with these charges, as in the case of other fares. Thus, the Commission has been deciding all along that the system of commutation fares is not in itself unduly prejudicial.1 The most important action of the Commission in regard to this matter has been its recent course in relation to the interstate commutation rates in the region surrounding the city of New York. In the earlier case the fares for New Jersey commuters were very fully treated. And in the later case it was held by that comparison with other fares the commutation fares of the New York, New Haven & Hartford from points in Connecticut into New York City were unreasonable, except as to certain stations.3

§ 598. How basing points are established.

Instead of grouping stations about a competitive point and charging a uniform rate, it is more customary now to fix a certain rate to the competitive point (called the basing point), and to fix rates to other points in the group by adding in each case to the basing rate the local rate from that point to the station in question. Such a combination rate is on the face of it unreasonable, and it will be closely scrutinized. The competitive rate to the basing point plus the local is at any rate the extreme limit of charge. A basing point was in a recent proceeding before the Commission described by defendants' witness as "where there is considerable freight." The fact that a city is a Mississippi River gateway considered in determining the reasonableness of its rates. Where the establishment of a

1 Boyle v. G. F. & O. D. R. R., 20 I. C. C. 232; see also Byzer v. W. Va. Ry., 20 I. C. C. 406.

2 Commutation Rate Case, 21 I. C. C. 428; see also Suburban Rate Cases, 26 I. C. C. 398.

3 Commutation Rate Case, 27 I. C. C. 549; this proceeding has no relation to similar proceedings in the interstate rates.

5

4 Trammell v. Clyde S. S. Co., 4 Int. Com. Rep. 120, 5 I. C. C. 324; Cordele Machine Shop v. Louisville & N. R. R., 6 I. C. C. 361; Gustin v. Atchison, T. & S. F. R. R., 8 I. C. C. 277; Board of Trade v. Central of Ga. Ry., 8 I. C. C. Rep. 142.

5 Arkansas Fertilizer Co. v. St. L., 1. M. & S. Ry., 25 I. C. C. 266.

6 City of Montezuma v. C. of G. 28 I. C. C. 280.

Ry.,

basing point system is justified by the circumstances affecting the rating of traffic at the point in question, an additional charge may properly be made for a back haul. According to the present doctrines of the Commission it does not follow that joint through rates over long distance to local or non-competitive points shall now be made by adding to basing point rates either the full locals or high differentials; on the contrary in making joint through rates on such traffic it is insisted that differentials or arbitraries above rates to basing points should bear some reasonable relation to total distances involved. It will be noted, therefore, that, under the basing point system, the key to the making of the rate is "the rate breaking point," which will necessarily command the jobbing business of the tributary territory. As the law stands, therefore, a rate to and from an intermediate point, higher by the local than the in-bound rate to a trade center, will not necessarily be condemned.10 An illustration of the working of the basing point system may be seen in a recent proceeding when it appeared that the rate to Douglas from the west is made up of the rate to Brunswick plus the rate from Brunswick back to Douglas, these rates being determined by competition of water lines from the eastern ports and rail lines through the Virginia gateways.11 Likewise it transpired in another proceeding that class and commodity rates to Texarkana from certain territory are made by adding differentials to the rates from St. Louis or Kansas City, which are taken as basing rates. 12 The Ohio River crossings are basing points for rates to points north, and reduction in rates at crossings will cause change in joint rates to beyond. 13

7 Speigle v. S. Ry., 25 I. C. C. 71. $ Board of Trade of Carrollton v. C. of G. Ry. Co., 28 I. C. C. 154. "Wichita B. of T. v. A., T. & S. F. Ry., 30 I. C. C. 35.

10 Durham v. I. C. Ry., 12 I. C. C. 37.

11 Mayor & Council of Douglas v. A. B. & A. R. R., 28 I. C. C. 445.

12 Texarkana Freight Bureau v. St. L., I. M. & S. Ry., 28 I. C. C. 569. 13 Davis Bros. Lumber Co., Ltd., v. C., R. I. & P. Ry., 26 I. C. C. 257.

And similarly the Missouri River is taken as the basing point in establishing proportional rates to interior cities of Iowa.14

§ 599. Whether basing points justified.

It was not until several years after the passage of the Act that the Supreme Court of the United States held that this system of making rates upon basing points was legal. It should be noted that at first after the passing of the Interstate Commerce Act, it was believed that section 4 would automatically prevent the reducing of a rate for a long haul below that for a shorter haul included in it; and, therefore, competitive points were grouped with a number of intermediate points, so that the carrier might compete without reducing his charge below intermediate charges. But as soon as it was decided that a carrier might in case of competition reduce the charges for a long haul below those for a short haul, this has become unnecessary, and the competitive points are now made basing points.15 the leading case justifying the basing point systems it appeared in the record that rates to non-competitive Georgia towns were arrived at by taking the Atlanta rate and adding to it the local rate back. The result of this was to make a higher rate in each case for the shorter haul; but all the rates were lower than they would be if the nearest competitive point to the west, Montgomery, had been taken as the basing point. The court upheld the rates, Mr. Justice White saying: 16 "It having been established

14 Interior Iowa Cities Case, 28 I. C. C. 64.

15 East Tenn., Va. & Ga. Ry. v. Interstate Commerce Commission, 181 U. S. 1, 45 L. ed. 719, 21 Sup. Ct. 516.

From basing points, through rates to ports are made by adding to rate to basing point, an "arbitrary." Aransas Pass Channel & Dock Co. v. G. H. & S. A. Ry., 27 I. C. C. 403.

In

See further as to rate structure under a basing system, La Grange C. of C. v. A. & W. R. R., 28 I. C. C. 178.

16 Interstate Commerce Commission v. Louisville & N. R. R., 190 U. S. 273, 47 L. ed. 1047, 23 Sup. Ct. 687.

It is under the theory of the propriety of reducing rates to meet competition at certain points that the basing point system of rate mak

that competition affecting rates existing at a particular point (Atlanta) produced the dissimilarity of circumstances and conditions contemplated by the 4th section of the Act, we think it inevitably followed that the railway companies had a right to take the lower rate prevailing at Atlanta as a basis for the charge made to places in territory contiguous to Atlanta, and to ask, in addition to the low competitive rate, the local rate from Atlanta to such places, provided thereby no increased charges resulted over those which would have been occasioned if the low rate to Atlanta had been left out of view."

§ 600. Determination of base rate.

The Commission may examine into the elements from which a rate is constructed, and, if, as in one of the earlier cases, it finds that the base rates of $4 per 100 pounds from Omaha to Denver and of $4.25 per 100 pounds from Denver to Ogden are excessive it may take action thereon.17 Thereafter such a rate becomes adjudicated for other purposes; and it will be urged, for example, that the 38cent rate from Chattanooga to New York is "an adjudicated basic rate" and as high as it reasonably might be, 18 The Commission has recently held that a rate adjustment under which cement rates are blanketed over a minimum distance of 213 miles and over a maximum distance of 475 miles, is not necessarily to be condemned. 19 And, indeed, differences in distance of much more than 264 miles are frequently disregarded under the blanket plan of making transcontinental rates. 20 The Commission recognizes the difference in the rate adjustment east and

ing may be defended against the allegation of undue preference as between localities. Board of Trade of Carrollton v. C. of G. Ry., 28 I. C. C. 154. The fact that a city is a Mississippi River gateway is considered in basing the rate. Montezuma v. C. of Ga. Ry., 28 I. C. C. 280.

17 Kindel v. Adams Exp. Co., 11 I. C. C. 475.

18 Union Tanning Co. v. S. Ry., 26 I. C. C. 159.

19 In re Advances on Cement, 24 1. C. C. 209.

20 In re Advances on Barley, 24 I. C. C. 664.

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west of the Mississippi River, and has held that the basis obtaining west may properly be on a higher scale than that obtaining east.21 And Chicago, because of traffic conditions imperatively demanding recognition, has been recognized as a natural point for breaking rates.22 In all rate groups there must necessarily be a more or less abrupt "rate hump" as between the most distant point in one group and the nearest point in the adjoining group." Group rates being based on distance, the difference should decrease as the distance to points of destination increase; and as between points embraced within the same group the percentage of distance over or under the average distance of the group to point of destination should not be excessive. 24 On the other hand, when the basing point is established at certain common points, with differential rates added for other points, there is a possibility of discrimination. 25 If the complaining places are all in active competition with the near-by basing points, and are adversely affected by the advantages which the latter enjoy in the matter of freight rates, the matter deserves scrutiny.26 It may be noted as an illustration of the distinction between these opposed systems of rate making that rates east of the Missouri River are blanketed with respect to non-water competitive freight, but not as to rates affected by water competition. 27

§ 601. Extent of power over grouping.

As the carriers have evidently considered at all times in their rate making that certain economic conditions exist which require grouping, the Commission cannot ignore these conditions in determining the reasonableness of rates

21 In re Advances on Apples, 24 I. C. C. 38.

22 Globe Milling Co. v. C., M. & St. P. Ry., 24 I. C. C. 594.

23 Taylor v. N. W. Ry., 25 I. C. C. 613.

24 In re Investigation and Suspen

sion Docket 38 and 38 A, 21 I. C. C. R. 591.

25 Texas Common Points Case. 26 Pelham v. A. C. L. R. R., 28 I. C. C. 433.

Commodity

27 Transcontinental Rates, West Bound, 26 I. C. C. 456.