SECTION 4. THE LONG AND SHORT-HAUL CLAUSE.

Long and short haul pro

Commis si o n has authority to

relieve carriers

SEC. 4. (As amended June 18, 1910.) That it shall be unlawful for any common carrier subject to the provisions of this Act to charge or receive any greater compensation in the aggregate for the transportation of passengers, or of like kind of property, for a shorter than for a longer distance over the same line or route in the same direction, vision. the shorter being included within the longer distance, or to charge any greater compensation as a through route than the aggregate of the intermediate rates subject to the provisions of this Act; but this shall not be construed as authorizing any common carrier within the terms of this Act to charge or receive as great compensation for a shorter as for a longer distance: Provided, however, That upon application to the Interstate Commerce Commission such common carrier may in special cases, after investigation, be authorized by the Commission to charge less for longer than for shorter distances for the transportation of passengers or property; and the Commission may from time to time prescribe the extent to which such designated common carrier may be relieved from the operation of this section: Provided, further, That no rates or charges lawfully existing at the time of the passage of this amendatory Act shall be required to be changed by reason of the provisions of this section prior to the expiration of six months after the passage of this Act, nor in any case where application shall have been filed before the Commission, in accordance with the provisions of this section, until a determination of such application by the Commission.

from the opera

tion of this sec

tion.

History of the Section.-This section of the Act to Regulate Commerce is in many ways the most important in its effect and its historic interest of all the provisions of this legislation. In the

original Act, as signed February 4, 1887, after the word "property" in the sixth line as given above occurred the clause "under substantially similar circumstances and conditions." By the Act of June 18, 1910, this clause was stricken out from the section, the second proviso was added and some other slight changes were made in the text and in the first proviso, including particularly the insertion of the clause forbidding carriers "to charge any greater compensation as a through route than the aggregate of the intermediate rates subject to the provisions of this Act."

During the first twenty-three years of the operation of the Act to Regulate Commerce the construction of this section in fact turned upon the meaning of the clause "under substantially similar circumstances and conditions," upon whether competition might determine or create a dissimilarity of conditions thereunder, and whether the carrier might under such conditions make the larger charge for the shorter distance of its own initiative or whether this charge could be made by the carrier only after investigation by and with the permission of the Interstate Commerce Commission.

In construing this section the Interstate Commerce Commission had ruled that actual competition between roads might create dissimilar circumstances and conditions but that the carrier could not determine this condition itself but must apply to the Commission which, after proper investigation and consideration, should determine whether the instance warranted an exception to the regulation that no greater compensation should be received for a shorter than for a longer distance. In 1897 the Supreme Court declared that competition when it affects rates was one of the most obvious and effective circumstances that make conditions, under which a long and short-haul is performed, substantially dissimilar. The court further declared that whether circumstances and conditions are similar or dissimilar under the 4th section are questions of fact to be determined by the carriers according to the features of each individual case-since from the very nature of the question they are in the first instance better fitted to adjust their rates to suit such circumstances and conditions than courts or commissions-subject of course to review at their peril upon application to the Interstate Commerce Commission and the courts.1

I Interstate Commerce Commission v. Alabama and Midland Railway Co., 168 U. S. 144, 42 L. Ed. 414, 18 Sup. Ct. 45. This action was based

The court emphatically declared that the phrase “under substantially similar circumstances and conditions" in the fourth section could not receive the same construction that the same phrase

upon the fact that the Alabama Midland Railway and its connecting lines charged a higher rate for carrying goods to and from Troy, the lesser distance, than for goods carried to and from Montgomery, the longer distance, over the same line. I quote at length from the opinion of the court:

"It is contended, in the briefs filed on behalf of the Interstate Commerce Commission, that the existence of rival lines of transportation and, consequently, of competition for the traffic, are not facts to be considered by the Commission, or by the courts, when determining whether property transported over the same line is carried under 'substantially similar circumstances and conditions,' as that phrase is found in the 4th section of the Act. Such, evidently, was not the construction put upon this provision of the statute by the Commission itself in the present case; for the record discloses that the Commission made some allowance for the alleged dissimilarity of circumstances and conditions, arising out of competition and situation, as affecting transportation to Montgomery and Troy respectively, and that, among the errors assigned, is one complaining that the court erred in not holding that the rates prescribed by Commission in its order made due allowance for such dissimilarity.

"So, too, In Re Louisville and Nashville Railroad, 1 I. C. C. Rep. 31, 78, in discussing the long and short haul clause it was said by the Commission, per Judge Cooley, that 'it is impossible to resist the conclusion that in finally rejecting the 'long and short haul clause' of the House Bill, which prescribed an inflexible rule, not to be departed from in any case, and retaining in substance the 4th section as it had passed the Senate, both Houses understood that they were not adopting a measure of strict prohibition in respect to charging more for the shorter than for the longer distance, but that they were instead leaving the door open for exceptions in certain cases, and, among others, in cases where the circumstances and conditions of the traffic were affected by the element of competition, and where exceptions might be a necessity, if the competition was to continue. And water competition was beyond doubt especially in view.'

"It is, no doubt, true that in a later case, Railroad Commission of Georgia v. Clyde Steamship Co., 5 I. C. C. Rep. 326, the Commission somewhat modified their holding in the Louisville and Nashville Railroad Co. case, just cited, by attempting to restrict the competition, that it is allowable to consider, to the cases of competition with water carriers, competition with foreign railroads, competition with railroad lines wholly in a single state; but the principle that competition in such cases is to be considered is affirmed.

"That competition is one of the most obvious and effective circumstances that make the conditions under which a long and short haul is performed, substantially dissimilar, and as such must have been in the contemplation of Congress in the passage of the Act to Regulate Com

occurring in the second section of the Act to Regulate Commerce must receive. The purposes of the two sections are manifestly different. The phrase “under substantially similar circumstances

merce, has been held by many of the Circuit Courts. It is sufficient to cite a few of the number: Ex parte Koehler, 31 Fed. 315; Missouri Pacific Railway v. Texas and Pacific Railway, 31 Fed. 862; Interstate Commerce Commission v. Atchison, Topeka and Santa Fe R. R., 50 Fed. 295; Interstate Commerce Commission v. New Orleans and Texas Pacific R. R., 56 Fed. 925; Behlmer v. Louisville and Nashville R. R., 71 Fed. 835; Interstate Commerce Commission v. Louisville and Nashville R. R., 73 Fed. 409. *

"But the question whether competition as affecting rates is an element for the Commission and the courts to consider in applying the provisions of the Act to Regulate Commerce is not an open question in this court. In Interstate Commerce Commission v. Baltimore and Ohio R. R., 145 U. S. 263, 36 L. Ed. 699, 12 Sup. Ct. 844, it was said, approving observations made by Jackson, Circuit Judge, (43 Fed. 37) that the Act to regulate Commerce was 'not designed to prevent competition between different roads, or to interfere with the customary arrangements made by railway companies for reduced fares in consideration of increased mileage, where such reduction did not operate as an unjust discrimination against other persons traveling over the road. In other words it was not intended to ignore the principle that one can sell at wholesale cheaper than at retail.' *

"In Texas and Pacific Railway v. Interstate Commerce Commission, 162 U. S. 197, 40 L. Ed. 940, 16 Sup. Ct. 666, it was held that 'in passing upon questions arising under the Act, the tribunal appointed to enforce its provisions, whether the Commission or the courts, is empowered to fully consider all the circumstances and conditions that reasonably apply to the situation, and that, in the exercise of its jurisdiction, the tribunal may and should consider the legitimate interests as well of the carrying companies as of the traders and shippers, and in considering whether any particular locality is subjected to an undue preference or disadvantage, the welfare of the communities occupying the localities where the goods are delivered is to be considered as well as that of the communities which are in the locality of the place of shipment; that among the circumstances and conditions to be considered, as well in the case of traffic originating in foreign ports as in the case of traffic originating within the limits of the United States, competition that affects rates should be considered, and in deciding whether rates and charges, made at a low rate to secure foreign freights which would otherwise go by other competitive routes, are or are not undue and unjust, the fair interests of the carrier companies and the welfare of the community which is to receive and consume the commodities are to be considered.'

"To prevent misapprehension, it should be stated that the conclusion to which we are led by these cases, that, in applying the provisions of the 3d and 4th sections of the Act, which make it unlawful for common

and conditions" in the second section is manifestly restricted to the case of shippers over the same road, thus leaving no room for competition. The purpose of the second section is to en

carriers to make or give any undue or unreasonable preference or advantage to any particular person or locality, or to charge or receive any greater compensation in the aggregate for the transportation of passengers or of like kind of property, under substantially similar circumstances and conditions, for a shorter than for a longer distance over the same line, in the same direction, competition which affects rates is one of the matters to be considered, is not applicable to the 2d section of the Act. As we have shown in the recent case of Wight v. United States, 167 U. S. 512, 42 L. Ed. 258, 17 Sup. Ct. 822, the purpose of the 2d section is to enforce equality between shippers over the same line, and to prevent any rebate or other device by which two shippers, shipping over the same line, the same distance, under the same circumstances of carriage, are compelled to pay different prices therefor; and we there held that the phrase 'under substantially similar circumstances and conditions,' as used in the 2d section, refers to the matter of carriage, and does not include competition between rival routes.

"This view is not open to the criticism that different meanings are attributed to the same words when found in different sections of the Act; for what we hold is that, as the purposes of the several sections are different, the phrase under consideration must be read, in the second section, as restricted to the case of shippers, over the same road, thus leaving no room for the operation of competition, but that in the other sections, which cover the entire tract of interstate and foreign commerce, a meaning must be given to the phrase wide enough to include all the facts that have a legitimate bearing on the situation-among which we find the fact of competition when it affects rates.

"In order further to guard against any misapprehension of the scope of our decision it may be well to observe that we do not hold that the mere fact of competition, no matter what its character or extent, necessarily relieves the carrier from the restraints of the 3d and 4th sections, but only that these sections are not so stringent and imperative as to exclude in all cases the matter of competition from consideration in determining the questions of 'undue or unreasonable preference or advantage,' or what are 'substantially similar circumstances and conditions.' The competition may in some cases be such as, having due regard to the interests of the public and of the carrier, ought justly to have effect upon the rates, and in such cases there is no absolute rule which prevents the Commission or the courts from taking that matter into consideration. "It is further contended, on behalf of the appellant, that the courts below erred in holding, in effect, that competition of carrier with carrier, both subject to the Act to Regulate Commerce, will justify a departure from the rule of the 4th section of the act without authority from the Interstate Commerce Commission, under the proviso to that section. In view of the conclusion hereinbefore reached, the proposition comes to