c) Makes it unlawful after May 1, 1908, for any railroad company to transport for sale any commodities in which it may have a proprietary interest, except lumber and its products. d) Provides that a common carrier shall provide, when practicable, and upon reasonable terms, a switch connection for any applicant who shall furnish sufficient business to justify its operation. e) Makes more explicit the specification as to the filing of tariffs, especially providing for the posting and filing of through tariffs; fixing penalty for violation. f) Provides that "every person or corporation, whether carrier or shipper, who shall knowingly offer, grant, give or solicit, or accept, or receive rebates, concession, or discrimination, shall be deemed guilty of a misdemeanor, and on conviction thereof shall be punished by a fine of not less than one thousand or more than twenty thousand dollars." Moreover, any person, whether officer or director, agent or employe, convicted of such misdemeanor, "shall be liable to imprisonment in the penitentiary for a term not exceeding two years, or both fine and imprisonment in the discretion of the court." In addition, the acceptor of any rebate shall forfeit to the United States three times the amount of the rebate. g) Provides for the publication of the reports and the decisions of the Commission and their acceptance as evidence. h) Empowers the Commission, if upon complaint it finds that a rate, or any regulation or practice affecting a rate, is "Unjust or unreasonable, or unjustly discriminatory, or unduly preferential or prejudicial," to determine and prescribe a maximum rate to be charged thereafter and modify the regulation or practice pertaining thereto. i) Empowers the Commission to award damages against a carrier in favor of a complainant. j) Provides for forfeit to the United States, in case of neglect to obey an order of the Commission, in the sum of five thousand dollars for each offense, each violation and each day of its continuance to be deemed a separate offense. k) Empowers the Commission to apply to a circuit court for the enforcement of its order, other than for the payment of money; for the appeal by either party to the Supreme Court of the United States; and that no order of the Commission shall be suspended or restrained, except on hearing, after not less than five days' notice to the Commission. 1) Provides for the rehearing by the Commission, upon application, at its discretion. m) Authorizes the Commission to require annual reports from all common carriers, that shall contain specified information; to prescribe the form of any and all accounts, records and memoranda to be kept by carriers, making it unlawful for the carriers to keep any other accounts, records, or memoranda than those prescribed and approved by the Commission; provides that all accounts of the carriers shall be open to the inspection of the special agents, or examiners employed by the Commission. n) Provides that a common carrier issuing a through bill of lading shall be responsible for loss, damage or injury to the property covered thereby upon the lines of any company over which it may pass, leaving it to the line issuing the way-bill to gain recovery from another line upon which the loss, damage, or injury may have occurred. o) Enlarges the Interstate Commerce Commission from five to seven members, with terms of seven years, increasing the salary from seven thousand five hundred to ten thousand dollars per annum. 182. The Mann-Elkins Act13 The Interstate Commerce Bill, as it was reported out of conference on June 14, contains the following provisions: I. It creates a court of commerce for the enforcement of orders of the Interstate Commerce Commission.14 2. It provides that no railroad shall charge any greater compensation for a shorter than for a longer haul, except in case where such action is authorized after investigation by the Interstate Commerce Commission. 3. It provides that railroads shall be required to state in writing the rate or charge applicable to a described shipment. 4. The Interstate Commerce Commission upon complaint is authorized to determine and prescribe the just and reasonable individual or joint rate as the maximum to be charged and to specify the individual or joint classification, regulation, or practice which it deems to be fair, just, and reasonable. 5. The commission may suspend the operation of any new rate, classification, regulation, or practice for a period not exceeding 120 days, and extend the time of suspension for a further period of six months, after which time the new rate, classification, regulation or practice will become effective unless the commission orders to the contrary. 18 Adapted from articles in the Railway and Engineering Review, L (1910), 546-47, 587. 14This court was practically abolished in 1912 by the failure of Congress to make financial provision for its support. 6. The commission may establish through routes and joint classifications and joint rates as to the maximum to be charged whenever the carriers themselves refuse to do so. 7. The right is given to the shipper to designate one of several through routes by which his property shall be transported to its destination. 8. Every failure to obey an order of the commission shall be punished by a fine of $5,000. 9. Copies of classification, tariffs, etc., furnished to the commission shall be public records. 10. Authority is granted for the appointment of a commission to report upon the advisability of the physical valuation of roads and the control of railroad capitalization. 183. The Adamson Act15 Two systems controlled in March, 1916, wages of railroad employees; one, an eight-hour standard of work and wages with additional pay for overtime, governing on about 15 per cent of the railroads; the other, a stated mileage task of one hundred miles to be performed during ten hours with extra pay for any excess, in force on about 85 per cent of the roads. The organizations representing the employees of the railroads in that month made a formal demand on the employers that as to all engaged in the movement of trains except passenger trains the 100-mile task be fixed for eight hours, provided that it was not so done as to lower wages and provided that an extra allowance for overtime calculated by the minute as one and one-half times the rate of the regular hour's service be established. The demand made this standard obligatory on the railroads but optional on the employees, as it left the right of the employees to retain their existing system on any particular road if they elected to do so. The principal terms of the demand were as follows: "I. In all road service 100 miles or less, eight hours or less will constitute a day, except in passenger service. Miles in excess of 100 will be paid for at the same rate per mile. "2. On runs of 100 miles or less overtime will begin at the expiration of eight hours. "3. On runs of over 100 miles overtime will begin when the time on duty exceeds the miles run divided by 121⁄2 miles per hour. "4. All overtime to be computed on the minute basis and paid for at one and one-half times the pro rata rate. 15 Adapted from the opinion of the court in the case of Wilson v. New, 243 U. S. 340-342. On March 19, 1917, the court found the Adamson Act valid. "5. No one shall receive less for eight hours or 100 miles than they now receive for a minimum day or 100 miles for the class of engines used or for the service performed. "6. Time will be computed continuously from time required for duty until release from duty and responsibility at end of day or run." 16 The employers refused the demand and the employees through their organizations by concert of action took the steps to call a general strike of all railroad employees throughout the whole country. The President of the United States invited a conference between the parties. He proposed arbitration. The employers agreed to it and the employees rejected it. The President then suggested the eight-hour standard of work and wages. The employers rejected this and the employees accepted it. Before the disagreement was resolved the representatives of the employees abruptly called a general strike throughout the whole country fixed for an early date. The President, stating his efforts to relieve the situation and pointing out that no resources at law were at his disposal for compulsory arbitration, to save the commercial disaster, the property injury, and the personal suffering of all, not to say starvation, which would be brought to many among the vast body of the people if the strike were not prevented, asked Congress, first, that the eight-hour standard of work and wages be fixed by law, and, second, that an official body be created to observe during a reasonable time the operation of the legislation and that an explicit assurance be given that if the result of such observation established such an increased cost to the employers as justified an increased rate, the power would be given to the Interstate Commerce Commission to authorize it. Congress responded by enacting the statute whose validity we are called upon to consider. D. VALUATION OF THE RAILROADS 184. Necessity for Valuation of Railway Property17 The Commission desires to reaffirm its opinion that it would be wise for Congress to make provision for a physical valuation of railway property. The increased responsibilities imposed upon the Commission make continually clearer the importance of an authoritative valuation of railway property, made in a uniform manner for all carriers in all parts of the country. 16 The language is that of the railroad brotherhoods, not of the Supreme Court of the United States. 17 Adapted from the Twenty-second Annual Report of the Interstate Commerce Commission (1908), pp. 83-85. In the first place, the Commission has been called upon to pass judgment upon certain rate cases, in which the reasonableness of a general level of rates was brought into question, and for such cases one of the most important considerations is the amount of profit secured to the investment. The actual investment in an enterprise needed for giving the public adequate transportation facilities is entitled to a reasonable return, and no more than a reasonable return, in the form of a constant profit; and a reasonable schedule of rates is one that will produce such a return. There is a growing tendency on the part of carriers to meet attacks upon their rates by making proof, through their own experts, of the cost of reproducing their physical properties. It is obviously impossible for shippers who are complainants in such cases to meet and rebut such testimony, or even intelligently cross-examine the railroad witness by whom such proof is made. In addition to the large expense of retaining experts competent to make such investigations, the shippers have no access to the property of the carriers or to their records showing the cost of construction and other necessary information. The carriers, on the other hand, having access to the records and property, can use the information compiled from them or not, in any given case, as their interests may require. A second consideration is the importance which the question of capitalization has assumed in recent years. No one at the present time can say whether railways are undercapitalized or overcapitalized. A valuation adequate to this problem should not stop with the simple statement of an amount; on the contrary, it should analyze the amount ascertained according to the sources from which the value accrues and show the economic character as well as the industrial significance of the several forms of value. A third argument is found in the present unsatisfactory condition of railway balance sheets. The balance sheet is, perhaps, the most important of the statements that may be drawn from the accounts of corporations; for, if correctly drawn, it contains not only a classified statement of corporate assets and corporate liabilities, but it provides in the balance, that is to say, the "profit and loss," a quick and trustworthy measure of the success that has attended the operation and management of the property. Every balance sheet begins with "cost of property," against which is set a figure which purports to stand for the investment. At present no court, commission, accountant, or financial writer would for a moment consider the present balance sheet statement, purporting to give the "cost of property," even in a remote degree, as a reliable measure either of the money invested or of present value. Thus, at the first touch of critical |