FOOTNOTES:
[547] Cf. Simon Sterne, Railways in the United States, 1912.
[548] Cf. Appendix C, Int. Com. Com. Annual Report, 1890.
[549] Cf. Brief of Counsel for Int. Com. Com. in the Danville case, p. 88.
[550] Cf. account in Yale Review, 1907, pp. 119-155.
[551] 142 U. S., 547.
[552] Brown v. Walker, 161 U. S., 591.
[553] 154 U. S., 447.
[554] The history of these cases up to 1900 will be found in 56th Congress, 1st session, Senate Document 319. Five years later they were more fully treated in Hearings before the Senate (Elkins) Committee on Interstate Commerce, 1905, vol. V, Appendix F, part 2, pp. 709-780.
[555] 37 Federal Reporter, 567.
[556] 149 U. S., 264.
[557] Cf. pp. [390], supra, and [481], infra; reprinted in full in our Railway Problems.
[558] 162 U. S., 184.
[559] 162 U. S., 197. Late data as to the extent of the practice are in App. V, Digest, Hearings (Senate) Committee on Interstate Commerce, 1905, pp. 1-29. Cf. also p. [406], supra.
[560] Delaware and Hudson Canal case; 1 I.C.C. Rep., 152.
[561] Hearings before Committee on Interstate Commerce, U. S. Senate, Feb. 15, 1900 and May 18, 1905, vol. IV, pp. 2866 and 2880.
[562] Chapter IX, supra.
[563] 162 U. S., 184: 4 I.C.C. Rep., 744.
[564] 32 Federal Reporter, 1002.
[565] Chapter VII, supra.
[566] 4 Int. Com. Rep., 592: 167 U. S., 479. Both the original opinion and final decision with a map are in our Railway Problems. Cf. also, p. [248], supra. The case revived in 1910 is in 18 I.C.C. Rep., 440. Vide p. [588], infra.
[567] The Congressional history of Section 4, is in Haney, op. cit., p. 304; especially good in Brief for Appellees, by Ed. Baxter in the Alabama Midland Case, U. S. Sup. Court, Oct. term, 1896, No. 563, p. 98. All the leading English cases are reprinted (Gov. Printing Office) in "Extracts from the Parliamentary Papers relating to the Long and Short Haul Clause," 1895, pp. 1-83; with an "Analysis of American Cases" (National Publishing Co., Washington), 1895, pp. 1-39; both issued in connection with the C., N. O. and T. P. case, U. S. Sup. Court, Nos. 729 and 832. The complicated legal history is best detailed step by step in Annual Reports of the Commission; references are in Judson on Interstate Commerce. App. F, part II (Elkins), Senate Committee Hearings, 1905, pp. 65-130, gives a garbled outline, convenient for citations. 21 I. C. C. Rep., p. 405, summarizes well. Several of the leading cases are reprinted in our Railway Problems, as indicated by footnotes hereafter.
[568] For a few pages, I follow closely the line of my report on the subject for the U. S. Industrial Commission in 1900.
[569] 1 I. C. C. Rep. 31; First Annual Report, Int. Com. Com.; also Digest (Elkins) Committee, 1905. To be distinguished from the Supreme Court decision affirming the validity of the Kentucky long and short haul clause, 183 U. S., 503.
[570] 52 Federal Reporter, 912; Ann. Rep., I.C.C., 1892, p. 31.
[571] The significance of this decision is fully discussed in the Sixth and Seventh Reports of the Interstate Commerce Commission, which early in 1887 had already defined the word "line" in the Central Vermont case, as meaning the physical line, and not mere traffic agreements or routing arrangements.
[572] 4 I.C.C. Rep., 744; 162 U. S., 184. Vide, also, p. [468], supra.
[573] Amendment of the law in 1910, precluded any further misunderstanding, also, by adding the word "route." P. [565], infra.
[574] Discussed, as an economic proposition in chap. VII, supra. Baxter's Brief in the Troy case, p. [117], proves it not peculiar.
[575] Which line makes the rate? Cf. p. [255], supra.
[576] 5 I.C.C. Rep., 324. Decided by the Supreme Court in 1901; 181 U. S., 29; after the Alabama Midland decision.
[577] 6 I.C.C. Rep., 3; overruled by the Supreme Court in 168 U. S., [144]. Both reprinted in our Railway Problems. Decisions of secondary importance down to 1905 are abbreviated in App. F, Senate Elkins Committee Hearings, 1905.
[578] 21 I.C.C. Rep., 407. Elkins Committee Digest. Judson on Interstate Commerce, etc.
[579] Reprinted in our Railway Problems. Sustained by the lower courts in 1903; 122 Fed. Rep., 800.
[580] 8 I.C.C. Rep., 503; 120 Fed. Rep., 934.
[581] Facts are given in chap. VII, p. [228], supra; and in full in our Railway Problems. The law is in 181 U. S., 1. The only later decisions, not changing the law, are in 190 U. S., 273.
[582] Pp. [564] and [601], infra.
[583] Known as the Savannah Naval Stores case. 8 Int. Com. Rep., 376. It is reprinted in full in our Railway Problems.
[584] Cf. the chart at p. [523], infra.
CHAPTER XV
THE ELKINS AMENDMENTS (1903): THE HEPBURN ACT OF 1906
New causes of unrest in 1899, [487].—The spread of consolidation, [487].—The rise of freight rates, [488].—Concentration of financial power, [490].—The new "trusts," [491].—The Elkins amendments concerning rebates, [492].—Five provisions enumerated, [493].
More general legislation demanded, [494].—Congressional history 1903-1905, [495].—Railway publicity campaign, [496].—President Roosevelt's leadership, [498].—The Hepburn law, [499].—Widened scope, [499].—Rate-making power increased, [500].—Administrative v. judicial regulation, [501].—Objection to judicial control, [503].—Final form of the law, [505].—Broad v. narrow court review, [506].—An unfortunate compromise, [507].—Old rates effective pending review, [508].—Provisions for expedition, [511].—Details concerning rebates, [512].—The commodity clause, [513].—History of its provisions, [514].—Publicity of accounts, [515].—Extreme importance of accounting supervision, [516].—The Hepburn law summarized, [520].
The new incentives to rehabilitation of the Interstate Commerce law by Congress, becoming year by year more insistent after 1899, were four in number. Most of the old long-standing grievances were still on the docket. New sources of dissatisfaction and danger were now added in plenty as a result of important industrial changes. The most far-reaching of these was the spread of consolidation among railroads. This, as we shall see,[585] led within a few years to a partition of the entire railway net of the country into a few large systems, each controlled financially, although seldom by actual majority investment, by powerful individuals or banking groups, mainly located in New York. Many small local roads, long closely identified with the welfare of particular communities, were now merged in great systems under entirely different and probably absentee ownership and management. Boston, Baltimore, New Orleans, St. Paul, Cincinnati, not to mention a host of other smaller places, seemed commercially cast adrift. The welfare of railroads and of the particular communities in which they lay,—long supposed to be indissolubly linked together,—was now seen by concrete experience to be separable, often into conflicting parts. The New Haven monopoly in New England might be managed rather in the interest of New York than of the port of Boston. The Illinois Central, once devoted whole-heartedly to the upbuilding of New Orleans, must now, as a part of the Union Pacific system, comprehend San Francisco and even Savannah within the scope of its plans. New systems implied new traffic arrangements. Railroad policy must of necessity involve a choice, not between two evils, perhaps, but between a resultant good and a necessarily attendant evil. All these corporate changes made inevitably for much commercial readjustment. And each readjustment left a trail of real or alleged grievances; for the settlement of which no competent tribunal existed. There can be no doubt, therefore, that the significant changes in the railroad map after 1899 had much to do with the demand for new legislation.
The second new and general cause of dissatisfaction among the public was the great and almost continuous rise of freight rates which began about 1900. This was of course a direct outcome of the spread of railroad consolidation. The movement of freight rates has been elsewhere described in detail.[586] It has appeared that the steady decline which ensued for almost a generation after the panic of 1873, was sharply reversed when combination succeeded competition as a fundamental policy of railroading. This striking reversal of the course of railway charges was not, of course, an isolated phenomenon. It took place in a period of marked and general rise of prices, not unconnected with changes in the value of gold. The upward trend was at first more striking, and apparently more irresistible, in the charges for transportation than in the prices of commodities. Prior to 1899, not even the most astute railroad managers ever anticipated any such change. The Boston & Maine Railroad even permitted the inclusion of a prohibition of any higher rates in future than were then in force, to be incorporated in the acts of the New Hampshire legislature authorizing its leases of important lines. Attorneys sought to prove that railroads were not subject to the law of increasing returns, because it was inevitable as an economic law that with growth in the volume of business, rates should progressively decline.[587] If there was often public dissatisfaction at the scale of charges under these conditions, how irresistible might the unrest among shippers become when rates actually began to move so strongly upwards!
A single illustration of the class of complaints thus engendered may not be out of place.[588] It concerned the reasonableness of an increase of two cents per hundred pounds on lumber from Georgia points to the Ohio river. From 1894 to 1903 these rates had been already raised by three or four cents, to a level of thirteen or fourteen cents; so that prosperity had been already discounted by a rise of thirty or forty per cent. On top of this, and despite an enormous increase in the tonnage, came a further raise of two cents per hundred pounds in April, 1903. This was too much. To this exaction, involving not less than $132,000 per year additional freight rates, the lumbermen of Georgia objected. The Interstate Commerce Commission upheld their contention; and in July, 1905, more than two years afterward, the Circuit Court sustained the Commission. Appeal was then taken to the Supreme Court which rendered a decision in 1907, more than four years after the increase had occurred; and during which time the railroads had been collecting the added charge. The shippers had naturally at once shifted the burden upon the public so far as the competition of other lumber-producing centres, each championed by its own railroad or set of roads, would permit. No recovery of this tax, now held to be unjust by the highest court in the land, could possibly be had. The loss was irreparable. The frequency of complaints of this sort, involving the absolute reasonableness of rates, proves conclusively how potent a factor in furthering legislation the rise of the scale of charges had become.
The demonstration of the menace to public welfare of an inordinate concentration of financial power in the hands of a few privileged individuals, served a useful end in bringing about new legislation. The general rise of rates had been a direct outcome of the substitution of combination for competition among railroads. The danger of absolute dominion over all trade, commerce and finance without accountability to the law, was a concomitant of the growth of great railroad systems.[589] A special investigation in 1905 showed, for example, that the majorities of the boards of directors of practically all of the roads east of the Mississippi river might be selected from a group of only thirty-nine persons. The spectacular career of Edward H. Harriman with the Union Pacific and other companies was a convincing argument in itself. The disclosures in the New York insurance investigation of 1905 as to the intricate ramifications of financial power came, as will shortly appear, at a most opportune time for promoting congressional activity. The need of it was, perhaps, never more clearly shown than in the following frank admission by Mr. Harriman in December, 1906,—only a few months after the law had been amended,—made in the course of a general investigation of railroad consolidations by the Interstate Commerce Commission.[590]
Questioned as to where his policy of acquisition was to end, the following colloquy ensued:
"A. I would go on with it. If I thought we could realize something more than we have got from these investments I would go on and buy some more things.
"Q. Supposing that you got the Santa Fe?
"A. You would not let us get it.
"Q. How could we help it?
"A. How could you help it? I think you would bring out your power to enforce the conditions of the Sherman anti-trust act pretty quick. If you will let us, I will go and take the Santa Fe to-morrow.
"Q. You would take it to-morrow?
"A. Why, certainly I would; I would not have any hesitation; it is a pretty good property.
"Q. Then it is only the restriction of the law that keeps you from taking it?
"A. I would go on as long as I live.
"Q. Then after you had gotten through with the Santa Fe and had taken it, you would also take the Northern Pacific and Great Northern, if you could get them?
"A. If you would let me.
"Q. And your power, which you have, would gradually increase as you took one road after another, so that you might spread not only over the Pacific coast, but spread out over the Atlantic coast?
"A. Yes."
Was there ever a clearer case of megalomania, menacing the welfare of a great people?
But it was not alone the dangers incident to monopoly in transportation which excited popular alarm. There was the ever increasing danger of abuse of monopolistic power by the newly created industrial combinations. Most of these had sprung up overnight in the great promotion movement of 1899-1901. The general public had long been aware of the gross favoritism in transportation, which had created the Standard Oil Company. It knew something of the power of the beef packers' monopoly, built up by the use of private car lines. But with the publication of Miss Tarbell's History of the Standard Oil Company in 1903-1904, followed by the reports of the United States Commissioner of Corporations in 1906, its attention was newly directed to the evil.[591] Even the carriers themselves were now roused to protest by the pressure for secret favors by large shippers. The Elkins amendments to the law in 1903, as we shall see, enabled the government to convict many offenders. But even this new law was not enough. The rebating still went on, under new and ingenious forms. If the United States Steel Corporation, the "Sugar Trust," the International Harvester Company, the Colorado Fuel and Iron Company and a host of others were not restrained, monopoly in transportation would soon be followed by monopoly in manufacture. Each new disclosure verified the suspicions of the public as to the magnitude of these abuses. The necessity of a special corrective was first applied to rebating; but this action in turn only served to reënforce the popular conviction that more general legislation was necessary. The Elkins amendments of 1903 surely paved the way for the Hepburn law three years thereafter.
The so-called Elkins amendments to the Act of 1887,—the first changes of importance in its substantive clauses,—were made in 1903, in response to a demand of the carriers. Educated to a sense of the grave losses of revenue incident to rebating and general rate cutting, prominent railroad men united in urging Congress to act. The ease and decorum with which this legislation was passed is, in itself, eloquent testimony to the organized influence of the railroads over Congress, which made itself felt during the next few years in opposition to further changes in the law for the benefit of the public. The entire inadequacy of the original act to prevent rebating had been proven time and again. The Interstate Commerce Commission had done its best. The Department of Justice had attempted to apply the equity processes of injunction without much result. Other Federal laws had been invoked in vain. When the carriers themselves asked for more stringent legislation, it was accorded by Congress with commendable despatch. No opposition whatever appeared. Nor was there much debate. The machinery of legislation moved expeditiously and almost without noise to the desired end.
These Elkins amendments dealt solely with the provisions of law concerning observance of published tariffs. They in no wise affected the determination of what those tariffs should be. That problem of reasonableness was the bone of contention in the great struggle in Congress, hardly as yet under way but soon to follow. The changes in 1903, therefore, had mainly to do with penalties and legal procedure. They were, as elsewhere outlined, five in number. The railroad corporation itself,—and not merely its officers and agents as heretofore,—was made liable to prosecution and penalty. This put an end to the anomalous immunity hitherto enjoyed by the principal and beneficiary of a guilty transaction. Secondly, the penalty of imprisonment for departure from the published tariff,—added to the law in 1889 in the hope of rendering it more effective,—was removed. It had been hoped that the reluctance of witnesses to become parties to such condign punishment of associates might thus be somewhat overcome; especially since the liability to fines now ran to the corporation rather than to the individual. The third change in the law was of great importance, as it had been construed by the courts. Preferential treatment of shippers had been made to depend upon proof; first, that rates lower than as published in the tariff had actually been allowed; and, in the second place, that these full tariff rates, or, at least, higher rates, had been paid by others on like shipments at the same time. Such proof had turned out to be practically impossible in any general rate war; inasmuch as, at such times, rates were cut more or less substantially for all shippers alike. In other words, there might well be departure from the published rates, without preferential treatment. And it was the object of the law to put a stop to both of these abuses. The Elkins law, therefore, explicitly made the published tariff the standard of lawfulness. Any departure from it, proven by itself alone, was declared a misdemeanor. In the fourth place, the new law made shippers or any other interested parties defendants; whereas formerly only the giver of rebates, not the recipient, could be prosecuted. This change rendering the guilty shipper liable, was an eminently proper one. And then, finally, the new law provided for the issuance of injunctions,—viz., peremptory orders punishable by contempt of court,—by any Federal judge whenever the Interstate Commerce Commission had reasonable ground for belief that any common carrier was deviating from the published tariff, "or is committing any discrimination forbidden by law." A summary prohibition from this judicial source, it was hoped, would act as a powerful deterrent.
The enactment of more general remedial legislation than the Elkins amendments was a far more serious matter. That statute has not inaptly been described as "not even a preliminary skirmish. It was a truce of the principals to abolish piracy." The original law of 1887 was avowedly experimental and imperfect. With this in view the statute had specifically directed that there should be transmitted to Congress in its annual reports "such recommendations as to additional legislation ... as the Interstate Commerce Commission may deem necessary." This duty was conscientiously performed year by year. One may find, therefore, in these documents, especially after 1896, the most convincing presentation of the need for amendment of the law. Yet despite its importance, Congress was for some years so intent upon more pressing public business, that no action was taken in the matter. Currency legislation, the Spanish War and the Philippines, the Isthmian Canal, pure food and the trusts quite engrossed public attention. And, oddly enough, when the campaign opened seriously in 1899, activity was for a time confined mainly to the Senate. This was in sharp contrast with the situation both before 1887 and after 1905, when the upper house was the obstructive member.
As early as 1894 the Senate Committee on Interstate Commerce had reported favorably a bill; but nothing came of it. Five years later, both Senators Cullom of Illinois,—sponsor for the original law,—and Chandler of New Hampshire introduced bills. All these measures aimed to confer rate-making power upon the commission and to expedite judicial procedure upon appeal. In the meantime important organizations, especially in the West, such as the National Board of Trade and the Conventions of State Railroad Commissioners, had taken the matter up. Much evidence was heard by the United States Industrial Commission which dealt with it in an elaborate report in 1901.[592] The chances seemed favorable for action. The Senate Committee on Interstate Commerce in that year added several progressively inclined members. The general freight rate increases of 1900 had greatly stirred the people. But at this juncture the powerful new financial influences, concerned with the formation of the great transportation systems, came into play. Effective regulation might interfere with some of these plans. The matter was becoming serious. Railroad opposition began to organize. It became clear that a bitter contest would be needed to secure legislation.
Renewed pressure from the public came in 1902. Senator Chandler had been retired by direct railroad influence in New Hampshire. But Senator Cullom again brought in a bill,[593] which was consolidated with another by Senator Nelson of Minnesota. Public interest was plainly rising; yet these measures all died in committee. And the House of Representatives was too busy with other concerns. But in 1903, for the first time, the lower house devoted some attention to the so-called Cooper-Quarles bill;[594] although no vote was taken. It did, however, with little debate, as we have seen, grant what the railroads asked for the suppression of rebating in the passage of the Elkins amendments. The necessity of general legislation on the subject was not yet strongly felt. The trusts, floundering in the panic of 1903, seemed more threatening to public order than the railroads. Only in a few communities like Wisconsin under the able leadership of Governor La Follette, had public opinion become sufficiently aroused to achieve definite results.
Matters were finally brought to a head by the determined attitude of President Roosevelt. In his annual message to Congress in 1904 he made railroad regulation "a paramount issue." The remedies proposed differed little from those of the bills above mentioned. The cardinal point was that the Interstate Commerce Commission was to be given power to prescribe actual rates, to be effective until reversed by the courts. Under this spur, the House of Representatives passed the so-called Esch-Townshend bill—an administration measure—by the impressive majority of 326 to 17. It was now the Senate's turn to delay. It, however, authorized its Interstate Commerce Committee to sit during the spring and summer, and to report in December.[595] A mass of testimony was taken, which despite the activity of a powerful body of paid railroad attorneys, proved to be most convincing. But even more cogent proof of the need of control was the outrageous attempt of the carriers to influence popular opinion through so-called publicity bureaus.[596] An extensive service, regardless of cost, was set up with headquarters at Washington and with branches in all the leading cities, headed by the President of the Southern Railway. Bogus conventions, packed for the purpose,—such as the "Alabama Commercial and Industrial Association,"—passed resolutions unanimously, to be scattered broadcast by free telegraphic despatches all over the country. "Associations for the Maintenance of Property" held conventions; the fact being duly advertised. Palpably garbled news items from Washington were distributed without cost, especially during the hearings of the Senate Committee. Even more insidious and misleading methods were employed. An elaborate card catalogue of small newspapers throughout the United States was made; in which was noted all of the hobbies, prejudices, and even the personal weaknesses of the editors. One of the cards is reproduced on this page. Magazine sections or "ready to print" insides were also made up, in which appropriate and subtle references to railroad issues were concealed in a mass of general reading matter. Two or three weekly letters were sent gratis to minor newspapers without regular Washington correspondents, containing "good railroad doctrine," together with spicy local news items. Dakota farmers got suggestions as to the danger of the proposed legislation affecting their rates. Kentucky planters were warned of the probable effect upon tobacco prices. As an indication of the formidable proportions of this campaign of education, the Chicago office, alone, employed some forty highly paid experts. Regular reports were rendered by this news service to the railroads' committee, as to the results achieved; setting forth the number of columns of news matter distributed and the changes effected in the proportion of "pro" and "con" items published. It was indeed a most astounding demonstration of the lengths to which organized corporate power would go to defeat regulative legislation. That it proved upon exposure to be a boomerang for the railroad cause, is to be inferred from the entire absence of all such political methods from the succeeding campaigns dealing with further amendment of the law.
| Town | Name of Paper | Circulation | Date of Issue | Politics |
|---|---|---|---|---|
| 600 | Wkly | Dem | ||
| 1167 xxxxxx 10870 C M St P | xxxxxxxx Owner & Nd | Infl. small 2nd paper Farmers Weak Eds 1 50 | Sat 6- | Anti-beef Anti-oil Anti-harvester Anti-corp Anti-Rep Machine Pro-R R Pro-Roosevelt |
| S. D. xxxx is weak and bibulous man. Tractable to R R suggestions. Many Bohemians in region. Rich county. Junction town. | ||||
Duplicate copied from a card in the Chicago Publicity Bureau's index of newspapers. These cards furnish, in the last column, detailed information as to the position of the editor on public questions. At the bottom they indicate by what opening he could be persuaded to accept railroad "doctrine." The data which would identify the paper and editor on this card have been erased.
The President again insisted upon action in the annual message of 1905, this time recommending control over maximum, not absolute, rates.[597] Executive pressure was brought to bear heavily upon Congress. The public was plainly becoming insistent; with the result that the so-called Hepburn bill was passed by 346 votes to 7. Whether the Senate, under the influence of one of the most powerful lobbies ever let loose upon a legislative body, would have yielded even then, had it not been for an extraordinary conjuncture of economic events, one dare not surmise. The general causes of dissatisfaction, already described, such as the spread of combination, the growth of autocratic power, the steady rise of freight rates and the abuses of personal favoritism had been long at work. But now at the psychological moment came the general breakdown and congestion of railroad service all over the country;[598] the insurance investigation in New York; the Pennsylvania Railroad coal car scandal;[599] the Atchison rebate disclosures, with "barefaced disregard of the law," besmirching a member of the President's cabinet;[600] and the exposure of the outrageous publicity campaign methods of the carriers. The evidence was cumulative and overwhelming as to the need of action. The Senate was forced to acquiesce in a conference committee bill, passing it at the end with only three dissenting votes.[601] On June 29, 1906, the Hepburn bill became law. The fundamental principle of governmental control over the most powerful corporations in the country had been fully affirmed. It was an historic event,—the most important, perhaps, in Theodore Roosevelt's public career,—and a not insignificant one in our national history.
The Hepburn law of 1906, in the first place, greatly broadened the field of Federal regulation.[602] This was now extended to cover both express and sleeping-car companies. Pipe lines,—such powerful factors in the creation of monopoly in the oil business as opportunely showed by the Report of the Commissioner of Corporations in 1906,—were expressly included. "Transportation" was now broadly defined as comprehending among other things, "all services in connection with the receipt, delivery, elevation, and transfer in transit, ventilation, refrigeration or icing, storage, and handling of property transported." Whether certain of these powers, especially over pipe lines, are practically enforcible as well as legally sound, remains yet to be seen. The inclusion of all switches, spurs, and terminal facilities, with appurtenances of all sorts, was an added detail of importance, in view of the complicated uses made of them in connection with rebating, as elsewhere described. And the express power to require facilities for shipment, as well as to regulate joint rates and services in every detail, was yet another notable extension of Federal authority. Part-rail and part-water transportation was included; but coastwise and inland traffic exclusively by water, was left out. In view of its intimate relation to rates and services by rail, this omission was unfortunate. The notorious instability of water rates and the difficulties incident to the enforcement of the long and short haul clause, render such water-borne traffic of great importance in the proper regulation of carriers on land.
The significance of the Hepburn law, however, was not primarily in the wider scope of Federal control. The heart of it consisted of its more intensive character. The rate-making power of the Commission was greatly increased. Two other points were contested with equal vigor, viz., the scope of judicial review of decisions of the Commission, and the question as to whether its orders in cases appealed should take effect at once, or only upon final judgment by the Federal court. Viewed in a large way, however, all three of these propositions depended upon the determination of a basic issue. A clear separation of powers between the legislative, executive and judicial branches of government was a fundamental principle in our Federal Constitution. It was generally agreed that a considerable confusion of functions, laid upon the Commission by the original law, must in future be avoided. Here, it was said, was a body which, if empowered to make rates, would be exercising a legislative function; if applying and enforcing them, would be acting administratively; and if hearing complaints, would be serving as a court. It was generally conceded, nevertheless, except by a few extremists, that the time had now come when some competent tribunal must be provided for the effective and prompt settlement of transportation disputes. To which one of these three branches of the government should this important duty be assigned? In other words, disregarding mere matters of detail, should the Interstate Commerce Commission or the Federal courts be charged with the real control of the common carriers of the country?
The alignment upon this question was clearly defined. The administration and the representatives of the shippers and the general public, were unanimously agreed that control of rates and regulations, to be effective must be through an administrative agency,—a body, that is to say, attached to the executive branch of the government. Their reasons will be set forth in due time. On the other hand every railroad proposition was based upon the exercise of real control by the judiciary. The Commission, as an administrative body, was not to be abolished; but in all matters of rate regulation it was to be subordinated to the courts. The motives for this policy will also appear shortly. Senator Foraker of Ohio,—soon retired because of his uncompromisingly pro-railroad attitude,—proposed to strip the Commission of all rate-making power whatsoever; and to reduce it to an initiating body which should merely certify all complaints to the Federal courts for settlement. Senator Elkins of West Virginia,—an equally ardent railroad representative,—introduced a bill to create a special transportation court, subordinate only to the Supreme Court of the United States on questions of law. Until this tribunal had heard the cause, and had sanctioned interference on the ground of unreasonableness, the Interstate Commerce Commission might not intervene.[603] And in any event its functions were to be mainly connected with the enforcement, not the promulgation, of orders as to rates or service. These plans favoring the carriers' interests, as we shall see, were all based upon the proposition that Congress could not constitutionally delegate general rate making, that is to say, legislative power to an administrative body.
The constitutionality of clothing an administrative body with large regulative power by act of Congress, was, of course, essential to the administration's plan. It was urged that there was one exception to the general rule that power delegated to Congress to legislate under the Constitution could not be further delegated. "There may be such delegation where the purpose in the original conferring of the power can be subserved only by its delegation to an agent. Obviously Congress cannot spend time and labor upon rate making, even were it economically competent to do so. If the power is to be exercised at all, practically, it can be done only through an agency like the Commission." Congress certainly could not delegate such legislative power, viz., power to make rates, to the courts. That would even more flagrantly transgress the constitutional rule. In brief, any plan for judicial control meant the exclusion of rate regulation in any thoroughgoing way. And that, of course, was the reason why the "railroad Senators" all insisted upon such a plan. Other support for the administration plan was found in the dictum of the court in the Maximum Rate case;[604] and in opinions cited by the Attorney-General in a special message on the subject to the Senate.[605] These and other points, such as the bearing of the so-called "preference clause" of the Federal Constitution requiring equality of treatment in commerce between all ports of the United States, need not detain us further. The constitutionality of the amendments have now been duly upheld. But, inasmuch as the particular form which the law assumed was the outcome of these debates, it is essential that they be reviewed. Other questions of interpretation at a later time, also follow the same line of cleavage in debate.
Judicial regulation of common carriers, as proposed by the railroad advocates, was open to many objections; so controlling that they fortunately turned the scales in favor of the administration plan. The first of these was in itself so fatal that it is almost a work of supererogation to state the others. Judicial control, as we have seen, had been the outcome under the old law. It was the desperate plight from which escape was sought. No decisions could be rendered until the rate or practice had been put into effect. The denial of power to make rates for the future had broken down the old law. The stable door might indeed be closed, but only some years after the horse had been stolen. Therein lay the primary defect of all judicial processes. When the bituminous coal-carrying roads and water lines were collecting fifty cents a ton additional on 10,000,000 tons of coal annually, destined for New England alone, as a result of the practical elimination of monopoly since 1904, the only effective way to prevent irreparable loss to consumers, would be to veto the increase before it went into effect. For a Federal judge to hold it an unreasonable exaction, four years or even six months after it had been paid, would be of no benefit to the coal-consuming public, upon which the incidence of the tax really fell.
The entire futility of judicial control was well exemplified in the Colorado Fuel and Iron Company case of 1895. This corporation complained of excessive rates from Pueblo, Colorado, to San Francisco on iron and steel. The Interstate Commerce Commission ordered the rates on steel rails not to exceed forty-five cents per one hundred pounds, or seventy-five per cent. of the Chicago-San Francisco rate on the same commodity, whatever that might be. The Southern Pacific, under pressure, complied with this order for about two years; and then in 1898 advanced the rate one-third, to sixty cents per one hundred pounds. Thereupon the Iron Company obtained an injunction from the United States Circuit Court prohibiting the violation of the Commission's order. The case went to the Circuit Court of Appeals, which reversed this decree. Meantime, proceedings before a master had fixed the amount of damages under the rate increase at $35,300. The court held that these damages, if due, could be recovered before a jury which should establish the unreasonableness of the rates in force. But while this was being done, what became of the California business of the Colorado Fuel and Iron Company? The Pacific coast was one of its most important markets. The price of steel rails for competitors from Pittsburg or Europe, who ship by water, would remain quite undisturbed. It would be difficult to recover trade when once lost. No damages, based upon mere increased freight rates, actually paid, would begin to measure the possible loss. And, moreover, even if this sum were recovered after prolonged litigation, the situation would not be remedied. Precisely the same rates which gave rise to the damages would still be in effect. An indefinite series of litigations might result, which would harass the company and perhaps drive it from the field altogether. The outcome of this Southern Pacific case sufficiently proves, even where the shipper is a powerful corporation, the futility of seeking redress through judicial proceedings. Again and again one is forced back to the same conclusion: that the only remedy for an unjust rate is not to continue an unfair one and pay damages, but as speedily as possible to substitute a reasonable charge. How much greater force has this conclusion for the small shipper, if the remedy fails even for an industrial combination, powerful enough to extort secret rebates of $1,000 a day from the Atchison railroad, as proved in the now celebrated Morton case of 1906!
Other serious objections to judicial control may be briefly stated. The functions of a court, acting judicially, permit of reliance as to reasonableness upon only one standard, viz., that the rate or practice under consideration will lead to confiscation of property. The courts can set this maximum limit to charges; but above that point they are powerless to intervene. Rates for the future must be judged with the same freedom exercised by the traffic officials who promulgated them in first instance. Correction can be applied only by an expert tribunal, possessed of the same sort of knowledge had by those who issued the tariff or ordered the practice at the outset. Of course, the objection of lack of technical knowledge on the part of judges, might be readily enough overcome by means of a specialized professional personnel. But the objection that judicial control, in contradistinction to administrative regulation, is necessarily intermittent rather than steady and constant is one not so easily met. As has been recently well said of our Federal policy toward the trusts, "Government by a series of explosions is rarely effective." There are too many and too long intervals between decisions. And then again, there is the slowness of formal court proceedings and the necessarily conservative attitude of judges, in matters concerning vested property rights. These arguments were all unanswerable in the end. It was inevitable that control should be exercised by a distinct enlargement of the powers of the Interstate Commerce Commission, as an adjunct of the executive arm of the government.
The law of 1906[606] authorized the Commission upon complaint to "determine and prescribe" just and reasonable maximum rates, regulations or practices to be thereafter observed; and to order conformity thereto. Such orders, except for money payments, were to become effective after thirty days; and were to remain in force for two years, unless suspended, modified, or set aside by a court of competent jurisdiction. In addition the Commission might order an apportionment of joint rates, when the carriers are unable to agree upon a division; establish through routes; and fix reasonable charges for services or instrumentalities rendered or provided by shippers. This covers the case of charges for icing refrigerator cars or for the use of special equipment.
Fairly general rate-making power was thus conferred upon the Commission; limited, however, to the adjudication of specific complaints. But the carriers being routed at this point, promptly fell back upon a second line of defences. Their representatives took a stand upon the directly consequent point of broad review by the Federal courts of the Commission's orders. It was yet possible to practically nullify administrative control by according indefinite limits to the appellate jurisdiction of these courts. Might they pass upon law points alone; or were they to be empowered to review the entire order of the Commission? A most brilliant constitutional debate again took place in the Senate.[607] The first detail concerned the power of Congress to restrict the right of the lower Federal Courts to suspend the Commission's orders by writ of injunction. Any limitation upon this power would, of course, lessen interference with the Commission's mandates, and greatly promote a speedy settlement of transportation disputes. Were these injunctions to be freely issued, holding up the Commission's orders and thereby leaving the old rate or practice in effect pending final adjudication, the carriers would, of course, then have everything to gain and nothing to lose by their issuance. Every order might be attacked, not with any serious expectation of final success, but merely to secure the benefit of the delay. And if, after this delay, the widest possible scope of review were allowed in the formal trial of the case, judicial instead of administrative regulation might still be brought about.
The first essential in the conservative programme, then, was to ensure the most comprehensive right of review for all cases appealed. But could Congress by statute limit or define the exercise of this judicial power on the equity side? There was no doubt as to its right under the Constitution to create or abolish Federal courts, other than the Supreme Court. But could it restrict their judicial functions, legal or equitable, including primarily the power to issue injunctions? Practically, the alternative lay either in omitting all reference to the subject in the amended act, leaving the scope of the courts' powers to be determined by judicial construction of the statute; or in attempting to define it specifically, item by item. The carriers' representatives would not agree to the former course, lest silence upon this matter, as they averred, might imperil the constitutionality of the law. Nor could the progressive reformers refuse a definition of the matter, under suspicion of bad faith. For if, as they had so stoutly maintained, the constitution amply safeguarded the rights of appellants without further prescription, a mere re-affirmation of these rights could do no harm. The result was a clause so worded as virtually to satisfy the conservatives; while ostensibly being a compromise. Power is expressly conferred upon the Circuit Courts,[608] by suit to "enjoin, set aside, annul or suspend" orders or requirements of the Commission. But this power is limited by the condition that five days' notice must be given to enable the Commission to prepare its case for protest. And the hearing must be had before three Federal judges instead of one. These details were intended to prevent the issuance of restraining orders for frivolous or merely obstructive reasons.
The unfortunate feature of this compromise, arrived at only after weeks of bitter controversy, was its entire indefiniteness as to the grounds upon which the courts might base their review of the Commission's orders. It thus stopped short of conferring more liberal powers of review for railroads than those enjoyed under the constitution by all other classes of persons and property.[609] In so far the railroads lost their case. It is evident that Congress intended to create a really competent administrative board, with whose orders the courts might interfere only when those orders were ultra vires, or unconstitutional. The courts under the law must accord the same consideration to such decisions, "if regularly made and duly served," as to an act of Congress, with the presumption always in favor of validity. Judicial interference might be expected only when the railroads had a good case. This, at least, was a clear gain. There was yet another even more important one. Under the old law the burden of initiative or proof on all cases appealed, rested upon the Commission. This might now be reversed. Penalties formerly did not begin to run until the final decision of the highest court to which appeal was taken, had affirmed the validity of the Commission's order. Carriers might continue to disobey with impunity throughout the period of protracted litigation. But now a penalty of $5,000 a day for each day's violation of the order, began at the expiration of thirty days. The initiative to secure relief from this order must now come from the carrier. It, and not the Commission, became the petitioner before the courts. A speedier adjudication of contested cases might far more confidently be expected under such conditions. But the grounds, legal or economic, upon which such determination of the reasonableness of the Commission's orders must rest, were, unfortunately, as we have seen, left open for judicial interpretation in the course of time.
The railroads won a decided victory in one other bitterly contested detail of the relation of the Commission to the courts. The new law still left the old rate or practice of which complaint had been made, in effect without penalty pending the review of the case. The administration bill would not have permitted restraining orders to issue until the Commission's decision had been held unreasonable in formal review. The point appears to have been decided by Congress upon economically unjustifiable grounds. The interval of time between the Commission's decision and the final settlement of the case might be considerable. Under the old conditions, the carriers had imposed the burden of disputed rates upon the public. The importance of this point may be illustrated by the fact that during the protracted litigation in the Chicago Terminal Charge case, finally settled in 1909, the sum involved for this period alone amounted to $3,000,000. Was this fair? The real disputants after all were not the government and the railway company. The Commission was supposedly acting impartially as an umpire. Such being the case, unless it were shown that greater injustice would result from the change, the natural condition would seem to be this; that in cases of dispute the decision of the umpire, and not of the bigger contestant, should prevail until final settlement of the cause. This would seem to be the obvious, the natural and the just conclusion from the premises.
But, the railroads contended, suppose the Commission should order a rate reduced, as in the Maximum Freight Rate case; put a lower tariff into effect; and then the courts should ultimately decide that the original rate ought not to have been disturbed at all. The railroad meantime would have suffered a corresponding loss of revenue on all traffic carried at the low rate. This would certainly be a hardship, and incontrovertibly unjust. But would it be more so than that the shipper should unjustly have borne the burden in the contrary case? As matters then stood, the public was compelled to pay the high rate, even if the courts afterward decided it to have been unreasonable. The railway as an interested party enjoyed the benefit of the doubt, and imposed the burden of proof upon the public at all times. Would it not have been more in consonance with justice, that the government, an impartial umpire, should temporarily lay the burden upon that party against whose contention the greatest reasonable doubt existed?
The only just remedy would seem to be one which would insure final recovery for unreasonable rates, by whichever party paid, during the uncertain period of adjudication. One of the principal objections of the railways to the proposed change arose at this point. Large corporations are more responsible parties at law than most individual shippers. Suppose, through an unjustly low rate, a railway had suffered loss of revenue; could it as readily recoup itself by suits for damages against scores of shippers, large and small, as could the latter, in the contrary case, recover back from the railway company? This cogent argument suggested a compromise measure. Why not permit the original railroad rate to continue in force, as before, pending final adjudication; but require the carriers to give bond for prompt repayment of any surplus charges over those finally sanctioned by the courts?[610] This would have left the business of rate making in railway hands; and yet have afforded a substantial remedy for the disputatious shipper.
The railways would not accede to such a compromise measure, with all the financial burdens thereby entailed. Unfortunately even this scheme is woefully short of a just solution. The whole matter looms up larger at this point. Enter again the interests of the real consumer! In most cases freight rates to some degree affect the price of commodities. Has the shipper, having paid a freight bill afterward adjudged unreasonably high, any right to sue for recovery of the amount? Has he not, with his fellow merchants, probably shifted the burden upon the public? Evidence shows that carload rates on cattle from Texas to South Dakota have been increased within ten years after 1898, from sixty-five dollars to one hundred dollars. Probably part of this thirty-five dollars increase has been taken from the profits of the cattlemen; but can there be doubt that a part of it has been added to the price of beef?[611] No, tackle it as you will, from whatever point of view, you return to the same proposition: that the damage of an unreasonable freight rate, once paid, is irreparable. Particular shippers may recover what seem to be damages; but which are likely not to have been so to them individually at all.[612] By standards of abstract justice, the real solution should distribute the temporary burdens incident to the delays of legal procedure, as nearly evenly as the laws of chance will permit. A compilation in 1905 showed that, of 316 freight rate cases decided by the Interstate Commerce Commission, fifty-four per cent.—practically one half—turned in favor of the complainant. Inasmuch as these complaints were practically all brought on behalf of shippers against the railroads, this shows how evenly balanced the issues have been. Were the orders of the Commission to become effective at once, the losses incident to errors afterward corrected by the courts, would be distributed in about equal proportions. Under the law even as amended in 1906, all the penalty of a mistake falls upon the shipper and the public; the railway always goes scot free. An impartial commission should be clothed with power to distribute these onerous burdens by prescribing the temporary rate. Quite possibly the limitation of the equity power of Federal judges to protect the railroads in their constitutional rights, might have been overthrown by the Supreme Court; but the advantage in the contrary case would have been well worth the risk.
The only remedy left for the public under the circumstances of compromise above outlined, was to forward the course of judicial procedure in every way. The Expedition Act of 1903 had done much. The new amendments went still further, by providing for appeal directly to the Supreme Court with the privilege of precedence upon its docket. Other details served the same purpose. Formerly it had taken much time for the Commission to prepare its formal orders and its prima facie case for the courts. All the evidence had to be duly set forth.[613] Except for damage suits, all this was now changed. The Commission in its orders need only state its conclusions in the premises, without the delays, labor and expense incident to formal re-examination of witnesses and the preparation of extended records of evidence. This has materially expedited the settlement of contested cases. It has yet another advantage. The Commission was stripped of one of its semi-judicial functions; always an anomaly under our plan of government. And the assignment of the duty of formal prosecution of cases on appeal to the Attorney-General of the United States, was yet another improvement along the same line.
In the matter of personal discrimination, the disheartening persistence of illegal practices, despite the provisions of the Elkins law of 1903, rendered it necessary to specifically extend jurisdiction of the Commission over private car lines; and to confer authority over all incidental services at terminals. Separate publication of storage, icing and other charges was called for; and railroads were held responsible for the provision of special equipment when requested. Industrial railroads, "tap lines," spurs and sidings, so ingeniously employed in discrimination,[614] were expressly included under the Commission's authority. Passes for individuals, a fruitful source of favoritism and political corruption in the past, were even more particularly prohibited. The only exceptions were for employees and their families, the poor or unfortunate, and persons engaged in religious or philanthropic work. In this connection, it may be added that the law of 1910 somewhat modified this rule by enlarging the meaning of "employees" to include caretakers of milk and other commodities. It also dealt with the issuance of franks by express, telegraph and telephone companies in some detail. Superannuated or pensioned employees and the bodies of persons killed in service might also be carried free. Such details are significant as illustrating the extreme nicety of definition required by the drastic character of the prohibitions.
An important change was also made by the law of 1906 in re-imposing the penalty of imprisonment, as well as of fine, for departure from the published tariff. Its removal from the original law of 1887, in the interest of effective enforcement, was recognized as a mistake. With the complete affirmance by the courts of power to compel the production of evidence, recalcitrant witnesses were now under control. It was hoped that vigorous prosecution with this criminal punishment added, might put an end to the abuse.
An entirely new feature was added to the law by the so-called "Commodity Clause." This sought to divorce transportation entirely from all other lines of business. The experience of years had shown that corporations, especially in the coal-fields, by combining both the service of carrier and shipper, might most effectively stifle competition of independent producers. Rank discrimination might be concealed by means of ingeniously framed systems of inter-company accounts. And denial of equal facilities such as cars or sidings might operate to drive competitors out of the business. While the Hepburn law was before Congress, several events drew attention forcibly to the existence of such abuses. The Interstate Commerce Commission in April, acting under the Tillman-Gillespie resolution, uncovered flagrant violations of law on the Pennsylvania system.[615] Equally important was the decision handed down in February by the Supreme Court in the Chesapeake and Ohio Railroad case.[616] This dealt with discriminatory rates on soft coal for the New Haven road, given by means of manipulation of the pro-rating division between the various companies interested. The general public was also greatly concerned over the growth of monopoly in the anthracite fields and the coincident rise in the price of coal. The independent producers in the soft coal regions were at the same time roused over the grievous discriminations practised against them, especially in West Virginia.[617] Senator Elkins of that state,—usually a strong railroad partisan,—introduced the amendment under pressure from his constituents. It was warmly supported by the most radical administration representatives. For it was apparent at once that a withdrawal of railroads from all such correlated businesses was not only proper in itself, but would also greatly promote the enforcement of many other provisions of the law. Yet the radical character of the proposition was perhaps scarcely appreciated. Some railroads, like the Lackawanna, were dependent for nearly three-fourths of their tonnage upon the anthracite coal traffic; much of it from their own mines. The Chesapeake and Ohio in the eastern fields and the 'Frisco in the Middle West, relied upon soft coal for more than half of their tonnage. A great many other carriers were interested to a lesser degree. To compel them all to give up their coal properties was indeed a serious matter.
The "commodity clause" provided that "after May 1, 1908, it shall be unlawful for any railroad company to transport from any state ... to any other state ... any article or commodity other than timber and the manufactured products thereof, manufactured, mined, or produced by it, or under its authority, or which it may own in whole or in part, or in which it may have any interest, direct or indirect, except such articles or commodities as may be necessary and intended for its use in the conduct of its business as a common carrier."
The original proposition was even more drastic. It was to apply to all common carriers, such as the pipe lines in the oil business. But it was soon considerably modified in the course of passage.[618] First, it was limited to railroads. Then the western senators, on behalf of the lumber industry, secured its special exception. And, finally, an attempt to prohibit specifically the control of subsidiary industrial companies through stock ownership was defeated. But, as thus limited, the clause finally passed the Senate,—the stronghold of the railroad interests,—by a vote of 67 to 6. This affords a good indication of the extent of popular feeling on the subject. It was fortunate indeed that the prohibition was not to take effect for two years, in view of the litigation necessary for its precise interpretation. For in any event it was bound to lead to much corporate readjustment. The course of these proceedings will be considered in the next chapter.
There remains for consideration one of the most important provisions of the Hepburn law, namely that dealing with publicity of accounts.[619] Section twenty of the law of 1887 called for the filing by all carriers of annual reports with the Interstate Commerce Commission. These reports were to be standardized; and the Commission was empowered, in addition, to demand specific information whenever it was so desired. But the absence of express authority to enforce these orders, except by means of tedious equity proceedings in the courts, made improvements in accounting almost entirely dependent upon the tact and resourcefulness of the statistician. The Commission was most fortunate in the services of Prof. Henry C. Adams, who succeeded in bringing about cordial coöperation between the accounting officials of the railroads and the government. Great improvements in the line of uniformity resulted; but the need of positive control became increasingly apparent.
Many officials were unwilling to certify by oath to the correctness of their returns. With the increasing size of the roads, it became more and more difficult to secure promptness. The annual Statistics of Railways had almost to await the pleasure of the carriers in filing their statements. And vitally important information was often withheld. In the case of the Lake Shore road, for example, which for years had charged all its improvements to operating expenses, it positively declined to state what portion of those improvements were permanent additions to the property, properly chargeable to capital account, and what were in the nature of renewals and repairs. And the Supreme Court had found no authority in the law to compel the furnishing of this information.[620] With the growth of extended systems of railroads, characterized by the most involved methods of inter-corporate accounting, the need of precise data became ever more imperative. Something more was evidently necessary than a mere expression by Congress of an opinion favorable to publicity. The mandatory provisions added in 1906 to the Twentieth Section are, therefore, vital, not only in themselves; they are essential to the administrative enforcement of nearly every other part of the regulative law. A determined effort was made in 1908 to defeat the purpose of this clause by restricting appropriations for carrying it into effect.[621] But it emerged unscathed—thanks to President Roosevelt—and stands today as one of the best features of the new statute.
One may readily distinguish no less than five distinct and important special services to be rendered by full publicity of accounts. The earliest to be fully appreciated was its serviceableness in securing equality of treatment of all shippers. In the good old freebooters' days, rebates were probably openly entered as such on the books. But with the need of concealment, they came to be covered up in all sorts of ways; oftentimes under such guises, as in the notable Atchison case, in such manner that not even the directors knew what they meant. With full standardization of accounts, such abuses may readily be detected and the offenders traced and punished. In the second place, open standardization of the books makes strongly for more efficient and honest operation.[622] The comparative method in statistics may be readily applied; so that the president of a railroad may have at command a complete statement of operations in detail, which is comparable not only with his own results in preceding years but with other roads similarly circumstanced. The haphazard and unscientific methods of operation in the British Isles are largely a resultant of the absence of any logical and uniform system of public accounts.[623]
Detailed cost keeping in the management of great systems of inter-related railroads, being absolutely essential to efficiency, makes also for honesty in operation. Such gross frauds as developed upon the Illinois Central in 1910, variously estimated to have cost the road from $2,500,000 to $5,000,000 through overcharges for equipment repairs, might readily enough have been detected under an efficient and honest management. This instance immediately suggests a third advantage of full publicity of accounts, namely the protection of investors. Flagrant manipulation of maintenance accounts, "skinning" or "fattening" roads in the interest of inside speculators, has always been dependent upon secrecy. Assurance of a stable market for railroad securities, based upon entire frankness as to the degree to which these properties are being kept whole or improved, is one of the prime advantages which may be expected to flow from such governmental prescription of accounts. And general public confidence in railway investments cannot conceivably be better encouraged than by such publicity. In no other detail than this, does the Act to Regulate Commerce more directly benefit the general body of stockholders in railroads, as well as the corporations themselves.
The three foregoing advantages of publicity had been long appreciated. These recent changes introduced in the Federal law brought two others into special prominence. One is the newly assumed responsibility by the government in the matter of rate making. The other is its intervention in cases of dispute between the carriers and their employees. In both cases it is imperative that there should be available data for a just determination of the issues at stake. There must be assurance that every essential feature of the situation is fully and fairly set forth upon the books. Otherwise, as in disputed rate cases, every fact as to cost of service,—a primary basis of measurement,—is vitiated. Absurd and misleading calculations may be presented in evidence, which greatly hamper the government in deciding the case.[624] And now with the projected physical valuation of properties as an element in rate making, all of the factors of maintenance, betterment and depreciation, of joint facilities, rentals and sinking funds must be taken into account. In labor disputes, the same considerations apply.[625] Under the requirements of the Erdman Act, every mediation,—and the need for it is more frequent every year,—calls for critical analysis by the chairman of the Commission and the Federal commissioner of labor of the statements from both sides as to the reasonableness of the action to be taken respecting wages or conditions of employment.[626] The notable arbitration in 1912 is the most important instance as yet. Having all of these services in mind, it seems likely that the accounting provisions added to the law in 1906 will be second to none in bringing about the elimination of existing evils, and in standardizing and improving operation, finance and traffic practice.
Under the new law monthly and special as well as annual reports, might be required under oath; with appropriate penalties of fine and imprisonment for delay or mis-statement. All accounts must be kept according to forms, general and detailed, prescribed by the Interstate Commerce Commission. Such rules applied of course to all carriers subject to the law, such as express and sleeping-car companies, pipe lines and even water carriers where operated in connection with railroads. Moreover, the Commission was to have access to the books at all times. For this purpose, it might employ special examiners.[627] In other words, the system employed for years in connection with the regulation of national banks, was now extended to the interstate carriers. An additional safeguard was provided in the clause which made it unlawful to keep any other accounts books or memoranda than those approved; with the same penalties for violation. In brief, the policy was now perfectly definite. Carriers were rendered public service companies in every sense of the word. Mere indefinite publicity was replaced by specific regulation. This policy was not only clearly written in the law; but the Commission in promulgating its orders relative to accounting, laid upon every officer concerned, full personal responsibility for the statements rendered. Minor officials, made scapegoats for chief offenders, were no longer to be tolerated. The relation between agent and principal was clearly defined. It was assumed that so far as accounts were concerned, such officials were representatives of the Commission in carrying out the law. A new principle was introduced in the regulation of carriers which could not fail to be productive of great good. In this respect the Hepburn amendments granted all that the most ardent advocates of publicity demanded.[628]
A summary view of this important legislation,—in form merely an amendment of the original law of 1887, but in reality constituting an entirely new departure,—may now be had. The gains for effective regulation were considerable. Among them may be noted its enlarged field, the separation of transportation from other businesses, elimination of the iniquitous railroad passes, control over joint rates and pro-rating, the expedition of judicial procedure, full publicity of accounts, enhancement of the dignity and compensation of the Commission, and, most important of all, the grant in so many words of administrative rate-making power. The carriers—and the administration also—failed to obtain the much-desired repeal of the prohibition of pooling. On the other hand, as against these gains for reform should be set the following concessions to the railroads. Rate-making control was still subject to broad court review. No one as yet knew what this might bring forth. Maximum rates only might be prescribed. And much as to the proper relativity of rates, involved both in matters of freight classification and of enforcement of the long and short haul clause, was left untouched. Rate advances were still possible without determination of their reasonableness in advance. Suspension of orders pending judicial review, still remained. There was as yet no control over physical operation, such as furnishing cars, although switches might be ordered. Many of the states had long since undertaken this work. And the great body of independent carriers on our inland waters were still left beyond the reach of the Federal law. In the main, the administration had won a notable victory, although at some considerable cost. The principle of effective regulation of public-service carriers had been, indeed, vigorously affirmed in no mistakable terms. But the task was not yet completed. Many details of law were needed to "Clinch the Roosevelt policies." Nevertheless, it was probably better that a brief experience with the new law, both among the people and in the courts, should precede further legislation. Great reforms should not be too suddenly effected, else reaction is certain to take place. For the time being a positive step forward had been taken.