Two distinct causes brought about the establishment of railway traffic associations. The first cause was the necessity of co-operation to facilitate the joint business of connecting lines. Through tickets, joint fares and rates, through bills of lading, the interchange of cars between connecting roads, and the settlement of joint accounts led to the establishment of co-operative freight lines, car-service associations, claim associations, and various other general and local organisations for the promotion of the joint transportation business.
The other cause of co-operation among the railways was the necessity of regulating competition. This cause first became potent after the process of consolidation had brought about the formation of numerous large railway systems, and had inaugurated the violent competition which led to discriminations in transportation charges, rate wars, and the other evils which have combined to produce "the railway question." The competitive struggles of rival railway systems began to be violent shortly after 1867, and soon led to the formation of railway traffic associations, with enlarged powers. The classification of freight, the determination of rates on competitive traffic, and the apportionment of that traffic, or of the earnings from it, among the competitors became functions of the associations.
THE WORK OF ALBERT FINK
The man who did more than any other person to develop traffic associations and to promote the co-operation of competing railroads was the late Albert Fink. It was his master mind that organised and put into successful operation in 1876 the Southern Railway and Steamship Association. The following year Albert Fink succeeded in organising the great trunk lines connecting the North Atlantic seaboard and the States north of the Ohio River. Though smaller traffic associations similar to these two organisations had been previously established where but few obstacles had to be overcome, it was Fink who first organised traffic associations including all the competing railroads serving large sections of the country.
In discussing the work of traffic associations, which are to-day concerns of really enormous magnitude, railway pooling and the classification of freight especially demand consideration.
RAILROAD POOLING
Railroad pools are agreements entered into by competing carriers, by which the railroads provide for the division with each other of their competitive traffic, or of the earnings from that traffic in accordance with stipulated ratios. Thus there are traffic pools and money pools. During the decade preceding 1887, the year when the present interstate commerce law was enacted, most traffic associations had the pooling feature, and most of the competitive railway traffic was pooled, thus eliminating all competition in rates.
Pooling agreements have never been legal in this country. Being illegal by the common law, they could not be enforced in the courts. Section 4 of the interstate commerce law made it unlawful for the carriers subject to the act to pool their freights or the earnings from their freight traffic, and made it necessary for the traffic associations to reorganise without the pooling agreements. Until March 22, 1897, it was supposed that the associations, without pooling agreements, were legal; but, on that date, in the case of the United States vs. the Trans-Missouri Freight Association, the United States Supreme Court held that the law of July 2, 1890, popularly known as the Sherman anti-trust law, applied to railways, and made it illegal for railway companies to contract with each other to maintain rates. Thus at the present time traffic associations are permitted neither to contain a pooling feature nor to provide arrangements for the enforcement or maintenance of rates, although the charges may be reasonable and be sanctioned by all the carriers interested. The associations may now legally exercise those functions which are connected with the joint business of their members, and they may act as bureaus of information regarding the competitive traffic. They have no power to make or to maintain rates.
TRAFFIC ASSOCIATIONS INCLUDING POOLING SHOULD BE LEGALISED
The best performance of the service of transportation by rail requires the fullest possible co-ordination of the different parts of our transportation system and the largest attainable measure of co-operation among the agents who perform the service. Section 4 of the act of 1887 and the law of July, 1890, as far as the latter relates to railways, are based on an unsound theory. Provision having been made for that kind and measure of governmental regulation of railway rates that will insure reasonable charges, the railways should be permitted to co-operate in rate-making and be given power to pool their competitive business.