The Interstate Commerce Commission, in making an investigation
on the complaint of a shipper, has, in the public interest, the
power, disembarrassed by any supposed admissions contained in the
statement of the complaint, to consider the whole subject and the
operation of the new classification complained of in the entire
territory, also how far its going into effect would be just and
reasonable and would create preferences or engender discriminations
and whether it is in conformity with the requirements of the Act to
Regulate Commerce. And if it finds that the new classification
disturbs the rate relations thereupon existing in the official
classification territory and creates preferences and engenders
discriminations, it may, in order to prevent such result, prohibit
the further enforcement of the changed classification, and an order
to that effect is within the power conferred by Congress on the
Commission, and so held as to an order of the Commission directing
carriers from further enforcing throughout official classification
territory a changed classification in regard to common soap in less
than carload lots.
146 F. 559 affirmed.
The facts are stated in the opinion.
MR. JUSTICE WHITE delivered the opinion of the Court.
Official classification territory embraces that portion of the
United States lying between Canada on the north, the Atlantic
Page 206 U. S. 143
Ocean on the east, the Potomac and Ohio Rivers on the south, and
the Mississippi River on the west. This territory includes what is
known as Central Freight Association territory and Trunk Line
territory, both being governed by the official classification. The
Central Freight Association territory comprises the area west of
Pittsburgh and Buffalo, including the Lower Peninsula of Michigan
and east of a line from Chicago to St. Louis, the Mississippi River
from St. Louis to Cairo, and north of the Ohio River. Trunk Line
territory lies north of the Potomac River and east of Pittsburgh
and Buffalo. Whilst official classification governed throughout the
whole of official classification territory, the rates throughout
the whole of the official classification territory were not
uniform, because of a difference of rates prevailing in the
subdivision -- that is, in the Central Freight and Trunk Line
territory. Thus, although on shipments from points in the Central
Freight Association territory to points in the Trunk Line territory
or
vice versa, rates were the same for similar distances,
yet, on shipments between termini wholly within one or the other of
these territories, the rates varied because of the different rules
governing rates which prevailed as to traffic exclusively moving in
that particular territory.
The first classification adopted by the railroads to control in
the territory above described as official classification territory
was made contemporaneously with the going into effect of the Act to
Regulate Commerce, presumably to comply with that act, and took
effect on April 1, 1887. From that date until January 1, 1900,
nineteen general classifications of freight, numbered from 1 to 19,
were at various times adopted to govern in official classification
territory. The articles embraced in these classifications were
divided into classes, numbered from 1 to 6, the rate increasing as
the number of the class decreased. From the beginning until June 1,
1891, common soap in boxes in carloads was rated as fifth class,
and fourth class for less than carloads. On the last-named date, in
consequence of an order entered by the Commission on a complaint as
to the
Page 206 U. S. 144
classification of common soap in carloads, made by Procter &
Gamble, soap manufacturers, of Cincinnati, Ohio, soap in carloads
was reduced to sixth class. This classification continued to govern
until January 1, 1900, when a new classification, known as official
classification No. 20, went into effect, by virtue of which soap in
carloads was advanced from sixth to fifth class, and soap in less
than carloads was advanced from fourth to third class.
After the going into effect of classification No. 20, the
Procter & Gamble Company, successor to the firm of Procter
& Gamble, complained to the Interstate Commerce Commission in
respect to the alterations made in the classification of common
soap. The petition recited the prior complaint by the firm of
Procter & Gamble and the making, in 1890, of the order which
led to the reduction from fifth to sixth class, heretofore referred
to.
It was charged in the petition that, in official classification
No. 20, there had been an inequitable selection of particular
articles and an increase in the rates upon such articles alone by
the device of changing them from a lower to a higher class, for the
sole purpose of increasing revenues to cover an alleged increase of
cost of operation of the railroads, and that,
"by such course, defendants have subjected and do thereby
subject the said traffic in the articles changed, including common
soap in carloads and less than carload lots, to an undue and
unreasonable prejudice and disadvantage with respect to the traffic
in all of the articles whose classification was not changed in
official classification No. 20."
It was further alleged as follows:
"If there are any qualities and conditions which, though not
considered by defendants at the time of the adoption of said
classification No. 20, justify, nevertheless, the making of any or
part of said changes, the same at any rate do not apply to common
soap in carloads or less than carload lots. The same should at
least have remained in sixth class in carload lots, as ordered by
this Commission as aforesaid, and in fourth class
Page 206 U. S. 145
in less than carload lots, so as to maintain the proper relation
and difference of rates between carload and less than carload lots.
The changing of particular articles as aforesaid from lower to
higher classes for the sole purpose of increasing the revenues of
the railroads interested therein is not a condition or circumstance
justifying the said change of classification in common soap."
It was prayed that an order might be entered requiring the
Cincinnati, Hamilton & Dayton Railroad Company and seven other
named railroad companies, forming various connecting and joint
lines of railroad in the territory governed by official
classification No. 20, to
"cease and desist from refusing to carry common soap in carload
lots at sixth-class rates and from refusing to carry common soap in
less than carload lots at fourth-class rates."
After the filing of the petition and before answer, official
classification No. 20 was in part changed by making a new class,
intermediate classes three and four for soap in less than carload
lots and on some other articles, this class being determined by
giving the articles in question the benefit of a reduction on the
third-class rate of 20 percent, provided the application of the 20
percent reduction did not reduce the charge below the fourth-class
rate, in which event the 20 percent reduction should not be fully
applied, but would only be applied to the extent necessary to make
the rate not less than fourth class. The classification thus
operating is spoken of as 20 percent less than third class, but not
less than fourth class, and we shall speak of it hereafter in this
way.
In the answers filed. the defendants in substance denied that
common soap was improperly classified in official classification
No. 20, originally or as modified, or that an unreasonable or
unlawful rate was exacted for the carriage of soap, or that the
defendants subjected the soap traffic to any undue or unreasonable
prejudice, disadvantage, or discrimination.
The taking of testimony was ended on September 26, 1900, and the
report and opinion of the Commission was filed about
Page 206 U. S. 146
two and a half years thereafter,
viz., on April 10,
1903. 9 I.C.C. 440. As respects putting carload soap in the fifth
class, the Commission refrained both from deciding that the
classification was unreasonable
per se or that its
reasonableness had been affirmatively established. It said:
"We regard the primary and controlling question in this case as
a question of classification -- that is, of relative rates -- and
dispose of it accordingly. In that view, it is sufficient to hold
that carload soap is not improperly placed in the fifth class, and
that fifth-class rates therefore are not shown to be unlawful. So
long as most articles entitled to as low rates as carload soap are
put in the fifth class and required to pay fifth-class rates, we
are not warranted, on the evidence before us, in condemning the
same rating for that commodity. This disposition of the case,
however, will not authorize the retention of carload soap in fifth
class if the classification of other articles with which soap is
compared should be reduced, nor will anything now decided preclude
the Commission from holding, in an appropriate proceeding, that
fifth-class rates in this territory are excessive."
In regard to the less than carload classification of common
soap, after directing attention to the fact that such traffic had
always been fourth class until January 1, 1900, the Commission
said:
"A presumption that such rates are reasonable arises from the
voluntary action of the carriers in keeping those rates in effect
during such a long period, and that presumption has not been
overcome, in our judgment, by the evidence presented in this
case"
It was also found that certain rules set out in the findings
governing carloads of mixed freight, permitting the carriage of the
same at carload rates, coupled with the increase in the
longstanding less than carload rates on soap, operated a strong
discrimination in favor of meat packers who manufactured soap,
against manufacturers who were mainly engaged in manufacturing and
selling soap. So also, the Commission held
Page 206 U. S. 147
that the change as to the classification of soap in less than
carload lots, besides involving the payment of higher rates for
less than carload shipments, had brought about rate relations
different from those previously existing between shippers of soap
in official classification territory. Thus, it was found that, as a
result of the new method of classification, a shipper located at
New York city could ship therefrom to practically all points in New
England and a large number of points in New York State without
paying higher than fourth-class rates, while a shipper located at
Cincinnati could not ship northerly or northwesterly therefrom more
than about sixty miles without paying an advance over fourth-class
rates. The Commission expressly declared that
"the difference of fifteen cents between fifth class and third
class, which was in effect as between carload and less than carload
shipments from January 1, to March 10, 1900,"
the time during which official classification No. 20 prevailed,
before it was modified by the percentage reduction as to soap in
less than carload lots, "would plainly be excessive," and that the
change operated by the percentage modification in question
occasions a difference "which varies according to a given percent,
as applied to different scales of rates, appears to be inequitable
and unjust, and the fact is so found."
In the order as entered, the Commission dismissed so much of the
complaint as referred to the classification of common or laundry
soaps in carloads, and the defendants were
"notified and required to cease and desist, on or before the
15th day of June, 1903, from charging, demanding, collecting, or
receiving for the transportation of common or laundry soap in less
than carload quantities charges or rates per one hundred pounds,
equal to twenty percent less than rates fixed by them for the
transportation of articles, designated as third class in their
established freight classification, called and known as the
'official classification,' which said twenty percent less than
third-class rates for the transportation of common or laundry soap
in less than carloads are found and determined in and
Page 206 U. S. 148
by said report and opinion of the Commission to be in violation
of the Act to Regulate Commerce."
The railway companies not having complied with the order, this
proceeding was commenced by the Commission in the Circuit Court of
the United States for the Southern District of Ohio, under the
direction of the Attorney General of the United States, to enforce
compliance therewith. As respects the alleged unlawful character of
the change in the classification of soap in less than carload
quantities, it was charged in the petition as follows:
"And the petitioner charges that the action of the defendants in
raising the classification of common or laundry soap in less than
carload quantities, on December 29, 1899, from fourth class to
third class, and subsequently on March 10, 1900, changing the
classification of common or laundry soap in less than carload
quantities to twenty percent below third-class rates, the same
being more than fourth-class rates, was in violation of the Act to
Regulate Commerce, and petitioner further charges that the rates
charged by the defendants since December 29, 1899, for the
transportation of common or laundry soap in less than carload
quantities are in violation of section 1 of the Act to Regulate
Commerce in that they are unreasonable and unjust, and said rates
are and have been in violation of section 3 of said act in that
said rates, based upon the classification aforesaid, give an undue
and unreasonable preference or advantage to other descriptions of
traffic, and subject common or laundry soap in less than carloads
to an undue prejudice and disadvantage. The petitioner further
charges that the change in classification by the defendants, made
effective about December 29, 1899, whereby common or laundry soap
in less than carload quantities was changed from fourth to third
class, and the change in classification by the defendants, made
effective March 10, 1900, whereby common or laundry soap in less
than carload quantities was charged more than fourth-class rates,
to-wit, twenty percent below third-class rates, were in violation
of said Act to Regulate Commerce in
Page 206 U. S. 149
that said changes were unreasonable and unjust, and result in
unlawful discrimination and prejudice against common or laundry
soap in less than carload quantities, and against localities in
official classification territory, wherein commodities are produced
and transported, and against producers, shippers, dealers, and
consumers in said territory."
In the various answers filed, issue was taken upon these
averments without any intimation that any of the issues so tendered
were improper to be raised.
The case was heard in the circuit court on the evidence before
the Commission and on additional evidence taken by the defendants,
principally directed to showing the extra cost incident to handling
and transporting freight in general in less than carload lots. The
complainant took no additional testimony. The circuit court decided
in favor of the Commission (146 F. 559), holding that the evidence
not only failed to justify the change of classification complained
of, but established that the advance in rates caused by the
increase in the classification of soap in less than carload
quantities was not only unreasonable and unjust, but also resulted
in an unlawful discrimination and preference between shippers. The
case was then appealed to this Court.
Before considering the fundamental question upon which the order
of the Commission and the decree of the court enforcing it rest, we
dispose of certain propositions relied upon by the railway
companies, because to do so we think will clear the way for an
analysis of the final question arising, stripped of confusing and
irrelevant considerations. We think the Commission, in making an
investigation on the complaint filed by the Procter & Gamble
Company, had the power, in the public interest, disembarrassed by
any supposed admissions contained in the statement of complaint, to
consider the whole subject and the operation of the new
classification in the entire territory, as also how far its going
into effect would be just and reasonable, would create preferences,
or engender discriminations; in other words, its conformity to the
requirements
Page 206 U. S. 150
of the Act to Regulate Commerce. And that such was the view
taken as well by the railway companies as by the Commission during
the course of the investigation before that body is, we think,
beyond doubt. Thus, on the examination of the very first witness
called for the complainant before the Commission, counsel for the
railway companies stated that, in his opinion, the pending
investigation had "no significance except as preliminary to a
judicial proceeding." And when, at the threshold, a question was
raised in the examination of the same witness as to the competency
of evidence on a subject not directly expressed in the complaint,
but bearing upon the effect of the new classification, the
Commission declared it was competent to show the general effect of
such classification in the territory through which it operated. Our
assent to this view of the power of the Commission conclusively, of
course, also disposes of the contention that the court was without
authority to determine the validity of the order of the Commission
by the scope of the Act to Regulate Commerce because of an
admission asserted to exist in the complaint originally filed
before the Commission. It is needless, moreover, to say that the
course of the proceeding before the Commission which we have stated
strips the case of any element of surprise or possible
prejudice.
The Commission, as we have seen, did not find that the rate
promulgated in official classification No. 20, as to soap in
carloads, was unreasonable, preferential, or discriminatory. From
this it is elaborately argued that the order rendered by the
Commission demonstrates its own error. This proceeds upon the
following theory: for a number of years prior to 1891, soap in less
than carloads was in the fourth class, and soap in carloads in the
fifth class. By the order of the Commission, rendered in 1891, as
we have seen, soap in carloads was put in the sixth class. By
official classification No. 20, soap in carloads was moved up to
fifth, and soap in less than carloads from fourth to third class.
The change made by the new classification destroyed the previous
relation, since the
Page 206 U. S. 151
difference between the rates governing third and fifth classes
made by the new was greater than the difference between the fourth
and sixth classes as obtaining in the prior classification. And
this was one of the complaints made by the Procter & Gamble
Company concerning the new classification No. 20. The carriers, it
is said, to meet this objection, adopted, after the complaint was
filed, the modified classification of twenty percent less than
third class, but not less than fourth class. The effect of this
reduction, it is declared, was to cause soap in less than carloads
to occupy just the same relative position to soap in carloads as it
had occupied in the classification existing prior to the going into
effect of official classification No. 20. And as the order of the
Commission did not change the classification as applied to soap in
carloads, made by official classification No. 20, the proposition
is that that body, in holding the modified classification of twenty
percent less than third class, and not less than fourth class, to
be illegal destroyed the relation which the Commission had created
by its former order and which it was the purpose of the complaint
of the Procter & Gamble Company to restore. But the argument
takes for granted the very question for decision -- that is,
whether the modified classification of twenty percent less than
third class, but not less than fourth class operated to continue
the relation between soap in carloads and soap in less than
carloads which prevailed throughout official classification
territory before the making of official classification No. 20. That
the proposition thus begs the whole question is demonstrated by the
mere statement that both the Commission and the court below decided
that official classification No. 20, as modified as to soap in less
than carloads by the percentage order, was unreasonable,
discriminatory, and, by its effect, created preferences among
manufacturers and shippers of soap which had not existed prior to
the new classification. When the real significance of the
proposition is thus seen it amounts to this -- that we must assume
that both the court below and the Commission erroneously decided
the controversy, and, upon this mere assumption,
Page 206 U. S. 152
proceed to reverse their action. But our duty not to assume but
to decide the case cannot be thus obscured.
Laying aside, however, the questions of unreasonableness of
discrimination, and of preference and the consequent destruction,
if these effects exist, by the new classification, of the prior
relation between soap in carloads and less than carload quantities,
let us briefly consider the intrinsic merit of the proposition
relied upon. It is that, prior to official classification No,. 20
there was a just relation between soap in carloads in class 6 and
soap in less than carloads in class 4. Of course, this admits that
such just relation was destroyed by official classification No. 20
as originally put in force, since thereby soap in carload lots was
placed in class 5 and soap in less than carloads in class 3,
between which classes there was a greater difference relatively in
rates than theretofore existed between the two commodities in the
prior classification. This inequality the carriers declare was
obviated after the complaint was filed by the modified
classification as to soap in less than carload lots of twenty
percent less than third class, but not less than fourth class. By
this means, it is insisted, the relation previously existing was
recreated, and any disturbance engendered by official
classification No. 20 was cured. Now, on the surface of things, the
contradiction of the position is manifest. The modified rate on its
face did not propose to put soap in less than carloads throughout
the whole territory in a uniform class, but in the class which
might result from the operation of a percentage basis, controlled
by whether or not the application of the percentage might or might
not take soap out of one class and into another. In other words, it
clearly contemplated that, by the varying rates to which the
percentage would be applied, soap in less than carloads would be
left in portions of the territory in fourth class and in a higher
class in other portions. How, in view of this, it can be in reason
conceived that the admitted uniform classification prevailing prior
to the percentage rule could possibly continue under a
classification inherently wanting in uniformity we fail to
understand.
Page 206 U. S. 153
But put the foregoing considerations aside. The complaint as to
the order of the Commission is that it disturbed the previous
relations between soap in carloads and less than carloads. What was
the order? In effect, it condemned, and directed the carrier to
desist from enforcing, the modified percentage classification. At
the worst view for the carrier the order complained of can only be
taken as persuasively indicating -- and such was the view intimated
in the opinion of the Commission -- the duty of the carriers to
return soap in less than carloads to class 4, in which it had been
uniformly placed prior to the going into effect of official
classification No. 20. The real grievance which the railway
companies must have reduces itself to this -- that the order may
lead to the putting of soap in less than carloads in class 4. But
the very percentage basis which the carriers adopted contemplated
that, in some portions of the territory and somewhere, the effect
of the modification by a percentage reduction might be to put soap
in less than carloads in the fourth class -- else, why the
limitation "but not less than fourth class" contained in the
modified classification.
We are thus brought to the fundamental question, which is did
the percentage classification lead to rates which were
unreasonable, unjustly discriminatory, or unduly preferential? If
either was the result, the order directing the carriers to desist
from enforcing the classification in question was proper.
We take up the related questions of discrimination and
preference because the arising of such consequences from the
classification more saliently appear, and because the demonstration
of such results is, in a measure, elucidated by what we have
previously said. Concerning the discrimination, the Commission
said:
"Whatever the effect of a percentage less than third class for
less than carload shipments of other commodities taking that rating
under the classification may be, it plainly works discrimination
against complainant and other western shippers
Page 206 U. S. 154
of soap in less than carload lots, in favor of their competitors
in the East, when the present situation is compared with that which
existed under the old fourth-class rating."
And this finding was expressly concurred in by the circuit
court. In pointing out the mode by which the modified
classification operated the result in question, the Commission
said:
"These differences are due to variations in the scales of rates
prevailing in the different sections. The twenty percent less than
third-class rating for less than carloads applies to all shippers
of less than carload lots of soap throughout the entire territory,
but it increases some rates more than others, and leaves some as
they were before it was adopted. When, for example, under the
application of that rule, the rate from Cincinnati to Boston is
increased four cents, and the rate from New York to Boston remains
the same, as compared with the fourth-class rates formerly in
effect, it is plain that this method of determining rates upon a
percentage basis operates unequally upon the different shippers of
less than carload quantities in that territory."
The statute gives
prima facie effect to the findings of
the Commission, and, when those findings are concurred in by the
circuit court, we think they should not be interfered with unless
the record establishes that clear and unmistakable error has been
committed.
See Cin., N.O. & Tex.Pac. R. Co. v.
Int.Com.Comm., 162 U. S. 184,
162 U. S. 194;
Louisville &c. Railroad Co. v. Behlmer, 175 U.
S. 648,
175 U. S.
672.
It is insisted that this is a case of that character. How, in
reason, it is urged, can it be said that discrimination or
preference, which did not before exist, was or could be produced
from the mere application to the prior rates of a uniform
percentage reduction? This, however, obscures the fact that the
twenty percent reduction was not uniform, but was that percentage
less than third class, with the qualification "but not less than
fourth class." In other words, the modified percentage reduction
was not a fixed percentage, but was one which might
Page 206 U. S. 155
vary, depending upon the result which would be brought about by
applying the rule. Putting, however, entirely aside this view, let
us consider only the result of the working of the rule on the basis
of twenty percent less than third class. The factors to be
considered are these:
a, the relation existing prior to
the going into effect of official classification No. 20;
b, the operation of that classification over the whole of
official classification territory;
c, the percentage
modification of twenty percent less than third class as to soap in
less than carloads, and also its operation over the whole
territory; and
d, the varying rates of charges in the
separate spheres into which the official classification territory
was divided --
viz., Central Freight Association territory
and the Trunk Line territory. Now testing the matter by these
criteria, does it appear, as contended, that the findings of the
Commission and the court as to resulting preferences and
discrimination are so contradictory and erroneous that we should
disregard them? The proposition that they were must rest upon the
assumption that the application of a fixed percentage reduction to
existing rates, whilst it might vary them, could not possibly
change their relation. But this assumes that the variation which
existed between rates in the different spheres of official
classification territory was only a difference in the sum of the
rate prevailing in one territory from that which prevailed in the
other as to the same class. But this is a mistake, since there was
also a difference in the two separate spheres of territory as to
the margin of difference between the different classes of rates
governing in the two territories. Thus, there was in Central
Freight Association territory not only a higher rate for
commodities in the third class than prevailed in Trunk Line
territory for the same class, but there was also in the Central
Freight Association territory a wider difference between the rates
governing commodities in the third class and those controlling
commodities in the fourth class. It follows from this that where,
in any given case, the twenty percent reduction was applied to the
increased rate which had arisen from having placed less than
Page 206 U. S. 156
carload soap in the third class, if the application of the full
twenty percent reduction was not sufficient to reduce the amount to
the fourth class, the commodity would pay more than fourth class.
In other words, although the commodity in the case stated would get
the full benefit of the twenty percent reduction from the
third-class rate, as giving it that benefit did not reduce to the
fourth-class rate, the commodity would yet pay higher than
fourth-class rate. It also follows that if, in any case where the
twenty percent reduction was applied, the result of applying it,
because of the narrowness of the difference between third and
fourth class in that territory, operated to reduce the same to the
fourth class, the commodity would be left exactly in the class in
which it stood before -- that is, fourth class. By this it
indubitably resulted that in a large degree in one of the
subdivisions of the same classification territory soap in less than
carloads remained in fourth class, and in the other took a higher
class. And this illustrates the correctness of the findings of the
Commission and of the court as to the preference resulting from
applying to a territory governed by one classification a rule of
percentage which, while assuming unity, produced diversity, and
which, while asserting equality of class, engendered inequality. Of
course we confine our decision to the case before us.
And the views heretofore expressed serve also to dispose of the
contention that, although it be conceded that discrimination and
preference was created, yet the carrier should not have been
ordered to desist from enforcing the modified percentage
classification, because the discrimination and preference, if any,
were not the result of the operation of that classification, and,
moreover were not repugnant to the Act to Regulate Commerce because
they were simply the consequence of natural competitive advantages
enjoyed by shippers in the sphere of the Trunk Line territory which
were not possessed by shippers in that other portion of official
classification territory known as Central Freight Association
territory. But this simply involves a restatement of the
misconception which we have
Page 206 U. S. 157
already pointed out. The discriminations and preferences which
the Commission and the court below found to exist were results
arising from the application to the conditions prevailing in
official classification Territory of the modified percentage
classification. In other words, the order forbidding the
enforcement of the modified percentage classification was based on
the finding that that classification disturbed the rate relations
theretofore existing in official classification territory, and
created preferences and discriminations which would disappear if
the further enforcement of the changed classification was
prevented.
This brings us to the final contention made on behalf of the
railway companies --
viz., that the order of the
Commission was not lawful, because not within the power conferred
by the act of Congress. This is, we think, largely disposed of by
what we have previously said as to the nature and scope of the
investigation which the Commission was authorized to make and the
redress which it was empowered to give irrespective of the
particular character of the complaint by which its power may have
been previously invoked. Whatever might be the rule by which to
determine whether an order of the Commission was too general where
the case with which the order dealt involved simply a
discrimination as against an individual, or a discrimination or
preference in favor of or against an individual or a specific
commodity or commodities or localities, or as applied to territory
subject to different classifications, we think it is clear that the
order made in this case was within the competency of the Commission
in view of the nature and character of the wrong found to have been
committed and the redress which that wrong necessitated. Finding,
as the Commission did, that the classification by percentage of
common soap in less than carload lots operating throughout official
classification territory brought about a general disturbance of the
relations previously existing in that territory and created
discriminations and preferences among manufacturers and shippers of
the commodity and between localities in such
Page 206 U. S. 158
territory, we think the Commission was clearly within the
authority conferred by the Act to Regulate Commerce in directing
the carriers to cease and desist from further enforcing the
classification operating such results.
Affirmed.