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favor of the Bellaire, Zanesville & Cincinnati Railway Company. The road thus exempted from regulation for the time being is the Chicago, Kalamazoo & Saginaw Railroad Company.
CASES DECIDED BY THE COMMISSION.
PROCEEDINGS UNDER THE FOURTH SECTION.
The rulings and decisions of the Commission under the fouth section since our last report and up to the decision by the Supreme Court in the Troy case, were as follows:
Three orders relieving applying carriers from the operation of the fourth section in respect of specified transportation over longer and shorter distances on the same line, in the same direction, have been granted during the year. It appeared upon the joint application of the Great Northern Railway Company and other carriers that they were engaged in the transportation of passengers to and from the “Kootenai mining district,” lying in British Columbia, near the northern boundary of the United States, and between the Cascade Range and Rocky Mountains; that in such transportation the applicants were in competition with the Canadian Pacific Railway Company from points on the Detroit and St. Clair rivers, and points easterly thereof in the Dominion of Canada, and also in that portion of New England reached by the rails of the Grand Trunk Railway Company, one of the petitioning carriers; that the Canadian Pacific Railway lies wholly in a foreign country, while all the petitioning lines, except the Grand Trunk Railway, are entirely within the United States; that the Canadian Pacific was making materially lower rates for west-bound passengers to the Kootenai district than those in force over the petitioning lines; that the petitioning carriers, to compete freely with the foreign railway not subject to the provisions of the act, must make the same rates; that they could not lawfully meet the lower rates of the foreign competitor without reducing their rates to intermediate stations, unless allowed so to do by order of the Commission; that a reduction of rates to such intermediate points would deprive the applying carriers of revenue to which they appear entitled, and disturb the basis of passenger rates throughout a large area; that while rates east bound had not been made lower on the Canadian Pacific than those in force via the petitioning lines, the former was under no legal restraint which would prevent such action, and that in the event of such reduction the petitioners would be under the same situation as to east-bound business as they were at the time in respect of west-bound passenger traffic to the district mentioned. On March 25, the applying carriers were granted permission to charge, until July, 1897, less for the longer distances between the Kootenai district and the points on the Detroit and St. Clair rivers and easterly thereof in Canada and New England above mentioned than for shorter distances to intermediate points in the same direction;
but it was provided that the lower longer-distance rates should not at any time be less than those previously made by the Canadian Pacific Railway Company for passenger transportation between the same points. The order of relief was subsequently continued in force until December 31, 1897.
Another application granted was that of the Chicago and Eastern Illinois Railroad Company in respect of traffic between Chicago, Ill., and Fair Oaks, Wheatfield, Wilders, and La Crosse, Ind., and intermediate stations in Indiana. It was shown by the petitioner that it operates a circuitous line via Percy Junction, Ind., between the points mentioned, and from Percy Junction southerly to Brazil, Ind.; that its line is crossed at Fair Oaks, Wheatfield, Wilders, and La Crosse by much shorter and competing lines from Chicago; that petitioner's rates between Chicago and the intermediate points on its line in Indiana were not unreasonable; that the petitioning carrier transports large quantities of coal from Brazil, Ind., through trains of empty coal cars constantly passing from Chicago to Brazil, stopping at Percy Junction, and that by utilizing such trains it can carry freight at low cost from Chicago to Fair Oaks and the longer-distance localities; that petitioner can not freely compete with the shorter lines between Chicago and Fair Oaks and said other junction points without making the rates as low as those established by its competitors; that it could not lawfully make such lower rates without reducing its rates between Chicago and shorter-distance stations in Indiana unless thereto authorized by the Commission, and that such reduction of shorter-distance rates would deprive it of revenue to which it is justly entitled. Upon these facts the carrier was allowed to meet the previously established rates of the short lines to Fair Oaks, Wheatfield, Wilders, and La Crosse without reducing rates between Chicago and any shorter-distance points; but it was provided that such permission should not be deemed to authorize the carrier to increase its present charges for such shorter distances.
The other order of relief granted under the fourth section was upon the application of the Delaware, Lackawanna and Western Railroad Company for leave to charge over its own and connecting roads to Chicago and other points less on freight from Oswego and Syracuse, N. Y., and other points in that section of New York, than from shorter-distance points on its line in New York south of Little York and west of Binghamton. It appeared that the West Shore and New York Central and Hudson River railroads between Syracuse or Oswego and Buffalo are much shorter than the Lackawanna line, which is via Binghamton, and that these lines charged materially lower rates to Chicago from Syracuse, Oswego, and various other points in adjacent territory, than those established and charged by the Lackawanna from Syracuse and other points on its line, Oswego to Little York, inclusive; that class rates so charged by the short lines ranged from 18 to 53 cents, and were known as “Syra
cuse rates,” while petitioner's rates on like freight from the same terri. tory were from 20 to 60 cents, and that these also applied from all points on the Lackawanna Line and branches in New York east of Wayland, N. Y., and were the same as rates charged by the short lines to Chicago from as far east as Albany, N. Y., and known as “ Albany rates;" that from points on petitioner's line near Syracuse traffic is forwarded at local rates to Syracuse and thence over the short lines to Buffalo and beyond, notwithstanding petitioner is engaged in transportation to Buffalo over its own rails from the same points of shipment, and that a reduction of rates from such points near Syracuse to the basis of Syracuse rates to Chicago would give it a much longer haul and greater revenue, and at the same time result in lower cost of transportation to manufacturers and shippers at such local points, and also give them additional transportation facilities; that the petitioner could not freely compete for or participate in the transportation of freight to Chicago and other western destinations from Syracuse and said other points of shipments without meeting the rates of the short lines, and it could not lawfully meet such lower short-line rates without reducing its rates from intermediate stations unless authorized so to do by an order of the Commission; that such reduction of its rates from such intermediate stations would deprive it of revenue to which it seemed justly entitled, and also disturb the basis of freight rates through a considerable section of country.
Order was entered relieving the carrier from the operation of the fourth section to the extent of authorizing it to charge less on freight to Chicago and other points west of Buffalo from Syracuse and other points in New York on its line, Oswego to Little York, inclusive, than for shorter distances over the same line, in the same direction, from stations on its line south of Little York and west of Binghamton to and including Atlanta, N. Y. But it was provided in the order of relief that petitioner's rates for the longer-distance points should not at any time be less than those of the shorter lines from Syracuse territory to the same destinations, nor should the order be deemed to authorize the petitioner to increase its present rates from the shorterdistance stations on its line.
On October 7, 1895, the Atchison, Topeka and Santa Fe Railway Company reduced its fifth-class freight rate from Chicago to Denver and other Colorado points from 92 cents to 50 cents per hundred, and this was followed by reductions made by other carriers, first to 38 cents and then to 30 cents. Some of the competing carriers made the reduced rates apply to intermediate points, so that they would not be in conflict with the fourth section, but most of them did not. The receivers of the Santa Fe Company did not put either of the reduced rates in force at shorter-distance points, and insisted that the lower charge for the longer distance was not in violation of that section because of dissim. ilar circumstances and conditions, namely, a prevailing rate war between competing lines to Colorado points. Although rates were soon
restored to the normal basis, and made not higher for shorter than for longer distances, the claim of exemption made by the Santa Fe receivers, and specifically stated by one of them at the hearing had in consequence of an inquiry having been instituted by the Commission, was one likely to be reasserted during subsequent rate wars; and for that reason it was deemed proper to pass upon the question. This railway receiver found that traffic from Chicago to Colorado cities, which customarily passed over the Santa Fe lines, was being diverted to those of competing carriers. He became satisfied that this was accomplished by cutting the published tariff rate, and that the only way he could meet such secret and unlawful competition was by establishing a like open or published rate, even though he knew it to be unremunerative. In themselves, the intermediate rates, long established, were apparently just and reasonable, and the receiver did not believe there was any equitable reason why he should reduce those rates and lose révenue to that extent because he found it necessary to make a lower longerdistance rate for the purpose of checking unlawful competition.
The substance of the defense was that a carrier may lawfully meet the secret rate of its competitor with a reduced open or published rate without making as low a charge on like traffic for shorter distances over the same line in the same direction, and without first applying for and obtaining a relieving order from the Commission. While admitting that open competition between carriers subject to the act did not, as the law was then interpreted, justify a departure from the long and short haul rule, his argument was that as competition with carriers not subject to regulation does create dissimilar conditions, so this secret competition, which he claimed was not controlled or controllable under the statute, comes to the same thing. Commenting on this proposition, the Commission in its decision said that the proposition really was, “that because one party violates the statute secretly in one particular, a second party may violate it openly in another particular,” and “that, applied to laws in general, it would result in complete anarchy.”
Competing lines were alleged to be secretly cutting rates, and this was a penal violation of the act. Why was not the act enforced in this instance? The Commission could have no knowledge of such unlawful rates until apprised from some outside source. The Santa Fe Company communicated none of its knowledge or suspicions to the Commission and did not apply to it for either assistance or relief. It undertook to correct the evil by its own action. The receiver stated that it would have been useless to furnish the Commission with what information he had, as in the state of the statute and public opinion the law could not be enforced. The position taken by the receiver, as shown by his testimony, was fully set forth in the decision and summarized by the Commission as follows: "I disobey the law because it is not enforced. The law is not enforced because I and other men in my position decline to cooperate in its enforcement. I decline to so cooperate because I do not like the law. That is to say, I disobey the law because I do not like it."
The Commission further said that the receiver might have applied to the Commission, furnishing it with the facts that had come to his knowledge, and publicity alone would have gone far toward stopping the practices complained of. The Commission would also have granted an order relieving him from the operation of the fourth section if in its judgment that had appeared necessary to protect the properties under his care. On the other hand, if he preferred not to enforce the law he might, as he did, seek to redress his wrongs by the lex talionis; but in that case he must proceed within the law, and when inaking a disastrously low rate to a competing point he must also put his rates to intermediate points in conformity with the statute. The point decided in this case was that no reduction of rates, secret or open, will justify the carrier in charging more for the short than for the long haul without an order of the Commission.
When charges have been made greater for shorter than for longer distances over the same line, in the same direction, the Commission has heretofore been able to afford a remedy by way of damages or reparation to injured parties to the extent of the difference between higher short-haul and lower long-haul charges temporarily in force. This remedy was indicated in a report, made by the Commission on April 3 last, of an investigation of freight rates charged by carriers to Southern points during a rate war in June and July, 1894, in which was cited the decision of the Commission in the Lynchburg Board of Trade cases, which awarded reparation to merchants and dealers in that city for injuries resulting to them in consequence of lower rates charged during that period to Knoxville, Tenn., than those in force to Lynchburg, the shorter-distance locality.
The plan of making rates in the South, known as the “Southern basing point system,” has frequently been held unlawful by the Commission, and its mischiefs have been fully stated in former reports. A prominent feature of the system is that rates to intermediate stations are made higher than those in effect to longer-distance points selected as competitive or basing points by the carriers, and this results because a local rate is added to the rate to a basing point to make the rate to the local shorter-distance station. The rates are often the saine, or nearly the same, to two basing points, while to a town located between the two points the rate is a combination of rates to and from one of the basing points, whichever will make the lower total charge.
In a case decided by the Commission on June 29 last, it appeared that defendants' rates from Louisville or Cincinnati were higher to Griffin, Ga., than for the longer distance over the same line to Macon, Ga., and were made by adding rates to Atlanta to those in force from Atlanta to Griffin. The rates to Atlanta and Macon were substantially the same. It also appeared that freight rates from New York and other