The plaintiff railroad offered standard rates on wheat over its
line from Dodge City to Kansas City, a primary grain market, and
from Kansas City to the Gulf, and a through rate from Dodge City
via Kansas City to the Gulf which was lower than the sum of the
standard rates. Under the practice known as "through rates with
transit privilege," owners of wheat which, within a certain period,
had been shipped from Dodge City to Kansas City without other
destination and for the standard rate between those points, could
reship the same or substituted wheat from Kansas City to the Gulf
by paying only a "proportional rate" or "balance of the through
rate," allowing them a discount equal to the difference between the
through rate from Dodge City to the Gulf and the sum of the
standard rates. To overcome the competition of a railroad with a
line from Kansas City to the Gulf which offered a lower rate from
Kansas City to the Gulf on
Page 279 U. S. 769
wheat which had originated in Dodge City, the plaintiff filed a
tariff increasing its standard rate from Dodge City to Kansas City
applicable only to such wheat as should later be reshipped from
Kansas City to the Gulf over the competing line, and it contended
that the Interstate Commerce Commission was without power to set
aside the increase, though unreasonable and discriminatory,
because, by so doing, it compelled the plaintiff to participate in
a through route and rate with the competing carrier, and thereby
short-haul itself, in disregard of the limitations imposed by
paragraph of § 15 of the Interstate Commerce Act on the
Commission's power to establish through routes.
Held:
1. That, in ordering cancellation of the proposed increase, the
Commission exercised only its function of determining the
reasonableness of rates. P.
279 U. S.
776.
2. The Commission's power to declare rates unreasonable applies
alike to all rates, be they joint, local, or proportional, and in
controversies involving through rates, it may, if it sees fit, deal
with one factor only of the combination of rates which make up the
through rates. P.
279 U. S.
776.
3. In conferring the restricted power to establish through
routes, Congress did not intend to limit the theretofore
unrestricted power of the Commission to pass upon the
reasonableness of rates. P.
279 U. S.
777.
4. The inbound and outbound movements of the Kansas City grain
to which the proportional rate applied were wholly independent and
distinct, and the fiction of a "through rate with transit
privilege" could not convert them legally into a through movement
from Dodge City to the Gulf. P.
279 U. S.
777.
5. There is no rule of law or practice which gives to a carrier
the right to recapture traffic which it originated. P.
279 U. S.
780.
6. A finding of the Commission that a rate is unreasonable is
binding on this Court when supported by evidence. P.
279 U. S. 781.
7. In a suit to set aside an order of the Commission cancelling
a rate proposed by the plaintiff carrier, failure of the Commission
to suspend and cancel a rate of a competing carrier is not subject
to review. P.
279 U. S. 781.
33 F.2d 345 affirmed.
Appeal from a decree of a district court of three judges denying
an injunction and dismissing the bill in a suit to set aside an
order of the Interstate Commerce Commission cancelling proposed
tariffs.
Page 279 U. S. 770
MR. JUSTICE BRANDEIS delivered the opinion of the Court.
This suit was brought in the federal court for Northern Illinois
under the Urgent Deficiencies Act of October 22, 1913, c. 32, 38
Stat. 208, 220 to enjoin and annul an order of the Interstate
Commerce Commission entered July 6, 1927. That order directed the
Atchison, Topeka & Santa Fe and two other railroads to cancel
proposed tariffs increasing the respective grain rates from
numerous country points in Colorado, Kansas, and Nebraska to Kansas
City, Missouri, and Wichita, Kansas. Grain and Grain Products from
Colorado, Kansas, and Nebraska to Gulf Ports for Export, 129 I.C.C.
261. Those three carriers are the plaintiffs. Besides the United
States and the Commission, the Kansas City Southern and certain
other carriers, which compete with the plaintiffs for the grain
export traffic from Kansas City to Gulf ports, are the defendants.
The district court, three judges sitting, denied the injunction and
dismissed the bill. 33 F.2d 345. The case is here on direct appeal
from the final decree. We are of opinion that it should be
affirmed.
The legal question presented is not dependent upon the fact that
the tariffs challenged are those of three independent
Page 279 U. S. 771
railroads; nor upon the fact that the rates are different for
wheat than for some other grain; nor upon the fact that the tariff
of each railroad includes differing rates from numerous country
points in each of the three states; nor upon the fact that some of
the rates from those points are for transportation to Kansas City,
and some to Wichita; nor upon the fact that there are several
railroads which, as competitors of the plaintiffs for traffic from
those cities to several Gulf ports, are affected by the rates
challenged. The statement of the facts may therefore be simplified
by limiting it to a single rate of one of the plaintiff carriers
for wheat to Kansas City, and showing the effect of that increased
rate on one of that carrier's competitors for traffic from that
market to a single Gulf port.
The Santa Fe has a line direct from Dodge City, Kansas, to the
Gulf via which its through rate on wheat for export is 47 cents per
100 pounds. It has also a line from Dodge City, via Kansas City, to
the Gulf, on which its through rate, prior to 1924, was 51 cents,
being the sum (or combination) of the local rate from Dodge City to
Kansas City (20.5 cents) and the standard proportional rate from
Kansas City to the Gulf (30.5 cents). [
Footnote 1] Usually the volume of grain in storage at
Kansas City is large, as it is an important primary grain market.
The Kansas City Southern has no line from Dodge City to Kansas
City.
Page 279 U. S. 772
But it has a line from Kansas City to the Gulf, and its standard
proportional rate also is 30.5 cents per 100 pounds. Prior to 1924,
the Southern was in a position to compete on equal terms with the
Santa Fe for the transportation to the Gulf of the grain from Dodge
City on storage in Kansas City. In that year, the Santa Fe reduced
its through rate from Dodge City to the Gulf via Kansas City to 47
cents. Thereby the Santa Fe's net proportional rate from Kansas
City to the Gulf was reduced 4 cents -- that is, from 30.5 cents to
26.5 cents. For, under a practice prevailing at primary grain
markets known as the through rates with transit privilege, one who
reships grain on the same railroad which had brought it into the
market is entitled to reship on what is called the balance of the
through rate. That is, a discount is allowed equal to the
difference between the through rate from the point of its origin to
the destination ultimately selected and the sum of the standard
inbound and outbound rates.
Thus, the Southern was disabled from competing with the Santa Fe
for the transportation from Kansas City to the Gulf of grain in
storage at Kansas City which had come from Dodge City. For the
Santa Fe refused to establish a similar through route via the
Southern from Kansas City, and the Commission did not order it.
Compare St. Louis Southwestern R. Co. v. United States,
245 U. S. 136. The
Southern undertook to help itself. It filed a tariff with what is
called a varying proportional rate, by lowering to 26.5 its own
rate from Kansas City to the Gulf on such grain as had come to
Kansas City from Dodge City. [
Footnote 2] The Santa Fe protested to the Commission
Page 279 U. S. 773
against the Southern's varying proportional rate; but the
Commission refused to suspend it. [
Footnote 3] Then the Santa Fe, in order to exclude the
Southern, filed the tariff here in question, imposing the 4-cent
addition to its Kansas City rate on any Dodge City grain that
should later be reshipped over the Southern's line. It is this
conditional addition of 4 cents to the Dodge City-Kansas City rate
which the Commission ordered cancelled.
The order followed extensive hearings before the Commission, had
after suspension of the tariffs pursuant to paragraph 7 of § 15 of
the Interstate Commerce Act. Since the proposed tariff involved an
increase in the rate, the burden of justifying the increase before
the Commission was imposed upon the carrier by paragraph 7 of § 15,
if applicable. Moreover, to make an additional charge for having
brought merchandise into a city, if it should afterwards be shipped
out, is, on its face, unreasonable. And it is discriminatory to
make that additional charge only
Page 279 U. S. 774
if the outbound shipment is over one of several possible
railroads. The Santa Fe made no attempt to justify the increase. It
contended that the general rules of law concerning reasonableness
of rates are not applicable, and that the Commission lacked power
to order the rate cancelled because, by so doing, it compelled the
Santa Fe to participate in a through route and rate, and thereby
short-haul itself, in disregard of the limitations imposed by
paragraph 4 of § 15 upon the Commission's power to establish
through routes.
Compare United States v. Missouri Pacific R.
Co., 278 U. S. 269.
The Santa Fe, regarding the grain in storage at Kansas City as
tonnage which, although temporarily held in abeyance, is in the
course of a through movement, and, as such, is to be held on its
lines, makes this argument: at the time that the cancelled tariff
was filed, the Santa Fe had a through route on its own lines from
Dodge City via Kansas City to the Gulf, and there existed no
through route from Dodge City to the Gulf via the Southern from
Kansas City. The Santa Fe was therefore legally entitled to carry
to the Gulf at the through rate all Dodge City grain stored at
Kansas City which had been brought in by it. The Southern's varying
proportional rate on Dodge City grain enabled the Southern to
secure some of this grain. The Santa Fe's proposed varying rate was
essential to prevent that invasion of its right not to be
short-hauled on Dodge City grain. By ordering its proposed tariff
cancelled, the Commission made possible a through route via the
Southern which compelled the Santa Fe to short-haul itself. As the
Commission was prohibited by paragraph 4 of § 15 from establishing
a through route via the Southern, which would short-haul the Santa
Fe, Congress must have intended to deny to it also the power to
cancel as unreasonable a tariff which was essential to the
preservation of the Santa Fe's long haul.
Page 279 U. S. 775
A supplemental argument is made by the Santa Fe to overcome the
finding of the Commission that, at the time when the tariff here in
question was filed, there already existed (without any order by the
Commission) a through route for grain over the Santa Fe from Dodge
City to Kansas City, and thence to the Gulf via the Southern.
Compare St. Louis Southwestern Ry. Co. v. United States,
245 U. S. 136,
245 U. S. 139;
Virginian Ry. v. United States, 272 U.
S. 658,
272 U. S. 666.
The supplemental argument is this: since the Commission could not
have ordered this through route via the Southern, it could not
prevent the Santa Fe's withdrawing from the same. [
Footnote 4] Its proposed tariff was, in
effect, a withdrawal; for, as the bill alleges, the rates were
"published not for the purpose of facilitating movement via the
routes in connection with which they were published, but were
published by plaintiffs to preclude and prevent movement via such
routes."
We have no occasion to consider the issue of fact whether there
was in existence, when the Santa Fe filed its proposed tariff, a
through route from Dodge City via the Southern from Kansas City;
nor need we consider the issue of law whether, if there was such a
route in existence, the Commission would have been powerless, by
reason of paragraph 4 of § 15, to prevent the Santa Fe's
withdrawal
Page 279 U. S. 776
from it. For we are of opinion that, although the Santa Fe
brought the grain into Kansas City, there is nothing in the
situation which precluded the Commission from cancelling the Santa
Fe's proposed tariff as being unreasonable.
First. In ordering cancellation of the proposed tariff,
the Commission exercised only its function of determining the
reasonableness of rates. It made a rate order to which the matter
or routing was merely an incident. The Santa Fe calls the proposed
rate, by which it undertook to add 4 cents to the Dodge City-Kansas
City rate, if the grain should be reshipped on the Southern,
proportional. To call it proportional is misleading. [
Footnote 5] But, if it were truly a part of a
through rate, the fact would be without legal significance. The
Commission's power to declare rates unreasonable applies alike to
all rates, be they joint, local, or proportional. The Commission
may, and in controversies involving through rates often does, deal
with one factor only of the combination of rates which make up the
through rate, and that factor may be a proportional rate. [
Footnote 6]
The broad power to pass on the reasonableness of rates conferred
upon the Commission in 1887 has not been in terms limited by any
amendatory act. On the other hand, there has been much legislation
designed to make the power more effective. [
Footnote 7] The special power to establish
Page 279 U. S. 777
through routes and joint rates was not conferred until 1906. Act
of June 29, 1906, c. 3591, § 4, 34 Stat. 584. There is not, in that
act as amended (
see United States v. American Ry. Express
Co., 265 U. S. 425,
265 U. S. 430,
note 2), or in any decision of this Court construing it, [
Footnote 8] or in any of the decisions
of the Commission applying it to which attention has been called,
[
Footnote 9] the slightest
basis for the suggestion that, in conferring the restricted power
to establish through routes, Congress intended to limit the
theretofore unrestricted power of the Commission to pass upon the
reasonableness of rates.
Compare Nashville, Chattanooga &
St. Louis Ry. Co. v. Tennessee, 262 U.
S. 318,
262 U. S.
323.
Second. The contention that the Santa Fe's cancelled
tariff was legally part of a through rate is also unsound. The
argument rests upon a fiction -- the fiction of a through rate with
transit privilege. As applied here, the fiction is inconsistent
with every fact of legal significance. When grain is shipped from a
country point to a primary market, its ultimate disposition is
rarely known. Who the owner of the grain will be when it reaches
the primary market is uncertain. It may be sold en route before
arrival there. While stored there, it may be resold several times.
Some of it may be consumed in local flour mills. Most of that
stored in local elevators will probably be shipped out. But, until
the grain is shipped out, it will not be known to what place, or
even in what direction,
Page 279 U. S. 778
or by what railroad, it will be carried. Southern Kansas Grain
Assn. v. Chicago, Rock Island & Pacific Ry. Co., 139 I.C.C.
641, 666. The treatment of substantially all grain coming from the
country point is this: the bill of lading is for a shipment from
the country point to the primary market. There is nothing in any of
the papers connected with that transportation to indicate that the
grain has a destination beyond the primary market. Upon arrival
there, the owner requires delivery to be made at such elevator or
other place as he selects. The freight charges are paid, the amount
being the full local rate for transportation from the country point
to the primary market. [
Footnote
10] The car is then released, and the movement -- called
inbound -- ends.
The practice by which grain shipped to a primary market is
given, when shipped out, the benefit of the low rate which would
normally have applied if the grain had actually been shipped from
the country point through to its ultimate destination antedates the
enactment of the Interstate Commerce Act. Transit Act, 24 I.C.C.
340, 348. The benefit attaching to grain shipped into the primary
market is commonly so broad that it is transferable not only to
another owner of the same grain, but to like grain coming from the
same country point. Thus, the owner of any grain in Kansas City can
get the benefit of the proportional rate out for Dodge City grain
by making proof that he had brought from there into the market,
within the period of 12 months, an equivalent quantity of like
grain. This he may do although it appears that the grain which he
brought in was actually consumed
Page 279 U. S. 779
in Kansas City. [
Footnote
11] Alleged Unlawful Rates and Practices in the Transportation
of Grain and Grain Products, 7 I.C.C. 240, 247; In re Substitution
of Tonnage at Transit Points, 18 I.C.C. 280; Transit Case, 24
I.C.C. 340. [
Footnote 12]
The practice prevails often, even where the haul to the primary
market is out of line -- that is, is not on the direct route from
the point of origin to the point which ultimately becomes the
destination of the grain.
When the outbound shipment from Kansas City is made, the grain
goes forward on a new bill of lading at the balance of the through
rate. Obviously this practice cannot convert the independent
shipment of grain from Kansas City to the Gulf via the Southern
into a through movement from Dodge City to the Gulf. The two
transportation services are not only entirely distinct, but they
are often rendered in respect to wholly different merchandise. This
convenient fiction is employed as a justification
Page 279 U. S. 780
for the discrimination involved in giving rates lower than those
ordinarily applicable to the service outbound. It is, of course,
true that a carload of grain might be shipped from Dodge City to
the Gulf as a through shipment, although, under the transit
privilege, it is to break bulk at Kansas City, and the grain is not
only to be stored there, but is to be treated or even converted
into flour, before it proceeds on its journey to the Gulf.
See
Central R. Co. v. United States, 257 U.
S. 247.
Compare Texas & New Orleans R. Co. v.
Sabine Tram Co., 227 U. S. 111;
Baltimore & Ohio Southwestern R. Co. v. Settle,
260 U. S. 166;
Carson Petroleum Co. v. Vial, 279 U. S.
95. But the grain with which the carriers are here
concerned is not that so shipped from Dodge City to the Gulf. It is
grain whose only destination, when shipped from Dodge City, was
Kansas City. Such reshipment under the transit privilege is also
entirely unlike the through shipment effected under the
reconsignment or diversion privilege.
See Reconsignment
Case, 47 I.C.C. 590; Wood v. New York, Philadelphia & Norfolk
R. Co., 53 I.C.C. 183, 185; Carolina Portland Cement Co. v.
Director General, 83 I.C.C. 388, 391.
The grain, while in storage at Kansas City, is, in every sense,
free grain. When delivered to elevators in Kansas City, the Santa
Fe's charges for the carriage to Kansas City were fully paid. Its
legal interest therein ended then. If the consignee or his
successor in title should at any time thereafter conclude to ship
elsewhere grain which he had brought into Kansas City, he was at
liberty to select not only the destination, but the carrier by
which it should be transported. And every railroad serving Kansas
City had like liberty to compete for the traffic. There is no rule
of law or practice which gives to a carrier the right to recapture
traffic which it originated.
Compare United States v. Illinois
Central R. Co., 263 U. S. 515,
263 U. S. 523;
United States v. American Ry.
Express Co., 265 U.S.
Page 279 U. S. 781
425. Moreover, here, the competition is not for transportation
of the identical merchandise.
Third. In this Court, there is a faint contention that
the evidence before the Commission did not support the finding of
unreasonableness. It was not made either before the Commission or
the district court, and is clearly unfounded.
See Virginian Ry.
Co. v. United States, 272 U. S. 658,
272 U. S. 665;
Assigned Car Cases, 274 U. S. 564,
274 U. S. 580.
There is also a suggestion that the Commission should have
suspended and ordered cancelled the Southern's varying proportional
rate. Its action in that respect is not subject to review in this
proceeding.
Affirmed.
[
Footnote 1]
A through rate is ordinarily lower than the combination of the
local rates. When a through rate is made by combination of rates
for intermediate distances, the rate for the later link in the
shipment is, when lower than the local, spoken of as a proportional
rate.
See Hocking Valley R. Co. v. Lackawanna Coal & Lumber
Co., 224 F. 930, 931;
also, Railroad Commissioners of
Kansas v. A. T. & S.F. Ry. Co., 22 I.C.C. 407; Swift & Co.
v. Director General, 66 I.C.C. 409; Kansas City Board of Trade v.
Atchison, Topeka & Santa Fe Ry. Co., 69 I.C.C. 185; Rates on
Bunker Coal, 73 I.C.C. 62; Lumber from San Francisco Bay Points, 78
I.C.C. 760; Wichita Chamber of Commerce v. Alabama & Vicksburg
Ry. Co., 109 I.C.C. 368.
[
Footnote 2]
This varying proportional rate was less advantageous to the
Southern than if a joint rate had been established by agreement
with the Santa Fe. For, in acting alone, the Southern was obliged
to absorb the whole of the 4-cent reduction, whereas, if the Santa
Fe had joined with the Southern in establishing a through route and
joint rate, the 4-cent reduction would presumably have been divided
between the two carriers.
[
Footnote 3]
Varying proportional rates had been approved in Export Rates on
Grain, 31 I.C.C. 616. The occasion for such rates and their
operation are described in Southern Kansas Grain Association v.
Chicago, Rock Island & Pacific Ry. Co., 139 I.C.C. 641,
653.
"The method of publication may be briefly explained by the
statement that proportional rates are provided from Kansas City in
varying amounts, depending upon the point of origin of the grain,
which, when added to the local rates into Kansas City, are equal to
the specific rates published by the lines which originate the
grain. If these varying proportionals or balances were not
maintained, the lines which serve Kansas City, but not the grain
fields, would be compelled to apply the flat proportional rate of
30.5 cents from that market to the Gulf ports. That flat
proportional exceeds the balances maintained by other lines, and
therefore would attract little, if any, traffic. By providing these
varying proportionals, the lines serving Kansas City have placed
themselves on a competitive basis for the outbound movement of
grain stored at that point."
Compare Grain and Grain Products from Kansas and
Missouri to Gulf Ports, 115 I.C.C. 153.
[
Footnote 4]
In support of this proposition, the Santa Fe relies upon Marble
Rates from Vermont Points, 29 I.C.C. 607; Ogden Gateway Case, 35
I.C.C. 131; Ocean and Rail Rates to Charlotte, N.C. 38 I.C.C. 405;
West Coast Lumber Mfgs. Assn. U.S. P. & S. Ry. Co., 45 I.C.C.
230; Routing on Sheep from K.C., M. & O. Texas Points, 69
I.C.C. 4; Restrictions in Routings over S.L. & U. R. Co., 115
I.C.C. 357; Port of New York Authority v. Atchison, Topeka &
Santa Fe Ry. Co., 144 I.C.C. 514.
But see Lake & Lake
Rate Cancellations, 42 I.C.C. 513, 516; Western Pacific R. Co. v.
Southern Pacific Co., 55 I.C.C. 71, 73; Routing on Coal from
Western Maryland Ry. Mines, 66 I.C.C. 103; Armour & Co. v. D.,
L. & W. R. Co., 66 I.C.C. 445; Fruits and Vegetables from Texas
Points, 74 I.C.C. 575, 578, 579.
[
Footnote 5]
See note 1
[
Footnote 6]
Compare Cairo Board of Trade v. C., C., C. & St.L.
Ry. Co., 46 I.C.C. 343; Atchison Board of Trade v. A.T. & S.F.
Ry. Co., 80 I.C.C. 350; Basing Rates on Paving Brick, 100 I.C.C.
390.
[
Footnote 7]
Act of June 29, 1906, c. 3591, § 4, 34 Stat. 584; Act of June
18, 1910, § 12, c. 309, 36 Stat. 539; Act of August 9, 1916, c.
301, 39 Stat. 441; Act of August 9, 1917, c. 50, § 4, 40 Stat. 270;
Act of February 28, 1920, c. 91, § 418, 41 Stat. 484; Joint
Resolution, approved January 30, 1925, 43 Stat. 801; Act of March
4, 1927, c. 510, § 2, 44 Stat. 1446.
[
Footnote 8]
See Interstate Commerce Commission v. Northern Pacific
Ry., 216 U. S. 538;
Louisville & Nashville R. Co. v. United States,
238 U. S. 1,
238 U. S. 18;
St. Louis S.W. Ry. Co. v. United States, 245 U.
S. 136;
Manufacturers' Ry. Co. v. United
States, 246 U. S. 457;
New England Divisions Case, 261 U.
S. 184;
United States v. Illinois Central R.
Co., 263 U. S. 515;
United States v. Missouri Pacific R. Co., 278 U.
S. 269.
[
Footnote 9]
[
Footnote 10]
If the then owner has directed delivery of the car to some local
elevator, not on the line of the carrier which brought the grain to
Kansas City, he pays the switching charge.
[
Footnote 11]
The outbound proportional as so reduced is spoken of as the
transit balance. The proof that the shipper brought grain into the
market entitling him to the reduction is made by presentation of
what is called "expense bills." This substitution has by some
carriers been extended to grain coming from other country points
with rates equally favorable to the carrier. The validity of that
practice has at times been questioned.
See In re
Substitution of Tonnage at Transit Points, 18 I.C.C. 280, 284, 285.
Compare Alleged Unlawful Rates, 7 I.C.C. 240, 244; Transit
Case, 24 I.C.C. 340, 350; Lathrop-Marshall Grain Co. v. Chicago
& Northwestern Ry. Co., 144 I.C.C. 227, 228. As to ratebreaking
points,
see Wichita Board of Trade v. Abilene &
Southern Ry. Co., 29 I.C.C. 376; Mississippi R. Co. Commission v.
Alabama & Vicksburg R. Co., 93 I.C.C. 435, 444.
[
Footnote 12]
Compare Nonapplication of Transit Privileges on
Deficiencies in Weight of Grain, 69 I.C.C.19; Southern Kansas Grain
Assn. v. Chicago, Rock Island & Pacific Ry. Co., 139 I.C.C.
641, 646; Lathrop-Marshall Grain Co. v. Chicago & Northwestern
Ry. Co., 144 I.C.C. 227; Omaha Corporation Commission v. Abilene
& Southern Ry. Co., 148 I.C.C. 316, 320.