Pacific Oceans is not a thing of the imagination, but rather of intense reality with which these rail carriers must deal.

"When the rail lines first reached the Pacific Coast all merchandise was brought in by water; at the end of several years the greater portion of it still came by that means. While both the tonnage and the proportion have been largely reduced since, there has been no time when the ocean was not an important factor in determining the rate from New York to San Francisco. Nothing gives stronger evidence of the present vitality of that competition than the fact that men familiar with the situation have been to an enormous expense in providing tonnage for this service which is more than three times the amount carried in recent years. From the day the transcontinental railroad touched the Pacific Ocean its struggle has been to divert business from sail to rail and with steamships already in service and the canal in immediate prospect it is certain that this struggle has not ended.

"In 1869, when the Central Pacific and Union Pacific began business, goods used in California were mainly manufactured upon the Atlantic seaboard. In order to secure the transportation of these goods the rail lines found it necessary to make a rate, not as low in cents per hundred pounds, but of as great value, all things considered, as the water rate. Most rates between New York and San Francisco have ever since been and still are established on this basis. It is idle to say that when wrought iron pipe, for instance, can be transported from coast to coast by water for 35 cents per hundred pounds, rail carriers can maintain a carload rate much above the 75 cents now in force."

There was competition in service prior to 1920, although competition in rates had about subsided. How far competition in service will be reduced by the Transportation Act, 1920, remains to be seen.550

§ 102. Rates Affected by Amount of Tonnage. The Interstate Commerce Commission has said: "The business of the defendants [the carriers], not only in lumber, but in traffic in

550 Tift v. Southern Ry. Co., 138 Fed. 753; Science of Railways, Vol. 8,

pp. 10, 11; Class and Commodity Rules, 38 I. C. C. 411, 431.

general, has grown and is growing largely, and in view of the fact that they derive their franchises, or right to exist, from the public, the lumber shippers as part of the public might plausibly, to say the least, claim that they have a right to participate in the prosperity of the defendants by having their rates reduced rather than advanced. The general rule is, the greater the tonnage of an article transported, the lower should be the rate. No rule is more firmly grounded in reason or more universally recognized by carriers. It is because of the greater density of traffic north of the Ohio River in Central Freight Association territory and in the eastern territory that rates in general are made materially lower in those territories than in the southern territory.551 This principle was restated by Mr. Commissioner Clements, in Farrar v. So. Ry. Co., 11 I. C. C. 632, 637.

In a later case, Mr. Commissioner Prouty, said:552

"It is well understood that freight rates should decline as a country develops and as business therefore increases

"It was urged that the improvements required for these economies, the reduction of grades, the laying of heavier rail, the purchase of modern equipment, had necessitated vast outlays of money and that this was a valid reason for the advance in rates. Undoubtedly the making of these improvements has required the expenditure of large sums; in many cases it has amounted to a virtual reconstruction of the railroad and to a practical change of its equipment. This added expenditure must be considered in determining the reasonableness of these rates, but does not justify an advance in rates. What has been the purpose of these improvements? Certainly to decrease the cost of operation, to handle freight

551 Tift v. Southern Railway Co., 10 I. C. C. 548, 583. The statement quoted in the text from this case undoubtedly had reference to class rates. It was not true as to commodity rates. 552 Re Class and Commodity Rates from St. Louis to Texas Common Points, 11 I. C. C. 238, 273, 274. For other cases applying the principle, see Re Advances in Rates, Eastern Case, 20 I. C. C. 243, 275; National

Hay and Grain Association v. Michigan C. R. Co., 19 I. C. C. 34, 47; Hydraulic Press Brick Co. v. Mobile & O. R. Co., 19 I. C. C. 530, 531; Virginia Carolina Chem. Co. v. St. Louis, I. M. & S. Ry. Co., 18 I. C. C. 1; Ozark Fruit & Grain Assn. v. St. L. & S. F. R. Co., 16 I. C. C. 134, 139; Burgess v. Transcontinental Freight Bureau, 13 I. C. C. 668, 675.

and passengers at less expense than they could be handled in the former way. It is a strange logic which imposes upon the public a higher rate while insuring to the carrier a lower cost of operation. The actual making of these improvements may have added not only to the expense of operation, but may have detracted from the efficiency of operation. The prosecution of the necessary work has interfered with the movement of traffic and thereby added to the cost of this movement. But all this is temporary and comparatively insignificant and should not be made an excuse for a permanent advance in rates.

"It is urged that the increased volume of traffic has necessitated these outlays; that otherwise the business could not be handled. And that is probably true; but increase of traffic, while it may produce temporary embarrassment, should reduce, not advance, rates."

The rule stated in the Tift case, supra, is too broad. While increased density of all traffic affects rates and generally, but not always, justifies lower rates, increased density of a particular traffic may not necessarily have that effect. If there is a large volume of a particular traffic with a light density of all traffic, higher rates may be necessary than when there is a lesser volume of the particular traffic with a greater volume of all traffic. It is, however, unquestionably true that a large volume of a particular traffic is a fact which ought to be considered in determining what should be the rate thereon, because it has some effect upon the cost of service.

The rule may not be applied too far. A traffic official of one of the defendants in the Morgan Grain case553 testified that the amount of traffic offered in 1907 was so large as to pass the "economic maximum,' and, therefore, the carriers not having sufficient equipment, the cost of handling the traffic was relatively higher than if less traffic had been offered. This may be true, and when true, while furnishing no reason why the carrier should increase rates based upon its inability to meet economically its obligations to the shippers, it would not be just to require the application of the rule that the greater the traffic the less relatively should be the rate. Al

553 Morgan Grain Co. v. A. C. L. R. Co., 19 I. C. C. 460.

though if the condition of more traffic than could be economically handled should be a permanent one, it would be the duty of the carrier to provide adequate facilities therefor. The effect of "this added expenditure" is discussed in the quotation, supra, from the opinion of Mr. Commissioner Prouty.

§ 103. Density of Traffic.-The term "density of traffic,' as commonly employed, signifies the combination of the volume of tonnage with the distance hauled. It means, therefore, something more than the amount of traffic handled. Within reasonable limits, the greater the density of all traffic the lower should be the rates. This is obvious, and is the practice of railroads generally. In the densely populated sections of the country, rates are frequently on a lower level than in the sparsely settled sections.

The statement of the Commission, speaking through Mr. Commissioner Prouty, in Re Class and Commodity Rates, supra, applies here. Rates should decrease as density of traffic increases,554 and the fact that a region is "comparatively thinly populated''555 may justify higher rates.556

§ 104. Distance and Revenue Per Ton-Mile. - Judge Cooley, then chairman of the Interstate Commerce Commission, in a head note, stated this rule:557 "As a rule, in the transportation of freight by railroads, while the aggregate charge is continually increasing the further the freight is carried, the rate per ton-mile is constantly growing less all the time, making the aggregate charge less in proportion every hundred miles after the first, arising out of the character and nature of the service performed and the cost of the service; and thus staple commodities and merchandise are enabled to

554 Re Advances in Rates,-Eastern Case, 20 I. C. C. 243, 275.

555 Cherokee Lumber Co. v. Atlantic C. L. R. Co., 27 I. C. C. 438.

556 Stiritz v. New Orleans M. & C. R. Co., 22 I. C. C. 578; Memphis Freight Bureau v. Illinois Cent. R. Co., 27 I. C. C. 507, 511; Railroad Com. of Ark. v. M. & N. A. R. Co., 30 I. C. C. 488; Railway Com. of Montana v. B.

A. & P. Ry. Co., 31 I. C. C. 641, 648, 649; Commercial Club of Mitchell, S. Dak. v. A. &. W. Ry. Co., 46 I. C. C. 17; Consolidated Southwestern Cases, 123 I. C. C. 203.

557 Farrar v. East Tenn., Va. & Ga. Ry. Co., 1 I. C. C., 480, 1 I. C. R. 764. The rule is not applicable to passenger fares and is only qualifiedly applicable to express rates.

bear the charges of this mode of transportation from and to the most distant portions of the country." Judge Cooley also pointed out that this rule is not only not abrogated, but is sanctioned, by the Act to Regulate Commerce. The general principle has been applied by the Commission in other cases.558 The rule is, however, subject to exceptions,559 and when comparing rates, "the rate per ton-mile is not always the measure of a reasonable rate, and, rightly applied, would make distance alone the gauge for transportation charges, but it is always valuable as affording a basis of comparison for relative rate burdens. ''500 Mr. Commissioner Prouty says, "The rate per ton-mile, while often instructive, is not by any means a fair index of a reasonable rate. ''561 While the rate per ton-mile usually decreases as distance increases, the rate per ton-mile on one road is not necessarily a safe guide in fixing a rate on another road operating under different conditions.

The rule that as the distance increases the rate per mile should decrease, as has been so frequently said of all formulas of rate-making, must be applied with due regard to all the circumstances and conditions surrounding the making of the rate or rates under discussion. The principle is but a rule of evidence, a fact which may justify a particular deduction, and not an inflexible rule of law. The question of expense incurred in earning the particular revenue must not be lost sight of,562 and the formula is but one of many considerations in rate adjustments.563

558 Business Men's Asso. v. Chicago, St. P. M. & O. R. Co., 2 I. C. C. 52, 2 I. C. R. 41; Business Men's Asso. v. Chicago & N. W. Ry. Co., 2 I. C. C. 75, 2 I. C. R. 48, 52; Gustin v. Atchison, T. & S. F. Ry. Co., 8 I. C. C. 277, 288; Re Investigation of Advances in Rates on Grain, 21 I. C. C. 22, 23; National Hay Assn. v. Michigan C. R. Co., 19 I. C. C. 34, 47; Muscogee Traffic Bureau v. Atchison, T. & S. F. Ry. Co., 17 I. C. C. 169, 173.

559 Manufacturers' and Jobbers' Union v. Minneapolis & St. L. Ry. Co., 4 I. C. C. 79, 3 I. C. R. 115.

560 Farrar v. So. Ry. Co., 11 I. C. C. 640, 649.

561 Re Proposed Advances in Freight Rates, 9 I. C. C. 383, 396; Butte Milling Co. v. Chicago & A. R. Co., 15 I. C. C. 351, 362.

562 Nebraska State R. Com. V. Chicago, B. & Q. R. Co., 23 I. C. C. 121, 125, 126. In Kansas v. A. T. & S. F. Ry. Co., 27 I. C. C. 673, owing to lighter density of traffic rates for the longer distances in West Kansas were approved which yield a revenue per net ton mile higher than for the shorter distances.

563 Ashgrove Cement Co. v. Atchi-