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REPORT

OF THE

INTERSTATE COMMERCE COMMISSION.

WASHINGTON, D. C., December 15, 1903. To the Senate and House of Representatives :

The Interstate Commerce Commission has the honor to submit its seventeenth annual report for the consideration of the Congress.

The preliminary income account for the year ending June 30, 1903, further reference to which is hereafter made, compiles returns from railway companies operating 201,457 miles of line, or approximately 98 per cent of the entire mileage in the United States. From these returns it appears that the gross earnings of such companies for the period named amounted to $1,890,150,679, or an average of $9,382 per mile of line; their operating expenses aggregated $1,248,520,483, or an average of $6,197 per mile, leaving net earnings of $641,630,196, or $3,185 per mile. The taxes of the operating companies, amounting to nearly $53,000,000, are not includued in this statement of operating expenses. Compared with the previous year, the net earnings are greater by some $34,000,000 and the amount paid in dividends on stock greater by nearly $9,600,000. It is interesting to contrast this showing with the statistics of 1897, when the gross earnings averaged $6,122 and the operating expenses $4,106 per mile of line.

THE ELKINS LAW.

The legislation passed by the last Congress, commonly known as the Elkins law, approved February 19, 1903, may properly be made a leading subject of comment. Although in the form of an independent measure, this law in fact, as its title implies, is an amendment to the act to regulate commerce, and the only important amendment since 1889. As there appears to be some misapprehension about the scope and effect of this enactment, it may be useful to point out the changes thereby made in the regulating statute. This explanation will be better understood if it is kept in mind that the original law embraces two distinct objects, or seeks to correct two different kinds of railroad abuses. It aims on the one hand to secure the publication of tariff rates which shall be just and reasonable, and free from discriminations, and on the other hand to compel carriers to observe the tariffs so published without variation or exception. In other words, it is directed against wrongdoing both in the fixing of tariff rates and in the failure to apply them when they have been fixed.

.Broadly speaking, it is the latter class of offenses only which are affected by the amendment in question. It makes no change in the law as respects the publication and filing of tariffs, except to set forth the obligation of carriers in that regard with greater clearness and in more comprehensive terms. It imposes no additional restraint in the matter of making and announcing the rates to be charged, but deals primarily with the enforcement of such rates. Its provisions are mainly designed to prevent or more effectually reach those infractions of law, like the payment of rebates and kindred practices, which are classed as misdemeanors.

In the first place, the recent amendment makes the railway corporation itself liable to prosecution in all cases where its officers and agents are liable under the former law. Such officers and agents continue to be liable as heretofore, but this liability is now extended to the corporation which they represent. This change in the law corrects a defect which has always been a source of embarrassment to the Commission, as has been explained in previous reports, because it gave immunity to the principal and beneficiary of a guilty transaction. As a practical matter, it is believed that much benefit will result from the fact that proceedings can now be taken against the corporation.

The amended law has abolished the penalty of imprisonment, and the only punishment now provided is the imposition of fines. As the corporation can not be imprisoned or otherwise punished for misdemeanors than by money penalties, it was deemed expedient that no greater punishment be visited upon the offending officer or agent. The various arguments in favor of this change have been stated in former reports and need not here be repeated. Whether the good results claimed by its advocates will be realized is by no means certain, but the present plan should doubtless be continued until its utility is further tested.

A further change has been effected by the act of 1903 which is of much importance. As the former law was construed by the courts, it was not sufficient to show that a secret and preferential rate had been allowed in a particular case; there had to be further proof of the payment of schedule charges, or at least higher charges than those in question, by some other person on like and contemporaneous shipments. That is, it was necessary to prove discrimination in fact as between shippers entitled to the same rates by reason of receiving the same service. The practical result of this construction was to render successful prosecutions extremely difficult, if not impossible, because the required evidence could rarely be secured, and this was particularly the case when there was an extensive demoralization of rates and consequently the most urgent occasion for the use of criminal remedies. Under such circumstances it frequently happened that all shippers received substantially the same rates, however much less than the published tariff, and thus there was no actual discrimination. This aggravating defect appears to have been wholly cured, as the new law in most explicit terms makes the published tariff the standard of lawfulness, as respects criminal misconduct, and any departure therefrom is declared to be a misdemeanor. It is sufficient now, in order to make out a case of criminal wrongdoing, to show that a lower or different rate from that named in the tariff has been accorded. The effect of this amendment is to make the shipper liable whenever the carrier is liable, while either or both of them may be convicted by simply proving that the rate charged is not covered by the tariff applicable to the transaction.

The foregoing are the principal changes made by the Elkins law as respects the criminal remedies for prohibited practices. They relate solely to acts which are made misdemeanors and have no other application. The further provisions of this law, affecting what may be called civil remedies, are likewise important and may be briefly mentioned. One of these makes it lawful to include as parties, in addition to the carrier complained of, all persons interested in or affected by the matters involved in the proceeding; and this may be done both before the Commission and when suit is begun originally in the circuit court. Under the former law carriers only could be made parties defendant; under the amended law shippers also may be included. To what extent this change will prove advantageous the Commission does not undertake at this time to express an opinion.

The other and more essential provision of the character now referred to is the one which confers jurisdiction upon the circuit courts of the United States to restrain departure from published rates, or “any discriminations forbidden by law," by writ of injunction or other appropriate process. The writ or process thus authorized is enforcible as well against parties interested in the traffic as against the carrier. This provision disposes of a question which has been the subject of much controversy, and furnishes a comprehensive remedy which is believed to be of the greatest value. If sufficient proof of misconduct is presented to afford reasonable ground for belief that tariffs have been disregarded, a court of equity may enjoin the offending carrier and enforce the observance of published rates by suitable order and in a summary proceeding. Although this remedy in terms is made applicable to any discrimination forbidden by law, it is at least doubtful whether it applies to discriminations which are the result of adhering to published rates. A tariff rate which is unreasonable or unduly discriminatory, although applied and enforced in all cases, is a rate “forbidden by law," but the observance of such a rate, until condemned by the Commission or the courts, can hardly be deemed a misdemeanor. Taking into account the evident purpose of this provision, and reading it in connection with the entire body of regulating statutes, it is not probable that injunctions will be granted for the correction of tariff rates which are actually observed, at least not until such rates have been adjudged unlawful by a competent tribunal.

Without further reference to the changes effected by this amendatory legislation the Commission feels warranted in saying that its beneficial bearing became evident from the time of its passage. It has proved a wise and salutary enactment. It has corrected serious defects in the original law and greatly aided the attainment of some of the purposes for which that law was enacted. No one familiar with railway conditions can expect that rate-cutting and other secret devices will immediately and wholly disappear, but there is basis for a confident belief that such offenses are no longer characteristic of railway operations. That they have greatly diminished is beyond doubt, and their recurrence to the extent formerly known is altogether unlikely. Indeed, it is believed that never before in the railroad history of this country have tariff rates been so well or so generally observed as they are at the present time.

While the amended law is a potent factor in doing away with ratecutting, other influences have contributed to the improved conditions now prevailing. Among these, of ccurse, is the great increase in traffic, which in most parts of the country continues to move in unprecedented volume. When the business offered taxes the carrying capacity of a road there is little temptation to add to its amount by unlawful methods. Under such circumstances tariffs would naturally be better maintained even if secret rates were not prohibited. That the strict enforcement of published tariffs, which now generally obtains, will be kept up when the traffic begins to decline, if that shall happen, is perhaps too much to expect. The wrongdoing which this legislation seeks to more effectually prevent has its origin and inducement almost altogether in the competition between carriers, and so long as that competition is subjected to no legal restraint it will be liable to find expression to a greater or less extent in secret and preferential rates. The test of the law will come when a lessened volume of competitive traffic invites sharp contest for business. In that case, however, we believe the law has now so much more vitality and can be so much better enforced that unlawful rates will never again reach their former magnitude. In its present form the law appears to be about all that can be provided against rate-cutting in the way of prohibitive and punitive legislation. Unless further expe

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