CHAPTER XL RELATIVE DISCRIMINATION § 1370. Essential illegality of relative discrimination. Topic A. Discrimination Between Localities Served § 1371. Unjust rates between localities. 1372. Evidence of disproportionate charging. 1373. Railroad rates not upon a mileage basis. 1374. Various systems of making distance rates. 1375. Long and short haul. 1376. The similar circumstances proviso. 1377. Competition as a justification for disproportion. 1378. Undue preference. 1379. Argument for competitive rates. 1380. Competitive rates must not be ruinous. 1381. Reconsignment arrangements. 1382. Back freights. 1383. Equalization of economic advantage. 1384. Law against commercial equalization. 1385. No obligation to make preferential rates. 1386. Due consideration of true differences. Topic B. Discrimination Between Services Rendered § 1387. Disproportionate rates for different services. 1388. Charging what the traffic will bear. 1389. Difference in rate between freight classes. 1390. Differences should not be grossly disproportionate. 1391. Comparison the basis of the differential. 1392. Difference in commodity rates. 1393. Rates vary with values. 1394. Improper to equalize values. 1395. Policy against all discrimination. 1396. Relative discrimination inconsistent with public duty. § 1370. Essential illegality of relative discrimination. It must now be apparent that the fundamental ques tion under discussion is how far public duty must necessarily deprive those who conduct public employments from basing their business policies upon the elementary principle of the law of increasing returns. That net returns tend to increase with the volume of business in a normal case of an industrial enterprise is obvious; and the question is whether a public service company is to be permitted without hindrance to shape all things so as to hold its present business and to add to it. Some managers of public service companies assert this boldly, and a few say frankly, for example, that they base their classifications and their rates upon what the traffic will bear in view of the situation of the customer making high charges against business from which high rates can be got, conceding low rates in order to get competitive business which could not otherwise be obtained. Of course this consideration has some place in every philosophy of rate making, but it is submitted that it is a dangerous principle which may often operate to the disadvantage of the public. For example, if railway managers are left practically unrestrained by law, it is sufficiently plain that they will maintain a high schedule of rates between localities where they have control of the situation and for valuable goods which will bear high rates, while at the same time making disproportionate concessions from this standard to get business at competitive points or to induce the movement of low grade commodities. The modern law seems to be that while in private business nothing need be considered except the law of decreasing cost, in public business there is the law against discrimination to be reckoned with. Topic A. Discrimination Between Localities Served § 1371. Unjust rates between localities. At common law the public servant deals with the individual; except under a statute a community as such cannot complain of a discrimination against its inhabitants. Thus at common law it is the shipper who complains of a disproportionate rate, not the locality which complains of discrimination. Whatever may be the present law as to the right of a customer in one locality to complain that his rates are disproportionally high as compared with those charged other customers of the company on other localities, it is certain that such discrimination is in itself evidence that the higher charge is an unreasonable one. Thus, whenever a rate between two points is attacked by an individual shipper as unreasonable in itself, as evidence in support of the complaint he may show that rates are lower for a similar haul between other points. But except so far as it has evidentiary bearing on the reasonableness of the rate in question, rates to and from other points were formerly not material.2 This rate complained of may be so outrageously disproportionate that nothing can justify it. But if a rational defense can be made for higher rate the courts have been inclined to permit it to stand.1 1 3 § 1372. Evidence of disproportionate charging. Such comparisons have always had an evidentiary bearing on the reasonableness of the rate complained of, even though it was thought that the showing that the rates to other places were disproportionate was not material at common law. How much weight shall be given to such evidence must, of course, depend on the facts of each case. In the Naval Stores case the Federal court in finding the rates unjust gave considerable weight to rates charged for State v. Minneapolis & St. L. Ry. Co., 80 Minn. 191, 83 N. W. 60 (1900). 2 Interstate Comm. Comm. v. Louisville & N. R. R. Co., 73 Fed. 409 (1896). Tift v. Southern Ry. Co., 138 Fed. 753 (1905). 4 Interstate Comm. Comm. v. Western & A. R. R. Co., 93 Fed. 38 (1899). 1 similar hauls. And in the East Tennessee Railroad case the Federal judge went so far as to hold that a less rate for a longer haul tended to prove the higher rate unreasonable. On the other hand in the Danville case 3 the Federal judge, after hearing evidence as to the rates charged between various other localities in the South, felt that the evidence presented did not show that the rates complained of were improper. And in the Hampton case the Federal court held that there was not evidence enough that the rates were unreasonable, notwithstanding that they compared somewhat unfavorably with other rates. 4 § 1373. Railroad rates not upon a mileage basis. Rate regulation upon legal principles, basing the rate charged ultimately upon the cost of the service, will not in the case of railroads, as many fear, mean an immediate recourse to a mileage basis. The chief reason that it can never come to that basis altogether is that mere mileage, as all authorities recognize, never measures the cost of the service. It is fundamental that a long haul is relatively cheaper per ton than a short haul. This is all the clearer 1 Interstate Comm. Comm. v. Louisville & N. Ry. Co., 118 Fed. 613 (1902). 2 Interstate Comm. Comm. V. East Tennessee, V. & G. Ry. Co., 85 Fed. 107 (1898). Interstate Comm. Comm. V. Southern Ry. Co., 117 Fed. 741 (1902). 4 Interstate Comm. Comm. V. Nashville, C. & St. L. Ry. Co., 120 Fed. 934 (1903). In the Federal courts particularly there have never been any doubts that this rule justified the making of a lower rate per ton-mile for a longer haul. See among many 5 others: Union Pacific Ry. Co. v. United States, 117 U. S. 355, 29 L. ed. 920, 6 Sup. Ct. 772 (1886); East Tennessee, V. & G. Ry. Co. v. Interstate Comm. Comm., 181 U. S. 1, 45 L. ed. 719, 21 Sup. Ct. 516 (1901); Tozer v. United States, 52 Fed. 917 (1890); Augusta S. R. Co. V. Wrightsville & T. R. Co., 74 Fed. 522 (1896); Northern Pacific Ry. Co. v. Keyes, 91 Fed. 47 (1899); Southern Ry. Co. v. St. Louis, H. & G. Co., 156 Fed. 728 (1906); St. Louis & S. F. Ry. v. Hadley, 168 Fed. 317 (1909); Missouri, K. & T. Ry. Co. v. Love, 177 Fed. 493 (1910). if the shorter haul has unusual physical obstacles making it actually more expensive; it will then justify a lower rate for a longer haul. Moreover the less expensive terminals may make the longer route the cheaper, so that sometimes business may be better handled if great volumes of low grade freights are diverted from congested points by differential rates. It is also often justifiable to group together various stations for convenience in making rates. These and many other considerations may be set aside the mere mileage involved. But undoubtedly rate regulation in the future will pay more attention to operating cost and mileage tables than in the past. Indeed what in the long run can prove to be a fundamental basis except the natural justice of dealing squarely with real conditions? The regulation of rates will henceforth inevitably tend to be determined by inquiry into costs. § 1374. Various systems of making distance rates. In practice it must be admitted rates have been made by the railroads with but little reference to mileage. There are four principal methods of making freight rates: (1) mileage rates, never exactly followed in practice; (2) group rates, the same rate being made to all points within a certain zone; (3) basing points to which through rates are made, the local rates therefrom being added to get rates for tributary territory; (4) competitive rates, the rate to the competitive point plus the local rate. Each has its advantages and each is open to some objections. The remote parts of the country object to a mileage basis. The blanket rate finds objectors where an important point is 1 The possibility that the actual cost of the shorter transportation between certain points may be greater than that of a longer transportation between other points is made much of in the English cases. See among many others: Bellsdyke |