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 may be said to have some reason in it.2

§ 1380. Competitive rates must not be ruinous.

3

Every one agrees that there is at least this limitation upon this permission to reduce rates to meet competition, that rates must not be brought below the special expense of doing the business. This was clearly explained by Mr. Justice White in one of the leading cases in the United States Supreme Court thus: "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." 4

1 See the opinion of Bathea, J., in Interstate Commerce Commission v. Chicago Gt. Western R. R. Co., 141 Fed. 1003 (1906).

2 See the opinion of Collins in State ex. rel. v. Minneapolis & St. L. Ry. Co., 80 Minn. 191, 83 N. W. 60 (1900).

East Tennessee, V. & G. R. R.

Co. v. Interstate Comm. Comm., 181 U. S. 1, 19, 45 L. ed. 719, 21 Sup. Ct. 516 (1901).

See further the general talk of the court in Interstate Commerce Commission v. Alabama Midland Ry. Co., 168 U. S. 144, 42 L. ed. 414, 18 Sup. Ct. 45 (1907).

§ 1381. Reconsignment arrangements.

A very important feature in modern railroading is the permission given to the owners of goods in transit to have the advantages of the through rate upon paying a very small additional premium, although the transit is interrupted for a time to do something to the commodities in question at some intermediate point, to prepare them for market, or even to entirely change their form by manufacture of some sort. Thus the railroads not uncommonly grant the privilege of cleaning in transit, of bagging in transit, of compressing in transit and of milling in transit. Upon similar principles a through rate may be established, not by uniting on a single rate for one entire haul over two roads, but by charging the separate rate on the goods to the junction point, and then upon the goods being there reconsigned and reshipped over a second road, paying a rebate on the charges of the first or of the second road. This is sometimes allowed when the goods are taken by the consignee at the junction point and there held for a considerable time, for the purpose of awaiting a favorable turn of the market. These privileges are only applicable to shipments intended from the outset to be through shipments.2 Loose practice in giving rebates on reconsigned goods may lead to a state of affairs which results in discrimination.

1 Railroads which have formerly allowed reconsignment without additional charge may make an extra charge for cars standing on a "hold track" awaiting reconsignment directions: State v. Atchison, T. & S. Ry. Co., 176 Mo. 687, 75 S. W. 776 (1903). See also State v. Atlantic C. L. Ry. Co. (Fla.), 52 So. 4 (1910).

'Although a true rebilling rate is permissible where the same goods

are reconsigned at some point in transit, the granting of a special rate for the transportation of other goods from a certain point to those who show "expense bills" for an equal amount received over an associated line constitutes illegal discrimination. Alabama & V. Ry. Co. v. Railroad Commission, 86 Miss. 667, 38 So. 356 (1905), affirmed in 203 U. S. 496, 51 L. ed. 289, 27 Sup. Ct. 163 (1906).

§ 1382. Back freights.

There is no reason for requiring the same charge for carriage between the same points in opposite directions. Various factors which properly enter into the rate may be different in the two cases. One reason often given for justifying higher rate in one direction is the fact that the volume of traffic may be less. It is characteristic of the inexact character of the law of rate making that this fact might also justify a lower rate, if the railroad chose to make it. At all events where in the direction of lighter traffic a railroad is carrying many empty cars, it will be justified in lowering the rate in order to fill the cars.1 When the preponderance of freight is so largely in one direction that the supply of empty cars exceeds the demand for return loads at full rates, it is held to be not unlawful to encourage business by affording transportation on less profitable terms. Of course this making of low "back freights" is subject to the limitation that the rate must not be so low as not to recoup the railroad for the additional expenses in hauling back loaded cars, which must receive due protection during transit.2

§ 1383. Equalization of economic advantage.

A theory of fixing rates which appeals to many economists, which is in fact a modification or special application of the rule for charging what the traffic will bear, is the theory that rates should be so fixed as to equalize

'Special circumstances, such as the flow of traffic, may show that a higher freight rate in one direction than in the opposite is not an overcharge. Scull v. Atlantic C. L. R. R. Co., 144 N. C. 180, 56 S. E. 876 (1907).

2 But in testing the reasonableness of a freight charge for carriage in one direction the fact that the

freight rate is lower in the opposite direction tends to show that the higher rate is unreasonable where the grades on the road and the expense of moving trains is substantially the same in both directions. Southern Ry. Co. v. Railroad Commission, 42 Ind. App. 88, 83 N. E. 721 (1908).

the advantage of its patrons for the good of the country. And some of the State courts have given countenance to these doctrines. Thus in a Minnesota case 1 Judge Collins justified the railroad commission in prescribing an abnormally low rate for a long haul of coal as compared with other commodities and other distances upon the commercial considerations of the sort above described, "namely, the application of principles when fixing rates which are forced upon common carriers by various conditions and circumstances and are in common practice among them, a business policy which actuates and influences the carriers themselves to disregard a rule of strict comparison and strict equality as between bulk, or weight, or value as well as distance of carriage." And in a recent Georgia case 2 where the issue also was whether the railroad commission had acted irrationally in taking economic considerations into account in fixing the rate upon particular commodities between stations, Judge Evans said: “We do contend that the commission, in the discharge of its duty to fix reasonable rates, is not precluded from the consideration of economic conditions recognized by the carriers in the conduct of their business. The full purpose of the creation of the commission would be thwarted if it could not consider and act on every economic or industrial factor potentially influencing the operation of a railroad and the transportation of freight. It cannot act arbitrarily nor by edict produce abnormal conditions of trade; it cannot display favoritism by capriciously giving preferential rates to one locality which are denied to another. It may, however, recognize the traffic conditions between given points, and adjust its schedule to meet these conditions.'

1 State v. Minneapolis & St. Louis Ry. Co., 80 Minn. 191, 83 N. W. 60 (1900).

2 Southern Ry. Co. v. Atlanta Stove Wks., 128 Ga. 207, 57 S. E. 429 (1907).

§ 1384. Law against commerical equalization.

1

It has sometimes been urged that a carrier should so arrange its rates as to bring about some desirable commercial result, whether by equalizing commercial advantages between two localities or by otherwise affecting natural conditions. However much this theory may have appealed to some economists who have applied their theories of what is for the best interests of society to the railroad problem, it has very little weight with the lawyers who have had to do with the question. As was said in one of the earlier Federal cases: "Shall government undertake the impossible, but injurious, task of making the commercial advantages of one place equal to those of another? It might as well attempt to equalize the intellectual powers of its people. There should be no attempt to deprive a community of its natural advantages, or those legitimate rewards which flow from large investments, business industries, and competing systems of transportation to facilitate and increase commerce." In the latest case 2 involving this problem it plainly appeared that the Interstate Commerce Commission had employed various economic policies in fixing the relative rates in question. The lower Federal court held that the Commission had no power to lower through rates between certain points, as between Atlantic seaboard points and Mississippi river points and Denver, so as to give, for example the Missouri river cities an artificial advantage over other points in shipments east of Denver, and Denver an advantage over Missouri river cities to points west of Denver. But the United States Supreme Court has just

1 Brewer v. Central of Ga. Ry. Co., 84 Fed. 268 (1897). See also Interstate Commerce Commission v. Louisville & N. Ry. Co., 118 Fed. 613 (1902).

2 Chicago, R. I. & P. R. R. Co. v.

Interstate Commerce Commission, 171 Fed. 680 (1909); overruled by Interstate Commerce Commission v. Chicago, R. I. & P. R. R. Co., 218 U. S. 88, 54 L. ed. 000, 30 Sup. Ct. 65 (1910).