SECTION 5.

§ 298. Pooling of freight and division of earnings forbidden. 299. Construction of section.

300. Controlling through routing by initial carrier is not pooling. 301. Agreements not within the prohibition.

302. The relation of the section to the Anti-Trust Law of 1890. 303. Pooling as a defense to action of the carrier.

§ 298. Pooling of freight and division of earnings forbidden. Sec. 5. That it shall be unlawful for any common carrier subject to the provisions of this act to enter into any contract, agreement, or combination with any other common carrier or carriers for the pooling of freights of different and competing railroads, or to divide between them the aggregate or net proceeds of the earnings of such railroads, or any portion thereof; and in any case of an agreement for the pooling of freights as aforesaid, each day of its continuance shall be deemed a separate offense.

$299 (227.) Construction of section.-This section has not been amended. It was more thoroughly discussed in congress and in the public press before the enactment of the statute than any other, except the long and short haul provision of section 4, yet in view of its importance as a declaration of public policy, it has received comparatively little discussion in the courts or before the commission. In 115 Fed. 588 (1902), this section was construed by the court, Hammond, J., in the western district of Tennessee, in a charge to the grand jury. He said that the statute contemplated two methods of pooling, both of which were prohibited. First a physical pooling, which means a distribution by the carriers of property offered for transportation on different and competing railroads in the proportions and on the percentages previously agreed upon; and secondly, a money pooling, which is described best in the language of the statute, "to divide between them (different and competing railroads) the aggregate or net proceeds of the earnings of such railroads, or any portion thereof." The court in its charge adopted the definition of the word "pool" from the Century dictionary, as: "It is a combination intended by concert of action to make or control changes in the market of rates; a combination of the interests of several otherwise competing parties,

such as rival transportation lines, in which all take common grounds as regards the public, and distribute the profits of the business among themselves equally or according to special agreement. In this sense pooling is a system of reconciling conflicting interests and obviating competition by which the several competing parties or companies throw their revenues into one common fund, which is then divided or distributed among the members of the pool on a basis, percentage or proportion previously agreed upon or determined by arbitration."

The agreement of the Southern Railway and Steamship Association provided for a division of territory between eastern and western lines, and also a system of fines and penalties among the members for violation of the association rules. The commission said in 6 I. C. C. R. 195, that these fines and penalties are available as substitutes for the penalties which would be exacted under a regular pooling system, and that the arrangement was tantamount to a combination forbidden by the section, and that the law had regard to the substance rather than to the form, and that whatever it prohibited from being done directly could not legally be done indirectly.

§ 300. Controlling through routing by initial carrier is not pooling. In the Southern California Fruit Case, 9 I. C. C. Rep. 182, the commission found there was a tonnage pool in traffic as between the connecting carriers and that the through routing was controlled so as to give specific percentages of traffic to their said connections. This view was sustained by the circuit court (S. D. of Cal.), 123 Fed. 597, and 132 Fed. 829, which rendered judgment for the enforcement of the commission's order, that the carrier should desist from this practice of controlling the through routing. The supreme court in Southern Pacific et al. v. Interstate Commerce Commission, 200 U. S. 356, 50 L. Ed. 585 (1906), reversed this judgment, holding that there was nothing in the act which prevented carriers from agreeing upon a through routing of the freight and of insisting upon the right of routing as a condition of guaranteeing through rates to the shipper. It seems that the rule was intended to break up rebating and in practical operation had been effective to that end.

Subsequent to this decision, by the amendment of 1910, this right of controlling the through routing was secured to the shipper (see section 15, infra).

§ 301 (229). Agreements not within the prohibition.—An agreement for the division of through freights between the members of a trunk line is not within the prohibition of this section. Neither is an agreement for consultation for the promotion of reasonable rates. 6 I. C. C. R. 85. In this case the commission ruled that the agreement of the transcontinental association was not within the prohibition of the section, as there was no provision for the actual pooling of freights or division of earnings between the parties, and it was not shown by the agreement itself or other evidence that the measures provided therein for fixing and maintaining rates constituted a contract, agreement or combination in violation of section 5, or that those measures if carried out in good faith for the purpose named, would lead indirectly to the same result as the actual pooling of freights and division of earnings prohibited by the act.

The operation and conduct of the Immigrant Bureau of the Western Passenger Association, whereunder the immigrant traffic was divided between the carriers in the agreed proportion based upon the proportion of the domestic passenger traffic done by each line, was not within the prohibition of the section. 10 I. C. C. R. 13. The commission said that the section forbade a division of the aggregate or net proceeds of the earnings of such competing railroads, whether such earnings arise from freight or passenger business, but for some reason it did not provide specifically against a division of passengers between competing roads. The amount of the immigrant traffic was insignificant compared with the general traffic of the railroads, and there was no discriminations against individuals, as the immigrants were forwarded at the domestic published rates and that the arrangements had eventually prompted the protection and greatly improved the comfort and treatment of immigrants. The commission declined therefore to take any action in the premises.

It would therefore follow that the prohibition of this section must be limited to an actual pooling of freights of competing railroads or the division of earnings, and would not include agreements between carriers looking to the convenient and expeditious handling of their business at terminal points which are not for revenue and therefore not subject to the specific prohibition of this section or of the Anti-Trust Act. See infra, § 432 et seq.

§ 302 (230). The relation of the section to the Anti-Trust Law of 1890.-The prohibition of pooling contained in this section has been considered in connection with the judicial discussion of the prohibition of all forms of combination whether of trusts or otherwise in restraint of interstate commerce contained in the Anti-Trust Law of 1890.

This section prohibits only the specific form of combination which comes under the definition of pooling, and it is limited to such agreements made by a common carrier subject to the provisions of the act "with any other common carrier or carriers." Thus it was ruled in the case of a complaint alleging an agreement for the pooling of freight between certain railroads and the Standard Oil Company, 5 I. C. C. R. 415, 4 Int. Com. Rep. 162, that such an agreement for the pooling of traffic between a carrier by rail and a carrier by pipe line did not fall within the description of contracts prohibited by section 5. In the opinion as to the relation of express companies to the act, ruling that they were not included therein (see section 1. supra), the commission said that the prohibition of section 5 did not include express companies, who were therefore at liberty to pool their earnings. 1 I. C. C. R. 349, 1 Int. Com. Rep. 677. This was prior to their inclusion in the act by the amendment of 1906, supra, § 138.

In United States v. Trans-Missouri Freight Association, 166 U. S. 290, 41 L. Ed. 1007, it was urged that as the Commerce Act related solely to railroads and their proper regulation and management, the act of 1890 should be construed as applying to all contracts of the nature therein described, entered into by any other than competing common carriers by railroads for the purpose of establishing rates of traffic and transportation. But the court said that the fifth section of the Interstate Commerce Act prohibited what was termed "pooling," because prior to the passage of the act railroad companies had some times endeavored to regulate competition and maintain rates by pooling arrangements, and in the act that kind of arrangement was forbidden, and while that act did not prohibit such an agreement as that of the Trans-Missouri Freight Association, it did not authorize it, and both statutes stand, as neither was inconsistent with the other. The court said that the amendment of the Interstate Commerce Act would not have been an appropriate method of dealing with other devices to suppress competition

for the reason that the Anti-Trust Act included other parties than common carriers. (See act of 1890, infra, § 432 et seq.

In the bill filed by the government in 1910 in eastern district of Missouri against the Western Trunk lines to enjoin the proposed general advance in freight rates, wherein a temporary injunction was issued, it was alleged that the advance was made pursuant to an agreement and combination violative of the AntiTrust Act. As the railroads agreed to withdraw the proposed advance, and refile the same after the pending amendatory act went into effect, the suit was dismissed.

In complaints by shippers and others before the commission it has been on several occasions charged that their rates were the result of an agreement between the carriers in violation of the Anti-Trust Act, and that this raised a presumption that the rates were unreasonable, but the commission has uniformly ruled that it has no powers in the enforcement of that act, and that there was no presumption of unreasonableness under the Interstate Commerce Act, if the rates were established in consequence of an agreement between competing carriers. 20 I. C. C. R. 463, 465.

§ 303 (231). Pooling as a defense to action of the carrier.In L. L. & W. R. Co. v. Frank et al., 110 Fed. 689 (1901), the United States circuit court for the western district of New York, denied an injunction against certain ticket brokers as to special excursion tickets issued for the Pan-American Exposition at Buffalo on the ground that the complainant with other railroads had made an unlawful combination for the fixing of rates and pooling earnings.

A contrary ruling however has been made in the United States circuit court for the eastern district of Missouri, unreported, and in Kinner v. Lake Shore & Michigan So. Ry. Co., 69 Ohio St. Rep. 339, on the ground that the alleged unlawful combination did not relate to the specific business sought to be enjoined.