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The avowed purpose in po ling is to avoid ruinous competition between the several roads represented, and the unjust discrimination between shippers which is found invariably to attend such competition.

Would you believe that in a bill largely and mainly aimed at the prevention of unjust discrimination a clause would be found making criminal that practice to which railroad companies have resorted to prevent unjust discrimination?

A pooling contract is based-that is to say, the percentage of freights or the portion of freights which each company agrees to be satisfied with-is based upon the results of traffic for several years under free competition; and it is a strange thing that, however fierce the competition, the amount of competitive traffic which a road secures remains practically the same; whether competition be fierce or whether there be little competition, the amount of traffic which a competing road secures is practically the same. This apportionment of traffic, then, is based upon what returns for some years under open competition, when competition has been fierce and when it has not been fierce, have been secured by each competing road.

The fact to which I have alluded shows that there is for every com peting railroad its natural, normal share of the competitive business, business which will come to it whatever the competition may be. A competing railroad company may be justified in saying that such share of the competitive business belongs to it so long as it maintains only reasonable rates for doing it. It is upon that theory that the apportionment is made. If it constitutes an agreement for the prevention of competition, for non-competition, it is this, that the railroad company will not fight for more than its natural share of the business. Its object is, as I have shown by the quotation from Judge Cooley, to remove the inducement which exists for railroads to enter into ruinous competition or into unnatural strife for business which does not belong to them.

It may be said that the purpose of pooling is to maintain and establish equal and stable rates. What is this bill for? What has been the purpose of the committee in this bill? They have heard from all over this land that one of the chief and greatest causes of complaint against railroads was the fluctuation of rates, rates which were up to-day and down to-morrow, up for the retailer and down for the wholesaler, and fluctuating up or down as the caprice of the railroads or the emergencies of the competitive strife should require. Look at the report of the committee, look at the testimony before the committee, and you find that one of the main objects of this bill is to make rates stable and permanent when they have been found to be reasonable. I challenge any man to show that the object or purpose or faithful observance of a pooling contract by which I mean the apportionment of the competitive traffic, or of the earnings derived from such competitive traffic can be anything else except the maintenance of stable rates. It is supposed, I think, on the part of the public, that in some way these railroad pools fix unreasonable rates.

I challenge proof of it. I heard petitions presented at that desk this morning praying for the passage of this bill. For what purpose? To prevent excessive rates, discriminations, and pooling. It shows the utter and lamentable ignorance of what pooling contracts

really are.

There is not a man who ever studied them, there is not a man who ever investigated their operation, but what will tell you that the main purpose of them is to prevent discriminations; and yet here we have a bill in which we propose to make criminal the means which the railroad companies adopt to prevent discrimination. Others may agree to it for the sake of getting legislation; I will not.

I know this is no place to discuss a legal question thoroughly and exhaustively, but I say the advocates of the prohibition of pooling can not maintain that these contracts are objectionable under the common law, certainly not that they are illegal at common law; nay, more, I would with confidence stand before the Supreme Court of the United States, or the supreme court of any of the great States of this country, and undertake to maintain that, one thing being assumed, such contracts are legal and would be enforced by the courts, and that one thing to be assumed is that the rates shall be reasonable.

A pooling contract, a contract to apportion between competing roads the competitive business for which reasonable rates have been agreed on I undertake to say, in my judgment, will be held valid at common law.

I am not unmindful of the general principle that contracts in restraint of trade are held to be illegal; that is, in the sense that they will not be enforced by the courts. I am not unmindful of the fact that combinations wholly to prevent competition in trade would be held illegal by the courts to the extent that they would not be enforced, that courts would say to the parties to such contracts, "These are voluntary agreements of yours; you can get no sanction from the courts, because we think they are against public policy." That is what is meant when it is said such contracts are illegal.

But contracts in partial restraint of trade have been held to be valid for the last one hundred and sixty years in all the courts of England and America. And I hold that combinations for the partial prevention of competition are governed by the same rules as govern contracts for the restraint of trade, and that contracts only for the partial restraint of competition will never be declared to be illegal and void unless it clearly appears that they are injurious to the public interest. The law of this country is well stated by the commentator in Smith's Leading Cases, commenting on the great case of Mitchell v. Reynolds, decided, I think, in 1711, thus:

The present doctrine is that while contracts in total restraint of trade are void, yet it the restraints imposed be partial, reasonable, and founded on good consideration they are valid and will be enforeed.

And Judge Bradley, of the Supreme Court of the United States, held in that very same language, in a case reported in 20 Wallace, that that was the doctrine of the common law as it exists in this country. You can not, therefore, jump to the conclusion, because a contract for the division and apportionment of freights between competing roads may in some sense to some extent regulate or limit competition, that it is illegal. I undertake to say that, with the exception of one or two cases to which I will allude, in this country there can not be a case found where such contracts have been held to be illegal unless they were for the total prevention of trade within certain limits; or unless they related to the control of a production like coal or iron, as well as the carrying of

the same. It depends on whether the prevention aimed at is total, unreasonable and injurious.

As I said, the common law of England certainly is that such contracts are legal. The common law of England and America is the same. And yet the English courts, law and chancery, each hold just such contracts as it is proposed to declare illegal and criminal to be valid, and enforce them, I want to put this question to the Senate of the United States: England has had as much experience in railroads as we have; it has had the experience of thirty years of legislation; it has experienced all the evils; it has tried all the evils; it has tried all the remedies for abuses; and does the Senate of the United States propose deliberately to-day to say that arrangements which English courts with all this experience hold be legal and valid shall subject the parties practicing them to criminal penalties of $5,000 a day? I cite from the last legal treatise on railway law, Wood's Railway Law, volume 1, published in 1885. The author is an approved law-writer, both in this and other branches of the law. I read from section 207, page 590:

SEC. 207. Pooling arrangements. In England it is held that "pooling" contracts, or arrangements between competing roads by which they agree to divide their joint earnings upon certain classes of business, or even their entire earnings, are legal and valid, where it does not appear that she interests of shareholders or of the public are prejudiced thereby. But the English authorities upon many questions conrected with railway law are hardly safe guides upon similar questions in this country, for the reason that their railway system is essentially different from ours, and such companies are under the direct and immediate supervision of a court of railway commissioners, which by statute is invested with authority to hear complaints and make orders which relieve the public against any particular oppression or illegal action of the companies; yet upon this question such authorities are entitled to weight, because they are predicated upon the common law, and not upon statutory grounds.-Wood's Railway Law, I, page 590.

The two leading cases in which the English courts held that such contracts were legal are on all-fours with the contracts which it is proposed to prohibit and make criminal by this bill. One was for a division of earnings; one for a division of traffic between competing roads running between two great points. Now I want to read what, when the case was tried at law, Judge Campbell said to the Court of Queen's

Bench:

The question, then, is whether the agreement is void in law.

That agreement was this:

Here two groups of railway companies being respectively the owners of independent conterminous routes from London to Edinburg, the west route and the east coast route, agreed to divide the profits of the whole traffic in certain fixed proportions, calculated on the experience of the past course of traffic.

They agreed to divide the whole traffic.

Lord Campbell says:

The question, then, is whether the agreement is void in law. As it has been clearly settled that an agreement to withdraw opposition to a railway bill for a pecuniary or other consideration is not illegal, the agreement in question would only be void in case it was illegal upon other grounds, such as those suggested on the part of the defendants-that it was injurious to, and therefore in a legal sense a fraud upon, the public or the shareholdThe defendant's counsel contended that it was injurious to the public by giving, in effect, a monopoly to the plaintiffs, and thereby depriving the public of the benefit that might be derived from competition.

ers.

That bugbear of free competition was invoked there as here.

If this were so, and the parties proposed by their agreement to endeavor to prevent competition generally, there might be weight in the objection; but the effect of the agree

ment is only that the one company shall not compete or interfere with the other upon the particular line mentioned in the agreement; this is no more illegal than it would be for two persons engaged in trade 1hat one shall not exercise his trade nor compete with the other within a particular district.

I shall not read further, but I will say that it having been settled that such contracts are valid in England, are held to be not injurious to the public, not against public policy, this law writer reviewing the whole question of decisions in America comes to this conclusion:

It is believed that, except when prohibited by statute, contracts for "pooling" earnings by rival lines, when made in good faith for self-protection, and which do not result in the creation of a monopoly injurious to the public, are valid and not obnoxious to the charge of being opposed to public policy.

Judge Stevenson Burke (I said I should quote but few railroad authorities, and I quote Judge Burke because he was an eminent judge before he became a railroad man) says:

In England parliament has established a railway commission and sanctioned by law contracts of the character and kind under consideration, but before parliament acted upon this subject the English courts held such contracts valid.

And he closes his argument for the legality of legal pooling contracts in these words:

Many similar quotations might be made, but the single point which I set out to maintain is that such traffic contracts or arrangements honestly and fairly made in the interest of the public and of the shareholders of railway companies, are not only not void as against public policy, but they are in all respects commendable, promotive of public and private interest, and conducive in all respects to the public welfare, and, therefore, of necessity lawful.

Judge Cooley in a very exhaustive work, from which I have already quoted "Popular and Legal Views of Traffic Pooling," goes thoroughly into the question. He says:

The suggestion of poolin, though, likely, perhaps, to occur anywhere, comes to us from England, where pooling contracts in the railroad business and others of a semi-public nature have been held not to be illegal, both when they were made on the basis of an equal division of profits and where the basis was a division of business between the contracting parties.

Judge Cooley in his argument clearly maintains that such contracts ought not to be held illegal in this country, but he says it is impossible to tell what the courts may do on the subject, as the question is still an open question.

I should not be treating this subject fairly if I did not admit that there were two cases decided in the State of New York in 1847, which seem to be conclusive so far as that law of the State is concerned, and until they are overruled it is there held that such contracts are against public policy and therefore void. Those are the only two cases. They have not escaped criticism. They have been very severely handled by other courts, and it is more than probable that they would not be foÏ

lowed.

I will read what Judge Cooley says about those cases. First, let me say, however, that such contracts when executed have always been held to be good by the courts of the United States. Judge Nelson in the circuit court in Massachusetts, and Judge Matthews in the circuit court in Ohio, have explicitly decided that when once executed the law would compel a party who had in his hands any money which, under the contract, should be paid to another party to pay it over. It may be said

that the doctrine of estoppel comes in there, but the doctrine of the legality of contracts was raised in those cases, although it was not specifically passed upon by the judges who decided them. Contracts for the pooling of business and receipts between continuous roads— roads forming a continuous line-have been repeatedly held to be good in this country.

Now, I come to what Judge Cooley says about the two New York cases, referring to the class of cases to which I have just been alluding. He says:

Before either of these cases was decided it had been held by the supreme court of New York (in 1847) that a contract between the proprietors of canal-boats for fixing rates and for a division of net earnings was void, though the object was expressed to be "to establish and maintain fair and uniform rates of freight and to equalize the business of forwarding on the Erie and Oswego Canals among themselves, and to avoid all unnecessary expenses in doing the same." The argument or the court is brief, and is summed up in two short sentences: "The object of this combinition was obviously to destroy competition between the several lines in the business engaged in. It was a conspiracy, between the individuals contracting to prevent a free competition among themselves in the business of transporting merchandise, property and passengers upon the pub'ic canals." "It is a familiar maxim that competition is the life of trade. It follows that whatever destroys or even relaxes competition to trade is injurious if not fatal to it."

I will not stop to read the decision in the other case because it followed the decision already referred to. Judge Cooley continues:

These cases have not passed entirely without criticism in this country. They were cited to the Supreme Court of Wisconsin not long after they were made, and were there dissented from in very vigorous terms. Referring to the maxim that competition is the life of trade, Judge Howe, speaking for the court, said that it is one of the least reliable of the host that may be picked up in every market place. It is in fact the shibboleth of mere gambling speculation, and is hardly entitled to take rank as an axiom in the jurisprudence of this country. I believe universal observation will attest that for the last quarter of a century competition in the trade has caused more individual distress, if not more public injury, than the want of competition. Indeed, by reducting prices below or raising them above values-as the narure of the trade prompted-competition has done more to monopolize trade or to secure exclusive advantages in it,than has been done by contract. Rivalry in trade will destroy itself, and rival tradesmen seeking to remove each other, rarely resort to contract, unless they find it the cheapest mode of putting an end to the strife. And it seems to me not a little remarkable that in the case of Stanton vs. Allen

In which I did not read the opinion of the court

it should have been urged against the agreement that its object was to exempt the standard of freights, etc., from the wholesome influence of rivalry and competition. For it is very certain that because of that very purpose-because they did tend to protect the party against the influence of rivalry and competition-courts of law have upheld like agreements in partial restraint of trade ever since the case of Mitchell vs. Reynolds.

Judge Howe was afterwards Senator Howe, and I need not say to Senators who served with him that he was an exceptionally good lawyer.

Those New York cases decided in 1847, thus criticised and dissented from by Judge Howe, may have been cited in the English cases; at least they were decided long before the English courts held precisely the opposite doctrine. Those two New York cases are the only ones in this country on which, as it seems to me, any expectation that our courts will hold such contracts illegal can be based.

Contracts for the division of competitive business of railroads, or of the earnings thereof, are not agreements to enhance or depress pricesare not agreements to control production, or the market for certain products-as in case of agreements to limit the output of coal or iron, or the supply of coal, or iron, or salt, or other commodities. Contracts for

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