In the ordinary case, such a rule would be prohibitive. A farmer, a thousand miles from market, could not afford to pay as freight on his grain what it would cost him to build a railroad or to cart his crops to market; nor could a person who desires to cross a river pay a bridge company by way of toll what it would cost him to get across on his own account. Such a basis of compensation is certainly unreasonable to the customer." § 529. Charging what the traffic will bear hardly applicable to passenger fares. Charging what the traffic will bear has obviously very little scope in justifying differences in passenger fares. Plainly rich men cannot be charged more than poor, nor men with important engagements more than people who have no business interests; but then these would be forbidden as personal discriminations. However, the principle has some operation in making up a schedule of passenger fares for a railroad system. Thus suburban fares for a considerable zone around a large city are placed at considerably lower rates per mile than for long distance runs. The real reason is that a heavy passenger traffic to suburban points could not be developed at the average mileage rate for the system. So long as this is a remunerative business it would seem that it is better for the whole traffic that these concessions should be made. In one case before the Inter state Commerce Commission 10 it was said: "The granting of commutation rates for suburban travel is quite general and such rates are defensible on various grounds. They tend to benefit the public by permitting and inducing residence at considerable distance from the place of occupation, thus aiding the territorial growth of cities and relieving their congested districts. So far as they have that effect such rates in turn benefit the railways by securing business that otherwise would 9 See Canada Southern Ry. v. International Bridge Co., L. R. 8 App. Cas. 723, B. & W. 315 (1883). 10 Sprigg v. Baltimore & O. Ry., 8 I. C. C. Rep. 443 (1900). not exist and revenue not otherwise obtainable. Ordinarily, the price of commutation tickets, the conditions upon which they are sold, and the distance from a given city to which commutation rates shall be extended, are matters within the discretion of the carrier." TOPIC E-RATES DICTATED BY COMPETITION. § 530. Rates may be made to meet competition. Within the many limitations which are discussed throughout this book a railroad company may make such rates as it is necessary for it to make to meet competition. A great deal of transportation is conducted under competitive conditions, the shipper having an alternative route by which he may get his goods to market. Under such circumstances railway rates between the competitive points will inevitably tend to be lower than between points where there is no competition. To a certain extent the public is rejoiced to see lower rates from whatever cause, and it will in an ordinary case be unquestioned that the carrier may make his competitive rates as low as is necessary to get the business. But this statement is subject to certain limitations, some of which will now be discussed, but most of which are discussed more fully in later chapters.1 531. Policy for permitting competitive rates. The policy of this matter seems to be to permit the making of rates to meet competition even if proportionately they seem preferenial, in order that competition may be possible, which it could not be without this permission. This is very acutely said by Lord Herschell in Phipps v. London & North Western Railway Company:2 "Suppose that to insist on absolutely equal rates would practically exclude one of the two railways from the traffic, it is obvious that those members of the public who are in the neighborhood where they can have the benefit of this competition would be prejudiced by any such proceedings. 1 See Chapter XIX and Chapter XXV, infra. 2(1892) 2 Q. B. 229. [513] And further, inasmuch as competition undoubtedly tends to diminution of charge, and the charge of carriage is one which ultimately falls upon the consumer, it is obvious that the public have an interest in the proceedings under this Act of Parliament not being so used as to destroy a traffic which can never be secured, but by some such reduction of charge, and the destruction of which would be prejudicial to the public by tending to increase prices." 532. Competitive rates may be made low enough to hold business. Without going into the many problems as to local discrimination, the result largely of statutory provisions and their construction, which are discussed later, it may be pointed out briefly that it is a general principle recognized in all of those cases that it is permissible to make the competitive rate low enough to get business and to hold it. In order that the language of the judges may be seen, one case is selected from this long list for quotation. In that case the reasonableness of relative rates to Montgomery, Ala., and Troy, Ala., was in question. The court pointed out that competition operated in fixing the Montgomery rate: "There are many more railway lines running to and through Montgomery, connecting with all the distant markets. The Alabama River, open all the year, is capable if need be of bearing to Mobile, on the sea, the burden of all the goods of every class that pass to or from Montgomery. When the rates to Montgomery were higher a few years ago than now, actual active water line competition by the river came in, and the rates were reduced to the level of the lowest practical paying water rates; and the volume of carriage by the river is now comparatively small, but the controlling power of that water line remains in full force, and must ever remain in force, as long as the river remains navigable to its present capacity. And this water line 3 Interstate Com. Com. v. Ala. Midland Ry., 69 Fed. 227, 74 Fed. 715, 41 U. S. App. 453. See Chapters XXV and XXXVIII, infra. affects, to a degree less or more, all the shipments to or from Montgomery from or to all the long distance markets. It would not take cotton from Montgomery to the South Atlantic ports for export, but it would take the cotton to its points of ultimate destination, if the railroad rates to foreign marts through the Atlantic ports were not kept down to or below the level of profitable carriage by water from Montgomery through the port of Mobile, The volume of trade to be competed for, the number of carriers actually competing for it, a constantly open river present to take a large part of it whenever the railroad rates rise up to the mark of profitable water carriage, seem to us, as they did to the Circuit Court, to constitute circumstances and conditions at Montgomery substantially dissimilar from those at Troy." § 533. Rates must not be reduced by competition, below a remunerative basis. This principle permitting the carrier to make in particular instances low rates to meet competition has its limitations; it will not justify the making of rates which will not be remunerative, as that must result in throwing undue burdens upon others. "The principle of relative justice applied is that when a carrier, by reason of competitive conditions, or for other reasons, serves certain localities at very low rates, the concessions made must not subject other localities or other patrons dependent on the same carrier to undue or unreasonable prejudice or disadvantage, but there must be an equitable adjustment of rates so that there is no unjust discrimination between competitors in like pursuits. "There may be cases in which a carrier legitimately engaged in serving some territory is compelled by some new and aggressive competition to reduce normal and reasonable rates to retain business for its line, and where corresponding reductions at points not affected, or less affected, by destructive competition, might be unreasonable. But when a carrier voluntarily enters a field of competition where, by reason of a disadvantageous route, or the rigor of the competitive conditions, remunerative rates cannot be charged, and its service to a portion of its patrons is unprofitable, it accepts the legal obligation that its service shall be impartial to all who sustain similar relations to the traffic, and from whom the service itself is not substantially dissimilar. As was said in Re Chicago, St. P. & K. C. R. Co.,* 'If they (carriers) deliberately proceed to destroy each other, the law must take care that in doing so they injure as little as possible individuals and communities dependent upon them for transportation facilities.' This is the plain requirement of the Statute, and it is in accordance with obvious principles of justice." 5 § 534. Standard rate among competing lines. Where a competitive situation has become established by presence of various competing lines performing the same service to the community, it tends to become settled between the competitors what shall be the standard rates and what differentials shall be allowed from these rates. The standard rate might be that established by the shortest and otherwise best located road, but it would not be fair in reducing rates all over the territory involved to reduce all rates to the lowest margin of profit fair to that particular road, for other roads could not meet that rate without ruin, it may be. On the other hand it would be bad public policy to permit as an artificial standard what the most circuitous and worst located road might need to make a good profit. As in most problems of rate making the result must be some compromise. This was pointed out by the Interstate Com 42 Int. Com. Rep. 137, 2 I. C. C. Rep. 231. 5 Schoonmaker, Com. in Manufacturers & Jobbers' Union v. Minneapolis & S. L. R. R., 3 Int. Com. Rep. 115, 1 I. C. C. Rep. 227 (1890). |