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statute, though condemning undue and unreasonable discrimination in all cases, has done more—it has prescribed rules of action, and among others those in relation to established and open routes and rates intended to prevent discriminations.
A further ruling by the Commission in these cases was that carriers are left by the law to procure equipment for their business by lease as well as otherwise, and that they are not prohibited from leasing cars belonging to a shipper, nor are they compelled to contract in this respect with all shippers because they do with one.
Other questions involved in the proceedings were whether defendants pool their citrus-fruit traffic or divide the earnings therefrom, whether the blanket rate of $1.25 per 100 pounds upon oranges and other citrus fruits from southern California to points on and east of the Missouri River, and the minimum carload weight of 26,000 pounds, are unjust or unreasonable, and whether the statute applies to the charges for refrigeration, and, if so, whether such charges are unjust or unreasonable. These questions were retained by the Commission for further hearing and investigation. It should be added that one member of the Commission did not concur in the decision and filed a dissenting opinion.
The carriers refused to obey the order of the Commission, and thereupon a suit to enforce the order was brought by the Commission in the United States circuit court for the southern district of California. A demurrer to the petition of the Commission was filed by the carriers, and the case was set down for argument on December 4 of the present year.
THROUGH ROUTES AND THROUGH RATES.
DISREGARD OF PUBLISHED TARIFF.
In November last the Commission decided the case of the Diamond Mills, of Buffalo, N. Y., against the Boston and Maine Railroad Company (9 1. C. C. Rep., 311). In this case it appeared that the Boston and Maine Railroad Company was a party with other carriers in establishing a joint through route and joint through rate on grain and grain products from Western points to Boston and other destinations in New England, and that the rates on grain and grain products were the same. One of the initial carriers permitted grain to be milled in transit on its line under a penalty of 14 cents per 100 pounds and allowed the milled product to be forwarded under the balance of the through rate, in this case to points in New England on the Boston and Maine road. The Boston and Maine declined to permit grain so milled in transit to be carried at the through rate from the point of origin of the grain to ultimate destination at the through rate provided for grain, and on all such milled products received by it imposed an arbitrary of 6 cents per 100 pounds. The complainant contended that in so refusing to receive and carry such grain products at the through rate and in imposing the 6-cent arbitrary the defendant acted in violation of the act to regulate commerce, and complainant sought to recover reparation for such alleged excess charges upon shipments, aggregating 34 carloads.
The question was one of considerable pecuniary importance to the complainant, since if all lines east of Buffalo, where complainant's mill is located, were to adopt the rule enforced by the Boston and Maine, it would seriously injure complainant's business.
It appeared that the grain originated at various points in the West and was delivered at various points in New England, but for illustration it may be assumed that the point of origin was Chicago and the point of delivery Boston. If a single railroad extended from Chicago to Boston, and that railroad publisbed a rate like the present on corn and the same rate on meal, the Commission held that the shipper could not, as a matter of right, stop a carload of corn at an intermediate point, grind it, and send it on to destination at the through rate. It is universally understood that the right of milling in transit is a special privilege for which extra compensation is usually exacted, and which is only permitted under certain terms and conditions. The question was therefore reduced to this: Must the Boston and Maine Railroad recognize the private arrangement which existed between the complainant and the Lake Shore and Michigan Southern Railway, in virtue of which the complainant, for a certain sum paid that company, was allowed to mill its corn in transit?
The line between Chicago and Boston is composed of several different railroads, which have united to form a through route and to establish a through rate. At common law no obligation rested upon carriers to form such routes. Their formation was matter of contract, and each carrier was free to enter into the contract or not, as it elected. As interpreted by several Federal courts, this rule has not been changed by the enactment of the act to regulate commerce.
The Commission said that if the establishment of this through line and through rate is a matter of contract between the different railroads composing it, it seems clear that the Boston and Maine Railroad may decline to become a party to that arrangement unless the terms and conditions are satisfactory to it. There was nothing in the joint tariff which gave the right of transit milling. The defendant notified its immediate connections that it would not permit that practice, and it notified the complainant to the same effect. We held that in so doing it acted within its legal right, and that this Commission has no power to direct otherwise. We further said, however, that this must not be construed as a condemnation of milling in transit. The fundamental idea involved is very generally recognized in railway operation, as in the reconsignment privileges accorded to many commodities, the milling of grain, dressing of lumber, floating of cotton, etc. In one case the Commission approved the latter practice, and doubtless in many instances the application of the principle is of great benefit to the public.
A complete system of interstate railway regulation would probably give the regulating body authority to determine when privileges of this kind should be accorded, and upon what terms, for they all enter into and are really a part of the rate; but no such authority is conferred upon this Commission by the present act. Still less should it be understood that railway companies can in the granting of this and similar privileges discriminate unduly between shippers, localities, or commodities. The record in this case showed no such discrimination. The record did show, however, that there was in effect a joint rate on grain products to which the defendant was a party of 12 cents per 100 pounds from Buffalo to Boston. The complainant milled its grain at Buffalo, and the shipments of grain products in this case, in fact, originated at Buffalo and moved from that point, and this being so it must be treated as having moved under this established rate of 12 cents per 100 pounds. The Boston and Maine could not, certainly, in the absence of some statement to that effect in its schedules, impose an arbitrary charge for some fancied delinquency upon the part either of the shippers or of its connections. It must apply the established tariff. We held, therefore, that it acted unlawfully in imposing the arbitrary charge of 6 cents per 100 pounds in addition to the through grain rate on complainant's milled products forwarded from Buffalo, and that it was and is bound to apply on such transportation from Buffalo its established joint rate on grain products from that point to New England destinations. The complainant was awarded reparation in the sum of $358.81, which represented the difference between charges exacted from it on the basis of the 6-cent arbitrary added to the through grain rate and the sum of established rates on grain to and on milled products from Buffalo.
A case of great importance as affecting shipping interests in the East and on the Pacific coast was that brought by the Business Men's League of St. Louis against the Atchison, Topeka and Santa Fe Railway Company and other carriers operating over the various through routes from St. Louis, Chicago, and other points in the Middle West (9 I. C. C. Rep., 318). The Commission rendered its decision in November of the present year. The complaint was directed, first, against the rate disparities on west-bound freight caused by lower rates to Pacific coast terminals, such as San Francisco, Los Angeles, and Portland, than to intermediate points on the same lines; second, against the blanket rates prevailing from all territory east of the Missouri River to Pacific coast destinations; and, third, against the differences between carload and less than carload freight rates, a system of varied commodity rates on similar articles of traffic, and a further rate adjustment whereunder numerous kinds of like freight could not be shipped in mixed carloads, all of which resulted from a tariff put in effect by the carriers in June, 1898.
Several large jobbing firms and commercial organizations in the Middle West, representing jobbing interests in that territory, intervened in favor of the complainant, and the Pacific Coast Jobbers and Manufacturers' Association intervened on behalf of the defendants. The case developed into a contest between the Middle West jobbers on the one side and the Pacific coast jobbers assisting the defendant carriers on the other.
The question as to the legality of the higher charges to intermediate points than to the more distant Pacific coast terminals was not litigated at the various hearings which were held in St. Louis, Los Angeles, San Francisco, Portland, Seattle, and Washington, nor was it pressed by complainant upon the argument, and it was therefore not a proper subject for consideration upon the record as made. So far as could be judged from mere inspection of the tariff sheets, these intermediate rates appeared in many instances to be unduly discriminative, but nothing could be gained by expression of an opinion not based upon a knowledge of all the facts.
As to the blanket rates prevailing on traffic shipped to the Pacific coast from all points on and east of the Missouri River, it appeared that graded rates, that is, rates lower than those from New York and decreasing as the shipping point might be farther west, were formerly in effect; but we held that such showing merely of less distance and that graded rates had formerly been permitted was not, in view of the established fact that water competition compels low all-rail freight rates from New York to San Francisco and other Pacific coast terminals, sufficient to warrant an order requiring lower rates from St. Louis, Chicago, and other interior points than from New York on traffic carried to Pacific coast destinations. This scheme of making rates from shipping points in the east is radically different from that which prevails at destination points in Pacific coast territory. Because of water competition the rate to the Pacific coast terminal is added to the local back from that terminal to make the rate to the intermediate point of destination, while as to points of origin in the east the rate from intermediate points is as low as the rate from New York. Applying this principle of water competition in the east exactly as it has been applied upon the Pacific coast, rates to terminal points from the east would be lowest from the Atlantic seaboard and would gradually increase toward the interior until some point was reached at which the rate so constructed equaled a reasonable rate by the direct rail route. If that theory of rate making which has been sanctioned by the courts
and by the Commission in some cases were applied to this territory east of the Missouri River, the rate from St. Louis to San Francisco would be, not lower than that from New York, as complainant insists, but higher, unless the direct rail rate from St. Louis to San Francisco ought reasonably to be less than the rate established from New York by water competition.
That the same system is not in force in both the East and the West is due to differing conditions in those sections. Upon the Pacific coast the great cities and the strong commercial interests are located at the seaboard. There are no interior towns of sufficient strength to insist upon a change of this policy, and apparently there never can be so long as the present system continues in force. In the East this is otherwise. Formerly manufacturing was mainly done upon the Atlantic seaboard, but to-day great cities have grown up and great commercial enterprises have developed in the Middle West, and these demand an entrance to the markets of the Pacific coast in tones which can not be disregarded.
Still more important is the situation of the carriers themselves. Those lines which distribute upon the Pacific coast control the adjustment of rates into that section, and their interests are united to maintain the present system. Indeed, it is declared that to reduce intermediate rates to a level with terminal rates would bankrupt these lines, and it certainly would have a most serious effect upon their revenues. In the East, however, we find many important systems beginning at the Missouri River or in the Middle West, and it is for the interests of these systems that traffic should originate at the eastern termini of their respective lines. Not only do they obtain more for the transportation of traffic so originating than they obtain from their division upon traffic originating farther east, but they also build up the industries of these localities and therefore remove them from the sphere of water competition.
The same question was passed upon by the Commission in Kindel et al. v. Atchison, Topeka and Santa Fe Railway Company et al. (8 I. C. C. Rep., 608). In that case Denver claimed that it was entitled to a lower rate to Pacific coast terminals than the rate from points on the Missouri River and east. We said that if these carriers extended the low water rate of New York west to the Missouri River they must carry it still farther to Denver, but that we could not affirm upon the mere score of distance that the rate from Denver should be lower. We did not, however, decide in that case nor in this that circumstances and conditions might not be such as to require a lower rate from the nearer point. If in this case the industries of St. Louis and the Middle West showed that they were, by this adjustment of tariffs, excluded from the markets of the Pacific coast their complaint might merit different consideration. But such is not the fact; on the contrary, it