larity, the difference in rates may be explained, as where the lower rate is a violation of the Act; 57 or where the lower rate was given by mistake, which the carrier is endeavoring to correct. 58 However, when all is said, one of the most satisfactory tests of the reasonableness of the rates of one carrier is a comparison with the rates of other carriers operating in the same territory under the same general conditions. 59 But, before the Commission can conclude that a rate on a given commodity is too high, because it is higher than some other rate named, it must know that the route selected as the standard for a comparison is a reasonable and a fair one.60

§ 449. Evidence inadmissible unless conditions are similar. This comparison cannot be made, however, without considering dissimilar conditions; and conditions may be so dissimilar that no comparison would be proper. Thus in the case of Hooper v. Chicago, Milwaukee and St. Paul Railway,61 Mr. Justice Kinne said: "Evidence was admitted as to the charges made by defendant in other States, but the court excluded evidence as to rates charged by other companies in other States and other roads in this State. The questions asked touching these matters were very numerous, and cannot all be set out here. In each case, however, the offered testimony was properly excluded because it was not shown that the circumstances and conditions were substantially the same as to the road inquired about as in the case at bar. One or two questions will serve to illustrate: 'Will you state to the court the

57 Squire v. Michigan Central R. R., 3 Int. Com. Rep. 515, 4 I. C. C. 611.

58 Rea v. Mobile & O. Ry., 7 I. C. C. 43.

59 Chamber of Commerce of Milwaukee v. C., R. I. & P. Ry., 15 I. C. C. 460.

60 Darling & Co. v. B. & O. R. R., 15 I. C. C. 79.

61 91 Iowa, 639, 60 N. W. 487.

In order to sustain reasonable rates to intermediate points, unreasonable rates between more distant points cannot be sustained. Norfolk & W. Ry. v. United States, 195 Fed. 953.

rates that were being charged at that time in the different States of the Northwest on the different roads?" 'State what was the charge of the different roads in Iowa for the transportation of line in 1888.' It requires no argument to show that the charges for carrying a like commodity on another road in Iowa or elsewhere would have no tendency to show the reasonableness of defendant's charges for a shipment of lime from Maquoketa to Sioux City, Iowa, unless the circumstances which must be taken into consideration in fixing the rate inquired about are substantially the same as those applying to the road in controversy. The proper foundation for the introduction of such evidence, even if admissible, was not laid." 62

§ 450. Comparison of rates between different localities. The rules against undue preference and their limitations have often been stated.63 The Commission does not accept the theory that one carrier's rate is unreasonable simply and solely because another carrier had at the time a lower rate; for what is reasonable for one carrier may not be reasonable for another.64 Freight rates are controlled by various and varying conditions; and, therefore, rates in one section furnish no reliable standard by which to measure the reasonableness of rates in another section, where dissimilar conditions prevail.65 Rates can seldom be tested, even as to their reasonableness, strictly by themselves, but must be considered to an extent in reference to their environment.66

62 Compare Interstate Commerce Commission v. Louisville & N. Ry., 73 Fed. 409.

It is not within the authority of the Commission to reduce rates not merely against the weight of the evidence produced to sustain them, but without anything substantial to warrant the conclusion reached or the reasons assigned therefor. Louisville & N. R. R. v.

The unreasonableness of a

Interstate Commerce Commission, 195 Fed. 541.

63 Morrell v. Union Pacific Ry., 6 I. C. C. 121.

64 Swift & Co. v. C. & A. R. R., 16 I. C. C. 426.

65 Acme Cement Plaster Co. v. L. S. & M. S. Ry., 171 C. C. 30.

66 Southwestern Missouri Millers' Club v. M., K. & T. Ry., 22 I. C. C.

422.

rate cannot be established by comparison with rates on other lines operating in different territory, where no evidence is offered to explain the conditions under which such rates were established, or to compare the circumstances of carriage in such other territory with the movement between the points in question.67 Before the Commission can conclude that a rate on a given commodity is too high, because it is higher than some other rate named, it must know that the rate selected as the standard of comparison is a reasonable and a fair one.68 Certainly, the unreasonableness of the rate is not established by evidence merely showing that a lower rate is in effect over another route.69 And a commodity rate to one point over one line affords no basis of comparison with a higher class rate to a longer distance point over two lines.70 It follows that the fact that the cost by rail is higher than by boat, does not establish unreasonableness of the rail rate.71

§ 451. Usual rates govern passenger fares.

The principle of permitting the railroads under ordinary circumstances to charge usual rates of fare is particularly useful in dealing with the validity of passenger fares. There are certain standards of what will constitute a not unreasonable charge per mile for a passenger in most communities which it can hardly be shown to be unreasonable to maintain. Thus in one proceeding 72 the Interstate Commerce Commission said: "We cannot find upon this record that $1.10 is an unreasonable charge from Niagara-on-the-Lake to Buffalo. This is a branch line of the defendant and the case does not show density of traffic,

67 Crutchfield & Woolfolk v. L. & N. R. R., 14 I. C. C. 558.

68 Darling & Co. v. B. & O. R. R., 15 I. C. C. 79.

69 Ohio Iron & Metal Co. v. Wabash R. R., 18 I. C. C. 299; Pankey & Holmes v. C. N. E. Ry., 18 I. C. C. 578.

70 Wells-Higman Co. v. St. L., I. M. & S. Ry., 18 I. C. C. 175.

71 Louisville Cotton Seed Products Co. v. L. & N. R. R., 26 I. C. C. 607.

72 Cist v. Michigan Central Ry., 10 I. C. C. Rep. 217.

nor the circumstances under which the passenger service is performed. It simply appears that a rate of 3 cents per mile is imposed. While lower rates are in force in many parts of the United States, it is also true that there is hardly any section of the country in which a rate as high as 3 cents per mile is not charged for a local service of this distance. The fact that a rate of 85 cents is made during the summer season to meet competition via Lewiston is not controlling, nor is the further fact that the New York Central under compulsion of law establishes a rate of 2 cents per mile from Lewiston to Buffalo. We do not find that this rate is reasonable; we simply fail to find that it is unreasonable, as there is no evidence in the record upon which an intelligent judgment can be formed. This is a most unsatisfactory disposition of the question, and if the case were of wider application, or the subject of more general complaint, it would be our duty to proceed on our own motion to develop the necessary facts." 73

Topic C. Rates Dictated by Competition

§ 452. Rates may be made to meet competition.

Within the many limitations which are discussed throughout this book, a railroad company may make such rates as it is necessary for it to make to meet competition. But whatever may have been the practice in the past of meeting the rate, the tariffs as scheduled must now be adhered to.74 A great deal of transportation is conducted under competitive conditions, the shipper having an alternative route by which he may get his goods to market. Under such circumstances railway rates between the competitive points will inevitably tend to be lower than between points where there is no competition. To a certain extent the public is rejoiced to see lower rates from whatever cause, and it will in an ordinary case be unquestioned that the carrier may make his competitive

73 See Kurtz v. Pa. Ry., 16 I. C. C.

410.

74 Menefee Lumber Co. v. T. & P. Ry., 15 I. C. C. 49.

rates as low as is necessary to get the business. But this statement is subject to certain limitations, some of which will now be discussed, but most of which are discussed more fully in later chapters. However, it is now appreciated that rate wars create a disturbing condition, and that their results cannot be used as a measure of reasonableness.75

§ 453. Competition as a factor in rate making.

But while the "law of increasing returns" cannot be pressed too far, it contains an element of truth which may be considered in fixing a particular rate. If traffic may be acquired by a specially low rate which would otherwise be lost, to acquire the traffic would benefit rather than burden other traffic of a different kind, since if under the law of increasing returns it is remunerative, the profit thus earned will tend to diminish the rates charged on the remaining traffic. On this ground competition may be considered as a factor in fixing rates. If a carrier is carrying goods from two stations, at one of which there is competition, the rate at the station where the competition exists may fairly be reduced, so far as is absolutely necessary to secure the traffic, provided the reduced rate remains a remunerative one under the law of increasing returns. If the rate were not reduced, ex hypothesi, the traffic would be lost, and the profit realized upon it must be exacted from the non-competitive traffic; if, on the other hand, the rates were reduced equally all over the road, the carrier could not earn a fair return from his whole schedule, since we are assuming that the necessary competitive rate is so low as to be profitable only as a result of the law of increasing return. The same result will follow if the competition affects not a particular station but a particular class of goods. It is therefore always fair even 75 Morgan Grain Co. v. A. C. L. R. R., 19 I. C. C. 460.

76 Little movement under a given rate to stimulate given article, is

no justification for advance, where such rate was not unusually low. In re Advances on Potatoes, 25 I. C. C. 247.