The obvious intent of the whole transaction was to evade the statute governing the movements of merchandise by water between United States ports, in order to effect a saving in freight estimated to amount to $4 a ton. In spite of the somewhat transparent nature of the business, the District Court of the United States for the Southern District of California and the Circuit Court of Appeals both held that the operation had been legally accomplished. According to these courts the law forbade a method, not a result, and unless goods were transported from one port of the United States to another port in a vessel belonging in whole or in part to foreign subjects, no penalty was incurred.[415]
It may be doubted if the roundabout route followed by the nails, here the subject of litigation, would ever have afforded a noticeable relief to importers on the Pacific Coast. Whatever chance existed was removed, however, by an amendment to the statutes in 1893, specifically forbidding transportation from one port of the United States to another port of the United States via any foreign port except in an American vessel.[416] This ended the first phase of the revived competition of 1891.
Organization of Association
The same month which saw the entrance of the 250 kegs of nails into the port of Redondo, saw also the establishment of the so-called Traffic Association in San Francisco. The Traffic Association was originally conceived as an organization of merchants of San Francisco for mutual protection, and for overcoming by united effort an alleged unjust discrimination against the business interests of the city. In fact the name first proposed for the new body was “Merchants’ Traffic Association,” and it was intended that the executive committee should be composed of eighteen members of the mercantile community. These details were, however, changed,[417] the words “merchant” and “mercantile community” were left out, and when the association was finally organized on October 30, 1891, the constitution and by-laws provided merely for the admittance of merchants, manufacturers, producers, and others interested in and favorable to its objects. Railroad employees or persons holding free passes over railroads were the only classes debarred. Subsequently an attempt was made to interest parties outside of San Francisco, but without large success. Characteristically the Traffic Association began and remained an association of San Francisco shippers for their own protection, particularly in the matter of transportation rates. Fifteen out of nineteen members of the first executive committee were representatives of San Francisco firms, and 97 per cent of the membership did business in that town. The first president was Mr. Stetson, of Holbrook, Merrill, and Stetson, and from first to last the overwhelming proportion of the association funds came from San Francisco.
The government of the Traffic Association was placed in the hands of an executive committee from which were to be selected the usual executive officers. All power was to be vested in the committee; that is to say, the executive committee was to have, in general, entire control and management of the affairs of the association, and in particular was to appoint a manager and other employees, who were to be relied on for the active work. By a special section the committee reserved the right to route all freight of members, should emergency require it and provided that the action was approved by at least ten members of the committee. Membership fees ranged from $60 to $150 per annum, payable quarterly in advance. Moreover, the constitution provided that any unusual work undertaken for the benefit of any particular line of trade, which entailed any unusual expenditure, should be charged pro rata to the firms or corporations most directly affected, and in accordance with the benefits derived. No membership was to be for a shorter period than two years.[418]
Functions
Inasmuch as some controversy later occurred with respect to the proper purposes of the Traffic Association of California, it is necessary to be explicit regarding the functions which, at the beginning, it was expected that the association would perform. According to the statements of its promoters, the association was not formed to fight the Southern Pacific or any other individual railroad company. The assertion was repeatedly made, on the contrary, that the intent was, by organization, merely to enable the shippers of California to deal collectively with the railroads, instead of one by one as heretofore, and so to secure a presentation of the shippers’ point of view which would carry weight by reason of the united sentiment behind it. In this way the shippers’ bargaining power would be improved without giving legitimate cause for offense to parties upon the other side, and without exposing individual complainants to retaliation.
In the invitation to the mass meeting which took up the question of organization on the 17th of October in San Francisco, it was explained that merchants, producers, and shippers could accomplish nothing at that time because they were disorganized. By opposing a solid front to the railroad combine, it was said, a good deal could be accomplished. Further, it was declared that the railroad would not resist such a movement. J. B. Stetson, chairman of the mass meeting, stated:
Our object ... is to organize a Freight Bureau or Traffic Association or whatever it may be termed, whose purpose shall be for mutual protection and extension of the interests of San Francisco; for overcoming, by united effort, discriminations and inequalities against the interests of San Francisco; for representation in conferences upon matters of importance to the shipping public to and with railroad or transportation companies. Associations similar to the one we propose forming here are in existence in all the eastern cities, and great benefits have accrued from them, and will not fail to prove successful here. We do not meet here for the purpose of waging warfare or encouraging antagonisms between the shipping public and the railroads, or any transportation lines. We believe that the same theory would govern them as would govern ourselves as business men in the redress of any grievance of our customers. We believe that by united action we can present to the railroad and transportation companies views in reference to freights, classifications, etc., that will cause them to make changes that will be beneficial both to ourselves and to them.... I cannot too earnestly advise prudence and caution in the outset, for if this association is started properly, great good will come from it and [it will] prove of lasting benefit to the commercial community.[419]
First Meeting