it has been put down, without appeal to the law courts, the
railway companies have practically arrived at the conclusion
that they will not put them down because they do not know
whether they will have an opportunity to put them up again.
"Senator CULLOM: Do you think it works to the advantage of the
people that the railways will not put the rates down for fear
they will not get a chance to put them up again?
"Mr. ACWORTH: Personally, I have no doubt it does not. It is
fair to remember always that it may protect the weaker in
commercial strife. It is rather hard on the weaker man to be
crowded to the wall by a wholesale concern in any walk of life.
But if it be true in ordinary business that, on the whole, the
public gains by the wholesaling method, it is probably true in
railway business also. I think that, so to speak, the heart has
been taken out of the railway man. The railway men understand
this business; they know how to manage it in their own way. The
railway men think 'the responsibility has ceased to be ours; we
must maintain the status quo,' and that is what they do.
"The CHAIRMAN: You think that dividing responsibility impairs
the administrative power of the officials of the roads as well
as the service they render to the public?
"Mr. ACWORTH: From the operating point of view, I do not think
our railways have been sufficiently interfered with to prevent
them developing the goodness of the service. But as to rate
making, I have no doubt that the interference of Parliament,
the courts, and the Executive has all tended to stereotype and
keep rates at an unnecessarily high level.
"The CHAIRMAN: Would you say that, on the whole, the power
to make rates generally and primarily should be left to the
railroads and to the free play of the forces of the business
world?
"Mr. ACWORTH: Speaking as an individual student, I have no
doubt that that is the process that will arrive at the best
results for the community, with this exception: That I fully
think it is necessary that the community in some way should
interfere to protect all customers from unfair treatment.
"The CHAIRMAN: You think that the power should reside somewhere
to correct excessive and extortionate rates by summary and
proper proceedings?
"Mr. ACWORTH: I am not sure that I should go so far as to say
excessive rates regarded as excessive in themselves. I am
myself inclined to think that excessive rates will correct
themselves. The wise men will discover that it does not pay to
charge excessive rates. But I think the law should interfere to
prevent unfair rates to A as compared with the rates given to
B. It seems to me that the State is bound to insist that the
rates shall be public, and that practically will settle it,
for if they are public they have got to be fair; I am inclined
to think the law should confine itself to securing that, where
there is a difference made as between A and B, the difference
should be a difference for a commercial reason, and not for any
reason of personal favoritism.
"Senator FORAKER: And I understand you to say that the effect
of fixing maximum rates is to lessen the tendency to reduce
rates, which railroads had practiced before this legislation
was enacted?
"Mr. ACWORTH: I am not quite sure that the maxima have really
had very much effect at all. It has been a tendency, but I do
not think an important tendency. But the interpretation by the
courts of the undue preference law, and the recent limitation
that having once reduced you can not subsequently increase,
have had that effect markedly, I believe.
"Senator FORAKER: So that the rates for the transportation of
freight on railroads in England have not been declining, I take
it from your statement, in recent years, but have remained
practically stationary?
"Mr. ACWORTH: I do not know what the average rate is, because
there are no statistics in England; but my own impression would
be that it had probably not declined to an appreciable extent,
whereas in an earlier period it certainly did decline pretty
fast."
The effect of a similar law, passed in England, as shown by the
testimony of Mr. Acworth, confirms the views of the committee which
have been expressed in this report, that with such a provision
embodied in the present interstate commerce law, there would be few
reductions or advances in American rates. If it had the effect in
England of destroying the flexibility of the rates of the carrier and
interfered with the development of England's commerce, as well as her
railroads, how much more serious would be the result in this country,
that is in the process of rapid development, both as to its commerce
and territory? It has been credibly stated that the Board of Trade of
England is now seriously considering a recommendation for the repeal
of that provision of the statute.
AN ANALYSIS OF THE COMMUNICATION TO THE COMMISSION--MANY OF ITS
OBJECTIONS APPLY TO THE AMENDMENT OFFERED IN COMMITTEE.
9. When this bill was referred to your committee for its
consideration the chairman addressed a letter to the Interstate
Commerce Commission, inclosing the bill, and requested the opinion of
the commission as to the wisdom of incorporating the amendment into
the interstate commerce law.
The chairman replied in the following communication:
"INTERSTATE COMMERCE COMMISSION,
"_Washington, January 29, 1908._
"HON. STEPHEN B. ELKINS,
"_Chairman Committee on Interstate Commerce_,
"_United States Senate, Washington, D. C._
"DEAR SIR: The Interstate Commerce Commission has the honor to
submit the following in response to your communication of 24th
instant, transmitting a bill (S. 423) to amend section 6 of the
act to regulate commerce, introduced by Senator Fulton December
4, 1907, and requesting the commission to 'advise the committee
before its next meeting, January 31, their opinion of said bill
and what action they would suggest thereon.'
"Whilst the views of the entire commission can not be
definitely ascertained within the time named, because of
absences on official business, a majority of the commissioners
and probably all of them would not be disposed to favor the
enactment of this measure.
"To give to the protest of a single shipper the effect of
preventing the advance of any rate until the reasonableness of
that advance was affirmatively determined by the commission
would establish a hard and fast rule of doubtful fairness
to the railroads and questionable advantage to the public.
Under existing conditions we are of the opinion that it would
be unwise to adopt the arbitrary limitation which this bill
proposes, whatever may be found desirable or necessary in this
regard in the future.
"It is further to be observed that the passage of such a bill
at this time would impose a burden upon the commission which
it ought not to be asked to undertake. If every proposed
advance had to be investigated by the commission and officially
sanctioned before it could take effect, the number of cases
to be considered would presumably be so great as to render
their prompt disposition almost impossible. In instances of
justifiable increase the necessary delay resulting from the
probable volume of cases would work injustice to the carriers.
Until conditions become more stable and the substantive
provisions of the act are more completely observed in railway
tariffs and practices we entertain the belief that a wider
latitude of discretion on the part of carriers than this
measure allows should be permitted.
"It is also suggested that the practical effect of the proposed
amendment might be to prevent voluntary reductions of rates
by the carriers. If no rate could be increased without the
approval of the commission after affirmative showing by the
carrier it might happen that many reductions now voluntarily
accorded would not be made.
"This subject of rate advances was discussed in our recent
annual report to the Congress, and that portion of the report
is transmitted herewith for the information of your committee.
It concludes with a recommendation relating to the matter in
question in which the entire commission concurred, and that
recommendation is now respectfully renewed.
"Very respectfully,
"MARTIN A. KNAPP,
_Chairman_."
It will be observed by an examination of this communication from the
commission that it deemed it unwise to recommend the adoption of the
amendment to the sixth section as offered in Senate bill 423, but the
letter refers to its former report as expressive of its views upon
this subject, which recommended a somewhat similar provision, but
differing in this respect. In Senate bill 423 the filing of a protest
would suspend the taking effect of the rate until after full hearing
as to the merits of the advance. The recommendation of the commission
in its former report, referred to in the communication, recommended
the adoption of a provision that would confer upon the commission,
upon the filing of a complaint, the discretion to suspend the rate
until final hearing. The amendment to the bill before your committee
offered during its consideration, and which has been fully discussed
in this report, was in substance the recommendation of the commission.
An analysis of the letter of the chairman of the commission, stating
the objections to the enactments of the proposed amendment into law,
sustains many of the reasons which have been urged in this report
against the approval of the principle announced by that amendment.
The committee quotes from the letter, as follows:
"(a) To give to the protest of a single shipper the effect of
preventing the advance of any rate until the reasonableness of
that advance was affirmatively determined by the commission,
would establish a hard and fast rule of doubtful fairness to
the railroads and questionable advantage to the public.
"(b) Under existing conditions we are of the opinion that it
would be unwise to adopt the arbitrary limitation which this
bill proposes.
"(c) If every proposed advance had to be investigated by the
commission and officially sanctioned before it could take
effect the number of cases to be considered would presumably be
so great as to render this prompt disposition almost impossible.
"(d) It is further to be observed that the passage of such a
bill at this time would impose a burden upon the commission,
which it should not be asked to undertake.
"(e) In instances of justifiable increase all necessary delay
resulting from probable volume of cases would work injustice to
the carriers.
"(f) Until conditions become more stable and the substantive
operations of the act are more completely observed in railway
tariffs and practices, we entertain the belief that a wider
latitude of discretion on the part of carriers than this
measure allows would be permitted.
"(g) It is also suggested that the practical effect of a
proposed amendment might be to prevent voluntary reductions of
rates by the carriers.
"(h) If no rate could be increased without the approval of the
commission after affirmative showing by the carrier, it might
happen that many reductions now voluntarily accorded would not
be made."
The nine reasons suggested by the commission why the original
amendment offered to section 6 should not be adopted, fully sustain
the committee in reporting the bill adversely, and to a great extent,
fully justify the views which it has expressed in this report as
influencing the actions of the committee in its adverse report upon
the amendment proposed in the committee.
The committee is unable to appreciate the force of the suggestion
of the modification proposed to the original amendment, as in any
way changing the principle embodied in it, or the practical results
which would flow from its adoption. If the power was conferred upon
the commission, when a rate was advanced, upon complaint to suspend
the going into effect of that rate until a final hearing, every
objection urged by the commission to the adoption of the bill, but
the first two, would be applicable to the modification proposed by
the commission to the original amendment.
Under the modification suggested by the commission the burden
imposed upon it would be greater, if possible, than under the
original amendment. Under the original amendment, by force of the
statute, the filing of the protest would suspend the advanced rate,
and the hearing upon the merits would take place after the thirty
days had expired. Under the suggestion of the commission conferring
upon it the discretionary authority upon complaint to determine
whether the rate should go into effect at the time prescribed by
law or be suspended, there is imposed an official quasi judicial
duty upon the commission, which it should not perform except upon
proof that probably the rate sought to be advanced would ultimately
be determined to be unreasonable. Remembering the large number of
changes of rates daily, and the fact that under the law the complaint
could be filed at any time within the thirty days, would it not be
an impossible undertaking for the commission to hope to perform this
official act with justice to the public or to the carrier? In the
multiplicity of duties now demanding its most earnest attention,
would not the practical operation of such a law compel it to enter
a pro forma order of suspension until the final hearing, when the
commission, upon an examination of the complaint, is satisfied that
it presented a prima facie case of unreasonable advance?
An official tribunal charged with the duty of preventing
an unreasonable advance in rates would be constrained, on
the presentation of such a complaint, to issue the order of
suspension. If the slightest doubt was raised in its mind as to the
reasonableness of the advance, its official obligation would require
it to enter the order of suspension. Is there any question that such
a prima facie case could be made where the consideration of the
protest would, of necessity, be ex parte?
The committee is not, therefore, able to draw a distinction between
the original amendment and that proposed in committee. In the opinion
of the committee the reasons stated in the letter of the chairman
of the commission, and the reasons given in this report, not only
justify it but compel an adverse report.
CONDITIONS CONFRONTING CONGRESS.
10. The act of June 29, 1906, took effect August 28, 1906. It has
been operative only about twenty-eight months. During half of that
period of time the country has experienced the effects of a severe
commercial panic; business has been prostrated; transportation
paralyzed; thousands of cars have been stored on the sidings, and
hundreds of engines have been placed in the shops, awaiting the
revival of business. From conditions existing today, we have a right
to assume that before many months we shall be approaching normal
conditions. The commission has not had sufficient time to interpret
and construe the recent law and to promulgate its orders in reference
to the action of the carriers under it. Many of the traffic questions
involved, under the provisions of that law, are yet to be construed
and put in force by orders of the commission. Is it wise, under these
conditions, to begin amending that statute by introducing provisions
inconsistent with the basis of the act? It has been shown that under
the power conferred by that recent enactment, the commission is
vested with the power to change an existing unreasonable rate and
to fix for the future a reasonable rate. It has also the authority
conferred upon it to award reparation to the extent of any injury
resulting to a shipper, by reason of the existence of an unreasonable
rate.
Attention has been called to the opinion of the commission, as
expressed in its decisions, narrowing very greatly the right of the
carrier to advance a rate that would meet with its approval upon
hearing. The committee must assume, in considering this question,
that both the shippers and traffic officials, with knowledge of the
views entertained by the commission upon the question of an advance
of rates, will in the one case be prompt to avail themselves of that
attitude of the commission, and in the other that they will seek to
so adjust their rates as to bring their schedules within the rulings
of that tribunal. The committee believes the highest duty of the
commission is to bring together shippers and carriers, to the end
that each may see that neither can be permanently prosperous at the
expense of the other. It further believes that in many instances
this effort has been made by the commission, and successfully made.
It cannot be accomplished by statutes causing rigidity of rates. The
most sensitive spot in the great business dealings of the country
is the railroad rate. This rate must be raised or lowered, not in
obedience to a rigid statutory law, but in obedience to the varying
conditions of trade and commerce.
The National Board of Trade, one of the most important commercial
organizations in the country and one of the most influential, met in
Washington on Tuesday, January 19, 1909. Two proposed resolutions
were submitted to that convention. First, by the Philadelphia Press
League, urging an amendment to the interstate commerce law, to permit
railroads engaged in interstate traffic to enter into the making
of agreements under the supervision and control of the Interstate
Commerce Commission. The second proposition was submitted by the
Scranton Board of Trade, embodying the provisions of the amendment
offered in the committee upon the consideration of Senate bill 423,
and approved in the report of the Interstate Commerce Commission as
to the advance of rates.
These resolutions were referred to the committee on resolutions
having charge of interstate commerce matters. That committee, through
its chairman, made the following report, which was unanimously
indorsed by the convention of the National Board of Trade:
"The committee on interstate commerce law respectfully reports
that, in its judgment, the National Board of Trade ought not
at this time to recommend any change in the laws relating to
interstate commerce."
The convention was not satisfied with the passage of this resolution,
but the chairmen of the several committees of that association were
subsequently authorized and directed by resolution to urge the
conclusions of the board in its name whenever possible.
The country is now demanding repose in its industrial upbuilding. It
is not a time to experiment and to change the basis upon which the
former acts to regulate commerce have been predicated. The recent
law passed by Congress so greatly enlarging the authority of the
commission should, before changes are sought, have the opportunity
of at least a fair trial as to the value of its provisions in the
regulation of interstate commerce. When trial has been given and
normal conditions have been restored, any defect in the regulating
statute can then, in the light of experience, be promptly remedied.
FOOTNOTE:
[J] The average rate per ton mile in 1908 was 7.54 mills.
STATISTICS OF AMERICAN RAILWAYS
FOR THE YEAR ENDING JUNE 30
1909
PREPARED BY
SLASON THOMPSON
MANAGER OF THE BUREAU OF RAILWAY NEWS AND STATISTICS
INTRODUCTION
"The function of accounts is to record facts. True accounting
is nothing more, nor nothing less, than the correct statement
of what in fact has taken place, and the measurement of that
fact in an appropriate figure."--Prof Henry C. Adams.
To be of the highest value, statistics must be accurate,
uniform and continuous.
Nothing in the nature of statistics under official authority more
confusing and misleading has ever been issued from the government
printing office than those portions of the Twenty-third Annual Report
of the Interstate Commerce Commission for the year ending June 30,
1909, purporting to deal with the financial results of the railways
of the United States for the fiscal years 1908 and 1909.
On the first page of the Report the financial results of the last two
fiscal years are set down thus:
===================================================================
| Operating | Operating | | Operating
| Revenues | Expenses | Taxes | Income
-----+----------------+----------------+-------------+-------------
1908 | $2,461,521,345 | $1,721,327,155 | $83,775,869 | $655,418,321
1909 | 2,494,115,589 | 1,662,102,172 | 89,026,226 | 742,987,191
-----+----------------+----------------+-------------+-------------
The mileage operated in 1908 is stated as 228,164.80 and in 1909 as
233,002.67 miles.
On page 54 of the report the summary compiled from the monthly
reports gives the following comparative figures for the same years:
===================================================================
| Total | Total | |
| Operating | Operating | Net Revenue | Taxes
| Revenues | Expenses | |
1908 | $2,421,542,004 | $1,687,144,975 | $734,397,029 | $83,775,869
1909 | 2,443,312,232 | 1,615,497,233 | 827,814,998 | 89,026,226
-----+----------------+----------------+--------------+------------
The mileage is the same as above, with the added information that the
mileage operated at the end of the fiscal year 1908 was 229,952.36;
and at the end of 1909, 234,182.70.
It will be observed that the taxes in both summaries are identical,
but in one they are subtracted from net revenues and in the other
they are not.
An insert facing page 54, giving the details of the monthly reports
from which the table on that page is compiled, reveals the common
source of both sets of returns and gives the key to the discrepancy
between them. This is no less than the inclusion in the former of the
revenues and expenses from "outside operations," which are excluded
from the summary on page 54, in which the "net revenue" only from
such outside source is mentioned and added to the net revenue from
rail operations.
The impropriety and inaccuracy of such accounting becomes manifest
when its effect is seen to vary the ratio of operating expenses to
earnings from 69.67% to 69.93% in 1908, and from 66.12% to 66.64% in
1909.
On pages 64 and 65 appears another set of income figures for the year
ending June 30, 1908. This is compiled from the annual reports of the
carriers operating 230,494 miles of line, from which _the mileage
of switching and terminal companies is excluded_. It supplies the
following summary:
YEAR ENDING JUNE 30, 1908.
===========================================+=================
Rail operations: |
Operating revenues | $2,393,805,989
Operating expenses | 1,669,547,876
Net operating revenue | 724,258,113
Taxes | 78,673,794
Net revenue from outside operations | 5,977,268
Operating income | 651,561,587
Ratio of operating expenses to earnings | 69.72
-------------------------------------------+-----------------
As these figures are compiled from the only returns which furnish
data respecting all the various phases of railway operation in the
United States, they will be accepted in subsequent pages as the
official returns for 1908.
The above figures are exclusive of returns from switching and
terminal companies, whose earnings, according to the monthly reports
in 1908, were $23,028,773; expenses, $16,383,481, and taxes,
$1,245,261.
GROSSLY EXAGGERATED DIVIDENDS.
But these are venial variations compared to the deliberate
misrepresentation as to dividends on page 62 of the report, where it
is stated:
"The amount of dividends declared during the year was $386,879,362,
being equivalent to 7.99 per cent on dividend-paying stock. For the
year ending June 30, 1907, the amount of dividends declared was
$308,088,627."