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The Commoner
5
5JANUARY '26, 1908
I
A CHAPTER ON RAILWAY RATE LEGISLATION
41 1
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Tho Commoner presents this week another
article from tho pen of the gentleman who has .
contributed many interesting articles with re
spect to railroad rate legislation. This gentle
man says:
The widespread demand for more effective
legislation to regulate and control interstate
carriers springs from the impotence of the pres
ent law, which was passed in 1887. Briefly
stated this law provides that all rates and
charges shall be reasonable and just and declares
unlawful every unreasonable and unjust charge;
that the schedule of chargeB shall bo published
and adhered to and that they shall not give un
due preference or advantage to any person or lo
cality; that the charge shall not be greater for
a shorter than for a longer distance over the
same line In the same direction, the shorter be
ing included in the longer distance; It creates
the interstate commerce commission and author
izes and requires the commission to execute and
enforce the provisions of the act.
The law reads good and would prove satis
factory if the commission had the power it was
thought the law conferred' upon it. To simply
declare that all charges shall be reasonable and
just without giving the commission the- power to
fix a reasonable maximum rate and substitute it
in place of an unreasonable and unjust rate, will
not and can not afford substantial relief; For
same six or seven years the commission assumed
that it had this power, and as the carriers thought
so, too, the commission's orders were complied
with. Finally, the right of the commission to
wield this power was contested and the supremo
court decided that the law conferred no such
power upon the commission. This adverse de
cision deprived the commission of its most po
tent and powerful weapon, Since that date the
railroads have had nothing to fear. The validity
of almost every order of the commission has
been attacked and usually with success.
Having definitely, located the weakness of
the present law, it ought not he a difficult mat
ter to intelligently proceed in making the law
effective, but here , we are met with numerous
suggestions put foyth and ahly championed by
those who oppose real, effective railroad regula
tion. President Roosevent proposes to correct
the defects of the present law by conferring upon
the interstate commerce commission, or some
other administrative body, the power to decide
whether a given rate prescribed by a railroad is
reasonable and just, and if found to be unreason
able and unjust, to prescribe a reasonable max
imum rate beyond which it shall be unlawful to
go, this decision to go into effect within a rea
sonable time and to remain in effect unless and
until it is declared confiscatory and destructive
of property rights by a court of competent juris
diction. In short, the president favors the en
largement of the duties and powers of the in
terstate commerce commission, the very policy
advocated and demanded by the democratic party
in its national platforms of 1896, 1900 and 1904.
The constitutional provision that no person
shall be deprived of his property except by due
process of law affords an ample remedy against
unreasonably low rates, whether fixed directly
by congress or by an administrative body created
for the purpose of regulating rates, and simply
because a carrier can invoke the aid of the courts,
if it feels that a given rate will unlawfully de
prive it of its property, those who oppose giving
the interstate commerce commission this power
insist that the short cut to justice and effective
regulation is to make the commission purely an
Inquisitorial body and impose upon the courts
the duty of determining whether a given rate is
unjust and unreasonable. That is the plan they
propose. In fact, the plan they propose would
afford no remedy against extortion which we do
not now have. In the Reagan vs Farmers Loan
& Trust Co. case, the supreme court used this
language in rendering its decision:
Yet it has always been recognized that if
a carrier attempted to charge a shipper an
unreasonable rate, the courts had jurisdic
tion to inquire into that matter, and to award
the shipper any amount exacted from him in
excess of a reasonable rate.
President Roosevelt, in his message to con
gress, said:
1 regard this power to establish a max
imum rate as being essential to any scheme
of real reform in the matter of railway regu
lation. The 'first necessity W to eciire it;
and.-unless it is granted to the commissions
there is littlo use in touching tho subject at
all.
Judge Grosscup of tho United States circuit
court strongly opposes President Roosevelt's
policy.- In explaining the method of procedure
under tho present law ho attempts to show how
effectively the courts can deal with tho question,
as follows:
Upon a complaint being made to the
circuit court that a rate is unreasonable
the court, if it finds that tho rate is unreason
able, may enter an order finding such rate
unreasonable, and thereafter the railroad is
not at liberty to charge tho rate because
"by defying a rate already judicially de
termined, tho railroads would expose them
selves to civil suits upon the part of evory
Bhipper aggrieved."
To say that a carrier is not at liberty to
charge a rate that has been judicially determined
to be unreasonable, is misleading. It implies
that the carrier would be compelled to observe
the rate judicially determined to be reasonable
and just. In other words, to make It tho tariff
rate for all future business of a similar char
acter and class. That is not true. A carrier
could disregard the rate judicially determined to
be reasonable without incurring any responsi
bility other than the liability of another law suit,
and that could hardly be considered a deterrent
because the carrier would appeal tho case to a
higher court nine times out of ten, and just
as often would the higher court reverse the
lower court, and the rate judicially determined to
be reasonable and just in the first instance would
subsequently be held unreasonable and unjust.
That the courts can not fix future maximum
rates is and muBt be conceded by all, because
that is a legislative and not a judicial function.
Former Attorney General Olney, in an article in
the North American Review for October, 1905,
says:
Yet in either or any event the courts'
are limited to action upon rates already es
tablished or attempted to be,, and are with
out power to decree what shall be .the rates
for the future.
The most potent .and effectivo weapon em
ployed by the courts is the restraining order,
or injunction, yet they can not use nor attempt
to use it against a carrier to fix a future max
imum rate. It is true the courts can enjoin a
carrier from departing from a published tariff
rate to favored shippers if the rate Is fixed by
the carrier itself and published as the public
rate, but tho carrier" Is at perfect liberty to
raise or lower the public tariff rate at any time
regardless of injunctions.
The courts do not and can not afford a
remedy against future extortionate charges, yet
that is the only remedy the opponents of rate
legislation have to offer. They propose nothing
we do not have and, as President Rooseyelt
says, -there is little need of touching the sub
ject at all.
Simply because the constitution prohibits the
taking of private property without due process ..
of law (and the fixing of a transportation rate
is a property right if the rate is confiscatory
a fact that must be determined by the courts),
Judge Grosscup contends, in effect, that neither
congress nor a commission created for that pur
pose should fix future maximum rates for the
reason that the railroad company, if they feel
aggrieved, can question the constitutionality of
the rate upon the grounds that that it would
confiscate its property. Congress, not being able
to determine in advance which of its acts will
be attacked as unconstitutional, would necessarily
become a useless body, if Judge Grosscup's ar
gument be followed to it3 logical conclusion, be
cause it could enact no law with any assurance
that its constltulonality would not be attacked.
But, if the railroads will attack rates fixed
directly by congress, or by a commission, they
would also- attack and resist rates judicially de
termined to be reasonable and just. The rail
roads' violate injunctions with impunity, and
that is the court's strongest and most reliable
weapon.
The best indication of how the courts would
handle this question is admirably Illustrated by
what they have done. The present law provides
that rates shall be reasonable and just and de
clares every unreasonable and unjust rate un
lawful; that all rates shall be- published and
s.triqtly adhered to. An Iowa shipper thought
tieas being' charged extortionate rates on shirk
ments of grain to Chicago. Ho brought suit and
prayed tho court to award him Judgment In any
amount found to have been exacted from him
by tho carrier in excess of a roasonablo rate.
Upon investigation tho fact was established that
tho carrier had only exacted from the shipper
tho published tariff rate. The court decided that,
as tho law required tho carrior to publish its
rates and to adhere to them as long as they
remain in effect, tho carrior could not legally
charge any other than the published rate, hence
the shipper had paid tho legal rato and had no
case. In commenting upon this wise (?) deci
sion tho interstate commerce commission, in its
twelfth report said: "Tho court apparently took
the position that tho publication of a given rato
under the sixth section by tho carrior ixcd
tho rate; that when the rate was so published
it became unlawful to receive any other or dif
ferent rate, and that it could not bo an unlawful
act to demand and collect the published rate,"
and added that "if this opinion should finally
prevail it would result that the public has ab
solutely no protection against an unreasonable
rate." Further comment Is unnecessary.
Tho laws proposed by tho opponents l Presi
dent Roosevelt's policy would greatly aid In se
curing a closer observance of tariff rates by tho
railroads, but they afford no remedy for those
who are injured by unreasonably high or ex
tortionate charges, or by rates that are inequita
bly adjusted. To permit a carrier to prescribe
an unjust or unreasonable rato and tlien compel
the carrier to observe that rato and the shipper
to pay It, Is nothing more nor less than com
pulsory extortion. Those who object to giving
the commission power to fix a future maximum
rate take it for granted that competition between
carriers will insure reasonable rates, but they
overlook the fact- that but about one place in
ten is served by two or more railroads, tho other
nine stations having but ond road and no com
petition whatever in fixing rates. The public
must not be without protection. It will not do
to rely upon a corporation's standard of just and
.reasonable rates, as is well illustrated by their
infamous policy of charging higher rates for a
shorter than for a longer haul on the same lino
and In tho same direction, the shorter being in
cluded in tho longer distance, previous to the
passage of the act to regulate commerce in
1887. They insisted that competition forced the"
charging of low rates to competing points and
contended that they were justified in charging
intermediate points higher rates for the simple
reason that -a certain amount of revenue must
be collected to pay operating and other ex
penses and leave something for dividends. That
is the corporation idea of justice and fair-dealing.
The railroads also strenuously contended
that they could not adjust their charges in ac
cordance with tho law without bankrupting every
road In the country, but they finally did so and
tho anticipated disasters did not come.
Then again the opponents' of rate legislation
prate long and loudly about the very, very com
plicated and delicate problem of adjusting freight
rates, which can only be accomplished by experts
In rate making. The interstate commerce com
mission was called upon to investigate a general
advance In rates in, the southwest, and the
traffic manager of an important system testified
that the advance was made because the finan
cial manager of the company in New York in
structed him to do so. The commission, In com
menting upon this said: "Here was no delicate
adjustment of rates to conditions."
When the supreme court decided that com
petition between railway carriers might create
the dissimilar circumstances and conditions,
which the fourth section of the Interstate com
merce law says might make an exception to the
general rule of the long and short haul clause,
the railroads filed schedules with the commission
raising the rates to Intermediate points over more
than 100,000 square miles of territory within
five days from the reading of the opinion. Thjs
fact is reported by the commission in its eleventh
annual report. Here is more evidence of tho
delicate adjustment of rates to conditions.
The necessity of fixing a minimum as well
as a maximum rate is "not often recognized, but
the power to do this must be granted to correct
certain forms of discrimination. This fact is
illustrated by a case that came under the ob
servation" of the Interstate commerce commis
sion. The lumber interests of Eau Claire, Wis.,
nnmniotnoi fio Hio- ni ft on lumber to a com
mon market was excessive as compared with
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