the point of destination, or of rates to
the Cincinnati-Detroit territory plus the
locals from the Ohio River crossing near-
est the destination. Milan, Humboldt,
Jackson, Elizabethtown, Hopkinsville
and Nashville were not in the' Mississippi
River territory or the Cincinnati-Detroit
territory. The through carload rate from
the points of origin in question to any of
the points taking a lower rate than Nash-
ville plus the local carload rate from
that point permitted a dealer thereat to
get within thirty miles of Nashville, from
either the north or the west, on an
equality of rates with Nashville. On a
combination of through carload rates in,
and less-than-carload rates out, the rates
from such points and from Nashville
equalized at something over fifty miles
either north or west from Nashville.
Under the rates attacked, however, Nash-
ville had an advantage in distributing
oods to points much nearer to Decatur,
Birmingham, Chattanooga and Atlanta
:han those points can get to Nashville.
The traffic in question moved by the
Texas Pacific and the Southern Pacific' R.
Rs. via New Orleans. Defendants were
compelled to meet in the haul to the Ohio
River the rates fixed by the short line
oads through St. Louis, Mo., and Cairo,
11., to the river. In making the haul de-
fendant I. C. R. R. carried the traffic
;hrough Milan, Humboldt, Jackson, Nor-
;onville and Elizabethtown, but not
through Nashville. It adopted a policy
n literal compliance with the fourth
section of the Act and applied to inter-
mediate points no higher rates than to
'arther distant basing points. When this
traffic was carried to the Ohio River
hrough Nashville it was hauled by tiie
j. & N. R. R., which had not adopted
a policy similar to that of the I. C. R. R.
The rate at Hopkinsville was fixed by
he I. C. R. R. and met by the L. & N. R.
466
LONG AND SHORT HAULS, 10 (a) (aa)
R., but they did not so compete at Nash-
ville. HELD, Nashville not being entitled
by its location to be included in the Mis-
sissippi River or other groups, and com-
petitive conditions applicable at the other
points taking lower rates than Nashville
not being influential at Nashville, that
city was not unduly discriminated against
and defendants were not violating the
long-and-short-haul provision of sec-
tion 4. Phillips-Trawick-James Co. v.
S. P. Co., 13 I. C. C. 644, 647, 648.
10. Water Competition.
See Discrimination, 8 (5) (k);
Equalization of Rates, 4 (4) (aa);
Evidence, 14 (5) (u).
(a) Where a higher rate to an inter-
mediate point is justified upon the ground
of water competition, the Commission has
certain rules for its guidance: 1. Is it
true that the long-distance rate is forced
by water competition? 2. Is the long-dis-
tance rate which has been established in
view of water competition less than
would otherwise be reasonable? 3. Are
the rates at the intermediate points rea-
sonable? 4. Do the rates unduly prefer
one locality to another? And relief from
the fourth section may be granted be-
cause of water competition. In Re
Transportation of Wool, Hides and Pelts,
23 I. C. C. 151, 178.
(aa) For the purpose of disposing of
the Spokane case under the fourth sec-
tion the Commission has divided the
United States into five territorial zones,
as follows: (The transcontinental groups
hereinafter described are as specified in
R. H. Countiss' (agent) transcontinental
tariff I. C. C. No. 929.) Zone No. 1 com-
prises all that portion of the United
States lying west of a line called line
No. 1, which extends in a general south-
erly direction from a point immediately
east of Grand Portage, Minn.; thence
southwesterly along the northwestern
shore of Lake Superior to a point im-
mediately east of Superior, Wis.; thence
southerly along the eastern boundary of
transcontinental group F to the inter-
section of the Arkansas and Oklahoma
state line; thence along the west side of
the Kansas City Southern Ry. to the
Gulf of Mexico. Zone No. 2 embraces all
territory in the United States lying east
of line No. 1 and west of a line called
'line No. 2, which begins at the interna-
tional boundary between the United
States and Canada immediately west of
Cockburn Island in Lake Huron, passes
westerly through the Straits of Mack-
inaw, southerly through Lake Michigan
to its southern boundary; follows the
west boundary of transcontinental group
C to Paducah, Ky.; thence follows the
east side of the Illinois Central R. R.
to the southern boundary of transconti-
nental group C; thence follows the east
boundary of group C to the Gulf of Mex-
ico. Zone No. 3 embraces all territory
in the United States lying east of line
No. 2 and north of the south boundary of
transcontinental group C and west of line
No. 3, which is the Buffalo-Pittsburg line
from Buffalo, N. Y., to Wheeling, W. Va.;
thence follows the Ohio River to Hunt-
ington, W. Va. Zone No. 4 embraces all
territory in the United States east of line
No. 3 and north of the south boundary
of transcontinental group C. Zone No.
5 embraces all territory south and east
of transcontinental group C. From Zone
No. 1 no higher charge can justly be
made at any intermediate point than to
a more distant point, and there is no
justification for a system of rates which
maintains from this territory a higher
charge to any interior point than is made
to the coast. From Zone No. 2 the rates
to intermediate points may properly ex-
ceed by not more than 7 per cent rates
from the same points of origin to Pacific
coast terminals. In Zone No. 3 the rates
from points of origin to intermediate
points may properly exceed those to
terminal points by not more than 15 per
cent. In Zone No. 4 rates from points
of origin to intermediate points may
properly exceed those to terminal points
by not more than 25 per cent. In Zone
No. 5 no opinion is expressed at this
time, since rates from that territory are
not involved in these proceedings. City
of Spokane v. N. P. Ry. Co., 21 I. C. C.
400, 425, 426; order enjoined, in A. T.
6 S. F. Ry. Co. v. U. S., 191 Fed. 856,
holding that the Commission by its or-
ders respecting the relation of rates from
eastern points to Spokane, Reno and other
intermountain cities as compared with
the rates to Pacific coast terminals estab-
lished certain zones and entered orders
which did not establish absolute rates
for either the long or short haul, or pre-
scribe the extent, in dollars and cents,
that the short-haul rate might exceed the
present or some definitely fixed long-
haul rate, but established a relation be-
tween any long-haul rate that the car-
rier might put into effect and the short-
haul rate by determining that from Zone
1 the western short-haul rate should not
LONG AND SHORT HAULS, 10 (b) (d)
467
exceed the long-haul rate, and from Zones
2, 3 and 4 the short-haul rate should not
exceed the long-haul rate by more than
7 per cent, 15 per cent and 25 per cent,
respectively, and, therefore, the Commis-
sion exceeded its authority, since it has
no power to say that any given percent-
age of an unknown less than reasonable
rate to the coast is necessarily a maxi-
mum reasonable and non-discriminatory
rate from the same point of origin to an
interior point.
(b) Spokane is a great distributing
center and aims to be a greater one. It
demands the right to rates which will
enable it to bring from the east and dis-
tribute into territory lying east of the
Cascade range. Such traffic, when dis-
tributed from Spokane, is hauled a less
distance by 400 miles than when dis-
tributed from Seattle, and the distribu-
tion haul itself is also much less ex-
pensive. It is a manifest economic waste
to haul traffic over the Cascade Moun-
tains and back again. The interest of
the carrier and the public as much re-
quire that this business should stop at
Spokane, instead of going on to Seattle,
as that it should originate in the middle
west instead of upon the Atlantic sea-
board. Spokane insists that if these de-
fendants give to Seattle the right to buy
in both New York and Chicago, when its
location entitles it to buy in New York
alone, they should give to Spokane,
which is nearer by 400 miles, the right
to buy in both New York and Chicago.
New York urges that if Chicago is given
an opportunity to sell in Seattle then
New York shall be given the opportunity
to sell in Spokane. In other words, the
same blanket rate which is applied on
the east should be applied upon the
west The carriers insist that they may
determine as a matter of policy whether
they will meet this water competition
and in what manner and at what points;
and this is true so far as that is a mat-
ter of policy. To a disinterested ob-
server it would seem to be in the true
interest of these transcontinental lines,
which begin at the Missouri River, to
make rates which would build up interior
points as against the coast. The haul
to these points is shorter and less ex-
pensive. The distribution from these
points is easier, but, above all, the traf-
fic which is created at such a point be-
longs to the rail line which creates it,
while the traffic which is fostered upon
the coast is the prey of every vessel
which sails the sea. Carriers in the
future will doubtless adopt this method
and will voluntarily make rates to inte-
rior points like Spokane which will en-
able those localities to compete with
coast cities. Admitting, however, that it
is for those defendants to say to what
extent, if at all, they will meet these
competitive conditions, they are not at
liberty in meeting them to adopt such a
policy, nor to execute the policy adopted
in such a manner as to unjustly discrim-
inate between different localities. They
may, perhaps, determine whether they
will apply the coast rate which is fixed by
water competition at the interior point,
but if they apply it at one point they
must apply it at others which are sim-
ilarly situated; they cannot, in the ab-
sence of some sufficient reason, give
Chicago that rate and refuse it to St.
Louis and Kansas City. They cannot
so adjust their whole tariff scheme, upon
the plea of water competition, as to con-
centrate in these coast cities commercial
and transportation advantages to which
their mere location does not entitle
them, and that in substance is the ef-
fect of the present rate adjustment. City
of Spokane v. N. P. Ry. Co., 21 I. C. C.
400, 423, 424.
(c) Considering the question broadly
with reference to the situation in the
Spokane case in all its aspects, it cannot
be said that the legitimate effect of
water competition upon the Atlantic sea-
board may not be to reduce the rail rate
from interior points. City of Spokane v.
N. P. Ry. Co., 21 I. C. C. 400, 423.
(d) In the Reno case the carriers in-
volved have not shown that undue dis-
crimination was not effected by their
rate adjustment between points in Ne-
vada and points in California, nor have
they established that the rates to the
coast cities if extended by them from
eastern points outside the zone of water
influence are not fully compensatory.
The Commission, however, desires to be
extremely conservative in this, the first
application of the new law, and to require
an adjustment of rates that will be
safely within the zone of its discretion.
For this reason it has decided that the
transcontinental carriers serving Reno
and other points upon the main line of
the Central Pacific R. R. shall make no
higher charge upon any article carrying
a commodity rate than is contempora-
neously in effect from Missouri River
points, such as Omaha and Kansas City,
468
LONG AND SHORT HAULS, 10 (e) (f)
to coast terminal points. This principle
should also be applied on commodity rates
to all main-line intermediate points in
Nevada and California. Traffic originat-
ing at Chicago and in Chicago territory
moving under commodity rates may
have a rate 7 per cent higher than that
imposed on freight originating in Chi-
cago and Chicago territory, and destined
to the coast terminals. From Buffalo-
Pittsburg territory the rates to intermedi-
ate points may rise above those de-
manded and charged from the same
points and territory to the coast termin-
als to the extent of 15 per cent, while
from New York and trunk line territory
the rates charged shall not exceed 25 per
cent over and above terminal rates. This
means that Suisun, Auburn, Truckee.
Reno and Elko, for instance, points inter-
mediate to San Francisco from the east,
shall have at least the benefit of the
commodity rates extended from the Mis-
souri River to Sacramento and San Fran-
cisco, and shall pay no more than 7 per
cent above the Chicago-coast terminal
rates, and corresponding increases of 15
and 25 per cent, respectively, from Pitts-
burg and New York territories. Some
of the petitions under the fourth section
which have been considered are made
by carriers reaching California terminals
through the southern gateways, southern
Nevada and Arizona. These applications
are also denied in so far as they in-
volve the imposition of higher rates upon
intermediate points than are applied on
commodities from the Missouri River to
Los Angeles, San Francisco or other
coast terminals. To all such intermedi-
ate points (Ash Fork, Maricopa, San
Bernardino, Bakersfield, Fresno and Ven-
tura, for instance) terminal rates shall
not be exceeded as from Missouri River
points, with the same proportionate ad-
vances east of the Missouri River as
heretofore specified. Railroad Commis-
sion of Nevada v. S. P. Co., 21 I. C. C.
329, 369; order enjoined, in A. T. & S. F.
Ry. Co. v. U. S., 191 Fed. 856, holding
that the Commission by its orders re-
specting the relation of rates from east-
ern points to Spokane, Reno and other in-
termountain cities as compared with the
rates to Pacific coast terminals estab-
lished certain zones and entered orders
which did not establish absolute rates
for either the long or short haul, or pre-
scribe the extent, in dollars and cents,
that the short-haul rate might exceed
the present or some definitely fixed long-
haul rate, but established a relation be-
tween any long-haul rate that the car-
rier might put into effect and the short-
haul rate by determining that from Zone
1 the western short-haul rate should not
exceed the long-haul rate, and from
Zones 2, 3 and 4 the short-haul rate
should not exceed the long-haul rate by
more than 7 per cent, 15 per cent and 25
per cent, respectively, and, therefore, the
Commission exceeded its authority, since
it has no power to say that any given
percentage of an unknown less than rea-
sonable rate to the coast is necessarily
a maximum reasonable and non-discrim-
inatory rate from the same point of
origin to an interior point.
(e) It is no reflection upon the traf-
fic manager of a railroad to say that he
bases his rates upon some line of policy.
He deals directly and in most cases ex-
clusively with the producer or the jobber.
His concern is to keep these patrons
satisfied and at the same time bring to
his railroad the greatest possible rev-
enue. This is what he means by saying
(hat he charges what the traffic will
bear. He regards as reasonable what-
aver rate will make for the best interest
for his road, and in determining this he
adopts a line of policy which affects
either favorably or unfavorably the in-
dustrial growth of the communities
which the carrier serves. The restric-
tions of the Act are governmental limita-
tions placed upon the unlimited and ar-
bitrary discretion of traffic officials.
While the latter may adopt policies which
they regard as most favorable to their
roads, such policies must be restricted by
the inhibitions of the law which this
Commission must enforce. The policy
of making Reno rates base upon those
extended to the more distant Pacific
terminal points may not be justified upon
the ground that Reno traffic will bear
that imposition, but may be justified by
conditions obtaining at the more distant
point, which the carrier may meet with-
out offense to any provision of the Act.
It is not sufficient to state that the ter-
minal points are situated on the water
to excuse the imposition of high rates
at intermediate points. Railroad Com-
mission of Nevada v. S. P. Co., 19 I. C. C.
238, 249, 250.
(f) The present commodity rates
charged by the Great Northern and the
Northern Pacific R. Rs. from eastern ter-
ritory to Spokane are unreasonable, and
just and reasonable rates which ought
not to be exceeded for the future would
LONG AND SHORT HAULS, 10 (g)_(m)
469
be those which are set forth in Schedule
A, attached. In fixing these rates the
Commission has proceeded upon the
view that under the present decisions
cf the Supreme Court of the United
States it could not use the rate to Seattle
i :S a standard by which to measure that
to Spokane. If this were otherwise, if
it were free to take into account all the
competitive conditions existing both east
and west, and to determine what, in the
light of all these conditions, would be a
just and reasonable relation between the
rates of Seattle and Spokane, a some-
what different question would be pre-
sented. City of Spokane v. N. P. Ry.
Co., 19 I. C. C. 162, 174.
(g) Where an inherently reasonable
rata is established by the Commission to
Srokane, a higher rate to an intermedi-
ate point cannot be permitted. City of
Spokane v. N. P. Ry. Co., 19 I. C. C.
162, 169.
(h) The mere statement that terminal
points are situated on the water is not
sufficient to excuse higher rates at in-
termediate points. R. R. Commission or
Nev. v. S. P. Co., 19 I. C. C. 238, 250.
(i) The city of San Pedro is situated
en San Pedro Bay about twenty-two
miles distant from Los Angeles, which
is inland. Los Angeles takes Pacific
coast terminal rates, as does San Diego,
which is about 125 miles south of San
Pedro bay on the coast. Tonnage mov-
ing by water that could not be unloaded
at San Diego for any reason could move
through the harbor at San Pedro, and
this creates a potential competition at
San Pedro. Through shipments from the
east to San Pedro pay the terminal rates
to Los Angeles plus the local rates to
San Pedro. HELD, that a rate adjust-
ment that deprives San Pedro of the
benefit of its own geographical situation,
while according the benefit of it to Los
Angelas, constitutes a discrimination
against San Pedro that is undue and un-
just, and, therefore, unlawful. To recog
nize to any extent in the rates to Los
Angeles cither the actual or the potential
competition through San Pedro, without
riving recognition to such competition
in the rates to San Pedro itself, is a dis-
criminatory and unlawful adjustment. If
such competition is recognized in the
Los Angeles rates there is no justice in
obscuring it in the San Pedro rates.
When one community leans upon an-
other for its competitive rates, the benefit
Df such rates ought not to be denied to
;he point that creates the competitive
joudition. Harbor City Wholesale Co.
v. S. P. Co., 19 I. C. C. 323, 331.
(j) The existence cf competition at
i farther distant point does not excuse
che unreasonableness per se of the
higher rate. Southern Timber & Land
Co. v. S. P. Co., 18 I. C. C. 232.
(k) Water competition creates prima
'acie dissimilarity of conditions justifying
i violation of the fourth section. Bayou
City Rice Mills v. T. & N. O. R. R. Co.,
18 I. C. C. 490, 492.
(1) A carrier may make low rates to
points for the purpose of meeting water
competition at those points, and may
make somewhat higher rates to inter-
mediate points at which the same com-
petition does not exist, but obviously its
higher rate to such intermediate point
cannot reasonably exceed its rate to the
competitive point plus its local rate back
from that point to the intermediate
ooint. Valley Flour Mills v. A. T. & S.
F. Ry. Co 16 I. C. C. 73, 78.
(m) The Commission established
class and commodity rates from St. Paul
and Chicago to Spokane, the order being
directed against the U. P., the N. P. and
G. N. R. Rs. The U. P. R. R. filed a peti-
tion asking to be relieved from the order,
first, on the ground it had no direct line
leading from St. Paul to Omaha and,
second, the distance from St. Paul and
Chicago via its line was much greater
than via the N. P. R. R. and G. N. R. R.
and, therefore, while the rates fixed
might be just and reasonable for the
shorter distance over the Hill lines, they
were unjust over the U. P. R. R. In
establishing the rates in question the
Commission took into consideration, as
an important factor, the difference in dis-
tances to Seattle and to Spokane, and
the difference in distances from Chicago
and St. Paul to those points. Via the
U. P. R. R. the distance from Chicago
to Spokane was 2,300 miles; via the
other lines, 1,900 miles. HELD, the
order should be modified, excepting the
U. P. R. R., as to St. Paul traffic, and
that the effective date of the order should
be postponed until a readjustment of
rates might be made by the carriers,
under which the carriers must take care
to protect the cities of Pendleton, Baker
City, Walla Walla, etc., which were far-
ther than Spokane on the N. P. R. R. and
470
LONG AND SHORT HAULS, 10 (n) (s)
nearer to Spokane on the U. P. R. R.,
and might suffer if the U. P. R. R. should
be relieved from establishing the rate
ordered to Spokane. Spokane v. N. P.
Ry. Co., 16 I. C. C. 179.
(n) The rate to San Francisco is
made under circumstances of water com-
petition, and therefore may be lower
than to intermediate points where such
competition does not exist. Rogers v.
0. R. R. & N. Co., 16 I. C. C. 424, 425.
(o) On a carload of household goods
from Spokane to Medford, Ore., com-
plainant was charged $1.11 per 100 Ibs.,
made up of 55c from Spokane to Port-
land and 56c from Portland to Medford.
Medford lay intermediate to Spokane and
San Francisco, and the rate between the
two latter points was 71c, resulting from
water competition. HELD, the rate at-
tacked was not unreasonable. Repara-
tion denied. Rogers v. Ore. R. R. & N.
Co., 16 I. C. C. 424, 425.
(p) Carriers may, for the purpose of
meeting water competition, make rates
lower than would otherwise* be justifi-
able, even to the extent of charging a
less rate to the more distant point.
Darling & Co. v. B. & O. R. R. Co., 15
1. C. C. 79, 87.
(q) A through rate on cross-ties to
a longer distance point, less than the
combination to an intermediate point,
may be justified by water competition.
MacGillis & Gibbs Co. v C. M. & St. P.
Ry. Co., 15 I. C. C. 329.
(r) On a carload of cross-ties from
Sault Ste. Marie, Mich., to Thiensville,
Wis., a rate of 20c was exacted, made up
of 9c to Champion and lie from Cham-
pion to destination. A joint through rate
of 13c was in effect over defend-
ants' lines from the point of origin to
Milwaukee, Chicago and points inter-
mediate to said latter two cities. Thiens-
ville is 17 miles north of Milwaukee and
intermediate to said city and Sault Ste.
Marie. The rate to Milwaukee was in-
fluenced by water competition. The local
rate from Milwaukee to Thiensville was
3c, making the combination on Milwau-
kee 16c. HELD, the rate exacted was
excessive to the extent that it exceeded
16c, but Thiensville was not entitled to
the 13c Milwaukee rate, nor was the
exaction of the higher rate in violation
of section 4 of the Act. Reparation
awarded. MacGillis & Gibbs Co. v. C.
M. & St. P. Ry. Co., 15 I. C. C. 329, 330.
(s) Complainant interests at Spokane
attacked the rates from Chicago and St
Paul, as typical points, to Spokane as
unjustly discriminatory in favor of Seat-
tle, as a typical coast point, compared
with the rates from Chicago and St. Paul
to Seattle. The traffic to Seattle over
defendants, G. N. and N. P. R. Rs., passed
through Spokane, which is some 400
miles east of Seattle. The class rates
from St. Paul to Seattle and Spokane
were practically the same; from Chicago
to Spokane the rates were materially
higher than to Seattle. The commodity
rates under which most of the traffic
moved were usually higher to Spokane
from St. Paul than to Seattle, the Spo-
kane rate being, in a majority of cases,
higher than that to Seattle by about 70
per cent of the local rate from Seattle
to Spokane. From all shipping points
east of the Missouri River the rates to
Seattle were the same, whereas the rates
from said points to Spokane were in-
creased according to the distance of the