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MR. ALBERT FINK ON THE NEW LAW.
Commissioner Albert Fink, in February, 1887, made public the following careful analysis of the principal features of the interstate commerce law, as he construes it:
In order to determine whether the present tariffs of the railroad companies comply with the requirements of the law regulating interstate commerce, and, if not, what changes are necessary, it is of the greatest importance to obtain a correct interpretation of the sections of the law bearing on the establishment of tariffs. This interpretation must be made in accordance with the language of the law, and not according to any explanation of it given while the interstate commerce bill was under consideration in congress.
Sections 1, 2 and 3 of the act prescribe the general principles upon which transportation charges should be made, but they do not specify and direct how these principles shall be carried into practical effect. The • law requires that rates shall be just and reasonable, but does not say what constitutes just and reasonable rates. This is left to the carriers to decide-a difficult task, considering that the problem to make just and reasonable tariffs over 130,000 miles of railroad owned and operated by so many different independent companies, whose co-operation in making reasonable joint through tariffs is absolutely necessary.
In questions so complicated and of such great diversity of character, the judgment of different parties may honestly differ, and yet should it be found that the honest judgment of the railroad managers differs from the judgment of the commissioners or the courts, in matters requiring expert knowledge, the railroad companies are liable under the law to heavy penalties, although they knew not beforehand what the law requires of them. The railroad companies find themselves placed in a most difficult position. They can not stop the operation of their roads until they ascertain what the law means and what they are to do under is, but they have to interpret it as best they can, and run the risk of being punished for putting a different construction upon it from the construction which may hereafter be given by the commission and the courts.
I propose to interpret the law strictly in accordance with its language, and, where that is ambiguous, to solve the doubt by keeping in mind the object for which the law was passed. This object is clearly expressed in sections 1, 2 and 3—there can be no misunderstanding about it, viz., the transportation charges of the railroad shall be reasonable and just.
I shall first deal with section 4, regulating the charges for long and short hauls. While sections 1, 2 and 3 lay down the general principles upon which tariffs are to be established, section 4 is the only one in
which it is attempted to lay down a specific rule, but it is so indefinite that it admits of different constructions. The first part of this section reads as follow – omitting the clause: “under substantially similar circumstances and conditions."
“That it shall be unlawful for any common carrier subject to the provisions of this act to charge or receive any greater compensation in the aggregate for the transportation of passengers, or of like kind of property, for a shorter than for a longer distance over the same line, in the same direction, the shorter being included in the longer distance."
There could be no misconstruction put upon this part of the section, as it is an absolute prohibition of charging more for a shorter than for a longer distance; but by introducing the clause" under substantially similar circumstances and conditions, this prohibition is qualified; and it may be lawful under dissimilar circumstances and dissimilar conditions to charge more for a shorter than for a longer distance. The law does not specify what circumstances and conditions would justify a greater charge for a shorter than for a longer haul, and we must
, therefore, inquire what are the different circumstances and conditions referred to which justify an exception to the general rule.
These circumstances and conditions must necessarily be such as to legitimately influence the relative charges for long and short hauls. The law can not mean any other circumstances and conditions. It can not refer to extraneous matters, as, for example, to the conditions of the weather, whether it rains or snows, or whether it is hot or cold, but it must refer to the conditions and circumstances which from the very nature of the case control transportation charges; and the principal elements that control transportation charges are the cost of the service and competition, using the word “competition" in its widest sense competition with water routes, competition with rail routes, competition between markets, etc. These are the main factors regulating transportation charges, and have done so at all times in this and all other countries. It must, therefore, be these conditions and circumstances to which reference is had in this clause.
If it can be shown, for example, that it costs a railroad more to carry freight for fifty miles over its road than it costs to carry the same kind and quantity of freight one hundred miles, this clause would be an authorization for charging more for the fifty mile service than for the one hundred mile service; or, if it can be shown that the rate to the end of the one hundred miles of road is fixed by water transportation, hardly sufficient to pay the railroad the cost of doing the work, without any or without an average profit in the capital invested in the road, the railroad company would be justified in making a lower rate to the station one hundred miles distant than it does to the station fifty miles distant, provided, however, that the rate to the fifty mile station is reasonable in itself — not as low as the cost of water transportation would be, but not higher than the cost of railroad operation and a reasonable interest on the cost of the road. The shippers at the one hundred mile station enjoy the natural advantages of their location on a navigable river, while those who live in the interior are necessarily under disadvantages. This discrimination exists in the nature of things - it is not unjust; it is not the result of the arbitrary action of the railroad transportation companies, who are compelled to regulate their charges in accordance with the circumstances and conditions of the situation as they find them. The railroad company would prefer not to make the lower charge for the long haul, but to assess the people along the line of the road ratably, according to the distance which freight is carried ; but this is rendered impossible by the very nature of the case when railroads compete with water routes, because of the cheaper cost of transportation by water than by rail.
In all cases, therefore, where the cost of the service and legitimate competition justify a higher charge for a shorter haul than for a longer, section 4 does not prohibit it, but the charge for the short haul must, of course, come within the restriction laid down in section 1-viz., it must be reasonable and just.
Assuming that this interpretation of the first clause of section 4, down to the proviso, is correct, the question will be asked, what meaning is to be attached to the proviso, which reads:
Provided, however, that upon application to the commission appointed under the provisions of this act, such common carrier may, in special cases, after investigation by the commission, be authorized to charge less for longer than for shorter distances for the transportation of passengers or property; and the commission may from time to time prescribe the extent to which such designated common carrier may be relieved from the operation of this section of this act.
In order to properly interpret the meaning of the proviso, which does not seem quite in harmony with the first part of the section, it is necessary to bear in mind that the original bill as reported by the Senate committee to the Senate did not contain in the first part of the fourth section the qualifying clause, “under substantially similar circumstances and conditions.” It made the prohibition of charging more for a short haul than for a long haul absolute; but it is obvious that the enforcement of such a rule would result in great injury to the commerce of the coun.. try. Discretion was therefore given to the commission in the proviso to suspend its operation; but it is evident that after the qualifying clause, "under substantially similar circumstances and conditions,” had been inserted by the Senate in section 4, there was no longer any necessity for the proviso, as no further exemption is needed for the operation of the first part of the section as amended by the Senate. Bearing this in mind, and reading the proviso in connection with the first part of the section, it can only mean that in cases where the circumstances and conditions are similar the commission may relieve the carriers from the operation of the rule when application for such relief is made. Should no such application be made, the commission have no cause for action under the proviso.
The qualifying clause in the fourth section, “under substantially similar circumstances and conditions,” therefore leaves the determination of whether a greater charge can justly be made for a shorter haul than for a longer, under different circumstances and conditions, to the judgment of the carriers, in the first place, to be finally passed upon by the courts. Section 4, therefore, does not prescribe a more definite rule than section 1, by which the carriers could be guided in determining in all cases what are reasonable and just charges. That section might there. fore have been omitted altogether, as it conveys no other meaning than that which is already expressed in section 1; viz., that the railroad charges shall be reasonable and just.
There can be no doubt that the above is the correct interpretation of section 4; it fully carries out the intent and object of the law. If the long and short haul rule had been made absolute, it is obvious that the very object of the law could not have been attained ; instead of regulating commerce the law would have obstructed it : instead of preventing unjust discrimination it would have created it; it would have stified competition with water lines and increased the transportation rates ; it would have deprived the people of facilities to ship to distant markets. These evils could not have been prevented by the exercise of the commissioner's power to exempt the carrier from the operation of the long and short haul rule, because it would have been an impossible task for the commission to investigate and decide the numerous cases that would come before them. The commission could not exempt any one railroad or line from the operation of the long and short haul rule without at the same time giving relief to all other railroads whose tariffs are affected thereby; otherwise, great injustice would be done both to the railroads and to business communities. It certainly was not the intention of the law to throw the transportation business of the whole country into confusion, which would be the result if section 4 were interpreted to make the long and short haul rule absolute and only subject to suspension by the commission.
In case of a doubt as to the proper construction and meaning of the law, it must be construed by the carriers in accordance with the avowed and clearly expressed purpose of the law, and not in opposition to it; otherwise, the carriers would lay themselves open to the imputation that they did so for the purpose of making the law obnoxious. Between the two alternatives—either to fail to construe the law as it may finally be construed by the courts, or to construe it in a way that would avoid this risk but result in the obstruction of commerce—the right course to pursue, it seems to me, would be to construe it with a view to carrying out the object and intent of the law, trusting that such construction will finally
be sustained by the court.
We now come to the consideration of section 2, upon which different and contradictory constructions are placed. It contains the following provision :
That no common carrier coming under the provisions of this act shall charge, demand, collect or receive from any person or persons a greater or less compensation for any service rendered or to be rendered in the transportation of passengers or property, subject to the provisions of this act, than it charges, demands, collects or receives from any other person or persons for doing for him or them a like and contemporaneous service in the transportation of a like kind of traffic under substantially similar circumstances and conditions.
Here, again, the question arises as to what are the circumstances and conditions referred to, which, if dissimilar, justify different charges for the same service performed; and the answer is, that they are circumstances or conditions which legitimately influence and control transportation charges—the cost of the service and competition, as before explained. Taking, for illustration, a specific case, that of the Boston and Albany Railroad receiving at Albany four car loads of freight, one originating at Albany, the others at Chicago, St. Louis and Cincinnati respectively,
and all destined to Boston. The question has been raised whether the Boston and Albany Railroad is obliged, under section 2, to charge precisely the same for hauling each car load to Boston, or whether the circumstances and conditions differ so as to justify different charges for each car load. In order to decide this question we must consider the present practice of the railroads in conducting the transportation business over two or more roads. The railroads have agreed with each other to establish through rates and fares all over the country, to issue through bills of lading, and sell through tickets. Instead of shippers and passengers having to make their own arrangements with each of the carriers whose road they want to use, the carriers subject to the provisions of this law have voluntarily associated themselves to act for each other as forwarders and agents, so that parties desiring to use many roads practically have to deal with only one, and every possible facility and convenience to the public is thus offered. It is necessary to speak of these great services which the railroad companies are rendering to the public by their voluntary co-operation because these arrangements have given rise to the system known as “pro-rating,”. by which each road agrees to take for its compensation for the service it renders a certain portion of the through rate which may have been established between certain shipping points. These through rates are not under the control of each individual railroad company, as the local rates are; they are adjusted in accordance with the laws of trade and competition, and it may here be remarked that the present established through rates are in accordance with the principles laid down in section 1 of the law—they are, as a general rule, reasonable
The share of a through rate which a road may receive is generally determined by the relative distance over which it carries the freight, as compared with the total distance. It is evident that this proportion must vary as the through rate, the total length of the route, and the length of each road in the route vary. For this reason it may happen under the practice of through billing that the Boston and Albany Railroad will receive a less compensation for a car load of freight from Cincinnati than for one coming from Chicago or St. Louis, although all these cars may be carried over its road on the same train. This is in the nature of the
It is a condition which is imposed upon each road by being a party to joint rates on through shipments, in accordance with the present practice of the railroads in this and all other countries.
Is this practice to be declared illegal by the second section of the law? There can be no doubt that if this section did not contain the qualifying clause "under substantially similar circumstances and contitions,” it would forbid the practice of prorating, but by the insertion of this clause, and taking into consideration the different circumstances and conditions legitimately influencing the rates, apart from the cost of the service, different rates may be charged for the same service.
Let us see what would be the result if the railroads of this country were required under this law to make the same charge for transporting similar kind and quantity of freight over the same part of its road, regardless of the circumstances and conditions above referred to. Each road would then have to charge its local rates on all traffic. The through rates from and to the various points in the country would be the sum of