Attention can only be directed to a few fundamental and general questions affecting classification of freight, which were considered and explained in our report in that proceeding.

It was recommended that a compilation of classification units be made expressing the relation to one another of weight, space, and value, as far as practicable, for every item in the classification.

The view was expressed that in revisions of this sort classification as such should be treated entirely separate from the question of the amount of rates or revenues of carriers; the sufficiency or insufficiency of certain revenues and the level of particular rates or schedules being regarded separate questions.

Two of the most important questions involved were those of minimum weights and mixture of articles in car loading. With regard to the former it was stated that carriers should take into consideration both the physical minimum car capacity and the reasonable commercial minimum in deciding upon a classification minimum to govern carload shipments. Respecting carload mixtures it was stated that liberal provision should be made and that artificial restrictions upon mixtures are a restraint upon the freedom of trade and commerce with a tendency to militate against the small dealer. It was stated that mixtures result in a better utilization of car space, lessen the demands upon terminal properties, decrease the expense of operation, and facilitate the movement of traffic.

The Commission's opinion held that, generally speaking, in the territory involved, carload ratings should be established whenever carload quantities are offered for shipment and the public interest requires it.

The testimony in this proceeding revealed considerable diversity in the spread between carload and less-than-carload ratings, and it was held that an excessive difference between carload and less-than-carload rates on the same commodities results in an undue preference to the carload shipper; that the relations between carload and less-thancarload ratings should be established in accordance with some consistent principle throughout the classification and the rate schedules which may be constructed upon it, and that in establishing a proper relation consideration should be given to the relative cost of handling, the demands upon terminal properties and the utilization of equipment.

It was held that from a classification standpoint, the security of a package may with propriety be considered in fixing the rating. A package which is less desirable from a transportation standpoint may be given a higher rating than one which is more desirable. The approval of this rule, however, does not sanction disproportionate and arbitrary increases in the rating of an article when offered in a less desirable package. It was stated that there should be the same rela

tion between the increased rating as between the increase in the risk, difficulty of handling, and other proper considerations.

Other matters referred to in the report were as follows: Classification movement since 1887; necessity for greater uniformity in classification; elements of classification; a graduated scale of minimum weights; rules protecting the minimum on the size of car ordered; declared and invoice values; "follow-lot shipments"; misbilling, due to error of initial carrier; misdescriptions; refusal of carrier to accept perishable freight; compensation for additional service in storing and handling carload shipments; extra charge for bulky articles; unloading of large, heavy, bulky less-than-carload shipments at small country stations where carriers have not sufficient help or facilities for handling; "shipper's load and count "; dunnage allowance; transportation of caretaker of perishable freight; advancement of storage and transfer charges; use as evidence of value and its relation to classification; restriction of the mixture of machinery and machines to articles "necessary for initial equipment"; estimated weights in accordance with standard weights per unit, etc.

Besides the consideration of the general question above referred to, the large number of changes which were proposed in individual items and classification rules were given careful consideration. In many instances the changes proposed by carriers were modified or disallowed. The new classification as modified by the Commission became effective February 14, 1913.

Finally, the Commission expressed the view that classification was essentially a public function, and that meetings of the classification committees should, in the future, be open to the public. During the pendency of this proceeding the respective committees invited representation on behalf of the Government, in response to which the Commission has designated a permanent delegate through whom it can keep fully advised regarding the progress of classification work.

TRANSCONTINENTAL COMMODITY RATES WESTBOUND.

Another prominent proceeding of inquiry based upon an order suspending the operation of tariffs pending investigation was that instituting an investigation into the propriety of a proposed realignment by the transcontinental carriers of their entire fabric of commodity rates to Pacific coast terminals, including San Francisco, Los Angeles, Portland, and Seattle, on traffic originating in the territory extending east from Colorado common points to the Atlantic seaboard. The action of the carriers with respect to these rates followed that of the Commission in the Reno and Spokane cases, which involved the reasonableness of rates to those points from the East, mainly under the fourth section of the act, and was largely influenced

also by the amendment to that section of the act in 1910. By these tariffs the carriers proposed to increase to the basis of the rates to Reno, Spokane, and other interior points, or to an amount in excess of that basis, all of their transcontinental commodity rates which were not actually influenced by the rail-and-water routes via Panama from the East, or which were not potentially influenced by the fact that the particular article of freight could, as a practical matter, move via that competitive route. Changes were proposed with respect to approximately 400 items in the tariffs which were suspended, certain of the changes, however, being reductions. During the course of the hear ings it was suggested that much could perhaps be accomplished in the expeditious handling of the matters in controversy and that it would tend as well to bring shipper and carrier closer together in their dealings with each other if they should meet in informal discussion as to the necessities of each article of traffic the rate on which it was proposed to change, these conferences to be held first between the carriers and shippers themselves and later with the Commission. The shippers accordingly met the representatives of the carriers in several such conferences, with the result that their principal differences were settled in a manner mutually satisfactory to them on all but a very few of the items in controversy, subject to approval by the Commission. The question as to the reasonable maximum rate on these latter commodities was left to the Commission for final decision, the carriers agreeing to publish whatever rates the Commission should deem proper, without the necessity for entering a formal order. Upon notice by the Commission of its conclusions with respect to these rates and of its approval of the agreement reached by the parties themselves on the other commodities the carriers promptly published the revised schedules.

PROPOSED RATE INCREASES IN OFFICIAL CLASSIFICATION TERRITORY.

The carriers operating in what is known as Official Classification territory have recently filed tariffs containing proposed general increases of existing rates on classes and commodities, varying somewhat in amount as to the different articles, but said to approximate about 5 per cent. Numerous protests were filed against these proposed increases, which, according to the tariffs, were to become effective November 12 and at later dates. The Commission, by order duly entered November 4, suspended the operation of these tariffs for 120 days, the maximum period prescribed by the statute for suspension in the first instance, and an inquiry has been entered upon as to the propriety of the proposed increased rates.

CASES DECIDED BY THE SUPREME COURT.

Since our last annual report to the Congress five cases involving the validity of orders of the Commission have been decided by the Supreme Court of the United States. All of these cases are of general public interest and will be briefly referred to.

NEW ORLEANS BOARD OF TRADE CASE.

Interstate Commerce Commission v. Louisville & Nashville Railroad Co. (227 U. S., 88).

This case involved an order of the Commission establishing class rates from New Orleans to a few points in the southeast. On August 13, 1907, the Louisville & Nashville Railroad Co. advanced certain class rates for the transportation of freight articles from New Orleans to Mobile and Pensacola, and thereby correspondingly advanced combination through rates from New Orleans via Mobile and Pensacola to Montgomery, Selma, and Prattville, Ala., whereupon the New Orleans Board of Trade challenged the reasonableness of the advanced rates in three separate complaints filed in the Commission's office. The rates thus advanced had previously been continuously in effect, practically without change, for a period of about 20 years.

After a full and extensive hearing in the premises the Commission found the rates complained of to be unreasonable and ordered reductions corresponding with the advances which had been made.

For the purpose of having the order set aside the Louisville & Nashville instituted a suit in the Circuit Court for the Western District of Kentucky and requested the court to issue a preliminary injunction, which, after hearing, was denied. Thereafter the case was transferred to the Commerce Court, where final hearing was had upon a certified copy of the proceedings before the Commission and new evidence which had been introduced before an examiner appointed by the circuit court. The Commerce Court, Judge Mack dissenting, held that the order was invalid because not supported by substantial evidence, and entered a decree permanently enjoining its enforcement, from which an appeal was taken to the Supreme Court. Upon the argument in the latter court counsel for the United States insisted that the Commission's opinion concerning the reasonableness of the rates was conclusive, even though wholly unsupported by evidence contained in the record made by the parties in the proceedings before the Commission, and in reply to this contention the court, speaking through Mr. Justice Lamar, said:

But the statute gave the right to a full hearing, and that conferred the privilege of introducing testimony, and at the same time imposed the duty of deciding in accordance with the facts proved. A finding without evidence is arbitrary and baseless. And if the Government's contention is correct, it would

mean that the Commission had a power possessed by no other officer, administrative body, or tribunal under our Government. It would mean that where rights depended upon facts, the Commission could disregard all rules of evidence, and capriciously make findings by administrative fiat. Such authority, however beneficently exercised in one case, could be injuriously exerted in another; is inconsistent with rational justice, and comes under the Constitution's condemnation of all arbitrary exercise of power.

In the comparatively few cases in which such questions have arisen it has been distinctly recognized that administrative orders, quasi judicial in character, are void if a hearing was denied; if that granted was inadequate or manifestly unfair; if the finding was contrary to the "indisputable character of the evidence" * * * or, if the facts found do not, as a matter of law, support the order made.

The Government's claim

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is contrary to the terms of the act to

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for methods The statute,

regulate commerce, which, in its present form, provides of procedure before the Commission that "conduce to justice." instead of making its orders conclusive against a direct attack, expressly declares that they may be suspended or set aside by a court of competent jurisdiction." * Of course, that can only be done in cases presenting a justiciable question. But whether the order deprives the carrier of a constitutional or statutory right; whether the hearing was adequate and fair, or whether, for any reason, the order is contrary to law-are all matters within the scope of judicial power.

Under the statute the carrier retains the primary right to make rates, but if, after hearing, they are shown to be unreasonable, the Commission may set them aside and require the substitution of just for unjust charges. The Commission's right to act depends upon the existence of this fact, and if there was no evidence to show that the rates were unreasonable, there was no jurisdiction to make the order. * * In a case like the present the courts will not review the Commission's conclusions of fact * * by passing upon the credibility of witnesses, or conflicts in the testimony. But the legal effect of evidence is a question of law. A finding without evidence is beyond the power of the Commission. An order based thereon is contrary to law and must, in the language of the statute, "be set aside by a court of competent jurisdiction." (Id., 91–92.)

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A further contention of counsel for the United States was stated and answered by the court, as follows:

The Government further insists that the commerce act (36 Stat., 743) requires the Commission to obtain information necessary to enable it to perform the duties and carry out the objects for which it was created, and having been given legislative power to make rates, it can act, as could Congress, on such information, and therefore its findings must be presumed to have been supported by such information, even though not formally proved at the hearing. But such a construction would nullify the right to a hearing, for manifestly there is no hearing when the party does not know what evidence is offered or considered and is not given an opportunity to test, explain, or refute. The information gathered under the provisions of section 12 may be used as basis for instituting prosecutions for violations of the law and for many other purposes, but is not available as such in cases where the party is entitled to a hearing. The Commission is an administrative body and, even where it acts in a quasi judicial capacity, is not limited by the strict rules, as to the admissibility of evidence, which prevail in suits between private parties. * But the more liberal the practice in admitting testimony the more imperative the obligation to preserve the essential rules of evidence by which rights are asserted or de fended. In such cases the Commissioners can not act upon their own infor

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