1. When a joint through rate, maintained by a trunk line and an
independent connection, though not unreasonable in itself,
Page 263 U. S. 516
undue prejudice to a shipper on the connection in view of lower
through rates for the same commodity from competing points in the
same territory over the trunk line and its branches and other
independent connections, both the trunk line and the other
participant in the high rate participate in the unjust
discrimination, and may be required by an order of the Interstate
Commerce Commission to remove the discrimination. P. 263 U. S.
2. A discrimination in rates is not illegal under § 3 of the
Interstate Commerce Act unless it is unjust. P. 263 U. S.
3. The fact that preferential rates on traffic originating from
some of its connections are given by a carrier in order to retain
and increase its business may relieve it from any charge of
favoritism or malice, but it will not justify a resulting unjust
discrimination. P. 263 U. S.
4. A difference in rates is not illegal unless shown not to be
justified by the cost and value of the respective services rendered
and by other transportation conditions. P. 263 U. S.
5. The fact that a rate is inherently reasonable and that a
lower rate from competing points is not shown to be unreasonably
low does not establish that the discrimination is just.
6. A blanket rate from points on a trunk line was made
applicable from points on some only of its connections through
shrinkage or absorptions allowed the connecting carriers by the
trunk line, with resulting prejudice to a shipper on another
connection in the same territory to which the privilege was not
that the fact that the preferential rate
was for the purpose of developing traffic on the main carriers
lines, or of securing competitive traffic, did not establish the
innocence of the discrimination as a matter of law, but was one
only of several proven factors to be weighed by the Interstate
Commerce Commission, and that the Commission's finding of unjust
discrimination, based on a consideration of them all, was
7. Such a decision of the Commission is not an attempted
substitution of the Commission's policy of ratemaking for that of
the carrier. P. 263 U. S.
8. An order of the Commission that a trunk line and short line,
participating in a joint rate, desist from resulting
discrimination, but which may be satisfied by raising other
competing rates of the trunk line or by reducing its division of
the joint rate complained of, is not subject to the objection that
it will have a confiscatory effect upon the short line. P.
263 U. S.
Page 263 U. S. 517
9. An agreement of a shipper to ship all his products over a
railroad is not a continuing assent to the rates in effect when it
is made. P. 263 U. S.
10. The power of the Commission to remove unjust discrimination
applies to a through rate consisting of a combination of locals, as
well as to a joint through rate. Id.
No. 40, decree reversed.
No. 38, decree affirmed.
Appeals from decrees of the district court in suits to enjoin
enforcement of orders of the Interstate Commerce Commission. In the
first case, there was a perpetual injunction; in the second, the
bill was dismissed.
MR. JUSTICE BRANDEIS delivered the opinion of the Court.
These cases, brought to set aside orders of the Interstate
Commerce Commission, were argued together, and present, in the
main, the same questions of law. In
Page 263 U. S. 518
each, carriers who were found to have unjustly discriminated
against shippers of lumber located on an independent short line
were ordered by the Commission to cease and desist from charging
them higher through rates than were contemporaneously charged for
like services from other points within what is called blanket
territory. [Footnote 1
case was heard before three judges on plaintiff's motion for a
preliminary injunction, on defendant's motion to dismiss the bill
for want of equity, and on final hearing. In each, the whole record
before the Commission was introduced. In No. 40, the Federal Court
for Southern Mississippi perpetually enjoined the enforcement of
the order issued by the Commission in Swift Lumber Co. v. Fernwood
& Gulf R. Co., 61 I.C.C. 485. In No. 38, the Federal Court for
Wyoming dismissed the bill, thus sustaining the order issued for
the Commission in Pioneer Lumber Co. v. Director General, 64 I.C.C.
485. Each case is here on direct appeal under the Act of October
22, 1913, c. 32, 38 Stat. 208, 220.
The facts in No. 40 present most of the questions of law
requiring discussion. The so-called blanket territory, which
extends south from Jackson, Mississippi, to the Gulf of Mexico
(about 200 miles), and from the Mississippi river into Alabama,
produces yellow pine lumber in quantity. Through this territory,
the Illinois Central Railroad extends from New Orleans to Jackson
and thence to the Ohio River crossings and leading lumber markets
of the North. Partly by its main line, partly also by branches, and
partly by connections with independent lines, it serves a large
percentage of the lumber mills in the territory. From all these
points on the
Page 263 U. S. 519
Illinois Central main line, from all on its branches, from all
on three independent short lines which connect indirectly with it,
and from all on the Mississippi Central (a longer independent line
which crosses it running east and west), the carriers have
established the same through lumber rates to the Northern markets
regardless of the varying distances within the blanket territory.
At Fernwood, Mississippi, a little south of its Monticello branch,
the Illinois Central connects with the Fernwood & Gulf, an
independent short line, on which the Swift Lumber Company has a
mill at Knoxo. The distance from Knoxo to the junction is 27 miles.
The joint through rate from Knoxo via Fernwood to Northern points,
voluntarily established by these carriers, is 2 cents per 100
pounds higher than the rate from Fernwood, or any other point
within the so-called blanket territory on the Illinois Central main
or branch lines or on the connections mentioned above. The distance
to the Northern markets from many of the points on these lines is
much greater than the distance from Knoxo, which lies near the
center of the so-called blanket territory.
The Swift Lumber Company instituted proceedings before the
Commission against the Illinois Central, the Fernwood & Gulf,
and connecting carriers in which it attacked the higher rates from
Knoxo both as unreasonable, under § 1 of the Act to Regulate
Commerce, and as unjustly discriminatory under § 3. The Commission
found that the rates from Knoxo were not unreasonable, but that
they subject the Lumber Company to undue prejudice in view of the
lower rates so given competing points within the so-called blanket
territory. The order directed the carriers "according as they
participate in the transportation . . . , to cease and desist" from
the discrimination found. All the carriers except the Illinois
Central and the Fernwood & Gulf acquiesced in the order.
Page 263 U. S. 520
These two joined as plaintiffs in this suit, and urge on several
grounds that the order is void.
It is contended that the order exceeds the
powers of the Commission. The argument is that a carrier cannot be
held to have participated in an unjust discrimination unless it is
a party both to the rate by which a preference has been given to
others and to the higher rate which is given to the complainant;
that the Fernwood & Gulf did not participate in the
discrimination complained of, since it did not join in the lower
rates from other points by which the Swift Lumber Company claims to
be prejudiced, and hence that it cannot be required to cooperate
with the Illinois Central in reducing rates from Knoxo which have
been found to be inherently reasonable; that, on the other hand,
the Illinois Central cannot be held to have subjected the Swift
Lumber Company to undue prejudice, since Knoxo is not on its own
lines, and it is not in a position to remove, by its own act, the
discrimination complained of. Neither proposition is sound.
Proceedings to remove unjust discrimination are aimed directly only
at the relation of rates. By joining with the Illinois Central in
establishing the prejudicial through rate from Knoxo, the Fernwood
& Gulf became as much a party to the discrimination practiced
as if it had joined also in the lower rates to other points which
are alleged to be unduly preferential. Compare St. Louis
Southwestern Ry. Co. v. United States, 245 U.
, 245 U. S. 144
If such were not the law, relief on the ground of discrimination
could never be had against preferential rates given by a great
railway system to points on its own lines which result in undue
prejudice to shippers on short lines connecting with it. [Footnote 2
] Moreover, it is not true
that the Illinois Central cannot
Page 263 U. S. 521
remove the discrimination without the cooperation of the
Fernwood & Gulf. The order leaves the carriers free to remove
the discrimination either by making the Knoxo rate as low as that
from Fernwood, or by raising the rate from Fernwood, or by giving
both an intermediate rate. American Express Co. v.
Caldwell, 244 U. S. 617
244 U. S. 624
The Illinois Central, acting alone, is in a position to raise the
rate from Fernwood. For its main line extends from there to the
Ohio River crossings, the rate-breaking point. [Footnote 3
It is contended that the order of the
Commission is unsustained by proof. That there is discrimination
against Knoxo is not denied. The rates charged from that station
are higher than those charged from competing points within the
so-called blanket territory for transportation of the same
commodity, to the same market, for the same or longer distances,
mainly over the same route, some of these competing points being
located on the Illinois Central main line, some on its branch
lines, and some on independent lines. But mere discrimination does
not render a rate illegal under § 3. Only such rates as involve
unjust discrimination are obnoxious to that section.
Manufacturers' Ry. Co. v. United States, 246 U.
, 246 U. S. 481
There is no claim that any one of the evidential facts found by the
Commission, and relied upon to show
Page 263 U. S. 522
that the discrimination was unjust, is without adequate
supporting evidence. The argument is that these facts, even when
supplemented by others appearing in the evidence, do not warrant
the finding of the ultimate fact, that the higher rates from Knoxo
are unduly prejudicial to the Swift Lumber Company to the extent
that they exceed the blanket basis of rates from Fernwood (the
junction with the Illinois Central) and other points.
A carrier is entitled to initiate rates, and, in this
connection, to adopt such policy of ratemaking as to it seems wise.
Interstate Commerce Commission v. Chicago Great Western
Ry., 209 U. S. 108
209 U. S.
-119; Southern Pacific Co. v. Interstate Commerce
Commission, 219 U. S. 433
Interstate Commerce Commission v. Louisville & Nashville R.
Co., 227 U. S. 88
227 U. S. 92
the exercise of this right, the Illinois Central adopted the policy
of establishing blanket, or group, rates on its main and branch
lines, by which the remoter lumber producing points were granted,
regardless of distances within the territory, the same rates to
Northern markets as points located nearer. In the exercise of the
same right to initiate rates, the Illinois Central adopted also the
policy of granting to connecting independent short lines, and to
longer connecting carriers, an allowance (called shrinkage or
absorption) by reason of which the Illinois Central's division of
the through rate on traffic originating on connections is reduced,
by the amount of the allowance, to less than its rate for freight
originating on its own line at the junction point. [Footnote 4
] The Illinois Central insists that
its general policy is not to grant to points on connecting lines
the blanket or junction point rate, and that it departs from this
policy only when it is compelled by competition to do so. Where the
through rate is the
Page 263 U. S. 523
same from points on the connecting line as it is from the
junction, the share or division of the connecting carrier consists
wholly of this absorption. Where the through rate from points on
the connection is higher than the junction point rate, the
connecting line receives as its share an additional amount
consisting of the difference between these rates. This additional
amount is called the arbitrary, or differential. Thus, the Fernwood
& Gulf receives a division of 4 cents per 100 pounds,
consisting of a 2-cent absorption and a 2-cent arbitrary. [Footnote 5
The Illinois Central argues that the discrimination in charging
a higher rate from Knoxo cannot be deemed unjust, since the
preferential rate to other points was granted solely for the
purpose of increasing its own business, and that the lower rate
from Knoxo was denied solely in order to preserve its own revenues.
In other words, it granted the blanket rate to all points on its
own lines in order to develop business originating thereon. It
declined to grant the blanket rate (and to increase the absorption)
where the connecting line was wholly dependent upon it, and traffic
originating thereon could be secured in spite of the higher rate.
It granted the blanket rate to points on connection lines (and
increased their absorptions) where this was deemed necessary in
order to secure traffic which might otherwise go to
The effort of a carrier to obtain more business, and to retain
that which it had secured, proceeds from the motive of
self-interest which is recognized as legitimate, and the fact that
preferential rates were given only for this purpose relieves the
carrier from any charge of
Page 263 U. S. 524
favoritism or malice. But preferences may inflict undue
prejudice, though the carrier's motives in granting them are
honest. Interstate Commerce Commission v. Chicago Great Western
Ry., 209 U. S. 108
209 U. S. 122
Self-interest of the carrier may not override the requirement of
equality in rates. It is true that the law does not attempt to
equalize opportunities among localities, Interstate Commerce
Commission v. Diffenbaugh, 222 U. S. 42
that the advantage which comes to a shipper merely as a result of
the position of his plant does not constitute an illegal
preference, Ellis v. Interstate Commerce Commission,
237 U. S. 434
237 U. S. 445
To bring a difference in rates within the prohibition of § 3, it
must be shown that the discrimination practiced is unjust when
measured by the transportation standard. In other words, the
difference in rates cannot be held illegal unless it is shown that
it is not justified by the cost of the respective services, by
their values, or by other transportation conditions. But the mere
fact that the Knoxo rate is inherently reasonable, and that the
rate from competing points is not shown to be unreasonably low,
does not establish that the discrimination is just. Both rates may
lie within the zone of reasonableness and yet result in undue
prejudice. American Express Co. v. Caldwell, 244 U.
, 244 U. S.
Every factor urged by the carriers as justifying the higher rate
from Knoxo appears to have been considered by the Commission. How
much weight shall be given to each must necessarily be left to it.
The Commission found, among other things, that the cost of the
service from Knoxo was not greater than the cost of the
transportation from many other points which enjoyed the lower rate;
that the value of the service was the same, and that other traffic
conditions incident to shipment from Knoxo were so similar to those
of shipments from other points enjoying a lower rate that the
prejudice to which
Page 263 U. S. 525
the Swift Lumber Company had been subjected was undue and
unreasonable. The innocent character of the discrimination
practiced by the Illinois Central was not established, as a matter
of law, by showing that the preferential rate was given to others
for the purpose of developing traffic on the carrier's own lines or
of securing competitive traffic. These were factors to be
considered by the Commission, but they did not preclude a finding
that the discrimination practiced is unjust. Such was the law even
before Transportation Act 1920. Texas & Pacific Ry. v.
Interstate Commerce Commission, 162 U.
, 162 U. S.
-220; Interstate Commerce Commission v. Alabama
Midland Ry., 168 U. S. 144
168 U. S. 167
168 U. S. 175
In view of the policy and provisions of that statute, the
Commission may properly have concluded that the carrier's desire to
originate traffic on its own lines, or to take traffic from a
competitor, should not be given as much weight in determining the
justness of a discrimination against a locality as theretofore, for
now the interests of the individual carrier must yield in many
respects to the public need, Railroad Commission of Wisconsin
v. Chicago, Burlington & Quincy R. Co., 257 U.
; New England Divisions Case,
261 U. S. 184
the newly conferred power to grant relief against rates
unreasonably low many afford protection against injurious rate
policies of a competitor, which were theretofore uncontrollable.
The order of the Commission was not an attempt to establish its own
policy of ratemaking. [Footnote
] See Southern Pacific Co. v. Interstate Commerce
Commission, 219 U. S. 433
Interstate Commerce Commission v. Union Pacific R. Co.,
222 U. S. 541
222 U. S. 554
It merely expressed the judgment of the Commission that existing
rates subjected shippers from Knoxo
Page 263 U. S. 526
to undue prejudice. The judgment so exercised, being supported
by ample evidence, is conclusive. [Footnote 7
The Fernwood & Gulf contends that the order
is obnoxious to the due process clause. The argument is that even
its present division of 4 cents per 100 pounds is unremunerative,
and that a smaller return would be confiscatory. To this argument
there are several answers. The order does not require a reduction
of the through rate. It may be complied with by raising the rate
from Fernwood and other points now being preferred. Moreover, a
reduction of the through rate would not necessarily result in
decreasing the amount of the short line's division. The Commission
may, upon application, accord to the Fernwood & Gulf the
appropriate division. [Footnote
] The New England Divisions Case, 261 U.
. There is no suggestion that the resulting
reduction of the Illinois Central's division would result in
rendering the rate confiscatory as to it.
Page 263 U. S. 527
The Fernwood & Gulf contends also that the
Swift Lumber Company is estopped from questioning the rates
applicable to it. The argument is that, when it acquired the mill
property from a predecessor of the short line, an agreement
provided that all lumber produced should be shipped over the line,
and that the 2-cent arbitrary was then known to be in effect, and
was thereby assented to for all time. The contract, which is silent
as to rates, is not susceptible of the construction urged. We have
therefore no occasion to consider whether such an agreement would
be valid, and what its effect would be. Compare Southern
Pacific Co. v. Interstate Commerce Commission, 219 U.
; United States v. Union Stock Yard,
226 U. S. 286
O'Keefe v. United States, 240 U.
In No. 38, where the short line alone seeks to set aside the
Commission's order, this additional fact requires mention. The rate
to the short line points is not a joint rate, but a combination of
the trunk line rate to the junction and the short line local rate.
The distinction is without legal significance in this connection. A
through route was established, and the transportation is performed
as the result of this arrangement between the carriers, express or
implied. [Footnote 9
prejudice may be inflicted as effectively by a through rate which
is a combination of locals as by a joint through rate. The power of
the Commission to remove the unjust discrimination exists in both
classes of cases.
In No. 40, decree reversed.
In No. 38, decree affirmed.
Compare St. Louis Southwestern Ry. Co. v. United
States, 245 U. S. 136
245 U. S. 138
note 1. The carriers insist that the rates are not properly called
"blanket rates," since they do not apply to all points within the
territory, and that they should be termed "group rates."
The cases relied upon by the carriers are not inconsistent with
this conclusion. In Central R. Co. of New Jersey v. United
States, 257 U. S. 247
creosoting privilege was not a part of the joint tariff. It was an
item in the local tariff granted without the concurrence of the
carriers before the Commission, and the revenues derived therefrom
were not shared by them. In Philadelphia & Reading Ry. Co.
v. United States, 240 U. S. 334
240 U. S. 340
it was pointed out by the Court that
"undue discrimination against itself or the locality of its
plant, as alleged by the cement company [the petitioner before the
Commission] was not found; the community declared to be prejudiced
by established conditions [Jersey City] had offered no complaint
and was not party to the proceedings."
In Penn Refining Co. v. Western New York and Pennsylvania R.
Co., 208 U. S. 208
208 U. S.
-222, it was sought to hold one of the connecting
carriers liable for what the Court deemed to be the act of
See St. Louis Southwestern Ry. Co. v. United States,
245 U. S. 136
245 U. S. 139
, note 2.
See The Tap Line Cases, 234 U. S.
; Louisiana & Pine Bluff Ry. Co. v. United
States, 257 U. S. 114
As a division of only 2 cents is ordinarily deemed inadequate
compensation by a connecting line, and as the trunk line is
naturally indisposed to submit to a larger shrinkage of its own
division, the through rate is commonly increased by an arbitrary if
the traffic will bear it.
Idaho v. Director General, 66 I.C.C. 330,
Idaho v. Oregon Short Line, 83 I.C.C. 4.
Interstate Commerce Commission v. Illinois Central R.
Co., 215 U. S. 452
215 U. S. 470
Interstate Commerce Commission v. Delaware, Lackawanna &
Western Ry. Co., 220 U. S. 235
220 U. S. 251
United States v. Louisville & Nashville R. Co.,
235 U. S. 314
235 U. S. 320
Manufacturers' Ry. Co. v. United States, 246 U.
, 246 U. S. 481
Seaboard Air Line Ry. Co. v. United States, 254 U. S.
, 254 U. S.
In East Tennessee, Virginia & Georgia Ry. Co. v.
Interstate Commerce Commission, 181 U. S.
, 181 U. S. 11
181 U. S. 23
and Interstate Commerce Commission v. Louisville &
Nashville R. Co., 190 U. S. 273
orders of the Commission were only prima facie
facts found by them, since they were entered before the Acts of
June 29, 1906, c. 3591, 34 Stat. 584, 589, 591, and the Act of June
18, 1910, c. 309, 36 Stat. 539, 551-554. See Proctor &
Gamble Co. v. United States, 225 U. S. 282
225 U. S.
-298; Kentucky & Indiana Bridge Co. v.
Louisville & Nashville R. Co.,
37 F. 567, 613. Moreover,
those cases involved primarily a question arising under the fourth
This was done, after removing the unjust discrimination, in
McGowan-Foshee Lumber Co. v. Florida, Alabama & Gulf R. Co., 43
I.C.C. 581, 51 I.C.C. 317.
See St. Louis Southwestern Ry. Co. v. United States,
245 U. S. 136
245 U. S. 139