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POOLING

COMPETITION.

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statutes, approved, respectively, February 11, 1893, Februáry 14, 1903, February 19, 1903, and February 25, 1903, each containing an express provision making the testimony of the witness compulsory, and securing immunity to the person so testifying, by prohibiting any prosecution of the witness on account of any matter to which he might be compelled to testify, except perjury in giving the evidence.

Congress also provided a method of securing information through an investigating bureau, known as the Bureau of Corporations in the Department of Commerce and Labor, created by section 6 of the act approved February 14, 1903, giving the Commissioner power to investigate “the organization, conduct, and management of the business” of corporations or joint-stock companies engaged in interstate com

This legislation was designed to promote Federal control in the field of interstate commerce.

merce.

COMMUNITY OF INTEREST AMONG CARRIERS.

The Commerce Act, among other provisions, prohibited pooling among railroads in order to stimulate competition among carriers. The consolidation and merger of competing systems of railway has been condemned by the Supreme Court of the United States as contrary to law and public policy and in violation of the Sherman Act. Yet from official data in the records of the Interstate Commerce Commission, and from testimony taken before that body from time to time, it would seem that the railways of the United States are practically merged and operated under a sort of gentlemen's agreement, which substantially eliminates competition. Mr. Edward A. Moseley, secretary of the Commission, is authority for the statement that 65 per cent. of all the railroads in the country are so closely united as to amount to a practical community of interest; while the remaining 35 per cent. are absolutely dependent upon these great consolidations. “Competition,” says Mr. Moseley, “ between carriers br rail, which formerly prevailed and acted as a check or restraint again unreasonable rates, has been to a great estrat intressed and destroyed. As a result of these consolidations, the shinnar can no longer safely rely upon competition to insure rates reasonably low, and to prevent rates unreasonably high. The principal and powerful lines are now controlled by a few, whose common interests make it desirable and profitable to act in concert and refrain from competition.”

Other objects sought to be secured by the Commerce Act originally, and by the legislation of 1906 amending it, were (1) to give to every shipper equality of opportunity, and prevent the carrier from charging one man more than another for transportation of property; (2) to forbid one carrying company to combine with another, so that there could be no merger of public highways, which could only result in eliminating competition, thus establishing a monopoly; (3) to compel a carrier to carry, and to prohibit it from engaging in any other business.

The Interstate Commerce Act was experimental legislation. Experience has shown that its provisions, even as amended by the Elkins Act and other supplemental legislation above referred to, failed to accomplish the benefits which it was designed to secure.

NEED OF SUPPLEMENTAL LEGISLATION,

One radical defect in the law was its failure to create a tribunal with power to fix rates and charges for transportation. When the act was passed the far-reaching consequences of conferring this sovereign power was ably discussed. Should it remain in the carrier ? Should it be vested in a judicial tribunal or court, clothed with jurisdiction over this particular field, to be known as the Court of Interstate Commerce (Congress undoubtedly has power to create such a court), or should supervision be conferred upon an administrative or quasi-judicial body. The latter expedient was adopted and the Interstate Commerce Commission was created with certain specified powers and duties.

The Commission, however, prior to 1906, was not clothed with power to fix rates and charges for transportation. It could take testimony as to whether or not a given rate was reasonable, but if it found that the rate was unreasonable, it

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had no power to prescribe what would be a reasonable rate in its stead. It could make orders commanding the carrier to cease and desist from practicing discrimination, or from continuing to charge an unreasonable rate, or to make reparation for losses sustained. But the orders were not obligatory until suit was brought by the Commission to enforce them. Pending the protracted delays which necessarily ensued, during which period the acts forbidden by the order were also prohibited by injunction, the discouraged shipper became exhausted. He found his business ruined by the acts complained of. He was helpless. As between carrier and shipper the latter was practically remediless.

Thus the carrier, with unlimited resources at its command, has been able to evade the law and defeat the beneficial provisions of the statute, by reason of the lack of power conferred upon the Interstate Commerce Commission.

RESULT OF CARRIER BEING DEALER.

But graver abuses than rebating and discrimination grew out of the practice of carriers engaging in business, and dealing in the commodities which they transport, Not only were shippers discriminated against and driven out of business by rivals, who, by means of secret rebates, could secure freight rates much lower than that paid by the competitor, but in many instances the rival and competitor of the helpless shipper was the carrier itself, who, contrary to public policy, was permitted to become a dealer in the very commodities it transported. A familiar instance of the evils resulting from the practice of the carrier engaging in business will be found in the mining regions of Pennsylvania and West Virginia, where the coal lands were largely absorbed and the coal business monopolized by the carrier. By mining and dealing in coal, the carrier, either directly or through subsidiary companies, found no difficulty in driving its competitors from the field by refusing them cars and facilities for transportation, and discriminating against them by secret rebates. The carrier was also the miner and shipper of coal, and in this dual capacity was enabled to establish a complete monopoly and to control absolutely the price of the commodity to the consumer.

The carrier in the exercise of the tremendous power which attaches to the control of rates of transportation upon the public highways was able to make its own markets, and to establish its own market towns. Communities were destroyed because rates were made lower to certain points at greater distances than the rates given to localities situated nearer to the place of the origin of the shipment. This sort of discrimination frequently destroyed communities, and built up rival localities, and market points at the expense of those destroyed. In one instance (the Tift case ?) the carrier, under the guise of increased freight charges, took a pro rata share of the increased profits realized from the business of a prosperous shipper.

LEGISLATION OF 1906. The President of the United States, Hon. THEODORE ROOSEVELT, carefully studied the conditions resulting from the criminal acts of the carriers, and the abuse of their great powers. He realized the difficulties attending the stupendous problem, and the far-reaching consequences of conferring upon some body or tribunal the rate-making power. He aroused public opinion to the importance of the subject, and the pressing need of a remedy for the evils complained of. In his annual message to Congress (December, 1905), he recommended that the power be vested in the Interstate Commerce Commission, in these memorable words:

“ The Interstate Commerce Commission should be vested with the power, where a given rate has been challenged and after full hearing found to be unreasonable, to decide, subject to judicial review, what shall be a reasonable rate to take its place; the ruling of the Commission to take effect immediately and to obtain, unless and until it is reversed by the court of review.”

Had this recommendation been enacted into law, the rights of the shipper would have been restored, and the power of

1 T'ift v. Southern Ry. Co., 138 Fed. Rep. 753.

RESULTS OF NEW LEGISLATION.

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the carrier to exhaust and ruin the shipper by interminable delay, and to continue to grant rebates, and to exercise unreasonable discrimination in its own behalf, would have been materially checked. The carrier would have been obliged to obey an order made after a fair trial, and to carry, upon the terms and conditions prescribed in the act, and to treat all shippers, similarly situated, alike. The struggle which resulted in Congress over the rate regulation recommended by the President became memorable. One phase of it was the strenuous effort to prevent the rate, made by the Commission, from taking effect immediately. This effort was successful. The act, passed June 29, 1906, vested in the Interstate Commerce Commission power to fix a maximum rate, the order of the Commission to take effect within such reasonable time, not less than thirty days, and continue in force for such period of time, not exceeding two years, as shall be prescribed in the order, unless the same shall be suspended or modified or set aside by the Commission, or be suspended or set aside by a court of competent jurisdiction.”

RESULTS ACHIEVED BY LEGISLATION OF 1906. Nevertheless, great and lasting results were achieved by the legislation of 1906. The task of securing efficient remedial legislation was difficult. The law must be just. The carrier must have reasonable compensation for services rendered. The shipper must be protected absolutely from unjust discrimination by the carrier. One man must not be charged more than another for the same service. Facilities of shipment and instrumentalities of commerce, including switches and sidings, must be open to all, and none unjustly excluded from their use. A railroad is a public highway and cannot, in the nature of things, be operated as a private way so as to permit its use by those only who are chosen by the carrier. Such discrimination would make the highway private. In order to secure these ends, the following provisions, in addition to the power to fix rates, will be found in the new law:

The Commission is given power, not only to fix rates gen

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