RAILROAD ABUSES.
As has already been shown, railroad enterprise met with comparatively
little opposition in the United States, for, as compared with the
interests certain to be benefited by the introduction of the new mode of
transportation, those likely to be injured by it were insignificant. It
is true, the innate conservatism of man even here recorded its
objections to the innovation. It viewed with distrust the new power
which threatened to revolutionize well-established systems of
transportation and time-honored customs and to force upon the people
economic factors the exact nature and value of which could only be
ascertained by practical tests. But the progressive portion of the
community was so decidedly predominant that these protests were soon
drowned in the general demand for improved facilities of transportation.
The farmer who had to haul his produce a great distance to reach a
market appreciated the advantages to be derived from the location of a
railroad station nearer home. The manufacturer who heretofore had, had a
very limited territory for the sale of his products well realized that
he could with the aid of a railroad enlarge his territory and increase
his output, and with it his profits. The pioneer merchant found that he
could no longer compete with former rivals in adjoining towns, since the
iron horse had reached them and lowered their freights, and he also
became a convert to the new order of things and clamored loud for
railroad facilities. Railroads seemed the panacea for industrial and
commercial ills, and every inducement was held out and every sacrifice
made by communities to become participants of their blessings. So great
was the estimate of the conveniences afforded by them and so strongly
was public opinion prejudiced in their favor that it is no exaggeration
to say that railroad companies as a rule were permitted to prepare their
own charters, and that these charters almost invariably received
legislative sanction.
To such an extent was the public mind prepossessed in favor of railroads
that any legislator who would have been instrumental in delaying the
granting of a railroad charter for the purpose of perfecting it, to
protect the people against possible abuses, would have been denounced as
a short-sighted stickler and obstructor of public improvements. Anxious
for railroad facilities, the people were deaf to the warnings of
history. Their liberality knew no bounds. National, State and county aid
was freely extended to new railroad enterprises. Communities taxed
themselves heavily for their benefit, and municipalities and individuals
vied with each other in donating money, rights of way and station
buildings. This was especially true of the West, whose undeveloped
resources had most to gain by railroad extension. So large were the
public and private donations in several of the Western States that their
value was equal to one-fifth of the total cost of all the roads
constructed. To still more encourage promoters of railroad enterprises,
general incorporation laws were passed which permitted companies to be
formed and roads to be built practically without State supervision. In
their admiration for the bright side of the picture, the people entirely
overlooked the shady side.
Besides this, there was virtually an absence of all law regulating the
operation of railroads. It was, under these circumstances, not strange
that abuses early crept into railroad management which, long tolerated
by the people and unchecked and even encouraged by public officers,
finally assumed such proportions as to threaten the very foundation of
free government. Great discoveries that add rapidly to the wealth of a
country tend to overthrow a settled condition of things, and organized
capital and power, if not restrained by wholesome laws and public
watchfulness, will ever take advantage of the unorganized masses. The
people of those regions which the railroad stimulus had caused to be
settled thrived for years so well upon a virgin soil that they gladly
divided their surplus with the railroad companies. They looked upon the
railroads as the source of their prosperity and upon railroad managers
as high-minded philanthropists and public benefactors, with whom to
quarrel would be an act of sordid ingratitude, and they paid but little
attention to the means employed by them to exact an undue share of their
earnings. Railroad men did whatever they could to foster through their
emissaries this misplaced adoration. They posed before the public as the
rightful heirs of the laurels of Watt and Stephenson, insisting that
their genius, capital and enterprise had built up vast cities and opened
for settlement and civilization the boundless prairies of the West.
These claims have been persistently repeated by railroad men, though
they are so preposterous that they scarcely deserve refutation. The
railroad, gradually developed by active minds of the past, and greatly
improved by the inventions of hundreds of men in the humbler walks of
life, is the common inheritance of all mankind, though no class of
people have derived greater benefits from it than railroad constructors,
managers and manipulators. Railroad managers are no more entitled to
the special gratitude of the public for dispensing railroad
transportation at much more than remunerative rates than is the Western
Union monopoly for maintaining among us an expensive and inefficient
telegraph service. No one believes that the disbanding of the Western
Union would leave us long without telegraphic communication. In like
manner railroads will be built whenever and wherever they promise to be
profitable. If one company does not take advantage of the opportunities
offered, another will. That large cities have been built up by the
railroads is true, but it is equally true that these cities by their
commerce and manufactures administer to the prosperity of the railroads
as much as the railroads administer to theirs. Commercial centers in
days gone by existed without railroads, but railroads could not long
exist without the stimulating influence of these busy marts of trade.
The same argument applies with still greater force to the agricultural
sections of our country, especially the great Northwest. The dry-goods
merchant might as well boast of having clad the public as the railroad
manager of having built up farming communities by selling to them
transportation.
And yet the American people have never ceased to be mindful of the
conveniences afforded to them by this modern mode of transportation. On
the contrary, they have been but too prone to credit railroad men with
being benefactors, when they were but beneficiaries, and this liberality
of spirit made them overlook, or at least tolerate, the abuses which
grew proportionately with the wealth and power of the companies.
The first railroad acts of England had contemplated to make the roads
highways, like turnpikes and canals. These roads were established by the
power of eminent domain. Companies were empowered to build and maintain
them and to reimburse themselves by the collection of fixed tolls. Had
the owners of the roads from the beginning been deprived of the
privilege of becoming carriers over their own lines, the system might
have so adjusted itself as to become entirely practicable; but as they
were allowed to compete with other carriers in the transportation of
passengers and merchandise, they were soon able to demonstrate, at least
to the satisfaction of Parliament, that the use of the track by
different carriers was impracticable and unsafe. A number of
circumstances combined to aid the railroad companies in their efforts to
monopolize the trade on their lines. In the first place, when the early
railroad charters were granted, but few persons had any conception of
the enormous growth of commerce which was destined to follow everywhere
the introduction of railways. The tolls as fixed in the charters soon
yielded an income out of proportion to the cost of the construction and
maintenance of the roads. Their large margins of profit enabled the
owners of the roads to transport goods at lower rates than other
carriers and to thus compel the latter to abandon their business.
Another defect of the original charters worked greatly to the
disadvantage of independent carriers. They contained no provision as to
the use of terminal facilities. The railroad companies claimed that
these facilities were not affected by the public franchise and were
therefore their personal property. This placed independent carriers at a
great disadvantage and made in itself competition on a large scale
impossible. These carriers were thus at the mercy of the railroad
companies for the transportation of their cars, and the companies never
permitted their business to become lucrative enough to induce many to
engage in it. It soon became apparent that under the charters granted
to the railroad companies such competition as existed on turnpikes and
canals was out of the question on their roads. In England the great
abundance of water-ways exercised for many years a wholesome control
over the rates of railway companies, until these companies, greatly
annoyed by such restraint, absorbed many of the larger canals by
purchase and made them tributary to their systems. These companies have
also acquired complete control over many important harbors.
In the United States the people depended from the beginning of the
railroad era on free competition for the regulation of railroad charges.
This desire to maintain free competition led to the adoption of general
incorporation acts, it being quite generally believed that such
competition as obtains between merchants, manufacturers and mechanics
was possible among railroads and would, when allowed to be operative,
regulate prices and prevent abuses. The remedy was applied freely
throughout the country, but for once it did not prove successful.
Stephenson's saying, that where combination was possible competition was
impossible, was here fully verified. The great ingenuity of the class of
men usually engaged in railroad enterprises succeeded in thwarting this
policy of commercial freedom. The opportunities for those in control of
railroads to operate them in their own interest, regardless of the
interests of their patrons or stockholders, were so great that men of a
speculative turn of mind were attracted to this business, which indeed
soon proved a most productive field for them. One road after another
fell into the control of men who had learned rapidly the methods
employed to make large fortunes in a short time.
As the roads multiplied, transportation abuses increased. A considerable
number of people early favored State control of railroads as the best
means of regulating transportation, but a majority looked upon the
existing abuses as being merely incidental to the formative period, and
hoped that with a greater expansion of the railroad system they would
correct themselves. And this doctrine was industriously disseminated by
railroad managers and their allies. They lost no opportunity to impress
upon the people that State regulation was an undue interference with
private business and that such a policy would soon react against those
who hoped to profit by it, inasmuch as it would prevent the building of
new roads and would thus hinder, rather than aid, in bringing about the
right solution of the railway question, viz., regulation by competition.
They contended, in short, that State regulation would be destructive to
railroads as well as to every other class of property.
Railroad sophistry for many years succeeded in preventing the masses
from realizing that an increased supply of transportation does not
necessarily lower its price, or, in other words, that railroad abuses do
not necessarily correct themselves through the influence of competition.
A large capital is required to build and maintain a railroad, which must
necessarily be managed by a few persons. Besides this, the construction
of a railroad practically banishes at once from its field all other
means of land transportation. The railroad has thus a practical monopoly
within its territory, and its managers, if left to follow their
instinct, will despotically control all the business tributary to it,
with unlimited power to build up and tear down, to punish its enemies
and to reward its friends.
It is not true that State control checks railroad building. While it may
prevent the construction of useless lines and discourage speculation, it
will encourage the building of roads for which there is a legitimate
demand. Stockholders as a whole do not participate in the management of
the roads and do not profit by railroad abuses, the origin of which may
almost invariably be traced to selfish designs on the part of a few
entrusted with the management of the property. Where through wise
legislation these abuses are prevented, the roads are managed in the
interest of all the stockholders, develop business and enjoy lasting
prosperity.
It may be laid down as a general rule that the policy which best
subserves the interests of the patrons of a road is always the best
policy for its owners. Injustice to a railroad will interfere with its
usefulness; injustice to shippers depresses production and consumption;
and in either case both the road and its patrons will suffer. State
control is therefore as much needed in the interest of the owners of
railroads as in the interest of their patrons. What should be the nature
of such control will be discussed hereafter. A full understanding of the
question at issue, however, makes necessary an inquiry into the various
abuses which unrestrained railroad management of the past has developed.
Perhaps no better presentation of the evils and abuses of railroads and
their consequences can be found than that contained in the report of the
Senate Committee on Interstate Commerce, submitted by Senator Cullom, in
1886. This report charges:
1. That local rates are unreasonably high, as compared with through
rates.
2. That local and through rates are unreasonably high at non-competing
points, either from the absence of competition or in consequence of
pooling agreements that restrict its operation.
3. That rates are established without apparent regard to the actual cost
of the service performed, and are based largely on "what the traffic
will bear."
4. That unjustifiable discriminations are constantly made between
individuals in the rates charged for like service under similar
circumstances.
5. That improper discriminations are constantly made between articles of
freight and branches of business of a like character, and between
different quantities of the same class of freight.
6. That unreasonable discriminations are made between localities
similarly situated.
7. That the effect of the prevailing policy of railroad management is,
by an elaborate system of secret special rates, rebates, drawbacks and
concessions, to foster monopoly, to enrich favored shippers, and to
prevent free competition in many lines of trade in which the item of
transportation is an important factor.
8. That such favoritism and secrecy introduce an element of uncertainty
into legitimate business that greatly retards the development of our
industries and commerce.
9. That the secret cutting of rates and the sudden fluctuations that
constantly take place are demoralizing to all business except that of a
purely speculative character, and frequently occasion great injustice
and heavy losses.
10. That, in the absence of national and uniform legislation, the
railroads are able by various devices to avoid their responsibility as
carriers, especially on shipments over more than one road, or from one
State to another, and that shippers find great difficulty in recovering
damages for the loss of property or for injury therefor.
11. That railroads refuse to be bound by their own contracts, and
arbitrarily collect large sums in the shape of overcharges in addition
to the rates agreed upon at the time of shipment.
12. That railroads often refuse to recognize or to be responsible for
the acts of dishonest agents acting under their authority.
13. That the common law fails to afford a remedy for such grievances,
and that in cases of dispute the shipper is compelled to submit to the
decision of the railroad manager or pool commissioner, or run the risk
of incurring further losses by greater discriminations.
14. That the differences, in the classifications in use in various parts
of the country, and sometimes for shipments over the same roads in
different directions, are a fruitful source of misunderstandings, and
are often made a means of extortion.
15. That a privileged class is created by the granting of passes, and
that the cost of the passenger service is largely increased by the
extent of this abuse.
16. That the capitalization and bonded indebtedness of the roads largely
exceed the actual cost of their construction or their present value, and
that unreasonable rates are charged in the effort to pay dividends on
watered stock and interest on bonds improperly issued.
17. That railroad corporations have improperly engaged in lines of
business entirely distinct from that of transportation, and that undue
advantages have been afforded to business enterprises where railroad
officials were interested.
18. That the management of the railroad business is extravagant and
wasteful, and that a needless tax is imposed upon the shipping and
traveling public by the necessary expenditure of large sums in the
maintenance of a costly force of agents engaged in a reckless strife for
competitive business.
Under the operation of the Interstate Commerce Law some of these evils
have, so far at least as interstate commerce is concerned, disappeared,
and others have been considerably mitigated. It cannot be expected,
however, that a bad system of railroad management, to the development of
which the ingenuity of railroad managers has contributed for two
generations, could be entirely reformed in a few years. It is a
comparatively easy task for shrewd and unscrupulous men, assisted by
able counsel and unlimited wealth, to evade the spirit of the law and to
obey its letter, or to violate even both its letter and spirit, and
escape punishment by making it impossible for the State to obtain proof
of their guilt.
It is a humiliating spectacle to see the self-debased railroad officials
confessing their own guilt by refusing to testify before the Interstate
Commerce Commission on the ground that they would thereby criminate
themselves. Congress should have sufficient respect for this commission
and for itself to provide a way to punish such recusant witnesses who
are willing to degrade themselves in so base a manner. Whether the law
will eventually be respected by all depends upon the vigilance and
courage of the people.
That our railroad legislation is not yet perfect even its friends will
admit; and as under a free government the demand of an enlightened
public opinion is the first step toward the enactment of a law, it
behooves the intelligent citizen to study the various railroad problems
and to then exert his influence toward bringing about such a solution of
them as justice and wisdom demand.
In discussing the various evils of railroad management, the author will
commence with and dwell more particularly upon those abuses which maybe
said to be the cardinal ones, viz., discrimination, extortion,
combinations and stock and bond inflation. When these are once
effectually eradicated, other abuses of railroad management which have
been the subject of public complaint will not long survive them.
One of the strongest arguments that could be adduced by the founders of
the American Constitution in favor of the establishment of a more
perfect union was that the inequality of taxes placed upon commerce by
the various States was a serious obstacle to its free development. Much
as the individual States dislike to give up a part of their sovereignty
to a central or national power, the demand for a common and uniform
system of commercial taxation was so great that they were forced to
yield and ratify the new Constitution. Our forefathers thus considered
it a dangerous policy to permit a single State to lay any imposts upon
the commercial commodities which passed over its borders. They were
rightly of the opinion that industrial and commercial liberty was as
essential to the welfare of the nation as political freedom and that
therefore interstate commerce should not be hemmed in or controlled
within State lines, but that the power to regulate it should be lodged
in the supreme legislative authority of the nation, the Congress of the
United States. For over half a century Congress alone exercised the
power thus conferred upon it by the people. After the introduction of
railroads, however, their managers gradually assumed the right to
regulate the commerce of the country in their own interest through the
adoption of arbitrary freight tariffs. Freight charges are practically a
tax which follows the commodity from the producer to the consumer. An
arbitrary and unjust charge is therefore an arbitrary and unjust tax
imposed upon the public without its consent. It is a well-established
rule of society that laws should be equitable and just to all citizens.
Congress never assumed the role of Providence by attempting to equalize
those differences among individuals which superior intellect, greater
industry and a thousand other uncontrollable forces have ever created
and will ever create. It has been reserved to railroad managers to
demonstrate to the public that a power has been allowed to grow up which
has assumed the right to counteract the dispensations of Providence, to
enrich the slothful, to impoverish the industrious, to curtail the
profits of remunerative industries and revive by bounties those
languishing for want of vitality, to humble proud and self-reliant marts
of trade and to build up cities in the desert. It will scarcely be
claimed even by railroad managers that their policy of thus arbitrarily
regulating commerce originated in philanthropic motives. They are forced
to admit that it grew out of an attempt to increase the income of
railroads by the extension of favors to naturally weak enterprises and
to recoup by overtaxing stronger ones.
The practical operation of this system soon showed to railroad managers
their power and to the patrons of railroads their dependence upon those
who dispensed railroad favors. The former soon discovered that their
power might be used to further their private interests as well as those
of the roads, and unscrupulous patrons were not slow to offer
considerations for favors which they coveted. When such favors were once
granted by the officials of one road, rival roads would grant similar
ones in self-protection. Thus this vicious system grew until the payment
of a regular tariff rate was rather the exception than the rule, and
special rates became an indispensable condition of success in business.
We may distinguish three classes of railroad discriminations, viz.:
1. Those which affect certain individuals.
2. Those which affect certain localities.
3. Those which affect certain branches of business.
Discrimination between individuals is the most objectionable, because it
is the most demoralizing of all. Where such discrimination obtains,
every shipper is in the power of the railroad corporation. It makes of
independent citizens of a free country fawning parasites and obsequious
sycophants who accept favors from railroad managers and in return do
their bidding, however humiliating this may be. The shipper, realizing
that the manager's displeasure or good will toward him finds practical
expression in his daily freight bills, finally loses, like the serf, all
self-esteem in his efforts to propitiate an overbearing master. He is
intimidated to such an extent that he never speaks openly of existing
abuses, lest he lose the special rates which have been given him, or, if
he is not a participant of such privileges, lest additional favors be
given to his rivals and they be thus enabled to crush him. Intimidation
of shippers prevailed to such an extent previous to the enactment of the
Interstate Commerce Law that when, in 1879, the special committee on
railroads appointed by the legislature of New York invited all persons
having grievances against railroads to come before them to testify, not
one shipper testified voluntarily. On the contrary, they all insisted
upon being subpoenaed, hoping that the railroad managers would not
hold them responsible for any statement which they might be compelled to
make under such circumstances. The report of that committee stated that
the number of special contracts in force within the period of one year
on the New York Central and Hudson River Railroad alone was estimated
by the railroad people at 6,000. Mr. Depew, when he made the statement:
"In territories comparatively new, and with little responsibility on the
part of the managers to distant owners, they became in many cases very
arbitrary and exercised favoritism and discriminations, which led to
popular indignation and legislation," had probably not heard of this.
The committee's report further stated that these special rates conformed
to no system and varied without rule, that every application for a
special rate was judged by itself and with reference to its own peculiar
circumstances, and that it depended upon the judgment, or rather
caprice, of the officer to whom the application was made, whether and to
what extent a special rate should be granted. The reductions made to
privileged merchants often amounted to more than what would be a fair
profit to the dealer on the commodities shipped. The privileged dealer
was thus enabled to undersell his rivals and eventually force them out
of business or into bankruptcy. It was not at all uncommon for railroad
companies to allow discounts amounting to 50, 60, 70 and even 80 per
cent. of the regular rates. The New York Central gave a Utica dry-goods
merchant a special rate of 9 cents while the regular rate was 33 cents
on first-class freights. The lowest special rate granted at Syracuse was
as low as 20 per cent. of the regular tariff rate on first-class goods.
David Dows & Company and Jesse Hoyt & Company, by means of a grain rate
from 2-1/2 to 5 cents lower than those given to other firms, were
enabled to control in the winter of 1877 the grain trade of New York.
The railroad even extended its fostering aid to A. T. Stewart & Co.,
giving them a special rate "to build up and develop their business." The
testimony given by Mr. Goodman, assistant general freight agent of the
New York Central, in reference to the principle by which he was guided
in granting special rates, is of sufficient interest to be given a place
here:
Question. You made the rate for A. T. Stewart & Company? Answer. Yes,
sir.
Q. Was that to build up and develop their business? A. Yes, sir.
Q. That was the object? A. That was one of the objects.
Q. January 11th, 1879? A. Yes, sir.
Q. You thought that business was not yet sufficiently built up and
developed? A. No, sir; not the manufacturing part of it.
Q. How long had the factories of A. T. Stewart & Company been in
existence? A. The one at Duchess Junction about three years, I think; it
isn't completed yet.
Q. And they were languishing and suffering? A. To a great extent; yes,
sir.
Q. And you acted as a fostering mother to A. T. Stewart & Company to
build it up? A. Yes, sir; I added my mite to develop their traffic; we
wanted to carry the freight; boats might have carried it in the summer.
Q. Do you know anything of G. C. Buell & Company? A. Yes, sir.
Q. You wanted to develop their business? A. Yes, sir; they are at
Rochester--wholesale dealers.
Q. Do you know H. S. Ballou, of Rochester? A. I do not.
Q. He seems to be a grocer there? A. A small concern, perhaps.
Q. Small concerns are not worth developing, according to your opinion?
A. Our tariff rates are low enough for them at Rochester.
Q. That is to say, a small concern ought to pay 40, 30, 25 and 20, as
against a large concern, 13; that is your rule? A. Well, if he is a
grocer, most of his business is fourth-class freight.
Q. And he ought to pay 20, as against 13? A. Yes, sir.
Q. That small man has no right to develop? A. He has the same chance
that the other man has.
Q. At 20 against 13? A. Oh, yes.
Q. Do you call that the same chance? A. About the same chance, yes, sir.
Q. You consider it the same chance? A. Yes, sir.
Many reasons were assigned by railroad men in justification of their
practices. It was claimed that special rates were given to regular
shippers, but it has been proved that not all regular shippers had
special rates, and that persons who made only single shipments were
often fortunate enough to obtain special favors. It was further claimed
that special rates were given to those who, starting out new in business
or developing new enterprises, needed aid and encouragement. But it was
shown on the other hand that the aid and encouragement thus given to
some bankrupted others, and in the end deprived the companies of more
business than their policy of discrimination brought them. Railroad
managers also argued that they could afford to make lower rates on large
shipments than on small ones for the same reasons that the wholesale
merchant can sell his goods for less than the retailer. But while this
may be a good reason why rates on car-load shipments should be lower
than rates on shipments in less than car-load lots, it is certainly no
good reason why five car-loads belonging to one shipper should be
transported the same distance for less than five carloads belonging to
five shippers. In the case of local shipments the car is scarcely ever
loaded to its full capacity; one shipment after another is taken from it
as the train moves along, and the car perhaps reaches its final
destination nearly, if not entirely, empty. The terminal charges are
here also largely increased, and it is but just that the shipper should
pay the additional cost of carrying and handling the goods. The case is
entirely different when the railroad company carries five full carloads
from one station of its line to another. Whether they have been loaded
by one or five persons, whether they are consigned to one or five
persons, matters little to the railroad company. It merely transports
the cars, and in either case its responsibility and its services are the
same. The car-load must therefore be accepted and is now generally
accepted by the best railroad men as the unit of wholesale shipments,
and any discrimination made in favor of large wholesale shippers is
arbitrary and unjust. In the shipment of some commodities, such as
wheat, flour and coal, a small advantage in rates is sufficient to
enable the favored shipper to "freeze out" all competitors. It is
certainly not to the interest of any railroad company to pursue such a
policy; for by driving small establishments out of the business it
encourages monopoly, which almost invariably enhances prices and
decreases consumption. The railroad thus suffers in common with the
public the consequences of its short-sighted policy. That even railroad
managers realize that these practices cannot be defended upon any
principle of justice or equity is apparent from the fact that one of the
never-varying conditions of special rates is that they be kept secret. A
specimen of a special rate agreement which was placed before the New
York investigating committee is here presented to the reader:
"This agreement, made and entered into this eighteenth day of
March, 1878, by and between the New York Central and Hudson
River Railroad Company, party of the first part, and
Schoellkopf & Mathews, of the city of Buffalo, N.Y., party of
the second part:
"Witnesseth, That said party of the first part hath promised
and agreed, and by these presents does promise and agree to
transport wheat from the elevator in Buffalo, reached directly
by said first party's tracks, except at such mills as time
said tracks may be obstructed by snow or ice, to the which
said second party may erect or operate at Niagara Falls, N. Y.,
at and for the rate of one and a quarter cents per bushel.
"And further, that said first party shall and will at all
times give, grant and allow to said second parties as low
rate of transportation on all property shipped by them from
their said mills at Niagara Falls, and as favorable facilities
and accommodation in all respects as are afforded by the party
of the first part to the millers of Buffalo and Black Rock.
And also that the said party of the first part will transport
for said second party all of their east-bound New York freight
at and for the price or rate of forty-seven per cent. of the
current all-rail through rates, via the route of party of the
first part, from Chicago to New York, at the times of shipment,
adding thereto three cents per barrel for flour and one and
one-half cents per hundred pounds for mill feed or grain, as
a terminal charge, to provide for the incidental expenses
attending local transportation.
"And will transport their freight to Boston and all points in
New England, taking Boston rates at the same rate as to New
York, with ten cents per barrel added for flour and five cents
per hundred pounds added for mill feed or grain.
"Provided, however, and this agreement is made upon the express
understanding and consideration, that said second party shall
regard and treat this agreement as confidential, and will use
all reasonable precaution to keep the same secret.
"And upon condition also that said second party shall ship
by the first party's road all the product from their mill at
Niagara Falls destined to all points in New York, Pennsylvania
and New England, reached by said first party, directly or by
connections with other routes.
"And this agreement shall be and remain in force for the term
of five years from and following the first day of September,
1878, after which period it may be terminated by sixty days'
written notice from either party.
"In witness whereof, the parties hereto have signed these
presents the day and year first above written.
"N. Y. C. & H. R. R. R. Co.,
By J. H. RUTLER,
General Traffic Manager.
SCHOELLKOPF & MATHEWS."
It will be noticed that this agreement was based upon the expressed
condition that Schoellkopf & Mathews treat it as "confidential," and use
all reasonable precaution to keep it secret. It is difficult to account
for this strong injunction of secrecy except upon the assumption that
the managers of the road, conscious of the great wrong which they
inflicted upon the body of the people by their discriminations, hoped to
escape public criticism by adopting a policy of secret dealing. Much as
special rates were sought after, but few shippers to whom they had been
granted were contented with their lot, for none was confident that his
rivals did not have better rates than himself.
Discriminations between localities had their origin in the natural
desire of competing roads to increase their business at the expense of
their rivals. When two or more railroads touched the same point each
would attempt to secure the largest possible share of the through
business by holding out every possible inducement in rates to the
shippers of that place. Indeed, the freight rates at competitive points
were often so low that railroad managers found themselves placed in a
rather unpleasant dilemma. They either had to admit that the rates
charged by them at non-competitive places were exorbitant or that they
were carrying the freights of competitive points at a loss and were thus
squandering the money of their stockholders. They preferred as a rule
to admit that they were doing competitive business at a loss, but
asserted that, inasmuch as they were compelled to run their trains, they
could better afford to do competitive business temporarily at a loss
than not to do it at all. The same logic might with equal propriety be
employed by the grocer. To draw to him distant customers, he might offer
to sell to them at cost or even at a loss; and then, to recuperate, he
might advance the prices of his goods for his regular customers. If
there is any difference between the grocer and the railroad company, it
lies in the fact that the former's old customers would soon find relief
at a rival store, while the patrons of the railroad at non-competitive
points are like the traveler in the hands of a highwayman, without
immediate redress. The railway company which discriminates between
competitive and non-competitive points forgets that its line is a common
highway for all points tributary to it; that all have equal rights, and
that the only differences in tariff which the principles of the common
law permit are those which arise from a difference of service and cost.
All other differences that railroad companies may make are unjust
discriminations in violation of their charter and expose them to a
forfeiture of the franchises conferred upon them.
The nature and extent of the discrimination practiced between different
places are often such that no interest of the company can possibly be
subserved by them, and the conclusion is forced upon us that the
advantages granted by railroad managers to certain places are designed
to serve chiefly personal and selfish interests. The great fortunes
amassed in a brief period of time by railroad managers can in almost
every case be traced to stock, real estate, commercial and other
speculations directly or indirectly connected with railroad
construction or management. And where other than personal interest
cannot be shown, this is the only basis upon which the many apparent
absurdities of railroad discrimination can be harmonized.
It is claimed by railroad men that transportation by water is a
regulator of railway rates which they must respect. It is contended, for
instance, that, although the cities situated on our large lakes enjoy
superior commercial advantages which are mainly due to their having at
their disposal water communication with the Atlantic Ocean, inland towns
have no cause to complain against the railroads for not equalizing those
differences which nature has largely created. It might be more difficult
to meet this argument if, owing to peculiar combinations, these water
rates were not made to extend their influence to almost every inland
city north, east and south in the Union, and if those cities were not
given much lower rates than hundreds of places much nearer the lakes.
The teamster who, half a century ago, found it impossible to compete
with the canal, river or lake boats, simply surrendered the field to
them and confined his operations to such a territory as could give him
assurance of a profitable business. Let the railroads do likewise. No
company has a right to destroy a rival route, water or rail, by adopting
special tariffs for competing points. There are at points accessible to
water transportation certain freights requiring speedy carriage which
will go to the railroads at profitable rates, but the heavier freights,
as coal, lumber and even certain kinds of grain, should go to the
carrier by water if he can afford to transport them at lower cost.
There have been but few legislative investigations of railroad abuses in
this country, but the disclosures which they have made to the public
are astounding. The most noteworthy of these were made by the Hepburn
committee, of New York, to which reference has already been made. It is
difficult to understand how a free and enlightened community could so
long and so patiently bear railroad despotism. Individual discrimination
might, under the veil of secrecy, long escape notice, but that a system
of open and widespread discrimination affecting every non-competitive
and even many a competitive point in the State, doing visible and
irreparable injury to thousands of shippers, and infringing upon the
rights of millions, should long be borne by a free and enlightened
people, is a strange phenomenon of democratic endurance.
It would lead us too far from our subject to review in detail the many
and glaring instances of local discrimination which the report
enumerates. A few will suffice to show their scope and nature.
William W. Mack, of Rochester, a manufacturer of edged tools, testified
that, in order to save fourteen cents per hundredweight on his freights
to Cincinnati, he shipped his goods to New York and had them shipped
from there to their destination, via Rochester; and that he availed
himself of the same roundabout route for his St. Louis shipments, and
saved thereby eighteen cents per hundredweight. In both of these cases
the railroad company carried the goods 700 miles farther than the direct
distance for a less charge.
Port Jervis millers had their grain shipped from the West to Newburgh, a
point fifty miles to the east of them, and then had it returned to Port
Jervis on the same line, at a less rate than that charged for a direct
shipment.
The grain rates from Chicago to Pittsburgh were 25 cents per hundred in
March, 1878, and only 15 cents from Chicago to New York.
Flour was carried from Milwaukee to New York for 20 cents, while the
rate from Rochester to New York was 30 cents at the same time. It was
also carried from East St. Louis to Troy at the same rate as from
Rochester to Troy. The rate on butter from St. Lawrence County, N.Y., to
Boston, over the Ogdensburg and Lake Champlain and Vermont Central, was
60 cents per hundred; from the nearer county of Franklin, 70 cents; it
then continued to increase as the distance decreased, until it reached
90 cents at St. Albans, Vermont.
Soap shipped by Babbit & Co., of New York, to Crouse & Co., of Syracuse,
paid 8 cents per box when the freight was paid in Syracuse, but 12 cents
per box when paid by the shipper in New York.
It cannot even be said that New York fared worse than any of her sister
States. There is hardly a business man in any community in the United
States who cannot cite many cases of similar discrimination. Hundreds of
well authenticated cases have been reported from every part of the
country. A few striking ones may be given space here:
The Illinois Central Company hauled cotton from Memphis to New Orleans,
a distance of 450 miles, at $1.00 a bale, while the rate from Winona,
Miss., to New Orleans, about two-thirds of the distance, was $3.25 a
bale. The same company charged for fourth-class freight from Chicago to
Kankakee, a distance of 56 miles, 16 cents per hundred, and only 10
cents to Mattoon, 116 miles farther. The rate from New York to Ogden was
$4.65 per hundred, and only $2.25 per hundred from New York to San
Francisco. The car-load rate on the Northern Pacific was $200 from New
York to Portland and just twice as much to a number of points from 100
to 125 miles east of Portland. The Chicago, Burlington and Quincy hauled
stock from points beyond the Missouri River to Chicago for $30 per
car-load, while it exacted $70 per car in Southwestern Iowa for a much
shorter haul.
To what extent local discrimination has been carried by railroad
companies is well illustrated by the following incident: A nurseryman
residing at Atlantic, Iowa, a station on the Chicago, Rock Island and
Pacific Railroad, 60 miles east of Council Bluffs, bought a car-load of
grapevines at Fredonia, New York. Finding that the through rate from
Fredonia to Council Bluffs, plus the local rate from the latter place to
Atlantic, was less than the rate for the direct shipment from Fredonia
to Atlantic, he caused the car to be consigned to Council Bluffs,
intending to have it thence hauled back to Atlantic. Being short of
stock at the time the train containing his car passed through his town
on its way to Council Bluffs, the consignee prevailed upon the station
agent to set out his car. In due time he received a request from the
general office of the railroad to pay an amount equal to the rate per
car-load from Council Bluffs to Atlantic. The request was promptly
complied with by the appreciative nurseryman, who after all had been
saved an annoying delay by the courtesy of the company's agent.
An infinite number of similar discriminations might be cited. They all
show the same violation of the fundamental principles of justice and
equity, the same despotical assertion of the power of the railroads to
regulate the commerce of the country as the caprice or selfish interests
of their managers might direct.
Discriminations between commodities, or, as they might also be called,
discriminations in classification, are probably the most common of
unjust railroad practices. For the purpose of establishing as near as
may be uniform rules in all matters pertaining to rates, the various
roads operating in a certain territory usually form traffic
associations. The general freight agents of the roads that are members
of the association in turn form a select body known as the rate
committee. These committees of freight agents have for more than twenty
years constituted the supreme authority in all matters pertaining to
freight classification. The trunk line classification recognizes six
regular and two special classes, and every article known to commerce is
placed in one of these classes. One whom Providence has not favored with
the mysterious wisdom of a general freight agent might suppose that
considerations of bulk, weight, insurance and similar factors formed a
basis of railroad classification. Nothing, however, is farther from the
truth. Freight charges, when permitted to be fixed by railroad
companies, are invariably such as the traffic will bear, and freight
classifications are arranged on this principle, provided competition by
water, rail or other land transportation does not demand a modification.
It is, as a rule, not to the advantage of a railroad to entirely starve
out any commercial or industrial concern along its line. Hence tariffs
are scarcely ever made entirely prohibitory. Railroads proceed here upon
the principle of the robber knight of mediaeval times, who simply
plundered the wayfaring trader to such an extent as to reduce his
profits to a minimum. He never stripped him, for by doing so he would
have prevented his return and would have destroyed his own source of
revenue. In like manner a railroad will never annihilate any weak branch
of business along its line, nor will it, if it is in its power, permit
any business to prosper without paying to it heavy tributes out of its
profits. Every commodity is therefore made to pay a transportation tax
based chiefly on its value and the profit which it yields, and all
classifications are prepared with this object in view.
The protection which, through exceptionally low rates, is extended by
the railroad companies to certain industries, may not be objectionable
_per se_, but the question arises whether the railroad companies or the
people should exercise the right to determine when and where such
protection is necessary. Moreover, to tax one branch of commerce for the
benefits bestowed upon another is a practice of extremely doubtful
propriety, and the power to do so should certainly never be conferred
upon a private corporation. When customs laws are proposed in Congress
ample opportunity is given to the representatives of the various
industries of the country to be heard upon the subject. No hasty step is
taken. Members of Congress have every opportunity to ascertain the
sentiment of their constituents, through the public press, petitions and
private correspondence. The subject is discussed in all its phases, both
in the committee-rooms and upon the floors of both houses of Congress.
Every detail is fully considered, and many compromises are often
necessary to secure for a bill the support of the majority. When it
finally passes it represents the will of the people, or at least the
will of their legal representatives, who may be expected to know their
wants and are accountable to them for their acts. Freight
classifications, however, while they are fully as far-reaching as
customs laws, are made by a few freight agents meeting in secret
session, listening to no advice and acknowledging no higher authority.
It is claimed by the railroad men that it is to the interest of railroad
companies to do justice to all, and that the best classification for
the largest number of people is also the best for the roads. If this be
true, it is difficult to see why railroads should fail to consult their
patrons in the arrangement of their freight classifications. Intelligent
shippers may certainly be supposed to know as well as the railroad
companies what classification is to their common interest. Railroad
managers are naturally despotical. They do not wish and do not tolerate
any outside interference with what they obstinately term their private
business. Even if the general policy of the companies designed the
greatest good to the greatest number, the opportunities and temptations
of their agents to pursue selfish ends or take advantage of individuals
in the preparation or application of their tariffs are such that in the
practical execution the evil will always outweigh the good.
It is not within the scope of the present inquiry to review in detail
the various classifications in force, or to point out the unjust
features. The author will confine himself to showing by a few
characteristic examples that the power now in the hands of the railroad
companies to classify the various commodities of commerce for the
purpose of rating is greatly abused and is a potent means of railroad
extortion. And that it may not be charged that abuses have been cited
which are a thing of the past, the examples will chiefly be taken from
cases which have come before the Interstate Commission for adjudication.
A complaint was filed with the commission in 1887 by T. J. Reynolds
against the Western New York and Pennsylvania Railroad Company, from
which it appeared that that company charged a greater price for the
transportation of railroad ties from points in the State of Pennsylvania
to points in the State of New York than was charged at the same time
for the transportation of lumber between the same points. The commission
held that this was a case of unjustifiable discrimination and ordered
the company to place railroad ties in the same class with other rough
lumber. Many Western roads for years have been guilty of the same
discrimination. The reasons for such a policy are obvious. A high tariff
on railroad ties prevents their being shipped, depreciates their market
price at home, to the sole benefit of the discriminating company, which
is thus enabled to buy ties at a low price. Prohibitory rates on ties
and rails are also often maintained by railroad companies to either
delay or render more costly the construction of new lines which threaten
to become their competitors. The Union Pacific Railroad Company several
years ago even went so far as to make prohibitory rates on steel rails
intended for the construction of a road which promised to become a
competitor of one of its connecting lines.
From another case decided by the Interstate Commerce Commission it
appeared that the Lake Shore and Michigan Southern Railway Company
charged for blocks intended for wagon-hubs, and upon which only so much
labor had been expended as was necessary to put them in condition, a
higher rate than for lumber, claiming that such blocks were unfinished
wagon material and were therefore, as articles of manufacture, subject
to higher charges than raw material. The commission justly held that
these blocks were as much to be regarded as raw material as the boards
from which wagon-boxes are made.
In the classification of the Southern Railway and Steamship Association
pearline was placed in the fourth class, with a rate of 73 cents per
hundred pounds, and common soap in the sixth class, with a rate of 49
cents per hundred pounds. This latter article, when shipped by large
manufacturers, enjoyed besides a special rate of 33 cents per
hundredweight. Pearline and soap are competitive; there is no
appreciable difference between them as regards the cost of
transportation; but one commands a higher price in the market than the
other, and upon this fact solely did the railroad company base its
alleged right to levy upon pearline a transportation tax 120 per cent.
in excess of that levied upon soap, though the service rendered by the
company was the same in either case. The commission held that the
discrimination made by the "special rate" of the Southern Railway and
Steamship Association between pearline and common soap was unjust, and
ordered that it be discontinued and that, with common soap in the sixth
class, pearline be placed in the fifth.
For years the rate from Indianapolis to New York was the same for corn
as for its direct products, such as ground corn, cracked corn, corn
meal, hominy and corn feed. Such a tariff made it possible for Western
mills to compete with similar mills that had been established in the
East, since a discrimination of 5 per cent. was sufficient to absorb
three or four times the profits of any Western mill. It was shown by the
evidence produced that the actual cost of transportation was
substantially the same for direct corn products as for the raw corn. The
only defense which the railroad company could make for this
discrimination was that in the carriage of raw corn they had to meet
lake competition. The weakness of this argument will be perceived when
it is remembered that Indianapolis is 154 miles from the nearest
lake-shipping point. There is but little doubt that this discrimination
was made by the railroad company because it was to its interest to haul
the raw corn from the West to the East and to return it in altered
form. Railroads care, as a rule, little for a waste of force, if such
waste is to their own advantage.
In another case brought before the commission in 1889 it was shown that
the "Official Classification" placed common soap in carload lots in
Class V, while such articles as coffee, pickles, salted and smoked fish
in boxes or packages, rice, starch in barrels or boxes, sugar, cereal
line and cracked wheat are placed in Class VI. The chief reply of the
railroad companies to this complaint was that soap was justly placed in
Class V because the components from which it is in part made stood in
Class V.
In another case it was shown that one kind of soap was burdened with a
higher transportation tax than another, irrespective even of cost,
because one had been advertised as toilet and the other as laundry soap.
The principle of charging what the traffic will bear is well illustrated
by the relative rates on patent medicines and ale and beer, as
maintained by the Official Classification.
In a complaint made by a prominent manufacturer of proprietary medicines
against the New York Central and other roads, it was shown that the
complainant's products were shipped at owner's risk, and that they were
in bulk and intrinsic value similar to ale and beer, but that in spite
of these analogies the former were rated as first-class and the latter
as third-class goods, simply because they retailed at a higher price.
Another unwarrantable discrimination is that in favor of live stock and
against dressed beef. While Mr. Fink, the commissioner of the Trunk Line
Pool, himself admitted that the cost of carrying dressed beef from
Chicago to New York was only 6-1/4 cents per 100 pounds in excess of
the cost of hauling live stock, the trunk lines maintained on dressed
beef a rate 75 per cent. higher than that on live cattle. The railroad
companies asserted that this was due to those people in the East whose
living depended on the live-stock interest. The railroads have in this
assumed a paternalism which would not be tolerated even in the
Government. To protect the East, railroads will not permit the West to
engage in new industries.
The position which the Interstate Commerce Commission has assumed in
interpreting the rights of shippers under the law which railroad
companies are bound to respect in the preparation of their tariff sheets
and classifications cannot but be most gratifying to the people. In a
decision relating to the classification and rates for car-loads and less
than car-loads, filed March 14, 1890, the commission laid down the
following rules for the guidance of railroad companies:
"1. Classification of freight for transportation purposes is
in terms recognized by the act to regulate commerce, and is
therefore lawful. It is also a valuable convenience both to
shippers and carriers.
"2. A classification of freight designating different
classes for car-load quantities and for less than car-load
quantities for transportation at a lower rate in car-loads
than in less than car-loads is not in contravention of the
act to regulate commerce. The circumstances and conditions
of the transportation in respect to the work done by the
carrier and the revenue earned are dissimilar, and may
justify a reasonable difference in rate. The public
interests are subserved by car-load classification of
property that, on account of the volume transported to reach
markets or supply the demands of trade throughout the
country, legitimately or usually moves in such quantities.
"3. Carriers are not at liberty to classify property as a
basis of transportation rates and impose charges for its
carriage with exclusive regard to their own interests, but
they must respect the interests of those who may have
occasion to employ their services, and conform their charges
to the rules of relative equality and justice which the act
prescribes.
"4. Cost of service is an important element in fixing
transportation charges and entitled to fair consideration,
but is not alone controlling nor so applied in practice by
carriers, and the value of the service to the property
carried is an essential factor to be recognized in
connection with other considerations. The public interests
are not to be subordinated to those of carriers, and require
proper regard for the value of the service in the
apportionment of all charges upon traffic.
"5. A difference in rates upon car-loads and less than
car-loads of the same merchandise, between the same points
of carriage, so wide as to be destructive to competition
between large and small dealers, especially upon articles of
general and necessary use, and which, under existing
conditions of trade furnish a large volume of business to
carriers, is unjust and violates the provisions and
principles of the act.
"6. A difference in rate for a solid car-load of one kind of
freight from one consignor to one consignee, and a carload
quantity from the same point of shipment to the same
destination, consisting of like freight or freight of like
character, from more than one consignor to one consignee or
from one consignor to more than one consignee, is not
justified by the difference in cost of handling.
"7. Under the official classification the articles known in
trade as grocery articles are so classified as to
discriminate unjustly in rates between car-loads and less
than car-loads upon many articles, and a revision of the
classification and rates to correct unjust differences and
give these respective modes of shipment more relatively
reasonable rates is necessary and is so ordered."
The efforts which the commission has made to bring about a uniform
classification throughout the country are in the right direction, while
the results of its labor are not yet satisfactory.
In their fifth annual report, the Commissioners, after giving an account
of their efforts and the shuffling and double-dealing of the railroad
companies with them upon this matter of uniform classification, said:
"Its conviction remains unchanged that the necessities of
commerce require that the existing classifications be
consolidated, and that this result should be accomplished as
speedily as may be found practicable; and it does not feel
justified in asking for the further efforts of the carriers
the same measure of indulgence which from time to time it
has heretofore suggested should be extended to them, and
which was thought to be required in the public interest.
"The commission can not but think that if legislation to
that end be enacted by Congress the carriers will speedily
consummate the reform already begun in this direction. It is
therefore recommended that an act be passed requiring the
adoption within one year from the date of its passage of a
uniform classification of freight by all the carriers,
subject to the act to regulate commerce, and providing that
if the same be not adopted within the time limited, either
this commission or some other public authority be required
to adopt and enforce a uniform classification."
The present confusion which exists in the classification and rates of
the seventeen hundred railroad organizations of the country makes it
difficult for the commission to do justice to all interests and
localities. With the adoption of a uniform classification it is to be
hoped that in time many of the present inequalities will be adjusted,
especially if an intelligent public sentiment upon the subject of
railroad regulation is maintained. A prominent railroad manager in the
East, whose devotion to corporate interest is only equaled by his
political ambition, has recently made repeated efforts to convince the
people that railroad abuses are things of the past and that, if any such
abuses still linger in isolated districts, they are simply unavoidable
exceptions to the rule which will soon have to yield to the general
spirit of fairness and amity for which, in his opinion, the railroads
have of late been distinguished. He reasons that the law has fulfilled
its mission, that the railroads have reformed, and that it now behooves
the people to relent and to extend to the much persecuted corporations
the hand of friendship and good will. The postprandial eloquence of this
gentleman has often suavely intimated that the repeal of the Interstate
Commerce Act would be the most opportune recognition of restored
confidence.
Still bolder champions of the railroad cause do not hesitate to demand
the repeal of the law. It is not likely that the sophistry of railroad
hirelings will triumph over the practical logic of an intelligent
public. No law, be it ever so wise, can in the space of a few years
correct all the abuses which half a century of unbridled railroad
domination has developed. Yet, since both the friends and the enemies of
the law agree that it has been partially successful in its operation, it
should be continued and improved to keep it in harmony with new
conditions and a progressive public sentiment. It is claimed by railroad
managers that the adoption of a uniform classification will remove the
only vestige of discrimination still left. This is not true, for by far
the largest number of complaints that have recently been brought before
the Interstate Commerce Commission charged personal and local
discrimination independent of any question of classification.
It is shown by the reports of the commission that discriminations are
still practiced by various companies, that annual passes are still
illegally issued to bribe or appease men of influence, that discounts
are still given to favor shippers under various pretexts, that some
large railroad centers still enjoy more favorable rates than smaller
towns, and that the long and short haul clause of the Interstate
Commerce Act is still violated by railroad companies. There are besides
these scores of other devices in vogue among railroad managers to
subvert the principles of the common law. No doubt discriminations are
now much less frequent, and are possibly the exception where but a few
years ago they were the rule, but the fact that such abuses still exist
is a strong argument for the retention of the law as well as for the
necessity of continued vigilance on the part of the people and those
especially charged with the execution of the laws. The railroad acts of
Congress and the various States ask nothing of common carriers but just
and equitable treatment for all their patrons. If this is freely
accorded, these laws are no burden to the railroads. If, on the other
hand, there is a tendency on the part of the railroads to resort to
subterfuges and evasions, the wholesome restraint of the statute is
absolutely necessary for the protection of the shipper.
The repeal of the Interstate Commerce Law, or the adoption of such
amendments as are demanded by railroad men, would be interpreted by them
as an abandonment of all its principles and would inaugurate an era of
unprecedented railroad oppression. History ever repeats itself.
Unchecked license will always lead to arrogance and despotism, and any
power which is long permitted to defy the state will in time control it.
It is not likely that the people of the United States can be induced to
demonstrate to the world that democratic government is incapable of
profiting in the dear school of experience.
Our railroad legislation contains no principle that is not found in the
common law. Its maxims are our birthright and will be the birthright of
our children and children's children, and while railroad companies may
be able in the future, as they have been in the past, to violate the law
temporarily with impunity, they will never be able to prevail upon the
American people to abandon the policy of railroad reform which the
passage of the Interstate Commerce Law inaugurated.
The Interstate Commerce Commissioners say in their sixth annual report:
"Whoever will read the report of the special committee of
the United States Senate, commonly called the 'Cullom
Committee,' will be astounded at the magnitude and extent of
railroad abuses brought to light by their investigation.
Those unfamiliar with the facts made public at that time can
hardly believe the outrages which were proven to exist and
the manifold devices by which the most flagrant injustice
was perpetrated. A single illustration will furnish a better
reminder than extended comment.
"It appears from that report that the Standard Oil Company,
in one instance at least, boldly demanded from a certain
railroad that its shipments should be carried for 10 cents a
barrel; that all other shippers should be charged 35 cents a
barrel on the same article, and that 25 cents of the 35 paid
by such other shippers should be handed over by the railroad
to the Standard Oil Company, and the penalty threatened for
non-compliance with this impudent extortion was a withdrawal
of its entire business.
"The foregoing statements but imperfectly describe the
situation which existed when the Interstate Commerce Law was
enacted. In any reasonable view of the case it was too much
to expect that the common and long continued abuses of
railroad management could be corrected in less than half a
dozen years, or that the first scheme of legislative
regulation would prove adequate to that end. It would be
contrary to all experience if so great and radical a reform
could be thus speedily accomplished, or if the initial
statute should be found sufficient to bring it about. The
law was the outgrowth of an aroused and determined public
sentiment, which, while united in demanding Government
interference, was divided and uncertain as to the best
methods of affording relief. Like all attempts in a new
field of legislation, the statute was a compromise between
divergent theories and conflicting interests. It was
scarcely possible that it should be so complete and
comprehensive at the outset as to require no alteration or
amendment. Those who are familiar with the practices which
obtained prior to the passage of this law and contrast them
with the methods and conditions now existing will accord to
the present statute great influence in the direction of
necessary reforms and a high degree of usefulness in
promoting the public interest.
"Whoever will candidly examine the reports of the commission
from year to year, and thus become acquainted with the work
which has been done and is now going on, will have no doubt
of the potential value of this enactment in correcting
public sentiment, restraining injustice and enforcing the
principle of reasonable charges and equal treatment.
Imperfections and weaknesses which could not be anticipated
at the time of its passage have since been disclosed by the
effort to give it effective administration. The test of
experience, so far from condemning the policy of public
regulation, has established its importance and intensified
its necessity. The very respects in which the existing law
has failed to meet public expectation point out the
advantages and demonstrate the utility of Government
supervision.
"Moreover, it may be fairly claimed that much greater
benefits would have been realized had the statute as enacted
expressed the evident purpose of those who framed it, and
received a construction according to its apparent import. It
is not too much to say that judicial interpretation has
limited its scope and ascribed to it an intent not
contemplated when it was passed. If its supposed meaning, as
understood at the time of its passage, had been upheld by
the courts, it is believed that its operation would have
been much more effective and its usefulness greatly
increased. So far as failure has attended the efforts to
give it proper administration, that failure can be mainly
attributed to differences between its apparent meaning and
the judicial interpretation which some of its provisions
have received; and the commission is of the opinion that if
the present law could be so altered as to express clearly
and beyond doubt what it was evidently intended to express
at the time of its enactment, it would prove, even without
other amendment, an instrumentality of the highest value in
removing the evils against which it is aimed.
"The specific instances in which the statute has received
judicial construction, and the limitations upon its scope
and meaning which the courts have imposed, will be alluded
to at greater length in another part of this report.
"It seems proper, however, to observe in this connection
that the effect of these decisions in weakening the law and
preventing its enforcement has been greatly exaggerated. The
impression has been created in many directions that judicial
construction has invalidated the essential feature of the
statute and condemned the general principle which lies at
its foundation. That impression cannot be too speedily
corrected, for nothing has been decided which permits such
an inference. On the contrary, neither the power of the
national legislature to regulate the transportation of
interstate commerce nor the general policy of the existing
law has been questioned by any tribunal."
Probably no law in the United States has ever before been so fiercely
attacked at all of its vital points as has this law. It is not strange
that among the great number of National and State courts the railroad
companies have found occasionally a judge ready and willing to assist
them in breaking it down, but upon the whole the judiciary has been
disposed to co-operate with other departments of the Government in their
efforts to secure effective regulation of the transportation business.