Mr. BACON. If they are required to observe the rate which the Commission fixes it can not be made lower.

Mr. SHACKLEFORD. Suppose they do make it lower?

Mr. BACON. Then they would be disobeying the law.

66

Mr. RICHARDSON. You are talking about the difference in "rate" and rates." Is it not a fact that you have some precedent established by the Interstate Commerce Commission prior to the maximumrate decision in 1897 that throws some light on this?

Mr. BACON. Yes, sir.

Mr. RICHARDSON. Did not Judge Cooley and other members of the Interstate Commerce Commission, before that maximum-rate case was decided, hold or give orders directing what rates should be maintained?

Mr. BACON. There were some cases in which they did that; yes, sir. Mr. RICHARDSON. And did they have any regard to what the technical difference is between "rate" and "rates?"

Mr. BACON. I never heard the question raised in any discussion on the subject.

Mr. RICHARDSON. By Mr. Cooley or Mr. Schoonmaker or any of those men?

Mr. BACON. Never.

Mr. RICHARDSON. Where a rate had been inquired into and they had held it to be unreasonable and unjust and unfair, they directed what the rate should be, and no question was ever raised as to the technical difference between "rate" and "rates?"

Mr. BACON. I never heard it raised before anywhere.

Mr. RICHARDSON. And those directions made by Cooley and Schoonmaker and others had reference to the relation or dependence of rates upon each other?

Mr. BACON. Yes, sir.

Mr. RICHARDSON. It was not as to a single rate, but as to whether it related to all the rates that involved that particular one on that railroad?

Mr. BACON. In one of the other cases when Judge Cooley was Commissioner, relating to rates from points in Minnesota, variously 30, 40, or 50 miles from the Mississippi River, the Commission made an order that the rates on that whole line of road to Milwaukee and Chicago should not be more than 2 cents higher than rates from points on the river which it paralleled, and it involved a reduction of 5 or 6 cents a hundred in some cases, and it included 50 or more rates.

Mr. RICHARDSON. And the opinion that you have given in answer to Mr. Mann's technical questions as to the difference between "rate" and "rates" is based upon the knowledge that you acquired from those orders made at that time?

Mr. BACON. Those are included in my mind; yes, sir.

Mr. STEVENS. I would like to return to the question brought up by Mr. Shackleford for a moment. You recall the statement made by Judge Prouty, as I remember it, that there existed a certain condition in the oil traffic between Cleveland, Ohio, and New Orleans and Chicago, Ill., and New Orleans. In Cleveland there are quite a number of independent refiners. In Chicago the refinery is owned by the Standard Oil Company. The rate from Cleveland to New Orleans, as I recall it, was, say, 26 cents a hundred, which was a fair and rea

sonable rate. The rate from Chicago to New Orleans was 24 cents, which was an unduly low rate. The freight on other articles of about the same class was at the same rate between Chicago and New Orleans and Cleveland and New Orleans. As I recall what Mr. Prouty said, he instanced that as one of the cases where the schedule discriminated in favor of the location of the Standard Oil Company and against the location of the independent oil refiners. He stated, as I remember, that that rate of the independents between Cleveland and New Orleans was a fair, reasonable, and just rate, and that the other was too low a rate. What would you think ought to be done or could be done under this bill in that sort of a case?

Mr. BACON. That is a pretty difficult question to decide.

Mr. STEVENS. I am giving you the statement that Judge Prouty makes. Now, I would like to have your opinion of what could be done in that hard case under this bill.

Mr. BACON. I think what would be done would be the reduction of the higher rate.

Mr. STEVENS. But he stated that that rate of 26 cents between Cleveland and New Orleans was a just, fair, and reasonable rate. Now, is there any authority under this bill to reduce a fair, just, and reasonable rate?

Mr. BACON. There is authority to adjust relative rates, making them relatively just.

Mr. STEVENS. I am asking you how it could be done. Here is a rate that is a fair, just, reasonable rate, a rate of 26 cents. Now, that rate is guaranteed to that carrier under the Constitution, is it not? He is entitled to a just, fair, and reasonable rate under this bill or any other, is he not?

Mr. BACON. The Commission is absolutely clear about that point. Mr. STEVENS. I am stating what Judge Prouty said-that that was a fair, just, and reasonable rate. Assuming that, the carrier is entitled to it, is he not?

Mr. BACON. Unless injustice is done by it to some other locality. Mr. STEVENS. Is not the carrier entitled to a just, fair, and reasonable rate as a fair compensation for the work that it does?

Mr. BACON. It is as a whole; but one rate taken out of a dozen rates, the change of one rate by 1 cent or 2 cents per hundred pounds would be likely to divest the carrier of a reasonable profit.

Mr. STEVENS. Now I am asking you here about two rates. One is stated by the Commission to be, in its opinion, just, fair, and reasonable, and the carrier is entitled to it. The other is unduly low and unreasonable, whereby the preference is given to a particular community and a particular part of the country. Now, how would that be decided under the bill under consideration?

Mr. BACON. I think that it would be, unquestionably, decided by the reduction of the higher rate.

Mr. STEVENS. Even though the higher rate was fair, just, and reasonable, and such action would take away the compensation of the carrier without just compensation?

Mr. BACON. NO. It is not supposable that the change of one rate out of a dozen will divest the carrier of its proper return on its investment; and if injustice is effected by the continuance of that rate, it is certainly within the power of the Commission to reduce that rate.

Mr. STEVENS. The tariff on oil was 26 cents, which was just, fair, and reasonable, in the opinion of the Commission. You would adjust that, and take off 2 cents, for instance, and put that on other commodities which are also paying a fair, just, and reasonable rate? Mr. BACON. I can hardly conceive of a case where it would be necessary to do that.

Mr. STEVENS. If a carrier is receiving fair, just, and reasonable rates, and you reduce one rate, that reduction has got to be made up by an addition being made to some other rate, has it not, in order to insure to the carrier a just, fair, and reasonable compensation?

Mr. BACON. Unless there is sufficient margin in its profits to admit of that reduction.

Mr. STEVENS. But suppose that a rate is fair, just, and reasonable, and you should reduce it, you would place the amount of the reduction somewhere else, would you not, in order to insure that carrier just, fair, and reasonable rates?

Mr. BACON. I do not think it would be necessary.

Mr. STEVENS. In other words, you are not willing to admit that there is any power given under this section 1 of the Cooper bill to raise rates, even though a rate is unjust, unduly low, and discriminatory, because it is too low?

Mr. BACON. Whether the power exists I can not say, but as I have said before, I am not clear. But I am clear in the opinion that it would never be exercised.

Mr. STEVENS. Even in a case like this I have cited?

Mr. BACON. No, sir.

Mr. ADAMSON. Do you think that a rate is ever found too low? Mr. BACON. It never has been ascertained yet how low freight can be carried and still give a fair profit to the carrier. That is one of the unknown things.

Mr. CUSHMAN. Referring to the matter that Mr. Stevens has spoken of, the rate of 26 cents being a just and reasonable rate, and assuming the rate of 24 cents to be too low, it is your opinion, as I understand, that the Commission in a case of that kind would lower the higher rate of 26 cents to 24 cents. Did I correctly understand you?

Mr. BACON. I think that would be the probable result."

Mr. CUSHMAN. If that were done, and the railroad companies then lowered that 24 cent rate from Chicago to 22 cents, leaving the difference existing as it did before, what would then be done in that case?

Mr. BACON. That could not be done, because the Commission would issue an order fixing the two rates, and requiring that each of the parties involved should adhere to those rates under this bill.

Mr. SHACKLEFORD. In the case supposed by Mr. Stevens, the Cleveland rate being a reasonable and fair rate, and the Commission reducing it below what was reasonable and fair, and an appeal being taken to the courts, what would the courts do with that decision of the Commission, it being conceded that they had reduced the rate below what was reasonable and fair, what would be done in that case?

Mr. BACON. If the courts found that that was an unfair rateMr. SHACKLEFORD. It being conceded, you know, that the rate was reasonable and fair.

Mr. BACON. If the court should find that the result of that reduc

tion was to prevent the corporation from having a proper return on its capital invested it would undoubtedly nullify it.

Mr. STEVENS. Just one more question. If a corporation was making a just, fair, and reasonable rate in competition with a corporation that was making an undue and discriminatory rate, you would punish the company that was obeying the law instead of the corporation that was violating .the law?

Mr. BACON. I do not conceive that such a result is likely to occur. I hold that railway companies, doing a public service, are in duty bound to see that no injustice is done in the operation of their rates with reference to any particular point or any particular commodity. Now, I have argued in the matter of the flour and wheat differential that even if the railroad company can not carry flour as cheaply as it can wheat, if it interferes unjustly with a manufacturing industry, an important manufacturing industry of this country, the company should submit to the equalization of the rates on the ground of its being possessed of valuable franchises which it has received from the public and on the ground that it is performing a public service, and that that service must be done not only without injustice between individuals and localities, but without injustice to commerical and manufacturing interests of the country.

The CHAIRMAN. Even though it imposes an injustice on the carrier?

Mr. BACON. Though it imposes a hardship in a single instance. You must take the average result, the average return, and action should not be based on one or two exceptional cases.

Thereupon the committee adjourned until to-morrow, Wednesday, January 11, 1905, at 10.30 o'clock a. m.

WEDNESDAY, January 11, 1905. The committee met at 10.30 o'clock a. m., Hon. William P. Hepburn in the chair.

STATEMENT OF MR. FRANCIS B. THURBER, PRESIDENT OF THE UNITED STATES EXPORT ASSOCIATION.

Mr. THURBER. I would state, Mr. Chairman and gentlemen, that I represent directly merchants and manufacturers who are members of the United States Export Association, some 220 in number, and situated in 34 States, that differ with Mr. Bacon and other supporters of the Cooper bill (H. R. 6273), and in order that I may not waste your time I have boiled down on paper a statement which I will read to you, because it may suggest some questions that members of the committee would like to ask me.

I represent directly merchants and manufacturers who are members of the United States Export Association, and indirectly the great majority of shippers in the United States, who, while opposed to unjust discriminations by railroads, are not prepared to adopt the remedy proposed by the advocates of this bill."

Mr. BACON. May I interrupt you to ask a question because it will, perhaps, save time. I would like to know by what authority Mr.

Thurber assumes to represent the shippers of the United States generally.

Mr. THURBER. I say indirectly.

Mr. BACON. In what manner indirectly?

Mr. THURBER. Based upon my knowledge of the situation.

Mr. BACON. And it is your individual assumption?

Mr. THURBER. Yes; it is an assumption on my part, so far as I say that I represent the shippers. I represent them indirectly.

Mr. MANN. You do not pretend to be their authorized representative? Mr. THURBER. No, sir.

Mr. MANN. The authorized representative of any commercial agencies or bodies or anything of that sort, do you?

Mr. THURBER. Excepting

Mr. MANN. Except the United States Export Association?

Mr. THURBEK. That is all, sir; and them I represent by resolution, which appears in this paper, and also I quote from the expressions of other commercial bodies that sustain my view.

I doubt if 10 per cent of its friends have given any serious thought as to whether there is any better way to remedy the evils which exist. They have simply followed the lead of Mr. Bacon, an earnest, honest man, who has embarked on a "Peter, the Hermit" crusade, and they have adopted his cure-all for a very complicated disease.

For thirty years I have been a student of the transportation question from a shipper's point of view, and an advocate of reasonable control of railways. I think I may say without egotism that I had more to do with creating a railroad commission, and defining its powers in New York State, than any other man; and with the exception of Hon. John H. Reagan, its father, I had as much to do with creating and defining the powers of the Interstate Commerce Commission.

The CHAIRMAN. Let me interrupt you there a moment. Do you give John H. Reagan the credit of the system that we have now? Mr. THURBER. Mr. Reagan was the father of the interstate commerce bill.

The CHAIRMAN. This bill that is now a law?

Mr. THURBER. Yes, sir.

The CHAIRMAN. You are entirely mistaken. He was the undeviating opponent of this bill. He had his own bill, an entirely different proposition, instituting an entirely different method of control, and as distinct from this as it is possible to imagine.

Mr. THURBER. Mr. Chairman, I should not expect

The CHAIRMAN. I was then a member of the House and a member of this committee at the time of the passage of that bill. You will remember and, if not, let me remind you that the House committee refused to report Mr. Reagan's bill. It adopted the bill that was then known as the Cullom bill. The House reversed that action and attached the Reagan bill to the Senate bill as an amendment, and in the conference, after Mr. Reagan had become United States Senator, the conference committee, of which he was a member, consented to the report of the House, receding from its amendment, and adopted the Senate bill.

Mr. THURBER. I know that there were several bills pending and that Mr. Reagan was, you might say, the advocate of regulation

The CHAIRMAN. Of control, yes.

Mr. THURBER. But I cooperated with him very earnestly, I rememH. Doc. 422, 58-3- -6