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rience discloses defects not now perceived, we do not anticipate the need of further amendments of the same character and designed to accomplish the same purpose.
This does not mean that preferences are no longer secured of the nature which the recent law aims to better prevent. We are only saying that tariffs as published and filed are now generally observed. But in some cases the tariffs themselves are so framed and contain such provisions as to permit preferences without departing from their terms. For example, a tariff may announce in connection with the rate proper that an allowance will be made, not exceeding a stated number of cents per 100 pounds, to equalize deliveries to industrial plants not reached by the rails of the carrier. This introduces an uncertain or flexible element, and it is obvious that such a tariff may be strictly complied with and yet varying charges be imposed for practically the same service.
Other illustrations of what is here referred to are the allowances of a portion of the total rate to mere switching roads, or to roads existing only on paper, of which a notable instance is mentioned in another connection. The tariffs are not departed from in such cases, but the things which can be done in accordance with the tariffs may be equivalent to the payment of a rebate. The letter of the law is observed, but its purpose may be disregarded. These evasions and the consequent wrongdoing are perhaps natural incidents of the new order of things. The obligation to conform to published tariffs is now so binding as to compel in most cases at least technical compliance with the law in this regard, while the desire to secure competitive traffic leads to the construction of tariffs under which there can be more or less manipulation. These are matters to be corrected from time to time as they are brought to the notice of the Commission. The circumstance that such discriminations occur does not detract from the excellence of the measure in question. As already remarked, the amended law appears to be efficient and workable, and gratifying progress has already been made in the publication of tariffs and in the observance of the rates thereby announced.
While this is distinctly true, and quite satisfactory so far as it goes, it must be borne in mind that the other class of offenses which the original act prohibited are not at all restrained by the amendment in question. Valuable as this law is in the direction and for the
purposes above outlined, it has added nothing whatever to the power of the Commission to correct a tariff rate which is unreasonably high or which operates with discriminating effect. It greatly aids the observance of tariff charges, but it affords no remedy for those who are injured by such charges, either when they are excessive or when they are inequitably adjusted. If the tariffs, published and filed as the law directs, are enforced against all shippers alike, the authority of the Commission to require such tariffs to be changed remains just as ineffectual as it was before this legislation was enacted. This is the point to which the attention of the Congress has been repeatedly called; this is the defect in the regulating statute which demands correction. In previous reports this question has been frequently and fully discussed. We have commented at length upon the weakness and inadequacy of the law as its provisions have been construed by the courts. We have carefully pointed out the amendments which we deem essential and explained in detail the reasons for our recommendations. We are unable to add anything of value to the presentation heretofore made. Our duty in this regard has been performed. Adhering to the views so often expressed, we repeat what was said a year ago.
Were it deemed possible to add weight to previous recommendations or to emphasize the need for their prompt adoption, this portion of our report might be greatly extended. It is not believed, however, that this subject can be more forcibly presented or the situation more clearly explained than has been done in former reports. If the representations already made do not induce favorable action, it is certainly not the fault of the Commission. A sense of the wrongs and injustice which can not be prevented in the present state of the law, as well as the duty enjoined by the act itself, impels the Commission to reaffirm its recommendations for the reasons so often and so fully set forth in previous reports and before the Congressional committees. Moreover, in view of the rapid disappearance of railway competition and the maintenance of rates established by combination, attended as they are by substantial advances in the charges on many articles of household necessity, the Commission regards this matter as increasingly grave, and desires to emphasize its conviction that the safeguards required for the protection of the public will not be provided until the regulating statute is thoroughly revised.
There is one aspect of the matter growing out of the Elkins amendment which gives special force to the paragraph quoted. The effect of that legislation in many cases was to bring about an increase of railroad charges. While in some instances tariffs were reduced to the basis of secret rates previously granted, the far more general result was to advance rates to the tariff standard. The extent to which revenues were thereby augmented can not of course be ascertained, but the aggregate amount was undoubtedly large. Although the injustice occasioned by secret concessions was largely removed, the shippers who had formerly been favored were compelled to pay higher rates of transportation. Not only was this so, but the enforcement of tariff charges operated to intensify whatever was wrong in the tariffs themselves. Barring discriminations between shippers caused by the payment of rebates, the secret rates actually applied were perhaps, in some cases, less unfairly adjusted, as between different localities and articles of traffic, than were the rates named in the tariffs. When these tariff rates are exacted from all shippers, as they now are for the most part, and such rates remain unchanged or are materially advanced, the effect is to accentuate any injury which is suffered by the public. In other words, the application of tariff charges which the amended law quite effectually secures brings into stronger light and calls more attention to rates claimed to be unjust or unfairly related.
This is doubtless one explanation of the marked increase in the number of formal complaints made to the Commission during the present year, which are more than double those of the previous year and more than four times the number received the year before. On the face of it, this is an indication that the general maintenance of rates which now occurs increases greatly the instances in which particular shippers or entire communities believe they have grievances, on account of such tariffs, which demand redress. The merits of these complaints are yet to be determined, except in cases already decided, but the fact that such complaints multiply is highly significant. Yet the authority of the Commission in respect of these matters has not been enlarged in the least by the amendment in question. It can do no more now in this regard than it has done heretofore. However plain a given case may appear, or however clearly injustice may be established by pertinent proof, the only order which the Commission has power to make is the limited and inconclusive order to “ cease and desist” from charging the rates or doing the things found to be unlawful. Even that order has no binding force upon the carrier, but can be disregarded with impunity until compliance is decreed by the courts at the end of tedious and expensive litigation. That there is such an increasing number of complaints under these circumstances, when the substantial result is little more than investigation and publicity, is accounted for by the fact that aggrieved shippers have no other recourse, and so appeal to the Commission in the hope of some relief from conditions which they regard as intolerable. Whatever view may be taken as to the degree and extent of power which the Commission ought to have over rates--and we retract nothing heretofore said upon that subjectthis much, at least, can not be disputed, that such authority as is conferred in that regard, whether much or little, should be actual and positive, and so granted as to be capable of prompt and certain enforcement.
RECENT ADVANCES IN FREIGHT RATES.
One of the most significant things in recent railway operations is the steady advance in the cost of the transportation of freight by rail. A few years ago the impression was general that freight rates could not and would not be advanced. Railway traffic officials frequently affirmed this in testimony. When the Commission had under consideration certain consolidations of railway property, the eminent gentlemen who had brought them about stated under oath that the purpose was not to advance but rather to reduce rates. Recent history belies these predictions. This increase in the transportation charge bas been accomplished in various ways.
First. The published rate itself has been advanced. Class rates have not as a rule been increased, although in some cases they have been, as, for example, from St. Louis and kindred points to the Southwest, where such rates are higher to-day than they were when first filed with the Commission in 1887; but rates upon those commodities which constitute the bulk of interstate traffic have been advanced in nearly all sections. Coal rates have almost without exception been increased. The same is true of iron schedules. Rates upon grain and its products, lumber, live stock and its products are generally higher to-day than four years ago.
Second. Many advances have been brought about by changes in classification. While, as already noted, class rates as a whole have remained the same, many commodities have been advanced from a lower to a higher class, this producing an increase in the transportation charge.
Third. Many commodities which formerly took a special commodity rate have been restored to the classified list. This has worked an advance, since the commodity rate is usually lower than the class rate. In the same line there has been a constant disposition to withdraw special privileges which had been accorded, and to charge for services which had been rendered free.
Fourth. Of greater importance is the maintenance of rates already referred to in this report. Up to within a recent time many of the most important commodities were moved under special contracts and upon actual rates much below the published tariff. No exact information is obtainable to show the extent of these secret concessions; but they were very considerable. The traffic manager of one large railway system testified that rebates and similar concessions allowed by his company amounted to approximately 10 per cent of its gross freight revenues. This was probably greater than in the majority of instances, but beyond question a maintenance of the published schedules has added many millions of dollars to the net income of our Failways.
What the total amount of increase from all these causes has been can not be stated with any degree of certainty.
The advances have usually been small as applied to a single ton or a single hundred pounds, and it is difficult to form any adequate comprehension of their tremendous significance in the aggregate. An increase of but 10 cents per ton in the coal rates of the entire country would mean more than $25,000,000 annually and the actual advance has been much more than this. During the year ending June 30, 1902, our railways transported in round numbers 1,200,000,000 tons of freight. The increase of a single cent per ton in the transportation charge from the point of origin to the point of delivery wouldamount to $12,000,000.
The freight rate has been properly termed a tax, imposed for the benefit of the carrier rendering the service. The effect of this advance has been to enormously increase the tax laid upon the general body of producers and consumers for the benefit of that species of property which renders the service. In this connection two things may be specially noted with respect to these advances:
(a) They have been almost without exception the result of concerted action. This must in the very nature of things be true. Rates—at all events controlling rates-are competitive and must be the same by all lines. It follows, therefore, that such rates can not be advanced unless such advance is made by all carriers which participate in the movement of the traffic. An examination will show that advances in competitive rates have uniformly been made effective by all carriers interested upon exactly the same day and for exactly the same amount. It is idle to say that where such a condition exists, where, for example, every one of the numerous lines transporting grain from Chicago, St. Louis, and kindred points to the Atlantic seaboard advance their rates upon the same day and by precisely the same amount, there has been no understanding between those companies. Nor do the carriers as a rule deny such concert of action, but they insist that it does not proceed to the point of an unlawful agreement. Without expressing an opinion as to whether what is done amounts to a violation of law, we wish to point out clearly and emphatically that such concert of action does prevail and that the prohibition resting upon carriers in this respect affords the public no protection whatever against such advances.
(6) It has been frequently said in the past that the adjustment of freight rates was a delicate problem, which could only be dealt with by those having a long understanding and intimate knowledge of conditions, and which could not be intelligently revised by any outside body. These recent advances have not been made upon that theory. They have not originated with the traffic representatives of the various systems, but rather with the financial heads of those systems. Upon a recent inquiry into a general advance in rates to the Southwest the traffic manager of an important system testified that he made the advance for the reason that the financial manager of his company in New York instructed him to do so. Here was no delicate adjustment of rates to conditions, but simply the imposition by the controlling authority of that system of a higher transportation tax upon its patrons; and this not by the traffic official who came into contact with those patrons, but by the fiat of its New York office.
It is not proposed to discuss here the propriety of these advances. It would be both unwise and unjust upon the part of the public to prevent them if they are reasonable under all the circumstances. Railway managers urge that the cost of operation has increased, and that the railway should be allowed to share in the general prosperity. Upon the other hand it is insisted that greater economies in railway