"It will, therefore, naturally be seen that the railroad official and the shipper are constantly planning to increase the business in which they are jointly interested, to the disadvantage of the rival railroad and shipper. Sometimes these efforts result in serious rate wars until the point in controversy has been adjusted and the competitive rates placed on a basis which is more nearly equitable to all concerned. In many instances these disputes result in arbitration either by the Interstate Commerce Commission or by individuals who may be agreed upon by the contending interests.
"Bearing in mind, therefore, that practically all rate reductions are the result of the effort of the railroad company to serve the shipper, it can easily be seen what the result will be if no advances in rates can be made without practically the approval of the Interstate Commerce Commission. Where it is difficult to restore rates to normal figures, the carrier will be loath to reduce them in order that the shipper dependent upon such carrier may increase, for the time being, his share in the competitive traffic in which he is interested."
ADJUSTMENT OF RATES.—INTERRELATION OF RATES.—PRACTICAL OPERATION OF AMENDMENT.
6. The subject of rate adjustment, even upon a single system of transportation, is one involving great difficulty and perplexity. When this adjustment is considered in its relation to the entire country, to the diversified commercial conditions, as affected by commercial competition, and as controlled by the interrelation of rates, it stands forth as one of the most difficult of all the problems which must be mastered that the transportation agencies may not be injuriously crippled in the performance of their quasi public functions, or the prosperity and development of the commercial interests be retarded by the failure to enact proper, reasonable, and just governmental regulations.
Rates which can be considered alone are comparatively few in number. In the large majority of cases they are interrelated with other rates, and frequently this interrelation exists as between areas widely separated. The rates upon iron and steel from mills within 50 to 100 miles of New York, Philadelphia and Baltimore, whose relations to each other are established by long custom and usage, are based primarily upon the necessity of preserving a fair comparative charge between the different shipping points and destinations. Rates upon coal from central Pennsylvania to tide water have close relations with the rates upon coal from West Virginia to tide water, competing as such coal does, in the same markets. The rates upon lumber from the Michigan markets must bear some relation to the rates on lumber from Louisiana and Georgia to the same market of distribution, although separated by hundreds of miles.
The rates upon grain from western farms to eastern points bear a relation to the other, and upon export grain the rates to the Atlantic seaboard bear a close relation to the rates to the Gulf. The rates upon fruit and vegetable traffic from the various shipping districts, as California on the West and Florida on the South, must be considered in the making of rates. The structure of rates between the territory east of the Mississippi and north of the Ohio River, and the territory east of Pittsburg and Buffalo, including New England, is closely interrelated; as an example, the rates between Chicago and New York take a percentage of the Chicago rate from all points west of Pittsburg and Buffalo. The principle of the interrelation of rates has frequently been recognized in the decisions of the Interstate Commerce Commission.
In the interest of the manufacturer there is a very important relationship between rates upon different products entering into the manufacture of a given article. In the great steel-producing districts of the Shenango and Mahoning valleys and Pittsburg for many years the rates upon raw material to the furnaces for the production of pig iron have been adjusted upon a basis, so far as possible, of making the freight cost of assembling the raw materials that enter into this product the same to each furnace. In the one case the rate upon coke may be higher and the rate upon ore or limestone lower; in other cases the reverse. The adjustment of rates upon these different raw materials is so made that when assembled at the different furnaces the aggregate cost is relatively the same. This illustrates the contention that such rates cannot be considered separately, but must be taken as a whole.
Bearing these facts in mind it is manifest that if an advance in rates is made and the protest of one shipper shall operate as a stay to the advance of a particular rate in which he may be interested the result would be to burden thousands of other shippers who have made no objection. The protesting shipper would thus secure an advantage, enjoying for a time, at least, a rate relatively lower than that to which he was entitled. It might be urged that it would be open to all other shippers to file similar protests, but under the provisions of the bill, or of the amendments suggested in committee, the protesting shipper might wait until the last day of the thirty-day period, thus giving no opportunity to other shippers, who would be ignorant of his purpose, to file their protest. It would be possible if this amendment became a law that many individual shippers would take advantage of their competitors by making contracts upon the basis of a lower rate and at the last moment file the protest, suspend the advance rate, and deliver their product under such contracts within the period of the suspension of the advanced rates and thus profit at the expense of their competitors.
The effect of this amendment becomes more serious where the relation of rates is between wide areas, and these relative rate adjustments cannot be made simultaneously. The rates upon grain for export, from the West to the Gulf, as compared with the Atlantic seaboard, will illustrate this statement. The protest of one shipper between two specific points would not only result in throwing out of relation the rates from all points in that section, but would also affect the competitive rates from other sections. Such a result would necessarily render the rate situation in reference to the grain rates "confusion worse confounded."
Rates in a country like the United States, which is comparatively young, and the development of which attracts the attention of the world, must, necessarily, be elastic, not only in the interest of the carrier, but of the shipping public. The principle is sound and has received the approval of the Interstate Commerce Commission, that rates must be fixed with regard to their relations one with the other, and not entirely upon the cost of service. This relation is because of the competition between shippers, between sections of shippers, and between localities, and as (because of the rapid development of our country in the production of new sources of supply, in the opening up of new grain fields, flour mills, mines, and factories, etc.) this competition is constantly changing. It is manifest that rates must constantly fluctuate, so as to be adjusted to the new condition; it is essential in the development of the country, even in the older sections, that rates must be elastic, which means constant reductions and advances.