RATES FROM THE NORTH AND SOUTH TO CENTRAL TERRITORY

(a) Relation.-The main issue is the reasonable alinement of rates within official territory with those from the South to official territory. As to cotton piece goods, the adjustment proposed by the northern carriers would restore the classification basis and dispose of the basic question of relation as an incident to the restoration of the class-rate level. The rates from the South then would be about 9 percent higher, mile for mile, than the rates within the North, using the basic eastern scale for the North and the southern scale for the South as the bases for the comparison. The southern manufacturers advanced an extreme claim for better than a mile-for-mile parity with the North, because of claimed more favorable transportation characteristics of textiles moving from the South, but they will accept a mile-for-mile parity in recognition of the competitive situation. We have recently determined the relation for stoves, glass, different descriptions of stone, and coke, all of lower value than textiles. The northern manufacturers contend for a relation, South against North, at least no lower than that prescribed for stoves, the highest valued of the other commodities, which would place the South as a whole at approximately a 25-percent rate disadvantage, like distances of movement considered. No satisfactory practical method has been discovered whereby differences in transportation conditions within differently rated territories may be reflected, for commodities as a whole or for a single commodity, in a corresponding difference in the rate levels in the respective territories or between them. There being no such method for determining relation we must aline the rates, for each commodity considered, accordingly as the issues are presented, upon our best judgment of the relevant circumstance as disclosed by the records which may be made.

Another element to consider is the extent to which the contending parties themselves have helped to solve the problem, without prior recourse to the Commission, by the establishment of the rate equalization at Chicago, first at 50 cents, later at 55 cents, and finally on an 83-86-cent basis. This has an important bearing upon the reiterated claim of the southern interests that their present contention for a mile-for-mile parity is merely a perpetuation of what the South has had for the past 40 years, with the inference drawn that there had long existed a fairly stable and harmonious rate alinement, satisfactory to the competitive interests.

Conditions during the past 40 years fall within three well-defined periods. The first (and longest) was until 1915. The rates from the Boston and Atlanta groups to Chicago were then the same, and

This

the rates from the Carolinas were 9.5 or 10 cents over Atlanta. was a period of healthy development and of prosperity for the mills in both sections. There was no complaint against rates or relations of rates. Boston and Atlanta were equalized at Chicago, but there was no mile-for-mile parity, and Boston's relative and actual advantage increased eastward from Chicago through central territory. During this period the class rates applicable on cotton piece goods even to trunk-line territory from Boston were lower, mile for mile, than the commodity rates from the South, as already shown.

The second period, 1915 to 1930, included the general rate changes, and the war period. It marked the disruption of the previous equalization at Chicago and the beginning of the unequal increases in the northern and southern rates, so that the former parity at Chicago from Boston and Atlanta became 23 cents in favor of Atlanta.

The third period began October 15, 1930, with the practical restoration of the old relation between Atlanta and Boston at Chicago, but not at central-territory points east of Chicago. The formation of the original 86-cent destination group east of Chicago in central territory as a result of the operation of section 4 of the act has already been explained, and we have seen how it was expanded in consequence of the increase in class rates in the eastern class-rate revision, so as to include destination points as far east as Pittsburgh. On shipments to Chicago or Pittsburgh the Boston shipper, instead of paying 55 or 36.5 cents, respectively, as he formerly did, now pays 86 cents to both points. The restoration of virtual rate parity between the North and the South at Chicago was by no means the equivalent of the restoration of the status quo of the original adjustment. If the new rate of 86 cents had been a class rate instead of a commodity rate and could have been scaled back in similar manner to the treatment given the Chicago rate in the early adjustment, New England manufacturers show that the rates from the South would now be 29 percent, mile for mile, over the rates from the Boston group.

Another fundamental question is the portion of official territory to which we should go to obtain a base for all-rail rate comparisons. All-rail rates are not of equal importance throughout the whole of official and southern territories. In the East, and especially to the seaboard, the influence of water competition is controlling, and most of the traffic moves in part by water. The motor truck has become an additional factor in the handling of this traffic to and from the ports and inland from the seaboard, but its effect is not yet experienced appreciably on the longer hauls from New England and the South to central territory. There are few large markets between

the seaboard and the border of central territory. It is to central territory, with its large cities, that the traffic moves predominantly all rail, and the rates to this market are those which the opposing interests have had in contemplation from the beginning. The heart of the case is the adjustment from the North and South to central territory, and the rates to that territory which should control determination of the issue of relation.

Equality of rates from Atlanta and from Boston to the Chicago market has been sought and obtained alternately by the South and the North, at first by the southern industry, then, in the course of the process of disruption of that equalization at the expense of the North, the northern industry demanded and finally obtained the restoration of substantial rate parity with the South at Chicago by bringing about the 86-83-cent relation. Equalization of the rates for the unequal distances from Boston and Atlanta to Chicago makes it strikingly plain that there was then no thought of invoking the principle of mile-for-mile parity in arriving at a satisfactory adjustment of the relation of the rates from the North and South to central territory. Under the early equalization the Atlanta rate was 34 percent over the Boston rate at Cleveland, and to a group of the largest cities, representative of central territory generally, Atlanta was 29 percent over Boston. While at some points in the eastern section of central territory a mile-for-mile parity now exists, this was less from intention than as a consequence of the unequal effect of the general rate changes and the eastern class-rate revision, and this accidental result does not conform with the theory on which the rate structure has been developed so far as the parties themselves have had part in such development.

Considering next the competitive rate structure to central territory which resulted from the equalization of October 15, 1930, and the effect on the northern rates of the class-rate increases which became effective December 3, 1931: On table 6 is illustrated the situation at points throughout central territory from Youngstown to St. Louis, which the parties have used as representative. Boston is taken as representative of the New England group, and in the South two points in the Atlanta group and three in the Carolinas were taken as origin points, in recognition of the relative importance of the Carolinas in the southern textile industry. The average figures in this table are simple arithmetical averages, for accurate weighted averages from the South are not available. The rates from New England to the original 86-cent group have not been changed since their establishment on October 15, 1930. To points east of the original 86-cent group, which were on the class basis prior to Decem

ber 3, 1931, and whose rates were consequently increased on that date, the degree of the increase resulting from the eastern class-rate revision is shown by the difference between the column of "present rates" and those in the column of "rates in effect prior to December 3, 1931." Other columns show distances, first-class rates on the basis of the basic eastern scale, the applicable first-class rates, and what the resulting rates would be if made 60 and 65 percent of first class. With the figures for the North, we have set forth the adjustment to these identical points from the five southern points taken as represensative, giving corresponding or analogous data in connection with each point. Rates from these points have not changed since October 15, 1930. The last two columns in connection with each southern origin show what the rates would be if made 50 and 55 percent of first class as proposed by the southern and northern carriers respectively. TABLE 6.-Rates on cotton piece goods to central territory from North and South, and relations to first class