a yet more powerful corporation. Before taking up the question of rates it will be well to study the history of the interrelations of ocean carriers.

REFERENCES FOR FURTHER READING

JOHNSON, E. R. "American Railway Transportation." 1903. Chapter XVIII on "Monopoly and Competition in the Railway Service."

KNAPP, M. A. "Social Effects of Transportation." Annals of the American Academy of Political and Social Science, vol. xx, pp. 1-15. 1902. "Some Observations on Railway Pooling.' Ibid., vol. viii, pp. 127-47. 1896.

CHAPTER XI

RATE AND TRAFFIC AGREEMENTS, POOLS, AND CONSOLIDATIONS OF OCEAN CARRIERS

A LARGE measure of coöperation among ocean carriers is necessary for them, and may be of advantage to shippers. The competition of steamship lines with each other is so intense, and, unless restrained by some agreement among the carriers, is so persistent, that the successful and profitable management of the ocean transportation business under existing conditions practically requires the steamship lines to enter into arrangements regulating their interrelations.

The agreements required to regulate the competitive relations of ocean carriers necessarily include many details. It is the purpose of this chapter to state the main provisions contained in these agreements, and to consider briefly the results that have been accomplished by the coöperation of ocean lines.

Although the chief purpose of coöperation among ocean carriers is to restrain competition, their rate and traffic agreements, and the pools they form may be a benefit to shippers. The merchant engaged in international trade desires an adequate service at rates that are reasonable and fairly stable; fluctuating rates seriously interfere with trade, whether it be domestic or international. Sudden and large changes, often characteristic of ocean rates, may interfere with the development of commerce as seriously as the unstable competitive rates by

rail in the United States have in times past hampered the industrial development of different sections of our country. Mr. Ellerman, chairman of the Ellerman Lines, speaking at an annual meeting of that company a few years ago, stated that "shippers and merchants, as a body, commonly prefer a basis of trade common to all shippers, on which they are enabled with confidence to conduct their calculations as to the prices at which they can land goods at any given point. Merchants are thereby enabled to conduct their business without the risk of serious fluctuations in freight from week to week, and they also have the knowledge that all merchants are paying the same rates of freight."

From the shipper's point of view, the advantages of coöperation on the part of the steamship lines are that coöperation gives a more regular service, a better adjustment of schedules of sailings, and greater stability in rates. These benefits to the shipper, however, may be largely nullified by the steamship companies, if they follow a policy of restricting the development of the service, and a policy of high fares and small volume of business instead of low fares and maximum traffic. Instances are not wanting of arbitrary action on the part of the steamship organizations to prevent outside lines from interfering with the established traffic of the associated companies, and shippers are often penalized for patronizing lines not belonging to the combination. The tendency of those possessing exclusive privileges is to seek vigorously to retain such privileges against outside interference; accordingly, it may well happen that combinations among ocean carriers, which seem to be rendered necessary by the severity of unrestricted competition, should be regulated by adequate legislation and be carefully supervised by governmental authority.

The name "Conference" is given to associations of

ocean lines. The lines from Europe or the United States to each important section of the world, usually unite in a conference. There is, for example, a South African Conference, a China Conference, and an Australian Conference of the European lines, and others for East South America, West South America, etc. Sometimes the lines from the United States are members of a European conference, and sometimes the American lines have separate associations.

The vessel lines forming a conference enter more or less formally into agreements regarding the number of vessels each line shall operate, the days of sailing, the classification of freight, and freight rates. Sometimes these agreements provide for a division of the traffic field; in some instances a division of the traffic within a common field is provided for; and frequently provisions are made for pooling the earnings of the several lines and dividing the joint earnings according to stipulated ratios. With the exception of the pooling contracts, the agreements entered into by lines forming a conference are more in the nature of "gentlemen's agreements" than of legally enforcible contracts. The agreements are usually for one year, and, as will be shown later, are usually unstable, requiring frequent amendments and readjust

ments.

The system prevails of giving rebates from the freight charges, usually ten per cent, to those shippers who patronize only the vessels belonging to the members of the conference. Shippers who patronize outside lines are compelled to pay the full rates without subsequent rebate. The funds required to pay the small expense of administering the conference are secured by levying upon the members of the association, each line paying in proportion to the amount of business it handles.

These conferences of ocean carriers have different

forms of organization and different purposes. The following types are distinguishable:

1. Representatives of the steamship lines operating from any one port may confer more or less frequently in regard to dates of sailing, frequency of service, classification of traffic and rates, and other matters of mutual interest. These conferences may be without formal organization, and be only for the purpose of reaching a common understanding as to the interrelations of the competitive carriers, with the hope that business arrangements satisfactory to all parties concerned may be decided upon.

2. The conference may have a more formal organization, with a secretary and other officers elected to supervise and regulate the business arrangements entered into by the members of the association. A good example of this more permanent type of organization is the North Atlantic Steam Traffic Conference, which has had a more or less continuous existence for many years. It has attempted to regulate the freight business of the conference lines by deciding upon the number of the ships each line should operate, and the terminal services that should be rendered by vessel owners, and it has also sought as far as possible to regulate freight rates. Rates, however, are so highly competitive in the North Atlantic service that the traffic conference has succeeded only in a slight degree in deciding upon an enforcible schedule of charges.

The most systematic effort made by the Conference to control freight rates was the attempt made in 1902, when its members entered into the "minimum freight agreement," whereby each line pledged itself to charge not less than stipulated rates for the relatively limited number of articles enumerated in the compact. By this agreement an effort was made to put an end to the demoralization in freight rates that occurred in 1902, when the shipping facilities were so much in excess of the de