in which large numbers of men have invested, in the aggregate, great

sums.

That such points have a decided advantage through these rate adjustments over points not so favored is beyond dispute. A town or city is entitled to the advantages accorded it by nature, but not to undue preference conferred by carriers. If, in competition with a water carrier, a railroad makes low rates to a point that is served by such water carrier, that point has the advantages and benefits of the competition. If, however, the railroad must make such rates the maxima at all intermediate points where the water competition is absent, it is possible that in order to maintain gross earnings sufficient for its existence it would be obliged to retire from competition at the water-competitive point. That point would thus lose the benefits of rail competition and might suffer from increased rates by the water carrier. Assuming that each intermediate point has rates that are reasonable per se, it is somewhat difficult to see how it would be benefited by destruction of the competition at the more distant point. The same principle applies in a general way to the other forms of competition.

A rigid and inflexible application of the long-and-short-haul rule would result in many reductions in rates to intermediate points, many increases in rates to the more distant points, and withdrawal of competition at many points, all dependent upon the volume of traffic involved as between the more distant points and the intermediate points and the competitive relationships between the commodities which made up that traffic. The interests of producers, consumers, and communities are involved to an extent as great as, and probably greater than, that of the carriers.

The statute authorizes continuance of the deviations from the rule which existed when the amended section was adopted until the applications for permission to maintain them are passed upon by the Commission. As will appear later, the number of such applications was large. The questions presented are, as we have endeavored to indicate, delicate and complicated. The relationship between the rate paid by a shipper and that paid by his competitor is of vital interest to both. The extent to which a carrier ought to be permitted to depart from the rule can be properly determined only after painstaking and thorough investigation and study.

As stated in our last annual report, approximately 5,000 applications for authority to continue existing deviations from the general requirements of the fourth section of the act, as amended, were filed within the period therein prescribed, to wit, on or before February 17,

1911.

In some instances these applications have reference only to particular situations, involving peculiar circumstances, while in others

they include all rates published in particular tariffs which in any manner contravene the provisions of this section. In still other instances single applications were filed on behalf of the carriers asking relief as to all rates in contravention of this section contained in all tariffs in which they participate.

Of the 5,000 applications above mentioned, approximately 1,100 have been disposed of by orders of the Commission, and certain parts of many others have been disposed of in connection with formal cases decided by the Commission.

Special applications, numbering 3,722, have been filed requesting authority to change rates which do not conform to the fourth section requirements in order to meet new and particular situations brought about by the continually changing commercial and transportation conditions. These applications have been responded to by special orders, most of which are necessarily temporary in character and automatically expire when the Commission acts upon the general applications which protect the rates to which the changes are related. During the year ended November 1, 1913, 1,252 of these special applications were filed. During the same period 114 applications were withdrawn, due mainly to the fact that the rates sought to be established were authorized under some general order of the Commission. During the year 1,256 fourth-section orders have been issued, 199 of which were permanent in character and 1,057 of which were for temporary relief.

Of the 199 permanent situations passed upon, some measure of relief has been granted in 137 cases and has been denied in 62 cases.

Of the 1,057 temporary applications disposed of by orders relief has been granted, in whole or in part, in 878 and denied in 179 cases. The applications for temporary relief have been based upon a variety of reasons. They are filed principally by carriers whose present rates do not conform to the provisions of the fourth section, but are protected by applications filed on or before February 17, 1911, that have not as yet been decided by the Commission.

Some of the situations shown where temporary relief was sought are as follows:

1. Where a new line has been constructed between common or junction points, or between points that are already served by other carriers, and which, by the construction of this new line, become junction points. It is necessary in such cases for this new line to establish the same rates as are in effect via the older lines; and where the rates of such older lines at the present time do not conform to the fourth section, but are protected by applications, the petition of the new line has been granted.

2. In some cases there are a number of lines or routes between certain points, and one of these lines has not established the same scale

of rates, or the same rates, on certain commodities as apply on the other lines. When the rates of such other lines do not conform to the fourth section, permission has been granted to the petitioning line to establish the same rates without observing the long-and-short-haul provision of the fourth section.

3. In other cases rates are in effect to or from a point on a given commodity, but higher rates are in effect to or from a point in close proximity thereto, situated on another line. Where it appears that the same transportation conditions which are present at the former point are also present and affect the traffic from the latter point, permission has been granted to establish the same rates to and from the one point as are in effect at the other.

4. In many cases where commodity rates that do not conform to the provisions of the fourth section are in effect on certain articles but those rates do not apply to analogous articles as to which the same transportation conditions attach, and which usually take the same or relative rates, permission has been granted to establish the same or relative rates on such articles.

5. There are also many cases where the commodity descriptions that applied on certain articles at the time that the rates were established have become, by reason of changes in the method of packing, shipping, or manufacture of such articles, no longer applicable. Where these conditions have been brought to our attention permission has been granted to revise the commodity descriptions. There are other cases where commodity rates have been established which at the time of their establishment were lower than the class rates applicable to such articles, but have become, by reason of changes in the classification or reduction in class rates, higher than such class rates. Permission has been granted in such cases to cancel such commodity rates and apply, in lieu thereof, class rates.

6. It has been the practice for many years to apply the same import and export rates from and to the different Gulf ports. Cases have arisen where, through changes, the rates from or to certain points have become higher or lower than are applicable at other ports, and where these have been brought to our attention permission has been granted to readjust such rates in order that these ports may be kept on a parity.

7. In addition to the applications that are based on these reasons, many others have been filed which ask for authority to establish or to revise rates from points of production of various commodities in order to enable the producers thereof to compete with producers at other points from which lower rates, not in conformity with the fourth section, are in effect to various points of consumption. This is the competition of one market of supply against another, given force and effect by the action of the lines serving these markets, and is a

reason which has not been recognized by the Commission as being, in and of itself, sufficient ground for departing from the requirements of the fourth section. That question, together with others involving the extent of the Commission's power under the fourth section, is now before the Supreme Court for determination. In view of this fact the Commission has felt that, pending a decision by that tribunal, relief in such cases should be granted for a limited period. Such applications have, therefore, been granted for a period of six months.

There are, perhaps, other cases where a few of the applications have been based upon other grounds. These, however, are the principal situations in which the Commission has, upon application, granted temporary relief from the provisions of the fourth section.

The applications for permanent relief that have been acted upon favorably by the Commission have been granted for various reasons, and the following are some of the considerations that have influenced the Commission in its decisions.

The principal reason for granting the majority of such applications has been the fact that the line seeking relief is a circuitous line which desired authority to meet the rates that were in effect between common or competitive points via a more direct line. In such cases, where it has been shown that the petitioning line is markedly circuitous, generally 15 per cent or more longer than the short line; where the short line has observed the fourth section at intermediate points, and where the intermediate rates upon the circuitous line have apparently borne a reasonable relation to the rates at the more distant points, and such rates have not been the subject of complaint, the relief prayed has been granted.

Other applications have been based upon the ground of water competition; that is to say, rail lines have sought to meet rates between water-competitive points in force by water lines operating between such points. These applications have been granted where it has been shown that an active, forceful water competition existed, and where the rates at the intermediate points have not appeared to be relatively unreasonable, and where not the object of attack in pending complaints before the Commission.

There have been a few other applications covering unusual and peculiar situations where other considerations have influenced the decisions of the Commission.

SUSPENSION OF PROPOSED CHANGES IN TARIFF SCHEDULES.

In our last report in referring to the provision of section 15 of the act of June 18, 1910, giving the Commission power to suspend the operation of tariff schedules pending investigation of the rates therein

contained, we pointed out the method of procedure and practice intended to insure a proper discretion in the exercise of this authority. The Commission's procedure and practice in this respect have not been changed.

The number of proceedings instituted under this docket during the year is 159, an increase of 39 as compared with the previous year. Of these, 62 cases have been disposed of. In 18 instances the tariffs under suspension were voluntarily withdrawn by carriers. In 18 instances the changes were allowed as filed; in 8 instances they were allowed in part; in 15 instances the changes were disallowed; and in 3 instances protests were withdrawn and proceedings subsequently dismissed.

In all 151 of these cases were disposed of during the year. Of 91 cases mentioned in our last annual report as not decided, 89 have been disposed of. In 14 instances the tariffs under suspension were voluntarily withdrawn by carriers. In 23 instances the changes were allowed as filed; in 24 instances they were allowed in part; and in 27 the changes were disallowed, and in 1 instance the proceeding was dismissed, no decision being rendered. Since November 30, 1912, the Commission has suspended tariffs in 159 cases and has declined to exercise that authority with respect to proposed changes in 191 cases. Sometimes the protest and request for suspension relates to reduced rates or to a tariff which contains both increased and reduced rates, the changes proposed being an effort to correct a misalignment of rates. The Commission has declined to suspend proposed reduced rates except in an instance where resulting undue discrimination would apparently follow the establishment of those rates.

In the appendix containing statement of points decided by the Commission in reported cases during the year are included cases arising upon the suspension of tariff schedules. It is therefore not deemed necessary to have a separate appendix covering cases of the latter class. While this was done in our last annual report, for the reason above stated, it will be discontinued.

WESTERN CLASSIFICATION.

Since the transmission of our last annual report we have disposed of the proceeding which was then under consideration involving an inquiry into the proposed Western Classification, designated as No. 51, the operation of which had been suspended upon numerous pro

tests.

The number of changes in this classification against which protest was made was from 1,500 to 2,000. The individual items were so numerous and varied that no reference can here be made to them. 16641-14- -3