had jurisdiction both over wages and rates. And there the attempt has been abandoned, and control over wages has been left in the industrial court, and the public utilities commission has been reestablished with control over rates. They are independent boards, just as the Interstate Commerce Commission and the Labor Board are. In Illinois the only rates which the Federal commission did not prescribe were commutation rates, and they are now making an investigation through one of their examiners. In due time it may be expected that the examiner will make a report to the commission, and that it will be adopted and put out in the form of a Federal order.

It may be that through employment by a department here in Washington a nonresident of Illinois may become able to make a wiser decision as to what local commutation rates about Chicago ought to be than the duly elected officials of Illinois, who live in that State and know conditions there, but I can not refrain from suggesting that the substitution of such control over the subject matter represents a wide departure from the governmental policy which in the past we have been accustomed to in this country.

I come now to the Wisconsin, Arkansas, Minnesota, Iowa, Montana, Ohio, and Michigan cases.

In these cases, reported, respectively, in 59 I. C. C., 391; 59 I. C. C., 471; 59 I. C. C., 502; 60 I. C. C., 55; 60 I. C. C., 61; 60 I. C. C., 78; and 60 I. C. C., 245, the Federal commission made orders similar to the order entered in the New York case prescribing a 20 per cent advance in passenger rates.

The CHAIRMAN. There is this difference between passenger fare cases in those States which you have mentioned as compared with New York. So far as Iowa is concerned, and I think it is true of every other State you have mentioned, the State commission has no power over passenger rates that have been fixed by statute.

Mr. BENTON. I thank you for mentioning that. I did not mean to say that the local law was the same. I meant to say that the Interstate Commerce Commission proceeded in the same way in those cases and made the same sort of order-one setting aside the entire body of State rates, which, according to the terms of the order itself, the commission saw fit to make permanent, that is, until a further order of the commission. It locked those rates in those States up so that they were beyond the control of either the local commission or the Federal commission itself; and I meant to say that they did that without consideration of the rates that they raised, applying a straight percentage of increase without finding whether the fares they raised were high enough already or not.

Some special mention may be made of the Iowa case. That was argued before the Federal commission very shortly before the Iowa Legislature convened. Counsel for the State of Iowa pointed out that there was no reason to believe that Federal power must be exerted to compel the allowance of just rates of fare in Iowa.

And I may say that Iowa has a State official known as commerce counsel, as the chairman of this committee will know, who is responsible not to the State commission but who is a State officer. He came here and pointed out the fact which I just mentioned.

It was suggested that Hon. John A. Guiher, of the Iowa commission, had been one of the men who had participated in the Ex parte 74 hearing, before the Federal commission, and that the Iowa commission had very promptly granted the freight advances and had refrained from acting with respect to passenger rates, because it had no jurisdiction over such rates. He asked the Interstate Commerce Commission not to destroy the power of Iowa over passenger rates, at least until the legislature should have had a reasonable length of time within which to act, by statute, as to such passenger rate, or to commit control of over the same to the State commission. In its report. handed down just after the legislative session began, the Federal commission did not refer to the request in any way but made an order as already stated.

In the Arkansas case the Federal commission held, in substance, that it was optional with carriers, desiring to raise intrastate rates, whether they would apply to the State authorities to make the desired advance, or would apply directly to the Federal commission. This, of course, had been decided by implication in the New York case, but the ruling was first clearly stated in the Arkansas case.

In each of these cases, it will be noted, because the legislature did not happen to have committed the power of legislation as to passenger rates to the local commission. it was punished by having its legislative power taken away, by an order of the character which I have mentioned.

The same sort of order was made in South Carolina and also in North Carolina.

SOUTH CAROLINA AND NORTH CAROLINA CASES.

These cases, reported, respectively, 60 I. C. C., 290, and 60 I. C. C., 362, I speak of separately only to show the extent to which the Federal commission has been carried under its interpretation of the existing law. In each of the cases State-wide orders were made advancing passenger rates, of the same character as that made in the New York case. It is, however, to other features of the order that I desire specially to refer.

By State statute in South Carolina, where the distance traveled is so short that the mileage rate in effect would be less than 5 cents, the minimum fare is made 5 cents. In all other cases the established fare applies. From interstate passengers, however, the carriers were permitted-without the matter ever having been passed upon, so far as I am aware, by the Interstate Commerce Commission-to collect a minimum fare of 10 cents prior to Ex parte 74, and after the Ex parte 74 decision this was increased 420 per cent, making 12 cents as a minimum fare.

The CHAIRMAN. I can hardly conceive that there would be any travel under an interstate rate as short as 12 miles.

Mr. BENTON. As short as 3 or 4 miles would give the 12-cent rate. There would be few instances if there were any I do not know where. I assume that there were some; but they were so few that they would be inconsequential.

When the carriers complained of the passenger fares, of the 5-cent minimum fixed by the South Carolina statute, they asked the Federal commission to advance the minimum within the State to 12 cents, and the Interstate Commerce Commission did it, saying:

While in this instance the intrastate minimum charge apparently has no very substantial effect upon the revenue of any one carrier, yet if the same charge were established throughout the southern group, and if similar discriminations were permitted in other minor rates, fares, and charges, the effect upon revenues might become considerable. It is clear that the question whether the intrastate charge is unjustly iscriminatory against interstate commerce does not depend upon the amount of revenue involved.

I call attention to the fact that they recognized they were not in any position to pass upon the justice of it, and they did not find it was just, but they found that the record did not prove it was unjust, so they required it to be put into effect intrastate in contravention of the South Carolina statute.

Senator POINDEXTER. Who wrote that opinion?

Mr. BENTON. That was put out by the commission, not under the name of any particular man.

The carriers in South Carolina also collected from interstate passengers boarding any train without tickets a cash penalty charge of 15 cents, without rebate. This was increased to 18 cents after the Ex parte 74. The South Carolina statute forbade any such penalty charge. Upon the carriers' petition the Federal commission ordered the imposition of a 15-cent penalty charge for intrastate traffic, without rebate. The reasoning upon which it made this order was stated in the commission's report as Hollows:

"The conductor's penalty charge is not levied for direct revenue purposes, but to facilitate the efficient handling of traffic and the collection of fares, and it was not our intent in Ex parte 74, although the language used may give color to the claim, to authorize an increase in charges of this character. We think, therefore, that the increase in the conductor's penalty charge from 15 cents to 18 cents has not been Justified, but upon this record we are not prepared to find that 15 cents, is an unreasonable amount. It is also our opinion that the absence of such a charge for intrastate application in South Carolina can hardly fail to have a prejudicial effect, not only upon intrastate but upon interstate passenger traffic as well, and that it is unjustly discriminatory against interstate commerce. Our conclusion as to the amount 13 without prejudice to any further consideration of the charge in the future upon a more comprehensive record.”

It may be proper for me to mention that in the New York case, when the commission for the first time frankly entered the field of local regulation and displaced the State, it attempted to lay down a rule which should justify its action and perhaps serve as restraint upon itself thereafter. It said:

"Inasmuch as the basis of our jurisdiction is our power to regulate interstate comerce, it follows that the decisive factor is whether the rates under consideration juriously affect interstate commerce. It is no answer to this to say that if this conclusion be admitted it may have the effect of completely displacing State jurisdiction Over State commerce. There may be cases in which intrastate rates affect interstate Commerce injuriously in ways so manifest as to make them subject to our control.

There may be cases in which the connection of intrastate rates with the movement of interstate commerce is so remote and unimportant that we may properly disregard it. But in every case which puts in question intrastate rates the decisive factor is whether or not they affect interstate commerce injuriously to a considerable extent. If they do, they are brought under our jurisdiction and made subject to our control, even although the whole rate structure of a State should be involved."

The New York decision was made November 13, 1920. The South Carolina decision was made January 28, 1921. In that space of time the Federal commission had become more accustomed to the exercise of its new power, and also prepared to indulge a passion for uniformity which is not uncommon to Federal boards. It had taken possession of the State field in the New York case avowedly to protect the revenues of carriers, and it had said there that the test of its right to do so in a given case was the extent of the injury shown to result from the difference in rates complained of. Within three months it had reached a point where it was prepared to set aside State statutes applicable to charges not designed for revenue purposes, and admittedly of slight consequence in their effect upon carriers' revenues, and was ready to say that the existence of unjust discrimination, giving the Federal commission jurisdiction. did not depend upon the amount of revenue involved.

These two charges, inflicted upon the people of South Carolina by Federal authority, were admittedly of no great consequence so far as the aggregate amount of money is concerned. This the Federal commission says, and this we admit. But they are charges which are irritating to the people of that State. The Legislature of South Carolina has not seen fit to delegate to the railroads of that State power to fine a man who may for any reason be unable to procure his ticket before boarding a train.

And I want to say in that connection that it appeared before the Federal commission and was argued by the chairman of the South Carolina commission in that case, that under the conditions existing locally in South Carolina a charge which might perhaps, be just somewhere else was unjust there because the carriers did not make provision by the employment of clerks so that people within a reasonable time before the departure of trains could procure tickets, and they were even compelled against their will to get on trains for passage without having purchased tickets, and for that reason he protested in the name of South Carolina against the setting aside of the South Carolina statute and the imposition of a 15-cent or 18-cent penalty charge, as then proposed. upon people who happened to be upon trains without tickets.

The legislature has also expressed its judgment that the general mileage rate in effect should apply in all cases except where the fare produced would be less than 5 cents, in which cases 5 cents should be the fare. The Federal commission has now stepped into South Carolina, at the request of the carriers, and has compelled the payment of 27 cents, instead of 5 cents, by the man who rides half a mile without having bought his ticket in advance. I say this has been done at the request of the carriers, because in my section of the country if a man fails to purchase a ticket he is required to pay 10 cents more than the regular fare, but he is given a rebate check upon presentation of which at any ticket office he can be repaid that 10 cents. The commission knows this, but it does not exercise its power to compel any change in the practice in my section of the country, although the carriers in New England need revenue perhaps worse than in any other section.

I waive any discussion of the question whether the 5 cents prescribed by the State of South Carolina for that half mile is or is not a more just rate than the 27 cents that is now prescribed under the order by the Federal Government. I point out the absurdity of the ground on which the carriers asked the Federal commission to act, and upon which the order of the commission must rest-that is, that the lower State charges put the man living outside South Carolina, and desiring to do business in that State, at a disadvantage, as compared with the man living in South Carolina was so serious that the Federal commission ought to find it unjust, undue, and unreasonable, and ought to bring into play the exercise of the power of the National Government to set aside local regulations made by the people of South Carolina to apply to their purely internal traffic.

Senator FERNALD. Mr. Benton, right there let me inquire: While in this particular instance it appears to be a great hardship to the citizens of South Carolina, do you know of any cases on record in any States where it has also been a hardship to the carriers and their revenue was less by reason of the increase?

Mr. BENTON. I have not any data in the way of compiled figures which I could present to the committee on that subject. I have expressed my opinion, early in the hearings, and have shown that in different States, where freight rates have been locked up, the carriers have joined with shippers in attempting to discover a way of escape from the locked-up rates.

Since I touched on that matter before the committee the other day an order of the Interstate Commerce Commission has come to my attention which shows that another method of procedure whereby the carriers and the public may escape from the effect of this cast-iron order has been discovered. It is a case that arose in the State of Texas, where the rates, as you will remember, have been permitted to be advanced by the State commission 334 per cent, and the Interstate Commerce Commission came in and held an investigation and found that they were unjustly injuring interstate commerce and ordered them up to 35 per cent-just a difference of 13 per cent. But it locked up every freight rate in Texas. A case arose where the parties wanted to ship gravel and they could not do it under the State rate because there was another rate that was discriminatory, which gave unfair advantage to another community. Both of the rates were subject to the jurisdiction of the State of Texas, but for the fact that they had been frozen up by the Federal commission's order.

Senator STANLEY. Let me ask you a question right there: What concern was it of the Interstate Commerce Commission whether one community within the State was discriminated against in favor of another community within the State if the traffic to both communities was intrastate?

Mr. BENTON. They had never heard of those rates, Senator. Those rates had been frozen up with all the other rates in the State by a blanket advance of 35 per cent without looking at the particular rates.

Now, they were frozen up. The Texas commission heard the parties and it could not enter an order. It knew what it wanted to do but it was obliged to file a formal petition to the Interstate Commerce Commission, and it carried through that petition, and the action of the Federal commission finally took the form of an order that excluded from the effect of its order those two rates and left them subject to the jurisdiction of the State commission. Now, the State commission after all that procedure can go ahead and make the change in the rates which will permit the internal commerce of Texas to move.

That shows that the Interstate Commerce Commission--whatever it may be disposed to say, and I believe it will be disposed to come here and frankly admit it—recognizes the hardship that is imposed by these State-wide orders. The Interstate ComDerce Commission, I want to say, and it would be assumed if I did not say it, is not actuated in what it does by a desire to injure the people of the several States. But it has entered upon a mistaken policy in attempting to administer this act, and in my judgment it has gone very far wrong, but it is due these gentlemen for me to say that I have the highest regard for them collectively and individually. They are hard-working, conscientious, overburdened men, put to a task that no body of men that could be gathered together in the United States can perform satisfactorily. They are not infallible. With respect to their attempt to assume and exercise jurisdiction over the rates of the States they have made a serious mistake, in my judgment, but I want to say that I do not question the motives of the men upon that commission. Senator STANLEY. I share your high opinion of the Interstate Commerce Commission. It has done good work, and it is the most successful commission, and the only successful one that I know anything about, that the Government has ever organized to do any great work. But without regard to any good faith of the commission, which I do not question, my inquiry is this: Has the Interstate Commerce Commission, according to your contention, any concern as a commission, without regard to the excellence of its members, with a differential or discrimination between two comunities both of which do strictly intrastate business? I want to get your viewpoint on that.

Mr. BENTON. Senator Stanley, in my judgment they have not. In my judgment the Congress never intended them to have anything to do with intrastate rates, except only to the extent that it may be necessary to abate discriminations which unduly injure interstate commerce and which show their effect upon persons and localities. But the Interstate Commerce Commission has construed section 15 (a) of this act as aving them responsibility for creating revenues, and from the beginning of their administration of the act until the last opinion they handed down they have shown that they were acting under the belief that the Congress had commanded them to do that thing. And that is the reason and not because they have any desire to injure the people of the State of Florida that in the Florida case, as Judge Burr told you on Yesterday, they actually compelled the East Coast Railroad in Florida, and other ailroads that were entirely satisfied with the rates prescribed by the State of Florida, increase those rates. I suggest that such a proceeding is unheard of before in governmental regulation in this or any other country, and it arises purely by reason the presence in the act of section 15 (a).

The CHAIRMAN. I wish you would point out somewhere the language in the decision Ex parte 74, or in any other proceeding before the Interstate Commerce Com

mission upon an application to increase State rates, which indicates that the commission looked upon section 15 (a) as a command to increase State rates without respect to discrimination.

Mr. BENTON. That can not be done because the Interstate Commerce Commission takes the words "discrimination against interstate commerce" which the transportation act contains in section 13, and takes the command to produce 54 per cent or 6 per cent on the aggregate value of the property which the Congress put into section 15 (a), and says that the effect of that command would compel them, should there be a shortage in appropriate revenues from intrastate business, to make it up from interstate business, and that is "unjust discrimination against interstate commerce." So that the thing in all the discussions of the commission touching the subject is tied up with that idea of discrimination. If the Senator asks me to point out language where the order is not based upon the idea of discrimination, I can not do it; it is based upon that false idea which arises from the interpretation they place upon section 15 (a).

The CHAIRMAN. Then I want you to specifically call attention to whatever language they use with respect to the construction of section 15 (a) which indicates that conclusion.

Mr. BENTON. I should be very glad to do that, Senator. I am not prepared to do that now. I would like to do it consecutively, and in an orderly way so that it may be as helpful to you as possible. If I may I would like to get the decisions, which have not here at hand, and examine them and present them later.

The CHAIRMAN. Very well. I would like to have you do that. I agree with all you say with regard to the high motives which actuate the Interstate Commerce Commission. But the fundamental error that has been made, from my standpoint, if your statements of fact are sustained is in accepting the fact that the State rates are lower than the rates which had been issued by the commission on interstate rates as conclusive evidence of discrimination, and of course that results in these frozen situations, of which you speak, and I do not believe that any member of the committee or any Member of Congress ever intended to do any thing of that kind. I never dreamed that the Interstate Commerce Commission would declare a rate discriminatory as against interstate commerce, unless it had investigated that partic ular rate and the traffic which moved under it and found that it did unjustly and unreasonably work to the disadvantage of the people outside the State who were doing this same kind of business. That was our idea, I am sure. Now, this blanketing the whole country with a uniform advance in State rates, that is by groups,is the thing that has done all this harm.

Senator STANLEY. It appears from what the judge says that the Interstate Commerce Commission seems to have been impressed with the idea that a duty was imposed upon them to so arrange rates as to provide this 6 per cent return. And I agree with the chairman that there was no such intention upon the part of the framers of the law. The CHAIRMAN. There was no such intention, and there is nothing in the act that could lead any reasonable person to any such conclusion as that. If they have done that, then, as far as I am concerned, why the quicker it is undone the better it will be for the country.

Mr. BENTON. Mr. Chairman, those are very sweet words to my ears, and the echo of them will be most welcome in the different States of this country.

Senator POINDEXTER. Let me ask you one question on the general principle of this question you are discussing. Suppose just for a hypothetical case, and stated in an extreme form, that all the State commissions fixed intrastate rates on a confisca tory basis, what would you say then as to the power of the Interstate Commerce Com mission to readjust them?

Mr. BENTON. It has not got any power to readjust a rate merely upon the basis of revenue, because Congress never gave it that power. Whether Congress has the constitutional power to do that or not, there is no necessity for it, because the carriers have not failed in any State to get a temporary injunction from the courts if they wanted to obtain a temporary injunction against a rate which they alleged to be confiscatory.

Senator POINDEXTER. You are getting back to the actual situation, in which 1 entirely agree with you, as has been stated here. It is perfectly absurd, in my opinion, that the commission should charge rates that they had never investigated for the purpose of finding out whether they were reasonable or unreasonable, or what relation they actually had to interstate business in their effect. But I am speaking about the fundamental question.

Mr. BENTON. The question of policy.

Senator POINDEXTER. The question of jurisdiction and power to regulate when such cases arise, and I want to get your opinion as to whether or not the fixing of