these things, I am made a criminal because I have gotten a rate less than the published rate. Mr. KNAPP. I have said that I do not advocate that, and I do not think it is the intention of the legislative proposal. Mr. DAVIS. Would it not make that statute practically inoperative? Mr. KNAPP. No, sir; I do not think it would make it inoperative. Mr. DAVIS. I do not think anybody would be proceeded against. I do not think you could find a district attorney who would prosecute a man who he knew had innocently and unintentionally gotten a rate less than the published rate. Mr. SHACKLEFORD. He was not supposing that that rate he spoke of had been gotten innocently. Mr. KNAPP. That is what I understood. Mr. DAVIS. No, sir. Suppose I knew that the rate that I was getting from Washington to my home was not the published rate, and I should go and get the best rate that I could. Now, as the law stands I would not be a criminal; per se that would not be a criminal act. But you are going to make it criminal by enactment, and the American people have always supposed that the individual not only ought to make the best terms that he could with the railroad, but that it would be shrewd for him to do it. Now, you are going to make that per se a crime which is not per se a crime, and therefore it would make the law very unpopular. Mr. KNAPP. I do not think so. I think nine hundred and ninetynine business men out of a thousand do not want anybody to be able to get a secret or preferential rate. Mr. DAVIS. One other question. You are going to use the word "knowingly." He must knowingly violate this law. The shipper must do it. Now, if that word were not there, the law, as I understand it to exist, would require it to be done knowingly? Mr. KNAPP. I do not understand that to be the law. Mr. DAVIS. How are you going to define the requisite knowledge and the means by which he must derive his knowledge? Mr. KNAPP. That is a question of fact for the jury. This man knows that he got a rate not authorized by the tariff. Mr. DAVIS. In order to make that operative at all, you would have to do it in this way: The rate must be prescribed and published, and if the rates were prescribed and published everyone would be charged with knowledge of them. Would you not have to do it that way; and if you did, would you not make the law unpopular? Mr. KNAPP. No, sir; I do not think so. I think a large majority of the business men of the country are in favor of it, in favor of just what I am advocating. I think there are a few, and they are the men who least need the favor, and ought not to get it, who do not want it that way. They want to pocket the rebates. It is not the rebates, gentlemen; it is not simply the thousands and hundreds of thousands and millions of dollars which certain concerns get out of the public tariff; that is not what they are after. Of course whatever comes in that way comes in handy, and it amounts to a vast balance; but it is the command of the markets which they get, because their traffic is carried lower than that of other persons, which is valuable to them. Mr. DAVIS. It is the large shipper you have in your mind? Mr. KNAPP. Yes, sir. The small shipper to-day does not get any rebates. Mr. DAVIS. Suppose he did get them? Mr. KNAPP. He can not. Mr. DAVIS. Suppose he got a less rate at the Mr. KNAPP. He can not do it. Mr. DAVIS. Do you not make the entire shipping public uneasy, do you not create in them a sort of uneasiness, which if you put them all Mr. KNAPP. The uneasiness arises from the suspicion that the larger and the more powerful rival is getting a rate which the smaller man can not obtain. You let the business men of this country understand that no combination of shippers, no matter how powerful or how immense their business may be, can get one mill off the published tariff, and you will give a satisfaction and an assurance to the business world that nothing else can assure. Mr. COOMBS. Is there any section of the country that is benefited over another by the rebate? Mr. KNAPP. That is not easy to answer. question If you will put a concrete Mr. COOMBS. I want to ask you questions which are hard. We want the knowledge that you have, and I want to ask you just as hard questions as I can. Mr. KNAPP. Very well. We were discussing this question before you came in, and we were mentioning the case where it appeared that habitually, for years, the packing houses on the Missouri River and at Chicago got very much lower rates than the published tariff. Now, what is a small concern at Indianapolis and Cincinnati or Des Moines or Davenport trying to do a little packing-house business against these packing houses that have 10 cents off on the tariff? They have to pay the published tariff. Railroad men do not give rebates to the little fellow. Mr. STEWART. As a matter of fact, under the new law the district attorney would only look after the occasional shipper? Mr. KNAPP. I said in answer to Mr. Mann's question that I did not think the district attorney would ever try to indict an incidental and occasional shipper who honestly and inadvertently got a rate which proved to be lower than the published tariff. Mr. STEWART. It is only the large and continual-professional-shippers who affect this tariff? Mr. KNAPP. Yes, sir. Mr. COOMBS. What has the district attorney to do with it? Mr. KNAPP. As a matter of fact he has not had much to do heretofore, because he could not get any facts on which to proceed. Mr. COOMBS. You are going into facts now and not into the law. What would he have to do with it provided the law was amended as you want to have it amended? Mr. KNAPP. If he had information leading him to believe that a given carrier had granted rebates to a shipper he would go to work and investigate to prove that fact. Mr. COOMBS. If he was left to his own judgment he would be affected by the sentiment of the particular community? Mr. KNAPP. Very likely; I think that might happen. Mr. STEWART. Might he not be affected by the charge of the judge and the judgment of that particular court? Mr. KNAPP. This gentleman refers to whom he should select for indictment. Mr. COOMBS. These things would be done in this way. From your body you would bring such information before the Department of Justice as would result in instructions to the district attorney of some other place to bring proceedings. Is not that about the way it would be done? Mr. KNAPP. Yes, sir; I suppose practically it would work out that way. Mr. COOMBS. That is the general routine; that is the way the district attorneys bring indictments? Mr. KNAPP. Certainly. Mr. COOMBS. Where there is a central body which has supervision of matters the information upon which the district attorneys act comes before that body. Is not that the rule? Mr. KNAPP. I suppose it is. Mr. COOMBS. The district attorney never brings originally a case relating to a violation of the internal-revenue law, for instance; he goes by instructions to bring certain indictments? Mr. KNAPP. No; if the postal laws or the import laws are violated I assume that some Government official having charge of the administration of those laws gets hold of the facts and goes to the district attorney, and he becomes the prosecutor. Mr. RICHARDSON. Is it not your observation that under the operations of the interstate-commerce law for the past few years there has been a greater improvement in the conditions between the railroads. and the shipping public? Mr. KNAPP. In what way? Mr. RICHARDSON. In all respects, in regard to rebates and everything else, is it not in a better condition to-day than ten years ago! Under the conservative policy which has been pursued, is not the relation of the railroads with the public far better than it was ten years ago? Mr. KNAPP. I wish I could affirm your view, but I can not. Mr. RICHARDSON. Then the Commission has accomplished very little good during the last ten years? Mr. KNAPP. That does not follow. Mr. RICHARDSON. Is there not an improvement? Mr. KNAPP. I think the condition is very much better than it would be if there was not any law nor any Commission. The CHAIRMAN. The hour for adjournment has arrived, Mr. Knapp and if you will now suspend you will have the stand when we resume to-morrow. Mr. KNAPP. Very well. Thereupon, at 12 o'clock m., the committee adjourned until to-mor row, April 21, 1902, at 10.30 o'clock a. m. WASHINGTON, D. C., April 22, 1902. Mr. KNAPP. Some little time ago the Commission arranged for taking the testimony in certain cases at St. Louis and elsewhere, beginning on Friday of this week. Two of my associates, Mr. Prouty and Mr. Fifer, are going to attend to that duty. They will be absent for at least a week for that reason, and to accommodate them I respectfully ask that they may be heard this morning and that I may be permitted to defer any remarks of my own until a subsequent meeting of the committee. The CHAIRMAN. That arrangement will be satisfactory to the committee. STATEMENT OF HON. CHARLES A. PROUTY, INTERSTATE COMMERCE COMMISSIONER. Mr. Chairman and gentlemen of the committee, as Chairman Knapp has stated, Governor Fifer and I are obliged to leave Washington tomorrow, and if we say anything we will be compelled to say it now. I had no desire, and have no desire, to address the committee; but there is one phase of this question that my associates think ought to be presented to the attention of the committee, and they desire me to present it. I wish to say, before I begin that, a single word in reference to the matter which Mr. Knapp discussed yesterday, and that is the preventing of the payment of rebates. He called your attention to necessary amendments to the act in order to secure that end by criminal enactment. That is not to my mind the only way in which the payment of rebates can be prevented, nor is it the only way in which the bill that you have before you, which is called the Corliss bill, will effect that object. Certain injunctions have been asked for and a restraining order has been granted to compel carriers between Chicago and Kansas City to observe the published rates. The effect of that injunction, if it is made properly and can be enforced against the carriers, is simply to raise the tariff rate which the packer pays from Kansas City to Chicago 5 cents. I believe that a more just way to reach that proposition is not to compel the carrier to maintain his published tariff, but to compel the carrier to publish and to accord to all the world the lower tariff which it has accorded to the favored shipper. In other words, the only effective remedy, or one of the most effective remedies, which can be applied to prevent the payment of the rebate is to invest some tribunal in some way with the power to compel the carrier to put into effect and maintain in effect, under certain circumstances and for a certain time, the secret rate, the lower rate, which it has accorded to the preferred shipper. Any other remedy simply results in making the rate so much higher to the general public. Mr. COOMBS. Excuse me; but the constitution of California established a railroad commission, and one of the provisions of the consti tution is that that should be done. This commission is a judicial body or a quasi judicial body, has judicial functions under the constitution. Now one of the propositions in that was this: That whenever the railroads gave a rebate or lowered the rate with reference to any person and with reference to any points that that should become the basis of all future regulations and they never could thereafter raise those rates. You know the history of that? Mr. PROUTY. I should suppose that provision would clearly be unconstitutional. Mr. COOMBS. You think what? Mr. PROUTY. I should suppose that that provision would probably be unconstitutional. Mr. COOMBS. Do you know what the result of that was? Mr. COOMBS. I understood it was; I misunderstood you. Mr. PROUTY. No; as you stated, the law of California provides that if a railroad allows a lower rate than the published rate, that that shall be the basis for all future time. Mr. COOMBS. I do not mean to state it that way exactly; but I mean to say that they shall not raise the rate. Mr. PROUTY. A provision of that sort might bankrupt every carrier in California; it might deprive every carrier in California of his property without due process of law, and I say that that is clearly in violation of the fourteenth amendment to the Constitution of the United States. The CHAIRMAN. Would it be, if they had voluntarily fixed that rate themselves? Would there not be a distinction between a rate made permanent simply a rate that they had fixed and made permanentand an arbitrary fixing of a rate by any other tribunal that would be confiscatory in its nature? Mr. PROUTY. With respect to that particular tribunal, that might be so and might not be so held; but you must remember that the rates of one carrier necessarily fix the rates of every other carrier in competition with that carrier. If one line makes a rate from Chicago to New York, every other line makes a corresponding rate from Chicago to the Atlantic seaboard. Mr. RICHARDSON. You say you think it is unconstitutional. That would deprive him of his property, would it not? Mr. PROUTY. My own impression is it would be confiscatory, but whether confiscatory or not it would be unjust. But it is not unjust to apply the remedy within certain limits, because the railroads must take their chances on their competitors, and this is the only remedy that the railroads themselves have not applied with any degree of effectiveness to stop rate cutting. Take the Joint Traffic Association. It embraces all the lines which operate between Chicago and the Atlantic seaboard. It was managed by a board of managers. One of the things which that board of managers had power to do was to put. in the rate over all those lines, and every line was obliged to observe that rate until it was taken out. When rates became demoralized the only way the traffic association had of stopping that demoralization was to reduce the rate, and that was what they invariably did. And Mr. Callaway, of the New York Central Railroad, once said to me I think it was in the presence of all the Commission-that that was the remedy; that no rate could be maintained that was radically too high, and that you had to reduce a rate to its proper basis or below its proper basis before you could secure its maintenance. Mr. RICHARDSON. Would it not have this effect, also, if I catch your meaning correctly? As I understand it, a railroad that negotiates for a rebate of course does that secretly, that is a secret matter; it is prompted by the desire to take the freight from some other railroad. Mr. PROUTY. Yes, sir; to get that traffic. Mr. RICHARDSON. Now, it intends to make up what it loses by that rebate by charging somewhere else. So, if you were to establish the |