JUDGE TAFT ON COMPETITION.

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movement of business under it are a complete justification of it, and foreclose judicial investigation. Such an assumption renders the Interstate Commerce Law nugatory and useless. There are other causes than normal competition that produce discriminatory rates. The Interstate Commerce Law, it is conceded, was intended to encourage normal competition. It forbids pooling for the very purpose of allowing competition to have effect. But it is not in accord with its spirit or letter to recognize, as a condition justifying discrimination against one locality, competition at a more distant locality, when competition at the nearer point is stifled or reduced, not by normal restrictions, but by agreement between those who otherwise would be competing carriers. The difference in conditions thus produced is effected by a restraint upon trade and commerce, which is not only violative of the common law, but of the so-called Federal Anti-Trust Act. U. S. v. Trans-Missouri Freight Assn., 16€ U. S. 290, 17 Sup. Ct. 540, 41 L. ed. 1007; U. S. v. Joint Traffic Assn., 171 U. S. 505, 19 Sup. Ct. 25, 43 L. ed. 259; U. S. v. Addystone Pipe & Steel Co., 29 C. C. A. 141, 85 Fed. 271. Certainly such a difference in conditions ought not to justify a difference in rates before the Commission or the court.

Chattanooga is 151 miles nearer than Nashville to New York by the southern and most direct routes. It has at least three through competing southern lines from New York under different managements. These lines reach Nashville over on? road from Chattanooga. Chattanooga is connected with Cincinnati, where the stream of traffic of the east and west trunk lines is reached, by a railroad 335 miles in length. Nashville reaches the same city by a railroad 295 miles in length. So far as the record shows, the conditions of railroad transportation between Cincinnati and Nashville are not substantially different from those between Cincinnati and Chattanooga. Both the Louisville & Nashville and the Cincinnati Southern are southern roads. The Louisville & Nashville does not cncounter as much unrestricted competition at Nashville as the Cincinnati Southern at Chattanooga, for the only other line entering Nashville is the Nashville & Chattanooga company, of which the Louisville & Nashville company owns more than one-half the stock. But it is said that the Louisville & Nashville company is vitally interested in building up Nashville by enabling her merchants to compete with those of cities on the Ohio river. Why should the interest of this company be any greater in Nashville than that of the Cincinnati Southern railroad in Chattanooga? The difference in the Chattanooga and Nashville rates is to be found in something other than the physical conditions existing at the two cities; for, regarding them alone, there is no reasonable ground for any substantial disparity. The evidence shows that

the rates to Chattanooga from Cincinnati and from the eastern seaboard have always been fixed and agreed upon by an association of the southern railway and steamship companies. The Louisville & Nashville company has not been a member of it, but the Nashville, Chattanooga & St. Louis company, of which the Louisville & Nashville company owns a majority of the stock, has always been a member; and so has the Georgia Central Railroad & Banking Company, whose road from Atlanta to Savannah the Louisville & Nashville company jointly operates.

"The association has grouped Chattanooga with a large number of towns to the south of it for the same rates, and all the members of the association make their rates to Chattanooga accordingly. The Cincinnati, New Orleans & Texas Pacific railway has been a member of this association, and it is the agreement between it and the other lines at Chattanooga which has prevented the lowering of its New York rate. Without such an agreement, it is not possible to see why normal competition would not give Chattanooga substantially the same rates as Nashville. The result of the agreement is to deny to Chattanooga the natural advantage which direct connection with Cincinnati secures to Nashville, and ought to secure to Chattanooga. The agreement is more than a mere tacit understanding resulting from a praiseworthy desire to avoid rate wars and the carriage of goods at less than cost; for the rates to Nashville are admitted to pay a profit over the cost of transportation, and they are from 25 per cent. to 50 per cent. less than the Chattanooga rate for a considerably longer haul, with no apparent difference in conditions.

"We are pressed with the argument that to reduce the rates to Chattanooga will upset the whole southern schedule of rates, and create the greatest confusion; that for a decade Chattanooga has been grouped with towns to the south and west of her, shown in the diagram; and that her rates have been the key to the southern situation. The length of time which an abuse has continued does not justify it. It was because time had not corrected abuses of discrimination that the Interstate Commerce Act was passed. The group in which Chattanooga is placed, shown by the diagram above, puts her on an equality in respect to eastern rates with towns and cities of much less size and business, and much further removed from the region of trunk-line rates, and with much fewer natural competitive advantages. If taking Chattanooga out of this group and putting it with Nashville requires a readjustment of rates in the South, this is no ground for refusing to do justice to Chattanooga. The truth is that Chattanooga is too advantageously situated with respect to her railway connections to the north and east to be made the first city of importance to bear the heavier burden of southern rates,

DANVILLE AND LYNCHBURG CASES.

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when Nashville, her natural competitor, is given northern rates. The line of division between northern and southern rates ought not to be drawn so as to put her to the south of it, if Nashville is to be put to the north of it. And we feel convinced from a close examination of the evidence that, but for the restriction of normal competition by the Southern Traffic Association, her situation would win for her certainly the same rates as Nashville. It may be that the difficulty of re-adjusting rates on a new basis is what has delayed justice to Chattanooga. It may well be so formidable as to furnish a motive for maintaining an old abuse."

Danville and Lynchburg Cases. The grounds of complaint were based substantially on the claim that the through rate made by defendants from the west via Lynchburg to Danville was greater than the rate to Lynchburg, and that the rate to Richmond via Lynchburg was less than that to Danville, though the latter was nearer to the shipping points than Richmond. The principal grievance against the Southern railway was as to the rate charged for freight between Lynchburg and Danville. The following table shows the rates per 100 pounds to Lynchburg and Danville:

It was shown that the Southern did not share in the competitive through rate from the west to Lynchburg, Richmond, and Norfolk, charged by the other carriers. The water competition from New Orleans was shown to have a direct effect upon rates to Norfolk and Richmond.

The defense was the usual one, that active competition created a dissimilarity of circumstances which excused the carrier for charging more for the short than the long haul. The court held that the evidence showed that the low rates to Lynchburg and Richmond were due to active legitimate compétition, and that the local rates charged by the Southern from Lynchburg to Danville were not per se unreasonable. Interstate Com. Co. v. Southern Railroad, 122 Fed. Rep. 800 (C. C. A., 4th Circuit, May, 1903), affirming 117 Fed. Rep. 741.

La Grange Cases. Where a lower rate is given to a point on the carrier's line as a result of competition, the making of such rate does not violate the long-and-short haul clause of the Interstate Commerce Act. The carrier, in order to give a particular point the benefit of proximity to a competitive point, may take into consideration the rate at the point of competition as a basis of rates to the point in question. Interstate Com. Co. v. Louisville Railroad, 190 U. S. 273.

The carrier charged less for freight shipped through from New Orleans to Atlanta, the longer distance point, than was charged, in the same direction, from New Orleans to La Grange, Hogansville, Newman, Palmetto, and Fairburn. The carrier made the rates from New Orleans to La Grange by taking the rate from New Orleans through to Atlanta and adding thereto the local rate from Atlanta back to La Grange. This rule was enforced as to stations between La Grange and Atlanta, to-wit, Hogansville, Newman, Palmetto, and Fairburn. Held, that the rates on through freight from New Orleans to Atlanta were the result of competition at Atlanta. That this competition created a dissimilarity of circumstances which justified lesser charges for carriage of freight from New Orleans to La Grange and the shorter distance points. Ib.

Held further, that where the ruling that the rate to the nearer points was in violation of the Interstate Commerce Act

SOCIAL CIRCLE CASE.

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was based on an error of law, it was not proper to conclude the question of the inherent unreasonableness of rates, but to leave it open for future action by the Commission. Ib.

Social Circle Case. The Georgia Railroad Company controlled a line of road across the State of Georgia extending from

TERRITORY, MILAGE AND DISTANCES IN SOCIAL CIRCLE CASE.

the city of Atlanta to the city of Augusta, a distance of 171 miles, both terminals being in the State of Georgia, the entire road being within that State. Social Circle is a point on its line, 52 miles east of Atlanta and 119 miles west of Augusta. The Georgia road, by arrangement with the Western Atlantic railroad, extending from Atlanta, its western terminal, to Chat