LONG-HAUL DECISIONS OF THE SUPREME COURT.
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.