79

order to meet circumstances and conditions not of its own creation, and whenever such discrimination seems reasonable and necessary, it may be justified in claiming relief from the fourth section.76 But it must clearly appear that it is differences in transportation conditions and not the vicissitudes of shippers which produced the difference in rates.77 Rate schedules may not be constructed for the purpose of alleviating individual misfortune growing out of bad business judgment or unfavorable commercial conditions.78 But in applying the Act the Commission should take into account whatever would properly be regarded by the carrier apart from the provisions of the Act as matters which warranted differences in charges. But the fact that there is a greater market for a commodity at the longer than at the shorter distance point does not create a substantial dissimilarity of circumstances and conditions,80 nor do joint tariffs nor an arrangement by the carriers with a wagon transportation company extending through lines to points not reached by railway.81 One of the most important factors is the cost of the service rendered. From this standpoint the long haul possesses some inherent advantages over the short haul. There are certain fixed charges which are the same regardless of the length of the haul, and the greater its length the less the charge per ton-mile will be.82 The same is true of passenger service.83 It is also obvious that traffic can be more cheaply handled per ton-mile in a densely populated

Green Business Men v. L. & N. Ry., 24 I. C. C. 228.

76 Pittsburgh Plate Glass Co. v. P., C., C. & St. L. Ry., 13 I. C. C. 87. 77 Ponchatoula Farmers' Ass'n v. I. C. Ry., 19 I. C. C. 513.

78 Florida Fruit & Vegetable Ass'n v. A. C. L. Ry., 17 I. C. C. 552, 22 I. C. C. 11; Railroad Commission of Kansas v. A., T. & S. F. Ry., 22 I. C. C. 407.

79 Pittsburgh Plate Glass Co. v.

P., C., C. & St. L. Ry., 13 I. C. C. 87.

80 Fewell v. R. & D. Ry., 7 I. C. C. Rep. 354.

81 Cary v. Eureka Springs Ry., 7 I. C. C. Rep. 286.

82 Indianapolis Freight Bureau v. C., C., C. & St. L. Ry., 15 I. C. C. 504.

83 Commercial Club of Salt Lake City v. A., T. & S. F. Ry., 19 I. C. C.

218.

85

region where the volume of traffic is large than in a thinly settled region where the fixed charges must be borne by a smaller amount of business.84 Differences in the physical configuration of the country may also render the operation of one part of a line so expensive as to justify a higher charge. The elimination of grades, larger trainloads, and increased car capacity may affect rates. All these factors may favor or even justify a deviation from the fourth section. But something more than difference in cost of service must usually be found. The Commission has held that that alone is not a sufficient justification,s 86 although it has also held that whenever a schedule is established for a one-line haul, certain arbitraries should be allowed for a two-line haul, since the cost of service is greater and the carrier should be allowed to charge more.87

§ 791. Competition as ground for relief from the Fourth Section.

The chief argument offered by the carriers as justifying a departure from the long-and-short-haul rule is the existence of competition at the farther distant point.ss Where this is clearly shown, and where the competition is real and substantial, and where no relief seems available to the carrier except a reduction in rates,91 this argument is persuasive." The competition may be in the

90

84 Memphis Freight Bureau v. F. S. & W. Ry., 11 I. C. C. 1.

85 Meeker & Co. v. L. V. Ry., 21 I. C. C. 129.

86 Grand Junction Chamber of Commerce v. D. & R. G. Ry., 23 I. C. C. 115.

87 Ontario Iron Ore Co. v. N. Y. C. & H. R. Ry., 21 I. C. C. 204; Iowa State Board of Railroad Commissioners v. A. E. Ry., 28 I. C. C. 563.

88 A more detailed consideration of competition as a factor justifying relief from the Fourth Section will be found in secs. 792-802.

89 Interstate Commerce Commission v. Ala. Mid. Ry., 168 U. S. 144, 42 L. ed. 414, 18 Sup. Ct. 45.

90 E. T., V. & G. Ry. v. Interstate Commerce Commission, 181 U. S. 1, 45 L. ed. 719, 21 Sup. Ct. 516.

91 Iowa Grain Rates, 28 I. C. C. 354.

92 Decisions holding that competition justifies a departure from the rule of the Fourth Section are too numerous for citation. Among them are the following: Interstate Commerce Commission v. Alabama Midland Ry., 168 U. S. 144, 42 L. ed.

transportation of one commodity only, e. g., coffee, and such competition does not require a competitive rate on other commodities, and in some circumstances would not justify such a rate.93 But while the facts of each case may present peculiarities which have an important bearing on the result, it is now well settled that a circuitous line may deviate from the rule of the fourth section where it does so to meet the competition of a direct line, provided that the higher intermediate rate is still a reasonable rate.94 It is equally well settled that land carriers may reduce

their rates at long distance points in order to meet water competition,95 but this does not authorize them to reduce their rates so far as to suppress water competition,9 nor are they free to meet water competition in whatever way and at whatever point and to whatever extent they see fit.97 Market competition, growing out of the efforts of rival carriers to transport to a given center from various points of origin on their respective lines commodities which compete for the market of that center, must always be considered when it exists, and may indeed be the determining factor in an application for a deviation from the rule of the fourth section. 98 Competition however is so easily alleged, and so easily made to appear, and assumes so many elusive forms that applications based upon it must be carefully scrutinized in order to prevent fraud.

Topic E. Competition as a Factor in Rate Making § 792. Competition as a justification for discrimination. Few questions come before the Commission with greater

95 Water competition is the justification relied upon in innumerable cases. Among them are the following: Darling & Co. v. B. & O. Ry., 15 I. C. C. 79; City of Spokane v. No. Pac. Ry., 15 I. C. C. 376; Rogers v. Oregon Ry. & Nav. Co., 16 I. C. C. 424; Bayou City Rice Mills v. T. & N. O. Ry., 18 I. C. C. 490; Steinfeld & Co. v. I. C. Ry., 20 I. C. C. 12; American Cigar Co. v. P. & R. Ry., 20 I. C. C. 81; Fruit Growers' Ass'n v. A. C. L. Ry., 20 I. C. C. 190; International Salt Co. v. G. & W. Ry., 20 I. C. C. 530; In re Transportation of Wool, Hides & Pelts, 23 I. C. C. 151; Escanaba Business Men's Ass'n v. A. A. Ry., 24 I. C. C. 11; Bowling Green Business Men v. L. & N. Ry., 24 I. C. C. 228; Railroad Commissioners of Oregon v. So. Pac. Ry., 24 I. C. C. 273; Southwestern Ship

pers' Traffic Ass'n v. A., T. & S. F.
Ry., 24 I. C. C. 570; In re Lumber
Rates, 25 I. C. C. 50; Gillis & Son v.
P. B. & W. Ry., 26 I. C. C. 61;
Gottron Bros. Co. v. G. & W. Ry.,
28 I. C. C. 38; Meridian Board of
Trade v. A. G. S. Ry., 28 I. C. C. 360;
New England Investigation, 28 I. C.
C. 560.

96 Texarkana Freight Bureau v. St. L., I. M. & S. Ry., 28 I. C. C. 569. 97 City of Spokane v. No. Pac. Ry., 19 I. C. C. 162.

98 Indianapolis Freight Bureau v. C., C., C. & St. L. Ry., 16 I. C. C. 276; Railroad Commission of Kansas v. A., T. & S. F. Ry., 22 I. C. C. 407; In re Rates on Salt, 24 I. C. C. 192; Kellogg Toasted Corn Flake Co. v. M. C. Ry., 24 I. C. C. 604; In re Lumber Rates, 25 I. C. C. 50.

frequency than the effect which competition may be allowed to have in justification of discriminating rates. This is not considered in determining questions of discrimination under section 2,99 but it is involved in both the third and fourth sections of the Act. The third section forbids "any undue or unreasonable preference or advantage" to any person or place or description of traffic, while the fourth section absolutely prohibits a lower charge for a long haul than for a shorter one included therein unless it has first been authorized by the Commission. In suits under both sections the carriers have availed themselves of the existence of competition at a given point as an argument for sustaining their rates to that point:-under the third section as a defense against a charge of undue discrimination, and under the fourth section as justifying relief from the operation of this rigid long-and-short-haul rule. The question therefore as to what competition will justify a discriminatory rate is almost constantly before the Commission, and while certain general principles have been developed in dealing with it, the question is still primarily one of fact which must be settled anew in each case as it arises. In the application of the third and fourth sections to a specific state of facts, one important distinction between the two sections presents itself at the outset. When a complaint alleging undue discrimination under the third section comes to the Commission for adjudication, the Commission finds the alleged discrimination in existence as an accomplished fact, and the burden of proving its unlawfulness rests on him who complains of it. But under the fourth section as amended in 1910, no discrimination of the kind there prohibited can be put into operation until the consent of the Commission has first been obtained. And the burden of justifying the discrimination lies with the carrier who seeks that consent. In a close case this shifting in the burden of proof may be the determining 99 In re Advances on Manganese Ore, 25 I. C. C. 663.