Missouri corporation. This inquiry disclosed a series of contracts and traffic arrangements which, in the opinion of the Commission, constituted a clear case of violation of both clauses of the fifth section of the act. Accordingly, in obedience to the requirement of the twelfth section, the Commission transmitted, through the Attorney-General, to the United States attorney for the eastern district of Missouri all the papers and evidence which it had in its possession bearing on the case, with a request that the persons offending, who were the officers of those corporations, be indicted. The case was laid before the grand jury in St. Louis, but that body failed to find a true bill.

It is generally known at this time that a contract has been agreed upon, in substance if not in all its details, by and between the principal railroads whose lines connect Chicago with the Atlantic Seaboard, and it is expected that such a contract will be put in operation at an early date.

Inasmuch as traffic agreements are a recognized feature of the railroad business, and contracts of this character have been filed from time to time with the Commission, many of which, in its opinion, did not transgress the law, it is obvious that the making of another contract affords no presumption that anything in contravention of law is contemplated. The Commission therefore does not consider that it would be justified in taking any steps until a contract illegal upon its face shall be filed with it, or until it shall have some evidence that, under color of an agreement, whether legal on its face or otherwise, the law is in fact violated by its operation.

In our report for the year 1892, on pages 47 et seq., we summarized the principal arguments for and against pooling which had been presented to us in replies to our circular letter asking the opinion of railroad officials, managers and operators, and shippers in different parts of the country, and also appended to that report copies of the replies actually received. Without repeating here the summary then given, the following may be taken as a concise statement of the leading reasons for and against the advisability of a statutory permission to competing railroads to pool their freights and earnings. It is urged by the advocates of such a measure that the main purpose of the act to regulate commerce is to protect the public from excessive rates, unjust discrimination, undue preference, and favoritism; that the evils under which the business of the country labored prior to the passage of the act, and which led to the intervention of Congress, arose mainly from discrimination by railroad carriers which gave to some shippers most unjust advantages, and practically worked the ruin of those discriminated against; that the most important object of the act was to prevent unjust discrimination against and favoritism to persons and localities; that the conditions of competition between parallel railroads, if unregulated by law and uncontrolled by agreements between the railroads themselves, are of a character that invariably results in dis

crimination; that such free and unchecked competition, in addition to the opportunity and temptation it affords for favoritism, produces a condition of uncertainty and instability of rates which is most prejudicial to the business interests of the country, inasmuch as the shipper can not calculate in advance the cost of the transportation, which must be in many cases the main element in the price at which he sells; that for this reason an unstable and fluctuating condition in railroad rates has a tendency to turn all legitimate commerce into speculation; that the direct effect upon the railroads themselves of this unchecked competition is to drive the weaker roads into insolvency, which magnifies the evil, and to result in the absorption of such lines by stronger lines that can afford for a longer time to conduct transportation at a loss, and therefore that the ultimate result of such unchecked competition is to destroy all competition.

Other considerations are urged in favor of allowing some modification of the fifth section, one of which is mentioned on page 53 of our report for 1892:

When excessive and ruinous competition is going on the condition of the railway lines deteriorates, the public is not suitably accommodated in the matter of trains and services, and the losses sustained by competitive rates, which are unreasonably low, compels reductions in wages and other hardships to the operating force.

On the other hand, the main argument of those who oppose pooling is that while unchecked railroad competition has its evils, such compe. tition as is possible is necessary as the only regulator of rates; that if competing lines are permitted to pool their freights and earnings not only is there no safeguard against extortionate rates, but there is no inducement to the several lines so united for the purpose of rate making in one great association to perfect their service or lower their charges, or even to maintain their service in an effective and suitable condition; that against most forms of partial monopoly created by large combinations of capital called trusts there exists in the last resort the check which results from the possibility of new capital entering into the business and again restoring the competition which the trust has destroyed, but in the case of the monopoly which directly and immediately results from the combination of railroads no such safeguard can be relied upon; that with existing lines of railroad more than adequate for all the traffic offered for transportation it is not to be expected that a proposition to establish a new line would attract favor or capital; that the time necessarily consumed in carrying such an enterprise to completion, even if there were any probability that capital could be found for it, is of itself sufficient to render such a safeguard inoperative and ineffectual, and that in the absence of competition there not only is no adequate protection against excessive rates in case of their establishment by such a combination, but there remains no criterion by which it can be determined whether the rates charged are reasonable or unreasonable. This view is pointed out in the dis

senting opinion of Shiras, district judge, in the above-mentioned case of the United States against The Trans-Missouri Freight Association, reported in volume 58 of the Federal Reporter. He says:

If it be said that the reasonableness of the rates charged is to be ascertained by comparison with the rates charged for like services by other railroads, then the rates accepted as the standard of comparison must be such as are the result of free competition, because it would not do to accept as a standard rates fixed by a combination, for it could not be shown that these rates are reasonable, and the proposed standard would be without value as evidence.

These seem to the Commission to be the principal points upon which the controversy hinges, but the opinions expressed by persons most familiar with and most interested in the subject, as collected in the appendix to our report for 1892, contain many additional and important considerations. While the Commission is impressed with the evils attending the present system of competition, often resulting in unequal rates and unlawful practices, and concedes that the practical results of that system upon the railroads and the public are unsatisfactory in many respects, it nevertheless believes that the reestablishment of pooling without adequate restrictions and further remedial legislation would be unwise, since otherwise it would be in the power of the combination to charge excessive rates for the transportation of staple commodities and necessaries of life, and thus to deprive the people of the benefits arising from the competition which now exists. The tendency shown by later agreements of various associations to enlarge and strengthen the provisions intended to bring about an apportionment of the traffic among competing lines, the fact that the last agreement of the Central Traffic Association-that of May, 1894, above set forth-virtually established a pooling system, and the open assertion that the contemplated agreement of the trunk lines is in plain contravention of the fifth section of the act, indicate that the difficulties attending the operation of competing through lines under the restrictions of the present law are felt to be very great, and that there exists a strong feeling of restlessness under these restrictions.

But at the same time it seems evident that if pooling is to receive the sanction of law, then the regulation, of rates by the Commission which would become the substitute for the safeguards which competition is supposed to afford should be an adequate substitute; and to this end it would be necessary, in our opinion, that the rates established by the combination should be subject to effective control by the Commission. This exercise of authority would be justified by the fact that it is in the nature of a condition upon which the Government grants to certain corporations the privilege of forming a combination or limited monopoly. Such a grant would constitute an exception to the general policy of the Federal laws prohibiting trusts and combinations in restraint of trade. Conditions have always been attached to Government grants of monopolies and special privileges. The railroad corpora

tions in effect represent that their business is of such a nature that, if subjected to the restrictions upon combination which the policy of the law imposes upon other kinds of business, the results will be destructive to themselves and injurious to the commercial interests of the country; and they ask to be relieved from the effects of this policy, and that an exception be made in their case because of the exceptional character and relations of public transportation.

Under the restrictions above suggested pooling would be permitted on condition that the corporations so privileged submit themselves to the only legal authority which can prevent an abuse of the privilege. In our report for 1892 we said on this subject, among other things, that "if Congress should, after due consideration, conclude to authorize agreements between competing railroads, having for their object the maintenance of fair rates at competitive points, with full protection to the public from unreasonable charges and unjust discrimination, and should the guaranties of that protection rest in the authority of this Commission, there would still be more urgent necessity for securing the speedy enforcement of its lawful orders, because the only shield against the exactions and injustices of railroad monopolies would be the methods devised for Government regulation and the machinery provided to make that regulation effective."

Sometime during the following year, after the Patterson bill had been introduced in the House, and in reply to a request from the committee to which that measure was referred for our official opinion as to its merits, we said, after commenting on other sections of that bill which related to other subjects:

The second section of this bill amends section 5 of the original act, which prohibits all those agreements between competing carriers implied by the term "pooling." In the last annual report of the Commission, 1892, this subject was discussed at considerable length. The expression of views in relation to the propriety of authorizing these agreements had been sought by us from a large number of persons presumably competent to give intelligent opinions, the arguments pro and con were quite fully set forth, and the various communications received by us were printed in the appendix. We are unable at this time to add anything of importance to the presentation of the case which was then made by the Commission, and respectfully refer your committee to the information and suggestions contained in our last report to Congress. In the guarded and restricted form which this measure presents in the pending bill it meets the cordial approval of some members of the Commission, though others are not fully convinced of its utility.

There would seem to be nothing more which can properly be said by us upon this controverted subject. We have laid before Congress the results of our inquiries and stated the main points on both sides of the proposition. We can only repeat our conviction that if the prohibitive features of the fifth section are modified, not only should adequate safeguards be provided, but in that event the importance of concurrent legislation of the character elsewhere described herein would be very greatly increased.

TICKET BROKERAGE.

We deem it a special duty to call your attention to the persistent survival and continued increase of the illegitimate business known as ticket brokerage or "scalping." So far from showing any signs of diminution it appears to be steadily enlarging in scope and volume. It is impossible to give any reliable estimate of the number of persons who take advantage of this means of procuring unlawful transportation, but it is evident that a considerable percentage of railroad passenger travel is accomplished through the medium of tickets bought at reduced rates of so-called brokers. In every city, and in many of the smaller towns, offices are to be found whose proprietors sell railroad tickets to very many points at less than the published tariffs. The streets are placarded with alluring advertisements, incoming and outgoing travelers are openly solicited, while in hotels and other public places, and not infrequently in regular railroad stations, the runners and agents of these clandestine dealers invite participation in transportation bargains, which upon their face-to give them no harsher term—are an obvious evasion of the law. It is a matter of serious concern that the spirit and purpose, if not the letter, of the statute should in this respect be so widely disregarded. The purpose of all the regulative measures which have been enacted is to require every person to pay the same sum for the same service; yet this purpose is often defeated by these irresponsible agencies, which in one way and another furnish for certain travelers a recognized ticket which costs less than the price paid by other passengers.

The sixth section of the act provides for the establishment of rates for passenger travel which can not be deviated from by any carrier without subjecting the offending party to the criminal penalties fixed by the statute. Rates of fare can not be lawfully advanced or reduced without giving the prescribed notice, and yet in numerous instances passengers are carried between the same points who do not pay the same price.

The opportunity for this illegal traffic is found in the general principle of transportation that the charge per mile of travel decreases as the length of journey increases. The through rate per mile between distant places is generally less per mile than the rate between local and nearer stations. This is especially the case when two or more carriers unite in selling through tickets over their connected lines, as such tickets are generally sold at a lower mileage rate than the tickets of either constituent line. This reduced charge is ordinarily conceded because of the supposed continuity of service. It is presumed that the passenger is taken up at a remote station and carried continuously over a long distance and therefore entitled, under the common principle of constructing tariffs, to a lower mileage charge than the local traveler is required to pay. But the ticket, being bought in advance