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having chartered a corporation to make use of said franchises, could not, in the exercise of its sovereignty, inquire how these franchises had been employed and whether they had been abused, and demand production of the corporate books and papers for that purpose. The fact that the corporation receives its franchise from a sovereign State is not material, because such franchise, when exercised in connection with interstate commerce, must be exercised in subordination to the power of Congress to regulate such commerce. The corporation is subject to a dual sovereignty, and the Federal government possesses the same right to see that Federal laws are respected, as the State has with respect to the special franchise which it has conferred. The powers of the general government in vindicating its own laws, are the same as if the corporation had been incorporated by an act of Congress.
“It follows, therefore, that the examination of the books and papers of a corporation, if duly authorized by act of Congress, would not constitute an unreasonable search and seizure within the Fourth Amendment. The objection, however, of a witness to the validity of a subpæna duces tecum as being too broad as far as the corporation is concerned does not excuse the witness from answering questions put to him, and has no bearing upon the validity of an order committing him for contempt for refusal to do so.” (Hale v. Henkel, 201 U. S. 43; McAlister v. Henikel, 201 U. S. 90.)
III. COMMERCE ACT – ELKINS' ACT — POOLING — RE
BATES — DISCRIMINATION. § 14. Unreasonable Rates — Charges Based on Shippers' Profits.- Where industries have been established to manufacture, sell, and ship certain commodities, to-wit, lumber, and the success attending the enterprise has greatly increased the profits resulting from the business, a carrier transporting the property has no legal right to increase the costs of carriage of the lumber in proportion to the prosperity and increased profits resulting from the suc
POOLING — WHAT CONSTITUTES.
cess of the enterprise. The carrier cannot arbitrarily draw to itself a portion of the profits of the manufacturer and producer whose commodities it transports, by arbitrarily increasing the charges of transportation in proportion to the profits earned by the enterprise of the shipper. Such arbitrary increase is unlawful, and will be restrained by injunction. (Tift et al. v. Southern R. R. Co., 138 Fed. Rep. 753. June, 1905, Cir. Ct., W. D. Georgia, S. D.)
§ 15. Pooling - What Constitutes.- A number of railroads combined and formed what is known as the Southeastern Freight Association. By concert of agreement, rates were advanced upon shipments of a particular class throughout the territory influenced by the association. Such a combination, when it actually advances rates and exacts the same of the shippers, will not be excused, nor will participants be relieved from the consequences of its acts, upon the ground that the members of the association have signed a stipulation, that each and all members can, at will, and at any time, withdraw from the agreement. The combination, when its object is to unreasonably advance rates, violates the provisions of the Interstate Commerce Act, which forbids pooling. The prohibition as to pooling was intended to destroy monopolies and secure competition. “Pooling," says SPEER, J., “may be as well effected by a concert in fixing in advance the rates, which in the aggregate would accumulate the earnings of naturally competing lines, as by depositing all such earnings to a common account and distributing them afterward. That such an association and concert of action between agents of naturally competing lines is destructive of competition is equally unanswerable. To entertain any other view is to ignore reiterated decisions of the Supreme Court of the United States and many rulings of the Circuit Courts and of the State courts.” (Tift et al. v. Southern R. R. Co., 138 Fed. Rep. 753. June, 1905, Cir. Ct., W. D. Georgia, S. D.)
§ 16. Pooling - When Joint Through Rate Is Not.A joint through rate, made by carriers having terminals on
the Pacific coast to transport oranges, lemons, and other citrus fruits to the Atlantic seaboard, the through rate being guaranteed by the initial carrier, on condition that the carrier and not the shipper shall select the routes to the Atlantic coast over the roads connecting with the eastern terminals of the initial carrier, is not a violation of section 5 of the Interstate Commerce Act, prohibiting pooling. (Southern Pacific Co. v. Interstate Com. Co., 200 U. S. 536 ; Southern California Ry. Co. v. Interstate Com. Co., 200 U. S. 536; Atchison, Topeka & Santa Fé Ry. Co. v. Interstate Com. Co., 200 U. S. 536; Santa Fé Pacific Ry. Co. v. Interstate Com. Co., 200 U. S. 536:)
The case cited arose upon an application by the Interstate Commerce Commission to the United States Circuit Court, southern district of California, to enforce an order of the commission, directing the carriers to cease and desist from enforcing their rule denying shippers of citrus fruits to designate the routes beyond the terminals of the initial carriers, for transportation of their property from California to the eastern markets, on the ground that the rule was in violation of various provisions of the Interstate Commerce Act. The court below enjoined the enforcement of the rule and the carriers appealed. The judgment appealed from was reversed and the injunction dissolved.
Prior to the adoption of the rule, shippers were accustomed to select the eastern route from the terminals of the initial shippers to the seaboard, over which the fruit was shipped, and in the enjoyment of this right the shippers, it was charged, received rebates from the eastern carriers operating roads beyond the terminals of the initial carriers. One shipper, the Southern California Fruit Exchange, admitted that in four years it received rebates amounting to $174,000. Among those participating in these rebates were the car-line companies, owning cars in which the fruit was packed, described as ventilating or refrigerating cars, which cars were hired by the initial carriers. The car companies received a bonus from eastern connecting roads, of from $10 to $40 a car, in consideration of the car being routed over the line, paying the bonus, a part of which was usually turned over
POOLING — RULE AS TO ROUTING.
to the shipper by the car company for the privilege allowed the latter of routing the shipment. The right of routing, therefore, was extremely valuable to the shipper and to the private carline companies. In order to break up the practice of rebating, which proved so valuable to the shipper, the initial carriers established the following rules:
Rule as to Routing. “In guaranteeing the through rate named herein, the absolute and unqualified right of routing beyond its own terminal is reserved to initial carriers giving the guarantee. In accordance with this rule, agents will not accept shipping orders or other documents, if routing instructions are shown thereon. Neither will agents accept verbal routing instructions."
“ Initial carriers will route each car from point of origin to point of destination and diversion in transit will not be permitted, except by consent of initial carrier, who will thereupon designate new routing when diversion necessitates change therein.”
The initial carriers on the Pacific coast embraced two systems known as the Southern Pacific and Santa Fé, whose termini were at Chicago, Ogden, and New Orleans, from which points the eastern shippers over various routes transported the fruit to all parts of the United States. After the rules denying to the shipper the right to select his routing, neither the shipper nor the car lines could secure rebates from the eastern carriers, because they could no longer designate the route over which the fruit should be shipped. The initial carrier then made joint-tariff rates for transportation of oranges, and citrus fruits from southern California at $1.25 per hundred to practically all points east of the Missouri river, which tariff agreements were filed with the Interstate Commerce Commission. The initial carrier, however, did not assume liability for negligence of any connecting line. After a full hearing, the commission held that the agreement made by the initial carrier with their eastern connections constituted pooling of the rates on citrus fruit traffic, or the divided earnings therefrom, in violation of section 5 of the Interstate Commerce Act prohibiting pooling, and that the rule complained of subjected the shipper to undue, unjust, and unreasonable preference and disadvantage, and gave the carrier an undue and unreasonable preference and advantage in violation of section 5 of the Interstate Commerce Act.
The Supreme Court reversed the ruling of the Circuit Court, which sustained the order of the Commission, and dissolved the injunction upon the ground that under the circumstances of the case, and in view of the fact that citrus fruits were a particular kind of freight in regard to which all other freight has substantially nothing in common, and also in view of the fact that as all shippers were treated alike by the initial carrier, it could not be said that any unjust discrimination or preference resulted from the rule under the circumstances; therefore the court held that the agreements for joint through rates by the connecting carriers were not pooling agreements within the prohibition of section 5 of the Interstate Commerce Act. The court observed that the evidence showed that the rules were adopted by the initial carrier for the purpose of breaking up rebating, which had been accomplished, and the evidence showed that the eastern roads entered into the routing agreement because they were satisfied that it would be better than the practice of rebating, which had previously obtained, and that they would get a fair share of the business or, in other words, would be fairly treated by the initial carrier, who gave them to understand that they would be so treated and that there was no evidence of the existence of a tonnage pool. The court further said that the court below treated the connecting carriers as rival and competing transportation lines, and assumed that between these lines there would exist, but for the routing agreement, a competition for the fruit transportation, which competition was destroyed by the rule. The Supreme Court, in answer to this contention, said: “We think these various routes were really not competing roads within the meaning of the fifth section of the Commerce Act, when the facts are carefully examined. * * * The initial carrier did not on its line reach the eastern markets, but reached various connecting roads which did reach those markets. The initial carrier had the right to enter into an agreement for joint through rates, with all or any of these connecting companies, though such companies