carrier for loss sustained on business carried by their doors at greatly lower rates for longer distances.

Under the influence of the passage of the act to regulate commerce, approved February 4, 1887, the trans-continental lines consulted with one another and agreed upon a general system upon which their tariffs should be constructed in compliance with the provisions of the new law. The opinion was entertained by the managers of some of the roads that section 4 of the act did not prohibit a greater charge for a shorter distance over the same line, in the same direction, when the circumstances and conditions were dissimilar, and that the competitive circumstances controlling the business of the long-distance traffic were such as to constitute dissimilar circumstances and conditions under the language of the section. This view did not universally obtain, the managers of some of the lines being unwilling to take the responsibility of so construing the section, and tariffs were prepared. published, and issued on April 5, 1887, contemporaneously with the taking effect of the law, under which the language of section 4 was literally applied upon all trans-continental business. Under these tariffs, which were all subject to the Western Classification, the rates to Missouri river common points, St. Paul, Minneapolis, Galveston, and Houston were as follows:

2

B C D E 1.75 1.40 I.10 1.00

Class. I 3 4 5 A 4.00 3.50 3.00 2.50 2.25 2.10 The rates to Mississippi river common points, Chicago common points, and New York common points were progressively higher than the above. The rates named above for Missouri river common points were applied for about 350 miles west of the river, from which point they gradually decreased to Denver. The Denver rates were as follows:

2

4

Class... I 3 5 A B C D E 3.00 2.65 2.30 1.95 1.70 1.50 1.20 .95 .85 .80 And were applied from Denver to a point near Green river, over 300 miles west from Cheyenne. From Green river the rates again diminished very gradually to the Pacific Coast.

The result of the enforcement of the aforesaid previously unknown rates from the Pacific to the Missouri river and points beyond, was what the carriers expected, and perhaps desired. The tariff for this long-distance business was regarded by shippers as prohibitory. Shipments ceased, and the Interstate Commerce Commission was at once importuned, by telegrams, letters, and petitions from a large variety of business interests on the Pacific slope, to interfere for their

relief. Applications were also filed by the carriers with the Commission for relief upon this traffic from the operation of the fourth section under what was understood to be the power conferred in the proviso attached to the aforesaid section. These matters were brought to the attention of the Commission immediately after its organization in connection with many other similar applications from other portions of the country. The course pursued by the Commission is stated in its first annual report. For the reasons and upon the considerations therein set forth,

"The Commission, after having made sufficient investigation into the facts of each case to satisfy itself that a prima facie case for its intervention existed, made orders for relief under the fourth section where such relief was believed to be most imperative. These orders were temporary in their terms," and were expressed to be in force for a given number of days, "until the Commission can make a complete examination of the matters alleged."

An order of this nature was made on the application of the Southern Pacific Company, dated April 23, 1887, by which said company was relieved from the operation of section iv. of said act for a period not greater than seventy-five days, upon the following traffic, to wit:

"Ist. Between San Francisco, Sacramento, Stockton, Marysville, San José, Oakland, Los Angeles, and San Diego, in California; Portland and Astoria, in Oregon; Tacoma, in Washington Territory; Victoria in British Columbia, and El Paso, in Texas, on the one hand, and New York, Boston, Philadelphia, Baltimore, Newport News, Richmond, and all points commonly rated with them or either of them, on the other hand.

"2d. Between the same western points and Chicago, St. Louis, Memphis, New Orleans, and points east thereof.

"3d. Between the same western points and El Paso, Galveston, and Houston, in Texas, and points on the Missouri river and east thereof."

This order was subject to the restriction that the rates at intermediate stations should not be raised from the rates in force prior to April 20th.

Similar orders were made upon the application of the other trans-continental lines, limited in like manner to traffic between the Pacific coast on the one hand and the Missouri river and points beyond on the other. All of said orders expired early in July, 1887.

The subject of the application of the fourth section to the business of the trans-continental lines was quite fully investigated by the Commission, in connection with their general

examination of the short-haul question during the ninety days first ensuing its organization.

Immediately upon the issuing of the aforesaid temporary order the defendant carriers announced a tariff to take effect April 27, 1887, under the Pacific Coast East-Bound Classification, which established a line of rates from $3.50 on the first class to 85 cents on the ninth from San Francisco to the Missouri river. These rates, on May 25, 1887, were further materially reduced, and as so established remained in force on August 1, to wit:

Meanwhile no substantial change was made during the year 1887 in respect to the tariffs established April 5 for all intermediate points between the Pacific coast and the Missouri river; the only important modification being that which was effected under the circulars mentioned above which operated to give shippers residing in the vicinity of the Missouri river and of the Pacific coast the benefit upon direct shipments of the right which they had to ship to the terminal and return over the same ground.

The reduction to the rate which was established for through business on April 27 was made by the carriers with full knowledge of all existing water competition, the facts concerning which were laid before the Commission at that time. with great detail. In justification of the subsequent reduction on through business which took effect May 25, 1887, the carriers pointed to the competition of the Canadian Pacific Railway, which was practically a new factor in the situation, and which became energetic and active in the spring of 1887, contemporaneously with the taking effect of the act to regulate commerce. A new line was thus opened, running for sixteen hundred miles or more through a foreign country, which competed on the streets of San Francisco for business from the Pacific coast to the Missouri river, Chicago, New York, and Boston. This competition was so managed as to make itself felt successively upon one commodity and another and at various points, forming a continual menace to the through business of the transcontinental lines in both directions, without undertaking the carriage of any very considerable amount of tonnage, except at the outset, when large consignments of sugar were shipped east for a few weeks over the Canadian line.

A steamer of the Pacific Coast Steamship Co. left San

dian Pacific

Francisco weekly for Vancouver, where its freight was loaded upon the cars of the Canadian Pacific Co. and taken east across the mountains to be delivered via St. Paul or via more eastern routes, accord- Same-Canaing to its destination. The rates of freight estab- competition. lished for each sailing of these steamers have been regularly filed with the Commission; and the Commission has also obtained accurate information respecting the amount and destination of all goods shipped in each steamer sailing from San Francisco to Vancouver between April 1 and December 31, 1887. The shipments of May 13 and May 21 were each a little over one thousand tons; the average of the thirty-four remaining shipments was about 150 tons each. The goods carried by this route to strictly Missouri river points were, 944 tons of refined sugar (900 tons of which were carried on May 13), 7 carloads of beans, 2 carloads of dried fruit, 4 carloads of canned fruit, and i carload of bags. These articles were taken at rates lower than the rates in force at the time on the defendant roads. The Canadian Pacific rate on dried fruit to Chicago was at different times ninety cents and one dollar.

It does not appear that the Canadian Pacific line charged a less rate to St. Paul and other points in the United States near the northern boundary than it charged to Omaha, Kansas City, Chicago, New York, and other more distant points in the United States on the same line in the same direction. It is not known, however, that any limitation exists upon the said line in respect to charging any desired rate to and from intermediate points in the Dominion of Canada, without reference to the rates established at more distant points, either in Canada or in the United States; and higher rates to and from intermediate points are in fact there charged. Nor does it appear that the Canadian business of this carrier is subject to any statutory prohibition of rebates, drawbacks, or other forms of unjust discrimination, or to any restrictions in respect to preferences between persons or localities. So far as appears, its Canadian rates may be changed at will and be varied from at pleasure. A general revision of railway laws now pending in the Canadian Parliament, introduced pursuant to the report of a Commission which has given much consideration to the question, provides as follows:

"No company in fixing any toll or rate shall, under like conditions and circumstances, make any unjust or partial discrimination between different localities, but no discrimination between localities which, by reason of competition by water or railway, it is necessary to make to secure traffic, shall be deemed to be unjust or partial."

34 A. & E. R. Cas.-40

The policy of the Canadian Pacific Co. during the period following the taking effect in the United States of the act to regulate commerce was to maintain its rates between San Francisco and the Central and Eastern States, upon leading articles, a little below the rates made by the transcontinental lines in this country; this was designed to compel the recognition by the latter of the general principle which it asserted, that rates upon a circuitous line between like terminals should be lower than rates upon the direct line, in order to enable the longer route to obtain a certain portion of the traffic. In other words, that natural disadvantages, operating to the prejudice of a route competing for the business in question, should be compensated by the privilege of offering to the public a lower rate.

And that policy was pursued with sufficient energy to produce at last the effect desired. On January 16, 1888, an arrangement was made by which the Canadian Pacific Railway became a member of the Transcontinental Association. The trans-continental lines, including the Canadian Pacific, are now working under a tariff which fixes rates from Pacific coast points to Missouri river common points and easterly to New York, that are considerably advanced from the low rates which prevailed after May 25, 1887. The new tariff provides that on rates from San Francisco to Chicago and the East via the Canadian Pacific Railway certain differentials are to be deducted amounting to a reduction of from five to ten per cent in favor of the Canadian road. No differentials are given that line on shipments to and from the Missouri river; the result of which is that business from the Pacific coast to Missouri River points is not now competed for by the Canadian road.

The competition of the Canadian Pacific Railway, a foreign railroad not subject to the provisions of the act to regulate commerce is the only justification relied upon by the defendants for charging higher rates at intermediate points in the case now under consideration.

The foregoing facts present the following question: Under the circumstances and bonditions stated, is a higher rate justifiable for the shorter haul from San Francisco Question pre- and Pacific coast common points to Green river, sented. Cheyenne, Denver, and common points, than for the longer haul to Kansas City, Omaha and other Missouri river points?

Before proceeding to the consideration of this question it is important to obtain exact knowledge of just what disparity now exists between the rates in question, and how it is practically effected.