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So also could a railroad situated wholly within a State as to the traffic within that State.
To extricate itself from the practical difficulties with which it was apparently overwhelmed, the Commission laid hold upon this plain difference between competition with carriers not subject to the act and competition with carriers or through carriers which are subject to the act, and it said, Re Louisville and Nashville Railroad Company (1 1. C. C., 31; Ga. R. R. Com. Cases, 5 I. C. C. Rep., 324), that competition not subject to the act did create the necessary dissimilarity of circumstances and conditions under the fourth section, while competition which was subject to the act did not. The act provides that the carrier shall not charge more for the sliort haul under similar circumstances and conditions. If the circumstances and conditions are dissimilar, the prohibition of the act does not apply, and the carrier is not forbidden by that section to charge more for the short than for the long haul.
It is upon these lines that the Commission has hitherto applied the provisions of that section. Perhaps the original decision would have been more consistent had it followed the interpretation already put upon the phrase “same circumstances” by the English courts and held that “similar circumstances and conditions” refer to the transportation itself and not to the surrounding conditions under which that transportation is conducted, but the holding of the Commission gave a reasonable and practicable interpretation to the law. There is no similarity between unrestrained water competition and competition regulated by the provisions of this act. Under this interpretation of the section, if the rate was controlled by unregulated competition the carrier might meet it without an application to the Commission. If competition between carriers subject to the act afforded a sufficient excuse, as it might, the Commission could grant leave, upon applicatiou and after full hearing, to make the lower rate to the more distant points. This apparently effectuated the intention of the act. It gave the carrier all the liberty to which it was entitled in the first instance, and it provided that it might obtain from the Commission whatever relief the circumstances warranted.
This view of the law was generally accepted by carriers throughout the country and tariffs were made to conform to it, with the exception of certain parts of the southern territory. We believe that at the time the decision of the Supreme Court was announced there were practi. cally no obnoxious rates of this sort except south of the Ohio and east of the Mississippi. If such rates existed elsewhere, they were sought to be justified upon the ground of water competition.
Carriers within the territory indicated claim to have found it impossible to conform their rates to the requirements of the section as thus interpreted. They have habitually charged more to the intermediate point, and have sought to justify this upon the ground that competition among themselves created the dissimilar circumstances and conditions. The Commission has contended that the section should not be so construed, for two reasons. First, as already stated, the evil which it was intended to remedy was occasioned mainly by railway competition. It is impossible to conceive of any other reason why a carrier should charge more to the nearer than the more distant point. Of course there might be a sporadic instance in which the officers of a railway company would desire on personal grounds to prefer some particular locality, but such instances must be extremely rare, and no such instance has ever come to the attention of the Commission. It was competition between railroads which forced down the rate at competitive points. Now, to hold that that same kind of competition might be shown as creating the necessary dissimilarity which would take the case out of the fourth section would be to hold that the very thing which it was intended to prohibit by the enactment of the statute might be shown as an excuse for a violation of the statute. Competition is the only reason why a carrier would desire to charge less to the more distant point, and if competition justifies him in so doing, there is nothing left for the section to act upon.
The second reason was of the same sort. The section provides that the Commission may in special cases, after investigation, authorize the charging of more for the short than for the long haul and prescribe the extent to which this may be done. Presumably Congress intended that this proviso should have some effect, but if the carrier may charge what it pleases whenever competition exists, in what case and for what reasons would it ever apply to the Commission for relief under that proviso?
We state the position of the Commission upon this question for the purpose of showing clearly what the effect of the decision actually made must be. It is hardly correct to say that the court has disapprored of these views, for, so far as appears from a reading of the opinion, the court never took pains to inform itself what the position of the Commission had been. It decides, however, that railway competition between carriers subject to the act creates the necessary dissimilarity of circumstances and conditions, and this necessarily overturns the procedure of the Commission under that section up to the present time, and virtually nullifies the section itself.
In the course of the opinion the following language is used: In order further to guard against any misapprehension of the scope of our decision, it may be well to observe that we do not hold that the mere fact of competition, no matter what its character or extent, necessarily relieves the carrier from the restraints of the third and fourth sections, but only that these sections are not so stringent and imperative as to exclude in all cases the matter of competition from consideration in determining the question of “undue or unreasonable preference or advantage,” or what are “substantially similar circumstances and conditions.” The competition may in some cases be such as, having due regard to the interests of the public and of the carrier, ought justly to have effect upon rates, and in such cases there is no absolute rule which prevents the Commission or the courts from taking the matter into consideration.
This language is intelligible as to the third section, but we are at a loss to understand how it can be applied to the fourth. That section enacts that the carrier shall not charge more for the short than for the long haul under substantially similar circumstances and conditions. If the circumstances and conditions are similar, the greater charge can not be made. If the circumstances and conditions are not similar, the section does not apply. The court holds that railway competition of controlling force makes the circumstances dissimilar. If, therefore, we find in a particular case that competition of controlling force actually exists, that ends the matter. We have no power to say whether, nor to what extent, such competition justifies the higher rate to the intermediate point.
The third section is still left, and under that section we may inquire whether, under all the circumstances, the rates as adjusted give an undue preference to the competitive point, but the fourth section is by this decision eliminated from the act. It would bave been instructive if the court had indicated in what instances, under its construction, application might be made to the Commission for relief.
It is evident that the railroads well enough understand the effect of this decision, and are quick enough to take advantage of it. Within five days from the reading of its opinion by the Supreme Court, the Trans-Missouri Freight Bureau, which appears to be doing business as the lineal descendant of the Trans-Missouri Freight Association, notwithstanding the decision in that case, filed schedules raising the rates to intermediate points over more than 100,000 square miles.
NECESSITY FOR FOURTH SECTION.
If, then, the effect of this decision is to strike from the act its fourth section, the question arises, in view of the experience of the past and the present conditions, Is some such section necessary! It is well known that England had, at the time of the passage of our law, no corresponding provision. The first three sections of our act are founded upon similar sections of the English act, but the fourth section was an addition,
With reference to this, it should be observed that no such condition of things ever existed there as was found here in 1887 in this respect. The railways of England have from the first been subject to a more stringent measure of regulation than have American railways. The equality clause was enacted in 1845, and the undue-preference clause in 1854. Upon the other hand, American railways have from the first run riot in the matter of rates and preferences. The result is that the evils of discrimination have never attained anything like the prominence in England that they have here.
This is seen by examining the case in which the English court held, in 1892, that competition might be shown upon the question of whether a preference was undue. That case was as follows: The iron furnace of the complainant was 60 miles from market. Those complained
against were respectively 71 and 82 miles from the same market, upon the same line of railroad. The latter furnaces were connected with the market by a second line of railway, while there was no competition at the complaining furnace. The rate from complainant's furnace was 5 shillings and 2 pence per ton, while that from the other two furnaces was a group rate of 5 shillings and 8 pence per ton. The complaint was that this did not give the complainant's furnace sufficient benefit from its greater proximity to the market. We doubt whether it would ever occur to an American shipper that such a rate was so unfair that it ought to be corrected. The ordinary condition of things with us would be, or rather would have been before the passage of this act, that the more distant furnaces paid about one-third less under those circumstances than the nearer.
In stating his reasons for holding that competition at the more distant point might be taken into account, Lord Herschel queried whether in every case the exaction of a greater charge for the shorter than for the longer haul would not be illegal.
It is pretty apparent, therefore, that there is no such occasion for a provision of that sort in Engl nd as exists here. At the same time it is worthy of remark that in recodifying their law upon this subject in 1888, after the enactment of our own, there was introduced a provision authorizing the railway commission of England to prohibit, in a particular case, the charging of more for the shorter than for the longer distance, and that seems to be the state of the law there to-day.
We can not better convey an idea of what this system is and of its workings than by stating a case which is now actually before us for determination. The Savannah Freight Bureau and certain fertilizer companies of Savannah, Ga., complained that the rates upon fertilizers from Savannah to various points in the South unjustly discriminated against that city in favor of Charleston, S. C., and Wilmington, N. C. The case has been heard, and we now have before us the facts for disposition. A single instance will show the nature of the complaint. Valdosta, Ga., is situated 158 miles from Savannah. The rate on fer. tilizers between Valdosta and Savannah is made by the railroad commission of Georgia and is $2.03 per ton. Valdosta is reached from Savannah by the Plant System, and can also be reached from Charleston, S. C., by a through line made up of three independent railroads. By this line the distance is 413 miles. Now, under the system of rate making in vogue in the South these three lines insist upon and are allowed by their competitors to make the same rate from Charleston to Valdosta ás is made by the Plant System from Savannah to Valdosta.
Kathleen, Ga., is situated upon the long line and is 288 miles from Charleston. The rate to Kathleen from Charleston is $3.02 per ton. That is to say, the rate from Charleston, 413 miles, to Valdosta is $2.03, while the rate from Charleston to Kathleen, 288 miles, is $3.02, although the traffic for Valdosta is hauled through Kathleen upon
there. The distance from Wilmington, N.O., to Valdosta is 485 miles, the rate
being the same as from Savannah. The same condition of things prevails at every point in the southern territory where two lines of railway intersect. There are 148 of these “common points,” so-called, to which the rate from Savannah, Charleston, and Wilmington is the same, no matter what the distance may be, and there are innumerable instances where the higher rate is charged to the intermediate point as it is to Kathleen.
The railroad companies defend this system upon the ground that it affords the common-point competition without injuring the intermediate point. The lines extending from Charleston to Valdosta say: If we are obliged to withdraw entirely from this business, Kathleen still pays the same rate. We lose the little which is to be made upon that business and Valdosta loses the benefit of competition.
If this were the only instance, that would perhaps be true, but what these lines gain at Valdosta they lose at some other common point.
The price of fertilizer is the same in Charleston and Savannah. The testimony showed that 90 per cent of that brought to Valdosta during the previous year came by the long lines from Charleston or Wilmington. Now it actually costs more, probably twice as much, to transport fertilizer 413 miles than it does 158 miles. The expense to the carrier of getting this phosphate to Valdosta for that year was vastly more than it should have been. In that particular instance the loss in traffic fell upon the Plant System, but that system recoups at other points where it is the long line what it has lost at Valdosta, and always at the expense of this same waste. And who pays this loss? Ultimately the intermediate point. When Kathleen asks that its rate be reduced, or that it be not increased, the carrier points to its revenues, depleted by this kind of rate making, as conclusive evidence that its rates are too low already.
This, however, is the most inoffensive manifestation of the system. Here no rate is changed from what it otherwise would be. Ordinarily the carriers determine by voluntary agreement that the competitive point shall have the advantage over all other neighboring points. In the Troy case Montgomery was made the basing point. Troy had two rival lines of railroad and was competitive by location, but the freight association which controlled that territory arbitrarily said that the competition should be given effect at Montgomery and should not be given effect at Troy. This is the special iniquity of the system, that it puts into the hands of a railway manager or a collection of railway managers the power to determine what localities shall pay and what receive tribute. Particular instances may be justifiable, but nothing can be said in favor of such a practice. It is believed that in no other part of the civilized world is such a one tolerated at the present day.
It seems to have been the unanimous opinion in 1887 that this particular form of railway discrimination was an evil which required special legislation for its correction. It was felt that no commission having power to correct an undue preference simply could cope with it. The