The Southern Pacific and other railroads published a guaranteed
through rate on citrus fruits from California to the Atlantic
seaboard. The shippers availing of this rate routed the goods
themselves from the terminals of the initial carriers and illegally
obtained rebates for the routing from the connecting carriers. To
prevent this -- and the action was successful -- the initial
carriers republished the rate reserving the right to route the
goods beyond their own terminals. On complaint of shippers, the
Interstate Commerce Commission ordered the initial carriers to
desist from enforcing the new rule, holding it violated § 3 of the
Interstate Commerce Act by subjecting the shippers to undue
disadvantage. The Circuit Court sustained the Commission, but on
the ground that the routing by the carrier amounted, although no
other agreement was proved in regard
Page 200 U. S. 537
thereto, to a pooling of freights and violated § 5 of the act.
Held error, and that: .
As the general purpose of the act was to facilitate commerce and
prevent discrimination, it will not be construed so as to make
illegal a salutary rule to prevent the violation of the act in
regard to obtaining rebates.
The question of joint through rates is, under the act, one of
agreement between the companies and under their control, and
nothing in the act prevents an initial carrier guaranteeing a
through rate to reserve in its published notice thereof the right
to route the goods beyond its own terminal.
A carrier need not contract to carry goods beyond its own line,
or make a through rate; if it does agree so to do, it may do so by
such lines as it chooses, and upon such reasonable terms, not
violative of the law, as it may agree upon, and this right does not
depend upon whether it agrees to be liable for default of the
connecting carrier.
The fact that the initial carrier, in order to break up the
practice of rebating by the connecting carriers, promises them fair
treatment and carries out the promise by giving them certain
percentages of its guaranteed through rate business, does not
amount to a pooling of freights within the meaning of § 5 of the
Interstate Commerce Act.
A reservation applicable to a single business by the initial
carrier, guaranteeing a through rate, of the right to route goods
beyond its own terminal does not amount to an unlawful
discrimination within the prohibition of the act if the business is
of a special nature, like the fruit business, having nothing in
common with other freight.
In a suit by the Interstate Commerce Commission to enforce an
order made by it, the court is not confined in passing on the
validity of the order to the reasons stated by the Commission.
These are appeals from orders or decrees of the Circuit Court of
the United States for the Southern District of California in
proceedings wherein that court affirmed, and ordered to be
enforced, the determination of the Interstate Commerce Commission,
relating to the above-named railroad companies, directing them to
desist from maintaining or enforcing a rule adopted by them and
pertaining to shippers of oranges and other citrus fruits in
southern California, whereby those shippers were denied their
alleged right of designating the routes for the transportation of
their property from California to the Eastern markets, under a
tariff of through rates, as mentioned in the orders or decrees.
The proceeding in each case was commenced before the Commission
under sections 13, 14, and 15 of the Interstate
Page 200 U. S. 538
Commerce Act, 24 Stat. 379, by the filing of a petition with the
Commission, on the part of certain corporations of the State of
California, called the Consolidated Forwarding Company, and the
Southern California Fruit Exchange, engaged in the business of
shipping oranges and other citrus fruit from southern California to
the Eastern markets. The proceeding was continued in the circuit
court under section 16 of the act. The petition charged the
railroads with various violations of the Interstate Commerce Act,
including specially the agreement for "routing," hereinafter set
forth, and asked the Commission to enjoin such companies from any
further violation of the act. The companies put in answers to the
petition, denying its material averments. Testimony was then taken
before the Commission, and the following, among other facts, were
shown:
The through tariff of rates from California to the East, with
the right of routing, which had been agreed upon between the
companies complained of (hereinafter called the initial carriers)
and their Eastern connections regarding the orange and other citrus
fruit transportation, was in force January 1, 1900, and these
proceedings were commenced February 26, 1900. Before the adoption
of the rule for routing, there had been among the Eastern
connections of the initial carriers under the through joint tariff
rates then existing the greatest rivalry to obtain the California
fruit freight business, and this rivalry led on the part of the
connecting carriers to a system of rebates from the through tariff
rates which was a clear violation of the Commerce Act, and was
demoralizing in every was to honest business. Indeed, the president
of one of complainants before the Commission admitted that his
company (the Southern California Fruit Exchange) had in four years
received rebates to an amount of over $174,000. The practice had
become so general that the shippers came to regard a rebate as part
of the legitimate returns from the orange business. Among those who
participated in this system of rebates were what is termed the car
line companies, which were incorporated companies
Page 200 U. S. 539
owning cars in which the fruit was packed, described as
ventilator or refrigerator cars, which were peculiarly adapted to
the carriage of the fruit, and were hired by the initial carriers
because they did not want to own equipment cars which they could
keep in service only part of the year, while the car companies
could use the cars for other purposes in other parts of the United
States when the orange transportation was over. These car companies
made arrangements with the connections of the initial carrier east
of Chicago and New Orleans, by which a certain bonus, varying from
$10 to $40 per car, was given the car line companies in
consideration of the car's being routed over the line paying the
bonus, a part of the bonus, varying from a quarter to a half, being
usually turned over to the shipper by the car company for the
privilege allowed the latter of routing the shipment.
The initial carriers form two systems -- one called the Southern
Pacific System, and the other the Santa Fe System. There are
numerous points of junction on these lines of the defendants, where
connection is made with other carriers, and at their termini in
Chicago, Ogden, and New Orleans such connection is made, and
through lines are formed over which the citrus fruit is transported
to practically all the markets of the United States. The two
systems are the only ones which reach the section of country where
the orange industry in Southern California exists, and they about
equally divide the transportation of the oranges therefrom. The
Commission said the evidence was unsatisfactory as a basis for a
conclusion whether the initial carriers pooled their citrus fruit
traffic or divided the earnings therefrom, and it therefore
retained such question for further hearing and investigation.
Prior to January, 1900, the rebates by the Eastern companies,
already referred to, had become so great and demoralizing that the
initial carriers at length determined to try and crush the whole
thing. The connecting carriers were themselves dissatisfied with
this state of things, but each felt it necessary in order to
compete with the others. It had been
Page 200 U. S. 540
assumed that the car line companies were not common carriers,
and were not within the Commerce Act, and therefore they were more
ready to indulge in the practice of getting rebates whenever they
could, and paying part of the amount to the shippers for giving
them the right to route the shipment. Prior to the adoption of the
through rate tariff with this rule under discussion, the shippers
had been permitted by the initial carriers to control the routing
of the freight, and also to divert it, en route, from the
destination point named in the bill. In order stop the rebating on
these joint through rates, it was proposed to agree upon a through
rate tariff, to be assented to and accepted by the railroads
interested in the fruit transportation, or by as many of them as
possible, with the rule in question to form part of the agreement.
Such a tariff agreement was made between some of the roads (and
subsequently assented to and joined in by most of the roads) and
filed with the Commission, for the transportation of oranges and
other citrus fruit from Southern California at $1.25 per hundred
pounds, to practically all points east of the Missouri River. The
tariff agreed upon by the companies contains the rule complained
of, which is part of such agreement, and by it the initial carriers
agreed to guarantee the through rates to the shipper, but only on
the following conditions:
"In guaranteeing the through rate named herein, the absolute and
unqualified right of routing beyond its own terminal is reserved to
initial carrier giving the guaranty. In accordance with this rule,
agents will not accept shipping orders or other documents, if
routing instructions are shown thereon. Neither will agents accept
verbal routing instructions."
Another rule reads:
"Initial carrier will route each car from point of origin to
point of destination, and diversions in transit will not be
permitted except by consent of initial carrier, who will thereupon
designate new routing when diversion necessitates change
therein."
Notwithstanding the rule thus published in regard to
routing,
Page 200 U. S. 541
the initial carriers generally thereafter permitted the shippers
to route the cars containing their fruit as they desired. The right
to divert freight from the destination point or route named in the
bill of lading, and before the freight reached the billed
destination, had been exercised generally by shippers, and had been
allowed by the carriers throughout the country, and the practice
was regarded of value to the shippers, as it enabled them sometimes
to realize higher prices than they otherwise might if the freight
were continued to the original destination. This diversion by the
shippers also continued to be generally allowed.
The reason for the rule, reserving to the initial carrier this
right to route the traffic, is stated to have been because it
enabled the initial carriers to secure the discontinuance of the
practice of paying rebates. Since the adoption of that rule the
rebates which had been paid to shippers and to owners of car lines
were discontinued, and the Commission says there is no evidence
that the practice has been resumed. They were discontinued for the
obvious reason that the shippers could not control the route, and
hence it would be useless for the Eastern railroad company to pay
the shippers or the car line companies rebates on freight the
Eastern company might not receive, and which the initial carrier
alone had the routing of. As soon as the routing was agreed upon
and the through tariff rates fixed, the Eastern connections had to
do business with the initial carriers instead of the car company or
the shipper. The shippers prepay or guarantee freight charges to
destination. The initial carrier does not assume liability from
damage resulting from negligence of any connecting line.
The Commission (the chairman, Mr. Commissioner Knapp,
dissenting) ordered the defendants to cease from exacting from the
shippers the right to themselves make the route which the freight
should take. The ground taken by the Commission was that such
routing by the initial carriers subjected the shippers to undue,
unjust, and unreasonable prejudice and disadvantage, and gave to
the carrier an undue and unreasonable
Page 200 U. S. 542
preference and advantage, and was a violation of the third
section of the act.
The initial carriers, believing the Commission had erred in its
decision, refused to obey the order which it made, and thereupon
the Commission, pursuant to the sixteenth section of the act, filed
its bill in the circuit court for the purpose of enforcing its
order.
The bill thus filed by the Commission was demurred to by the
defendants, and that demurrer was overruled. 123 F. 598. The
railroad companies then answered, and the case, after the taking of
further evidence, came up for final hearing, when the order of the
Commission was affirmed and directed to be enforced (132 F. 829),
although the circuit court put the affirmance on the ground that
the agreement as to routing showed that there was a violation of §
5 of the Interstate Commerce Act, in that such agreement amounted
to a contract or combination for the pooling of freights. The court
passed upon no other question raised in the case. A very full
statement of facts is contained in the report in 132 F.
supra.
A motion was made for a supersedeas pending the hearing of this
appeal, which, for the reasons stated in the opinion of the circuit
court, was denied. 137 F. 606.
Page 200 U. S. 550
MR. JUSTICE PECKHAM, after making the foregoing statement,
delivered the opinion of the Court.
Although there are separate proceedings in these various cases,
the question arising in all is identical, and the cases will
hereafter be spoken of as if there were but one proceeding before
the court. The single question presented is, has the carrier that
takes the fruit from the shipper in California the right, under the
facts herein, to insist upon the rule permitting such carrier to
route the freight at the time it is received from the shipper?
The Commission has decided that the carrier has not the right,
and that the rule denies to shippers the use of their
transportation facilities, which such shippers are entitled, to and
that, in its application by the initial carriers to the fruit
traffic, the shippers are subjected to undue, unjust, and
unreasonable prejudice and disadvantage, and the carriers are given
an undue and unreasonable preference and advantage.
Page 200 U. S. 551
If this be the necessary effect of the rule, it may be assumed
to be a violation of section 3 of the Interstate Commerce Act, and
the Commission therefore rightly ordered the carriers to desist
from observing it.
By section 16 of the act, the circuit court is given authority
to enforce "any lawful order or requirement of the Commission." If
the order be not a lawful one, the court is without power to
enforce it. Whether or not such order was lawful is the matter to
be determined.
The Commission does not find that any contract existed between
the initial carrier and its Eastern connections to bill the fruit
according to certain proportions among the connecting railroads.
The Commission said:
"The situation warrants the inference, however, that these two
initial carriers or systems, connecting with other carriers at
various points, and they, in turn, connecting with numerous other
carriers, as shown by the tariff, are able, by acting in concert,
and routing as they see fit, to only send traffic over the roads of
such carriers as fulfilled an agreement to refrain from making any
rate concession to the shippers, and some influence of like
character could doubtless be exerted by them upon the car lines
which are also hereinafter referred to."
Such statement simply shows that, if any Eastern railroad with
which an agreement for joint through rates existed should give
rebates on the joint through rate tariff, thus carrying freight
below the rates agreed upon as the through rate tariff, that road
would not get the freight.
We see nothing in the initial carrier endeavoring to maintain
the rates agreed upon as a through rate tariff, and thereby
preventing the paying of rebates, which, in itself, is a violation
of the act. The act especially prohibits, in the sixth section, any
alteration of the rates agreed upon, in favor of any person or
persons. There is no finding that there has in fact as a result of
the rule, been any discrimination or unjust action as between the
initial carriers and the shippers themselves, and there is no
evidence that any was ever practiced.
Page 200 U. S. 552
In the examination of the rule it is well to bear in mind the
situation of the companies and the business at the time of its
adoption. It is fully set forth in the foregoing statement of
facts. The payment of the rebates was a shame, and was in truth
unsatisfactory to all the railroads, besides being plainly a
violation of the Commerce Act.
We think there is nothing in the act which clearly prohibits the
roads from adopting the rule in question. The decision turns upon
the construction of a statute which at least does not in terms
prohibit.
In cases such as this a court is bound to consider the bearing
of the result of either construction upon the general purposes of
the act. In enacting the Commerce Act, this Court has stated that
the object of Congress was to facilitate and promote commerce by
the adoption of regulations to make charges for transportation just
and reasonable, and to forbid undue and unreasonable preferences or
discriminations.
Texas & Pacific Ry. Co. v. Interstate
Commerce Commission, 162 U. S. 197.
The importance of the rule in this case, so far as the shipper
is concerned, is not so great as is its importance to the railroads
in preventing rebates. If the right of routing be looked at alone,
without any connection with the claimed right of diverting the
freight, the rule itself would be generally of little importance to
the shipper. In all probability the freight gets to its destination
when routed by the carrier as early as if routed by the shipper,
and in that event the particular route taken is not very important
to the latter. The evidence before the circuit court shows that the
routing, when done by the carrier, was fairly apportioned among the
Eastern connections, having an eye to good service and expedition,
and the roads that the routing was done over were the best roads in
the country; the roads that have been eliminated were the
roundabout roads; there were no roads that were insolvent, so far
as known by the witnesses. Now, as the fact appears that the actual
routing is generally conceded the shipper, and also his request for
a diversion allowed, there is nothing in the mere
Page 200 U. S. 553
right of routing by the companies, separate from other facts, of
which the shipper can properly complain. The Commission says it
does not distinctly appear in testimony that a delivery by a
particular terminal road has been denied in any particular case,
yet the manifest evil results of an arbitrary application of the
rule must be considered in determining its legality. If there is no
such arbitrary application, we do not agree that the rule itself is
to be held illegal because a violation of the act may be committed,
while the evidence is that none in fact was committed. It does
appear that the mere existence of the right to route on the part of
the company has ended the practice of rebating. But the opportunity
to obtain rebates on the part of the shipper is surely not a ground
for action by the Commission or by the court. Of course, if, in
attempting to cut off rebates, there is a violation of the act, the
act must be followed, and that means of prohibiting them must be
abandoned. Courts may well look with some degree of care before so
construing a statute which confessedly does not in terms so
provide, as to prohibit such a rule one the ground that it would be
a violation of the statute. We are of opinion that the rule is not
a violation thereof.
It is conceded that the different railroads forming a continuous
line of road are free to adopt or refuse to adopt joint through
tariff rates. The commerce act recognizes such right, and provides
for the filing, with the Commission, of the through tariff rates,
as agreed upon between the companies. The whole question of joint
through tariff rates, under the provisions of the act, is one of
agreement between the companies, and they may, or may not, enter
into it, as they may think their interests demand. And it is
equally plain that an initial carrier may agree upon joint through
rates with one or several connecting carriers, who, between each
other, might be regarded as competing roads.
It is also undoubted that the common carrier need not contract
to carry beyond its own line, but may there deliver to the next
succeeding carrier, and thus end its responsibility,
Page 200 U. S. 554
and charge its local rate for the transportation. If it agree to
transport beyond its own line, it may do so by such lines as it
chooses.
Atchison &c.. R. Co. v. Denver &c. R.
Co., 110 U. S. 667;
Louisville & Nashville R. Co. v. West Coast Naval Stores
Co., 198 U. S. 483.
This right has not been held to depend upon whether the original
carrier agreed to be liable for the default of the connecting
carrier after the goods are delivered to such connecting carrier.
As the carrier is not bound to make a through contract, it can do
so upon such terms as it may agree upon; at least, so long as they
are reasonable and do not otherwise violate the law. In this case,
the initial carrier guarantees the through rate, but only on
condition that it has the routing. It was stated by the late Mr.
Justice Jackson of this Court, when circuit judge, in the case of
Texas &c. R. Co. v. Interstate Commerce Commission, 43
F. 37, as follows:
"Subject to the two leading prohibitions that their charges
shall not be unjust and unreasonable, and that they shall not
unjustly discriminate, so as to give undue preference or advantage,
or subject to undue prejudice or disadvantage persons or traffic
similarly circumstanced, the Act to Regulate Commerce leaves common
carriers, as they were at common law, free to make special
contracts looking to the increase of their business, to classify
their traffic, to adjust and apportion their rates so as to meet
the necessities of commerce, and generally to manage their
important interests upon the same principles which are recognized
as sound, and adopted in other trades and pursuits."
This statement was approved by this Court in
Cincinnati
&c.. R. Co. v. Interstate Commerce Commission,
162 U. S. 184,
162 U. S. 197.
Having this right to agree on a joint through tariff on terms
mutually satisfactory, we cannot find anything in the Commerce Act
which forbids the agreement with such a condition therein as to
routing. It is said that the sixth section, properly construed,
prohibits such condition. We confess our inability to find anything
in that section which does so.
Page 200 U. S. 555
The fact that the rate, when agreed upon, must be filed with the
Commission and made public by the common carriers when directed by
the Commission does not prevent the adoption of an agreement for a
through rate tariff with the condition as stated. Nor does the
provision granting power to the Commission to prescribe forms of
schedules of rates, as provided for in the sixth section, have any
such effect. Where there is an agreed through rate tariff, and as
part of such agreement, which is joined in by several railroads,
the right to route cars is reserved to the initial carrier, we do
not think that the shipper, by virtue of the sixth section, has the
right to ignore the condition which is part of the agreement under
which the through rate is made and is guaranteed.
We cannot see that the rule violates the third section of the
act. All the facts referred to by the Commission are nothing but
statements as to how, under such a rule, there might occur a
violation of that section, but we find nothing in the facts stated
by the Commission showing that such violation had occurred. In
truth, the companies did not always even enforce the rule; still
less did they discriminate against shippers or in favor of
carriers. On the contrary, the Commission stated that, "while the
initial carriers do not always route as requested by the shippers,
they generally comply with their request." The mere failure to do
so does not, however, prove a violation of the section.
The right to route is also complained of because the rule
confined it to the fruit business, and therefore it was, as
contended, a discrimination against those engaged in it or against
the traffic itself. The transportation of this fruit is a special
business; large interests are involved in it, and particular pains
are taken to transport it as speedily as possible. With regard to
all other freight it has substantially nothing in common. The cases
are wholly unlike, and there has been no proof or complaint as to
rebates being given in connection with other freight, and the
witnesses for the railroad state if there were any evidence or
complaint of such rebates, the same rule as to
Page 200 U. S. 556
routing would be immediately adopted. As has been said, there is
no pretense of discrimination under this rule between the shippers
of freight themselves. There seems to be unanimous agreement that
all shippers are treated alike and are granted the same privileges,
and the routing is generally accorded them. It is the power to
route, which rests with the initial carrier, that really takes away
the motive for a rebate in the manner indicated, and therefore the
granting of the request of the shipper as to a particular route may
be, and is, generally conceded without danger that the rebate
business may be again practiced.
The important facts that control the situation are that the
carrier need not agree to carry beyond its own road, and may agree
upon joint through tariff rates or not, as seems best for its own
interests. Having these rights of contract, the carrier may make
such terms as it pleases; at least, so long as they are reasonable
and do not otherwise violate the law. We think the routing rule is
not unreasonable under the facts herein, and that it does not
violate the third section of the act.
Because opportunities for the violation of the act may occur by
reason of the rule is no ground for holding, as a matter of law,
that violations must occur, and that the rule itself is therefore
illegal. We are consequently unable to concur in the view taken by
the Commission that the rule violates the third section of the
act.
Upon the proceeding before the circuit court, that court did not
pass upon the question decided by the Commission, but held that the
routing rule agreed to between the initial carrier and the various
Eastern companies, and forming a part of the subsequent joint
through tariffs which were filed with the Commission, was in itself
a contract or combination for the pooling of freights.
The defendants objected that the circuit court had no authority
to decree the enforcement of the order upon any other ground than
that taken by the Commission itself. We think that the court was
not confined to those grounds, and if it
Page 200 U. S. 557
found the rule was, in itself, for any reason illegal as a
violation of the act, the order might be valid and be a lawful
order, although the Commission gave a wrong reason for making it.
If it held the rule to be a violation of one section, the order to
desist might be valid if, instead of the section named by the
Commission, the court should find that the rule was a violation of
another section of the act. All the facts being brought out before
the Commission or the court, the court could decide whether the
order was a lawful one, without being confined to the reasons
stated by the Commission. We therefore look to see the ground taken
by the circuit court.
That court found that the rule was adopted to uphold their
published rates; or, in other words, to maintain the rates on the
joint through tariff. Although, under previous through rate tariff,
these rates had been secretly cut by the Eastern connections of the
initial carriers, yet, when the routing rule was agreed to as part
of the through rate tariff, these rebates ceased. Hence, as the
court said, the purpose of the rule was undoubtedly to maintain the
through rate tariff, and that it was effectual. But the court held,
as a result, that this routing provision, being part of the through
rate tariff agreed to by the various Eastern roads, made a contract
among those roads for the pooling of freights on competing
railroads within the meaning of section 5 of the Commerce Act. It
held that it was not necessary, in order to form a pool, in
violation of that section, that the contract or agreement should
fix the percentages of freight the several railroads were to
receive, or that the railroads should know in advance what the
percentages should be; that it was sufficient to constitute a pool
if the contract or agreement provided for special means or agencies
for apportioning freights, which would destroy the rivalry which
would otherwise exist between the competing railroads, and an
agreement by which the apportionment was left to the will of the
initial carrier accomplished that purpose as effectually as though
definite percentages were fixed in the contract; that defendant's
plan to maintain through rates
Page 200 U. S. 558
through the operation of the routing rule necessarily destroyed
competition, and the adoption of the routing rule put the shippers
in a position where their patronage could not possibly be competed
for by the defendant's Eastern connections.
Thus, the mere fact that the initial carrier was granted by this
through tariff agreement the right to route the freight was held to
result in the formation of a pool, in violation of the fifth
section of the act. There was no other agreement proved in the
case. It is stated by the Commission that the shipments are
forwarded by the initial carrier so as to give certain percentages
of the traffic to connecting lines. At the same time the Commission
finds that initial carriers generally comply with the requests of
the shippers to route the freight as desired. The substance of the
report of the Commission is therefore that there is a certain
percentage of the traffic given the connecting carriers when there
is no request for routing given by the shippers. It amounts to the
giving of fair treatment to the connecting carriers. It is true the
Commission calls this a tonnage pool between the connecting
carriers, to which the initial carriers give effect by their
routing arrangement, and that its object was not so much to prevent
rebates, which was but an incident, as to affect the tonnage
division. We are of opinion, however, that the evidence is
substantially one way, and that is, that the arrangement for
routing was to break up rebating, and that it has been
accomplished. The evidence before the circuit court was to the
effect that there was no agreement whatever with the eastern
connections that any of them should have any particular proportion
of the freight, but the Eastern roads entered into the routing
agreement because they was satisfied that it would be better that
the then present practice of rebating, and they thought that they
would get a fair share of the business, or, in other words, would
be fairly treated by the initial carriers, who gave them to
understand that they would be so treated. The tonnage pool was, as
the witnesses said, a myth, and it was testified to that there was
not one of the Eastern
Page 200 U. S. 559
companies that knew what percentage of the whole business that
company secured. They simply knew that the through rates were
maintained under the operation of the routing agreement and that
rebating ceased, and they were satisfied with the manner of their
treatment by the initial carrier.
The circuit court, in order to arrive at its result, necessarily
treated the connecting carriers as rival and competing
transportation lines for this freight, and assumed that between
these lines there would exist, but for the routing agreement, a
competition for the fruit transportation which could not be
extinguished by any agreement as to routing, as a condition for
making through tariff rates; that as competition was destroyed by
this rule, it was idle to say that such result was not intended by
the defendant, and so it was held that the carrying out of the
routing agreement violated the act.
We thing these various roads were really not competing roads
within the meaning of the fifth section of the Commerce Act when
the facts are carefully examined. That act recognizes the right of
the carriers to agree upon, and provides for the publication of,
joint through tariff rates between continuous roads, on such terms
as the roads may choose to make, provided, of course, the rates are
reasonable, and no discrimination or other violation of the act is
practiced. The initial carrier did not, on its line, reach the
Eastern markets, but it reached various connecting railroads which
did reach those markets. The initial carrier had the right to enter
into an agreement for joint through rates with all or any one of
these connecting companies, though such companies were competing
ones among themselves. And the agreements could be made upon such
terms as the various companies might think expedient, provided they
were not in violation of any other provision of the act.
Prior to the adoption of the routing rule, these connecting
railroads were already acting under a through rate tariff which
continued up to the time when the agreement for the routing was
adopted. When so acting, it was no longer possible to
Page 200 U. S. 560
compete with each other as to rates (and it is upon the rebates
as to rates that this whole controversy is founded) provided the
companies fulfilled their joint rate tariff agreements. The only
way the rate competition could exist under the through rate tariff
was by violating the law. This, unfortunately, was habitually done,
and during that time the competition consisted in a rivalry between
these roads as to which would be the greatest violator of the law
by giving the greatest rebates.
In truth, the only way in which these connecting lines could
legally become competing railroads for this California fruit trade
would be in the absence of all joint tariff rate agreements. The
moment they made such agreements, and carried them out, rate
competition would cease.
All that would be needed for the total suppression of rate
competition among the connecting railroads would be the honest
fulfillment of their agreement as to joint through rates. And just
here is where they failed and where they violated their agreement
and the law by granting rebates -- or, in other words, by
competing, as to rates, for the freight, in violation of the joint
rates. In such case, we do not see any violation of the pooling
section of the act by putting in the agreement for joint through
rates the provision for routing by the initial carrier. It achieved
its purpose and stopped rebating, although it thereby also stopped
rate competition which, in the presence of the through rate tariff,
was already illegal. The railroads are no longer rate-competing
roads after the adoption of a through rate tariff by them, and they
have no right to privately reduce their rates.
Now, while the most important, if not the only, effect of the
routing agreement is to take away this rebating practice, and to
hold all parties to that agreement as part of the joint through
rate tariff, we think no case is made out of a violation of the
pooling provision in the fifth section of the act, even where the
initial carrier promises fair treatment to the connecting roads,
and carries out such promises.
We must remember the general purpose of the act, which is,
Page 200 U. S. 561
as has been said, to obtain fair treatment for the public from
the roads, and reasonable charges for the transportation of
freight, and the honest performance of duty, with no improper or
unjust preference or discrimination. Under such circumstances, the
court ought not to adopt such a strict and unnecessary construction
of the act as thereby to prevent an honest and otherwise perfectly
legal attempt to maintain joint through rates, by destroying one of
the worst abuses known in the transportation business. The effort
to maintain the published through joint tariff rates is entirely
commendable.
We think that the agreement in question, upon its face, does
violate any provision of the Commerce Act, and there is no evidence
in the case which shows that in fact there has been any such
violation.
The decree of the Circuit Court is reversed and the case
remanded with instructions to dismiss the bill.
Reversed, etc.
