sification can be made, and the maximum rate must be fixed the same for all, then the law is admitted to operate unequally and unjustly, because some companies are to less expense than others in the same length of road by reason of the nature of the country through which they run; some have costly terminal facilities, and some have not; some owe large amounts, and some do not; and some do a large amount of business, and some do not." § 1208. Circumstances of particular service. The point that the cost of service may be different for different parts of the same system was insisted upon in Interstate Commerce Commission v. Lehigh Valley Railroad Company. It appeared in that case that the Interstate Commerce Commission, upon complaint of a shipper, had adjudged a certain rate upon coal unreasonable. The Commission based its finding upon its deductions from the annual report of the defendant company that the average cost of carrying a ton of coal from the Lehigh anthracite regions to Perth Amboy was 85 cents. Judge Acheson held that this was an inadequate basis to justify the finding that the particular rate in question was unreasonable; he said: "Having adopted an estimated average rate of revenue, namely, $1.495 from each ton of coal carried over the 149 miles from the Lehigh and Mahanoy regions to Perth Amboy, the Commission assumed that the expenses of the transportation of coal over this particular branch of the defendant's railroad system was necessarily only the average cost of the carriage of all coal upon the defendant's entire system. The assumption which thus underlies the Commission's estimate is unwarrantable. Merely because the cost of carriage of all coal upon the defendant's entire railroad system from all points of shipment to all destinations was 174 Fed. 784 (1897). 56 per cent of the gross receipts from all coal is no reason for concluding that upon a particular line or part of the system the cost of carriage bears the same ratio to the coal receipts from that particular line or part." § 1209. Proportionate rates always legal. Upon the other proposition there is no conflict of authority whatever. The rate maker may always with the approbation of the law work out a schedule of rates in which the respective rates are based upon their proportional cost of the whole service rendered. Not only would all courts undoubtedly agree that legislation forbidding disportionality in rates is constitutional,1 but also it is doubtless law that a public service company may so arrange its schedule as to make each rate yield a reasonable profit for each service above the fair cost, without any question as to the legality of such a course.2 It is, therefore, well within limits to say in summarizing what has gone before, that although the rate making party is as yet by the weight of authority not held to act illegally in imposing a schedule where the particular rates are out of proportion,3 it is unanimously agreed that if the policy of proportional distribution of the real costs is adopted by the rate making body, no objection can be made on any grounds whatsoever.1 § 1210. Full extent of the doctrine. to The suggestion is sometimes made that a distinction is be drawn between keeping the different classes of 1 Seaboard Air Line Ry. Co. v. Florida, 203 U. S. 261, 51 L. ed. 175, 27 Sup. Ct. 109 (1906), and cases cited. 2 Pennsylvania R. R. Co. V. Philadelphia County, 220 Pa. St. 100, 68 Atl. 676, 15 L. R. A. (N. S.) 108 (1908), and cases cited. 3 Willcox et al. v. Consolidated Gas Co., 212 U. S. 19, 53 L. ed. 382, 29 Sup. Ct. 192 (1909), and cases cited. Interstate Comm. Comm. v. Western A. R. R. Co., 88 Fed. 186 (1898), and cases cited. 4 1 charges proportionate and making the different items proportionate. Except for the inherent difficulties of pursuing the inquiry further the writer perceives no difference in principle between the two; and he has no reason to believe that the distinction has foundation in law. It is true that by the weight of authority a rate on coal 1 or oil,2 may be made disproportionately small; provided the total receipts of the railroad are sufficient. But it is also true that if the rate on phosphates 3 or lumber is kept in proportion to other rates no one can complain that the rates are illegally made. This policy is altogether in accordance with the tendency of the modern law of public service against all discriminatory practices. Indeed any method of fixing rates which results in disproportionate treatment to different customers asking somewhat different services would seem to be against that fundamental principle of equality which of late years has been held to be violated by discriminatory treatment of different patrons asking substantially similar services. Topic C. Value of Service as the Basis § 1211. What the traffic will bear. It is sometimes suggested that the value of the service to the customer is "what the traffic will bear," that is, what he will be willing to pay rather than go without service. This Mr. Judge Bethea ventured to call the "ideal method." ." 5 In one sense the service is worth what one will pay for it; and this is the rule which usually ap 1 See Minneapolis & St. Louis Ry. Co. v. Minnesota, 186 U. S. 257, 46 L. ed. 1151, 22 Sup. Ct. 901 (1902). 2 See Tucker v. Missouri Pacific Ry. Co. (Kan.), 108 Pac. 89 (1910). Seaboard Air Line Ry. Co. v. Florida, 203 U. S. 261, 51 L. ed. 175, 27 Sup. Ct. 109 (1908). 4 Gulf C. & S. F. R. R. Co. v. Railroad Commission (Tex.), 116 S. W. 795 (1909). 5 In Interstate Com. Comm. v. Chicago G. W. R. R. Co., 141 Fed. 1003 (1905). peals to the company as fair. This consideration, it may be, has some place in the philosophy of rate making; although it is submitted that it is a dangerous principle which may often operate to the disadvantage of the public, unless it is much limited. But so necessary is some such principle felt to be by the managers of a company that it will always be employed in rate making. And this is one of the prime causes for the necessity of governmental revision for the protection of the public, of the rates established by the corporation. "This domination" by the corporations Judge Speer says prophetically the American people will "never tolerate." 1 The real truth of this matter seems to be that charging what will produce the largest profits is fundamental in private business, but often wholly opposed to public duty. § 1212. Necessity of legal limitation. It is urged sometimes that this principle of charging what the traffic will bear contains it own safeguards; for if more is charged than the value of the service to the customer business will cease, and the managers, realizing this, as they are in close touch with the situation will never intentionally or permanently charge more than the service is worth. The answer to this seems to be that many customers will pay for service more than its true value if that is necessary in order to get service. They will shift this undue burden upon the ultimate consumer if they can, and if not, they will be obliged to shoulder it themselves. From a legal point of view it is a conclusive answer to the economic argument that people will continue to pay for service at unfair rates. Indeed, any considerable concession to the principle of charging what the 1 In Tift v. Southern R. R. Co., 138 Fed. 753 (1905). 2 See Brunswick & T. W. D. v. Maine Water Co., 99 Me. 371, 59 traffic will bear is dangerous. The public service company is acting primarily for the benefit, not for the exploitation of the public. To allow a carrier, for instance, to charge what the traffic will bear is to foster a continual increase of railroad rates, at least when prices are rising.1 § 1213. Worth of the service to the individuals taken as a whole. An excellent distinction is made in a recent case 2 as to the methods of arriving at the value of the service to the person served by a public service company. It is pointed out that what is sought is the worth to the individuals served, taken as a whole, of such service as they are receiving from a company, such as that which is serving them. This shows the true test of the value of the service to the person served to be far from what the person in question will pay rather than to go without service. As this is a matter not often discussed with discrimination a considerable quotation is necessary. Mr. Justice Savage said: "When the worth of the water to a consumer is estimated, we are not limited to the value of water itself, for it is an absolute necessity. Its value has no limit. Water, speaking abstractly, is priceless; it is inestimable. To sustain life it must be had at any price. And in this respect a public water service differs from all other kinds of public service. In estimating what it is reasonable to charge for a water service that is, not exceeding its worth to the consumers-water is to be regarded as a product, and the cost at which it can be produced or distributed is an important element of its worth. It is not the only element, however. The individuals of a com See Tift v. Southern Ry., 138 Fed. 753 (1905). Brunswick & T. W. Dist. v. Maine Water Co., 99 Me. 371, 59 |