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ters from the king or the Parliament. In the case of national banks, this power is conferred upon the banking department and is exercised through the bank examiner. As to carriers the power is vested in the Interstate Commerce Commission supplemented by the aid of the Bureau of Corporations in the Department of Commerce and Labor.
RECORDS OF CARRIER MUST BE UNIFORM. Under section 20 of the Commerce Act the Commission has power to prescribe the form of all accounts, records, and memoranda to be kept by carriers, including details as to the movement of traffic and of all receipts and expenditures. The carrier is forbidden to keep any accounts other than those prescribed by the Commission. False entries in books and records, the mutilation of books or records, falsification of any records, failure to keep true and correct books or correct entries, or to keep books or accounts other than those prescribed by the Commission, or a refusal to submit them to the examiner for inspection is declared to be a misdemeanor. The Commission may employ special agents or examiners, to examine all records of the carrier, with power to administer oaths, examine witnesses, and receive evidence.
The primary objects of the Commerce Act, as has been observed, is to abolish rebates, false billing, false weights, false classification of freights, and all sorts of discrimination. The object of requiring but one set of books was to render accessible evidence of any violations of law in this respect, upon the theory that with all books open to the inspection of a government expert examiner, it would be wellnigh impossible to conceal such violations, as a record of every transaction must be kept; and to alter, mutilate, or conceal any entry is declared to be a crime.
The carrier, in the absence of these requirements, might be able to baffle an investigation of its affairs through an ingenious system of bookkeeping. What part of the disbursements of the carrier should be charged to capital account? How is the stockholder to know, or how is the shipper to know, or how is the Commission to know what constitutes a reasonable rate for freight charges, if income which should be used for operating expenses is used for something else? Expenses which should be charged to capital account might be charged to operating expenses, or might be credited to a fund used to liquidate damage suits incurred by the carrier in killing and maiming passengers and employees, for thousands are killed and maimed by the carrier every year.
The bookkeeping problem also bears directly upon the accuracy of schedules of rates and charges, required to be kept and posted, so that rebates cannot be hidden by manipulating these schedules, as has been done frequently and successfully. Mr. ALPHEUS B. STICKNEY, President of the Chicago and Great Western railroad, is perhaps as well qualified as any one to enlighten the public on this phase of the railroad problem. Mr. STICKNEY heartily approves of a rigid compliance with the requirements of the Commerce Act in this regard.
“In order to furnish this information,” says Mr. STICKNEY, “the tariffs must be published in such a way that a man of ordinary understanding can tell what the rate is. Now the tariffs are published in a private cipher, which no one save the expert clerk who has immediate charge of this business can understand. The tariff managers and the freight agents cannot find the rates in their tariffs. Every officer must have what is called a tariff clerk who keeps track of the tariff amendments, and when it is desired to know what the rate is, he is called upon for information.
“As an illustration, suppose a tariff is made upon a certain commodity. The tariff is modified by an amendment. Another amendment may follow. Then a circular will be issued which further modifies the rate. Thus the stream of schedules grows in volume until there are more than 2,500,000 tariffs filed in the office of the Interstate Commerce Commission.
“An example of the effect of the modification of tariffs is found in the way in which the Standard Oil Company secured lower rates for its shipments from Whiting, Ind., to East St. Louis, than did its independent competitors. The
APPRAISAL OF RAILWAY PROPERTY..
railroads in Illinois published a tariff between Chicago and East St. Louis, both places being within the State. Then they published a little circular saying the rates between Chicago and East St. Louis applied between Whiting, Ind., and East St. Louis. This circular was filed with the Interstate Commerce Commission. Nobody knew what it meant. The Illinois tariff contained some very low rates on oil and its products. The circular was sent to the Standard, and it secured the advantage through the ignorance of its rivals.”
The recommendation of Mr. STICKNEY to cure this evil, was a suggestion that the Commission should refuse to permit amendments to schedules, or permit them to be filed. As it would be impossible to go around to every station and change the tariffs to conform to the amendment, the only practical way is to reprint the whole tariff, and let the carrier give more permanency to its rates, to prevent constant changes, in order that a shipper may be reasonably certain what freight rates will be when he intends to ship goods to be manufactured, perhaps six months after he receives an order for them.
APPRAISAL OF RAILROAD PROPERTY. The inquisitorial power now conferred upon the Interstate Commerce Commission, under section 20, coupled with the duty imposed upon it by section 15 of the Commerce Act, which requires that body to fix rates and charges of transportation, and “to determine and prescribe what will be the just and reasonable rate,” is broad enough, it would seem, to enable the Commission to appraise and value the railroad properties of the United States. Indeed, this task has been assumed, and Professor HENRY C. ADAMS, the statistician of the Commission, has been selected by it to aid in that delicate and important duty, by far the most important phase of the railroad problem. In order to fix the amount of rates and charges, it is essential to ascertain the amount of capital actually invested in constructing, equipping, and operating the railway. A rate to be just must yield a fair return on the capital invested. How much capital has been invested ? From official data gathered by the Commission, from time to time, the carriers claim that the railroads of the United States are capitalized at about $13,000,000,000, and are worth that amount. How much of this vast sum represents money actually invested; how much is based upon no consideration whatever, and represents what is ordinarily designated as water? It is a matter of common knowledge that mergers and reorganizations of railroad properties usually result in large bonuses, represented by stock, and sometimes bonds, issued by the new corporation, which are merely gifts. But they find their way into the hands of innocent holders. Upon these fictitious securities the carrier must pay dividends, which must be taken from the earnings, and these earnings represent the money which is paid for freight and transportation by merchants and the traveling public. An illustration of the vast amount of securities of this character will be revealed by an examination of the Northern Securities case, in which the defendants sought, by a merger agreement, to consolidate competing lines of railway between the Great Lakes and the Pacific ocean. Had the transaction been legalized, the projectors of the plan would have received $122,000,000 of watered stock. The earnings of the consolidated companies was the only source from which the money could be realized with which to pay the dividends, not only on the capital actually invested in the properties, but in addition, upon the $122,000,000 which was issued as a bonus to members of the syndicate. The payment of these dividends, therefore, would have cast an additional burden upon the shipper and consumer, for there is and can be no other source from which the revenues of the carrier can be derived with which to pay them.
In justice to the shipper and consumer, it is obvious, that a reasonable rate of transportation of persons and property must be based on knowledge of the amount of capital invested in railway properties. This fact, when known, will form the only true basis upon which to estimate what will be a just and fair compensation to the carrier in return for the services it renders.
1 Northern Securities Co. v. United States, 193 U. S. 197.
But, notwithstanding its manifold defects, the railway legislation of 1906 will shed new lustre on the administration of Mr. ROOSEVELT, who is entitled to the credit of its enactment, and will add to his great reputation.
THE CHESAPEAKE AND OHIO CASE AND TOBACCO TRUST
DECISIONS. The efficiency of railroad and anti-trust legislation has been immeasurably strengthened by two notable decisions made by the Supreme Court of the United States in February, 1906, a short time previous to the legislation amending the Commerce Act and the Elkins Act. These deliverances were made in what are known as the Chesapeake and Ohio case,' and the Tobacco Trust cases. In the former the court established two new principles; first, as to the rule of construction to be applied in administering the Commerce Act; second, the wholesome doctrine, that to permit a carrier to engage in business other than that of carrier in commodities transported by it, is contrary to public policy, and that contracts in violation of that rule, entered into by carriers, are void. This principle has been enacted into law, and is embodied in section 1 of the Commerce Act by the act approved June 29, 1906.
The rule of construction is based upon the assumption that the Commerce Act, when invoked in civil actions or when injunctive relief is sought, is remedial and not penal legislation. Aside from its penal aspect, it is a remedial statute, and should be construed and interpreted liberally to secure the beneficial purposes for which it was designed, and in aid of those for whose benefit the law was enacted. In this connection Mr. Justice WHITE, speaking for every member of the court, said:
“It cannot be challenged that the great purpose of the act to regulate commerce, whilst seeking to prevent unjust and unreasonable rates, was to secure equality of rates as to all and to destroy favoritism, these last being accomplished by
1 Interstate Com. Co. v. Chesapeake & Ohio R. R. Co., 200 U. S. 261. 2 Hale v. Henkel, 201 U. S. 43; McAllister v. Henkel, 201 U. S. 61.