There were several reasons for this sudden shift of attitude toward the law in 1908 on the part of the carriers. The political atmosphere had suddenly cleared so far as popular hostility to railroads was concerned. A change of administration had ensued, with a marked preponderance of professional legal talent in the Cabinet. And several important decisions of the Supreme Court, once threatening, had now been rendered in favor of the carriers. Among these may be mentioned the first interpretation of the "commodity clause,"—on the one hand upholding the constitutionality of the law, and on the other, pointing the broad and easy way to its evasion; the Harriman decision, protecting witnesses from disclosure of details as to their personal participation in the finances of companies under their control; and the exculpation of the Standard Oil Company by the aid of eminent counsel and the technicalities of the law, with escape from the extreme penalties of the statutes for rebating and personal favoritism. Things seemed indeed to be going at last the railroads' way.
The brightening financial outlook also gave better heart to the carriers. The panic of 1907, with its forced postponement of ambitiously constructive plans, seemed to have passed. The revival of these projects might be hampered by a further extension of government regulation and publicity. Railroad labor, moreover, was becoming restive. Demands for increased wages were imminent; and the carriers evidently proposed to shift the incidence of these wage increases, if granted, upon the public by means of an advance of rates. Such increases were bound to be disputed. It was deemed important to test the law at every point. This need was the more imperative as the Commission itself was bound to pass upon several questions of fundamental importance, such as the adjustment of transcontinental freight schedules and others soon to be described.
A presidential campaign took place in 1908. Both political parties committed themselves in their platforms to still further amendment of the Interstate Commerce Law. The Republican party, however, modestly confined its recommendations to authorization of traffic agreements and the regulation of stock and bond issues by railroads for the prevention of over-capitalization. The Democrats offered a much broader program providing for real amplification of the power of the Commission over rates. President Taft,—well in advance of his party, controlled as it was by the so-called "regulars,"—offered soon after election a more definite policy. Its main feature was the establishment of a Court of Commerce to which all judicial review of orders of the Commission should be submitted, in lieu of revision by the regularly constituted Federal judiciary. He evidently proposed to seriously amend the law; but, beyond the foregoing proposition, most of the other details of his plan seemed to be either half-way measures or else ill-designed to meet the real difficulties of the case. Thus the proposal to give power over mere rules and regulations in advance of their taking effect, without at the same time conferring a like power to pass upon the reasonableness of rates themselves, seemed to miss the main point. The same criticism was applicable to the plan of conferring authority to postpone the taking effect of a new classification until it had been approved by the Commission. Other excellent details were such as conferred authority to compel through routes and to forbid stockholding by one road in other competing lines, set forth in speeches in the fall of 1909.
A special presidential message of January 7, 1910, contained the specific program recommended for legislation to Congress. It consisted merely of a tentative bill, which was introduced in both houses and properly referred.[688] By this time the influence of the Interstate Commerce Commission in strengthening the proposals was apparent. More positive provisions were added, such as the right to suspend rate increases pending determination of their reasonableness. Serious consideration was given this bill in appropriate committees both of the House and Senate. It was, in fact, with the consent of the Attorney-General, amended out of all semblance to its original form. The most serious changes were made in the Committee on Interstate Commerce of the House of Representatives. The coalition of Democrats and "insurgent" or "progressive" Republicans, succeeded in striking out the authorization of traffic agreements, as well as a proposition permitting a railroad owning a majority of stock in other non-competing lines to purchase the balance of their shares. Several radical amendments of the Commerce Court plan were likewise effected, especially those giving the power of appointment to the Chief Justice instead of the President. The hands of the "progressives" in all this work were considerably strengthened, without doubt, by the course of events during the spring months of 1910, especially the impending general increase of freight rates all over the country.
The strength of political sentiment in favor of the measure appears in the fact that the radical House bill was passed unanimously; while the Senate bill was adopted by a solid Republican vote with the aid of six Democrats,—the total vote being fifty to eleven. Reference to a conference committee, which considered it for ten days, still further modified the original plan. Pooling was dropped entirely; stock-watering and details of inter-corporate finance between non-competing lines were also thrown but as favoring the carriers unduly. Physical valuation, as provided in the House bill, was considerably restricted. Prompt approval of the conference bill followed in both houses. And the signature of the President was added on June 18. Thus did the Mann-Elkins "Amendments" become law.
The three most important features of the Mann-Elkins Act[689] were: the grant of power to suspend changes in rates for examination as to their reasonableness; resuscitation of the long and short haul clause; and the creation of the Commerce Court for review of the Commission's orders. Of these, the first two represent substantial extension of the regulative power of the government; the third being a mere modification of procedure on appeal.
The proposition to so amend Section 15[690] of the Act of 1887 as to confer power upon the Commission to suspend proposed changes in rates, seems to have been a feature added at the behest of the insurgent-Democratic coalition in Congress. It was neither in the President's first unofficial program nor in the formal bill drawn up by the Attorney-General. The intolerable obstructions in the way of prompt determination of transportation disputes incident to the practical working of the law, even since 1906, had created a renewed demand for relief. Great force was added to this demand among shippers by the rate advances which had been occurring all along the line for two years; and particularly by the rumors of a general rate advance by the western and trunk line roads during the progress of the debate upon the bill. The President, to be sure, blocked this advance by means of a clever legal and political move. On May 31 an injunction was issued against twenty-four carriers, temporarily restraining them from putting into effect higher tariffs, as they had planned on June 1. This action was taken upon the allegation that the simultaneous action of all these roads in so doing constituted a violation of the Anti-Trust Law. The injunction, which as a weapon had been turned mainly by the carriers against enforcement of the orders of the Commission, was now invoked against the railroads. Regardless as to whether a bona fide prosecution was contemplated, the effect of these equity proceedings was to secure postponement of the advance in rates; and, of course, at the same time forcibly to attract the attention of Congress to the necessity of control. The carriers withdrew their tariffs in some discomfiture; the injunctions were dissolved; and all proceedings were stopped.
It is unnecessary, perhaps, to repeat the demonstration that a loss by shippers once incurred through payment of an unreasonable rate, is irretrievable. The manner in which transportation costs enter into the profitableness of contracts by the shipper for future delivery is well known.[691] Any change of rates during a period for which shippers have contracted to deliver at fixed prices, must seriously affect the chances of profit. It was recognized as essential, therefore, that adequate protection for the shipper could be given only through suspension of any change in rates until the reasonableness of that change had been determined.
The extent to which the aid of the courts had been invoked by the carriers to set aside orders of the Commission has already been described. Proceedings on the equity side in the courts had also, although in a most unsatisfactory manner, been undertaken to restrain advances in rates. But in all cases the exercise of this power had been bitterly contested, and proved at best to be so cumbersome as to be almost futile. The utmost confusion resulted in some cases. For example, in 1908 the carriers filed notice of an advance in rates on boots and shoes from New England to the South. An injunction was obtained prohibiting such advance, on condition that application be immediately made to the Commission for a ruling upon the reasonableness of the proposed change. This would have left the carriers without choice except to collect one rate while continuing to publish another. They therefore withdrew their schedules, leaving the old rates in effect. As a result no complaint could be filed with the Commission, the new rate not having come into operation. To meet this situation, the court then so modified its injunction that carriers might publish the advanced schedule, but were restrained from collecting it. This was manifestly an absurd situation. Moreover, supposing that the Commission could immediately take up the question, no order could become effective until after thirty days. In the meantime, the whole matter must remain in suspense. Considering that 15,000 tariffs advancing rates in trunk line territory alone, were filed in July, 1910, the necessary delay incident to such roundabout procedure would render it intolerable. Other complications might be mentioned, such as the localization of injunctions within the territorial jurisdiction of the enjoining court; legal technicalities touching the filing of bonds; and the status of non-petitioning shippers. Speedy relief must be had: that was clear beyond question.