•OR. RY. ECON.
Abstract of the Reply
of tho
Interstate Commerce Commission
Introduced In the Senate by Senator Elklns and
Adopted January 16, 1905.
FROM THE NEW YORK JOURNAL OF COMMERCE OF MAY 22, 1905.
Revised and Republished, together with certain observa¬
tions upon the present rate question,
January 31, 1906.
By JOSEPH NIMMO, Jr.,
Statistician and Economist.
Fermer Chief of the Bureau of Statistics In the Treasury Department.
to a
Resolution of Inquiry
THE RUFUS H. DARBY PRINTINQ COMPANY,
WASHINQTON, D. O.
ABSTRACT OF THE REPLY OF THE INTER¬
STATE COMMERCE COMMISSION TO A
RESOLUTION OF THE SENATE OF JAN¬
UARY i6, 1905.
On January 16, 1905, Senator Elkins, Chairman of the
Senate Committee on Interstate Commerce, introduced in
the Senate a Resolution of Inquiry, addressed to the Inter¬
state Commerce Commission, for information in regard to
what had been accomplished under the provisions of the
Act to Regulate Commerce with respect to formal and in¬
formal complaints, hearings, decisions of the courts,
exorbitant rates, unreasonable rates and rebates. The re¬
port of the Commission has a very important bearing upon
the rate question now being considered by Congress. It
proves beyond all question the efficiency and sufficiency of
existing statiites for the regulation of rates. But such
amendments in the spirit and purpose of those statutes,
which may from time to time be indicated by ever varying
circumstances and conditions should be adopted.
In view of the fact that the reply of the Commission is
quite elaborate I have prepared the following abstract of
its statements in tabular form :
INFORMAL COMPLAINTS TO THE COMMISSION
BETWEEN JANUARY i, 1900, AND MARCH
I, 1905.
Total number of informal complaints 2,296
Number of informal complaints disposed of 2,171
Number of informal complaints not disposed of.. 125
Total 2,296
2
The Commission states that it is unable to give the num¬
ber of informal complaints prior to January i, 1900.
Since that date the informal complaints have amounted to
about 442 a year, all of which have been disposed of by
the Commission without the interposition of the courts.
Assuming this to have been about the average result for
the entire period of about eighteen years, embracing the
life of the Commission, the total number of informal com¬
plaints was 7,956. It also appears that from April 5, 1887,
to March i, 1905, 188 formal complaints as to exorbitant
rates and 175 formal complaints as to unjust discrimination
were settled by the Commission without any formal hear¬
ing, making a grand total of 8,319 cases settled informally.
FORMAL COMPLAINTS !\IADE TO THE COMMIS¬
SION FROM APRIL 5, 1887, TO MARCH i, 1905
—THE LIFETIME OF THE COMMISSION.
Formal Complaints.
Total number 770
Number which have come to a final hearing 400
Settled or discontinued 206
Indefinitely postponed 74
Heard but not decided 20
Partially heard. 27
No hearing 43
Total 770
The immense preponderance of informal complaints over
formal complaints—8,319 of the former as against 770 of
the latter since April 5, 1887—clearly indicates the dis¬
position of railroad officers to abide by the informal or
mediatorial determinations of the Commission.
3
CASES OF ÄFF SORTS APPEAFED TO THE
COURTS.
Total number of cases appealed to the cotirts 45
Commission sustained 8
Otherwise disposed of for various reasons stated 37
Total 45
PToni this it appears that the total number of cases ap¬
pealed to the courts was, on the average, 2 ^ a year, and
that the number of cases in whicli the Commission was
sustained by the courts amounted to a little more than one
case in each two years.
It appears, therefore, that of the 770 formal complaints
made to the Commission, only 45 have been appealed to
the courts, with the result that in 8 cases the Commission,
was sustained and that in 37 cases not sustained.
FORiMAF COMPFAINTS TO THE COMMISSION'
AFFEGING EXORBITANT RATES AND
HOW DISPOSED OF.
Exorbitant Kates.
Total number 351
Disposed of without formal hearing 188
Disposed of without decision 24
Decided by the Commission 139
Total ÍCI
From this it appears that the total number of formal
complaints as to exorbitant rates amounts, on the average,
to 19 a year, and that the total number of such complaints
decided by the Commission was, on the average, a little
more than 7 each year.
4
CASES INVOEVING EXORBITANT RATES AP¬
PEARED BY THE COMMISSION TO THE
COURTS FROM APRIR 5, 1887, TO MARCH
I, 1905.
Exorbitant Bates.
'Total cases appealed to the courts ... .. 15
Sustained by the courts None
Not sustained 15
Total 15
From this it appears that during the eighteen years from
April, 1887, to March, 1905, not a single case of exorbitant
rates appealed to the courts by the Commission was sus¬
tained by the courts.
FORMAL COMPLAINTS TO THE COMMISSION
INVOLVING UNJUST DISCRIMINATION
AND HOW DISPOSED OF.
Total 366
Settled without formal hearing 175
-Disposed of without investigation 27
Decided by the Commission 164
Total 366
From this it appears that the total number of formal
complaints as to unjust discriminations amounted, on the
average, to about 20 a year, and that the total number of
such complaints decided by the Commission was, on the
average, about 9 each year.
5
CASES OF UNJUST DISCRIMINATION APPEAEED
BY THE COMMISSION TO THE COURTS
FROM APRIL 5, 1887, TO MARCH i, 1905.
From this it appears that thirty-two decisions of the
Commission as to nnjnst discriminations were appealed to
the courts in eighteen years, or less than two a year, of
which only eighty or less than one in each two years, were
sustained by the courts.
VIOLATIONS OF THE PROVISIONS OF THE ACT
OF FEBRUARY 19, 1905, KNOWN AS THE
ELKINS ACT.
The Commission reports twenty-seven formal complaints
for violations of published rates or failure to publish rates
made since February 19, 1903, of which ten have been
heard and one dismissed. These twenty-seven complaints
embrace all the offences denounced by the Elkins Act —
namely, failure to file and publish tariffs or rates and
charges, rebates, concessions and discriminations in respect
to the transportation of property.*
Total number
Commission sustained .
Not sustained
M
32
8
Total
* There aro certain slight discrepancies in the above figures which
the Commission can perhaps explain, but which are not clear from its-
report to the Senate.
6
NUMBER OF FREIGHT TRANSACTIONS ON RAIE-
ROADS OF THE UNITED STATES.
In order to ascertain the proportion which the number
■of complaints to the Commission and of decisions of the
courts on rate questions bear to the total number oí freight
transactions on the railroads of the country I have applied
to nine of the principal railroad companies of the country
for the desired information. The companies which have
furnished the necessary data are: The Boston & Maine,
the Pennsylvania, the Chicago & Alton, the Chicago, Mil¬
waukee & St. Paul, the Atchison, Topeka & Santa Fe,
the Northern Pacific, the Delaware & Hudson, the Union
Pacific, and the Southern Pacific. From this data it ap¬
pears that there were about three hu7idred a7id forty mil¬
lion freight trajisactions on the railroads of the United
States during the year 1904. This indicates that since the
organization of the Interstate Commerce Commission in
the year 1887 there were about three thousand million
(3,000,000,000) freight transactions on the railroads of the
United States.
SUMMARY.
From the foregoing data the results of the administra¬
tion of the Act to Regulate Commerce as stated by the In¬
terstate Commerce Commission in its reply to the resolu¬
tion of inquiry of the Senate Committee on Interstate Com¬
merce of January 16, 1905, may be summarily stated as
follows for the period of eighteen years from April, 1887,
to March, 1905, inclusive :
7
îsumber
in Eighteen Years.
Total number of complaints heard by the
Commission 9)089
Number of informal complaints 8,319
Number of formal complaints 770
Number of cases appealed to the courts.... 45
Number of cases sustained by the courts. .. 8
Number of cases of unjust discrimination
sustained by the courts.. 8
Number of cases of exorbitant rates sus¬
tained by the courts None
Total number of freight transactions—ap¬
proximately 3,000,000,000
These figures, in the incontrovertible logic of fact,
demonstrate the efficiency and sufficiency of the present
law for the regulation of rates on the railroads of the
United States. Of the total number of complaints made
to the Commission, 8,319 were of so simple or unimportant
a nature that they were disposed of informally by a mere
exposure of the facts in the several cases. Seven hundred
and seventy cases came to a formal hearing before the
Commission, of which only forty-five cases were appealed
to the Federal courts, and of these only eight cases were
sustained by the courts, all of which involved unjust dis¬
criminations, not a single case involving exorbitant or
unreasonable rates. These eight cases of unjust discrimi¬
nation were all that the Commission was able to prove in
the courts of the United States out of a total of three
thousand million freight transactions or one case in each
three hundred and seventy-ßve million freight transactions.
8
The civil and criminal court records of the country,
State and National, exhibit no parallel to this phenomenal
compliance with statutory requirements.
The foregoing statements, certified to by the Interstate
Commerce Commission, prove beyond all question the effi¬
ciency and sufficiency of the present mode of regulating
the railroads of the country.
It must be clear to every intelligent and fair-minded
student of commercial and industrial affairs that this com¬
pliance with the provisions of the law, was due mainly,
and indeed almost entirely, to the compulsion of commer¬
cial forces. Those forces constitute the environment and
governing conditions under which the interstate commerce
of the country is carried on. This incontrovertible fact
utterly repels the populistic scheme of abandoning a com¬
mercial policy pursued from the beginning which has re¬
spect for rates resulting from the interaction of commer¬
cial and industrial forces and in lieu thereof setting up a
wild scheme for the autocratic determination of rates by a
bureau of the executive branch of the Government, a
scheme of regulation which involves the establishment in
this country of bureaucratic rule, a species of govern¬
mental administration which the more advanced nations
of the globe have long since abandoned. The people of
Russia are to-day struggling to expurgate this particular
form of despotism from the governmental institutions of
that country.
9
FORCES WHICH EXERT A REGULATIVE
INFLUENCE OVER RAILROAD RATES.
There are three forces which exert a regulative influence
over rail rates. These forces may be stated in the order of
their potentiality, beginning with the most forceful.
First. The competition of commercial forces.
Second. The persistent efforts of the railroad companies
to institute rules and regulations in the nature of self-gov¬
ernment, which rules and regulations the companies were
unable to enforce effectually until they had acquired the
sanction of law.
Third. The Interstate Commerce Act of February 4,
1887, which legalized the unsuccessful attempts of the com¬
panies to prevent rebates and unjust discriminations of every
sort, and to require the publicity of rates, and due notice
of changes in rates, and the observance of other regulative
measures instituted by the companies.
The regulating influence over rates exerted by the rail¬
roads through arrangements in the nature of self-govern¬
ment are much more effective than all the regulative
measures employed by the Interstate Commerce Commis¬
sion, and the influence of commercial forces in determining
and regulating actual and relative rates is very much more
potential than is that exerted by the railroads for their
own regulation and protection.
The co-existence of these potential regulative influences
over rates constitutes the explanation of the phenomenal
success which has attended the administration of the Act
to Regulate Commerce.
10
THE COMMERCIAE POEICY OF THOMAS JEFFER¬
SON VINDICATED BY THE REPORT OF
THE INTERSTATE COMMERCE COMMIS¬
SION TO THE SENATE COMMITTEE ON
INTERSTATE COMMERCE.
The report of the Interstate Commerce Commission, of
which this paper conveys an abstract, constitutes a remark¬
able vindication of the wisdom of the commercial policy
proclaimed by that great apostle of liberty, Thomas Jeffer¬
son, and of his noble faith in the conservatism which in¬
heres in the interaction of forces.
In his first inaugural address as President delivered
March 4, 1801, Mr. Jefferson recommended:
"Qovernment which shall restrain men from injuring
one another and ieave them otherwise free to regulate
their own pursuits of industry and improvement."
And in his first message to Congress as President trans¬
mitted December 8, 1801, he said :
"Agriculture, manufactures, commerce and naviga¬
tion, the four pillars of our prosperity, are the most
thriving when left most free to individual enterprise."
Such a result as that attained in the administration of
the Interstate Commerce Act, namely, not a single case of
unreasonable rates, and only eight cases of unjust dis¬
criminations in three thousand million freight transac¬
tions, far surpasses the anticipations of the author of the
Declaration of Independence.
T-O'/z
The correctness of Mr. Jefferson's faith in the results of
commercial liberty is further illustrated as follows :
1. The average rate charged for transporting freight on
the railroads of the United States fell from 1.24 cents per
ton per mile in 1882 to of a cent per ton per mile
in 1904, a decrease of 38 per cent. This on the receipts
from freight during the year 1904 amounted to a saving of
about $800,000,000 to the people of the country during
that year.
2. The railroad mileage of the United States increased
from 76,808 miles in the year 1876 to 217,250 miles on
January i, 1906, an increase of 182 per cent.
3. The tonnage of freight transported on the railroads of
the United States increased from 360,490,375 tons during
the year 1882 to 1,275,321,607 tons during the year 1904,
an increase of 254 per cent.
4. As the result of improvements in roadway, equipment,
terminal facilities and the means provided for joint traffic
the efficiency of the railroad of to-day is vastly superior to
that of the railroad of thirty or even twenty years ago.
5. As the result of freedom from paternalistic restraints
the United States to-day enjoys the advantages of the
cheapest, the most expeditious, and the most efficient sys¬
tem of railroad transportation of any nation on the globe.
II
COMMERCIAIv IvIBERTY OR AUTOCRATIC RUEE
—THE VITAL QUESTION NOW AT ISSUE
IN THIS COUNTRY.
Shall the justice and reasonableness of the rate submit¬
ted to the Federal Judiciary be of the rate charged and
collected by the carrier or of the rate substituted there¬
for by the Interstate Commerce Commission ? The answer
to this question defines the line of demarkation between com¬
mercial liberty and autocratic rule—between the determi¬
nation of justice by "'The Judicial Power of the United
States" or by a bureau invested with autocratic authority.
Rate-making by executive authority constitutes an essen¬
tial element of bureaucratic rule. The abandonment of
rate-making by judicial authority and the determination of
rates by executive authority would transfer our govern¬
ment from democratic to bureaucratic rule. In the lÍ2:ht
of the lessons of history these are self-evident propositions.
The Supreme Court of the United States has decided that
the Federal courts can pass judgment only upon the justice
or injustice, the reasonableness or unreasonableness, of rates
which have been actually charged and collected and does
not extend to the determination of rates which shall be
charged in the future. Hence the determination of rates
for the future prescribed by an administrative body, as ex¬
plained by Judge Cooley, first Chairman of the Interstate
Commerce Commission involves the creation of a dispens¬
ing power. This, as stated by that great jurist, "would not
be consistent with sound principles of government." In
other words, it would create in this country bureaucratic
rule which, as already remarked, is the antithesis of com¬
mercial liberty.
12
The judicial mode of determining the justice and reason¬
ableness of charges for transportation services has prevailed
in this country from the beginning. Under it this country
has prospered as no other nation ever prospered on this
globe, and mainly as the result of the facilities afforded for
the collection and distribution of the products of industry
afforded by railroads.
But at this late day it is proposed that the rate which
the courts shall pass upon shall be the rate prescribed by
the Commission and not the rate charged by the carrier.
This theory of government finds expression in the bill in¬
troduced in the House of Representatives on January 27th,
designated as H. R. 12987. This bill provides in its sec¬
tion four on page eleven, with respect to orders of the
Commission prescribing rates for the future, that
"Such orders shall go into effect thirty days after notice
to the carrier and shall remain in force and be observed by
the carrier, unless the same shall be suspended or modified
or set aside by the Commission or be suspended or set aside
by a court of competent jurisdiction."
This, without a word in the nature of explanation or ex¬
cuse, is the autocratic rule which it is proposed to set up in
this country in the place of the rule of commercial liberty
which has prevailed from the beginning.
In order to change this proposed statutory provision so
that it shall express the rule of commercial liberty it would
have to read substantially as follows :
" Such order shall go into effect thirty days after notice to
the earner, and shall remain in force and be observed by the
carrier unless the court to which such order may have been
appealed by any carrier or carriers shall determine that the
rate, fare or charge established by such carrier was not un-
13
just or unreasonable, in which case the court shall enter a
decree or order setting aside such order of the Commission
and restraining the enforcement thereof."
These two suggested provisions of law define the vital
question of commercial liberty versus despotic rule which
now confronts the Congress and commands the earnest at¬
tention of the people of the United States. All else upon
the subject in this elaborate bill (H. R. 12987) and in all
other bills is merely subsidiary and comparatively un¬
important.
And yet this vital issue—the crux of the whole rate
question—is submerged in a single line of H. R. 12987—
line 9, page 11. Besides it is hidden from view in the Re-
2)ort of the Committee which reported it in the face of the
fact that it involves the most im^Dortant public question
wliich has commanded the attention of the American jreo-
ple since the'outbreak of the Civil War.
Section 5 of the bill which authorizes the Commission
to ai^peal to the Circuit Court and the Siqrreme Court of
tlie United States relates to suius for damages and has no
reference to the vitally important matter here considered.
In review of the foregoing I submit the historic facts
that the mode of regulating the commerce of the United
States proposed in H. R. 12987 goes in the face of the
whole theory and practice of governmental regulation of
commerce which has prevailed in the country from the be¬
ginning, that serious doubts exist as to its constitutionality,
that it involves the creation of a dispensing power repug¬
nant to the fundamental jDrinciples iqron which our whole
governmental system rests, and that the lessons of experi¬
ence in the administration of the Act to Regulate Com-
14
merce as stated officia.lly by the Interstate Commerce Com¬
mission and hereinbefore presented utterly repel the idea
that such drastic and revolutionary legislation is just, wise
or expedient.
CONCLUSION.
I heartily approve and recommend thorough and effect¬
ive regulation of the railroads, but let it be done in a fash¬
ion which comports with the genius of our institutions and
not through the adoption of a revolutionary scheme.
The vital question now at issue is, shall the rate sub¬
mitted to the Federal judiciary be the rate made by the
carrier or the rate substituted by the Commission. This
marks the line between commercial liberty and autocratic
rule ; between a course which from the beginning has led
this nation upward and onward, and a course which inevit¬
ably leads to bureaucratic government with all that it im¬
plies of stagnation and decay.
JOSEPH NIMMO, Jr.
Washington, D. C., February i, 1906.
JOSEPH NIMMO, Jr.,
Statlsticia.n and Kconomist,
Huntington. 1031 f Street n. w.
Long Island, n. Y. Washington, d.
S pec i AU ATTC NTION OIVCN TO QUESTIONS IN HCOARD TO
commerce, transportation, navigation and industry.