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and all parts of the United States on or east of the Missouri River. Its policy was to make rates upon leading articles a little below the rates made by transcontinental lines in this country. This was designed to compel the recognition by the latter of a general principle which it asserted, that rates upon a circuitous line between like terminals should be lower than rates upon more direct lines, in order to enable the longer route to obtain some portion of the traffic; or, in other words, that natural disadvantages, operating to the prejudice of a route competing for the business in question, should be compensated by the privilege of offering to the public a lower rate.
In pursuance of this plan it arranged with a steamer line leaving San Francisco weekly for Vancouver to take shipments of freight upou through rates to various points in the Eastern States; this competition was so managed as to make itself felt successively upon different articles, consigned to various points, and was so persistently followed up that it seriously affected all through trans-continental business in both directions. Through rates were reduced on April 27, 1887, and again on May 25, 1887, and at the time of the hearing of the Denver case, in December, 1887, remained at figures which were extremely low in consideration of the length of haul and the expensive operation of the roads concerned in the traffic. Intermediate and local rates meanwhile remained as originally established on April 5, 1887.
The pressure of this situation in respect to the through business brought about an arrangement among the lines in January, 1888, by which the Canadian Pacific became a member of the trans-continental association of roads and agreed with the other lines upon through rates considerably higher than the low rates which previously prevailed. It was understood that the Canadian Pacific should be allowed certain differentials, or, in other words, that the charges by that line should be less by from 5 to 10 per cent. on the various classes than the rates charged upon the lines situated in the United States. And, no differentials being provided for at Missouri River points, the Canadian road was understood as retiring from competition in respect to that business. This plan of agreed rates with differentials in favor of the longer Canadian route still remains in operation.
One practical effect of the arrangement thus consummated was to raise local rates at points near the terminals of the different roads, by precisely the same amount that was added to the new through rates. When the hearing in Nebraska took place, in March, 1888, the whole subject as it then stood was carefully investigated, and a decision in the Denver case was announced in May, to the effect that traffic from the Pacific coast to Missouri River points did not then appear to be subject to any actual competition of controlling force by carriers not subject to the provisions of the law, and that there was no fact apparent which could justify the greater charge for the shorter haul in the case presented.
This decision was accepted by the carriers as requiring the adoption of a new system of making rates upon the trans-continental lines. The subject was entered upon, and on September 1, 1888, an entirely new system of tariffs was prepared and put in operation, affecting rates to and from all points upon nearly 40,000 miles of road, operated by eighteen different companies.
The changes made were very radical, and were in the direction of conformity to the fourth section of the law. They resulted in many reductions at intermediate points, in part compensated by some increase upon through business. As at first adjusted serious inconsistencies and discriminations were discerned in the schedules, which attracted public
attention, and were investigated by the Commission. Many changes were made and more are in contemplation; suggestions made by the Commission to the representatives of the lines have been promptly acceded to. The ocean competition is still recognized by the roads to some extent as controlling through rates upon overland traffic, and is relied upon as a justification for somewhat higher rates to points this side of the Pacific coast terminals than are made to points situated directly on the Pacific coast; it is claimed that freight is taken to the latter points at low rates by clipper ships to be there consumed or sent forward to points in the vicinity at local charges. With this exception and some others of minor importance, the rule of the short-haul provision of the law has been put in force upon the trans-continental roads, where its operation and effect can be observed under what now appear to be favorable conditions.
In the Southern and Southwestern States the Commission has had reason to think the carriers were moving more slowly in bringing their tariffs into conformity with the general statutory rule than in other sections. The Commission recognizes the existence of peculiar difficulties in those States, growing out of the fact that water competition is felt at so many points, at some of which it is of controlling force, but this would not excuse the failure to keep the rule of the statute in view, or to press towards it as rapidly as was found to be practicable. Not being satisfied that this duty has been sufficiently apprehended and observed by the carriers, the Commission has ordered an investigation to be made of the whole subject on the 18th instant at its rooms in Washington, when it is intended to make thorough examination of the exist ing rate sheets, and to give all parties concerned an opportunity to be heard.
It is not improbable that the carriers by land, in competing with carriers by water, have sometimes pressed the competition beyond what was reasonable and beyond what the law would justify. Rate sheets in some cases indicate that carriers by rail consider themselves justified in making any rate, no matter how low, that will take business away from a water carrier. When, however, the question is one of justification for making the greater charge on the shorter haul, the reasonableness of the lesser charge is in issue as much as that of the greater, and the justification ought to involve considerations affecting the public good.
But it can hardly be for the public good that carriers by water should be subjected to unreasonable and excessive competition; they ought, as much as the carriers by rail, to be allowed to charge remunerative rates; and the carrier by rail does not therefore make out a complete case, when called upon to justify extraordinary differences between his rates at a point of water competition and at other points, when he shows that at the former he made the very low rates because otherwise he would not have obtained the business. It may be. that when the case is examined in the light of the public interest it will be manifest that he ought not to have had it; that in taking it he had pressed the competition to an extreme which, while it harmed the carrier by boat, was harmful also to points on the railroad by reason of the great disparity in rates which it created, and also because of its producing so little revenue that the burden upon other traffic was increased in consequence. Undoubtedly the public good is best subserved when all the carriers which the needs of the country require are suffered to do business at reasonable compensation, and when their rates as between all their
patrons are relatively as nearly equal and just as under the circumstances they can be made. These are facts which are sometimes overlooked in the making up of railroad rate sheets when water competition is to be taken into account and its legitimate influence allowed for.
A pending case, not yet fully submitted, presents the question of justification of rates from local stations on the New York, Philadelphia and Norfolk Railroad for the transportation of freights to New York and Philadelphia, which are greater than are made from Norfolk to the same destinations. The contention of the railroad companies is that at Norfolk it does no more than to meet the rates made by the steamers, and that if required to equalize its rates as between Norfolk and other stations it would be forced to raise the rates at Norfolk, since the lowering of them at other points would be ruinous. But to raise the rate at Norfolk would be to go out of the business at that point.
A railroad company disposed to deal fairly with steam-boat owners in the competition for business is exposed to some disadvantages growing out of the fact that its competitor is not required to publish his rates or to maintain them. If the regular lines of boats were required by law to do this, it would tend to put the competition between carriers by boat and carriers by rail on a better footing, and would, as we believe, be in the end advantageous to both. A fair and open competition is always better than one in which one party or the other is constantly tempted to push his own measures to an extreme because he suspects his competitor is doing the same thing and has no means of knowing what the actual facts are.
THE FILING AND PUBLICATION OF TARIFFS.
The provisions of section 6 of the act, which require that all local and joint interstate tariffs, classifications and rate sheets be filed in the office of the Commission, have been enforced from the outset, and they have been found of the utmost value. It is difficult to see how any proper understanding of the traffic arrangements in use could otherwise have been had; it enables the Commission to keep abreast of all changes and to exercise, to some extent at least, the supervision authorized by the twelfth section of the act. The documents received, varying in size from single sheets to large volumes, are delivered to the officer in charge of the subject of Rates and. Transportation, where they are receipted for; a general examination of their contents is made, and they are then distributed in file cases appropriated to the different transportation lines, indexes being kept so far as necessary. The system employed makes it possible for the Commission to ascertain at any time and with very little difficulty the legal rate in force for the transportation of passengers or of any article of freight between any points throughout the land.
The organization of this division embraces an auditor, an assistant auditor, a stenographer, ten clerks, and a messenger. One thousand
and twenty-one separate files are kept, among which all schedules and documents relating to rates are distributed as rapidly as received. The receipt of about 500 tariffs is acknowledged daily, making about 160,000 per year. The total number received since the organization of the Commission is about 270,000.
In addition to this, contracts, agreements and traffic arrangements are also required to be filed with the Commission, and are arranged and indexed in a way to permit of their immediate production and examination at any time.
Much still remains to be done in order to assure a complete and adequate supervision of the transportation schedules furnished by the carriers. No uniformity in form has yet been reached, nor has any general system been adopted under which they are prepared. Amendments to the act, now pending in Congress, are designed to enable the Commission to enforce the adoption of better and more systematic methods, which are greatly needed, as well as to secure more complete publication of such schedules as are required to be kept for public inspection in every depot or station upon every road.
Certain circulars and orders issued to carriers in relation to the filing of tariffs and similar subjects are contained in Appendix D. The same appendix also contains the Rules of Practice in cases and proceedings before the Commission, together with a statement showing in detail the expenditures of the Commission for the period ending June 30, 1888, including the number of persons employed and the amount of compensation to each.
THE OPERATION OF THE LAW.
To what extent, if at all, the administration of the act has been harmful to the carriers is a subject upon which the views of railroad managers have from time to time been publicly expressed, sometimes to the effect that the damage has been very considerable. The Commission is possessed of no evidence showing that the general result has been otherwise than beneficial. In so far as the act puts an end to the practices before indulged in, which operated to the public detrimentsuch as the improper granting of free transportation, the giving of special rates and rebates, and the making of unjust discriminations-the question whether the revenue of the carriers was injuriously affected may well be considered immaterial, since the prohibition was demanded on grounds of common justice and public morality, and ought to have been declared, even though the profit from such practices were unquestionable.
But the Commission believes that such prohibition tended to benefit the revenues of the carriers and not to deplete them. It made all traffic more generally and more evenly remunerative, and at the same time to some extent relieved very much traffic from the weight of burdens which were before relatively unjust. The requirement of notice of a proposed advance in rates was also one of obvious justice, and the Commission does not often hear complaint of it. The loss most frequently brought forward as a subject of complaint is that which results from the rule of the fourth section, which has for its object the doing away with the practice of making the greater charge for the shorter transportation on the same line in the same direction. But as the act expressly makes exception of cases in which the circumstances and conditions are dissimilar, it is not conceded that the complaints of the act on this ground are well founded. If the circumstances and conditions of the longer and the shorter haul are substantially similar, the greater charge on the shorter haul can not be just, and the carriers ought not to desire the privilege of making it.
Unquestionably the railroad business of the country has suffered many and very severe losses during the past year. But these have not been due to the act to regulate commerce. One of the most serious of these came from a strike of engineers on the Chicago, Burlington and Quincy Railroad. This strike was so important, not only to the parties concerned, but to the whole public, that the Commission had intended 12366 I C C- -2
to make it the subject of investigation for the purpose not only of sifting the facts and of presenting a reliable history, but also for the purpose of such lessons as the facts might teach. As this became impracticable, it is only necessary here to say that the losses of the railroad company resulting from the strike were simply enormous, while those of the brotherhood, by which the strike was ordered and sustained, were, perhaps, in proportion, equally great. The strike began February 27, 1888, and was for several months a seriously disturbing factor in transportation in the whole region reached by the system of roads aimed at. It was also the cause of some subsidiary or sympathetic strikes, and as the main strike has never been declared at an end, the injurious consequences have perhaps not wholly ceased up to this day.
Serious impairment of net revenue has in several cases resulted from the construction and opening of new lines of road, involving great outlay, and at first producing comparatively little income. In some instances, such new lines have paralleled existing roads which were adequate to handle the existing traffic. In such cases they have not only imposed new burdens upon the systems responsible for their construction, but have resulted in the diminution of receipts upon competing lines.
More serious consequences have resulted from rate wars. During a considerable portion of the year rates have been unsettled in the Northwest, and from time to time the relations between the carriers, always sharply competitive, have resulted in destructive warfare. This can not, however, with any justice or to any extent be claimed to have resulted from the act, or from its administration. In so far as the Commission has had occasion to deal with questions at issue in that section of the country the effect of its decisions has been towards an improvement in the relations between the carriers instead of towards the originating or intensifying of controversies.
The same may be said of the serious contention in respect to rates, which, at the time of the preparation of this report, is in progress between the trunk line roads. As is commonly the case in rate wars, the existing difficulties had their origin in suspicions on the part of the carriers respectively that their competitors were not observing the open public rates, and the reductions were made professedly for the purpose of recovering the proportions of freight which those entering into it claimed was their due, but which they were not getting because of the secret or unlawful practices of others.
Efforts of the Commission to obtain from the parties evidence of the practices they suspected have been wholly ineffectual, and the war of rates has proceeded without the possibility of any external authority interposing effectually to bring it to an end.
The legal right of the carriers to reduce their general scale of rates to any extent under the law as it now stands is believed to be unquestionable; they have proceeded to do so to a destructive extent, and whether with any ultimate benefit to themselves is at least very questionable.
What should be distinctly understood in the matter is that the immediate losses in such cases are not in any proper sense due to the act to regulate commerce. They are, on the other hand, due to violations of the act; and if those engaged in reducing rates because of supposed improper practices by their competitors were able and were disposed to produce evidence of the practices the existence of which they charge, the enforcement of the law based upon such evidence would tend to the common benefit of all concerned.