The first response to the new Federal law by the railroads was entirely favorable.[547] They sought to obey its mandates both in letter and spirit. The Commission reports in 1888 that the railroads "conformed promptly" to their orders; although in the South and West they were "moving more slowly." On the other hand, the new Commission under the leadership of Judge Cooley, an able jurist trusted by all parties concerned, was equally conciliatory in spirit. Many desirable changes were brought about in railway practice. Attempts were made to remodel tariffs all over the country, particularly in the East, to conform to the long and short haul clause.[548]

The immediate effect of acquiescence in Section 4 was to compel, in many parts of the country, a reduction of the local rates in order to reduce them below the rates charged to terminal and competitive points. Thus, for example, throughout trunk line territory, they were almost uniformly adjusted to meet this requirement. Even in the southern states, where in some quarters the most persistent opposition to the law has from the first existed, there was a patent disposition shown to recognize the justice of such legislation. The Southern Railroad modified its tariff all along the line as far as Atlanta, although it claimed inability to make changes beyond that point. For nearly three years, in fact, the carriers conformed in an increasing degree to this requirement of the law.[549] A sincere effort toward uniform classification of freight, with substantial results in the direction of simplification of schedules, extended over several years. Many pools were disbanded; all were reorganized in conformity with the statute. And in the matter of uniformity and publicity of statistical returns, friendly coÖperation between the railroads and the Commission, brought about great improvements in accounting practice. No considerable popular interest in the new commercial tribunal, to be sure, is indicated by the volume of its business. After five years experience, only thirty-nine formal complaints were filed in 1892. But this may have been due in part to the natural hesitancy of shippers to antagonizing the roads by coming out into the open with their grievances. Or, perhaps, it was merely because the people at large were as yet quite unfamiliar with the law and with the ease of procedure under it.

The earliest intimation of determined resistance by the carriers came in connection with prosecutions for rebating in 1890. This abuse was still widely prevalent. The Commission complained in that year of the "general disregard" of the law against personal discrimination; and set out to prosecute with vigor. But witnesses called upon to testify before grand juries as to such practices, proved recalcitrant.[550] Corporations could be made amenable to the law only through the instrumentality of persons in their employ. And guilt in such matters could be detected only by the testimony of those who had directly witnessed, or participated in, the unlawful acts themselves. As one writer has put it, "Rebate contracts are not usually negotiated before large audiences nor are rebate payments commonly made upon street corners. An essential element in these practices, quite aside from their legality, is the secrecy with which they are conducted." It soon became apparent that unless this mantle of secrecy could be stripped off in preliminary proceedings, not even indictments could be had,—to say nothing of the proof needed for subsequent conviction.

The first ground for contesting the right of the government to extort testimony from unwilling witnesses arose, oddly enough, from an amendment of the law intended to increase its effectiveness. Originally punishable only by heavy fine, on recommendation of the Commission, Congress added in 1889 an amendment whereby departure from the published rate was made punishable also by imprisonment. By this change criminal, as well as civil, procedure was thus brought into play. The amendment, moreover, extended the punishment to shippers; the railroad official who gave rebates having alone been liable hitherto. An unexpected result speedily followed. In 1890 one Counselman, a shipper, questioned concerning his enjoyment of less than the open rate upon grain, declined to answer, taking refuge under the Fifth Amendment to the Constitution of the United States. This declared that "no person ... shall be compelled in any criminal case to be a witness against himself." The witness persisted in his refusal to testify even before a district judge: and the case went on appeal through the Circuit Court which decided in favor of the Commission, up to the Supreme Court of the United States. This tribunal in 1892 held that the Revised Statutes of the United States which for twenty-five years had been held to protect the constitutional rights of witnesses when called upon to give testimony, against criminal proceedings based upon such evidence, did not in fact adequately afford such protection. Counselman was ordered discharged from the custody of the United States Marshal. It was held, furthermore, "that a statutory enactment to be valid, must afford absolute immunity for the offence to which the question relates."[551] Congress promptly passed a law to this effect in the following year. The matter did not, however, rest here. The validity of this later statute had now to be upheld. And, with discouraging defeat in 1894 in an Illinois Circuit Court, the issue had to be raised again a year later elsewhere, to be then carried on appeal a second time to the Supreme Court. This took place in the so-called Brown case.[552] The final outcome in 1896 was a complete denial of the right of witnesses to withhold material testimony. But it required six years of litigation to bring about the desired result.

During the pendency of the proceedings above described, a second line of resistance to the government developed. Not the merely negative personal right of witnesses to withhold testimony, but the positive legal authority of the Commission to exact it, was called in question. This struck at the very roots of all procedure. For it challenged the validity of the Act itself. In how far might an administrative body, independently, have power, hitherto resident alone in the courts and Congress, to compel the attendance and testimony of witnesses as well as the production of papers? Section 12 of the Act was evidently intended to confer such powers as were possessed and might be delegated by the Congress. But then there was the Constitution again to be considered! Certain witnesses declined to produce books and answer questions in 1892. One Brimson was selected for a test case. The first decision by the Circuit Court held these sections of the statute to be unconstitutional on the ground that "Congress cannot make the judicial department the mere adjunct or instrument of the other departments." But the Supreme Court of the United States in 1894 reversed this judgment; and, unreservedly, although by a bare majority opinion, affirmed the constitutionality of the procedure under the Act.[553] This Brimson opinion, together with the Brown decision two years later, were confidently believed to have so strengthened the arm of the government that rebating might at last be eliminated. But, as will shortly appear, an entirely new law was yet needed to eradicate the evil. For the moment, however, the right of Congress to legislate and of the Commission to act, had been upheld.

The relation of the Interstate Commerce Commission as an administrative body to the Federal courts under the provisions of the Act of 1887, proved unsatisfactory from the first. In order to understand the situation, it may be well to review the ordinary procedure. Formal complaint having been filed, the Commission heard the case and promulgated its decision in the form of an order to the carriers. If they chose to comply with it, well and good. Otherwise, the Commission must apply to a Federal court for the issuance of a judicial writ to compel obedience to the order. Thereupon the court proceeded to review the case; and upon the findings to issue an order of its own. From this order, however, appeal might be taken even up to the Supreme Court. Then, and then only, did the original mandate of the Commission have the force of law. Practically, two results followed, as shown by the experience of the succeeding years. There was intolerable delay in the redress of grievances; and, in the second place, all definitive proceedings were postponed until the case had gone on appeal to the courts. In other words the Commission instead of being a coÖrdinate body with the courts, was reduced to an entirely subordinate position. Its function became merely to institute proceedings, and thereafter to appear as a complainant before other tribunals competent alone to decide the case. Intolerable delay in procedure was the constant complaint of shippers. Years elapsed before final judgments were rendered. The average duration of cases appealed was not less than four years. Sometimes they extended over twice that period. Often, as in the Charleston, S. C., case in 1898, several years elapsed before the Commission itself rendered a decision. Knotty cases were sidetracked.

But the main source of delay was in the carriage of cases on appeal up to the Supreme Court of the United States. They had to await their turn in regular order, being given no priority on the crowded dockets. The Social Circle and Import Rate cases, soon to be discussed, consumed five years in litigation, even after the Commission had rendered its opinion. The Florida Fruit Exchange case involving rates on oranges, originally decided by the Commission in 1891, was for six years thereafter before the Federal Courts. The Georgia Railroad Commission cases were not settled for nine years. Nor did the tedious process end here. After the judicial review, which usually covered the law points, the entire question had to be remanded to the Commission for a new order in conformity with the findings of the court. After nine years of litigation in the Chattanooga case, back it went to the Commission to be re-tried after consideration of other commercial factors. First decided in 1892, it was reopened in 1904.[554] Is it any wonder that the number of formal proceedings instituted on complaint of shippers steadily dwindled year by year? In 1901 only nineteen petitions were filed. Business of this sort was almost at a standstill.

A second unsatisfactory feature of the relations of the Commission to the courts, lay in the refusal of the latter to accept the evidence taken before the Commission in the original proceedings as final. Trouble began in 1888 on the first appeal, known as the Kentucky and Indiana Bridge case.[555] The court treated it as an original proceeding, even as to questions of fact; and proceeded to consider it de novo. This of course involved a duplication of all expenses; which, in causes sufficiently important to appeal, were very heavy. Ten volumes of typewritten testimony, each as large as the Congressional Record, were taken, for instance, in the San Bernardino case.[556] Both shipper and railroad, therefore, commonly came to regard the proceedings before the Commission as merely a necessary formality to be observed prior to the conclusive adjudication of the matter by the courts. This placed the Commission in a most awkward predicament. It was compelled by law to render a decision upon an entirely imperfect presentation of facts. And this decision was thereafter liable to be reviewed upon the basis of entirely new testimony. Thus in the leading Alabama Midland case, involving the reasonableness of rates to Troy, Alabama, as compared with adjacent towns, much depended upon the existence of effective competition with the railroads from boat lines on the rivers at other places.[557] Before the Commission the evidence adduced by the carriers dwelt upon the navigability of the Chattahoochee river as compelling lower rates at Columbus and Eufaula than at Troy, an inland town. Yet, when the case was really opened up in appeal proceedings, it appeared that this magnificent waterway was really dry about half the year; that the channel was never deeper than three feet; and that boats were at all times of the year "embarrassed by the overhanging trees." How could the Commission be expected to pass upon vital questions wisely under such circumstances? Whether wilfully done or not,—and evidence is not lacking of a deliberate policy adopted in some cases,—the inevitable effect was to bring the Commission and the law itself into discredit. So accentuated did this evil become, that in the Social Circle case the Supreme Court distinctly discountenanced the practice, declaring it to be the intention of the law that all material facts should be disclosed in the original proceedings.[558] But it was not until 1906 that the mode of procedure on appeal was by statute clearly defined. In the meantime public interest in the work of the Commission was bound to wane.

In this connection it may not be out of place to refer to the persistent use made of the record of the Commission in court proceedings under these adverse circumstances, as a plausible argument by the railroads in later years against any augmentation of its powers. One brief, for example, recites that "since 1887, forty-three suits have been instituted to enforce final orders of the Commission as to rates. The net result of the action of the courts shows two affirmances and thirty reversals." It continues later, "as over ninety per cent. of the Commission's orders as to rates which have gone before the courts have been overruled, it is impossible to foretell what havoc would follow from the exercise of such powers." This statement is entirely true, but it is not the entire truth. We may profitably consider the cases of sufficient importance to have been passed upon by the Supreme Court of the United States. Between 1887 and 1905, sixteen such decisions were rendered on cases appealed for enforcement by the Interstate Commerce Commission. Fifteen of these were decided in favor of the carriers, while only one sustained in part the contention of the Commission. At first sight, this record certainly appears to warrant the condemnation of the Commission. A body so persistently on the wrong side of great questions as this record indicates, would surely invite distrust. There were two answers to this contention, however, which merit consideration before a final judgment can be rendered. One of these was the irregularity of procedure, above described. The other was that these court cases had nearly all involved, not so much the administrative application of the law to economic abuses, as the purely judicial interpretation of the law itself.

Only by means of concrete cases decided by the Commission as an administrative body, could the scope and meaning of the original law be determined. This was a most difficult task hinging upon the utmost legal technicalities and refinements. Even the most learned judges failed to agree among themselves. Thus in eight of the sixteen cases above mentioned, the decisions in the lower Federal courts failed of agreement with the final decree of the Supreme Court. In the Cartage case,—involving the legality of a railway giving one shipper free cartage of goods to a railway station as an inducement to ship over its line, while withholding the privilege from another,—the Commission was sustained in the Circuit Court and reversed in the two higher tribunals. In other instances, like the Social Circle case,—turning upon the discrimination in freight rates against small towns in favor of large competitive centres,—the first court ruled adversely, while the Circuit Court of Appeals and the Supreme Court sustained the Commission in part. Or yet again, as in the Chattanooga case,—wherein this city complained against a higher freight rate from New York than the rival city of Nashville enjoyed, although the goods for Nashville passed through Chattanooga and were hauled one hundred and fifty-one miles further,—both lower tribunals sustained the Commission only to be finally overruled by the Supreme Court. The fact that in only eight of these most important cases the courts could agree among themselves indicates the nicety of the legal issues comprehended. All parties were in fact working much in the dark, both as to the intention of the original law and as to the possible effects of its interpretation. The charge of incompetence, if it held good for the Commission, applied equally well to a large number of the most learned judges in the Federal courts.

Another indication of the extreme delicacy of the legal issues involved, is found in the lack of unanimity even among the justices of the Supreme Court itself. In nine of the sixteen Supreme Court cases the final decision was not rendered without dissent. As the lower courts were divided among themselves, so the justices of the Supreme Court were apparently somewhat at sea. The minority, to be sure, was small, in most cases being due to the failure of Justice Harlan to concur. But in the far-reaching Import Rates case,[559] the court was more evenly divided. The issue raised, concerned the legality of lower through rates on imports from Liverpool to San Francisco via New Orleans, than were granted on domestic shipments from New Orleans to the same destination. Thus the rate on books, buttons, and hosiery, from Liverpool to San Francisco through New Orleans was $1.07 per hundred pounds. At the same time the domestic shipper was compelled to pay $2.88, or two and one-half times as much, for a haul from New Orleans to San Francisco alone. In another important instance, tin plate was carried from Liverpool by steamer and rail through Philadelphia to Chicago for twenty-four cents per hundred pounds. For the American merchant in Philadelphia the rate to the same market was twenty-six cents. For the inland haul alone the Pennsylvania Railroad was receiving sixteen cents on the foreign goods, while coincidently charging American merchants ten cents more for the same service. Discrimination against the American merchant in favor of foreign competition, not infrequently more than sufficient to overbalance any supposed protection afforded by the tariff, has been repeatedly proved in such cases as this. The duty on imported cement was eight cents per hundredweight. In one instance, this duty with the total freight rate added amounted to only eighteen cents, as against a rate of twenty cents for the domestic producer from New York to the same point. There were reasons for this grievous discrimination against the domestic shipper, mainly concerned with the vagaries of ocean freight rates. Steamers must have ballast for the return trip to equalize out-going shipments of grain and other exports, and they will carry heavy commodities, such as salt, cement, crockery, and glass, at extremely low rates. Nevertheless, such imported commodities can be sold to advantage in competition with domestic goods only when the railways will contribute equally low rates to complete the shipment.

The Interstate Commerce Commission in these Import Rate cases originally held that such discriminations were unlawful. Two appellate courts, in turn, sustained this view. Finally, however, the Supreme Court decided, with three members, including the Chief Justice, dissenting, that the Interstate Commerce Law as phrased did not expressly prohibit the practice. Everything turned upon the interpretation of certain clauses in the law. No question was ever raised as to the economic issues involved, nor was it competent to these tribunals to pass upon such issues. The question was simply and solely this: When the Act to Regulate Commerce forbade inequality or discrimination between shippers, did it contemplate competition between shipments originating within the country and others from foreign ports? Was the Interstate Commerce Commission, in other words, empowered, in interpreting this act, to consider circumstances and conditions without as well as within the boundaries of the United States? If it was entitled to consider solely domestic conditions, it was certainly right and economically sound in forbidding such practices; if, on the other hand, it was required to take account of commercial conditions the world over, irrespective of the effect upon the domestic producer and internal trade, its decision should have been favorable to the railroads. To appreciate fully the extreme nicety of the legal points involved and the delicacy of the economic interests at issue, one must needs read the extended opinions both of the majority of the Supreme Court and of the three dissenting justices, including Chief Justice Fuller. But to interpret the reversal of the original decision of the Interstate Commerce Commission by this tribunal as in the slightest degree involving incompetence or judicial unfairness is a misrepresentation of all the facts involved. As in the preceding cases touching the interpretation of the long and short haul clause, it may fairly be said that the consensus of opinion among business men, and certainly among the professional economists of the country, was on the side of the Commission in condemning such practices. As to the law, that was decided otherwise by a narrow majority.

The final breakdown of the law of 1887 came, however, not from mere defects in procedure, but from the adverse construction placed by the Supreme Court of the United States upon its fundamental clauses, viz., those concerning the exercise of rate-making power by the Commission. Whether or not it was the intention of Congress to delegate such power, seems not to have been considered for some years. At all events, within two months after the law was passed the Commission certainly interpreted the law as giving it, not only power to investigate but to prescribe remedies for what it conceived to be unreasonable charges. The right to exercise general rate-making power in first instance was distinctly disclaimed.[560] But the right to prescribe a modification of existing rates on complaint was repeatedly affirmed, without question either by the carriers or the Federal courts.[561] The first order of the commission in Evans vs. The Oregon Navigation Company directed a reduction of the rate on wheat from Walla Walla, Washington, to Portland, Ore., from thirty to twenty-three and one-half cents. It was promptly complied with. Then came the Farmington-Red Wing, Minn., wheat case, touching not absolute but relative rates between two competing places. The order that the charge to one town should not exceed that to the other by more than one-third was likewise obeyed. Even freight classification, not specifically mentioned in the Act, was supposed to be fully subject to the Commission's control.

In the Reynolds case, railroad ties and lumber were ordered to be grouped together, without contest. The activity of the Commission at this time in promoting uniform classification elsewhere discussed,[562] was evidently based upon a similar belief in its legal competency to act. For nearly a decade attention seems to have been so concentrated upon matters of judicial procedure, that this more fundamental proposition was neglected. Moreover, all this time was needed to secure a final pronouncement from the Supreme Court, which was alone competent to settle it as a matter of law.

It was not, then, until almost ten years after the institution of the Commission, in fact, that its rate-making power was denied. The first shadow of doubt seems to have been expressed in the decision of the Supreme Court in the so-called Social Circle case.[563] This involved the reasonableness of rates from Cincinnati to the town of Social Circle, Georgia, as related to the rates to Atlanta and Augusta on either side. Disregarding other phases of the case which concerned the interpretation of the long and short haul clause, the Commission had, when the case was first decided in 1891, ordered a reduction of the rate from Cincinnati to Atlanta from $1.09 to $1 per hundred pounds. This case was carried to the Supreme Court, where decision was finally rendered in 1896. Purely as an obiter dictum the court discussed briefly the interpretation of the original act in respect to rate-making power. It expressed a reasonable doubt in the premises, even going further and confessing inability to find any provision of the act "that expressly or by necessary implication confers such powers." It does not seem clear whether by this statement the court had reference to the arbitrary prescription of rates in first instance to the carriers, or merely to action of the Commission in prescribing rates after complaint, in order to redress grievances.

Several decisions of circuit courts during 1896 reËnforced the judicial doubt as to the validity of the rate-making power of the Commission. Thus, for example, in the case of Coxe Brothers,[564] involving rates upon anthracite coal, which, by the way, had been pending since 1891, the Circuit Court of Appeals expressly declined to enforce an order of the Commission, stating that it "is not clothed with the power to fix rates which it undertook to exercise in this case." The court's reasoning in the Social Circle case was followed and expressly cited. During the same year, 1896, other cases, such as that of the Truck Farmers' Association, were decided in the same spirit. The final adjudication of this point, however, was reserved for the decision in the so-called Cincinnati Freight Bureau case. This had its origin in an application from the Commission to enforce an order issued in 1894 against the Cincinnati, New Orleans and Texas Pacific Railroad Company.[565] The case involved the adjustment of rates from eastern and western centres, respectively, into the southern states; and the Commission had decided that a reduction of the rates from the western cities was reasonable and necessary. This leading case, also known as the Maximum Freight Rate decision of 1897, is characterized by the Commission itself as perhaps "the most important since the enactment of the Act to Regulate Commerce." It merits consideration in some detail.

The reasoning in the Maximum Freight Rate case[566] cannot be better put than by the following excerpts from the opinion of the Supreme Court.

The immediate effect of this decision was to put an end to any enforcement of decisions relative to rates by the Commission. The carriers immediately refused to obey any orders which the Commission issued for the redress of grievances. This policy was manifested with increasing clearness during the five years subsequent to the decision. It became more and more certain that the denial of the right, not only to pass upon the reasonableness of a particular rate, but to prescribe what rate should supersede it, meant the abolition of all control whatever over the scale of charges. The entire inadequacy of making rate regulation dependent upon the mere determination of rates as applied in the past, without reference to the rates which should prevail in the future, was apparent on all sides. More than this, all remedy for the parties who had borne the burden of an unreasonable rate would seem to have been removed. This was clearly described in the report of the Commission for 1897. It was illustrated by the rates upon oranges. In 1890 there had been a sudden advance on rates from Florida to New York from thirty to forty cents. The Commission after investigation ordered that the rate be reduced to thirty-five cents. As a matter of fact, how could this action redress grievances of those who had already paid forty cents per box? It was difficult in the first place to discover who bore the burden of the unreasonable charge; and in the second place it was certain that some of those who suffered could not legally sue in court. The actual shipper who alone could sue for repayment of unreasonable charges was a middleman who recouped himself in any event, either from the grower, the consumer, or both. He lost nothing by reason of the unreasonable rate. As a matter of fact, not any single individual but the locality, had been mulcted by five cents per hundred pounds, supposing that a rate of forty cents were unreasonable. Experience showed that almost no shippers or other parties injured, actually attempted to secure the restitution of moneys already paid for unreasonable charges. In only five out of 225 cases down to 1897 was a refund actually sought; and in those cases $100 was the maximum sought to be recovered. As a matter of fact the damage inflicted by the existence of such an unreasonable rate could not be measured by hundreds or perhaps by hundreds of thousands of dollars. The bearing of this citation is to show that any effectual protection to the shipper must proceed from adjudication of the reasonableness of rates before, and not after, they have been paid; that is to say, in advance of their exaction by the carrier. Power to pass upon the reasonableness of such rates prior to their enforcement, as a consequence, constitutes practically the only safeguard which the shipping public may enjoy. It will be observed that in this discussion reference is made simply and solely to that class of cases where complaint is made against the unreasonableness of a rate per se as applied to all shippers alike, entirely distinct from the exercise of powers by the Commission in respect of unreasonable discrimination as between two or more persons or places. That other question of relative rates was to come up in another connection.

Despite this denial by the Maximum Freight Rate decision of power to prescribe future rates, in substitution for others held to be unreasonable, there were still certain things which the Commission might do in the matter of rate determination. The only question was as to whether they afforded an adequate remedy for the redress of grievances. Were they really worth while? Complaint as to a rate, once paid, might still be made. The Commission might still hold it unreasonable; and even pass upon the degree of its unreasonableness. And the complainant shipper might then institute proceedings for repayment of the excessive charges under that particular rate. But the difference between this range of powers and those which had been claimed by the Commission for ten years was simply this: That under the original interpretation of the law the Commission had not only decided whether rates were wrong; it had also prescribed a remedy by issuing an order as to what rates were right, believing that these would be enforced by the courts. Not even the power to prescribe maximum rates remained to the Commission after this interpretation. The only action open to it would be to declare one rate after another unreasonable until the carriers had been brought to terms. Its inadequacy as a practical remedy was the main factor in bringing about the passage of the new law of 1906.

It must not be assumed that the Supreme Court in the Maximum Freight Rate decision intended to render the Commission an entirely superfluous body. But its functions, as set forth in the following quotation from the opinion, proclaimed the adoption of an entirely different policy concerning public control of rates from the one hitherto pursued. Whether it was adequate for the purpose in view will appear, as has just been observed, from the subsequent course of events.

The nadir of government regulation for the time being was reached in November, 1897,—six months after the Maximum Freight Rate decision. A second opinion from the Supreme Court of the United States in the Alabama Midland (Troy) case, with one blow practically nullified the long and short haul clause.[567] The first opinion had put an end to control over the reasonableness of rates in and of themselves. This second one denied the right to establish their reasonableness relatively as between competing places or markets. In order fully to appreciate the significance of this decision it will be necessary to review cursorily the tedious litigation which led up to this result,—the entire emasculation of the Fourth section. The final outcome may be best described by Justice Harlan in his dissenting opinion in this leading case:

The interpretation of the long and short haul clause[568] as applied to concrete cases by the Interstate Commerce Commission, was first enunciated in the decision known as the Louisville & Nashville case.[569] Immediately after the enactment of the law, a multitude of petitions were received from carriers all over the country praying that they be exempted from the operation of this clause, which prohibited a greater charge for a lesser haul than for one over the same line between points more distant. The policy outlined in the Louisville & Nashville case, delivered by Judge Cooley, has practically remained unchanged to the present time. This railroad company operating a line parallel to the Mississippi, as well as intersected at various points by its tributary rivers, claimed that the existence of water competition compelled a rate to all competitive points, lower than rates which could be made to local and intermediate stations. It alleged that an adjustment of its local rates to the low level necessitated at competitive points, would prove disastrous from the point of view of revenue. The point at issue was as to the interpretation of the phrase "under substantially similar circumstances and conditions"; which, in the words of the Act, was necessary in order that the prohibition of the lesser charge for the longer haul should become operative. Without entering into the details of this decision, in the course of which the nature of railroad competition and of rate making were fully discussed, as well as the legislative history of this clause of the Act, it will suffice to note the conclusions. These were; firstly, that the prohibition against a greater charge for a shorter than for a longer distance over the same line in the same direction, the shorter being included within the longer distance, was limited to cases in which the circumstances and conditions were substantially similar; secondly, that carriers might judge in the first instance as to the similarity or dissimilarity of circumstances; but, thirdly, that this judgment was not final but was subject to review by the Commission and the courts. Perhaps the most important point, however, was the determination of the conditions which constituted such dissimilar circumstances and conditions as entitled the carrier to charge less for the longer than for the shorter haul. These conditions were the existence of water competition; the existence of other railroads not subject to the statute; and "rare and peculiar" cases of competition between railroads which were subject to the law. The Commission also held as a guiding principle in the interpretation of this clause that no distinction would be recognized between local traffic and so-called through business; and also that the expense to the carrier involved would not be recognized as a factor unless it happened to come under the case already cited as "rare and peculiar." Furthermore, the desire to encourage manufactures or to build up business or trade centres, was not recognized as a competent reason for claiming exemption from the prohibition in the Act.

The leading decision of the Interstate Commerce Commission, above mentioned, was rendered in 1887. It was not until October of 1892 that the first serious interference arose through judicial interpretation in the United States Courts. The first was the so-called "separate and independent line" decision.[570] This case arose respecting a suit for the repayment of $225 as overcharges on corn shipped by one Osborne from Scranton, Iowa, to Chicago. It was claimed that the charges were unjust and unreasonable, inasmuch as they were in excess of rates charged from Blair, Nebraska, a point more remote from Chicago. The United States Circuit Court of Appeals at St. Paul reversed the decision of the lower court, holding that the lesser rate from Blair with which the Scranton rate had been compared, was not a rate to Chicago, but part of an agreed through rate to New York and other eastern points. Under this interpretation, the aggregate charge for the longer distance from Blair to New York was not less than the charge for the shorter distance from Scranton to Chicago. To this point the decision was in conformity with the previous interpretation by the courts and the Commission; which had uniformly held that a portion of a joint through rate cannot be compared with local or individual rates in the determination of what constitutes the rate for the shorter or the longer haul. This decision went further, however, and therein profoundly affected the subsequent interpretation of the law. It proceeded to define the word "line" as used in the Act, by holding that the joint line formed by two roads is wholly independent of the two lines represented by the several roads taken separately and apart. Interpreted in this way, the decision held furthermore that the total joint rate over two roads, not being over the "same line," might for anything in the fourth section of the Act, not only be as low but even lower than the local rate of either. The effect of this decision was obviously to permit a railroad to engage in traffic agreements for through carriage of freight; and by so doing, legally to become a line separate and independent from the same physical property when engaged in the transportation of freight over its own line. Moreover, by every contract for through carriage of freight with different carriers, the road became a separate and independent line in the eyes of the law. As many lines could exist over one set of rails as there were traffic agreements for through haulage of freight between its terminal points.[571]

The apprehension of the Interstate Commerce Commission that this interpretation of the word line might render the Fourth section of the Act inoperative, was realized in the following year. Several decisions not only adopted the obiter dictum of the Osborne case, above described, but proceeded to expand upon it. Thus, for example, in the Georgia Federal Court, a case arose involving rates from the North to Atlanta as compared with the higher rates to intermediate points. The court held that traffic from Cincinnati to Augusta or Atlanta was carried over a different line than that which was used for transportation to points intermediate between Atlanta and Augusta; inasmuch as the several carriers agreeing upon the joint rate as far as Atlanta from the North, were different.

Moreover it held that the road from Atlanta to Augusta being wholly within the state of Georgia, might by making a local rate from Atlanta which was added to the through rate into Atlanta, constitute itself merely a state road, and therefore be exempted from the prohibition of the Act. Thus it appeared, to quote from the report of the Commission for 1893, "that in addition to the embarrassments proposed by the original 'line' decision, the very jurisdiction of the law itself is invaded by the extension of the line theory indulged in by the Georgia Federal court."

The interpretation put upon the Fourth section of the Act by the decision above cited, remained in force and largely nullified application of the Act itself until 1896. The next important interpretation came, in the decision by the Supreme Court of the United States in the so-called "Social Circle" case.[572] This decision fully discussed the interpretation placed upon the word "line" in the Act. The rates involved were those on buggies from Cincinnati, Ohio, to Social Circle, a local station between Augusta and Atlanta, Georgia. Following the practice of the carriers for some years, the Georgia Railroad Company, which alone served the town of Social Circle, had requested its connections at Atlanta not to name through rates to that place or any other local station on its road. The Circuit Court following the line of argument already described, had held that under such circumstances the Georgia railroad was only a local carrier and not a party to a joint or common arrangement, which would make it subject to the control of the Federal Commission. The Supreme Court reversed this opinion, however; and held that when goods are shipped on a through bill of lading, they constitute an interstate carriage subject to Federal supervision and control. The court held further that this state road became part of a continuous line, not by consolidation with other companies, but by a traffic arrangement for continuous carriage or shipment. The Supreme Court interpreted the original Osborne decision as merely affirming that a railroad company doing business in one state could not be compelled to enter into any agreement with connecting carriers. For by so doing, it continued, the carrier might be deprived of its rights and powers to make rates on its own road. Viewed in this way a carrier might agree to form a continuous line for carrying foreign freight at a through rate without being prevented from charging ordinary local rates for state traffic. Stripped of legal verbiage, this interpretation by the Supreme Court, virtually overruled the previous decisions by lower courts, and rehabilitated the original interpretation of the word "line" by the Commission; namely, that when a continuous line for through traffic is formed by several railroads, the roads constituting that line and making use of it are merely parts of one through route and are not separate lines. In short, not being able to constitute themselves as separate lines by reason of traffic contracts, they must continue to conform their through charges to the rates which they have made upon local business. So far as the enforcement of the Fourth section was concerned, therefore, developments to this point had upheld the law as originally passed.[573] It remained, however, for a separate and distinct course of judicial interpretation to once more jeopardize both the practical operation of the law and the power of the Commission.

Reverting to the original Louisville & Nashville decision in 1887, it will appear that the Commission held at that time that competition between carriers subject to the Act, did not constitute such dissimilarity of circumstances and conditions as would justify the carriers in making their long distance rates lower than the rates between intermediate points. The only exception recognized at that time was to be found in certain "rare and peculiar" cases.[574] One of these will suffice as an illustration. There are two routes by which traffic from Youngstown, Ohio, may reach the East. One is by way of Pittsburg and the Pennsylvania Railroad; the other by an outlet to the north, at Ashtabula upon the Lake Shore and New York Central trunk lines. Between Youngstown, Ohio, and Pittsburg, two parallel lines exist, each having an interest in forwarding freight to the East by the two routes above mentioned. The peculiarity of the situation is that competitive traffic for the East may leave Pittsburg in either direction. If it goes around by Youngstown, that place becomes an intermediate point between Pittsburg and New York. If, on the other hand, it goes from Pittsburg directly east, Youngstown becomes not an intermediate point, but one more remote than Pittsburg from New York. Inasmuch as the Pennsylvania route from Pittsburg is the shorter, it makes the rate.[575] The other roundabout route is obliged to accede to this compelled rate or lose the business. The result is that the smaller indirect road is obliged to give a lower rate from Pittsburg round by way of Youngstown to New York than it gives to Youngstown itself. Any other course of action would deprive it of any participation in Pittsburg business. Such, then, is one of those "rare and peculiar" cases under which the Commission from the first recognized the necessity of exempting carriers, even where all are subject to the Act, from the prohibition of charging less for a shorter than for a longer haul over the same line.

The carriers from the outset had made a determined effort to show that the competition of carriers among themselves was sufficient to produce that dissimilarity of circumstances and conditions which would justify exemption from the Act. This contention the Commission refused to recognize, and did so particularly in the important decisions of 1892 known as the Georgia Railroad Commission cases.[576] These again, like the Maximum Freight Rate case, involved rates from Cincinnati to various points throughout the South; and had reference particularly to the prevalent practice of granting low rates to certain important centres known as basing points. In this decision the Commission re-affirmed the principles set forth in the Louisville & Nashville case, except in one detail; namely, as to whether the carriers were justified in deciding for themselves in first instance whether a case of railroad competition was of that type already defined as "rare and peculiar" which would permit exemption from the long and short haul prohibition. Experience of five years had shown that the right of decision in this respect had led to manifold abuses; inasmuch as a strong disposition on the part of the carriers all over the country was shown to interpret all cases of railroad competition, however simple, as "rare and peculiar." The Commission, therefore, proceeded to overrule its earlier decision; and denied the right on the part of carriers to determine for themselves as to what constituted dissimilarity of circumstances and conditions, affirming that that right was its own.

All of the foregoing judicial interpretation is secondary in importance to the final decision of the United States Supreme Court in 1897 in what is known as the Alabama Midland case.[577] This once and for all overruled the interpretation placed upon the law by the Commission, that railroad competition did not constitute that dissimilarity of circumstances and conditions which would entitle a carrier to exemption from the prohibitions of the statute. This case, like almost all the others involving the interpretation of the Fourth section, arose upon complaint of a small town in the southern states that more important trade centres were securing advantages in the matter of rates which were denied to it. The Board of Trade of Troy, Alabama, complained that it was compelled to pay $3.22 a ton on phosphate rock from Florida and South Carolina points, whereas the rate to Montgomery, a longer distance, was only $3.00 per ton. The rock was carried through Troy. It was also complained that rates on cotton discriminated against Troy as compared with Montgomery and other points; and that, thirdly, rates from Baltimore and New York were higher to Troy than to Montgomery, which was fifty-two miles further away. The case was carried on appeal to the Supreme Court of the United States, where an opinion was handed down in 1896. The gist of this decision was that competition, whether of trade centres or of railroads, must be recognized as a factor in the determination of the similarity of circumstances and conditions under which the Fourth section of the clause should be applied. In other words, it recited that Montgomery being a larger place than Troy; and having been an important trade centre on a navigable river for many years, it was competent to the railroads centering at Montgomery to determine in part for themselves whether the existence of effective competition would warrant them in granting lower rates to Montgomery than to local stations like Troy. The court held, however, that such competition was only one of the elements which must be considered. It did not define it as the dominating one. The railroads, nevertheless, seized upon this interpretation of the law at once, making use of it to justify whatever departure they pleased to make from the practice originally contemplated in adjusting long and short haul charges.

After the discouraging reverse in the Alabama Midland decision, which the Commission interpreted to mean that if circumstances and conditions were different at the more distant point, that fact, of itself, removed the case from the inhibition of the Fourth section; certain inferior Federal court opinions somewhat modified this view.[578] The question as to whether the discrimination at bar was or was not justifiable, was permitted to be considered; in addition to inquiring merely whether circumstances and conditions were different at the more distant point. The Commission somewhat reanimated by these decisions, sought to apply this judicial modification of the Alabama Midland reasoning to several then pending complaints as to local discrimination. Both in the Danville[579] and Hampton cases[580] the carriers were ordered to desist from discriminating against the nearer point under this interpretation of the law. But the Supreme Court put an end to it all by condemning this line of reasoning in its last leading decision upon the Fourth section rendered in 1901, finally disposing of the so-called Chattanooga case. This dealt the final death blow to the long and short clause.[581] The complaint in this case arose from the fact that freight rates to Chattanooga, Tennessee, from eastern cities were higher than to Nashville, although the latter was the more distant point. The Commission found that there was no water competition at Nashville compelling the lower rate; but that there was competition of railways and of markets. The Supreme Court reversed the Commission in its final attempt thus to revivify the moribund Fourth section, and fully confirmed its original view as to the meaning of the Alabama Midland decision. If such circumstances and conditions as competition of markets or railways at the two points were dissimilar, carriers might without restraint depart from the long and short haul rule. Thus the Fourth section of the law was to all intents and purposes repealed. Complaint after complaint was perforce set aside by the Commission. For practical purposes this part of the law was rendered absolutely nugatory. The chapter was closed. For twenty years, in face of the litigation above outlined, no order of the Commission respecting local discrimination was enforced. Only with its amendment in 1910, as subsequently described,[582] did the long and short haul clause once more resume its due importance upon the statute books.

One special case may be cited in this general connection, as typical of the arbitrary action of carriers particularly in the South. It was this sort of thing which went far to arouse public opinion and focus attention upon the need for real regulation.[583] The situation appears upon the accompanying map. The planters in a certain southern territory served by the Louisville & Nashville railway had been accustomed to ship out their cotton to the North by various routes. It might go by way of New Orleans, via Pensacola, up the main line along the Mississippi valley, or be hauled eastward to Savannah and other Atlantic ports, and thence go by vessel to New England. Inasmuch as the through rate was the same by all routes, no monetary issue to the planter was involved. But not so to the railway. For by the first routes it secured a long haul; while by the last it not only was limited to short carriage of the goods, but was compelled to accept an even smaller fraction of the joint through rate. In this case the Louisville & Nashville railway—which, by the way, more persistently denied the existence of abuses than any other road in the country—advanced the Savannah cotton rate arbitrarily in 1899 from $2.75 to $3.30 a bale. This effectually dammed up the eastern outlet and jeopardized the interests of the port of Savannah to that degree. Doubtless the Louisville & Nashville was not oblivious to the welfare of that great seaport. It could not afford to be, for Savannah's growth must indirectly accrue to its benefit. It did not love Savannah less; but it loved its own particular seaport, Pensacola, or the long haul via Louisville, more. Maybe it was better that traffic should go out this way—who knew best? The real point to be made is that no competent tribunal or process for impartially determining the question was provided by the now emasculated law.