WEDNESDAY, April 9, 1902. The committee met at 10.30 o'clock a. m., Hon. William P. Hepburn in the chair.

STATEMENT OF MR. E. P. BACON-Continued.

The CHAIRMAN. The committee will be glad to have you proceed, Mr. Bacon.

Mr. BACON. Mr. Chairman, I wish to state before proceeding that the convention which I have the honor to represent consisted of delegates from various commercial organizations from different parts of the country-41 in number-business men representing various branches of business; and I will state, also, as to my personal position, that I am simply a business man and was a delegate at that convention, representing the Milwaukee Chamber of Commerce.

I endeavored yesterday to answer a few questions of a legal nature, which I did from the information which I have obtained from a somewhat careful observation of the workings of the interstate-commerce act since its enactment and some of the important cases that have been adjudicated under that act.

I will say that the constitutional questions which have been brought up were treated at some length before the Senate committee two years ago, when the Cullom bill was before that committee, by Judge Cowan, from Texas, and his discussion of the matter will be found in the report of the hearings before that committee, which I will file for the information of this committee.

The question that was asked, and not fully answered at the time of my closing yesterday, was in relation to a legislative act being effective in relation to rates prior to its confirmation by the courts. I personally answered the question, but wish further to say in connection with it that, as I understand, the State laws in relation to transportation and the fixing of rates are immediately effective, as I believe all legislative acts are; the carriers, however, having the privilege, having the right, of suspending the operation of the law by obtaining a writ of injunction and proceeding in the courts to test its constitutionality. That, I think, is very similar to the position in the matter of the fixing of rates by the Interstate Commerce Commission, as proposed in the bill which has been introduced through the instrumentality of the committee which I represent, called the Corliss bill, in the House.

Although in terms the rulings of the Commission are made effective, as I stated yesterday, except as being suspended for thirty days in case of review by the circuit court, yet the carriers would have the same privilege under that provision of instituting legal proceedings in their behalf and suspending the operation of the ruling of the Commission by means of an injunction in the same manner in which the carriers in the individual States under the laws relating to the State commissions proceed.

I wish to call the attention of the committee to the report of the Industrial Commission on transportation, which was presented in the month of February, I believe, a Commission which, as you all know, was organized by Congress, consisting of four members of the two Houses of Congress and ten citizens who were appointed by the President to complete the Commission, making a Commission of eighteen in

number. That Commission has been between three and four years engaged in a thorough investigation

The CHAIRMAN. The committee are familiar with that.

Mr. BACON. Yes, sir. And the report which it made was signed by 16 of the 18 members of the Commission; and I would like, from the fact that its recommendations made to the committee coincide to a large extent with the provisions of the bill which is under consideration, to read the recommendations made by the Commission in relation thereto. It states in its report on transportation:

To the end that discrimination and inequality as between shippers, and maladjustment of freight rates between competing markets and trade centers may be abolished or minimized; that the public may be assured of reasonable and stable freight rates, which will at the same time afford fair returns upon capital invested, etc., we recommend:

1. That the policy of governmental supervision and control of railroads as originally laid down in the Senate committee report of 1886, and embodied the following year in the interstate-commerce act, be revived and strengthened; that the authority of the Interstate Commerce Commission necessary for the adequate protection of shippers, and clearly intended by the framers of the law, be restored, etc. Specifically, such legislation should provide

That strict adherence to published tariffs be required and rebates or discriminations prevented by an increase of the penalties therefor. These penalties should be not only against the person who gives but also against the one who accepts discrimination in any form whatsoever. Corporations should be made liable, the same as individuals. Provisions for imprisonment in the present law should be repealed.

For the definite grant of power to the Interstate Commerce Commission, never on its own initiative, but only on formal complaint, to pass upon the reasonableness of freight and passenger rates or charges; also the definite grant of power to declare given rates unreasonable, as at present, together with power to prescribe reasonable rates in substitution.

Appeal from an administrative order of the Commission should not vacate or suspend an order unless it plainly appears that such order proceeds upon some error of law or is unjust or unreasonable on the facts, in which case, and not otherwise, the court may suspend its operation during the pendency of proceedings in review. All findings of fact by the Commission, when properly certified, should be received as prima facie evidence in subsequent proceedings in the case. New testimony offered by either party, when it appears that such testimony is material and could not have been taken in the first instance, should be taken by the Interstate Commerce Commission on order from the court. The time in which an appeal to the Supreme Court of the United States may be taken should be limited to thirty days, but such appeal should not vacate or suspend the order appealed from.

Those provisions are precisely as contained in our bill.

In connection with the subject that was brought up yesterday, in regard to giving the Commission power to prescribe a rate to be substituted for one which is found to be unreasonable or unjust, I would like to cite further from the report of the Industrial Commission, under the head of "Effect of maximum freight rate decision," the Supreme Court decision in which the power to prescribe rates was denied to the Commission, although it had been exercised during ten years prior thereto. The Industrial Commission says:

The immediate effect of this decision was to prevent any enforcement of orders relative to rates by the Commission. The carriers immediately refused to obey any orders which the Commission issued for the redress of grievances. This policy has been manifested with increasing clearness during the five years subsequent to the decision. It has become more and more certain that the denial of the right, not only to pass upon the reasonableness of a particular rate, but to prescribe what rate should supersede it, means the abolition of all control whatever. The entire inadequacy of making rate regulations dependent upon the mere determination of rates as applied in the past without reference to rates which shall prevail in the future is apparent on all sides. More than this, ali remedy for the parties who have borne the burden of an unreasonable rate would seem to have been removed.

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Experience shows that almost no shippers or other parties injured actually attempt to secure the restitution of moneys already paid for unreasonable charges. In only 5 out of 225 cases down to 1897 was a rebate actually sought, and in these cases $100 was the maximum sought to be recovered. As a matter of fact, the damage inflicted by the existence of an unreasonable rate could not be measured by hundreds or perhaps by hundreds of thousands of dollars. The bearing of this citation is to show that any effectual protection to the shipper must proceed from adjudication of the reasonableness of rates before and not after they have been paid; that is to say, in advance of their exaction by the carrier. Power to pass upon the reasonableness of such ates prior to their enforcement as a consequence constitutes practically the only safeguard which the shipping public may enjoy.

In that connection I wish to introduce an interview, published in the Railway World of March 22 last, with Judge James A. Logan, general solicitor of the Pennsylvania Railroad, in discussing this question. I will read these extracts from it:

Fortunately, as the law came to be framed

Referring to the interstate-commerce law

it was recognized to be experimental and was conservatively expressed, its method of enforcement being left to depend upon the constraint of penalties named for its violation. The result was that, like all efforts to enforce business propositions by penal consequences, as an aggressive agency it was not a great success. Conservative action, however, on the part of the Interstate Commerce Commission, controlled by the guiding and restraining hand of the courts, coupled with the disposition of the railroad managers who recognized that having large gifts from the people, in the possession of their franchises to construct and operate railroads and in the possession of the power of eminent domain, and having much occasion to rely upon Government support in operation, and above and overruling all, the American instinct of recognizing the importance of the observance of existing laws, the whole tendency was that of gradual conformity to the law and a recognition of the right of reasonable governmental supervision. The result has been that latterly, whatever may have been the facts as to previous periods, the act to regulate commerce has been fairly well observed by the larger railroad interests; and being well observed, the crudities of the law as existing have been discovered and the necessity of a more direct means of enforcement of the powers of the Government recognized.

That an unjustly discriminative or unreasonable rate is wrong goes without saying. That when a given rate has been found to be unjust and unreasonable, after å full hearing of the parties by a disinterested administrative tribunal appointed by the Government, and another rate suggested as fair and just by the same tribunal, it must be manifest that the old rate ought to go out and the new rate come in, subject, of course, to review by the courts.

Further, he says, after having made a particular statement:

It may generally be stated otherwise as a provision authorizing the Interstate Commerce Commission to put in force a rate found by them to be just, subject only to the supervision of the courts; whereas now the Commission has no power at all to make an order as to a rate for the future, and its orders, even as to the past, can not go into force until after full hearing in the courts on new testimony; and the observation has been that such hearings are capable of indefinite prolongation.

For my part, I have faith in the integrity of governmental agencies, especially those of the dignity of the Interstate Commerce Commission. I believe not only the shipper but the carrier needs governmental help. In short, it seems to me the time has come when the Government should reassume the right of a moderate control and supervision over the carriers occupying the Government's highways and that this, in its operation, should reach forward as well as backward-the carrier to have a reasonable return for his investment in the agencies of carriers, and the shipper the assurance of a prompt service and a reasonable rate, and the public to be protected by stability and uniformity in all charges.

One further extract:

Another marked feature of the proposed legislation is that it makes the shipper who is a party with the railroad in violation of the law-that is to say, the shipper who accepts rebates and preferences subject to the same penalties for this violation of the law as are imposed upon the carrier for such violation. Moreover, it allows the power of the court to be invoked against both shipper and carrier against the

allowance of continuance of preferences on the complaint of the Commission, its decrees in this respect to be enforced by prompt injunction processes. If this act is passed railroads can no longer be, as they are sometimes said to have been in the past, subject to the dictation of the great shippers both as to rates and facilities. Mr. RICHARDSON. If it does not interrupt your argument

Mr. BACON. No, sir; it does not.

Mr. RICHARDSON. I would like to hear you define just what authority and what power the Interstate Commerce Commission has now. I catch the drift of what you think it ought to have in addition, but what can it do now?

Mr. BACON. It has now the power of investigation and recommendation. Its orders have no effect until enforced by the court upon the application of the Commission. That is, if the order is not voluntarily obeyed by the railroad company the Commission is required to go before the circuit court and have the case reviewed and obtain from the circuit court, if the court finds it proper, an order for the enforcement of the ruling of the Commission.

Mr. RICHARDSON. Now, your policy is, instead of going before that circuit court, it is to give the Commission the power to enforce its own order and allow the railroad, in the meantime, to take an appeal?

Mr. BACON. That is it exactly; making the orders of the Commission immediately effective, subject to appeal by the carriers, placing the carriers in the position of complainants in that case, instead of defendants, as is now the case.

Mr. RICHARDSON. You would make the Interstate Commerce Commission take the place of the court?

Mr. BACON. That is it.

Mr. RICHARDSON. And give it judicial powers?

Mr. BACON. The Commission would occupy the position of defendant in the case, whereas now it is the complainant. The Commission now comes before the court as complainant to secure an order for the enforcement of its rulings.

Mr. MANN. That is not the real gist of what you are after. The Interstate Commerce Commission now has only authority as to rates to declare what is an unreasonable rate; it has not authority to declare what a reasonable rate is. You want to confer upon them the power to declare what a reasonable rate is and to enforce it.

Mr. BACON. The decision of the Supreme Court has placed the Commission in that position.

Mr. MANN. That is the law as it stands.

Mr. BACON. Yes; but, as I said a few moments ago, the Commission proceeded on the presumption that after finding a rate to be unreasonable it had a right to prescribe a reasonable rate for application in the future, which it did without question for ten years, and the object of this proposed amendment is to confer that power on the Commission, which it was supposed to possess, but which has been denied, and to enable it to resume its operations in the same manner it proceeded in the preceding ten years referred to.

The CHAIRMAN. During that period of ten years that you have spoken of was the administration of the interstate commerce law more effective, in your judgment?

Mr. BACON. It was far more effective.

The CHAIRMAN. Was it satisfactory at that time?

Mr. BACON. It was highly satisfactory, and I will say that as a close observer of transportation operations for the past thirty-five years or

more, and a pretty intimate knowledge of the workings of transportation affairs in connection with important business, that during that ten years the condition of transportation throughout the country was better than it ever was previously or than it has ever since been since this power was denied by the Supreme Court; and our desire is to restore that condition which existed during those ten years.

Mr. MANN. Do you know how many cases there were during those ten years where the Interstate Commerce Commission declared and enforced a reasonable rate?

Mr. BACON. I could not say the precise number; I know that there was a large number of such cases. Among its first cases-in fact, within three months after its organization-a case of that kind was determined and was complied with on the part of the railroad, as, in fact, all of their rulings were during that period that I have referred to.

Mr. MANN. I may be mistaken, but my recollection is that Judge Cooley, who was one of the first Commissioners, decided, in an opinion he rendered, that the Commission had no such power within the first year after it was inaugurated.

Mr. RICHARDSON. Had no power to declare what a reasonable rate was?

Mr. MANN. Yes; that is as I understand it.

Mr. BACON. The decision was, as I understand it, as rendered by Judge Cooley, that the Commission had no right to fix a rate primarily, but it did exercise the power, and exerted it continuously, to prescribe a rate to be substituted for one that was found to be unjust or unreasonable.

Mr. RICHARDSON. That is, you mean to revise a rate?

Mr. BACON. Yes.

Mr. RICHARDSON. Or change it?

Mr. BACON. Order a change, and such orders were complied with universally.

Mr. RICHARDSON. You say that existed during the period of ten years and that there was no trouble about it?

Mr. BACON. During the latter part of the ten years the question began to be raised whether this authority was specifically conferred by the interstate-commerce act upon the Interstate Commerce Commission.

Mr. RICHARDSON. To revise a rate?

Mr. BACON. To revise a rate, and under that questioning the Supreme Court sustained the position taken by the railroad interests. Mr. RICHARDSON. That the Commission could not do it?

Mr. BACON. That they could not do it.

Mr. RICHARDSON. And you want, by this law, to be reinstatedMr. BACON. Yes, sir.

Mr. RICHARDSON. Put back in that condition which you say proved entirely satisfactory, and under which things went along all right? Mr. BACON. Yes; it gave general satisfaction throughout the country.

Mr. MANN. Whatever may be the contention on the two sides, by the actual jurisdiction exercised during that ten years, you say that the enforcement of the law during those ten years was satisfactory to the shippers?

Mr. BACON. It was entirely satisfactory to the country at large. Mr. MANN. And that any authority which they did exercise would be sufficient to be conferred upon them?