The long-haul clause did not realize the intent of its framers. It received a series of shocks from the United States Supreme Court, which produced, if not paralysis, at least a bad case of nervous prostration.[134]
At first, believing that the law would be enforced in accordance with its purpose and intent to get rid of unjust and needless discrimination between localities, the Northern and Western roads revised their tariffs in good faith in reference to long and short haul rates, but, later, when they found that the Supreme Court did not intend to enforce the 4th section, they joined the Southern roads in practical disregard of it wherever they found it convenient to do so, and only in a few cases has their disregard been checked.
Within 5 days after the Commission was appointed a large number of railroads applied for relief from the long and short haul clause; and in many cases, on the ground of water competition, etc., relief was given.[135] The Commission held that dissimilar circumstances existed under the 4th section in case of competition with water carriers, or railroads not under the Act (foreign railroads and railroads lying wholly within a single State), and in “rare and peculiar cases of competition between interstate railroads, when a strict application of the rule would be destructive of legitimate competition,”[136] but ordinarily competition between interstate roads was not regarded as sufficient to relieve them from the 4th section.
In November, 1892, the Commission decided the famous Alabama Midland Case. The complaint was that rates from the East and Northeast to Troy, Ala., were higher than to Montgomery, a longer haul passing through Troy. The railroads pleaded competition at Montgomery. The Commission held that railway competition would not justify departure from the rule of Section 4 of the Interstate Act. Five years later, in November, 1897, the United States Supreme Court sustained the judgment of the Circuit Court and Circuit Appeals Court, overruling the Commission, and held that the existence of railway competition at Montgomery made a substantial difference of circumstances within the meaning of the exception in Section 4.[137]
The Court held that competition even of interstate lines is a substantial difference of conditions which may justify a greater charge for a short than for a long haul, but said, “We do not hold that the mere fact of competition, no matter what its character or extent, necessarily relieves the carrier from the restraints of the 3rd and 4th sections.”
In the 2d section, which prohibits any rebate or discrimination and is intended to enforce equality of shippers over the same line, “‘similar circumstances and conditions’ refers to matters of carriage, and does not include competition between rival routes;” but in the 3d and 4th sections “similar circumstances and conditions” includes competition, which “is one of the most obvious and effective circumstances that make the conditions under which a long and short haul is performed, and substantially dissimilar.” The railroad people think the circumstances are very dissimilar also when the Oil Trust or the Beef Combine threatens to take hundreds of thousands of dollars worth of business if they don’t get the rates and facilities they want, while Messrs. A. B. C., etc., ship their goods and pay the schedule rates without suggesting any reduction. This dissimilarity is harder for the railroads to deal with than the other. They can stop competing among themselves on long-haul schedule rates more easily than they can enforce equal rates on the big shippers.
In the Chattanooga Case it appeared that rates from New York and other points via South Atlantic points to Chattanooga were higher than to Nashville, 152 miles further on. The Commission in December, 1892, ordered this discrimination to cease. The order was not obeyed. Suit to enforce it was brought in the Circuit Court, and a decision sustaining the Commission was rendered in February, 1898. And in November, 1899, the Court of Appeals confirmed the decision, holding that the ruling of the Supreme Court in the Midland Case did not apply, because “normal competition” would give Chattanooga the same rates as Nashville.[138] But the Supreme Court in 1901 reversed the lower courts and decided against the Commission.[139]
The Georgia Railroad Commission Cases, also decided by the Interstate Commission in 1892, went the same way, the United States Supreme Court again deciding against the Interstate Commission on the long and short haul clause, holding that any substantial competition of markets or railways creates dissimilar conditions within the 4th section.[140]
The result is that dissimilarity of conditions created by the railroads themselves becomes the means of freeing them from the long-haul rule of the 4th section of the Interstate Act.
In the South a method called the “basing-point system” is in vogue. The railroads name certain towns as distributing centres and competing points, fix the rates to and from these points, and make rates to and from other localities by adding to such through rates the local charges in force between the distributing centres, or “basing-points” and the said other localities.
The Commission says: “Our annual reports to Congress and reported decisions in cases have uniformly condemned this distributing centre theory of rate-making, but the Southern carriers have resisted our efforts to correct the practice.”[141]
A thoughtful writer in the Popular Science Monthly says: “The most serious class of unjust discriminations includes those which have for their victims the entire populations of towns, cities, and even extensive districts, which are made to suffer from the unfair adjustment of railway rates. Practically the whole region south of the Potomac and Ohio and east of the Mississippi has continuously suffered from discriminations of this kind through the system of making charges to a few selected cities the basis for through rates to all other points. Through rates are made to and from about two hundred of the larger towns, including Atlanta, Birmingham, Chattanooga, Vicksburg, New Orleans, and Mobile, and traffic shipped from or to all other points is charged the rate to one of these basing-points plus the local rate from such basing-points to final destination. In practice it is common to make the combination by the use of rates to and beyond whatever basing-point will give the lowest total, whether on the line traversed by the shipment or not. Thus a shipment from Cincinnati to a point on the line from that city to New Orleans may be charged the full rate to New Orleans plus that from the latter back to the local point. The condemnation of such a system cannot be too severe. It not only limits the commercial activities of the towns unjustly discriminated against and restricts the sources from which they can directly draw supplies, but by hindering their growth it retards the development of the entire section, including the cities supposed to be favored.”[142]
In a case decided in 1894 it was found that hay was being carried from Memphis through Summerville to Charleston for 19 cents a hundred, against 28 cents a hundred from Memphis to Summerville, the 9 cents difference being equal to the local rate from Charleston back to Summerville. “The difference of $1.80 per ton was sufficient to preclude the Summerville dealer from selling in neighboring towns in competition with Charleston dealers. The Summerville dealer was thus practically confined to Summerville for a market, and even there had to compete with dealers doing business at Charleston 19 miles away. If $3.80 per ton is profitable to the carriers for bringing hay in carloads from Memphis to Charleston, then $5.60 per ton, nearly 50 percent more, from Memphis to Summerville, which is nearer than Charleston is to Memphis, represents an extra profit of $1.80, which the carrier did not and could not show to be equalled by extra cost of transporting a car of hay and delivering the same at Memphis.” The Commission (June 1894) ordered the carriers not to charge more from Memphis to Summerville than from Memphis to Charleston, holding that competition of markets or of railways would not justify a higher charge for a shorter than for a longer haul. The order was made in September. In its report to Congress in December the Commission said, “The order has not been obeyed.”[143]
Social Circle, situated between Atlanta and Augusta in Georgia, was required to pay a rate from Cincinnati made up of the rate to Atlanta plus the local rate from Atlanta to Social Circle, while Augusta, considerably more distant, had rates from Cincinnati no higher than those to Atlanta. The Commission in June, 1891, ordered the railroad to cease charging more from Cincinnati to Social Circle than for the longer distance to Augusta.[144]
Hill and Brother, in the wholesale grain, flour, and hay business at Cordele, Ga., were in competition with dealers at Albany, Americus, and Macon, which were made basing-points and had lower rates than Cordele from the common source of supply. Cordele was shown to be nearer the coast than the other points, and to have several railway routes from Nashville, so that it could not be excluded from the low rate list on competitive grounds. The railroad men said it was excluded because it was not so large a distributing point as the other places, but admitted that if it had equally low rates it would largely increase as a distributing centre; so that the case stood thus: The railroads did not give Cordele equally low rates because it was not a sufficiently large distributing centre, and it was not a sufficiently large distributing centre because it was denied equally low rates; i. e., the railroads sought to excuse themselves for wrongdoing by offering the results of the wrong in justification. The Commission refused to allow the railroads to take advantage of their own wrong and condemned the Cordele rates.[145]
The Louisville and Nashville charged $3.69 per ton on pig iron from Birmingham, Ala., to Cordele, Ga., 267 miles, and only $1.80 a ton from Birmingham to Macon, 332 miles. On coal the rate was $2.60 to Cordele and $1.60 to Macon. The Commission decided that the rates to Cordele should be no higher than to Macon.[146]
La Grange is 71 miles nearer New Orleans than Atlanta, yet the rates to La Grange were made so much higher than to Atlanta that an Atlanta dealer could ship goods from New Orleans through to Atlanta and then back to La Grange as cheaply as the goods could be shipped direct to La Grange.[147]
To keep traffic from going to Savannah and make it go to the Northwest or to Pensacola, the Louisville and Nashville made very high rates on shipments to Savannah. On Savannah traffic the Nashville haul was short and the receipts small; on shipments to the Northwest the Nashville receipts were much larger, and in Pensacola it had a special interest. So the Savannah cotton rate was advanced from $2.75 to $3.30 a bale, and the rates on naval stores were also made much higher than to Pensacola or to the Northwest.[148] The Commission ordered the railroad to discontinue the discrimination against Savannah, January, 1900, and the Circuit Court sustained the decision, July, 1902.
The Commission has condemned the rates from New Orleans to Danville, Va., as excessive in comparison with the rates on the longer haul to Lynchburg;[149] also the rates on sugar and molasses from New Orleans to Nashville as higher than on the long haul to Louisville;[150] the rates from New York, Cincinnati, Chattanooga, Nashville, and New Orleans, as discriminating against Dawson and in favor of Americus, Eufaula, and Albany;[151] undue preference to Sioux City against Sioux Falls, in the rates from Chicago and Duluth;[152] and many other discriminations between localities, and violations of the long and short haul clause;[153] yet all the complaints and decisions, numerous as they have been, are but a cupful from the sea; and the evils removed in pursuance of orders of the Commission which the Courts neglected to overrule form an insignificant group compared to the mass that remained untouched.