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to produce a reasonable price of commodities in general. This was the idea expressed in the enactment of the 5th section of the act to regulate commerce in 1887 which prohibits pooling. It was also the purpose of the Sherman Anti-Trust Act of 1890 which forbids all agreements in restraint of interstate commerce, and as interpreted by the Supreme Court of the United States, all agreements between carriers as to the rate of freight applied to interstate shipments. The idea has received the sanction of judicial interpretation and the approval of judicial dicta. It is impossible to read the utterances of the Supreme Court in the Trans-Missouri case and the Joint Traffic Association case without the conviction that a majority of that tribunal were of the opinion not only that competition could be relied upon to regulate freight rates, but that it was the safest and best means to that end."

The principle applied by the Commission has received the approval of the courts. The Supreme Court has said: "The interstate commerce law was intended to promote trade. ''542 And, in another case,543 it was said:

"It must be remembered that railroads are the private property of their owners; that while from the public character of the work in which they are engaged, the public has the power to prescribe rules for securing faithful and efficient service and equality between shippers and communities, yet, in no proper sense, is the public a general manager. As said in Interstate Commerce Commission v. Alabama Midland R. Co., 168 U. S. 144, 172, 42 L. Ed. 414, 425, 18 Sup. Ct. Rep. 45, 51, quoting from the opinion in Circuit Court of Appeals, same style case, 5 Inters. Com. Rep. 697, 21 C. C. A. 59, 41 U. S. App. 466, 74 Fed. 723:

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'Subject to the two leading prohibitions that their charges shall not be unjust or unreasonable, and that they shall not unjustly discriminate so as to give undue preference or disadvantage to persons or traffic similarly circumstanced, the act to regulate commerce leaves common carriers as they were at the common law,-free to make special rates looking to

542 Louisville & N. R. Co. v. Behlmer, 175 U. S. 648, 44 L. Ed. 309, 20 Sup. Ct. 209.

543 Int. Com. Com. v. Chicago G. W. R. Co., 209 U. S. 108, 52 L. Ed. 705, 28 Sup. Ct. 493.

the increase of their business, to classify their traffic, to adjust and apportion their rates so as to meet the necessities of commerce and of their own situation and relation to it, and generally to manage their important interests upon the same principles which are regarded as sound and adopted in other trades and pursuits.'

"It follows that railroad companies may contract with shippers for a single transportation or for successive transportations, subject though it may be to a change of rates in the manner provided in the interstate commerce act (Armour Packing Co. v. United States, 209 U. S. 56, 52 L. Ed. 681, 28 Sup. Ct. Rep. 528), and also that, in fixing their own rates, they may take into account competition with other carriers, provided only that the competition is genuine, and not a pretense (Interstate Commerce Commission v. Baltimore & O. R. Co., 145 U. S. 263, 36 L. Ed. 699, 4 Inters. Com. Rep. 92, 12 Sup. Ct. Rep. 844; Texas & P. R. Co. v. Interstate Commerce Commission, 162 U. S. 197, 40 L. Ed. 940, 5 Inters. Com. Rep. 405, 16 Sup. Ct. Rep. 666; Interstate Commerce Commission v. Alabama Midland R. Co., supra; Louisville & N. R. Co. v. Behlmer, 175 U. S. 648, 44 L. Ed. 309, 20 Sup. Ct. Rep. 209; East Tenn., V. & G. R. Co. v. Interstate Commerce Commission, 181 U. S. 1, 45 L. Ed. 719, 21 Sup. Ct. Rep. 516; Interstate Commerce Commission v. Louisville & N. R. Co., 190 U. S. 273, 47 L. Ed. 1047, 23 Sup. Ct. Rep. 687).

"It must also be remembered that there is no presumption of wrong arising from a change of rate by a carrier. The presumption of honest intent and right conduct attends the action of carriers as well as it does the action of other corporations or individuals in their transactions in life. Undoubtedly, when rates are changed, the carrier making the change must, when properly called upon, be able to give a good reason therefor; but the mere fact that a rate has been raised carries with it no presumption that it was not rightfully done. Those presumptions of good faith and integrity which have been recognized for ages as attending human action have not been overthrown by any legislation in respect to common carriers."

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It is evident that there is no presumption of wrong" when a carrier "takes into account competition with other car

riers" and, without an illegal combination between it and other carriers, makes an advance in its rates, for, as said by the court in the course of the same opinion, "Competition eliminates from the case an intent to do an unlawful act." But, when an advance is made as a result of a combination that is illegal, there can be no presumption that the act of making the advance was in good faith and the carrier should not only show "a good reason therefor," but the rate so advanced is presumptively illegal, and the carrier should be required clearly to show that it is not unreasonable. Judge Speer, with that ability and clearness that usually mark his opinions, in the case of Tift v. So. Ry. Co.,544 states the rule correctly and at length.

It is true that the Interstate Commerce Commission has no authority to enforce the Sherman Anti-Trust Law and cannot penalize carriers who may violate it, but the Commission can and should, when considering the difficult question of what is a reasonable rate, look to the causes that produced the rate and the method adopted in putting it into effect. Congress has been repeatedly importuned to permit interstate carriers to combine, and has so far refused to amend the Sherman Anti-Trust Law in that respect. That the law applies to carriers, and that any contract or combination in restraint of trade between the states violates the Act, have been definitely settled in the Trans-Missouri Freight and Joint Traffic Association Cases cited, supra. It is probably true that freight

544 Tift v. So. Ry. Co., 138 Fed. 753, 761, 762, 763. Affirmed, So. Ry. Co. v. Tift, 148 Fed. 1021, 206 U. S. 428, 51 L. Ed. 1124, 27 Sup. Ct. 709. The Amendment of 1910, as changed in 1920, provides: "At any hearing involving a rate fare or charge increased after January 1, 1910, or of a rate fare or charge sought to be increased after the passage of this Act, the burden of proof to show that the increased rate, fare or charge, or proposed increased rate, fare or charge is just and reasonable shall be upon the carrier." The Tift case was decided before this provision was

adopted, and at the time when the burden of proof was on him who attacked a particular rate. The rule applied where rates were advanced as the result of concerted action was a rule of evidence, the principal effeet of which was to shift the burden of proof. Such rule in so far as that effect is concerned has now no application as the statute itself has placed the burden on the carrier that increases the rate. The Transportation Act, 1920, has removed all necessity for the consideration of concerted action.

associations are necessary to the proper conduct of the great business of carriers, and that there should be some modification of the law with reference to such associations. Such modifications, if made, should protect the interests of the public as well as those of the carriers, and rates made by such associations should, in some manner, be investigated and found reasonable before becoming effective. Of course, if a rate is reasonable, although made as the result of concert of action, it cannot, for that reason alone, be condemned by the Commission.545

The Transportation Act, 1920, changes the principle of competition, but the foregoing discussion of the reasons why monopoly was, prior to that Act, regarded as harmful, is an appropriate statement in deciding what facts should be considered in judging whether or not particular rates are reasonable. The 1920 Amendment permits pooling under certain conditions, opens terminals to joint uses, makes the AntiTrust Laws inapplicable to railroads, and invites consolidation of competitive lines.546 It also contemplates the establishment and maintenance of a reasonable degree of uniformity in rates over all lines,—at least the standard lines-of railroads in the same rate-making territory." 547

§ 101. Limitations on the Observance of Competition in Rate-Making. The carriers are permitted to meet competition, provided that, in doing so, they do not transport at a loss. Market competition frequently may require a carrier to transport goods a long distance at a comparatively low rate. So long as any profit is made by such transportation, it benefits not only the carrier, but all shippers, that such transprotation should be undertaken. But it would be unjust to the carrier to make this kind of traffic a basis for all rates. Kirkman, speaking of this kind of competition, says:548

545 China & Japan Trading Co. v. Ga. R. Co., 12 I. C. C. 236, 241, and cases there cited; Enterprise Mfg. Cc. v. Ga. R. Co., 2 I. C. C. 451, 456; Board of Bristol, Tenn. v. Virginia & S. W. Ry. Co., 15 I. C. C. 453. The Commission has not always indulged any presumption against a rate established in consequence of an agree

ment between carriers, R. R. Com. of Texas v. Atchison, T. & S. F. Ry. Co., 20 I. C. C. 463, 466.

546 See Sec. 68 and Chapter XI, post.

547 See Consolidated Southwestern Cases, 123 I. C. C. 203.

548 Science of Railways, Vol. 8, pp. 8 and 9.

"Competition is a potent factor in determining rates, and is general in the case of railroads. Thus the facility and cheapness with which wheat may be moved from India to Liverpool affect the rate on wheat in every quarter of the globe. They also affect the rates on substitutes therefor, such as rye, barley, and so on. In so far as this is so, it is apparent that competition is only partially dependent upon the presence of neighboring lines or other local influences. Local competition, while valuable, is not enough to enforce equitable conditions. It must be supplemented by the competitive markets of the world, including the diversified carriage of mankind by land and water. Richness of soil, facilities of production, the price of labor and rates of local carriers from points of production to places of general consumption influence the charges of other carriers in every quarter of the globe. It is no exaggeration to say that sources of competition among carriers are as numerous as the divergent interests of trade. Because of this they are self-regulative. Their errors of judgment and sins of omission and commission are self-corrective."

This quotation would not be accurate if applied to competition generally; but it does correctly describe market competition. Water competition, where it exists, affects rates in a similar way to that of market competition. The carriers have suppressed water competition in some cases and use it in others to defend some particular practice. This competition is discussed by Mr. Commissioner Prouty as follows:549

"Without doubt water competition is made to do most heroic service in many portions of the United States in justifying anomalies in the freight rate, but we are constrained to believe that this competition between the Atlantic and

549 Business Men's League of St. Louis v. Atchison, T. & S. F. Ry. Co., 9 I. C. C. 318, 359, 360. Low rate induced by water competition, Re Advances in Rates for the Transportation of Flaxseed, 23 I. C. C. 272, 275. Water competition creating dissimilar conditions, Georgetown Ry. & Light Co. v. Norfolk & W. R. Co., 2 I. C. C. 144; Chamber of Commerce of

Newport News v. Southern Ry. Co., 23 I. C. C. 345. But a competing water route will not justify unreasonable rates, Southern Pac. Co. v. Interstate Com. Com., 219 U. S. 433, 55 L. Ed. 283, 31 Sup. Ct. 288. See amendment as to water competition suppressed by rail carriers, Sec. 435, post.

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