standing; and yet operate in the same spirit of harmony that would prevail if a written agreement existed. There is still friendly rivalry in procuring business, but this business is secured at not less than certain understood rates. Again, in nearly all of the few trades where agreements or understandings have been denied by all the interested lines, a remarkable uniformity in rates seems to exist and not a trace of a rate war can be found. The situation has been explained to the committee as one of "following the leader," the dominant carrier fixing the rates and the less important lines adopting those rates, they being allowed to exist in the trade without having an effective fight waged against them, as long as they conform to the rates and conditions established by the dominant carrier.

(6) Unlike the practice in the foreign trade, definite agreements to charge certain rates, to divide territory or regulate sailings, to pool traffic, to impose deferred rebate stipulations, etc., are very few in the domestic traffic. Chiefly because of their probable illegality under the anti-trust laws such agreements have been carefully avoided. Yet the presence of any real competition between the lines in rates is quite as difficult to find in this trade as in the foreign trade. The desired elimination of objectionable competition has been accomplished in many other ways than through the effecting of definite agreements which may not stand the test of legality. Some twenty-eight methods of controlling competition between domestic carriers by water have been referred to (see Appendix II of this volume) and most of them relate to control through (1) the acquisition of water lines by railroads or by other carriers by water, (2) the control by purchase or otherwise of accessories to the lines, and (3) the throttling of independent competitors by various special practices which make it impossible for them to secure business on advantageous terms. Where one method would not accomplish the elimination of a weak competitor another could be easily substituted; and in general one is warranted in saying that the methods of control used by domestic carriers have been quite as effective in eliminating competition in rates, if not more so, than any of the agreements prevailing in the foreign trade.

Conference arrangements in the foreign trade are binding on the members. In the domestic trade, on the contrary, traffic associations and conferences participated in by water carriers do not definitely bind the lines, i.e., there is no express agreement to observe the rates. One of the most noticeable features of the committee's investigation was the painstaking and emphatic manner in which

the representatives of domestic lines reported to the committee that their affiliation with existing traffic associations or conferences is simply for the purpose of discussion and interchange of information and opinions on matters of mutual interest, and that their rights of separate and independent action are in no way restricted. Yet the testimony before the committee showed that the rates and divisions of rates are determined at these conferences in such a manner as to cause no discrimination against any of the members. It is also noteworthy that in a number of trades where not a trace of a rate war could be found, the several lines operating on the route reported under oath that they have no understanding or working arrangement whatsoever with any of the other lines, except that each line of its own volition generally notifies the other lines of changes in its rates and receives similar notification from them. Each line may then do as it pleases. Such arrangements are truly "gentlemen's understandings," and one is prompted to ask how long it will be before definite agreements, whether written or oral, will no longer be needed.

[NOTE. In addition to the Report on Steamship Agreements and Affiliations in the American Foreign and Domestic Trade, to which reference has been made repeatedly in this article, the readers attention is also called to volumes I and II of the "Proceedings of the Committee on the Merchant Marine and Fisheries in the Investigation of Shipping Combinations under House Resolution 587," and volume III of the same "Proceedings" entitled "Special Diplomatic and Consular Reports Dealing with Methods and Practices of Steamship Lines Engaged in the Foreign Carrying Trade of the United States." Volumes I and II of the Committees "Proceedings" contain the hearings before the Committee during its investigation.)

THE ADMINISTRATION AND ENFORCEMENT OF STEAM

SHIP CONFERENCES AND AGREEMENTS

BY WILLIAM H. S. STEVENS, PH.D.,

Instructor in Economics, Columbia University.

"The development of a Conference," says the Report of the Royal Commission on Shipping Rings, "may be tested by the extent to which it endeavors to regulate competition between the lines included and prevent competitive wastage." For example, a conference which has merely an understanding as regards freight rates has not obviously reached so high a stage of development as one which in addition to this divides and restricts the ports of call or number of sailings, pools the earnings, and uses a system of deferred rebates. It follows that the internal mechanism of a conference varies in more or less accordance with the extent to which these various arrangements are carried out.

For the sake of convenience of discussion the writer has deemed it best to divide this paper into two parts, one dealing with passenger agreements and conferences, and the other with freight agreements and conferences.

PASSENGER AGREEMENTS

Outside of the traffic between the United States and Europe but few conferences or agreements exist with regard to the transportation of passengers. Practically all other arrangements for the carriage of passengers are governed by the provisions of freight traffic agreements and cannot be discussed separately therefrom. For the purpose of this paper, therefore, the discussion will be limited to a consideration of the passenger arrangements existing in the traffic between the United States and Europe. There are several of these agreements which, broadly speaking, may be divided into two classes, major and minor. There are three major agreements: Nordantlandischer Dampfer-Linien Verband (commonly called the N. D. L. V.) Passenger Agreement, Agreement A. A., and the Mediterranean Steerage Traffic Agreement. These agreements are very lengthy

1 Report of the Royal Commission on Shipping Rings, pt. I, p. 22.

and go into the greatest detail with reference to administration. The balance of the agreements are minor agreements. These are mere skeletons and are in several cases special contracts between the parties to one or more of the major agreements and some particular line or lines covering some specified portion of the passenger business.

None of the minor agreements provides for much administrative machinery. Some expressly declare the contract to be subject to all the conditions of the major agreement governing those lines which are parties to the minor agreements. Hence the discussion here given must be to all intents and purposes based upon the three major agreements with only occasional references to the minor ones in those few instances where the latter contain administrative provisions. All the major and several of the minor agreements apply to steerage traffic. Two of the minor agreements, however, apply to other classes of traffic, i.e., agreement V to first class, and agreement W to second class.

One of the two main objects of a steamship conference is to regulate competition between the companies. The two features looking to this end which stand out most clearly in the passenger agreements of the lines are, first, the division of traffic among the lines, and, second, the reservation of special areas. These two features afford a conveniert starting point for the discussion of the administrative arrangements of passenger agreements.

Division of Traffic and Enforcement of it Among the Lines.-Steerage and third-class business alone are subject to provisions for traffic division and arrangements necessary for the administration and enforcement of that division. The discussion in this section, therefore,

2 Thus Agreement N is between the N. D. L. V. Lines and the Austro-Amer icana, allotting to the latter a certain portion of the steerage business.

Cf. Agreement G, United States of America, v. Hamburg-Amerikanische Packetfahrt Actien-Gesellschaft and others, Petitioner's Exhibits, vol. i, art. 14, p. 93; Special Agreement B. ibid., art. v, p. 114; Special Agreement A, art. iv, p. 118. As all references in the discussion of passenger agreements are taken from the above volume except where otherwise indicated only the Agreement article thereof and page number will be given in the footnotes.

4

Royal Commission on Shipping Rings, pt. II, p. 9.

' Agreement V of February 5, 1908, relating to first-class business and Agreement W of the same date relating to second-class business of both minimum rate contracts do not divide traffic except in so far as the differential rates given the various lines may do so.

8

relates only to these classes of business. The steerage traffic of the various steamship lines is distributed among them upon a percentage basis. A certain percentage may be allotted to each line, or the lines may be divided into groups and a percentage allotted to each group, or a combination of these two methods may be used, certain lines receiving each a specific percentage and another or other specific percentages being allotted to a group or groups of lines. Agreement G, regarding third-class passenger business, is of the last type, which is the most prevalent. In some cases, the percental participation allotted is based upon averages of the passengers carried over a period of years as is the case in the N. D. L. V. Agreement and in Agreements L and G.10 In certain other cases, the participation allotted is made conditional upon a certain number of sailings per annum as in the Mediterranean Steerage Agreement, Special Agreement B and Agreement N."

No matter in what way the percentages are distributed, the methods of enforcing the allotments upon the lines are identical in requiring the payment of a compensation price of so much per head for all excess of allotted percentages. This compensation price varies. Under Special Agreement A between the Italian Line and the Transatlantic, American, and White Star Lines, covering Italian and Oriental steerage passengers, it is as low as 75 lires (about $15).12 Under Agreement L between the N. D. L. V. Lines and the Transatlantic and American Lines, covering eastbound steerage traffic, the price is even lower, being only 40 marks (about $10).18 On the other hand • Agreement AA, article iii, pp. 52-53.

'Mediterranean Steerage-Traffic Agreement, pp. 95-96.

8 Contract, North Atlantic Steamship Lines Assn. (N. D. L. V.) Passenger Agreement, art. iii, pp. 5–7; Agreement L (eastbound pool), arts. i and iii, pp. 84-87; Special Agreement B (Italian lines, Cunard, and Austro-Americana), art. ii, p. 114; and also p. 113; Special Agreement A (Italian lines, Cie. Gen. Trans-Atlantique, American, and White Star), art. ii, pp. 117-118; Agreement N (N. D. L. V. lines and Austro-Americana), art. i and ii, pp. 121.

9

' Agreement G (N. D. L. V. lines and Cie. Gen. Trans-Atlantique), arts. ii and iii, pp. 90-91.

10 N. D. L. V. Agreement, art. iii and commentary pp. 5-6; Agreement L, arts. i and iii, pp. 84-87; Agreement G, art. ii, p. 90.

11 The Mediterranean Steerage Traffic Agreement, art. iii, pp. 96-97; Special Agreement B, art. iii, p. 114; Agreement N, art. ii, p. 120.

12 Special Agreement A, art. iii, p. 118.

13 Agreement L, art. iv, p. 87.