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provisions of the act to regulate commerce, both of which statements are strenuously denied.

A recent news item indicates that at last the Commission has awakened to a realization of the fact that the law imposes upon it a duty with respect to the suppression of rate cutting, and that it is disposed to try to set in motion the means for accomplishing that object before the courts as provided in the act to regulate commerce.



The plan of conferring upon the Commission the power to prescribe rates is totally inapplicable to the offense of rate cutting. It has no relation to such offenses as of means to an end. The Commission has never sought to show that it has such relation. There is not the slightest reason to believe that rates made by the Commission would be any more exempt from rate cutting than are rates made by the companies. The true remedy pointed out by the judiciary and by the lessons of experience lies in a faithful enforcement of existing laws, which the Commission has spurned and neglected to enforce. Such laws, however, may be amended or supplemented by others which would facilitate the administrative work of the Commission, for the question is one of procedure, and not one as to the power to act.

The history of the course pursued by the Commission in this matter clearly indicates that the idea of asking Congress for autocratic power over the commercial, industrial, and transportation interests of this country in order to suppress rate cutting is an afterthought. Rate cutting is now brought to the front apparently from the fact that the Commission sees no other means of advancing its claim to the exercise of autocratic power either in exorbitant rates or in unjustly discriminating published rates.

Secret violations of published rates have their origin in the competition of rival commercial forces and are expressions of such struggles. This is apparent to merchants and to railroad managers throughout the country, and as such is deprecated by them. The fact is also clearly perceived that the remedy for such evils lies primarily in railroad selfgovernnient dictated by enlightened views of self-interest, the inspiring motive of all wholesome statutory enactments. Unfortunately the Commission has frowned upon such self-restraint and sought to substitute therefor its claim to the exercise of arbitrary power.

The question is one of vast political import and should not be left to the discretion of any administrative body-certainly not to any bureau of the Government bent upon the acquisition of autocratic power over the commerce and industry of this country. It is eminently a question for Congressional determination.

Besides, it may be observed in this connection that the duty imposed upon the Commission by the twenty-first section of the act to regulate commerce, to recommend to Congress such additional legislation “as the Commission may deem necessary" does not extend to great questions of public policy or to political questions which would naturally command the attention of Congress, but, in the language of Mr. Justice Shiras in Texas and Pacific Railway v. Interstate Commerce Commission (162 U. S.), should be confined to the obvious purposes and directions of the statute.” It is to be regretted that the Commission has not been guided throughout by this obvious rule of propriety.




Beyond all question the remedy proposed by the Commission is misdirected. There are always two parties to offenses involving contractual relationships. In the case of rate cutting these are the shipper and the carrier. The shipper is invariably the promoter to the offense, for it is always to the interest of the carrier to secure tariff rates and to the interest of the shipper to secure less than tariff rates.

The concrete cases which supply the text and ostensible cause of the present movement of the Interstate Commerce Commission for the purpose of preventing rate cutting is furnished mainly by the persistent efforts of certain large shippers of packing-house products of the West to secure less than tariff rates for the carriage of their products. It is an old story to which public attention has been several times directed during the last two years. So uniform, however, has been the “cut” by the several competing companies that it constitutes practically a common rate, lacking only the legal requirement of publicity. The rates actually charged would avoid the censure of being "cut rates” if they were published. They involve no material discrimination with respect to producers, localities, or shippers, but do involve most outrageously discriminations with respect to carriers. All this is clearly stated by the Commission in its annual report just published. Therein it adduces the fact that at one time a particular road carrying into Kansas City 334 per cent of the cattle slaughtered there and carrying out of that city only 2 per cent of the product.

The Commission also shows, in the report mentioned, that the cut rates are a source of benefit to the producer, the consumer, and the packer. At the same time they involve enormous loss to the carriers. This is stated by the Commission in reply to two self-addressed inquiries: First, “Who has the benefit of the reduction in these rates!” and, second, “Does it result in advantage to the producer and consumer, or is it absorbed by the packing house itself.” The answer of the Commission to these questions is as follows:

It seems probable that in case of a reduction like this, which seems to be tolerably uniform and long continued, the general public must obtain some advantage, but we think that in the main these sums swell the profits of the packers. The number of these great concerns is only some five or six, and there does not appear to be much discrimination between them. Each usually knows about what the lowest rate is and usually manages to obtain that rate.

This clearly expresses the whole matter at issue. The cut rate is practically a common rate and irregular only because not published as required by law. This results in some benefit to the producer and the consumer, much more to the packer, and appalling loss to the carrier—the railroad company. This conclusion has been laconically expressed as follows by one of the Interstate Commerce Commissioners since his recent return from Chicago: “The fact is that five or six big shippers have for years been sandbagging the railroads." Hence the question arises, Why attempt to punish those who are sandbagged instead of having recourse to some plan to punish the sandbaggers? But it is just this injustice and manifest solecism into which the Commission has unconsciously stumbled in its most unreasoning desire to acquire a coveted power by visiting upon the railroad companies the severest and most humiliating punishment, namely, that of depriving them of the right to contract freely with the general public as to the commercial value of the service which they render and with no other apparent excuse than an utter inability to base their claim to autocratic power upon any other plausible pretext.

What has been said of rates on packing-house products applies substantially to complaints as to “cut rates” on wheat and flour. The latter involves a long and sharply debated question as to the relative rates on wheat and flour. This is a complex and involved commercial and economic question. The general but rather vague conclusion of the Commission in regard to it is expressed as follows on page 16 of its last annual report:

To an extent the rate upon flour in the foreign market must be higher than that upon wheat. This is decreed by physical conditions which no statute and no commission can alter. To that extent this industry must expect to operate at a disadvantage.

In the light of all these facts the proposition to have recourse to the haphazard and absurdly misdirected remedy of governmental rate making for the cure of problematical evils attending the transportation of provisions, flour, and wheat, and the commerce in these commodities would be as absurd as it would be monstrous.

A Congressional investigation, as thorough and as impartial as that known as the “Cullom investigation of 1886,” would not fail to set all these difficulties in their true light and to disclose a remedy which would be properly directed and efficacious.

I have sought neither to palliate nor to defend rate cutting. Its extent and effects have been greatly magnified for the purpose of predicating upon it the Commission's claim to the exercise of autocratic power; but it is an undoubted evil, and has no defenders other than those shippers who practice it to their own advantage and to the detriment of their competitors and of the carriers. Beyond all doubt it is an evil which can be abated and as successfully prevented as are other misdemeanor's which are mala prohibita.

The art of playing off one railroad against another in the matter of securing cut rates in the interest of large and constant shippers was invented about thirty years ago by one endowed with the very genius of commercial affairs, and the game is apparently as successfully played to-day as it was in the beginning. It remains to be seen whether the courts are possessed of the power to circumvent and prevent this nefarious practice, under the provisions of section 16 of the act to regulate commerce, which section was recently invoked for the first time by the Interstate Commerce Commission.

It is stated by The Railway Age in its issue of April 4, at page 578, that the entire movement of packing-house products was not in excess of 800,000 tons for the latest year. The total movement of freights on the railroads of the country during the year 1900, the latest year of commercial statistics, amounted to 1,101,680,238 tons. From this it appears that the packing-house traffic amounted to less than one-tenth of 1 per cent of the total freight traffic of the country.


Mr. CHAIRMAN: In his recent testimony before the Committee on Interstate and Foreign Commerce of the House of Representatives, Commissioner Prouty stated at page 238 that 807 complaints against advances in rates or against rates which are alleged to be too high have been filed with the Commission during the last three years. A similar statement was made by Commisstoner Prouty in an address delivered at Chicago, on April 2, 1902, before the Illinois Manufacturers' Association. On the latter occasion he said:

While it (the Commission) can not grant relief, there are now pending before it for investigation complaints involving millions of dollars—I think I might say millions annually.

Manifestly these statements were intended to convey the impression that the charging of exorbitant rates is now rampant throughout the country. But this is absolutely refuted by the annual reports of the Commission, which show that during the last three years only 23 cases in all were decided by the Commission upon formal hearings, which cases embrace only eight complaints of unreasonable rates per se. Of these the unreasonableness of only four was sustained by the Commission, constituting less than one-half of 1 per cent of the 807 complaints alleged to have been made to the Commission, or less than one case in 200 complaints. This would indicate either that the Commission has been derelict in the discharge of its duties or that nearly 800 of the 807 complaints were inconsequential or outside the function of the Commission. The latter is undoubtedly the correct view of the case. Besides, the fact that not a single case of exorbitant rates has been sustained in the courts during the fifteen years of the life of the Commsssion raises the presumption that not one of the four cases of exorbitant rates in the entire United States as determined by the Com. mission during the last three years would stand the test of judicial inquiry.

The total number of cases decided by the Commission each year during the last three years, and the number of cases of unreasonable rates tried and sustained, according to the last three annual reports of the Commission, are stated in tabular form as follows:

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The data from which this statement was compiled are found on pages 20 to 43 of the report of the Commission for 1899, on pages 34 to 48 of the report for 1900, and on pages 22 to 39 of the report for 1901.

Hon. Martin A. Knapp also attempted to create the same impression as to the charging of exorbitant rates, notwithstanding the fact that the statistics of the Commission indicate an average reduction of 224 per cent for the entire country from 1890 to 1900 and a substantial reduction in the average rate in each one of the ten groups into which the railroads of the country are divided by the Commission.


The fact adduced by Commissioner Prouty that during the last three years 807 complaints of unreasonable rates were filed with the Commission, of which only four, or less than one-half of 1 per cent were proved to be well founded, has a much more important significance than the members of the Interstate Commerce Commission seem to have imagined. It serves to illustrate a fact of controlling force respecting the broad subject of regulating commerce among the States, namely, the fact that from the beginning the complaints which have been filed with the Commission have had their origin chiefly in the discontent incident to struggles for commercial advantage. Such discontent, however, is the chief stimulant to commercial enterprise. It involves problems which must be wrought out by human intelligence, enterprise, and interaction, and not by any sort of governmental interference, for we live in a world in which we are all debating. Every individual and every section, State, city, town, village, and hamlet in this country is at rivalry with competitors near and far, and it is preposterous for any governmental agency to attempt to reconcile these commercial antagonisms. They are intangible to any sensible or just method of governmental regulation.

Besides, the exemption of such antagonisms from governmental interference is a natural and proper expression of the freedom of commercial and industrial intercourse, and has been so regarded in this country since the foundation of our Government. Faith in the conservatism which inheres in this conflict of commercial forces has begotten the maxim “ Competition is the life of trade," a maxim which has found its way into our statute laws and has become a tenet of judicial faith and practice. So firmly are the people of this country imbued with this sentiment of nonpolitical interference with commercial struggles that for nearly a hundred years after the founders of our Government had incorporated into the national Constitution the provision that “Congress shall have power to regulate commerce among the States," no systematic attempt was made to exercise that power, and clearly owing to the danger attending any attempt to meddle with a commercial interaction which is not and can not properly become the subject of governmental concernment.

But at last by the act to regulate commerce, approved February 4, 1887, an apparent, but carefully limited and clearly defined, exception was made to this policy of noninterference with commercial struggle. The restraints provided by that act, however, applied exclusively to the struggle of railroad transportation, and not to the struggles of trade or of industrial pursuits. Moreover, the restraints imposed by the statute had already become approved as proper methods of railroad self-government after the various lines of the country had become closely connected and cooperative members of one great transportation organism—the American railroad system. As such these restraints already constituted a part of the American common law of the railroad, being based upon the lessons of experience and that consensus of public sentiment which Lord Bacon has characterized as leges legum.

Unfortunately, and as subsequently was proved without any sanction of law, the Interstate Commerce Commission assumed in the Maximum Rate case, decided by it in the year 1894, that the act to regulate commerce authorized it to prescribe both absolute and relative rates for the future. This assumption of authority clearly and inevitably embraced the power to determine the relative commercial status of competing cities, towns, States, and sections affected by that decision. This monstrous assumption of political power was denied by the

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