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nies with railway managers on different lines of roads, and all more or less competitors. Each railway wants the business. They are secret and powerful combinations, with mutual desires for securing traffic. The rates and devices known only to railroad men are mere playthings.
The act to regulate commerce was passed solely to secure an equable distribution of the benefits of transportation and to correct abuses which had imperceptibly and gradually crept into the administration of the vast powers conferred upon railroad corporations, not for the corporations alone, but for the people in the prosecution of their business enterprises. This Interstate Commerce Commission was not framed to impair business interests, but to conserve and protect. In the words of the Interstate Commerce Commission, “It had for its object to regulate a vast business to the requirements of justice, and was not passed for a day or a year; it had permanent benefits in view, and to accomplish these with the least possible disturbance to the immense interests involved.” But, as the years since the enactment of the law have gone on and law itself tried, it seems to-day as if the Commission (without reflecting in any manner upon the character and ability of its members) has signally failed in the exercise of controlling power; its mandates have either been supinely forced or altogether evaded. The great complaint against the law and the Commission to-day is that it is a creation powerless to enforce its decrees.
I am of the opinion that the bill now before the committee, and known as Senate bill No. 3575, will meet the requirements and give to the interstate-commerce law greater effectiveness. I believe the interstate-commerce law should be so amended as a whole that under the light of experience and decisions of the courts of the United States the rights and interests of the people in general should be properly safeguarded under it, and defined by it, and the responsibility of carriers carefully fixed and defined in it, and the
and scope of the Interstate Commerce Commission, including the right to fix rates and enforce their decisions, properly established by it.
I am not wise enough nor am I lawyer enough to go into the details of this bill.. Its common sense appeals to me, and I leave it to others, and no doubt you have heard them, to argue out the amendments proposed in the bill now before you. My own experience in freight matters makes me believe that such portions of the bill now before you as relate to the imprisonment clause in the original law should be dropped and that fines against corporations violating the law be imposed. Railroad officials and agents hold social positions among themselves and in the community; different shippers are personal friends of one another; to complain one of the other, and send them to imprisonment for violating a law which we know emanates from corporations themselves, goes against our best feeling. But if a fine could be imposed on corporations, who are in reality above agents and general managers, and in fact the real offenders, our courts would now be full of violators of the law.
The temper, if not the spirit of railway managers, toward the successful administration of the interstate-commerce law has become more hurtful to the railways than to the public. But these corporations are in no sense exempt from public opinion because of the nearly universal, if not organized, opposition to laws enacted for the purpose of regulating their relations with the people. It is not too much to assume that the people hold these laws in higher and higher esteem to
the ratio of contempt for them and the constant violation of their terms by the railways. This conflict between the railways and the interstate-commerce enactment has well-nigh exhausted the patience of the people and those who are appointed to execute its provisions. That the law itself has demonstrated that it needs some changes to make it more applicable to present needs, none will deny. The public demands at the hands of Congress some radical improvements. What we need in reference to the Interstate Commerce Commission is that its powers shall be more definitely specified; that it shall have greater powers to enforce its orders. We need an interstate-commerce law, and that the powers of its commission be defined. I believe that there is but one way to maintain reasonable, fair, and just rates, and that is by giving the railways the right to establish a rate, and then go to the Commission and have that rate indorsed, publish the rate, and live up to it. In a word, be honest. Heretofore Congress has seemed slow and apparently indifferent, but we believe needed changes in the law will be obtained and justice be done to all.
Senator TILLMAN. Will you please tell us what your association thinks of pooling?
Mr. Lyon. I can not tell you. I do not believe our association has put itself on record one way or the other as an association. Our directors have from time to time opposed it, and they are the controlling power.
Senator Tillman. What is your individual opinion?
Mr. Lyon. My own opinion is decidedly against it-always has been and always will be-because it smothers competition.
Senator TILLMAN. Will you leave with us a list of the membership of your association?
Mr. Lyon. We have a book that should be on file in Congress, certainly, in the form of our board of trade reports from 1870. Those are now on file in the library. We send them every year.
Senator TILLMAN. You know what I want, from what I said to the other gentlemen.
Mr. Lyon. We will send them, and will be glad to do so.
Senator TILLMAN. I want some testimony as to the character and respectability of the men who are asking relief.
Mr, Lyon. Many members of the New York Produce Exchange are members of our board of trade, and many of the members of our board of trade are members of the New York Board of Trade. We also have members in Europe, and one, I believe, in Australia.
Senator FOSTER. Do you believe that the railroads should establish a rate, submit that to the Commission, and then that the Commission should either ratify or reject it?
Mr. Lyon. I think the Commission should have power to say whether a rate is reasonable or not, and then should also have the power to compel the railroads to live up to it.
Senator TILLMAN. You mean that after they have establsihed it they should not change it without the permission of the Interstate Commerce Commission?
Mr. Lyon. Yes, sir.
Senator Foster. Suppose the Commission should establish unjust rates?
Mr. Lyon. The Nelson bill provides for that. We indorse the Nelson bill, that the rates be in force for two years.
Senator TILLMAN. You mean that the Commission should be given the power to fix what it decides to be just rates, with right of appeal?
Mr. Lyon. With right of appeal to the courts. Let that power be enforced.
Senator TILLMAN. While litigation is going on?
STATEMENT OF CHARLES N. CHADWICK.
WASHINGTON, D, C., April 16, 1902. The Honorable Committee on Interstate Commerce, United States
Senate. GENTLEMEN: At a meeting of the Manufacturers' Association of New York, on the 17th day of February, 1902, the following resolution was unanimously adopted:
Resolved, That this Association favors the enactment of H. R. bill No. 8337, and urges upon our representatives in Congress to use their best endeavors to secure passage of said bill. The undersigned was appointed a delegate to appear at Washington as a representative of the association to advocate the enactment of the above measure and for the following reasons:
First, under the interstate-commerce act, as it now exists, orders of the Commission can only be made effective by judgment of the courts. The pending amendment provides for a remedy to give effect to the orders of the Commission while securing to the defendants the right of appeal. This appears to us to be eminently just and fair.
Second. These amendments do not confer upon the Commission any general ratemaking power. This power is still left with the common carriers. It seeks to give the Commission power to correct rates which have been shown by judicial investigation to be unreasonable, unlawful, and discriminative, and the orders of the Commission to be obligatory only for a period of two years. Inasmuch as common carriers are recipients of favored legislation, it is but right they should be subjected to governmental control. Under the circumstances it is not a dangerous precedent, and if wrong be done remedy lies with the courts. It reverses present conditions and makes the railroads the defendants rather than the public. Because of the varying conditions, the implied contract between the public and the common carrier must be, to a great extent, a matter of continuous interpretation. Common sense and fair dealing would seem to point to some authority with full power to enforce the needed remedy.
Third. To leave the jurisdiction of conflicting interests to the courts provides only a remedy and compensation for the particular question under consideration. The condition still remains unchanged unless power lodges with some body to rule effectively upon the question and make the needed change, which shall be continuous.
Fourth. The added powers and penalties provided for in these amendments seem to meet the situation and make the interstate-commerce act a mandatory rather than an advisory measure. As an advisory measure it is an absurdity, because it can compel no action. As a mandatory measure it places control over the common carrier, where it belongs, with the Government as a representative of the people, and insures, so far as human limitations admit, substantial justice to all.
For these and other reasons, would respectfully urge that these amendments be enacted into law. I have the honor to be, Respectfully, yours,
CHARLES N. CHADWICK, Delegate of the Manufacturers' Association of New York. The committee adjourned to 10 a. m. to morrow.
FRIDAY, April 18, 1902. At the sitting of the committee on Friday, April 18, 1902, the following-named gentlemen appeared: William H. Chadwick, representing the Chicago Board of Trade; T. W. Tomlinson, representing the Chicago Live Stock Exchange; J. B. Daish, representing the National Hay Association; F. B. Thurber, representing the United States Export Association; and John D. Kernan, counsel for the New York Produce Exchange.
STATEMENT OF WILLIAM H. CHADWICK.
The CHAIRMAN. Please state whom you represent.
Mr. CHADWICK. I will read my credentials first; and in fact I will read the whole of what I shall say, with the permission of the committee. I think that is the better way. I will now read my credentials, so that you can see the charter I have.
BOARD OF TRADE OF THE CITY OF CHICAGO,
Chicago, April 9, 1902. Mr. William H. CHADWICK,
Chairman Transportation Committee. DEAR SIR: I have the honor to inform you that I have appointed you to represent the Board of Trade of the city of Chicago at hearings in Washington before the committees of the Senate and House upon the subject of granting additional powers to the Interstate Commerce Commission.
While the association has indorsed the Nelson-Corliss bill, and you are to use your endeavors toward the passage of that bill, you are granted discretion to agree to such compromise as may seem necessary in your judgment to secure the relief sought. Respectfully,
WM. S. WARREN, President. If the committee wish any information in regard to the Chicago Board of Trade, I shall be pleased to furnish it.
To draw our attention to conditions which formerly prevailed and which led to the enactment of the act to regulate commerce, I now quote, from the proceedings of the National Board of Trade in Washington, December 15, 1897, the statement of Hon. George F. Stone, secretary of the Board of Trade of the city of Chicago, as follows:
The proposition to establish pooling is not by any means new, and we are therefore not left in doubt as to its effects upon the business interests of the country. The first prominent pool was the Chicago-Omaha, and was formed in 1870, and was found in its operation immensely profitable to railroads, so that in the year 1887 practically all competitive traffic was pooled.
During those years business suffered, localities and shippers were discriminated against, secret rebates to a greater extent than before or since were granted. Discrimination in favor of industries in which some of the parties to the pool were financially interested placed other industries under great and sometimes fatal disadvantages.
One of the most mischievous and demoralizing pools that were established about this time was the Southwestern Railway Association, a vampire which for a decade sucked the life-blood of the commerce of the Missouri Valley. The Southwestern Railway Association solved the problem of how to get rid of competition and to rob the people within the letter of the law. Kansas City built a line to the South and thought she had a line that could be used to fight this pool. It had not been in operation a year before this association, with subsidies, had it bound hand and foot. Another outlet to the East, via Omaha and Council Bluffs, was also shut up, leaving the Missouri River country absolutely at the mercy of the pooling lines.
At every acquisition of competing lines, rates were moved up a notch, until they reached an appalling figure. When this association was organized, in 1876, the rate on first-class matter between Missouri River Valley and Chicago was 60 cents. It
was at once advanced several cents, and in 1880 had reached 75 cents on east bound and 85 cents on west bound. In a few months it was moved up to 90 cents. When the association was organized, it included the Burlington, Chicago and Alton, Missouri Pacific, Rock Island, and Wabash. The system was soon found incomplete, in that there were several loopholes by which the people were enabled to avoid the association's higher tariff.
One of these was the Missouri Pacific in Kansas. The business of ten points on the Gould system-Parsons, Chanute, Garnett, Ottawa, Humboldt, Fort Scott, Paola, Burlington, Emporia, and Junction City, since known as the ten junction pointswas sent to St. Louis over Gould's southern line, avoiding the pool points. In order to divert this traffic through the pool, by which means alone the higher rates could be maintained, the association entered into an agreement to pay the Missouri Pacific a liberal percentage of the gross earnings of the pool, on condition that this business be sent via pool points. The amount paid the Missouri Pacific in 1885, on account of the ten junction points, was $660,000, the agreed percentage of the receipts of the association, which amounted to $11,000,000.
During several years of the existence of this pool the shippers of the Missouri Valley had occasionally taken advantage of the rates offered by the Milwaukee and St. Paul Railroad to ship via Omaha and Council Bluffs. The pool, in order to prevent this, found it necessary to bind the Missouri Pacific and Council Bluffs Railroad from making special rates to Omaha and Council Bluffs. Here again a money plaster was applied, the pool agreeing to pay the two lines a percentage of the gross earnings, amounting to $75,000 a year; the lines on their part to charge the full local rates between the pool points and Omaha and Council Bluffs.
The object of this was to make the rate via the northern roads the same as that via the association or pool roads, in order to keep all the business in the pool, as shippers would not use the Milwaukee or Northwestern at the same rates, owing to the greater length of those lines. The Burlington and Missouri River coming into competition with the central branch of the Union Pacific (a pool line), the association, in order to maintain rates and have the business pooled, subsidized the competing line to the amount of $250,000 a year; the same principle was applied to the St. Louis, Fort Scott and Wichita after its extension into southern Kansas. The Fort Scott and Wichita, in consideration of the maintenance of rates and pooling business of its lines, received of the association a percentage of the gross earnings of the pool amounting to $225,000 a year. All the competitors who could be taken into the pools were thus brought in. The commissioner in the meantime turned his attention in other directions. Immediately upon the completion of the Kansas City, Springfield and Memphis, in 1883, the Fort Scott began to compete for the St. Louis business in conjunction with the St. Louis and San Francisco; by its connection with the latter at Springfield it was enabled to cut the association rate to St. Louis and still get a fair remuneration. In order to stop this, the association entered into an agreement with the Fort Scott and Frisco roads by which the latter were paid $8,000 a month on condition that they keep out of the St. Louis business.
Such instances and similar combinations might be multiplied almost indefinitely, but sufficient is shown to indicate the nature of railway pools; they are inimical to the public interests; they are in restraint of trade; they prevent competition; they are monopolistic in purpose and effect; they are odious in law; they are subversive of the very interests which railways were created to conserve, viz, the general welfare, in so far as that welfare relates to the functions and obligations of a common carrier.
I have read this simply to take your minds back to the reason why there ever was created an interstate commerce commission, and why the law was ever framed to bring about that result, to get a body of men who could do the things that were apparently intended by the authors of the law to be done; but I have always thought that if able men had written that law with the contrary intent it could not have been found more fatally weak.
Year after year we plain people have been coming to committees of the Senate and the House seeking and asking relief from conditions which are a disgrace to the Republic and which never should have been tolerated in this country.
The people have long known and testified what the conditions have been, and their statements have had such full corroboration recently that their case is completely established beyond refutation.