54

the determination of rates. Again it has said that there is no such thing as market competition which is distinct from competition between lines of transportation serving the markets. 55 It has described market competition as "a euphemism for railroad policy," and has held that the desire of a number of shippers to reach a market is a force to which the carrier may not yield unless it can clearly establish that the adoption of such a policy will not unfairly discriminate against one community in favor of another, and will not produce those results which the Act was intended to prevent.56 Market competition, moreover, should be carefully distinguished from competing markets. The fact that there is competition for the purchase of certain coal between Nebraska communities and communities in Wyoming and Utah affords no justification to the carrier for charging more than a reasonable rate for the transportation of such coal as the Nebraska people succeed in buying.57

§ 796. How the Commission determines justifiable discrimination.

Since the Act in both the third and fourth sections recognizes that discrimination of certain kinds or to a certain extent may in certain circumstances and conditions be justifiable, it is the business of the Commission to ascertain whether such justification exists and whether the discrimination exceeds the justification. In passing upon an application for relief from the fourth section because of the existence of water competition, the Commission imposed the following tests: 1. Is it true that the longdistance rate is forced by water competition? 2. Is the long-distance rate which has been established in view of

54 Jennison Co. v. Gt. No. Ry., 18

I. C. C. 113.

55 City of Spokane v. No. Pac. Ry., 21 I. C. C. 400.

56 Railroad Commission of Nevada v. So. Pac. Ry., 21 I. C. C. 329.

57 Nebraska State Railway Commission v. Un. Pac. Ry., 11 I. C. C. 349.

water competition less than would otherwise be reasonable? 3. Are the rates at the intermediate points reasonable? 4. Do the rates unduly prefer one locality to another? 58 These tests, it would seem, apply equally well to land competition, and when competition is the defense they might also be employed in determining whether there was undue discrimination within the meaning of section 3. Having found that competitive conditions exist which make it imperative that some one should suffer, it is pertinent for the Commission to inquire how the least injury may be inflicted. 59 Everything depends upon the circumstances under which a rate is made and the transportation conducted,60 and a change of conditions may lead to different conclusions.61 The Commission takes the whole situation into consideration, and even though it was competitive conditions among the shippers which were the chief inducement to the complaint, yet it will show due regard for transportation conditions and the rights of the carriers.62 It will also take into account the interests of all competing lines and not merely of that line which could handle the business at the lowest rate.63

If competition exists at a certain point, the Commission is disposed to give shippers the benefit of it.64 If the competition is between a railroad and a waterway, such as the Mississippi, the Commission will endeavor to measure the force of the competition at different distances from the river and thus determine what degree of discrimination is allowable at various points." 65

58 In re Transportation of Wool, Hides and Pelts, 23 I. C. C. 151.

59 Bluefield Shippers' Ass'n v. N. & W. Ry., 22 I. C. C. 519.

Go Oregon & Washington Lumber Manufacturers' Ass'n v. So. Pac. Ry., 21 I. C. C. 389.

61 Sinclair & Co. v. C., M. & St. P. Ry., 21 I. C. C. 490.

62 Chicago Lumber & Coal Co. v. T. S. E. Ry., 16 I. C. C. 323.

63 Receivers & Shippers' Ass'n of Cincinnati v. C., N. O. & T. P. Ry., 18 I. C. C. 440.

64 Steinfeld & Co. v. I. C. Ry., 20 I. C. C. 12.

65 Railroad Commission of Tennessee v. Ann Arbor Ry., 17 I. C. C. 418.

§ 797. Competitive rates must be compensatory.

The fact that a carrier is compelled to make a low rate at a competitive point in order to obtain any part of the traffic at that point does not authorize it to lower its rate to any extent which may be necessary in order to attain this result. A carrier owes a duty to every point on its line to see that its traffic at one place, even though not very profitable, is at least not a burden on the traffic at other points. If railway carriers engage in a competitive struggle for business at a place where they meet, and underbid each other or other carriers to a point which is not in itself remunerative, can they turn back on the line, and taking advantage of the conditions existing at other localities, arising either from the fact that there is no opportunity for competition, or from the fact that by concert of the carriers there is none, charge such rates for the shorter haul as shall make good their lack of profits in competitive business, and even up the profits on their whole business to the point they set before themselves as reasonable? 66 Against this Mr. Justice White clearly expressed the dissent of his court: "That, as indicated in the previous opinions of this court, there may be cases where the carrier cannot be allowed to avail of the competitive condition because of the public interests and the other provisions of the statute, is of course clear. What particular environment may in every case produce this result cannot be in advance indicated. But the suggestion of an obvious case is not inappropriate. 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. 66 Interstate Commerce Com. v. East Tennessee, V. & G. Ry., 85 Fed. 107.

unreasonable rates on other business would arise from the carriage of traffic at less than the cost of transportation to particular places." 67 Thus it is evident that there are limits beyond which a carrier may not go in its attempt to meet competition.68 It is well settled that a carrier may not lawfully engage in transportation at a rate less than the cost of service, since this would result in an improper and unlawful burden on other traffic.69

§ 798. Non-competitive rates must be reasonable.

While the Act favors the competitive point in that it allows it to reap whatever advantage its competitive conditions may afford, it nowhere contemplates that the interests of the intermediate points are to be sacrificed. As has just been indicated, the carrier is obliged to make a rate to the competitive point which is at least high enough to meet the cost of service, and thus save non-competitive points from the burden of any loss on competitive traffic. Furthermore, no matter what rate is charged to competitive points, every non-competitive point is entitled to a rate which is reasonable. The mere fact of competition, regardless of its character or extent, does not relieve the carrier of the restraints of the third and fourth sections.70 While competition may justify the carrier in charging to competitive points a rate that is less than reasonable, it does not deprive other points of their right to a rate that is not unreasonably high," and a carrier applying for relief under the fourth section must show that its in

67 East Tennessee, V. & G. Ry. v. Interstate Commerce Com., 181 U. S. 1, 45 L. ed. 719, 21 Sup. Ct. 516. See also Interstate Commerce Commission v. Alabama Midland Ry., 168 U. S. 144, 42 L. ed. 414, 18 Sup. Ct. 45; Chamber of Commerce of New York v. N. Y. C. & H. R. Ry., 24 I. C. C. 55.

68 Burnham, Hanna, Munger Co. v. C., R. I. & P. Ry., 14 I. C. C. 299.

69 City of Spokane v. No. Pac. Ry., 19 I. C. C. 162; Commercial Club of Superior v. G. N. Ry., 24 I. C. C. 96. 70 Interstate Commerce Com. v. Alabama Midland Ry., 168 U. S. 144, 42 L. ed. 414, 18 Sup. Ct. 45.

71 Southern Timber & Land Co. v. So. Pac. Ry., 18 I. C. C. 232; Grain Rates in C. F. A. Territory, 28 I. C. C. 549.

termediate rates do not violate this right." In determining what is reasonable, the Commission will examine the situation at the intermediate point. If it is a junction served by another carrier it is entitled to a lower rate.73 Obviously the reasonableness of the non-competitive rate cannot be determined by comparison with the competitive rate, but if it can be shown that the latter is reasonable, it should not be exceeded at a point with a shorter haul.75 In the absence of any differentiating circumstance, the reasonableness of the intermediate rate may be determined by a comparison with other rates for the same distance.76

74

§ 799. Potential competition.

Both the Commission and the courts recognize that rates may be affected by potential as well as actual competition. While the courts were somewhat reluctant to take this view, their hesitation may be largely explained by the facts of the cases before them. Chief Justice White said, "What the 4th section of the Act to Regulate Commerce has reference to is an actual dissimilarity of circumstances and conditions, not a conjectural one.""7 But this was only a dictum and was said with reference to a possible competition by a route so circuitous as to be altogether impracticable. Before any legal restraint was placed on the carriers in the making of rates, they were obliged to take into account not only existing competition but also that which could easily be developed. There is nothing in the Act which prevents the carrier from applying the same sound business principle. When it is once admitted that existing competition is a dissimilarity

72 Bluefield Shippers' Ass'n v. N. & W. Ry., 22 I. C. C. 519.

Commission

73 Gamble-Robinson Co. v. St. L. & S. F. Ry., 19 I. C. C. 114.

74 Flint & Walling M'fg Co. v. G. R. & I. Ry., 14 I. C. C. 520; Rainey & Rogers v. St. L. & S. F. Ry.,

18 I. C. C. 88; Gillis & Son v. P. B. & W. Ry., 26 I. C. C. 61.

75 Bluefield Shippers' Ass'n v. N. & W. Ry., 22 I. C. C. 519.

76 Fourth Section Violations in the Southeast, 30 I. C. C. 153.

77 Interstate Commerce Commission v. L. & N. Ry., 190 U. S. 273, 47 L. ed. 1047, 23 Sup. Ct. 687.