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Mr. Bacon. That is what I said. Let me read to you the exact
provision of the bill in that respect. I read from the second paragraph on page 6 of the Nelson bill:
The filing of a petition to review an order shall of itself suspend the effect of such order for thirty days, and the court before which the same is pending may also, if upon an inspection of the record it plainly appears that the order proceeds upon some error of law, or is unjust and unreasonable upon the facts, and not otherwise, suspend the operation of the order during the pendency of the proceedings in review, or until further order of the court.
Senator CARMACK. The application of itself suspends the order, as I gather from the reading of that.
Mr. Bacon. Yes; the application to the circuit court for a review of the order itself suspends the operation of that order for thirty days. I was about to say, in further response to the question asked by Senator Foraker, that the Commission is not authorized under this bill to make any change in rates in order to correct any error found to exist in the rates, except where formal complaint has been filed before the Commission, and that complaint has been investigated and all parties in interest have been given an opportunity to be heard.
The CHAIRMAN. Is it clearly provided that this order of the Commission shall be in force for two years, and that thereafter the railroads shall make a new rate in that given case?
Mr. Bacon. The railroad will be free to make a new rate in that case. It is provided, however, as a protection to any interested party in regard to the change of rate, that he may file with the Commission his objections to such change.
The CHA'IRMAN. I know; but let us suppose that the Commission makes an order reducing the rate; that order stands good under the Nelson bill for two years, does it?
Mr. Bacon. Two years.
The CHAIRMAN. And after that the railroad is at liberty to make another rate?
Mr. Bacon. Yes; and if they do make another rate there is this provision: That any party interested may file with the Commission his objections within sixty days, and the Commission “may thereupon order the carrier to restore and maintain the rate or practice required by the original order, pending its investigation as to the lawfulness or reasonableness of such change.'
The CHAIRMAN. Suppose that the railroad, after the Commission has made an order, takes no appeal, but goes on to carry out the Commission's order upon an individual case; that order is binding for two years, and only two years?
Mr. Bacon. That is right.
The CHAIRMAN. Consequently, the railroad can make any rate it pleases in that case?
Mr. Bacon. It can. But anyone interested has the privilege of filing with the Commission objections to that change, and in that way reopen the case before the Commission.
Senator CARMACK. You mean any shipper?
Mr. Bacon. Any shipper can file his objections with the Commission itself.
The CHAIRMAN. How long do you think that would keep a rate in force?
Mr. Bacon. It would remain in force another two yea rs.
Mr. Bacon. There is no provision as to how often this process may be repeated. But the provision is inserted so that any party interested, feeling that he has been wronged by the change of rate, can have an opportunity to have it considered under the circumstances existing at the time.
Senator CLAPP. At the end of the two years would the subject be thrown back where it was originally?
Mr. Bacon. Exactly.
Senator CLAPP. The Commission has jurisdiction to take up another complaint.
Mr. Bacon. It would be virtually a new complaint brought before the Commission, to be considered with reference to the changed conditions and circumstances.
Senator DOLLIVER. Does the order of the Commission contemplated here apply to the individual only or to the classification?
Mr. Bacon. Simply to the individual complaint. The complaint may, however, be in relation to an unjust and unreasonable rate or to an unjust and unreasonable classitication.
Senator DOLLIVER. Suppose it is an unjust personal discrimination, is not the order of the Commission liable to create more discriminations than it cures, by putting that individual case out of relation with everybody else?
Mr. Bacon. A personal discrimination is simply a criminal matter, and the parties are proceeded against criminally. Personal discriminations do not require a determination of the question of whether there was discrimination or not; that is, the payment of rebates is by the present law made a crime, and the railway company guilty of it and the party receiving the rebate are both amenable for the violation of the law under criminal proceeding.
Senator DOLLIVER. But the complaint is very general that there is a secret departure from the published rates.
Mr. Bacon. That is one of the serious complaints.
Senator DOLLIVER. What is there in this bill to make it more difficult for the railroads to depart from the order of the Commission secretly than there is to depart secretly from their own agreed and published schedule rates ?
Mr. Bacon. There are provisions in this bill aiming particularly at that evil, making it more practicable for the commission to obtain the necessary evidence to convict the parties of violation of law. But the payment of rebates, like any other dishonest proceeding, will never be wholly prevented by law. It can only be punished when practiced, the same as any other criminal act. But that is an entirely different thing from the matter of exercising supervision over rates.
Senator CARMACK. Is not the matter of rebates the worst trouble in the whole business?
Mr. Bacon. I am very much surprised to find that there is entertained very generally by the public that idea, that individual discrimination is the great evil of the transportation business. But from my own observation-and I have made a study of the operation of the interstate-commerce act ever since its original enactment and have followed its workings very closely—my own observation is that that is comparatively a trivial evil. The great evil is the discrimination between localities-discrimination in the published rates-certain localities being discriminated against in favor of other localities.
Senator DOLLIVER. Has Milwaukee escaped that evil?
Mr. Bacon. It has not. I do not know of any city in the country that is more discriminated against than Milwaukee. I will say, however, that Milwaukee brought a case before the Commission some six years ago on account of discrimination and obtained a decision in its favor from the Commission. The Commission ordered a reduction, and that order has never been obeyed by the railway companies, for the reason that just about the time the decision was promulgated the decision of the Supreme Court declared that the Commission had not the authority to prescribe what change should be made in the rates when it found existing rates wrong.
Under that decision the railway companies absolutely refused to pay any attention to the order of the Commission. And I will say in this connection that up to that time, which was ten years after the organization of the Commission, the Commission had made its orders in just such cases, prescribing what changes should be made in the rates, and those orders were almost universally observed by the transportation companies. The right of the Commission to do that had never been questioned up to that time. The condition of traffic matters throughout the country during that period was the most satisfactory it has ever been either before or since.
The chief purpose of this bill is to restore that condition of things, to give the Commission specifically this authority which it exercised during that period, under what it deemed inferentially to be its power, its right, and not only its power and right, but its duty. The decision of the Supreme Court was not predicated upon any question as to the constitutional right of Congress to vest the Commission with this power, but it was confined to the fact that the power was not specifically conferred in terms by the law.
Senator DOLLIVER. What is the usual motive for discriminating against localities, as in the Milwaukee case to which you have referred? Mr. Bacon. I will answer that question.
Senator CARMACK. It is more frequently discriminated against than some other localities, is it not?
Mr. Bacon. The motive is not for the purpose of discriminating in favor of one locality as against another, but it arises from competition for business over a certain territory. Certain railroads taking business from a certain territory to a certain market are in competition with other roads taking the same kind of business to another market, and each of the roads is trying, of course, to get the advantage over the other in the division of the business. In consequence of that the rates become discriminative.
Senator KEAN. Demoralized.
Mr. Bacon. Not demoralized, but discriminative as against certain localities. For instance, here are these various seaboard cities-Boston, New York, Philadelphia, and Baltimore. Certain rates are made from the western country to these seaboard cities. Each of the trunk lines is desirous to obtain as large a share of that business as possible, and in making rates each seeks to make rates that will give itself the advantage over competitors. The railroads, in order to break up destructive competition between them, agree upon certain differentials from certain territory to certain markets or certain ports; they agree upon that with reference to the distribution of the business, not with reference to the question of right or equity. It is simply to divide the business as nearly satisfactorily as possible under the operation of the rates between themselves. The result of that often is that certain places are discriminated against and certain other places are favored. That practice will be continued until some competent authority requires it to be changed, because it is only natural that the railroad companies should continue it.
A case of that kind came up a few years ago with reference to Cincinnati and Chicago in regard to the business to the southeast as compared with the business from the seaboard cities to the southeast. In that case the Commission decided that the rates from Cincinnati and Chicago into that territory were unjustly large as compared with the rates from the seaboard cities into that territory, and the Commission prescribed a certain difference which should be made in those rates in order to equalize the two sections of the country with reference to the Southern trade. That case was carried into court, appealed to the Supreme Court, and the Supreme Court denied the right of the Commission to specify what rates should be enforced in future.
In reference to the exercise of this power by the Commission I wish to read an extract from the annual report of the Commission for 1897, in which it expressed itself on this subject. It says:
It (the Commission) understood that when, as in this case, the rates had been established by the carriers and afterwards challenged or complained of as unreasonable, and the question of unreasonableness had been tried, the Commission could declare not only what rate was wrong, but what would be right, and could lawfully petition the court to enforce the right. That is to say, when a rate had been established by the carriers, challenged by or on behalf of shippers, and tried by the Commission in a proceeding ordered and regulated as near as may be in conformity with United States court proceedings, the Commission had a right, and it became its duty when justified by the facts, to declare the rate wrong, decide what rate would be right, and through the judgment of the court compel the carrier to perform its legal duty to receive and carry property at rates which are reasonable and just.
The Commission exercised this power in a case commenced in the second month after its organization and continued to exercise it for a period of more than ten years, during which time no member of the Commission ever officially questioned the existence of such authority or failed to join in its exercise. As already stated, the authority of the Commission to modify and reduce an established rate, and to enforce a reasonable rate for the future, was not questioned in the answer of the defendant in the Atlanta rate case, decided March 30, 1896 (previously cited), nor had it ever been denied in any of the answers made to more than four hundred cases previously commenced, many of them alleging unreasonable and unjust charges and praying the Commission to enforce a reduction and lower rates in the future.
I introduce that to show clearly what the practice of the Commission had been for that ten years, and also to show the fact that the authority for the Commission to proceed in that way had never been questioned during that ten years by any of the carriers.
We were speaking, when I was interrupted, about the limit of time during which these orders of the Commission should be obligatory, being two years under the Nelson bill but only one under the Elkins bill. I wish to say to the committee that the limitation of one year strikes business men as being altogether too limited. Even two years is regarded by business men generally as a very short time. The length of time taken, the amount of labor required to prepare a case before the Commission and to carry it through to a decision, and then the possible contest of that case in the courts, entail such an amount of time, labor, and expense upon the shipper, or upon the commercial organization conducting it, that if the order were only to be in force for one year there would not be one case in twenty, to say the least, that would ever be brought before the Commission; that is, it would be considered by the party injured that it would not pay him to go to the labor and expense for the sake of having the prescribed rate in • effect only one year.
Senator DOLLIVER. I want to get more clearly the application of this bill. When there has been an adjudication of an individual complaint, would it not be better to have some mechanism by which the order could be made applicable to all such cases?
Mr. Bacon. That is the case, sir.
Senator DOLLIVER. Is there any process is the law by which an order made in an individual case shall also be made obligatory upon all cases similarly situated ?
Mr. Bacon. That is the case as regards what I term personal discriminations--payment of rebates, for instance.
Senator DOLLIVER. Or extortion?
Senator CLAPP. You do not understand Senator Dolliver. Complaint is made by an individual that the rate which he is paying upon something is excessive.
Mr. BACON. I understood it.
Senator CLAPP. What the Senator means, as I understand, is how far can the Commission upon that complaint take into account the effect of modifying that rate as to other cases? That is what the Senator is referring to.
Mr. BACON. The Commission takes into consideration the relation of that rate to other rates and determines largely upon that relation as to reasonableness or unreasonableness. It has no power to order a general reduction. It can only order a change in the particular rate complained of in each individual case.
Senator FORAKER. Why not make the rate for every shipper, not for the one shipper?
Mr. Bacon. The Commission can go no farther than to change the rate in the particular instance where complaint has been made.
The CHAIRMAN. Suppose that the court after final review at the end of two years should decide that the order of the Commission was wrong, and that the rate fixed by the railroad in the first instance was right. Then what recourse would the railroad have upon the shipper to get back the difference in money?
Mr, Bacon. It is impossible to make any such provision. It is simply a question of who shall suffer during the pendency of the proceeding
The CHAIRMAN. Should not the shipper give bond for the repayment of that money?
Mr. Bacon. It is impossible to do that for the reason that the party who has paid the freight has passed it along on his goods sold to the consumer, and so he does not himself sustain any damage.
The CHAIRMAN. Let me go further: Suppose this order had affected one hundred shippers, as Senator Clapp suggests, to a given destination or between certain points; and suppose that the railroad should lose $400,000 to $500,000 by reason of transporting freight at the rate prescribed; would you not suggest some provision or remedy by which, if the court should decide that the Commission had been in error, the railroad could recover back the difference?
Senator McLAURIN. There would be this trouble about that: Sup