of circumstances which excuses a discrimination in rates, it logically follows that potential competition must be allowed to have the same influence. And this is the view now taken by the Commission and the courts.78 But care must be taken to distinguish potential competition from merely possible or conjectural or imaginary competition. It must be a competition that is reasonably apprehended.79 A river which is not navigable is in no sense a competitor, but when an appropriation has been made for dredging it, it at once becomes a potential competitor.80 A river continues to be a potential competitor of a railroad even though the boats on it have ceased running for lack of cargoes.81 The ocean without a ship upon it is nevertheless a powerful factor in restraining rates of land carriers.82 Potential competition by the Tehuantepec route justifies low rates from the Mississippi to the Pacific coast.83 The Erie canal, as an active competitor, has to a considerable extent disappeared, but it still produces a profound effect upon grain rates.84 The Great Lakes not only compete with land carriers through the vessels now in service on them, but also through the vessels potentially in service on them.85 It is not the actual amount of competition but the ever-present possibility of its increasing which is significant.86 Such a potentiality

78 E. T., V. & G. Ry. v. Interstate Commerce Commission, 99 Fed. 52, 39 C. C. A. 413; Lead Commercial Club v. C. & N. W. Ry., 12 I. C. C. 460; Planters' Gin & Compress Co. v. Y. & M. V. Ry., 16 I. C. C. 131; Memphis Cotton Oil Co. v. I. C. Ry., 17 I. C. C. 313; Kentucky Wagon M'fg Co. v. I. C. Ry., 18 I. C. C. 360; Audley Hill & Co. v. So. Ry., 20 I. C. C. 225; Bowling Green Business Men's Ass'n v. L. & N. Ry., 24 I. C. C. 228; Memphis Freight Bureau v. B. & O. Ry., 28 I. C. C. 543; Texarkana Freight Bureau v. St. L., I. M. & S. Ry., 28 I. C. C. 569.

Commodity

79 Transcontinental Rates, West Bound, 26 I. C. C. 456. 80 Texarkana Freight Bureau v. St. L., I. M. & S. Ry., 28 I. C. C. 569.

81 Arkansas Fertilizer Co. v. St. L., I. M. & S. Ry., 25 I. C. C. 645.

82 Railroad Commission of Nevada v. So. Pac. Ry., 21 I. C. C. 329.

83 Kentucky Wagon M'fg Co. v. I. C. Ry., 18 I. C. C. 360.

84 Board of Trade of Chicago v. A. C. Ry., 20 I. C. C. 504.

85 Commercial Club of Duluth v. B. & O. Ry., 27 I. C. C. 639. 86 City of Spokane v. No. Pac. Ry., 21 I. C. C. 400.

not only influences rates but insures better service and fairer treatment.87 The extent to which a carrier shall lower its rate to meet anticipated competition is a matter primarily for its decision, and should it later raise the rate, the sole question for the Commission's determination is whether that increased rate is just and reasonable for the service performed.88

§ 800. Suppression of competition by agreement.

In East Tennessee, Virginia and Georgia Railway v. Interstate Commerce Commission,89 Judge Taft in the Circuit Court of Appeals dealt with an apparent competition which was not real because of a secret arrangement between the carriers. The lower rates for the longer haul from Nashville to the seaboard were justified by the competition at Nashville between two railroads, the Louisville & Nashville and the Nashville, Chattanooga and St. Louis. There was an apparent competition between these roads, and they named independent rates; but the latter road was controlled by the former through ownership of a majority of the stock. The Circuit Court of Appeals held that this was not a real competition, and could not be considered as a dissimilar circumstance which would justify a difference in rates. The Supreme Court reversed the decision on the ground that the facts on which it was based were at variance with those found by the Commission; and the court refrained from expressing its opinion upon the proposition of law.90 It is difficult to see how any doubt can exist on the point. If the Circuit Court of Appeals was right in finding that the competition which appeared to exist at Nashville was in reality stifled by a control of all carriers by one of them, there was surely no such competition as would create a dissimilar condition forc

87 New England Investigation, 27 I. C. C. 560.

88 Scrap-iron Rates between Duluth and Chicago, 28 I. C. C. 467.

89 99 Fed. 52, 39 C. C. A. 413. 90 East Tennessee, V. & G. Ry. v. Int. Com. Comm., 181 U. S. 1, 45 L. ed. 719, 21 Sup. Ct. 512.

ing upon one road a low competitive rate. In a later case in the Supreme Court, Mr. Justice White said: "Of course, if, by agreements or combinations among carriers, it were found that at a particular point rates were unduly influenced by a suppression of competition, that fact would be proper to consider in determining the question of undue discrimination and the reasonableness per se of the rates at such possible competitive points." 91 This view was adopted by the Commission when a railroad attempted to justify a competitive rate at a point where it had obtained control of the competitive water carrier.92

§ 801. Suppression of competition by consolidation.

93

Where competition at the intermediate point is stifled, not by an agreement among the competing roads, but by a consolidation of all the roads into one, it has been urged that for the purpose of determining the reasonableness of discrimination the point should continue to be regarded as a competitive point. This was urged in the Danville case. The rates between southern and western points and Danville were very much higher than those between the same points and Lynchburg, the business rival of Danville. There was an active competition between railroads at Lynchburg. Such competition had existed at Danville, but all the other roads were absorbed by the Southern Railway. The courts held the discrimination justified. The case went off on the ground that before the consolidation of the last competing road with the Southern the rates were as high as at the time proceedings were begun. When carriers which are nominally competitive are controlled by the same persons, it is difficult to make out a competitive condition which will justify discrimination.94 Common ownership puts it in the power

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

92 Bowling Green Business Men's Ass'n v. L. & N. Ry., 24 I. C. C. 228.

93 Interstate Commerce Commission v. Southern Ry., 117 Fed. 741, 122 Fed. 800, 60 C. C. A. 540.

94 Bowling Green Business Men's Ass'n v. L. & N. Ry., 24 I. C. C. 228.

of the controlling interest to stifle all real competition, and the history of such relationship shows that the power is likely to be used.95 Where two roads are under a substantially common ownership and control, they are considered as one system, notwithstanding the fact that they may be operated separately, and each is considered as having its rails extended to points directly served by the other.96

§ 802. Carriers may refuse to make competitive rates.

Since the Act authorizes carriers to make lower rates to points where competitive conditions obtain, many shippers concluded that the Act gave them the right to demand lower rates at such points. But such a construction of the Act is unwarranted. While the law permits carriers to maintain low rates under stress of competition, it does not require them to do so. Hence where two carriers serve the same destination from two different points of origin, neither can be held to discriminate against mills at that destination because it sees fit to make or refuse a rate lower than is inherently reasonable.98 Whether they will reduce their rates to competitive points or not is a question of business policy which each carrier is free to determine for itself. Not infrequently it happens that a carrier would increase its rates in order to retire from traffic to competitive points rather than sacrifice much needed additional revenue on traffic to its intermediate stations.99 Shippers, therefore, must trust to economic pressure to secure for them low rates at competitive points. The Commission has no power to

95 Flour City S. S. Co. v. L. V. Ry., 24 I. C. C. 179.

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

97 Crews v. R. & D. Ry., 2 Int. Com. Rep. 703, 1 I. C. C. Rep. 401; Oregon & Washington Lumber Manufacturers' Ass'n v. Un. Pac. Ry., 14 I. C. C. 1.

98 Saginaw & Manistee Lumber

Co. v. A., T. & S. F. Ry., 19 I. C. C. 119.

99 Kansas-Iowa Birch Rates, 28 I. C. C. 285.

1 North Brothers v. C., M. & St. P. Ry., 15 I. C. C. 70; Darling & Co. v. B. & O. Ry., 15 I. C. C. 79; Bainbridge Board of Trade v. L. H. & St. L. Ry., 15 I. C. C. 586; Lindsay Brothers v. B. & O. S. W.

order a reduction in rates in order to meet competition.2 If two carriers serve a common point at the same rate, and the carrier with the shorter line reduces its rate, the carrier with the longer line is not obliged to do the same.3 But if a carrier elects to make a competitive rate, it thereby subjects itself to certain restraints. It cannot compete at one point and decline to compete at another where all the conditions are the same. Nor ordinarily should it be allowed to compete one day and decline to do so the next. This would violate the public's right to equal and uniform treatment. Hence, if a carrier once establishes a competitive rate there may be circumstances under which the Commission will require its continuance. In deciding to what extent it will meet competition the carrier must avoid any undue discrimination between localities." While a railway may refuse to meet the competitive rates of a water carrier, it may not charge a high and unreasonable rate and justify it on the ground that there was water carriage available to shippers at a low and reasonable rate. It is permissible for a carrier to establish competitive rates on certain commodities between two points and refuse to do so on other commodities even though the same degree of competition is involved. In the case of connecting

Ry., 16 I. C. C. 6; Frederick & Kempe Co. v. N. Y., N. H. & H. Ry., 18 I. C. C. 481; Georgia-Carolina Brick Co. v. So. Ry., 20 I. C. C. 148; Cohen & Co. v. Mallory Steamship Co., 23 I. C. C. 374; Omaha Grain Exchange v. C., M. & St. P. Ry., 24 I. C. C. 122.

* LaSalle Paper Co. v. M. C. Ry., 16 I. C. C. 149; Chicago Lumber & Coal Co. v. T. S. Ry., 16 I. C. C. 323. 3 Commercial Coal Co. v. B. & O. Ry., 15 I. C. C. 11.

'Darling & Co. v. B. & O. Ry., 15 I. C. C. 79; City of Spokane v. No. Pac. Ry., 21 I. C. C. 400. Granting Los Angeles terminal rates be