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It must not be forgotten that our railways are the arteries through
which the commercial lifeblood of this nation flows. Nothing could be
more foolish than the enactment of legislation which would unnecessarily
interfere with the development and operation of these commercial
agencies.—PRESIDENT ROOSEVELT'S MESSAGE TO CONGRESS,
December 3, 1901.
A commeRCIAL
AND
PoliticAL DANGER.
REVIEW OF THE FIFTEENTH ANNUAL REPORT
O F THE - -
INTERSTATE COMMERCE COMMISSION
A N D of * . . .
THE POLICY PURSUED BY THE COMMIssion
FROM THE BEGINNING.
... as cºaº.escº “”
****
By Jose PH NJM Mo, Jr.,
STAT 1 st 1 c 1A N A N D Eco No M is T.
CONTENTS.
Historical review of the policy pursued by the Inter-
state Commerce Commission.
Attempts of the Commission to secure autocratic powers
A Constitutional Limitation
Renewed attempts to secure autocratic powers.................
The proposed submission of the orders of the Commis-
sion to the Courts .
Magnitude of the authority which the Commission
seeks to acquire.
Dangers Involved.
Exorbitant Rates
Unjustly Discriminating Rates .
Compliance with Acts relative to safety appliances.......
A Baseless Prediction .
Secret Violations of Rates ...
The American Railroad. System
Resumé…~~~~~~~~
Page.
I 2
I 5
I9
2O
22
26
28
28
29
4 I
43
|Introbuctorp ikemark3.
President Roosevelt's Message to Congress, transmitted
December 3, 1901, contained the following wise and conserv-
ative passages:
“It must not be forgotten that our railways are the arter-
ies through which the commercial life-blood of this Nation
flows. Nothing could be more foolish than the enactment
of legislation which would unnecessarily interfere with the
development and operation of these commercial agencies
In facing new industrial conditions. the whole history of
the world shows that legislation will generally be both unwise
and ineffective unless undertaken after calm inquiry and with
sober self-restraint. -
The first requisite is knowledge, full and complete—
knowledge which may be made public to the world.”
The following discussion of the proposition advanced and
persistently advocated by the Interstate Commerce Commis-
sion, in favor of legislation which shall confer upon it the
power to exercise administrative control over all interstate
railroad traffic, and to dictate the course of the development
of the commercial and industrial interests of the United
States, freed from all judicial restraint, is essentially an
appeal for “calm inquiry '' and for “knowledge which may
be made public to the world.”
In the attempt to discuss the unwisdom and dangers
attending the adoption of such a policy I have presented
an historical sketch showing just what powers the Commission
has assumed to exercise, or has attempted to secure through
legislation ; the manner in which the Commission has asserted
its claim to such powers, and its failures to impress either
the judicial or legislative departments of the Government with
the justice, the utility or the reasonableness of its several
attempts to secure the desired authority. I have next con-
sidered the question in its legal aspects and upon its commer-
cial and economic merits and finally, have discussed the
subject of rate-cutting, which the Commission has latterly
made the ground of its contentions.
JOSEPH NIMMO, JR.
WASHINGTON, D. C., March 22, 1902. -
A com MERCIAL AND POLITICAL DANGER.
The Fifteenth Annual Report of the Interstate Com-
merce Commission repeats the persistent request of the
commission that Congress shall confer upon it legislative
powers which, if granted, would eliminate judicial restraint
from railroad regulation, and in connection with its present
administrative function would invest the commission with
the authority to dictate the course of the development
of the commercial, industrial and transportation interests
of this country. I shall attempt to prove that such grant
of power would far transcend any rule of public policy ever
adopted in any civilized country; that it is repugnant to
the genius of our political institutions, inadmissible under
our present form of government, prejudicial to the com-
mercial and industrial interests of the country, and, if
adopted, would be subversive of the ends of justice and of
liberty.
A proper consideration of this important subject in-
volves a brief historical review of the line of policy pur-
sued by the Interstate Commerce Commission from the
beginning :
Historical Review.
At the very beginning the Interstate Commerce Com-
mission assumed that the fourth or “long and short haul.”
section of the Act to Regulate Commerce conferred upon
it a legislative or dispensing power, independent of judicial
restraint. The result of this assumption and practice was
that within a month from the day when the law went into
operation the commission was overwhelmed with applica-
tions for relief. Accordingly, in a decision written by
Judge Cooley, and rendered June 15, 1887—only two
months after its organization—the commission reversed its
policy and procedure by declaring that the companies
6
should first judge for themselves as to whether the charges
imposed by them were just and legal, and that then, in case
of complaint, duly instituted, such charges would become
subject to the ordinary judicial procedure in litigated cases.
The reasons assigned by the commission for this change
from the autocratic to the judicial mode of procedure
were, first, that the interpretation of the Act at first
adopted involved a superhuman task; and, second, that
under it the commission “would in effect be required to
act as rate-makers for all the roads.” Hence the commis-
sion concluded that the construction of the Act first adopted
“could not have been intended ” by the lawmaker.
But the commission soon after relapsed to the idea that
by necessary implication of law, it is invested by the Act
to Regulate Commerce with both judicial authority and
delegated legislative power. Both of these assumptions
were distinctly disclaimed by the Senate Committee which
framed that Act, and both have been indignantly repelled
by the courts.
In the case of “Kentucky and Indiana Bridge Co. v.
Louisville and Nashville R. R. Co.,” decided January,
1889—less than two years after the commission was organ-
ized—Judge Jackson, of the United States Circuit Court
for the District of Kentucky, decided that the Interstate
Commerce Commission is not a court; that it is not in-
vested with any judicial functions, and that Congress has
no power to invest an administrative body with the judi-
cial function. (137 Federal Reporter, 613.) This opinion
of Judge Jackson, in the case cited, has never been seriously
called in question, even by the commission. -
Dissatisfied, however, with the judicial decision just
noted, in its annual report submitted November 29, 1890,
the commission denied the doctrine of constitutional law
announced by the court and stoutly maintained that with
respect to administrative questions, its “conclusions should
* .
. . .
7
be a finality even though their enforcement might require
judicial aid.” (4. I. C. C. R., p. 13.) This the courts
have positively denied. --> . - -
A bill expressive of its peculiar ideas was then drawn
by the commission and at its instance was introduced in
the Senate on December 15, 1891. (Senate Bill 892, 52d
Congress Ist Session.) At hearings before the Senate
Committee on Interstate Commerce from February 3 to
February 24, 1892, the proposition was strenuously opposed
by eminent counsel, mainly upon the elementary principle
of constitutional law and of rational government that it is
absurd to attempt to invest a single governmental agency
with the functions of detective, witness, party complainant,
prosecutor and judge in the same proceeding. That sa-
vored too much of the Pooh Bah style of government.
The attempt of the commission to secure the desired
power was disregarded by the Senate Committee on Inter-
state Commerce before which the hearings took place.
But in spite of this failure, in succeeding annual reports
the commission has persistently maintained its right to ex-
ercise an important degree of judicial power.
Attempts of the Commission to Secure Legislative or
- Autocratic Powers.
Realizing its utter failure to secure independent judicial
authority the commission soared to loftier heights of power.
It assumed that its proper function is to direct the course
of the commercial and industrial development of this vast
country as well as to administer its transportation interests.
In its seventh annual report (page IO), submitted Decem-
ber 1, 1893, the commission declared that it ought to be
endowed by Congress with the right “to investigate raiſ-
road tariffs, to require their correction and to determine
what are just and reasonable rates for public carriage.”
But the commission far transcended even this claim to
authority. In the same report it declared that it ought to
8.
be invested with the right to determine the relative status
of the commercial and industrial interests of this vast
country. This appears on page IO of its seventh annual
report, submitted December 1, 1893, and reads as follows:
“To give each community the rightful benefits of loca-
tion to keep different commodities on an equal footing, so
that each shall circulate freely and in natural volume, and
to prescribe schedule rates which shall be reasonably just to
both shipper and carrier is a task of vast magnitude and
importance. In the performance of that task lies the great
and permanent work of public regulation.”
This was a clean-cut proposition to abandon the faith of
the fathers in the conservatism which inheres in the inter-
action of forces and to have recourse to the experiment of
an autocratic determination of the conduct of the commer-
cial, industrial and transportation interests of the United
States. -
This wild thought was soon set in motion. The com-
mission asserted its right by necessary implication under
the Act to Regulate Commerce to prescribe maximum
rates, minimum rates and absolute rates for the future. By
an order dated May 29, 1894, it declared that the rates
which prevailed from trade centres north of the Ohio River
to points in the South Atlantic and Gulf States should bear
a certain relation to the rates from trade centres of the
North Atlantic States to the same Southern points; thus
assuming the right to dictate the course of the commercial
and industrial development of three great sections of this
vast country. The most glaring vice of this assumption
was that it was calculated to give rise to a fierce sectional
struggle of a political character. The case ran the course
of judicial procedure. It is known as the “Maximum
Rate Case” and also as the “Cincinnati-Chicago Freight
Bureau Case.” (167 U. S., 479). The courts treated the
attempted usurpation of power with contempt. In refer-
ring to certain assumptions of the commission the Supreme
9
Court of the United States used such language as the fol-
lowing: “Could anything be more absurd, &c., &c.,” in-
timating also that the commission appeared to “evolve out
of its own consciousness” the solution of the problems with
which it was struggling. The decision of the court ren-
dered May 24, 1897, was as follows:
“Our conclusion is that Congress has not conferred upon
the commission the legislative power of prescribing rates
either maximum or minimum or absolute.”
A Constitutional Limitation.
In the same decision the Supreme Court announced the
doctrine of constitutional law that ſ/he determination of the
reasonableness of rates which have been charged and coſ-
Zected as a yudicia/ acá, but that / rescribing ražes zwhzch
sha// be charged in the ſuture is a legislative acá. This
seemed to open up to the commission a new possibility for
the acquisition of autocratic power. It resolved, if possi-
ble, to avail itself of the opportunity, exposed by the court,
to cut loose from the judiciary through an attempt to ac-
quire legislative authority. This would free it of all judi-
cial restraint. Accordingly in its next annual report (the
eleventh), submitted December 6, 1897, the commission
recommended to Congress the following amendment to sec-
tion 6, of the Act to Regulate Commerce (Pages 141–142):
“If the commission is of the opinion that the rates,
fares or charges as filed and published in connection there-
with are unreasonable or otherwise in violation of law, it
shall determine what are and will be reasonable and other-
wise lawful rates, fares, charges, classification, privileges,
facilities or regulations, and shall prescribe the same, and
shall order the carrier or carriers to file and publish, on
or before a certain day, to take effect on a certain day,
schedules in accordance with the decision of the commis-
sion.”
About six weeks later, 11amely on January 22, 1898,
there was introduced in the Senate a bill—Senate Bill
IO
3354, 55th Congress 2d Session—drawn by the commis-
Sion, which contained verbatim the provisions just stated.
This bill in explicit terms provided that the commission
shall have full authority—
I. To prohibit a greater charge for the shorter than for
the longer haul, unhampered by the consideration of “cir-
cumstances and conditions.”
2. To prescribe actual rates, fares or charges, classifica-
tions, privileges, facilities, regulations, and to order the
publication of “schedules in accordance with the decision
of the commission.” -
3. To fix maximum rates and minimum rates.
4. To determine relative rates.
5. To determine the division of joint rates between car-
riers.
6. To make changes in classifications and to amend the
rules and regulations under which traffic moves.
7. To issue self-executing administrative orders and final
administrative orders—a strictly judicial function.
8. In the face of the opinion rendered by the Supreme
Court in the Maximum Rate Case that “the power to pre-
scribe a tariff of rates for carriage by a common carrier is
a legislative, and not an administrative or judicial, func-
tion " the bill proposed to require the courts to review the
rates, fares, classifications, &c., &c., prescribed by the com-
mission.
9. It was provided in the bill that “the case as certified
from the commission, together with any additional testi-
mony taken as above, shall be the record upon which it
shall be heard.” This was also in direct violation of the
clearly stated opinion of the Supreme Court of the United
States that the commission cannot exercise judicial author-
ity.
It would be difficult to imagine a more flagrant attempt
to violate the fundamental principles of our organic law
II
as clearly expounded by the Supreme Court of the United
States. It was essentially a proposition to use and then to
eliminate the “judicial power of the United States” from
the administration of justice in the broad domain of com-
mercial regulation. As such it was a clean-cut proposition
to establish in this country the bureaucratic form of govern-
ment—the antithesis of that form of government which is
prescribed by the Constitution of the United States.
In order to be entirely explicit, upon this point, I will
state that by “bureaucratic form of government,” I mean
specifically the delegation of legislative powers to an ad-
ministrative office of the government, freed from judicial
restraint and subject to no adequate control by the chief
executive authority of the nation. Such authority I have
also characterized throughout this article as autocratic
Aozyer. -
So infatuated was the commission with the dream of
power expected to be conferred upon it by Congress, that
it betrayed in glowing terms the picture which its imagina-
tion had already painted in its own mind as to its expected
triumphs over the Federal Judiciary. On page 26 of its
eleventh annual report it said :
“If we have the power to entertain and decide them,
these cases will necessarily be numerous and important.
The amount of money involved will be much greater than
that involved in the decision of any trial court in the United
States. The results will usually be of more consequence
to the litigants than those of any such court.”
This was undoubtedly true. Not only would the com-
1mission have overshadowed the Federal Courts as to the
magnitude and importance of its work, but it would have
exercised over the property and the commercial and indus-
trial interests of this country an authority vastly greater
than that ever exercised by Congress or by the President
of the United States, except in time of war.
I 2
The effect of the proposition of the Commission would
have been to devolve upon the National Government full
responsibility for the course of the material development
of the country, and to make the commission the practical
arbiter of the comparative commercial well being of every
locality and section of the country.
This Utopian scheme made no sensible impression upon
the legislative mind. The bill which the Interstate Com-
merce Commission had so carefully drawn was the subject
of a hearing before the Senate Committee on Interstate
Commerce at which the commission was fully heard.
But the bill was never reported to the Senate.
Renewed Attempt to Secure Autocratic Power.
The Commission has been persistent in its struggle for
autocratic power. Its latest avowed attempt to secure both
judicial and legislative authority is embodied in Senate Bill
I439 of the 56th Congress Ist Session, introduced in the
Senate December 12, 1899. This bill was the subject of a
hearing before the Senate Committee on Interstate Com-
merce extending from January 26 to April 13, IOOO. It
contained substantially the same provisions as Senate Bill
3354 of the 55th Congress just described. But in this en-
deavor the Commission adopted even bolder and more
questionable methods. It had recourse to a propaganda
and to an unmistakable lobbying expedient.
The propaganda was represented by a secretary and
agent for legislative purposes in Washington. This is in-
dicated by the testimony taken in 1890. It seems beyond
question that the commission had become so infatuated by
an alluring heresy as to adopt the idea that the end which
it sought to attain justified the peculiar means employed
for its accomplishment.
That the commission was the soul of this propaganda
appears to be evident from current reports and from the
I 3
testimony given by Hon. Martin A. Knapp and Hon.
Charles A. Prouty, Interstate Commerce Commissioners,
and others. The commission took the initiative in draft-
ing the bill, in securing its endorsement by trade bodies
and individuals, and finally, by a direct lobbying expe-
dient, in attempting to induce persons in various parts of
the country to request Senators and Representatives in
Congress to support the bill. The correctness of this last
statement is clearly evidenced by a formal order of the com-
mission concerning “co-operation with certain mercantile
organizations to secure the adoption of amendments to the
Act to Regulate Commerce,” dated December 8, 1899, di-
recting the secretary of the commission to devote himself
assiduously to such work of co-operation, and also in the
circular letter subsequently issued by that officer wherein,
in pursuance of such order he expressed a desire that the
persons to whom such circular might be sent would request
the Senators and Representatives from their respective
States to support the bill which provided for granting to
the commission the desired powers. This was a clean-cut
lobbying expedient.
The disclosure of this manifestly improper procedure on
the part of the commission naturally reacted upon it, and
tended to hinder rather than to aid the passage of the bill.
Another incident occurred in the month of April, 1900,
which had a marked effect upon the fate of the bill. On
April 16, Senator Elkins of West Virginia, a member of
the Interstate Commerce Committee, introduced in the
Senate a resolution calling upon the commission for the
following information : -
“The total number of cases heard and determined by
the commission during the last ten years, the number of
such cases which have been appealed to the courts, the
number of such cases in which the decisions of the com-
mission have been sustained, the number of such cases in
which the decisions of the commission have been reversed,
I4.
and the number of such cases which have not been deter-
nined.”
This resolution was at once considered and agreed to. It
is known as Senate Resolution No. 267, 56th Congress 1st
Session. On the 28th of April the Interstate Commerce Com-
mission transmitted its reply to the Senate (Senate Docu-
ment No. 31.9, 56th Congress Ist Session). From this all-
Swer the history of the cases decided from April 16, 1890,
to April 16, 1900, appeared to have been summarily as fol-
lows:
Total number of cases decided by the commission, 18O
Number appealed to the courts. . . . . . . . . . . . . . . . . 35
This showed that in the millions of freight transactions
in the United States during the ten years from April 16,
I890, to April 16, 1900, only 18O cases, or 18 a year came
to a hearing, and that of these only 35, or 3% a year were
appealed to the courts. J.-zº
The 35 cases appealed to the courts during the ten years
were disposed of as follows:
Commission sustained in 4 cases.
Commission reversed in 17 cases.
Cases pending - - - I 2 cases.
Cases withdrawn - - - 2 cases.
Total - - 35 cases.
The above result showed that of the 21 cases appealed
from the decision of the commission to the courts, and de-
cided, the commission was overruled in over four-fifths of
those cases. This, in connection with the fact as to the
small amount of litigation involved, was exceedingly det-
rimental to the claim of the commission.
The bill–S. I439, 56th Congress Ist Session—was re-
ported adversely from the Senate Committee on the Inter-
state Commerce and failed of consideration in the Senate.
I 5
General Observations upon the Historical Aspects of
- the Case. . . . .
The most astounding feature of the controversy in which
the commission has engaged, of its own motion and in its
own interest, has been its open and persistent denial of ju-
dicial conclusions of the Federal Courts. This the commis-
Sion has not sought to evade or deny. In its reply to the
Senate Resolution of April 16, 1900 (Senate Document No.
3.19, 56th Congress Ist Session), the commission, appointed
under a law which does not require that any one of its
1members shall be a lawyer, explained that the reason
why SO few of its orders had been sustained and enforced
by the courts was that during the period mentioned it had
Opposed its opinion in regard to the constitution and
authority of “the Judicial Power in the United States” to
that proclaimed by the Supreme Court of the United
States. Thus the judicial (?) views of the commission have
been at variance with those of the Supreme Court of the
United States during the last twelve years.
The commission has somewhat contracted the expression
of its desires in its fifteenth annual report, and in the bill
introduced in the House of Representatives of the present
57th Congress. But it firmly adheres to its demand for the
power to prescribe rates for the future, which involves all
the objectionable provisions for autocratic power, embodied
in its eleventh annual report and in Senate Bill 3354 of the
55th Congress already described.
Having thus briefly stated the main facts in the history
of the attempts of the Interstate Commerce Commission to
acquire practically autocratic powers, I proceed to consider
the various propositions of the commission upon their merits.
The Proposed Submission of the Orders of the Commis–
sion to the Courts has no Practical Significance.
The proposition of the Commission that its orders coli-
cerning rates, rules, regulations and conditions by legisla-
I6
tive authority, shall be submitted to the courts is imprac-
ticable, for the following reasons: The Supreme Court of
the United States in the Cincinnati-Chicago Freight Bureau
Case, already cited, announced the following rule of con-
stitutional law :
“It is one thing to inquire whether the rates which have
been charged and collected are reasonable—that is a judi-
cial act; but an entirely different thing to prescribe rates
which shall be charged for the future—that is a legislative
act; ” -
And again :
“The power to prescribe a tariff of rates for carriage by
a common carrier is a legislative and not an administrative
or judicial function.” (167 U. S., 479.)
In a word the Supreme Court has declared that it will
have nothing to do with a rate for the future made under
legislative authority. The business of the judiciary relates
to legally contested cases. Its normal expression is the
lawsuit—not the administration of the affairs of the busy
world. This constitutional view was accepted and has
been clearly expressed by members of the Interstate Com-
merce Commission.
In commenting upon these and related judicial utter-
ances, Hon. Martin A. Knapp, Chairman of the Interstate
Commerce Commission, an attorney at law, made the fol-
lowing statement on March IO, 1898, before the Senate
Committee on Interstate Commerce (page 9):
“One doctrine is now settled—that whereas the investi-
gation of the question whether an existing rate is a reason-
able and lawful one or not is a judicial question, the deter-
mination of what the rate shall be in the future is legisla-
tive or administrative question with which the courts can
have nothing to do.” -
Again on page 26 of the same hearing, Mr. Knapp said :
“This is the theory of it: This commission, for the
purpose we are now discussing, represents the Congress of
I7
the United States, and when it has made an order, in a
certain sense it is like an act of Congress.”
On page II8 of “Hearings before the Committee on In-
terstate Commerce of the United States Senate, February
20, 1900,” Hon. Charles A. Prouty, Interstate Commerce
Commissioner, also an attorney at law, said :
“The prescribing of a rate is, under the decisions of the
Supreme Court, a legislative, not a judicial function, and
for that reason the cozarás could moſ, even ºf Congress so
e/ected, be 2/22/ested zyżth that authority.”
The principal of constitutional law thus enunciated seems
to have inspired the commission to strenuous efforts to ac-
quire legislative or administrative power, not only over
rates, but over railroad management generally. By this
means the restraint of judicial review upon their deter-
minations and orders would be thrown off, and the power
thus gained would, of course, render the decision of the
commission final and practically autocratic.
In the light of the constitutional doctrine enunciated by
the Supreme Court it appears to be useless to expect the
judiciary to take any notice whatever of rates for the future,
as to their reasonableness or unreasonableness. Any legis-
lative enactment conferring upon the judiciary the power
to review an administrative act of the commission, in pur-
suance of legislative authority, is therefore delusive. This
appears evident also from the following opinions:
In the recent case of Louisville & Nashville R. R. Co. z.
Kentucky, decided January 6, 1902, the Supreme Court
said: - -
“It is scarcely necessary to say that courts do not sit in
judgment upon the wisdom of legislative or constitutional
enactments.”
In the case of San Diego Land Co. v. National City, the
Supreme Court of the United States held as follows (174
U. S., 739–754):
I8
“Judicial interference should never occur unless the case
presents clearly and beyond all doubt such a flagrant at-
tack upon the rights of property under the guise of regula-
tion as to necessarily have the effect to deny just compen-
sation for private property taken for public use.”
Similar judicial opinions are abundant and need not be
cited here. -
An exceedingly able and distinguished lawyer, who has
given practically his entire time to the study of transporta-
tion questions since the Act to Regulate Commerce was
passed, has recently expressed the following opinion upon
this vitally important point:
“As the power to make future rates is a legislative
power, Congress camzzot, 27, my of 2nzozz, cons/2/2//zozza//y
conſer upon the judicial department any power ſo review
or reverse the action of the commission in making ſuture
rates. The only power that would be left to the judiciary
or that could be conferred upon the judiciary by Congress
would be the power to decide whether those rates (made by
the commission) were confiscatory in character.”
And again. “No court can determine whether an Act
of Congress is upon the facts unjust or unreasonable, or
whether an act has been passed under some error of law.”
While it is unquestioned constitutional law that no carrier
can be compelled to carry freights at rates which are in ef-
fect confiscatory, yet a broad line of distinction lies between
remunerative and confiscatory rates, which in practice ex-
cludes the courts from the power to condemn any rate
made in pursuance of legislative enactment upon the
ground that it is unjust or unreasonable. Without doubt
the discretionary power proposed, embraces the entire range
of commercial profits which in practice justifies both the
construction and the operation of railroads. In a word, it
is an absolute and practically autocratic power.
I9
The idea that the Federal Judiciary will ever allow itself
to be used for the purpose of eliminating its own authority
in the realm of justice seems too preposterous for serious
consideration. It can be safely predicted that in reply to
any such proposition the judiciary would again be forced to
the indignant exclamation, “could anything be more
absurd P”
The Magnitude of the Administrative Authority which
the Commission Seeks to Exercise.
The magnitude of the administrative authority which
the commission seeks to exercise over the commercial, in-
dustrial and transportation interests of this country, and
incidentally over its political interests may be realized from
a comparative statement:
Suppose an administrative office of the National Govern-
ment were authorized to prescribe the freight charges on
all vessels—American and foreign—engaged in the for-
eign commerce of the United States and were also invested
with the authority to adjust the relative freight charges to
and from foreign countries with reference both to the in-
terests of navigation, and of the sharply competing inter-
ests of rival seaports. Suppose also that such administra-
tive body were endowed with the function of prescribing
the “rules, regulations and conditions for freight transpor-
tation ” upon the Ocean, as is now proposed by the commis-
sion with respect to our internal commerce, and that all
this authority were delegated to it by Congress as an abso-
lute power exempt from any sort of judicial restraint touch-
ing the reasonableness or the propriety of the methods of
regulation adopted. Such power would vastly exceed the
administrative responsibilities ever assumed under any con-
stitutional government on earth. Besides it would involve
political difficulties of an appalling character, arising out of
local and sectional jealousies, which would endanger the
stability of our governmental system. And yet this ideal-
2C)
istic and utterly impracticable assumption of governmental
function would fall very far short of the power “to give to
each community the rightful benefit of location, to keep
different commodities on an equal footing, so that each
shall circulate freely and in natural volume, and to pre-
scribe schedule rates which shall be reasonably just to both
shipper and carrier’’ an exercise of administrative author-
ity which in these very words the commission has declared
to be its “high ideal” of the governmental regulation of
the internal commerce of this vast country, and toward
which ideal all its efforts to secure additional power have
been directed. - -
The total value of the foreign commerce of the United
States during the year ended June 30, 1901, amounted to
$2,310,937, I 56. But the value of the internal commerce
of the United States amounts to fully twenty times the
value of its foreign commerce, or to fully forty-six billion
dollars a year ($46,000,000,000).
The property interests affected by the asserted right of
the commission to regulate the commerce of the country
would greatly exceed even this amount. Besides, the politi-
cal interests affected would be exceedingly involved and
absolutely appalling.
Such would be the magnitude of the interests affected.
The proposition is monstrous. It would be dangerous if
it were not so unspeakably absurd.
Danger Involved in the System of Regulation Advo-
cated by the Commission.
It needs no argument to prove that the system of regu-
lation proposed and vigorously advocated by the Interstate
Commerce Commission is essentially in the nature of state
socialism. The danger involved in such a system consists
not in any fault of character or disposition on the part of
the commission as a body or of its members individually.
The danger to be apprehended, and which is imminent,
2 I
arises from evils having their origin in the infirmities of
human nature. This is clearly evident. As soon as
it should become known that an agency of our repre-
sentative form of government were invested with dispens-
ing power involving both absolute and relative rates,
as well as absolute and relative facilities for transpor-
tation throughout this vast country, the commission
would be assailed with applications for reduced rates,
readjustments of rates and facilities involving the com-
petitive interests of towns, cities, states and sections of
the whole country. Such method of administration might
be compatible with the political institutions of an absolute
monarchy, but would constitute a glaring solecism under
our representative form of government. The history of
the first attempts of the commission to administer the long
and short haul rule which overwhelmed it with superhu-
man responsibilities and the subsequent history of the at-
tempt of the commission in the “Maximum Rate Case”—
already explained—at once illustrates and justifies this
statement. The clamor for preferential rates under the
method of administration proposed by the commission
would be characterized by all the fierceness of political
strife. The demands upon it for relief would be like unto
that of the horse-leech's two daughters which do contin-
ually cry Give! Give || The struggle for political prefer-
ment would be tame in comparison with the struggle for
commercial privilege. The restraint now opposed by the
judiciary, the bulwark of our liberties and of justice being
removed, cupidity and passion would run riot. There
would not even be left that last measure of protection
which exists in the Spanish-American States, where the
people seem to be incapable of appreciating the force of any
legislative or judicial authority which has not the sanction
of the executive power ; for our chief executive is not
clothed with any such authority as that popularly recog-
22
nized in the other republics of this continent. In a word,
the method of regulation proposed by the commission is
incompatible with the structural features and the genius of
our system of government.
THE POSSIBLE BASIS OF FACT UPON WHICH THE
COMMISSION MAY PREDICATE ITS APPEAS FOR
EN LARGED POWERS.
Having considered the history and the nature, magnitude
and dangers involved in the appeal of the Interstate Com-
merce Commission for enlarged powers, it remains to con-
sider the state of facts upon which it is possible for the
commission to predicate its demands. Such claims have
been based (a) upon exorbitant rates, (b) upon unjustly dis-
criminating published rates and (c) upon violations of pub-
lished or legal rates. These will be considered in the order
mentioned. -
Exorbitant Rates.
In its seventh annual report, submitted December I,
1893, the commission said at page I2 : “To-day exortion-
ate charges are seldom the subject of complaint.” In its
twelfth annual report, submitted January 9, 1899, at
page 27, the commission said: “It is true, as often asserted,
that comparatively few of our railway rates are unreason-
able.” From time to time the commission has had quite
a good deal to say about “unreasonably low rates.”
On March 18, 1898, Hon. Martin A. Knapp, the present
Chairman of the Interstate Commerce Commission stated
before the Senate Committee on Interstate Commerce that
“the question of excessive rates, that is to say, railroad
charges which, in and of themselves, are extortionate, is
pretty much an obsolete question.”
The Supreme Court has in no case decided that a rate
charged was in itself exorbitant, and I think I am not mis-
taken in saying that the question as to the reasonableness
23
of any rate per se has never been presented to that court.
I think also that I am not in error in stating that no rate
has ever yet been proven to be unreasonable in the lower
Federal Courts. -
Besides all this, the record of constantly reduced freight
charges in this country since the year 1870, as published
by the Interstate Commerce Commission and by the Bureau
of Statistics of the Treasury Department, affords over-
whelming proof not only of the fact that rates are not ex-
cessive, but also that they are very low. During the last
thirty years rates have steadily declined in every section of
the country. This is shown on page 397 of the Statistical
Abstracts for 1901 as follows:
The Average A’eceipts per ton per mile on A'ailroads of
the United States during the Year 1870, 1890 aud. 1900.
RAILROAD LINEs. I87O I890. I900.
Cents. Cents. Cents.
Lines east of Chicago... . . . . . . . . . . I. 61 .63 55
Western and Northwestern Lines. . . 2.61 | I. OO . 89
Southwestern Lines . . . . . . . . . . . . . 2.95 I. II . 9I
Southern Lines. . . . . . . . . . . . . . . . . . 2. 39 .8O .63
Transcontinental Lines . . . . . . . . . . . 4.50 I. 50 . 93
Average . . . . . . . . . . . . I. 99 . 9 I . 7O

The average charge per ton per mile for the United
States fell from Iºr cents in 1870 to ſº cents or seven
mills per ton per mile in 1900. This shows that the aver-
age rate in 1900 was only a little more than one-third of
the average rate in 1870—thirty years ago.
At the same time the facilities for railroad transportation
have been enormously increased, and wonderfully im-
proved. The service during the year 1900 was very much
more efficient than in 1870.
24
It may also be observed in this connection that the charges
for railroad transportation in the United States are much
less than in any other country on the globe.
An effort has been made to evade these conclusions by
declaring that while there has been a reduction in the
average freight charges as compared with prevalent rates
thirty or even twenty years ago, yet that the decline from
.91 of a cent per ton per mile in 1890 to .7O of a cent per ton
per mile in 1900 is apparent and not real, for the reason
that there has been such an enormous increase in the
amount of coal, ores and other low grade freightstransported
during the last ten years. But this assumption has 110
foundation whatever in the facts of experience. This is
clearly indicated by the following table which shows the
tons carried one mile on railroads, the tons of coal marketed
and the tons of iron ore produced in the United States in
1890 and in IQOO :
Increase
I890. I900. Per Cent.
Tons. Tons.
# Tons carried one mile... 76,207, O47,298 || I4I,599, I57,270 .86
+Coal marketed............. II4,628,266 I99,977,758 *
f Iron ore produced ....... I6,036, O43 27,553, 16 I . 74
* Interstate Commerce Commission Statistics.
# Statistical Abstract of the United States.
f Mineral Resources of the United States, 1900, Geological Survey,
pages 43–44.
From this table it appears that the increase of railroad
traffic, as expressed by tons of freight carried one mile, ac-
cording to the statistics published by the Interstate Com-
merce Commission, exhibited an increase of 86 per cent
during the ten years 1890 to IOOO, whereas the coal
Imarketed and iron ore produced in the United States dur-
ing the same period showed together an increase of only
74 per cent, so that the attempted argument that the appar-
ent reduction in the average rate per ton per mile during
25
the ten years from 1890 to 1900 is due to the enormous
increase in the tonnage of coal and ores transported is seen
to be utterly fallacious. -
The table on page 23 shows that the average rate per ton
per mile on the railroads of the United States fell from .91
of a cent in 1890 to .7O of a cent in 1900, a fall of 23 per
cent during the ten years.” This, however, fails to show
the actual average reduction in rates, for the reason that
wars of rates prevailed for several years prior to and sub-
sequent to the year 1890. These contests were also detri-
mental to the commerce and the productive interests of the
country on account of the incertitude which they intro-
duced in all commercial transactions. If rates had been as
fairly maintained in 1890 as in 1900 the actual reduction
in charges between those years would probably be seen to be
about 30 per cent.
This wonderful reduction in the cost of transportation
has been due to inventions, improved economics and ad-
vanced administrative methods, the benefits of which have
accrued to the whole country. -
The contention that rates have not been greatly reduced
during the last ten years is as glaringly untrue in detail
as in the general expression already given for the whole
country. For example, the tons of freight transported
one ton a mile over the lines embraced in Group II of
the Interstate Commerce Commission’s subdivision, in-
cluding the States of New York, New Jersey, Pennsylvania,
Maryland and Delaware, increased from 23,236,827,478 in
I890 to 41,275,547,319 in 1900, an increase of 77.63 per
cent, while the coal produced in the States of Pennsylvania,
# The statistics of the Interstate Commerce Commission exhibit a fall
from .94t of a cent in 1890 to .729 of a cent in 1900 a reduction of 22%
per cent in the United States. Besides the statistics of the Commission
show that there was a marked reduction in the average rate per ton per
mile in each of the ten groups into which the railroads of the country
are divided.
26
Maryland and West Virginia exhibited during the same
period of ten years an increase of only 65 per cent, viz.,
from 88,860,072 tons in 1890 to 146,323,336 tons in 1900.
It also appears from the statistics of the Interstate Com-
merce Commission that the average rate charged on the
lines of Group II fell from .828 of a cent in 1890—to .613 of
a cent in 1900, a reduction of 26 per cent, thus clearly in-
dicating a large and important reduction in the rates
charged on the four leading trunk lines of the East—the
New York Central, the Erie, the Pennsylvania, and the
Baltimore and Ohio, together with their branches and con-
nections in Group II.
From the foregoing it is evident that no sensible reason
for conferring upon-the Interstate Commerce Commission
autocratic powers can be based upon exorbitant rates or
upon any assumption as to increased rates.
Unjustly Discriminating Rates.
-On page I 3 of this article it was shown in reply to a
Resolution of Inquiry submitted by Senator Elkins on
April 16, 1900, that during the ten years from April 16,
I890, to April 16, 1900, out of the millions of freight trans-
actions in this vast country, only 18 cases a year, on the
average, came to a hearing before the Commission, of
which only 3% cases a year came to a hearing, and oy
z0/zch agaziz ºn Zess than ozze case a year zwas the commis-
sºon sustained by the courts. In its last annual report the
commission says, “The great mass of complaints are
handled and disposed of by the commission by preliminary
investigation and correspondence. The total number of
proceedings brought before the commission during the
year were 340, but only 19 formal proceedings were insti-
tuted before the commission, or only one in 18 of the com-
plaints preferred. There were only ten cases decided by
the commission during the year, or one in 34 of the com-
27
plaints entertained. This admirably result indicates the
high degree of perfection to which the railroad system of
this country has attained. It is also creditable to the Act
to Regulate Commerce and to its administration.
In an argument which I had the honor to make before
the Senate Committee on Interstate Commerce on April 3,
1894, I was able to present the following statement:
“In the exercise of its function of preventing unjust dis-
criminations and exorbitant charges the work of the Inter-
state Commerce Commission has been crowned with abun-
dant success. Although several hundred complaints as to
alleged violations of the Act to Regulate Commerce were
made during the year ending December 1, 1893, only 16.
cases came to a formal consideration and hearing, all the
rest having been settled by the mediatorial offices of the
commission. In only one of the cases decided was the
reasonableness of rates called in question, and in that single
instance the claim was decided to be not well founded.
One of the commissioners has informed me that only about
two-thirds of the cases decided sustain the charges pre-
ferred. This indicates that the actual number of proven
cases of unjust discrimination did not exceed II, and Con-
stitutes a most gratifying proof of the success of this non-
judicial tribunal in the exercise of its appointed function.
Mr. Chairman, I venture the assertion that no court in this
country inferior to the Supreme Court of the United States
has had so few cases appealed from its decision in a single
year.”
All this proves beyond question that unjust discrimina-
tions and preferences of all sorts have been reduced to a
minimum, and that they furnish no reason whatever in
justification of the appeal of the commission for more
power. This the commission practically concedes. Ac-
cordingly, it has abandoned unjust discriminations in rates
as a basis for its demand for autocratic powers, and now
bases such claims almost, if not exclusively, upon rate
cutting.
28
Compliance With the Acts Relative to Safety Appli-
- a 11CCS.
In this connection it is of interest to note that in its fif-
teenth annual report just issued the commission states
that “the railroads now need no compulsion to induce
them to use automatic couplers.” It also states that both
the automatic coupler and the continuous power brake are
now regarded by the companies as absolute necessities in
the operation of their roads. -
Thus with respect to the three essential features of regul-
tion—the reasonableness of rates, non-discrimination in rates,
and compliance with the laws relating to the safety of trans-
portation—the acts regulative of commerce are complied
with to a degree beyond which it is unreasonable to expect
observance in the conduct of human affairs. And yet in its
fifteenth annual report just issued the commission repeats the
oft repeated assertion that its “efforts at regulation are
feeble and disappointing,” a statement which is absolutely
refuted by the recorded and clearly admitted facts in its
own experience. -
A Baseless Prediction.
Apparently appreciating the fact that it has no substan-
tial grounds upon which to base its claims to autocratic
power, in its thirteenth annual report, submitted January
15, 1900, the commission indulged in the following specu-
lative statement: “Nine-tenths of the people do know that
any railroad company can charge for its services whatever
it pleases and as much as it pleases.” In reply I would
observe that all the people of this country do know or can
readily inform themselves that this statement has no foun-
dation whatever in fact. Rates and the decline in rates
have been and are to-day dictated by commercial and eco-
nomic forces as strong and even more compulsory than
any statute which could be enacted upon the subject by
the Congress of the United States. The commission seems
29
to have been forced to a realization of this truth and in
consequence has been compelled to have recourse to another
excuse for its persistent appeal for what would constitute
autocratic power over the industry and the internal com-
merce of this country. This statement is easily susceptible
of verification by a congressional committee.
SEcRET violations of PUBLISHING RATES.
Having been forced to abandon all other reasons for its
persistent claim to autocratic power, the commission has had
recourse to secret rate-cutting as the gravamen of its com-
plaint. Here again facts are against the commission.
(I.) It has steadfastly denied that it is in any especial man-
ner responsible for the prevention of rate-cutting. (2.) It
has opposed any amendment to the Act to Regulate Com-
merce designed to afford to the commission greater facility
for the enforcement of the penal provisions of the statute.
(3.) It has been derelict in the discharge of its duties with
respect to the prevention of rate-cutting. (4.) The remedy
proposed by the commission is not applicable to the cure
of the evil complained of, and (5.) The remedy proposed by
the commission is misdirected. These points will be con-
sidered in the order stated.
The Commission has Strenuously Maintained that it is
not Responsible for the Prevention of Rate=Cutting.
By the second section of the Act to Regulate Commerce
every departure from tariff rates is expressly forbidden
and is declared to be illegal. By section 6, it is provided
that in order to compel every common carrier to publish
and file with the commission its tariff rates, fares and
charges the “writ of mandamus shall issue in the name of
the people of the United States at the relation of the com-
missioners,” and section 12 provides that “the commission
is hereby authorized and required to execute and enforce
3O
the provisions of this act”; for which purpose the commis-
sion is given the widest possible powers of investigation,
including the power to require by subpoena the attendance
and testimony of witnesses and the production of all books,
papers, contracts and agreements and documents relating
to any matter under investigation. The law distinctly pro-
vides that it may by one or more of its members prosecute
any inquiry necessary to the discharge of its duties in any
part of the United States. It has also the power to require
every district attorney in the United States to prosecute all
necessary proceedings for the punishment of violations of
the act, and its findings in all judicial proceedings are
made prima facie evidence as to each and every fact found.
Furthermore, it is provided by section 16 of the Act to
Regulate Commerce that if it is made to appear to any
United States Court “that the lawful order or require-
ment of said commission drawn in question has been vio-
lated or disobeyed it shall be lawful for such court to issue
a writ of injunction or other proper process, mandatory or
other wise, to restrain such common carrier from further con
tinuing such violation or disobedience of such order or re-
quirement of said commission and enjoining obedience to
the same.”
Notwithstanding these clearly prescribed powers and
duties the commission has, from the beginning, sought to
repel the idea that by the Act to Regulate Commerce it is
especially charged with the duty of enforcing the provi-
visions of the act against secret rate-cutting—the para-
mount purpose of the act. In proof of the correctness of
this assertion the following facts of record are adduced :
In its annual report to Congress for the year 1893, at
page 7, the commission declared that it “is wholly with-
out authority as respects those discriminations between
individuals which are made misdemeanors by that enact-
ment,” that “it is endowed with none of the functions per-
3I
taining to the detection and punishment of delinquents ex-
cept such functions as may be exercised by private citi-
zens,” and (on page 8) it deprecated the idea that it has
anything to do with “uncovering the guilty transaction
and bringing to justice those who engage in it.”
In a letter addressed to Hon. Wm. E. Chandler, a Sena-
tor of the United States from New Hampshire, under date
of October 17, 1895, Hon. Martin A. Knapp, then an In-
ter state Commerce Commissioner and now Chairman of
the Commission, strenuously maintained that the preven-
tion of the crime of rate-cutting is a thing “with which
the commission has no power to deal.” (Senate Document
39, 54th Congress Ist Session, page I4.)
For this and other declarations of similar import Sena-
tor Chandler administered to Mr. Knapp and to the com-
mission a sharp rebuke.
Mr. Knapp appears to have been then, as he has been
ever since, laboring under the delusion that the duty of
preventing rate-cutting and other penal offenses denounced
by the Act to Regulate Commerce is incompatible with
and beneath the function of revising all the freight tariff of
the country, of prescribing rates for the future, and of de-
termining the relative advantages to be enjoyed by com-
peting towns, cities and sections, and by competing indus-
tries throughout this vast country, a conception which he
described in his letter to Senator Chandler as “my high
ideal of the work in which the commission is engaged,” an
idea which as I have endeavored to show is expressive of a
malignant form of bureaucratic government, and as such
utterly inconsistent with the governmental institutions of
this country.
In its persistent denial of the fact that it is explicitly
charged by the Act to Regulate Commerce with the duty of
preventing rate-cutting the commission flatly opposes its
32
opinion to that of the Supreme Court of the United States.
In the Maximum Rate Case (167 U. S., 479) the court said:
“It (the commission) is charged with the duty of seeing
that there is no violation of the long and short haul clause;
that there is no discrimination between individual ship-
pers, and that nothing is done by rebate or any other de-
zyżce to give preference to one against another, Zhał zºo
20/2due preferences are given to one place or places or in-
dizzdual or classes of individuals, but that in all things
that equality of right, which is the great purpose of the
Zn/erstate Commerce Act, shall be secured to all shippers.”
But, as before stated, in this as in other respects the com-
mission has not and does not to-day hesitate to oppose its
opinion to that of the Supreme Court of the United States
regarding the interpretation of the statutory or constitu-
tional law of the land.
The Commission Has Repelied Any Attempt to Give it
Greater Power in Enforcing the Penal Provisions of
the Act to Regulate Commerce.
Not content with a denial of its duty to prevent rate-cut-
ting the commission has deprecated the idea of increasing
its power to prevent the commission of misdemeanors, par-
ticular reference being had to rate-cutting. On page 7 of
the seventh annual report of the commission is found
the following declaration : g
“But the main point to be considered is that Congress has
zzo pozwer to cloſhe the commission, or any similar tribunal,
with authority to execute the penal provisions of this
statute, other than to aid prosecuting officers in procuring
evidence against suspected parties.”
And again at page 8:
“No amendment of this statute, therefore, is necessary
or suitable with the view of giving greater power to the
commission in enforcing its penal provisions.”
33
But when driven from the charges of exorbitant rates
and unjustly discriminating rates, as possible excuses for
demanding of Congress autocratic power the commission
glaringly stultifies itself by seeking to secure amendment
to the Act to Regulate Commence for the purpose of pre-
venting rate-cutting through an expedient which as herein
shown is not only out of all proportion to, but totally in-
applicable to the effense, besides being essentially revolu-
tionary. --- .
The repudiation by the commission of responsibility for
the prevention of rate-cutting and its simultaneous effort
to prevent any strengthening of its powers for that pur-
pose, which would be subject to judicial review, clearly in-
dicates its fixed purpose and desire to free itself of any sort
of co-operation with or dependence upon the judiciary in the
discharge of its official function.
The Commission has been Derelict in the Discharge of its
Duty with Respect to the Prevention of Rate–Cutting.
The Commission has neglected the duty of using its best
efforts to aid in detecting and in bringing to punishment
persons who have been guilty of the offense of rate-cutting
and other misdemeanors, a duty plainly incumbent upon
it under the provisions of sections 2, 6, Io, 12 and 16 of
the Act to Regulate Commerce. This seems to be the re-
sult of the extreme aversion entertained by the commission
toward that class of duties.
In the fifteenth annual report of the commission sub-
1mitted January I7, IQO2, at page 8, appears the following :
“To convict for unjust discrimination it is necessary to
show not merely that the railway company paid a rebate
to a particular shipper, but it must also be shown that it
did not pay the same rebate to some other shipper with re-
spect to the same kind of traffic moving at the same time
under similar conditions. As a fractical maſter this is
a/most always impossible.” -
34
The rule of law here stated by the commission was an-
nounced by Judge Grosscup, of the Northern District of Illi-
nois, in a decision rendered June 20, 1896, in the case of
U. S. z. Hawley, 71 Fed. Rep. 672, with which case the
commission had nothing to do. It is as follows:
“This case illustrates that whatever difficulties there are
in the enforcement of this act are not so much due to the
law itself as to the failure of the prosecution to gather up
and lay before the grand jury the essential facts of a case
The facts difficult to obtain—the transaction between the
carrier and the favored shipper—are fully spread upon this
indictment. The facts not difficuſ to obtazm-the identity
of the shipper discriminated against—constitute the fatal
Omission. Ordinary aſer//ness and in ſe//gence zvozz/d//ave
avoided // is piſ/a//.”
Herein the court declared that the facts as to the identity
of the shipper discriminated against are “not difficult to
obtain '' and sharply animadverted upon the failure to ob-
tain them, whereas the commission in its annual report
dated January 17, 1902 has declared that the discovery of
such facts “is almost always impossible.”
In this the commission flatly opposes its opinion to that
of the judiciary and of every freight traffic manager in the
country. I mention this contrariety of opinion upo 1 a
matter easily susceptible of proof, as one worthy of con-
gressional inquiry.
The judicial opinion just cited relates particularly to the
Offense of unjust discrimination. But in the same case the
court stated the fact that it is a violation of the law to
charge Zess than // e Zariff rate. Even this offense, not in-
volving any charge of unjust discrimination, the commis-
sion seeks to ignore, declaring that the law “does not pun-
ish (it) otherwise than by a possible nominal fine.” The
law, however, explicitly prescribes for this particular of
fense a fine of “not to exceed $5,000.”
35
The declaration of the commission that the Act to Regu-
late Commerce does not confer upon it ample power to pre-
vent rate-cutting is strenuously denied by able lawyers and
jurists who hold that sections 2, 6, Io, 12 and 16 of the
Act give it ample power to correct and prevent such of
fenses. If, however, the law is in this respect defective,
by all means let it be amended so that the procedure may
be freed from any political difficulty.
Differences of opinion prevail as to the nature of the
remedy which should be adopted for the prevention of rate-
cutting. In its fifteenth annual report, submitted January
I7, IQO2, the commission suggests as a remedy for rate-cut-
ting that the corporation as well as its officers should be
subject to the penalty prescribed in the Act. The gen-
eral solicitor of one of the great trunk lines of the coun-
try suggests that the corporation alone ought to be subject
to the penalty. The question is one to be determined by
Congress and is worthy of careful consideration.
It is believed that any proper amendment to the Act in
regard to rate-cutting would be cheerfully accepted by the
principal railroad managers of the country, and that they
would cordially co-operate in the enforcement of the law.
The public attitude assumed by the leading railroad offi-
cials of the country toward this subject seem fully to sanc-
tion this statement.
In this connection it is worthy of observation that the
commission fails to show in how many cases it has given
the courts a chance to consider rate-cutting upon evidence
which the court declares not diffic/// to obtain, or to adduce
evidence upon which the courts may impose what the com-
mission calls “a possible nominal fine " but which may
amount to $5,000, and which with ordinary diligence can
be imposed.
It is believed that if the commission had been half as
earnest in the attempt to prevent rate-cutting as it had been
36
in its efforts to secure autocratic power the misdemeanor
complained of would now be very much less the subject of
complaint. It is believed also that a thorough congres-
sional investigation of this particular subject, would clearly
expose a manifest dereliction of duty on the part of the
Commision.
The history of the case exposes the aversion of the com-
mission to a duty clearly imposed upon it by the Interstate
Commerce Act and this is exhibited nowhere so glaringly
as in the oft-repeated assertion of the commission that it
has been deprived of the power to afford relief to complain-
ants against wrongs incident to infractions of the law, and
that is not responsible for the prosecution of specific viola-
tions of the provisions of the Act to Regulate Commerce,
both of which statements are strenuously denied.
A recent news item indicates that at last the commission
has awakened to a realization of the fact that the law im-
poses upon it a duty with respect to the suppression of
rate-cutting, and that it is disposed to try to set in motion
the means for accomplishing that object before the courts
as provided in the Act to regulate Commerce.
The Remedy Proposed by the Commission is Not Appli-
cable to the Cure of the Evil Complained of.
The plan of conferring upon the commission the power
to prescribe rates is totally inapplicable to the offense of
rate-cutting. It has no relation to such offenses as of means
to an end. The comission has never sought to show
that it has such relation. There is not the slightest reason
to believe that rates made by the commission would be
any more exempt from rate-cutting than are rates made by
the companies. The true remedy pointed out by the judi-
ciary and by the lessons of experience lies in a faithful
enforcement of existing laws, which the commission has
spurned and neglected to enforce. Such laws, however,
37
may be amended or supplemented by others which would
facilitate the administrative work of the commission, for
the question is one of procedure, and not one as to the
power to act.
The history of the course pursued by the commission in
this matter clearly indicates that the idea of asking Con-
gress for autocratic power over the commercial, industrial
and transportation interests of this country in order to
Suppress rate-cutting is an afterthought. Rate-cutting is
now brought to the front apparently from the fact that the
commission sees no other means of advancing its claim to
the exercise of autocratic power either in exorbitant rates
or in unjustly discriminating published rates.
Secret violations of published rates have their origin in
the competition of rival commercial forces and are expres-
sions of such struggles. This is apparent to merchants
and to railroad managers throughout the country, and as
such is deprecated by them. The fact is also clearly per-
ceived that the remedy for such evils lies primarily in rail-
road self-government dictated by enlightened views of self-
interest, the inspiring motive of all wholesome statutory
enactments. Unfortunately the commission has frowned
upon such self-restraint and sought to substitute therefor its
claim to the exercise of arbitrary power.
The question is one of vast political import and should
not be left to the discretion of any administrative body—
certainly not to any bureau of the goverment bent upon
the acquisition of autocratic power over the commerce and
industry of this country. It is eminently a question for
congressional determination.
Besides, it may be observed in this connection that the
duty imposed upon the commission by the twenty-first sec-
tion of the Act to Regulate Commerce, to recommend to
Congress such additional legislation “as the commission
may deem necessary" does not extend to great questions of
38
public policy or to political questions which would natur-
ally command the attention of Congress, but, in the lan-
guage of Mr. Justice Shiras in Texas and Pacific Ry. 2's.
Int. Com. Com. (162 U. S.), should “be confined to the
obvious purposes and directions of the statute.” It is to be
regretted that the commission has not been guided through-
Out by this obvious rule of propriety.
The Remedy Proposed by the Commission is Misdirected.
Beyond all question the remedy proposed by the com-
mission is misdirected. There are always two parties to of—
fenses involving contractual relationships. In the case of
rate-cutting these are the shipper and the carrier. The
shipper is invariably the prompter to the offense, for it is
always to the interest of the carrier to secure tariff rates
and to the interest of the shipper to secure less than tariff
TateS. -
The Concrete cases which supply the text and ostensible
cause of the present movement of the Interstate Commerce
Commission for the purpose of preventing rate-cutting is
furnished mainly by the persistent efforts of certain large
shippers of packing house products of the west to secure
less than tariff rates for the carriage of their products. It
is an old story to which public attention has been several
times directed during the last two years. So uniform,
however, has been the “cut” by the several competing
companies that it constitutes practically a common rate,
lacking only the legal requirement of publicity. The rates
acturlly charged would avoid the censure of being “cut
rates '' if they were published. They involve no material
discrimination with respect to producers, localities or ship-
pers, but do involve most Outrageously discriminations
with respect to carriers. All this is clearly stated by the
commission in its annual report just published. Therein
it adduces the fact that at one time a particular road “was
39
carrying into Kansas City 33% per cent of the cattle
slaughtered there and carrying out of that city only two per
cent of the product.”
The commission also shows, in the report mentioned,
that the cut-rates are a source of benefit to the producer,
the consumer and the packer. At the same time they
involve enormous loss to the carriers. This is stated by
the commission in reply to two self-addressed inquiries:
First, “Who has the benefit of the reduction in these rates?”
and, second, “Does it result in advantage to the producer
and consumer, or is it absorbed by the packing house
1tself.” The answer of the commission to these questions
is as follows: e
“It seems probable that in case of a reduction like this,
which seems to be tolerably uniform and long continued,
//e gene, aſ pató/7c must obtain some advantage, but we
think that in the main these sums swell the profits of the
packers. The number of these great concerns is only some
five or six, and there does not appear to be much discrimi-
nation between them. Each usually knows about what
the lowest rate is and usually manages to obtain that rate.”
This clearly expresses the whole matter at issue. The
cut rate is practically a common rate, and irregular only
because not published as required by law. This results in
some benefit to the producer and the consumer, much more
to the packer, and appalling loss to the carrier—the rail-
road company. This conclusion has been laconically ex-
pressed as follows by one of the Interstate Commerce Com-
missioners since his recent return from Chicago: “The
fact is that five or six big shippers have for years been
sandbagging the railroads.” Hence the question arises
why attempt to punish those who are sandbagged, instead
of having recourse to some plan to punish the sandbag-
gers? But it is just this injustice and manifest solecism
into which the commission has unconsciously stumbled in
its most unreasoning desire to acquire a coveted power by
4O
visiting upon the railroad companies the severest and most
humiliating punishment, namely, that of depriving them
of the right to contract freely with the general public as to
the commercial value of the service which they render and
with no other apparent excuse than an utter inability to
base their claim to autocratic power upon any other plaus-
ible pretext.
What has been said of rates on packing house products
applies substantially to complaints as to “cut rates '' on
wheat and flour. The latter involves a long and sharply
debated question as to the relative rates on wheat and flour.
This is a complex and involved commercial and economic
question. The general but rather vague conclusion of the
commission in regard to it is expressed as follows on page
I6 of its last annual report.
“To an extent the rate upon flour in the foreign market
must be higher than that upon wheat. This is decreed by
physical conditions which no stafazfe and 7zo commez'sszoza cazz
alter. To that extent this industry must expect to operate
at a disadvantage.” -
In the light of all these facts the proposition to have re-
course to the haphazard and absurdly misdirected remedy
of governmental rate-making for the cure of problematical
evils attending the transportation of provisions, flour and
wheat and the commerce in these commodities would be as
absurd as it would be monstrous.
A congressional investigation, as thorough and as im-
partial as that known as the “Cullon investigation of 1886”
would not fail to set all these difficulties in their true light
and to disclose a remedy which would be properly directed
and efficacious. -
I have sought neither to paliate nor to defend rate-cut-
ting. Its extent and effects have been greatly magnified
for the purpose of predicating upon it the commission’s
claim to the exercise of autocratic power, but it is an un-
4. I
doubted evil, and has no defenders other than those ship-
pers who practice it to their own advantage and to the
detriment of their competitors and of the carriers. Beyond
all doubt it is an evil which can be abated and as success-
fully prevented as are other misdemeanors which are mala
prohibita. -
THE Ari ERICAN RAILROAD systEM.
There is an historical view of the matter herein consid-
ered which demands at least a passing notice. The rail-
roads of the United States sustain to each other certain
physical and co-operative business relationships indepen-
dently of and superior to any authority which can be exer-
cised by the several companies for their own guidance. I
refer to the fact that the various lines constitute an inti-
mately connected system of transportation over which
traffic moves almost as freely as though under the absolute
control of one directing head. This practical unity of
transportation facilities imposes clearly defined restraints
and limitations upon the interaction of the different lines,
and sharply conditions both their competitive struggles
and their contractual relationships. At the same time it is
highly conservative of the public interests. No such con-
ditions govern the interaction of rival enterprises of com-
merce and industry. The Act of Congress of June 15, 1866,
commonly known as “The Charter of the American Rail-
road System ’’ fully legalized the juncture of tracks and joint
traffic arrangements which made railroad unity in this
country possible. Besides, it voiced the general public
demand for the commercial facilities which it afforded.
The American Railroad System is the outcome of public
necessities and of economic conditions, and not of the pre-
science of legislators or of railroad managers. It has been
essentially an evolution. Cosmos has emerged from chaos
through rough experiences. Uniformity of classification
lies at the foundation of all traffic unity. When the Act
42
of June 15, 1866—the charter of the American Railroad
System—was enacted there were 138 freight classifications
in the area east of the Mississippi River and north of the
Ohio and Potomac Rivers, or about as many as there were
railroads. Now one common classification prevails
throughout that vast area. Another classification prevails
west of Chicago and St. Louis and west of the Mississippi
River to the Gulf, while a third governs throughout the
States south of Virginia and West Virginia, south of the
Ohio and east of the Mississippi River from its junction
with the Ohio to the Gulf.
The Interstate Commerce Act is based upon the condi-
tions which characterize the American Railroad System,
for to such conditions all sensible attempts at governmental
regulation must be conformed. This grand system of
transportation involves arrangements in the nature of self-
government through associations of various sorts, a fact
clearly recognized by the Interstate Commerce Commission
in its last annual report as follows:—
“In justice to all parties, we ought probably to add that it
is difficult to see how our interstate railways could be oper-
ated, with due regard to the interest of the shipper and the
railway, without concerted action of the kind afforded
through these associations.” .
This reluctant admission is gratifying in view of the fact
that for years the commission has opposed railroad self-
government, apparently for the reason that it conflicts with
the purpose of the commission to acquire absolute author-
ity not only over the administrative affairs of the railroads
of the United States, but also over the course of the devel-
opment of the commercial and industrial interests of the
country in the manner hereinbefore described. To the
extent to which the rules for self-government imposed by
railroad associations have been observed, they have ren-
43
dered an indispensable service in maintaining the orderly
conduct of the railroad transportation affairs of the country.
In the whole domain of commercial and industrial enter-
prise it would be impossible to point to an industry more
thoroughly regulated as to charges and general conduct
than is the American Railroad system, by competitive for-
ces, within and without.
To-day the question as to how far the means of co-oper-
lative self-government provided for the control of this vast
system of transportation can be safe-guarded, extended and
limited constitutes an important subject for Congressional
inquiry. It is a feature of the ever recurring problem as to
how far and in what manner human interaction can be
benefically regulated through statutory enactment.
Resumé.
The commission at first attempted to exercise the judi-
cial function under an assumption of authority granted by
the Act to Regulate Commerce. This was promptly con-
demned by the Federal Judiciary. The commission next
assumed the right to prescribe rates for the future and to
determine the relative commercial status of the various
localities and sections of this country by implication of law.
This assumption was also declared by the Supreme Court
of the United States to be baseless. The commission sub-
sequently attempted to secure from Congress the desired
powers, but thus far without success. *
It is maintained that the policy proclaimed by the com-
mission, if adopted, would result in the establishment
in this country of a bureaucratic method of government
over the commercial, industrial and transportation inter-
ests of the United States, and as such be repugnant to the
genius of our political institutions. t
Next, it has been shown that no excuse for the auto-
44
cratic contention of the commission can be based upon ex-
orbitant rates, upon unjustly discriminating rates or upon
any increase in freight charges. .
The attempt of the commission to base its claim to au-
tocratic power upon secret violations of published or legal
rates is shown to be without any substantial foundation
in reason or in the lessons of experience. -
The main objects of this paper are, first, to expose the
impolicy and the dangers of a commercial and political
character involved in the propositions advanced and per-
persistently advocated by the Interstate Commerce Com-
mission, and, second, to advocate a thorough congres-
sional inquiry in regard to the various phases of the com-
mercial and transportation interests of this vast country,
now so seriously the subjects of public debate. The
history of similar inquiry in Great Britain through inves-
tigations by committees of the House of Commons, of joint
committees of the two Houses of Parliament and by Royal
Commission is most instructive. It forcibly illustrates the
wisdom of the British maxim, “We have government by
discussion.”
The President of the United States in his recent message
to Congress has voiced this admirable spirit of inquiry in
regard to such matters of public concern, and especially in
his declaration and warning that “in facing new industrial
conditions, the whole history of the world shows that legis-
lation will generally be both useless and ineffective unless
undertaken after calm inquiry and with sober self restraint.”
WASHINGTON, D. C., March 22, 1902.
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