tion rates are made to Colorado common points with Denver, Colorado Springs, Pueblo and Trinidad named as such points in the schedules, but there are several hundred smaller interme diate points to which the rates apply, so that the system is nearly the equivalent of a blanket rate, or a like rate for a large territory. The coast system of rate-making by adding the local back to the low through rate arouses complaints, for the reason that the shortest haul where the system prevails has the highest rate; that is, rates are lower the nearer to the coast terminal - an apparent violation of the fourth section. The basing point system arouses friction, in that rival centers and shorter-distance points demand like privileges, and the blanket rate finds objectors where an important point is ambitious to supply the surrounding territory. Each has its advantages and each is open to some objections." 1

§ 851. Long and short haul at common law.

The charge by a carrier of a less rate between two points than it charges for carriage from the same initial point to an intermediate point seems at first sight indefensible. In the case of carriage of passengers it would be difficult to enforce the higher charge upon a conveyance which stopped at the intermediate point; for the passenger who had bought a ticket to the point of destination could not be restrained from leaving the train at an intermediate station. It would seem to be actionable false imprisonment to keep him on the train against his will. A train might, to be sure, run from one end to the other of the long haul without stopping at the intermediate station; and a reasonable schedule might be so arranged as to run no accommodation train through from one end of the long haul to the other. Only in that way could a lower rate for the long haul be effectually enforced.

In the case of carriage of goods, also, it appears to be clear

1 Quoted from Kindel v. Boston & A. R. R., 11 I. C. C. Rep. 495 (1905).

abstractly that the owner may demand that his goods shall be delivered up to him at any point on the journey, provided it is reasonably easy for the carrier to comply with the demand. It is of course possible for a railroad to run freight trains through without stopping from one end to the other of the long haul, and thus defeat the demand of the owner to have his goods at the intermediate point; and it is also in its power so to make up the train that it will be difficult to drop goods directed to the end of the route at a way station. This being the case, it is not a difficult matter in the case of goods to defeat the demand of an owner for the delivery of his goods short of their destination; and as a practical matter, therefore, a lower charge for a longer haul may be enforced.

§ 852. Limitations upon charging less for longer haul.

As a matter of reasonableness the charge has still to be justified at common law; but this may be done in some cases. If competition is met at one point and not at another, a competitive rate is established at the former point. A railroad whose line runs through the non-competitive to the competitive point must at the latter point either meet the competitive rate or lose all business. It must of course give up the business rather than carry at a loss, and throw upon the remaining traffic the burden of supporting the road and also of making up the loss. But the competitive rate is ordinarily slightly remunerative; it yields a net income, though less than is necessary to pay its proportion of the fixed charges. If the business is given up, all the fixed charges must be paid by the traffic at the non-competitive points; if the competitive rate is met and business obtained, the profit from the business will go to reduce the amount of fixed charges to be paid by the non-competitive traffic. As the competitive traffic will not pay its share of the fixed charges, the non-competitive traffic, having more than its share of the fixed charges to bear, will necessarily pay a rate higher than the competitive rate in proportion to the distance; and it may well be obliged

to pay absolutely a higher rate than the competitive rate for a longer haul. Nevertheless, the rate will be lower than it would be if the railroad did not meet the competitive rate and obtain its share of the business; and therefore, being the lowest rate which the carrier can charge and obtain fair compensation, it is reasonable at common law.

§ 853. Competition justifies reduction.

Led by these considerations, the courts have held that competition at the more distant point will constitute such dissimilarity of conditions as to justify a lower rate for the longer haul.2

The most elaborate argument in favor of that view has been made by Mr. Justice White in East Tennessee, Virginia & Georgia Railway v. Interstate Commerce Commission.3 "The only principle by which it is possible to enforce the whole statute is the construction adopted by the previous opinions of this court; that is, that competition which is real and substantial, and exercises a potential influence on rates to a particular point, brings into play the dissimilarity of circumstance and condition

2 An important series of recent cases in the United States Courts established this doctrine:

UNITED STATES SUPREME Court:

Cincinnati, N. O. & T. P. Ry. v. Interstate Com. Com., 162 U. S. 184, 40 L. Ed. 935, 16 Sup. Ct. 700 (1896); Texas & P. Ry. v. Interstate Com. Com., 162 U. S. 197, 40 L. Ed. 940, 16 Sup. Ct. 666 (1896); Interstate Com. Com. v. Alabama Mid. Ry., 168 U. S. 144, 42 L. Ed. 414, 18 Sup. Ct. 45, B. & W. 433 (1897); Louisville & N. Ry. v. Behlmer, 175 U. S. 648, 44 L. Ed. 309, 20 Sup. Ct. 209 (1898); East Tenn. V. & G. Ry. v. Interstate Com. Com., 181 U. S. 1, 45 L. Ed. 719, 21 Sup. Ct. 516 (1901); Interstate Com. Com. v. Clyde S. S. Co., 181 U. S. 291, 45 L. Ed. 866, 21 Sup. Ct. 512 (1901).

FEDERAL Courts:

In addition to the above cases, while in various stages below, see: Missouri Pac. Ry. v. Texas & P. Ry., 31 Fed. 862 (1886); Ex. p. Koehler, 31 Fed. 315 (1886); Interstate Com. Com. v. Atchison, T. & S. F. Ry., 50 Fed. 295 (1892); Interstate Com. Com. v. Southern Ry., 105 Fed. 703 (1900).

3 Supra.

provided by the statute, and justifies the lesser charge to the more distant and competitive point than to the nearer and noncompetitive place, and that this right is not destroyed by the mere fact that incidentally the lesser charge to the competitive point may seemingly give a preference to that point, and the greater rate to the non-competitive point may apparently engender a discrimination against it. . If the carrier was prevented under the circumstances from meeting the competitive rate at Nashville, when it could be done at a margin of profit over the cost of transportation, it would produce the very discrimination which would spring from allowing the carrier to meet a competitive rate where the traffic must be carried at an actual loss. To compel the carriers to desist from all Nashville traffic under the circumstances stated would simply result in deflecting the traffic to Nashville to other routes, and thus entail upon the carriers who were inhibited from meeting the competition, although they could do so at a margin of profit, the loss which would arise from the disappearance of such business, without anywise benefiting the public."

TOPIC E--COMPETITION AS A FACTOR.

$854. Competitive rate must be reasonable.

On the other hand, considerations which must lead the courts to some limitation of this doctrine were thus expressed by Judge Severens in the court below: "If railway carriers engage in a competitive struggle for business at a place where they meet, and underbid each other or other carriers to a point which is not in itself remunerative, can they turn back on the line, and taking advantage of the conditions existing at other localities, arising either from the fact that there is no opportunity for competition, or from the fact that by concert of the carriers there is none,

1 Interstate Commerce Com. v. East Tennessee V. & G. Ry., 85 Fed. 107, 115 (1898).

charge such rates for the shorter haul as shall make good their lack of profits in competitive business, and even up the profits on their whole business to the point they set before themselves as reasonable? To the proposition thus roundly stated, no doubt counsel for the carriers would say that they could not contend for it. And yet this is the result reached by the not very indirect steps of the argument. And the proposition itself cannot be admitted without tearing up by the roots' the whole scheme of the commerce act. This is one of the considerations tending to minimize somewhat the privilege arising from competition."

And this Mr. Justice White reiterated, clearly expressing the nature of the limitation. "That, as indicated in the previous opinions of this court, there may be cases where the carrier cannot be allowed to avail of the competitive condition because of the public interests and the other provisions of the statute, is of course clear. What particular environment may in every case produce this result cannot be in advance indicated. But the suggestion of an obvious case is not inappropriate. Take a case where the carrier cannot meet the competitive rate to a given point without transporting the merchandise at less than the cost of transportation, and therefore without bringing about a deficiency, which would have to be met by increased charges upon other business. Clearly, in such a case, the engaging in such competitive traffic would both bring about an unjust discrimination and a disregard of the public interest, since a tendency towards unreasonable rates on other business would arise from the carriage of traffic at less than the cost of transportation to particular places.2

$855. Non-competitive rate must not be extortionate.

On the other hand the rate to the intermediate point where there is no competition must not be unreasonable in itself.

2 White, J., in East Tennessee V. & G. R. R. v. Interstate Commerce Com., 181 U. S. 1, 19, 45 L. Ed. 719, 21 Sup. Ct. 516 (1901).