"One paramount purpose of the act to regulate commerce, manifest in all its conditions, is to give to all dealers and shippers the same rates for similar services rendered by the carrier in transporting similar freight over its line. Now, it is apparent from the evidence in this case that many American manufacturers, dealers, and localities, in almost every line of manufacture and business, are the competitors of foreign manufacturers, dealers, and localities for supplying the wants of American consumers at interior places in the United States, and that under domestic bills of lading they seek to require from American carriers like service as their foreign competitors.... The act to regulate commerce secures them this right. To deprive them of it by any course of transportation business or device is to violate the statute."
The Commission thereupon ordered the carriers to cease and desist from making such discrimination. This order, while obeyed by a number of carriers, was disregarded by the Texas and Pacific Railway, which operated an import line from New Orleans to San Francisco. Upon application by the Commission this case was carried to the Supreme Court of the United States for final adjudication. The Supreme Court decided that the interpretation of the law by the Commission was defective, although three members of the court, including the Chief Justice, dissented from this opinion. As an illustration of the discrimination which existed in this case it appeared that the domestic rate on books, buttons, carpets, etc., from New Orleans to San Francisco was $2.88 per one hundred pounds, while the total through charge on the same articles from Liverpool to San Francisco was only $1.07. The Supreme Court distinctly refrained from an opinion as to the reasonableness of these rates, and contented itself with passing upon the propriety of any difference in rates whatever. It held that the contention of the railroads was sound, namely, that all circumstances and conditions, whether within the United States or having regard for ocean rates and foreign competitive conditions, must be considered. In other words, they recognized the validity of the claim of the railroads that this import traffic must be taken at an extremely low rate if at all, since otherwise the goods would go by water around Cape Horn, or by another route. On the basis of such reasoning it would appear that any contribution from low import rates to the fixed charges of the railroad would enable that road to transport its domestic traffic at a lower rate than it otherwise might. What, however, the majority of the court did not add, although it was developed by the dissenting justices, was the fact that these conditions might exclude domestic purchasers entirely from certain markets, giving them over to importers who could control the market by reason of the low rates accorded. Since this decision in 1896 the railroads have still further developed this system of discrimination. The only safeguard for the domestic producer must lie, obviously, in some decision by a competent tribunal as to the amount of such differences which may reasonably exist. The Supreme Court has upheld their validity as a system, but it still remains for the amount of such difference which may be deemed reasonable, to be determined.
Identical in principle with the above described case, although presenting reversed conditions, are the so-called export rate cases. These have to do mainly with the rates charged on products for domestic consumption as against like products for export. As an illustration of the extent of such differences, it was clearly shown before the Industrial Commission that at times the freight rate on wheat from Kansas City to Galveston was twenty-seven cents per one hundred pounds if for domestic consumption, while the proportion of an export rate for a similar service was ten cents.[485] The rate on wheat from the Mississippi river to New York for domestic consumption was at times twenty or twenty-one cents per one hundred pounds, while for the same service when the goods were to be exported, the rate would be thirteen cents per one hundred pounds. This system of stimulating foreign business by discriminatingly low rates seems to have attained large proportions only since 1897. The Interstate Commerce Commission took cognizance of the system in a decision rendered in 1899.[486] It was enabled to do so by virtue of the Import Rate decision above cited, whereby the United States Supreme Court authorized it to consider not only circumstances and conditions within the United States, but also those relating to ocean transport and foreign competition.
The railroads justify their action on the ground that only by making such concessions in export rates could they lay down grain in foreign markets in competition with other parts of the world. On the other hand, it was not made clear why such competition from foreign markets had become any more acute in the last few years than prior to that time. There appears to be much force in the argument of many shippers, and also of some railroad men, that this anomalous condition of rates was due, not so much to the keenness of foreign competition, as to the rivalry among the American carriers themselves. In other words, it was said that the competition between the Gulf ports and the Atlantic ports was responsible for the abnormally low rates on export business. In line with this argument would seem to be the fact that it is the rates upon wheat and not upon flour for export, which have decreased more than in proportion to the decrease upon similar commodities for domestic consumption. The passing of the acutest phase of competition from the Gulf ports since 1906, has rendered these questions of lesser interest of late years. They may at any time be revived, but seem unlikely to regain the importance which they formerly assumed.
FOOTNOTES:
[436] Among the best references on the subject are the following: McPherson, Railway Freight Rates, pp. 85-92, especially on the Virginia-Carolina cities; Rep. U. S. Internal Commerce, 1876, App., pp. 1-20; U. S. Senate (Elkins) Committee Hearings, 1905, Digest, App., III. The principal I.C.C. cases are as follows: 1891. Social Circle; 4 I.C.C. Rep., 744.—1892. Georgia R. R. Com.; 5 Idem, 324.—1893. Troy, Ala.; 4 Int. Com. Rep., 348. In Railway Problems.—1894. Summerville, Ga.; 4 Idem, 521.—1894. Cordele, Ala.; 6 I.C.C. Rep., 343.—1895. Tifton, Ga.; 6 Int. Com. Rep., 343.—1897. Lagrange, La.; 7 Idem, 431.—1897. Griffin, Ga.; 7 Idem, 224.—1899. Dawson, Ga.; 8 Idem, 142. In Railway Problems.—1899. Aberdeen, S. C.; 10 I.C.C. Rep., 289.—1899. Wilmington, S. C.; 9 Idem, 118.—1900. Piedmont; 6 Int. Com. Rep., 588.—1900. Hampton, Fla.; 8 Idem, 503.—1900. Danville, Va.; 8 Idem, 409. In Railway Problems.
[437] Chapter I affords a historical review of railway development in the United States.
[438] Rep. Internal Commerce, 1876, App., p. 28; Senate (Elkins) Committee, 1905, Digest, App. III, p. 71.
[442] A list of these on the Louisville and Nashville R. R. is given in U. S. Senate (Elkins) Committee, 1905, Digest, App. III, pp. 84-93. There is a distinction between a basing and a common point. The latter is a competitive junction, to which rates are made on combination of locals. The basing point enjoys a still further advantage in that it gets even lower than the combination rates.
[444] Senate (Elkins) Committee Hearings, Digest, App. III, pp. 73 and 78.
[446] H. R. Meyer's, Government Regulation of Railroad Rates, pp. 196 and 292-303.
[448] Senate (Elkins) Committee, 1905, p. 65: 80 per cent. of net earnings on the Louisville & Nashville in 1886 were from local business.
[450] 24 I.C.C. Rep., 228, for Bowling Green, Ky., clearly establishes such a community of interest between rail and water lines.
[451] Senate Interstate Commerce Committee, Hearings, 1897. Twelfth Annual Rep. I.C.C., p. 59, well describes the situation.
[452] Compare chap. XX, p. 638, infra. Other references on internal waterways are as follows: 1905. Senate (Elkins) Committee, Digest, App. IV.—1908. Report Inland Waterways Commission, 2 vols.—1910. Reports U. S. National Waterways Commission, especially Document 11. Traffic History of the Mississippi river. Cf. also, Railway Age Gazette, June 2 and 30, 1911 and Jan. 12, 1912: Bulletin 21, Bureau of Railway Economics; and the Bulletins of the U. S. Census.
[453] Compare vol. II, on railroad consolidation in this territory, since 1900.
[454] 6 I.C.C. Rep., 343.
[455] 23 I.C.C. Rep., 140.
[457] Senate (Elkins) Committee, 1905, Digest, App., III p. 93; gives a list of new basing points created since 1887.
[458] Southern Railway and Steamship Association Proceedings; Meeting of Aug. 12, 1880.
[461] Cf. chap. XX on the conflict of state and Federal powers.
[462] Cf. chap. IX on carload rates as a problem in classification.
[463] This problem is discussed as a form of local discrimination at p. 245, chap. VII, supra, and as a long and short haul question at p. 610, chap. XIX, infra. The voluminous record in the pending Union Pacific-Southern Pacific Merger case before the U. S. Supreme Court, No. 820, October term, 1911, is a primary source of material. It is outlined and examined in detail in our Railway Problems, rev. ed., chap. XXII.
[464] Best described in 19 I.C.C. Rep., p. 245; and 21 Idem, pp. 345-354, 416-421.
[465] Historically discussed in 9 Int. Com. Rep., p. 318 and 19 I.C.C. Rep., p. 238 with map; both reprinted in our Railway Problems; and 21 Idem, pp. 352 and 418.
[466] 9 Int. Com. Rep., p. 318; reprinted in our Railway Problems, chap. XVII.
[467] 19 I.C.C. Rep., p. 238 with map, reprinted in our Railway Problems, voicing the complaint of the Nevada Railroad Commission, is thoroughly typical. The leading Kindel cases are in 8 I.C.C. Rep., p. 608; 9 Idem, p. 606 and 11 Idem, p. 495 (with a highly suggestive map); the San Bernardino cases are in 4 Idem, p. 104; and 9 Idem, p. 42; and for Salt Lake City, 19 Idem, p. 218. Cf. also University of Colorado, Economic Studies, Dec. 1909.
[470] Chapter XIX, infra.
[471] Board of Arbitration on Question of Canadian Pacific Differentials Proceedings and Decision, Oct. 12, 1898.
[472] Typical cases 8 Int. Com. Rep., p. 47; and 10 I.C.C. Rep., p. 675.
[473] The Central Yellow Pine case, No. 681, 1903; and Op. 705, 1906. Also in 1912, 22 I.C.C. Rep., p. 239.
[474] Best described by Bowes, Senate (Elkins) Committee, 1905, p. 2851.
[475] 14 I.C.C. Rep., 11.
[476] 23 I.C.C. Rep., 169 and 438.
[478] 8 Int. Com. Rep., p. 121, is typical of a large number.
[479] 23 I.C.C. Rep., p. 448: U. S. Commerce Court, April session, 1912, No. 47. Ann. Rep., I.C.C., 1896, p. 78. Extensive investigations concluded July 6, 1912.
[480] The literature upon this subject, aside from the decisions specifically noted below, is voluminous. The Senate (Elkins) Committee, 1905, vol. V, devotes much attention to it as a constitutional difficulty in the way of amendment of the law. The admirable catalogue prepared by the Bureau of Railway Economics, 1912, at p. 126, well covers the field. Cf. chap. X, p. 361, supra.
[481] 11 Int. Com. Rep., 13.
[483] 24 I.C.C. Rep., p. 55.
[484] The leading references are as follows: 4 I.C.C. Rep., p. 450; 10 Idem, p. 55; 13 Idem, p. 87; Rep. to the Senate by I.C.C., Feb. 28, 1903; Senate (Elkins) Committee, 1905, Digest, App. V. The leading export rate case, 8 I.C.C. Rep., p. 214, is reprinted in our Railway Problems. Johnson and Huebner, Railroad Traffic and Rates, vol. I, pp. 492-518. In this instance I have reproduced a portion of my report prepared for the U. S. Industrial Commission in 1900.
[485] Cf. Ann. Rep., I.C.C., 1899, p. 22.
[486] 8 Int. Com. Rep., p. 214; reprinted in our Railway Problems, chap. XVIII.