51 S'' 
 
 9 ^^ 
 
 Report of the Examination of MILTON H. 
 SMITH, Vice-President of the Louisville & 
 Nashville Railroad Company, by the Inter¬ 
 state Commerce Commission, at Washing¬ 
 ton, D. C., December 19, 1888. 
 
 Extract from the order of the Interstate Commerce Commission, dated Wash¬ 
 ington, D. C., October 22, 1888: “Orderedthat the following-named carriers, to 
 wit, the Louisville & Nashville Railroad Company, =■' appear 
 
 before this Commission, at Washington, D. C., on December 8, 1888, at 11 
 o’clock A. M., for the purpose of a general examination and investigation of their 
 tariffs and classifications as on file in the office of the Commission, and as in use 
 upon their lines. ” 
 
 JOHN P. MORTON & CO., PRINTERS, LOUISVILLE. Kv. 
 
Extract from the order of the Interstate Commerce Commission, dated Washington, 
 D. C.. October 22 , 1S88: “ Ordered that the following-named carriers, to wit, the Louisville 
 & Nashville Railroad Company, * * appear before this Commission, at Washington, 
 
 D. C., on December 18,1888, at 11 o’clock A.M., for the purpose of a general examination 
 and investigation of their tariffs and classifications as on file in the ofl&ce of the Commis¬ 
 sion. and as in use upon their lines. * # * 
 
 Report of the Examination of MILTON H. SMITH, 
 Vice-President of the Louisville & Nashville Rail¬ 
 road Company, hy the Interstate Commerce 
 Commission, at Washington, D. C., Dec. 19,1888. 
 
 Mr. M. H. Smith (Vice-President of the Louisville & Nash¬ 
 ville Railroad Company): I desire to make a short statement, if 
 you will permit me. 
 
 The Chairman : All right, sir. 
 
 Mr. Smith : The adjustment of rates for the transportation 
 of all kinds of property between points on a large system of 
 roads and between points on such system and other points on 
 connecting transportation lines throughout the country, is as is 
 well kn-own to your honorable body, an exceedingly complex 
 and most difficult duty to perform ; the most difficult and com¬ 
 plicated one known in commercial and financial experience. 
 Some twenty years since, Mr. Albert Fink, on being asked in a 
 formal way as to the requisite qualifications to render a person 
 competent to intelligently adjust rates for the transportation of 
 property upon a railroad, or a system of railroads, or the rail¬ 
 roads of a State, replied that one competent to perform the dif¬ 
 ficult duty ought to know as much of the business of each ship¬ 
 per as such shipper knew. While this statement may be too 
 broad when applied to certain kinds of property, it is certainly 
 not so as to many of the more important articles of domestic 
 :^commerce. Many persons charged with the duty of adjusting 
 rates do learn as much of the values of property and of the 
 limitations in placing it upon the different markets of the coun- 
 
2 
 
 try as the shipper knows. In addition to this, such agent must 
 necessarily know many things of which the shipper is not aware. 
 
 I have, during the past twenty years, had perhaps as much 
 practical experience in the adjustment of rates for the transpor¬ 
 tation of property in the territory south of the Ohio and east of 
 the Mississippi River and between points in that territory and 
 other points as any other one person. While I am familiar in a 
 general way with the conditions under which the various tariffs 
 are adjusted, I am not familiar with the details in many specific 
 cases, nor do I believe that any one can from memory make an 
 accurate, coherent, and lucid oral explanation relative to the 
 many rates and combinations used ; not that it can not be done, 
 but the conditions are too complex to permit of any person 
 doing so from memory or in answer to categorical questions. 
 As it is desirable that so far as possible none but accurate infor¬ 
 mation be given, I suggest, that when any specific information is 
 desired, or when it may appear to this commission or any of its 
 members that the tariffs of the Louisville & Xashville Railroad 
 Company are in certain specific cases inconsistent and apparently 
 unnecessarily complicated or vague, the secretary or stenogra¬ 
 pher make a memorandum of the information desired, when it 
 will not be difficult, within a reasonable time, to furnish it fully 
 and accurately. I make this suggestion because I know that 
 even some experts, those who have devoted much time to the 
 adjustment of rates and who are perfectly competent to do so 
 intelligently, may readily become confused when they undertake 
 to make oral replies to categorical questions, and unintentionally 
 give erroneous information, when the same parties could, without 
 difficulty, give perfectly accurate information from their offices, 
 where the records of transactions are kept. The reason is, that 
 the great multiplicity of rates and combinations renders it prac¬ 
 tically impossible for a person to give correct information from 
 memory, unless it might be one who dev^otes his whole time to 
 the details of the adjustment of rates upon a small system. 
 There are other persons who are capable of superintending in a 
 general way the traffic of an extensive system, but who are not 
 sufficiently familiar with the details to give intelligent replies to 
 many of the questions your commission have been asking yester- 
 
 / 
 
3 
 
 clay and to-day. I think, perhaps, I can give you some informa¬ 
 tion relative to the methods in use by the Louisville & Nashville 
 Railroad Company in adjusting its tariffs; and, with your per¬ 
 mission, I would prefer to submit to an examination before you 
 examine Mr. Knott. I earnestly desire to give the commission 
 anv information that I can, but I shall not undertake to answer 
 (questions that I can not answer correctly. Mr. Knott is here 
 and will submit to an examination ; but it is but right to inform 
 you that his experience up to this time has not been as extensive 
 as that of some of the other officers of our company, including 
 myself. He has performed the duties of traffic manager but a 
 few months, and before assuming them his duties were in a dif¬ 
 ferent direction, which will account for the fact that he may not 
 be as familiar with the details of making and adjusting tariffs 
 and classifications as might be expected. 
 
 The Chairman : The purpose of our examination was rather 
 to get at the facts than to discuss the general principles that we 
 have had occasion to go over heretofore, and in respect to which 
 we may all perhaps be su})posed to have become somewhat fa¬ 
 miliar. At the same time it was not, in any inquiry into the 
 facts, our purpose to go into little things, and to make inquiries 
 in regard to matters which a man would not be expected to have 
 in mind, but to call attention simply to the general methods of 
 making up your tariff sheets; not perhaps so much the matter 
 of classification and the difficulties that attend the same, as to 
 direct attention to the method in which you make your joint 
 rates, and also to the methods of making up the tariff sheets 
 that you file with us, and those which you put before the public. 
 We had supposed that perhaps your Traffic Manager would be 
 more familiar with this thing than anyone else, but of course we 
 are glad to hear from any member of your official board, or any 
 one of your officers that the company itself shall desire to put any 
 information before us; and with this understanding—with the 
 understanding that we are here mainly for the purpose of ascer¬ 
 taining facts, of getting at general methods, and of considering 
 the forms of doing business—you can of course proceed, if you 
 desire to be heard before Mr. Knott is examined. 
 
 Mr. Smith : 1 know from experience, that in making verbal 
 
4 
 
 statements relative to these complicated traffic transactions, I am 
 certain to make incoherent, and possibly erroneous statements; 
 and, therefore, if the statements that I may make are to be re¬ 
 corded, I ask that, after the stenographer has written out his notes, 
 
 I be permitted to revise the transcript before it is entered upon 
 the records. 
 
 The Chairman : All right, sir. What we want are the facts, 
 and we should be as anxious as vou could be that there should be 
 no mistake made in them. You may proceed. 
 
 Mr. Smith : What feature of our tariffs do you prefer that I 
 should make a statement in respect to ? 
 
 The Chairman : You can speak, if you desire to do so, in re¬ 
 gard to the classifications prevailing in your system. AVhat 
 classifications do you have there? 
 
 Mr. Smith : That of itself is a pretty big subject, and you 
 may think me somewhat tedious and perhaps unnecessarily vo¬ 
 luminous. I have, during a long experience, talked so much 
 upon such matters that when I get started I do not always know 
 when to stop. 
 
 The Chairman : Have you had our second annual report ? 
 
 Mr. Smith : I have seen an advance copy, but I have not had 
 time to read it carefully. 
 
 The Chairman : Have you read what appears there on the • 
 subject of classifications ? 
 
 Mr. Smith : I have not. Before discussing the question of 
 the classifications used by the Louisville & Xashville Railroad 
 Company, may it not be well for us to see if we understand alike 
 what is meant by the term classification,^’ or why classifications, 
 which are in reality attempts to describe different kinds of prop¬ 
 erty, are made ? 
 
 The Chairman : Well, sir, proceed. 
 
 Mr. Smith : A classification is an alphabetical arrangement of 
 the description of property subject to transportation, such ar¬ 
 rangement being made for the purpose of facilitating the quoting 
 of rates between a large number of points. Were it only re¬ 
 quired to quote rates from one point to another point, it would 
 only be necessary to make a descriptive list of the property sub¬ 
 ject to transportation and enter the rates opposite each article 
 
o 
 
 described. The grouping of articles into classes would be un¬ 
 necessary. This method of publishing tariffs has been and still 
 is in limited use. Many years since the Louisville Nashville 
 Railroad Company and connecting carriers published a tariff of 
 this kind, covering rates of transportation from New York to 
 New Orleans, the rates upon each article being carefully adjusted 
 to the rates of competing steamship lines plus the cost of marine 
 insurance calculated upon the value of the different kinds of 
 property. 
 
 The Chairman : W^e have got far beyond that, Mr. Smith. 
 That is not what we want. Can not vou state what classification 
 prevails on the line of the Louisville & Nashville Railroad Com¬ 
 pany ? 
 
 Mr. Smith: I can ; but I would like to proceed in my own 
 way, and will take as little time as possible. I desire to do this 
 because I want, if possible, to show clearly the impracticability 
 of adapting a uniform classification to the traffic of the Louis¬ 
 ville & Nashville Railroad Company. I have stated that the 
 method of fixing rates upon each article transported is still in 
 limited use. The tariffs of the steamboats plying the southern 
 and western rivers have been, and to some extent are still made 
 in this way, i. e., by fixing rates upon the principal articles trans¬ 
 ported, the rates being quoted per package, per barrel, per ani¬ 
 mal, etc. Rates so adjusted are applicable to but a limited terri¬ 
 tory, the boats using them plying sometimes between two points, 
 and at most between comparatively few points. When, however, 
 it is attempted to compile a tariff covering the transportation of 
 property from a number of points to a num'ber of points, such 
 tariff is very much simplified by endeavoring to group the de¬ 
 scription of articles, upon which the rates are to be the same, 
 into classes; the greater the number of points between which 
 rates are quoted, the greater the necessity for the use of such 
 classification. It is no exaggeration to say, that originally the 
 classifications of no two companies were alike, each being made 
 in accordance with the limitations of charters and the individual 
 views of the officers compiling them, the conditions under which 
 the traffic of the different roads was being developed being differ¬ 
 ent. I was local freight agent of the Louisville & Nashville 
 
6 
 
 Railroad Company at Louisville from 1866 to 1869, during 
 which time there were in use at that station in adjusting rates 
 and making manifests not less than twenty different classifications. 
 The manifest and receiving clerks were necessarily compelled to 
 be familiar with all of them. After I assumed the duties of 
 General FreightAgent, in 1869, I for some years made strenuous 
 efforts to secure the adoption of a uniform classification by im¬ 
 mediate connecting roads for the purpose of facilitating the in¬ 
 terchange of traffic between local stations on the Louisville & 
 [Nashville Railroad and upon connecting roads. In this I was 
 only partially successful. Nevertheless, during the past twenty 
 years considerable progress has been made in that direction, and 
 now most of the freight traffic transported by the Louisville & 
 Nashville Railroad Company is subject to but four or five differ¬ 
 ent classifications. 
 
 The Louisville & Nashville Railroad Company owns and 
 controls what were originally some twelve or more distinct cor- 
 j)orations, each of which originally had its own local tariff and 
 classification, each one differing from all others. As the Louisville 
 & Nashville Railroad Company acquired control of these various 
 railroads, either by purchase, lease, or ownership of a majority 
 of the capital stock, it invariably not only replaced the tariffs 
 governing the transportation of property between non-competi¬ 
 tive stations on such roads with others giving greatly reduced 
 rates, but also covered the entire system with a uniform classifi¬ 
 cation and with rates practically the same for the same distances. 
 The reduction in the local rates, especially on the roads acquired 
 south of Nashville,‘was from twenty-five to fifty per cent; and 
 I think I may add that even now the local rates upon the roads 
 controlled by the Louisville & Nashville Railroad Company 
 within the State of Alabama are materialIv less than those of the 
 roads controlled by other companies in that State. It will thus 
 be seen that the Louisville & Nashville Railroad Company has 
 done something in the direction of adopting a uniform classifica¬ 
 tion, the present local classification applicable to its system hav¬ 
 ing been substituted for not less than twelve different classifica¬ 
 tions formerly in use. 
 
 The Louisville & Nashville Railroad Company having care- 
 
7 
 
 fully compiled a local tariff with a uniform classification cover¬ 
 ing its entire system, which was intended to and undoubtedly 
 does in a legitimate way encourage the interchange of traffic be¬ 
 tween points on said system, such rates and classifications are 
 applied to all traffic passing between local points on its system 
 and points on or reached via connecting lines. This is believed 
 to be equitable and necessary to prevent unjust discrimination. 
 Should the Louisville & Nashville Railroad Company accept a 
 classification of the Trunk Lines on shipments from New York 
 destined to a point on its line between Cincinnati and Louisville, 
 that will make its proportion of the rate from Cincinnati eitlier 
 less or more than it would receive on similar shipments for¬ 
 warded from Cincinnati proper, it would be an unjust discrimi¬ 
 nation either for or against Cincinnati. Should the Louisville 
 & Nashville Railroad ^Company accept a classification of the 
 lines north of the Ohio River on shipments from Chicago des¬ 
 tined to local Doints on its lines south of Louisville, that would 
 make its proportion of the rate from Louisville either more or 
 less than it would at the same time be receiving for the transpor¬ 
 tation of like kind of proj)erty from Louisville proper to same 
 destination, it would be an unjust discrimination in favor of or 
 against Louisville. The same is true of traffic reaching our 
 lines at Nashville, Montgomery, and other junction or terminal 
 points. It is true that what is termed the local classification 
 differs from the classification used in adjusting rates upon traffic 
 passing between competitive points for which two or more car¬ 
 riers compete. There are a number 'of such classifications, all 
 of them subject to and constantly being changed or modified. 
 For some years past the tendency has been to reduce the number. 
 
 In addition to the local classification applicable to traffic 
 passing between local stations or between terminal and junction 
 points and local stations, what is known as the Southern Railway 
 & Steamship Association classification is aj)plied to traffic passing 
 from points on and beyond the Ohio River to competitive points 
 and points on connecting roads south and southeast. What is 
 termed the official or Trunk Line classification is also applicable 
 to some traffic. Two or three other classifications are used to a 
 limited extent. These general classifications, or classifications 
 
8 
 
 applicable to traffic passing between competitive points, or appli¬ 
 cable to joint traffic of two or more carriers, while apparently 
 arranged by agreement, are in reality necessarily made to con¬ 
 form to the views of that one of the parties to the agreements 
 desiring to make the lowest classification, as it is a condition 
 peculiar to the adjustment of joint and competitive rates for the 
 transportation of property that the views of the party that in¬ 
 sists upon making the lowest rates must necessarily be adopted 
 by all the parties to the agreement. When, therefore, a large 
 number of carriers attempt to adopt a uniform classification, as 
 is the case with those using what is termed the Southern Railway 
 and Steamship Association classification, such classification must 
 necessarily be subject to frequent changes, or whenever any of 
 the parties to the agreement desire to change any article to a 
 lower class. For the same reason it is exceedingly difficult to 
 raise the classification of any article, as it can only be done by 
 the unanimous agreement of all the parties. This is one of the 
 reasons why those who attempt to adapt such classification to 
 their local traffic can only do so to a partial extent, their inter¬ 
 ests requiring that there be numerous exceptions. 
 
 In addition to the necessity for adopting the classifications 
 and rates used by competing rail carriers, we are also compelled 
 to adjust rates in competition with water carriers; and when we 
 do so, and undertake to compete for the transportation of prop¬ 
 erty between two points directly located upon the rivers, we find 
 it practically impossible to adopt any of the classifications in 
 use by rail carriers. While some one of the classifications might 
 be adopted as.a basis or skeleton, an examination of the tariffs 
 filed with this commission will show that the rates on nearly all 
 the property transported in competition with such water carriers 
 are based on what are termed b}^ some exceptions ’’ to the 
 classifications, or specials,^^ and that the classification of 
 the railroad only applies to miscellaneous articles not specif¬ 
 ically enumerated in the rate sheets. I do not think there 
 can be a stronger illustration of the difficulty that must be 
 encountered in attempting to secure the adoption of a uniform 
 classification throughout the country than this necessity of ad¬ 
 justing rates to meet the rates of water carriers. 
 
 t 
 
9 
 
 The commission have expressed the opinion that in some cases 
 at least the rail carriers were in fault, in that they had made the 
 rates unnecessarily low in competition with the water carriers; 
 that the rail carriers should avoid making the rates so low as to 
 render the business unprofitable to the water carriers, or so low 
 as to be less than the actual additional cost of carriage. To ena¬ 
 ble the railroads to make nicely discriminating tariffs in compe¬ 
 tition with water carriers—rates that will not be materially less 
 than the rates of such water carriers—it is necessary to take the 
 rates of the water carriers and add thereto the estimated cost of 
 marine insurance, and perhaps’in some instances add also some¬ 
 thing for prompter service and better care of property. In 
 doing this it will be readily seen that the ordinary railroad clas¬ 
 sification can not be used. Some articles that in railroad tariffs 
 are classified as first class, are of very much less value per hun¬ 
 dred pounds than other articles in the same class. Some, like 
 certain kinds of dry goods, may be worth one dollar per pound, 
 in which case insurance at one half of one per cent would be 
 fifty cents per hundred pounds, which should be added by the 
 rail carrier to the rate of the water carrier. Other articles in 
 the same class may be worth five cents per pound or less, in 
 which case the cost of insurance would be but nominal, and the 
 rate of the rail carrier should closely approximate that of the 
 water carrier. In other instances, while the value per hundred 
 pounds of the property transported may not be great, yet, if of 
 a perishable nature, the rail carrier may secure a materially 
 greater rate in consideration of prompter and more reliable 
 transportation. It will therefore be seen that, if a closely dis¬ 
 criminating tariff is to be made by the rail carriers in competing 
 with the water carriers, the classifications used must be made 
 upon an entirely different basis from that used in adjusting the 
 rates between rail points; inasmuch as in the one case the value 
 per hundred pounds of the property transported is an important 
 factor, while in the other entirely different considerations gov¬ 
 ern—such as what the articles will bear, action of competing 
 carriers, the bulk as compared with weight, perishable or non- 
 perishable, character of package, etc. 
 
 There have been intimations that it is desirable that the Lou- 
 
 2 
 
10 
 
 isville & Nashville Railroad Company should adapt the classifi--- 
 cation of the Southern Railway and Steamship Association to its 
 local traffic. This can not well be done without incurring the 
 loss of considerable revenue. A careful computation was re¬ 
 cently made by the auditor of the company of the revenue actu¬ 
 ally derived during a stated period from the transportation of 
 certain classes of property between certain representative local 
 stations under the classification now in use; and a careful 
 computation was also made of the revenue that would have been 
 derived from the transportation of the same kind and quantity 
 of property between the same points, had the Southern Railway 
 and Steamship Association classification been in use. The loss 
 was ov’er ten per cent. 
 
 Commissioner Walker : Which is the higher ? 
 
 Mr. Smith : The local classification. Therefore, had the clas¬ 
 sification of the Southern Railway and Steamship Association 
 been in effect at that time to and from those stations, the gross 
 revenue from the traffic in question would have been reduced 
 ten per cent, and the net very much more. Loss resulting from 
 the change of classification could, perhaps, be partially regained 
 by advancing the rates somewhat; but, should we advance the 
 rates upon third class articles because articles that in our present 
 classification are classified as second class Avould, by the adoption 
 of the Southern Railway and Steamship Association Classification, 
 be reduced to third class, it would cause an advance in the rates 
 on many articles that are classified as third class in both classifi¬ 
 cations, on which we do not desire to advance rates, as all changes 
 in our local tariffs during the past twenty years have been reduc¬ 
 tions. There are numerous other conditions which render it im¬ 
 practicable to adapt a uniform classification to all the traffic of the 
 country. Those prevailing in many cases on short hauls differ ma¬ 
 terially from those existing where rates are made for long distances 
 over a large territorv, and over the lines of a number of carriers. 
 Hundreds of articles described in classifications are shipped only 
 from a few stations, and the making of rates on such articles be¬ 
 tween much the larger portion of the stations is superfluous. 
 For illustration of some of the varying conditions: take the 
 article wood, which can only be transported for short distances. 
 
11 
 
 the rate must be adjusted to the local conditions, such as the 
 proximity of the wood to the railroad, the condition of the 
 wagon roads, the j)rice of coal at the nearest consuming market, 
 etc. Take the article pig iron, which has heretofore been prac¬ 
 tically made at but one point on the Louisville & Xashville sys¬ 
 tem, consisting of something like twenty-five hundred miles of 
 railroad, it is evident that it can not be governed by any of the 
 general classifications in use. The rates are, in fact, based upon 
 the price at which the iron is sold, and, as its manufacture has 
 heretofore been confined to one point, it is unnecessary to issue 
 or change rates from other stations on the system. To do so 
 would simply be to cumber the records of the general offices, oi 
 the various as'encies, and of this commission. The same is true 
 of shipments of many other articles, such as lime, coal, coke, 
 staves, to some extent lumber, etc. 
 
 Again, even when articles of low value, or upon which the 
 rate of transportation forms a large part of the value of the 
 property at point ^of consumption, are shipped from local sta¬ 
 tions, the rates must necessarily be adjusted to meet the ‘^compe¬ 
 tition of product with product, the most potent factor of compe¬ 
 tition.^’ For instance the rate on staves from the Knox¬ 
 ville line to Louisville, Ky., must necessarily be adjusted so that 
 the shipper can compete successfully with staves reaching Louis- 
 via both rail and water lines. Lime shipped from Blount 
 Springs, Siluria, and Calera, Ala., to Xew Orleans, can only 
 be shipped if the rates are adjusted so as to enable the seller to 
 compete with lime shipped in barges by river from Cape Girar¬ 
 deau, Mo., and vicinity. The foregoing are but a few of the 
 many illustrations that might be given going to show that it is 
 necessary to make numerous exceptions or modifications of the 
 classifications in use between local stations and terminal or com¬ 
 petitive points; and to show the difficulty of endeavoring to 
 adopt a uniform classification over a large system of railroads, 
 covering all kinds of traffic, in competition with water as well as 
 rail carriers, and between non-competitive or local stations, that 
 will be just and equitable and permit of the interchange of traffic, 
 or that will create instead of destroy commerce. 
 
 Commissioner Bragg: You will find that all these matters 
 
 U. OF ILL. LIB. 
 
12 
 
 \ 
 
 you mention are discussed in a general way in the annual report 
 of this commission, and therefore the Chairman, in asking you 
 the questions that he did, desired to call out the facts with re¬ 
 spect to the classifications you have. We recognize and know 
 all the difficulties about these matters in a general way. 
 
 Mr. Smith : Before proceeding farther, it may be best to re¬ 
 call the fact, well known to your honorable body, that the Lou¬ 
 isville & Xashville Railroad Company does accept less for the 
 transportation of property for the longer distance than for the 
 shorter distance; but, in doing so, the management does not be¬ 
 lieve it is violating the act to regulate commerce. You may 
 recall that the management claimed, that when the act to regu¬ 
 late commerce took effect its rates for the transportation of pas¬ 
 sengers and property were adjusted in accordance with the pro¬ 
 visions of said act. You will also recall that your honorable 
 body decided that each carrier must judge for itself as to what 
 constitutes such dissimilar circumstances and conditions as would 
 justify the charging of less for the longer than for the shorter haul. 
 This the Louisville & Nashville Railroad Company has done, 
 and it is believed that its freight tariffs are substantially in ac¬ 
 cord with the act; that while there are in many cases apparent 
 inconsistencies and irregularities, most of them are the unavoid¬ 
 able result of the necessity of using one basis of rates for com¬ 
 petitive and another for non-competitive traffic ; and that where 
 such irregularities are apparent no real injury is inflicted upon 
 the parties directly interested, namely, the owners of the prop¬ 
 erty transported. In your citation for the Louisville & Nash¬ 
 ville Railroad Company, and other companies to appear here, 
 you refer to the fact that in some cases two classifications are 
 used in adjusting rates between two points. Such is the fact 
 upon the Louisville & Nashville Railroad under certain con¬ 
 ditions; but I think I can make it clear to the commission that, 
 if it is right to accept a less rate, say from Louisville to Memphis, 
 than is accepted for the transportation of like kind of property 
 from Louisville to intermediate stations, in making the rates be¬ 
 tween Louisville and some of these intermediate stations the use of 
 two classifications and two rates is unavoidable. It is evident that 
 the rate from Louisville to stations near Memphis can not well 
 
13 
 
 be greater than the rate from Louisville to Memphis, plus the 
 rate from Memphis to such stations, As the classification used 
 in adjusting rates from Louisville to Memphis differs from the 
 classification used for interniediate local stations, such combina¬ 
 tion must be made by the use of the two classifications as well as 
 the two rates ; in other words, precisely the same result is reached 
 or the same difficulty is encountered as if the property were 
 shipped by steamboat from Louisville to Memphis and from there 
 by rail to destination, the consignee paying the sum of the two 
 rates based on the classifications of the steamboat and the rail¬ 
 road companies. This, after all, is something that in no way 
 concerns the shipper or owner of the property, so long as he is 
 not required to pay a higher rate than the direct rate, when such 
 rate is less than the rate based on the combination of the two 
 rates, or a higher rate than the sum of the combined rates when 
 less than the direct rate. He need not care that the clerk or 
 agent of the carrier is put to some inconvenience to ascertain the 
 correct rates, which inconvenience after all is not a serious mat¬ 
 ter, as with the tariffs before him a clerk with very little experi- 
 rience can readily ascertain the rate on any specific article, such 
 as hay, grain, flour, etc., by combining the two tariffs. This has 
 been successfully done for many years, and transactions of the 
 kind are still made dail^^ This method of adjusting rates, how¬ 
 ever, may make the rates, say from Louisville to stations near 
 Memphis less than to stations less distant from Louisville. 
 
 The Chairman : I gather from what you have said that there 
 are in use on your road two classifications. 
 
 A. Several classifications; but two classifications are some¬ 
 times combined in making rates. 
 
 Q. You do not use classifications for any other purpose, do 
 you? 
 
 A. Classifications are used merely for convenience in making 
 rates. 
 
 Q. Tell us now what are the classifications in use ? 
 
 A. As I have already stated, we have in use what is desig¬ 
 nated as a local classification, applicable ti) traffic passing be¬ 
 tween local stations and between terminal points and local sta¬ 
 tions; the Southern Railway and Steamship Association classifi- 
 
14 
 
 cation, applicable to a portion of the competitive traffic passing 
 between points on and north of the Ohio River, and points in 
 the South and Southeast—what is sometimes designated as the 
 Trunk Line classification—the classification used by boats or 
 water carriers and some others, as we are necessarily governed 
 by the action of competitors. All of these classifications are 
 changed and modified from time to time as competition and the 
 requirements of the traffic seem to demand. 
 
 Q. These are what are commonly called commodity classifi¬ 
 cations? 
 
 A. What I understand by the term commodity classifica¬ 
 tions,^’ a term of comparatively recent use, is where an article is 
 taken out of the classification and a rate made upon it; or, as it 
 were, makino^ it a class bv itself. 
 
 Q. When you make a different classification from the general 
 classification you have spoken of on any thing not a commodity 
 classification, what do you make it on? You sav that in addi- 
 tion to these general classifications there are sometimes rates 
 given on commodities. 
 
 A. Yes, sir; like rates upon pig iron from Birmingham, 
 lime from Blount Springs to Xew Orleans, or rates upon coal. 
 
 Q. But you say there is something in the nature of a classifi¬ 
 cation besides these general classifications, and besides these there 
 are commodity rates. Xow what are there in your territory be¬ 
 sides these ? 
 
 A. It may be termed a commodity rate, or an exception sheet. 
 It is, however, nothing but a part of the classification. In fixing 
 commodity rates, or making exceptions to the classification, you 
 have really modified or changed the classification—have added a 
 class or classes consisting of one or more articles. . 
 
 Q. Is that any thing beyond what is commonly spoken of as 
 a commodity rate? 
 
 A. Taking an article out of the general classification and 
 fixing a rate upon it has, during the past few years, been termed 
 making a commodity rate. 
 
 Q. You spoke i)i giving an illustration as you went along, 
 and I ask a question to understand clearly what you intend to 
 convey to us. You spoke of making rates to these competitive 
 
15 
 
 points which would be sonietiines less than the rates to points in¬ 
 termediate, and you spoke of the necessity of making use of 
 two classifications for that purpose. 
 
 A. Yes, sir. 
 
 Q. Now, do you not make your rates specify the rates in dol¬ 
 lars and cents to these stations? 
 
 A. It has been the custom of the company to print a tariff 
 showing in dollars and cents the rates, say from Louisville to all 
 local stations between Louisville and Memphis; which tariff is 
 applicable to all traffic moved from Louisville to such stations, 
 except where a combination of the rates to a competitive point 
 with the local rate from such competitive point to the adjacent 
 local stations would be less than the direct rate so published. 
 It is impracticable to publish a tariff showing in dollars and 
 cents the actual rates that may be made from time to time by 
 combining the competitive and local rates, say from Louisville to 
 stations near Memphis. By the term impracticable, I do not 
 mean that it is impossible, but that it is impracticable in a busi¬ 
 ness sense; that is, that the injury to any interest or the injustice 
 to any one, if any injury or injustice results from the failure to 
 publish the actual rates that may be made by a combination of 
 the two rates, is not sufficient to justify the labor and expense 
 that would have to be incurred in publishing the rates so made in 
 dollars and cents. In order to publish a tariff showing in dol-# 
 lars and cents the rates that may be made by a combination of 
 competitive and local rates, it would be necessary, first, to make 
 a new classification combining the two classifications in use ; 
 that is, certain articles would be found to be classified as first 
 class in both classifications ; other articles would be classed as 
 second class in both ; other articles would be found to be classi¬ 
 fied as first class in one and second in the other, and these would 
 have to be combined into a separate class. Possibly some articles 
 that are classified as first class in one classification might be 
 classified as third or fourth class in the other. Each of these 
 would have to be combined into a class. Then the manv rates 
 quoted on designated articles, or what are termed by some com¬ 
 modity rates, in the competitive classification, say from Louis¬ 
 ville to Memphis, would have to be combined and the rates 
 
16 
 
 adjusted to the classification thus compiled, which rates would 
 probably not be alike to any two of the intermediate stations. 
 Then it would of course be necessary to reprint these tariffs 
 every time a change of rates or classifications was made from 
 Louisville to the competitive point. After this had been done, it 
 would still be necessary to examine the two tariffs; that is, the 
 one based upon the local classification, and that based upon the 
 combined classification, and use the' one giving the lowest rate. 
 As stated before, this is not impossible; but, as very little traffic 
 is shipped from Louisville to stations near Memphis, it may, I 
 think, be deemed impracticable to compile and publish a tariff 
 showing the rates in dollars and cents that result from a com¬ 
 bination of the two classifications and the two rates, when such 
 rates are lower than the local rates ; or showing the local rates 
 when less than the rates made by the combined tariffs. It is, how¬ 
 ever, entirely feasible and practicable for our receiving clerks, 
 bill of lading clerks, agents, and manifest clerks, to readily 
 quote rates on any designated article, say flour, from Louisville 
 to any of the local stations, made by the combination of the 
 two rates, by simply referring to the tariff and ascertaining the 
 rate on flour, Louisville to Memphis, and adding thereto the 
 rate from Memphis to the focal station. 
 
 The total shipments from Louisville to all stations between 
 ♦Memphis and Brownsville during the fiscal year ending June 
 30, 1888, amounted to 194,800 pounds, a large part of which 
 was properly charged local rates, they being less than the com¬ 
 bined rates. The total revenue derived from the shipments from 
 Louisville to the stations near Memphis just named, on which 
 the combined rate was less than the local rate, would be but a 
 small portion of the expense that would have been incurred in 
 printing tariffs showing the rates in dollars and cents that 
 resulted from combining the two tariffs during that period. 
 
 Unless it can be shown that the owners of the property trans¬ 
 ported were unjustly charged more than the sum of the competi¬ 
 tive and local rates, the company is justified in not incurring the 
 labor and expense that would have been necessary in order to 
 have printed the actual rates, when such labor and expense 
 would have been of benefit to no one. 
 
 t 
 
17 
 
 Q. Do we understand that you do not have a tariff sheet 
 printed and posted in your offices so that a shipper at any time 
 would be enabled to ascertaii> what the rates are at that time? 
 
 A. As heretofore stated, the tariffs printed and posted do not 
 show in all cases the actual rate that may be made by combining 
 the rate from one competitive point to another, say from Louis¬ 
 ville to Memphis, with the local rate, say from Memphis to the 
 adjacent local stations, when such combined rates are less than 
 the rate from the competitive point, Louisville, to the local sta¬ 
 tion direct. 
 
 Q. They show a rate, do they ? 
 
 A. Yes, sir. 
 
 Q. But that is sometimes greater than the actual rate? 
 
 A. Such rates from a competitive point to stations near a dis¬ 
 tant competitive point are often greater than the actual rate that 
 may be made by combining the competitive with the local rates; 
 but, as heretofore explained, our agents are instructed to in no 
 case charge more than the sum of the two rates. The shipper 
 can, if he is advised, ship the property to the competitive point 
 and then reship to destination. Should we, by neglect or for 
 other reasons, induce the shipper to do this, we would incur the 
 extra expense of transporting the property to the competitive 
 ’point and back to the intermediate station without securing any 
 additional revenue. There is, therefore, no inducement for us 
 to undertake to exact more than the sum of the two rates. 
 
 AVhile these tariffs, in these exceptional cases, may be a tech¬ 
 nical violation of the 6th section of the act to regulate com¬ 
 merce, the violation is more apparent than real; as practically 
 no traffic is shipped, say from Louisville to stations near Mem¬ 
 phis, the traffic of all such stations being confined to the nearest 
 commercial center. The small stations near Memphis, up as far 
 as Brownsville, do practically all their business with the city of 
 Memphis, and therefore get the benefit of competitive rates upon 
 traffic, not only from Louisville, but also from all parts of the 
 country to Memphis. There is, therefore, no actual violation of 
 the 6th section of the act to regulate commerce. 
 
 Q. We are familiar with all that argument, and I was calling 
 
 attention by the question I put to the method of making up these 
 
 3 
 
18 
 
 rate sheets that are put before the puljlic. Of course Memphis 
 is not the only place. 
 
 A, The same conditions exist near all water competing points. 
 
 Q. For instance, Nashville and Decatur. 
 
 A. Not Decatur; but between Cincinnati and Louisville, 
 between Cincinnati, Louisville, and Evansville, between Cincin¬ 
 nati, Louisville, Evansville, Shawneetown, St. Louis, Nashville, 
 Montgomery, Mobile, New Orleans, Pensacola, etc. These are 
 the principal points where we come in direct competition with 
 water lines. The same conditions exist at one or two other 
 points on our system where we do not come in direct competi¬ 
 tion with water lines. I recall now only Birmingham, Ala., and 
 Lexington, Ky., where the same conditions exist to a certain 
 extent, although the competition is not directly with the water 
 carriers. 
 
 Q. This is the point to which I wish to direct your attention : 
 Your tariff sheets you first print and then post, and they are sup¬ 
 posed to be for the information of the public. Suppose they 
 would show, for example, a first class rate from Cincinnati to 
 Nashville of fifty-three cents, and to Gallatin, nearer to Cincin¬ 
 nati, eighty cents. That would be what the rate sheet would show 
 your office, but the actual rate would be something less than 
 that, would it? 
 
 A. It might, provided the rate to Gallatin on that class thus 
 printed was greater than the sum of the rate on same class from 
 Cincinnati to Nashville and the rate from Nashville to Gallatin. 
 
 Q. The question is, whether that tariff sheet as published would 
 not tend to mislead the shipper instead of giving him the infor¬ 
 mation which the law intended that he should have. 
 
 A. I would like to be heard on that question ; but you have 
 already seen that perhaps it is a little hazardous to notice these 
 points, as I am somewhat inclined to be voluminous. 
 
 Q. In the same connection you many explain if this tariff 
 sheet is not apt to mislead your agents. 
 
 A. I will get to that point directly. I am aware that very 
 great stress has been laid upon the great importance of the fea¬ 
 ture of the act to regulate commerce requiring the publication 
 and posting of rates. 
 
/ 
 
 19 
 
 Q. The importance of it is not in question. The simple 
 question is, whether in this respect your tariff sheets as you 
 print and publish them do give the information which the law 
 expects the public will have. 
 
 A. I have already admitted that literally they do not; that 
 there are exceptions. I would like to discuss the question from 
 a practical standpoint. 
 
 Q. If you want to discuss the importance of the law, that 
 should be discussed with Congress, not with us. Here is a law 
 that requires you to publish these rates for the information of 
 the public. Now, as a matter of fact, as I understand you, it 
 has a tendency to mislead the public instead of informing them. 
 
 A. No more can be done than is possible. If the law re¬ 
 quires a carrier to do something that is impracticable, then it 
 must be violated; and I do not believe that those violating it 
 will be punished for not doing something that is not possible. 
 
 Q. In respect to this, some gentlemen who have preceded you 
 have shown that they make up their tariff sheets in a different 
 way ; and let me ask you now, suppose the rate from Cincinnati 
 to Nashville be fifty-three cents, as appears here, first class, and 
 from Nashville back to Gallatin fifteen cents, what is the diffi¬ 
 culty in stating on your rate sheets that the rate from Cincinnati 
 to Gallatin, first class, is sixty-eight cents, instead of stating as 
 you do now, that it is eighty cents ? 
 
 A. I think I have heretofore explained fully the difficulties 
 of publishing the actual rates in dollars and cents between one 
 competitive point and a local station adjacent to another com¬ 
 petitive point made by combining the rates made in competition 
 with water carriers with the rates from the competitive point to 
 such adjacent local stations; that while it is possible, it is imprac¬ 
 ticable ; that, while this may be a technical violation of the act re¬ 
 quiring the printing and posting of tariffs, there is no actual viola¬ 
 tion of the spirit of the act, so long as the charge to shippers 
 for the transportation of property is based upon a combination 
 of the two rates when such combination is less than the direct 
 rate. 
 
 Q. Then are we to understand, because we want to under¬ 
 stand you as we go along, that from day to day you may change 
 
20 
 
 your local tariff without putting it in print, and without posting 
 it in your offices as the law requires ? 
 
 A. We do not from day to day print and post changes in the 
 local tariff resulting from the changes that may be made in rates 
 from one competitive point to another; but, if we are justified 
 in meeting the rates of competing water carriers, we can not 
 avoid changing the rates from a competitive point to local sta¬ 
 tions adjacent to another competitive point as often as the rates 
 between the competitive points are changed, as the shipper has it 
 in his power to at all times avail himself of this rate by shipping 
 to the competitive point and thence back to the adjacent local 
 station. It can only be’ avoided by disregarding the rates of 
 competing lines, fixing a rigid rate between the competitive 
 points, and only changing such rate when the rates to local sta¬ 
 tions are changed; but that would not prevent the owner of the 
 property from availing himself of the actual rate. 
 
 Q, What do you refer to as the actual rate ? 
 
 A. I refer to the sum of the two rates, say the rate Louisville 
 to Memphis, plus the rate Memphis to the adjacent local station. 
 
 Q. As it exists from day to day ? 
 
 At Yes, sir. You can not prevent the owner of the property 
 from availing himself of the rate based on a combination of the 
 two rates, because if your rate is greater to the competitive point 
 than that of your competitors, he can ship via the competing 
 line, and of course is only charged the current local rate from 
 the competing point back to the local station. 
 
 Q. How does he get the information as to what the rate is? 
 
 A. I have already referred to the fact that great importance 
 has been placed upon the provision of the act to regulate com¬ 
 merce requiring the printing and posting of tariffs in all the 
 offices of the company. That requirement is like many enact¬ 
 ments of States, and, possibly, of Congress, of no value or benefit 
 to any one—superfluous legislation—a regulation that is certain 
 to become inoperative. I think I can give some practical illus¬ 
 trations to sustain my position. Some ten years since the legis¬ 
 lature of the State of Kentucky enacted a law requiring railroad 
 companies to post “ schedules of the rates of freight actually 
 charged,’^ and I doubt if an officer or agent of any of the rail- 
 
21 
 
 road companies in the State knew of the existence of the act, 
 with perhaps the following exceptions: 
 
 Q. That really has no bearing whatever on any thing that is 
 before ns. 
 
 A. If you will permit me to proceed, I will endeavor to an¬ 
 swer your questions. 
 
 Q. If you are coming to that point, we will wait for you. 
 
 A. A few years ago the Louisville & Hashville Railroad 
 Company was indicted at one of its stations for not posting its 
 tariffs, and fined one hundred dollars, thus bringing the existence 
 of the act referred to' to the attention of some of the officers of 
 the company in a forcible way. On investigation we found that 
 the person who reported the company to the grand jury, and 
 thus secured the indictment, was not a shipper, had never shipped 
 any thing; and apparently the only motive prompting him to be 
 thus officious in a matter that could not in any way benefit 
 him, was to demonstrate that he was wiser, at least in regard to 
 some matters, than some of his neighbors. I was, on yesterday, 
 told by our attorney for Tennessee, that a similar law has for 
 several years past been in effect in Tennessee. His statement 
 was the first information I have had of the existence of such a 
 law, and I doubt if a railroad official or shipper aware of its ex¬ 
 istence can be found in Tennessee. 
 
 The difficulty of enforcing a law requiring the posting of 
 tariffs for the benefit of the public, which no one desires to use 
 or examine, and which consequently are of no benefit to any one, 
 is apparent. Nevertheless, in compliance with the act to regu¬ 
 late commerce, we have endeavored to publish and post tariffs at 
 all our stations; but I venture the assertion that they have not 
 been examined by shippers during the twenty months that they 
 have been so posted. In practice, such shippers as desire infor¬ 
 mation relative to rates, especially at the smaller stations, will not 
 examine the posted tariffs, but will insist on getting the informa¬ 
 tion from the agent, and will require the agent to insert rates in 
 -the bill of lading. 
 
 It has been the practice of the Louisville & Nashville Rail¬ 
 road Company in the past to require shippers at important points 
 like Louisville to keep advised of the rates, furnish and fill out 
 
22 
 
 bills of lading, insert rates, etc.; but competition now usually 
 forces it to furnish the shippers with bills of lading, fill them 
 out, and insert the rates. At such points there is no diffi¬ 
 culty in the shippers being fully advised relative to rates, as 
 they are inundated with them, and, as a general thing, almost 
 continuously importuned by the various soliciting agents for 
 their patronage. 
 
 Commissioner Walker: You say that your tariffs do not have 
 the true information, and I do not see why any shipper should 
 want to consult them. 
 
 A.'Our tariffs do furnish true information except in the cases 
 which I have endeavored to explain; and such exceptions are 
 applicable only to traffic that is relatively of no importance. 
 Shippers do not care to spend time in studying classifications 
 and rates. If they want a rate at all, they want it inserted in 
 their bill of lading or contract. 
 
 Q. In connection with that, it may be that sometimes your 
 agents are misled. We find that when they draft a bill of lad¬ 
 ing they put in it the erroneous rate. 
 
 A. It seems to be assumed that the Louisville & Nashville 
 Railroad Company, through its various officers and agents, is 
 engaged in robbing or defrauding its patrons, or that portion of 
 them who are not sufficiently informed or experienced in ship¬ 
 ping transactions to protect themselves. There is no foundation 
 for this. Thousands of transactions are daily made, not only 
 with patrons who can neither read nor write or who may deliver 
 their property for shipment by the hands of ignorant servants, 
 but also by merchants doing the most extensive business, and 
 who have transacted business with the company for many years, 
 and who rely implicitly on the fair dealing of the company, so 
 much so that they never insert or require the company to insert 
 rates in bills of lading. Notwithstanding these thousands of 
 daily transactions, I am sure that there has not been before your 
 honorable body a single complaint against the company, sus¬ 
 tained by evidence showing an intentional effort to defraud its 
 patrons by charging more than the tariff rates or more for one 
 shipper than another of like kind of property under similar 
 circumstances and conditions. 
 
23 
 
 In the many thousands of transactions, some of which are 
 necessarily made with agents of but ordinary intelligence, occa¬ 
 sional errors must arise. To insure accuracy and guard against 
 errors, the following checks are provided: (1) the delivering 
 agent is, by the rules of the company, made responsible for the 
 correctness of the rates charged upon all shipments received at 
 his station, thus checking the forwarding agent. (2) Copies of 
 all manifests are furnished to and carefully revised in the audit 
 office. If any errors are made that are not corrected by the 
 agent at destination, they should be promptly corrected by the 
 auditor's assistants. I repeat, that legislation requiring the post¬ 
 ing of tariffs is superfluous; that the shipper in Cincinnati desir¬ 
 ing to know the rate to Gallatin would not go or send to the 
 office to examine the posted tariff, but would apply to the agent 
 for the rate and require it to be inserted in the bill of lading. 
 Nevertheless the company does comply with the law by posting 
 tariffs which show the actual rates upon practically all the prop¬ 
 erty transported. 
 
 Commissioner Walker: I think you are very much mistaken 
 in assuming that that is the principal object of the requirement 
 in the statute—that the principal object is the giving of informa¬ 
 tion to the public. It was not so claimed by the railroad gen¬ 
 tlemen who testified before the congressional committee. Thev 
 did not understand that that was one of the most important feat¬ 
 ures of the law. They have other important objects in view. 
 We have nothing to do with these matters you speak of. We 
 are simply to see whether or not the law is obeyed. 
 
 A. I am aware that it has been claimed that requiring car¬ 
 riers to post and publish their rates at points like St. Louis and 
 Chicago, where competition is excessive and where at times great 
 irregularities prevail, would be beneficial by enabling each car¬ 
 rier to be advised as to the actual rates made by competitors; 
 but so far as I am advised it has not had this effect, and I doubt 
 if anv such use has ever been made of the tariffs that mav have 
 been posted. But were the contrary the case, these conditions 
 would not apply to the miscellaneous business of the country. 
 We have nearly nine hundred stations on our lines, and no such 
 conditions are in existence at any of them. 
 
24 
 
 The fact on your line is this, as I understand you, that 
 you have rates for instance from Louisville to Memphis, and 
 under those rates shipments are made according to the Southern 
 Railway and Steamship Association classification. 
 
 A. The classification of the Southern Railway and Steamship 
 Association can not be said to be applicable to the traffic between 
 Louisville and Memphis, as much the larger portion of the ton¬ 
 nage transported consists of articles on which what are termed 
 commodity rates are made. 
 
 Q. Say Louisville to Nashville. 
 
 A. The classification of the Southern Railway and Steamship 
 Association does not apply altogether to traffic between Louis¬ 
 ville and Nashville. The traffic from Louisville to Nashville 
 and Memphis is taken in competition with water carriers; and, 
 while the Southern Railway and Steamship Association classifi¬ 
 cation is used as'a basis, there are numerous changes or modifi¬ 
 cations. 
 
 Q. From Louisville to Nashville the usual plan is to make 
 them under the Southern Railway and Steamship Association 
 classification ? 
 
 A. A^es, sir; with numerous exceptions. 
 
 Q. It is some classification of that sort? 
 
 A. Yes, sir. 
 
 Q. But in order to get the rate from Louisville to Gallatin 
 you took that Nashville rate under one classification, and then 
 you looked up the rate from Nashville to Gallatin in another 
 classification and added the two together, so that in every rate 
 from a terminal point to a lo^cal station you have to use two rate 
 issues combined with two classification sheets? 
 
 A. In arriving at the rate on any specified article from Louis¬ 
 ville to Gallatin, you would first ascertain what the rate would be 
 by adding the rate from Louisville to Nashville to the rate from 
 Nashville to Gallatin ; and, if the sum of these two rates should 
 be less than the local tariff rate from Louisville to Gallatin, it 
 would be the rate charged. If the sum of the two rates should 
 be greater than the local rate from Louisville to Gallatin, the 
 local- rate would be used. The fact is, that the rate on some 
 articles from Louisville to Gallatin, based on a combination of 
 
25 
 
 the two rates, is less than the local, and on many the combina¬ 
 tion is greater than the local rate. But this does not by any 
 means apply to every rate from a terminal point to a local sta¬ 
 tion, but, as heretofore stated, applies to comparatively few sta¬ 
 tions near the competitive points, between which little or no 
 traffic is moved. 
 
 Commissioner Morrison : Do your competitors know what 
 the rates are to these points ? 
 
 A. We are supposed not to have competitors for local traffic. 
 If our competitors desire to issue through rates to our local sta¬ 
 tions, they must be governed our local rates and classifications. 
 
 Q. How are they to ascertain the local rates ? 
 
 A. From our published tariffs. The investigation seems to 
 proceed upon the idea that the carriers are trying to conceal 
 their rates. The management of the Louisville & Nashville 
 Bailroad Company has never advertised its facilities for the 
 transportation of property except in one way, namely, by the 
 publication and circulation of its tariffs. At important points 
 like Louisville, when material changes are made, a revised tariff 
 is issued and extensively distributed among our patrons at that 
 point. In many instances, in addition to distributing it among 
 shippers at Louisville, in order to induce patrons to seek the 
 Louisville market and ship via the Louisville & Nashville Rail¬ 
 road, large sums of money have been spent in distributing such 
 tariffs throughout the country; for instance, at times when new 
 tariff's have been published showing rates for the transportation of 
 property between Louisville and stations on the Mobile & Ohio 
 Railroad, several hundred dollars have been expended in dis¬ 
 tributing such tariffs by mail to merchants located at points on 
 the line of that railroad and at towns adjacent thereto. 
 
 So far as I can see, there can be no possible inducement for 
 carriers’ concealing their rates. The management of the Louis¬ 
 ville & Nashville Railroad Company earnestly desires to comply 
 with the law by publishing the actual rates; and, as heretofore 
 stated, where we encounter the difficulties in adjusting rates to 
 stations near competitive points, the traffic is nominal in amount, 
 and is mainly confined to miscellaneous articles. 
 
 Shipments of live stock, grain, lumber, etc., from Gallatin 
 
 4 
 
26 
 
 are considerable, and there is of course not the sliglitest diffi¬ 
 culty in publishing the actual rates on these articles, while the 
 difficulties that have been heretofore explained do arise in pub¬ 
 lishing the actual rates to Gallatin on miscellaneous articles; but 
 our statistics show that nearly all such articles, such as groceries, 
 boots and shoes, dry goods, etc., received at Gallatin, are shipped 
 from Nashville, not Louisville. 
 
 ’ As the Louisville & Nashville Railroad Company acquired 
 the railroads belonging to different corporations and combined 
 them into a system, it did not attempt to adjust rates so as to 
 disturb the commercial conditions existing at the time. It made 
 no attempt to adjust its tariffs so as to divert traffic from one 
 point to another in order to give it the long haul as against the 
 short haul. As an illustration : When the Louisville & Nash¬ 
 ville Railroad Company, in 1880, acquired control of the Mobile 
 & Montgomery Railroad, it continued to adjust rates, say between 
 Louisville, Cincinnati, and other competitive points on its lines 
 and local stations between Montgomery and Mobile upon approx¬ 
 imately the same basis as had been used in adjusting rates be¬ 
 tween same points theretofore, namely, by adding the rate, say 
 from Louisville to Montgomery to the local rate from Montgom¬ 
 ery to the local station beyond. It continued to interchange 
 traffic with connecting roads at Montgomery and local stations 
 between Montgomery and Mobile upon the same basis, so that it 
 is probable that the traffic directly and indirectly interchanged 
 between points on or reached via the Western Railway of Ala¬ 
 bama and the Central Railroad of Georgia and points between 
 Montgomery and Mobile is relatively as great as it was prior to 
 the time the Louisville & Nashville Railroad Company secured 
 control. The same is true of traffic from and to stations between 
 New Orleans and Mobile. No effort has been made to divert 
 traffic from the two points named. Rates are not made relatively 
 high to New Orleans and low to Cincinnati or Louisville, but 
 have been left very much as they existed when the road between 
 New Orleans and Mobile was operated by an independent cor¬ 
 poration. It is true that the miscellaneous traffic of some of 
 these roads is unimportant. No traffic originates between New 
 Orleans and Mobile except lumber, and that is nearly all moved 
 
27 
 
 by water carriers. The amount of agricultural products in ex¬ 
 cess of the requirements of the inhabitants is nil. 
 
 An examination of the statistics compiled by the Louisville 
 & Nashville Railroad Company will sustain the statement, that 
 while the published tariffs do not in all cases show the rate that 
 may be made by a combination of local and competitive rates, 
 and to that extent it may be said are not in strict compliance 
 with the 6th section of the act to regulate commerce, there is no 
 actual violation of the law, inasmuch as the charge upon the 
 property actually transported is not in excess of the rate made 
 by a combination of the two taritis when such combination pro¬ 
 duces a lower rate than the direct rate. 
 
 In making such a multiplicity of transactions errors may oc¬ 
 casionally be made. Instructions to agents may not in all cases 
 be clear and explicit, or the agent may overlook his instructions, 
 as the agent at New Orleans did when asked for a rate on sugar 
 from New Orleans to Glasgow. It had for a long time been 
 the custom of the man that asked for this information to buv his 
 sugar at Louisville, Cincinnati, or eastern points. He also showed 
 his ability to protect himself had the company attempted to 
 charge him the erroneous rate quoted, as he was fully advised 
 of the rate to Louisville and the rate from Louisville to Glasgow, 
 and could have shipped via Louisville, either via the Louisville 
 & Nashville Railroad or competing lines. 
 
 The Chairman • Does this complete your statemeut, Mr. 
 Smith ? 
 
 A. I have confined, my remarks to rates upon freight traffic 
 between points on the lines of the Louisville & Nashville Rail¬ 
 road. There are other points not directly on our line where 
 the rate is less for the longer than for the shorter distances. 
 Some time since I had some correspondence with you relative to 
 a report made by a person living on the line of the Knoxville 
 & Ohio Railroad, between Jellico and Knoxville, to the effect 
 that the rate from Louisville to Knoxville was less than from 
 Louisville to intermediate stations. The facts in that case are, 
 that the East Tennessee, Virginia & Georgia Railroad Company, 
 controlling the Knoxville & Ohio Railroad, was willing that the 
 rates from Louisville to stations between Jellico and Knoxville 
 
28 
 
 should not be greater than to Knoxville, and they made a rea¬ 
 sonable proposition for a division of the revenue that would be 
 derived from the transportation of the property at Knoxville 
 rates. The Louisville & Nashville Railroad Company declined 
 to become a party to such an arrangement, for the reason that 
 the making of the rates from Louisville to stations between 
 Jellico and Knoxville the same as from Louisville to Knoxville 
 would in some instances make the rates to such stations less 
 than to some of the stations on the Louisville & Nashville Rail¬ 
 road north of Jellico. The Louisville & Nashville Railroad 
 Company has built a railroad into this mountainous district, the 
 cost of construction being very great. Before the road was con¬ 
 structed the country was practically valueless, it not being 
 adapted to agricultural products, but being possessed of great 
 mineral wealth and valuable forests. 
 
 The Louisville & Nashville Railroad Company is now en¬ 
 gaged in building a branch from Pineville to Cumberland Gap. 
 In building these railroads great benefits have been conferred 
 upon the country. The values of the lands owned by some of 
 the people have in some instances been increased a hundred-fold. 
 Many people have, almost without their knowledge, been made 
 comparatively rich. The property shipped into that country is 
 being transported at a cost very much less than was incurred in 
 transporting like property before the railroad was constructed. 
 So far as I know, the people are perfectly willing to pay iis bur 
 local rates on any traffic they receive and ship. This may be taken 
 as an illustration of the hardship that would be entailed, should 
 it be decided that the rates, say from Louisville to Knoxville, 
 should not in any case be less than the rates to intermediate sta¬ 
 tions. The people who pay the local rates are, so far as we are 
 advised, perfectly satisfied, while the people of Knoxville, hav¬ 
 ing had the benefits of reduced rates for years, would certainly 
 deem it a hardship if for any reason the same rates should be 
 made applicable to intermediate local stations. 
 
 I do not know that I have any thing more to say, but I shall 
 gladly answer any qj^uestions that you may desire to ask. 
 

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