observed in such case.” The parenthetic exception as to joint rail and water rates might be held to apply only to the Commission's jurisdiction to prescribe maximum or minimum joint rates and not to its authority to fix the specific rate.

Competition may be the only safeguard of the public interest in unregulated branches of industry. The railroads are presumed to be regulated in the public interest. If the public interest is provided for in the operation of the railroads, competition by unregulated water transportation against rail transportation is certainly superfluous, it would seem, and might serve no other purpose than to defeat the ends of regulation by rendering it impossible for the rail carriers to secure tonnage at minimum rates fixed for rail transportation by the regulatory body. Lacking the tonnage, the revenues of the particular rail carrier might decline to such a point that it will become unable to discharge its common carrier functions. Does not the better policy seem to be to regulate water transportation as well as rail transportation and let competition in transportation be confined solely to a competition in service and not charges?

Paragraph 2 provides for the time when orders of the Commission. shall take effect and their continuance in effect. Under the old provision the Commission was limited to two years as the period during which its orders might remain effective. Now there is no limit specified and all orders unless made effective for a specified time, continue in force until suspended, modified, or set aside by the Commission.

Paragraph 3 provides for the establishment by the Commission of through routes, joint classifications, and joint rates. This paragraph embraces the same change with respect to minimum and maximum rates as explained in Paragraph 1, including the exception as to minimum joint rates on through rail and water routes.

The change in the Commission's jurisdiction with respect to divisions is embraced in this paragraph. It was suggested in the first article on section 1, under the discussion of paragraph 4 of that section, page 9, supra, that the Commission's jurisdiction over divisions might now be a primary one and that the divisions might now be fixed at the same time that it determines the joint rates. There seems to be no doubt on this score under the specific terms of this paragraph and those of paragraph 6.

Paragraph 4 provides the short hauling limitation on the Commission's powers to establish through routes, and the change here is noteworthy, in that the limitation does not seem to apply when one of the carriers to the proposed through route is a water line.

Provision is also made for temporary routes during any emergency which will be exempt from the effect of this short hauling limitation.

Paragraph 5 is new and further defines transportation wholly by railroad of ordinary live stock in carload lots destined to or received at

public stock yards to include all necessary service of unloading and reloading en route, etc.

Paragraph 6 has been mentioned in the discussion of paragraph 3 in connection with the Commission's authority to prescribe divisions. Divisions fixed by the Commission may be made retroactive back to the date of the filing of the complaint. Certain considerations which the Commission shall observe in fixing divisions are also set out.

Paragraph 7 is the suspension provision. There are two changes in these provisions: (1) The second suspension period has been shortened from six months to 30 days, so that the total period now available in which to decide investigation and suspension cases is 150 days, whereas under the old act it was 120 days plus 6 months. (2) Provision is made, however, so that in cases where the hearings and decision cannot be completed before the 150 days, the Commission may require the carriers to keep a strict account of the money received on the increased rate so that, if the increase is finally found to have been unjustified, refund of such increase can be made.

Paragraph 8 is the same as the fifth paragraph of the old act and provides for the routing of freight by the shipper.

Paragraph 9 is new. It is intended to protect a participating carrier on routed freight in its right to its haul. If routed freight is diverted from a line specified in the routing, that carrier may recover from the carrier making the improper delivery, the rate or charge it would have otherwise received.

Paragraph 10 is also new. It provides that the Commission may, whenever the public interest and a fair distribution of the traffic require, direct the route which unrouted traffic shall take.

Paragraphs 11, 12, 13 and 14 are the 6th, 7th, 8th and 9th paragraphs, respectively, brought forward from the old act.

Paragraph 11 provides against the disclosure of information as to shipments.

Paragraph 12 provides the penalty for any disclosure provided against by paragraph 11.

Paragraph 13 provides for allowances to shippers for any service connected with transportation or for furnishing any instrumentality used therein.

Paragraph 14 provides that the enumeration of powers of the Commission shall not exclude any powers which it would otherwise have in making an order under the provisions of the act.

SECTION 15-A

See Appendix, Page 116, for text of

present Act.

Section 15 was further amended by adding at the end thereof a new section to be known as section 15-a. This section is important not only because it is new but doubly important because of its subject matter, which embraces an innovation in railroad regulation. This is the section which is intended to guarantee to all railroads subject to the act as a whole a return of 6 per cent on their investment. Broadly speaking, its provisions require the Commission to make a survey of the railroads as a whole and then initiate rates high enough so that a return of 6 per cent will be yielded upon their value. The section is composed of eighteen numbered paragraphs.

Paragraph 1 defines the terms used in the section. The term "carrier" as defined excludes sleeping car and express companies and belt line and terminal switching railroads and other terminal facilities publicly owned and operated. Street or interurban railways not otherwise subject to the act are likewise excluded. "Net operating income" is defined as "railway operating income, including in the computation thereof debits and credits arising from equipment rents and joint facility rents."

Paragraph 2 is the most important of the entire section and is quoted

in toto:

In the exercise of its power to prescribe just and reasonable rates the Commission shall initiate, modify, establish or adjust such rate so that carriers as a whole (or as a whole in each of such rate groups or territories as the Commission may from time to time designate) will, under honest, efficient and economical management and reasonable expenditures for maintenance of way, structures and equipment, earn an aggregate annual net railway operating income equal, as nearly as may be, to a fair return upon the aggregate value of the railway property of such carriers held for and used in the service of transportation; Provided, that the Commission shall have reasonable latitude to modify and adjust any particular rate which it may find to be unjust and unreasonable, and to prescribe different rates for different sections of the country.

Paragraph 3 requires the Commission to determine from time to time and make public what percentage will be a fair return upon the aggregate value of the whole railroad properties, and directs that this determination shall be governed by a consideration of the needs of enlarged transportation facilities. For the two years from March 1, 1920, it is provided that a fair return shall be 52 per cent, to which the Commission may add 1⁄2 per cent to make provision for improvements or betterments.

Paragraph 4 requires the Commission to determine "the aggregate value of the property of the carriers" from time to time and in arriving at this value to “give due consideration to all the elements of value recognized by the law of the land for rate-making purposes, and shall give to the property investment account of the carriers only that consideration

which under such law it is entitled to in establishing values for rate-making purposes." This paragraph, from its further wording, evidently contemplates that the value so to be determined shall not depend upon the physical valuation that is now being made by the Commission pursuant to Section 19-a. It is provided that the Commission may use the results of its physical valuation in arriving at the value here in mind, in so far as deemed by it available. And it is further provided that when a valuation is determined pursuant to Section 19-a, the value so obtained shall thereafter be the value as finally contemplated by this paragraph.

It is apparent on its face that this paragraph is impossible of immediate administration by the Commission. Its terms provide that the Commission shall fix a value giving due consideration to all the elements of value recognized by the law of the land for rate-making purposes, especially providing that the property investment account shall not be given any other consideration than that to which it is entitled under the law of the land for fixing values for rate-making purposes.

The physical valuation act of March 1, 1913, which appears as Section 19-a of the interstate commerce act, was enacted by Congress for the avowed purpose of securing the real value of the carriers for rate-making purposes. The provisions of Section 19-a specify detailed directions to be observed in arriving at this value that is to be available thereafter in fixing rates. It would seem, therefore, that Section 19-a is "the law of the land" which fixes the elements of value that are to be considered in arriving at a value for rate-making purposes. How, therefore, can the Commission, under paragraph 4, fix a value giving "due consideration to all the elements of value recognized by the law of the land for rate-making purposes" without going through all the processes required of it by the law of the land as set forth in Section 19-a?

If it be argued that by "the law of the land" is meant the court decisions, this might be answered in two ways, either of them equally conclusive, it would seem. First, the decided cases are the law of the land on matters of public policy only until the legislature acts with respect to the particular subject matter; thereafter the substantive enactment of the legislature is the law of the land, subject only to constitutional limitations. What constitutes the elements of value for rate-making purposes is, of course, a matter of public policy subject only to the constitutional limitation prohibiting confiscation. Since Congress by substantive enactment undertook in the physical valuation act to state the elements of value it desired to be considered in fixing a value for rate-making purposes and the method to be pursued, it would seem that this enactment is the only "law of the land" subject only to constitutional objections. Of course, Congress can amend the physical valuation act, but certainly paragraph 4 of Section 15-a is not amendatory of Section 19-a. Second, the elements of value that

must be considered under a proper administration of Section 19-a embrace every element of value recognized by the decided cases, where those decisions are not contradictory.

The Commission has been diligently employed on this physical valuation for seven years and the estimate has been announced that at least two more years will be required to complete the task. Undoubtedly the hope which prompted those interests which proposed this section and so diligently lobbied it through Congress was in some way to anticipate the results of the physical valuation to be obtained pursuant to Section 19-a. It is significant, however, that at the hearing held by the Commission on this section no one was able to suggest how the Commission was legally to give effect to its provisions, until the physical valuation was completed.

If the real value to be used as a basis for rate-making could have been secured in any other way than by a physical valuation, presumably it would have been so ordered by Congress in the act of March 1, 1913. The only alternative available would be the aggregate of the property investment accounts of all the carriers. The property investment account in the parlance of railroad accounting is nothing more nor less than the book value under ordinary accounting. It is the value which a particular carrier places upon itself as a going concern. Book values are generally reputed to be more or less "moistened" with "water." Few of the property investment accounts of the carriers have been through the wringer. Certainly freight rates are not to be made on the carriers' own estimate of their value.

Indeed the interests which secured the enactment of this section were not so audacious as to insist on any such thing. Congress provided that the property investment account should be given only that consideration to which it was entitled under the law of the land in fixing values for ratemaking purposes. Under the law of evidence, a property investment account, being a self-serving declaration, is, on objection, not competent as evidence, it would seem, on the issue of value. The best evidence of value is the receipt showing what the particular thing cost. Any other evidence of value must be speculative. Whether speculative evidence of value in varying degrees is competent evidence is, of course, beyond the purview of this discussion.

The only suggestion made by those interested in the immediate application of the provisions of this section is that the aggregate of the property investment accounts be taken as a basis and then by some process of judgment as yet not known to the human mind the Commission, without any detailed facts, which it can secure only by a physical valuation, on which to base its finding, shall estimate how much, if any, should be deducted from that aggregate so that the result will be the real value for rate-making purposes.