REPORT OF THE

INTERSTATE COMMERCE COMMISSION.

WASHINGTON, D. C., December 1, 1918.

To the Senate and House of Representatives:

The Interstate Commerce Commission has the honor to submit herewith its thirty-second annual report to the Congress. The period covered by this report extends from November 1, 1917, to October 31, 1918, except as otherwise noted.

On December 5, 1917, we transmitted to the Congress a special report with reference to transportation conditions as affecting and affected by the war, the text of which is reproduced in a later part of this report.

On December 26, 1917, the President, by his proclamation, took possession and assumed control from and after 12 o'clock noon on the 28th day of December, 1917, of all the rail or combined rail-andwater systems of transportation located in whole or in part within the boundaries of the continental United States, in order to utilize the same for needful and desirable purposes connected with the prosecution of the war, and directed that the possession, control, operation, and utilization of such transportation systems, by him undertaken, should be exercised by and through the Director General of Railroads, thereby appointed.

In his accompanying statement the President declared that it had become necessary for the complete mobilization of our resources that the transportation systems of the country should be organized and employed under a single authority and a simplified method of coordination, which had not been possible under private management and control.

In his ensuing address to the Congress, on January 4, 1918, he sought certain legislation forecast in his address, and on March 21, 1918, he approved the federal control act, under which the Director General has since administered the transportation systems under federal control.

This act provides, among other things, that such control shall continue during the war and for a reasonable time thereafter, not to exceed 21 months after proclamation by the President of the exchange

of ratifications of the treaty of peace; is expressly declared to be emergency legislation enacted to meet conditions growing out of war; and nothing herein is to be construed as expressing or prejudicing the future policy of the Federal Government concerning the ownership, control, or regulation of carriers or the method or basis of the capitalization thereof.

In our previous annual reports we have, as provided in the act to regulate commerce, transmitted to the Congress such information and data collected by us as were considered of value in the determination of questions connected with the regulation of commerce, together with such recommendations as to additional legislation relating thereto as we deemed necessary. These bore on the regulation of competing common carriers, privately owned and operated. We deem it both unnecessary and inappropriate to renew these recommendations under existing conditions, an important feature of which is temporary unified operation of the carriers by a governmental agency during national emergency and under war powers. That emergency is passing, and in the light of experience gained and to be gained therefrom it will be profitable to appraise the results of unified operation and to apply them, in so far as pertinent, to the solution of the problems expressly reserved by the Congress for later consideration. The conditions, without precedent or parallel, which the war has produced now press upon the Congress matters of the gravest national and international concern.

While we do not deem the present conditions and moment opportune in which to recommend concrete proposals for legislation, we may indicate certain lines of inquiry which must be pursued in order to reach sound conclusions.

Whatever line of policy is determined upon, the fundamental aim or purpose should be to secure transportation systems that will be adequate for the nation's needs even in time of national stress or peril and that will furnish to the public safe, adequate, and efficient transportation at the lowest cost consistent with that service. Tothis end there should be provision for (1) the prompt merger without friction of all the carriers' lines, facilities, and organizations into a continental and unified system in time of stress or emergency; (2) merger within proper limits of the carriers' lines and facilities in such part and to such extent as may be necessary in the general public interest to meet the reasonable demands of our domestic and foreign commerce; (3) limitation of railway construction to the necessities and convenience of the government and of the public, and assuring construction to the point of these limitations; and (4) development and encouragement of inland waterways and coordination of rail and water transportation systems.

Among the plans which doubtless will be proposed are the following: (1) Continuance of the present plan of federal control; (2)

public ownership of carrier property with private operation under regulation; (3) private operation under regulation with governmental guarantees; (4) resumption of private control and management under regulation; and (5) public ownership and operation. Additional plans and modifications or combinations of those enumerated might be listed.

If the policy of private ownership and operation under regulation is continued, the following subjects will require legislative consideration: (1) Revision of limitations upon united or cooperative activities among common carriers by rail or by water; (2) emancipation of railway operation from financial dictation; (3) regulation of issues of securities; (4) establishment of a relationship between Federal and state authority which will eliminate the twilight zone of jurisdiction and under which a harmonious rate structure and adequate service can be secured, state and interstate; (5) restrictions governing the treatment of competitive as compared with noncompetitive traffic; (6) the most efficient utilization of equipment and provision for distributing the burden of furnishing equipment on an equitable basis among the respective carriers; (7) a more liberal use of terminal facilities in the interest of free movement of commerce; and (8) limitations within which common carrier facilities and services may be furnished by shippers or receivers of freight.

Should the policy of public ownership and operation be adopted, there must be considered: (1) The just and fair price at which, and the terms under which, carrier properties are to be acquired; (2) prohibiting the operation of railways as a fiscal contrivance, insuring their administration in the interests of the convenience and commerce of the people, requiring that they shall be self-supporting and that their rates shall be properly related to the ascertained cost of service, and retaining and extending the economies and advantages of large scale production in transportation; (3) responsibility and relationship of the railway administration to Congress and other Federal authorities and to the states; (4) guarding against the intrusion of party politics into railway management; (5) a status for railway officers and employees under which the railway service will attract and retain the best talent; and (6) maintenance of a tribunal for the determination of controversies which will inevitably arise even under public operation.

The above outline is a mere enumeration of some important points to be considered. We will at an appropriate time report to Congress such information, suggestions or recommendations as we believe may be of assistance in solving the many and difficult transportation problems. It is important, however, to point out the relation of this Commission to the transition to the new régime of federal control.

TRANSITION TO FEDERAL CONTROL.

The duties of the Interstate Commerce Commission, as outlined` in the act to regulate commerce, have involved the minimum participation in actual railway management or administration. Its work has related particularly to rates, rules, regulations, fares, charges, and practices; and while occasionally lending its good offices in matters of administration, the Commission has not assumed that under the act there is assigned to it the rôle of railway management or direction of operations. The only exceptions of moment until the passage of the Esch car service act in May, 1917, have been in the domain of the safety acts.

It was not found necessary to resort to the summary power conferred by the Esch act. A new bureau of the Commission, that of "car service," was created and with a joint committee of the carriers, known as the commission on car service, exerted wide regulatory power over car service and over transportation generally. Directions to the carriers' commission on car service sufficed to effect compliance with directions of the bureau of car service.1

Similar functions involving direct participation in railway administration and management had in the meantime devolved upon other governmer tal agencies. Under an amendment to the act to regulate commerce approved August 29, 1916, the President was given power to direct that priority in transportation be given troops and material of war; and in consequence the War and Navy Departments, as well as the United States Shipping Board, required priority to be given to shipments of a large tonnage of materials and supplies. Control of priority orders later was intrusted to the Priority Director under an act approved August 10, 1917. The Food Administrator, by licenses and regulations governing the purchase and sale of certain food supplies, virtually prescribed carload minima in excess of those named in the carriers' tariffs. The Fuel Administrator also issued instructions which affected the movement of fuel. In addition to this divided authority over railroad transportation, the conditions, despite the carriers' efforts at cooperation in moving the vast amount of freight then being offered became so grave that on December 5, 1917, the Commission transmitted a special report to Congress as follows:

To the Senate and House of Representatives:

The act to regulate commerce requires the Commission to transmit to the Congress such recommendations as to additional legislation relating to regulation of commerce

1 Our last annual report, pages 65-68, affords the details relating to this act and the bureau of car service organized thereunder. The Director General on February 6, 1918, created the car-service section of the Division of Transportation. This supplanted the commission on car service and took over intact its organization and personnel and a portion of the personnel of the bureau of car service, in effect continuing the existing arrangement for handling car service and transportation generally. The Commission's bureau of car service has coordinated its activity with the car-service section.