Regulation of Rates of Common Carriers
by the Federal Government Alone,
and Increase of Rates Measured by
Increased Operating Expenses
AN ADDRESS
BEFORE
THE LAW ASSOCIATION OF PHILADELPHIA
FEBRUARY 26, 1915
BY
WILLIAM A. GLASGOW, JR., ESQ.
Of the Philadelphia Bar
Printed by
H gm The Law Association of Philadelphia
1915
2.151
REGULATION OF RATES OF COMMON CARRIERS
BY THE FEDERAL GOVERNMENT ALONE.
AND INCREASE OF RATES MEASURED BY
INCREASED OPERATING EXPENSES.
An Address Delivered by William A. Glasgow, Jr., Esq.,
Before The I.aw Association of Philadelphia,
February 26th, 1915.
I venture to briefly call attention to the attempt made
to regulate commerce by the act passed by Congress for that
purpose in 1887, and subsequent legislation, and to suggest
that we have yet much to learn in dealing with this subject,
so broad in its scope, and equally important to the carriers
and the general public who use the facilities provided for
the commerce of the country. The time seems to have
arrived when we should consider what may seem proper to
improve and strengthen the lines we have laid out for deal¬
ing with this important subject.
1.
Prior to 1887, the regulation of railroad carriers in the
United States, so far as it was attempted, was confined to the
efforts of certain States to restrain ''corpwrate abuses," and
the regulation of the vast and increasing "commerce with
foreign nations and among the several States" had not re¬
ceived the attention of Congress, to which the subject had
been entrusted by the Constitution.
In the New England States, with the exception of
Massachusetts, Railroad Commissions had been created with
duties "mainly limited to the inspection of the railway
equipment and service," but in some of the Western States
Commissions were established, by legislation, with powers
I
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.C'Y M . o- RA'LWAV ECONOMICS
V-'AShl^GTON, 0 c,
intended to correct abuses and to bring the carriers, in their
service, within a proper conception of their duties to the
public.
Some of this legislation may have provided what has
been called "forceful methods," but in the words of a dis¬
tinguished Senator of the United States, the policy of these
States assured "the cultivation of a better understanding and
state of feeling between the railroads and the people, and a
sufficient mitigation of the local abuses most prevalent, to
sensibly diminish the volume of complaint."
At that time twenty-five States and Territories had
adopted the commission system, while five depended upon
"legislative restrictions without providing any special means
for the enforcement of their enactments," and in sixteen
there was "no regulation in force or practically very little."
On March 2tst, 1885, a "Select Committee was ap¬
pointed by the President of the Senate of the United States
"to investigate and report upon the subject of the regula¬
tion of the transportation by railroad and water routes in
connection or in comp>etition with said railroads, of freights
and passengers between the several States," etc.
The report of this Special Committee was made on
January i8th, 1886, and as a result of an overwhelming pub¬
lic demand for regulation of interstate carriers. Congress
enacted, on February 4th, 1887, "The .\ct to Regulate
Commerce," creating the "Interstate Commerce Commis¬
sion," and intending by the powers of regulation and admin¬
istration entrusted to this body, "to cut up by the roots the
entire system of rebates and discriminations in favor of par¬
ticular localities, special enterprises or favored corporations,
and to put all shippers on an absolute equality:" Union
Pacific Railway v. Goodridge, 149 U. S. 680, 690.
It was found, however, by nineteen years .experience,
that the powers entrusted to the Interstate Commerce Com¬
mission were insufficient to accomplish the purpose which
Congress had in view, and which the public demanded, and
on the 29th of June, 1906, Congress (by the Hepburn Act)
re-enacted the Act of February 4th, 1887, giving to the In¬
terstate Commerce Commission greatly increased powers,
2
and declaring with certainty, in many instances, the duties
of common carriers, subject to the provisions of the act.
It is unnecessary for the moment to notice subsequent
legislation, for by the last act above referred to. Congress
gave to the Interstate Commerce Commission such adminis¬
trative and regulative power as to enable it to correct almost
any abuse from which the public may suffer and of which a
carrier may be guilty.
In the meantime, the Constitutional Conventions and
Legislatures of the States had not been idle, and State "Cor¬
poration Commissions" or "Public Service Commissions"
have been created in almost all the States, with powers, ap¬
parently, over intrastate commerce, equally broad and in
many cases far beyond the powers entrusted by Congress to
the Interstate Commerce Commission, and with these two
regxilative or administrative powers, acting on the same or
parallel lines, frequent doubt arises and difficulty is encoun¬
tered to determine which hand shall control the carrier in the
particular instance.
In the Miniwsota Rate Cases (230 U. S. 352), the
the Supreme Court held that; "The fixing of reasonable
rates for intrastate transportation was left," by Congress,
"where it had been found, thar is, with the States and the
agencies created by the States to deal with that subject and,
further: "Under the established principles governing state
action, Minnesota did not transcend the limits of its author¬
ity in prescribing the rates here involved, assuming them to
be reasonable intrastate rates. It exercised an authority
appropriate to its territorial jurisdiction, and not opposed to
any action thus far taken by Congress."
The court further clearly intimates that when the time
arrives (if it is not already here) "that intrastate transac-
toins may become so interwoven" with interstate transac¬
tions "that the effective government of the former inciden¬
tally controls the latter," that this fact will not limit Con¬
gress in the execution of its constitutional power to regulate
interstate commerce. The court then says (p. 432) :
"But these considerations are for the practical judgment
of Congress in determining the extent of the regulation
neccssart' under e.xisting conditions of transportation to
3
conserve and promote the interests of interstate commerce.
If the situation has become such, by reason of the inter-
blending of the interstate and intrastate operations of inter¬
state carriers, that adequate regulation of their interstate
rates cannot be maintained without imposing requirements
with respect to their intrastate rates which substantially
affect the former, it is for Congress to determine, within the
limits of its constitutional authority over interstate com¬
merce, and its instruments, the measure of the regulation it
should apply. It is the function of this court to interpret
and apph'. the law already enacted, but not under the guise
of constniction to provide a more comprehensive scheme of
regulation than Congress has decided upon. Nor, in the
absence of Federal action, may we deny effect to the laws of
the St.rte enacted witliin the field which it is entitled to
occupy until its authority is limited through the exertion by
Congress of its paramount constitutional power."
Attention w:is called by the court to the fact that "there
has been no finding by the Interstate Commerce Commis¬
sion" that the intrastate rates fixed by the State of Minne¬
sota produced "unjust discrimination violative of the act;
and no action of that body is before us for review." As a
matter of fact, the Interstate Commerce Commission had
not considered the rates fixed by Minnesota, but if it had,
after investigation, found that such rates discriminated
against shippers who were required to pay reasonable inter¬
state rates, and if the Commission had ordered the carriers
to cease and desist from such discrimination, then it would
seem that the court, under the Shrcz^port Case (234 U. S.
343), would have required the carriers to obey the order of
the Interstate Commerce Commission "by so adjusting the
other rates (Minnesota intrastate rates), to which the order
relates, as to remove the forbidden discrimination." In
other words, to decline to charge the rates fixed by Minne¬
sota and adjust their intrastate rates to the basis of the rea¬
sonable interstate rates necessary to remove the discrimina¬
tion found to exist by the Interstate Commerce Commission.
An interstate carrier must get revenue to properly
operate its lines from its transportation service—intrastate
and interstate. In many cases, illustrated by the Shreveport
case, the whole .system of rates is so interwoven that a
change in an intrastate rate may afiiect disastrously the
4
business of shippers paying interstate rates and vice versa,
and as to the question of charges for transportation, the
time seems to have arrived when Congress should consider
whether a reasonable, non-discrinimatory and uniform
standard of rates should not be worked out under Federal
regulation alone, which would be fair alike to shippers of
interstate and intrastate traffic, and relieve the carriers of
the embarrassing doubt and uncertainty as to which master
they should obey.
I speak of the "adjustment of rates," for no carrier and
no Commission can today make or fix rates on any com¬
modity between two points, without adjusting the rate to
a basis of relation to rates on the same or other like com¬
modities, covering transportation both between the States
and between points in the same State. The late Henry Fink,
one of the ablest and most distinguished men in railroad
management I have had the privilege of knowing, who dis¬
charged his duty with loyalty to the owners of property and
with patriotic interest in his adopted country, said :
"The facts are that railroad companies have a very limited
control over their freight tariffs; that the cases are excep¬
tional where they have the power to make or establish rates ;
that generally they can only adjust their rates of transporta¬
tion in accordance with certain conditions and circumstances
over which they have no control. This is not only true of
competitive traffic and interstate traffic, but also as to rates
on traffic within a State, and on local traffic for which there
may l>e no direct competition."
At this time it can hardly be doubted that all traffic,
state and interstate, so far as rates are concerned, is inter¬
related.
This situation is illustrated by the case of Chicago, Mil¬
waukee & St. Paul Ry. Co. v. lozva. 233 U. S. 334, where
it appeared that rates for the transportation of coal from
Southern Illinois to points in Iowa were duly filed and estab¬
lished with the Interstate Commerce Commission, but a ship¬
per of coal from Southern Illinois, had the coal billed to
himself at Davenport, a Mississippi River crossing, and
when the coal reached an interchange track at Davenport, it
was tendered to the Chicago, Milwaukee & St. Paul Rail¬
way Company for transportation to points in Iowa, under
5
the distance tarifif established by the State of Iowa for intra¬
state transportation. Tlie result was that the shipper of coal,
by a combinaion of rates established by the State of Illinois,
from Southern Illinois to Davenport, thence under the Iowa
tariff to destination in that State, secured the transportation
from point of origin to destination at a less charge than the
interstate rates iiled with the Commission. There is no
doubt that the combination of rates fixed by Illinois and by
Iowa destroyed the integrity of the interstate rates, and but
illustrates the jiroposition that the intrastate and interstate
rates for transportation are inter-related and interwoven to
such an extent that the fixing of intrastate rates which may
be used in combinaion necessarily affects the interstate rates
for transportation.
Unless "a uniform standard of rates" is established,
covering the interwoven traffic. State and interstate, it
would necessarily "result that violations of the" Act to
Regulate Commerce "as to preferences and discriminations"
would inevitably follow (Texas & Pacific Ry. Co. v. Abilene
Cotton Oil Co.. 204 U. S. 426, at page 440) ; and, therefore,
by the fixing or regulation of rates by State commissions as
well as by the Interstate Commerce Commission, the very
purpose of the Interstate Commerce Act is impaired and dif¬
ferent standards of rates are established, measured by State
lines, and when this condition is shown, should not Congress
deal with the situation as intimated by the court in the
Minnesota Rate Cases, heretofore mentioned? Undoubtedly
the power of the Interstate Commerce Commission to
presenile rates upon which traffic will move, and which will
be free from unjust discrimination or undue advantage, is
impaired and embarrassed by the fixing of rates applicable
entirely within State lines, for if two States unite in fixing a
low rate on any commodity, the interstate rate cannot, as a
pracical and commercial matter, be greater than the sum of
the two intrastate rates thus fixed by State commissions.
With such a situation Congress undoubtedly has power to
deal.
As said by the late then judge, afterwards Mr. Justice
Bradley (Stockton v. Baltimore & New York R. R. Co., 32
Fed. 9, at page 17) :
6
"We think that the power of Congress is supreme over
the whole subject, unimpaired and unembarrassed by State
lines or State laws ; that in this matter the country is one
and the work to be accomplished is national ; and that State
interests, State policies and State prejudices do not require
to be consulted. In matters of foreign and interstate com¬
merce there are no States."
And as said again by Mr. Justice Bradley {Robins v.
Shelby Taxing District, 120 U. S. 489, at page 494) :
"In a word, it may be said that in the matter of inter¬
state commerce the United States are but one country, and
are and must be subject to one sjstem of regulation and not
to a multitude of systems."
Since Congress has the power to establish "a uniform
standard of rates" through the Interstate Commerce Com¬
mission, avoiding confusion and frequent injustice, it would
seem that the policy of exercising this power, as justified by
present conditions, is beyond doubt.
The suggestion here offered applies to the adjustment
of rates alone, and would leave to the States and to their
commissions the many matters of regulation necessitated by
"the special requirements of local conditions," which are of
no concern beyond the boundaries of the State which acts.
The question of revenue to be produced by a compre¬
hensive system of rates upon "a uniform standard," in order
to make possible the best, most expeditious and safest ser¬
vice, is one not limited to State lines, and the burdens neces¬
sary to assume in order to provide such revenue should be
adjusted so as to hear with equality and justice both upon
intrastate and interstate traffic.
If the State Commissions are engaged in an effort to
cut the basis of intrastate rates, below that of interstate
rates, or if the Interstate Commerce Commission is inter¬
ested in protecting interstate traffic from advantages which
it may be claimed intrastate traffic has, how, it may be asked
with earnestness, can a comprehensive, harmonious and fair
adjustment of railroad charges upon a "uniform standard"
he established or pre.served?
7
If Mr. Madison were here, would he not again observe,
as he did in the Constitutional Convention, that '"'He was
never more convinced that the regulation of commerce was
in its nature indivisible and ought to be wholly under one
authority." Congress undoubtedly has power, when the
inter-relation of intra and interstate traffic is established, to
take over the entire subject of rate regulation, and in the
light of present conditions, it should be seriously and patri¬
otically considered whether the time for such assumption of
duty by the Federal Government has not arrived.
We have been so engrossed in the proper operation
of removing grievances in the conduct of the business of the
railway carrier, and by administrative and regulative super¬
vision to prevent the recurrence of such practices, that we
have hardly had time, after the operation and the applica¬
tion of antiseptic treatment, to consider what rules of living
the patient should follow, so that hereafter he may live a
clean, useful and prosperous life, to the advantage of the
community and for his own well-being. It now seems time
to consider the future of the patient, and by constructive
work help him to build up to the point where his own pros¬
perity may add to the general good.
It would seem essential that there should be but one
master to control the rates charged by carriers, so that, as
far as possible, a fair, reasonable, harmonious and sufficient
basis of rate adjustment may be established and maintained,
and the present conflict of authority, which was of little im¬
portance when interstate communication and traffic were
less frequent, be removed by Congress, in recognition of the
fact that we live in a country indivisible and bound together
by ties of a common interest.
II.
There is, to rny mind, another important question which
I desire to suggest. By amendment, approved June i8,
1910, of Section 15 of the Interstate Commerce Act, Con¬
gress provided as follows :
"At any hearing involving a rate increased after January
I, iQio, or of a rate sought to be increased after the passage
of this act, the burden of proof to show that the increased
rate or proposed increased rate is just and reasonable shall
8
be upon the common carrier, and the Commission shall give
to the hearing and decision of such questions preference
over all other questions pending before it, and decide the
same as speedily as possible."
At the time of this amendment of our act, the English
Railway and Canal Traffic Act required that:
"Where a railway company have either alone or jointly
with any other railway company or companies, since the first
day of December, one thousand eight hundred and ninety-
two, directly or indirectly increased or hereafter increase,
directly or indirectly, any rate or charge, then, if any com¬
plaint is made that the rate or charge is unreasonable, it
shall lie upon the company to prove that the increase of the
rate or diargc is reasonable," etc.
It will be observed that the English act requires that
the carrier only justify "the increase of the rate or charge,"
thereby impliedly creating a presumption that the rates and
charges of English railway companies, in effect on Decem¬
ber 31, 1892, were reasonable (see Prouty, Commissioner,
Eastern Advanced Rate Case, 20 I. C. C. 243, at page 255) ;
but l>y the Act of 1910, Congress required that wherever a
hearing was had involving a rate increased after January i,
1910, etc., that the burden should be upon the carrier to
show that "the increased rate or proposed increased rate is
just and reasonable," leaving it open to the shipper to at¬
tack such increased rate or proposed increased rate, and
requiring the carrier to assume the burden of justifying not
only the increase, but the rate itself, as a just and reasonable
charge. The difference between the two acts is clear and
substantial.
In the early summer of 1910, the carriers operating in
what i.s known as "Official Classification Territory," and in
"Western Trunk Line Territory," filed with the Interstate
Commerce Commission tariffs proposing to increase in the
first territory all class rates and about one-half of the com¬
modity rates therein, and in the latter territory proposing to
increase rates on some 200 commodities.
Protests were filed with the Commission against such
proposed increased rates, and under Section 15 of the Act
to Regulate Commerce, as amended on June 18, 1910. it be-
9
carne the duty of the carriers to assume the burden of show¬
ing that the proposed increased rates were just and reason¬
able. The carriers undertook to justify the proposed in¬
creased rates on the ground of increased expenses, and
because "we need the money," and a protracted investigation
followed, and finally the two cases were decided by the
Commission on February 22, 1911.
In the Eastern case, it was held that "upton a view of
the whole situation, we hold these defendants have not
established such a need for additional revenue as justifies at
this time an increase in these rates." In the Western case,
it was held by the Commission :
"It is not for lis to say that we represent the Govern¬
ment and may have a policy of our own which in any degree
runs counter to the power granted to us or the duty imposed
upon us. The railroads may not look to this tribunal to
negative or modify the expressed will of the legislature.
They have laid before us the facts and the law which would
make for a justification of their course in the increasing of
rates. To our minds, their justification has not been con¬
vincing."
In both cases it was held that the carriers had not sus¬
tained the burden put upon them by the Act of June 18,
1910, and had not shown that the proposed increased rates
were just and reasonable.
In May, 1913, the carriers operating in Official Classi¬
fication Territory filed a petition with the Interstate Com¬
merce Commission, asking that the former case might be
reopened for further consideration, and to avoid any tech¬
nical question the carriers, on October 15, 1913, filed tariffs
proposing to increase rates on practically all freight traffic
moving in Official Classification Territory, which tariffs were
suspended by the Commission, and a general investigation
was ordered as to the justness and reasonableness of such
proposed increased rates, the burden being upon the carriers
to justify the proposed increased rates; and this investiga¬
tion is what is generally spoken of as the recent case involv¬
ing a five per cent, increase in freight charges.
The carriers undertook to justify the proposed in¬
creased rates on the following grounds ;
10
(ö) That the rate of return in net operating income
upon the property investment is declining.
(b) That the principal cause of this decline is a steady
and constant increase in operating expenses, due to a mat¬
ter of a continuing character, such as wage increases, legis¬
lative requirements and the necessity of maintaining a
higher standard of track, equipment and facilities generally.
(c) That the return upon money invested in railway
facilities since 1913 has been utterly inadequate, and that no
return at all has been received upon the money so invested
since 1910.
(d) That the effect of these things is so to impair the
credit of the railway companies as to seriously check the
normal construction and development of railway facilities
which are required to meet the public demands.
It will be observed that these reasons assigned as jus¬
tification for the proposed increased rates do not materially
differ from the position of the carriers in the first investiga¬
tion above referred to, to wit, "'we need the money."
After a full investigation involving the carriers and
shippers of the country in expensive and burdensome work,
the Commission filed its report on July 29, 1914, approving
certain increased rates in Central Freight Association Ter¬
ritory, but holding that the trunk line carriers had not
"proved that the existing interterritorial rates in Official
Classification Territory are too low or that the proposed in¬
creases in those rates would be just and reasonable;" and
further, as to rates by rail and lake routes in Official Classi¬
fication Territory, that "there was no substatnial effort to
Justify the increase in those rates on any other ground ex¬
cept as to some increases in costs at certain terminals be¬
cause of an extension of the service performed without an
increase in the charge." Therefore, it was ordered that the
tariffs proposing to increase rates in Official Classification
Territory be canceled. In their report the Commission
stated that :
"We are of opinion that the net operating income of the
railroads in Official Classification Territorj', taken as a
whole, is smaller than is demanded in the interest of both
the general public and the railroads."
II
On September 15, 1914, the carriers filed a petition for
rehearing, and on September ig, 1914, the Commission
ordered that a rehearing be had, limiting the facts to be pre¬
sented, however, to such as occurred subsequent to the date
on which the record in the cases had been previously closed ;
and on December 16, 1914, the Commission filed its supple¬
mental report, in which it is shown "that the facts disclosed
and occurrences originating" since May 29, 1914, as pre¬
sented by the carriers at the rehearing, were addressed to
the decreasing revenue of the carriers, the war in Europe
and the result following the original order of the Commis¬
sion, all of which facts, however, were really addressed to
the need of the carriers for more revenue, and no evidence
was introduced as to the reasonableness of any specific rate.
Again, the Commission finds that the carriers in Official
Classification Territory need "increased net revenue," and
by order entered on the i6th day of December, 1914, the
Commission permitted the proposed increased rates to be¬
come effective, with certain exceptions therein stated.
Whether we conclude that the action of the Commis¬
sion was wise or unwise, proper or improper, the fact re¬
mains that the Commission, upon the evidence presented as
justifying the proposed increased rates, strained its power
under the Act to Regulate Commerce in that only the same
character of evidence was offered as to the needs of the
carriers, which the Commission in the first case held was
insufficient to sustain the burden of proof put upon the car¬
riers by the Act of June 18, 1910.
It needs no extended argument to show, as the courts
have held, that the fact that carriers need more revenue,
does not furnish proof that any specific proposed increased
rates is just and reasonable, for the rates on one commodity
may be too low and on other commodities too high. For
illustration ; The carriers may need more revenue, and yet
the present rate on cement may be unreasonably high for
the service rendered and for the value of the service. On
the other hand, the carriers may not need more revenue, and
yet for the service rendered the rate on canned goods may
be below what is reasonable and just.
The strict and true construction of the provisions of
section 15 of the act referred to would require the presen-
12
tation of specific proof that each increased rate is reasonable
and just, and this construction of the act requires the as¬
sumption of a burden physically impossible to bear, when a
genera! increase of rates is proposed, and yet the act re¬
quires that this burden should be borne. Congress clearly
intended to reserve to itself questions of policy, and to make
a general increase of rates impossible, but that where a pro¬
test was filed against a proposed increase of a specific rate,
evidence of its reasonableness should be adduced before the
Interstate Commerce Commission. It should be evident,
therefore, that the Interstate Commerce Commission neces¬
sarily had to go beyond the powers given it by the Act to
Regulate Commerce, strictly construed, in sustaining the
proposed increased rates as reasonable and just on the
proof presented. It may have been necessary under present
conditions, but certainly any criticism of the Commission for
hesitating to approve the increased rates without sufficient
evidence to sustain their reasonableness, is entirely unjusti¬
fied in view of the provisions of the act heretofore referred
to, and the duty to observe the same.
The question of increasing the expenses of the public
servant and permitting it to collect from the public generally
additional money to be thus expended, is certainly a ques¬
tion of public policy, and this is illustrated by the fact that
Congress, in the exercise of its discretion, as a question of
policy, has negatived the power of the carriers to increase
rates, unless specific proof is offered as to the reasonable¬
ness of the proposed increased rates, and in case a general
increase of rates is proposed, the burden put upon the car¬
riers is so great as to practically make it impossible to pre¬
sent the requisite proof. Further, the Interstate Commerce
Commission was created for administrative work, and has
no power, under the Act to Regulate Commerce, to exercise
its discretition, on grounds of public policy, as to increasing
rates. The reasonableness of the rate involved is the ques¬
tion for the Commission to determine, not the public policy
of permitting an increase ; and, therefore. Congress has
reserved to itself the power of permitting an increase of
rates to carry out its conception of the public policy.
Strong appeals were made to the Commission in the
recent case to allow the increase of rates so that the car-
13
riers might have a basis of credit upon which to borrow
money for improvements and reconstruction along their
several lines, but to what extent carriers should be encour¬
aged in extending or improving their property in the public
service and providing therefor by increased burdens u{)on
the public, comes certainly to a question of public policy,
rather than one of administration or regulation.
With Federal and State legislation increasing the ex¬
penses of carriers in large sums at recurring periods, it is
essential that there should be some elasticity in the standard
of rates charged, so as to meet additional expenses; and,
therefore, periods come when it is necessary, in order to
maintain the efficiency of common carriers in the public
service, that their revenues should be increased in order to
meet their increased expenses.
The great difiiculty under which carriers have been
laboring, as shown by the evidence in the recent investiga¬
tions referred to, was largely due to the indiscriminate and
irresp>onsible power lodged in all kinds of legislative and
other bodies, of increasing the expenses of railroad carriers
without power in the carriers to protect net revenue by in¬
creased rates. At present no responsibility attaches to indi¬
vidual members of State Legislatures, or even of the Con¬
gress of the United States, in voting increased expenses
upon railroads, so long as such increased expenses are not
added to tlie rates which are to be paid by the shipping pub¬
lic, and so long as the individual member of the legislative
body is not held responsible for increased rates by his con¬
stituents, the shippers of the country, and it is well worth
considering whether some principle should not be established
under which those who increase the expenses of carriers
could be held under direct responsibility to justify their
action to the people, who have to pay the rates of transporta¬
tion, to take care c.f expenses of operating railroads.
I do not intend to suggest that expenses should not be
increased in order to properly maintain the safety and ef¬
ficiency of railroad operation, but I do maintain that such
expenses should he required only after judicious and care¬
ful investigation, and then only by the act of persons who
are under a proper responsibility to the persons who have to
pay for railroad service.
14
Therefore, it seems proper that some method should be
adopted by which the railway carriers of the country may
properly provide for increased expenses put upon them, and
which also would hold tlie power creating expenses to a rea¬
sonable justification and responsibility.
England had exactly the same question presented to it
in 1911, and the Railway and Canal Traffic Act had some¬
what the same provision as to the burden of proof being
upKjn the carriers to justify proposed increased rates. As a
remedy, an Act of Parliament was passed in 1913, providing
as follows :
Railrvay and Canal Traffic Act, 1913. (2 & 3 Geo. 5,
Cap. 29.)
"i. (i) Wliere, on a complaint with respect to any in¬
crease (within any limit fixed by an Act of Parliament or
by a Provisional Order confirmed by an Act of Parliament)
of any rate or charge under Section i of the Railway and
Canal Traffic Act, 1894, the railway company proves to the
satisfaction of the Railway and Canal Commissioners—
"(o) that there has been a rise in the cost of
working the railway, excluding the cost of carrying and
dealing with passengers, resulting from improvements
made by the company since the 19th day of .August,
1911, in the conditions of employment of their labor
or clerical staff ; and
"(b) that tlie whole of the particular increase of
rate or charge of which complaint is made is part of
an increase of rates or charges made for the purpose
of meeting the said rise in the cost of working; and
"(c) that the increase of rates or charges made
for the purpose of meeting the said rise in the cost of
working is not, in the whole, greater than is reason¬
ably required for the purpose; and
"(d) that the proportion of the increase of rates
or charges allocated to the particular traffic with respect
to which the complaint is made is not unreasonable,
the Commissioners shall treat the increase of rate or charge
as justified: Provided that nothing in this section shall be
constnied as preventing the Commissioners from taking into
account any circumstances which are relevant to the deter-
15
mination whether an increase of rates or charges is or is not
greater than is reasonably required for the purpose of meet¬
ing the said rise in the cost of working.
"(2) Where it appears to the Commissioners that the
increase of the rate or charge of which complaint is made
should for the time being be treated as justified in pursuance
of this act, but that an opportunity should be given after a
limited time for reconsidering the increase, they may, in
making an order declaring the increase to be justified, add
to their order a provision that the question may ,after a
period to be fixed by the Commissioners, be reopened in
accordance with the conditions (if any) made by the order.
"(3) Where any such order is made, a complaint may
be made as to the increase of the rate or charge under the
Railway and Canal Traffic Act, 1894, in accordance with the
order of the Commissioners, notwithstanding that the mat¬
ter has already been determined by the Commissioners."
The result of this act is that whenever the railway com¬
pany shows a legitimate and proper "rise in the cost of
working the railway," that the company may recoup itself as
to such expenses by increasing rates, and that "the Commis¬
sioners shall treat the increase of rate or charge as justified."
It seems to me very desirable that an earnest effort should
be made to induce Congress to pass an act somewhat along
the lines of the English act above referred to, providing that
wherever expenses of operating railroads are increased by
legislative action, State or Federal, or by the award of any
recognized arbitration board, and perhaps in other ways,
that, so far as a proposed increase of rates is concerned, in
sufficient amount to meet such increased expenses, the In¬
terstate Commerce Commission shall treat such increased
rates as justified, of course guarding the legislation in such
way as may be necessary, but establishing the principle
above mentioned. Legislation along this line would be bene¬
ficial, for two reasons :
First. It would give assurance to the carriers and those
who hold their securities, that the (jovernment would pro¬
tect them in charging a sufficient amount to reimburse them
for .expenses legitimately and properly put upon them by the
Government or by governmental agencies, and perhaps
otherwise.
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