bill insofar as they related to other matters should receive favorable consideration. In consequence of this decision, the bill here being reported was introduced." The Interstate Commerce Commission endorsed bill H. R. 2324, which, as stated, was similar to S. 1194, but I wish to point out that in its letter, as reproduced on pages 3 and 4 of House Report No. 208, the Commission stated:

"The limited experience under part IV so far has not shown any important need for a provision authorizing awards of reparation against freight forwarders. Nevertheless it seems desirable and logical that all four parts of the act be uniform in providing such a remedy, and the amendment of part IV here proposed therefore seems opportune."

Thus, Congress was asked to make reparations provisions applicable to freight forwarders not because of any real or apparent need for such provisions, but in the interest of uniformity. While uniformity may be desirable as a general objective, it is not an end in itself. We maintain that the incorporation of reparations provisions in part IV, even though they be framed in the same language as that appearing in part I of the act, will not bring about uniformity. We further maintain that even if uniformity of treatment should result there is no justification for imposing such a burdensome requirement upon, freight forwarders.

A provision for the award of damages, if included in part IV of the act, would have a very different effect upon freight forwarders from the effect which such a provision now has as applied to railroads. This is true both because of the legal situation and the practical considerations involved.

First of all, the doctrine laid down by the Supreme Court in the Arizona Grocery Co. case (284 U. S. 370) affords a large measure of protection to the railroad rate structure insofar as reparations claims are concerned. In that case the Supreme Court said that the Interstate Commerce Commission may not award reparation on shipments which have moved under rates prescribed or approved by the Commission. In other words, if the Commission, in a proper proceeding. declares a rate to be reasonable and lawful for the future it cannot, at a later date, based on the same or additional evidence, declare that rate unreasonable and award reparations. The Commission has had the power to prescribe maximum reasonable rates for ailroads since 1906, and it has exercised that power extensively.

Freight forwarders, on the other hand, have only been regulated by the Commission since 1942, and during that time the Commission has had no occasion to prescribe maximum reasonable rates for forwarders. Therefore, the doctrine in the Arizona Grocery Co. case, which has a very material effect in barring reparations in the case of railroads, would have no application in the case of freight forwarders.

The subject of reparations is apparently of very little importance in the administration of part I of the act today, but that has not always been the case. Prior to the decision in the Arizona Grocery Co. case the whole question of reparations was of the gravest concern to the Commission, as its repeated recom mendations to Congress for modification or repeal of such provisions will show. Many agencies sprang up whose sole business was to solicit paid freight bills from the shippers for the purpose of attempting to recover reparations on a commission basis. If freight forwarders are now subjected to a reparations provision, with no prescribed rates to rely on, a return of such conditions is inevitable. We seriously fear that forwarders will be subjected to much litigation in what the Commission referred to in one case as "frivolous or moot complaints" (Bell Potato Chip Co. case, (43 M. C. C. 337) ).

Freight-forwarder rates are patterned after, and to a substantial degree are the same as railroad rates. The application of a reparations provision to the two groups, however, would have a very different result. Because of the policy the courts have laid down, the Commission's determination as to the reasonableness of railroad rates must operate very largely as to the future, whereas in the case of the freight forwarders it would have a retroactive effect. In other words, having largely prescribed the rail rates already, the Commission upon reexamination, can only say that they will be unreasonable for the future, whereas if a forwarder rate should be found unreasonable it would subject the forwarders to reparations for the full length of the statutory period in the past.

Statistics of the Commission show that freight forwarders pay out more than 80 percent of their gross income for transportation charges to the underlying carriers they utilize. Here, again, the forwarders might be subjected to unfair treatment under a provision for reparations. If a forwarder were required to pay reparations he would have no recourse against the underlying carrier who

would have received four-fifths of the charges which were the subject of the reparations claim, even though the unreasonableness of the forwarder rate might be attributable to an unreasonable rate of the underlying carrier.

In view of these facts it is very clear that uniformity of treatment as between the transportation industries will not be obtained merely by making the same reparations provisions applicable to all. To understand the effect which such provisions will have on a newly regulated industry such as the freight forwarders it is necessary to go back into transportation history. No provision of the Interstate Commerce Act has caused more difficulty, concern, and confusion than the reparations provision. Few provisions have been the cause of more litigation. In 1930 the Commission pointed out to Congress, in its annual report for that year, that the number and complexity of reparations cases have so encroached upon our time and energies as to deprive us of adequate time for the thorough consideration of the many larger and more important problems continually coming before us."

66* * *

What reason is there to suppose that the same conditions will not be brought about if these same provisions are now extended to freight forwarders and others?

It is our belief and earnest recommendation that no reparations provision is necessary in part IV of the act. If, however, your subcommittee should be convinced that consideration should be given to a provision that will have a uniform effect in the case of all media of transportation, then we suggest that de novo consideration be given to the whole subject. No better treatment of the question of reparations can be found than that contained in the reports of the Interstate Commerce Commission to Congress on the subject, during the many years when the Commission advocated either outright repeal of such provisions or a modification that would achieve a just and equitable result.

It should be borne in mind that the so-called reparations provisions confer authority to award damages, and actions to recover such damages rest upon a tort or public wrong and not upon contract. The original theory was that damages for such a public wrong could be recovered where private injury was shown to result. Thus in Parsons v. Chicago & Northwestern Railway (167 U. S. 447), decided in 1897, the Supreme Court held that before any aggrieved person could recover damages under the Interstate Commerce Act: "He must show not merely a wrong of the carrier, but that the wrong has in fact operated to his injury." With the passage of time the courts and the Commission made a distinction between damages claimed where a rate is found to be unreasonable and damages claimed where a rate is found unjustly discriminatory. The original theory of requiring the showing of actual loss was maintained in cases where the basis of the claim is unjust discrimination. That was the doctrine laid down in the International Coal case (230 U. S. 184). However, in cases where the claim is based on the allegation of unreasonableness the aggrieved party has been held to be entitled to the difference between the reasonable and the unreasonable rate as the measure of his damages, without proof of any actual damage. That was the decision of the Supreme Court in the Darnell-Taenzer Lumber Company case (245 U. S. 531) and it has been followed in other cases. The Commission discussed this situation in its annual report to Congress in 1916, stating, at pages 75 and 76 of that report:

"The ideas originally had as to awards of reparation and the showing which complainant must make in order to be entitled to an award of reparation have been substantially modified in recent years, especially with regard to reparation because of undue preference, undue prejudice, or unjust discrimination. The Supreme Court of the United States has held that in a discrimination case the damage to the complainant, if any, may be exactly equal to the difference between the rates paid by the complainant and those paid by his competitor; it may be more and it may substantially less; but whatever it is, he must prove his damage with the same degree of certainty that would justify a judgment in court (Pennsylvania Railroad Company v. International Coal Company, 230 U. S. 184). With respect to reparation because of the payment of a rate that is unreasonable per se, the Commission has followed the rule that the measure of damages is the difference between the rate paid and that which would have been paid under the reasonable rate, and has declined to go beyond the parties to the transportation contract in an effort to prove or to disprove that the complainant was damaged. There are many who argue that this policy is erroneous and that with regard to proof of damages there is and should be no distinction between the discrimination case and the case of an unreasonable rate. Counsel

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for the carriers argue that if the shipper has paid a rate that is later found to have been unreasonable, but has conditioned his commercial transactions in the light of and on the basis of the rate paid, he has passed along to his vendees any damage that he might have sustained and is therefore not entitled to reparation."

*

"In connection with the question of reparation on account of an unreasonable rate charged it should be borne in mind that the standard of reasonableness under our act is not a definite fixed standard. That is to say, whether a certain rate is reasonable or not often cannot be known by the carrier until the Commission has passed upon it. Now, in seeking reparation on account of an unreasonable rate, complainants frequently invoke the common law in support of their claims, but we have been referred to no common-law case where the standard exceeded by the carrier was not a fixed definite standard which the carrier knew and was bound to observe. The act contemplates that we shall find rates reasonable or unreasonable according to whether, in our opinion, the rate bears a proper relation to the service rendered. But this is preeminently a question upon which opinions of the Commission and of the carriers may differ, and the act contemplates an original exercise of the carriers' judgment."

After making the foregoing remarks, the Commission said, at page 78 of the same report:

"For a period of more than 6 years all proposed increased rates have been subject to protest and suspension before becoming effective. Obviously there should come a time when as to the past the general level of the rates and the relationship of rates should be fixed as reasonable."

Again, in 1919, the Commission included a very thorough discussion of the whole subject of reparations in its report to Congress. Because of its length I will not read the Commission's discussion in that report, but I have appended a copy to my statement and I respectfully ask that it be printed as a part of the record. It is worthy of very careful study. The conclusions urged upon Congress were:

"That consideration be given to our recommendation in the 1916 annual report that the power to award reparation be placed wholly in the courts; that a condition precedent to an award of reparation by a court for unreasonable rates or charges be that we have found such rates or charges unreasonable as of a particular time; that the law affirmatively recognize that private damages do not necessarily follow a violation of the act; that provision be made that sections 8, 9, and 16 of the act to regulate commerce shall be construed to mean that no person is entitled to reparation except to the extent that he shows he has suffered damage; and that the law should provide that if a rate is found to be unreasonable the rule of damages laid down in the International Coal case (230 U. S. 184) should control."

It is our firm belief that the recommendations of the Commission made at that time are sound today. The circumstances with respect to reparations are precisely the same, in the case of freight forwarders, as they were then in the case of railroads.

In its report to Congress for the year 1930 the Commission, pointing out that Congress had not heeded its previous recommendations, tried a new approach. The Commission then recommended that its power to award reparation under the first four sections of the act be restricted to the period commencing 90 days prior to the filing of the complaint. In support of this recommendation the Commission pointed out that when the original act was passed the Commission was not given power to prescribe rates for the future, and that such power was not conferred until 1906; that prior to 1906 it was fair and proper that parties who could not secure in advance reasonable rates for prospective shipments should have a period of time after their shipments moved and the unreasonable charges had been paid within which to file complaints for damages. This recommendation was renewed in the 1931 and 1932 annual reports of the Commission to Congress.

Even though in recent years the Commission has apparently abandoned its efforts to have the reparations provisions in part I of the act eliminated or modined, I submit that the views of the Commission when the subject was more active, as expressed in the reports, are sound and logical. There is no good reason why a person who alleges successfully that a particular rate is unreasonable should obtain as a matter of course, and without proof of any injury, the difference between the rate prescribed for the future and the rate observed in the past. In most such cases the person claiming damage will have passed the entire charge

to this customer, and there is no reason why he should be enriched at the expense of the carrier. When a carrier has collected his rates in good faith and has conducted his operations upon the belief that they are just and reasonable, it seems patently unfair to permit a shipper who has suffered no actual loss to recover damages. As the Commission has pointed out, the standard of reasonableness is not a definite fixed standard. Whether a certain rate is reasonable or not oftentimes cannot be known by the carrier until the Commission has passed upon

it.

For the reasons I have stated, I sincerely hope that your subcommittee will conclude that reparations provisions are neither necessary nor desirable in connection with part IV of the act. If you should conclude that it is not proper to have such a provision in one part of the act and not in others, then I respectfully urge that you go thoroughly into the history of this provision of the act and consider the past recommendations of the Commission on the subject. If you do that I am sure you will be convinced that this is not a simple question of providing uniform language for all parts of the act. The legal and the factual situations are different. The inequities of which the Commission so long complained would come back into full play.

The rates of forwarders are subject to the full jurisdiction of the Commission, and shippers may ask for suspension of a new rate or complain against any established rate to bring about a ruling as to its reasonableness. We believe that this is ample protection for the shipping public.

In closing, I respectfully urge that your subcommittee recommend the prompt reporting of bill H. R. 2759, without change.

APPENDIX

EXCERPT FROM THIRTY-THIRD ANNUAL REPORT OF THE INTERSTATE COMMERCE COMMISSION TO CONGRESS, FOR THE YEAR 1919, PAGES 17-21

REPARATION

In our thirtieth annual report to Congress, in December 1916, we said: "In connection with the question of reparation on account of an unreasonable rate charged it should be borne in mind that the standard of reasonableness under our act is not a definite fixed standard. That is to say, whether a certain rate is reasonable or not often cannot be known by the carrier until the Commission has passed upon it. Now, in seeking reparation on account of an unreasonable rate, complainants frequently invoke the common law in support of their claims, but we have been referred to no common-law case where the standard exceeded by the carrier was not a fixed definite standard which the carrier knew and was bound to observe. The act contemplates that we shall find rates reasonable or unreasonable according to whether, in our opinion, the rate bears a proper relation to the service rendered. But this is preeminently a question upon which opinions of the Commission and of the carriers may differ, and the act contemplates an original exercise of the carriers' judgment."

We also pointed out that as its awards of reparation are only prima facie evidence in the court and as they must be enforced in the courts, if not paid by the carrier, the rights of a shipper might be sufficiently protected by amending the law so as to place the power to award reparation exclusively with the courts. The Supreme Court has since dealt with the rights of shippers to reparation where the rates are found to be unreasonable in Southern Pacific Co. v. DarnellTaenzer Lumber Co. (245 U. S. 531). The defense of the carriers in that case was that the complainant was not damaged and that it had in fact passed the unreasonable charge along to the consumer in the price of his goods. As to this the Court said:

"The general tendency of the law, in regard to damages at least, is not to go beyond the first step. As it does not attribute remote consequences to a defendant, so it holds him liable if proximately the plaintiff has suffered a loss. The plaintiff suffered losses to the amount of the verdict when they paid. Their claim accrued at once in the theory of the law and it does not inquire into later events. * * * If it be said that the whole transaction is one from a business point of view, it is enough to reply that the unity in this case is not sufficient to entitle the purchaser to recover, any more than the ultimate consumer who in turn paid an increased price. He has no privity with the carrier. * * The carrier ought not to be allowed to retain his ilegal profit, and the only one who can take it from him is the one that alone was in relation with him, and from whom the carrier took the sum. * .* * Behind the technical mode of state

*

ment is the consideration well emphasized by the Interstate Commerce Commission, of the endlessness and futility of the effort to follow every transaction to its ultimate result (13 I. C. C. 680). Probably in the end the public pays the damages in most cases of compensated torts.

"The cases like Pennsylvania R. R. Co. v. International Coal Mining Co. (230 U. S. 184), where a party that has paid only the reasonable rate sues upon a discrimination because some other has paid less, are not like the present. There the damage depends upon remoter considerations. But here the plaintiffs have paid cash out of pocket that should not have been required of them, and there is no question as to the amount of the proximate loss. See Meeker v. Lehigh Valley R. R. Co. (238 U. S. 473)."

Under the act to regulate commerce there are three principal public wrongs: (a) To exact an unreasonable rate is unlawful under section 1; (b) to unjustly discriminate is unlawful under section 2; (c) to practice undue preference or undue prejudice is unlawful under section 3. Section 8 of this act provides that the carrier

* * shall be liable to the person or persons injured thereby for the full amount of damages sustained in consequence of any such violation of the provisions of this Act. * * * "?

Section 16 provides:

"That if, after hearing on a complaint made as provided in section 13 of this Act, the Commission shall determine that any party complainant is entitled to an award of damages under the provisions of this Act for a violation thereof, the Commission shall make an order directing the carrier to pay to the complainant the sum to which he is entitled on or before a day named."

Section 9 gives the persons claiming to be damaged the right to file his suit for the damages in a court. These provisions empower us and the courts to award damages growing out of violations of the act.

That damages in a pecuniary sense must be proven upon an allegation of unjust discrimination or undue preference under sections 2 and 3 of the act, and that no such proof is required upon an allegation of unreasonableness under section 1 of the act allows the cause, character, and measure of the wrong rather than the proof of injury to determine whether damages should be awarded. That is to say, damages are presumed by the payment of an unreasonable charge, and the measure of damage is a question of law instead of a question of fact. The statute does not fix the measure of damages to be the difference between a reasonable and an unreasonable rate, as a matter of law or otherwise (211 Fed. 810). On the contrary, it was decided in L. & N. v. Ohio Valley Tie Co. (242 U. S. 277), that the damage resulting from the payment of unreasonable rates might be the difference between the rates or it might be the damage to the complainant's business "following as a remoter result of the same cause"; and that the latter "must be taken to have been considered in the award of the Commission and compensated when that award was paid."

We have often said that there is no presumption of damage under the act, and that the distinction is plain between a carrier's unlawful act and the shipper's right to damage, if any, caused thereby (Oregon Fruit Co. v. S. P. Co., 50 I. C. C. 719).

The distinction between the rule of damage of the International Coal case in respect to the discriminatory rates and the rule of damage in the Darnell-Taenzer case in respect to unreasonable rates is apparently based upon what is said to be the common-law principle that an unreasonable charge is equivalent to an "extortion" or "overcharge." But there appears to be no real analogy between an action to recover an extortion or overcharge at common law and an action to recover an unreasonable charge under the act to regulate commerce. The common-law action is more nearly analogous to an action to recover a charge over and above the published rate. At common law the overcharge was often in fact an extortion. But the exaction of a published charge which is legal under the statute, and which is afterward found to be unreasonable, is in no proper sense an extortion, inasmuch as the law itself requires the payment of the published rate or charge. In publishing rates in the first instance, carriers have no way of knowing that a regulating commission will subsequently find a particular rate to be unreasonable. It is understood that common-law cases were rare and were usually based upon a breach of contract; i. e., where the carrier forced the shipper to pay a rate or price that exceeded the contract rate or price and was thereby guilty of extortion.

In Anadarko Cotton Oil Co. v. A., T. & S. F. Ry. Co. (20 I. C. C. 43), cited by the Supreme Court in Baer v. D. & R. G. (233 U. S. 479), we said:

"A rate reasonable in view of the circumstances and conditions when it is established may, in the course of time, become unreasonable by virtue of changed circumstances and conditions. It is manifestly impracticable for the carriers and