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In the circumstances to be considered are all questions bearing upon the cost of service by the carrier, including any special services rendered the shipper, such as rapid transit and increased cost of handling. 2 I. C. C. R. 73 and 2 Int. Com. Rep. 49.

Greater value alone is not conclusive of the reasonableness of a higher rate of freight on a given article than upon another commodity of the same general character, especially when the incidents of transportation are identical, 21 I. C. C. R. 522.

§ 187 (137). Distance as a factor in rates.-The commission has uniformly ruled that distance is an important factor in determining the reasonableness of rates and ordinarily the standard, but not always controlling. It has been said to be controlling in the absence of other influential conditions. 7 I. C. C. R. 180. Distance by the shortest route has been frequently considered in determining the rate on another and competing line, and the distance by the shortest available route has been taken as a basis of differentials in grain rates. 7 I. C. C. R. 481. When the act to regulate commerce was before congress, the mileage basis for rates was suggested but not adopted. The commission said in I. C. C. R. 629, 2 Int. Com. Rep. 9, that the fact that the rates were not fixed on a mileage basis does not necessarily make them either illegal or unjust, and the commission has no power to make an order requiring the adoption of such a basis. See also 2 I. C. C. R. 52, 2 Int. Com. Rep. 41.

Where rates seemingly reasonable are made by a number of carriers in a widely extended territory and are relatively fair so far as the evidence shows, the commission will not order these rates changed at one important point, thereby throwing the rates of the entire system into confusion for the purpose of conforming to the mileage basis. 2 I. C. C. R. 315, 2 Int. Com. Rep. 199.

For illustration of the blanketing of rates in a considerable territory securing substantial equality between producing points and markets, and the denial of the contention for rates based upon distance, see 17 I. C. C. R. 169. The commission has refused to change rates reasonable in themselves to equalize commercial conditions, or to enable cities to secure traffic from their own territory, 6 I. C. C. R. 195; as rates cannot be fixed to overcome natural advantages, or for the purpose of equalizing commercial conditions. See preferences as to communities, infra, § 241.

The rule of increased aggregate rate and decreased rate per ton per mile as distance increases, while general, is subject to qualifications and exceptions. 9 I. C. C. R. 17. Charges are not proportion to distance where distances are considerable and the distances between the points relatively small. 5 I. C. C. R. 264 and 4 Int. Com. Rep. 65. As to grouping of rates, see infra, section 3.

§ 188 (138). The commission on comparison of rates.-Rates reasonable in one section of the country may be unreasonable in another. 6 I. C. C. R. 121. There is no necessary connection between rates on traffic of the same kind or class in one direction and rates in the opposite direction, as special circumstances, such as flow of traffic, may justify higher rates in one direction than in the other; especially is this the case where the distance is of great length. 6 I. C. C. R. 121, 9 I. C. C. R. 642. The share of a through rate is not necessarily the measure of a reasonable rate, but is properly used as a basis of comparison in determining its legality, 6 I. C. C. R. 458; and the apportionment of through rates to the different parts of the through line may be significant of the question of the reasonableness of the through rate. 2 I. C. C. R. 131, and 2 Int. Com. Rep. 78. Local rates are not properly compared with through rates. 1 I. C. C. R. 401, 1 Int. Com. Rep. 703; 3 I. C. C. R. 534, 2 Int. Com. Rep. 778. Where a railroad owned two parallel lines, it was ruled that having accepted low rates on one of them, it should have provided corresponding advantages to the patrons of its other lines, allowances being properly made for any differences in conditions. 4 I. C. C. R. 79 and 3 Int. Com. Rep. 115.

In comparison with rates in other localities, dissimilar conditions and modifying circumstances are to be considered.

§ 189 (135). Reasonableness of rates as relating to cost of service and needs of the shipper.-The general considerations of public policy relating to the cost of production of the commodity and the needs of the shipper on the one hand, and the circumstances and financial condition of the carrier, such as are involved in the cases before courts relating to interstate traffic, have been considered by the commission in several cases, notably in the report to the senate in 1890 in response to a resolution of

the senate calling for such report, on the alleged excessive freight rates and charges on food products. 4 I. C. C. R. 48, 3 Int. Com. Rep. 93-151, and in the opinion of April 1, 1903, on the proposed advance in freight rates. 9 I. C. C. R. 382. Thus the circumstances of the carrier, its operating expenses, cost of transportation, grades, density or sparseness of population, volume of business, book charges, dividends, are all properly considered but are not controlling. See 2 I. C. C. R. 375, and 2 Int. Com. Rep. 289; 3 I. C. C. R. 473, and 2 Int. Com. Rep. 742; 6 I. C. C. R. 601. See also 2 I. C. C. R. 272, and 2 Int. Com. Rep. 162.

In the Spokane and Coast Rate Cases, 15 I. C. C. R. 376, in 1909, the commission ruled that the distribution of new stock of the Great Northern Railroad among the holders at par, though the market value was above par at the time of distribution, had no bearing upon the earnings to which the company was entitled, or on the rates which were under question. It was ruled, however, that the earnings on the railroads were excessive, and the freight rates were ordered reduced. The opinion in this case has an exhaustive review of the history and capitalization of railroads with a discussion of the relation of coast and inland rates. See also 9 I. C. C. R. 318.

The capitalization of a railroad, the commission has said, to have consideration in cases involving the readjustment of rates, should be examined by the history of the capital account, the value of the stock and various securities and the actual cost and the value of the property itself, as the making of the capital account alone the basis of legitimate earnings would place, as a rule, railroads conservatively managed and capitalized at an enormous disadvantage. 8 I. C. C. R. 158. But the circumstances of the carrier and its financial interests are not alone to be considered. 9 I. C. C. R. 160. While the expense of operation, liability to damage from sand drifts, etc., and the requirement of a return upon the investment of the carrier, are considered, the financial necessities of the carrier do not justify excessive rates. Railroads are entitled to share in the general prosperity of the country, but the cost of replacement and of new construction should not be charged to earnings and cost of operation so as to diminish net earnings and cause an advance of rates. 9 I. C. C. 382; 5 I. C. C. R. 156, and 3 Int. Com. Rep. 794. Rates on the lines of rival companies or different branches of the same company are properly considered. 6 I. C. C. R. 121,

I. C. C. R. 325, 1 Int. Com. Rep. 641, 6 I. C. C. R. 195; as also rates to contiguous points on same line. 2 I. C. C. R. 588, 2 Int. Com. Rep. 412.

On the question of reasonableness, it is immaterial whether the railroads combine or act separately. 2 I. C. C. R. 375, 2 Int. Com. Rep. 289. And an increase of rates for the purpose of securing certain lines of traffic from territory set apart to railroads under an agreement is prima facie unreasonable. 6 I. C. C. R.

195.

190 (140). Reasonableness and proportion.—It was said by the commission in an opinion by its chairman, Judge Cooley, in an early case, 2 I. C. C. R. 231, and 2 Int. Com. Rep. 137, that the phrase "rates reasonable in and of themselves" was very likely to be misleading, and that it was not the theory of the act that reasonableness of rates could thus be separately and independently determined.

On the contrary, it is assumed in the act that persons, corporations and localities are interested not only in the rates charged them, but in the rates which are charged to others also, and that while the act does not require all rates to be proportionate, it nevertheless makes proportion an important element when the rates to any locality are to be determined. No rates therefore can be reasonable in and of themselves, in contemplation of the act, which are made regardless of proportionment. And in another case it was said (3 I. C. C. R. 534, and 2 Int. Com. Rep. 777):

"The terms 'reasonable and just' as used in the statute, as applied to rates are each relative terms. They do not mean to imply that the rates on every railroad employed in interstate commerce shall be the same or even about the same. The conditions and circumstances of each road surrounding the traffic, and which enter into and control the nature and character of the service performed by the carrier in the transportation of property, such as the cost of transportation, which includes volume or lightness of traffic, expense of construction and operation, competition in some respects of carriers not subject to the law, rates made by shorter and competing lines to same points of destination, space occupied by freight, and risk of carriage,-all have to be considered in determining whether a given rate is reasonable and just.” Tested by these a rate may be very reasonable and just as to one road, and not as to another.

As to the complexity of the question of adjusting rates so as to make them at once reasonable per se and in proportion, see supra, § 126.

§ 191 (141). The commission on rate wars and reasonableness of rates. In the matter of the Chicago, St. Paul & Kansas City Railway Co. (2 I. C. C. R. 231, 2 Int. Com. Rep. 137), the commission in an opinion by Judge Cooley, considered this subject under an application for alleged violation of the fourth section of the act, and said that the act was not passed to protect railroad corporations against the misconduct or mistakes of their officers, or even primarily to protect such corporations against each other, and that the term "just and reasonable" is employed to establish a maximum limitation for the protection of the public, not in minimum limitation for the protection of reckless carriers against their own action. The commission conceded that there was evidence that in many cases railroad companies temporarily established rates which were not only below the fair compensation for their services, but if persisted in were destructive of their own interests as well as of the interests of its rivals; but carriers that made such unreasonably low rates were giving the public to understand that those rates were reasonable and remunerative and were doing very much to establish against themselves a low standard of rates for all time. The commission held that it had no power to order rates to be increased upon the ground that they were so low that persistence in them would be ruinous. This ruling was cited and approved by the supreme court in the Maximum Rate case, 167 U. S. 511, 1. c., 42 L. Ed. 257, the court saying that the argument showing that the commission had no power to fix a minimum or establish an absolute ratio went also to show that they had no power to fix any rate to control in the future (under the act prior to amendment of 1906).

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