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Hon. MARTIN A. KNAPP, of New York, Chairman. Hon. JUDSON C. CLEMENTS, of Georgia.

Hon. JAMES D. YEOMANS, of Iowa.
Hon. CHARLES A. PROUTY, of Vermont.
Hon. JOSEPH W. FIFER, of Illinois.

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WASHINGTON, D. C., December 15, 1902.

To the Senate and House of Representatives:

The Interstate Commerce Commission submits its sixteenth annual report for the consideration of the Congress.

The preliminary income account for the year ending June 30, 1902, further reference to which is hereafter made, compiles returns from railway companies operating 195,385 miles of line, or approximately 98 per cent of the entire mileage of the United States. From these returns it appears that the gross earnings of such companies for the period named amounted to $1,711,754,200, or an average of $8,761 per mile of line; their operating expenses aggregated $1,106,137,405, or an average of $5,661 per mile, leaving net earnings of $605,616,795, or $3,100 per mile. The item of taxes, amounting probably to $54,000,000, is not included in this statement of operating expenses. Compared with the previous year, the net earnings are greater by some $51,000,000 and the amount paid in dividends on stock greater by nearly $30,000,000. It is interesting to contrast this showing with the statistics for 1897, when the gross earnings averaged $6,122 and the operating expenses $4,106 per mile of line. As the rates, broadly speaking, were about the same in both years, it follows that the large increase in earnings resulted mainly from the increased volume of traffic. These figures furnish an indication of the great prosperity enjoyed by the railroads.

The tendency to combine continues to be the most significant feature of railway development. The facts in this regard are matters of common knowledge and little is gained by the mention of particular instances. It is not open to question that the competition between railroad carriers which formerly prevailed has been largely suppressed, or at least brought to the condition of effective restraint. The progress of consolidation, in one form or another, will at no distant day confine this competition within narrow and unimportant limits, because

the control of most railway properties will be merged in a few individuals whose common interests impel them to act in concert. While this will insure, as probably nothing else can in equal degree, the observance of published tariffs, and so measurably remove some of the evils which the act was designed to prevent, the resulting situation. involves consequences to the public which claim the most serious attention. A law which might have answered the purpose when competition was relied upon to secure reasonable rates is demonstrably inadequate when that competition is displaced by the most far-reaching and powerful combinations. So great a change in conditions calls for corresponding change in the regulating statute.


It is now nearly sixteen years since the passage of the act to regulate commerce, and more than thirteen years since it has been amended in any material respect. At the time of its adoption it was understood to be more or less tentative and experimental, and changes were anticipated as experience in its operation might show to be needful. The growth of railway systems in the last decade has been remarkable. The form and direction of this growth present questions of regulation which were not taken into account when the existing law was framed, and it is not surprising that its provisions have proved unequal, in some respects unsuited, to existing conditions. Obviously, the main purpose of the law was to prevent unreasonable charges and undue discriminations. The prevalence of these evils and their resulting injustice led to its enactment. The offenses which excited public indignation were prohibited and standards of conduct were prescribed which are founded on natural justice. In the principles declared there is no unsoundness or want of adequate statement. The defect is not in the rules formulated, but in the machinery provided for the enforcement of those rules. All the details of regulation incorporated in the act, its requirements as to publishing and filing tariffs and making annual reports, its methods for presenting complaints and conducting their investigation, its criminal remedies, the authority of the Commission to make orders founded on ascertained wrongdoing, and various other administrative features, were designed solely to give effect to its substantive provisions and thereby secure to the public reasonable charges and impartial treatment.

If the actual operation of this law and the efforts of the Commission to make it effective had disclosed only minor and incidental defects, if its leading purposes had been fairly attained and its expected usefulness realized, the Commission might be excused from repeating its recommendations for amendment. This is not saying that the law is of little value or has failed to bring about important reforms. On the contrary, it has furnished a considerable restraint upon the carriers

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