held that it would be unreasonable to make a uniform rate for all milk stations to New York, but reasonable to establish zones at proper intervals by which all milk from stations up to a certain distance, say 40 miles, should pay the same rate, then all milk originating in the zone from 40 miles to 60 miles a slightly higher rate, and so on.5 The Commission thus in effect compromises with the principle under discussion. It will not allow the natural advantages of nearby sources of supply to be altogether eliminated; on the other hand it will permit relatively slight differences between the different zones; and, as one notes, it will permit grouping all the stations within the zones at a flat rate whether say 41 miles or 59 miles.

§ 636. When uniform rate to a group of stations is justifiable.

Although it may be conceded that a slightly greater profit will be made on a traffic passing to the nearest grouped point than to the furthest point, the difference, if the stations are properly grouped, will not be sufficient to make the arrangement illegal. It is clear that the grouping must be so managed that the rate to the nearest point will not be unreasonable in itself, and the rate to the furthest point will be remunerative. These general principles are well set forth in the quotation which follows:

"It is said by way of argument that there is an inherent injustice in carrying the product of one locality at a less rate than that of another which lies nearer to the common market, because in that case the nearer shipper pays a part of the expense of transporting the freight of his rival a longer distance upon the

These were substantially the facts and the decision in Milk Producers' Assoc. v. Delaware, L. & W. R. R., 7 I. C. C. Rep. 92 (1897). In Howell v. New York, L. E. & W. R. R., 2 Int. Com. Rep. 162, 2 I. C. C. Rep. 272 (1888), the Commission had held an arrangement for a flat rate not necessarily unreasonable even if it incuded all milk brought to New York from stations within 200 miles.

same train. This result does not necessarily follow, however. In cases where the rate is sufficiently high to afford a reasonable profit upon each portion of the traffic by itself, there are no losses upon the longer portion of the route to be made up by overcharges upon the remainder. Although the product of the most distant locality may yield a substantially less measure of profit than that of the nearer, nevertheless the traffic which pays the least profit to the carrier may pay its own entire transportation expense, and perhaps a good deal more. In that event there is nothing in its transportation which is saddled upon other communities, and the smaller profit which is made from the longest haul helps to support the facilities which the carrier is enabled to maintain for the common benefit of the entire route covered. In the present case it will not be contended by complainants that the milk business from even the most distant stations is done at any loss to the roads."

637. Basing points established.

Instead of grouping stations about a competitive point and charging a uniform rate, the prevailing custom now is to fix a certain rate to the competitive point (called the basing point), and to fix rates to other points in the group by adding in each case to the basing rate the local rate from that point to the station in question. Such a combination rate is on the face of it unreasonable, and it will be closely scrutinized; and the competitive rate to the basing point plus the local is at any rate the extreme limit of charge.

After the passing of the Interstate Commerce Act, which was at first believed to prevent the reducing of a rate for a long

6 Walker, Com. in Howell v. New York, L. E. & W. R. R., 2 Int. Com. Rep. 162, 175, 2 I. C. C. Rep. 272 (1888).

Trammell v. Clyde S. S. Co., 4 Int. Com. Rep. 120, 5 I. C. C. 324 (1894); Cordele Machine Shop v. Louisville & N. R. R., 6 I. C. C. Rep. 361 (1895); Gustin v. Atchison, T. & S. F. R. R., 8 I. C. C. Rep. 277 (1899); Board of Trade v. Central of Ga. Ry., 8 I. C. C. Rep. 142 (1899).

haul below that for a shorter haul included in it, competitive points were grouped with a number of intermediate points, so that the carrier might compete without reducing his charge below intermediate charges. Since it has been decided that a carrier might in case of competition reduce the charges for a long haul below those for a short haul, this has become unnecessary, and the competitive points are now made basing points.

§ 638. Basing points justified.

The Supreme Court of the United States 8 has held that the Southern system of "basing points" is legal. Rates to noncompetitive Georgia towns were arrived at by taking the Atlanta rate and adding to it the local rate back. The result of this was to make a higher rate in each case for the shorter haul; but all the rates were lower than they would be if the nearest competitive point to the west, Montgomery, had been taken as the basing point. The court upheld the rates, Mr. Justice White saying:

"When the situation just stated is comprehended, it results that the complaint in effect was that a method of rate making had been resorted to which gave the places referred to a lower rate than they otherwise would have enjoyed. In this situation of affairs, we fail to see how there was any just cause of complaint. Clearly, if, disregarding the competition at Atlanta, the higher rate had been established from New Orleans to the noncompetitive points within the designated radius from Atlanta, the inevitable result would have been to cause the traffic to move from New Orleans to the competitive point (Atlanta), and thence to the places in question, thus bringing about the same rates now complained of. It having been established that competition affecting rates existing at a particular point (Atlanta) produced the dissimilarity of circumstances and conditions contemplated by the 4th section of the act, we think it inevitably

8 Interstate Commerce Com. v. Louisville & N. R. R., 190 U. S. 273, 47 L. Ed. 1047, 23 Sup. Ct. 687 (1903).

followed that the railway companies had a right to take the lower rate prevailing at Atlanta as a basis for the charge made to places in territory contiguous to Atlanta, and to ask, in addition to the low competitive rate, the local rate from Atlanta to such places, provided thereby no increased charges resulted over those which would have been occasioned if the low rate to Atlanta had been left out of view. That is to say, it seems incontrovertible that in making the rate, as the railroads had a right to meet the competition, they were authorized to give the shippers the benefit of it by according to them a lower rate than would otherwise have been afforded. True it is, that by this method a lower rate from New Orleans than was exacted at LaGrange obtained at the longer distance places lying between LaGrange and Atlanta, but this was only the result of their proximity to the competitive point, and they hence obtained only the advantage resulting from their situation. It could be no legal disadvantage to LaGrange, since, if the low competitive rate prevailing at Atlanta had been disregarded, and the rate had been fixed with reference to Montgomery, and the local rate from thence on, the sole result would have been, as we have previously said, to cause the traffic to move along the line of least resistance to Atlanta, and thence to the places named, leaving LaGrange in the exact position in which it was placed by the rates now complained of."

TOPIC C-THROUGH RATES.

§ 639. Carriers may combine in a joint rate.

It is permissible for two carriers to combine upon a joint. through rate over both lines, which shall be less than the sum of their separate rates. In other words, it is entirely proper that two carriers should combine to form a single route, join in one haul, and name a single rate for the haul. It is not only

1 St. Louis Hay & Grain Co. v. Illinois Cent. R. R., 11 I. C. C. Rep. 486 (1905). See, generally, Chapter XXXI.

permissible, but extremely desirable, that this should be done; and the lower through rate thereby secured is quite justifiable. "The through rate is almost universally less in proportion to distance than the local rate; the carriers can afford to make it lower; if they were compelled to measure the one by the other, there would be no inducement to form through lines and shippers would be annoyed by having to deal with a succession of local roads instead of with one road acting for all. But if the through rate is less in proportion than the local, some of the carriers, if not all of them, must accept for their division of the through rate a sum less than the local rate. This is very manifest. It is well known, also, that many influences affect the making of a through rate that may not bear at all, or if at all in less degree, upon the local rates. This is especially the case when there are competitive lines reaching points for which the through rate is made or through which the transportation is to be had. Such competition may in some cases force the making of a through rate which will barely pay the cost of moving the freight." 2

§ 640. The entire rate must be reasonable.

The shipper or consignee has no direct interest in the way a joint rate is divided between the carriers, nor in the amount of the division received by each carrier. The entire through rate is what interests the public, and in so far as a carrier gives up a part of its fair division for the sake of obtaining business the public is not concerned.3

It is clear, of course, that the entire rate must not be so low as to be unremunerative, and thus burden the local traffic.* As the rates for long distances cannot be exactly compared

2 Lippman v. Illinois Cent. R. R., 2 Int. Com. Rep. 414, 2 I. C. C. 384 (1890).

3 Re Proposed Advances in Freight Rates, 9 I. C. C. Rep. 382, 433 (1903). 4 Lippman v. Illinois Cent. R. R., 2 Int. Com. Rep. 414, 2 I. C. C. Rep. .584 (1889).