THE SENATE INVESTIGATION OF 1885 AND THE INTERSTATE COMMERCE ACT.
In 1885 the United States Senate appointed a committee to investigate
railway discriminations, etc., and this committee made one of the ablest
reports that has ever been issued in relation to railway abuses. It
threw a flood of light upon the nature and prevalence of discrimination,
and the reasons for it. On page 7 of this report the committee says that
our efficient service and low rates (low average rates) “have been
attained at the cost of the most unwarranted discriminations, and its
effect has been to build up the strong at the expense of the weak, to
give the large dealer an advantage over the small trader, to make
capital count for more than individual credit and enterprise, to
concentrate business at great commercial centres, to necessitate
combinations and aggregations of capital, to foster monopoly, to
encourage the growth and extend the influence of corporate power, and to
throw the control of the commerce of the country more and more into the
hands of the few.”
On page 40 the committee says: “Railroad companies are not disposed to
regard themselves ‘as holding a public office and bound to the public,’
as expressed in the ancient law. They do not deal with all citizens
alike. They discriminate between persons and between places, and the
States and Congress are consequently called on to in some way enforce
the plain principles of the common law for the protection of the people
against the unlawful conduct of common carriers in carrying on the
commerce of the country.”
On page 188 the following example is given: “One reference to the
testimony must suffice to illustrate the universality of individual
favoritism, the reasons which influence the railroads in favoring one
shipper to the ruin of another, and the injustice of the system. Mr. C.
M. Wicker of Chicago, a former railroad official of many years’
experience, was asked if he knew anything of discrimination upon the
part of the transportation companies as between individuals or
localities, and testified as follows:
“MR. WICKER. Yes; I do. And this discrimination, by reason of rebates,
is a part of the present railroad system. I do not believe the present
railroad system could be conducted without it. Roads coming into this
field to-day and undertaking to do business on a legitimate basis of
billing the property at the agreed rates would simply result in getting
no business in a short time.
“SENATOR HARRIS. Then, regardless of the popularly understood schedule
rates, practically it is a matter of underbidding for business by way of
rebates?
“MR. WICKER. Yes, sir; worse than that. It is individual favoritism, the
building up of one party to the detriment of the other. I will
illustrate. I have been doing it myself for years and had to do it.
“SENATOR HARRIS. Doing it for yourself in your position?
“MR. WICKER. I am speaking now of when I was a railroad man. Here is
quite a grain point in Iowa, where there are 5 or 6 elevators. As a
railroad man I would try and hold all these dealers on a “level keel”
and give them all the same tariff rate. But suppose there was a road of
5 or 6 or 8 miles across the country, and these dealers should begin to
drop in on me every day or two and tell me that the road across the
country was reaching within a mile or two of our station and drawing to
itself all the grain. You might say that it would be the just and right
thing to do to give all the 5 or 6 dealers at this station a special
rate to meet that competition through the country. But as a railroad man
I can accomplish the purpose better by picking out one good, smart, live
man, and giving him a concession of 3 or 4 cents a hundred, let him go
there and scoop the business. I would get the tonnage, and that is what
I want. But if I give it to the five, it is known in a very short
time.... When you take in these people at the station on a private
rebate you might as well make it public and lose what you intend to
accomplish. You can take hold of one man and build him up at the expense
of the others, and the railroad will get the tonnage.
“SENATOR HARRIS. The effect is to build the one man up and destroy the
others?
“MR. WICKER. Yes, sir; but it accomplishes the purposes of the road
better than to build up the 6.
“SENATOR HARRIS. And the road, in seeking its own preservation, has
resorted to that method of concentrating the business into the hands of
one or a few, to the destruction of the many?
“MR. WICKER. Yes, sir; and that is a part and parcel of the system.”
On page 189 the committee says:
“The practice prevails so generally that it has come to be understood
among business men that the published tariffs are made for the smaller
shippers, and those unsophisticated enough to pay the established rates;
that those who can control the largest amounts of business will be
allowed the lowest rates; that those who, even without this advantage,
can get on ‘the inside,’ through the friendship of the officials or by
any other means, can at least secure valuable concessions; and that the
most advantageous rates are to be obtained only through personal
influence or favoritism, or by persistent ‘bulldozing.’
“It is in evidence that this state of affairs is far from satisfactory,
even to those specially favored, who can never be certain that their
competitors do not, or at any time may not, receive even better terms
than themselves. Not a few large shippers who admitted that they were
receiving favorable concessions testified that they would gladly
surrender the special advantages they enjoyed if only the rates could be
made public and alike to all.”
Again, on page 191:
“Universal complaint has been made to the committee as to the
discriminations commonly practised against places, and as to the
conspicuous discrepancies between what are usually termed ‘local’ rates
and what are known as ‘through’ rates.”
In summing up the testimony on pages 180–182 of their report, the
committee presents this tremendous indictment:
“The complaints against the railroad systems of the United States
expressed to the committee are based upon the following charges:
“1. That local rates are unreasonably high, compared with through rates.
“2. That both local and through rates are unreasonably high at
non-competing points, either from 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 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 special secret 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.
* * * * *
“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.
* * * * *
“18. That the management of the railroad business is extravagant and
wasteful, and that a needless tax is imposed upon the shipping and
travelling public by the unnecessary expenditure of large sums in the
maintenance of a costly force of agents engaged in the reckless strife
for competitive business.”
The result of this investigation and report was the passage of the
Interstate Commerce Act, in 1887, affirming the common law rule that
carriers’ charges must be reasonable and impartial. Common carriers are
forbidden to give “any undue or unreasonable preference or advantage to
any person, locality, or description of traffic in any respect whatever,
or subject any person, locality or description of traffic to any undue
or unreasonable disadvantage in any respect whatsoever.” “No common
carrier” says Section 2, “shall directly or indirectly, by special rate,
rebate, drawback, or other device, charge or receive from any person
greater or less compensation for any service in the transportation of
passengers or property than it charges or receives from others for a
like and contemporaneous service under substantially similar
circumstances and conditions.” Section 4 makes it “unlawful to receive
more for a shorter than for a longer distance, including the shorter on
the same line, in the same direction, under substantially similar
circumstances and conditions,” except where the Commission created by
the Act shall authorize the carrier to charge less for the longer than
for the shorter distance. Rates must be published and filed with the
Commission, and 10 days’ notice must be given of advances. Any deviation
from the published tariff is unlawful. The Act excepted traffic “wholly
within one State,” and provided that property might be handled free or
at reduced rates for the United States, State, or municipal governments,
or for charitable or exhibition purposes; that preachers might have
reduced rates, and that passes might be given to employees of the road
or by exchange to employees of other roads. The penalty for breach of
the law was made a fine not exceeding $5000 for each offence, and
victims of discrimination, etc., could collect damages.