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RATE BASES

WATER
COMPETITION

(Con.)

The water competition which the Trans-Continental lines had to meet did not become a keen factor until the Panama Canal route was opened. The completion of the Panama Canal enabled the steamship lines operating through the Canal to make a one-way trip in about twenty days, which made the service of the water lines more attractive to the shipper. In order for the Trans-Continental lines to procure a share of the traffic from Eastern shipping points to the Pacific Coast terminals, they were obliged to bring their rates into a close relationship to the rates of the water lines. As a result of the Trans-Continental lines meeting competition of the water lines at the Pacific Coast terminals, the rates of the Trans-Continental lines from the Eastern shipping points to points intermediate to the Pacific Coast terminals (commonly called Inter-Mountain or Back-haul territory, whích includes such points as Spokane, Walla Walla and Yakima, Wash., Bonners Ferry, Idaho, Pendleton and Huntington, Ore., Reno and Winnemucca, Nev., Marysville, Fresno and Neddles, Cal., and Phoenix and Prescott, Ariz.) were higher than the rates from the Eastern shipping points to Pacific Coast terminals. This was in violation of the Fourth Section of the Act to Regulate Commerce, which prohibits higher rates for a shorter than for a longer haul over the same route, the shorter being included within the longer haul.

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FOURTH
SECTION
ORDER 184

Prior to the opening of the Panama Canal, the competition of the water routes
caused the Interstate Commerce Commission in Fourth Section Order No. 124,
etc. (June 2, 1911), to grant to the Trans-Continental lines relief from the applica-
tion of the Fourth Section of the Act as to rates to "Inter-Mountain" or "Back-
Haul” territory, to the extent that the rates should not exceed the rates to the Pacific
Coast terminals by the following measure:
From

Per Cent.
Missouri River Territory (Group F Points and west thereof) No relief
Chicago-St. Louis Territory (Groups D and E).

7
Cincinnati-Detroit Territory (Group C)

15 Buffalo-Pittsburg Territory (Group B)

25 Boston-New York-Philadelphia Territory (Group A)......... 25

The decision embraced in the Commission's Fourth Section Order No. 124 was appealed by the Trans-Continental carriers to the Commerce Court (now abolished), which reversed the finding of the Commission. The Commission then appealed the case to the United States Supreme Court, which sustained the Commission. Fourth Section Order No. 124 was thereupon ordered by the Commission to become effective October 1, 1914. This case is known as the "Inter-Mountain Rate Case," 234 U.S., 276, decided June 22, 1914.

During the progress of the Inter-Mountain Rate Case the Panama Canal was

completed, its actual operation beginning in September, 1913. This brought a new PANAMA CANAL element for consideration in the adjustment of Trans-Continental rates, because it

materially shortened the time consumed by the water lines in transporting goods from the Atlantic to the Pacific Coast, as well as enabling the water lines to reduce their

COMPETITION

RATE BASES

rates. Therefore, the water lines became more attractive to the shipper from the standpoint of both rates and service. In view of these facts the Trans-Continental lines were confronted by keener competition for Trans-Continental traffic and consequently filed a petition with the Interstate Commerce Commission asking for

reconsideration of their rates. PANAMA CANAL COMPETITION (Con.)

In July, 1914, the Interstate Commerce Commission reopened the Inter-Mountain Rate Case, and on January 29, 1915, in Fourth Section Order No. 205, etc., authorized the Trans-Continental lines to establish rates to intermediate points on the following basis:

The adjustment was divided into three groups, known as Schedules "A," "B" and “C,” respectively.

Schedule “Acovered class rates and special or commodity rates on those commodities not affected by the water competition. The rates for Schedule "Awere established without regard to competition of the water lines and strictly in conformity with the Fourth Section of the Act to Regulate Commerce.

Schedule “B” covered special or commodity rates on commodities that were SCHEDULE “B” subject to potential water competition or commodities as to which the Trans-Con

tinental lines did not encounter competition from the water lines to any great extent. Schedule “B” rates were established in conformity with the Commission's Fourth Section Order No. 124, supra.

SCHEDULE “A” RATES

RATES

Schedule “C” covered those commodities as to which actual and keen water competition was encountered by the Trans-Continental lines. Schedule “C” rates were made on the following basis:

CARLOAD RATES
From

Basis
(Where the rate to the Pacific Coast Terminals

is 75 cents or more per 100 lbs., rate to in

termediate points to be strictly in conMissouri River Territory (Group F formity with Fourth Section of the Act. points and west thereof).... Where rate to Pacific Coast Terminals is less

than 75 cents per 100 lbs., rate to intermediate points not to exceed 75 cents per 100 lbs.

SCHEDULE “C”
RATES

(Rate to intermediate points to be not more Chicago-St. Louis Territory (Groups

than 15 cents per 100 lbs. higher than the D and E points)

rate from Missouri River Territory.

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Cincinnati - Cleveland - Detroit-Pitts- Rate to intermediate points to be not more

burg Territory (Groups B and C than 25 cents per 100 lbs. higher than the points).

rate from Missouri River Territory.

Rate to intermediate points to be not more Boston-New York-Philadelphia Ter

than 35 cents per 100 lbs. higher than the ritory (Group A points)

rate from Missouri River Territory.

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Where the rate to Pacific Coast Terminals is

150 cents or more per 100 lbs. on articles classified first and second classes, and 125 cents per 100 lbs. on articles classified third class or lower, rate to intermediate points

to be strictly in conformity with the Fourth Missouri River Territory (Group F

Section of the Act. points and west thereof).

Where rates to Pacific Coast Terminals are

less than the above amounts, rates to intermediate points not to exceed 150 cents per 100 pounds on articles classified first and second classes and 125 cents per 100 lbs. on articles classified third class or lower.

SCHEDULE “CH
RATES Con.

Rate to intermediate points to be not more Chicago-St. Louis Territory (Groups

than 25 cents per 100 pounds higher than D and E points)

the rate from Missouri River Territory.

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Cincinnati - Cleveland - Detroit-Pitts- (Rate to intermediate points to be not more

burg Territory (Groups B and C{ than 40 cents per 100 lbs. higher than the points)

I rate from Missouri River Territory.

(Rate to intermediate points to be not more Boston-New York-Philadelphia Ter

than 55 cents per 100 lbs. higher than the ritory (Group A points)

rate from Missouri River Territory.

FOURTH SECTION ORDER 6790.

During the World War ships became scarce on the Atlantic, which had the effect of depleting the service between Atlantic Ports and Pacific Ports via the Panama Canal, and in view of the service via the Panama Canal being curtailed, TransContinental rates were again considered, at which time the Interstate Commerce Commission held that the relief from the Fourth Section of the Act that was granted to Trans-Continental carriers could no longer be maintained on such rates as came under Schedules "B" and "C," and that these rates, as a whole, were unreasonably low from Eastern Territory to the Pacific Coast Terminals. The continuation of the violation of the Fourth Section of the Act could not continue at intermediate points. This decision by the Interstate Commerce Commission is covered by Fourth Section Order No. 6790, effective April 15, 1917. This order resulted in the rates from Eastern shipping points to Trans-Continental Territory being established in conformity with the Fourth Section of the Act in so far as it affects previous Fourth Section Orders Nos. 124 and 205, etc.

RATE BASES

Previous to Fourth Section Order No. 6790, the lowest rate combination ofttimes was made by the application of the commodity rate to a Pacific Coast Terminal plus the "back-haul" rate to the interior point.

As an illustration, a first class article having commodity rate to Pacific Coast
Terminals and intermediate points:
Rate New York to Terminals (Seattle).....

$1.00 per cwt.
Rate under Schedule "C" to Inter-Mountain Territory
BACK HAUL
(Spokane)......

2.05 per cwt. Back-haul rate Seattle to Spokane, first class.

.99 per cwt. Lowest rate: Seattle combination........

1.99 per cwt. From the above it will be noted that the lowest rate is made by using as factors the Terminal rate plus the "back-haul” rate, although in such operations the shipment very seldom, if ever, moves in and out of the terminal point. The InterMountain Territory ofttimes was referred to as "back-haul” territory. However, in view of Fourth Section Order No. 6790,"back-haul" territory has been eliminated in so far as it affects the computation of freight rates.

The water competition via the Panama Canal again became an important factor in establishing trans-continental rail rates during the latter part of 1920. In fact, the re-establishment of water service was more or less anticipated by the Commission, as, in the Inter-Mountain Rate Association vs. Aberdeen & Rockfish, 61 I.C.C., 226, the Commission said:

Conditions warrant the carriers, in their discretion, in continuing the present blanket adjustment on many and perhaps most of the commodities that move in considerable volume. The ships that now ply between the Atlantic and Pacific ports are not nearly so numerous and the tonnage now moving is not nearly so heavy as during the period that followed the opening of the canal and preceded our entry into the war, but it is, nevertheless, certain that there is now sufficient transportation by water, and ample indication that it will further develop and increase, to warrant the belief that within a comparatively short time it will reach a point where it will be felt in a serious loss of tonnage by the rail lines unless they have available appropriate measures to meet the situation. There is not that strife and rivalry that formerly characterized the co-existence of these two modes of transportation to and from the Pacific Coast, but as between these separate sets of carriers there is that natural and well-grounded fear of each other's ascendency and power, sufficient, especially in view of the existing movement by water, to warrant a finding that there is actual competition at

the present time. Energetic business competitors in their struggle for success always look beyond RB-ESTABLISH- the present and are justified in keeping themselves fortified against each other's activities even MENT OP

before the situation becomes serious. COMPETITION

To partially meet the competition of the water lines operating through the Panama Canal, the Trans-Continental Pacific Coast railroads filed, May, 1921, special Sixth Section application under Order 52838, wherein reductions were outlined by the carriers, such reductions being considered sufficiently low to enable the carriers to participate in a share of the traffic moring to Pacific Coast terminals and intermediate points. Under Sixth Section application Order 52838, no violation of the Fourth Section occurred in connection with the rates that were to be published, but the keenness of the water competition in 1922 caused the rail carriers to petition for rates that would be lower at Pacific Coast terminals than at intermediate points, and therefore filed various Fourth Section applications through R. H. Countiss, Agent, seeking authority to re-establish on a large number of commodities rates from Eastern shipping points to Pacific Coast terminals on the basis that prevailed before the disappearance of water competition and previous to Fourth Section Order No. 6790.

RATE BASES

RE-ESTABLISH-
MENT OF
COMPETITION

(Con.)

Findings of the Commission in Transcontinental Cases of 1922, 74 I. C. C., 48, which embraced Fourth Section applications 11940, 11948, 11957, 11985, 12094, 12118, and general westbound Fourth Section application 12063, denied the transcontinental carriers relief from the Fourth Section of the Act, except application 11940, granted lower rates on sulphur from Texas and Louisiana points to Pacific Coast Terminal than to intermediate points; also eastbound application 11985, California terminals via Gulf Ports to New York Piers, on asphalt, beans, canned goods, condensed milk, fruit and rice, at rate lower than at intermediate points.

In Transcontinental Wool Case of 1922, 74 I. C. C., 99, the Commission denied the carriers the right to violate the Fourth Section of the Act on wool from Pacific Coast Terminals at intermediate points. This order covered Fourth Section applications 345, 349, 11996, 12012, 12017 and 12018. Case submitted June 3, 1922; decided October 30, 1922.

WOOL CASES

The "Wool Cases of 1922" was reopened and considered in "Wool Rates Investigation, 1923,” 91 I. C. C., 235, decided July 8, 1924, together with carriers' schedules that were to take effect February 10, 1923. The new schedulesprovided for advances in the terminal rates, with reductions or no change from intermediate points; and also where the Fourth Section would be violated, the carriers proposed to maintain higher minimum carload rates from terminals than from intermediate points also the interior rates to be made on combination to the lowest rated terminal plus rate from terminal to eastern destination. The Commission order denied Fourth Section relief (Order No. 8430) and prescribed mileage rates to Eastern points via shortest working routes and shipping points to be grouped, such groups not to be more than 75 miles in diameter.

Previous to Federal control it was the practice of some of the railroads, in connection with their water service, to provide on westbound traffic Group D (Chicago) rates from New York piers via South Atlantic and Gulf ports to California terminals and intermediate points. These rates were maintained from New York piers to meet, to some extent, the competition through the Panama Canal, and in some cases were applied from interior eastern points. This adjustment was discontinued by the Railroad Administration during Federal control.

To re-establish the custom from New York Piers, the Southern Pacific CompanyAtlantic Steamsbip Lines (Morgan Line) filed schedules to become effective March 31, April 5, July 1, September 30 and November 30, 1922, proposing to apply Group

D rates on about 206 items to points west of El Paso served by the Southern Pacific NEW YORK

Company. Tariffs were suspended under I. & S. Dockets 1511, 1597, 1655 and 1696, VIA GULF LINES and in “Reduced Rates from New York Piers," 81 I. C. C., 312, decided July 2, 1923,

the Commission required the cancellation of the proposed tariffs, but permitted the carriers to establish from New York Piers the Group D rates that were in force on September 15, 1922.

Further reductions in New York Pier rates to South Pacific Coast were embodied in schedules to become effective in October and November 1923, but suspended under I. & S. Docket 1930. The suspended schedules provided “Group D” rates from New York Piers on about 115 items, this addition being necessary by changes taking place from “Group D” to Pacific Coast. The Commission, in “Reduced Commodity Rates from New York Piers to Pacific Coast,” 89 I. C. C., 512, decided June 10, 1924, found the Morgan Line schedules were justified and vacated the suspensions.

PIER RATES

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