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Section 2.

§ 192. Section 2. Unjust discrimination defined and forbidden. 193. Origin of the section.

194. Purpose of the section.

195. Effectiveness of the section. The Act of February 19, 1903. 196. Common law as to discriminations.

197. Just and unjust discrimination at common law.

198. Discrimination in charge based upon differences in service not discriminative.

199. Circumstances and conditions of through traffic and local traffic are dissimilar.

200. Competition of carriers does not make circumstances dissimilar under section 2.

201. The party rate case.

202. Wholesale and retail rates in freight traffic.

203. Wholesale rates in freight and passenger traffic distinguished. 204. Discrimination not unjust when based on special service.

205. Carload and less than carload rates.

206. Discrimination in application of carload rates.

207. The supreme court on forwarding agents in carload rates. 208. Discrimination in carload rates.

209. Cargo rates discriminative.

210. Different forms of discrimination.

211. Discrimination in restricted rates.

212. Discrimination through industrial tap lines and plant facilities.

213. Discrimination through interest in connecting company.

214. Discrimination by carrier in favor of itself as a shipper.

215. Discrimination in storage of goods, etc.

216. Stoppage in transit privileges.

217. Unjust discrimination through abuse of stoppage in transit privileges.

218. Unjust discrimination in passenger service.

219. Giving passes to shippers prohibited.

220. Unjust discrimination in telephone service.

221. Application of the section.

222. Retention of overcharge.

223. Enforcement of the section.

224. Connecting carrier not responsible for discrimination by initial carrier.

225. Effect of rebates upon contracts of affreightment.

226. Discrimination in allowance to private transfer companies

[Unjust discrimination defined and forbidden.]

§ 192 (143).-SEC. 2. That if any common carrier subject to the provisions of this act shall, directly or indirectly, by any special rate, rebate, drawback, or other device, charge, demand,

collect, or receive from any person or persons a greater or less compensation for any service rendered, or to be rendered, in the transportation of passengers or property, subject to the provisions of this act, than it charges, demands, collects, or receives from any other person or persons for doing for him or them a like and contemporaneous service in the transportation of a like kind of traffic under substantially similar circumstances and conditions, such common carrier shall be deemed guilty of unjust discrimination, which is hereby prohibited and declared to be unlawful.

§ 193 (144). Origin of the section. This section has not been amended. It was said by the supreme court in the Texas & Pacific Railway case, 162 U. S. 197, 1. c. 219, 40 L. Ed. 940, to have been modeled upon section 90 of the Railway Clauses Consolidation Act of 1845, 8 & 9 Vict. ch. 20, the first English statute regulating railways. This section is as follows:

"Sec. 90. And whereas it is expedient that the company should be enabled to vary the tolls upon the railways so as to accomodate them to the circumstances of the traffic, but that such power of varying should not be used for the purpose of prejudicing or favoring particular parties, or for the purpose of collusively or unfairly creating a monoply, either in the hands of the company or of particular parties; it shall be lawful therefore, for the company, subject to the provisions and limitations herein and in the special act contained, from time to time to alter or vary the tolls by the special act authorized to be taken, either upon the whole or upon any particular portions of the railway, as they shall think fit; provided that all such tolls be at all times charged equally to all persons, and after the same rate, whether per ton, per mile, or otherwise, in respect to all passengers, and of all goods or carriages of the same description, and conveyed or propelled by a like carriage or engine, passing only over the same portion of the line of railway under the same circumstances; and no reduction or advance in any such tolls shall be made either directly or indirectly in favor of or against any particular company or person traveling upon or using the railway."

This section of the English law, known as the equality clause, differs from section 2 of the American act in the words "passing only over the same line of railway under the same circumstances," which impart a very different meaning as construed in the English courts from the words "under substantially similar circumstances and conditions" found in the American act. The

English section as construed by the English courts was confined in its operation to shipments passing only over the same portion of the line between the same points of departure and the same points of arrival. See M. S. & L. Ry. Co. v. Denaby Main Colliery Co., 4 Railway & Canal Traffic Cases, p. 452; Murray v. G. & S. W. Ry. Co., 4 Railway & Canal Traffic Cases, p. 460; Denaby Main Colliery Co. v. M. S. & L. Ry. Co., 6 Railway & Canal Traffic Cases, p. 141; L. & Y. Ry. Co. v. Greenwood, Law Reps. 21 Q. B. Div. pp. 217 and 218.

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It appears from a statement made in the debate in congress by Senator Sherman, on May 14, 1887, that the words "and from the same original point of departure or from the same point of arrival" were at one time contained in section 2, but that these words were taken out by the conference committee, and the words 'under substantially similar circumstances and conditions" adopted in lieu thereof. So that discriminations are "unjust" and violative of this section: first, when the service is like and contemporaneous; second, when it is rendered in the transportation of a like kind of traffic, and third, when the service is rendered under substantially similar circumstances and conditions. That is, all three of these conditions must concur.

§ 194 (145). Purpose of the section.-The purpose of this second section is the prevention of unjust discrimination between shippers by any form of device. It was said by the commission in its report on its investigation of the subject of "underbilling," 1 I. C. C. R. 633, and 1 Int. Com. Rep. 813, that the enumeration in this section of special rates, rebates, drawbacks and other devices showed the methods of favoritism which were presented most distinctively to congress in framing the act, and added: "The investigation which preceded the passage of the act had disclosed the fact that preferences were frequent, in fact were almost universal." The commission quoted from the report of the senate committee to the effect that the prevailing policy of railway management is but an elaborate system of special rates, rebates, drawbacks and concessions to foster monoply, to enrich favored shippers and to prevent free competition in the many lines of trade in which the item of transportation is an important factor. The commission said that the act was prepared accordingly with these evils directly in view.

The section has been construed both by the commission and by the courts, in recognition of these evils which congress intended to remedy. The supreme court said in Wight v. United States, 167 U. S. 512, 42 L. Ed. 258, that the section was designed to compel every carrier to give equal rights to all shippers over its own road and to forbid it by any device to enforce higher charges against one than another.

In another case, Union Pacific Railway Co. v. Goodrich, 149 U. S. 680, 37 L. Ed. 896, the court said in construing a Colorado statute similar in terms, that the purpose of the Colorado statute was to apply to intrastate traffic the same wholesome rules and regulations which congress thereafter applied to commerce among the states, and to cut up by the roots the entire system of rebates and discriminations in favor of particular localities, special enterprises and favored corporations, and to put all shippers upon an absolute equality.

This section 2, however, does not deal with discriminations between and preferences in favor of or against localities, or with discriminations between kinds of traffic, which are dealt with in the succeeding section, but only with discriminations between shippers of the same kind of traffic, that is, where the service is in the transportation of a like kind of traffic "under substantially similar circumstances and conditions."

195 (146). Effectiveness of the section. The act of February 19, 1903.-The effectiveness of the act is more distinctly expressed in the second section than in any other. The reasonableness of rates remains as complex and indefinite a problem as when the act was passed, and as will be hereafter seen, the anticipated prevention of the building up of trade centers to the prejudice of smaller towns has proven impossible of realization in the face of controlling competition, but in the question of discrimination between individuals, or classes of individuals in the same kind of traffic, the rulings of the court have been, with the exception of the Party Rate decision, in harmony with those of the commission. It may be said further, that the evils prohibited in this section are recognized by railway managers, so that they have in the main co-operated with the commission in their efforts for their suppression. Thus the commission said in its first annual report, 1887, in reviewing the operation of the act

for the first eight months in which it was in force, that it was justified in saying that the act had operated directly to increase railroad earnings by putting an end to rebates, drawbacks and special rates upon freight business, a result which was also found to be eminently satisfactory to the general public; and the investigations of the commission had not as yet disclosed the existence of unjust discriminations resulting from the use of those particular methods of preference in interstate traffic. "On the contrary, a vast number of instances have been found where special rates, rebates and drawbacks have been discontinued, and where preferences and advantages which were formerly thereby given, have been terminated."

In the intense competition of business, new devices for securing discriminating freight rates have been eagerly sought, and it appears from the subsequent reports of the commission that while discriminations are less openly given, the evil is far from being suppressed, particularly in the use of private cars in freight traffic, in the division of rates with terminal railroads. owned or controlled by shippers and in other devices. See report of 1904, pages 12 to 19, and 10 I. C. C. R. 385, 10 I. C. C. R. 450. The act of February 19, 1903, commonly known as the Elkins bill, has very materially enforced this section. This law, infra, § 422, requires carriers in all cases to publish their tariffs and prohibits "any practice on the part of the carriers whereby any such property shall by any device whatever be transported at a less rate than that named in the tariff *** or whereby any other advantage is given or discrimination practiced." Under this amendment the practice of secret rebates from published rates, though made to all "similarly circumstanced" is made unlawful.

§ 196 (147). Common law as to discriminations.-It was said of the first section, as to the obligation to charge reasonably, that it was only a reaffirmation of the common law. This can be said only in a qualified sense of the obligation to charge equally imposed by the second section. In the Party Rate Case, 145 U. S. 271, 36 L. Ed. 703, the supreme court said that at common law it was even doubted whether carriers were bound to make the same charge to all persons for the same service, although the weight of authority in this country was in favor of equality of

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