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HERVEY BATES AND H. BATES, JR., v. THE PENNSYL-
HERV
VANIA RAILROAD COMPANY AND THE PENN-
SYLVANIA COMPANY.

Complaint filed August 29, 1889. Answers filed September 12 and 13, 1889. Heard at Indianapolis September 17, 1889. Leave to appear and be heard granted to the Baltimore & Ohio Railroad Co., October 31, 1889. Brief on behalf of Baltimore & Ohio Co. filed November

22, 1889. Decided February 7, 1890.

The defense of water competition from Chicago and the lake shipping points to seaboard points east, as a justification for an otherwise unjustifiable discrimination in rate between corn and its direct products from Indianapolis to said seaboard points was held to be untenable, owing to the situation of Indianapolis as to the lakes and to the location of the territory where the corn was mainly raised that was marketed at Indianapolis, and to the other facts established in this case.

Where an existing classification and rate are not shown to operate injuriously to the carriers from a given point or to give undue advantage to shippers, a change is not justifiable that materially injures an important industry and a class of shippers at that point who have there built up the industry in reliance upon a continuation of the previous classification and rate first established and long maintained by the carriers themselves, without complaint from any quarter. Such change in classification and rate would subject the persons engaged in the industry and the locality and the particular traffic to unreasonable disadvantage within the prohibition of section three of the Act to regulate commerce.

A discrimination between the rate on corn and its direct products from a given locality resulting from a reduction of the rate on corn below the rate on its direct products, which subjected persons in that locality engaged in the business of manufacturing corn into its direct products and of selling the same to unreasonable prejudice or disadvantage, and was without necessity or advantage to the carrier, or any reason founded on the character or condition of the traffic. Held, to be in violation of section three of the Act to regulate commerce, notwithstanding the new rate on corn was open to all persons equally and with equal service.

When carriers other than the respondents of record are committing the same violations of the Act to regulate commerce as the respondents, an order may issue against the respondents and the cause be held for the purpose of bringing such other carriers into it to be proceeded against unless they comply with the order.

W. A. Ketcham, for complainants.

J. T. Brooks, for defendants.

John K. Cowen and Hugh L. Bond Jr., for Baltimore & Ohio R. R. Co.

VEAZEY, Commissioner:

The complaint in this case charged that Hervey Bates and H. Bates, jr., are engaged in the business of milling at Indianapolis, Indiana, operating and carrying on the mills known as The Indianapolis Hominy Mills; that the defendants are common carriers by railroad between Indianapolis, in the State of Indiana, and New York, in the State of New York, and subject to the Act to regulate commerce; that by the terms of their freight tariff in force they persist in a serious and ruinous discrimination against the business of the complainants, and to the corresponding advantage and profit of certain and all millers making the same or similar goods at or near the seaboard, or in the various cities at or near the eastern termini of said railroads; in that they charge and collect as freight charges on corn transported from said city of Indianapolis to said city of New York, at the rate of eighteen and one-half cents per hundred pounds weight; while contemporaneously and under similar conditions charging and collecting as freight charges on ground corn, cracked corn and corn meal, grits and hominy, and the refuse from the manufacture of said products called feed—at the rate of twenty-three cents per hundred pounds weight, thereby giving a direct and immediate advantage to millers at or near the eastern termini of said defendants' railroads of four and one-half cents per hundred pounds, and placing upon the complainants a disadvantage and consequent loss exactly corresponding to the gain of these eastern competitors; that the goods manufactured by the Indianapolis Hominy Mills are largely and mostly sold in New York and other eastern

cities, and that the business of complainants has grown to its present large proportions nurtured through many years by a freight tariff from Indianapolis to the seaboard always equal to and no more than the tariff on the whole grain, and that it is but recently that mills making the same or similar goods have been established in the eastern part of the country; that such discrimination is ruinous in the extreme is shown by the fact that two and eight-tenths cents per bushel on the price of corn (5c. per cwt.) is sufficient to absorb the profits of any western mill for the past three years some three or more times.

Each defendant answered separately but in substance the same, denying all averments of violations of the Interstate Commerce Law by discriminations as alleged in the complaint, but admitting that the rates charged for raw corn and its products were as alleged therein, and averring that the rate of twenty-three cents for transportation of corn products is just and reasonable, and the rate of eighteen and one-half cents per hundred pounds for transportation of raw corn is not as much as it should be, but denying that the difference in rates for the transportation of corn and corn products is an unlawful discrimination against complainants.

The defendants respectively averred that the rate of eighteen and one-half cents per hundred on corn is forced upon them and other railway lines of transportation between Indianapolis and New York city and other eastern cities by northern lines of transportation which are made up wholly of lake and canal or partly lake and canal and partly rail routes; that the price charged by these northern water routes for the transportation of corn to New York city and other eastern cities is much less than eighteen and one-half cents per hundred, and unless defendants and other rail routes extending from Indianapolis eastward should reduce their rates for transportation of corn to eighteen and one-half cents per hundred, no corn would be offered to defendants for transportation eastward. Defendants further say that the rail routes extending from Indianapolis eastward transport only about six hundred thousand bushels of corn per year, while the northern water routes above mentioned transport annu

ally about fifteen million bushels, and the defendants aver that whatever disadvantage complainants incur in consequence of difference between rates charged on corn and corn products arises from the fact that the northern water routes transport corn eastward in such large quantities and at such low rates in comparison with what the defendant companies do, and from the further fact that it is impossible for the complainants doing business at Indianapolis to be on an equality with competitors in business who are so situated as to have the advantage of water routes of transportation.

It is found from the evidence that in the railroad official classification of corn and its direct or immediate products, such as ground corn, cracked corn, corn meal, grits, hominy and feed, they have all for twenty years, more or less, been in the sixth class, and were so classified by the defendant companies and other railroad companies constituting the railroad routes between Indianapolis and eastern seaboard points; that this classification continued until July, 1889, and that until the last-named date there has been no discrimination in rate between raw corn and its immediate products; that on the said 1st of July the rate on raw corn as well as its direct products was and had been previously thereto twenty-five cents per hundred pounds by rail from Chicago to New York and other eastern seaboard points, and that on that basis the charge was and had been twenty-three cents from Indianapolis to New York, as the fair proportion of the rate from Chicago to New York on account of the less distance from Indianapolis; that about the 10th of July a reduced rate was put into effect to the seaboard on corn. This reduced rate was first made by the Baltimore & Ohio Railroad Company and was soon followed by the defendants and other companies. This resulted in negotiations between railroad companies and an agreement was finally effected to make the rate on corn products between Chicago and eastern seaboard points twenty-five cents per hundred pounds and the rate on raw corn twenty cents, and the rate from Indianapolis to the same points was fixed at eighteen and one-half cents on corn and twenty-three cents on its products, this being a fair proportion of the last-named Chicago rates.

It is further found that twenty-three cents per hundred pounds is not an unreasonable charge for the transportation of corn products from Indianapolis to the seaboard, and that the rate of eighteen and one-half cents per hundred pounds on corn produced but little profit under favorable circumstances, and sometimes none to the carrier, but that the railroad would rather carry it at that rate than not to transport it. The evidence tended to show, and there was no evidence to the contrary, that no reason founded on cost of service existed for difference in rates between corn and corn products, and it is found upon the showing in this case that the defendant companies could afford to carry the direct corn products at the same rate that they could afford to transport the raw

corn.

It is further found that the rate for the transportation of corn from Chicago to New York by water, through lake and canal, is and has always been a varying rate, depending upon supply and demand of traffic and vessels for the service, but always as low as twenty cents per hundred pounds, and generally lower. It was clearly established that the proportion of corn carried east from Chicago by water, as compared with that which is transported by rail is very much larger. The corn raised easterly of the line of the Chicago & Eastern Illinois railroad does not to any great extent go to Chicago in its transportation to eastern markets, but is carried east by the railroad lines.

The corn raised west of the said described line does, as a rule, find its way to market through Chicago. This was the condition before the said reduction in rates last July, and there has been no apparent change since. That is, the same proportion went by Chicago prior to July that has gone since the reduction in the rate on corn was made by taking the corn out of the classification and making a commodity tariff.

One of the complainants testified that this change in the classification of corn and the consequent change in the rate thereon affected their business injuriously and it is found that their milling business has suffered materially since that change. One of the complainants testified, and it is so

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