discriminate, but accept the same amount as its share of the through charge on each.82 And similarly if a lower through or export rate is allowed to one station on a railroad, a similar rate should be allowed to other stations.83

§ 765. Railroad rates tend toward a cost basis.

Rate regulation upon legal principles, basing the rate charged ultimately upon the cost of the service, will not in the case of railroads, as many fear, mean an immediate recourse to a mileage basis. The chief reason that it can never come to that basis altogether is that mere mileage, as all authorities recognize, never measures the cost of the service. It is fundamental that a long haul is relatively cheaper per ton than a short haul.84 This is all the clearer if the shorter haul has unusual physical obstacles making it actually more expensive; it will then justify a lower rate for a longer haul.85 Moreover, the less expensive terminals may make the longer route the cheaper, so that sometimes business may be better handled if great volumes of low-grade freights are diverted from congested points by differential rates. It is also often justifiable to group together various stations for convenience in making rates.

82 Calloway v. L. & N. Ry., 7 I. C. C. Rep. 431.

83 Re Export and Domestic Rates, 8 I. C. C. Rep. 214; Chicago F. P. C. Co. v. Chicago & N. W. Ry., 8 I. C. C. Rep. 316.

84 In the Federal courts particularly there have never been any doubts that this rule justified the making of a lower rate per ton-mile for a longer haul. See among many others: Union Pacific Ry. Co. v. United States, 117 U. S. 355, 29 L. ed. 920, 6 Sup. Ct. 772; East Tennessee, V. & G. Ry. Co. v. Interstate Com. Comm., 181 U. S. 1, 45 L. ed. 719, 21 Sup. Ct. 516; Tozer v. United States, 52 Fed. 917;

Northern Pacific Ry. Co. v. Keyes, 91 Fed. 47; Southern Ry. Co. v. St. Louis, H. & G. Co., 156 Fed. 728; St. Louis & S. F. Ry. v. Hadley, 168 Fed. 317; Missouri, K. & T. Ry. Co. v. Love, 177 Fed. 493.

85 The possibility that the actual cost of the shorter transportation between certain points may be greater than that of a longer transportation between other points is made much of in the English cases. See among many others: Bellsdyke Coal Co. v. North British Ry. Co., 2 Ry. & C. Tr. Cas. 105; Coal Co. v. Caledonia Ry. Co., 2 Ry. & C. Tr. Cas.

39.

These and many other considerations may be set beside the mere mileage involved. The most satisfactory comparison to ascertain whether relative injustice is being done to one section as against another is through the earnings per car.86 But undoubtedly rate regulation in the future will pay more attention to operating cost and mileage tables than in the past.

§ 766. Various systems of making distance rates.

These statutory provisions affect rate making only to a certain extent. "There are four principal methods of making rates to localities: that prevailing in the Trunk Line Territory, in practical compliance with the fourth section; that in the Southeastern Territory, where basing points or trade centers are recognized to which through rates are made and the local rates are added for rates to tributary territory. To the Pacific coast, water competition has brought about low rates, and a combination of these with the local rate back fixes the rates for the interior mountain territory points. In the case under consideration rates are made to Colorado common points with Denver, Colorado Springs, Pueblo and Trinidad named as such points in the schedules, but there are several hundred smaller intermediate points to which the rates apply, so that the system is nearly the equivalent of a blanket rate, or a like rate for a large territory. The coast system of rate making by adding the local back to the low through rate arouses complaints, for the reason that the shortest haul where the system prevails has the highest rate; that is, rates are lower the nearer to the coast terminal-an apparent violation of the fourth section. The basing point system arouses friction, in that rival centers and shorterdistance points demand like privileges, and the blanket rate finds objectors where an important point is ambitious to supply the surrounding territory. Each has its advantages and each is open to some objections." 87 The

86 Ozark Fruit Growers' Ass'n v. St. L. & S. F. Ry., 16 I. C. C. 106.

87 Quoted from Kindel v. Boston & A. R. R., 11 I. C. C. Rep. 495.

system of basing points was held illegal by the Commission,88 but in this it was not sustained by the Supreme Court.89 Somewhat inconsistently the Commission has always favored group rates,90 whereby competition in commodities carried is preserved.91

§ 767. Burden upon the railroad to defend discriminatory rates.

Whenever a carrier establishes a discriminatory rate, it assumes the burden of justifying it. Every discriminatory rate is prima facie unlawful, and it can be sustained only by showing that it is authorized by some provision of the Act. The burden of showing this rests upon the carrier. In a case involving the rates to Boston from Fredericton and Fairfield, two places situated upon different branches of the same road, Commissioner Veazey said: "A departure from equal mileage rates on different branches or divisions of a road is not conclusive that such rates are unlawful, but the burden is on the company making such departure to show its rates to be reasonable when disputed. The essential question here is one of relatively reasonable rates; not whether either rate is reasonable in itself. It is the effect of the carriers' action at one point upon the legitimate business prosperity of another point, which is the vital point in this controversy. If the present Fredericton rate does not actually result in profit, the carriers should not seek to control or stimulate traffic from that point by making the rate so low; and if they carry for unusually small compensation from that place they do so

88 Hamilton v. Chattanooga, R. & C. R. R., 3 Int. Com. Rep. 482, 4 I. C. C. 686; Perry v. Florida, C. & P. R. R., 3 Int. Com. Rep. 740, 5 I. C. C. 97; Hill v. Nashville, C. & S. L. Ry., 6 I. C. C. Rep. 343; Gustin v. Atchison, T. & S. F. R. R., 8 I. C. C. Rep. 277; Hampton Board of Trade v. Nashville, C. & S. L. Ry., 8 I. C. C. Rep. 503.

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

90 Howell v. New York, L. E. & W. R. R., 2 Int. Com. Rep. 162, 2 I. C. C. Rep. 272.

91 Milk Dealers' Ass'n v. Delaware, L. & W. Ry., 7 I. C. C. Rep.

92.

under the plain injunction of the law that their action must not inflict undue prejudice or disadvantage upon other communities or persons. When a carrier engages in transportation for which, by reason of competitive conditions or for purposes of its own, it receives less rates from some patrons and at some localities, it accepts the legal obligation to give impartial service to other patrons and at other localities that sustain similar relations to the traffic." 92

Topic C. What Constitutes Undue Prejudice

§ 768. Provisions against undue prejudice.

It is not enough under the Act that transportation charges to a certain place should be reasonable in themselves. Rates must also be relatively reasonable as compared with those to other places on the same line in order to prevent unlawful discrimination.93 Every community is entitled to a non-discriminatory rate.94 The fundamental

principle of the Act is one of fair play.95 Hence a carrier may not give preferential rates to shippers or commodities or localities, even though by so doing it would develop the greatest amount of traffic for itself. A carrier which has built up a seaport of its own may not discriminate in favor of that port,96 nor may it build a rate wall around one point in order to advance the interests of a competing point,97 nor by arbitrary adjustment of rates determine where wheat shall be milled or flour shall be marketed,98 nor may it foster the industries upon its own system by undue discrimination against industries at points on other systems,99 nor make rates whereby the jobbers in a given city are enabled to extend their trade,1 nor favor one city at the expense of another as a mere matter of railroad policy, or because it is an assembling point for freight,3 nor retain to itself the lumber market at points on its own line for the benefit of producing points thereon to the exclusion of producing points on other lines, nor discriminate in favor of a point where it maintains a market. Undue discrimination is not confined to transportation charges, but may be found in demurrage charges,"

5

95 Mobile Chamber of Commerce v. M. & O. Ry. Co., 23 I. C. C. 417.

96 Interstate Commerce Commission v. L. & N. Ry., 118 Fed. 613.

97 Alabama Coal Operators' Ass'n v. So. Ry., 21 I. C. C. 230; Indianapolis Freight Bureau v. C., C., C. & St. L. Ry. Co., 26 I. C. C. 53; Aransas Pass Channel & Dock Co. v. G. H. & S. A. Ry., 27 I. C. C. 403.

98 Valley Flour Mills v. A., T. & S. F. Ry. Co., 16 I. C. C. 73.

99 Reliance Textile & Dye Works v. S. Ry. Co., 13 I. C. C. 48.

1 In re Advances on Knitting Factory Products, 25 I. C. C. 634.

2 In re Application of Southern Pacific Co., 22 I. C. C. 366.

3 Iowa State Board of Railroad

4

Commissioners v. A. E. Ry., 28
I. C. C. 193.

4 Lumber Rates Texas, etc., to Oklahoma & Missouri, 28 I. C. C. 471; Aransas Pass Channel & Dock Co. v. G. H. & S. A. Ry., 27 I. C. C. 403; but see also Avery Mfg. Co. v. A., T. & S. F. Ry., 16 I. C. C. 20. Western traffic may not be exterminated in a desire to serve the Oklahoma coal industry. Wichita Falls System Joint Coal Rate Cases, 26 I. C. C. 215.

5 Wilson Produce Co. v. Pennsylvania Ry. Co., 16 I. C. C. 116.

Pennsylvania Miller's State Ass'n v. Philadelphia & Reading Ry. Co., 8 I. C. C. 531; Galveston Commercial Ass'n v. A., T. & S. F. Ry., 25 I. C. C. 216.