No. 29887

SAALFIELD PUBLISHING COMPANY V.

ATCHISON,

TOPEKA & SANTA FE RAILWAY COMPANY ET AL.

Submitted January 13, 1949. Decided July 27, 1949

Ratings and resultant rates on so-called juvenile books and juvenile activity articles, in carload and less-than-carload lots, from Akron, Ohio, to destintions throughout the United States found to be unreasonable but not shown to be unduly prejudicil and preferential. Reasonable future bases prescribed.

John Deremigio, William A. Disque, Dean A. Herrold, and John R. Meeks for complainant.

J. P. Canny and Edward R. Gustafson for defendants.

REPORT OF THE COMMISSION

DIVISION 2, COMMISSIONERS AITCHISON, SPLAWN, AND ALLDREDGE BY DIVISION 2:

The complainant filed exceptions to the examiner's proposed report, and the parties were heard in argument. Our conclusions differ somewhat from those recommended by the examiner. Exceptions and requested findings not discussed in this report nor reflected in our findings or conclusions have been given consideration and found not justified.

The complainant, a corporation, alleges that the classification ratings and the resultant rates on so-called juvenile books and juvenile activity articles, in carload and less-than-carload lots, from Akron, Ohio, to destinations throughout the United States, are unjust and unreasonable, and are unduly prejudicial to it, in that lower and unduly preferential commodity rates are maintained for competitors at various points in Wisconsin, Illinois, Indiana, Massachusetts, and New York, in violation of sections 1 and 3 of the Interstate Commerce Act. We are asked to prescribe lawful rates for the future.

Juvenile activity books and juvenile activity articles are described as inexpensive nursery rhyme, picture, story, coloring, and juvenile fiction books, doll cut-outs, and boys and girls activity articles, made chiefly of paper and paperboard. They are shipped by the complain

ant to all parts of the United States and are used primarily for the play and amusement of preschool age and early school age children. These products are printed chiefly on lithograph paper, novel news, and paperboard. Novel news is a type of paper made of ground wood pulp and is only slightly better than ordinary newsprint in quality. A process of wire stapling known as saddle stitching is used in the binding of the books. The printing is done either by direct printing by means of rotary presses or indirect printing, by means of lithograph presses. Direct rotary printing, as the name implies, is accomplished by casting the printing plates in roller form and then placing the printing paper in direct contact with the revolving plates. Lithographing, by contrast, is an offiset process of printing whereby the page image is first transferred from zinc printing plates to rubber pads or blankets, which in turn make direct contact with the printing paper. Although the initial costs of the lithograph presses are greater than those of roller presses, the lithograph method ordinarily is used because of the better coloring work which can be done on the cheaper grades of paper.

Almost all of the complainant's production is for the market represented by children from 1 year to 9 years of age. No adult books of any description and very few children's books of an expensive nature are produced by the complainant. The books are sold through retail outlets, such as Nation-wide chain stores, which carry a great variety of low-priced articles. During the past 5 years the complainant produced and shipped by rail about 20 million pounds of books annually. Since 1940 the production has been limited by the supply of paper available, rather than by the demand for the books. The accelerated national birth rate indicates that the demand for the type of book and activity article represented here will continue to increase. Of the tonnage shipped in interstate commerce, 86 percent moved at less-than-carload ratings, 5 percent at carload ratings, 8 percent at less-than-truckload ratings, and 1 percent at truckload ratings.

For the most part the retail prices of the complainant's items range from 10 to 19 cents each. Of the entire tonnage, only 15 percent is comprised of items which retail for 29 cents or more each. Approximately 85 percent of the items which move by rail are tracing books of numbered dots which retail for 10 cents a copy and have a shipping value of 20 cents a pound. Briefly described, this is the type of book wherein a child may complete sketches or pictures by drawing lines between numbered dots. Some shading and printing other than the numbered dots is present. The covers are lithographed in color and

the inner pages are printed in black and white on rotary presses. The average wholesale selling price of each book shipped in 1947 was 8.4 cents. During the first part of 1948 the average had moved up to 8.5 cents. The average shipping value of all of the complainant's products is 2213 cents a pound.

Orders for these books generally call for a variety of titles, the heavier demand being for the cheaper books. Only a few of the more expensive books are included in the average order. The complainant's witness estimated that by comparison the value of the typical adult book would average 75 cents a pound. Shipments are made in corrugated cartons complying with the requirements of rule 41 of the classification. The cartons range from 11 x 11 x 7 inches to 24 x 19 x 14 inches in size, with the one most commonly used measuring 18 x 14 x 12 inches. The latter container weighs about 90 pounds when ready for shipment, or an average weight of 51.4 pounds a cubic foot. Loss and damage claims on the complainant's shipments are negligible.

Freight charges, which amount to about 20 percent of the invoice value of the shipments under consideration, are paid by the complainant's purchasers. Because the retail selling prices of the books have been standardized for so long, retailers refuse to attempt to pass increased transportation costs on to their customers. Instead, the complainant is expected to absorb the increases as they occur by lowering the wholesale prices of the books. General increases authorized by the Commission since 1938 have increased the level of class rates to the extent that the transportation costs on the complainant's products have increased 70 percent. In spite of those increases, the nature of the commodities makes it difficult to increase prices. The result has been that the complainant must lower prices to allow its customers to absorb the added freight costs.

There being no commodity rates in effect on books from Akron, the shipments move at class rates. Juvenile books and juvenile activity articles are not listed as such in the classification, but ratings are provide don books n. o. i. b. n. The carload ratings are rule 26,2 fifth class,3 and fourth class,2 in official, southern, and western territories, respectively, subject to a uniform minimum of 30,000 pounds, and the less-than-carload rating is second class in all three territories. From Akron to southern territory there is an exception rating on less than carloads of 70 percent of first class. The complainant does not dispute the applicability of the foregoing ratings on its shipments; nor does it contend that the class rates as such are unreasonable. It does con

1 Not otherwise indexed by name and not more specifically provided for in the classification. 2 Fifty-five percent of first class. Forty-five percent of first class. 4 Eighty-five percent of first class.

tend that the ratings shown are, and for the future will be, unreasonable when applied to books of the type described.

Shippers at other points where similar books are published are accorded commodity rates which, on the whole, are lower than the corresponding class rates. These commodity rates from various origins average about 32 to 45 percent of first class for carload shipments. Similarly, the less-than-carload commodity rates average 60 to 75 percent of the first-class rates. In most instances the descriptions in connection with the commodity rates are sufficiently broad to include the complainant's products.

As a possible form of relief, the complainant suggests that a new item, "Juvenile Books and Juvenile Activity Articles, made chiefly of paper and paperboard," be incorporated in the classifications to permit less-than-carload shipments at third class and carload shipments at 35 percent of first class. If it be determined that this suggestion is not practical, the complainant suggests as an alternative that progressive ratings based on valuation be established.

The defendants contend that the complainant's suggestions for classification changes are neither practical nor consistent with previous rulings of the Commission. The defendants admit that perhaps these books may be recognized readily as children's books, but urge that by the same token there may be books manufactured by other shippers using classification ratings whose products could not be distinguished so readily. They say that innumerable difficulties would arise from the use in the classification of the term "juvenile," and that it would be difficult to police shipments of books made under that description. They experience no difficulty in policing shipments made from points from which commodity rates apply, and in affording relief to the complainant, if rates lower than the class bases are established from complainant's only shipping point, Akron, it is not clear why the defendants similarly would have any trouble in their policing efforts. With respect to the suggestion that, in the alternative, actual or released value ratings be established, the defendants point out that in the past such rates or ratings have been used only when certain conditions have been found to exist. Those conditions are, in brief, that the commodity be one (1) easily susceptible of damage, (2) having a wide range of values, and (3) whose value could not readily be ascertained after loss and damage. None of these conditions exists with respect to the complainant's products.

The complainant relies principally upon the low value of its products and the existence of commodity rates on a lower level from other

Seventy percent of first class.

points to support its allegations that the applicable classification ratings are unlawful. Taking into consideration the low value of the complainant's books, and their weight density, we are of the view that rates no greater than 77.5 percent of first class on less than carloads, and 45 percent of first class on carloads, minimum 30,000 pounds, would be reasonable.

The plant of complainant at Akron is the only one of its kind in that city. Its principal competition allegedly is with publishing firms in Racine and Kenosha, Wis., Chicago, Ill., Crawfordsville, Ind., New York and Poughkeepsie, N. Y., and Springfield, Mass., but the complainant has not shown with particularity the extent and nature of that competition. That there are in existence commodity rates from those points on a level lower than the applicable rates from Akron does not of itself show that this difference in rates results in any undue prejudice to complainant in the marketing of its products. To establish undue prejudice and preference, the evidence must be such as to make reasonably clear how and where an assailed disparity in the relative levels of rates operates to the advantage of parties or traffic alleged to be favored and to the detriment of other parties or traffic. They may not be assumed or left to inference. General declarations as to competition, unsupported by evidentiary facts, and a mere showing of disparity of rates do not warrant a finding of undue prejudice and preference. Cast Iron Pressure Pipe Institute v. A., T. & S.F. Ry. Co., 219 I. C. C. 667; Walter Brewing Co. v. Union Pac. R. Co., 225 I. C. C. 760, E. R. Blackinton & Son Canning Co. v. Alton R. Co., 259 I. C. C. 584. The allegation of undue preference and prejudice is unsupported by the evidence.

We find that the assailed ratings and resultant rates are not shown to be unjustly prejudicial or preferential, but that they are, and for the future will be, unreasonable to the extent they exceed or may exceed 77.5 percent for less than carloads and 45 percent for carloads, minimum 30,000 pounds, of the present first-class rates in effect from Akron to the same destinations.

An appropriate order will be entered.

274 I. C. C.