ambitious to supply the surrounding territory. The basing point system arouses friction, in that rival center points demand like privileges. And no community which suffers by the competitive rate system can ever see anything but extortion in it. § 1375. Long and short haul. The charge by a carrier of a less rate between two points than is charged for carriage from the same initial point to an intermediate point on the same route seems at first sight indefensible upon any legal basis. Nevertheless such rates have always been common in every railroad schedule and are still vigorously defended. Such discrimination flourished practically without any real check during the period when no rule against any discrimination was recognized. In the interstate commerce legislation of 1887 there were clauses against all kinds of discriminatory rates, specifying in a separate clause charging more for a short haul than for a long haul which included it. There is similar legislation, including the same specific clause, in many of the states as well. And consequently there is a large body of judicial construction of these prohibitions both general and special, which although really germane enough, it would be really beyond the scope of this work to discuss in the detail it demands. 1376. The similar circumstances proviso. This long and short haul clause in the Interstate Commerce Act expressly provided that exceptions to it must be by special dispensation from the commission.1 But 1 The philosophy of the act as expressed by Judge Shiras in Van Patten v. Chicago, M. & St. P. Ry., was that competition would reduce the rates to a fair amount at all competitive points, and that the fourth section would then keep the rates at noncompetitive points down to the level of the competitive rates. The courts, however, finally decided in view of the limitation of the section to cases where the conditions were substantially similar that competition with other rail tucked away in the section was the vague phrase, "under substantially similar circumstances," which proved its destruction. At first there was some disposition to enforce the act according to its obvious reading, and the Interstate Commerce Commission began to grant dispensations from its operation on petition of the railroad in proper cases. But it was finally held that wherever there was competition at the distant points, the conditions were dissimilar. As a result of this the railroads were then freed from the operation of this particular clause in every case where there is any business reason why they should wish to act in violation of it. In the latest Federal legislation the power to prevent such discrimination is apparently restored to the commission. It is to be hoped that when the time comes for judicial action upon this new legislation, it will not be construed away. § 1377. Competition as a justification for disproportion. It is now well settled in the Federal courts that competition with other carriers at a certain point justifies a lower rate at that point than at neighboring noncompetitive points. But this is not admitted by a majority of the roads would justify a lower rate for the longer haul, and as practically all cases of the sort before the passage of the act had been due to the competition of other railways, this decision in effect qualified the whole section. 1 The first case to decide this was Texas & P. R. R. Co. v. Interstate Comm. Comm., 162 U. S. 197, 40 L. ed. 940, 16 Sup. Ct. 6 (C. C., 1896). 2 Cincinnati, N. O. & T. P. Ry. Co. v. Interstate Comm. Comm., 162 U. S. 184, 16 Sup. Ct. 700, 40 L. ed. 935, B. & W. 424 (1896); Inter state Comm. Comm. v. Alabama Midland Ry. Co., 168 U. S. 144, 18 Sup. Ct. 45, 42 L. ed. 414 (1897); Louisville & N. R. R. Co. v. Behlmer, 175 U. S. 648, 20 Sup. Ct. 209, 44 L. ed. 309 (1900); East Tennessee, V. & G. Ry. Co. v. Interstate Comm. Comm., 181 U. S. 1, 21 Sup. Ct. 516, 45 L. ed. 719 (1901); Texas & P. Ry. Co. v. Interstate Comm. Comm., 162 U. S. 197, 16 Sup. Ct. 666, 40 L. ed. 940 (1896); Interstate Comm. Comm. v. Louisville & N. R. R. Co., 190 U. S. 273, 47 L. ed. 1047, 23 Sup. Ct. 687 (1903); Interstate Comm. Comm. v. Southern State courts by any means. It even has not been applied under all circumstances by the Federal courts. Under what circumstances the Federal doctrine has been applied is indeed interesting. Water competition was at first held an excuse for a lower rate for the longer haul. Then rail competition was recognized.2 Next potential competition over existing routes was held enough. But finally the courts refused to consider the mere possibility of new routes. At the same time a competitive point might lose its preference by consolidation of existing routes, thus eliminating competition, and in this way the commerce of Ry. Co., 105 Fed. 703 (1909); Interstate Comm. Comm. v. Nashville, C. & S. L. Ry. Co., 120 Fed. 934, 57 C. C. A. 224 (1903); Interstate Comm. Comm. v. Cincinnati, P. & V. R. R. Co., 124 Fed. 624 (1903); Interstate Comm. Comm. v. Chicago Gt. W. Ry. Co., 141 Fed. 1003 (1905). The court was much influenced by the English cases, the language of the English act being similar. See Phipps v. London & N. W. R. R. Co. (1892), 2 Q. B. 229. 1 State cases against relative discrimination are: Illinois. Illinois Central Ry. Co. v. People, 121 Ill. 304, 12 N. E. 670 (1887). Iowa.-Blair v. Sioux City & P. Ry. Co., 109 Ia. 369, 80 N. W. 673 (1899). Kentucky.-Louisville & N. Ry. Co. v. Com., 21 Ky. L. Rep. 232, 51 S. W. 164, 1012 (1899). Massachusetts. See Com. v. Worcester & N. R. R. Co., 124 Mass. 561 (1878). Missouri.-Cohn v. St. Louis, I. M. & S. Ry. Co., 181 Mo. 30, 79 New Hampshire.-Osgood v. Concord R. R. Co., 63 N. H. 255 (1884). Oregon.-Portland Ry., L. & P. Co. v. Railroad Commission (Oreg.), 109 Pac. 273 (1909). But see apparently contra: Alabama.-Lotspeich v. Central Ry. & B. Co., 73 Ala. 306 (1882). Minnesota.-State ex rel. Minneapolis & St. Louis Ry. Co., 80 Minn. 191, 83 N. W. 60, 89 Am. St. Rep. 514 (1900). South Carolina.-Ex parte Benson & Co., 18 S. C. 38, 44 Am. Rep. 564 (1882). Tennessee.-Ragan & B. v. Aiken, 9 Lea, 609 (1882). 2 Texas & P. R. R. v. Interstate Comm. Comm., 162 U. S. 197, 40 L. ed. 940, 16 Sup. Ct. 666 (1896). Interstate Comm. Comm. v. Alabama Midland Ry. Co., 168 U.S. 144, 42 L. ed. 414, 18 Sup. Ct. 45 (1897). East Tennessee, V. & G. Ry, v. Interstate Comm. Comm., 181 U. S. 1, 45 L. ed. 719, 21 Sup. Ct. 516 (1901). a flourishing town might pass to a rival, because its railways were consolidated and competition thus eliminated, while its rival still enjoyed the lower competitive rate.1 § 1378. Undue preference. The general clauses in these statutes, as has been said, cover undue and unjust preference or priority between localities or communities under substantially similar circumstances and conditions. So general is this language that it has not been invoked nearly so often as the more specific long and short haul clause from which it is usually distinguished. It can, therefore, hardly be discussed except in generalities. It is not enough under the act that freight charges to a certain place should be reasonable. Rates must be relatively reasonable as compared with those to other places in the same part of the country,2 in order to prevent unjust discrimination. This discrimination may be made in other treatment as well as transportation charges; for instance, car distribution. The prejudice is not illegal unless it is undue, and whether this is true is a question of fact.3 In passing upon the question, it is not only legitimate, but proper, to take into consideration, besides the mere differences in charges, various ele 1 Interstate Comm. Comm. v. Southern Ry., 117 Fed. 741 (1902). 2 As to what constitutes relative discrimination, see: United States.-Chicago, R. I. & P. Ry. Co. v. Interstate Comm. Comm., 171 Fed. 680 (1909). Iowa.-Blair v. Sioux City & P. Ry. Co., 109 Iowa, 369, 80 N. W. 673 (1899). Nebraska.-Chicago, B. & Q. R. R. Co. v. Anderson, 72 Neb. 856, 101 N. W. 1019 (1907). Pennsylvania.-Central Iron Co. v. Pennsylvania R. R. Co., 17 Pa. Co. Ct. 651 (1895). 3 As to what is not relative discrimination: United States.-Interstate Comm. Comm. v. Detroit, G. H. & M. Ry. Co., 167 U. S. 633, 42 L. ed. 306, 17 Sup. Ct. 986 (1897). Arkansas. Little Rock Ry. Co. v. Oppenheimer, 64 Ark. 271, 43 S. W. 150, 44 L. R. A. 353 (1897). Kentucky.-Louisville & N. R. R. Co. v. Walker, 23 Ky. L. Rep. 453, 63 S. W. 20 (1901). Massachusetts.-Com. v. Worcester & N. R. R. Co., 124 Mass. 561 (1878). ments, such as the convenience of the public, the fair interest of the carrier, the relative quantities or volume of the traffic involved, the relative cost of the services and profit to the company, and the situation and circumstances of the respective customers with reference to each other. In comparing rates from two points to a common destination, distance is the first factor to consider, though it is not controlling or always the most important. As has often been stated, rates are not made on a ton-mile basis, and they cannot be expected to bear an exact proportion to the distance. If, however, the localities are neighboring ones and the conditions substantially the same it seems that distance should govern. § 1379. Argument for competitive rates. 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 noncompetitive 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 noncompetitive 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 noncompetitive traffic. As the competitive traffic will not pay its share of the fixed charges, the noncompetitive traffic, having more than its share of the fixed charges to |