Og” bs, D's “0F6 ae Yim & ey , geye ei -PURSUANT TO SENATE JOINT RESOLUTION No. 10 ee i” Mee oe ‘Report of the Attorney General Pursuant to Senate Joint Resolution No. 10, Directing the Attorney General to Make Inquiry into Alleged Violations of the Law by Certain Railroad Companies. CoLumBus, Outo, April 25th, 1910. To the General Assembly of the State of Ohio: On April 8, 1910, there was certified to this department a copy of Senate Joint Resolution No. 10 adopted by the General Assembly,’ which resolution with the several preliminary recitals therein contained, provides as follows: “Whereas, The Congress of the United States by joint resolution approved March 7, 1906, directed the Interstate Commerce Commission to make. investigation into the subject of railroad discriminations and monopolies in coal and oil; and “Whereas, The said Interstate Commerce Commission, acting in pursuance of said resolution of Congress, at a meeting begun in the City of Columbus, Ohio, March 19, 1909, made inquiry and investigation into said subjects set out in said resolution as related to conditions within the State of Ohio; and “Whereas, Said Commission in its report to Congress of its said Ohio investigation, of date May 10, 1909, among other things, disclosed that certain railroads, to-wit: the Toledo and Ohio Central Railway, the Zanesville and Western Railway, and the Kanawha and Michigan Railway are controlled through stock ownership or otherwise of the Hocking Valley Railway Company, a parallel and competing line of said - railways, all of which said railway companies hold ‘their privileges and derive their authority from the people of Ohio; and further, that said the Hocking Valley Railway Company is controlled by the community of interests known as “Trunk Line Syndicate,” thus forming an absolute monopoly in the carrying trade in the Hocking district and adjacent territory; and “Whereas, It appears that such combination of interests or monopoly aforesaid is in violation of the statutes of the State of Ohio prohibiting combinations in restraint of trade, and forbidding railroads to hold stock in parallel and competing lines; and “Whereas, There has been such persistent and bitter complaint upon the part of shippers of this State, particularly coal operators, that the control and combination of these several railroad lines by a common interest, has worked injuriously to the interests of the said coal oper- ators, their fifty thousand employees and the dependent members of their families, and likewise has affected detrimentally the consuming public, as well as resulting in discriminations against the material welfare of the people of Ohio; therefore “BE Ir RESOLYED, by the General Assembly of the State of Ohio; That the Attorney General of the State of Ohio be, and he hereby is directed to make full investigation into the alleged monopoly aforesaid in violation of the laws of the State of Ohio; and, if, upon such inves- 1 ow tigation it shall appear to the satisfaction of the Attorney General that the said laws have been violated, he shall take such immediate and proper action as the statutes of this State warrant that the laws of Ohio be properly observed and such monopoly dissolved to the end that the injuries to the people of Ohio aforesaid resulting from the violation of the laws shall cease and that the discriminations alleged to be practiced shall be discontinued; and further that the Attorney General be and he is hereby instructed to inquire into any other unlawful combinations of railroad or railroad officers within this state whose practices are in restraint of trade, particularly that he investigate the nature, com- position, purposes and practices of an organization known as the Ohio Coal Traffic Association, and that the said Attorney General make report . to the General Assembly at as early a date as possible at the present session the result of his investigations hereby directed to be made into these several alleged unlawful combinations. GRANVILLE W. Mooney, Speaker of the House of Representatives. FrRANcIS W. TREADWAY, President of the Senate. Adopted February 24, 1910.” Pursuant to the direction by your body as set forth above, the Attorney General submits herewith a report bearing upon the subject matter of that resolution. me a RELATIONS BETWEEN THE RAILWAY COMPANIES AND THE COAL COMPANIES. As to the relations between and among the Hocking Valley Railway, the Toledo and Ohio Central Railway, the Zanesville and Western Railway and the Kanawha and Michigan Railway Companies and the various coal companies operated in Ohio and West Virginia, and as to the relations of all of these to the “Trunk Line Syndicate”, this department on April 11, 1910, pursuant to House Resolution No. 6 submitted to the House of Rep- resentatives of this present General Assembly a full report, a printed copy of which is herewith attached and made a part of this report. This printed report of the Attorney General, pursuant to said. House Resolution No. 6, covers and, as the Attorney General believes, complies with your direction in Senate Joint Resolution No. 10, as quoted above, asking him to make an investigation into the alleged monopoly covered by the recitals in such resolution. This department is still of the opinion that this printed report pursuant to House Resolution No. 6, and attached hereto, correctly states the facts with respect to the matters therein mentioned and referred to, and that the opinion therein expressed as to the invalidity under the law of the relations and transactions between said railway companies and coal companies is correct. Senate Joint Resolution No. 10 directs the Attorney General to make . a full investigation of the relations and transactions between these railways and coal companies and that, “Tf upon such investigation it shall appear to the satisfaction of the Attorney General that the said laws have ben violated, he shall take such immediate and proper action as the statutes of this state warrant that the laws of Ohio be properly observed and such monopoly dissolved”, etc. The right of the Hocking Valley Railway Company to own or control the stock of other competing lines, viz., the Kanawha and Michigan, the Toledo and Ohio Central and the Zanesville and Western Railway Com- panies, and to own and control the capital stock of various coal companies operating in the Hocking Valley district, and to guarantee the bonds of such coal companies, is involved in the case of Ohio ex re] Attorney General vy. The Hocking Valley Railway Company, and has been decided in favor of the State. This case is reported in 31 Circuit Court Decisions, page 175 and in 8 Circuit Court Reports, new series, page 145, the court holding that the attempt of the Hocking Valley Railway Company to own and control the capital stock of these competing railway companies, to own and control the capital stock of the coal companies and to guarantee the bonds of such coal companies, is wholly illegal and without warrant of law. The prayer of the petition was and is that the Hocking Valley Railway Company be ousted from its charter rights; that its charter be forfeited and that it be excluded from all rights thereunder. The court in its discretion, however, refused to forfeit the charter of the company but did enter judgment ousting and forever prohibiting it from exercising any of the illegal acts hereinbefore referred to. This case is now in the Supreme Court of Ohio on the questions 4 ae eae as to whether the Kanawha and Michigan Railway Company is a competing line with the Hocking Valley and as to the right of the Hocking Valley Railway Company to guarantee the bonds of the coal vompanies. We expect to argue this case in our Supreme Court in the month of June this — year. ‘The decision by the Supreme Court in this case with the decision of the circuit court will determine the validity or invalidity of the questions involved in the controversy over the action of the Hocking Valley Railway Company with respect to the Toledo & Ohio Central, the Kanawha & Mich- igan and the Zanesville & Western Railway Companies, and the various coal companies heretofore referred to, and controlled by the Hocking Valley Railway Company in the Hocking Valley field, and in West Virginia, and they will also determine the questions of discrimination on the part of the Hocking Valley Railway Company and the others so controlled in giving or refusing switch or track connections to independent coal companies along the lines of these roads. As to the relations between these railway companies already men- tioned, viz., the Hocking Valley, the Kanawha & Michigan, the Toledo & Ohio Central and the Zanesville & Western and the “Trunk Line Syn- dicate,” so called, I have to report that, since the decision of the Hocking ‘Valley case by the circuit court, the Chesapeake and Ohio Railroad Company is reported to have purchased, or is about to purchase the Hocking Valley Railway Company with a portion of the stock of the Kanawha & Michigan, and that the New York Central Railway Company has purchased, or is about to purchase the Toledo & Ohio Central Railway Company with a portion of the capital stock of the Kanawha & Michigan. A complaint has lately been filed in this department by certain minority stockholders of the Hocking Valley Railway Company; and another complaint has been filed here by certain minority stockholders of the Kanawha & Michigan Railway Company, each of which complaints is to the effect that the “Trunk Line Syndicate’, so called, is made up of the Baltimore & Ohio, The Lake Shore & Michigan Southern, The Pittsburg, Cincinnati, Chicago & St. Louis, the Chesapeake & Ohio and the Erie Railway Companies, and that the intention of the Chesapeake & Ohio, and the Lake Shore & Michigan Southern, the New York Central Lines, in purchasing as above stated the Hocking Valley and a part of the Kanawha & Michigan, by the Chesapeake & Ohio; and purchasing of the Toledo & Ohio Central, the Zanesville & Western and a part of the Kanawha & Michigan by New York Central Lines, is to control in another form and in a different way, the railroads running into the Hocking Valley field, viz., the Hocking Valley, Toledo & Ohio Central, Zanesville & Western and the Kanawha & Michigan. Notice has been served from this department upon all of these companies to appear here and show whether or not this complaint is true, and what reason, if any, exists why proceedings should not be started by this department to prevent such com- bination. That hearing will be had at the earliest possible time, and the Attorney General will then be able to advise what proceedings may or should be taken in compliance with the direction in your resolution above quoted. We oge LPS ey ete eee we fo bees andy Poked 4 HH THE OHIO COAL TRAFFIC ASSOCIATION. AS Pomvosns, CoMPOSITION AND PRACTICES OF THE ASSOCIATION. Your Senate Joint Resolution Number 10 instructs the Attorney General, “To inquire into any other unlawful combinations of railroads or railroad officers within this state whose practices are in restraint of trade, particularly that he investigate the nature, composition, purposes and practices of an organization known as The Ohio Coal Traffic Asso- ciation, and that the Attorney General make report to the General Assembly at as early a date as possible at the present session”, etc. Some time in the fore part of the year 1909 a complaint was filed before the Railroad Commission of Ohio against the Wheeling & Lake Erie Railroad Company and its receiver, complaining that the rate charged by this company for transportation of coal from the Ohio Coal field, known as Pittsburg Number 8, and comprising Belmont and adjoining counties, to ports on the Great Lakes, was unreasonable. This complaint came on for hearing before the Railroad Commission on July 6th, 1909, and on that hearing many witnesses were examined, among whom was Mr. A. D. Smith, of Columbus, Ohio, Secretary of the Ohio Coal Traffic Association. From his testimony, a transcript of which, and of the testimony of the other witnesses, was preserved by the Railroad Commission, it appears in his own language that The Ohio Coal Traffic Association is “A voluntary association that calls itself, for business purposes, the Ohio Coal Traffic Association”, and on being asked as to who the members of the association are, he answered that these members at that time, July 6th, 1909, were the Balti- more and Ohio, the Cleveland, Lorain & Wheeling, the Cincinnati, Hamilton and Dayton, the Detroit, Toledo & Ironton, the Hocking Valley, the Kanawha & Michigan the Lake Erie, Alliance and Wheeling, the Marietta, Columbus & Cleveland, the Toledo & Ohio Central, the Toledo, Walhond- ing Valley & Ohio, the Wheeling & Lake Erie, the Wapash, Pittsburg Terminal, and the Zanesville & Western Railroad Companies. Being asked if the Pennsylvania company and Pittsburg, Cincinnati, Chicago & St. Louis Railway company were represented in the Association, Mr. Smith replied that, “That portion of the road called The Toledo & Walhonding Valley Railway is a part of the association, but not the other divisions,” and he stated that the Toledo and Walhonding Valley Railway Company is operated by the Pennsylvania Company. The office of this association is in Columbus, Ohio, and this office is under charge of Mr. A. D. Smith who, as above stated, is the secretary of the association. The testimony of Mr. Smith shows that the association has been in existence for a number of years, and this department, aside from this testimony, has examined copies of the minutes of the regular and special meetings of the association during the years from 1902 to 1909, both inclusive — eight years. oc sN\ These records fatter show that ieeeen this time various cor have been held at Pittsburg, New York and Chicago, between West Virg’ Western Pennsylvania, Kentucky and Ohio bituminous coal carrying roads. The railroads participating in these conferences have usually, in fact, in nearly every case, in several conferences during each ofS years, been the following: ; 2 aa Prrrspure Districr: Pennsylvania R. R. Pennsylvania Co. PRU Crate. ile ye B. & O. R. R. L. 8. & M.S. Ry. BoG Lh. Ee RR NS ae: ba Bite Be Erie R. R. Bessemer & Lake Erie R. R. Wabash-Pittsburgh Terminal Ry. Buffalo, Rochester & Pittsburgh. West Virginia District: OQ} oal & Coke ‘Ry. JACKSON County District. B. & O. S. W. R. R. C. H. & D. Ry. DT & L RR. He? Voy, L. N. R. R. Disrricr. L. & Ni RR. Onto River Disrrior. iy The above list for these conferences includes, as may be seen, the roads which Mr. Smith said are members of the Ohio Coal Traffic Asgo- ciation. The purposes of these conferences, and of the Ohio Coal Traffic Association, as disclosed by the minutes of the meetings, seem to have been through these years to fix the rates to be charged by all the roads for the transportation of coal from the Pennsylvania, West Virginia, Kentucky and Ohio coal fields to ports on the Great Lakes, including Chicago, and to intermediate points between the fields and those ports, and to various other points not strictly intermediate, both within the State of Ohio and in other ‘states westward. Their transactions may probably be best illustrated by the following copy from the record of a Pittsburg conference held on Tues- day, January 28, 1908, at the Hotel Schenley, in the city of Pittsburg: “Mr. Ferris in the chair. A committee of fourteen was appointed to formulate and present to the full committee a recommendation for its consideration. Their report was as below: Recommended. “That a Committee of the Coal Traffic Officials take up with the lines beyond Chicago and Illinois junctions the ques- tion of establishing through rates to points beyond Chicago on a fair competitive basis with Illinois coal, with such arrangements for divisions and through billing as can be made’. The following committee was appointed to carry out the above recommendation. Hudson Fitch, . H. M. Matthews, Wm. Hodgdon, H. J. Booth, G. H. Ingalls, Jas. Webster, H. B. Dunham. That we recommend: That effective April 1st; 1908, and con- tinuing to March 31, 1909, the rates of last year be reaffirmed as follows: To Chicago and Chicago points, From Ohio District, : $1 65 From Pittsburg District, Fairmount District, Kanawha District, $1 90 Thacker District, L. & N. District, Middlesboro and West From Pocahontas District, New River District, Cumberland District, $2 05 Altoona District, L. & N District, East of Middlesboro Railway Fuel Rates: Recommended individually by the roads represented. That the Railroad Fuel rates be from the Ohio district. CSE 8 Se Ese Adee or See ce ea nee 72% cents per ton ORIOL UM DUS yo acate assoc chuntesncseanes arsicaperes ali dciteases 60 cents per ton To Cleveland (from No. 8 District) .............. 65 cents per ton To Cleveland (from Middle District) .......... 57% cents per ton Other Junction delivery points in proportion. Lake rates: Recommended individually that the rates from the Pittsburg District to lake ports, Huron, O., to Erie, Pa., inclusive, be as follows: 8 Lake cargo coal, proportionate rate for reshipment:; sce ccccsteek 88 cents f. 0. b. cars on dock Dake: Piel Sc abate catia 98 cents f. 0. b. cars on dock Commercial Coal in. ccc econ 100 cents f. 0. b. cars. The rate from the West Virginia District on Lake Cargo and Lake Fuel Coal to be 834 cents higher than the Pittsburg District rates respectively, and the rate from the Cumberland, New River and Poca- hontas group on Lake Cargo and Lake Fuel Coal to be not less than 15 cents above the West Virginia rates. That the rates from the Hocking No. 8 and other Ohio Districts taking same rates to the lake ports, Lorain to Toledo, inclusive, be as follows: Lake cargo coal, proportional rate for shipment................ 90 cents f. 0. b. vessel Ibakecaliel ot aka on eh eae 95 cents f. o. b. cars on dock Commercial: coal aca oe 100 cents f. o. b. cars Report accepted and sub-committee discharged, then taken up in full committee and individually: recommended by the roads represented. Mr. Randolph announced for the B. & O. R R. that they may decide from mines on the Sunday Creek to meet the rates from similar mines on the C. & M. V. Road on notice to be given to the Chairman of this meeting. Mr. Dunham of the H. V. Ry. and Z. & W. Ry., made a similar announcement to that of Mr. Randolph, substituting the Z. & W. Ry. thin vein mines for the Sunday Creek Railroad. Mr. Fitch for the T. & O. C. Ry., made a similar announcement substituting the Ohio Central Lines for the Sunday Creek Railroad. For the Louisville & Nashville Railroad Company, Mr. Compton made the following announcement: The Louisville & Nashville Railroad Company, to points north of the Ohio River, outside Cincinnati switching limits, Jeffersonville and New Albany, Ind., will, on coal, maintain, effective April 1st, 1908, from the following mines: Appalchia, Va, Big Stone Gap, Va. Blackwood, Va. Dorchester Junction, Va. Norton, Va. the basis of rates in effect from Cumberland, Pocahontas and New River Districts, and from all of its other mines, the basis of rates in effect from the Kanawha, Fairmont, Thacker Districts. Further, that if the resulting conditions from this adjustment of rates proves unsatisfactory to the Louisville & Nashville Railroad, it reserves the privilege of calling a later meeting for a reconsideration of the matter. This announcement is made with the understanding that the lines north of the River will accept the same proportions on coal delivered to them by the Louisville & Nashville Railroad as they accept on coal delivered them by other lines. On motion, the following committee was appointed to deal with any question that might arise as to rate of Railway Fuel coal during the coal year: Messers. McCabe, Ferris, Davant, Randolph and Booth.’ Adjourned. A. D. Smira, C. E. E. CHILpErs, Secretaries.” 9 / \ I am informed that the words “Railway Fuel Rates” mean rates for ‘transportation of coal to be charged by railroads carrying the same from the coal fields to other railroads for use by such other railroads in operating their lines; “Lake Cargo” coal means coal to be shipped to some lake port and there reshipped by boat across the lakes to destination; “Lake Fuel” means coal to be used by the boats on the lakes; “Commercial Coal” means coal shipped to the public generally, such as manufacturers and other persons purchasing the same for general and private consumption. From the record as quoted above it will be seen that these roads agreed that the rates to be charged for transporting coal on any road from the Ohio Districts, such as Belmont County, Hocking Valley, Jackson and Ohio River District, to Toledo, for use as fuel by other railroads, should be 7214 cents per ton; to Columbus, 60 cents; to Cleveland (from No. 8 District, Belmont county) 65 cents; to Cleveland (from Middle District, Coshocton, Tuscarawas, etc., counties) 5714 cents per ton; other junction delivery points to be in proportion to these rates, while on coal shipped for regular cargo, lake fuel and commercial purposes, the rates were fixed by the com- panies at from 88 cents to one dollar per ton, from the Ohio Districts to those same lake ports. In other words, through this agreement these roads fix the minimum rates charged by any of them for transporting coal from the districts named in the record set forth above to other railroad companies to be used by such other companies as fuel for their locomotives and other- wise, at figures from 2214 cents per ton to 4214 cents per ton lower than the rates charged for transporting coal from the same districts to the same place for general and private consumption by manufacturers and other private citizens, and they charged for hauling this coal to themselves or other railroads for fuel from 151% cents per ton to 4014 cents per ton less than they charged for the same service in transporting coal to the same place for lake cargo and lake fuel purposes. It will be noticed that the charge for transporting commercial coal for the public generally is $1.00 per ton f. 0. b. cars, while the charge for transporting lake cargo and lake fuel coal is from 2 cents to 12 cents below that figure f. 0. b. the vessel or f. 0. b. cars on the dock. The discrimination as a result of this agreement is apparent. The record above quoted on pages 11 and 13 inclusive, as heretofore stated, is a copy of the reeord of the minutes of the conference held at the Hotel Schenley in the city of Pittsburg on Tuesday, January 28, 1908, among West Virginia, Western Pennsylvania, Kentucky and Ohio bitu- minous coal carrying roads, and the names of these roads are given above on pages 9 and 10. All the-members of the Ohio Coal Traffic Association, as named by Mr. Smith and quoted on pages 7 and 8 herein, were in this con- ference. On the next two days, January 29th and 30th, 1908, those roads, members of the Ohio Coal Traffic Association, held their regular monthly meeting at the Coal Traffic Association rooms at Columbus, Ohio. At this meeting by the Ohio Coal Traffic Association, as appears by the record of the minutes of the meeting, action was taken on new tariffs, the record showing the following entry: 10 EXECUTIVE COMMITTEE. “There being no business for this committee, the meeting was called to order and adjourned. STANDING COMMITTEE. Proofs of the new Tariff were carefully checked and immediate printing ordered. Mr. Dunham was appointed a committee of one to decide any question that might arise during the printing. Also to formulate a cancellation circular for cancelling any Tariffs that were carried by the new Tariff. As the Penna. Co.’s Lines are not an originating party in the new Tariff the secretary was instructed to arrange the expense account so as to relieve them of any proportion of the expense of printing the Tariff and supplements beginning with January Ist, 1908. The secretary was authorized to take up in his account for Jan- uary, 1908, a payment of eight hundred dollars on account of work done by Nitschke Bros. on the new Tariff. Adjourned. A. D. SMITH, Secretary.” The next regular meeting of those Ohio Coal Traffic Association roads was held at the association rooms, Columbus, Ohio, on February 19, 1908, and the minutes of that meeting are as follows: ~ “The Wabash Pittsburg Terminal Railway Company were admitted as members of the Association covering their lines in Ohio only; effective from this date. Adjourned. STANDING COMMITTEE. First subject: Reconsignment of Coal at Detroit. Laid over to next meeting for further examination of past record. If record war- ranted, roads interested individually proceed with the check, reporting at next meeting in either case. Second subject: Rates to Chicago, Lake Shore and EHastern Railway points. Laid over to next meeting. Third subject: “Intermediate Clause” in Tariff. Referred to Mr. Fitch to take up with the Interstate Commerce Commission and report as early as possible. Fourth subject: Number of Tariffs for connections: ~ Mr. Dunham presented form of circular letter to connections concerning the matter and asking them to put in their requisitions as early as possible. Approved and the secretary instructed to print and issue to all the lines named in the Tariff. Fifth subject: Rates to Crawfordsville, Ind. Referred to the following committee: Messers. Griggs, Mat- thews, Perkins, Booth and Hotchkiss. Sixth subject: Supplements to the present Tariffs 14 and 60. It was the view of the members that no such supplements should be issued that would in any way interfere with or delay the new Tariff. Seventh subject: A sub-committee from the Western Trunk Line Committee was present by invitation to confer with the members of the Ohio Coal Traffie Association concerning the methods used in compiling statistics, tariffs, ete., with a view of establishing a similar bureau to cover the coal districts of Illinois and Indiana. The matter was gone over in all its details and the meeting adjourned. E A. D. Smita, Secretary.” — aid _ This record of the minutes of the conference held at Pittsburg and of the two meetings held in Columbus, with records of the minutes of other meetings thereafter in that year, with other information gained by this department, establish, in my opinion, as matters of fact, that the companies involved agreed to, put into effect, and carried out the rates and charges for the particular matters heretofore set forth. This record is only a fair sample of the minutes of many other meetings held through each of the years 1902 to 1909, both inclusive, as conferences of the West Virginia, Western Pennsylvania, Kentucky and Ohio bituminous coal carrying roads, which roads are named above herein, and of the Ohio Coal Traffic Associa- tion roads alone. That is to say, these bituminous coal carrying roads held ‘a number of meetings throughout these years in which action was taken similar to that above set forth and the Ohio Coal Traffic Association held regular monthly meetings and a number of special meetings in Ohio. The regular meetings being held at Columbus, Ohio, and the special meetings generally at Cleveland, Ohio. Some regular monthly meetings were also held at Cleveland and Toledo, Ohio. The Ohio Coal Traffic Association roads through these years have participated in conferences at various other points, such as meeting at Detroit with what are known as the Detroit lines of railroad; at Columbus at a meeting of bituminous coal carrying roads west bound, and a meeting at Chicago with roads interested in transporta- tion of bituminous coal via rail and lake, and Lake Michigan car ferry lines. I have not been able to find any record or document showing that this association has any set of written rules, regulations or bylaws setting forth the purposes and objects of the association and defining the conditions upon which any railroad may become a member thereof, but from the recorded minutes of the numerous various meetings held as heretofore stated, I am clearly of the opinion that the objects sought and attained by these roads in maintaining this association were and are to agree upon and maintain, applicable to all roads in the association, rates for transporting bituminous coal from the Pennsylvania, West Virginia, Kentucky and Ohio coal fields to ports-on the Great Lakes to intermediate points and to other points ‘beyond and westward from Ohio, and that these agreements and arrange- ments were made by these roads, members of the Ohio Coal Traffic Associa- tion, with other roads members of other associations in the territory to the north and northwest and west of Ohio. It does not appear from these minutes that any formal written agreements were made and signed by the companies, but it does appear in numerous instances all through these years that rates or modifications of rates were proposed by a representative of some road, member of the association, and that after a discussion of the matter a resolution would be adopted fixing the rate or modification, or the roads would recommend or agree to the same individually. It further appears that if any road, member of the association, desired to modify its rates to any point it was the practice that such road make request of or proposition to the association to be allowed to make such change. An illustration of this is found in the minutes of a meeting of the association held at Cleveland, July 17, 1906, the record made thereof in the minutes reading as follows: “Second Subject: Rate from Hocking district $1.40 and Jack- son county $1.30 to Hartford City via L. E. & W. R. R. This was over- looked in lining up, at the Cleveland meeting, June 11th. It should be $1.30 and $1.20, same as Hartford City via P. C. C. & St. L. R. R. Secretary to issue notice and supplement to cover.” 12 “Fifth Subject: Request of B. & O. R. R. to apply Saginaw rates to Midland, Michigan; it was the view of the members that it was not advisable to make any reductions in Michigan rates until the ques- tion of all Michigan rates could be taken up and considered.” P Another resolution from the minutes of a meeting held August 21, 1906, is as follows: “Seventh subject: Application of C. H. & D. to put in rate of $1.50 from the Jackson county district to’ Amboy and Peru, Indiana, including Santa Fe as intermediate, via C. C. L. R. R. same as by other routes. Approved by the roads individually.” B. ReEsuLtT oR EFFECT OF THE PRACTICES OF THE ASSOCIATION. To summarize the purposes of and results attained by this association I beg to report that, in my opinion, the minutes of the various meetings of the Ohio Coal Traffic Association and of the other associations and railroads with which the Ohio association met in conference shows that these roads, through agreements and arrangements voluntarily entered into from time to time through a number of years, up to and including the year 1909, have fixed and maintained the rates to be charged, and charged by the various roads mentioned above as members of the Ohio Coal Traffic Association for the transportation of coal by them, or any of them, from the Western Pennsylvania, West Virginia, Kentucky and Ohio districts of bituminous coal to ports on the Great Lakes and intermediate points beyond, north and northwest and west of Ohio, and I am further of the opinion that the facts are that these roads have fixed these various rates at certain intervals in the first instance, and that if at any time any company desired to change or modify these rates, it was necessary for that company to make application to this association for the privilege, and that this request was granted or refused as should be determined upon in the particular case by the members of the association acting jointly in the matter. In my opinion the facts are that the Western Pennsylvania, West Virginia, Kentucky and Ohio bituminous coal carrying roads, a list of which is set out in the beginning of this sub-division and of which the roads, members of the Ohio Coal Traffic Association, are a part, met at stated intervals, usually the fore-part of the calendar year and fixed the rates in a manner similar to that shown by the record illustration given above herein from the Pittsburg meeting on January 28, 1908. That thereafter the roads, members of the Ohio Coal Traffic Association, met at some point in Ohio and ratified these rates, and thereafter carried them out, except as they might from time to time be changed in individual instances at the request of some particular road through agreement of the other roads, members of the Ohio association. The various coal districts of Ohio are the Belmont and adjoining counties, known as Pittsburg No. 8; the middle district being Coshocton, Guernsey, Tuscarawas, etc., counties; the Hocking Valley district, being Hocking, Perry, Morgan and Athens counties; the Jackson County district and the Ohio River district, the latter being principally Lawrence county. Into or through each of these districts run two or more of these Ohio Coal Traffic Association roads. For instance, from the Belmont field are the Wheeling and Lake Erie and the Baltimore and Ohio Railroads; in Coshoc- ton, Tuscarawas and Guernsey (middle district) are the Wheeling &«Lake Erie, Baltimore & Ohio and Toledo, Walhonding Valley & Ohio Railroads; 13 in the Hocking Valley field are the Baltimore & Ohio, the Toledo & Ohio Central and Kanawha & Michigan and the Hocking Valley Railroads; in the Jackson county district are the Baltimore & Ohio, the Hocking Valley, the Cincinnati, Hamilton & Dayton and the Detroit, Toledo & Ironton Railroads, and through the Ohio River district are the Cincinnati, Hamilton & Dayton, Detroit, Toledo & Ironton and the Balti- more and Ohio. Each of these roads has an out-let, from their respective fields to all lake ports over their own lines or connecting lines, and each of the roads-running from any particular field is in direct competition with others from that field, and in indirect competition with each of the roads running from each and every other of the coal fields above mentioned. These records above referred to clearly show that there has been through the period of time covered by this report no real competition between these roads for the transportation of coal from the fields named, but on the contrary the competition which would otherwise necessarily exist and prevail to the benefit of the public, were it not for the existence of those facts, was completely and entirely suppressed. This association still maintains its office with Mr. A. D. Smith as its secretary in the city of Columbus, and while I have not examined the records or minutes of its meetings held during this year, 1910, I am informed that it is still in existence under the same conditions as heretofore related of the period from 1902 to 1909 both inclusive. I have heretofore stated in effect that the minute records of these meetings did not disclose the execution of formal written agreements further than that in such meetings resolutions were adopted, fixing these rates; the minutes stating, in many instances, to the effect that the following resolu- tion was adopted by the roads individually recommending the same, or that a certain rate was individually recommended by the roads represented. Such proceedings not only clearly establish a meeting of minds on one common object, viz.: the fixing of uniform rates on all the .vads interested, to the end that competition might be suppressed, but they clearly indicate a thorough consciousness of the inexcusable wrong which such action was perpetrating upon the public. These records, written in the way they are, must clearly indicate to any one who reads them that these companies, through their representatives, were aware that what they were doing was wholly illegal and against the public policy of the state. When men make agreements or arrangements with respect to business matters which are sanctioned by the law and the public policy of the state, matters of such importance as those involved in these transactions, they are made in the usual forms of lawful written agreements which will stand the inspection and receive the approbation of a reasonable public. If what is sought to be done is outside the sanction of and against the law it is often sought. to evade the penalties under the law of such action by resorting to subterfuges, or what is sometimes known as “gentlemen’s agreements”. So in this case these records show by the form in which they are written that these inter- ested parties were fully conscious of the violations they were committing of the law and the wrongs those same actions were perpetrating against the public in view of the law as it exists in Ohio and under the federal statutes, These records disclose discriminations in the rates for transportation of coal not only between persons and interests of the general public standing in the same relative relations or situations with respect to these roads, but they disclose the fact that these roads transport coal to other railroads at rates twenty-five per cent or more lower than the rates charged 14 to the general public, the people who give them the right to incorporate, organize and exist and upon whom they must depend for patronage and support. Difference in rates charged under dissimilar conditions and circum-— stances may be justified, but it is difficult to see how there is any justifica- tion for a charge on the part of any road of 65 cents per ton from Belmont county No. 8 district to Cleveland for the transportation of coal for the use of some other railroad company, while a charge of $1.00 per ton is made for the transportation of coal from the same point, or any other Ohio district point to the city of Cleveland for the use of some manufacturer or a wholesale dealer who must supply the public generally with fuel for domestic purposes. ‘T'he spirit and command of the law is that common carriers and other persons, firms and corporations doing a quasi-public business or service shall treat all members of the public alike under the same or similar circumstances. It is further difficult to see why these roads should charge this rate of 60 cents for the haulage of coal to other railroads at the city of Cleveland and other lake ports to be used by such roads as fuel, and at the same time charge 98 cents per ton for the haulage of coal to the boats running on the lakes to be used as fuel by those boats. Whether, however, these differences are reasonable or unreasonable or whether there would be any justification for them at all if made by any railroad acting individually and without relation to any other railroad, there is absolutely no justitf- ication under the public policy of Ohio and the federal statutes for the com- bination agreements or arrangements between these associated roads, as disclosed by these records in fixing these discriminatory rates or any other rates to be charged by all roads, and thus completely deprive the public of competition between and among the roads. Those who form these arrange- ments and agreements would without hesitation denounce as immoral, un- lawful and unjust-a combination between and among grocerymen or other vendors of provisions necessary to the sustenance of the family and the home, and they would at once give their assent to the condemnation and punishment of such practices. Bituminous coal is used as fuel by a very large number of the families in the cities on the lake and elsewhere in the state, and it is largely used by manufacturers and other business enterprises in the conduct of their respect- ive lines of business. All of these are entitled to the benefit of competition in the transportation of this commodity which forms so large a part of the cost and expense of securing comfort to the family or the administration of these lines of business. C. Lagat STATUS OF THIS ASSOCIATION. It has already been stated that the practices of these roads, members of the Ohio Coal Traffic Association, as disclosed by their records are illegal and wholly without warrant of law. That statement is made not only upon the authority of the statutes of the State and of the United States from the plain reading thereof, but it is made upon authority of the decisions by courts of Ohio and the Supreme Court of the United States. It is true that such combinations and arrangements as these under consideration and others have long been practiced in the country, but this fact cannot be urged to their justification even in the absence of express statutory declarations against them. They are not necessary to legitimate trade and business conditions. \ Yee J: (tues CLS nok, Wie Bee ee eee se Toe val EMD ASE Ee em <2 ER Oe ee 15 It is conceded by everybody that fair competition is the life of trade and business, and it has been aptly said that, “Combination is the opposite of competition. When the one (competition) is free the other does not exist.” The combination here under discussion, the subject of this report, is one of three forms of transportation combinations which have existed in the past, viz.: (1) Agreements to maintain rates, (2) Pools, and (3) Comsoli- dations. Hach and all of them are contrary to the statutes and the decisions of the courts. Railroad pools are of two kinds, traffic pools and money pools. The former is defined as “‘an agreement whereby each member is guaranteed to receive and can receive only a stated percentage of the competitive traffic.” A money pool in railroad transportation is defined as, “an agree- ment whereby each member is guaranteed to receive and can receive only a stated percentage of the receipts from competitive traffic.” This form of agreement or combination was expressly prohibited by the act to regulate commerce passed by the Federal Congress in 1887 fol- lowing statutes enacted for the same purpose in the several states. This act put an end to the practice of pooling but the other two forms of com- binations are still attempted, viz: agreements to maintain rates and con- solidation of competing lines. Arguments are often advanced by persons interested, attempting to justify these agreements to maintain rates and consolidations of competing lines on the claim that one or the other is necessary to prevent bankruptcy or to reduce the cost of operation, but the public, feeling that they are not responsible for the construction of unneces- sary lines of railroads have not only refused to accept these arguments and contentions but have gone further through their representatives in the general assembly of the several states and in the Congress of the United States, and have expressly prohibited each and all of these combinations, have made them criminal offenses and prescribed penalties to prevent them. So long as these statutes are on the books they should be obeyed by persons, firms and corporations alike, not only because of their existence but for the the very much greater reason that history and the reasoning of our courts through all the years teach and show that they are just and righteous. The practices of the Ohio Coal Traffic Association themselves, as well as in connection with other roads mentioned in this report, and as disclosed by the record, show a direct violation of the prohibitory terms and the penalty clause of the Valentine Anti-Trust Act of Ohio insofar as intra- state business is concerned at least, and the long continuance of these practices as disclosed by these records indicates an utter contempt for this law. This statute provides that a violation of any of its provisions is a conspiracy against trade, and that a person engaged in the same or taking part therein or as principal manager, director, agent, servant or employer, or in any other capacity, knowingly carrying out any of the stipulations, purposes, prices or rates or furnishing any information to assist in carrying out such purposes or orders thereunder, or any provisions thereof, shall be fined not less than $50.00 nor more than $5,000.00 or imprisoned not less than six months nor more than one year, or both, and that each day’s violation of this provision shall constitute a separate offense. Another part of the statute defines a trust to be a combination of capital and skill or acts by two or more persons, firms, partnerships, cor- porations or associations of persons for the purpose, among others, to make, enter into, execute or carry out contracts, obligations or agreements of any 16 kind or description by which they bind, or have bound themselves or agree in any manner to keep the price of any article or commodity or any article of trade, use, merchandise, commerce or consumption or the transportation thereof at a fixed or graduated figure, or by which they shall in any manner establish or settle the price of an article, commodity or transporation between them or themselves and others so as directly or indirectly ‘to preclude a free and unrestricted competition among themselves; purchasers or consumers in the sale or transportation of such article or commodity; or by which they agree to pool, combine or directly or indirectly unite any interests which they have connected with the sale or transportation of such article or commodity that its: price might in any manner be affected, and such trust is declared by this law to be unlawful and against public policy and void. That the practices under consideration, as shown by the records dis- cussed are within these definitions of the statute, and that they are pro- hibited by it there can be no question. They are equally in violation, so far as inter-state commerce is concerned, of the Sherman act entitled “An Act to protect trade and commerce against unlawful restraints and monopolies,” passed by the Federal Congress July 2nd, 1890. The first section of that act provides that: “Every contract, combination in the form of a trust or otherwise, or conspiracy in restraint of trade or commerce among the several states, or with foreign nations, is hereby declared to be illegal. Every person who shall make any such contract or engage in any such combin- ation or conspiracy, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding $5,000 or by imprisonment not exceeding one year, or by both such punishments, in the discretion of the court.” This federal statute was construed in the case of United States v. Trans-Missouri Freight Association, 166 U. 8S. Reports, 290. What was known as the Western Traffic Association was formed in 1891 as a federation of several traffic associations in different parts of the country, one of these subsidiary organizations being the Trans-Missouri Freight Association, which had been formed in 1889 “for the purpose of mutual protection by establishing and maintaining reasonable rates, rules and regulations on all freight traffic, both through and local.” In 1892 a suit was instituted by the United States against this association charging - that it was a combination in violation of the Sherman Law, which provides as above quoted. The decisions of the lower courts were in favor of the association, but the case was appealed to the Supreme Court of the United States where the two questions were presented: 1, Whether the Sherman Law applied to railroads; 2, Whether the Trans-Missouri Freight Associa- _ tion violated its provisions. The Supreme Court of the United States answered both questions in the affirmative and held broadly that agreements between competing railroads to maintain rules — whether reasonable or unreasonable — are against public policy and contrary to the federal statute. In 1896 what was known as the Joint Traffic Association was formed in which were represented nine leading trunk lines inthe country, and one of their rules was that a failure to comply with the recommendations of the board of this association was punishable by a fine of $5,000 vo be paid to the association... A suit was immediately started by the government against this association charging, 1, that it was in violation of the Sherman act, and, 2, that it contravened the anti-pooling provisions of the interstate commerce 17 act. The case went to the Supreme Court of the United States where an attempt was made to distinguish it from the T'rans-Missouri case, upon the ground that in the latter case power was conferred upon the association to actually make rates, while the Joint Traffic Association merely adopted rates already in force. The Supreme Court, however, held that the Joint Traffic Association violated the Sherman law. It is said by Judge Noyes in his book on “American Railroad Rates”, . that, “The decisions in the Trans-Missouri and Joint Traffie Associa- tion cases show that under the Sherman law the right of railroads to co-operate is confined within very narrow limits. They have no right to enter into agreements to maintain rates in any form”. Noyes American Railroad Rates, 149-151. U. S. v. Joint Traffic Ass’n, 171 U. S. Rep. 505 I beg to report to the General Assembly that while this department has not completed its investigation of the practices and transactions of the Ohio Coal Traffic Association, and that while we expect to, and will continue the investigation until we know the details of the purposes of the association and of its workings and practices, yet the information given by the secretary of that association, in the case before the Ohio Railroad Commission, with the information given by the records or minutes of the great number of meetings and conferences heretofore referred to, bring us firmly to the opinion that the transactions of this association have been, and are wholly in violation of the state and federal laws, and on this matter it is only left for me to add that if this association is not immediately dissolved, and the practices heretofore indulged in, wholly abandoned, it will be the duty of the department of the Attorney General to institute and prosecute whatever, and all proceedings that may be warranted under the law and necessary to dissolve it, and that action will be taken at the earliest moment consistent with the other work in this department. D. Somer DEFECTS IN THE QHIO Law. In a report transmitted to the Governor by the Attorney General in the last week of December, 1909, it was stated in effect that considerable attention had been given to the efficiency of the remedies afforded by the Valentine Anti-Trust law and other statutes to break up and prevent these combinations, and that because of the great amount of other work with which this department has had to deal at all times during the past year, we were not able to submit satisfactory plans or suggestions, and in that report is was further stated as follows: ¢ “One thing is certain, and that is, that if combinations and monopolies are bad and should be prohibited, then our laws should be framed so as to prohibit them. In some lines of enterprises the laws as they have stood for many years have only involved the state in much litigation and great expense, with but very little, if any, accomplish- ment. This is wrong and should not be tolerated unless the public policy against combinations and monopolies is to be changed. There are certain lines and departments of business in which everybody knows, who gives attention and thought thereto, that single management or control under strict and close regulation through reasonable statutory enactment is good and of benefit for and to the public, but as to the great majority of business enterprises and the things in which they deal, it is conceded by all members of the public, and held by the courts, upon authority and reason of long establishment, that combinations and 18 monopolies therein should not be allowed or tolerated, because of the | hardships and impositions sure to result to the public welfare if they be allowed or tolerated’. : Re-aflirming this statement just quoted from that report, and believing that the Valentine Anti-trust law should be revised as it now stands in the General Code, not only to correct and make clearer some provisions thereof, but to provide remedies making more certain of accomplishment the relief sought with greater dispatch than now seems possible, I have prepared a bill amending certain sections of that law and submit a copy thereof herewith — for the consideration of the General Assembly. Under this statute as it now stands, proceedings in quo warranto are authorized in certain instances, and there seems to have been an attempt to authorize proceedings to restrain and enjoin violations of the provisions of the act, but whether this latter remedy is secured by it, and in what courts — we would proceed if the literal terms of the act are followed, are doubtful. It is provided in the act, in addition to the criminal penalty, that any person, firm or corporation violating any of the provisions of the act shall forfeit the sum of fifty dollars for each day the offense continues, but there is no provision as to whether this money is to be forfeited to the state or to a — county, and the section providing for this penalty provides that if the Attor- ney General begins an action for this forfeiture money he may begin it in the circuit court of Franklin county.. This provision, of course, is of no effect, being unconstitutional, because of the fact that under the constitution the circuit court has original jurisdiction only in quo warranto, mandamus, habeas corpus and procedendo, and to recover this forfeiture requires an action for money, and such action must be instituted in the vourt of common pleas. The bill as drawn corrects these errors, and without doubt invests the several courts of common pleas in the state with jurisdiction to restrain and enjoin violations of the act. The remedies under this law are cumula- tive to each other, and this bill would secure to the state the right to institute proceedings both in injunction and quo warranto in the p.oper courts, and under the bill the privilege is given to begin these actions in the proper court in any county where any defendant resides or does business and all persons, firms and corporations, parties to the conspiracy or combination, may be made parties defendant in any court in which any proceeding may be brought under the provisions of this law as so amended, if the General Assembly shall pass the bill herewith submitted. The law as it now stands absolutely prohibits a foreign corporation from doing business in this state if such corporation is found guilty of violating any of the provisions of the act. Conforming to that the bill herewith submitted provides that if in a suit in quo warranto begun by the Attorney General it shall be finally found and adjudged by the court that the defendants have been guilty of violations of the Valentine law, the charter of such corporation shall be forfeited, and the court shall declare such forfeiture and appoint a trustee or trustees to wind up the affairs thereof, the same as in other proceedings in quo warranto. The effect of this provision, and of the other provisions of the bill authorizing suits to restrain and enjoin violations, will be to give the state the right to proceed by injunction for some trivial violation not long or flagrantly continued and in which it might not be wise, under the circumstances, to forfeit the charter. But if such offenses are serious in their nature and greatly against the public welfare, and have been indulged in to such an extent as indicates a contempt of the law, the state, through the Attorney General, would have a right Bre " . Sie ase - fcr, ee o Rae ater a halen A er . es rie ‘ ms : oe. : ¢ e »y- ih; ee Ne a eG “¢ Re sire AA ae yD pate Se ae or te gt ee x ih i a eee ae 19 under ‘this bill to institute a proceeding in quo warranto, and if on the hearing the court should find that the company had transgressed the law —as claimed in violation of the Valentine act, it would be the duty of the court to declare the forfeiture. As to the limitation of time in which these suits or criminal prose- - cutions may be instituted, the bill provides that there shall be no such limitation as to any violation of this act. House Resolution No. 6, in answer to which the attached printed report was made, requested this department to make recommendations upon the situations discussed in that report and in this one, and while Senate Joint Resolution No. 10 does not specifically request our recommendations upon the situation investigated under such Joint Resolution, I take it for — granted that the general assembly in directing this department to make — report thereon meant that we should report not only as to the facts and circumstances which should appear to us to be in existence, but that we should make to you such recommendations as to this department might seem proper in view of the whole situation. We believe that to make the Valentine Law effective and to put it into such shape as that its provisions may be carried out with dispatch, it is necessary that the amendments as embodied in the bill hereto attached should be adopted. We have accordingly placed in the hands of a member of the Senate and a member of the House copies of this bill with request that the same be introduced, and we would respectfully recommend that it be passed. ; I submit herewith a copy of the report of the Interstate Commerce Commission covering the Hocking Valley situation, and would suggest that this report, with the Interstate Commerce Commission report, be printed in one document. Respectfully submitted, U. G@. DENMAN, Attorney General. To renew DATE DUE call 292-3900 a - = > ta The Ohio State University ~™ 10620