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ALBANY, January 13, 1890.
To the Honorable the Legislature of the State of New York:

Chapter 353 of the Laws of 1882 requires the Board of Railroad Commissioners to report to the Legislature on or before the second Monday of January of each year. In conformity with this statute the Board submits its Seventh Annual Report.

GENERAL SITUATION. The year ending September 30th, 1889, was marked with much less disturbance among the railroads of the country than that preceding it.

The volume of business was largely increased and rates maintained at more profitable figures.

Towards the close of the year 1888 matters had reached such a state through the reckless competition of irresponsible railroad managers, particularly in the territory west of the trunk lines, that it became evident to the owners of railroad property and to their representatives, the prominent bankers, that some action must be taken to arrest it, or a large proportion of hitherto profitable railroads would cease to be profitable, if they did not become actually bankrupt.

With this object in view the Interstate Commerce Railway Association was organized to take effect January 1st, 1889. The agreement was made between the presidents of twenty-six of the principal railroads west of what is known as the “trunk lines." The trunk lines themselves were not parties to the agreement It superseded a number of other agreements affecting particular localities or routes.

The objects of the Association are stated in article 1 to be, “the enforcement of the provisions of the Interstate Commerce Act and the establishment and maintenance of public, reasonable, uniform and stable rates in conformity with the provisions thereof."

Article 20 provides that “this agreement shall continue in force absolutely for ninety days from January the 1st, 1889, subject to thirty days' notice thereafter of the desire of any party to withdraw from or amend the same, and in case any such notice shall be given, the chairman of the Executive Board shall forthwith call the presidents together to consider the matter."

The Board understands that the agreement is still in force and has been, to a considerable extent at least, effective in correcting the abuses that it was intended to reach.

New articles of association between the trunk lines were entered into, to take effect February 20th, 1889. They begin with a preamble as follows:

WHEREAS, Past experience has fully established the fact that the joint action of railroad companies is necessary to establish and maintain reasonable and just transportation tariffs on freight and passenger traffic; and,

“WHEREAS, Such joint action is also necessary to avoid unjust discrimination in transportation charges, in conformity with the requirements of the Interstate Commerce Law;

“Now, therefore,” etc.

The articles are signed by the Grand Trunk, the New York Central and Hudson River, the West Shore, the New York, Ontario and Western, the Delaware, Lackawanna and Western, the New York, Lake Erie and Western, the Pennsylvania, the Lehigh Valley, the Philadelphia and Reading, and the Baltimore and Ohio railroad companies.

It can be said that as peaceful relations between the trunk lines and their affiliated connections have been maintained during the past year as have ever before, or are likely to be hereafter. When there is taken into consideration the enormous extent of railroad property owned or controlled by these organizations, this is a most significant fact.

The diminution of ruinous railroad competition during the last year was largely due to the facts, first, the very great increase of business, giving all a share; and second, the long and short haul provision of the Interstate Commerce Act.

Under the latter provision a railroad cannot reduce its through rates without reducing its locals at the same time. This, no railroad can afford to do, particularly in the eastern States and more thickly populated parts of the country, where the local business is by far the more reliable and profitable. There is no doubt in this respect that the Interstate Commerce Act has been instrumental in maintaining the stability of rates and of great benefit to the railroads and the community.

Many abuses still exist, however, in the commercial management of railroads, which it is difficult for the State to reach, as for instance the intentional delay in the return of freight cars by certain roads, often depriving others for months of their needed rolling stock; the permitting favored customers to use freight cars as warehouses, for days and weeks at a time, without charging demurrage; the reduction of rates to an unduly low point on certain articles, as for instance, soft coal, in order to crush or bring a competitor to terms, with a correspondingly unjust rise after the result is accomplished.

Perhaps the greatest difficulty that railroads, acting in good faith, have now to contend with, is to so adjust their rates, as between each other, that those having the longer routes or poorer facilities shall be enabled to obtain something like a satisfactory share of the business without reducing the rates to a point alike unprofitable to all. The former methods of pooling are now prohibited by law. The adjustment is, therefore, attempted by the stronger roads making to the weaker, concessions, termed “differentials,” which are intended to represent as nearly as can be reached, the money value to the shipper or traveler of the superior facilities or agreeability of one route over the other.

Of course these differentials are uncertain as to their results and have to be modified from time to time to correct any unjust or unsatisfactory disturbance of the proportions of traffic to each road brought about thereby.

The uncertainty and unsatisfactory nature of this adjustment is such, however, that, as was indicated in the Report of this Board last year (p. x), a tendency towards the absorption of the weaker roads by the stronger, or of a general consolidation of all railroads in great groups, as in England, is distinctly visible. A circular

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