INVESTIGATION AND SUSPENSION DOCKET No. 4367 Submitted April 14, 1938. Decided July 12, 1938 Proposed increased rates on fresh meats, in carloads, from certain points in Iowa and Minnesota to destinations in official territory east of the IllinoisIndiana line found not justified. Proportional rates from those origins to Mississippi River crossings for application on traffic to the described territory, which will remove existing undue preference of those origins and undue prejudice of certain Missouri River points and St. Paul, Minn., approved. Suspended schedules ordered canceled without prejudice to the filing of new schedules in accordance with the findings herein. ing discontinued. Proceed Robert W. Fyfe, D. P. Connell, J. N. Davis, Wallace T. Hughes, Walter McFarland, E. A. Smith, P. F. Gault, O. J. Norris, E. A. Tharp, E. J. Hyett, Geo. C. Jeck, and R. I. Miles for respondents. Ross Dean Rynder, Paul E. Blanchard, Nuel D. Belnap, Geo. M. Cummins, G. Frank Morris, George P. Boyle, C. C. Hibbard, Andrew H. Brown, John J. Esch, Wilbur LaRoe, Jr., F. E. Brown, S. L. Foote, G. E. Saddy, W. W. Adams, and H. R. Park for interveners on behalf of respondents. Warren H. Wagner, L. R. Simpson, and B. H. Pemberton for protestants. BY THE COMMISSION: REPORT OF THE COMMISSION Exceptions to the proposed report of the examiner were filed by certain of the interior Iowa packers, to which respondents and others replied, and the issues were orally argued. By schedules filed to become effective May 27, 1937, respondents proposed to establish increased rates on fresh meats, in carloads, from slaughtering and meat-packing points in Iowa and southern Minnesota,1 hereinafter for convenience called interior Iowa, to destinations in official territory east of the Illinois-Indiana State line. 1 Principal shipping points are Albert Lea and Austin, Minn., and Cedar Rapids, Des Moines, Estherville, Fort Dodge, Marshalltown, Mason City, Ottumwa, Perry, Storm Lake, and Waterloo, Iowa. A new plant at Estherville began operation in July 1937, and rates were first published effective July 5. Estherville, therefore, is not named in the suspended schedules, but as all the parties hereto desire that rates therefrom be properly related to rates from the other origins, it will be treated herein as though directly involved. Upon protest of certain packing companies operating plants in interior Iowa, operation of the schedules was suspended until December 27, 1937, and their operation has been further voluntarily suspended by respondents until October 27, 1938. Rates are stated in amounts per 100 pounds, and, unless otherwise indicated, are those in effect at the time of hearing in July 1937. This proceeding is the outgrowth of our findings in Swift & Co. v. New York Central R. Co., 220 I. C. C. 171, which involved rates on both fresh meats and packing-house products. The issues with respect to fresh meats were presented in two complaints, Nos. 26970 and 27224. In the former, undue prejudice was alleged against packing plants on the Missouri River and at St. Paul, Minn., and undue preference of plants located at six of the interior Iowa points. In No. 27224 it was alleged that the rates from the Missouri River points and St. Paul exceeded the rates from the interior Iowa points by such excessive amounts as to constitute an unreasonable exaction for the additional transportation service rendered. In other words, the rates from the Missouri River points were alleged to be relatively unreasonable as compared with the rates from interior Iowa, but the reasonableness per se of the rates was not in issue. We found as follows: Upon consideration of the facts here presented with respect to fresh meats we are of the view that, as in the case of packing-house products, the class rates afford an appropriate guide for relating the rates from the various origins. In the circumstances we are of the opinion that the rates considered properly may be related on approximately the fourth-class basis. In view of the fact that the fresh-meats rates are the same from the Missouri River points and the class rates are different, it would be impossible to relate the rates from interior Iowa to those from the Missouri River points on the basis of the exact differences in the fourth-class rates in every instance without disrupting the present equalized adjustment from the Missouri River points. The attack here is upon the relation between the Missouri River points and St. Paul, on the one hand, and interior Iowa, on the other, and we find no warrant for a basis which would indirectly bring about a disturbance of the relation among the Missouri River points themselves. We are of the view, therefore, that the appropriate way to relate the rates in question is upon the basis of the differences between the fourth-class rates from interior Iowa and Sioux City, the highest rated of the Missouri River points. Nothing here said, however, should be construed as approving fourth-class rates as reasonable either from interior Iowa or from the Missouri River points or St. Paul. We find that the present relation between the rates assailed on fresh meats from the Missouri River points and St. Paul, on the one hand, and from Cedar Rapids, Ottumwa, Waterloo, Mason City, and Des Moines, Iowa, and Austin, Minn., hereinafter referred to as interior Iowa, on the other, is, and for the Austin, Minn., and Cedar Rapids, Des Moines, Mason City, Ottumwa, and Waterloo, No. 27224 names these and Albert Lea and Faribault, Minn. Iowa. future will be, unduly prejudicial to the Missouri River points and St. Paul and the packers there located, and unduly preferential of the named Iowa and Minnesota points and the packers there located, to the extent that the difference between the rate from any interior Iowa point (other than Austin) and from any Missouri River point or St. Paul to any destination considered is greater than the difference between the fourth-class rates from the same interior Iowa point and Sioux City, to the same destination, and to the extent that the difference from Austin, Minn., to any such destination is greater than the difference between the fourth-class rates from Mason City, Iowa, and Sioux City, to the same destination; and we further find that differences in excess of those last mentioned are and for the future will be excessive and unreasonable. That method of removing the undue preference and prejudice and relative unreasonableness by making the spread between any interior Iowa point and any Missouri River point no greater than the spread in the fourth-class rates from such interior Iowa point and Sioux City, Iowa, is hereinafter, for convenience, called the formula. The rates herein considered have been specifically passed upon but once previous to the above-mentioned report, and then only in part. In Morrell & Co. v. New York Central R. Co., 104 I. C. C. 104, 120 I. C. C. 537, those applying to trunk-line and New England territories were assailed as unreasonable and unduly preferential of interior Iowa packing points, and Missouri River packing points were alleged to be unduly prejudiced. We there found that the factors of such rates applying east of the Mississippi River and Chicago were unreasonable, and prescribed reasonable rates; that the rates from points west of the Mississippi River to destinations in trunk-line and New England territories would for the future be unreasonable to the extent that they exceeded the lowest combination of contemporaneous factors west of the Mississippi River or Chicago plus the rates therein found reasonable east thereof; and that the rates there prescribed would remove the alleged undue prejudice in the relation of the rates from Missouri River points versus interior Iowa points. Fresh meats, in carloads, are rated third class in both western and official territories. The rates herein considered are made on the combination basis, generally of proportional commodity rates west of the Mississippi River and the commodity rates prescribed in Morrell & Co. v. New York Central R. Co., supra, east of the river, and this is also true of the rates from the Missouri River. The class rates which the applicable rates most closely approximate are the fourth-class rates. Third class is 70 percent and fourth class is 50 percent of first class in this adjustment. The western factors of the rates are the same proportional rates as applied on packing-house products prior to the effective date of the rates found justified in Swift & Co. v. New York Central R. Co., supra. 76405-39-vol. 227-51 The rates on packing-house products from and to the points here involved have been before us for consideration on various occasions, the most recent being in Swift & Co. v. New York Central R. Co., supra. We there found that the reductions of August 20, 1935, in the fifth-class rates applicable on packing-house products from Missouri River packing points lessened, but did not eliminate, the undue prejudice of those points and undue preference of interior Iowa points found in Packing-house Products from Western Trunk-line Points, 197 I. C. C. 353, 206 I. C. C. 449, to exist; that the record afforded no basis for a further reduction in the rates applicable from the Missouri River; that if the rates on packing-house products from and to the points considered were related as were the class rates, except from Austin, the resulting adjustment would be free from undue prejudice and preference; and that the rates from interior Iowa, except Austin, may reasonably be placed upon the full fifthclass basis. Rates from Austin, it was found, might not reasonably exceed those from Mason City. The suspended schedules were found not justified, without prejudice to their being refiled upon revision of the rates from Austin, and it was found that when they become effective they would remove the basis for the complaints therein considered. The fifth-class rates (35 percent of first class) therein approved became effective on packing-house products on April 30, 1937. In attempting to work out rates on fresh meats to comply with our order in Swift & Co. v. New York Central R. Co., supra, respondents reached the conclusion that the formula was inconsistent, and concluded that the order could be complied with only by publication of the lowest combination of local rates based on Chicago or Peoria, Ill., St. Louis, Mo., or Davenport, Iowa. For an understanding of respondents' evidence and of some of the errors into which they fell, we believe it best to state first the correct application of the formula. In applying the formula the peg is the Missouri River rate. To any given destination the difference between the fourth-class rates thereto from Sioux City and the particular interior Iowa point is the measuring stick which, when applied to the peg rate, discloses whether undue prejudice and preference is found to exist and the extent thereof; and the extent of such undue prejudice and preference is the amount in which the interior Iowa rate is authorized to be increased. Thus, the difference in the fourth-class rates from Sioux City and Des Moines to New York, N. Y. (118 less 105) is 13 cents. To determine whether the rate from Des Moines is found unduly preferential in relation to the rate from Kansas City, Mo., deduct this 13 cents from the rate of 115 cents applicable on fresh meats from Kansas City to New York, and the difference of 102 cents marks the minimum be |