ments over an extreme distance of six hundred and forty miles to East St. Louis, and which in the next two hundred miles fall to thirty per cent. on second class and twenty-two per cent. on the third class, were held prima facie unreasonable and unjustly discriminative against points within the group which were nearer to East St. Louis, and unfair as to shipments from Verona. The Commission said however that there were probably circumstances under which a group rate of this kind might be justifiable, and no order was made pending an opportunity for the defendant to readjust its group scale, or justify the apparent discrimination.

183. Qualifications in the application of the competition rule. The judicial construction of the term "unjust preference" by the elimination therefrom of the preferences compelled by railway competition has very materially affected the enforcement of the third section by the Commission. Thus during the first ten years after the enactment of the law, the Commission proceeded upon a different theory of the law, and the decisions reported in the first six volumes of the Interstate Commerce Commission Reports, and all of the Interstate Reports, in the construction of this section as well as of section 4, are based upon the theory that the competition of railways subject to the act was not, although it was conceded that water competition was, a justification of a higher rate for the shorter haul and the resulting preference of localities. In S I. C. C. R. 107, the Commission said that the greater charge for the shorter than for the longer haul over the same line in the same direction had been made in no case which had been presented to them, except where the competition existed at the longer distance points and was set up as the sole excuse for such greater charge.

But under the decisions of the Supreme Court, the application of the competitive rule is subject to the following qualifications: First, the competition must compel the lower rate. That is, the competition must be controlling. The carrier must either reduce its rates or lose the business. Second, the competition must not be created by the carrier; that is, the preference must not be affected through an agreement or combination of the carrier with other carriers stifling competition. Third, the competitive rate must be at the preferred point

remunerative to the carrier. Fourth, the rates must be reasonable in themselves.

This reasonableness of rates in themselves must be determined in the light of all the circumstances. The Commission has held, 9 I. C. C. R. 581, following the decision of Chairman Cooley in 2 I. C. C. R. 231 and 2 Int. Com. Rep. 137, that no rates can be reasonable in themselves within the contemplation of the Act which are made regardless of proportion; that rates to be reasonable must be under all the facts and circumstances relatively reasonable. In the case cited, the Commission held that although there was a substantial dissimilarity of circumstances and conditions as between Nashville and intermediate points on the Louisville and Nashville Railroad to Louisville, so that section 4 of the Act did not apply, that a difference of one cent in the rates fully offset this difference in circumstances and conditions, and that any greater difference rendered the rates from the intermediate points relatively unreasonable in violation of sections 1 and 3, although the Commission said that it did not feel competent to say that the rates from the intermediate points, independent of the Nashville rate, were absolutely unreasonable in and of themselves.

The Commission has considered the claims of unjust preference in the adjustment of rates as between localities in a great variety of cases from all parts of the country. Thus in 8 I. C. C. R. 608, the subject of the transcontinental rates was considered, and it was held that the rates from Denver to San Francisco should not be higher than the rates from Missouri river points to San Francisco. It was found however that the rate on sugar might be higher to Denver from San Francisco than to the Missouri river on the ground that the circumstances and conditions governing the traffic were different when it was carried to Missouri river points than when it stopped at Denver, but that there was nothing shown justifying higher intermediate rates on any article west bound.

In 10 I. C. C. R. 460, decided January 17, 1905, the differential between Wichita and Kansas City and other Missouri river points of fifteen cents against Wichita was held excessive. In a former case, 6 I. C. C. R. 586, such a differential was held violative of the long and short haul clause, but that decision was rendered before the construction of the clause

by the Supreme Court. As railroad competition existed at Kansas City, a higher charge to Wichita was justified, but the amount of the differential, fifteen cents per one hundred pounds, on sugar in carloads, was held unduly preferential under section 3. The rate from New Orleans to Wichita, forty cents per one hundred pounds, was also held to be unreasonable per se. In 8 I. C. C. R. 503, the rates from St. Louis, Nashville and Chattanooga, to Hampton and Palatka, in Florida, were held prejudicial to the Hampton merchants. That while the competition at Palatka justified a lower rate, the difference should not be greater than the local rate from Palatka to Hampton. In 9 I. C. C. R. 160, rates on sugar from New Orleans to Tifton, Georgia, were held unduly prejudicial as compared with rates to other Georgia points. See also on general subject of undue preference to localities, 8 I. C. C. R. 316, and 8 I. C. C. R. 290.

Where an existing relation of rates is found to be unduly preferential as between localities, the discrimination may be corrected by raising one rate or reducing the other, provided of course, the rate when adjusted is reasonable in itself. See 10 I. C. C. R. 456. In this case it was ruled that the existence of water competition between Buffalo and New York did not justify any wider difference in the rates from Saginaw and Buffalo to points on the New York and Long Branch Railroad than existed in the rates from those shipping points to New York.

These and other cases cited under the different topics of this section will illustrate the almost infinite variety of circumstances bearing upon the complex question of the adjustment of rates between localities.

184. Recognition of natural advantages of localities not an unjust preference. The Commission has repeatedly held that a town favorably situated for trade, possessing natural advantages therefor, is entitled to the benefits in rates naturally arising from such location. See 5 I. C. C. R. 571, 4 Int. Com. Rep. 230; 10 I. C. C. R. 148 (the Michigan Salt Case). The law requires the regulation of railroad charges according to the ascertained rights of persons and places, and it is not an agency for the regulation of trade by enabling shippers or communities to do business by putting them on even terms

with rivals more remote from competitive territory. 6 I. C. C. R. 458, 8 I. C. C. R. 409. The equal right of a competing locality is neither increased nor diminished by municipal subscriptions advanced for the building of a road. 2 I. C. C. R. 147 and 2 Int. Com. Rep. 95.

The refusal to give a through rate is not an unjust discrimination to a locality when the same rule is applied to all towns and the privilege accorded to none, although the refusal may operate prejudicially to one town and favorably to another, as the discrimination must consist in doing for or allowing to one party or place what is denied to another. 1 I. C. C. R. 401 and 1 Int. Com. Rep. 703.

Neither can a railroad be held to discriminate against a town which it does not reach and in whose carrying trade it does not participate. 5 I. C. C. R. 264, and 4 Int. Com. Rep. 65.

While the Commission has conceded that the recognition of natural advantages of localities is not unjustly preferential, yet it has also ruled that the mere fact that one point is larger than another with more business does not justify a discrimination in its favor, 9 I. C. C. R. 42, and that one of the underlying principles of the Act was equality between great and small. See also 2 I. C. C. R. 25 and 2 Int. Com. Rep. 32.

§ 185. Competing cities on opposite banks of rivers. The principle that a city is entitled to the benefits arising from its location, and that when it enjoys exceptional advantages in one respect it should not therefore be subjected to discrimination in other respects, has been applied in the case of cities situated on the banks of rivers, which railroads must cross by expensive bridges for which an arbitrary toll is charged, or which must be allowed for in an apportionment of through rates. Several such instances have been presented to the Commission. Thus the cases of Omaha and Council Bluffs, St. Louis and East St. Louis, Cincinnati and Louisville were presented, though in the ' latter case the cities are situated on the opposite banks of the Ohio river some distance apart, but are competitors for the business of the same territory.

In the case of Cincinnati, 7 I. C. C. R. 180, complaint was made by the Freight Bureau of the Chamber of Commerce against the higher rates charged from Cincinnati than Louisville to southern points. The Commission said that the loca

tion of Cincinnati upon the north bank of the Ohio river and the fact that the railroads leading south must cross that river by expensive bridge charges justified a higher differential from Cincinnati over rates from Louisville on the south bank of the river. As the Commission had nothing before it except the fact of distance, it did not pass any opinion as to whether the existing differentials were just or excessive.

In the case of Omaha and Council Bluffs, 7 I. C. C. R. 386, it was held that there was no unjust discrimination against Omaha in the fact that rates to points in Iowa were higher for Omaha than for Council Bluffs by the amount of the bridge toll on an expensive bridge over the Missouri river. It was said in the opinion that all like or group rates were frequently applied to cities considerably further apart than Omaha and Council Bluffs, but that the usage in this regard was not so uniform and well established as to make their application to those cities even prima facie unjust.

In 5 I. C. C. R. 57 and 3 Int. Com. Rep. 701, an East St. Louis miller was held entitled to the advantage of his location on the east side of the river as against his competitors on the other side of the river in St. Louis, and that a railroad terminating in East St. Louis which allowed St. Louis millers a rebate for the cost of their teams across the bridge to the railroad station was an unjust discrimination against the East St. Louis miller, and the latter was therefore entitled to a reduction of six cents a barrel as to flour handled by him to the station on the rates in force, as long as the railroads bore that amount of the cost of carriage for the St. Louis shippers.

$186. Differentials between competitive cities.-The intense competition of modern commerce is illustrated in the complaints made to the Commission by the Boards of Trade or other commercial organizations of different cities against alleged discriminations in the relative railroad rates to competing localities. The differentials allowed by the trunk line associations, particularly on the grain traffic from the west to the seaboard, as between the different seaboard cities, have been very exhaustively investigated. Thus in the case of the alleged discriminations against Boston, 1 I. C. C. R. 436 and 1 Int. Com. Rep. 756, the Commission held in 1888 that the then existing differentials between Boston and New York, being ten cents per hundred pounds on the first and second