certain other Cuban ports. The defendant, the Commercial Union, is an anonymous society or limited company organized under the laws of Cuba, and likewise acting as a common carrier of freight between Habana, Cuba, and Galveston, Tex.

The Atchison, Topeka & Santa Fe Railway Company and thirteen other rail carriers of the United States, subject to the act, were also made parties defendant. The Commercial Union and all but three of the rail carriers answered the complaint, and the case being at issue, testimony was taken at Galveston before a special examiner designated by the Commission, depositions were taken under agreement of counsel before the consul-general of the United States at Habana, and further evidence taken before the Commission at Washington. The case was fully heard on briefs and oral argument.

The substance of the complaint is that the defendants have violated and are violating the interstate commerce laws, by reason of their through route and joint rates on shipments from points of origin on the defendants' railway lines in the United States via Galveston to ports in the island of Cuba; by reason of the organization of the defendant, the Commercial Union; and by reason of the dealings of the Commercial Union with Cuban merchants purchasing goods in the United States and routing the same from points of origin on the lines of the railway defendants to Galveston and from Galveston in its ship to Cuban ports-giving a certain number of shares of its capital stock for every $1,000 received by it on such freight.

Shipments from points of origin in the United States consigned to destinations in the island of Cuba are made and routed either by the complainant, or by the defendant, the Commercial Union, and the freight charges specified in the tariff on the through routes and joint rates are paid to the railway carriers at the point of origin.

The Commercial Union was organized in Habana, April 27, 1905, under the laws of Cuba, as an anonymous society, or limited company. Seventeen citizens of Habana, mostly merchants, joined in organizing the company, and each one of the seventeen organizers received gratuitously 10 shares of the capital stock of the company, which was placed at $1,000,000 currency of the United States of America, represented by 10,000 shares of a nominal value of $100 each. The objects of the association were fully set forth in the papers filed according to the laws of Cuba, and were briefly: (a) To establish a line of steamers between Habana and the ports of the United States, particularly the Gulf ports; (b) to center the control of such ocean carrier in the merchants of Habana; and (c) to stimulate shipments via such carrier by awarding for every $1,000 paid to said carrier for freight 4 shares in the capital stock of the company during the first year of its existence, 3 shares the second year, 2 shares 13 I. C. C. Rep.

the third year, and 1 share the fourth year, after which no further shares were to be given for freight, shippers being permitted to tack the freight paid during any year to that paid during succeeding years until the $1,000 was made up to authorize the receipt of shares. Some shares were sold for cash, and with the money thus raised the Commercial Union chartered a steamer and began business as a common carrier between the ports of Habana, Cuba, and Galveston, Tex.

The ninth section of the complaint is, in part, as follows:

That said Commercial Union, by the means aforesaid, and by solicitation and by the offer to give and grant the concessions aforesaid in the way of the said gratuitous stock, and by the inducements held out to permit shippers of such freight to share in the profits of the business of the said Commercial Union, secured a large number of customers at Habana and other points on the island of Cuba who, from that time down to the present time, have been and are now entitled to receive the said shares of stock in consideration of the shipment of freight from points on the said lines of railroad in the United States to Cuba, via Galveston and the Commercial Union steamship, and which shipments have been and are so made upon the said published through joint rates of freight from said points in the United States, via Galveston and the Commercial Union steamships, to Habana, and if consigned to other points of Cuba, then by transshipment on to other points.

That in accordance with its obligation to do so, said Commercial Union did issue and distribute said gratuitous shares of stock to its patrons who were shippers of freight as aforesaid upon the rate aforesaid, and about November, 1906, issued said shares to patrons of the said Commercial Union who were the shippers of said freight upon said rates as aforesaid, being 228 common shares, widely distributed to various and sundry merchants of importance in the island of Cuba, and to parties elsewhere located, which said shares are still outstanding. That said shares were issued as an inducement and as a thing of value to persons to whom issued for the purpose of inducing them to ship and route their freight from said points in the United States via the Commercial Union via Galveston to Cuba.

That the persons, firms, and corporations holding said gratuitous certificates of shares are constantly shipping upon the through joint rates of freight aforesaid, various articles of merchandise from points of origin in the United States on said lines of railways as shown in said tariff, from which said rates apply as therein shown, to Cuban points via Galveston, and over the line of the said Commercial Union, being induced thereto by the advantages offered and to be given through the means of receiving the aforesaid gratuitous shares of stock of the Commercial Union, and that the said parties are induced to route the said freight and direct that it be routed from points of origin in the United States on the lines of said railways over the respective railroads to Galveston, and thence over the line of the Commercial Union to Habana, for the purpose of obtaining the benefits to be thus received on account of the payment of the freight, to wit, the amounts specified in the tariffs on file as aforesaid with the Interstate Commerce Commission.

Paragraph 10 alleges knowledge on the part of the railway companies of the facts set forth, and paragraph 11 asserts the violation of the second, third, and sixth sections of the act to regulate commerce by the Commercial Union and the railway companies.

The answer of the Atchison, Topeka and Santa Fe Railway Company, as well as the answer of the Commercial Union, admitted the situation with respect to the giving of shares by the Commercial Union; but denied that this was a violation of the act to regulate commerce, and denied that such shares were given upon the joint through rate. These answers also set forth the protest by the Atchison, Topeka and Santa Fe Railway Company against the issuance of such shares by the Commercial Union on freight received, as soon as it learned of them, and further set forth that the charter of the Commercial Union had been amended to prohibit the issuance of gratuitous shares for freight routed via the ocean carrier.

The reason for the organization of the Commercial Union is found in the course of business between the United States and Cuba which is, and for many years has been, that all goods sold for delivery at Habana are sold c. i. f.; or, in other words, the price charged the consignee in Habana includes the cost of the goods, the insurance on the shipment, and the freight from point of origin to the port of Habana. Under this custom, no matter where the contract may be made, the transaction is in reality a sale of goods delivered at the port of Habana. The payment for the merchandise, therefore, was in effect the same as though the consignee himself had paid the freight. The organizers of the Commercial Union having this in mind, determined to derive some benefit therefrom, if possible, by owning the ocean carrier participating in the transportation, and as the manifests and other papers of such carrier would be under their own control and the division of the through rate enjoyed by it known to them, they could readily ascertain what amount of freight, estimated in dollars, was paid by any particular consignee whereon to assign stock in the company.

The laws of Cuba permitted maritime transportation companies to issue shares of stock in consideration of patronage extended. There was nothing illegal and nothing concealed or underhanded about the organization of the Commercial Union. The articles of association of the company were duly recorded in the office of the mercantile recorder of Habana, and all the formalities of the Cuban laws complied with. In addition to this the company issued a printed circular addressed to the merchants of Habana generally calling attention to the new carrier and offering its benefits and facilities to all equally. The complaint does not allege any wrongdoing with regard to rebates on freight originating at Habana and carried thence to the United States, but is directed solely to the giving of shares of the company, the Commercial Union, to merchants in Habana on freight paid by them from the United States. No share of the company was ever issued to any citizen of the United States in consideration of freight routed via the Commercial Union.

This case differs from the case of the Cosmopolitan Shipping Com pany, 13 I. C. C. Rep., 266, in that while the case cited named only the ocean carriers as defendants, here the rail carriers of the United States, which participate in the joint through rates involved, arc also joined as defendants. The knowledge, by the rail carriers, of rebating on the part of the Commercial Union in respect to freight carried by such rail carriers from the point of origin in the United States to the port of transshipment, the through charges on which had been collected by them, was alleged in the complaint and denied in the answer. The proof is conclusive that, assuming the practices of the Commercial Union to have been illegal and assuming the jurisdiction of this Commission, no guilty knowledge was ever had by such rail carrier. On the contrary, the fact is, that when the defendant, the Atchison, Topeka & Santa Fe Railway Company learned in July, 1907, of the shares given by the Commercial Union for freight participated in by it, the said railway company notified the Commercial Union of its doubt concerning the legality of such practices and demanded the cessation thereof. Thereupon, at a regularly called meeting of the Commercial Union, in Habana, on September 9, 1907, at which the required majority of the stock of the company was represented, the articles of association of the company were amended so that thereafter no shares should be issued in return for freight paid. This action of the Commercial Union, as contained in the notarial minutes of the meeting, was duly recorded according to Cuban law in the office of the mercantile recorder of Habana October 7, 1907. These recorded notarial minutes show, in part, as follows:

The president [of the Commercial Union] stated that in his opinion it was unnecessary to give away free any more shares of said corporation to patrons of the same or to any other person; that it had so been required by United States railway companies, whose services this corporation utilizes, as an indispensable condition for them to continue rendering such services, said railway companies alleging that such gifts had given rise to claims by certain parties on the basis that they were contrary to the United States laws and that such claims might injure said railway companies. The president opened the question to discussion and the meeting finally resolved, unanimously, that without accepting or acknowledging the assumed illegality of said gifts, and because it is necessary as a practical measure in order to continue utilizing the services of said railway companies shares * * can not be given away free to patrons of the corporation or to other persons. Ninth. The prohibition contained in the latter part of the foregoing clause shall in no way affect holders of common shares already issued.

*

This action of the meeting of September 9 was incorporated in the notarial deed of September 13 and recorded in the public records of the office of mercantile recorder of Habana October 7, 1907, thereby amending the articles of association of the company and notifying all who might be concerned.

The complaint in this case was filed November 23, 1907, a month and a half after the things complained of ceased; indeed, the act of the Commercial Union was really retroactive in that the action taken in September, 1907, prevented any issue of stock for freight paid for a year prior thereto, the company year ending on September 30. The matter before us, therefore, is narrowed to the point stated at the hearing of the case before the Commission February 11, 1908, by the attorney for the complainant.

The main question is a question of law. The facts are undisputed in regard to the cessation of the issuance of stock. We admit that. Unless it is a violation of law to have the stock outstanding in the manner and under the circumstances in which it is outstanding, the Commission would have nothing to decide.

In the present case it is unnecessary to discuss the jurisdiction of the Commission where ocean carriers participate with rail carriers of the United States in joint rates on through bills of lading. That matter is settled by the decision of the Supreme Court of the United States in the cases of Armour Packing Company et al. v. United States (Nos. 467, 468, 469, 470), October term, 1907, delivered March 16, 1908, and the decision of this Commission in the case of the Cosmopolitan Shipping Company, 13 I. C. C. Rep., 266. As we said in the case last cited, the complainant

may bring before the Commission the rail carriers engaged in the transportation of such foreign commerce to and from the ports of transshipment and subject them to investigation as to their methods of handling such business and the reasons therefor. If it is found that there is discrimination * on the part of these rail carriers, it is within the function of the Commission to correct such wrong.

In this case such rail carriers have been brought before the Commission, but the evidence shows them to have been without knowledge of the practice of the Commercial Union in giving shares of stock in return for freight paid until July, 1907, and that immediately thereafter they demanded the cessation of that practice in order to avoid even the appearance of concurring in what might be construed as a violation of the act.

The complainant raised the question whether Cuba is "an adjacent foreign country" within the meaning of the act. The word "adjacent," as used in the act to modify the words "foreign country," would seem to mean adjacent in the sense of the possibility of substantial continuity of rails. Indeed, as was pointed out in the report to the Senate on the original act to regulate commerce in the year 1886, this meaning is made plain. The report said:

While the provisions of the bill are made to apply mainly to the regulation of interstate commerce, in order to regulate such commerce fairly and effect