(2) Adds enormously to the expense and difficulty of successful prosecution, and thus discourages resort to the law.

V. Fails to provide effective means of compelling before Commission production of papers and answering of questions.

(1) This is one of the worst evils of the existing law, under which a case can be halted for a year while the relevancy of a paper or of a question is being litigated all the way up to the Supreme Court, as in the coal trust case.

This bill does not touch matter of terminal railroads or private car abuses at all, and these are among the greatest and most outrageous abuses existing.

MERITS OF HEARST BILL.

I. Avoids all the enumerated objections to Quarles-Cooper bill. II. Provides a trained and experienced court for this special branch of law.

III. Judges less liable to be controlled by railroads, for, as every case would come up before them and they would be conspicuously before the public, a positive tendency to favor the railroads would be patent and therefore unsafe and improbable.

CONSTITUTIONAL QUESTION.

COMMISSION CAN FIX RATE.

SECTION 1. Congress has power to regulate interstate commerce. (Constitution, section 8.)

Power to regulate includes power to fix a rate.

Maximum rate case (vol. 167, U. S.-opinions of Supreme Court), Judge Brewer: "Congress might itself prescribe rates.'

Reagan case (154 U. S.):

The power of fixing rates is not a matter within the absolute discretion of the carriers, but is subject to legislative control.

"The legislature has power to fix rates." (143 U. S.)

THIS POWER CAN BE DELEGATED.

Maximum rate case (167 U. S.):

Congress might itself prescribe the rates, or it might commit to some subordinate tribunal this duty.

Reagan case (154 U. S.):

There can be no doubt of the general power of a State to regulate the fares and freights which may be charged or received by railroads or other carriers, and that this regulation can be carried on by means of a commission.

Similarly decided in State railroad commission cases. (116 U. S.) In maximum rate case, where the court held that under the existing law the Commission did not have power to fix a rate, its decision was based solely on the fact that the express words giving power were not contained in the act and that it would not imply such broad powers. No suggestion was made that this power could not be delegated. On the other hand, the court quoted the statutes from a dozen or more States where the power to fix rates was given to commissions, such as

Alabama, California, Florida, Georgia, Illinois, Iowa, Minnesota, Mississippi, New Hampshire, South Carolina, Kansas, and New York.

[New York statute.]

If in the judgment of State railroad commissioners it appears necessary that additional terminal facilities shall be afforded, or that any change of rates of fare for transporting freight or passengers or in the method of operating a road or conducting its business is reasonable or expedient in order to promote the security, convenience, and accommodation of the public, the board shall give notice and information in writing to the corporation of the improvements and changes which they deem proper. The supreme court, at special term, shall have the power in its discretion in all cases of decision and recommendations by the board which are just and reasonable to compel compliance therewith by mandamus.

NOT CONFINED TO COMPLAINT.

Reagan case (154 U. S.), Judge Brewer:

It is not to be supposed that a commission appointed under the authority of any State will ever engage in a deliberate attempt to cripple or destroy institutions of such great value to the community as the railroads, but will always act with the sincere purpose of doing justice to the owners of railroad property as well as to other individuals.

Coal trust case (194 U. S.):

Powers conferred upon the commission, under section 12 of the act, to inquire into the management of the business of all common carriers, subject to the provisions of the act, and keep itself informed as to the manner and method in which the same as conducted.

Maximum rate case (167 U.S.):

The Commission is charged with the general duty of inquiring as to the management of the business of railroad companies and to keep itself informed as to the manner in which the same is conducted.

CONSTITUTIONAL QUESTION.

COURT CAN NOT FIX RATE.

Reagan v. Farmers' Loan and Trust Company (154 U. S.):

The courts are not authorized to revise or change the body of rates imposed by a legislature or a commission; they do not determine whether one rate is preferable to another or what under all circumstances would be fair and reasonable as between the carriers and the shippers; they do not engage in any mere administrative work. This rule specifically restated in St. Louis and Santa Fe Railroad Company v. Gill (156 U. S., 662).

San Diego Land and Town Company. National City (174 U. S., 739):

But it should also be remembered that the judiciary ought not to interfere with the collection of rates established under legislative sanction, unless they are SO plainly and palpably unreasonable as to make their enforcement equivalent to the taking of property for public use without just compensation.

Trammel v. Dinsmore (102 Fed. Rep.), 800 circuit court of appeals): The formation of a tariff of charges for the transportation by a common carrier of persons or property is a legislative or administrative rather than a judicial function. The courts are not authorized to revise or change the body of rates imposed by the commission.

Western Union v. Myatt (98 Fed. Rep., 335):

Concisely stated, to prescribe a tariff of rates and charges is a legislative function; to determine whether existing or prescribed rates are unreasonable is a judicial func

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tion. That this is the settled doctrine of this country is no longer open to question. It is firmly fixed in the body of our jurisprudence. It follows, therefore, as a corollary of this doctrine that courts have no power to prescribe a schedule or rates and charges for persons engaged in a public or quasi public service, because that is a legislative prerogative. The legislative prerogative is the power to make the law to prescribe the regulation or rule of action; the jurisdiction of the courts is to construe and apply the law or regulation after it is made. The two functions are essentially and vitally different.

The fundamental reason for these decisions is that all power to regulate commerce, from which flows the right to fix rates, is derived from the Constitution. Where the Constitution confers no power, no power lies. The Constitution has expressly given this power to Congress and has refrained from giving it to the judiciary. Fundamentally therefore and wholly apart from the constitutional separation of the Executive, the legislature, and the judiciary there is no possible basis for asserting that the courts might fix a rate.

If anything more is needed, see Hayburn's case (2 Dallas, 409), United States v. Ferreira (54 U. S., 40), and Interstate Commerce Commission v. Brimson (154 U. S.).

All to the effect that it is not in the power of Congress to assign to the courts of the United States any duties except such as are properly judicial and to be performed in a judicial manner.

THE COST OF MINING COAL.

Replying to the questions of the chairman concerning the cost of mining and preparing anthracite coal, I find on referring to the testimony that the average cost per ton to the Philadelphia and Reading Coal and Iron Company, the largest company in the trust, for six months ending April 30, 1904, was $2.31 a ton, and for the six months ending April 30, 1900, $1.79 a ton, showing an increase of 52 cents a ton These figures cover all sizes. I might state parenthetically that the average increase in the selling price of the domestic sizes during the same period is $1.14 a ton. This period of increased cost includes both advances in wages after the two strikes. It is clear that the coal companies have not only made the public bear the entire burden of the strike awards, but have actually turned the strikes into a source of profit.

The following figures for the Reading Company, just mentioned, for the month of April, 1904, during which month the cost of mining and preparing coal was $2.06 a ton is fairly illustrative of the elements that make up the cost.

Mining, $1.43; repairs, $0.07; deadwork, $0.23; colliery improvements, $0.17; royalty, $0.06; department expenses, $0.07; proportion of general expenses, $0.02. The cost to the Delaware and Hudson Company for mining coal during the month of January, 1904, was $2.14 a ton, including a sinking fund of 4 cents a ton and general office expenses of 6 cents a ton, and the various other elements mentioned in the Reading statement.

These figures may be taken as fairly typical of the other companies, including the Lehigh Valley Coal Company, where the cost was $2.25 a ton, and it was claimed by the company that the profit for the year ending June 30, 1904, on a business of 5,000,000 tons was but $0.079 a ton. They claimed to account for the discrepancy between the sell

ing price of $5 and the cost of $2.23, plus the freight rate of $1.55, by alleging that on the small sizes, such as pea coal and the like, which constitute about 40 per cent of the total output, there is a loss after paying the freight rates, because the selling price of the smaller sizes averages under $3 a ton.

These figures sufficiently show the intimate relation between the freight rate and the selling price of coal. They demonstrate with equal force that coal freight rates are so exhorbitant that it is with the greatest difficulty that the mining company is able to keep its head above water, and its only chance of making a reasonable profit, after paying excessive freight, is by increasing the selling price to the consumer. This is exactly what has been done. The freight rates are the key to the situation. It is at these unreasonable freight rates maintained by a combination of railroads in control of both the means of transportation (and most of the production) that I am striking in my pending suit before the Interstate Commerce Commission.

STATEMENT OF WALKER D. HINES, ESQ.

Mr. HINES. Mr. Chairman and gentlemen of the committee, I appear here in behalf of the Atlantic Coast Line and the Louisville and Nashville Railroad. Mr. Erwin, president of the Coast Line, was here yesterday and expected to make a preliminary statement on behalf of that company, but he was called to New York by important engagements, and as we had discussed the matter, and our views coincided, he left the matter to me entirely.

It would perhaps be well for me at the outset to state in a general way what opportunity I have had to form conclusions on this subject. As early as 1895, while I was in the law department of the Louisville and Nashville Railroad Company, I began a close study of the interstate-commerce act on account of traffic questions then arising in Kentucky. In 1897 I enlarged that study on account of the efforts which began then to secure the rate-making power for the Commission. Until 1901 I remained in the law department of the Louisville and Nashville Railway Company and continued to make a special study of these questions. I was then made first vice-president of the company, in charge of traffic matters as well as law matters, and until last July, when I resigned from the company to enter the general practice of the law, I continued to give the question special

attention.

I may say on behalf of the two railroad companies for which I appear, and I think on behalf of railroads generally, that there is no effort to deny the propriety or necessity of effective regulation of the railroads. I think if the day ever existed, and probably it did, when railroad managers denied the right or propriety of it, that day has passed. The public certainly expect effective regulation; and I realize and I believe that the railroads generally realize, that effective regulation must be had. The question is, What is the best effective regulation? What are the evils that call for regulation? What regulations will correct those evils? And what are the possible evils that may flow from any character of regulation that may be adopted? As this committee is considering various bills which nearly all

involve in one way or another the rate-making power, and as that seems to be the vital thing now under consideration, it seems proper at the outset to consider briefly what is the necessary scope of the ratemaking power, if conferred upon any tribunal. I am glad to say that the fallacy which has misled a great many people, that you can give a rate-making power which is not a general rate-making power, seems to have been pretty effectively exploded.

We still hear some talk about not making rates in the first instance, not making original rates, making rates only on complaint and notice, and after investigation, but I think it is generally recognized that if you put all those incidents in it can not change the substantial and the general character of the power. Suppose, to illustrate it briefly, that Mr. Jones is appointed traffic manager of a railroad company. He can not make rates in the first instance, because they are already made. He does not undertake to make rates generally; he does not undertake to make rates except when a case arises for considering the propriety or the applicability of an existing rate to a new situation, or on account of some trouble that has arisen as to an existing situation. Presumably he does not make a rate without finding out what he is doing.

You give the power to any tribunal to make a rate on notice and after investigation, and you give that tribunal the power for all practical purposes to do exactly what the traffic manager of that railroad company would do. No matter how you restrict it, if you say that it shall make only one rate in a proceeding, or that it shall make a rate only on complaint, that is simply a difference in incidents; it is not a difference in substance, and a tribunal vested with the power in the most restricted language which could be devised would still have the power, one at a time, it may be, but still the power, to change every rate it thought ought to be changed. If it could not originate a complaint itself, you can not find a rate anywhere that somebody is not ready to complain against, if he thinks that he is to be benefited by it, so that complaints would come, and fullest opportunity would be given to change every rate which that tribunal wanted to change. And, no matter how you frame the language that confers the power, the fact still remains that a tribunal with the rate-making power is the traffic manager of every railroad company in the United States to whatever extent it chooses to exercise that power.

Now, I think the situation ought to be, and I think now is being, faced with a full appreciation that there is no sticking your head in the sand on that proposition; that if you give the rate-making power, you give the rate-making power, and that there is not a little ratemaking power and a big rate-making power, but there is simply one, and you give it or withhold it.

Now, let us consider what is meant and what will be some of the important effects of giving that power to any governmental tribunal. In the first place and this is the point that I think has not been generally touched upon or appreciated whenever any tribunal undertakes to make a railroad rate it necessarily becomes the perpetual administrator of that rate. It is not like a case in court. When a court decides a case, that case is done. The court goes on and decides some other case. But when a railroad commission or any tribunal makes a rate, which is necessarily a rate for the future, its work is not done; its work has just begun.