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in desiring that this and other defects in the statute be promptly remedied. It is also true that shippers generally have been practically unanimous in favor of a single classification of freights, one that will be uniform for all roads and all sections of the country, and reasonably stable when established. The general public dissatisfaction with the present statute has frequently been expressed in resolutions adopted by various national organizations composed of business men, manufacturers, and farmers, and by the National Convention of Railroad Commissioners. At a conference held in Chicago in November last, and attended by representatives from a number of national associations of manufacturers, merchants, millers, and other branches of trade, a bill embracing the more important amendments which have been recommended by this Commission was, after discussion of each feature, formally approved as the measure which would best meet the requirements of business and commercial interests. This bill has been introduced in the Senate by Senator Cullom, known as Senate bill No. 1439, and will be found in Appendix C to this report. Such a movement on the part of associated producing and shipping interests, representing, it is said, an amount of invested capital exceeding the aggregate capitalization of all the railways, is in itself a clear indication of the popular demand. The query suggests itself whether continued failure to perfect the regulating statute on reasonable lines will not soon result in an irresistible demand for the most radical and drastic legislation. It is a matter of common knowledge that vast schemes of railway control are now in process of consummation and that the competition of rival lines is to be restrained by these combinations. While this movement has not yet found full expression in the actual consolidation of railroad corporations, enough has transpired to disclose a unification of financial interests which will dominate the management and harmonize the operations of lines heretofore independent and competitive. This is to-day the most noticeable and important feature of the railway situation. If the plans already foreshadowed are brought to effective results and others of similar scope are carried to execution, there will be a vast centralization of railroad properties, with all the power involved in such far-reaching combinations, yet uncontrolled by any public authority which can be efficiently exerted. The restraints of competition upon excessive and unjust rates will in this way be avoided and whatever evils may result will be remediless under existing laws. Among the noteworthy facts of general interest is the remarkable increase during the year in the volume of railroad business. This increase has been so great and to an extent so unexpected that many carriers were not prepared for the unusual demands upon their facilities. As a rule their equipment has been taxed to full capacity and often found inadequate for the service required. This, of course, has brought a substantial addition to the gross and net revenues of nearly every road in the country and greatly reduced the number of railway failures. It has also contributed to the improved observance of published rates, as is stated in another connection, and diminished the frequency of those practices which are made misdemeanors by the statute. Coincident with these schemes of unified control, and while this exceptional movement of traffic continues the carriers operating throughout an extensive and important territory have recently made substantial, and in many cases very large, increases in their scale of charges. These advances in rates have been mainly effected by concerted and agreed changes in the classification of freight articles by roads, both connecting and competing, which use the same classification and make the same a part of the tariffs filed by them under the law. Numerous articles have been taken from the class in which they were formerly placed and put in a higher class, to which a higher rate is applied, and many articles heretofore on the commodity list have been included in the classified traffic with the result of materially increasing the charges imposed thereon. Advances of rates in this manner have been made on hundreds of articles, many of which are necessaries in general use and constantly moving from place to place in the process of distribution. It is not intended to intimate that these advanced rates are unlawful, and no opinion is expressed as to their actual or relative reasonableness. But the fact that such extensive increases in railroad charges have been brought about by the method described must be of significant import and furnish a weighty argument in favor of measures which will be effective to secure compliance with the primary requirements of the act. These advances in rates have been agreed upon by the carriers without opportunity as a rule for shippers, dealers, or consumers to be heard. It is inevitable that changes so numerous and important, affecting public interests throughout so large a part of the country, will give rise to many complaints, both in respect of the reasonableness of particular rates complained of and alleged discriminations in the relation of rates. Reference is elsewhere made to the nature and number of complaints and protests on account of these changes in classification and the consequent increase of rates and readjustment of rate relations. Whatever may be the merits of these complaints, the parties making them are recognized by the law as having rights involved in the question of the reasonableness and justice of the charges which they are required to pay. But so long as the Congress sees fit to leave carriers practically free to make and apply such rates as they choose, whether acting independently or by concert, and whether competing or otherwise, and there is at the same time no adequate provision for deter
mining whether such rates are just and reasonable, or for preventing the exaction of those found unjust and unreasonable, although declared by the statute to be unlawful, the injustice which may result must be without available redress.
CONFERENCES WITH RAILWAY PRESIDENTS.
During the first three or four months of last year the Commission held a series of conferences with the presidents and other executive officers of the principal railroads in the United States. None of these conferences were held distinctly or exclusively with the presidents of roads forming any particular association, nor was the fact of former or existing associations taken into account in determining what officials should be invited to any of these meetings. The selection in each case was made with reference to the territory in which different connecting and competing lines operate, and the rate conditions in that territory, and not with reference to the relations of the carriers through organized associations or otherwise.
The occasion for these conferences was found in the general demoralization of rates, through disregard of published tariffs, which reached an acute and deplorable stage during the autumn of the year before. The situation at that time is described on pages 5 and 6 of our last annual report, as follows:
Tariffs are disregarded, discriminations constantly occur, the price at which transportation can be obtained is fluctuating and uncertain. Railroad managers are distrustful of each other and shippers all the while in doubt as to the rates secured by their competitors. The volume of traffic is so unusual as to frequently exceed the capacity of equipment, yet the contest for tonnage seems never relaxed. Enormous sums are spent in purchasing business and secret rates accorded far below the standard of published charges. The general public gets little benefit from these reductions, for concessions are mainly confined to the heavier shippers. All this augments the advantages of large capital and tends to the injury and often to the ruin of smaller dealers. These are not only matters of gravest consequence to the business welfare of the country, but they concern in no less degree the higher interests of public morality.
The Commission believed then and still believes that this statement is not exaggerated. It is scarcely too much to say that, on competitive traffic moving between the great centers of trade, the published tariff was little more than a basis from which to calculate concessions and discriminations, with the result that shippers who failed to secure these unlawful favors were in many cases forced to do business at a loss and in some instances driven out of business.
It is often said in substance that if any carrier gives discriminating or preferential rates it is the duty of the Commission to prevent or punish such misconduct. Unfortunately, the Commission is powerless to perform any such duty. It is practically without authority to either prevent or punish these criminal infractions of the law. The most it can do in any case is to ascertain the facts respecting such wrongdoing, when that is possible, and turn over whatever proofs may be obtained to the Department of Justice. The regulating statute contemplates nothing more, and provides for nothing more on the part of the Commission in dealing with the misdemeanors created by the act. The Commission has made earnest and persistent efforts to secure the enforcement of the penal provisions of the law, but such efforts have been mainly unsuccessful. Whatever may be the reason for this failure, the actual fact is that convictions have been very few in comparison with the number of prosecutions instituted. The difficulties that stand in the way of successful prosecution for these offenses have been stated and illustrated so fully in previous reports that further explanation is deemed unnecessary. The Commission is forced to the conclusion that attempts to enforce the act by criminal prosecutions must, under present conditions and in the present state of the law, be for the most part futile and ineffectual, though it is not doubted that the penal provisions of the statute could be made much more effective by suitable amendment. The reasons which lead to this conclusion are fully set forth in our recent annual reports. Under these circumstances there appeared to be only two courses open to the Commission. One was to accept the situation as unavoidable and content ourselves with reporting to Congress, as we have done heretofore, that the requirements of the act respecting the observance of published tariffs were not enforceable. The other was to endeavor to bring about such new conditions as would render these provisions operative to the fullest extent practicable. The latter course was adopted. As one means to the end in view, and apparently the best means available, the Commission decided to have personal interviews with presidents of the principal roads in various parts of the country with the hope of securing their cooperation in bringing about an observance of the law, the object being to reach those having the fullest power and responsibility in the management of their respective properties. The paramount and distinctly announced purpose of these conferences was to secure a pledge from each president that his road would adhere to whatever rates it published at any time and on any traffic. In other words, it was sought, by friendly appeals and persuasion, to secure that compliance with law which can not practically be compelled by hostile proceedings. The Commission perfectly understands that competing carriers can not agree with each other as to what their competitive rates shall-be, and then agree with each other to establish and maintain those rates; but the Commission believes it is not unlawful for such carriers to mutually agree that each of them will observe whatever rate it publishes, each of them being perfectly free at any time, by independent and unrestrained action, to publish and apply just such rates as it pleases, changing or reducing the same whenever it sees fit in the manner prescribed by the sixth section of the act. There seemed abundant reason for meeting a number of these officials at the same time rather than attempting to get the desired assurance from each of them separately. Much time could be gained by meeting them in groups or companies, and the speediest action that could lawfully be taken was fully justified. Moreover, the method of separate interviews did not seem calculated to produce the desired result. Theoretically it is possible for one road to absolutely conform to its published tariffs whatever its competitors may do in respect of their tariffs, but in point of fact such a thing has rarely, if ever, happened, and is not likely to happen in the present state of the law. Therefore, each road in promising to observe its own tariffs, and intending in good faith to keep that promise, needs the assurance that its competitors will also in good faith observe their tariffs. The mutual and concurrent promises, to each other and to the Commission, that each will honestly adhere to its published rates whatever they may be, are practically necessary to accomplish the result desired, which is conformity to the requirements of the act. So long as each competitor is free to publish such lawful rate as it deems for its interest, and that rate is not fixed or controlled by agreement with its rivals either to fix or maintain it, the independence of each of the carriers is secured and their competition with each other by lawful methods is unrestricted. This is precisely what the Commission has attempted to bring about. It has endeavored to commit each road, through the pledge of its chief executive officer, to the policy of applying its published tariffs to its entire business and to every one of its patrons, without making any agreement with its competitors, expressed or implied, which violates in the slightest degree either the antitrust law or the antipooling section of the act. It has sometimes been asserted that the object of these conferences, was the “maintenance of rates,” and that the meetings have actually resulted in “agreements to maintain rates” between lines represented. But such a charge has no foundation in fact. The Commission has been extremely careful to point out precisely what can be done and what can not be done under existing laws, and it was distinctly understood that the only thing sought or desired by the Commission was a bona fide promise by each road to observe its own tariffs, and to cease entirely from every sort of secret discrimination. It was repeatedly affirmed that no restriction could be placed upon the freedom of every road to change or reduce its rates at any time by the publication and filing of new tariffs as provided by the act. It is certainly not the duty of the Commission to prevent railroads from reducing their rates in the manner required by the act, whatever