factor. On the other hand, it must be recognized that the third section is much more elastic than the fourth, and there might be a violation of the rigid rule of the fourth section under a state of facts which would not constitute a violation of the third section, but a discrimination which can be justified under section 4 is never a violation of section 3.2

§ 793. Competition as a factor in rate making.

It is now well settled that competition at a given point is a dissimilarity of conditions which may justify a lower rate than to other points which are in all other respects similarly situated. The Commission has always allowed this to be shown, but it was with much reluctance that it followed the precedents of the English courts and accepted it as a complete justification. Now, however, both the Commission and the courts regard competition with favor as a circumstance to be encouraged, and allow it to have whatever effect it can be shown to have in the making of rates. It has even been asserted that the carrier has a "natural right" to make his rates low enough to meet

1 Kellogg Toasted Corn Flake Co. v. M. C. Ry., 24 I. C. C. 604.

2 Bovaird Supply Co. v. A., T. & S. F. Ry., 11 I. C. C. 56.

3 This doctrine is now so well established by a multitude of decisions that specific citations are unnecessary. In the following cases, competition was sustained as a dissimilarity of condition which justified a less charge for a long haul before the adoption of the Amendment of 1910. Cincinnati, N. O. & T. P. Ry. v. Interstate Com. Comm., 162 U. S. 184, 40 L. ed. 935, 16 Sup. Ct. 700; Texas & P. Ry. v. Interstate Com. Comm., 162 U. S. 197, 40 L. ed. 940, 16 Sup. Ct. 666; Interstate Com. Comm. v. Alabama Mid. Ry., 168 U. S. 144, 42 L. ed. 414, 18 Sup. Ct.

In

45, B. & W. 433; Louisville & N. Ry. v. Behlmer, 175 U. S. 648, 44 L. ed. 309, 20 Sup. Ct. 209; East Tenn., V. & G. Ry. v. Interstate Com. Comm., 181 U. S. 1, 45 L. ed. 719, 21 Sup. Ct. 516; Interstate Com. Comm. v. Clyde S. S. Co., 181 U. S. 291, 45 L. ed. 866, 21 Sup. Ct. 512. addition to the above cases, while in various stages below, see: Missouri Pac. Ry. v. Texas & P. Ry., 31 Fed. 862; Ex parte Koehler, 31 Fed. 315; Interstate Com. Comm. v. Atchison, T. & S. F. Ry., 50 Fed. 295; Interstate Com. Comm. v. Southern Ry., 105 Fed. 703. It should be noted also that all parts of a joint rate may be affected by competition. Interstate Commerce Commission v. C., P. & V. Ry., 124 Fed. 624.

4

those of his competitor, and it is well recognized that a carrier may for competitive reasons establish a rate lower than it could justly be compelled by the Commission to establish. In thus accepting on a comparatively small volume of traffic moving to a given point exceptionally low comparative rates, which it must establish in order to secure any part of the traffic, a carrier does not thereby estop itself from charging reasonably remunerative rates to other points to which it hauls the volume of the traffic from which it must derive the principal part of its revenues. Nor do carriers which accord competing localities the same rates to a particular point obligate themselves to grant to them the same rates to other points where they do not compete. So far indeed have the courts and the Commission gone as to treat it almost as a matter of judicial knowledge that in fixing certain rates the carrier had practically no choice, but must make rates which would meet those of its competitors, or else withdraw from that traffic altogether. Thus the Commission recognizes that the rates from the Atlantic ports to Asia are the result of the rivalry of the transcontinental roads and the Suez and Panama canals, while the rates fixed by the railways on traffic between the Atlantic and Pacific coasts are controlled by the steamship lines operating by way of Panama. Rates from the North Atlantic ports to the

8

4 Indianapolis Freight Bureau v. C., C., C. & St. L. Ry., 26 I. C. C.

53.

5 Indianapolis Freight Bureau v. Pa. Ry., 15 I. C. C. 567; BreezeTrenton Mining Co. v. W. Ry., 19 I. C. C. 598; Evens & Howard Fire Brick Co. v. St. L., I. M. & S. Ry., 25 I. C. C. 141; Sioux City Terminal Elevated Railroad Co. v. C., M. & St. P. Ry., 27 I. C. C. 457.

6 Railroad Commission of Kentucky v. L. & N. Ry., 13 I. C. C. 300.

7 Colorado Coal Traffic Ass'n v. C. & S. Ry., 18 I. C. C. 572.

8 China and Japan Trading Co. v. Georgia Ry., 12 I. C. C. 236; Enterprise Manufacturing Co. v. Georgia Ry., 12 I. C. C. 451.

'City of Spokane v. No. Pac. Ry., 15 I. C. C. 376; Kentucky Wagon Mfg. Co. v. I. C. Ry., 18 I. C. C. 360; Taylor Dry Goods Co. v. Missouri Pac. Ry., 28 I. C. C. 205; Keats Auto Co. v. O. R. R. & N. Co., 28 I. C. C. 412. See re-opened Intermountain Rate Cases, I. C. C., Feb. 11, 1915.

south are fixed by water routes, 10 while those to the middle west are determined by the existence of the competition of the Great Lakes." Cleveland, Toledo, Detroit and Duluth possess competitive conditions which cannot be ignored in the making of rates, 12 while St. Louis, Memphis and Vicksburg are equally indebted to the Mississippi.13 The Commission has repeatedly indicated that rates to Minneapolis, St. Louis and Memphis are the result of acute competitive conditions, 14 while it was held that competition at Louisville justified a variance in rate according to the grade of coal, while at a neighboring noncompetitive point one rate was applied to all grades. 15 But while the Commission and the courts are ready to allow to competition whatever weight it can be shown to have in the making of rates, the question always remains what weight does competition actually have in this particular case. This is a question of fact, in the determination of which decisions in other cases are of little help. The Commission, however, has held that it is not enough to show merely the existence of actual or potential competition. 16 Its character must be examined and its bearing upon the making of rates must be determined. If carriers rely upon competition as a justification for a discriminatory adjustment of rates, they must show not only the

18

10 Receivers' & Shippers' Ass'n of
Cincinnati v. C., N. O. & T. P. Ry.,
I. C. C. 440; Atlanta Journal Co. v.
S. A. L. Ry., 28 I. C. C. 186.

11 Board of Trade of Chicago v. A. C. Ry., 20 I. C. C. 504; International Salt Co. v. G. & W. Ry., 20 I. C. C. 530; Wisconsin State Millers' Ass'n v. C. N. & St. P. Ry., 23 I. C. C. 494; Gottron Bros. Co. v. G. & W. Ry., 28 I. C. C. 38.

12 Saginaw Board of Trade v. G. T. Ry., 17 I. C. C. 128.

13 Anadarko Cotton Oil Co. v. A., T. & S. F. Ry., 20 I. C. C. 43. 14 Business Men's League of Albert

Lea v. B. & O. Ry., 24 I. C. C. 125;
Lumbermen's Exchange of St. Louis
v. A. & S. R. Ry., 24 I. C. C. 220;
Holland Blow Stave Co. v. A. C. L.
Ry., 24 I. C. C. 81; Merchants'
Freight Bureau of Little Rock v.
A., T. & S. F. Ry., 26 I. C. C. 543;
Boston Chamber of Commerce v.
A., T. & S. F. Ry., 28 I. C. C. 230;
Traffic Bureau of Nashville v. L. & N.
Ry., 28 I. C. C. 533.

15 Lebanon Commercial Club v. L. & N. Ry., 28 I. C. C. 301.

16 Chamber of Commerce of Newport News v. Southern Ry., 23 I. C. C. 345.

fact but the reason for it. If there is no reason outside the mere whim of their traffic managers, then the roads must bear the burden of the poor company in which they find themselves at competitive points." It must also be shown that the competition was sufficient to justify a difference in rates, 18 and that the rate differential established is not greater than the competition warranted. 19 It must furthermore appear that the competition is genuine, 20 and was not created nor is it controlled by the carrier.21 The existence of competition at a favored point is no defense to a charge of undue prejudice when similar competitive conditions exist at the place prejudiced. 22 The agency or instrument used by the competing carrier is immaterial. The competition may be by rail,23 or by

17 E. T., V. & G. Ry. v. the Interstate Com. Comm., 99 Fed. 52; Suffern Grain Co. v. I. C. Ry., 22 I. C. C. 178.

18 City of Spokane v. No. Pac. Ry., 21 I. C. C. 400.

19 Grain Shippers' Ass'n v. I. C. Ry., 8 I. C. C. Rep. 158; Holdzkom v. M. C. Ry., 9 I. C. C. Rep. 42; Marten v. L. & N. Ry., 9 I. C. C. Rep. 581; Gardner v. So. Ry., 10 I. C. C. Rep. 342; Merschom, S. P. & Co. v. Central Ry., 10 I. C. C. Rep. 456; Lehmann-Higginson Grocery Co. v. A., T. & S. F. Ry., 10 I. C. C. Rep. 460; Planters' Gin & Compress Co. v. Y. & M. V. Ry., 16 I. C. C. 131; Sondheimer v. I. C. Ry., 17 I. C. C. 60.

20 Int. Com. Comm. v. C. G. W. Ry., 209 U. S. 108.

21 Chamber of Commerce of Ashburn v. G. S. & F. Ry., 23 I. C. C. 140; Bowling Green Business Men's Ass'n v. L. & N. Ry., 24 I. C. C. 228. A higher rate on lumber shipped from southern territory to Des Moines over that shipped to Omaha and Council Bluff cannot be justified on the

ground that Omaha is “an important dumping ground" for lumber, where it appears that such dumping ground results from the very difference in rates complained of. Greater Des Moines Committee v. C. G. W. Ry., 14 I. C. C. 294.

22 Mayor and Council of Boston v. A. C. L. Ry., 24 I. C. C. 50; Mfrs. & Merchants' Ass'n v. A. & A. Ry., 24 I. C. C. 331; Board of Trade of Morristown v. A. C. L. Ry., 24 I. C. C. 372; In re Advances on Barley, 24 I. C. C. 664; Mfrs. & Merchants Ass'n v. A. A. Ry., 25 I. C. C. 116; North Fork Cannel Coal Co. v. Ann Arbor Ry., 25 I. C. C. 241; Southern Furniture Mfrs. Ass'n v. So. Ry., 25 I. C. C. 379.

23 Randolph Lumber Co. v. S. A. L. Ry., 11 I. C. C. 601; Wright Wire Co. v. P. & L. E. Ry., 21 I. C. C. 64; Indianapolis Freight Bureau v. C., C., C. & St. L. Ry., 23 I. C. C. 195; Chamber of Commerce of New York v. N. Y. C. & H. R. R., 24 I. C. C. 55: Bahrenburg Bros. & Co. v. A. C. L. Ry., 24 I. C. C. 560; City of Crawford v. C. & N. W. Ry., 25 I. C. C.

boat, 24 or by wagon, 25 or by a trolley car. 26 It has even car.2 been held that water competition is created by floating ties down a river,27 and that circumstances are dissimilar at a city served by break-bulk boats and by car ferry as compared with a city not so served. 28 Within certain limits express rates and freight rates compete, and to that extent express rates should be established with reference to freight rates.29 Express rates in turn are affected by the competition of the post office, which shows itself in the disproportionate charges for large and small packages.30 Whether the competing carrier is subject to the Act is immaterial.31

$794. Incidents of competition.

When it is once established 259; Philadelphia Veneer Lumber Co. v. C. Ry. of N. J., 25 I. C. C. 653; Coke Producers Ass'n of Connellsville v. B. & O. Ry., 27 I. C. C. 125; Indianapolis Freight Bureau v. C., C., C. & St. L. Ry., 28 I. C. C. 53; Omaha Grain Exchange v. C., R. I. & P. Ry., 28 I. C. C. 680.

24 Enterprise Mfg. Co. v. Georgia Ry., 12 I. C. C. 130; Montgomery Freight Bureau v. L. & N. Ry., 17 I. C. C. 521; Receivers' & Shippers' Ass'n of Cincinnati v. C., N. O. & T. P. Ry., 18 I. C. C. 440; Industrial Lumber Co. v. St. L., W. & G. Ry., 19 I. C. C. 50; Truck Growers' Ass'n v. A. C. L. Ry., 20 I. C. C. 190; Georgetown Ry. & Light Co. v. N. & W. Ry., 22 I. C. C. 144; South Atlantic Waste Co. v. So. Ry., 22 I. C. C. 293; Escanaba Business Men's Ass'n v. A. A. Ry., 24 I. C. C. 11; In re Advances on Flaxseed, 25 I. C. C. 337; Rates on Knittingfactory Products, 25 I. C. C. 634; Arkansas Fertilizer Co. v. St. L., I. M. & S. Ry., 25 I. C. C. 645; Merchants Freight Bureau of Little Rock v. A., T. & S. F. Ry., 26 I. C. C.

that substantial competition

543; Texarkana Freight Bureau v. St. L., I. M. & S. Ry., 28 I. C. C. 569; LaGrange Chamber of Commerce v. A. & W. P. Ry., 28 I. C. C. 178; Meridian Board of Trade v. A. G. S. Ry., 28 I. C. C. 360; Wausau Advancement Ass'n v. C. & N. W. Ry., 28 I. C. C. 459.

25 Santa Rosa Traffic Ass'n v. So. Pac. Ry., 24 I. C. C. 46; Baker Commercial Club v. O. W. R. R. & N. Co., 25 I. C. C. 281.

26 Elgin Commercial Club v. B. & M. Ry., 28 I. C. C. 380.

27 Preston v. C. & O. Ry., 19 I. C. C. 406.

28 Escanaba Business Men's Ass'n v. Ann Arbor Ry., 24 I. C. C. 11.

29 Kindel v. Adams Express Co., 11 I. C. C. 475.

30 Sandford v. Western Express Co., 16 I. C. C. 32; In re Express Rates, 24 I. C. C. 380.

31 Pittsburg Plate Glass Co. v. P., C., C. & St. L. Ry., 13 I. C. C. 87; In re Investigation of Advances in Rates on Grain, 21 I. C. C. 22; Commercial Club of Superior v. G. N. Ry., 24 I. C. C. 96.