higher rates from the nearer stations than those in effect from the more distant points. The cases of The City of St. Cloud, Minn., and George Tileston Milling Company v. Northern Pacific Railway Company, heard in August last and decided in November (8 I. C. C. Rep., 346), presented an interesting question under the long and short haul clause. Four lines, including the Northern Pacific, are operated from St. Paul and Minneapolis to Duluth. The Northern Pacific line is considerably longer than any of the others. St. Cloud is an intermediate point on the Northern Pacific. Anoka and Elk River are intermediate points on that line more distant than St. Cloud from Duluth. These points are also on the line of the Great Northern, and they, together with Princeton and Milaca on the Great Northern, take St. Paul and Minneapolis rates. The Great Northern reaches St. Cloud, but not over its road via St. Paul and Duluth. While for about fifteen years it has been physically possible for the Northern Pacific to compete for traffic between St. Paul and Duluth, it did not publish a tariff on such business until April, 1899. The question was whether, having engaged in such competition by making lower rates on flour from St. Paul, Minneapolis, Anoka, and Elk River than from St. Cloud to eastern points, via Duluth and other Lake Superior ports, it was violating the fourth section. On coal and other articles to St. Cloud the rate from the East was higher than to St. Paul and the other more distant points above mentioned, and the same question was therefore presented as to westbound traffic. It was shown that the differences in rates against St. Cloud were 7 cents per 100 pounds on flour and 75 cents per ton on hard and 85 cents per ton on soft coal. The difference in the rate on flour was two or three times the profit made by the St. Cloud miller in grinding his flour, and this difference in rate made the price of wheat in St. Cloud some 6 cents a bushel less than at Minneapolis or Princeton or Elk River. The producing value of land was thereby greatly lessened in the vicinity of St. Cloud. The difference in westbound rates was so great that St. Cloud could not compete with Princeton and Elk River on various articles. The Commission said:

Whatever goes to the maintenance of life in that community, where the freight rate enters into the price, costs the consumer more than in these nearby communities. It is sometimes difficult to point out the direct and individual hardship of these freightrate discriminations, although this could be done in the case under consideration; but their effect is none the less real. They are a perpetual tax upon the vitality of the community discriminated against, and sooner or later must produce a visible result.

The defendant carrier insisted that the discrimination againt St. Cloud was equally great before its rates between St. Paul and Duluth were put in, and that putting in those rates in no way aggravated that discrimination. The Northern Pacific had carried only an insignificant part of the competitive traffic, and in entering upon the competition it accepted the rate of its competitors. It appeared, however, that, being engaged in the traffic, it was able to control the through rate equally with the other competing lines, and that it alone, of all the lines, made a higher charge to or from any intermediate point. The substance of our rulings in this case is as follows: Competition between railways does not, in and of itself, create dissimilarity in “circumstances and conditions,” but it is a factor which may and perhaps ought to be taken into account in cases arising under the fourth section of the statute. The question is largely one of fact, and is in each particular instance whether, in view of all the facts surrounding that individual instance, the circumstances and conditions are so dissimilar as to justify the greater charge for the shorter distance; and in deciding this question the interests of all parties, the carrier as well as the public, must be considered. This is understood to be the rule laid down by the United States Supreme Court in the Alabama Midland Railway case (168 U. S., 144). The rail lines between St. Paul and Duluth are part of lake and rail routes to New York, and we held that such rail carriers, operating under through rates with the lake carriers, could not be heard to set up water carriage via the lakes as competition in excuse of the rates which they themselves make in furtherance of that competition. The fact that one competing carrier has the long line does not create a dissimilarity in circumstances and conditions which justifies it in disregarding the rule of the fourth section, while competing short lines are bound by that rule. To permit the carrier by the long line to meet lower competitive rates at a more distant point without making as low rates from intermediate stations, while its competitors are obliged in all cases to make no higher charge from intermediate points on their lines, would place those competitors more or less at the mercy of such long line carrier. When a carrier comes into the field of competition, whether it be as the long line or the short line, it comes subject to the same limitation as every other competitor. To allow one carrier to meet the rates of its competitors until it is found to have done something more than meet such rates does not constitute a workable basis, for the causes which lead to rate fluctuations are so intangible, often resting upon mere suspicion, that any attempt to determine in an individual case what those causes are would ordinarily be futile; and to enforce such a rule would stifle that competition which the act to regulate commerce was intended to secure. Allowing railway competition, such as is shown in this case, to constitute an exception to the rule of the fourth section would permit throughout the whole country the making of higher rates to or from intermediate points, thereby disarranging business conditions and producing endless discriminations which do not now exist. Such application of the long and short haul clause was not intended by the act, and it should not be permitted in due consideration of the interests of all parties concerned.

Upon consideration of the whole situation, we decided that the Northern Pacific carried this business from and to St. Paul, Minneapolis, Anoka, and Elk River under substantially similar circumstances and conditions with those existing in case of business to and from St. Cloud, and that the higher rates to and from St. Cloud, the intermediate point, were in violation of the fourth section.

A further point decided in this case was that a rate can seldom be considered “in and of itself.” It must be taken almost invariably in relation to and in connection with other rates, for the freight rates of this country, both upon different commodities and between different localities, are largely interdependent, and it is the fact that they do not bear a proper relation to one another, rather than that they are absolutely too low or too high, which most often gives occasion for complaint.


In the case of the Board of Railroad Commissioners of Kansas, above cited, it was alleged that higher rates on flour than on wheat, and on corn meal than on corn, from Kansas points to destinations in Texas were unlawful. These differentials amounted to 5 cents per 100 pounds against flour and 7 cents per 100 pounds against corn meal. The differential of 5 cents more on flour than on wheat on shipments from stations in Kansas to points in Texas had been approved by the Commission in 1890 in Kauffman Milling Co. v. Missouri Pacific Railway Co. (4 I. C. C. Rep., 417). The question arose whether upon this point the complainants in this case were not estopped by the former decision. We held that a decision in one case is not necessarily controlling in all similar cases, but that when the relation in freight rates determines where and how business should be done, the decision of this Commission fixing or approving a given relation should only be reversed for imperative reasons. The changes which had taken place in conditions governing the transportation of wheat and flour from Kansas points to destinations in Texas, although material in some respects, were not held sufficient to warrant interference in this case with the differential making the rate 5 cents higher on flour than on wheat. While the rate upon flour and corn meal to Texas points was the same, the rate upon wheat was 2 cents higher than that upon corn, making the difference as against corn meal 7 cents per 100 pounds. It was difficult to understand why the difference in rate between corn and corn meal should ever have been made greater than that between wheat and flour; indeed it would appear that every consideration, excepting H. Doc. 298—3

possibly the mere question of cost of service, dictated that the difference should be less. A hundred pounds of flour was said to be worth $1.40, while a hundred pounds of meal was only worth 50 cents. Evidently if 5 cents a hundred pounds could produce much effect in case of flour, a difference of 7 cents in case of meal would be almost prohibitive. Such was the testimony, which showed that under present rates practically no corn meal could be shipped from Kansas to Texas points. We found that the difference in the cost of service as between corn and corn meal need not exceed 3 cents per 100 pounds, and that no other conditions surrounding the transportation of these two commodities, such as difference in value or greater liability to injury, would justify a difference in rate of more than 3 cents. Accordingly, the Commission decided that the difference in rate of 7 cents against corn meal and in favor of corn unjustly discriminated against Kansas millers, and that the differential should not exceed 3 cents per 100 pounds. The case of the Grain Shippers' Association of Northwest Iowa v. The Illinois Central Railroad Co. et al. (8 I. C. C. Rep., 158) involved the question whether rates on corn from points in northwest Iowa and southeast Dakota to Chicago and other eastern markets were not unreasonable. It was claimed that the rates should be reduced from 2 to 4 cents per 100 pounds. The complainants apparently relied upon the proposition that the rates on grain were too high in comparison with the rates on other commodities. In our judgment the evidence did not sustain this contention. It was also alleged that the rates from northwestern Iowa and southeastern Dakota to Chicago and other eastern destinations were disproportionately high as compared with rates for corresponding distances from Minneapolis and that vicinity, upon the north, and from Kansas City and that vicinity, upon the south, and that they worked an undue preference against the locality represented by the complainants. It appeared that the transportation of grain eastward from Kansas City and from Sioux City and other points in the territory adjacent to Sioux City is subject to competition between the carriers; that while reduced rates had resulted from the competition at Kansas City, the competition in northwest Iowa had been more effectively restrained by an agreement formerly in effect, and, since such agreement was canceled, by continuance of rates without substantial reduction. The rate on corn to Chicago from most points in western Iowa was 17 cents per 100 pounds. Examination of the rates and rate changes for a period of years indicated that a rate of 15 cents on corn from Kansas City to Chicago should be applied at all Missouri River points, but the evidence was not sufficient to enable a definite conclusion. It did appear, however, that the rate of 19 cents on corn from Sioux City and other points in a limited section of northwest Iowa was too high. The Commission held that this 19-cent corn rate from Sioux City and other points in adjacent territory should be reduced, that the 17-cent rate on corn in effect from most points in western Iowa should be extended to Sioux City and points in Iowa on and east of the Sioux City & St. Paul Railroad, and that corresponding reduction should be made from other points in southeastern South Dakota. It was further held that while upon the evidence no opinion could be expressed as to what would be the proper relation of the rates on wheat and corn from Sioux City and adjacent territory, the difference of 4 cents which prevailed from most shipping points in that section should not be exceeded. The order issued has not been obeyed by the carriers. The following rulings were also made in this case: A slight reduction in freight rates from a large extent of territory upon a staple commodity like grain may result in very largely diminishing the revenues of the carrier, as well as determining whether or not grain can be raised at a profit, and, ultimately, whether it shall be raised at all. Questions of this nature, involving as they do great interests to both parties, and interests which mean not merely the loss or gain of a given sum for a single year, but a similar loss or gain year after year, ought not to be determined except upon some reasonably satisfactory showing, if the material for such showing exists. If a carrier can profitably make a low rate for the purpose of obtaining traffic in existence which would otherwise pass over a competing line, then it may profitably, under some circumstances, make a low rate for the purpose of bringing into existence traffic which would not otherwise pass over any line. The capitalization of a railroad, to have consideration in cases involving the readjustment of rates, should be accompanied by a history of the capital account, the value of the stock and various securities, and the actual cost and value of the property itself. To make the capital account of railroads the measure of legitimate earnings would in many cases place the corporation which has been fairly capitalized and honestly managed from the outset under enormous disadvantages. It is not enough for defendant carriers to say, in a case involving the relation of rates, that competition justifies or requires the thing which is done; something must be known of the nature and extent and effect of that competition. In the case of the Board of Trade of Dawson, Ga., v. Central of Georgia Railway Company and Georgia & Alabama Railway Company (8 I. C. C. Rep., 142), it was claimed that the carriers violated the act by charging higher freight rates to Dawson than to Eufaula, Ala., and Americus and Albany, Ga., towns in the section of country surrounding Dawson. The rates under consideration created a prejudice against

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