United States. Congress. Senate. Committee on Inte.

Railway freight rates and pooling : hearings before the commiittee on interstate commerce, U.S. Senate, having under consideration the bills (S.3521) to enlarge the jurisdiction and powes of the Interstae Commerce Commission -- and (S.3575) to amend an act entitled 'An act to regulate commerce' online

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Online LibraryUnited States. Congress. Senate. Committee on InteRailway freight rates and pooling : hearings before the commiittee on interstate commerce, U.S. Senate, having under consideration the bills (S.3521) to enlarge the jurisdiction and powes of the Interstae Commerce Commission -- and (S.3575) to amend an act entitled 'An act to regulate commerce' → online text (page 5 of 96)
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sonable under the facts, it may suspend the order of the Commission
for a specified time, or during the proceedings under the adjudication
of the order. That, I believe, differs somewhat from the Elkins bill.
But that is considered a point of equal importance with that of giving
the Commission the authority to prescribe the rate to be substituted
for the one found to be wrong, for the reason that the cases that have
been taken before the courts contesting the orders of the Commission
have been in course of adjudication for a long period of time, and the
order consequently suspended during that period.

The commission states in one of its recent reports that the average
length of time that these cases have been before the courts has been four
years. There are several that have been before the courts from five
to seven years. There were two that were decided by the Commission
which were eight years before the court. There is one which has not
yet been decided although it has been nine years before the court. The
result of that, as you can readily see, is to make the rulings of the
Commission practically inoperative, of no effect, affording no relief
whatever to the complainants. After a competent body, skilled in
questions of railroad traffic, has found a rate to be unreasonable or
unjust, it is continued in force during all this period of adjudication,
and the public is subjected to a continuance of that wrong and that
injustice, in the absence of relief of this kind making the order opera-
tive. It should continue in operation until the courts have declared
it wrong. The Commission is utterly unable to afford any relief to the
business community as it is now.

The practice on the part of the railway companies in these cases has
iDeen to protract the proceedings to the utmost possible extent, it being
readily seen that it is for their interest to do so. If the Commission
has ordered a reduction of 20 per cent, the longer the railway company
can prevent the putting into operation of that order, the more it is to
its advantage, of course; and it has made use of that to a very great
extent, so that it has come to be regarded as almost useless on the
part of the business men to bring any case before the Commission. In
some cases it takes two or three years to get them through the Com-
mission, to hear all the parties concerned, and to bring the matter to
a conclusion. Any business man or commercial organization under-
taking the conduct of a case before the Commission becomes almost
tired out before it reaches a conclusion in the Commission itself; and
then the case is subject to a further delay of three to six years while
the validity of the order of the Commission is being contested in the



20 RAILWAY FREIGHT RATES AND POOLING.

courts. This practicaUy renders the interstate-commerce act of no
value whatever to the business community.

Senator Foeaker. Does the bill which you favor undertake in any
way to have that difficulty remedied in the commission ?

Mr. Bacon. As to the Helays before the commission ?

Senator Foeaker. Before the commission itself, yes.

Mr. Bacon. There is no special provision made in that respect.

Senator Foeakee. The remedy is aimed simply at the courts, so far
as any provision of the bill is concerned ?

Mr. Bacon. The desire is to avoid any further delay. Nevertheless,
the business organizations have urged upon the Interstate Commerce
Commission the expediting of cases before the commission, and will
undoubtedly continue to do so.

Another provision of the Nelson bill is that the testimony taken
before the Commission shall be certified to the court when the order
of the Commission is appealed from; and if additional testimony is
offered before the court by either party, the court is to refer the case
back to the Commisson to take that additional testimony, and to certify
the facts to the court as thereafter found. The object of that is to
necessitate the carriers presenting all their testimony before the Com-
mission. It has been the practice to present only a part of it, and
then when the case is appealed to the courts to introduce additional
testimony, and the consequence has been that the decision of the court
has been at times on an entirely different case from that before the
Commission.

Furthermore, that causes delay. Ordinarily it takes a case a year,
or a year and a half, to go through the commission, and once in awhile
two to three years. But the carriers, by means of this method of
introducing additional testimony before the court, simply subjects the
.shipper or the commercial organization, complainant in the case, to
unnecessary delay. That seems to be one of the means that is taken
advantage of for the purpose of promoting delay, and preventing any
order of the commission going into effect within a reasonable time.

One of the important differences between the two bills is that under
the Elkins bill the order of the Commission is made obligatory for '
only a period of one year, while under the Nelson bill it is made
obligatory for two years. Under the present law there is no limita-
tion to the time of this obligation. The committee that prepared the
Nelson bill deemed it best for the protection of the railway interests
to provide that the order of the Commission should be in effect only
two years. An objection had been made by the railway interests to
the effect that the Commission having the power to prescribe the rate
to-be observed in the future, when it found the existing rate to be
wrong, would before many years have made all the rates for the coun-
try. To obviate that objection on the part of the carriers, the com-
mittee in the preparation of the Nelson bill made this provision: That
the order of the Commission should be obligatory only for a period of
two years.

Senator Foeaker. That is the order fixing the rate, where complaint
has been made and heard ?

Mr. Bacon. Yes.

Senator Dollivee. Did I understand you to say that in case the rate
suggested by the Commission is obviously wrong and burdensome to
the company, the court would have the right to suspend it pending lit-
igation ?



KAILWAT FREIGHT BATES AND FOOLINa. 21

Mr. Bacon. That is what I said. Let me read to you the exact pro-
vision of the bill in that respect. I read from the second paragraph on
page 6 of the Nelson bill:

The filing of a petition to review an order shall of itself suspend the effect of such
order for thirty days, and the court before which the same is pending may also, if
upon an inspection of the record it plainly appears that the order proceeds upon some
error of law, or is unjust and .unreasonable upon the facts, and not otherwise, sus-
pend the operation of the order during the pendency of the proceedings in review, or
until further order of the court.

Senator Cakmack. The application of itself suspends the order, as I
gather from the reading of that.

Mr. Bacon. Yes; the application to the circuit court for a review
of tlbe order itself suspends the operation of that order for thirty
days. I was about to say, in further response to the question asked
by Senator Foraker, that the Commission is not authorized under this
bill to make any change in rates in order to correct any error found
to exist in the rates, except where formal complaint has beeii filed
before the Commission, and that complaint has been investigated and
all parties in interest have been given an opportunity to be heard.

The Chairman. Is it clearly provided that this order of the Commis-
sion shall be in force for two years, and that thereafter the railroads
shall make a new rate in that given case?

Mr. Bacon. The railroad will, be free to make a new rate in that
case. It is provided, however, as a protection to any interested party
in regard to the change of rate, that he may file with the Commission
his objections to such change.

The Chairman. I know; but let us suppose that the Commission
makes an order reducing the rate; that order stands good under the
Nelson bill for two years, does it?

Mr. Bacon. Two years.

The Chairman. And after that the j-ailroad is at liberty to make
another rate?

Mr. Bacon. Yes; and if they do make another rate there is this

E revision : That any party interested may file with the Commission
is objections within sixty days, and the Commission " may thereupon
order the carrier to restore and maintain the rate or practice required
by the original order, pending its investigation as to the lawfulness or
reasonableness of such change."

The Chairman. Suppose that the railroad, after the Commission has
made an order, takes no appeal, but goes on to carry out the Commis-
sion's order upon an individual case; that order is binding for two
years, and only two years ?

Mr. Bacon. That is right.

The Chairman. Consequently, the railroad can make any rate it

pleases in that case ? , , . •, -. ^i

. Mr. Bacon. It can. But anyone interested has the privilege ot fil-
ing with the Commission objections to that change, and in that way
reopen the case before the Commission.

Senator Carmack. You mean any shipper? . , , r.

Mr. Bacon. Any shipper can file his objections with the Commis-
sion itself. , . , , , ,11 i •

The Chairman. How long do you think that would keep a rate in

force? „ ^,

Mr. Bacon. It would remain in force another two years.
The Chairman. Can this go on indefinitely?



22 RAILWAY FREIGHT RATES AND POOLING.

Mr. Bacon. There is no provision as to how often this process may
be repeated. But the provision is inserted so that any party inter-
ested, feeling that he has been wronged by the change of rate, can have
an opportunity to have it considered under the circumstances existing-
at the time.

Senator Clapp. At the end of the two years would the subject be
thrown back where it was originally ?

Mr. Bacon. Exactly.

Senator Clapp. The Commission has jurisdiction to take up another
coinplaint.

Mr. Bacon. It would be virtually a new complaint brought before
the Commission, to be considered with reference to the changed condi-
tions and circumstances.

Senator Dolliver. Does the order of the Commission contemplated
here apply to the individual only or to the classification?

Mr. Bacon. Simply to the individual complaint. The complaint
may, however, be in i-elation to an unjust and unreasonable rate or to
an unjust and unreasonable classification.

Senator Dolliver. Suppose it is an unjust personal discrimination,
is not the order of the Commission liable to create more discrimina-
tions than it cures, "by putting that individual case out of relation with
everybody else?

Mr. Bacon. A personal discrimination is simply a criminal matter,
and the parties are proceeded against criminally. Personal discrim-
inations do not require a determination of the question of whether
there was discrimination or not; that is, the payment of rebates is by
the present law made a crime, and the railway company guilty of it
and the party receiving the rebate are both amenable for the violation
of the law under criminal proceeding.

Senator Dolliver. But the complaint is ver3' general that there is
a secret departure from the puBlished rates.

Mr. Bacon. That is one of the serious complaints.

Senator Dolliver. What is there in this bill to make it more
difficult for the railroads to depart from the order of the Commission
secretly than there is to depart secretly from their own agreed and
published schedule rates?

Mr. Bacon. There are provisions in this bill aiming particularly at
that evil, making it more practicable for the commission to obtain
the necessary evidence to convict the parties of violation of law. But
the payment of rebates, like any other dishonest proceeding, will
never be wholly prevented by law. It can only be punished when
practiced, the same as any other criminal act. But that is an entirely
different thing from the matter of exercising supervision over rates.

Senator Carmack. Is not the matter of rebates the worst trouble in
the whole business ?

Mr. Bacon. I am very much surprised to find that there is enter-
tained very generally by the public that idea, that individual discrimi-
nation is the great evil of the transportation business. But from my
own observation— and I have made a studv of the operation of the
interstate-commerce act ever since its original enactment and have
tollowed its workings very closel}^— my own observation is that that
IS comparatively a trivial evil. The great evil is the discrimination
between localities— discrimination in the published rates— certain
localities being discriminated against in favor of other localities

Senator Dolliver. Has Milwaukee escaped that evil?



KAILWAY FREIGHT BATES AND POOLING. 23

Mr. Bacon. It has not. I do not know of any city in the country
that is more discriminated against than Milwaukee. I will saj', how-
ever, that Milwaukee brought a case before the Commission some six
years ago on account of discrimination and obtained a decision in its
favor from the Commission. The Commission ordered a reduction,
and that order has never been obeyed by the railway companies, for the
reason that just about the time the decision was promulgated the decision
of the Supreme Court declared that the Commission had not the author-
ity to prescribe what change should be made in the rates when it found
existing rates wrong. Under that decision the railway companies
absolutely refused to pay any attention to the order of the Commission.
And I will say in this connection that up to that time, which was ten
years after the organization of the Commission, the Commission had
made its orders in just such cases, prescribing what changes should be
made in the rates, and those orders were almost universally observed
b3'' the transportation companies. The right of the Commission to do
that had never been questioned up to that time. The condition of
traffic matters throughout the country during that period was the
most satisfactory it has ever been either before or since.

The chief purpose of this bill is to restore that condition of things,
to give the Commission specifically this authority which it exercised
during that period, under what it deemed inferentially to be its power,
its right, and not only its power and right, but its duty. The decision
of the Supreme Court was not predicated upon any question as to the
constitutional right of Congress to vest the Commission with this
power, but it was confined to the fact that the power was not specific-
ally conferred in terms by the law.

Senator Dollivee. What is the usual motive for discriminating
against localities, as in the Milwaukee case to which you have referred?

Mr. Bacon. I will answer that question.

Senator Carmack. It is more frequently discriminated against than
some other localities, is it not?

Mr. Bacon. The motive is not for the purpose of discriminating in
favor of one locality as against another, but it arises from competition
for business over a certain territory. Certain railroads taking busi-
ness from a certain territory to a certain market are in competition
with other roads taking the same kind of business to another market,
and each of the roads is trying, of course, to get the advantage over the
other in the division of the business. In consequence of that the rates
become discriminative.

Senator Kb an. Demoralized.

Mr. Bacon. Not demoralized, but discriminative as against certam
localities. For instance, here are these various seaboard cities — Bos-
ton, New York, Philadelphia, and Baltimore. Certain rates are made
from the western country to these seaboard cities. Each of the trunk
lines is desirous to obtain as large a share of that business as possible,
and in making rates each seeks to make rates that will give itself the
advantage over competitors. The railroads, in order to break up
destructive competition between them, agree upon certam differentials
from certain territory to certain markets or certain ports; they agree
upon that with reference to the distribution of the business, not with
reference to the question of right or equity. It is simply to divide
the business as nearly satisfactorily as possible under the operation ot
the rates between themselves. The result of that often is that certain
places are discriminated against and certain other places are favored.



24 RAILWAY FREIGHT RATES AND POOLING.

That practice will be continued until some competent authority requires
it to be changed, because it is only natural that the railroad .companies
should continue it.

A case of that kind came up a few years ago with reference to Cin-
cinnati and Chicago in regard to the business to the southeast as com-
pared with the business from the seaboard cities to the southeast. In
that case the Commission decided that the rates from Cincinnati and~
Chicago into that territory were unjustly large as compared with the
rates from the seaboard cities into that territory, and the Commission
prescribed a certain difference which should be made in those rates in
order to equalize the two sections of the country with reference to the
Southern trade. That case was carried into court, appealed to the
Supreme Court, and the Supreme Court denied the right of the Com-
mission to specify what rates should be enforced in future.

In reference to the exercise of this power by the Commission I wish
to read an extract from the annual report of the Commission for 1897,
in which it expressed itself on this subject. It says:

It (the Commission) understood that when, as in this case, the rates had been
established by the carriers and afterwards challenged or complained of as unreasonable,
and the question of unreasonableness had been tried, the Commission could declare
not only what rate was wrong, but what would be right, and could lawfully petition
the court to enforce the right. That is to say, when a rate had been established by
the carriers, challenged by or on behalf of shippers, and tried by the Commission in
a proceeding ordered and regulated as near as may be in conformity with United
States court proceedings, the Commission had a right, and it became its duty when
justified by the facts, to declare the rate wrong, decide what rate would be rigbt, and
through the judgment of the court compel the carrier to perform its legal duty to
receive and carry property at rates which are reasonable and just.

The Commission exercised this power in a case commenced in the second month
after its organization and continued to exercise it for a period of more than ten years,
during which time no member of the Commission ever officially questioned the exist-
ence of such authority or failed to join in its exercise. As already stated, the authority
of the Commission to modify and reduce an established rate, and to enforce a reason-
able rate for the future, was not questioned in the answer of the defendant in the
Atlanta rate case, decided March 30, 1896 (previously cited), nor had it ever been
denied in any of the answers made to more than four hundred cases previously com-
menced, many of them alleging unreasonable and unjust charges and praying the
Commission to enforce a reduction and lower rates in the future.

I introduce that to show clearly what the practice of the Commission
had been for that ten years, and also to show the fact that the authority
for the Commission to proceed in that way had never been questioned
during that ten years by any of the carriers.

We were speaking, when I was interrupted, about the limit of time
during which these orders of the Commission should be obligatory,
being two years under the Nelson bill but only one under the Elkins
bill. I wish to say to the committee that the limitation of one year
strikes business men as being altogether too limited. Even two years
is regarded by business men generally as a very short time. The
length of time taken, the amount of labor required to prepare a case
before the Commission and to carry it through to a decision, and then
the possible contest of that case in the courts, entail such an amount
of time, labor, and expense -upon the shipper, or upon the commercial
organization conducting it, that if the order were only to be in force
for one year there would not be one case in twenty, to say the least,
that would ever be brought before the Commission; that is, it would
be considered by the party injured that it would not pay him to go to



KAILWAY FREIGHT RATES AND POOLING. 25

the labor and expense for the sake of having the prescribed rate in
enect only one year.

Senator Dolliver. I want to get more clearly the application of
this bill. When there has been an adjudication of an individual com-
plaint, would it not be better to have some mechanism by which the
order could be made applicable to all such cases?

Mr. Bacon. That is the case, sir.

Senator Dolliver. Is there any process is the law by which an
order made in an individual case shall also be made obligatory upon
all cases similarly situated?

Mr. Bacon. That is the case as regards what I term personal dis-
criminations — payment of rebates, for instance.

Senator Dolliver. Or extortion?

Mr. Bacon. That is a different matter. The question of discrimi-
native rates must be determined by the Commission in each case.

Senator Clapp. You do not understand Senator Dolliver. Com-
plaint is made by an individual that the rate which he is paying upon
something is excessive.

Mr. Bacon. I understood it.

Senator Clapp. What the Senator means, as I understand, is how
far can the Commission upon that complaint take into account the
effect of modifying that rate as to other cases ? That is. what the Sen-
ator is referring to.

Mr. Bacon. The Commission takes into consideration the relation of
that rate to other rates and determines largely upon that relation as
to reasonableness or unreasonableness. It has no power to order a
general reduction. It can only order a change in the particular rate
complained of in each individual case.

Senator Foraker. Why not make the rate for every shipper, not
for the one shipper ?

Mr. Bacon. The Commission can go no farther than to change the
rate in the particular instance where complaint has been made.

The Chairman. Suppose that the court after final review at the end
of two years should decide that the order of the Commission was
wrong, and that the rate fixed by the railroad in the first instance was
right. Then what recourse would the railroad have upon the shipper
to get back the difference in money ?

Mr. Bacon. It is impossible to make any such provision. It is
simply a question of who shall suffer during the pendency of the pro-
ceeding.

The Chairman. Should not the shipper give bond for the repay-
ment of that money?

Mr. Bacon. It is impossible to do that for the reason that the party
who has paid the freight has passed it along on his goods sold to the
consumer, and so he does not himself sustain any damage.

The Chairman. Let me go further: Suppose this order had affected
one hundred shippers, as Senator Clapp suggests, to a given destina-
tion or between certain points; and suppose that the railroad should
lose 1400,000 to 1600,000 bj^ reason of transporting freight at the rate
prescribed; would you not suggest some provision or remedy by
which, if the court should decide that the Commission had been in
error, the railroad could recover back the difference ?
Senator McLaurin. There would be this trouble about that: Sup-



26 RAILWAY FKEIGHT RATES AND POOLING.

pose A makes application to the Commission for a reduction, and the
Commission orders that reduction, and the order goes into force; the
railroad company during the time that order was in force would have
to reduce the freight rates on that commodity not only to the appli-
cant, but to everybody else.

The Chairman. That is my question. I said that.

Senator McLauein. Practically, it would deter anybody from mak-
ing application if he had to give bond to idenmify the railroad com-
pany against all loss.

The Chairman. Not one shipper alone, bat every other shipper.

Senator McLaurin. There would be this trouble about that, that
although B might have had nothing to do with the litigation between
the applicant and the railroad company, he would have to become a
bondsman.

The Chairman. How is the railroad to be protected against hauling
freight at a loss of 1400,000 to 1500,000? We do not want to confis-
cate the railroads.

Senator McLaurin. There would be considerable difliculty about it,
but you might require everybody to pay into some fund somewhere



Online LibraryUnited States. Congress. Senate. Committee on InteRailway freight rates and pooling : hearings before the commiittee on interstate commerce, U.S. Senate, having under consideration the bills (S.3521) to enlarge the jurisdiction and powes of the Interstae Commerce Commission -- and (S.3575) to amend an act entitled 'An act to regulate commerce' → online text (page 5 of 96)