(íUf .Fortunate (impla fr ment of a bivotal ^(dca.
AN HISTORICAL REVIEW
of the enactmext of the
INTER-STATE COMMERCE ACT
AND ITS ADAIINISTRATION
from april 5tfi, 1887, the date, whiin it took
f;fff;ct, to junk 15th, 1887, thi-; date of
tfip; decision of the inter-state com¬
merce commission in the louisville
and nashville railroad cask.
lîy JOSEPH NIALMO, Jr.
RefyÍ7iied Oct. 10, iSSS.
WASHINGTON :
Gibson Bros., Printers and Bookbinders.
1888.
PKEK ACE.
October 10, 1888.
This preface to the " Historical Review," which was written in
the month of August, 1887, constitutes, in connection with that
document, an introduction to a more comprehensive review of the
administration of the Inter-State Commerce Act from Sept. 1,
1887, to the present time. This sujrplemental statement will be
prepared in the course of a few weeks.
The report of the Inter-State Commerce Commission for the year
1887 showed that three hundred carriers reported that they were ob¬
serving the "long and short haul rule" of the 4th section of the
" Act to regulate commerce," while seventy-three companies re-
jjorted that they were making exceptions to the rule. Of this lat¬
ter number thirteen were trans-continental lines, forty-four were
linesj in the Southern States and in the Western and Northern
States claiming exemption on account of water competition, and
sixteen were North and South lines claiming exemption on account
of the competition of East and West railroads at points of intersec¬
tion. A few general remarks are here presented in regard to such
exceptions to the rule :
First. The traffic now exempted from the operation of the
long and short haul rnle''^ constitutes an exceedingly small part
of the entire railroad traffic of the United States.
The three hundred railroads which observe the rule embrace all
the great trunk lines east of Chicago and St. Louis and include
the New York Central and Hudson River Railroad, the New York,
Lake Erie and Western Railway, the Pennsylvania Railroad, and
the Baltimore and Ohio Railroad, each one of which constitutes in
itself a great railroad system. But of the total traffic of the sev¬
enty-three railroads which do not fully observe the long and short
haul rule, only a small proportion thereof is exempted from the
action of that rule. In some cases it is only a single commodity,
or only a very few commodities which are excepted. The several
trans-continental railroad companies which reported to the Com¬
mission upon this subject stated that upon their own lines the
rule was perfectly observed, and that the exception existed only
with respect to traffic over connecting lines between the Pacific
coast and the Valley of the Mississippi, or between the Pacific
slope and the Atlantic seaboard. Without going into any elabo¬
rate figuring it appears perfectly safe to say that not more than
three per cent, of the entire railroad traffic of the United States is
now carried at rates which constitute an exception to " the long
and short haul rule."
4
Second. The present observance of the long and short hatd rule
is almost entirehj the result of the developmient of the railroad
system of the United States, emd only in a very hiconsiderable
degree the result of the Inter-State Commerce Act, or of its ad¬
ministration.
The whole tendency of the growth of railroad trafRc has been
toward eliminating exceptions to the so-called "long and short
haul rule." This is railroad history, and it has been rejjeated in
ten thousand instances. "When a railroad is constructed into new
territory its first freight tariff is usually based upon the general
idea of making rates which are only one-half, one-fourth, or one-
eighth the cost of ti'ansportiug goods between the same points by
teams. This process in detail would make a rugged tariff with
glaring exceptions to " the long and short haul rule," especially
at points where water comjjetition exists. But the growth of traffic
and the development of commerce and industry resulting from the
facilities afforded bj' railroad transportation tend constantly toward
a parity of values, and towai'd the equalization of rates. In time
the railroad manager finds also that the forces of commerce which
have been created by railroads are much more potential than dis¬
tance in determining rates. Thus it has come about that the ex¬
ceptions to the long and short haul rule now constitute propor¬
tionally so small a i^art of the total freight traffic of the country.
Third. The existing exceptions to the long emd short haul rule
are for the most part justified by circumstances and conditions
beyond the control of railroad managers, and the violent enforce¬
ment of the ride would he unjust and prejudicial to the healthy
development of the commercied, industrial and transportation in¬
terests of the country.
The larger and more important instances of the lower rate for
the longer haul find their justification chiefly in the consideration
of principed and auxiliary sources of traffic. Principal traffic
may be defined as that for the carriage of which a railroad may
charge rates deemed fairly remunerative, and which, at the same
time, tend to develop and not to depress traffic, while auxiliary
traffic is that upon which the maximum rates obtainable are deter¬
mined absolutely by conditions of competition or of market value,
but the carriage of which at such rates will yield something more
than the mere cost of handling and hauling. For the most part
the principal traffic of a railroad is that for which it constitutes
the only available highway of commerce, or at least the rnost
available route, while au.r.iliaxy traffic is chiefly traffic which is
competitive as between rival railroads, or between railroads and
water-lines. As the cost of transportation by water ranges from
about one-sixth to about one-third the cost of transportation by
rail, and as such competition wherever it exists usually aflects onlj'
the terminal traffic of railroads, it is easy to see how such com-
6
petition may enforce the lower rate for the longer haul. The
economic law of the case was admirably stated and with perfect
unanimity by the Inter-State Commerce Commission in the Louis¬
ville and Nashville Railroad case, the opinion having been written
by Judge Cooley. Referring particularly to competitive traffic be¬
tween a railroad and a water-line, the learned Commissioner said ;
" If it can then be made to pay anything toward the cost, above
what the taking of it would add to' the expense, the railroad ought
not, in general, to be forced to reject it, since the surplus under
such circumstances would be profit and in this same connection
the opinion of M. de la Gournerie is quoted, with approval, to the
effect that " a railroad ought not to neglect any traffic of a kind
that will inci'ease its receipts more than its expenses." But this
in many cases, and it maybe said in the great majority of the cases
in which it actually occurs to-day, compels the lower rate for the
longer haul.
Exceptions to the '• long and short haul rule " also arise from
the competition of rival railroads. This fact is also recognized by
Judge Cooley in the case just cited in these words: " Unless the
force of strictly' railroad competition is allowed to create exceptions
under the statute, an existing competition which is supposed to
be of public interest must come to an end." And in a case in¬
stanced by the learned Commissioner he declares that '• the greater
charge for the shorter haul preserves the proper advantage of situa¬
tion, and has in itself no element of injustice to localities." So
it is seen in innumerable instances that to forbid a railroad com¬
pany from engaging in such traffic of an auxiliary character would
either involve the injustice of depriving the company of the profits
which legitimately flow from its principal sources of traffic, or else
compel it to abandon competitive traffic to the detriment of the
public interests. This difficulty was clearly apparent to the Inter-
State Commerce Commission in preparing the Louisville & Nash¬
ville Railroad decision.
The more this whole subject is examined the more evident it
becomes that oceans and rivers, and mountain ranges and arid
wastes, and the interaction of commercial and industrial forces may
and do present to the transportation of commodities by rail '-cir¬
cumstances and conditions " which in the determination of rates
override the single condition of distance. As a general rule it
may be stated with confidence that rates which are enforced by
circumstances and conditions beyond the control of railroad com¬
panies are not only just rates, but in their operation beneficial and
not detrimental to the public interests.
The idea is sometimes industriously inculcated that the lower
charge for the longer than for the shorter haul is an abuse which
has been developed by or has grown up with the railroad system.
This is a great error. The fallacy of the proposition is proved
6
by overwhelming historic evidence, and it is a fact beyond con¬
troversy that the extension of railroads and the development of
railroad traffic has tended to reduce the instances of the lower
rate for the longer haul apjiarently almost to a minimum.
Fourth. There are some especial reasons lehij trans-continental
railroad traffic should be e.r,empted from the operations of the
long and short hatd rule.
The first of these reasons is the sharp competition for this traffic
between rival railroads. That this may and does constitute a valid
exception to the long and short haul rule, as already stated, has
been clearly recognized by the Inter-State Commerce Commission
in the Louisville & Nashville Railroad case.
The second reason for exempting transcontinental traffic from
" the long and short haul rule " is the competition of the ocean route
around Cape Horn and of the route via the Isthmus of Panama.
The fact that competing water lines may induce such discrimina¬
tion in rates has also been clearly recognized by the Inter-State
Commerce Commission, and the merits of the exception are too
apparent for discussion.
The third "circumstance or condition" which justifies lower
" through " rates than certain •• local rates on the trans-conti¬
nental routes is the competition of the Canadian Pacific Railway
in connection with a coastwise steamer line on the Pacific Ocean.
The Canadian Pacific Railway cost about $159,000,000 and was
aided by the Canadian government to the extent of over $180,-
000,000. That government also stands behind the Canadian Pa¬
cific in all its competitive struggles. The railroad is, in fact, the
(Uter ego of the Canadian government in the work of grasiiing as
large a share as possible of the internal and foreign commerce of
the United States. This is not competition but aggression. It is
an open assault by the Dominion government upon the trans¬
continental traffic of the United States. The common sense and
patriotism of the country declare that the trans-continental rail¬
roads of the United States shall be allowed to meet this assault by
all the means of retaliation in their power, and that the United
States Government shall also see to it that this " competition,"
falsely so-called, is suppressed—at least in so far as relates to the
jjortion of the Canadian Pacific line which extends west from
Manitoba.
The fierce competition for trans-continental railroad traffic has
had an unexpected result. The through traffic, at first regarded
as the principal traffic of those lines, has been so divided up be¬
tween rival roads, and the competition for it has so reduced rates
that the various railroad companies participating in it have been
compelled to regard it as an.ciliary traffic, and to regard local
traffic as their principal source of revenue. This has forced the
various companies to the policy of constructing lateral lines
7
throughout an arid region on the average 1200 miles wide from
east to west, and 1500 miles from north to south, a region in
which agriculture can be carried on only by means of irrigation,
and in which according to our present knowledge less than five
per cent of the entire area can be irrigated. This area also abounds
in rich but wideh' scattered mining resources. The railroad train
is here, in an economic sense, like a ship at sea, touching and
trading at islands. A stranger in passing over these lines, even
to-da)', beholds such vast expanses of waste land and meets so
few visible evidences of development that it appears strange to
him that railroads should ever have been constructed under such
apparently unfavorable conditions.
The characteristics of through and local traffic of the railroads
upon which this vast region is entirely dependent for its develop¬
ment has been ably set fortli in a paper submitted to the Pacific
Railroad Commission by the late Vice-President Potter of the
Union Pacific Railwa}-. An)' person who is unable to see that the
physical characteristics of this vast area present " circumstances
and conditions " more potential in the determination of freight
charges than distaiicc^ betrays ignorancis of the topography and
geography and climatology of his country.
One difficulty which has been met in the administrationof the
Inter-State Commerce Act has arisen from a failure to give j^roper
weight to the word " snhsiimtially^'" as it occurs in the phrase
•' under substantially similar circumstances and conditions." Its
obvious meaning is nuiteruilly ajftcting. It is submitted that au)-
circumstance or condition beyond the control of a compaii)' and
materiallj' affecting rates ought to be regarded as constituting a
dissimilarity of circumstances and conditions in the eyes of the
law.
Since the woj'k of creation was ended no other human instru¬
mentality has done a tithe so much to " subdue the earth as the
railroad. It has been a great leveller, but it has not yet removed
mountain ranges nor arid wastes, nor the conditions which they
impose. The perfect conformity of the American railroad system
to the public utility and welfare is the end which we must all have
in view, and in the advancement of this beneficent work the Inter-
State Commerce Commission, within the range of its possibilities,
is expected to be an efficient agency. This it will surely become if it
shall stick to the sound docrines touching questions involved in the
equitable administration of its ¡rowers and duties as announced in
the opinion rendered in the Louisville & Nashville Railroad case.
It was impossible that such an enormous and highly organized
scheme of transportation as the American Railroad system could
have attained to its present magnitude and usefulness without a
great deal of frictional resistance and open conflict with other
forces. The adjustment of this system to the commercial, indus-
8
trial and social needs of the ¡íeoijle has thrown a vast amount of
work and perplexit}- upon the legislative and judicial branches of
the State and National Governments. In the courts the railroads
have had the advantages which wealth affords for the employment
of able counsel and the continuance of expensive suits, but in the
political struggles which have been engendered the railroad com¬
panies have been stricken with impotency. The shoemaker and
the tailor, and the blacksmith and the farmer have outvoted them,
and in many ways secured the correction of abuses, but at the
same time induced legislation characterized by injustice, and
tending to jjroduce harm rather than good. Evils of this sort
are, however, always corrected in this country when seen in their
true light, and it appears certain that out of the conflict of forces
a railroad system fairly in adjustment with the public interests
will eventually emerge and be recognized as a complete expression
of the inherent honesty and integrity of the American mind.
ÍUc /ortunatr (J'iuplarcmcnt of a bivotal ^Irtca.
HISTOmCAL SIvKXCH.
1ÎY JOSEPH NIMMO, Je.
To the. JRditor of the Hdil/may jVch's :
It was only a few pays ago that m}' attention was called to your
criticism upon my discussion of the provisions of the second and
fourth sections of the Inter-State Commerce Act. You take me to
task soirlewhat sharplj' for my comments upon that law. But I
must regard your strictures in the light of a discussion of a great
public question, and as such can, of course, take no exception to
them. The situation of affairs, however, has greatl}- changed
since I wrote, and my views as " to the merits of the law have cor¬
respondingly changed. Ily article appeared June Ilth. Five
days afterwards the decision of the Inter-State Commerce Com¬
mission in the Louisville and Nashville Railroad case was rendered.
It was a surprise to me, and I think also to every person who had
given the subject any attention. Prior to that time the Commis¬
sion had acted upon an interpretation of the law which I opposed,
but in this decision they changed to the very interpretation which
at the beginning I embraced and have since advocated. This in¬
terpretation is, in brief, that the phrase "'under substantially sim¬
ilar circumstances and conditions," in the fourth section, is an in¬
tegral part of the law, that the greater charge for the shorter than
for the longer distance is not forbidden under dissimilar circum¬
stances and conditions, and that in such cases the Commission has
no power whatever to suspend the law, nor to suspend anything
supposed to be the law. The Commission also decided that among
other things competition and cost of service may constitute such
dissimilarity of circumstances and conditions as will justifj' a de¬
parture from the "long and short haul rule." In an opinion ren¬
dered about two weeks later—July 2,1887—United States Circuit
Judge Deady also affirmed this doctrine Is it a strange thing,
therefore, that I now have a much better opinion of the Inter-State
Commerce Act than I had two months ago ? This is, of course, a
matter of no public importance, but is a matter of great national
importance that the Inter-State Commerce Commission has radi¬
cally changed its views as to the meaning of the law, and that ft
has had the honesty and moral courage to state that fact, and to
10
change its course of action. This •' new departure " on the part
of the Commission has been the result of the logic of events, and
of a careful study of the law in its relations to the public inter¬
ests.
Under every form of popular government the history of the
growth of any measure of public policy constitutes largely the
sanction of its establishment. Impressed by this thought, I shall
attempt a brief sketch of the events which have marked the pro¬
gress of the Inter-State Commerce Act since the 15th of December,
1880, when it was reported as a bill in Congress from a conference
committee.
In the debate which ensued, distinguished lawyers and states¬
men, including both the friends and opponents of the measure,
expressed diametrically opposite views in regard to the meaning
of the fundamental provisions of the bill. The fourth section,
which was the bone of contention, reads as follows :
" Sec. 4. That it shall be unlawful for any common carrier sub¬
ject to the jirovisions of this act to charge or receive any greater
compensation in the aggregate for the transijortation of passen¬
gers or of like kind of property, under suhfituiitially similar cir-
ctimstances and conditions, for a shorter than for a longer dis¬
tance over the same line, in the same direction, the shorter being
included within the longer distance ; but this shall not be con
strued as authorizing any common carrier within the terms of this
act to charge and receive as great compensation for a shorter as
for a longer distance : Provided, however, That upon application
to the Commission appointed under the provisions of this act, such
common carrier may, in special cases, after investigation by the
Commission, be authorized to charge less for longer than for
shorter distances for the transportation of jDassengers or property ;
and the Commission may from time to time i)rescribe the extent
to which such designated common carrier may be relieved from
the operation of this section of this act.''
In the course of the debate in Congress the following diverse
opinions were expressed as to the meaning of the section :
1. That it i^rovides an inflexible '• long and short haul '' rule,
and that it does not.
2. That the Commission is authorized to suspend the " long
and short haul rule " only when the circumstances and (conditions
are similar, and that this power extends to cases in whic.h the cir¬
cumstances and conditions are dissimilar.
3. That competition in its various forms may constitute the dis¬
similarity of circumstances and conditions contemjilated by the
bill, and that it may not.
4. That differences in the volume of traffic may justify a greater
cljarge for the shorter than for the longer distance, and that they
may not.
11
5. That differences in the cost of transportation services may
justify a departure from the ''long and short haul" rule, and that
they may not.
C, That the words " the shorter being included within the longer
distance " are vague and ambiguous, and that they are perfectly
clear and intelligible.
7. That the circumstance that goods are hauled from the interior
to a seaport for exportation may justify a less charge than when
not for exportation, and that this circumstance is not a valid rea¬
son for such discrimination.
Senators of great ability, who earnestly favored the adoption of
the fourth section, and about an equal number among those who
opposed it, assumed that it provided a hard and fast rule in regard
to long aud short haul charges, and that the enormous power of
suspending the law under dissimilar circumstances and conditions
was delegated to the Commission.
Senator Brown, of Georgia, thought that the Czar of Russia
could not have a more arbitrary power than is conferred upon the
Commission by the fourth section, while another Senator thought
the jDower conferred upon the Commission is very small, and that
section four is an impotent ¡jiece of legislation.
The Chamber of Commerce of New York, the Peoria Board of
Trade, the Minneapolis Board of Trade and other commercial
bodies sent petitions to Congress protesting against the adoption
of section four, in the belief that it provided an inflexible " long
aud short haul rule."
Senator Cullom, Chairman of the Inter-State Commerce Commit¬
tee and the author of the bill, was unwilling to express any posi¬
tive opinion as to the import of the words " under substantially
similar circumstances and conditions," and was content with the
assertion that the extent to which these words do qualify the
" long and short haul rule " would be judicially determined by the
Commission and the courts. He held, however, that the proviso
confers upon the Commission the power to suspend the rule under
dissimilar circumstances and conditions, i. e., that it conveys both
a judicial duty and a dispensing power. This view had the con¬
currence of quite a number of Senators, but it has since been
negatived by the Inter-State Commerce Commission and by Judge
Deady.
Representative Crisp, a member of the Conference Committee,
in a letter to Senator Hoar declared that in his opinion the fourth
section provided an inflexible long and short haul rule, which could
not be set aside, even on account of the circumstance of compe¬
tition, aud believed that his colleagues on the Conference Com¬
mittee, Judge Reagan and Mr. Weaver, coincided with him in this
view. The out-and-out advocates of an inflexible " long and short
haul rule" in the House of Representatives, headed bj' Mr. Reagan,
12
of Texas, appeared to be firm in the opiiiiou that none of the eir-
cuinstaiices and conditions which, prior to the passage of tlie act,
had caused the railroad c,onipaiiies to charge more for the shorter
than for the longer distance could thereafter be admitted as justi¬
fying causes of such discriminations. But the Inter-State Com¬
merce Commission has decided that this opinion has no footing in
the terms of the statute.
In the public discussion of the bill the idea was advanced that
differences in the cost of transiiortation may constitute dissimilarity
of circumstances and conditions, while others contended that it is
only variations in the elements of cost of transportation which
can occasion such dissimilarity.
The debate was rambling. A vigorous effort to follow it was
enough to make one's head swim. It is difficult to imagine how
the subject could have been more confused by contrariety of
opinion.
A Senator of large experience as a legislator said : '• I have never
in all my experience heard so many diff'erent and strangely con¬
tradictory constructions placed upon the material ])rovisions of
any piece t)f legislation as have been placed upon the material and
arterial provisions of this bill by able constitutional and statutory
lawyers, both in and out of the Senate, since it was reported on
the I5th of December last.''
Senator Frye, of Maine, exju'essed the feelings of a great many
jieople lioth in and out of tlongress. when he said, somewhat
brusquely : I should like to know what the fourth section means
from this discussion. I should like to know how I or mj' constit¬
uents are to know what it means from this discussion. I should
like to know what lights have been thrown upon it. The conferees
disagree in relation to it ; almost, every Senator who has discussed
it disagrees with the other Senators in relation to it. Boards of
trade and legislatures of the different States all disagree as to
what this fourth section means."
Another Senator said : '■ Nobody knows what it means, and yet
we have all agreed it ought to pass."
A distinguishe<l member of th<! House of Representatives, a firm
advocate of an inllexiblc long and short haul rule, a])parently sus¬
pecting the real import of the phrase, "■ under substantially similar
circmmstances and conditions," dedared that the hand of a Talley¬
rand was present in tlu; constI'uction of the bill. But this was
evidently a mistake, for the clause was inserted in ojien Senate,
upon the motion of Senator Camden, of West Virginia, who was
not a mmnber of the Intei -State Commerce Committee. Besides,
Senators Stanford and Brown, and others siq)posed to be especially
friendly to railroad inleicsts, earnestly opjjosed the fourth section
u])on the grouml that it jn'ovided an intlexible "long and short
haul rule," and when the bill had become a law, the railroads of
13
the country, in this belief, overwhelmed the Commissioners with
petitions for relief from its assumed provisions.
Representative Weaver, of Iowa, an earnest advocate of a rigid
long and short haul rule, in opposing the Senate bill, said : " Supjjose
the Great Lawgiver had framed the Ten Commandments with the
same uncertainty. Suppose he had said : ' Thou shalt not steal ;
thou shalt not bear false witness : thou shalt not covet, under sub¬
stantially similar circumstances and conditions the world would
have been without a moral law from Moses to Cullom, and from
Mount Sinai to Pike's Peak."
In both branches of Congress the debate had marked charader-
istics of a legislative comedy.
But there is a divinitj' which shapes the ends both of individ¬
uals and of nations, and the sequel appears to prove that in the
passage of the Inter-State Commerce bill the national legislator
" builded better than he knew."
Near the close of the debate Senator Mitchell, of Oregon, one
of the ablest lawyers in Congress, gave a clean-cut and incisive in¬
terpretation of the fourth section of the bill. He held, Firtit, that
the inhibition against the greater charge for the shorter than for
the longer distance attaches only (1) when the property trans¬
ported is of like kind; (2) when transported in the same direction,
the shorter being included in the longer distance, and (8) under
substantially similar circumstances and conditions. /SccotkI, that
the Inter-State Commerce Commission has no authority to sus¬
pend the long and short haul rule except in cases when that rule,
under the law, is ojierative, i. e., when the circumstances and con¬
ditions are similar, and then only in special cases, upon a proper
presentation of facts ; and. Third, that competition, in its various
forms, cost of transportation services, volume and character of
traffic, may constitute such dissimilarity of circumstances and con¬
ditions as are contemplated by the law. This interpretation of
the fourth section has since been proclaimed b}' Mr. Albert Fink,
one of the ablest railroad men in the country, and it has also been
affirmed by the Inter-State Commerce Commission and by Ü. S.
Circuit Judge Deady. Senator Mitchell a^^x^ears to have based his
02)inion u^jon a state of facts quite similar to that uj^on which the
Commission afterwards reached a similar conclusion.
I adoj^ted Senator Mitchell's inteiqjretation of the fourth section
of the law in the beginning, and have not since doubted its cor¬
rectness. I believe also that the law, as thus construed, will jn-ove
to be the safeguard of just and wholesome regulations of the rail¬
road system of the United States.
In the jargon of debate. Senator Mitchell's clear and logical in-
teiqn-etation did not in an es^jecial manner impress the j)ublic
mind. Other inteiq)retations of the fourth section ^n'evailed in
the Senate and throughout the country. It now seems strange
14
that such erroneous views of the meaning of the section should
ever have gained general assent, for the debate on the Senate bill
which took place from January to Julj', 1886, clearly shows that
it was the intention to exempt carriers from the operation of the
long and short haul rule in cases where " the great law of com¬
petition " renders such exemption proper, and on the 11th of Jan¬
uary, 1887, Senator Cullom, in referring to the words " under
similar circumstances and conditions," stated the historic fact
that " the}' were put there because the original section reported
by the Committee was too rigid, and it was feared it would inter¬
fere with the general commerce of the country."
The press and the people of the country were utterly confused
by the debates upon the bill in Congress, but the opinion pre¬
vailed quite generally among railroad officials that an inflexible
" long and short haul rule " had been provided.
As all freight tarifl's in force at tlie time when the Commission
entered upon the discharge of its duties were based U23on the idea
of conformity to dissimilarities of circumstances and condition,
and as a sudden reversal of the practice would undoubtedly have
thrown a large part of the internal commerce of the country into
confusion, ai^plications for relief began to pour in upon the Com¬
mission as soon as they had taken the oath of office. Albert Fink,
Chairman of the Eastern Trunk Line Association, always cool and
clear-headed, advised the railroad companies to make no appeal
for relief, holding that the long and short haul ruléis not operative
under dissimilar circumstances and conditions and that the Com¬
mission has no power whatever to suspend the law in such cases.
But the companies which supposed themselves to be adversely
affected by the law were unwilling to take the risk of incurring the
five thousand dollar penalty prescribed for violation of its pro¬
visions. Besides, there was a practical consensus of opinion among
them that the granting of relief in cases where the circumstances
and conditions are dissimilar is a proper function of the Inter-State
Commerce Commission. The debates in Congress sustained this
view and the Commission appears to have adojated it without
question.
When the Commission came to the discharge of their duties on
the 5tli of April. 1887, an avalanche of petitions for relief saluted
them. The railroad companies at first thought that a mere ap¬
prehension of incurring the penalty denounced in the law consti¬
tuted sufficient ground for an application for relief, and the Com¬
mission for awhile acceded to this view. But they soon afterwards
became convinced that they had no power thus to apply the law
by jireliininary judgmont. Within ten days from the time when
the law toolc effect, the Commission had, in advance of investiga¬
tion, suspended the operation of the ■' long and short haul rule " for
periods of 60 and i)() days on thirty-seven important trunk lines.
15
covering the transportation interests of more than half the area of
the coimtr}-, and b}' the 18th of Maj' fifty-five petitions had been
riled. The Commission was completel3' snowed under b\' the mass
of accumulated business. If the method of procedure then
adopted had been continued much longer, instead of relieving
orders for 60 and 00 da^-s, the Commission would have been obliged
to issue orders of relief, subject to a hearing somewhere about thé
beginning of the twentieth century. They declared that single
cases " might require for their determination the taking of evi¬
dence all the way from the Pacific to the Atlantic Ocean," and
these cases would even then be subject to constant review, with
ever changing circumstances, on account of new issues constantlj'
arising. The Commission also subsequentlj' declared that if thej^
had continued in this course of procedure they " would have been
compelled to forego the performance of judicial and other func¬
tions which, bv' the statute, are assumed tobe of high importance."
Thej' frankly conceded that the task which they had undertaken
was " superhuman," and that a construction of the statute which
involved such a scheme of administration would render the due
administration of the law altogether impracticable.
During this period of doubt and perplexitj'. Commissioner
Morrison wrote to Senator Reagan, asking. ■' What kind of a case
was in j'our mind when the clause was adopted allowing a sus¬
pension of the fourth section of the Inter-State Commerce law ? "
The sturdj- Texan, who for ten v-ears had been fighting for an in-
fiexible " long and short haul rule," replied : " I must answei',
with great deference to the opinions of the Commission, that there
are no circumstances or cases which will justify it in suspending
section four." Mr. Reagan also repudiated the idea that the com¬
petition of a water line can be a just cause of sus2)ension. He
seemed to regard the power of sus23ensiou in sj^ecial cases as out¬
side of anj' question of comjietition or other ordinary- cause of dis¬
crimination in rates.
This ojfinion gave the Commissioners no comfort.
It soon became evident that the course upon which they had en¬
tered, if persisted in much longer, would wreck both the Commis¬
sion and the law. In a communication to the traffic manager of
the Minnesota A N.W. Ry. Co., under date of IMay 18, the Com¬
mission expressed their determination to grant no more tenqjorary
orders of relief. That document clearly revealed the trials of
their p)osition. It might have been 2)refaced by the legend 'A
profiDidis cldUKini.
But the Commission was jJassing through an exj^erience of in¬
estimable value to itself and to the country, for it demonstrated
the fact that the jjoj^ular view as to the sco23e of their 23owers in
the matter of sus2)ending the long and short haul 23rovision was
not only im2rossible of administration, but without equal founda-
16
tion under any sensible rule of interjjretation. A month later the
Coininission had reversed its whole coarse of procedure and placed
the law upon its feet.
An investigation is always a process of groping one's way out
of the darkness into the light. The inter-State Commerce Com¬
missioners were diligent investigators from the beginning. After
their opinion of Hay 18th they tool? nearl}' a month for study and
reiiection. 'They invited light from all sources, and considered
carefully the views of all who desired to be heard in regard to the
important matter tis to n-hether the couipaiiicii are or are not
empon-ered hy the lav to make rates vhioh are not iu. conformity
to the lonej and short haid, rule in cases 'inhere the circumstances
and conditions attendiny the tmo an- dissimilar. In a word, the
(|uestion which confronted them was, do the six words '-under sub¬
stantially similar circumstances and conditions " imply a judicial
duty or a dis^jensing power ? This question involved the essential
character of the law and the possibility- of its administration.
The result of this inquiry brought the Commission squarely to that
interpretation of the law which had been proclaimed by Senator
Mitchell in his speech in the Senate on the 12th of January, viz:
that the companies are authorized to charge more for the shorter
than for the longer distances under dissimilar circumstances and
conditions : that in such cases the Commission has no i^ower to
suspend the law, and that all the competition of water lines, of
railroads, and of commercial forces, among the circumstances and
conditions which may alone or together justify a departure from
the general rule. This interpretation of the law was promulgated
June 15, 1887, bv a unanimous Commission, in deciding upon the
petition for relief fíled by the Louisville & Nashville Eailroad
Company.
This new interpretation of the law involved a radical change in
the method of administering it. The Commission, therefore,
announced the following as the correct mode of procedure : The
companies will continue to exercise the right to make their own
tariff's, judging for themselves first as to whether the circumstances
and conditions in particular cases do or do not justify a greater
tliarge for the shorter than for the longer distance. In c.ase any
person thinks he is injured by such charges he may institute pro¬
ceedings before the Commission, in the hearing of which the bur¬
den of proof is thrown upon the company to show that the charge
is justifted by a dissimilarity of circumstances and conditions.
The Commission will then determine the case in its judicial capac¬
ity. This new method of procedure, sifted from an almost infinite
number of de2iartures from the "long and short haul rule" all
those cases which in the nature of things are jn-o^jer, and left for
judicial determination the conqiaratively few cases which are im-
2)roper. The difference in theory between the two methods of
17
administration is that between restraining law-breakers from going
wrong and attempting to show law-abiding people how to go right.
The method at first pursued was an awkward attempt at railroad
management, which, if persisted in, would have clogged the wheels
of commerce, while the latter is a sensible and practical method
of regulating commerce among the States. Thus the Commission
threw off the incubus of an immense mass of assumed duties and
the exercise of its function became entirely practicable. As before
shown, this result has come about naturally, and in so far as can
be learned, fortuitously. The introduction of the words " under
substantially similar circumstajices and conditions," as they occur
in the fourth section, is now seen to have been the fortunate em¬
placement of the pivotal idea of the law.
Even during the brief period when the benign " long and short
haul rule " was assumed to be prevalent, it began to show its
teeth. The managers of certain trunk lines thought it was going
to enable them to shake off the competition of certain lateral con¬
necting roads which had converted " longer hauls " of the former
into shorter hauls of their own routes. There was talk of legiti¬
mate and illegitimate competition. But there is nothing worthy
the name of competition which is not legitimate in this free coun¬
try, where of all things commercial intercourse is free.
The experiences of the Inter-State Commerce Commission have
been of immense value in illustrating certain facts concerning
The Administration of a Long and Short Haul Rule.
There appear to be but three possible methods of administering
" long and short haul rule " as a statutory provision.
First. To establish an inflexible law upon the basis of the idea.
But this would go in the face of commercial and economic law^s
which are stronger than any statutes of human contrivance,
Sec07ul. To make the rule subject to susiiension or modifica¬
tion by a Commission as ch-cumstances and conditions, L e., com¬
mercial and economic laws, may require. But the Inter-State
Commerce Commission has proved by the painful experiences of a
few short weeks that this method of administration is utterly im¬
practicable, It has been shown to be nothing more nor less than
a vain attempt at railroad management in the name of railroad
regulation.
Third. The only practicable method of giving the '' long and
short haul rule " a name to live in the administration of the law
appears to be to enact that it shall prevail only when, as expressed
by the phrase " under substantiall}' similar circumstances and con¬
ditions," it does not conflict with commercial or economic laws.
But this is simply to declare that the latter shall prevail, and that
the railroads of the country shall conform to the public utility and
18
welfare. This is the regulation and not the rule of the railroads
by the Government, and it falls within the legitimate scope of law
making. The right thus to regulate is aside from all questions of
property or of franchise, and the exj^eriences of the world have
proved it to be a necessary and proper function of government.
The problem of the age is how to exercise this power justly and
beneficialhv
This sketch would be imperfect without a brief consideration of
the merits of the " long and short haul rule as an element of
statutory provision.
The I.wpk.xi'ticability of .a Loxo .ixd Short H.aul Rule.
The futility and absolute misohievousness of any hard and fast
rule based upon the idea of conformity to the single condition of
distance is illustrated in the almost limitless diversity of condi¬
tions which affect rates throughout the country. Forest and mine,
and river and lake, and fruitful soil and waste places, assert their
claim to a voice in the matter. So do the wages of labor and all
other elements of cost. The most striking characteristic of our
commercial and industrial life is that of a competitive struggle.
Competition is at once the best stimulus and the best regulator of
trade. There is the never-ceasing competition of soil with soil, of
mine with mine, of foi'est with forest, of product with product, of
industry with industry, of market with market, and of transporta¬
tion with transportation. The experiences of mankind ¡irove that
the orderly conduct and the very persistence of organized society
inheres in the untrammelled operation of these forces. The high¬
est and best function of human law is to supply the instrumental¬
ities necessary to prevent infractions of natural law. But to
ticularize ; An iiiHexible long and short haul rule would run
counter to the needs of the country very extensively. Railroads
whose through traflic is most remunerative might be forced to
lower just and reasonable loc.al rates to a point which would em¬
barrass and perhaps bankrupt them, while other lines whose local
traihc is most remunerative would be obliged to raise through
rates to a point at whiith tln-ough traffic would be destroyed. The
latter case is in a marked degree illustrated in the condition sur¬
rounding the transcontinental railroads of this countiy. Those
lim^s were built, at least in so far as governmental patronage is
conceriKid. to subserve groat jiolitical and industrial ends through
free, sjieedy, and uninterrupted social and commercial intercom¬
munication. Two remote sections of the country were to be
united, and a vast arcia which, during preceding ages, had been
the range, of the bufliilo and the dwelling-place of the savage, was
to be subdued to the uses of civilized man. This has been done,
and it stands as one of the grandest achievements of human pro-
19
science and enterprise. The commerce over our transcontinental
railroads could not now be interrupted except through a war cost¬
ing, perhaps, several times as much as the total cost of all these
lines. For the jjrivilege of constructing a railroad of very much
less importance with the object of reaching the markets of the
United States, the pioneers of Manitoba are to-day risking a
bloodj' encounter with the government of the Dominion of Can¬
ada.
At first it was supposed that the through traffic of the trans¬
continental lines would be by far the most remunerative, but the
reverse has proved to be the case. This is one of the wonderful
developments of the age. And now the proposition of some of
the most earnest advocates of an inflexible long and short haul
rule is to force those companies to pursue such a course as would
involve a virtual abandonment of their through traffic—the very
traffic for which, above all other considerations, the patriotism
and public spirit of this nation demanded their construction. In
the debate which has ensued, such advantages taken of oppor¬
tunity as are the unavoidable concomitants of human enterprise
are now brought forward to give point to specious arguments.
A fair analysis of the case j^roves it to be one of frictional resist¬
ances and incidental evils on the one hand as against governing
jjrinciples and important jjublic interests on the other.
Similar instances of the impolicy of an inflexible long and short
haul rule, and, in the magnitude of the interests involved, more
striking ones, could be adduced in other parts of the country, and
notably in the States situated south of the Potomac and Ohio
rivers. But in this country there need be no fear that success
can ever attend anj- attempt to correct evils by expedients which
tend to arrest national progress. Any man or combination of men
in public or in private station who may succeed in accomplishing
that by an inflexible " long and short haul rule will not long-
thereafter be led to appreciate the ¡practical wisdom of the remark
of Mr. Dick Swiveller, that '■ no obscure individual ever yet set
himself up against fate and succeeded.''
Infirmities of the Long and Shout Haul Kui.e.
As a rule rates and fares are graded according to distance, and
thej' will undoubtedly continue to be so graded, both in the in¬
terest of the public and of the railroads, so long as other circum¬
stances and conditions do not intervene to the extent of reversing
this, the normal rule. Exceptions to the rule embrace, however,
a large and vitally imjiortant part of the internal commerce of the
country. In determining the exceptional cases involving a greater
charge for the shorter than for the longer distanc.e, unjust dis¬
criminations will of course be made. This is unavoidable. Ex-
20
actly liow rates shall be graded is not a thing which can be figured
out. It must be determined ujjon judgment and the lessons of
experience. Nevertheless, for the cure of such wrongs a general
rule forbidding a greater charge for a shorter than for a longer
haul is utterly vague and impracticable. This may be shown as
follows : Suppose a railroad 500 miles long with a large commer¬
cial city at each end, a greater charge for a haul of 190 miles to a
local station than for the full distance of 500 miles might, on ac¬
count of relative cost of the services rendered in the two cases be
entirely just and reasonable, whereas a greater charge for ten
miles than for five hundred miles would be outrageous. Yet both
would fall alike under the ban of an inflexible rule forbidding a
greater charge for the shorter than for the longer haul.
Again, in the economies of transportation it is susceptible of
proof upon the basis of actual cost of service that a rate of GO
cents to the 190 miles local station as against 40 cents for the full
500 miles might not be an unjust discrimination, while a charge
of five dollars for the shorter as against 40 cents for the longer
distance would be manifestly unjust, but an inflexible long and
short haul rule would treat both alike.
Then, again, dissimilarity of circumstances and conditions not onlj'
in particular cases justify a greater charge for the shorter than
for the longer distance, but in many cases justify a much greater
propoi'tionate charge for the longer than for the shorter distance.
Suppose the railroad instanced has a line extending beyond the
500 mile point, and that while it charges 40 cents to the 500 mile
station it charges 80 cents or even one dollar to a point onl}' 25
miles be3'ond. Circumstances and conditions with respect to ter¬
minal facilities, car service, volume of traffic, etc, might justifj'
this latter charge, manifestlj' so out of proportion to distance,
while a charge of five dollars to the 525 mile point as against 40
cents to the 500 mile point would constitute an unjust and very
absurd discrimination. But the blind side of a '• long and short
haul rule" is alwa3's turned towards this class of cases. Generally
speaking it is just to charge more for a longer than for a shorter
haul, but the practical (juestion as to luno much more is a matter
which must be left to judgment and the lessons of experience.
So tin; vaunted long and short haul rule is too indefinite to be
regarded as a principle of regulation, for as shown it has no uni-
iforni relation to aiu' class of abuses.
The fact seems to be generidl3' ignored by all advocates of an
inflexible long and short haul rule that distance is only one of
many circumstances and conditions which tend to determine rates.
But after all, even as it is limited and practicall3' estojiped by
the phraseology of the fourth section of the Inter-State Com¬
merce Act, the long and short haul rule, like certain other legal
fictions, may i)erhaps bo made to do good service in a just and
21
equitable scheme of regulations, and the work of the Inter-State
Commerce Commission thus far seems to give promise that this
may be the result of their determination of the idea as it has found
lodgment in the statute.
Aside from the provisions of the fourth section there is a weak
point in the Inter-State Commerce Act which may here be touched
upon, viz :
The Competition of Canadian Railroads.
Under the 29th Article of the Treaty of Washington, and of the
exceedinglj' liberal regulations of the Treasury Department made
in pursuance thereof, the principal trunk railroads of Canada have
become practically constituent members of the railroad sj'stem of
the United States. Thus Canadian railroads are now enabled to
engage in commerce between different points in the United States
with much less constraint of our customs laws and regulations
than is imposed upon railroads of the United States in transport¬
ing dutiable merchandise from the seaboard to interior jiorts of
entry.*
Prior to the enactment of the Inter-State Commerce Law oui-
transcontinental railroads and Eastern trunk lines could, in some
measure, protect themselves against rival Canadian lines through
voluntary associations by means of pooling. But as the law now
in force forbids pooling, our own lines are greatly restrained by
various provisions of the Inter-State Commerce Law, while the
Canadian lines are left free. It would be a wrong which our people
would not be slow to resent, if, under the privileges of unrestricted
reciprocity in transportation affairs, the competing Canadian lines
should be allowed to depredate upon our east and west internal
commerce to the extent of turning trade out of its natural and
most convenient courses. The Inter-State Commerce Law, singu¬
larly enough, has prescribed against Canadian railroads for the
much smaller offence of neglecting to publish rates on American
goods transported " in transit " through Canada the penalty of
subjecting such goods to customs duties, as if they were of foreign
introduction. It would be eminently fitting if Congress should
prescribe this penalty for the much more serious offence above
mentioned.
In this connection it is of interest to advert to the fact that while
* In the transportation of imported goods from a seaport to an interior port
of entry, the railroads of this country feel the hand of the Government at
every movement. In such cases a bond is required in a penal sum equal to
double the duties chargeable on the goods ; the goods must be sent from the
vessel to the oar under inspection of an officer of tlie customs, and then
tallied into the car according to the invoice. But American goods going
through Canada are merely manifested as they go into the car, entry having
been made at the Custom-house. The car is locked and sealed, and is not dis¬
turbed or examined until it reaches its destination in the United States.
22
our railroads are so fully exposed to the competition of Canadian
railroads, American vessels on the lakes are absolutely protected by
our navigation laws against foreign competition. These laws ab¬
solutely prohibit Canadian vessels from engaging in our domestic
commerce.
Conclusion.
The interpretation of the " Act to Regulate Commerce," an¬
nounced by the Inter-State Commerce Commission in passing upon
the petition for the relief of the Louisville and Nashville Railroad
Compam', outlines the whole theory and practice of a just, reason¬
able, and as I believe also, a beneficial system of regulation. It is
now seen that what is needed in this country is to build ujion the
lessons of experience in concrete cases a bodv of law distinguishing
between just and unjust discrimination, and between reasonable
and unreasonable charges, and not to attempt to reach that grand
resultant of practical knowledge by means of any single specious
rule such as the "long and .short haul rule."
Differences of opinion will naturally arise as to the weight which
should be attached to the various commercial and economic forces
which constitute the " circumstances and conditions " of the law,
and the Commission will of course expect to see their views on all
these points earnestly debated as the work goes on. In this great
undertaking they will have the best wishes for their success of citi¬
zens generally, and it is reasonable to suppose also that they will
meet the cordial co-operation of the railroad companies. The
managers of almost all the important trunk lines have for years
been trying to abate certain abuses, but not with entire success,
for lack of legal authoritj'.
Let it be remembered always that the question of railroad regu¬
lation presents to the people of this country no less a problem
than the betterment of a system of transportation which has grown
up without special governmental supervision, which has been the
chief instrumentality of a grander industrial development than the
> world ever saw before, and is to-day one of our chief causes of
national pride.
The determination of all the difficult questions which will be pre¬
sented to the Inter-State Commerce Commission will require the
mastery of a vast amount of statistical and other information and
a clear understanding of the course of the development of the
national industry and of the relations of transportation thereto.
The Commission has only reached the threshold of this great work,
but that from year to year they will be able to report good progress
cannot be doubted, since already they have " magnified the law
and made it honorable."
JOSEPH NIMMO, Jii.
Huntington, Long Island, N. Y.,
A ugust 29, 1887.