Light on the Law: A Reference Book on "The Act to Regulate Commerce ...

abuse in railroad management by specific legislation, by hard and fast iron-bound statutes applying thereto. I think the committee were right, and therefore I have great pleasure in standing by the committee bill with the single exception to which I am to-day to call the attention of the Senate.

The discussion upon this bill is narrowed to two issues, and I think the committee and the Senate may be congratulated that the work of the committee has been practically adopted by both branches of the national legislature, with the exception of these two topics which still excite discussion. These two questions are, first, whether the Senate will adopt the modification proposed by the conference committee in the short-haul section, and, second, will it prohibit pooling instead of leaving it for the present to the investigation of the commission.

Now that these two issues come clearly before the Senate, I wish to put in juxtaposition, side by side, the provisions of the Senate bill and the provisions of the bill recommended by the conference committee upon these topics. First, I read the short-haul clause of the Senate bill, section 4:

SEC. 4. 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, under substantially similar circumstances or conditions, for a shorter than for a longer distance, over the same line, in the same direc tion, and from the same original point of departure, or to the same point of arrival; but this shall not be construed as authorizing any common carrier within the terms of this act to charge and receive as great compensation for a shorter as for a longer distance; provided, however, that upon application to the commission appointed under the provisions of this act, such common carrier may, in special cases, 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 make general rules exempting such designated common carrier in such special cases from the operation of this section of this act; and when such exceptions shall have been made and published they shall, until changed by the commission or by law, have like force and effect as though the same had been specified in this section.

That is all there is of it except the penalty clause, which appears elsewhere in the conference bill. The section in the conference bill is this:

It will be seen that those words have been substituted for the words "and from the same original point of departure or to the same point of arrival."

But this shall not be construed as authorizing any common carrier within the terms of this act to charge and receive as great compensation for a shorter as for a longer distance; 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.

The main change, as will be seen, recommended by the conference committee is as I have indicated, the striking out in the Senate bill of the words" and from the same original point of departure or to the same point of arrival," and substituting therefor the words "the shorter being included within the longer distance."

Now, I read the Senate bill provision with regard to the subject of pooling. It is simply this :

SEC. 19. That the said commission shall specially inquire into that method of railroad management or combination known as pooling, and shall report to Congress what, if any, legislation is advisable and expedient upon that subject.

I read next the section in the bill proposed by the conference committee on the subject of pooling:

SEC 5. That it shall be unlawful for any common carrier subject to the provisions of this act to enter into any contract, agreement, or combination with any other common carrier or carriers for the pooling of freights of different and competing railroads, or to divide between them the aggregate or net proceeds of the earnings of such railroads, or any portion thereof, and in any case of an agreement for the pooling of freights as aforesaid, each day of its continuance shall be deemed a separate offense.

Elsewhere in the bill it is provided that the commission of any act which it is provided shall be unlawful may be punished by a fine not exceeding $5.000.

Now, with regard to the change in the short-haul clause, I have this to say I do not think as an original proposition the change was a wise one I do not think it is an improvement of the bill as it left the Senate. I think the Senate bill recognized a principle which was sound, and that principle was that the question of what is a reasonable charge upon freight to a station or from a station is not to be determined by the question of what is charged for freight to or from another station. In other words, the question of reasonable freight charges must vary with the location of the place to or from which the freight is shipped, the volume and character of the business to be transacted going to and from that place. I believe that was a wise provision based upon a sound principle, and I do not think it was wise to depart from it; and I think that these words which have been inserted about the shorter distance being included within the longer distances are uncertain and ambiguous. I do not think any man knows to-day what they do mean. I think it will greatly trouble courts and commission to decide what they mean.

It is certain that the introduction of these words makes an exception to the rule It is certain that the bill, as it stands reported by the conference committee, implies that there are some shorter distances for which more may be charged than for longer distances. It is for courts and the commission to find out what those shorter distances are, for, mathematically speaking, every shorter distance is included within the longer distance. But this bill says on this subject that it shall not be lawful to charge more on the same line in the same direction, under similar conditions and circumstances, for a like kind and amount of freights, for the shorter than for the longer distance which includes the shorter. Mathematically speaking, we should say that was impossible. Speaking of the words when put into a statute, we know they must have a construction. I have never yet seen the man who was able to say what those shorter distances were in which railroads were to be permitted to charge more than for longer distances. They are there in the bill if it passes, and the courts here will say what they mean.

But, notwithstanding all this, I stand by the short-haul clause for the purpose of getting legislation on this subject. I am willing to surrender so far my judgment as to what is wise and best. Right here I want to

allude to an objection based upon a possible construction which I have heard urged against this short-haul clause.

I am told that there is fear in many quarters that this construction will be put upon it; that where two or more independent lines of railroad (independent in ownership and operation) contract with each other to forward freight over the entire line so made up, and for each independent link the railroad company owning and operating it to accept a certain proportion of the through freight as its share, that portion which it so agrees to accept under these circumstances will be made the measure of the charge upon freight shipped over its own road or any portion of it. I do not think that such can be the construction of the bill.

Every road must stand by itself. It is upon the company's own road that the short-haul clause takes effect. If a number of independent companies, having independent lines which together form a continuous through route, contract as to the freights which shall go over those routes, then they, as contracting parties, are bound as to freight which is shipped over those roads as to the price, and may not charge more on freight sent under contract between those points for the shorter than for the longer distance; but the share which each road may receive for carrying such through freight does not, in my judgment, furnish the measure by which any one of those independent and independentlyoperated companies is to measure the rate for other freight upon its own road.

I have said this much to explain the fact that, although I do not think we have improved the Senate bill on this subject, I still take it and stand by it.

But the section of the bill proposed by the conference committee which prohibits pooling under criminal penalties I can not consent to. I would for the sake of getting legislation assent to it if I did not believe in my inmost mind that it was impolitic, unjust, and calculated to embarrass and possibly defeat the beneficial operation of the bill.

I do not think that to justify my dissen. I must hold affirmatively that pooling contracts are legal and right. I think the burden of proof is upon them who would make such contracts criminal. Can it be that in the Senate of the United States and in the House of Representatives of the United States crimes are to be made and penalties of $5,000 a day are to be inflicted, and the parties who propose it are not show why the contracts for which those fines are imposed are illegal or wrong? And to give reasons why I can not assent to such legislation, must I prove affirmatively that such contracts are right and are according to the common law? It is for those who say that pooling between railroads shall be criminal to show that such arrangements are either opposed to the common law, condemned by the common law, or they are so far wrong in principle as being opposed to public policy that it is just and wise legislation to make them criminal offenses.

Mr. President, we must get back to definitions. I apprehend that these contracts, which are known as pooling contracts, are entirely mis-' understood in character, in purpose, in results, and it is the evil significance which attaches to this unfortunate word "pool," which railroads never apply to these contracts, which has created an unreasonable prejudice in the minds of the people of the country, upon which it is sup

posed that without investigation and without affirmatively showing anything wrong or improper in these contracts, we are to brand the making of them as criminal. It is said that "that which we call a rose by any other name would smell as sweet," but the converse of that proposition does not hold true. These contracts under other names would never be supposed to be against the public interest. Railroad companies have tried to escape from the fateful influence of that name. They have called such contracts what they more properly are-co-operation contracts for traffic unity-but without avail; that unfortunate name is fastened upon these contracts. But I do not propose, therefore, to strike at what can not be shown to be wrong, improper, or against the public welfare or opposed to public policy.

What is a pool? What is a pooling contract? It is simply an agreement between competing railroads to apportion the competitive business; that, and nothing more I repeat it; it is an agreement between competing railroads to apportion the competitive business. It does not touch the local business, it does not reach it; it has no reference to it. The local business is left to each individual company. It is non-competitive. A pool has nothing to do per se with making rates.

And right here I want to call attention to a glaring inconsistency in this proposed legislation. The proposed prohibition of pooling does not prohibit the railroad companies from making rates. Indeed the whole bill compels agreements between competing roads for the making of rates. The section does not propose to prohibit a hard and fast agreement between railroads to maintain rates. Indeed it almost compels it. It does not propose to interfere with any other means which railroads may adopt, which are inducements to the railroads themselves to maintain rates. All that it does propose to do is to make criminal the apportionment of freight between competing railroads, or the division of earnings by competing railroads. With that criminal clause in the bill, it would still be open to railroads to enter into any other kind of contracts which they might invent for the purpose of maintaining rates agreed upon. It would be open to competing roads to put a sum of money in the hands of a commissioner or an arbitrator to be used as penalties, as liquidated damages to be recovered by the other companies of any company that should violate the agreement to maintain rates. It does not apply to a hundred means by which railroad companies may in some way make it for their interest to maintain the rates which they themselves have fixed and have agreed to maintain legally under this bill. Is it not pretty remarkable legislation that there should be left the right of competing roads to fix rates jointly for competitive business; that there should be left the right to agree to maintain those rates and not to cut or vary from them; that there should be left free to them every means to protect themselves against the violation of those agreements, except just this matter of apportioning between them the competitive business of the roads or the division of joint earnings?

It may be said that perhaps it is not so bad a measure after all if it leaves all those things open to the railroads, but the inconsistency of it is intensified many times.

I say, then, that the thing which it is proposed to make criminal is contracts for the pooling of freights of different and competi

tive railroads or the division between them of the aggregate or net proceeds of the earnings of such railroads. Now, I want to read a word from Mr. Nimmo's report, which is called the report on the internal commerce of the United States in 1879, showing what a pool really is. And I want to say a word about Mr. Nimmo, whom I shall frequently quote during this discussion; I shall not quote railroad presidents, with a single exception or two; I shall not quote pool commissioners; I propose to fortify what I have to say on this subject by quotations from men who have studied this question from an independent standpoint and with no interest to favor railroads. Mr. Nimmo, Chief of the Bureau of Statistics until 1884, an able statistician and a careful student of political problems, who in the nice adjustment of offices to civil service reform principles by the present administration was asked to make way for another man. Mr. Nimmo is certainly good authority by reason of the attention which he has given to this subject. As far back as 1879 he said:

The use of the term "pool" as a designation of the agreements entered into between railroad companies for the apportionment of traffic, or the receipts from traffic, is of recent a plication. The term has usually been applied to a game of chance, in which all the players contribute towards making up the stake or pool, and the winner in the game gets the whole, whereas what is now known as a railroad "pool" is simply an agreement entered into between companies for the apportionment or division of the traffic between roads engaged in competitive traffic. By this arrangement they take no chance, but seek to escape the chances that, under unrestrained competition, they may be able to secure less than what they deem to be their equitable share of traffic and reduce to a certainty the share of the traffic whi h they hall secure. The main object, however, is to avoid the great losses inevitably resulting from wars of rates. In its application to the apportionment of division of railroad traffic the meaning of the word pool" appears to be, in a double sense, the reverse of its ordinary significance in its application to games of chance.

Again, in 1881, he said:

A railroad freight pool is simply an agreement that, at competing points, the several contestants for traffic shall be allowed a certain percentage of it, or of the receipts therefrom, to be determined either by arbitration or by a convention of the representatives of all the competing roads. When such an agreement is faithfully observed, it is found to be comparatively an easy matter to decide as to the rates which shall be charged and to maintain them.

Sometimes the same authority agrees upon and fixes the rates, and sometimes it does not; the same authority which apportions or divides the traffic. The maintenance of rates is in no sense per se part of the pooling contract, and it is not so treated in the bill, as I have shown. It is not so treated in the bill which prohibits and makes criminal only a thing independent of and distinct from the making of rates and the agree ing to maintain them.

Now I call attention for a moment to Judge Cooley's explanation of a pool, which is to be found upon page 2 of a recent pamphlet by Judge Cooley in 1884, entitled "Popular and Legal Views of Traffic Pooling." He says:

In this country the method of pooling seems to be for the several contracting parties to create some common authority upon which will be conferred the power to establish and change rates for the transportation of property within a certain territory or over a certain line, and also to apportion the business between them. The apportionment will be made upon a consideration of what the companies severally would be likely to obtain under the operation of free competition, and it will be changed from time to time if found to be relatively unjust. The feature of arbitration upon controversies arising between the contracting parties will also be prominent in the arrangement.

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