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may be the effect of such reductions on their revenues. The Commission took occasion to emphasize this view as long ago as 1888 when it said, In re Chicago, St. Paul & Kansas City Railway Company (2 I. C. C. Rep. 231)— The act to regulate commerce assumes that the carriers, in their power to make
rates, have ample remedy to protect themselves againstrates which are unreasonably low.
Substantially the same thing was again said in 1898 in the case of New York Produce Exchange (7 I. C. C. Rep. 612):
Railway companies may make whatever rates, form whatever lines, and establish whatever differentials they deem best for the purpose of securing and conducting transportation, provided the just interests of the public are not sacrificed thereby, and whether in so doing they act wisely or unwisely, fairly or unfairly between themselves, is not for the Commission to determine; the jurisdiction of the Commission is confined to inquiring whether the situation which the carriers have created is in violation of the act to regulate commerce.
This is only another way of saying that the duties of the Commission are confined to enforcing the act, and the Commission has been particularly cautious not to do anything inconsistent with its official obligations in this regard.
The Commission believes that the propriety of holding these conferences has been fully vindicated by the results which have followed. We are confident that these meetings have contributed in a material degree to the better observance of the law. All reports agree that there has been a marked improvement in the maintenance of published rates, and that unlawful practices by railroad carriers have been less general and conspicuous than for some years before. Secret discriminations are believed to be much less frequent than was formerly the case, and the general situation in this regard is undoubtedly much better than it was at the time of our last annual report.
It is not claimed that the more favorable conditions lately prevailing have been brought about by the action of the Commission in holding these conferences. Other causes have been much more potent. The great increase in the volume of business, which is observed in almost every part of the country, is sufficient of itself to account for the better maintenance of rates. When the amount of traffic offered exceeds the capacity of equipment, as has frequently happened during the last year, there is no occasion for efforts to secure tonnage by secret concessions. The force of competition is greatly diminished, if not altogether removed, when each competitor obtains without solicitation about all the business it can handle. When the demands of shippers for cars are met with difficulty, and when motive power is insufficient for the prompt movement of trains, it is to be expected that preferential rates will seldom be accorded.
Under such circumstances there is neither temptation nor excuse for the disregard of published tariffs. Moreover, there are indications that the financial interest, which ordinarily has the power to control railroad management, has been directly exerted to an unusual degree during the last year to prevent the demoralization of rates and consequent loss of revenue. The influences emanating from this source have undoubtedly had a restraining effect upon traffic officials and more or less dictated a policy which discountenances rate cutting and similar practices. In other words, the owners of railroad securities have apparently regarded it for their advantage to have railroad operations conducted in conformity with the law. It is perhaps not too much to claim that the Commission has had considerable influence, through these conferences and otherwise, in promoting the improved conditions that now generally prevail, but that influence would not have been sufficient to secure the result without the more powerful aids to which we have just referred.
CHANGES IN FREIGHT CLASSIFICATION AND ADVANCES IN EREIGHT IRATES HY CARRIERS USING THE OFFICIAL CLASSIIFICATION.
During the two weeks following the 25th of November numerous complaints were filed with the Commission alleging, in substance, that discriminating and wrongful changes in freight classification had been agreed upon by the carriers composing what is known as the “Official classification committee,” and that a new classification embodying such changes was to be put in effect by such carriers on or about January 1, 1900, and through adoption of the new classification by all, or nearly all, other railroad carriers in the territory covered by the classification. Such territory is generally described as lying east of the Mississippi and north of the Ohio and Potomac rivers. The complaints further alleged that many carriers in official classification territory had in various ways made known their determination to cancel, on or about January 1, the great majority, if not all, of existing commodity rates, many of which had been in effect for a number of years, and which were materially lower than the class rates otherwise in force on the freight articles taking such commodity rates. These changes in classification and rates would, it was claimed, subject shippers and shipments in that territory to unreasonable charges, unjust discrimination, and undue prejudice and disadvantage.
An advance copy of the proposed new classification, entitled Official Classification No. 20, to become effective January 1, 1900, was by direction of the Commission filed with the Commission by the chairman of the official classification committee on November 29. Upon examination it appeared that a very large number of changes from a lower to a higher class would be made in consequence of the new classification, and that the existing differences in classification for carload and less than carload quantities would be thereby considerably increased. None of the carriers had filed any notice of reductions in class rates to meet such higher classification of freight articles, and tariffs and notices of rate changes had been forwarded to the Commission by many carriers showing the cancellation of numerous commodity rates in the affected territory. The Commission thereupon issued an order instituting a proceeding of inquiry and investigation into the manner and method in which the principal carriers using the official classification conducted and managed their business, particularly in respect of the changes in freight classification and the cancellation of commodity rates above mentioned. The order also required such carriers to appear before the Commission in Washington on December 21, and to be prepared, with the testimony of their traffic managers, general freight agents or others, to fully disclose all of the facts and conditions involved in the making, putting in force, and application of the new classification and the proposed advances in freight rates. At the hearing the respondent companies were represented by their traffic officials, and a large number of representatives of the complaining shippers and commercial organizations also appeared. The complainants had previously been notified, and at the hearing it was again announced, that the Commission had no authority to make any order in this proceeding against any particular carrier, or against all of the carriers using the official classification. It was our opinion that such an order as would direct the carriers to cease and desist from any action alleged or found to be unlawful could only be made in a proceeding which had been instituted with a complaint, and which complaint the carriers had been called upon and given an opportunity to answer, and upon their answer an opportunity to be heard. It was also doubtful whether such a proceeding could be taken until the advanced rates had actually gone into effect. For the purpose of this proceeding no answers had been required of the carriers. Under its general authority and in discharge of the duty imposed upon it by the terms of the law; the Commission is required to keep itself informed as to the methods and manner in which carriers conduct their business, and to call upon them for information respecting their methods of business, either actual or proposed. That was the character of this investigation, and in view of the nature of the proceeding and of the limitations upon our power to act, we held that the carriers should be asked to explain the general causes and reasons which induced them to make the classification and rate changes under consideration, and that the burden of proof was not upon the shippers. On December 22, after the respondent carriers had put in their testimony, the shipping interests, as the result of a conference held the evening before, presented a resolution and petition to the Commission which read as follows:
Whereas the committee, known as the official classification committee, representing 60 railroads, in the central and eastern parts of the United States, have signified their intention of making radical changes in freight classification and advances in freight rates by carriers using such official classification; and
Whereas, such violent changes by increasing the part carload rates over that of carload rates and increasing carload rates will greatly inure to the benefit of the large shipper and to the detriment of the small shipper, even to the destruction and extermination of such small business interests; and
Whereas, such committee, through its representative, Mr. C. E. Gill, has expressed its views and made known the determination of the carriers to forthwith put in force said increased rates on or about January 1, 1900, and will not consent to postponing the time sixty or ninety days, as requested by the representatives of the shippers here present:
Therefore, be it resolved, That the representatives of such shipping interests here present, sign the following petition, addressed to the honorable Interstate Commerce Commission:
WASHINGTON, D.C., December 21, 1899.
To the Interstate Commerce Commission, Washington, D. C.
GENTLEMEN: The undersigned shippers and representatives of various shipping interests would respectfully and respectively petition your honorable body, in view of the testimony disclosed at the session held in this city on December 21, in the matter of changes in freight classification and advances in freight rates by carriers using the official classification, request that such testimony be laid before his honor, the Attorney-General of the United States, for the purpose of informing him of the necessity of taking legal action by injunction or otherwise in the premises.
In view of the principles laid down in Thurber v. Railroad Company, March 21, 1890, and in view of the decision of the Supreme Court of the United States, in the Trans-Missouri case (166 U. S., 290); and the decision in the Joint Traffic Association case (171 U. S., 505), we think the evidence will warrant such proceedings, as the action of said official classification committee is clearly in violation of the Federal statute known as the Sherman Antitrust Act.
The petition was signed by representatives of thirty-six commercial organizations, companies and firms. After some discussion as to the purpose of the petitioners, the submission of some testimony on behalf of shippers, and various statements and protests against the changes announced by the carriers, the hearing was adjourned.
Upon careful consideration of the petition filed by the shippers, a majority of the Commission reached the conclusion that, as this body is not charged with any duty under the antitrust law, it should not express an opinion concerning the violation of that act alleged by the shippers, nor recommend the bringing of a suit under that statute. We were unanimous, however, in the belief that it was our duty, in recognition of the many important commercial interests represented in the petition, to furnish the Attorney-General with a copy of the papers and the testimony and a statement showing the scope and main features of the proceeding. In accordance with this view, a copy of the record
accompanied by the following letter of transmittal was sent to the Attorney-General: INTERSTATE CoMMERCE CoMMIssion, Washington, December 28, 1899. DEAR SIR: In the latter part of November of this year the Interstate Commerce Commission was informed, in various indirect ways, that the railroad companies using what is known as the official classification had prepared, or were preparing, a new classification to take effect January 1, 1900, under which numerous articles would be put in higher classes than those in which they have been and are now placed, with the effect of materially increasing the charges on the articles so advanced if the present class rates remain unchanged. Generally speaking, the official classification is used by the carriers operating in that part of the United States north of the Ohio and Potomac rivers and east of the Mississippi River, and is applied to traffic moving between points in that territory. Shortly after this information was received and, as we supposed, resulting from the fact that many shippers had learned of the proposed changes in classification, numerous complaints and protests were received by the Commission, and its intervention was sought to prevent such changes from going into effect. On or about the 29th of November the Commission procured from Mr. C. E. Gill, chairman of the official classification committee, a copy of the proposed classification. For the purpose of ascertaining what changes were made by this new classification, a comparison was instituted between it and the one heretofore and now in use. A list of the changes shown by such comparison was prepared and a copy of the same is annexed hereto marked “A.” Acting upon the information so obtained and taking the only course permitted by the act to regulate commerce, the Commission instituted a proceeding of inquiry and investigation by an order made on the 8th day of this month, a copy of which is hereto annexed marked “B.” The principal reasons which induced this action, and the names of the carriers which were required to appear before the Commission, are set forth in the recitals and directions contained in the order just mentioned. The hearing of the matter was fixed for the 21st instant and took place on that and the following day. Notice of this hearing was given to many of the shippers whose protests had been received, and especially to the representatives of trade organizations in different cities, and such persons were invited to be present at the hearing, and many of them were in attendance. In the course of this hearing the Commission took the testimony of Mr. C. E. Gill, chairman of the official classification committee, Mr. Nathan Guilford, traffic manager of the New York Central and Hudson River Railroad Company, and Mr. Frank Harriott, a member of the official classification committee, who is also the general freight traffic manager of the Erie Railroad. At the conclusion of the testimony given by these witnesses an application was made by many of the shippers present that such testimony be transmitted to the Attorney-General of the United States, the claim being made by them that the evidence showed a violation of the act of Congress commonly known as the Sherman Antitrust Law. This application was in writing, and a copy of the same and of the signatures thereto annexed hereto, marked “C.” In compliance with this request the Commission herewith transmits to you, marked “D,” a copy of the entire proceedings had at the hearing on the 21st and 22d instants, as the same were taken by its official stenographers and written out by them. There is also sent with this a copy of the proposed new classification received from Mr. Gill, as above stated, known as No. 20, together with a copy of the official classification heretofore and now in use, known as No. 19.