wheat, and that the rates in force for such water transportation are actually considerably higher upon flour than upon wheat. If the rail carrier obtains this business, it must meet, or nearly meet, the water rate; in other words, it can obtain a better rate upon flour than upon grain. That this is not an imaginary condition appears from the fact that during the months of June, July, August, and September, 1901, 17,595,277 bushels of wheat left Chicago by water as against 2,392,019 bushels by rail. It was also said that during the season of navigation the bulk of the flour at or passing through Chicago and other lake ports was transported by water.

The tramp boats above referred to as carrying the bulk of the wheat are in no way controlled by rail carriers. The line boats are, as a rule, directly or indirectly operated in connection with lines of railway, and the flour rates are made by agreement between these different lines in the same way that rail rates are, being, therefore, to an extent in the control of rail carriers. The lines of railway leading from Buffalo to New York make a very low rate upon ex-lake wheat and do not make a correspondingly low rate upon ex-lake flour. To an extent, therefore, rail carriers are responsible for these higher lake-and-rail rates upon flour, but, after all has been said, it is evident that in this water competition inheres a condition which during a considerable portion of the year, if given its natural result, must secure to wheat a somewhat better rate than to the manufactured product. This applies to all wheat which is in any sense tributary to the Great Lakes, and that is the bulk of the wheat raised in this country.

RATES FROM KANSAS CITY TO THE SEABOARD.

What has been said refers to rates east of Chicago. Those west are of equal importance, since the total transportation charge, of which the miller complains, is the sum of the two.

A considerable portion of the wheat exported during the past season was grown in the region which may, perhaps, be called tributary to Kansas City, and of which that market may be taken as a type. A glance at the map will show that this wheat may be exported either through the Gulf ports, New Orleans and Galveston, or through the Atlantic ports. The lines of transportation leading to the Eastern seaboard are the oldest and most powerful, but the distance to the Gulf ports is much less, and the railways serving these ports insist that a considerable portion of this grain should be exported by that route. This condition has given rise to the most active competition between rail lines leading in various directions from Kansas City, and the result has been a very low rate upon export grain from that section. Certain other conditions at Kansas City render it very difficult to maintain the published rate upon grain, and the testimony clearly

showed that these rates had not been observed. During the past summer the open tariff from Kansas City to Chicago has been 12 cents per 100 pounds, but the actual rate at which wheat has moved has been as low as 5 cents. The published rate from Kansas City to Galveston has been 15 cents for export, while the domestic rate for the same service has been 37 cents.

Turning now to flour, we do not find the same conditions. Owing to reasons which need not be detailed here, flour does not move at all through Galveston and in comparatively small quantities through New Orleans. The competition, therefore, which produces so marked an effect upon the wheat rate is not felt in case of flour. It did not definitely appear what the actual flour rate from Kansas City to Chicago had been, but it was without doubt considerably above the wheat rate.

Another manifestation of this competition in the West is seen in the practice of allowing some particular individual a concession which enables him to handle practically all the grain transported upon a particular railway. While the investigations of the Commission have not fully covered this aspect of the case as yet, it is a matter of common information, and we know from repeated complaints received, that some one firm or some one individual purchases substantially all the grain which is handled by a given line of railway, and the claim is made, and the inference is almost a necessary one, that this firm or individual must receive concessions which enable him to underbid other buyers in the same market. These different lines, in an effort to obtain a share of this business and to divide it up among different competing routes, deem it necessary to drive out of business the small buyer and to operate through a single large concern. Another effect of this is to

put the miller out of the market as an independent buyer.

CONCLUSIONS FROM FOREGOING FACTS.

Attention is called to the following propositions, which are established by the above facts:

First. At the present time grain and grain products move from points of origin to the seaboard generally upon secret rates. This is entirely true of that portion which is exported, and, in the main, true of domestic traffic. No serious attempt was made, or could be made, to distinguish between export and domestic in applying the cut rate to Chicago. Carriers from Chicago to the seaboard do attempt to maintain a distinction from that point upon all-rail grain.

Second. The effect of these secret rates is to discriminate in favor of the foreigner, to give preferences to particular shippers, to exclude from business the small operator. We do not intend to say that this is always the result, or that such a result may not in some cases be

necessary. This Commission has previously held that, under certain conditions, an export rate lower than the domestic rate is proper. It may be true that in the future commercial scheme the small dealer can have no place. But, certainly, unjustifiable freight-rate preferences ought not to contribute to that end, and, until there is a published rate which is accorded to all shippers alike, it must be impossible to determine whether the rates enforced are just or unjust. Third. These discriminations militate against a great American industry. To an extent the rate upon flour to the foreign market must be higher than that upon wheat. This is decreed by physical conditions which no statute and no commission can alter. To that extent this industry must expect to operate at a disadvantage. But many of the present discriminations are unnecessary, and here, again, it never can be known to what extent they are just or unjust until it is first known what rate this traffic actually bears.

Nothing can more strongly emphasize the necessity for such changes in the present law as will secure the maintenance of the published rates.

TRAFFIC ASSOCIATIONS.

These secret rates from Chicago to the seaboard were referred to by the witnesses as "agreed" rates. It was said that they were so termed because they had been agreed upon by the lines interested. The railroads carrying this traffic had, by concerted action, agreed to make and maintain these rates.

A further inquiry in the same direction developed the fact that these roads, together with many other roads, were members of an association, called the Central Freight Association, covering certain territory, and that this association determined the competitive rates within that territory. It was claimed that each road was in theory at liberty to put in whatever rate it saw fit, but practically the rates recommended by the association were always adopted.

What is done in this section by this association is accomplished in other sections by other associations. It is not the business of this Commission to enforce the antitrust act, and we express no opinion as to the legality of the means adopted by these associations. We simply call attention to the fact that the decision of the United States Supreme Court in the Trans-Missouri case and the Joint Traffic Association case has produced no practical effect upon the railway operations of the country. Such associations, in fact, exist now as they did before those decisions, and with the same general effect. In justice to all parties, we ought probably to add that it is difficult to see how our interstate railways could be operated, with due regard to the interest of the shipper and the railway, without concerted action of the kind afforded through these associations.

COMPLAINTS.

The work of the Commission which pertains directly to regulation involves two distinct kinds of procedure: One based upon formal petitions filed with the Commission under section 13 of the law, and involving regular hearing and investigation, the preparation of a report setting forth the material facts found and conclusions reached by the Commission, and issuance of an order dismissing the case or directing the carrier or carriers complained against to correct the rate or practice which may be held unlawful. The other kind of procedure arises in the performance by the Commission of its duty, under the twelfth section, to "execute and enforce the provisions of the act," and relates to complaints presented by letter, the examination of tariffs on file in the office in connection with such complaints, and correspondence with shippers and carriers concerning the same. Complaints of the latter class are called informal complaints to distinguish them from the formal petitions or complaints which constitute the basis of contested

cases.

No order can be issued upon an informal complaint and inquiry. The main object of that method of procedure is the speedy disposition, through settlements, readjustments plainly required by the statute, or advice given by the Commission, of matters in which regulation is demanded, and thus to limit the number of contested cases upon the docket. It would be an injustice to complaining shippers and communities, amounting frequently to denial of relief, to compel the institution of a regular proceeding every time cause of complaint is brought to the attention of the Commission; and the number of cases requiring the hearing of witnesses, oral or written argument, and formulated decision would probably be greater than the Commission could dispose of properly or without intolerable delays. The great mass of complaints are handled and disposed of by the Commission by preliminary investigation and correspondence or conference with carriers and shippers. The matters considered and acted upon in this way range from overcharges upon small shipments to rate relations affecting the interests of entire communities, and are of the same nature as those which find their way to the regular case docket of the Commission.

Formal proceedings before the Commission are usually instituted after the shipper and carrier have failed to reach a settlement or upon facts developed in a preliminary inquiry by the Commission. The result is that these formal cases are generally stoutly contested, and in some of the more important several hearings, producing voluminous records of testimony and argument, are often required. It follows, of course, that considerable time may be consumed by each side in the 1881-02- -2

preparation and presentation of cases of this description. One case, involving mainly the differences between carload and less than carload rates to States on the Pacific coast and affecting directly the interests of shippers in those States and the Middle West, has been pending over two years, during which time several hearings in Washington, St. Louis, Los Angeles, San Francisco, and Portland, embracing the testimony of a large number of witnesses, have been had. It is now expected that the case will be argued by counsel and finally submitted within a few weeks. On the other hand, a case may be brought, heard, and decided within a comparatively short period. An instance of this kind is a proceeding of some importance relating to the classification of hatters' furs and fur scraps and cuttings, which was instituted in February, answers filed by the defendants in March, hearing had in April, submitted on briefs filed in May and July, and decided in November, 1901. Whether cases before the Commission shall be promptly heard or greatly delayed depends largely upon the attitude of the parties themselves.

Undoubtedly many more formal proceedings would be instituted if the Commission possessed authority to deal effectively with these violations of the law. The instances are frequent where complaining parties have not filed formal complaints, though apparently warranted in taking that course by facts developed in preliminary investigations. Such failure on the part of complaining shippers to prosecute their cases in the way provided in the statute can only be ascribed to lack of confidence in the power of the Commission to afford relief, for under the practice of the Commission complainants need, as a rule, go to but little trouble or expense in bringing and maintaining a proceeding. The complaint will, upon request, be drafted in the office of the Commission, the hearing will be had in or near the complainant's own locality, he may conduct his own case at such hearing, a copy of the testimony will be furnished to him free of charge, and he will have such other incidental facilities as can be provided consistent with fair treatment of the carriers involved in the controversy. This practice of affording such information and aid as may be deemed proper, including statements of railway rates and statistics and advice coverng rulings or decisions of the Commission, also extends to the carrier. The total number of proceedings brought before the Commission during the year was 340. These were brought by shippers and shipping organizations, and include formal as well as informal complaints. One hundred and forty-nine informal complaints were settled through preliminary investigation by the Commission. Following is a summary of the matters involved in formal proceedings instituted during the year, and Appendix C hereto contains a detailed statement of all the cases: