between localities. It is needless for me to say to this committee that the matter of adjusting rates between different localities-commercial, manufacturing, mining, and agricultural-is an extremely intricate and difficult question in any section of the country. It has been found exceedingly difficult within the State borders where such questions have arisen. To apply it to the whole United States of course broadens it out enormously. It is a question of deciding between ports, deciding between distributing centers and jobbing centers, between manufacturing centers, between mining centers, between agricultural and forest regions.

It is impossible to say, it is impossible even to estimate the enormous variety of questions that must arise in that connection, and therefore the question presents itself as to what is the best way to deal with it. The rates of this country-the relative rates, I mean, and I am speaking of relative rates alone-have already been adjusted in a certain sense. That adjustment is the result of long experience, long and sometimes bitter competition, not only between the carriers themselves, but between communities, because the carrier is invariably appealed to if one community feels that it can not put its product, whatever it may be, into some distant market which it thinks it ought to reach. not alone a question of carriers' rates. It is a question of prices. It is a question of quality of goods. It is a question of every item that enters into the problem as to whether a given article can be marketed at a given place or not. To argue that would be endless. But the result is that it has settled down to a measurable, fixed condition of affairs. It can never be absolutely fixed, because the affairs of commerce fluctuate always to an extent that prevents absolute stability. If absolute stability should exist there would be absolute stagnation in

commerce.

Let us see what the result of this question of discriminations between localities has been for eighteen years since the passage of the interstate-commerce act. The facts, as recorded in the Interstate Commerce Commission's reports and the experience of the Commis sion, are these, and this comes from the Commission. I have stated what all of the litigation was, namely, that there were 43 cases of all kinds of litigation in eighteen years; there were 25 cases of litigation on rates. For the ten years prior to 1901 the Commission sustained 31 cases of discriminations between localities. (See Senate Doc. 319.) I use the ten years prior to 1900 because they happen to have been grouped by the Commission itself. This shows only an average of 3 cases per annum, and of these 31 cases only 1 case of discrimination between localities was sustained by the courts.

Now, admitting and that is all I propose to argue before you gentlemen-admitting that the adjustment of rates between localities involving over 200,000 miles of railroad and 45 States is intricate, enormous-so enormous as to be scarcely within the range of contemplation of any statement that could be made about it-if that is the case, does the result of 31 cases going into court in ten years indicate that there is a necessity for giving to another authority than that which now has it the power to name the rates between those localities? There is a feature of that which is the Commission's affair, of course, and not ours, but the Commission would be overwhelmed with applications for relief from discrimination. I think the town or the district or the section in this country of any importance which H. Doc. 422, 58-3-7

does not feel in some form or other that it is discriminated against is

very rare.

The adjustment between those localities is made by competition between railroads, some of which reach one locality and some another, and a decision is obliged to be reached from a commercial standpoint. It might be entirely different if all of these communities, or all these centers of industry of whatever character, were reached by all the railroads. It would then be entirely a different question. But the adjustment, such as it is, that now exists grows out of the fact of the earnest purpose of a railroad which reaches a given point to see that that point is protected and its products distributed against another point which it does not reach and into the markets of which it wants to put its products. That is the adjustment of competition, and it is not competition alone of the carriers, as I have already stated. It is the competition of commercial communities as well, and to undertake to adjust that solely with reference to the carriers will be to cover only one portion of that very complex and important subject.

The next point that has been made is that this legislation is necessary to prevent the making and the continuance of unreasonable rates, or rates unreasonable and unjust within themselves. Going back for a moment to the result of the experience of the Interstate Commerce Commission in its own decisions, and what has transpired where its decisions have been appealed to the courts for eighteen years, there has not been one single case of unjust and unreasonable rates-unjust and unreasonable per se-sustained by the courts of this country; not a single one. The chairman of the Interstate Commerce Commission himself has borne testimony to the fact that unjust and unreasonable rates per se have become obsolete; that they do not exist. Of course, I mean do not exist substantially; I am not denying that they are possible. But if they are possible, they are condemned by the existing law. They were condemned by the common law before the existing law was passed. Since the passage of the law in 1887 the power of the Commission has been materially increased by amendments to it. Finally, by the Elkins Act of 1903, they have been given what might be called almost summary powers, as complete and prompt and drastic as it is possible to give in respect to any offense against the law in any country where trial must precede conviction.

If there are unjust and unreasonable rates in existence, the remedy is at hand. We have seen that of the cases which have gone to the courts not one single charge of unjust and unreasonable rates per se has been sustained. Now I ask, gentlemen, if it is fair to the railroad interests, under those conditions, that the irreparable injury shall be inflicted upon the railroads of having that rate take effect on the findings of the Commission? If there had been numerous cases where rates had been adjudged unjust and unreasonable, and they had been found to be so, and the penalty of reducing them had been inflicted after long delays, and therefore an injustice had been done to others, the case might wear a very different aspect. But precisely the opposite is true. On trial they have not been sustained; and from that I think it is perfectly fair to argue and to answer that the necessity does not exist for taking out of the hands (even after hearing a complaint) of the railroad companies the making of those rates which, to a very large extent not entirely, of course-are the subject of competition between carriers and competition between communities.

In this connection in your committee room several weeks ago I heard in person the statement made that this reason for the passage of this act was a potent one, namely, because rates were unreasonable, they were being raised extortionately; and as alleged proof of that the figures given in Senate Document No. 257 were placed before you, the figures being these, that the average rates per ton per mile on all the railroads in the United States for the year ending June 30, 1903, were thirty-nine thousandths of 1 cent per ton per mile higher than they were in 1899, four years previous. There is no denying that fact as stated in the Interstate Commerce Commission's report. It is probably proper to state, though, in passing, that the resolution which called for that information from the Interstate Commerce Commission requested a statement of the rates and of the effect on gross receipts and net of the railroads. The answer

Mr. MANN. I think you said thirty-nine thousandths?

Mr. SPENCER. Thirty-nine thousandths.

Mr. MANN. It should be thirty-three thousandths, if you will pardon me.

Mr. SPENCER. I beg pardon, then; I am mistaken. I had that impression. I am speaking from memory, and my notes had it thirtynine thousandths.

Mr. MANN. Well, I have a memorandum taken from the report of the Commission itself.

Mr. SPENCER. I beg pardon. I am very much obliged. That even makes it less. But at all events it does figure out $155,000,000Mr. MANN. That is right, on my basis.

Mr. SPENCER. Yes, sir; I accept the correction with pleasure. The fact is that the net results for that year were relatively smaller. It is well known that during that period there was almost a constant rise in the cost of material and labor in this country, so that the net results to the railroad companies were less in 1903 than in 1899; and it is an easy calculation to make that the railway companies paid out more to haul a ton of freight 1 mile the last-mentioned year than they did in the first-named year, and that the money that they got would not go as far in purchasing power as the dollar of 1899. But apart from that, we all know that the fluctuation of rates per ton per mile has, taking the average, gone steadily down. It happens in this particular resolution, whether by chance or otherwise I shall not undertake to say, that the lowest average rate for any year in the history of this country was taken, namely, 1899. From the formation of the Interstate Commerce Commission, or going back of that, if you please, until 1899, that rate went down steadily, and in the annual report of that very year-1903-the Interstate Commerce Commission took occasion itself to say that if, in meeting commercial depression, the railway rates were put down during such a period, it was nothing but fair that on a return of prosperity they should go up.

The CHAIRMAN. Mr. Spencer, the hour has arrived when, under the rules of the House, this committee must adjourn. Will you continue your remarks in the morning? I think we have another order for to-morrow, but we have time enough to let you conclude.

Mr. SPENCER. At your pleasure, sir.

Mr. DAVEY. May I ask for an executive session to-morrow for the purpose of considering the motion which I offered?

The CHAIRMAN. Very well. The committee will be in recess until to-morrow morning at 10.30 o'clock.

(Thereupon, at 11.55 o'clock a. m., the committee adjourned until to-morrow, January 13, 1905, at 10.30 o'clock a. m.)

THURSDAY, January 13, 1905.

The committee met at 10.30 o'clock a. m., Hon. W. P. Hepburn in the chair.

STATEMENT OF SAMUEL SPENCER, ESQ., PRESIDENT OF THE SOUTHERN RAILWAY COMPANY-Continued.

The CHAIRMAN. Proceed, Mr. Spencer.

Mr. SPENCER. Mr. Chairman and gentlemen: At the point of interruption yesterday I was in the midst of the discussion of that statement or argument which had been presented to the committee in respect to the increase of approximately $155,000,000 in 1903 as compared with what the revenue would have been on the same tonnage at the average rates which applied in 1899, the statement that that increase had taken place having been used as an argument that rates were rising in this country and were becoming unjust, unreasonable, and extortionate. Mr. Mann will pardon my repetition, because this has a particular bearing upon the difference of rates between 1899 and 1903, upon which difference the computations were made in respect to the tonnage of 1903 in order to produce the $155,000,000.

I think Mr. Mann, on examining the question, will find that the average rate between those two years was thirty-nine thousandths of 1 per cent instead of thirty-three thousandths of 1 per cent. I should be delighted to accept the difference, or the correction made by Mr. Mann, because it would add force to what I have to say.

Mr. MANN. I understand

Mr. SPENCER. But I think Mr. Mann was using the figures of 1899 and 1902, and I was using the figures of 1899 and 1903. Am I right?

Mr. MANN. Well, Mr. Spencer, it is very easy to get at what the exact figures were. The figures as I got them from the Interstate Commerce Report for 1899 were .724 of 1 per cent.

Mr. SPENCER. Yes, sir.

Mr. MANN. And the figures for 1903 were .757 of 1 per cent.

Mr. SPENCER. Well, I made those of 1902 as 0.757, and it is 0.763 for 1903, according to the reports themselves. I went back to the reports and not to Document 257. I went back to the Annual Report of the Commission.

Mr. MANN. I took the statement of the Interstate Commerce Commission, and unless I am mistaken-which might easily be

Mr. SPENCER. It really is not material, except that if I should accept the figures as now suggested by Mr. Mann the increase would be less than the $155,000,000, and I think we must stand on the point that the

Mr. MANN. It does not affect the principle, of course.

Mr. SPENCER. It will not affect the principle in the slightest. Now, as I said at closing, the year of the lowest average rate in the history of the country was in 1899 and that year was selected as the

basis of comparison. In the annual report of 1903 of the Commission this language was used, not having reference to the point that is before us, but to an entirely different question: That if rates are reduced during periods of commercial depression, it would be reasonable that they should be increased on the return of industrial activity. That may not be an exact quotation, but it is substantially so. I find I have it here. "When reductions have been made on account of commercial depression, it is difficult to see why corresponding advances may not be properly made with the return of business prosperity," is the wording.

Now, if that be true, and there can be no doubt about it, to reach fair conclusions in respect to that small increase of thirty-nine thousandths of 1 cent for the carrying of 1 ton of freight 1 mile it would certainly be fair to go back and look at what the average was. When the interstate commerce law took effect the rate was over 1 cent. In 1903, the year on which this argument was made, it was 0.763. There is a reduction of over 25 per cent within the period since the interstate-commerce law was passed. If the railroads are to be judged--and they ought not to be; I am not saying that at all— adversely because during one particular period, from 1899 to 1903, the rate rose gradually; if that is to be argued as representing an extortionate raising of rates, the reduction from 1887 down to 1899, twelve years, from over 1 cent to 7.24 mills, ought to be put as a balance upon the other side of the account.

The fact is, however, that the increase which took place from 1899 to 1903 did not, as it would appear from the surface of the report and upon the statement and arguments which have been based upon it, indicate a raising of rates in this country at all. The average rate per ton per mile is always fluctuating. It is true that the average of all the fluctuations has been down continually except for short periods, but it is fluctuating more or less all the time. It would show a fluctuation from now until next July, and from next July until next December. If the rates were absolutely rigid and fixed and unalterable by any conditions whatever, there are other large and important elements entering into the question of how an average rate results than the mere point of what each individual tariff upon each individual article may be. I have pointed out yesterday that even if there had been a raise of rates, that the dollar which the railroad company got for that business, for that particular year, 1903, would have purchased less in the way of its necessities in labor and material than it would have purchased in 1899, upon the same tonnage; and all this increase of that $155,000,000 is based upon the theoretical view of the same tonnage. The $155,000,000 is made up assuming that the tonnage of the two years was the same, and applying the average rate.

Mr. TOWNSEND. Which year do you assume the tonnage to be in? Mr. SPENCER. Nineteen hundred and three was the year for which the tonnage was taken, the larger tonnage of the two. If there is an argument made upon the two, of course they took the larger tonnage. On the same basis the operating expenses increased per ton, or per unit of traffic, whichever you may call it, in a very much larger proportion than the rate per ton per mile increased.

Now, what were the causes which were operative? Various explanations have been made. The manifest one to look at first is the difference in the classes of tonnage. The statement has been erroneously made,