THE INTERSTATE COMMERCE LAW.

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No. 3.] they could prevent combination by prohibiting pooling; in reality they have destroyed that which still preserves partial competition and by prohibiting pools have made ultimate consolidation less remote. In their anxiety to prevent monopoly they have taken the surest step to create monopoly; in their ignorance of economic laws, while hoping to raise an impassable barrier to combination they have in reality levelled the course. The result will be the exact opposite of their anticipations.

The progress of this consolidation may indeed be arrested for a time. Railway wars cannot of course be the normal condition, and the short-haul clause of the law will have some slight effect in preventing the inordinately low war-rates to centres of competition. It is therefore possible, nay, almost certain, that the results of the pooling policy will be attained in another way through the medium of "differentials." Rather than enter upon a war of rates, the stronger roads, which through their better facilities would tend to carry the larger portion of the traffic, will consent to give the weaker lines a "differential," i.e., allow them to charge so much less per ton, and to attract in consequence more business. The limit of the "differential " 1 will depend naturally on the desire or ability of the weaker line to declare war rather than to accept less than the demanded differential. This system, however, is virtually, although not nominally, tantamount to pooling, in so far as it is a form of combination which still retains a certain amount of competition. But if successful, it is open to the same objections as pooling; while the absence of any vigorous executive authority to enforce the agreements will be felt still more strongly than has hitherto been the case in the traffic associations and pools. This policy of what we may call 'differential pools" cannot possibly be stopped by any law.

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The anti-pooling clause 2 of the federal law thus sins in

1 This technical phrase is used in an entirely different manner from that described in my first essay, POLITICAL SCIENCE QUARTERLY, June, 1887, pp. 236, 237.

2 Sec. 5: "That it shall be unlawful for any common carrier . . . to enter into any contract, agreement, or combination with any other common carrier or carriers, for the pooling of freights of different and competing railroads, or to divide between them the aggregate or net proceeds of the earnings of such railroads, or any portions thereof."

a double manner. It weakens the government in its attempt to prevent discriminations, and it is destined to produce a state of affairs precisely the contrary of what was intended. The first three sections of the act, which define and forbid unjust discriminations,1 are in effect simply declarative of the common law, although based almost literally on Cardwell's Traffic act of 1854. It may well be doubted whether this mere legislative enunciation and prohibition will suffice to abolish the evils complained of. The definition is so utterly vague as to be susceptible of varied interpretations; and whatever interpretation be adopted, it must, as we have shown in the previous essay, be so essentially elastic as to preclude any hard and fast application. Whether the prohibition of unjust discrimination will be anything more than the expression of a pious wish, depends largely on the commission; but the law imposes on the commission an unnecessarily severe burden, and by prohibiting pools removes what would have been a most serviceable crutch with which the better to support the burden. If self-help, or at least private co-operation, be a fundamental feature of the American polity, then this law violates the American idea, for it voluntarily resigns the advantages that would accrue from the self-help of the railways. I do not object to state interference, but I do object to the hasty abandonment of an institution which tends to decrease the necessity of state interference. And when the abolition of the institution results, as is assuredly the case with pools, in hastening the advent of the very monopoly which it was designed to avoid, then the prohibition becomes not only unwise but absolutely absurd. The anti-pooling clause is a sad

1 Sec. I declares that "all charges . . . shall be reasonable and just; and every unjust and unreasonable charge . . . is prohibited and declared to be unlawful." Sec. 2 defines an unjust discrimination as the charging any persons different amounts for a "like and contemporaneous service in the transportation of a like kind of traffic under substantially similar circumstances and conditions." Sec. 3 declares it unlawful "to make or give any undue or unreasonable preference or advantage to any particular person, company, firm, corporation, or locality, or any particular description of traffic, in any respect whatsoever, or to subject any particular person, company, firm, corporation, or locality, or any particular description of traffic to any undue or unreasonable prejudice or disadvantage in any respect whatsoever." These three clauses are virtual repetitions, and afford no basis for a definite decision.

evidence of the results of demagogic ignorance in producing hasty and ill-advised legislation. The Philistines of the daily press exaggerate the dangers of the short-haul section, because these lie on the surface; but for the far more important fifth section of the federal law they have neither eye nor ear. Fortunately pooling will practically continue in another form which Congress will be powerless to prevent.

The Senate select committee of 1886 has at least this claim to respectful attention, that it opposed the prohibition of pools. The abandonment of its position was an inexcusable concession to popular clamor. A careful analysis of the testimony discloses the fact that not only all the railway officials, but also a large majority of the intelligent shippers, had become convinced of the break-down of competition and the necessity of pooling. The railway men opposed unrestricted competition because it curtailed profits; the intelligent shippers opposed competition because it produced discrimination. Both were correct. The Senate committee therefore, swayed by the unanimous opinion of the railway men and the preponderant weight of testimony on the part of the public, decided that "the evils to be attributed to pooling are not those which most need correction," and that "it would seem wiser to permit such agreements rather than by prohibiting them. . . to endanger the success of the methods of regulation proposed for the prevention of unjust discrimination.” That the members of the committee, with a few honorable exceptions, should have seen fit to abdicate their strong position is sincerely to be regretted. The clause as it stands is in defiance of the teachings of experience and the laws of political economy.3

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1 Among the shippers who uphold pooling may be mentioned (vid. Report, Testimony) Bacon (707), Burrows (1170), Chapin (684), Dunnell (1330), Elliott (695), Field (655), Francis (919), Goodman (1104), Gue (1070), Herrick (217), Joseph (1030), Lowry (721), Meek (1012), Miller (269), Murch (941), Noble (988), Phelps (1410), Reynolds (1185), Root (1198), Speare (347), Tredway (841), Welch (1445), Wicke (766), and Williams (1059). The number of shippers who oppose pools is far smaller, and of these the great majority base their opposition on their belief in "free, open competition in railways, as in other things" !

2 Report, p. 201.

8 Even European experts who are by no means admirers of the American rail

Free competition between railways, as a regulator of transportation charges, is thus a mere chimera.1 But "competition" has become such a shibboleth with a certain class of reformers that it may be well to devote a few words to other forms which are advocated as panaceas for existing abuses.

Perhaps the most common recommendation is that of competition of carriers on the line. Divorce entirely the business of the common carrier from that of the highway; let the corporation indeed own the railway, but let every one have the right to run his own trains and use his own locomotives on this railway. This indeed would be perfect competition, but of a very different kind from the competition between the railways that we have been considering. Alluring as is this plan at first blush, it is open to three vital objections. I. It is impracticable, or, if practicable, would be far more costly. 2. It would not cure the great evils of the present system. 3. It would produce abuses far worse than any which now exist.

First, the plan is impracticable, or, if practicable, would be far more costly. The project is not new. Competition between carriers was the original theory. The early railway acts were based on the canal and turnpike acts. When the system of turnpike trusts was inaugurated in England in 1706,2 the original public character of the king's highway disappeared, and the control fell into semi-private hands. But the highway of course remained free to all on payment of the tolls. With the advent of canals the private speculative element was introduced into transportation; for although a very few of the canals were put into the hands of canal trusts, the first canal3 and most of the others were built by private individuals and corporations. The early canal acts, however, invariably contained the clause way system concur in this opinion. See Archiv für Eisenbahnwesen, 1887, S. 333. Cf. also Jeans, Railway Problems (1887), p. 518.

1 Cf. Bontoux, Die Concurrenz im Eisenbahnwesen (1873).

2 The old Watling road. The first turnpike act empowering the raising of tolls was passed 1663, but the power was given to overseers, not trusts. It is only in the last few decades that the turnpike trusts are giving way to the highway boards and that the public character is being restored.

8 Duke of Bridgewater's canal from Liverpool to Manchester. Acts of 1758, 1759, and 1762.

69 that all persons without distinction should have free liberty to use the canal on payment of tolls. When the first tramway bill was enacted in 1801,1 it adopted this idea, and provided, among other sections borrowed verbatim from the canal acts, that all persons should have the right to use the tramway with their own horses and wagons. In the charter of the first railway built with the avowed purpose of using steam locomotives a similar clause was introduced, modified so as to meet the exigencies of the new methods of transportation.

For many

years the identical provision is found in all the railway acts.

In the United States analogous provisions were inserted in the early charters. So, e.g., in the charter of the Ithaca and Oswego railroad.3 In the general railroad law of Prussia competition between the carriers is likewise legalized, after the expiration of three years from the opening of the railway. In France the principle was carried so far as actually to distinguish between the charge for the use of the track, or the toll (droit de péage), and the charge for the transportation itself (prix de transport). To this day even, the concessions of the railways contain the legal distinction. Everywhere, in fact, a sharp line was drawn between the two functions of the railway companythat of providing the public highway free to all and that of furnishing the means of transportation on the highway. The railway company was not excluded from the latter function, but it was thought that its activity in this direction would be very slight.

The experience of a very few years totally destroyed all these 1 The Surrey railway from Wordsworth to Croydon. Cf. Francis, History of the English Railway (1851), vol. i.

2 Liverpool and Manchester Railway act, 7 Geo. IV, cap. 49, cl. 165: “All persons shall have free liberty to use with carriages all roads, ways, and passages for the purpose of conveying goods or passengers or cattle."

8 Sec. 12: "All persons paying the toll aforesaid may, with suitable and proper carriages, use and travel upon the said railroad, subject to such rules and regulations as the said corporators are authorized to make by the ninth section of this act. Laws of New York, 1828, p. 17. The "proper carriages" of course included the steam-carriages.

4 Eisenbahngesetz, 1838, § 27.

5 Picard, Chemins de fer français, t. v, p. 184; Jacqmin, De l'exploitation des chemins de fer, t. i, p. 20.