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positive prohibition of a statute was necessary. That statute was enacted, and under its operation the abuse had practically ceased to exist, except in the territory mentioned. How ready it is to return can be inferred from what has already happened. Unless the country is satisfied to undergo a recurrence to the practices which existed before the passage of this section, it must, in some form or other, be reenacted.
If it is desired to amend the section, two courses seem to be open. First, to add to the section as it now stands the words: “Competition with carriers not subject to the provisions of this act may be taken into account in determining what are substantially similar circumstances and conditions under the provisions of this section, but other forms of competition shall not be.” This would leave the law as it has been interpreted up to the present time by the Commission. The carrier would be free to meet unrestrained competition without an enabling order, but could not meet railway competition by a lower rate to the more distant point without an application to the Commission.
Second, to provide, as does the present English act, that the Commission may, upon hearing, prohibit the charging of the higher rate to the nearer point. A provision of this sort would amount to nothing unless some means were provided by which the orders of the Commission were made effective. With such a provision this would perhaps accomplish the end desired, and be more in accord with the spirit of the act than an absolute prohibition. The carrier is then allowed to fix its own rates in the first instance in view of all the surrounding circumstances, subject to correction in this as in other respects. The form suggested at the end of this report conforms to this view.
FAILURE TO MAINTAIN PUBLISHED RATES.
If the act were amended in accordance with the foregoing suggestions, we believe it would in the main secure the establishment and publication of just and reasonable tariffs. If such rates are published shippers will see to it that they are not charged too much. This, however, is but half the problem. It is one thing to secure the publication of a proper rate, and another thing to secure adherence to it. Discrimination may be occasioned not only by charging too much, but as well by charging too little. We are constrained to believe that one of the worst features in the present situation arises from a departure from the published rate in favor of particular shippers, and that this might continue to be so.
It is well understood that the statute at the present time makes it a criminal offense, punishable by fine or imprisonment, for an officer or agent of a railroad company to receive for like service less from one shipper than from another. It is also a crime, punishable in the same manier, if any shipper takes a rate less than the published rate. It was assumed when these provisions of the law were enacted that they would secure compliance with the open rate. It speedily began to be said, however, that carriers did not maintain their rates, and the Com
mission undertook the investigation of complaints of this character; but upon inquiring of those persons who had knowledge of the transactions, either as agents of the carrier or as shippers, objection was made that the witness could not be obliged to criminate himself and was, there." fore, not compelled to answer. This left the Commission entirely without power to obtain evidence of offenses of this character, since neither the shipper who received the rate nor the railroad official who gave it could be compelled to testify to the fact. In order to meet this difficulty the law was so amended as to exempt the witness from all further prosecution for that offense, and this provision was held in the Brown Case to be a constitutional one.
The Brown decision was announced in April, 1896, and thereupon railroad managers immediately became loud in their protests that whatever might have occurred in the past, upon the strength of the notion that it could not be discovered, should no longer occur, and that rates from then on would be scrupulously maintained. It soon began to be said, however, that conditions were becoming much the same as they had been before. Railroad men themselves tacitly admitted that rates were not maintained. The press openly charged it, and what inquiries the Commission could make led us to the same conclusion. Finally, for the purpose of ascertaining what could be developed in the way of investigation, we began that inquiry into grain rates between the West and the Atlantic Seaboard which is referred to in another part of this report. It is only proposed to observe here in reference to that inquiry that it was participated in by the several members of the Commission in person; that those officers of the different railroad companies engaging in that traffic, who must have known had the rate been departed from, were called before us and compelled to give evidence under oath, That evidence was, without exception, that the rate had been in all cases maintained.
Now, these gentlemen must have known whereof they spoke. Their testimony covers a period in which rates of the kind involved were said to have been more than ordinarily disturbed, and that testimony shows that during all that time and in reference to all those shipments tbe published tariff was scrupulously exacted. Nevertheless, there are strong reasons for believing that the fact is otherwise. Those who are in a position to know say that this is so. Railroad managers themselves, with one accord, declare it to be so. Facts which are morally convincing, although not of a character to secure a legal conviction, lead us to the same opinion. We have no doubt that at the present time very large quantities of competitive traffic are carried at other than published rates.
The effect of this rate cutting is most unfortunate. Incidentally it prefers the large to the small shipper. Rebates can not be given to-day as they were before the passage of this act, nor as they were before the Brown decision even. Various devices are resorted to. Only a few can know of the transaction. The whole matter must be covered up
and kept secret, with the result that the large shipper, the trust, the monopoly, is able to secure the concession, while the small shipper is obliged to pay the published rates, and this concession, while at the present time small as a rule in individual instances, is often very large in the aggregate.
But the most unfortunate feature of the whole situation is the fact that it often prevents the honest shipper from doing business at all. It being a crime to accept less than the published rate, one who believes that the law of the land should be obeyed can not accept a reduction from that rate. It is only the dishonest trader that can and does accept it. This concession is often the only profit in the transaction. A margin of a cent a bushel on grain when handled in large quantities for export is considered a fair one, and this is not a large nor unusual concession in the freight rate. The result is therefore that not only is the honest dealer at a disadvantage, but he may be absolutely prohibited from engaging in that business.
The same thing is true with the carrier. It is a crime for the agent of the railroad company to give this concession in rates, and no honest man can be, on behalf of the railroad company, a party to such a transaction; so that the carrier which would obey the law is deprived of the business that legitimately belongs to it.
It is not suggested that railroad managers wantonly violate the law in this respect. As a rule, they are apparently anxious to obey it. The failure to do so not only makes them criminals, but inflicts enormous losses upon the properties they represent. Why, then, should not rates be maintained? “Because," says the carrier, “this law, under existing conditions, puts it into the power of the dishonest railway and the dishonest shipper to compel every competing railway and every competing shipper to be dishonest also or withdraw from the business." The shipper declares: “If I pay the published rate, I must close my warehouse.” The carrier asserts: "If I exact the published rate, the traffic which belongs to me goes to my rival and my stockholders are without dividends."
It is difficult to conceive a graver charge than this or a more outrageous situation than that which is assumed to justify the charge. To what extent that situation actually prevails the Commission has no definite knowledge. That it exists to a considerable extent seems certain; that there is pressing need of a remedy can not be denied. The carriers insist that such a remedy lies in the enactment of a pooling bill, which they earnestly demand.
As to the wisdom of this legislation, the Commission is not agreed. In the first place, we do not agree as to the probable effect of such a law. There is no precedent by which we can be fairly guided as to the result. It is insisted that such a system in England has prevented the
evils which exist here, and that the same result might be expected here from the same measure. So far as we have been able to examine the literature of that subject, we are inclined to think that the evils complained of do not exist to any considerable extent in that country, but we see no reason for believing that this is due to the operation of pooling. Pooling, as the term is understood with us, does not appear to be much resorted to there. There are two or three "joint-purse" arringements between rival carriers which are legalized by special act of Parliament, and it is probable that there may be some contracts of the same sort not so legalized, but we are informed by those who have charge of these matters in England that there is practically very little of what we term “pooling.” Indeed there is no occasion for it, owing to the way in which the territory of that country is divided between the different railways. They do agree upon competitive rates, and these agreements seem to be pretty generally kept by the carriers.
Pooling in this country had not been tested previous to the act under such circumstances as to make its success or failure then a fair criterion of what legalized contracts of that sort might accomplish. The tendency of pooling would be to remove the inducement to a departure from the published rate, and to the extent that it prevailed such would be the result. A majority of the Commission think it must occasion some improvement in the rate situation at almost all points and that it might altogether amend it at many points. The result in that respect would depend entirely upon the action of the carriers, and the present condition is so disastrous, that they would be inclined to embrace in good faith, any way out of it.
At the same time it must be remembered that if pooling produces any beneficial result it necessarily does so at the expense of competition. It is only by destroying competition that the inducement to deviate from the published rate is wholly removed, and it is only to the extent that competition is actually destroyed that beneficial results can be expected. Notwithstanding the specious argunents of carri to the contrary, this is and must be the fact. By the legalizing of pooling the public loses the only protection which it now has against the unreasonable exactions of transportation agencies. We are all agreed that the enormous power which such a measure would place in the hands of railroad companies ought not to be granted, unless the exercise of that power is properly restrained in advance. In view of the whole situation, a majority of the Commission would be inclined to recommend that the experiment be tried if suitable safeguards are provided. Clearly something should be done. The carriers insist that this is the proper remedy. They are in better position to judge than anyone else, and they constitute so important a part of the whole public that they are entitled to careful attention in a matter which they insist is vital to them. But this recommendation of a majority of the Commission, if it is to
H. Doc. 157—4
be given any weight at all, must be taken with the limitation above stated. It is too much the fashion of certain advocates of pooling to select a particular sentence from some report and hold that up as an exhibition of what its author believes upon this subject. The members of the Interstate Commerce Commission wish to say in the strongest possible terms that they are unanimous in the opinion that to overturn the Trans-Missouri decision, to repeal the fifth section and enact in its place a pooling bill, thereby permitting and inviting unlimited combination between carriers, would be little better than a crime against the people of the United States, unless this tribunal, or some other tribunal, is at the same time invested with adequate powers of control, and that nothing less in degree than those outlined in this report or their equivalent would be adequate.
It should be further said that, while a majority of the Commission have felt that it would be wise to adopt the remedy suggested by the carriers in the present emergency, we do not admit that Congress is altogether powerless to correct this evil without the adoption of that means. The difficulty with enforcing the present law is not in its criminal features, which with some slight changes, are well enough and strong enough, but in obtaining evidence of violations of that law. When those who have knowledge of what is actually done are put upon the witness stand, they refuse to disclose the truth.
Since these witnesses will not state the fact as it exists, some means must be provided of otherwise ascertaining that fact. So long as these gentlemen refuse to tell, it is necessary to provide a way by which the Government can find out for itself. If the interstate carriers of this country were compelled to keep their accounts in some prescribed form, and if the agents of the United States had the right at any time to inspect those accounts, or to take charge of one or more of the stations of a carrier when so advised, the effect must be to greatly diminish these practices. This kind of supervision would be no more rigorous than that under which national banks now exist.
We do not recommend the passing of this last-named legislation at this time. Such supervision would be a laborious and expensive undertaking, and ought not to be necessary. It is simply suggested that the remedy lies in this direction if other expedients fail. We do earnestly recommend that Congress undertake the revision of this entire law.
Mr. Justice Harlan dissented from the opinion of the court in the Troy Case. In the course of his dissenting opinion be uses this language:
Taken in connection with other decisions defining the powers of the Interstate Commerce Commission, the present decision, it seems to me, goes far to make that Commission a useless body for all practical purposes, and to defeat many of the important objects designed to be accomplished by the various enactments of Congress relating to interstate commerce. The Commission was established to protect the public against the improper practices of transportation companies engaged in cominerce among the several States. It has been left, it is true, with power to make