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rate advances by concerted action and under circumstances not showing justification for increased revenue, they can not successfully plead the excuse of financial necessity where the legality of such action as applied to any given commodity is challenged; and the controlling question must be as to the reasonableness and justice of the particular advance in classification and rate upon the facts shown in each case.
The Commission said, however, that if it be assumed that some valid reasons existed for increased revenues to the defendants, it was nevertheless dealing with a question where the relation of rates as between hay and straw and other commodities was a chief matter for consideration, and this involved the recognized legal duty of the carriers to so classify traffic and fix charges thereon that the burdens of transportation should be reasonably and justly distributed among the articles they carry. That is the governing principle of a freight classification, and it arises under the obligation imposed upon carriers by the statute not to charge unreasonable or unjust rates or to impose any unjust discrimination or undue prejudice in any respect whatsoever. It is evident, therefore, that even in cases where the need of additional revenue is apparent, the carrier can not arbitrarily select some one or more articles upon which to apply higher rates regardless of the relation which such article or articles bear to other commodities commonly offered for transportation.
If these carriers bad advanced all of their class rates in case of complaint against the increased rate upon any particular article, the reasonableness of such higher charge might well have been the principal question; but what these defendants did on January 1, 1900, was to increase the classification rating, and consequently the rates, upon numerous commodities selected by them from the classification, including hay and straw, and by such action they laid themselves open to the additional charge of having subjected such higher rated traffic and those interested in it to undue prejudice and unjust discrimination.
The carriers kept hay and straw in the sixth class and charged sixthclass rates thereon for a period of thirteen years or more, with the exception of a few weeks in 1894. The Commission held that in doing this they were furnishing evidence that such classification and rates were reasonably high, and while the continuance of such classification and rates was not conclusive evidence of their reasonableness, it was in the nature of an admission against them which tended to show the unreasonableness of the advance of hay and straw to fifth-class rates in January, 1900, and the force of this admission became great in view of the largely increased business and profits of the defendants in 1899 and subsequent years.
The Commission restated a ruling laid down in a former proceeding that in the carriage of great staples which supply enormous business, and which in market value and actual cost of transportation are among the cheapest articles of commerce, rates yielding only moderate profit to the carriers are both necessary and justifiable; and applying that ruling in this case it said that although the defendant carriers may be at some greater expense to handle and transport hay than some other articles in the fifth or sixth class of their freight classification, the character, value, volume, and use of that commodity are such as to require relatively low charges for its carriage.
In a freight classification like the Official, which contains but six general classes, it is manifestly impossible to bring together in each class only such articles as resemble each other in character, use, value, volume, bulk, weight, risk, expense of handling and competition; the best that can be done under such a scheme of classification is to place two or more articles possessing general similarity in the same class, and where an article is not analogous to any other to put that article in the class containing commodities which are most nearly related to it in general character and other essential respects.
It was conceded that hay and straw should take the same rates. Hay, in respect of character, use, value, and volume, corresponds more nearly with articles taking sixth class or lower commodity rates than with those in the fifth class. Apparently all commodities which come to defendants in aggregate volume or tonnage equal to or exceeding that of hay were given commodity rates by the defendant carriers. Hay, as compared with grain and some other articles, when carried between the same points gave the carriers less revenue per car,
but the Commission said that it did not follow therefrom, taking the whole traffic, local as well as through, that hay may not give the carriers an average revenue per car per mile nearly as great or even greater than that derived from grain or such other articles, and this was illustrated by a table showing actual tonnage, revenue, and average earnings per car upon all hay, potatoes, apples, and grain carried for a period of nine months by one of the most economically operated and best equipped roads in Official Classification territory. Though hay may be less desirable than grain as an article of traffic, the Commission found that it is much more profitable to the carriers, considering its greater volume and the certainty of large quantities seeking transportation each year, than many, if not all, other commodities actually taking fifth or even sixth class rates. Hay is a raw agricultural product which is grown, shipped, and consumed in all parts of Official Classification territory, and, coming to the carriers in steady and large volume, is profitable to them at sixth-class rates.
It also appeared that the cost to the shipper of transporting hay from the Middle West to Eastern markets constitutes a large part of its value in such markets, and when added to the cost of baling and sale the total approximates or exceeds the price realized by the producer. The increased rates added to the cost of hay and straw to consumers or diminished the price to producers, or both, and prejudiced in some degree the business of middlemen. It further appeared that the advance in hay rates changed a long-existing rate adjustment as between American and Canadian hay shipped to New England and parts of New York in favor of a producing section in a foreign country from which hay shipments into the United States are required by law to pay a duty as high as $4 per ton. We were of the opinion, upon all the facts and circumstances, that the carriers were mistaken in believing hay and straw to have been improperly classified and carried by them as sixthclass freight, and that their action on January 1, 1900, whereby those commodities were raised to fifth-class and thereafter charged fifth-class rates was unreasonable and unjust, and resulted in unlawful discrimination and prejudice against hay and straw, localities in Official Classification territory wherein those commodities are produced, and against producers, shippers, dealers, and consumers of such articles in that section of the country.
An order was entered requiring the carriers to cease and desist from such violations of law on or before December 1, 1902, but the order has not been obeyed.
LONG AND SHORT HAUL CHARGES-RELATIVE RATES.
The case brought by the mayor and council of Tifton, Ga., against the Louisville and Nashville Railroad Company and other carriers, decided by the Commission in March, 1902 (9 I. C. C. Rep., 160), involved the question of the legality of freight rates to Tifton, Ga., compared with those to surrounding longer distance points from New York, Cincinnati and other Ohio River points, and Nashville, and also the rates from New Orleans.
Freight passes from New York and other Eastern cities over water and rail lines via Savannah to Tifton, Ga., and through Tifton to Albany, Ga. Freight also passes by all-rail routes from Cincinnati, Louisville, Evansville, and Nashville to Tifton, and through Tifton to Valdosta, Ga. The circumstances and conditions at Tifton were shown to be substantially similar to those at Albany on traffic from the east, and the circumstances and conditions at Tifton were shown to be substantially similar to those at Valdosta on traffic from the north and west. Accordingly, the Commission held that freight rates from New York and other Eastern cities over such water and rail lines to Tifton, which are higher than those to Albany, the longer distance point, are in violation of the act to regulate commerce; and that freight rates from Cincinnati, Louisville, Evansville, and Nashville, which are higher to Tifton than those to Valdosta, the longer distance point, are also in violation of that statute. It was further held that nothing in the decision should authorize the increase of freight rates to Tifton, which are less than those to Albany or Valdosta, and that the rates then in
force for the transportation of sugar from New Orleans to Tifton were unjust and unduly prejudicial to Tifton, and that such rates to be lawful should not exceed the rates on the same commodity from New Orleans to Valdosta.
Tifton is not a point intermediate on the same line between New Orleans and Valdosta, but the distances to both places are similar, the initial and delivering carriers over the short lines to both points are
same, and on account of these facts and the further consideration that the same rates are in force to Valdosta and Tifton, and that it is the practice to make rates on sugar from New Orleans to all points in this territory with reference to the rates from the Ohio River, and that the rates from New Orleans to Tifton about three years ago were practically as low as those in effect at the time of the decision to Valdosta, it was held that the sugar rate from New Orleans to Tifton should be the same as from New Orleans to Valdosta.
One of the defendants in this case, the Tifton and Northeastern Railroad Company, which delivers a large proportion of the freight tonnage destined to Tifton, while disclaiming responsibility for the rates in question, admitted each and every allegation of the complaint. The other defendants relied upon the theory that lower rates for the longer haul may in the discretion of the carriers be established to meet competition when it exists without regard to the rates for the shorter haul where it does not exist. The idea seemed to be that this one fact—actual operating competition at one place and not at another, or greater at one place than another-is the controlling factor in such a case, regardless of the overpowering advantages which the discrimination in rates thus made may set up in favor of one competing community against another. Applying that theory to this case, several witnesses who were traffic officials of some of the defendant carriers testified in substance that the carriers to the points of destination in question other than Tifton had competed with each other nd thereby brought into effect the rates thereto, which were therefore competitive rates and lower than they might reasonably be in the absence of such competition; that the carriers had not competed at Tifton in the same way; that the rates to Tifton were lower for like distances than could be obtained by any other known mode of transportation to that place, and that therefore in their opinion the rates in question were reasonable and just.
The Commission held that neither the absence nor presence of competition by carriers alone, nor the extent of its operation measured solely by their financial interests, could be relied on to produce rates reasonable and just to all. There may be effectual means foreign to local traffic conditions for curbing competition at one point and not at another. One carrier may deem lower rates just and due to a given point and desire to put them in, and yet be restrained because of the power of retaliation or the threat of rate changes by a rival carrier at some other point detrimental to the former carrier. The necessary result of the theory set up in defense of these rates would be to allow the carriers to create and shape the conditions to justify their rates. They could, among other things, restrain competition at one place by agreement or otherwise and not do so at another, and that, too, independent of equal facilities for competition in carrying at both.
The Commission restated the ruling of the United States Supreme Court in the Import Rate case (162 U. S., 197), namely, that it is the duty of the Commission to fully consider all the circumstances and conditions that reasonably apply to the situation, the legitimate interests of the carrying companies as well as those of traders and shippers, the welfare of communities at localities where the goods are delivered as well as that of communities in the places of shipment, and held that to give effect to this rule a much broader view must be taken than that of the competition of carriers alone.
The order issued by the Commission against the carriers in this case was disobeyed, and a petition to enforce the order is now pending in the United States circuit court for the southern district of Georgia.
UNREASONABLE AND UNJUST RATES-PUBLICATION OF TARIFFS.
In the case of Charles H. Johnson against the Chicago, St. Paul, Minneapolis, and Omaha Railway Company and other carriers (9 I. C. C. Rep., 221), the Commission decided that the freight rates in effect from Chicago, Ill., to Norfolk, Nebr., and from Duluth, Minn., to Norfolk, were unjust and unreasonable; and upon the facts and circumstances shown in the case it was held by the Commission that the rates from Chicago to Norfolk should not exceed those in force from Chicago to Columbus, Nebr., and that the rates from Duluth to Norfolk should not exceed the rate in force from Duluth to Emerson, Nebr., added to the local rate then in force from Emerson to Norfolk.
It also appeared in this case that the failure of the Chicago, St. Paul, Minneapolis and Omaha Railway Company to publish through freight rates from Chicago, Ill., and other points to Norfolk, Nebr., while such through rates were established and published by that company in connection with other carriers to other points on its line in Nebraska, amounted to unlawful discrimination against Norfolk.
Another question in the case involved the method of posting tariffs in railway stations, and it was held that posting a notice in a station or depot that the tariff sheets of the railroad company may be found in some other place is not compliance with the provision in the sixth section of the act requiring the posting of rate schedules or tariffs in every such depot or station.
A dissenting opinion was filed by one member of the Commission in this case.
The decision was complied with by the defendant carriers.