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Its functions are partly inquisitorial; for it must "inquire into the management of the business" of all railroads doing an interstate freight traffic which is nearly the equivalent of all the roads in the country

- and it may call for books and papers, and subpoena witnesses. There is a suggestion of the judicial about it, too, for it is obliged to hear all complaints laid before it, and decide upon the reasonableness of all rates and charges, just as a court might. It must also play the rôle of party litigant, or prosecutor, and enter the equity side of the courts for the enforcement of its own decrees, if not voluntarily obeyed. And, finally, it is a statistical bureau of information, to which the railroad companies are bound to report, and which must report its own doings to Congress, with recommendations for legislation.

Unquestionably these are very important duties, which ought to be performed by some one; but the performance of some ought to be an absolute disqualification for the discharge of others. The inquisitorial power of examination and the power of prosecution before the courts, duties of an executive nature, are quite sufficient to render the Commission unfit to perform the judicial function of determining the reasonableness of a rate; and the combination of such powers was in flagrant violation of modern constitutional principles as to the separation of the legislative, executive, and judicial departments. If, as the new amendments provide, the Commission is also to fix maximum and minimum freight rates a legislative and not a judicial act-there will be a union of legislative, executive, and judicial powers scarcely to be found in any other branch of our Government.

The law may have been drawn upon the theory that the Commission should be a cross between the advisory Commission of Massachusetts and the Commission with power as existing in Illinois and other States. If so, the framers have not been disappointed; for it has turned out different from either. It has, in recent years at least, found itself unable to maintain the close and friendly relation toward the roads which has been such a conspicuous feature of the Massachusetts body; while, on the other hand, as it has lacked the power of the Illinois Commission, great difficulty has been experienced in securing obedience to its orders. It has had the power to annoy, but not to enforce. Nor has such failure arisen from any lack of good material in the personnel of the Commissioners. Some have been gifted with attainments of a very high order men like Judge Cooley and the late President Aldace F. Walker. All have shown themselves men of ability, character, and learning. So far

1I. C. Com. v. C. N. O. & Tex. Pac. Ry., 17 Sup. Ct. Rep., p. 896.

from the law having failed because of the officers appointed to administer it, we would rather assert that such measure of success as has attended it has been due in great part to their skill, judgment, and conservative course of action. The law has failed through the sheer dead

weight of its own impracticable provisions.

The bill recently introduced into the House of Representatives, No. 2,040, may be taken as an exemplification of the plan first described above. Its general purpose is in the line of an extension of the powers of the Commission, which is to be authorized, of its own motion or upon petition, to order the formation of through routes or connecting lines of freight. All tariffs are to be filed with it as heretofore, and no advance is to be made in them except upon sixty days' notice to the Commission, unless special permission to the contrary is obtained. The Commission is also to prepare uniform freight schedules, and is to have full authority to prescribe maximum and minimum rates of freight. There is no provision for pooling or freight agreements of any kind. The hard, unreasonable, vexatious conditions now existing are to be continued. More force is to be applied "to stamping out the disease" of discrimination, but "the miasma which is its cause is to be stimulated."

more.

We have already seen the effect of the Interstate Commerce Act on rates, and have observed that its anti-pooling section has bred the very discriminations it was intended to eradicate. But it has done much It has affected the companies themselves. Forbidden to agree peacefully upon tariffs, they have grown weary of endless strife, and have determined to combine; so combination is the order of the day on a scale without a parallel. The combination of coal roads more than a year ago, the purchase of the Southern Pacific Road by the Union Pacific, and the formation of the Northern Securities Company for the control of the Northern Pacific, Great Northern, and Burlington systems - these are significant expressions of a tendency that cannot pass unheeded. So marked has it become that we have actually coined a phrase to describe it. But "community of interest" is the very opposite of what was contemplated by the makers of the Interstate Commerce Act. They aimed not at "community" but at "hostility" of interest, and all their calculations were based on the assumption that such hostility could be maintained. If this assumption is false, does not the reason for the law cease? It is needless to speculate whether the equity power of the courts can be successfully invoked against railroad combinations like the Northern Securities Company. The aim of this article is rather to suggest that the friction, the irritation, the perpetually recurring discrimina

tions, and the absolute impossibility of enforcing certain provisions of the present law are strong indications that the statute was framed in disregard of fundamental principles of economics and trade. If amendments are to be made, should they not proceed rather on the lines indicated in the second of the two plans mentioned at the outset of this article?

Let there be a complete legal recognition of pools and freight associations, having central bureaus, with power to establish and adjust rates in territory where traffic is competitive. Each freight association should be provided with some arbitration machinery for the settlement of disputes; and the decision of the arbitrator should be permitted to become, if necessary, the basis of a suit at law, and, what is more important, be enforceable in equity.

This would be doing for the railroads what the law has long allowed to be done for individuals. President Hadley has noticed how very early the English courts had the wisdom to perceive that pooling contracts should be permitted, as based on a sound economic rule; and he has suggested that our own courts would probably have come to the same conclusion had the passage of the Interstate Commerce Act been delayed a few years. That statute, however, has introduced an arbitrary rule of its own, and has stood like a stone wall across the path of progress in the direction of maintenance of rates by mutual agreement.

Of course, all tariffs and agreements should be filed with the Commission, and should not take effect for a certain number of days after their filing. During such period of expectation, any party in interest should be at liberty to file exceptions and objections to the proposed arrangement. If these objections met with the approval of the Commission, it should be its duty to apply to the circuit court for an injunction to restrain the company from putting the rates in force; or it might itself file objections and seek an injunction. But if no objection was presented, the rates should be deemed prima facie just and reasonable as against all future objecting parties, and should become the legal rates of carriage, binding upon the railroad company. In any suit or proceeding in court, the presumption would be in favor of those rates which had been filed and approved. Thus the burden of proof would be sometimes on the railroad, as when seeking to substitute a new tariff for an old one over the objection of the Commission; and sometimes on the shipper, as when attacking the reasonableness of a rate already established. In this way, the rights of all parties would -1 Q. Journ. Econ., vol. iv., p. 161,

be protected. Sudden and unreasonable advances in rates would be difficult; the court, not the Commission, would judge of the reasonableness of a rate; but the Commission would be the constant and watchful representative of the interests of the shippers. Where traffic conditions had changed to such a degree that a rate or agreement originally just and reasonable had ceased to be so, the Commission might be authorized to institute proceedings for its cancellation.

In this way, the Commission might be made a most useful administrative body, which is the form it should really take. Where roads failed to agree as to their traffic arrangements, it should be competent for the Commission to act as an arbitrator, upon the voluntary submission of the dispute for its decision; and, judging from the experience of some of the State commissions, a great field of usefulness would lie before it in this direction. But of judicial powers it should have none. They can only be properly exercised by a purely judicial tribunal. Even as this article is under preparation comes the news of the sittings of the Interstate Commerce Commission for the purpose of probing into the facts connected with the so-called merger of the Northern Pacific, Great Northern, and Burlington roads. How can the Commission afterward, with any degree of propriety, act as a judge, if some shipper on the lines of these roads presents his petition praying for a reduction in rates? Might not the companies justly complain that their judge had too lately been their prosecutor? It is believed that a direct application to the courts, after an investigation by the Commission sufficient to assure itself that the petition of a shipper was probably meritorious, would be far more satisfactory and expeditious than the present tedious process of taking testimony and hearing arguments before the Commission, resulting in an order on the railroads, of no force and effect, after which the whole proceeding must be recommenced in the equity court.

Some measure of relief on the lines indicated is believed to be im

peratively demanded. Let us return to first principles and allow the railroads the same right of contract and the same liberty to arbitrate disputes as individuals have long enjoyed. Let us depend rather on publicity than on penalties. We are, or ought to be, able to bring more wisdom and experience to the study of the railroad problem than was possible a generation or even a decade ago. Some things formerly but little understood are gradually coming into the light. For example, the much-abused, seemingly harsh, and arbitrary rule of charging "what the traffic will bear" is much nearer reason and justice than was once supposed. Professor Taussig has shown that it is a truly scientific arrange

ment.'

On the other hand, the rule of "cost of service," once stoutly maintained, is now generally rejected.

But the problem is a large one. To a certain extent we must be content to stand by and let it work out itself; for it is so new, and has come upon us with such swiftness, that we scarcely know what legislation it demands. We Americans have always been tremendous resolvers and legislators, evincing at times a blind, almost sublime, faith in the power of preambles and enactments, so that we have often greatly overdone them. But in new fields of law a growth is usually better than a manufacture. Our modern law of evidence is almost entirely the result of the long-continued, slowly developed practice of the English courts, with only occasional interference and correction from the legislature. The same may be said of the law of commercial paper. The courts have, in great part, sought to follow the custom of merchants as that has advanced step by step. How much larger and more practical have been the results than if the work of preparing codes of evidence and commercial law had been turned over to Parliamentary commissions a century or two ago! Is it too much to ask that railroad law shall develop in the same way? WILLIAM A. ROBERTSON.

Am. Econ. Assn., 1891, p. 52.

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