pending the outcome of the appeal from the finding and order of the Commission in Case No. 70, which is now in the Supreme Court of the United States. 84. C. F. Evans and C. Cohenour, Receivers of The New England Coal Company, Complainants, versus The Baltimore and Ohio Railroad Company, Defendant. ties. This case is unassigned, pending an agreement between the par 85. James Wilson, Jr., et al., Complainants, versus The Cincinnati, Hamilton and Dayton Railway Company and The Toledo and Ohio Central Railway Company, Defendants. The complainants in this proceeding, representing the manufacturing and distributing interests of Wapakoneta, Ohio, seek the establishment of interchange facilities in their city between the two railroads serving Wapakoneta. Following the service of the complaint upon the defendants, the parties to this proceeding represented to the Commission that a satisfactory arrangement had been consummated, looking to the early construction of this connecting track, and the matter was thereupon continued without day, but has now, upon application of the complainants, been assigned for early hearing. 91. New York Coal Company, Complainant, versus The Hocking In the matter of the complaint of the New York Coal Company against The Hocking Valley Railway Company, alleging the unreasonableness of rates on coal, carloads, from Nelsonville to Toledo and intermediate points. Held, The rates complained against, with certain exceptions, to be unreasonable, and reasonable rates substituted. In this action complainant attacks rates on coal in carloads from Nelsonville to points on the Hocking Valley Railway, East Clayton to Toledo, inclusive, alleging the said rates to be unreasonable, and prays that they be reduced to a reasonable basis. In discussing the issue raised; whether or not the rates challenged are unreasonable, it may be well at the outset to state that in the opinion of the Commission the effect of the rates have no bearing on the question. Were rates to be determined upon their effect upon the business of a particular shipper, or a particular locality, discrimination would naturally result. The shipper with the most influence would secure the best rates, regardless of whether the rates were equitable or not. Rates adjusted on a fair basis must necessarily give advantage to patrons and localities situated so as to naturally derive. that advantage, as against those differently situated. It is not the province of the rate-maker to confer artificial advantages upon certain patrons or localities and nullify the natural advantages of other patrons or localities. If rates are equitably adjusted with reference to other rates, the shipper unfortunately situated cannot justly complain of being shut out of particular markets. A carrier may not justly complain of a comparison made between particular rates and other rates existing on the same line. The comparison may be made between local rates and proportionals where the aim is to determine the reasonableness of either. Ordinarily a proportional is less than a local for the same haul, and it should be. To justify a proportional higher than a local, the conditions must be peculiar. The haul on a proportional rate usually involves but one terminal service, while the same haul on a local rate involves two terminal services. On short hauls the terminal service cost is a high ratio of the whole transportation cost. On long hauls the terminal service cost is of course a relatively smaller ratio of the whole transportation cost. There must be, however, some limit to the excess of local over a proportional rate. Each class of traffic should bear its equitably relative share of the total cost of operation. If local rates are relatively low and the proportionals high, the business carried on proportional rates is assigned an undue share of the burden of providing the revenue necessary to operate the road and pay dividends. If locals are relatively high and proportionals low, the business carried on local rates is assigned an undue share of the burden. Quoting from Smythe vs. Ames, 169 U. S.: "The state cannot justify unreasonably low rates, for domestic transportation considered alone, upon the ground that the carrier is earning large profits on its interstate business * *. Nor can the carrier justify unreasonably high rates on domestic business upon the ground that it will be able to meet losses on its interstate business." * Let us endeavor to apply that doctrine to this case: Mr. Connors, General Manager, Hocking Valley Railway, in his testimony stated clearly that the handling of coal received from connecting lines at Amitage was the same as that forwarded from Nelsonville, except that the coal from Nelsonville entailed an additional cost for assembling. The distance from Armitage to the Hocking Valley points involved in this complaint is greater than from Nelsonville by about fifteen. miles. Mr. Dunham, Traffic Manager, Hocking Valley Railway, testified that the revenue accruing to the Hocking Valley for its transportation from Armitage was compensatory. That proportion as shown by the exhibits is 54.4 cents per ton, Armitage to Toledo, on coal originating in the New River District, and 51.6 cents per ton on coal originating in the Kanawha District. Assuming that the margin of profit on the Kanawha coal is slight, say only ten per cent., the cost would be approximately 46 cents per ton. The cost from Nelsonville could be no greater. Adding ten cents per ton for assembling cost, the total cost to the Hocking Valley on Nelsonville coal to Toledo would be 56 cents per ton. On this basis the charge of $1.00 per ton would yield a profit of 44 cents per ton, or eighty per cent. contrasted with a profit of ten per cent. on West Virginia coal. In other words, the Hocking Valley is charging for local traffic 90 cents per ton, and charging 51.6 cents per ton on other traffic, the cost of transportation being exactly the same in both cases. This looks very much like controverting the doctrine enunciated in the Smythe vs. Ames case as noted above. It is asserted that the Hocking Valley Railway must accept the divisions allowed it on West Virginia coal or lose it altogether. Mr. Dunham testified that he reported to Mr. Whittaker, who is a C. & O. traffic official, that means that Mr. Whittaker is the authority as to both C. & O. and Hocking Valley traffic. Therefore, as to coal originating on the C. & O. and terminating on the Hocking Valley, Mr. Whittaker's authority is supreme as to both rates and divisions. It follows that the Hocking Valley is not a free agent but must accept whatever divisions the C. & O. see fit to establish. The New River District-Toledo rate of $1.45 per ton divides C.&O. 36.2 cents, K. & M. 54.4 cents and H. V. 54.4 cents (see exhibit 30). The C. & O. haul varies from 25 to 40 miles; the K. & M. haul is 142 miles and the Hocking Valley haul is 200 miles. Were the rate divided on a mileage ratio, the divisions would be (allowing the C. & O. an average distance of 33 miles), C. & O. 13 cents, K. & M. 55 cents, H. V. 77 cents. It is customary to allow the short line something more than its mileage ratio of a rate; especially if it be the initiating line. Applying that principle, equitable divisions of this rate would be C. & O. 20 cents, K. & M. 52 cents, H. V. 73 cents. Of this rate C. & O. is allowed almost three times its mileage ratio. The Kanawha District-Toledo rate of $1.25 per ton, divides C. & O. 31.2 cents, K. & M. 42.2 cents and H. V. 51.6 cents (see exhibit 30). The maximum C. & O, haul is 41 miles. The average haul may be liberally estimated as 33 miles. On a mileage ratio the divisions. of this rate would be C. & O. 11 cents, K. & M. 47 cents and H. V. 67 cents. Applying the principle of allowing the short line something more than its mileage ratio, an equitable division of the rate would seem to be C. & O. 20 cents, K. & M. 43 cents, and H. V. 62 cents. Certainly such a division would allow the C. & O. all it equitably is entitled to. It will here be observed that the proportion of the Kanawha District rate allowed the C. & O. is nearly three times its mileage ratio. Apparently the C. & O. in its control of Hocking Valley traffic has not allowed the latter what would be considered a fair division of revenue on West Virginia-Toledo coal traffic; but on the contrary has retained for itself an undue proportion. This makes it necessary for the Hocking Valley to make up the deficit in revenue on some other traffic. Were the divisions, indicated above, allowed the Hocking Valley on this traffic, it could reduce its own line coal rates and still maintain a low operating ratio. The West Virginia coal would then contribute more equitably to the burden of producing revenue for operating expenses and dividends. The deduction from this situation is that the Hocking Valley is violating the dictum of the United States Supreme Court in the Smythe vs. Ames case enunciated in this language: "Nor can the carrier justify unreasonably high rates on domestic business upon the ground that it will be able to meet losses on its interstate business." According to the Annual Report the average ton mile revenue earned by the Hocking Valley Railway for the year ending June 30, 1910, was 4.58 mills and the average haul 126 miles. This average included long and short haul, high-class and low-class freight. Obviously short-haul high-class freight should yield a higher ton-mile revenue than the average, and long-haul low-class freight a lower. As a matter of fact, coal from the Nelsonville District to Toledo pays 5.37 mills per ton mile. Coal is a commodity entitled to the lowest class rating and 186 miles is one-third farther than the average haul. This seems anomalous. The distance from Nelsonville to Fostoria, 152 miles, is considerably in excess of the average haul upon which the 4.58 mills per ton mile average revenue is based, and the average ton mile revenue derivable from that traffic on the existing rate of $1.00 per ton is 6.5 mills or nearly fifty per cent. in excess of the average. Complaint alleges that the following carload rates on coal from Nelsonville are excessive and unreasonable: The last column in the above statement shows the cost of service as found by Mr. Hillman, a witness put on the stand by complainant as an expert. It may be assumed that there is no such thing as determining the ratio of service cost as between commodities, with exact certainty. But it is admitted that there is a relative cost as between commodities. This is always assumed in rate making. In fact the principle is universally recognized by rate makers. The classification of freight is a recognition of the principle. Mr. Hillman's method seemed reasonable. He began with an assignment of expenses to freight and passenger service; then subdivided the freight expenses there found, between coal and other freight; finally dividing between on-line and off-line coal. The calculations were based on operating expenses as shown by the Annual Report of the railway company and classified in accordance with the instructions of the Interstate Com |