the other hand, many persons are of opinion that these pooling agreements, under proper restrictions, are beneficial to commerce, in preventing unjust discriminations, and instability and fluctuations in the charges of railroad companies; and it is unquestionable that they have exercised a very decided influence upon commerce by rail. Their legalization and regulation, as well as their prohibition, as applied to interstate commerce, seems to be clearly within the authority of Congress. But whatever may be the power of Congress over pooling agreements, the futility of prohibiting pooling by act of Congress is plain, wherever the States think proper to permit consolidations of competing lines.

owners.

The national government, as well as the several States, is also limited in its control and regulation of railways, by the consideration of the private-property rights of their "The United States cannot, any more than a State, interfere with private rights, except for legitimate governmental purposes. They are not included within the constitutional prohibition which prevents the State from passing laws impairing the obligation of contracts, but equally with the States they are prohibited from depriving persons or corporations of property without due process of law." The limitations upon legislative power growing out of these considerations have already been examined. The exclusive powers of the States over their domestic commerce, and of Congress over interstate

1 See Sinking Fund cases, 99 U. S., 718,

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87

commerce, and the fact that the revenues of the railways are derived from both these sources, makes the proper application of this limitation very difficult, unless there shall be harmonious action on the subject between the Federal and State authorities.

One of the most important considerations involved in the question of the reasonableness of railroad charges, is that of the earnings of the companies. Many companies operate lines extending through several States. In each of these States they do a large business which is entirely confined within State limits; and they also do a large interstate business. The earnings, of course, are derived from the aggregate of the traffic within each State and between the States. Each sovereignty has regulative powers within its sphere, but the justice or expediency of the regulation may depend upon conditions which are under the control of a different sovereignty, and some concert of action between them would appear to be essential to success. The laws of one State, limiting railroad charges within its jurisdiction, may possibly operate indirectly to make charges on the same road higher in other States, or on interstate traffic. A company may endeavor to compensate for a diminution of revenues sustained by the legislation of one State, by increased charges on traffic over which that State has no control. Under these circumstances, questions of great delicacy may be presented, for whose final solution the Federal courts must be appealed to.

There is at least one important limitation on the power

of a State over its railroad corporations in their domestic commerce, which does not apply to the powers of Congress over them in their interstate commerce. This is the limitation which is frequently imposed by a contract between a State and a railroad company contained in its charter. These contracts usually relate to the rates which the companies may charge, and to the exclusive right of transportation over their roads; although they may of course relate to other subjects. But the State cannot surrender or relinquish by contract any rights but its own, or confer any greater powers than itself possesses. And Congress is therefore not at all hindered by any State charter from reducing or fixing railroad charges on interstate traffic below the tariff of charges authorized by the State, even though the latter has pledged itself not to reduce the tariffs. Nor, it would seem, can a railroad company claim the exclusive right of transporting interstate traffic over its road,—although by its charter from the State it enjoys that exclusive right,-where Congress prescribes a different mode of use. This would not be a requirement which, if reasonably applied (for instance, to compel a free interchange of traffic), would impair the authority of the State over its railroads, or the capacity of the latter for the transportation of commerce within the State.

THE ECONOMIC ASPECTS OF THE

QUESTION.

CHAPTER V.

Extortion-Discriminations of Various Kinds-Relations of Railroads to Each Other and to Water Routes-Results thereof -Competition and Monopoly-Relative Charges for Long and Short Distances-Illustrations and Effects thereofDiscussion of the Long- and Short-Haul Question—Under What Circumstances and Conditions a Greater Charge for a Shorter Haul Justifiable-Illustrations and Analogies.

HAVING examined somewhat in detail the authority of the legislatures, both State and National, over railroad transportation, as well as the constitutional limitations upon legislative powers, it is proper to give some account of certain railroad methods and practices against which legislation has been invoked. No extended discussion of the subject, however, will be entered upon, but only a few illustrations given from the voluminous testimony which has been adduced concerning it. And here it is to be observed that the leading object had in view in fixing railway charges, is always to produce the largest net earnings from the operation of the road. This is an irresistible deduction from the first principles of human

nature. All men will naturally seek to make the most of their own, and should proprietary rights in this respect conflict with public rights, the former will surely have the preference at the hands of the management. And yet these charges are perhaps in no case of that entirely arbitrary character which has sometimes been predicated of them. They are in the first place limited by the general doctrine of the common law, that they must be reasonable; though the difficulties to be encountered in seeking relief from real or supposed extortion under this general principle are so great as to make it of little value. The direct limitation imposed by the existence of competition is frequent and striking, but it is by no means sufficiently pervasive to make its influence of universal benefit; and indeed it has sometimes operated to produce any thing but beneficial results. In the third place, where neither the reasonableness of the charge, from the shipper's standpoint, nor the necessity of meeting competition, affects the action of the railway management in fixing rates, there are other considerations which will always exert an influence (though sometimes an inadequate one) to modify the purely arbitary character of charges. These considerations, when duly weighed and given their proper influence by a management seeking merely to increase net revenues, operate to place the rate on any given commodity at such a figure as that the product of the rate and the quantity of the shipment, minus the expense of the carriage, will be a maximum.