carriers are being operated as a unified and coordinated national system and not in competition; that the rates were initiated under a certificate of the President; and that consideration shall be given to that certificate and to any recommendation the President may make with respect to such rates. In other words, Congress intended that the Commission is not to interfere by any action it may take, or any order it may make, with the operation of the railroads of the country for purposes for which Government control was assumed, or reduce rates initiated by the President without carefully weighing all the circumstances under which they were initiated and fully considering the reasons therefor and the purpose sought thereby.

The words "just and reasonable” as used in the control act obviously bear a similar or closely analogous meaning to that attaching to their use in the act to regulate commerce; in both cases they are to be construed in the light of all the circumstances and conditions; certainly they are not to be more narrowly construed. Rates made by the President must be reasonable in and of themselves and they must be relatively just in view of all the conditions enumerated in the control act and in view of other circumstances and conditions.

The second contention that the evidence already taken in this case is irrelevant and insufficient to support the issues raised in the supplemental complaint is untenable. It is to be remembered that the real issue in the case is now, and was when it was heard and first submitted, one of relationship.

*

Because of the rates initiated by the Director General, the alleged undue prejudice against complainant's members has been increased. What additional evidence need the complainant offer except the fact of the increase in the discrimination? That appears from the rates on file, and they are proper to be taken into account. Even if the old relationship had been maintained by an increase of 25 per cent in the through charges no new evidence is needed, nor could any well be submitted by complainant that would enable the Commission better to determine the questions at issue than the evidence now in the record. In simple justice to complainant it should not now be called upon to make further expenditures to show simply what the Commission already has before it.

There is no authority in the control act for perpetuating during the period of federal control a rate adjustment that is unlawful under the act to regulate commerce.

If it should be shown to us that to grant the prayer of the complainant would interfere with the operation of the railroads as a unit, or would deprive the Government of needed revenue to operate the railroads for war purposes, a different situation would be presented from that now under review. The facts with respect to such showing are with the Director General. It is not even suggested on the record that what the com- . plainant seeks in this case, if granted, would in any manner interfere with the operation or maintenance of the defendant railroads under federal control for the purposes that dictated the assumption of their control by the Federal Government.

It does not appear that the establishment of the joint rates prayed for will in any way interfere with the operation of the federally controlled defendants as a unit.

The third contention made on behalf of the defendants is that there is a presumption that the rates and relations of rates initiated by the Director General are just and reasonable and can not be changed with propriety except on affirmative evidence by the complainant to the contrary.

One obvious answer to this contention is that the Director General did not initiate the inequality in the rates which evoked the complaint. The increases initiated by him were superimposed on the then existing basis. That basis was initiated by the defendants and had been maintained by them for many years before federal control. At the hearing the complainant assumed the burden of showing that the rate adjust

ment was unreasonable and unjust. All the facts are now in the record with respect to that adjustment. It is inconceivable, in our opinion, that the Congress did a vain thing in conferring upon this Commission power to determine whether or not the rates initiated by the Director General are just and reasonable. The same force and effect must be given to that part of the law as to its other provisions. The simple fact is that if the rates were unlawful because unduly prejudical when the evidence was submitted, the changes in rates since federal control have increased the prejudice.

The rates were found relatively unjust and unreasonable and unduly prejudicial to the extent that they exceeded those contemporaneously maintained from the coast group, including Portland, to the same destinations, and joint rates were required to be established. An appropriate order was entered against the defendants, including the Director General.

KAW RIVER SAND & MATERIAL COMPANY CASE.

In this case, Kaw River Sand & Material Co. v. A. T. & S. F. Ry. Co., decided November 2, 1918, 51 I. C. C., 350, complainant alleged that charges based on the rate of 1 cent per 100 pounds in addition to the rate from Kansas City, Mo.-Kans., on shipments of sand from complainant's plant on the line of the A., T. & S. F. Ry. near Turner, Kans., a short distance outside of the Kansas City switching district, to points on the lines of defendants other than the A., T. & S. F. Ry., within 150 miles from Kansas City, were unreasonable and unduly prejudicial to the extent that they exceeded charges exacted from complainant's competitors in the same producing locality. The complaint, filed in May, 1917, was against all the steam railroads serving Kansas City. The complainant asked for just and reasonable joint rates and for reparation on shipments made under the rates assailed.

On June 25, 1918, after the hearing had been completed and the case submitted on oral argument, the rate from Turner to Kansas City was increased from 1 cent to 2 cents per 100 pounds in alleged compliance with General Order No. 28 of the Director General. By supplemental complaint the Director General was made a party defendant. His answer was similar to that set out in our report in the Willamette Valley case, supra. No further hearing was asked or had and the case stood submitted upon the record made, considered in the light of present conditions.

After referring to the provision in section 10 of the federal control act that

In determining any questions concerning any such rates, fares, charges, classifications, regulations or practices, or changes therein, the Interstate Commerce Commission shall give due consideration to the fact that the transportation systems are being operated under a unified anu coordinated national control and not in competition,

we said:

The Santa Fe applies the Kansas City basis of rates from complainant's plant only when shipments are destined to points on its own lines. No possible justification can

be found, under a unified and coordinated national control, for a different treatment when shipments are destined to points on lines other than the Santa Fe. Indeed, it is substantially accurate to say that there are no "shipments destined to points on lines other than the Santa Fe," for federal control makes, for present purposes, all the lines serving Kansas City, except the connecting electric carrier, a single line.

As stated above, the provisions for the absorption of switching charges in the tariffs of the various carriers are not uniform:

Under present conditions and the elimination of carrier competition, when there is absorption of switching charges within a switching district, the provisions therefor should be uniform where similar circumstances and conditions prevail.

We found that defendants were subjecting complainant to undue and unreasonable prejudice, which was ordered removed. The evidence of pecuniary damage resulting therefrom was found insufficient to warrant an award of reparation.

CERTIFICATES PREREQUISITE TO EXECUTING COMPENSATION

CONTRACTS.

The federal control act provides that a carrier taken under federal control may be guaranteed during the period of federal control an annual sum

not exceeding a sum equivalent as nearly as may be to its average annual railwayoperating income for the three years endea June thirtieth, nineteen hundred and seventeen.

And also that

The average annual railway operating income shall be ascertained by the Interstate Commerce Commission anu certified by it to the President. Its certificate shall, for the purpose of such agreement, be taken as conclusive of the amount of such average annual railway operating income.

In making the certificates we were governed by the consideration that the federal control act employed certain specific terms of the accounting system prescribed by us for the reports required of the carriers. The end of the three-year period designated in the statute did not however coincide with the end of the fiscal year currently in effect: We were, therefore, compelled to compute the railway operating income attributable to the first six months of the calendar year 1917 in conformity, so far as possible, with the accounting methods laid down by us for the carriers' observance.

Inasmuch as the financial reports of the carriers under the current accounting system were before Congress when the federal control act was passed, we were of opinion that our certification was intended to proceed along the lines of the established accounting system and within the limits of practicability.

This certification is made subject to such changes and corrections as we may hereafter determine and certify to be requisite in order that the accounts and reports of the company used as the basis of computing said average annual railway operating income may be

brought into conformity with our accounting rules or regulations in force at the time of such accounting, or in order to correct computations based on such accounts or reports.

We have always exercised the power to require correction of reports made by the carriers. In the making of the certificates we required revision of wage entries since January 1, 1917, so as to make them conform to the wages fixed by the Adamson act. We also required for the first six months of 1917 appropriate accruals of the war taxes at a sum equal to one-half of the total for that year.

The difficulty which arose from the different standards of maintenance and depreciation observed by different carriers was met by a provision in the standard compensation contract. Stated in general terms, this provides that during federal control the United States Railroad Administration shall expend sufficient on the carrier's property to insure its return in substantially as good repair and complete equipment as it was on January 1, 1918, with the proviso that an average annual expenditure for such purposes, equal, making due allowance for differences in wages of labor and cost of materials, to that made by the carrier itself during the test period shall be deemed a satisfaction of the covenant, and with a further proviso that expenditures in excess of those so made by the carrier for the test period, but required for the safe and proper operation of the property, assuming a use similar to the use for the test period, shall be made good by the carrier.

On September 3, 1918, we transmitted to the President the first lot of certificates required by the federal control act, accompanied by the communication appearing in Appendix F, which shows the manner in which the amounts certified were derived.

THE ACT TO REGULATE COMMERCE AS AFFECTED BY FEDERAL CONTROL.

The act to regulate commerce is based upon the constitutional power of Congress to regulate interstate and foreign commerce. The federal control act is based upon the war powers of the National Government. The latter power, while its exercise has ordinarily been of shorter duration, is of much wider extent than the former.

The federal control act would apparently have permitted the President to allow the carriers, as such, to operate the railroads under his general supervision and control. He has chosen, however, not to do so, but to operate them directly through the Director General. The orders issued by the Director General are the orders of the President whose representative he is.

It has thus come about that for the time being certain sections of the act to regulate commerce have, in their application to carriers

under federal control, been superseded by the orders of the Director General. Thus General Order No. 1 authorizing the disregard of established routes where efficiency or economy would thereby result has superseded the fifteenth section of the act to regulate commerce in so far as carriers were previously protected from being short hauled and in so far as the shipper's right to route the movement of freight is concerned.

Similarly, the Director General's Order No. 1 unifying the transportation systems under federal control supersedes the protection thrown by section 3 of the act to regulate commerce around the carriers' exclusive right to the use of their tracks or terminal facilities.

Section 10 of the federal control act provides that the Commission shall not suspend, pending final determination thereon, rates or fares initiated by the President; and that rates and fares initiated by the President shall become effective at such times and on such notice as he directs.

Fifteenth section applications to file increased rates, fares, charges or classifications are no longer compulsory so far as carriers under federal control are exclusively concerned. It is disputed whether the provision of the same section relating to the burden of proof to show that an increased rate is just and reasonable is qualified by section 10 of the federal control act.

THE ADVISORY FUNCTION OF THE COMMISSION.

Section 8 of the federal control act provides:

That the President may execute any of the powers herein and heretofore granted him with relation to federal control through such agencies as he may determine, and may fix the reasonable compensation for the performance of services in connection therewith, and may avail himself of the advice, assistance, and cooperation of the Interstate Commerce Commission and of the members and employees thereof, and may also call upon any department, commission, or board of the Government for such services as he may deem expedient.

If it be assumed that the power of the Director General to initiate rates applicable wholly within a state is not inhibited by section 15 of the federal control act, the question arises whether the jurisdiction of the Commission has not been extended by section 10 of that act to embrace a review of state rates so initiated. The first proviso of section 1 of the act to regulate commerce is that "the provisions of this act shall not apply to the transportation of passengers or property, or to the receiving, delivering, storage, or handling of property wholly within one state." The Government has taken over transportation systems carrying both state and interstate traffic. The federal control act empowers the President to initiate rates, fares, charges, classifications, regulations, and practices whenever in his opinion the public interest requires, by filing the same