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time exacting an unjust amount from some particular shipper.

Topic A. Certain Limitations Fundamental.

§ 212. Rates must be fair to the company and to the public. The fundamental principle as to the reasonableness of a particular rate is that it should be fair compensation for the service rendered. There are, therefore, limits within which the railroad company must act in fixing its rates. The company must have reasonable compensation; but the shipper must not be charged more than a reasonable price. The Commission has often said that the carrier is entitled to reasonable compensation and the shipper to a reasonable rate for the service performed.73a The compensation, in order to be reasonable, must be fair to both parties. It is not enough that the whole schedule shall bring in a fair return to the company; the particular rate fixed for carriage must be in itself no more than a reasonable amount for the customer to pay under the circumstances, for the service rendered him. The question of reasonableness involves the element of reasonableness both as regards the company and as regards the public. The Commission is well aware that a continuous process of reducing carriers' revenue would be detrimental to the public interest as well as to carriers.74

§ 213. Limitations within which rates must be made.

Stated in more accurate terms, the law requiring fair compensation has two distinct sides. It is desirable that the carrier should receive the full cost to it of performing 74 Union Tanning Co. v. S. Ry. Co., 26 I. C. C. 159.

73a Memphis Grain & Hay Asso. v. St. L. & S. F. R. R. Co., 24 I. C. C. 609.

Differences in earnings of carriers in different territories considered in determining the propriety of rate comparisons. Evens & Howard Fire Brick Co. v. St. L., I. M. & S. Ry. Co., 25 I. C. C. 141.

The relative lack of financial prosperity of carriers, considered in determining the reasonableness of a rate. Michigan Copper & Brass Co. v. D. S. S. & A. Ry. Co., 25 I. C. C. 357.

the service. It is desirable, also, that the shipper should not pay more than the value of the service to him. These two limitations are obviously at the extremes within which in normal cases rates must be made.75 "The cost of service, while recognized as an important element in classification and rates, is not alone controlling. On that basis some articles, on account of relation of commercial value to cost of service, though furnishing a large volume of traffic, would not be carried at all, and others of high commercial value would have a very low rate without increasing tonnage. Another element of the highest importance, and that cannot be disregarded, is the value of the service to the article carried. This is a factor that largely determines the classification and rates the article will bear in the transactions of commerce, and necessarily qualifies the influence of other factors in the distribution of charges with the view to average reasonable revenue."

29 76

§ 214. Unreasonable regulation universally forbidden.

The company performing the service should be protected in getting as a reasonable return for its services, at least what is fairly the cost of those services as a minimum, as the United States Supreme Court has been insisting of late years." This, however, cannot always be done; in such a case the utmost protection possible must still be given to the company. The balance of interests was well stated by the Interstate Commerce Commission

75 The interests of all lines must be considered, and not alone those of the line that can handle the traffic with the least cost; and the interests of the consumer and of the producer must not be lost sight of. Commercial Club of Superior v. G. N. Ry. Co., 24 I. C. C. 96.

76 The quotation is from Thurber v. New York Central R. R., 2 Int. Com. Rep. 742, 3 I. C. C. Rep. 473.

"Interstate Commerce Commission v. Stickney, 215 U. S. 98, 30 Sup. Ct. 66.

It should be noted that the Commission has no power under the Act to fix minimum rates for the protection of a competitor; its jurisdiction is confined to fixing maximum rates for the carriers involved in the proceedings before it. See Norfolk & W. R. R., 195 Fed. 953.

thus: 78 "It is vitally important to the development of this country that the service performed by our railways should be efficient and complete. The wealth invested in these enterprises should be sacredly protected, and no unnecessary burden should be imposed in the way of public supervision. But it is equally important that the rates charged for the service should be just; and, in view of the monopolistic conditions under which these rates are now made, the public has no protection save by regulation by the Government."

§ 215. Value of the services constitutes maximum.

The value of the services to the customer constitutes the limit of charge which the company is permitted to make. Considering all the circumstances, if the services have a certain value to the consumer and no more, the carrier must charge no more. The elemental principles thus far noted may be summarized as, on the one hand, the right of the company to derive a fair income, based upon the fair value of the property at the time it is being used for the public, taking into account the cost of maintenance or depreciation, and current operating expenses; and, on the other hand, the right of the public to have no more exacted than the services in themselves are worth.79 "While the company is entitled, so far as this case shows, to a fair return upon the value of the property used for the public at the time it is being used, the public (that is, the customers) may demand that the rates shall be no higher than the services are worth to them, not in the aggregate, but as individuals. The value of the services in themselves is to be considered, and not exceeded. These views seem to be

78 The quotation is from Re Proposed Advances in Freight Rates, 9 I. C. C. 382.

The Commission cannot be unmindful of the serious effect upon the revenues of the carriers when reduc

tions therein proposed. Anadarko Cotton Oil Co. v. A., T. & S. F. Ry. Co., 24 I. C. C. 327.

79 The quotation is from Kennebec Water District v. Waterville, 97 Me. 185, 54 Atl. 6, 60 L. R. A. 856.

consonant with reason. They are also established by the highest judicial authority in our country."

9 80

§ 216. Interests of the companies to be considered. However desirable it may be to provide lower rates for the public that is receiving the service, it is equally necessary to leave a reasonable return to the company that is performing the service. In some cases where a rate has been fixed by the State the court when it is called upon to pass upon it may find that both interests are sufficiently protected; but in others it may be found that the constitutional rights of the company have been ignored in the desire to grant a lower rate to the public. The court

found this in Metropolitan Trust Company v. Houston & Texas Central Railway,81 "As popularly expressed, the rights of the people the rights of shippers who use it as a carrier—have to be regarded; but, as judicially expressed, these last have to be so regarded as not to disregard the inherent and reasonable rights of the projectors, proprietors, and operators of these carriers. It is settled that a State has the right within the limitation of the constitution, to regulate fares. From the earliest times public carriers have been subject to similar regulations through general law administered by the courts, requiring that the rates for carriage should be reasonable, having regard to the cost to the carrier of the service, the value of the service to the shipper, and the rate at which such carriage is performed by other like carriers of similar commodities under substantially similar conditions." The cost of the service in carrying any one particular shipment may be difficult to determine, but the cost to the carrier of receiving, transporting, and delivering the whole volume of tonnage and number of passengers in a given period of time must include, as

So The shipping public has a right to enjoy reasonable rates, and the private interests of a carrier cannot defeat or qualify this right. Wichita

Board of Trade v. A., T. & S. F. Ry., 25 I. C. C. 625.

81 90 Fed. 683.

one of its substantial elements, a return on the value of the property used in the service. As the Commission has recently said it is necessary that carriers be permitted to charge rates that are fully compensatory for the service they perform, so long as they are not unreasonable.82

§ 217. Interests of the public to be considered.

That there are in reality two tests, not one, is pointed out by the most discriminating judges in the more recent cases, and it is the avowed policy of the United States Supreme Court that both parties to the service, the carrier and the shipper, should be considered in deciding all cases. Thus, in the leading case of Smyth v. Ames,83 the court, in declaring the Nebraska maximum freight law unconstitutional, guarded itself against being understood as taking an extreme position in favor of the carrier by saying: "It cannot therefore be admitted that a railroad corporation maintaining a highway under authority of the State may fix its rates with a view solely to its own interests and ignore the rights of the public. But the rights of the public would be ignored if rates for transportation of persons or property on a railroad are exacted without reference to the fair value of the property used for the public and the fair value of the services rendered, but in order simply that the corporation may meet operating expenses, pay the interest on its obligations, and declare a dividend to its stockholders." 84 And in Covington & Lexington Turnpike Road Company v. Sandford, the court, in questioning the State legislation, said similarly: "A corporation is not entitled as of right and without reference to the interests of the public, to realize a given per cent. upon its capital stock. Stockholders are not the only persons whose rights or interests are to be considered. The rights of the public are not to be ignored. The public cannot properly be

82 Morgan Grain Co. v. A. C. L.

R. R., 19 I. C. C. 460.

83 169 U. S. 466, 42 L. ed. 819, 18

Sup. Ct. 418.

84 164 U. S. 596, 41 L. ed. 556, 17 Sup. Ct. 198.

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