REGULATION OF RAILWAY RATES. ! 385 Un33r HEARINGS BEFORE THE COMMITTEE ON INTERSTATE COMMERCE UNITED STATES SEISr ATE, IN SPECIAL SESSION^ PURSUANT TO SENATE EESOLUTION NO. 288, FIFTY-EIGHTH CONGRESS, THIRD SESSION. STATEMENTS OE INTERSTATE COMMERCE COMMISSIONERS MARTIN A. KNAPP, JUDSON 0. CLEMENTS, CHARLES A. PROUTY, JOSEPH W. FIFER, AND FRANCIS M. COCKRELL. May 18, 19, 20, and 22, 1905. WASHINGTON: GOVERNMENT PRINTING OFFICE. 1905. '^•■-"'^^" ^0^m^ mM THE UNIVERSITY OF ILLINOIS Return this book on or before the Latest Date stamped below. University of Illinois Library j L161— H41 REGULATION OF RAILWAY RATES. HEARINGS BEFORE THE COMMITTEE ON INTERSTATE COMMERCE Ul^ITED STATES SEl^ATE, IN SPECIAL SESSION, PURSUANT TO SEMTE RESOLUTION KO. 288, FIFTY-EIGHTH CONGRESS, THIRD SESSION. STATEMENTS OP INTERSTATE OOMMEEOE COMMISSIONERS MARTIN A. KNAPP, JUDSON 0. CLEMENTS, CHARLES A. PROUTY, JOSEPH W. PIPER, AND PRANCIS M. COCKRELL. May 18, 19, 20, aud 22, 1905. WASHINGTON: GOVERNMENT PRINTING OFFICE. ,| 1905. \ REGULATION OF RAILWAY RATES. 3S^ ^ HEARINGS BEFORE THE COMMITTEE ON INTERSTATE COMMERCE, 1 . C2 -3. x/^ UNITED STATES SENATE. Thursday, May 28, 1905. STATEMENT OF INTERSTATE COMMERCE COMMISSIONER PROUTY. The Chairmax. I will state that the committee has invited the members of the Interstate Commerce Commission to come before them and make any statement that they see fit on the pending ques- tion. Mr. Knapp, being the chairman, will be heard first. Commissioner Knapp. Mr. Chairman, when it was understood that the attendance of the Commission would be desired on the first part of this week one of my associates, Commissioner Prouty, made an engagement which compels him to leave Washington to-morrow morning for an absence of some days. For that reason I ask that he have the first opportunit}^ to present any statement that he desires to make or to answer an}^ questions the members of the committee ^ may desire to ask. ' The Chairman. Very well. Mr. Commissioner Prouty, you maij ; proceed. ; Commissioner Prouty. Mr. Chairman, the Commission is here this , morning because you, as the chairman of the committee, requested it to ) be here, and I come here as a member of the Commission for that rea- , son. Since these hearings began I have been absent from Washington I almost all the time on official business. My time when in Washington has been so engrossed that I have had no opportunity to examine the testimony given on these hearings. I am not in any way competent to discuss it. I am not competent to reph^ to anything which has been said, and I do not desire to take up your time. It would not be profitable for me to take up your time in any general discussion of this question. I am here, as I indicated, at your request, and if the committee desires to ask me any question in reference to what has been done, in reference to what has not been done, in reference to why it has not been done or why it has been done, I shall be glad to answer that question, but unless you have some question to ask in ref- erence to something I do not care to trouble you. Senator Cullojm^ How long have you been a member of the Com- mission ? Mr. Prouty. I was appointed on the Commission in December, 1896. I succeeded Judge Vesy, who succeeded Commissioner Walker, afterwards chairman of the Atchison board. Senator Cullom. The committee has now been taking testimony on this subject for about a month, and the chief point about which there seems to be a difference in the country, and possibly in the committee — I do not know how that is, for we have not made known our views to each other — is the question of whether the Commission, either as it is or as we might see proper to make it hereafter, should be given powers in addition to what it already has, and on being called upon by a locality, or at the complaint that a 3611:36 ' 4 KEGULATIO]Sr OF EAILWAY KATES. rate was not satisfactory, and the Commission should respond to the call and determine that the rate was not reasonable and so declare and order, that in addition to that the Commission should have the power to determine what rate would be reasonable and enforce its order on that decision. Mr. Proutt. I do not understand that the Commission at the present time has any power in the premises. In my view of it the de- fect in the present law is that neither the Commission nor the court nor anybody else has any power to say, with respect to the future, whether a rate is reasonable or unreasonable — whether a discrimina- tion is due or undue — and therefore we have no power to make any order in the premises. Senator CuLLOii. Well, ought you to have? Mr. Prouty. My views on that subject have been stated in repeated reports to Congress. Senator Cullom. We would like to hear you discuss that question. Mr. Prouty. Mr. Senator, I believe this: I have said it a great many times and I can say it in a word again, that there must be, and esj)ecially in view of the combined railway influence at the present time, some tribunal somewhere which has power to judge between the railway and the public. I do not mean by that that I should have or that anybody else should haA^e any power over the property of the railway. I think the railways should make their own rates. I think the}- should be allowed to develop their own business. I have never advocated any law and I am not in favor of any law which would put the rate-making power into the hands of any com- mission or any court. AVhile it may be necessar}^ to do that some time, while that is done in some States at the present time, while it is done in some countries, I am opposed to it, and I could give, if it were material, the reasons why I am opposed to it. You have heard them already from other parties. Senator Cullom. We would like to hear them from j^ou. Mr. Prouty. And I say this, that there must be some tribunal which can determine whether the railroad has so used its property as to destroy my property. If a railroad having the absolute monopoly imposes upon me an unjust and an unreasonable rate it takes my property. If the railroad, having power, imposes a discrimination which shuts up my coal mines or shuts down my mill it takes my property. Now, there must be a tribunal somewhere which can judge between me and the railroad, which can say whether the rail- way is using or has used its property in a legitimate way with respect to my rights and my property rights. Now, as a matter of fact I go a little bit further. I say that the only way in which the public can be protected is by acting directly upon the railroad rates. The thing which hurts is the rate. The thing which must be acted upon is the rate. In some way or other you must revise the action of the traffic manager. Now, if you can do that by a court, all right. As I under- stand the Constitution of the United States it can not be done by a court. A court has no power and can be given no power to determine a rate for the future. Therefore, you must bestow that power, you must confer that power upon some commission. Now, when you ask what commission and how that commission should be constituted and to what extent the orders of that commission should be reviewed EEGULATION OF RAILWAY RATES. 5 you come to a field about which my awn ideas, although I have thought a gTeat deal about the subject, are not altogether clear. The Interstate Commerce Commission at the present time is an executive body. It is charged with the duty within certain limits of executing this law. It is our duty to enforce the criminal features of the law. Now, I am perfectly clear in my own way that those powers should be taken away from the Interstate Commerce Commission. In the first place, a body of five men is too cumbersome a body to act as an executive. It does not do things. It does not get anywhere. In the next place, I do not think joii ought to combine in the same tribunal or the same body the executive, the administrative, and the judicial functions. That is my attitude as a Commissioner. If it is my dut}^ as a Commissioner to investigate, to unearth criminal violations of the law, I think I am very likely to get into a frame of mind which unfits me to dispassionately pass upon the rates made by the defendant; so I say now, and I have always said, that you should take away from the Interstate Commerce Commission and put either in the Department of Justice or in the Department of Commerce and Labor what I may call the executive functions of the Commission. Now, the Commission has certain judicial functions. It is allowed in certain cases to award damages. I think those •judicial functions should be taken aAvay from the Commission. I do not think that the Commission as now constituted, hearing cases as it hears them, receiving testimony as it receives testimony, ought to be charged with the judicial duty of trying a damage suit. There are certain instances where the only thing to be done is to make a computation between the rate charged and the rate paid, wdiere the Commission might with propriety make the computation and make the order; but where the process goes further, where it becomes necessary to determine damages, to award damages, the work of the Commission is apt to be unsatisfactory. "Wlien it is done, it amounts to nothing. The order of the Commission is merely prima facie. The same suit must be tried over again, and I believe it would be better to try that suit in the first instance in the courts. It is quite likely that you ought to permit suits to be tried in the State courts for violations of this statute, if that can be done, and I rather think it could be. A man, perhaps, ought not to be required under all circumstances to go into the Federal court; but you gain nothing by his bringing the suit in the first instance before the Com- mission, and it seems to me that you should take away the executive and the judicial duties, and leave the Commission with simply its administrative duties. - Senator Ctjllom. You have, I think, taken up these damage cases, as you call them, and disposed of them, have you not, as a Com- mission ? Mr. Peouty. Yes ; the Commission heard before I came on to the Commission the case of the Independent Refiners' Association putting in issue rates on petroleum from certain points in Pennsylvania to various points in New England. In that case the Commission awarded damages to a considerable amount. Suit was brought in the circuit court and the complainant recovered his damages. That matter was taken up to the circuit court of appeals, and the circuit court of appeals has just reversed the decision of the circuit court and virtually held that no damages can be recovered. Now, in that 6 KEGULATIOX OF RAILWAY EATES. case it would have been very much better for the complainant if he had been obliged to first go into court. Senator Cullo3i. Did the court decide that no damages could be recovered on the merits or on account of the fact that the Commission had no foundation for the case? Mr. Prouty. It would not be profitable for me to go into that fea- ture of the case; but the court decides for a great many reasons that they can not recover — not because the Commission made any error in determining whether the rate was unreasonable or reason- able, because that question did not go to a jury, but because the Com- mission awarded damages against a receiver when they ought not to have been awarded, and for other reasons of that kind. Senator Cullom. You have the power now, as a Commission, on complaint to investigate and determine whether the charges were reasonable or unreasonable, and when you determine that they are unreasonable you make an order to that effect, do you not, or what do you do ? Mr. Prouty. These questions arise before us in a great many ways. There are a great man}^ different kinds of questions. There is the question pure and simple, Is the rate unreasonable? There is the question, Is this a discrimination between localities? There is the question. Is this a discrimination against commodities? I be- lieve that in every case the ultimate question reduces itself to this: AATiat shall the railroad charge for the future? I think that is true in ever}^ case. Now, we have just gotten back from Chicago, and we have heard a series of cases there, and I might take those cases as illustrations. One case involved refrigeration charges on peaches, plums, and grapes shipped from Michigan. The only question in that case is the amount of the refrigeration charge. Senator Citllo^i. Was that against the railroad or against the pri- vate car line? JSIr. Prouty. Well, the railroads were brought in as parties and the private car lines were brought in as parties. If we make any order it must be made against the railroad, and I think the Com- mission will be disposed to hold that the refrigeration charge is a part of the transportation charge which the railroad must publish and for Avhich it is responsible; but we have no power to say what that refrigerator charge shall be. Our only power is to say that the refrigeration charge is unreasonable, and I desire to call the atten- tion of the committee to the fact that the Supreme Court has never yet decided that we had the power to say that. Senator Cullom. Even that they were unreasonable? Mr. Prouty. No; not as applied to the future. Senator Dollb^er. Do you have an additional power to compute and find the damages that they have suffered by reason of that viola- tion of law in the same proceedings ? Mr. Prouty. We do, not exactly in the same proceeding, but in the same connection, compute the damages which a shipper has sus- tained between the payment of what we find to be a reasonable rate and the payment of whatever rate was paid. Senator Dolliver. Does the original interstate-commerce law allow that to be done in the same proceedings? Mr. Prouty. They are really two distinct proceedings, and the EEGULATION OF EAILWAY KATES. 7 orders are two distinct orders. The order to cease and desist from making a certain charge must be enforced in a court of equity and the order to make reparation must be enforced in a court of law, where a jury trial can be had. Therefore the Commission makes two separate orders. We make one order to cease and desist and another order for reparation. Senator Dollivt^r. If you pass both orders over to the court in the same proceeding Mr. Prouty. Both orders are made in the same proceeding. A proceeding to enforce those orders would not be brought in the same proceeding in court. One would be a proceeding in equity and the other would be a proceeding before a jury. As I started to say, you take this bunch of cases that we heard in Chicago, and in every single case the question is, Wliat rate shall be charged for the future ? This Michigan case was one. Now, another case was this: The mills in western Nebraska grind corn meal, which they use in the Northwest. The corn out of which they grind it is raised in Nebraska. The rate on corn and corn meal from Nebraska to the Northwest has always been the same. Recently the rate on corn has been reduced without a corresponding reduction of the rate on corn meal. Now, the Ne- braska miller alleges that the reduction of the rate on corn without a corresponding reduction of the rate on corn meal puts him out of business. His mill was built to grind for that territory. If he can not grind for that territory, it virtually amounts to a destruction of his mill, the confiscation of his property. Now, there is no way in which you can decide that question except by determining what rate shall be applied for the future. Senator Dolltter. Could you not get an order of court requiring that discrimination between those particular descriptions of traffic shall cease ? Mr. Prouti'. Suppose the court Avere of the opinion that the dif- ferential of 10 cents was too wide, but that a differential of 5 cents might properly be applied. What order would the court make? Senator Dolliver. It would depend on the proceeding. Suppose the complaint was that any discrimination in excess of 5 cents, or any discrimination at all, was illegal. Could that be brought before the court by a direct proceeding? Mr. Prouty. If the complaint Avas that any discrimination at all was illegal, and if the courts Avere of the opinion that there ought to be no discrimination at all, I am not prepared to say that the court might not enjoin the making ©f a discrimination. Senator Doi.liver. Has that form of proceeding eA^er been adopted by the Commission in cases of complaint about discriminations be- tween these descriptions of traffic? Mr. Prouty. I do not think so. I do not see that anything would be gained by adopting that form of jDroceeding. Senator Dolliver. It Avould, if the court Avould make an order requiring the discrimination to cease, and it would appear to be a fairly effective Avaj^ to reach it. Mr. Prouty. Suppose the railroad ought to have the right to make that discrimination of 5 cents and the court ordered it not to make any discrimination at all, would that be just to the railroad ? Senator Dollwer. You would not suppose the court would make such an order in that case. 8 KEGULATION OF EAILWAY EATES. Mr. Proutt. Then the court makes no orders to cease and desist, and the result is that j'^ou go along charging the 10 cents. Senator Dolli\t]e. Do you say that the court could not make an order to cease and desist about a discrimination of 5 cents ? Mr. Prouty. Certainly I would. In order to do that the court must determine the differential for the future, must it not ? Senator Dolliver. I do not desire to answer the question. Mr. Prouty. Certainly I would say that. That is what the Supreme Court has held with reference to orders of the Commission. The first order this Commission ever made in respect to a rate was made in the case of Evans against the Oregon Navigation Company, or the Oregon Short Line — I forget which. The thing involved there was the rate on wheat from Walla Walla to Portland. The rate in effect was 30 cents. The rate the Commission ordered was 23| cents. What the Commission did was to order the defendant to cease and desist from charging more than 23^ cents. That was the form of the order which the Commission made, and it is the form of the order which the Commission has alwaj^s made. That order was complied with by the railway, but the Supreme Court of the United States has since held in subsequent cases that the Commission had no power to make that sort of an order, because that kind of an order of necessity involved a determination that 23^ cents should be charged for the future. Now, an order of the kind that you mention Senator Newlands. In what case was that last decided? Mr. Prouty. In all these cases. In the Maximum Kate Case the form of the order was that the carrier should desist and cease from charging more than a certain sum. That is the order we always make. Our order formerly was that the carrier shall cease and desist froiti charging more than the amount which we determined was reasonable. At the present time the order is that the carrier shall cease and desist from charging the present rate, and along with that goes a recommendation as to the rate which the carrier shall charge. Senator Newlands. Do I understand that some of the counsel for the railroads have insisted that in the case put by Senator Dolliver the court could give full relief by enjoining a charge above a certain amount, and that that would belong to the equity side of the court in order to avoid a multiplicity of suits for damages and to get ade- quate relief? Of course, if that is so, that power would be exercised by the court entirely regardless of the question as to whether or not the Commission had the power to fix the rates for the future. The remedy there would be to prevent an irremedial injur}' and to Dre- vent a multiplicity of suits. That is the contention, I understand it, of some of the lawyers of the railroads. Is not that your under- standing ? Mr. Prouty. The court in Mississippi decided that the court had no such jurisdiction. Judge Spear decided in Georgia that the court had that jurisdiction, and the court decided in the Missouri Pacific Case that under the statute — under the Elkins bill — an action would now lie in the name of the United States to restrain a discrimination, but all that does not reach the point. The question is. Can the court apply a remed}^? Now, my proposition is that the court, by the deci- sion of the Supreme Court of the United States, has no right to fix a rate for the future. There is no question about that. That has been EEGULATION OF RAILWAY RATES. 9 decided. It must be accepted as axiomatic. My second proposition is that the court can not fix that differential without fixing a rate for the future. If the court says that for the future the carrier shall be enjoined from charging more than 5 cents difference between corn and corn meal, it determines that 5 cents shall be the differential for the future, and that thing the court has no power to do. The Chairiman. AAHiiat would 5^ou suggest as the remedy right there; what amendment would you put in the existing law to make the enforcement of that effective? Mr. Prouty. The trouble now is that you are endeavoring to ad- minister this law by the court. That can not be done. You may take every case that stands on the docket of the Interstate Commerce Commission, you may take every case that has been decided by the Interstate Commerce Commission for the last eight years, since I have been on that Commission, and the thing can not be corrected unless 3^ou, in effect — you might by indirection — fix the rate for the future, and you must create a commission and you must give it that power. The Chairman. Would you leave the right to review the finding and judgment of the Commission? Mr. Prouty, I have never advocated the exercise of that power by the Commission without the right to review. The Chairman. Wlien the court reviews it and comes to a conclu- sion, would not that indirectly fix the rate? . Mr. Prouty. Just what the court can do in that matter is an em- barrassing question, and a question which no man can answer with very great certainty. The Attorney-General has told you gentle- men, I think, that the court has no power to review an order of the Commission. Now, I entirely agree with that proposition. I have always insisted that the Commission must, in the first instance, fix the rate. It has always seemed to me that a court could review the decision of the Commission. The Chairiman, In the first instance the railroad fixes the rate, and you then review that, Mr, Prouty, Yes, The Chairman. You say the Commission fixes the rate? Mr. Prouty. Our power is this, or ought to be this: The fixing of a rate is an administrative duty. The altering of that rate is an ad- ministrative duty. Now, an administrative duty can not be dis- charged by the court. The court may determine whether a rate is reasonable or unreasonable for certain purposes. It may determine whether a rate is reasonable if I, having paid the rate, sue the rail- road company to recover. It may determine that; it may submit that to a jury. It may determine whether the rate is reasonable or unreasonable under the fourteenth amendment to the Constitution of the United States — that is, for the purpose of enforcing the provisions of that amendment. It has never been decided by any court — the contrary has been decided, as I understand it — that the court has power to determine whether a rate is. reasonable or unreasonable for the purpose of fixing that rate for the future. Now, I say it is a very embarrassing question — it is a very doubtful question — what the power of the court is under the fourteenth amendment. That amend- ment provides that no person shall be deprived of his property with- out due process of law. The railway rate is property. It is all the property that the railway has. The rest of its property is 10 REGULATION OF RAILWAY RATES. good for nothing unless it can charge a rate. Now, it has always seemed to me that when a rate was fixed, if that rate was an unrea- sonable rate it deprives the railroad company of its property pro tanto. It is not necessary that you should confiscate the property of a railroad; it is not necessary that you should say that- it shall not earn 3 per cent or -i per cent. "Wlien you put in a rate which is inher- ently unreasonable you have deprived that company of its rights, of its property, and the circuit court of the United States has jurisdic- tion under the fourteenth amendment to restrain that. Senator Dolliver. Does that view correspond with the decisions of the court ? Mr. Prouty. That is as I understand it. Senator Dolliver. I think the Attorney-General says that the review of the rates does not go to the question of whether it is reason- able or not, but goes simply to the question of whether it confiscates the railroad company's property. Mr. Prouty. Well, I read the opinion of the Attorney-General hastily. Of course I have no desire to assert any opinions in opposi- tion to that of the Attorne^^-General, but I have looked at these cases a great many times and I can only come to this conclusion, that a rail- road company is entitled to charge a fair and reasonable rate. It is entitled under the fourteenth amendment to charge a fair and reason- able rate, and if any order of a commission, if any statute of a State legislature, takes away that right, the fourteenth amendment pro-, tects the railwa}^ company. To contniue, the legislature has certain powers over the rate. For example, the legislature may say to a railway company, you shall create no discrimination between locali- ties. The legislature may say to a railway company, you shall in all cases charge no less for a long haul than \^ou clo for a short haul. Now, when that has been said the railway company must comply with that enactment of the legislature. The Supreme Court held that the State of Kentucky had a right to say to the railroads in that State, with respect to traffic within the State, that the long and short haul clause should be absoluely observed. The railroads came to the court. They said : If you com- pel us to observe this law, it ruins us; it confiscates our property. But the court, as I understand it, rejected that argument and said: It makes no difference; the legislature of Kentucky may prescribe that rule and you must obey it. Now, I take it that the Congress of the United States may say, with respect to interstate transporta- tion, that in no case should less be charged for the long haul than for the short haul. It would be a very foolish thing to say ; it would produce a very disastrous effect upon railways in some parts of this country ; but I think Congress might say it, and if Congress did say it the railways would be obliged to comply with it. Now, there is another thing that Congress may do. It exercises and can exercise a very wide supervisory power over rates. For example, a rail- road company can afford to make a lower rate for 100 pounds, if it receives a train load a day from a factory, than it can if it receives a single carload a day from a factory. Nevertheless I think that Congress, or a commission acting under the authority of Congress, might say that the railway shall accord the same rates whether the shipment is in one carload or in fifty carloads. Otherwise you con- REGULATION OF RAILWAY RATES. 11 centrate the business of this country in the hands of a few large cor- porations — certain kinds of business. Senator Dolliver. Do joii thinlv tliat would be a wise provision of law ? Mr. Prouty. That no lower rate should be made for a train load ? Well, now with respect to that, the Commission has held that such is the law now. The Supreme Court of the United States, as I un- derstand it, has held with respect to passenger traffic that such is not the law. In point of fact, the railroads of this country do ordinarily apply the same rate per hundred, pounds, whether the traffic moves in carloads or in train loads. Senator Dolliver. But they do not go below a carload ? ]Mr. Prouty. ISTo ; if they were to apply any different rule it would create an insurrection which you gentlemen would hear from from all parts of the country. I think there are, however, certain cases in which railroads ought to, and may, with perfect propriety, make a lower rate by the train load than by the carload, and I believe they ought to have that right. Now, it seems to me that Congress would have the power to say — they may say it by absolute enactment or they may delegate that power to a Commission — ordinarily you shall make the same rate per 100 pounds, whether one carload or fifty, but you may, under these peculiar circumstances and conditions, make a lower rate bj^ the train load than by the carload. Senator Dolliver. Do you have in mind raiy condition of that sort ? Mr. Prouty. Yes; the transportation of live stock. I think there are many instances where railroads might, with propriety, make a lower rate for a train load of live stock than they make for a single carload of live stock. I think it would be for the interest of the ship- per of live stock if they had that privilege. I think in many instances the railroads should have the right to make a lower rate for the transportation by the railroad of a train load of perishable fruit or other commodity than it makes for a single carload, and it is for the interest of the public that they should have that right. Take an- other illustration: A railroad company can transport kerosene oil or petroleum much more cheaply by the gallon in a tank car than in a barrel. Nevertheless, I think the people of this country might, through their Congress or through a commission, say that the rail- roads of this country shall extend the same rates by the gallon, whether kerosene oil is transported in a tank car or by the barrel. Senator Cullom. Do you think those provisions ought to be put m the statute? Mr. Prouty. I am not saying now that they ought to be put into a statute. I am illustrating to you the power which Congress has and which the court can not refuse. I think that Congress may say that a railway shall earn less in proportion to the service from the transportation of coal than it earns from the transportation of some- thing else. NoAV, within those limits the power of Congress is supreme. Within those limits the power of a commission created by Congress is supreme, and with those things the court can not interfere. The court can say, on the whole you are not giving to this railroad company a reasonable return ; but the court can not say that simply because we have required, or Congress has required, a railroad to transport coal for less in proportion to service than silk that the 12 EEGULATIOISr OF KAIL WAY EATES. rate on coal is unreasonable. In my view of the matter the power of the court is something like this: The making of a rate is a legis- lative act in essence. The court has the same power over that leg- islative act that it has over an}^ other legislative act.- Just as it can declare a law which Congress enacts unconstitutional, sO it can declare a rate, j)ut into effect by Congress or put into effect by the Commission, void. If Congress were to enact that the Baltimore and Ohio Rail- road should transport passengers from Washington to Baltimore for 5 cents apiece, I take it that is an unconstitutional act. That does not allow the railroad proper remuneration for its service. That could be set aside b}' the court. But if Congress were to enact that service should be rendered for 40 cents apiece, it is not at all clear, although the rate would be too low, that it could be set aside by the court. That may be as much as the railroads get at present on the whole. It seems to me that a court should presume in favor of a rate exactly what it presumes in favor of a statute. It should presume it is reasonable; but if it clearly appears to be unreasonable it should set it aside, and should do that although the railroad is making i 00 per cent on its investment. From what I have seen of the operation of this right under the fourteenth amendment and the acts of State commissions I have felt that it did not afford to the railroad the full measure of protection which it deserved, and I have advocated the creation of a special court, which should be an expert court, upon tlie theory that the court may exercise, if it were given the power to review the lawfulness of a rate, some additional power to what it could exercise under the fourteenth amendment. Senator Dolliver. Could we, by creating a special court, give to it am'^ special powers that could not be by law conferred upon the ex- isting judiciar}^ of the countrj-? Mr. Prouty. As a matter of theor}^, as a matter of course, you could not, but as a lawyer you know that the courts do in the process of time some things that it was not originally intended they should do. Senator Dolliver. If I could see the same latitude in the jurisdic- tion of a court in hearing one of these appeals from the order of the Commission that 3^011 have expressed there, it would greatly sim- plify this problem; but the way it has been presented to us is that the court would consider nothing but reasonable earnings, the rea- sonable surplus to be laid up against evil times, or a reasonable lousi- ness administration of the propertj^, and confine itself to the question of whether the rates fixed by the Commission took the property of the company without compensation, without due process of law. Mr. Prouty. If it is too low it does take it without process of law, because the rate is the property. Senator Dolliver. No, the rate is a mere expression of the use of the property ; and the rate could be brought down until the property was earning veiw little — not enough to pay dividends and not enough to maintain a surplus fund or to keep up improvements or a great variety of expenses beyond the mere payment of dividends and still be short of taking the property. That is the view that has been pre- sented to us. Mr. Prouty. Of course the court can not review the order of the Commission in so far as that order is discretionary; in so far as it kegulatiojST op kailway eates. 13 is a matter of judgment; in so far, in other words, as it is legislative. It can onh' review the lawfulness of the order; but it has seemed to me that a special court, charged with the duty of reviewing the lawfulness of the orders of the Commission, would exercise a most potential influence upon the rates of this country. A^Tien the Su- preme Court of the United States decides that the rates put in effect by the Texas commission are in violation of the fourteenth amend- ment, they of necessity inquire whether those rates are reasonable. They do not inquire with reference to the future, but they inquire, Are those rates reasonable? When the court inquires whether one of the orders of the Commission is justified, it must inquire whether the rate is reasonable for the time being; and while I freely admit that the thing accomplished may be an expression of opinion as to a rate to be charged for the future I have felt that under that kind of a provision the jurisdiction would be exercised by a court. It might not. Your opinion is worth more than mine. I have simply given to you the impression which I have had. The Chairiman. Where do interstate railroads, by combination or consolidation of lines in three or four States, making it one combina- tion, get the j)ower to charge rates. Mr. Prouty. I do not know that I understand. The Chairman. Every road is incorporated originally in a State, and by uniting two roads or three roads or four roads in several States we get an interstate railroad. Mr. Prouty. Yes. The Chairman. Now, the power to charge — the franchise — the power to make the rate, comes from what source? Mr. Prouty. Why, each railroad is chartered by the State, and it is allowed to charge a reasonable rate in that State. In the next State it is chartered and given the same power. Now, when you put those two lines together that power is exercised in the State of Illinois under the power granted there and in the State of Indiana under the power granted by that State. The States, in forming this com- pact, which makes the United States of America, have given up certain of their powers to the Federal Government. They have given up to the Federal Government the power over interstate commerce on those railroads. The Chairiman. They surrender the power when they allow the combination — that is, as to the interstate charges and the operation of the roads. Mr. Prouty. I do not think the State could decline to allow the interstate movement. The Chairman. The States can not inquire into or correct a through rate. Mr. Prouty. No ; that must be done by Congress. The Chairman. And Congress gets that power how ? Mr. Prouty. By delegation from the States, under the commerce clause. The States have said in the Constitution, by subscribing to it, that Congress shall have the power over interstate commerce. They have thereby given up the power which they might otherwise exercise over a railroad or over interstate transportation. The Chairman. This combination and consolidation which is per- missible under the laws makes an interstate road. Is that a legisla- tive act? 14 EEGULATIO]Sr OF BAIL WAY EATES. Mr. Peouty. You mean the making of a rate? The Chairman. Yes. Mr. Prouty. Certainly. I say a legislative act — it is an adminis- trative act. The Chairman. It is a legislative act so far as the power is derived from some source to fix it. Mr. Prouty. If Congress should fix the rate, that would be a legis- lative act. The Chairman. The fixing of a rate, then, by an interstate road is by the consent of the public ? Mr. Prouty. Yes. The Chairman. And by the carrier? Mr. Prouty. Yes ; as I understand it; The Chairman. But in the State, when it incorporates a railroad, the power to make rates is delegated and there is a power conferred upon the railroads to make rates in the States. Mr. Prouty. You mean the United States has conferred no power which corresponds to the State? The Chairman. No. Mr. Prouty. And I say when the State of Illinois creates one rail- road and gives it that power, and the State of Indiana creates an- other railroad and gives it that power, that it is not within the power of either the State of Indiana or the State of Illinois to say that those two roads shall not engage in interstate business and make interstate rates, and those interstate rates may be higher than the sum of the local rates. I have before me to-da}^ a complaint received from a gentle- man who was traveling from Feriiandina, Fla., to Savannah, Ga. He bought a ticket from Fernandina to Savannah and paid $5 for it. The gentleman who rode in the same car with him and in the same seat bought his ticket to a little town located on the border between Florida and Georgia, and when he got to this little town he got out and bought another ticket, and he got through for $3.28, I believe it was. The Chairman. Now, how would you constitute the Commission, and what powers would you give it in the interests of the public to correct the evil abuses of extortionate rates? "What powers would you confer on that Commission ? Just explain that to us from your large experience in viewing these questions. Mr. Prouty. I expect that if I were to give you my honest oj)inion about that I would say that you ought to take away from the Inter- state Commerce Commission all its executive work. I have already said that. You ought to take aAvay all its judicial work, and I do not know, but I would say that you ought to go one step further. Now, at the present time the Interstate Commerce Commission re- ceives a complaint. That is an informal complaint. It serves that on the railroad. It endeavors to persuade the railroad to correct that rate. It is our j^ractice at the present time to say to a com- plainant, " if the rate is not corrected, if you desire to proceed with this matter, we will formulate a complaint and send it to you." The Chair3ian. Wliether you believe or not the complaint was well founded ? Mr. Prouty. If I did not believe the complaint was well founded, if I did not believe there was a fair question, of course I would tell the complainant that I did not think he had a case; but if I thought EEGULATION OF RAILWAY EATES. 15 his case was well founded, or if, after I told him, I did not think he had a good case, and he insisted that it was a good case — as a com- plainant did the other day (I wrote to him that I did not think he had a complaint, and he said he thought he had, and he thought he could convince my associates that he had, and would like to have a complaint sent, so I instructed to have it sent, and I think it has been sent) — but whenever a man wants to proceed with his complaint, the Interstate Commerce Commission always formulates his complaint for him. The lawyers do not know how to do that. We just turn it over to our assistant secretary, who has a force for that purpose, and he formulates the complaint and has it filed. There are some cases in which we go no further than that. Where the question is one of very general interest which, we think, ought to be heard in the interests of the public, we sometimes furnish a lawyer to develop the facts of the case. Now, I am inclined to think, if you could arrange this thing just exactly as it ought to be arranged, you would create a bureau or a department — I do not say that a department would be any too large for it — which had jurisdiction of railroads. The Chairman, A department of railways ? Mr. Prouty. a department or a bureau of railways. You would lay all these informal complaints before the bureau of railways, and if the bureau of railways thought a complaint ought to be formulated it would be the duty of that bureau to file a complaint with the Inter- state Commerce Commission, and I would create a commission whose whole duty it should be to hear and decide those complaints. You could not find any men too good for such a commission ; you could not find any too impartial men for such a commission; but I do not see any other way in which it could be done. The Chairman. And have this bureau refer the complaint to the commission ? Mr. Prouty. In my opinion you have got finally to let a commis- sion determine what these rates shall be, because the court can not do it. In my opinion the decision of the commission must finally go a long way toward being taken as right. In my opinion there is no way in which you can protect the railroads of this country from an erroneous decision of that commission within pretty broad limits. Of course, there are limits within which you can and limits within which you can not. Anything outrageous can be stopped, anything manifestly wrong can be stopped, but anything that is a little wrong or partly wrong I do not believe can be stopped. There is no other way to do it. That is the way they do it in England, that is the way they are doing it in Canada, and that is the way you have got to do it here ; and I believe you ought to create a commis- sion and give it that duty and also take awaj^ from it entirely all these duties which tend to make a commission a partisan body, and allow that commission to decide those questions. There ought to be enough commissioners, so that the question can be heard and decided promptly. The Chairman. If they reach a conclusion that a rate was too high, would you have them make a substitute rate that would go immediately into effect and make that binding upon the railroads, and then within certain limits have that reviewed or not reviewed? Mr. Prouty. I think they must have the power to make a rate 16 REGULATION OF RAILWAY RATES. which is binding upon the railroad, unless it can be reviewed under the fourteenth amendment. The Chairman. As confiscatory? Mr. Prouty. Yes. The Chairman. But outside of that you would not. allow it to be reviewed ? Mr. Prouty. I would allow it to be reviewed if it can be, but Sen- ator Dolliver says that it can not be. As an Interstate Commerce Commissioner I would a great deal rather act if my acts were re- viewed by some competent tribunal, but I want a tribunal which is engaged exclusively in that business, which will look at these ques- tions as I do, which will appreciate them, or at least consider them, from the same standpoint. I do not mean that I would expect they would have the same opinion that I had about them, because I sup- pose thej would not, but if they do not I am entirely satisfied. Give me a competent tribunal. You may take any three judges in this land, I do not care who they are, and let them hear these questions from one year's end to the other, let them become familiar with every condition which surrounds the railway transportation of this country, and I will, as an Interstate Commerce Commissioner, prefer to be reviewed by a body of that sort than to have the absolute power to make the rates without review, because I am conscious of the fact that I might make mistakes, and I think I might sometimes decide in favor of the public in that case where I would not in the other. The Chairman. If you are satisfied that the difficulty can not be' settled, that the dispute between the carrier and the shipper can not be reconciled, and in your judgment there should be a suit brought, why not bring that suit directly in the court rather than let the Com- mission take the time and have a hearing and then have that re- viewed ? Do you get the idea ? Mr. Prouty. I do, entirely. You look at that from a practical standpoint, of course. The Chairman. Yes; to prevent delay. Mr. Prouty. In some instances it would prevent delay and in some instances it would not. Let me give you a practical illustration. Now, you take the only case in which an application has been made to us to proceed under what is known as the Elkins bill. That was the Wichita sugar differential case. In that case the question at issue was the comparative rate on carloads of sugar from various points to Kansas City and to Wichita. Sugar is refined in the United States very largely on the Atlantic seaboard. 'Wlien it is refined on the Atlantic seaboard it may get to Wichita in two ways. It may go to Kansas City and so on through to Wichita, or it may and frequently does go down to Galveston and go from Galveston by rail up to Kan- sas City, and in that way it goes through Wichita. ' In the first case the sugar travels 225 miles farther in going to Wichita than going to Kansas City, and in the second case the sugar travels 225 miles farther in going to Kansas City than in going to Wichita. Now, a great deal of sugar is produced in Louisiana, at, I may say, New Orleans, The distance from that point of production to Kansas City and to Wichita is practically the same. A great deal of sugar is produced out on the Pacific coast. That sugar, in order to get to Kansas City, has to go through Wichita to Kansas City. Now, out of that very complicated situation there has grown up in the last REGULATION OF EATLWAY RATES. 17 dozen years a bitter fight, and that fight has resulted in the applica- tion of all sorts of differentials between those points. The differen- tial has sometimes been 15 cents. It has sometimes been nothing. It has sometimes been five or seven or eight, or whatever happens to be. On the 1st of January the railroads had entered into an agree- ment. They had arrived at some sort of an understanding by which that differential was fixed at 15 cents, and the people of Wichita applied to the Interstate Commerce Commission and asked to insti- tute a suit under the Elkins bill for the purpose of correcting that discrimination. I happened to be in the West at that time, and w^as the member of the Commission who saw the attorney for the Wichita people. I said to liim, " This act provides that the Interstate Commerce Commission shall institute a suit if it has reasonable ground to believe that the present differential is wrong. I can not say that I have any reason- able ground to believe that the present differential is wrong. We have decided that the rate may properly be higher to Wichita than to Kansas City, and how can I say, without some investigation, that your rate is wrong, and how can I recommend the institution of a suit on that basis? Before I can do that we must have an investiga- tion." I said to him, '" You file a complaint with the Interstate Com- merce Commission, and we will investigate your complaint, and after we have done that we will determine whether we will proceed imder the Elkins bill or whether we will make an order and proceed in that way." I think his complaint was filed somewhere about the 16th or 17th of December. AVe had to be in Chicago on the 27th of December, and we heard the complaint then. We decided it in ten days after it was heard. We decided that they ought to apply a differential of 8 cents. The railroads complied with that order. Now, if in that case the Interstate Commerce Commission had brought a suit, there would not have been an}^ termination of that suit until it got through to the Supreme Court of the United States. The shippers at Kansas City were on one side and the shippers at AVichita were on the other side, and they were bound to fight it out, and in that case where the order of the Commission was complied with the petitioners got relief within a month, whereas in the other case they would not have gotten it witliin two years. Now, suppose the order had not been complied with. Suppose we had brought a suit to enforce the order. There is no reason why we might not have secured a judgment in the case of that suit exact!}' as quick as we could secure a final decree in the ca;-e of a proceeding under the Elkins bill. Senator Dolliver. Was that an order within the present power of the Commission? Mr. Prouty. No; the order of the Commission was this. The Commission ordered that they cease and desist from charging the present differential of 15 cents and it recommended that a differential of 8 cents be substituted, and the railwaj^s accepted the recommenda- tion and substituted that differential. Senator Dolliver. Do you recognize the present differentials exist- ing by consent of the public in the railroads as a beneficial and wise thing and something in the interest of transportation, or would j'ou abolish them. 74lA— 05 2 18 KEGULATIOX OF RAILWAY RATES. Mr. Prouty. I do not think you could abolish them. Senator Dolliver. Do j^ou think that they are beneficial and in the interests of the public? Mr. Prouty. I think they are absolutely essential,, yes. I was going to say that a differential sometimes means one thing and some- times another. Generally speaking 1 ihink tliere must be a difference in rate between communities, and that that is in the interest of com- petition. You could not have competition Avithout it. Senator Dolliaer. One other question and I am through. In adjusting the difference between localities situate on different rail- roads, don't you think that on the whole the railroads themselves on the ground having charge of the matter could adjust those differ- ences ? Mr. PROiTTy. Yes. The Chaikimak. Better than the Commission? Mr. Prouty. Yes, I do; but I think there are cases in which numbers of the public who are injured should have some remedy, and in a case of that sort I believe the only possible remedy is to be applied through a commission. The Chairman. Through a commission rather than through the courts ? Mr. Prouty. I do not think the court has the power to apply it. The Chairman. As to localities? Mr. Prouty. Certainly, as to localities. Now, as to whether in my opinion the railroad traffic men are not ordinarily better qualified than a member of the Interstate Commerce Commission to determine what these differentials should be between different i^oints, especially different points on the line of that particular traffic man, I think that he in all cases ought to have that right, but that the right should be subject to supervision somewhere. I desire to give an illustration of that. I can best take all these illustrations right out of the files of the Commission, and 1 will take this illustration from the last case that we had in Chicago. A good deal of corn is raised in Texas, but not all that they consume there. A certain amount is bought in Kansas and sent down there. It is sometimes sent as corn meal and sometimes as corn and ground in Texas. The Texas mills have insisted that the railroads should make a lower rate on corn than they made on corn meal, and the Texas commissioners insisted that they should malce a lower rate on corn than on corn meal for the purpose of allowing the Texas mills to grind corn. This differential for the last ten years has been 3 cents a hundred pounds. On the 19th day of last February it was advanced from 3 cents a hundred pounds to from T| to 9 cents a hundred pounds by rais- ing the rate on corn meal. One cent a hundred pounds is a pretty good profit in grinding that corn meal, and of course this change in that differential simply puts the Kansas miller out of business, shut up the mills, and they applied to the Interstate Commerce Com- mission to investigate that. On our hearing in Chicago these facts were developed : The Texas commission was proposing to reduce the rates on grain and the products of grain in the State of Texas, and they had issued notice that on a certain day they would have a hear- ing at the capitol for the purpose of determining whether these rates should be reduced. The millers of the State of Texas were asking EEGULATIOX OF RAILWAY RATES. 19 for this reduction in Texas rates. The railroads went to the millers of Texas and they said to them, "Is there anything you warit here?" " AAHiy," said the millers, " 3'es ; Ave would like to have that dili'erential between corn and corn meal increased ; we think you ought to put the rate on corn meal up." The railroad said, "All right; you just stay away from that meeting down at Austin so that there will not be any excuse for the Texas commission, if it undertakes to reduce these rates, and we will raise this differential; we will raise the rate on corn meal to the rate on flour."' The millers kept away from Austin — they kept their part of the bargain — and they stayed away, and the Texas commission was left without an^' support for their j^roposi- tion to reduce the rates, and the railroads kept their part of the bar- gain and lifted up the rate on corn meal so that the differential was from 9 to 7^ cents, and that put the Kansas mills out of business. Now, I think in a case of that sort those Kansas millers ought to have somebody to whom tlie}^ can go who has power to right that wrong. I do not believe those Texas lines have any business to do that thing. Senator Kean. That was all in Texas? Mr. Prouty. Oh, no, sir; the lines that did it were the lines that led from Kansas City to Texas — into Texas. Those were the lines that made the raise, but thev did it at the request of their Texas connections. You talk about the confiscation of property. Could you have any more absolute confiscation of proj)erty than the con- fiscation of the property of those mills? You talk about autocratic action. Could you have any action that is any more autocratic than that? Is it not the duty of the United States Government to pro- vide a tribunal somewhere which justly and fairly can judge be- tween these Kansas millers on the one side and these railroad lines on the other side? And I want to say, Mr. Chairman, as em- phatically as I can, that I utterly dissent from this proposition which has been sent broadcast over the country, that to give some tribunal that right is tantamount to investing that tribunal with the pjower to fix the interstate rates of this country. I want to insist that there is not the slightest analogy between the two propositions, and I want to make that as plain and emphatic as I can, because it to bestow upon the Interstate Commerce Commission that right is to clothe it with the right to make the interstate rates of this countrj^ I am not for it; but it has not that right, it has not that power, and it is not analogous to that power. Senator Dolliver. AATiat is the objection to that general power? Mr. Prouty. Of fixing all the rates ? Senator Dolliver. Yes. Mr. Prouty. Well, now, I do not admit that the Interstate Com- merce Commission Senator Dolliver. Mr. Stickney, of the Great Western Railway, has filed a paper in wdiich he says that this piecemeal business is worthless to the public, and that nothing could be of anj'- value to the public in that particular unless the power to adjust these schedules was placed bodily in this Commission. Mr. Prouty. I do not admit that a proper commission — and I do not think the present Commission is a proper commission — I do not admit that a proper commission, with the proper staff, could not 20 EEGULATIOISr OF RAILWAY RATES. make the interstate rates of this country. I think they could, without any difficulty, but I have always believed, in the first place, that, as a matter of justice, the railroads should be allowed to fix their own rates. Our railroads are private property. The moiiey has gone into those enterprises upon the implied understanding, at least, that they should have the right to manage them as they wanted. I believe they should be allowed to do that, subject only to this qualification, the same qualification which rests upon the use of every other kind of property in the world, that they shall manage that property within the law. I think as a matter of justice it is the right of the railroad com- pany' to fix its own rate until by the fixing of that rate it injures the public, and then I think the public must interfere and stop it. That is the first reason. The second reason is that in my opinion it is for the interests of the public that they should fix their own rates. I think it is for the interest of the public that a raih'oad should have the right to develop an industry on its own lines. Let me give you an illustration of what I mean there, and I will take that from the last case Ave had in Chicago — another case, the case of the Meneshaw Wooden Ware Company, Lard tubs are used in great quantities on the Missouri River, and until of late they have been manufac- tured in Minnesota. A factory has been established at Tacoma to make them. Lumber costs less in Tacoma than it does in Minnesota, although labor costs a little bit more. Still the lard tubs can be produced much more cheaph^ in Tacoma than they can in Minne- sota. The Tacoma people went to the Northern Pacific and said, " Make us a rate by which w^e can put those tubs into the Missouri River country." A rate of 85 cents w^as made, but that was not satisfactory, and finally a rate of 65 cents was made, and on that rate the Tacoma factory sells about half the lard tubs used in the Missouri River district. It seems to me that ]Mr. Hanniford, of the Xorthern Pacific, should have the right to make a rate of that sort to develop an industry on his line, provided he does no injustice to anybody else, and I believe it is for the interest of the public that he should have the right to make that rate. The case came up in this Avay : AVhile Mr. Hanni- ford's rates on those commodities from Tacoma to the Missouri River is 65 cents, his rate the other w^ay is $1.85, and a complainant said that jVIr. Hanniford ought to have made him just as low a rate from the Missouri River to Tacoma as he made from Tacoma to the Mis- souri River. That is the way the complaint came up ; but my point IS illustrated by the rate which Mr. Hanniford made to develop his industry. I think he should be alloAved to do that, and that it is for the interest of the public that he should. In my judgment the railroad rates of this country to-daj^ are lower than they would have been had they been made by any interstate commerce commission in the world. But I call attention especialh' to the fact that the influ- ences Avhich have forced down the railwa}^ rates of the United States no longer operate to a very great extent. AVhen I came on to the Interstate Commerce Commission eight years ago there was a most vigorous competition between the railroads in railway rates in all parts of this country. To-day that competi- EEGULATIOX OF RAILWAY KATES. 21 tion has disappeared. You have left the kind of competition that I refer to in some cases, but that competition only exists in peculiar cases and particular cases, and it is disappearing. You have heard, I expect, a good deal — I have not read these hearings so I do not know — about the force of market competition. That is the kind of competition I call attention to. It is a more subtle kind of com- petition than railroad competition is, because it can take place between the railroads which reach the same point from opposite directions, and that is not true where vou have the simple railwav competition between competing carriers, so to speak. But let me assume a case. St. Louis sells goods in Denver and Chicago sells goods in Denver. The St. Louis merchant says to the Missouri Pacific, " Make me a rate and I will give you some traffic." The Chicago merchant says to the Northwestern, " Make me a rate and I will give you some traffic." These two lines make the rate to Denver against one another, bidding against one another for the purpose of obtaining the traffic. It does not, as a general rule, increase the amount of traffic, it does not increase the amount of groceries con- sumed in Denver; it simph^ determines whether they shall start from St. Louis or Chicago, whether they shall go by the Missouri Pacific or the Northwestern. Now, then, if the Missouri Pacific and the Northwestern are owned by the same persons, what becomes of your market competition They raise that rate 2 cents a hundred pounds; the distribution of the traffic is exactly the same and your market competition is gone. Senator Dolliver. Do you mean to say that that kind of competi- tion between the Missouri Pacific and the Northwestern in a case like that has disappeared ? Mr. Prouty. Certainly I do, to a very great extent. I do not mean to say entirely. I do not mean to say it has disappeared to the same extent that competition in the rate has, because that, for all practical purposes, has absolutely disappeared in the United States. I do not pretend to say that competition in facilities, market competition, has disappeared, but I say it is disappearing. Let me give you an illustration of that. I will take this from our own files. About the 1st of January, 1903, the rates from St. Louis and that territory into Texas were advanced. They were advanced to a higher j^oint than they had ever touched before since the Interstate Commerce Commis- sion existed, and we felt that it was our duty to investigate the ques- tion of those rates. This situation was developed : Articles consumed in Texas are purchased both in St. Louis and Chicago and also in New York. Now, the rate from New York to Galveston and from Galveston to the interior towns of Texas, common points, as compared with the rate from St. Louis to Texas common points, determines whether the goods shall be bought in New York or in St. Louis, so that you have there market competition. It turned out that before this advance in rates from St. Louis into Texas an agreement had been made between the steamship lines which serve Texas and the railroads which carry that traffic into the interior by which the rates from New York were to be advanced to the same extent that the rates from St. Louis were to be advanced, and the traffic men testified that they could not and they would not have made the advance from St. Louis had not the 22 EEGULATIOlSr OF RAILWAY RATES. Xew York lines agreed to make the advance from New York. Just look on that map there and you will see across the southern part, from Georgia to the middle of Texas, a zone where yellgw-pine lumber grows. There are mills all the way from Georgia to the middle of Texas, nearly 1,500 miles. Above the Ohio Elver and east of the Mississippi !River and Avest of a line drawn from Pittsburg to Buffalo is what is called the Central Freight Association territory. Very large quantities of yellow-pine lumber are produced in that whole section which find their way into the Central Freight Association territory, and the mills all the way from Georgia to Texas desire to sell in that territory. Now, there you lia^e market competition, and market competition of the most virulent kind, and that sort of market competition ham- mered doAvn that rate until it was a low rate without the slightest doubt. That competition has disappeared. Those rates were ad- vanced, first 1 cent, and then another cent, and finally they were advanced 2 cents a hundred pounds, and the testimony on that trial was to the effect that unless every line which led from every part of that territory had first agreed to make that advance it never could have been made. That is the testimony. That is what I mean by the disappearence of market competition. I don't know whether 5-0U gentlemen appreciate the extent to which railroad operation has been unified in the United States. I had occasion the other day to tell one of our clerks in our office to make me up a statement which would show certain facts with reference to certain great systems of railroads in the United States. I gave to him six systems, and if I remember right those six systems were the Vanderbilt system, the Pennsylvania system, the Gould system, the Harriman, the Hill sys- tem, and the Ivock Island system. I said to him, " You take the statistical returns of the railways to the Interstate Commerce Com- mission and tell me from those statistical returns how many miles of railroad are controlled by those six systems." He did so, and it turned out that of all the railroads of the United States about 55 per cent were embraced in those systems. But, gentlemen, that did not express it, for the simple reason that the railroads which were embraced within those systems do so much more business and were so much more important than the railroads left out of the systems. For instance, there are 17,000 miles of double track in the United States. Of that 17,000 miles 10,000 miles belong to the Pennsylvania and the New York Central systems alone. Of the railway capitalization of the United States two-thirds is em- braced in those systems. Of the railway gross receipts in the United States 62 per cent are embraced in those systems. That does not express it. The men who arc potential in these systems are poten- tial in other railroads in the United States. I say that competition between the railroads has ceased, and if it has not ceased entirelj^ it will in the near future. The end of this thing is not yet. You come up into my country, and take the Boston and Maine Railway Com- pany, and there you have a j)roperty Avhich operates 2,300 miles of railway. Its capital stock is $27,000,000. so that an investment of $14,000,000 controls every railroad there is in New England north of Boston and Albany and east of the Green Mountains. You can go then into Mr. Hine's territor}'. I do not remember just how much the Louisville and Nashville operates, but probably 3,500 miles. EEGULATION OF EAILWAY RATES. 23 The Atlantic Coast Line operates 4,500 miles, and the Atlantic Coast Line owns the Louisville and Nashville. The capital stock of the Atlantic Coast Line, as I remember it, is $38,000,000; so that an investment of $19,000,000 controls those 8,000 miles of railway. AVhy, gentlemen, there is no limit to it. You can not rely on competi- tion to reduce these rates. That is the point I wish to make. I say that you must rely on something else, because competition has gone. 1 do not say that it ought not to go. I do not sa}^ that anybody is complaining because it has gone, but I say it has gone, as a fact. Senator Doluver. Those cases you cited where the differentials were changed, were they such cases that you think could not be brought directly into the courts under the Constitution, according to your argument — in the first instance, I mean? Mr. Prouty. I do not think the court has any power to determine a rate for the future, and I do not think that the Commission has to-day on its docket a case which can be satisfactorily disposed of without determining the rate for the future. Senator DoiiLivER. These are the cases you cited. Mr. Prouty. Yes. Senator Dolliver. You say the power to fix the rates primarily belongs to the road, but there should be this power invested in some tribunal to correct an abuse. The power of those to fix a rate, accord- ing to the testimonv given here, would lead to the reduction of, say, 1,000 rates. Mr. Prouty. That is often so. Senator Doij;.iver. Following that up, joix would reach nearly all the rates in the country. Mr. Prouty. I do not think you would; but I would like to say a word on that, because I have some ideas about that. Suppose that the Esch-Townsend bill became a law. That is a rather violent sup- position, but we may suppose it for the sake of argument. "We will say that to-morrow morning it becomes a law. Every traffic manager in the United States has exactly the same right to change his rates to-morrow morning that he has now. There is no question about that. If that bill became a law, what would happen? I do not know of any better answer to that question than to inquire what did happen. The Interstate Commerce Commission never possessed the power to make a rate or to fix a differential, but the Interstate Commerce Com- mission supposed that it had that power. It exercised that power. The people supposed it had that power. The railroads, with some few exceptions, supposed it had that power and conceded it. Now, what did happen when just exactly that thing was done? The act to regulate commerce went into effect in April, 1887. On November 1, 1887, the Commission decided the case of the Board of Farming- ton, if I get the name right, against the Milwaukee and St, Paul road. The Milwaukee and St. Paul has two lines between St. Paul and Chicago, one of which is called the " River Line," running through Red Wing, and the other — I forget the name— runs through Farm- ington and is a longer line. The rate on grain — corn, wheat, and grain products — on the river line was 7^ cents to Chicago, and the rate on the other line from Farmington was 15-J- cents to Chicago.' Farming- ton complained that there was an undue discrimination against that town. The Commission heard the case and decided that there was — decided that the rate from Farmington must not exceed the rate from 24 REGULATION OF RAILWAY RATES. Red Wing and other points on the river division hj more than one- third, and that order was complied with. Immediate!}^ afterwards there came this Evans case, of which I have spoken, in which the court reduced the rate on wheat from "Walla Walla to Portland from 30 to 234 cents. Immediately afterwards came the Reynolds Case, in which the Commission determined the classification on lumber should be the same as the classification on ties, and it ordered the railways to make the classificaton on ties the same as the classification on lumber. The thing I desire to call attention to is the fact that the Interstate Commerce Commission did exercise then exactly the power which it saj's must be exercised b}" some commission now, and the important bearing of that is to determine what would be the result to-day. What was the result then? The result then was that a good many complaints of discrimination were filed; that very few complaints for unreasonable rates were filed; but there was no overturning of commercial conditions, there was no attack on railway securities, the streets were not filled with widows and orphans rendered destitute by that legislation. It produced very little effect on the railroad operations of this country. There is no reason to suppose that the effect to-day would be any different. There are more unreasonable rates to-day. Senator Dolliver. That vou have reasoned from the fact that after the interstate-commerce law was passed it became evident that the general railway situation was pretty nearly perfect; that there was little or no dissatisfaction in it and few or no complaints made against it. Would that same state of things prcA^ail to-day? Mr. Prouty. No; I think there was the greatest dissatisfaction before that act was passed. Senatoi' Dollivek. There was a good deal of talk? Mr. Proi'ty. But the testimonv, if vou will look into it, showed the rankest condition. Senator Dolliver. How did it happen so few complaints were made ? Mr. Prouty. A law does two things: It punishes a thing which is wrong — corrects that — and it prevents the perpetration of a thing which is wrong. Senator Dolliver. Did it in this case actually operate to induce the railroads to themselves immediately set about the correction of these evils? Mr, Prouty. Certainly; the railroads of this countiy absolutely re- vised their tariffs in all official classification territory from the time the long and short haul clause was observed, and all over the country these tariffs were revised to conform with what was understood to be the requirement of the law — certainly. And that, I should expect, would be the efl'ect of the passage of a substantial law now. The Chairman. You say that competition is destroj'-ed, or in many instances it is destroyed, and therefore I infer the possibility you stated that the rates can be advanced and have been advanced by reason of this diminution of competition? Mr. Prouty. Yes. The CHAiR3kiAN. But is it not a fact that it is to the interests of the railroads themselves to help build up and foster the localities on their REGULATION OF RAILWAY RATES. 25 lines, and is it probable or possible that they would oppress localities situate on their lines and advance rates to the injury of the com- munities ? Mr. Prouty. There is no prospect that an enlightened railroad manager would do anything which would lessen the revenues of his railroad. The Chairman. Does not the railroad live and prosper and have success just as the communities it reaches do? Mr. Prouty. It certainly does. The Chairman. And can a railroad afford, under those conditions, to unreasonablv advance the tariff rates? Mr. Prouty. A railroad can not afford to advance the tariff rates to such an extent as will deplete its revenues. The Chairman. Or reduce business. Mr. Prouty. It may reduce its business and not dej)lete its reve- nues. Take an illustration. I put it to Mr. Baer when he was talking about coal. There are 4,000,000 tons of anthracite coal used in the cit}?^ of Xew York. If the price of that coal is advanced a dollar a ton, it will perhaps decrease its use by a half million tons, so that you will sell three million and a half tons there. If you increase that price a dollar, you gain three million and a half dollars, and you lose the sale of half a million tons. Senator Dolliver. That is where the road owns the product? Mr. Proi'ty. Yes. Senator Dollivp:r. There is no competition ; and there is another thing that the road was doing — a vicious thing. Mr. Prouty. I do not say that it is a vicious thing or an improper thing at all. I do not intimate that. I do not say that the rate is too hisfh. Senator Dolliver. It is an abuse. Mr. Prouty. I do not claim it is an abuse. I am not intending to make any insinuation that- the rate is too high. Senator Dolliver. But do you think it is projDer for railroads to be interested in manufacturing or mining as against their competitors on their lines ? Mr. Prouty. That is an economic ^proposition. No ; I do not much think that it is; but they are in a great many cases, not only in the case of the anthracite-coal roads in Pennsylvania, but it is the case with the bituminous roads out West and in a great many places. Now, what I wanted to say was this : Take the cattle rate from Texas. That cattle rate has been advanced three times within the last six years. I do not suppose that the advance in that cattle rate has affected the movement of cattle. I expect there are probably as many cattle raised in Texas to-day as would be raised in Texas if the rate was exactly the same as it was six years ago. Nevertheless, the revenues of the companies have been very materially increased, so that when you can increase the rate without diminishing the move- ment it is for the interest of the railway to increase the rate ; and it may often happen that a railroad can increase the rate without diminishing the movement to a point which would be utterly ut;rea- sonable and unjust. I would like to say one thing more. I said competition had pretty well gone out in this country. We heard some testimony the other 26 EEGULATION OF RAILWAY EATES. morning which rather ilhistrates that. It was the testimony in the case of the Pittsburg Plate Glass Company, which complained that the import rates from Antwerp to certain points in thi§ country/ were lower than the domestic rates in this country. It appeared that the rate from Antwerp to Chicago through Boston was 40 cents, and from Boston to Chicago the rate was 53 cents, as I remember it. It appeared that the rate which INIr. Fish charges from New Orleans to Chicago was To cents, but that the through rate from Antwerp through New Orleans via the Illinois Central was 32 cents. Now, when we came to inquire into it, this turned out to be the fact. There Avas no competition between New York and Chicago; they had got that out of the way. There was no competition between Boston and Chicago; they had got that out of the way. There was no competition between New Orleans and Chicago because that was out of the way ; but when you started on the other side in Ant- werp, where you could come in through the Gulf of St. Lawrence or through Boston or New York or New Orleans or Galveston, there was the most active competition, and that competition produced a rate of 38 cents from Antwerp to Minneapolis as against the rate of -10 cents from Chicago to Minneapolis. That illustrates the effect of competition. They have expressed the thought that they were confident they would be able to get rid of that competition. They had not been able to devise a means yet, but they thought that Avithin a short time they avouIcI be able to persuade the Gulf lines that they ought to get together and fix the rate up and then they Avould be able to charge the foreigner just as much as the x\merican. Senator Dolliver. What localities were injured? What localities complained and will complain to you ? Mr. Prouty. The people Avho complained Avere the Pittsburg Glass Company. The}^ said: " Great heaA-ens, we manufacture glass down here in Pittsburg, and it costs us more to get our product up to Min- neapolis than it costs the Belgian manufacturer to get his product all the Avay from Antwerp." Senator Dolliver. Was the complaint made to the Commission? Mr. Prouty. Yes. Senator Dollia'er. What is the disposition of that? Mr. Prouty. We have not decided that case yet. Senator Dollia'er. Noav, in beginning an inquiry, how Avould you constitute the Commission? Would you have their term of serAdce for a long time — longer than noAv ? Mr. Prouty. If you ask me Avhat I think about it as an individual, I Avould say " no."' If you ask me what my opinion about it is if I were to be appointed an interstate commerce commissioner, I Avould say " yes." Senator Dolliver. Do you think a body subject to political in- fluences, such as is the case of the Commission at present, removal at the pleasure of the President Mr. Prouty. I do ?iot understand that the commissioners can be removed at the pleasure of the President. He takes that vieAv of it, but I do not. Senator Dolliver. At the end of a given time or at pleasure would you be as untrammeled and free to act as a court Avhich was appointed 'for life? REGULATIOI^ OF RAILWAY RATES. 27 Mr. Prouty. No; I think you obtaii:^ a somewhat more independent action in case of a court than you do in case of a commission, but, after all, I think it is a pretty good plan to have an administrator coming back to the source of power about once in six or seven years. I do not find any fault with that. Senator Dolliver. If the power is given the Commission to sub- stitute a rate for one challenged, will not that confer upon it the power to advance and lower rates ? Mr. Prouty. I do not think the Commission would exercise the power to advance a rate. It would confer that power and it must of necessity confer that power if the Commission is to fix a differ- ential, because there are certain cases where a differential can not be fixed unless you have a right to fix both the maximum and the mini- mum rates. Senator Dolliver. Where discriminations between the communities are alleged, if the power is given to the Commission to fix the rate, could it not lower the rate or raise the rate to avoid the discrimina- tion? Mr. Prouty. I think the Commission in that case should be allowed to determine the differential without saying whether the rate should be lower or higher. The railroads should be allowed to observe it. If they decline to observe it, then the Commission should be allowed to do it. Senator Dolliver. Could you control the question of discrimina- tion between communities except on the power to fix both the maxi- mum and the minimum ? Mr. Prouty. I have answered that question. Senator Dolliver. That is all the questions I desire to ask. ISIr. Prouty. I want to add one thing. I have said that the power to correct a rate was not in any way analogous to the power to fix the interstate rates of this country, and it is not; but there is a certain basis of fact to the claim of the railroads in that respect. If you fix one rate to-day and another rate to-morrow, you presently have fixed a great many rates, and if those rates can not be departed from without the consent of the Commisison or a court that fixes the rates, you have got in fact a more or less rigid system of rates. I have always insisted in order to obviate that difficulty— I do not think there is any real difficulty, but in order to obviate it, if there be one — -that the rate fixed by the Commission should be observed for a certain length of time, and should then cease to be obligatory on the carrier. I have said if the railroads observe it for a year or two years that the carrier should have the same right to change that rate as any other to begin anew. Senator Cullom. jMr. Prouty, I do not think I want to ask you ver}' many questions, but as I understand you, the chief thing that you think ought to be done by this Congress if they do anything, is to not only allow you to determine a reasonable rate on complaint, but if you find that it is not reasonable, to allow you to make another. Mr. Prouty. I do not say that any power should be conferred on me or that it shall be conferred upon the present Commission, or any- thing of the sort, but I say in order to regulate the railroad rates of this country you have got to do it by a commission, and that commis- sion must do what you have said. It must have the right to fix the rate. 28 KEGULATIOX OF SAILAVAY EATES. Senator Cullom. I do not mean j^ou personally or this particular Commission, but an}' commission that may be apj^ointed. Mr. Prouty. Some commission. Senator Ciillom. You think it ought to be a commission to fix a rate for the future. Mr. Prouty. It can not be anything else. I do not know whether it has been spoken of here or not, but the experience of the English people on that point is instructive. They have a law like ours, ex- cept that Parliament fixes the maximum rate. Senator Culi.om. You do not believe a maximum rate in this coun- try would amount to anything? Mr. Prouty, It depends on who fixes it. If the legislature of Nebraska fixes it, it amounts to a good deal; if somebody else, it may not. Senator Cullom. Can a commission or anybody else make a rate for the whole country and put it in force and sa}" no railroad, no interstate commerce carrier, should go above it ? ^Ir. Prouty. Congress could. Senator CuLuoat. We could make it, but could it be operated suc- cessfully in the interests of the public as well as of the railroads? Mr. Prouty. It would depend on the schedule. If the schedule was all right, the railroads might fall below that if they wanted to. That is what a railroad does when it develops an industry on its lines; it makes a lower rate and not a higher one. Senator Culloim. If the maximum rate were to be made for the whole country, it would have to be made so high that the railroads would not observe it or else the people would be charged more in many cases than they ought to be. Mr. Prouty. I would not favor the attempt to make a maximum rate. I have said that. Senator Cullom. Some of these States make maximum rates. Mr. Prouty. Yes; and some make absolute rates. Senator CuLuo^r. And it is possible that in a State a maximum rate might be lifted up and not be injurious, but when you come to a whole country with all sorts of conditio)is existing it would seem to me at least that the maximum rate would be of no particular account; aud, as I understand, you would not approve the making of such a rate ? Mr. Proitty. Xo ; I have never l:)elieved in that. Senator Cuu>03r. But you do believe — I -want to get that under- stood thoroughly wliether you do or not — tliat a commission, to have its full force and value to the country, ought to have the power not only to detei'mine what a reasonable rate is or what an unreasonable rate is, but when the}^ determine that a rate is unreasonable, to under- take or to declare what a reasonable rate should be. ;Mr. Prouty. Certainly. Senator Cullom. And you are willing to let that rate be subject to a court of review, to be investigated afterwards? Mr. Prouty. I think it ought to be. m just so far as a court can review it. Senator Cullom. You think it ought to be ? Mr. Prouty. Yes. sir. Senator Cullo^i. What would you do in the meantime? Would you have the rate take effect immediateh^ upon your making it ? REGULATION OF RAILWAY RATES. 29 Mr. Peouty. 1 do not think that you can say anything about that. I think the court has an absolute right to decide and suspend any rate which any commission may make and that you can not help it. Senator Culi.om. That is probably so, but the court would have to have some little time to do that in, and what would you do with the rate in the meantime? Mr. Protjty. It seems to me that a rate ought to stand in abeyance long enough to permit a railroad company to take any steps it wanted 10 take. It must publish its schedules if it Avants to put a rate in effect, and it must file a petition if it wants to test a rate. Senator Cullom. You were going to leave it to the courts to deter- mine that question. Mr. Prouty. I think when the question gets to the courts the court will take its own time. Senator Cullom. I am talking now about what you would do with the rate before the court gets hold of it. Mr. Prouty. It seems to me the rate ought to go into effect after so many days. That is the ordinary rule. Senator Cuixom. You have talked a good deal about these cases that you haA^e had under consideration. It has been stated here, I believe, that some thirty-odd cases have been tried by you which have been taken to the courts, and all but two of them., perhaps, have been overruled. Is that true ? Mr. Prouty. I can not give you the exact figures, and I think you had better ask somebody else on the Commission about that. I simply say this, that I do not think the Commission has ever been overruled by the Supreme Court of the United States on a question of fact. We have attempted to make something out of this law. Senator Cullom. I wish you Avould explain a little about these cases that have been taken to the courts and overruled. Mr. Prouty. You have a good illustration of that in the case re- ferred to, this Missouri Pacific Case, in wdiich the court held that the circuit court might take jurisdiction and grant an injunction. This Commission, a good many years ago, in looking around for some wa}^ in which this law could be enforced, instituted that suit. I call attention to the fact that this suit was begun b}^ the Commission and not by the recommendation of Congress or the advice of anybody else ; the Commission did that because it was trying to find a way in which to enforce the law. We brought a suit in the name of the United States to enforce the act to regulate commerce. Before that was decided the Elkins bill had become a law; but if the Elkins bill had not been passed, the judgment of the court would have been against the contention of the Commission in that case, and that would have added one more to the cases in which the Commission was overruled. Now, what the Commission was trying to do was to find some foothold, some place where it could stand to enforce the provisions of this law. Senator Newlands. Was that a suit to enjoin rates? Mr. Prouty. No ; to prevent the charge of higher rates to Wichita than to Omaha. Senator New'lands. You say the court would have held that the court had no jurisdiction in that case if it had not been for the Elkins bill? Mr. Prouty. The court says that. 30 EEGULATIOX OF EAILWAY EATES. Senator Cullom. Are you certain about that ? Mr. Prouty. I think so. Senator Cullom. It is true they did hold that if the Elkins bill had not passed it would take jurisdiction • Mr. Pkouty. When you get seven members of the Supreme Court you get a good many. It is generally about four to five. Mr. Commissioner Fifer. I think the majority opinion was against the injunction, that the injunction would not lie under the old law; but the Elkins bill in the meantime had become a law and the court said it could not try the case under the Elkins law. Mr. Prouty. I'hat may be ; that is what I understood. Senator Dollivek. What has become of that case ? Mr. Prouty. Nothing has been done with that case for this reason. The Commission has held in several instances that competi- tive conditions on the Missouri Eiver justify a lower rate than to Wichita, and we do not think we could say that the rate to Wichita ought to be as low as the rate to Omaha. Senator Dolliver. You got the case now on the calendar of the circtiit court ? Mr. Prouty. Yes. Senator Dolliver. Do you mean to say the Commission refuses to prosecute further ? Mr. Prouty. I do not know that the Commission refuses to prose- cute the case further. In view of what has been said I think we ought to go on further, and see what the court can do, but my under- standing of that case has been this, that if it was found as a fact that the rate to Wichita ought not to be any higlier than the rate to Omaha the court may possibly enjoin the higher rate to Wichita ; but if the court was of opinion that the rate might be higher to Wichita but not as much higher as now, it would have no power to act in the premises. The opinion of the Commission has been that the rate to Wichita must be higher than to Omaha, but not perhaps as high as tiie present differential. Senator Dolliver. Where do j^ou get the idea that the court would not entertain the question of what the differential might be in such a case ? Mr. Prouty. Because the Supreme Court of the United States has said it can not. Senator Dolliver. Have you got the form of the complaint, the prayer for relief in that case. Senator Clapp? Senator Clapp. The ultimate prayer of relief is set out. The whole bill. I thinl?:, is not set out. Mr. Commissioner Fifer. The Commission could do nothing fur- ther. The majority opinion said the}^ had no authority whatever to file the bill, and it could not be sustained under the old law. The Elkins bill, however, had been enacted, but the court said it did not apply to that case, and what further could we do? Senator Dolliver. You could appeal it to the Supreme Court of the United States. They sent it back under the general ojDinion. as I recollect, that it was a question of equity fully within the jurisdiction of the court under the Elkins law and could be proceeded with in the circuit court. I maj^ be wrong about that, but that is my recollection of the situation of the case. Xow, then, if the Commission would REGULATION OF RAILWAY RATES. 31 go ahead, possibly amending the complaint so as to make this case tliat any discrimination except one they might suggest is unjust and illegal, I do not see why the court would not be thoroughly within its jurisdiction to enter a decree that such a discrimination should cease. Mr. Commissioner Fifer. And proceed under the Elkins Act? Senator Dolliver. Yes. Mr. Commissioner Fifer. That would be beginning a new suit. Senator Dolliver. No; the suit is back there on the calendar under directions from the Supreme Court. Mr. Prouty. I have not understood, and I do not think the Commission has understood, that the Elkins bill added anything practically to our power to correct a discrimination in the published tariff; perhaps it does. The view of it you suggest had never quite occurred to me. I do not see how 3^011 could gain anything under the Elkins bill. I do not believe you would gain anything by going directl}^ into the court. I do not believe the remech^ which the court can aj)ply is auA^ broader now than before the Elkins bill was passed. Senator Clapp. According to your own statement this suit to restrain discrimination could not have been entertained at all before the Elkins bill was passed. Mr. Peouty. No. Senator Clapp. Noav they do entertain it ? Mr. Prouty. They have jurisdiction now, but that does not increase the remedy. Senator Clapp. You had not any remedy at all before this was passed ? Mr. Prouty. It does not increase the remedy which the court could apply. Senator Clapp. No ; of course not. Mr. Pkouty. And under the Constitution of the United States the courts can not be given power to apply that remedy. Senator Cullom. One witness says here that he wants a commis- sion because that is a clear way of correcting the wrong; another witness says that the Commission dawdles along with these cases and never gets to a decision or to a conclusion of them, and that a direct application to the court would result in a more speedy remedy. What I want to get at is an explanation from you as one of the Com- missioners as to what has been the cause of these long delays upon the part of the Commission in disposing of cases coming before it. Mr. Prouty. Those delays are partly due to general causes; they are partly due to specific causes in particular instances. The varied duties of the Commission render it impossible to proceed with great expedition in many cases. As I have already said to jou, we have certain executive duties. We also have to deal with these informal complaints. I recently went to Chicago and was gone ten ■days hearing cases out there. When I came back I found on my table correspondence with reference to informal comj^laints that took me three days to answer and dispose of. We have conferences about various things. People come to talk to us. We listened all day yesterday to a man from California who was setting out the condi- tions of the fruit industry. We are subject to the requirements of the public in that respect. We can not proceed with the same expedi- 32 REGULATION 01?' KAILAVAY RATES. tion that a court does which simply has a docket to hear and nothing to do but to hear that docket. Now, there is another reason. You gentlemen do not understand the extent of these cases. We are send- ing out to-day what is called the differential case between the ports of Boston, Philadelphia, New York, and Baltimore. That case was begun a year ago, a year and a half ago perhaps. Now, we have taken the testimony in that case in all I expect a month. We have taken three or four thousand pages of typewrit- ten testimony. That takes time. We had the greatest difficulty in getting the parties together to agree on a time when we could hear the case and take the testimony. That was a case where every- body was especially anxious to expedite it and where the Commission has never declined to assign the case when the parties were ready to hear it, and still that case was not submitted for decision until about a month ago. Now, when you sit down to decide that case you have 3.000 pages of testimony and you have a mass of exhibits which you could not read through in a month. The case was argued for sev- eral days and a thousand pages of briefs were filed. It takes time to examine and work out that kind of a case. In that case also I prepared the opinion myself, sat up nights and worked Sundaj^s in order to get it out. I got it done so that I was readj^ to hand it to the printer. It had taken me, I believe, ten days to do that work, including nights and Sunday, and it has taken eighteen days to print it, so that the delay is not altogether on the part of the Commission. Now, there are some other cases which stand like this: Judge Veazie, as you know, was my predecessor on the Commission. For the last year he was unable to do any work at all, and for a year before that he did very little work. These cases that were assigned to him in their regular order, as a result came to me, and when I came on the Commission I found a lot of old cases in which I prepared the opinions. There were some cases in which I prepared an opinion which appeared to be two years old before the opinion was promul- gated. I prepared another opinion in the Bourbon Stock Yards Case, from Louisville, and after the opinion was prepared in that case and before it was promulgated, we were asked to retain the case until a case involving the same principle was decided by the Supreme Court of the United States. Mr. Commissioner Fifer. That is better than the courts, because they held the Wichita case for five years. Mr. Prouty. I think the cases ought to be heard more promptly by a commission. They can be heard more promptl}^ by a commission than by a court. Senator Neavlands. In that connection, it is claimed by the repre- sentatives of the railroads that this delay is simply an inherent part of the system, and their contention is that it is utterly impossible for a commission to revise the action of hundreds of traffic managers in this country and accomplish the work. Mr. Prouty. If they can accomplish the work at all, they can do it promptly. If they can not do it prompth', they can not accom- plish it at all. Senator Newlands. Could you suggest any method by which it could be expedited? KEGULATION OF EAILWAY RATES. 33 Mr. Pkouty. If you will take away from the Commission its other duties and leave to it simply its administrative duties as a Connnis- sion you will have added very much to its capacity for work. I think, too, if the Commission were to proceed as a conimission proper, and not as a court — it has proceeded too much as a court — it would make much greater expedition. Take the testimony in this live-stock case. I took it, and I sat there, and Judge Baxter, who was for the railways, sat there day after day. It kept us a month in taking that testimony. I said to Judge Baxter, "You know all about it, and I know all about that, and the Commis'^ion knows all about it.^^ Now, what is the use of our staying here to take this testimony? " The judge replied, " Of course' you and I know all about it, and your associates do, and there is no dispute about the fact anyway, but I h'dve to make the record for the court." That has been one trouble — that we have been making a record for the court. The Chairman. Would j^ou do away with that? Mr. Prouty. Certainly I would. I think the Commissioners should sit down, and should simply get at the facts in a case. The Chairmax. And not bother himself about making a record or about hearing long arguments? Mr. Pkouty. No; he should get at every fact in the case; he should hear all there is to be said about the case. But he is not the court, and he ought not to make a record for any court, in my judgment. You take that ^Alchita case which I referred to — the case of sugar differentials. There was a case that we decided in a month. It was a complex case, and yet I undertake to say that we never decided a case where the record was any more complete than that record was. I required them to file their briefs within ten days. They all said that they could not do it, but we never had better briefs than were filed in that case. You can get along if you say you must get along, jincl a commission can move faster than a court. The Chairman. You suggest by your testimony the theory that a commission could take care of the interests of the public more expe- ditiously than a court would do it, and hence I have been a little anxious to know what the reason has been for what appeared to be the very slow progress on the part of the Commission in deciding cases. I am glad to have you explain that situation to some extent. I think that is all. ' Senator Keax. You stated that you had made up a table of the rail- roads owned by different individual systems controlling about 65 per cent of the mileage of the country. Ml'. Prouty. I haven't it here ; I have it at the office, and I would be very glad to file it as a part of my testimony. Senator Kean. I wish you would. Then, Ihere is one other ques- tion I have. You stated that all of the opinions of the Supreme Court of the United States had dealt with questions of law and not Avith questions of fact. Mr. Prouty. No; I don't think I said just that. Senator Kean. The decisions were founded on questions of law. Mr. Prouty. In reviewing our cases I think that is so. Senator Kean. I call your attention to the cattle case. Mr. Prouty. Yes; I have in mind that case. Senator Kean. That was decided on a question of fact ? 74lA— 05 .3 34 EEGUIoATIOX OF RAILWAY RATES. Mr. Prouty. Xot against the Commission. The decision of the Commission on the question of fact was sustained. 'The court held that certain other facts appeared in the case which rendered it im- possible to execute the order of the Commission, and sent the case back for farther proceedings. The Commission had held in that case that of the added $2 terminal charge, $1 was improperly im- posed. The court held with the Conunission on that proposition, btit it appeared that from certain territory the rate had been reduced after the imposition of the charge, and the court held that niasmuch as that territory could not be distinguished from the other territory the order of the Commission could not be enforced, and the case was sent back, as I say, for further proceedings, and further proceedings are being had in the case now. Mr. Commissioner Fifer. That the through rate over certain terri- tory was an offset to the permanent charges. Senator Kean. So it is stated here. It was decided on a question of fact, however, and not upon a question of law. Mr. Prouty. It has been stated here that discriminations are the serious thing. I am told that there are no advances in rates which are complained of. I want to deny that most emphatically. I tliink the serious questions which confront the Commission, and which have confronted the Commission in the last three or four years, are questions of advances of rates — questions where the only thing com- plained of was the advance in rates. Senator Kean. Wouldn't vou claim that the Commission, if it had the power to revise rates, would also have the power to raise them ? Mr. Prouty. I do not tliink thev would. Thev might in some cases. The railroad would have the power to raise the rates. Senator Iveax. The Commission, if it had the power to fix the rates, would it not have the power to say that the rate was too low and to lower it? Mr. Prouty. But the Pennsylvania Railroad would not ha^e to go to the Commission and ask leave to raise the rate. It would raise the rate to start with. Senator Kean. Do you think that the people of the country would want you to declare that the rate was too low ? Mr. Prouty. Xo, sir. Senator Keax. You think they are on a declining scale, and not on a rising one ? Mr. Prouty. I think the'rates to-day are on a rising scale. Senator Keax. I mean the Commission, and not the rates. Mr. Prouty. Well, the Commission ought to be in favor of a just scale, whatever that is. The peach growers of Georgia complained to us that the rates were too high. I heard a gentleman here this morning say that there never had been any complaint of high rates with the peach growers of Georgia. Senator Keax. He said he thinks the freight rate is absolutely right, but he thought the icing charges might be too high. Mr. Prouty. I understood him to say that there never had been any complaint of the freight rates. In j^oint of fact, the peach growers of Georgia complained to the Commission that the rate was too high. Senator Keax. Was it the peach growers of Georgia ? REGULATION OF EAILWAY EATES. 35 Mr. Proutt. The peach growers. Senator KEA^^ Was it not the commission merchants? Mr. Prouty. Oh. no : the commission merchants did not do it at all. The growers themselves came in before the Commission, and we tried that case and heard it and decided that the rate was low enough and it ought not to be any lower. Mr. Commissioner Flfer. That is. a part of it. Mr. Prouty. We decided that the rate £rom Xew York to Boston was too high. Senator Dollhter. ]\Ir. Prouty. I have l:)een interested in your statements that the Commission at present exercises certain contra- dictory functions, and you have suggested the transfer of certain of the present duties of the Commission to somebody else. You have certain duties in relation to the prevention of offenses against the interstate-commerce law. have you not ? Mr. Prouty. I think so. Senator Dolliver. Xow. to what Department of the Government would you suggest the transfer of those duties ? Mr. Prouty. If those duties alone were to be transferred it seems to me they shoidd go to the Attorney-General, to the Department of Justice. Senator Dolliver. You have certain duties, of inquiry and investi- gation, and to what Department of the Government would you trans- fer those ? Mr. Prouty. I think that the duty of conducting the inquiry or i-ather I should think that the duty of holding an inquiry should be left with the Commission. The duty of asking for the inquiry or determining whether the inquiry shall or shall not be conducted should, it seems to me. go to the same Department as the executive functions, biu I think the Commission should still have power to compel the attendance of witnesses and take testimony ; but it should be done at the request of some other department, not on the initiative of the Conxmission. Senator DoLLI^■ER. You have exercised, and I think with very great value to the public, a certain j^ower of arbitration, of conciliation between the public and the carriers. Would you desire to have those powers retained in the Commission I Mr. Prouty. I would not desire to make any reconxmendation that they be taken from the Commission, but I suggest to you it might be better if those powers were taken away and placed with some other department. Senator Dollr-er. And after you have all these powers transferred to somebod}' else the function of the Commission would be to settle questions of rates and discriminations when they were presented to you ? Mr. Prouty. Yes. Senator Dollia-er. Xow. I have taken the opportunity during the winter of reading through the Interstate Commerce Commission re- ports, and I have been impressed by the fact that notwithstanding they lack the power to fix rates, which are complained of, neverthe- less your Commission has exercised a very useful function in the Government, and I have been wondering whether it would not be 36 REGULATION OF RAILWAY RATES. policy to continue tl|e Commission with substantially the same poAvers and duties which it now exercises and to create in addition to the Interstate Commerce Commission a tribunal to sit in judgment upon these questions of rates for the future and " discriminations, leaving this higher commission a commission which might be called a " commission of interstate commerce appeals," in a quiet atmos- phere undisturbed by the business of the detective, the prosecutor, or the inquisitor of any sort — just to pass judgment on this rate question. What would vou say to that idea? Mr, Prouty. That meets my suggestion exactly, only it must be a commission. It can not be a court. Senator Dolliver. I think it would greatly weaken this situation to have these powers of inquiry in the Department of Justice or in the Department of Commerce and Labor removed from the atmos- phere that surrounds the present Interstate Commerce Commission. You would think there is some sense in the opinion, then, of just continuing the present Commission in the exercise of its present pow- ers, possibly increasing them somewhat, at least defining them some- what, and creating a commission administrative in character, purely, above the present Interstate Commerce Commission to pass judgment uj)on questions of rates and discriminations? Mr. Prouty. I see no objection at all to that suggestion. Senator Cullo:m. Would not that be running at cross purposes ? Mr. Prouty. No; that commission would have no power to pass on any questions unless complaint was brought by the Interstate Com- merce Commission or somebody else. You might make it simply an appellate commission. Senator Cullom. Yes. Mr. Prouty. The objection to that is that it takes up so much time. Senator Cullom. So far as the Commission is concerned I would have it of original jurisdiction, and let the question be raised by the other commission. Mr. Prouty. All I contend for is some tribunal that can pass on these questions and give effective relief. I think that you ought to make that tribunal just as fair as 3'ou can make it. Senator Cullom. Plow many people ought to sit on that higher tribunal ? Mr. Prot'ty. I have always thought three was enough. Senator Cullom. ~\\'oukl that adequatelv represent the whole coun- try ? Mr. Prot:ty. I do not know what you mean by that. Senator Cullo^h. Are not these questions likely to become terri- torial in character? Mr. Prouty. Then you ought not to represent the whole country, because it would be very unfortunate if a commissioner was to have a particular opinion because he came from a particular territory. Senator Cullom. I know, but you take the IVIaximum Rate Case, and it was essentially a fight between the Mississippi Valley, or at lease the western country, and the Atlantic seaboard cities. Might it not be a good idea to have these commissioners so distributed as to get the point of view of the various sections of the country ? Mr. Prouty. I think the members of our Commission, if we are the initiating body, probably ought to be distributed. I do not think EEGULATION OF RAILWAY EATES. 37 the members of the appeUate commission ought to be distributed. I think thev ought to be entirely removed from every consideration of that sort. Senator Cullom. Would you suggest a larger salary for such an appellate commission ? Mr, Prouty. I speak noAv as an individual and not as an Interstate Commerce Commissioner. I think all Government officials are under- paid. I think you are underpaid and I think the judges are under- paid and I think the Interstate Commerce Commission is underpaid, but I do not see any propriety in paying an Interstate Commerce Commissioner any more than you pay a Federal judge. Senator Cullo^i. But ought not those people to be people of large affairs, great business men with jDersonal knowledge of the practical details of American businesss, and would it be possible to induce men of such business qualifications to give their attention to public affairs without a salary someAvhat corresponding to the salaries paid in the business world ? Mr. Prouty. There has been a proposition, I believe, made to pay the members of the Interstate Commerce Commission $10,000. I do not think that $10,000 would secure a better Interstate Commerce Commissioner than would $7,500. If a man is big enough to be an Interstate Commerce Commissioner and wants to be one it w^ould hardly make any difference to him whether he got $7,500 or $10,000. He ought to have enough so that he can live. Senator Cullom. If he was getting ten or fifteen thousand dollars in private business, he would not have any motive to go into the Interstate Commerce Commission. Mr. Proi;ty. You might say the same thing about the Federal judges. Senator Xewlaxos. Does not this require an experience in rate making, and Avould it not be advisable to have traffic managers of great experience on this commission? Xow, such men get very high salaries. Mr. Prouty. In my judgment a traffic manager would not make a good Interstate Commerce Commissioner. I am talking now about the appellate commission, so called. I think if you will take any railroad president who has a competent knowledge of the manage- ment of his road, he will tell you that he would not want a traffic man on that board unless he was his traffic man, and if he was his traffic man he would like to have him. I believe that the best board would be a board consisting either of lawyers or of business men who had had some intellectual training. A man must have a certain amount of intellectual training to tit him for that place. He must also have a certain amount of expert knowledge. The expert knowl- edge he will get by working there for three or four years. The in- tellectual training does not come to him unless it comes to him as a result of his previous life. I express the opinion with great hesita- tion, but I do not think that a board of traffic men would make a good appellate commission. I do think if you had seven Inter- state Commerce Commissioners as the initiating board it would be w^ell to have one traffic man on it and one financial man, I take it, perhaps, but so far as that is concerned the traffic men in this coun- try who know about traffic are not all paid $50,000 a year, you Iniow. 38 EEGULATIOISr OF RAILWAY RATES. Senator Cullom. You do not take to this extremely high salary- business, do 3"on, either ? Mr. Prouty. I do not, unless I am getting the salary. Senator Clapp. In regard to the provisions of the law which you would suggest, I think you suggest that you, of course, would make provisions for a few of the orders fixing the substituted rate. Xow, ought there not to be the same jDro visions for reviewing the action of the Commission in the condemnation of the existing rate ? Mr. Prouty. VThj, it seems to me that the condemnation of the ex- isting rate and the fixing of the new rate are essentially the same thing'. » Senator Clapp. Yes; subject to the same principle. Do you think that the rate when it is fixed should be by law for a certain definite length of time ? Mr. Prouty. No; I do not think it should be fixed for a certain length of time, but I do think there is no objection to saying that when the carrier has observed that rate for a certain length of time it has the same right to change it as it has to change every other rate, subject, of course, to the same right of review. Senator Clapp. Would you fix that time by law, or leave it to the earner ? Mr. Prouty. Well, it sounds like a nonsensical proposition, but I have always said that if the carrier were obliged to accept the judg- ment of that tribunal and put in that rate it would answer the same purpose as though it were obliged to observe it for a certain length of time. Senator Clapp. First have the carrier accept that rate and put it into effect and let it become the condition as to that road? Mr. Prouty. Yes. Senator Clapp. And then if the carrier thought that conditions had changed so as to require another rate, let the carrier initiate that other rate, subject to the same authority of the Commission to chal- lenge and reduce or fix as they did before? Mr. Prouty. Yes ; it has always been my opinion that that would work out all right. The principal thing is to substitute the judg- ment of somebody else for the judgment of the carrier. Senator Clapp. And that being once done and efiectiveh' done, it would still preserve the elasticity in adjusting rates to varying con- ditions, to allow the carrier to change that by initiatinij a new rate at his own peril. Mr. Prouty. As I have said, it sounds like a ridiculous proposition to say that after the Commission has been to the trouble of determin- ing the rate that the carrier may change it the next day, having put it in for one day. but you must assume that people are going to act in good faith in this world, and it seems to me that you would have ac- complished all you desired to accomplish by a provision of that sort. Senator Clapp. The plan of Senator Dolliver of an appellate com- mission, except as to the distribution of the first functions, is prac- tically 3^our theory ? Mr. Prouty. Practically what I have always contended for. Senator Newlands. Your plan does not involve an appellate com- mission, but a division of the Commission into two bodies— one a prosecuting body and the other a quasi judicial bod3\ REGULATION OF RAILWAY RATES. 39 Mr. Prouty. What I think yon must accomplish is to create in some other way a body which shall be absolutely free from all partisan interest. Senator Newi.ands. It would make little difference whether that was a new body or whether certain functions were taken from this Commission leaving tliis Commission clothed with that function. ]Mr. Prouty. I w\ant to say this : I have only one hope in this mat- ter and tliat is that you will define the powers of the Interstate Com- merce Commission. We have been trying to find out for eight years what power we have and we do not know yet. I hope you will tell me Aviiat I have got to do, and if you tell me what I have got to do, if I sta}^ on the Commission, I will try to do it and to be satisfied with it. Senator Newlands. Judge Prouty, regarding the organization of this Commission, your idea is that three members will be sufficient for a commission whose duties are to be limited as you suggest? Mr. Prouty. I have alwavs thought so. Senator Newlands. Xow, the contention of the carriers is that a very large number of men are emplo^^ed in rate making; that these men run all the way from the local freight agent up to the traffic managers, and they come in intimate contact with the communities which they serve, and know their wants and conditions, feel the com- mercial pulse of the country, and communicate with each other, and in that way get a vast amount of information and experience that fits them for ^his duty ; and they insist upon it that a board of this kind, of only a few members, would be overloaded, and so forth. Now, did you ever think of enlarging the Interstate Commerce Com- mission in such a way as to provide for branches — two or three in each one of the rate-making centers of the country ? As I understand it, there are five or six rate-making centers in the country, such as San Francisco, Chicago, St. Louis, Boston, New York, etc. Did you ever think of the suggestion that these Commissioners would be as close to the conuuercial conditions of the country, or approximately as close, as the traffix managers, so as to act expeditiously? Mr. Prouty. We have often discussed in the Commission the advisability of establishing a branch in Chicago, and perhaps in San Francisco. I do not think that would be necessary in San Francisco, because San Francisco is not an interstate rate-making center. At the present time it is doubtful if the Commission would be justified under the law in doing it. Senator Newlands. I am asking now if it could be done ? Mr. Prouty. I speak only for myself, but I think it would be of great value if the Commission had a permanent abiding place in Chicago, in Kansas City, and perhaps in New York City. Senator Newlands. In addition to the one here? Mr. Prouty. Certainly. A place into which the shipper could come, and where he could sit clown Avith a representative of the Com- mission. The Commission would come into closer touch with the railway operations and the commercial operations of the country, and a great many shippers would present complaints in that case who never do so now. Senator Newlands. Now, in that case, if you had Commissioners who were located in such rate-making centers, they would belong to 40 EEGULATION OF EAILWAY EATES. the quasi-judicial board which directs them, or belong to the execu- tive and prosecuting board? Mr. Prouty. I should certainh^ think they belong to the executive and prosecuting board. Senator Newlands. Xow, as to the constitution of the Commission from that point of view, do you not think that we could provide for the selection of men who had been trained at rate making in the country to act in that capacity in these rate-making centers, and would it not be an advantage over the system of appointing for such executive and prosecuting duties men simply trained in the law ? Mr. Prouty. Yes. If the Interstate Commerce Commission were to have a single representative in Chicago, to come into touch with the shippers and the railways there, he ought to be some man with a knowledge of traffic conditions. He must either have it originally or he must obtain it. Senator Newlands. It does not necessarily follow that because a man has been trained in the service of one or more railways when he is transferred to the service of the United States he would continue to serve the interests that had heretofore employed him ? You would not regard that as a disqiuilification ? Mr. Prouty. Not at all; but a traffic man gets into the habit of looking at these questions from a certain standpoint. Now, an Interstate Commerce Conmiissioner should not look at the question from his standpoint. The traffic man looks at the qviestion from the standpoint of the railroad mind. The Interstate Commerce Com- missioner should consider it from the standpoint of the railroad mind and the whole public. Senator Newlaxds. But, if such a traffic man, with intimate knowledge of rates, Avere transferred to the service of the Govern- ment and public, would he not be likely to look out for the interests of the governing public, even though he had that training? Mr. Prouty. He ought to do so. I do not see why he should not. Senator Xewlands. Xow, as to the powers of the Interstate Com- merce Commission, vou sav vou have been engaged in constant ef- fort to ascertain what your powers were ? Mr. Prouty; Yes, sir. Senator Xewlaxds. Then I think your criticism is entirely just as applied to the original act of 1SS7, that it would seem to limit your jjowers merely to providing for the forms of schedules and arranging for the filing of schedules, and publicity, and so forth, and also for the institution of damage suits at the instance of persons claiming damage; but the statute of 1891 seems to enlarge those powers and give you this power : And the Commission is hereby authorized and required to exec-ute and enforce provisions of this act ; and upon the request of the Commission it shall be the duty of any district attorney of the United States to whom tlie Connnission may apply, to institute in the proper court and to prosecute under the direction of the Attorney-General of the United States all necessary proceedings for the enforcement of the provisions of this act. Xow, will you kindh' state what the Commission does regarding those proceedings in court after a complaint has been filed l^y the Commission ? Mr. Prouty. Xoav, the powers of the Commission relate to two dis- tinct subjects-matter. One thing is the compelling of an observance EEGULATION OF KAIL WAY EATES. 41 by the carriers of published tarilis: another thing is the correction of discrimination in the tariif. Now. do yon want to know what the Commis:-ion has done to j^revent the payment of rebates, or do you want to know what the Commission does with the comphiints that are made before it as to discriminations in the tariif rate? Senator Newlands. T would like to know what you do as to both, simply the form of procedure as in the courts. ^Ir. Prouty. In respect to the compelling an observance of the pul)lished schedules, and a prevention of rebates, there are just two things we can do. We can, of course, o-q out and ferret out testi- mony. We can not do that personally, but we can employ agents to do it. We can hold investigations. We can put these traffic men on the stand; we can ask them to produce their books and their papers, and we can turn the evidence which we obtain in to the Attorney -General. Now, while the act sajs that the district attorney shall prosecute under our direction, if you read it carefully it comes to this : That all we can do is to pass over to the Department of Jus- tice the evidence which we obtain. When I first came onto the Interstate Commerce Commission, I used to see continually in the newspapers statements like these: "Rates sadly demoralized," "Agreement between railroad officers to restore rates." and everything of that sort. I said to my associates, " Gentle- men, this thing will not do ; we must stop the payment of these rebates." They said. " How are you going to stop the payment of the rebates? " I said, "■ We are going to call these gentlemen before us ; we are going to put them under oath, and we are going to make them admit they paid these rebates, and we are going to use the evidence which we obtain to convict them." We emploj'^ed Mr. l^ay, who is now with the Depart- ment of Justice. The rates which have been almost uniformly demor- alized have been the grain rates from Chicago to the Atlantic seaboard. We called in the chief traffic officials of all these lines and we put them inider oath. Now. I would ask these gentlemen. "Are you the chief traffic official of this road ? *" " I am.'' "■ Would you know it if a rebate was paid?" "I would." "Are any rebates paid on your road? " " There are none." '" The rates are absolutelv maintained? " " They are." Well, every traffic official who came before us in that capacity — and we prosecuted it for three daj^s at Chicago — testified that rates were absolutely maintained. Senator Newlands. How manj'' did you have before you? Mr. Prouty. We had the official of every trunk line leading from Chicago to New York. Senator Neavlands, Did you have the officials of the lines west of Chicago ? Mr. Prouty. Not at that time. Senator Newlands. I understand that most of the rebates were there. Mr. Prouty. I do not know whether they were or not. Now, they all testified the rates were absolutely maintained from 'Chicago to New York. Two years after that I examined the chief traffic officer of the Baltimore and Ohio, and of the New York Central — do not think it was the same man in either case — and of the other lines, and thev all testified that rates had never been maintained. I Avould 42 REGULATION OF RAILWAY RATES. like to know what I could do as Interstate Commerce Commissioner to make those tjentlemen admit that the_y paid rebates, and, as tlie}^ would not tell that they paid rebates, I would be glad to know how 1 could obtain evidence that the}' did. Having gotten througli. Senator, with the lines between Chicago and Xew York, we said perhaps this is not a fair sample. Now, we will go up in the Xorthwest. and we Avill take the lines that carry flour from ^Minneapolis east. AVe instituted another investigation, and Ave went up into the XortliAvest, and Ave put the railroad and the traffic men of the millers on the stand, and they all SAvore Avithout exception that the rates Avere ab-olutely maintained. One traffic official there, Avhen it got a little bit hot for him, became sick enough so that he threAv up his dinner, but he did not throAv up the truth. We could not get the admission from auA' man there that they had ever paid a rebate. We said, " This does for the East ; now let us go West." So Ave Avent into the Pacific coast, to Portland, Oreg., and Avent oA^er exactly the same i^erformance there. AYe made one man ad- mit that he burned up his books rather than to present them to the Interstate Connnerce Commission, but Ave could obtain no admission of the payment of any rebate there. '' Well," Ave said, " gentlemen, this is a farce. This makes light of serious matters. AYe Avill not proceed further in this direction." Now, it so happened that there Avas a traffic association in the SoutliAvest. called the St. Louis Southwestern Traffic Committee, or traffic association. It has had a great many different names, and I do not remember the exact name under which it went at that time. This traffic association incorporated in the articles of association the pro- vision that officers of that association should, if possible, obtain evi- dence of the payment of rebates and present that evidence to the Interstate Commerce Commission. They hired a young gentleman by the name of Camden, and put him at the head of the association. Thev not only made him subscribe to the articles of association, but they put him under oath, and compelled him to swear that he would obserA'e that provision to lay before the Interstate Commerce Commission any evidence that he got. He had not been there more than tAvo or three Aveeks before he found some CA^dence to the effect that the Baltimore and Ohio Eailroad had been departing from the published rate. He supposed his oath meant something, and he came up to Washington and laid that evidence before the Interstate Com- merce Commission, and Ave began proceedings against the Baltimore and Ohio Eailroad. Now, that was the first instance from the time I came onto the Commission that Ave could obtain any evidence of a departure from the published rate. Senator Neavlands. Then what happened ? Mr. Prouty. I am going to tell you Avhat Ave did then. AYe di- rected the Baltimore and Ohio road to file a statement showing what shipments they had made during a certain time, and the rate of freight paid them for the transportation. It was necessary to do that in order to connect up with the evidence that we had. ' There- upon they filed a statement showing a great many departures from the published rate. At the same time they sent to the Interstate Commerce Commission a letter. They said in that letter — now, I EEGULATION OF RAILWAY RATES. 43 repeat from memory; I maj^^ get it a little wrong — but they said, in substance, in that letter, that the roads in the territory in which they operated had habitually departed from the published rate ; that was after they had sworn they maintained the published rate in that ter- ritory : '' Now, for us, the receivers of the Baltimore and Ohio, we have gotten through, but we can not maintain the rate unless our competitors maintain the rate. AVe propose from this time on to maintain the rate ourselves, and we propose to see that they maintain it ; but in order that we may do that, we ask you to call a conference of the railroad presidents in trunk-line territory." NoA\', the Commission did, acting on that suggestion, invite every president of the trunk-line railroads to come to Washington. They came, all of them. Mr. Calloway was there for the New York Cen- tral ; Mr. Thompson was there for the Pennsylvania Railroad ; Mr. Murray and Mr. Cowan came there for the Baltimore and Ohio ; Mr. Harris came from the Philadelphia and Reading, and Mr. Walters was there for the Lehigh Valley. I do not remember them all, but they all came there. Those gentlemen all said: " It is true; we have departed from the published rate. We did not like to do it, but Ave did. But we have gotten through. We shall depart from the pub- lished rate no more. If you gentlemen will only let bygones be by- gones, we assure you that in the future there will be no discrimination under this law," * Well, I exj)ect. perhaps, that we ought to have said to them, " You are a j^ack of consummate liars ; we do not believe anything you say, and we will prosecute you if we can.'' But we did not think so ; we believed exactly what they said, and we told them we did, and they went home and no prosecutions were begun on the facts which we had against the Baltimore and Ohio. Then we called, at the request of certain persons in the West, the presidents of all those lines, and they all came. Mr. Marvin Hewitt came ; ]Mr. Bird, of the Milwau- kee line, came: in all, 30 or 40; and we had the same sort of an ex- perience meeting again. They all said : *' We have sinned, but we have got through. Now. gentlemen, just help us to maintain the act to regulate commerce." We said: "We will do it."' And they went home. Now, I do not wish to pass any criticism at all on these gentlemen. I have not the slightest doubt that they meant precisely what they said. I think I know something about the difficulties under which they labored; but they did not maintain those rates for a month, probably. The thing went along in that way until the fail of the 3'ear 1901, or about one year after this first meting with the presi- dents. We then obtained evidence of a departure from the published rate in the transportation of packing-house products and grain. They wanted to say once more: " We will stop if 3'ou will let us go." But we said : " No, gentlemen, we have heard this story once," and went to the court and obtained injunctions against these roads, because of departure from the published tariil. We passed the evidence which we had over to the Department of Justice. I want to say most emphatically that since I have been on the Interstate Commerce Commission, with the single exception of the evidence which we had against the Baltimore and Ohio Railroad, I have never 44 EEGULATION OF EAILWAY BATES. known of any way we conld obtain evidence AvhicU I have not used, and if the evidence could be obtained and transmitted to the proper person Senator Xewlands. The Commission had no doubt that rebates were going on all this time ? Mr. Peouty. I have not the slightest doubt. Senator Newlaxds. You so stated in your report? Mr. Prouty. That was stated in our reports, and it has been so admitted since. These same men have admitted it since. Senator Xewlaxds. You instituted this action to enjoin the com- pany in equity ? Mr. Prouty. "NVe did. Senator Newlakds. These western roads? Mr. Prouty. And the eastern roads, too; some of them. Senator Xeavlaxds. The trunk lines? Mr. Prouty. Some of the trunk lines. AVe took all those that we had anv evidence against. Senator Newlands. You enjoined them from this? Mr. Prouty. For a departure from the published tariff. Senator Ne-\\tl,ands. Now, we have been told that the judge him- self was doubtful as to his jurisdiction in that case. Mr. Prouty. Well, novr, the Commission was very doubtful as to the jurisdiction in that case, but we thought w^e ought to try it. It might be of some service. We were bound to do all Ave could to stop that thing, and we adopted that plan. Senator Xewlaxds. The companies themselves made no contest, did they ? Mr." Prouty. AAliy, yes; they objected. It was a nominal objec- tion, and we were really asked by some lines not embraced in the in- junction to be taken in. They wanted to be enjoined. Senator Newlands. But there was no real contest either in the court or in the appellate court, was there, over the question of juris- diction? And was the injunction granted before the Elkins Act was passed ? Mr. Prouty. The injunction was granted before that act, and the provision you referred to had gotten into that act, because of the doubt we entertained on the Commission as to the jurisdiction of the court. Judge Logan asked me to draw the l)ill. and in doing that I incorporated that provision, because of the doubt we had on the Com- mission, and while Judge Logan threw my bill away and dreAV one of his own, he retained that provision and added to it the provision that other parties might be brought in. Senator Xewlands. Now. JNIr. Prouty, if your Commission came to the conclusion that you could bring a bill of injunction to restrain these companies from departing from the published rate, why could it not have brought or instituted the same sort of suit to enjoin these com2:>anies from discrimination of all kinds which are forbidden by the interstate-commerce act? Mr. Prouty. Because, in the first place, the court is simply required to enforce a positive enactment of the statute. The statute says you shall publish your rate and you shall maintain that rate. Having published the rate, the law itself compels the observance. All the court is required to do is to compel the compliance with the statute. REGULATION OF RAILWAY RATES. 45 In the other case the court must, to correct the discrimination, deter- mine the rate for the future. Senator Xeavla>s^ds. Now, the court must determine. That is your contention ? Mr. PuouTY. That is my contention. Senator XEWLA^"DS. But you never instituted such a proceeding, did you ? . Mr. Prouty. Certainly : we brought that Missouri Pacific case. Senator Xewlaxds, Was that before the passage of the IClkins Act, in 1003 ? Mr. Prouty. That was done before I came on the Commission; I found that suit pending when I came on the Commission. Senator Xewlaxds. And that was an action for injunction? Mr. Prouty. Yes. sir. Senator Xeavlaxds. To prevent the railroads from charging a greater rate to "Wichita than to Omaha? Mr. Proi'ty. Yes. sir. Senator Xewlaxds. Xow, what is the result of that case? Did the court declare it had no jurisdiction? Mr. Prouty. The courts below took jurisdiction: before the case was decided in the Supreme Court of the United States the Elkins bill had been passed. As I understand the case, the court said it would have had no jurisdiction but for the Elkins bill. Senator Xewlaxds. So that entirely absolved you then from any failure to attempt to employ the process of injunction? Mr. Prouty. We did attempt to employ the process of injunction. Senator Xewlaxds. In that one case? Mr. Prouty. In that case. Of course, we would not have employed it in any other case until we had a decision in that case. Senator Xeavlaxds. That case was instituted in what year? Mr. Prouty. All I know about it is this: The case was pending when I came onto the Commission, and we made on two or three oc- casions special efforts to hurr^" that case along, but it seemed to meet with a series of misfortunes. Senator Xeavlaxds. I understand that it is contended b}' some of the representatives of the carriers here that the courts had ample jurisdiction in this matter. Just as they had the jurisdiction to en- join against this system of rebates, so they had jurisdiction to enjoin against discrimination. ancL that "the Interstate Commerce Commis- sion failed in the discharge of their duties in not instituting any such proceedings. You say you instituted one in 1902 ? Mr. Prouty. Yes, sir. Senator Xeaa^laxds. Just about a year after the passage of the act of 1901 ? Mr. Prouty. Yes, sir. Senator Xeaa^laxds. Are there any other suits of that nature ? Mr. Prouty. Xo. Senator Xeaa^laxds. And you had to wait for five years before you got a determination of that ? Mr. Prouty. More than five years. Senator Xeavlaxds. Would it not have been well to have brought other suits of the same nature ? Mr. Prouty. We were yerj doubtful about the jurisdiction. I 46 . EEGULATIOX OF RAILWAY RATES. have never been able to see if the court took jurisrdiction it would help matters. I do not see how the Commission is in any better shape now with the decision than withoiii. Senator Xewlands. We will admit that. You assume that you have a right to go into court to ask for an injunction concerning a railroad discriminating in favor of one place as against another, and that discrimination consists of exacting a rate of 5 cents a hundred, say, in one case, less than in another. Now, that is the discrimination complained of, and in determining that case you must determine the amount of the discrimination necessary? Mr. Proitty. Yes, sir. Senator Newlands. If. then, the court is to grant full and adequate relief, would it not necessarily include the determination of what a fair rate was, and an injunction against anj'thing in excess of that rate ? Mr. Prouty. That is my contention. Senator Newlands. Has not the court yielded to that contention? Mr. Prouty. The court would have no power. Senator, to grant that relief, because it has no power to determine for the future what is a fair rate. Senator Neavlands. Has the Supreme Court ever declared that ? Mr. Prouty. I understand it has. Senator Neavlands. I presume, of course, it will be admitted that the Supreme Court can not fix a rate. Mr. Prouty. But it fixes that rate. Senator Newlands. The Supreme Court has the power to deter- mine what is a reasonable rate. It has the power to protect against extortion, and that necessarily means the determination of what is a reasonable rate, it seems to me. I will ask you whether the Supreme Court has ever passed upon that question ? Mr. Prouty. The Supreme Court has never, to my knowledge, passed upon that question in that form. The Supreme Court has said in several cases that the fixing of a rate for the future was an administratiA^e or a legislatiA^e function. It has held in case of the Commission itself that where the Commission attempted to do pre- cisely what you say the court ought to do that would be a fixing of a rate by the Commission and not within the power of the Commission. Now, if that is a fixing of the rate when it is done by the Commission, I fail to see Avhy it Avould not be a fi^^ing qf the rate when done by the court. Senator Neavlands. And that has been your assumption, and that has been the reason Avhj' you have not brought many of these injunc- tion suits? Mr. Prouty. Yes, sir. Senator Neavlands. Noav, as to that Wichita case, it Avent back to the inferior court, did it not ? Mr. Prouty. Yes, sir. Senator Neaaxands. Hoav long ago? Mr. Prouty. Well, I do not remember ; two or three years ago. Senator Neaa'lands. Has that case been terminated? Mr. Prouty. No ; it has not. Senator Neavlands. ^yeU., why not? Mr. Prouty. So far as I am concerned — my associates may speak REGULATION OF RAILWAY RATES. 47 for themselves — I never understood that the Elkins bill — I say three years — I have never understood that the Elkins bill added anything to our power to create a discrimination in a published schedule, and therefore my attention has never been called to that matter. I have also assumed that the decisions of the Supreme Court of the United States made since the institution of that suit were rather conclusive of the fact that that discrimination alleged in a suit was not an un- due discrimination, and therefore not in violation of the act to regu- late commerce. In other words, when we began that suit we held that the only sort of competition which would justify charging less at a more distant point than at an intermediate point was that of some carrier over whom the interstate lavr exercised no control. Now, the Supreme Court of the United States has said that all kinds of competition must be taken into account — competition with other railroads whicli are subject to the jurisdiction of the railway act, or competition of markets; everything of that kind must be taken into account. The Commission has held in other cases, and it is undoubt- edly true, that there are competitive conditions on the Missouri River which justifj^ a lower rate than is made to Wichita. And I assume that the thing complained of in the JNIissouri case was not in violation of laAv, That has been my reason for not proceeding in that case. Of course, I have had no doubt of the power of the court to proceed vrith that case. I think the court should do with that case exactly what the Commission could do by law, neither more nor less. Senator Newlands. Then you think it could not grant the relief necessary ? Mr. Prouty. I think it could not grant the necessary relief unless, as Senator Dolliver suggested, the only thing to be done Avas to re- strain the Missouri Pacific from charging a higher rate to Wichita than it charged to Onuiha. If that was the only thing to be done, I am not at all clear that the court might not secure that by injunction. Senator Newlands. But your opinion is that it could not determine that an intermediate rate was a reasonable rate and enjoin everything above that? Mr. Prouty. I do not know. I do not think you could say that the rate to Wichita is 5 cents above the rate to the JMissouri Kiver. Senator Newlands. Could you not test that in the Supreme Court ? Mr. Prouty. I could not say it could not be tested. It has been tested. I say if the court could exercise the jurisdiction over any- thino; of that sort it would be as well for this committee to write into a bill that statement. Senator Dolliver. We did that in the Elkins law, or tried to do so. Mr. Prouty. I did not understand it that way. Senator Newlands. Let us refer to the language of the Elkins Act. The Elkins Act was passed in 1903. Section 3 of the Elkins law states that — That whenever the Interstate Commerce Commission sliall have reasonable ground for belief that any common carrier is engaged in the carriage of pas- sengers or freight traffic between given points at less than the published rates on file, or is committing any discriminations forbidden by law, a petition may be presented alleging such facts to the circuit court of the United States sitting in equity having jurisdiction ; and when the act complained of is alleged to have been committed or as being committed in part in more than one judicial dis- trict or State, it may be dealt with, inquired of, tried, and determined in either such judicial district or State, whereupon it shall be the duty of the court sum- 48 EEGULATION OF E AIL WAY EATES. marily to iuquii-e into the circnmstanees. upon such notice and in such manner as the court shall direct and without the furiner pleadings and proceedings applicable to ordinary suits in equity, and to make such other persons or cor- porations party thereto as the court may deem necessary, and upon being satis- fied of the truth of the allegations of such petition, said court shall enforce an observance of the publislied tariffs or direct and require a discontinuance of such discrimination by proper oi-devs, writs, and process, which said orders, writs, or process may be enforceable as well against the parties interested in the traffic, as against the carriers, sanject to the right of appeal, as now nrovided by law. Now, there a clear j)ower is given to the court to direct and require a discontinuance of such discrimination. I understand that your contention is that, according to decisions of the Supreme Court, a discrimination of this kind betAveen localities because of competition of any kind is not forbidden bv the law ? Mr. Prouty. Oh, no. The discrimination might be forbidden by the law and might not. That, under the decision of the Supreme Court, is a question of fact. Now, my point is that the court has no power to inquire whether or not that discrimination is undue and to prescribe the rented}'. Senator Newlaxds. It says that the court shall have the power to require a discontinuance of discrimination. Now, if the discrimina- tion consists in charging a higher rate for the shorter distance than for the longer distance, can not the court, under this law, require a discontinuance of such discrimination? Mr. Prouty. I think it could in that case, because in that case the statute f)rescribes the rule by which the court acts. The statute saj^s that the carrier shall not charofe more for the short than for the lonir haul. Now', if the carrier did get more for the short than for the long haul, I have no doubt that the court under that provision of law could stop the discrimination, could stop the higher charge at the intermediate points. But the fourth section contains another provision, which is that it may charge more at the intermediate point if circumstances and conditions are different at the more dis- tant point. Now. if circumstances and conditions were such that the carrier might properly charge a higher rate at the intermediate point, I do not think the court could determine how much higher that rate should be; and if the rate was higher than it should be, could not therefore reduce the rate because there is no standard by which it acts? Senator Newlands. And yet that precise point has never really been determined by the court? Mr. Prouty. Nearly, Senator. Let me tell you what has been de- termined. The fifteenth section of the act provides that the Com- mission shall hear these complaints. Having heard the complaint, if they find that the carrier is in violation of the law, they shall order the carrier to cease and desist from such violation. That is the power of the Interstate Commerce Commission. Senator Newlaxds. ^^-liere do you say that is? Mr. Prouty. That is in the fifteenth section, on page 15 of what I have here. The Interstate Connnerce Commission is given the power to order the carrier to cease and desist from that violation. Now, the Supreme Court has held that that does not give the Inter- state Commerce Commission power to remove or make an order which will remove a discrimination of that sort. So I say the court has EEGULATION OF RAILWAY KATES. 49 come mighty near to holding that the language in the Elkins bill does not give the court that power. And j'ou will understand, Senator, that gives no power at all over the unreasonable rate. Senator XEWLA^^DS. If in this statute we could give the court the power to determine that without giving the Commission the power to fix the rate, would the remedy, in your judgment, be adequate for unjust discrimination? Mr. Prouty. I think it would be adequate for unjust discrimina- tion if the court had any constitutional right to exercise its remedy. The court has no constitutional right to do it, and could not exercise that power. That is my point exactly. Senator Newlaxds. There are proceedings, are there not, where the railroad has sought to enjoin the enforcement of rates which they declared were uni-easonable law ? Mr. Prouty. Yes ; that is. a common proceeding. . Senator Newlands. That is a common proceeding against State commissions ? Mr. Prouty. And against State legislatures. Senator Newlands. Have any proceedings been taken against the action of the Interstate Commerce Commission ? Mr. Prouty. No occasion for that kind of proceeding, because the rates of the Interstate Commerce Commission can only be enforced by the court upon application b}^ itself or somebody interested. "^ Senator Newlands. Such proceeding would be by injunction, would it not? Mr. Prouty. By proceeding in equitj^ ; and I suspect the court would, in connection wnth that, proceed to grant an injunction. Senator Neavlands. I understand your contention is a rate that is unreasonable is destructive of the rights of property of the carrier, and a rate that is unreasonable is destructive of the rights of property of the shippers ? Mr. Prouty. Yes, sir. Senator Neavlands. Now, why should not the shipper have the same right also to proceed by injunction? Mr. Prouty. He should. Senator Neavlands. Has he that right now ? Mr. Prouty. Well, that is a question which has not been decided yet. Judge Niles held that he had not, and Judge Speer held that he had. Senator Neavlands. The matter has never been decided by the Supreme Court ? Mr. Prouty. It ncA'er has gone to the Supreme Court. Senator Neavlands. Has the Interstate Commerce Commission itself ncA^er sought to bring such a suit ? Mr. Prouty. I do not say that the Interstate Commerce Commis- sion w^ould have any such poAver. Apparently the circuit or Federal court only entertains suit in behalf of the Interstate Commerce Com- mission when the statute permits it. Now, there is no statute Avhich permits that sort of proceeding. I think there ought to be a statute which would permit the Interstate Commerce Commission to file a petition and ask for an injunction. In the case of an advance the court Avould probably haA^e the power to grant an injunction, tempo- rarily pending proceedings before the Commission, although it would have no power to permanently reduce the rates. 741 A— 05 4 50 EEGULATIOlSr OF RAILWAY RATES. Senator Newlands. Then, if the Interstate Commerce Commission was authorized to institute such a suit, would this not meet all these questions as to extortionate rates? Mr. Prouty. If the court had the further power to determine whether that rate was reasonable or unreasonable, and you awarded final process in the premises, provided the court was a tribunal com- petent to exercise that function. I do not think it would amount to anything to give to all the courts of the United States that juris- diction. I think it would answer the purpose if you could give some special court that jurisdiction. Senator Newlands. A special court of transportation? Mr. Prouty. I thinlc so, if you could give it that jurisdiction. Senator Kean. Could you do so? Mr. Prouty. I do not think a^ou could. I have been saying here to-day that you could not invest a court with power to fix a rate for the future. Senator Newlands. We are proceeding under the fourteenth amendment, which declares property shall not be taken without due process of law. You said that a carrier has a right to go into court to enjoin the enforcement of a tariff fixed by the Commission on the ground that it is destructive of the right of property. Mr. Prouty. Yes. Senator Newlands. And. on the other hand, you say the fixing of an extortionate rate is destructive of the rights of property of the shipper. If the carrier has a right to go into court under the Consti- tution, why would not the shipper have the right, if the wrong com- plained of is the same in each case ? Mr. Prouty. It is not the same thing in each case. Senator Newlands. It would be destructive of the rights of property. Mr. Prouty. That is true. Say that I go out here and take your property. It is destructive of your property, but you could not bring suit under the fourteenth amendment. The taking of your property or my property by a railroad rate is with due process of law. The State has authorized that railroad to make a rate, to impose a rate upon me, and the State must provide that the rate is a just and reasonable rate. Senator Newlands. So that you think under existing conditions a remedy could not be given to the shipper which is now clearly within reach of the carrier, when his property rights are unjustly afi^ected ? Mr. Prouty. I think so — that is, I think the shipper should have a remedy, but it must spring from a different source. Senator Newlands. How about the powers of conciliation? Do you think that those can be exercised to advantage ? Mr. Prouty. Oh, jes. I think the best part of the work of the Interstate Commerce Commission for the last eight years has been in the exercise of that power and in the conducting of its investigations. That has been about the only work it could do. Senator Newlands. Would you have that power rest in this board that you speak of — by some designated as an appellate board? Mr. Prouty. No. Senator Newlands. You would have that authority conferred upon REGULATION OF RAILWAY RATES. 51 a special bureau or upon the other branch of the Interstate Commerce Commission ? Mr. Peoitty. If you are going to organize an appellate commission, I see no objection to leaving the preseiit Commission as it is exactly — that is, allow it to discharge all the functions it discharges now. Senator Newlands. And you would have them exercise this power of conciliation, leaving to others the power of judging? Mr. Pkouty. Simply the power to hear and determine. Senator Newlaxds. The criticism is made that out of quite a num- ber of cases — I believe there are 120 involving decisions of the Inter- state Commerce Commission — that the courts have overruled the Commission in almost everj^ case, except four or five. What explana- tion have you to make of that? Mr. Proutt. Well, as I said, the only explanation is that the Com- mission was wrong. But you can not understand what the court thought without looking into the case itself. Senator Newlands. First, is that the fact? Mr. Prouty. Now, I can not give you the exact figures. We have sent up here a statement which shows exactly what the fact is. But I would say probably that out of 35 or 36 cases in some 27 or 28 cases the contention of the Conunission has not been sustained. Now let me illustrate what that means. Six of those were cases in which the Supreme Court decided that the Commission had' no power to fix a rate for the future. The Commission had decided that a certain rate was unjust. It had declared that certain other rates would be just. It had ordered the carriers to observe that other rate. Now, the court held in those six cases that the order of the Commission was unlawful, because it exceeded the power of the Commission. The court did not hold, and the court has never held, that the rates of the Commission in those six cases were unreasonable. It has never decided that the judgment of the Commission upon the question of fact was not right. Now, I say. as a practical matter, that the thing which the Interstate Commerce Commission undertook to do has got to be done, and the proposition to-day is to- give the Interstate Commerce Commission power to do exactly that thing which the court said had not been given to it by the original act. So it does not seem to me that it is anything particularly to the discredit of the Commission to have made that holding and to have that holding reversed by the Supreme Court. Senator Newlands. Were there anv other cases in which the de- cision went off practically on the same point ? Mr. Pkouty. Not on this same point. Senator Newlands. Not on this point ? Mr. Prouty. I thinic if vou will look through those cases you will find in fourteen or fifteen cases the question at issue was the long and short haul clause. The Commission had held that competition of car- riers subject to the law did not justify departure from the fourth sec- tion. The court decided that it did. Therefore, the order of the Commission was unlawful, but it never has been held by the Supreme Court that the thing wdiich the Commission attempted to do in that case, as a matter of fact, ought not to be done. Now, you take the import rate case. The question involved there was just this: The Texas Pacific charged on articles transported from New Orleans to 52 EEGULATIOX OF KAIL WAY RATES. San Francisco perhaps one-quarter when those articles originated in Liverpool as much as they did when those articles originated in New Orleans. The Commission had held that its purview was bounded by the ocean and it could not look bej^ond the ocean to find out what competitive tariff governed that traflic. The Supreme Court simply said. "" Your application of the law is wrong. You must consider the competitive condition abroad as well as the competitive conditions at home." Senator Xewlands. Outside of these cases, however, that were con- tested in the courts there were very numerous cases decided by you that were accepted by the railroads? Mr. Prouty. In the early daj'S of the Commission practically all its orders were complied with. At the present time, with the present state of public sentiment, any order of the Interstate Commerce Com- mission which does not involve too much to a railroad is pretty certain to be complied with, just as we are pretty certain that there will not be any advance in rates as long as this excitement concerning rates keeps up. Senator Newlands. Can you give any idea of the number of cases that you have decided in which the railroads have complied practi- cally^ with your decisions ? Mr. Prouty. Well, now. we have sent up here a statement which shows exactly the number, and therefore I do not like to guess at it. In the early days they were practically all complied with. There are a great many cases in which the railroads did not literally comj^ly with the decision where the decision Avas substantially complied with, and I think if it could be done the railroads ought to have that privi- lege. They sometimes prefer to comply in substance in one form rather than in another. For example, the Commission held the dif- ferential between New England and New York should be 10 per cent of the rate between Chicago and New York. Now, the railroads did not, comply exactly with that order, but they put in an arbitrary dif- ferential which amounted to a substantial concurrence with it. They preferred to make it in cents a hundred pounds rather than 10 per cent. Senator Kean. That was satisfactory, do you think? Mr. Prouty. That was satisfactory. Senator DoLLivER. Did anybody dispute you? The Chairman. Did anybody dispute your rights to make that order ? Mr. Prouty. No ; that was in a day when the}^ were not disputing our right. The differential between JS^ew England and New York — the Commission held that the differentials ought not to exceed 10 per cent of the New York rate. They were reduced, and have been ever since. A^Tien they were once put into effect, actually complied with by the railroads, they themselves saw they were right, and they have never been taken out. Senator Newlands. Mr. Prout3% has the Commission the power to investigate the books of the railway company ? Mr. Prouty. The Commission has the power to compel the rail- way company to produce its books; it has the power to compel the production of those books in court, but that does not amount to a practical inspection of the books. REGtJLATIOiSr OF RAILWAY RATES. 53 Senator Newlands. Do you understand the Commission would have the power in connection with that to have an expert examine the books with a view to ascertaining whether or not the rebates were granted ? Mr. Prouty. I do not think the Commission would have the power to send an expert into the office of a railroad to examine its books. I do expect that any railroad company in the United States would probabh" permit an expert to examine the books of that company if we asked them to do so. Senator Newlands. It is contended by the representatives of the carriers here that the rebate must show in some form or another, and it is contended, as I understand it, that if the Commission had exer- cised its poAvers of investigation and not simply contented itself with the examination of the traffic managers it would have gotten evidence of these rebates. Now, how about that? Mr. Prouty. Now, it may be that we could have shown in some way that those gentlemen were not telling the truth. It is possible we might have done so. But, in my judgment, it would have amounted to nothing to examine their books unless you had the power to pre- scribe the method in Avhich those books should be kept. We did examine their books. ^Ve ordered books brought into court. We ordered them to file the fullest statements. We spent a week in the examination of their books and movement of traffic, and everything of that sort. Senator Newlands. With the view of discovering rebates? Mr. Prouty. Yes, sir. Senator Newlands. And you could not ascertain anything from them ? Mr. Prouty. No. sir; I desire to say that tliere has been no time since I became an Interstate Commerce Commissioner when if any strong trunk line operating between Chicago and New York had said, " We will pay no more rebates ourselves and we will not suffer our competitors to pay rebates." the payment of rebates in that section would not have stopped. It might have cost the railway something, but rebates would have ceased. Nor has there been a time since I have ])een an Interstate Commerce Commissioner when if the traffic officers of the trunk lines between Chicago and the Atlantic seaboard would have consented to tell the truth under oath, the Interstate Commerce Commission would not have stopped the payment of rebates. I have been able to discover no way in which to make them tell the truth. Senator Newlands. In regard to the future, will it not be possible for them to commence again this system of rebates? Mr. Prouty. I think they pay rebates now. Senator Newlands. You think they do? Mr. Prouty. I think they do. Senator Newlands. Do you think it is as extensive as it was? Mr. Prouty. Oh, no. I think that the payment of i"ebates, as such, practical^ ceased when the Elkins bill went into effect, and it has only been resumed in aggravated instances where apparently there could not be anything else done. For example, there are certain lines which handle grain from the Missouri Piver to Chicago and the East. Those lines have buyers on their roads, which own elevators at terminal points. They allow an elevator charge to their buvers. Certain other lines which have no elevators, so that thev 54 KEGULATIOX OF RAILWAY EATES. are unable to make that allowance of an elevator charge to their buyers, I think have at times been compelled to pay a rebate which amounted to that elevator charge. Senator Newla^-ds. Or lose the business ? Mr. Proijty. Or lose the business. That is an example of what I mean. I could not produce any evidence of that. If I could it would be my business to turn it over to the Attorney-General. I have no doubt that rebates to a greater or less extent are paid in many parts of this country. And if it turns out, as the railroads contend, that the disclosure b}^ any officer of a railroad gives the company its exemption under the Elkins bill, your law is good for nothing. They can resume the pajanent of rebates whenever they desire. Senator Xewlaxds. Mr. Hill. I believe, stated that this matter of rebates would require constant vigilance. Mr. Prolty. If you want to stop the payment of rebates. Senator, in my judgment you have got to provide certain things. In the first j)lace you have got to take care of the terminal railroad. You have got to take care of the private car lines, although that is very much overdrawn just at the present time. There is not as much to this private car line as the newspapers and magazines talk. You have got to take care of the elevators. You have got to do that. Then, in my judgment, you have got to provide that some tribunal shall have authority to prescribe the form' in which the books of these railroads, Avhich refer not only to their accounts, but the move- ment of their traffic, shall be kept, and to further provide that that tribunal may at any time examine those books. Now, there is just one thing further that I think might be done, and which should be done, perhaps, as the last resort. You can pro- vide that the man who receives and pays out that money shall be an official of the Government. He shall not have anything to say as to how the mone3^ is paid out ; he shall have nothing to do' with the administration of the road, but he shall have the right to receive and pay out that money. Xow, I think that would stop it. Senator Dolliver. Unless they got possession of the man. Mr. Prouty. That might be so. Still, gentlemen, that will not necessarily stop it. Now, I know some years ago that a trainlpad of wheat was trans- ported from ]Minneapolis to Chicago for nothing. There was simply no record of that shipment on the books of the railroad company which took it. The}" carried that trainload of wheat down there to Chicago, and there was no record of it at all. Senator Cullom. What object had they in doing that? Mr. Prouty. They wanted to prefer the man that had the wheat. They did not want to pay him a rebate on his shij)ments, but gave him that shipment for nothing. Senator Neavlands. What do vou regard the g-reatest evil in con- nection with transportation — this question of rebates or this ques- tion of discrimination under the published tariff as betAveen localities? Mr. Prouty. In the past the rebates have been the most serious question. My own opinion is that in the future the discrimination in the tariff itself Avill be the most serious question. Go into New England to-day, and you will find that the tariff puts absolutely into KEGULATION OF RAILWAY BATES. 55 the possession of the Standard Oil Company every foot of the terri- tory of the New York, New Haven and Hartford Kailroad. You will find that class of discrimination all through this country. I think in the future that class of discrimination will probably be more serious than the question of rebates. That is really not a dis- crimination against localities. Tliat is discrimination as between shippers. That is the adjustment of a tariff in such a way as to prefer one shipper to another. Senator Newlands. Do you think there is any great danger from the fact that men who are lar:^ely interested in these great industrial corporations control certain railway lines? Mr. Peouty. I do regard that as the very gravest danger. Senator Newlands. Is it possible by the utmost vigilance to secure an absolute and square deal as amongst shippers where great pro- ducers control the lines of transportation ? Mr. Prouty. That is a broad question. You ask if it is possible. It would be pretty nearly possible. It would be possible if the Gov- ermnent took these railroads and operated them to give everybody a square deal. I doubt if it will be done otherwise. Senator Newlands. So that, in your judgment, the only way we will ever secure absolute equality of service as between shippers would be under Government ownership ? Mr. Prouty. Why, equality is a thing we do not often secure any- way. I do not think there is any trouble in securing a condition of things that is good enough without Government ownership. If you want absolute equality, you would probably get it under Government ownership, although that is by no means certain. Senator New^lands. Do you think oiFicials of the railroads could be controlled certain ways — for instance, bribery, etc. ? Mr. Prouty. Not just that. Somebody has got to determine what these rates are. Even if the Government owned the railroads it is not at all certain that the rates would be without discrimination. It is pretty certain that everybody would pay the same rate on the same goods in the same shipments. Friday, May 10^ 1905. STATEMENT OF HON. JUDSON C. CLEMENTS, INTERSTATE COM- MERCE COMMISSIONER OF THE UNITED STATES. Senator Kean (in the chair). The committee will be glad to listen to you, Mr. Clements. Mr. Clements. Mr. Chairman and gentlemen of the committee, it liad not been my purpose, and certainly was not the purpose of the Commission, so far as I am advised, in the beginning of these hear- ings, to ask for any hearing before the committee on the subject of legislation. The Commission has, since its existence, annually made reports to Congress, as the law peremptorily requires it to do, respect- ing the work of the year, respecting defects in the law, and making such recommendations and suggestions as may be deemed necessary for the amendment of the law. That is a specific requirement of the original act. The Commission has endeavored, upon the facts de- 56 REGULATION" OF RAILWAY RATES. veloped from year to year, to make recommendations in compliance with that duty put upon them, and has given reasons therefor. This has been done from year to year for a long period of time, and we would have been content to let the matter rest there, so far as any theory of amendment is concerned or any reasons therefor, because they have been set out v^iih care and repeatedly presented in that form. But I have felt myself — and 1 have no doubt that the other Com- missioners have felt the same way — that from the beginning of these hearings there has been a continued effort to disparage the Commis- sion, disparage its work by insinuation, by innuendo, and by one form of expression or another, upon generalities and without specifications, to put the Commission on trial. One who would read the newspaper accounts of these hearings — and these accounts are justified, as the statements of the gentleman who just preceded me indicate — in saying that this inquiry in respect of amendments to the law has been largely turned into criticism by those witnesses, if they may be called wit- nesses — advocates I should say, mostly — by the manner in which they have discussed this subject. For illustration, the gentleman who has just taken his seat is so much encouraged by this atmosphere of criticism, this contagion which grows stronger day by day, as it is uttered by one and heard by another — :he has gone so far as to say, in effect, that recently some of these complaints are by invitation or solicitation. Where is the proof for that charge? The gentleman stands up here resting under the obligations of a gentleman to be fair and just, having heard these insinuations day by day by the advocates of the corporations that are to be regulated in some form or another, until he grows bold enough to charge that these complaints have been brought upon solicitation, the inference necessarily being upon the solicitation of the Interstate Commerce Commission. Where is his proof? Where is the justifica- tion that a just and honest man wants to present to a fair and intelli- gent committee as a warrant for such a statement as that? I can not undertake to reply in detail to all these matters that have been going on. The Coinmission all of last Aveek was in Chicago hearing cases. We can not do that and read every word that is said here from day to day. I know not what is in these various publica- tions from day to day in large part. I have looked into it so far as it has been practicable to do so consistently with the work we have had on hand, enough to see some samples of it. But I shall content myself with dealing with a few representative samples of this charac- ter of misrepresentation, and not undertake to consume your time for a week here to follow gentlemen, some of whom have occupied your attention for three days at a time, mainly for the purpose of disparag- ing the Commission, not upon specific charges, but upon innuendo and insinuation. There is no reason why this condition of feeling should be mani- fested here. The Commission is required to recommend from year to year what it finds and believes to be needful of amendment. That is what it has done. The gentlemen who are casting these reflections upon the Commission at this season have never been very much agi- tated by the recommendations of the Commission heretofore. Why? Because they have never been brought forward. There has been no EEGULATIOi:^ OF KAILWAY EATES. 57 serious proposition to amend the law. There has been no immediate probability that it would be done. 'But last fall the President of the United States, impressed with the conditions as they exist, put into his message the specific and pointed recommendation that the law be amended in two particulars— one for the suppression of rebates and other kindred discriminations, and the other for the correction of unreasonable rates. Senator Dolliver. Judge Clements, my recollection is that it did not specifically mention rebates or discriminations, but recommended simply that the act of the Fifty-eighth Congress be enforced. My recollection is that he did not suggest any new legislation as to rebates. Mr. Clements. The President's message? Senator Dolliver. Yes. Mr. Clements. Well, I do not know that he specified any particular form of legislation, but he indicated clearly that such legislation as was needed for the correction of these two recognized evils should be had. I think vou will see, bv a reference to the language of it, that that is true. I do not remember that there was anything in it that specifies that the law had not been enforced or that it was based upon any such assumption as that. • Senator Dolltver. I do not think he blamed the Commission for not enforcing the law, but my recollection is as I have stated. ]VIr. Cle3Ients. A^Hien you find that, Senator, we will come to it again. I have not the message before me now. What I remember about it is this : That the annual recommendations of the Commission for the last ten vears, which have vearly been substantiallv the same, have not attracted any specific and particular attention as being the basis of a probable early amendment of the law; but when the Presi- dent of the United States put the matter into his message, he brought it up conspicuously, and that has been followed up until it was apparent that there was a probability of some legislation. It is in that condition and on that account that these o-entlemen have seen proper to conduct their advocacy of their interests here in such a way as to put the whole blame on the Interstate Commerce Commission. They never manifested any feeling toward the Com- mission till now, when you come to this matter; and now, instead of showing by argument, by facts, "and b}^ conditions that the Presi- dent is mistaken, or that Secretar}^ Taft — the gentleman a few moments ago alluded to him — is mistaken, or that Mr. Williams, of Mississippi, is mistaken, or that Mr. Bryan is mistaken, with all of whom he is pleased to put us in company, of which I am not ashamed, the matter has become acute. It has loomed up in such a way as to indicate that something practical will have to be done in the way of regulation and amendment of the law, and therefore it becomes a matter to be met by these gentlemen who resist that regulation ; and, instead of discussing the question on its merits — I do not mean to say that they have not done that — in large part they have switched off from that and undertaken to switch your attention and the public attention from the merits of the question into an arraignment of the Commission. For what? For what is the Commission arraigned by these gen- tlemen who appear here, I say, not strictly as witnesses, but as advo- 58 KEGULATIOlSr OF RAILWAY RATES. cates? It is because the Commission has not enforced the law against them. The Commission has not stopped them from paying rebates. The Commission has not paid rebates. Every rebate that has ever been paid has been paid by a raih'oad. It is the railroads that arraign the Interstate Commerce Commission because it has not compelled them to quit committing crimes which they confess and admit, and then turn upon us and make the charge that we have not done our duty in compelling them to obey the law I Now, what is the history of this matter ? You have been told by Mr. Hines that late in the eighties, within two or three years after the Commission was organized, the railroads began to ignore those orders. That is true. They did not, however, begin to ignore these orders upon any contention that was then made manifest that the Commission did not have jurisdiction to make those orders, but it was upon the fact that they knew that the finding was only a prima facie one, that they would have another trial in court, and that they would try it over again, because they did not admit that the Commis- sion was right in each case. I will have more to say about that later in connection with another branch of the discussion. The original act made it a crime on the part of a railroad to pay rebates, but not on the part of the shipper to receive them. In 1889 that was amended so as to make it a misdemeanor on the part of the shipper to receive rebates. The law contained a provision that no witness should be excused from testifying in an}' case before the Commission on the ground that to do so would tend to incriminate him, but that his testimon}- should not be used against him in any proceeding. ]\lr. Counselman. of Chicago, now deceased, who owned a large elevator, or, more than one elevator, and was encaged in the srain business, in the capacity, as we understand it. of a middleman, was called before the Commission and was asked whether he had received rebates or not from the railroads, and he declined to answer on the ground that to do so would incriminate him. The Commission under- took to compel him to answer, but. as you know, under the law the (Commission has no power to punish for contempt or compel a wit- ness, but they must stop the proceeding and go into court and ask the circuit court to compel him to answer. The Commission undertook that, and the court decided with Counselman. That case was taken by appeal to the Supreme Court of the United States, and it was held in that case that the witness could not be compelled to answer, because, although the statute undertook to give him immimity, it did not acquit him of liability to punishment and that his testimony, which he might be compelled to give, might be used as a clew to pro- cure other testimony on which he could be convicted without that; and therefore that part of the statute became a nullity. After that the Commission Avas dependent upon the will of wit- nesses as to whether they would tell about any of these matters or not, and of witnesses who did know of them. So when you asked a wit- ness then, all he had to say was. " That will incriminate me if I should answer, and I will not answer." Under that state of the law you can see it was impossible to get testimony about these matters. The next step was that the Commission asked Congress to pass a REGULATION OF RAILWAY RATES. 59 law to correct that, and Congress did so with reasonable promptness, providing that a witness should not be excused, but that he should not be punished for anj- ollense concerning which he might testify; not simply that he should not be prosecuted, but that he should not be subjected to indictment at all for any matter to which he testified. Thait was challenged, and we got into court under that law. It- was said by the able advocates, by those gentlemen who represented the Baltimore and Ohio road, I believe it was — at any rate, it was a railroad witness — that it was not adequate protection; that to com- pel a witness to tell of his own misdemeanors was to disgrace him, would reflect on his reputation, and that he was entitled under the Constitution of the United States to protection against that. But the Supreme Court brushed that aside and said he had ample protec- tion for all that the Constitution intended to give him; that if he wanted to blacken his own character that was his own act. We took steps several years ago to test the first law ; procured an amendment to cure that defect after it had gone all through the different courts: and then we were met at the threshold and again compelled to go through the same process to the Supreme Court. There was no idleness about this. It was pursued with diligence. After that act was passed we were investigating the Illinois Steel Company and its connection with some railroads there, in respect of alleged rebates in the form of terminal charges, etc. This was several years later. Then a witness named Brimson, an employee on the part of the steel company, refused to answer on general grounds, that the Commission had set down a hearing on its own motion under a general order for a general inquiry under the twelfth section of the act to regulate commerce. The witness was asked to produce books and papers from his employer's office. He was ad- vised by counsel to object to answer, and he did refuse to answer, not on the ground that it would incriminate him. He did that it first, and then withdrew it, and put it on the ground that the Commission was not a grand jury and had no right to ask him general questions; and that atthough the twelfth section of the act to regulate commerce did seem to give the Commission authority, it was unconstitutional and void. So we started in on another series of litigation about getting testimony. We went to the circuit court, the contention being that the Com- mission had no case against the witness, and that the courts would not lend themselves to become a mere instrumentality of the Com- mission to procure testimony for it; and the circuit court held that within the Constitution of the United States there was no case in controversy giving the court judicial authority and power to act. So that "came to the Supreme Court of the United States on appeal by the Commission. The case was heard and decided, the opinion of the majority of the Supreme Court being in favor of the conten- tion of the Commission, and that the witness should be compelled to answer. So here were these strung-out contests from year to year, from one court to another, on one ground and another, and after the law was amended in order to get a basis upon which to get an answer from a witness. 60 EEGULATIOISr OF RAILWAY EATES. Senator Newlands. When was that last case concluded ? Mr. Clements. I do not remember the year. It was perhaps as far back as 1898. I would not undertake to give the year exactly. Those three cases covered quite a number of years. Possibly it was 1896, instead of 1898, as some gentleman suggests here. Only last year we had an inquiry in New York in the coal case, in which a witness refused to produce books, papers, and contracts, and refused to answer certain questions. So the Commission had to suspend the inquiry and go to court and ask for a compulsory process to require the witness to answer. That case was argued. The in- vestigation was suspended, and the matter went on for several weeks or possibly months, for there was a decision whether the witness could be compelled to give testimonj'' or to produce books and papers. The ruling was against the Commission, and we appealed it to the Supreme Court, and there the ruling was in favor of the contention of the Commission, that they were compellable and must give the testimony. Then the case had to be set again, and we had to go back and take the testimon3\ Along last fall, when we were investigating the matter of the Armour Car Lines and the private cars in Chicago, another witness refused to answer, and we have there a proceeding pending now to comj^el a witness to ansAver questions. All these cases show the history of the contest from the very begin- ning, soon after the Inter.^tate Commerce Commission was organized and Avhen there seemed to be a general purpose to disregard the orders of the Commission and dispute every question at every point. This is a brief history of that matter. In addition to that, as you were told yesterday by Commissioner Prouty, the Commission inau- gurated many general investigations to ascertain what was going on in regard to flour rates from jNIinneapolis to the East, where it was in the air that there were rebates in tliat business, as well as in the grain and packing-house products at Chicago, Kansas City, and other places. Commissioner Prouty told you yesterday the results of these earlier inquiries, when it could not be proved by any witness that rebates were being o-iven. But a turn came, for some reason, in 1902, when we had another general inquiry of that sort in regard to grain and packing-house products, when tliey did come up, one by one, and tell that they were giving rebates and had been doing so for years. Not only that, but let me read you a little of the testimony. It seems such an easy thing for a gentleman to come here and call us amateurs. It seems such a little thing that the Commission could enforce the law against everybody if it only wanted to. If the gentle- man had been around with the Comuiission on these various occasions and had heard from the same Avitnesses that there were no rebates, and afterwards that there were, and had seen the contest that they had under these statutes and the necessity to make other statutes by Congress in order to meet the situation, he perhaps would not have thought that the Commission had been sitting idle while this con- dition, which he so much deplores, was continuing. After having told that there were rebates paid. Mr. Johnson, of the Eock Island road, at that time vice-president of it — a road rej^re- REGULATION OF RAILWAY RATES. 61 sented here a feAv days ago by Mr. ]SIather, "who said that all this agitation for amendment of the laws was mostly on account of misled sentiment. Now, Mr. Day was employed by the Commission at that time to conduct this inquiry before it, and he was asking some ques- tions of Mr. Johnson. As I say, Mr. Johnson at that time was vice-president of the Eock Island road, as I remember. A fter having testified that rebates had been given — I will not undertake to read all of this^-Mr. Day asked and Mr. Johnson answered as follows : Mr. Day. How were these paymeuts noted in your accounts — were they as refunds of overcharges? Mr. Johnson. They do not go through our general accounts. Mr. Day. How are they carried — in separate accounts? Mr. Johnson. They are not carried very long. They are destroyed soon afterwards. Commissioner Prouty. AA'hat do y©u mean by saying that they do not go in the general account? JMr. Johnson. I suppose they go through the treasury. I mean they do not go through the freight auditor's account in the ordinary way of an overcharge claim. The Chairman. There must be an entry on the books of your company some- where corresponding to the amount drawn out for this purpose. Mr. Johnson. I suppose there is in the treasury department. The Chairman. What that entry is you do not know? Mr. Johnson. No; I do not know anything about that. !j! ***** * Commissioner Clements. Talce one of these transactions and tell us what evidence there is now in your boolvs or papers of the transaction. A claim is filed. The communication — this statement comes from the house, for instance, in an envelope. You take that and check it up. Then where does it go? Mr. Johnson. I think it is destroyed. Commissioner Clements. And upon some sort of memorandum a check is drawn? Mr. Johnson. It is not destroyed until checked up with the billing — the file in the office — then the statement is made from the claim as filed. The draft is drawn, and tlien the j)apers are desti'oyed. as I understand Commissioner Clements. Why are they destroyed? Mr. Johnson. Simply for the purpose of destroying any evidence there may be. Commissioner Clements. Is there no entry on a book that so much money has gone into your treasury and some of it conies out? Mr. Johnson. That is a matter with the treasury department. I do not know anything about that. Commissioner Clements. You do not know what entries are made about it? • Mr. Johnson. No ; I do not. Commissioner Clements. All the papers you know about or entries that you are familiar with are destroyed? Mr. Johnson. I understand they are all destroyed. Commissioner Clements. Have you not any recent ones? Mr. Johnson. I do not think they are more than thirty days old. Commissioner Clements. You think that all up to within thirty days are destroyed? Mr. Johnson. That is the rule or custom. Commissioner Clements. Is it probable you have some that are not yet de- stroyed ? Mr. Johnson. It may be. There may be some that have just been filed. Commissioner Clements. Well, is that practice still going on of paying these claims? Mr. Johnson. The old ones. Commissioner Clements. You are paying the old ones? Mr. Johnson. Yes, sir; nothing has been filed since the 1st of January. Now, there is the testimony of that witness, and I need not read more. There is plenty more of it in there. Mr, McCabe, of the 62 REGULATION^ OF RAILWAY EATES. Pennsylvania, also testified that these rebates were paid and ad- justed, and that the papers were probably destroyed. Mr. Bird, of the Milwaukee road, also testified as to this wholesale practice of pay- ing these rebates, and Mr. Mitchell, of some other road in the North- west — I do not know just at this moment what it was — testified spe- cifically that these vouchers and papers were destroyed, soon after they were made, that the entries were not made upon the books, and there were settlements from time to time on a piece of paper or memorandum, and as soon as that served its purpose it was de- stroyed — and destroyed, as Mr. McCabe said, because they were afraid at some time they might be called upon to lay those papers before the Commission. Xow, these things are all in there, and I would be glad, with the consent of the committee, not to have to read any more of that, but to insert it as an appendix of what I may say. Senator Dolliver. That may be done. Mr. Clements. Here is the document. It all refers to these mat- ters. I do not care to single out a particular witness or to point out what he has testified to. The document referred to is printed as Appendix G. Senator CuLi.oar. Do vou mean to sav that that is all there is on the subject of rebates in this countrv? JNIr. Clements. No: I say that is the testimony in that particular hearing — at that particular time. Senator CuLLO^r. Just one hearing? Mr. Cle:mexts. As to rebates. Senator Cullom. I'hat relates to rebates. The CHAiR:\rAN. \Aniat year did that occur? Mr. Clements. Januarj^ 1902. The Chatrjian. Before the Elkins bill was passed? Jilr. Cle:ments. Yes. Senator Cullom. There is testimony there on both sides of the question. Mr. Clements. Yes. The only people who were called in that case were the railroad officials. The}^ were the only ones examined. It is their oAvn testimony in relation to what they themselves did. The Chairman. I thought you described the cases as occurring since the passage of the law. Mr. Clements. I will come to that directl3^ The Commission has been arraigned here by so many of these advocates of these people who have been indulging in these practices for not doing anything — sitting idly by — that I simply want to show in some form what we have been doing and what our difficulties have been, and how it has attempted to get decisions that would enable us to do anything, and how it has taken time to get an amendment to the law that we might proceed in order to get testimony about anything. Of what value would be the reports of the findings of the Commission so long as it is powerless to get the testimony to develop the whole case ; of what use would be the whole business of ascertaining the facts and making findings and reporting them as a basis for suit in court to enforce the order of the Commission unless the Commission, in some way, can get the testi- mony? And, as I have pointed out, it had a series of lawsuits in order to get on a basis where it was understood we could get it. REGULATION" OF RAILWAY RATES. 63 Now, you will see there what the methods were of concealing these rebates and of destroying the testimon}'^ — admitted and sworn to by the gentlemen under whose supervision it was done. Mr. Tuttle told you a few days ago here, as I remember it — the statement is in the record — in one instance, on one page, that rebates can not be con- cealed ; that there must always be some evidence left which an active commission or an investigating authority could find out. On the next page he says, in substance, that if a road was going willingly and deliberately into the rebate business they certainly would not leave any evidence of it. I have this quotation here, and I could read it to you, but you have heard the statement and it is in the record, I will not take the time to quote what he said literally. Then that was fol- lowed up by Mr. Morawetz, who said about the same thing. First, it is an easy matter to detect these things. Surely the Commission could do it if it would. That is the substance of it. On the next page we find that if it is undertaken to be done those who do it, of course, will conceal it. Then it was suggested by the chairman of the committee or somebody else that there were various ways of doing it. Sometimes it might be a present, that had nothing to do with it and would not appear on the books — a present to his wife or some member •of his family — and then it was agreed all around by these gentlemen who said the Commission could do it and ought to do it and was to blame because it had not been done, that nobody would be fool enough who was going to pay rebates to leave the evidence lying around by which that fact could be detected. That is the substance of the argu- ment. Now, these things are not consistent; but what is- the matter in issue? Wliat is the question before the country at this time? If you were to listen to the gentleman who was last before the commit- tee and to manj^ others, j^ou would suppose that the Commission had recommended and that the President had recommended and that there was a bill pending now here that should authorize the Commission to lay its hands upon every rate in the country to-morrow and to fix it and regulate it arbitrarily. We hear that expression continually — arbitrarily fix all rates. The Commission has never intimated that it was in favor of any such procedure as that; no such thing has been contemj)lated by any- body that I know of in connection with this subject ; no such proposi- tion is involved in the matter; but thev sav it will lead to that, that rate by rate you correct one to-morrow and another one the next day. and after a while another one, and the next day a good many, and finally you will have laid your hands on all of them. Well," about the best answer to that is tliat for the ten years the Commission was undertaking to exercise this, no such result as that came about. There was no such avalanche as we have heard would come upon the Com- mission next week, if it had these powers. There was no such revo- lution as that. AVliy, we hear continually, every day this is talked about, that it would bring chaos, ruin, bankruptcy. Did it bring it? A^Tiy, Mr. Hines said, -in his argument a few days ago, that if this power was given there would be a perfect avalanche of complaints on the Commission ; it would be overwhelming ; and no matter how many there were, or how efficient it might be, that it could not move 64 REGULATION OF RAILWAY RATES. with the business. That was not so then. I am not undertaking to quote literall}' his words, but that is the meaning of it. Senator Cakmack. You mean it was not so while the Commission was actually exercising that power ? Mr. Clemexts. Yes; the ten years it did; and yet we are told in the next breath that everything is pacific, everything is quiet, every part of the country is at repose ; that there is no objection to the rates; that there are no rebates, no unreasonable rates, nothing to clamor about : that there is nobody clamoring but the Interstate Commerce Commission, and that that is due to an inordinate lust for i30wer and authority to lay its hands upon this property. Does that seem a reasonable proposition, if everything is serene and there is nobody to complain and nothing to complain about? Wh}^ would there be an avalanche heaped upon the Commission until it would be covered up and could not move ? It was not so before. That brings me to the justification for the contention of the Commission before in its efforts to enforce this law. It Avas said a few days ago, I think again by Mr. Hines, that for several years after the maximum rate decision in 1807 it was contended that all that was sought by this new legislation was to give the Commission the power that Con- gress intended to confer upon it originally, and he also said that as great a man and as conspicuous a person as the Speaker of the House, Mr. Cannon, had recently voiced that idea in a caucus at the other end of this Capitol. That was so conceded, and I have no doubt that he did. These gentlemen over here — these newspaper gentlemen — always get what was done in the caucus. If they do not get anything else right, thej^ get that, and I have no doubt that Mr. Cannon said that, and I have no doubt that he believed it. Now, let me introduce a witness whose name is familiar to all of you and whose name is synonymous with truth and courage, a man who could say " no " to a friend and " yes " to an enemy as readily as any man who ever lived. I refer to William R. Morrison. In the first annual report of the Commission, after the first maximum-rate decision, in which the Supreme Court held that the Commission could not do that: that it amounted to fixing a future rate ; that it had no such au- thority under the act, Mr. Morrison at that time beino; chairman of the Commission and one of the original panel, so to speak, appointed when the Commission was organized, penned the following words. Now, perhaps he knew as much about the views of his associates from the organization of the Commission as anybody else did, and no amount of interest on either side of this case would have induced him to shade it one iota. Here is-what he said: The Commission exercised its power in a ease commenced in tlie second montli after its organization and continued to exercise it for a period of more than ten years, diu'ing which time no member of the Commission ever offi- cially questioned the existence of such authority or failed to join in its exer- cise. As already stated, the authority of the Commission to modify and reduce an established rate and to enforce a reasonable rate for the future was not questioned in the answer of the defendant in the Atlantic rate case, decided March 30, 1896, nor had it ever been denied in any answers made to more than 400 previously commenced, many of them alleging unreasonable and unjust charges and praying the Commission to enforce a reduction and lower the rates in the future. The circuit court of appeals in the sixth circuit either understood the EEGULATION OF KAILWAY RATES. 65 decision as tbe Commission understood it or was in doubt as to its meaning, for that court certified a later case involving the question to the Supreme Court to determine what powers Congress had given this Commission in re- spect of the matter of rates. It also appears that in part the Supreme Court itself had the same understanding or misunderstanding as did the Commission, for in a later decision made in the case certified one member dissented from the determination of the judgment of the court. In the proceedings of Monday, April 24, 1905, on page 20, occurs this statement, made by Mr. Hines : In 1891 the Lehigh Valley Railroad was made the defendant in a suit by the Commission to enforce a rate-making order, and set up in court the defense that the Commission had no power to nialce rates. Mark j'oii, gentlemen, that is said to have occurred in 1891. This is said in connection with the argument that early the railroads began to dispute this poAver of the Commission, so that in a case begun in 1891 against the Lehigh Valley road to enforce an order of that kind made by the Commission the defendant disputed it. Now, what are the facts about that? There is Colonel Morrison's statement that in no answer made by any carrier — although the Commission com- menced in the second month and made an order of this kind in a case begun in the second month of its existence — that for ten years no carrier put into its ansAver any denial of this authority. Yet we find here that it is said that in a case commenced by the Commission against the Lehigh Vallej^ Kailroad in 1891 that point was made. Now, the fact about that is that in the answer to the Commission there was no such question raised by the carrier; in the answer filed in the lower court there was no such question made, for it went to the circuit court first, and in 1897, ten years after the Commission was organized, that case was still pending in the circuit court of appeals in Pennsylvania, and the court had decided the Social Circle Case and had it pending probably before it. I am not sure as to that, but it was just before the Maximum Rate Case was decided, and the probability is that that case was pending in the circuit court. Then in the argument of that case in the circuit court of appeals in 1896 or 1897 — 1897, I believe it was — Mr. Johnson, representing the Lehigh Valley Railroad, did make an argument to the effect that the Commis- sion had no such authority. In the argument in the circuit court he had said as follows in his brief: If the Interstate Commerce Commission is clothed with the power to make reductions in rates which are uniform and nondiscriminative, such power is one which ought to be exercised with exceeding care. etc. There was a frank admission that the power existed, but a caution that it should be exercised with care. That was in the circuit court in this case, which it is true was commenced in 1891, but no such plea or answer as that was put in in 1891; but later when it was argued before the court there was that practical admission that the poAver existed, with a caution that it should be exercised with care. Two or three years later, just before the decision in the Maximum Rate Case, when that case was still pending in the court of appeals in Pennsylvania, he put into his brief the contention that the Commission had not the power. But now let us see what he said when the case was on trial before the Commission. This is Mr. Johnson, who was 74lA— 0.5 5 66 REGULATION OF RAILWAY RATES. the lawyer then for the Lehigh Valley Railroad, and is now one of the distinguished corps of lawyers on behalf of the Pennsylvania Railroad. The Chairman. Mr. John G. Johnson, of Philadelphia? Mr. Clements. Yes. Now, when this case was being tried before the Commission, before it got into court Senator Dolliver. AVlien was that — in 1891 ? Mr. CLEME^'TS. The complaint was filed October 19, 1888. The answer was filed November, 1888. The hearing of arguments was had on March 19 and 20, 1889. That is when the case was heard finally before the Commission. The briefs and printed arguments were filed April 4, 1S89, and the case was decided March 12, 1891. This case was prepared by Colonel Morrison. It vv'as the decision of the Commission, but in the assignment of cases it went to him also. Here is what occurred on the trial before the Commission. Colonel Morrison, reciting the history of the case and the finding of facts, and so forth, savs this : After submitting the proposed findings of facts for the consideration of the Coniniission, counsel for the complainants, in his concluding argument, said : "As to the xnireasonahleness of the charge, we ask the Commission to find that the rate of iRl.SO is unreasonable within the statute. We do not ask or care about ^-our honors' establishing any particular rate. There are a great many ways in which these coal rates can be determined without fixing any arbitrary or inflexible standard. It could be a sliding scale, depending upon the price of coal. You could determine, first, the cost of mining the coal, and then the cost of railroad transportation. Another way to establish a rate would be at some fixed proportion of the average of the selling price of the coal at tide water. If they, the carriers, are informed that their present rate is unrea- sonable, they will then meet the individual operators out of their district in consultation, and I am sure some amicable arrangement will be reached by which both parties can make money." Now, that was the suggestion of Mr. Gowan, also a lawyer of distinction, who represented the complainants in that case. The Chairiman. Was he the president of the railroad? Mr. Clements. No; this is Mr. Franklin B. Gowan, He is not living now, I think. He was the lawyer for the complainants in this case, and that is what he said — find that this rate is unreasonable and leave it there, and we will find some way for the railroad to adjust it on some basis that will help us. That is a good deal like that which has been suggested here in the hearings a good many times, to just let the Commission find that it is unreasonable and after that is litigated and the court decides that it is unreasonable, then everything wrong will disappear, and you will get a reasonable rate without doing anything more. That is the idea of these complainants also. The Chairman. Don't you think that the railroads would try to make a reasonable rate after that? Mr. Cle3Ients. I should think they would in many instances. I do not repudiate that suggestion. I have no doubt that there Avould be such an adjustment made as would endeavor to avoid another controvers3\ but it might not always meet the full needs of justice. The CiiAiR3iAN. That would leave the rate-making power still with the railroads and avoid all disputes. Mr. Clements. Yes. That is what the complainant's counsel asked in this case. Now, what did Mr. Johnson say, who represented the railroad ? REGULATION OF RAILWAY RATES. 67 Complainant's counsel here expressed the belief that the coal traffic afforded a fair profit to both the producer and the carrier ; that to secure an equitable division of profits it was only necessary to declare the charge made to be unrea- sonable, and the parties would come together and fix the proper rates themselves. The last I quoted there was from Mr. Morrison, repeating what Mr, Gowan said. I now come to what Mr. Johnson said. He was the counsel for the road. Mr. Johnson said, in reply: That will not do. If this Commission says that the present rates are unrea- sonable, they must say so because there is a different rate that they have deter- mined to be a proper one. It will not do for you to make a general finding and say that the present rates were unreasonable, but we do not know what they ought to be. We can not fix them for you. You must agree upon them among yourselves. If unreasonable, say to what extent they are unreasonable, whether to the extent of one cent, or of many cents, or a dollar a ton. Would it be proper for you to lay down an alistract principle that would lead to endless confusion in the application? That would put all at chaos. The committee has heard a good deal of chaos during the last few days. For heaven's sake, do not ever make the matter of a proper rate foi- carrying coal one to be regulated in a confere]ice between the carrier and the shippers. If you have been convinced by the petitioners that the present rates are unrea- sonable and unjust, then say what the rates ought to be. This will be your duty. I do not wonder that JNIr. Gowan shrinks, etc., from the contest of the •case. Then he went on to argue that Mr. Gowan had not made out any case which would justify that kind of a specific finding. But there he says, for heaven's sake don't ever lea^'e it for a scramble between the railroad and the shippers, with endless chaos, but to be definite about it, and if you know that this rate is an unreasonable one, you must know that something else is reasonable, because they are directly related and you can not say that one rate is reasonable un- less you have a standard by which to judge it. The Chairmax. Before that he had denied the power of the Com- mission ? Mr. Clements. No; he denied that several jenrs later. He denied that in the court of appeals. The Chairman. On what case? Mr. Clements. This same case. The Chairman. And when he argued this case when it was taken up Mr. CLEifENTS. In this case the Commission made the order and undertook to do Avhat he asked it to do and find what was a reason- able rate. The Commission was not trying then to make rates, but the Commission found that the rate existing was unreasonable, and imdertook to find out to what extent it was unreasonable, and in its order to the carrier to cease and desist from the ascertained viola- tion of the law it ordered it to cease and desist charging any part of that unreasonable excess, or more than so much, which was found to he reasonable. That was what it undertook to do. The Chairman. Then on the appeal Mr. Johnson changed his position ? Mr. Clements. That was before the Commission Mr. Johnson said that. Then the order was disobeyed, and the Commission brought suit in the circuit court, and in the argument of that case Mr. John- 68 REGULATION OF RAILWAY RATES. son used the language which I first read here, that if the Commission has such authority it ought to be exercised with great care. Then when the case was appealed to the court of appeals several years later he put in his final proof there a dispute of this power. The Chairman. He got to that little by little. Mr. Cle]ments. He got to it little by little. He was helped to it, perhaps, by the decision of the Supreme Court in the Social Circle Case. The Chairman. I think so. Mr. Clements. Then he was also helped to it, a little, doubtless, by the fact that the court of appeals at Cincinnati was not a unit, or at least had seen proper to certify the decision to the Supreme Court. Judge Taft was a member of that court of appeals. Judge Harlan delivered the dissenting opinion in the case when the case was ap- pealed. It was Secretary Taft, who was a member of that court when it certified the question up here, all of which tends to show that the Commission at least had some color of contention that it had something to do with doing away with an unreasonable rate, and it had some good company in its contention. Senator Cullom. And determining what a new rate should be ? Mr. Clements. Yes; and that was brought about in this way: The language of the interstate-commerce act, as originally passed, was that when the Commission ascertained in a case that there is any violation of the interstate-commerce law it shall order the car- riers to cease and desist from that ascertained violation. Now, sup- pose a rate is a dollar and complaint is made that it is unreasonable and the Commission investigates it. The Commission takes the testi- mony and hears all that can be said in testimony and argument, and concludes that the complaint is well founded — that a dollar is unrea- sonable — and, as Mr. Johnson said here, it must have some idea as to what is a reasonable rate — at least, as to what it thinks is reasonable — otherwise it could not find what is unreasonable. The testimony that shows the one indicates the other. I do not mean with absolute pre- cision, but it fixes a basis upon which the mind of the traffic manager or the commission or whoever it is — the jury — dealing with the mat- ter, thinks he or they have found what is reasonable Avhen they have found what is unreasonable. Senator Kean. In 1890 the Commissioners, in their annual report, I think, you will find said as follows : In some eases the carriers decided against have, for a considerable period, manifested a purpose not to obey an order of the Commission reducing rates, claiming to have the advice of counsel that the action of the Commission was not conclusive, and that they might safely await the determination of the courts in. the premises. If they have finally acquiesced in the reduction, they have in some cases taken pains to have it understood tliat in doing so they were acting from motives of policy rather than because of any legal obligation which required it. Mr. Clements. Well, I have no doubt of that. I will come to that in a moment. There is quite a difference in the question discussed. What did the Commission 'do in that case, having found that the rate was unreasonable on the basis of what is thought was satisfactory testimony as to what was reasonable? It proceeds to order the car- rier to cease and desist from it. Well, suppose it had found 90 cents REGULATION OF RAILWAY RATES. 69 was a reasonable rate; that a dollar was unreasonable. If the car- rier refused, but put anj^thing above 90 cents, was it not just as much in contravention of the act to regulate commerce as it was to put in the dollar rate? The law says that all rates shall be reasonable and just, and any rate that is not reasonable and just is an unlawful rate. That is in the first section, Xow, if a dollar was found on the facts and demonstrated to be unreasonable and 90 cents was the best that could be found for a reasonable rate, and if that was a true finding and was justified by the facts, then any cent above 90 cents was in violation of the first section of the act to regulate commerce, whether it was 91 cents or 95 cents or $1. Each and every part that makes up the excessive rate above what is reasonable was a violation of the act to regulate commerce, according to the terms of the first section, and it was upon that theory that the Commission thought to make an order to correct the entire violation and not simply a part of it. But that has all gone by. I am discussing this in defense of the course of the Commission in the matter and as bearing upon dealing with this question now. Now, Senator Kean has shown jne what the Commission said in its report in the year 1890. and I have no doubt it is correct. That does not contradict what Colonel Morrison said or anything else that has been said here. The Commission said that it was true that in 1890 they were manifesting a disposition in many cases to disregard these orders, but why? Because, as I stated there, they were ad- vised by their lawyers that the finding and conclusion of the Com- mission was not conclusive, that they could well wait until the court had passed upon it. Well, that was not disputed, that the Commission had the power when it found a rate to be unreasonable to say to what extent it was unreasonable and condemn that entire extent of unreasonableness, but it was simply saj'ing that you have got another day in court, where you can be heard on the facts, and where the order of the Commission is onh'^ prima facie. Its findings are only prima facie. It is only the basis of a lawsuit, and you can not issue process upon it. It is not conclusive, of course. We all know that there never was any contention that it was conclusive. It was only prima facie ; it was only a basis for a suit if the carrier did not obey the order, and there is nothing inconsistent with that. They were standing back and saying, I will obey this when the court orders me to do it — not that the Commission did not have jurisdiction to say to what extent the rates found unreasonable were unreasonable, but they said, "' We have a day in court, and we will try the facts and we will obey the order when the court says so." That Avas their right and privilege under the law to do that. The Com- mission was not complaining about their exercising their rights under the law, but the Commission was calling attention, as it felt it its duty to do, of the Congress of the United States to the fact that they could do this and their own action was delayed until a lawsuit, one of which we have just been reading about, was com- menced in 1891 and ended in 1897. That was the Coxe Case. Senator Kean. There is an extract from the Commissioners' report for 1895. Mr. Clements. Thank you. Now, let me go back to that Coxe Case and say this : When the Maximum Rate Case was decided the Com- 70 REGULATION OF RAILWAY RATES. mission dismissed that proceeding, of course, because upon the prin- ciple of that case the Coxe Case fell to the ground ; but it was begun m 1891 and it was dismissed — not tried in the court of appeals — in 1897. The Senator from New Jerse}' calls my attention to this quota- tion said to be from the Commission's report in 1895 : The complaints investigated by the Commission relate for the most part to the measure of compensation which the shipper shall pay and the carrier ac- cept. Yet nowhere in the act is the Commission specifically empowered to de- cide in any case what this compensation should be, and its authority to do so exists mainly by implication. It seems a common-sense proposition that the power to condemn a given rate as unreasonable involves the power to adjudge and declare what rate is reasonable, and the Commission has invaribly acted on the assumption. Nevertheless, the correctness of this position has been openly denied, and it may be too much to claim that the dissenting view is wholly unsupported by argument. "Well, I can tell you the history of that exactly. Senator Kean. That was in 1895 ? Mr. Cleinients. Yes, and that as I remember it, was soon after the Social Circle Case was decided, in which the Supreme Court used the same language which tended to the outcome which has since been realized in the Maximum Rate Case. Although it was not clear, it pointed to that, and was cited by Colonel Morrison in that report, notwithstanding the cue that was given, if I may use that term in the Social Circle Case indicating the trend that way. The Chairman. Was not the Social Circle Case decided in 1896, and this report was in 1895? Mr. Clements. Well, I said I thought not. I will not be sure about that, but I do know that this question was then beginning to be mooted and discussed and talked about, and while there was a contest as to the meaning of the Social Circle Case, it turned out afterwards that in the Maximum Eate Case the judges were divided as to what it did mean, whether it went to the full extent they finally went or not. It was a controverted question. Senator Xeavlands. How did the court stand in the Maximum Rate Case on that question ? Mr. Clements. I think they all decided one way. except Justice Harlan. The Chairman. The Social Circle Case was decided March 30, 189C. That is the precise date. jSIr. Cle^ients. It perhaps had been argued and the matter was being contested. It was brewing, and the matter was on hand, and the Commission was advised then they were beginning to make this contest; but still I put the testimony"^ of the chairman of this Com- mission when the Maximum Eate Case was decided — Mr. Morrison, who was one of the original panel — and I put in the testimony here of what he said about it, and although there may have been talk among lawyers and discussion about it, they put no such question as that in their answers ; and Mr. Johnson, who did finally put it in there after the indications were that that was going to be attacked — ^you have heard his language when he held up his hands and said, " For heaven's sake, do not do such a thing as that, and leave us all at sea ! " The Chairman. Lawyers often change their opinion. Mr. Clejments. Yes ; there is no doubt about that, and so do other REGULATION OF RAILWAY RATES. 71 people. Now, however all that may be, as to whether the Commis- sion Avas ever justified in its contention or not, that has been settled. It has been settled now ever since 1897 that the Commission has no authoritj' to fix a rate for the future. As I said a moment ago, it never affirmatively undertook to do that in any case. All it under- took to do Avas, when it found a rate unreasonable, to declare that it Avas unreasonable and order the A-iolation to the full extent of the un- reasonableness to cease. That, of course, in effect did operate to designate a maximum rate, which could not be exceeded for the future if the order was obeyed, but it did not fix the rate. They could have charged a less rate, and it Avas not an aflirmatiA^e effort to name a rate, but it was an effort to say to Avhat extent the rate in question and con- demned was unreasonable and therefore unhiAvful. I have not the language before me just at this time, but I have a memorandum of it that Avas used by Mr. Bond, the attorney for the Baltimore and Ohio, in which he said that the Commission ncA^er did undertake affirmatiA'ely to fix a rate for the future, and substantially said that Avhat the Commission undertook to do is what I have just said, without using his exact language. That is the history of all this business. It was simply an effort to ascertain hoAV much of the unreasonable rate Avas unreasonable and condemn that and leaA^e the balance. Mr. Bond also goes to the extent of saying, in speaking of the Esch-Townsend bill, so called, that they — and Avhen asked whom he meant hj " they," he ansAvered, " the Interstate Commerce Commis- sion " — in Avriting that bill they thought they Avere giving themselves a discretion in regard to the fixing of a rate which he contended they had failed in the language of that bill to do. All I care to refer to in that connection is to say that Avhen Mr. Bond said that they — the Interstate Commerce Commission — in Avriting tlie Esch-Townsend bill undertook to do certain things, to give themselves certain discre- tion in making a rate, that he simph^ absorbed what was in the atmosphere among his associate advocates here— that the Interstate Commerce Commission was at the bottom of that, as it is apparently believed to be at the bottom of everything else. No member of the Interstate Commerce Commission ever Avrote a line of the Esch- Townsend bill or asked to make a suggestion about it or had anything whatever to do Avith it, and that statement is absolute and Avill no doubt be confirmed by the authors of that bill or anyboc^y else who knows what he is talking about. The Commission had nothing to do Avith it. Mr. Bond just naturally assumed it because, in company, as I say, with his coadvocates here, he assumed that the Commission, of course, was at the basis of trying to get some more poAver and to do that which is unreasonable. Senator Cakmack. It Avould be just as reasonable to assume that it Avas Avritten at the White House. Mr. Clements. "Well. I should think so; or anyAvhere else. A great many things have been assumed. It has been assumed that the Commission started out with an unwarranted assumption of au- thority, headed by Judge Cooley, and Judge Cooley is continually praised, and I join in his praise, for his is a great name. These gentlemen praise him wheneA^er they feel he has said something which can be used, as they think, in some form about the present con- t2 REGULATION OF RAILWAY RATES. ■ditions*; but I have called up the testimony of Mr. Morrison, who was on the original panel, to show that there never was a member ■of the Commission who questioned it or who failed to join in one of these orders, and that included Judge Cooley. Senator Dolliver. Judsre Coole}' wrote some of the orders, did he not? Mr. Clements. Yes; he did. Now, what has the Commission done since that? It has from year to year recommended certain amendments, among which was that the law ought to be made effect- ive to the correction of an unreasonable rate when it is ascertained upon the facts and the parties have been heard; that is -as far as it has ever gone. The Commission has never asked for authority to make everybody's rates arbitrarily or any other way. It has never asked for authority, and it does not recommend any authority, to originate rates, to lay its hands upon rates in general; and it is an assumption without reason that the Commission is moved in this matter, as we are frequently told, by a simple thirst and desire for more power. Power for what, and why? Why should the Com- mission put itself in such an attitude in an idle and baseless demand for power? Just to bring trouble and turmoil upon itself and every- body else connected with these questions? Why, there is no clamor, we are told ; there is nothing to complain about, and all the clamor there is — it has been characterized differently from time to time, this feeling, sometimes being called " clamor,'' sometimes " an outcry," sometimes a '• misguided argument or sentiment," and a " misleading sentiment " — all this clamor is without cause. These gentlemen have used all these terms. They have applied those terms to the Commission in their criticism of the Commission about its desire for authority, about its recommendations, which were official and which were made under oath in the exercise of a duty. How would you have it do — run away from these things? Would these gentlemen have the Commission run awaj^ from its responsibility in reporting the facts as they are developed and its judgment as to ^vhat ought to be done as the law requires it to do? Because it has done that, all this flood of criticism has come upon it, and from what source and why? When they speak of Mr. lioose- velt, the President of the United States, as a gentleman did here, occupying the same position as the Commission, they knoAv that the Commission has never recommended or asked for anvthino- more than the President recommends or suggests, but the President is spoken of with great reverence, and justly so. The}' do not assume to criticise him, but because the Commission has done it, it is ineffi- cient, it is greedy for poAver, it is reckless, it would ruin this vested property and the vested rights in it — destroy it, as Mr. Hill said, like a freeze, or a frost — anarchy, revolution, chaos, ruin, all over night — there would not be any credit to buy bonds with, to float bonds, to get money to double track, to build the bridges, to carry the people's freight — save us from such an institution as this. Why, jNIr. Hill said, in discussing this, that the Commission might well haA^e found something to do in investigating and dealing with the terminal charge in Xew York. He said, " Why should they be allowed there to charge more for floating over the Harlem River to REGULATION OF RAILWAY RATES. 73 New York than the entire rate on grain from the West? " Well, that must have been very impressive. I think one member of the committee, whom I have the pleasure of knowing, but who is not here now, asked him if that was not a matter with which the Commission could deal under the Elkins Act. Of course it was, and perhaps under the prior act, because they are required to publish their terminal rates, and so forth. He was not asked to tell what he meant by this startling assumed statement of a if airs. There will be something nice for tlie Conunission to busy itself about, and that a court would probably be slow to say that they might charge more for that little terminal floating service than the entire through rate to New York. Well, I should think it would. I do not disagree with Mr. Hill about that, but the trouble is that there is no such condition as that. There is no such state of facts as that. There never was any such state of facts as that, except possibly in the ex- treme of some rate war, where everything goes to pieces, like a year or two ago. when they were carrying grain from the Lakes down to Philadelphia for "2 mills — those odd and abnormal things that hap- pen in a rate war. I will not say that such a thing as that never happened. I think I remember when I was a younger man of a rate war down in the South when they paid a little premium to get it away from the other roads. That is. they paid the shipper a premium in order to win the freight. But there fs no such condition as that now in New York, and there never is when matters are normal. This picturesque, able, and distinguished gentleman who has done so much to develop mat- ters in the Northwest — and he is an able and a practical man — does not think that his road ought to be regulated. None of them think that any road ought to be regulated. He does not believe in regula- tion. Then he talked about everything being all right; that there were no rates that needed correction, no unreasonable rates, and that no railroad is going to make an unreasonable rate. A\liy? Because, as you were told this morning, that the interests of the railroads and its patrons are so bound up together that the very life of the railroad depends on the prosperity of the patrons, and therefore, in its own selfish interests, it can do no wrong in respect to these matters of rates. That was Mr. Hill's attitude in substance about the matter, and yet, when he wanted to say that the Commission was idle and not doing- its duty and cast an aspersion upon it. he said, ^' Why, here is a rate in the Southwest on engines that for 500 miles was as much as it was over his own line from Philadelphia to Yokohama, across the conti- nent and across the ocean." Somebody asked him about that; if he thought that rate was too high. Oh, yes, he said he thought it was about twice as high as it ought to be. That is in one breath. There are no unreasonable rates in one breath. The railroads are incapa- ble of making them, because for their own selfish interests they would not do it, and then, on the next page, he says, in effect. Here is a rate that is 100 per cent too high, and therefore, to that extent, unreasonable and unlawful. It was because the Commission had not found it. He did not say what road that was on. He was not asked to say, and he did not state any fact that you could lay your hand on. Then he went on and quoted from the Lord's prayer, " Deliver us 74 REGULATIOK OF RAILWAY RATES. from temptation." applying that to the Commission, and practically saying that that was his advice. That was practically his advice to the Commission — " Deliver us from temptation." Undoubtedly he meant in trying to get too much power; to become the five greatest men in all the world about these matters. Then he said that those who had come in contact with the Commission knew that it Avas incapable of dealing with these great questions in the proper way. I am not trying to use h'.s exact words, but I am not misquoting the meaning of what he said, as you will bear witness. Xow. I have been on the Commission for thirteen years, and the only time that I have ever known that the Commission came into contact with Mr. Hill, and he with it. was whon we investi- gated the Northern Security Case or the Northern Security's plan. He was a witness before the Commission at that time and gave his testimony. AAlien the Commission got through the Department of Justice asked for the testimony that had b?en taken before the Com- mission in that case, in which Mr. Hill and many other of his co- workers in the railroad business of the same grade testified. The Government of the United §tates instituted a proceeding against that under the antitrust law. and the Supreme Court of the United States held that that institution and transaction and the whole thing was a conspiracy under the antitrust law. Senator Kean. I would like at this time to call your attention to another case which I will show you. Mr. Clements. The Senator from NeAv Jersey calls my attention to an utterance made by the Commission to which I will refer in a few moments. I was speaking of Mr. HilFs rash utterances in dis- paragement of the Commission. One of his utterances implied that there was a terminal charge at New York for floating on the Harlem River to New York at a sum greater than the through rate on grain from the West, and I had already stated that there was no such con- dition. I also want to sav that the lighterage chartre, which has again and agaiji been explanied, does applv on floating grain across the river from the Jersey side into New York, and that is usually a charge of 3 cents. There is a floating or lighterage charge which the carriers bringing the grain to the river on the Jersey side put in for floating it across the river into New York. That is not. however, a terminal charge in any true sense. It is not contracted as a terminal charge. It is what the delivering road which makes the last haul charges in a division of the through rate from the West to New York, not to Jersey City or to Hoboken or to any of those places on that side of the river, but there is a through rate charged from the western point to New York proper, and that includes the transportation across the riA^er at New York, and the delivering road which does that in its own floating vessels. AAhich is a part of its line, takes 3 cents out of the through rate before prorating the balance between the connecting lines that ha^e originated it in the western points. So that it is no more a terminal charge than is the division of the last road in every connecting through route on any transportation. It is not any sort of terminal charge that the law requires to be separately charged. " There is no secret about it. It is a division of the through rate, and the criticism was wholly unwarranted by the REGULATION OF BAIL WAY RATES. 75 facts or by any interpretation of the law as apjjlied to the facts that exist. Now, I did refer to this gentleman's use of that portion of the Lord's prayer, " Deliver us from temptation," which meant that this Commission ought to keep out of temptation to seek more unnecessary power, and I refer to the further statement, which was to the effect that those who came in contact with the Commission knew perfectly well that it was not competent to deal with these questions. That was the substance of it, and I repeat that the only time since I have been on the Commission that he has had contact with the Commission, or the Commission has had with him, was when it investigated the Northern Securities scheme, in which he was a witness and told of the scheme, and, of course, we never convinced him that that was a bad thing to do. The Supreme Court doubtless has failed to convince him that it was not a good thing to do. Pie expresses with freedom his contempt for the views of the Commission about these questions. Like other witnesses who have appeared here, or advocates, he is not so ready to express his dissenting views from the court, and from the President of the United States, but he focalizes his wrath upon the Interstate Commerce Commission. The Supreme Court of the United States in that case held that that was, as I repeat, a con- spiracy in violation of the criminal provisions of the antitrust law, and whatever else may be said of the Interstate Commerce Com- mission, the judicial power of the United States has never yet been called upon to restrain it from committing a crime against the public under the interstate-commerce law or the antitrust law. Mr. Hill further said : A year ago we were carrying flour from Minnesota to Australia and to China and to Japan, but tlie Interstate Commerce Commission came in and affixed a condition that compelled us to stop carrying the trade. Senator Forakek. Wliat was that condition? Mr. Hill. They said, "You must file with us your through rate and your proportion as between your ships, whether it is your ship or anybody else's, with us in Washington." We said, " If we file a rate, it is a published rate, and the German ship or the British ship or the Dutcli ship or the Norwegian ship or the Italian ship is under no such obligation, and we can not change it after we have filed it with you. without notifying j'ou," etc. Now, there is a statement that the Commission had fixed a condition which broke up this beneficent business, good for the railroad that Mr. Hill represents, good for the public, and good for all American people to dispose of their surplus, etc. Senator KeajST. What was the fact? Mr. Clements. I was just coming to that. The Commission had held an inquiry in respect to the matter of the publication of tariffs on exports and imports, and, having called in the railway people, notified all of -them and heard what they had to say about it, wrote up what it believed to be the facts and the requirements of law in respect to that matter. Senator Kean. In this instance did you try to compel the Great Northern road to file their rates? Mr. Clements. No, sir; we did not. We ascertained the facts and presented them in a report, as the law requires, and presented our conclusions in respect to it, and, reading the sixth section of the act to regulate commerce, which requires all interstate rates and 76 EEGULATION" OF EAILWAY RATES. foreign rates in respect to these matters to be published and filed, we could not do anj'thing except to find that the law requires what it says. Senator Kean. Is there not a limitation on that? Mr. Clements. No. The Commission had investigated this years ago and listened to the complaints of carriers to the effect that literal compliance with that in respect to import and export would embar- rass them in many respects in this oriental business and in other re- spects, and in its annual report to Congress had set out these difficulties which they encountered in complying with that provision of the law in regard to export, and had invited the attention of Congress to it as a thing in which they ought in some respect to be relieved from the embarrassment and trouble. The matter kept on. Complaints were made to this effect. I remember once when we were making a gen- eral inquiry about grain rates and packing house product rates from Kansas City — the inquiry was in regard to rebates — one gentle- man suggested there might be a cessation of rebates in respect to do- mestic business, possibly, carried wholly in the United States, but so long as the export rates were not published and not required to be published and, in fact, were not published, that it was an easy mat- ter for a packing house to give its business, both domestic and export, to a railroad, and pay the full rate on the domestic and take whatever it pleased in the way of rebates out of the export business. If there is to be no established tariff', or if there be one that is not required to be published, or, if published, it is not required to be ad- hered to, and the provisions of the sixth section do not apply to export business, it needs only a suggestion to indicate that a business that is carried on partly export and partly domestic can pay the full rate on the domestic business in which the tariff is published and do what it pleased in respect to the balance. So, the Commission never com- pleted this case, knowing that many roads did not publish these export rates, claiming they could not do it without embarrassment, and it did not proceed to enjoin or indict, but it called the carriers together and heard all the}' had to say, and wrote up the result, and here it is, and after finding that the law requires it and that the Com- mission has no discretion under the law to waive it, it concluded the case with this paragraph: Upon the whole, we are inclined to leave this matter as it is until oppor- tunity has been afforded carriers to adjust their tariffs and arrangements, and, if so advised, present this matter to Congress ; provided, however, that in the meantime all carriers that do not maintain export and import tariffs shall file with the Commission, as promptly as possible, a statement of the rates actually charged. It is evident there must be uniformity in the enforcement of these provisions of the act. One carrier can not be expected to publish and maintain its tariffs, while its competitor is relieved from that obligation. If the act is not amended within a reasonable time, it will be our duty to enforce it. That remains that way to this day. That Avas done before the assembling of the last Congress — ]Derhaps the early part of last year — and yet Mr. Hill comes in and tells you that the Commission created a condition which destroyed this foreign business on flour; and the Commission took the responsibility, in view of the embarrassment that might arise in respect to this matter, and which had arisen, and knowing the fact that there was not a general compliance with this EEGULATION OF KAIL WAY RATES. 77 requirement of the Irav. Some rates were published and some we^e not, and it has presented the matter in that yvay and taken the respon- sibility of waiting to see what might be done before undertaking to create a hard condition. Senator Dollivek. In other words, you practicallj^ suspended that part of the law ? Mr. Cleinients. We ignored that requirement of the law, which is a pretty serious responsibility for an administrative board to take upon itself, and we did it in tlie belief that there was a good reason which was presented, and it was not done secretly. It was put into a published report and the Congress was advised of it, and the reasons for it ; and yet after all that has been done and that responsibility taken, in order to prevent the very thing that Mr. Hill says the Com- mission has enforced upon him, he comes here and says that the Commission created this condition. Now, a good deal has been said in respect to certain cases that the Commission has disposed of. Professor Meyer, assistant professor of economics in the Chicago University, appeared before the com- mittee a few days ago and gave testimony in which he referred to what is called the " Milk Case," which was decided by the Commission some years ago, and he brushed it aside as one of the very plain cases of incompetency and inefficiency on the part of the Commission, because there was one rate from any place within about 300 miles from New York on milk, and the complaint was made that it created an undue discrimination between the localities near by and those far away. The Commission heard the case, which was presented by able counsel, including Mr. Choate, who represented the milk dealers that were comj)laining, and the producers and dealers that were complain- ing of the discrimination, and able counsel on the other side, there being a thorough investigation, and the Commission held that there was a discrimination there in favor of the far-away points as against the near-by points and recommended a scale of rates which were higher for the far-off points than for the near-by points. That was the whole sum of that case. The Chairman. Do you remember the adjustment now? Did you put it in zones? Mr. Clesxents. We put it in zones. The Chairman. Can you state now from memory how that is distributed over the 300 miles ? Mr. Clements. I can not from memory. I could file here the Commission's report and the specific finding and disposition of the case if desired. The CirAiRMAN. Was there any appeal from that case? Mr. Clements. No appeal. The Chairman. It was acquiesced in? Mr. Clements. Yes. The Chairman. I wish you would, as a matter of information, because we have had this subject up before, file just what the find- ings were — that is, the rates — how many groups 3'^ou made, and the rates. Mr. Clements. If you will allow me, I will file the report of the Commission in that case. 78 REGULATION OF RAILWAY RATES. The Chairman. Well, an extract from it. Mr. Clements. Yes; we will do that. Senator Cullom. File what is strictlj^ pertinent to your conclu- sion. The Chaie^nean. We do not want the whole report. There seems to be some confusion in the minds of the committee about it. Senator Dolliver. There were several of these milk cases. Mr. Clements. I think there were some others at other times. Senator Dolliver. I read one of them where the decision seemed to be that the end-of-the-route men should have the same privilege as the near-by men. Mr. Clements. I do not know what case you refer to. Senator Dolliver. I think that was the first milk case. It is in one of the early reports of the Commission. Mr. Commissioner Knapp. That was one which was only 100 miles out. Senator Dolliver. I think it was 200 miles. Mr. Commissioner Knapp. It may be; I do not remember about that. Mr. Clements. I will have to look up the record about that, be- cause I did not participate in that case. It was an earlier one than my connection with the Commission. I was with the Commission in this New York case, and this same assistant. Professor Meyers, finds fault with the fact that the Commission took in this blanket rate and split this up and said there was something connected with a man's geographical position which affected the matter of costs, and the considerations are set forth in the report. Yet it is brushed aside by this doctrinaire, who from his sanctum reads about rates in Germany and elsewhere without going over there to investigate the conditions or knowing anything about them in a practical way, and he is deemed a wise adviser here by these gentlemen Avho tell you that nobody knows anything about rates except them, and a man who knows about it must be in it all the time himself in a practical way. Yet here is this professor who said he had not been to Ger- many and he was discussing rates and conditions in Germany, which he said, he had read in reports, etc. Then he referred to another case where the vegetable rates into the city from near-by points and far-away points were involved, and the Commission there decided there was some discrimination when the rate was the same, regardless of distance, when the distance was great; and he said that was a case in which one Mr. Kay com- plained to the Commission, and the Commission found error. Well, we have always supposed that one Mr. Ray, although he may be somewhat small in the eyes of the doctrinaire who promulgates theories for the Government of all conditions, still is entitled to his protection and his equal opportunities under the laws of the United States as we understand them. Then the professor said m substance that the Interstate Commerce Commission could never see anj'thing except that the price of somebody's land was falling off, or that a mill which produces 50 barrels of flour a day was falling off in its production on account of some rates. Well, how is it possible for a man to answer such statements as this according to their folly? It has been said that aristocracy wherever it exists will always dictate REGULATION OF RAILWAY RATES. 79 public sentiment. We have none in this country except as wealth creates distinctions of that sort. Wealth always finds it is easy to employ men of theor}^ and doc- trine and ability to express its views, and they are often directed to educating the public up to the idea of the superior sanctity of vested rights as against individual rights and individual opportunities in the contests in which men engage in the different walks of life. It is ordinarily to be expected that these gentlemen would attack a doctrine or practice that was at variance to the doctrines dear to the patron saint of that institution whose colossal fortune had its incep- tion and support to a large measure in the rebates in the early times of this business of Standard Oil, etc., which canie like a mildew, like an overreaching cloud that leveled all competitors and gave the field to him, a position he still occupies. They employ not only able lawyers and other people to rej^resent their views as a means of dis- seminating their doctrines, but they found colleges and institutions of learning that the younger generation may be taught the superior sanctity of vested rights and vested propert5^ Now, if the Interstate Commerce Commission should bring in here a professor who had never had anything to do with the practical affairs of railroads, how much Avould the railroads accept his views as sustaining the views of the Commission? Wh}'^, this must all be done b}^ the practical men, they say, who have grown up with the business, who know, as nobody else does, who have the precise knowl- edge for regulating all these varying conditions from time to time, the cost of service, the cost of movements, the value of the service to the shipper, and the fluctuating interests manifested in competition. It requires a man who is constantly in the business, they say, who has done nothing else, who has all the exact knowledge to fix and arrange these things with a nicetj^, and perfect justice and equality between every man and every interest. Why, Mr. Chairman and gentlemen, no man has that. No railroad president has it; no rail- road traffic man has it. Mr. Stickney is right when he says there is no such precise knowledge as that. There is none attainable. The most that can be done in an effort to do justice and equality in this matter is an approximation. Is there any exact knowledge that enables a jury of twelve men to tell you exactly to a cent how much you are damaged in a case of tort or any other matter that becomes an issue? It is an estimate: it is the conscience; it is ordinary practical judgment and common sense applied to the facts— an effort to say what is right. That is the ut- most that can be done in many of these matters. It is a false pre- tense that there is any such thing had or attainable as precise knowl- edge, which enables anvbody to do these things with nicetv or exact justice. Since this can not be done it is manifestly unjust that the shipper should make the rate for the railroads, because he is inter- estecl; but it is equally unjust, if the shipper has any right in the question, that he should have no voice, and that the other party at interest in res23ect to the matter should have the making of the rates without let or hindrance. The question is whether or not some disin- terested tribunal upon conscience and upon oath and official responsi- bility shall determine that. I do not say that the Interstate Com- 80 REGULATIOlSr OF RAILWAY RATES, merce Commission shall do it. Many times this Commission has called attention to the need of such a tribunal. It has more often suggested some ])ublic tribunal tlian it has eAer said or suggested the Interstate Commerce Commission should do the same. The law says the rates shall be reasonable and just. It has assumed that there is such a thing possible as an unreasonable rate, and it has made that unlawful. Not only the shippers, but other parties injured by a rate are authorized now to file a complaint alleging unlawfulness and extortion in rate. The law does not permit merely the Inter- state Commerce Commission to investigate it, but it requires and demands it to report upon it. to report the facts and to report its con- clusions. That assumes that there is such a thing possible as an unjust and unreasonable rate. It assumes that the shipper or the consumer or somebody besides the railroad has an interest in it, a lawful interest, a right to question, a right to put it in issue. "Where- upon, if that be so, is it not an anomaly that in this particular busi- ness or matter one of the parties at interest shall determine what is right, and the other shall be left without any voice in the matter? What is asked for is that the shipper may have the right somewhere along the line to be heard in resj^ect to this question in which he has a recognized lawful right. Now, is there amthing unreasonable, irrational, revolutionary, extreme about that? Are not the tribunals of the country open for the settlement of controversies by juries and by courts in respect to all other matters? AVhat is there revolutionary about this? From time immemorial, in controversies in which the parties are at issue, and in which both have a right, the common law has stepped in and settled those controversies by outside parties. "When you call a jurj'^ to settle a controversy between two parties you obtain a jury that knows the least about it. in order that it may be impartial. Is it impossible that a commission composed of five or seven men. one coming on at a time and going on in that way, shall attain that knowl- edge about these matters that would enable it, after it has heard both sides, to do as like tribunals do in other cases, and in all things to do what is approximately fair and reasonable and right, and do so without any hope that any tribunal, or any railroad man, or any shipper, or anybody else, can ever lay his finger on the precise amount that makes justice and equity between both parties, something which is not attainable? Is it impossible for a tribunal of that sort to take into account the varying conditions when presented by intelligent railroad men on one side and shippers on the other, to put all these facts together, and give them the same sort of consideration which, if it is not based on as full an experience as a railroad man obtains, will- at least be the judgment of a party that is not interested in the matter ? Now, it is said for many reasons there is no need of any legisla- tion. The first is because everything is all right anyway; that there is no cause of complaint, and that there is no complaint. Well, T will not waste any time on that. I suppose the Commission will not be charged with having misled the President of the United States. I suppose it will not be charged with having indulged in this outcry, this great clamor which has no foundation in fact or in justice. It is needless for me to argue that question. Mr. Hill found a rate that was 100 per cent too high. He did not tell us where it was. KEGULATION OF RAILWAY EATES. 81 The Commission has decided during the years it has been in exist- ence about 400 formal comphiints, and it has made orders in about 170 of those. It has dismissed or otherwise disposed of about 230. This inchides the cases in Avhich it found with the railroad as against the complainant, and some others have been in cases where the cause of complaint was removed either before the taking of the testimony or afterwards before the decision, and in various ways they went out. A large number of them are cases in which the Commission decided with the railroads. In the cases in which mandatory orders were made and complied with there are about 94. The number in which mandatory orders were partially complied with is 21; the number in which orders were disobeyed, 55 ; suits brought in court to enforce orders which were ignored, about 48. Senator Cullom. Those are all in addition to the cases where you settled them in an informal w^ay ? Mr. Clejnients. Yes ; these are simply the formal complaints where a petition has been jfiled and an answer made, and the Commission has heard the case, like a proceeding in court, and disposed of it. There are a number of other cases that have not proceeded that far that have been disposed of in one w^ay or another and a number still pending, and it does not include in this about 2,300 informal complaints which have been made in the last five years, as set forth in our answer. Senator Cullom. Will you state whether in any of these cases you refer to that you disposed of in a formal yvay j'^ou attempted to settle them before proceedings were begun ? Mr. Clements. In a great many of these cases which became formal there was a correspondence and conference and an effort to adjust the matter before it took that shape. A great many of these cases which are in the answer we have made to your resolution showing about 2,300 informal cases disposed of in the last five years are cases which have been settled with correspondence without reaching the stage of a formal complaint. The Chair:man. You have been able to settle that man}^ between the shippers and the carriers? Mr. Clemexts. No. The Chair:\[an. ^Vhx, were not the 2.300 cases disposed of satis- factorily ? Mr. Cle^ients. Not all satisfactorily. Let me tell you about that. That number includes those brought up by informal correspondence. Some of them grew into formal cases afterwards. A large number of those are overcharge matters where the rate can be settled — that is, when the complaint comes in it is referred to the auditor, who has his hand on the rates as they are published and filed, and he makes up a statement to see Avhether the rate charged was too much or not, and wdien he makes it he says w^hat it ought to be, and when that is submitted to the carriers, if they find that there is no error in that, as they generally do, they accept it as the rate and promptly adjust the matter. Now", a good many of these cases were cases where there was some controversy about classification or rate, and some of those were ad- justed. A large number of them are, however, cases where there is some correspondence, and the matter is taken up in that way, and it IS presented to the roads, and they see no way from their standpoint 741 A— 05 6 82 EEGULATIOKT OF EAILWAY EATES. to change the rates, and they decline to do so, and the shipper de- clines to file a formal complaint, and the matter is practically dropped, so that in many of these cases not all of them are by any means adjusted. They are adjusted or abandoned. Many of them are adjusted, however, and no doubt some of them are cases that are groundless. The Commission does not urge a man to make a formal complaint out of his informal complaint. He is left to determine the matter for himself, and the matter is often dropped at that. But I read these figures to show that there is no justification for the idea that is constantly brought forth in these hearings to the effect that the Commission has been in an attitude of unjust hostility. Mr. Kobbins, I think, the other day spoke of the hostilitj^ of the Commission to the car lines. Well, you know Avhen I used to prac- tice law down in north Georgia and to get around in the justice courts I used frequently to hear a man who was disappointed at something that the justice of the peace did — go out and curse the court, as we called it — whether the court was right or w^rong. Peo- ple do not like to lose their cases; people do not like to be disap- pointed, and people do not like to be investigated and to have facts, which they would rather not have made public, exposed; and it seems hardly just tliat because of these various matters there should be a disposition to criticise the Commission for what it has done and to turn this investigation as to what the law should be into a criti- cism and a complaint against the Commission on the part of these people because it has not enforced the law against them. That is a peculiar situation. The Chaieman. I desire to say that it is not necessary for jou to come here and defend the Commission at all. Mr. Clements. I am very glad to hear that. I could not know, of course, how that was. I saw it stated in the paper a few days ago that whatever else might be the result of these hearings, one thing was sure — that from the expressions of the committee the Commis- sion would be severely condemned and criticised. The Chairivian. I hope that you do not believe all that you see in the newspapers. Mr. Clements. No; and I would not believe the members of this committee capable of making up their minds about this matter and concluding so serious a result as that without hearing what we have to say, but it illustrates this, that there has been a continued attack day by day from very high sources, and these gentlemen, as Pro- fessor Meyer, of the Chicago University, said have greater imagina- tions than the poets. He thinks they have developed the world and the fullness thereof, and their imagination exceeds the imagination of the Grecians and the Eomans in the palmiest days of mythology. Now, these are the gentlemen, and it is from their lofty standards, who have day by day testified to the incompetence of the Interstate Commerce Commission. I will not call it testimony. I still say that it is advocacy on the part of those employed on that side of the question. Do you expect tKem to come in here and court regulation? Did anybody ever court regulation? Do I think there is any law needed to restrain me from robbing 'you or otherwise injuring you? We make laws to restrain others, not ourselves. Now, these gentle- men do not court regulation. REGULATION OF EAILWAY RATES. 83 This question was up here for about ten j'ears, and the Senator from Illinois (Mr. CuUom), at this end of the Capitol, and that distin- guished, honest, strong friend of justice, Mr. Reagan, of Texas, at the other end of the Capitol, took an interest in the matter when it was up for about ten years. No doubt he remembers then that he heard the same cry — ruin, chaos, destruction, revolution, bankruptcy, widows and orphans that have these bonds and stocks, savings banks — all of them. I remember that it is thirty years ago when I happened to be a member of the legislature in Georgia, when there was a propo- sition then of a law creating a State railroad commission. We then heard the same thing, that there were to be no more railroads built in Georgia, and tliat that was to be the end; there was to be no develop- ment. The law, however, was passed, and it has been a law ever since, and there has been tenfold more authority delegated to the commis- sion than this Commission has ever suggested, until to-day they make the classifications, have classified i-ates, and make the rates all over the State. One b}^ one other States have done the same, and still there is hardly a road in the country to-day in the hands of the courts. They used to be at war and they would plunge and make rates that were ridiculous and destroy their revenues. They used to be in the hands of the courts more often than they are now. • I had a conversation with Mr. Peck, of Chicago, the other day, after he made his argument. I would say that he was a notable exception to this disposition to place his entire argument here upon the faults of the Commission, supposed or otherwise, and he argued like a lawyer the questions of law. After it was over he asked me if I had read his remarks. I said: "Yes; you did just exactly like you would do in a court-house; you did just like a defendant or any- body else would expect you to do. You are employed by the rail- ]'oads, and you went there as an employee of the railroads to argue their side of the question." Now, did anj^body expect him to do anything else? Did anybody expect him to go and state that his road needed regulation because it was charging too much or because it was paying rebates? Does anybody expect my friend Mr. Hines, as the lawyer of the Atlantic Coast Line, to come up here and tell you that the Atlantic Coast Line needs regulation? These gentle- men are not witnesses; they are advocates. I do not disparage what they say as men. I do not expect them to say anything except an argument against any regulation at all. That has always been so. But it is said that the interests of the railroads and the inter- ests of the shipper are so bound up together that the carrier dare not do any wrong to the shipper because it would reflect against the carrier in its revenues. In other words, it is to the interest of the carrier to build up the interests of the shipper on its lines. I concede that, and I concede further that the general policy of the roads is in that direction and to that end. It would be senseless to expect anything else; but because that is a general policy it does not follow that there are no cases of injustice, because some communi- ties have a great deal more influence on the management than others have, and when it is left to that sort of matter, to the self-interest of the carrier, there are some who can be heard, and others are per- haps too weak to be heard. It would be a great exaction on the Si KEGULATIOlSr OF KAIL WAY KATES. time of these gentlemen if every single shipper in every little town and hamlet in the countn^ could come in and be heardi but a great big chamber of commerce composed of capitalists can generally be lieard almost any time. It would be an anomaly to say that in' this business the rights of one party to the transaction should be left for protection to the interests of the other party. I do not know any other dejDartment of life, any other line of business, in which the j)nblic, the lawmaking power, leaves the interests of one party to a trans- action of this sort solely to the protection of the self-interest of the other party. It would hardly be assumed to be a sound basis for the ascertainment and administration of justice anywhere else, and yet that is the proposition, that is the whole argument — that there can be no wrong on account of the common interests between the two — and it rests upon the assumption that the rightful and lawful inter- ests of one party to the transaction can be left for its protection to the self-interest of the other party. Is that a sound proposition ? Xow, these gentlemen, when they have been asked at the conclu- sion of their statements if they have any suggestions to make as to amendments to the law in the nature of such as would improve it have said, ''Just push up the Interstate Commerce Commission a little and make them force us to ol^ey the law as it is now and things will be better." Then they say it would help things if they were permitted under a law to agree upon rates and to maintain them, and that there need be no fear of an abuse of that. In that connection there has been some discussion of another decision by the Commission in respect to rates from Chicago and Cincinnati into the southeastern territory. That has been referred to as an example of Avhat the Commission would do if it had the power to reduce rates complained of. In dis- cussing that case it has been disclaimed, as I understand it, by Mr. Hines, that there was anything shown that indicated that there Avas a combination betvs-een the roads or a division of territory or a division of the business whereby the rates from these western centers to south- eastern territory were kept up higher than they would have been under free competition. That, briefly stated, is what I understand to be his contention. In that respect he has discussed the case as a case of discrimination as between the Middle "West and the East for business in the common territory of the South. In the statement of the matter he has referred to the fact that there was no pretense or claim that the rates from the Ohio Eiver to this territory were unreasonablv high. Now, I have that case before me — just what the Commission did do, or what it undertook to do. This is the case out of which grew the maximum-rate decision of the Supreme Court. I will not take the time now to hunt it up, but m this there is a specific quotation from the complaint of the Chicago Board of Trade that these rates from the Ohio River to southeastern territory — say Atlanta, as a center — were unreasonably high. The complaint was twofold. The Cin- cinnati freight bureau complained that the rates were unjustly and unequally related with reference to eastern rates to that territory. The Chicago Board of Trade complained of the same thing, that the rates from the Ohio Eiver into that territory were unreasonably high. Both features were put into the complaint and the cases were con- solidated, heard, and handled and disposed of together, and the Com- REGULATION OF RAILWAY RATES. 85 mission distinctly lielcl that it could not undertake to make the rates on these roads from the Ohio River into southeastern territory a per- centage of or base them in any way upon the rates from eastern cities to that territory, they being independent roads and independent lines, and one road should not fix the scale of rates for another territory. It did not undertake to do any such thing as that, but it went back to the complaint that tliey were unreasonably high, and upon that, and that alone, the order Avas based. There was at that time an agree- ment between, these roads binding them together under what was known as the Southern Eailwai' and Steamship Association. I have a. copy of the articles of agreement that were in force at the time this case was hied and heard. I do not desire to read extracts from that at length and take your time here, but since it has been dis- claimed that there was any spirit of combination that affected these rates, and that there was nothing but the freest of competition, I think it is incumbent u]:!on me to read somewhat from that agree- ment. Sec. 2. For the mutual protection of the various interests and for the purpose of securing the greatest amount of net reyeu\ie to all the companies, parties to this agreement, it is agreed Senator Dolliver. ^^'lliat is the date of that? Mr. Clements. This agreement was made on the 4th day of Jan- uary, 1892. [Continues reading:] It is agreed that what are termed " western lines " shall protect the revenue derived from transportation bj^ what are known as " eastern lines " with the rates as fixed by this association, so far as can be done by the exaction of local rates, and that eastern lines shall in a like manner protect like revenue of western lines. Then section 2 of article 23 reads as follows : It is distinctly understood and agreed that the maintenance of rates as estab- lished under the rules of the association is of the very essence of this agree- ment, and the parties hereto pledge themselves to require all their connections to maintain such rates, and in the event of anj- company or line or its connec- tions not members of the association failing to conform to this 'obligation, the other parties in interest pledged themselves to increase their proportion of through rates sufficiently to protect the authorized rate whenever required by the commission to do so — That meant the officer of this association and commission. [Con- tinues reading :] provided that in no case shall any company be required to charge more than the published local rates. Then here is a division of territorj^, a line drawn from Buffalo by way of Pittsburg. Salamanca, and some other place in the north, with a specific stipulation among these roads in this signed agree- ment that traffic originating west of that line should not be carried by the roads in the P^ast and delivered in the Southeast west of a line that was there set out, from Chattanooga to Montgomery and other places, perhaps. I am not sure about the line, but there was a line in the South and one in the North, and an obligation in this agreement that the eastern roads should not reach over and take 86 EEGULATION OF KAILWAY RATES. business west of that line in the Xorth for delivery in the South, %Yest of the line down there, and that the western roads should not reach east of that line in the Xorth for business east of that other line in the South. It is all set out here. Senator Dolliver. Now. was that the first agreement? Mr. Cle-ments. No. sir; there had been other agreements before. Senator Dollrtir. A^^iat was the date of the earliest agreement as to that division of southern business ? INIr. Cle:ments. I can not tell. Of course the date is set out some- where in this report. Senator Dolliver. I sot an impression it was about as far back as 1870. Mr. Clements. They came together in 1870 or 1871. That is set out here. Mr. Peck was then presiding over their deliberations when they met. Senator Dolliver. Was it your intention to have the report printed ? Mr. Clements. I would be glad to have it printed here. Senator Dolliver. "We will be glad to have it included. Mr. CLE^rENTS. Because it sets forth these facts just as they are. The ao;reement referred to is as follows: Objects of the associa- tion. To be at- tained by co- operation. The Southern Railnw.y and Steamship Association — Agreement. This agreement, made this 11th day of January, A. D. 1892, by the parties whose signatures are hereto attached, witnesseth that — "Wliereas the establishment and maintenance of tariffs of uniform rates to prevent unjust discrimination such as necessarily arises from the irregular and fluctuating rates which ine\dtably attend the separate and independ- ent action of transportation lines is important for the protection of the public: and . "Whereas it is deemed to be the mutual advantage of the public and the transportation companies that business in which they have a common interest should be so con- ducted as to secure a proper correlation of rates, such as will protect the interests of competing markets without unjust discrimination in favor of or against any city or section; and A^^iereas these objects can be attained by the coopera- tion on the part of the various transportation lines en- gaged in the traffic of the territorv south of the Potomac and Ohio rivers and east of the Mississippi Eiver ; and "\ATiereas such cooperation is absolutely necessary to a strict compliance with the act of Congress entitled "An act to regulate commerce : " Now, therefore, in order to secure such cooperation among the said transportation lines and to provide means for the prompt adjustment of the differences which may arise between them by placing the conduct of all the traffic common to two or more companies under well-de- REGULATIOlSr OF RAILWAY RATES. 87 fined rules and regulations which will insure the mainte- nance of rates, it is mutually agreed as follows : Article First. Section 1. The association herein formed shall con- gp^^^^'i^jj*^^ ^^' tinue to be styled '' The Southern Railway and Steam- ship Association." , Article Second. Section 1. The traffic subject to this agreement shall iimit''"or"nnes be (a) all business for which two or more of the parties ^i^'c^ may be hereto compete, having origin and destination within the territory of this association — that is, south of the Vir- ginias and south of the Ohio River and east of the Mis- sissippi River, and {?)) all traffic between territorj' on org,.^'"^^^^^'?^" north of the southern boundaries of the Virginias and on agreement. or north of the Ohio River and west of the Mississippi River, and the territory south of such south boundary of the Virginias and the Ohio River and east of the Missis- sippi River, except that traffic to or from. a local point on any line shall be considered local to that line, and so far as that line may be concerned shall not be subject to this agreement, and* further except that traffic between points on the Ohio and ISIississippi rivers or between points on the Ohio and Mississij^pi rivers and points north of the Ohio and west of the Mississippi River shall not be sub- ject to this agreement. Sec. 2. For the mutual protection of the various inter- nautuai'^piotec- ests and for the purpose of securing the greatest amount tion to eastern of net revenue to all the companies parties to this agree- unes^^^*^^" ment, it is agreed that what are termed western lines shall protect the revenue derived from transportation by what are known as eastern lines, under the rates as fixed by this association, so far as can be done by the exaction of local rates, and that eastern lines shall in like manner protect like revenue of western lines. Sec. 3. That a line from BufTalo through Salamanca, ^.e^tl^^'^gj.^?^ Pittsburg, Wheeling, and Parkersburg, to Huntington, <^?i''es respec- W. Va., be made the dividing line between eastern and '^^"^ Avestern lines for the territory hereinafter outlined. That the western lines shall not make joint rates from points east of that line for any points east of a line drawn from Chattanooga through Birmingham, Selma, and Montgomery to Pensacola. Sec. 4. The eastern lines, including the Richmond and Danville Railroad via Strasburg or points east of Stras- burg, and the East Tennessee, Virginia and Georgia Rail- way via Bristol, shall not make joint rates on traffic from points w^est of that line (Buffalo, etc.), to any points on or west of a line drawn from Chattanooga through Athens, Augusta, and Macon to Liveoak, Fla. Sec. 5. The traffic from Buffalo through Salamanca, 88 EEGULATION OF RAILWAY EATES. Cooperation between east- ern and west- ern lines promised. Pittsburg, "Wlieeling, and Piirkersburg to Huntington, W. Va., and points on that line to and east of Chatta- nooga, Calera, and Sehna shall be carried by either the eastern or western lines only at such rates as may be agreed upon. Sec. 6. It is understood that the eastern and western lines will cooperate in the enforcement of the third and fourth section of this second article. Time and place for hold ing conven- tions. Business of conventions. Article Third. Section 1, The representatives of the several com- panies, members of the association, shall meet in conven- tion annuall}^ on the second "Wednesday in June, in the city of New York, or at such other place as ma}'' be mu- tually agreed upon, and special meetings may be called at any time as hereinafter provided. Article Fourth. Section 1. The business to be transacted in general convention shall be confined to the election of officers, fix- ing their salaries, the representation of members on the executive board, and the adjustment of such matters as can not be properly determined by the e'xecutive board with the aid of the board of arbitration. Each company a member of the association shall have one vote. Two- thirds of the whole vote of the members present shall be required to make the action of the convention binding. Companies members of the association may be represented in the convention by the president, vice-president, gen- eral manager, traffic manager, superintendent, or general freight agent, in person or in proxy, provided such proxy presents to the secretary a properly attested power of attorney. In case of more than one nomination being made for any office the election shall be by ballot. Officers of association. Vacancy in elective office. Article Fifth. Section 1. The following officers shall be elected at the annual meeting, and shall hold their office until the next annual meeting, and thereafter until their successors are elected. A president, a commissioner, a secretary, and three arbitrators. Sec. 2. In the event of a vacancy occurring in any elective office the president may fill the vacancy until a general meeting can be convened to elect a successor, and such meeting shall be called by the president within twenty days after the vacancy occurs. Article Sixth. Lines repre- Section 1. The East Tennessee. Virginia and Georgia elecutive° * ^ Kailwav ; Norfolk and Western Railroad ; Richmond and board. EEGULATIOX OF RAILWAY EATES. 89 Danville Eailroad; Seaboard and Roanoke Railroad; Central Railroad of Georgia ; Georgia Railroad ; Western and Atlantic Railroad; Wilmington and Weldon Rail- road; Atlanta and West Point Railroad, and Western Railway of Alabama; Savannah, Florida and Western Railway; Old Dominion Steamship Company; Ocean Steamship Company; Merchants and Miners' Transpor- tation Company; Cape Fear and Yadkin Valley Rail- way; Cincinnati, New Orleans and Texas Pacific Rail- way; Illinois Central Railroad; Kansas City, Memphis and Birmingham Railroad; Louisville, New Orleans and Texas Railway; Louisville and Nashville Railroad; Mo- bile and Ohio Railroad; Nashville, Chattanooga and St. Louis Railwaj^, and Newport News and Mississippi Val- ley Company shall each designate a representative, who shall be authorized to represent them in matters of busi- ness with the association or its members. The several representatives so designated and such other representa- tives of members of the association as may be designated by the executive board shall constitute the executive board, of which the commissioner shall be chairman. If any company or line which is entitled to a representative fails to appoint one, or if their representatives be not present at any meeting of the executive board, such com- pany or line shall be represented by the commissioner. Article Seventh. Section 1. The executive board shall meet at the call executive^^ ^' of the commissioner whenever and wherever in his judg- board, ment it is necessary, or when any three members of the board request it; but all such calls must state the object of the meeting and the subject to be acted upon by the board. All absent members shall be represented by the g^^'^jf ^J^^^^^^J commissioner, whose duty it shall be to make himself absent mem- familiar with their views and interests, so that he can ^*^^"^' represent them properly; and votes cast b}^ the commis- sioiier for absent members, at any meeting, on any sub- ject stated in the call, shall have the same force and effect in binding such members as if cast by them in person. Other subjects than those mentioned in the call may be considered and acted upon in the meeting of the execu- tive board, but the assent of the absent members must be obtained, or a decision of the board of arbitration, before such action becomes binding upon them. The executive o/executlve ° board shall have jurisdiction over all matters relating to board. the traffic covered by this agreement but shall act only by unanimous consent of all its members. In the event of failure to agree, the questions at issue shall be settled by the board of arbitration as hereinafter provided for. Sec. 2. The principle of apportionment of business sub- ject to arbitration shall be recognized in the oj^eration of the association so far as this can be lawfully done. consent. 90 KEGULATIOlsr OF EAILWAY RATES. Article Eighth. boaM^^may^ SECTION 1. The execiitive board shall haA^e the right appoint rate at their discretion to appoint rate committees and other committees , • , , ■,■, J Zi • i j? and other sub- Subcommittees, either ot their own number or irom among committees. ^j-^g officers and agents of the companies members of the association, and to delegate to such subcommittees juris- diction over such matters as may be specially committed ra4"comm?t-° to their charge. With a ^'iew of .a proper relative adjust- ^^^- ment of all rates, and especially a proper relative adjust- ment of rate on similar articles from the East and West to common territory, the rate committees shall have sole authority to make all rates and classification on all traffic covered by this agreement, subject to decision of the com- missioner, the executive board, or board of arbitration, as hereinafter provided in case such rate committees can not gCommis^ionei- agreg . |3ut if the rate Committee shall fail or omit to make rates. make rates on any traffic covered by this agTeement, the commissioner shall have authority to make such rates, it being the intention that there shall be properly authenti- cated tariffs of rates on all such traffic, tee^s^sbau^act ^*-^^" ^' Subcommittees shall only act by unanimous by unanimous coiiseiit, and ill failing to agree the questions at issue may """^ upon demand of any member, be referred to the executive board for action at their next meeting, or the votes of members of the executive board ma}^ be taken separately and apart b}^ correspondence, and such questions may be submitted direct to the board of arbitration when so authorized b}^ a majority of the executive board. shX b?ex"*^^ Sec. 3. The commissioner shall be ex-officio chairman officio chair- of Subcommittee, and as such shall be the medium of corn- subcommittees munication between the subcommittees and the executive res^nt'^absent'^ board. Abseiit members of subcommittees shall be repre- members. sented by the commissioner, as in case of absent members shall have au- ot the exccutive board. During the interim between the cide 'tempo- ^^ reference of any matter of difference from a subcommittee t^ n'^on"which ^" ^^^^ executive board and the final determination of such •subcommittees matter the commissioner, if he deem it a matter requiring fail to agree, pj^gmpt actioii, shall have authority to decide it tempo- rarily, and his decision shall be binding on all parties until reversed by the executive board or by arbitration. Article Ninth. Executive SECTION 1. The executive board shall have authority to board author- i c j_- j_ ±- ^ i i i j.- j. ized to maijo make f rom time to time such rules and regulations, not uiatfons!^ ''^=" inconsistent with this agreement, as may be necessary to secure a systematic conduct of the affairs of the associa- tion and obtain the objects for which it is formed. Article Tenth. Duties of Section 1. The president shall preside over all general the president, j-^^gg^-^-^gg ^f ^j^g association, certify to the record of such EEGULATIOX OF RAILWAY EATES. 91 meetings, and communicate the proceedings to all mem- bers. He shall call a general meeting of the association whenever he is requested to do so by three members of the executive board, or whenever it is, in his judgment, neces- sary. Article Eleventh. Sectiox 1. The board of arbitration shall hear and de- Duties of termine all questions which may be submitted to them IrbitratfJn"' under this agreement or by consent of the parties, and the decisions of the said board of arbitration shall be final and conclusive. Article Twelfth. Section 1. The secretary shall make complete and accu- Duties of rate records of the proceedings of all general meetings of ^^^^ secretary. the association, the originals of which shall be preserved in the general oiRce of the association, and copies fur- nished to each member. He shall act as secretary also to the board of arbitration, to the executive board, and to all "committees herein provided for, and preserve similar rec- ords of their proceedings, and perform such other duty as may be assigned him by the commissioner. Article Thirteenth. Section 1. The commissioner shall be the chief execu- Duties of the tive officer of the association, and as a representative of commissioner. its members, both severally and jointly, shall act for them in all matters which come within the jurisdiction of the association in conformity with the requirements of this contract and the instructions of tlie executive board and committees herein provided for, but exercising his dis- cretion in all cases which are not provided for either by this agreement or by the executive board and committees acting under its authority and sanction. When directed by the executive board the commissioner shall also take charge of reports and claims and appoint such clerks and claim agents as may be necessary, and charge up the expense to the roads interested in the business on an equi- table basis, managing the business for the benefit and at the cost of the companies interested. He shall also have authority to reduce the rates when necessary to meet the competition of lines or roads not parties to this agree- ment, and he may at the same time make corresponding reductions from other points from which relative rates are made. He shall have such authority over the traffic officers and their subordinates and over the accounting departments of the parties hereto as may be necessary to enforce the terms of this contract relative to the mainte- nance of rates, and to require information relating to the traffic to be furnished to him in such form or manner as 92 REGUIATION OF RAILWAY RATES. Accounts of traffic to be kept by com- missioner. he may deem necessary. He shall have access either in person or by deputy to the books, papers, correspondence, etc., of any of the oflicers, agents, or employees of the parties hereto that relate to the freight traffic covered by this agreement. Article Fourteenth. Section 1. The commissioner shall keep such accounts of the traffic covered hj this agreement and make such reports of the same as may be directed by the executive board. Article Fifteenth. Disburse- ments of funds. Section 1. All disbursements of the funds of the asso- ciation shall be made by the commissioner, who shall give bond, with security, in such amount as shall be satisfac- tory to the executive board, that he will duly and prop- erly account for all moneys of the association or belong- ing to members thereof, which may in any manner come into his possession or under his control. No payments shall be made except on properly receipted vouchers, which shall be held subject to inspection by the executive board or such person or persons as may be appointed by them for that purpose. Article Sixteenth. Deposits to Section 1. In order to provide for the promiDt pa5'ment ^^^ of any fines that ma}^ be assessed against any member of this association for violating rules, each company shall deposit with the commissioner an amount equivalent to $5 for each mile of the road operated by said company under the provisions of this agreement, or, in case where a com- pany operates a water line, $5 for each mile allowed as a prorating distance in the decision of through rates, pro- vided such amounts shall not exceed in the aggregate the sum of $5,000 for any one company ; but in all cases where fines are assessed the commissioner is hereby authorized to draw at sight on the parties against whom such fines are assessed for the full amount of said fines, and each company party to this agreement hereby binds himself to promptly pay such drafts, it being the intent and mean- ing of this section that the deposit herein provided for shall not be diminished by reason of the payment of any fines that may be assessed against a company making such deposit. Article Seventeenth. •commissioner Section 1. The Commissioner shall be furnished with n?shld^^ith copies of all manifests for traffic covered by this agree- festf °* ™^°'"ment, such copies to be forwarded at the time the ship- EEGULATION OF RAILWAY RATES. 98 ments to which they appertain are made, and shall show the original shipping point and through rates, and also the divisions thereof, so far as such divisions are con- trolled by this agreement, and abstracts of such manifests shall be furnished to the commissioner at the expiration of each month ; but it is understood that the members of the association shall not have access to any of such mani- fests or be furnished with the names of consignors or con- signees. The tonnage books of every company in the asso- ciation shall be open at all times to the inspection of the commissioner or such agent as he may from time to time appoint, for the purpose of enabling him to get a complete record of all traffic covered by this agreement. Article Eighteenth. Section 1. Copies of all rates that may be from time to copies of time agreed upon or fixed in the manner provided shall gent^ to° offi- be furnished promptlj^ to the auditors and other officers ^er| "i" "^^^- of the parties to this contract, and they shall see that the rates are enforced in conformity therewith and that no •variations are made from such rates or manifests by voucher or otherwise. Article Nineteenth. Section 1. That all-rail rates to and from the ports of ,.j^4s"'"^" Boston, Providence, New York, Philadelphia, and Balti- m_ore to points within the territory as covered by this agreement shall be higher than the rates by water or com- bined water and rail lines by the present differentials, as established by the board of arbitration July 19, 1889, and subject to the Southern Railway and Steamship Associa- tion classification. Sec. 2. Water lines or combined water and rail lines water lines may insure against marine risks by issuing insured bills ^!ate?°and^*^aii of *^lading between the above-named ports and points J^'^j'^es a'lJlfnir within the territory covered by this agreement, they giv- marine" risks. ing two weeks' written notice to the commissioner, nam- ing the points to which the}^ will issue insured bills of lading. Sec. 3. No water line or combined water and rail line ,5^^^"^.^^^/ ^^^^^ shall assume the cost of insurance against marine risk in assumed only any other manner than herein provided for, viz, by the Insm-ld' wa's" issue of insured bills of lading. It is, however, dis- "* lading. tinctly understood and agreed that no reduction of the established tariff rates, rebates, or consideration of any kind shall be given or offered to influence shippers or to secure their preference for any road or line. Sec. 4. The above-named differentials as between all- feitntlais sillu rail lines and water or combined water and rail lines shall -^^IJ^l b^'^afm not be changed except by arbitration, which may at any tiation. ^ time be called for b}^ any party to this agreement. Sec. 5. The present insurance clause shall remain in 94 EEGULATIOISr OF RAILWAY BATES. force until the business shall have been apportioned and after such apportionment has been made effective, then the insurance clause as amended by the majorit}^ report of the committee on revision shall be substituted there- for. Article Twentieth. frMa*fntei-ior"^ Section 1. The parties to this agreement who control eastern points, all-rail lines through Alexandria, Hagerstown, Rich- mond, or Norfolk agree to protect the water lines or com- bined water and rail lines upon the basis of the above- named differentials, or such other differentials as may be fixed by arbitration in making rates between points in the territory covered b}^ this agreement and all interior points in the Northern and Eastern States east of the territorial line above mentioned. Sec. 2. It is agreed that rates made to points reached by lines via Cincinnati or Louisville not members of this association niSij become the rates of all association lines. Sec. 3. It is also agreed that in cases where a combina- tion of locals to and from interior points by rail lines make lower totals than the established water lines port rates plus differentials, the rate may be by all lines the lowest combination, but shall not be less than such com- bination. Sec. 4. In all cases changes of rates made under above provisions shall be made by the rate committees or the commissioner, who shall promptly notify all parties in- terested. Article Twenty-first. Reports of tonnage and revenue to commissioner. Section 1. The executive board shall organize such a system for the rendition of tonnage and revenue reports of traffic covered b}^ this agreement as shall enable the commissioner to be at all times fuUj'^ informed of the movements thereof and the observance of rates estab- lished therefor, in order that he may detect promptly any violation of rates and keep each company or line in- formed of the action of the other companies or lines. For these purposes the executive board at their discre- tion may appoint agents to examine the books of the members of the association and inspectors of the weights and classifications, who shall at all times have access to and be permitted to examine goods. Any losses or dam- ages resulting to initial carrier from the opening of packages by inspectors shall be prorated on the basis of revenue. The expense of such agents and inspectors shall be distributed among the members as hereinafter set forth. Tonnage and revenue statements shall be ren- dered monthly to each member of the association, and also annually on the 30th day of April in a report to be made by the commissioner at the expiration of each year REGULATIOISr OF RAILWAY RATES. 95 and distributed to the members at least two weeks before the annual meeting. Article Twenty-second. Section 1, All measures necessary to carry out the j-eferred^to^^ purpose of this agreement shall be taken jointly by the arbitration, parties hereto ; and should any question arise upon which they can not agree in relation to the terms of this con- tract, or to any matter arising thereunder, it shall be decided by arbitration as herein provided, it being one of the fundamental principles of this contract that no party shall take separate action in any matter affecting the interest of one or more of the other parties contrary to the spirit and intent of this contract, and that all differ- ences relating to the establishment, adjustment, and main- tenance of rates upon the traffic covered by this contract shall be adjusted by arbitration. Artici;E Twenty-third. Section 1. Wlienever rates have been fixed by the rate committees, the commissioner, the executive board, or bj^ arbitration there shall be no reduction from such rates without the consent of the commissioner. No member of the association shall reduce such rates, directly or indi- rectly, by any special rate, rebate, or drawback, or by payment of commissions, or by reductions on manifests, or b}^ combinations of local rates, or by rebilling, or by underbilling weights, or by any consideration in the way of free transportation, or in any manner, or by any device whatsoever. Sec. 2. It is distinctly understood and agreed that the vance*'propor-^' maintenance of rates as established under the rules of tions in case the association is of the very essence of this agreement, ^ and the parties hereto pledge themselves to require all their connections to maintain such rates, and in the event of any company or line, or its connections, not members of the association, failing to conform to this obligation, the other parties in interest pledge themselves to increase their proportions of through rates sufficiently to protect the authorized rate whene^^er required b}" the commis- sioner to do so : Provided, That in no case shall any com- pany be required to charge more than its published local rates. Sec. 3. "Wlienever the commissioner shall have reason ^^'^'ij^'^.^'n^^f^ed to believe that the rates established under the rules of the to -board of association are not being fully maintained by any line or^' ' '^ '^°' company, member of the association, it shall be his duty to make a full investigation of the facts in such case, and if in his judgment there has been any violation of this agreement on the part of any member or members of this association which he can uot properly correct, he shall submit the evidence in such case to the board of arbitra- 96 EEGULATION OF RAILWAY RATES. tion; and if the board of arbitration shall find, after a full hearing of the case, that any member is guilty of violating this agreement, it shall impose such penalties therefor as it may deem proper„ and necessary to secure the maintenance of the rules of this association. The commissioner shall enforce such penalties, making use, if necessary, of the fund provided for this purpose. Any surplus over and above the amount that maj'' be awarded by the board of arbitration to indfannify any members for losses sustained shall be applied to the payment of the expenses of the association. Board of Sec. 4. The board of arbitration shall from time to makelts^^uils. time make or amend rules of procedure for the trial of such cases, and the submission of arguments in cases referred to it for decision, as it may deem proper. Article Taventy-foitrth. Sectiox 1. In order to defray the expense of the asso- ciation, there shall be first assessed annually on each mem- ber thereof a tax of $300. which shall be applied to pay- ing salaries of general officers and toward general expenses, such as office rent, printing, etc. ; and such addi- tional amount may be assessed on members pro rata, according to their gross revenue derived from the traffic covered by this agreement, as may be necessary to meet these and all other expenses of the association. Article Taaenty-eifth. Duration of Sectiox 1. This coutract takcs effect the 14th day of agreement. j.^i^^^f^.y, 1892, and shall terminate on the 31st day of Julv. 1892, and the fiscal year of the association shall termniate on the 30th day of April, 1892. The Oixcinnati, New Orleans and Texas Pacitic Railway, By Hexry Fink, Vice-President. Illinois Central Railroad, By J. T. Harahan, Second Vice-President. Louisville, Xew Orleans and Texas Railway, By E. AV. How, Traffic Manager. Mobile and Ohio Railroad Co:NrPANY. By J. C. Clarive, President. ^Louisville and Nashville Railroad Company, By S. R. Knott, First Vice-President. '^Me:mphts and Charleston Railroad Company, By Henry Fink, Vice-President. Alabama Great Southern Railroad Company, By Henry Fink, Vice-President. Georgia Pacific Railroad, By Sol. Haas, Traffic Manager. 'East Tennessee, Virginia and Georgia Railway Company, By Henry Fink, Vice-President. Old Dominion Steamship Co:mpany, By W. L. GuiLLAUDEU, Traffic Manager. regulation of railway rates. 97 Merchants' and Miners' Transportation Company, By J. C. Whitney, TraffiG Manager. Seaboard and Roanoke Railroad Company, By O. V. Smith, Traffic Manager. Norfolk and Western Railroad Company, By Charles G. Eddy, Vice-President. Richmond and Danville Railroad Company, Central Railroad of Georgia, including Port Royal and Augusta, By Sol. Haas, Traffic Manager. The Atlanta and West Point Railroad Company and Western Railway or Alabama, By C. H. Phinizy, President. The Georgia Railroad, By C. H. Phinizy, Acting General Manager. The Wilmington and WEiiDON Railroad Company, B}^ H. Walters, Y ice-President. The Savannah, Florida and Western Railway Company, By H. S. PIaines, Vice-President. Cape Fear and Yadkin Valley Railway Company, By J. W. Frye, General Manager. The Baltimore Steam Packet Company, By R. L. Poor, General Freight Agent. The Ocean Steamship Company of Savannah, By G. M. Sorrel, Manager. The Newport News and Mississippi Valley Company (W. D.), By E. W. How, Traffic Manager. Georgia Southern and Florida Railroad, By A. C. Knapp, Ti^affic Manager. Nashville, Chattanooga and St. Louis Railway and Western and Atlantic Railroad, By J. W. Thomas, President. Kansas City, Memphis and Birmingham Railroad Company, By Geo. H. Nettleton, President. The Baltimore, Chesapeake and Richmond Steamboat Company, Py Reuben Foster, Vice-President. Senator Newlands. What is the title of those articles which you read? Mr. Clements. The Southern Railway and Steamship Association agreement, dated the 14th day of January, 1892. It was openly stated in the earlier part of these conferences, which is a part of the history of this whole transaction, these agreements were supposed to be made once a year and rencAved every j^ear. When the first one was made in specific form I do not know. There was no law then against pooling and these things, and subsequent agreements to this, one or two, had penalties, fines, and forfeitures to be paid in. They were to be paid in in advance, so that if any road violated any of these rules there would be money in the treasury belonging to it, so that the commissioner could apply it to the penalty and as a fine, so as to 741a— 05 7 98 REGULATION OF RAILWAY RATES. enforce the observance of these rules and reguhitions. It was clearly to distribute the business. Mr. Peck, who was presiding over the early conference, out of which all this business grew, said in sub- stance that there ought to be about 10 cents greater rate on the man- ufactured goods from the West and about the same difference, per- haps, on other heavier and coarser goods that were then common and peculiar to the West. There was no disguising the fact that the rates were made relatiA'ely between these eastern roads and western roads for the purpose of getting the greatest amount of net revenue to the parties to this agreement out of the business, and to that end these lines were made so that the eastern goods would be carried into tlie South by western roads and western goods into the South by eastern roads. Now, Mr. Hines said the other day that was done hi order to avoid this absurd movement away around from the West to the Atlantic Ocean and then down South. Senator Dolliver. That was Mr. Kipley, I think, who made some such statement as that. Mr. Clements. That is only another way of saying it was to bridle and limit the competition between these carriers; that there must have been some roads that were willing to do that in order to get a part of the business. Otherwise it would not have been nec- essary to bridle them and keep them from it. That is self-evident. Now, something was said a few days ngo here in an incidental way of the acquisition of the Louisville and Nashville road b}' the Atlantic Coast Line. It was said that it was not contrary to the policy of an}' law because they were not in any sense competitive; that they were too far apart and served different territories. And yet there was this very rule that it was found necessary to put in here to keep the eastern roads from trying to participate in part of the business of the West, and that was peculiar to the West, to carr}'^ it around that way, and for what purpose? All this was for the purpose of enabling the parties to get the greatest amount of net revenue out of the business. They must not cut one another's throat. Roundabout roads must not do such things as that, as it has a tendency to reduce rates. They went to the extent of requiring parties to this agreement to exact their full locals against connections which did not adhere to all of these rules. Not that the connection be allowed to do as it pleased and take less than a local, but it must not be allowed to do it under these bristling pen- alties to prevent that desired movement and distribution of the busi- ness and lowering of rates, which would prevent the obtaining of the greatest net revenue to the parties. Now, inasmuch as this has been discussed, although it was decided distinctly on one allegation which was investigated that the rates were unreasonably high and went off on that, it has been discussed here as a matter of comparative rates from the East and from the West into that territory, and some interesting testimony was presented in that case by letters and by commissions of some of the railroads. Mr. S. S. Knott, then traffic manager of the Louisville and Nashville Railroad, in a letter to Mr. J. J. Grammar, dated April 14, 1890, wrote that — While the adjustments may be unfair, as we think it is — He was then talking about the existing adjustments — yet it cau hardly be said to be arbitx-ary or wholly unreasonable — REGULATION OF RAILWAY RATES. 99 And that his company, together with other lines interested in western traffic, who Avere members of the Southern Railway and Steamship Association, urged a modification of the difference between eastern and Avestern rates, and succeeded in having the matter brought under the rules of the association and before the board of arbitration. They had a board of arbitration to settle these matters, and the question was fully presented from both sides of the case, and the decision of the board at the time — May, 1888 — Avas that the best pro- tection of all interests did not AA'arrant the change in the adjustment of rates', AA'hich they, in common AA'ith the other AA^estern lines, had re- quested — that is, changing the adjustment from the Ohio Ili\'er points and points north, as compared AA'ith the rates from the eastern cities. Mr. B. E. Hand, assistant general freight agent of the Michigan Central Railroad, stated that he had made repeated efforts Avith rail- roads operating in southern territory for a reduction of rates on manufactures from the West to the Southeast. Mr. J. J. Graimner, of the Central Traffic Association committee on relations AAdth south- ern roads, in a letter to N. J. Eickelhardt, of April 2, 1890, AAdio was at the head of this Chicago freight bureau at that time, said : All our efforts thus far have been unavailing to more justly equalize the rate. You doubtless understand the southern road rates from the Ohio River are arbitrary, their rates being from 50 to 100 per cent greater per mile than on the lines north of the river on similar trattic. In a letter dated April 8, 1890, to Mr. S. S. Knott, he says : The injustice of the present basis of rates from the Ohio River must of necessity be apparent. But noAT, these Avere railroad men — traffic men — men Avho have a j)recise knoAvledge of what is right and what can be done and Avhat ought to be done. These were their letters. They were bound up — some of them, not all of them — but Mr. Knott represented the Louis- ville and NasliAdlle Railroad, and they were bound by this agree- ment, and Avhen they Avanted to rearrange this adjustment they had to bring it to the arbitration board made by that agreement, and then thbj had to abide by what it did. Senator Kean. That man Eickelhardt was not a traffic manager, AY as he ? Mr. Clements. He was the traffic manager of the freight bureau. And then he represented the shipping interests. That was Avhat they called them at the time. He was at the head of Avhat they called '' the freight bureau of Chicago," which was a body representing the shippers — the same board of shippei;? that made this complaint. I think this agreement by its terms fully ansAvers all that has been said here about there being no adjustment of rates there on any basis of free competition or on any basis Avhich did not undertake to dis- tribute that traffic. The waj^ it was done was with the rates on the classes. The classes 1, 2, 3, 4, 5, and 6 of the official classification territory, . which applied from the eastern territory to the South, Avere made comparativel}^ Ioav Avith respect to the same classes from Cincinnati and Chicago to the same southeastern territory. They did not say anything about manufactured goods, the rates being adjusted with reference to manufactured goods in one part of the territory, but the class tariffs were made lower relatiA'ely from the 100 KEGULATION OF RAILWAY RATES. East than from the West, and it happened that these high-class goods imported and manufactured in this country fall into the classes. Now, a good deal has been said here and we have been drawn into a discussion of some actual cases he then handled. One was a recent case, namely, the Lumber Case. Senator Dolliver. Did you intend to return to this Maximum Rate Case any further? Mr. Clements. Perhaps not, unless there is some question about it. Senator Dolliver. If the chairman will permit me. I would like to ask you a few questions about that, referring to Mr. Hines's testimony. Mr. Clements. Yes ; I will be glad to answer. Senator Dolliver. The impression which Mr. Hines sought to make, I think, was that the order in that case was so comprehensive as to practically fix innumerable rates, and in its practical operation to disturb about as many commercial conditions north of the Ohio River and south as it settled. For instance, I recollect that he sug- gested that Chicago and Cincinnati went in together in a fight against New York, and that by the order of the Commission Cincinnati won out as against New York, but lost vastly by the order of the Commission on account of changes made in the Chicago rate, although no testimony had been taken, and there was no controversy between Cincinnati and Chicago. Also that two cities in Georgia, situated, I think, as Atlanta and Rome are, which for many years have had a perfectly satisfactory adjustment of rates from the Ohio River, found themselves at the end of that controversy, to which they were not a party, disturbed in their adjustment, Rome getting a differential of 7 cents against Atlanta. Mr. Cleiments. How^ much? Senator Dolliver. I think he said 7 cents in a hundred; and he gave that as onh^ one of several disturbances of fixed commercial re- lations, which, had the order ever gone into effect, would have cre- ated an insurrection down in that section of the country. Mr. Clements. I am glad, Senator, that you asked me that ques- tion, because I had intended to refer to that argument, and for the moment I had passed away from it. Senator Dolliver. I confess, Judge Clements, I was more inter- ested in the account of how far-reaching the order was in that case and how far it justifies the complaint which has been lodged here that this power of which we are considering the propriety would, in fact, be the power of general fixing of the rates. In other words, that the complaint could be so enlarged as to completely cover the whole commercial territory. Mr. Cle:^ients. The order in that case did undertake to deal with all classes of rates from Cincinnati and Ohio River points to the basing point in this southeastern territory, which was covered by the complaint, including Atlanta, Rome, Anderson, and several other places, and including Meridian, Miss. The complaint was that these rates were unreasonably high and that they were unduly favorable on the class goods to the eastern roads. We disposed of- that last question, as I have told you, upon the idea that the western roads should not have their rates made by the eastern roads; that while you could deal with lines that made up one system, the differences which made discriminations that way, there was no power in the EEGULATION OF RAILWAY RATES. 101 Commission to say that because a road leading from the East into the Southeast wanted to make a low rate, therefore a road leading from Chicago into some point in the South, wholly independent, should make a rate based upon that, except as a comparison might afford some basis for arriving at what was a reasonable rate. The complaint was, as 3'ou have stated, from these Ohio River points, particularly Cincinnati, to southeastern territory. It was only from Cincinnati, but of course it affected the Ohio Kiver points and others as Avell. The Chairman. The Commission's rates in that case were lower from Rome than from Atlanta ? Mr. Clements. Yes, sir. We made other adjustments there for which it nndertook to give the reasons in this report. We were deal- ing with these rates to these different places. We dealt with each one from the place of origin to the place of destination, and the dis- tance was taken into account, and Rome being 75 miles shorter there was that difference, and the same thing ran through the others. There was not an absolute making of rates on distance, because the Commission took into consideration the water rates and the method which the railroad had agreed upon as the basis for counting miles on wator as compared with miles on land in their adjustment of rates. The Chairman. In the finding you did not give the reasons. Are the}^ given there '? Mr. Clements. The Commission set out all the facts in its con- clusion. The Chairman. The reasons for it? Mr. Clements. The reasons for what it did, whatever the}^ are. They may not be considered good by these gentlemen. The Chairman. Was any particular reason set up as to the differ- ence between Rome and Atlanta? Mr. Clements. None at all, except the difference in distance. Senator Dolliver. Were either of those cities parties to the pro- ceeding ? Mr. Cle:ments. They Avere not. Senator Dolliver. Or heard ? Mr. Clements. They had witnesses there from different i^laces. I do not remember now, but they were not parties to the proceeding. The complaint was brought by the Cincinnati Board of Trade and brought against these roads leading from Cincinnati into that terri- tory. The roads were heard, the complainants Avere heard, the whole facts Avere ascertained so far as could be ascertained, but these cities in the Southeast did not intervene ; they did not come in and ask to be made parties. They Avere not sliut out, but you can see if the Com- mission undertook Avhen it received a complaint to invite all interests that might be affected, directly or indirectl}^, to become parties to the case, which they maj^ do if tliey ask to do so, it would Aviden this mat- ter out beyond limit. The Chairjian. Judge, here is a comparative statement showing the rate as changed from Chicago to Knoxville and Cincinnati to Knoxville. I Avish 3'^ou Avould glance OA^er it and see if these changes as noted there are correct. Wliether it would not have that effect ac- cording to the decision of the Commission in the Maximum Rate Case. That makes a very material change or difference ? 102 KEGULATIO]Sr OF KAIL WAY RATES. Mr. Clements. "\Miy,-yes; it did make a material diiference. Of course I can not verify all these figures in a moment. The Chairman. I believe you wrote the decision, did you not? Mr. Clements. Yes, sir. The Chair:han. Then you can readil}' say whether that is accurate, that comparison? IVIr. Clements. I have looked at some of these rates. As I remem- ber it, they were the rates in that case, and I have no doubt this is a correct presentation of them. I have them here in the report of the Commission. The Chairman. If that is correct, let it go in the record. It can come in here or elsewhere. Mr. Clements. Before .putting it in as a part of my testimony I should want to verify it, which is more than I can do here on my feet in a moment. The Chairman. You can put it in subject to correction. If you find it is correct, you may say so ; and if you find it is not, you may state in what particular. Mr. Clements. If you will allow me to put in the whole report, it will tell the whole story. The Chairman. According to the change ? Mr. Clejnients. Yes, sir. There is a table there showing just what the changes would be. The Chairman. I would like to get that point settled and take only half a page. The following is the table referred to : [Rates in cents per 100 pounds.] To- From— Knoxville — Chattanooga Rome Atlanta Meridian ... Birmingham Anniston ... Selma /Chicago . . . l^Cincinnati /Chicago... tCincinnati /Chicago... /Cincinnati If Chicago... l\Cineinnati I/Chicago . . . JtCincinnati /Chicago... ^Cincinnati I /Chicago... j\Cincinnati I/Chicago... i1 Cincinnati Classes. T3 o © 116 76 116 76 147 107 147 107 134 122 119 89 147 107 138 108 93 .53 100 60 114 75 126 86 114 114 111 87 126 86 i 128 ; 108 P3 99 65 99 65 126 93 126 92 109 102 103 79 126 92 126 102 79 45 88 54 97 64 107 73 98 98 95 74 107 73 113 92 cj « 82 62 57 I 37 82 ! 65 57 40 4. 106 79 81 54 106 85 81 60 91 82 89 80 83 72 68 60 106 85 81 60 103 89 88 78 64 47 64 47 85 68 85 68 76 75 64 55 85 68 80 71 5. 37 23 39 24 49 34 50 ■So 47 49 44 36 50 35 .53 48 6. 42 30 42 30 58 46 58 46 55 54 42 36 58 46 53 47 EMENTS. I think if you will examine that carefully you will see it refers to discriminations. Senator Dolliver. I think it does, but also to any other unlawful act. Mr. Clements. Any discrimination forbidden by law. I think you will find it is limited by that. Suppose, now, that the Commis- sion had filed a bill and sent this testimony to the Attorney-General. Suppose they had filed a bill at that time. Senator Kean. Is not any unjust change in classification and dis- crimination forbidden by law? ]Mr. Clements. The law requires the carriers to file their classifica- tions — make them and file them with their rates — and the Commission is not permitted to participate in making them for them. Senator Kean. It is an unjust discrimination and can be enjoined? Mr. Cle:ments. Well, a great manv of these rates doubtless w^ould not have been challenged as an unjust discrimination. They were challenged as being excessive. We did find in the Hay Case there was an element of discrimination, but that it was unreasonable also, and there w^ere doubtless some discriminations. But, now, think of the situation. There is a paper filed on the 20th, terms of which are to go into effect on the 1st of the following month. Senator Newlands. Mr. Clements, before we get to that, I will read a quotation from this Maximum Rate Case. Mr. Clements. Let me ask you this question: With what intelli- gent degree of information coidd the Commission go into a court in those two days and classif;\' all of those changes, six or eight hun- dred, and even lay a prima facie foundation for an intelligent allega- tion in regard to each one of them? Some of them may have been reasonable and some unreasonable, some discriminatory and some not. It is a wholly unworkable proposition to act in time to prevent the REGULATION OP RAILWAY RATES. 109 application of a change like that. Then, suppose we had gone on taking it up rate by rate, as has been suggested here, on one line after another. None of us here would have lived long enough to be able to get through with this line of hundreds of articles— six or seven hundred at one time. They were increased generally for one reason, and that was to get more revenue. They frankly said they picked out the articles that would bear it best. They were after more money, and they looked around and saw what would stand it best. There was no concealment of the purpose or method. Senator Cullom. The railroads fix their own classification, and there is no law to prohibit them ? Mr. Clements. No, sir. Senator Cullom. And the question is whether, if they put in force the actual freight under them, they are extortionate or not, and unreasonable ? Mr. Clements. Yes, sir. Senator Newlands. As to the remed}'. Judge Clements, I find this m the opinion of the court, page 5 : We perceive in tliis case that tlie Interstate Commerce Commission assumed the right to prescribe rates which would control in the future, and their appli- cation to the court was for a mandamus to compel the companies to comply with their decision ; that is to say, by their determination as to the maximum rates to be determined in the future. I understand that some of the representatives of the railroads who have appeared before us contend that injunction would be available in order to prevent the imposition of a rate a part of which was ex- cessive, and that the injunction would lie against the excess. As I understand it, this case was brought by the Attorney-General, was it not? Mr. Clements. No ; it was brought by us. Senator Newlands. You made up the case and sent it to the Attor- ney-General? Mr. Clements. Of course, it was proceeded with under the direc- tion of the Attorney-General, as are all of these cases. Senator Newlands. The pleadings were prepared there? INIr. Clejients. No; I guess that was prepared in the Interstate Commerce Commission's office, and by the United States attorney. Senator Newlands. Now, I am not sure whether there is anything in the point or not, but I would like your opinion as to that. As I understand, the contention is that injimction would lie regardless ef the question as to whether the Interstate Commerce Commission has got any power at all as to rates, or regardless of the question as to whether it has the right to make any order compelling the railroad to desist. Senator Clapp. If you will pardon me. Senator, I think you mis- take their position. Their position is that the law might be framed imder which that could be done. Under existing law the injunction could only lie where the complaint is based upon discrimination. I do not think any of their lawyers would claim under the existing law that a judgment would lie against existing rate on the ground that the rate per se was unreasonable. Mr. Clements. If it did, under that decision, it seems to me that the court could not fix a rate for the future. 110 EEGULATIOIs^ OF RAILWAY RATES. Senator Neavlands. I understood it was contended an injunction would lie to restrain an extortionate rate. Mr. Clements. I do not know any authority under which it would lie. Certainly the methods by which these cases are laid out in the law, it says how the Commission shall proceed, how it shall report, how it shall investigate, what it shall do, how it shall file its pro- ceedings to enforce its orders. It is statutory. Senator Newlands. Now, take the case of a shijDper who com- plains of an extortionate rate. He can, after j^aying that rate, bring an action for damages for the extortion, and he can recover. Now, suppose he brings eight or ten such suits, one after the other, and re- covers, are they to continue to collect this extortionate rate? Would he not have a right to go into equity upon the ground of preventing a multiplicity of suits, and enjoin the railroad in the collection of that extortionate rate? Would not that be outside of the inter- state-commerce act? Mr. Clements. I could not say whether he could or not. I would say that that was a wholly inadequate remedy for the wrongs that are suffered by reason of unjust rates. Mr. Bond referred to that process in his discussion of this matter. He said you could put it before a jury. A jury here to-claj'^ would find one rate reasonable, and one over yonder would find another, and you could have no uniformity of rates. The law requires the carriers to enforce and collect their published rate so long as they are published, but it is a crime to collect any other rate or to pay back any part of it. The law has fixed the published rate which the}' file as the standard, so long as it is not condemned, and it is enjoined upon them to adhere to this rate, and they are punishable for deviating from it either more or less. Now, there must be some way in which to correct that. But I do not desire to go away from the question that Senator Dolliver suggested. I realize the objection to it and the difficulties about it. On the other hand, it is an old principle of law that will be found in the books in every State perhaps, that wherever there is wrong there must be a remedy, and the theory is that the remedy must be coextensive Avith the wrong. For every injury there must be a redress, or the theory of it, at least, and tli^ one must be as broad as the other. Now, if the carriers can in one paper, 60 or 70 of them, promulgate rates — fix rates all over this country in ten days — if there be any stijjervision of it, there must be a supervision that is as broad as any injury complained of. Senator Kean. How can the Interstate Commerce Commission do that? If they can not in ten days revise the rate on six or eight httndred articles, how can they take the whole cotmtry under their eye? Mr. Clements. How can the railroad take the whole country and in one paper upset the rates all over the country? Is it to be as- sumed that what they do creates no wrong, and that because it is big we must run away from it? I understand that the American people, by their history, show that they are capable of dealing with all questions and conditions as they arise. Senator Dolliver. If it were possible to frame the law so that the Commission independent of the Department of Justice in such a case as you have described could immediately apply to a cowrt of equity REGULATION OF RAILWAY RATES. Ill for a temporarj" injunction on the ground that the new classification created an unreasonable schedule of rates, would not that be a swift and efiective remedy ? Mr. Clejnients. 1 think it would. I think it would be a very wholesome thing. Senator Dolliver. Very nuich better than the long investigation of a year or two by the Commission while the rate is still in force? Mr. Cle^ients. I think it Avould be a verv wholesome thing; that m a case like that the Commission, or somebody else representing the public, could go to a court and have that paper suspended and have it held up until there can be some investigation of it, and before it goes into effect. Senator Dolltver. Especially if the complaint in equity might prove the fact that there v\as an unhiAvful combination of carriers to produce this result ? Mr. Clements. It might be that there was good ground, and the Commission has not disputed that there was good ground, for an increase of some rate, that more money was needed, and that it was not assumed — and I am not pretending now to assume — that all of this business was wrong. But this was done in one paper, and at one time, and noboclj^ could help it. In two or three months they were revising it themselves, and cut out some of these increases. There has been a good deal of this increase effected by putting the goods at a class rate that for some time back had been going at a commodity rate, that rate being much lower than the class rate. But they re- vised their work, still leaving in a great mau}^ of these increases. I want to call your attention to another fact. It has been stated that since this increase is made in different sections of the country, this among others, that there has been a process of reduction. Now, we must not be misled by that too much, becau-e many of these reductions that are spoken of are high yet, occurring since that time, in southern and in western territory, and in eastern territory- -reduc- tions from the increases that were then made, not reductions back to the old rates. So that it is not fair to give credit for everj^thing that is called a reduction since that time, which in the end was nothing but a modification of the increase that had been made, for many of these have not even been reduced in that way. Xow, here is another illustration. On March 15, 1903. there was an advance in class and conmiodity rates from all the territories to Texas foints, an advance from the Missouri River and all territory east tliereof, being an average of 7.G per cent. Xoav, there was a blanket advance, an advance on all the roads on all the class articles and sub- stantially on all the commodities from every point in the Missouri River territory and east thereof into Texas. That was a very sweep- ing advance. If the Interstate Commerce Commission had ever made an order that amounted to one-fourth of them, it would have been berated here as a rate-making and promulgating act, and it would be said it had undertaken to lay hold of the business of the country and held up all these industries and laid its heavy hand upon these'^ mat- ters. But where does the man who is said to have the right to a reasonable rate there as a shipper or consumer have a hearing? Now, if he has any right invoivecl in it, there must be some place in the Government, which proposes to give equal justice to all people, where he can be heard and say something about it. Now, you say he can be 112 REGULATION OF RAILWAY RATES. heard. He can be heard before the Interstate Commerce Commission now. He can file a complaint, and grumble about it, and so he is heard. When I refer to a hearing, I mean by that a hearing where a wrong can be stated where there is one, and a right can be put in its place. That is the kind of a hearing I am talking about. Senator Keax. Pie has that in the court, has he not ? Mr. Clements. I think not. Even upon the theory that he could enjoin the enforcement of a rate because it was unreasonably high, the court Avould not undertake to say how much the road should charge next week. That would be making a rate b}^ judicial action — a rate for the future. There are man}- other increases here which I have written in this memorandum. I have not undertaken to put in the little ones, but a few that occurred at the time. It is the large and sweeping ones. Xow. I repeat, if there is anything in the idea that the people are to have an}^ place where they can be heard with eifect, where there could be a remedy ad;ninistered for an ascertained wrong, the remedy must be as broad as the wrong. Otherwise it is a failure. There have been some references to the Lumber Case, recentl}' decided, and now pending in the court. Senator Kean. It was not decided. Mr. Cle3[ents. By the Commission, I mean. Senator Kean. It was decided by the Commission? Mr. Clejmexts. The Commission held that the increase was un- reasonable and unlawful. Senator Keax. The Yellow-Pine Lumber Companj^? Mr. Cleimexts. Yes. Senator Keax. I thought the Commission stood 2 to 2. Mr. Clemexts. No; 3 to 2. Senator Keax. I thought it was 2 to 2. Mr. Ci.EMEXTS. No, sir. Senator Keax. I did not know that the other man was here. Mr. Clemexts. Yes, sir. It is said by Mr. Hines in respect to that matter that it was first raised to 14 cents and then to 16 cents. " Then that brought about a corresponding raise east of the Mississij^pi River on some traffic, because it had been brought down to that unreasonabl}'- low figure on account of the very low rate west of the IMissouri River. Lumber people were making enormous profits, and of course the cost of production to the railroad had very much increased, and they took advantage of the opportunity which the withdrawal of the excessive competition west of the river gave them to raise their rate. In other Avords. it was brought down simply because the rate from Arkansas to Cairo came down to 13 cents, and, when conditions were such over there that the rate was raised, the rate east of the river was raised accordingly. I think lumber, as I now recall, was the only com- modity that constituted any ver^^ important part of the change where the rate was raised. As I say, in this reduction a ver}^ low figure in the first place, and if increased afterwards was due to that fact." Now, it would seem from that that j^ou are to understand that there has been a low rate by reason of competition. The carriers from Arkansas to Cairo made a 13-cent rate, and roads from Georgia and Missis- sippi had to meet it and they put in a 13-cent rate. And when the Arkansas railroad withdrew that excessive competition that had made the 13-cent rate, that gave the opportunity to the roads east of the REGULATION OF IIAILWAY RATES. 113 river to come in and take what they thought they ought to have out of it. Now, I want to give you the manner in which that matter was pro- ceeded with. Senator Keax. Is that the Yellow Pine Case ? Mr. Clements. It is the Georgia Sawmill Company, as it is called, H. H. Tift & Co. et al. against the Southern Railway Company et al. These cases are very much alike. One is known as the Georgia Case and the other is the Mississippi Case. Senator Kean. AVe have in the record the whole of that Mississippi Case, put in by ]\fr. Robinson, of Louisiana. Mr. Cleimekts. Not the testimony in the case, I presume. I only want to call the attention to the manner in which this excessive com- petition west of the river was removed, and it will not take me long to do that. It would appear from this statement of Mr. Hines that it was a very innocent and natural thing in the course of business that there had been a very low rate, and that had caused a low rate from points east of the river, and that the Arkansas people took out their exces- sive competitive rates and that gave the opportunity to the roads in there to go back to their rates, such as they wanted. Mr. Green, a witness in the case in behalf of the Southern Rail- way, testified as follows : Mr. EoATEiGHT. With reference to this general increase in the lumber rate through the yellow-pine producing section, \Yas there any effort made on the part of the Southern Railway or other Georgia line, in your knowledge, to have the lines west of the river increase their rates, or did they do that voluntarily and without suggestion? I am referring to the increase in 1903. Mr. Green. Do you mean a conference between the southern lines and the lines west of the Mississippi River? yiv. BoATRiGHT. Conference or understanding or suggestion ; I do not know which it might be called. Was there any effort on the part of the Georgia line to secure this advance from Arkansas territory, or did they make it of their own volition and without consultation? Mr. Green. I will relate the whole story, so far as I know it. My information is that this question of advance rates on lumber was first discussed at the meet- ing in St. Augustine on January 28. Commissioner Prouty. What year? Mr. Green. 1903. Commissioner Prouty. You are referring now to this last advance? Mr. Green. Yes, sir. That rs what I understand he is asking about. Mr. BoATRioHT. Yes. sir ; the last increase. Mr. Green. The conference was between the lumber-carrying roads, and I think possibly representatives of some of the Mississippi lines were present ; but there were none from west of the river, so far as I know. I was not present at the conference. There was a subsequent meeting at New Orleans and. I think, a third meeting at St. Louis, at which I believe the Arkansas lines were represented. Whether any line east of the Mississippi River suggested an advance from Arkansas I do not know. Mr. P.OATRIGHT. Were the rates from Arkansas territory as well as Missis- sippi and Alabama all put into effect or intended to be put into effect -at the same time — April 15? Mr. Green. Yes, sir. Mr. BoATRiGHT. Do you think that would have been possible, Mr. Green, with- out some common understanding? Mr. Green. I do not think there is any doubt about the date the rates were to become effective. We would hardly want to put our rates up on April 15 from Georgia and have the Arkansas rates go in on the 30th. The Chairman. I understand Mr. Boatright's question to refer to the lines 741a— 05 8 114 EEGULATION OF RAILWAY RATES. east of the I'iver, including your road, as to whether they made au effort to induce the lines west of the river to advance their rates? Mr. Green. Speaking for the Southern Railway. I will say no. ilr. BoATRiGHT. In speaking for the others, what would you say? Mr. Greex. I do not know what. Mr. Compton. of tlie Louisville and Xashville Eailroad, a traffic official in some capacity, testified as follows: Commissioner Clements. You are in charge of the trattic of your road and I suppose received some instruction or information from those who did attend that meeting, or some information as to what was to be done? Mr. CoMPTox. After the St. Augustine conference I had a conference with 'Mr. Good\Ain — he is our general freight agent — and I told him I thought it desiraiile on our part to get an advance in posed the Senator from NeAv Jersey called attention to it for some reason. Senator Kean. I did. Mr. Clements. That shows a little delay. But here is the printed testimony in one of those cases [indicating record]. Senator Kean. I do not sec very w^ell how Mr. Gardner could have done anything else but give such testimony, after having 3 to 2 of the Commission decide in his favor. Mr. Clements. I should hardly impute to Mr. Gardner a motive such as that, that he had come here simply because he had won a case, if you could call it Avinning a case. Here is one of these cases contain- ing some 1,700 pages of testimony filed, with the exhibits. There is another here quite as elaborate. It is not strange that it should have taken a little over a year, with all the other engagements of the Com- mission, to make a decision in that case. There have been about 2,300 informal complaints disposed of in the last fi^'e j^ears by the Commission. That is somcAvhere betAveen one and a half and two a day. All of those required a lot of letters back and forth, and there is a large volume of that business going on all the time. The Commis- sion can not close its doors and go and sit, lilce a court, you know. Senator Xeavlands. I do not understand that there has been any complaint that the Commission has not been active in its work. The question is raised that the Commission is OA^erloaded with work now, and to increase its jurisdiction Avould simply delay the administration of these matters. Mr. Clements. I understood that the railroads were complaining here because Ave did not enforce the laAv against them rapidly enough. That is the Avay that I ha\'e understood it. Senator Neavlands. That is true. INlr. Gardner Avas not complain- ing, as I understand it, that you Avere not actiA^e enough. Mr. Clements. I do not think that any undue amount of time was spent on that case. Senator Neavlands. And on that subject, as to whether or not this duty that is assigned to the Commission Avill so increase their Avork as to make it practically impossible for them to hear and determine, what is A^our opinion? Mr. Clemeis^ts. I should think not. If it does, we could find some remedy for that, I suppose. It is not going to upset the business of the Avorld. It did not before. And people, I guess, in the main, are fairly reasonable. People do not Avant to confiscate railroads. I am sure that is true. You maA" go out in the countrA" and go everv- where and you Avill find that nobody Avants to confiscate the railroads. No man Avants to do it, and the courts are here forcA^er to stop it if they did. But the shipper, if he has any rights whateA^er in\"olving the amount of the rate, I repeat, ought to have a place somewhere where he can be heard with etfect and haA^e a correction of it. NoAv, we have here another investigation of the increase of the rates on grain and iron articles, and so forth, and Mr. PoAvell, of the 118 REGULATION . OF RAILWAY RATES. Southern Railroad, a very reputable gentleman, who knows a great deal about railroads and their rates and their business, was asked in that case certain questions, and testified as follows : You draw a distinction between an announcement and an agreement as to what was done at the New York meeting? He had been attending a meeting of that sort regarding these rates and made some statement of that sort. You do not mean to convey the idea that there was an announcement by each road, that there was an absolute intention to raise these rates regardless of what the others did? Mr. Powell. As some of the witnesses have explained, all rates are made after discussion. No line can, in point of fact, without a great deal of danger to its revenue, without notice and discussion with another line reduce its rates. The effect of such action in the past has been the demoralization of the rates. Therefore at all meetings the advancement or reduction or the reasons for and against it are given, as a general thing. Sometimes it requires only a small amount of discussion, and sometimes it takes considerable, different lines having different views on the subject. But having concluded the discussion, it is the practice, in all deliberations in which the Southern participates, to make sepa- rate announcements. Q. They did not mean to say that one would do it whether the other did or not? — A. You mean advance? Q. Yes. Mr. Powell. It would be impossible to advance rates between two commercial centers on one road unless it was done by competing lines, unless the first- named line would go out of business. Then he was asked : So it is fair to say that the action of each company was dependent on what the others did, is it not? Mr. Powell. I think that is a fair statement. Now, that is the way these rates are increased. They get together and talk it over and say that it ought to be done, and each one goes off and they all do it. Senator Dolliver. Are the reductions also made by the same kind of agreement ? ]Mr. Cle:mexts. Yes, sir. They are frequently made the same way ; not always. Senator Dolliver. Does the Commission regard that as a violation of law ? Mr. Clements. It can hardly find that it is a violation of the law that it is charged with enforcing — the interstate-commerce law. Senator Dolliver. AVhat do 3^011 think of the wisdom of giving legality to such agreements, subject to the revisory power of the In- terstate Commerce Commission ? Mr. Cle:ments. Tiie powder to make these agreements, to make rates, and maintain them? Senator Dolliver. Yes, sir. Mr. Clements. I have always been afraid of that, mj'self. I con- less there are many good people who think it would be a wise thing to do, but it certainly ought not to be done without some adequate measure of correcting a wrong when it is done. Senator Dolliver. Supj)05ing the law is modified so as to give the proposed increase in power I0 the Commission in finally adjudicating these matters. AMiat would you say as to the legality of giving the right to make agreements — I do not mean pooling contracts, but KEGULATION OF RAILWAY RATES. 119 agreements as to rate schedules — where railroads are involved in the same traffic ? Mr. Clements. I would not feel justified in saying affirmatively that that is a wise thing to do. I will not say that I am thoroughly satisfied, beyond doubt, that it would be unwise. It is a very large question, and it is particular!}^ large when you come to look at the manner in which these combinations are going on all the time. I should think the railroad people would regard the Commission as wholly incompetent to deal with such a question as that; that they would hardly be able to get along with it. Senator Dolliver. On the other hand, Judge Logiin prepared a bill which was jDending before the committee for some time Mr. Clements. Yes, sir. Senator Dolliver (continuing). ^ATiich involved that exact scheme, or very nearlj^ the same thing. Mr, Clements. Yes; I knoAv. Pooling, or something like it, has been advocated for a long time. Mr. Tuttle told you the other day that pooling was no longer thought of, at least Iw himself. Senator Dolliver. Professor Ritchey told us it was the one thing to do. Mr. Cle]\[ents. Yes. Senator Dolliver. Public ojoinion seems to be opposed to it. Mr. Clements. The public is afraid that these people will do like other peojile, and that that would enable them to get more than if they were left in competition with each other. Now, I am not here to arraign the railroad^. These gentlemen are elegant gentlemen in many ways, but they are not different in human nature from other people, and when, under the law, you can lawfully take a profit, most people are disposed to take it by lawful methods. It may be an excessive one, but whether you can get it under a pro- tective tarifl' or under a railroad adjustment, or, frequently, under a rebate, people are tempted to take it. regardless of their neighbors. They do not regard themselves as the keepers of their brothers and neighbors in that respect. In regard to this matter of capitalization something has been -aid, in this argument on behalf of the widows and orphans. I see a good deal of data has been put in here from time to time showing the distribution of railway bonds and lailway stocks, and some gen- tlemen have been in here and discussed the interests of people who have their little holdings invested in these things as a kind of a savings bank, and say that that is an interest which must be looked after, which simply means that they must look after that property and provide against its confiscation by destroying the profits and taking away the interest and dividends, which is a perfectly rational and reasonable thing to do. Und()ul)tedly a rr.ilrond onulit to be able to earn enough to take care of its fixed charges and to earn a reasonable profit, if it can do so, whether these stocks and bonds are held in the hands of one person in a block of 10,000 bonds or whether they are scattered among many hands — whether they are held by widows and orphans or by millionaires. I see no difference in the principle. It is a monstrous proposition that if property is held by (me or two millionaires you can confiscate it, but if held by widows and orphans yon can not. The law makes no such distinction as that, 120 REGULATION OF RAILWAY RATES. and the presentation in itself involves the theory that there is one rule for one class of people and another for another. There is also this argument, which I have observed: That any- thing is to be inferred from the fact that a lot of railway conductors and switchmen and railway employees of various sorts have sent in petitions protesting against this power. I would hardly assume that they were men of such exact knowledge of rate-making conditions that they would know enough about this branch of the railway busi- ness to. afford you information. They simply protest that if you rob the railroad, the railroad can not pay them ; and if you let the rail- road make an excessive profit, then it can pay them excessive wages. I hardly think the law takes notice of anything of that kind. There is no principle upon Avhich it is right for a railroad, a railroad management, or the railroad employees to combine against the con- sumers and the producers of this country. Wliat is right is fair and just. Beyond that it makes no difference whether the exaction, if it is unjust, is taken by one or by the other or by both, and distributed. There is no soundness in that principle. But I have a little matter here that I want to call to your attention, which was disclosed in the proceedings two or three years ago. The railway commission of Kentucky presented a complaint before the Commission which called for the investigation of the acquisition of the Louisville and Nashville Eailroad by Mr. Gates. That came out, at least, in the investigation. It appears that Mr. Gates, a very activ^e man, had gotten hold of a majority of the stock of the Louis- ville and Nashville Railroad Company, which had previously' been held and controlled by the Belmonts, in the interest of others whom they represented, and it disturbed some gentlemen in New York very much to think that Mr. Gates should be turned loose as a railroad man in the South, running the Louisville and Nashville road. The testimony shows that Mr. Gates had begun to buy this stock of the Louisville and Nashville Railroad at about 110, and he paid as high as 130. It was said that he paid on an average about 125 for it. It was running along at about 110 before he commenced. When it was ascertained that he had a majority of the stock. Mr. Morgan was able to get Mr. Schwab to go, at 1 or 2 o'clock at night, to his hotel and wake him up to knoAv upon what terms he could get an option upon that, or b^iy it, and they found Mr. Gates and got him to give an option by which he agreed to take 150 for all majority of the stock. They took the option and handled it, and Mr. Morgan called up the president of the Atlantic Coast Line and suggested the situation to him, and the outcome was that the Atlantic Coast Line agreed to take it at 150, and to do so issued $35,000,000 in new bonds, $8,500,000 in new stock, to the former stockholders — to the then stockholders— and $5,000,000 of stock further. That resulted in an increase of the bonds and stocks of the Atlantic Coast Line: a net increase, of about $50,000,000, in order to enable the Atlantic Coast Line to take the control of the Louisville and Nashville Rail- road out of the hands of Mr. Gates. Mr. J. Pierpont Morgan ex- pressed it in this way in his testimony : I do not wish to impugn any man's ability, but I did not consider that Mr. Gates was a proper person to manage the LouiSAnlle and Nashville Railroad. Mr. Gates was perhaps an active man, and he might indulge in what would be called among railroad brethren " unreasonable and REGULATION OF RAILWAY RATES. 121 rough competition." I suppose that is what it meant. Pie was not wanted in that family of railroad men. And therefore the net out- come was that the Atlantic Coast Line was saddled with about $50,000,000 more of capitalization in order to get Mr. Gates out of the way. The proj^erty did not have another nail driven in it, or another cross-tie, or any more rolling stock, or any stock of any sort in addition ; but when you talk about the railroad rates of the Atlantic Coast Line and the increase of 2 cents on lumber Avhich the Atlantic Coast Line made along with others, the Commission, or Congress, or the country want to consider that $50,000,000 of capitalization, as well as that j)art of the capitalization of these railroads in the hands of the widows and the orphans who have put in their little savings into these securities. And when you consider these $50,000,000 worth of bonds, of capitalization, you should consider that the bonds be- come a fixed charge. Interest on them must be paid. That is just one^little case. That is an illustration of what is going on and has been going on. Senator Dollivek. Would you suggest an investigation of the issue of new securities of these railroads ? Mr. Clements. There may be a remedy of that sort; but I am making an answer now to this crj^ about the confiscation of bonds ■and stock, and the confiscation of propert3\ and so forth. I think considerations of that sort, as well as of these combinations in restraint of trade l)y Avhich rates are advanced upon agreement, are legitimate and pertinent considerations when you come to consider the reasonableness of a rate; because the law has left competition to fix the standard of reasonableness in respect of rates. Senator Cullom. If it will ni^t disturb you, will you be, kind enough to tell me when Mr. Gates sold to Mr, Morgan, on what date; and also when did jNIr. Morgan sell ? My understanding is that there was considerable time between those transactions. If you have the dates there, I would like to have them. Mr. Cle^ients. I can take an extract from the testimony taken in that case and send it to you ; but I could not give vou the dates here. It is somewhere about two or three years ago that that was heard. But there was a limit on the option, and as I remember the testimony, the whole matter was fixed up before the option ran out. Senator Cullom. Mr. Morgan was away, I think, when one of the transactions took place, and if you can furnish the data I Avould be glad to have joii do it. Mr. Cle3ients. I can furnish that. It was some couple of years ago, I think, speaking from memory. Senator Clapp. Was there an investigation by the Commission? Mr. Clements. Of this matter? Senator Clapp. Yes. Mr. Clements. Yes, sir. Senator Clapp. How did that come out? Mr. Clements. The railroad commission of Kentucky instituted a complaint before the Interstate Commerce Commission in respect to these matters. Senator Clapp. "What was that based on ? I am simply asking for information. Mr. Clements. I do not remember now all the grounds on which 122 REGULATION OF RAILWAY RATES. that investigation -was based. It was a complaint from the railroad commission of Kentiiclcy to the Interstate Commerce Commission, and I should say. from memory, that it involved the allegation of imreasonable rates brought about b}^ combinations. There was a good deal said in the case about some combination in violation of the laws of Kentucky. Senator Clapp. Have there been any rates changed? Mr. Clements. I do not remember about that. This testimonj^ was brought out in this way : ^Alien the railroads answered this complaint made by the Kentucky commission they set up that it was a matter not within the jurisdiction of the Interstate Commerce Commission to interfere ; at least a part of it. Senator Cullo3i. I suppose you referred to it more because it was a notable transaction, and a questionable one, than with a view to what effect it would have upon the country ? Mr. Clements. I referred to it simply to illustrate how it is that the fixed charges can be increased, and the public must meet the in- terest on stocks and bonds without any change in the property, and how it has been done in other cases. So that matters have gone so far that it is not safe to say that all these bonds and stock represent a bona fide investment, entitled to earn a profit. And I want to say in reply to the Senator from Minnesota that both the railroads when they answered the complaints denied the power of this Commission to investigate the matter. I do not know whether that went to the whole complaint, but it certainly did to a part of it. and possibly to all of it. But when we met to take it up, one by one they withdrew that. Mr. Stetson, I think, and some of these others, said that they withdrew it, and they represented some of them, and they would be glad to disclo'se everj'thing about the mat- ter, and Mr. Baxter, representing the Southern, said the same thing, so that the testimony was given by common consent. I referred to it not for the purpose of impugning these men. They conducted what they considered a lawful transaction as the law stands. I spoke of it to show how the competition goes on in one form and an- other, but the competition is more or less^ diminishing, and therefore the greater the necessity of some sort of efficient regulation of rates. Senator Clapp. What have you to tell us about what use was made of that ? Mr. Cle:ments. The Commission did not pursue it. They stated that they wanted to take it up again at Louisville, but they never did it, and the matter Avas left in that form. Senator Xewlands. Do you think it would be wise to provide that stock and bonds of railroads engaged in interstate commerce should have to be approved? Senator Clapp. I would suggest that that has not been brought up by the witness, and accoi'ding to our agreement. I think we ought to confine our inquiry to what lie brings out at this stage, and bring these things up later. . Senator Neavlanos. I think that it is pertinent. Senator Clapp. It is pertinent, but we had agreed to take these things up later. Of course, it is perfectly pertinent. Senator Xewlands. Very well. Mr. Clements. That happens to be a subject of larger dimensions, KEGULATION OF RAILWAY RATES. 123 which I did not come here to discuss, but I am perfectly willing to answer anything that I can on it. On this subject of consolidation, etc., I have some figures here further illustrating the processes by which it goes on steadily, and I have taken this simply because it is a striking illustration of the same consolidation and combination which must affect the limitation on competition. The Pennsylvania Railroad has $296,504,550 in stock, and the Pennsylvania Company, $40,000,000; the Baltimore and Ohio Railroad Company, $184,000,- 000 ; the Chesapeake and Ohio, $62,000,000 ; the Norfolk and Western, $89,000,000; the Philadelphia, Baltimore and Washington Railroad, $23,000,000; the -Northern Central Railroad Company, $11,000,000. I am merely giving you the round numbers here without the odd dollars. Senator Kean. Is this the capitalization of the Pennsjdvania Rail- road? Mr. Clements. It is the capitalization of these roads. There are a great many other railroads in the Pennsylvania System. I am only speaking of these important lines. This includes the Pennsylvania Railroad Company and the Pennsylvania Companj^, the Baltimore and Ohio Railroad Company, the Norfolk and Western, the Chesapeake and Ohio, the Philadelphia, Baltimore and AVashing- ton, and the Northern Central. I have limited these to this number because they are very conspicuous and important roads and illustrate the manner in which these holdings are interlocked, so to speak, with these different roads. Of the stock of the Pennsylvania Company the Pennsylvania Railroad Company owns all — $40,000,000. Of the stock of the Baltimore and Ohio Railroad Companj^, which is $184,- 000,000, the Pennsvlvania owns $51,000,000 and the Pennsylvania Company $16,000,000, the Philadelphia, Baltimore and Washing- ton Railroad Company owns $1,781,000. and the Northern Central Railroad Companj^ owns $1,781,000. Of the Chesapeake and Ohio Railroad Company, which is $62,000,000, the Pennsylvania Railroad owns $10,000,000, \he Pennsylvania Company $4,000,000, the North- ern Central Railway Company $1,500,000. Of the stock of the Nor- folk and Western Railroad Company, which is $89,000,000, the Penn- sylvania Railroad Company owns $25,000,000, the Pennsylvania Company $26,500,000, the Northern Central Company $1,500,000; and of the stock of the Philadelphia, Baltimore and Washington Railroad Company, which is $23,000,000, the Pennsylvania Railroad Company owns $23,000,000, with some odd figures — practically all. The Northern Central owns $352,000. The Pennsylvania Company owns $9,000,000. I have left off the odd figures generally. Now, among the persons who are on boards of directors, one person, who is on the Pennsylvania Railroad Company's board of directors, is on 24 different boards of directors. Another person is on 17 boards, and so on. Some of these directors are on practical!}^ all of these boards of directors. For instance, Mr. Barnes is on the directorship of the Norfolk and Western road, the Baltimore and Ohio, the Penn- sylvania Company, and the Pennsylvania Railroad Compiiny, b".t not on the Chesapeake and Ohio. Mr. McRae is on the Pennsylvania Company, the Pennsylvania Railroad Company, the Baltimore and Ohio, and the Norfolk and Western. And so it goes. I have these 124: REGULATION OF RAILWAY RATES. statements, which illustrate how the management of these roads is in the hands of the same men. Senator Kean. Do you intend to put those statements in ? Mr. Clejnients. Yes ; I will put them in if they are acceptable. Senator Kean. Those are very well managed properties, I pre- sume ? Mr. Clements. T presume so. I am not questioning that. But I think it is a legitimate inference that when the same or many of the same people are on the boards of directors of each one of these roads, or all but one, that they are not as likely to indulge in competition with one another as they were when they were separate "and distinct and independent. That seems to be a reasonable inference. Senator XEWiiVNos. Hence you would not expect any reduction to take place by competition such as has hitherto taken place? ]Mr. Clements. That is exactly the issue that I make in these things; that is what I call to your attention. I see Senator Gor- man is on one of these, as well as another gentleman, whose name I can not find here now. Senator Kean. Is Senator Gorman on there for the State of Mary- land, as a State director? Mr. Cle^ients. Mr. Gorman and one other man are here as repre- sentatives of the State of Maryland. That Avas what I was proceed- ing to state. I wanted to state the fact in the record. They are there as representatiA'es of the State and not in any personal ca- 13acit3^ Senator Kean. You think that the service to the public of the Pennsylvania Railroad is good? Mr. Clements. Good ? Senator Kean. Yes. Mr. Clements. They have undoubtedh" good service. I think they complain at times that they are very greatly congested and need more rolling stock, and I know at times they have been so. But I am not making any contest here that they do not render good service, and I am not making any contest for the confiscation of these stocks or bonds or trying to impugn any man here because he is on two or three of these boards. That is under the law, and I suppose that it is legiti- mate ; but I am speaking of it as a continuous and a growing condition which tends, as every man must recognize, I think, to the limitation of competition upon which the public is supposed to rely for protec- tion against unreasonable and extortionate rates. We are constantly told in these hearings that there is no danger of the railroads putting on excessive rates, for several reasons. In the first place, because it is against their interest to do it : in the second place, because the force of competition is such that it is practically impossible to do it any- how. Now, the Senator from New Jersey called my attention when I commenced — and I intended to speak of it soon — to this statement found in a report made by the Commission in a case concerning Senator Kean. Strawberries? Mr. Clements. {Strawberries : yes, sir. Senator Kean. Rates from Florida? Mr. Clements. Yes. This was reported by Commissioner Yeazey, and in that report it is said : REGULATION OF RAILWAY RATES. 125 Notwithstanding the Commission has held from the time of its organization to the present time that the statute reqiiires it to ascertain and determine what the reasonable maximum rate is, on a comphiint alleging violation by reason of excessive freight charges, yet some carriers continue to deny the soundness of this view of the law. But under the renewed presentation of this argument, it still seems plain to us that regardless of where the general i>ower to estab- lish rates may be lodged, the ascertainment of a reasonable rate where extor- tion is charged necessarily involves the determination of how much an existing rate is in excess of what is reasonable. Senator Kean. That was in 1892. Senator Newlands. What case is that? Senator Kean. That was the Strawberry Case. Mr. Clements. Decided in January, 1892. That was a complaint made before I was a member of the Commission. I was only calling your attention to that case because of the statements that have been made as to whether or not that power of the Commission had been questioned prior to the statement of Mr. Morrison. I want to print what Mr. Slorrison said in here. AATiat the Commission said was written and jjenned by Mr. ISlorrison, and I want you to understand that thoroughly, that i\[r. Morrison did not say that nobody ques- tioned its power. AYhat he said was that no member of the Commis- sion ever officially expressed any other view or ever failed to join in the action which was taken, beginning with the case which was com- menced the second month after the Coinmission was organized, and as to that, no railroad company filed in any answer a contest about this question for the first ten years that the Commission was rumiiiig. That there was some argument and talk here and there about it I have not denied, of course. Senator Clapp. The time has come for adjournment now. We can not get through with you before dinner this evening, Mr. Clements, so we will take a recess, and if it suits your convenience and that of the Commission we will be pleased to hear you further at 11 o'clock to-morrow morning. Mr. Cle]n[ents. I thank you. I have but little more to say, and I will be here then. Saturday, May 20^ 1905. CONTINUATION OF STATEMENT OF HON. JUDSON C. CLEMENTS. Senator Cullom (in the chair). You may proceed, Mr. Clements. Mr. Clements. Mr. Chairman and 2:entlemen of the committee, when the adjournment was held yesterday afternoon I had referred to some papers relative to the ownership by different railroad companies of the stock in others. I had gone through with the papers and was asked by a member of the committee to put them in. By accident I got hold of them and took them away with my other papers. I sim- ply want to present these papers in connection with my statement yesterda}' afternoon. Senator Cullom. They will be considered a part of your remarks and go in. 126 EEGULATION OF RAILWAY EATES. Report for the year ending June 30, 1904. Capital stock outstanding : Pennsylvania Railroad Company- $296,504,550 Pennsylvania Company 40,000,000 Baltimore and Ohio Railroad Company 184,244,812 Chesar>eake and Ohio Railway Company 62,799,400 Norfolk and Western Railway Company. 89,000,000 Philadelphia, Baltimore and Washington Railroad Company__ 23,494.575 Northern Central Railway Company 11,462,300 Of the stock of the Pennsylvania Company 40. 000. 000 Pennsylvania Railroad Company owned 40,000.000 Of the stock of the Baltimore and Ohio Railroad Company 184, 244, 812 Pennsylvania Railroad Company owned 51,773,300 Pennsylvania Company owned 16,044,600 Philadelphia. Baltimore and Washington Railroad Company owned 1, 781, 500 Northern Central Railway Company owned 1.781,500 Of the stock of the Chesapeake and Ohio Railway Company 62, 799, 400 I'ennsylvania Railroad Company owned 10,130.000 Pennsylvania Company owned 4,000,000 Northern Central Railway Company owned 1.500,000 Of the stock of the Norfolk and Western Railway Company 89, 000. 000 Pennsylvania Railroad Company owned 25,830,000 Pennsylvania Company owned 6,500,000 Northern Central Railway Company owned 1,500,000 Of the stock of the Philadelphia, Baltimore and Washington Rail- road Company 23,494,575 Pennsylvania Railroad Company owned 23,132,200 Northern Central Railway Companv owned 352.200 Of the stock of the Northern Central Railway Company 11, 462. 300 Pennsylvania Railroad Company owned 9,401,950 ?tarnes of persons on the board of directors of more titan 6 railivaij companies. Boards. Oreen. John P 24 McC)-ea, James , 17 Rea, Samuel 17 Shortridge. N. P 16 AVoods, Jose]»h 16 Turner, J. J 14 Barnes, W. H 14 Tavlor, E. B - 13 Pugh, Chas. E 12 Wood, George 9 Cassatt, A. J 8 Prevosc, S. M S Morris, E. B 7 It apjwars that the members of the boards of directors of certain railway com- panies, mostly in tlie Pemisylvania Railroad system, as given in their reports for the year ending June 30, 1904, aggregated 395. An analysis of this number *>hows that : 157 directorships were held liy 157 persons on 1 board only. 63 directorships were held by 26 persons on from 2 to 5 boards. 375 directorships were held by 13 persons on more than 5 boards, distributed as follows : 1 person held 24 1 i)ersou held IJ 1 person held 7 ^1 1 person held !■'' 1 person held 1^ 1 person held ^"^ 1 person held 1* REGULATION OF EAILWAY EATES. 127 1 person held 13 1 person held 12 1 persoji held 1 person held S 1 person held--. S 1 person held 7 13 persons held 175 Names of the directors of the Pennsylvania Railroad Company, Pennsylvania Company, Baltimore and Ohio Railroad Company. Chesapeake and Ohio Rail- loay Company, and Norfolk and Western Ralicay Company, as given in their annual reports for the year ending June 30, lOO'f. Pennsylvania R. R. Co. Barnes, Wm. H Cassatt, Alexander J. Cuyler.T.DeWitt. .Ellis, Rudolph . . . . Fox, Alexander M . Godfrey, Lincoln. Green,. John P Griscom, Clement A Little , Amos R McCrea, James Morris, Effingham B. Patterson, C. Stuart Prevost, Suther- land M. Pugh, Charles E-... Rea. Samuel Shortridge, N. Par- ker. Wood, George Pennsylvania Co. Baltimoi'e and Ohio R. R. Co. Barnes, Wm. H Cassatt, A. J Green, John P. McCrea, James .. Morris,E.B Patterson, C. Stuart. Pugh, Charles E Rea, Samuel Shortridge, N. P. Taylor, Edw. B Turner, J. J Wood, George Wood, Joseph- Bacon, Edward R Baughman, L. Vic- tor. Cowen. John K. Chesapeake and Ohio Rwy. Co. Axtell, Decatur . Gorman, Arthur P Green, John P- Harriman. Ed- ward H. McCrea, James. Depew, Chaun- cey M. Green, John P. Norfolk and West- ern Rwy. Co. Newman, Wm. H Prevost, Suther- Prevost, S.M land M. Rea, Samuel Rea, Samuel Ream.NormanB _ SchiflE, Jacob H Speyer, James . Steele, Charles . Stillman, James. Stevens, Geo. W Twombly, H. McK. Wickham.H.T.. Barnes, Wm. H. Doran, Joseph I. Fink, Henry. Green, John P. Johnson, L.E. McCrea, James. Morawetz, Vic- tor. Prevost, S.M. Rea, Samuel. Shortridge, N. Parker. Taylor, WalterH. Senator Kean. Before we proceed, I want to call attention to an error in the record of yesterday. At the top of page 93 the atten- tion of Judge Clements was called to what was known as the " Straw- berry Case." It reads, " That was in 1902." It should be 1892. Mr. Clements. The date was 1892. That is correct. Senator Kjean. I would like to have that correction made, Mr. Clements. In connection with this same question of issuing bonds and owning bonds and stocks of one company by another, it 128 EEGULATION OF RAILWAY RATES. was developed in the investigation of the Northern Securities scheme that the stock of the Chicago, Burlington and Quincy road was taken over at the rate of 2 for 1 by the Great Northern and the Northern Pacific, and they were to issue bonds and make mortgages on those roads to the amount necessary to take the stock of the Burlington at that rate. There was a large increase proposed at that time by that plan of making an annual fixed charge to pay the interest on those bonds that were put upon those northern roads in order to acquire the stock of the Burlington at a very handsome price. I do not wish to dwell upon this particular question any further in that line or extend the discussion further, but I Avish again to say, as I did yesterday in referring to those matters of ownership by one road in the stock of another, and these directorships where one person is on the board of directors of a half dozen or dozen or twenty roads, that the whole purpose of it is to indicate the process and trend of the present condition in respect to amalgamation and community of interest, resulting in the elimination of competition, which has interfered with the right of the public to be protected against extrava- gant and unreasonable rates. This is no personal matter. If it is lawful for the gentlemen to do it, they are within the law, and I do not say that it is or is not. I am not talking of men. The Senator from Ncav Jersey asked me if the Pennsylvania road, to which reference was made, was not well managed. Of course it is well managed. There is no better managed road in the country. I am not making any attack upon the Pennsyl- vania road or upon any man whose name appears in these papers. It is not a question of men ; it is a question of conditions. That is all the reference I have made to these matters, and that, I think, is j)erti- nent in connection with the question as to whether the public is fully protected now as against unreasonable rates. I must pass on. I do not intend to extend my talk much further this morning. I was asked to state some dates in respect to another matter to which I referred yesterday — that was a transaction between the Atlantic Coast Line and the Louisville and Nashville road. I have taken from the record in that case this quotation from the testimony, which I think covers the question the chairman asked me j^esterday to cover by information this morning : IVIr. Gates : First besiui to acquire the stock, " I think, in March." Last stock which entered into tlie transaction bought between the " 7th and 10th of April." Mr. Schwab " came to my hotel and woke me up at 2 or 3 o'clock in the morn- ing " the 9th. 10th, or 11th of April. Option given April 15, 1902. Mr. Erwin : On or about December 1, scrip representing 306,000 shares of Louisville and Nashville stock was delivered to the Atlantic Coast Line Rail- road Company. Those dates I think cover the information asked for yesterday respecting the beginning and end of that transaction. I was also asked to present, as an appendix, the hearing of the Milk Case, to which reference has been repeatedly made. That I have this morning. The paper referred to was ordered to be printed as Appendix H. Senator Kean. Has the Atlantic Coast Line presented any com- plaint to the Interstate Commerce Commission for violations of the interstate-commerce act? EEGULATION OF EAILWAY BATES. 129 Mr. Clements. I can not tell you the details of that complaint. It was presented by the board of railroad commissioners of the State of Kentucky, and they were represented by the attorney-general of Kentucky. As I remember it, there was some allegation of combina- tion in restraint of trade, in violation of the law. Whether or not there was complaint of rates I had no opportunity to ascertain last night after I left the committee room. Senator Ivi:an. But the Commission occupied a good deal of time in that case. Mr. Cle^ments. "We occupied a few days in New York, and when we quit there it was with the understanding that we would be re- quested to go to Louisville to take further testimony; but we never went, and the matter never went any further. If the Senator has reference to the question Avhether the matter involved there ^as one within the jurisdiction of the Interstate Commerce Commission, I am free to say that I have always had the impression that it was quite doubtful whether it was or not. Senator Ke.vn. I am under the impression also. Mr. Clements. We were not called upon to pass on that question, for the reason that, although the respondents raised that question, when we heard the case they withdrew all objections and said they would present the witnesses, Mr. Stetson and Mr. Baxter represent- ing the road, so that what was done was done without question, by common consent, so to speak. Senator Kean. I was only looking at it in the way of taking up the time of the Commission. Mr. Cle:ji:ents. The Commission hardly felt at liberty to refuse the State of Kentucky, as it Avas represented by its commission and at- torney-general, to hear what they had to say about the case at least, and see whether they could present a case or not. Besides that, by the twelfth section of the act to regulate commerce the Commission is required to keep itself informed with respect to these general mat- ters and to make recommendations from time to time. I concur in some of the statements I have seen from time to time, to the effect that probably some of the most effective good that has been accom- plished has been by these public investigations held before the Com- mission and the publicity that has resulted. Senator Kean, I agree with you on that. Mr. Clements. I am glad to hear that. It was said a few days ago that the Commission in 1891, in the Social Circle Case, upon the testimony of a single witness, undertook to reduce the rate on first-class goods from Cincinnati to Atlanta, which would result in other changes, and it is only fair to say that that was the case that went to the Supreme Court. It was a long and short iiaul case, as Avell as involving a complaint of the rate to Atlanta. But it leaves an unfair impression to say that the Com- mission, on the testimony of one witness, reduced the rate or under- took to reduce it a cent below the rate that that witness said was a reasonable rate. That was another case that was prepared and de- cided before I came on the Commission. Colonel Morrison handled that case, and the report bears his name. The other facts of the case pertinent to that question for a fair 74lA— 05 9 130 REGULATIOiSr OF RAILWAY RATES. understanding are that the through rate from Cincinnati to Augusta, 170 miles be3'ond Atlanta, was $1.07; the rate to Social Circle and intermediate points was $1.37, as I understand; the rate to Atlanta was $1.07, the same as to Augusta ; the rate to intermediate points was the through rate to Atlanta plus the local rate from Atlanta. The Commission did not undertake to disturb the rate to interme- diate points. The one witness, to which reference was made as being " the one," was the vice-president of the Cincinnati, New Orleans and Texas Pacific, otherwise called the Cincinnati Southern road, from Cincinnati to Chattanooga, which covered two-thirds of the entire through route from Cincinnati to Atlanta. That was the sworn testimony of the vice-president of that road. It is only fair to say that although there was but one witness that one witness was the vice-president of the road covering two-thirds of the distance. But the rate of $1.07 to the point 170 miles farther was another perti- nent fact of which the Commission took cognizajice. I have nothing further I wish to say about that case, but it is only fair to say that the person who was that •'■ one witness "' should be known as a railroad man operating that line two-thirds of the dis- tance. His testimony was taken as in the nature of an admission as to what was reasonable. Some questions were referred to yesterday in respect to this case, out of which the Maximum Rate Case grew, and I neglected to say, as I intended to do, that not long since the rates were reduced b}' the carriers themselves from $1.07 from Ohio River points to Atlanta as a representative point. The old rate having been $1.07, it has been reduced to 98 cents, and only three or four days since there has gone into effect a reduction from Chicago to the Ohio River to the amount of 5 cents on first-class and relative reductions on the other classes. So that the carriers themselves have at last moved a long way in the direction the Commission then found or directed or ordered that they should do. It is true a good many j^ears have elapsed, but there has been a substantial moA^ement by them in that direction. It may be said that this was not altogether voluntary. The Geor- gia railway commission undertook to make some rules and regula- tions last year, or in the early part of this J^ear, which resulted in an application for an injunction by the railroads against that com- mission to enjoiii a revision of rates going into effect in the State. Out of that grew a conference and compromise, the result of which was that the railroads undertook to and did reduce rates first from eastern points and then from western points all through that ter- ritor}^ Of course, the}' filed the injunction upon the theory that the rates were already low enough and ought not to be reduced. They compromised that, and the commission's case was taken out of court. If it be said that the contention of the railroads was right; that the rates were already as low as they ought to be, and that there was then a compromise, it only illustrates what I said yesterday, that a large city backed by a State commission and by influences — newspaper, public opinion, and otherwise — can be focalized so as to induce them to do a thiug of this kind. Perhaps an individual or a hamlet or small town would not be able to bring about such a result as that. It is one way or the other. The rates before this change was made were either proper or improper. If they have REGULATION OF RAILWAY RATES. 131 been forced into a reduction of them without due reason and cause. by the potency of the influence behind them, then in order to get justice or in order to get rates reduced there must be some such opinion as that which can not be brought to bear by every man in every communitv and every town. If it was right on the merits of the proposition, it ought to have been done without that sort of pro- ceeding, and perhaps might have been done some time between this and the years ago when this matter was up before. Senator Cullom. A new condition of affairs has been brought about in the meantime so as to justify it now, when it might not have been so before. Mr. Clements. Of course, there can be a great many changes. The Commission then said there had been great changes in the then exist- ing conditions from what they wore when that basis of rates was orig- inally fixed, and that the density of traffic had increased on these roads. All of that was taken into account and discussed, and given among the reasons for the finding and conclusion of the Commission in that case. I hardly think that iustice can be done to a full con- sideration of that case, if it is to be gone into without having the full report that was made at the time about it. It has been said here that the Commission hardly assigned any reasons for what it did. The reasons are all set forth there, compari- sons and costs, so far as the}^ could be ascertained. Changed condi- tions may have been due to the increased volume and density of movement over those roads which had grown up, and all those changed conditions have gone on since the original basis was made. Senator Newlands. In that case did you take into consideration any of the elements spoken of by the Supreme Court, as to value of the road and fair return upon capital invested ? Mr. Clements. We undertook to do that as well as we could with the facts before us, in resjDect to the earnings per ton per mile, the increase in density of business, and all those things. Senator Newlands. Do you find that practicallj^ any rule of ad- justing, with the considerations referred to by the Supreme Court, can be held in view ? Mr. Clements. It is very difficult to give a practical application of some of these matters in any case. I think it is said, among other things, that regard must be had to the value of the property, and per- haps to the value of bonds and stock and the earning capacity of the road and all that. Of course, the earning capacity of the road depends on the rates they are allowed to charge, in a great measure. The value of bonds and stock depends upon what they earn; what they earn depends mDon the rates; and so it goes in a circle to some extent. Senator Cullom. I do not want to hurry 3^ou, Judge, in what you have to saj^ , but I think it is proper that the committee should make it known that we expect to conclude our hearings in a few days, and that two or three other Commissioners are to be heard, as well as a good many other gentlemen, so that we would like to have what you have to say further condensed as much as it can be done con- sistently with doing justice to yourself and to the subject. Mr. Clements. I am trying to do that, and I am very nearly through, Mr. Chairman. 132 KEGULATION OF KAIL WAY BATES. As I said yesterday, it is impossible that reply can be made to many things that have been said here. I will not undertake to do that. I have done practically as much of that as I expected.- I have taken certain representative samples of what I thought was unjust, unfounded, and unfair, and I must rest with that as a sample of what might be said about the others. A good deal of reference has been made from time to time to a comparison of the rates in this country with those in England. It has been said that our rates are very much lower than they are in England. The conditions arp totally different. The hauls are very much longer in this country than they are in England. The Com- mission has repeatedly asserted, and I think established by its official statistics, that, taken as a whole, the American rates are reasonably low, particularly upon the bulk of low-grade raw mate- rials. It is not the intention of the Commission to claim that all rates, in this country or generally, are unreasonable. Upon the other hand, it is not conceded that such a thing as an unreasonable rate is either impossible or improbable. But no intelligent comparison has yet been made with foreign rates since, as a rule, the comparisons have been made by the book, and no two systems of accounts in various countries are alike. The service is unlike. The shipper loads and unloads in most cases in this country, and the shipments are carload in such large proportion. The cream of the traffic here is carried by postal cars, express cars, and private car lines, which service abroad is reported as railway serv- ice, and where, too, the rate includes such terminal charges as free cartage for collection and delivery. The freight rates, for instance, of Germany cover what here is expected only of express companies with their high cost. Senator Newlaxds. In Germany does the shipper actually have to attend to the delivery of the goods ? Mr. CLE:\rENTS. I do not know how it is in Germany. My refer- ence is to England on that point. So often as overcapitalization is mentioned of the railways of this country, comparison is made of the $60,000 to $65,000 per mile on our roads and $200,000 per mile on English roads. Acworth shows they are worth it. We have over 200,000 miles of line, mostly single track; 270,000 miles of all lines, or about one-third of a mile extra track or siding for each mile of route. England has 20,000 miles of route, but 50,000 miles of track, or 2^ miles for each single track mile. Their roads are far better ballasted and policed; their buildings are all substantial brick or stone, while most of ours are cheap frame; their terminals are far more expensive in proportion to their shorter lines, and the equipment much more dense and expensive. To all this should be added the fact that grade crossings are almost unknown, and the double tracking nearly universal, which means more expensive and numerous viaducts and bridges, usually of stone, where a great proportion of our own is trestle. Much merit is made of the fact that the carriers, by their conces- sions in low long distance tariff's, have built up the trade of favored localities ; have, as they are proud to put it, evened up the advantages of location of varied industries. Let me read a clause from the opinion of Judge Taft and the court KEGULATION OF KAILWAY KATES. 133 composed of Justices Harlan, Taft, and Lurton, in what is known as the Chattanooga Case, a few years ago, in respect to this matter of comiDetition and the lessening of it. This is a statement of that oj)inion : The interstate-commerce law, it is conceded, was intended to encourage normal competition. It forbids pooling for the very purpose of allowing competition to have effect. But it is not in accord with its spirit or letter to recognize, as a condition justifying discrimination against one locality, competition at a more distant locality, when competition at the nearer pont is stifled or reduced, not by normal restrictions, but by agreement between those who otherwise would be competing carriers. The difference in conditions thus produced is effected by restraint upon trade and commerce, which is not only violative of the common law. but of the so-called Federal antitrust act. (99 Fed. Rep., 52.) Senator Newlands. That was reversed, was it not? Mr. Clements. The case was reversed, but I do not think that lan- guage was criticised in any degree by the Supreme Court. The case was reversed on the ground, as in the circuit courts in the long and short haul cases, that if there was an unjust discrimination it must grow out of the fact that tiie rates were unreasonable at the nearer point — Chattanooga — or that there was nothing to justify the lower rate at the other point ; and they held that there was competition in that case from the Ohio River. This was in reference to freight from the East, southward through Chattanooga, and around to Nash- ville. That is what was involved in the complaint. A great deal has been said here in the way of criticism of some statements that have appeared in regard to the effect of these in- creases, but as the committee is anxious to get on, and I want to get out of the way of others who are to speak, I will not take up that matter and go into detail about it. But I will call attention to this fact : That the gross receipts from the railroads of the country for the year 1903 exceeded the gross receipts from the freight business in the year 1899 (two years put into that comparison) by $425,000,000. That money came from some source. There was perhajDS 15,000 miles more of mileage the latter year than the first. I want to be perfectly fair about it. There had also been a decided increase of tonnage, and there had been a diminu- tion of rate cutting and rebates, which added to the gross receipts from all these sources. But it is idle to deny that this great increase of rates on so many hundred leading products over the countr}' that move every day over everv road in the countrv plaved no part in that vast increase of revenue in 1903 over 1899 of $425,000,000 on freight. It is idle to go into it and say that the increase of rates was a mere bagatelle or not to be considered. Why were they increased? The allegation everywhere was that it was done to get a greater revenue ; that they had to confront greater expense. They did it to get money. They show what they got. Yet the argument is made that that played no part in it ; that the effort was a failure : that they increased rates; but it did not produce much money from that source. That is a mere guess. It is said that the best estimate was made, but that they had nothing to estimate upon. It is said that in the year 1899, when freight was scarce, there would be more of it — a greater proportion of it — carried. It seems to me the reverse would be the case in the natural order of things; that where 134 REGULATIOiSr OF RAILWAY BATES. the roads -were all congested and the centers were congested the freight would move then by the direct and short line, so as to relieve conges- tion the quickest, because they would save time to take the short route. So in the matter of duplication's, which are unavoidable because some roads do not report what originates and what is brought to them, do not segregate what originates on their own lines from what is brought to them by other lines. So there is this duplication where it is hauled from one group to another. But the same basis was used for all that in both years. Beyond that, also, the percentage of the increase of tonnage in the year 1903 over the year 1899 was very much less than the increase in the percentage of gross receipts, which is another fact showing that when they increased all these rates on these leading articles for the purpose of getting more money they did not fail to do it. These gentlemen know what they are about. They are practical men, they are not theorists. The Chairmax. A"\Tien you made the,statement or report that is incorporated in Senate Document Xo. 257 3'ou had before you all the data, had you? Mr. Clements. The reports had not been handled, and most of them were in ; I do not know whether all were in or not ; some come in very late. But the tabulation and handling of these papers had not been put in shape in the statistician's office so that the matter could be covered at that time on an exact basis. Senator Dolliver. Has any report been made since that Avould bring these figures up to date ? Mr. Clements. It has been stated here, I think, that, figuring on the basis of the statistician, as he does from year to year, it would show about $104,000,000. Senator Newlands. $104,000,000 increase for 1904 or 1903? ]Mr. Clements. We take the tonnage and divide that into the gross receipts, but the difficulty was that the total tonnage included duplications. The statistician has a way of eliminating part of that, for this reason: Although the roads are required to report the ton- nage that originates segregated from that which comes to them from another road and is hauled parth^ by one or more roads, consequently causing more or less duplication, yet they are requested to report those separately so that they can be divided and the truth accurately ascertained. But a substantial percentage of the roads fail to segre- gate the tonnage in their reports. Senator Dolliver. Does not the law require them to do it? ]\Ir. Clements. The twentieth section of the act to regulate com- merce requires them to make annual rejDorts to the Commission, and the Commission has ordered that to be done, and prescribes and prints forms which are sent to the roads with specific directions to do these things, but a substantial percentage of them never do that. They will report the tonnage and omit the revenue, or they will report revenue and omit the tonnage, and then they will omit to segre- gate the tonnage which comes to them from another road from that which originates on their own road. So that the final handling of these reports by the statistician must take into account all these matters, eliminating the reports from the roads which have made imperfect reports, and reach an average from what is left. KEGULATION OF RAILWAY RATES. 135 Senator Dolliver. Do these failures, to make the report ordered or required, tend to vitiate the statistics and disturb their value? Mr. Clements. I think they substantially indicate the conditions yfter they are finally made up, but of course you can see that it makes it utterly impossible to make an absolutely accurate statement with- out full and accurate reports. Senator Dolliver. Would you suggest any changes in the law as to the form in which these reports shall be made so as to make them available and useful? Mr. Clements. I think if the twentieth section were amended so thai a reasonable penalty should be provided for failure to make reports, that would be a spur to cause the roads to comply not only within a reasonable time, but to comj^ly in full. The Commission has several times recommended that. There is no penalty now. We beg for reports, and correspond abotit them, and do all we can to get them. That is one reason why the annual report does not appear earlier. The Chairman. Proceed with your statement, Judge. Mr. Cle^ients. I do not mean, by referring to this matter of in- crease of revenue, to say that that was all ill-gotten gain by unjust increase. I find it necessary, in order not to be misunderstood, to caution against that. There is no pretense that there was no justi- . fication for some of these increases, and it is idle to say that they did not result in increase of revenue to the railroads. This whole matter is before you now. I am through with what 1 desire to say. The Chairman. The members of the committee will desire to ask you some questions. Mr. Clebeents. Before that I would like to say that the gentleman who preceded me yesterday, ]\[r. Gates, of Tennessee, referred to what 1 understood, in the connection in which he used it, to be an allega- tion that the recent complaints had been solicited by the Commission. lie did not say " by the Commission," but he had used the matter in such a connection that I could see no other inference, and made reference to it as an inijust, unjustifiable, and unfounded charge. The gentleman spoke to me about it after I went out of here — it was the first time I had met him- — and said he wanted to say that he had no idea of intimating that the Commission had done things of that kind, but "\;^ hat he did mean to say was that certain literature which had been sent out from some source or other had encouraged that sort of thing. It was a mere general expression of opinion, and in justice to him I wanted to make this statement. The Chair^ian. AVould you suggest any amendment to the exist- ing law to provide that the private car lines or private car systems be put under the interstate-commerce law, subjecting them to all the provisions of law relating to interstate carriers ? Mr. Cle^ients. I have thought that it was necessary to the ends of justice that the service in connection with refrigeration should in some way be amenable to the same jurisdiction that the freight rates are, however that can be done. • The Chairman. Do you believe, or do you know directly or indi- rectly, that there are abuses and discriminations growing out of switching and terminal charges and paying commissions? ISIr. Cleieents. The Commission has investigated a few cases of 136 REGULATION OF RAILWAY RATES. that kind Avhere it was satisfied that a manufacturing establishment, which had a short-line SAvitch or short road, was getting an undue and unreasonable amount of the through rate which would be awarded to the railroad. It would be incorporated as a railroad, and the Commission has no power to destroy its chaiter. It is in- corporated and acting as a railroad and is coupled with a joint tariff with a real railroad, and we thought it got such an undue proportion of the thi'ough rate as to amount practically to a rebate. The Chairman. Are there abtises and wrong j^ractices between railroads and ele^-ator companies? Mr. Clements. It is so alleged. The Commission had occasion to investigate that matter once or twice within the last few years. Take the Union Pacific case, for instance. It was true that they were paying a certain amount for all grain put into their elevators at Omaha. PecAw & Co.. who are doing business over that road and bringing it in there, would get the same allowance for their own grain which they put into their own elevator that was allowed the railroad. The railroad said it was to its interest to ha^'e it go into an elcA-ator there, because that was the end of the line of the Union Pacific; that they did not want their cars to go East; they wanted them emptied promptly so as to use them again back West: and that it was cheaper to them to pay this allowance to PeeA'y- & Co. on their own grain than it would be to build elevators and operate them, and so they had made this contract. The testimony shows, and in all probability it was true as a contract proposition between the elevator company and the railroad, that it was not a bad con- tract for the railroad: but at the same time a great manv have said and thought that was an undue advantage to PecAW & Co.. and that illustrates it. It is a difficult matter for the Commission, as it would be for any court, to say whether three-fourths of a cent or a cent is excessive and that j^art of it is rebate. It may be a little excessiA'e, a little more than cost, and may giA'e the man who owns the elevator a cIuId over his competitors to that extent, and on large transactions it would amount to a good deal, and yet no court, jury, or commission could satisfactorily say and demonstrate that it was so excessiA-e as to amount to a rebate. The Chairman. Do you think that the abuses, preferences, ad- vances, SAvitching charges. eleAator charges, and terminal charges can now be corrected by the laAv as it is? If not. Avhat suggestions would you make in the Avay of amendment so as to reach these particular abuses ? Mr. Cle:ments. The difficulty is illustrated in this : Take the icing business, for instance. Undoubtedly there may be some allowances made for the service. Icing is necessary to protect certain property in transit, "^^'hat shall it be? Shall it be the bare cost of the ice, or shall there be something added for the serAdce and for the other incidental expenses? And if so. how much? It becomes a matter of proof in the case. One jury would think one amount, and another jury would thing another amount was correct; and one commission might think this amount was correct, and the court another amount. Unless there can be some uniform rule to cover all that ought to be coA^ered by this extraordinary service there will always be discrimi- nations as long as the rule is flexible. We have not altogether agreed REGULATION OF RAILWAY RATES. 137 about that. Some of us have thought that this matter might ulti- mately- be reached, under the present Elkins law, as a discrimination, but it is a vexed question, and it will be litigated to the end. The CiTAiR^iAx. Xaturally, Congress wants to have the law put in such shape as to correct and prevent these abuses. Having regard to your experienc > and constant study of these matters for a number of years, what specific amendment would you recommend to be made to the present law to better prevent and puiysh all these abuses ? ]Mr. C'LEME^'TS. I can not think- of anything better than to require the carrier over whose road the cars run — or the car lines, if j^ou can make them subject to the law as a carrier — publish their rates like the railroads publish freight rates. The CiiAiRiMAN. If you could take time. Judge Clements, to write out and send to us some specific amendment to a particular section of the Elkins law or the original law, the committee would be glad to have that. \Ye should be glad to have it either from j^ou or from any member of the Commission. Our desire is to strengthen the law so as to reach these abuses and stop them entirely. Mr. Cle:\eents. If you desire, we will undertake to frame a sug- gestion of that kind. Of course, I can not do it here. It requires a good deal of ingenuit}' to make a law that will do enough and not ttDO much. The Chairman. I draw your attention to these specific abuses, and the committee Avill be glad to have any amendment proposed by you or the Commission to cover the subject. Mr. Clements. I have no doubt all the members of the Commission will be glad to take time to do that. The Chairman. In the direction of correction of these abuses, could a more uniform system of bookkeeping be devised and adopted b\' the railroads for showing the business of the roads? I mean a svstem that would enable the officers or anvbodv to examine them and detect wrong. j\[r. Clements. I am not an expert in the business of bookkeeping, but it has always seemed to me that if every road should be required to keep the same kind of books so that an examiner could go into a railroad office and find every class of items on the same book in each office and have books enough to cover the business, it would be a great facility afforded if the papers and vouchers could be entered, and that it would serve sometimes to uncover a rebate — not always. The Chairman. You would recommend that these books be open at all times to inspection by a Government railroad examiner? Mr. Clements. I certainly think that would be a great check on these evasions. The Commission now has the power to investigate under the decision of the Supreme Court — to call for the production of books and papers — but it must call for something definite. It does not know what to call for until it has found out, and does not know the number of the voucher or what book to call for, and if we call for all the books wanted to make a rambling search, then we have a wagonload of books, and we would not know where to look for any- thing. The Commission Avould be a year in examining those books, and even then might not find what it wanted. In the meantime it would be unreasonable to have those books out of the custody of those in charge of the railroad business in their offices. 138 EEGULAT10I5- OF KAIL WAY KATES. The Chairman. Do you agree that the long and short haul clause of the original Cullom law, as interpreted by the Supreme Court, is just and fair to the shippers and to the public, or would you amend it; and if so, in what particular? Mr. Clements. It stands now just as it stood before the law was passed. There never was a time, so far as I know or have any belief, when the railroads ever wanted to or did charge more for a short haul than a long haul, except where it met competition at the long- haul point. Inasmuch as it is permitted to do that in its own discre- tion in the first instance, and on its own judgment of the circum- stances and conditions, it may take into account market competition — competition of railroads and competition of water, any kind of com- petition — and they now do exactly what they did before the law was passed in certain territory in this country: They judge of it and decide that there is competition at the far point, and they meet the rate in force there and add the local rate to it, either beyond or back. If anj^thing that was being done before the interstate-commerce law was passed was in that respect wrong, it is still wrong where this practice prevails. But on that point I want to say that when the interstate-commerce law was passed there was what almost amounted to a revolution in readjustment of rate charges and classifications. A great manj' of the roads had their own classification. There were numerous classifications in the country, but they are substantially brought down to the three which now prevail and that simplifies the situation verj!- much. There was a general overhauling of rates in this territory between the Ohio Eiver and the Potomac and the Lakes, and in New England, and out as far as Chicago, perhaps, or the Mississippi River. There is now but an occasional case of that practice of charging more for the short haul than for the long. The roads went out of that business when the law was passed. I think they want to observe the law. I do not think they want to introduce the practice again where it has been abolished. The Chairman. "Would you advise, if it can be effected, that the through railway and ocean rares be subject to regulation? Mr. Cle:ments. You mean across the ocean ? The Chairman. Yes ; say from Chicago to Liverpool. In the first place, do you think it can be done, and secondly, would j'^ou advise it ? Mr. Clements. I should think that would be a very difficult thing to do. The Chairman. If it can be done by law, would 3^ou advise that it be done? Mr. Cle3ients. I should hesitate about that. I do not know. The Chairman. As I understand it, the through exjDort rate to Europe and the through imjiort rate, we will say to Chicago, are often less than the rate from Xew York to Chicago. Do you think that is fair and in the interest of the public, the shipping interests of the United States and of the producers? Mr. Clements. It undoubtedly seems to me that there should not be such a ^^•ide discrimination as that. It has always seemed to me that it would be healthful to have some competition in this country from other countries. I have always been of that school, but I ara not a radical in that respect.. The Chairman. Do you mean as to import or export ? REGULATION OP RAILWAY RATES. 139 Mr. Clements. As to import. I am speaking of that particularly, because that is a matter that has several times been brought to our attention. There is the rate, which was brought to our attention, from Belgium to Chicago, being less than from Pittsburg to Chicago. That has never seemed to me to be a reasonable adjustment. There was the Import Rate Case, where freight was brought from some point in Europe through New Orleans for San Francisco, where the rate was three times as much, as I remember it, from New Orleans to San Francisco as the rate from Liverpool to San Francisco through New Orleans. The Commission decided that that was a violation of law, an undue discrimination; but on this ground of competition the Supreme Court said that the railroad leading from New Orleans to San Francisco had a right to make it, so as not to go out of that business ; that it had to meet water competition at San Francisco. The Chairman. Does it not have the practical effect of distributing business, decentralizing business? Mr. Clements. To do that ? The Chairman. Yes. Mr. Clements. T think it promotes competition. The Chairman. That is what I mean. Mr. Clements. Sometimes it results in unjust discrimination. The Chair]man. Does it not help interior towns as against great ports and cities ? Mr. Clements. I have no doubt it does, but it is believed by the local manufacturers that it hurts them. The Chairman. In what case ? Mr. Clements. At Pittsburg. Senator Dollr'er. Does that alwavs depend upon water compe- tition? Mr. Clements. Not altogether; no. sir. Senator Dolliver. I notice it is said by the pottery people at East Liverpool, Ohio, that pottery is sent to New Orleans through Denver at a through rate from Liverpool, for less than the rate from East Liverpool to Denver. Mr. Clements. There are many such cases. Senator DolI;Wer. That would seem to require some other explana- tion than water competition. Mr. Clements. It is railroad competition in a large measure, just as was demonstrated in this Glass Case that we had. A railroad from the Gulf did some business in Chicago, and the railroads from the Atlantic Seaboard wanted it, and they undertook to take a hand. This was rail competition to the interior. Of course the Canadian route was in that case, but it was mostly water competition. The Chairman. How long has the Commission been giving atten- tion to this abuse of division of freight money between terminal com- panies and the railroads? Mr. Clements. It commenced that in the Brimson Case. The Chairman. In 1892 ? Mr. Clements. In 1892 or 1893, but it had investigated matters of that sort before. The Chairman. The Supreme Court held that Brimson must tes- tify, and that gave you a pretty frfee hand. Mr. Clements. Yes, sir. 140 REGULATION OF EAILWAY RATES. The Chairman. Did 3'ou follow that up ? Mr. Clements. No ; that case got so old before it was decided and conditions had so changed that we did not go further with that. We conducted a great many other investigations successfully under that ruling. The Chairman. With a view of getting this before Congress fairly, have you any case that you have prosecuted to final judgment to correct the evils growing out of the division of rates? Mr. Clements. The Commission has reported upon matters of that sort at Chicago and at St. Louis, has made recommendations about it, and has sent the testimony to the Department of .Justice in respect to one of these matters. Senator Kean. That was only lately ? Mr. Clements. Within a few months. ■Senator Kean. Since Congress adjourned? Mr. Clements. Oh, no. The Chairman. You have that now under consideration ? Mr. Clements. Yes, sir; I do not know exactly the status of it, but we have done what we could about it. The Chairman. I believe you are investigating the refrigerator car abuses now in Chicago ? Mr. Clements. Yes, sir. The Chairman. Then I do not want to inquire about that. But before this have you ever directed your attention to these abuses, and have you taken action ? Mr. Cleiments. The Commission has several times reported the condition of things in regard to the car lines. The Chairman. To the Attorney-General? Mr. Clements. No, sir ; to Congress, and referred the matter — the question as to whether or not they were subject to the interstate law in their charges. The Chairman. Has anybody refused to testify in those cases? Mr. Clements. I think one of the employees of the Armour Car Lines or Armour & Co., I forget which it was, declined to answer last fall; but we were doubtful as to whether they ought to be re- quired to answer in that case. The Chairman. Was that doubt only about the law ? Mr. Clements. No; we were doubtful as to whether the question was proper or pertinent. The Chairman. On the ground that the law was not sufficient ? Mr. Clements. No, sir. The Chairman. ^YhRt the committee wants is to make the law effective to reach these abuses. Mr. Clements. I do not think anything more can be done. The Supreme Court has decided in the broadest way that the Commission has the right to compel testimony upon this question. I do not know how that can be accomplished so long as the Commission can not punish. The Commission is not a court, and of course when a wit- ness declines to answer, we have to stop proceeding and wait until we can get a decision from the court, and then if the case goes to the Supreme Court we have to wait until it decides. I do not know any- thing that Congress could do to cure that, so long as these matters are conducted before a commission- that can not exercise any judicial authority over the witnesses and punish for contempt. EEGULATION OF RAILWAY RATES. 141 Senator Cullom. In your last report you discussed all these matters you have been referring to. Mr. Clements. I think so. Senator Cullom. Well, I have not read it very perfectly, but my impression is that you made recommendations in the report for such legislation as you think ought to be enacted to strengthen your hands and strengthen the law. Is that so, or not ? Mr. Clements. That is so ; yes, sir. Senator Cullom. Do you discuss in this report the question of the importance of giving you the additional power that has been dis- cussed so much here as to rate making, so called? Mr. Clements. That matter was discussed more fully in the report from which I read yesterday, in 1897, than at any other time. That was the first report made after the decision of the Supreme Court in the Maximum Eate Case, and the matter was gone into very care- fully and fully and it has been referred to repeatedJy and annually ever since, but probably not so fully as then. Senator Cullo:m. Have you made any recommendation in this last report or any other recently on the question of these private cars ? Mr. Clements. Yes ; the last annual report submits that matter. Senator Cullom. Do you recommend specifically what law should be made, if anj^? Mr. Clements. I do not think we undertake to frame the amend- ment, but we do recommend that the carrier or the car line, or what- ever is the suitable thing to do, be made subject to the law, and be put under the same rule. We do not say in that report that that is not the law now, because there is a dispute about that; but there is such a contest over it that we think the wisest thing to do is to remove it from the field of debate. Senator Cullom. Did you ever undertake to make a case against them in any way so as to test the law as to whether you had jurisdic- tion over them or not? Mr. Clements. Well, it is not improper for me to say in this con- nection that v.e took this matter up with the Department of Justice, and certain other information which was asked for and desired,^ and the matter has been taken up subsequently and is still under inves- tigation, with a view to getting a fuller development of the facts, with a view of testing the question, putting it into court where the question can be raised and a judicial determination had upon it; but still we have thought that the end of the controversy would be reached a great deal more quickly if it was determined by an amend- ment. Senator Cullom. Now, I think the impression prevails that the question of whether you should be given power to make rates, and when T say that I do not mean that you should be given power to make rates for the whole country at one time; but on a question where there is a dispute or a claim on the part of anj^one that he has been charged an exorbitant rate, whether, if you determine that ques- tion, you should have the right to determine what a reasonable rate would be. That is one of the questions before the country about which the public is very much concerned. Another is the question as to terminal charges, and another is the question of these private cars. Now, those three things, to my mind, are engaging the atten- 142 REGULATION OP RAILWAY RATES. tion of the country very materially, and we are called upon to de- termine whether any legislation additional is necessary, and if so, what kind ? Now, has your Commission, or the Commission of which you are a member, in any of these reports lately set out any recom- mendation on those three different things ? Mr. Clements. In our last annual report all those matters are re- ferred to specifically. Senator Cullom. Do you in your reports recommend some specific legislation? Mr, Clements. I would not say that we undertake to specify the language that would carry out the end, but we specifically recommend that there be an amendment in respect to these matters so as to remove all doubt there may be. Senator Cullom, What have you recommended under those three different propositions ? Mr, Clements. In connection with the power to correct an unjust rate, by substituting a just one therefor, it was recommended in order to make that effective that there ought to be some power to put into effect, to fix divisions between companies and connecting lines, mak- ing a through rate; otherwise it would be largely defeated in some cases. Senator Cullom. And you recommend new legislation to be had. Mr. Clements. Yes. Senator Cullom. Is there any other question ? Mr. Clements. I do not think in the last report we referred to this matter of some penalty for failure to make reports, and to make them as required, but we haA^e recommended that at times heretofore, and I am quite sure the railroads have never had any serious objec- tion to that kind of a spur. Those which do make their reports fully and promptly certainly would have no objections to the other. This to the end that these statistics may be made up promptly and more accurately. Senator Cullom. And the public is desirous that whatever law we enact not only be enforcible, but be enforced. Mr. Clements. Yes, Senator Cullom, And we would like to know as a committee as near as possible what the Commission vrho are dealing with the matter all the time really think as to what should be done from the different points of view where you consider them. So, if there is any other suggestion you have to make as to an amendment to the law or a change of the law, we would like to know exactly what it is. Mr. Clements. Well, it has been said frequently that the water lines ought to be placed within the Interstate Commerce Commis- sion's power. I refer now to the coast water lines. The railroads think that is a fair thing, that if they are under the law these lines ought also to be under the law. I see no objection to that. I do not know that it is urged from the public standpoint, but it would seem to be a just thing. Senator Newlands. Is that urged as to tlie river lines also? Mr. Clements. Well, I do not know about that. That has not been a matter which has been considered. The railroads have partly taken care of that themselves. They have run the boats out of the rivers, and, to use Mr. Lincoln's expression, who was on the stand REGULATION OF RAILWAY RATES. 143 the other day, they have met the water rates in the interior, so that the boats do not do A^ery much. Senator Newlands. You gentlemen are attempting to administer this law as it stands, and you find difficulty in doing it, and we are now .trying to find out what improvements of the act are necessary to be made in order to enable you to enforce the law. Mr. Clemen; TS. I think you haA-e covered about those Avhich the Commission has thought are necessary to give effect to its purposes. I ought to say on this matter about private car abuse and terminal abuse, and particularly the abuse about the terminal lines, that that is a matter that hns groAvn up mucli more intensely and to an aggra- vated degree, in my judgment and observation, than it has ever been before, since the Elkins Act, since outright rebates ha\^e stopped. These other devices ha\'e crept in. Senator Cullom. They haA^e made up new styles of rebates? Mr. Clements. Yes. Senator Newlakds. Is not that ahvays the case? Mr. Clements. Yes; A\'hen the water is dammed up one Avay, they find some other Avay, if they can do it hiAAfully. if the desire is there and it is practical. That is human nature ; but the Elkins Act is an act against all forbidden discriminations. . Senator Neavlands. You do not pretend to say that the passage of the Elkins Act Avas a bad thing to clo ? Mr. Clements. Not at all. We haA^e said that it has had a tre- mendous effect in the diminution of these abuses. Hoav long that Avill last is a matter to be determined. When the Cullom bill was passed, for tAvelve or fifteen months there AA'as but little abuse of these matters. It grew up gradually afterwards, and almost every 1st of January, from that time doAvn to this, these railroad gentle- men get together and make a gentleman's agreement that they will quit and reform and turn a ucaa- leaf and not do it any more. They break doAAm again and make a resolution again. They are noAV under a good resolution, and I have not a doubt in the Avorld that the prac- tice has been greatly diminished since the Elkins Act Avas passed and since these injunctions Avere obtained. And so much has been said here time and again to the effect that the Commission had not invoked the Elkins Act or undertaken to exercise its duties and poAvers under that, that I Avould say it is wholly unfair, because Avhen this exposure of wholesale rebates was made in January, 1902, the Commission promptly passed the matter over to the Deportment of Justice and asked to have proceedings instituted to enjoin and stop it, and any other proceeding that could be instituted under the laAv. That Avas done in 14 cases against 14 of the leading railroads in the West and in the trunk lines. The injunctions AA'ere granted temporarily, and before the matter Avas passed upon, Avhile it Avas before the court, the Elkins bill was passed, •and, as I understand it, those injunctions hold good now, but they hold by virtue of the Elkins law, which came in afterAvards. So it is not fair to say that because aa'c anticipated that when it was a doubtful remedy, as Mr. Peck said, it was the most available thing, and it was another additional opportunity the Commission was af- forded to reach these matters. I hold that exposure had a good deal to do with the passage of the Elkins bill, if I may be permitted to say so. It exposed a condition of things which suggested the act. 144 EEGULATIO]S^ OF RAILWAY RATES. Senator Newlands. The first proceeding for injunction was under the original act? Mr. Clements. Yes. Senator Neavlands. And the Elkins law was passed before the matter was determined? Mr. Clements. Yes. Then there was another suit begun directly under the Elkins Act against the Chesapeake and Ohio Eailroad. That makes 15 cases. Senator Dolliver. What was the subject-matter of the suit? Mr. Clements. It was coal rates from Virginia points into !N^ew England, where the Chesapeake and Ohio undertook to deliver coal to the New York, New Haven and Hartford road, I believe, in New England at a price which was less than the freight rates from the mine to the seaboard and the rate from there to New England. Senator Dollivek. What form did that take? Mr. Clements. It was a contract between the Chesapeake and Ohio Railroad to deliver a certain number of tons — up in the mil- lions — within a certain period, and they did deliver a part of it, and were proceeding to deliver the balance, while their published rate and the rate beyond to New England points made it impossible for them to do it on the terms of the contract, and the competing miners complained of it. Senator Dolliver. Have you sought to enjoin a discrimination be- tween two localities? Mr. Clements. I do not think that ever has been made where the discrimination was on the published rate, except in the case referred to the other day, that case of some years ago, involving Wichita and Missouri River points; and referring to that Elkins Act, you will find that the words are " where the Commission has reason to be- lieve " that there is a violation of the law it may ask for an injunc- tion. I mean discrimination that is forbidden by law. Now, it has been said here that the Commission need not wait for an investiga- tion and play like a court and investigate and find out the facts, but just walk right into court and begin a case, that that would be sufficient, if it was permitted to do that in regard to the correction of an unreasonable rate. Now, the Commission acting in good faith must have the belief before they can go into court and accuse a road with violating the law. There must be some reason for that belief. Now, must it inaugTirate the practice of taking up every complaint thrown at it from every source and saying that a complaint is here and we will institute a suit? I do not think that would please the Louisville and Nashville road or any other road. I do not think it would be fair or just to the Commission, and if it is going to inform itself so that it may have a belief based on reason, how can it do that better than hj ascertaining the facts in the presence of both parties? Shall it go and see one of the parties in a fence corner and get one side of it and form a belief on that and institute proceedings against a road ? I do not think so. Senator Dolliver. Are not most of these discriminations which are published in the rates obvious ? Mr. Clements. They are obvious as discriminations, but whether they are reasonable or unreasonable, due or undue, is not so obvious as the discrimination. The third section condemns undue and un- REGULATION OF RAILWAY RATES. 145 reasonable discriminations, but there are many discriminations which the court has said, and which, according to the facts and the law itself , it is manifest are not necessarily illegal because they are discrimina- tions. They are due and reasonable because due to circumstances and conditions which in many cases justify them, as the courts have held and as the Commission has found. Senator Kean. How long have you been a member of the Inter- state Commerce Commission? Mr. Clements. About thirteen years. ' i Senator Kean. You were a member in 1889 ? Mr. Clements. No. Senator Kean. In 1899 ? Mr. Clements. Yes. Senator Kean. Did the Commission, on the 8th day of December, 1899, enter a formal order instructing its secretary to cooperate assiduously with associations to secure the passage of an act through Congress ? Mr. Clements. Well, there was an order of that sort entered on the minutes by the Commissioners that were present at that time. Senator Kean. Will you kindly give us a copy of that? Mr. Clements. I haven't it here. • Senator Kean. Could you produce it ? Mr. Cleinients. Yes. That is some five or more vears ago. It was gone over here with Mr. Wolcott on this committee when he was a member of it and was fully discussed. Senator Kean. Did your secretary, under date of February 3, 1900, issue a circular letter in his official capacity to associations and shippers to write to Senators and Representatives in favor of the passage of a bill ? Mr. Clements. I do not know about that. I can find out. Senator Kean. If you would give us that we would like to have it. I have here a copy of a publication and the substance of testimony offered at hearings held by the Interstate Commerce Commission of the United States, sent to the House of Representatives, in favor of amending the interstate- commerce act, published bj' the interstate- commerce law convention. You had a large number of copies, did you not, in the office of the Interstate Commerce Commission last winter ? Mr. Clements. I do not know about that. Senator Kean. Given out with your report? Mr. Clements. I do not know about that. It may have been done. What year is that that you refer to ? Senator Kean. Published in the year 1904. Mr. Clements. I have no knowledge of anything of that kind. Senator Kean. At the close of Mr. Prouty's statement the other day it was suggested that the committee would like some information as to the statistical work of the Commission. Will you be kind enough to tell me who has charge of that work? Mr. Clements. Prof. W. C. Adams, of Ann Arbor, Mich. Senator Kean. Is he a professor in the Michigan University ? Mr. Clements. Yes. Senator Kean. Of what ? 74lA— 05 10 146 EEGULATION- OF EAILWAY RATES. Senator Dollr'er. He is the head of the school of political econ- omy, I think. He is one of many professors of economics, but I think he is the head of this college or school of economy. Senator Ivean. How long has Professor Adams had charge of the statistical work of the Commission? Mr. Cle^ients. He has had it longer than I have been on the Com- mission — I suppose, practically, from the beginning. Judge Cooley brought him there. He selected him, practicall3% as I understand it. Senator Kean. Do you think that if the Commission had the power to fix a rate that would do awav with all rebates ? Mr. Clements. No. Senator Kean. Do you think it would add to it? Mr. Clements. I do not know that that would materially affect the rebate question. Senator Kean. Do you think it would prevent discrimination? Mr. Clements. Well, it might be in some cases that it would oper- ate to do so. The Commission has called attention to it as it has thought a proper thing to do, mainly for the correction of excessive and unreasonable rates. It is not contended that that would add to the remedy against paying rebates. Senator Kean. 1 have no further questions. Mr. Cle3ients. Since the matter of the order made five years ago, or something like that, has been brought up, I would say that I have had it brought to my attention in the last few days by what was shown to me as a j)rinted circular, which is being scattered over the country broadcast, and a copy of which I have here, and which shows that a' campaign is on hand to secure the organization of railroad emjiloyees to protest against any legislation which might affect this matter. Senator Kean. I merely call your attention to these to contradict your statement in regard to what the Commission had done. Mr. Clements. How does that contradict the work we have done? Senator Kean. Your statement as to what the Commission had done in regard to legislation. That is all. Mr. Clements. I do not see how that contradicts anything that I have said. Senator DoLLI^•ER. I was interested, Mr. Clements, in a statement you have just made that the main operation of this power to revise rates would be in respect to rates that are exorbitant or unjurt in themselves, rather than as respects rebates and other discriminptions. I would like to go a little further into that. Would you exprct this power to revise rates to be confined to the power to readjust si set of rates complained of? Mr. Clements. Well, I do not see wliere else it could be applied unless there was some power given in respect to fixing th^. minimum rate, for the correction of a discrimination, because if the Conmiis- sion is given a power of that sort, for the correction of discrimina- tion, and it orders that the discrimination cease, that might be done by raising one rate or lowering the other. Senator Dollfver. So that the mere power to fix the maximum rate would not enable the Commission to handle the question of discriminations at all? Mr. Clements. I do not think it would. Senator Dollrer. Would it be agreeable to the opinion of the REGULATION" OF RAILWAY RATES. 147 Commission to narrow this power to revise rates in cases where the rates are complained of as unjust and unreasonable in themselves? Mr. Clements. You mean to fix the minimum? Senator Dolliver. I mean to confine the power of supervising the rates to cases Avhere a rate is complained of as unjust and unreason- able in itself. Commissioner Fifer. The exercise of the power? Mr. Clements. I have never thought of it as a suitable thing for any other i^urpose except for the correction of an excessive rate. Senator Ts'eavlands. You mean an excessive rate per se or exces- sive by comparison? Mr. CLEiNfENTS. Excessive in itself. Senator Foster. How does the number of complaints, say, within the last two years compare with the years preceding? Mr. Clements. There have been a good many more in the last year or two than in the same length of time ever before. Senator Foster. What is the nature of those complaints generally ? Mr. Clements. They often complain of the excessiveness of the rates, and they frequently complain of the relation of the rates re- sulting in the discrimination as between places. Most of them are in one class or the other of those two. It is an unjust relation result- ing in an undue and hurtful discrimination, or that the rate is exces- sive. Of course, these numerous increases in rates that have been made in the last three or four years have resulted in a good many complaints of the latter class. Senator Foster. Since the Elkins law has been in effect the com- plaints have multiplied instead of decreased? Is that the case? Mr. Clements. I think that is true. Senator Neavlands. They Avere caused by the passage of the Elkins law ? Mr. Cle]ments. I should not say so, and I should not think so — co- incident Avith it. Senator Foster. What is the difficulty that your Commission ex- periences in the enforcement of the laAv? Mr. Cle:ments. When the Commission iuA^estigates a complaint as it is required under the laAV to do, and makes its report and findings of fact, and its conclusions, and finds that there is a disobedience of the law, in its judgment, it makes an order that the carriers cease and desist from that. That has no effect at all until the Commission can go into court affirmatively and obtain a judgment or decree to that effect. Mr. Foster. Wliat remedy would you suggest to correct that de- fect in the laAv, or that want of poAver in the Commission ? Mr. Clements. Well, I have ahvays thought that when a rate was found to be unreasonable, that public authority ought to be able to find what is the reasonable rate and order the carriers to cease and desist from charging any more than the reasonable rate in that case, and that that ought to go into effect after a reasonable time within which the carriers may apply to the courts if they desire to do so. Senator Kean. Does that mean a maximum and a minimum ? Mr. Clements. I have never advocated a minimum rate. Senator Foster. Have you finished ? 148 KEGULATION OF KAIL WAY RATES, Mr. Clements. That is all, that the rate go into effect, say, in thirty days or forty days after the Commission has made its order. That would give forty days, if the carrier thought it was an unrea- sonable order and ought not to be enforced, within which the car- rier might file a bill against it, and if there is any ground on which it can be held up, they can get an order to that effect. There is not the slightest objection in my judgment to the question of what the Commission has done, the propriety of it and so on, in going to the court, if there was any way in which !he court can act upon it; but as the law has been interpreted the courts can not legislate. The fixing of a rate for the future is legislation, and it seems to me that if the rate for the future is to be fixed, it must either be done directly by Congress or by a board that is authorized to do a legislative act to that extent, and I do not see how you can confer any power on the court to do anj^ more than to take jurisdiction on the matter on the complaint under the Constitution of the United States; but if the rate is one that is confiscatory, the courts can enjoin it and will do so. Senator Foster. Now, how will these abuses of the railroads which are complained of be abated or corrected by conferring this power upon the Commission to revise the rates of the railroads? Mr. Cleiments. You ask how it will be abated? Senator Foster. How would these alleged evils and wrongs of the railroad be corrected by conferring this rate-making power upon the Commission. Mr. Clements. You- mean discrimination ? Senator Foster. Any of the abuses. Mr. Clements. If the Commission is authorized to investigate a complaint that a rate is unreasonable, and it does so and finds the facts to that effect, and is authorized to name what is the fair and reasonable rate, and the carrier is ordered not to go beyond that and is required to obey that, that would be a correction of that excessive rate. It would not only condemn the rate to being corrected, but it would condemn it down to the point of what was reasonable in the judgment of the tribunal. Senator Foster. You would not only have to clothe the Commis- sion with the right and the power to declare a rate unreasonable, but also to declare what is a reasonable rate, and then further to declare that the findings of the Commission shall go into immediate effect. Mr. Clements. That is what I think. . Senator Foster. If the law did not authorize the finding of the Commission to go into immediate effect, then joii think there would be no relief, no practical relief, because the condition would remain just as it is to-day? Mr. Clements. Yes. Senator Foster. Suppose that the law should authorize the Com- mission to examine into these complaints and the Commission should find the complaint well founded and the charge excessive and unrea- sonable and should order that the railroads should fix a reasonable rate within a reasonable time or fix another rate within a reasonable time, and in the event that they failed to fix a reasonable rate within that time that the Commission would then be authorized to go into court and enjoin them from carrying out their excessive rates. Mr. Clements. If I understand you, the proposition is, if the Com- EEGULATION OF RAILWAY RATES. 149 mission .was authorized only to condemn the rate that was in issue and then recommend that the carriers fix a reasonable rate after the Commission has named them Senator Foster. Yes. Mr. Clements. And the matter was left that way for a period of time within which if they did not do it the Commission could make another order and say what is reasonable — or, what is the next step ? Senator Foster. The next step is that the Commission could man- damus them to fix a reasonable rate. Mr. Clements. I do not see how they could go any further than to enjoin them from charging the rate which they had been charging and which it condemned, because if the court said they must cease and desist from charging that, and in addition to that should order them to cease and desist from charging any more than the court found to be a reasonable rate, then the court would be doing exactly what the Commission undertook to do in the Maximum Rate Case, and in the same way would be making a rate for the future, as the court held that the Commission was doing then ; and I do not under- stand that the court can do a legislative act or that Congress can confer upon the court such authority. Senator Neavlands. In such a proceeding suppose the Commission should have the power not only to condemn the existing rate, but to find what a reasonable rate was, and the law should provide that the Commission itself should proceed against the corporation to pre- vent it from collecting a rate in excess of the rate that was deter- mined reasonable, could not the proceeding be so expedited by the law as to result in comparatively speedy relief? Mr. Clements. You mean if the Commission made no order as to what the rate is to be, but simply condemned the rate that was in existence ? Senator Xewlands. No ; condemned the rate that was in existence and declared what the rate should be, and then instead of having that go into effect immediately requiring the Commission to com- mence a suit against the corporation to enjoin it from collecting any rate in excess of that amount. That would accomplish the same result as the other; but I understand your claim is that it would result in delay. Mr. Clements. AVhat would be the status of that order by the Commission? Is that simply a recommendation of a rate or is it a rate that the Commission is authorized to declare as the rate? Senator Newlands. It is the rate that the Commission is author- ized to declare. Then the question comes up as to its enforcement. Mr. Clements. The difficulty of that is that the Commission have been required to make an investigation and has found the rate un- reasonable and has found a reasonable rate, and that is ]orima facie taken as correct — under the present law that is the condition. Then the Commission must assume the onus of going into the court where the matter will be tried de novo; and such proceedings in equity, as all know, relating to matters of that sort, not only in regard to questions of this kind, but also all other equity proceedings, are tedious. It is particularly so in respect to these cases. The carriers want to introduce witnesses in different places and many witnesses from different parts of the country to testifj^ about rates and com- 150 KEGULATION OF RAILWAY RATES. parative rates; and, in the very nature of things, if this is to be a thorough investigation either before the Commission or before the court, to obtain all the facts that the parties at interest think have a bearing by way of comparison, and one rate with another, and the conditions, and the changing conditions, etc., it is not a matter that could be expedited. Senator Neavlakds. You think it would necessarily take a long time? Mr. Clements. It would necessarily take a long time. Senator Newlakds. How long do you imagine? Mr. Clements. That depends on the condition of the docket in the particular court. Senator Newlands. Suppose the law provided for expediting the cases in the lower court and in the higher court also ? Mr. Clements. It would be a mere guess that would be of hardly any value. I would not undertake to guess it. Senator Newlands. What have you to say as to this, that if the rate which you declare is a reasonable rate should four or five years later on be upset by the court upon the initiative of the railroad, the railroad would lose the difference? Mr. Clements. Well, if it was thought possible there can be some guard against that, but somebody must lose some amount in these matters. You can not have exact and equal justice in all these matters. If the rate is not put into force, and it is unreasonable before the litigation was commenced and afterwards, the shipper loses, and these cases would be very greatly expedited if the onus was upon the railroads to show that the order which the Commission made was unlawful. The matter would then be determined and the end of it reached much sooner than it will be when the onus is on the public to assume the burden through the Commission and through the courts. Mr. Clements. If they thought it was a rate which they could not afford to put in, they would apply at once for an injunction and show the facts, naturally, and I do not think it is a hardship. Senator Newlands. Now, where the railroad seeks to enjoin a rate upon the ground that it is confiscatory, a preliminary injunction is often granted, is it not ? Mr. Clements. Yes Senator Newlands. Do they have to give bonds in such proceed- ings? Mr. Clements. I think they usually do, but I am not sure about that. . I think that is a matter in the discretion of the court. Senator Newlands. Very well; then how is the shipper protected in such a case as that ? The case may last for t\^^o years, and during all that time the unjust rates are collected. Mr. Clements. The trouble about that is that it is impossible to protect the people injured by the unjust rate, because if a bond were required and an accounting made and the difference between the just rate aftd the unjust rate finally paid into court by the railroad, after that question had been settled the people who ship would be the ones to stand in the place to receive the reparation — the men who had shipped and who had the bill of lading and can show their names as shippers. They have bought the grain or the cotton or whatever EEGULATIOJSI OP EATLWAY KATES. 151 it may be on the price of the going rate in effect when the shipment was made. They have sold on the basis of that rate. They have disposed of the matter. The rate has followed it on down and finally rested upon the consumer, who buys and consumes the product. He would have no standing in court, for he did not ship a bushel of grain or a bale of cotton. Senator Neaatlands. Under these cases the reparation would not go to the right men. Mr. Clements. It would go to the men who had already protected themselves, and the persons really injured would have no standing. That is the.peculiarity of this business which singles it out from other matters of litigation, that there can be no adequate protection against the wrong of an unjust rate, except to make the rate right. After the rate has gone into effect it is impossible to find those who were injured and to distribute it among them. Senator Xewlands. At that rate, if the rate fixed by the Commis- sion is determined two or three years afterwards not to be reasonable, then the railroad loses and you could suggest no method by which it could recompense itself. Mr. Clements. I do not know anj' method by which it could be done except to expedite the matter and have it determined as soon as possible. There must be some injustice in all these matters, as I have repeatedly said. There is no waj", in my judgment, by which there can be exact justice done in relation to these matters. They are too complex. Senator Xewlands. The court can onlj^ take into consideration the question as to whether or not the rate is confiscatory. Is there any margin of difference between a confiscatory rate and a reasonable rate? Mr. Cle:mexts. It has always seemed to me if the rate was made unreasonably low to the extent that it affected the earning capacity of the property, b}^ invading a just and reasonable rate, it had begun to be confiscatory from the start. Senator Neavlands. Just as soon as it falls below the standard of what is reasonable, that moment it begins to be confiscatory. Mr. Clements. To that extent it begins to invade the right of the property. Senator Xewlands. Is there anj^ record so considered ? Mr. Clements. I do not know about that. Courts look at the substance of things, and I think that will be the final outcome of it. Senator Xewlands. You think that is the trend of the decisions thus far? Mr. Clements. I think that is the reason and justice of the matter. Senator Xewlands. Xow, as to the elasticity' of rates, great stress has been laid upon that by the representatives of the railroads, and the contention is that when the rate has once been established by the Commission and approved by the court, it can not be changed after that, and that it is desirable to leave a free hand somewhere in ad- justing these rates. Hoav about that? Mr. Cle3Ients. I have no idea that there would be any trouble about that. A decree of that kind ought never to be like a judgment or decree of a court, final and conclusive. It must of course be ad- ministered upon the idea that conditions and circumstances may 152 EEGULATION OF EAILWAY EATES. change, and. therefore, when they do substantially change and become different from what they were, when the rate was made, there is a basis for a change, a just and reasonable basis for a change in the rate. Senator Newlands. To whose iudfifment would you leave the de- termination as to whether or not there was a change in the circum- stances and conditions that would justify a change in the rate that had been fixed by the Commission and approved by the court ? Mr. Clemexts. It might be safe to require a hearing of the matter and approval by the Commission or by whatever tribunal acted, but I have no idea that, if it was left to the discretion and judgment of the carrier, the carrier -^ould undertake to put in another rate without a reason for it. because there ^^oiild be a basis immediately for a proceeding, and it would be courting trouble if it did it. Senator Newlands. So that you think we can safeh" leave that matter to the discretion of the carrier ? Mr. Clements. I think after it had been put in that the carriers as a rule would not undertake to trifle with the matter or to change the rate unless they had a substantial reason for it. They would have to justify it in a short time before the court again, and it would be folh'. unless there was a substantial, bona fide reason for doing it, and I think it is perfecth^ safe to leave it to the carriers to judge of that, subject to review. Senator Newlands. Now, as to the cases where the carriers refuse to accept the orders of the Commission. Your procedure then is to turn the matter over to the Attorney-General? Mr. Clements. Yes ; the law is that the Commission shall request the United States district attorney to institute the next proceeding, and he shall do it under the direction of the Attorney-General. For convenience to both the Department of Justice and to ourselves, and that the Attorney-General may be notified what the district attorney has been asked to do, these matters as a matter of practice are sent through the Department of Justice, and then the district attorney is directed by the xVttornej^-General from the beginning. Senator Xewlands. Have you found that there has been any delay in the Attorney-General's office regarding the matters turned over to that Department ? Mr. Clements. I have not. Senator Xewlands. There is no complaint upon that score? Mr. Clements. No. Senator Newlands. No complaint that your applications have been pigeonholed by subordinates in that office? Mr. Clements. None at all that I know of. Senator Newlands. And as a rule during your experience the Attorney-General's office has acted expeditiously? Mr. Clements. Yes; there is no delay and I have never heard of any delay in respect to that. These injunction cases were instituted by bills drawn in the Department of Justice. They were instituted promptly and the matter was taken up promptly and attended to. There have been sometimes matters that have been sent there about which there was to be some further consultation or inquiry, where the proceeding has not been instituted at once, but I do not know that that is being done except where there is a good reason for it. Senator Neavlands. In the Interior Department. I believe, they EEGULATIOlSr OF EAILWAY BATES. 153 have an assistant attorney-general, have they not, who attends to the business of that Department? Mr. Clements. I think there is an assistant attorney-general for the Interior Department. Senator Newlands. Would it not expedite the business of the Interstate Commerce Commission if an assistant attorney-general were deputized to act with you, if his office were in the same building? Mr. Cle3ients. I am sure it would. There are a great many questions of the drawing of complaints, and questions of law and consultations that ought to be referred to a lawyer specially in charge of the matter. It can be handled by one man much more easily than it can by a consultation between five who have other things to do at the same time. Senator Newlands. Then j^ou would recommend that that be done ? Mr. Clejients. I think it would be an improvement. I have no doubt. Senator Newlands. Now, as to rebates, I understand you to say that after the original Cullom Act was passed, there was a cessation of rebates for a year or more, and then they were resumed ? Mr. Clements. Graduall}^; yes, sir. Senator Newlands. And a cessation upon the passage of the recent •Elkins bill. Mr. Clements. Yes. It is often attributed to these injunctions. I think the whole thing went together. It was the availability of the proceedings under the law to stop those things. Senator Newlands. And you really rely upon the Elkins law to get those injunctions" and make them efficient? Mr. Clements. Yes. Senator Newlands. Now, don't you think that such a contingency that has occurred a year or more after the passage of the Elkins law will likely occur again and that these rebates will blossom out anew. Mr. Clements. If the traffic falls off, and there is a scramble among the railroads for business, and the roads are hustling for it, I think there would be a tendency in that direction unless the matter is con- stantly watched. Senator Newlands. It is more likely to occur in a period of de- pression ? Mr. Clements. Yes. That has been the history of it. Senator Newlands. The whole policy of our law is to force these railroads into competition and then punish them for resorting to the usual methods that are used in those cases. Mr. Clements. You have left them in a state of competition. I do not think they are altogether in that condition. Senator Newlands. What do you think about competition in rail- roading ? Do you think it is a good thing to have as much as we have had, or do you think that this consolidation of railroads which has been going on has tended to efficiency and perfection of service ? Mr. Cle:ments. There is no doubt about it tending to imperfect service in some ways. It may operate otherwise in some parts. Railroads are not competing with one another and making fast lines and good service and handsome cars to get business. That has been their method of advertising in competing with one another. When that incentive is r(»moved the service would hardlv be as good, I think. 154 EEGULATION OF RAILWA? RATES. Senator Xeavlands. How about equalit}^ of service? Do you think it tends to equality of service ? Mr. Clements. If the roads would observe their published tar- iff, recognizing that the demands of the laws of the country are the first obligation resting upon them, and the revenue for their com- panies is the second, instead of reversing that, there would not be any trouble about rebates. They say thej^ pay rebates because others do, and therefore the first thing to do is to save business and the next thing is to obey the law. Now, there will be rebates, of course. Senator Xeantt.ands. Xow, so far as equality of service and equality of rate is concerned, where three railway sj'stems, Ave will say, are serving ten States, each in active competition with the other, there is less likelihood of equality of rate and equalit}^ of service, and pro- portion of rate in such a condition of active competition, than where those three systems are consolidated into one road? Mr. Cleme^^ts. Undoubtedl.v. Senator Newlaxds. So that consolidation tends toAvard equality of service ? Mr. Cle.aiexts. Steadiness of rate -and equality of rate and a higher grade of rates. Senator Xea\'i,axds It might tend, in your judgment, to diminish the character of the service? Mr. Clements. Yes; and certainly tend to prcA'ent reductions in rates that otherwise would be made. Senator Xeavlands. Xow, as to your Commission, so far as rebates are concerned, a good deal of detective work is required. ]Mr. Clements. A good deal ; jes, sir. Senator Xewlands. So that we have united in one Commission the men Avho are to be both the judges and the detectives in order to make them efficient in both branches. Mr. Clejients. Well, the members of the Commission do not them- selves go out as detectiA^es simph' to find out about these things. "We employ agents to do that to a limited extent, and Avhen we get Avhat seems "to be evidence of the violation of the law, we utilize that by making a public inquiry or by pursuing through the detectiA'e an extended quiet inquiry, and utilize it in Avhatever waj' seems to be the wisest to ascertain the facts and correct the wrong. Senator Xeavlands. Do you think it would be Avise to segregate those detectiA'e duties from the present members of the Commission? Mr. Clements. I have neA'er thought there was A^ery much in the protest that the Commission was the detective, prosecutor, jury, judge, and executioner. I liaA^e heard all that said. The Commis- sion has no personal interest in these rates, no member of it has, and it seems to me as if it is an objection to form rather than to substance. Of course, if the work of detection and iuA^estigation in the hearing of complaints is to become so that it requires more work than the Commission can do, there might be a reason for adding to it for that purpose, but I haA-e never thought there Avas much substance to the objection that these things Avere concentrated in the same persons for the reason that they haA-e no interest whatever except to enforce the law as between the parties in the interests of the public. Senator Xeaa-lands. Do you think that a man who is trained to dis- charge quasi judicial duties, the highest duties that belong to this REGULATION OF RAILWAY RATES. 155 Commission, has that class of mind which enables him to prosecute successfully detective work? Mr. Clements. No. If you want to make a ferret of him, I do not think he is suitable for both places. Senator Newlands. Now, as to the through rates, you would be called upon to make a division of the rate, would you riot? Mr. Clements. In some cases we have thought that the effect could not be given to the correction of a wrong rate and the substitution of a just one without that power. Senator Newlands. And you would expect that power to be given ? Mr. Clements. I think that is incident to the other. Senator Newlands. Wliat do you think of a special court? Mr. Clements. Well, I have thought that a special court would probably be more expeditious than the miscellaneous courts all oyer the country; and if a court has this class of business to deal with and no other, that there would be this much about it: The matters would be expedited, and there are a great many things about this mat- ter of rate making and about the testimony produced by witnesses in respect to it, traffic men and others, which at first is much more bewildering to a man who has only heard one case or hears one only now and then, than it is to a person who is dealing with it all the time, who has been told repeatedly that it is full of peculiarities and changing conditions, and that practical experience and association with it is necessary to have any judgment about it at all. I think it would greatly aid a court in the course of a few months or years if it became familiar with all these questions and familiar with the witnesses who testify about these matters and the methods by which they consider these questions in constructing their tariff', etc. I see no objection to a special court because it is dealing with a special matter, if it is constitutional to make such a court. Senator Neavlands. Would you have such a court sit in Washing- ton? Mr. Clements. Washington and other places. Senator Newlands. A^^ierever convenience would require? Mr. Clements. Yes; whatever would be the wisest. Senator Newlands. As to the constitution of the Interstate Com- merce Commission, the number of its members, etc., do you think it would be advisable to have this Commission divided into branches, so that there could be one or more members of the Commission at each one of the rate-making centers of the country. Mr. Clements. I have never thought there was any great advan- tao-e about that. I think that it has become understood that all mem- bers of the Commission, or even a majority of the members of the Commission, would not undertake to hear every case that arises. One must act in many cases and take the testimony, or two, as the case may be, in order to prevent delay about these matters. Senator Newlands. Now, it is contended that as it is, that under existing conditions, the rate-making is the result of the united judg- ment of a great many minds — the local agent at the local station, the freight agent, and, finally, the traffic manager, and that the rate- making is finally adjusted in five or six great centers in the country, and that it is essential that these men should be in touch with com- mercial conditions and should feel the commercial pulse. If that is 156 REGULATION OF RAILWAY RATES. SO, would not that consideration also attach to the Commission — that is, to have the power of revising and correcting these rates? Mr. Clements. A general observation of that sort might afford some help, but if there is to be any power of that sort, the Commis- sion has got to deal with it by the intelligent and thorough j^resenta- tion of the matter by the parties interested. Senator Newlands. Do you think it would be an advantage to provide that a certain proportion of the Commission should consist of men who have been trained in experience in rate making as traffic managers or otherwise? ]\Ir. Cleinients. Well, I do not think it would be amiss to have some of that sort. A good many of the State commissions have provisions of that sort. I know in my own State one of the commissioners must be a lawyer, another a business or commercial man, and another a railroad man. Senator Newlands. And as a result of your experience, do you think we will ever have equality of rate and of service as between in- dividuals and communities and proportionate rates as to commodities, until we have Government ownership? Mr. Clements. I do not think you ever will have exact justice. I do not think anvbodv can construct the scales that will indicate what exact justice is. Senator Cullom. Do you think that exact justice would be brought about b}' the Government owning the railroads? Mr. Clements. I do not see how that could be done either. Senator Newlands. I am not asking you about exact justice. Do you think we could more nearly approximate equality of service and equality of rates as between individuals and communities, and pro- portionate rates as to commodities under Government ownership than under private ownership? Mr. Clements. The temptation to give rebates, of course, would be entirely eliminated, but somebody would have to judge as to what was a reasonable discrimination between places and commodities, in order to make a scale of rates, for the Government as well as for the carriers, and the judgment of the man might be defective. I have never thought that Government ownership was a wise proposition. It was on that question that I retired from the other wing of the Capitol some years ago, when the Farmers' Alliance required a man to say that he was for Government ownership and for the sub- treasury, which I could not say; but there are many difficulties about that. 'Wliat Government Department would determine what improvements were to be adopted in the way of new devices for the saving of life and for the enlargement of the business and for those many things which the interest of the corporations cause them to adopt after investigation, and with a view of increasing their revenue, and then, also, think of all the contracts that would be made, etc., and the army of employees. It looks to me as though it would build up a Government Department that would be unwieldy, full of cor- ruption and abuse, and I need not enlarge upon that. Senator Xeavlands. As I understand it, the chairman has re- quested your Commission to bring in such specific amendments as you recommend ? Mr. Clements. Yes; I so understood; and we will do our best to suo-gest sometliing to canw out the views which we have. Senator Newlands. That is all. KEGULATION OF RAILWAY RATES. 157 STATEMENT OF INTEESTATE COMMERCE COMMISSIONER MARTIN A. KNAPP. Mr. Knapp. Mr. Chairman and gentlemen of the committee : The doleful picture just painted in your presence by the accomplished artist of the Northern Pacific Railway has acted with such distress- ing effect upon my imagination that I can scarcely summon courage to address you. Indeed, I have been wondering whether I could not escape a prosecution for treason against my country by pleading guilty to a charge of incompetency. In the course of your protracted hearings you have listened to some of the ablest law3'ers and railroad managers in the United States and to numerous other persons of prominence and authority in various walks of life. There is no phase of this many-sided subject which has not already been brought to ^^our attention, and it would be rank presumption on my part to assume that I can con- tribute anything of real value to this discussion or otherwise aid your deliberations. Nevertheless, there are a few things I should like to say if your patience permits, merely for the purpose of indicating my own point of view and suggesting those phases of the subject w^ith Avhich my mind is most impressed. There appears to be a disposition in some quarters to discredit the present law and belittle the result of its oper- ations. It has been described as a crude and ill-considered measure, which has made little advance toward the accomplishment of its in- tended purpose. I am very far from having any sympathy with that erroneous view. On the contrary, I regard the act to regulate com- merce as one of the most important and beneficent statutes ever en- acted by the Congress of the United States. When you consider that the enormous power of the Congress under the commerce clause of the Constitution had lain dormant for nearly a hundred years, when you call to mind the amazing rapidity of railway construction during the two speculative decades that followed the civil war, when you take into account the conditions which had grown up with that ex- traordinary development, and bear in mind that the practices which we now regard with reprobation were looked upon with tolerance and found little condemnation in the average conscience, when you think of the difficulties to be overcome and the obstacles encountered, it seems to me remarkable that a law should have been passed based upon broad principles which are fundamentally correct and eternally right, and which contain such comprehensive and salutary provisions. Not even the distinguished Senator, so long the chairman of the committee, whose persistent efforts deserve chief credit for that enact- ment, who has taken the deepest interest in the administration of that law, and for whose personal kindness I can not be too grateful, realizes the immense progress that has been made toward correct methods of railroad operation, realizes the extraordinary change which has taken place in the attitude of railway managers and the public generally toward the whole subject of public regulation. Only when you compare the conditions which were characteristic and universal in 1887, with the conditions which generally prevail to-day, can you understand what great progress has been made in the conduct of these great highways of commerce. And I say that, if the men who were instrumental in procuring the passage of the act 158 REGULATION OF RAILWAY RATES. to regulate commerce have their names connected with no other measure, they deserve to rank high on the list of constructive states- men. And I say this for the reason, gentlemen, that I do not myself favor any radical departure from the theories and plans and pur- poses of the present law. And I believe that the immediate legisla- tion needed is that which shall be built uj^on the foundations so wisely laid in this law, and which is directed to correcting its defects, strengthening its weak places, and augmenting its authority'. If there is an}^ possible pliase of this subject which has been over- looked, or respecting which there is some confusion in the public mind, it is in confounding things which, as T think, ought to be kept separate and distinct. It seems to be supposed by many that the one thing needful to bring about a railway millennium, although our railway friends say it has already arrived, is to increase the powers of the Interstate Commerce Commission, and the controversy seems to turn very largely upon that particular question. To my mind, that is only one side of the subject which you ought now to consider. The keynote to what I have in mind in this connection is found in the very clear and illuminating opinion of the Attorney-General. In the Congress of the United States is vested plenary and exclusive powers of legislation upon this subject. You can not delegate that legislative power in any wholesale fashion. You can not turn over some part or section of it to be exercised by the grantee according to his discretion. You must yourselves, and in the statute law, lay down at least certain general rules of conduct. You may legislate as minutely as you choose, you must legislate at least to the extent of imposing requirements, placing prohibitions, fixing restraints and limitations, and if you fail to do all that is needful in that regard, the injustice and wrongdoing growing out of that neglect, if any there be, can not be corrected by simply increasing the powers of the administrative body which you create. Therefore, it seems to me that you may appropriately consider what are the rules of conduct prescribed by the present law which are inadequate, insufficient, and lacking in definiteness. "WTiat further rules ought to be prescribed? T\Tiat shall be their character? The things you incorporate in the statute are the foun- dation of all the work that is done or can be done by the body whom you select to carry out the details of your legislation. For example, and I am liable to weary you with an oft-told tale, if a discrimina- tion against a community results from the fact that there is a higher charge for a shorter than for a longer haul, that is a discrimi- nation which can not be corrected under the present law no matter how much authority the Commission maj have, because you have not declared that discrimination to be unlawful and prohibited. No one, I think, can read the fourth section of the act to regulate commerce and be in doubt that Congress intended to provide some actual and potential restraint upon that particular form of dis- crimination. And, I may say, it remains to-da}' much as it was then, not the greatest evil, but the most irritating and obnoxious form of discrimination that has been encountered. Senator Cullom. Discrimination as to localities? Mr. KxAPP. The long and short haul. Senator Cullom. Discrimination as to localities? Mr. Knapp. That particular form of discrimination. EEGULATIOlSr OF RAILWAY EATES. 159 Now, I am far from suggesting that you ought now to go so far in recasting the rule of conduct which shall have relation to that par- ticular type of discrimination as to prohibit it altogether, or even to limit the exemptions to such cases as shall be sanctioned by the Com- mission. I am only suggesting whether you should not somewhat in- crease the restraint which has been entirely removed from the dis- crimination effected by much more for the short haul than the long one. Let me give you the most recent instance which has come before the Commission. The Chesapeake and Ohio Railway crosses the Blue Ridge Mountains just below Charlottesville. Shortly after passing over the mountain it intersects with the Norfolk and Western, and a few miles farther west with the Baltimore and Ohio. The two latter roads run down the Shenandoah Valley, and one of them by the Penn- sylvania, and the other by its own rules, carries traffic from that re- gion to a common market, like Philadelphia. The rate on lumber on the Chesapeake and Ohio Railroad for 100 miles to the west and for a hundred miles to the east to Philadelphia is 16 cents. In the Shen- andoah Valley it is 14 cents. Therefore the man who is producing some lumber to-day on the eastern slope of the Blue Ridge Moun- tains, almost within sight of us, must pay 2 cents per hundred pounds .more to get lumber to Philadelphia than the man 50 or 75 miles far- ther west, who gets his lumber transported for 14 cents. Now, 2 cents a hundred pounds is 40 cents a ton. That is $12 a carload of 30,000 pounds, and that is probably about all the margin of profit there is in lumber of that kind. It has already been stated in your presence that one great railway corporation practically controls all three roads — the Chesapeake and Ohio, the Norfolk and Western, and the Baltimore and Ohio. They compete, according to the statement of their traffic managers, just as vigorouslj^ in the Shenandoah Valley as they did when they were entirely independent in oAvnership and management. And when they are charged Avith this discrimination they set up that competition as a defense. And I should like to inquire of the lawyers of this com- mittee whether that defense is not complete under the doctrine of the Supreme Court in the Alabama Midland Case ? Now, beyond any question where the competition of the carrier which is subject to the act at the longer distance point is the competi- tion of a carrier which is not subject to the act, as a water carrier or a foreign railroad, there should be freedom to make the lower charge to meet that competition. "Wliere the sole competition is between carriers all of which are subject to this law and to your regulation, it seems to me that a different situation exists and a different rule ought to be applied. But unless you create a different rule in the statute your Commission will be powerless to afford any relief in a case of that kind. A kindred question arises respecting import rates. I thinly I appreciate both sides of the argument, and I pay a deserved compli- ment to my associate on the Commission who wrote the report in January, 1904, when I say that you can not find a more comprehen- sive, clean-cut, and fair discussion of that question than is contained in that report. Here, again, I am not suggesting that any hard and fast rule should be put into the statute. I am quite prepared to admit that there are conditions under which foreign import traffic 160 REGULATIOX OF EATLWAY RATES. may rightfully be carried to an interior destination at lower rates than the inland carriers may reasonably charge on domestic traffic; but I must confess to a feeling of discomfort, to a suggestion of injustice, when the same serA'ice is performed for the foreigner for less than one-third of the charge to our own citizens. Let me pursue that a step further, because it is very closely connected with a point I am now trying to make. Complaint came before us. directed. I may say. in a general way, against the Vanderbilt system, because they charged 50 cents on plate glass from Boston to Chicago and participate in carrying plate glass from Antwerp to Chicago for 40 cents. And the traffic mana- ger of the Xew York. Xew Haven and Hartford Eailroad. giving his testimony, used the adjectives. " absurd." •' deplorable." and others of equal significance, not undertaking to defend it on any ground of light and justice, "but. he said. *' They are making a rate from Ant- werp to Chicago, by way of Xew Orleans and the Illinois Central Rail- road, of 32 cents; and if I do not make a rate which approximates that the imported traffic will be carried to destination by another route and I shall lose the revenue." Xow. when we take up the com- plaint of the same parties against the Illinois Central, as we presently shall, and say, " How does it happen that you are carrying imported glass from Antwerp through New Orleans to Chicago for 32 cents and to St. Paul and Minneapolis for 38 cents, when you charge 75 cents from New Orleans to Chicago and 40 cents from Chicago to St. Paul." he will say. '• I am obliged to do it. because the New York, Xew Haven and Hartford Railroad makes a through rate from Ant- werp to Chicago of 40 cents, which I am obliged to meet." Senator Keax. How do they ship that by the New York, New Haven and Hartford Railroad ? Mr. KxAPP. I think by the Poughkeepsie Bridge route. I rather assimie that. I think that is their present route for that description of traffic from Boston. Now. I am only mentioning those instances for the purpose of pointing out to you that unless you put some restraint upon that form of discrimination in the statute, the Conmaission will be powerless to remedy the injustice. The same thing applies to private cars and to these terniinal railroads. It certainly is not natural for the Commis- sion to admit that the law which it is appointed to administer does not give it jurisdiction over offenses which are brought to its atten- tion, but, personally, I have never been able to see in the act to regu- late commerce or in the supplemental law anything which enabled the Commission with any effectiveness, if at all. to reach the dis- criminations which now occur and which have become so acute with regard to private car refrigeration charges and the operations of these terminal railroads. And again I refer to the subject, not with any disposition to go over it irT detail, but to impress it upon you that unless you put some restrictions, some limitations, some requirements, some obligations in the statute when you come to amend it the regulating body, which is your subordinate, will not be able to afford any relief in cases of that kind. Now. let me take a minor one. of which I think very little has been said, but which to me seems of very considerable im- portance, not only in itself, but because it is connected with another BEGITLATIOX OF RAILWAY EATES. 161 subject of very much larger significance and about which considerable has been said. Under the present law any railroad or any two or more railroads operating together under a joint tariff may reduce a rate on three days" notice and advance a rate on ten days' notice, and instances have been brought to my attention in an unolTicial way of operations which are as offensive to the moral sense and as injurious in their effect as any check ever gi^en for a rebate. Xow. of course, as long as you leave it in the law that those changes can be made upon that short notice any injustice, any operation which is the equivalent of a rebate will be beyond the power of any commission to correct. Senator DoLLn-ER. "What, exactly, have you in mind i Senator Ivlax. Midnight tariffs. Mr. KxAPP. ^lidnight tariffs. Read the very remarkable address which Mr. Stickney has filed here. Senator Dollr-er. I had the pleasure of hearing that when he read it before the Economic Association. Mr. Kx.vpp. One of my associates made this observation, that ;Mr. Sticlaiey is always surprising, whether he makes a speech or files a tariff'. Within a fortnight 1 have had a talk with one of the most successful and prominent traffic officials in the United .States, who to- day controls absolutely the entire traffic of one of the largest systems in the Lnited States, and we were talking upon this subject; and in the most emphatic manner he indorsed my proposition. And when I said that notice ought to be thirty days or sixty days, he said it ought not to be less than ninety days. Senator Dolli^-ek. How would that help it ? Mr. KxAPP. You can not make contracts so far ahead, ordinarilv. Senator Dollt^ter. A man might go and get ready for business of that sort in ninety as well as thirty days. I reckon. Mr. KxAPP. It would be much more difficult and transactions which give offense would be much less liable to occur. •Senator Doluhtee. But if a rate could not be reduced without ninety days' notice, would not that operate to a very great disad- vantage in a thousand other directions f ^Ir. KxAPP. I was about to add that I surely would not recommend any hard and fast rule be put in the statute. That is one of the cases where you should leave to your Commission some discretion, at least in cases of emergency, and perhaps not go further than to establish a general rule. Because in some directions vour legislation should be general; in other cases, more definite and exact, according as the nature of the circimistances might require. Let me give another illustration: Some few years ago I was really ambitious to get this law amended on what I conceived to be wise and workable lines, and I was indiscreet enough, perhaps, to attempt to cooperate with some railroad lawyers and experienced traffic officials in preparing suitable amendments to this law: and with some assistance I prepared a draft, which I sent to the late Judge Green, whom some of you knew, at that time the general counsel of the Vanderbilt system, in which I proposed a thirty-day notice, with the right of the Commission to allow any short notice. "\Mien the draft came back the only change in it was that he had substituted sixty days for thirty days. T4lA— 4:>5 11 162 REGULATION OF RAILWAY RATES. Now, I want to speak of what that particidar thing suggests to me in somewhat hirger relations. In the course of these hearings, so far as I have been enabled to keejD in touch with them, I observe a great deal has been said about the necessity of flexibility in tariffs, of traffic managers being able to accommodate their rates to fluc- tuating commercial conditions, and one of the arguments advanced against remodeling this law in any material respect in that the tend- ency of any actual control through a Government agency of the rates made by the carriers would be toward ironclad rules, and mileage rates, and limitations of that sort. Of course, I am far from admitting that any such consequence would follow either im- mediately or remotely from a grant of authority far greater than has been proposed by any pending measure. But when I ran over the statements of some prominent traffic officials in which they em- phasized the necessity of frequent changes in tariffs, the necessity of adapting their rates to changing connnercial conditions, I hap- pened to think of one or two instances which I thought I might bring to your attention. The most important part of the United States is what is known as " official classification territory '" — the section north of the Ohio and Potomac and east of the Mississippi rivers. The class rates which govern most merchandise and articles of manufacture and ordi- nary household consumption are adjusted upon the basis of the New York-Chicago rate — places nearer Xew York taking a percent- age below the Chicago rate, and places more to the west taking a percentage above. Now, not only has that basis of rates in all that territory' remained unchanged since 1887, but so have the rates re- mained unchanged. And you gentlemen know as well as I do the changes that have occurred and the fluctuations that have happened in commercial conditions in that territory during that period. Senator Dollivek. They seem to have been pretty generally shaken up along about 1900. jNIr. Knapp. "When thej' made very numerous advances by simply changing the classification of the articles; but the}' did not change the rates or adjustments between localities. Senator Dolliver. Simply the classification ? Mr. KxAPP. Simph' the classification — moved an article up from the sixth class to the fifth, or from the fifth to the fourth — an ex- tremely simple process, and then, of course, it operates under the principle of adjustment throughout the entire territory. Now, take another illustration, which, to my mind, is more ap- posite. T take it there is no agricultural product the price of which has shown such wide fluctuations in the last few years as cotton. It is one of the great staple articles of the country: the most valuable, per pound, of anything that grows out of the ground in large vol- ume. More than half of it is exported, and you know the price has gone from scarceh' above 5 cents to 16 or 17 cents. And if there is am' article which woidd seem to be susceptible to market fluctua- tions and the changes in commercial conditions it must l)e cotton. But an inspection of the tariffs will show you that the rates on cotton have not been changed in ten years. There has been no material change. I think, in any cotton rate in ]nore than ten years, except that certain reductions have been made in the State of Texas by the commission of that State. KEGULATIOISr OF KAIL WAY EATES. 163 Now, when I observe instances of that kind, when the aljlest and most experienced traffic officials tell me that there is no sort of reason for 500 to 1,000 changes in interstate tariffs every twenty-four hours, as our files show there are, j'ou must not be surprised if I fail to ac- cejjt at par value all that is said here about the necessity of adapting rates to commercial conditions. Undoubtedly, when you take a con- siderable period of time great influences do operate to an extent which may justly require material modifications in freight charges, but to my mind it is quite unsuitable that the little surface fluctua- tions in trade should find expression in extended changes in the daily tariffs. I believe that those surface currents should adjust themselves to the tariffs and not the tariffs to the currents. And I am saying this, gentlemen, not as a result so much from my own ob- servation or from any a priori view of the case as because of the state- ments made and arguments submitted to me by practical railroad men of the highest distinction. And that suggests another view to my mind which I think may properly be taken into account even by our railroad friends. As I said, I am very far from believing that there should be anything more than the most inconsiderable tendency, if any at all, toward the adjustment of rates on a mileage basis, and I think. the prosperity of the railroads, the develoi^ment of the different sections of the country and their industries, justify, the making of rates upon what might be called a commercial basis rather than any distance basis; but do you realize Avhat an enormous power that is putting into the hands of the railroads? That is the power of tearing down and building up. That is the power which might very largeh^ control the distribution of industries. And I want to say in that connection that I think on the whole it is remarkable that that power has been so slightly abused. But it is there. My esteemed friend, Mr. Elliott, has just told 3^ou that the rates on wool from IMontana must be adjusted with reference to the rates on wool from Kentucky. '\A'ell, grant it. But suppose he should see fit to adjust his rates on wool so that the}^ moved to the Pacific coast and it became for the interest of his railroad to change that adjustment. Is that to be left entirely to his judgment? Or it comes back to the question which Senator Dolliver asked of him, in substance. After all, are the railroads to be left virtuallv free to make such rates as they conceive to be in their interests? Undoubtedly their interest in large measure and for the most part is the interest of the connnunities they serve. Undoubtedly^ in large measure and for the most part they try as honestl}^ and as con- scientiously as men can to make fair adjustments of their cliarges. But suppose they do not. Is there not to be an}'" redress for those who suffer? That is really the question. And since I have said so much on that subject, if you will pardon me, I will venture to pursue it for a moment in another direction, although it leads us into the domain of economics. Supj)ose it were true that a more potent exercise of Government authority and the adjustment of rates tended somewhat to increase the recognition of distance, with the result of producing a greater diffusion of industry rather than its concentration. I am not a political economist, nor competent to speak on a subject of such large dimensions, but I can not believe that all those institutions, laws, administrations which operate to the concentration of industries and population are alto- 164 REGULATION OF RAILWAY RATES. gether to be commended. Thej^ may result in greater aggregate wealth for the country. I am prepared to admit that they do; but do they result in happier homes, better lives, greater social comfort? T have some doubt of it. To state one other instance of what I am trj^ing to say — of the things that you must put in the law if the thing is to be regulated — and that is this question of compelling carriers having physical con- nection to unite in making through routes and through rates. You have already been told. I dare say. that it is not probable that another trunk line will be constructed at any early date, and that such rail- way development as takes place — say, east of Chicago — must mostly be in branches and laterals, in extensions of existing systems. Well, suj^pose some enterprising gentlemen build a railroad in West Vir- ginia which at one end toucTies the Baltimore and Ohio or the Penn- sylvania. What are they going to do with it when they get it there? If they can not involve public authority to make some equitable arrangement with reference to joint rates and the interchange of traffic, they may be A^ery much disappointed in the outcome of their enterprise. That only suggests again that, if anything of that kind happens, if there is danger of injustice of that sort, the safeguard must be found, not in anything that the Commission can do primarily, but in some restriction or requirement in the law you pass. Senator Dolliver. In such a case would you have the laAv define the portion of the rate to go to those roads, the portion which they would be entitled to? Mr. Knapp. Oh, no. Senator Dolliver. The ratio? Mr. Knapp. Probabh^ you could go no further there with useful- ness than in a general way to put the obligation upon the carriers, with the power in your regulating body, if they ctid not agree, to make the division and to prescribe rules of interchange. So, without pursuing that branch of the subject further, I venture again to say that the primary thing is to see what restrictions, what obligations.^ what prohibitions, what restraints, what limitations are to be placed upon -the interstate railways, and those must all be in the statute: or else they Avill not be the subject of regulation. Senator Dolliver. The thing we want to find out is just what we want to put in the statute. Mr. Knapp. And you see all that precedes the question of your Commission and what it can do. And when I use the term Commis- sion I do so for convenience, not necessarily referring to tlie present Commission, but as describing whatever subordinate body you create and must create for the purpose of ascertaining whether the rules you lay down are conformed to. and if not to exercise such authority as you may give it to bring about that conformity, and all that which I have tried to suggest precedes the question of the subordinate tri- bunal. Xow the second question is, 'WTiat sort of a tribunal is that going to be? We are told at this late day that no administrative or legisla- tive tribunal is necessary ; that whatever j^rinciples of regulation you adopt and promulgate may all be applied and enforced in the Federal courts. I suppose I must be lacking in quick perception and ready receptiveness. but I have not yet been able to see how that scheme could be made to work. To my notion regulation is legislative. It EEGULATION OF RAILWAY RATES. 165 must begin in the nature of the case with the tariff — that is to say, it must begin with requiring the announcement by the carrier of what he is going to charge. And then tAvo questions at once arise. One is, Wlio will see to it that the rate that it says it is going to charge is actually charged to everybody alike? And the other question is. If that rate is wrong, how is it going to be corrected? And the two are very unlike propositions. A tariff is a law. It is a rule of action of general application. So long as it is in force it has all the characteristics and all the bind- ing obligations of a statute. To depart from it is a misdemeanor, and it does not make any difference whether that tariff law is passed by the railroads, made by a commission, or enacted by Congress. In either case, if that law is wrong the only thing to do is to change the law. If that law is broken, then the thing to do is to punish the man who broke it. The courts are constituted to apply and enforce law and to punish those who violate law. The legislature is ordained to make laws and change laws, and in the very nature of the case the proposal to use the methods of a court to deal with a purely legisla- tive question is incongruous and unsuitable. Senator Dolliver. It is rather an extreme thing, it seems to me, to say that a railroad tariff is in the nature of a law. Mr. Knapp. Precisely that. A-VTiat else is it to-day? Senator Dolliver. We had that law \A'ell broadened by various in- terpretations — — Mr. Knapp. Of course it is not statute law. Senator Dolliver. Is it a law of the United States in any sense of the word ? Mr. Knapp. Not in the sense of being a legislative enactment; not in the sense that it is a principle Avhich has been developed by the adjudications of courts; but in the sense that it is a rule of conduct of general application binding upon everybody. Senator Dolliver. But prescribed not by the power of the State, but b}' some private business enterj^rise ? Mr. Knapp. Prescribed by the railroads ; but I am only suggesting. Senator, that in its relation to the public, and with reference to the question of whether that law is right or wrong it might as well have been made by the Commission or enacted b}' the Congress; and if you, as you might, should say by statute that the rate on grain from Chicago to Baltimore shall be 13^ cents, and from Chicago to Phila- delphia 14 cents, and from Chicago to New York 15 cents — and somebody said that is a discrimination against New York — would it not be rather absurd to sav that vou must go to court and have it enjoined? It is a law that you have passed. Senator Dolliver. I do not see how a thing is a law that a man may go into court and assert is illegal — ^contrary to law — and recover dam- ages for an excessive charge. If I imderstand the decision of the Supreme Court a man can take one of those tariff' rates and go into court and state that it is unreasonable and illegal and get the court busy to finding damages. Senator Cullom. Of course you could not do that if it had been enacted by the power that makes the statute. Mr. Knapp. 1 am aware that is said, and, of course, I am not using the term " law " in the sense of statute ; I am only suggesting that it is a legislative act, and it does not matter who legislates it into 166 EEGULATION OF HAIL WAY KATES. existence, whether it is the carrier or a commission or the courts; if it is wrong it ought to be changed and amended. Senator Cut.i.om. It is misleading, is it not, to call it a law ? Mr. Knapp. Oh, I suppose it is: I only used that to illustrate, for Avant of a better term, the difference between those obligations which exist between the carrier and the public and which are of general application and the rights of individuals which come in controversy- in court. Senator Dollivee. I raised the question not for mere controver- sial purposes, but because it has been repeatedly suggested here that the publication of this railroad schedule here, which has been re- quired by statute, gives it a certain sanctity that protects if from individual complaints as to its injustice or illegality, and it seems to me that it adds nothing to it. Mr. KxAPP. Well, we do not know yet about that. I know we are all accustomed to speak about the right of any person who has paid what he regards as an excessive charge to a carrier to bring his action in damages. Theoretically, of course, that right exists. Have you ever known it to be exercised? We are accustomed to speak of that as though there were cases of frequent occurrence. Senator Doi.liver. I know they are not frequent, but they have been sufficiently frequent .for the courts to lay down the general principles which govern the rights of the parties of the cases. Mr. KxAPP. Undoubtedly ; and in such a case as that the court nec- essarily must determine what would be a reasonable rate for the purpose of fixing the measure of damages. Senator DorjjVER. If you will permit me to call your attention to the case of Regan v. the Farmers' Loan and Trust Company (154 U. S., p. 3G2) , there the court say : It has always been recognized that if the carrier attempted to charge a ship- per an unreasonable sum the courts had jurisdiction to inquire into that matter and award to the shipper any amount exacted from him in excess of a rea- sonable rate; and, also, in a reverse case, to render judgment in favor of the carrier for the amount found to be a reasonable rate. Mr. KxAPP. There is no question about the doctrine. My question was. Have you known of any such suit being brought against the railroad? Senator Dolliver. I think that must have been some such suit. Mr. Knapp. I suppose there are much better and more diligent lawyers than I am. but I have never found a reported case and would be very much obliged if any of my friends will call my attention to one where there has been such a suit brought against the railroad company. Senator Dolliver. Section 15 of the interstate-commerce act seems to have contemplated such a double proceeding to correct the unrea- sonable rate and to collect damages in all these cases where complaints are made of the rates. I do not know whether any of those cases have gone to the courts or not. Mr. KxAPP. And it jDerhaps must remain an open question until it is decided whether an action will lie to recover an alleged excessive charge where that charge is in accordance with the tariff' filed as required by law. I do not know what the law is until that question shall have been decided. KEGULATION OF RAILWAY RATES. 167 Without pursuing that subject too far — because the question has become familiar to you and you have to decide it — I only make this suggestion. At besti and at the most, the remedy which can be admin- istered by the courts is uncertain, limited, indirect. If you were to adopt that plan, you must be prepared to enter upon some years of litigation to find out just how much a court can do, how much it will do, and how it will do it. And I have rather wondered whether all this insistence that all these questions should go to the courts instead of to a commission because a commission is incompetent is not a little insincere. Now, is it really because it is believed that the men who would be upon a commission are incapable of determining these questions? Including the five first appointed, fourteen men have been appointed on the Interstate Commerce Commission. Excluding myself and one other who never studied law or was admitted to the bar, I undertake to say that every one of the other twelve was qualified by ability, legal attainments, professional standing, and in other respects for appoint- ment on the Federal bench. I believe those twelve men, from the great jurist. Judge Cooley, to the distinguished statesman. Senator Cockrell, will compare very favorably with the average of the men who have been appointed to the district and circuit court benches of the United States in the last fifteen years; and I find myself wondering how it is that the same men who as judges, with the multifarious duties of that office, would be so competent and so highly qualified to pass upon these traffic problems, are unfit and incompetent when they are com- missioners and not judges. Candidly, is not this the reason, that our friends know perfectly well that a legislative tribunal can con- trol rates, if it has the authority, and they know that courts can not control rates effectively, no matter how much authority you may attempt to give them? Is not that the real reason why a court is preferred to a commission ? There is an old Italian proverb to this effect, " If you want a thing done do it yourself; if you don't w^ant it done get somebody else." So I venture to say that if you really want to regulate railroads, reg- ulate them yourselves by legislation and by a legislative tribunal. If you do not want to regulate them, get the courts to do it. 1 want to get through in a few minutes. "WTiat is the use of my going over the ground that has been traversed so many times by men much more competent to discuss these questions than I am? You first settle what the la ay shall require, prescribe, enjoin, and you then decide what tribunal shall be selected to give force and effect to those requirements. That tribunal must be legislative, in my judgment, to accomplish the purpose of settling the questions that arise. One of the questions is, How much authority are you going to give that tribunal? I do not care to discuss that. It has been thrashed over here for six wrecks, and I could not add a thing to the discussion one way or the other. If you think there is any way to accomplish the thing that ought to be done, short of giving your administrative tribunal the power to substitute a reasonable rate for an unreasonable one, I shall be very glad to have you find the way. Then the other question. What is to be the effect of any order made by the tribunal which you create? One of the embarrassments which 1 have felt from the beginning has been that under the existing law when the Commission has heard one of these complicated ques- 168 KEGULATION OF RAILWAY RATES. tions relating to what is a reasonable rate or a properh' adjusted rate and has reached a conclusion and made its report and given direction to the carrier accordingly, if its view of that situation is not accepted, then the Commission must become a suitor in the courts to enforce its own determination. Now, speaking for myself, and I think upon that point I am in har- mony with the views of all my associates, I do hope at least this will be done. Whatever authority' is given, let the exercise of that au- thority be final ; let it take effect by its own force within such reason- able time as you maj^ prescribe or under any conditions that j'^ou may prescribe, but when a commission has made such a ruling" as it is authorized by you to make, whether that ruling is to be limited to the present or extend into the future, then the Commission's work should be finished. And the carrier should be put in this position: That it must either accept that ruling and act accordinglv, whether that be merely a ruling of condemnation or a ruling of requirement for the future, or must itself go to court and get rid of the ruling. Now, that does not involve any radical change from the present law, because it is now provided that the findings' of the Commission are prima facie correct. So that to-day if a suit is brought to enforce a disregarded order of the Commission you can simply go into court and present your case, and there is your prima facie case, and the burden of proof is on the carrier. In other words, you are not mak- ing so radical a change as to trasfer the burden of proof by adopting the plan I suggest, and you do relieve the Commission of what to me has seemed an embarrassing attitude, one that at least furnished some excuse for the criticism that its functions are inconsistent. Senator Kean. Let me ask you a question just there. If the fixing of a future rate is a legislative act, then the court probably could not review it? Mr. KxAPP. Senator Kean. I may not say anything here unless I speak the absolute truth as I see it, and your observation suggests a very serious question. All the answer I can make is that f do not know. I have believed thai if a law conferred upon a commission the authority in such a case as this — pne of these contested cases — to substitute a reasonable rate, that the carrier could go to court on the theory that the Commission had exceeded its authority by pre- scribing an unreasonable rate. Now\ how far you can give jurisdic- tion to courts or to wdiat extent they will take"^ it I think no lawyer can predict with any confidence until the question has been decided. Senator Kean. Then, in any act we drew, if we gave the Commis- sion power to fix the rate, if the court had any jurisdiction it would have to be decided, would it ? Mr. Knapp. That is the way the matter rests in my mind. I have been very strongly inclined to the opinion, already expressed in your hearing, that there is no such difference as has been assumed between a rate merely unreasonabl}' low and a rate that is confiscatory. I should think it not unlikely that the Supreme Court will some day hold, when the question is presented, that a rate imposed upon a carrier by public authority which is unreasonably low, which is less than in justice and fair dealing that carrier is entitled to receive is pro tanto, a confiscation of that carrier's property. Of course, if that view prevails and that is held to be the law, then the carriers have every remedy under the Constitution which can be conferred upon EEGULATIOE" OF RAILWAY RATES. 169 them by statute. But suppose you accept the proposition that there is a margin — jDossibly a wide margin — between a rate that is unrea- sonably low and a rate that infringes upon the constitutional rights of the carriers. Is that a sufficient reason for not granting the au- thority? Of course, the Commission is likely to make mistakes. The only gentlemen who have appeared before you and freely claimed that they never made a mistake are these railroad managers. Senator Kean. I do not think that is so. Mr. Knapp. I do not say that with the utmost seriousness, of course, but in jDoint of fact I do not remember, in running over the records of your hearings, that any railroad manager has ever intimated that he has ever made an erroneous rate, or in any resj^ect unjustly treated his patrons. Now, I can not claim that for myself, as a member of the Commission. I have made mistakes. Senator Clapp. Judge, the record which we have here shows that since 1897, the time of the Maximum Rate case, when it was definitely decided that the Commission could give no such legal effect to the recommendation of the substituted rate as they could give to the condemnation of the existing rate, that since that time, of the cases where the Commission has condemned a rate and recommended another rate, and the condemnation has stood, either without a con- test or after taking it into court, with two exceptions the carrier has accepted as a substituted rate the rate recommended by the Commission. Mr. Knapp. I think that is true. Senator Clapp. ^Vell, with the power of the Commission to chal- lenge anew the substituted rate, practically the carrier would have to, as a rule, accept the recommendation, would it not? Mr. Knapp. Senator Clapp, I will answer that question in this way: I anticipate that when a decision of the Commission is taken to court, imder any scheme that you are considering, the vital question will be, was the Commission right in its condemnation of the rate complained of? Senator Clapp. Yes. Mr. Knapp. If it was, the rest follows. Senator Clapp. Yes. And when that is established, either by ac- ceptance without a contest in the court or by the court, that settles the vital question that was at isstie, does it not? Mr. Knapp. Substantially; yes, sir. Senator Clapp. Yes. And practically, as a rule, the carrier would necessarily and naturally adopt the rate recommended in substitution ? Mr. Knapp. That would not follow. Senator Clapp. What ? Mr. Knapp. That would not follow. Senator Clapp. Well, I do not say in all instances. Mr. Knapp. No. Senator Clapp. But with the power left back in the Commission to again challenge the substituted rate, which of^course it would have, would it not, as a practical result — practically follow, to use that expression — that the carrier would adopt the rate recommended by the Commission? Mr. Knapp. Oh, I should put that this way Senator Clapp. Well, you state it, then. Mr. Knapp. The carrier can not afford to trifle with public author- ity. It can not afford to do a trivial and evasive thing. I must 170 EEGULATIOX OF RAILWAY RATES. honestly say that I do not belieye any railroad manager would make, under such a theory- as that, a nominal change in a rate for the pur- pose of technically complying with an order to cease and desist. If that was done twice in this country the next session of Congress would fix it. Senator Cla?p. Yes.' Mr. Knapp. If you will pardon me for making a further answer. Senator Ci^app. Yes : certainly : go on. Mr. Knapp. Xow. as a practical matter, after all there is not so much difference between the plans, because I haye long been of the opinion that not only should the initiatiye in rate making remain with the carriers, but that any order which the Commission makes requiring a rate to be changed for the future should be limited in time as to its effect to a not yery long period. Senator Clapp. Yes. Mr. Kxapp. So that, let us say after a year, if you please, the ini- tiatiye as to that rate should attach. And it seems to me that is a complete answer to this suggestion that a commission that can change one rate can^ change all rates, and it is only a question when they are all made by the Goyernment. Senator Clapp. Xow. as between the order condemning a rate and an order substituting another rate, in so far as it inyolves, by the court upon reyiew. the suggestion of a legislatiye duty, as sug- gested by the Senator from Xew Jersey, the question would be ab- solutely free, would it not. from all embarrassment of that sort, if it was limited to the order condemning a rate as unreasonable? Do I make that plain ? Mr. KxAPP. If I comprehend your question, as I think I do, it is quite obyious to me that such a plan, of course, ayoids certain questions which haye been yery much controyerted during this hearing. Senator Clapp. I did not mean to interrupt you. Senator Cullom. You mean simph' the declaring of the rate un- reasonable ? Senator Clapp. Xo; what I mean is as to a reyiew by the court, declaring a rate unreasonable. That would be free from any of these questions. Mr. Knapp. Oh, I think so. Senator Clapp. Yes. ]SIr. KxAPP. And I, for one. can see that that right should be granted. That is to say, the carrier which is unwilling to accept the adjudication and order of the Commission, and wishes to reyiew that, should haye the right to reyiew the condemnation of the rate com- plained of as well as the rate put in substitution. It seems to me that is within the range of justice. So I say, gentlemen, it would be a waste of time for me to discuss the remaining question. I will say again, as I haye said, I am not able to see how you can apply the remedy which a giyen situation may seem to require unless you haye an administratiye or legislatiye tribunal which can, acting under your authority, substitute arate to be charged in the future in place of the rate which has been found unlawful. If you can find a way to accomplish the purpose and meet the needs in that regard^ in some other way, I can only say that I, as a member of the Commission, shall BEGULATIOX OF EAILWAY BATES. l7l be glad to be relieved of the responsibility, which is a very great one, of saying in such a case as that how much the railroad sliall charge in the future. Senator Cullom. There is only one of two ways. One is by the Commission and the other is by the court, if you can show that the court has the power. Senator Kean. If a court finds a rate unreasonably high and de- crees that that rate shall be discontinued, do you not think that that decree would result in substantial relief? Mr. KxAPP. Senator Kean, we do not know. In the first place, we do not know whether the court would do that or not. There is no authority to indicate that at all. The weight of authority is very much to the proposition that it will not. Senator Ci.app. Pardon me. but I do not think that you quite caught the Senator's inquiry. Senator Kean. If the court finds a rate unreasonably high and decrees that that rate shall be discontinued, do you not think that that decree would result in substantial relief ? Mr. KxAPP. Yes; if it did. But this is my proposition. Un- questionably there are certain situations in which a court may render a judgment which affects a rate, and may indirectly, under some circumstances and to some extent, practically affect that rate for the future. But is there any case in which that has not happened as an incident to some other purpose, and is there any authority for the proposition that a court will maintain an action, the object and pur- pose of which is to reduce a freight rate, while plainly the object and purpose of the action is to require a lower rate to be charged for the future? Does not every authority deny that a court can do any- thing of that sort ? , . * . Senator Clapp. Did you not. Judge, have in mind, in connection with the Senator's question, the idea that in that proceeding not only was a present rate being condemned, but another rate was sought to be substituted — a definite rate? Mr. KxAPP. I understood the Senator's question to be this: If a court should entertain an action, the object and purpose of which is to have it declared that a rate in force is unreasonably high, and to have an injunction restraining the carrier from continuing that rate Senator Keax. Yes. Mr. KxAPP (continuing). "NMiether that would not operate to affect the rate for the future? Of course it would, if the court did it. If the court entertained the action, and did enjoin the further imposition of the rate. why. of course, that would have the effect of bringing about some change in that rate for the future. But you are assuming two propositions, neither of which finds any judicial support up to this time. Now, if I may add one word about the Elkins bill. A more effective and complete measure for its purpose 4>as not come within my observation. It is invaluable. Now, gentlemen, just think of it; just see what the defect was in the original law. judge Grosscup held very early after it went into operation that you could not con- vict a carrier for paying a rebate unless you proved that, for like and contemporaneous service, it charged somebody else more. That is, you had to prove an actual discrimination. As a practical matter, 172 REGULATION OF RAILWAY RATES. you never could do it. For eight years, gentlemen, we were here ask- ing this Congress to just make enough change in that section so that the tariff rate should be the legal rate, and any departure from it an offense. And when we got that in the Elkins bill the thing stopped over night. That is to say, when your law is effective, when anybody that is violating it knows that he can be reached and punished, why, he is going to stop. You do not appreciate sometimes, I think, the deterrent force of law. That is a great thing to be said about this act to regulate commerce. Suppose it is inadequate. Granted that the Commission has not been capable of administering so great a trust. Can you overestimate what the effect has been on the railway operations and practices of this country, that there was such a law, and that there was a Commission with the fullest powers of investi- gation and exj)osure ? Well, gentlemen, I have talked long enough to prove the charge that I am unfit for my j^lace, and I will now answer any questions that you want to ask. Senator Clapp. I would like to ask you about one point, and that is this long and short haul. I understand that you favored in some form an exception to the prohibition contained in the fourth section. Mr. Knapp. Let me add another reason. In the present state of the law there is no restraint upon the spread of that form of dis- crimination into the territory where it now seldom happens. But I see some indications that the discriminations of that kind are re- appearing in that territory, and I think Senator Dolliver will find that not very long ago, when a sort of a rate war broke out between the lines leading to the Atlantic and the lines leading to the Gulf, that corn and perhaps some other jiroclucts were carried from Omaha to tidewatei* for considerably less than the rates from Iowa. So there was a violation of the long and short haul clause up in that territory. vSenator Dolliver. Yes; we took a good deal of corn down to Omaha to start it. Mr. Knapp. Yes. I will make this suggestion, that it may turn out that if we can put some sort of restraint on that form of dis- crimination, at least enough to prevent its spread, that would oper- ate to prevent some of these rate wars, and to prevent the demoraliza- tion that alwaj^s happens. In this case they would not have been making a 13-cent rate from Omaha to Baltimore if they had had to apply that as the maximum rate in all this territory. Senator Clapp. "What I wanted to know is whether there should be some exemption to the prohibition? Mr. Knapp. Undoubtedly. Senator Clapp. Now, undoubtedly the law provides at j^resent that the exemption is to a dissimilar condition. The court, in the Midland Case, emphasized two or three times that competition was not the only consideration. Mr. Knapp. Yes, sir. Senator Clapp. Now, what kind of a limitation would you suggest to this exemption; or, in other words, to put it more grammatically, probably, how would you frame this exemption? Do I make that clear? Mr. Knapp. Yes. This is one way ; that the competition of carriers EEGITLATION OF RAILWAY BATES. 173 not subject to the act may justify the higher charge for the shorter haul ? Senator Clapp. Yes. Mr. Knapp. But other forms of competition shall not. But, of course, retaining and perhaps amplifying the proviso clause now in the section, so that even in cases of competition between carriers subject to the act the Commission Avould have power. Senator Clapp. Then, you would limit the legal exemption, and leave the broader exemption to the Commission? Mr. Knapp. Yes, sir. Senator Clapp. I wanted to get vour idea in reference to it: that is all. " Senator Kean. Do we understand that the other commissioners will be heard on Monday ? Senator Cullom. It is understood that the commissioners, those who have not been heard, may be heard on Monday morning, at 11 o'clock, if they so desire. Monday, 3Imj 32, 1905. STATEMENT OF HON. JOSEPH W. FIFER, INTERSTATE COMMERCE COMMISSIONER. Senator Cullom (in the chair). Judge Fifer, we shall be glad to hear you now. Mr. Fifer. Mr. Chairman and gentlemen of the committee, I ap- preciate the fact that you have been here for a long time patiently and thoroughly investigating the matters which you have under con- sideration, and I shall therefore detain you for but a short time. I regret exceedingly that our railroad friends deemed it necessary for the proper presentation of their case to criticise the Commission as harshly as they have done. As I read from day to day these criticisms in the newspapers, I felt that they were making a mistake, and I entertain that opinion still. Many bitter things might be said in reply, I expect; things that will suggest themselves to the dullest mind, but I decline to enter that field and will leave the subject with this single further remark: If members of the Com- mission have manifested some feeling, apparently, in regard to this subject, we beg the committee to remember the provocation. Our friends may possibly have learned by this time that hunting the tiger is fine sport, but the fun all ceases when the tiger hunts them. I have thought that I might aid the committee to a proper solu- tion of the questions it has under consideration by a brief reference to the regulating statute as it now stands. Turning to that law you will find the first five sections of the statute impose most of the duties and obligations upon the railroads. They are the most important sections in the statute. Wliat are they ? ^ First. That all rates must be reasonable and just, and that rates that are not reasonable and just are declared unlawful. 'Wliat next? The second section provides that rebates and draw- backs shall not be paid. That is called by the Commission the " per- sonal discrimination section." 174 EEGUL-^TION OF RAILWAY RATES. The third section provides against discrimination between locali- ties. The fourth is the long and short haul provision. And fifth, pooling. If 3'ou ■\^ ill examine the statute you will find that nearly all the other provisions, for the most part at least, are intended to give vitality and force to these five sections. How do they do it? I need not go over all the i^owers that are delegated. First, the Commission was provided for and certain powers given to the Commission, the poAver to issue subpoenas and compel attend- ance of witnesses, the production of books and papers, and to admin- ister oaths. The railroads were required to make reports, among other provisions. But all had reference to giving vitality, force, and effect to the first five sections of the act. I shall endeavor to show, later on, that these powers are not sufficient. Around those five sec- tions rages this contest, and I feel that I am not saying too much when T sa}' that that citadel has been taken and lost, perhaps, in the minds of the members of this committee, several times since these discus- sions were begun. What ones of those five sections are in dis]3ute here? Not the fifth section, with reference to pooling. We can cut that right out and set it aside as having nothing to do, as I understand, with the discussion. We can dispose of that. The shippers are unwilling to grant the power of pooling on the one hand, and, on the other, many railroads do not want pooling. It has been said here and contended by those who are pressing for an amendment of this law that the rail- roads now do not desire pooling, for the reason that they have com- bined. Then, the pooling section being out of consideration, what is left? The second section, which provides that railroads shall not pay rebates and drawbacks. Is there any dispute in regard to that sec- tion? Not a particle. I firmly believe that there is not a railroad in the United States, or any of its officers, that would not stop rebates and draAvbacks if it had the power to do so. The railroads are the losers when drawbacks are paid, and if they could stop them they would do so and preserve their business. Before I pass to the other sections I want to make this observation : Our good friend Mr. Hines said that the second section was the most important provision of the whole act, and that the principal object that Congress had in enacting the law was to prevent rebates and drawbacks. In that statement I do not agree. Let us see. What class of people are affected by rebates and drawbacks? "Wlio are injured and who are benefited? In saying wdiat I shall on that subject, I want it understood that I do not in the slightest degree minimize the evil results flowing from the payment of rebates and drawbacks. They are the Pandora's box from which flow many evils, and, in the language of the Presi- dent, they should be stopped. Let us examine, now. Who are affected by rebates and drawbacks? The railroads, of course, because they pay the money. AMio are benefited ? Unfortunately, only a few large shippers. There are remote consequences that follow also. The payment of rebates to the large shippers enables them to break down and run out of the business their competitors, thereby lessening the number of persons to whom the original producer can sell his goods. REGULATION OF RAILWAY 'eATES. 175 Those rebates do not affect the producer, snch as the grain grower out on the broad prairies of Illinois and Iowa. Many of those people never pay a railroad rate. They do not deal with railroad men. The}^ haul their grain to the markets in wagons, and there it is sold. Those men are more directly interested in the size of the rate than they are in regard to rebates. But it is utterly immaterial to a farmer whether there are two or a dozen elevator men in the town where he sells his grain, with this qualification : That there must be competition, for he is affected in that way. There must be competi- tion so that the purchase of the grain by the elevator man will not become a monopoly. You will hear the large shippers, the middlemen, remark fre- quenth' that they do not care anything about the amount of the rate, and neither do they, provided alwaj^s that the rate is kept down so that the traffic will move. That is all tliey care for, and they make just as much money whether the rate is $1 or whetlier it is 80 cents, provided the traffic will move as freely under one rate as it will under the other. So that they are not interested in the rate, with that one solitary qualification. But there are a class of people who are interested in that rate — the consumer and the original producer. Mr. Hines said that the con- sumer did not feel the high rate so much. That is true to a very large extent. You take a man on the plains of the West — a cattle raiser, who has a thousand head of cattle — he markets them in Chi- cago or New York ; the rate may be ever so high. Perhaps a million human beings eat that beef, and the excessive rate is divided up to that extent. A load under which a single man will stagger two will carry with ease and ten Avill feel not at all. But how is it with the producer who has the thousand head of cat- tle ? All he has in the world is, perhaps, iuA^ested in his herd, and it is a matter of the most vital importance whether he pays 50 cents a hundred or whether it is 5 cents higher. He is the man that feels the excessive rate. So I say that ]Mr. Hines is mistaken when he says that that is the most important feature of the statute. That it is important I do not deny, and I repeat that I would not in the least minimize the evil consequences flowing from the payment of rebates and drawbacks. Let us examine the statute again. The first thing, the thing that stands at the head, affects the rate — " all rates shall be reasonable." That is at the top of the ladder, and the rebate is included in the sec- ond section. Well, that might not be of very much importance, but I must pass on from this with this further observation : Our friend Hines says that this section, the second section, has not been enforced. While he does not say so in terms, inferentially he does say that the Commission has been derelict in its duty. Think for a moment. Congress enacted a statute that created offenses which before were not offenses. There are offenses denominated by the law as malum in se and malum prohibitum.^ Before Congress en- acted this statute it was no violation of law to pay a rebate. Yester- day' it was no offense; to-day it is made a penal offense punishable with a term in the penitentiary. I do not care what moralists may say in regard to those different kinds of offenses. They may dilate forever upon the enormity of the crime of leaving rebates and draw- backs, but the generality of mankind never have regarded and never 176 REGULATION OF RAILWAY RATES. will regard it in the saiiie light as they do crimes malum in se, such as murder and theft, acts which have been made crimes by the com- mon consent of mankind through all time. I say it is diflPerent. We have met with that difficulty. You take these railroad men. The}^ might pay rebates, hundreds of them, and violate the law every day in the year. You would know it and their neighbors might all know it. But they do not lose caste. They would be invited to your homes and introduced to your families just the same as they were before. So that we have that difficulty, and any lawyer who has ever prosecuted crimes can cor- roborate what I sa}'. It was told here b}' Mr. Clements, the Nestor of the Commission, and perhaps who is as well acquainted with its inside history, its record history, as any member — he told you about these investiga- tions where the evidence of the rebates was kept separate from the general records; it was a private matter, a private transaction- - '' on the side," as the boys sometimes say ; and when the necessity for the use of the account of the private transaction had gone by the papers were all destroved and no evidence left. AVliat are you going to do when you run up against a proposition of that kind ? Mark you, I think it was not until 1897 or 1898 that the Commission could call upon a railroad official to testify before the Commission. There was no exemption, and you could not ask him to incriminate himself ; he was entitled to the protection of the law. These things have been gone into, so that, knowing these things as ISIr. Hines did, and knowing, as he evidently did, the efforts that were put forth by the Commission to stop rebates, it was certainly very unkind in him to put forth the insinuations that he did. AVhy harp upon one string all the time? ^YhJ the second section? It is simply because, as I have stated a moment ago, there is not a railroad man in the United States who would not stop paying rebates if he could. I am speaking now dispassionately about these things. I was a railroad lawyer for many years, attorney for one of the prin- cipal railroads in my State, and I think I can look at this question both from the outside and the in. Of course they want to stop rebates. Senator Cullom. ~\Yh\ don't they ? ]Mr. FiFER. I will tell you why the}^ don't. The trouble is that these traffic men know each other, not wf41 enough, but too well. I do not want to disparage them now, but every mother's son of them is afraid, and refuses to trust the other fellow. That is the secret. ."\Miere one road seems to be getting more than its share of the traffic, they are so suspicious that they think the rates are being cut, and the lirst thing you know everybody is paying rebates and the tariffs are ffoing to the demnition bowwows. Senator Cullom. AAliat are you going to do about it? Mr. FiFER. "Well, I will say this: Do not think, gentlemen, that you can reform the world by making law tii rough the a^^es and noes of a legislative assembly. If you could, this would be a splendid world for honest people to live in. You never can j^revent the commission of crime and 3'ou never can reform the world by the enactment of laws. The preacher and the school-teacher must do their share, while the lawmaker and the law prosecutor are holding crime in check as much as they may. So far as the second section is concerned, it is universally admitted REGULATION OF RAILWAY RATES. 177 that never in the history of this country have rates been so well maintained as they are at this blessed moment, and have been for the past two or three years. Senator Cijllom. By that do you mean that there has never been a time when the law was so well enforced? Mr. FiFER. Well, m}'- colleague. Judge Clements, told you about what was being done; that is a Avide-open door, and it is no use for me ao-ain to travel over the same ground. That section has tended to hold the railroads in restraint. I believe that the best results do not always come by simply catching people who have committed crimes and sending them to the penitentiary. I believe the restrain- ing influence that hangs over the heads of people follows from the fear that if they do wrong the}" are likely to get into trouble. I believe that that is the most beneficial part of any criminal statute. Of course there must be an attempt to enforce it — no doubt about that — because if it is utterly neglected nobody will have any respect for it. So that I disagree with Mr. Hines when he says that the most important purj)ose that Congress had in view in enacting the law was found in the second section. That it is important, I admit: that it is the most important, I deny. We all agree that if the second section is not, strong enough to prevent rebates and drawbacks, make it stronger. The railroads say so, the Commission says so. the great shipping public says so. Senator Foraker. If I do not interrupt you Mr. FiFER. Not at all ; ask me any question you desire. Senator Foraker. I understood von to sav a moment ago that there never was a time when rates were so well enforced as they have been during the last two or three years. That followed im- mediately after your discussion of rebates. By that do you mean to have us understand that rebates are not now so much granted as heretofore ? Mr. Fifer. Undoubtedly that is true. Senator. While I am on that point I will further st^te that we have taken occasion, when traffic men have been before us — although it was irrelevant to the subject under inquiry — to ask questions, under the general joowers delegated to the Commission, to inform ourselves whether they kncAv of any rebates being paid and whether rates were being maintained. Further, Senator, I believe that rates are now being maintained. What brought about that happy condition is due to several causes. I think, as was suggested by the Senator from Louisiana [Mr. Foster] yesterday — or perhaps it was the Senator from Nevada [Mr. Newlands] — that these are flush times, that railroads have an abundance of traffic, and that the inducement to cut rates does not now exist. I think there is a large share of truth in that. I think it is due somewhat, and very largely possibly, to the Elkins law, because that tied up some fourteen roads from departing from their rates and paying rebates. I think there is a general understanding among railroads that they will maintain rates. It is all these things com- bined. Of course I have no information in regard to that matter except as I can gather it from rate men and shippers. But I think if everj^ traffic man in the United States were called before this com- 741 A— 05 12 178 EEGULATION OF RAILWAY RATES. mittee and made to testify he would say here, as I have said, that there has scarcely ever been a time, certainly not in recent years, when rates were so well maintained as now, and that there are but few rebates paid. Senator Foraker. If we should have a recurrence to the practice of giving rebates, what, in your judgment, is the best remedy for that? Mr. FiFER. I do not know that I can make any suggestion, Senator ; T do not knov>' how the second section could be made any stronger. _ Senator Foraker. I am referring now to the provision, found in the Elkins law, granting a remedy by injunction and requiring a summary proceeding in court, if it has jurisdiction, to stop rebates. ^¥[\s^t would you suggest, by way of amending the law, if the prac- tice of giving rebates should again be resorted to? Mr. FiFER. I do not believe, Senator, that I could make any sug- gestion. I would not say that the law could not, perhaps, be made more rigid and the way of the transgressor made a little more diffi- cult. But yet I do not see now how I could make any suggestions in regard to that, except to provide for expert examinations of the books. That disposes of the jfif th and second sections ; that is, the pooling and the rebate sections. You will remember that at the close of the war, when the now his- torical peace conference occurred between President Lincoln and Alex- ander H. Stephens, Mr. Stephens is said to have asked Mr. Lincoln, " What terms are you willing to grant? " i\jid it is rejDorted that Mr. Lincoln replied, "" If the South will consent to the abolition of slav- ery, they can write the other conditions." So, if the right of the railroads is reserved to them to make and control their own rates, they will consent, I take it, to about all the other conditions. But I think you will find, gentlemen, that they will never consent to surrender the smallest fraction of that power. They will hold on to that like a lost sinner to the Rock of Ages. They will never let go. And I expect, if I were a railroad man, I would take the same view. Not because these railroad men are any worse than anybody else. If you take all the people to-day in the United States who are complaining in regard to these matters, and let them change places with the railroad men, you would hear just as much complaint, perhaps. The individuals might change places, but the racket would keep on just the same. Looking at it fairly, I know, and every reasonable man knows, that some of this talk about the injustice and the inequality of these tariffs and the conduct of railroads is unjustifiable and unreasonable. Much of it, too, rests on a good foundation. There are two of those sections disposed of. "W^iat are the others? The first, which says that rates shall not be unreasonable. The third, that you shall not discriminate between localities. And fourth, the long and short haul clause of the law. Every one of those sections, if violated, requires what? It requires a change of rate. If any railroad man can think of any other way to correct a violation of either one of those sections (the first, third, or fourth), let him speak up now, or forever hold his peace. He can not do it. If the rate is too high, it must be cut down. If there is a discrimination between localities, one rate must be cut down a little EEGULATIOK" OF EAILWAY EATES. l79 or the other must be raised a little, and a proper relation of rates must be brought about. As to the long and short haul clause, you can not correct the ine- qualities unless there is a change of rates. If you will examine into the question, you will find that a great deal of injustice is done in regard to inequalities between localities, excessive rates, and in the long and short haul clause. Before I leave that I want to make this observation, since I am on the question no^^' of rate making: The railroads have the right, in the first instance, to make their own rates, free and untrammeled, so far as any governmental influence or authority is concerned. That leads to the inquiry, Is there no limitation upon the power of railroads, then, to make rates in this country? Can they charge just what they please? Certainly not. There are three limitations: First, competition. Eailroads, by combining, can do away with competition, except water competition. But there is competition in this countr}^, both rail and water, and the majority of railroad rates in this country are made by competition, either of markets or by direct competition. That is one limitation upon their authority. Wliat are the other two ? Another one is the commercial conditions. You will hear traffic men whirl that off their tongues as gliblj' as j^ou please. What does it mean? We have heard this question over and over again, until it has become as familiar as the primer. ^Vliat are com- mercial conditions? Suppose I own a thousand acres of timber down Scfuth that will make lumber. It will cost me $15 per thousand to manufacture that timber into lumber; the rate is $5 a thousand; the lumber in the market is worth $20. If I can not get a reduced rate I will allow that timber to rot in the forest, because it would be a silly farce for me to work for nothing and manufacture that timber into lumber. I go to a railroad man, explain to him the circum- stances, and I say, " I can not manufacture this timber into lumber unless you reduce your rate; if you will reduce that I will make business for you and I will make something out of it for myself." In order to move that lumber the railroad man must reduce his rate, and generally does, and makes something out of the transaction. That is an illustration of commercial conditions. That is two limitations. The other limitation upon the power of railroads to make rates is what the traffic will bear. Some traffic men will tell you that that is true and others will hedge a little on that. They do not like to come out flat-footed and admit that they charge as much as the traffic will bear. But they do, all the same. As Mr. Hines says, this is not a religious or moral ques- tion. It is a business question — that is, when these gentlemen come to make their rates they do not go into a closet and fall on their knees and ask divine guidance. Senator Ingalls, j^u know, once said about our pilgrim forefathers : First they fell upon their knees, And then upon the aborigines. Now, Senator, consider our country out on those great prairies, those great oceans of fertility and beauty. Do you suppose that those railroad men ride over those prairies and take an inventory of te 18U EEGULATION OF RAILWAY EATES. those crops and say, *' I dearty love these people and I intend to do by them as I would that others should do unto us ? '' Do they act upon that principle? I do not Avish to be understood as saying that there is no commercial honesty in the world, I believe the world is growing better, and I think there is more commercial honesty now than ever before. I am an optimist, not a pessimist. But they do not. AAhen the}' go to make rates, apply the (iolden liule; they apply David Harum's golden rule: ''Do the other fellow before he can have time to do you." Railroad men are just as good as others in regard to that; just as good as others. But business is conducted on that priuciple. Not that the commercial world is generally dishonest or in particidar is dishonest. But every man is trying to get the best end or the bargain if he can, and if these railroad people can get the best end of the bar- gain they will do it. Now, what next? I know that in reply to all that it is said — and the questions that have been asked by members of this committee in- dicate that — that the factory, the farm, and the railroad are all in partnership ; that they lean each against the other and support each other ; that their interests lie along the same channel. Gentlemen, . that is true; up to a certain jioint it is entirely true. The railroad and the factory will go hand in hand up to a certain point, and that is the point where the factory can live, thrive, and flourish, and fur- nish at that point as much traffic for the railroad as it could under any other condition. The raih-oad is not going to strangle the fac- tory. It will foster that industry as tenderW as a mother will her child; not for the same purpose — of love and affection — but for cold dollars, just for cold dollars, and that is incentive enough. ^Alien you reach the point where the factory can live, flourish, and furnish business for the railroad, the common interest of the railroads in the factory ceases. They will foster that industr}" not for a da}", not for a year, but for all time, so far as speaking from the business point of view is concerned. Time was when wild-cat railroading was going on in the country. Then they would dart down on a small railroad like a hawk on a spring chicken and get away with as many feathers as the}" could, and they did not, undoubtedly, care whether the industry flourished or whether it failed. But that has long since gone by, and railroad- ing is settling down rapidly now to legitimate business, and the rail- roads want to foster these industries. It is to their interest to do so, and that is why they want to. Let me pursue this a little further. There is frequently a wide margin between the rate that will allow a farmer, a coal miner, oi" a ft ... factory man to live — a wide margin between that amount and the amount to which he is justly entitled. If the farmer makes 5 per- cent on his investment he will not leave his farniv and he may be entitled to 10 per cent. The coal miner may, if he only makes 5 per cent, stick to his coal mine, and he may be entitled to 10; likewi';e with the factory. When it comes to that point the railroads hold the edge on the factory. Senator Dolliver. What do you mean by that ? Mr. FiFER. I mean they have them in their jDOwer. The Senator never played cards, I take it. Excuse me. I did not recognize the fact, Senator, that perhaps you did not understand those terms. REGULATION OF RAILWAY RATES. 181 The railroad has the power. Take it to yourselves, g-entlemen. Will those engaged in any ordinary business exercise it for their own benefit, or will they divide the extra profit? I am not going to point out. or attempt to point out, to any great extent, what the com- mittee ought to do or what it ought to recommend. It is easy to make complaints, it is easy to find fault. l)U.t it is the business of statesmen to apply the remedy. Senator Cullom. You are one of the Commissioners undertaking to execute the law that exists. You know whether there are faults in it, or places in it that ought to l)e strengthened. ]Mr. FiFER. I will come to that, Senator, a little further on. ' Senator Keax. Before you pass from this question of rate making, rou have told us how the railroads make rates. How would you make a rate? Mr. FiFER. Of course it is a difficult question to make a rate. If the reasonableness of a rate were challenged, I know of no better way to test it, no better standard by which it shall be measured, than to take other rates throughout the country on the same product, under like circumstances and conditions, and find out if you can whether the rate by which you measure the challenged rate is a rate that is made by competition. If it is, and is a rate of long standing, you can not go verv far Avrong in establishing that. If there had been no railroads yesterday in this country, and to-day they were all dropi3ed down on us just as they are, without any schedule of rates ever having existed, and you told all the traffic managers in the United States, " Now, come and make rates for these railroads," they would have a great big job. But that is not the case at all. These rates are of long standing. The railroads have been making rates for sixty or seventy-fi^-e years, and there are standards by v.-hicii these rates are measured. Take all the common law that it has taken a thousan.d years to build up, our constitutions, and our statutes. Wipe them all out, and then undertake to build up a system of laws — either by this body of men or any other — in a day, and you will find that you will have a great big job on hand. Constantly society and legislative bodies are fight- ing, so to speak, on the skirmish line. New questions are arising every da3^ You take old principles and apply them to new conditions, and society and government go on progressively from day to day. Now and then you encounter a new principle — -the railroad, the telegraph, and the telephone — and all these questions have brought up new con- ditions. They raise new questions, and, so far as the courts can, they apply the old principles to the new conditions, as every judge or law- yer throughout the country knows. So with rate making. There is a sort of fixedness about it that people understand. The shippers understand it. Everybody who has to do with shipments understands it. Now, gentlemen, I have explained a condition without suggesting a remedy. I shall do that later on. Let us see further in regard to the actual condition of some of the rates. Glance your eye upon the map hanging upon the wall, and 3'ou will see that between the Rock}' Mountains and the Atlantic seacoast that country is traversed by large navigable rivers — the Mississippi and the Ohio and their tributaries. You will see that the Great Lakes reach nearly halfway across the continent. That water communication has in all time, and will for 182 REGULATION OF RAILWAY RATES. all future time, modify, regulate, and control railroad rates through- out the great Mississippi Valley. I could explain, and it would be interesting, if you had time to listen, how one water rate will affect the rates over a large country. Take the grain rate from Chicago. Generally, when navigation opens, the railroads put down their grain rates, by reason of water competition, 2^ cents on a hundred pounds. It was suggested here, I noticed, last week, I believe, as to where went this profit derived from the demoralization of freight rates. Gentlemen, from the best light I can get upon the subject, I believe that for the most part it goes to the producer. I know here recently, when we were examining witnesses in regard to the differentials between the four great North Atlantic seaports, Boston, New York, Philadelphia, and Baltimore, a few years ago there was a wretched demoralization of the grain rate from the West to the Atlantic seaboard, bringing it down to 7 cents a hundred, and I specifically inquired of the shippers and railroad men where that profit went. It was said the railroads were carrying at a loss. The grain men, the middlemen, said they made no more than when the rate was 17 or 20 cents. " Where did it go ? " I inquired. They said that it went to the producer for the main part. The pro- ducers are the men planting corn in Illinois to-day. They are not here. Senator Foraker. Did you examine the market reports of that period to see whether or not there was any explanation in them as to what became of the profits on that grain ? Mr. FiFER. No. Senator Foraker. They would have told the tale conclusively, would they not ? Mr. FiFER. I did not examine the market quotations of that time. This question was not really in issue, and I inquired about it for gen- eral information only. But this investigation gave the members the opportunity to inquire about this matter, to bring up that question. Senator Foraker. I am not disputing your proposition, but would not the market quotations for that time have told that tale conclu- sively ? Mr. FiFER. Yes ; they would have told exactly ; but this was only a collateral question. Senator Foraker. It seemed to me that those prices would show whether the producers got that profit or not. Senator Cullom. ^¥hiit was the date of that rate cutting when the rate was 7 cents? Mr. FiFER. I do not know exactly when it was. ^Ir. Chairman — about four or five years ago. Senator Foraicer.. A^^iat was the date when the rates fell and when you investigated the subject of differentials as between Boston, New York, Philadelphia, and Baltimore? Commissioner Knapp. I think it Avas about the beginning of 1904, and related to ex-lake grain from Buffalo. Senator Foraker. He was not talking about any ex-lake grain. Mr. FiFER. No, Mr. Chairman, you did not understand the inquiry. There was a rate war. The roads leading from Buffalo to New York insisted that they ought to share in Avhat is called the ex-lake grain — that is, the grain that goes to Buffalo by water, and there had been a differential in favor of Baltimore and Philadelphia ; but they got EEGULATION OF EAILWAY KATES. 183 into a war and reduced the rate down to the fraction of a cent, out- rageously : th.e rates were utterly demoralized. Senator Kean. You say that was in 1904? Mr. FiFER. In 1901. but the demoralization of grain rates was previous to that. The testimony in that case will show. I haA-e shown you what there is on the east side of tht* Rocky Mountains. Now' glance your eye to the Pacific coast, and 3'ou will see that there are "no great rivers running from the interior to the coast; no lakes, except in the extreme northern portion perhaps. Now. if you please, examine the railroad rates of what is called the Middle "West and the Pacific coast. I am not good enough in remem- bering figures to run through that in my mind particularly, and I failed to make copies of them; but the tariff's are on file in our office and will show for themselves. To begin with, from the Missouri River to the Atlantic seaboard there is what is called a blanket or postage-stamp rate, so that a merchant going from San Francisco East to buy a^oods — it makes no difference whether he buys at Omaha or Chicago, Pittsburg or New York — his freight from the point where the^ goods are purchased is exactly the same to the Pacific ter- minal — Los Angeles. San Francisco, Portland, and Seattle. It is exactly the same. Now, it is just the reverse when you get on to the Pacific coast. I draw those comparisons in proof of my assertion that railroads, when they get a factory or an industry where it has no com- petition, when it is helpless, so to speak, they make the rate — and that is the only limitation — just exactly what the traffic will bear. I think those western mountain rates, so called, are too high. Now, I had our auditor examine some of them only a short time ago, and let us take the matter of window-shade cloth, just as an example. From New- York to Salt Lake City the rate is $2.30 per hundred. From New- York City to San Francisco it is $1. You take cotton goods. From New York to San Francisco it is $1, and from New York to Salt Lake City it is just double, $2. Senator Foraker. Why is that? Mr. FiFER. AYell, I will tell you. It is a long story, but I need not tell it all. Senator Foraker. No ; you can tell it in a word. Mr. FiFER. That was affected by the Avater competition from NeAv York, and unless the railroads make a rate at the Pacific coast terminals that Avill take the freight from the w^ater and put it upon the rails, it Avill go hj water, and they must meet the w^ater competi- tion at the Pacific coast terminals. They make a very plausible and, I Avill say. in many instances a very just argument in the advocacy of the lesser cost for a longer haul. I wall say further that the rail- road, in my judgment, could not get along in this country Avithout that provision, Avithout that elasticity. Senator Foraker. Then the low rate for the through haul is, I conclude, all right, in your judgment? Mr. Fifer. They meet that, and certainly nobody can object to a low rate. Senator Foraker. They must either give the low rate or let the business go ? Mr. Fifer. Yes. I will explain that. They make this argument, for instance — and Avhat I say in respect to this wall apply to everA^ other Pacific coast terminal. They say, for instance, Ave have a railroad run- l54 EEGULATIOX OF RAILWAY RATES. ning from Salt Lake on. AVe have what isknoATii in raih'oad parhmce as '• fixed " charoes. and thev sav that if Ave do not carrv that freio-ht and meet tlie water competition Ave can not carry it at alh That freig-lit. in theory, is just the same — it is treated by the raih-oads exactly the same as if it all reached the Pacific coast by Avater or originated at that point, was manufactured there, and then comes east. That is the principle on which it is done. They say. further, that Ave can make a little something hj hauling that freight to the terminal, and if we do not do it the water will take it there. The freight Avill go there at the reduced price, and they contend, therefore, that it is no discrimination to Salt Lake City. proA'ided ahvaA's that the rate to Salt Lake City is a reasonable rale. Xow, that is their position. Senator Foraker. And you come back, then, to that question as to whether the rate to Salt Lake Cit}^ is reasonable? Mr. FiFER. Yes; you get back to that. Now, there is Avhere the greatest stumbling block is for traffic men that I haA'^e found. It arises just there. There is no way of getting around it in the world, and it is this: TheA' say they make a small profit, and the}' say by engaging in that traffic to the terminal theA' can get a little something, and therefore make even less on the other lines of their roads. Senator Foraker. That is, even less to Salt Lake City, keeping up your illustration ? Mr. Fifer. Yes; but if they would spread that rate all OA^er ,th« lines of their road thcA' Avould soon be in chancer A^ and I think that IS true. Senator Foraker. That is, a^ou do think that a dollar rate, for in- stance, for a long haul Avould not be a pro^table rate, if that Avere spread OA^er the whole system ? Mr. Fifer. I do not think so. I think they are right about that, but here comes the trouble for railroad traffic men, and I think they are the smartest men in the world. Allien we Avere iiiA^estigatina: that water competition around the Horn, because we had that question up. they Avould explain it and make you see it so A'iA'idly that you could fairly hear the flapping of the sails as the A'essels rounded Cape Horn. So that the\' can embellish those things. I do not dare sav that they SAvear to Avhat is not true. It does not lie m my mouth to come here and say that, and I do not, but they can make their side appear the best ahvays, and here is a point that is ahvays difficult for them to get around. If. for instance, you take the rate I haA^e men- tioned on AvindoAv-shade cloth from Xew York to Salt Lake City — $2.?i0 — carrying it 800 miles farther they charge only $1. and that dollar rate affords them a sliglit profit, is not their rate of $2.30 ex- cessiA^e to Salt Lake ? That is the question. Senator CullojNI. Does not that fact almost conclusively make it appear to be unreasonable to charge $2.30? Mr. Fifer. Yes. Xoav, let us be fair about it. The men Avho build a citj^ in the interior- of a continent, in a mountainous district, can not expect to get as reasonable a rate as the men who build their city upon the shore of the sea. Anybody can see that, and yet. granting all that, do not the conditions Avhich I liaA'e stated indicate that the rate upon these articles to Salt Lake City is excessive, illustrating my original proposition that the railroads impose such tariffs Avhen they haA^e a factory or an industrA' all in their power — just such tariff as REGULATION OF EAILWAY RATES, 185 the traffic will bear ? Xow. Mr. Hines in the course of his testimony said that he would ten times rather have an industry on his road where there was no competition than an industry at the end of his line where there was competition. AVhy would he rather have that? Turn it over and look at it. Simply because at the end of his road the rate would be fixed by competition. AVhen it is a solitary indus- try on a single line of railroad and that railroad his. he will determine what the rate shall be. and that is why he would ten times j^refer to have an industry on his road. He said he would foster it, and so he will. Senator Foraker. I want to ask j^ou a question right there. Assuming, now. that the difference in the rate between San Francisco and Salt Lake City is conclusive, as Senator Cullom says, as showing that the rate to Salt Lake City is unreasonable, what would that be — a discrimination against Salt Lake City? Mr. FiFER. Xo : an excessive rate to Salt Lake. Senator Foraker. And if so, have you or not a remedy, in your opinion, already? Mr. FiFER. I was going to come to that later on ; I was going to speak of that. Senator Foraker. I do not want to interru]3t the course of your argument, but I want to know right now, when you reach that point — admitting that this higher rate to an intermediate point is a discrimination against that locality, being on the same line — have you not a complete remedy now under the Elkins law ; or if it be on different lines and the rate is so high as to amount to a discrimina- tion in favor of a locality on another line, have you not a remedy, or have you ? I simply want the benefit of your opinion. Mr. FiFER. I will say this much right now in regard to that : You take the long and short haul clause and 5'^ou take the third provision, that there shall be no discrimination between localities. Xow, it seems to me that both those provisions might api3ly to the situation. Senator P'oraker. You, of course, agree with the construction of the long and short haul clause that the Interstate Commerce Com- mission has given to it and that the courts have given to it ? ]Mr. FiFER. Oh. I think perhaps I bow to the decision of the court and agree that the court is right. Senator Foraker. You do not bow; you are a part of the decision? Mr. Fifer. Yes: but at the same time the legislature could have modified that long and short haul clause in this way : It now savs that the railroad shall not charge more for a short haul than it does for a long haul over the same line of road in the same direction, where the shorter haul is included in the longer one. where the cir- cumstances and conditions are substantially the same. Xow, they could have made it still more faA'orable to the railroads, and said, '• where there is the slightest competition." They have said, '' where the circumstances and conditions are substantially the same." The view of the Commission has been overruled by the courts several times regarding this clause. Senator Foraker. Xow. we want to get to the point of this whole controversy. The question is whether we are going to amend or supplement this law. "Would you have us strike out of the long and short haul clause, that provision " under substantially similar cir- cumstances and conditions." and make it an arbitrary, riofid rule. 186 EEGULATION OF RAILWAY RATES. that there shall be more charged for the long haul, proportionately, than for the short haul i Mr. FiFER. Just the exact limitation that ought to be placed there is not clear in ni}' own mind. Senator Foraker. Tf we strike it out, transcontinental lines Avould go absolutely out of transcontinental business, would they not, so far as their long hauls are concerned ? Mr. FiFER. It would not do to apply it on the Pacific coast, be- cause the water competition on that coast is a controlling factor. It would not do, but just what limitation - Senator Cullom. What limitation would you put upon the statute making it stronger against extravagant differences? jNIr. Fii-^ER. I have thought if it was left to the Commission to say that thev should examine mto and permit this thing to be done Senator Dolliver. Didn't they do exactly that same thing when the Commission was first organized? Mr. FiFER. I could not speak in reference to that, because I have only been on the Commission a short time. Senator Dolliver. How is that, Judge Knapp ? Did not the Com- mission entertain the petitions of a multitude of roads to be relieved of this short-haul provision ? Mr. Commissioner Knapp. Broadly speaking, I think the carriers generally assumed that the fourth section imposed a limitation which they must either observe or get relief from under some other clause, and at least to avoid any risk, and, as a matter of prudence, they appear to have made very general applications for relief. Senator Dolliver. What action did the Commission take on those applications ? Mr. Commissioner Knapp. You will find that very fully set forth in the opinion delivered in what is known as the " Louisville and Nashville Case," in the early work of the Commission. Senator Foraker. You take the same position there that the courts take, do you not, that you would take into account the question of conditions ? Mr. Commissioner Knapp. No ; the courts have given a much more liberal and extensive meaning to the phrase " similar circum- stances and conditions " than the Commission, I think. Senator Foraker. Which case is it that you refer to? Mr. Commissioner Knapp. It is in the first volume, in the first year. Senator Foraker. But I was speaking of recent decisions. In all your recent decisions you have followed the interpretation, of course, given by the courts? Mr. Commissioner Knapp. Oh. certainly; so that, if I may have a word, if I understand the law now, if in point of fact the circum- stances and conditions at a long-distance point are substantially dis- similar, no matter for what reason, the fourth section does not apply. Mr. FiFER. There was a gentleman who appeared here last week from Tennessee, a gentleman who so delightfully entertained and instructed us all in" regard to the growth and development of the South, all brought about by the railroads. You remember his well- turned periods and his flashes of rhetoric — very eloquent indeed. Senator Foraker. There have been so many gentlemen of that kind before the committee recently that I do not recall him. Mr. FiFER. This was one special gentleman who was from Ten- KEGULATIOF OP RAILWAY RATES. 187 nessee. As the gentleman progressed he became more serious, and as he scurried up and doAvn the gussets and seams of Hamilton's and Jefferson's old clothes and described the awful chasm toward which the country was tending — that is, Government ownership of railroads — I confess that the cold chills went up my spinal column, my teeth chattered, aiicl my knees knocked together, as I seemed to stand on the awful brink of this awful precipice, and I looked around for some of those impoverished widows and orphans expect- ing every moment to be precipitated to the base of that abyss. Now, he said that he represented the entire South, as I remember his lan- guage, in this question. Now, gentlemen, I beg you to remember that the South is a great big country, and if he were representing the whole South on this industrial or rate c|uestion he certainly must be a very busy man, and it was very kind in Judge Clements to give way until he could give his testimony. Let us examine and see whether the gentleman rep- resents all the southern section on this rate question. Down on the northern limits of South Carolina, or the southern limits of North Carolina, is the city of Charlotte, of about 20.000 inhabitants. From New Orleans to what is known as the " Virginia cities " — Richmond, Lynchburg, and Norfolk — is, in round numbers, about 800 miles. Charlotte is about halfway, about half that distance. The people doAvn there complained to the Commission of this state of facts — that on some articles of traffic from New Orleans to Charlotte the rate is double what it is to the Virginia cities, twice the distance. There is no railroad competition. The Southern Railway and the Seaboard Air Line reach the same city, but they claimed that they were under the same control and the same management, and that competition was done away with. But that state of facts existed. Now. then, the other side of this case, the side of the railroads, is that they want to do business in the Virginia cities, and must meet the water competition that reaches the Virginia cities by the ocean — - the .same old question, but I call attention to this disparity now. Per ton per mile the rate to Charlotte is four times what it is to the Virginia cities per ton per mile. If they can do business at a slight profit, however slight, carrying the same goods right through Char- lotte — I leave it to you — whether if they do business at a slight profit to the Virginia cities the intermediate rate is not too high. Senator Foraker. That is on the same line of road, is it ? Mr. FiFER. The same line of road, the Southern road. I don't know whether the Southern road reaches all the Virginia cities or not. Senator Foraker. How did that come to the attention of the Interstate Commerce Commission? Mr. FiEER. It came to the attention of the Interstate Commerce Commission by complaint duly filed. Senator Cullom. Have you tried the case? Mr. FiFER. The testimony has been heard, but no decision has been made. I would not like of course to express any opinion at this time. These facts I call attention to are public propert}^ now. Senator Foraker. Now, it was identically that sort of thing that we, after a great deal of consideration, undertook to provide for in the Elkins law where it provides in the third section that all discrimi- 188 REGULATION OF EAILWAY RATES. nations of that character particularly might be enjoined, and it would be the duty of the court to proceed summarily, provided the Interstate Connnerce Commission would make the comphiint. Mr. FiFER. Senator, you Avill find that is the most difficult tiling, in my judgment, jou will have to deal with when 3'ou undertake to crys- tallize all this talk into a bill. It is easy to talk; it is easy to find fault. Senator Foraker. What I want to find out is why did not the Interstate Commerce Commission. Avith this law before it and that complaint made out, institute a proceeding under this statute. Mr. FiFER. Well, I thought I would speak of that in its proper place. Senator Foraker. I just want to get at the facts. Mr. FiFER. M}^ construction of the law is that the courts could do no more than the Commission could do. Senator Foraker. They could enjoin it, couldn't thej'? Mr. FiFER. The courts could enjoin them from charging that rate. Senator Foraker. No; could enjoin the discrimination. ' Mr. FiFER. Well, enjoin the discrimination. I have already pointed out that the violation of each one of these sections involves a rate, and while the court, if the rate is too high, may do as the Commis- sion does, declare the rate too high and excessive, and ma}" enjoin its enforcement, yet there it must stop. Senator Foraker. You take the vieAv, do you, that the court has no right, even though you would seek to make that an issue, to enjoin anything in excess of what was a reasonable rate, which the law says shall be the lawful rate ? Mr. FiFER. Yes; the court might enjoin the rate that is in, but I do not believe that the court can ever substitute one rate for another. Senator Foraker. Nobody ever contended that any court could. That never was thought of, as I understand it, by anybody; but there is a difference of opinion, and I onl}^ want to know whether you as a lawyer believe that it is not competent for a court of equity to enjoin anything wdiich you allege to be in excess of a reasonable rate, if they found your allegation had been sustained by the proof. Mr. FiFER, The decision in what we call the Wichita Case would indicate that a court would enjoin unjust or undue discrimination, and that the court would enjoin an excessive rate. The court, in other words, could do just what the Commission does, and no more, and if you leave the Commission and go to the court you are travel- ing in a circle and reach the same point from which you started. Senator Foraker. Is there not this difference: The Commission can condemn and that is all they can do; but the court can at once enjoin not only the collection of the rate which may be unreasonable, but the collection of any rate which is in excess of the lawful rate ? Mr. FiFER. Yes ; but who is to determine what the reasonable rate will be? Senator Foraker. The court. Is there any trouble about that as a proposition of law ? Mr. Fifer. I think there is a great deal of trouble. Senator Foraker. I would like to have some lawyer point it out. ]Mr. Fifer. There is a trial, we will say, in your State court before a jur3^ The jury renders excessive damages, and you take the case to the appellate court. The court may reverse it solely on account REGULATION OP RAILWAY RATES. 189 of the excessive damages. Can the court fix what the verdict ought to be? Senator Foeaker. Well, it is not an analogous case, because the interstate-commerce act says that a raih'oad may charge a reasonable rate and that it shall not charge any more. In other words, a rea- sonable rate is a lawful rate and anything in excess of a reasonable rate is unlawful. Now, suppose they charge $1.25 where they should charge $1. The question is not whether $1.25 is unreasonable, unless the jDleader raises only that issue ; it is certainly competent for him to raise the issue whether anything in excess of $1 is unreasonable and because if $1 be the maximum reasonable rate that is the rate pre- scribed by the statute. The court can enjoin that on a state of facts presented, but of course if to-morrow the conditions change, that injunction would not be binding under changed conditions, though a railroad would not be very likely to violate what the court had found. jVIr. FiFER. AYhat kind of a decree would 3'ou enroll? Enjoin the excessive rate, of course. To go further and enjoin an unreasonable rate as unlawful without naming the unreasonable rate vou Avould condenni what the statute already condemns, and the question is still left open as to what a reasonable rate is. If you fix that, then it is the fixing of a rate b}' the court. But lawyers perhaps will differ in •regard to the duties and power and the rights of courts in that par- ticular. . I expect 3T)u and I differ in respect to that. Senator Foraker. I hear a great discussion of the right of a court to fix a rate, which is simply striking at a man of straw. I never heard am^body propose to have rates fixed by a court. Mr. FiFER. I understood from some inquiries here yesterday it was supposed that the court, in saying that a rate was too high, by that simple mental operation must of necessity decide what was a reasonable rate and might suggest it. I think you asked that ques- tion yourself. Senator Foraker. I perhaps did. I am only trying to get your view now. Mr. FiFER. My view is this, that the rate-making power is the exercise of a legislative power. Senator Foraker. Yes; we are all agreed upon that. Mr. Fifer. That you can confer that power upon some adminis- trative body, but you can not confer it upon the courts; that you can not confer a little power upon the courts any more than you can confer a big poAv.er; that the size of the dose does not change the quality of the medicine. If yoii can confer a little power to fix rates, you can confer upon the courts the power to make the entire schedule. Senator Foraker. "Well, we will agree you can not confer any. I wanted simply to get the benefit of your legal opinion, and it is important because you are a member of the Commission and a lawyer of experience. Senator Cullom. I want to follow that inquiry of Senator Fora- ker's a little further. As I understand it, you do agree that a judge, a court, if an application is made to it for an injunction under the Elkins law, may grant the injunction. Mr. Fifer. Yes. Senator Cullom. And by that declare that the common carrier shall not charge that rate any longer ? 1 190 REGULATIOISr OF RAILWAY RATES. Mr. FiFER. Yes. Senator Cullom. Now, then, what is the result? If they do busi- ness, they have to put down the rate. jSIr. FiFER. Yes. Senator Cullom. Well, that is what we want. Mr. FiFER. Just the power that the Commission can exercise, and that is what I say. You are traveling in a circle and you do not get anywhere. Senator Cullom. The Commission does not need to exercise any power at all except to make application to the court for that injunction. Mr. FiFER. That is all true. I think we understand one another, but while we are on that I want to note another point, and that is that our railroad friends say that they do not want the Commission to lay its ignorant hands upon their freight rates — that they want men of experience — and yet they say that they want to go to the court!=. Are you going to turn all the lawyers off the bench and put on railroad men? Who is to have the final say about this? It is the courts. Well, are they lawyers? Now, there is this further physical difficulty in regard to the courts, 1 am trying to aid you, gentlemen, if I can, to a proper solution of this difficulty. Senator Foraker. You have to go to the court eventually. Mr. FiFER. You have to go to the court eventually, and you must go before a body of men who are not railroad experts, and there is where these railroad men say you ought to go in the first place. Senator Foraker. If they have the final say, why not? Mr. Fifer. Well, that is the question. Now, you see the truth of it is these railroad experts do fix their own rates in the first instance, and I say it with all due respect to the courts, they do not like to dig through this kind of cases. They are lacking somewhat in the tech- nical experience. It is a pleasure for a good lawyer to pass upon a clean-cut question of law, without all this physical labor of running through large records of 20,000 pages, as we sometimes have. We have one case now where the evidence is taken and it is to be argued 0X1 the 25th day of May, where there are 20,000 pages of testimony. Now, we did not bring this lawsuit. It was the cattlemen of the Southwest Avho brought it, and all their testimony had some bearing on the question. We had to hear it. Now, think of hurling a volume of testimonv of that kind at a supreme court or a circuit court or a district court. How much con- sideration, with all due respect to the court, would it give? It must be a body of men who are in and with and of this question, studying it day by day and knowing something about it, in my judgment. Now, there is another difficulty, which is purely physical, and that is you would have to make a traveling menagerie of these courts. In this cattle case we took testimony at Fort Worth, Chicago, St. Louis, and Denver. Would you have the courts travel around? That is a necessity, because a lot of merchants from different cities are all interested in the same rate. They are busy men. Our law provides that the Commission can go to the place Avhere the com- plaint is made and take the testimony. Now, to bring up a perfect cohort of witnesses from Denver to Washington and from St. Louis and Chicago and Fort Worth would be a substantial denial of jus- REGULATION OF RAILWAY RATES. 191 tice. You must go where this testimony is to be found and wliere the men live. Now, there is that further difficulty in regard to submitting this question entireh' to a court. Senator Cullom. I understand from the general tenor of your remarlvs that j'ou believe that this Commission or a commission ought to have this power extended, so that when it finds a rate is unreason- able it can find what is a reasonable rate. Mr. FiFER. I will answer that in this way. that I stand with the President — his message has been discussed here, and in that connec- tion I want to say this: I do not agree with our railroad friends that if the Commission was given this power to fix what is a reason- able rate it would turn the world upside down. I think that the earth Avould continue to turn on its axis and the sun would rise and set as of yore, and these gentlemen would do business at the old stand, with jperhaps some little fear of doing anything that might call down on their heads the condemnation of the Commission. Now, I believe that the mere fact that the power exists in some body of men to regulate rates will make the railroads more cautious and more care- ful than they otherwise would be. The man who is whipped the easiest is generally whipped the oftenest; and so if there is no power. and the railroads can run over the Commission, they will continue to run over them. If the power exists, it would not be necessary to exercise it, in my judgment, very often. When these traffic associations met and formulated rates — and I do not know but Avhat they ought to be legalized in some way, because they do it anyhow — they would say, " Here, we had better not raise that rate; if we do, we will get into trouble with the Interstate Commerce Commission," and I believe that that would prevent the raising of many rates. Now, just pursuing that a step further. You have heard very often from our railroad friends that they lower many rates, and yet they say the lowering of a rate will demoralize business. They have lowered hundreds of rates in recent years. I suppose they lowered them be- cause they were too high. They did not lower them for any other reason. Suppose a complaint had been made and the Commission had .condemned the rate and lowered it, would not the effect have been exactly the same ? Senator Kean. Would not the Commission also have the power to raise the rate if they condemned the rate ? Mr. FiFER. I am glad to have my attention called to that. When it comes to adjusting rates between localities, in my judgment the poAver sho\ild be given to the Commission to lower one rate and to ]-aise another, so that they can be brought to where they are just. Senator Foraker. That is. j^ou think thej^ should have the right to fix a minimum as well as a maximum. Mr. FiFER. I think, generall3^ it would be better to fix a maximum rate and give elasticity as much as possible to the rate. Mr. Hines had much to say about elasticity — the more the better. He wanted that kind of elasticity, I suppose, we used to get with an old pair of yarn suspenders, that drew up and let out as occasion required, with a few buttonholes in front for extraordinary occasions when there was undue expansion. Now, gentlemen, look at that a moment. Expansion ! His argument there proceeds upon the theory that the Commission was to make the rates in the first instance. AVliy, not 192 REGULATION OF RAILWAY RATES. at all. He called attention to these very experienced men running all over the country and up and down the railroads feeling the com- mercial pul^^e. and finding out just what ought to be done. Do you suppose that if this power was in the Commission these men would be discharged ( Thay would be of jiT^t as much use after the power was granted as before, and they would nmke the same rates then as they do to-day — just exactly the same. Senator Fokaker. May I ask jou, before you get too far away from it, whether the Interstate Commerce Commission has yet decided the question raised by the complaint of the cattlemen? Mr. FiFER. No ; that is to be argued on the 25th of ]May. Senator Foraker. How long since that complaint was filed with the Commission ? Mr. FiFEK. I do not know exact h\ It was by attorneys hired by the cattlemen. Senator Foraker. It was three or four years ago? ]Mr. FiFER. Xo. Senator Foraker. It has been long enough ago to take 20,000 pages of testimony. Mr. FiFER. Yes; with the exhibits. The attorney for the cattle raisers, Mr. Cowan, I believe, is here. ]Mr. Cowan. The case was begun in February of last year and the evidence was concluded in December. If I have an opportunity of appearing before the committee, I shall refer to that. Mr. FiFER. Our worthy friends have not only complained of us because we have not made good citizens out of them by injunction, but they have also complained because we have not tried these civil cases fast enough. Senator Foraker. I do not want you to think there is any complaint involved in that question I asked. I am only thinking about the feasibility, and using 3'our own case as an illustration. jSIr. FiFER. Oh, A'es. "NMierever there has been these long delays, so far as I can remember now, it has been the fault of the attorneys themselves. Senator Foraker. Doubtless not the fault of the Commission. We all recognize that. ]\Ir. Fifer. Xo; it is not. I do not know an anstance where the Commission has ever continued a case or failed to go to a place and hear it — some one of us— whenever the parties were ready. Now, you take the Soap Case ; that arose from your own State. That was represented by some of the best lawyers from Cincinnati for the com- plainants, and we hurried through as fast as we could. We took great volumes of testimony. Senator Foraker. I have not heard anybody complain of the Com- mission. Mr. Fifer. Mr. Hines cited that particular case. The complain- ants are not here complaining, and the railroads come here and. in a measure, complain that there has been too much delay. I believe Professor Meyer — I did not read one word of his testimony — came here all the way from Chicago to talk about the Commission in legard to that. I am very soriy that he thought it was necessary to do that. There are many kinds of professors in the world — pro- fessors who have a large grasp of practical affairs, and there are professors again who fall within that class described by Macaulay, REGULATION OF KAILWAY RATES. 193 laborious pedants, who infest large libraries, spending most of their time in learning the wrong thing. I do not know to what class Professor Meyer belongs. Senator Foraker. Well, Ave have had two professors here. Mr. FiFER. That is one more than I had heard of. Senator Foraker. It should be said in behalf of Professor Meyer, now that you speak of him as you do, that he came here on the invita- tion of the chairman of the committee and without any compensation from anybody, and refused to accept even his expenses. , Mr. FiFER. I do not abuse Professor Meyer at all. Senator Foraker. It was purely an act of philanthropy on his part. Mr. Fifer. I am very glad that he came. For one, I want all the light on this subject that is within the reach of the committee. Senator Newlands. I understand that the complaint of the rail- way men is not regarding the delay of the Commission itself, but they assert that these delays are an inseparable part of the system ; that it is impossible for the Commission to act with the rapidity that is desired, the rapidity of judgment that is desired; that these traffic men with their numerous assistants are watching the commercial conditions all the time and are able to act quickly and decisively, and that it is important for the commercial interests that the decisions should be quick and decisive. It is the system that they object to as necessarily involving delay. I do not understand that they complain of the Commissioners themselves in that regard. Mr. Fifer. Now, gentlemen, one further thought, and I have done. Our eloquent friend from Tennessee, to whom I have before referred, pictured the dangers of Government ownership by granting this power to the Commission. Now, in my judgment the road to Govern- ment ownership does not lie in that direction at all. It does not lie in that direction at all in my judgment, but the reverse. Government ownership in my judgment will come, if it ever does at all — and I pray that it never may — when the people of this country get the notion into their heads that these railroad corporations are too strong for the Inter- state Commerce Commission, are too strong for the courts, aye, too strong for the Government. Now, that maj come sooner than we think. We have heard the mutterings, and I am no alarmist, I am no Jeffer- son man, I have always been a Hamilton man, and I am no alarmist. I believe this Government ultimately will take care of itself, and is strong enough to do so, but we have heard the mutterings in the great city by the Lakes, and in my OAvn town of 25,000 inhabitants there was a vote upon that question this spring, and although every news- paper was against it, yet it voted for municipal ownership of public utilities by two to one. Senator Foraker. Still you would do what is right, wouldn't you ? Mr. Fifer. Yes, exactly; and let the consequences take care of themselves. The railroads are cutting out their very sharp curves, and it is good railroad policy, and they have been cutting down the heavy grades. Now, instead of working overtime on this widow and orjDhan argument, I would set those men to work and I would cut out some of these heavy grades in these tariffs and I would take some of these sharp curves out. Senator Kean. That is what they are doing — taking the grades and curves off. 74lA— 05 13 194 REGULATION OF RAILWAY RATES. Mr. FiFER. Yes ; that is, the physical curves, but I would take them out of the tariffs, and I say this in all good part as to what I would do if I were a railroad man. As long as these situations exist over the country, it is like a thorn in the foot; it will never down until the thorn is removed. It is a festering sore, and I believe — I am hope- ful — I believe that the time will come when this everlasting conflict that is going on between the railroads on the one side and the people on the other will stop. I believe that it will find repose in just laws justly administered, and when that is done there will be a better understanding. I believe that we are passing through, and have been, a transition period in this country so far as railroads are concerned. I think we are a little different from what they are in Europe. We are running a foot race to get on in the world and get the dol- lar, and each railroad man wants to be the biggest railroad man. I think that we will pass through that by and by and the railroads will settle down to where there will be less antagonism. I admire wonder- full}^ Mr. James J. Hill. I admire INIr. Cassatt, and I admire Mr. Fish, of the Illinois Central. They are all in a measure benefactors. If I had their money, I would not invest it in boring holes through the Kocky JMountains; I would go off' to Europe, I think, and have a good time — quit business ; but they have the pluck and the nerve to develop these great industries. They do not do it for charity; they want to measure their prowess and their genius with the genius and ability of others, and they become great benefactors. There is Mr. Fish, who look various roads throughout the South. He galvanized them and breathed the breath of life into them, and has made a great railroad system, and so has Mr. Hill. When he went to the Pacific coast he might have lost ever}^ cent he put into it. I would have said so. I would not have done it. I say. All hail to these men ! and I would not lay a straw in their way. I say they are benefactors, and I know of nobody who is doing more for this country than these great captains of industry, the railroad men, but they should not impose on the public. I have often thought that I would rather be a railroad president than to hold any other position on eaVth. Senator CuUom will per- haps remember that in our town some years ago Bishop Spaulding, of Peoria, came over there and delivered a wonderfully brilliant and eloquent lecture. We have a sort of an eccentric in our town who imagined that he was something of a litterateur. He went out to hear the Bishop, and in going away with a friend he said : " Do you know if I had my life to live over again I would be a bishop ? " Now, gentlemen, if I had my life to live over again I would be president of some great railroad company. I have a great admiration for them. They have done wonders for this country. The railroads should be fairly treated, and I am willing to concede that much of this talk is unfounded and unjust. We must view these questions not as partisans, not as railroad wreckers, but as fair men looking on both sides of the question, and that I believe I am able to do; but in order to allay this constant friction that has been going on for years and which is increasing, there must come about in some way a better under- standing between the people on the one side and the railroads on the other, and that can be done by fair dealing. Senator Foraker. Do you think this friction is increasing ? REGUIATION OF RAILWAY RATES. 195 Mr. FiFER. Well, I don't know whether it is or not, but I think it is at this time. Senator Foraker. Is it not true that there is less friction to-day between the shippers and the public and the railroads than ever before in the history of railroads in this country ? Mr. FiFER. I hope that is true; and possibly, Senator, you may be right about it. Senator Foraker. I ask to get your opinion. Mr. FiFER. It is not being allayed very fast. It is not disappearing very rapidly, and it is still, I might say, a diabolical fact. It is Avith us. Senator Kean. Won't it always be with you ? Mr. Fieer. No; I think not. I think it will come about as it is in Europe to-day. I have not had time to read it, but I understand that the people over there have no such feeling against the railroads as they have here. You can take a personal-injury case before a jury and get just as fair a trial as you can where the controversy is be- tween two individuals. That kind of feeling to which I refer does not exist at all. I think, possibly, it is because there is some sort of regulation, and the railroads have acquiesced, and for that reason it has largely disappeared. That is my own opinion. Senator Foraker. Do you think "^the railroads have an advantage before American juries in personal-injury cases? Mr. FiFER. Not at all. Senator Foraker. Just the reverse, is it not? Mr. Fifer. To some extent. I have tried that question to my sor- row many, many times. And I think that is the general experience. Now, gentlemen, that is my say. I have given you the experience of one who has had only a few years on the Commission. I may be mistaken. I think in the main I am correct. Senator Foraker. You told us of two instances in which you thought excessive rates were charged, both to intermediate points, one to Salt Lake City and the other to Charlotte. Now, what would you do in those cases if we were to give you the power? I would like to see how these things would work. Mr. Fifer. As far as the Charlotte case is concerned, I would not like to discuss that further. I have told the circumstances, which now are public record. We have to pass on that question soon. In ttie other I do not know. The Rocky Mountain or western mountain situation must all be tried together. It is a large question; you can not single out any railroad running to any Pacific coast terminal and try that case. What affects one affects all the transcontinental roads, and it would be very unfair to try one situation without bring- ing them all in. Senator Foraker. Well, I did not want to have you testify any further about that matter. Inasmuch as you cited those situations I thought you had something clearly in your mind as to what you would do to remedy those troubles. Mr. Fifer. Now, we have been talking about investigating that whole western mountain situation. Bring in all the roads and let them all be heard. Senator Foraker. You do know that you would not raise the rate, as I understand you, on the through haul to the Pacific coast? Mr. Fifer. No, sir. 196 KEGULATION OF RAILWAY RATES. Senator Foeaker. You would have to leave that as it is or else drive the railroads out of that business? Mr. FiFER. Yes ; that is right. Senator Foraker. Then you would have to reduce the rate to Salt Lake City? Mr. FiFER. That would appear to be true. Senator For^vker. If you were to set out to do that, you would have to determine upon the facts adduced whether or not that was an unreasonable rate under all the circumstances? Mr. Fifer. Under the first section, but not under the fourth. Senator Foraker. If it was reasonable, it would stand. Mr. Fifer. Yes; that is the situation exactly. Senator Foraker. If we have any remedy for that, you are not aware of it, as I understand ? Mr. Fifer. I want to add in closing that I do not believe, except in som*} instances Avhere I have stated, that the railroad rates through- out this country are excessively high at all. I have never believed that, and neither do I believe there would be or ought to be any great disturbance of these rates, whatever powers the Commission might be invested with. Senator Foraker. As a matter of fact, it is true, is it not. that rates b3^ themselves, rates in the absolute are not unreasonably high? Mr. Fifer. I believe that is true with some exceptions. Senator Foraker. There may be some exceptions, of course, to the rule? Mr. Fifer. Yes ; I think so. Senator Foraker. And if there is not any remedy against that, that is adequate, one should be provided, I suppose, would be your opinion ? Mr. Fifer. Yes. Senator Foraker. That disposes of the rate question. Then as to the rebates, you state, as I understand you, that they are practically discontinued, and, if not, there is all the law you can think of neces- sar}^ to enforce the discontinuance of them. Mr. Fifer. I can not think of anything else. However, I would say this : This escaped me when we were on that subject before. If you would delegate some power to the Commission to have a skilled accountant to examine the books, I thinli that that would be a very material help. Senator Foraker. Have a sort of power of visitation? Mr. Fifer. A power of visitation; that is, by an expert. I could not, nor could you, go into those books and find out anything about them in the rest of my lifetime. Senator Foraker. Something like a bank examiner? Mr. Fifer. We must have somebody of skill. There is one thing further that I think the committee ought to consider, and that is in regard to export rates. Mr. Hill came here, I am very sorry to un- derstand, and abused the Commission, and said in substance that the action of the Commission had prevented him from sending flour to the Orient. Senator Foraker. I do not think Mr. Hill abused the Commission, if you will allow me to interrupt you there. He simply said the Com- mission required, in accordance with the provisions of the law, that he should publish his rates. EEGULATION OF EAILWAY BATES. 197 Mr. FiFER. No; I will tell you about that. I do not think that Mr. Hill has ever been trammeled in his export rates in the slightest particular by an}'- action of the Commission. I think that the law is as the Commission has decided, that those rates must be published along with the other schedules. I have always been in favor of an emergency tariff on export rates — for instance, a great deal of these sales to the Orient are made by cable. They telegraph to Chicago or to Pittsburg for steel goods or for canned goods, and they have also the bid from some place in Europe where they have water com- munication, and the man here can fill the order if he can get a reason- able internal rail rate. If he publishes his schedules, he can not change his schedules in time to take the order, and therefore he will lose it. Now, it is not discrimination against th(? American producer, or not much at least, to have an elastic export tariff that can be done away with in special emergencies, because it is a question whether the American producer shall fill a foreign order or whether he shall not. Now, we called all the railroads together and the shippers, something over a year ago, and he«,rd all of their complaints. Some of the roads were in favor of publishing the export tariff and others were not, and some of the shippers were and others were not; but we de- cided that the law was that it must be published, and said that we would not enforce it, however, until the railroads had had an oppor- tunity to lay the whole matter before Congress and get relief. I think, gentlemen, you ought to give us some legislation on that ques- tion. Senator Fokaker. Under the law as it now stands the Commission has the power to waive that requirement about the publication of through rates on export business, I believe, has it not? Mr. FiFER. Oh, I think not. Now, if the committee will indulge me, before I answer any questions which they may desire to put to me, I would like to crystallize all these things that I have been saying into some concrete, definite form. First, I stand with the President in regard to granting power to the Interstate Commerce Commission to fix what a reasonable rate should be after an investigation. Senator Doixiver. Now, do you apply that to the question of rates that are unreasonable in themselves or do you apply it also to these discriminations ? Mr. FiFER. I do not see why it should not be applied to discrimi- nations between localities. As I said earlier in my statement, I do not see if there is a discrimination such as there was in what we called the " Wichita case "^ — that is, they charged from St. Louis to Wichita a higher rate for a shorter haul over the lines of the same company than they did to Omaha, a longer distance. I do not know how you are going to correct that inequality unless you lay your hands on the rates. I believe that when you determine that a rate is unreason- able when it is charged, and you hear all the evidence and the argu- ments, when you find that the rate is too high, somehow in some way by the same mental operation you find what a reasonable rate should be. Senator Kean. If you find that it is too low, what would you do? Mr. FiFER. Well, that would hardly ever be the case, and the sole question is as to whether or not the rate is reasonable. I think we can rely upon our railroad friends to fix their rates high enough. 198 REGULATION OF RAILWAY RATES. I do not think that we need trouble ourselves about that. They will take care of that. Senator Iveax. Do you think a 7-cent rate on grain to New York was too low ? ]Mr. FiFER. Decidedly too low. It was a ruinous rate. Perhaps it might pay operating expenses, and yet I doubt that. Certainly, every road in the United States, if all their rates were fixed at that standard, would be in chancer}^ Senator I^an. Suppose that New York was complaining as against New Orleans, that thej'^ had too low a rate, how would you arrange that? Mr. FiFER. That is over different lines. This discrimination be- tween localities is generally over a single line. We have that trouble in regard to the import rates, of which you heard from Judge Clements on the rate from Antwerp on jDlate glass to Chicago. The rate is 40 cents, whereas from Boston it is 50 cents. The Gulf ports wanted to participate in that traffic from Antwerp. The vessels that go to the Gulf ports are largely tramp vessels going around the world. The}' are not regular lines of steataers, and they bring but little import traffic and frequently it happens that wheat is carried over and back across the ocean several times, simph^ for ballast. It is frequently the case that these vessels pay a certain amount for sand, as ballast, if they have not freight enough to put in the holds of their ships. Those vessels that serve the Gulf ports might bring that glass for ballast, and, therefore, could bring it for nothing. Mr. Fish wanted to participate in that traffic, and he made a rate of 32 cents. He had a right to do so. I do not know that we ought ever to say that he should not. That is the competition between markets, and that is the great regulator of rates in this countr3^ For instance, the man from the North Atlantic seaboard meets a man from the Gulf in the grain markets of Kansas City, say, and they begin to bid against each other for grain, and what they can bid depends upon the rail rate so that brings these railroads into competition with each other. Now, strange to say, the ^Mississippi Kiver from the grain fields of the West to the (julf regulates the grain rates to the East over these freight lines. That seems strange, and how is it brought about? Mr. Fish's road parallels the Mississippi from Cairo to New Orleans. Now, he "must make a rate that will take that traffic from the water and put it uj^on the rails, and the man from New Orleans meets a man in Kan- sas Cit}^ or St. Louis to purchase grain. There is a water rate that is fixed by the Mississippi Kiver to tide water. The Mississippi River fixes it. It also fixes the rate for the Atlantic seaboard. If the Atlantic seaboard wants to get that grain, the}^ must give a rate that is substantially the rate fixed b}'^ Mr. Fish. So there you have what is called on wide fields a competition between markets. As I said. I do not believe that granting that power to the Commission would upturn these rates as much as our railroad friends imagine that it would, and I doubt if we would ever be called upon to exercise the authority that would be delegated very often, because simply the fact that the power exists would cause these men when they met in conference as they do, to not go so fast. It would be a restraining force. Thev would sav we had better go slow about this, we had better KEGULATION OF RAILWAY RATES. 199 use moderation ; if we do not and fix these rates too high the Commis- sion will be after us and we will have trouble. It is said, however, by Mr. Hines that the courts would never dis- turb a rate fixed by the Commission unless it was confiscatory: that they could not do so. I do not think that is true if you simply dele- gate that power, but suppose you insert a little provision in the law saying that the courts when applied to should, on the evidence pre- sented, have a right to pass upon that question of fact, just the same as the Commission. I think they would do so anyhow, but suppose you did that; it would obviate all the objections urged by Mr. Hines, and his argument goes to the ground. Now, then, further, I wouFd talve away from the Commission this executive power. The railroads complain, and I think justly, that they do not like to go into a police headquarters and try their civil rights, and I think that power should be taken away from the Com- mission and conferred upon some other tribunal. I think if this remains with the Commission or you create another commission for that purpose you should delegate to that body or this body, if we con- tinue to exercise that power, the right of investigation by skilled ex- perts. I believe that was suggested by Mr. Hines, and I think there would be no trouble about that, because I believe that these railroads want to stop these rebates as much as thej^ can. It is natural to sup- pose that they should, and I think that that would be a great aid in preventing these rebates for the future. I believe there are rebates paid now, and possibly there will be as long as there are railroads. You can not stop all crime, I do not care what law you have. There is not a cit}^, there is not a town, or a village throughout the length and breadth of this land where the law is not violated in some way every twenty-four hours. You can drive it to cover, you can restrain it, you can minimize it, but you can not wholly prevent it. and so with the exercise of this power. Now, I would provide for a court. I would provide for a court, and it seems to me that the better plan would be to restrict the jurisdic- tion ©"f that court exclusively to the trial of these cases, although I am not clear in regard to that proposition. You might make some such provision as the Esch-Townsend bill contained and adopt it. Senator Cullom. Well, you say you would provide for a court. Do you mean that that court should simply listen to and try cases sent to it by the Commission, or after the Commission had made a finding ? Mr. FiFER. Yes, I think so. You might delegate to that court the powers that are exercised by the courts now, the power of injunction. We have some fourteen railroads tied up already by injunction, and you might confer' upon that court that power. That might be a good thing ; and in regard to export rates I think there ought to be some amendment of the law and rigid regulation in regard to import rates; but so far as export rates are concerned, I think the widest latitude ought to be permitted, perhaps to have some tariff, but to provide also for what might be called an emergency tariff, so that it could be changed quickly, and when our manufacturers and producers received a cable for a large order of goods and the same purchaser had a bid from perhaps some of the countries of Europe for the same order, there ought to be some arrangement made for an emergency tariff. I think it would help very greatly. I did not read Mr. Hill's testi- 200 EEGULATIOX OF RAILWAY KATES. mony, but I have no doubt from the expressions that I have heard from raih'oad men that that would be a most excellent provision. Now, I do not know what other amendments you could make to this law. Senator Cullom. If I understand you, you propose that the law should be amended so that you not only on complaints could determine whether a rate was reasonable, but if you found it to be unreasonable you could determine what rate Avould be reasonable? Mr, FiFER. AA^iat rate would be reasonable. Senator Culloai. And to make an order accordingly? Mr. FiFER. Yes. Senator Keax. Whether a higher or lower rate. Mr. FiFER. Well, as I said a moment ago, I think the railroad traffic men will take care of the maximum. Senator Keax. That is not the question. You are going to decide a complaint that is made, and you are to decide whether that rate is reasonable or unreasonable. Mr, FiFER. AATio would bring a complaint of that kind ? Certainly not the shipper: and the railroad would not bring it, because the railroad has the right to make it in advance. Senator Kean. But you have to decide whether this thing is fair or not. Senator Foraker. Suppose you have two localities, on different lines, and complaint is made that one locality has a rate that is dis- criminatory as against it as compared with the other, and suppose the defense Avould be by that road that that is only a reasonable rate and you would find it reasonable, vou would have to find the other was unreasonably low ? Mr. FiFER. Then you would destroy the competition of markets. That would be the danger about that. Senator Foraker, And that would not be a good thing to do? Mr, FiFER, I think it would not. Senator Foraker, This rivalry between localities is one of the best kinds of competition that we have, is it not? Mr, Fifer, Oh. most certainly. Senator Foraker, And you would not believe in giving to the Commission the right to fix a minimum rate below which one locality in the case heard might not go? Mr, Fifer. I doubt the propriety of that for the reasons I stated, that it would tend to destroy the competition between markets, which is certainl}^ a great regulator of rates. Senator Foraker. If you found one rate was unreasonably high and you were to require it to be reduced, and it were reduced, the same discrimination could be practiced by dropping the other rate so as to keep the difference? Mr, Fifer. That could be done, yes, sir. I do not believe, however, that the railroads themselves would ever consent to that. Senator Foraker. And you do not think it would be a good thing for i;he country, do you ? Mr. Fifer, I do not. You take the great Mississippi Valley. The traffic is going to the Gulf. That is the natural outlet, and they would not want to have their natural rights and advantages taken away. Senator Foraker. Now, ii you take awaj- from this subject the REGULATION OF RAILWAY RATES. 201 question of rates as j^ou take awav the question of rebates and dis- crimination between localities, what is there left except discrimina- tion in commodities and private car lines and terminal charges for us to consider? Mr. FiFER. Well, that is about all. Senator Fokaker. It comes down to within pretty narrow limits? Mr. FiFER. Yes. Senator Xewlands. There is more complaint about discrimination between localities than any other, is there not? Mr. FiFER. Yes; there is a great deal of complaint in regard to that, and that is one of the most difficult questions we have to deal with. Senator Foraker. If you grant a complaint in a given case the other locality is likely to complain as against that which has been remedied ? Mr. Fifer. Yes; and that is liable to force on a rate war. You take the competition between the North Atlantic seaboard and the Gulf ports in the grain trade. Out in our country last fall, or in the early winter, there was something of a rate war. The Gulf roads were carrying grain very low. They could not get above the Mississippi River rates, which will always fix the rate. The mo- ment they put the rate up high the traffic goes by water. So that in determining rates j^ou can always get a case of that kind and by that standard you can measure rates, so that you can not get very far out of the way. Senator Foraker. What is the differential now between Boston and New York in favor of New Orleans? Mr. Fifer. On grain? Senator Foraker. Yes. • Mr. Fifer. I could not tell you just what it is now. They say that it takes, I think, about three quarters of a cent to a cent to divert the grain traffic from the Northwest to the Gulf, because there are some natural disadvantages at the Gulf— the warm weather — and it is preferable to ship the grain out from a port farther north. So that the Gulf ports in regard to grain and grain products labor under that natural disadvantage. Senator Foraker. The New Orleans and Galveston ports were not involved in this investigation the Interstate Commerce Commission has just made with reference to the differentials applying to Phila- delphia and Brooklyn? Mr. Fifer. No; they did not participate in that investigation at all, yet the witnesses reached out and they came in incidentally. But in the plate glass, this import case, they took leave to bring in the Illinois Central Railroad, and there is to be a further inquiry, as I remember, in regard to that. Senator Foraker. There is a differential in favor of New Orleans as against New York of something like T cents, is there not ? Mr. Fifer. On grain? Senator Foraker. Yes. Mr. Fifer. A hundred ? Sentitor Foraker. Yes. Mr. Fifer. Oh, I think not so high. Senator Foraker. What is the differential in favor of Baltimore as a port ? 202 REGULATION OF RAILWAY RATES. Mr. FiFER. AA'ell, we fixed that, but I am not prepared on those fig- ures. At Baltimore it is a little more than it is at Philadelphia; I think about 2 cents at Baltimore as against New York and Boston. New York and Boston take the same rate. Senator Keax. Boston is not very well satisfied? Mr. FiFER. No. Senator Forakek. New York and Boston have the same rate for exports. They have not the same rate, however, for domestic trans- portation, have they? Is not the rate from Chicago to Boston 2 cents per hundredweight higher than from Chicago to New York ? Mr. FiFER. On exports? Senator Foraker. No ; on domestic. Mr. FiFER. It is somewhat higher; but just the rate I could not tell you. Senator Forakek. But the rate for export is the same from Chi- cago to Boston as from Chicago to New York? Mr. FiFER. Yes; but a little less at Philadelphia and a little less at Baltimore than at Philadelphia. Mr. Commissioner Knapp. May I be pardoned if I endeavor to answer that question ? Senator Foraker. I would be very much obliged if you would. Mr. Commissioner Kxapp. One of the earliest (Questions that came before the Commission was the proper adjustment of rates from the West as between New York and Boston. They had been very much higher to Boston. The Commission heard that case before I became a member of it, and decided that the domestic rate to Boston should exceed the rate to New York by one-tenth of the New York rate — that is, to be 10 per cent above. Carriers substantially complied with that determination, not by fixing the positive rate of 10 per cent above, but by making changes in the figures, which was substantially 10 per cent, so that now, I think, the difference ranges from 2 cents on the lowest class up to perhaps 8 cents in the first class, and pos- sibly even more than that. Senator Foraker. Assuming it is 2 cents higher to the Boston port for domestic consumption than it is to New York, and the same for export from Chicago to Boston and Chicago to New York ports, what would be the effect of making the rate for exports from Chicago to Boston the same that it is for consumption ? In other words, not giving Boston a differential for export as against her domestic rate? Mr. Commissioner Kxapp. Why, I should think if the inland ex- port rate to Boston were higher than to New York — materially higher; say, 2 cents — it would practically close up the Boston port. Senator Cuelo?■. The 222 EEGULATIOX OF RAILWAY RATES. Detroit and Grand Haven Railroad (167 U. S.). In that case the United States circuit court for the western district of Michigan sus- tained the decision of the Commission, and the United States circuit court of appeals and the United States Supreme Court reversed the decision of the circuit court. That shows that the judicial mind had not been unanimous in overruling the decisions of the Commission, because here was a circuit judge that sustained the decision and then the court of appeals and the Supreme Court reversed that judge and reversed the Commission. Now, Ave will take the case of the Florida Fruit Exchange r. The Savannah, Florida and Western Railroad (167 U. S.). The decisions of the Interstate Commerce Commission were sustained by the United States circuit court for the southern district of Florida and also by the circuit court of appeals, and the United States Supreme Court re- versed both of them. I think the Commission is in prettj^ good com- pany there. It decided the case, the United States circuit court and the circuit court of appeals sustained the decision, and the Supreme Court reversed the whole thing. Well, now, we will take another case, that of the Interstate Com- merce Commission i\ The Texas and Pacific Railway Company (162 U. S.). The decision of the Commission, in the circuit court for the southern district of New York — and there are supposed to be great lawA^ers and jurists there — was sustained, and on appeal to the court of appeals that decision was affirmed ; and the Supreme Court of the United States reversed both of them. Now, then, in the case of Behlman v. The Louisville and Nashville Railroad (169 U. S.) the decision of the Interstate Commerce Com- mission in the circuit court in the South Carolina district was reversed. The Commission was overruled bj^ the circuit court of the district of South Carolina, and on appeal to the circuit court of appeals the Interstate Commerce Commission's decision was sus- tained, and then on appeal to the Supreme Court the court of appeals was reversed. Senator Cullom. "\Miat became of the Commission? Were they reversed, too? Mr. CocKRELL. They were reversed, too. But you will notice the conflict of the judicial mind on these intricate questions. Now, I come to the Colorado Fuel and Iron Company v. The Southern Pacific. In that case the order of the Interstate Commerce Commission was sustained by the United States circuit court for the district of Colorado, and the United States circuit court of appeals, April 6, 1900, reversed the decision of the circuit court. The case did not go any further. Now, in the East Tennessee and Georgia Railroad Company v. The Interstate Commerce Commission (181 U. S.) the circuit court for the eastern district of Tennessee affirmed — and I want to call the special attention of the committee to this case — affirmed the de- cision of the Interstate Commerce Commission. And on appeal to the United States circuit court of appeals that decision was affirmed, and on that circuit court of appeals was Judge Taft, the present Secretary of War, and Judge Lurton, and Mr. Justice Harlan, of the Supreme Court. Now, then, that case was taken to the Supreme Court and by the Supreme Court was reversed. Now, it seems to me, if you analyze these, the decisions of the Inter- EEGULATION OF EAILWAY RATES. 223 state Commerce Commission have been about as well sustained as the decisions of the district and circuit courts, and even the court of appeals. Senator Cullom. As many judges deciding for the question as there were those deciding against it? Mr. CocKRELL. Yes ; and they have been from all over the country. Now, in this process there is a kind of a law being established throuii'hout the country. Senator Dolliver. Has the Supreme Court been unanimous in all of these cases? Mr. CocKRELL. No: they have not been unanimous at all. In one cfise, although I am not certain, there were three judges who dissented. Now. I want to come to one case, that of The Interstate Commerce Commission r. The Louisville and Nashville Railroad. The order of the Commission was sustained by the United States circuit court for the southern district of Georgia. In this case a multitude of points were involved. In the first place there was complaint against the rate on cotton, turpentine, and rosin, and other property convej^ed by the Louisville and Nashville Railroad from stations in Florida to Savannah. Then there were charges in regard to rates on bacon and other freights, groceries and hardware, etc., transported from Savan- nah to Pensacola and Atlantic points, and there were charges as to the rates on all the lines from New York to Pensacola and the Atlantic division on general articles of freight, but especially on sugar. Now, there were divers railroads and clivers charges submitted to the Commission, and the Commission was called on to decide that case. It has been intimated that with the contrariety of business, and those things, the Commission might throw everything into con- fusion by having so much before it. I want to read just a little. Y^ou have this report here, but I want to call attention to it. In the first place, the Interstate Commerce Commission decided, after having all the railroads, all the traffic managers, and all the attorneys in presenting the evidence and in presenting the contracts, that the rates on sugar and other products from New York to Pensacola and other i^tlantic jjoints were not in violation of the law, and then they decided that the rates on bacon and other articles from Savannah to Pensacola and other points were not seriously wrong, and they dis- missed the charges against the sundry railroads as to those two charges. And then they decided as to the rates on cotton, turpentine, rosin, and other articles from stations in Florida to Savannah. Now, I will read what the Commission say in regard to that: The Commission found that the rate on uncompressed cotton from stations in Florida on the Pensacola and Atlantic division to Savannah was $2.75 per bale at the time of hearing. When complaint was filed and for some years prior thereto, but subsequent to the hearing, this rate had been increased 55 cents, to $.3.30 per bale. The rates from the same points to Mobile and New Orleans had been, and were at the time of the decision, respectively, $2 and $2.50 per bale. The Commission held that the rate of $2.75 to Savannah was not unlaw- ful, but that the whole advance of 55 cents was unlawful, and that any higher rate on such cotton to Savannah than the former difference of 25 cents per bale alwve the rate in force from the same stations to New Orleans violated sections 1 and 3 of the statute. The Louisville and Nashville made certain local rates on rosin and turpentine from stations on its Pensacola and Atlantic divi- sion in Florida to Pensacola, Fla., and had joined with connecting carriers in making certain through group rates from the same stations to Savannah. For 224 EEGULATio:sr of railway rates. its service to the junction point, namely. River Junction, Fla., the Louisville and Nashville exacted a share of the through joint rates to Savannah which greatly exceeded its purely local rates for like distances to Pensacola, while the shares accepted by its connecting carriers were reasonably low. Upon consideration of all the facts and circumstances the Commission held that the shares of the Louisville and Nashville in the freight rates to Savannah were unreasonable and unjust under sections 1 and 3 of the act, in comparison with the rates to Pensacola. The Commission further held that rates on rosin and turpentine from such Pensacola and Atlantic division stations to Savannah should be adjusted to the rates to Pensacola by adding to the local rates of the Louisville and Nashville for the distance to Pensacola which is nearest to the distance from each sta- tion to River Junction the present share accepted by the carriers to Savannah from River Junction, provided that on shipments of turpentine to Savannah from stations east of Mossy Head the Louisville and Nashville should have more than its local rates for like distances to Pensacola, and that such rates should be determined by adding the rate of 6 cents from Sneads to Pensacola, the car- riers east of River Junction accepting their present share from such stations east of Mossy Head. With respect to these rosin and turpentine rates, the Commission said in its opinion that whatever difference may have seemed necessary at the outset to create a demand in the Pensacola market, it had become apparent after several years' trial that the rates to Savannah, as compai-ed with the Pensacola rates, gave an unwarranted advantage to I'ensacola ; that in endeavoring to build up the near-by market at Pensacola, and so furnish these products with a :narket in addition to the one existing at Savannah, the Louisville and Nashville vas acting in the interest of producers of and dealers in naval stores on its Pensa- cola and Atlantic division, but that it had so adjusted rates as to give Pensacola a practical nionopoly of the trade. The Louisville and Nashville claimed that the lower scale of rates to Pensacola was necessary to hold the traffic for long hauls on the Louisville and Nashville system to points north and west of Pen- sacola. The Commission ruled that when a carrier makes rates ,to two com- peting localities which give one a practical monopoly over the other because it can secure reshipments from the favored locality and none from the other, it goes beyond serving its fair interests and disregards the statutory requirement of relative equality as between persons, localities, and descriptions of traffic. The railroad companies against whom the order was directed refused to gbey it, and thereupon the Commission brought suit to enforce its order in the United States circuit court for the southern district of Georgia. That court, in July, 1902, rendered its decision, fully sustaining the Commission and requiring the enforcement of the various provisions of the order. The carriers appealed to the circuit court of appeals, but the appeal was never perfected. The president of the Louisville and Nashville Railroad, the general superintendent of the second division of the Atlantic Coast Line, and the superintendent of the fifth division of ihe Seaboard Air Line were cited before the court for contempt. Subsequently, upon hearing in the contempt case, the defendants offered to com- ply with the decree of the court enforcing the order of the Commission, and thereupon, counsel for all parties consenting, a decree was entered by the court suspending the contempt proceedings until otherwise ordered. In that decree the railroad companies were granted leave upon substantial changes of the circumstances and conditions affecting the traffic to apply to the court for such modification of its decree as they might desire. The defendant railroad companies were required to pay the costs of the con- tempt proceeding and to refund to the parties entitled thereto any charges collected by them in excess of the rates provided for in the decree enforcing the order of the Commission. Now, there is one of the most complicated cases, involving various interests and various points and manv companies. The Commission made a decision. Now, what happened? The companj' refused to pay. They took an aj)peal, but did not perfect it, and when they were brought up for refusing to obey the order of the court, as they had been ordered to do, turned around and paid it. AYell. there was no panic produced by that thing. There was no great wrong done. The roads themselves were unwilling to take it to a higher court, and rather than perfect their appeal and prosecute the procedings, they EEGULATION OP RAILWAY RATES. 225 yielded to the decision of the circuit court. That shows exactly how this Commission has been proceeding. Everything has been consid- ered, and I think its work has been eminently beneficial to the rail- roads and to the country. There have been many cases that have been settled, many little cases, many little irregularities, where amicable relations have been established between the shipper and the railroad company by virtue of the action of the Commission. I will mention one little thing. A former constitutent of mine, from Missouri, living in the strawberry region, sent me a bill that he had paid. I sent it down to one of our auditors. He compared it with the rating and the bill of rate or rates filed by that railroad company, and there was an overcharge of probably $56. I have forgotten the exact amount — do not remember it exactly. The com- pany was notified that this overcharge existed. Now, as a matter of course, that party could have gone into court, and there is no doubt he could have shown a clear violation of the law. The Com- mission hunted the matter up, and they settled it. They imme- diately advised me they would have the matter looked uj), and it was done. Senator Cullom. "Who hunted it up? Mr. CocKRELL. The railroad conipany. He could have gone to court and harassed the railroad company if he had wanted to do so, but he would have been compelled to pay the cost, for it was a clear error. I find, in looking over the reports and decisions of the Commission, that that has been the general rule, and that many cases have been decided, and many cases have decided where damages were assessed by the Commission, and the railroads have paid them rather than to go into further litigation. I believe that it is to the very best inter- ests of the railroads that this power shall be delegated and the ques- tion settled, and that there will not be any abuse of power in a Com- mission selected hj the President and confirmed by the Senate, fol- lowing the precedents that have been established by the Commission itself and by the decisions of the courts. Senator CmLLOM. You mean that there will be no danger to the railroads ? Mr. CocKRELL, No danger to anybody. I believe it will be pro- motive of good. I believe it will be to the interests of the railroads, and that they will thank Congress inside of twelve or eighteen months for having delegated that authority to the Commission. The Chairman. The committee desires to thank the members of the Commission for their attendance and the statements which they have presented. Senator Newlands. Before the Commission leaves, I would ask, do I understand that they are to submit to the committee amendments that they would suggest to this bill, and among other things I would call their attention to this division of the powers of the Commission, either into two branches of the same Commission or segregation to some other Department. 74lA— 05 15 APPENDIX G-. BEFORE THE INTERSTATE COMMERCE COMMISSION— IN THE MATTER OF THE TRANSPORTATION OF DRESSED MEATS AND PACKING-HOUSE PRODUCTS-ORDERS AND TESTIMONY. 227 BEFORE THE INTERSTATE COMMERCE COMMISSION. IN THE MATTER OF THE TRANSPORTATION OF DRESSED MEATS AND PACKING-HOUSE PRODUCTS. At a general session of tbe Interstate Commerce Commission, held at its office in Washington, D. C, on the 12th day of March, A. D. 1901. Present: Hon. Martin A. Knapp, chairman, Hon. Judson C. Clem- ents, Hon. James D. Yeomans, Hon. Charles A. Prouty, Hon. Joseph W. Fifer, Commissioners. IN THE MATTEE OF THE TRANSPORTATION OF DRESSED MEATS AND PACKING- HOUSE PRODUCTS. Ordered, That a proceeding of investigation and inquiry into the manner and method in which carriers subject to the act to regulate commerce conduct and manage tbp.ir business with respect to rates, facilities, and practices applied in tne transportation of dressed meats and packing-house products from Kansas City in the State of Missouri and Omaha in the State of Nebraska and other points, called and known as Missouri River points, to eastern destinations be and is hereby insti- tuted, and that tbe matters involved in such proceeding be, and the same are hereby, set down for hearing before the Commission on the 21st day of March, 1901, 10 o'clock a. m., at United States court rooms, Kansas City, Mo., the said hearing to be continued at such other times and places as may appear to be required. BEFOEE THE INTERSTATE COMMERCE COMMISSION. m THE MATTER OF THE TRANSPORTATION OF DRESSED MEATS AND PACKING- HOUSE PRODUCTS. Hearing at Kansas City, 3Io., March 21, 1901, 10 o'clock a. m. Present: Commissioners Clements, Yeomans, Prouty, and Fifer. W. A. Day and J. T. Marchand for the Commission. INDEX. Page. Barnard, T. J 277 Collister, J. J 271 Everest, W. E 279 Gault, F. M 259 Gavin, J. E 280 Golden, H. C 267 Harvey, William : 284 Hitchins, E. S 230 Hurd, D. F 246 Kresky, D. H '. 283 Lund, J. D 286 McAllister, S. D 278 McKone, W.J 257 Marshall, W. N 260 Shannon, J. A 283 229 280 APPENDIX O. Commissioner Clements. Gentlemen, we are here to proceed with an inquiry, under an order recently made by the Commission, into the man- ner and method by which carriers subject to the act to regulate com- merce conduct and manage their business with respect to rates, facilities, and practices applied in the transportation of dressed meats and pack- inghouse products fi om Kansas City, in the State of Missouri, and Omaha, in the State of Nebraska, and other points called and known as Missouri Kiver points, to Eastern destination. Mr. Day will con- duct the examination of witnesses. Who will you call, Mr. Day? Mr. Day. I think we will present Mr. E. S. Hitchins. E. S. HiTCHrNS, being duly sworn, testified as follows: Mr. Day. Mr. Hitchins, you are the local agent at Kansas City for the Chicago Great Western Railway? Mr. Hitchins. No, sir. Mr. Day. What is your relation? Mr. Hitchins. I am the agent. Mr. Day. There is a local agent independent of you? Mr. Hitchins. Yes, sir. Mr. Day. What is the scope of your work? Mr. Hitchins. I represent the freight, passenger, and transportation departments in Kansas City. Mr. Day. For the Chicago Great Western ? Mr. Hitchins. For the Chicago Great Western Railway. Mr. Day. How long have you sustained that relation? Mr. Hitchins. About three years — it will be three years the 1st of une. Mr. Day. Has it been part of your work to secure shipments of dressed beef and packing-house products by your line? Mr. Hitchins. No, sir; not directly. It is part of my duty to see that we get our share of all business out of Kansas City. Mr. Day. Have you done any contracting for the transportation of packing-house products? Mr. Hitchins. No, sir. Mr. Day. At any time during the past year? Mr. Hitchins. No, sir. Mr. Day. Have you made any arrangements with any shipper of packinghouse products during the past year? Mr. Hitchins. No, sir. Mr. Day. Have you had any conversation respecting the rates on packing-house products out of Kansas City during the past year? Mr. Hitchins. I do not understand that question. Mr. Day. Have you made any contract or arrangement? Mr. Hitchins. I have answered that. If you ask if I have had any conversation in regard to rates Mr. Day. Yes. Mr. Hitchins. Yes; it is a matter of common gossip. Mr. Day. With the freight men of the packers. Mr. Hitchins. No, sir; with the general pubhc, newspaper men, other railroad men, and fast freight line men. Mr. Day. You have made no arrangements or propositions for the transportation of packing-house products with Mr. Ellis? Mr. Hitchins. No, sir. Mr. Day. Mr. Davis? Mr. Hitchins. No, sir. Mr. Day. Mr. McKone? APPENDIX G. 231 Mr. HiTOHTNS. No, sir. Mr. Day. ISTone of the traffic men of the packers! Mr. HiTCHiNS. No, sir. Mr. Day. Or their agents? Mr. HiTCHiNS. No, sir. Mr. Day. Or Mr. Machett? Mr. HiTCHiNS. No, sir. Mr. Day. You have had no conversation with any of those gentle- men in regard to the transportation of packing house jjroducts? Mr. HiTCHiNS. 1 may have had conversations with regard to it, but I have not talked to them about making arrangements, either directly or indirectly, in regard to the rates. Of course, I had conversations with them. I have charge of the transportation department, and I have had considerable talk with them in regard to getting out on time, icing, etc. Mr. Day. You say you have charge of the transportation department. Who, now, is the individual who quotes the rates over your line, or has done it during the last six months or a year? Mr. HiTCHiNS. On packing-house products? Mr. Day. Yes ; or dressed beef. Mr. HiTCHiNS. I do not know who does it. Mr. Day. Who has the authority to do it? You know your own force or the force of the Chicago Great Western. Mr. HiTCHiNS. There is no one in Kansas City representing the Great Western road that has authority to quote anything but the published rate. Mr. Day. Who makes contracts for the transportation to North Atlantic ports, say New York, in which the Chicago Great Western participates in the haul? Mr. HiTCHiNS. I do not know. Mr. Day. Who has done that in the past six months? Mr. HiTCHiNS. I do not know. Mr. Day. When traffic is transported by your line in part, destined for New York, crossing the Mississippi River at the north crossings, or any of them, how is that traffic billed? Mr. HiTCHiNS. Destined to New York? Mr. Day. Yes, sir. Mr. HiTCHiNS. It may be billed to the final destination on our line or it may be billed to a station on an Eastern line. I understand as " billed" you mean, how is it waybilled. Mr. Day. How is the bill of lading issued ? Mr. HiTCHiNS. It usually reads " through." Mr. Day. From here to point of destination? Mr. HiTCHiNS. Pinal destination. Mr. Day. When the traffic is destined for local consumption at New York, say, is the bill of lading ever taken up and a through bill beyond issued in its place? Mr. HITCHINS. We do not issue any thrbugh bills. Do you mean export bills ? Mr. Day. Yes, sir. Mr. HiTCHiNS. We do not issue any. Mr. Day. You issue bills up to the Atlantic port, New York? Mr. HITCHINS. Yes, sir. Mr. Day. When that traffic is destined for foreign shipment who executes the through bill to Liverpool, or wherever it may be destined abroad? 232 APPENDIX G. Mr. HiTCHiNS. We have nothing to do with that. I nnderstand in a general way tliat they malie a through bill from Kansas City to Liverpool, it may be, issued here in Kansas City by a fast freight line. It may be issued by a steamship man, but we have nothing to do with it, and I do not know really who does issue the bill. Mr. Day. Who pays the freight charges on traffic destined for New York via your line? Mr. HiTCHiNS. That would depend on circumstances. If billed pre- paid, the shippers pay; if collect, the charges are collected at desti- nation. Mr. Day. What is the general practice respecting packing-house products? What has been the practice during the last six months in that i^articular? Mr. HiTCHiNS. A great deal is billed prepaid. Mr. Day. When billed prepaid, who pays? Mr. HiTCHiNS. The shipper to the initial carrier. Mr. Day. In the case of your line who is it paid to — to you personally ? Mr. HITCHINS. No, not to me personally. Mr. Day. To whom? Mr. HITCHINS. We have collectors. Mr. Day. Who are your collectors? Mr. HiTCHiNS. I do not know who is the collector now. Mr. Day. Who was your collector in the month of January? Mr. HiTCHiNS. I do not know his name. He works in the local office. I can not think of his name. • Mr. Day. Who is your collector to-day? Mr. HiTCHiNS. I do not know. Mr. Day. Who was your Collector last week? Mr. HiTCHiNS. The last collector that I remember the name of is Kaiser. We have a young man now who is a member of the Third Kegiment. I can get you his name. Mr. Day. I want you to bring after recess the names of the men who have done the collecting for you during the past six months. Mr. HiTCHiNS. Yes, sir. Mr. Day. ]Sow, you say that when the traffic is prepaid by the pack- ers or their representatives it is paid into your office? Mr. HiTCHiTNS. Yes, sir. Mr. Day. Have you had any information that any traffic has been carried to New York or Boston or Philadelphia or Baltimore originat- ing on your road at Kansas City and that less than the published tariff has been jiaid on it? Mr. HiTCHiNS. No, sir; I do not think so. Mr. Day. Either domestic or export shijiments? Mr. HiTCHiNS. No, sir; as I understand it, there is no tariff on export. Mr. Day. Well, how about domestic? Mr. HiTCHiNS. I know of none. Mr. Day. What do you mean by that — that you have collected the full tariff rate, the published tariff" rate, in all instances? Mr. HiTCHiiNS. Yes, sir. Mr. Day. And finally retained it? Mr. HiTCHiNS. I have remitted it to headquarters. Mr. Day. To where? Mr. HiTCHiNS. Our treasurer. Mr. Day. Where? Mr. HITCHINS. At St. PauL APPENDIX G. 233 Mr. Day. How often do you remit monies you collect to your treas- urer? Mr. HiTCHiNS. Every day. We deposit in the National Bank ol Commerce here and the treasurer makes a draft on the bank. Mr. Day. In any instances of domestic trallic have claims been presented to j^ou by the packers for a refund, a rebate? Mr. Hitch [NS. No, sir. Mr. Day. On any moneys that have been previously paid you? Mr. HiTOHiNS. No, sir. Mr. Day. On accouut of any previous shipment? Mr. HiTCHiNS. No, sir. Mr. Day. No claims came to you from any source? Mr. HITCHINS. No, sir. Mr. Day. From line agents? Mr. HiTCHiNS. No, sir. Mr. Day. Or packers? Mr. HITCHINS. No, sir. Mr. Day. Or any of their representatives? Mr. HITCHINS. No, sir. Mr. Day. Mr. Fay, Mr. Ellis, Mr. Machett, Mr. McKone— have none of those gentlemen within the last six months presented claims to you, either they or their clerks, for refunds on previous shipments? Mr. HITCHINS. No, sir. Mr. Day. When a refund is made by your road on account of ship- ments out of Kai)sas City during the past six months how is that refund brought about? Mr. HiTCHiNS. 1 did not know any had been made. Mr. Day. You mean to be understood as testifying without qualifica- tion that you have no information of any rebates being paid on packing- bouse products during the past six months? Mr. HiTCHiNS. You mean by rebates, refunding down to less than tlie tariff rate? Mr. Day. Yes, sir. Mr. HiTCHiNS. No; I know of no such transaction. Mr. Day. Or by any other m.eans Hby which a concession has been made in the tariff, the cost of the transportation of packing house prod- ucts or dressed beef; is that what you mean to be understood as saying? Mr. HITCHINS. That is what I mean; yes, sir. Mr. Day. You say there is no export rate? Mr. HiTCHiNS. I understand there is no export tariff nublished. Mr. Day. Have you participated — 1 mean by "you"— whenever I use that term I mean the Chicago Great Western. Mr. HITCHINS. I understand. Mr. Day. Has the Chicago Great Western road participated in any lower rate than the domestic rate to New York on trafiic destined for export? Mr. HiTCHiNS. I think they have. I have no doubt they have. Mr. Day. You think they have? Mr. HiTCHiNS. Yes, sir. Mr. Day. At what rate has it been carried for export? Mr. HiTCHiNS. We get a division of the through rate to Liverpool, or wherever it is going, and the export rate is changed from time to time. Mr. Day. What is your division up to the Mississippi River on the New York rate? 234 APPENDIX a. Mr. HiTCHiNS. On the published rate? Mr. Day. Yes, sir. Mr. HiTCHiNS. Eighteen and one-half cents. Mr. Day. What was it during the mouth of February on traffic des- tined for export? Mr. HiTCHiNS. I do not know. Mr. Day. How much did you receive on traffic destined for export? Mr. HiTOHiNS. I do uot know. Mr. Day. In the month of March? Mr. HiTCHiNS. I do not determine those things at all. I do not know anything about them. Mr. Day. At what rate during February did you carry traffic for New York destined for export? Mr. HITCHINS. I do not know. Mr. Day. You do not know anything about what the export rate has been? Mr. HITCHINS. No, sir; I do not. Mr. Day. As a matter of fact, have not you personally during the past three months made engagements with some of the packers at Kansas City or their representatives to carry their traffic through to New York on a concession of the rate of your division from Kansas City to the Mississippi Eiver of 7 J cents and, in instances, 10 cents? Mr. HiTCHiNS. I do not understand the question. Mr. Day. I will ask the stenographer to repeat the question. The stenographer repeated the question, as follows : Mr. Day. As a matter of fact, have not you personally during the past three months made engagements with some of the packers at Kansas City or their representatives to carry their traffic through to New York on a concession of the rate of your division from Kansas City to the Mississippi River of 7^ cents and, in instances, 10 cents? Mr. HiTCHiNS. No, sir. Mr. Day. Have you made an arrangement of that kind with any line representative? Mr. HiTCHiNS. No, sir; with no one living. Mr. Day. You stated a few minutes ago tliat you had carried traffic destined for export at a rate lower than the published rate. Mr. HiTCHiNS. That was not my answer. I said that I had no doubt on export traffic we had participated in a rate less than the rate pub- lished on domestic traffic. Mr. Day. What rate did they accept? Mr. HiTCHiNS. I do not know. Mr. Day. What was the through rate? Mr. Hi'iCHi^s. I do not know. Mr. Day. Who had authority to make the quotations for the Chicago Great Western? Mr. HiTCHiNS. I do not know. I did uot. Mr. Day. Have you no information who represented the Chicago Great Western in the making of the concession on export traffic? Mr. HiTCHiNS. I know of no concession. Mr. Day. You said you had no doubt it was true. Mr. HiTCHiNS. I say there is no export tariff. The rate is made from week to week as necessity arises. Mr. Day. Have you carried any export traffic within a week? Mr. HiTCHiNS. I think we have. Mr. Day. At what rate? Mr. HITCHINS. I do not know. Mr. Day. You do not know the rate made through to any point? APPENDIX Q. 235 Mr. HiTCHiNS. No, sir. Mr. Day. Nor the inland portion of the rate to New York? Mr. HiTCHiNS. No, sir. Mr. Day. You said you had no doubt the Great Western had par- ticipated in a lower rate than their published tariff on domestic. I understand you to say that? Mr, HITCHINS. Yes, sir. Mr. Day. On what do you base the statement that there is no tariff on export traffic? Mr. HiTCHiNS. It would be impossible to have one. Mr. Day. Have you examined the tariff sheets to see if there is any rate named? Mr. HiTCHiNS. Not to my knowledge there is not. Mr. Day. On what do you base your statement that you had no doubt the Chicago Great Western had carried export traffic at a rate lower than the published rate on domestic? Mr. HiTCHiNS. I do not think it would be possible to move it at the tariff' on domestic. It is a matter of common gossip. The rates have been published from week to week what the stuff was moving at. I have every reason to believe all railroads are carrying it at less than the published rate on domestic. Mr. Day. What are your reasons? Mr. HiTCHiNS. It is a matter of common gossip. I do not think it would be possible to have one fixed tariff on export. Mr. Day. Who quotes the rate on export traffic? Mr. HiTCHiNS. It may be quoted by an Eastern line man, a fast-freight line, by some link road, the three I's, the representative in St. Paul, or a steamship man — I do not know. " Mr. Day. How many men in your employ subject to your supervision? Mr. HiTCHiNS. Well, I could not tell you definitely. I have about, I should judge, between thirty and forty. Mr. Day. How many men in your office that quote rates, to whom application may be made and who quote rates? Mr. HiTCHiNS. Four or five. Mr. Day. Name them and the positions they hold. Mr. HiTCHiNS. W. E. Hogan, freight solicitor; E. M. Jordan, freight solicitor; M. J. Pringle, freight solicitor; H. G. Davis, rate clerk That is about all. Mr. Day. Do you have a chief clerk, a man you call chief clerk ? Mr. HiTCHiNs. Yes, sir. Mr. Day. Who is he? Mr. HiTCHiNS. C. H. Towney. Mr. Day. You have named all the men subject to your supervision that have authority to quote rates ? Mr. HiTCHiNs. Those men have no authority other than any man in my employ would that knew how to go to the tariff and get the rates. Mr. Day. What is the function of the freight solicitors? Mr. HiTCHiNS. They patrol the streets looking for business. Mr. Day. Seeking traffic? Mr. HiTCHiNS. Yes, sir. Mr. Day. Have you ever solicited freight? Mr. HiTCHiNS. Very little. Mr. Day. Have you ever been present with them when soliciting? Mr. HiTCHiNS. Very rarely. Perhaps I have gone around with them occasionally. Mr. Day. How recently ? 236 APPENDIX G. Mr. HiTCHiNS. I could not say. I do not think I have been out with one of them for six months or a year. Mr. Day. What does the freight solicitor do when he wants to secure traffic? Mr. HiTCHiNS. He may drop in and see a man and ask if there is anything going my way. The man will say, "Can you take Marshall- town?" "He will say, "Yes, sir." "Can you give me good service?" "Yes." "I want the car tomorrow." "Well, I will see that you get it to-morrow." That is one method. Mr. Day. What else does probably occur? Does he quote a rate to him ? Mr. HiTCHiNS. He may. He may say, " I do not know what the rate is. 1 will go back to the office and call you up." Mr. Day. Are there instances where the shipper has said, "I can do better by another line than your line?" Mr. HiTcniNS. They very rarely do that. It is a rare thing for a shipper to do that. Mr. Day. When it does occur — do instances of that kind occur? Mr. HiTCHiNS. Sometimes. Sometimes their tariffs are out of line. Sometimes another line has a published tariff less than ours. We have lost business that way. Mr. Day. Sometimes it is said the rate is not out of line and the rate is lower than other rates prevailing. When that occurs, when he says your rate is too high, has your man authority to quote a lower rate? Mr. H1TCHIN8. No, sir. Mr. Day. What does he do in that instance? Mr. HiTCHiNS. He makes a report. Mr. Day. To whom^ Mr. HiTCHiNS. To me, and I send it to my immediate superior in the freight department. Mr. Day. Who is he? Mr. HiTCHiNS. C. R. Berry, assistant general freight agent. Mr. Day. Then, are there instances where Mr. Berry authorizes you to meet the rate by another route? Mr. HiTCHiNS. No, sir: nobody has ever authorized me to cut a rate. Mr. Day. And you never have cut a rate? Mr. HiTCHiNS. How far back are you going? Mr. Day. A year. Mr. HiTCHiNS. No, sir. Mr. Day. What do you mean by " cutting a rate?" Mr. Hi rcHiNS. 1 mean accepting less than our published tariff. Mr. Day. That is what I understood. I wanted to see if I under- stood you right. You want the Commission to understand that you have not authorized or consented to the cutting of a rate on packing- house products or dressed beef within a year? Mr. HiTCHiNS. That is exactly what I said. Mr. Day. And neither directly nor indirectly have you countenanced anything of the kind or been privy to anything of the kind? Mr. HiTCHiNS. That is right. Mr. Day. Has any refund on rates paid been presented to you because of any shipment that has passed over your line the last year on any claim that has come to you for approval or examination for your O.K.? Mr. HiTCHiNS. You mean accepting less than the tariff rate? Mr. Day. Tes, sir. Mr. HiTCHiNS. Not to my knowledge. APPENDIX G. 237 •Mr. Day. Wlietlier it was domestic or export? Mr. HiTOHiNS. As I say, I do not kuow of any tariff on export. Mr. Day. I ask whether any such claim of that kind has been pre- sented to you on traffic destined domestic or exijort where the refund involved the carrying of that traflic at less than the tariff rate — the rates you publish*? Mr. HiTCHiNS. There is uo export tariff. Mr. Day. Admitting that is true, has any claim been presented to you for a refund on the amount paid ou that export traffic *? Mr. HiTCHiNS. No, sir. Mr. Day. You have seen no such claim? Mr. HiTCHiNS. No, sir. Mr. Day. And have not approved of any? Mr. HITCHINS. No, sir. Mr. Day. Neither directly nor indirectly? Mr. HiTcniNS. No, sir. Mr. Day. What has been the practice of your office, say at any time during the past six months, regarding the settlement of freight charges on packing house products in which your road participates in the trans portation"? Mr. HiTCHiNS. I do not understand exactly what you want. Mr. Day. How often do you make settlements with shippers of pack in g- house products'? Mr. HiTCHiNS. I am under the impression that they settle once a week. I am not positive. IMr. Day. Has that been the general practice? Mr. HiTCHiNS. I think so. Settlements are made with the general office. Mr. Day. It is not paid into your office? Mr. HiTCHiNS. No, sir. Mr. Day. Do the accounts come to your office at all? Mr. HiTCHiNS. Not necessarily. Mr, Day. Well, have they come within the past six mouths? I am speaking now of the regular weekly accounts. Mr. HiTCHiNS. No; they would not come to me at all. Mr. Day. They would not come to your office at all? Your office has nothing to do with it? Your clerks do not examine them and verify the accuracy ? Mr. HiTCHiNS. You are speaking of the regular weekly settlements on the packing house products? Mr. Day. Yes, sir; or the monthly accounts, Mr. HiTCHiNS. They would not come to me. Mr.-DAY. What accounts come to you? Mr, HiTCHiNS. All kinds of accounts come to me. Mr. Day. What statements come to your office regardiug packing- house products — what have come to your office the past six months iu regard to the transportation of packing-house products? Mr. HiTCHiNS. I do not know. Mr. Day. Any ? Mr. HiTCHiNS. I suppose there have been statements and papers come to my office about everything connected with the business at Kansas City. Mr. Day. I am speaking of packing-house products, one single article of traffic, or the articles that come under the general denomination ot packing-house i)roducts. What are the duties of your office or of you in regard to those ? 288 APPENDIX G. Mr. HiTCHiNS. I have no particular duties in regard to packing-honse products. Mr. Day. Have your clerks anything to do in regard to packing-house products? Mr. HiTCHiNS. The same as in regard to anything else. Mr. Day. What is that? Mr. HiTCHiNS. We get the bills of lading; we make a waybill for it. Mr. Day. Who brings the bills of lading to you? Mr. HiTCHiNS. The Armour Packing Company make their own. We send to them for it. All the others send their bills to us. Mr. Day. What do you do with those? Mr, HiTCHiNS. We sign an original and duplicate and return to them. One duplicate we retain. Mr. Day. Three copies of the bill of lading are made and you sign two that go to them? Mr. HITCHINS. Yes, sir; and we retain one as our billing instruc- tions; then it gets to the billing desk. The waybill clerk waybills it according to the bill of lading. The bill of lading is sent out to the yard, or else it may be slipped on a waybill and the waybill mailed to the final destination on our line. Mr. Day. Are these bills of lading executed there ever returned to your office again ? Mr. HiTCHiNS. The ones we give Armour, they would be returned in case of a claim for damage or overcharge, or anything of that kind. Ordinarily they are not returned. I think they are usually surrendered on export stuff for a through bill, or otherwise used as a negotiable instrument. Mr. Day. Surrendered to whom on export stuff? Mr. HiTCHiNS. The line that issues the export bill of lading. Mr. Day. He takes up your bill of lading and issues a through bill of lading? Mr. HiTCHiNS. Yes, sir; that is the custom. Mr. Day. In export stuff on the through bill it is the line agent that quotes the through rate? Mr. HiTCHiNS. I do not know. Mr. Day. Who does? Mr. HiTCHiNS. I do not know. Mr. Day. You quote no rate? Mr. HiTCHiNS. The through rate may be quoted by the lineman, the steamship man, or it maybe quoted by anybody interested in the traffic. Mr. Day. But the Chicago Great Western makes no through rate across the water ? Mr. HiTCHiNS. I do not know whether they do or not; I do not. Mr. Day. Have you any reason to believe that it has been done by the Chicago Great Western in the past year? Mr. HiTCHiNS. I do not believe it has. Mr. Day. Do you get ocean quotations? Mr. HITCHINS. IsTo, sir. Mr. Day. Or any quotations? Mr. HiTCHiNS. We get them, but we do not pay attention to them. Mr. Day. ISTow, instances where the Armour Company, or any com- pany, send over the bill of lading on traffic that goes out over your route, who makes the collection for that traffic which is prepaid? Mr. HiTCHiNS. I do not understand that. Mr. Day. I will ask the stenographer to repeat it. APPEl^DTX G. 239 The stenographer repeated the qnestiou as follows: Mr. Day, Now, instances where the Armonr Company, or any company, send over the bill of lading on traffic that goes out over your route, who makes the collection for that traffic which is prepaid? Mr. HiTCHiNS. What do you mean by "that traffic?" Mr. Day. For instance, cases where Armour and other packers send over bills of lading to you in duplicate or triplicate? Mr. HiTCHTNS. The local office. Mr. Day. The local agent? Mr. HiTCHiNS. Yes, sir. Mr. Day. What is his name? Mr. HiT(!HiNS. The man that has charge of the local office^ his title is assistant agent; his name is C. J. Blodgett. Mr, Day. He is assistant to you? Mr. HiTCHiNS. Yes, sir. Mr. Day. He makes the actual collection of cashT Mr. HiTCHiNS. No ; he sends his collectors over. Mr. Day. Who are his collectors? Mr. HiTCHiNS. I will get the names after a while. Mr. Day. Are they the men you spoke of a while ago as your subordinates? Mr. HiTCHiNS. Oh, no; you asked who might quote a rate. Mr. Day. This man is your subordinate? Mr. HITCHINS. Mr. Blodgett? Mr. Day. Yes. Mr. HiTCHiNS. Yes, sir. Mr. Day. When he makes collections of money, or his office collects money, is that deposited in your name? Mr. HiTCHiNS. Yes, sir. Mr. Day. You do not know who it is in his office that makes col- lections on prepaid packing-house products? Mr. HiTCHiNS. I told you I knew him, but his name has slipped my memory. Mr. Day. Do you exercise- supervision over those accounts to see whether the cash is collected that ought to be collected? Mr. HiTCHiNS. Not personal supervision. Mr. Day. You do not examine the accounts to see from whom the cash is coming and whether the amount is paid in that ought to be paid in? Mr. HiTCHiNS. It would be an impossibility to attend to all those details. Mr. Day. How do you satisfy yourself that those things are straight? Mr. Hitchins. My subordinates are all bonded. Mr. Day. You make no examinatiou? Mr. Hitchins. No; the railway company have an auditor that makes an examination. Mr. Day. Commencing on the 28th of January and running through to the 17th of February there was transported over the Chicago Great Western, in conjunction with the Traders' Despatch, 15 cars of traffic, packing-house products, which went through to New York on an agreement of 17 cents a hundred off the through rate. Were you cog nizant of that? Mr. Hitchins. No, sir; I do not believe it, either, Mr. Day. You do not believe it? Mr. Hitchins. No, sir. Mr. Day. You mean to say that on all traffic transported by the 240 APPENDIX G. Great Western road during the month of February— packing-house products — destined for New York the full published tariff rate was paid? Mr. HiTCHiNS. 1 have no knowledge of anything less, and I believe firmly that that was the case. Mr. Day. That there were no contracts or agreements made? Mr. HiTCHiNS. Not to my knowledge. Mr. Day. Did you ever hear of an agreement made by the Chicago Great Western road, a contract with the Armour Packing House Com- pany, or the Armours, made in the year 1900, called the " protection agreement?" Mr. HiTCHiNS. I never heard of that. Mr. Kellogg. And, Mr. Day, nobody else ever heard of it, because it was never made with anybody. Mr. Day. Or with the agents of the Packing House Company. You never heard of anything of that kind? Mr. HiTCHiNS. No, sir. Mr. Day. You never heard a phrase of that kind? Mr. HiTcniNS. No, sir. Mr. Day. What fast freight lines operate over the Chicago Great Western ? Mr. HiTCHiNS. None. Mr. Day. I do not mean that the Chicago Great W estern participates in the furnishing of the cars or are parties to the fast-freight line, but what fast-freight lines operate most over the Chi(;ago Great Western up to Chicago? Mr. HITCHINS. There are no fast-freight lines operating over the Chicago Great Western road. Mr. Day. What do you mean by "operating?" Mr. HiTCiiiNS. What do you mean? Mr. Day. Well, what do you mean? I am asking you. Mr. HiTCHiNS. The Chicago Great Western are not interested in the operation of a fast freight line, have no arrangement with any fast- freight line to run their cars and participate with us, and we do not participate in any of their expenses in any shape or form. Mr. Day. Take the Traders' Despatch ; any claim made by a shipper for a refund for damage— do you contribute anything whatever? Mr. HiTCHiNS. Only so far as our liability as the Chicago Great Western. We operate entirely independently. Mr. Day. I understand that. What sort of participation have you had the past six mouths in the way of making up a claim, refunding a claim, or paying damage? Have you had anything of that kind? Mr. HiTCHiNS. I would not handle a damage claim. If there was a damage claim it might come to me here at Kansas City to get informa- tion, but we have no diiierent arrangement with the Traders' Despatch from any other line. Mr. Day. I understand that. I do not mean to intimate that you had. If a claim should be presented through the Traders' Despatch to the Chicago Great Western to participate in a rebate, would that come to you? Mr. HiTCHiNS. No, sir. Mr. Day. Or come to your office? Mr. HiTCHiNS. No, sir; I do not suppose it would. I have never seen any. Mr. Day. I am asking now if the agent, any agent of the Traders' Despatch, should seek to collect the assessment of refund whereby a APPENDIX G. 241 rebate was secured on the transportation of packing-house products, would those claims come to you for your share of the rebate? Mr. HiTCHiNS. No, Mr. Day. Suppose the rate was shrunk 15 cents a hundred from here to New York, or 7i or 8 cents from here to the Mississippi River, and supposeyour road did participate in that, would the claim for that be presented to you at all? Mr. HiTCHiNS. I do no care to suppose that. Mr, Day. Well, has it been done in any instance within a year? Mr. HiTcniNS. No, sir. Mr. Day. You know of no claim of that nature? Mr. Hit CHINS. No, Mr. Day. :>!r. Hitchins, during the month of October, 1000, did you or any of your force with your knowledge and consent — knowledge after or before the fact — propose to carry packing-house products at less til an tlie rate named in your published tariff? Mr. IIiTCHiNS, No, sir. Mr. Day. Not in the month or October or November? Mr. Hitchins. No, sir. Mr, Day, Nor December, 1900? Mr. Hitchins. No, sir. Mr. Day. On traffic exported, have you or your subordinates accepted less for the haul to the seaboard than the rate jiublished on domestic traffic? Mr. Hitchins. I have no doubt they have. Mr. Day. Do you know whether you have or not? Mr. Hitchins. Well, I do not remember any specific case of any divisions, but I know it is customary for us to accept a division of the export rate which is less than the published tariff rate on domestics. Mr. Day. Can you state to the Commission any rate you have accepted less than the published rate on domestic for the same port? Mr. Hi 1 CHINS. No; I could not. Mr. Day. Well, approximately. Mr. Hitchins. Well, 1 would not know what the divisions were finally. It is a matter for adjustment between the lines. We do not quote any rates to Liverpool or Loudon. Our otlice does not quote any export rates at all. Mr. Day. You say it is a matter of adjustment between the lines — how of adjustment? Mr. Hitchins. Well, it may be adjusted by claim. Mr. Day. How is the claim presented? Mr. Hitchins, There are a number of ways. It may be presented by the line that clears the stuff" at the seaboard. The provisions may be billed from here to seaboard and a bill of lading given by the fast- freight line naming the rate. The line at the seaboard Avould deliver to the steamship company on the basis of the inland division or propor- tion of the export rate, and if it is, as a matter of convenience, billed at the rate on domestic, the foreign -freight agent at New York, Boston, or Baltimore will make a claim on his company which will be cleared through the different lines. That is one method. Mr. Day. Well, what is another? Mr. Hitchins. Another method would be for the fast- freight line man here to collect the money and send it to us. The packer may remit direct to him. Mr. Day. Has any claim come under your cognizance, either by the 741a— 05 16 242 APPENDIX G. delivering carrier at the port of export or any steamship agency, for participation by your road in any share of the oceau charges? Mr HiTCHiNS. Not to my knowledge. I do not remember receiving anything of that kind. Mr. Day. In domestic bills of lading that are sent to your office for signature you say they come in triplicate. Is the rate named therein ? Mr. HiTCHiNS. Usually. Mr. Day. The through rate to destination is mentioned in the bill of lading? Mr. HiTcniNS. On export traffic? Mr. Day. No ; on the domestic. Mr. HiTCniNS. Yes, sir. Mr. Day. How is it in regard to bills of lading for export? Mr. HiTCHiNS. I do not know, because I do not issue any export bills of lading. They are surrendered here Mr. Day. I mean the bills of lading you issue which are afterwards taken up bj^ the fast-freight line agents on export traffic. Mr. HiTCHiNS. I do not know whether they are rated or not. Mr. Day. Yon say you do not know whether the rate is inserted? Mr. HiTCHiNS. Yes, sir. I will explain our system: Our principal packing-house business is with the Armour Company, They are very close to us. Our fast meat train leaves at 6 o'clock and they usually have the billing ready at 5.30. We send a man over and he signs the bills over there. If they are rated, they rate them themselves. Mr. Day. Who is the man who goes over to sign them? Mr. HiTCHiNS. My son has been doing it. A young man, 17 or 18 years old. Mr. Day. Whose name does he sign — yours or his own? Mr. HiTCHiNS. Mine. Mr. Day. Is it not usual on bills of lading — is it not a usual thing to have inserted phraseology substantially like this : " Rate prepaid, ocean charges to follow." Mr. HiTcniNS. That may be. Mr. Day. What is your son's full name? Mr. HITCHINS. Clayton S. Hitchins. Mr. Day. Do you have anything to do with the mileage that is paid by your road on refrigerator cars? Mr. Hitchins. No, sir. Mr. Day. Or private cars — do you have anything to do with the accounts? Mr. Hitchins. The mileage accounts? Mr. Day. Yes, sir. Mr. Hitchins. No; not a thing. Mr. Day. Who does that? Mr. Hitchins. It is handled by the car accountant in St. Paul. Mr. Day. What is his name? Mr. Hitchins, Snow. Mr. Day, You have nothing to do with it? Mr. Hitchins, Not a thing. Mr. Day. Take these refrigerator cars. Do they come back with the traffic or do they simply carry traffic one way? Mr. Hitchins, That depends on the convenience of the carrier. Mr. Day. How does it prevail on your line ? Mr. Hitchins. If we are short of cars we load them west; if we are moving empty cars this way anyhow, we move them empty. It is a matter of convenience. APPENDIX G. 243 Mr. Day. Wbicli practice prevails? Mr. HiTOHiNS. It depends on circumstances. Sometimes we are load- ing merchandise in them and at other times we are not. Mr. Day. What is your estimate as to the time they are used? Mr. HiTCHiNS. I could not give you an estimate at a time of this kind. When there is a big east-bound movement it is more convenient to load box cars, and the refrigerators are allowed to come empty. When we do not have empty cars in this part of the country we load merchandise in refrigerators. Mr. Day. That is all. Commissioner Prouty. I want to ask a question about the export business. Doyou know when a carload of packing-house products leaves Kansas City whether it is for export or domestic consumption? Mr. HiTCHiNS. Yes, sir. Commissioner Prouty. You always know that? Mr. Hitchins. On export it is consigned in cars of a foreign freight agent and mentions to sail on such and such a steamer, such a date. Commissioner Prouty. That is so even though the billing is at the domestic rate. I understand you to say that export traffic is sometimes billed on the domestic rate and the difference subsequently adjusted by claim ? Mr. Hitchins. Yes, sir. Commissioner Prouty. My inquiry is, can you always determine when the freight leaves Kansas City whether it is for export or domestic consumption? Mr. Hitchins. Yes, sir; the bill of lading reads "for export," and gives the routing. Commissioner Prouty. That bill of lading would be made out by Mr. Hitchins. The shipper with us. Commissioner Prouty. And would give the steamship by which it was to go? Mr. Hitchins. Yes, sir. Commissioner Prouty. Through whose office is settlement made with the Great Western for its share in the rate on an export shipment? Mr. Hitchins. Well, it would ordinarily be through the auditor's office. Commissioner Prouty. Would it come to your office at all? Mr. Hitchins. It might. Commissioner Prouty. You say it might? Mr. Hitchins. There are so many different methods by which it could be settled. Now, the method I described to Judge Day, the ship, ment to be billed from here at the published domestic rate Commissioner Prouty. Suppose it is billed at the published domes tic rate; in that case do they pay you at this office the published domestic rate? Mr. Hitchins. Well, if it is billed collect, it is paid at the port. If they pay us, they pay not the published rate on domestic, but the rate they have on the export rate. Commissioner Prouty. That is. Armour & Co. have a rate for export business, and they pay you that rate even though it is billed at the domestic rate ? Mr. Hitchins. Yes, sir. Commissioner Prouty. There have been instances in which they have paid you in that way? Mr. Hitchins. Yes, sir. 244 APPENDIX G. Commissioner Phouty, I wish you would look uji some iustances of that kind, some one instance of that kind, and tell us the amount paid you on some one car or shipment just as an illustration of that methi^d of doing business. Mr. HiTCHiNS. Yes, sir. Commissioner Trouty. You say there is another method of doing business and that is by way of claim which your freight agent would make in New York ? Mr. HiTCHiNS. The foreign freight agent of the line that brought the stuff into New York. Commissioner Prouty. Does that claim pass through your office? Mr. HiTCHiNS. ]So, sir; it would not. Commissioner Prouty. You would not know anything about that? Mr. HiTCHiNS. No, sir. Commissioner Prouty. Can you tell in a rough way what the rela- tive amount of export and domestic business is that you carried out of Kansas City for the packers for the last year — how much has been export and how much domestic? Mr. HiTOHiNS. I have not that at my fingers' ends. I could ascer- tain. Commissioner Prouty. 1 wivsh you would give me a general notion. Has two thirds been ex])ort or three-fourths? Mr. HiTCHiNS. I would guess the other way. Commissioner Prouty. Two-thirds domestic? Mr. HiTCHiNS. Yes, sir; but I may be wrong about that. Commissioner Prouty. You have in your office the material by which you could make a statement showing how much was domestic and how much export during the last year? Mr. HiTCiiiNS. Y^es, sir. Commissioner Prouty. I wish you would make a statement of that sort from March 1, 11)00, to March 1, 1901, showing how much you han- dled and how much was for export and how much domestic. Mr. HiTCHiNS. Yes, sir. Commissioner Prouty. Y^ou say you do not understand that there is any export published rate. That means, I suppose, that on exi)ort traffic you take any rate you can get, or some rate that some person authorized has a mind to give? Mr. HiTCHiNS. The final divisions of an export rate I have nothing to do with determining how much they are, but my understanding is that there is not and can not be a published rate on export traffic. Commissioner Prouty. It is your business, you say, to get your share of the traffic at Kansas City? Mr. Hitchins. I beg pardon. I say to try to get it. Commissioner Prouty. I do not suppose you do get it. No road does that. When you think you are not getting quite your share of the traffic, what do you do about it? Mr. Hitchins. I report to my superior officer. Commissioner Prouty. That is a problem you do not undertake to deal with? Mr. Hitchins. Yes, sir. Commissioner Prouty. And presently the traffic comes your way again ? Mr. Hitchins. If it does not I keep hammering at them. Commissioner Prouty. I want to ask you how many lines carry packing-house products out of Kansas City east? Mr. Hitchins. Initial lines out of Kansas City? APPET*7DIX G. 245 Commissioner Prouty. Out of Kansas City. Mr. HiTCHiNS. I think there are thirteen. Commissioner Prouty. Thirteen lines operating in Kansas City to carry traffic from Kansas City to eastern destinations? Mr. HiTCHiNS. Yes, sir. Commissioner Prouty. What do you mean by lines? Mr. HiTCHiNS. I mean railroads. Commissioner Prouty. Are there more than 13 railroads entering Kansas City? Mr. HiTCHiNS. Yes, sir. Commissioner Prouty. How many railroads in Kansas City compete for export business? Mr. HiTCHiNS. Thirteen, as I understand. Commissioner Prouty. Are there not some roads that carry export business through southern ports? Mr. HiTCHiNS. In the 13 I include those. Commissioner Prouty. How many compete for business to Kew York? Mr. HiTCHiNS. Well, I do not know without counting up. I should say about ten. Commissioner Clements. How many important packing houses in Kansas City for whose business these roads compete? Mr. Hitchins. There is the Armour Packing House, Swift, Fowler, Cudahy, Schwarzschild & Sulzberger; the Dold Packing Company were in business, but they burnt out and have not yet rebuilt. Commissioner Clements. Does your road get business from all these companies in important quantities? Mr. Hitchins. We may get business from all, but we get the bulk of our business from the Armour Packing Company. Commissioner Clements. Does Armour & Co. ship mostly over your road, or divide among all the roads? Mr. Hitchins. It divides among all of them. Commissioner Clements. When you sign a bill of lading, or some- body does on your behalf, presented by the Armour Company, what steps do you take to ascertain whether it is a correct statement of the weight and quantity? Mr. Hitchins. The Armour Comj)any are members of the Western Eailway Weighing Association, an association formed by all the rail- roads; they are members of that association, who have men examine their books at regular intervals to see that they have given the right weights. Commissioner Clements. Who compose the association? Mr. Hitchins. All the railroads west of Chicago, I think, are mem- bers of the Western Eailway Weighing Association. Commissioner Clements, In case of foreign shipments you bill, as I understand, to the seabord only? Mr. Hitchins. Yes, sir. . Well, tke bill is issued in Kansas City through to the final destination. Commissioner Clements. Is it issued here? Mr. Hitchins. It is issued here to the final port — final destination. Commissioner Clements. Well, in respect to shipments of this kind, does anything come to your knowledge subsequently, any papers or inquiries of any kind relating to claims for overcharge or damage or things of that kind? Mr. Hitchins. Well, it would depend. If a shipment was damaged I would be asked for my record, how it was loaded, under what seals it went forward, what train, what conductor 246 APPENDIX G. Commissioner Clements. And what quantity? Mr. HiTCHiNS. Yes, sir; and if we bad inspected the car, if we knew that quantity was loaded, whether we a(3cepted the packer's check. Commissioner Clements. In case it was an overcharge, would the same inquiries come to you? Mr. HiTCHiNS. It would depend altogether on the nature of the overcharge claimed. If they claimed an overcharge in weight or an overcharge that they had given an erroneous description of the article or we had charged them on one article and it was really another, that claim would go to the Western Railway Weighing Association and they would have their inspector go down and see what the goods were and what the shipment was and make his recommendations. Commissioner Clements. You have no information directly or indi- rectly of any method of adjusting claims under these various classes for overcharges, damages, etc., by which a part of the rate is to be paid back and is paid back? Mr. HITCHINS. No, sir. Commissioner Clements. That is all. Mr. Day. When you issue bills of lading or execute bills of lading sent to you by the shipper, what does that bill of lading contain that you have your name subscribed to? Mr. Hitchins. It is our printed form of contract. Mr. Day. What is written in ? Commissioner Prouty. Have him bring one, Mr. Day, and let us see it. Let him bring one of each kind, a domestic and a foreign one. Mr. Day. Very well, Mr. Hitchins, bring that with the memorandum of names. Mr. Hitchins. Yes, sir. Commissioner Clements. Will you bring those in the afternoon? Mr. Hitchins. Yes, sir. Commissioner Clements. That seems to be all. The witness was excused. D. F. HuRD, being duly sworn, testified as follows: Mr. Day. What is your occupation, Mr. Hurd? Mr. HuRD. I represent the Lake Shore and Michigan Southern Rail- road, the Red Line, and White Line, and the West Shore Line. Mr. Day. So you have a double capacity here. You represent the Lake Shore and Michigan Southern Railroad and the three lines? Mr. HuRD. The three fast freight lines operating over their rails. Mr. Day. What roads do those three lines operate over? Mr. HuRD. The Red Line is primarily the Lake Shore and l^ew York Central to New York; to Boston and New England territory the Lake Shore, the New York Central, and the Boston and Albany; to Phila- delphia it operates over the Lake Shore, the New York Central, and the Philadelphia and Reading. The West Shore is similar except that the West Shore Railroad is substituted for the New York Central. Mr. Day. Do the lines you represent operate over any particular roads west of Chicago? Mr. HuRD. No, sir. Mr. Day. You send your cars loaded over whatever route from here may suit the convenience of the shii)per or your convenience? Mr. HuRD. We have no line. Mr. Day. What are your functions here in relation to those three fast freight lines and the railroads you have mentioned ? What is the scope of your duties? Mr. HuRD, Looking after their interest in their varied nature. APPENDIX Q. 247 Mr. Day. What work do you perform for the Lake Shore? Mr. HuRD. I endeavor to secure traffic for them and look after such matters as may come up in connection with it. Mr. Day. In respect to packing-house products, do you quote rates? Mr. HuRD. When we are called upon. Mr. Day. Where do you quote rates to? Mr, HuRD. To territory to which the lines interested operate. Mr, Day. Do you have published tariffs in your office? Mr, HuRD. Yes, sir; we have the file of tariffs, Mr, Day. Are you supplied with tariffs as they are changed from time to time by the road you represent? Mr. HuRD. We are supposed to be. Mr. Day. And the agencies of which they are members? Mr. HuRD. We are supposed to have a complete file. Mr. Day. What is the present rate on packing-house products to New York City? Mr. HuRD. From where? Mr. Day. i^>ora here to New York City. Mr. HuRD. My recollection is that the rate is 53J cents. Mr. Day, How is that made up? Mr. HuRD. It can be made up in two ways, one based on the Missis- sippi River of 18^ cents and 35 cents east, aud the other based on Chi- cago 23^ cents plus 30 cents east, Mr. Day. During the month of February did you quote any rate on packing-house products to New York less than that rate? Mr. HuRD. Not that I know of. Mr. Day. Did you during the month of March? Mr. HuRD. You speak of this month ? Mr. Day. Yes, sir. Mr. HuRD. Not that I know of. Mr. Day. Do your records show what rates you have contracted to take traffic at? Mr. HuRD. We have practically had none. Mr. Day. You mean the three lines of road you represent have not carried any from here during the month of March — packing-house products ? Mr. HuRD. Practically nothing, Mr. Day. What do you mean by "practically nothing?" None at all? Mr. HuRD. We might have had one or two cars. Mr. Day. How about the month of February? Mr. HuRD. You are referring to packing-house products other than dressed beef? Mr. Day. Packing-house products, dressed beef — either or both? Mr. HuRD. I could not say how much we have had. I do not know. Mr. Day. Do your records show? Mr. HuRD. Yes, sir. Mr. Day. What sort of record do you keep? Mr. HuRD. Of such shipments as we are advised move our way. Mr. Day. How many employees have you in your office? Mr. Hurd. I have a contract agent and a stenographer. Mr. Day. Have you quoted any traffic for export at a lower rate than the published rate on domestic traffic ? Mr. Hurd. No, sir. Mr. Day. Have you contracted for any during the months of January, February, or March? Mr. Hurd. No, sir. 248 APPENDIX G. Mr. Day. Did you during the mouth of December? Mr. HURD. No, sir. Mr. Day. Or November? Mr. HuRD. No, sir. Mr. Day. Or October? Mr. HuRD. No, sir. Mr. Day. Have you contracted to carry any traffic, either domestic or export, to the port of New York or Boston at a lower rate than the published rate? Mr. HuRD. I have not, Mr. Day. Has anybody in your office under your sux>ervisiou done that? Mr. HiiRD. Not to my knowledge. Mr. Day. Would you know it if it had been done? Mr. HuRD. I believe I would. Mr. Day. You wish the Commission to understand, do ;^ou, that all of the traffic that has been contracted for, packing- house products or dressed beef, during this year has been contracted for at the ijublished rate, that is, 53i cents? Mr. HuRD. In so far as I know anything about or have had anything to do with. Commissioner Prouty. How do you. make export rates? Do the packers inquire for an export rate? Mr. HuRD. They may very seldom of me. Commissioner Prouty. If they did, how would you make it? Mr. HuRD. We would add the ocean rate obtainable from time to time to the published tariff rate to seaboard. Commissioner Prouty. That is all. Mr. Day. Mr. Hurd, from whom do you get your tariffs which yon quote to shippers? Mr. Hurd. It depends what basis we use, or rather, what initial routing. The Mississippi Elver tarlHs are ])ublished by Western roads. Mr. Day. I mean from the Mississippi River east? Mr. Hurd. They would come to us, and probably do, from the offices of the western roads. Mr. Day. Do you get any of them from the Central Freight Association ? Mr. Hurd. Any tariffs? Mr. Day. Yes, sir. Mr. Hurd. No, sir. Mr. Day. Do you get any tariff sheets from the office of which Mr. J. F. Tucker is chairman ? Mr. Hurd. I do not recall any. Mr. Day. Have you received a document from his office or from the Lake Shore and JMichigan Southern agencies, any of them, or from any other of the lines east of the Mississippi Kiver, or any association, nam- ing an export rate on packing-house products of 29 cents from the Mississippi Elver ? Mr. Hurd. Of how much? Mr. Day. 29 cents. Mr. Hurd. I have no knowledge of it. Mr. Day. Have you any information that there is such a rate? Mr. Hurd. No information. Mr. Day. Or a rate of 25 cents from Chicago east on export traffic? Mr. HuED. No, sir. APPENDIX G. 249 Mr. Bay. You bave had no information of any such rate being quoted either formally, officially, or informally? Mr. HuRD. I have no knowledge of it. Mr. Day. Yon have not heard of it"? Mr. HuRD. Heard whether there was or nott Mr. Day. Yes, sir. Mr. HuRD. I have heard it remarked as a matter of conversation. Mr. Day. Heard what remarked? Mr. HuRD. That there was such a tariff. Mr. Day. Who did you hear that it came from — what source? Mr. HuRD. That the information came from or the document? Mr. Day. The tariff — the information you have. Assign the origin of that tariff. Mr. HuRD. I do not know; I do not recollect. Mr. Day. When did yon understand that that was issued? Mr. HuRD. My recollection is possibly six weeks ago; possibly less. Mr. Day. Was it not about or shortly after the 1st of January? Mr. HuRD. It would not ajipear to me so. Mr. Day. From whom do you get the authority to make rates? Mr. HuRD. I have no authority. Mr. Day. To name rates — to quote rates? Mr. HuRD. Other than our published tariff rates. Mr. Day. Where do you get that from? Mr. HuRD. I consider that the tariff furnished me is authority to quote the rate therein contained. It may come from one source or another. Mr. Day. Have you, within the past six months, say, had any authority from any source to quote a lower rate than the published tariff rate on either domestic or export traflflc? Mr. HuRD. Not that I know of. Mr. Day. Do you mean that no such authority has been given you or that you do not remember whether it has or not? Mr. HuRD. I do not know of such authority having been given me. Mr. Day. Have you participated at all in the refund of any charges that had been collected, prepaid, on packing-house products in thei^ast six months? Mr. HuRD. Not to my knowledge. I do not know that there have been. Mr. Day, Have you at any time? Mr. HuRD. How far back do you refer? Mr. Day. Well, say a year and a half. Mr. HuRD, No, sir. Commissioner Prouty. Ask him if he ever did, Mr. Day, Mr. Day. Well, answer that question. Mr. HuRD. I do not know that I 'lave. Mr. Day. Do you not remember? Mr. HuRD. I do not know that I have. Commissioner Prouty. Do you know you have not? Mr. HuRD. My recollection is strong that way. Mr. Day. Has any claim passed through your hands, whether coming from either of the officers of the fast freight lines that you represent here or through the shipi)er, for any refund on charges that had been prepaid on traffic destined for domestic consumj)tion at the Atlantic seaboard or for export? Mr. HuRD. I do not know of any such conditions. Mr. Day. I ask you whether any claim has been presented to you? 250 APPENDIX G. Mr. HURD. ISo, sir. Mr. Day. Or passed through your hands lor your approval! Mr. HuRD. No, sir. Mr. Day. Or for your examination? Mr. HuRD. No, sir. Mr. Day. Not within the last six months? Mr. HURD. No. sir. Mr. Day. No claim presented to you on behalf of Armour & Co.? Mr. HuRD. No, sir. Mr. Day. Swift & Co.? Mr. HuRD. No, sir. Mr. Day. Schwarzschild & Sulzberger? Mr. HuRD. No, sir. Mr. Day. Or Fowler, Limited? Mr. HuRD. No, sir. Mr. Day. Or the Cudahys? Mr. HuED. No, sir. Mr. Day. Has any claim been presented to you for a contribution or for you to collect from others to the payment of ocean charges on traf- fic that has beeu carried east by the lines you represent or either of them? Mr. HuRD. That question once more. Mr. Day. I will ask the stenogra])her to repeat it. The stenographer repeated the question as follows: Mr. Day. Has any claim been presented to you for a contribution or for you to collect from others to the payment of ocean charges on traflic that has been carried east by the lines you represent or either of them? Mr. HuRD. No, sir. Mr. Day. The traffic that went out over either of the lines you repre- sent here in the month of January or February— you say some did go- how is that traflic billed? Mr. HuRD. Let me refer to dressed beef in that particular. That is the only traflic I know of, and I know nothing about that as to its condition. Mr. Day. You know nothing about what? Mr. HuRD. The movement of the dressed-beef business other than the records that we have had dressed-beef business. Mr. Day. I am asking as to the bills of lading. You issue a bill of lading on the traflic that comes by the White Line, or either of the lines you represent? Mr. Httrd. We may be called on to do so. Mr. Day. What is expressed in the bill of lading? What do you put into the bill of lading? Do you sign it? Mr. HuRD. I do not know that we have issued any bills of lading for that traflic. Mr. Day. For any traffic? Mr. HuRD. Not for that traffic referred to. Mr. Day. Well, any dressed beef traffic within the last six months, or packing-house products within the last six months. Mr. HuRD. We may have issued bills of lading. Mr. Day. Tell the Commission what is the course of your business, how you conduct it, whether you take up the bills of lading issued by the initial line and what sort of bill of lading you substitute for it, and what appears in that bill of lading? Mr. HuRD. Should we be called on to issue a bill of lading the west- APPENDIX G. 251 em road's receipt would be presented, for which we would exchange the bill of lading. Commissioner Prouty. Would you do it here or somewhere else? Mr. HuRD. At Kansas City. Mr. Day. What do you exj^ress in that bill of lading! What do you write into it? The number of the car? Mr. HuRD. If it is requested ; not always. Mr. Day. The consignor — is he named? Mr. HuRD. Yes, sir. Mr. Day. The consignee? Mr. HuRD. Yes, sir. Mr. Day. The character of the trafiacf Mr. HuRD. Yes, sir. Mr. Day. The weight? Mr. HuRD. Yes, sir. Mr. Day. Who makes out these bills of lading? Mr. HuRD. They are made out in my office by the clerk. Mr. Day. They are not written up by the shij)pers, by the packers? Mr. HuRD. We have hiid none that way. Mr. Day. Is the rate at which the traffic is carried named in the bill of lading t Mr. HuRD. It may be. Mr. Day. What is the usual practice? Mr. HuRD. 1 hardly feel competent to speak on the usual practice because we have not had enough of it to sigiiify. Mr. Day. I am speaking of either dressed beef or packing-house l)roducts. Mr. HuRD. Dressed beef we issue no bills of lading on whatever. Mr. Day. What substitute is used for a bill of lading? What is your procedure ? What do you do ? How do you keep your account ? What do you issue to the shipper? Mr. HuRD. We issue nothing to the shipper. He calls on us for nothing. In fact, we have no record of it other than thej come to us with copies of billing. Mr. Day. The copies of billing on dressed beef? Mr. HuRD. Yes, sir; copies of the waybills. Mr. Day. Well, now, in the bills of lading you have issued in the past six months, in what instances has the rate been inserted in the bill of lading? Mr. HuRD. I do not know that it has or has not. Mr. Day. In wliat instances do you, as a matter of course, insert it? Mr. HuRD. What would we insert? Mr. Day. In what instances is the rate at which the traffic is carried or at which it is contracted for inserted in the bill of lading? Mr. HuRD. It strikes me at the request of the shipper whether or not. Mr. Day. Otherwise you do not insert it. Who writes up the bills of lading in your office? Mr. HuRD. Mr. Ledlie. Mr. Day. He signs your name? Mr. HuRD. My name. Mr. Day. How long have you been agent for these lines here? Mr. HuRD. Two years. Mr. Day. When the traffic goes out over one of the lines you repre- sent, and the charges are jwepaid, who are they paid to? Mr. HuRD. It may be in one instance one party or another. I do not know. 252 APPENDIX Q. Mr. Day. Are they paid to yonr office at all in any instance? Mr. HuRD. I do not recall any instance. Mr. Day. Do you wish the Commission to understand that you say it has not been paid to your office? Mr. HuRD. It may have been. Mr. Day. Has that occurred this month? Mr. HuRD. 1 do not know of anything this month. Mr. Day. Any instance during the month of February? Mr. HuRD. I do not know of anything during February. Mr. Day. You mean to say that none was prepaid during February? Mr. HuED. I do not know of any. Mr. Day. Your books show, do they? Mr. HuRD. I do not know whether they would or not. Mr. Day. What books do you keep? What sort of books do you keep in which packing-house products or dressed beef transported by either of the lines you represent are mentioned? Mr. HuRD. We have no books, no bookkeeping method. Mr. Day. What sort of record do you keei)? Mr. HuRD. I do not know how to answer that question as to a record. Mr. Day. What sort of documentary evidence do you preserve from day to day or week to week respecting packing-house products or dressed beef that has passed across the Mississippi River by either of the lines you represent? Mr. HuRD. We enter it in what we call a tonnage book. Mr. Day. What does that shoM'^? Mr. HuRD. It shows the date, the car number, the consignee, the destination, and weight. Mr. Day. The rate? Mr. IIURD. It may show the rate. Mr. Day. Does it usually? Mr. HuRD. I do not know whether it does or not. Mr. Day. What rate does it show? Mr. HuRD. The rate from which the record is made. Mr. Day. Does it show the rate at which the traffic is carried? Mr. HuRD. So far as I know. Mr. Day. Y'ou say you have two clerks in your office, two assistants? Mr. HuRD. I have a stenographer and clerk. Mr. Day. WHiat is your stenographer's name? Mr. HuRD. A lady, Miss Hardacre. Mr. Day. What is her first name? Mr. HuRD. Ruth. Mr. Day. What is the man assistant's name? Mr. HuRD. H. L. Ledlie. Mr. Day. Have you at any time within the past six months made any assessment or presented any claim to any of the roads that par- ticipated in the hauling of the traffic that went by your line — packing- house products or dressed beef? Mr. HuRD. No, sir. Mr. Day. Have any moneys passed through your hands — and when I speak of moneys I include checks, drafts, or any evidence of the right to collect money — passed through your hands in the past six mouths which represented a refund or rebate on traffic that had been taken by your lines to points east of the Mississippi River? Mr. HuRD. Has any? Mr. Day. Yes. APPENDIX G. 253 Mr. nuRD. There may have. Mr. Day. When? Mr. HuRD. I do not know of any particular period. Mr. Day. How about the month of February — any in Fl'briiary? Mr. HuRD. You ask me whether we have handled any moneys during the month for the transportation of business? Mr. Day. Which represented a rebate or refund on what has been paid? Mr. HuRD. I would like to amend my answer to say, there has not. Mr. Day. Do you quote ocean rates? Do you quote rates from Kan- sas City on packing-house products to Liverpool or any continental ports? Mr. HuRD. If we should be called on we would. Mr. Day. Have you done so within a month ? Mr. HuRD. I may have. Mr. Day. When? Mr. HuRD. I do not know when. Mr. Day. This week? Mr. HuRD. No, sir. Mr. Day. Last week? Mr. HuRD. I do not recall last week. Mr. Day. Quote them, I say — name tlie rate, or Mr. Ledlie represent- ing you? Mr. HuRD. Rates may have been quoted. We are frequently called up over the telephone to name rates. Mr. Day. I ask if that has been done within a week? Mr. HuRD. I could not say whether it has or has not. Mr. Day. How about last week? Mr. HuRD. It is possible. Mr. Day. What rate to Liverpool were you quoting last week? Mr. HuRD. I do not know I was quoting it. Mr. Day. Name a rate you did quote last week to some foreign port. Mr. HuRD. I do not know that I quoted a rate last week to a foreign port. Mr. Day. Or this week? Mr. HuRD, Or this week. Mr. Day. Or Mr, Ledlie quoted for you? Mr. HuRD. I do not know. Mr. Day. Name some rate you quoted within a month to Liverpool or a continental port. Mr. HuRD. I do not recall a rate quoted to Liverpool or a continental port. Mr. Day. In January, then? Mr. HuRD. I do not recall. Mr. Day. How was that rate made up when you did quote it? Mr. HuRD, I do not remember. Mr. Day. When you quote it, how do you make up the rate to the continental port or Liverpool or London or Gla-sgow? Mr. HuRD. I think I answered that question. Mr. Day. Answer it again. Mr. HuRD. The ocean rate obtainable from time to time added to the inland. Mr. Day. Added to the full inland? Mr. HuRD. Yes, sir. Mr. Day. In every instance the full inland was exacted that you did carry it at? 254 APPENDIX O. Mr. HuRD. I do not know that we have always computed the rates. Mr. Day. Did you have anything to do with the collecting of them? Mr. HuRD. No, sir. Mr. Day. When you quote a rate to any foreign port, how are the ocean charges cared for, i)aid, or by whom? Mr. HuRD. They may be prepaid and they may be collected at the other end. Mr. Day. When prepaid, who pays them and to what agency? Mr. HuRD. If prepaid they would be paid by the shipper. Mr. Day. Do your agencies have any relation to agencies in New York that prepa3' the rate to you? Mr. HuRD. Forwarding agents in New York? Mr. Day. Yes, sir. Mr. HuRD. No, sir; not that I know of. Mr. Day. Do you have anything to do with quoting an ocean rate, or do you have anything to do with the payment of it? Mr. HuRD. Not necessarily. Mr. Day. Do you at all, in any instance? Have you paid it? Mr. HuRD. I do not know of any instance. Mr. Day. You said that in the bill of lading, or in your tonnage book, the weight of the trafiQc loaded and carried by your lines, or the lines you rei)resent, is stated. What is the purpose of having the weight stated in the tonnage book? Mr. HuRD. It is a matter of an abstract of billing. Mr. Day. Simply an abstract of the billing? Mr. HuRD. Yes, sir. Mr. Day. Does the statement of weight serve any purpose other than the formal abstract of the billing? Do you use that weight later on for any puri)ose? Mr. HuRD. I know of no purpose it would be used for. Mr. Day. So far as the keeping of your accounts are concerned or any further dealing with the traffic is concerned you might as well not have the matter set down. Mr. HuRD. As far as dealing with the traffic? Mr. Day. Yes. Mr. HuRD. It is simply an office convenience. Mr. Day. What do you use it for? Mr. HuRD. Possibly making up a tonnage statement; possibly in referring to it sometimes. Mr. Day. For what purpose might you refer to it? Mr. HuRD. We might be called upon to locate a delayed shipment or lost shipment. Mr, Day. Or if referred to you for the purpose of adjusting an account? Mr. HuRD. If we were sent papers in a damage claim or an over- charge claim it would probably be referred to. Mr. Day. How would the overcharge be, for a greater weight than actually carried? Mr. HuRD. It might be. Mr. Day. How do you ascertain the weight set down in the tonnage book? Is the weight actually represented in the car? Mr. Hurd. We do not know it to be a fact. Mr. Day. From whom do you get the weight? Mr, Hurd. The weights are from copies of waybills. Mr. Day. Who does the weighing? APPENDIX G. 255 Mr. HuRD. The weighing done at Kansas City is done, I believe, by the Western Weighing Association. Mr. Day. Do they weigh all cars of packinghouse products and dressed beef? Mr. HuRD. I do not know that. Mr. Day. Do they generally weigh them ? Mr. HuED. 1 do not know that. Mr. Day. Do you know whether they have an agent at each of the l^acking houses? Mr. HuRD. I do not know it positively. Mr. Day. What is your understanding? Mr. HuRD. I never have had the question presented. Mr. Day. When traffic goes along with charges to follow, does your office have anything to do with the collection of the charges? Mr. HuRD. No, sir. Mr. Day. Then for the past six months the only function your office has served is the quoting of rates and the exchange of billing. Is that it? Mr. HuRD. Not exactly. Mr. Day. Well, what is it? Mr. HuRD. Soliciting traffic. Mr. Day. What else? Mr. HuBD. Looking after such traffic as might have been solicited and secured. Mr. Day. What else? Mr. HuRD. I do not know that I could definitely specify anything else. Commissioner Prouty. You say you are frequently called on to quote an export rate? Mr. Hurd. Not frequently, no, sir; infrequently. Commissioner Prouty. Do you solicit traffic from these packers? Mr. Hurd. I call upon them occasionally. Commissioner Prouty. What for? Mr. Hurd. For the purpose of enjoying some of their business. Commissioner Prouty. Do you have any talk with them about rates? Mr. Hurd. I have not for a considerable period. Commissioner Prouty. Why not? Mr. Hurd. There does not seem to have been any object. Commissioner Prouty. You have been here about two years now? Mr. Hurd. Yes, sir. Commissioner Prouty. And has it been true all the time that your lines did not carry any of this packing-house traffic? Mr. Hurd. Practically none of it. Commissioner Prouty. They never carried any? Mr. Hurd. I do not say that. We have carried some of it. Commissioner Prouty. When was that? Mr. Hurd. We may be carrying some of the dressed beef business every few days, some every week possibly. Commissioner Prouty. I am talking now of packing-house products. Mr. Hurd. We have carried some of it. Commissioner Prouty. Your lines are the West Shore and New York Central? Mr. Hurd. Our lines operate over those two railroads. Commissioner Prouty. You reach New York and Boston over those lines? Mr. HuED. Yes, sir. 25(5 APPENDIX Q. Commissioner Prouty. You say your lines operate over those lines'? Wlio pays the expense of your line? Mr. HuRD. I understand the exi)enses of the lines are paid by the railroads interested forming the line. Commissioner Prouty. What are the railroads interested? Mr. Hi'RD. I believe I answered that question in specifying how the different lines operated. Commissiouer Prouty. I did not hear it and perhaps we can get at it quicker by having you rei>eat than by referring back to it. Mr. Hurd. The Red Line operates over the Lake Shore and Michigan Southern and the ISTew York Central to New York; the White Line over the Lake Shore and Michigan Southern, the New York Central, and the Boston and Albany to Boston; and to Philadelphia over the Lake Shore and Michigan Southern, the New York Central, and the Philadelphia and Reading. Commissioner Prouty. Now, take that. You reach Boston and New York over the New York Central and the Lake Shore and Michigan Southern? Mr. Hurd. Yes, sir. Commissioner Prouty. Do I understand you to say that those lines never carried any of this ijacking-house traffic — I mean the line you represent, the Red Line, never carried any of this traffic? Mr. Hurd. I never said that we never carried any. I said a frac- tional portion. Commissioner Prouty. Have they ever carried any considerable amount? Mr. Hurd, Not in the two years I have been here. Commissioner Prouty. Have you ever had any talk with the packers about that? Mr. Hurd. Yes, sir. Commissioner 1*routy. What is the reason they do not send their traffic by those lines? Mr. Hurd. That is a proposition I never have been able to answer successfully myself. Comissioner Prouty. You say that recently you have not had any talk with them about rates. Did you originally? Mr. Hurd. A rate discussion will possibly come up in talking with a man. He may want a rate to a point. We would quote a rate if he asked for it. Commissioner Prouty. Does the Red Line feel satisfied that you do not carry any of that traffic? Mr. Hurd. You do not mean individually? Commissioner Prouty. I mean the line itself; are they satisfied? Mr. Hurd. I hardly think they are. Commissioner Prouty. Do you correspond with them about this situation? Mr. Hurd. Occasionally. Commissioner Prouty. What do you tell them the reason is that you do not carry that traffic — what do you think the reason is that you do not carry it? Mr. Hurd. Well, I do not know what to think. Commissioner Prouty. You have not any idea about itt Mr. Hurd. I may have an idea, but it may be wrong. Commissioner Prouty. Do you understand from your knowledge of the situation here that rates on packing house products are maintaiuedt Mr. HuED. I have no knowledge to the contrary. APPENDIX G. 257 Commissioner Prodt Y. I am not talking about knowledge. You have an idea or impression. From what you hear and see, do you understand that rates are maintained from Kansas City to New York? Mr. HuRD. I hear more or less current report to that effect. Commissioner Prouty. To the effect that they are not maintained or that they are maintained? It would require considerable current report to convince you that they were maintained. Mr. HURD. I can not say it has actually convinced me. Commissioner Prouty. Have you ever been told by these packers that if you make as good a rate as other lines you could carry that traffic? Mr. HuRD. I do not think the question has ever been up. I do not think I have been told that. Commissioner Prouty. That is all, Mr. Day. That is all. The witness was excused. Mr. Day called the name of M. M. Vincent, to which there was no response. Mr. Day. If the Commission please, this witness, Mr. M. M. Vincent, was duly served with a subpoena and the return is made by the United States marshal. He executed this writ by reading same to M. M. Vin- cent, March 13, at Kansas City, Mo. Mr. Marshal [addressing deputy marshal], will you call Mr. M. M. Vincent three times in court? The deputy marshal called the name of M. M. Vincent three times in a loud voice in the court room, to which there was no response. W. J. MoKoNE, being duly sworn, testified as follows: Mr. Day. Mr. McKone, what is your business— your occupation? Mr. McKoNE. I have charge of the Jacob Dold Packing Company and Refrigerator Car Line. Mr. Day. Is that a corporation or partnership? Mr. MoKojNE. The car line is owned and operated by the Jacob Dold Packing Company, which is a corporation. Mr. Day. What business relations do you have to the Jacob Dold Packing Company other than looking after the car line? Mr. McKoNE. Well, previous to a year and a half ago I looked after all their detail business in the way of shipments. Mr. Day. How since then? Mr. McKoNB. Since then I have their business in general. I do a little of everything to sustain my position. Mr. Day. How many cars do you have in this car line under your charge? Mr. MoKoNE. I think we have about 220 or 230— under 230. Mr. Day. Are they all refrigerator cars? Mr. McKoNE. No, sir. Mr. Day. What are they? Mr. McKoNE. We have refrigerator cars, tank cars, and box cars. Mr. Day. Other than refrigerator cars? Mr. McKoNE. About 212 or 215. Mr. Day. What mileage do you receive from the different railroads over which your cars operate on your refrigerator cars? Mr. McKoNE. Well, the mileage varies. Mr. Day. West of the Mississippi River ? Mr. MoKoNE. West of the Mississippi River to the Colorado line I think we get 1 cent a mile. Mr. Day. And east? 741 A— 05 17 258 APPENDIX a. Mr. McKoNE. East of the Mississippi River all lines pay three- fourths of a cent. Mr. Day. Do you get the same mileage on your tank and box cars? Mr. McKoNE. No; tank cars are three-fourths and some Eastern lines only pay six-tenths. Mr. Day. What do you get on box cars? Mr. MoKoNE. Six-tenths. Mr. Day. Do you get mileage both ways on your tank carsT Mr. McKoNE. Yes, sir. Mr. Day. Whether they are full or empty ? Mr. McKoNE. Yes, sir. Mr. Day. Are tank cars used for return trafl5c? Mr. McKoNE. Well, I do not know any case where any were used. Mr. Day. What do you use tank cars for — what commodity? Mr. McKoNE. We used them at that time in shipjjing lard. Mr. Day. What do you use them for now? Mr. McKoNE. Oil. Mr. Day. Do you maintain any system of accounts in your oflBce regarding these cars? Mr. McKoNE. Yes, sir. Mr. Day. What accounts do you keep respecting the cars and their use? Mr. McKoNE. We have a mileage record with all parties we rent cars to or loan out. They give us a report every morning of their ship- ments. They are entered up on this record. It is a record of one ot our own system. Then, we get junction cards from every junction in the United States, telling where the cars are, what line they have been delivered to, and we figure the mileage each month for ourselves. Mr. Day. From the railroad companies or any transportation com- pany do you get any compensation for the use of your cars other than the mileage you have mentioned? Mr. McKoNE. No, sir. Mr. Day. Have you had to deal with the securing of rates on the transportation of packing-house products during the past six months. Mr. McKoNE. We have not shipped any. Mr. Day. Out of Kansas City? Mr. MoKoNE. No, sir. Mr. Day. Or dressed beef? Mr. McKoNE. No, sir. Mr. Day. Your works here were destroyed by fire? Mr. McKoNE. September 2, 1899. Mr. Day. And have not yet been restored? Mr. McKoNE. We have not killed a hoof of any kind of stock since the fire. Mr. Day. Where is the nearest packing house of the Jacob Dold (3ompany? Mr. MoKoNE. We have one at Wichita, Kans., and one at Buffalo, N. Y. Mr. Day. Have you had anything to do with the securing of rates during the past six months on traffic from the Wichita house? Mr. McKoNE. No, sir. Mr. Day. Who has been dealing with that subject for your company? Mr. McKoNE. There is a man by the name of F. Miller. Mr. Day. What is his title? Mr. McKoNE. Well, he is salesman and general utility man. APPENDIX O. 259 Mr. Day. What is his first uamet Mr. McKoNE. Frank. Mr. Day. Where does he live? Mr. McKoNE. At Wichita. Mr. Day. Traffic destined for Atlantic seaports or points on or near the Atlantic coast, taking the New York, Philadelphia, or Boston rates, coming from your Wichita house, does that come by the Kansas City gateway ? Mr. McKoNE. Yes, sir; it would necessarily be obliged to come here or go through St. Joseph, or pass at points below here on the Missouri Pacific. Mr. Day. You know nothing regarding what rates have been secured on that traffic? Mr. McKoNE. No, sir. Mr. Day. You have had nothing whatever to do with the securing oi rates for the Jacob Dold Packing Company since when? Mr. McKoNE. Since September, 1899. Mr. Day. I think that is all I wish to ask Mr. McKone. There being no further questions, the witness was excused. F. M. Gault, being duly sworn, testified as follows: Mr. Day. What is your official relation to fast-freight lines or rail- roads, Mr. Gault? Mr. Gault. I am agent for the Lehigh and Wabash Despatch? Mr. Day. What roads — railroads — do the Lehigh and Wabash operate over? Mr. Gault. The Wabash and the Lehigh Valley. Mr. Day. What work have you performed for that line here daring the past six months? What has been the general scope of your work? Mr. Gault. Principally soliciting west-bound business. Mr. Day. West-bound business? Mr. Gault. Yes, sir; west bound. Mr. Day. Have you anything to do with the soliciting of packing- house products or dressed beef? Mr. Gault. No, sir. Mr. Day. Have you solicited any? Mr. Gault. No, sir. Mr. Day. Or quoted any rates on any? Mr. Gault. No, sir. Mr. Day. Do you quote rates out on east-bound traffic? Mr. Gault. Yes, sir; I do whenever I have inquiries or whenever I can locate east-bound business. Mr. Day. Have you bad any inquiries for rates on packing-house products or dressed beef within the last six months? Mr. Gault. No, sir; I have not. Mr. Day. Nor have you quoted any? Mr. Gault. No, sir. Mr. Day. From whom do you get your rates that you quote— the tariffs? Mr. Gault. From our manager's office, Mr. M. L. Dougherty, of Detroit. Mr. Day. He is manager of the Lehigh and Wabash Despatch? Mr. Gault. Yes, sir. Mr. Day. From any other do you get rates or tariffs? Mr. Gault, Occasionally from the Wabash Eailroad. 260 APPENDIX G, Mr. Day, Do you get any from the Central Freight Association or its chairman, Mr. Tucker? Mr. Gault. Xo, sir. Mr. Day. Or fi'om any other freight association t Mr. Gault. No, sir. Mr. Day. Have you seen that informal or unofficial tariff on export traffic which quotes a25-cent rate east of Chicago? Mr. Gault. No, sir. Mr. Day. Have you heard of it? Mr. Gault. I never heard of it. Mr. Day. Or a 29 cent rate from St. Louis or the Mississippi Eiver? Mr. Gault. No, sir. Mr. Day. On export traffic? Mr. Gault. No, sir. Commissioner Prouty. Does your line issue a bill of lading from here to New York? Mr. Gault. We would if we were called on. Commissioner Prouty. You would not ask anybody for the chance, but if they came and asked you to you would do it? Mr. Gault. If any shipment moved over our line and they wished to surrender the railroad bill of lading, we would issue our bill of lading in lieu of that. Commissioner Prouty. Have you done that? Mr. Gault. Not on packing house business. We have not handled any. Commissioner Clements. Why do you not get any of that business? Is it because yon do not want it, do not solicit it? Mr. Gault. That is it. The understanding is, and my instructions are, to look after west-bound business, and I am required fo be out of Kansas City two thirds of the time; consequently 1 could not keep in touch with the packers. Commissioner Prouty. Do you know who represents the Lehigh Valley and Wabash in soliciting packing-house freight here in Kansas City? Mr. Gault. They have not handled any and I do not know of any- body soliciting it. Commissioner Prouty. You mean the roads have not handled any; the Wabash and Lehigh Despatch, made up of the Lehigh and Wabash roads, have not handled any packing-house business since 1899? Mr. Gault. Yes, sir. Commissioner Clements. It does move over the Wabash road away from here, does it not? Mr. Gault. I have no knowledge of it. Commissioner Clements. Well, what is your general information? Mr. Gault. I would have no information except it moved over the Wabash and Lehigh Valley both. Commissioner Fifer. Have you any idea what roads carry the bulk of this packing-house business to the East? Mr. Gault. 1 have no information in regard to that. Commissioner Fifer. That is all. The witness was excused. W. N. Marshall, being duly sworn, testified as follows: Mr. Day. What is your occupation? Mr. Marshall. Agent for the Nickel Plate Line. Mr. Day. Any other line? APPENDIX a. 261 Mr. Marshall. No, sir. Mr. Day. Tliat is a fast freight Hue? Mr. Marshall. Yes, sir. Mr. Day. Over wLat railroads does the Nickel Plate Line operate? Mr. Marshall. Well, it operates over any line up to the Mississippi River that we can secure the business over; then it operates over the Big Four out of East St. Louis; it operates over the Lake Erie and West- ern out of Bloomington, and over the New York, Chicago and St. Louis out of Chicago. The New York, Chicago and St. Louis forms the line to Buffalo. East of Buffalo it operates over the West Shore; Boston and Maine; Ne-w Yorkj New Haven and Hartford, and the Philadelphia and Reading. Mr. Day. How long have you been agent for that Hue here? Mr. Marshall. About three and a half years. Mr. Day. During the past month have you secured any packing- house products? Mr. Marshall. I could not say as to the exact time. Mr. Day. Well, withiu the last two months? Mr. Marshall. Yes,sir; within the last two months we have. Mr. Day. Have you solicited the traffic? Mr. Marshall. Yes, sir. Mr. Day. How many people have you in your employ? Mr. Marshall. I have a clerk and stenographer. Mr. Day, What are the functions of the clerk? Mr. Marshall. Well, he does the clerical work of the office. ]\lr. Day. You quote the rates? Mr. Marshall. Yes, sir. ]Mr. Day. From what source do you get your rates? Mr. Marshall. From the tariffs. Mr. Day. Who furnishes you with the tariffs? Mr. Marshall. Well, I use the different rates of the Western lines principally on through business. They publish tariffs to the Missis- sippi River and I use them. Mr. Day. From what source do you get them? Mr. Marshall. We secure them from the agents of the Western roads. Mr. Day. Did you hear anything of this tariff" I have mentioned here; this unofficial tariff of 29 cents from the Mississippi River to New York and 25 cents east of Chicago? Mr. Marshall. I have not heard of any tariff. Mr. Day. Or rate? Mr. Marshall. I have heard of the rate. Mr. Day. Have you seen a copy of the paper? Mr. Marshall. No, sir; I have not. There is not any tariff. Mr. Day. I am speaking of a paper, an authorization. Mr. Marshall. Yes, sir; I have. Mr. Day. Where did you get that? Mr. Marshall. I received notice from some official of the Lake Erie and Western road stating that after the 1st of March or 10th of March they would not accept anything less than their regular proportion of a minimum rate of 29 cents from the Mississippi River on export provi- sions. Mr. Day. What was the published tariff from the Mississippi River to New York at that time? Mr. Marshall. Thirty five cents on domestic provisions. There is none issued on exi)ort provisions. 262 APPENDIX O. Mr. Day. Did you carry any export traffic the last month? Mr. Marshall. Yes, sir — well, I would not say as to the last month. You asked a while ago as to the last two months. Mr. Day. Well, the last two months? Mr. Marshall. Yes, sir. Mr. Day. At what rate did you take that! Mr. Marshall. I took that, I think, at 27^ cents from the Mississippi Eiver. Mr, Day. Did you carry any domestic traffic at a lower rate than the published rate'? Mr. Marshall. Ko, sir. Mr. Day. Did you carry any domestic traffic at allt Mr. Marshall. No, sir. Mr. Day. How do you determiue when traffic is offered you for export that it is in fact exjjort traffic? Mr. Marshall. We require them to furnish us a bill of lading from the Western line showing that it is for export. It contains the export marks and states what steamship line it goes by and what port it is cleared from and the date generally of the sailing of that steamer. Mr. Day. That is shown in the bill of lading issued by the initial line? Mr. Marshall. Yes, sir. Mr. Day. You take up that bill of lading and issue a new onet Mr. Marshall. Yes, sir. Mr. Day. And you issue a new bill of lading to a foreign port? Mr. Marshall. Yes, sir. Mr. Day. And the rate you made up of 27^ cents from the Mississippi Eiver ])lus the ocean rate to the point of destination? Mr, Marshall. And plus the rate west of the Mississippi River. Mr. Day. Now, what route did that traffic take out of here? Mr. Marshall. That went over the O., K. C. & B. from here to Quincy, and at Quincy it took the 0., B. & Q. to Peoria; from Peoria it went over the Lake Erie and Western to Fostoria, and from h'ostoria it went over the Nickel Plate to Buffalo; from Buffalo to Ivotterdam Junction over theW^est Shore, and then over the Boston and Maine. Mr. Day. How much was there of that traffic? Mr. Marshall. About fourteen cars. Mr. Day. Whose traffic was it? Mr. Marshall, Fowler's. Mr. Day. Who did you negotiate with representing Fowler for that traffic? Mr. Marshall. I did not negotiate with Fowler at all. I negotiated with the Western road. Mr. Day. Who did you quote the rate to? Mr. Marshall. I quoted the rate to Mr. Moore. Mr. Day. Who is he? Mr. Marshall. Assistant general freight agent. Mr. Day. Of the Kansas City connecting road? Mr. Marshall. Yes, sir. Mr. Day. What rate was quoted up to the Mississippi River in that deal? Mr. Marshall. I could not tell you. Mr. Day. Mr. Moore negotiated with the packer? Mr. Marshall. For a through rate. Mr. Day. And you negotiated with Mr. Moore for a rate east of the Mississippi River? APPENDIX G. 263 Mr. Marshall. Tes, sir. Mr. Day. Now, who were the charges paid tot Mr. Marshall. They were paid to him. Mr. Day. Was the traftic prepaid all the way through? Mr. Marshall. I could not say as to that. Mr. Day. What was the agreement? Mr. Marshall. I will take that back. The inland charges were paid on some of it, and I think they were paid all the way through on some of the other stuff. Mr. Day. And prepaid here? Mr. Marshall. Yes, sir; they were prepaid to Mr. Moore, and he prepaid to me east of the Mississippi Eiver. Mr. Day. Well, are there any other instances that you remember of like character or similar character within the past six months? Mr. Marshall. Well, there may have been and probably were, but I can not just remember any specific case just now. Mr. Day. Generally that was the form of procedure? Mr. Marshall. Yes, sir; export rates have never been maintained out of Kansas City on provisions and never will be. They can not be maintained. There is no system by which you can make an inflexible rate on export provisions out of Kansas City. It can not be done. Commissioner Prouty. Why not? Mr. Marshall. Well, we have to meet the competition of New Orleans, Savannah, Charleston, and all those ports; Newport News, Norfolk, and everywhere else, and if we want to get any share of the business we have to meet the rate made by those ports. Commissioner Prouty. If you make an inflexible rail rate to all ports, would not Boston and New York take their share of that busi- ness? Mr. Marshall. No, sir; they would not get it. Commissioner Prouty. The ships there are not anxious enough for that kind of traflic to take it? Mr. Marshall. The inland rate cuts the figure. Commissioner Prouty. Suppose the inland rate was absolutely fixed ? Mr. Marshall. If you fix the same inland rate to New Orleans and the oceao rate was the same, it could be maintained. Commissioner Prouty. But the ocean rate is not the same. Sup- pose you gentlemen maintain an inflexible rate, would not ocean com petition then divide up this traffic in as equitable a way as railroad competition does now? Mr. Marshall. I do not think it would. Commissioner Prouty. Have you any reason to suppose it would not? Mr. Marshall. Yes, sir. Commissioner Prouty. State what it is. Mr, Marshall. Well, there are steamers that go out of New Orleans and the Southern ports with light tonnage. There are more tramp steamers coming to those ports than the Northern ports, and they will take business for almost anything. I have heard of a rate, and have reason to suppose it was made, on which some export business moved from Kansas City to Hamburg, and that business moved at a lower rate through from Kansas City through to Hamburg than the inland rate from Kansas City to Baltimore. Commissioner Yeomans. On domestic! Mr. Marshall. Yes, sir. 264 APPENDIX a. Commissioner Prouty. Now, the testimony in other cases has been that the cheapest rates have been secured by regular line steamers, not tramp steamers. Mr. Marshall. That is the case where you have no tramp steamers, but I have had some experience with export business from Fernaudina, Fla., and Savannah, Ga., in the phosphate business. That is aside from packing-house products, but the same rule will govern. I have knowu of vessels to come to Fernaudina partly loaded and go to Savan- nah and take turpentine, for instance, for ballast. Commissioner Prouty. The statement you make is often made, and 1 wanted to get at why it was not possible to maintain a fixed inland rate and let the ocean competition divide the traffic. Now you seek and virtually engage the ocean carrier. Mr. Marshall. We do to a certain extent, but very frequently the ocean steamers make a lower rate. I have known ocean steamship companies to reduce their rate on exportpacking house products where we would ask special quotations. For instance, I was accustomed to getting a line of rates from our foreign freight agents from New York and Boston every Saturday or Monday morning, and I would furnish them to packers. These rates were made for a certain clearance from the seaboard and I would notify the packers of the rates and the clear- ance. They would probably come back and say, " Here, I can use" — if they were making a 20 shilling rate to Christiania — they would say, "I can use a 17.6 rate if you can get it." I would offer the steamship com- pany the business at that rate and they would accept it. That is fre- quently done. Commissioner Prouty. Do you negotiate mostly with the packers or the railroads that lead out of Kansas City? Mr. Marshall. Generally the packers. Commissioner Prouty. Do you have any line out of Kansas City over which you oj^erate? Mr. Marshall, No; any of them. Commissioner Prouty, If a packer told you what kind of a rate you could ship on, you would go around to these men at Kansas City and try to get a combination to move the stuff? Is that right? Mr. Marshall. No; I have at times asked a Western road what kind of a rate they would make on so many cars, but not frequently. Commissioner Prouty. Do you understand that the rates from here to the Mississippi Kiver have been maintained? Mr, Marshall. I understand they have been. Commissioner Prouty. And what cutting has been done has been done east of the Mississippi River? Mr. Marshall. Yes, sir. Mr. Day. What evidence have you that this traffic billed for export is not diverted at the coast for Atlantic seaboard use? Mr. Marshall. Simply the fact that the bill of lading — the initial line bill of lading — I issue the export bill on it and send to our foreign freight agent, together with a manifest of the slutt" to the steamship company. That is as far as my knowledge of the business goes. Mr. Day. Have you any reason to suppose that in instances it is diverted at the coast and not exported in fact? Mr. Marshall. No, I have not. I never knew a case of that kind. Mr. Day, Take this instance you have given here of 14 cars, which 1 understand you to say is an example of the way the business is transacted for export Commissioner Clements. Was that all for export? A1>PENDIX Q. 265 Mr. Marshall. Yes, sir. Mr. Day. Was the rate named in the bill which you issued in taking up the local billing? Mr. Marshall. In the export bill of lading? Mr. Day. Yes. Mr. Marshall. In some cases the ocean rate was inserted in the bill of lading and the inland charges prepaid, marked prepaid on that bill. Mr. Day. And in other instances? Mr. Marshall. In the other instances all charges were prepaid, both the inland and the ocean. Commissioner Clements. Why was that difference made? Why was some prepaid to the ocean and some all the way? Mr. Marshall. Well, that is something I know nothing about, but I presume it is caused by the fact that the packer sells the stuff at the seaboard. Commissioner Clements. But this was all for export. Mr. Marshall. Yes, sir; he sells it delivered at the seaboard, and the consignee accepts it subject to ocean charges. Commissioner Clements. What is there to prevent him selling it to somebody at the seaboard and not have it go farther, and not pay any more? Mr. Marshall. Well, I do not know that there is anything to pre- vent him if he wants to do it and railway companies will allow him, but I have never had an instance arise where we have not got the clearance advices from the seaboard. We always get from the seaboard agents telegraphic advices, confirmed by mail, that these different shipments on which our bill of lading is out have cleared on certain steamers. Commissioner Clements. Do you not think it likely where railroads pay rebates to get shipments and where shippers are willing to accept them that both parties would be willing to bill at the foreign rate to seaboard and then take it out there? Mr. Marshall. No; I do not. Commissioner Clements. Do you not think that the same set of fellows that would do one thing would do the other"? Mr. Marshall. I do not think the railroads would do business that way. If they want to cut a rate, they will cut it outright, and will not let all the people in creation know about it. Commissioner Clements. Well, if they did not want everybody to know it, would not that be as convenient a way as any? Mr. Marshall. Well, it could be done that way, but I know of no instance where it has been done. Commissioner Clements. Now, as a matter of history — you have been in the business at Fernandina and other places, and doubtless know the ways of shippers, and railroads as well — it is true that in times past rates have been very much demoralized, traffic moving at less than the published rates. Mr. Marshall. I have heard that. Commissioner Clements. Did you not believe it? Were you not satisfied that it was so? Mr. Marshall. It was on export, but I never knew the time that we ever had cases up where we had to pay on domestic business. Commissioner Clements. I am not asking now for particular in- stances of your traffic, but in regard to the general situation in regard to domestic as well as foreign. Has there not been at times in the last 266 APPENDIX a. few years a period when it was generally known to a moral certainty that rates were not being maintained? Mr. Marshall. Oh, yes, sir. Commissiouer Clements. So there is no mistaking a couditiou of tbat sort by a practical railroad man such as you when it comes about. You always know when that condition is prevailing? Mr. Marshall. Well, there are certain people in the railroad world who have an idea that rates are always demoralized. They are not able to get the business that they think they ought to get against com- petitors, and are alwaj^s accusing them of cutting rates. That does not follow that such a situation exists. This man may not be as clever, may not be as well liked, may not have as many cigars to bnru up as the other man, and may not get the business. Commissioner Clements. All those things count. One is a good politician and the other is not. Still it is a fact that a practical rail- road man in the business, hustling for all the business he can get, knows when a condition of that sort exists. Mr. ]\Iarshall. Yes, sir; he should if he is ui) to his business. Commissioner Clements. Before it goes on long. Mr. Marshall. Yes, sir; if he knows his business he ought to determine. Commissioner Clejnients. You have been through a period of that sort here, have you not? Mr. Marshall. Yes, sir; I have. Commissioner Clements. You have seen it when it got back for a time to where everybody was trying to maintain the rate? Mr. Marshall. Yes, sir. Commissioner Clements. Well, now, what has been the condition the last three or four mouths, according to your best judgment and knowledge of the situation ? Mr. Marshall. Well, the situation on export business Commissioner Clements. I am not asking you for particular detailed facts, but how is the situation in general? Mr. Marshall. Well, Mr. Clements, we are not in the market for domestic business. We do not want it. I have been instructed not to solicit it at tariff rates, so I am not in a position to say what the situa- tion is as to that. We have also been practically out of the market for months for any provision business. Commissioner Clements. You mean dressed beef? Mr. Marshall. Yes, sir; we do not want dressed beef or packing- house products; have not wanted them for months. Our connections east have been blocked. The Fitchbnrg road has been blocked and traffic I had secured had to be diverted to other lines — has gone over the Boston and Albany instead of the P'itchburg. The West Shore and New York Central have been blocked with grain and flour from the Northwest for months, and they did not want this business, and I have not been in a position to go after it at all or secure it; conse- quently I am not in a i^osition to tell you what the situation on jjacking- house business has been since last October. Right at the present time my instructions are to take no packing-house products at all. We do not want them. As far as the Nickel Plate road is concerned — Judge Day spoke about that 29-cent rate from the Mississippi River — as far as the Nickel Plate is concerned, they are not a party to that. They will not accept this 29J cents from the Mississippi River. Commissioner Clements. What business are you here for? What business do you solicit? APPENDIX G. 267 Mr. Marshall. I am not soliciting much of anything, on account of this blockade, but I go after everything iu sight when I am prepared to handle it. Some export business that went out of here in August did not reach the seaboard until February. That will give you an idea of what kind of condition they were in. Commissioner Clements. That is all. There being no further questions the witness was excused. Commissioner Clements. We will suspend until 2 o'clock. At 12.35 o'clock p. m. the Commission took a recess until 2 o'clock p. m. AFTER RECESS. 2 o'clock p. M. Commissioner Clements. Who will you call next, Mr. Day? Mr. Day. Mr. H. C. Golden. H. C. Golden, being duly sworn, testified as follows: Mr. Day. Mr. Golden, what fast freight line are you agent for here? Mr. Golden. The Star Union. Mr. Day. How long have you been connected with the Star Union ? Mr. Golden. Some seventeen years. Mr. Day. How long have you been here? Mr. Golden. Four years. Mr. Day. Eegarding packing-house products and dressed beef, has your line been carrying these products? Mr. Golden. Yes, sir. Mr. Day. Within the last six months? Mr. Golden. Yes, sir. Mr. Day. For domestic or export, or both ? Mr. Golden. Principally domestic. Mr. Day. What road does your line operate overt Mr. Golden. Over the Pennsylvania system. Mr. Day. How from here? Mr. Golden. Over any of the lines from here. Mr. Day. And the Pennsylvania by way of Chicago or St. Louis? Mr. Golden. Yes, sir. Mr. Day. At either Chicago or St. Louis it meets the Pennsylvania lines? Mr. Golden. Yes, sir. Mr. Day. At what rate during the months of eJanuary and February did you take traffic to New York from here — tbat traffic named? Mr. Golden. Domestic? Mr. Day. Domestic; yes, sir; dressed beef or packing-house products. Mr. Golden. At the tariff. Mr. Day. Have you made any concessions from the tariff? Mr. Golden. Not on domestic business. Mr. Day. You maintained the tariff rates? Mr. Golden. Yes, sir. Mr. Day. Now, on export business how have you made up your rates ? Mr. Golden. We have taken some export business on a basis of the through rate named from the Mississippi Eiver, including the ocean rate. Mr. Day. What do you mean by the through rate from the Mississippi River? Mr. Golden. The rate from the Mississippi River, including the ocean rate, would make the through rate. 268 APPENDIX Q. Mr. Day. What was the rail rate from the Mississippi River to tide water which you collected for the inland haul? Mr. Golden. Twenty nine cents. Mr. Day. The published tariff rate at that time was 35 cents, was it not? Mr. Golden. Yes, sir. Mr. Day. Where did you get your instructions to carry export from the Mississippi Kiver at the 29-cent rate? Mr. Golden. There were no specific instructions. Mr. Day. Your authority, then ? Mr. Golden. In Chicago the matter was talked over among our oflicials and I was asked wliat was the going rate, I figured it to be about 29 cents and I took the property on that rate. There were no written instructions to that effect. Mr. Day. You had no written authority or no written consent I Mr. Golden. No, sir. Mr. Day. Or paper or statement? Mr. Golden. No, sir. Mr. Day. What was the rate east of Chicago? Mr. Golden. Our proportion of the through rate? Mr. Day. Of which rate? Mr. Golden. Of the 29 cents. Mr. Day. Which was about what — 25? Mr. Golden. Eighty per cent, first deducting the terminals of 3 cents. Mr. Day. At Chicago or at New York? Mr. Golden. At New York. Mr. Day. And you took your export traffic from any port on the same basis— Boston 29? Mr. Golden. I did not take any to Boston. Mr. Day. What was the rate to Philadelphia? Mr. Golden. Twenty-seven. Mr. Day. Just the usual differential? Mr. Golden. Yes, sir; the differential. Mr. Day. And Baltimore? Mr. Golden. I did not take any to Baltimore. It would have been 26 cents. Mr. Day. Three cents differential? Mr. Golden. Yes, sir. Mr. Day. What is the rate now on export that you are contracting now to carry it for? Mr. Golden. I am not contracting. I can not get it. Mr. Day. Do you seek to get it at that rate? Mr. Golden. I have been; yes, sir. Mr. Day. And do not get any? Mr. Golden. No, sir. Mr. Day. Do you get any domestic? Mr. Golden. I get domestic right along. Mr. Day. That pays the full tariff" rate? Mr. Golden. The full tariff" rate. Commissioner Prouty. By what line is the export business going now ? Mr. Golden. I do not know; I can not say. Commissioner Prot'TY. By what lines does your traffic leave Kansas City? Mr. Golden. It left by different lines. APPENDIX a. 269 Commissioner Prouty. Do you know what the rate is between here and the Mississippi River? Mr. Golden. I do not. Commissioner Prouty. Did you make that contract with the packing- house shippers'? Mr. Golden. Yes, sir. Commissioner Prouty. Were you not obliged to name him a rate irom Kansas City ? Mr. Golden. Ko, sir. Commissioner Prouty. You named a rate from the Mississippi River and he took care of his own rate to the Mississippi River? Mr. Golden. Yes, sir. Commissioner Fifer. Does your company do business in Kansas City — that is, ship from heref Mr. Golden. No, sirj we have no line entering Kansas City — only Chicago and St. Louis. Mr. Day. What lines out of Kansas City, what initial line do you usually employ? Mr. Golden. We have no choice. Mr. Day. What line does the bulk of your traffic go out over? What line has it gone over during the last mouth or two months? Mr. Golden. I can not say which gets the most. It goes over all lines. Mr. Day. How was it prior to the 1st of January? What was the rate prior to the 1st of January? Mr. Golden. The published tariff rate. Mr. Day. On domestic? Mr. Golden. Yes, sir. Mr. Day. What was it on export? Mr. Golden. The same as far as I know. Mr. Day. There were no concessions made prior to January 1? Mr. Golden. No, sir. Commissioner Prouty. You are talking of the rate from the Missis- sippi River east altogether? Mr. Golden. Yes, sir. Commissioner Prouty. That is the only rate you know anything about? Mr. Golden. That is the only rate. Mr. Day. You spoke of some contracts you made for 29 cents east of the Mississippi River for export. How recently did you make con tracts of that kind? Mr. Golden. About the middle of February. Mr. Day. flow much traffic did you get? Mr. Golden. Simply four cars. Mr. Day. Whose traffic was it? Mr. Golden. Ruddy Brothers. Mr. Day. And prior to that? Mr. Golden. I had none. Mr. Day. That is, since the 1st of January! Mr. Golden. Yes, sir. Mr. Day. You had no export since the 1st of January? Mr. Golden. That is since January 1. The product I am speaking of is since the 1st of January. Mr. Day. Did you have any other since January 1 ? Mr. Golden. No, sir. Mr. Day. Did you have any prior to that? 270 APPENDIX G. Mr. Golden. I^o, sir. Mr. Day. You are carrying domestic traffic right along I Mr. Golden. Yes, sir. Mr. Day. That all goes at the published rate? Mr. Golden. The established rate. Mr. Day. And no concessions are made from the ratet Mr. Golden. Under no circumstances. Commissioner Prouty. Do you carry that domestic traffic to the city of Kew Y^ork? Mr. Golden. Yes, sir. Commissioner Prouty. And to Philadelphia? Mr. Golden. Yes, sir. Commissioner Prouty. And Baltimore? Mr. Golden. Yes, sir. Commissioner Clements. What is the rate now on dressed beef? Mr. Golden. Sixty eight and one-half cents from Kansas City to New York. Commissioner Clements. And packing-house products? Mr. Golden. Fifty-three and a half cents. Commissioner Clements. How long has that been the rate? Mr. Golden. I can not remember distinctly, but it is several years. Commissioner Clements. For several years there has been no change in the published rate? Mr. Golden. No, sir; not to my knowledge. Commissioner Clements. During that time that has been the rate. You have been there how long? Mr. Golden. Four years. Commissioner Clements. Has there been a general demoralization or departure from those rates at some period of time? Mr. Golden. Not to my knowledge. Commissioner Clements. Have you had a general impression to that effect without having absolute knowledge? Mr. Golden. From common report I could say that I hear of less rates being named on export. Commissioner Clements. Well, leaving the export out of the present? Mr. Golden. No, sir ; I do not. Commissioner Clements. Is it your belief that during three or four years that you have been here the published rates have been adhered to and collected and retained by the carriers during all this period? Mr. Golden. On domestic? Commissioner Clements. On domestic. Mr. Golden. Yes, sir; so far as I know. Commissioner Clements. Well, so far as you believe? Do you believe it? Mr. Golden. Yes, sir; I believe it has. Commissioner Clements. Is there any arrangement, or contract, or understanding, or any sort of device between the carriers, the different roads, and the packers, or either, or part of either class, whereby the business from Kansas City in these products is distributed or appor- tioned among the roads? Mr. Golden. Not to my knowledge. Commissioner Fifer. Have there been any rebates that you know of or have heard of? Mr. Golden. I have never paid any, and I do not know of any being paid to my knowledge. Of course, I have nothing to do with the west- ern lines. APPENDIX Q. 271 Commissioner Clements. Aud there is no apportionment of the traffic? Mr. Golden. Not to my knowledge. Commissioner Clements. Does the road yon represent feel at liberty to take all the business it can get of this kind? Mr. Golden. Yes, sir. Commissioner Clements. And carry it and retain all they get for it? Mr. Golden. Yes, sir. Commissioner Clements. Without any adjustment or division of the proceeds? Mr. Golden. Yes, sir. Commissioner Clements. That is all. There being no further questions, the witness was excused. J. J. Collister, being duly sworn, testified as follows: Mr. Day. What fast freight line are you agent for? Mr. Collister. 1 am agent for the Continental Line and Central States Despatch. Mr. Day. Over what roads does your line operate? Mr. Collister. Over the Baltimore and Ohio Southwestern, the Baltimore and Ohio, the Central Railroad of New Jersey, the Philadel- phia and Reading, and the New York, New Haven and Hartford and their connections — connections of the Baltimore and' Ohio Railroad. Mr. Day. Have you participated in the packing-house products traffic out of Kansas City the last six months? Mr. Collister. Not in the last six months. Mr. Day. Neither export nor domestic? Mr. Collister. Oh, yes; we get domestic business right along. Mr. Day. In the domestic traffic, have you contracted for any at less than the published rates? Mr. Collister. No, sir. Mr. Day. Have you carried any at less than the published rates? Mr. Collister. Not at all. Mr. Day. You have maintained the jjublished tariffs on all the traffic of that character you have carried? Mr. Collister. Yes, sir. Mr. Day. How about dressed beef? Mr. Collister. The same thing applies. Mr. Day. You charged the published tariff rates and have adhered to them? Mr. Collister. Yes, sir. Mr. Day. There have been no rebates? Mr. Collister. Not at all. Mr. Day. Have you participated in any export tariff on beef? Mr. Cqllister, Not on beef. Mr. Day. You carried in the last four, five, or six months no exports? Mr. Collister. No export provisions. Commissioner Prouty. Why is that? Is there being any of that stuff" exported from Kansas City at the present time? Mr. Collister. I think there is. Commissioner Prouty. Do you know by what lines it moves? Mr. Collister. Well, I have an idea. Of course, we learn from time to time approximately what the movement is, and what lines handle the business, but I can not tell offhand now what lines they are. Commissioner Prouty. How many cars are sent out a week on the average, for export? Mr. COLUSTEK. Well, I would approximate it at 100 cars. 272 APPENDIX G. Commissioner Fiier. For export, you mean! Mr. (JOLLISTBR. Yes, sir. Mr. Day. You do carry domestic packinghouse products'? Mr. CoLLisTER. Oh, yes; our terminal advantages, etc., attract very much of that tiaffic. Mr. Day. I think that is all, your honors, that I wish to ask Mr. Collister. Commissioner Clements. How long have you been in the business? Mr. Collister. Two years with this company. Commissioner Clements. Have you ever seen anything that indi- cated that the established rates, the published rates, were being departed from ? Mr. Collister. Yes, sir. Commissioner Clements. During what period? Mr. Collister. Do you refer now to export or domestic? Commissioner Clements. Well, either. I believe there has been no published rate on exi)ort. That is your idea, is it? Mr. Collister. My idea. Commissioner Clements. Then, the only published rate is the domes- tic. Now, during the time you have been here at what period and dur- ing what period have you seen evidence of a de])arture from the rate, cutting of the rate, rebates, or anything of that character? Mr. Collister. You mean on packing-house products? Commissioner Clements. Packing-house products and dressed beef, or either. Mr. Collister. Well, it would be rather hard to answer that. We have felt at times tliat the rates have been manipulated, but we have no absolute positive knowledge of it. Commissioner Clements. That is the reason I do not ask as to par- ticular instances, because it seems impossible to get those, and we can see how difficult it is for a competitor to get at those details, but we are often told by those who are unable to give specific details of trans- actions themselves that they see the outcroppings and evidences which satisfy them to a moral certainty that something of that kind is being done. Have you seen any of those signs? Mr. Collister. I think I have; that is, I felt that I have. Commissioner Clements. How is it now? Mr. Collister. It is all right, I think. I am almost certain that the tariff rate is being maintained at the present time. Commissioner Clements. That is your belief about it from all the circumstances and things that you see? Mr. Collister. Yes, sir. Commissioner Clements. How far now do you go back with that statement? Mr. Collister. Well, I do not know. Commissioner Clements. A week? Mr. Collister. Yes, sir; you could go back a week sure. Commissioner Clements. A month? Mr. Collister. Yes, sir; I think you could go back to the first of the year — back to the first of the year. Commissioner Clements. How about the latter part of last year? Mr. Collister. I am not so sure about that. Commissioner Prouty. You generally begin over again the first of every year? Mr. Collister. I think that is the general plan. Commissioner Clements. Can you give us some idea — this is a gen- APPENDIX G. 273 eral inquiry for information — can you tell us what it is that has made these impressions on you? When the rates were disorganized and demoralized, what made you think so; what did you see that made you think so? Mr. OoLLiSTER. Principally gossip. Commissioner Clements. Well, there is gossip now, is there not — what we would call gossip or a report of cut rates? Mr. CoLLisTER. Yes, sir; I do uot think there is any just now on domestic traflSc. Commissioner Clements. There are charges of that sort, are there not? Mr. CoLLiSTER. I do not believe so. 1 think that in making these reports domestic and export business is confounded. A man says the export packing-house products rate is cut, say G cents a 100 pounds, and it is assumed that the domestic rate is also manipulated to the extent of the inland proportion of the export rate. Commissioner Clements. Is there any difficulty in the way of par- ties billing it as export and shipping it for export and then using it for domestic purposes ? Mr. CoLLiSTER. There certainly is, ye?, sir. There is a difficulty. They can not do it for the reason that the product is billed out for export It shows a foreign destination. It shows a steamship line to which it is consigned. The export papers are made up, and export bill of lading issued and export manifests are made out. They are sent to the foreign freight agent at the seaboard and an agent is advised when that traffic clears at the seaboard and he knows to what steam- ship line it is delivered and he absolutely knows that it went for export. Commissioner Clements. Well, if he wanted to carry domestic freight and the road wanted to carry it and cooperated, it could be diverted there and delivered for domestic use, could it not? Mr. COLLISTER. There are so many roads in interest that I doubt very much whether they would stand for any connivance of that sort. Commissioner Clements. You thiuk your competitors Mr, COLLISTER. No; I mean the roads in interest. Commissioner Clements. You mean the lines that make up the through line? Mr. COLLISTER. The lines that make up the through line. Commissioner Clements. Well, these lines that do make up the through line from time to time drop into the habit of paying rebates, do they not? Mr. COLLISTER. I believe they do. They have in the past. Commissioner Clements. Well, would not they just as soon evade the rate by this other means as to pay a rebate? Mr. COLLISTER. I do not think so. Commissioner Clements. Why? Mr. COLLISTER. Well, it would be very hard to cover up in the first place. Commissioner Clements. So that it is your belief that foreign ship- ments are not treated that way? Mr. COLLISTER. I think that all the stuff billed showing a foreign destination, all export traffic that goes forward from here showing a foreign destination, ultimately goes to that destination if the export papers are made out. Commissioner Clements. Well, are they made out in all cases? Mr. COLLISTER. So far as I know; yes, sir. 74lA— 05 18 274 APPENDIX a. Commissioner Clements. So far as you believe where you have no knowledge'? Mr. CoLLiSTER. I have no knowledge to the contrary. Commissioner Clements. I will ask this question: Is there any arrangement, understanding, or practice whereby outgoing freight from Kansas City of this kind is apportioned between the different roads or lines? Mr. CoLLiSTEB. You mean by agreements'? Commissioner Clements. By agreement, understanding, practice, or any other way. Mr. CoLLisTER. Why, it is all apportioned. Commissioner Clements. How? Mr. CoLLiSTER. By reason of solicitation. Commissioner Clements. Is there any jiractice, by agreement or otherwise, whereby it is understood or worked out that this line shall have a certain proportion of the business, and so on, or do you get a certain proportion of the business? Mr. Collister. Well, not that I know of No. Commissioner Clements. Do you have any reason to believe there is such? Mr. Collister. I have not. Commissioner Clements. How long have the rates been the same as they are now? Mr. Collister. The published rates on domestic business? Commissioner Clements. Yes, sir. Mr. Collister. Well, they have been that way for years, with some few changes that were brought about by competition. The basis has been 30 cents from Chicago to New York for ])ossibly fifteen years, with the exception of times when a less basis would be necessary by reason of competition and a tariff issued, and subsequently they would come back to this same basis again. The recognized basis on packing-house products for years has been the fifth-class rate, which is 30 cents from Chicago to New York. Commissioner Clements. But there is nothing in practice or agree ment or otherwise that interferes with every single road here soliciting, securing, and carrying all the traffic it can get from any of these shippers and retaining without accounting to any of the others for any portion of it? Mr. Collister. Not a thing I know of. Commissioner Clements. You have no reason to believe there is such a thing? Mr. Collister. No reason. Commissioner Clements. Do not some of these tarifi's have on them a statement that the rates therein imblished apply on domestic as well as on export? Mr. Collister. Well, I am not sure about that, but I do not believe they show that. Commissioner Clements. Or maybe it is put the other way — on for- eign as well as domestic. Mr. Collister. I was not evading the question. Commissioner Clements. I did not mean that you were. I was not sure which way it was stated. Mr. Collister. I have seen tariffs — I do not remember whether they were provision tariffs or not — that would make a statement that these rates will apply as the proportion of the through rate on export as well as domestic business, or there has been a specific tariff issued which APPENDIX G. 275 sliows that this tarift'will apply ouly on export business as a proportion of the through rate. Commissioner Prouty. Your present understanding is that you have a right to make any rate on export business irrespective of the pub- lished tariff; that you are under no obligation to adhere to any pub- lished tarift? Mr. CoLLiSTER. No; I do not understand that. I am governed very largely by the desire or wish of my superior officers. Commissioner Prouty. Your instructions, then, from your superior officers are, that on export business you may make a rate without ref- erence to the published tariff? Mr. CoLLiSTER. No, sir; they might instruct me to the effect that on export business they will accept down to a certain minimum. Commissioner Prouty. In point of fact, you do not regard the pub- lished tariff* in making an exijort rate? Mr. COLLISTER. No, sir. Commissioner Prouty. How long is it since you have gone on that theory ? Mr. COLLISTER. Well, since the 1st of January, although I have car- ried no business. Commissioner Prouty. Previous to the 1st of January your instruc- tions were to charge the domestic rate as your part of the through export rate, were they? Mr. COLLISTER. Not at all times. Commissioner Prouty. That is all. Commissioner Fifer. It has been stated here by some witnesses that a regular, even rate could be maintained on export goods. What is your view about that? Mr. COLLISTER. I do not believe it can be unless you get the basis down very low. On packing-house products, for instance, the rate from Kansas City to Gulf ports is 27 cents per hundred pounds. Now, competition would compel a lower rate than o3.^ cents from Kansas City to New York if the product was forwarded through that port. Commissioner Prouty. Well, suppose it did. The question is why not publish a lower export rate. Mr. COLLISTER. I believe when you do that it will result in very serious manii)ulations. I believe if a published rate was put into effect of 27 cents to New York tbe product could be billed to New York for export at 27 cents, and be then and there diverted for domestic purposes. Commissioner Fifer. Is there any common understanding between the railroads reaching tide water as to what this rate shall be for export goods! Mr. Oollister. At the present time; yes, sir. Commissioner Clements. Did you not give some forcible reasons why they could not be shipped out for foreign and diverted to domestic use ? Mr. COLLISTER. I qualified by saying when a through export bill of lading had been issued. They can not deixjat that now because we nq,me a through rate. Commissioner Clements. Suppose the rates were published, what would be the difference between the situation then and now? It would make it easy to divert for domestic purposes under the changed condi- tions and impossible now? Mr. COLLISTER. If you had a tariff issued to New York, for instance, tor export, so reading, I do not believe you could decline to accept a 276 APPENDIX O. - man'3 product if it was billed to New York for export and he would say I have my own ocean engagement and my agent at New York will take charge of this jjroduct and bill it for export. Commissioner Fifer. That would terminate his contract? Mr. CoLLiSTER. I think so. Commissioner Clements. Why could not that be done nowt Mr. CoLLiSTER. For the reason that we name the through rate to Liverpool or foreign destination, whatever it may be. Commissioner Clements. Do you know that all roads do that on all shipments? Mr. COLLISTER. I believe so. They may not name a through rate, but the i)acker furnishes them with an ocean contract and they make complete ocean papers. Commissioner Clements. There is not any fact I can see, however, why it should not be just as easy now to do that as it would be in case of publishing the rates, as suggested a moment ago, if they were dis- posed to do it. Mr. COLLISTER. Well, I just expressed my own views on the subject. Commissioner Clements. Do I understand you to say that it would be any more difficult in the one case than in the other if they were inclined to do it? Mr. COLLISTER. I think so. I believe if you had a published tariff in effect in New York on business for export that it would by some means be applied on domestic business. Commissioner Clements. I still can not see why that can not be done now just as easily as if you had that rate. Mr. COLLISTER. You would not publish a through rate to Liverpool. If you came to an agreement to make a less rate to tide water on export business than on domestic business you would not publish a through rate to Liverpool or destination, because the ocean rates change from time to time. You would publish it to tide water, and your tariff would read "New York, for export," and a man would hand you a lot of freight billed to New York for export. I do not believe that under the law you could decline to accept it under the tariff you have in effect. Commissioner Clements. You do not think any business is handled that way now shipped to New York for export ? Mr. COLLISTER. I do not know of any that is not actual export business. Commissioner Fifer. And a through contract for the foreign desti- nation ? Mr. COLLISTER. Yes, sir; all the business I have handled has been of that class. Mr. Day. 1 neglected to ask you — I do not recall that I asked you — if you had received any authorization to apply this 29-cent rate on export traffic east of the river? Mr. COLLISTER. Yes, sir; I received it. Mr. Day. From whom did you get that? Mr. COLLISTER. Well, it came to me in a regular file of tiariffs that come in from time to time — just a notice that the basis on export pro- visions, the minimum basis, would be 29 cents from the Mississippi River and 25 cents from Chicago to New York. Mr. Day. Was it signed by anybody ? Mr. COLLISTER. No, sir. Mr. Day. Where did it come from? Mr. COLLISTER. I believe it came from Chicago. Mr. Day. From Mr. Tucker? APPENDIX a. 277 Mr. CoLLiSTER. I would not say. I am not certain that it came from Mr. 1'iicker. Mr. Day. Well, what is your belief? Mr. CoLLiSTER. Well, I believe it is an agreed rate in Chicago. Mr. Day. Do you think it came from Mr. Tucker? Mr. COLLISTER. I do not know that. Mr. Day. What do you thiuk? What is your belief? Mr. COLLISTER. Well, 1 do not know whether I care to express a belief. Mr. Day. Did you assume that it came from him? Mr. COLLISTER. Not direct to me. Mr. Day. But you assumed it originated there. How was it dated? Mr. COLLISTER. I do not remember the date. Mr. Day. You have it? Mr. COLLISTER. I think I have. Mr. Day. That is all. There being no further questions, the witness was excused. T. J. Barnard, being duly sworn, testified as follows: Mr. Day. What lines do you represent? Mr. Barnard. The Cumberland Gap Despatch. Mr. Day. Over what railroads does the Cumberland Gap Despatch operate? Mr. Barnard. The Louisville and Nashville, the Louisville, Hender- son and St. Louis, and the Norfolk and Western. Mr. Day. How long have you been acting as agent of that line here? Mr. Barnard. Two years. Mr. Day. During the past six mouths have packinghouse products gone to your line? Mr. Barnard. No, sir. Mr. Day. Either domestic or export? Mr. Barnard. No, sir. Mr. Day. Or dressed beef? Mr. Barnard. No, sir. Mr. Day. Have you sought the business? Mr. Barnard. No, sir. Mr. Day. What traffic are you engaged in? Mr. Barnard. Export flour and grain. Mr. Day. You have not participated at all in the transportation of packing-house products or dressed beef? Mr. Barnard. Not domestic; no, sir. Mr. Day. Or export? Mr. Barnard. We have had no export. . Mr. Day. Have you a rate on export? Mr. Barnard. No, sir. Mr. Day. Did you have this advice that you might make a rate of 29 cents east of the river and 25 cents east of Chicago on packing house products ? Mr. Barnard. No, sir ; ve never quoted those rates east to the sea- board. Ours is a rail and water line from Norfolk. Mr. Day. A rail line to Norfolk? Mr. Barnard. Yes, sir. Mr. Day. You are not in that packing-house product business at all? Mr. Barnard. No, sir. Mr. Day. I think that is all I care to ask. Commissoner Prouty. Have you solicited that business at all ? 278 APPENDIX G. Mr. Barnard. Well, we are not prepared to handle it. Our line ia a rail and water line, and we can not solicit tUat traffic for domestic use. There being no further questions, the witness was excused. S. D. McAllister, being duly sworn, testified as follows: Mr. Day. What line are you agent for here? Mr. McAllister. The American Refrigerator Transit Company. Mr. Day. What roads does that operate over? Mr. McAllister. Any road. Mr. Day. Who owns it— is it a corporation? Mr. McAllister. Yes, sir. Mr Day. What road does it act in conjunction with or is it gov- erned by? Mr. McAllister. By the Missouri Pacific, the Iron Mountain, and the Wabash. Mr. Day. Have you been in the transportation of packing-house products for the past three months'? Mr. McAllister. They load some of our cars. Mr. Day. They use your cars? Mr. McAllister. Yes, sir. Mr. Day. Have you had anything to do with the quoting of a rate? Mr. McAllister. I do not quote rates on it, and do not solicit the business in any way. Mr. Day. Your duties are in conjunction with the refrigerator cars, are they? Mr. McAllister. Yes, sir. Mr. Day. ^our duties are in connection with the cars themselves and not the commodities transported in the cars? Mr. McAllister. We solicit some classes of business, but not pack- ing-house i)roducts. Mr. Day. Dressed beef? Mr. McAllister. No, sir. Mr. Day. What class of business do you solicit? Mr. McAllister. Produce, vegetables— any perishable freight. Mr. Day. You have not carried any packing-house products at all? Mr. McAllister. They are loaded in our cars; yes, sir. Mr. Day. But you made no rate and quoted no rate? Mr. McAllister. No, sir. / Mr. Day. Have you had anything to do with collecting any of the rates charged or refunding? Mr. McAllister. No, sir. Mr. Day. Has any passed through your hands? Mr. McAllister. No, sir. Mr. Day. Or any accounts regarding it? Mr. McAllister. No, sir. Mr. Day. What do you do — rent your cars to the roads? Mr. McAllister. Our cars are owned by the roads mentioned. Mr. Day. You look after the mileage? Mr. McAllister. Our car accountant does; yes, sir. Mr. Day. What is the scope of your duty in connection with the car company? Mr. McAllister. I do everything to further their interest in this territory, to promote prompt loading of my cars. Mr. Day. You have authority from the Missouri Pacific or the roads APPENDIX G. 279 that control this line to name rates on other things than packing-house j)roduct8 and dressed beef? Mr. McAllister. No, sir. Mr. Day. Or anything? Mr. McAllister. ISTo, sir. Mr. Day. Do you quote rates on anything? Mr. McAllister. I do as a matter of information only. Mr. Day. What do you mean by that? Mr. McAllister. When a shipper wants to know what the rate is between one point and another I look it up for him and let him know, but I do not guarantee that rate or anything of that kind. Mr. Day. But you do nothing in regard to packing-house products? Mr. McAllister. No, sir. Mr. Day. That is all. The witness was excused. W. B. Everest, being duly sworn, testified as follows: Mr. Day. What line are you agent for? Mr. Everest. 1 am agent for the Great Eastern Line. Mr. Day. Over what roads does your line operate? Mr. Everest. The Grand Trunk and its connections east, the Lack- awanna roads to Buffalo, the Boston and Maine and eastern connections. Mr. Day. Has your line carried any packing-house products in the last six months? Mr. Everest. I have not seen any. Mr. Day. Have you known of any? Mr. Everest. None billed by the Great Eastern Line. There might be a stray car or two. We take it when we can get it, but I have not solicited it for a year or more. Mr. Day. Do yoR speak now of domestic or export, or both ? Mr. Everest. Both. Mr. Day. You have not carried either except a stray car? Mr. Everest. Excepting as it comes along to us. I think I have not had any export since October. Mr. Day. The domestic traffic that has come to your line during the six months, what rate has been charged and collected on it? Mr. Everest. I do not know. Nothing but tariff I am sure. I do not pay mucli attention to the packinghouse products at all. I work chiefly west bound. We do not refuse it, understand. Mr. Day. When it does come to you, you say it has paid the tariff rate? Mr. Everest. Yes, sir. Mr. Day. The tariff rate has been collected and retained? Mr. Everest. So far as I know. Mr. Day. How about export coming to you? Mr. Everest. Just the same. Mr. Day. What rate has been charged on that? Mr, Everest. The full tariff. Mr. Day. No concession for the export rate? Mr. Everest. No, sir ; we have no authority. Mr. Day. The export traffic that has gone your way has paid the published tariff? Mr. Everest. The published tariff' inland to the seaboard plus the ocean. Mr. Day. You mean to say that the export traffic that has gone your way has paid the rate the domestic traffic bears to the seaboard! 280 APPENDIX a. Mr. Everest. Certainly ; the published tariff rate to the seaboard. Mr. Day. Did you receive this notice about a 29-ceut rate east of the river on export? Mr. Everest. I have never heard of it until it came out in evidence here this morning. Mr. Day. That is all, your honors. There being no further questions, the witness was excused. J. E. Gavin, being duly sworn, testified as follows: Mr. Day. What line are you agent for? Mr. Gavin. The Vandalia Railroad. Mr. Day. How long have you been its agent here? Mr. Gavin. About fifteen years. Mr. Day. Agent for the railroad or the line? Mr. Gavin. For the railroad. Mr. Day. Have you been in the packing-house products transporta- tion? Mr. Gavin. I have not solicited any for a year and a half. I devote my time to west bound business. Mr. Day. Have you contracted for any ? Mr. Gavin. No, sir. Mr. Day. Neither domestic nor export? Mr. Gavin. No, sir. Mr. Day. You do not represent any fast freight line? Mr. Gavin. No, sir. Mr. Day. Simply the Vandalia road? Mr. Gavin. Yes, sir. Mr. Day. Have you had any authorization to solicit for packing- house products or dressed beef f Mr. Gavin. No, sir. Mr. Day. Nor have you contracted to transport any? Mr. Gavin. None at all. Mr. Day. Had you received a copy or notice of this 29-cent rate east of the river? Mr. Gavin. Yes, sir. Mr. Day. And 25 cents from Chicago? Mr. Gavin. I do not know — 29 cents from the river. Mr. Day. Your line does not i^articipate from Chicago? Mr. Gavin. No, sir; only by St. Louis and Peoria. Mr. Day. What rate applied by Peoria? Mr. Gavin. I do not know. I did not quote the rate. Mr. Day. Who did you get the authorization from? Mr. Gavin. I think it came from Chicago. Mr. Day. From where in Chicago? Mr. Gavin. I do not know. Mr. Day. Who did it come from? Mr. Gavin. The general oflHce. Mr. Day. Of the Vandalia line or the PennsylvaniaT Mr. Gavin. The Vandalia road. Mr. Day. It came from the man in your office? Mr. Gavin. That makes the tariffs, I suppose. Mr. Day. Do you know who he is? Mr. Gavin. No, sir. Mr. Day. It was not accompanied by any letter of advice t Mr. Gavin. No, sir; it was just a little memorandum. Mr. Day. When did you get it? APPENDIX Q. 281 Mr. Gavin. I tliink it was February 25tli or 24th. I did uot quote the rate. Mr. Day. Was it dated! Mr. Gavin. I believe it was. Mr. Day. What date? Mr. Gavin. The 24th or 25th of February. Mr. Day. What did it contain — what did it state? Mr. Gavin. Export something, I do uot remember — export rate 29 cents; export from the Mississippi River 29 cents. I knew at the time 27^ cents. Mr. Day. Who named 27|^ cents? Mr. Gavin. Heard it mentioned this morning by Mr. Marshall and I think the daily papers were stating what the packers were doing the last two or three months. Mr. Day. Is that your only source? Mr. Gavin. My only source. Mr. Day. Is that by way of the Mississippi River or the Gulf ports? Mr. Gavin. I presume from the Mississippi River to New York on a basis of 27^ cents to New York. Mr. Day. And you have not had any packing-house products or dressed beef? Mr. Gavin. No, sir. Mr. Day. Have you solicited them? Mr. Gavin. No, sir. Mr. Day. That is all. Commissioner Prouty. Who solicits that line for your road to the Mississippi? Mr. Gavin. Nobody. Our road is a short road to Indianapolis. I devote my time to Central States business. Commissioner Prouty. Your road is just as long from the west to the east as from the east to the west? Mr. Gavin. Then we let the Pennsylvania solicit the business. We are a part of the Pennsylvania or will be, I guess. Commissioner Clements. What was the published rate from Kan- sas City to the Mississippi River when this 27^ -cent rate was in? Mr. Gavin. I think 18J cents. Commissioner Clements. You do not know actually of its being in? Mr. Gavin. No, sir; I do not. Commissioner Clements. Is this business an undesirable kind of freight for the railroads — dressed beef and packing house products? Mr. Gavin. I do not know. Commissioner Clements. There does not seem to be anybody hardly that solicits it. It just finds its way out somehow. Mr. Gavin. That may be. Commissioner Clements. Is it because the rate is cut that makes it undesirable for a road that wants to adhere to the rate? Mr. Gavin. I do not know. Commissioner Clements. You have been in the business here how long? Mr. Gavin. Fifteen years. Commissioner Clements. You know pretty well when rates are demoralized ? Mr. Gavin. I guess I do. Commissioner Clements. I do not mean with absolute certainty. Mr. Gavin. No, but two and two generally make four. Commissioner Clements. Now, with your experience, and observa- 282 APPENDIX G. tion, and knowledge of the situation all these years, what is your conviction and belief from the times and circumstances'? Mr. Gavin. I could not tell you; I would hesitate to say. Commissioner Clements, You would testify that you believe the rates are being maintained now? Mr. (jAVIN. No, sir. Commissioner Clements. Is there any understanding, or contract, or agreement, or practice whereby the east-bound freight is apportioned among the several roads which leave Kansas City? Mr. Gavin. I do not know anything about'it, sir. I have not been to a packing house for a year and three months. I have not had a cut rate on anything since November, 1898. Commissioner Clements. Well, you can tell us why you do not go to the packing house. Mr. Gavin. Well, I presume they prefer shipping their domestic freight over the roads they ship the export freight over. They can make trainloads and make faster time tlian by dividing it up. Commissioner Clements. Do you think the roads that get the export business get the domestic, as a rule — the bulk of it ? Mr. Gavin. I do not know that as a fact. It looks but fair though. If I was making a rate on export to a packing house I would look for the domestic at the tariff rate. Commissioner Clements. You would probably make the foreign rate lower than necessary to get the domestic rate? Mr. Gavin. That I do not know. I never experimented. Commissioner Clements. It could be done where there is no fixed rate for the foreign business; it can be played and used to get the other business. Mr. Gavin. There is nothing to prevent my going down to the pack- ing house and paying $10 apiece for hams if I wanted to; if I did not want to cut a rate, there is generally a way out of the hole. Commissioner Clements. A good many ways ; and it is your belief that a good many of these have been practiced, is it not? Mr. Gavin. I do not know. I would not like to say. Commissioner Clements. I would not suppose that you would know the particulars, but does the situation indicate that? Mr. Gavin. 1 do not know. Commissioner Prouty. If you bought hams enough at $10 apiece the packing house could give you the trafitic at full rates? Mr. Gavin. Yes, sir. Commissioner Prouty. Have you ever known that to be donet M r. Gavin. No, sir ; but I say there are lots of ways out of the woods. Commissioner Prouty. Do you think the foreign rate can be pub- lished to the seaboard just as the domestic rate can? Mr. Gavin. Yes, sir. Commissioner Prouty". And business done under itt Mr. Gavin. Yes, sir. I do not quite understand you. Commissioner Clements. Do you think there is any difficulty in the publishing of the rate on foreign over domestic? Mr. Gavin. It is generally specified in the tariff. Commissioner Clements. The foreign is? Mr. Gavin. Yes, sir ; export and domestic. Commissioner Clements. Well, the teatimony to-day Mr. Gavin. By some ports — a great many go that way. When it is for New York it takes the export rate. When it is not it takes the domestic, 5 cents higher. APPENDIX G. 283 Commissioner Clements. The testimony, as I understood it to day, is that they pay no attention to a tariff on the export rate. Mr. Gavin. Well, I may be wrong on it. I do not understand it thoroughly. Commissioner Clements. They testify, many of them do, that it is impossible to do the business on a published rate, the foreign shipments. Mr. GrAViN. Do you mean that a representative of the line is per- mitted to make his own rate to secure the business? I do not know anything about that. Commissioner Clements. Do you think, as a traffic man — a railroad man— do you see any difficulty in the way of transacting this business, foreign as well as domestic, under published rates which are adhered to? Mr. Gavin. I do not, sir. I have not given it any thought at all. 1 have not had a pound, and I do not waste my time and thought on it. Commissioner Clements. Do you handle any foreign shipments of anything? Mr. Gavin. No, sir. Commissioner Clements. No kind? Mr. Gavin. No, sir; that is, I have not the last two or three years — say two years. Commissioner Clements. That is all. There being no farther questions, the witness was excused. J. A. Shannon, being duly sworn, testified as follows: Mr. Day. What line are you agent for? Mr. Shannon. The New York Despatch and National Despatch Refrigerator lines. Mr. Day. Over what roads does your line operate? Mr. Shannon. Over the Grand Trunk out of Chicago, the West Shore to New York; the Grand Trunk and Boston and Maine and Central Vermont to Boston. Mr. Day. How long have you been agent here? Mr. Shannon. For the last eight years. Mr. Day. Well, during the last six months have you carried any packing-house products? Mr. Shannon. We do not carry any packing-house products. It is a purely dairy line. Mr. Day. Are your cars refrigerator cars? Mr. Shannon. Yes, sir. Mr. Day. You have nothing whatever to do with packing-house prod- ucts ? Mr. Shannon, No, sir. Mr. Day. Or dressed beef? Mr. Shannon. No, sir. Mr. Day. That is all I wish to ask, Mr. Shannon, The witness was excused. D. H. Keesky, being duly sworn, testified as follows: Mr. Day. Mr. Kresky, what line are you agent for? Mr. Keesky. The Reading Despatch. Mr. Day. Over what do you operate — what roads? Mr. Keesky. The Grand Trunk, Lehigh Valley, Philadelphia and Reading, and New York, New Haven and Hartford. Mr. Day. How long have you been agent for the line here? Mr. Keesky. About eight years. Mr. Day. Well, I will ask you if in the last six months you have carried any packing-house products? 284 APPENDIX G. Mr. Kresky. I bave not. Mr. Day. You have not transported any! Mr. Kreskv. Well, the line has. Mr. Day. I say, your line. Mr. Kresky. Yes, sir. Mr. Day. Domestic or exportt Mr. Kresky. Both. Mr. Day. Plow about dressed beef? Mr. Kresky. Some of that. Mr. Day. Does any dressed beef go for export! Mr. Kresky. No, sir. Mr. Day. It is all for domestic consumption? Mr. Kr]<]SKY'. Yes, sir. Mr. Day. Well, the domestic business you have transported, I will ask you what rate you have carried it at? Mr. Kresky.' I did not quote the rate. Mr. Day. You did not quote the rate? Mr. KRESKY^ No, sir. Mr. Day. What do you do — take up the bills of lading and issue others? Mr. Kresky. There are none taken up on domestic. Mr. Day. Who quotes the rate on the traffic you carry! Mr. Kresky. I do not know. Mr. Day. You did not have anything to do with it? Mr. Kresky. Not a thing. Mr. Day. Did you not solicit it? Mr. Kresky. No, sir. Mr. Day. Did anyone in your office quote the rate? Mr. Kresky. No, sir. Mr. Day. Nobody under your supervision? Mr. Kresky. No, sir. Mr. Day. How about export? Mr. Kresky. The same way. Mr. Day^ You do not make the rate in either case! Mr. Kresky. No, sir. Mr. Day. What is your function? Mr. Kresky. We get some export business, and what export we do get the packers simply send the local bill of lading and I issue the export bill of hiding. Mr. Day. Your office does simply clerical work? Mr. Kresky. That is all. Mr. Day. You do not handle any money or collect any charges? Mr. Kresky. No, sir. Mr. Day. And do not have ajiythiug to do with refunding auy por- tion of it? Mr. Kresky. No, sir. Mr. Day. You do not quote rates? Mr. Kr:^ky. No, sir. Mr. Day. I think that is all I wish to ask. The witness was excused. William Harvey, being duly sworn, testified as follows; Mr. Day. What line are you agent for, Mr. Harvey? Mr. Harvey. The Empire Line. Mr. Day. How long have you been its agent heret Mr. Harvey. In this city eighteen years. APPENDIX Q. 285 Mr. Day. Have any packing-bouse products or dressed beef gone by your line the last six months? Mr. Harvey. No, sir. Mr. Day. None at all? Mr. Harvey. None. Mr. Day. You have not been in the business? Mr. Harvey. No, sir. Mr. Day. What commodities do you chietiy carry? Mr. Harvey. Grain, general merchandise, and Hour. Mr. Day. You do not have anything to do with the soliciting of pack- ing-house products or dressed beef? Mr. Harvey. We have at times, but not now. Mr. Day. How long have you been out of it? Mr. Harvey. We have not been in it this century. Mr. Day. How about the last? Mr. Harvey. Last century we carried a great deal. Mr. Day. How late in the last century? Mr. Harvey. Probably up to the last of the year, along in Decem- ber. Mr. Day. I will ask you in regard to that you did carry in, say, the last two or three months of 1900; was it domestic or export? Mr. Harvey. Export. Mr. Day. No domestic? Mr. Harvey. Very little. Mr. Day. That which you did carry, at what rate was it taken? Mr. Harvey. The tariff. Mr. Day. The tariff collected? Mr. Harvey. It was prepaid. Mr. Day. The full tariff' was prepaid? Mr. Harvey. That is my understanding. Mr. Day. Who was it paid to ? Mr. Harvey. I presume it was paid to the local agent here. It went out of here by different roads. Mr. Day. Have -you any reason to believe that any portion of that which was collected was refunded? Mr. Harvey. No, sir. Mr. Day. Have you any reason to believe that any concession was made on it? Mr. Harvey. I think not. Mr. Day. How about the export rate ? Mr. Harvey. The export was billed in this way : It was billed mostly to Philadelphia, we will say, and they have an agent there who makes their own contracts for the ocean. Mr. Day. I did not get your last answer. Mr. Harvey. I say that most of the freight that went out of here, in fact I think all of it for export, was billed to Philadelphia, and there the packing-house people had an agent who made their own arrange- ments for the ocean. In other words, it was prepaid up to Philadelphia and turned over to the vessel. Mr. Day. What rate did it bear to Philadelphia? Mr. Harvey. The tariff. Mr. Day. The domestic tariff" rate? Mr. Harvey. The domestic tariff' rate. Mr. Day. I have no desire to ask this witness anything further. The witness was excused. 286 APPENDIX G. J. D. Lund, being duly sworn, testified as follows: Mr. Day. What is your relation to the Wabash road! Mr. Lund. I represent the freight department. Mr. Day. What is your title. Mr. Lund. Assistant general freight agent. Mr. Day. How much of an office do you maintain herel Mr. Lund. At present I have three clerks. Mr. Day. What is the general scope of your duties'? Mr. Lund. To solicit freight and quote rates. That is about the gen- eral scope. Mr. Day. Take packing-house products and dressed beef shipped by your road and charges prepaid — to whom are they paidi Mr. Lund. Paid to the local agent at this point. Mr. Day. Who is the local agent? Mr. Lund. Hugh B. Darneille. Mr. Day. Do you have anything to do with the collectiont Mr. Lund. I have uothing to do with the collections. Mr. Day. Does any portion of it pass through your handst Mr. Lund. ISone of that money passes through my hands. Mr. Day. Well, does any money pass througli your hands on account of traffic transported over your road? Mr. Lund. 1 receive moneys for payment of claims — things like that. That has not a direct bearing on the question. But answering the question direct, prepaying the charges, 1 do not handle that now. Mr. Day. Do you keep a book account of the claims you pay? Mr. Lund. Yes, sir; they have a claim book. Mr. Day. I mean an account of moneys paid on account of claims, do yon keep an account of what you do? Mr. Lund. I have a book that I keep a record of claims in. Mr. Day. Any money you pay for claims, do you keep a record of the money you pay out for claims? Mr. Lund. Not all; no, sir. Mr. Day. What moneys do you pay out which you do not keep a record of? Mr. Lund. I have paid moneys on export traffic that I do not keep a record of. Mr. Day. What else? Mr. Lund. That is all. Mr. Day. What claims do you pay on account of exiiort traffic? Mr. Lund. This business I have solicited myself. Mr. Day. Who do you pay it to? Mr. Lund. To the parties witli whom I made the arrangements. Mr. Day. Now, during the past six months have you quoted rates to the packers on domestic traffic to the Atlantic seaboard? Mr. Lund. I do not remember quoting any rates on domestic traffic the last six months to the Atlantic seaboard. Mr. Day. Have you on export traffic? Mr. Lund. I have on export provisions. Mr. Day. What is the lowest rate you quoted on export provisions! Mr. LiiND. The lowest rate I remember is 35 cents per hundred pounds from Kansas City to New York for export. That is my recollection. Mr. Day. When was that? Mr. Lund. That was in December. Mr. Day. How low a rate have you quoted on export since January 1? Mr. Lund. I have not quoted a rate on export since January 1. APPENDIX G. 287 Mr. Day. Have not you participated in that business? Mr. Lund. We handle some business, I understand frcfm the billing. Mr. Day. What rate did fliat carry? Mr. Lund. As far as I know, the full tariff. . Mr. Day. You mean the published tariftl Mr. Lund. Yes, sir; 18i cents to the river. ]\Ir. Day. And 35 cents"' on? Mr. Lund. We did not handle the business beyond. Mr. Day. To whom did you turn that over? Mr. Lund. Various lines. Mr. Day. What lines from the Mississippi? Mr. Lund. It would be handled by any line leading from the Missis- sippi River. Mr. Day. The Mobile and Ohio? Mr. Lund. The Mobile and Ohio. Mr. Day. The Clover Leaf? Mr. Lund. The Clover Leaf. The Mobile and Ohio can not handle the !New York business, though. Mr. Day. Does the Mobile and Ohio take some south and connect with the Southern, and then come in by the Southern? Mr. Lund. I do not know of any tliat way. Mr. Day. The trafBc that went by the Mobile and Ohio by your road • went through the Gulf? Mr. Lund. Yes, sir; it goes through Mobile. Mr. Day. Now, the traffic you turned over to the Clover Leaf since the 1st of January, what rate did you quote through to the seaboard? ]\Tr. Lund. I made no rates at all. Mr. Day. You simply made a rate up to the Mississippi River? Mr. Lund. Made no rate at all; did not even quote a rate. Mr. Day. What rate did it pay? Mr. Lund. Eighteen and a half cents, to the best of my knowledge. Mr. Day. Was there any refund or rebate made on that? Mr. Lund. Not to my knowledge. Commissioner Clements. Did it go on a through rate of 35 cents? Mr. Lund. I do not know. We deliver the property at East St. Louis, and that ends it with us. Commissioner Clements. I understand you to say that some did go on a through rate of 35 cents from here. Mr. Lund. That is business I contracted for myself in December. Commissioner Fifer. Was that for foreign shipment? Mr. Lund. Yes, sir. Commissioner Clements. It was for export? Mr. Lund. Yes, sir. Commissioner Peouty. Wlfkt was your division of that rate, 35 cents? Mr. Lund. I really do not know. I do not know what the division of that would be. Commissioner Prouty. Did you not know when you quoted that rate, made that contract, how much of it your line was to get? Mr. Lund. No, sir; I do not know the details of the division. Commissioner Prouty. Were you instructed by your superiors to make that quotation? Mr. Lund. No, sir. Commissioner Prouty. How did you happen to make that low export rate? 288 APPENDIX G. Mr. Lund. It was, I supposed, the current basis in effect ab the time the sbipments were made. Commissioner Prouty. What determines the current basis? Who tells you what thfe basis is — the packer; or do you tell the packer? Mr. Lund. We quote the rate to the packer to handle his business. Commissioner Prouty. Tou quoted a rate of 35 cents to the packert Mr. Lund. Yes, sir. Commissioner Prouty. How did you happen to quote that rate? Mr. Lund. I quoted it from my own mind — that that was the figure that would secure the traffic at that time. Commissioner Prouty. What led you to suppose that that figure would secure the traffic? Mr. Lund. By conditions that may have happened previous — the previous weeks, for instance. Commissioner Prouty. Well, did the packer tell you he would not pay any more than 35 cents? Mr. Lund. I do not remember that. Commissioner Prouty. Had you tried to get traffic at a little above that, which you did not get? Mr. Lund. Tou mean on that specific shipment? Commissioner Prouty. Yes, sir. Mr. Lund. I do not remember the details of it; only I remember I made that quotation. Commissioner Prouty. Do you have a general understanding among yourselves with the packers here what this export rate should be at a given time? Mr. Lund. No, sir; not to my knowledge. Commissioner Prouty. How do you know what it is? Mr. Lund. I do not know until I test it by my own quotation. Commissioner Prouty. You go to the packer and offer to take the traffic for so much, and if you get it you think your quotation is as low as the going rate. If you do not get it, do you assume there is a lower rate? Mr. Lund. Tbat is the only means I have of knowing. Commissioner Prouty. You say you made this rate of 35 cents. At that time what was the published division east of the Mississipiii liiver — 35 cents? Mr. Lund. I think it was. Commissioner Prouty. So you might, according to your theory, have to carry that to the Mississippi River for nothing? Mr. Lund. It is barely possible. Commissioner Prouty. Do you know what line it went by beyond the Mississippi ? , Mr. Lund. I think it was handled via a line to Buffalo. Commissioner Prouty. Who has been soliciting this traffic that has gone over your line since January 1? Mr. Lund. I do not know of anyone but myself. Commissioner Prouty. I thought you said you had not solicited any since January 1 ? Mr. Lund. I meant export business and Eastern business. We solicit local business to Illinois and those points. Commissioner Prouty. By what fast-freight line did that go since January 1. Mr. Lund. We handled it to St. Louis and there delivered it to the line to which it was consigned. APPENDIX G. 289 Commissioner Prouty. That business now goes from here over the Mississippi lliver and is there consigned to some other line? Mr. Lund. Yes, sir. Commissioner Prouty. Now, as you understand the matter, who solicited that particular traffic? Mr. Lund. 1 do not know. Commissioner Prouty. Do you mean to say at the present time your line is exacting the full tariff rate on both export and domestic shipments? Mr. Lund. So far as 1 know, yes, sir. Commissioner Prouty. And whatever cut there is is beyond the Mississippi River? Mr. Lund. That would be the inference. Commissioner Cle:ments. Have j^ou ever been able to obtain a larger proportion of the business of these packing houses by reason of very low rates on foreign shipments'? Mr. Lund. No, sir; I never solicited business on that basis at all. Commissioner Clements. Who does solicit this business for your road now? Mr. Lund. I do. Commissioner Clements. But you say you do not solicit the eastern or foreign business"? Mr. Lund. Yes, sir. Commissioner Clemicnts. Who does? Mr. Lund. I do not think it is being solicited at all for our road. Commissioner Clements. Is there no solicitation for tliis business on the part of any of the roads you know of? Mr. Lund. Tluit I can not say. I can not answer for anybody but myself. Commissioner Clements. Why is your road careless about it? Mr. Lund. Unless it is tliat we are the available line to St. Lonis for handling it. We only handle it to St. Louis and that is the only means we have of reaching the lines to which it is consigned; that is, at St. Louis. Commissioner Clements. You mean that is not the way most of it goes? Mr. Lund. That is the way most of it is going at tlie present time, by St. Louis. Commissioner Clements. By your road? Mr. Lund. We handle some that way. Commissioner Clements. It comes without solicitation, then, does it? Mr. Lund. Yes, sir; so far as I am concerned. Commissioner Clements. Is there any arrangement or contract or prac^tice of any kind, either understood or otherwise, by which this business is apportioned among the several roads leading eastward from Kansas City? Mr. Lunq. Not to my knowledge. Commissioner Clements. Has there been at any time during the past year? Mr. Lund. Not that I know of. Commissioner Clements. Every road is free to take all it can get, carry it, and retain all it can without any obligation to pay any back to anybody? Mr. Lund. I know of no arrangement of that kind. Commissioner Clements. Well, why is it you do not solicit it— pusli for it? 74lA— 05 19 290 APPENDIX G. Mr, Lund. I am satisfied with what is coming to us. Comiiiissiouer Clements. That is rather a modest position for a rail- road to take, is it not? Mr. Lund. Well, it is a fact just the same. Commissioner Fifer. What roads carry the bulk of these packing- bouse products — what roads leading out of Kansas City does the weight or bulk of these packing-house products pass over? Mr. Lund. I do not kuow. I could not say. Commissioner Fifer. Does any one road or any particular set of roads carry it above others? Mr. Lund. I think some roads carry more than others and distri- l>ute it. Commissioner Prouty. Is there not an account kept of the tonnage by all lines from Kansas City? Mr. Lund. There is a statement kept of the carloads. Commissioner Prouty. Who keeps that statement? Mr. Lund. Tliat is kept by the agent of the Western trunk lines. Commissioner Prouty. Who is he? Mr. Lund. G. A. Kimball. Commissioner Prouty. He^e in Kansas City? Mr. Lund. Yes, sir. Commissioner Prouty. How often does he send you gentlemen a statement? Mr. Lund. There is a statement furnished us every day of the carload business out of this i)oint. Commissioner Prouty. Does any other line solicit now? Mr. Lund. I do not kuow. Commissioner Prouty. You do not find that their solicitation pro- duces any effect on your trafflc? j\Ir. Lund. It has not this year. Commissioner Prouty. Who pays this gentleman for his work in sendiug out these statements? ]\Ir. Lund. I think it is done by the lines generally in the associa- tion. Commissioner Prouty. What association? Mr. Lund. The Western Trunk Line Association. Commmissioner Prouty. Do you kuow about what part of this traffic the .Missouri Pacific gets? Mr. Lund. No, sir. Commissioner Prouty. Do you know what part the other lines get? Mr. Lund. No, sir. Commissioner Prouty. Do you not see his statement? Mr. Lund. I glance over it from day to day to see what we handle. Commissioner ProuTY. Do you not know what part of the whole you ought to handle? Mr. Lund. No; I do not know. Commissioner Prouty. About what part have you handled? Mr. Lund. I can not say ofthand. Commissioner Prouty. I wish you would let us see one of those statements. Could you do that? Mr. Lund. Yes, sir. You mean for one day? Commissioner PROUTY. Three or four of them, so that I can see what they are. Commissioner Cle:ments. What is the volume of business by the carload by the day or week or mouth? Mr. Lund, It varies. Some days it is more than others. APPENDIX G. 291 Commissiouer Clements. Undoubtedly; but about what would be an average week*? Mr. Lund. You mean for all lines? Commissioner Clements. Dressed beef and packing-house prod- ucts — all lines'? Mr. Lund. You mean the combined total number of carloads for a week? Commissioner Clements. Yes, sir. Mr. Lund. You mean to all territory? Commissioner Clements. Foreign and eastern. Mr. Lund. I should say — of course these are not facts — I should say 600 to 700 cais a week, perhaps more. Commissioner Clements. Eastbound, including domestic and foreign ? Mr. Lund. Yes, sir. Commissioner Clements. And about how many roads lead eastward from Kansas City over which it can move? Mr. Lund. Did you say how many? Commissioner Clements. Yes, sir. Mr. Lund. I do not know. I would have to count them up — twelve or thirteen. Commissioner Clements. Well, it is easily ascertainable. How do you account for the fact that there is such a stillness about this busi ness in regard to solicitation that it is allowed to find its way out the best it can? It has not always been that way, has it? Mr. Lund. No, sir. Commissiouer Clements. They have had rate wars over it in times past? Mr. Lund. There have been rumors of disturbances in rates. Commissioner Clements. Well, what is the reason? Everything that exists is supposed to have a cause. Why has it changed, so that every road is apparently content with what comes to it without solicitation ? Mr. Lund. I do not know why it is. I know only so far as our own line is concerned, it must be on account of the service. We are the short line from here to East St. Louis, and our service considered the best from here to that point. Commissioner Clements. Well, that M'ould not be very satisfactory to the roundabout roads that wanted to get a part of it, would it? Mr. Lund. That I can not say. I do not know how they would feel. Commissioner Clements. You can not assign any reason for the fact that there are practically no solicitations now for this business? Mr. Lund. No, sir; I can not assign any reason. Mr. Day. These shipments you spoke of that left in February, that went by the Wabash and Clover Leaf, whose shipments were those? Mr. Lund. I do not remember. Mr. Day. You spoke of paying some money on account of export traffic secured. Mr. Lund. That was business I secured in December. Mr. Day. What concern ? Mr. Lund. Schwarzschild & Sulzberger. Mr. Day. What was the basis of the refund? Mr. Lund. Based on a oO-cent rate I quoted from Kansas City to New York. Mr. Day. What had they actually paidY 292 APPENDIX Q. Mr, Lund. Fifty-three and a half cents. Mr. Day. Who did you make the payment toT Mr. Lund. Mr. Cusey. Mr. Day. What is his position? Mr. Lund. I do not know what position he has. Mr. Day. When was it you made the payment? Mr. Lund. I do not remember that. I think the latter part of December. I am not certain. Mr. Day. Approximately, what was the amount of iti Mr. Lund. 1 do not remember just exactly. Mr. Day. Well, about? Mr. Lund. I do not know. Mr. Day. Was it made on a claim presented to you — a statement, a claim made to you in writing"? Mr. Lund. No; they made no statement to me in writing. I made the statement up myself on the business I handled. Mr. Day. That is all. Commissioner Clements. Mr. Day, what is the name of the witness that was called this morning who did not answer? Mr. Day. Mr. M. M. Vincent. Commissioner Clements. Is Mr. Vincent in court? (No response.) Commissioner Clements. He appears not to be here. All the wit- nesses we have been able to subpoena, with the exception of Mr. Vin- cent, have been sworn and examined, and it is manifest that information which we wanted about certain matters can not be had from the wit- nesses whose attendance we have been able to secure, and that on those points others will be necessary. Therefore, the hearing of this matter will now be suspended to such other time and place as the Conmiission may fix, then to be proceeded with. With that understanding we will adjourn. At 3.50 o'clock p. m. the Commission adjourned. At a general session of the Interstate Commerce Commission, held at its oliice in Washington, D. 0., on the 19th day of December, A. D. 1001. Present: Hon. Martin A. Knapp, chairman, Hon, Judson (3. Clements, Hon. James D. Yeomans, Hon. Charles A. Prouty, Hon. Joseph W. Fifer, commissioners. IN THE MATTER OF THE TRANSPORTATION OF DRESSED MEATS AND PACKING- HOUSE PRODUCTS. Ordered, That this matter be set down for hearing at United Stater court rooms in the city of Chicago, 111., on January 7, 1902, at 10 o'clock &. m. BEFORE THE INTERSTATE COMMERCE COMMISSION. IN THE MATTER OF THE TRANSPORTATION OF DRESSED MEATS AND PACKINQ- HOUSE PRODUCTS. Hearing at Chicago, III., January 7, 1902, Present: Hon. Martin A. Knapp, Hon. Judson C.Clements, Hon. J.D. Yeomans, Hon. C. A. Prouty, and Hon. Josei)h W. Fifer, commissioners. Mr. W. A. Day, for the Commission. INDEX. Page. Bird, A. C 365 Cost, Edward F 330, 334 Grammer, G. J 377 Johnson, J. M 347 McCabe, D. T 318, 334 Miller, Thomas 356 Mitchell, B. B 335 Morton, Paul 371 Wann, Fred A 359 Whitney, CD 293 United States Court Room, Chicago, 111., January 7, 1902 — 10 a. m. The Chairman. Gentlemen, please give us your attention. The Commission is here this morning to resume its inquiry in the matter of the transportation of dressed beef and packing-house products. Mr. Day, are you ready to proceed? Mr. Day. Yes, sir. C. D. Whitney, having been duly sworn, testified as follows: Mr. Day. Your name is C. D. Whitney? Mr. Whitney. Yes, sir. Mr. Day. And you are traffic manager of what road? Mr. Whitney. Of the Toledo, bt. Louis and Western. Mr. Day. How long have you been connected with that roadf Mr. Whitney. Since August 1, 1900. Mr. Day. With what road were you connected prior to that timet 293 ' 294 APPENDIX Q. Mr. Whitney. The Ohio Southern. Mr. Day. Mr. Whitney, the Commission is here for the purpose ol having you tell them the methods that prevail on your road respecting the transportation of packing-house products and dressed meats, and particularly with regard to concessions in rates that have prevailed on your line or that may have prevailed there. Take a period of six months prior to January 1, 1902. Mr. Whitney. In what way do you mean? Mr. Day. In whatever way that may have prevailed. Have you made any concessions or has your road made any concessions from the published rates in the transportation of packing-house products or dressed meats during that period? Mr. Whitney. Yes. • Mr. Day. Please state in your own way how that was brought about; first, what the concession was. The Chairman. First, on shipments from what point? Mr. Day. From the Missouri River and Chicago to Atlantic seaboard j)oints, both. Mr. Whitney. It is the rule to meet conditions. That is the meat of the whole thing. If a rate from the Missouri River is made to the Atlantic seaboard through Chicago, it follows that the lines through St. Louis must meet it or go out of the business. Mr. Day. Well, the rate on dressed meats from Kansas City to the Mississippi River was what — the published rate was what? Mr. Whitney. From where? Mr. Day. From the Missouri River to the Mississippi River, to St. Louis? Mr. Whitney. Eighteen and one-half cents. Mr. Day. And the rate from Kansas City to Chicago was 23J cents? Mr. Whitney. Yes, sir. Mr. Day. And the rate from Kansas City to New York was Mr. Whitney. Sixty-eight and one half cents. Mr. Day, That is on dressed meats? Mr, Whitney. Yes, sir. Mr. Day. Now, the rate on packing-house products was 18J cents to the river? Mr. Whitney. Yes, sir. Mr. Day. And 23i cents to Chicago? Mr. Whitney. Yes, sir ; a through rate of 53i cents. Mr. Day. What concession from the published rate — first, did you participate in the transportation of either of those products to Chicago? Mr. Whitney. To Chicago? Mr. Day. Yes, sir. Mr. Whitney. No, sir. Mr. Day. What traffic did you participate in? For what general destination ? Mr. Whitney. Do you mean on dressed beef and provisions? Mr. Day. Yes, sir. Mr. Whitney. We have handled some dressed beef and provisions from the Missouri River to New York and Boston, Mr. Day. Now, what concessions did you make, or did your line par- ticipate in making, in the way of diminution of the rate of 68J cents during the period I mentioned? Mr. Whitney. We made a rate of 41| cents from East St. Louis to New York and Boston. APPENDIX G. 295 Mr. Day. And what was the published rate at that time from East St. Louis? Mr. Whitney. Fifty cents. Mr. Day. Is that the greatest or largest reduction you have made? Mr. Whitney. Yes, sir. Mr. Day. Now, what reduction did you make on packinghouse products ? Mr. Whitney. We made a rate of 29 cents. Mr. Day. That was a reduction of 6 cents? Mr. Whitney. Yes, sir; 6 cents. That was the greatest. It don't follow that that was continuous; simply that it went that low. Mr. Day. You have stated the lowest rate you particiijated in ? Mr. Whitney. Yes, sir. Mr. Day. Take this New York and Boston traffic that you hauled. Where was the point of departure from your rails? Mr. Whitney. Some of it went via Ohio City and the Erie and its connections, some via Continental, the Nickel Plate road aud its con- nections, some via Toledo and the Michigan Central Eailroad and its connections, and some via Toledo and theLake Shore and its conuectious. Mr. Day. Your Western and Eastern termini are East St. Louis and Toledo? Mr. Whitney. Yes, sir. Mr. Day. What was your division of the haul of Kansas City-New York packing-house products where you turned it over to the Eastern line at Toledo? Mr. Whitney. You mean the division of the proportion from St. Louis ? Mr. Day. Yes, sir. Mr. Whitney. It is made up on a mileage basis. It runs about 35 per cent. Mr. Day. How much of your division did you shrink out of that 29 cents packing house product rate? Mr. Whitney. Our proportion. Mr. Day. What did that amount to on that? Mr. Whitney. About 35 per cent of 0— about 2 cents. Mr. Day. Now, who else participated in the shrinking of that rate? Mr. Whitney. I have stated the routes that we have used on our traffic. Mr. Day. Did they all join in the shrinkage? Did all the lines par- ticipate in it from the Mississippi Eiver, or was it borne alone by your road? Mr. Whitney. On the authorized rates? These rates that I have mentioned are what we call the current rate. Mr. Day. Now, the published rate being 35 cents from the Missis- sippi Eiver to New York, you say you carried traffic as low as 29 cents? Mr. Whitney. Yes, sir. Mr. Day. Now, in the reduction of that rate of G cents a hundred, in that reduction did your road stand all of that, or did all of the lines that participated in the haul of the traffic from the Mississippi River to the Atlantic seaboard divide it? Mr. Whitney. I can not answer whether all the lines joined or not. The bills are put in the claim department and collected. 1 do not know how they were collected. Mr. Day. Who authorizes this reduction when it is done on your line? 296 APPENDIX Q. Mr. Whitney. There is really no sucL thing as authorizing it. You test the market and find the rate is so and so, or by discussion it is brought out that the rates are what we use. There is no such thing as authorizing it. Mr. Day. Your subordinates would not put in a 29-cent rate without some authority to do that, would they? Mr. Whitney. No, sir. Mr. Day. What authority do they get to rely upon? Mr. Whitney. On my authority. Mr. Day. How do you express it to them ? How have you authorized it? What form has your authorization taken? Mr. Whitney. Nothing more than advice that conditions — for instance, that conditions at the i)resent time — I do not mean now, but when there was a 29-ceut rate; if there was a 29-cent rate I would tell them they could make that rate. Mr. Day. What concerns, what packing-house concerns, chiefly employ your line, or did six months prior to January 1? Mr. Whitney. I could not follow that up closely. For instance, we give our agent authority to make a 29-cent rate. I do not know who he gives it to or what business he gets on it. Perhaps he don't get anything. Perhaps we have had some from all of them with one or two exceptions. Mr. Day. You have some that use your line pretty generally all the time? Mr. Whitney. Oh, no; we do not have any that use it all the time. Mr. Day. I do not mean all the time. I suppose every road has its customers that it largely relies on? Mr. Whitney. I do not think the proviwsion business is handled that way. Mr. Day. How about dressed meats? Mr. Whitney. Dressed meats are usually shipped right along on accduut of the arrangements they have on a line for icing, and so on. Mr. Day. What concerns have employed your line in the shipment of dressed meats ? Mr. Whitney. Since the 1st of July? Mr. Day. Yes, sir. Mr. Whitney. We have not had any dressed meats from Kansas City since the 1st of July. Mr. Day. Well, all kinds. Mr. Whitney. We have had no dressed meats from Kansas City since the 1st of July. Mr. Day. What? Mr. Whitney. Provisions. Mr. Day. What concerns have employed your line? Mr. Whitney. I could not tell you. Possibly we have had them from the Cudahy Packing Company, and perhaps from Fowler, and perhaps from Schwarzschild & Sulzberger; I don't know. I could not say positively. Mr. Day. When the concession was made you say it was handled through the claims department. Did the billing show the published rate, or would the billing show the reduced rate? Mr. Whitney. The billing would show the published rate up until very recently, when it was billed flat. Mr. Day. How recently was it billed flat? When did you commence that? APPENDIX G. 297 Mr. Whitney. I think along abont tlie 1st of August — somewhere between the 15th of July and the 1st of August. Mr. Day. Was that about the time you put in the export rate — the published through export rate? Mr. Whitney. Yes, sir. Mr. Day. Now, when the billing showed the published rate and the traffic was actually carried at a reduced rate, just state how those claims were presented and how they were vised or approved? Mr. Wiiii'NEY. I do not think I would be competent to say that, because they are not handled in my ollice. Mr. Day. But you are cognizant of tlieir adjustment, are you not? Your office had to give some approval or ratification of it. Mr. Whitney. We give our claims department instructions that the current rate is so much, and if a claim is presented later on that tallies with that previous advice the claim is no doubt settled on that basis. Mr. Day. How would the claims department get the advice that the buvsiuess was actually carried? Mr. Whitney. From the billing. Mr. Day. During the year 1001 was there traffic carried on your line— that is, traffic that we are discussing here, dressed meats and packing-house products— carried at all on underbilling as to weights or in any other form ? Mr. Whitney. Not that I know of. Mr. Day. Was shrinkage made in any other form, or was concession in any other way made than in the iiarticular way you have named? Mr. Whitney. No, sir. Mr. Day. There was no false billing or underweights that prevailed on your line that you had any intimation of? Mr. Whitney. No, sir. Mr. Day. What is the practice prevailing now regarding packing- house products? Mr. Whitney. Since the 1st of January — why, we have had nothing but the full i)ublished tariff rate. Mr. Day. Why did you stop that practice on the 1st of January, or did you cease that practice before? Mr. Whitney. It is a kind of unwritten law that rates on the first of the year become what we call firm, and everyone tries to keep them in that condition. We start out on the first of the year and try to maintain them. Mr. Day. Prior to the 1st of July you were carrying some dressed meats, in the year 1901? Mr. Whitney. Yes, sir. Mr. Day. Who did you carry dressed meats for? Mr. Whitney. For Schwarzschild »& Sulzberger from, I think, Janu- ary 1 to June 1, and we carried for Cudahy from January 1, I think it was, to April 1. Mr. Day. For anyone else — that is, of the large concerns? Mr. Whi'J'NEY. No; not from Kansas City. Mr. Day. Well, from St. Louis? Mr. Whitney. Swift & Co. from East St. Louis, and, I think a part of their Kansas City business also. We do not get that now. Mr. Day. What concessions from the established rates — the published tariff rates — were made on dressed meats? Mr. Whitney. On the dressed beef? Mr. Day. Yes, sir. Mr. Whitney. I do not know that I could tell you now. 298 APPENDIX G. Mr. Day. Well, about, approximately? Mr. Whitney. I think it was in tlie neighborhood of 5 cents. Mr. Day. From Kansas City or St. Louis? Mr. Whitney. Of course our revenue begins at East St. Louis. Mr. Day. Do you know what was made back of the Mississippi River? Mr. Whitney. I could not tell you positively, because it would not be a positive opinion. Mr. Day. What is your impression? Mr. Whitney. I do not know that I have a right to express that. Mr. Day. You acted on rumors as to reduction of rates that you con- sidered you were compelled to meet elsewhere, I understand. What was the rumor prevailing at that time? Mr. Whitney. The rumor prevailed that the rate from concession was reduced 5 cents from Kansas City to the seaboard. Mr. Day. Is that the greatest concession you heard of that prevailed on dressed meats — 5 cents, Kansas City to the Atlantic seaboard? Mr. Whitney. That is a year ago and I do not remember distinctly, but that is my impression. Mr. Day. Was the concession greater in regard to packing-house products than it was in regard to dressed meats? Mr. Whitney. I do not think there was any concession the first of the year. As a matter of fact, we do not handle many provisions. It is only now and then that we handle them. Mr. Day. Tell the commission specifically what induced you to authorize your subordinates to cut the rate. Mr. Whitney. Well, as I say, the St. Louis line would have to do that in order to get any business from the Missouri Eiver. If a rate is made through Chicago and it is less than the rate that could be obtained through East St. Louis on the combination of locals, it follows that you have to meet that rate through St. Louis. Mr. Day. You mean that the published rates by way of Chicago to the seaboard were lower than the sum of the locals bj'^ way of St. Louis? Mr. Whitney. No ; because the published tariffs through Chicago are supposed to be the same as the published tariifs through St. Louis. Mr. Day. Then it was a reduced rate, lower than the published rate, that prevailed through Chicago that induced you to make a reduction from the published tariff" rate? Mr. Whitney, Yes, sir. Mr. Day. Did you ascertain, as a matter of fact, that a lower rate did prevail by way of Chicago than the lawful published rate? Mr. Whitney. We ascertained as near as we could in those cases. If the business was moving continually through Chicago and you can not get anything through St. Louis, why Mr. Day. Is the time longer or shorter by way of St. Louis than by way of Chicago. Mr. Whitney. I think the time through St. Louis is just as quick as through Chicago. Mr. Day. Is it just as short? Mr. Whitney. I have not figured it in miles, but in time we make as good time as through Chicago. Mr. Day. Is there any advantage of one route over another in prompt delivery, or as to less, expense, prompter icing, etc.? Mr. Whitney. I don't know. After a line starts to ship dressed beef by a certain route they usually follow it up through the year, because they have their arrangements made for that route. APPENDIX a. 299 Mr. Day. I have heard it said, in attempted jnstification by some traffic men who represent lines through Chicago, that where reductions from the published rate were made via Chicago it was because of the wickedness of the lines via St. Louis. Mr. Whitney. Yes, sir; Chicago claims it is St. Louis and St. Louis claims it is Chicago, and sometimes Peoria comes in for her share. Mr. Day. Is that the cause of reducing the ratel Mr. Whitney. That is the principal cause. We have Gulf competi- tion on export that affects rates through Chicago, Peoria, and St. Louis and other gateways. Mr. Day. Does this reduction in rate apply equally to traffic des- tined for domestic consumption as to export? Mr. Whitney. Oh, no; we are talking about export business. Mr. Day. Do yon mean to be understood as saying that you carried no domestic traffic at a rate below the published rate? Mr. Whitney. We may have. Mr. Day. What is the fact? Mr. Whitney. I could not tell you. That is a matter of detail that I was not prepared for. 1 had no notice of what was to be taken up here to-day. Mr. Day. Who of your subordinates would know? Mr. Whitney. It is merely a question of record. Mr. Day. Your records will disclose? Mr. Whitney. I suppose our records would tell, of course. Mr. Day. Who has charge of those records? Mr. Whitney. They are the company records. Mr. Day. I assume that, of course, but who is the particular indi- vidual who has charge of those records? Mr. Whitney. You mean of our claim department? Mr. Day. Yes, sir. Mr. WhiTxNEY. Mr. W. F. Booth is our general auditor. Mr. Day. Is Mr. Booth the man who adjusts those claims on packing- house products and dressed beef? Mr. Whitney. He would do nothing more than carry out the iustructiojis I gave him as to the rate. Mr. Day. Do these bills of lading or these bills that accompany the traffic, waybills some people call them Mr. Whitney. Waybills or manifests. Mr. Day. Would they show whether it was export or domestic? Mr. Whiitney. Yes, sir. Mr. Day. He relies on that? Mr. Whitney. You have to have an export bill of lading. We would not consider business billed locally to New York with the simple nota- tion "for export" as export; we would not recognize that. It must be a bona fide export shipment, accompanied by an export bill of lading, booked for a certain steamship for a certain day's sailing. That would become an export shipment. Mr. Day. Do they present that bill of lading for settlement? Mr. Whitney. If it was flatbilled, that would end it so far as the shipper was concerned. Mr. Day. How if it was not flatbilled? Mr. Whitney. If it was not flatbilled that bill of lading would have to be the evidence of the export shipment. Mr. Day. 1 think that is all I will ask Mr. Whitney now. Commissioner Fifer. Is there any reason why a rate for export ship- ments can not be maintained — the regular rate? 300 APPENDIX G, Mr. Whitney. Do you mean the regular tariff rate for export busi- ness? Commissioner Fifer. Is there any reason why a regular published rate can not be maintained on export business? Mr. Whitney. Yes. The different steamship lines, which we do not regulate as far as their rates are concerned, make rates from different points and you have to adjust rates accordingly. For instance, if a rate from Kansas City to London, England, is established via some X>articular route, you have got to meet that. If your rate is not the same as the rate via the route which originally made it, you have to make it via any route you use. We would have to reduce our rate. Commissioner Fifer. But your charge is only to the seaboard, and what has that to do with unsettling rates for export shipment — when your charge is only to the seaboard? Mr. Whitney. We have to make the same through rate and guar- antee it, and the shipment is booked to the steamshij^ company. Commissioner Fifer. That would apply to domestic shipments just as well. Mr. Whitney. No; because domestic shipments are not interfered with by the rates made beyond our points. Commissioner Fifer. You are compelled to adjust your rates so as to get business and not allow other roads to carry it all? Mr. Whitney. Well, I do not know that I understand your point there; but you ask there if the rate to New York could not be maintained, for instance, regardless of what rate was made through Boston, or Port- land, Montreal, or Philadelphia. I say we can not do that, because the rate through Boston, Montreal, or Portland might be out of line with the rate via New York via the steamship lines. It would simply be adjusting to meet the through rate. Commissioner Fifer. What proportion of our export shipments are carried by regular line steamers? Do you know? Mr. Whitney. I could not tell you. The fact of its being a regular line would not mean that rates are always the same by that line, because ocean rates fluctuate. I understand that if they are short of tonnage by some port, why their rates go down in order to fill up their boats, and that would affect another port. I may be misinformed on that, however. Commissioner Fifer. Suppose all the roads reaching the seaboard established and maintained the published rate; could they not do that irrespective of what the ocean rate might be? Mr. Whitney. I do not think they could. Commissioner Fifer. Your testimony here all relates, when you speak of cut rates, to export shipments? Mr. Whitney. Yes, sir; except as I have stated of the domestic, as to which I could not answer. Commissionc)' Fifer. You have not stated anything. Mr. Whitney. I stated I could not answer now; but it is a matter of record which could be easily determined. Commissioner Fifer. Do you publish any rate for export goods? Mr. Whitney . No. Commissioner Fifer. That is all. Commissioner Prouty. Do you publish an export rate for export wheat or flour? Mr. Whitney. No, sir. Commissioner Prouty. Do you participate in that business f APPENDIX G. 301 Mr. Whitney. We occasionally have export shipments of flour and wheat. Commissioner Prouty. Don't you concur in these rates published by other carriers on export wheat and flour? Mr. Whitney. The rates being divided on the river on an arbitrary basis, there is no through tarift" published from the Missouri River to the seaboard. Commissioner Prouty. There are tariifs published from the Missis- sipi)i River to the seaboard. Mr. Whitney. We are the originating line in that case. Commissioner Prouty. Don't you participate in shipments of wheat and flour which go from St. Louis for export ou an export rate? Mr. Whitney. We are the originating line and we don't issue a tariff to cover it. Commissioner Prouty. Don't you concur in the published tariff? Mr. Whitney. There is no tariff. Commissioner Prouty. Is there no tariff from St. Louis to New York on export flour and export wheat? Mr. Whitney. No; we have none. Commissioner Prouty. Have other lines any? Mr. Whitney. Not that I know of. Commissioner Prouty. Is there any such tariff from Chicago? Mr. Whitney. I could not say. Commissioner Prouty. What is the domestic rate on wheat from St. Louis to New York at the present time? Mr. Whitney. It is 116 per cent — 21 cents; 116 per cent of 17 cents. Commissioner Prouty. Now is there not an export rate? Mr. Whitney. Not now there is not. Commissioner Prouty. Is there an export rate to Baltimore? Mr. Whitney. We do not handle any Baltimore business. I could not tell you. Commissioner FiFER. He is speaking of his own road. Commissioner Prouty. I understand; but 1 ask whether he knows there is a published export rate to Baltimore? Mr. Whitney. I do not know. Commissioner Prouty. Has there been during the last summer? Mr. Whitney. I do not think so. Commissioner Prouty. Do you participate in a through rate from Kansas City to a foreign port, like London and Liverpool? Mr. Whitney. Yes, sir. Commissioner Prouty. These provisions all move on a through rate? Mr. Whitney. Yes, sir. Commissioner Prouty. How is that through rate made? Mr. Whitney. It is established there at Kansas City in connection with whatever they can get, in connection with the ocean rate. Commissioner Prouty. Who established that rate? Mr. Whitney. By the combination with whatever rates you can get. Commissioner Prouty. What has the agent of your line to do with establishing that rate? Mr. Whitney. If we could get a very low ocean rate from New York, in connection with our tariff rate and some other fellow could not get as low a rate through his port as ours, he would have to shrink his pro- portion to the seaboard to meet our through rate. Commissioner Prouty. You are not the originating line in Kansas City? Mr. Whitney. No, sir. 302 APPENDIX G. Commissioner Prottty. You have some connection which originates the business there? Mr. Whitney. Yes, sir. Commissioner Prouty. In case a shipment is to be made over your line from Kansas City, who fixes the route by which it is to go? Mr. Whitney. At the combination of the rate from Kansas City to East St. Louis. Commissioner Prouty. Do I understand by that that a line that carries up to East St. Louis says "I will take so much to East St. Louis" and you say "I will take so much to Toledo?" Mr. Whitney. No; the tariff rate from Kansas City to East St. Louis plus the tariff rate from East St. Louis to New York plus what- ever ocean rate we canget, and, as I should say, if we should be low enough, that establishes the rate. Now, the other fellow in meeting that competition, if his ocean rate is higher and he can not take advan- tage of that ocean rate tliat we have must shrink his proportion to meet it to the seaboard. Commissioner Prouty. You are talking about the tariff". I am talk- ing about when it was the tariff tliat the other fellow had was less. That is something else. I want to know in that case who makes the rate over your line. Mr. Whitney. That other fellow makes it for us. Commissioner Prouty. Who says that you will accept that rate? Who determines that you will accept or take business at that reduced rate? Mr. Whitney. We determine it. Commissioner Prouty. Does your line determine it, or the line up to East St. Louis, or your connection east of Toledo determine it? Mr. Whitney. When a line makes a rate that is a legitimate rate, the eastern line simply accepts it. Commissioner Prouty. Have you authority to make a rate from East St. Louis to New York over your eastern connection without con- sulting them ; that is, make a rate that is less than the tariff" rate? Mr. Whitney. No and yes. We have authority where conditions are plain that rates are so and so; we have authority to meet it, of course, but we would not have authority from an Eastern line to make any rate that we saw fit. Commissioner Prouty. You have authority to meet conditions? Mr. Whitney. That is, known conditions. Commissioner Prouty. How much of a cut do you have authority to make between East St. Louis and New York in order to meet couditionst Mr. Whitney. It is not handled in that way. We are not advised that we can cut so much. Con missioner Prouty. You are advised to get the business? Mr. Whitney. It is all business, of course. Commissioner Prouty. And you make whatever rates are necessary to get business? Mr. Whitney. That is, if we want it. Occasionally we do not make it because we do not want it at the rates made through some other gateways. Commissioner Prouty. You told us in your direct examination that the difficulty in maintaining rates between Kansas City and New York was the rate through Chicago ; that you had to make a low rate because the lines through Chicago were making it? Mr. Whitney. Yes, sir; that is the opinion of the St. Louis lines. That is reversed. APPENDIX G. 303 • Commissioner Prouty. How about the Chicago rate! Mr. Whitney. The ocean competition is continual. Commissioner Prouty. Do you say that you do not carry any (hiinestic business to New York at less than the tariff rate? Mr. Whitney. I did not say that. Commissioner Prouty. What is the form of the advice that you give your auditor when you tell him that a certain rate shall be made, and he is to make a rebate in a certain amount? ;\Ir. Whitney. If I should say to him that the current rate until further notice is 29 cents, and give him the date that it goes into effect, and then later on advise him when it is canceled, he will protect any rate during the period named. Commissioner Prouty. That is on domestic? Mr. Whitney, That is about export. Commissioner Prouty. How about domestic? Mr. Whitney. I could not tell you about that now. Commissioner Prouty. Could you tell us what form of advice you give your auditor about it? Mr. Whitney. If we had anything of that kind, it would be handled the same way, whether domestic or export. Commissioner Prouty. The auditor does not inquire whether it is export or domestic? Mr. Whitney. It is not a part of his duties to inquire. Commissioner Prouty. If he is satisfied that the business has been handled, he does not inquire? He does not know whether it is export or domestic? Mr. Whltney. The through bill of lading is evidence of export. Commissioner Prouty. Do you advise him that he is to apply that rebate only to export? Mr. Whitney. Oh, yes ; if we had any domestic, we would say it was domestic, I suppose. Commissioner Prouty. You say you put this rate in effect, and it continues in effect about how long? Mr. Whitney. If we should advise him on such a date that the rate was 29 cents, he would pass claims until I told him it was different. Commissioner Prouty. About how long do those periods run? Mr. Whitney. You can not tell anything about that. I'liey are fluctuating all the time. Commissioner Prouty. Tell us about how long the rate from St. Louis to > ew York was in effect. Mr. Whitney. I think that rate was fully maintained from the time it went into effect — from along about the 1st of August up to the first of the year. Commissioner Prouty. Five months? Mr. Whitney. Yes, sir. Commissioner Prouty. Don't you understand that ocean rates fluc- tuated during that period? Mr. Whitney, I say that was the lowest. Occasionally we would not want to make them. If they get below that, we drop out. There are times when we can not meet conditions, or we do not care to. Commissioner Prouty. Could you furnish the Commission a state- ment showing the amount of business you carried for export and domes- tic between July 1 and January 1, and the rate at which it was carried? Mr. Whitney. Oh, yes; that is a matter of record. Commissioner Prouty. That is all. 30-1 APPENDIX Q. Commissioner FiFER.. Is there any chance that goods carried for export are used in the domestic markets at the seaboard? Mr. Whitney. Ko; it is handled on an export bill of lading. Commissioner FiFER. You think that could not happen? Mr. Whitney. I am sure it could not. It could not with us, because it is sent right to a pier, where it is lightered to the steamship, if it has to be lightered, or taken to the pier where the steamship is docked. It would not be with our consent. After it passes out of our posses- sion — that through bill of lading — we can not control it, but I do not know of any case where it was used that way. Commissioner Prottty\ Do you have any conference with your West- ern connections from Kansas City ui> to East St. Louis as to what the rate shall be? Mr. Whitney. I suppose the people on the Missouri River — I sup- pose rates are talked over there. Commissioner Prouty. Your man in Kansas City advises you that in order to get the business he has to make a certain rate? Mr. Whitney. It virtually amounts to that; yes. Commissioner Prouty. Does he advise you how much of a cut the carrier up to the Mississippi Kiver will make? Mr. Whitney. Ino and yes. It is divided between the rivers. The subdivisions of that amount would not cut any figure in the through rate. When the through rate is established, that ends it. The question as to how it is divided does not bear ou the question at all, as I under- stand it. Commissioner Profty. It does on the question of who gets the money and who pays the rebate. Mr. Whitney. I shou.d not think it made any difference whether it came from one line or another. If there is a certain shrinkage, I should not think it would make any difference where it came from. Commissioner Clements. You can furnish a statement showing the amounts collected on all shipments on these particular goods for the last calendar year ? Mr. Whitney. Oh, yes ; it is a mere matter of record in the auditor's office. Commissioner Clements. Showing how much was carried and what the rate was for export and what for domestic? Mr. Whitney. I can tell you all about it. Commissioner Clements. What the published rate and actual rate was and what rebate was paid back? Mr. Whitney. Tell you all about it. Commissioner Clements. Can't you add to that statement, showing what other carriers participated with you in that shrinkage, and how much they shrunk their rates? Mr. Whitney. I suppose it is a matter of bookkeeping. I can not speak for our auditing department. Commissioner Clements. It is adjusted in some way and a record kept. W^e would like to see it all the way through — how much the shrinkage was and how much each road helped to make it. You can furnish that statement for the calendar year on these products? Mr. Whitney'. Yes, sir. Commissioner Clements. And you can show in columns the amount carried, the time when it was carried, the name of the shipper, and then the amount of rebate paid and who it was paid by besides yourself ? Mr. Whitney. Yes, sir. APPENDIX G. 305 Commissioner Prouty. On a throup:li shijimeut from Kansas City, is the rebate all paid in one lump, or part by the line from the Missouri Kiver up to St. Louis, and the lines east of the Mississippi liiver the other part of it? Mr. Whitney. There is no rule covering that. It might be some- time that the line west of the river paid ir, and it might be another time it would be paid by the line east of the river. There would be a charge between the two companies. It is a mere matter of detail. The Chairman. I infer from your testimony that your line has iiabitually participated in export shipments of dressed meats and pack- ing-house products originating at Kansas City and carried at less than the published tariff? Mr. Whitney. Did you say largely? The Chairman. Habitually. Mr. Whitney. I say we handle them occasionally. We do not have a continual run of it. The Ohairbian. More or less frequently? Mr. Whitni; Y. Yes, sir ; but we have had no fresh meat from Kansas City since the 1st of June. The Chairman. So your participation in that traffic has been con- fined to packing house products? Mr. Whitney. Provisions. The Chairman. You have an agent at Kansas City? Mr. Whitney. Yes, sir. The Chairman. Will you kfndly explain how he would arrange with some particular shipper for traffic at a given time, on a given date? What is his method? Mr. Whi'iney. lie would ascertain from the different steamship lines — he would first have to know what was going and where it was going to. He would be asked to make a quotation on a certain shipment. The Chairman. By whom? Mr. Whitney. By the party who would have the business to move. The shipper would ask him to give him a quotation. The Chairman. Would the shipper come to him or would he go to the shipi)er? Mr. Whitney, If he was active he would go to the shipper. The Chairman. In some way your agent in Kansas City and the shipper of provisions meet together? Mr. Whitney'. No; he asks us for a quotation and we give it, unless you call that getting togetiier. He will make that quotation if he wants to get the business. That is all there is to it. The Chairman. They come in con tact; they have a personal interview? Mr. Whitney. Ko, sir; not necessarily. The business is done by phone, because the packing houses are located way out at the edge of town. It is done generally by phone. The Chairman. He says there is a certain amount of traffic ready to move? Mr. Whitney. Yes, sir. The Chairman. And he names to that shipper a rate at which your line will carry it? Mr. Whitney. Yes, sir. The Chairman. And that proposition may or may not be accepted I Mr. Whitney. That is it. The Chairman. If the proposition is rejected he may make another, still lower? 741a— 05 20 306 APPENDIX G. Mr. Whitney. No; tluit ends it, because he has made the best he can make, aud that settles it. The Chairman. He is sui)i)osed to know the best rate that he can giiiiraiitee from Kansas City to the foreign destination over your line? j\I !•. Whitney. Yes, sir. The Chaiiiman. And when he comes to make the arranoemcut witli the sliijjper lie names at the outset the lowest rate he can make on the tral'lic? Mr. Whitney. Yes, sir. The Chairman. And ii" that is accepted, the traffic is delivered at Kansas City to some line which in turn gives it to you at East St. Louis f Mr. Whitney. Yes, sir. The Chairman. Do you have any particular connection between Kansas City and East St. Louis, or do you get that traffic from all .lines? Mr. Whitney. Over all lines except the Wabash. Tliere is not a very free intercliange with the Wabash. The CHATRAiAN. What did you meau that traffic would be billed in such a (!ase at the tariff rate? Mr. Whitnev. I stated that probably since about the UOth of July or 21st of July it has been billed flat. The Chairman. That is, billed at the actual rate charged? Mr. Whitney. Yes, sir. The Chairman. That is since about what time? Mr. Whitney. I think about July -51 we gave instructions of that kind, or August 1, or somewhoie in there. The Chairman. And since that time has all of the export traffic in which you have i)aiticipated been carried at tbe actual rates named in ths bills of lading f . Mr. Whitney. Yes, sir. The Chairman. Prior to that time was there a published tariff for export? Sir Whitney. For export, do. We have no tarifi on export. The Chairman. Then, again, what did you mean by saying that the traffic was billed at the tariff rate, and then afterwards a claim was made for the difference between that rate and the rate agreed upon? Mr. Whitney. That was prior to the time I speak of. ^ The Chairman. So at some time there was a tariff rate? Mr. Whitney. The same tariff that is in effect now has been in efle(;t for a year. The 35-cent rate from East St. Louis to New York has been in for a year. The Ciiaikman. Is that the domestic tariff'? Mr. Whitney. That is the domestic and export rate, unless there is a special export rate. The Chair:man. Then, so far as published tariffs are concerned, there is no dilferen(;e between export and domestic? Mr. Whitney. Not with us. The Chairman. Has there been at any time? Mr. Whitney. Not since 1 have been with the company. The Chairman. Now, going back to the period prior to the time when you billed at a flat rate and when some rebate arrangement was made, I understand you to say that the traffic would be billed at the published tariff rate, which would be the domestic rate from Kansas City to New York, and then a claim would be made for the difference APPENDIX Q. 307 between that rate and the rate which had been actually agreed upon for that shipment? Mr. Whitney. Yes, sir. The Chairman. By whom would that claim be made? Mr. Whitney. Well, there are two ways of handling that. For con- venience it might be that the shipper would pay the correct rate; that is, he would pay the correct rate, prepay it, for instance, and while billed at the tariff rate, when the business arrived at New York at the tariff rate the Eastern agent at l^ew York would apply for relief for the difference. That is probably the general way. Then the export bill of lading is the evidence there, and, on the other hand, the evidence would be in the auditor's ofBce. The Chairman. Does that mean when the shipper paid the published tariff rate that the claim for rebate would be presented by some con- signee or agent at New York? Mr. Whitney. On the arrangement I speak of 1 The Chairman. Yes. Mr. Whitney. No; he is through with it. The shipper is through with it then. The Chairman. In no case has the shipper paid the full tariff' rate? Mr. Whitney. Oh, yes. Then the other plan would be for the shipper The Chairman. Let us stick to that for a moment. Take the case where the shipper pays the full tariff" rate. That would be 35 cents? Mr. Whitney. Yes, sir. The Chairman. From Kansas City to New York? Mr. Whitney. From East St. Louis to New York. The Chairman. What would it be from Kansas City to New York? Mr. Whitney. Fifty-three and one-half cents on the full combina- tion of tariff' rates. The Chairman. The full published tariff" rate for this trafiic would be 53i cents from Kansas City to New York? Mr." Whitney. Yes, sir. The Chairman. Whether for export or domestic use? Mr. Whitney. Yes, sir. The Chairman. Now, were there cases in which the Kansas City shipjier paid the 53i cents in advance, at the time of shipment? Mr. Whitney. I could not answer that for the business clear through from Kansas City, because the tariffs from Kansas City to East St. Louis would have nothing to do with that. It would be a pie- paid shipment, and we would not be interested in the back charges up to us. It would come to us prepaid. The Chairman. You may not know in a particular instance, but do you know generally? Mr. Whitney. We would know at the time in what way it had been settled at Kansas City. That would only develop several months afterwards, when the claim was j)resented. If the claim was not pre- sented, it would follow that they were not. The Chairman. I assume there were cases where the full tariff" rate was paid at Kansas City. Mr. Whitney. No; I am speaking now of the proportion. So far as we are concerned, I could not tell you at Kansas City whether they are ever paid in full or not. The Chairman. Does it come to this : That sometimes that claim is made by the ISlansas City shipper and sometimes by an agent or con- signee at New York ? 808 APPENDIX G. Mr. Whitney. Yes, sir; in one case it would be for the equalization of the through export rate, paid to the shipper to equalize the rate made by another route. The other would be the same rate settled for the relief of the agent at the seaboard. The Chairman. This 53J cents tariff rate from Kansas City to New York is divided between the different carriers, when you j)articipate in traflic, in certain agreed proportions'? Mr. Whitney. It is an arbitrary division between the rivers. The rate from Kansas City to the Mississippi is not prorated on a mileage basis like it is east of the Mississippi River. The Chairman. There is an arbitrary from Kansas City to East St. Louis'? Mr. Whitney. That is the way the rate is made. The Chairman. Does the prorate begin at East St. Louis 1 Mr. Whitney. The proportion of the rate east of St. Louis is divided on prorate basis, based on the mileage of each line. The Chairman. When a rebate was i^aid, was that divided between the different carriers, or shared by the different carriers in the same l»roportion in which they share in the tariff rate? Mr. Whitney. That is pretty hard to tell here, because it would dej)end The Chairman. How is it so far as your line is concerned ? Mr. Whitney. I am speaking of it. There is no ironclad rule of that kind. As to the question of dividing the shrinkage, that is merely a matter of agreement from time to time; but, at any rate, it would not be on a prorate basis, as I say. The Chairman. Does it come to this: That the shrinkage or conces- sion, whatever name you may call it by, would not regularly or ordinarily be borne by the different carriers in the same proportion in which they share in the full tariff rate*? Mr. Whitney. It would be about that way. It would amount to l)robably the same thing. The Chairman. It would be approximately the same thing? Mr. Whitney. Yes, sir. The Chairman. Now, when a claim was presented to your company, would it be for your share of the concession or for the entire concession *? Mr. Whitney. Well, it is both ways, I imagine. It depends entirely on the arrangement at the time. The Chairman. Then some arrangement is made by your repre- sentative with the shipper in reference to the presentation of this claim for rebate? Mr. Whitney. It might be that way. That is right. The Chairman. What other way would it be? Mr. Whitney. Well, it would be either the whole presented to us and we collect from all the lines, or it might be presented separately. That would only be a matter of detail. After the rate is made it don't make any difference how it is taken care of, as I can see. The Chairman. When your agent can secure a consignment of this kind of traffic from Kansas City at a rate agreed upon with the shipiier, does the arrangement include the presentation of the claim, by whom and to whom for any concession? Mr. Whitney. No ; I think not. The Chairman. If the claim is to be made by the shipper, how does lie know? Mr. Whttney. He don't care wliere it comes from. We have made him the rate, and we wiU be responsible for that ratej of course. APPENDIX O. 309 The Chairman. If you made him the rate, he would hold you respon- sible for that rate ? Mr. Whitney. Yes, sir. Commissioner Fifee. Is that true of Liverpool or other foreign destinations? Mr. Whitney. The shrinkage is up to the Atlantic seaboard. The Chairman. He must know at some time whether he is to present his claim to your company or to somebody else. Mr. Whitney. He would i^reseut them to our agent at Kansas City. The Chairman. The claim would be made out at Kansas City in such case by tbe shipper at Kansas City, and delivered to your agent at that place? Mr. Whitney. Yes, sir. The Chairman. And your agent would turn the claim over to the auditing department? Mr. Whitney. Yes, sir; turn it over to the auditing department with a memorandum of the arrangement for taking care of the shrinkage. The Chairman. That arrangement would c cents is as much as we have ever shrunk the rate. If it was necessary to shrink it more than that, we would not want it. The Chairman. The rate from East St. Louis to New York was 35 cents? Mr. Whitney. Yes, sir. The Chairman. That means 18| cents from Kansas City to St. Louis? Mr. Whitney. It w^mld if there was nothing off there. The Chairman. So, then, you say <» cents is the largest concession in which you have participated; you mean G cents off' of the rate of 35 cents from East St. Louis to the seaboard? Mr. Whitney. Yes, sir. The Chairman. But it does not follow that the traffic paid 18^ cents from Kansas City to East St. Louis? Mr. Whitney. No. The Chairman. And probably does not in many cases t Mr. Whitney. In many cases. The Chairman. In such a case as that would there be two claims made, one against the carrier to East St. Louis and another against your company? Mr. Whitney. No; the claim would be presented to our agent at Kansas City. The Chairman. And that would be for the entire concession? Mr. Whitney. Yes, sir. The Chairman. And what would he do? It would be just one claim made out by one shipper for the difference between the rate agreed on and the rate of 35 cents'? 310 APPENDIX O. Mr. Whitney. Yes, sir. The Chairman. What would he do with it? Mr. Whitney. Prepare a statement and send it to the general auditor. The Chairman. Would he call on them to pay the whole? Mr. Whitney. It might be. There is a system that would make it possible to do that. The Chairman. But your company would only pay 6 cents out of that? Mr. Whitney. Our comi>any and its connections. The Chairman. Your connections east? Mr. Whitney. Yes, sir. The Chairman. And if any greater concession was made — any concession greater than that — it would be borne by the line between Kansas City and East St. Louis'? Mr. Whitney. Yes, sir. The Chairman. Those claims are made in the name of the shipper, I suppose, in such a case as I assume? Mr. Whitney. Yes, sir. The Chairman. And when the claim is audited, how is it paid? Mr. Whitney. I suppose it is paid by check or voucher. The Chairman. And the records of your company show all those transactions? Mr. Whitney. Yes, sir. The Chairman. Can you tell approximately what share of the aggregate traffic in provisions from Kansas City to the Atlantic sea- board is carried by your road ? Mr. Whitney. I could not tell you even approximately. It would only be a guess on my part. The Chairman. Do you not have some idea about it? Mr. Whitney. There is a record that will determine it exact. The Chairman. Who keeps that record? Mr, Whitney. I think there is a record kept in Kansas City. I think the chamber of commerce or some of those concerns there keep it. The Chairman. There are accessible data from which it can be deter- mined just what share each road carried of the aggregate traffic? Mr. Whitney. I think so. The Chairman. Now, is it your understanding that when a 29-cent rate was made by your line from East St. Louis that the same rate was made by all other lines from East St. Louis at the same time? Mr. Whitney. I could not say as to that. The Chairman. What is your understanding of it? Mr. Whitney. I imagine that if they wanted any of the business they would probably have had to make that rate. The Chairman. You are able to tell about what rates are received by other lines than your own from East St. Louis? Mr. Whitney. We try to keep posted. That is a part of our business. The Chairman. Have you reason to believe that traffic of this description has been carried through East St. Louis at less than 29 cents? Mr. Whitney. I do not believe there has. The Chairman. You maintained a 29-cent rate on that, and there has been no lower rate than 29 cents for the last six months? Mr. Whitney. All the information we have would show that there has not been. The Chairman. What did I understand you to state as the fact, that APPENDIX G. 311 there is the actual rate that has j)revailed over your line the last six months — 29 ceutsi Mr. Whitney. That was the lowest. The CriAiEMAN. It was not uuiformly 20 cents? Mr. Whitney. No, sir; it tluftuates every week. The Chairman. When it is 29 cents on your road, do you understand that it is l-'9 cents on other roads at the same timei Mr. Whitney. Throuji'h St. Louis? The Chairman. Yes, sir. Mr. Whitney. I would understand so if they handled it. All lines do not handle provisions. The Chairman. Do you saj^ from such knowledge as yon have of the situation that practically tiie same rates prevail on the same day during the same week via all lines from St. Louis to the same seaboard destinations f Mr. Whitney. No: it is a question of finding out. Some line may be a little late in getting information and may be a week behind. The Chairman. Then it may be that at the time that you are carry- ing at 29 cents some other line is getting MO cents? Mr. Whitney. I do not think they would get very much at 30. The Chairman. Some might be carrying at 28? Mr. Whitney. If they were we would not be carrying any at 29. The Chairman. Does it not then follow that rates must have been practically the same at the same time, or else some one carrier would get all the business at a particular time? Mr. Whitney. No; if the rates are settled down to one settled rate and it is discovered that the rate is a certain figure, then each line is on an equal footing. The Chairman. Was there a considerable period during last year when that was the condition? Mr. Whitney. Along the first of the year. The Chairman. As to the 29-cent rate, was^there a considerable period when all the roads carried at 29 cents? Mr. Whitney. Through East St. Louis? The Chairman, Yes, sir. Mr. Whitney. It probably settled down to a 29-cent rate; that is, after the rate is made and it is discovered what the rate is. The Chairman. Have you carried any provisions at the full tariff rate during 1901? Mr. Whitney. Yes. The Chairman. Have you carried provisions from East St. Louis, say, to New York, on which 35 cents was actually paid and retained by the carriers? Mr. Whitney. Yes, sir. The Chairman. Are you able to say what proportion, approximately, of the traffic you have carried paid the tarilf rate of 35 cents? Mr. Whitney. It was a very small precentage of the total, and it was probably along about the 1st of January of last year. The Chairman. You are accustomed to indulge in New Year's resolutions? Mr. Whitney. Yes, sir; we all swear ofioii New Year's and begin again. The Chairman. Is it a fact that from January 1, 1901, there was a period when the tariff' rate was actually applied by all the roads? Mr. Whitney. Yes, sir; I think it was. The Chairman. How long did it last? 312 APPENDIX Q. Mr. Whitney, I tliink it lasted probablj^ two weeks. The Chairman. Did any traffic move duiiug that timet Mr. Whitney. Yes, sir. Tlie Chairman. Over your line? Mr. Whitney. Yes, sir. The Chairman. And over other lines? Mr. Whitney. Yes, sir. The Chairman. What led you, Mr. Whitney, to direct your agent to make a lower rate than 35 cents? Mr. Whitney. I think it was the other way. The first of the year, when rates tightened up, for reasons best known to ourselves we got a very large portion of the provisions, and probably the other lines thought there was something wrong, and of course they probably went aftfir some of the business. The Chairman. Confining yourself to the period of time in the early part of last year, when you got a large share of the traffic at 35 cents Mr. Whitney. I did not say a large share-of it. We got some of it. The Chairman. At that time, or for a short time after the 1st of January, 1901, you understand all of the roads got the 35 cents? Mr. Whitney. That is, through St. Louis. The Chairman. Now, there was some period later than the 1st of January when you began to make a rate less than 35 cents. Can you state when that was? Mr. Whitney. About the third week in January. The Chairman. What induced you to do it then? Mr. Whitney. On account of competition through Chicago. The Chairman. What was the evidence of that competition? Mr. Whitney. That is pretty hard to tell or explain. It is some- thing that is known at the time. It is what we call an open secret, what the rates are, at the time, and our man out there, like all the rest of the representatives, knows what the rate is. The Chairman. Does that mean that your agent in Kansas City discovered, about the 20th of January, 1901, that provisions were moving by way of Chicago at less than the tariff rate? Mr. Whi'I'NEY. That would be the inference. The Chairman. Do you remember whether that was the fact? Mr. Whitney. I would say that that was the reason that we did readjust it at that time. I would say that was the fact. Tlie Chairman. As a matter of fact, you did readjust it about that time? Mr. Whitney. Yes, sir. I do not think we handled any the third week. We handled a few the fourth week, but during the month of February I do not think we handled any. The Chairman. And since that time have you carried any traffic which paid the 35 cents tariff rate? Mr. Whitney. I doubt it. That is, export traffic? The Chairman. Any traffic. Mr. Whitney. Our domestic — I could not say as to that, but I think we have on the domestic; in fact, I know we have carried it at 35 cents. The Chairman. Since the 1st of January? Mr. Whitney. Yes, sir; I kuow we have. The Chairman. You have carried provisions to New York for whteh you got 35 cents? Mr. Whitney. Yes, sir. The Chairman. But I understand you to say that was a small per- centage. APPENDIX a. ' 313 Mr. Whitney. The exj)ort as compared with the domestic. The domestic is a sranll proportion. Very few domestic provisions were handled. The Chairman. Bnt the provisions actually consumed in the East are not a small proi)ortion of the total shipments of provisions out of Kansas City and other Missouri River points, are they? Mr. Whitney. I do not know anything about that. I know we do not handle domestic provisions to amount to anything. The Chairman. Why not? Mr. Whitney. I could not tell you. Commissioner Prouty. Do you know whether any other line does? Mr. Whitney. No; I could not tell you what would be the per cent of domestic as compared with export. I must say 1 am not informed on that. The Chairman. But in your case you say it is very small? Mr. Whitney. It is very small. The Chairman. I think I am warranted in inferring from your state- ment that the amount of provisions you carried subsequent to January 1, 190 J, for which you got 35 cents was very small? Mr. Whitney. Yes, sir. The Chairman. And the bulk of the provision traffic in which you participated during that year was carried for less than the published tariff? Mr. Whitney. Yes, sir. The Chairman. Well, Mr. Whitney, is it not a fact that very little of this traffic has been carried at the domestic rate, in iact? Mr. Whitney. Do you mean domestic business? The Chairman. Any kind of business. Mr. Whitney. Do you mean domestic business at the tariff rate? The Chairman. Yes. Mr. Whitney. I do not know. Our information does not point that there has been any disturbance in the domestic rate. The Chairman. You say that out of the total traffic in provisions which you have carried only a very small percentage or fraction has paid you 35 cents — as to the entire provision traffic which you have carried, a very small proportion of it has i)aid you 35 cents? Mr. Whitney. Y'"es, sir ; for the reason that practically 90 per cent of the provisions we carried were for export. The Chairman. Is that probably the case with the other lines? Mr. Whitney. I could not tell you. I do not know the amount of domestic they have compared with through export, but I suppose the export with other lines is about the same as with us. The Chairman. Y"ou do not think that 90 per cent of the provisions that move east are export? Mr. Whitney. I do not know. The Chairman. Wliat do you think? Mr. Whitney. I would not ventui-e a suggestion on it. The Chairman. Is it not a fact that a large part of this traffic is destined for domestic consumption? Mr. Whitney. I do not think so. The Chairman. It has not been carried by your linef Mr. Whitney. It has not been by our line. The Chairman. What reason have you to think it has not been car- ried by other lines? Mr. Whitney. I never heard anything about domestic provisions. The Chairman. If the provisions that are actually consumed in the 314 APPENDIX a. East are carried by these lines at tariff rates, what is the reason you do not get any of that traffic? Mr. Whitney. 1 could not tell you, unless it be that these other lines — these stron<;er lines, as we call tliein — have facilities for reaching local points. We Lave access to Philadelpliia and New York on au equal footing with other lines. The Chairman. You could not take provisions for interior destina- tions like Buffalo, Eochester, or Albany so well ? Mr. Whitney. I do not think we could handle them in as good shape as other lines. The Chairman. So at tariff" rates on that traftic you would not expect to participate very extensively in if? Mr. Whitney. No, sir; and they have packing houses on those tracks. On our export business we name a rate, and we can send it any route we see lit. Y"ou can not do that with domestic, because it has to go a certain route. That may account for the fact that we do not handle many domestic provisions. The Chairman. If I understand your statement, it comes to this. You say there is no tariff' on export traffic of this kind; that the only published tariff is the domestic tariff' of 35 cents; that down to some time last summer the provision traffic, so far as you participated in it, was billed at the domestic rate of 35 cents, and then when a concession was made to somebody in some form, not exceeding cents in any case, it was billed at the actual rate, and that you carried very little domes- tic traffic which paid the 35 cents? Mr. Whitney. No; I did not say that. I said we carried very little domestic and that we got 35 cents on domestic bnsiness, but I wonld not say positively that every pound of it was carried on that rate. If of it was carried on that rate. If there was any concession from that, it would not amount to anything at all. The Chairman. Since some time last summer this traffic for export has been billed at the actual rate agreed upon? Mr. Whitney. Y^es, sir. The Chairman. In point of fact, does this rate fluctuate from day to day? Mr. Whitney. From week to week ; probably every day. The Chairman. Did you, during the season of 1001, participate in the movement of grain for export? Mr. Whitney. Why, I guess we had some wheat from East St. Louis to Philadelphia. The Chairman. Not generally through the year? Mr. Whitney^ No. The Chairman. You have not generally engaged in that business during the year? Mr. Whitney. No. The Chairman. You spoke of competition by the Gulf ports. Is it your understanding that a good deal of this provision traffic originating at Kansas City leaves the country by the Gulf ports? Mr. Whitney. No; I do not think there is any trans- Atlantic busi- ness to amount to anything. The Chairman. Then what did you refer to when you spoke of com- petition by Gulf ports ? Mr. Whitney. It probably would if we did not control it through the States. The Chairman. I thought you made that statement. Mr. Whitney. We were talking at that time about the grain and • APPENDIX O. 315, grain products; in a general may asking how rates were made in com- petition. That is why 1 made that remark there. It did not apply particularly to provisions. The Chairman. How is it that you do not carry any dressed meats'? Mr. Whitney. Well, that is pretty hard to tell. The shipper may not want to give it to us. He may not be fixed to ship by our line. The Chairman. You appear to participate in the carriage of provi- sions to a considerable extent. Mr. Whitney. Well, there is a great difference about dressed beef as to time and service. You see, it is a very valuable product and per- ishable, and it is not shipped like provisions. You have to send it by established routes; you can not change it around. The Chairman. The general fact is that you do not carry dressed meats to a great extent over your line? Mr. Whitney. No. The Chairman. Won't you repeat the points of departure of traffic from your line and the Eastern connections which join with you in the movement of provisions'? Mr. Whitney. Ohio City and the Erie The Chairman. Traffic leaving your rails there would go east via the Erie? Mr. Whitney. Yes, sir; and its connections; then Continental and the Nickel Plate road and its connections; Toledo and the Lake Shore and its connections, and Toledo with the Michigan Central and its con- nections. I would like to qualify that by saying that we have not sent any provisions lately through Toledo and the Michigan Central and the Lake Shore, but there is no special significance in that. To Ohio City and Continental saves that much of a haul. The Chairman. You go east by different carriers. Mr. Whitney. The question of intermediate routing does not cut any figure. The Chairman. If the traffic leaves your rails at Ohio City, it would go from that point by the Erie*? Mr. Whitney. Yes, sir. The Chairman. And if it left at Continental Mr. Whitney. That would go by the Nickel Plate road. The Chairman. And at Toledo by the Lake Shore or the Michigan Central? Mr. Whitney. Yes, sir. The Chairman. Are Ohio City and (Continental in the neighborhood of Toledo? Mr. Whitney. Ohio City is 90 miles from Toledo — 90 miles this side of Toledo. The Chairman. What determines that traffic shall go east by way of the Nickel Plate or the Lake Shore? Mr. Whitney. We like to even up our interchange with our connec- tions. The Chairman. Does the question of the actual rate enter into that matter? Mr. Whitney. No, sir. The Chairman. Not at all? Mr. Whitney. No, sir. Now, let me qualify that. It might be at times that some Eastern line, for some reason, would not care for export provisions. The Chairman. That is to say, some Eastern connection might be unwilling to join with you in carrying at a 29-cent rate? 316 APPENDIX a. • Mr, Whitney. No, sir; tLat would not be the point, but that they would not care for them at all. Their line might be in a congested condition and they would not want them at all. That would be an excei)tiou to the rule. The Chairman. And it would not in A,\\y case be because the Erie or the Nickel Plate would make a better rate than the Michigan Cen- tral, for instance? Mr. Whitkey. No, sir; the rate is made at the point of shipment, and that ends it. There is no question of competition with our Eastern connections on that business. The Chairman, Does your agent, when he makes a through rate at Kansas City, determine the routing! Mr. "Whi'J'NEY. Yes; unless I told him we would like to even up our interchange. The Chairman. Unless he has instructions from you, he routes that traffic? Mr. Whitney. Yes, sir. The Chairman. What considerations control him in dividing it up or in determining at which point it shall leave your rails? Mr, Whitney. As this business all goes through to connect with steamers, these shippers all have their ideas as to what lines can make the best time. For instance, during the washouts last month down East the Lehigh Valley could not handle any. The shipper would say, "JDon't handle it via the Lehigh," and the Lehigh didn't get any. That fluctuates. Some particular line for the time could make better time than the Lehigh Valley, and again the Lehigh Valley could make better time for the time being. It is a continual shifting, the same as rates. Commissioner Clements. I wish you would put with your statement that you are to furnish a copy of one of these rebates, showing in what form it is made and the entries upon it, how passed upon, and how allowed, and by what authority your connections authorize the pay- ment of it? Mr. Whitney. I would say there is no prescribed form. You can not govern the shipper as to how he shall present it. Commissioner Clements. As a matter of fact, or practically, how does he present it — the claim for rebate? Mr. Whitney. He would put in a bill for so many pounds of provi- sions shipped on a certain date, and the rate would be shown, the cur- rent rate at that time, and we take that, and all over that we have charged is refunded. Commissioner Clements. Now, he puts in a claim for $100. He has paid the published rate and no more. Does he designate his claim as a rebate or refund? Mr. Whitney. No; simply on ocean contract so and so. It is merely a protection of the ocean contract. Commissioner Clements. He just designates the shipment as a contract? Mr. Whitney. It is a contract. Commissioner Clements. Does he call it a rebate, loss, or damage, or what? Y^ou do not pay any claim that conies into your office, do you? Mr. Whi'JNEY. If a claim comes in the auditor's office that is improper, or that the auditor has no pre\ious advice of, that claim is turned dowq.. Commissioner Clements. What do they call it! APPENDIX Q. 317 Mr. Whitney. It is notLing more tliau the current rate. It is an overcharge claim. Commissioner Clements. It i)asses through the office as an over- charge claim'? Mr. Whitney. Yes, sir. Commissioner Clements. I wish you would send us a fair sample of one of those claims, indicating everything that is done about it in your office or by anybody connected with your road; both by your road and its connections. Mr. Whitney. All right. Commissioner Prouty. You say about August 1 you stopped bill- ing at the tariff' rate and began billing at a flat rate. Why did you do that? Mr. Whitney. Our shippers said that other lines were billing at flat rates, and upon investigation we found it was so and we immediately gave instructions to do the same thing. Commissioner Prouty. Did you ascertain why they were doing it"? Mr. Whitney. It didn't make any diflerence whether it was handled flat or the other way. I think the flat billing is the preferable way. Conmiissioner Proxtty. Were you advised about that time that you were not obliged to publish and adhere to the export rates? Mr. Whi'iney. No, sir. Commissioner FiFER. You say the third week in January you con- cluded to cut the rate on export business. Did you fix a sum that would secure the business? Mr, WiiiTNKY. The first tw6 weeks we handled it at the tariff' rate. The third week there was a break. I do not know that we got any the third or fourth week, but during February we did not handle anything. Commissioner Fifer. During any time do you have a fixed rate or carry at any rate that will secure the business? Mr. Whitney. During the year the thing gradually settles down to a certain thing. At the middle of the year it has run into a hole. It is evened up, and that becomes the rate. Commissioner Fifer. Is that by agreement with other roads or does it just settle down? Mr. Whitney. No; you might meet another freight agent, and by discussion it might be brought out that they are all about on the same level — that the other St. Louis lines are about the same as ours, and that is all there is in it. Mr. Day. Do you file any tariff's with the Interstate Commerce Com- mission? Mr. Whitney. Yes, sir; all of them. Mr. Day. When did you file a tariff on packing-house products from the Mississippi River to New York? Mr. Whitney. I suppose it has been in effect for a year. Mr. Day. Did you file it or concur in the tariff' of another road? Mr. Whitney. Our tariff. Mr. Day. Your own? Mr. Whitney. Yes, sir. Mr. Day. Do you know or are you aware that there is a clause in the tariff's filed with the Interstate Commerce Commission that the export rate shall be made up by adding the domestic rate to the ocean rate at the present time? Mr. Whitney. That applies on grain, does it not? Co«imissioner Prouty. It applies on packinghouse products except through Boston. 318 APPENDIX G. Mr. Whitney. I munt have passed that. I am not clear on that point. Commissioner Prouty. Don't your tariff state that the export rate shall be made by adding the domestic rate to the ocean rate, but to Boston li cents lower? Mr. Whitney. I do not know that it does. Mr. Day. Where you carried tratfic at the published rate, say 35 cents, at the time you supposed that was the going rate, and the ship- ])er subsequently discovers that a rival shi])per at that time had a lower rate, do you then readjust your rate? Mr. Whitney. Do you mean on advice from the shipper? Mr. Day. Or when you ascertain that to be true. For example, you have taken, say, a large quantity at 35 cents, and then you subsequently discover that at the time you took that another road was carrying at a 29-cent rate, or any rate less than 35 cents, is it your practice to refund down to that rate? JNIr. AVhitney. If we wanted the business we would meet the rate. Mr. Day. I mean as to past traffic. If you had taken traffic at 35 cents, and carried it through at 35 cents, and it was discovered that a rival line had carried at a less rate, do you refund? JNIr. Whitney. AVe do not make it retroactive. Mr. Day. It is always done on agreement? Mr. Whitney. Yes, sir. Mr. Day. That is all. Witness excused. D. T. McCabe, having been duly sworn, testified as follows: Mr. Day. Mr. McOabe, state your official relation to the Pennsyl- vania lines. Mr. McCabe. Freight traffic manager of the Pennsylvania lines west of Pittsburg. Mr. Day. The purpose of this inquiry is to ascertain the rates and conditions under which packing-house products and dressed meats have been carried during — go back to July 1 of last year. Take that six months. Just tell the Commission what has been the practice on the lines under your control. Mr. McCabe. With regard to the packing-house product rate? Mr, Day. Take the packing house rate from the Missouri River and the Mississippi River through Chicago to the Atlantic seaboard. Mr. McCabe. We make no effort to control packing-house freight from the Missouri River. We do not solicit it. If it comes to us, it comes unsolicited on our part. We do solicit and try to control packing- house freight from Chicago. We have no direct line of our own to the Mississippi River; we work through our connections. Mr. Day. Don't you have a line, or control a line, which extend to St. Louis? Mr. McCabe. No, sir. Mr. Day. Don't the Panhandle extend to St. Louis? Mr. McCabe. Only to Indianapolis. The Vandalia line does. Mr. Day. And that is an independent road? Mr. McCabe. That is a road in the hands of receivers. Mr. Day. You work over that line? Mr. McCabe. Yes, sir; over the Vandalia line. Mr. Day. And that has been classed as a Pennsylvania linet Mr. McCabe. It is generally recognized as such. Mr. Day. You work in harmony ? Mr. McCabe. Yes, sir. APPENDIX a. 319 Mr. Day. In conjunction with that line or any other line leading up to St. Louis have you participated in any shrinkage of rates on pack- ing-house products, whetlier from points west of the Mississippi River or from the Mississippi River to tlie Atlantic seaboard? Mr. McOAEE.-Ican not answer that definitely as to the route via St. Louis, because we do not make the rates from St. Louis. They are made by the Vandalia line; but if they did make a rate over our line we would ]>articipate in it. Mr. Day. If they did make a rate less than the established rate, less than the rate establislied according to law, and shrink it, how would you become aware of the tact that the rate was less than tariff where they took traffic that you participated in ? Mr. McOabe. I suppose possibly through settlements that might be made. Mr. Day. Who would the settlements be made with on your line? The Vandalia would call on you for settlement? Mr. McOabe. The Vandalia Avould call on us for settlement of our l)roportion. Mr. Day. Through whose hands would claims of that character pass? Mr. McOabe. They would pass through the general officers of our company — the freight office. Mr. Day. 1 hrough your office? Mr. McOabe. Not necessarily through my office; through the general freight oil ice. Mr. Day. And the general freight office is under your control? Mr. McOabe. Yes, sir. Mr. Day. Who in your general freight office would have principal charge or control of matters or claims of that character coming from the Vandalia line? Mr. McOabe. Mr. Hill. Mr. Day. They would pass through Mr. Hill? Mr. McOabe. They would pass through his office. Mr. Day. Now, on the other branches, just state whose hands they would pass through ? Mr. McOabe. In what respect? Mr. Day. In the settlements of these claims coming from the Van- dalia, where the Vandalia was the initial line in taking packing-house products to points east in which your line i)articipated, I want to know how those claims would be adjusted between your line and the Vandalia line. Mr. McOabe. They would go from the general freight agent to the accounting department, and we would make proper remittance to the Vandalia line for the proportion. Mr. Day. What department of the Vandalia line would transmit the claims or accounts to your road? Mr. McOabe. I think their accounting department. Mr. Day. You say on the Sguthwest lines they would go to Mr. Hill ? Mr. McOabe. Yes, sir. Mr. Day. Where is Mr. Hill's office? Mr. McOabe. Oolumbus. Mr. Day. And on the Northern lines? Mr. McOabe. There would be no business, no through business, interchanged with the Vandalia line by the Northern lines. Mr. Day. Now, when a concession is made by the Vandalia, in which you are expected to participate — your lines, I mean — how would you be made aware of the fact that you were expected to go into that? 320 APPENDIX G. Mr. McGabe. I might uot be made aware of it at all except that 1 would have kiiowlcdi^e that rates were not being maintained, and that the Vandalia found it necessary to make the same rates that competi- tors made. Mr. Day. Who of the Vandalia makes those rates? * Mr. McCabe. Made by the general freight agent. Mr. Day. What is his name? Mr. McCabe. Mr. Taylor. Mr. Day. Would Mr. Taylor communicate to you that in order to secure traffic he found it necessary to make a concession f Mr. McCabe. No; he doesn't inform me as a general thing. Mr. Day. Or your subordinates with whom you are in touch? Mr. jM(;Cabe. As a general rule Mr. Taylor or the Vandalia people would know that any rate they made on business from St. Louis would be protected by us. It would not require specific information to that effect. That is just a matter of practice — common custom. Mr. Day. You say to Chicago you do not make rates from the Mis- souri Kivcr, but you do make rates out of Chicago. Take, for conven- ience of your memory, the last six months of 19U1 — what (concession, or what is the greatest concession that your line established during that period that you can now recall? Mr. McUabe. Are you leferiing to export or domestic? Mr. Day. Both. Take export tirst. Mr. McCabe. Well, the recognized rate from Chicago since the 21st of July on export provisions has been 25 cents a hundred. That rate, 1 believe, was uniformly maintained until i)ossibly some time after the 1st of October, when the rate was made -2 cents, Chicago to New York. The domestic rate is 30 cents. We have not, to my knowledge, made any settlements on domestic provisions since the 21st of July. Mr. Day. The rate on packing house products, Chicago to New York, was 30 cents? Mr. McCabe. The published tariff was 30 cents — the domestic rate. Mr. Day. Don't you i^ublish — have you not a provision in your tariff — that the export traffic shall be carried at the domestic rate plus the ocean rate at the present time? Mr. McCabe. I believe there is such a provision. Mr. Day. Did you put in that rate? Did you make the rate of 25 ceuts or direct to have it put in? Mr. McCabe. Yes, sir. Mr. Day. Whom did you direct? Mr. INIcCabe. Our representatives here in Chicago. Mr. Day. That applied only to traffic from Chicago? Mr. McCabe. Only on traffic from Chicago. Mr. Day. You made no concessions on traffic coming from the Mis- souri Iviver via Chicago? Mr. McCabe. Yes; I believe there were recognized rates from Chi- cago known as proportional rates on export traffic coming from the Missouri Eiver. Mr. Day. What rate did you put in on that? Mr. McCabe. I think the rate was 24 cents from Chicago to New York. Mr. Day. That is, the division? Mr. McCabe. The division as applied on Missouri River business. Mr. Day. You mean to say that was the rate you put in? Mr. McCabe. That was the rate we charged. APPENDIX a. 321 Mr. Day. And your division, if the published tariff had been col- lected, would have been what — 28;^ cents"? Mr. MoCabe. In that neighborhood. Mr. Day. You shrunk it about 4 cents? Mr. McCabe. Yes, sir. Mr. Day. And on the traffic originating here, you shrunk it first 5 cents and then 7^'? Mr. MoOabb. Ultimately. Mr. Day. Taking the traffic which originated here — take, for example, the first concession that was made, down to 25 cents; how was that traffic billed? Mr. McOabb. Billed at 25 cents. Mr. Day. Billed flat? Mr. McOabe. The through export shipments covered by a through bill of lading. Mr. Day. That always accomiianied it? Mr. McCabe. Yes, sir ; that is the rule. Mr. Day. Now, was it done the same way in regard to the 22 or 22^ cent rate when that rate was in? Mr. McCabe. I am not sure about that. Mr. Day. How was it billed when the 22-cent rate was in? Mr. McCabe. I am not sure whether it was billed flat, or on the .25-cent basis. Mr. Day. You can ascertain that fact? Mr. McCabe. I can ascertain that. Mr. Day. In such instances where traffic has been carried on a lower rate than the established published rate, and the billing was at the established rate, how was the settlement made for the difference? Mr. McCabe. Usually by refund. Mr. Day. Just state or tell the Commission what the form was, what procedure you went through, who the claim was presented to by the shipper, or by the initial or terminal line? Mr. McCabe. Ifour arrangement was with the shipper or the under- standing was with him, we recognized the claim for the difference between the shipment as billed and the actual rate. Mr. Day. Who was it presented to? Mr. McCabe. To somebody in the West. To myself or one of our general freight agents. Mr. Day. What would you do with it? Mr. McCabe. Put it in process of settlement. Mr. Day. What was that process ? Mr. McCabe. Drawing a bill and approving it, and sending it to our accounting department to have it paid. Mr. Day. To tlie accounting department in Philadelphia or here? Mr. McCabe. No; in Pittsburg. Mr. Day. When you put in the 22-cent rate for whom did you make that? Mr. McCabe. For everybody who shipped by it! Mr. Day. Who availed of it? Mr. McCabe. Everybody who used our line. Mr. Day. Who chiefly? Mr. McCabe. I do not know that I can recall. Mr. Day. Who did you in the first instance make it tot Mr. McCabe. We quoted the rate to everybody. Mr. Day. How long did that 22-cent rate remain in! Mr. McCabe. Until the 1st of January. 741a— 05 2i 322 APPENDIX Q. Mr. Day. Have any of those claims been presented to you for refund on the 152 cent rate ? Mr. McCabe. No, sir. Mr. Day. When will they come in, under your agreement or under- standing? Mr. McOabe. I don't know; at the convenience of the party. Mr. Day. In any of these refunds that have been made, have any of them been made on account of Swift & Co. ? Mr. McCabe. 1 don't know. We made them to everybody who used our line. Mr. Day. Who did you deal with in settlements representing Swilt &Co.f Mr. McCabe. I do not know. I would not make the settlement. Mr. Day. Who would? Mr. McCabe. I presume it would be remitted. The remittance would be made to Swift & Co. Mr. Day. Who did you make the negotiations with, or make this contract with, for the reduced rate; who did you state it to? Mr. McCabe. I didn't state it to anybody. I simply instructed our people to state it. Who they stated it to 1 do not know. Mr. Day. Did you have any conference with Mr. Fay in regard to it? Mr. McCabe. Not for a great many mouths. Mr. Day. Or Mr. Ellis? Mr. McCabe. No, sir. Mr. Day. Or Mr. Frisbie? Mr. McCabe. We are doing business with him all the time. It is not improbable that it may have been mentioned. Mr. Day. Did you carry any for Hammond & Co. ? Mr. McCabe. I don't think we have. We may have carried an occa- sional car, but I do not know. Mr. Day. How about Cudahyf Mr. McCabe. That I don't know. Mr. Day. Or Morris — do you know his traffic manager? Mr. McCabe. Very well. Mr. Day. Did you state it to Mr. Taylor? Mr. McCabe. No, sir; I didn't. Mr. Day. Has Mr. Taylor presented any claim to you for refund? Mr. McCabe. Not to me. I do not know whether there has been any claim for refund presented by them during the past year or not. Mr. Day. Or Mr. Frisbie? Mr. McCabe. Whatever arrangements we have had with them have been provided for. Mr. Day. I am trying to ascertain who the settlements were made with. Mr. McCabe. I don't know, Mr. Day. They were made with some body representing the house. Mr. Day. Have you participated in — have you carried any traffic at a weight which was less than the actual weight of the traffic? Mr. McCabe. Not to my knowledge. Mr, Day. Has your system participated in anj^ underbilling in regard to weights on packing-house products or dressed meats? Mr. McCabe. Not knowingly. Mr. Day. You participate in carrying dressed meats? Mr. McCabe. Yes, sir. Mr. Day. What concession was made in regard to dressed meats during that period? APPENDIX G. 323 Mr. McCabe. Three and one-fourth cents. Mr. Day. Was that from Chicago? Mr. McCabe, From Chicago. Mr. Day. How about west of Cliicago'? Mr. McCabe. We would apply the rate from Chicago on business done from the West. Mr. Day. The same rate? Mr. McCabe. Yes, sir. Mr. Day. When the 3;| cents shrinkage was made out of the haul east of Chicago, what shrinkage was made out of the rate west of Chicago? Mr. McCabb. I have no idea. We did not deal with that feature of it at all. Mr. Day. You didn't know what the total concession was from the point of origin of the trafdc? Mr. McCabe. No, sir. Mr. Day. Did the shrinkage apply on domestic? Mr. McCabe. As well as on exjjort; that is, the domestic to the seaboard. Mr. Day. We are talking about the seaboard — New York, Phila- del])hia, Boston, and jjoiuts taking the rates to those places. Do you quote rates through from Chicago on i)ackiug house products to foreign points? Mr. McCabe. Our representative. Mr. Day. Who is your representative? Mr. McCabe. Mr. Eorner for the Fort Wayne and Mr. for the Panhandle. Mr. Day. Do you have a steamshii) agent here? Mr. McCabe. No, sir. Mr. Day. What Hue of steamers do you employ! Mr. McCabe. All lines. Mr. Day. Don't you have a line, a preferred line, a line to which you give the first preference? Mr. McCabe. That is controlled by the solicitation of the agent of the steamship line. The steamships are all represented in Chicago and they solicit the business. Mr. Day. Is there not a line of steamships that you prefer and which you send by when you can? Mr. McCabe. We work freely with them all. Mr. Day. I am asking you if there is not one which you prefer? Mr. McCabe. I think we probably do more business with the Inter- national Navigation Company. Mr. Day. The American Line? Mr. McCabe. Yes, sir ; the American Line. Mr. Day. Who issues the through bills for that line heret Mr. McCabe. I think the through bills are issued by Mr, Lawrence. (See page 151.) Mr. Day. What is his relation to your road ? Mr. McCabe. He has no official relation to us. He is the general western agent of the steamship line. Mr. Day, Was he not at one time the agent of the Pennsylvania lines? Mr, McCabe. No, sir. Mr, Day. Or auditor? Mr, McCabe. He was one of the auditors of the Union Line many years ago. 824 APPENDIX a. Mr. Day. The fast freight line? Mr. McCabe. Yes, sir; that was when it was the fast freight line. Mr. Day. How are the export rates made up where a through rate is made? Mv. McCabe. By combination of the inland and the ocean rate. Mr. Day. Have you any information, either by conversation with other officials on your road, your auditor, or traffic managers of the eastern lines of your system, or from conversations with your local men here, or the steamship men, that leads you to believe that a low ocean rate is quoted by your route and adjustment of the rate subse- quently made between your auditor and the steamship company by which a part of your rate is shrunk out and added to the ocean rate? Mr. McGabe. I think that might be possible. Mr. Day. Have you information to that effect, that such has occurred, such instances have occurred ? Mr. McCabe. I think it is possible that has occurred? Mr. Day. Has that not occurred quite recently, say, in the year 1901 ? Mr, McCabe. I am unable to say. Mr. Day. Who, connected with the system of which you are an official, would be able to say as to that! Mr. McCabe. If any such adjustments were made, 1 think they would be made in the East and not here. Mr. Day. Through the auditing department? Mr. McCabe. I presume so. Mr. Day. Are the published tariffs maintained now on packing- house products ? Mr. McCabe. I believe so. Mr. Day. Are you carrying export trafi&c now on the domestic rate? Mr. McCabe. Yes, sir. Mr. Day. That is to say, out of Chicago on packing-house products, whether for export or domestic, you get 30 cents a hundred ? Mr. McCabe. Yes, sir. Mr. Day. And you retain that? Mr. McCabe. And retain that. Mr. Day. If that can be done at one period of the year, why can't it be continued at other periods'? Mr. McCabe. Some think it can. Mr. Day. Why don't you do it, then? Mr. McCabe. Because we do not control it. We are only one of the factors in it. Mr. Day. What are the factors? Mr. McCabe. The general railroad interests of all the roads combined. Mr. Day. You think there must be a combination in order to bring that about? Mr. McCabe. Not necessarily; no, sir. In order to maintain a 30- cent rate the railroads would have to be agreed on that point; other- wise the rates — taking our experience in the i^ast — can not be main- tained, but there is no good commercial reason why they should not be maintained. Mr. Day. When this 22 cent rate was put in, what was the real cause for your putting that rate in? Mr. McCabe. Our belief that others had made the rate. Mr. Day. What evidence did you have about that? Mr. McCabe. Only the evidence that comes to us usually in matters of that kind — common report, reports from our people that they could APPENDIX G. 325 not secure, business at the 25 cent basis and their belief that at least a 22-cent rate wtis being made. You c;iu never i.';ct any data, of course. Mr. Day. During' any period when there is a shrinkage either in the division of the rate on packing-house i)roducts that come from the Mis- sissippi Kiver or points West by way of Chicago — you take it here, do you make any distinction in regard to what carrier you may receive it from as to wiiat your division shall be in the whole rate? Mr. McCabb. InTo. Mr. Day. You treat all lines west of Chicago the same in that respect! Mr. McCatje. Yes, sir. Mr. Day. You carry at your proportion east of Chicago the same for one line as for all other lines? Mr. McCaee. Yes, sir. Mr. Day. Do you favor any packing house Mr. MoCabe. 'No, sir. Mr. Day. I was going to specify in what respect. You do some shifting of cars and switching, for which charges are imposed ranging up to $2, here in Chicago? Mr. McCabe. It is not done by us. It is done by the stock yards companies. Mr. Day. Do you absorb that or any part of that for any packing- house comj)any in (^hicago? Mr. McCabe. I am not sure whether that charge is absorbed by the rate or not. At one time it was a charge on the product. My impres- sion is that that charge is now absorbed by all the roads. Mr. Day. By all the roads alike? Mr. McCabe. By all of them. Mr. Day. Do you absorb that in taking packing house products from the packing house that come from the stock-yards road? Mr. McCabe. That is absorbed. Mr. Day. Do you think that is done by all of them? Mr. McCabe. It is done by all of them uniformly. Mr. Day. That is all I wish to ask Mr. McCabe now. Commissioner ProUty. You say that about the 21st of July you began to bill this export stuff flat, and previous to that time you billed it at the 30-cent rate? Mr. McCabe. Yes, sir. Commissioner Prouty. Had you applied the refund both to domestic and export previous to that time? Mr. McCabe. We did to the export. 1 am not sure about the domestic. Commissioner Prouty. Why did you at this time change the plan of maintaining the rate on domestic and applying the flat rate on the ex])ort? Mr. McCabe. Simply because we felt that the rate on domestic could be maintained, and it was a matter of convenience as to billing on export. Commissioner Prouty. Was that done by any concerted action of the different lines? Mr. McCabe. l^o. It was understood that other lines would do the same thing. We talked it over with them, but the action was indi- vidual. Commissioner Prouty. At that time you i)ut in a 25-ceut rate on export business? Mr. McCabe. Yes, sir. Commissioner Prouty. How did you arrive at that rate? Was there any agreement between you and other lines? 32fi APPENDIX a. Mr. McOabe. We found that was about tlie rate by other lines and as high as we could maintain. Commissioner Trout y. Did you believe the same rate was put in by other lines'? Mr. McOabe. I presume so. Commissioner Proutt. When you reduced your rate to 22 cents did you follow other lines or did the otlier lines follow yon? Mr. McOabe. We followed other lines. Commissioner Prouty. Yon say that from the 21st of July to Octo- ber you maintained a 25 cent rate? Mr. McOabe. Yes, sir. Commissioner Prouty. And from October you maintained a 22-cent rate. If you maintained a uniform rate of 25 and 22 cents, why could you aot maintain a 30-cent rate on ex])ort? Mr. McOabe. I think we could have if we could have had the cooper- ation of the other roads. Commissioner Prouty. You can maintain an export rate just as well as domestic when rates get low enough? Mr. McOabe. Yes, sir. Commissioner Prouty. Who gets the benefit of this cut in the rate? Mr. McOabe. That I am unable to judge. Commissioner Prouty. You have no opinion about that? Mr. McOabe. No. Commissioner Prouty. You think it reduces the price of provisions in Europe? Mr. McOabe. I think it does. Commissioner Prouty. That is to say, you think the foreigner gets his provisions a trifle cheaper on account of the reduction? Mr. McOabe. The consumer pays less for his goods. Commissioner Prouty. Did you in any way publish that 25-cent rate? Mr. McCabe. No, sir. Commissioner Prouty. You say it was generally understood; that it was open to everybody on export business? Mr. McOabe. Yes, sir. Commissioner Clements. Could you furnish a statement that would show all these shipments from Chicago during the last calendar year, 1901; showing the published rate at the time and the rate actually charged, and the refund in each case? Mr. McOabe. I doubt very much whether I could do so. Commissioner Clements. What is the difliculty about it? Mr. McOabe. I think our records have not been kept in such shape as to enable us to do that. Commissioner Clements. Where would they fail to show the trans- action — at what particular point? Mr. McOabe. After the statement was made we would not aim to preserve the records. Commissioner Clements. Would you destroy them? Mr. McOabe. Possibly. I car. not answer that definitely. Commissioner Clements. Are you in the habit of destroying records not a year old ? Mr. McOabe. Sometimes. Commissioner Clements. But generally? Mr. McOabe. If they are not essential or it is not important that they should be kept. APPENDIX a, 327 Commissioner Clements. What would be the particular reason for destroying- these papers aud records'? Mr. MoCabe. Possibly because we thought you might want them laid before you some time. Commissioner Clements. You destroyed the evidence bf the illegal transaction? Mr. McCabe. Yes, sir; that is right. Commissioner Clements. Then you can not furnish this because you have destroyed them? Mr. McCabe. I can not answer that definitely. J don't know. Commissioner Clements. What are we to understand are the facts? You indicate that you have? Mr. McCabe. I beg your pardon. I didn't say we had destroyed them, but that I was not sure they had been kept. Commissioner Clements. If they have not been destroj^ed yon can furnish a statement showing the name of the shipper in each case, the amount of freight paid, and the rebate paid back. Mr. McCabe. That would have to be furnished from our accounting department. Commissioner Clements. I mean your company. Your accounting department could make it up? Mr. McCabe. I could not say. That would be for them to furnish. Whether they could furnish that statement or not I do not know. Commissioner Clements. Who is at the head of your accounting department? Mr. McCabe. Mr. J. W. Renner, our comptroller. Commissioner Clements. Where is his office? Mr. McCabe. Pittsburg. Commissioner Clements. At the time you were making these rebates or paying these rebates and departing from the 30-cent rate, what was the published rate from Cincinnati on these packing-house products to the seaboard? Mr. McCabe. About 87 per cent of the rate from Chicago — about 26 cents. Commissioner Clements. Did you make concessions or any rebates of the same kind on Cincinnati shipments east at the same time you were making them from here? Was there any cut in that rate? Mr. McCabe. I can not answer that definitely. I am not clear on that point. Commissioner Clements. At what minor points east of Chicago do you get packing-house products ? Mr. McCabe. Get them at Indianapolis and Louisville. Commissioner Clements. Was there any cut in rates from those places during the last year? Mr. McCabe. I think so. Commissioner Clements. You think sot Mr. McCabe. There were. Commissioner Fifer. On both foreign and domestict Mr. McCabe. On export. Commissioner Fifer. Not on domestic T Mr. McCabe. I think not. Commissioner Clements. Who takes the responsibility for doing these things, for making these sei'ious departures aud cuts, in regard to the Pennsylvania Railroad ? Is it you? Do you do it without any authority from the officers of that road above you, or do you have their approval of it! 828 APPENDIX G. Mr. McCabe. I am in charge of the freight traffic, and I do the best r can under the circumstances. Commissioner Clements. Do you act independently of them, or do you have to have their approval? Mr. McCabe. I assume to do what I think is proper, being governed by the competitive conditions. Commissioner Clements. Do you have reason to know tliat the oflQcers above you in the management of that company's affairs knew of it? Mr. McCabe. Not in detail. Commissioner Clements. I do not mean the details. I could have answered that myself. But as to the general fact tbat the Pennsylvania Railroad was cutting the rate in this serious way, was it known to the president of that company and other officers? Mr. McCabe. I do not know. Commissioner Clements, liave you ever had any conference with the officers above you in the management of that company's affairs in which you disclosed this condition of things? Mr. McCabe. I have said to them from time to time that rate con- ditions were so and so; that rates were not being maintained, and that our com]»etitors were cutting the rates. Commissioner Clemicnts. And that you must cut the rates? Did they sanction it, or approve it, or tell you to stoj) it? Mr. McCabe. I think they left it to my discretion. Commissioner Clements. Will you look into the matter to see if you can furnish a statement of the shipments made from Chicago for the last calendar year? Mr. McCabe. Yes, sir. Commissioner Clements. Indicating the name of the shipper, the amount of freight paid, and the amount refunded, and send us a sam- ple of one of the cla,ims upon which the refund was made? Mr. McCabe. I will look into that. Mr. Day. This traffic that you carried from Chicago on the 25-cent rate, what route took it out of Chicago? Mr. McCabe. The Pennsylvania. Mr. Day. But which one of the Pennsylvania linest Mr. MoCabe. Both. Mr. Day. And how about the 22-cent rate? Mr. McCabe. Both lines carried it. Mr. Day. Take the 25-cent ratej there was a shrinkage there of 5 cents a hundred? Mr. McCabe. Yes, sir. Mr. Day. From the ]>nblished rate? Mr. McCabe. Prom the published tariff. Mr. Day. Who i:)articipated in that shrinkage? Take the traffic destined to New York. Mr. McCabe. Our own line through to New York. Mr. Day. All the way through? Mr. McCabe. Yes, sir. Mr. Day. Do you mean the lines east of Pittsburg, or did this shrinkage apply only to the lines west of Pittsburg? Mr. McCabe. To the account of the lines Chicago to New York. Mr. Day. The lines east of Pittsburg, which we call the Pennsyl- vania Railroad, bore a share in that? Mr. McCabe. Yes, sir. Mr. Day. Did it bear the same share that it would have borne — did APPENDIX a. 329 it get the same percentage out of the 22 or 25 cent rates tliat it would bave received out of the 30 cent rate^ Mr. McOabe. Precisely the same. Mr. Day. What is the percentage of the Chicago New York rate that the Fort Wayne takes? Mr. McCabe. It is approximately 50 per cent. That is not exactly correct, but ai)proxiniately. Mr. Day. Is it less or more? Mr, MoOabe. I tliink west of Pittsburg is about 51 percent — 51 and and a fraction. Mr. Day. What is it by the Panhandle*? Mr. McCabe. I think it is a little greater; probably 52 per cent. Mr. Day, The Panhandle takes 52 per cent out of the Chicago-New York rate? Mr. McCabe. It is adjusted on mileage. Mr. Day. Then if the Panhandle took 52 per cent the Pennsylvania Eaihoad would take 48? Mr. McCabe. Forty-eight per cent. The Chairman. I infer from your testimony that you desire to be understood as saying that there was no actual discrimination between different shippers by the Pennsylvania Railroad? Mr. McCabe. That is correct. The Chairman. When the rate was 25 cents it was 25 to everybody? Mr. McCabe. Yes, sir. The Chairman. And when it was reduced to 22 cents all shippers in that traffic knew it? Mr. McCabe, Yes, sir. The Chairman. Did the 25-cent rate apply to domestic as well as to export traffic ? Mr. McCabe. No, sir. The Chairman. At no time? Mr. McCabe. Well, there have been times in the past when possibly a 25 cent rate applied to domestic traffic, but not since the 21st of July. The Chairman. What would the rate be from Indianapolis when it was 30 cents from Chicago? Mr. McCabe, Twenty eight cents — 93 per cent of the Chicago rate. The Chairman, 1 )id I understand you to say that the rate from Indianapolis was shrunk to some extent? Mr. McCabe. To some extent. The Chairman. Do you know whether the concession on Indian- apolis was proportionate to the concession on Chicago traffic? Mr. McCabe, I can not say positively. The Chairman. Is it not the general fact, Mr. McCabe, that while there was no discrimination between different shippers from Chicago that they all got an advantage over Indianapolis and Cincinnati shippers of the same traffic, owing to the reason that the concession from Chicago was greater in proportion than from these other places? Mr. McCabe. No; I don't know that to be the fact. The Chairman. Do you think the fact is otherwise? Mr. McCabe. I think they were practically on a parity with Chicago. The Chairman. So that if the tariff:' adjustment is fair as between Chicago and Indianapolis and Cincinnati on this class of traffic, the ictual rates were a])proximately on the same relative basis? Mr. McCabe. I should think so. That is my imjiression. The Chairman. Do you know whether that is true or not? Mr. McCabe. I know there were concessions made, but whether 330 APPENDIX Q. the coiK^essions corres])oiid in each ease at each time with the conces- sion from C/hicaj;o i ;mi not |)iei)are(l to say doliuitely. The Chairman. This -J") cent rate was actually maintained by your line for quite a long- i)eriod? Mr. McCabe. Yes, sir. The Chaikman. Was there any reason why it should not have been published 1 Mr. MoCabe. N^o; I think there was no good reason why it should not have been published. The Chairman. And the same is true of the 22-cent rale? Mr. McCabe. Except it was a pretty low rate and we did not want to give that official recognition in a tariff. It was entirely- too low. Commissioner Prouty.' Suppose, Mr. McCabe, that when you made a rate like that you were compelled by law to publish as low a rate as you made, what effect would it have on the maintenance of rates? Mr. McCabe. I think it would probably have the ettect of better maintenance of rates. Coujuiissioner Fifer. When you concluded to cut the rate, what method did you adopt to let your customers know about it, so that they could all take advantage of it? Mr. McCabe. We have solicitors here, and I think they kept pretty busy getting around telling parties what the rates were. Commissioner Clements. Can you state with certainty that there was no discinmination between shippers and that they all got the same rate? Mr. McCabe. I do not believe there has been any discrimination. The Chairman. That seems to be all, Mr. McCabe. Witness excused. Edward F. Cost, having been duly sworn, testified as follows: Mr. Day. Give your name to the stenographer and state your jtosition. Mr. Cost. Edward F. Cost; freight traffic manager of the Three C's and St. Louis Eailway, Cincinnati. Mr. DAy. You know the subject of this inquiry? Mr. Cost. Yes, sir. Mr. Day. It will save time and we will progress better if you will go ahead and tell the Commission what has transpired on your line during the last six months of 1901, if that is representative of the year. Mr. CpsT. It is really nothing move than has already been stated, so far as our action is concerned. We have naturally followed the trend of our competitors. We are not so largely interested, perhaps, as some of the others in the transportation of dressed meat and packing-house l)roducts from Chicago and the Missouri liiver. In fact we have been practically out of the business for two years, and never carried any dressed meats to local points except to Cincinnati, Louisville, and Springfield, but in the Eastern business v/e have never been a factor in that business. The Missouri River business, I say, we have not carried for two years, or we have not entered into competition for tiie business. We may have received vsome business for interior points but practically lione for the seaboard. If we had any it was very little; the shipments have been very few. At St. Louis we have, I sui)pose, carried our pro- portion of the business from all of the industries there, and we have not, I do not suppose, assessed any more than other roads in doing so; in fact if we did we could not get the business. At the other points at which we are interested, Indianapolis and Louisville, we have prac- tically placed those people on a parity with what we understood, was APPENDIX O. 331 being done elsewhere. I speak now of export provisions. On the domestic I want to y;iy we have luaintaiiied the rate8; particularly from the latter point, Indianapolis, we are more largely interested in pacldng-liouse products than anywhere else on direct Eastern ship- ments than export. I do not know that 1 can add any more. Mr. Day. What is the greatest shrinkage you have made out of St. Louis on packing-house products ? Mr. Cost. 1 think it was on the 20 cent basis. Mr. Day. And how do you tidvetraftic destined for New York and Boston that you bring from tlie Mississippi River? Where do you turn it over to connecting lines'? Mr. Cost. Our prin(ii)al connections are the Lake Shore and the Nickel Plate — the Vanderbilt lines. jMr. Day. Whose traffic do you take principally? Mr. Cost. We handle from all of tlicm— Swift & Morris, the St. Louis Dressed Beef^ — we get some from all. Mr. Day. And whose at Indianapolis'? Mr. Cost. Kingan & Co. Mr. Day. What shrinkage is made out of Indianapolis'? Mr. Cost. The proportion — the rate from Indianai)oHs is 28 cents, and the rate from here is 30 cents; I think that is it. We give them the proportion made on 93 per cent of Chicago, 93 per cent of the shrinkage that accrues from Chicago. Mr. Day. Ninety-three per cent of the shrinkage that accrues from Chicago*? Mr. Cost. Yes, sir. Mr. Day. How about Cincinnati? Mr. Cost. If we had any we would work on the same basis. We have not had any of that business there. Mr. Day. Have you made any concessions by uuderbilling? Mr. Cost. No, sir. Mr. Day. Or by carrying at false weights'? Mr. Cost. No, sir. Mr. Day. When shrinkage was made out of rates from any of these points, Cincinnati, Indianai)olis, or Chicago, how was that made good to the shipper— by flat billing or by voucher? Mr. Cost. In some cases by billing and in some cases by voucher. Mr. Day. Tell the Commission what the form was"^ Mr. Cost. It generally passed through our olti(;e for approval, and sent by us passed over to the consolidated lines, or fast freight line, and sent to tlie accounting department for them to adjust, and a divi- sion of that rate made with all the lines interested. Mr. Day. And they made the settlement '? Mr. Cost. Yes, sir. Mr. Day. Made through the accounting department of the fast freight lines! Mr. Cost. Yes, sir. Mr. Day. And not through your line'? Mr. Cost. No, sir. Mr. Day. Of the G cents cut made out of St, Louis, what proportion of that shrinkage did the Big Four stand where you turned it over to the Lake Shore? Mr. Cost. Our proportion is about 45 per cent of the through rate, based on mileage. Mr. Day. Where do you turn it over to the Lake Shore? Mr. Cost. At Cleveland. 832 APPENDIX O. Mr. Day. You take 45 per cent where the full tariff is collected t Mr. Cost. Yes, sir. Mr. Day. Ami where the full tariff is uot collected do you still take 45 i)er cent of wliate\er is collected? Mr. Cost. Of whatever is agreed upon as the through rate. Mr. Day. When it is 29 cents you take 45 per cent of that? Mr. Cost. Yes, sir. Mr. Day. And the Lake Shore would stand their share of the cut ? Mr. Cost. Yes; that is the old established custom, tor a line that is part of a through line to stand their share of a reduction in rate. Mr. Day. And if the Lake Shore turned it over to the New Vork Central or West Shore, those lines would stand their share? Mr. Cost. That is usually the custom; yes, sir. Mr. Day. I understand you to say that no concession was made, so far as you are aware, on domestic products destined for domestic consumption? Mr. Cost. No, sir. Mr. Day. That the cut was confined to export traffic. Mr. Cost. To export business. Mr. Day. How did you assure yourselves that it was not diverted from export to domestic? What evidence liad you? Mr. Cost. It is generally on a through bill of lading; consigned to a foreign destination. Of course we have no positive knowledge. I do not believe they could tamper with those bills at the seaboard. It is consigned on a through bill of lading to a foreign destination. I never knew of an occurrence of that kind. Mr. Day. Is there no method by which this foreign bill of lading may be surrendered at the seaboard and the trathc diverted to domestic? Mr. Cost. I do uot think so. Commissioner Fifer. Have you never had any suspicion of that being done? Mr. Cost. No; never. Mr. Day. When these rebates of concessions are presented, or these claims for them are presented, they come through your office and are verified there, and you jiass them on to where? Mr. Cost. As I say, to the accounting department of our fast freight lines that handle them. Mr. Day. And who do they draw on for your share? Mr. Cost. That comes through our treasurer, of course. Mr. Day. They make a draft there — your auditing department does? Mr. Cost. Yes, sir. Mr. Day. And your treasurer sends your share to the auditing department of the fast freight line and they make the distribution? Mr. Cost. Yes, sir. Commissioner Clements. Can you send us a statement of the ship- ments of last year? Mr. Cost. I think I can. I will make an effort to do so. Commissioner Clements. Showing the name of the shipper, the amount of freight, the amount of refund, and to whom refunded? Mr. Cost. Yes, sir. Commissioner Clements. And we would like that to include the extent to which other lines participated in the rebates, how much they participated in the shrinkage. The Chairman. During the period, Mr. Cost, that you carried for export on the basis of a 25-cent rate from Chicago, was there a consid- APPENDIX a. 333 erable movement ou your line of domestic traffic which paid the full rate? Mr. Cost. No; I think not. I do not think the domestic ever com- pares with the export business in any resj>ect. Of course I refer to trmik line territory as compared with the movement of export business passing the same way. Our domestic business does not amount to anything. Tlie Chairman. Does a large percentage of the total which goes East go abroad? Mr. Cost. Yes, sir; of what we handle. The Chaieman. From what sources, then, does the Eastern territory get its dressed beef? Mr. Cost. I could not give you information on that. We are not a large handler of domestic dressed beef or provisions. I suppose it is on account of the distribution of the product from various storehouses in the East, and no doubt there are a great many small jjackers in the East, all through the country. The Chairman. The point is that you do not carry much, if any, domestic? Mr. Cost. No, sir ; not to speak of. The Chairman. Are you carrying any now? Mr. Cost. I suppose we are. I could not tell you to what extent. The Chairman. At the present time is the published rate main- tained? Mr. Cost. Absolutely. The Chairman. Both on domestic and export! Mr. Cost. Yes, sir. The Chairman. And is the rate the same for both! Mr. Cost. Yes, sir. The Chairman. When that is the case, is there any considerable movement for domestic consumption? Mr. Cost. I do not know that that makes any difference. The Chairman. I observed that you spoke of your road as following the others. Mr. Cost. Yes, sir. The Chairman. I have heard a similar statement from other gentle- men. Have you any idea who is the leader? Mr. Cost. No; I have not. I could not give you that information. The Chairman. You never heard of the leader? Mr. Cost. No, sir. The Chairman. They are all followers. Mr. Cost. That does really seem to be the case. I feel very positive about our situation in the matter. Commissioner Fifer. Do you think there is any difficulty in main- taining a published export rate? Mr. Cost. No, sir. Commissioner Fifer. Do you think it can be done? Mr. Cost. Yes, sir. The Chairman. You do not agree with Mr. Whitney about it? Mr. Cost. No, sir. The Chairman. That there is any more difficulty in maintaining export than domestic? Mr. Cost. No, sir. Commissioner Fifer. There was testimony at Kansas City that tramp steamers came in at the Gulf ports and took stuff for less than regular 334 APPENDIX a. line steamers — cut rates — and made it imi)ossible for the roads to main- tain rates from the West to the seaboard. Is that true? Mr. Cost. That is not our experience. The Chairman. Is Mr. McCabe still in the roomt Mr. McCabe responded. D. T. McCabe, recalled. The Chairman. I forgot to ask you the same question that I asked Mr. Cost. I infer from what you stated that you see no great difliculty in publishing and maintaining a tariff on export traffic. Mr. McCabe. None, whatever. The Chairman. And there is no reason why it should not be done? Mr. McCabe. No reason why it should not be done. The Chairman. This theory of fluctuating ocean rates is not a per- suasive one to your mind? Mr. McCabe. No, sir. I think the rate could be maintained to the seaboard. Mr. Day. Suppose, Mr. McCabe, a railroad controlled a line of steam ships and they should maintain a fixed rate— the published through rate to the ocean — and give a through bill of lading at a very low rate across the ocean, and then settle with the ocean steamship, would that not demoralize rates? Mr. McCabe. It would be very apt to. Mr. McCabe was excused, and the examination of Mr. Cost resumed. Mr. Day. Mr. Cost, how did you make known the cut in your rates? Mr. Cost. To whom? Mr. Day. To the people affected. Take it when you put the rate in from the Mississippi Kiver, or St. Louis to the Atlantic seaboard. How did you make that known to shippers that you would carry at that rate? Mr. Cost. There are various mediums of that. 1 suppose our people at Indianapolis would notiliy them or let them know what we proposed to do and keep them in line with other points. There are various ways of doing that. We go to the shippers; thei'e is no secret. Mr. Day. You mentioned St. Louis. How would you let Morris know? Mr. Cost. I could not tell you how that is communicated. Mr. Day. Do they have a traffic man ? Mr. Cost. I think they have a man there. Mr. Day. Have they a man who looks after rates? Mr. Cost. Yes; just the same as we have our agents to visit them. Mr. Day. Who is the man who represents Morris that comes to see you? Mr. Cost. Me personally ? Mr. Day. Yes. Mr. Cost. I hardly ever come in contact with those people. Mr. Day. Or the man who comes to your subordinates? Mr. Cost. I sui)pose the regular representative; the man authorized to conduct such negotiations. I could not tell you. Mr. Day. Have you had any conti act with any packer for any period of time to fix rates, or any understanding of that kind? Mr. Cost. No, sir. Mr. Day. You give them the benefit of what the rate is at the time? Mr. Cost. Yes, sir; there is no fixed understanding. Witness excused. Mr. McCabe was recalled. Mr. Day. Mr. McCabe, I will ask you whether you have had any agreement or understanding during the past year or year and a half APPENDIX G. 335 with any packer that you would give them a certain rate for a certain time? Mr. McCabe. No, sir; if we give them a rate it is liable to be can celed the next day. Mr. Day. You never entered into an agreement in advance that you would put in a lower rate and maintain it for any particular time? Mr. McCabi]. No. Mr. Day. That is all. The Chairman. We will take a recess until 2 o'clock. The Commission at 12.40 p. m. took a recess until 2 o'clock. apter recess. 2 o'clock p. m. The Chairman. Who will you call next, Mr. Day? Mr. Day. B. B. Mitchell. B. B. Mitchell, being duly sworn, testified as Collows-- Mr. Day. Just give your name, Mr. Mitchell. Mr. Mitchell. B. B. Mitchell, general traffic manager of the Mich- igan Central Eailroad. Mr. Day. Were you here this morning? Mr. Mitchell. Yes, sir. Mr. Day. You understand the subject of inquiry here, and I wish you would be good enough to state to the Commission what concessions obtained in which the Michigan Central participated in carrying of packing-house products and dressed beef to New York, Boston, Phila- delphia, and points taking the same rates that those points take during the year 1901, or you can confine yourself in the first instance to subse- quent to July 1. Mr. Mitchell. The going rate has been on the same lines as the testimony rendered here this morning. There were certain periods where, so far as provisions are concerned, different rates prevailed. The going allowance on dressed beef has been about 5 cents oft the tariff' — and packing-house products. Mr. Day. Five cents from what point? Mr. Mitchell. From Chicago. It was testified to here this morning, and the figures named are in line with such as the Michigan Central has used. Is it necessary to repeat these? Mr. Day. I would rather you state what occurred on your line, so that we may know. Mr. iNliTCHELL. There was a 25-ceut export rate in from July 21, as I recollect. Mr. Day. That applied on what? Mr. Mitchell. On export provisions. There was a 22-cent rate that went into effect later in the season and which remained in effect until the expiration of the year. That is on export. There has been no allowance by the Michigan Central on domestic business. Mr. Day. On traffic that came from, say, points west of Chicago, take the Missouri Eiver — Omaha, for example — what concession was made in the rate from Omaha to Eastern points in which you participated ? Mr. Mitchell. On provisions? Mr. Day. Yes, sir. Mr. Mitchell. On export provisions the proportion of the rate was on the same basis, I think about 24 cents; I am not very clear on that. Mr. Day. About 1 cent under the other? 386 APPENDIX Q. Mr. Mitchell. About 1 cent under what we call the Chicago local rate. Mr. Day. The division of, say, the Omaha New York rate on provi sions was lii cents from Chicago to New York at the time the 25cent rate was in from Chicago to New York on export? Mr. Mitchell. 1 think so. Mr. Day. During any period during last year did your road partici- pate in any concession in provisions carried for domestic consumption? Mr. Mitchell. No, sir. Mr. Day. Not at all? Mr. Mitchell. No. sir. Mr. Day. In no instance? Mr. Mitchell. Not to my knowledge. Mr. Day. Had you any reason to believe it had? Mr. Mitchell. It may have. I do not know, sir. We have made no allowance on domestic consumption. Mr. Day. You have made none? Mr. MiT(!HELL. Have made none. Mr. Day. How did you determine that the traffic yon did carry at a rate below the published rate was actually exported? Mr. Mitchell. All export provisions, so far as I know, are han- dled on through bills of lading. A bill of lading is given from the point of shipment to the foreign port; that is passed over to the packers, and, I understand, banked by them. Therefore there is no way, it seems to me, of stopping a car of export provisions at the seaboard for domes- tic use. Mr. Day. Take these provisions you carried from Chicago on the 24- cent division. What was the total rate at that time from Omaha or the Missouri River to New York? Mr. Mitchell. You mean the published rate? Mr. Day. No; the actual rate the stuff was carried at. Mr. Mitchell. I do not know. Mr. Day. You do not know the actual rate from the Missouri River east? Mr. Mitchell. From the Missouri River to Chicago? Mr. Day. I mean from Omaha to Chicago, or from the Mississij)pi River to Chicago. Mr. Mitchell. We should know what the rate from the river was. It was on a corresponding basis, 116 per cent of 28 or 120 per cent, whatever the basis was. Mr. Day. One hundred and sixteen per cent of 24? Mr. Mitchell. No; the basis would figure diflerently. Mr. Day. What would the rate be there from the Mississippi River to New York when the 24-cent basis was put in by you from Chicago? Mr. Mitchell. Probably 29 cents. Mr. Day. Who i^articipated in this 24-cent division from Chicago east with you ? Mr. Mitchell. By whatever line the property may have been routed. Mr. Day. What routing did prevail? Mr. Mitchell. The major part of the business went over what is called the Yanderbilt lines, the West Shore and New Y'ork Central. Mr. Day. In those instances did the New York Central participate in the shrinkage? Mr. Mitchell. Yes, sir. Mr. Day. And the Lake Shore likewise! APPENDIX Q. 337 Mr. Mitchell. Yes, sir. Mr. Day. Now, tell us about dressed beef the last year — about the rates. ivlr. Mitchell. 1 stated that the goiug rate was about 5 cents. Mr. Day. That was tVoui Chicago? Mr. Mitchell. From Chicago. Mr. Day. Can you tell what the rate was from the Mississippi River at that time — the actual rate? Mr. Mitchell. I have not the figures with me aud do not remember the figures. 1 should say that the rate from Chicago was 40 cents Mr. Day. I do not mean the publislied rate. I mean the rate at which the dressed beef was being carried to New York. Mr. Mitchell. That is wbat I am trying to tell. If the rate from Chicago was net 40 cents, the rate from the river would be 110 or 120 per cent of that, whatever the percentage might be. Mr. Day. Now, how was this traffic billed in which your division or the division east of Chicago is 24 cents on provisions'? Mr. Mitchell. Billed Hat. Mr. Day. And how on the 25-cent ratet Mr. Mitchell. Flat. Mr. Day. In all instances'? Mr. Mitchell. So far as I know. Those are my instructions. Mr. Day. Where a concession was made or a shrinkage of the rate was made, did you make any settlements by voucher'? Mr. Mitchell. Undoubtedly we did. Mr. Day. Last year? Mr. Mitchell. Yes, sir. Mr. Day. When settlement was made by voucher, what was the course of procedure; how was it made; to whom was the claim presented? Mr. Mi rcHELL. No doubt to our representative at Chicago or the river, and by them passed to me. Mr. Day'. Then you approved them? Mr. Mitchell. I do not approve them until they make them up. Mr. Day. They were presented to your representative at the river or Chicago, and he sent them to you. What did you do? Mr. Mitchell. Made a voucher and sent them to our fast-freight line office for distribution, and they were afterwards paid. Mr. Day. Paid by whom? Mr. Mitchell. By the manager of the fast-freight line. Mr. Day. He paid them direct to the claimants? Mr. Mitchell. No; to my office. Mr. Day. Who made the payment in your office t Mr. Mitchell, One of my clerks. Mr. Day. Under your direction? Mr. Mitchell. Yes, sir. Mr. Day. Did you make any settlement with Mr. McNaughton, of the Cudahy Company? Mr. Mitchell. I presume we did. Mr. Day. And with Mr. Urquhart, of the Omaha Packing Company? Mr. Mitchell. I presume we did; I can not say positively. Mr. Day. Have you made some settlements with Mr. Jenkins? Mr. Mitchell. Yes, sir. Mr. Day. Of the Hammond Packing Company? Mr. Mitchell. Yes, sir. Mr. Day. During the past year? Mr. Mitchell. Yes, sir. 741a— 05 22 338 APPENDIX G. Mr. Day. Were those settlements you made with those men I named on dressed meat or on packing-house provisions, the bulk of them? Mr. Mitchell. Both, probably. Mr. Day. Mr. Mitchell, was there any shrinkage made by way of uuderbilling? Mr. Mitchell. Never. Mr. Day. Underweighiugl Mr. Mitchell. Never; not with my knowledge or consent. Mr. Day. You never knew of anything of that kind on your road last year? Mr. Mitchell. Never, sir. Mr. Day. When did you make the last settlement with Mr. Jenkins? Mr. Mitchell. I do not remember. Mr. Day. About how long ago? Mr. Mitchell. About a month ago. Mr. Day. That was on a basis of li^ cents? Mr. Mitchell. My impression is that Mr. Jenkinses export business, and the only business on which any allowance was made, was billed flat. I am not clear on that, whether it was all billed flat. My instruc- tions were to do it. Mr. Day. If any settlements were made on vouchers, they were made before the 22 or 25 cent rate went into operation ? Mr. Mitchell. If so, yes, sir. Mr. Day. I understood you to say that the 25-cent rate went in in July? Mr. Mitchell. I think July 21. Mr. Day. I think you stated, but I will ask what was the greatest concession made in which you participated prior to July 21, during 1901 ? I mean your line when I say "you." Mr. Mitchell. So far as I can remember, 5 cents. I have no recol- lection of any other. Mr. Day. In any of these concessions made between Omaha and Kansas City and Chicago on traffic that you carried on east, did you have anything to do with the concessions made west of the river, west of the Mississippi, or between the Mississippi and Chicago? Mr. Mitchell. No, sir. Mr. Day. You had nothing at all to do with any concession except that much as related to the shipments east of Chicago? Mr. Mitchell. Yes, sir. Mr. Day. Did you participate in any traffic coming from the Missis- sippi River by way of St. Louis or the lower crossings? Mr. Mitchell. You mean coming to us through our Chicago termi- nals? Mr. Day. Yes. Mr. Mitchell. Yes, sir. Mr. Day. Would you participate in the concessions there the same as when it came by way of Chicago and the Northwestern, for instance, or any of these lines at the upper crossings? Mr. Mitchell. Undoubtedly we should. Mr. Day. Did you make any greater concessions on traffic that came by any one line from the West, say from the Mississippi liiver, than you did by any other line? Mr. Mitchell. Not knowingly. Mr. Day. This rate — this concession — was open to all the lines ; you participated in it with any of them t Mr. Mitchell. Yes, sir. APPENDIX Q, 339 Mr. Day. I think that is all I wish to ask, Mr. Mitchell. Comiuissioner Clements. These rebates you paid, were they paid by check ? Mr. Mitchell. As a rule, yes, sir. Commissioner Clements. Who would the check be signed byl Mr. Mitchell. By the bank it was obtained from. Commissioner Clements. Signed by the bank? Mr. Mitchell. From which it was obtained. Commissioner Clements. What authority would the bank have to pay it! Mr. Mitchell. They would have a check probably of my own. Commissioner Clements. That would be drawn in favor of the bank? Mr. Mitchell. Drawn in favor of the bank. Commissioner Clements. And the bank would pay the rebate to the shipper 1 Mr. Mitchell. No, sir; the bank would furnish such exchange as was asked for. Commissioner Clements. Why was it done that way? I do not understand it very clearly. Mr, Mitchell Would you hke to have me make it clearer? Commissioner ClemI'NTS. I wish you would. Mr. Mitchell. The check comes to me from Buffalo covering a number of amounts; that is, covering a sum of money to pay a certain lot of claims. That check is de])Osited and checked against by myself, and the checks I malie are the checks issued by the bank; that is, the bank exchange which is sent about the country in payment of these bills. Commissioner Clements. You can not furnish us a statement of the shipments over your road last year of these products, indicating the name of the shipper, the amount of the shipment, the amount of the freight, and the amount of the rebate? Mr. Mitchell. I can not, sir. I can furnish the tonnage and charges and the shij^per, and I can furnish you some portions of the rebates. I can Jiot say at the moment how far back I can go. Commissioner Clements. Could you do it covering last year? Mr. Mitchell. No, sir ; I can give a portion of the year. Commissioner Clements. Back to what time? Mr. Mitchell. I presume six months. I can not say without going into detail. Commissioner Clements. During the last six months, as I under- stand, they were billed on what you call flat rates? Mr. Mitchell. Not altogether. Necessarily some of the billing creei)S in on the tariff rate. Commissioner Clements. What is the diiflculty about showing the same thing for the first half of last year? Mr. Mitchell. I think the papers are not in existence. Commissioner Clements. Wliat has become of themt Mr. Mitchell. They are probably destroyed. Commissioner Clements. You mean the claims and pajjers relating to them? Mr. Mitchell. Yes, sir. Commissioner Clements. The entries on your books would show, would tliey not? Mr. Mitchell. We do not have any books. Commissioner Clements. How do you run a railroad without books? Mr. Mitchell. I am referring to the special settlements you refer to. 340 APPENDIX a. Commissioner Clements. You do not make use of books in tho?.© transactions'? Mr. Mitchell. I have not made use of them; no, sir. Commissioner Clements. Why do you except that business from the other and transact it without books and then destroy the papers? Mr. Mitchell. It was thought to be a wise plan to pursue. Commissioner Clements. Is the management of your road cognizant of this method of doing business? Mr. Mitchell. The freight department of the Micliigan Central is handled by myself. I have no doubt the management may have some idea of what is being done. They are not conversant with the details. Commissioner Clements. Have you gone over it with the managers and those above you sufficiently to say that they consider that a great railroad is justilied in transacting its business that way, and therefore approve of it? Mr. Mitchell. The management of the road necessarily has knowl- edge of the general matters and the way they are handled. The depart- ments, as I understand, are given authority as a rule to manage that department to the best of their ability. Commissioner Clements. How much did you ever pay out at one time in regard to any one of these transactions? Mr. Mitchell. I can not say. Commissioner Clements. Well, about how much? Have you any idea? Mr. Mitchell. Well, $5,000, approximately. Commissioner Clements. Do you know who you paid that to? Mr. Mitchell. No, sir. Commissioner Fifer. To whom were your heaviest rebates paid, taking the last year? Mr. Mitchell. Well, they were paid to Hammond & Co., or the G. H. Hammond Company, or Cudahy & Co., or Schwarzschild «.^" Sulz- berger. They are, perhaps, among the heaviest. Commissioner Fifer. How much would their rebates amount to in the course of a year ? Mr. Mitchell. I do not know. I never — do you mean each or collectively? Commissioner Fifek. Each one. Mr. Mitchell. Perhaps lifty or sixty thousand dollars. Commissioner Clements. Do you mean to say that papers in these transactions — that is the way I understand you, and I do not want to do you or your road an injustice — that you destroy these papers in order to destroy the evidence of these transactions? Mr. Mitchell. The papers such as have been destroyed — I said before that I do not know how far back that goes — they were destroyed because their usefulness for our purposes had goue and passed. Commissioner Clements. You said you did not keep books about these matters ? Mr. Mitchell. No, sir. Commissioner Clements. Is that for the purpose of concealing the transactions? Mr. Mitchell. It was never considered necessary to keep books in regard to those accounts. Commissioner Clements. Do you destroy your other i)apers as recent as these? Mr. Mitchell. Not as a rule, sir. Commissioner Clements. Well, I will ask you again if you destroy APPENDIX Q. 341 these papers in order to destroy the evidence of the transactions to which they relate? Mr. Mitchell. Well, L have endeavored to answer your question, Mr. Commissioner, and have made three statements on the subject, 1 think. Commissioner Clements. Neitlier of which exactly answered the question, as I understand it. You do not wish to add anything further to that? Mr. Mitchell. Certainly we should dislike very much to have those papers exposed to the general i)ul)lic. Commissioner Clements. Why? Mr. Mitchell. It would be an unwise thing from a railroad stand- point to have such matters going about. Commissioner Clements. Why would it be unwise to disclose the method of procedure ? Mr. Mitchell. Well, on account of the interstate law. Commissioner Clements. Because it violates the law, yes. That is what you really mean, is it not"? Mr. Mitchell. I suppose that is it, sir. Commissioner Clements. That is all. The Chairman. Mr. Mitchell, are you correctly understood as say- ing that when the rate from Chicago was 25 cents in fact that that rate was the rate by all the lines'? Mr. Mitchell. So far as I know, it was. The Chairman. And that continued for quite a long period of time? Mr. Mitchell. Yes, sir. The Chairman. And according to your understanding all the lines engaging in this traflQc were carrying it on that basis? Mr. Mitchell. I think so. The Chairman. The percentage which ordinarily applies on the Islew York-Chicago rate being applied to the rate on which this traffic was hauled ? Mr. Mitchell. Yes, sir. The Chairman. If you could maintain the 25 cent rate, why not the published rate? Mr. Mitchell. There is no reason in the world that that rate could not be maintained except a sentimental reason. The Chairman. What is the sentimental reason? Mr. Mitchell. I will undertake to explain. The competition as brought before us, or the alleged evidence of competition, is in a great measure, in my opinion, sentimental. I think in many cases it does not exist, but it goes from one transporter to another, and we finally fall into the trap and undertake to meet these alleged conditions. Commissioner Clements. You mean by that the alleged cutting of rates by other lines? Mr. Mitchell. Yes, sir. The Chairman. I suppose in this matter you are a "follower?" Mr. IVIiTCHELL. We undertake to be followers. We have no desire to be leaders; do not intend to be, and, too, as far as my knowledge goes, never have been. The Chairman. Now, these rates you spoke of, 25 cents and 22 cents, only applied on export traffic? Mr. Mitchell. By us on export traffic. The Chairman. During the period that these rates actually applied on export traffic were you carrying the same kind of traffic for domes- tic consumption for the Eastern part of the country? 342 APPENDIX a, Mr. Mitchell. Yes, sir. The Chairman. Did you get the full tariflf rate on that! Mr. Mitchell. Yes, sir; so far as 1 know, I believe we did. The Chairman. And that, irrespective of the origin or destination of any particular shipment ? Mr. Mitchell. Yes, sir. The Chairman. Are you as confident that business is so conducted that no traflBc billed as export and carried as export is diverted at the eastern seaboard for domestic consumption*? Mr. Mitchell. I am very well satisfied of it. The Chairman. Has any case of that kind ever come to your knowl- edge? Mr. Mitchell. Never. The Chairman. Have you ever had any information that that is done? Mr. Mitchell. Never. The Chairman. Were you carrying a considerable amount of domes- tic traffic at the same time that these 25 and 22 cent rates applied on export? Mr. Mitchell. We were carrying all the packers whose export prod- uct we moved — we moved their domestic; therefore we carried our full share, I should say, of domestic traffic. The Chairman, Can you give us some idea of the relative amounts of export and domestic traffic of this kind carried during the last six months of 1901? Mr. Mitchell. You mean the percentage of each? The Chairman. Yes, sir. Mr. Mitchell. I should say about 25 per cent domestic and 75 to 80 per cent export. That is easily discovered by going through the details. The Chairman. There are accessible data from which the facts can be obtained? Mr. Mitchell. Undoubtedly. The Chairman. Are you able to say whether a similar percentage was carried by other roads — 25 iier cent domestic and 75 ])er cent export? Mr. Mitchell. I think the total east-bound movement of provisions carried by the Eastern trunk lines from Chicago is just about in the same proportion. I think that is the consumption as between export and domestic. The Chairman. Is it your understanding that of the total east- bound movement by the trunk lines of provisions 75 i^er cent goes abroad ? Mr. Mitchell. Yes, sir ; I should say fully. The Chairman. What is the general fact in that regard with refer- ence to dressed meats ? Mr. Mitchell. The preponderance is in favor of domestic tonnage. The Chairman. More than half of the dressed meats go east for domestic consumption ? Mr. Mitchell. I should say so, undoubtedly. The Chairman. And were the rates maintained on domestic ship- ments of dressed meats during the last six months of 1901? Mr. Mitchell. No, sir. The Chairman. You say the rates were not maintained on domestic shipments of dressed meats during the last six months of 1901? Mr. Mitchell. No, sir. The Chairman. What was that rate from Chicago 1 APPENDIX G. 343 Mr. Mitchell. Up to the 31st of December, from about October or September, it was 3().^ cents, 1 believe. The Chairman. On dressed meats? Mr. Mitchell. On dressed meats? The Chairman. What was the published rate? Mr. Mitchell. Forty five cents. Commissioner Prouty. Was not the published rate 40 cents? Mr. Mitchell. It may have been 40 cents. I will correct that. The Chairman, What was the fact prior to October"? Mr. Mitchell. The 40-cent rate was put in, Mr. Commissioner, reduc- ing the rate from 45 cents to meet alleged conditions in tlie early part of the year. I do not remember the date. The Chairman. Did you carry any considerable amount of dressed meats during 1901 that paid the tariff rate? Mr. Mitchell. 1 think not. The Chairman. Practically all of it went at some secret rate? Mr. Mitchell. Yes, sir. The Chairman. Some concession from the published tariff? Mr. Mitchell, Yes, sir. The Chairman. Is that true, as far as you have information, on other lines? Mr. Mitchell. I think all lines and all packers had about the same rates. The Chairman. And that was, generally speaking, about how many cents below the published tariff"? Mr. Mitchell. About 5 cents, except in this case I have stated, wliere it was 6f or 7. The Chairman. You are speaking now of dressed meats? Mr. Mitchell. Yes, sir; of dressed meats. The Chairman. Do you get shipments of dressed meats at any point east of Chicago? Mr. Mitchell. You mean fresh beef? Tiie Chairman. Well, that traffic described as dressed meats. Mr. Mitchell. We get practically none; I think none at all. The Chairman. It would not be likely to come to you there? Mr. Mitchell, ifo, sir. If you referred to dressed beef^do you mean dressed beef or provisions ? The Chairman. Dressed beef. Mr. Mitchell. We get no dressed beef. We get no fresh beef that originates east of Chicago. The Chairman. Does that traffic, so far as you participate in it, orig- inate mainly at Chicago? Mr. Mitchell. Chicago and the Missouri liiver. Commissioner Pbouty. Are these dressed meats carried on a time contract usually? Mr. Mitchell. No, sir; it is an open arrangement as a rule, subject to notice. Commissioner Prouty. How do you take care of the difference there between the published rate and the actual rate? Mr. Mitchell. As 1 have described. Commissioner Prouty. By a refund? Mr. Mitchell. Yes, sir. Commissioner Prouty. That has been done since the 21st of July? Mr. Mitchell. No, sir. From the time the 36^-ceut rate went in, or three-fourths, which ever it may be, it has been billed flat. Commissioner Pkouty. At 36^ ? 344 APPENDIX Q. Mr. Mitchell. Yes, sir? Commissioner Prouty. The published rate has been 40 1 Mr. Mitchell. It has horn 40. Commissioner Prouty. Tlie actual rate has been specified on the lace of the bill of lading? Mr. Mitchell. I think so. Commissioner Prouty. Tou have not called that an export rate? Mr. Mitchell. No, sir. I'he Chairman. Then, I understand that you T|)art{cipated in carry- ing dressed meats for domestic consunii)tion at less than the published rates, and billed them at less than the tariff rates then in fon;e? Mr. Mitchell. Domestic meats we have — fresh meats. I do not know that we billed the domestic meats at less than the tariff rates. The Chairman. Your former statement related to provisions? Mr. Mitchell. Provisions. The Chairman. And I understand that down to about the 21st of July you may have billed at the published rate and then i)aid a con- cession in the way you describe? Mr. Mitchell. Yes, sir. The Chairman. And after that the provisions were billed at a flat rate? Mr. Mitchell. The export provisions were. The Chairman. Whereas in the case of dressed meats, you say they have been billed at the tariff rate all the time, or generally speaking? Mr. Mitchell. Yes, sir; I think they have been. The Chaifiman. So dressed meats have not ordinarily been billed at the actual rate? Mt. Mitchell. No, sir. The Chairman. But at some agreed rate? Mr. Mitchell. Yes, sir. The Chairman. And the difference refunded to the shipper? Mr. Mitchell. Yes, sir. Commissioner Fifer. You spoke of these rates as secret rates. If they are secret rates, they are not taken advantage of by all shippers, are they? Mr. Mitchell. I think they are. Commissioner Fifer. They are not very secret then? Mr. Mitchell. They are not. Did I use the word " secret?" Commissioner Fifer. I so understood. I may be mistaken. Were all shippers advised of the reduction in rate on a departure from the published rate? Mr. Mitchell. On dressed beef? Commissioner Fifer. Yes; wherever there was a departure? Mr. Mitchell. They unquestionably knew of it and shared alike. Commissioner Fifer. Was there any instance where one shipper was preferred over another? Mr. Mitchell. I think not. Commissioner Fifer. What means did you adopt to advise your shippers — your patrons — as to the reduction of rate; that is, from the established rate — the published rate? Mr. Mitchell. By personal consultation, as a rule. Commissoner Prouty. What do you include in the term " provi- sions?" Mr. Mitchell. Salt meats is what I understand to be provisions, and the transj)orter understands. Commissioner Prouty. In distinction from fresh meats? APPENDIX G. 345 Mr. Mitchell. Yes, sir. Commissioner Frouty. Why is it you can not maintain the rate on fresh meats as well as on salt meats? Yon say .\on do maintain the domestic rate on salt meats? Why can not you n)aiiitain it on fresh meats? Mr. Mitchell. For the same sentimental reason that I described a moment ago. Commissioner Prouty. Is the sentiment stronger on fresh meats than it is on salt meats? Mr. Mitchell. Not at all; but you understand the total volume of domestic provisions that are handled by east bound roads from Chicago IS a small percentage. Commissioner Prouty. It comes to this, then: There is so much export in the case of i)rovisions that you can cut the rate on export and carry a man's domestic provisions for the tariff; whereas on fresh meats there is so little, you have to cut the rate on both. That is it, is it not? Mr. Mitchell. That is one way of putting it. The Chairman. So the settlements for rebates on fresh-meat ship- ments have continued down to nearly the present time in the manner you described? Mr. Mitchell. Yes, sir. The Chairman. That is to say, when you at some time received a check which you deposited in the bank to your credit, then you would have a list of iiersons to whom you wanted to make payment. You draw your check on that bank and ask them to give you drafts on New York or cashiers' checks for certain persons? Mr. Mitchell. Yes, sir. The Chairman. And you take those and distribute them to the per- sons they belong to? Mr. Mitchell. Yes, sir. The Chairman. That is the method adopted and continued on dressed-meat shipments to the end of this year? Mr. Mitchell. Yes, sir. The Chairman. And at the present time it is being donet Mr. Mitchell. Yes, sir. The Chairman. Since when? Mr. Mitchell. First of January. The Chairman. Has any traflic moved since that time? Mr. Mitchell. Quite considerable; yes, sir. Commissioner Fifer. Can you give any idea how many shippers have been given this concession, say in the last year, by your road? Mr. Mitchell. All shippers that have used our road liave had it. Commissioner Fifer. Can you give the number approximately? Mr. Mitchell. 1 should say six, perhaps. Commissioner Clements. You have named them, have you not? Mr. Mitchell. Yes. I did not name but three, I think; but some of the minor ones were using our road. Commissioner Clements. Who are they? Mr. Mitchell. The Omaha Packing Company, for example, and there is a small concern at Detroit. Commissioner Clements. You said a month ago that you brought these cut rates to the attention of these i)eople by personal interview. Do you vourself see the representatives of these shippers and advise them? Mr. Mitchell. Sometimes I do and sometimes they are interviewed by my immediate subordinates. 346 APPENDIX Q. Commissioner Clements. They look out for you, too, sometimes, I guess, looking for rntes. Do tbey come to you? Mr. Mitchell. We generally receive our share of visits from them if they think the rates are being manipulated by others. It is a mutual agreement. Commissioner Clements. They solicit the best rates they can get, do they"? Mr. Mitchell. Undoubtedly. Commissioner Clements. Who are the individuals you have dealt with in this matter in regard to the packing housi s in Chicago, what representatives ? Mr. Mitchell. Mr. Mci^aughton, of Omaha; Mr. Machette, of Kansas City; Mr. Jenkins, of Chicago. Tliere must be others. I do not happen to think of them just now. Commissioner Clements. How many of the Chicago ones did yon name? Mr. Mitchell. Mr. Jenkins. Commissioner Clements. What house is hist Mr. Mitchell, Hammond & Co. Commissioner Clements. Who, in connection with Armour, do you deal with? Mr. Mitchell. Mr. Ellis, of the Armour Packing Company, of Kan- sas City. We do not handle Armour's business from Cliicago. Commissioner Clements. Do you not handle any of it from here? Mr. Mitchell. We have handled none for a long period, to my knowledge. Commissioner Clements. What other houses here besides Armour and Morris? Mr. Mitchell. We do not handle the Morris output. Commissioner Clements. Who does? Mr. Mitchell. I do not know. Commissioner Clements. And Swift? Mr. Mitchell. We handle none except a little local business into Michigan territory from Swift & Co. Commissioner Cleivients. Who do you deal with as to that company in respect to what you do haul? Mr. Mitchell. When I deal with them it is with Mr. Fay. Commissioner Clements. How are these payments delivered to these respective houses? Are they mailed? Mr. Mitchell. Usually, I think, through our local representatives. Commissioner Clements. Handed over by your agent to the house? Mr. Mitchell. Yes, sir. Commissioner Clements. Somebody for each liouse? Mr. Mitchell. Yes, sir. The Chairman. Are the checks drawn to the order of the principals? Mr. Mitchell. I^To, sir. The Chairman, To whose order are they drawn? Mr. Mitchell. Generally the people with whom we negotiate. The Chairman. For instance, if you had a transaction with Mr. Jenkins, representing Hammond & Co., the check for the rebate agreed upon would be drawn to his order? Mr. Mitchell. Yes, sir. Commissioner Clements. In what form is the claim put in — as an overcharge ? Mr. Mitchell. When you make the voucher, you mean? APPENDIX Q. 347 Commissioner Clements. I suppose you do not pay except some- body claims. When they put in ii claim for the difference what is the form? Is it in the form of overcharge, loss or damage, or rebate? Mr. Mitchell. An overcharge; in fact, i do not know that it comes under any specific name. (Commissioner Clements. It is a statement of the shipment, amount and rate, and then there is so much refund? Mr. Mitchell. Yes, sir. Commissioner Clements. These payments of rebates up to January 1 on one class of meat, fresh meat; the papers have not been destroyed in regard to all these, have they? Mr. Mitchell. I think, Mr. Commissioner, I said sometime ago that there is no question that we have some of those papers, several months back, covering dressed meats and provisions. Commissioner Clememts. Well, I hope you will keep what you have. That is all. The Chairman. You are excused, Mr. Mitchell. Mr. Day, Mr. Chairman, Mr. Whitney wishes to know whether he may be excused from further attendance. The Chairman. There appears to be no reason why he should remain longer unless he desires to*. He may be excused. Mr. Day. I will call C C Cochran. Mr. Johnson. As 1 stated, Mr Cochran has been confined to his bed since the 24th day of October, and is therefore not present. Mr. Day. S. B. Knight. (No response.) The Chairman. Is anyone here representing the Wabash road? (No response.) Mr. Day. G. B. Spriggs. Mr. Calhoun. Mr. Spriggs also is sick. He has undergone an opera- tion. I have a certificate here from the doctor. He will be glad to come before the Commission at any other time. The Chairman. He is actually confined to his house and you have the physician's certificate? Mr. Calhoun. Yes, sir; I have the certificate here. Mr. Day. I will call Mr. J. M. Johnson. J. M. Johnson, being sworn, testified as follows: Mr. Day. State your official relation to the Rock Island, please. Mr. Johnson. Third vice president and freight tratfic manager. Mr. Day. You have heard some of tlie testimony here and know the subject of this inquiry. If you will be good enough to state what methods have prevailed respecting the trans]K)rtation of packinghouse products over your line from Kansas City or irom Missouri River points when the traffic was destined to Chicago or points east of Chicago dur- ing the past — say going back to the 1st of July, for instance — the i)eriod between July 1 and December 31, 1901? Mr. Johnson. Well, I suppose you want a statement of the rate con- ditions that surrounded the movement of traffic? Mr. Day. Yes, sir. Mr. Johnson. I might say that the published tariff rate on packing- house products and dressed beef from all Missouri River points is 18^ cents and 23^ cents to Chicago. While we have moved the traffic to Chicago at 18J cents, the special arrangements, you might say, with all packers Mr. Day. How long has that prevailed t 348 APPENDIX a. Mr. Johnson. Well, I think that rate went in about the middle of June. Mr. Day. Has it been maintained at that rate? Has that been the going rate? Mr. Johnson. I do not know of anything lower. Mr. Day. Has it fluctuated from time to time? Mr. Johnson. I think previous to that time there was 3 J cents off for a short period ; I think the rate was pretty well maintained from the 1st of January up probably until March or April. Then there was a concession of 3^ cents, if I remember correctly. Along in June the concession was made 5 cents. Mr. Day. That prevailed on fresh meats and packinghouse products? Mr. Johnson. Yes, sir. Now the export is handled in an entirely different way. You asked if there was anything lower. There may have been something lower on export provisions; export provisions are taken on a special contract for each shipment, while the rate on domes- tic provisions and on dressed beef is taken until notice is given that the rate is withdrawn. Now, there may have been some provisions. I do not know that that went much lower than that, but there may have been some cases that did go lower than 13^ cents between the rivers. Mr. Day. That was 5 oft" there? Mr. Johnson. Yes, sir; and we joined in whatever was necessary between the Mississippi River and the seaboard lor export. Mr. Day. This concession, this rate of ISi cents from Kansas City or the Missouri River to Chicago, did that apply on domestic traflic for domestic consumption oi' was it limited to export? Mr. Johnson. That applied on domestic as well as export. We do not know of any export dressed beef. We take it all the same, whether export or domestic. Mr. Day. What I have been endeavoring to ascertain is whether that ISJ-cent rate to Chicago applied on provisions for domestic con- sumption as well as on dressed beef, which we will assume was for domestic consumption. Mr. Johnson. I understand it did. Mr. Day. Now, you say if a concession was made east of Chicago, you joined in that? Mr. Johnson. I said east of the Mississippi River. Mr. Day. Where it was brought to the Mississippi River at 13 J cents as against 18^ cents published, and the roads east of the Mississippi River would make a concession between the Mississippi River and the Atlantic seaboard, you would join in that? Mr. Johnson. Yes, sir. Mr. Day. How low a rate can you recall at which provisions or dressed meats were carried from the Missouri River to the Atlantic seaboard? Mr. Johnson. Well, we do not make a through rate on the dressed beef. You might eliminate that. We make a through rate on export provisions only. We do not make a through rate on domestic provi- sions. I mean we do not make a concession on the through rate on pro- visions. Our concession is west of Chicago entirely or west of the Mississippi River. I have not personally handled export provisions, so I could not say what rate we did join in as a through rate, but it was whatever was going. Mr. Day. Who did handle that for your line? Mr. Johnson. It was handled by Mr. Gower. Mr. Day. During this period, say 1901, what other concessions were APPENDIX G. 349 made or participated iu by y oar line; concessions in any other form than tliose you noted? Mr. Johnson. No. Mr. Day. Nothing iu the way of under weighing t Mr. Johnson. No, sir. Mr. Day. Underbilling? Mr. Johnson. None whatever. Mr. Day. False billing? Mr. Johnson. No, sir. Mr, Day. How was this cut rate exhibited on the bill of lading? Was it exhibited there? Was it dune Hat or fixed up by voucher? Mr. Johnson. The net rate on domestic provisions and ou dressed beef was fixed by voucher; that is, the difPereuc between the published tariff rate and the contract rate on domestic provisions and dressed meats was refunded, while the export provisions were handled in a dif- ferent way, sometimes billed prepaid at a flat rate and then again repaid the difference between the contract rate and the domestic tariff rate. Mr. Day. When these i-ebates and readjustments were made by voucher or check other than flat billing, through whose hands did it pass? Mr. Johnson. Well, a great many claims came to me. Mr. Day. Were presented to you by the packers or shippers? Mr. Johnson. They were mailed to us by the packers. Mr. Day. And you in turn passed them over to whom? Mr. Johnson. To our freight auditing department for checking. Mr. Day. Then what? Mr. Johnson. They were checked up and drafts sent to me for pay- ment, and I mailed them to the packing houses — the packing firms. JMr. Day. Can you name some of the concerns to whom you sent those checks? Mr. Johnson. Well, I guess almost everybody on the river. We did business with almost everybody — Fowler & Co., Ruddy Brothers, Cudahy, the Omaha Packing and Provision Company, and Ham- mond & Co. Mr. Day. And Swift? Mr. Johnson. And Swift. Mr. Day. And Armour? Mr. Johnson. We had very little from Armour. Mr. Day. Morris? Mr. Johnson. Yes, sir; and Morris. Mr. Day. Who did you make your settlements with — with Morris? Mr. Johnson. I think the checks have gone to the order of the Nel son Morris Packing Company or the Nelson Morris Company. Mr. Day. In each instance, was the check drawn to the concern or to the man? Mr. Johnson. I will not say. I think, as a rule, our checks were drawn to the order of the packing house. Mr. Day. What was the occasion or reason for cutting the rate on domestic traffic? Mr. Johnson. In order to meet com])etition. Mr. Day. What competition? Mr. Johnson. The competition of other lines. Mr. Day. From Kansas City or Missouri River points to Chicago and the Bast'^ Mr. Johnson. And the Bast. Mr. Day. You do not mean Gulf competition t 350 APPENDIX G. Mr. Johnson. No; I mean competition between ourselves. Mr. Day. Is there any other reason that you have to assign for that? Mr. Johnson. I do not know of any. Mr. Day. These checks turned in, are they returned to you or the auditing department? Mr. Johnson. I think they were not checks; they were drafts. They would go back to the bank 1 guess. Mr. Day. They were cashier's drafts? Were they sent to you or did you procure those? Mr. Johnson. They were sent to me. Mr. Day. Not payable to your order? Mr. Johnson. Oh, no. Mr. Day. How were these payments noted in your accounts — were they as refunds of overcharges? Mr. Johnson. They do not go through our general accounts. Mr. Day. How are they carried — in separate accounts? Mr. tXoHNSON. They are not carried very long. They are destroyed soon afterwards. Commissioner Prouty. What do you mean by saying that they do not go in the general account? Mr. Johnson. I suppose they go through the treasury. I mean they do not go through the freight auditor's account in the ordinary way of an overcharge claim. The Chairman. There must be an entry on the books of your com- pany somewhere corresponding to the amount drawn out for this purpose. Mr. Johnson. I su])pose there is in the treasury department. The Chairman. What that entry is, you do not kuow? Mr. Johnson. No; I do not know anything about that. Mr. Day. You do not know what evidence is preserved in the books of the company — the auditor's or treasurer's — as to the disbursement of these moneys, how they are chari^ed? Mr. Johnson. I could not say. 1 never went into that. The Chairman. I inler that you in some way are furnished from the treasury of your company with wliarever money is necessary to meet the contracts you have made up to this time? Mr. Johnson. I would not like to put it just that way. They come to me in the shape of drafts, those that I handle personally. Those that Mr. Gower handles, 1 suppose come to him in the same way. The claims come in, and are checked up and a statement made of the amount and a draft is received for that amount and my clerk mails it to the proper party. The Chairman. You receive directly, and in the first instance from presumably the treasurer of your company these drafts made out to the diflerent parties to whom rebates are due? Mr. Johnson. They come to me that way. The Chairman. And you simply hand them over or mail themt Mr. Johnson. Mail them. The Chairman. You do not conduct the matter as Mr. Mitchell does of the Michigan Central? Mr. Johnson. No. Commissioner FiFER. Do you mail these drafts to the man, the individual? Mr. Johnson. My recollection is that they are drawn as a rule to the house. I do not recall any being drawn to the order of an individ- ual. There may be cases of that kind, but I would not like to say as to that. APPENDIX G. 351 Commissioner Clements. Are tlie claims made by the house? Mr. Johnson. They generally come to us as a statement of billing. Commissioner Clements. From whom — Swift & Co. or some indi- vidual ? Mr. Johnson. It would be Swift & Co.'s envelope and by checking up we know what business it is. Commissioner Clements. Is there any communication in it signed by anybody? Mr. Johnson. No communication. Commissioner Clements. You know what it relates to? Mr. Johnson. If it is my arrangement I know what it relates to. Commissioner Clements. You have talked it over beforehand with the representatives of these houses? Mr. Johnson. If we have an arrangement with them, we have. Commissioner Clements. How much have you paid iu the last year in that way to all of them ? Mr. Johnson. Well, I have no idea. Commissioner Clements. Have not you a pretty accurate idea? Mr. Johnson. I have not the slightest idea. We keep no record of it and do not charge our minds with it. Commissioner Clements. I know, but this is a pretty important business. Looking at revenues and rates and things of that kind, I suppose you get very familiar with a serious matter like this so as to know whether it is $5,000 or $100,000 a year? Mr. Johnson. I know it is over live. I know it is as much as five sometimes in a month. Commissioner Fifer. To one individual? Mr. Johnson. I do not think we pay $5,000 to one individual in a month. Commissioner Clements. How much have you paid to any one of them iu a year ? Mr. Johnson. 1 could not say. Commissioner Clemen'J'S. Have not yon any idea? Mr. Johnson. I have not the slightest. Commissioner Clements. Who have you talked to about these mat- ters and arranged with about these matters — what individual? Mr. Johnson. Well, there are different men in charge of the traffic of the different houses. Commissioner Clements. Each one has a traffic man that looks out for these things, and that is the man you deal with? Mr. Johnson. Yes, sir. Commissioner Clements. Can you name some of them, the Individ uals of these houses ? Mr. Johnson. Well, I have had some talk with Mr. Taylor of Morris & Co., Mr. Fay of Swift & Co. Commissioner Clements. And Armour? Mr. Johnson. We have had very little with Armour. What busi- ness we had with Armour was through Mr. Ellis. Commissioner Clements. And Hammond & Co.? Mr. Johnson. Mr. Jenkins. Commissioner Clements. Cudahy? Mr. Johnson. Mr. McNaughton. Commissioner Clements. And any others? Mr. Johnson. Mr. Urquhart, of the Omaha Packing Company, Commissiouer Clements. And Schwarzschild & Sulzberger? Mr. Johnson. Mr. Machette. 352 APPENDIX G. Commissioner Clements. Take one of these transactions and tell us what evidence there is now in your boolvs or papers of the transaction. A claim is filed. The communication — this statement conies from the house, for instance, in an envelope. You take that and check it up. Then where does it go'^ Mr. JoiiNSJON. I think it is destroyed. Commissioner Clements. And upon some sort of memorandum a check is drawn? Mr. Johnson. It is not destroyed until checked up with the billing, the file in the office; then the statement is made from the claim as filed. The draft is drawn and then the papers are destroyed, as I understand. Commissioner Clements. Why are they destroyed? Mr. Johnson. Simply for the purpose of destroying any evidence there may be. Commissioner Clements. Is there no entry on a book that so much money has gone into your treasury and some of it comes out? Mr. Johnson. That is a matter with the Treasury Department. I do not know anything about that. Commissioner Clements, You do not know what entries are made about it? Mr. Johnson. No; I do not. Commissioner Clements. All the papers you know about or entries that you are familiar with are destroyed? Mr. Johnson. I understand they are all destroyed. Commissioner Clements. Have you not any recent ones? Mr. Johnson. I do not think they are more than thirty days' old. Commissioner Clements. You think that all up to within thirty days are destroyed ? Mr. Johnson. That is the rule, or custom. Commissioner Clements. Is it probable you have some that are not yet destroyed ? Mr. Johnson. It may be. There may be some that have just been filed. Commissioner Clements. Well, is that practice still going on of paying these claims? Mr. Johnson. The old ones. Commissioner Clements. You are paying the old ones? Mr. Johnson. Yes, sir; nothing has been filed since the 1st of Jan- nary. Commissioner Clements. Nothing filed since then? Mr. Johnson. No, sir. Commissioner Clements. You mean nothing in reference to a ship- ment since then? Mr. Johnson. Yes, sir; that is what I should say, since January 1. Commissioner Clements. Has there been any arrangement to allow on shipments since the 1st of January? Mr. Johnson. I can not say there has been any arrangement. Commissioner Clements. Has the old arrangement been broken up? Mr. Johnson. It is understood that everything expired with Decem- ber 31, 1001. I might say in explanation that it is generally understood with the lines between the Missouri Kiver and Chicago that there is an arrangement at less than the tariff between the Missouri River and Chicago, and all roads that engage in the packing house business will have to meet it if they do any business. Commissioner Clements. Who makes that arrangement? APPENDIX G. 353 Mr. Johnson. I think that will develop probably in the hearing when you get the proper man on the stand. Commissioner Clements. Is it your road? Mr. Johnson. No, sir; not the Eock Island. Commissioner Clements. Do you know who it is? Mr. Johnson. Yes, I think I do; but I would prefer not to answer, because I think you can get it direct from the party who is interested. Commissioner Clements. Well, can you not furnish us a statement covering all of last year's shipments, showing each shipment and the amount of the rebate paid and to whom paid? Mr. Johnson. I think that would be very doubtful. I might be able to furnish you the amount of money paid to different persons, but I doubt if we could give a statement of shipments. I think the papers have been destroyed. Commissioner Clements. Could you furnish the amount paid to each house? Mr. Johnson. I think likely I could, not positively. Commissioner Clements. Could you furnish a statement showing what other roads besides you participated Mr. Johnson. Nobody participated with us unless it was some ship- ment of export taken on contract from the Missouri River. In that case we did participate with our connections East. That business is small compared with the other. Commissioner Proxjty. Suppose you had been compelled to publish a rate of 18^ cents from the Missouri River to Chicago, do you think that rate would have been maintained? Mr. Johnson. Do I think the 18J cents — well, I do not know. Commissioner Prouty. What is the reason you can not maintain a published rate the same as a rate that is not ])ublished? You grad- ually drift down to a rate of 18i cents and maintain that rate? Mr. Johnson. Yes, sir; that is true. We get to a lower level? Commissioner Prouty. Suppose you started with a published rate on that lower level, do you think you would maintain that rate? Mr. Johnson. We would for a short time, but I am afraid it would be cut. Commissioner Prouty. Who do you think gets the benefit of these cuts — the packer? Mr. Johnson. The dear public gets the benefit of it. They get the benefit — from the man that raises the calf to the millionaire that eats the steak. Commissioner Prouty. You do not think that the millionaire that kills, packs, and ships it gets any part of it? Mr. Johnson. No; I think he gives it all away. Commissioner Fifer. Is it not true that a few men, these large shippers, force the railroads to cut the rate, depart from the published rate, and when they get it down to where they are satisfied things go along smoothly? Mr. Johnson. I would not like to say that that is a fact. Commissioner Fifer. Don't you kind of think it is the fact? Mr. Johnson. No, sir; I think once in a while a weak sister gives away, and we all follow. Commissioner Fifer. Yes; but, as suggested by Commissioner Prouty, it seems that you can maintain this rate that is irregular when it gets down to a certain point, and yet it seems impossible to maintain the published rate. Is not that brought about by reason of the fact that a few men compel the roads to cut the rate, and when it is down 74lA— 05 23 354 APPENDIX Q. to a point where they get an advantage it satisfies them ana the mattei runs along smoothly"? Mr. Jt)HNSON. I do not think they can compel the roads. They could not compel them if they had a way of standing together. Commissioner Fifeb. Well, the roads do not do this voluntarily, do they? Mr. Johnson. They do it, they say, in order to protect themselves. Commissioner Fifer. 1 do not mean when I say " comi)el " — I do not mean they do it by physical violence, but they do it in other ways. Mr. Johnson. 1 would not like to say. They may find a road once in a while that is willing to do something to get their share of the business. Commissioner Fifer. They play one road against the other, do they not? Mr. Johnson. I would not say that. They are seeking the best rate, and sometimes they find somebody that wants to increase their carry- ing, and then the others follow in a short time. The Chairman. It appears that the actual rate has been 5 or 6 cents below the published rate? Mr. Johnson. Five. The Chairman. Does any shipper or any packer have any assurance that he will continue to get that rate from mouth to month or week to week ? Mr. Johnson. I think not; no. As a rule it is a temjjorary arrange- ment. The Chairman. Do you think any farmer gets a cent more for the animal he raises on account of that rebate? Mr. Johnson. Yes, sir; I think it increases the price of the cattle. The Chairman. The packer has no assurance that he will get it back, has he? Mr. Johnson. He is iiretty sure he will get it that month. The Chairman. And you think he pays more? Mr. Johnson. I think it has an influence in establishing the market on stock in the yards. Tlie Chairman. And that the packer himself does not make any more than if he paid the published rate? Mr. Johnson. I do not believe they do. Their competition is so severe that 1 think they give away all they get in the way of rebates, the same as the grain man does in the grain. The Chairman. Is the published rate too hight Mr. Johnson. I think it is too low. The Chairman. Then the actual rate must be extremely low? Mr. Johnson. Very low. We do not find any profit whatever in the business from Kansas City to Chicago. Commissioner Fifer. What business? You mean this particular traffic? Mr. Johnson. This particular traffic, dressed beef and provisions. Commissioner Pboiity. Are the rebates on live stock maintained? Mr. Johnson. Yes; I understand they are. I want to explain that answer. There is no live stock that originates in Kansas City. The stock all comes in there from some western point — some jioint east or west. The stock is carried out of Kansas City at what we call the remainder of the rate, and in that way the through rate to destination from ])oint of shipment is preserved. Commissioner Prouty. That is all. The Chairman, Any further questions! APPENDIX a. 355 Mr. Day. In the year 1901 did you luive a contract with any shipper, any packing-bouse company or concern? Mr. Johnson. Not with any shipper. Mr. Day. Or agreemeot to put in a certain rate or carry this trafific at a fixed rate for a certain time? Mr. Johnson. We agreed to make the same rate our competitors made. Mr. Day. Nothing binding on you beyand the day? Mr. Johnson. Well, beyond the month, I might say. It was not renewed every mouth. It was understood that it would run along until canceled. Mr. Day. What were the terms of that understanding? Mr. Johnson. Simply an understanding that we would carry at 18.J cents to Chicago. Mr. Day. During the pendency of that contract if your competitors reduced the rate Mr. Johnson. We would restore it. Mr. Day. At once? Mr, Johnson. At once. Mr. Day. Such were the terms of the agreement! Mr. Johnson. That was the understanding. Mr. Day. Have you a contract for this year? Mr. Johnson. No, sir. Mr. Day. Have any of the lines? Mr. Johnson. There is rumor. I can not say except from rumor. Mr. Day. What was the lowest you carried packinghouse products at ? Mr. Johnson. Thirteen and a half cents, Mr. Day. Why did the rate not go below that? Mr. Johnson. 1 do not know but it did by some lines. We put that as a minimum. Mr. Day. Why did you put that as a minimum? Mr. Johnson. We thought there was no protit at a lower figure. Mr. Day. You say there is a rumor abroad that there is a prospect- ive contract or a contract for the current month, is it, or for a time? Mr. Johnson. I think it is for a period. I can not say how long. As long as I did not make the contract, 1 can not swear to it. Mr. Day. What is the rate? Mr. Johnson. Eighteen and a half cents to Chicago. Mr. Day. Is that with more than one packing concern or with one? Mr. Johnson. I could not say about that. Mr. Day. What is your information ? Mr. Johnson, I say we have a rumor that one line has an engage- ment at 18J cents. I think you will probably develop that during the afternoon. Mr. Day. That is all. The Chairman. You are excused, Mr. Johnson. Mr. Day. There is anotlier question, Mr. Johnson, I want to ask you. Is it your understanding that that contract was made subsequent to the holidays? Mr. Johnson. No, sir. Mr. Day. It is an old contract! Mr. Johnson. I think so. Mr. Day. Continuing overt Mr. Johnson. I think so. Mr. Day. That is all. The witness was excused. Mr. Day. I will call Mr. Miller, of the BurlingtoiL 356 APPENDIX G. Thomas Miller, being duly sworn, testified as follows: Mr. Day. State your name and official relations to the Burlington road. Mr. MiLLEK. Thomas Miller, general freight agent, C, B. & Q. Mr. Day. What is the scope of your functions on the Burlington? Mr. Miller. I have charge in freight matters on what is known as the O., B. & Q. proper from Chicago to the Missouri River and St. Paul. It does not go to the Southwest — to Kansas City. Mr. Day. Your jurisdiction does not? Mr. Miller. No, sir. Mr. Day. Who has charge of that? Mr. Miller. That belongs to our Missouri River lines. Mr. Ives is the agent. Mr. Day. Who is your superior in regard to traffic on the Burlington? Mr. Miller. Well, in the past my superior has been our general manager. Since the 1st of January it has been changed. Mr. Day. Who was your general manager the last two months of the year? Mr. Miller. F. A. Delano. Mr. Day. Who is now? Mr. Miller. Mr. D. Miller. He is vice-president, in charge of traffic for the entire Burlington system. Mr. Day. And the southern point over which you have jurisdiction is what point on the IMissouri River — the most southerly? Mr. IMiLLER. Well, we have everything north of St. Joseph. Mr. Day. Were you here this morning? Mr. Miller. I was. Mr. Day. You heard the testimony here to-day? Mr. Miller. Yes, sir. Mr. Day. And know the scope of this inquiry? Mr. Miller. Yes, sir. Mr. Day. Will you, without taking up the time of having me specifi- cally interrogate you, state to the Commission what conditions prevailed on that i)ortion of the Burlington over which you had jurisdiction dur- ing 1901, particularly commencing with the 1st of July, 1901, speaking of packing-house products? Mr. Miller. I think since July 15 the rate on packing-house prod- ucts has been 18i cents to Chicago; dressed beef the same. Prior to that, from the 1st of April, it was 3 cents, and Irom^ January until April we got our tariff rate. Mr. Day. From January to April, 1901, you got your tariff rate? Mr. Miller. That is my recollection. Mr. Day. After April you gave a concession of 3 cents ? Mr. Miller. Yes, sir. Mr. Day. And since then it has been 18J cents, whether export or domestic? Mr. Miller. That is right. Mr. Day. That applied to Chicago t Mr. Miller. Yes, sir. Mr. Day. On traffic destined to the Atlantic seaboard was there any difference in the concession? Mr. Miller. We joined in any rate made by Eastern lines east of the Mississippi River. Mr. Dav. What is the lowest rate you recall prevailing on packing- house products from the Missouri River to New York and the seaboard? APPENDIX G. 357 Mr. Miller. I tliink it was 45 cents from the Missouri Eiver to the Atlantic seaboard. Mr. Day. That was the lowest rate from the Missouri River ? Mr. Miller. That was the lowest I recall. We did not participate in those low rates, speaking for our own line. Mr. Day. Have you any information that traffic was carried by your road — this particular traffic we are inquiring into here — at false weights ? Mr, Miller. Never. Mr. Day. No underbilling 1 Mr. Miller. There never has been an ounce of trafflc nnderbilled on the Burlington of any description. Mr. Day. Any other shrinkage except in the rate itself in regard to packinghouse products or dressed meats ? Mr. Miller. Never. Mr. Day. How about cattle ? Mr. Miller. Just the same. Mr. Day. Was this traffic billed out from Missouri River points to Chicago or for the Atlantic seaboard billed flat, or was it billed at the tariff? Mr. Miller. At the published tariff. Mr. Day. How are the differences made up? How is the refund or rebate paid ? Mr. Miller. By voucher. Mr. Day. Just state briefly the course of procedure, the formula? Mr. Miller. We receive a statement giving reference to the billing of the freight — no regular claim is made up — and that is checked and a voucher made for the amount. Mr. Day. Checked by whom? Mr. Miller. The freight auditor. He knew nothing about the transaction. Mr. Day. The claim first went to him? Mr. Miller. To me. Mr. Day. And you transmitted it to the auditor? Mr. Miller. I took it to them and had it checked. Mr. Day. How was it disbursed — by check? Mr. Miller. Check. Mr. Day. Payable to whom? Mr. Miller. It was different — sometimes to the traflSc manager and sometimes direct to the principal. Mr. Day. You mean the traflfic manager of the packing house ? Mr. Miller. Yes, sir. Mr. Day. Under what circumstances were checks made payable to the traffic manager? Mr. Miller. I know what firms were handled that way. Mr. Day. What firms? Mr. Miller. At Omaha, I think the Omaha Packing Company; I think it was paid to Mr. TJrquhart. For Swift & Company, to Mr. Fay. I do not remember how it was as to Armour & Company. Mr. Day. How about Morris ? Mr. Miller. He has no packing house there. Mr. Day. Did you carry any for Morris? Mr. Miller. From St. Joseph. Mr. Day. How was it settled there? Mr. Miller. I settled that, although it did not come under my jurisdiction, with Mr. Taylor. J358 APPENDIX G. Mr. Day. He is his traffic man? Mr. MiLLEE. Yes, sir. Mr. Day. Did you give the check in Mr. Taylor's name? Mr. Miller. In Mr. Taylor's name. Mr. Day. Do you draw your own check? » Mr. Miller. No, sir; the company's check. Mr. Day. How are these disbursements carried on the books of your company? Mr. Miller. I do not know. Mr. Day. Is the check drawn in your favor in the first instance? Mr. Miller. jSTo, sir. Mr. Day. The company's check is sent to you? Mr. Miller. Yes, sir; on a voucher approved by me. Mr. Day. And you send the check to Mr. Taylor? Mr. Miller. Yes, sir; mail it to him. Mr. Day. Did you have a contract covering any period of 1901? Mr. Miller. No, sir. Mr. Day. A contract, agreement, or understanding? Mr. Miller. No understanding that lasted overnight. Mr. Day. Have you any now? Mr. Miller. No, sir. Mr. Day. Are published tariffs being maintained on these products now? Mr. Miller. They are supposed to be. Mr. Day. What do you think about it? Mr. Miller. Mr. Johnson made reference to something that I did that, so far as your knowledge or information goes, the only concession not know anything about. I heard the same rumor. Mr. Day. Do you wish tlie Commission to understand you as stating that, so far as your knowledge or information goes, the only form of concession made by your road — that portion under your jurisdiction — during 1901 you have stated to them? Mr. Miller. Yes, sir. Mr. Day. That is all. Commissioner Clements. Is your road the one that Mr. Johnson meant, do you think? Mr. Miller. No, sir ; the Burlington road never tried to contract Commissioner Clements. I do not know that he meant a contract. How much has been i)aid in 1901 in rebates? Mr. Miller. I have not any idea. Commissioner Clements. Could you not approximate it? Mr. Miller. No, sir; I can ascertain and let you know. Commissioner Clements. I did not know but you Mr. JMiLLER. If you want that information, if it is possible for me to get it I will do so and give it to you. Commissioner Clements. I did not know but that you knew these things in the general run of your business and could give us some idea. You can give us a statement showing the tonnage of the shipments, the freight collected, the amount paid back, and to whom paid? Mr. Miller. I do not know whether I can or not. If you want it and I can furnish it, I will do it. Commissioner Clements. We want it, and if you can not furnish it, we would like to know why. Mr. I\Iiller. All right, sir. The Chairman. That seems to be alL Witness was excused. APPENDIX G. 359 Mr. Day. I wiil call Mr. Stohr. Mr. Kellogg. When Mr. Stolir received your notice he was on the Paciiio coast aud had not time to get back. He will come before the Commission at any time you desire. It was not possible foi him to get here yesterday, to day, or to-morrow. The Chairman. When did he leave for the Pacific coast? Mr. Kellogg. A week ago last Saturday, I think. Mr. Stohr is a man who never keeps out of the way. He will come here if you want him. The Chairman. If his attendance is required he will come to Wash- ington or such place as we designate? Mr. Kellogg. Yes, sir. Mr. Day. I will call Mr. Wann. Fred A. Wann, being duly sworn, testified as follows: Mr. Day. Please give your name and relations to the Chicago and Alton. Mr. Wann. Fred A. Wann ; general freight agent. Mr. Day. How long have you been general freight agent of that road? Mr. Wann. A little over five years. Mr. Day. Who is your superior oflBcer in the traffic department? Mr. Wann. Our president. Mr. Day. You have no traffic manager, so-called? Mr. Wann. No, sir. Mr. Day. Have you been here all during the day? Mr. Wann. All day; yes, sir. Mr. Day. Please go ahead and tell the Commission in what respect your road has made concessions Irom the published tariff's in the trans- portation of packing house products and fresh meats from Missouri Elver points to the Mississippi River, and from the Mississippi River to Chicago or points east of Chicago, during the year 1901, or subse- quent to July 1. Mr. Wann. The first three months we got tariff' rates on dressed beef and packinghouse products. I should say three months, it may be three and a half — about that time. Then we were approached and told that there was 3 cents being used on packing-house products. Mr. Day. A concession of 3 cents from the published rate? Mr. Wann. Yes, vsir. Then, I should say the latter part of May or June, 5 cents on fresh meats and packing-house products from Kansas City. That is where our provisions come from to Chicago and the East. Mr. Day. What did you do when you heard that? Mr. Wann. We did not haul any jn'ovisions from July until the latter part of October. In October we met the 5 cents. Mr. Day. You mean to say that from July until some time in October on all traffic you carried you collected and retained the published rate? Mr. Wann. I do not think we hauled five cars, during that time, of packing-house i)roducts. Mr. Day. How about dressed meats? Mr. Wann. Dressed meats we hauled from seven to ten cars. Mr. Day. What concession did you make on dressed meats? Mr. Wann. We simply stated that if we found later that our com- petitors were making this 5 cents we would protect them, which we did. Mr. Day. In the first case you collected the published tariff? Mr. Wann. Yes, sir. Mr. Day. And subsequently made a refund of the difference between the jjublished rate and what rate — 18 J cents? 360 APPENDIX G. Mr. Wann. Eighteen and a half or 22, as the case might be. Mr. Day. Tlie rate from Kansas City to Chicago was 23^? Mr. Wann. The pubhshed tariff'. Mr. Day. And you carried dressed beef at what rate? Mr. Wann. I do not think we hauled any beef to Chicago proper. Mr. Day. Well, taking the Chicago rate, I mean. How much con- cession did you make in that? Mr. Wann. Five cents. Mr. Day. Now, about j)acking-house products up to the Mississippi River. Did you carry any uj) to the Mississippi River? Mr. Wann. For the first three months, yes, sir; then, as I stated, from July to October we virtually hauled none. Mr. Day. After October what rate did you put in? Mr. Wann. I instructed my men 5 cents off. Mr. Day. That was 18^ cents from Kansas City to Chicago or Chicago common points? Mr. Wann. This was through export traffic; 90 per cent of the Kansas City business is export, possibly 05. Mr. Day. You carried some for domestic consumption at that con- cession? Mr. Wann. If there was any, it would not amount to anything — would not amount to 5 per cent. Mr. Day. Whatever you did, it went at the samet Mr. Wann. At the same rate; yes, sir. Mr. Day. How did you adjust the differences to the shippers T Mr. Wann. Through our connections. Mr. Day. How? State how you did it. Mr. Wann. In export provisions we prepaid at the net rate. Mr. Day. Prepaid at Kansas City through to the seaboard? Mr. Wann. I do not know whether it was paid through to seaboard or not. Mr. Day. It was prepaid beyond your line? Mr. Wann. Prepaid all the way through, so far as I understood. It was prepaid, so lar as our comi)any was concerned, less the amount we agreed to refund. • Mr. Day. Was tlie shrinkage taken out in advance? Mr. Wann. I issued a relief to our agent. It was 18 J cents; we would accept 13 J i)repaid. Mr. Day. Did you settle any of these by voucher? Mr. Wann. No, sir. Mr. Day. In October, after you put in this cut rate, made this con- cession of 5 cents, was that billed flat? Mr. Wann. That is what I am talking about now. Mr. Day. That was billed at the published tariff rates? Mr. Wann. Yes, sir. Mr. Day. Now, what concession was made on dressed meats after October, during the mouths of November and December? Mr. Wann. That was 5 cents. Mr. Day. How were dressed meats billed t Mr. Wann. At tariif rates. Mr. Day. The same thing? Mr. Wann. Yes, sir. Mr. Day. Tbey prepaid them? Mr. Wann. No, sir; my understanding is that that is not prepaid. That is settled through our connections. Mr. Day. They charge it back to you? APPENDIX G. 361 Mr. Wann. Yes, sir. Mr. Day. It is settled in your general accounts t Mr. Wann. General accounts, on vouchers by me. Mr. Day. What is it supposed to be for? Mr. Wann. Traffic balances. Mr. Day. Does it state that it is a shrinkage of the rate? Mr. Wann. No, sir. Mr. Day. Is there any evidence in the voucher ? Mr. Wann. No, sir. Mr. Day. How does it appear on the books of your company? Mr. Wann. That I do not know. All I know is that I approve the voucher and I sign it. I know what it is. Mr. Day. So far as the paying of rebates to the shippers or con- signees of traffic is concerned, during the past year you have done noth- ing of that kind? Mr. Wann. Not on this particular business. Mr. Day. I am speaking of this particular business. Packing-house products and dressed meats we are talking about. Mr. Wann. Yes, sir. Mr. Day. Did you have any information that traffic was underbilled on your line? Mr. Wann. No, sir; I have no knowledge of it. Mr. Day. Have you any reason to believe that traffic is carried at less than actual weights? Mr. Wann. No, sir; I have not. Mr. Day. Has your road, so far as you have information, partici- pated in any shrinkage whereby a reduction of the rate has been accomplished? Mr. Wann. No, except where the rate from the Mississippi River to New York is lower than the division of the through rate, which would force us to participate from the Mississippi Eiver to New York, as Mr. Johnson explained. Mr. Day. And in these instances you settled Mr. Wann. By line voucliers. Mr. Day. The line agents would draw on yoii for your share of that — their auditing department would draw on you for your share of the rebate? Mr. Wann. No. Mr. Day. How would they do it? Mr. Wann. Those balances come to me, and when checked by the auditor 1 issue a check to the agent of the line. Mr. Day. Tlie line agent distributes it to the persons entitled t» it? Mr. Wann. I do not know. Mr, Day. Who do you send the check to? Mr. Wann. The check is made in favor of the line— the Red Line, the Blue Line, the Traders' Despatch, taking into account our share Mr. Day. And the rebates? Mr. Wann. Yes, sir. Mr. Day. And they divide it and make application of the payment? You simply recognize and approve of the allowance by your company of its share of that? Mr. Wann. Yes, sir; our proportion. Mr. Day. After you found in October what you regarded as neces- sity to cut the rate, did you make any contract for any specific time with any packing house or any traffic man representing any packing house or any shipper? 362 APPENDIX O. Mr. Wann. No, sir. Mr, Day. You have made no contract or understanding? Mr. Wann. Only this: We never make an arrangement except we can take it out in thirty days, and often in ten. This particular con- tract would be subject to thirty days. iMr. Day. What was said when you put this in? How did you inform the shipper that he might rely on this rate for thirty days? JMr. Wann. I would say to a connection, you can charge us that amount subject to thirty days' notice of change. Mr. Day. How did you advise the people on the Missouri and the Mississippi rivers that you would make that cut? Mr, Wann. I do not think it necessary to advise them, because most of them are represented in Chicago. Mr. Day. But it was necessary for them to know that it would stay in thirty days, was it not? Mr. Wann. I do not think so. Mr. Day. How did you make this special arrangement; what form did this special arrangement take? Mr. Wann. I sny AAhen we were convinced that other roads were making this, I told our connections and shij)pers when they came into my office Mr. Day. Told them what? Mr. Wann. I told them we would meet the situation, and in the mean- time if they found out, to let me know. Mr. Day. That they could go ahead and ship? Mr. Wann. And I would protect them. Mr. Day. Did you give them to understand that they could rely on this for thirty days? Mr. Wann. I do not know whether I said that specifically. Mr. Day. It was understood that they could? Mr. Wann. No, sir. Mr. Day. Have you such an arrangement as that in nowt Mr. Wann. Virtually; yes, sir. Mr. Day. It is in now? Mr. Wann. Virtually; yes, sir. Mr. Day. Are you carrying either of these commodities at a lower rate than the published rate now? Mr. Wann. That I do not know yet. I will not know until I know what the other roads are doing. All I know is what rumor says. I believe there is one now. Mr. Day. You believe there is a contract other than yours! Mr. Wann. I do not know. Mr. Day. You say it is the rumor? Mr. Wann. Yes, sir; that is the rumor. Mr. Day. Do you make any concessions on cattle f Mr. Wann. If we were asked — I do not know that we would charge more on cattle than on fresh beef. Mr. Day. During last year did you carry cattle at a lower rate than the published rate? Mr. Wann. I think we did. Mr. Day. For whom ? Mr. Wann. I do not know. I would have to look that up. Mr. Day. At what rate? Mr. Wann. Some at $5 and some possibly at $10 a car oft' at Chicago. Mr. Day. It did not go by the hundred pounds? Mr. Wann. No, sir; cattle take the same rate as beef. APPENDIX G. 363 Mr. Day. There is a great difference between $5 a car and 5 cents a liuudred poiiuds off. Mr. Wann. Yes, sir. The division of the through rate would be 19 or 20 cents. It would be at that case $3. Mr. Day. When did you hear this rumor that there was a contract for 1902 ? Mr. Wann. Last time, just now. Mr. Day. Well, prior to this inquiry? Mr. Wann. I do not know that I could say. Mr. Day. What packing house did this rumor attribute the contract to be with? Mr. Wann. I do not know. Mr. Day. What ones? You know what concerns the rumor at- tached to? Mr. Wann. I do not like to testify as to rumor. Mr. Day. I am asking you as to the rumor. You say you are pre- pared to meet that situation. Mr. Wann. Well, I think the testimony that will be given will satisfy you about the situation on this particular commodity. Mr. Day. Where is it rumored that this contract applies between? Mr. Wann. Well, I presume between the Missouri liiver and New York. I presume between the Missouri River and New York or the East. Mr. Day. How much concession does rumor attribute to this contract? Mr. Wann. That I do not know. That has never been mentioned in my presence. Mr. Day. Now, where you made these authorizations to your agent at Kansas City to accept 13i cents on provisions, in whose behalf was that? Who was the shipper? Mr. Wann. Well, we liave hauled the provisions of the Cudahy peo- ple, the S. & S. Company, Swift & Co., and the Omaha Packiug Com- pany. We treat tliem all alike. Mr. Day. Does your line extend up to Omaha? Mr. Wann. No, sir. Mr. Day. Has the Omaha establishment a place at Kansas City? Mr. Wann. They had. I think they stopped the 1st of January. Mr. Day. January of this year? Mr. Wann. Yes, sir. Mr. Day. You say you have made no settlements by voucher with these shippers? Mr. Wann. No, sir. Mr. Day. Nor check? Mr. Wann. No, sir. Mr. Day. Nor cash! Mr. Wann. No, sir. Mr. Day. That is all, j'^our honors. Commissioner Clements. Can you make up a statement and show each shipment during the last year and who it was made by and the rate paid ? Mr. Wann. You mean this particular traffic? Commissioner Clements. These products that are the subject of this inquiry. Mr. Wann. That can be done, Mr. Commissioner. The auditing department has charge of that. Commissioner Clements. And show the amount of rebates paid to each person? 364 APPENDIX Q. Mr. Wann. I presume that could be done. It would be quite a job, because there might be a number of other items for traffic balances. I presume it could be done, but it would take a lot of time. Commissioner Clements. It is an important matter, and we would be glad to have that statement of each shi])ment, the amount of the rate collected, the amount of the rebates paid, and the date of each. Mr. Wann. I will have that made up by the auditing department. Commissioner Clements. Do you know how much was paid during the year? Mr. Wann. I should think not to exceed $2,500 or $2,000 a month. Commissioner Clements. To all shippers? Mr. Wann. Yes, sir. Commissioner Clements. Have you named the persons with whom you deal in regard to these rebates respecting each of these houses? Mr. Wann. Yes, sir. Commissioner Clements. You have already given the names? Mr. Wann. Yes, sir. Commissioner Clements. I infer from your testimony that when this rate got down to 13J cents it was pretty well maintained by all the lines? Mr. Wann. Yes, sir; it was by us. The Chairman. What is your information and belief as to whether it was maintained by other lines? Mr. Wann. I think it has been maintained. The Chairman. I will ask what has been asked a previous witness. Can you exj^lain why it is easier to observe a 13^-ceiit rate than an 18^-cent rate? Mr. Wann. It is as easy to maintain an 18^-cent rate as a 13^-cent rate. The Chairman. Why has it not been done? Mr. Wann. You might ask me if I was the leader. The Chairman. I know you are not. Mr. Wann. Simply competition forces it, I am sorry to say. The Chairman. You do not approve of this state of affairs, Mr. Wann? Mr. Wann. No, sir; I do not. The Chairman. How do you think it can be corrected? Mr. Wann. That is a great big problem. I have tried to study it for a number of years. The Chairman. You have no remedy to suggest for this state of things? Mr. Wann. ISTo, sir. Commissioner Fifer. How did the rates in the days of pools com- pare with the rates at the present time? Were tliey more or less? Mr. Wann. Well, the rates all the time have been declining for the last thirty years. Commissioner Prouty. How much did this rate decline in the last twenty years? Mr. Wann. I was talking of rates in general. I do not know as to rates on dressed beef. I have only had direct charge of it for five years. But it is too low to day. The Chairman. Is the published tariff lower than it was five years ago? Mr. Wann. No, sir. The published rate is too low, in my judgment? Commissioner Prouty. Is it lower than it was ten years ago? Mr. Wann. I do not think so. I may be wrong. APPENDIX Q. 365 Commissioner Prouty. This competition has not produced any efifect on the published taiitil Mr. Wann. Ko, sir (Joramissiouer Prouty. Whatever effect it has produced has been on the secret tariti? Mr. Wann. Yes, sir. Commissioner Prouty. Do you think the secret tariff would be better maintained if you had a pool, than it is now? Mr. Wann. If there was a pool, I do not think there would be any secret rate. Past experience makes me say that. Commissioner Prouty. If Mr. Johnson's idea is right, the public would ])ay just so much more for this service than they do now? Mr. Wann. I do not think they would. Commissioner Prouty. Who do you think gets the benefit of the cut rate^ Mr. Wann. It is a hard question. When rates are very low they have got to give it up. They can not keep it. The competition among themselves is so great. I never found my butcher reducing my bill on account of it. Commissioner Fifer. If pooling was legalized at the present time, do you think it would reduce the rate between Kansas City and Chicago? Mr. Wann. No, sir. Commissioner Fifer. You think there would be no disposition on the part of the railroads to get together and push up the rates? Mr. Wann. No, sir. Commissioner Prouty. Why not, if they are too low? Mr. Wann. I was thinking of the whole situation. Commissioner Prouty. You think it would raise the rate on dressed beef? Mr. Wann. I think it should be raised for the service given. Commissioner Prouty. Do not you think the rates generally are too low? Mr. Wann. Yes, sir; on the heavy commodities moved. Commissioner Prouty. The effect of a pooling provision would be to raise the rates, would it not? Mr. Wann. No, sir; if the rates were maintained. Commissioner Prouty. If they were satisfied they could maintain the rates? Mr. Wann. Yes, sir. Commissioner Prouty. That is all. The Chairman. If there are no further questions to be asked Mr. Wann, he will be excused. The witness was excused. Mr. Day. I will call Mr. A. C. Bird. A. C. Bird, being duly sworn, testified as follows: T\Ir. Day. Mr. Bird, you are the traific manager of the Chicago, Mil- waukee and St. Paul? Mr. Bird. I am third vice-president. Mr. Day. What is the general scope of your jurisdiction? Mr. Bird. I have charge of all traffic. Mr. Day. Mr. Bird, please state to the Commission what concessions from the published tariffs were made on your line during the year 1901 in respect to the transportation of packinghouse products and dressed meats, taking packing-house products first. 366 APPENDIX a. Mr. Bird. The tariff rate IVom the Missouri lliver to Chicago is 234 cents, and from the Mississii)i)i Itiver crossiiijjs 18.V cents. During the early part of the year, as near as I recall it, the tariff rate was enforced. In the spring-, or a little later, my impression is, a concession of 3 cents was made; and in July, perhaps about the middle of July, the conces- sion was 5 cents, and that is true of fresh meats. Mr. Day. And that 5-cent concession continued throughout the year! Mr. Bird. Yes, sir. Mr. Day. Was the concession greater than that during any period of the last eight mouths of the year? Mr. Bird. 1 think not. Mr. Day. Was that concession made on these two commodities — the commodities known as packing-house products and dressed meats with- out reference to the destination of the traffic? I mean domestic and export. Mr. Bird. Yes, sir. Mr. Day. How was it billed? This traffic that your road carried at a concession from the established rates, how was it billed? Mr. Bird. With the possible exception of export for a period, it was generally billed at the tariff' rate. Mr. Day. What period was that exception? Mr. Bird. I am not clear as to that. Certain export business was billed prepaid at the net rate to the Mississippi Eiver and there rebilled through to the Atlantic destination. Mr. Day. AVhen settlements were made, what form did they take, settlements with the shippers? They billed it at one rate and carried it at another? Mr. Bird. I can not answer that in detail, but in general 1 can tell you. A statement was made by the shipper, or agent of the shipper, shewing the date of shipment and the weight, and handed in. It was understood how much concession was made, and it was made. iMr. Day. How was it done — in the form of a voucher or check? Mr. Bird. Voucher. Commissioner Prouty. Was that voucher signed by the shipper when he got his money? Mr. Bird. Well, doubtless. I do not think I ever saw one signed by the shipper, but there was a receipt given in some form. Commissioner Prouty. Is that receipt preserved by your company? Mv. Bird. I can not say definitely. Commissioner Prouty. Into whose office, or through whose office, would that receipt pass? Mr. Bird. When I approved the voucher, it was the last I saw of it, I do not know. Commissioner Prouty. Do you think it was discreet to let somebody else deal with it afterwards? Mr. Bird. I could not do it all myself. Commissioner Prouty. You approved the voucher? ]Mr. Bird. Yes, sir. Commissioner Prouty. You do not know how it is paid? Mr. Bird. I could not answer definitely in that respect. Mr. Day. To whom did you transmit the claim after you approved it? What office did it go to? Mr. Bird. The general freight agent or some one designated by him generally. Mr. Day. Well, when it went to voucher and the check or draft was issued, who issued the draft or check? APPENDIX a. 367 Mr, Bird. I do not kuow. I did not touch that part of it. Some cue paid it. Mr. Day. You approved these claims in the first instance? Mr. Bird. Yes, sir. Mr. Day. In whose behalf were these claims approved, what con- cerns? M \ Bird. My recollection is that it was with the individual with whoM the arrangement was made, but I can not be positive. There were a good many transactions and I really do not know. Mr. Day. Your recollection is that the claims were in favor of the agent who took charge of the business? Mr. Bird. Yes, sir. Mr. Day. Now, what concerns, what firms, what packing houses, say, during the past six months, were tliese claims made in favor of? Mr. Bird. I think the St. Paul company handled claims that way for every packer on the Missouri River. Mr. Day. Were these concessions uniform ? Is it your understanding that all the lines between Kansas City and Chicago made identically the same concession from the published rate? Mr. Bird. Well, not precisely that. Perhaps there might be a variation of dates — not very much. As a rule, my impression is that all the shippers had the same rates. Mr. Day. What was the occasion of these concessions? They were made under your direction or authorization? Mr. Bird. Under my authorization. Mr. Day. What reasons moved you to depart from your published rate? Mr. Bird. Competition, pure and simple. Mr. Day. You mean by that somebody else had made a concession or that you believed they had? Mr. Bird. I believed they had. Mr. Day. Lines between Kansas City and Chicago or between Chi- cago and St. Louis? Mr. Bird. So far as the general business is concerned, between our direct competitors. Mi-. Day. Did you make any greater concession on traffic destined for points east of Chicago than on traffic that had Chicago for its objective? Mr. Bird. I can not answer that definitely, but I think there was a time that we carried on export provisions a little lower rate. Mr. Day. What was the lowest rate you know of that traffic was carried on from the Missouri River to the Atlantic seaboard, or from the Mississippi River to the seaboard? Mr. Bird. I can not answer that. We have made our rates to the Missi8sip])i River or to Chicago. We made the rate to the Mississippi River an arbitrary rate, and from the Mississippi River to the seaboard destination we joined our eastern connection in whatever rate was made. Mr. Day. Wliat was the lowest rate you made from any Missouri River point to the Mississippi River? Mr. Bird. I think the lowest made during the year was 13^ cents. That is my recollection. Mr. Day. And the lowest to Chicago? Mr. Bird. Eighteen and a half cents. Mr. Day. And the lowest from the Mississippi River to New York or Boston? 368 APPENDIX a. Mr. Bird. I do not know. Mr. Day, The lowest you can recall? Mr. Bird. About 20 or 30 cents on packing-liouse products, and possibly 35 on dressed meats, or 45. I do not remember; 45, I think. Mr. Day. Mr. Bird, has your road a contract or arrangement with any concern now representing a concession in rates on packing-house products or dressed meats? Mr. Bird. I think we have an understanding that we intend to meet the rates made by any standard line. Mr. Day. What do you mean by a "standard line?" Mr. Bird. A line that can make a fast run on dressed beef. Mr. Day. What are those lines? Mr. Bird. Such lines as the Northwestern, the Burlington, the Alton, and the Eock Island. Commissioner Prouty. What evidence are you going to require to convince you that a standard line has made another rate than the i)ub- lished rate? Mr. Bird. The only evidence we ever have— either the statement of the shipper or possibly the admission of the other carrier, or both. Commissioner Fifer. Can you not sometimes tell by the shifting of the freight? Mr. Bird. We guess it from that. We surmise that there is either a change in the rate or a purpose to make us believe the rate has been changed. . Commissioner Prouty. I understand that you are carrying this freight, and you say to your shippers if any line makes a lower rate we will meet it? Mr. Bird. We expect to meet it. Commissioner Prouty. How are you going to know ? Mr. Bird. Those are the only means we have of knowing. Commissioner Clements. Suppose one of these houses sends a state- ment for a shipment made yesterday or the day before, what are you going to do about it? Mr. Bird. I do not know. ' Commissioner Prouty. About how low a rate do you understand the other fellow is likely to make? Mr. Bird. I do not think there is any inclination to go below 18^ cents to Chicago. I think most lines are willing to go out of the busi- ness at anything less than that. Commissioner Prouty. If your shipper came around and said that the rate was ISi cents, would you be inclined to accept that statement and give him the benefit of it? Mr. Bird. Very much inclined. Commissioner Clements. Don't you think the shippers unduly work the railroads that way, if their statement is accepted as satisfactory proof of the cutting of the rate by some competitor? Mr. Bird. Well, I ought to suspect a good many such things as that. Commissioner Clements. It makes a very unsatisfactory condition of rates, does it not, to have to depend on the statements of shixjpers that want a lower rate? Mr. Bird. Exceptionally so. Commissioner Prouty. Who do you think gets the benefit of the cutting of the rate? Mr. Bird. I am not so sure of that as I am who makes the loss. I think under some circumstances the public get it. I think there is just as much competition sometimes between the packers as there is APPENDIX Q. 369 between the railroads, and they are laboring under the same disad- vantages as the carriers, and therefore they lose the imaginary profit. If a single shipper had a concession that others had not he would get the benefit probably. Commissioner Pkouty. Your impression is that all of them get the same rate? Mr. Bird. I am quite certain of that. Commissioner Prouty. And that the railroads carry at about the same rate ? Mr. Bird. My belief is that 18^ cents is considered as low as any- body wants to go. Commissioner Prouty. If a low rate is a good thing for the public, why is not this thing all right now? The public are getting about 5 cents better than they would if you maintained the published rate? Mr. Bird. I do not think I quite comprehend your question. Commissioner Prouty. You say that is a bad state of affairs; that you do not like it. If the i)ublic get the benefit of this rate tlie public are getting the benefit of a 5 cent better rate than they would if you maintained the published tariff. You say that everybody has the same rate. If that is so, why is not this present condition of things all right? Mr. Bird. I think the rate is too low. Commissioner Prouty. That is the only fault you have to find with it, that the rate is too low? Mr. Bird. I think it is, decidedly. Commissioner Prouty. What is your remedy for this situation? How are you going to stop these departures from the published rate? Mr. Bird. 1 have never been able to find one. I do not think there is any hope of a better condition until the carriers are permitted to make contracts with each other. Commissioner Prouty. You tliink that would remedy it? Mr. Bird. Under jjroper arrangements; yes, sir. Commissioner Prouty. You seem to have gotten into a hopeless situation. Last year you maintained the rate at the beginning; then you got to a concession of 3 cents. This year you are willing to start out with 5. Mr. Bird. Not start out. It is more like a continuation. The fore part of 1901 the rates were satisfactorily maintained. Commissioner Prouty. In other words, you have got around now to the point where there is no new leaf to turn over. You have turned them all over. Mr. Bird. I am afraid so. Commissioner Clements. Don't you think that some of the smaller shippers get the worst of it in these departures, and do not get an equal cut with the larger ones? Mr. Bird. I do not know of any such case. Commissioner Clements. You are speaking now of those on the Missouri River and at Chicago? Mr. Bird. At the Missouri River. Commissioner Clements. You do not know anything about how it affects any of these smaller ones east of Chicago? Mr. Bird. I do not know how the business is conducted here except from information I got to day. Commissioner Clements. You think the small ones fare as well as the large ones along the Missouri River — that they get as low a rate and get it as quickly? Mr. Bird. There seems to be something in the air that they all know it and get there pretty quickly. 741a— 05 24 370 APPENDIX O. Commissioner Clements. Can you furnish us a statement of all ship- ments during the last year, 1901, showing the amount of each sliipment over your road, the names of the shippers, the amount of freight col- lected, the amount i)aid back, and to whom paid? Mr. Bird. That involves a laborious statement, but we can furnish it if you wish. All our statements of this character are for the calendar year— from whom shipped, to whom consigned? Commissioner Clements. And the amount of each rebate allowed and the date when paid? Mr. Bird. 1 think so. I am not positive. Commissioner Fifer. If pooling was legalized would it raise the rates materially from Kansas City to Chicago? Mr. Bird. That would depend on the conditions under which it was legalized, the restrictions placed on pooling. Are you speaking of this particul ar traffi c ? Commissioner Fifer. Yes, sir. Mr. Bird. I think if the pool was legalized the rate would be 23^ cents net. Commissioner Fifer. That is the published rate now? Mr. Bird. Yes, sir. Commissioner Fifer. You say that rate is too low? Mr. Bird. I doubt if it would be good policy to advance a rate under such circumstances. Commissioner Fifer. Is there a fair profit at 23^ cents? Mr. Bird. I do not think that traffic pays its share of transportation charges at 23^ cents. Commissioner Clements. As an active, intelligent traffic manager of a railroad, I suppose you are always looking out for leaks in your rail- road as far as you can. Can you tell us the amount you paid last year in rebates? Mr. Bird. It would only be a guess. Commissioner Clements. Would it not be something more than a guess? Mr. Bird. There have been parts of the year that we were not doing much business. Commissioner Clements. Well, I guess that statement will cover that. Mr. Day. Mr. Bird, is the contract in writing 1 Mr. Bird. Is^o sir. Mr. Day. Is it for a definite time? Mr. Bird. I think not. I do not think it is. Mr. Day. Does it fix the rate? Mr. Bird. The general proposition is that we are supposed to meet our competitors, but not lower than so much. Mr. Day. How long has it been in operation? Mr. Bird. We have been carrying probably this same rate since sometime in October, perliaps farther back than that. Mr. Day. Is it with more than one concern? Mr. Bird. The same rate to all. Mr. Day. 1 am speaking of this contract. Mr. Bird. We have no specific contract— provided the rate does not go belo w somuch. There have been conversations with various people on the subject, but I can not attempt to give you more than a general answer on these questions. Mr. Day. That is all I wish to ask Mr. Bird. The Chairman. That seems to be all, Mr. Bird. Mr. Day. Mr. Paul Morton. APPENDIX G. 371 Paul Morton, being duly sworn, testified as follows: Mr. Day. -Mr. Morton, will you state your official relation to the Atchison road, what your jurisdiction is? Mr. Morton. I have general charge of the commercial relations of the company. Mr. Day. And charge of its traffic department? Mr. Morton. Yes, sir. Mr. Day. Mr. Morton, the Commission wants to know the conces- sions that have been made during the past year; take the year 1901, or the last part of it, or eight months of the year; what concessions have been made from the established tariffs in the transportation of packinghouse products and dressed beef or dressed meats by your road? Mr. Morton. We have carried the business from Kansas City to Chicago for 5 cents less than the published tariff to Chicago and Chicago junction points. Mr. Day. Domestic as well as export? Mr. Morton. Both. Mr. Day. How long have you been doing thatT Mr. Morton. We did it, 1 think, about April 1 ; we commenced to do it from the beginning of the year, at which time there was a general declaration of good faith and intention of an absolute maintenance of rates. We maintained the rate until about April 1. We carried, I think, about 2 per cent of the business from Kansas City to Chicago. We bring into Kansas City about 33 J j)er cent of all the live stock brought in there. Commissioner Fifer. What per cent? Mr. Morton. About 33^, and we were not satisfied with the propor- tion of the product that we were getting out. 1 do not know that rates were being cut via Chicago or via St. Louis, but we do know that we were confronted with a condition, not a theory, and we could not get any business unless we met the conditions, which we did. We told one of the largest shi[)pers in Kansas City that if they would come and ship with us we would give them 5 cents reduction from the tariff", and in order to get them we had to promise to do it for a year — I think until the ist of July of this year, 11)02. Ordinarily, on tariff rates we ought to carry 20 to 25 per cent of the business from Kansas City, where the rates are equal by all lines. Our Justification for taking this business was that Ave were carrying less than 10 per cent of what we thought we were fairly entitled to. Mr. Day. What per cent of the packing-house products from Kansas City to Chicago do you think your road ought to have? Mr. Morton. We think we ought to have one-fifth of it. We prob- ably would not get that under an arbitration, but that would be what we would contend in case we went before an arbitration committee for a fair share of the business. Mr. Day. Have you carried traffic — these commodities — at a lower rate than 18 J cents? Mr. Morton. No; we have not, unless there may have been one or two occasions that I do not know of when the export rate was on a lower basis than that. Mr. Day. How much lower basis was it ? Mr. Morton. I could not tell you. I do not know what the details are. I do not know that there were any occasions. Mr. Day. Have you made concessions in this traffic in any other form than the one which you have mentioned? 372 APPENDIX G. Mr. Morton. No; no other form. This rate, by the way, has been open to everybody. There has been no discrimination, so -far as our company is concerned, between the various shippers of packing-house products and dressed beef. Any shipper that used our line we would settle with on that basis. Mr. Day. How was this traffic billed out? Mr. Morton. Billed on the tariff. Mr. Day. How was the adjustment made? Mr. Morton. By cash. ]\rr. Day. At the timel Mr. Morton. Later. Mr. Day. It was billed at the tariff and the tariff was collectedt Mr. Morton. The tariff was collected. Mr. Day. Were there claims presented for settlement? Mr. Morton. Statements. Mr. Day. Presented to whom? Mr. Morton. To our freight department. Mr. Day. Approved there? Mr. Morton. Settled there. Mr. Day. They did not go through the auditing department? Mr. Morton. The vouchers went through the auditing department — any vouchers for specific accounts. These shippers that did not sign any vouchers — some settlements have been made through connecting lilies. Mr. Day. Who were the settlements made with? Mr. Morton. The shipper. Mr. Day. Any more than one? Mr. Morton. Yes, sir. Mr. Day. Who were they? Mr. Morton. The packing-house owners. Do you want the names? Mr. Day. Yes, sir. Mr. Morton. The principal shipper was the S. & S. Company, but settlements have been made with other people shipping at the same time. Mr. Day. Made directly with the houses or through their agents? Mr. Morton. Through their agents that have charge of that par- ticular branch of the business. Mr. Day. What other concerns did you carry for to whom concessions were made in case of through connecting lines? Mr. Morton. I think all — Swift, Armour Mr. Day. And made the same concessions to each? Mr. Morton. Yes. There has been no discrimination, as far as the concession was concerned. Mr. Day. The concession was alike to all ? Mr. Morton. Yes, sir. Mr. Day. Are you carrying it now at that? Mr. Morton. We are still carrying it in ou that basis? Mr. Day. Five cents off? Mr. Morton. Yes, sir. The other roads know about it. Mr. Day. How are the other roads informed of it? Mr. Morton. We told them. Mr. Day. When? Mr. Morton. At various times in meetings and conferences respect- ing Missouri River rates. We are willing to have them make it the open rate, and ottered to do it, but out of deference to some of the other lines we did not. APPENDIX a. 373 Mr. Day. You mean you offered to make it the open rate? Mr. MoETON. The published tariff. Mr. Day. To publish that as the tariff? Mr. Morton. Yes, sir. Commissioner Prouty. If you did know, Mr. Morton, that you were obliged to publish that tariff" and keep it in effect lor a year, would you make it? Mr. Morton. Under the circumstances; yes, sir. Mr. Day. You made the contract for a year? Mr. Morton. Those were the only terms on which we could get the business. We met the condition that was before us. Mr. Day. What percentage of the traffic were you carrying at that time? Mr. Morton. Tjcss than 2 per cent — about 2 per cent. In other words, we were bringing the live stock into Kansas City, supplying that market with 33| i)er cent of everything that came in there, and then we lost it. Other roads took it up, and that was not satisfactory to us. Commissioner Prouty. How many packers are there at Kansas City? Mr. Morton. About half a dozen. Commissioner Prouty. Might they combine to create that condition for the purpose of compelling you to make a lower rate? Mr. Morton. They might; yes, sir — although the business was not all moving by one line. There might have been a combination for the purpose of forcing this condition. Commissioner Prouty. Did you believe at that time that other roads were making a lower rate than the published rate? Mr. Morton. I believed, and it subsequently developed, that other roads were cutting rates at that time. I do not know that they were cutting it 5 cents, but they were cutting it 3, after they had agreed to maintain the tariff". Commissioner Fifer. What do you say is a proper remedy for this situation? Mr. Morton. I think the legalization of pooling would go a long way toward stopping it. Commissioner Prouty. Who do you think gets the benefit of this reduction ? Mr. Morton. If it is a secret rate, the shipj^er; if it is an open rate, the public. Commissioner Prouty. This is a rate that seems to be extended to everybody. Mr. Morton. Well, I think, in a case of that kind, there was possi- bly a benefit to both the shipper and the consumer. Ordinarily, I think, the consumer pays the freight. Commissioner Prouty. But in this case the previous history of the thing seems to have been that you start periodically with the main- tenance of the published rate and then gradually drop off". That prob- ably would not have the same effect as a permanent reduction of the rate? Mr. Morton. That is my idea exactly. Commissioner Clements. Which house was it you made this con- tract with ? Mr. Morton. It is generally known as the S. & S. Packing Company. It is the Schwarzschild & Sulzberger Company or the Sulzberger & Schwarzschild Company, I do not remember which. ;^74 APPENDIX Q. Coiiimissioner Clements. Did they tell you that they were getting a lower rate by some io;uI at that time? Mr. Morton. 1 do not thiuk they did. Commissiouer Clements. You made that contract for a year from what time? Mr. Morton. I think the contract was made about April 1. I do not know that we commenced getting the business until June 1. I think the contract was made on the oOtli of June, 1001. Commissioner Clements. That will go until the middle of this year? Mr. Morton. Yes, sir; it is an illegal contract. It was illegal when we made it, and we knew that. Commissioner Prouty. Well, it would not be an illegal contract if you carried their stuft" from there to Chicago for 18i cents for a year? Mr. Morton. I think it was illegal so long as we did not publish the tariff. If we jMiblished the taritt", it would be perfectly legal. My imj^ression is that they did not want us to publish the tariff. Commissioner Clements. Why not? What objection did they have? Mr. Morton. Well, I do not know. Commissioner Clements. Can you tell how much you paid out in a year ? Mr. Morton. On this business? Commissioner Clements. Yes, sir. Mr. Morton. No, I can not. Commissiouer Clements. In a general way, I mean. Mr. Morton. There is a great deal more money paid out than there ought to be. Commissioner Clements. Have you an idea whether it is $50,000 or $100,000 or $10,000— anything definite? Of course, if it is a mere guess and you do not know Mr. Morton. Well, I thiuk there was a great deal more than any sum you mention paid out. Commissioner Clements. By your company? Mr. Morton. By all the companies. I think we paid out $50,000 a year or more. Commissioner Clements. You say it is paid in cash by your com- pany? Mr. Morton. Cash settlements. Commissioner Clements. Who is it paid by? What officer of your company hands over the money? Mr. Morton. It may be one and it may be another. Commissiouer Clements. Under what department would it be? Mr. Morton. The traffic department, the freight department. Commissioner Clements. Who would have the direction of that? Who would see that it was paid? Who would direct it to be done? Mr, Morton. I would. Commissioner Clements. You pass a voucher along to somebody! Mr. Morton. Yes, sir. Commissioner Clements. And then a check is drawn from that? Mr. Morton. Yes. Commissioner Clements. On the road ? Mr. Morton. On the bank that the money is in? Commissioner Clements. Drawn by your road on the bankt Mr. Morton. Y^es, sir. Commissioner Clements. In favor of the individual with whom you made the deal? Mr. Morton. Yes, sir. APPENDIX G. 375 Commissioner Clements. Not the firm? Mr. Morton. Not the firm; it may be the firm. It depends on their ideas in regard to that. Those settlements are necessarily made in accordance with the wishes of the people we are settling with. Commissioner Clements. Who sends these statements in upon which the checking is done"? Mr. Morton. The parties in charge of that particular branch of the business. Commissioner Clements. Do they send a letter with it! Mr. Morton. Kot necessarily; they may bring it in. It is done in a very secret way generally. They are very careful. Commissioner Clements. Well, I suppose, with your familiarity with this business, you could give us a statement of the amount of the sbii)ments, the amount collected, the rebates paid out, and who to. Mr. Morton. That could be done. Commissioner Clements. Have you named the individuals you dealt with in each case here? JMr. Morton. No, I have not. Commissioner Clements. Will you give the names? Mr. Morton. I did not deal with them myself, and I do not know all of the individuals. I know some of them. Commissioner Clements. So far as you do know? Mr. Morton. Well, I would prefer not to. Commissioner Clements. That has been asked everybody else. Mr. Morton. I have not heard the testimony that other people gave. Have they given the names. Commissioner Clements. Yes, sir. Mr. Morton. I would rather have you call our traffic officers, I think, and have them tell you. Co]nmissioner Clements. Well, if they can do it better — it is the fact we want. That is all. Will you have them furnish it? Mr. Morton. Yes, sir; we will be glad to send it to you. I will be glad to post myself and send it to the Commission. Commissioner Clements. If you will send us a statement of that sort it will be more accurate than giving it from memory. Commissioner Prouty. Did you ever make any estimate to see how much it cost your company in any year to deviate from the published rate — how much less you received than you would receive? Mr. Morton. In regard to this particular business? Commissioner Prouty, No; all your business. Mr. Morton. I know in a general way. Commissioner Prouty. Taking any one year, how much would it cost your railroad ? Mr. Morton. I should think between $500,000 and $1,000,000 a year; nearer a half a million than a million. Of course a good many of those rates are made for the promotion of local industries, and are perfectly proper rates to make. Nobody is aftected except the parties directly interested. I heard a question asked Mr. Bird in regard to whether these rates have been reduced or not. Some of us think that the rates on packing-house i)roducts and dressed beef are lower than they ought to be, and while there has been no reduction probably in ten years, there has been a very substantial reduction in twenty years in these rates, and there has been a reduc- tion in two ways. There has been a direct reduction in the rate of freight, and there has been a most wonderful condensation going on which people do not generally understand. It used to be that the 376 APPENDIX G. Western railroads hauled corn. It is generally understood that it takes about 3 carloads of corn to fatten a carload of cattle; so it takes 6 car- loads of corn to fatten 2 carloads of cattle; and it takes 2 carloads of cattle to make 1 carload of dressed beef; and we haul dressed beef to-day from the Missouri River to Chicago at about the same rate that we used to get for hauling a carload of corn. Ho you can see the wonderful reduction going on in the rate of freight paid to the railroads owing to the condensation that has been going on. Commissioner Fifer. About one-sixth? Mr. Morton. About one-sixth. That is a reduction in the rate of freight that the country generally does not consider. I want to answer a question that Commissioner Fifer asked. I do not think that with a pooling law there would be any material advance in the rates, and yet I think there might be specific advances in the rates in a great many instances. There might be advances and also reductions, but I think they would equalize themselves so that the rates would be fairer than they are to day and everybody would be just as well satisfied. I do not think we are justified in hauling a carload of beef at the same rate that we haul a carload of cattle, per hundred pounds. I do not think there is any more justification for that than for hauling a carload of furniture at the same rate as a carload of lumber, per hundred pounds. And that is what we are doing from the Missouri River to Chicago. There the rate on dressed beef is lower than it ought to be or else the rate on live cattle is too high. The Chairman. If tliere is no further statement you care to make, Mr. Morton, you will be excused. Mr. Day. I want to ask one more question, Mr. Morton, regarding underweighing — concessions by false weighing. Does that obtain at all on the Atchison road I Mr. Morton. ISTot where we can prevent it. If it is done anywhere, it is in spite of the best efforts we can put forward to prevent it. These packing-house shipments are supposed to be checked by an association which we have at the point of loading. It is i)retty difficult, I am told, at times to get the i)roper weights, and there are probably instances where the weights are inaccurately given us. Commissioner Clements. In this particular contract you made for a year, did you deal with the firm or their traffic official? Mr. Morton. I dealt with their traffic man. At the time I made that arrangement I did it with the full intention of publishing that rate in case it became necessary — in case the other roads did not object. The only reason we have not published it was out of deference to the other lines. Commissioner Clements. And to the shipper; he did not want it published? Mr. Morton. I do not think the shipper wanted it published. I think he preferred to have it the way it was, although I do not know that any conversation ever took place in regard to that part of it. Commissioner Clements. That is all. The witness was excused. Mr. Day. S. B. Knight. (No response.) Mr. Day. Mr. McCabe wants to correct a statement he made, your honors. Mr. McCabe. I want to correct a statement I made this morning (page 97) wherein I stated that the export bills of lading issued by our lines from Chicago are issued by Mr. Lawrence. I find that I was APPENDIX G. B77 mistaken and that those bills of lading, the through bills of ladling, are issued by our own representative. I wanted to correct that part of it. Mr. Day. Mr. Gramnier, will you take the stand. G. J. Grammer, being duly sworn, testified as follows: Mr. Day. Will you please give your full name and official relation to the Lake Shore. Mr. Grammer. G. J. Grammer, general traffic manager Lake Shore road. Mr. Day. You know the subject of inquiry here, Mr. Grammer. If you will state to the Connuissiou what practices have i)revailed on the Lake Shore system, or in wliich it has participated during the year 1901, or specifically from July 1 or April 1, regarding packing house products and dressed meats in the way of concessions in rates. Mr. Grammer. Beginning in 1901 we maintained published rates in good condition. Rates were restored on all property by all lines and all routes. That condition during January, 1901, was so satisfactory to me that I went to California and was gone a little over two months. When I got back L found that conditions had materially changed and they were the subject of conferences from that time. The dressed beef had left us and they gave as a reason that we were not meeting condi- tions. Finally, on July 21, at a full conference between east-bound roads at which information bearjng on the rates on provisions and packing-house products and dressed beef was fully canvassed, so that all understood then what the rates were, most of the roads published a tariif on dressed beef on a basis of 40 cents from Chicago to New York. It was understood that the rate on export provisions was 25 cents and on domestic 30. In a few days it was shown that there was evidence of an agreement or contract by which dressed beef was taken to the seaboard from Chicago for 36J cents. So the result was that that had to be met or we had to go out of the business. Speaking for the Lake Shore we met conditions and billed the property at a flat rate and had no settlement to make. Mr. Day. At what rate? Mr. Grammer. Boston and New York 36J cents, and all the other business 40 cents. Mr. Day. The published rate being at the time Mr. Grammer. Forty cents. The provision business we have been practically out of for two or three years. I do not think we handled in 1901 1 per cent of the business from Chicago and Chicago junctions. The reason was that every time we go into tlie business the rates seem to go to pieces. There is no revenue in it from our standpoint. There is nothing in it, so I have kept out of the business. We have received more or less provisions from different shippers and different routes, but all our solicitors are instructed positively not to solicit provisions at less than the full authorized rate. We had some contests and have some to-day, as to whether or not we should settle for that, which I have declined to do. To give you an example about provisions : The provision business, taken from Chicago, the minimum weight — and that is generally the maximum — is 28,000 pounds. At least 75 per cent of the provision business which originates in Chicago and in the west is export. That is explained: Nearly all the cattle produced in Indiana, Ohio, Michigan, and Pennsylvania, cattle and hogs, are ship- ped east as live stock, and a very large percentage of those are slaugh- tered there and sold. Two or three of the largest slaughterhouses in the country are in Boston and there are four or five in New York. So 378 APPENDIX G. dressed meats in New York are worth more money than the western dressed meats at all time, and any one familiar with that knows that to be true. So a large percentage of tlie dressed meats that go east are for export, whether they originated on the river, at Chicago, Peoria, or wherever packed. The Chairman. Do you mean dressed meats or provisions! Mr. Grammek. Dressed meats, I mean. We speak of dressed meats as fresh meats. Provisions mean all the articles taking provision rates. The Chairman. You are really speaking of provisions and not dressed beef? Mr. Grammer. Yes, sir. Provisions mean cut meats, lard, and all packiug-liouse products outside of dressed meats, shipped as fresh meat, such as fresh beef and sheep, etc. I was going to say, to explain my position, take a car of provisions at a minimum weight of 28,000 pounds that originates at Chicago. The rate is 25 cents. That is about the maximum rate obtained this year, 1001, and that means $70 a car. We pay out of that to the stock yards $2.40 a car for switching, we pay $15 car mileage for a round trip of the car, and at New York we pay 3 cents a hundred lighterage; that is $2.40 and $15, $17.40, and $8.40— $25.80, which we pay out of that rate as absolute arbitraries. Tliat laaves the Lake Shore $16 or $17 net for hauling that car to Buffalo, with the return car empty, and we have to give practically passenger service to that traffic. I think it is unremunerative business, and I have always taken the position that we did not want any provisions on the Lake Shore road at less than the full tariff rate, whatever that might be. The dressed beef minimum will average 22,000. That car is subject to the same arbitraries and mileage. The lighterage is 3 cents a hundred, which would be $0.00 instead of $8.40, and it is subject to the same service eastbound and westbound as to movement; and there is not 1 per cent of those cars loaded east with dressed beef that are loaded with any freight coming west. There may be a few ai)ples daring the fruit season, or something of that kind. As I said before, we handle that business on a flat billing. There is no voucher to make out, no settlements. When there is any settlement of that character, we have a method of settling which is substantially as follows: Jf the rate is n)ade from Chic:igo, the Chicago officer O. K.'s the account. That is sent to the line manager. He audits it and settles it. I never see the voucher. I never approved a voucher and never would approve one that carries a rebate. Mr. Day. Who does it for your road? Mr. Grammer. We do not have it done on our road. It is settled in the line account. The auditor is there and sees that the proper charge is made against the road. Mr, Day. You say your agent is at the line-office settlement? Mr. Grammer. He simply O. K.'s the account. If the shipper puts in a claim against us, he simi)ly O. K.'s it as to whether the amount is correct. Then it is sent to the line manager. The line manager has a billing check and the record to see that it is correct, and then a representative of the auditing department checks those accounts and he is authorized to pay, and we are charged in the line account our proportion. Mr. Day. Is there no approval of any general officer? Mr. Grammer. No, sir. Mr. Day. That is all under your general supervision? Mr. Grammer. Every rate made, I give the authority — of any kind. Mr. Day. And where a rebate is paid your share of the rebate is APPENDIX G. 379 collected tlirough the fast freight line agency and he disburses the money? Mr. Grammer. Yes; that is, he collects it from us. Mr. Day. And pays it to the shipper? Mr. Grammer. Yes, sir. I have heard a question asked here of almost every person, as to whether or not the exi)ort rates can be pub- lished. It seems to me they ouglit to uuderstaud that very thoroughly. Theoretically it looks very nice, but it is a question whether it can be done unless a new situation obtains. I will explain that. If the rate on provisions from Chicago to New York is 27 cents and from Chicago to Baltimore it is 24 cents, very frequently the same ocean rate is in effect from Baltimore and New York, so a line competing by New York with a combination of rates, in order to get the business has to cut the rate 3 cents, and it is no unusual thing that a line working via Port- land will make the rate via Baltimore. So, if you undertake in that case to publish the rate, you would have a different tariff' on every shipment. So in theory it looks very pretty, but in practice it will not work. There is another solution. If a legitimate combination is really made through Baltimore that is lower than can be made by any other route, let the other roads stay out of the export traffic, and then it might regulate itself by the ocean carriers making a lower rate. That probably has been tried for years. It has never worked. Another thing about this export rate, making it 5 cents less than the domestic rate, the presumption was, and the instructions, that this rate should be billed flat wherever there was actually an export bill of lading issued under a through contract. That of itself insured the absolute delivery to the vessel, so it could not be diverted domestically. But there were a great many jjrovisions that would be shipped to New York in care of the exi^ort agent, and there was evidence last spring of that being tampered with, so we adopted the plan that that property would be billed at the domestic rate and when it was exported it would be corrected back to the export rate. That prevented the manipulation of the export rate of domestic business. Mr. Day. This traffic on which you make concessions, when was the first concession made last year? Mr. Grammer. I do not know exactly. We felt that the rate was absolutely maintained from the 1st of January. Mr. Day. Up to when? Mr. Grammer. From the 1st of January up to about the 1st of March it was by a good many lines; by some it was not. Subse- quently it developed — our own shippers produced evidence that they were shipping by other roads for less money. Then the question came up whether we would settle with them. Those things are all bones of contention. It takes a long time sometimes to dispose of them. Our method is to try and do it without making a fuss. That business would be over our belt lines, and we would probably have it corrected through the billing. I do not think that was done prior to June. Mr. Day. You think that prior to June 1 your road absolutely main- tained its published tariffs? Mr. Grammer. No, I will not say that; but we came as near doing it as we have done any time in six months for the past several years. There were instances Mr. Day. You mean in instances you did meet the cut? Mr. Grammer. Yes, sir. We are not the originating line. Where we get it from a connection we frequently join in that. 380 APPENDIX Q. Mr. Day. Take the instances where you are the originating line and met the cut prior to June 1, in wliose behalf did you meet that? Mr. Grammer. If we met any cuts then it applied to that particular business. Mr. Day. Who were they? Mr. Gramjvieti. Our principal houses were Armour & Co., Swift & Co., and Morris. They are the principal ones. We get none from Hammond. We have no connection with them. Mr. Day. How much concession was made in those three instances you s])eak of prior to June 1? Mr. Grammer. I do not believe they had any concession given. There was a contention about it, but we had no agreed concession; but I think after June we settled on 5 cents a hundred. Mr. Day. That was done by correcting the billing! Mr. Grammer. Correcting the billing. Mr. Day. You had no vouchers? Mr. Grammer. No, sir. Mr. Day. Well, if you corrected the billing there must have been a refund? Mr. Grammer. Well, they are large shippers, and we always hold some money of theirs. Mr. Day. Oh, you simply give them credit for it. Mr. Grammer. Yes, sir. Mr. Day. Who approved of those credits? Mr. Gramivier. Wherever a matter of that kind is done the state- ment is made up and the auditor always has knowledge of it. Mr. Day. Where does he get his information? Mr. Grammer. He gets his information through my office indirectly. Mr. Day. In the form of written instructions? Mr. Gramivier. In a case of that kind I generally take the paper up to him and tell him that is correct. We are all in the same building. Mr. Day. How long did you keep in this concession of 5 cents after you first put it in? Mr. Grammer. We did not have a concession in until after June, and then on a Hat billing. Mr. Day. How long did you keep in this flat billing! Mr. Grammer. Until January 1st. Mr. Day. Twenty-five cents to New York? Mr. Grammer. On provisions, 25 cents. Mr. Day. And fresh meats? Mr. Grammer. Thirty-six and three-quarters cents. Mr. Day. Are you carrying now on those rates? Mr. Grammer. No, sir; we have no agreement with any shipper in the world on anything. Mr. Day. Have you an understanding that if others do it you will conform to the rate? Mr. Grammer. No, sir; I have made up my mind that in the future it will be on the open tariff' and everybody will have to dance to that music. I am out of patience with that method of doing business. I know we will make no friends, but I am tired of it. Mr. Day. On export traffic that has its origin here, do you issue through bill to foreign ports? Mr. Grammer. Yes, sir; that is done through our line office, fast freight line office. Air. Day. You have your own lines of steamers! APPENDIX G. 381 Mr. Gkammer. Yes, sir; we have four lines working over the Lake Shore — the Red Line Mr. Day. I mean lines of steamers. Mr. GiiAMMER. No, we have no line of steamers. We work with the public steamers. We have a foreign agent at Boston, New York, and Philadelphia — contribute to his salary and he makes the contract. Mr. Day. Has your line participated in any arrangement during the past year by which traffic was taken at the going export rate plus the steamer rate and subsequently that rate was corrected and reduced by a division between the railroad company and steamship company? Mr. Grajvimer. No. I do not know anything about it. Commissioner Clements. Your road terminates at Buffalo? Mr. Grammer. At Buifalo. Commissioner Clements. Do your connections east, respecting ship- ments of the kind you have testified about that originate at Chicago, participate in the shrinkage of the rate? Mr. Grammer. Always. Whatever the rate is, they get their per- centage. Commissioner Clements. They get their jiercentage of the rate? Mr. Grammer. On the basis of the mileage, whatever tlie rate may be. Commissioner Clements. So they share in the shrinkage with you to Boston ? Mr. Grammer. To Boston, New York, and every point east of Buf- falo, by every road. Commissioner Clements. At what other places east of Chicago do you get products of this kind? Mr. Grammer. The only place we have is Cleveland. Commissioner Clements. How have the rates been there the past few years ? Mr. Grammer. The Cleveland situation is always a troublesome one with us, because we are hardly ever in the provision business here, and we endeavor to keep those people on a level with the Chicago basis. Commissioner Clements. Do they get a cut corresponding? Mr. Grammer. Practically so, and we settle that by a correction of the billing. Commissioner Clements. Do you know how it was in respect to your connections east in dealing with Buffalo"? Mr. Grammer. I do not know anything about that. Commissioner Clements. You do not know whether they get a cut? Mr. Gr ameer. No, sir. Commissioner Clememts. There are some packing houses there of some importance, are there not? Mr. Grammer. 1 think not. There used to be one, but I do not think they amount to anything now. The Dold people were there. I do not think there is a house in Buffalo that does a regular packing-house business — export business. Commissioner Clements. I do not mean export. Mr. Grammer. I do not believe there is a house there now that amounts to much. Commissioner Clements. Do you mean by that absolutely none or that they are not important? Mr. Grammer. Well, I guess there may be two or three small houses but they are not a factor in the shipment. It is more a domestic ques- tion with them. Commissioner Clements. Eate cutting from the west such as 382 APPENDIX G. described here to day would be very severe on them, little or big, unless they shared in it, would it not? Mr. Grammer. I have no doubt that any house in Buffalo aftected by that would be amply protected by eastern roads. Commissioner Clements. Can you give a statement of all shipments over your road the past year showing the difference between the pub- lished rate and actual rate, whether adjusted by rebate or otherwise? Mr. Grammer. I think that could be done but I would have to have the consent of our attorneys and general officers to that effect. Commissioner Clements. It is a thing that can be done? Mr. Grammer. It is a possibility, yes, sir. Commissioner Clements. And showing the amount borne by your connections east in each case? Mr. GRAMMEii. Showing the whole thing, yes, sir. ' Commissioner Clements. That is all. The Chairman. That seems to be all. The witness was excused. Mr. Day. I think I have called all the witnesses I have, your honors, that are present. The Chairman. Gentlemen, I may say, for the information of those interested, tliat in the judgment of the Commission, it is not necessary to take any more testimony in this proceeding during this visit. Such witnesses as are in attendance will, therefore, be excused until they are requested to meet us at some otlier time and place; that is, in this particular investigation we have had up to-day, in the matter of rates on packing-house products. We will now adjourn. At 5.20 o'clock the Commission adjourned. INDEX TO APPENDIX G. Page. Barnard, T. J 277 Bird, A. C 365 Chicago hearing 293 ColUster,.!. J . 1 271 Cost, Edward F 330, 384 Everest, W. E 279 Gault, F. M 259 Gavin, J. E 280 Golden, H. C , 267 Grammer, G. J 377 Harvev, William " 284 Hitchins, E. S 230 Hard, D. F 246 Johnson, J. M 347 Kansas City lieariug 229 Kreskv, D." H " 283 Lund, J. D 286 McAllister, 8. D 278 IMcCabe, D. T 318, 334, 377 JNIcKone, W. J 257 Marshall, W. N 260 Miller, Thomas 356 Mitchell, B. B 335 Morton, Paul 371 Shannon, J. A 283 AVann, Fred A 359 Whitney, C. E 293 383 o 1 «■ i