A strong Commission was appointed, the Chairman being Thomas M. Cooley, one of the ablest jurists in the country, Chief Justice of the Michigan Supreme Court, author of “Constitutional Limitations” and other works of the highest authority. The Commission started with a review of the evils the Interstate Act was intended to abolish, and entered earnestly upon the great work of enforcing the law.
The Commission’s statement of the arrangements used by the railways for discrimination is so admirably clear that a part of it cannot fail to be useful here.
“These arrangements,” says the Commission, “took the form of special rates, rebates and drawbacks, underbilling, reduced classification, or whatever might be best adapted to keep the transaction from the public; but the public very well understood that private arrangements were to be had if the proper motives were presented. The memorandum book carried in the pocket of the general freight agent often contained the only record of the rates made to the different patrons of the road, and it was in his power to place a man or a community under an immense obligation by conceding a special rate on one day, and to nullify the effect of it on the next by doing even better by a competitor.
“Special favors or rebates to large dealers were not always given because of any profit which was anticipated from the business obtained by allowing them; there were other reasons to influence their allowance. It was early perceived that shares in railroad corporations were an enticing subject for speculation, and that the ease with which the hopes and expectations of buyers and holders could be operated upon pointed out a possible road to speedy wealth for those who should have the management of the roads. For speculative purposes an increase in the volume of business might be as useful as an increase in net returns; for it might easily be made to look to those who knew nothing of its cause like the beginning of great and increasing prosperity to the road. But a temporary increase was sometimes worked up for still other reasons, such as to render plausible some demand for an extension of line or for some other great expenditure, or to assist in making terms in a consolidation, or to strengthen the demand for a larger share in a pool.
“Whatever was the motive, the allowance of the special rate or rebate was essentially unjust and corrupting; it wronged the smaller dealer oftentimes to an extent that was ruinous, and it was generally accompanied by an allowance of free personal transportation to the larger dealer, which had the effect to emphasize its evils. There was not the least doubt that had the case been properly brought to a judicial test these transactions would in many cases have been held to be illegal at the common law; but the proof was in general difficult, the remedy doubtful or obscure, and the very resort to a remedy against the party which fixed the rates of transportation at pleasure might prove more injurious than the rebate itself. Parties affected by it, therefore, instead of seeking redress in the courts, were more likely to direct their efforts to the securing of similar favors on their own behalf. They acquiesced in the supposition that there must or would be a privileged class in respect to rates, and they endeavored to secure for themselves a place in it.
“Local discriminations, though not at first so unjust and offensive, have nevertheless been exceedingly mischievous, and if some towns have grown, others have withered away under their influence. In some sections of the country if rates were maintained as they were at the time the interstate commerce law took effect, it was practically impossible for a new town, however great its natural advantages, to acquire the prosperity and the strength which would make it a rival of the towns which were specially favored in rates; for the rates themselves would establish for it indefinitely a condition of subordination and dependence to ‘trade centres.’ The tendency of railroad competition has been to press the rates down and still further down at these trade centres, while the depression at intermediate points has been rather upon business than upon rates.
“The inevitable result was that this management of the business had a direct and very decided tendency to strengthen unjustly the strong among the customers and to depress the weak. These were very great evils and the indirect consequences were even greater and more pernicious than the direct, for they tended to fix in the public mind a belief that injustice and inequality in the employment of public agencies were not condemned by the law, and that success in business was to be sought for in favoritism rather than in legitimate competition and enterprise.
“The evils of free transportation of persons were not less conspicuous than those which have been mentioned. This, where it extended beyond persons engaged in railroad service, was actual favoritism in a most unjust and offensive form. Free transportation was given not only to secure business, but to gain the favor of localities and of public bodies; and while it was often demanded by persons who had, or claimed to have, influence which was capable of being made use of to the prejudice of the railroads, it was also accepted by public officers of all grades and of all varieties of service. In this last case the pass system was particularly obnoxious and baneful. A ticket entitling one to free passage by rail was even more effective in enlisting the assistance and support of the holder than its value in money would have been, and in a great many cases it would be received and availed of when the offer of money made to accomplish the same end would have been spurned as a bribe. Much suspicion of public men resulted, and some deterioration of the moral sense of the community traceable to this cause was unavoidable. The parties most frequently and most largely favored were those possessing large means and having large business interests.
“The general fact came to be that in proportion to the distance they were carried those able to pay the most paid the least. One without means had seldom any ground on which to demand free transportation, while one with wealth was likely to have many grounds on which he could make it for the interest of the railroad company to favor him; and he was oftentimes favored with free transportation not only for himself and family, but for his business agents also, and even sometimes for his customers. The demand for free transportation was often in the nature of blackmail, and was yielded to unwillingly and through fear of damaging consequences from a refusal. But the evils were present as much when it was extorted as when it was freely given.”[29]
The Commission had plenty to do. Complaints of unreasonable rates and unjust discriminations between shippers, commodities, and places poured in upon it, and vigorous decisions against favoritism and excessive rates poured out upon the railroads. During 1887 and 1888 the Commission dealt with cases of passes issued in contravention of law,[30] preferential fares for drummers,[31] commissions on the sale of tickets,[32] discounts on freight rates to large shippers,[33] discrimination by combination rates,[34] by preference of tank shipments of oil,[35] by unfair distribution of cars,[36] by underbilling,[37] false classifications,[38] commissions to soliciting agents,[39] etc. Underbilling, false classification, false weighing, and commissions to soliciting agents were investigated by the Commission in 1888 at New York, Buffalo, Detroit, Chicago, Omaha, Lincoln, and Washington.[40] All these methods of discrimination were found widely prevalent, and new legislation was asked for imposing a penalty on shippers who fraudulently obtained reduced rates.
When Congress met for the session of 1889 it was believed that the law had greatly reduced the number of passes issued, straightened out a part of the long-haul discriminations, and accomplished a good deal in the way of suppressing rebates, but it was clear that much remained to be done. In one way or another all over the country secret discriminations were still being made for the benefit of favored shippers. Congress therefore in March, 1889, amended the Interstate Commerce Act by adding to the fine a penalty of two years’ imprisonment in the penitentiary in case of unlawful discrimination, and pronouncing the same penalties against shippers and their agents who secure advantage by false billing, false classification, etc., or by soliciting or otherwise inducing a railway to discriminate in their favor, or by aiding or abetting any such discriminations. It was also provided that 3 days’ notice must be given in case of any reduction of rates, and that homeless and destitute persons, as well as preachers, might be favored with low fares.
The stringent provision for imprisonment did not prove any more effective than the milder law that preceded it, less so apparently, for the following years were flooded with unfair discriminations.[41]