The sun., 1919-10-06
SAY CONGRESS CAN
REGULATE EARNINGS
Root and Four Associates Take
Issue With Hgghes's Claim
of COnfiscatiOn.
RAIL GROUPS HELD LEGAL
Owners of Securities Told of
U. s. Powers, in Opinion
of Five Lawyers.

of Five Lawyers.
Elihu Root and John G. Milburn of
New York. John S. Miller of Chicago,
Hugh L. Bond. Jr., OF Baltimore, and
Forney Johnston of Birmingham. ad-
visory counsel for the National Associa-
tion Of owners of Railroad Securities,
have given an opinion to the association
that Congress has the constitutional
power to regulate excess earnings of
railroads over and above faip return
upon the value of property. The five
lawyers take decided issue with the
opinion aNlounced last week by Charles
p. Hughes that it would amount to con-
fiscation, under the Fifth Amendment
to the Federal Constitution, IL the Gov
ernments collected any portion of rail-
road receipts. except a valid tax, to be
used in any Governmental purpose or
for the benefit of other carriers.
Mr.. Root and his associates hold that
Mr. Hughes's conception of the provision
relating to the disposition of excess earn
| ings as embodied in Section 6 of the
original draft of the Cummns Railroad
| Bill Is based upon erroneous assump-
| tions. and that Mr.. Hughes failed to
| take into consideration that the prin-
ciple of grouping carriers into competi-
tive areas for ths purpose of rate max
ing, accompanied by appropriate provi-
sions for the regulation of excess earn
ings, is clearly within the power OF
Congress. The big point made by the
advisory counsel Is that rates are not
| to be adjusted to individual railroads
but to groups of railroads; to a level
necessary to sustain transportation in
the aggregate or in the group.
| Reasonableness of Rates.
| 1t is erroneous, the five lawyers state
to conclude that rates are necessarily
| 'just and reasonable for the service
rendered" for 1t is expressly declared
that while rates may be necessarily in
excess of what is just and reasonable
for tho service rendered by particular
carriers, nevertheless the rates may be
Just and reasonable in order to keeI
alive the essential agencies of transpor'
| tation in competitive areas.
1t is not true. the advisory counsel
| hold, that rates made on a group or ag
gregate basis have been declared to bt
| Just and reasonable" as to every car
rier and every service, for such a con
clusion would rest upon the hypothesis
that Congress must perpetuate that dis
which is based exclusively upon the cost
or value of each particular service.
I'VE have heretofore given you our
opinion" Mr.. Root and his associates
state to their client, las to the power
of Congress to regulate the earnings oi
railroads III excess of fair and reason
able return upon their properties held
and used for the service of transporta'
tion, where such excess results from the
l J.
lishment of rates in competitive area!
which are Intentionally higher than are
required to produce a reasonable return
for exceptionally situated carriers in th'
group, but are necessary 10 sustain theil
less favorably circumstanced competi
tors whose maintenance is nevertheless!
essential in the public interest.
Regulating Excess Earnings.
without this mower Congress mus
acknowledge its inability to sustain com
petitive agencies of transportation. anC
the power to regulate commerce on {
constructive basis would fail at the frs
test. Any act of Congress proposing tt
regulate excess earnings thus produced
should clearly set forth in the act tn
theory upon which the regulation 4
based and should make 1t clear that, Il
the extent to which rates established
with this end in view shall be found T.
produce more than a fair and reasonable
return upon the property of particula
carriers, thcy are to be received condi
r tionally and in trust for administratio
5 by the United States for the benefit o
the general public interest in transporta
ton"
The question of "reasonab bleness," tn
r five lawyers state, must, from the ship
e per's standpoint, be determined by tn
= necessities of transportation in tn
group. The shipper cannot insist upo
= a rate that would destroy essentia
/ / agencies of transportation by attractin
( | all of the business to their competitors
f From the carriers standpoint the law
$ yers hold, the question as to what eac
' particular carrier shall be entitled t
retain out of its earnings over and abov
p reasonable return upon its property
: | dependent upon entirely different consid
: erations. The carrier cannot complai
!, of action by Congress If such actio
. leaves 1t with fair and reasonable re
!, turn.
!. The right OF a shipper" the advis
ory counsel holds, "to have his comm6d
ties transported by each common carrie
! at reasonable rate for each service
. mere common law right that is 4
e subject to the discretion of Congress
{ under the commerce clause as was III
n common law right of carriers to po,
q their tonnage. TO combine or to enforC
n the fellow servant doctrine as to the
i employees 1t was never propert
$ right or right protected against mod
n fication by Congress under the commerC
IS clause.
d Must Survive TO Compete.
o MANY of the common law rights {
a ahrnppfpd in 4.
& to enforce a competitive status anon
IS competing carriers. They must surviy
- before they can compete. Any rate reg
d ulatiOn found necessary hY Congress