lowering their fares and rates so as to compete with traffic by sea, by canal, or by a shorter or otherwise cheaper railway, and would thus deprive the public of the benefit of competition and the company of a legitimate source of profit. (b) It would prevent railway companies from making perfectly fair arrangements for carrying at a lower rate than usual goods brought in large and constant quantities, or for carrying for long distances at a lower rate than for short distances. (c) It would compel a company to carry for the same rate over a line which has been very expensive in construction, or which, from gradients or otherwise, is very expensive in working, at the same rate at which it carries over less expensive lines." In short, as our Commission equally well appreciates," to impose equal mileage on the companies would be to deprive the public of the benefit of much of the competition which now exists or has existed, to raise the charges on the public in many cases where the companies now find it to their interest to lower them, and to perpetuate monopolies in carriage, trade, and manufacture in favor of those routes and places which are nearest and least expensive, where the varying charges of the company now create competition. Therefore, to consider the yield per ton per mile as wholly controlling in a particular case is equivalent to the fixing of rates on the basis of distance alone.78 And comparisons of distance are of but little value in view of the well-known fact that the transportation conditions are very often wholly dissimilar.79

§ 583. Rates in rough proportion to distance normally.

Generally speaking, it is perhaps fair to assume that distance should be controlling, where transportation conditions are substantially similar.80 At all events, consider

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

78 District No. 1, Fort Smith, Ark., v. St. L. & S. F. R. R., 26 I. C. C. 541.

79 Goldfield Consolidated Milling & Transportation Co. v. A., T. & S. F. Ry., 26 I. C. C. 567.

80 Commercial Club of Superior v. G. N. Ry., 24 I. C. C. 96.

able differences in distance must always be taken into account; 81 and if the difference in rates is out of proportion to the distances involved the Commission will be influenced by that fact.82 It has, for instance, been noted with approval by the Commission that local rates in C. F. A. territory are based on distance.83 But any approval of distance rates depends upon the observance of the principle that, when distance increases, the per ton-mile revenue decreases.84 And it follows that a mileage scale ordinarily yields a much higher rate in proportion for a short haul than for the long one.85 Carriers, therefore, are entitled to charge higher per mile rates for shorter hauls than are proper to be charged for longer distances.86 It is realized that a nearby point in a blanketed zone pays more per ton per mile than a more distant point.87 And certainly a difference of 32 miles on hauls ranging from 600 to 1,000 miles is negligible.88 In one proceeding recently the defendants contended that, so long as rates from farther distant points were greater in the aggregate than those from shorter distant points, no claim of discrimination could arise; but with this the Commission did not agree. Followed to its logical conclusion, it said, carriers would have the right to completely nullify distance, and give shippers far removed from consuming markets absolute control of prices in such markets, as against shippers located nearer thereto.89 But in another case, decided about the same time, the Commission said that, under the conditions involved, rate construction on the per ton-mile basis would give to distance an exagger

81 Union Tanning Co. v. S. Ry., 26 I. C. C. 159.

82 Sims v. M. & W. R. R. R., 26 I. C. C. 275.

83 Indianapolis Freight Bureau v. Chicago C., C., & St. L., 23 I. C. C.

195.

84 Victor M'fg Co. v. S. Ry., 21 I. C. C. 222.

85 Sheridan Chamber of Commerce

v. C., B. & Q. R. R., 26 I. C. C. 638.

86 Metropolitan Paving Brick Co. v. A. A. R. R., 17 I. C. C. 197.

87 Schmidt & Sons v. M. C. R. R., 19 I. C. C. 535.

88 Montezuma v. C. of G. Ry., 28 I. C. C. 280.

89 Elk Cement & Lime Co. v. B. & O. R. R., 22 I. C. C. 84.

ated influence, resulting in relatively prohibitive rates beyond certain distances, and the elimination of competition.90 As the situation now stands, therefore, it is certainly true that carriers are not required to disregard differences in distance." And, indeed, in cases where such action is clearly indicated, the Commission, in the absence of compelling circumstances, will prescribe distance rates.92

§ 584. Construction of distance rates.

As has just been pointed out, distance rates are now not uncommonly recommended by Commission.93 But it will sometimes be found that the establishment of rates on a mileage basis, instead of group adjustment, is not warranted by commercial conditions.94 And it is clear enough that carriers are not required to disregard difference in distance.95 Certainly if by doing so they cause unjust discrimination, they may not properly be required to do so.96 Percentage rates, so called, are based upon distance; and the rates to the various percentage groups are determined by short-line mileage to the more important points located within those groups.97 In giving explicit directions in a recent case, it was ordered that proportional class rates should be graded back across the State on the basis of a proportional scale of 55 cents between the rivers.98 In another late case, it was pointed out that the rates to a certain point were properly in projection on the basis and method of computing the C. F. A. territory percentage scale.99 Where the conditions are abnormal,

90 Alabama Coal Operators Ass'n v. S. Ry., 21 I. C. C. 230.

91 R. R. Com. of Oregon v. S. P., 24 I. C. C. 273.

92 Pulp & Paper Mf'rs Traffic Ass'n v. C., M. & St. P. Ry., 27 I. C. C. 83. 93 Wharton Steel Co. v. D., L. & W. R. R., 25 I. C. C. 303.

94 In re Advances on Live Stock, 25 I. C. C. 63.

95 Arizona Corporation Commis

sion v. A., T. & S. F. Ry., 28 I. C. C. 428.

96 Railroad Commission of Oreg. v. S. P. Co., 24 I. C. C. 273.

97 Commercial Club of Superior v. G. N. Ry., 24 I. C. C. 96.

Ass'n

98 Springfield Commercial v. P. R. R., 28 I. C. C. 511. 99 Interior Iowa Cities Case, 28 I. C. C. 64.

4

3

it is urged that the direct line should not be used in figuring comparative mileages, as for instance where trains must be operated over heavy grades. But the Commission cannot properly allow an unreasonable rate by the direct line, for the purpose of permitting the circuitous line to engage in the business at a reasonable profit.2 Constructive mileage is often allowed in computing distance, as two miles for one in the case of water carriage. Dividing the valuation placed upon the bridge by the assessed valuation of defendant's line in Iowa and Illinois, it appeared in one case that such valuation represented the assessed value of 661⁄2 miles of line. Flat differentials are sometimes established for one city over another or one route in comparison with another." And similarly arbitraries for additional hauls are established without regard to exact distances.6 Differentials are sometimes established for different distances, but this system is falling into disfavor. It will be noted that when rates conform to length of haul they naturally increase as distance increases.8 For long-distance movement the rate should not, and ordinarily does not, increase for the last miles of that movement by the amount of the local rate for that distance." The structure upon which rates are established tends to shrink them with increasing distance, and they vanish when the mileage on which the differential is based becomes inconsiderable in proportion to total mileage from basing point to destination. 10

1 Elgin Commercial Club v. B. & M. R. R., 28 I. C. C. 380.

2 Texarkana Freight Bureau V. St. L., I. M. & S. Ry., 28 I. C. C. 569.

3 Grain Rates in C. F. A. Territory, 28 I. C. C. 549.

'Southwestern Shippers' Traffic Ass'n v. A., T. & S. F. Ry., 24 I. C. C. 570.

5 East Dubuque Supply Co. v. I. C. R. R., 28 I. C. C. 425.

6 Omaha Grain Exchange v. C., R. I. & P. Ry., 28 I. C. C. 680.

7 Schmidt & Sons v. M. C. R. R., 19 I. C. C. 535.

8 Topeka Traffic Ass'n v. A. & V, Ry., 27 I. C. C. 428.

'Appalachia Lumber Co. v. L. & N. R. R., 25 I. C. C. 193.

10 Sheridan C. of C. v. C., B. & Q. R. R., 28 I. C. C. 638.

585. Bases of rate structure.

To consider yield per ton per mile as wholly controlling is equivalent to fixing of rates on basis of distance alone, which the Commission is not ready to do.11 Moreover, as traffic is moved, the ton per mile revenue usually decreases as distance increases. 12 Differences in distance are relatively inconsiderable when rates are constructed and maintained upon the group system, and the subjectmatter is a heavy commodity like coal.13 That rates are below the continuous-mileage scale is not conclusive of their unreasonableness. 14 But rates are not infrequently prescribed by the Commission on a mileage basis.15 And graded rates recently have several times been substituted for blanket rates. 16 According to the rate policies of the country now current the west bank of the Mississippi River is the west boundary of percentage zone based upon the rate between Chicago and New York as the 100 per cent territory; and all crossings, both upper and lower, are under percentage basis of rates with respect to traffic to and from points east of Buffalo and Pittsburgh.17 In the exercise of its power to see that traffic similarly circumstanced is handled without undue preference, the Commission has gone so far as to hold that in view of the well-established method of making rates in C. F. A. territory, Detroit was entitled to 78 per cent of the Chicago rate. 18 The Mississippi River, as has been seen, is the axis of rate adjustment.19 And to restore the relation as between the gateways, ton-mile earnings on

11 Board of Improvement v. St. L. & S. F. R. R., 26 I. C. C. 541.

12 Truck Growers Ass'n v. A. C. L. R. R., 20 I. C. C. R. 190.

13 Victor Mf'g Co. v. So. Ry., 27 I. C. C. 661.

14 Middlesboro Board of Trade v. L. & N. R. R., 27 I. C. C. 14.

15 Portland Chamber of Commerce

v. O. R. R. & N. Co., 21 I. C. C. R. 640.

16 Re Wool Transportation, 23 I. C. C. 151.

17 Mississippi River Case, 28 I. C. C. 47.

18 Delray Salt Co. v. Penn. R. R., 18 I. C. C. 259.

19 Topeka Traffic Ass'n v. A. & V. Ry., 27 I. C. C. 428.