publishing a rate but slightly less than the rate condemned. A new complaint and a new decision would be necessary. The Commission has not recorded evidence of actual bad faith; but it did, from time to time, indicate that the effectiveness of its control over rates, especially the ability to protect from extortion, was limited because it could not set maximum rates. The Hepburn Amendment of 1906 contained the necessary grant of power; the Commission might fix maximum rates in place of rates condemned as unreasonable or unjustly discriminatory. At first the power could be exercised only after investigation made upon the Commission's own initiative. In practice, the naming of maximum rates has generally meant fixing the absolute rate, because the carriers which had fought a reduction in rates would not adopt a rate lower than one which they were establishing under compulsion.

The power to fix maximum rates reached one phase of the problem; it made possible the protection of the user of the railroad against unreasonable exactions. This, indeed, in 1900-1906, when the battle for the Hepburn Amendment was being waged, seemed the important factor; for the "harmony of management," incident to the railroad consolidations of the first years of the century, was making itself felt in rate advances.' But the business man is interested in the freight rates which his competitor must pay quite as much as he is concerned with the rates he must himself pay. In the competitive field of business, the practical problem is usually not created by the absolute level of rates, but by the relative charges paid to a common market, or from alternate sources of supply. The problem of regulation is not alone that of preventing extortion, but of preventing unjust discrimination, or undue preference. Fixing maximum rates did not give control over the latter problem if the preference and prejudice resulted from unduly low rates of one competitor. Complete control over the discrimination problem, in so far as it is concerned with published rates, required the power to fix minimum rates and absolute rates. Without these powers, the Commission, when it had condemned a rate adjustment as discriminatory, frequently left to the carriers the method of removing the

"Harmony of management" was Mr. Harriman's phrase. Consolidation and Combination of Carriers, 12 I. C. C. 277, 304.

unjust discrimination indicated: they might advance the preferential rates or lower the rates which were discriminatory because relatively too high. On other occasions, a reasonable "relative" adjustment was prescribed, really a nondescript phrase, since the essence of discrimination is relativity or comparison. But the Commission was applying the power which it possessed to the practical problem faced. Such lack of definiteness need no longer appear; the Act of 1920 gave the Commission power to fix the absolute or minimum charges; these being set, a particular relative adjustment is effected.

§ 6. The power of the Commission over tariffs established by the carriers is not limited to a consideration of rates already being charged. The Commission may act in advance of the effective date of new rates. In handling problems of general public importance, indeed, it has even initiated investigations and indicated the character of new rate scales and adjustments which would be acceptable. In Reduced Rates, 1922, this was done in advance of the publication of tariffs in order that the carriers might proceed on sure ground in issuing their schedules. Without such assurance there would be the possibility that the Commission might "suspend" the rates. For, since 1910, the Commission has had power to suspend new rates whenever their reasonableness or non-discriminatory character was questioned. No obligation rests upon the Commission to suspend new rates, nor will it do so without cause; but the suspension power makes it possible to prevent violations of the principles of the Act. The undoubted purpose of the power was the suspension of advances in rates. That the ten year period after 1910 was a period in which rising railroad costs furnished the motive for seeking to advance rates, tended to minimize the phase of the suspension power which in a period of falling prices would become of general significance; the power to suspend rates in order to prevent apparent discrimination. Whether the Commission, prior to 1920, had the power to suspend reduced rates on the ground that a discrimination was threatened by the reduction, is not now significant. Under the amended law, the full power has been exercised. Just as the suspension power has in the past been exercised to hold down advances, it should, if the future brings considerable declines in Reduced Rates, 1922, 68 I. C. C. 676.

the price curve, operate to hold rates upon existing levels. Especially would this be true when the proposed reduction covered only a small portion of highly competitive consuming or producing areas.1

It is clear, however, that the original suspension power was aimed primarily at unreasonably high rates, not at rates unduly discriminatory. The Commission felt that if rates could be suspended during investigation, it would be possible to prevent charging unreasonable rates, with resultant complaint and the necessity for a reparation order. Because freight charges usually are "passed on" to consumers, who have no standing before the Commission, since they are not parties to the transportation contract, those most injured by the high rate can not be recompensed. Reparation paid to the business man who pays the charge, represents an "unearned" profit. Or if, on the other hand, the business man finds his market circumscribed because of a discrimination created by the newly established advanced rates, and he loses business, it is extremely difficult to prove damage equal to the real loss. To suspend new rates, pending investigation, shifts the burden to the railroads.

The result was real injustice to the railroads which the amendment of 1920 recognized. Rate suspensions were prolonged, and, when advanced rates had been finally granted, the railroads had no recourse to secure "underpayments" for the difference between the new rate which had been found reasonable and the old, recognized to have been unduly low. Prior to 1920, the original suspension period was 120 days, with provision for an extension of

1

1 When, late in 1921, the newly acquired Ford road, the Detroit, Toledo & Ironton, sought to reduce rates from coal fields on its line to Detroit, the rates, first suspended, were, after investigation, ordered cancelled, because low D. T. & I. coal rates were "interwoven" in a rate structure, which would be disrupted. Coal from D. T. & I. Mines, 64 I. C. C. 564, 566; another case is Reduced Rates on Coal to Kansas City, 66 I. C. C. 457, citing Suspension of Rates on Packing-House Products, 21 I. C. C. 68, in which the power was asserted, though not exercised. In Wickwire Steel Co. v. N. Y. C. & H. R. R. R. Co., 30 I. C. C. 415, it was asserted that the power had on occasion been exercised. In Skinner & Eddy Corporation v. U. S., 249 U. S. 557, 565, before the grant of new powers to the Commission in 1920, the Supreme Court said: "But the main source of the Commission's influence to prevent excessively low rates lies in its power to prevent unjust discrimination, . . . The order prohibiting the unjust discrimination, however, leaves the carrier free to continue the lower rate; the compulsion being that if the low rate is retained the rate applicable to the locality or article discriminated against must be reduced."

six months. Since the rates were filed 30 days in advance of effective date, this gave a period of eleven months for investigation. The law's delay was irritating to the railroad managers. It was unjust to the railroads. Now the original suspension period is 120 days, with provision for an extension period of 30 days. After this time, the rate or regulation becomes effective automatically if the Commission has not yet passed upon the problem. The shortened period of suspension, therefore, seeks to minimize the hardship on the railroads, in the event the new rates are ultimately justified. Coupled with the change, is a clause to protect the shipper; the Commission may order a strict accounting of the amounts collected because of disputed advances, and, subsequently, if the advanced rates are found unreasonable, may order a refund (with interest) of the amounts collected in excess of the rates or charges found justified. But this requirement is not iron-clad; the Commission may make such orders; but it need not do so. An exercise of discretion is called for. After the price advances which culminated in 1920 it was the railroad, not the shipper, which needed help.

It was inevitable that the Commission should have been slow to approve general advances in rates. The business interests took full advantage of the strategic position which they occupied. The burden of proof rested with the carriers; and those opposing advances contented themselves with pointing out apparent waste. Mr. Justice Brandeis, serving as counsel for shippers in 1910-11, startled the imagination of the business world by talking of economies of $1,000,000 a day from widespread introduction of scientific management. In the Five Per Cent Case, the shippers focused their energies on the alleged unremunerative and wasteful practices of the carriers. As a result, the Commission in 1914, although finding that the income of the carriers was smaller than was demanded in the public interest, refused to approve the

The amendment of 1910 established another principle which operates to the advantage of the user of the railroad whenever the reasonableness or discriminatory character of a rate advanced since Jan. 1, 1910, is under investigation. Since practically all present-day rates were advanced in the general percentage advances of 1918 and 1920, the principle is of widespread application. The burden of proof rests on the railroad to justify all rates advanced since Jan. 1, 1910. The risk of non-persuasion rests on the carriers Burson Knitting Co. v. C. M. & G. Ry. Co., 42 I. C. C. 739, 741; Traffic Bureau, Toledo Commerce Club v. C. H. & D. Ry. Co.; 43 I. C. C. 446, 457.

proposed advances. Instead there was extended obvious good advice on economy.

The carriers, on the other hand, seldom presented a unified front; nor were their cases complete logical units. They based their pleas for advances upon the need to maintain railroad credit. They did not, until bitter experience had taught the necessity, seek to prove that the particular rates which it was proposed to advance were unduly low. The Commission had at once denied its responsibility to protect the revenues of the carriers.1 The burden was later assumed reluctantly, and not without clear exposition of a cleavage of opinion within the Commission.2

§ 7. Just when the issue must have been forced by inevitable wage adjustments came the war and the aftermath. The weakness of the law was recognized, and the Transportation Act of 1920 included a rule of rate making:

"In the exercise of its power to prescribe just and reasonable rates, the Commission shall initiate, modify, establish, or adjust such rates so that carriers as a whole (or as a whole in each of such rate groups or territories as the Commission may from time to time designate) will, under honest, efficient and economical management and reasonable expenditures for maintenance of way, structures and equipment, earn an aggregate annual net railway operating income, equal as nearly as may be to a fair return upon the aggregate value of the railway property of such carriers held for and used in the service of transportation."

This, it should be clear, is not in any sense a guarantee of earnings. Indeed, the carriers, as a whole, operating during 1921 with rates established in 1920 under the authority of the Commission

1"We must not regard too seriously, however, the effort of railroad counsel to establish this Commission in loco parentis toward the railroads. We must be conscious in our consideration of these rate questions of their effect upon the policy of the railroads and, ultimately, upon the welfare of the state. This country cannot afford to have poor railroads, insufficiently equipped, unsubstantially built, carelessly operated. We need the best of service. Our railroad management should be the most progressive. It should have wide latitude for experiment. It should have such encouragement as would attract the imagination of both the engineer and the investor. Nevertheless,

it is likewise to be remembered that the government has not undertaken to become the directing mind in railroad management. We are not the managers of the railroads." Advances in Rates-Western Case, 20 I. C. C. 307, 317.

See, for example, the majority and dissenting opinions in the Five Per Cent Case, 31 I. C. C. 350, 32 I. C. C. 325: Western Advanced Rate Case of 1915, 35 I. C. C. 654; the Fifteen Per Cent Case, 45 I. C. C. 303.