Unfv. ©fill. Library 51 3431 ARGUMENT Committee of Commerce Oak Street UNCLASSIFIED L i OF THE SENA TE OF THE UNITED ST A TES , ON THE REAGAN BILL, FOR THE REGULATION OF INTER-STATE COMMERCE, ALBERT FINK. Washington, February 11, 1879. New York: Russell Brothers, Printers, 17, 19, 21 & 23 Rose Street. Mr. Chairman: The first and second sections of the Reagan Bill provide that the rate of railroad transportation shall be the same to all persons for like service, and that no rebate, drawback, or other advantage in any form, shall be given to any person. The object of this bill is to secure to all shippers in the country reasonable, equitable, and permanent rates of transportation, and to avoid unjust discrimination not only between the individual shippers at the same locality, but also between the shippers, at different localities. If this object can be attained, then this bill ought to have the cheerful support of every citizen, be he mer- chant, manufacturer, miner or agriculturist, railroad proprietor or railroad manager ; it would at once solve one of the most compli- cated and difficult problems that has engaged the attention of the best minds of all countries during the past half century. Does this bill solve that problem ? NO PROVISION IS MADE FOR THE ENFORCEMENT OF A JUST AND UNIFORM TARIFF. In the first two sections the bill simply reasserts the principle that has always been recognized in the common law of the country governing common carriers, but has hardly ever been enforced in practice. Does this present bill make any provision for carrying this principle into practical execution in such a » manner as to remedy the existing evils which have arisen -from ■2 a violation of the common law, and which this bill is intended M to.correct? In my opinion it does not. After the Reagan bill J has become a law, we have no assurance whatever that there shall be no longer any discrimination or differences in rates for. / ^ like service performed to persons at the same locality, nor does ya insure that like rates of transportation shall be maintained 3 with any degree of permanency, or that the rates from different localities shall be so adjusted as not to be unjustly discriminat- tfC&ig. -y Take for example the five roads terminating at Chicago, V^engaged -in carrying the traffic from there to the seaboard. Road j'" • No. 1 establishes to-day a rate of 40 cents per 100 lbs. from Chicago to New York ; Road No. 2 may make to-morrow a rate of 35 ; Road No. 3 the next day a rate of 30 cents, and Road J 4 No. 4 on the following day a rate of 25 ; and the fifth Road on the fifth day a rate of 20 cents. This may be done when the Reagan bill is in force, as it is done now without it. The ship- pers on the fifth day may have to pay only one -half the rate paid by the shipper who is obliged to ship on the first day. The bill, therefore, does not secure uniformity and permanency of rates of transportation to the shippers from the same locality for like service, as it is expected to do. Neither does it secure to shippers from different localities equitable, permanent and non- discriminating rates. What assurance is there that the rates from St. Louis to New York, which ought to be higher than the rates from Chicago, on account of its greater distance from New York, may not be lower than the rates from Chicago, at the same time ? They may be 40 cents from Chicago to New York when they are only 25 cents from St. Louis. What is there to hinder it ? Is there any provision in the Reagan bill that pro- hibits this unjust discrimination ? The fourth section of the bill evidently was intended to have that effect. But have not the Chicago roads under this bill the right to make any rate they please from Chicago, and have not the St. Louis roads the right to make any rate they please from St. Louis ? These roads are independent of each other. How then is the object of the fourth section of the bill, which is intended to secure to ship- pers at different places non-discriminating rates, to be carried into practice ? As the bill now stands it cannot be carried out. PRINCIPLE UPON WHICH PRESENT RAILROAD TARIFFS ARE BASED. It is the practice of competing railroad companies to establish at all places where they come in competition a joint tariff, according to which the rates are made the same to all persons for like service, and to adjust the tariff from the different locali- ties, to each other, upon the mileage basis — that is, according to the distance of the localities from the common points to which shipments are made, or nearly so. The rates that are established by agreement from Chicago to New York form the basis of all rates from every point in the territory east of the Mississippi, north of the Ohio River and the seaboard. The rate from East St. Louis is made exactly six- teen (16) per cent, more than the rate from Chicago to New York, because St. Louis is sixteen (16) per cent, further than Chicago from New York. From Indianapolis the rate is made nine (9) per cent, less, also according to distance, and so on. There can be no principle more correct than the one upon which the transportation tariffs of the country are now based ; Congress could not suggest a better one. Under its operation the fourth section of the Reagan bill, according to which freight shall not be carried at a greater cost over short distances than it is carried over longer distances, would be fully carried out from all competitive points: No serious difficulty is experienced by the competing railroad companies, in the country in agreeing upon and establishing tariffs entirely satisfactory to the commer- cial community and to the people. An examination of the tariffs that have from time to time been established would show that they are based upon principles recognized by all commer- cial men as correct, and fully in accordance with the laws govern- ing common carriers. The evils which the Reagan bill wants to remedy do not arise from defective or badly constructed tariffs, but they arise from the failure to carry these well devised tariffs into execution, and here lies the whole difficulty of the transport- ation problem. WHY ARE THESE ESTABLISHED TARIFFS NOT ENFORCED? These tariffs are not enforced simply because each of the many competing railroad companies, after having agreed to maintain a joint competitive tariff, is left at liberty to depart from it whenever it pleases. If a company hopes to secure a few additional tons of freight by a rebate or a drawback, it pays it in violation of its voluntarily assumed obligation to adhere to the tariff. This action, although in- tended to be secret, is discovered by the watchful eyes of its competitors and might as well have been taken openly as it will have to be hereafter, if the Reagan bill becomes a law. No sooner is the agreed tariff departed from by any one of the many competitors, than all the others follow, as they necessarily must. The consequence is that the properly constructed tariff falls to pieces from the touch of a single hand like a house of cards. Where before there was a symmetrically arranged structure there is now nothing but a confused heap of the material with which it was constructed Where before equal rates were charged to all persons for the same service, and where proper relations existed between the tariff of all commercial communities, avoiding unjust discrimina- tion between individuals or communities, there is now nothing but chaos, each man at every place has now his own tariff and his own classification, regardless of what other parties have. The rates are changed from day to day — even from hour to hour ; the through rates are lowered, while the local rates remain com- paratively high. When by this process the rates have become as low as they possibly can go, the railroad .managers meet and with one stroke of the pen the rates are raised at once from the lowest depth to the highest pitch — say from a 15-cent rate from Chicago to New York to a 40- cent rate. Thus are produced all the evils which the Reagan bill proposes to remedy. They follow as the natural consequence of the action of perhaps a single railroad manager, at whoso mercy, or whim, or selfishness, the people of the whole country are made to suffer — not only those who use, but also those who own the railroads. It is a wonder that the people have allowed this abuse to go on so long. Will the Reagan bill, if it becomes a law, put a stop to it.? It will not. The bill makes no provision that reaches the root of the evil. It makes no provision for the establishment and main- tenance of a just and properly constructed tariff. It does not restrict any of the numerous railroad companies from making at any time, each for itself, whatever rate it chooses to make, regardless of the rate that may be made by its competitor in the same city or in distant markets. As long as this liberty is not restricted, and the Reagan bill does not restrict it, no security whatever is offered to the public that the same confusion of tariff, the same unjust discrimination between shippers in the same locality, and the same violent fluctuation in rates, will not take place with all the attending evils, after, as well as before, the Reagan bill becomes a law. The fact that one and the same line of transportation can, under the Reagan bill, make only one rate to shippers from the same locality for like service during five consecutive days, does not insure that some other line will not make a different rate; the effect of which is precisely the same as if the same line 7 of transportation could make, as it now does, different rates for like service to different shippers, and this is exactly what the Reagan bill wants to prevent. A FEATURE OF THE BILL THAT MAY WORK SOME IMPROVE- MENT BY INDIRECTIONS. There is, however, one feature of the Reagan bill that may possibly work some good, but, unfortunately, only by indirec- tion, and in spite of the spirit and declared object of the bill. The reductions of tariff which are now generally made secretly would hereafter have to be made openly ; this is tbe only dif- ference between the method now in use and the one proposed by the Reagan bill. The provision of the bill, according to which the tariff has to be published five days in advance of its going into effect, will have the tendency to consolidate the pres- ent loose combinations between railroad companies in establish- ing their joint competitive tariffs, and the penalty imposed for a violation of the published tariffs, will enable the roads to maintain the tariffs more permanently than they could do with- out this restraint. In this respect the Reagan bill will work an improvement, but this result is by no means certain. Suppose, for example, that after an agreement to maintain cer- tain tariff rates from Chicago, any one of the numerous routes from Chicago to New York — and there^are some fifteen — finds that it cannot secure any business, or not as much as it thinks it ought to have, it will give notice to the other roads that in five days its tariff will be reduced. This will at once destroy the equali- ty of rates unless the other roads make similar reductions, and if they do, then the permanency of rates will be destroyed. How- ever, the practical result most likely will be, that in order to prevent the general reduction in rates, the roads will agree to let the dissatisfied road have a certain proportion of the business by permitting it to lower its rate to a certain extent, while the other roads keep up theirs until the agreed additional tonnage has been thrown upon the road that could not get, under equal rates, a satisfactory share of the business. The method is pre- cisely the same, in effect, as the pooling of the business, which latter is forbidden by the bill. There is no law, however, which forbids a road to lower its rates, nor is it likely that such a law would be enacted, and hence the provision of the bill according 8 to which no pooling is to be allowed, can be readily evaded, like all laws that are not properly considered. The fact is, that the objects of the Reagan bill can only be attained by the process which T have just described, no matter by what name it may be called, although it is in direct violation of the provision and the spirit of the bill. All the good that the bill can possibly accomplish must be accomplished by indi- rection. I take for granted that this is not the proper method in which the American people want to deal with so important a subject. WARFARE AND COMPETITION BETWEEN RAILROAD COMPANIES MUST BE RESTRICTED. It ought to be understood and frankly acknowledged that in order to carry out the object of the Reagan bill it is absolutely necessary, First — That all the railroad companies competing with each other must agree upon a joint competitive tariff, the same by all routes between the same termini, and equitably adjusted as between all competing points in the country so as to secure to the shippers the same rates for like service, and to the different communities, just and non-discriminating rates. Second — That a tariff so arranged must be strictly adhered to by all competing roads, until it is changed again in the same manner and upon the same principles as that upon which it was first established. It is only in this way, and in no other, that the object of the Reagan bill can be carried into practical execution, and that a stop can be put to the existing evils. These measures, of course, cannot be carried out without re- stricting, to a certain extent, the competition between the indi- vidual transportation companies, and for this reason Congress may be afraid to put them in operation; but it might as well be attempted to mix fire and water into a homogeneous mass as to attempt to secure to the people of this country the. maintenance of an equitable and just transportation tariff, and at the same time leave the competition between the transportation companies as it now is — unrestricted by any law. The existence of one condition of affairs excludes the existence of the other. 9 The question for Congress to decide, is, which will they have ? If it be decided that the present method of competing between railroad companies is beneficial to the public, then, the people must accept with it all the attending evils ; and if, upon the other hand, it is admitted that the present evils of the transportation business are unendurable, then the proper remedy is to restrict the competition or warfare as it now exists between the railroad companies. I am, of course, an advocate of the latter proposition, believing that it will be to the interest of the public that there should be a proper and just tariff maintained, and that all unjust discrimina- tions should be eliminated from the transportation business. I am aware that there will be great objection raised to any measure looking to the restriction of competition, for fear that the rates of transportation would thereby be increased. I believe this fear to be entirely without foundation, knowing that it is impossible to eliminate from the transportation business, all elements of legitimate competition, and that it is only a species'of competition, of a very unhealthy character, that must necessarily be restricted, in order to carry out the objects? of the Reagan bill. WHAT CONSTITUTES HEALTHY AND UNHEALTHY COMPETITION — THE LATTER TO BE RESTRICTED. It will be necessary to explain what I mean by healthy, per- manent and legitimate elements of competition which enter into the construction of railroad tariffs, and what are the incidental secondary elements, which act not only spasmodically and without law, but simply according to the whims or selfishness of railroad companies, and which work so much mischief to the public, as well as to the railroad companies themselves. When competing railroad companies establish a joint competi- tive tariff, they take into consideration all the legitimate elements of competition that may have a bearing upon the tariff, and these are many. Thus, in establishing the rates from Chicago to New York, they will consider the lake and canal competition, and determine their own rates in such a way as to secure a reasonable share of the business against these competitors. It will be admitted that, between water competition and rail competition there can be no permanent combination. Now, 2 10 considering further that the rate from Chicago to New York controls the rates all over the country, yiz. : the rates from St. Louis, Indianapolis, Louisville, Columbus, etc., to New York, and that the rates from these places to New York govern again the rates from the same places to Boston, Philadelphia and Bal- timore, it will appear that the rates of transportation throughout this great territory, and to and from all places beyond the points named, are controlled and influenced by the competition with the lakes and the Erie Canal. It may be said that this is true only during the season of navi- gation, and that in winter the railroads might, by combination, exercise absolute control over the rates. There are, however, many other influences at work, which are constantly controlling railroad managers in the formation of their competitive tariffs. Thus in the winter time, when the lake and canal navigation is closed, the rates from Chicago to New York would be influenced by the lower water rates from St. Louis to New Orleans. Were the managers of the Chicago or St. Louis roads inclined to charge exorbitant rates, they would soon find that traffic, would be diverted to St. Louis and down Jhe Mississippi River. Even if there were no Mississippi River, other considerations would influ- ence the rates of transportation from Chicago to New York. If these rates were made too high during the winter months, only a small amount of the grain crops of the West would be marketed during that time ; grain would be stored, awaiting the opening of navigation. In most cases it is only a question of interest upon the capital invested, whether to keep the grain in store for a few months, and ship after the opening of navigation at lower rates, or to ship immediately at the higher rates. If railroad companies were to charge much more than the cost of water transportation, plus the interest on the capital invested and plus the cost of storing the grain, a considerable portion of the grain shipments would be withheld until the opening of navigation. In addition to all these influences, the market value of grain in Europe, and the competition with other sources of supply from other countries, influence the rates of transportation from the West. I refer to these various elements, that always are and must be considered in establishing railroad tariffs, for the purpose of 11 explaining what I mean when I assert that legitimate competi- tion cannot be eliminated by any combination between railroad companies. Although referring here only to a special case — the tariffs from the West to the East — it can be demonstrated that the same or similar influences exist in all cases, at least in this country, where the navigable rivers, lakes and ocean afford cheap means of transportation and a complete check on any attempt of railroad managers to charge exorbitant rates. I will now explain what I understand by. the species of com- petition which must be eliminated, if the object of the Reagan bill is to be attained. When the transportation lines from Chi- cago and all other points to the East have agreed upon a joint tariff and properly adjusted rates of transportation, after taking fully into consideration the legitimate elements controlling the competitive rates, then the contest generally commences between • these various lines themselves as to the quantitjr of the total competitive business that each is to carry. And it is in conse- quence of this contest that the well devised, just and proper tariffs of transportation are sacrificed and all the evils which the Reagan bill intends to remove are developed. METHODS AS* NOW PRACTICED BY RAILROAD COMPANIES TO CARRY OUT THE OBJECT OF THE REAGAN BILL. The methods that have been proposed for the purpose of avoiding this sort of competition, by the railroad companies themselves (and they are just as anxious to see the object of the Reagan bill carried out as the public), contemplates that the traffic from competing points be apportioned between the competitors, satisfactorily to the parties in interest, in order thus to remove all motive for paying rebates and drawbacks, and to prevent the frequent changes in rates. So far, where such arrangements have been made and faithfully carried out, it has been possible to secure to the people like rates for like service. This method, gen- erally known under the name of pooling (a misnomer), is to be for- bidden by the Reagan bill, although it is the only one by which the object of that bill can* be carried into practical execution. Fully impressed with the necessity of reform in the trans- portation business, both in the interests of the people as well as 12 in the interests of the railroad companies, I have myself for the last three years endeavored to induce the railroad companies, by voluntary action and organized co-operation, to adopt such meas- ures as are absolutely necessary to practically secure the object of the Reagan bill ; but I am free to say that these efforts, so far, have been only partially successful. It is my opinion that the objects of the Reagan bill cannot be secured except by the aid of Congress — not, however, in the way proposed by this bill. A much simpler law would accomplish the purpose. PROPOSED AMENDMENTS. The opponents of the bill have been reproached for having failed to offer substitutes that would remove their objections to the bill. This makes me venture to suggest an amendment to the bill, viz.: To strike out every section after the second, except such as provide merely for the machinery by which the bill is to be carried out, and then add the following : Sec. 3. That all competing railroad companies shall jointly establish a tariff from all competing points. Sec. 4. That the tariff so established shall be submitted to a Commission of Experts appointed by the Federal Government, and if they find that the tariff is just and equitable, and based upon correct commercial princi- ples, and not in violation of the common laws govern- ing common carriers, then such tariff shall be approved, and shall become the law of the land until changed in the same manner by the same authority. Sec. 5. In cases where railroad companies cannot agree upon such tariffs, or upon any other questions such as might lead to a war of rates between railroad com- panies, the questions of disagreement shall be settled by arbitration, the decision of the arbitrator to be enforced in the United States Courts. I merely desire to express the general principle that should be embodied in the Reagan bill without going into details, which I think it will not be difficult to arrange. Nor will I detain the Committee with urging the many reasons which lead me to 13 believe that, with the foregoing amendments, the object of the Reagan bill could be fully carried out, and that without some such provision, it will be impossible to do so. In offering the above amendment to the Reagan bill, it is proper to say that I do so on my own responsibility, and without having consulted any railroad managers or proprietors. To what extent these amendments would meet their approval, I am, therefore, not prepared to say. In concluding this portion of my argument, I will mention that in Germany the railroad tariffs are established in a way similar to that proposed. They are prepared first by each sepa- rate company ; then the various competing companies meet in counsel and arrange a joint tariff, which is submitted to the government, and when approved it becomes the tariff of the country, and cannot be changed except by the same process by which it was established. The difficulty of the railroad problem in Germany does not arise from a want of carrying out the established tariffs, but from the fact that so many small and separate interests cannot readily agree upon a joint tariff, especially as the business has to be transacted there upon the circumlocution principle. This difficulty could only be overcome by adopting a provision simi- lar to section 5 of the proposed amendment, and for the want of which the railroad problem in Germany is just as troublesome as it is here. In this country the practical sense of the railroad managers has long ago established a quick and ready method of making tariffs, and there are now in existence properly constructed tariffs for all parts of the country that can readily be changed to suit the commercial exigencies. The difficulty is that these tariffs are not being maintained. And it is not in the power of any one or a great number of railroad companies to adhere to them, simply because it requires the cooperation of all competing lines , without exception , to accomplish that result. This necessary co-operation, I am convinced, can be secured only by the author- ity of Congress, under some such legislation as I have above suggested. Having considered the fundamental principles of the Reagan bill, I will now refer to some of its other features. 14 CONTINUOUS SHIPMENTS CANNOT BE ENFORCED, HENCE THE OBJECTS OF .THE REAGAN BILL CANNOT BE CARRIED OUT. The Reagan bill applies only to property which is carried continuously. It forbids railroad companies entering into “ any combination contract or agreement, by changes of schedule carriage in different cars, breaking car loads into les§ than car loads, with intent to prevent the carriage of such property from being continuous.” In considering this provision of the bill, it ought to be known that the present practice of making continuous ship- ments in the sense here mentioned, has been introduced by the voluntary action of a number of railroad companies form- ing a continuous line between the points of shipment and destination. These companies generally enter into an agree- ment to let the cars of any one company run over the roads of the others for the purpose of preventing change of bulk. They also enter into an agreement by which the terminal roads, at the point from which the shipment is made, issue through bills of lading, and assume to the shippers the res- ponsibility of delivering the goods at the point of destination. The terminal road at the point of destination collects the whole freight charges and makes settlements with all the roads in the line, acting as collector for them. These arrangements are of the greatest importance to the commercial community. In former times, before the establishment of these excellent through lines, a merchant making a shipment to points that could be reached only by passing over more than one road, had to consign his goods to some commission merchant at the junction of the several roads, who attended to the transfer of the goods. In many cases no direct rail connections existed between the different roads; or if such connections did exist, the shipper might consign the goods to the next carrier, the responsibility of each carrier ceasing with the delivery of the goods at the end of his line. No through bills of lading were given. In case of loss of the goods, the shippers had first to ascertain on what particular link of the line the goods were lost — a work of some difficulty — and when at last dis- covered, he had to bring suit, at great expense, in a different 15 State, where he could not personally attend to it, and in which different laws prevailed from those in the State in which the shipment originated. It ought to be borne in mind that the great improvements in- troduced in the transportation business since the time to which I refer, were made altogether voluntarily by the railroad com- panies without legal or any other constraint, and without cost to the shipper. They were introduced merely from a desire on the part of the railroad companies to accommodate the wants of trade and commerce, and by benefiting the people benefit them- selves. The Reagan bill now assumes for the first time that Congress has the power to force railroad companies to form through lines, and compel them to make continuous shipments, whether they wish to do so or not. The whole bill is based upon this falla- cious theory. The obligation of a railroad company as a common carrier ceases when it delivers the goods at the end of its own line. If it assumes responsibility beyond, and engages to deliver the goods at some distant points reached only by other lines of transportation, it no longer acts in the capacity of a common carrier under its charter as such, but simply as a forwarder. The Supreme Court of the United States has decided [Railway Co. v. McCarthy, Yl. Otto, 258] that common carriers can act as forwarders, but they cannot be forced by any known laws to assume the responsibility of forwarders against their own will. While Congress has the right to regulate commerce, has it a right to say that the Erie Railroad, for example, shall, without compensation, assume the responsibility of any damage or de- struction that may occur to a shipment of goods destined to St. Louis via the Erie Railroad, while passing over the Atlantic and Great Western Railroad ? Has it even a right to say that it shall assume this responsi- bility for a certain compensation ? If so, what shall be the compensation ? Has Congress a right to order that the cars of the Erie Railroad shall p&ss over any of the Western connecting roads in order to make a continuous shipment under the pro- vision of the Reagan bill, when the connecting roads may not want to use the cars of the Erie Railroad ? But if Congress has the power to order the property of • one road to be used by any 16 other road, has it also the power to fix the compensation for the use of that property ? Suppose the connecting roads do not wish to pay what the Erie Railroad demands for car hire, is Congress to determine the question how much shall be the compensation ? I take for granted that the proper answer to these questions will show that the Reagan bill proposes to legislate upon a sub- ject for which there is no constitutional warrant. But suppose it could do all it proposes to do, can it make a car built to run on a gauge of four feet eight and a half inches run over a road of six feet gauge ? Can it force the cars of the Ohio & Mississippi Railroad, for example, to run over the Atlantic and Great Western road? Can it force the cars of the American roads — the New York Central, Erie or Boston and Albany roads — to run over the Canada roads which form part of the through line between Chicago and the seaboard and are not under the control of Congress ? I believe it cannot. The bill very properly makes an exception. Section 1 pro- vides that “ no break, stoppage or interruption * * * shall be made, to prevent the carriage of any property, unless such stoppage, interruption, contract, arrangement or under- standing was made in good faith for some practical and necessary purpose.” The cases which I have just mentioned no doubt must be considered as proper exceptions that could be made in good faith, but these very exceptions must necessarily prove fatal to the bill. They nullify the practical value of all its other provi- sions. Are the Erie, Atlantic and Great W estern and Ohio & Missis- sippi Railroads, for example, to be allowed to carry goods between New York and St. Louis, and are the several lines through Canada, between New York and Chicago, allowed to carry goods between those points at whatever rates they please? Are they to be allowed to pay rebates and drawbacks and keep their tariff a secret, while the Pennsylvania Railroad, controlling lines of transportation to these points, exclusively its own, directly competing with the first named roads, must publish its tariff five days in advance, can pay no rebates and drawbacks, but must adhere strictly to the published tariff rates ? But apart from the gross injustice which this bill would enact 17 to some transportation lines, how can it be expected that a law which exempts some lines entirely from its operations, and en- forces it upon another, can stop discrimination between shippers. For example, under the operation of the proposed law, the Pennsylvania Railroad’s business to St. Louis, is likely to be altogther destroyed on account of its inability to compete with the lines of the Erie, Atlantic and Great Western and Ohio & Mississippi Railroads, to which the law does not apply. The shippers over the latter lines, or over the Canada Roads, to which the law also does not apply, can always have rebates or drawbacks, and reductions from the published rates, while the shippers over the Pennsylvania Railroad must pay full tariff rates. Its effect, therefore, will be to create and enforce, legally, the very discrimination which it intends to abolish. If one stone in the arch is removed the whole superstructure resting upon it must fall to pieces and so must the Reagan bill, if it cannot be applied to all competing transportation lines alike. As Congress has not the authority to force railroad companies to make continuous shipments as contemplated in this bill, and to act as forwarders against their will, the Pennsylvania Railroad, in order to compete with its more fortunate rivals would only have to discontinue the continuous shipments, in which case the only practical effect of the bill would be to deprive the people in this country of one of the most important and most useful transportation facilities. EXEMPTION OF WATER LINES, UNJUST AS WELL AS FATAL TO THE PRACTICAL WORKING OF THE BILL. The next feature of the bill to which I wish to refer is this — the bill exempts from its operation all common carriers by water routes, and common carriers part by water and part by rail routes. The same argument and reasons just named in regard to the injustice, as well as the impolicy, of exempting one or more rail lines from the operation of the law, apply with the same force to this exemption of water lines. If it be proper and right that common carriers by rail' shall not discriminate unjustly between shippers ; that they shall not pay rebates and drawbacks ; that they shall publish their tariffs five days in advance, why is it not 3 18 right and proper that common carriers by water shall do the same ? — especially when railroad companies and steamships and canal lines are competing with each other, and when it is impos- sible to carry on fair and honest- competition if one of the com- petitors is to be bound hand and foot and the other is allowed to do as it pleases. The free competition between rail and water lines is one of the safest regulators of transportation rates in this country, and ought rather to be encouraged than prohibited. The practical effect of the Reagan bill, if enacted, will be either to break up continuous shipments or to drive the railroad com- panies out of competition with water lines or to force both to combine, which latter has heretofore not been the case. To explain what I mean : A railroad company publishes its tariff, which becomes known to the competing steamship lines end enables the latter thereby to offer secretly a reduced rate, sufficiently low to secure the bus- ness ; the railroad company not being able to secure any share of the traffic under the circumstances, keeps on reducing rates un- til they become so low that there is no profit to the steamship line. The natural consequence is an agreement to raise the rates and to divide the business between the competitors in the manner already explained, which can readily be done without violating the provision of the bill prohibiting pooling. Now, this may be a proper solution of the problem ; but I call attention to the inconsistency between what the bill proposes to do and what in my opinion it will do, and to show that whatever good this bill could possibly produce could be done only by indirection. If the principle upon which the Reagan bill is based is a cor- rect one, it ought to be applicable to all classes of common car- riers without distinction ; if this be not the case, it is proof in itself that the principle is not correct. TRANSPORTATION CHARGES MAY BE MORE FOR SHORTER THAN LONGER DISTANCES. — BY NO GENERAL RULE CAN JUST AND UNJUST DISCRIMINATION BE DEFINED. I come now to the consideration of the fourth section of the bill which provides that it shall be unlawful to charge more for carrying property lor shorter distances than for a longer distance. 19 I have already shown that if the competitive tariffs estab- tablished throughout the country could be properly enforced, there would be, so far as competitive business is concerned, no necessity for this restriction. All intelligent railroad managers acknowledge the principle embodied in this section to be one that should be followed when- ever a violation of it would cause an unjust discrimination against the shippers of any locality. An examination of the competitive and local tariffs of well managed roads, will show that in most cases the tariffs are arranged upon this principle, but there are cases in which a de- parture from it does not unjustly discriminate, and in which the enforcement of this section would work great injustice to the railroad companies. To prove the correctness of this assertion, I will assume a case, which represents many that occur in this country, mostly however in the local business. Let A D B represent a navigable river, the places A and B being cities, between which intimate commercial relations exist. Let C be an interior town 50 miles from B, and 150 miles from A. The cheapest mode of transportation from A to C before a railroad was built, would be via river from A to B and from thence by wagon to C. Say the distance by river from A to B is 300 miles, from B to C by turnpike 50 miles, and that the cost of transportation by 20 river is half a cent per ton per mile, and by turnpike 12 cents per ton per mile. To ship a ton of freight from A to C would cost 300Xic.= $1.50, plus from B to C=50X12=$6.00— total cost, $7.50. Now suppose a railroad is built from B to C which reduces the cost of transportation to the person living at C from twelve cents per ton per mile to three cents, so that he can ship at $8 per ton from A to C. Now suppose the railroad company concludes to extend its line from C to A, involving the outlay of a large amount of capital. After this is accomplished, the Beagan bill prescribes that the railroad company shall carry freight from A to C at $1.50 per ton, at the same rate at which freight is carried by river from A to B. The shipper at the interior point C, had always to pay some- thing for transportation from the river to this place ; when no railroad was built, $6.00 per ton ; when the road was built from B to C, $1.50 per ton ; and now since the capital and enterprise of the Railroad Company has extended the road from C to A, his transportation from the river is practically to be made free. If it be the object of the Reagan bill that no difference in the cost of transportation shall exist, whether people live on navig- able rivers, or in the interior of the country, then Congress should make an appropriation for free transportation from river points to all interior points, but should not put the burden of furnishing free transportation upon railroad companies. There seems to be no good reason for legislation of this kind, even if Congress had the authority to determine what a shipper in cer- tain places is to pay for his freight. The shipper at C is fully protected by the provision of the common law, according to which only reasonable rates can be charged to him ; he may be fully protected by the charter of the States through which the road . passes, and which generally confine the railroad charges within certain limits, and he is also protected by the low rates of river transportation, as he can continue to ship via river from A to B, and via rail from B to C at $3 per ton. The railroad company cannot charge more for a direct shipment from A to C than this sum, which is, in the assumed case, at the rate of 2 cents per ton per mile — not an extravagant charge considering the cost of construction of the road through, perhaps, a 'mountainous and' sparsely settled country. 2 1 Although this rate of $8 per ton for a distance of 150 miles, is more than the rate from A to B via railroad, which is only $1.50 per ton for 200 miles as limited by the river com- petition, this charge cannot be considered an unjust discrimina- tion. And yet the Reagan bill, in order to prevent supposed unjust discrimination, proposes to have Congress determine at what rate a railroad company shall work, regardless of the cost to that company, and regardless of its rights which are conferred upon it by the State laws, and the rights which it has under the common law, to charge a reasonable compensation. RESTRICTIONS OF THE BILL TO CAR LOAD SHIPMENTS DEFEATS ITS OBJECT. One of the weakest features of the bill is the one to which I shall allude last. It is contained in the Ninth Section, and restricts the operation of the proposed law to car loads of freight only. After making the most elaborate, preparation to prevent unjust discrimination, this last provision of the bill nullifies completely all the benefits which could . possibly be derived from the bill, in its application to a very large and important portion of the traffic, and it excludes from the benefit of the bill by far the greatest number of people, and legalizes unjust discrimination to a greater extent than it now exists. If a merchant has a car load of sugar to ship from New York to Chicago, he has to pay the published tariff rates, but if his neighbor has half a car load to ship, or three quarters of a car load to the same place, a railroad company may give him what- ever lower rate it may wish to make, by rebate or otherwise, to secure his shipment. Under these conditions there would here- after be but few shipments by car loads. If a shipper has to ship 12 car loads from New York to Chicago or from Chicago to New York, he could divide it and ship four fifths of a car load by each of the 15 routes by which freight is carried between these two places. What necessity would there be of a Reagan bill when no more car load shipments would be made ? No law can compel a shipper to ship by the car load if he finds it to his interest to ship less than car loads at a time. 22 This peculiar provision of the bill would introduce an entirely new feature in the transportation business. It would either put large shippers to great inconvenience to break up their shipments in less than car load lots, and thus distribute their shipments over many lines an i avoid the restriction of the law, or it would very unjustly discriminate against the large shippers and in favor of those who ship less than par load lots. It is difficult to conceive what could have been the possible object of this provision of the bill. If it be proper and right that there should be no more unjust discrimination, and that the rates for like service performed, should be the same to all persons, then why should this bill not apply to the shipments of one pound of freight as well as to one hundred car loads ? There are other features ot the bill which would operate very unjustly, but it will not be necessary to refer to them here. CONCLUSION. Enough has been said, I hope, to show that the Reagan bill as it now stands, if enacted into a law, could not be carried into practical operation, because Continuous .shipment cannot be enforced ; but, even if they could be, it would not remove any of the difficulties of the transportation business which it is intended to remove, but would aggravate them all. 23 45th Congress, ^ 3d Session. f H. R. 3547. IN THE SENATE OF THE UNITED STATES. December 12, 1878. Read twice and referred to the Committee on Commerce. January 17, 1879 Ordered to be printed. AN ACT TO REGULATE INTER-STATE COMMERCE AND TO PROHIBIT UNJUST DISCRIMINATIONS BY COMMON CARRIERS. Be it enacted by tbe Senate and House of Representatives of the United States of America in Congress assembled, that it shall be unlawful for any person or persons engaged alone or associated with others in the transportation of property by rail- road from one State or Territory to or through one or more other States or Territories of the United States, or through or from any foreign country, directly or indirectly to charge to or receive from any person or persons any greater or less rate or amount of freight, compensation, or reward than is charged to or received from any other person or persons for like and con- temporaneous service, in the carrying, receiving, delivering, storing, or handling of the same. And all persons engaged as aforesaid shall furnish without discrimination, the same facilities for the carriage, receiving, delivery, storage, and handling of all property of like character carried by him or them, and shall perform with equal expedition the same kind of services con- nected with the cotemporaneous transportation thereof as afore- said. No break, stoppage, or interruption, nor any contract, agreement, or understanding, shall be made to prevent the carriage of any property from being and being treated as one continuous carriage, in the meaning of this act, from the place of shipment to the place of destination, unless such stoppage, interruption, contract, arrangement, or understanding was made 24 in good faith for some practical and necessary purpose, without any intent to'avoid or interrupt such continuous carriage, or to evade any of the provisions of this act. Sec. 2. That it sliall be unlawful for any person or persons engaged in the transportation of property, as aforesaid, directly or indirectly to allow any rebate, drawback, or other advantage, in any form, upon shipments made or service rendered, as afore- said, by him or them. Sec. 3. That it shall be unlawful for any person or persons engaged in the carriage, receiving, storage, or handling of pro- perty, as mentioned in the first section of this act, to enter into any combination, contract, or agreement, by changes of schedule, carriage in different cars, breaking car loads into less than car loads, or by any other means, with intent to prevent the carriage of such property from being continuous from the place of ship- ment to the place of destination, whether carried on one or several railroads. And it shall be unlawful for any person or person carrying property, as aforesaid, to enter into any contract, agreement, or combination, for the pooling of freights, or to pool the freights, of different and competing railroads, by dividing between them the aggregate or net proceeds of the earnings of such railroads, or any portion of them. Sec. 4. That it shall be unlawful for any person or persons engaged in the transportation of property, as provided in the first section of this act, to charge or receive any greater com- pensation per car load of similar property for carrying, receiv- ing, storing, forwarding, or handling the same for a shorter than for a longer distance in one continuous carriage. Sec. 5. That all persons engaged in carrying property, as provided in the first section of this act, shall adopt and keep posted up schedules, which shall plainly state : First, the different kinds and classes of property to be car- ried ; Second, the different places between which such property shall be carried ; Third, the rates of freight and prices of carriage between 25 such places, and for all services connected with the receiving, delivery, loading, unloading, storing, or handling the same, Such schedules may he changed from time to time as herein- after provided. Copies of such schedules shall he printed in plain, large type, at least the size of ordinary pica, and shall be kept plainly posted for public inspection in at, least two places in every depot where freights are received or delivered ; and no such schedule shall be changed in any particular except by the substitution of another schedule containing the specifications above required, which substitute schedule shall plainly state the time* when it shall go into effect, and copies of which, printed as aforesaid, shall be posted as above provided, at least five days before the same shall go into effect ; and the same shall remain in force until another schedule shall, as aforesaid, be substituted. And it shall be unlawful for any person or persons engaged in carrying property on railroads as aforesaid, after thirty days after the passage of this act, to charge or receive more or less compensation for the carriage, receiving, delivery, loading, un- loading, handling, or storing of any of the property contem- plated by the first section of this act than shall be specified in such schedule as may at the time be in force. Sec. 6. That each and all of the provisions of this act shall apply to all property, and the receiving, delivery, loading, un- loading, handling, storing, or carriage of the same, on one actually or substantially continuous carriage, or as part of such continuous carriage, as provided for in the first section of this act, and the compensation therefor, whether such property be carried wholly on one railroad or partly on several railroads, and whether such services are performed or compensation paid or received by or to one person alone, or in connection with another or other persons. Sec. 7. That each and every act, matter, or thing in this act declared to be unlawful is hereby prohibited ; and in case any person or persons, as defined in this act, engaged as aforesaid, shall do, suffer, or permit to be done, any act, matter, or thing in this act prohibited or forbidden, or shall omit to do any act, * matter, or thing in this act required to be done, or shall be guilty of any violation of the provisions of this act, such person or per- 4 26 sons shall forfeit and pay to the person or persons who may sus- tain damage thereby a sum equal to three times the amount of the damages so sustained, to be recovered by the person or persons so damaged by suit in any district or circuit court of the United States, where the person or persons causing such damage can be found, or may have an agent, office, or place of business ; and the person or persons so offending shall for each offence forfeit and pay a penalty of not less than one thousand dollars, to be recovered by the United States, by action in any circuit or district court aforesaid, one half of such penalty or penalties, when collected, to be paid to the informer. Any action to be brought as aforesaid to recover any such penalty or damages maybe considered, and if so brought shall be regarded as a subject of equity jurisdiction and discovery, and affirmative relief may be sought and obtained therein. In any such action so brought as a case of equitable cognizance, preliminary or final injunctions may, without allegation or proof of damage to any plaintiff or complainant, be granted upon proper application, restraining, forbidding, and prohibiting the commission or con- tinuance of any acts, matters, or things, within the terms or purview of this act, prohibited or forbidden. In any action aforesaid, and upon any application for any injunction above provided for, any director, officer, receiver, or trustee of any cor- poration or company aforesaid, or any receiver, trustee, or person aforesaid, or any agent of any such corporation or company, receiver, trustee, or person aforesaid, or of any of them alone or with any other person or persons, party or parties, may and shall be compelled to attend, appear, and testify and give evidence, and no claim that any such testimony or evidence might or might tend to criminate the person testifying or giving evidence shall be of any avail, but such evidence or testimony shall not be used as against such person on the trial of any indictment against him. The attendance and appearance of any of the persons who as aforesaid may be compelled to appear or testify, and the giving of the testimony or evidence by the same, respectively, and the production of books and papers thereby, may and shall be compelled, the same as in the case of any other witness ; and in case any such deposition or evidence, or the production of any books or papers, may be desired or required for the purpose of applying for or sustaining any injunction 27 aforesaid, the same, and the production of books and papers, may and shall be had, taken, and compelled, by or before any United States commissioner, or in any manner provided or to be pro vided for, as to the taking of other depositions or evidence, or the attend- ance of witnesses, or the production of other books or papers, in or by chapter seventeen of title thirteen of the Revised Statutes of the United States. In actions to be brought as aforesaid, damages sustained in the period of a month or part of a month may be regarded as and counted or declared upon, or com- plained of generally, and as one separate cause of action, and so, whether such damages be sustained in one month or in different months ; and such separate causes o^ction may be joined in the same action. No action aforesaid shall be sustained unless brought within one year after the cause of action shall accrue. Sec. 8. That any director or officer of any corporation or company acting or engaged as aforesaid, or any receiver or trus- tee, lessee, or person acting or engaged as aforesaid, or any age'nt of any such corporation or company, receiver, trustee, or person aforesaid, or of one of them alone, or with any other corpor- ation, company, person, or party, who shall directly or indirectly do, or cause or willingly suffer or permit to be done, any act, matter, or thing in this act prohibited or forbidden, or directly or indirectly aid or abet therein ; or shall directly or indirectly omit or fail to do any act, matter or 'thing in this act required to be done, or cause or willingly suffer or permit any act, matter, or thing so directed or required to be done not to be so done ; or shall directly or indirectly aid or abet any such omis- sion or failure ; or shall directly or indirectly be guilty of any infraction of this act, or directly or indirectly aid or abet therein, shall be guilty of a misdemeanor, and, upon conviction thereof, shall be fined not less than one thousand dollars. Sec. 9. That nothing in this act shall apply to the carriage, reviving, storage, handling, or forwarding of property less than an ordinary car load, or wholly within one State or Territory, and not destined for carriage in another State or Territory, or going to or coming from some foreign country, or to property carried for the United States at lower rates of freight and charges than for the general public, or to the transportation of articles 28 3 0112 105256850 free or at reduced rates of freight for charitable purposes, or to or from public fairs and expositions for exhibition. Sec. 10. That the words “ person or persons ” as used in this act, except where otherwise provided, shall be construed and held too mean person or persons, officer or officers, corporation or corporations, company or companies, receiver or receivers, trustee or trustees, lessee or lessees, agent or agents, or other person or persons acting or engaged in any of the matters and things mentioned in this act. Passed the House ofEepresentatives December 11, 1878. GEO. M. ADAMS, Cleric. Attest :