21 Q. B. D. 215. The equality clause of the Railway Clauses Consolidation Act of 1845 had been construed by the courts to mean equal rates for the carriage of goods over the same portions of the line, and did not apply where the places over which the goods were carried were not the same; and this restricted application led to the more comprehensive provisions of the act of 1854.

It will be seen that section 3 of the act of congress to regulate commerce inserts the word "locality," which does not appear in the English act, so that any undue or unreasonable preference or advantage is prohibited to any particular person, firm, company or corporation or any locality, or any particular description of traffic.

The effect of the English cases construing the preference branch of the English act were thus summarized by Judge Jackson in his opinion in the Party Rate case in the circuit court, 43 Fed. 37 (1890), (affirmed by the supreme court in 145 U. S. 263, supra), quoting from a report of the English Amalgamation Committee of 1872, page 130, as follows:

"The effect of the decisions seems to be that a company is bound to give the same treatment to all persons equally under the same circumstances, but there is nothing to prevent a company, if acting with a view of its own profit, from imposing such conditions as may incidentally have the effect of favoring one class of trade or one town, or one portion of that traffic, providing the conditions are the same to all persons, and are such as lead to the conclusion that they are really imposed for the benefit of the railway company."

It was said by the supreme court in this case, 145 U. S. 263, as to both sections 2 and 3, p. 276: "It is not all discriminations or preferences that fall within the inhibition of the statutes; only such as are unjust and unreasonable. Indeed the possibility of just discrimination and reasonable preferences is recognized by those sections in declaring what shall be deemed unjust."

§ 229 (174). Relation to sections 1 and 2.-The first paragraph of the section in its prohibition of any undue or unreasonable preference or advantage to any particular person, company, firm or corporation, or the subjection of any particular person, company, firm or corporation to any undue or unrea

sonable prejudice or disadvantage in any respect whatever, is comprehensive enough, standing alone, to include the prohibition of discrimination contained in section 2, and such is the judicial construction in England of the term "undue or unreasonable preference or advantage" as used in the English Railway and Canal Traffic Act, from which the terms of this section are taken. United States v. D. L. & W. R. Co., 40 Fed. 101 (1889).

Section 3 is broader than section 2 in that it is not limited to discrimination in rates, but includes any form of unjust discrimination or preference whereby a person, a class of business, a locality, or a kind of traffic is unjustly prejudiced.

That part of the section which forbids a carrier from making or giving any undue or unreasonable preference or advantage to any particular description of traffic, it was said in U. S. v. B. & O. R. Co., 153 Fed. 997 (1907), relates to the property transported, and does not apply to either the method of transportation or the rate charged therefor.

Section 1 prohibits unreasonable rates and the reasonableness of rates can only be determined by the consideration of whether rates are relatively reasonable. A rate which subjects a person or community or any kind of traffic to any undue or unreasonable prejudice or disadvantage is in that sense an unreasonable rate. Proceedings before the commission and the courts contesting the rates established by the carriers have usually included sections 1 and 3 and not infrequently sections 1, 2, 3, and 4, the latter when the long and short haul on the same line are involved. Under section 3 however, it is only the relative reasonableness of a rate which is considered, and as cases of individual discriminations in rates have been considered in connection with section 2, the cases grouped under this section will be those relating to discriminations between shippers other than in rates and to alleged preferences to localities and kinds of traffic.

§ 230 (175). Preferences of localities enforced by competition are not unjust.-Section 3 has been closely related to section 4 in the judicial discussion of the relation of competition to preferential rates. Section 3 contains the general prohibition of undue or unreasonable preference or advantage to any

locality, while section 4 contains the specific prohibition of any greater rate for a shorter than for a longer distance over the same line. After the decision of the supreme court in the Social Circle case in 1897 (162 U. S. 184), infra, section 4, it was ruled by the commission in a proceeding involving the relative rates to Chattanooga and Nashville from the eastern seaboard, 5 I. C. C. R. 546, and 4 Int. Com. Rep. 213, that while the carrier had the right under the law then existing to judge in the first instance, whether it was justified in making the greater charge for the shorter distance under section 4, nevertheless the third section of the act forbiding the making or giving of undue or unreasonable preference or advantage was still applicable, and that where such unjust preference was created, even as a result of railway competition, compelling a lower charge for a longer haul, the carrier should apply for exemption under the proviso of the fourth section. This ruling was sustained in the circuit court and circuit court of appeals, on somewhat different grounds, 39 C. C. A. 413 and 99 Fed. 52, but was reversed in the supreme court, East Tennessee, etc., R. Co. v. Commission, 181 U. S. 1, 45 L. Ed. 719, 729 (1901), who said that the effect of this ruling of the commission was to blend the third and fourth sections in such a manner as to necessarily destroy one by the other. The prohibition of the third section was directed against unjust discrimination or undue preferences arising from the voluntary or wrongful act of the carriers complained of, and does not relate to acts the result of conditions wholly beyond the control of such carriers. Where the competition was controlling, the preference was not undue or the discrimination unjust. It appeared in this case that there was a margin of profit in the rates in force to Nashville and Memphis. The court said there might be a case where the carrier would not be allowed to avail himself of the competitive condition. Thus if he could not meet the competitive rate without transporting the merchandise at less than the cost of transportation, and therefore bringing about a deficiency which would increase charges upon other business, the engaging in such competitive traffic would both bring about an unjust discrimination and a disregard of the public interest.

The court said that the question whether the charges were reasonable or otherwise, and whether the certain discrimina

tions were due or undue were questions of fact to be passed upon by the commission in the light of all the facts, and the case was directed to be remanded and the proceedings dismissed without prejudice to the rights of the commission to proceed with the further investigation of the facts.

§ 231 (176). Application of the competition rule.-The same ruling has been made in several cases in the circuit courts and circuit courts of appeal. Thus in Commission v. Atlantic Railway Co. et al., 35 C. C. A. 217, and 93 Fed. 83, the court said that under the decisions of the supreme court competition was a factor to be considered, and if the competition was real and controlling, it created substantially different circumstances and conditions, and where such lower rate was so induced, if not so low as to be unreasonable and unremunerative to the carrier, it could not afford a basis of undue and unreasonable preferences and advantages in favor of the competitive point within the inhibition of the third section, nor be unjust and unreasonable under the first section of the act. It would seem however that under the rulings of the supreme court even if the competition is controlling, and thus creates substantially different circumstances and conditions justifying the lower rate for the entire haul, and precluding the inference of an unjust preference therefrom, it would still remain for the commission under all the facts to determine whether the established rates were reasonable or not.

See also 10 I. C. C. Rep. 111, where the commission applied the ruling of the court in this case to the reasonableness of rates from New York to Chattanooga and Nashville. In 12 I. C. C. Rep. 68, the commission said that a railroad could not arbitrarily deter-mine that a particular mill shall compete in a certain market with other localities, and that other mills on its line shall not so compete, particularly where the discrimination is not justified by operating conditions. It was also ruled, 13 I. C. C. Rep. 56, that dissimilar circumstances, which justified under section 4 a greater charge for a shorter than a longer haul, will also prevent such rate from constituting an illegal preference or advantage under section 3, and in 13 I. C. C. Rep. 342, that a carrier may in its own interest, if it so desires, carry for a longer distance over its own lines than would be necessary if carried

between the same points over the line of its competitor, in order to obtain a portion of the competitive business, upon terms that will afford some profit. It did not necessarily follow, however, that a carrier in competing for traffic in this way thereby subjects itself to an order compelling it to do so. And in 15 I. C. C. Rep. 11, a carrier with a longer route is not obliged as a matter of law to meet the rate of a short line competitor; and neither is a carrier via any route obliged as a matter of law to reduce its rates because a short line competitor reduces its rate, which has been the same via both routes. And also, 15 I. C. C. Rep. 49, the commission declined to lend sanction to the idea that a lower rate in effect via one line than via another line is conclusive evidence of an unreasonable rate.

§ 232 (177). Whether competition is controlling is a question of fact. When competition enters into a case as an element, whether or not there is an undue preference or advantage, that is whether the competition is controlling, is a question not of law, but of fact. Commission v. L. & N. Railroad Co., 73 Fed. 409. See also Brewer v. Central Railroad of Georgia, 84 Fed. 258; Commission v. Western A. R. Co., 88 Fed. 186; Commission v. Cincinnati & P. R. Co. et al., 124 Fed. 624.

In the latter case, the commission, 9 I. C. C. R. 118, had found that the rates from western cities to Wilmington, N. C., were prejudicial and unduly preferential to Norfolk, Richmond, and other Virginia cities, and it ordered that they should be made upon a basis of 125 per cent of the rates contemporaneously in force from East St. Louis to Norfolk. The court refused to enforce this order, holding that the conditions at Norfolk and Richmond, by reason of the larger number of carrying lines, both rail and water, created a very active competition; and furthermore, the fact that these two cities were in what was known as trunk line territory and Wilmington was in what was known as southern territory, where there were fewer transportation lines and less active competition, resulting in higher rates to Wilmington, although the length of haul was about the same. The commission had refused to recognize the higher preferential rates based upon the location in the southern territory in another case from Wilmington. See 9 I. C. C. R. 17. In the latter case the commission said it was the first case during their fourteen years