against valuable goods than against cheap goods, as has been conceded; but that the carrier can, in analogy to taxation, throw the burden upon the more valuable goods and relieve the cheaper goods in direct proportion to their respective values cannot be admitted. The duty of the carrier is to move all goods at a reasonable price for the service rendered, a matter not to be determined upon any ad valorem basis. The wrong to the public in making what the goods will bear the basis of rates is well pointed out in the succinct quotation which follows: "It is not a question of what the traffic will bear, but rather of what the public should bear. Conditions are such that this rate can be advanced as between the people who pay it and the stockholders who receive it. Is the advance right? Every question as to the reasonableness of a rate may present itself in two aspects. First, is the rate reasonable, estimated by the cost and value of the service, and as compared with other commodities? second, is it reasonable in the absolute, regarded more nearly as a tax laid upon the people who ultimately pay that rate? The considerations which determine the first of these aspects are of but little weight in determining the second. Every such inquiry involves the idea of some limit beyond which the capital invested in railways ought not to be allowed to tax other species of property. What is that limit, and how can it be fixed ?"4

§ 484. Rates may be shown to be unreasonable in them

selves.

Occasionally a case will come up when the competition between the principle of protecting the carrier in its fair return and the principle that no more than a reasonable charge should be exacted from the shipper is not a difficult issue to decide. For sometimes the unreasonable character of the charge exacted will be so apparent that the case for the shipper will be unaffected by the most skillful argument for the carrier. Thus

4 Re Advances in Freight Rates, 9 I. C. C. Rep. 382 (1902).

in one case under examination by the Interstate Commerce Commission, the railroad company met the charge that the rate established was unreasonable by attempting to show that they were earning no more than a fair return. But the Commission, in holding for the complainant, seized upon the obvious fact that the rates were plainly unreasonable in themselves. On that point it was said: "In the fiscal year which had just closed when this proceeding was commenced, the average rate received by the railway companies of the United States for hauling one ton of freight one mile, was less than 1 cent. The average received by the railway companies, including the defendants, operating in the territorial group composed of the States of Arkansas, Missouri, Kansas, parts of the States of Colorado and Texas, and Indian and Oklahoma Territories, and part of the Territory of New Mexico, was less than 1.2 cents. The Eureka Springs Railway Company received more than 10 cents per ton per mile, which is about nine times the average amount received by the railway companies operating lines in said States and Territories so grouped, because of similarity of, or in respect to, density of population, topography and nature of the country, character of industries served by railways, and other characteristics affecting the question of the cost and reasonable compensation for railway service."5

4a Cary v. Eureka Springs Ry., 7 I. C. C. Rep. 286 (1897).

5 A rate unreasonable in itself to the person served cannot stand. See: UNITED STATES SUPREME COURT:

Union Pac. Ry. v. Goodridge, 149 U. S. 680, 37 L. Ed. 896, 13 Sup. Ct. 970 (1893), affirming 37 Fed. 182; Covington & L. T. R. Co. v. Sandford, 164 U. S. 596, 41 L. Ed. 561, 17 Sup. Ct. 198 (1896), reversing 20 S. W. 1031; Smyth v. Ames, 169 U. S. 466, 42 L. Ed. 819, 18 Sup. Ct. 418, B. & W. 347 (1898), affirming 64 Fed. 165; Minneapolis & St. L. R. R. v. Minnesota, 186 U. S. 257, 46 L. Ed. 1151, 22 Sup. Ct. 901 (1902), affirming 80 Minn. 191, 83 N. W. 60.

FEDERAL Courts:

Wells v. Oregon Ry. & H. Co., 15 Fed. 561 (1883); Interstate Com. Com. v. Louisville & N. R. R., 118 Fed. 613 (1902).

STATE COURTS:

485. Adjustment between the claims of the company and

the patron.

It may be that a public service company cannot obtain a fair return on its investment without charging more than a fair amount for the particular service. This will not usually happen: there will usually be some ground left between the limit. of reasonable return and the limit of value of the service. As Mr. Justice Savage said in Kennebec Water District v. Waterville:

In some of the cases to which we have referred, it is suggested that there may be instances where these two principles will clash, where public service rendered at rates not higher than the service in itself is worth may produce less than a fair income, or no net income at all. But we assume that it is unnecessary to discuss this question here, for neither upon the face of the bill and answer, nor in the requests for instructions, nor in the arguments of counsel, is there any suggestion that what will be reasonable rates for the public in this case will not also be reasonable rates for the company."

Where, however, the question is approached from the opposite standpoint, and the court has found that a schedule of rates charged by the company does not of itself bring in more than a reasonable return to the company, it may be necessary to cut down this maximum permitted rate by considering the rights of the individual served. That is, in determining what are reasonable rates, the fact that a road earns little more than operating

California-Spring Valley W. W. v. San Francisco, 82 Cal. 286, 23 Pac. 910 (1890).

Maine Kennebec Water Dist. v. Waterville, 97 Me. 185, 54 Atl. 6, 60 L. R. A. 856 (1902).

See §§ 515-521, infra.

INTERSTATE COMMERCE COMMISSION:

New Orleans C. Ex. v. Cincinnati, N. O. & T. P., 2 Int. Com. Rep. 289,

2 I. C. C. Rep. 375 (1899); Cary v. Eureka Springs Ry., 7 I. C. C. Rep. 286 (1897).

6 97 Me. 185, 54 Atl. 6, 60 L. R. A. 856 (1902).

expenses is not to be overlooked, but cannot be made to justify grossly excessive rates. Thus, wherever there are more roads than the business at fair rates will remunerate, they must rely on future earnings for a return of investments and profits.7

§ 486. Equalization of advantage as a factor affecting the particular rate.

A theory of fixing rates which appeals to many economists, which is in fact a modification or special application of the rule for charging what the traffic will bear, is the theory that rates should be so fixed as to equalize the advantage of shippers and thus establish the conditions of business for the good of the whole country. It is in substance a sort of legal protection to struggling industries. Thus if wheat cannot be raised in Wyoming as cheaply as in Iowa, the rates from Wyoming to the seaboard should be correspondingly reduced; unless indeed it does not seem to the rate-fixers to be for the country's good that wheat should be raised in Wyoming. A practical objection to this doctrine will at once appear. It calls on the private individuals who happen to have power over rates to act in such a way as to subserve the public good, rather than their own advantage; and thus without election as legislators and without the responsibility of office, to perform one of the most difficult of legislative functions. Nor is it practically possible to fix rates entirely or principally on this theory. As Mr. Commissioner Veazie well said:

"The complainants have advanced the theory that the Commission in fixing these relative rates should be governed by commercial considerations wholly, independent of the cost of carriage. It was said by Mr. Squire, one of the complainants, in his testimony, that railroads should make just relative rates so

7 New Orleans Cotton Exch. v. Cincinnati, N. O. & T. P. R. Co., 2 Int. Com. Rep. 289, 2 I. C. C. Rep. 375 (1888); Rice v. Western New York & P. R. Co., 2 Int. Com. Rep. 298.

that both parties could live, and that the product rate should be higher than the live-hog rate, even if the cost of transporting the two articles be the same, which is not the case. It is to this theory that the complainants have very largely directed the attention of the Commission. A rate which is based upon this theory would have to vary in the case of the live hogs with every change in the market price of the animals in the western markets.

"Rates for the transportation of property should be arrived at and based so far as practicable upon permanently continuing, fixed facts and conditions. The fluctuations of the markets of the country are so frequent, especially as to competitive articles, and oftentimes unexpected, that commercial considerations alone would not furnish a sufficiently stable and fixed rule for guidance in making a rate which ought to remain substantially permanent through all fluctuations. Upon this point so strenuously urged by the complainants that carriers should adjust their rates in a way to produce equality between the competitors in all markets, it must be apparent that it would be a useless task for the Commission, even if it had the power, to attempt to accomplish such a result. It would involve a careful research into all the circumstances surrounding the business of each locality, as questions of rent, rates of taxation, cost of labor, and many other things which suggest themselves. The evident result would be that there would have to be as many differently constructed rates as there are different localities." 8

§ 487. Carriers not obliged to equalize disadvantages.

But while the equalization of advantage cannot be a chief factor in rate-fixing, it may legitimately be considered as one of the subordinate factors tending to lower the particular rate, and may be taken into account with the other factors enumerated in this chapter.9

$ Squire v. Michigan Central Ry., 3 Int. Com. Rep. 515, 4 I. C. C. Rep. 611 (1891).

9 Equalization of advantages is discussed in §§ 538-542, infra.