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much consideration continue to be given to the administrative interpretation of the act for the guidance of shippers and carriers. Numerous questions as to the meaning and application of various provisions of the statute are submitted from time to time in correspondence and personal interviews. Many of these questions are of great practical importance and not a few of them difficult of solution. It is the policy of the Commission to answer all proper inquiries of this kind with an indication of its views upon the points presented. If a given question relates to matters of common interest or frequent occurrence the official opinion is usually announced in conference rulings, tariff circulars, and the like, which are thereupon printed and distributed for general information. In most instances these rulings have been accepted as correct expositions of the law and subsequent practices brought into conformity therewith. By this means a comprehensive code of rules is in process of development, the observance of which operates with increasing influence to promote just and impartial conduct. Moreover, the rules so promulgated have the highly beneficial effect of avoiding a multitude of contentions which otherwise would come to the Commission in the form of individual complaints. This method of administration, which aims to prevent uncertainty and dispute by an authoritative construction of the act, appears to be regarded with special favor, and it is believed that the efforts of the Commission in this direction are of distinct and permanent value.
In subsequent pages of this report will be found statements more or less in detail respecting the operations of the several bureaus or divisions established for the purpose of discharging the duties imposed upon the Commission. It may fairly be said that the Commission has been able to keep abreast of the current work involved in the hearing and determination of complaints, general correspondence, and the enforcement of the safety-appliance and kindred laws, and that encouraging progress has been made toward the accomplishment of important reforms directed or authorized by the amendments of 1906, such as the formulation of a uniform accounting system for carriers by railroad and of rules intended to secure the simplification of tariff construction.
Since our last report to the Congress the Commission has decided 591 cases instituted by formal complaint and answer, and 197 such cases have been disposed of in other ways, such as by stipulation of the parties for dismissal or motion of the complainant for discontinuance. Thus a total of 788 formal cases have been removed from the Commission's docket during the year. A digest of the matters decided by the Commission in important cases will be printed in an appendix to this report.
During the same period 1,097 formal proceedings have been instituted, 1,090 upon complaint and answer and 7 by the Commission upon its own motion. On July 2, 1909, the Commission adopted a rule providing for the consolidation under one docket number of all cases involving substantially the same subject-matter. Had that rule been in force during the entire year, the number of formal complaints would have been reduced by 387, and the number of cases disposed of would approximately equal the number added to the Commission's docket. More than half of the formal complaints now pending involve only claims for small amounts of reparation. Having reference to the number of proceedings instituted and their importance, the work now in hand appears to be somewhat less, and is certainly not greater, than it was a year ago, although the actual number of complaints filed in 1909 is 98 per cent greater than the number filed in 1908.
The number of informal complaints made the subject of correspondence between the Commission and interested carriers shows a slight decrease for 1909 as compared with 1908, 4,640 such complaints having been received during the latter and 4,435 during the former year. On the other hand, the number of special reparation claims filed in 1909 exceeds the number filed in 1908 by 717, the number for the last year being 4,406 and for the previous year 3,789. A more detailed statement respecting the special reparation docket will be found in the chapter relating to the Bureau of Statistics and Accounts.
Six hundred and one hearings and investigations respecting alleged violations of the act have been had at sessions of the Commission in Washington and at various places throughout the country, which more than 61,000 pages of testimony were taken. It will be recalled that the Hepburn law authorizes the Commission to appoint special examiners to take testimony, and a number of these examiners are constantly employed. In view of the large number of cases on the Commission's docket, it is impracticable for the Commissioners to take testimony in many cases except those of general importance. In cases of secondary importance the evidence is generally presented before one of the examiners, but the parties are always permitted to argue their cases orally before the Commission in Washington, or to submit them on briefs if they do not desire to appear in person. The economy of time effected by this procedure has enabled the Commission to dispose of complaints with reasonable dispatch.
AMENDMENTS TO THE ACT. The experience of the past year confirms our conviction that certain amendments are necessary to enable the Commission to more
fully accomplish the purposes of the act. Most of these amendments have been referred to in previous reports, and it seems unnecessary to repeat at this time the reasons upon which our recommendations are based; but we deem it our duty to keep this matter before the Congress by restating the recommendations themselves.
PHYSICAL VALUATION OF RAILWAYS.
There is, in our opinion, urgent need of a physical valuation of the interstate railways of this country. In the so-called “Spokane case” the engineers of the Northern Pacific and Great Northern railways estimated the cost of reproducing those properties in the spring of 1907. In the trial of pending suits brought by the above companies to enjoin certain rates upon lumber which the Commission had established from the Pacific coast to eastern destinations, these same engineers have again estimated the cost of reproduction in 1909. The estimates of the latter year exceed the estimates for 1907 by over 25 per cent.
There is no way by which the Government can properly meet this testimony. Even assuming that the valuation of our railways would be of no assistance to this Commission in establishing reasonable rates, it is still necessary, if those rates are to be successfully defended when attacked by the carriers, that some means be furnished by which, within reasonable limits, a value can be established which shall be binding upon the courts and the Commission.
PREVENTION OF ADVANCES IN RATES PENDING INVESTIGATION.
It seems plain to us also that some method should be provided by which railroads can be prevented from advancing their rates or changing their regulations and practices to the disadvantage of the shipper, pending an investigation into the reasonableness of the proposed change. The confusion and discrimination which result from present conditions have been carefully pointed out in our last two reports.
It is said that the shipper who pays an unreasonable rate can, if that rate be finally adjudged excessive, recover the overplus which he has paid. But this in no respect meets the situation. The shipper most injured is the one who can not pay the rate and take the chance of recovery, and who, therefore, may be forced out of business; the producer, or the consumer, who does not pay the rate at all in the first instance, and consequently has no recourse, is the real sufferer.
Nothing can be more fallacious than to assume that damages are in most instances a remedy for the extortion of an unreasonable rate; nor, if it should be finally held that courts have authority to prohibit advances, are the injured parties in most cases able to conduct
an expensive litigation and file the enormous bonds which are necessary to the obtaining of an injunction.
There is no absolute standard of a reasonable freight rate, and there is, therefore, no absolute right upon the part of a railroad to charge a particular rate. Where a given rate has been in effect, often for years, a strong presumption of its reasonableness arises, and there is no hardship in giving this Commission authority, in its sound discretion, to require a continuance of that rate until opportunity has been afforded to investigate the proposed advance.
This Commission now has authority to establish a through route and joint rate“ provided no reasonable or satisfactory through route exists.” Elsewhere in this report, in connection with a reference to the Portland Gateway case, it is suggested that this proviso should be eliminated with respect to passenger travel at least; and, in our opinion, it should be stricken out as to freight traffic also. While it may usually be true that a shipper can use without disadvantage the existing route, if that be a reasonable one, still there are cases where additional joint rates ought to be established, notwithstanding that the route already in existence may fairly be termed reasonable and satisfactory. Railroads ought not to be required to turn over their business to a competitor; but we think the Commission should have authority to establish through routes and joint rates wherever, upon investigation, it is found that the public necessity and convenience, having due reference to the interests of the carrier, require such action.
RIGHT TO ROUTE TRAFFIC.
Of much the same character is the right to route traffic. The courts now hold, apparently, that carriers have this right, or at least that they may reserve it in their tariffs and may therefore, as a practical matter, exercise it at will.
Ordinarily it is immaterial to a shipper by what route his traffic moves, if it reaches its destination in due time, upon a proper rate and with the desired delivery. In such cases there is no apparent reason why the railroad ought not to be permitted to send that traffic by whatever route it may elect. There are, however, circumstances under which the privilege of designating the route by which the traffic shall move is a matter of convenience as well as value to the shipper, and under such circumstances his right ought to be protected. In our opinion the Commission should have authority, after investigation, to prescribe the conditions under which traffic may be routed by the shipper.
ORDERS IN PROCEEDINGS INSTITUTED BY THE COMMISSION.
Section 13 of the original act, after enumerating the different parties who might complain to the Commission, provided that the Commission itself might “ institute any inquiry on its own motion in the same manner and to the same effect as though complaint had been made.” Under this provision the Commission, previous to the Hepburn amendment, frequently instituted proceedings for the correction of unreasonable rates and practices.
The thirteenth section stands the same now as formerly. Section 15 as amended empowers the Commission to make orders “after full hearing upon a complaint made as provided in section 13 of this act.” Can the Commission to-day make an order under the fifteenth section in a proceeding instituted upon its own motion under section 13? The Commission has in one or two instances exercised this authority, but the right is by no means certain, and we feel strongly that this doubt should be removed by appropriate amendment. If this body is to be relied upon to correct unreasonable railway rates, regulations, and practices, instances must frequently arise in which no formal complaint will be filed, but where investigations ought to be had and orders made. Our experience shows that it will often be necessary to broaden the scope of complaints which are filed and prosecuted if justice is to be done between different communities. We believe that wherever it appears, either from a formal complaint filed or from informal complaint received or from the general knowledge of the Commission, that a given situation ought to be investigated the Commission should have authority, upon its own motion or by modifying a complaint already filed, to prosecute an adequate inquiry upon notice to the carrier and to make a relieving order if one be required.
CONTROL OF CAPITALIZATION.
The need of exercising control over railway capitalization is again urged upon the attention of the Congress. Upon this subject, constantly increasing in importance, we can not better express our views than by quoting the following from our last annual report:
The problem of railway valuation touches the figure which should be allowed as a measure of the corporate investment placed at the service of the public; the problem of railway capitalization, on the other hand, as that word has come to be understood, pertains to the amount of securities that should be issued by a corporation and distributed to investors as the evidence and measure of their respective interests. What interest, if any, has the public in the amount and the kinds of securities issued by public service corporations?
The reasonable limit of stock and bond issues from the point of view of sound corporation finance is plain. No conservative management will increase securities beyond the ability of assured earnings to support the increased