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and Hudson Canad Company, 1 1. C. C. Rep., 152–156), the Commission said, speaking of its relation to the making of rates:
Its power in respect to rates is to determine whether those which the roads impose are, for any reason, in conflict with the statute.
In Cincinnati Freight Bureau v. Cincinnati, New Orleans and Texas Pacific Railway Company and others (7 I. O. C. Rep., 191), which was one of the latest cases decided, and in which the opinion was published about the same time with the opinion of the Supreme Court in the above case, it was said:
This Commission is not primarily a rate-making body. The carrier is left free to arrange its own tariffs in the first instance. We sit for the correction of what is unreasonable and unjust in those tariffs.
It will be seen, therefore, that the Commission has never assumed to make the rate. It has assumed that it was charged under the act with the duty of determining whether the rate complained of was just and reasonable, and, if found to be unjust and unreasonable, of correcting that violation of the statute. In doing so it has been assumed that the plain, and in fact, the only way to do this was to prohibit the charging of the unreasonable rate and compel the charging of one which was reasonable. Up to the present time the Commission has proceeded upon this theory. Of the 135 formal orders made in suits actually heard from its institution down to the present time, 68 have prescribed a change in rate for the future.
The decision above referred to determines that all this is wrong. We can proceed no further along the lines followed in the past. No relief can be given in the cases which are now before us. An entirely new system must be adopted. We can no longer inquire what shall be done in the future. Our action is entirely confined to an inquiry as to what has taken place in the past. Assuming that the provisions of the first section are to stand, that the statute is to ordain that interstate freight charges shall be just and reasonable, is there in the law, as it is now interpreted, anything which will secure to the people the benefit of the provisions of that section? Have they any adequate protection against the charging of improper rates ?
COMMISSION HAS NO REAL POWER AS TO RATES.
Just what is the remedy for an exaction of this sort? Apparently it is this: The person who has paid the freight money may make complaint to the Commission or may bring suit directly in the Federal court, and if in those proceedings it is finally determined that the rate is unreasonable, he may recover the difference between what he has actually paid and what he ought to have paid. He gets nothing in the way of punitive damages, and the carrier pays nothing in the way of penalty.
To test the practical application of this remedy, let us take an actual
case, and for that purpose we may select one of those in which the Supreme Court made the above decision, viz, the Florida Fruit Exchange v. Savannah, Florida and Western Railway Company (167 U.S., 512), which is commonly known as the “Orange Rate Case.”
During some four years previous to November, 1890, the rate upon oranges from Florida to New York by the all-ocean lines had been 30 cents per standard box of 80 pounds, with correspondingly higher rates for rail-and-ocean and all-rail shipments. About November 1, 1890, this rate was advanced by the ocean lines from 30 cents to 40 cents a box, with a corresponding advance by the other lines. The orange crop of Florida for the previous year had been about 2,150,000, boxes. The crop was rapidly growing in volume and about two-thirds of it went to points to which those rates applied. The matter was, therefore, of considerable consequence to the orange growers of Florida, and the railroad commission of that State entered a complaint to this Commission, as it might under the statute. That complaint was filed December 30, 1890, and was decided October 29, 1891. We held that an advance of 10 cents was not justified, but that an advance of 5 cents would be, and ordered the various carriers to reduce their rates accordingly. This they declined to do, and the proceedings which were brought in the courts to compel them to do so finally terminated as above indicated.
Now, assuming that this advance of 10 cents was, to the extent of 5 cents per box, unjust and unreasonable, and the decision of the Commission in that respect was affirmed by the circuit court and has never been overruled as a question of fact, what adequate relief is afforded to the people who are compelled to pay this rate by the interstate-commerce act as now interpreted?
Manifestly any protection against the exaction of an unreasonable rate should protect those persons whom the rate injures. An advance of 5 cents per box in the freight rate on oranges from Jacksonville to New York makes that box of oranges worth 5 cents less in Jacksonville or 5 cents more in New York. It does not very clearly appear how the orange crop of Florida is marketed. If each individual grower ships his own product to market and there sells it through the commission broker, the producer, in the first instance, pays the freight money. In case the price of oranges in New York is absolutely fixed, then the producer loses the entire amount above the reasonable rate. If the price of oranges in Florida determines the price in New York, then the consumer in New York pays the whole of the advance above the reasonable rate. In point of fact, probably neither the one nor the other assumption would be altogether true, so that the loss would fall partly upon the producer and partly upon the consumer.
Whatever may be the case with oranges, it is certain that with the great majority of the productions of the soil in this country the producer does not ship directly to market, but sells to the middleman, who ships
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to market and pays the cost of transportation. Grain, cotton, hay, and the products of the dairy are handled in this way. Now, in all these cases while the middleman actually pays the freight, very little, if any, of the loss in case of an unreasonable charge falls upon him. If the rate on cotton from Memphis to Boston is advanced $1 per bale, either the cotton planter receives that much less for his product, or the New England mill pays that much more for its raw material, or the loss is divided between the two. The cotton factor who handles the product loses nothing whatever. If the rate on flour from Minneapolis to New York is advanced 25 cents per barrel, the problem becomes a trifle more complex, but the probability still is that the miller loses little if anything. The real hardship falls upon the farmer who produces the wheat out of which that flour is made or the consumer who uses the flour at the other end of the line. So, too, the rate is of very little consequence to the merchant, provided it is the same to his competitors as to himself. He adds to the cost of his goods in the market the expense of transporting them to the point of distribution, and the sum total is their cost to him, upon which he makes his profit. An advance in coal rates to a particular locality does not affect the coal dealer. His customers are the losers.
Of course there are instances where the cost of carriage is small, in which the trader might be obliged to absorb the whole advance in the rate and in which he would gain the whole benefit of a reduction. There are very many instances in which it is impossible to say just where the excess in the freight rate does rest. It is sometimes upon the producer, sometimes upon the consumer, and sometimes, though not oîten, upon the trader. Often it is divided into indeterminable proportions between the three. It is sufficient to know for the present purpose that it seldom happens that the person who actually pays the freight is the person upon whom any considerable part of an excessive rate falls.
Now, the only person under this law who can sue the carrier and recover judgment for an excessive freight rate is the person who actually pays the freight money. The real loser can by no possibility recover any part of this extortion. The price of wheat in Sioux City is fixed by subtracting from the price in Chicago the rate from Sioux City to Chicago. If the rate is 3 cents higher than it ought to be, the Iowa farmer receives 3 cents less for his wheat. The trader who buys this wheat and sends it to market is absolutely unaffected by the rate, and yet he, not the farmer, is the only person who can recover from the carrier the unreasonable exaction.
It is plain, therefore, as a general proposition, that this law, which permits simply the recovery of the excess above a reasonable rate, affords, and can afford in the majority of instances, no relief whatever to the one who needs protection. From the very nature of the case the only way in which that can be accomplished is by establishing a proper rate for the future.
It would seein, therefore, that this law affords no protection against an excessive rate, for the reason, in the first place, that the person actually injured can not obtain redress. But even if the real sufferer could in all instances sue and recover the excess the law would still be ineffective, because, in the second place, he would not invoke it.
An ir dividual is seldom a complainant in a proceeding wbich has for its sole object the reduction of a freight rate-certainly not where the reduction asked for is of wide application. Complaints of that sort are usually brought by some State railroad commission, some mercantile or agricultural organization, or by the Interstate Commerce Commission of its own motion, in consequence of informal complaints received by it. If the name of an individual stands as the nominal complainant, it is likely that some one else bears the brunt of the contest. The complaint as to orange rates above referred to was originally made by the railroad commission of Florida. When proceedings were begun to enforce that order in the courts, the Florida commission bad ceased to exist and the case was taken up by the Florida Fruit Exchange.
The reason for this is obvious. The freight rate affects, not merely an individual, but a whole locality or an entire industry. A State is justified in prosecuting a suit in which many of its citizens are interested. A freight bureau may well conduct a proceeding which concerns the business welfare of an entire city. The United States Government may properly investigate a matter which affects the interests of large bodies of its citizens.
This was the theory upon which the act to regulate commerce was constructed. No individual could ordinarily be a match for the vast wealth and power of a railroad corporation. Nor could an individual be expected to prosecute a claim for the benefit, so to speak, of the public. The purpose of the act was to provide a means by which the public could array itself against the carrier, by which the interests ultimately to be affected could be made to bear the hardship of the trial.
How does this stand if the only relief which the complainant can recover is a repayment of a portion of the freight money actually paid? In that case the remedy pertains to some one individual. It regards a sum which is usually in the individual case almost insignificant. We have held, to be sure, that where an association begins a complaint and establishes that the rate is unreasonable, the individual members of that association may come in and ask reparation in the same snit. Whether or not that method of procedure is legal has not yet been passed upon by the courts; but assuming that it is, would a State feel justified in prosecuting a mere personal claim when the only thing to be gained as a result was the repayment of so many dollars and cents ? Would a freight bureau begin and carry throngh such a case for the benefit of a single shipper! Would the United States Government, represented by the Interstate Commerce Commission, be justified in conducting an investigation of which the only result could be the establishment of an individual or of a number of individual personal rights? Clearly not. Since we are powerless to reduce the rate for the future, it is manifest that complaints will no longer be made by State railroad commissions, by business organizations, nor, by the Interstate Commerce Commission upon its own motion,
Will not individuals prosecute suits on their own account? Ordinarily they will not. No penalty is attached to the taking of the excessive rate. The only thing recoverable is the were excess. In individual cases this amount is usually trifling, while the expense and annoyance of carrying through to a termination such a trial is very great. There would, of course, be instances in which the individual could afford to and would prosecute such a suit to a conclusion. There would be other instances in which this would be done by combinations of individuals. In some cases substantially all the overcharge paid might be refunded. Generally speaking, the carrier would retain whatever it collected.
Some idea of what would be likely to happen in the future may be gathered from what has already happened in the past. Since its existence the Commission has entertained in all 225 formal complaints in which a reduction was either ordered by the Commission or agreed to by the carrier in compromise of the proceeding. The excess which shippers had paid over and above the reduced rate in these cases must have amounted to hundreds of thousands of dollars. In every casecertainly in every case where a formal order was made-the shipper might have obtained an order for reparation had he applied for it and made proof of the amount of his shipments, and yet in only five of these cases was any reparation ordered; and, with the exception of two cases, the amount did not exceed $100 in any case. This shows how insignificant to the mind of the people who suffer and complain is the mere right to recover a portion of the freight.
First, then, the injured party can not sue.
Third, if he does sue, the result is unsatisfactory and entirely at variance with the purposes of the act to regulate commerce.
Apparently, in the view of the Supreme Court, a shipper who has paid an excessive rate may file his complaint with the Commission, which, upon determining that the rate is excessive, can award him reparation for the difference between the rate actually paid and what would have been a reasonable rate. If the carrier is not satisfied with this decision, the complainant must then proceed in a United States court to enforce the order of the Commission, and in that court this order is merely prima facie evidence of its correctness. The shipper may, if he elects, proceed in the first instance in court, and in that course there is no intimation from the Commission as to wbat is or is not a reasonable rate in the case under consideration. In each instance