The railroads seriously object, first, to the fixing of their rates by anybody but themselves, and second, to the putting of such rates into effect before they are tested in court. The immediate enforcement of a rate order is most strenuously opposed, and with much force of reason. The railroad people say that rate-making is very difficult and many mistakes are likely to be made. Railroad history certainly affords ample ground for this conclusion. But they say, or imply, that the Commission makes more mistakes than they do. They declare that only trained traffic experts can deal successfully with rate questions; that the Commission has made so many errors that almost every one of its decisions that has gone to the courts has been overruled; and that great havoc would have been wrought if these decisions had been put into effect at once without judicial review. “Take for example, the Maximum Rate Case where the Commission ordered the rates from Cincinnati to important Southern points cut down 15 or 20 percent. This change in rates to the basing-points would have affected two or three thousand rates. Some of the railroads didn’t have a margin of more than 15 or 20 percent and they determined to fight the case. It is true that the Commission exercised the power to fix rates a number of times in the first ten years, but the cases were comparatively insignificant and the railroads said, ‘Oh, well, let it go. We’ll take the rate the Commission wants.’ But when it came to the Cincinnati case the situation was serious and the railroads said, ‘These fellows haven’t got the power to make rates. In the debates on the Commerce Bill in Congress it was distinctly declared that no such power was intended to be given. We’ll take the question to the courts.’ And the courts sustained the railroads. Now what would have been the consequence if the Commission could have put its order into effect at once? The railroads would have been subjected to serious losses during all the time that might elapse before they could get a decision reversing the order of the Commission. It often takes years to get a final judgment and there would be no way for the railroads to recover for the losses entailed by erroneous orders.” This is the argument substantially as presented to me by President Tuttle and there is great weight in it.
Alleged Errors of the Commission.
Another railroad president turns the lime-light of mathematical analysis on the errors of the Commission. David Willcox, President of the Delaware and Hudson, says: “About 93 percent of the decisions of the Commission which have been passed upon by the courts have been held to be erroneous. In case, therefore, the Commission had the future rate-fixing power, so far as its decisions were in force until the courts passed upon them, injustice would be accomplished in 93 percent of the cases. For this there would be no remedy, because no recovery could be had from those whose goods had been carried at unjustly low rates.”[[400]]
We shall see that this statement gives too strong an impression of the capacity of the Commission for mistakes, but there is no doubt that it has made mistakes, that any person or persons attempting to fix rates, even the railroad managers themselves, are liable to make mistakes, and that losses result to the roads from their own mistakes and might naturally result from the mistakes of a commission or court if its erroneous orders were enforced upon them.
It may be said that if the orders of the Commission went into force immediately it would be the interest of the railroads to hasten the proceedings in court instead of prolonging them indefinitely as they are too apt to do, and that with reasonable provisions for prompt adjudication and the stimulus of powerful railroad interests in that direction, the delay of the law, or this branch of it, at least, would vanish. It may also be said that the railroads could recoup themselves for the losses under discussion by curtailing the service they render for the new rates, or by raising other rates not fixed by the Commission. But the Commission might veto the raising of other rates, and the entailment of service would be very undesirable. The question arises whether it would not be fair for the public to stand any loss clearly resulting from an improper order of its Commission, or else require that any order the validity of which is questioned should be passed upon by the court before it is put into effect? The Commission is itself perhaps a sufficient court in respect to questions of fact, and if it were arranged that in case of dispute on a question of law the Commission might call upon the Supreme Court for an immediate interpretation of the law, the rulings of the Commission could be squared with the law at the start, and the danger of loss from an erroneous order would be reduced to a minimum.
As above remarked, the mistakes of the Commission have not been so vast as the reader might infer from the percentage of overruled cases stated by President Willcox.
The work of the Commission may be summarized as follows:
It has received about 3,726 informal complaints relating to overcharges, classification, rates, etc. Most of these, perhaps 3,200, have been disposed of by correspondence or some mild form of arbitration, very many have been settled satisfactorily, some have been abandoned, and some have crystallized into formal complaints. The total number of formal complaints has been about 854, including those that were formal at the start and those that started as informal complaints and grew to be formal through failure of adjustment by conciliatory methods. “From 1887 to October, 1904, the Commission rendered 297 decisions involving 353 cases, two or more cases being heard and decided together in some instances. About 55 percent, or 194, of the decisions were in favor of the complainant and 45 percent in favor of the railroads.[[401]] Mandatory orders were issued to the number of 170. Of these 94 were complied with by the railroads, 55 were disobeyed, and 21 were partly complied with and partly disregarded. Some 43 suits were instituted to enforce the orders of the Commission; and 34 of these have been finally adjudicated.” The Commission claims that 8 cases of excessive rates and unjust discrimination have been decided in its favor, while President Willcox says that the courts have sustained the Commission on the merits in only 3 cases.[[402]] Mr. H. T. Newcomb, who appeared before the Senate Committee as the representative of several railroads, gives a table showing that in the circuit courts the Commission has been sustained 7 times and reversed 24 times, the Circuit Court of Appeals has sustained the Commission 4½ times and reversed it 11½ times and the United States Supreme Court has partly sustained the Commission in one case and reversed it in 15.[[403]]
Several comments are necessary. First, about ⅘ of the Commission’s decisions have been right on the railroad’s own showing. They claim only 32 reversals out of 170 orders—nearly all the rest have been accepted by the railroads or enforced upon them by the courts. Second, the reversals have been based on questions of law in respect to which the courts disagreed among themselves. The Commission has not been overruled in respect to questions of fact, but on the application of what it believed to be law (and what the framers of the law believed to be law) to the removal of economic abuses. Third, the points of law in respect to which it has been overruled are very few. The decisions have gone in bunches. For instance while the Alabama Midland long and short haul case was pending in the courts a number of other long-haul cases were decided by the Commission, and when, after several years, the Supreme Court gave final judgment, a whole block of the Commission’s rulings on this point were discredited and subsequent reversals were simply repetitions involving no new error. So the question of power to fix rates covers a cluster of cases all thrown down in reality by one ruling.[[404]] And these two questions represent nearly the whole difference between the courts and the Commission. The 15 reversals in the Supreme Court do not mean 15 errors, even in respect to legal points, but only a very few errors if any. Fourth, the higher court reversed the lower in 9 out of the 17 cases that went up from the Circuit Court, and in three of these cases the Supreme Court reversed both the Circuit Court and the Court of Appeals. Fifth, it is by no means certain that the Commission was wrong and the court right. The fact is that the Supreme Court has not interpreted the law according to its manifest and well-known intent, but in a narrow, technical way that has defeated in large part the real purpose of the law. It is an absurdity to rule that the law is valid and then to decide that the railroads may escape from the long-haul section by means of dissimilar circumstances created by themselves. And many believe it to be an equal absurdity to declare that the Commission may order the discontinuance, of an excessive rate or unjust discrimination, but cannot fix a reasonable rate.
Take the Kansas oil rate for example. The railroads at the dictation of the Combine raised the rate, as we have seen, from 10 to 17 cents. Suppose the Commission had ordered the roads to cease charging 17 cents, that being found to be unreasonable. The railroads could appeal and appeal, and if after several years the case went against them they could make a rate of 16½ cents. Then a new investigation could be begun, the Commission could make a new order, and after years in the courts the rate might come down another half cent perhaps. And so on; even if all the decisions went against the railroads it would take 105 years to reduce the rate to 10 cents again, calculating on the basis of the average period of 7½ years required for final litigation. Why not sum up the process in a single order for the 10 cent rate and if objected to by the railroads have one judicial contest and finish the business. By the indirect method of declaring one rate after another to be unreasonable the Commission has now the power at last to fix the rate. The proposition to allow it to name a reasonable rate is only putting in direct, brief, effective form the power it now has in indirect, diffused, and ineffective form. The railroads might not act in the way described, but the point is that they could do so; there is no power in the law as it stands to-day to compel them to adopt a reasonable rate within a reasonable time.