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Party Rate Case.*
“It was not the design of the Act to stifle competition.”
Decision of the Supreme Court in this case.
The Commission's order in this case did not have the
approval of either of the courts which passed upon it. It is worth noting that while the original complaint was filed with the Commission on July 10, 1889, and decision rendered on February 21, 1890, seven months and eleven days thereafter, the petition for the enforcement of the Commission's order which was filed in the Circuit Court on May 1, 1890, was dismissed by that court on August 11, 1890, or only three months and eleven days later.
The complainant in this case, being a railway company, was engaged in competition with the defendant for passenger traffic, and the latter chose to offer prospective passengers opportunity to combine in parties of ten or more and to purchase single tickets covering such groups of travellers at a lower average charge per capita than the single fare at the same time in force. Tickets of this class had long been known in railway practice by the name of “party-rate” tickets. The complainant did not care to issue tickets of this sort but objected to the business which they attracted going exclusively to its rival. The former, therefore, wished to have the practice of issuing such tickets declared illegal. The party rates of the defendant were not restricted to any particular class or section of the public but were open to all. On this point the Commission said:
* Pittsburg, Cincinnati & St. Louis Railway Company vs. Baltimore & Ohio Railroad Company; Inter. Com. Comm. (3 I. C. C. Rep. 465), decided February 21, 1890. Interstate Commerce Commission vs. Baltimore & Ohio Railroad Company; Circuit Court, Southern District of Ohio (43 Fed. Rep. 37), decided August 11, 1890. Interstate Commerce Commission, Appellant, vs. Baltimore & Ohio Railroad Company; Supreme Court of the United States (145 U. S. 263), decided May 16, 1892.
"By the party-rate system the carrier says to all persons in substance—if you want one ticket for the transportation of ten or more persons on the same train to the same destination you can have it at a specified reduced rate below the regular rates.”
The precise question before the Commission was whether persons travelling in groups of ten or more are carried under circumstances and conditions substantially similar to other persons travelling at the same time, singly, between the same points in the same direction. The broader question now under discussion is whether there is substantial injustice in charging the former less than the latter. The Commission discussed both questions and decided them both in the affirmative; the Circuit Court and the Supreme Court also discussed them both and decided both in the negative. Judge Jackson, who rendered the decision in the Circuit Court, said: “Now it is neither claimed nor proved in the present case that defendant's charges, either for single passenger or 'partyrate' tickets, are in themselves unjust and unreasonable. On the contrary, both rates are shown to be just and reasonable. The public has, therefore, no ground of complaint on that score, nor has any legitimate complaint been made on its behalf, either by the original petitioner or by the Commission.”
Further along in the decision, taking up the question of relative justice, he said:
“It is clearly shown by the proof that the same business reasons, considerations, circumstances, and conditions which induce the most enlightened railroad management, having due regard both to the interests of their lines and to the convenience of the public, to make reduced rates on mileage, excursion, long distances, round trip, time trip, or specified number of trip tickets apply in all their force to 'partyrate' tickets for ten or more persons travelling together in one body on a single ticket. Reduced rates to these several classes or descriptions of passenger traffic rest upon the same general principle, which the Act to regulate commerce nowhere calls in question, that common carriers may rightfully so adjust their charges as to encourage and develop travel; that the amount or volume of such traffic is a legitimate element to be considered in determining what reduction should be made over local or ordinary rates, so as to make both correspond with the cost of service and the fair profit which the carrier is entitled to earn from each class of travel. Quantity of traffic affects both the cost of service and the legitimate profit which may be demanded for such service. When the profit on frequency of trips or on larger numbers transported at reduced rates reasonably corresponds with the fair profit of the carrier on a single trip, or smaller number transported at the ordinary higher rate, the carrier making such an adjustment of its charges with a view of encouraging and developing its legitimate business is only putting into practice the reasonable and well settled business principle of every avocation or trade, which recognizes quantity, whether arising from the number or size of the transactions, as a proper element in the consideration and adjustment of the price. No complaint was ever made against common carriers acting upon this principle. * * *
“The evidence before us shows that, if party-rate' tickets, as described and used by defendant, cannot be lawfully issued or should be discontinued, the revenues of common carriers derived from passenger traffic will be seriously impaired, while the convenience and benefit to the public, traveling in parties or bodies of ten or more, such as amusement companies, associations, clubs, organizations, delegates, and representatives attending conventions, religious, educational, or political, will at the same time be greatly interrupted and prejudiced.”
The Supreme Court sustained the view of the Circuit Court, and the decision by Judge Brown received the unanimous approval of his colleagues. It repeats much of the reasoning adopted by Judge Jackson and only a brief quotation need be made.
In part, the Supreme Court said:
“These tickets then being within the commutation principle of allowing reduced rates in consideration of increased mileage, the real question is, whether this operates as an undue or unreasonable preference or advantage to this particular description of traffic, or an unjust discrimination against others, * * * Even if the same reduced rate be allowed to every one doing the same amount of business, such discrimination may, if carried too far, operate unjustly upon the smaller dealers engaged in the same business and enable the larger ones to drive them out of the market. The same result, however, does not follow from the sale of a ticket for a number of passengers at a less rate than for a single passenger; it does not operate to the prejudice of the single passenger who cannot be said to be injured by the fact that another is able in a particular instance to travel at a less rate than he. If it operates injuriously toward anyone it is the rival road, which has not adopted corresponding rates; but, as before observed, it was not the design of the Act to stifle competition, nor is there any legal injustice in one person procuring a particular service cheaper than another.
* “The evidence shows that the amount of business done by means of these party-rate tickets is very large; that theatrical and operatic companies base their calculation of profits to a certain extent upon the reduced rates allowed by railroads; and that the attendance at conventions, political and religious, social and scientific, is, in a great measure determined by the ability of the delegates to go and come at a reduced charge. If these tickets were withdrawn the defendant road would lose a large amount of travel, and the single trip passenger would gain absolutely nothing."