§ 207. Penalties.-By paragraph (21) of Section 1, penalties are provided for violation by carriers of the provisions relating to the abandonment and construction of facilities.

§ 208. Consolidation of Carriers. By paragraph (2) of Section 5 of the Act, the Commission may, after hearing, permit the acquisition wholly or in part by one carrier of the control of another carrier or carriers, which acquisition may be either under a lease or by the purchase of stock, or in any other manner not involving consolidation, and by paragraph (4) of the same section consolidation of railroads into a limited number of systems is authorized, the Interstate Commerce Commission being directed to "prepare and adopt a plan for the consolidation of the railway properties of the continental United States into a limited number of systems." Further procedural rules are given in subsequent paragraphs of the same section. Paragraph (4) is not compulsory, but authorizes the carriers, within the limits prescribed, to propose consolidation and gives the Commission power to approve such proposals.233 Details of the kinds of agreements carriers may make are given in paragraph (6) of Section 5. Little or nothing has been accomplished towards the consolidation of railroads and there is a wide difference of opinion among the commissioners about consolidation. This difference of opinion is indicated by the opinions of the commissioners in the Van Sweringen case234 and in the Southwestern Lines case.235

§ 209. Interlocking Directorates.—Paragraph (12) of Section 20a236 prohibits, without authority from the Interstate Commerce Commission, any official or director of any carrier from directly receiving benefits from his position and prescribes a penalty therefor, and also prohibits an officer or director of one carrier from being such officer or director of another, "unless such holding shall have been authorized by

233 Snyder v. New York, C. & St. L. R. Co., 118 Ohio St. 72, 160 N. E. 615.

234 Nickel Plate Unification, 105 I. C. C. 425.

235 Proposed Unification of Southwestern Lines, 124 I. C. C. 401. Since the decision in this case, however, the

Commission has published its general plan of consolidation pursuant to Seetion 5 of the Interstate Commerce Act. -See Consolidation of Railroads, 159 I. C. C. 522.

236 Sec. 20a, par. (2), Title 49 U. S. C. A.; see, post, Sec. 615.

order of the Commission upon due showing in form and manner prescribed by the Commission that neither public nor private interest may be adversely affected thereby." The Commission, prior to the passage of this statute, had pointed out the evil of interlocking directorates,237 and since the statute has been passed the Commission has referred thereto and again indicated its opinion of the danger of such interlocking directorates.238

§ 210. Express and Telephone Companies.-The Interstate Commerce Commission was given power to approve and authorize the consolidation of the four express companies formerly existing. This was done by the formation of the American Railway Express Company.239 A similar authority with reference to telephone companies exists. Typical of the decisions of the Commission are, in acting on an application for permission to consolidate, the Illinois Southern Telephone Company,240 and Milford Home Telephone Company.241 In the former case, permission was denied because there was no direct connection between the properties sought to be consolidated, no evidence that the subscribers would receive any other or different service than was being performed, and no economies shown except a possible lessening of overhead expenses. In connection with this matter, the Commission said: "The plan of financing proposed would increase largely the securities outstanding in the hands of the public without the addition of any property so far as shown." In the second case referred to, consolidation was permitted. As in other cases where similar consolidations were authorized, the Commission recited communications from interested persons favoring the project and used, as always, a statement similar to the following: "The Bell Company is, and after acquiring the properties in question will be, subject to the Interstate Commerce Act."

237 Financial Investigation N. Y., N. H. & H. R. R. Co., 31 I. C. C. 32. 238 Denver & Rio Grande, 113 I. C. C. 75.

239 See Consolidation of Express Companies, 59 I. C. C. 459 and par. (7), Sec. 5, Title 49 U. S. C. A.

240 Acquisition of Illinois Southern Tel. Co., 145 I. C. C. 43.

241 Purchase of Properties of Milford H. Tel. Co., 145 I. C. C. 451.

§ 211. Anti-Trust Laws.-The consolidation of carriers herein discussed would, in all probability, have been held to violate the Anti-Trust Laws.242 To prevent such holdings, the Congress, in the Transportation Act, 1920, Section 5, paragraph (8), relieved the carriers engaged in consolidation "from the operation of the Anti-Trust Laws as designated in Section 12 of Title 15, Commerce and Trade (U. S. Code), and of all other restraints or prohibitions by law, state or federal, in so far as may be necessary to enable them to do anything authorized or required by any order made under and pursuant to the foregoing provisions of this section (Section 5).'243

§ 212. Water Carriers.-The Panama Canal Act of 1912244 limited the rights of carriers to own, lease, operate, control, or have any interest whatsoever in, any common carrier by water operated through the Panama Canal or elsewhere. In the provisions relating to the consolidation of carriers, no consideration is given to water carriers and this limitation contained in the Panama Canal Act continues. In view of the fact that water carriers compete with rail carriers, and without questioning the value to the public of these water carriers, there is presented by this statute, in connection with the right of rail carriers to a fair return on their investment, a situation adversely affecting rail carriers. Water carriers do not serve all the people. Rail carriers do. Perhaps the cost of service to the water carriers is less than to the rail carriers. Thus, to the extent that the water carriers transport commodities which would otherwise be transported by rail carriers, there is a reduction in the return to rail carriers which falls upon the users of this service. Carrying out the spirit of the Transportation Act, 1920, it would seem to be wise to permit joint operation and use of rail and water carriers.

§ 213. Issuance of Securities-The Statute. In Section 20a of the Transportation Act, 1920,245 Congress gave jurisdiction to the Interstate Commerce Commission to regulate the issuance of securities by common carriers by railroad, ex

242 Northern Securities Co. v. U. S., 193 U. S. 197, 48 L. Ed. 679, 24 Sup. Ct. 436.

243 See United States v. So. Pac. Co., 290 Fed. 443.

244 Title 49 U. S. C. A., Sec. 5, pars. (10) and (11); see, post, Secs. 444 to 446; see also, post, Secs. 470 and 471. 245 Title 49 U. S. C. A.; Sec. 15a; see, post, Sees. 605 to 614.

cept street, suburban, interurban, or electric railways not operated as a part of a general steam railway system, and provided a procedure for the enforcement of the statute. No securities can be authorized by the Commission unless for some lawful object within the corporate purposes of the carrier and compatible with the public interest, and this must be necessary or appropriate for, or consistent with, the proper performance by the carrier of its public service. The form of application for the issuance of certificates is prescribed, the disposition of securities is regulated, and notice to the interested governors is required. The jurisdiction of the Commission is exclusive and plenary and includes also power as to certain short-term notes and certificates and requires reports from the carriers. Securities issued contrary to the law are void and penalties are prescribed.

§ 214. Constitutionality of Provision with Relation to Issuance of Securities. The question of the constitutionality of this statute was raised246 and, discussing this question, the Court of Appeals, in holding the statute constitutional, said: "We think the power thus conferred by Congress has a direct relation to commerce and forms an important factor in the general scheme for the regulation of commerce by the railway systems of the country as set forth in the Transportation. Act. The power of the Commission to regulate rates for the protection of the public and the carriers alike is settled. If this mutual protection is to be mutually administered, supervision of the whole matter of the issue of capital stock, investment, and incurring of bonded indebtedness, as well as the extension and consolidation of railway lines, becomes so directly interrelated with the problem of maintaining a just relation between the public and the carrier, that they fall clearly within the constitutional authority of Congress to regulate interstate commerce."

§ 215. Rights of the States not Wholly Excluded. As has been shown in Section 213, ante, the power of the Interstate Commerce Commission, within the provisions of the statute, is exclusive and plenary, but the statute does not apply in

246 Pittsburgh, etc., R. Co. v. I. C. C., 293 Fed. 1001, 54 App. D. C. 34;

appeal dismissed, 266 U. S. 640, 69 L. Ed. 483, 45 Sup. Ct. 124.

all cases. The states may require of rail carriers, where the circumstances justify, the establishment of grade crossings."

247

§ 216. Procedure of Interstate Commerce Commission with Reference to Issuance of Securities. Where an application is made to the Interstate Commerce Commission for authority to issue securities, that Commission need make only such investigation as it considers necessary, and this investigation may be informal.248 The sufficiency of the grounds to support an order of the Commission in this respect is for the exclusive determination of the Commission,249 although it would seem, under general principles of law, if the Commission acted wholly without evidence, that the public, where the permission is granted, may object; and the carrier, where the permission is refused, may have opportunity for a determination by courts of the validity of the action of the Commission.

247 State ex rel. and to use of Wabash Ry. Co. v. Public Service Commission, 306 Mo. 149, 267 S. W. 102; reversed on other grounds, 273 U. S. 126, 71 L. Ed. 575, 47 Sup. Ct. 311; In re Bay St. Crossing of Staten Island Rapid Transit Ry. Co., 221 N. Y. S. 129, affirmed 245 N. Y. 643, 157 N.

E. 892; certiorari denied, 276 U. S. 603, 72 L. Ed. 726, 48 Sup. Ct. 338.

248 Miller v. U. S., 277 F. 95. 249 Missouri Kansas-Texas R. Co. of Texas v. Mars, 294 S. W. 941; reversed on other grounds, 298 S. W. 271.