"7. That the effect of the prevailing policy of railroad management is, by an elaborate system of special secret rates, rebates, drawbacks, and concessions, to foster monopoly, to enrich favored shippers, and to prevent free competition in many lines of trade in which the item of transportation is an important factor.

66

"8. That such favoritism and secrecy introduce an element of uncertainty into legitimate business that greatly retards the development of our industries and commerce.

"9. That the secret cutting of rates and the sudden fluctuations that constantly take place are demoralizing to all business except that of a purely speculative character, and frequently occasion great injustice and heavy losses.

"14. That the differences in the classifications in use in various parts of the country, and sometimes for shipments over the same roads in different directions are a fruitful source of misunderstandings, and are often made a means of extortion.

"15. That a privileged class is created by the granting of passes, and that the cost of the passenger service is largely increased by the extent of this abuse.

"16. That the capitalization and bonded indebtedness of the roads largely exceed the actual cost of their construction or their present value, and that unreasonable rates are charged in the effort to pay dividends on watered stock, and interest on bonds improperly issued.

"18. That the management of the railroad business is extravagant and wasteful, and that a needless tax is imposed upon the shipping and travelling public by the unnecessary expenditure of large sums in the maintenance of a costly force of agents engaged in the reckless strife for competitive business."

The result of this investigation and report was the passage of the Interstate Commerce Act, in 1887, affirming the

common law rule that carriers' charges must be reasonable and impartial. Common carriers are forbidden to give "any undue or unreasonable preference or advantage to any person, locality, or description of traffic in any respect whatever, or subject any person, locality or description of traffic to any undue or unreasonable disadvantage in any respect whatsoever." "No common carrier" says Section 2, "shall directly or indirectly, by special rate, rebate, drawback, or other device, charge or receive from any person greater or less compensation for any service in the transportation of passengers or property than it charges or receives from others for a like and contemporaneous service under substantially similar circumstances and conditions." Section 4 makes it "unlawful to receive more for a shorter than for a longer distance, including the shorter on the same line, in the same direction, under substantially similar circumstances and conditions," except where the Commission created by the Act shall authorize the carrier to charge less for the longer than for the shorter distance. Rates must be published and filed with the Commission, and 10 days' notice must be given of advances. Any deviation from the published tariff is unlawful. The Act excepted traffic "wholly within one State," and provided that property might be handled free or at reduced rates for the United States, State, or municipal governments, or for charitable or exhibition purposes; that preachers might have reduced rates, and that passes might be given to employees of the road or by exchange to employees of other roads. The penalty for breach of the law was made a fine not exceeding $5000 for each offence, and victims of discrimination, etc., could collect damages.

CHAPTER VII.

THE INTERSTATE COMMISSION.

A STRONG Commission was appointed, the Chairman being Thomas M. Cooley, one of the ablest jurists in the country, Chief Justice of the Michigan Supreme Court, author of "Constitutional Limitations" and other works of the highest authority. The Commission started with a review of the evils the Interstate Act was intended to abolish, and entered earnestly upon the great work of enforcing the law.

The Commission's statement of the arrangements used by the railways for discrimination is so admirably clear that a part of it cannot fail to be useful here.

"These arrangements," says the Commission, "took the form of special rates, rebates and drawbacks, underbilling, reduced classification, or whatever might be best adapted to keep the transaction from the public; but the public very well understood that private arrangements were to be had if the proper motives were presented. The memorandum book carried in the pocket of the general freight agent often contained the only record of the rates made to the different patrons of the road, and it was in his power to place a man or a community under an immense obligation by conceding a special rate on one day, and to nullify the effect of it on the next by doing even better by a competitor.

66

Special favors or rebates to large dealers were not always given because of any profit which was anticipated from the business obtained by allowing them; there were

other reasons to influence their allowance. It was early perceived that shares in railroad corporations were an enticing subject for speculation, and that the ease with which the hopes and expectations of buyers and holders could be operated upon pointed out a possible road to speedy wealth for those who should have the management of the roads. For speculative purposes an increase in the volume of business might be as useful as an increase in net returns; for it might easily be made to look to those who knew nothing of its cause like the beginning of great and increasing prosperity to the road. But a temporary increase was sometimes worked up for still other reasons, such as to render plausible some demand for an extension of line or for some other great expenditure, or to assist in making terms in a consolidation, or to strengthen the demand for a larger share in a pool.

"Whatever was the motive, the allowance of the special rate or rebate was essentially unjust and corrupting; it wronged the smaller dealer oftentimes to an extent that was ruinous, and it was generally accompanied by an allowance of free personal transportation to the larger dealer, which had the effect to emphasize its evils. There was not the least doubt that had the case been properly brought to a judicial test these transactions would in many cases have been held to be illegal at the common law; but the proof was in general difficult, the remedy doubtful or obscure, and the very resort to a remedy against the party which fixed the rates of transportation at pleasure might prove more injurious than the rebate itself. Parties affected by it, therefore, instead of seeking redress in the courts, were more likely to direct their efforts to the securing of similar favors on their own behalf. They acquiesced in the supposition that there must or would be a privileged class in respect to rates, and they endeavored to secure for themselves a place in it.

"Local discriminations, though not at first so unjust and offensive, have nevertheless been exceedingly mischievous, and if some towns have grown, others have withered away under their influence. In some sections of the country if rates were maintained as they were at the time the interstate commerce law took effect, it was practically impossible for a new town, however great its natural advantages, to acquire the prosperity and the strength which would make it a rival of the towns which were specially favored in rates; for the rates themselves would establish for it indefinitely a condition of subordination and dependence to trade centres.' The tendency of railroad competition has been to press the rates down and still further down at these trade centres, while the depression at intermediate points has been rather upon business than upon rates.

"The inevitable result was that this management of the business had a direct and very decided tendency to strengthen unjustly the strong among the customers and to depress the weak. These were very great evils and the indirect consequences were even greater and more pernicious than the direct, for they tended to fix in the public mind a belief that injustice and inequality in the employment of public agencies were not condemned by the law, and that success in business was to be sought for in favoritism rather than in legitimate competition and enterprise.

"The evils of free transportation of persons were not less conspicuous than those which have been mentioned. This, where it extended beyond persons engaged in railroad service, was actual favoritism in a most unjust and offensive form. Free transportation was given not only to secure business, but to gain the favor of localities and of public bodies; and while it was often demanded by persons who had, or claimed to have, influence which was capable of being made use of to the prejudice of the railroads, it was also accepted by public officers of all grades