HARVARD

LAW REVIEW.

VOL. XIX.

MAY, 1906.

No. 7.

R

RAILWAY RATE REGULATION.

AILWAY rate regulation is now the subject of a brilliant debate in the Senate, a debate largely confined to legal questions, chief of which is whether or not Congress can give a commission the power to make railroad rates without giving interested parties a day in court to determine whether such rates are legal and binding. Senators Spooner, Knox, Bailey, and Foraker have spoken with learning, clearness, and power. They all agree that the Hepburn Bill must be amended to give the courts an opportunity to review the rates made by the commission, or there is great danger that any legislation may be declared unconstitutional, on the ground that it provides for taking from an owner the income of his property by the mere fiat of a commission, without giving him any day in court, any "due process" of law, within the Constitution.

President Hadley, in his able discussion of the subject in the Boston Evening Transcript of April, 1905, touched upon the necessity of being conservative and remembering the rule "more haste, less speed" in legislation of this character. His conclusion

was:

"But while Congress could undoubtedly increase the powers of the Interstate Commerce Commission if it wanted to, and that without any serious financial damage to the railroads, it is improbable that such action would result in much good to the public."

More recently, President Hadley is reported to have taken substantially the same position, but to think that the public demand is such that some legislation must be enacted.

What are the points to be kept in mind in considering this subject?

1. Even the Interstate Commerce Commission concedes that our railroad rates are not too high; that this issue is "obsolete." From 1887 to the present time but few cases have been brought before the Commission on this subject, and in but a single instance has one of them been carried to the Supreme Court of the United States. Either the railroads have complied with the suggestions or decisions of the Commission, or the lower federal courts have compelled them so to do, or have overruled the Commission for its mistakes. It follows that neither producers nor consumers have any grievance here, because the rates in this country are so much lower than those in any other as to show that the utmost possible commercial freedom is advisable in dealing with railroads.

2. Our rate legislation grew out of unjust discriminations. The publicity given to railroad rates, contracts, and arrangements by the Interstate Commerce Act and the Elkins Law, making the shipper as well as the carrier guilty for violations of the Interstate Commerce Act, have largely ended such discriminations. Neither publicity nor an act like the Elkins Law can instantly end such abuses; but the experience of England shows that patience and a reasonable enforcement of our statutes will end unjust discriminations and preferences by rebates, or otherwise.

3. The Interstate Commerce Act should be amended so as to extend its provisions to all common carriers engaged in interstate commerce, and to all rates affecting interstate commerce, that thereby carriers and artifices that now escape the law may be made subject to its regulations. It should not be possible for manufacturing corporations to organize their switches into an independent railroad, get an unjust division of the rate with some railroad company, and then snap their fingers at rate regulation aimed to prevent unjust discrimination, thereby obtaining an undue preference or advantage over competitors. Nor should it be possible for independent car lines, or other common carriers, to make excessive charges for icing fruits or meats, or rendering other services to producers, and then to escape complaints because they claim they are not within the provisions of the law. All common carriers, or quasi common carriers, and all rates affecting interstate commerce, from the time it starts until it stops, should come within the provisions of the law.

4. The Commission having the power to require that the rates

shall be reasonable, and shall not unjustly discriminate or prefer one over another, and the Supreme Court so construing the law as to prevent the common carrier from getting any advantage to itself out of being a dealer in commodities, it follows that the law as it stands to-day, if enforced, will necessarily end in divorcing the carrier from all other business, so that further provisions upon this subject are unnecessary.

5. The Commission is a grand jury or district attorney to investigate, an executive to enforce the law, and is clothed with judicial functions in hearing and determining cases that come before it upon complaints. Because of these warring and opposing functions, which all writers have agreed for more than a century should not be united in the same body, the Commission should not be given the power to fix any rate without giving the courts the power to review the Commission's action. In the courts we object to trying a case before a petit jury composed of grand jurors who found the indictment, or before a judge who was the district attorney who procured the indictment, and in like manner interested parties should not be compelled to submit to a final decision by any body of men discharging different and opposing functions, as does the Interstate Commerce Commission. The natural zeal of honest men to find that their charges are well founded explains the numerous rulings of the Commission which have been overthrown by the courts because they have been unfounded in fact or law. If so able a Commission, after long experience, is so frequently overruled as ours has been, it must be apparent, unless the courts themselves are at fault in their decisions, that they should have the power to review the action of the Commission.

6. A review of the decisions of the courts shows that they have not been at fault in overruling the Commission. Of the cases coming before the Commission, but a very small percentage have come before the courts, because in the vast majority of the cases coming before the Commission the railroads have either easily shown they were not at fault or have submitted to the decision of the Commission without going to the courts. In the small percentage of cases which the railroads have taken to the courts because they were dissatisfied with the rulings of the Commission upon the facts or upon the law, they have usually succeeded, because the Commission has been in error. The courts have not laid down any new or startling doctrine in reaching their conclu

sion, but instead have given the same construction to our Act given to similar provisions of their statute by the English courts; we having borrowed our Act largely from the English acts on the same subject. Where English decisions have not furnished the rule, because the question was an original one, the courts have examined the Act to see if it gave the Commission authority to do what it did. As the Commission is not a court, and due process of law, within the Constitutional Amendments, requires that every person shall have a legal day in court before his property, or the income of his property, can be taken from him, it must be clear that Congress cannot enact legislation that can deprive a person of that day in court without thereby showing such a plain intent to violate the Constitution itself as to require the courts to pronounce such legislation unconstitutional and void.

7. The silent attack upon our courts for merely discharging their constitutional duties is but a continuation of the affirmative and aggressive attack upon them in 1896 for doing the same thing. As our courts are the very safeguards of our institutions, all charges that they are owned by corporations, or that they must be ignored by the citizen who would obtain justice, are unfounded, or should be made the basis of an impeachment of the judge of whom they are true.

8. In the power to "regulate" interstate commerce Congress has no power to fix charges upon services or for materials. It only has the power to prevent unjust or illegal exactions or discriminations; hence it can give no greater power to the Commission.

An intelligent study of the problem of regulating railway rates cannot ignore the experience of England. In other European countries, so large a proportion of the railways are owned and operated by the nations, which rigorously regulate the rates upon those not so owned, and the circumstances and conditions are so dissimilar, that little light is obtained from their experience. In England, however, the railways are owned by corporations, as is the case in our own country. England was a country abundantly supplied with means of transportation by water at the time railways were introduced, and therefore railways had to win their freight traffic by competition with water carriers upon the seas and upon her inland rivers and canals. The dense population of England, and the enormous extent of her manufactures, enable a comparatively small number of miles of railroad to do an enormous passenger and freight business for one of the richest nations in the

world. The English Parliament and the English courts are hampered by no constitutional restrictions, and therefore each has free play to regulate railway rates to the fullest extent deemed compatible with the true interests of the nation, or justice to investors in railway stocks and securities. Under such circumstances, we would naturally expect to find that water competition, regulation of rates by the English Government, and a dense traffic on comparatively few miles of railroad, would all together result in lower freight rates and more satisfactory conditions to producers and consumers than those found in our own country. Does the experience of England indicate that it will be wise to give the largest possible powers to our Interstate Commerce Commission, that that Commission may, so far as possible, make railway rates on interstate commerce whenever complaint is made to it? Does the experience of England indicate that it would be wise to make our Interstate Commerce Commission as independent as possible of the courts, and any right of review by the courts, so far as that can be done under our Constitution? Let the facts touching England's experience with railway rate regulation be the answer to these questions, and a valuable object lesson in their consideration.

Our present Interstate Commerce Act was largely borrowed from England, and our Supreme Court has followed the decisions of the English courts in construing our Act, so far as those decisions were applicable. It must be clear, then, that we shall get an insight into our own problem by studying that of England. And we shall best study the English railway rate problem and experience by taking as our guide a gentleman who is as disinterested and high an authority in England upon this subject as is President Hadley in our own country; I mean Mr. Acworth, author of the "Elements of Railway Economics," the most informing work upon this subject that can be had in small compass, and a worthy companion to President Hadley's work on "Railroad Transportation."

Mr. Acworth, as a member of the International Railway Congress, happened to be in this country as a delegate for the British Government at the time the Interstate Commerce Committee of the Senate was engaged in its very thorough inquiry into this subject, and he gave the Committee a clear statement as to the legislation and experience of England. After reviewing the various English acts, he states the net result of them all to be: