United States v. Standard Oil Company, 148 Fed., 719. (District court, northern district of Illinois. Landis, J.):

A number of indictments against the above-named defendant for accepting from carriers subject to the act to regulate commerce rates less than the rates published and filed with this Commission were under consideration. In overruling demurrers to these indictments important principles of law were announced, as follows:

Defendant contended that the Elkins law does not prohibit a shipper from taking directly from a carrier a less rate than the published rate, the defendant's claim being that the purpose of the law is merely to prohibit the parties from resorting to indirect methods or inventing fraudulent devices to obtain preferential treatment. The court held that the thing prohibited is the departure from the published and filed rate, by any means whatsoever, "whether direct between the parties or indirect by the employment of the most deviously circuitous subterfuge.”

Defendant also contended that to require a shipper to adhere to a fixed published rate is to defeat the ultimate object of the interstate commerce legislation, that object being the transportation of property for a reasonable compensation. It was held that the intention of Congress was to bring about reasonable rates for all shippers—not simply for some shippers-and that Congress knew that, as an essential prerequisite to this, preferences must be abolished. "To abolish preferences the law provides that the published rate shall be the only lawful rate. This does not mean that a rate once fixed and published shall never be changed, but it does mean that when the change is made it must be in the way provided by law, namely, by publication, to the end that the new rate may be available to all shippers at the same time on equal terms."

Defendant also contended that some of the indictments were had because they alleged that the defendant procured its property to be transported for less than the published rate from or to points beyond the carrier's own line, the argument being that the interstate-commerce law requires the carrier only to publish rates for the transportation of property between points on its own road. This contention, if upheld, would have left rebating from joint rates outside the terms of the act. In denying the contention the court held that "the law regards such carrier so publishing its rate as thereby announcing that it has facilities for the transportation of property between the points mentioned in the schedule. Whether part of the distance is covered by lease, license, or some species of traffic arrangement is wholly immaterial. The rate once published, until publicly changed according to law, is no less binding upon all parties than it would be if the carrier owned outright the entire line."

Defendant contended that certain indictments charging it with accepting rebates in the form of refunds and storage charges were bad. The allegation was that the published freight tariffs of the Lake Shore & Michigan Southern Railway Company showed that the carrier would impose a certain charge for the storage of shipments of petroleum after their arrival at Chicago; that a quantity of oil product was shipped from Whiting, Ind., to the Standard Oil Company at Chicago and remained in the custody of the railway carrier until such storage had accrued, and that this storage charge was canceled as a concession or rebate to the Standard Oil Company in respect to the transportation of the property. The court held that such published terminal charges are no less binding on the parties than is the tariff specified for the transportation. It also held that the law is operative upon consignees as well as upon consignors.

Defendant also contended that the act of June 29, 1906, by repealing the Elkins law, made these prosecutions impossible. This repealing act contained the following words:

Nothing contained in this act shall affect any prosecution or other proceeding, criminal or civil, begun under any existing act hereby amended, but such prosecution or other proceeding, criminal or civil, shall proceed as if this act had not been passed.

It was argued that, inasmuch as this clause specifically authorized the future prosecution of proceedings begun, Congress must be presumed to have thereby expressed

its intention that nothing else should be prosecuted. After an elaborate discussion of the point the court held that section 13 of the Revised Statutes would operate to save all prosecutions for violation of the act prior to the enactment of the act, June 29, 1906, and that it was not intended by Congress to relieve offenders under the old law from subsequent prosecution for such offenses, while leaving those previously indicted subject to punishment.

The court held that the act of June 29, 1906, became effective on that date, and that the resolution of June 30, 1906, providing that the rate law "shall take effect and be in force sixty days after its approval by the President of the United States," was ineffective to postpone the date of effectiveness of the act, the resolution not being signed by the President until one day after the act had been signed. No opinion is expressed as to whether or not the act was suspended during the sixty days covered by the resolution.

The court also held that an indictment for violation of the Elkins law need not allege that the published rate is a reasonable rate.

On August 3, 1907, in passing sentence upon the Standard Oil Company, which had been found guilty on one of the indictments above referred to, the following rulings were made (United States v. Standard Oil Co., 155 Fed., 305):

Defendant's contention that it has a natural inherent right to make a private contract for a railroad charge, of which the Elkins law would deprive it by requiring it to pay the rate published and filed by the carrier, and that, therefore, this act deprives it of life, liberty, or property without due process of law, has nothing to support it. The railway carrier is fundamentally incompetent to make a private contract for a rate. It is a public functionary, exercising the power of eminent domain. "There is no more reason for the claim of natural right to private contract for the exercise by a railway company of the public power with which it is endowed than there would be for the claim of similar right to private contract with the collector of customs or tax assessor for a secret valuation of property."

Defendant's contention that by authorizing common carriers to establish rates which when published and filed shall be binding upon the shipper the law delegates to the carrier legislative power has been disposed of by the Supreme Court of the United States in cases relating to the same question of rates under State statutes empowering railroad commissions to fix rates.

Defendant's contention that the law vests in the Interstate Commerce Commission the power to pass ultimately upon the question of the reasonableness or unreasonableness of freight rates as established by a carrier, thereby depriving it of its right to invoke the judgment of the courts in respect thereto and so violating section 1, article 3, of the Federal Constitution, which vests the judicial power of the United States exclusively in the courts, is not sound. The interstate commerce law does not purport to deprive the courts of their jurisdiction at the suit of a shipper to ultimately determine the question of reasonableness or unreasonableness of a rate.

Defendant's contention that the commerce clause of the Constitution does not empower Congress to forbid and make criminal the act of defendant in accepting from the carrier a less rate than that published and filed by the carrier is not sound. The only point involved in this proposition is whether Congress has authority to require that railroad rates shall be uniform. It is well settled that Congress has this power. It necessarily follows that to preserve uniformity Congress may prohibit the doing of any act or thing whatever by any person or corporation calculated to impair uniformity, and may enforce such provisions by such penal provisions as Congress may deem requisite.

Defendant contended that, inasmuch as the transportation furnished by the Chicago & Alton Railway was wholly within the State of Illinois, it was not subject to the act to regulate commerce. "The trouble with this contention,” said the court, is "that it ignores the basic proposition underlying the whole question and confuses the intrastate

character of the carrier with the interstate character of the commerce in which the carrier is engaged. The true and primary test is whether the commodity to be transported is to pass from one State into another State. If it does so pass, then it is interstate commerce, regardless of whether the rails over which it moves be owned by one or many carriers; and when this commodity begins to move, interstate commerce has begun and interstate commerce it continues to be until it reaches destination."

The court also held that in the absence of a formal agreement establishing a joint through rate effective over a through route made up of connecting lines of more than one carrier, the lawful rate in force over such through route is the sum of the local rates lawfully established by the several connecting carriers over their respective roads.

It was also held that in determining whether or not the defendant accepted the concession knowingly it need not be affirmatively shown that the defendant had actual knowledge of the lawful rate. "The defendant must be presumed to have known that which a diligent endeavor made by an honest man in good faith to ascertain the lawful rate would have disclosed to him."

It was also held that each carload shipment named in the indictment constituted a separate offense and that each carload was properly made the basis of a separate count. It having been shown that the defendant Standard Oil Company of Indiana was owned practically in its entirety by the Standard Oil Company of New Jersey, the court said:

The nominal defendant is the Standard Oil Company of Indiana, a $1,000,000 corporation. The Standard Oil Company of New Jersey, whose capital is $100,000,000, is the real defendant. This is so for the reason that if a body of men organize a large corporation under the laws of one State for the purpose of carrying on business throughout the United States and for the accomplishment of that purpose absorb the stock of other corporations such corporations so absorbed have thenceforward but a nominal existence. * * * So when, after this process has taken place, a crime is committed in the name of such smaller corporation, the law will consider that the larger corporation is the real offender.

The court examined certain tariffs of other roads brought to its attention by the defendant for the purpose of proving that it might have enjoyed the lower rate if it had made the shipments over competing roads instead of over the Chicago & Alton. These tariffs, however, it transpired, were not legally filed during the time of the shipments covered by the indictment and did not serve to excuse the defendant for accepting the lower rate.

The defendant having been found guilty on 1,492 counts, was sentenced to pay a fine of $29,240,000.

An appeal has been taken.

United States v. Vacuum Oil Company; United States v. Standard Oil Company of New York, 153 Fed., 598. (District court, western district of New York, March 29, 1907. Hazel, J.):

The indictments in the two cases above named were said by the court to involve similar transactions and legal questions and were therefore disposed of in one opinion. By two indictments in these cases each of the above-named defendants was charged with having knowingly received from the Pennsylvania Railroad Company a concession whereby petroleum was carried from Olean, N. Y., to Rutland, Vt., at less than published rates. It appeared that a published rate of 19 cents per hundred pounds was quoted by the Pennsylvania Railroad Company, the New York Central & Hudson River Railroad, and the Boston & Maine Railroad between these two points. While this rate was legally effective the Pennsylvania, the New York Central & Hudson River, and the Rutland Railroad Company, via another route than that covered by the published rate, transported petroleum for the defendants at a rate of 16.1 cents per hundred pounds. The court held that while the initial carrier may ignore its established route and carry over any connecting route, it could not "within the intent and spirit of the Interstate Commerce Act charge or exact in arrangement with such connecting

lines a less sum or rate for transportation than that which had been established." The court also said:

In other words, the initial carrier, when it has once established a joint traffic compact to transport property over a certain route between points in different States, can not transport over any connecting route pursuant to traffic arrangement at a less

rate than that published and filed in conformity with the tariff act. * ** In my

opinion, if a railroad company has entered into an arrangement with connecting carrying companies to transport property on a through line between two points situated in different States, charges for the transportation being agreed upon and copies of such joint tariff of rates being filed and published in conformity with the provisions of the act, the initial carrier, intending to evade the provisions of the act by which a uniformity of rates to all shippers is established, can not legally transport property at a less rate over other connecting roads between the same termini. *It is true that the established rate may be increased or decreased and other arrangements for continuous carriage of merchandise may be entered into, but this can only be done by compliance with the provisions of the act relating to a joint tariff compact and publication of change in rates.

*

*

It was held that no shipments at the published rate need be shown, it being sufficient that the higher rate was published and filed.

The so-called "Burlington" indictment against the Standard Oil Company of New York, containing one hundred and twenty-three counts, was disposed of in this opinion. This indictment charged the Standard Oil Company of New York with having knowingly received an unjust discrimination from the Pennsylvania Railroad Company in relation to the shipment of certain petroleum from Olean, N. Y., to Burlington, Vt., in violation of section 1 of the Elkins Act. By these indictments it was alleged that the initial carrier, the Pennsylvania Railroad Company, pursuant to a common arrangement with the New York Central and Hudson River Railroad Company, the Rutland Railroad Company, and the Central Vermont Railway Company, connecting carriers, transported petroleum for the defendant from Olean, N. Y., to Burlington, Vt. (468 miles distant), at the agreed rate of 17.8 cents per hundred pounds, and refused to accept the said rate on petroleum for transportation from shippers located in Bradford and certain other towns in Pennsylvania mentioned in the indictment, which are farther distant from Burlington than is Olean by from 20 to 136 miles, or at a proportionally greater rate, based upon their greater distances from Burlington; that the rate demanded from said competing towns other than Olean was 33 cents per hundred pounds; and that the circumstances and conditions of the transportation from said places to Burlington were substantially similar to the circumstances and conditions of the transportation from Olean to Burlington. The indictments further charged that shippers from towns and localities in the State of Pennsylvania, except Bradford, were charged for forwarding property to points in other States located in a southerly or westerly direction from Olean, except petroleum, the same tariff rates as were exacted from shippers from Olean, while shippers from Bradford of goods, except petroleum, were charged the same tariff rates for forwarding in all directions as were charged shippers from Olean. The argument for defendant upon demurrer proceeded upon the theory that the recital in the indictment charged an offense by the carriers against the localities and places mentioned therein, which is forbidden by section 3, and that, therefore, the indictment on its face was defective and must be dismissed. This contention was overruled by the court with the statement that

Any doubts that I may have in relation to the correct interpretation of the statute must be resolved in favor of the evident intendment of Congress, namely, that equality among shippers should be maintained and unjust discrimination and favoritism of all kinds condemned.

The next point made by the defendant on the demurrer was that the indictment was defective because it did not allege a departure from a tariff rate printed and filed in accordance with section 6. Defendant urged that if the indictment should be held by the court to properly charge the defendant with having accepted an unjust discrimina

tion, and if it were assumed that the rate was published and filed as required by the act, there being no allegation in the indictment of failure to file, then any shipper before making a shipment would be required to take into consideration the rates enjoyed by shippers of competing localities before being certain that he was not violating the law in shipping at the published rate. In overruling this contention the court said:

Even though the indictment fails to charge the filing and publication of the 17-cent rate, it nevertheless alleges that the 33-cent rate from Bradford and other localities was quoted to shippers at those points and that the carrier refused to accept shipments of oil from shippers of oil at such points at a rate less than 33 cents, all of which was known to the defendant. In these circumstances it may be presumed that the defendant had knowledge that oil producers in the localities specified in the indictment, except Olean, were absolutely prevented from shipping their commodity to Burlington in competition with defendant because of the unjust, extortionate, and discriminating freight charges demanded by the carrier of other shippers. It may be presumed that the Standard Oil Company was aware that it received an advantage such as enabled it to dispose of its commodity in the Burlington market to the detriment and exclusion of other shippers. It may be presumed that it knew that the difference between the rate paid by it and the 33-cent rate quoted to other shippers was relatively too high and that no reasonable differential was made by the carrier. The acceptance of such advantages manifestly evidenced a favoritism which is abhorred by the Interstate Commerce Act; and in the situation presented the defendant must be held to have unlawfully received a discrimination or concession in its favor.

OPERATING DIVISION OF THE COMMISSION.

Since the twentieth annual report of the Commission was submitted to Congress, 5,156 complaints have been filed with the Commission for consideration and action. These cases include both formal and informal complaints, as well as proceedings and investigations instituted by the Commission upon its own motion and under resolutions of the Congress. The number of formal cases and investigations instituted during the year was 415, relating directly to the rates and practices of 2,236 carriers. This shows a very great increase over previous years, as the number of such complaints filed in 1905 was 65 and 82 in the year 1906, while the total number filed during the six years previous to 1907 was 350, or 65 less than in the present year. A detailed statement of the formal complaints docketed during the year, with a brief statement of the provisions of the law claimed to be violated, will be found in Appendix C of this report. In addition to these formal complaints, 359 petitions for reparation have been filed and served on more than 2,500 carriers as a result of the decisions of the Commission in the cases of H. H. Tift and others against the Southern Railway Company and others, and Central Yellow Pine Association against the Illinois Central Railroad Company and others, which decisions were sustained by the Supreme Court of the United States. Accompanying these petitions were thousands of pages of tabulated statements showing the shipments of lumber upon which reparation is claimed, adding materially to the work necessary to the filing and serving of these petitions.

The work of the Commission in all its branches has increased to such an extent that it seems almost impossible to prepare a statement