Steamship Lines operating between Galveston and New York and between New Orleans and New York for through transcontinental service; that certain of the practices of the Southern Pacific Company in connection with the operation of the Atlantic Steamship Lines between Galveston and New York and between New Orleans and New York were unduly discriminatory and otherwise prejudicial to the public interest; but that under conditions then existing an extension of time within which the petitioner might continue to operate or have any interest in the steamship lines between Galveston and New York and between New Orleans and New York would not exclude, prevent, or reduce competition on the routes by water, and, if the practices referred to were corrected, would be in the interest of the public and of advantage to the convenience and commerce of the people.

The case was held open for a period of 60 days, during which time the Southern Pacific Company discontinued the objectionable practices and brought the operations of its Morgan Line steamships into harmony with the act; whereupon we issued a supplemental report and order in which we found that the service of the Southern Pacific Company-Atlantic Steamship Lines between the designated points was in the interest of the public and of advantage to the convenience and commerce of the people. 45 I. C. C., 505.

THE FIFTEEN PER CENT CASE.

On March 22, 1917, carriers in official classification territory represented to the Commission in a public conference that an emergency had arisen in their operations which required prompt remedial measures. Similar representations were made in like manner on March 27 by the carriers in western classification territory and on April 10 by carriers in southern classification territory. In these conferences prompt action on the part of the Commission was urged, because, it was said, the situation had become critical and delay would. detract from the beneficial effects of the remedial measures proposed. Under authority delegated by the act the Commission has established rules governing the publication and filing of rate schedules. It was asked that these rules be modified so as to permit the filing in simplified form of schedules proposing a general and horizontal increase in all freight rates, except upon certain designated commodities, and to permit such rates to become effective on less than statutory notice.

The request that increased rates be permitted to become effective on short notice was not granted.

As a result of conferences between representatives of shippers and carriers and the Commission, at which practically no objections were raised to the proposed percentage form of publication, and it appearing that the publication of all the necessary tariffs in the form re

quired by the rules would have involved an expenditure of hundreds of thousands of dollars and consumed much time, a permissive order was entered, on April 23, 1917, granting to the carriers authority to publish and file, on 50 days' notice, supplemental tariffs proposing the increased rates in the simplified form desired. Such tariffs were filed on behalf of all, or practically all, the railways in the United States, to become effective July 1, 1917.

Fully recognizing the importance of the proceeding, the Commission sat as a body for almost 30 days listening to testimony and arguments favoring or opposing these increased rates. More than 6,000 pages of testimony were received and a mass of statistical and other exhibits was made a part of the record.

The proceeding was submitted June 12, 1917. It was decided June 27, 1917. The Fifteen Per Cent Case, 45 I. C. C., 303. After considering the evidence submitted the Commission said:

In so far as anything that is here asked of us might contribute to the success of the war, we should respond unhesitatingly to the fullest extent of our lawful authority. We are not unmindful of the fundamental and immensely valuable service which the carriers perform in times of peace and even more in times of war. No one will deny that the successful operation of the railways is vital to our national welfare. We fully appreciate the services which the railways are performing and the unusual efforts they are making to secure a maximum of efficiency. But this record does not convince us that the suspending or refusing to suspend the proposed rates or the granting or refusing to grant increased rates will facilitate or retard the successful prosecution of the

The consideration of a general increased rate case is necessarily a study of tendencies. The trend of the curves shown in the different diagrams for the respective periods of time is unmistakably in a certain direction. It will be observed that there have been numerous ups and down, but the general tendency has been favorable, including, for the country as a whole, the first four months of 1917. These figures and diagrams do not suggest a country-wide emergency. Emergencies of greater or less intensity may have existed with respect to individual carriers during various limited periods, but the direction of the curves shows recovery in each instance before the lapse of extended periods of time. The general trend has been distinctly favorable.

An examination of the operating results of individual carriers shows that certain of them have lacked prosperity while others have been affluent. The reasons for lack of prosperity on the part of some of them are well known. The great majority of them show a healthy condition from financial and operating standpoints. We must consider not only the successful and strong, but also the unsuccessful and the weak. The needs of certain weak lines, however, can not justify a course of action that is unwarranted by the condition of the larger number of strong and successful lines. This record shows that many of the carriers are in a most prosperous condition. They have been managed by men of conspicuous ability and integrity, in whose achievement the whole nation may well take pride. It is certainly desirable that successes of this character, which mean efficient service, shall continue.

We found that

No condition of emergency exists as to the western and southern carriers which would justify permitting a general increase in their rates to become

effective. In the eastern district increased rates have recently been permitted to become effective generally on bituminous coal, coke, and iron ore. We think that similar increases may properly be permitted in the southern district on coal, coke, and iron ore, and in the western district on coal and coke.

We further found that—

The conditions confronting the eastern carriers are substantially different from those confronting the southern and western carriers, and we are persuaded that they are entitled to increased revenue beyond and above that which they are securing and will secure from the increased rates on bituminous coal, coke, and iron ore.

For the reasons stated in the report the Commission permitted the eastern carriers to increase their class rates between New York and Chicago to a scale beginning with 90 cents first class in lieu of the former one beginning with 78.8 cents first class, and to correspondingly increase their other class rates applying intraterritorially between points in official classification territory, observing the established relationships between ports and localities.

On account of largely increased costs of operation the diversion of traffic to other channels because of war conditions and the attendant increased marine insurance the Commission permitted rates via railand-water routes in all three territories to be increased to a level not higher than the all-rail rates between the same points.

In conclusion the Commission stated that while the carriers were clearly within their rights in bringing matters to the Commission's attention when they did, the expectations that had prompted this action had not been realized. It appeared unprofitable to hold further hearings at that time, and accordingly the Commission said:

We shall, through the medium of the monthly reports of the carriers, keep in close touch with the operating results for the future, and if it shall develop that the fears which have prompted the carriers are realized or that their realization is imminent, we shall be ready to meet that situation by such modification or amplification of the conclusions and orders herein reached and entered as are shown to be justified. If it shall develop that what has been accorded herein is more than is appropriate or that the increased rates are no longer warranted, we shall depend upon the pledges of the carriers to respond promptly to an announcement by us of a conclusion to that effect. Inasmuch as a general percentage increase is so undesirable because of its serious effect upon commercial conditions and established relationships, it would seem to be appropriate for the carriers to cancel the tariffs which we suspend herein, and permission is hereby accorded them so to do. The record will be available for consideration in any further proceedings that may be necessary or appropriate in this connection in the future, and any substantially changed conditions which may develop can be promptly, adequately, and fairly dealt with. The foundation for any such action can doubtless best be laid in conference between the Commission and representatives of the carriers and of the shippers. The existing public sentiment to which we have referred and the manner in which the proposals of the carriers have been presented and handled by them indicate a feeling of mutual confidence, which at many times in the past has been regrettably absent.

Subsequently many carriers filed tariffs proposing substantial increases on certain commodities on which no increased rates had been authorized by our report. These tariffs were suspended by appropriate orders.

On October 17, 1917, representatives of the eastern carriers in an informal conference suggested that the operating revenues of these carriers do not now adequately overcome mounting costs. They requested a hearing in from 60 to 90 days' time.

Upon consideration of these representations the Commission, on October 22, 1917, wrote to the spokesman for these carriers that, in accordance with statements in its report, supra, The Fifteen Per Cent Case was still open and before the Commission. It was further said:

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If your suggestion is well grounded that further financial relief is needed by the carriers, it is obvious that such relief should be had promptly in order that transportation demands in time of war may be fully met. If this be so, the Commission's stated purpose of meeting that situation will not have been attained by adopting your suggestion of a hearing 60 or 90 days hence. The Commission is emphatically of the opinion that the evidence necessary to establish the full truth should be presented without delay, in order that the carriers may be maintained in a position to do their full war duty.

The suspension proceedings referred to above have been consolidated for hearing with this case. Hearings before the Commission begin November 5, 1917.

COOPERATION WITH STATE COMMISSIONS.

In the course of our review of the Shreveport case in the last annual report, at pages 80 to 91, we made certain suggestions and recommendations with the view of reducing and eliminating, to the greatest extent possible, the conflicts between intrastate rates prescribed by state commissions and interstate rates prescribed by this Commission. We there recommended legislation to provide a legal basis for the cooperation which we thought desirable as being in the interest of uniform and efficient regulation from the point of view of the carriers and the public. Our recommendation with respect to congressional action was expressed in the following language:

* * * We believe that without abdicating any of the federal authority to finally control questions affecting interstate and foreign commerce we should be authorized to cooperate with state commissions in efforts to reconcile upon a single record the conflict between the state and the interstate rates.

With the view of promoting this kind of cooperative action hearings have been held in a half dozen different states, which were in fact, although not in law, joint hearings of the interstate and the respective state commissions. In one instance these hearings extended through many weeks, and while the controversies in question have not yet been disposed of, we believe that what has already been

accomplished has been distinctly in the interest of all the affected parties, and that a proper basis has been laid for final disposition of questions which have vexed the citizens and authorities of the respective states as well as the carriers operating under these conditions, so that it will be possible for us to carry these proceedings to a final conclusion with substantial harmony of action on the part of the respective authorities. Very recently similar joint hearings have been provided for in connection with proceedings in which two different state commissions are directly interested.

Our suggestion contained in the above-quoted recommendation for legislation received the unanimous indorsement of the National Asso ciation of Railway Commissioners at its last annual convention, recently held in this city. By resolution a committee of that association was "directed to confer and cooperate with members of the Interstate Commerce Commission in bringing said matter before the federal Congress, with the view of securing the necessary statutory authority for effective cooperation between the Interstate Commerce Commission and the regulatory commissions of the several states." The committee representing state commissions is cooperating with a similar committee representing the Interstate Commerce Commission in the preparation of a draft of a proposed bill which it is expected will be presented for consideration to the respective committees of both houses of Congress at the proper time.

ENLARGEMENT AND SUBDIVISION OF THE COMMISSION.

Since our last annual report was submitted the membership of the Commission has been increased from seven to nine, and we have been authorized by law to act through subdivisions. The most pertinent portions of this amendment to the act to regulate commerce, known as Public No. 38, approved August 9, 1917, are given below:

The Commission is hereby authorized by its order to divide the members thereof into as many divisions as it may deem necessary, which may be changed from time to time. Such divisions shall be denominated, respectively, division one, division two, and so forth. Any Commissioner may be assigned to and may serve upon such division or divisions as the Commission may direct, and the senior in service of the Commissioners constituting any of said divisions shall act as chairman thereof. In case of vacancy in any division, or of absence or inability to serve thereon of any Commissioner thereto assigned, the Chairman of the Commission, or any Commissioner designated by him for that purpose may temporarily serve on said division until the Commission shall otherwise order.

The Commission may by order direct that any of its work, business, or functions arising under this act, or under any act amendatory thereof, or supplemental thereto, or under any amendment which may be made to any of said acts, or under any other act or joint resolution which has been or may hereafter be approved, or in respect of any matter which has been or may be referred to the Commission by Congress, or by either branch thereof, be assigned or referred to any of said divisions for action thereon, and may by