virtual competition and then that power becomes absolute; but as has been seen already in this chapter, the public needs the protection of the law of the land in this situation, for the economic limitation leaves scope for gross oppression. It is therefore plain law that the absence of competition does not justify an increase in rates. The elimination of railroad competition by the aggregation of large systems has been the characteristic fact in railroad history during the last twenty-five years; and indeed within the last ten years there has been a further extralegal consolidation of many of these systems by communities of interest, until to-day there are comparatively few groups. 88 "Such unification of railway control permits advances in rates and a maintenance of rates which has never before been possible. If carriers are entitled to larger returns, these increases are proper, and should be permitted; otherwise they should be checked. It cannot be accepted without careful consideration that all this vast increase in traffic, all these notable economies in railway operation are to result in the permanent imposition of higher transportation charges." 89

§ 460. No obligation to meet competition.

The Commission has recognized what it considers to be the natural right of the carrier to establish low rates to

88 Re Proposed Advances of Freight Rates, 9 I. C. C. 382.

Competition has a more or less definite relation to the rate that carrier may reasonably demand. Memphis Cotton Oil Co. v. I. C. R. R., 17 I. C. C. 313.

89 While a carrier may establish a lower rate to meet competitive conditions and the Commission takes into account such conditions in passing upon the reasonableness of the rate adjustment, it does not follow that in a particular instance the Commission will condemn an ad

vance of a rate which was formerly maintained to meet competition between different producing points. Florida Fruit & Vegetables Ass'n v. A. C. L. R. R., 17 I. C. C. 552.

By the last paragraph of section 4 of the Act as amended in 1910 it is provided that, if rail rates have been reduced to meet water competition, they shall not later be advanced for no other reason than that the water competition has been discontinued; see Am. Insul. W. C. v. Ch. & N. W. Ry., 26 I. C. C. 415.

A carrier may,

94

meet competition over other routes.90 therefore, for competitive reasons, voluntarily do things which it may not lawfully be compelled to do."1 There is no principle of law that requires a carrier to be content with a part of the traffic, or that forbids it to adjust its rates so as to fight, the moment it feels the effect of its competitors' rates.92 A carrier may, therefore, voluntarily make under the force of controlling competition, rates which it might not be required to make.93 And a competitive rate cannot be said to be voluntary reduction, and ought not to be used as a standard of comparison." But while the law permits carriers to make and maintain a low rate under stress of competition, there is no law requiring the carriers to make such a rate.95 It is for this reason that a competitive rate is not a measure of the reasonableness of a non-competitive rate. And the Commission has often remarked that it is obvious that a competitive rate to one point is not a measure of rate to a non-competitive point. Where, owing to competition, a rate is unnecessarily low, it affords no basis for comparison. A rate comparatively the lowest in its territory on a given article of freight, and by reason thereof made the basis of reductions from competitive points, will not be further reduced on the ground alone that it had at stated periods in the past been somewhat lower, unless shown to be unreasonably high for the service performed." In fixing rates on competitive articles, the relation should be determined on the basis of difference in cost of service, and many of the other considerations entering into establish

Indianapolis Freight Bureau v. C. C. C. & St. L. Ry., 26 I. C. C. 53. 91 Swift & Co. v. C. & A. R. R.,

16 I. C. C. 426.

92 Bulte Milling Co. v. C. & A. R. R., 15 I. C. C. 351.

93 Indianapolis Freight Bureau v. P. R. R., 15 I. C. C. 567.

94 Southwestern Shippers' Traffic

96

Ass'n v. A., T. & S. F. Ry., 24 I. C.
C. 570.

95 Oregon & Washington Lumber Mfrs. Ass'n v. U. P. R. R., 14 I. C. C.

1.

96 Commercial Club of Superior v. G. N. Ry., 24 I. C. C. 96.

97 Warren Manufacturing Co. v. Southern Ry., 12 I. C. C. 381.

ment of rates upon independent or isolated articles should be in large part eliminated.98

§ 461. Competition in passenger fares.

Competition dictates particular rates in passenger schedules to a certain extent, but the differences between stations by this process are not made glaring. It is true that between competitive points fares are kept down, but this tends to shrink the whole schedule relating to intermediate stations. Even the most extreme cases are usually those where the long haul between competitive points is charged, relatively less than the short haul, or in some cases where the short haul is made as high as the long haul; 99 but if a railroad attempted to charge more for a short haul than for a long haul it would hardly be possible to make the public accept a difference of this sort. The general operation of competition upon passenger fares is to keep all down to a lower level. The matter of joint through rates, discussed at another place, gives more scope to the doctrine that particular rates may be lowered to meet competition. Thus the part of a through passenger rate apportioned to one of several railroads as its share may often be less than the rate which that railroad makes between its own termini to its own passengers; as these joint through rates may be reduced to meet competition this difference is justified.1

Topic D. Rates Designed to Equalize Advantages

§ 462. Operation of the principle of equalization.

This topic as to the limitations placed by the law upon making rates designed to equalize advantages is again one that will receive attention later when the construction to be placed upon statutory provisions forbidding local discriminations is brought up. But it seems appropriate

98 Carstens Packing Co. v. O. & W. R. R., 22 I. C. C. 77.

99 See Com'l Club of Salt Lake v.

A. T. & S. F. Ry., 19 I. C. C. 218. 1 See Weber C. & I. Fair Assur. N. P., 17 I. C. C. 212.

to point out in this place that it is a principle in ratemaking subject to all of the limitations which have been brought out in this chapter, and that it has therefore a very limited operation. However much this theory may have appealed to some economists who have applied their theories of what is for the best interests of society to the railroad problem, it has very little weight with the lawyers who have had to do with the question." "It is not the duty of a carrier to regulate markets. If by reason of competition in transportation or the condition of markets a carrier sees fit to move traffic at very low rates in order to participate in the business, that may be done and often is done, but that is a very different matter from compelling it to reduce all its rates to equalize competition between shippers from different fields of supply and by different and unrelated routes." 3

§ 463. Limitations upon the Commission.

The Commission has no power to substitute a new and differing rate for a just and reasonable rate on the ground that it seems to it a wise policy to do so, or that the railroad had so conducted itself as to be estopped in the future from being entitled to receive a just and reasonable compensation for the service rendered. The authority

2 Schoonmaker, Com., in Rice v. Western N. Y. & Pa. R. R., 2 Int. Com. Rep. 298.

It is not the province of the Commission to overcome nature. National Refining Co. v. Mo. P. Ry., 24 I. C. C. 315.

3 In comparing the transportation charges on wheat and on flour from Minneapolis to New York, in a controversy between Minneapolis and Buffalo millers, the commercial profits of the parties are neither controlling nor important. Jennison Co. v. G. N. Ry., 18 I. C. C. 113.

It is not the function of the Com

4

mission to make all producers on a parity in markets which they have in common. Slider & Co. v. So. Ry., 24 I. C. C. 312.

4 Southern P. Co. v. I. C. C., 219 U. S. 433, 55 L. ed. 283, 31 Sup. Ct. 288.

In a few States the courts have apparently adopted the theory of the economists, that a railroad should so fix its rates as to equalize the advantages of its patrons in so far as this will be for the good of the country. In State v. Minneapolis & St. L. Ry., 80 Minn. 191, 83 N. W. 60 it was held that a commission in

5

granted to the Commission does not confer absolute or arbitrary power to act on any considerations which the Commission may deem best for the public, the shipper, and the carrier; its order must be based on transportation services, and it must disregard as well the demand of the shipper for protection from legitimate competition, domestic or foreign, for unlimited markets, or for the enforcement of equitable estoppels arising from a justifiable expectation that past rates will be maintained. And it should be said that the Commission has often insisted that it is not its function to equalize the profit and loss resulting from competing operations in different localities, by overcoming natural and commercial conditions with rate adjustments. The Commission has not recognized the right of a carrier to fix its rates to or from a given point on a higher level than they otherwise should be, in order to prevent one community from competing with another, or to keep the products of one community out of a territory, the wants of which may be fully supplied by another community."

§ 464. Rates made from a commercial standpoint.

It is sometimes maintained by a shipper of one product

fixing rates might act upon the business policies which the railroads themselves have been accustomed to pursue in making rates. And in Southern Ry. v. Atlanta Stove Works, 128 Ga. 207, 57 S. E. 429, it was held that a commission is not precluded from considering the conditions affecting the markets it serves.

Atchison, T. & S. F. v. I. C. C., 231 U. S. 736, 34 Sup. Ct. 316.

The general principle which the majority of courts are now laying down as the guide for all concerned seems to be that what is a reasonable rate depends upon the significance of that phrase at common law. South

ern Indiana R. R. v. Railroad Commission, 172 Ind. 113, 87 N. E. 966. The question then is what, in view of all the facts affecting the movement of a commodity, is the amount which a carrier should obtain to recoup itself fully for the service it is rendering, having in mind the property it is employing in performing the transportation. Morgan's L. & T. R. R. & S. S. Co. v. Railroad Commission, 127 La. 635, 30 So. 83.

6 Louisville Cotton Seed Products Co. v. L. & N. R. R., 26 I. C. C. 607. 'Indianapolis Freight Bureau v. C., C., C. & St. L. Ry., 26 I. C. C. 53.