and most important duties in respect to this matter. It is charged with the general duty of inquiring as to the management of the business of railroad companies, and to keep itself informed as to the manner in which the same is conducted, and has the right to compel complete and full information as to the manner in which such carriers are transacting their business. And with this knowledge it is charged with the duty of seeing that there is no violation of the long and short haul clause; that there is no discrimination between individual shippers, and that nothing is done by rebate or any other device to give preference to one as against another; that no undue preferences are given to one place or places or individual or class of individuals, but in all things that equality of right which is the great purpose of the interstate-commerce act shall be secured to all shippers. It must also see that that publicity which is required by section 6 is observed by the railroad companies. Holding the railroad companies to strict compliance with all these statutory provisions and enforcing obedience to all these provisions tends, as observed by Commissioner Cooley in In re Chicago, St. Paul and Kansas City Railway (2 Int. Com. Com. Rep., 231, 261), to both reasonableness and equality of rate contemplated by the interstate-commerce act."

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In these constructions of the interstate-commerce act all of the justices of the Supreme Court concurred at various times, with the exception of Justice Harlan. It has since been pertinaciously asserted that these decisions either read into the act something which was not in it or read out of it something which it originally contained. Apparently in order to lend emphasis to this claim, terms grotesque in the discussion of judicial decisions have generally been employed. Thus a recent writer in the North American Review speaks of the Supreme Court as having annulled and "set aside" the act and eviscerated " the Commission; it has frequently been said that the court emasculated" the statute; the Commission speaks of the courts having made "discoveries" contrary to the general understanding (Annual Report for 1897, pp. 6, 9), by which sections of the statute were eliminated" and stricken from the act" (Id., p. 43), and refers to the effect of these adjudications in defeating the purposes of the act" (Annual Report for 1898, p. 5; Annual Report for 1901, p. 5), and the Commissioner of Corporations, in his recent report, says that "the force of the interstate-commerce act has been seriously weakened by judicial interpretation."

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These fashions of speech, if serious, are founded upon misconception of the processes of jurisprudence. The act contained no provisions in terms authorizing action in regard to future conditions. Accordingly, the Commission promptly held that it had no power in that regard. Thereafter the Commission adopted a contrary view and sought to exercise control over future rates. Thus it became necessary for the Supreme Court to decide which view was sound. It decided that the view first adopted by the Commission was the correct construction of the statute. This, of course, settled by authority the meaning of the act as originally passed. It took nothing therefrom and added nothing thereto. The court decided merely that nothing contained in the statute as it was passed in 1887 conferred any power regarding future rates; no more and no less.

It is therefore idle and foolish to speak of these decisions as having in any way qualified the act as Congress passed it.

PROPAGANDA FOR FURTHER LEGISLATION.

The action of Congress as thus finally construed was not accepted in all quarters as sufficient. A propaganda was at once set on foot for further legislation increasing generally the powers of the Commission. The statement has often been made that this movement originated largely with and has been kept alive by the Commission itself. This statement is supported by the facts that in each of its annual reports since these decisions of the Supreme Court the Commission has vigorously criticised those rulings and urged legislation for the purpose of enlarging its powers, and has generally submitted drafts of statutes for that purpose; that at each session of Congress one or more acts of the sort have been introduced, with its approval; that members of the Commission have appeared before Congressional committees and strongly advocated such legislation, and have urged the same in numerous articles, addresses, and interviews; that one of the Commissioners attended and urged such action and submitted a draft of an amended statute at the formation upon November 22, 1899, of what ICL-05-16

is now known as the Interstate Commerce Law Association—the organization which is principally active in support of the legislation now proposed, and that by formal order on December 8, 1899, the Commission instructed its secretary to cooperate assiduously with any mercantile or agricultural organizations in efforts to secure the result sought and especially the passage of the bill to which reference has just been made (Senate bill 1439, 56th Cong., 1st sess.),

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By a circular letter dated February 3, 1900, the secretary of the Commission accordingly stated that said bill was designed to give to the Commission "the authority intended to be conferred by Congress when the bill was originally enacted; that the shippers of the country, with the approval of the Interstate Commerce Commission, seek such an amendment as will empower the Commission to proceed on the lines and to the ends contemplated by the original act; that it is respectfully suggested that (the person addressed) take action expressing (his) approbation and support to the Senators and Representatives from (his) State, and to the Committees on Interstate Commerce, and that the secretary would be pleased to be advised of any action taken in the premises." Such action has followed naturally from the view that the "purpose of the act was to provide a means by which the public could array itself against the carrier." (Annual Report for 1897, p. 19.)

The Commission, too, has every year taken Congress and the courts severely to task for failing to agree with its views. The decisions regarding the statute have rendered "its enforcement as a remedial statute practically impossible." (Annual Report for 1897, p. 6.)

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Nearly every essential feature of that act has failed of execution."

p. 37.)

(Id.,

By virtue of judicial decision, it (the Commission) has ceased to be a body for the regulation of interstate carriers." (Id., p. 51.)

*

"The requests of the Commission for needful amendments have been supported by petitions, etc. yet not a line of the statute has been changed and none of the burdensome conditions which call for relief have been removed or modified." (Annual Report for 1899, p. 5.)

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Until further legislation is provided the best efforts of regulation must be feeble and disappointing." (Id., p. 5.)

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This (the power to make future rates) is the point to which the attention of the Congress has been repeatedly called; this is the defect in the regulating statute which demands correction. In previous reports this question has been frequently and fully discussed. We have commented at length upon the weakness and inadequacy of the law as its provisions have been construed by the courts." (Annual Report for 1903, p. 12.)

"The popular demand may eventually take that form (the original ratemaking power) under the stress of continual delay in remedying ascertained defects in the present plan of regulation." (Annual Report for 1904, p. 8.)

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It would be impossible to state in detail the efforts which, incidentally to this propaganda, have been made to stimulate public feeling. One or two instances must suffice. Thus the expression "transportation tax" (Annual Report for 1900, pp. 9, 13, 24; Annual Report for 1903, pp. 14, 15, 17) has been habitually applied to the charges of the carriers, apparently for the purpose of arousing the same sort of prejudice against the payment of such charges as is felt by many against the payment of taxes. The expression, of course, has no more accuracy than would such an expression as the "wheat tax," or the "beef tax," or the corn tax," or the "clothing tax," or the newspaper tax" have in describing what is currently paid for those articles of general use. The individual consumer has no more to do with fixing the prices thereof than with fixing the charges of the carriers. And those prices are far more of a universal burden than are transportation charges; for, as the Commission said in its annual report for 1900 (p. 9), "generally a slight increase in the rate does not materially affect the price to the consumer;" and, again, in its annual report for 1903, so, too, with the great volume of traffic, the cost of transportation is not a sufficiently large factor in the total cost of the article to the consumer, so that a reduction of the freight rate would stimulate consumption to a sufficient degree to justify the reduction (p. 16).

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Perhaps in most instances the freight rate is so small a part of the total cost of a commodity that the consumer is unconscious of the increase in rate." (Id., p. 32.)

But the general body of the consumers creates the demand which settles the amount of the transportation charge quite as much as the price of the goods

transported. Indeed, the most potent cause of the downward course of rates in the past has been the commercial necessities of shippers and consumers and the efforts of traffic officials to meet them.

So, too, the Commission, in its annual report for 1903 (pp. 13-15), and one or more of its members in various published statements, have asserted with emphasis that rates as a whole have greatly increased. In an article recently published in the North American Review one of the Commissioners goes so far as to say: "Within the last five years rates upon every important commodity in every section have been advanced. * * ** We are confronted with increasing monopoly, with advancing freight rates, and with no probable relief in sight." Yet in 1898 the average freight rate per ton per mile was 0.753 cents or 7.53 mills, and in 1903 it was 0.763 cents or 7.63 mills (infra, p. 14). So that the increase upon which are founded these lugubrious views amounted, in a time of generally rising prices, to, ten thousandths of a cent per mile, or 10 cents per ton for each thousand miles. Moreover, as will shortly be shown, almost no cases of unreasonable rates have ever been established before the Commission and none whatever in the courts, and the cost of materials between 1898 and 1903 rose out of all proportion to transportation charges.

* * *

Still further, on March 11, 1904, the Senate requested the Commission to report the principal changes in tariff rates since June 30, 1899, with "an estimate of the effect of such changes upon the gross and net revenues of the railway corporations during each fiscal year since then and also to report the changes in cost of operation and maintenance of the railways for said years." The Commission reported on April 7, 1904, that, comparing 1899 with 1903, there was, from this cause, an addition to the gross earnings amounting to $155,475,502. It omitted to answer the request for information regarding the net revenues and cost of operation and maintenance on the ground "that the returns for the fiscal year 1903 have not yet been compiled, and the figures relating to the cost of operation and maintenance for that year must, therefore, be omitted, but said that its " method of computation was not without value as indicating enormous additions in recent years to the cost of railway transportation to the people of the United States."

*

*

Yet the figures as to operating expenses were in possession of the Commission quite as much as those as to gross earnings; they were contained in the same official reports of the railway companies to the Commission. In the preliminary report of their statistician, dated December 12, 1903, and again in the regular annual report of the Commission for 1903, dated December 15, 1903, those figures had already been stated for 98 per cent of the mileage of the country at $1,248,520,483, which was an increase of $620 per mile over 1902. The advance in operating expenses from 1902 to 1903 is stated in the report of the statistician for 1903 (p. 85) to have been $141,290,105 and in the report of the Commission for 1904 (p. 112) as $141,193,494, and the increase in taxes and interest was $13,262,391, making the total increase in expense of the business in that one year $154,455,885. It will shortly be shown, too, that the Commission's figures indicated that from 1899 to 1903 the increase in both gross earnings and net revenue had not been as great relatively to the volume of business as the increase in expenses of operation. These facts the Commission did not mention, although the Senate resolution called for information on the precise subject of operating expenses and net revenue.

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The Commission's annual report for 1900 (p. 9) stated that generally a slight increase in the rate does not materially affect the price to the consumer," but that "since every such advance adds to the net revenues of the railway, a very slight increase in all rates, if it should be permanently maintained, would enhance enormously the value of railway securities."

The view of this report of March 11, 1904, apparently was that any such result would necessarily be a calamity. The results for 1904 show how completely increasing expenses have exhausted increased gross earnings of the railroads. Their gross earnings increased, over 1903, to the amount of $65,188,714. but the net earnings decreased $6,393,265, as compared with the previous year. Operating expenses increased $250 per mile over 1903, and the operating ratio increased from 66.16 per cent to 67.75 per cent of gross earnings, or an increase of 1.59 per cent on the entire amount of gross earnings. (Annual Report for 1904, p. 106.)

It is much to be regretted that the action has been taken which is indicated by these illustrations. The shippers and the carriers stand in relations to each other very similar to those of merchants and their customers. The effort of all parties interested in the general welfare should be toward closer and more har

monious relations between them. In investigating grievances presented to them and bringing the parties together, the Commission has done a great and beneficent work, and that has been and always will be by far its most important function. (Annual Report for 1893, p. 14; Annual Report for 1895, p. 48; Annual Report for 1897, pp. 32, 51.) In its Annual Report for 1904, .pages 36, 73, it appears that 487 complaints were filed with the Commission, of which 425 were settled by correspondence with the carriers and only 62 were made the subject of contest, the greater number of these complaints having been settled to the satisfaction of all concerned” (p. 73). It is unfortunate that the dignity and usefulness of the Commission in this regard have been, in a measure, compromised by grasping for powers to control the future such as are possessed by no branch of the Government, and probably could never be successfully exercised.

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PROPOSITIONS

TO INCREASE THE COMMISSION'S POWER, INCLUDING PENDING
LEGISLATION.

The changes in the law which have been urged upon Congress have varied considerably from time to time. Shortly after the Supreme Court decisions above stated a bill was introduced substantially conferring general original ratemaking power upon the Commission. When this failed a bill followed providing that the carriers should make the rates in the first instance and the same should thereafter be subject to general revision by the Commission, which would thus really have been the rate makers. On the failure of this, it is now proposed that when the Commission has decided that an existing rate offends against the statute it shall have power to establish a rate for the future, thus giving it complete control over all rates. This proposition is embodied in the bill now pending before Congress known as the Quarles-Cooper bill, from the names of the Senator and Representative by whom it was introduced. The provisions of the pending bill are in brief as follows:

(1) Where the Commission has made an order declaring any rate, regulation, or practice to be unjustly discriminative or unreasonable, and declaring what rate, regulation, or practice would be just and reasonable, and requiring them to be substituted therefor, such order shall become operative and be observed by the parties at the expiration of thirty days, or in case of proceedings to review, at the expiration of sixty days; but such order may at any time be modified, suspended, or revoked by the Commission upon full hearing of all parties in interest.

(2) In case the rate substituted by the Commission is a joint rate, and the carriers fail to agree as to division thereof, the Commission may make the division; moreover, the Commission may establish "the just relation of rates" to or from common points on the lines of the carriers and prescribe the rates to be charged by either or all of the parties to or from such common points when the carriers fail to agree.

(3) Every such order as to its justness, reasonableness, and lawfulness shall be reviewable by the circuit courts on petition filed within twenty days. Thereupon the record before the Commission shall be certified to the court. The court shall proceed to hear the case on this record; or, in its discretion, may, in such manner as it shall direct, cause additional testimony to be taken. If, after hearing, the court shall be of opinion that the order was made under some error of law or is, upon the facts, unjust or unreasonable, it shall modify, set aside, or annul the same by appropriate decree; otherwise the petition shall be dismissed. Pending the review the court may, if in its opinion the order is clearly unlawful or erroneous, suspend the same. Within thirty days after rendition of any final decree of the circuit court, any party may appeal to the Supreme Court, but there shall be no stay on appeal.

(4) The defense of all such cases shall be carried on by the United States attorney, under the direction of the Attorney-General, and the Commission may with his consent employ special counsel. If any party bound thereby shall neglect to obey or perform any order of the Commission, obedience thereto shall be summarily enforced by writ of injunction or other proper process, mandatory or otherwise, which shall be issued by any circuit court upon petition of the Commission or any party interested. accompanied by a certified copy of the order and evidence of the violation, and in addition the offending party shall be subject to a penalty of $5,000 per day recoverable by the Commission in an action of debt for the use of the United States.

These provisions are certainly both novel and drastic. The burden is very strongly upon those who urge such methods of dealing with the greatest indus

trial interest of the country to establish that (1) they are required by present conditions; (2) they are judicious as a future system; (3) they are warranted by the Constitution of the United States, and (4) they would be likely to accomplish the desired results. But the affirmative can be established as to not a single one of these propositions.

(1) THERE IS NOTHING IN PRESENT CONDITIONS

INNOVATIONS.

WARRANTING THESE DRASTIC

The substantive provisions of the act are that (a) rates shall be reasonable and (b) rates shall not discriminate unjustly and there shall be no undue or unreasonable preference between persons or localities or classes of traffic. (162 U. S., 197.) The former provision concerns the public generally and the latter the persons or localities directly affected. (43 Fed. Rep., 48.)

(a) The existing rates are reasonable in themselves. The past course of freight rates throughout the country has shown that there is no ground for complaint in this respect. It has been as follows, according to official figures, using those of the Interstate Commerce Commission since it was established. It should be borne in mind that these figures include local as well as interstate business, and that if the two were separated the interstate rates would be considerably less.

The average rate per ton per mile was, in

1870

Cents.

1882

1887

1888

1889

1890

1891

1892

1893

1894

1895

1896

1897

1898

1899

1900

1901

1902

1903

Thus the average in 1870 was more than two and one-half times that in 1903. The freight earnings for 1903 were $1,338,020,026. (Annual Report for 1904, p. 111.) On the basis of 1870 they would have been approximately $3,408,497,432. Upon the basis of 1870 the gross freight earnings would, therefore, have been greater by $2,070,790,646 than they in fact were in 1903. When the Interstate Commerce Commission was established, in 1887, the rate was 1.03, and in 1903 it was 0.763-a difference of nearly 26 per cent. If the rates of 1887 had applied to the traffic of 1903 the earnings would have been about $468,109,714 greater than they were in fact. Ten years ago, in 1893, the rate was 0.878, and in 1893 it was 0.763-a difference of 13 per cent. If the rates of 1893 had been applied to the traffic of 1903 the earnings would therefore, have been about $201,620,288 greater than they were in fact.

Upon the general course of rates the following remarks of the Commission are pertinent: "Where changes of any importance have taken place in the freight rates of any section, either for local or competitive traffic, in nearly all cases lower rates are now charged than prior to the date of the act to regulate commerce." (Annual Report for 1894, p. 50.)

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*

Only from an extended inquiry would it be possible to accurately estimate the total reduction effected since the passage of the act to regulate commerce, but that it has been very considerable is well known. Comparing the amounts received by the railways for transportation with amounts which they would have received on the volume of traffic carried from 1889 to 1893, if the average receipts per mile for 1888 had been maintained during the subsequent five years, it appears that the public would in such case have paid for freight and passenger transportation by railroad from 1889 to 1893, inclusive,