the basing point. The circuit court sustained the order of the commission. 102 Fèd. 709. This judgment was reversed by the circuit court of appeals, 108 Fed. Rep. 988, and the judgment of the latter court was affirmed by the supreme court, Commission v. L. & N. Railroad Co., supra. The latter court said that as it was conceded that the rate on the through freight from New Orleans to Atlanta was the result of competition to Atlanta, there was a resulting dissimilarity of circumstances which prevented any unjust preference in the fact of a high charge to LaGrange, and that there was no just cause of complaint in giving to the local stations the advantage resulting from their proximity to Atlanta, the competitive point, as the same result would have followed if the rate had been fixed at Montgomery, the competitive point nearer to New Orleans, and the local rate fixed from thence on.

It was subsequently ruled by the commission (1907), in 12 I. C. C. R. 372, that in a territory where the basing point had been in operation since the advent of railroads, rates to a competing point made by a combination of the through rate to the nearest trade center and the local beyond, need not, under the construction of the fourth section by the supreme court, be reduced to the basis of every neighboring point of like distance, when the other points in the group whose rates are sought have the advantage of water or other competition. This was prior to the amendment of the fourth section by the act of 1910.

§ 238. Basing points not exempt from regulating power of commission.-In Interstate Commerce Commission v. Chicago R. I. & P. Co., 218 U. S. 88, 54 L. Ed. 946 (1910), the supreme court (Justices White, Holmes, and Lurton dissenting) reversed the circuit court of the northern district of Illinois, 171 Fed. 680, which had enjoined the enforcement of an order of the commission reducing the class rates on through freight from the Atlantic seaboard to the Missouri river cities. It was claimed, and a majority of the circuit judges held, that this order was beyond the power of the commission, as it introduced a new system of rate making which had theretofore had the Mississippi river as a basing point; but the supreme court held that on the finding of the commission, which carried with it the presumption of correctness, that the through rates to the Missouri river cities were too high and unreasonable, that the

commission had the power to readjust the rates, although that involved a change in the basing points theretofore established in rate making. The supreme court in this case quoted from the opinion of the commission 14 I. C. C. R. 312.

"We are not impressed with the view that making rates on certain basing lines should be abolished. No system of rate making has been suggested as a substitute for it, except one based upon the postage stamp theory or one based strictly upon mileage. Either of these would create a revolution in transportation affairs and chaos in commercial affairs that had been builded upon the system of rate making now in effect. It must not, however, be assumed that a basing line for rates may be es tablished and be made an impassable barrier for through rates, or that cities or markets located at or upon such basing line have any inviolable possession of or hold upon the right to distribute traffic in or from the territory lying beyond. Development of natural resources, increase in population, growth of manufacturing or producing facilities and increased traffic on railroads, create changed conditions which may warrant changes in rates and in rate adjustments in order to afford just and reasonable opportunity for interchange of traffic between points of production and points of large consmuption.

And the supreme court added:

"It was the sense of the commission, however, that such points could not be immovable forever and fixed forever against power of changing, or that through rates based on such points must be exempt from regulation no matter what their character, or be constituted at the will of the railroads of the sum of local rates or the sum of rates from one basing point to another, however unjust the rates might be."

The commission has ruled, 18 I. C. C. R. 502, that if the basing point system is adopted, it must be applied alike to all places where real dissimilarity of circumstances or controlling competition does not exist. See also, as to application of system in rate making, 16 I. C. C. R. 20, 56, 182, 134, 254; 7 I. C. C. R. 30, 197, 302.

In this connection see orders of the commission upon application for relief from the long and short haul provision of section 4 and creating zones of traffic as basing points in connection with transcontinental traffic, § 297, infra.

§ 239 (182). Grouping of rates. While section 4 of the act prohibits the charging of a greater rate for the shorter distance, there is no prohibition against charging the same aggregate rates

on like traffic for the longer distance over the same line in the same direction. There is in the act no requirement of mileage apportionment of rates. The commission in several cases has passed upon the so called "group" or "blanket" rates, that is, the making of the same rates for different points situated on the same line, or on different lines under the same control communicating with a common centre and being the same or approximately the same distance from such centre and possessing substantially the same commercial relations. The principle was applied in 2 I. C. C. R. 540, and 2 Int. Com. Rep. 313, to a large number of mines composing a coal mining district extending across the state of Illinois to points in western Wisconsin, Iowa and Minnesota, the distance by some part of the route being substantially a fair equivalent for the distance from other points and the commercial necessities being substantially the same for all.

In another case the grouping of coal rates at the rate of ninety cents per ton for a distance covering a radius of forty miles around Pittsburgh, Pennsylvania, was sustained. 2 I. C. C. R. 618, 2 Int. Com. Rep. 436. The commission said that actual undue prejudice or damage of which the rate is the cause must result to more favorably situated producers to render a group rate unlawful. In this case the commission cited the practice under the English Railway & Canal Traffic Act of 1854, where it had been held that the grouping of rates was not unlawful, unless as a matter of fact the effect was to produce an undue preference, and noted that the new English act of 1888 had made specific provision for grouping of rates in conformity with the rule which had been acted on by the commissioners and the courts. See also 4 I. C. C. R. 533, and 3 Int. Com. Rep. 460, where groupings of mines in the Lehigh anthracite coal region were held to involve no unreasonable disadvantage.

Thus in 4 I. C. C. R. 417, 3 Int. Com. Rep. 400, it was found that the rates on wheat and wheat flour, for reasons peculiar to the territory lying west of the Mississippi river and comprising the large portion of Texas, the state of Missouri and a considerable portion of Kansas, were grouped without reference to distance. In 7 I. C. C. R. 92, the subject of grouping of rates was considered in its application to the rates on milk, which was fixed at a uniform rate from all interstate shipping

stations along the lines of the New York, Susquehanna & Western Railroad west of the Hudson river to the points of delivery at Weehawken, Hoboken and Jersey City. The commission said, reaffirming 6 I. C. C. R. 131, that the practice of making one rate for the same product over a very large district and thus equalizing the burdens of transportation to the same market was only justified under special and exceptional circumstances. The circumstances in this case were peculiar, in that the furnishing of an extra perishable article like milk in no greater quantity than is required for daily use in a great city was a business which falls naturally to those producers nearest the city who were able to provide the needed supply. The commission found under the facts that a uniform or blanket rate from all stations of the road was an unreasonable preference to the more distant stations, and said there should be at least four divisions, extending respectively forty miles, fifty-two miles, one hundred miles, one hundred and ninety miles and stations beyond one hundred and ninety miles, with rates adjusted to the respective groups according to distance. On this application of the grouping of rates to milk traffic, see 2 I. C. C. R. 272, and 2 Int. Com. Rep. 162.

In 5 I. C. C. R. 478, and 4 Int. Com. Rep. 183, "blanket" or group class rates applying upon the Northern Pacific road for a distance of over five hundred and eighty miles were found relatively unreasonable.

In 7 I. C. C. R. 43, group rates of seventy per cent. on second class articles and forty-four per cent. on third class applying within a distance of two hundred and seventy-one miles from Pritchard, Alabama, to Verona, Mississippi, on shipments over an extreme distance of six hundred and forty miles to East St. Louis, and which in the next two hundred miles fall to thirty per cent. on second class and twenty-two per cent. on the third class, were ruled prima facie unreasonable and unjustly discriminative against points within the group which were nearer to East St. Louis, and unfair as to shipments from Verona. The commission said however that there were probably circumstances under which a group rate of this kind might be justifiable, and no order was made pending an opportunity for the defendant to readjust its group scale, or justify the apparent discrimination.

§ 240 (183). Qualifications in the application of the competition rule. The judicial construction of the term "unjust preference" by the elimination therefrom of the preferences compelled by railway competition has very materially affected the enforcement of the third section by the commission. Thus during the first ten years after the enactment of the law, the commission proceeded upon a different theory of the law, and the decisions reported in the first six volumes of the Interstate Commerce Commission Reports, and all of the Interstate Reports, in the construction of this section as well as of section 4, are based upon the theory that the competition of railways subject to the act was not, although it was conceded that water competition was, a justification of a higher rate for the shorter haul and the resulting preference of localities. In 8 I. C. C. R. 107, the commission said that the greater charge for the shorter than for the longer haul over the same line in the same direction had been made in no case which had been presented to them, except where the competition existed at the longer distance points and was set up as the sole excuse for such greater charge.

But under the decisions of the supreme court, the application of the competitive rule is subject to the following qualifications: First, the competition must compel the lower rate; that is, the competition must be controlling. The carrier must either reduce its rates or lose the business. Second, the competition must not be created by the carrier; that is, the preference must not be affected through an agreement or combination of the carrier with other carriers stifling competition. Third, the competitive rate must be at the preferred point remunerative to the carrier. Fourth, the rates must be reasonable in themselves.

This reasonableness of rates in themselves must be determined in the light of all the circumstances. The commission has ruled, 9 I. C. C. R. 581, following the decision of Chairman Cooley in 2 I. C. C. R. 231 and 2 Int. Com. Rep. 137, that no rates can be reasonable in themselves within the contemplation of the act which are made regardless of proportion; that rates to be reasonable must be under all the facts and circumstances relatively reasonable. In the case cited, the commission ruled that although there was a substantial dissimilarity of circumstances and conditions as between Nashville and intermediate points on the Louisville & Nashville Railroad to