141 F. 1003 | U.S. Circuit Court for the Northern District of Illnois | 1905
after, making the above statement, an- • nounced the following opinion:
' The court has considered all of the evidence in the case, and finds 'the following facts:
First. That the live stock rates are reasonable in themselves. All live stock from points west, southwest, and northwest of the Missouri river and St. Paul are shipped on a proportional rate from the Missouri river or St. Paul to Chicago. These rates are equal to. or less than the rates on dressed meats and packing-house products between
Second. That the cost of carrying live stock is greater than that of carrying dressed meats and packing-house products.
Third. That the value of the service of carriage is greater to the packers, because of the higher price of a car of dressed meats or packing-house products. Dressed meats and packing-house products are in value worth nearly twice as much as live stock. This factor is important, in ordinary cases, however, in part, because of the greater risk of carriage of high-priced commodities. In these cases as to the particular commodities in question, the evidence shows that the defendant railroad companies pay out a much larger amount in damages for losses arising from the carriage of live stock than they do for losses arising from the carriage of dressed meats and packinghouse products, in proportion to the value of the products carried, and more in damages per car regardless of the value. This makes the risk of carriage greater for live stock. The result is that the value of the service is not such an important factor in this kind of a case as it is considered to be in ordinary cases.
Fourth. That the rates in question given to the packers at Missouri river and St. Paul were the result of competition. The product of the packers at these points was large in quantity, was certain and continuous in amount, was in the hands of a few people, and for years before the federal injunction of March, 1902, had been competed for so strenuously by the railroads reaching and passing through these points, as to cause the cutting of rates and the giving of secret rebates in large amounts. Four of the defendant companies, the Chicago, Milwaukee & St. Paul Railroad Company, the Chicago & Northwestern Railway Company, the Chicago, Rock Island & Pacific Railway Company, and the Chicago, Burlington & Quincy Railroad Company, passed through these points into the territory west of the Missouri river and St. Paul. Four other of the defendant companies, the Chicago Great Western Railway Company, the Chicago & Altoh Railway Company, the Illinois Central Railroad Company, and the Wabash Railroad Company reached the Missouri river points and St. Paul, competing for this business. Other railroads, running south to the Gulf of Mexico, also competed more or less for said business, including the Atchison, Topeka & Santa Fé Railway. After said injunction was granted the defendant railroads (according to evidence herein) obeyed it, and until August of that year the said traffic was carried under competition between the defendants at the rate of 23^4 cents from Missouri river points to Chicago, and 25 cents from St.Paul to Chicago, etc., as set out above. As a result of such competition, the Chicago Great Western Railway Company became dissatisfied with the proportion of the business it received, and in order to get what it claimed as its share cut the rate to 20 cents to Chicago and 18^á cents to the Indiana line for Eastern business, and published
Fifth. That the competition in question did not result from agreement of the defendants, but was actual, genuine competition.
Sixth. That the present rates on live stock have not materially affected any of the markets, prices, or shipments; that they are reasonably fair to Chicago and to the shippers; that the shipments of live stock from points between Chicago and the Missouri river and St. Paul are as great in proportion to the volume of business as before the present rates were made; that the majority of the live stock comes to Chicago from points as near as 150 miles this side of the Missouri river and St. Paul, and that the lower rate given to- the packers does not seem to directly influence or injure the shippers of live stock.
Seventh. That the rates for carrying packers’ products and dressed meats were remunerative. They did not pay any portion of the fixed charges and interest of the railroad companies, nor its full share of the operating expenses, but they did pay more than its cost of movement and leave something to apply upon operating expenses.
Fight. That the welfare of the public, including the shippers, consumers, and all localities and markets, does not seem to be materially affected by the present rates.
Ninth. That the usual custom is for railroads to charge a higher rate for the finished product than for the raw material, and this, as a rule, has been applied to live stock and its finished products. This is not universal, however. There are many commodities where the raw material is charged more for carriage than its finished product, as in the case1 of the raw material of cotton and the compressed cotton, straw, unbaled and baled,, pig iron and its products, and many other
What is the law applicable to the above facts? These petitions were filed to enforce sections 1 and 3 of the interstate commerce act (Act Feb. 4, 1887, c. 104, §§ 1, 3, 24 Stat. 379, 380 [U. S. Comp. St. 1901, pp. 3154, 3155]) and section 3 of the Elkins act (Act Feb. 19, 1903, c. 708, 32 Stat. 848 [U. S. Comp. St. Supp. 1905, p. 600]). They are as follows:
“Section 1. All charges made for any service rendered or to be rendered In the transportation of passengers or property as aforesaid, or in connection therewith, or for the receiving, delivering, storage or handling of such property, shall be reasonable and just; and every unjust and unreasonable charge for such service is prohibited and declared to be unlawful.”
“See. 3. That it shall be unlawful for any common carrier subject to the provisions of this act to mate or give any undue or unreasonable preference or advantage to any particular person, company, firm, corporation or locality, or any particular description of traffic, In any respect whatsoever, or to subject any particular person’, company, firm, corporation or locality, or any particular description of traffic, to any undue or unreasonable prejudice or disadvantage in any respect whatsoever.”
Elkins act:
“Sec. 3. That whenever the Interstate Commerce Commission shall have reasonable ground for belief that any common carrier is engaged in the carriage of passengers or freight traffic between given points at less than the published rates on file, or is committing any discriminations forbidden by law, a petition may be presented alleging such facts to the Circuit Court of the United States sitting in equity having jurisdiction.” etc.
The questions are: Do the facts in these cases show that the defendants have, under section 1 of the interstate commerce act, furnished reasonable rates? Have they, under section 3 thereof, given any undue or unreasonable preference or advantage to any particular person, company, firm, corporation, or locality, or any particular description of traffic in any respect whatever? Have they, under section 3 of the Elkins act, committed any discriminations forbidden by law? Or, in other words, did it make an undue preference in favor of the packers, or their products, at the Missouri river points and St. Paul, or unjustly discriminate against live stock, the shippers thereof, or against Chicago, for the defendants to lower the rates for the packers without making the same or a greater reduction for the shippers of live stock?
1. The evidence above shows that section 1 has not been violated. The rates were not unreasonable.
2. Section 3 of the Elkins act covers the same questions as do sections 1 and 3 of the original interstate commerce act. That section provides a remedy without going before the Interstate Commerce Com
3. Does the evidence show a violation of section 3 of the interstate commerce act?
(A) The principal objects of the interstate commerce act, as shown by the many cases in the Supreme Court of the United States, were to secure just and reasonable charges for transportation; to prohibit unjust discriminations in the rendition of like service under similar circumstances and conditions; to prevent undue or unreasonable preference to persons, corporations, or localities; to inhibit greater compensation for a shorter than for a longer distance over the same line; and to abolish combinations for the pooling of freight. It was not designed to prevent competition between different roads, but rather to encourage competition. The railroad companies, under the decisions of the courts in England and the United States, are only bound under this act to give the same terms to all persons alike under the same conditions and circumstances, and any fact which produces án inequality of condition and a change of circumstances justifies an inequality of charge. Interstate Commerce Commission v. Baltimore & Ohio Railroad Company, 145 U. S. 272, 12 Sup. Ct. 844, 36 L. Ed. 699. The object of section 3 was to prevent undue or unreasonable preference or advantage to any person, company, firm, -corporation or locality, or any particular description of traffic. The statute does not define undue or unreasonable preference or advantage. That must be left to the circumstances of each case. It is proper, under this section, to give a preference or an advantage, or to discriminate between persons, localities or traffic; but not make them undue or unreasonable. Interstate Commerce Commission v. Alabama Midland Railway Company, 168 U. S. 144, 18 Sup. Ct. 45 , 42 L. Ed. 414; Cincinnati, New Orleans & Texas Pacific Railway Company v. Interstate Commerce Commission, 162 U. S. 184, 16 Sup. Ct. 700, 40 L. Ed. 935.
(B) What is meant, then, by “undue” or “unreasonable” preference or advantage? Judge Jackson in the case of Interstate Commerce Commission v. Baltimore & Ohio Railroad Company (C. C.) 43 Fed. 37, stated that:
“These words necessarily involve the idea or element of comparison of one service or traffic with another similarly situated and circumstanced, and require that, to be undue and unreasonable, the preference or prejudice must relate and have reference to competing parties, producing between them unfairness and an unjust inequality in the rates charged them, respectively, for contemporaneous service under substantially the same circumstances and conditions. In determining the question whether rates give an undue preference or impose an undue prejudice or disadvantage, consideration must be had to the relation which the persons or traffic affected bear to each other and to the carrier. When and so long as their relations are similar or ‘substantially’ so, the carrier is prohibited from dealing differently with them in the matter of charges for a like and contemporaneous service. * * * The English cases referred to above, and others that might he cited, establish the rule that, in passing upon the question of undue or unreasonable prefer*1015 ence or advantage, it is not only legitimate, but proper, to take into consideration besides tbe mere differences in charges, various elements, such as the convenience of the public, the fair interest of the carrier, the relative quantities or volume of the trafile involved, the relative cost of the services and profit to the company, and the situation and circumstances of the respective customers with reference to each other, as competitive or otherwise.”
This opinion was affirmed in 145 U. S. 263, 12 Sup. Ct. 844, 36 L. Ed. 699, and followed in other opinions of the Supreme Court.
(a) A careful examination of the opinions of that court (as well' as the evidence taken in these cases) shows that there are a great many factors and circumstances to be considered in fixing a rate. Noyes, Am. R. R. Rates, pp. 61 et seq., 85-109. Among other things: (1) The value of the service to the shipper, including the value of the goods and the profit he could make out of them by shipment. This is considered an ideal method, when not interfered with by competition or other factors. It includes the theory so strenuously contended for by petitioners, the commission, and its attorneys, of making the finished product carry a higher rate than the raw material. This method is considered practical) and is based on an idea similar to taxation. Interstate Commerce Commission v. B. & O. Ry. Co. (C. C.) 43 Fed. 37, 53; Noyes, Am. R. R. Rates, 53. (2) The cost of service to the carrier would be an ideal theory, but is not practical. Such cost can be reached approximately, but not accurately enough to make this factor controlling. It is worthy of consideration, however. Interstate Commerce Commission v. B. & O. Ry. Co., supra; Ransome v. Eastern Railway Company (1857) 1 C. B. 437, 26 R. J. C. P. 91; Judson on Interstate Commerce, §§ 148, 149; Western Union Telegraph Co. v. Call Publishing Co., 181 U. S. 92, 21 Sup. Ct. 561, 45 L. Ed. 765; Interstate Commerce Commission v. Detroit, Grand Haven & Milwaukee Railroad Co., 167 U. S. 633, 17 Sup. Ct. 986, 42 L. Ed. 306. (3) Weight, bulk, and convenience of transportation. (4) The amount of the product or the commodity in the hands of a few persons to ship or compete for, recognizing the principle of selling cheaper at wholesale than at retail. Interstate Commerce Commission v. B. &. O. Ry. Co., 145 U. S. 263, 12 Sup. Ct. 844, 36 L. Ed. 699. (5) General public good, including good to the shipper, the railroad company and the different localities. Interstate Commerce Commission v. B. & O. Ry. Co., 145 U. S. 263, 12 Sup. Ct. 844, 36 L. Ed. 699. (6) Competition, which the authorities, as well as the experts, in their testimony in these cases, recognize as a very important factor. Pickering Phipps v. London & Northwestern Railway Company, 2 Q. B. D. (1892) 229 (this case construes section 2 of the English act of 1854, which is almost like section 3 of our interstate commerce act); Interstate Commerce Commission v. B. & O. Ry Co., supra; Cincinnati, New Orleans & Texas Pacific Railway Company v. Interstate Commerce Commission, 162 U. S. 184, 16 Sup. Ct. 700, 40 L. Ed. 935; Interstate Commerce Commission v. Alabama Midland Railway Company, 168 U. S. 144, 18 Sup. Ct. 45, 42 L. Ed. 414; Louisville & Nashville Railroad Co. v. Behlmer, 175 U. S. 648, 20 Sup. Ct. 209, 44 L. Ed. 309; East Tennessee, Virginia & Georgia Railway Co,, v. .Interstate Commerce Commission, 181 U. S. 1, 21 Sup. Ct. 516, 45 L. Ed. 719;
None of the above factors alone are considered necessarily controlling by the authorities. Neither are they all controlling as a matter of law. It is a question of fact .to be decided by the proper tribunal in each case as to what is controlling. In .every case the Supreme Court has held that competition may be controlling. In only one case has it, as a matter of fact, been held not to be a defense.
(C) Counsel for the commission strenuously contend in able arguments that competition does not apply to section 3 of the interstate commerce act. The authorities, however, are to the contrary. The question was raised in substantially all of the above and others of the Supreme Court cases wherever section 4 was considered. In the following cases the Supreme Court has held that this' principle of competition applies to section 3. East Tennessee, Virginia & Georgia Ry. Co. v. Interstate Commerce Commission, 181 U. S. 1, 21 Sup. Ct. 516, 45 L. Ed. 719, and cases cited; Interstate Commerce Commission v. Alabama Midland Railway Company, 168 U. S. 144, 18 Sup. Ct. 45, 42 L. Ed. 414, and cases cited from English court; Judson on Interstate Commerce, §§ 175 to 183; Interstate Commerce Commission v. Clyde S. S. Co., 93 Fed. R. 83, 35 C. C. A. 217.
(D) But it is further claimed by petitioners’ counsel that competition should not have any effect in settling the questions involved in these cases, because one of the defendants originated the competition. The Interstate Commerce Commission in its opinion considered the facts as to competition and found they did not control the fixing of rates. Its opinion, and the concurring opinion of Commissioner Knapp, show, however, that the majority of the commission acting in this case (Fifer and Prouty) thought that it was not a case to which competition applied. Their position is that competition cannot apply to this case because one of the defendants (the Chicago Great Western Railway Company) originated the competition in rates. They argue that in all of the other cases decided by the Supreme Court the competition resulting in the cutting of rates was begun by some transportation company not a defendant in the hearing before the commission and the court, and that the identical question involved in this case has not been passed upon by the Supreme Court. They further argue that in those cases the question as to the construction of the words “particular description of traffic” was not raised or disposed of. In reply it may be said that the questions of undue preference against persons or localities were in the decided cases, and those questions are in these. Besides an undue preference cannot be given to a “particular, description of traffic” without giving it to a.“person” also.
The facts in these cases, however, show that competition was going on between these different defendants and other railroad companies that were not defendants (particularly the Atchison, Topeka & Santa Fé Railway Company) before the granting of the injunction in March, 1902, and that such competition was going on under the law after March, 1902, down to August 8, 1902, when the Chicago Great Western Railway Company’s contract was made and the above rates fixed. Each company was striving to get what business it could. The Atchison, Topeka & Santa Fé Railway Company, which is not a defendant here, was a very formidable competitor and had perhaps the shortest route between the points in question. The other railroad companies, who had longer routes, as did the Chicago Great Western Railway Company, in order to get business, were forced to do something to accommodate and please their patrons. That was going on during all the time mentioned, and was competition. So it cannot be said that competition was originated by the Chicago Great Western Railway Company. That company first lowered the rates, and competition forced the other defendants, including the Atchison, Topeka & Santa Fé Railway Company, to lower their rates. It is the duty of the officers of a railroad company to get business in the interest of its stockholders. It appears, then, under the facts, that the reduction of rates was not voluntary, according to the definition and description thereof in the case of East Tennessee, V. & G. Ry. Co. v. Interstate Commerce Commission, supra, and other cases, but was caused on the part of the Chicago Great Western Railway Company by the necessity
(E) The evidence shows that the rates were (1) remunerative, (2) reasonable, (3) that competition was not the result of agreement, and (4) that the carrier must reduce the rate or lose the business. There was, then, a meeting here of all the four conditions required by the law to make competition a factor in the fixing of these rates. This is set out by Mr. Judson in his work on Interstate Commerce (section 183) in a discussion of section 3 and effect of competition on it, in the following language:
“But under the decisions of the Supreme Court, the application of the competitive rule is subject to the following qualifications: First. The competition must compel the lower rate; that is, the competition must be controlling. The carrier must either reduce its rates or -lose the business. Second. The competition must not be created by the carrier; that is, the preference must not be affected through an agreement or combination of the carrier with other carriers stifling competition. Third. The competitive rate must be at the pre- ■ ferred point remunerative to the carrier. Fourth. The rates must be reasonable in themselves.”
That author shows in section 183 how materially competition has affected the enforcement of section 3 of the interstate commerce act. It must be remembered in reference to this question pf competition that there are more railroads competing for the packers’ products than for the live stock, as shown in the findings of fact, supra. There are four railroads west of the Missouri river carrying live stock east to Chicago, besides the Atchison, Topeka & Santa Eé Railway Company. There are eight of the defendant railroads competing for the" packers’ products at the Missouri river to carry it east to Chicago. There are other railroads running south from the Missouri river that may make more or less competition. As to the live stock originating east of the river, there is much less and an entirely different kind of competition from that arising at the Missouri river points and St. Paul for the packers’ business. Upon the principles announced in the above authorities, if the different commodities were exactly the same, as if it were all live stock or all packers’ product, the railroads would have a right to consider, east of the Missouri river and St. Paul, the stronger competition at Missouri river points and St. Paul in fixing their rate the same as they do under section 4, or the long and short haul clause. So we are limited to the live stock driven into the Missouri river points and St. Paul, in determining whether that commodity is there entitled to the same rate as packers’ products shipped from those same points.
(F) The contention is that because the defendant companies have reduced the rate there as to packers’ commodities they must reduce it at the same identical points as to live stock. But there is strong competition at all those points as to packers’ products—competition in rates—and there is no such competition at the same points as to live stock. It is argued that because they compete as to one kind of a commodity they must compete as to other kinds of commodities at the same points. This is substantially the same question that wras raised in the case of Interstate Commerce Commission v. Louisville
“In the report of the commission a suggestion is found that La Grange should be entitled to the same rate as Atlanta, because, if the carriers concerned in this case in connection with other carriers reaching La Grange choose to do so, they might bring about competition by the way of a line between Macon and La Grange, which would be equivalent to the competitive conditions existing at Atlanta. We are unable, however, to follow the suggestion. To adopt it would amount to this: That the substantial dissimilarity of circumstances and conditions provided by the act to regulate commerce would depend, not as has been repeatedly held, upon a real and substantial competition at a particular point affecting rates, but upon the mere possibility of the arising of such competition. This' would destroy the whole effect of the act and cause every case where competition was involved to depend, not upon the fact of its existence as affecting rates, but upon the possibility of its arising.”
The same principle must apply here. The construction is of the same sentence. In that case it was a portion of the sentence that referred to localities or certain shippers, or a certain kind of a particular description of traffic, if you please. In these cases it refers to a “description of traffic” and “to shippers.”
(G) In passing upon this question of competition it is the duty of the commissioners and the court to take into consideration, in determining whether the circumstances and conditions are the same, and whether prejudice is undue or not, the quantity of the traffic in each, case. While this may not be controlling, still it ought to be considered. In the Party Rate Case, supra (145 U. S. 272, 12 Sup. Ct. 844, 36 L. Ed. 699)-, it was held controlling as to passengers. In the English cases above cited it has been held a very important factor as to freight. The facts show that there is a large amount of packers’ product to be shipped at stated intervals, fixed and continuous quantities, in the hands of a few people, under almost one control. The live stock is not in such hands, and cannot and does not create such competition. Noyes, Am. R. R. Rates, 102. After considering as far as possible all the surrounding circumstances and conditions, and considering the rates between the two classes of products involved in these suits, and the law as announced by the Supreme Court, this court holds that lawful competition must be considered as a factor in determining the questions of fact as to undue preference and unjust discrimination.
The court is bound to consider all of the above facts and factors with others, in determining whether the preference and advantage in question is “undue” or “unjust.” In such consideration there appears in favor of the preference and advantage given to the packing-house products—the cost of service, the damage to the commodities, the quantity of the commodity in the hands of a few persons, the less bulk, the interest of the railroad companies, the interest of a majority of the localities and consumers, the general dissimilarity of conditions, and competition. While there is, in favor of the live stock, the less value of the product and of the service in the .carriage, the interests of
The petitions of the Interstate Commerce Commission are dismissed, with costs.