No. 634. THE MAYOR AND CITY COUNCIL OF WICHITA, KANSAS, v. THE MISSOURI PACIFIC RAILWAY COMPANY et al. Decided January 27, 1904. 1. It is the province of the Commission to interfere and secure, if possible, a fair adjustment in cases of unreasonable rates or unjust discrimination; but the Commission has no more authority to place competing millers in different states upon precisely the same footing than it has to equalize conditions in all localities and in every industry. 2. Rates from points in Kansas and Missouri to points in Texas are five cents per hundred pounds higher on flour than on wheat, and such differential is not applied on flour or wheat carried in any other direction. This differential has been the subject of controversy in two previous cases before the Commission, Kauffman Milling Co. v. Missouri P. R. Co. (1890) 4 I. C. C. Rep. 417, 3 Inters. Com. Rep. 400; Railroad Comrs. v. Atchison, T. & S. F. R. Co. (1899) 8 I. C. C. Rep. 304, and in the decisions of those cases the five cent higher rate on flour than on wheat, as applied on the traffic to points in Texas, was not declared unlawful. Held, upon the record in this case, that since the former decisions were rendered there has been no such change in conditions governing the traffic as to warrant interference by the Commission. Messrs. Helm, Ashbaugh and Adams for complainant. M. F. Clardy and C. E. Benton for Missouri Pacific Ry. Co. Gardner Lathrop for A., T. & S. F. Ry. Co. M. A. Low for C., R. I. & P. Ry. Co. W. O. Littlefield for St. Louis & San Francisco Ry. Co. REPORT AND OPINION OF THE COMMISSION. CLEMENTS, Commissioner: This proceeding is based on a petition filed by the Mayor and City Council of Wichita, Kansas, in which it is alleged that the city of Wichita, its millers, shippers, and merchants are unjustly discriminated against, and subjected to undue and unreasonable prejudice and disadvantage by reason of the rates on flour from Wichita and other points in Kansas and Missouri to points in Texas, being five cents per hundred pounds higher than on wheat-a differential which does not apply on like transportation in any other direction; that this is not warranted by any difference in cost of service, and that any differential operates as an unjust and illegal discrimination in violation of the Act to regulate commerce. The complainant prays for an order directing defendants to cease and desist from publishing and maintaining said differential of five cents per hundred pounds, or from maintaining any differential whatever. Defendants, in their answers, make statements in justification of the differential between wheat and flour. They allege that a similar differential exists in the State of Texas, established by the Commission of that State; that differences in circumstances and conditions connected with the transportation warrant the difference in rates; that flour is a manufactured article and more valuable than wheat; that, therefore, defendants incur greater risk when they transport flour than when they transport wheat; that the barrel in which flour is packed is carried free, while transportation charges are collected on the actual weight of wheat; that wheat is all raw material, while it takes about 280 pounds of wheat to make 196 pounds of flour, the difference in weight being accounted for by 79 pounds of mill offal, such as bran and screenings, and 5 pounds of "invisible loss;" that, therefore, transportation charges are paid on a much greater proportion of comparatively worthless material when wheat is transported than when flour is transported; that without the differential Texas millers would be unable to compete with Kansas and Missouri millers, except at places where mills are located; and that the milling-in-transit privilege is dependent upon the existence of the differential. Defendants also call attention to the decision of this Commission in Kauffman Milling Company v. Missouri Pacific Railway Co., rendered in 1890, wherein the 5-cent differential was not declared unlawful, and aver than conditions, if changed, are stronger in support of the differential now than they were at that time. On application, the Commission, on September 18, 1902, entered an order by which the Galveston Chamber of Commerce and the Texas Millers' Association were granted leave to intervene. An extended hearing was held by the Commission at Wichita, Kansas. For more than twenty-five years a differential has been maintained between the rates on wheat and flour moving into Texas from points north of that state. In the earlier years it was several times as great as at present, and even when established at five cents per hundred pounds, the reduction at harvest periods on the transportation of wheat without a like reduction upon flour until some later date would have the effect of increasing the differential by the amount of the reduction upon the grain. All this was reviewed in the former adjudication on this subject of Texas differentials in the Kauffman Milling Co. Case. The irregular practices then complained of by which the differences were exaggerated find no place in the present complaint, and it may be assumed the situation is to that extent improved. The increase of mills in points nearer the wheat producing area, as in Kansas, Oklahoma, and Texas, the increase of population throughout the territory in question, enlarging the Texas market, the almost universal use of the roller mill, the keen competition which has reduced the profits upon flour, the increase of transportation facilities that provide ready means for direct export of both wheat and flour through nearby southern ports-all indicate some changes in the conditions existing at the time the former opinion was rendered when the Commission declined to disturb the five cents per hundred pounds differential. The facts were then exhaustively collected and the arguments considered for and against the maintenance of the differential. It is unnecessary to again go over this ground, as, in the main, the parties in interest occupy the same relative positions as before. The millers of Wichita and other complaining points contend that without the differential they would be enabled to grind the wheat, near the fields where produced, and ship their product to Texas, where consumed, to a greater extent than they are now able to do; that on the contrary, the Texas millers, with this advantage, can and do meet them in their own fields and outbid them for their wheat at their own doors, and undersell them with the flour in the Texas markets. On the general facts there is no dispute, the issue being whether there had been such a change in conditions of population, agriculture, milling industry or transportation in this section as to warrant an interference by the Commission which it formerly declined to make. The differential rates on wheat and flour to Texas points have been long in operation. In the Kauffman Milling Co. Case, in 1890, these had already been in effect for some fifteen years, in the earlier years being much higher than the five cents now the subject of complaint. The Kansas millers contend they are shut out of the Texas market by flour made with Kansas wheat; that Texas does not grow enough wheat for home consumption, and that the larger mills in Texas with greater capacity enable the Texas millers to come into Kansas and compete for the wheat, which they are able to get and grind cheaper than the Kansas millers can get the flour to Texas markets; that the Texas millers can overbid for Kansas wheat and thus advance its price, and that Kansas products are thus thrown out of line, which works injury to complainant, not only in Texas, but in the general market. Texas mills export some flour; make some sales even in the southern portion of Indian Territory. Territory mills complain they must go outside and ship some wheat in on the flour rate, while Texas comes in and ships their wheat out. On the other hand, the Texas millers contend that in the shipping of wheat they are paying freight on offal and invisible loss, while in the shipment of flour in barrels the package is carried free and that the differential of five cents per hundred pounds is insufficient to enable them to fairly compete with their rivals and that the difference between the rates on wheat and flour should be greater than five cents. The value of flouring and grist mills in Texas in 1890 was $9,903,455, in 1900, $12,333,730, and the testimony indicated a large increase since the last census year, encouraged by the ex traordinary wheat production of 1900, reaching that year 23,395,913 bushels, more than double its average production. Kansas, too, showed an increase in the value of the mills from $17,420,475 in 1890 to $21,926,768 in 1900. This increase in the milling capacity of points situated nearer the wheat fields was bound to affect the industry at more remote places, and we are prepared to find the value of mills in the state of Missouri falling from $34,486,795 in 1890 to $26,393,928 in 1900. In 1900 the product of the Texas mills was above two and a half million barrels; of the Kansas mills above five million barrels, and Missouri produced but little more. The argument that the Kansas milling industry had grown up under the operation of the five cents per hundred differential, and had kept pace with the growth in Texas, and almost equalled the capital and capacity of the Missouri mills, and therefore that the differential could not be a serious drawback is unfair. If the only outlet for Kansas flour was the Texas market, that might be a natural inference; but the markets of the world are open, and such Kansas millers as testified at the hearing of the case declared they had little or no trade in Texas, and for the most part found sale for their products, after local distribution, in the markets of the east. The differential of five cents a hundred pounds is equivalent to ten cents upon a barrel of flour. This, it appeared from the testimony, was a measure of the profit upon much of the surplus of the mills. But it does not follow that five cents per hundred pounds differential upon flour places Kansas flour in the Texas market ten cents a barrel higher than the product of Texas mills. There are many other elements to be taken into consideration: the price of Kansas wheat as compared with Texas wheat or that from other markets; the relative proportions of the amount of flour, bran, and waste in the wheat so shipped; the relative efficiency of the mills in the various localities; the relative cost of labor and fuel in the two states, and the relative value of the by-products at the mill door and in nearby markets. All these elements, none of which are fixed, render it impossible to adjust the rates alone in such manner as to equalize the |