Many causes have doubtless contributed to the greater reduction of earnings on these 28 central freight association lines as compared

For the reasons just stated group III is thought to be more typical of local conditions than group I. If those lines had been able to earn the same ratio of net operating income as was earned by the lines in trunk line and New England territories, shown upon the first of these three tables, the net operating income for 1913 of the lines in group III in central freight association territory would have been $52,000,000 greater than it actually was.

The results shown on these tables are more readily discernible to the eye from the following chart, showing in graphic form the ratio of net operating income of the three groups of carriers for the period of 11 years compared with the ratio of all lines in official classification territory:

Comparison of ratios of net operating income to property investment.

with the other lines in official classification territory, but in our opinion it is due chiefly to the following:

First. The larger decrease in the rate per ton-mile, as appears by the following table:

The figures in the above table for the 17 roads include the 5 New England lines heretofore mentioned. Omitting the latter lines, the yield per ton-mile of the lines in trunk line territory for the year ending June 30, 1913, was 6.46 mills. If the group III rates in central freight association territory had been such as to result in that average earnings per ton mile for the year 1913, there would have been added to the revenues of the roads in that group more than $29,000,000. The average earnings per ton-mile during that year of the roads in central freight association territory included in group I was 5.63 mills, as compared with 5.61 mills for group III.

Second. The difference in the character of the freight traffic handled. With the 28 central freight association lines the products of mines constitute a much smaller percentage of the tonnage carried, as appears by the following table, taken from compilations prepared by the Commission:

As to the class rates effective in and through Ohio, Indiana, and Michigan and controlled by what is known as the central freight association scale, evidence introduced by the carriers and an examination of our own tariff files convince us that they are lower than comparable rates prevailing in any other part of the country. The

level is indeed so low that an increase of 5 per cent would clearly not be unreasonable.

The following table shows the class mileage scale, used as the basis for class rates in central freight association territory, in comparison with the class rates applicable in various other territories:

1 Classifications used in connection with these scales provide 10 classes, making comparisons below fifth class impracticable. Tentatively approved by Michigan Railroad Commission.

As to the commodity rates in central freight association territory the evidence is less specific; but commodity rates are ordinarily lower than the class rates. The class rates therefore afford a reasonable test for measuring the general level of the commodity rates, and we think the carriers operating in that territory have sustained the burden of showing that they are unduly low and that an increase in them of 5 per cent would be reasonable, except as to the heavy or bulky commodities hereinafter specifically mentioned.

READJUSTMENT OF CENTRAL FREIGHT ASSOCIATION RATES.

The testimony tending to show that a readjustment of rates in central freight association territory is what is needed was not disputed. The class-rate structure is honeycombed with inconsistencies. That scale of rates is said to be largely controlled by an Ohio statute, which holds the first-class rate down to a level of 74 cents per

100 pounds for the first 30 miles. As a result, the second and third classes are upon the same level as the first class for nearly that distance; and the resulting class-rate structure is not logical, nor are the rates remunerative. The scale is based on the rate from Pittsburgh to Chicago, which is 60 per cent of the New York to Chicago scale; and this rate amounting to 45 cents first class extends for a distance of 475 miles. It is graded down from that figure to 7 cents, the maximum applied for the 30-mile distance in Ohio. The basing rate from Pittsburgh to Chicago is 60 per cent of the New York to Chicago rate. The rate from Pittsburgh to St. Louis is 64 per cent of the New York to St. Louis rate, and the rate to the upper Missisisppi River crossings in Iowa is made generally on a scale 2 cents higher than to St. Louis. Such inconsistencies existing as to the terminals are emphasized by an analysis of rates to and from points within central freight association territory. Weak lines lacking terminals have attempted to induce traffic to their rails from time to time by reducing a rate here or extending a special concession there, so that the whole rate structure would seem to require revision. The attitude of the officials of the roads operating in central freight association territory, as disclosed on the record, indicated that they joined in this proceeding not because they thought the so-called 5 per cent increase of rates would meet their requirements or that this form of relief is appropriate in central freight association territory, but only because of the desire of other and more powerful lines operating in trunk-line territory to present to us in this proceeding one general plan of relief. These officials, while stating that the so-called 5 per cent increase would add substantially to their revenues, expressly condemn the present basis of rates as unsuitable and unsatisfactory. The leading railroad witness on the question affirmed, with some earnestness, that "the class rates do not sustain any logical relation to each other," and that under the present basis of rates "certain shippers of certain classes of freight have not for years borne their share of the burden of transportation, and in addition to the rates being extremely low they are unscientific and illogical."

This view was also expressed of record by many large shippers. A rate expert of the Chicago shipping interests, whose testimony in another proceeding was put of record here, testified that the central freight association scale was a "relic of barbarism." Counsel for western state railroad commissions, by which protests were made against any increase in rates in official classification territory, particularly criticized the basis now in effect in central freight association territory because of the great advantage which it is said to give to Chicago over points on and west of the Mississippi River.

Counsel who presented and argued the case for the central freight association lines admitted and definitely stated that while the 5 per cent increase would help the financial situation, the whole rate structure in that territory needed a readjustment; that many of the lines in the territory would not survive without "an overhauling of their rates," and "could not serve the public as they should until those rates are readjusted and brought upon some logical basis." He also stated that if the rates were now advanced on the so-called 5 per cent basis it would be but a short time before those lines would be before us again. He gave express noticc that the central freight association lines, if the 5 per cent increase were now allowed, would "in due time file tariffs and bring the matter to the attention of the Commission."

CONCLUSIONS.

In what has preceded we have found, treating as one road the 35 railway systems in official classification territory that have asked for this so-called 5 per cent increase in rates, that their net operating income is insufficient and should be increased. There remains for consideratiou the question whether the proposed increases in rates should be approved.

We have seen that the class rates in central freight association territory are on a lower scale than can be found elsewhere in the country, and that many of the commodity rates are too low and are probably unremunerative, considering the diversified nature of the traffic. The class rates and many of the commodity rates may therefore with propriety be increased. This approval, however, is subject to the following limitations:

(a) With respect to certain heavy commodities, namely, brick, tile, clay, coal, coke, starch, cement, iron ore, and plaster, protestants made such a showing as to constrain us to hold that the carriers have failed to sustain their burden under the statute.

(b) Reference has heretofore been made to the fact that the proposed tariffs are based on a minimum increase of 5 cents per ton on all commodities moving under rates stated in cents per ton when less than $1 per ton; with respect to certain hauls, this would result in increases much in excess of 5 per cent and in certain cases the increases would be as high as 50 per cent. The carriers have failed to establish the propriety of this minimum increase, and the evidence offered by the protestants makes it clear that it would work hardships and discriminations and can not be approved, since under it a disproportionate burden is cast upon the heavy short-haul traffic. (c) The tariffs also name many other rates involving increases exceeding 5 per cent by varying amounts; these rates also must be