they feel it is desirable to support the railroads as a basic national industry | and because the railroads pay large amounts in local taxes, noted.-New Automobiles in Interstate Commerce, 259 I. C. C. 475(486)*.

37. Public interest in rate structure.— Interests of the consumer may not be disregarded by the commission.-Coal to Beloit, Wis., and Northern Illinois, 263 I. C. C. 179 (204).

The apparent willingness of the southern public to have its traffic bear a relatively high share of the general transportation burden within that territory cannot justify unreasonable through rates from other territories.Grain to, from, and within Southern Territory, 259 I. C. C. 629 (739)*.

Of importance to cotton growers, carriers, merchant-shippers, textile manufacturers, compress-warehouse operators, and their communities, is the extent to which services of the compresswarehouse industry in marketing and transportation of an annual crop worth over $600,000,000, are jeopardized. Adjustment is required that will be fair to all.-Blytheville Chamber of Commerce v. Aberdeen & R. R. Co., 259 I. C. C. 200(218)*.

Except from a competitive standpoint, manufacturers are not paricularly interested in freight rates on automobiles, as the traffic moves freely and freight charges are borne by the public as a part of the delivered price of the car. -New Automobiles in Interstate Commerce, 259 I. C. C. 475 (547)*.

A rate, less than reasonably compensatory on a single commodity, lending itself more or less accurately to a demonstration of the cost of the service, might have inconsequential effects on the public in general, but lends itself readily to adjustment. Morton Salt Co. v. Alton R. Co., 264 I. C. C. 71 (89)*.

The act was not intended to correct minor wrongs only, but likewise to correct the more important ones affecting the public interests of large areas.Id., p. 90.

712633-47-2

46. Disturbance of adjustment.-See §13(1), n. 135, Summer & Co.

48. Frequency of service; time in transit.-Up to 200 miles, highway service generally is faster than rail, and as expeditious up to 500 miles; for greater distances difference in transit time is not sufficient to be important.-New Automobiles in Interstate Commerce, 259 I. C. C. 475(484)*.

The privilege of storing free at end of the barge-haul and shipping out by rail at any time within one year overcomes the disadvantage incident to slow movement by barge.-Inland Waterways Corp. v. Southern Ry. Co., 263 I. C. C. 227 (236).

49. Interests of labor, employees.— That some shippers move automobiles by rail because they serve communities largely populated by railroad employees who boycott automobiles that are not transported by rail, noted.—New Automobiles in Interstate Commerce, 259 I. C. C. 475(486)*.

Profit to the Carrier

51. Consideration given value of property.-Return on investment for land and structures, heater car facilities, n. 593, infra.

53. Right to fair profit-Upon each part of system or class of traffic.Passenger service from 1930 to 1941, inclusive, failed to pay its proper share of expenses. Even with the large increase in 1942, the operating ratio for passenger and allied services remained decidedly less favorable than for freight. -Increased Railway Rates, Fares, and Charges, 1942, 259 I. C. C. 159(194)*.

54. Upon each service.-Even if freight rates are producing on property devoted to freight service, the rate of return fixed as fair, the commission can, as a matter of law, authorize increase in such rates to correct deficiencies in aggregate earnings growing out of inability of passenger business to meet its full share of the revenue burden.-Class rate Investigation, 1939, 262 I.C.C. 447 (658)*.

58. Earnings.-Increased, on government traffic, considered, §65a, infra.

59. Weight of showing of carrier's financial needs. The general financial condition of certain respondents and defendants is a factor to be considered but is no bar to readjustment of rates or rate relations shown to be unlawful.— Iron and Steel to Iowa, Minn., Mich., and Wis., 263 I.C.C. 361(400)*.

A substantial rate reduction is an essential part in a broad program that must be evolved looking toward the permanent rehabilitation of the anthracite coal industry and the anthracite carriers dependent upon the industry. -Alden Coal Co. v. Central R. Co. of N. J., 263 I.C.C. 639 (655)*.

60. Needs of strong and weak lines.Elimination of arbitraries in the 44 counties of Florida in the arbitrary territory, a land area of 38,224 square miles, would reduce the carriers' revenue to the extent that they now apply, unless additional revenues could be found to offset the loss. Denied.-Class Rate Investigation, 1939, 262 I.C.C. 447 (633, 634, 700)*.

Short and weak lines should be granted authority, with prescribed method of publication, to add existing arbitraries, reduced by 10 percent, in applying the minimum scale, to avoid an unjust result to those which have been accorded arbitraries.-Id., 264 I.C.C. 41(46)*. |

Continuation of arbitraries now added to trancontinental group A rates by certain New England carriers, approved, from Trona, Calif. to New England, (citing arbitraries approved for such carriers in 168 I.C.C. 107).—American Potash & Chemical Corp. v. Aberdeen & R.R.Co., 262 I.C.C.157*.

Cost of Service

71. Applied generally.-Cost of service, as a basis for rate making, is never out of mind, if not always in sight.— Class Rate Investigation, 1939, 262 I.C.C. 447(692)*.

79. Related to whole schedules.-See also n. 53, 54, above.

Contention that expenses for nonrevenue traffic should have been grouped with the traffic, general overhead expenses, and passenger deficits, and regarded as a transportation burden unassignable to specific traffic movements, is untenable, because nonrevenue traffic is largely fuel, and railroad consumption of fuel is closely related to traffic volume.-New Automobiles in Interstate Commerce, 259 I.C.C. 475 (525)*. 81. Wages, taxes, interest.

Taxes: One primary cause of the downward tendency of net railway operating income in 1943 and 1944, is increase in tax accruals, chiefly Federal income and excess-profits taxes. However, such taxes are not based on operating, but on net income, which is derived from other sources as well as railway operations.-Increased Railway Rates, Fares, and Charges, 1942, 259 I.C.C. 159(165)*.

The disparity in rates as between liquid carbon dioxide and dry ice is augmented by imposition of Federal transportation tax, for 800 miles such tax on the former being 70.8 cents, on the latter, 27.6 cents.-Cardox Corp. v. Ahnapee & W. Ry. Co., 264 I.C.C. 173 (189).

Wages: To apportion train-crew expenses among different freight trains on a train-hour basis would ignore the mileage basis of wage payments.--New Automobiles in Interstate Commerce, 259 I.C.C. 475(525)*.

Wage rate increases had the effect of increasing the average straight-time rate of pay of all railroad employees from an average of 73.4 cents per hour in 1940 to 82.8 cents per hour in 1942, or 12.8 percent; to 92.9 cents per hour in 1944, or 11.4 percent.-Increased Railway Rates, Fares, and Charges, 1942, 259 I. C. C. 159 (164)*.

What Constitutes Cost of Service 85. Out-of-pocket costs. Comparisons of rates with out-of-pocket costs indicate whether or not the rates cast an undue burden on other traffic by failing to meet those costs.-New Automobiles in Interstate Commerce, 259 I.C.C. 475 (513)*.

While rate between points considered fails to cover out-of-pocket costs by 0.2 cents, such a nominal difference may well be disregarded; costs cannot be determined with such exactness.-Id., p. 515.

The concept of cost at capacity to produce cannot be substituted for the out-of-pocket basis, in determining the compensatory character of rates under normal conditions.-Id., p. 526.

A return on investment in equipment and road property should be included, otherwise no consideration is given to the fact that carriers have been able to hold down a substantial portion of their operating expenses only through added investment.-Id., p. 528.

Out-of-pocket costs in the South and West are frequently as low as, or even lower than the out-of-pocket costs in the East.-Class Rate Investigation, 1939, 262 I.C.C. 447(586)*.

Out-of-pocket costs should ordinarily establish the floor of all rates. Rates yielding merely out-of-pocket costs have been condemned as being less than reasonable minima. Rates which yield something more than out-of-pocket costs have also been found to be less than reasonable minima.-Id., p. 693.

Ascertainment of Cost

Costs alone do not determine the maximum limits of rates, nor control contours of rate scales or fix relations between rates or between rate scales.Class Rate Investigation, 1939, 262 I. C. C. 447 (693)*.

It is unwise from the standpoint of both shippers and carriers to attempt to reflect in any rate schedule or rate structure all the minute and unsubstantial variations in costs that occur on dif ferent divisions or segments of the same railroad or between individual railroads or groups of railroads.—Id., p. 693.

The tendency has been to deal with average costs in such manner as to avoid needless rate variations and to permit the freest possible movement of traffic.-Id., p. 693.

A cost study is defective, when it is not a comparison of like with like, as, comparison of main-line tonnage ratings with main- and gathering-line tonnage ratings.-Commonwealth of Kentucky v. Illinois Central R. Co., 259 I. C. C. 259 (266)*.

Arithmetical averages of tonnage ratings in a given group do not reflect service available under the tariffs or the actual service performed.-Id., p. 266.

91. Equitable distribution of transportation burdens.-Indirect costs and return on investment, strictly speaking, are not costs but may be more accurately referred to as the revenue need or transportation burden, distribution of which depends on value of service and other circumstances surrounding movement of the particular traffic.--Blytheville Chamber of Commerce v. Aberdeen & R. R. Co., 259 I. C. C. 201(214)*.

92. Cost accounting not an exact science.-Cost finding as applied to common carriers has been and still is a progressive science. Carriers have never installed or observed, because of the expense, a system of routine cost accounting. All cost calculations and com

be made by special studies.-Class Rate Investigation, 1939, 262 I. C. C. 447 (692)*.

Even if losses in their revenues would be somewhat less than estimated by western and southern rail carriers, the reductions, nevertheless, would be substantial, and occurring at a time when revenues from other traffic might be declining, are matters meriting most serious consideration. New Automobiles

in Interstate Commerce, 263 I.C.C 771 (780)*.

Evidence of substantial increase in railway operating income since the beginning of World War II in 1939, particularly since entrance of the United States in the war in 1941, is of little probative value in determining reasonableness of rates on a particular commodity.-Grain Proportionals, ExBarge to Official Territory, 262 I.C.C. 7(25)*.

59. Weight of showing of carrier's financial needs. The general financial condition of certain respondents and defendants is a factor to be considered but is no bar to readjustment of rates or rate relations shown to be unlawful.— Iron and Steel to Iowa, Minn., Mich., and Wis., 263 I.C.C. 361(400)*.

A substantial rate reduction is an essential part in a broad program that must be evolved looking toward the permanent rehabilitation of the anthracite coal industry and the anthracite carriers dependent upon the industry. -Alden Coal Co. v. Central R. Co. of N. J., 263 I.C.C. 639(655)*.

60. Needs of strong and weak lines.— Elimination of arbitraries in the 44 counties of Florida in the arbitrary territory, a land area of 38,224 square miles, would reduce the carriers' revenue to the extent that they now apply, unless additional revenues could be found to offset the loss. Denied.-Class Rate Investigation, 1939, 262 I.C.C. 447 (633, 634, 700)*.

Short and weak lines should be granted authority, with prescribed method of publication, to add existing arbitraries, reduced by 10 percent, in applying the minimum scale, to avoid an unjust result to those which have been accorded arbitraries.—Id., 264 I.C.C. 41(46)*.

Continuation of arbitraries now added to trancontinental group A rates by certain New England carriers, approved, from Trona, Calif. to New England, (citing arbitraries approved for such carriers in 168 I.C.C. 107).—American Potash & Chemical Corp. v. Aberdeen & R.R.Co., 262 I.C.C.157*.

Cost of Service

71. Applied generally.-Cost of service, as a basis for rate making, is never out of mind, if not always in sight.— Class Rate Investigation, 1939, 262 I.C.C. 447(692)*.

79. Related to whole schedules.-See also n. 53, 54, above.

Contention that expenses for nonrevenue traffic should have been grouped with the traffic, general overhead expenses, and passenger deficits, and regarded as a transportation burden unassignable to specific traffic movements, is untenable, because nonrevenue traffic is largely fuel, and railroad consumption of fuel is closely related to traffic volume.-New Automobiles in Interstate Commerce, 259 I.C.C. 475(525)*. 81. Wages, taxes, interest.

Taxes: One primary cause of the downward tendency of net railway operating income in 1943 and 1944, is increase in tax accruals, chiefly Federal income and excess-profits taxes. However, such taxes are not based on operating, but on net income, which is derived from other sources as well as railway operations.-Increased Railway Rates, Fares, and Charges, 1942, 259 I.C.C. 159(165)*.

The disparity in rates as between liquid carbon dioxide and dry ice is augmented by imposition of Federal transportation tax, for 800 miles such tax on the former being 70.8 cents, on the latter, 27.6 cents.-Cardox Corp. v. Ahnapee & W. Ry. Co., 264 I.C.C. 173 (189).

Wages: To apportion train-crew expenses among different freight trains on a train-hour basis would ignore the mileage basis of wage payments.---New Automobiles in Interstate Commerce, 259 I.C.C. 475(525)*.

Wage rate increases had the effect of increasing the average straight-time rate of pay of all railroad employees from an average of 73.4 cents per hour in 1940 to 82.8 cents per hour in 1942, or 12.8 percent; to 92.9 cents per hour in 1944, or 11.4 percent.-Increased Railway Rates, Fares, and Charges, 1942, 259 I. C. C. 159 (164)*.

What Constitutes Cost of Service 85. Out-of-pocket costs. Comparisons of rates with out-of-pocket costs indicate whether or not the rates cast an undue burden on other traffic by failing to meet those costs.-New Automobiles in Interstate Commerce, 259 I.C.C. 475 (513)*.

While rate between points considered fails to cover out-of-pocket costs by 0.2 cents, such a nominal difference may well be disregarded; costs cannot be determined with such exactness.-Id., p. 515.

The concept of cost at capacity to produce cannot be substituted for the out-of-pocket basis, in determining the compensatory character of rates under normal conditions.-Id., p. 526.

A return on investment in equipment and road property should be included, otherwise no consideration is given to the fact that carriers have been able to hold down a substantial portion of their operating expenses only through added investment.-Id., p. 528.

Out-of-pocket costs in the South and West are frequently as low as, or even lower than the out-of-pocket costs in the East.-Class Rate Investigation, 1939, 262 I.C.C. 447(586)*.

Out-of-pocket costs should ordinarily establish the floor of all rates. Rates yielding merely out-of-pocket costs have been condemned as being less than reasonable minima. Rates which yield something more than out-of-pocket costs have also been found to be less than reasonable minima.-Id., p. 693.

Ascertainment of Cost

90. Principles involved, generally.Discretion and flexibility of judgment within reasonable limits have always attended use of costs in making of rates.

Costs alone do not determine the maximum limits of rates, nor control contours of rate scales or fix relations between rates or between rate scales.Class Rate Investigation, 1939, 262 I. C. C. 447 (693)*.

It is unwise from the standpoint of both shippers and carriers to attempt to reflect in any rate schedule or rate structure all the minute and unsubstantial variations in costs that occur on different divisions or segments of the same railroad or between individual railroads or groups of railroads.—Id., p. 693.

The tendency has been to deal with average costs in such manner as to avoid needless rate variations and to permit the freest possible movement of traffic.-Id., p. 693.

A cost study is defective when it is not a comparison of like with like, as, comparison of main-line tonnage ratings with main- and gathering-line tonnage ratings.-Commonwealth of Kentucky v. Illinois Central R. Co., 259 I. C. C. 259 (266)*.

Arithmetical averages of tonnage ratings in a given group do not reflect service available under the tariffs or the actual service performed.-Id., p. 266.

91. Equitable distribution of transportation burdens.-Indirect costs and return on investment, strictly speaking, are not costs but may be more accurately referred to as the revenue need or transportation burden, distribution of which depends on value of service and other circumstances surrounding movement of the particular traffic.--Blytheville Chamber of Commerce v. Aberdeen & R. R. Co., 259 I. C. C. 201(214)*.

92. Cost accounting not an exact science.-Cost finding as applied to common carriers has been and still is a progressive science. Carriers have never installed or observed, because of the expense, a system of routine cost accounting. All cost calculations and computations, therefore, of necessity must be made by special studies.-Class Rate Investigation, 1939, 262 I. C. C. 447 (692)*.