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received had they retained and transported it as it was billed. In this case, as in other cases referred to, the points of final delivery were stations on the line operated by the receivers. The road to which this traffic was diverted is, in a financial sense, one of the strongest lines in the country. Its chief traffic officer testified that about the 1st of Jan. uary, 1897, his road was "180,000 tons behind the percentages” it was entitled to; and that the traffic (together with traffic from other of its competitors) was turned over to it to help make up the deficit. The witness further stated that one of the receivers proposed to make this division of the traffic, and that he accepted the offer.
These transactions, with the accompanying testimony, are especially significant in that they establish a practical interpretation, by the parties thereto, of a clause of the joint traffic agreement in respect to the meaning of which there has been much controversy.
A short time prior to the taking of this testimony another important investigation was had in which it became material to ascertain how, and by what means, the recommendations of the board of managers of the Joint Traffic Association, in regard to rates fixed by them, were enforced. The principal witness upon this point was the commissioner of that association.
Ile testified, among other things, that one of the chief objects of that association was to secure the maintenance of the rates named by it, and that by its efforts maintenance of uniform through rates had been more nearly secured than
by any other means at any recent time, unless it may be the first eight to fifteen months after the passage of the interstate-commerce law.”
He also said that the rates were in the first instance agreed upon by a board of managers composed of one representative of each of the ten railroad systems parties to the joint traffic agreement; that the rates so named were recommendations” which the individual roads might adopt or not at their pleasure, and that there was nothing in the agreement or the administration of it to prevent the free exercise of their right in this respect. He was then asked if members of the association who wanted to reduce the rates below those established by the board of managers could do so and yet conform to tho agreement. He replied in the affirmative. When asked how they would then proceed, he replied:
They would dissent from the prior rate and give the notice provided in the clause of the contract to which I have referred. The contract provided that the managers shall then consider the steps necessary for the due protection of the other companies and localities.
When asked what steps were provided for, he replied, in substance that there were none, except that the tariff be reduced generally to correspond with the reduction insisted upon by the objecting road.
In his replies to numerous questions, which sought to ascertain what influences were exercised through the association to prevent its mem
bers from reducing rates below those established by the board of managers, this witness gave no intimation that under the operation of the joint traffic agreement the inducement, or one of the inducements, to secure maintenance of the rates established or “recommended” by its "managers” was a division of the competitive traffic according to percentages fixed by arbitrators; nor that in pursuance thereof traffic from Chicago to the Atlantic Seaboard had been actually divided by the parties to the agreement, though the award was promulgated many months before by the association of which he was the chief administrative officer, and repeated divisions of such traffic had been made thereunder.
This will, to some extent, illustrate one of the difficulties which the Commission often encounters in its efforts to comply with the duty enjoined upon it, to inquire into and keep itself informed as to the methods and practices of the common carriers subject to the act. Information of pooling of traffic under the operation of the joint traffic agreement first came to the Commission at a subsequent hearing in another case and from a railroad official at Chicago, whose opportunities for learning the methods and practices of the Joint Traffic Association were meager in comparison to those of the commissioner of that association.
Another episode that pointedly illustrates a type of character the Commission has frequently met with in its investigations and upon whose recollection of agreements and practices it has often been required to rely for its information, which may in part account for the barren results from prosecution of complaints that when instituted appeared to be well founded, occurred in the examination of the general western freight agent at Chicago of the receivers referred to, who was called as a witness in the Graiu Case.
His attention having first been invited to testimony previously obtained from other sources, which showed that he ha directed the diversion from the line operated by the receivers to a competing road of a very large volume of traffic, he was asked whether, in any other instance since the road went into the possession of receivers, he or the line of which he was the general agent had turned over any portion of its traffic to any other competing road. He replied that he could not recall any other instance. He was tlien asked whether there was any precedent for his action in this instance. He replied that he could recall none; and yet evidence subsequently obtained from another source abundantly established that this witness had, but a few weeks prior to the instance mentioned, in person together with his superior officer, the freight traffic manager, called on the general agent of another rival road and made him a tentative proposition to turn over to such rival line traffic which had been received and billed for trans. portation by the line operated by the receivers. They stated that as their road was in the hands of receivers they did not know whether
the courts would permit them to deliver the traffic, but if he would assent to the conditions named they would endeavor to get permission to divert the traffic as they proposed. Concerning this offer there was some correspondence between the officers of the two roads.
The evidence further established that this witness afterwards, in order to carry that offer into effect, made a statement in writing, signed by himself, which provided for the ronting of such traffic; for a division of the earnings thereon by stated percentages, and for the proportion of switching, elevator, and terminal charges to be borne by each road; and then, in pursuance of the offer and terms stated, turned over to such competing line about 2,000 tons of competitive traffic.
The witness had apparently forgotten those instances. His answers to all material questions propounded, excepting to those relating to facts that had already been developed, were, “I do not recall.”
The infirmity of the memory of this witness, as exhibited in this investigation, is remarkable in view of the extraordinary character of the transaction, which, as he proposed it, involved the consent of Federal courts that its receivers should ignore the prohibitions of section 5 of the law.
In its last annual report the Commission invited the attention of Congress to the disadvantage under wbich our people and their products were placed by the law as interpreted by the Supreme Court of the United States in the Import Rate Case.
After considering at length the effect of that decision, it was said: It is perfectly evident, in our opinion, that this construction of the act opens the doors to manifold and endless abuses, from which there is little redress under the laws now in force.
The opinion then expressed has been realized in the practices of the railroads during the last year. The decision in the Import Rate Case has been generally accepted by the roads as exempting from the operation of the law all of the traffic which is shipped for export. As a consequence, during a greater part of the year a preference of 5 cents per hundred pounds has been enjoyed in the transportation of corn for export over that designed for consumption by our own people. Provisions have been and are transported by rail from the Missouri River to New York and thence by steamer to Liverpool at 454 cents per hundred pounds of which rate the railroads received 384 cents per hundred pounds and the steamship 6 cents per hundred pounds, while traffic identical in weight, quality, and value, and carried on the same trains from the same point of origin to New York, but which was for domestic consumption, was required to pay 531 cents per hundred pounds. Thus, the export traffic was carried through to Liverpool, including the ocean laul, for. 8} cents per hundred less than was exacted for the carriage to New York of like traffic for domestic use. The precise amount of discriminatiou made by the railroads against our own people in this case was 15
cents per hundred pounds, which on a single shipment amounted to several thousand dollars.
It was ascertained that the Western roads required no evidence that traffic carried at the reduced rates was to be exported, beyond the mere statement of the shipper to that effect. Some, but not all, of the Eastern lines had in force certain checks to ascertain whether the traffic which was carried at the preferential rate was actually exported. Most of the lines delivered the grain to elevators or storehouses, but required no assurance and received none that it was in fact shipped abroad. The opportunities for discrimination by the use of the export rate for traffic for domestic use is apparent, and it is alleged they have been resorted to by those who are unmindful of the law.
In connection with the foregoing, it may be of public interest to consider a letter received by the Commission during the past summer from one of the oldest and, in the line of trade in which they are engaged, one of the largest houses in Chicago. For obvious reasons the signature to the letter is omitted.
CHICAGO, June 5, 1897. Hon. WM. R. MORRISON,
President Interstate Commerce Commission, Washington, D. C. DEAR SIR: Referring to the interstate-commerce law, a representative of one of the leading freight lines from the East to Chicago called this morning to solicit our business, and as an inducement offered us 25 per cent off the regular tariff rates. We asked him if this was not violating the United States commerce law. He said certainly it was. This is a sample of what has been done for a long period and what is being done to-day.
What is a firm to do who will not violate this law? Adhering to it costs us thousands of dollars per annum.
We are confident that there are many, many reputable houses in Chicago who are suffering on account of their strong desire to be law-abiding citizens. Violators of the law are in a position to get control of more than their share of business.
Yours, very truly,
JUNE 25, 1897. DEAR SIR: We have yours of 5th instant, which we found here on our return from Chicago on the 12th. Had we been advised of its contents while we were in Chicago, the first ten days of this month, we would have made some effort to get further information upon the subject of which you write. While we were in Chicago, at the time above referred to, we subpænaed as witnesses a number of business men who were shippers from Chicago, all of whom testified that they had no knowledge of shipments being made at less than the open, published rate, and that they had not been offered transportation at any other than the published rate. We would be glad to obtain facts which would enable us to lay any such matter before the grand jury with any sort of assurance of proving that shipments had been or were being made at less than the published, established rate, and we will be greatly obliged to you for any facts and details which will aid in this direction.
No response was made to this letter, and later a representative of the Commission called on the firm in question for information upon which to found a prosecution if the facts should warrant. They said that the letter stated what had repeatedly occurred, but that they invariably
refused to avail themselves of the offers made, for the reason that they would not participate in a violation of the law. They declined, however, to give any further information, and expressed their regret at having written the letter, and asked that the matter be dropped because of the unpleasant consequences that would result to them should they appear as complainants against the men they were required to have constant business dealings with. This request could have been disregarded and their testimony could have been compulsorily required, but it was found that the offense had not been consummated-in fact, that it was but a proposition by an individual to give the firm a preferential rate—and it was believed that the mere exposure of an offer to violate the law, made by a subordinate agent of a railroad company, would not warrant the placing of reputable and law-abiding citizens at the disadvantage which they feared would follow them if their complaint should become public.
These cases will also serve to illustrate the character of other complaints and the facts developed in relation thereto that the Commission has been called upon to deal with.
THE PENAL SECTION OF THE ACT.
It has been pointed out with some care in previous communications to the Congress, and the matter has been brought to your attention in this report, that the Commission can not be endowed with authority to enforce the penal provisions of the act otherwise than by aiding the prosecuting officers of the Government to secure evidence against accused or suspected parties. In the nature of the case this must be so, as has been heretofore explained. Whatever acts are declared to be criminal offenses, and whatever criminal remedies may be applied to their correction, are matters which pertain almost wholly to the functions of the Federal courts and the various district attorneys of the United States. The same principles and methods of procedure must be regarded in enforcing the penal provisions of the act as are available for the detection and punishment of criminal offenses under other laws. It becomes important, therefore, that transactions which are declared misdemeanors by the interstate-commerce law shall be defined with such exactness that the requisite proof can be obtained without needless or unusual difficulty. In this respect the provisions of the tenth section—the criminal section, as it is often called—are extremely defective. Parts of it are drawn upon an erroneous theory regarding actual practices, and the language in various paragraphs is obscure and uncertain.
Broadly speaking, the conduct which should constitute a misdemeanor was undoubtedly designed to consist in secretly giving favored persons lower rates than those named in the published schedules—that is, by the payment of rebates, commissions, and the like, and the employment of other devices for departing in individual cases from the