CHAPTER V

THE INTERSTATE COMMERCE LAW AND ITS INTERPRETATION

BY THE COMMISSION AND BY THE COURTS (concluded)

We shall now take up those cases which deal with alleged discriminations between localities.

THE NASHVILLE COAL CASE 1

The rate upon that quality of coal known as the "run of mines," from the producing district in Western Kentucky to Nashville, was $1.00 per ton all the year round. The rate upon screened coal, however, was $1.15 in summer, and $1.40 in winter. The rates upon all grades of coal from the same points to Memphis was $1.40 the year round. It was contended that Nashville, being so much nearer the producing district, ought to have as much advantage over Memphis in the rate on screened coal, as it had in the run of mines variety.

The Commission held that the rate of $1.40 on screened coal to Nashville was unjust when compared with the Memphis rate. Accordingly, it ordered that the rate to Nashville should, in no season of the year, exceed $1.15, and that this rate should be proportionally reduced upon any reduction in the Memphis rate.

The Circuit Court, in setting aside the order of the Commission, severely and properly criticised that body for its attempt to make the Nashville rate proportionate to that to Memphis, where entirely different considerations entered as factors in determining the rate. The discrimination between the winter and summer rates was

1 In re Alleged Unlawful Charges in the Transportation of Coal by the Louisville and Nashville R. R. Co., 5 I. C. C. Rep. 466, Oct. 1892. 73 Fed. Rep. 409, April, 1896.

not the kind of discrimination which was intended to be forbidden by the Interstate Commerce Act. In fact, it was found that such discrimination was highly advantageous, both to the railroads, and to the public at large.

THE MINNEAPOLIS CASE

The Chamber of Commerce of Minneapolis vs. Great Northern Railroad Company et al.1

This case arose out of the struggle between Minneapolis and Duluth for the flour business of the Northwest. Duluth possessed the advantage of situation, being at the head of Lake Superior, while Minneapolis had the advantage of an earlier development of the industry.

After much warring of rates, the railroads of the Northwest agreed upon a division of the grain traffic of that section. This agreement provided that the rates upon grain from points in North and South Dakota, and from a section comprising a large portion of Minnesota, should be the same to Duluth as to Minneapolis. The Chamber of Commerce of Minneapolis complained that this was an unjust discrimination against that city, for most of the points to which the blanket rates were extended were from ten to forty per cent nearer Minneapolis than Duluth, and it was claimed that since Duluth had the advantage of being situated nearer the common market, Minneapolis ought not to be deprived of its advantage of situation nearer the sources of supply.

In deciding this question, the Commission stated that under the present circumstances, the milling trade of Minneapolis was bound to decline. So far as such a result should be attributed to the greater natural advantages of Duluth, nothing could properly be done to prevent it. But the natural advantage of situation of Minneapolis should not be taken away from it. A milling town possess

1 8 I. C. C. Rep. 346, Nov. 1899.

ing great natural, acquired, and improved advantages for the carrying on of that industry, and favorably situated in point of distance to a large grain-producing region, is entitled to the benefits of its location, and carriers of grain to that point are not justified in making rates to competing towns, considerably more remote from the producing area, which destroy the advantage which the former town is entitled to enjoy. The Commission, therefore, ordered that the rates on grain to Minneapolis and Duluth should be adjusted upon the basis of their respective distances.

This decision has been severely criticised by Professor H. R. Meyer.' He would have us believe that if the Commission had the power, it would seek to limit markets and to give to every competing industry the advantages which it possesses over others in point of distance.

A short time after this decision, a case arose in which the Chamber of Commerce of Minneapolis strongly objected to the application of the very principle for which it had contended. When Milwaukee and LaCrosse, its competitors upon the south, sought to secure for themselves the advantages which they possessed over Minneapolis in point of distance, the Chamber of Commerce of the latter city requested that the order of the Commission which had been recently made in its favor should not be enforced. Accordingly, the case was not pressed before the courts.

THE SAVANNAH NAVAL STORES CASE

The Savannah Bureau of Freight and Transportation vs. Louisville and Nashville Railroad Company et al.2

For a long time the rate on cotton from points in Florida to Savannah had been $2.75 per bale, while the

1 H. R. Meyer, Government Regulation of Railway Rates, pp. 397405.

28 I. C. C. Rep. 377, 1900. 118 Fed. Rep. 613, 1902.

rates to New Orleans and Mobile were $2.50 and $2.00 respectively. Under these rates, competitive conditions had grown up which divided the business fairly equally between the various commercial centres.

The Louisville and Nashville, however, in order to secure for itself practically the whole of this business, refused to continue the joint rate which had enabled the cotton to move to Savannah at $2.75 per bale. The result was that the Savannah rate was advanced to $3.30 per bale, a rate which was practically prohibitive. As the rate to New Orleans and to Mobile remained the same, the whole of the traffic now moved in that direction, and the Louisville and Nashville thus obtained the full income from the haul, while if the cotton had been carried to Savannah it would have been compelled to divide the rate with the other joint carriers.

The Interstate Commerce Commission decided that discrimination between different localities, for such reasons as had influenced the Louisville and Nashville, was unjust within the meaning of the Interstate Commerce Law. Though the distance to New Orleans was greater, it recognized the legality of a lower charge to that point in order to enable that city to share in the business. But the advance in the Savannah rate to a point beyond $2.75 per bale, which resulted in the exclusion of Savannah from a participation in that business, was unlawful and unduly discriminatory toward that city. The Circuit Court sustained the order of the Commission, and there was no appeal.

THE DANVILLE CASE

The City of Danville et al. vs. Southern Railway Co. et al.1 The rates on sugar and other commodities from Northern and Eastern cities to Danville, Virginia, were constructed upon the basis of the local charge to the Ohio 18 I. C. C. Rep. 409, 571, 1900. 122 Fed. Rep. 800, 1903.

River plus the local charge from the Ohio River to Danville, while Richmond, Lynchburg, and other Virginia cities enjoyed a much lower through rate. On the other hand, the rates from Southwestern points to Danville consisted of the through rate to Lynchburg plus the local rate back over the same line to Danville. The rate on tobacco to Western points was out of all proportion higher at Danville than at Lynchburg. It thus appeared that the city of Danville was handicapped upon every side.

In deciding this case, the Commission recognized the fact that competitive conditions justified lower charges to Richmond and Lynchburg, but it refused to recognize the legality of a discrimination as great as had been practiced by the railroads:

If the carriers desire to make rates in that manner, they must so adjust their charges as not to annihilate the city of Danville.

Accordingly, the Commission ordered that the rates from the South and West to Danville should not exceed the rates from the same points to Lynchburg by more than ten per cent, and that the rate on tobacco from Danville to the West should not exceed the rate from Lynchburg by more than fifteen per cent.

The Southern Railway refused to obey this order, and the Commission began suit for its enforcement. Both the Circuit Court and the Circuit Court of Appeals refused to sustain the order of the Commission. It appeared that the Southern Railway, which had refused to obey the order, had had nothing to do with the reductions of the rates which had taken place at Lynchburg and Richmond. It had come into the field as the last competitor, and had accepted the rates to these cities, just as it had found them. Since these rates were therefore beyond the control of the defendant carrier, the rate to no other point upon its line could be shown to be unlawfully discriminatory when compared with them. As the Commission had not found