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much unjustifiable injury if it is not restrained therefrom by fear of making rates at noncompetitive points, which, when compared with those at competitive points, are unreasonable; in other words, rates which, though not absolutely unreasonable in and of themselves, are upon all the facts and circumstances relatively unreasonable.
Aside from the disparity in rates between Nashville and the intermediate points, there was much in this case to show that the rate from the latter points was unreasonable, but we did not feel warranted in saying that the rate from the intermediate points, considered entirely independent of the Nashville rate, was unreasonable in and of itself.
The question therefore arose whether it could be said that the rate from the intermediate points was unreasonable in violation of section 1, and unduly discriminatory, in violation of section 3, when it was not found that the rate from Nashville was unremunerative, or that the rate from the intermediate points was unreasonable in and of itself, or that the circumstances and conditions at Nashville and the intermediate points were substantially similar.
We held that there was substantial dissimilarity of circumstances and conditions as between Nashville and the intermediate points, and that, therefore, the fourth section of the act did not apply, but that a difference of 1 cent would fully offset the difference in circumstances and conditions, and that any greater difference would render the rate from the intermediate points relatively unreasonable, in violation of section 1, and unduly discriminatory, in violation of section 3.
In the case of Kindel et al. v. The Atchison, Topeka and Santa Fe Railway Company et al., the Commission had issued an order directing that rates from the Pacific coast should not be higher to Denver than to the Missouri River, and the carriers complied with this order of the Commission except as to 140 commodities. Later, pending further investigation, the number was reduced to 32. In its previous report the Commission held that the carriers were warranted in charging a higher rate to Denver than to the Missouri River on sugar carried from the Pacific coast.
In November last the Commission rendered its decision in regard to these 32 articles, rates on which had not been brought into compliance with its previous order. (9 1. C. C. Rep., 606.)
In its last decision the Commission further held that the defendants are justified in maintaining rates from the Pacific coast which are lower to Missouri River points than to Denver upon rice, hemp, baking powder, blankets, books, boot and shoe heels, chocolate, cocoa,
and extracts, but that as to all of the other commodities mentioned in the decision the rate from Pacific coast points should not be higher to Denver than to points on the Missouri River.
In this decision the Commission defined the general rule laid down in its previous decision, and said as to traffic other than the excepted commodities herein mentioned the general rule which has been laid down in this case is that in the making of these transcontinental rates Denver must receive the same treatment that is accorded to cities in the Middle West and Missouri River territory, and that it had not been held that rates between New York and San Francisco in either direction must not be lower than at Denver, nor had the inherent reasonableness of the rates to Denver from any direction been considered. The decision in Wichita v. Atchison, Topeka & Santa Fe Railway Company et al., first above mentioned, and in Marten v. Louisville & Nashville Railroad Company, also discussed in this report, were referred to in connection with the question arising in this case.
In the case of the Procter & Gamble Company v. the Cincinnati, Hamilton & Dayton Railway Company et al. (9 I. C. C. Rep., 440) the complainant challenged the legality of the change made by these carriers on January 1, 1900, in the classification of common or laundry soap from sixth to fifth class in carloads, and from fourth to third class in less than carloads. Such increase in classification was alleged to be unreasonable and unjust and to subject the traffic in that commodity to undue and unreasonable prejudice and disadvantage.
In December, 1890, the Commission ordered the defendant carriers or their predecessors to change their classification of common soap in carloads from fifth to sixth class, and this order was issued upon complaint of the firm of Procter & Gamble, which was afterwards succeeded by the Procter & Gamble Company.
In the case decided during the present year it appeared that our decision in 1890 was not based upon all of the facts in relation to what was known as the net-weight practice in billing common soap, and which appears to have been given controlling importance in the former decision. The evidence in the former cases indicated a general practice of shipping soap at net weights; that is, exclusive of the weight of the package containing the soap. It appeared in the present case that the old practice of shipping at net weights was very larely indulged in by the Central West manufacturers, including the complainant, while manufacturers in the East had generally shipped at gross weights. While as between Procter & Gamble and the defendant carriers in the former cases the ruling made was not unjust, the decision went further, and, upon the then apparent or assumed general prevalence of the net-weight practice, required the defendants to change their rates from fifth to sixth class on soap in carloads, not only for Procter & Gamble, but for all other soap shippers over their lines; and the natural effect of compliance by these important roads was to compel a general change to the lower sixth-class rates throughout the whole territory.
The fact that most shippers of a given article in part of a described territory were permitted to secure reduced rates by billing at net weight, while many other shippers of the same article in another portion of that territory paid higher rates through billing at the full weight of the package and its contents, would be ample warrant for an order requiring the carriers to remove the unjust discrimination as between such shippers, by discontinuing the practice of shipping at net weights in any part of the territory. On the other hand, unless the net-weight practice was prevalent throughout substantially the whole territory affected, and either authorized by carriers generally in that territory or so well known from constant and general application as to receive implied sanction, it would not of itself constitute sufficient ground for an order requiring a reduction in rates when all the carriers undertook to apply their established charges on the basis of gross weights. We deemed this the proper view to take of the net-weight practice, and that it was the one which would have been taken by the Commission in 1890 if all of the facts concerning that practice had been brought out in the cases then decided.
It was contended further in this case that the carriers had long continued to apply sixth-class charges to carload shipments of common soap and, therefore, that such charges were presumptively reasonable. It would appear, however, that the carriers classified soap in carloads as fifth-class freight originally and only changed it to sixth class in compliance with the order of the Commission issued in 1890, such compliance taking effect in 1891.
Upon this point the Commission said that, however limited the compulsory effect of an order by the Commission may be in the present state of the law, compliance with its requirements can not be regarded as voluntary action by the carriers. There was nothing to show that the carriers would have changed soap in carloads to sixth class in 1891 or later if no order requiring that to be done had been issued; and the carriers insisted that they had always been dissatisfied with the order of 1890. However that may be, it seemed clear to the Commission that the presumption as to the reasonableness of rates, long kept in effect by carriers as a voluntary act on their part, did not attach in this
It might be said, in view of the fact that orders of the Commission can only be enforced by action in the Federal courts, that long compliance with an order of the Commission is in effect voluntary; but we thought and held in this case that, when complaint is made to the Commission and the case goes to hearing and decision, and order against the carriers is issued with which they comply, there is a marked distinction in the respect here referred to between rates thus established and like or similar rates applied by the carriers on their own volition, and that such distinction was sufficient to remove the presumption of the reasonableness of sixth-class carload rates for soap which would have arisen if such rates had been voluntarily accorded without the intervention of an order by the Commission.
The Commission did not, on the other hand, hold that the reasonableness of the fifth-class rates had been affirmatively established. We regarded the primary and controlling question in this case as a question of classification, that is, of relative rates, and disposed of it accordingly. In that view we held that carload soap was not improperly placed in the fifth class and that fifth-class rates thereon had not been shown to be unlawful; that so long as most articles entitled to as low rates as carload soap were put in the fifth class and required to pay fifth-class rates, we were not warranted on the evidence before us in condemning the same rating for that commodity; but that such disposition of the case would not authorize the retention of carload soap in fifth class if the classification of other articles with which soap was compared should be reduced, nor would anything determined in the case preclude the Commission from holding, in an appropriate proceeding, that fifth-class rates in Official Classification territory were excessive.
The following extract from our decision indicates the more important considerations which led to our conclusion:
Soap is analogous in character to articles of general merchandise, particularly those sold in the grocery trade, and which are all in the fifth or higher classes of the classification. It does not move in such great volume, or, to be more explicit, furnish the carriers with such great aggregate tonnage, as to distinguish it speciaily from other common articles of merchandise; nor is it so low in value as to take it out of comparison in that respect with other fifth-class articles and place it in the category of low-grade freights which require the lower sixth-class rating. It is conceded to be and is very desirable traffic for the carrier, but equally so are canned goods, sugar, heavy iron articles, and other commodities now included in the fifth class. In the manufacture of soap, as conducted by complainant, the shipment of large quantities of raw material and fuel is involved, and this furnishes additional traffic to the carrier, but the same thing is true of many other manufacturing industries. These and other matters are set out in detail in the findings, which indicate in substance that soap is a manufactured article of merchandise properly in the fifth class as distinguished from the mass of low-grade freights, cheap chemicals, and raw products which are in class six and actually move under sixth-class rates. Previous to this decision in regard to the classification of soap,
the Commission held in a case involving the classification of hay, in Official Classification territory, that hay was improperly in fifth class and should be carried as sixth-class freight. Hay was found to be a raw agricultural product having relatively low value, moving in great volume largely from the West to the East, and apparently furnishing the carriers with greater aggregate tonnage than any single article actually taking class rates, and as such was entitled to transportation at the lowest class rate. Soap, on the other hand, is a manufactured article of merchandise not specially low or high in value, and moving under present rates freely in all directions from competing factories in various portions of the classification territory, and furnishing a large but not exceptionally great aggregate tonnage to the carriers. As such we held it was also entitled to fairly low rates, but upon no reasonable basis of comparison could it be said to merit the low classification demanded by hay, and which is given to numerous other articles now in the sixth class.
A materially different situation was found to exist in regard to the classification and rates for less than carload shipments of soap. Soap in less than carloads was formerly carried at fourth-class rates. In January, 1900, these rates were increased to third class, and on March 10, 1900, the rates were reduced to 20 per cent less than third class, but not lower than fourth class. As compared with fourth-class rates, this rating based upon 20 per cent less than third class operated with respect to soap to increase materially the rates paid by complainant and others in the section of country about Cincinnati, and presumably the rates paid by other shippers in most parts of the Central West, while it advanced in less degree or not at all, the less than carload rates paid by soap shippers in New York City and other parts of the East. That is to say, the application of a fixed percentage to varying and different rates had the effect of changing the relation of rates which before prevailed on shipments made by complainant and its competitors in the East to common territory. Soap in less than carloads has always paid fourth-class rates until January 1, 1900. A presumption that such rates were reasonable arose from the voluntary action of the carriers in keeping those rates in effect during that long period, and we held that such presumption had not been overcome by the evidence presented in this case.
Under the operation of mixed carload rules, as set out in the findings of the Commission in this case, coupled with the increased less than carload rates, the meat packers who manufacture soap were given advantages in their competition with complainant and other independent soap producers. The packers were thus enabled to ship in mixed carloads numerous meat and provision articles with less than carload quantities of soap at fifth-class rates, while less than carload quantities of soap forwarded by complainant took 20 per cent less than thirdclass rates. We held that the privilege of shipping small quantities of articles in the same class as a mixed carload is valuable to a great many shippers, and is not to be condemned because it may result in some degree to the advantage of particular manufacturers or to jobbers, but that when it appears, as it did in this case, that shippers, like complainant, are subjected to additional disadvantages under the operation of a mixed carload rule, through the increase in a long-standing less than carload rate, the effect of that rule is properly to be considered in determining the reasonableness and justice of such increased rate. We held that the 20 per cent less than third-class rates on less