The Interstate Commerce Commission (1887–1891)

BY ALDACE FREEMAN WALKER (1891)

THIS universal reliance upon competition as the safeguard of the public has had two noticeable results: first, it has tended to entrench railroad managers in the belief that the public was protected sufficiently thereby, and that carriers by rail, like carriers by sea, were entitled to fix rates at will, subject only to the control of competitive conditions. . . .

In the second place, in its practical working, competition bred discrimination. The evils of unjust discrimination in railway methods cannot be too vividly portrayed. As time went on they became more and more pronounced, until they were too great to be endured. Legislative investigations were demanded. . . .

The remedy proposed was the forbidding of unjust discrimination under pains and penalties. That was the essence of the Interstate Commerce law. In other words, the result was prohibited while the cause was left in full operation. It was thought that free and unrestricted competition must be maintained as an essential principle of the American railway system. . . .

. . . Of course discriminations in railway rates are necessary; for example, the rate upon silk and upon sand should not be the same, and the question is often a doubtful one whether a particular discrimination is or is not unjust. The determination of this question, arising in innumerable forms, is the matter which has chiefly occupied the attention of the Commission since the passage of the law. . . .

. . . When the law first went into operation it was felt that a new era had arrived. The statute demanded the undeviating and inflexible maintenance of the published tariff rates. . . . This was just what conservative and influential railway managers desired. It was not only just, but it protected their revenues. The new rule was cheerfully accepted and imperative orders were issued for its obedience. But toward the close of 1887 it began to be perceived that there were difficulties, which became much more serious in 1888. On even rates the traffic naturally flowed to the direct lines, which could give the best service and make the best time. Roads less direct or of less capacity, roads with higher grades or less advantageous terminals and roads otherwise at a disadvantage, found that business was leaving them. It was discovered that the law in this its most essential feature, as well as in other respects, was practically a direct interference by the government in favor of the strong roads and against the weak. Dissatisfaction arose among officials of roads whose earnings were reduced and which were often near the edge of insolvency. It had been customary for them to obtain business by rebates and other like devices, and they knew no other method. It presently became to some of them a case of desperation. There was nothing in the law specifically forbidding the payment of "commissions," and it was found that the routing of business might be secured to a given line by a slight expenditure of that nature to a shipper’s friend. Other kindred devices were suggested, some new, some old; the payment of rent, clerk hire, dock charges, elevator fees, drayage, the allowance of exaggerated claims, free transportation within some single State—a hundred ingenious forms of evading the plain requirements of the law—were said to be in use. The demoralization was not by any means confined to the minor roads; shippers were ready to give information to other lines concerning concessions which were offered them, and to state the sum required to control their patronage. A freight agent thus appealed to at first perhaps might let the business go, but when the matter became more serious and he saw one large shipper after another seeking a less desirable route, he was very apt to throw up his hands and fall in with the procession.

Meanwhile nothing was done in the way of the enforcement of the law. It was found that the sixth or administrative section had been so framed as to require the exact maintenance of the tariffs of each carrier, but that this important provision had been omitted respecting "joint tariffs," in which two or more carriers participate; rates upon interstate traffic are usually joint. . . .

Toward the end of the second year came a reaching out for a remedy. In the closing days of the Fiftieth Congress amendments to the law were adopted by which shippers as well as carriers were made subject to its penalties, and the punishment of imprisonment was added to the fine in cases of unjust discrimination; joint tariffs were also distinctly brought within the jurisdiction of the Commission and the courts.

These amendments became effective March 2, 1889, and their influence was immediately felt. . . . The third year therefore exhibited an almost entire cessation of the use of illegitimate methods for securing business, and until near its close little complaint was heard. The fourth year, 1890, witnessed a renewed relaxation of the spirit of obedience. The conditions that had prevailed in 1888 again became pressing, and evasions secretly inaugurated were not efficiently dealt with; for a considerable time no prosecutions were commenced; customers began to renew their appeals for favors, or as they term it, for relief; and it was presently a common statement among shippers and traffic agents that the law was after all a dead letter, and that its penalties need not be feared. A short corn crop added its pressure by threatening a deficiency in the usual tonnage; and at the end of last year, although irregularities were more carefully concealed, they were generally believed to exist to a considerable extent. . . .

Aldace F. Walker, The Operation of the Interstate Commerce Law, in July, 1891 (New York), XI. 524–533 passim.