it might occur in your judgment, or probabl}'^ would occur? Mr. Knapp. Well, before doing that, let me suggest something which I think should be kept in mind on this branch of the discussion. In my judgment, it is one thing to ( ondemn a rate simply because it is excessive, and it is quite another thing to condemn a rate because it is discriminative. The constitutional rights of the carriers in respect of their revenues would only permit the reduction of a rate where no element of discrim- ination enters except upon satisfactory proof that their revenues under the rate complained of were greater than they were entitled to receive, and that the reduced revenue which the lowered rates would pi-oduce would still be all that they would be entitled to exact from the public; but where the element of discrimination enters, as the Supreme Court has said, neither the Congress nor the administrative body would be under quite the same limitations, because the carriers have no right, merely for the purpose of getting more revenue, to so adjust their rates as to unduly prejudice one community or give a rival community undue advantage. While I agree with what Commissioner Prouty said, that the future question, the question the country is coming to presently, is the ques- tion of the reasonableness of the general basis of rates, the questions which so far have come up, excepting the recent one which has grown out of the raising of rates by changes in classification, with that excep- tion the complaints have more generally been complaints of discrim- inations between localities or between different articles of traffic, and the grievance most commonly asserted is a grievance of that kind. To illustrate, Mr. Chairman, the Commission conducted an investiga- 272 INTEKSTATE-COMMEECE LAW. tion some four or five years ago which involved great interests, and that was the proper differential on grain originating, say, at Chicago, as a typical point, to Boston, New York, Philadelphia, Baltimore, and Newport News. What should be the adjustment of grain rates — the relation of grain rates from a common center to those different ports ? That is' a great question; but, as Commissioner Prouty said yesterday, somebody has to settle it, and the question is, shall the carriers be free to settle it just as they see fit, no matter what consequences to the communities or to individuals may result, or shall public authority intervene to some extent and, under proper restrictions, control in a degree that judgment ? Bear in mind another thing, gentlemen. It is not proposed that an order of the Commission made after this careful hearing shall' be final. The bill provides that any carrier can go to court to get rid of it, and the court is required to stay it unless it finds that that is a just and reasonable and lawful order. Therefore, before any rate can be changed under this Corliss bill there must be a determination of the Commission reached in the care- ful manner I have described, and there must be a decision by a court, or made at the instance of the carrier that that is a just and reasona- ble and lawful order. Now, is that too much? The Chairman. That scarcely answers the question. I wanted your opinion as to how far this authority might be exercised in a given case. Has it ever occurred that the entire schedule of rates as filed by a company, a carrier, has been in their entirety assailed in any one proceeding before you? Mr. Knapp. That has occurred in numerous cases, Mr. Chairman, but only (I am very confident that I am correct) in those cases involv- ing the long and short haul clause. Mr. Chairman. In a case like that, where there was a sort of blanket charge covering the whole of a schedule, and the entirety of the business of a carrier, would it be competent in that kind of a case, in your judgment, under the authority proposed to be given by this bill, for the Commission to make out an entire new schedule of rates covering the whole of the business of that corporation so far r.3 their compensation for service is concerned? Mr. Knapp. I am not perfectly sure that I apprehend. Let me see. It is true now, as I said, in cases which involve the long and short haul clause, as you gentlemen all know, in the territory south of the Ohio and Potomac rivers and in the territory west of the Missouri River, there is a very general system of making rates under which there is a lower rate to the distant terminal or the basing point than is applied to intermediate points. The Chairman. Waiving that question of the long and short haul, and taking this subject as involved under that kind of inquiiy or com- plaint, would you consider a general charge made by a citizen that involved all of the rates of a complete schedule of a railroad, covering its whole system, if they had made such a schedule as that, or would you require a specific statement of just the complaint that he wanted to make with regard to some particular charge? It would be in the nature of a general demurrer. Would you require him to be more specific ? Mr. Knapp. So far as I now i-ecall, Mr. Chairman, no complaint has ever challenged the entire schedules of a carrier except for discrimi- nSTTERSTATE-COMMEBCB LAW. 273 nation, either under the long and short haul clause, which is the com- mon type, or because of the widely different rates between two places, at about the same distance from a common center. In other words, in every instance where the entire schedule of rates has been challenged it has not been for inherent unreasonableness, but for its discriminating results, and the bill does not change the present law in that regard in any particular, and it does not change the fourth section. 1 might say for your information that there is nothing left of the long and the short haul clause of the present law. The construction which it has received from the Supreme Court has deprived it of- all vitality. No violation of the long and short haul rule ever occurs except because of competition; and the Supreme Court has held that competition, whether the competition of carriers or of markets, or what not, may constitute the dissimilarity of circumstances and con- ditions which justify the carrier in charging more for the short dis- tance than for the long distance. So as that fourth section has been construed, it might as well be dropped from the law. In my judgment we can do nothing under the fourth section to-day which we could not do under the third section. It is a discrimination between localities. The specific type of the dis- crimination, the higher charge for the shorter distance, which most people assumed was to be separately treated or specially treated by the fourth section, is unaffected by that section now in the way it has been^ construed. (Thereupon, at 12 o'clock m., the committee took a recess until to-morrow, Thursday, April 24, at 10.30 o'clock a. m.) Thursday, April ^, 1902. The committee met at 10.30 a. m., Hon. WiUiam P. Hepburn in the chair. The Chairman. The committee will be in order. Mr. Thurber has been here several days from New York, and if there be no objection we will interrupt the order to give the floor to him for ten minutes. STATEMENT OF MR. FRANCIS B. THTJRBER. Mr. Thurbek. Mr. Chairman and gentlemen, I appear before you as representing the United States Export Association, which is a union of American interests in 34 States, with membership in 34 States, that are interested in widening the markets for American wares, and our view of it, therefore, is not sectional. It is not that of any particular port or any particular market, and we are not opposed to the Corliss bill in all its features, but we think it is defective in some of them. In so far as the bill strengthens the powers of the Interstate Com- merce Commission for investigation and preventing of unjust discrim- inations, it is desirable, but we think that conferring the right, making the power, to the extent that the bill does is unwise. For instance, one section of the country mayhave the idea that a rate is unjustly discriminating against that section. At present we have that senti- ment in New York. They feel that the differentials between the vari- ous Atlantic ports are unjust to New York, and there is a feeling on i-c L 18 274 INTBRSTATE-OOMMEKOE LAW. the part of our local merchants that makinsj lower rates for export is unjust to our local trade. Well, it is {perfectly natural that they should feel that; but looking at it in its widest aspect, it seems to me that there should be an elasticity in the making of rates which would permit the placing of our surplus in foreign markets in competition with the products of other countries. To-day the question of competition is a world-wide one. The field is the world. It is a competition of markets, of countries, of nations, while the popular idea of competition is competition between indi- viduals or between individual lines of railroad. The question is so large that it is, of course, very difficult to any more than indicate to you gentlemen the thoughts that have come to me in my study of this question. I have been interested in the study of transportation ques- tions for many years. 1 have been an advocate of the regulation of railroads. 1 stood with Mr. Reagan in advocating the enactment of the interstate-commerce law and in the prohibition of pooling. We felt at that time that the combination of railroads was likely to result in excessive rates of freight, and that the prohibition of pooling was necessary to obviate that, although we both appreciated that the object of the interstate-commerce bill was chiefly to prohibit discriminations. It took ten years to convince Mr. Reagan and myself that we had done the very thing that had increased the evil of unjust discrimina- tions, because prohibiting the same right of contract between carriers which all other individuals and corporations enjoyed, it left it open for an unscrupulous minority to all tne while overreach a majority who desired to enforce uniform rates of freight, and it greatly increased the evil of unjust discrimination. Now, one defect in the Corliss bill, as it seems to me, is that it does provide for agreements between railroads; it may not be pooling agreements, but for the maintenance of associations which are abso- lutely necessary in the practical operations of railroads to insure uni- form and stable rates, which are the great thing to be desired; not that there may not be excessive rates, but that there should not he a power above the railroads to say what is a reasonable rate. And I do not share the fear which Commissioner Prouty expressed here so elo- quently the other day, that the great combinations, the community vt interest idea, which has progressed so far, is likely to result in exces- sive rates of freight. Our products are now being carried a thousand miles to the seaboard for less than the railroads of other countries charge for carrying those products inland from their seaboards. On the average, the rates of freight in this country are less than half those of other principal coun- tries, and a very interesting diagram was prepared by the Philadelphia Museum that gives a graphic illustration, by the different lengths of line, showing the comparative rates of freight in the principal coun- tries during the year 1897. That was the latest that they had the rate of freight of all the various countries. That was so interesting that the United States Export Association reproduced it, and I have a sufficient number of copies here so that if any of the members of the committee here are interested in that they can take one. That gives the ton mile rate upon the entire traffic or the various countries. Touching this question of whether there is a danger of too high rates as discussed by Commissioner Prouty, and the large increase which has been made in rates during the last three years, I have given INTEKSTATE-COMMEKCE LAW. 275 a good deal of study to that question, and while I think there is room for criticism as to the method, the indirect method, by which rates have been advanced through the changes in classification, I do not see that the rates have been raised to even as high an extent as the cost of transportation, of all materials that enter into transportation, includ- ing labor, has advanced; and while our railroads have been making large profits because of the prosperous condition of the country and the enormous increase in the volume of business, it is certain that there will come lean years as well as fat years, that it is impossible for carriers to reduce their fixed expenses in proportion as the volume of business decreases in the lean years, and hence it is only fair, I think, viewed f rona both the standpoint of the shipper and the carrier, that no narrow view, based upon a few years or two or three years' results, should govern our conclusions. There is one point which is not generally appreciated, and that is that it is a surplus which demoralizes markets, causes shutdowns of factories, and generally makes hard times. And the great problem seems to me to be to get rid of our surplus, both of our fields and of our factories, and hence 1 think that any power conferred — that is con- ferred, for instance, upon the Interstate Commerce Commission — to make rates which would prevent the giving of lower rates for export trade than are given for our domestic transportation would be unwise and against the interest of the country as a whole, and I believe that the present power of the Interstate Commerce Commission, in its power to investigate and declare a rate unreasonable, leaving it to the courts to decide what is a reasonable rate, is . safer for the general public interest than it would be to confer a more sweeping and arbi- trary power. One feature of the Corliss bill, which throws the burden of proof, so to speak, upon the railroads in an appeal to the courts, it seems to me is going too far. I think that the shipper and the carrier should have equal access to the courts, and that the usual rule that the burden of proof is on the plaintifi' is perhaps as just to the shipper as it is to the carrier. Now, it has been alleged that the court delays in arriving at decisions, which seems subversive of justice, and that is sometimes no doubt true; but I think that the able lawyers on this committee can devise some way of expediting the decision of cases that are brought before the courts so that it would not result in a denial of justice. One very interesting feature of the power already possessed by the Interstate Commerce Commission is shown in recent injunctions which have been granted by the courts against the continuance of discrimi- nating rates of freight, and I hope tnat that will be found to be a source at the command of the Interstate Commerce Commission which will result in the uniformity of rates. I think that those injunctions ought to be made against shippers who seek preferential rates as well as carriers who grant them, and indeed the initiative, the pressure, for discriminating rates usually comes from the shipper — the large ship- per. There is no doubt that the small shipper is very much at a disadvantage as compared with the large shipper, and that that is an evil which ought to be remedied. The vote of the small shipper had as much to do with conferring the franchise under which a common carrier operates as the vote of a large shipper, and there is a principle involved there of the right of the 276 INTERSTATE-COMMEKCE LAW. citizen on the public highway which goes far to modify the rule of wholesale and retail that governs to an unlimited extent in private transactions. The thought of the world-wide competition, and that we are not in danger of excessive rates of freight, is one which seems to me to be most important and worthy of your consideration, perhaps, to a greater extent than these other birds-eye view remarks that I have been put- ting before you. 1 have put together on paper some figures as regards the decrease in the rates of freight and the increases up to the time when these statistics were available, and also some figures as to the relative cost of labor and materials, and I do not wish to trespass upon the time of the committee to read them, but with your permission I will file a copy of this with the stenographer, and it may go into the proceedings. The Chairman. Very well. Mr. Thurber. I thank you, gentlemen, for the consideration you have given me. I happen to have some other business here in connec- tion with some of the measures which have been introduced by the boards of trade, and so I have been backward and forward two or three times, and it is very kind of you to give me this time, because I have to go back to New York this afternoon. Mr. Corliss. I would like to ask you a few questions. Mr. Thurber. Certainly. Mr. Corliss. You represent an export association ? Mr. Thurber. Yes, sir. Mr. Corliss. Organized under the laws of the State of New York? Mr. Thurber. Yes, sir. Mr. Corliss. With a capitalization of 15,000,000? Mr. Thurber. Yes, sir. Mr. Corliss. You manufacture no products? Mr. Thurber. No, sir. Mr. Corliss. You buy and sell no goods? Mr. Thurber. No, sir. Mr. Corliss. That is all. Mr. Thurber. I wish, however, to add just a word there. The United States Export Association was incorporated at the suggestion of one of its members that it ought to be incorporated, so that there would be no liability of its members over the amount of their mem- bership dues. Mr. Stewart. How large is your membership? Mr. Thurber. We have 230 at the present time. Mr. Stewart. Representing how many States? Mr. Thurber. Thirty-four States, and representing the largest shippers in the United States, without exception. Mr. Stewart. You say your views have changed in these past ten years with reference to the powers that ought to be given to the Interstate Commerce Commission ? Mr. Thurber. Yes, sir. Mr. Stewart. When you advocated these powers, you were then a shipper, were you not? Mr. Thurber. Yes, sir; and a large one. Mr. Stewart. And then your views in reference to the railroads, etc. , were different from what they are now since you ceased to be a shipper? INTEESTATE-COMMEECE LAW. 277 Mr. Thurbek. Well, yes, sir; I think so. But that change of views has been very largely the result of study. I used to think that the transportation question was quite a simple one, and that a very few pro- visions in the law would remedy the whole situation; but as I grew in experience I grew in knowledge, and the great complexity of it and the difficulty of reaching all the various problems involved became more apparent to me. Mr. Stewart. Ave you a salaried o(Ecer of this export association? Mr. Ti-iUEBER. Yes, sir. Mr. Stewart. And your duties are simply to supervise legislation? Mr. Thurber. No, sir; not by any means. The United States Export Association business is to furnish to our members information. Mr. Stewart. Information? Mr. Thurber. For instance, credit information as regards the send- ing of foreign buyers. Mr. Sticwart. You are frequentlv at Albany, before the legislature of New York? Mr. Thurber. I have been once at Albany. Mr. Stewart. Representing this association? Mr. Thurber. Yes, sir. Mr. Stewart. You have also been in other States; you have been in New Jersey ? Mr. Thurber. No, sir. Mr. Stewart. You have never been at Trenton ? Mr. Thurber. No, sir; never to the legislature at Trenton. Mr. Adamson. It is purely an educational institution, is it? Mr. Thurber. No, sir; it is purely a business institution. Mr. Adamson. As a matter of fact, you never buy or sell anything. What do you do? Mr. Corliss. They disseminate information. Mr. Thurber. We have 300 correspondents in foreign countries through whom we acquire credit information which we transmit to our members. We furnish our members with freight information, and take charge of their shipments when they are shipped through New York. We attend to their insurance and banking. Mr. Adamson. Have you any expenses except your salary and your traveling expenses? Mr. Thurber. Oh, yes, sir. Mr. Stewart. Have j^ou an office? Mr. Thurber. We have. Mr. Stewart. Where? Mr. Thurber. No. 30 Broadway, New York. We employ 20 clerks. Mr. Stewart. Is that the Thurber Building? Mr. Thurber. No, sir; it is the Gherkin Building. Mr. Adamson. If you have no capital stock and no business, I do not see how j'our members could be liable Mr. Stewart. Where do you get your money to pay your clerks? Mr. Thurber. We have $100 a year from each member, for which they get this service. We publish also a bulletin for foreign circula- tion in four languages, which circulates to 20,000 foreign buyers in all parts of the world. Mr. Stewart. What do you charge for that service? Mr. Thurber. Nothing at all. 278 INTERSTATE-OOMMEBOE LAW. Mr. Stewart. You do not charge anything to the foreign corre- spondents? Mr. Thuebeb. No, sir; the foreign correspondents furnish us infor- mation, and we, in turn, furnish our foreign correspondents with this information they may require in the United States. We have, you might say, a foreign mercantile agency on a small scale. We have accumulated information in our records so that we can answer about one-half of the credit inquiries we get from our books alone. The other answers to inquiries we get by correspondence or by cabling, as the case may be, and that is an important department. Mr. Stewart. Do you furnish secret information of the standing of merchants? Mr. Thurber. Yes, sir; that is a part of our business. Mr. Stewart. You are paid for that? Mr. Thxtrber. No, sir; that is a part of the privileges of our mem- bership. Mr. Stewart. Outside of your clerks do you have a system of espionage by detectives, or how do you get at the standing of a firm? Mr. Thurber. You are probably familiar with the system of mer- cantile agents. Mr. Stewart. You mean Bradstreet's ? Mr. Thurber. Yes, sir. Mr. Stewart. Yes. Mr. Thurber. It is on that principle. Mr. Stewart. Do you have agents in those States Mr. Thurber. We have 310 or 315 foreign correspondents in all parts of the world. You see the credit information which our mem- bers require is on the standing of foreign buyers, and in many cases our correspondents in other countries want information as to the standing of people in this country. We make reciprocal arrangements to inter- change that information. Mr. Stewart. You have annual meetings? Mr. Thurber. We have had monthly meetings, usually, and we have had two annual meetings only. Mr. Stewart. What is the average attendance at those meetings? Mr. Thurber. You mean at the monthly meetings or the annual meetings? Mr. Stewart. At the annual meetings. Mr. Adamson. At both. Mr. Thurber. Sometimes at the monthly meetings it is only the board of directors. Mr. Stewart. How do you arrive at the views upon this particular question which you have been expressing of the members distributed through thirty States? Mr. Thurber. We are in constant communication Mr. Stewart. Can you produce any correspondence with your mem- bership throughout these 34 States which gives you a standing before this committee as representing them ? Mr. Thurber. I can. Mr. Stewart. Have you that correspondence with you? Mr. Thurber. No. Mr. Stewart. Can you produce that correspondence? Mr. Thurber. Yes, sir; and if you wish an expression of the indi- vidual views of the members it will be a very easy thing to get it. INTEKSTATE-COMMEROB LAW. 279 Mr. Stewart. You say you have them in your archives ? Mr. Thurbek. We have in this respect, that we are in constant con- tact and communication with them, and I know their views, and I am voicing their interests. Mr. Stewart. Will you produce any minutes of your association authorizing you to appear here and represent them before this com- mittee? Mr. Thdrber. Yes, sir. Mr. Stewart. I wish you would do so. Mr. Thurber. I will. Mr. Corliss. Mr. Thurber has said that the members of this cor- poration thought it necessary to incorporate, that it was the object of the corporation to avoid liability Mr. Thurber. The object of the incorporation; yes, sir. Mr. Corliss. Is the business such as to make a man liable Mr. Thurber. Any voluntary association is subject to the unlimited liability of its members unless it is limited by an incorporation. Mr. Corliss. You are, then, doing something that might create lia- bility if it was done by an individual, and that you seek to remedy by the organization of this corporation ? Mr. Thurber. Yes, sir. Suppose that I, as president of the asso- ciation, were to go and make contracts binding the association, and that it was not incorporated with a limited liability, every member would be individually liable. Mr. Mann. The liabilities being just. Mr. Thurber. A man making a contract with you would be limited to $500 in his recovery. The liability of the members is limited to their membership dues. Mr. Stewart. Under what laws are you incorporated? Mr. Thurber. The laws of New York. Mr. Stewart. Under what particular incorporation law? Mr. Thurber. Our general incorporation law. Mr. Stewart. What powers have you to do business? Mr. Thurber. General business powers, not the banking power. Mr. Stewart. Have you resolutions and by-laws ? Mr. Thurber. Yes, sir; a constitution and by-laws. Mr. Mann. Without an incorporation your members would be only liable for just claims? Mr. Thurber. Yes, sir. Mr. Mann. But under your incorporation you are not liable for just claims Mr. Thurber. You are now speaking of the association; but taking the individual membership, they are liable to the extent of their mem- bership dues, which is $100 a year. Mr. Mann. Practically nobody who had a just claim against you could recover it? Mr. Thurber. We do not have any liabilities. Mr. Mann. You might have. Mr. Thurber. Our membership dues pay our liabilities. 280 INTER3TA.TE-C0MMEB0E LAW. ADDITIONAL STATEMENT OF P. B. THURBER, PRESIDENT OF THE UNITED STATES EXPORT ASSOCIATION. Mr. Chairman and gentlemen of the committee, I appear before you in behalf of the United States Expoi't Association, of which I am pres- ident, and which is a union of American interests for the purpo&e of widening the markets for American products, and whose membership comprises leading houses in the principal lines of industry situated in thirty-f our States. It does not, therefore, represent any special inter- est, or any special port or section, but the interests of the country as a whole. I have been studying the Corliss bill (H. K. 8337), with the result of concluding that while much in it is good, in its present form it is .inexpedient, for the reason that it proposes the wrong remedy for the disease. Section 2 proposes to confer the rate-making power upon the Interstate Commerce Commission when the rate-making power has nothing whatever to do with the prevention of unjust discriminations. In so far as this bill strengthens the hands of the Interstate Commerce Commission to investigate and expose unjust discriminations it is likely to be beneficial, but in so far as it confers upon the Commission the power to make rates and classifications it is likely to be injurious alike to shippers and carriers, because, in the first place, it will pre- vent the passage of any bill amending the interstate-commerce law, and if the proposed bill could be passed, conferring the rate-making power on the Interstate Commerce Commission, it would not prevent the evasions of it which constitute unjust discriminations. The only thing which will prevent this is to give carriers the same right of contract which is enjoyed by all other corporations and indi- viduals, the right to legally enforce their agreements upon each other, a right which is denied to carriers at the present time by the prohibi- tion of pooling in the interstate -commerce law, and the interpretation which has been given by the Supreme Court of the United States to the antitrust act in the joint trafiic and trans-Missouri decisions, pronouncing all associations for the maintenance of rates illegal, the direct result of which has been to promote the "community of inter- est" consolidations, a process which has already progressed so far that close observers are in doubt as to whether or not the master spirits in these consolidations would not prefer to see the present conditions of chaos maintained in order that these consolidations may be fostered. As chairman of the committee on railroad transportation of the New York Board of Trade and Transportation, and of the National Board of Trade, as well as member of the committee on internal trade of the New York Chamber of Commerce, I have been a close student of this question for 25 years from a shipper's point of view. I have had perhaps as much to do with legislation regulating the relations of shippers and carriers as any other individual. I advocated the New York railroad commission and the enactment of the interstate- com- merce law, and cooperated with Mr. Reagan, the father of the bill, in prohibiting pooling. We feared that with the right to pool car- riers might charge the public exorbitant rates for freight, but the experience of fifteen years has shown that there is no danger of high rates in this country; that the chief danger is in unjiiSt discriminations, which always operate to the benefit of the few instead of the many; to the advantage of the large instead of the small shipper. INTEKSTATE-OOMMEROE LAW. 281 So far as the rate-making power is concerned, it was not intended by Congress to confer that power on the Interstate Commerce Com- mission. This is shown by the following extracts from the debates in Congress while the interstate-commerce bill was pending. In the House of Representatives, on December 8, 1884, Mr. Findlay said: It is perfectly legitimate to prescribe that a rate shall be reasonable and then leave it to the courts to determine what is and what is not reasonable, but to declare in advance, not merely the principle by which the fixing of the rate shall be gov- erned, but to prescribe the rate itself by referring it to a fixed standard and apply the rule to the complicated system of interstate transportation, with all of its vast ramifications and subtle competitions, is the exercise of a power which, if it be held legislative in its nature, certainly ought to be sjiaringly and cautiously used. The bill of the committee keeps this distinction full in view in all of its provisions, and is consistent and symmetrical throughout; but the Reagan substitute, as I have shown, is not only not distinguished by this unity and integrity of purpose, but is complex and contradictory in some of ite essential features. Mr. Reagan. But it would be understood from his reasoning that my bill not only requires rates to be reasonable, but fixes the rates. There is not a word in the bill having that effect. On January 7, 1885, Mr. Reagan said: One of the greatest troubles I have had, even with the friends of legislation in this direction, has been to get them to understand that this is not a bill to regulate freight rates; that it does not undertake to prescribe rates for the transportation of freight, I know the difficulties which would attend any measure attempting to pre- scribe rates of freight. I am persuaded that no law fixing rates of freight could be made to work with justice either to the railroads or to the public, and I have intended from the beginning to avoid that difiiculty. The difiiculty with gentlemen in considering the bill is that they can not keep out of their minds the arguments of the railroad lawyers and lobbyists who are con- tinually harping upon it, that this bill establishes arbitrary rates of freight. It does no such thing. It carefully guards against that, simply intending to prevent the most manifest abuse against the public, and control the monopoly powers of these corporations. In the Senate, May 6, 1886: Mr. Kenna. What constitutes a reasonable rate is precisely the thing which the people of this country are unwilling to leave to the arbitrary discretion of the Rail- road Commission. As regards reasonable rates as a whole the people of the United States have no cause to complain. They have steadily declined until even with the recent advance they are less than half those of other principal nations. Our railroads carry our products 1,000 miles to our seaboard for less than those of other countries charge for carrying the same products 200 miles inland from their seaboard. The steady decline in rates is illustrated by the following figures: The average rate for 1 ton of freight 1 mile since 1892 has been as follows: Mills. 1900 7.29 1899 7.24 1898 - 7.53 1897 7.98 1896 8.06 1895 - 8.39 1894 8.00 1893 8.78 1892 8.98 The rate was probably still higher in 1901; but everything else has risen. 282 INTEKSTATE-OOMMEROE LAW. These results have been largely attained by subsidies in land, money, and mail pay, and giving freedom of action in combining and consoli- dating, thereby attaining the highest economies of operation. If we had pursued the same course on the sea as we have on land we would now have a merchant marine which would give us permanent low rates on the sea and enable us to put our heavy products of the field, forest, mine, and factory into all the markets of the earth, and our finished products would closely follow. I am unwilling to take any steps that will hamper such development, for in this age of steam, electricity, and machinery "the field is the world" in commerce as with religion; and with our command of these forces, brought to bear upon our great natural resources, with intelli- gent and liberal statesmanship, we will lead the world in the march for commercial supremacy. It is alleged by some that rates for railroad transportation during the last two years have been unduly increased by means of changes in classification, rules, etc. While opinions may diflfer as to the methods by which rates have been increased, there can be no doubt but that railroads were obliged to advance their rates on account of the large advance in the price of labor and materials; What these have been is perhaps indicated by the following figures: The price of steel rails in 1898 was $19 per ton; the present price is f28. The price of yellow pine lumber, used in the construction of freight cars, in 1898 was $15.75 per 1,000 feet; the present price is |20. The price of axles in 1898 was 2 cents per pound; the present price is 3 cents. Car wheels in 1898 were $6.25; the present price is $7.25. Bar iron in 1898 was $1.10 per 100 pounds; the present price is $1.60 per 100 pounds. Steel required in the construction of locomotives in 1898 was $1.50 per 100 pounds; the present price is $2.25 per 100 pounds. Railroad labor upon the average was advanced 15 per cent during the last two years, while the ton-mile rate of freight on all the railroads of the United States has not been advanced more than 8 to 10 per cent. Of course, the increased volume of business has yielded increased profit as a whole, but much of it has gone into permanent improvements and increased equipment, which when the lean years .come will be unremunerative. It will be conceded by fair-minded men that our railroads are entitled to share in the general prosperity of the country, in which they are so large a factor. Both shippers and carriers are apt to see only their own side of the question, arid no just conclusion can be arrived at which does not take into considera- tion both sides. I believe that a majority of both shippers and carriers are honestly desirous of doing what is fair and rignt in their relations with each other, but there is an unscrupulous minority in both who are con- stantly overreaching to get an unfair advantage of the other. On a single railroad in the month of November last over 50,000 instances of fraud on the part of shippers in billing goods were detected by the inspection bureau of that company in order to get a lower classifica- tion than the goods were entitled to, and the chief inspector estimated that 97 per cent of these were willful frauds, and only 3 per cent were attributable to honest error on the part of shippers, The system of organized fraud on the part of ticket scalpers is familiar to all stu- dents of transportation questions; There was probably never a head of stock killed or an injury to property that the claim for damages was INTBRSTATB-COMMEROE LAW. 283 not excessive. In view of such facts as these we can not wonder that railroad officials are just a little skeptical of the human nature embodied in the average shipper or citizen. In conclusion, Mr. Chairman and gentlemen, I would call attention to the fact that the most successful railroad commissions have been those of Massachusetts and New York, neither of which have had the power to prescribe rates, but which have had full powers to investi- gate and bring abuses to the attention of the courts and public opinion. These have been found sufficient to remedy the evils which existed in their jurisdictions, and I hope that yOu will not approve this bill unless amended so as to preserve the right alike of carriers and shippers to appeals to the courts without prejudice, and to provide the right to make reasonable pooling and other agreements between carriers, for the maintenance of uniform and stable rates, subject to the approval of the Interstate Commerce Commission. In this way only can the evil of unjust discrimination be eliminated. From my study of this question, I have become convinced that there is no danger of even the largest combinations imposing upon the pub- lic unreasonable rates of freight. It will not eliminate competition, for this principle is all-prevailing. The popular conception of compe- tition is competition between individual shippers and individual rail- road lines, but the larger working of the principle is embodied in the competition of markets — the competition of towns, cities, sections, and countries. If all the railroads of the United States were combined into a single corporation, or the Government itself, this force would still be active. Every road would be developing the industries along its line, and these industries would compete with similar industries along other lines, even though ownership of all the lines was unified. Another factor in the field of competition is water transportation, embodied in our lakes, rivers, canals, and the ocean, which surrounds our country on all sides. There is no fear whatever of excessive rates for trans- portation in this country. The only fear is as to unjust discriminations, and these can be remedied by full powers of investigation, by super- vision of railroad commissions with power on the part of both shippers and carriers to appeal to the courts, and giving carriers the same right of contract which all other individuals and corporations enjoy except railroad companies, which are debarred from this right by the prohi- bition of pooling in the interstate-commerce act and the interpretation of the Sherman antitrust act given by the Supreme Court of the United States in the Trans-Missouri and Joint Traffic Association cases. I am familiar with the agitation which is seeking to confer increased powers upon the Interstate Commerce Commission embodied in the Corliss bill (H. R. 8337) and the Nelson bill (S. 3576). it began by a bankrupt line, leading from Kansas City to Gulf ports, making abnormally low rates on export wheat. To meet this the east and west trunk lines made equally low rates on wheat but not on flour, because they were not exposed to the same competition in carrying the products of the widely-scattered mills of the Middle West to the seaboard, and hence export flour was charged a much higher rate than export wheat. This great discrimination against American millers in favor of European millers led to an agitation for lower rates on flour. Members of the Interstate Commerce Commission endeavored to utilize this well-founded dissatisfaction to get the rate-making power. A preliminary meeting was held at Chicago, followed by a 284 INTEESTATE-COMMERCE LAW. convention of shippers representing various interests, held at St. Louis, November 20, 1900, at which the CuUom bill (S. 1439) was indorsed, which was substantially the foundation for the present Corliss and Nel- son bills. There is a diversity of opinion, both among shippers and carriers, as to the necessity for an}^ legislation in the direction of increasing the powers of the Interstate Commerce Commission. Spurred by some criticisms to the effect that the Commission was not using the powers at its disposal, it has recently invoked the power of the courts to prohibit unjust discriminations by injunctions, and it is too soon yet to say just what effect the injunctions which have been granted will ultimately have, but thus far they have been beneficial, and it sooms to me that if made applicable to shippers as well as car- riers the probability of their being a permanent remedy for the evils of unjust discrimination would be increased. Railroads do not willingly make unjust discriminations. The initiative is always with the ship- pers, and railroad agents yield to pressure brought to bear upon them by shippers controlling large amounts of business. In closing, Mr. Chairman and gentlemen of the committee, I wish to repeat that I believe that in the face of the basic fact that the present sj'stem of elasticitjf in American railroad management has resulted in giving our great country lower rates by one-half for the transportation of freight than any other principal nation enjoys, and that this affords an outlet to the markets of the world for the great volume of our surplus products, we should go slow in imposing cast-iron rules and regulations in an intricate and complex business like that of transportation. It may seem unjust to a merchant on our seaboard that he should be charged a higher I'ate in proportion than the same freight destined for export, or that freight originating on the seaboard should be charged a higher rate than freight from foreign countries destined for an interior city in our own country pays. It may seem unjust to a local shipper doing business within his own State that his local rate should be so much higher than interstate rates, but if a producer or manufacturer can get a contract, at a dis- tant point through the means of a reduced rate of freight, the carrier, having perhaps empty cars going in that direction, can afford a conces- sion rather than let its rolling stock go empty. Labor and capital are both benefited by a reasonable elasticity which permits of such conces- sions being made, and, after all, it comes down to a question'of what is reasonable, and of this there is perhaps no better authority than the courts, notwithstanding that delays sometimes may result in a substan- tial denial of justice. Such instances are the exception rather than the rule, however, and you gentlemen, who represent all sections of our great country, after hearing all sides, must make up your minds as to what is reasonable, but I hope, if there is any amendment to the interstate-commerce law, that it will be in the direction of strengthen- ing the provisions for investigation and publicity, conferring the right of contract upon carriers, subject to the approval of the Interstate Commerce Commission, and giving equal right of appeal to the courts of both shippers and carriers, but not conferring the authority upon the Commission to make rates or classifications. INTEBSTATE-COMMERCE LAW. 285 STATEMENT OF HON. MARTIN A. KNAPP, CHAIRMAN OF THE UNITED STATES INTERSTATE COMMERCE COMMISSION— Continued. Mr. Knapp. Mr. Chairman and gentlemen, before proceeding with my argument I desire to make a word of comment upon some of the observations made by my esteemed friend, Mr. Thurber. Inferences drawn from the average rate per ton per mile on all traffic are liable to be very misleading. It is frequently said that railway rates in the United States are not half what they are in Eng- land. That is true only when you compare the average rate per ton per mile on all traffic of the one country with the same average in the other country. Allow me briefly to explain to you how the average rate per ton per mile may be greatly reduced without any change at all in the rates as to any particular shipment. Now the relative amount of low-grade freight carried in this country, like ore, coal, etc. , has enormously increased in the last fifteen years. If in one year you carry a thousand tons of first-grade freight at $1, and another thousand tons of sixth-class freight at 20 cents, the aver- age rate will be 60 cents. But if in the next year you carry a thou- sand tons of first-class freight at a dollar, and 10,000 tons of sixth class at 20 cents, the average rate on all the traffic will be more than cut in two without any change in the rates themselves. Now the enormous reduction in the average rate per ton per mile in this country has come from three principal causes. First and mainly, the enormous increase in the relative amount, the relative tonnage, of these low-grade articles which are carried at a low price; second, there has been from the beginning a difi'erence between carload and less than carload rates, and in the last fifteen years there has been an enormous increase of the relative proportion of the traffic carried in carloads and at carload rates, so that without any change in the rates themselves, without reducing the cost of shipping a carload or 100 pounds, you may have an average reduction in the average rate per ton per mile on all traffic. There have been reductions in grain to some extent, in iron articles, and in other commodities, which I will not stop to mention, which have entered into the reduction of the average. When you speak of English rates, you must remember that their rates include cartage at both ends. An English carrier goes to the warehouse and gets the stuff and transports it to the railroad, and when it arrives at its destination he gets it and ti'ansports it to the place of the customer. Of course, that enters into the rate. Now, I ask Mr. Thurber to bear in mind that England is a small country, and that it is seldom that traffic moves more than 500 miles there, and tak- ing into account the cartage, I ask him to compare what it costs a man in New York to deliver dry goods, boots and shoes, or merchandise of any class, the articles in which the great mass of people are interested — how much it costs him to effect the movement from his store to the store of the customer as compared to the cost of moving the same articles the same distance in England, and I think that he will be very much surprised. It is not so very much lower than it is there. Mr. Thukbee. How is it with other countries ? Mr. Knapp. There is no country that is as low as the United States. Now, there is another thing that is to be taken into account. It is a well-known thing in railway transportation, and water transportation, 286 IJSTEKSTATE-OOMMERCE LAW too, for that matter, that the cost per unit of traffic moved diminishes with the distance it is carried. You do not get twice as much for carrying a carload 1,000 miles as for carrying it 500 miles. Our traf- fic is carried long distances, because we have a great big country, and much of it moves 2,000 and even 3,000 miles, while in England there is but little movement that exceeds 500 miles, so that my suggestion is that you compare the ordinary cost of moving the ordinary mer- chandise, the articles in which the mass of the people are interested, the same distance for the same service, and you will find that it is not anything like twice as great in England as it is in the United States. The truth is, gentlemen, that in the official territory, that is the terri- tory north of the Ohio and the Potomac rivers and east of the Mis- sissippi, the most populous and wealthy part of the United States, producing the greatest volume of traffic, the basis in making rates in all that territory is the Chicago rate. Places nearer New York take a percentage under the Chicago rates, and places farther than Chi- cago take a percentage over the Chicago rate, so that when the basis of New York and Chicago is reduced there is a corresponding reduc- tion in all that territory. Now, the class rates in all that territory on the six classes are just as high to-day as they were fifteen years ago, and in numerous instances the actual rates applied have been increased by the fact that articles have been advanced in their classifications to take a higher rate. Gentlemen, I did not mean to go into that. I just wanted to call your attention, however, to the fact that we may be very much misled when our attention is called to the extremely low average rate per ton per mile on all traffic. Why, the Chesapeake and Ohio Kail- road shows the lowest average rate per ton per mile on all its traffic of an}' railroad in the United States, and yet everyone knows that the actual rates applied to merchandise, applied to the articles that the people living along the line of that road are interested in, are very much higher than they are along the New York Central or along the Pennsylvania Railroad, simpl}'^ because 90 per cent of the traffic of the Chesapeake and Ohio is coal and ore, and that is of course carried from the summit where it is produced both ways to tide water, and of course that results in a very low average rate per ton per mile on all articles on that road, and yet it costs more to haul a carload of boots and shoes or clothing or any of the articles of domestic use over that road than it does over the New York Central. In order that I may not forget it, I want to make another observa- tion now. If I understand the measures which are pending before this committee, and I have endeavored to examine them with care, there is not a single one of them which proposes to change the present state of the law in respect to allowing a rate on exports lower than on doinostic traffic; not a syllable. ?»lr. TiiUKBER. It proposes to give the power to the Commission, wliicli they do not now have, and that might enable the Commission to f!oc:;flc that the contention of our local New York merchants, that they should pay no higher than the proportionate rate on export goods — than the people who export — might be sustained. _ Mr. Knapp. Let me see. I might as well strike out that question right here now. I want you to bear this in mind, that this Commis- sion, under the Corliss bill even, can make no order except an order justified by the sworn testimony before it; and if, in a pz'oceeding IHTJSKBTATJli-uuMMEKOE LAW. 287 where all parties have an ooportunity to be heard, the facts are pro- duced and the testimony is presented which warrants and justifies a conclusion that that relation between domestic and export rates is wrong, then it ought to be changed. Now, I am not saying for a moment, gentlemen, that domestic traffic should always be carried at the same rate as export traffic. I think conditions arise in this country, have arisen, and are likely to arise again, when it is an economic advantage, to say nothing about a commercial benefit to the people of this country, to permit these surplus products to be carried abroad at rates for the land carriage to the seaport which are less than the rail carriers should be obliged to accept on domestic trans- portation. Mr. Adamson. An instance was cited the other day where a shipper had billed on an export bill of lading, and then had stopped cotton, I believe it was, in New York, thus enabling him to sell cotton cheaper there. You would not permit any such thing as that, I suppose? Mr. Knapp. I do not think that such a practice as that can find a defender or an apologist in the United States. I think to allow such a practice as that is disgraceful. Mr. Adamson. If you bill on a bill of lading it should be in good faith? Mr. Knapp. Certainly; in good faith. Now, there are some other remarks made by Mr. Thurber which I prefer to comment upon in their proper connection as I proceed. Gentlemen, I have already said all I care to say respecting those proposed amendments to the law which aim to give greater efficiency to the criminal remedies provided for its enforcement. My position is simply this: A right to the common highway, the right to use it on equal terms with everybody else, is a right that existed long before any written constitutions were adopted. That is a right founded in the very constitution of human society. It belongs to that class of rights which the Declaration of Independence described as inalienable; and that right is exactly the same, gentlemen, whether the highway is made of dirt or of steel. And I do not for one moment assent to any suggestion that laws should encourage or permit a public service to be performed for one man cheaper than it is for another; and speaking from my observation, and such crude reflections as have resulted Mr. Adamson. I do not think anybody has made such a suggestion as that. Mr. Knapp. Some questions were asked the other day on that line. Mr. Adamson. Those questions were on an entirely different posi- tion. Mr. Knapp. That you might allow shippers to get a secret and preferential rate if they could. Mr. Coombs. Who made those statements ? Mr. Knapp. They were implied in some questions which were asked. Mr. Coombs. I asked some questions in regard to that, but I desire to say that I did not intend to imply anything by those questions. I thought I had a right to ask them to get all the light that I could. Mr. Adamson. Nobody has ever disputed your presumption as to the right of the Government to control the highways. I asked you some questions about the right of the Federal Government to regulate the commerce between the States, and I could not understand your discrimination between regulating different kinds of commerce, private as well as public. . 288 INTEESTATE-COMMEROB LAW. Mr. Knapp. I venture to say that I said that the best answer I could make was to refer you to the Supreme Court of the United States. Mr. Adamson. Referring me to the Supreme Court does not answer my question. Mr. Knapp. It would be idle for me to make an answer inconsistent with the law of the land laid down by the highest judicial authority. Mr. Adamsoist. I did not ask you about law at all. I simply asked you where you claimed to get your authority. Mr. Knapp. Of course, the authority to make any provision in the line of these bills is found in the commerce law of the Constitution. Mr. Adamson. We are legislating every day about private com- merce as well as public — private tradesmen and individuals engaged in interstate commerce. Mr. Knapp. So far as the subject of legislation is interstate com- merce there is no question about the right to legislate. Mr. Adamson. That has nothing to do with it at all. Mr. Knapp. The question is whether this is interstate commerce or not. Mr. Adamson. You touch no corporation except in interstate com- merce, no railroad except in interstate commerce; so there is no dis- crimination in your authority at all as to whether it is a corporation, a public carrier, or a private citizen, or who it is, so long as he or it is engaged in interstate commerce. Mr. Knapp. So long as it is interstate commerce it does not matter whether it is an individual, or a corporation, or a partnership, of course. Now, not to take too much time, I feel that I am abusing your patience, and I can only say that I regard it not only as an act of justice, but of probably great value, to so change the tenth section as to make the corporation carrier, and I do not know of anyone who makes a serious objection, or any objection at all, to that proposition. And 1 say that if the shipper is to be made liable at all, then it should be under circumstances and a rule of law which makes it practical to bring the shipper to justice when he violates it. If, in your wisdom, you think this law will be more efficiently enforced by leaving the shipper out altogether and putting the penalties solely on the carrier, 1 am not disposed to argue against that proposition. The Chairman. But your judgment would be against that? Mr. Knapp. It would be against it, Mr. Chairman. While I can see that as a matter of practical administration there would be advan- tages in having, the shipper innocent, so that he could be called as a witness and he could be required to testify without pleading any con- stitutional privilege, because he is not himself an offender, still, after all, gentlemen, after all, I must express my honest conviction to be that the shipper ought to be liable as well as the carrier, first, because I think that is necessary to satisfy the fair-minded sense of justice. The Chairman. In cases where he would be liable, you think there should be an exemption from punishment when he is called upon to testify, so as to compel him to testify? Mr. Knapp. Yes, sir; that is provided so now. You do not need to legislate on that subject. It is no longer, under existing conditions, thi> occasional, the infrequent shipper, who gets a rebate. It takes a very powerful shipper or combination of shippers to get a preferen- tial rate. Therefore, when these secret arrangements are made, when INTERSTATE-COMMERCE LAW. 289 these private concessions actually occur, they occur under such cir- cumstances and in favor of such men as to indicate a degree of moral turpitude on thepa t of the shipper fully equal to that of the carrier. They are under equal moral responsibility, and they iire certainly equally deserving of the opprobrium which attaches to the violation of the law and to the punishment which results from that violation. Now, just a few moments on the other question. Let us see exactly where we are to-day. Under the law as it stands the Commission has full authority to receive complaints. It may serve those complaints upon the carrier complained of and require it to answer. The law needs no alteratipn in that regard. The jurisdiction of the subject- matter is as broad and ample as the case requires. And the important question right here is this, it is in very narrow compass, and very easily stated, and it is a question which appeals to you with far greater gravity than it does to me. It is just this: When a formal complaint is made in the manner which the law now provides, that a given rate is excessive, or that its enforcement upon everybody effects a discrimi- nation against one locality and in favor of another, or against one and in favor of another, and the carrier complained of answers that alle- gation, and the Commission then, proceeding with all the formality of a judicial inquiry, takes all the testimony which either side has to offer bearing on that question, what order, justified by that disclosure of sworn facts, what order shall the Commission be authorized to make? That is all there is of it. At present the Commission can make sim- ply an order, if the facts warrant, condemning the rate relation com- plained of, and requiring the carrier to cease and desist from continuing that rate, or rate relation, and that is all the order the Commission can make. 1 am speaking now, bear in mind, simply of the authority of the Commission. Now, gentlemen, if you are content to leave the Commission with only that degree of authority, the discussion ends at this point. Mr. Corliss. It is not binding on the carrier, after the order is made? Mr. Knapp. No, sir; that is another question. The question now is only in such a case as this, bear in mind; the jurisdiction to make an order is dependent upon the jurisdictional facte which are contem- plated by the measure: There must be a complaint, there must be an answer, there must be full hearing, and the order can be onlj^ such as can be justified by those facts. Now, what order shall the Commission have authority to make ? That is all. Mr. Thurber spoke about an arbitrary order. The Commission can make no arbitrary order, it can simply decide what the truth is and what ought to be done in view of the state of facts actually disclosed. Now, if you are satisfied — if you think under existing conditions, with practically no railway competition, that the authority of the Commis- sion shall be limited to a mere condemnation of the thing complained of, and that it shall have no authority to say what thing shall be done in the future in place of the one condemned, then ftie question is ended. The responsibility is upon you. The country perfectly under- stands what the Commission can do and what it can not do. If you do not want it to do any more than it can do now, then the law should not be changed in this regard. Mr. Davis. Have there been numerous instances in which the rail- roads have declined to make future rates upon your findings since the i-c L 19 290 INTEESTATE-COMMEECE lATV. Supreme Court decision— where they have ignored findings or deci- sions, or whatever they may be called? Mr. Knapp. Oh, yes, sir. "Numerous," of course, is an'uncertain term; but there are frequent instances of that kind. Mr. Davis. Have there been many instances in which the railroads have fixed their rates for the future on what you have found to be just rates? Mr. Knapp. Some instances of that kind. As I have already ex- plained, for ten years, or until the Supreme Court decided otherwise, the Commission acted upon the theory that in such a case it could name the thing to be done in the future. And it was not until January, 1897, or perhaps later, that the Supreme Court of the United States decided that, under the law as it now stands, the Commission had no authority to do that. Since that interpretation has been made, and under circumstances which completely cover the question, the Commission, of course, has made no order except an order to cease and desist from the thing com- plained of. The Chairman. Has the Commission made any recommendations accompanying those orders ? Mr. Knapp. Yes, sir; 1 was about to say that. The Commission, without any authority to do so in the statute, have undertaken in such cases to express their judgment as to the thing which the carrier ought to do. But, of course, the order that it makes goes no further than to The (Chairman. What is the historj' of the matter with reference to obedience to that suggestion ? Mr. Knapp. It is exactly what happens, and what will happen. In several cases, decided since that time, the carriers have, with reason- able promptness, made changes in their tariffs so as to make them con- form to the recommendations of the Commission. In other cases they have simply ignored the order and done nothing. Of course j'ou gentlemen understand that in the present state of the law, and the authority of the Commission merely such as I have described, the carrier could effect a technical compliance with that order by making only a nominal change in the rate under consideration, and then the whole thing would come to naught. Mr. Mann. Under the present law, you have authority to order them to cease and desist from charging such a rate. That is effective for a future offense ? Mr. Knapp. Yes, sir; we assume that it is. Mr. Mann. I say assume under the present law Mr. Knapp. I do not doubt it. Mr. Mann. What has been the fact where you have made an order of that kind; what has the raih-oad company actually done? Mr. Knapp. Well, I say, in all such cases, we have included in the report of the case a recommendation ; that is, unless we have found for the carrier, as often happens; that is, not sustained the complaint. And in every case the carriers have either adopted the recommenda- tion and changed their tariff' accordingly or they have done nothing. Mr. Mann. You mean they have failed to carry out your order and to cease and desist? Mr. Knapp. Yes, sir. INTERSTATE-COMMERCE LAW. 291 Mr. Mann. You have a power to file a proceeding in court to com- pel them to obey that order? Mr. Knapp. Yes, sir. Mr. Mann. Have you done that? Mr. Knapp. Yes, sir; we have several cases in court now. Mr. Mann. Some of those cases 'have gone into court and are now pending; have any of them been disposed of? Mr. Knapp. No case, I think, has been decided. Mr. Mann. What I wanted to get at is whether, in fact, the railroad companies have adopted this policy, which of course they could do; if, for instance, you decide that the rate of one dollar is reasonable, and you order them to cease and desist from charging a dollar in the future, 1 want to know whether they thereupon obey that order and the next day make a rate of 99^ cents. Mr. Knapp. No, Mr. Mann; no railroad would be as stupid as that. Mr. Mann. You said they could Mr. Knapp. Yes, sir; they could do that. Mr. Mann. I want to know whether they do. Mr. Knapp. No, sir; let me explain to you why. Mr. Mann. That is a very practical matter, and one of considerable interest. Mr. Knapp. Surely a very practical matter. Now, of course, the Commission can not enforce its own order. We have been talking about the order that the Commission can make. The effect of that order when it is made, how it shall be enforced, is another question, but under the existing law, as you doubtless understand, the carrier is under no legal compulsion to take any action when the order of the commission passes against it. It can wait, and does wait, until in accordance with the proceedings or procedure under certain laws, a bill is filed by the circuit court to enforce the order. Take a concrete case. Suppose that a board of trade representing a community complains of a rate, which is $1, and the complaint is served upon the carrier, and the complaint is heard. The Commission reaches a conclusion that a dollar rate is unreason- ably high, and thereby violates the first section of the law, which requires that rates shall be just and reasonable. It therefore makes an order that the carrier shall cease and desist from charging a dollar. That is all the order to make. Now, of course, if the carrier is dis- posed to make some concession or to adopt the recommendation which the Commission may have made in its report it does that. If it is disposed to adhere to its position and defend this rate, of course it does nothing. And the reason why the carrier will not make a nomi- nal change in the rate in order to technically comply with the order of the Commission is simply this: The carrier will wait until the bill is filed to enforce the order, which is simply an order to cease and desist, and the carrier will then try the case out in the circuit court, and then it may appeal to the circuit court of appeals, and then to the Supreme Court of the United States. And if finally the court of last resort sustains the decision of the Commission, which was simply to cease and desist from charging a dollar, then the carrier can reduce its rate to 99i cents, and thereby comply not only with the order of the Commission but with the order of the Supreme Court of the United States as well. 292 INTERSTATE-COMMERCE LAW. Mr. Mann. That is what the law permits them to do. But what, as a matter of fact, have they done? Mr. Knapp. They have either done nothing, and awaited the suit Mr. Mann. Have you had suits of that sort commenced? Mr. Knapp. I think in every case, after a reasonable delay, a suit has been brought, and those suits a/re now pending. Mr. Mann. Have any of those suits been disposed of? Mr. Knapp. I am quite confident that no suit has been decided. There are a number pending. Mr. Clements. None by the Supreme Court. Mr. Coombs. By the circuit court of appeals? Mr. Knapp. They have been pushed. I am speaking now, as Mr. Clements suggests, of the cases in the Supreme Court. None have been decided by the Supreme Court. Mr. Mann. Has any case been disposed of by the court of last resort? Mr. Knapp. There has been no case which was commenced since the Supreme Court decided that we could only order the carrier to cease and desist, which has been disposed of by the Supi'eme Court. Mr. Mann. It may not have been appealed to the Supreme Court. Has any final order been passed Mr. Knapp. Yes, sir; and sustained by the circuit court of appeals. Mr. Mann. And not appealed to the Supreme Court of the United States? Mr. Knapp. No, sir; in no case has the litigation been entirely finished. Mr. Mann. How long ago was that decision rendered? Mr. Knapp. In 1897. Mr. Mann. How many cases have you now pending? Mr. Knapp. I do not know quite the number. Mr. Mann. Do you I'eport all the cases in your last report? There are only about two dozen there. Mr. Knapp. Yes, sir. Mr. Mann. In the last annual report, just issued? Mr. Knapp. I suppose there are six or eight pending. Mr. Mann. Are all those oases pending in which you have had occa- sion to find that the rate was unreasonable and to order a railroad com- pany to cease and desist from charging it in the future? Mr. Knapp. With this difference — that there would sometimes be a group of cases, or a number involving the same question, and then, of course, to save expense, only one suit would be brought and the other matters would stand in abeyance awaiting the decision of the question which controlled them all. Mr. Mann. It is impossible to tell, then, what the operation of the law would be if the Supreme Court passed upon these questions — this question which you decided and ordered the railroad company to obey, your order to cease and desist? Mr. Knapp. Of course it is impossible to tell what the railroad com- pany will do. Mr. Mann. You have had no practical experience in reference to it at all; that matter has not been tried yet? Mr. Knapp. No, sir. Of course, as to a railroad company which the Commission has ordered to cease and desist from charging a par- ticular rate, when that order has been sustained by all the courts, including the Supreme Court, we do not know what the carrier would INTEE8TATE-COMMER0E LAW. 293 do. I am only suggesting to you that the carrier can make a nominal change which will effect legal complicance with both the order of the Commission and the decree of the court. Mr. Mann. And it has been over five years since that opinion was given by the Supreme Court, and yet no case has reached the point yet where you get any practical experience out of it? Mr. Knapp. That is substantially true. Mr. Richardson. I hope you will excuse me, Judge Knapp; I am very much interested about these facts, and the matter of the enlarge- ment of the powers of the Commission. I hope that it will not put you out to ask you to give me certain information, as 1 was not here when you began your remarks to-day. As 1 understand from you, when the Commission, for instance, ascertain that the railroad is charg- ing a dollar for certain things, and that that is too much, the Commis- sion say that is too much, and say, for instance, 50 cents would be right — giving that as an illustration — that is not permanent, that order, but suppose it is taken to the circuit court, as you suggest it will be or can be; it can be taken to the circuit court. Now,'the circuit court passes upon the order of the Commission as made, and sustains the Commission; then an appeal is taken to the final court, the United States Supreme Court, and that court holds that the order of the Interstate Commerce Commission is not right and proper, and cancels it and sets it aside; has the railroad, from the time you made that order, been complying with it or not, and charging only 50 cents ? Mr. Knapp. JSfot at all. Mr. Richardson. Then what charge is it making? Mr. Knapp. The charge originally complained of. Mr. Richardson. The original one? Mr. Knapp. Yes, sir. Mr. Richardson. Then your order has no effect upon the situation so far as decreasing the charge is concerned? Mr. Knapp. No, sir; our order has no effect until it is enforced by court, and of course it is not enforced by a court until the court of last resort has decided the question. Mr. Richardson. That, as I understand, is not the provision con- tained in the Corliss bill at all. Mr. Knapp. The Corliss bill proposes to make Mr. Richardson. To make it arbitrary, and enforce it at once? Mr. Knapp. To a certain extent. Mr. Corliss. If I understand you, you state that if the rate was a dollar and you should hold that that was an excessive rate, and you had recommended 80 cents, the Supreme Court has held that you could not enforce an 80-cent rate, nor would the court uphold that order and enforce an 80-cent rate. Mr. Knapp. That is right. Mr. Corliss. So that really, when these cases which are nOw pend- ing reach the Supreme Court of the United States, all that the court will decide, if they follow their prior decisions, is whether or not they should cease and desist from charging a dollar? Mr. Knapp. That is all. Mr. Corliss. And that a compliance with the decisions to the extent of 5 cents would be a satisfaction of that entire judgment, and you would have to start over again. 294 INTERSTATE-COMMERCE LAW. Mr. Knapp. You have aimply got a final decree that the rate origi- nally complained of was too high. Mr. Corliss. And they could start again at 99 cents. Mr. Knapp. You have got no lower rate fixed. You have no actual relief to anybody. That must be so. Mr. Mann. They have the power to decide that a rate is unreason- able. That is all they can hold, as a matter of law "i Mr. Knapp. Under the present statute. Mr. Mann. They can argue all they please as to what is a reasonable rate, and then it is in the discretion of the railroad company to accept the statement of the court as to what is considered to be a reasonable rate or not, just as they please, or at least you have not tried that to see whether it is or not? Mr. Knapp. There has not been time to get a case through the Supreme Court. Mr. Mann. You have not any decision on that. All you could do was to say that the dollar charge was too much, but the Supreme Court could say what a reasonable charge was. Mr. Knapp. No, sir; they can not do it. Mr. Mann. They can say what a reasonable rate is, but they can not issue an order fixing what it shall be. Mr. Knapp. Who can say it? Mr. Mann. The Supreme Court of the United States. Mr. Knapp. No, sir. Mr. Mann. Oh, yes, they can. It may become very necessary in arguing a particular case. But they can not fix it as a future rate. Mr. Knapp. They can only say to the extent of deciding that the rate has been or is unreasonable. Now, gentlemen, that is the whole question; that is, that is the vital question, the important question. Mr. Adamson. There would still be a good deal of circumlocutionary legislation even after you got the Corliss bill? Mr. Knapp. Well Mr. Adamson. If the Supreme Court decides that the rate you fix, ven under the Corliss bill, is too high, you can fix another rate, but hey can stUl make that , can they not? Mr. Knapp. No, sir. The Corliss bill provides that when the Com- mission has heard a case in the way 1 have described Mr. Adamson. Yes, sir. Mr. Knapp (continuing). It may not only condemn a rate com- plained of, but may prescribe the rate to be substituted in its place in the future. Mr. Adamson. That goes to the courts, and that case is carried through, and they decide that it is too high, and then the Corliss bill says that you may sit down and make another rate, and they can say that that is too high • Mr. Knapp. Yes, sir; of course. Mr. Adamson. Why don't you fix legislation so that it has an end somewhere ? It looks like human sagacity ought to be able to fix it so as to end this matter somewhere. Mr. Knapp. I undertook to say in the beginning that I am not in favor of extreme or radical changes in this law. Mr. Adamson. You would like the present generation to get some benefit out of this, would you not? INTERSTATE-COMMEKCE LAW. 295 Mr. Knapp. I think the development of our laws on this subject should be by evolution, and not by revolution. And I am not here to advocate — because no pending measure proposes it — any arbitrary or final power on the part of the Commission. The question is ri*ht here, in verj' narrow compass, and very easily stated. When you have the complaint and the parties all before you and the question examined with all the light thrown upon it that can come from the testimony* of witnesses and the argument of counsel, what order shall the Commission have authority to make in such a case ? That is all the question there is. That is the real question here. Mr. RiCHAKDSON. Right there, do you not think that as a mere matter of common sense and conservatism, from the bench or from any commissioh that has such authority as that, if the Supreme Court had held that a dollar charge was not reasonable, or any authority was given to you to take advantage of the Corliss bill and fix another charge without any further evidence, that you would fix it, in view of the decision of the Supreme Court, and use conservatism and good judg- ment in trying to strike a middle ground ? Mr. Knapp. I can not imagine a commission that would not do that. Mr. Mann. You can imagine a railroad company that would, but not a commission ? Mr. RiCHAKDSON. That is another question entirely. Mr. Adamson. You say five years have passed, and you have not got the first case determined yet. If you decided a case under the Corliss act, and the railroads spent five years in going around through the courts, and then it comes back and you take another hearing, and on j'our own suggestion, or on the suggestion of the court's talk, you make another rate— -you may heai" evidence or not, or you may fix the new rate on the record, and then the railroad enters another rate, and then the court says that you have not got it quite low enough yet, and it is not at all certain that the Supreme Court will ever decide to let a rate stand; there is a generation gone Mr. Knapp. And in such a case the recommendation of the Com- mission has been heralded to the country as " the inordinate demand of the Interstate Commerce Commission." Mr. Mann. Mr. Adamson is pointing at the question, as I under- stand it, as to whether the court, the Supreme Court of the United States, which refused your decision upon all the evidence you had before it, shall have the power to say what is a reasonable rate. Mr. Knapp. Do not let us have any confusion on that. No court can fix a rate for the future. If authority is given to determine in such a case as I have described, what rate shall be substituted for the one under consideration, that authority can be given only to a com- mission, or exercised directly by Congress itself. It can not be given to a court. Mr. Stewart. Eight there, railroad corporations want to avoid litigation? Mr. Knapp. Assuredly they do. Mr. Stewart. In case the Supreme Court should decide that the Commission was right, and they should fix a reasonable rate for the future, do you not think that the corporation in order to avoid litiga- tion would acquiesce, if it were a reasonable rate? Mr. Knapp, Certainly. 296 INTEBSTATE-COMMEROE LAW. Mr. Stewaet. To avoid the litigation Mr. Adamson speaks of — further litigation? Mr. Knapp. When you bear in mind the very limited authority the Commission now has, which is simply to say, "This thing is wrong," and bear in mind that the order of the Commission saying it is wrong is not obligatory upon anybody, that before it can be enforced there must be a suit in the courts for that purpose, which must be carried through to the courts of last i-esort; wheJh you take all that into account, I think it is to the credit of the railways of the country as a whole that so many of the recommendations of the Commission have been adopted. Mr. Mann. You say that no court can decide what is a reasonable rate? Mr. Knapp. For the future. Mr. Coombs. It can not establish a rate? Mr. Knapp. Can not establish a rate. Mr. Mann. That may be true that it can not establish a rate. Mr. Knapp. A court can decide whether a rate has been reasonable or not. Mr. Mann. The court can decide whether a man has offered a reason- able rate under the common law, and always could; that is a future rate. Mr. Knapp. Yes, sir; but it applies only to the time when the tender was made, and to the particular traiSc to which the tender relates. Mr. Coombs. Does the Supreme Court pass upon questions of fact in its appeals? Mr. Knapp. Oh, no; no, sir. Mr. Coombs. Does the circuit court of appeals ? Mr. Knapp. 1 understand, of course, the circuit court will pass upon the facts. Mr. Coombs. Upon your appeal, what do you appeal upon? Mr. Knapp. Let us try to avoid confusion at that point. Bear it in mind, gentlemenij that while the determination whether a given rate is — that it has been — reasonable or not, as a judicial question, the determination of the rate to be substituted in the future is not a judi- cial question, can not be made a judicial question, and that authority, if exercised at all under the circumstances, must be exercised either by the legislative body itself or by an administrative tribunal to which some portion of the legislative power is delegated. Now, that being so, of course you must bear this in mind, that it is incorrect and mis- leading to speak of an appeal from the order of the Commission. The Commission is not a court, and in a constitutional sense the carrier has not had its day in court when the Commission has decided its case. The carrier gets its day in court under present law when the suit is brought to enforce the order. Mr. Adamson. Your idea is not to ask for a greater number of powers, but for more power as to the few things that you do try to do; that while you do not seek to go further and fix a rate, or decide how low a rate ought to be, you want the power, when you sav a rate is too high, to put that opinion in force and stop the railroad charging that rate? Mr. Knapp. This bill proposes that the Commission shall not only have authority to say that this rate complained of is wrong, "but to INTERSTATE- COMMEBCE LAW. 297 determine the extent to which it is wrong, and prescribe the rate to be put in its place and observed in the future. Mr. Adamson. I tallied to you a while ago about the wheel going around so often. Had we not better improve that bill, or amend it, so as to say that after that thing has been back to you a certain num- ber of times it shall stop, except under such conditions as extraordi- nary motions made in court, showing that extraordinary conditions exist, beyond the power of a party to control, or something of that sort, and so put an end to the matter somewhere ? Mr. Knapp. With reference to that, as I said, when you have deter- mined the question as to the authority of the Commission, what kind of an order to make, then the next question comes, what effect shall be given to that order; how shall compliance with it be secured; how shall a review of it by the courts be permitted ? Mr. Thurber, this morning, in commenting on that branch of the case, indicated his opposition to the method of procedure embodied in the Corliss bill, which is that the order of the Commission shall be self-enforcing, so to speak, by reason of accumulating penalties for disobediences, the carrier having the right to go to the court and file a bill to restrain the order; but Mr. Thurber spoke of that as shifting the burden of proof." I want to call your attention to the fact that it does not shift the burden of proof at all. The importance and desii'a- bility of that change is not in any way connected with the burden of proof, because under the law as it now stands, when the bill is filed to enfoi'ce the order, the findings which the Commission have made con- stitute a prima facie case. The burden of proof is now on the carrier when you get into the courts. The decision of the Commission that this rate is unreasonable and that the carrier must cease and desist from charging it, is prima facie good in the circuit court, and the burden of proof is on the carrier to show otherwise. Mr. Coombs. Is that a judicial order or a legislative order? Mr. Knapp. It is a part of the present law. Mr. Coombs. I am asking you for a distinction. Is that a judicial or a legislative order ? Mr. Knapp. Well, it is an act of Congress which prescribes the method by which the authority of an administrative tribunal is to be enforced. The Chahiman. The hour of adjournment has arrived. We will be glad if you will be here tomorrow at half past 10, Judge Knapp. Mr. Knapp. Very well. (Thereupon, at 12 o'clock m, the committee adjourned until to-mor- row, Friday, April 25, 1902, at 10.30 oclock a. m.) Feidat, April S5, 1902. The committee met at 10.30 o'clock a. m., Hon. William P. Hep- burn in the chair. The Chairman. The committee will be in order. Judge Knapp, will you resume your statement? Mr. Adamson. Before Judge Knapp proceeds I wish to say that I have been listening with great interest to these gentlemen, and I wanted to hear Judge Clements, but I have an important engagement 298 INTERSTATE-COMMERCE LAW. at the Treasury Department with some constituents of mine, and I want them to understand why I withdraw. I will have to ask you to excuse me. STATEMENT OF HON. MARTIN A. KNAPP, CHAIEMAN OF THE UNITED STATES INTERSTATE COMMERCE COMMISSION— Con- tinned. Mr-. Knapp. Mr. Chairman and gentlemen, you have honored me with such respectful attention during the making of my quite pro- tracted statement that the- best acknowledgment I can make is to bring my remarks to a close at the earliest possible monent. I have endeavored to point out that the first question on this branch of the case is as to what orders the Commission shall have authority to make; and 1 do not know that I care to add anything to what I have already said upon that subject. You understand the present situation. You are aware that after the fullest investigation, upon complaint, notice, and due hearing, the only order which the Commission now has authority to make is, if the facts so warrant, for the carrier to cease and desist from charging the particular rate, or maintaining the par- ticular rate relation, which is complained of. The question is whether in those cases, and under those circumstances, and subject to the con- ditions proposed, the Commission shall have authority not only to say that the rate or rate relation complained of is unlawful, but also authority to prescribe in the first instance a rate or rate relation which shall be substituted in place of the one complained of. That is the question. The Chairman. Now, Judge, if this will not interrupt you, I wish ' you would state how comprehensive that order should be, looking to the entire rate charges of a system of roads; whether it should be so comprehensive as to cover an entire schedule of rates, as one act, or whether it should be limited to the particular rate that was com- plained of. I ask that question for this reason: that I am satisfied that there are parties who would, perhaps, be contented to have, we will say, to illustrate, a single rate regulated by a commission when they would not be willing that ' at one time and in one order there should be an entire rearrangement of the rates of their whole system of roads. If you would give your views as to that matter, whether the power ought to be limited, and if so, how it would be limited, I think the committee would be glad. Mr. Knapp. If I correctly understand the present law, as it would be modified by the provisions of the Corliss bill in the particular sec- tion now mentioned, I must say that it is conceivable it would be within the terms of the law that the entire schedule of a given carrier, or system' of carriers, might be made the subject of complaint and adjudication. I think I perceive the objection which is suggested by your remarks. Mr. Mann. If that were the case, would it not be necessary that the court, in passing upon it, should have the authority to say that the order should remain in force as to one part of it if the court should find as to a particular commodity, for instance, the order made a rate unreasonably low? Under this provision the court can either order the order of the Commission to remain, in force or not, and if it INTERSTATE-COMMERCE LAW. 299 found that the rate on a particular commodity would be too low, what would be the eflfect of that? Mr. Kjstapp. May I defer taking up that question until I take up that particular part of the subject? I am endeavoring to confine this now to what order the Commission shall have power to make. The eflfect of that order, how it is to be enforced, how it is to be reviewed, is another part of the question. Mr. Mann. Very well. Mr. Knapp. Now, Mr. Chairman, the best answer which I can make to the suggestion presented by you is this : In the first place, it has never yet happened, in the experience of the Commission, that complaint has been made of an entire system of rates, or any carrier, or system of carriers, except where the element of discrimination was involved, and then the complaint was not that the rates were excessive, but that they were unfairly adjusted as between two difi'erent localities. I do not recall an instance, and I am very certain not one has ever occurred, in which anything like the comprehensive system of rates has been challenged on the sole ground that it gave the carrier an undue reve- nue, and imposed upon the public an undue burden. And I think that will always be the case. My further answer is this: Under any pending proposal the Com- mission would have no authority to make any kind of an order except one which was justified by the facts proven in the investigation, and as a matter of practice and justice, if a complaining locality should be able to establish, the burden of proof being laid upon it, that the whole range of a given railway's charges were excessive, and secured to that carrier a greater revenue than it was entitled to, and imposed upon the public a burden which it ought not to bear, if that was proved and established to the satisfaction of fair-minded and impartial men, I do not see how we are to resist the conclusion that an appropriate order ought to be made, that is, in such a case. So that when you take into account that there is to be no arbitrary authority, no ex parte decree, but only such a determination as a judicial tribunal might reach if it had jurisdiction upon the precise facts, I do not know why the authority should not go to that extent. I add to that The Chaikman. Would you object to giving your views upon the practicability of the procedure; for instance, suppose that a complaint originates in New York, where the entire system terminates, and where the complainants might be interested in a rate on some one of the sub- sidiary lines, branch lines, in a very remote region. What would be the practicability of entering in on the part of the Commission to the necessary proofs, to go over all of the rates from, say, the adjacent stations that might be on that road, and then the practicability of a review of all of that by a court within the limited time of two years, treating it simply as a practical matter, you striving for the informa- tion that would be necessary to enableyou to make your order, and the court then, in making that investigation which would enable it to determine whether that order was a just one, and involving the entirety of one of these great systems, terminating, we will say, at a seaboard point? Mr. Knapp. There is no impracticability in theory. The practical difficulty would be, and it is almost insuperable, I think, for any com- plaining shipper or locality to make proof that would justify the Com- mission in interfering with the general range of rates of one road, or a 300 INTERSTATE-OOMMEBOE LAW, system of roads, if the element of discrimination between localities was not involved. One thing and another, Mr. Chairman, has led me to give some con- sideration to that question, and 1 have endeavored to inform myself by reading with care the decisions of the Supreme Court and other courts in cases which have some relation to that question. The obser- vations of Mr. Justice Brewer in the recent case of the Kansas City stock yards indicate to my mind that no tribunal would be warranted in reducing the general range of rates, thereby reducing in a substan- tial degree the entire revenues of the railroad or system, without the clearest and most cogent proof that that carrier was exacting an undue tribute from the public. Such consideration as I have given to that question leads me to believe, Mr. Chairman, that it would be extremely difficult, practically impossible at the present time, to prove such a case as your observa- tion suggests. I doubt very much whether it can be done. Speaking for myself, I am inclined to say this: That you can not materially reduce the entire revenues of a railroad system until you have some definite basis upon which to proceed; and one of the difficulties which must lie at the foundation of any such inquiry is, on what principal sum is this carrier entitled to make dividends, and then the question comes. What dividends is it entitled to make? Now, when you con- sider the way in which our railway systems have actually been devel- oped, how they have been built and rebuilt, and are never finished, the question of determining with anj' reasonable certainty what aggre- gate sum has been expended on this property which ought to get a return, if the business warrants, you have a very difficult question to solve — one which commissions and courts, I think, will approach with a full sense of its difficulty and of their responsibility. The Chaieman. I realize in part the difficulty, and the infinite number of factors that enter into the matter as elements of cost of construction, and conditions of operation, and that was why I wanted to know, in your judgment, in case a question of that kind should be presented to you, if it is presented to you in the nature of a complaint and if issue is joined by the answer of the company, then it must be investigated. Mr. Knapp. Quite true. The Chairman. And what the nature of the proof would be I do not know. Of course I do not know what the character would be, what the elements that would enter into the cost would be; all of that would depend, I suppose, a good deal upon the genius of the complainant; and therefore I wanted to get your opinion, in a case of that kind, if it was practicable for the Commission to hear, and then determine, and then make such report and take such action that the court that would have to review it could have sufficient time; if it was not practically impossible to make an inquiry of this nature within a period of two years, where the case was vigorously prosecuted and resisted. Mr. Knapp. You mean, I suppose, if the Board of Trade of Chicago, representing the commercial interests of that city, should complain of all the rates on all the lines leading out into the territory which gets its supplies from Chicago, whether it would be practicable for such a case to be investigated? The Chairman. That case might be an illustration, but I had in my mind some competent complainant complaining of the New York Cen- INTERSTATE-COMMERCE LAW. 301 tral system at the New York terminus; somebody in New York making that complaint on the charges of the entire system. Mr. Mann. May I give you an instance of a complaint that has just been made, according to the newspapers, by the wholesale merchants of Chicago, who have just presented to Governor Fifer, of your Com- mission, a protest signed by nearly all of the wholesalers of Chicago, protesting against the railroad rates from New York and Chicago to the Pacific seaboard, which I take it would involve the question of rail- road rates from one end of the country to the other, east and west. Mr. Coombs. What paper was that? Mr. Mann. The Chicago morning papers that came this morning. Mr. Knapp. That case, if 1 understand the one j'ou refer to, is not of recent origin, but has been pending for a long time; but even the case that you assume would be a different question from the one the chairman assumes, because his inquiry goes to a case that simply involves the reasonableness per se of the rates. Your case involves an alleged discrimination between localities, which is a very different question. I know of no recent case, and I am sure there is not one, unless it is within the last twenty-four hours Mr. Mann. This was published in the Chicago papers which reached Washington this morning — that is, they were the papers of yesterday morning — and they state that this complaint has been presented to Governor Fiferj or that it would be presented, I do not know which, and the allegation was that the freight rate from New York to the Pacific coast was less than the freight rate from Chicago to the Pacific coast, and hence they alleged their freight rate was too high. Mr. Knapp. My very confident belief, Mr. Mann, is that the news- papers are mistaken; that they refer to a case which was commenced more than two years ago.- Mr. Mann. No; this was a new petition, I judged from the papers. Of course, 1 do not know; the newspapers are not very reliable. Mr. Knapp. A case has been pending before the Commission for a long while which, within the scope of the pleadings, presents that question; but it also presented another question. in which Chicago is very much interested, and that was the real grievance, and that is the relations between carload and less than carload rates on traffic moving to the Pacific coast, which a little reflection will show comes really to be a controversy between the jobbers of the Mississijapi Valley and the Middle West as against the jobbers on the Pacific coast. They did, in that complaint assail the lawfulness of what is known as the blanket rate, under which rates to the Pacific coast are the same from all points on and east of the Missouri River, and the allegation is that to charge the same amount from St. Louis and Chicago to San Francisco, as they charge from New York is a discrimination against St. Louis and Chicago. Mr. Coombs. Is that why the jobbers of the Pacific coast opposed the amendments to this bill? Mr. Knapp. Well, Mr. Representative, I was not aware that the jobbers of the Pacific coast do oppose it, and if they do I certainly can not undertake to say what their reasons are. Mr. Coombs. I will show you a letter wherein they do oppose it [handing letter to Mr. Knapj)]. This is from the port of Portland. Mr. Knapp (after examination of letter). It will serve no useful pur- 302 INTEESTATE-OOMMERCB LAW. pose to enter into a detailed discussion of that matter; but I may men- tion that I can understand the attitude of the Portland jobbers, because while there is one relation between carload and less than carload rates on traffic moving from Chicago to St. Louis and San Francisco, there is a different relation in carload and less than carload rates on traffic moving from St. Louis and Minneapolis to Portland. The North Pacific jobbers have now got the relation between carload and less than carload rates that they want and that St. Louis wants, so that it is quite natural that the Portland people should not want their present arrange- ment interfered with, or that we should have any authority to interfere with it, while some equally enterprising gentlemen in Chicago and St. Louis and San Francisco are equally desirous that we should have that power. Mr. Coombs. 1 will state that the jobbers of San Francisco have taken the same position as the jobbers of Portland have. Mr. Knapp. I did not know that. Mr. Coombs. I will state that they have. I have letters from them as well as from the jobbers of Portland. I did not happen to have them, and I have probably lost them, but I kept that one. That was addressed to somebody else and it was handed to me, which is the reason ithat I happened to retain it. Mr. Knapp. Let me say, Mr. Chairman, I can only repeat that it would be possible for a community to bring a complaint which would challenge the reasonableness of all the rates of all the roads and in all directions in which that community was interested. They can do that now. No bill pending here increases the jurisdiction of the Commis- sion over the subject-matter. The question is what order in such a case the Commission shall have power and authority to make after it has heard all the facts, and while 1 must admit that a complaint could be brought which would challenge the whole area of rates ot a system, or of more than one system, I think it would be very difficult for the complainant to furnish the proof which would warrant the Commission in making an order reduc- ing those rates simply on the ground that they were unreasonable, and I say further that if that proof should be made, if facts should be established which fairly lead to that conclusion, I do not know any reason why such an order should not be made. If the entire New York Central system is charging the public for its services a sum which gives to that system a greater revenue than it is entitled to secure, and imposes upon the great public which that system serves a greater transportation burden than it ought to bear, and if facts are proven which sustain that conclusion, I do not know any reason why it should not be reached. You see, gentlemen, to say otherwise it seems to me forces this alter native: The railroads being free from any legal restraint in establish ing their tariffs, and being under legal obligation to enforce those tariffs, when they are once established, upon everybody, if there is no way in which those tariffs can be changed when the3'^ are proven to be wrong, or because they are oppressive or relatively unjust, then, of course, the determination of what the railroads of this country shall earn, what they shall charge, is in their owa hands, and I am not prepared to admit, Mr. Chairman, that the owners and managers of our railway systems are entitled to say themselves what the public ghall pay and that their determination in that regard is to be practically INTERSTATE-OOMMEBOE LAW. 303 incapable of alteration; which brings us right back again to the ques- tion, in such case as that, after complaint and notice and due hearing, and opportunity for the carriers to show every fact upon the question presented, if those facts establish with reasonable certainty that charges complained of are wrong, the question is, Shall the Commis- sion have authority to say what the carriers are to do to correct the wrong? That is all there is of it. The Chairman. There is a little more than that. Judge, in the abstract. The question as you presented it is undoubtedly the correct position. I do not think that anybody, or but very few persons, would gainsay that, outside of those who are directly interested; but here is the situation: Up to this time that claim on the part of the railway companies has been acquiesced in by the lawmaking power. The prop- osition now is to change the location of that right to fix rates. Of course that means antagonism. There are friends of the old method, the present method, and there are friends of the new. There is an effort being made to get legislation, legislation that is urged and legis- lation that is opposed. Now, as you are presenting the question, and I think rightly, on the part of the railway, the argument is: Here is a surrender of a right wnich is of inestimable advantage to us, and it involves our entire possible prosperity, if the power that is to be f ranted is to be as comprehensive as Judge Knapp has just claimed, he object being to get remedial legislation, there are difficulties in the way of securing that. What I was trying to get from you in your view in the presentation of that was this thought: Is there some intermediate method, as, for instance, the establishment of the power of the Commission over a particular rate, o\^er a rate that is specific and especially complained of, and of marked importance, that could be the subject of legislation without taking from the company the present power that they enjoy over their whole system of rates? Mr. Knapp. Well, Mr. Chairman The Chairman. You can see that much opposition might be removed in the way of securing very beneficial legislation. Mr. Knapp. 1 think I perfectly appreciate the position which many railroads take. I think I appreciate its very great importance. As I remarked a couple of days ago, my study of this question, a study which I-try to make careful and conscientious, leads me to great con- servatism. I am not disposed to advocate any radical alteration in this law, nor any extraordinary increase in the authority of the Commis- sion. It IS not necessary for me to advocate that the Commission be given the authority in respect of making an order which the Corliss bill proposes, for that question is for you. My duty is to explain to you exactly the present situation, to have you understand precisely the extent to which the Coriimission's authority now goes, to point out the authority which I think it would have if this measure were adopted. It is for you, gentlemen, to say whether that authority shall be granted or not. I am not covetous of increasing authority. The Chairman. No; I do not Mr. Knapp. It is often charged, Mr. Chairman, that the Interstate Commerce Commission has disregarded its obligations under this law, failed to perform the duties which it might perform, and is eagerly reaching out for great authority with a view of making itself a oody of enormous consequence. There is no foundation for the charge; no 304 INTEESTATE-OOMMEECE LAW. facts can be adduced to support the contention. The most careful study of the reports which the Commission has made to the Congress, and the recommendations which have been embodied in its reports, the most careful examination of the things it has done, the views it has expressed in deciding cases, and otherwise attempting to administer the present law are a complete refutation of any such charge. The Chairman. Well, I do not suppose that it is necessary, Judge, for you to say that to those of us who know you. But there are persons who are not willing to intrust any five men with the enormous power that is involved in the possible order that we have been discussing this morning. The committee would be glad, I think, to have the benefit of your large experience in the suggestion whether it is possible to effectuate benefit by the bestowal of a less power, a power with regard to a part of this immense interest, that might be more immediately the subject of complaint, with regard to the matter that might be more immediately the subject of complaint. I can see how a board of trade might pass a resolution instituting a proceeding of this kind with regard to all rates on an entire system when there are two or three particular matters, perhaps, which are of enormous importance. Is there any way of separating and of taking out those which are of great, importance in this particular contention, that particular conten- tion, and to give power to the Commission to adjudicate those, and the others for a special complaint, or where there are special com- plaints with regard to a portion of the other questions? Mr. Knapp. Mr.^ Chairman, I make the very best answer 1 can, and am absolutely _f rank in it, of course. Now, I honestly doubt whether there is any middle ground such as you suggest. I think you will have great difficulty in defining in what cases the Commission shall have authority to name the future rate and the cases in which it shall not have that authority. The Chairman. Yes, but can you not come to the other end of the proceeding and define what may be the basis of a complaint? Instead of allowing a man to complain against all of the laws of nature, com- plain against that particular snowstorm that just now assails him. Mr. Knapp. Well, Mr. Chairman, if there is some way by which proceedings can be limited to specific and definite grievances, there is very much to be said in its favor. The Chairman. In your judgment is there a method of that kind that may be adopted ? Mr. Knapp. Oh, yes; there are things that could be done. If I Understand this bill, in connection with the present law, theCommis- sion itself could proceed on its own motion without anybody's com- plaint. It could, acting upon its own judgment, formulate a complaint against the rates of an entire sj^stem and in a sense be the nominal complainant representing the public interests. Now, of course, it is entirely feasible to say that the Commission shall not exercise the authority here proposed except in case of somebody, some responsible person, complaining. You could drop out the right of the Commis- sion to institute a proceeding on its own motion. But I do not see that that would help us very much. Of course this has been suggested; of course you gentlemen are aware that most railroads feel under very considerable restraint, in view of the prohibition of pooling and the application of the antitrust law, and there have been various proposals to modify those laws in INTERSTATE-COMMEECE LAW. 305 their application to railroad operations, and it has been suggested, that so far as the railroads secure by legislation rights of contract and as- sociation with each other, which go to the question of their rates, that the Commission should have authority in respect to the future of those rates, and not have this authority in respect of rates which are not made by association and agreement. Of course there is a distinction that could be made. If, in your judgement, the time has come when railroads ought to be permitted to take associated action, to agree with each other as to what are just and reasonable rates, to agree with each other to maintain those rates, to be able to make agreements of that kind which are enforceable in the courts, why then you could provide that so far as their rates are made or maintained by those agreements, that those rates should be subject to this authority, and that rates which are not thus made or maintained should be only subject to the authority which the Commission now has. But you can not very well, Mr. Chairman, I think, limit the right of making complaint to the actual shipper. I think the value of any law on this subject largely results from the fact that representative bodies, commercial organizations, municipalities, street-railroad com- missions, representing the great body of shippers, should be compe- tent to complain, and if you allow such representative complaint, you will have some difficulty in defining the narrower field from the one now open to investigation, unless it be in connection with legislation which gives the roads rights of contract with each other which are now denied, when that could be imposed in the nature of a condition. The Chairman. Might it not be limited somewhat by the establish- ment of a jurisdictional fact, namely, that the complainant had an interest in the subject-matter of the complaint? Mr. Knapf. Yes, but The Chairman. Now, if individuals complain, individuals alone, it is scarcely conceivable that any one individual would ever have an interest in all parts of a schedule of rates. It is scarcely conceivable that any one individual in the city of New York ever received a con- signment from all of the stations on the New York Central system. Mr. Knapp. That is quite true. The Chairman. Is it possible to limit the complaint to one who had a pecuniary interest in the subject-matter of the complaint? Mr. Knapp. Yes, sir; that is quite possible. The Chairman. Well, what would be the effect of that, in your judgment? Mr. Knapp. I do not think there would be many complaints. The Chairman. You think not? Mr. Knapp. No; only in rare instances does any one person have a sufficient pecuniary interest to justify him in entering upon a pro- tracted contest with a railroad, and unless chambers, of commerce and boards of trade, municipal organizations. State railway commissions, and other organizations which represent the general public can be competent complainants, I do not think much can be done. The Chairman. If the complaint was limited to State railway com- missions or to grand juries, or to some recognized and authorized body, what would be the effect of that, in your judgment? Mr. Knapp. Well, of course it is competent to limit the jurisdiction of the Commission just as far as you see fit. The Chairman. Of course I know that; but what 1 want to get at is i-o L 20 306' INTERSTATE-OOMMBRCB LAW. youi-, judgment on the benefits of the harmful results of that kind of limitation. We are trying, Judge, to get the benefit of your experi-' ence on this subject. Mr. Knapp. 1 do not need to assure you, of course, that if there is anything which I can say which will aid you in reaching a conclusion I want to say it. ' ' The Chairman. I do not think there is any doubt about that. The difficulty is in my expressing to you just what we want to get at, just the class of legislation. ' Mr. Knapp. I will say, Mr. Chairman, in my opinion, more results would follow and more would be done to realize the beneficial purposes of this law if the Commission could be put in motion, as it now can, by these commercial organizations and representative bodies and could only make the order to cease and desist, which it can now make, than would result from much narrower jurisdiction and greater authority. Desiring only to aid, if I can, in my limited way, the successful work- ing out of this great railroad problem, 1 will say that I would rather the Commission had only the authority in respect of making an order, which it now possesses, in connection with some other things, than to be able to name the future rate only in case a complaint was brought by a shipper who showed a pecuniary interest. The Chairman. Well, what would be the result if the limitation I have suggested was made, and the matter was confined to the complaint of the piersons with pecuniary interests involved, and the public aids that I nave spoken of — grand juries, district attorneys, State commis-' sionsi — and the Interstate Commerce Commission retaining the power that the Commission now has with reference to. the initiative of proceedings? ^ Mr. Knapp. Well, I would not be in favor of limiting the right of complaint to interested shippers and to State railroad commissions,, because many States do not have railroad commissions, and where they do their duties are diverse and their authorities vary. Their attitude in one State is quite different from what it is in another. That would not give us any uniform, harmonious method of initiation, and I certainly wQuJd not be in favor of limiting the complaints to cases where there is a presentation by a grand jury, nor would I make it competent for a grand jury, by its presentation, to institute a complaint. The Chairman. I did not mean the formal institution by indictment, but by complaint; that simply because of the necessity, as I thought, of having a number of possible complaining. parties. Mr. Knapp. No, Mr. Chairman; when you bear in mind that we are dealing in these cases not always with individual rights, not with, con- troversies between man and man, but dealing in a legislative way with results which must aflect everybody, I do not think it would be wise or useful to limit the right of complaint to an individual having a pecuniary interest in a rate; that, as I said, I think we will get more useful results and acccomplish more to leave the authority to make an order just where it is, with the freedom of initiative as it now exists, than we would to very much narrow the field of complaint and increase the authority of the Commission in that narrower field. The Chairman. As it is now, any person may lodge a complaint and put in motion the legal machinery for investigation? > Mr. Knapp. I misht say in that connection what perhaps is not very INTEKSTATE-OOMMEECE LAW. 307 important; still the Cominission is not bound to proceed in any case. The Commission is unlike a court in that regard. An individual may bring an utterly frivolous suit and the court is bound to hear it. But the Commission only proceeds on complaint, in its discretion, and it; may decline to investigate a given case, and has frequently declined, because it was satisfied from what it knew or what appeared in the application that it was not brought in good faith, had not any merit, that no useful results would come from investigation, and it declined to do anything about it, and I think that discretion should remain. I think we should be kept an administrative body, with discretion to act, and not be like a judicial body which is bound to act no matter how frivolous the case or how unworthy the motive which sets the court in motion. I have taken a great deal of time, and 1 want just a few ininutes to speak about the other branch of the case. There is this first question, about what order the Commission shall have authority to make. Now, passing that, there is the other question of when that order is made what shall be its effect, how shall it be enforced, how shall it be reviewed? At the present time, as you are aware, the order, when made, is merely one to cease and desist, and it has no self-enforcibil- ity. It is obligatory in any legal sense upon nobody. The carrier can continue to disregard it as long as it likes, and the only way .to give any effect to the order is to file a bill in equity in the circuit court and ask the court to enforce that order. In such a suit the findings of the Commission constitute a prima facie case, which has the effect, of course, of putting the burden upon the carrier to show that the Com- mission has made a mistake. Now, 1 shall ask this committee to make a change in the law in the respect I am now discussing. If you make no change it enlarges the authority of the Commission to make an order. If we go no further at present, Mr. Chairman and gentlemen, in developing our theories of railway regulation, we ought at least to go now to the extent of providing that when the Commission makes an order, although it be only an order to cease and desist, that the carrier must obey that order or itself go to court to get rid of it. It is not a proper attitude for the Commission to be in, to sit in a judicial way, hearing both sides of a controversy, and rendering a decision, and then being obliged to go to court to enforce its own order, to become the prosecutor in support of the judgment which it has rendered. And without any hesitation, without having heard any objections to it from any source, I ask you at least to adopt so much of the Corliss bill as will change the method of procedure. The scheme is a very simple one. The Commission makes an order and, as I say, suppose it is only an order to cease and desist from doing the thing, that is complained of. The provision is that in case the carrier fails to comply with that order, that is, by actually ceasing and desisting from doing the thing and sets about doing something else, why, then, penalties will accumulate against it, which could be enforced by the proper district attorney. Now, the carrier may. file its bill to stay the order, so that the theory and purpose are to put the carrier in the position, so that whfen an order is made against it it must either do soiftething different from what it was doing or go to court to show that that order is wrong and to get rid of it. If, for example, the rate in controversy is a dollar, 308 INTEBSTATE-OOMMBBOE LAW. when the Commission finds upon all the facts that it is unreasonable, and makes an order to cease and desist from charging a dollar, then 1 want the railroad to be put in a position where it nas got to make some change in the rate, if it is not more than half a cent, or go to court and get a change in the order which condemned the rate. This change is not a radical one; not at all. When you bear in mind that the present findings of the Commission constitute a prima facie case, you will see that the burden is now on the carrier in the circuit court, and of course under the procedure proposed the burden would still be upon the carrier. It would have to file its bill and maintain it. Now, in that connection I want you to observe again that the author- ity proposed to make an order is not to make any kind of an order. •This bill does not go on that theory, and I am not advocating that while the jurisdiction of the Commission is limited to a case where there is plain violation and afterwards a full disclosure of the facts that then it can go on and make any kind of an order it has a mind to. That is not contemplated nor advocated. It can only make such an order in the first instance as is justified by a fair consideration- of those facts. And the circuit courts may stay that order if they are satisfied that it is not a just, reasonable, and lawful order. In other words, Mr. Chairman, the Commission is given authority in such a case to make a just, reasonable, and lawful order. And the courts may review the case to see whether the Commission has exceeded this authority. Mr. Richardson. There is not there, then, an enlargement of the power of the Commission as it is. now? Mr. Knapp. Yes; it is. Mr. RiCHAKDSON. I thought it was just a change of the procedure. Mr. Knapp. Let me explain with a concrete case. If the rate com- plained of is $1, and that is heard on complaint and answer and proof, we can now only say, "Yes; that is wrong, and you must cease and desist from charging it." We can not say what rate they shall charge for the future. Under the Corliss bill we could say " In the future you must only charge 90 cents." That simply goes to the question of the order which the Commission has power to make. It does not go at all to the question of how the order is to be enforced; so I say, in either case, whether we are to have, as now, only authority to make an order to cease and desist, or authority as is expressed here to say what the rate shall be, but not in the future, I think in either case the order should be made obligatory upon the carriers by accumulating penal- ties, with the privileges on their part to go to the court to get rid of that order. Mr. EiCHAKDSON. The railroad must be the actor in getting rid of the order. Mr. Knapp. Yes; in getting rid of the order. I think that is in harmony with the general Scheme. Mr. Stewart. Would it be better. Judge, in order to prevent cir- cuity of procedure, to have the rate fixed by the order, in the order to cease and desist, a reasonable rate for the future? Mr. Knapp. That is the question we are considering, whether it shall have that authority. Mr. Stewart. I mean not only in that particular case, but in all analogous cases; in that particular order, to avoid circuity of action. INTEKSTATB-OOMMERCE LAW. 309 Mr. Knapp. Well, the order could not go outside of the scope of the complaint and the testimony. Mr. Stewart. No; but it would cover all cases that come within the testimony, could it not? Mr. Ejjapp. It could cover that case. Mr. Stewart. And all analogous cases? Mr. Knapp. Of everybody affected by that question. Mr. Stewart. And all analogous cases in the future? Mr. Knapp. Only so far as it would be a precedent. But when you bear in mind that these are questions of fact, or at most questions of mixed law and fact, why, the determination in one case does not fur- nish a precedent for another case in the same sense and to the same degree that the decision of a court on a question of law furnishes a precedent for the decision of another court on a similar question of law. That is to say, if we were considering a case against the Mobile and Ohio Railroad, where a charge of a dollar was complained of as unrea- sonable, and we had authority to do so, and as the result of that investi- gation required that rate to be reduced to 90 cents, that would not furnish much of a precedent if we had some other case where a com- plaint was made that the charge of the New York Central Railway Company from New York to Cleveland, Ohio, of 25 cents, was wrong. Mr. Stewart. Then why should the Government be put to the expense of publishing your decisions as precedents, if they are not considered worthy of being so considered? Mr. Knapp. They are precedents, to a certain extent. They show what has been done in a given case under the act. Mr. Stewart. There could be a memorandum to show that, without these long decisions being printed at the expense of the Government; if they are not precedents in analogous cases they are not of much use. Mr. Knapp. In some cases the situations are of such a high degree of similarity that the decision made in the former case is controlling upon the latter, but frequently that would not be the case. The Chairman. Is there not a little more involved in that matter, Judge, than is apparent from j'Our statement? At this time the order of the Commission takes the form of a judgment only; that is, an authoritative judgment by which a railroad might be deprived of a right by the action of the court. Under the theory that a man may not Ise deprived of his property without due process of law, the legal pi'ocedure that effects that change of his property is through the courts at the present time, and he has his day in court. The proceedings before the Commission are not regarded as judicial. It is not regarded as a court. It has not the power of judgment or of execution, and it can not deprive a citizen of a right and give him due process of law. Now, does not this order, or this change, change entirely that situation, and does it not invest the Commission practica,lly with judicial power — the power to render a judgment, or to deprive a citizen of property without due process of law — if you make it effective at once, before the intervention of any judicial procedure ? Mr. Knapp. I think not, Mr. Chairman. Now, observe The Chairman. Upon the supposition that a railway makes a rate to charge $1 and the Commission says "You must charge but 90 cents," there is no judicial investigation in which you pass upon that question 310 INTERSTATE-COMMEBCE LAW. of his right to charge that sum. To that extent, the extent of that 10 cents, there is a confiscation of a right without the intervention of the court, without his having his day in court, and without compliance with the constitutional provision that no man shall be deprived of his property without due process of law. Mr. Knapp. Now, 1 will put it in this way. The court has plenary and exclusive authority. If a carrier was charging a dollar for inter- state carriage you could pass a law to fix that rate at 90 cents. The carrier could file a bill in court on the theory that that was an uncon- stitutional statute, and the court would stay the execution of that stat- ute until the case was heard and determined. In that way the carrier gets its day in court. Now, similarly, that is just what would happen in this case. Mr. Stewart. What if the law was unconstitutional; what would the law amount to ? Mr. Knapp. It would not amount to anything if the court overturned it. I do not want any law that the Supreme Coui-t says is unconstitu- tional. Mr. Stewart. Unless you think that the enactment of a law by Con- gress is a due process of law, there is no necessity of taking time to go through the experiment of the process of the courts. If an enact- ment by Congress shows due process of law, does that mean an act of Congress, or a trial in court? Mr. Knapp. It means a trial. Mr. Mann. The question is whether you are taking property when you fix a rate. Congress has power to fix a rate, if the rate is not unreasonably low Mr. Knapp. No, sir. Mr. Mann. It is taking private property if it is unreasonably low. Mr. Adamson. If you take away the earnings and income of the railroad, I think you are materially depriving them of their property. Mr. Mann. Not if it is more than they are entitled to. Mr. Knapp. Take this illustration: If a railroad was charging a dollar, and you fixed a rate of 90 cents by direct legislation, the carrier would be obliged to obey that law or to get rid of it. Mr. Adamson. Yes, sir. Mr. Coombs. Suppose Congress or the legislature of a State passed a law directly fixing the rate itself, acting in its primary right, and should also embody in that law this term: That if the railroad company sought a remedy the onus should be upon the railroad and it would have to proceed to the courts to set it aside. Now, that is pi'actically the proposition that the chairman of this committee put before you, except he applied it to your authority. Applying it now to the legis- lature itself, suppose they fix a rate and put the onus on the railroad company to ascertain whether they have done an unlawful act or not — that is, have violated the Constitution or not in taking property with- out due process of law — what would be the effect of that law ? Mr. Knapp. Just this. It does not make any differences^ whether there is any provision in that law or not, if in the case I named, where the railroad has been charging a dollar, you should by an act of Co»- gress fix that rate at 90 cents, whether you provided in the statute that the railway could review it or not, it would have a right to review. It would have a right to file its appeal and claim that that was an? unconstitutional statute because it deprived it of its property. INTEKSTATE-OOMMEECE LAW. 311 Mr. Coombs. They have this right in the absence of that, to ignore it and leave it alone. • Mr. Knapp. Oh, no. Mr. Mann. They have a right to file a charge that according to the bill it is not being enforced. Mr. Knapp. If they did not go into court they would have to suffer the consequences. Mr. Mann. In the proceeding against them the onus would be on the (Jovernment? Mr. Knapp. No, sir; I think not. Mr. Mann. The Supreme Court of the United States settled that in the original warehouse case, that the public had the authority to fix a rate for the warehouse, provided the law would be unconstitutional if the rate was fixed unreasonably low, so that it did take private prop- ei-ty. That would be the very question Mr. Knapp. Yes, sir. Now, similarly, Mr. Chairman, in this case, if the railroad is charging a dollar, and the Commission, having authority, had, after this full investigation, fixed the rate at 90 cents, the carrier can file its bill to stay that order, not only on the theory that it is unconstitutional, but on the theory that it is not a just, reasonable, and lawful order, because the Commission has authority to make only a just, reasonable, and lawful order; and the courts, I take it as a matter of course, on the filing of such a bill, would stay the order pending the hearing of that suit. For that reason I can not advocate all the provisions of the Corliss bill in that regard. That bill, as I understand it, provides that the filing of a bill would of itself operate as a stay for thirty days, but the order could not be stayed beyond the thirty days, unless it plainly appeared to the court that the order was unreasonable upon the facts or made upon some erroneous rule of law. Mr. Mann. I think you are slightly mistaken as to the bill. Judge. The stay of thirty days is after the order is made, in order to give an opportunity to file the bill. Mr. Knapp. That may be. Now, I am not prepared to advocate that particular provision. Mr. Mann. Do you not think there ought to be a reasonable stay after an order is made ? Mr. Knapp. Yes, sir. Mr. Mann. So that the railroad company may have an opportu- nity Mr. Knapp. Yes, sir; certainly. What I referred to is the further provision that undertakes not to permit a stay beyond the thirty days, unless it plainly appears that the order is wrong. That can not be determined until the case is tried. I would not myself like to see the law so framed that the mere filing of the bill should of itself operate as an indefinite stay; but I think the carrier should have a right, after it has filed its bill, to make an application to the court for a stay of tjiat order pending the hearing of its case, and that a court should have discretion to grant that stay pending the hearing of the case. I say that because I think that is in harmony with the general adminis- tration of the law. It rather accords with one's sense of justice, and it avoids any constitutional question. Now, it has practically come to this,, that to determine what author- ity the Commission shall have to make an order, it is left with the 312 INTBESTATE-OOMMEBCE LAW. courts, then, to say whether that order shall be stayed pending the trial of the suit brought for a perpetual stay, I think that is a rea- sonable and workable plan. Mr. Mann. You want a change of the law so that the order will go into eiOFect at once. Suppose that that were done and you make an order, what is the result? The railroad company does nothing in the way of filing a bill. What is the result? Maybe the railway company pays no attention to it. Mr. Knapp. Yes; but then the penalties would accumulate against it. That is the theory of the bill. And in a suit to recover those penalties, I think the carrier could not question the lawfulness of the order. So on this theory the carrier is put in a position where it must either do something or go to court to get rid of the order. I think that is a very simple, workable, and not oppressive method of procedure. It does not shift the burden of proof; it would not materially change the course of litigation. It would have two bene- ficial results. First, it would relieve the Commission from the embar- rassing attitude of being a prosecutor in the courts to enforce its own decrees. In the second place, I think this would happen as a matter of practice; I think in many cases the courts would be likely to stay the order under some provision that would require the carrier to keep an account of its trafiic pending the hearing, so that if the order of the Commission were finally sustained, the money could be paid oter to the shippers Who were entitled to it. Mr. Mann. I do not quite understand the distinction which you make about an order being unconstitutional when you file a bill for injunction against it, and being constitutional when you seek to enforce it by penalties. Mr. Knapp. If you should fix a rate of 90 cents in the case I have been talking about, and provide in the statute that if they charged more than 90 cents they should be subject to a penalty of f500 a day, they would have to go to work to get rid of that statute, would they not? Mr. Mann. That is a question of the constitutionality of the law. Mr. Knapp. Yes; it is. Mr. Mann. Nobody questions the power of Congress to pass a con- stitutional act upon the subject. Now, if the act is unconstitutional, it can be attacked in any way, in the way of seeking to enforce a penalty, or in any other form that would arise. Mr. Knapp. I do not know about that. Mr. Mann. It is not collateral to attack the order. It is a direct question of the constitutionality of the act. Mr. Coombs. You can attack that collaterally or in any other wav. Mr. Mann. Of course, you can attack the constitutionality in any way. Mr. Knapp. The order of an administrative body which has limited jurisdiction can be assailed on the ground that it exceeded the author- ity of the body that made it. Mr. Mann. That is a question about jurisdiction. There is no ques- tion about the jurisdiction. The question would be whether you made a constitutional order or not, or violated the Constitution of the United States. Mr. Knapp. No, Mr. Mann; this bill does not provide anything of the kind. Undoubtedly, if the Commission made an order which INTEESTATE-COMMEEOE LAW. 313 deprived the carrier of its property against its constitutional rights, the carrier could file a bill whether it was permitted to do so by this law or not, just as it could if it was fixed by statute, without any, per- mission. But the proposition is to give the Commission authority to make a just, reasonable, and lawful order on the facts disclosed. Now, I say a court can review that action and decide whether that action is just, reasonable, and lawful on the facts, although that order, if a statute, might not be unconstitutional. Mr. Stewart. There is no doubt that Congress can fix a reasonable rate constitutionally, but is there not much doubt under the decisions whether it can delegate that power to the Commission ? Mr. Knapp. Not the slightest, Mr. Stewart. That has been over and over again settled. Mr. Chairman, I feel as though I had imposed upon the committee. I am very much obliged for the patience with which you have heard me. If there are any more questions to be asked me, I am entirely ready to answer them. Mr. Mann. You did not answer the question which I put to you a while ago as to the administration of this order which goes to the whole question. Mr. Knapp. What was that? Mr. Mann. If you have the power to fix and make an order which the court must pass upon as to whether the order is reasonable or not, and the court finds one portion of the order is reasonable — as, for instance, the rate upon a particular commodity — what will be the effect then? The court must hold that your order was unreasonable and set aside your order, but can not say that any portion of the order shall remain in effect under the terms of this Mr. Knapp. That is as I understand it. If the order was not in all respects just, reasonable, and lawful, the court would stay it. Mr. Mann. I am talking about a final opinion of the court, as to whether it should have the power to say that a portion of the order should stand and a portion of it should not stand. Mr. Knapp.- I have no disposition to avoid the question. I have a little difficulty in understanding what it would be in a concrete case. Mr. Mann. Suppose you fix the rates on a dozen articles between Chicago and New York, and the court, upon its decision, finds that the rate upon one of those articles is too low, should the court have the power to say that the order should remain in force asto the eleven other articles, or permit the order to remain in force, or set aside the entire order? Mr. Knapp. Oh, I think it should be the former. I think if the order was so separable in reference to its provisions that the court could say, "Some parts of this order are just, reasonable, and lawful, and some parts are not," that that should be done. Mr. Mann. I take it that the court could not do that under the provisions of this bill, and I do not know whether the power ought to be granted or not. You answered the question I wanted to get an answer to. Mr. Knapp. There are certain general questions, but all that I care to talk about is the question whether the method of enforcing the orders shall be had as in this bill proposed, and I think it ought to be. Mr. Chairman, unless there is some question to be asked, I feel as 314 INTERSTATE-COMMERCE LAW, though I had claiaied your attention much longer than I ought, cer- tainly much longer than I expected. The Chairman. We have made claims upon you, sir. Mr. Knapp. It is my duty, and a pleasant duty, to give you all the information I can, and to make every suggestion to you that I can which will aid you in reaching a wise conclusion. The chairman asked me to say a word about classifications. As you know, there are three great classifications — one which applies in the territory north of the Ohio and Potomac rivers and east of the Mississippi; one which applies in all of the territory south of the Ohio and Potomac rivers and east of the Mississippi, and the third, which applies to all the rest of the territory, being the territory west of the Mississippi River. And a great deal has been said about a uniform classification f ot the . whole United States. I think a uniform classification is desirable, and I think one could be made. Some confusion, and even some actual discrimination results from the present diversity of classification where traffic moves from one territory into another of such a kind that it is in one class in one territory and in another class in another territory, and while some instances of injustice result from that situation, and while a uniform classification for the whole country is highly desirable, there are so many other things which seem to be of so much more importance that I could not urge you to take any legislative action in that regard. I may say, however, that a uniform classification can be secured by a voluntary action of the railroads only when they are all agteed about it, and that is not liable ever to happen; and when we get other tilings which are of urgent importance, and come to the question of securing uniform classification, Congress will have to take the initia- tive, in my judgment, and provide some way by which a uniform classi- fication can be compelled. What the people are complaining of just now is not .of the diversity of classification, but of the ease with which rates are raised by changing an article from one classification to another. As has already been stated, and I have no doubt that you are all aware, two years ago the rates on some 800 of the articles in most common use were increased, averaging, I think, about 35 per cent, by the simple process of changing their classification from the class in which they had been to a higher class which bore a higher rate; and no measure which is pending before this committee, no point which I have discussed, would go to that question or limit_ in any way the E resent right of the carriers to change the classification of an article. If course, we may get some day — I do not know that I would be dis- posed to advocate it immediately — some reasonable restraint upon the power of the road to increase rates b}'^ the simple process of changing the classification. It is a pretty serious question. And there is some good reason, I think, for providing, if we could by a safe general statute, that where the rates on a given article have been enforced for a certain length of time, that if those rates should be increased, and anybody within a reasonable time complained of that increase, the Commission should have discretionary power to require the carrier to restore the old rate pending a determination as to whether the higher rate was justified or not. But no such proposal is before you, and I preferred, if I could, to avoid the discussion of INTEBSTATE-COMMEECE LAW. 315 questions that are not likely to take the form of practical legislation except to the extent that the general principles and collateral ques- tions are involved in the discussions of the measures before you. The Chaieman. Judge, you adverted a few moments ago inciden- tally to the question of pooling. I have not any doubt but what the committee would like to have your views with regard to the authori- zation of associated action of that kind, which comes under the general name of pooling. Mr. Knapp. Mr. Chairman, 1 have some rather definite convictions on that subject, and 1 am at your service, if that is your pleasure. The Chairman. If you please. Mr. Knapp. 1 have alluded to the subject in an incidental way, but did not pursue it, because 1 did not understand that that question was involved The Chairman. It is not in any legislation pending. Mr. Knapp. In the bills pending before the committee. The Chairman. It is a subject which has been discussed a great deal and is in the public mind a great deal, and we would like to have your views with regard to it. Mr. Knapp. Well, let me begin with putting a case this way: If we were presented with the alternative between actual railway competi- tion maintained by a large number of actually separate and independ- ent roads, on the one hand, and the legal privileges to be granted by Congress to those roads to associate and agree to the combination of traffic or its earning, that would be one question; but to-day it is only an academic question. So far as this subject you now suggest is con- cerned, the only choice we have got left is not the one I have described. The only choice that remains is between general, almost complete, rail- way combination, without any restraint, or to the extent that roads still remain independent, allowing them to measurably associate and make agreements with each other respecting their competitive traffic. Now, my associate the other day pointed out to you the extent to which railway combination has already proceeded, and his statements, which I think are quite within the truth, are that already a large majority of the mileage, and the mileage upon which all the traffic practically depends, is controlled by a very few men. And it is rather curious to me to observe that the men who have been the most vociferous in opposing any idea that railroads could be allowed to carry on their operations by legalized association seem to view with entire complacency an actual consolidation of those roads. No one can tell to what extent the railway combinations of recent years and those that are to be antici- pated in the future have been induced, if not forced, by our legislative policy. No one knows what would have happened in that regard under a • different legislative policy. No one can express any more than his own individual opinion, and for myself I firmly believe that if, from the beginning, we had recognized the nature of this business, its rela- tion to every form of industry, if we had understood it as a public service, if we had appreciated the fact that the railroads are discharging a function of the Government, a function which the Government might rightfully discharge by direct agency, but which from reasons of expe- diency only it has so far allowed to be done by corporations created for that purpose, if we had recognized the monopolistic nature of the business, and provided by wise and reasonable rules of law for railway 316 INTEKSTATE-COMMEROE LAW. association, subject to public control, then the evils which have since troubled us would not have occurred, many of the railway combina- tions would not have been made, there would be to-day a much larger number of separate and actually independent railway ownerships, and a far greater degree of railway competition than now occurs or is likely to occur in the future. So that the object of the prohibition of pooling in 1887, when this law was passed, the purpose of the antitrust law, the whole legislative policy of the country in that regard, has not only failed to accomplish the object at which it was aimed, but has indirectly but potently influ- enced the opposite result, and we have far less railway competition to-day in this country, in my judgment, than we would have had under an opposite policy. And just so far as we can and ought to rely upon railway competition as a protection against unreasonable charges, just so far as we can or ought to get the benefit of railway competition, we must do so by allowing railroads to agree with each other and putting those agreements under public control. It is an absurdity to me, gentlemen, that one law should say to the railroads, "You must pub- lish your rates, and you must make them alike and open to everybody, and if you depart from them you commit a misdemeanor," and to say by another law, "If you agree to maintain those rates, you also com- mit a misdemeanor." It is impossible for railroad operations to be conducted in conformity with both laws, and they are not so conducted, and the only recourse is to bring about the elimination of competition by such methods as the law itself provides. Now, I said incidentally the other day, and I think spoke quite within bounds when I said it, that you would be surprised upon inves- tigation to discover the comparatively slight and inconsequential degree to which open tariff rates have been reduced in this country within the last ten years as the result of railway competition. The basis of rates remains where it was fifteen years ago. The class rates in official territory are the same as they were ten years ago, and many articles are in a higher class than they were then. The railway com- petition has been a very forceful influence, but it has found expres- sion in the secret and preferential rates by which a few men have profited, and not in reduced rates to the general public. Now, consider the subject from another point of view for a moment. Take the railroads between Kansas City and Chicago. They had at a certain date a certain rate in eflect on grain from Kansas City to Chicago. Of course, whatever rate one road puts in every other road must put in; that goes without saying. Now, suppose our laws had been so efiScient, so enforcible that they would have been complied with. Suppose no railroad would ever have dared to deviate from its published tarifl:s on account of the risks and- penalties that it would incur. Each railroad would know that if it made a reduction in the open tarifl: every other road would make the same reduction, so that the distribution of tarifl' between the different roads would be just the same on one published rate as on another. Now, under those circumstances what possible inducement would there ever be to either road to reduce its rate? If they were charging 20 cents on grain ten years ago, each one of them charging 20 cents, and not one of them dared to make a different rate, they would have secured a certain distribution of that business between them on the 20-cent basis. Each one of them would know INTERSTATE-COMMERCE LAW. 317 that if it reduced that rate to 15 cents, every other one would go to 15 cents, and there would be no different distribution between them on the 15 cent and on the 20 cent basis. No possible inducement to reduce the rate. And I fail to see how it is to be expected that any railroad tariff will be reduced as a matter of fact by methods which the present laws contemplate. Of course, the railroads discovered it, and what is the result? The competition took the form of a rebate and the secret rate, and that has done more than any other influence, in my judgment, to build up the great concerns and strengthen the great combinations which are now regarded with so much apprehension. I believe that we should have had a great deal less of that sort of thing, that industrial combination would not have taken many of the forms which it has assumed, if from the beginning of railroad history it would have been impossible for any railroad shipper to get any better rate than a smaller one. So the actual result now of railroad competition is to benefit the large shipper. The principal outcome is to aid the strong against the weak. It is not the isolated and infrequent shipper who gets some- thing off the tariff; it is the large combination. Mr. Stewart. Then you think that providing pooling would prevent any further combination between the railroads? Mr. Knapp. I think it would have a tendency. Here are the roads between Kansas City and Chicago. Pooling would simply mean an agreement between them to divide the competitive traiEc. They would retain their separate organizations, their separate ownership, their cor- porate autonomy; they would simply be allowed to make legal agree- ments with each other for the combination of the competitive business, and that agreement would be under ample public control. Is not that better than to allow them to actually combine in one case? At least the competitive attitude remains. There is potential competition. There is independent and separate ownership. In the other case, if you have consolidation, why the competition is permanently wiped out. Mr. Stewart. Do you think the railway companies would be satis- fied with less profit under the pooling system than they get under the combination system? Mr. Knapp. No one can say about that. I do not know. Now, going a step further, having referred to present conditions and the present situation, we are liable, possibly, to be confused by this word "pooling." If the right of contract were granted which is now denied, I do not anticipate that that right would be exercised to any great extent in the actual combination of traffic or its earnings. It is no longer necessary to do that. Systems have been so developed and have so natural relations to each other that there is not an assembling of the competitive traffic at some point, and the combination of that bj" an agreement. The right should be a broader one than that which is denied by the antipooling section of the present law — a right to form associations, a right to make agreements with each other as to what are just and reasonable rates, and to agree with each other to maintain them. That is the general form which those matters would take, rather than the specific one of a. combination of traffic. Now, I put the matter from my point of view on the broad ground of public welfare. I can see where the competition between railways, 318 INTERSTATE-COMMERCE LAW. which it has been the aim of oui- laws to enforce, has given great advantages to large capitalists. I fail to see where it has been of any appreciable benefit to the great mass of our people. I think you will ■ have difficulty in demoiistrating that that policy has operated to the advantage of the farmers, the small dealers, the wage-earners of the country. It has been an immensely profitable policy to the Armours, and the Rockefellers, and the Havemeyers of the United States; and if I had to choose, gentlemen, between a range of rates absolutely imposed upon everybody, without deviation or exception, although somewhat higher than might be reasonable — if I had to choose between that and the secret rates to a few large shippers, with the resulting discrimination which puts the great mass of small dealers at serious and sometimes staple disadvantage, I would say that the public welfare was promoted by the former policy. Take our antitrust law. Have you estimated the scope of that law as it has been interpreted by the Supreme Court ? The logic of that decision is to condemn any sort of understanding or arrangement between rival roads which in any degree restricts their competition. So if the rival railroads should agree on storage charges or demur- rage, or car service rates, those incidents of transportation which the general public desire to have uniforra, stable, and certain, to say noth- ing about rates, those carriers would violate the antitrust law, because our Supreme Court has said that law means this. It is not a question whether the restraint upon combination is reasonable or unreasonable, but they have said that any arrangement, any understanding, any combination, which has the effect of putting the restraint upon the competitive freedom of parties, although that restraint be wholesome and beneficent to individuals, is a violation of the antitrust law, and I agree with my colleague, Judge Prouty, when he told you that if the antitrust law could be and should be applied to the railroad operations in this country — the spirit of it be applied — it would bankrupt every railroad and bring on a transportation condition of chaos. And one of the difficulties of this whole situation, in my judgment,, is that there is no legal sanction or support for that method of railway^ operation,' according to which they ought to be conducted. Whj, the commerce of the country, the welfare of the country, requires the utmost freedom of action, and every arrangement of association and interchange and uniformity gives an indirect but very great public advantage. So I say we ought to have recognized the nature of this industry and its relation to every other form of activity, and should have encouraged associated action under proper restraint. Why, gentle- men, just imagine the agriculture of this country, the manufactures of this country, the mining of this country, conducted by methods which have no legal sanction or support. And that is exactly the railway situation to-day; and while the business done by our railroads is enor- mous and their earnings very great, I regard the general railway situ- ation with no little apprehension for the very reason that I have now tried to suggest. If the Attorney-General is right in his suit against the Northern Securities (^.ompany — and very likely he is; I am not implying the slightest criticism upon the Administration for bringing the suit, for I think, on the contrary, the Administration is very much to be com- TNTEKSTATE-OOMMEECE LAW. 319 mended for bringing it — if he is right, just see the consequences that are involved. Now, it may be that the technicalities or the language of the anti- trust law are violated in the one case and not in the other, but the principle involved is precisely the same in all of them; and if the com- bination which has been attacked can be broken up, then upon prin- ciple and upon grounds of public welfare every railway combination which has been effected in this country within the past ten years ouglit to be broken up; and with what result, to what end, to what good purpose? Resolve these great systems of railway into their constituent ele- ments, bring us back into the condition we were in twenty-five years ago. Why, the whole aim and tendency and effect of that legislative; policy, if it could be adopted, would be not to perfect and develop our great railway systems of communication, but to bring us back to the disjointed and hagmentai'y and separated and warring elements we had ten years ago. What ought we to do? Not merely recognize an inevitable tend- ency, but recognize the great public advantage of these railway com- binations and then control them. Let me put it in another way. Let me remind you of the funda- mental difference which there is between combinations in the industries and in railway service; the difference is fundamental, gentlemen. It is fundamental in the constitution of society, and in the Constitution of the United States, when it comes to actual property, the things which we eat and use and wear, the products of human labor and skill; why, we do not want uniformity of price, if we can help it. ': We want every producer to be perfectly free to get the most he can for everything that he has to sell and every purchaser to be equally free to buy everything as cheap as he can. That is, we want~ the utmost freedom of contract between buyer and seller in the exchange of property, and in the freedom of that contract rests industrial liberty. It may well: be that those industrial combinations which have for their purpose temporary or permanent restraint upon that freedom of contract, either by limiting production or controlling prices, or anything of the kind, are against public welfare, and ought to' be pre- vented if they can be. But when you come to railroad transportation, you have an entirely different situation. It is a public service. It is not a matter of contract at all, as I said to you the other day. You do not ride upon the cars as you buy flour, by contract, but you ride on the cars and have your property transported in the exercise of your political rights, and you do want uniformity, and if I am compelled to pay for a public service one sum and you get it at a lower sum, my political rights have been invaded. I have been denied the protection which the Constitution under- takes to guarantee me, and if 1 could have my way I would have the prices of railroad transportation as certain and- uncha,ngeable as the price of postage stamps. I do not mean unchangeable from month to month or from year to year, but for the time being, as between man and man; and I would make it impossible for anArmour,ora Rockefeller, to get a car load of freight carried any cheaper than the humblest cross-roads merchant. • And to repeat what I said yesterday, for I am very much impressed with that, there is no influence which will so operate to bring down 320 INTERSTATB-OOMMEKCE LAW. railroad rates as the absolute maintenance of railroad rates. When you have the conditions which have heretofore prevailed, and which must prevail more or less under the competitive system, a railroad will yield to the powerful shipper, to great combinations, and hold up its rates as to everybody else; but when the big shipper, the largest company, can not get one mill oflf the rate, you have the approval of everybody to bring down the rate. Let me put it in another way. What is at the bottom of our appre- hension and our alarm as to these industrial combinations ? Wny, I suppose, I believe that it is the apprehension that they will so use their power and the degree of monopoly which they get by their com- bination as to extort from the public fairer prices than would otherwise prevail. Now, we can not reach the price of property; you gentle- men can not fix by legislation the price of sugar or cotton ties or iiour or anything else — steel rails, for instance. So what do you try to do? You try to prevent the combination out of which those high prices result, because that is the only thing you can do. You can not go to the end you want to reach and control the sum which the con- sumer would pay, because that would far transcend your constitutional powers; so you try, and so the State legislatures try, to accomplish your result, or some measure of that result, by the indirect method of putting every obstacle you can in the way of combination. And I am not making any adverse criticism upon those laws, either State or national; but I want to contrast with that the railway situation. When t comes to that, you can go right to the end in view ■ nd co i- trol the pric . You have not got to resort to any indirect and unsuit- able methods. The price of the thing in question is under absolute control. You can fix railroad rates. You can do it through the Com- mission, and you have absolute control over it, so that for the very reason you may be opposed to industrial combination you ought to be in favor of railway combination. I am talking too much, gentlemen. Mr. Stewart. We are very much interested. Judge. The Chairman. Judge Clements, would it suit your convenience to be heard to-morrow morning? Mr. Clements. Yes, sir; any time it suits the committee. The Chairman. I have been notified that certain representatives of the railways will be ready to be heard on Tuesday, and if we can get through with the balance of the subject by that time we will do so. If not, we will give you such time as you need. Mr. Clements. I certainly do riot expect to take more than an hour and a half. The Chairman. If it will suit you, we will be pleased to hear you to-morrow at half -past 10 o'clock. Mr. Clements. Very well. Thereupon, at 12.40 p. m. , the committee adjourned until to-morrow, April 25, 1902, at 10.30 o'clock a. m. INTEESTATE-COMMERCB LAW. 321 Washington, D. C. , Saturday^ April '26, 1902. The committee met at 10.30 o'clock a. m., Hon. William P. Hep- burn in the chair. STATEMENT OF HON. JUDSON C. CLEMENTS, INTERSTATE COM- MERCE COMMISSIONER. Mr. Clements. Mr. Chairman, I think I will be excused for speak- ing generally for a few moments, although it is not my purpose to go into the general question to any great length. There are some features of the general subject of regulation which ought to be referred to in connection with the practical details, which I suppose it is the object of the committee and of all of us to get down to, and only so far as I think necessary for a proper consideration of those will 1 refer to the subject in general. The magnitude and importance of these questions and the difficulties and complexities surrounding them are not to be wondered at, and they are sufficient to caution anyone who approaches this subject, either from the standpoint of legislation or administration, against overconfidence in being able at once to formulate suitable and effective legislation in all particulars. There are men living who were born before there was a mile of rail- road built in this country, and yet we now have nearly 200,000 miles. It is a business which reaches everybody, touches everj^ other busi- ness, and upon which everybodj^ is more or less dependent. This immense property has been constructed under public franchises which have authorized the promoters to take private property for public use upon the theory that they perform a public service, and therein this business is distinguished in principle, fundamental principle, from the ordinary private business in which men engage without public regu- lation. Another feature distinguishes it, and that is that every rail- road is of necessity to most people a monopoly. There are several roads for the same people at the trade centers. There were formerly more than there are now, since modern combinations have been per- fected; but after all the great body of the people who need protection from injustice most are those who can patronize only one railroad. Hence long since has grown up the idea that it is perfectly correct and necessary to regulate this business. It has more to commend regulation than many other things that have been regulated. From the beginning in this country it is a matter of history that public authority — legislative authority of the States, at least — has always regulated the tolls at grist mills, over turnpikes, and monopolies of that sort in which the public are interested, in which it was believed that the public was entitled to fair and equal treatment as between man and man. It is true that is a small matter now as compared to this business. It was an important matter, however, in the former days before railroads and the steam mills and merchant mills that have been brought about at trade centers; it was a vital matter then, and the public authority did not hesitate to regulate it on the sole ground that it was a monopoly, though a private business. In addition to the fact that the railway is a monopoly to most people there is the further i-c L 21 . 322 tlSTTBRSTATE-COMMBECE LAW. fact that it was created only by grant of public authoritj- for a public purpose, to take private propertj' in order to do the public business. But I will pass from that question, because it is settled by judicial interpretation that there is competent authority and adequate reason, both, for regulation. Sometimes when these matters are presented those who oppose regu- lative legislation speak of it as a great innovation, as revolution, as something unheard of, and therefore I' have made this reference to these matters. For a long time the people of the countr}^ got along without any demand for regulating railroads, although they had the authority in the Constitution, formed long befoj-e a road was built, for that purpose, and upon which the present law was enacted. But the warfare between railroads apd between rival communities and markets and products had not been made so sharp thai there was neces- sity for regulation. The roads were far apart; they were separate lines. Thej^ had not formed these aggregations, and great trade centers had not been built up by the facilities of the railroads, and therefore the necessity for regulation for a long time did not exist, and for a still further time the sharpness of friction and warfare and strife between communities and individuals in business and carriers was not such as to inake impera- tive the demand for legislation such as resulted in the passage of the present law, which was enacted in 1887. But for ten years before that time it was a matter of public agitation. It was before both Houses of Congress for about that time, and this law was the fruit of that agita- tion and contention. It is not strange that Congress at that time did not make a perfect law. It was a great field, a great subject; there were great interests, great difficulties involved, it was tentative and experimental, and two years later, in 1889, following the provision of the statute which requires the Commission annually to report to Congress and make sug- festions as to needed legislation to perfect the law, certain recommen- ations were made, and Congress took it up again and amended it in several particulars, one of which was to include the shipper under the criminal provisions of the law. He was originallj^ not under the criminal features. Another provision then added to the law was one making it a crime for a shipper to underbill or misdescribe the products he shipped so as to cheat the railroads by marking a package a certain kind of freight which would go at a low rate, whereas it was a higher grade of freight that went at a higher rate. Those were two important provisions put ill at that time at the instance of the carriers and recommended liy the Commission. They thought that was just and went toward malt- ing an adequate law protecting both interests with irnpartiality. Since that time there has been practicallj- no amendment to this law; none, I might say, except the supplemental act which relates to the matter of taking testimony, which grew out of what is known as the Councilman case. _ It has been now about thirteen years since the law was overhauled in the particulars to which 1 have "referred. The Commission has in obedience to a requirement of the act year after year made sugges- tions as to what it thought was necessary "to give effect to the purposes of the law, and, as you well know, has annually provoked a campaign of criticism, which has already been referred to on the part of those INTEESTATE-COMMEBCB LAW. 323 who undertake to defeat the proposed legislation by charging the Commission with greed and anxiety for unlimited power, i will not waste time on that. I think the committee understands that this Com- mission, acting officially and under oath, has no interest in the matter except to endeavor to carry out its duties faithfully as time and expe- rience show them to be. That is what it is trying to do. I will present a few figures which relate to the subject in general, not for the purpose of arguing from these that rates are or are not reasonable, but for the purpose of emphasizing the extent, the magni- tude of this matter and the questions involved in it, whether viewed from the standpoint of the carrier or that of the shipper. The gross earnings of the carriers, the railways alone, not includ- ing the water carriers, for the year ending June 30, 1901, were $1,578,000,000. This is equal to more than ^4,000,000 a day for every day in the year. It equals about $175,000 an hour for every hour of the twenty-four in every day. The increase shown in these gross earnings from operations for the year 1901 over the year 1899 amounts to $265,000,000, which is an increase in two years of over $3 a head for every man, woman, and child in the United States. The gross annual receipts amount now to more than $21 a head for the whole population, or $105 for every male adult, supposing there to be one in every five of population. Now, of course a large proportion goes out as fast as it comes in, in the waj"- of expenses of operation. Therefore I have said that I do not use these figui'es as applicable to the question of the reasonableness of rates, but I present them to emphasize the imj)ortance of the sub- ject and of the questions that arise under it, because it is not to be conceived, in a business so large as this, conducted by -so many peo- ple, where the carriers are left to fix their own rates, with referr ence to their own earnings, that the result of it will be that rates will in all instances be just and right and equal to everybody. It is impos- sible to conceive of such a state of things with such a result so long as humanity is what it is. Railroad carriers are made up of the same kind of people that the shippers ai'e and every other class. Mr. Stewaet. What percentage on the supposed capital invested were those gross earnings ? Mr. Clements. The capitalization as it stands is about $11,500,- 000,000. That includes bonds, stock, and every class of so-called capital- ization. Mr. Stewart. About what percentage would the gross earnings be ? Mr. Clements. The gross earnings would be something like 14 or 15 per cent; but, asl say, something like $10,000,000 go out for operating expenses. There would still be left over $500,000,000 to go for other purposes. Not quite all of that is available for dividends and interest, however; but something like 4i per cent is available for interest on bonds and dividends on stocks. That is about what it figures down to in round numbers. - After you take btit e'xpenses for operation, and taxes, and other matters that are proper to come but, thfere is still left some ii per cent, or between 4^' and 5 per cent, on the present capitalization, or about that. That includes the interest on funded debt and bonds, as well as the dividend's on stocks. But the substantial ownership of i-ailrpads is largely in bonds. When you come to consider this, it is unfair to take simply the amount of dividends on the stock and say that is all they earn in 324 INTERSTATE-COMMERCE LAW. the way of profits, because in many instances the roads have, been built by the bonds, and the stocks represent no investment. It is impossible to say what percentage is so. It is shown in some cases that when a carrier has been paying a 6 or 7 per cent dividend for several years and it still has earnings that will 'permit more than that, some form of liability is issued. I have in mind now one instance of that kind particularly where the specific thing to which I refer was done — that is, there was handed around to every stockholder an equal amount in certificates of indebtedness to , the amount of his stock, and the so-called indebtedness to draw 6 per cent a year. That differs only from a mortgage in that it can not be foreclosed. But it is one device to take up whatever might be left without reducing rates. It goes into this capitalization of $11,000,000,- 000, or something over that, that exists now. Koads have been built within my own knowledge where the money that built and equipped them was paid in dollar for dollar to the amount of only the first-mortgage bonds. Then, in addition to that, the holders of the bonds were given an equal amount of stock, for which they paid nothing. Mr. Stewart. That is substantially watered stock. Mr. Clements. Tl es, sir. There is no doubt much of that in this capi- talization, and notwithstanding all of that and the many ways in which similar things have been done there is still available, for the year 1901, including surplus, something like what would pay 4 to 5 per cent on the total capitalizations, covering stocks, bonds, etc. The United States collects in customs duties, or did for the year ending June 30, 1901 — the same year to which I have been referring — $238,000,000; from the internal revenue, all sources, 1305,000,000; miscellaneous sources, $41,000,000, making a total of $584,000,000, which is little more than one-third of what the railroads collect in a year. Still, I wish to repeat that I refer to these figures now only to show the magnitude of this matter and to illustrate and emphasize what I believe must be admitted by all, and that is that so long as the carriers doing this business, immense as it is, are allowed to fix their own rates upon their own considerations, looking to their own interests, as all men do — thej'^ are not peculiar in that respect — it is not to be assumed that every shipper will have a just and reasonable rate to ship upon. In the scramble for gain such a conclusion as that would be unreasonable. Hence the necessity for some middle moderate course to take care of both sides in respect to what is just and reasonable. If either of you and I have a controversy about accounts, for instance, or anything, and we can not agree about it, you do not try the case; neither do I. We are all bound in the society of government, in order to guarantee justice to both sides and all, through the instru- mentality of public tribunals — impartial, just, and fair. That is the theory of our whole Government. It is declared in the first section of the act to regulate commerce that every rate shall be just and reason- able, and that every rate that is not so is unlawful and forbidden. We are told that this did not create any new law; that it only dis- closed what was common law. But if it was common law — and I con- cede it was, at least in respect to a reasonable rate — why was it put into a section of this act? Did that make it any more the law than it was before? Not at all. It was declared there for the reason that. INTERSTATE-COMMERCE LAW. 325 although common law, it was nothing but a beautiful but dormant principle which had never had substantial application. The shipper could not go into court because he had been charged five, one, or several dollars too much on a single shipment and maintain a suit which would cost him a hundred dollars or more in the end, even if successful, and in contest with a great corporation, with its salaried lawyers, who are paid from one year's end to another to take care of all its cases. The individual could not cope with his adversary in such a fight as that and get redress, although he had a theoretical remedy at common law. I challenge anyone to find a recorded case in any court which ever gave back to a man one dollar because he had been charged more than a reasonable rate. It is practically, I repeat, only a theoretical remedy. It is mockery to tell a man in such case that he has his remedj^ in court. It is worse than giving a man a stone when he asks for bread. He can not avail himself of it. The record shows he never did. The reasons why he did not are apparent to every man. Well, why did Congress declare the principle of the common law in the first section of this act? Manifestly to give it some vitality. They followed that declaration up with other provisions intended to give it eft'ect, for left alone it does not amount to anything more than a last j^ear's spread-eagle declaration of a political party. We come together in party assemblies from time to time, and after sufficient "whereases" each denounces everything pretty much the other has done and seeks favor by popular declarations sometimes too general for practical realization. To leave the declaration that a reasonable and just rate is lawful and any other rate is unlawful, unsupported by some method to give it effect, is worth no more than one of these campaign declarations, practically. Hence it was followed up with all the sections, the whole of which simply provides certain things to be done to give effect to that fundamental declaration that rates must be reasonable and just. Now, they do not give effect to it. After an experience of fifteen years they fail to do it. Of what use is it to require the carriers to file their schedules, pub- lish and print them, and the Commission to collect reports and publish them, and to do all the other minutiae of the things required to be done in this act by the Commission or by the courts in the way of proced- ure, investigation, and things of that sort, if after all that is done it is still left where it was before, for the carrier to fix his rate, enforce it whether reasonable and just or otherwise, and there is nobody to hinder him? I will not say that the public investigation of these questions has not been of value in general. It would not be true to say so. I will not say that the varied' and constant correspondence conducted by the Commission in respect to complaints of discriminations and unreasonable rates presented by letter to us and disposed of in that way has not been of benefit. We do the best we can to present to the railroads reasons why there should be an alteration here or there in such cases, some of which suggestions are complied with and some not. In the same way the carrier's side of the question is presented to the shipper. I wUl not say that all of this is utterly worthless or that it has not accomplished a good deal of improvement in conditions. After all, however, the substantial thing that was aimed at is largely a fail- ure, and that is the correction of a rate that is wrong. 326 INTERSTATE- COMMERCE LAW. For what intent are individuals, associations, firms, and corpora- tions authorized to file complaints with the Commission ? For what intent is the Commission required to serve notice on the carriers com- plained against, institute an inquiry, have a hearing, and make a report thereon? It is the rate that is complained of. The rate is the basis of all of these controversies. Sometimes there is a question of dis- crimination in respect to such a matter as not furnishing cars to one shipper, while they are furnished to other shippers; but these are rather minor matters compared to the one continuing thing that is the subject of complaint, and that is the rate. It all goes to the rate. The amount you pay, or the amount which you pay as related to what other people pay, that is the controversy. How, it is not of much value to make a lot of regulations about one thing and another and still leave that question untouched. To regulate all around the one thing which is the cause of the trouble and leave that unregulated is unprofitable. This brings me to the question as to the authority of the Commission in respect to a rate when it is complained of and investigated, and I shall not dwell upon that. It seems to me that the statement of the whole matter suggests of itself that if there is to be any' remedy it must be authority in some board — somebody. It can not be a court, because the Supreme Court has decided that the fixing of the rate for the future is a legis- lative act, and courts can not le'gislate under the Constitution. There- fore it must be done in one of the, ways that Congress has said. Con- gress itself must fix the rate or authorize somebody else to do it in a limited way, if it is to be fixed at all. Now, if the time has not arrived that we are convinced it is right and just under proper safeguards and limitations to give a certain limited authority to fix bj^ review the rate which the railroads have first fixed, then there is no use to do anything more than has been done. I want to read to you the utterance of a distinguished railroad lawyer in an early case before the Commission. To get down to where the friction comes in a controversy is the best way to get at the question. A complaint was made of the unreasonableness of rates on coal in Pennsylvania, and Mr. Johnson, then and now, I believe, counsel for the Pennsylvania Railroad, which was a party to the case, said in his argument to the Commission: You must fix this rate under the testimony in this case, and not upon the argu- ment of Mr. Go wen; for while he gives you his experience as a railroad manager, that can not help you unless it is in accordance with testimony given under oath and under the sanction of cross-examination. Under the testimony only will you be justified in saying that these rates are so extortionate as to demand your interference. You must fix the rate to be charged. Mr. Gowen sees the difiiculty which will beset you in doing this, and he therefore says that he does not ask you to fix rates, but only to say that the present one is unreasonable. He tells you that after you have said this, and after you have established the principle that before the carrier names his rates he must consult with the shipper, 'Hhese people" will come together and fix the rates themselves. That will not do. If this Commission says that the present rates are unreasonable, they must say so because there is a different rate they have determined to be a proper one It will not do for you to ma,ke a general finding and to say ' ' The present rates are unreason- able, but we do not know what they ought to be. We can not fix them for vou You must agree upon them amongst yourselves." If unreasonable, say to what extent they are unreasonable; whether to the extent of a cent, or of many cents or of a dollar a ton Woud it be proper for you to lay down an abstract principle that would lead to endless confusion m the application? That would put all at chaos. For Heaven's sake do not ever make the matter of the proper rates for car- INTERSTATE-COMMERCE LAW. 327 rying coal one to be regulated in a conference between the carrier and the shipper. If you have been convinced by these petitioners that the present rates are unreason- able and unjust, then say what the rates ought to be. This will be your duty. 1 read this not for the purpose of offering an apology for the inter- pretation of the statute by the Commission as then constituted, with that recognized jurist, Judge Coolej^ at its head, but I read it for the now more important purpose of illustrating the inefficiency of the act as since construed, lor Heaven's sake, says this eminent counsel, if you condemn this rate it is because you have in mind an idea from the testimony of what is the proper rate. Now, when you condemn this, say what the other is; but do not turn it over to the shippers and car- riers for another controversy, and another and another, with endless difficulty and confusion. Suppose the rate complained of is a dollar, to use an illustration which was used by a member of the committee yesterday, and the complaint is that it is excessive to the extent of 20 cents, and it is alleged that it ought to be not over 80 cents; that this is reasonable, and anything above it is unreasonable. Then the Commission serves the complaint and takes testimony, and after a careful examination of several months and with several hun- dred pages of testimony of numerous witnesses, railroad officials, and all interested, takes into careful account all the circumstances and con- ditions that can be ascertained pertinent to the matter, and with delib- eration — not with the haste of a court-house proceeding, but with all the time that is necessary to devote to it for a careful consideration and consultation — reaches the conclusion that 90 cents is a reasonable rate. If the shipper is entitled to a just and reasonable rate, he is entitled to it to-day and all the time. He is entitled to it to ship on, not for a cause of action to recover $5 on some shipment he made last week, which he can not go after at all. How is he to do business on the chances of recovering back the excess? What he needs, and what the law declares him entitled to, is a rate which is just and reasonable which he may use and ship under. Well, now, if under the present law in the case just assumed the reasonable rate stated was ascertained by the Commission and so found, all that could be done would be to condemn the dollar rate. If 90 cents is all that is reasonable the ninety-first cent is just as unlawful as the one-hundredth cent. The ninety-second is just as unlawful. And hence it was that the Commission, with Judge Cooley at the head of it, determined away back, that when the Commission found that a carrier was doing any act prohibited under this law, ordering them to cease and desist from that act went as much to one part of a violation as to another, and that the inhibition applied as well in the case stated to the ninety-first cent, which was 1 cent above that which was reason- able, as to the one-hundredth cent, which was 10 cents above; and that the violation of law found was in charging any part of the excess, and therefore it was competent to make the orders it did make, which were as broad but no broader than the violation. So much for that. I have presented it not by way of criticism of any decision, but for the purpose of illustrating the necessity of ascertaining what is the rea- sonable rate, as well as what is the unreasonable one, so as to give effect to what is a shipper's declared right under this law. Now, is that any great hardship ? Doubtless you will be told by some of the gentlemen, but not all of them, whose property is to be regulated — that is, if it is to be regulated; I do not know whether it 328 IJSTEESTATE-COMMEBCE LAW. is or not — that this is unnecessary. Of course they do not want to be regulated any more than they can help; that is natural; that is the way you would be, and the way any of us would be. We think we can trust ourselves to do justice to everybody, and, therefore, we do not need any regulation. That is humanity, but that is not society. Society can not rest on an}' such principle as that. The Chairman. May I interrupt you with a question which is perti- nent here? Mr. Clements. Certainly. The Chairman. I wish you would tell the committee if it was authorized to establish a rate what would b^ the elements of cost of transportation that would enter into your calculation in determining that rate. It is a comprehensive question, but I think it would be beneficial if some one with experience and authorized thereby to speak would tell us of all these elements of cost. What would you look to, what would you look at on the part of the carrier, in the expenses and all of that? Mr. Clements. The Commission has in several cases made orders of that sort, and while I can not stand here and oflPhand repeat all the elements that have been suggested from time to time in all these vari- ous cases, I do recall some of them, perhaps the principal ones. The Chairman. If j^ou could give them to us I would like to have them all, as they have appeared in jj^our experience, and if you would rather answer the question on Monday, after thinking it over, very well. Mr. Clements. I can answer in a general waj'^ I think now, and if it occurs to me later on that I have omitted anything I maj^ make further answer. The Chairman. If you please. Mr. Clements. One of the things that would be considered is the distance and the charges made for like distances on a like freight in other parts of the countiy . Another is the value of the freight, because you can not laj^ as much charge per ton per mile on a load of straw as on a load of gold dust, and you nave to take into account the value of the projjerty shipped, the risks incurred by the carrier, how much he would have to pay in the event it was burned or lost and he became liable for it. You would have to consider the weight of the article in comparison with the space it would occupy in the car, because the carrier can put perhaps three times as nmch or four times as much grain into a car in bulk as wagons or buggies set up or some agri- cultural implements which take a good deal of space and yet do not weigh so much — furniture and things of that sort. And you must take into account the expenses of the road, its con^ dition, its financial condition, so far as j'^ou can ascertain it. It is all fraught with varying details and difiiculty; there is no doubt about that. And after all, the best that any railroad man can do now or pretends to do, the best that any other man or the Congress or a com- mission can do, is but an approximation, because there are so many varying conditions and articles. They must be classed, and yet if you classify at all you must put a lot of articles into every class that are not exactly alike in these respects to which I have referred — of bulk, weight, value, and space required in a car. Therefore it is that on some articles a road can earn less per ton per mile than upon others, because if it charges on the lower grades of freight the same rate per ton per mile that it does on the higher grades it would be prohibitory; INTERSTATE-COMMERCE LAW. 329 the articles would not be moved at all. Therefore they are bound to take into account what the traffic-will bear, and by that I do not mean to say that they are authorized to go as high as it will bear; but in considering whether they will carry the article at all or not they must consider whether or not there is any proiit to them after paying the expense of the movement of that freight. All of these are matters that must be taken into account. The Supreme Court said, in the Nebraska case, I think, where a State under- toolc to fix the rates on all articles on all roads, that it must take into account the bonded indebtedness and the other indebtedness, of stock and its value, market value, what the roads earn. The}" must not be confiscated — that is, no rates must be made which would leave them no profit. But to illustrate some difficulties about these matters. You say you must take into account the value of their stock. The value of their stock depends on what rates you will permit them to charge, and so you get into a circle when you come to consider it from that standpoint. Mr. Stewart. To fix rates on agricultural implements, would ndt this be the process: You would first ask that if the company were engaged entirely in the transportation of agricultural implements whether the reasonable rates fixed would give them sufficient earnings on the capital imested? Would not that be the process? Mr. Clements. I presume so, if that were all they were hauling, and yet of course that case could never arise in practice, because they all engage in carrying a great many kinds of freight. Mr. Adamson. Under legitimate conditions their property may increase in value and they would be entitled to profits on real bona fide value whether it cost that much or not. Mr. Stewart asked you in regard to the cost. If its value increased, they are entitled to the bona fide value, are they not? Mr. Clements. Yes, sir. Mr. Adamson. Sometimes that happens without watering stock ? Mr. Clements. Undoubtedl3^ Mr. Adamson. In all kinds of property ? Mr. Clements. Undoubtedly. I would not think that the original investment was the only thing to go upon. Mr. Stewart. My question was this: In order to arrive at whether a rate was reasonable on agricultural implements, would j-ou not have first to ask that if the companj^ were engaged entirely in the transpor- tation of that article, whether the rate would give them a reasonable earning on the capital invested? Mr. Clements. I presume so. If that were all they were doing and you found out the basis upon which they were entitled to earn, what- ever that might be, that until they had earned something more than a reasonable return you would not be authorized to reduce it. The Chairman. If fixing or estimating value of plant and you allow anv sum for the franchise, would you consider the value of the fran- chise? Mr. Clements. Well, Mr. Chairman, I hardly know how to answer that question. It is probablj'^ one that has never been considered by the Commission, certainly not within my knowledge except as the franchise may be bound up with the tangible property'. Mr. Coombs. For instance, in California the franchise is taxed; it is considered taxable property. It is taxed very heavily, so much so that 330 INTERSTATE-COMMEECE LAW. the railroads have been fighting it; but I think it has been established that it is taxable property. Would you consider that an asset? Mr. Clements. I should say the road was protected in this, that before you undertake to reduce their revenues you consider what tax they have to pay on their franchise and their property and on all these things they pay on. The Chairman. In this estimate of value, would you take into account what is known as good will 'i Mr. Clements. Well, Mr. Chairman, I would not know how to measure that in any way except as it expressed its value in the value of the property. I reckon that an element that enters in; I would not know how to measure it, how to estimate it separately. It shows itself in the value of the stock, whatever there is to that. The road that has a good deal of good will, a high reputation and high standing, has high-priced stock. The Chairman. But there are many persons who insist that stock and bond valuations are not proper "criterions to be looked to in per- forming the duty of fixing a rate. Mr. Clements. Not alone, no; I agree to that. The Chairman. I want to know whether or not you can tell me whether these matters of franchise and of good will are, to your mind, or would be to your mind, in performing this duty, elements of value to be considered in considering the aggregate value of the plant? Mr. Clements. I do not think they are entitled to any consideration except so far as their value is shown in the stock and property itself. The Chairman. But if you abandon the method of ascertaining value of taking stock and bonds, if you abandon that method, then would you not consider the separate elements of value ? Mr. Clements. Undoubtedly. The Chairman. Would that include, in your mind, then, value of franchises and value of good will? Mr. Clements. It is rather a new question to me; but I suppose if you eliminate the consideration of the stock and all questions of that sort you would appraise the property Upon the same terms that you would other property, and in that way the good will necessarily shows itself in the value of the property. The franchise and the property are bound up together; it is all one earning thing; speaking generally, one is not available without the other — that is, for railroad purposes. The Chairman. There are a good many persons who do not agree with you, who say that in making estimates of this kind, ascertaining value of this kind, the value of the franchise, the value of the good will, are not to be considered. 1 have read much on that subject. Now, I would like to know if you were to be intrusted with this power of fixing a rate, where you must consider value of plant, whether to your mind these particular elements of value are to enter into your computation ? Mr. Clements. I do not see how the}'- are to be left out on that basis, if you abandon the stocks and go to the tangible property. The Chairman. Excuse me for interrupting you. Mr. Clements. That is all right; it is rather a novel question to me, but speaking on the spur of the moment I do not know of any better answer to make than that. Of course if the Commission had ever been intrusted with or assumed that it had the power to make rates, initiating rates on all traffic, we would have been confronted with that INTERSTATE-COMMERCE LAW. 331 question long ago; but never having assumed that power, and only believing that we had the power to correct the rates complained of in particular instances by review, that question has not come up. Mr. Stewart. The railroad companies in making up their assets upon which they calculate their earnings do not value their good will or their franchises at all, do they? Mr. Ci-EMENTS. I do not know that they do. They take into account their stocks and bonds and so on. Mr. Stewart. And therefore the Commission, in finding whether the rate was just or unreasonable, would not have to take into account the question of what their franchise was worth ? Mr. Clements. I think so, on the basis suggested. The chairman's question had reference to eliminating a lot of those things. Mr. Stewart. Do not the railroads eliminate it now? Mr. Clements. But they take into account their stocks, and the chairman's question was based upon the idea of eliminating that and going to the value of the tangible property itself, ignoring the stocks and bonds and all those things, and it was in that view I said what I did. The Chairman. In fixing a rate would you consider the fluctuation in volume of business from one year to another; or, in other words, in fixing a rate in what was spoken of yesterday as a fat year, would you take into consideration the fact that last year had been a lean j^ear or next year might be a lean year? Mr. Clements. That requires me again to saj^ that in respect to all these matters, whether we consider rates originated by the carrier or corrected by a commission or arranged b^^ a railroad association, the best that can be done is approximation; to deal with generalities and approximate what is just and right, all things considered. There are too many details, too many particulars, too many differentiating cir- cumstances of time and place and value, to make it possible to do it in any other way except upon approximation. Now, that brings me to say what I think would be a right and proper thing in regard to these fluctuations of which you speak, and I am very glad you asked the question at this point, because it will enable me to refer to some things which I was going to defer but might as well speak of now. Undoubtedly, any substantial, important change in these matters is one that would be considered, and ought to be considered in a deter- mination of what is reasonable and right, because you can see at a glance by the figures that I have ref erred'to here that whereas the earn- ings for the year 1901, ending June 30 of thatyear. were $1,578,000,000, for the year 1899 they were $1,313,000,000. Making a difference of 1265,000,000 — about as much as you collected in the whole year from the tariff on imported goods. The difference alone, that is, the increase shown in 1901 over 1899, was $265,000,000. Mr. Clements. Whereas the receipts from customs weref 238,000,000, what 'did you ask ? Mr. Adamson. Were the disbursements for 1901 more than they were in the year 1899 ? They are somewhere near a fixed ratio. Mr. Clements. The increase of expenses was $166,000,000; the increase of receipts over earnings was $265,000,000. Mr. Adamson. There is somewhere a fixed ratio, then ? Mr. Clements. Approximately so, somewhat. These figures show 332 INTERSTATE-COMMERCE LAW. 1100,000,000 more increase in the earnings than there was in the expenses in these two j^ears. What I was about to say in answer to the chairman's question about iixing rates in reference to fluctuations in earnings and so forth was this: A few years ago the tonnage was not near so great as it is now, and the earnings were less. Expenses were less then than now. Naturally the}^ are more now, to handle a bigger volume of freight. But you can not vary the rate; neither can the Commission or the rail- roads vaiT the rate with every monthly or frequent fluctuation, or one that affects some articles and does not affect business generally. Reasonable stability in rates is desirable alike for the public and the Commissioners. Rates can not be stable at all, whether made by the rail- roads or a commission, on constant fluctuating changes in the value of propertjr or the volume of business. That is another case for the exercise of reasonable, fair judgment, so as to arrive at something that is approximately just. I' remember a few daJ^s ago seeing in the newspapers of Washington that the cabmen of this city had applied to the District Commissioners for authority to increase their rate of 25 cents for hauling a person a certain number of blocks, and they assigned as a reason therefor the fact that the price of hay and corn had gone up so it took more to feed a horse now than before. Another reason they assigned was that whereas for hauling a person they were entitled to charge the fixed rate of 25 cents for so many blocks, and 50 cents for so many more blocks, that in some instances thej'' were required to go 10 blocks after a man, and then to take him to a place that he wanted to go, the depot, for instance, and then thej'^ would have to go back again to their stand, and that in view of the' actual distance traveled, and in view of the greater cost of feeding their horses, they ought to be allowed to charge a higher rate. But that request was refused by the Com- missioners, the authority of this District, acting under the law of Con- gress. You can not lay down an exact rule about such matters except the general rule of reasonableness and fair play. This regulation of cabs and street cars in Washington is interesting in connection with the contention that to give the Commission the limited authority to review the rates made by the carriers, for the purpose of correction, not creation, is said to be revolutionar}^, radi- cal, unreasonable, and dangerous, and yet right here in this community of 300,000 people, the capital of the United States, by authority of Congress the Commissioners of this District are authorized and that without a hearing to fix a schedule of rates for the cabmen of this city, to say what they shall charge you and me, so as to protect us when you get off the car at the depot, for instance, against an exaction of fl where the rate ought to be 50 cents. Now, if this little business in this city, as between these men who stand around in eager compe- tition, lifting their hands to you, saying "Here's a carriage," "Here's a carriage," bidding for your business, if under that competition, I repeat, in a little matter like this there is justification for the arbi- trary fixing of a schedule of rates on this business, how infinitely more important it is in respect to this greater business of the rail- roads of the country that the individual, the shipper, should be pro- tected in the rates he pays. Now, if we take the advice of those who say that the fixing of the rates by review and the correction in promotion of justice, of a rate INTEBSTATE-COMMERCE LAW. 333 which the carriers have made is revolutionary, confiscatory, destruc- tive, radical, and therefore not to be permitted, are we not straining at a gnat and swallowing a camel when we set up this regulation for the cabmen and street cars of this town ? You regulate their fares. Is there any possibility that j'ou can be so badly hurt and oppressed by the rates of these* local carriers here where they are in competition as that the man out in the country, dependent on one road for transpor- tation, will be subjected to a worse injustice? Take the man who lives on one road and has no choice as between roads in respect to moving his crop. He may sue in the courts for an excessive charge, we are told. Well, one judge — a circuit court judge in Iowa — has decided that the law fixes the published tariff rate now under this law as the rate conclusive, and if you have paid the published rate and then complain that it was unlawful and sue for the excessive part of it in a court, that j'^ou can not recover it because the law has said that the carrier shall make the rate and publish it, and when published he shall collect it. Not that he may do it. It is a crime for him to remit it after he has published it. He is guilt}' of paying rebates if he does so; he is guilty of a criminal offense if he takes less than his published rate. He is not only permitted to collect it, but he is required to collect, and he is a criminal under the law if he does not collect it. And yet shall the law be left in such shape that a man must go into court and complain that he has paid the rate which it was a crime on the part of the railroad not to coUect after it is published? According to the decision referred to there could be no recovery in such a case if the rate collected was the published rate, however unreasonable. But if this decision be erroneous and the amount of excessive rates collected be sufficient to justify suit, now who is it that can collect in a case in court. Take the grain men of the West or the cotton men of the South, who grow the corn or cotton, as the case may be. At the end of the harvest, or soon thereafter, these men sell their crop to a local buyer. He sells it to Mr. Councilman or Mr. Richardson, or some other one of the great grain dealers in the West, or, if cotton, to deal- ers in the South. And what do the local men pay for it ? They pay a price which is based upon what he is authorized by the person i^ith whom they are dealing. That is fixed by the market price of the grain in Chicago or in the markets of consumption farther beyond in the case of grain, and they get that price or thereabouts less the freight rate that is necessary to take it there. The grain man sells at a price which is based on the published rate, and suppose after that a complaint is made and upon investigation it is found by the Commission first, and then the courts, that that rate was unreasonable by 3 or 5 or 2 cents. The shipments have all been made, the crop has been moved, practically, and the bills of lading have been made out in the names of the dealers, not the farmer, the man that bought the grain shipped it. In the bill of lading his name only appears. He paid the freight. The farmer did not pay it; the cotton man did not pay it; each bore the burden of it, however; but the dealer paid the freight, having shipped the grain and cotton. Now it is determined that that rate was unreasonable by two or three cents, and the court sustains that finding. Who is it that recovers back the difference, supposing anyone can ? It is not the farmer, who has parted with his crop based upon the higher 334 INTEEST ATE- COMMERCE LAW. rate. He has no standing in court or before a commission or anywhere, because he had no transaction with the railroads. He did not ship any- thing. He has no bill of lading, he has no expense bill showing what he paid, and he has no standing anywhere, and yet he is the loser. But who can recover in such a case? The middleman or the dealer who bought it and paid for it at the lower price. He has the freight bill, the bills of lading, and if anybody can recover he can. He has already had his profit in the transaction. These are illustrations to show that there is no protection, neither can there be any protection, to those entitled to and needing it in these matters unless you fix the reasonable rate beforehand, so that he need not pay more than the reasonable rate nor sell his products on the false basis of an import rate. If he has no remedy until he has shipped, then he has none at all, practically. Hence the necessity of fixing the rates for the future. Now, is it so unreasonable that such a thing should be done? Not for a commission to sit down and write out and promulgate all the rates for all the carriers. That is done in a good many States, as you well know. There are 20 States in this Union how whose commis- sions, or public authorit}^ of some sort, fix rates for the carriers in respect to State shipments. Within all these late years I remember only three or four cases that have gone to the Supreme Court (one was from Nebraska, one from Texas, and one probablj'' from South Dakota) in which the carriers have charged that the rates fixed by the State commissions were unreasonable, confiscatory, and unlawful. With all these 19 States — I included above Virginia, which has just adopted a provision in its new constitution, although the constitution is not yet in force — there are only a few cases where the railroads have had occasion to resort to the courts to stay the rate-making power of the States on the ground that it was unreasonably or unjustly exercised. Now, the record does not show any rash haste or disposition on the part of any public rate-making power to make unreasonable or unjust rates, where they have the full power to make the rates out and out. There is no such thing as that suggested in any of these bills or in any reports or suggestion of the Commission at any time. It is not an authority that anybody need covet for the purpose of exercising it. It is full of difficulties, but after a great deal of thought and experi- ence about this matter, I respectfully submit that it is the only way in which you can protect the snipper or producer, because to give him a remedy of back action to recover either puts it in the hands of the middleman who has no right to recover, as he has the only standing in court and the producer has none in the one case, or else it requires such a multitude of suits to recover little amounts that it is more expensive than it is to submit to the wrong and bear the loss. So you will find, when you turn this question over and look at it from eveiy standpoint as long as you will, that there is no way- where carriers make unjust rates to protect the other side except to correct that rate, not simply by condemning the one that is wrong but by substituting the one that is right. Now, where is the hardshipin this? The shipper is entitled to a reasonable rate. The carrier is entitled to a reasonable rate. Each one is working for his own interest, naturally and properly. The carrier says that he is capable of making a rate that will be just to his patrons, that he will not oppress them; but can you leave the shipper INTERSTATE-COMMERCE LAW. 335 in his hands with safety ? Human experience says no. You will not permit the carrier to make the rates. Now, what else does the con- science and the mind go to except some natural, reasonable, fair-minded course such as we resort to in all other matters of controversy ? That is, to have a court — which you can not have in this case, because it has been decided that this is a legislative power when it relates to the future. That eliminates the courts. Mr. Stewart. New Jersey has no public debt or no State tax what- ever. Her entire revenues are gathered from the railroads. Our railroad commission fixes future rates, does it not, on the railroad traffic in that State 'i Mr. Clements. That may be; I am not aware of a commission in that State. Mr. Stewart. Has there ever come a complaint to the courts on account of the unfairness of those rate.s^ Mr. Clements. From New Jersey ? Mr. Stewart. Yes. Mr. Clements. None that I have heard of and call to mind. Mr. Stewart. If that is so in New Jersey why could not this com- mission fix rates without difficulty '< Mr. Clements. I must confess that all of these matters are important and that there is more or less difficulty; but this is done, and I see no other answer but that it will be more fairly done by an impartial tribunal, whether you call it a commission or a congress, that has power to do it, than to let it be fixed by either the shipper or the carrier in his own interest. Of course, it would be wrong for the shipper to make the rates, because he is an interested party. So, too, why should the carrier make the rates ? He is an equally interested party. Now, if the railway is just like a wagon and a horse, if it is nobody's busi- ness, and every man should make his own trade and do the best he can, then leave it where it is; but if there is anything in the doctrine and declaration that the shipper has certain rights on the ground that this is a public service, under a public franchise, which is put beyond controversy by the decisions of the Supreme Court, and now admitted by all parties, then it is a different case, and whj' should there be any question that there should be some power to make an adequate and just correction of the rate made by the carriers when, upon due inquiry, it is found to be wrong? Suppose the Commission should be eager for the exercise of power, and go pellmell, making rates so as to injure the roads, the roads would do what thej' have done in the Texas case and in the Nebraska case and in the Dakota case — ask the courts to protect them under the law against an unlawful rate which the Commission has made. They have equal protection under the law. It is not confiscation; it is not a ques- tion of that sort. Where can the injured shipper or producer go and secure like protection with like promptness? As it is now it I'eminds me of a game some boys were playing as I passed along the road once. They were playing some game and one boy asked: " What is the rule of this game?" "Every fellow for himself and the devil take the hindmost," replied one of the boys. That is the situation in which this business, immense as it is, is left in the present scramble, for two reasons — first, there is no power to correct the published rate, and, second, no practical power to prevent deviation from the published rate whereby one man gets a rebate while the general public does not. 336 INTEESTATE-COMMERCB liAW. Now, these are the two principal defects of the laws It would be unreasonable for the shipper to dictate the rates, and it is equally unfair for the carrier to do so without the power of correction some- where. The Supreme Court has said in one of these cases that was before it, in which it did not approve the conclusions of the Commission in the long and short haul feature, that the carriers have the right in the first instance to make their rates, not finally, but subject to review by the Commission and the courts. The principle is recognized. The court said in the very case in which it held that the law did not author- ize the fixing of a rate by the Commission to take the place of the con- demned rate, that Congress had the power to regulate by fixing the rates itself or to delegate that authority to the Commission. It having done neither, the authority was not found in the act by implication. Now, as I say, the courts are open; carriers have the same protec- tion there from an unreasonable rate made bj^ the Commission that everybody else has for their various rights under the law. The ques- tion was asked yesterday, and probably one the day before, in respect to the exercise of this authority in regard to several rates or several classes between one State and another, different States, and if there was not some way in which to limit the jurisdiction of the Commission in a particular case to some smaller scope, some smaller field. I appreciate the motive of that suggestion as having in view a possible compromise by which to get something in the direction of what is right. But I have thought a good deal about it, and I see no practical way in which a limitation of that sort can be applied and make the law efficacious. For instance, the remedy ought to be as broad as the evil, and in some cases the matter complained of has been the adjustment of the rate on all classes or on a large number of them. Take, for instance, the action of the official classification committee at the first of the year 1900. Alleging that the expenses of operation, railway materials, bridge materials, cars, and the things that go in to make up cars, and labor, cost to the roads more than they had pre- viously cost. They said, "We were justified in making more revenue." It was not a blind way of going about it; there was no deceptive way of going about it. What they did was to bring their classification com- mittee together, and that committee represents all the roads of the trunk lines from the Ohio River to the Great Lakes, covering a num- ber of the most populous and strong States of the Union, in which the classification applies. They came together and fixed up classification No. 20 to take the place of classification No. 19, and they increased the rates on something like 700 or 800 articles, by taking them out of the fifth class and putting them into the fourth class, out of the second and into the first, and so on — that is, from one class to another. We received several hundred complaints within a week about this one matter. The roads fixed upon these numerous and substantial increases, so far as the public was concerned, without any notice. I do not mean to say that some isolated shippers here and tRere did not know that they were going about it, but there was no official notice; there was no notice to the public; there was no right on the part of any shipper to be heard. I do not say that some shippers may not have been per- mitted from time to time to talk to some member or members of the committee and present their views, but there was no public right for any man to enter and make suggestions about it. It was a transaction INTERSTATE-COMMERCE LAW. 337 wholly within themselves, except so far as they, or any one of them, permitted some shipper to talk about it to them. They made these increases, averaging about 31 or 32 per cent on all of these articles by this change of classification. Up to about the 1st of March following the complaints had been so vehement and so numerous that they revised their work and so changed it as to reduce the increase to about 20 per cent above what the rates had been before. Now, what would you do with that kind of a transaction if }^ou had limited jurisdiction? If j'^ou were limited to the consideration of a complaint on a particular commodity between two places, what would you do ? They substituted the higher classification for no purpose except to raise the rates. W e called upon tHem on the complaint of tnese hundreds of shippers, the members of the committee were sworn, and they testified that their reason was to get more revenue, and in doing / it they looked for the things that would bear the increase best. Do you suppose there was no wrong in all of that to any shipper any- where ? If they are incapable of doing a wrong thing, if in the per- formance of their work in their own interest for gain they are inca- pable of doing injury to the shipper, then we need no law; but if in all this multitude of things thej^ did — upon which three months later they confessed that they had done wrong so far as to correct a whole lot of it, and do you suppose there was no imperfection left in it, no injustice left? If there was there ought to be a remedy for it. If they are incap- able of doing wrong, then there is no remedy needed. But assuming that there was any injustice done, how can you get at it except to apply a remedy which is as broad as the act which they did? Now, what has followed % Under the law as it is complaints can be made. These several hundred complaints I speak of were by telegraph and letter. They came all at once, a flood of protests against it. We took testi- mony a day or two from the people who made the complaint and the carriers, and sent it to the Attorney-Greneral on the request of some of the complainants, who insisted that the thing done was a violation of the antitrust law. The complainants wanted to proceed against the carriers that way, and it was upon request we sent it there. He stated in a written opinion that it was not a violation of the antitrust law. So you see how they were able to act together. There were about 65 "roads that were included that used that classification. The committee was composed of fourteen or fifteen members, and they got together and revised this whole schedule of their rates. Mr. Stewart. Did he admit it was a violation of the interstate Mr. Clements. He did not say; he said in substance it was left to the ('ommission to do what it could under the interstate-commerce law. Mr. Stewart. Did he discuss the Sherman law? Mr. Clements. Yes; but he did not discuss it except to say that this testimony did not show a violation of the Sherman antitrust law, and, therefore, these complaints were thrown back to seek protection under this law or submit. Several of them filed formal complaints. Proctor & Gamble, of Cincinnati, complained of rates on soaps. I wanted to go into that a little — not the merits, but the nature of the controversy merely — to answer the question that was asked the other dav; but it is 12 o'clock now, and you may wish to adjourn. i?he Chairman. You can go on now or go on on Monday, just as you please. i-c L 32 338 INTEESTATE-COMMEECE LAW. Mr. Clements. Very well. Proctor & Gamble are soap manufac- turers near Cincinnati. They filed a complaint because the soap had been changed from one class to another, raising the rate. And the Hay Association of the country tiled a complaint, which was to the same effect. Suppose the jurisdiction of the Commission was so limited. As suggested, Proctor & Gamble had complained of the rate from their factory near Cincinnati to Chicago, in order to correct the rate on soap to Chicago, and then they had to file another complaint on each road leading to Cleveland, and another on each road leading to Buffalo, and so on to every part of the country. What the carriers did was to raise the rate by raising the classification on soap on everjf road using that classification, which was sixty-odd, not only between Cincinnati and Chicago, but between each place and every other place in that territory. Now, you see at once that the only possible way in which you can deal with the question to give any relief in a lifetime is to deal with it just as broadly as the carriers do. If complainants are entitled to any relief, they are entitled to relief as broad as the wrong done. Take another case which was tried a good many years ago. It is the one in which the Supreme Court decided that the' Commission had no power to fix a rate. The carriers were complained of by the freight bureaus of Chicago and Cincinnati on account of the rates from those two cities to certain points in the South, and it was shown among other things in the investigation as follows. I read now from the findings of fact by the Commission in that case: At the convention of the Eastern and Western lines in 1878 it was announced by Mr. Peck, general manager of the Southern Railway and Steamship Association, that the Western lines "concede that the transportation of manufactured articles into the territory embraced by the association should be left to the Eastern lines, and to nuadertake by prohibitory rates to prevent such articles from Eastern cities reaching association points over their lines." Accordingly a basis of rates was then adopted, by which rates on the Western lines for articles peculiar to the East were to be at least 10 cents higher than the rates on the Eastern lines, and rates on Eastern lines for Western puoducts were to be at least 10 cents higher than the rates on Western lines. Now, they fixed up a whole lot of agreements there. They declared openly then — that was before there was any antitrust law — that their object was to divide the traffic between the Eastern lines and the West- ern lines, and there are numerous provisions in the agreement here shown to that effect, declaring, for instance, that the lines leading through the Ohio River gateways shall exact full locals and not caiTy at other rates in respect to any shipment that would come to them over a line that would not agree to those rates. They made a line from Buffalo down by way of certain towns to Pittsburg and Hun- tington, W. Va., and they said that whatever originates east of that line must go to the South by the Eastern roads, and not the Ohio River crossiligs; and whatever originates west of that line must reach its way to the South by the Ohio River gateways and not by the Eastern lines. And they fixed penalties, and they fixed it so it took unanimous consent to change the arrangement, and that no rate should be changed by the individual roads; that each road should collect full locals in certain cases; and then they fixed another line in the South which could not be ci'ossed by these respective carriers, in the transportation of this great traffic, so divided. All that is cited in this case, and they made it apply to the six INTEE8TATE-00MMBE0E LAW. 339 broad classes of freight, general merchandise, etc. The declared object of that was set forth then — because there was no law against it then except the common law — and they continued that right on down until the decision was made in the case of the Joint Traffic Associa- tion, and the same adjustment continues to this day, because this deci- sion of the Commission was not put into force on account of the fact that the Commission undertook to find and fix the reasonable rate, and not only found that the rate the carriers had made was unreasona- ble, but substituted the other rate for it, and those rates fixed by the carriers were made on the basis shown confessedly 10 cents higher one way than the other way in order that the traffic might be divided for the declared purpose of allowing all of the carriers to get the greatest net revenue out of the business as a whole. These rates were made for that purpose on that basis, and it was these rates that were challenged by the freight bureaus of Chicago and Cincinnati, and after the question was tried by the Commission the Supreme Court never passed upon the question; neither did the circuit court of appeals pass upon the question of the reasonableness of the rates found and prescribed in the order made, except it was beyond the authority of the Commission to make it, because it fixed the rate for the future. There is a case where they came together in association and fixed up the division of the territory, both North and South; they said what should go by the Ohio River and what by the Eastern lines down into the South, and it was declared to be for the object of allowing the Western lines to carry to the South such things as hay and grain and the products that were peculiar to the West, and to allow the Eastern roads to carry imported goods, merchandise and things that were peculiar to the East. Now, the former conditions as to place of production and manufacture have changed. Manufacturers have gone to the West. Chicago has become one of the greatest manufacturing cities, and yet she is farther away by the rate than New York is from these towns in the South. So this adjustment has not been changed in any material respect in twenty years, and it was built for this declared purpose by the members of the old Railway and Steamship Association and their associates, the railway carriers in the East and the West. It is all set forth here. And yet it is said because the rates which they declared should be higher from the West to those places in the South than from the East, in order to effect this division and obtain for all of the carriers the greatest net revenue out of the entire business, the thing which stands to-day — the agreement, of course, is gone — the agreement is not in writing anywhere any more as it was, but the practice appears to be the same to-day; at least, the rate adjustment is the same. And now the distance is disregarded. Changed conditions are disregarded. The declared purpose, then, the principal thing, then, as they avowed, was to get the greatest net revenue to themselves out of the traffic. They had been having rate wars and contests, and so when they settled that they divided the country into territories, and they said in effect, "You take that and we will take this." Now, where does the shipper come in — the producer, the community ? If a thing of that sort is done for the sole purpose of gain to the carriers and there is no remedy to correct what they do if found wrong, then there is no remedy for the shipper. If they do any wrong in a matter of that sort, the remedy 340 INTEESTATE-COMMEKCB LAW. should apply to what they have done. They did not do this by piece- meal; they did not do it on one article between two places; they did it in respect to the whole territory on six classes, on that adjustment, and which, I repeat, is the same to-day as it was then, substantially fifteen or twenty years ago. Take the rates frqm Meridian, Miss., to Chicago, a distance of 723 miles. On the first class the rate is 1.34. From NewYork, a dis- tance of 1,142 miles, it is 1.24; 10 cents less from New York than from Chicago, the distance being much greater from Chicago. Distance does not alone control in these matters, but here are the plain declara- tions of the purpose in this matter, and it was shown that it was with a view of dividing the territory, dividing the business, suppressing the competition so as to get the greatest net revenue for each of the carriers out of it, to stop fights. 'J'hat was the adjustment. It was made with the purpose of permitting the greatest revenues to the carriers. Now, where is the shipper's voice in that'^ Mr. ^TEWAKT. Would not that condemn, then, the system of pooling ? Mr. Clements. I think so. Mr. Stewart. That would be an argument against pooling. Mr. Clements. I think so. I have different views about pooling from the views of our friend the chairman. We hear now about the progress we are making, and that we are finding out that many of the old notions we used to have are untrue; they are blasted and found groundless, and we hear that they ought to be overturned. I do not believe in it all. This is a progressive age, but I think sometimes we lose sight of old principles which never change, and that we would ruthlessly and thoughtlessly overturn them to our hurt if we are not prudent. I bought a book once, and on the first page I found, "Times change and men change with them, but principles never." I do not know whether it has application to this case or not; but I do know that for hundreds of years the courts, without as well as with statutes condemning monopolies, under the English law, the common law, as transplanted in this country founded on common justice and common sense, and the perfection of wisdom, which is what we used to under- stand law to be, have found and declared that monopolies are injurious to the public; that human nature was yet too imperfect and too selfish to be trusted. When we have aggregation and monopoly, so that the consumer and producer are in their hands, we can trust that they will deal justly with them without law. It would be a long stride in"^my judgment at this time for Congress to say — that is for you to consider, however; but as the question has been presented here it is not out of place I suppose for me to say— it would be a long step in the wav of progress either in the right or wrong direction, and I think it would be the lat- ter, to say that which to-day in the eyes of the common law is con- demned on the ground of public policy, and it would be unlawful with- out a statute against it; not only that,' but it is condemned by the act to regulate commerce passed fifteen years ago, and made a crime; not only that, but it is condemned and made a crime by the Sherman Act of 1890 and made a felony to do these things— that we now go with one plunge, by one bound clear over the fence, reverse the order and say it shall not only be permissible, that it shall not only not be against the law, but it shall be lawful; it shall not only be lawful when you have done it but the courts of this country shall be set up INTEESTATE-COMMEECE LAW. 34 i to give it force and effect, so that which to-day is a crime must be set up and enthroned to-morrow as a thing to be commended and enforced. Now, that is a long ways to go at one leap. I think there are other ways to stop these evils. What would pooling do? What do the roads want with it? Does anybody suppose for one moment that thej^ want it for anj"^ other pur- pose except to increase or make more sure their revenues. If they are greatly concerned about the discriminations between the shippers they have it in their power to stop them; but you are told one road can not stop it and let another one go on. There is a good deal in that. But there is a way, 1 think, to correct that practice. I do not think it will be questioned that the primary object the roads have in bringing about pooling is to enable them to increase their net revenues. How? They say in part by eliminating the competition between themselves. If they divide the business then they won't have to have soliciting agents and other agencies which they now maintain; and you must see at once that the economy in saving to the carriers that there would be in respect to these minor matters would be comparatively immate- rial. There would be some, undoubtedly, but it is no great factor in the matter. The principal things in view, I apprehend, are, first, that it would enable them to get rid of the payment of rebates, making cut rates, etc. Therefore they would then collect the published rate from everybody, and I do not think that it is without reason to apprehend that they would do what they have done in the past; that they would undertake to get the greatest amount of net revenue that they could out of the business, and therefore they would eliminate competition and put up or at least hold up rates. Why should they not? Does not every man put up rates when he can in his business; does not every man take about all he can, whether he is selling shoes or hats or wheat, whether he is a farmer, a merchant, a manufacturer, or a rail- road man? I am not indicting the railroads. Their management is made up of the same kind of men as that of every other business. But their busi- ness is peculiar. The public is in a measure in their hands, and hence the trouble. They want more revenue. They do not think they get enough. They would have it in their power to get more. Again, I have not seen a pooling bill around here yet anywhere that did not authorize them to contract not only with one another, but common car- riers generally, including, of course, water lines. I have not seen anj^ limitation in any bill that railroads should only be authorized to combine with railroads. They maj' combine with common carriers without limit. The Congress will appropriate, probablj^ this session, millions of dollars to clear out and deepen the water in the rivers and harbors, to promote commerce mainly, and will at the same tinie authorize these already great financial giants to go on with their combinations and put not only the railroads that were in competition heretofore together, not connecting, but competing lines, into one management, one system, and then to go to the lakes, the rivers, and harbors, and combine with the steamer lines. These are great questions, and sometimes it seems like we are disposed to go too rapidly and too blindly. Mr. Coombs. Do you think the Government would have a right to regulate fares on steamships? Mr. Clements. I should think so. In fact, there is no limitation in the Constitution if they are engaged in commerce between the States. 342 INTEKSTATE-COMMEECE LAW. Mr. Coombs. The question of eminent domain does not enter. Mr. Clements. Tlie constitutional provision is to regulate commerce between the States and Indian tribes, etc. Mr. Coombs. That is regulating commerce; I understand that. Mr. Clements. That is what I mean. Is there anything that would hinder Congress from regulating the lines on the Mississippi River ? Mr. Coombs. I do not know whether it is necessarily implied in the power given to Congress to regulate commerce. Mr. Clements. I supposed it was. I have alwaj-s supposed it was. Congress has not undertaken to do it in respect of rates for the mani- fest reason, I suppose, that the river is anybody's highway and not that of a monopoly. Mr. Coombs. That is the difference between a railroad and a river. The railroad can invoke the sovereignty of the State and get a right of way; it is a quasi public institution. Mr. Clements. If the public authorize it; yes. Mr. Coombs. Yes. Now, the river is open to everybodj', but it is opened and controlled by the United States. The same element of sovereignty, you might say , does not enter. The railroad is exercising a sovereign right when it gets its right of way. Mr. Clements. Yes. Mr. Coombs. Now, that same rule does not obtain, you might say,. in reference to the right of a man traveling on the highways of the sea, on the water. Mr. Clements. Well, the Government has the control of all these waterways within the countrj' and the harbors, and it is expending a great many millions of dollars to make them available to commerce, and now is it going to give an affirmative authority here to enable the carriers by land to make such contracts with the carriers by water as to make these part of a monopoly, too ? Mr. Coombs. I simply asked that "question. Mr. Clements. I am glad you did. I think there is no question about the authority of the Government, and I think, after all, the greatest protection that this country, the world, has against unreason- able rates foi- transportation is the waterways. Surely, I think it would be wise to hesitate about giving over the waterways of compe- tition also to combine with the railroads, if combinations are to be authorized. It was said yesterday by my friend, the chairman of the Commis- sion — he has his convictions strongly as I have mine, and we do not agree about this. I do not believe the sovereign remedy for rate cut- ting discriminations is pooling, and that it is the only remedy ; nor do I believe if it is adopted it would not result in evils as great as the one we attempt to cure thereby. The tonnage is so great that if 3'ou were to increase the present rates of the railwaj's the amount of 1 mill per ton per mile, which is equal to an increase of i cent for carrying a ton 10 miles, which, while it would seem at first glance a small matter, it would result in a net increase of $150,000,000, in round figures. With sufficient concert among carriers as we have seen, it is not impossible nor very difficult to increase rates. Will they not do it? Will there be no temptation to do it? Are the people absolutely safe against any such result As that? And when you go to correct it we have pointed out the difficulties encountered. Sup- pose they have made a slight increase on a great many things so that liN LM. aoi ji. ± jL-^;OMMERCE LAW. 343 the gross increase amounts to $150,000,000 in the way I speak of, and if wrong in whole or in part where is the remedy ? If upon complaints correction were attempted, you would no doubt hear what Judge Prouty told you of the other day in one case we have been hearing — that the increase was so little on a ton of freight of the kind there in question — 50 cents or $1 — that the question was asked, Who cares about it? _ Why should the Commission waste its time in dealing with a ques- tion like that? The consumer, we are told, does not care whether he pays 50 cents more for a ton or not. The work of the Commission ought to be on broader lines, it is said, than to consider small, trivial matters like that. And yet on that product the increase will amount to several million dollars upon the whole. How easy it is to move up the rate a little on this, a little on that, and yet make the increase so slight that it would seem hardly worth while to deal with it in a par- ticular case. We are told, when we come to deal with it, that it is a trifle. When the matter gets in court it is asked how you can tell whether a given amount — say 90 cents or 93 cents — is a reasonable rate. What mathematical rule can you lay down? What demonstration in mathematics can you apply, like you can count the interest on a note or bond, and saj^ up to this notch it is lawful, but above it is unlawful? You can not. You can not, with like certainty, demonstrate the reason- able rate. The railroads do not do it; they do not try. Nobody can do it. How easy it is then with power to make all rates, competition eliminated, to make slight increases here and here and all around, and then, when they are challenged, who can say which is reasonable — 90 cents or 93 cents? It is a matter of estimate; it is a matter of approx- imation at best. Who is right, now, in such a case — the railroad or the shipper, each insisting on a different rate, or the Commission, which determines on a different one still ? These are some of my objections to that method of removing this evil, because 1 think'if you remove the one you erect another. There is, further, no assurance that all the railroads would pool if they were permitted to. There is no way to make them all pool, and who can say that it will be a remedy for cutting rates ? The only benefit which the roads can offer to the public in this concession of the right to pool is simply that they will thereby get rid of what they have not been able to get rid of by any other means; that is, deviation from the published rate, discrimination by rebates. They say, "If you allow us to pool we will observe the published rates, because there will be no competing, or it will be so restrained as to induce observ- ance of rates." These calculations might not work out. We do not know AV'hat influences would still work. This is not demonstrated as the sovereign remedy. There was a time before this interstate-com merce law was passed when there was no statute against pooling. They did pool, notwithstanding it was against the common law. It was not a crime. They could not enforce their pooling contracts. They did not stop discriminations then. There was no law requiring a published rate then, but there were discriminations then as well as now. So it is not demonstrated at all that this is a sufficient and conclu- sive remedy. Upon the other hand, if it fails to do what you want it to do and at 344 INTERSTATE-COMMERCE LAW. the same time increases the rates^ then you have two evils instead of one, and you have not corrected any. It was said yesterday by our friend the chairman, I think, in sub- stance, that these two laws — the antipooling law and the Sherman antitrust law — had, strange to say, resulted in the bringing about of the exact things which they were intended to defeat. 1 think that would be a little hard to demonstrate — that these two things were responsible for the present conditions. I believe, Mr. Chairman, that you and 1 both voted for these laws, and if the chairman of the Com- mission is right, what fools we mortals must have been. Now, I do not think the present conditions relative to trusts and combinations of all sorts are solelj'^ due to these two acts. These things were going along and growing at a rapid rate. Here were two efforts to check them. They have failed. The chairman also says (I have no doubt he thoroughly believes it, and I am not saying this in any criticism, for our relations are most cordial) in substance that these laws are not obeyed, are not lived up to, that they can not be, and therefore they must be absurd and unwise. What he saj^s amounts to a declaration that they have not been enforced. If they have not, who can say what the effect would have been if other- wise. Returning now to one of the particular provisions of the bill before you, a suggestion was made the other day by Mr. Mann that if you enacted this law in respect to making it a crime to receive a rebate on the part of the shipper. I think the law should make it a good deal harder for such shippers, so they would not be so apt to take rebates. If instead of a fine of |5,000 the shipper who takes rebates was made in each case a fine never be less than the amount of the rebates he got, then it would be a more dangerous business for him to take them. If you put it so that he shall not profit by the violation of the law, then he is not apt to violate it; but what does it amount to to pay $5,000 in a fine and get five times that in rebates? The fine in every case ought to exceed the unlawful profit of the transaction whether against carrier or shippers. The Chairman. The offense would be committed, would it not, when one shipment had occurred? Mr. Clements. I suppose that would be so, but a man might ship a whole train load of grain or beef and the rebates amount to a large sum. He could take a bill of lading for 50 cars as well as for 1 car. Now, it was suggested bj- the gentleman from Illinois (Mr. Mann) . that an individual who did not know the rate might get caught and be given trouble. I do not think it is necessary for us to apprehend that the law will be used to reach the innocent. We can of course, in respect to any proposed legislation, imagine cases that are possible where the innocent might be caught, but there is no real substantial danger in respect to these matters at all. During all the years that this law had been in force there has not been an instance of that sort. The guilty are not caught, that is the trouble, much less the innocent. And in order to stop the payment of rebates and the acceptance of rebates, and these unlawful discriminations, it must be made tx'ouble- some to those who do such things. It must be made expensive to them. So long as it profits the road more to pay the rebate and get the business which it bids for l)y paying the rebate there is a tempta- tion to do it. INTEE8TATE-C0MMEBCE LAW. 345 When you make them upon conviction, disgorge, and the shipper also, to the extent of the profit in the violation of the law, then there would not be any temptation to do it. I am siire there is no danger of an innocent shipper being caught. It is not the small shipper in the country or small town that gets the rebate. He complains more often of an overcharge which is above the published rate, and we are constantly having them corrected bjr correspondence, and reference to the published rates. Errors in rates, of course, occur, and the court can take care of these things so as not to involve a man who by mis-, take ships at less than the published' rate, because it has been mis- quoted to him, or by mistake. Mr. Adamson. If you catch an innocent man it would be easy to pardon him if the case was a plain one ? Mr. Clements. Yes; and he will not be prosecuted. Mr. Coombs. How can a district attorney make a distinction between two offenders, the shipper on the one hand and the railroad on the other? Mr. ClBments. In that case there is no offense. Mr. Coombs. Is he to prejudge that? Mr. Clements. I should think so, to some extent." He does not draw a bill for everybody that comes in and represents a fact. It is his duty to find out; he is discharging a public duty when he makes a ■discrimination between a case that is a genuine, real crime, and one which is an oversight or mistake. Mr. Coombs. Where proofs are equal Mr. Clements. They would not be. Neither would I have the railroad indicted for a clerical error made by a clerk in collecting less than the rate. They do that sometimes. The court can take care of such questions as that. They will not punish the innocent. We can find difficulties of that sort about any law by imagining' extreme possibilities. Take an illustration. Under the operation of these laws, a few years ago railroads filed with the Commission what was known as the Joint Traflic Association agreement. The Commis- sion thought it violated the antipooling clause of this law, and in the performance of its duty sent it to the Attorney-General, as required by the twelfth section of the act to regulate commerce, which says that the Commission shall enforce the act, and upon request of the Commis- sion it shall be the duty of the district attorneys of the United States to institute and prosecute the necessary proceedings to that end, under the direction of the Attorney-General of the United States. In that case we sent it to the Attorney-General asking that the guilty parties be enjoined and punished. I think Mr. Hai'mon was Attorney-General at that time. He instituted a proceeding in the court in New York to enjoin the parties. The case went through all the courts up to the Supreme Court of the United States, and that court, upon the face of the contract alone, without any other testimony, said it was a violation of the antitrust law. It did not decide whether it was a violation of the antipooling law or not. It took it under the other law and said it was a violation of that. The cas6 was, I believe, prosecuted before the Supreme Court by Mr. Harmon's successor. There were 31 railroad presidents whose names were signed to that agreement. Thirty-one presidents; the most intelligent railroad men in the country had signed that agreement. Mr. Stewart. What vear was that? 346 1NTEK8TATE-C0MMERCE LAW. Mr. Clements. That has been about, 1 should say, four or five years. Mr. Stewart. Who was chairman of the traffic commission at that time? Mr. Clements. Mr. Blanchard, who is dead now, was the executive officer of the association. Mr. Stewart. Who succeeded him ? Mr. Clements. After the injunction they dissolved. Since that time they hs^ve had what is known as the official classification com- mittee. Mr. Gill is at the head of that. They do not do, I suppose, now all the things that contract' authorized them to do, and yet they do remodel rates and classifications afi'ecting rates, as I have already said. Now, to go on, as I was proceeding to say, there was not one of those 31 gentlemen indicted for signing that agreement, notwithstand- ing it was a violation of the antitrust law. There was the trans-Mis- souri agreement. That was another one that preceded this. I do not recall how many parties there were to that. It was decided in the same way by the same court. Nobody was indicted, nobody has been prosecuted in respect to either one of them. It was doubtless that these gentlemen had been advised by counsel that these were lawful agreements, and were presumed not to have intended to commit an offense. Mr. Stewart. Was there an appeal taken from that commission, from that decision ? Mr. Clements. That was a railroad traffic agreement, you know; there could not be an appeal. I do not quite understand what you mean. Mr. Stewart. Could not an appeal be taken from the decision of the traffic commission? Mr. Clements. Oh, yes. Mr, Stewart. Could not an appeal be taken to the courts? Mr. Clements. Not an appeal to the courts. Mr. Stewart. Were there not Mr. (Elements. They had an appeal to a board of arbitrators, or some board of their own, but it was a voluntary outside affair. There could not be any appeal to the courts, you know. Now, I mention this to show that wherever there is any doubt of the intent — of the criminality of a thing — the courts are not hasty to punish. In this case these are very intelligent men. They signed a written contract respecting a very important affair, and, for the reason named, doubtless, they were not prosecuted. That being so, surely the individual shipper who goes to a freight agent and asks the rate from one point to another, and accepts the rate the carrier gives him through his agent, is not going to be run down by the court and by a grand jury and petit jury if the agent who gives him that rate has made a mistake. Mr. Stewart. Was not Vice-President Hobart chairman of that association at the time he was elected Vice-President? Mr. Clements. Pie held some office in connection with it. It was shown afterwards, I think, that he was chairman of the board of arbi- tration. He was appointed by this association to arbitrate the per- centages. Thej'^ got pooling — that is, they got to dividing the business. Their contract did not provide for that. INTERSTATE- COMMERCE LAW. 347 There is another thing I think should be done. I refer to giving the informers a part of the fine in these cases. There is no reason why that should not be done with reference to the railroads, and to the shippers, too. We hear it said that we ought not to encourage informers; we do not want to encourage a man to give information against his employer, etc. ; but we have to do a good many things on the score of expediency to give practical effects to law. There is nothing wrong inherently in such provision. It has , been resorted to and is resorted to constantly in many instances. There is now on the statute book, section 4273, provision in reference to the passenger transportation laws as to ships coming to this country,' in which case the informer gets one-half the fine imposed for violating those laws, and in respect to carrying explosives on ships there is a fine and the informer gets half of it. That is resorted to to give pro- tection to the public. It seems to be necessary in some cases to do these things, and in respect to the navigation of streams there are certain regulations and laws and the informer gets one-half of the fines that are collected from persons violating these laws. There was a moiety law in respect to internal revenues, and the informers got one-half of that. That has been repealed. Rewartis are offered to give effect to criminal laws in many cases. Mr. Stewart. Is there any law in reference to overcrowding on ocean steamers ^ Mr. Clements. I do not know whether there is or not. I should think there was, but I do not know. Nobody defends rebates; nobody defends these deviations from the published rates; everybody wants to get rid of them except the man who recetves them and puts them in his pocket. They are a small part of the people in number. It is not the little man in the country or the small town that is able to press the road so as to.get rebates. It is the large shipper in a great commercial center, where there are several roads, and where there is scramble for the business. There is where these laws are disregarded. It is said that they are not malum in se, and that a violation of such a law does not affect a man's stand- ing in the community, or in his church, or anywhere; that if a man can get a rebate it is all right for him to get it. And so they go. The railroads want to get rid of the rebates; they want to get the published Tates in order to increase their revenue. I therefore suggest that if the informer shall have one-half of the fine, it will be one way to do a^ay with the rebate. It will be said that this will put the employer's clerks and his book- keepers and the men who handle his money as spies on him, and that it would tempt them to reveal the facts. So it would; there is no doubt about that. Why do you offer a reward for the capture of a person who commts a crime? The governor of every State offers rewards for the purpose of interesting somebody who knows where the guilty party is, or of the testimony that will convict him. It may be an employee or somebody else. It promotes the ends of justice to do that, and the harm that would come of this would be insignificant com- pared to that coming to young men who are j?ow employed by these great establishments receiving rebates, who are tempted to commit per- jury when they are called before the Commission or before court. To 348 INTEESTATE-COMMERCE LAW. them it is tlie alternative of telling the truth and losing their employ- ment or committing perjury. I have seen them put to the test, and it is an awful alternative. _ There is infinitel^r more wrong that grows out pf that condition of things to society and the country in that way than would ever come by reason of their revealing the truth in order to get half of the fine. Mr. Stewart. Are those people church members? Mr. Clements. Yes; some of them are. It seems to be so common that it does not interfere with their standing. Now, Mr. Chairman, I have not much more to suggest about this. I think there ought to be authority to review upon challenge, upon complaint, the rate that is complained of, and that the Commission or somebody should be authorized — besides one of the parties to the con- troversy — to determine not only what is wrong, but what is right, and to give it effect; and not simply condemn what is wrong and leave the parties to scuffle it out, with all the delays incident. If all of a rate above 95 cents up to $1 is unreasonable, then any part of it is unreasonable. Mr. Adamson. You do not think there is any use for this circuitous appeal in this bill? Mr. Clements. I do not see, myself; I do nOt think it is a radical thing at all Mr. Adamson. There is no limit to the number of times that 3'ou may set a rate and have it reviewed and set it aside. I think it would be better to put the order into effect unless the carrier can show the court that it is illegal. I am not criticising the carriers' manner of managing their business. The laws are as they are, and railway people are actuated by the same motives that actuate other men. I am not arraigning them; 1 am talking of the condition of the law. I think I have not any other important point I have omitted to talk about. There are a few practical things in regard to these amend- ments. I think the tenth section should be amended so as to keep in the shipper and the railroad, and to fix a minimum fine, and to fix it in no ca,se less than the amount that has been obtained on the part of the shipper in respect to rebates that are paid, and to give the informer half the fine or recovery. And then I think there should be an important amendment to the twentieth section. As it is now carriers are required to make annual, reports to the Commission. But there is no time specified in which they are required to do it, nor do they incur penalties if they fail or refuse, and the reports are not required to be made under oath. The Commission takes them under oath and has a regulation of that sort, but it is questionable whether a party would be guilty of perjury when there is not a command in the law for an oath. It is an oversight in the law. I know of no earlier opposed to it, and I do not think any- body would object. They ought to be required to swear to their reports, and they ought to be required to make them by the 15th of September each year. That gives them two months and a half after the close of the fiscal year to put it in form and sen(^ it to the Commission. As it is now the law does not specify the time. The Commission by order does specifv the time ; but if they disobey it or disregard or neglect it there is no penalty, and the result is that some important reports we do not get until after inteestAtS-coMMerce law. 349 January, until six months or more have elapsed, and it delays the pub- lication and formulation of these reports in a way that is very unde- sirable. An accumulating penalty of |25 a day for every day would correct the whole thing. There would be no hardship to the railroads about it. The reports would be promptly made and no penalties incurred. I am very much obliged to you, Mr. Chairman and gentlemen, for your attention. Committee on Interstate and Foreign Commerce, April %6, 1902. STATEMENT OF MR. JOSEPH NIMMO, JR., STATISTICIAN AND ECONOMIST. Mr. Nimmo. Mr. Chairman, I do not propose to range over the entire subject which you are now considering. I have recentlj'^ writ- ten a pamphlet to which I have devoted three months of my time and effort. It expresses very fully my thought in regard to the particular phases of the subject to which I shall now invite! your attention. There is one matter of great importance, Mr. Chairman, which I desire to bring to your attention. I refer to action taken about a, month ago before the United States circuit court at Chicago which has an important bearing upon the particular bill — -the Corliss bill — which you are now considering. It turns out that the act to regulate commerce has two arms, the- right arm of the civil remedj' and the left arm of the criminal rem- edy. The criminal remedy is provided in section 10, and the Inter- state Commerce Commission has for the last fifteen years been working- this left arm alone. The whole situation has been described to you by others, and I will not repeat it. It is very interesting. Recently the Commission seems to have discovered the efficacy of the right arm of judicial remedy provided in section 16 of the act to regulate com- merce, and they have had recourse to that section in a case which came- up before Judge Grosscup in Chicago in March last. Judge Crosscup in that case said: The question presented by this application is a new one and a very great one; and I will not pass upon it finally until there have been elaborate arguments on each side. If the United States courts, sitting in equity, have the power called for it will make them master of the whole rate situation, for an inquiry instituted by them to inquire whether the injunction has been violated or not will, much, more readily than criminal proceedings, probe to the bottom of the railroad's doings.. For my own partj. I believe that railroad rates ought to be as stable as postage rates, so that every ship- per would know, as certainly as the sender of a letter, how much it would cost him and the fact that no one else could send it for less. An injunction something like- this has been granted in other cases, notably in the Debs case,, but an important dis- tinction between that case and this is that in the Debs case the things complained of ' were in their nature temporary, while in this case the injunction will be against conduct running continuously into the future. The interstate-commerce act has hitherto been ineffectivel); executed, but the taking of such power by the courts, as this injunction implies, might turn out to be the vitalizing of the act. That is hopeful. I concur in all that the learned judge said in regard to the evils complained of. I have no comment to make oni that. The injunction is a feature of the case which we may look for- ward to hopefully. The injunction will be against conduct running- continuously into the future. That is a very cheering aspect of the^ case. As has been said, it will be a remedy for the future. 350 INTEKSTATB-COMMBECE LAW. And Judge Grosscup says in conclusion: The interstate-commerce act has hitherto been ineffectively executed, but the taking of such power by the courts as this injunction implies might turn out to be the vitalizing oi the act. There is thus a hope held out that after having expended its energies upon the criminal remedy for fifteen years, within a month the Inter- state Commerce Commission has had recourse to the civil remedy. It might turn out to be the vitalizing of the act. So the suggestion I have to make to you practically is this: If there is such a hope held out why not postpone legislation of this kind until you have seen whether this vitalizing is going to take place ? If we have waited fifteen years to get at section 16, why not wait a little while in order to see how the judicial procedure under it will turn out? There is another important aspect of this question, and that is that section 3 of the Corliss bill in effect takes the vitality out of this vitalizing section. I will not argue that. I think if you will read the first two pages of section 16 as it is printed in the ordinary print of the interstate-commerce act and compare that with the substitute whith is proposed in section 3, repealing the former, you will see that it takes the vitality out of what Judge Grosscup called the vitalizing of the act. Another point. The courts have no power whatever under this act to overrule a ruling of this Commission. In theory it may seem well to give this Commission this unlimited power, but to throw upon five gentlemen not only the power to say wnether a specific rate is right, but to order a whole schedule of rates on a road, on a system of roads, and even on a great series of systems, is giving them a tremendous power. It is a great political power. With that power given to the Commission you would be besieged by claims in a way which you can hardly imagine. You gentlemen here know how you are troubled with claims and applications from your constituents throughout the country, asking for oflBces and clerkships and all sorts of favors. All that would be as nothing in comparison with what would ensue under this bill. It would be simply intolerable from the political point of view, however plausible in theory it may be. The Chairman. Why do you say that there would be no judicial review? Does not the amendment provide specifically for that? Mr. NiMMO. Mr. Chairman, excuse me for not fully discussing that aspect of the case just now. I state that to you as a fact. I have gone into this in the book I have recently written. That is the opinion of the best lawyer I have consulted. 1 have gotten the best legal view I could. In the Supreme Court decision in the maximum rate case the court held that it is one thing to inquire whether rates that have been made are reasonable — that is a judicial act; but it is an entirelj^ different thing to prescribe rates for the future — that is a legislative act. In the Joint Traffic Association decision the Supreme Court decided that public policy is what the law directs. I think it is a principle well established that the courts will not overrule a law of Congress on the ground of its not being reasonable, or even on the ground that it violates an abstract principle of justice. The Chairman. But has not the Supreme Court on several occasions held that where this legislative power was directly exercised by the legislature of a State in fixing rates that those rates were confiscatory and have set them aside ? Mr. NiMMO. Yes, sir. I will read right here from the pamphlet INTERSTATE-COMMERCE LAW. 351 already referred to my view on that particular point, focus of the whole contention: That is the very While it is unquestionably constitutional law that no carrier can be compelled to carry freights at rates which are in effect confiscatory, yet a broad line of distinction lieS: between remunerative rates and confiscatory rates which in practice excludes the courts from the power to condemn any rate on the ground it is unjust or unreason- able. Without doubt the discretionary power proposed embraces the entire range of commercial profits which in practice justifies the construction and the operation of railroads. In a word, it is an autocratic and absolute power.' Now, there is a subject stated by Judge Knapp in regard to which I take issue with him on a question of fact. I think that in his zeal he has misstated a great fact. Judge Knapp declared that rates are exorbitant, and that they have not been reduced within the last ten years. Judge Knapp. I made no such statement as that. Mr. NimSio. The statement made was exactly this, that there has been no substantial reduction in rates during the last ten years. Mr. Knapp. I made no such statement. Mr. Stewart. Judge Clements made that remark. Mr. NiMMO. I want to be entirely right. Mr. Clements. I made that remark in respect to the rate involved in the case I was then talking about. The Chairman. It is not necessary that we discuss that matter. Mr. NiMMO. I have the record here The Chairman. Our record will show what was said. Mr. NiMMO. Judge Knapp said that there has been an apparent reduction in rates during the last year; that that apparent reduction, however, is deceptive; that it has been the result of the fact that there has been an enormous and disproportionate increase in the carriage of coal and other low freights. Am I right? Mr. Knapp. I said that. Mr. NiMMO. That I deny. There is the issue of fact. I deny that statement by Mr. Knapp. Now I will come right to the point. Here I have compiled a statement. The Interstate Commerce Commission divides the railroads of the country into ten groups and works out a charge per ton per mile according to the statistics of the internal com- merce of the country. 1 take the report of 1890 furnished me by the Interstate Commerce Commission, and also the one for 1900. Now, here are the rates, the charges for 1890 and the charges for 1900. This shows the reduction— 16, 26, 21, 29, 24, 16, 22, 16, 28, 35, and for the whole United States 22^ per cent. Revenue per ton per mile charged by railroads of the United States, according to statistics of the Interstate Commerce Commission. Groap I Group II Group III Group IV Group V Group VI Group VII Group VIII Group IX Group X United States 1890. Cents. 1.373 .828 .695 .844 1,061 .961 1.360 1.152 1.303 1.651 .941 Cents. 1.152 .613 .546 .595 .808 .806 1.064 .964 .938 1.067 .729 Reduc- tion. Per cent. 16 26 . 21 29 24 16 22 16 28 35 22i 352 WTlRSTATE-COMMEROE LAW. Here we see by the Commission's own figures that comparing data for 1900 with the data for 1890 there was a fall in the average rate in each one of the ten groups ranging from 16 to 35 per cent, and that the average reduction for the whole country was 22^ per cent. So I am compelled to say that the recent declaration of Mr. Prouty at Chicago as to advancing rates is absolutely erroneous or that the data upon the subject published by the Bureau of Statistics and the Interstate Commerce Commission are absolutely erroneous. The attempt is made t9 refute these figures upon the ground that . there has been an inordinate increase in the tonnage transported of low-grade rates, such a,s coal and ores. But I have shown in this state- ment, which I desire to submit as a part of my remarks, that there is not a particle of truth in this assumption, the general increase of ton- nage having been proportionately greater than the increase in the tonnage transported of iron ore and coal. The data just given is not afi'ected by changes of classification, as it embraces freights of all descriptions without regard to class. Now I come to the statement of Judge Knapp that these reductions in rates have been due to the inordinate increase in the carriage of coal, ores, and other low freight, and I assert to you that the reverse is true,' namely, that the increase in the freights other than coal, iron, and so on has been more rapid than the increase in the total of iron, coal, and other low freights. I make this diametrically opposite statement, and I base it upon the statistics of the United States Government, pub- lished in the statistical abstract of the mining resources of the United States. The total tons carried 1 mile on railroads in the United States increased in ten years 86 per cent, while the coal marketed and the iron ore produced, according to the statistics of the Geological Survey, increased only 74 per cent. That is, coal and iron. The pro- duction in those articles did not increase as fast as the increase in the general merchandise of the country. As a special example, 1 have taken group No. 2, which embraces the States of New York, Pennsylvania, and Maryland, and compared them with Pennsylvania, West Virginia, and Maryland, three great coal- producing States, as to the amount of coal produced, and I find that the traffic on those roads of general merchandise increased faster than their traffic in the carriage of coal. Now, in order to be specific. Judge Knapp made the statement to> me verbally, and he has set me to work on these figui'es. I have written to six or eight railroads in difi'erent parts of the country, aadt I have brought to their attention this specific statement of Judge- Knapp, and asked them if the rates I have read increased or decreased, dm'ing the ten years. There is one aspect of this case which seems to be lost sight of by ■ Mr. Ktiapp. He says seven or eight hundred charges have been filed lately of increases in railroad rates. Here is a fact in railroad economics. A classification or a schedule gets stale in about a year. This is a great and growing country; conditions are continuously changing, and so the classifications have to be changed. A railroad schediile may be all right to-day but it will be stale in about a year or two. This has. been going on ever since we have had railroads. They have to meet, together occasionaly and adjust their classification. I have asked cer- INTEESTATE-COMMERCE LAW. 353 tain gentlemen to send to you and let you know whether the average cost of charges on those things has gone up or gone down. Gentlemen, this whole talk about exorbitant rates in this country is sheer moonshine; without any feeling of disrespect I say it is nonsensi- cal. In March, 1898, Mr. Knapp, the president chairman, who is pres- ent with us to-day, said: The question of excessive rates, that is to say, railroad charges which, in and of themselves, are extortionate, is pretty much an obsolete question. The Supreme Court has in no case decided that a rate charged is in itself exorbitant, and I think 1 am not mistaken in saying that the question as to the reasonableness of any rate per se has never been proved in any Federal court. In all these millions of transactions 120,000,000,000 worth of prop- erty moves every year, probably S25, 000,000,000, and yet there has never been any rate which has been proven in a Federal court to be extortionate. The amount just stated is about twice the value of all the railroads of the country. I next come to the question of discriminating rates. The question of discriminating rates was thrashed out in the Senate committee about two years ago. A resolution of inquiry, submitted by Mr. Elkins, who is now chairman of the Senate Committee on Interstate Commerce, was addressed to the Interstate Commerce Commission asking them certain questions about discriminating rates. The Commission answered promptly, and this is about the result in all the United States during the ten years from April, 1890, to April, 1900. The total number of cases decided by the Commission was 180. The number of appealed to the court was 35. The Commission was sustained in 4 cases; the Comniission was reversed in 17 cases. I now refer to something here which is highly commendatory, very highly complimentary, to the Interstate Commerce Commission. I like to compliment the Commission, because they are estimable men. In its last annual report the Commission saj^s: The great mass of complaints are handled and disposed of by the Commission by preliminary investigation and correspondence. The total number of proceedings brought before the Commission during the year was 340, but only 19 formal pro- ceedings were instituted before the Commission, or only 1 in 18 of the complaints preferred. There were only 10 cases decided by the Commission during the year, or 1 in 34 of the complaints entertained. This admirable results indicates the high degree of perfection to which the railroad system of the country has attained. It is also creditable to the act to regulate commerce and to its administration. Now, the efficiency of this law has been questioned and denied, but with this section 16 put in force it is going to turn out to be a much better law than anybody thought it was going to be. Here is a Commission that hears these cases, 340 a year, as a conciliatory body and as an arbitration bodj', and they settle informally 321 cases out of the 340 cases submitted to them. Where is there a court in the United States that has such success as that? This is a sort of a demonstration. This Commission has been look- ing with disdain upon the most admirable feature of this law. That is its conciliatory feature, its arbitration feature. It has a power to settle things out of court, and it has succeeded admirably in doing it. Why, sir, I regard it as one of the ornaments of our civilization, and am pi'oud that we have a jurisdiction here that can settle 19 out of 20 i-c L 23 354 INTEESTATE-OOMMEBCE LAW. eases submitted to its judg-ment. But notwithstanding this great administrative success they come here and say that this law is weak, and that they are powerless. They are exercising the finest kind of power that was ever exhibited by a civilized government, and they are doing it successfully. Mr. Clements. The gentleman says they were settled. _ They were not settled. In most cases they were disposed of by leaving the ship- per right where he was. Mr. NiMMO. In the book that I have written I have gone into the subject of secret violations of published rates with great care and have made these declarations: First. It has steadfastly denied — I am referring to the Commission — that it is in any especial manner responsible for the prevention of rate cutting. I want Judge Knapp and these other Commissioners to bring the facts disproving these statements. Second. It has opposed any amendment to the act to regulate commerce designed to afford the Commission greater facility for the enforcement of the penal provisions of the statute. In other words it has treated not only with disdain but with aversion that very feature I have been talking about, that magnificent feature of conciliation. Third. It has been derelict in the discharge of duties with respect to the prevention of rate cutting. I have referred to the proceedings of the Judge to prove that. Four. The remedy proposed by the Commission is not applicable to the cure of the evil complained of. And that is the reason why we have resorted to section 16, aban- doned the criminal, and invoked the civil remedy — the right arm of the law, and — Five. The remedy proposed by the Commission is misdirected. Those are the five statements I make in reference to the secret viola- tions of published rates, in reference to the Interstate Commerce Com- mission taking action in connection therewith, and I desire here to introduce just what I have said upon that subject: The Commission has strenuously maintained that it is not responsible for the pre- vention of rate cutting. By the second section of the act to regulate commerce every departure from tarin rates is expressly forbidden and is declared to be illegal. By section 6 it is provided that in order to compel every common carrier to publish and file with the Commission its tariff rates, fares, and charges the "writ of mandamus shall issue in the name of the people of the United States at the relation of the Commissioners," and section 12 provides that "the_ Commission is hereby authorized and required to execute and enforce the provisions of this act;" for which purpose the Commis- sion is given the widest possible powers of investigation, including the power to require by subpoena the attendance and testimony of witnesses and the production of all books, papers, contracts, and agreements and documents relating to any mat- ter under investigation. The law distmctly provides that it may Ijy one or more of its members prosecute any inquiry necessary to the discharge of its duties in any part of the United States. It has also the power to require every district attorney in the United States to prosecute all necessary proceedings for the punishment of violations of the act, and its findings in all judicial proceedings are made prima facie evidence as to each and every fact found. Furthermore, it is provided by section 16 of the act to regulate commerce that if it is made to appear to any United States court "that the lawful order or require- INTERSTATE-COMMERCE LAW!. 355 ment of said Commission drawn in question has been violated or disobeyed it siiall be lawful for such court to issue a writ of injunction or other proper process, man- datory or otherwise, to restrain such common carrier from further continuing such violation or disobedience of such order or requirement of said Commission and enjoining obedience to the same." Notwithstanding these clearly prescribed powers and duties the Commission has, from the beginning, sought to repel the idea that by the act to regulate commerce it is especially charged with the duty of enforcing the provisions of the act against secret rate cutting — the paramount purpose of the act. In proof of the correctness of this assertion the following facts of record are adduced: In its annual report to Congress for the year 1893, at page 7, the Commission declared that it " is wholly without authority as respects those discriminations between individuals which are made misdemeanors by that enactment," that "it is endowed with none of the functions pertaining to the detection and punishment of delinquents except such functions as may be exercised by private citizens," and (on p. 8) it deprecated the idea that it has anything to do with " uncovering the guilty trans- action and bringing to justice those who engage in it." In a letter addressed to Hon. William E. Chandler, a Senator of the United States from New^ Hampshire, under date of October 17, 1895, Hon. Martin A. Knapp, then an Interstate Commerce Commissioner and now chairman of the Commission, strenu- ously maintained that the prevention of the crime of rate cutting is a thing "with which the Commission has no power to deal." (Senate Doc. No. 39, Fifty-fourth Congress, first session, p. 14. ) For this and other declarations of similar import Senator Chandler administered to Mr. Knapp and to the Commission a sharp rebuke. ' Mr. Knapp appears to have been then, as he has been ever since, laboring under the delusion that the duty of preventing rate cutting and other penal offenses denounced by the act to regulate commerce is incompatible with and beneath the function of revising all the freight tariff of the country, of prescribing rates for the future, and of determining the relative advantages to be enjoyed by competing towns, cities, and sections, and by competing industries throughout this vast country, a conception which he described in his letter to Senator Chandler as "my high ideal of the work in which the Commission is engaged," an idea which as 1 have endeavored to show is expressive of a malignant form of bureaucratic government, and as such utterly inconsistent with the governmental institutions of this country. In its persistent denial of the fact that it is explicitly charged by the act to regu- late commerce with the duty of preventing rate cutting the Commissson flatly opposes its opinion to that of the Supreme Court of the United States. In the Max- imum Eate Case (167 U. S., 479) the court said: "It (the Commission) is charged with the duty of seeing that there is no violation of the long and short haul clause; that there is no discrimination between individual shippers, and that nothing is done by rebate or any other device to give preference to one against another; that no undue preferences are given to one place or places or individual or classes of individuals, but that in all things that equality of right, which is the great purpose of the interstate-commerce act, shall be secured to all shippers." But, as before stated, in this as in other respects the Commission has not and does not to-day hesitate to oppose its opinion to that of the Supreme Court of the United States regarding the interpretation of the statutory or constitutional law of the land. The Commission has repelled any attempt to give it greater power in enforcing the penal provisions of the act to regulate commerce. Not content with a denial of its duty to prevent rate cutting the Commission has deprecated the idea of increasing its power to prevent the commission of misde- meanors, particular reference being had to rate cutting. On page 7 of the seventh annual report of the Commission is found the following declaration : ' ' But the main point to be considered is that Congress has no power to clothe the Commission, or any similar tribunal, with authority to execute the penal provisions of this statute, other than to aid prosecuting ofiicers in procuring evidence against suspected parties." And again on page 8: "No amendment of this statute, therefore, is necessary or suitable with the view of giving greater power to the Commission in enforcing its penal provisions." But when driven from the charges of exorbitant rates and unjustly discriminating rates as possible excuses for demanding of Congress autocratic power the Commission glaringly stultifies itself by seeking to secure amendment to the act to regulate com- merce for the purpose gf preventing rate cutting through an expedient which as herein shown is not only out of all proportion to, but totally inapplicable to the offense, besides being essentially revolutionary. 356 INTERSTATE-COMMEECE LAW. The repudiation by the Commission of responsibility for the prevention of rate cut- ting and its simultaneous effort to prevent any strengthening of its powers for that purpose which would be subject to judicial review clearly indicates its fixed purpose and desire to free itself of any sort of cooj)eration with, or dependence upon, the judiciary in the discharge of its official function. The Commission has been derelict in the discharge of its duty with respect to the prevention of rate cutting. The Commission has neglected the duty of using its best efforts to aid in detecting and in bringing to punishment persons who^ have been guilty of the offense of rate cutting and other misdemeanors, a duty plainly incum- bent upon it under the provisions of sections 2, 6, 10, 12, and 16 of the act to regulate commerce. This seems to be the result of the extreme aversion entertained by the Commission toward that class of duties. In the fifteenth annual report of the Commission, submitted January 17, 1902, at page 8, appears the following: "To convict for unjust discrimination it is necessary to show not merely that the railway company paid a rebate to a particular shipper, but it must also be shown that it did not pay the same rebate to some other shipper with respect to the same kind of traffic moving at the same time under similar conditions. As a practical matter this is almost always impossible." The rule of law here stated by the Commission was announced by Judge Grosscup, of the northern district of Illinois, in a decision rendered June 20, 1896, in the case of United States?;. Hawley (71 Fed. Eep., 672), with which case the Commission had nothing to do. It is as follows: ' ' This case illustrates that whatever difficulties there are in the enforcement of this act are not so much due to the law itself as to the failure of the prosecution to gather up and lay before the grand jury the essential facts of a case. The facts difficult to ' obtain — the transaction between the carrier and the favored shipper — are fully spread upon this indictment. The facts not difficult to obtain — the identity of the shipper discriminated against — constitute the fatal omission. Ordinary alertness and intelligence would have avoided this pitfall." Herein the court declared that the facts as to the identity of the shipper discrimi- nated against are "not difficult to obtain" and sharply animadverted upon the fail- ure to obtain them, whereas the Commission, in its annual report, dated January 17, 1902, has declared that the discovery of such facts "is almost always impossible." In this the Commission flatly opposes its opinion to that of the judiciary and of every freight traffic manager in the country. I mention this contrariety of opinion upon a matter easily susceptible of proof as one worthy of Congressional inquiry. The judicial opinion just cited relates particularly to the offense of unjust discrimi- nation. But in the same case the court stated the fact that it is a violation of the law to charge less than the tariff rate. Even this offense, not involving any charge of unjust discrimination, the Commission seeks to ignore, declaring that the law "does not punish (it) otherwise than by a possible nominal fine." The law, however, explicitly prescribes for this particular offense a fine of "not to exceed |5,000." The declaration of the Commission that the act to regulate commerce does not confer upon it ample power to prevent rate cutting is strenuously denied by able law- yers and jurists who hold that sections 2, 6, 10, 12, and 16 of the act give it ample power to correct and prevent such offenses. If, however, the law is in this respect defective, by all means let it be amended so that the procedure may be freed from any political difficulty. Differences of opinion prevail as to the nature of the remedy which should be adopted for the prevention of rate cutting. In its fifteenth annual report, submitted January 17, 1902, the Commission suggests as a remedy for rate cutting that the cor- poration as well as its officers should be subject to the penalty prescribed in the act. The general solicitor of one of the great trunk lines of the country suggests that the corporation alone ought to be subject to the penalty. The question is one to be deter- mined by Congress and is worthy of careful consideration. It is believed that any proper amendment to the act in regard to rate cutting would be cheerfully accepted by the principal railroad managers of the country, and that they would cordially cooperate in the enforcement of the law. The public attitude assumed by the leading railroad officials of the country toward this subject seems fully to sanction this statement. In this connection it is worthy of observation that the Commission fails to show in how many cases it has given the courts a chance to consider rate cutting upon evidence which the court declares not difficult to obtain, or to adduce evidence upon which the courts may impose what the Commission calls "a possible nominal fine " but which may amount to |5,000 and which with ordinary diligence can be imposed. It is belived that if the Commission had been half as earnest in the attempt to pre- INTERSTATE-COMMERCE LAW. 357 vent rate cutting as it had been in its efforts to secure autocratic power, the misde- meanor complained of would now be very much less the subject of complaint. It is believed also that a thorough Congressional investigation of this particular subject would clearly expose a manifest dereliction of duty on the part of the Commission. The history of the case exposes the aversion of the Commission to a duty clearly imposed upon it by the interstate-commerce act, and this is exhibited nowhere so glaringly as in the oft-repeated assertion of the Commission that it has been deprived of the power to afford relief to complainants against wrongs incident to infractions of the law, and that is not responsible for the prosecution of specific violations of the provisions of the act to regulate commerce, both of which statements are stren- uously denied. A recent news item indicates that at last the Commission has awakened to a real- ization of the fact that the law imposes upon it a duty with respect to the suppression of rate cutting, and that it is disposed to try to set in motion the means for accom- plishing that object before the courts, as provided in the act to regulate commerce. The remedy proposed by the Commission is not applicable to the cure of the evil complained of. The plan of conferring upon the Commission the power to prescribe rates is totally inapplicable to the offense of rate cutting. It has no relation to such offenses as of means to an end. The Commission has never sought to show that it has such relation. There is not the slightest reason to believe that rates made by the Commission would be any more exempt from rate cutting than are rates made by the companies. The true remedy pointed out by the judiciary and by the lessons of experience lies in a faitlitul enforcement of existing laws, which the Commission has spumed and neglected to enforce. Such laws, however, may be amended or supplemented by others which would facilitate the administrative work of the Com- mission, for the question is one of procedure and not one as to the power to act. The history of the course pursued by the Commission in this matter clearly indi- cates that the idea of asking Congress for autocratic power over the commercial, industrial, and transportation interests of this country in order to suppress rate cutting is an afterthought. Rate cutting is now brought to the front apparently from the fact that the Commission sees no other means of advancing its claim to the exer- cise of autocratic power either in exorbitant rates or in unjustly discriminating pub- lished rates. Secret violations of published rates have their origin in the competition of rival commercial forces and are expressions of such struggles. This is apparent to merchants and to railroad managers throughout the country, and as such is deprecated by them. The fact is also clearly perceived that the remedy for such evils lies primarily in railroad self-government dictated by enlightened views of self-interest, the inspiring motive of all wholesome statutory enactments. Unfortu- nately the Commission has frowned upon such self-restraint and sought to substitute therefor its claim to the exercise of arbitrary power. The question is one of vast political import and should not be left to the discretion of any administrative body — certainly not to any bureau of the Government bent upon the acquisition of autocratic power over the commerce and industry of this country. It is eminently a question for Congressional determination. Besides, it may be observed in this ^connection that the duty imposed upon the Commission by the twenty-first section of the act to regulate commerce, to recom- mend to Congress such additional legislation "as the Commission may deem neces- sary," does not extend to great questions of public policy or to political questions which would naturally command the attention of Congress, but, in the language of Mr. Justice Shiras in Texas and Pacific Railway v. Interstate Commerce Commission (162 U. S.), should "be confined to the obvious purposes and directions of the statute." It is to be regretted that the Commission has not been guided throughout by this obvious rule of propriety. Beyond all question the remedy proposed by the Commission is misdirected. There are always two parties to offenses involving contractual relationships. In the case of rate cutting these are the shipjjer and the carrier. The shipper is invariably the prompter to the offense, for it is always to the interest of the carrier to secure tariff rates and to the interest of the shipper to secure less than tariff rates. The concrete cases which supply the text and ostensible cause of the present move- ment of the Interstate Commerce Commission for the purpose of preventing rate cutting is furnished mainly by the persistent efforts of certain large shippers of packing-house products of the West to secure less than tariff rates for the carriage of their products. It is an old story, to which public attention has been several times directed during the last two years. So uniform, however, has been the "cut" by the several competing companies that it constitutes practically a common rate, lack- ing only the legal requirement of publicity. The rates actually charged would avoid 358 INTEKSTATE-OOMMEECE LAW. the censure of beliig "cut rates" if they were published. They involve no material discrimination with respect to producers, localities, or shippers, but do involve most outrageously discriminations with respect to carriers. All this is clearly stated by the Commission in its annual report just published. Therein it adduces the fact that at one time a particular road "was carrying into Kansas City 33 J per cent of the cattle slaughtered there and carrying out of that city only 2 per cent of the product." The Commission also shows, in the report mentioned, that the cut rates are a source of benefit to the producer, the consumer, and the packer. At the same time they involve enormous loss to the carriers. This is stated by the Commission in reply to two self-addressed inquiries: First, "Who has the benefit of the reduction in these rates?" and, second, "Does it result in advantage to the producer and consumer, or is it absorbed by the packing house itself." The answer of the Commission to these questions is as follows: "It seems probable that in case of a reduction like this, which seems to be tolerably uniform and long continued, the general public must obtain some advantage, but wp think that in the main these sums swell the profits of the packers. The number of these great concerns is only some five or six, and there does not appear to be much discrimination between them. Each usually knows about what the lowest rate is and usually manages to obtain that rate." This clearly expresses the whole matter at issue. The cut rate is practically a common rate, and irregular only because not published as required by law. This results in some benefit to the producer and the consumer, much more to the packer, and appalling loss to the carrier — the railroad company. This conclusion has been laconically expressed as follows by one of the Interstate Commerce Commissioners since his recent return from Chicago: " The fact is that five or six big shippers have for years been sandbagging the railroads." Hence the question arises, Why attempt to punish those who are sandbagged, instead of having recourse to some plan to punish the sandbaggers? But it is just this injustice and manifest solecism into which the Commission has unconsciously stumbled in its most unreasoning desire to acquire a coveted power by visiting upon the railroad companies the severest and most humiliating punishment, namely, that of depriving them of the right to con- tract freely with the general public as to the commercial value of the service which they render and with no other apparent excuse than an utter inability to base their claim to autocratic power upon any other plausible pretext. What has been said of rates on packing-house products applies substantially to complaints as to "cut rates" on wheat and flour. The latter involves a long and sharply debated question as to the relative rates on wJieat and flour. This is a com- plex and involved commercial and economic question. The general but rather vague conclusion of the Commission in regard to it is expressed as follows on page 16 of its last annual report: "To an extent the rate upon flour in the foreign market must be higher than that upon wheat. This is decreed by physical conditions which no statute and no com- mission can alter. To that extent this industry must expect to operate at a dis- advantage." In the light of all these facts the' proposition to have recourse to the haphazard an(} absurdly misdirected remedy of governmental rate making for the cure of prob- lematical evils attending the transportation of provisions, fiour, and wheat and the commerce in these commodities would be as absurd as it would be monstrous. A Congressional investigation as thorough and as impartial as that known as the '_' Cullom' investigation of 1886" would not fail to set all these difficulties in their true light and to disclose a remedy which would be properly directed and efficacious. I have sought neither to palliate nor to defend rate cutting. Its extent and effectS' have been greatly magnified for the purpose of predicating upon it the Commission's claim to the exercise of autocratic power, but it is an undoubted evil, and has no defenders other than those shippers who practice it to their own advantage and ta the detriment of their competitors and of the carriers. Beyond all doubt it is an evil which can be abated and as successfully prevented as are other misdemeanors which are mala prohibita. Mr. Chairman, there is one subject I would like to speak to you about, in which I am very much interested, and that is the impor- tance of a thorough Congressional investigation of the railroad prob- lem. During our long period of railroad construction we have had only one thorough investigation on this subject. These hearings, you know, are partial. Your time is broken in upon, but to come down to a thorough investigation, we have had but one, namely, the Cullom INTER8TATE-C0MMEB0E LAW 359 investigation of 1886. Even the Windom investigation of 1873-74 was not a complete railroad investigation. I was employed as a special- ist by the Windom Commission on this very question. Subsequently I studied the question carefully and wrote a series of reports on it as Chief of the Bureau of Statistics, the result of ten years of investi- gation. In England, since 1840, they have had ten Parliamentary investiga- tions. With only one twenty-fifth of the area, and with only 22,000 miles of railroad, as against 20.0,000 miles of railroad in the United States, Great Britain has had ten investigations on that subject. 1 have worked up something upon that subject with great care, and I will hand it in; and I want to say that when you consider all the com- plexity of conditions — these difficulties — I have been studying this subject for over forty years. I began to write on it in 1856, when I was employed as a civil engineer on one of the first railroads con- structed in Iowa. There is nothing I crave so much as the knowledge which would come from a thorough and impartial Congressional inves- tigation, such as was had in England, which was started in 1842. Mr. Gladstone was chairman of that investigation, and it was an example for all the commissions which have followed in England. There is another subject which I would like to bring to your atten- tion. It will not take me over five minutes. I refer to the history of pooling. In no other way can you get at the merits of pooling. That is the way with all great economic questions. Their solution is always based on the lessons of experience. Perhaps there are few living men who are more familiar with the early history of pooling than I am, because so many others, with whom it was a matter of personal experience are now dead. Many railroad men, especially well-informed men, have passed away within the last ten or twelve j^ears. Go back with me to 1856, when every railroad was practically independent of every other railroad. The idea of building competing railroads was not entertained. Such a thing was thought to be bad policy. That idea prevailed in your State, Mr. Chairman, at the time when I was out there in 1855, 1866, and 1857. There were five lines projected. In a letter which I wrote to a New York newspaper at that time Mr. Stbwakt. Can you tell us what you represent, what organiza- tion, if any? Mr. NiMMO. I am coming to that in a moment. This is about the substance of the article describing the I'ailroad problem of that period, in 1856. It was like this: ''There are five railroads projected across Iowa. Take those five roads; thej^ will each be about 20 miles apart, 20 or 30 miles, so that each railroad will have 10 or 16 miles of land on each side to feed it. Each one will have a separate terminus on the Mississippi River, which is to be for all time the great highway of commerce for the United States. They will each have a different ter- minus both on the Missouri River and on the Mississippi River. The commerce will come out from the West to go down the Mississippi River. That was about the idea of having it then and competition was not known. At that time the best informed railroad men in the country, engineers and constructionists, declared a transcontinental railroad to.be an impossibility, that it could not be constructed in one hundred years. All that is of the dead law. Now, we have one vast network of 360 INTEESTATE-COMMEBCE LAW. railroads extending from the Atlantic to the Pacific Ocean. The phys- ical union between them became as intimate as that between the Siam- ese twins. The intimacy begot strife. It is said that Chang once beat Eng into a state of insensibility, and the result was that they both had to go to bed for three weeks. The railroads encountered similar troubles; they were forced to adopt measures in the nature of self-government. Now, the railroads of the countrj^ constitute physi- cally one great oi'ganization. That organization must have the means of self-government. That government has got to be instituted in some way by associations of various sorts. They adopted all sorts of plans to complete this organization of the American I'ailroad system, the greatest system of transportation the world ever saw. It is still involved in diflicultj^, but it is the grandest system of transportation the woi'ld ever saw. Mr. Stewakt. Is there harmony in this one organization ? Mr. NiMMO. The degree of harmonj' is wonderful; but still there are loose ends, there are frictional resistances, and there will be to the end of time. Here the question which confronted all the railroads of the United States was, "How can we organize this great mass of rail- roads so intimately connected physically f It is physicallj^ one. It is united in ten thousand different ways. Cars and locomotives all employed jointlj' on different lines. There is a commercial demand that goods starting, say in Chicago, shall go in that same car over the different roads to the furthermost part of the country. The act of June 15, 1866, was the result of public demand. I have called that act the charter of the American railroad sj'stem. It permitted the rail- roads to connect their lines and to engage in joint traffic. That brought about the most terrific problem, one of the most complex and the most difficult problems that the human intellect ever grasped. It has not yet been worked out perfect!}', and never will be; there always will be frictional resistances and incidental resistances. And now as to the histor}'^ of pooling: There had been some small efforts at pooling as between Chicago and Omaha. Three or four of the Iowa roads got together and they made a pooling contract, a division of traffic. There were two or three other arrangements of the sort. But the question arose how to take a whole series of rail- roads in different States and sections and get those roads into an agree- ment which would stop cutting each others' throats, a practice which brought about horrible discriminations. That which occurs to-day is nothing compared to it. Demoralizing discriminations occurred all over the United States. There was one man, Albert Fink, vice- president of the Louisville and Nashville road, who worked out a plan b}^ which he could take the railroads south of the Ohio River and bring harmony out of that great mass where they were fighting com- merce to death. He figured that put. The history of that is this: In 1875 I entered upon an office which was created for me. It was called the division of internal commerce, for the purpose of carrying on the study of what the Senate Commit- tee on Transportation Routes had been engaged on for two years. 1 entered upon that work the 1st of Julj', 1875. In September Mr. Fink was appointed and started his big pooling scheme at Atlanta, Ga. I wrote to him that I would like to understand his scheme, and he came to Washington to see me and talked it over. He spent a week here. We talked over the pooling scheme, and the aim and object was INTERSTATE-COMMERCE LAW. 361 to stop this cutthroat fight involving these outrageous discrimina- tions, which were bringing about chaos in the traffic of the commerce of the country. Mr. Fink had hard work to get his scheme into the heads of railroad officers. He did not succeed perfectly. He died almost in despair because he believed he had a remedy for the whole difficulty. He could not get the railroad presidents of the United States to agree with him on certain points. The first principle in all railroad transportation is to get traffic. The second principle is to get as much as you can for it. The fil'st step is an agreement as to the proportion of traffic which each line is to have. That has got to be the basis upon which we can build up the government of this great organization. He got them interested in it. I said to him: Your scheme has two grounds of support. First, you have demonstrated the fact that an enUghtened sense of self-government ought to prompt these men to adopt this scheme. The second, they have imphcit confidence in you, in your inteUigence, and in your integrity. But they need a third prop, for it takes three props to make a stable tripod. No inanimate thing can stand unless it has three points of support. You have to legalize this thing. You must make it legal. He said, "That will come by and by." The fact is, this whole pooling scheme ran on two points of support. It occupied a position of unstable equilibrium. I think to-day pooling is very uni^opular with some of the leading railroad men of the country. Some men say that thej^ would rather have a simple agreement as to rates. Then let the rates divide the, traffic. But I think pooling among the leading railroad men is unpopular. Don't you think so. Judge Knapp? Judge Knapp does not answer that. I think the Judge must know that. Mr. Knapp. I am not afraid to answer any question. I stated yes- terday that if the right was exercised it would rarely find expression in pooling; it would find expression in the organization of traffic associations. The Chairman. Mr. Nimmo, I would like to ask you for whom you speak, if for anjj^one? Mr. Nimmo. Only for myself. The Chairman. You are not authorized to speak for anyone else? Mr. Nimmo. No, sir. I ha^^e been asked two or three times to.repre- sent certain parties, but the fact is that the railroad men of this country are just about as much at loggerheads and as diametrically opposed to each other in their views as other men. Mj^ business is that of statis- tician and economist. 1 furnish information, and I am very desirous of furnishing information, not only to people that believe as I do, but to people that do not believe as I do; and sometimes the people who do not are in the majority, and, like everybody else, 1 like to have as much patronage as possible. I have had a wide correspondence on this thing, and I want to be perfectly independent in my views. Mr. Stewart. You are in the pay of some of the railroads ? Mr. Nimmo. I furnish information. Mr. Stewart. You furnish information now in reference to these hearings ? Mr. Nimmo. No, sir; nobody has ever suggested Mr. Stewart. I mean you nave furnished information in regard to these hearings ? 862 INTERSTATE-COMMERCE LAW, Mr. NiMMO. I furnish information to anybody. Mr. Stewart. Who are those corporations ? Mr. NiMMO. I merely furnish information. The companies will appear here by the attorneys of the railroads. Mr. Stewart. Have you any delicacy in furnishing their names? Yours is an honest employment? Mr. NiMMO. Yes. Mr. Stewart. Why should you conceal your employers' names? Mr. NiMMO. The same as anybody. I would rather not. If they want to come up and use my statistics they can quote them, but my work is confidential; 1 have pursued that course. Mr. Stewart. That is the vice we want to get rid of — these secret arrangements and rebates. Why should you be so clandestine about your eniployment ? That is what we are complaining about. Mr. NiMMO. I am giving you merely a philosophical view of the case as I understand it after forty-two years' study. Mr. Stewart. You do not want to pose here as a philanthropist? You do not say you are publishing these statistics without remuneration ? Mr. NiMMO. Oh, no; oh, no. I say I am adopting the prof ession of statistician and economist. I furnish information, and it is all confi- dential. Mr. Stewart. Were you invited to come before this committee? Mr. NiMMO. I asked my friend, the chairman, to let me come up here. It is the joy of life to me to be engaged in this work, Mr. Kep- resentative. Besides any question of remuneration, I am in this work because I am personally interested in it. I have been preparing a book on it for forty-six years, and I expect to continue in the work while I live. Mr. Stewart. But you are not doing it merely for your health ? Mr. NiMMO. No; I haye a book that I am writing, and it has got to be a life work with me. My book will be entitled the Evolution of the American Railroad System. I have written a great deal on the subject, and I want to boil it down, but I want the subject to evolve a little further. There are some problems that you have before you which I want to see settled before I finish this work. Mr. Stewart. What is the rate per volume ? Mr. NiMMO. 1 dp not know how big the volume is going to be. The Chairman. We have been in session now over three hours, and the committee will be in recess until next Tuesday, April 29, at 10.30 a. m. (Adjourned.) The following is the statement referred to in the course of this hear- ing in regard to the importance of a thorough Congressional investiga- tion of the railroad transportation question in this country. INVESTIGATION BEFORE LEGISLATION. The many vitally important questions which confront the country touching any attempt at a radical change in our laws relative to the regulation of the railroads seem to point unerringly to the necessity for a thorough Congressional investigation of the subject in advance of any attempt to legislate upon it. In this we may profit very much from the example set by the people of Great Britain. As early as the year 1840 questions arisingout of the independent corporate owner- ship and control of the railroads agitated the public mind in Great Britain. The old British ideas of liberty involved in the consideration of monopoly, competition INTEESTATE-OOMMERCE LAW. 363 and combination, which from time immemorial had been the subject of lieated public discussion and of reflective judicial debate, gave rise to just such apprehensions and political theorizing as those which now seriously affect public sentiment in the United States. A British statesman of influence declared at an early date that ' ' the State must govern the railroads or the railroads would govern the State." George Stephenson — eminent as a civil engineer — declared that "where combination is possit)le competi- tion is impossible." These expressions were for years accepted in Great Britain as politico-economic dogmas. In the year 1844 a strong Parliamentary committee was appointed for the purpose of inquiring into and providing against the assumed danger. The Hon. William E. Gladstone was chairman of that committee. Its labors resulted in an act of Parlia- ment (act 7 and 8 Victoria, 85) passed in the year 1844, wherein it was provided that the Government might, upon terms stated in the act, at the expiration of fifteen years after completion, purchase any railroad constructed after the passage of the act.* In a word, the British Parliament provided, constitutionally, for governmental owner- ship and control of the railroads. But that power has never been exercised, and the public sentiment of Great Britain to-day utterly repudiates any such policy. This has come about as the result of the lessons of experience and of patient and persistent Parliamentary inquiry, reference being had particularly to the Parliamen- tary investigations of 1840, 1844, 1846, 1852, 1865, 1867, 1872, 1881, and 1893-94. The results of these ten Parliamentary inquiries were that the asserted dogmas herein- before quoted have been exploded, while other baseless notions, such as those which now to a greater or less degree possess the public mind in this country, have been dispelled; and the ancient principles of liberty and methods of justice still prevail in the regulation of the railroads of Great Britain. In this regard railroad regulation in that country strikingly illustrates the favorite British maxim, "We have govern- ment by discussion." But how different has been the practice in this country. With an area, exclusive of Alaska and our insular possessions, 25 times that of Great Britain and Ireland, and a railroad mileage of 192,161 miles, as against 22,000 miles in Great Britain, we have had only one thorough Congressional investigation, namely, that conducted in the year 1886 by the Senate Committee on Interstate Commerce. The act to regulate commerce drawn by Senator Cullom, chairman of that committee, is loyal to the fundamental American principle of government, that all contested questions affecting the commercial interests of the country shall be subjected to the test of judicial inquiry and determination. But the Populistic proposition confronta the country in favor of eliminating the courts from this domain of justice and in lieu thereof of sub- stituting an autocratic rule of admijiistrative authority, without any Congressional investigation whatsoever. There are also other and exceedingly important questions which demand Congres- sional investigation and public scrutiny in the light of such inquiry. Some of these questions are more important than those determined by the Senate investigation of 1886. The magnitude and importance of the commercial, financial, and industrial interests involved repel the very idea of any radical legislation in advance of such inquiry as that here suggested. Beyond all doubt, a thorough Congressional investigation of the various commercial, economic, and political questions involved in the general subject of railroad regula- tion in this country would develop results quite as salutary as those realized in Gi-eat Britain. It may also be stated in favor of such action that the two committees of Congress, as at present constituted, are admirably fitted for such inquiry. In his recent annual message to Congress, President Roosevelt referred to the railroads as "the arteries through which the commercial lifeblood of this nation flows;" and in urging the importance of investigation said: "The whole history of the world shows that legislation will generally be both unwise and ineffective unless undertaken after calm inquiry and with sober self-restraint." 364 INTERSTATE-COMMERCE LAW. Interstate Commerce Commission, Tuesday, April 29, 190'2. The committee met at 10.30 o'clock a. m., Hon. William P. Hepburn in the chair. STATEMENT OF MR. A. C. BIRD, OF CHICAGO, ILL. The Chairman. What road or system are 3^ou connected with? Mr. Bird. The Chicago, Milwaukee and St. Paul Railwa}' Company. The Chairman. What are the principal points that that line reaches 'i Mr. Bird. That line is operated in eight States — Illinois, Wiscon- sin, and the peninsula of Michigan, Missouri, Iowa, Minnesota, North Dakota, and South Dakota. Its lines reach Omaha and connect with the system of roads running through Nebraska and west to the Pacific coast. In Kansas City its lines connect with the Kansas lines running to the coast, Denver, and all through the far West and the Southwest, Texas, and the Gulf of Mexico. It is directly interested in the traffic of many large cities, commercial centers, manufacturing and distribut- ing points, such as Chicago, Milwaukee, Racine, St. Paul, Minneapo- lis, Lacrosse, Winona, Dubuque, Cedar Rapids, Des Moines, Sioux City, Sioux Falls, and the great Northwest wheat belt, which lies east of the Missouri River in the Dakotasand extends northward to Fargo. It is in touch with the general traffic of the country, as well as through all the States I have named. If you please, Mr. Chairman, I am not a public speaker, and I can not easily suffer interruption and preserve \nj thought, and if I may be permitted to go forward with my statement without interruption I would prefer to do so. Mr. Blythe. Just at this point I would like to ask Mr. Bird to state his services with the Milwaukee and St. Paul in a general way, in order that the committee may be informed of his means of knowledge. Mr. Bird. I am the third vice-president of that companJ^ I have been connected with the company twent}^ years in various capacities. I have heard and read a good deal of what has been said on the sub- ject of the necessit}' of the proposed legislation, and I have attempted to keep in touch with what has been said in this committee i-oom in favor of the bill. I understand that the bill in contemplation is the Corliss bill, and that that clause of it by which it is proposed to con- fer upon the Interstate Commerce Commission greater power over rates than they have at present is more particularly under con- sideration. That clause proposes to give to the Commission the powei' to fix rates after complaint and investigation, and to enforce their orders by a process which sets aside the usual order of procedure and denies to the railway owner the rights of jsroperty which are conceded to all other property owners. The right to fix a rate and to collect it is the essence of railroad property, and to take away that right and vest it in a board is to deprive the stockholders of their property without due process of law. Many reasons have been urged in support of this unique propo- sition, and the principal ones which have attracted my attention are: First. That serious abuses exist, and therefore the proposed measure should be adopted to put an end to them. INTERSTATE-COMMERCE LAW. 365 Second. That the orders of the Commission are disregarded, and certain cases have been cited and elaborated upon to show that an emergency exists which justifies an unusual procedure. The cases upon which great stress has been laid are the Milwaukee Chamber of Com- merce grain rates case, the Eau Claire lumber rate case, and the food rate case of the Northwest. At the proper time I will make some further statement in regard to these cases. Third. The practical abolition of railway competition. Fourth. It is said that for the first ten years under the law the car- riers as well as the public and the Commission believed that the Com- mission had the power to fix their rates after investigations, and that the orders of the Commission were promptlj'^ complied with; that the public was well served and satisfied. Fifth. That the right of eminent domain enjoyed by carriers is a suflicient reason for depriving the carriers of all other rights. Sixth. That, aside from the prevalence of secret preferential rates and rates which are unreasonable per se, relatively unreasonable i"ates prevail generally, and no remedy is available unless the Commission is clothed with the arbitrary power of the enforcement of its own opinions. These are the principal reasons that have come to my attention which have been urged in support of the measures now under consid- eration, and I would like, if you please, to touch upon these matters as briefly as possible from the standpoint of everyday experience. I am not versed in law, and I can not undertake to view this subject from a strictly legal standpoint. I claim some practical knowledge of the practical side of these questions. The first great complaint is well founded. There is not an official of any of the railways of any prominence or weight who will attempt to deny that the railway service has been honeycombed with secret preferential rates, which, to use an old popular phrase, make the rich man richer and the poor man poorer. Nor is there a respectable railway official of responsibility or author- ity who will not admit that that one abuse adds more to the difficulties, the anxieties, and the perplexities of railway management than all others combined; and speaking for myself, for the company which I represent, and for the class of officials of which I am one, I think the unanimous desire of railroad people is to aid in the enactment of meas- ures which will do away with that great, admittedly great, and flagrant abuse. At the proper time, if you permit — at this time, perhaps, as well as any — I wish to make a suggestion that is not an original one (it has already been made to this committee), but I wish to add the weight of my opinion to what has been said on that subject. The original act. or the act as soon afterwards amended, provided penalties for this class of offenses; it was made criminal. The com- mittee is well advised of all those conditions, that the offense has been made infamous, not only criminal but infamous, because punish- able by an. infamous punishment. The very nature of the case is such that if the offense is committed, or when an offense is contemplated, the two parties to the offense surround the case with every possible safeguard, and there are so many ways of violating the spirit of the act in that respect that it has always been exceedingly difficult to obtain evidence sufficient to bring the guilty parties to punishment. So much has been said regarding the reasons why railroad officials who are morally certain that the offenses exist will not testify that it 366 INTERSTATE-COMMERCE LAW. is unnecessary for me to amplify upon that point, because all that has been said by the proponents of this measure is freely admitted bj' rail- road people. This is the great crime of the times — ^secret preferential rates — and it seems to me that this committee may wisely attempt to devise means by which those crimes can be reduced in number and the practice itself discontinued. If I conceive the situation properly, the method, the whole respon- sibility, of the convicting and bringing the guilty parties to justice devolves upon the Commission and the limited agencies which it is able to maintain. And, for the reason I have given, they have met with the utmost difficulty. It has been almost no thoroughfare. Every railroad officer, stockholder, director, manager, or official is much more in position to find the facts and ascertain the means by which the truth can be ascertained in the form of testimony, arid has much more complete and satisfactory means of so ascertaining it than any expert of the Government has so far been able to employ. As the bill stands, if the law could be so amended as to abolish the personal feature of this penalty and to levy a just and proper fine upon the offending carrier for each offense, that act would instantly convert an army of 100,000 experts into detectives interested in bringing about the enforcement of the law. I speak in this manner after an experience of a good many years, and I know that there are thousands of cases where to the public the existence of the evil is morally certain, but none but an expert knows how to get evidence such as is necessary to enforce the penalty. It has been asserted here that there are a number of cases that show wherp the order of the Commission is disregarded, which proves con- clusively that this is an emergency and that new measures must be adopted. I would like to add a few words, if you please, in regard to the first subject. I find nothing whatever in the proposed measures that touch upon the chief cause of complaint. I do not see how it is possible that the mere power on the part of the Commission to fix a rate after a complaint will enable it or any other tribunal to detect and punish the grave secret offenses so often and so properly referred to. I find nothing whatever in the bill that even approaches that subject. Eegarding the second argument, that the orders of the Commission are disregarded, the Milwaukee grain-rate case was a peculiar one, and I am glad that the chairman of the Interstate Commerce Commission is here to hear what I have to say on that subject, and correct me if I fall into error. The complaint was brought by the Milwaukee Cham- ber of Commerce against the Chicago, Milwaukee and St. Paul Railway Company. In the course of the proceedings other roads became parties. I am hot sure but a number of them were originally parties to it; but others were added. Also, in the course of the procedure the Minneapolis Chamber of Commerce, a rival (and a very strong rival) of the Milwaukee Chamber of Commerce, also became, a party to the controversy. In order to make that case clear to the committee a map ought to be here to show the geography of the lines involved but I will try to describe them to the committee. The St. Paul Company has a line running west from Milwaukee through Wisconsin to Prairie du Chien and westwardly through the northern counties of Iowa to its western border, and beyond into South Dakota to the Missouri River. This line is known as the Iowa IKTEESTATE-COMMERCE LAW. 367 and Dakota Division. It is as near a direct east-and-west line as exists anywhere. It also has a line, one of its main thoroughfares, running northwestwardly from Milwaukee to La Crosse and thenee westwardh^ through the southern portion of Minnesota and beyond into South Dakota, known as the Southern Minnesota Division, parallel to the first described line, to its intersection with the James River Valley, which is the center and heart of that portion of the northwestern spring-wheat belt which is reached by the lines of the St. Paul Company, with one exception. It also has a line running "southwardly from Minneapolis through southern Minnesota, and which crosses the Southern Minnesota Division and thence south- wardly to Mason City, Iowa, where it connects with the Iowa and Dakota east-and-west line first described. These lines? from the wheat belt in western Minnesota, western Iowa, and South Dakota to Minneapolis are right-angle lines in each case. Its lines to Milwaukee are direct lines. There exist a number of rival lines radiating westwardly and southwestwardly from Minneapolis, tapping the lines of the St. Paul Conipan}^ which I have described at acute angles. One instance will be sufficient to illustrate. The North- western system, including the Northwestern road proper and the St. Paul, Minneapolis and Omaha, intersects or parallels the St. Paul Company's lines in southwestern Iowa, southern Minnesota, and South Dakota. Pipestone, Minn., is one point of direct contact which is sufficient for the purpose of explanation, but the two competing lines are parallel for a long distance east of Pipestone. The Imes of the Great Northern Company radiate like the spokes of a wheel from Minneapolis, cutting the lines of the St. Paul, and the north and south lines in the James River Valley, at angles in every direction. Then the Minneapolis and St. Louis Railway Company has lines extending southwardly and westwardly from Minneapolis, largely parallel with the lines I have described from Minneapolis, and those lines radiate westwardly and southwardly, crossing the St. Paul lines to Chicago, Milwaukee, and Minneapolis at various angles and dis- tances from the principal market of the competing companies, Minne- apolis. The Chicago and Northwestern system has lines southwardly and southeastwardlj' from Minneapolis to Milwaukee and Chicago. The Illinois Central has lines through the northern portion of Iowa east and west, not touching the Milwaukee market, but reaching Chicago only. Now, the complaint of the Milwaukee Chamber of Commerce was that the rates from the wheat district, say, from Pipestone to Milwaukee, did not bear a just relation to its rates from that point to Minneapolis; that the diflferential was not justified bj' the additional haul; that the distance from Pipestone of the two rival markets was disproportionate; or rather that the differential against Milwaukee was disproportionate with the diflerence in distance. Proceedings were brougnt under that clause of the law which requires that rates shall be comparatively just and reasonable. It seemed to me, representing the interests of the St. Paul Company, that there was much foundation of justice in the complaint. 1, like many others, was influenced by what appeared to be the interests of my company. There were many reasons why it would have been profitable to have hauled a larger proportion of the wheat crop to Mil- waukee, and the principal defense of the conditions complained of was 368 INTERSTATE-COMMERCE LAW. the importance of the Minneapolis market as a millers' market and the large volume of business wnich resulted from the manufacture of the wheat into flour. The order or recommendation of the Commis- sion in the case seemed to be eminently just, and at first it was regarded as a wise, prudent decision. There was no attempt by the Commission to fix the rates to Milwaukee from any of the wheat-producing districts. The controversy was as to the relation of rates, and the substance of the order was that a properly constructed distance tariff which was designated by the Commission should be used by applying it to the rate from a given point to Minneapolis, using the distance traversed, and from that same point to Milwaukee, using the distance in that case also, to see what the rate difference was, and that difference should be substantially the differential in lieu of the differential complained of. I think the Chairman of the Commission will correct me if-I am wrong. I do not attempt to follow every detail. Necessarih^, all the railways concerned in the complaint, or concerned in its settlement, convened their traflic officers to revise their rates so as to bring- them into harmony with the decision of the Commission. But practical difficulties that had never before been encountered in that precise way showed themselves, so that it was found impossible (practically impossible) to make any substantial modification of the rates, because companies that were rivals of the St. Paul company had the same standing that the St. Paul company had, and they were entitled to the application of the same principles that was to govern the St. Paul Company, and the Minneapolis Chamber of Commerce was entitled to all the benefits that could be obtained from the Commission's decision, precisely the same as the Milwaukee Chamber of Commerce. It soon' became apparent that the distance of the St. Paul Company from Pipe- stone to Milwaukee bore a greatly different relation to its distance from Pipestone to Minneapolis from that which the distance over the Northwestern from Pipestone to Milwaukee bore to its distance from Pipestone to Minneapolis, the Northwestern Company's line from Pipe- stone to Minneapolis being the short line, and its line to Milwaukee being the long line, and the St. Paul Company's line to Minneapolis being the long line, and its line to Milwaukee being the short line. So that if the St. Paul Company reduced its rates to correspond with its own individual mileage the same line of reasons and the same recommendations of the Commission would require the Northwestern to reduce its rate from Pipestone to Minneapolis; and so we would have the rate of first one road going down and then the other, and so on back and forth without end a whirlwind of reduction, without in the least changing the relation of the rates, which was the sole cause of the complaint. The modifications of the rates under these circumstances were imma- terial. The Milwaukee Chamber of Commerce people were dissatisfied, and in the course of time they petitioned for a further hearing, which was granted. The circumstances and conditions affecting the ease was explained to the Commission. My recollection is that one member of the railroad committee then and there, by the consent and approval of all the others, made this suggestion, that the Commission might fix rates from all the territory involved to the two competing markets, and the railroads were pledged to accept them in full. If I recollect right the chairman of the Com- mission himself disclaimed for the Commission their fitness for under- INTERSTATE-COMMEBCE LAW. 369 taking that line of action and assumed that it was the duty of the railways to adjust their rates as closely as pdssible to the orders or suggestions of the Commission. They were asked to renew their efforts and to see what could be done. The Milwaukee Chatober of Commerce was represented at that hearing by a number of its experts who had been engaged in traffic more or less; they were employed by their chamber of commerce to supervise this case. The Minneapolis Chamber of Coilihierce was represented in like manner, and the railway companies then proposed that if they could agree unanimously upon a schedule of rates, that the railroads would adopt those figures. They failed of any agreement and that was the end of the case. Mr. Chairman, one of the gentlemen who cited that case to this com- mittee to show how necessary it was t6 clothe the Commission with additional and unusual power, knew as well as I know, as well as the chairman of the Commission knows, tire truth of the case, and I want to add that a very large proportion of the complaints with which I have to deal have been instigated and backed and pressed under just such circumstances. Another case referred to, upon which much stress was laid, is the Eau Claire lumbei'-rate case. Eau Claire is a railway point, and is located upon the Chippewa River, which empties into the Mississippi River at Reeds Landing. There was at that time an immense pro- duction of lumber at Eau Claire, and instead of being shipiped by rail it was dropped into the river and rafted to points on the Missouri River, and the low cost of transportation by watei', in connection with prices at Mississippi River mkrkets, was such as to put upon the lum- ber at Eau Claire a value so great as not to permit it to be shipped to the Missouri River markets at the then rail rates. It was a source of continual regret to us, having a line down the whole length of the Chippewa River, not to be able to secure a substantial pbrtion of the immense tonnage produced at its very doors and floated past it. In the more palmy days of the northern white pine, when the traffic to the West from the Missouri River cities was immense, there had been many discussions relative to the relation of rates from various manufacturing districts to the Missouri River cities. It was at that time the largest item of west-bound tonnage hauled on the roads west of Chicago. There was very great rivalr}' between the manufacturing points and rival carriers serving competing districts, and "as far back as 1874, when I was first connected with a road interested in that traffic, meetings were held, and discussion of tariff' rates to be made to and from the principal points were frequent. Every effort for a term of years was a failure. At one time there was a general convention of the railway people involved in the question, as well as the lumber peo- ple of the great white pine districts of Michigan, Wisconsin, and Minnesota. It was proposed at that time (I think that was in 1874 or 1875) that the lumber interests should appoint delegates having author- ity to represent their constituents from the various districts, and that they should then agree upon rate differences that should apply, but they failed to come to any agreement. The railway companies thereafter submitted the matter to railway arbitration. I have nothing to say in defense of the principles which were recognized as controlling the arbitrator in his conclusions. Thej' were bound to. adopt the differences which he prescribed. He visited i-c L 24 370 INTERSTATE-COMMEKCE LAW. the entire country and received cooperation from every district except tlie district of Eau Claire. Tlie gentlemep there at that tim&did not understand the importance of the cjuestion. The result was that the arbitrator failed to get the information that was necessary to give Eau Claire a fair representation, and it was believed by me and by others at that time that Eau Claire was rated relatively too high. In the course of time it became evident, as I have already said, that the lumber could not move to the Western markets by rail, and the middlemen of Eau Claire, and, I think, only one lumber firm, fornied an association known as the Eau Claire Board of Trade. Some time in 1882 they filed a complaint against the St. Paul Railway Company, alleging that the rates from Eau Claire were relatively unreasonable as compared with the rates from other points, which were secondary markets, and that the distance of the St. Paul Company from Eau Claire, as compared with the distance froot other manufacturing points, was such as to show the great discrepancy as -to rates. The Commis- sion rendered a decision which appeared to many to be just. The rate from Eau Claire to the Missouri River was not to exceed the rate from La Crosse and Winona by more than 2^ cents. The railway people did not fully comprehend all these conditions that would ultimately affect the situation. They looked more to their own interests, and as I say, it seemed to the management of the St. Paul company that the decision was just, and would redound greatly to the benefit of the St. Paul road. All the rival carriers interested in many other districts besides Eau Claire, having lines from Eau Claire to St. Paul and southwestwardly to the Missouri River, reaching the Missouri River on the shortest possible haul to a Missouri River basic point, having a line connected with a part of their system from La Crosse and Winona, also, immediately reduced all the other rates including Minneapolis, to the same extent as the St. Paul cornpany recjuced the rate from Eau Claire. The St. Paul company at that time felt aggrieved at this action, influenced somewhat by its own interest; but after having demon- strated clearly that it could not change the relation of rates, which was the basis of complaint, it restored its original Eau Claire rate, and resumed the old differential which was complained of, and all other rates were restored to the previous condition. After more calm reflection and consideration of the matter, it occurred to me, and became very apparent, that the same trouble existed in the lumber rates that existed in the Milwaukee Chamber of Commerce case. I attempted to explain a moment ago that the rela- tive rates and distances' on one road were diametrically opposite to the rate and distances of other lines, and I do not see at this time how it would have been possible to have enforced the orders of the Commis- sion. The gentleman who cited that case also knew the facts in the case. The other case, and the only other case to which I wish to refer Mr. Bltthe, Mr. Chairman, if I may be permitted to suggest to Mr. Bird a point which I wish to have brought out, I should like to do so at this point. The Chairman. Very well. Mr. Blythe. Would you be kind enough, Mr. Bird, to explain to the committee the manner in which the award of the board was origi- nally made, who was a party to that award, -why, if at all, the rate INTEESTATE-COMMERCE LAW. 371 was restored, how long it was in operation before the Eau Claire case was heard, why it was restored, and whether or not it is now in effect ? Mr. Bird. What is the exact point you wish answered, Mr. Blythe? Mr. Blythe. What led up to the award of the board, first? Mr. Bird. I only touched upon that briefly. The facts were that the railroad companies were competing with each other for the lumber traffic of the white-pine districts, from Chicago, from Wisconsin and Michigan and Minnesota points; controversies at that date centered largely on lumber going to and beyond Sioux City, Omaha, and Kansas City, which were then the gateways to the plains of Kansas and Nebraska, the. great consumers at that time of lumber. The rival manufacturing districts and locations were without number. At that time Chicago was the prominent lumber market, by reason of the pro- duction on the east shore, and also the west shore, of Lake Michigan, which lumber was brought in enormous quantities by sail vessels to that market; and Chicago was recognized as the central basic point for all lumber rates. Milwaukee was then a manufacturing point of some prominence. \ Racine was also an important point, by virtue of water transporta- tion; and Menominee, Marinette, Green Baj', Oconto, and along the west shore of Lake Michigan, and then the Eau Claire district, the Chippewa Falls district^ and Duluth and other places in that vicinity; and Minneapolis, by virtue of its river connections with the northern pine of Minnesota, was one of the larger points — I think the second largest — next in importance in volume of business and trade to Chi- cago.. Various Mississippi River cities were also important factors. A great many railways were interested solely in the transportation of lumber from Chicago to the Missouri. Some were interested only from Stevens Point or Chippewa Falls; others from one town, and still others from different places, so that there was an interlacing of railroads, one having an interest here and another there, and the con- flict was almost irrepressible. The parties to this arbitration were the railroad companies leading from Chicago and all points in Michigan, Wisconsin, and Minnesota to the Missouri River, and some leading to Kansas City and Atchison, some to Sioux City and to no other points, and some to Omaha and no other points, so that you see there was a great complication of con-- ditions. It was only after a warfare of two or three years, and after many failures to get a mutual understanding, that as a final resort, as a forlorn hope, an attempt to arbitrate by one man was made. Whole communities would rise up and say, " You are destroying our business, and if we can find any way of diverting our general traffic from you, we will do so;" and it was diverted, and the bloody hand was extended to the railroads of every district, and there was no remedy except arbitration. Now, with the exception of a short interval following the orders of the commissioners those differentials have applied, have governed, since 1874 or 1875, excepting as they have been subsequently modified by the construction of new lines which made new railroad geography, and except as they have been affected by the discontinuance of manu- facturing in various districts; the pine having been all used up; so that those differentials are to-day the law of the land. Is there anything more you would like to have me answer? Mr. Blythe. Nothingmore now. 372 INTEESTATE-COMMERCB LAW. Mr. Bird. The other case, and the onlj^ other one to which I wish to refer, is what was known as the food-rate case. It is reported on page 48 of the Fourth Annual Report of the Commission for the year 1890. If my recollection is accurate, this case had its origin at a time when there was an unusual depression in the value of grain at home and abroad. The price of coarse grain in the Northwest was very low. There was a considerable period during which the farmers burned their corn for fuel rather than buy coal or wood, and Congress passed a resolution directing the Interstate Commerce Commission to investi- gate the conditions and facts bearing upon that subject. I think Col. William R. Morrison was chairman of the Commission at the time, and repeated investigations and sittings at various places were held by the Commission, and a great mass of testimony was taken. Probably this was in 1890. Mr. Knapp. Judge Cooley was chairman at that time. Mr. Bird. Mr. Morrison was present and took a prominent part in the investigation. I think you are right, that Judge Coolej'^ was chairman. The rate on coarse grain from Missouri River points to Chicago was either 20 cents or 21 cents. The Commission not only made its report, as I suppose, to Congi-ess, but it issued an order on the railroads directing a reduction off reights to a maximum of 17 cents to Chicago, versus either 20 cents or 21 cents, and 12 cents to the east bank of the Missouri River, which was used as a portion of the through rate to the seaboard, in lieu of 15 or 16 cents. Before the report was sub- mitted, or soon after its promulgation, there had been a material advance in the value of food products. I do not know how much it was, but I think it was 25 to 30 per cent. At any raie, the railroad companies ignored the order and did not make any change of rates. Soon thereafter there was organized in the Northwest, including north- western Iowa, the Northwestern Iowa Grain Dealers' Association, and by contract with certain counsel on the Commission basis, suits were entered in the United States courts for the reclamation of all the excess charges collected on their grain over and above 17 cents to Chicago, between the time of the order and the time when this suit was brougnt. This suit was against three or four prominent "Western railways — • train carriers — and I believe the amount sued for was in the aggregate 3,000,000. I do not remember the exact period of time covered by those suits. The case was tried before Judge Shiras at Dubuque, Iowa. The railroad company set up a demurrer that it was unlawful, having pub- lished a rate in accordance with law, and having enforced it in accord- ance with law, to refund any portion of it to the middleman or grain dealer, an