RUSSELU BROTHERS, PRINTERS. 17 TO 23 ROSE ST., N r (LAW TELEPHONE, 502.)
ADDRESS OF
Albei't Fink, Gliairinan,
AT THE
öj] Jföint if.^eciîiîue ^otîiHtîifef,
^.xjoxjsT xo, xeex.
This laeeting has been called to (îoiisider the causes which
have led to the present disru¡)tion in the maintenance of the
tariff rates established by this committee, and to devise proper
means for their future maintenance.
The present tariff went into elfect on the 15th of June, upon
the basis of 2(1 cents per 100 lbs., on 8th class, Chicago to Aiew
York, or about 0.1 cents per ton ]ier mile, which is less than
the average cost upon any of the roads engaged in this traffic
—even on the cheapest operated road ; but the actual rates
which have been charged since about the ITth of June are
upon a basis of about from 12 to 15 cents, or from 0.21 to 0.3
cents per ton per mile, which is less than one half of the aver¬
age cost of transportation upon most roads engaged in this
business.
A circular was issued from this oflice on the 30th of June, to
ascertain whether the 20-cent rate could not be maintained.
Every member of the Committee expressed himself in favor of
maintaining this rate—under the condition, however, that all
the others should strictly maintain it. Ao such guarantee
could be given by this oflice. The cause, therefore, of the rail¬
road comi)anies working for less than cost, as they do at pres¬
ent, lies simply in want of coididence. The managers do not
trust each otiier's promises—that each would strictly adhere
to the agreed rates.
This want of confidence is, of course, well justified b,y ])ast
experience. It would, however, do great injustice to the rail¬
road managers of this country to assume that the constant and
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repeated failure to earry out agreeiueuty iu regard to tlie uuiiu-
teuauce of joiut tariffs, was owiug to a want of honesty ou tlieir
part.
The true cause of this failure luust he found iu the great dif¬
ficulty of coutrolliug tariffs, owiug to tlie circmustauces under
which it is attempted.
It is simply impossible to carry ou an active competitive
strife between so luaiiy I'ailroads, having such couüictiug in¬
terests, and at the same time to maintain agreed tariffs.
1 am free to say that until lately I have labored under the
impression that the tariffs could be maintained if it were the
honest intent on the part of the railroad managers to do so.
The late events, which have led to the present disrnjition,
have convinced me that, even with the most sincere intention,
it is impracticable; and if that sincerity is wanting, it is
im])ossil)le to maintain the established tariff's. The main
difficulty lies in the present niethod of soliciting traffic through
the cooperative line organizations, which were established
with the special view of securing to each company the largest
share of toinuif/ej and not with the view of iiiaiiitaininf/ (ujreed
tarifs, and obtaining proper compensation for the service ren¬
dered by the railroad companies.
Under the rules of these organizations, the soli(;iting agents
arc subject to the orders of any of the general freight agents
forming the lines at the points where the business originates.
If any of these many freight agents believe that some compet¬
itor has reduced the tariff rates, he can authorize a similar re
dnction, without consultation with the other members of the
line. Thus, il is placed in his imwer to make rates over the
mimerons roads that form part of the Line, and over the Trunk'
roads, and he can do so, whether his action is based njmn a
sincere conviction that some other Line has ¡)receded him in
reducing the rates, or upon the mere desire to benefit his own
road at the exptmse of his com])etitors.
In either case tlie connecting roads, who may have an incom-
piirably larger interest in the business tlian the initial road,
liracticaliy surrender the power of controlling tiieir own iiro))-
erty to the agents of other roads. Tiiere would, however, be no
difficulty in permanently controlling tluî tariffs under this ar¬
rangement, if the power of tmiking rates were con/n/cd to and
actnalli/ exercised by no one else but the general freight agent
of each roaal niton which the ti'itffic originates.
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But ill practice the general freight agents upon whose roads
the traflic originates, do not and cannot alwaj's exercise that
control, because they must necessarily be guided by and rely
to a great extent, if not altogether, upon the reports and
judgment of the solictiting and sub-ageiits, to whom finally
the real power of controlling tariffs is virtually surrendered.
To add still further to the confusion, and make it more
difficult to fix the resjionsibility for violation of agreed rates, the
general managers sometimes enter into special agreements with
shiiniers without the knowledge of the general freight agent or
Line agents, and, to make it still worse, the Eastern Trunk Lines
make sjiccial contracts on East-bound trafhc over Western roads,
whenever they see lit, or give directions to that effect to the Line
agents, without the knowledge of the general freight agent of
the road upon which the traffic originates, thereby violating
the agreement, that East-bound tariös should be under the ex¬
clusive control of the Western roads. Thus, no one knows, or
can know, in whom is lodged the power id' making rates or who
does actually exercise it. In case of violation of agreed tariffs
it is utterly impossilile (as 1 can testify from four years' experi¬
ence) to determine where the responsibility lies. Under such a
system, or rather want of a system, the soliciting agents become
practically independent of all control. They get, generally, in¬
structions to meet the reduced rates which may be made by their
comiietitors, or which they suppose have been made. The so¬
liciting agents acting according to such instructions, only
too readily accept any statement the ship[)ers may see ñt
to malc(\ and as the shiiipers do not disdain using iiiisrep-
resentations to stimulate competitive strife among the railroad
agents, they generally suci'.eed in securing for themselves very
low rates, without the least regard to ihc cost of sen-ice." In
this way the rote-mahinij ¡loirer is rirtuolly surrendered to
the shippers. The iiroprietors of the roads lose all control
over their property. The stockhohlers, in the first place, sur¬
render their control to a. board of directors, the board of direct¬
ors surrender it to the jiresident, the iiresident surrenders it to
a general manager, who in turn surrenders it to the general
freight agents of his own and a great niiinlier of other roads, who
again surrender it to a large number of soliciting agents, and
finally these soliciting agents surrender it to the shippers. The
shippers practically make their own rates. I'he result is utter
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confiisirtii iiiid (leinoralizatioii of faillis, and no end of unjust
disci'inunation bofweeu shipiiers and localities.
'Idiis, of course, is not the, thcori/ on w liieh this ,ureat railroad
])ro|>crty is supiio.sed to be. nianai^cd, but, unibrtuuatel\', it is
oidy too often the praeficc. At the luesent tiuic it is tin- proc¬
live with a lin\L;(' nuiuber of railroads in this country.
The doini Ivxccutive Coniinittcc was orii'anizcil for the juir-
posc of rciuoviu«;-, so lar as ])ractic,able, the luauy great diffi¬
culties which I have Just ineutioncd, and which stand in the
way of tiic iutclligent control and projier luanageinent of the
railroads.
'ldu> conduct of the business under tlie Joint Executive Goni-
iiiil tee lias already resulted in great iinjirovenient ; but, uufortu-
natcly, sonic of the essential features of the jilan of tlie organ¬
ization ha,\'c never been carried out, in other cases the (vstab-
iishcd rules have been iuteutioually and utterly disregarded.
I lu'ojiose to review the iiractical o]ieration of the Committee
duiiiig the past two years, and show in what particulars it has
failed to accomplish the result desired.
fhe theories upon which the Joint Executive Connuittee re-
lii'd to control the tariff (piestious were :
Firxt.—ifhat the general manager of each road represented
on the Committee was in a iiosition to control the tariffs over
his ow u road, and would do so if he agreed to.
This has pro\-ed a, fallacy.
Article 'i.'! of the organization proviiles, that "members who
represent the different conqianies on the Joint Executive Com¬
mittee, shall tilonv have the power to make, change and enforce
all through iiasseiigci' and freight rates, and exercise such
jiower o\-er all oflicers, soliciting, contracting and other agents,
as may be necessary for the maintenance and enforcement of
the agreeil rates.''
The agreement of March II, ISMl, further enforces this ruh».
rticic -! [irovidcs :
II. "The liudersigned hereby bind themselves to witiidraw
all jiower and authority from au,\ subordinate olficers or lane
agents to \ ary fidiii the established rates in the least particulai' ;
and the iimlcisigucd herewith assume the full couti'ol of the
rate-making power ovei' their roads, and hold themselves re-
15
sponsible to eacb other for the strict maintenance of rates, it
being ixnderstood that, if anj- rates are cut upon any of the
roads controlled by them, it shall be presumed to be proof that
it was authorized by the undersigned, except it can be shown
that it was done by mistake or direct disobedience of orders."
The object of these articles was to concentrate the rate-
making power in the hands of the responsible managers and the
fewest possible persons.
I have already pointed out the reason why the general man¬
agers cannot and do not control tariffs over their own roads, in
case such roads form a part of any co-operative Line.
Second.—In order to determine the responsibility of violating
the tariffs. Articles 1.5 and 16 of the organization provide ; that,
"All companies a)-e to make all complaints as to direct or in¬
direct violations or evasions of rates, prom[)tly, by wire or mail,
to the chairman of the Committee, and not to take any steps to
meet any alleged abatements or evasions of rates by other lines
until the Committee has acted thereon."
If this rule had been strictly adhered to, it would have been
l)0ssible to flx the resjionsibility upon the party who first
varied from the agreed tariff's, and, perhaps, to prevent further
reduction.
But, unfortunately, little attention has been x^aid to this rule.
The fact was also <le\'elo])ed, that when x)arties acted upon it
in good faith, they x)laced themselves at a great disadvantage,
because the time required to make the investigations, and the
impossibility under the system 1 have described to trace the
resx)onsible party, enabled the parties who violated tlie agree¬
ment, to secure all the business while the complaining party
relied on and waited for the protection of the Committee.
To i)revent this iiijnstiee the agreement of IMarch 11th was
made, which authorized the manager of any company, who was
convinced that some conqtetitor had reduced rates, to at once
ask for a general reduction of the tariff, thus xuitting all roads
and all shix)j)ers on the same footing, and x)reventiug the guilty
party from reapniig any benefit.
The fact that such a reinedy existed it was snx)X)osed
would i)revent further violations of agreements ; but results
subsequent to ilarch lltli have shown that it is inqjossible,
even with the best intentions of the managers of the i)rincipal
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roads, to permanently control tariffs, as long as tlie pres¬
ent .system of soliciting traffic is allowed to be jtracticed.
In view of past experience, I would respectfully suggest that
the rule of the CommitLee, be so amended as to place the re¬
sponsibility of maintaining rates upon a single oflicer of the road
upon which the traffic originates, be it either tlie general traffic
manager or the general freight agent, and to permit no one else
to make rates for such traffic.
I know that the adoption of this rule would be no absolute
safeguard or security for the strict maintenance of rates, as
it may also be violated, but it would, at least, fix the responsi¬
bility somewhere, and thereby lead to a great improvement
over the present methods.
Third.—Many of the difficulties which I have mentioned
were anticipated, and in order to overcome them as far as pos¬
sible, the Standing Committee was appointed, which consists
of the five representatives of the Trunk Lines. That commit¬
tee was especially relied ui)on to supervise and check the
transactions of the numerous connections of the Truide Lines.
All the traffic from the West has to ])ass over the Trunk roads.
This puts it in their power, if working together as a unit,
to check any irregularities. They could refuse to lie bound by
contracts made by ^Yestern connections at less than the agreed
tariff, and in a variety of ways exercise a wholesome influence
that would at once check any tendency towuird demoralization
of rates. The success of maintaining rates, especially during
the early j^eriod of the existence of the Joint Executive
Committee, was due in a grea'' measure to tliat control which
was then, exercised. Latterly, however, owing to a want of
confidence between the Trunk Line managers themselves,
this control has not been exej'cised, and, therefore, it was easy
to find means to evade it altogether. Cases have come to my
knowledge where the agents of small Western I'oads, in si)ite
of instructions from the Trunk Lines to maintaiji rates, have made
private contracts, hoi)ing that at some future daj- the Trunk
Lines would participate in the reduction. The present disruj)-
tion is mainly due to these causes and to the failure of the
Trunk Lines to hold their connections to a more strict observ¬
ance of the established tariffs. Without sincere co-operation
between the Trunk Lines; without the strict observance of
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agreements by themselves; without their joint action to secure-
the maintenance of taritfs l)y their respective connections, it
will be utterly impossible and useless to make any other efforts
at maintaining tarifts.
The fourth method ui)on which the Joint Executive Com¬
mittee relied for the attainment of its objects, and jierhaps the-
most important one, was the ])lan oí opportioning traffic between
competing lines and the adoption of the principle of arbitra¬
tion in case of disagreement u])ou any question which, if un¬
settled, would lead to a war of rates.
Article 2d of the organization provides, " In view of the dif¬
ferences then likely to arise in said Joint Executive Committee,
we further agree, as au essential to any permanently successful
results, the distinct adoi>tion of the principles of arbitration.
# * * 4= Tliat any dilferences, of ufhatever nature, arising
in said Joint Executive Committee, upon which the Joint
Executive Committee is not unanimous, shall be ]iromptly
referred to the said Board of Arbitration ; and the decision of
said Board of Arbitration, or that of a majority of its members,
shall be final and binding upon all parties."
The agreement of llan-ii 11th re-allirms the principle of the
division of trafile. Article \'I. reads: "It is the judgment of
the parties to this agreement, that the di\ isiou of all classes of
freight in both directions, should at once be proceeded with,
and perfected between all the roads, both terminal and connect¬
ing, to the fullest possible extent ; and thus by assuring all
parties of a fair share of the trafile, remove the motive for cut¬
ting rates, and restore confidence between the contracting
parties."
This agreement was thought necessary and essential for the-
proper management of the roads; it was signed by all mem¬
bers of the Committee, if it had been promptly carried out
the present difficulties might have been ])revented.
The ex]ieriment to maintain rates without the protection
of the aiiportionment of traffic has been tried so often and
failed, and each failure has only increased the want of confi¬
dence, and hence the difficulties of the jiroblem.
Only a few efforts hav^e been made so far to divide East-bound
traffic. The division made so far covers only a very small per¬
centage of the competitive business, perhaps not more than one-
tweiitieth, leaving the remaining nineteeu-tweutieths oi)en to
competitive strife.
IS
Ereil the aLíreements at the différent points where huxiness
lias lieen divided lia\'e not been carried out. Srateinents, iiow-
ever, sliowint;' the amount of trai'lic carried liy eacli coiipietin«;'
road, have been exchanged, but witliunt any attempt at agreed
distribution. Even tiie.se statements iiave assisted very mncli
in maintaining tarifl's, by showing tiie amount of trahie carried,
and liy removing the suspicion of tiie competing roads tinit one
or tlie other was carrying too large a proiiortion of Imsiness.
1 n my opinion tliere is no prospect for tiie proper manage-
inenf of tiie coniiietitive traffic other than liy tiie applica¬
tion of file general plan originally laid down liy tiie .Joint Ex¬
ecutive Committee, and the sooner it is perfected and carried
out, the sooner can reasomible compensation be secured to the
railroads, and fiie ]iniilic can reiy upon reasonalilc, uniform
and ]ierinanent rates of transportation.
It is in the power of tlie Western roads upon wliich the
traffic originates to divide tlieir traffic \)y agreement witii tiieir
connecting roads, from point of origin to point of destination.
.Statistics have now been collected, and were presented
for your consideration last Decendier, siiowing tiie distribution
of traffic over the different roads, as it has taken place for some
time past: tiiey will aid yon in an eipiitable division of traffic.
In case satisfactory coiicliisions cannot be reaciied, tiieii the
Board of ^Vrbitration is ready to decide liipweeii you.
Tiie meeting of April UTtli was called for the [lurpose of
agreeing upon divisions, iiut no progress lias since been made.
I am fully aware, of tiie many ditticulties to be encountered
in carrying out this plan, iiut tiie greater tiie difliculties, tlie
greater the. reason that efforts siiouid be iiromptiy made to
overcome them.
The (luestion of rates is. of course, entirely independent of
the division of traffic. Tin; tariffs can be made as low as any
of tiie companies desirig or tiiink it to tiieir interest: Imt
■wiiateve,!' tariffs may be iiunle. tiiey siiould be maintained alike
b\' all com])etifors, and lie |iropeiiy adjusted between the differ¬
ent localities, fliereliy avoiding the unjust discrimination so in-
separalile from a war of rafees, and of whicli tlic peoiile do and
have a Just rigiit to com]ilaiii.
! liave felt it my duty to make these obser\'atioiis, to point
out ill wiiat jiarticidars the rules of tlie Eoniniittee have been
defective or have not been obser\'ed, and fo wliat extent its
plan has not yet been fully cai'ried out and tested, so that you
may be able to ajipiy the proper remedy.