territory. The competitive conditions applying in the transportation of this traffic to Wichita and Kansas City are stated and found not to justify the 15-cent differential against Wichita, and the existing rates to Wichita are excessive. Held:

1. That the rate of 47 cents on sugar from New Orleans to Wichita is unreasonable.

2. That the present differential of 15 cents applied at Wichita above Kansas City on shipments of sugar from the Atlantic Seaboard and New Orleans subjects Wichita to undue discrimination; and such differential should not be more than 8 cents per 100 pounds.

3. That as to traffic passing through Wichita to Kansas City the rule laid down in Johnston-Larimer D. Co. v. A., T. & S. F. Ry. Co. 6 I. C. C. Rep. 586, forbidding any higher charge to Wichita than to Kansas City on shipments from Galveston, is, in the light of decisions of the United States Supreme Court, no longer applicable, and defendants operating lines through Wichita to Kansas City are not prohibited from charging a higher rate on sugar to Wichita than to Kansas City so long as the Wichita rate is reasonable.

A. E. Helm and T. F. Garver for complainants.

Robert Dunlap for A., T. & S. F. Ry. Co.

J. G. Egan for St. L. & S. F. R. R. Co.

W. T. Rankin for C., R. I. & P. Ry. Co.

Henry G. Herbel for Mo. Pac. Ry. Co., St. L., I. M. & S. Ry. Co., and Tex. & Pac. Ry. Co.

Ed. Baxter and S. F. Andrews for Ill. Cent. R. R. Co.

W. P. Trickett and F. W. Maxwell for Interveners.

REPORT AND OPINION OF THE COMMISSION.

PROUTY, Commissioner:

On December 22, 1904, the Lehman-Higginson Grocer Company and four other firms engaged in the wholesale grocery business at Wichita, Kansas, filed with the Commission a complaint against the Atchison, Topeka & Santa Fe Railway Company and certain other railway companies alleging that the rates on sugar were at that time in carloads from New Orleans, · Louisiana, to Wichita, Kansas, 25 cents per hundred pounds and to Kansas City and other Missouri River points 20 cents; that on January 1, 1905, the defendants proposed to put in effect rates from New Orleans, to Wichita of 47 cents per hundred pounds and to Kansas City of 32 cents per hundred

pounds; that this increased the difference in rates on this commodity from New Orleans to Kansas City as compared with Wichita from 5 cents per hundred pounds to 15 cents per hundred pounds, and that the proposed rates were unjust and unreasonable in themselves and relatively.

The petition further alleged that the defendants proposed to make advances on sugar from other points of origin, recognizing the same differential of 15 cents between Kansas City and Wichita; that this sugar in passing from New Orleans or from the Atlantic seaboard by ocean and rail via the Gulf ports would be transported by some of the defendants through Wichita en route to Kansas City and by others of the defendants to both Wichita and Kansas City at approximately the same cost; that the proposed rates would be unreasonable in themselves and that maintenance of a higher rate at Wichita was in violation of sections 3 and 4 of the Act to regulate commerce.

The petition also called attention to the case Johnston-Larimer Dry Goods Company v. Atchison, Topeka & Santa Fe Ry. Co., decided by the Commission May 12, 1896, and reported in 6 I. C. C. Rep. 568, in which it was held that no higher rate should be charged at Wichita than was applied at the Missouri River on traffic from Galveston through Wichita.

The petition asked that the Commission request the attorney general to institute proceedings under the so-called Elkins Bill, approved February 19, 1903, to enjoin the defendants from maintaining the discrimination which would be worked against the complainants located at the city of Wichita.

The statute in question provides, "That whenever the Interstate Commerce Commission shall have reasonable ground for belief that any common carrier, is committing any discrimination forbidden by law" a proceeding may be begun in the circuit court. We were not altogether clear whether the discrimination. set forth in the complaint was such a discrimination as that contemplated in the statute referred to, but assuming that it was, it seemed to us that we could hardly say without hearing the carriers that there was reasonable ground for belief that the relation in rates which it was proposed to establish on January 1, would create an unjust discrimination against the city of

Wichita and, therefore, against the complainants. It was, therefore, ordered that the petition be treated as a formal complaint, that the carriers be required to file answers forthwith and that the matter be set down for speedy hearing. In accordance with this order the defendants answered and a hearing was held at Chicago December 29 and 30, the various parties interested being allowed until January 10, for the filing of briefs. Jobbers at Kansas City and on the Missouri River were allowed to intervene and have been duly heard in the premises.

The questions presented, as we construe the record, are: First. The reasonableness of the present rates to Wichita. Second. The reasonableness of the 15-cent differential at Wichita above Kansas City.

Third. The lawfulness of higher rates to Wichita than are made to Kansas City by those lines which either transport traffic through Wichita or serve both Wichita and Kansas City.

While the petition did not ask the institution of a suit to restrain the proposed rates at Wichita upon the ground that they would be unreasonable, since no such suit could be brought under the statute invoked, it did allege the unreasonableness of those rates and that allegation has been traversed by the answers of the defendants. At the same time

no testimony has been introduced with special reference to that point; the complainants are only interested in the reasonableness of these rates to the extent that this may be involved in securing a just relation of rates between Kansas City and Wichita, and we have only considered the inherent reasonableness of all these rates in that aspect.

The interest of these complainants is manifest. They are wholesale grocers at Wichita. In the jobbing of groceries, sugar is what is termed a "leader." Unless the jobber can sell his customers this commodity, he cannot ordinarily obtain their other business, and largely for this reason it is sold upon a very narrow margin. The difference in the freight rate to Wichita and Kansas City determines the relative price at which competing jobbers located at these two points can own their supplies of sugar. While the carriers are interested in the adjustment of

these rates, the jobber is even more vitally concerned and seems to have borne a leading part in this contest.

It may be instructive, before inquiring what rates have actually prevailed, to consider the general situation. The sugar consumed in the United States is mainly refined upon the Atlantic seaboard. Since 1900, sugar in the Official Classification has been, in carloads, 5th class, and the regular 5th class rate from New York to East St. Louis has been 35 cents per hundred pounds. The Mississippi River is a basing line, rates beyond being made by adding the full local to the rate up to the Mississippi. The carload class rate between East St. Louis and Kansas City on sugar has been 22 cents per hundred pounds and in theory, therefore, the Kansas City rate from New York has been 35 cents plus 22 cents, or 57 cents per hundred pounds.

The Missouri River forms a second basing line, rates beyond being again made by adding the full local rate to the rate up to the Missouri. Of late the carload rate on sugar from Kansas City to Wichita and corresponding interior jobbing towns has been 15 cents per hundred pounds. It was formerly much higher, but interior Kansas jobbers applied to the Railroad Commission of the State of Kansas, which put in effect some 12 years ago this 15-cent rate, and since then, in theory, the Wichita rate has been made by adding 15 cents to the Kansas City rate, making the total rate from New York 72 cents.

Sugar from New York may reach both Kansas City and Wichita by other routes than the all-rail route over which the above rates apply. There is what is known as the lake-andrail route, via rail from New York to Buffalo, or some eastern port on the Great Lakes, from there by water to some western port, and thence again by rail to destination. It is also transported by sea and rail, going from New York to Norfolk or some other east Atlantic port and from thence by rail to destination. By all these routes the sugar passes through the Missouri River en route for Wichita, and there is no apparent reason why the additional cost of transportation from the Missouri River to Wichita should differ, whether the traffic reaches the Missouri River all-rail, or by lake and rail, or by sea and

rail. Shippers ordinarily prefer the all-rail route at the same price and in order to divide the traffic between these three possible routes, it is necessary to accord the part water routes a differential below the all-rail routes. That differential is 4 cents in case of ocean and rail via the Atlantic ports in both carloads and less than carloads; it is 5 cents in carloads, and 4 cents in less than carloads via lake and rail, the same differential applying both at the Missouri River and at Wichita.

It will be seen that under this scheme of rate-making the wholesaler at a basing point enjoys over his competitor at another basing point whatever advantage can be derived from the difference between the carload and the less than carload rate. The carload rate from East St. Louis to Kansas City, as already stated, has been 22 cents, the less than carload rate 27 cents. The Kansas City jobber and the St. Louis jobber own their sugar at the same price at St. Louis. The distribution of this sugar is necessarily under the less than carload rate. Now the Kansas City jobber transports his sugar from St. Louis to Kansas City for 22 cents while the St. Louis jobber pays the less than carload rate of 27 cents. It follows that the Kansas City wholesaler can send sugar back upon equal terms with his competitor at St. Louis into such territory as can be reached by a less than carload rate of 5 cents and no farther. The carload rate from Kansas City to Wichita has been 15 cents, the less than carload rate 20 cents, which permits the jobber at Wichita to operate as against the jobber at Kansas City only so far to the east as a less than carload rate of 5 cents will reach. may be stated here that on September 25, 1904, the less than carload rate from Kansas City was increased to 25 cents, thereby adding to the territory into which the Wichita wholesaler can come towards the east.

It

Kansas City jobbers urge that the same method of constructing rates which applies against them in favor of St. Louis ought to apply against Wichita in favor of Kansas City, and if the conditions were exactly those above assumed, it is difficult to see how there could be any escape from this conclusion. If sugar did originate exclusively at New York and if the allrail rates on sugar to East St. Louis and Kansas City were