Opinion — Texas & Pacific R. Co. v. United States

ponte =: . : ee ee (RD

SUPREME COURT OF THE UNITED STATES.

No. 1.—OcToser Term, 1932.

Texas & Pacifie Railway Company, et

dk Seiiinain Appeal from the District

Court of the United

US.

: , : States for the Southern

United States of America, Interstate Te

. : 7-4 District of Texas.

Commerce Commission, et al. J

[May 29, 1933. ]

Mr. Justice Roperts delivered the opinion of the Court.

The Galveston Commercial Association complained to the Inter-

state Commerce Commission that carload commodity rates on im-

port, export and coastwise traffic between a portion of western

classification territory and Galveston were unreasonable, and their

relationship with those to and from Houston, Texas City, Beaumont,

Port Arthur, and Orange, Texas, and New Orleans, La., was un-

duly prejudicial to Galveston.! The claim of unreasonableness

was abandoned, as was also the assertion of discrimination in

favor of the other Texas ports. The latter intervened and prayed

the same relief as might be accorded Galveston in respect of rate

relationship with New Orleans. The issue was therefore nar-

rowed to one of prejudice to them and preference of New Orleans.

Railroads serving the Texas ports and various shippers and com-

mercial bodies intervened in support of the complaint; interests

connected with the port of New Orleans and shippers intervened

in opposition. -

The Commission found that export and import rates on fourteen

commodities from or to points © Arkansas, Texas, Oklahoma,

southern Kansas, and Louisiana west of the Mississippi River,

were unduly prejudicial to Galveston and unduly preferential of

New Orleans. In all instances where the distance to Galveston

is less than the distance to New Orleans by not over one hundred

1The complaint also attaeked rates to and from a portion of the State of

Iilinois and the port of Mobile, Ala. The Commission, however, did not deal

with these, and the averments of the complaint in this respect are immaterial

to the decision of the ease.

2 Texas & Pacific Ry. Co. et al. vs. United States et al.

miles it permitted equal rates; but for differences in distance ex.

ceeding one hundred miles it prescribed certain named minimum

differentials in favor of Galveston.*

On rehearing the prior decision was modified by including the

other Texas ports with Galveston in the finding of undue pre-

judice; substituting a twenty-five per cent. difference in distance

for the 100-mile basis; exempting from the scope of the order

rates to or from points on the Texas & Pacific and the Louisiana

Railroad & Navigation Company ;* exempting rates on petroleum

and its products; and making certain other changes not here ma-

terial.*

The proceeding was later reopened for the purpose of deciding

whether the Texas & Pacifie and the L. R. & N. should continue to

be exempted. The Commission reversed its previous finding and

included them within its orders.’ Both carriers filed bills in the

District Court to enjoin the enforcement of all the orders except

in so far as the second exempted them from the finding of prefer-

ence and prejudice. The cases were consolidated, and upon final

hearing before three judges the bills were dismissed.” The plain-

tiffs, Texas & Pacific and L. R. & N., and also the State of Louisi-

ana, the New Orleans Traffic Bureau and other intervenors ap-

pealed.

The Texas ports are served by some half dozen lines which either

themselves or through their connections reach the areas of origin

or destination embraced in the Commission's order. Generally

speaking their routes trend north rather than east of Galveston.

The Southern Pacific is the only carrier serving both Galveston

and New Orleans. Texas is also connected with New Orleans by

the Gulf Coast Lines, by the Texas & Pacific, extending east from

E] Paso through Dallas and Fort Worth to Shreveport, La., and

2100 1. CC. 110,

"The Louisiana Railroad & Navigation Company was at the time of the

earlier hearings operated under a single ownership with the Louisiana Rail-

way and Navigation Company of Texas; and the two are referred to by the

Commission as the L. R. & N. System. Prior to the institution of suit in the

court below both lines were acquired by the Louisiana & Arkansas Railway

Company. The latter joined with the other two as plaintiffs in the District

Court. In the opinion the System will for convenience be called the L. R. & N.

“128 17. ©; ©; 340.

5160 I. C. C. 345.

642 F. (2d) 281.

Pine

Texas & Pacific Ry. Co. et al. vs. United States et al. 3

thence southeast to New Orleans, and by the L. R. & N., which con-

nects eastern Texas and western Louisiana with that port. Sev-

eral other lines extend between New Orleans and western Louisi-

ana, Arkansas, Kansas, and Oklahoma.

With minor and immaterial exceptions the carriers serving the

Texas ports and New Orleans have for many years equalized the

import and export commodity ecar-load rates between the terri-

tory embraced in the Commission’s orders and Galveston and New

Orleans. The gravamen of the complaint is that in many instances

the distance to New Orleans is so much greater than that to the

Texas ports, and the increased haul so important a part of the

service rendered, that this factor should be reflected in a fixed

differential in rates. The Commission’s order prescribing dif-

ferentials is challenged only in so far as it compels the Texas &

Pacifie and the L. R. & N. to establish rates to New Orleans higher

by the amount of the fixed differentials than those charged be-

tween the same interior points and the Texas ports. Inasmuch as

the assertion of unreasonableness was withdrawn and the Com-

mission made no finding that the Galveston rates were unreason-

able, the prohibitions of Section 1 of the Act to regulate ecom-

merece, as amended, are not involved.* The evidence failed to show

that the rates of the Texas & Pacific and the L. R. & N. on export

and import shipments to and from New Orleans were not compen-

satory. The Commission refused to find that they were so low

as to cast a burden on other traffic. There was therefore no basis

for an order fixing minimum reasonable rates under Section 15 (1)

of the Act.© The parties agree that authority for the order must

be found in Section 3 (1), which is:

“Tt shall be unlawful for any common earrier . . . to make

or give any undue or unreasonable preference or advantage to any

particular person, company, firm, corporation, or locality, or any

particular description of traffic, in any respect whatsoever, or to

subject any particular person, company, firm, corporation, or lo-

vality, or any particular description of traffic, to any undue or un-

reasonable prejudice or disadvantage in any respect whatsoever.’”®

The appellants contend that in the circumstances disclosed the

ports as such are not localities preferred or prejudiced, but that

7U. S. C. Tit. 49, See. 1.

8sU. S. C. Tit. 49, § 15 (1).

9U. 8. C. Tit. 49, § 3 (1).

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+ Texas & Pacific Ry. Co. et al. vs. United States et al.

if they may be so denominated the Texas & Pacific and the L. R. &

N. can not be held responsible for any undue prejudice to the Texas

ports, since they do not reach those ports with their own lines or

control the rates to or from them. They also assert that the orders

violate Article I, Section 9, of the Constitution, which prohibits

any regulation of commerce giving preference to ports of one State

over those of another; are without support in the evidence, and ar-

bitrary.

The cause has been twice argued; it was first presented at the

October Term, 1931, and on account of the importance of the ques-

tions involved a reargument was ordered and was had at the Oc-

tober Term, 1932.°° Statement of certain facts and settled prin-

ciples will tend to clarify and define the issues presented.

The traffic with which we are concerned does not move on

through bills of lading, but the movement is, nevertheless, from

points of origin to a foreign or coastal destination, or vice versa,

and is, therefore, essentially through transportation. Compare

Binderup v. Pathe Exchange, 263 U. S. 291, 309. As the Com-

mission said in this case, ‘‘A port is neither the destination nor

the origin of traffic passing through it. It levies toll on the traftie,

in substantially the same manner as do common carriers, in its

charges for the use of its facilities in the transfer of traffie between

the rail and water carriers’’. Although the shipper in the first

instance consigns the commodity to the port and a separate con-

tract is made for ocean carriage, the through rate none the less

consists of the rail rate to the port, plus the ocean freight, whieh

is the same from all Gulf ports.

1%*This cause is restored to the docket for reargument upon all questions

involved, and the attention of counsel is invited to the question whether the

respective relations of the Louisiana ports and the Texas ports to the export,

import, and coastwise traffie affected, and to the rates condemned, by the

orders in controversy are such that the Louisiana ports may be regarded as

localities unduly or unreasonably preferred by such rates within the sense

and meaning of sections 3(1) and 15 (1) of the interstate ecommerce act and

that the Texas ports may be regarded as localities unduly or unreasonably

prejudiced by such rates within the sense and meaning of the same sections.’’

Journal, October Term, 1931, p. 342.

11The evidence shows that the regular steamship lines make the same rates

to foreign destinations from all Gulf ports. Tramp steamers occasionally

eut the conventional rate, but this may happen at any port, and the oppor-

tunity to obtain such a reduced rate does not depend upon the choice of port

through which shipment shall be made.

gl t — - F z hae TRIE Me, SPSS

Texas & Pacific Ry. Co. et al. vs. United States et al. 5

The choice of route is determined solely by the rail rates from

or to the ports. If these are equalized the shipper has an option ;

but if they are disparate the route through the port taking the

higher rate is necessarily excluded. A very slight differential

in the rail rate, in some instances as little as a fraction of a cent

per hundred pounds, will divert the traffic through the port so ad-

yantaged. The application of a distance scale to the rail rate auto-

matically precludes shipment through the more distant port.

Long prior to the passage of the Act to regulate commerce the

railroads, recognizing this situation, and desiring to hold to their

own lines the traffic running to ports which they serve, equalized

rates through the ports reached by their own lines with those main-

tained by their rivals to other ports, or established differentials

in favor of their own ports in order to retain a portion of the

competitive export business. And a carrier serving two ports has

for like reason fixed an equal or lower rate to the more distant of

the two, solely to meet the competition of rivals who reached it

by more direct routes. These practices have not been indulged

either to aid or to harm a port as such, but solely to obtain or

retain business for the carrier’s own line.2* With the abstract

fairness of such adjustment neither the Commission nor the courts

have any concern. This is not to say, however, that the rates pro-

mulgated are beyond the Commission’s jurisdiction. While that

body has no control over the ocean rate, it has power to compel a

reasonable charge for the rail haul. Compare Armour Packing Co.

v. United States, 153 Fed. 1; News Syndicate Co. v. New York Cen-

tral R. R., 275 U.S. 179, 186-72° As the carriers are in competi-

tion for the business they may, within tne zone of reasonableness,’*

prescribed by the statute, adjust their rates so as to obtain or retain

the desired traffic for their own lines. Interstate Commerce Comm.

v. Alabama Midland Ry. Co., 74 Fed. 715, 723-4; 168 U. 8S. 144,

12New York Produce Exchange v. B. & O. R. Co., 7 I. C. C. 612; In re

Differential Rates, 11 I. C. C. 13.

13In Chamber of Commerce of New York v. N. Y. C. & H. R. R. Co., 24 I. C.

C. 55, 74, the Commission said: ‘‘We have no jurisdiction of the ocean rates

and must deal with this question as though the ports were destinations instead

of gateways.’’

14Since 1887 Section 1 has forbidden that an export or import rate be un-

reasonably high; and since the Transportation Act, 1920, the Commission has

been charged to see that the rate be not so low as to render the receipts of

the business unremunerative.

6 Texas & Pacific Ry. Co. et al. vs. United States et al.

172-3; Skinner & Eddy Corp. v. United States, 249 U.S. 557, 564;

United States v. Illinois Central R. R., 263 U.S. 515, 522.

The theory of the Act is that the carriers in initiating rates may

adjust them to competitive conditions, and that such action does

not amount to undue discrimination; Teras & Pacific Ry. Co. y,

Interstate Commerce Commission, 162 U. 8S. 197. There the

charging of rates on import traffic moving from a port on through

bills of lading, much lower than those fixed for domestic trans-

portation was held not to amount as matter of law to diserimina-

tion forbidden by Section 3. The carrier showed, in justification

of the lower rates on import traffic, that unless these were per-

mitted water and rail-and-water competition would divert the

traffic away from the port of New Orleans and the carrier’s

lines extending from that port. Since that decision it has been

recognized that export and import shipments, although not made

on through bills, might lawfully be transported at rates below those

charged for domestic traffic between the same points.’® The same

purpose not to stifle competition justifies relief under Section 4

from the prohibition against charging the same or less for a longer

than for a shorter haul. Interstate Commerce Comm. v. Baltimore

& Ohio R. R. Co., 145 U.S. 263, 276; Interstate Commerce Comm.

v. Alabama Midland Ry. Co., 168 U.S. 144, 164; Louisville & N. R.

Co. v. Behlmer, 175 U. S. 648, 671; Intermountain Rate Cases, 234

U.S. 476, 483-485. And relief under the Fourth Section has been

granted on this ground in respect of export and import rates.

Export and Import Rates, 169 I. C. C. 13.

While the carriers may, therefore, meet competition by equaliz-

ing rates or maintaining differentials both to interior points and

to ports, they may not adjust their rates with the motive of in-

juring or aiding a shipper, a particular kind of traffic, or a locality,

for so to do is to depart from the transportation standard, con-

formity to which the Act contemplates, and substitute others whieh

are prohibited. A tariff published for the purpose of destroying a

market or building up one, of diverting traffic from a particular

place to the injury of that place, or in aid of some other, is unlaw-

ful; and obviously, what the carrier may not lawfully do, the Com-

mission may not compel. Souwihern Pac. Co. v. Interstate Commerce

15New Orleans Board of Trade v. Illinois Cent. R. Co., 23 I. C. C. 465;

In re Import and Domestic Rates, 36 I. C. C. 389; In re Import and Domestic

Rates—Clay, 39 I. C. C. 132.

2% As OPT EATN

Texas & Pacific Ry. Co. et al. vs. United Stotes et al. 7

Comm., 219 U.S. 433, 444; Interstate Commerce Comm. v. Diffen-

baugh, 222 U.S. 42, 46; Ellis v. Interstate Commerce Comm., 237

U. 8. 434, 445; United States v. Illinois Central R. R., 263 U.S.

515, 524; Atchison T. & S. F. Ry. v. Interstate Commerce Comm.,

190 Fed. 591; Anchor Coal Co. v. United States, 25 F. (2d) 462,

471.'°

1. In the light of the facts exhibited by the record and the prin-

ciples underlying the Act, are ports, in respect of export, import

and coastwise traffic, localities susceptible of undue preference or

prejudice within the meaning of Section 3? The purpose of See-

tions 2, 3 and 4, as exhibited by committee reports and explained

by those in charge of the bill in Congress, was to prevent unjust

discrimination resulting from existing practices. Similar com-

modities were, without reason or excuse, carried at different rates.

Shippers similarly situated were put on unequal terms. Pro-

ducers and consumers at points of origin and destination were pre-

judiced by unequal treatment in the matter of rates or service.

Obviously localities of origin or destination might also be pre-

judiced by undue discrimination. One of the most prevalent and

reprehensible practices at which the Act was aimed was the charg-

ing of a less or an equal rate for a longer haul upon the same line

or route. The Act was passed for the protection of those who pay

or bear the rates. The standards it establishes are transportation

standards, not criteria of general welfare. The word ‘‘localities’’,

therefore, has its proper office as denoting the origin or destination

of traffic and the shipping, producing, and consuming areas affected

by rates and practices of carriers. The phrase was, however, not

intended to cover a junction, a way station, a gateway, or a port,

as respects traffic passing through it.

Considered as points of origin or destination any or all of these

are localities within the purview of the section. All of them may,

moreover, though not considered as localities served, be involved

in acts of discrimination. The situation here presented furnishes

a close analogy to proportional rates or combination rates, and

with respect to either of these the charge on shipments through

a given gateway or port may discriminate against traffic passing

16The Commission has recognized the same principle. Ashland Fire Brick

Co. v. Southern Ry. Co., 22 I. ©. C, 115, 121; Chamber of Commerce of New

York v. N. Y. C. & H. R. R. Co., 24 I. C. C. 55, 63, 70, 75; Maritime Assn. of

Boston, &e. v. Ann Arbor R. Co., 95 I. C. C. 539, 565.

nace

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8 Texas & Pacific Ry. Co. et al. vs. United States et ai.

through another so as to deprive a shipper of his right of choice

of route through either.’ In such case, however, the discrimi.

nation operates upon the shipper, not upon the port. There are

through rates, proportional rates, and combination rates, appli-

eable to traffic routed through river crossings and gateways. It

seems too plain for argument that the Commission has no au-

thority, upon « showing by a gateway that under an existing tariff

too much traffic passes through another, or too little through it, to

readjust the rates and prescribe differentials so as to divert traffic

through the complaining gateway. The interests and industries of

a gateway are not entitled thus to obtain a benefit reflected from

additional traffic which would be diverted by such action of the

Commission. We perceive no difference in principle as to export

or import traffic routed through ports.

The legislative history of the Act demonstrates that Congress

did not intend to forbid the equalization of export or import rates

by lines serving several ports in order to meet competition. These

rates, it was said, were not to be proportioned to the respective

distances between inland origins or destinations and the ports."

Both equalizations and differentials had for some time been main-

Mobile Chamber of Commerce v. Mobile & Ohio R. R. Co., 32 IT. C. @,

272; Astoria v. Spokane, Portland & Seattle Ry. Co., 38 I. C. C. 16.

1sSee the explanation of Senator Cullom, chairman of the Committee having

charge of the original bill, Cong. Ree., 49th Cong., Ist Sess., Vol. 17, Part 4,

pp. 3471, 3472. House proceedings, Cong. Ree., Vol. 17, Part 7, pp. 7277,

7294, 7298. And see the Report of the Committee of the Senate, Report No,

46, 49th Cong., Ist Sess., p. 57, referring to the investigation by a committee

of the British Parliament:

‘*Other important conclusions were reached by the Committee as follows:

‘¢ «That a system of equal mileage rates, or charges in proportion to dis-

tanee, was inexpedient and impracticable for the following reasons:

‘**(a) It would prevent railway companies from lowering their fares and

rates, so as to compete with traffie by sea, by canal, or by a shorter or other-

wise cheaper railway, and would thus deprive the publie of the benefit of com-

petition, and the company of a legitimate souree of profit.

‘**In short, to impose equal mileage on companies would be to deprive

the publie of the benefit of much of the competition which now exists, or has

existed, to raise the charges on the publie in many cases where the companies

now find it to their interest to lower them, and to perpetuate monopolies in

carriage, trade, and manufacture in favor of those rates and places which are

nearest or least expensive where the varying charges of the companies now

create competition.’ ’’

0 ANITA, ED

Texas & Pacific Ry. Co. et al. vs. United States et al. 9

tained in the rates to various Atlantic ports. Congress was

aware of this, and had no intention of interfering with the main-

tenance of these rate adjustments.

Appellees say, however, that the Commission has always treated

ports as localities within the meaning of Section 3, and exercised

the power to abate discrimination by prescribing differentials in

export rates. They add that though the Act has been several times

amended, this section has been retained in its original form and

Congress has thus sanctioned the Commission’s interpretation.

Where a statutory body has assumed a power plainly not granted,

no amount of such interpretation is bi: ding upon the courts. In-

terstate Commerce Comm. v. v. N. O. & T. P. Ry. Co., 167 U.S.

479, 510. This we think is the situation here presented, for, as we

have said, the word localities is used with reference to places of

origin and destination; its employment is not intended to permit

the Commission, in its discretion, to favor or hamper a community

having no such relation to the service of transportation.

Morevore we do not find that any such settled construction had

been adopted or that Congress intended to sanction it. With few

end oecasional exceptions the Commission has not until a recent

date essayed to prescribe differentials in export rates. Prior to the

Hepbarn Amendment in 1906, port differentials were considered in

three cases.’ In the first certain carriers applied for leave to

equalize their export rates to Boston with those charged to New

York. The petitions were dismissed on the ground that the Com-

mission should not authorize what the carriers might lawfully do

without permission. In the second, a New York trade association

complained that the maintenance of differentials in export rates

to Philadelphia and Baltimore voluntarily established by the ear-

riers worked undue prejudice against New York. The Commis-

sion found they did not result in undue prejudice; though it

treated the ports as localities which would be entitled to relief

under a proper showing. In the third case shippers and ear-

riers serving north Atlantic ports submitted to the Commission the

question of the fairness of the current differentials, and that body

acted merely as an arbitrator and not in its official capacity.

The legislative history of the Hepburn amendment discloses a

clear intent not to confer power to circumscribe the adjustment

WExport Trade of Boston, 1 1, C. C, 24 (1887); New York Produce Ex-

change v. B. & O. R. Co., 7 1, ©, ©, 612 (1898); In the Matter of Differential

Rates, 11 I, C. C. 13 (1905).

MEGS 08 oe

10 Texas & Pacific Ry. Co. et al. vs. United States et al.

of export and import rates by the carriers to meet competition.”

The expressions used disclose no thought that the Commission had

held the contrary.”*

Between the dates of the Hepburn amendment and the Trans.

portation Act, 1920, the Commission had before it two cases rele.

vant to the power to prescribe port differentials.** In the first the

Commission recognized its lack of power to deal with the relation.

ship of the rates.2* In the second the complaint was that Astoria

*0Cong. Ree., 59th Cong., Ist Sess., Vol. 40, Part 2, pp. 1777, 1788; Part 3,

Ppp. 2084, 2085, 2086, 2247, 2248; Part 4, p. 3792; Part 5, p. 4111; Part 7, p,

6683. Representative Mann, a member of the committee, said, 1m explaining the

purposes of the bill before the House (Cong. Ree., Vol. 40, Part 3, p. 2247);

oe

We do not give them the power to say whieh port shall be built

up, which city shall be preferred; we leave open the competitive forces of

the railways. The old bills which we had sought to stifle competition; we

leave competition in foree. The railroads running south, west of the Missis-

sippi, and the railroads running east, north of the Ohio, will have to fight out

the question as to whieh road shall carry the grain for export abroad.’?’

And again: ‘‘It will not give the Commission the power to determine dif-

ferentials, the power to say whether grain from the Northwest shall be shipped

for export by way of the Gulf ports or the no:th Atlantic ports, the power to

destroy the law of competition . . .’’,

There is much more to the same effect.

*1Report No. 591, 59th Cong., Ist Sess., p. 3: ‘As but little complaint

has been made to the committee concerning classification, it was not deemed

wise at this time to suggest new legislation upon that subject. So, too, with

the question of the relation of rates. The committee has not deemed it wise

at this time to suggest new legislation to change existing law upon that sub-

ject. It is one of very great importanece—interesting, however, as a rule—to

certain particular communities rather than to the publie at large. It involves

conflicts between towns and cities rather than the publie generally, and it

relates more to the building up of certain local interests of a local nature

rather than to the interests of the people of the whole country.’’

22Chamber of Commerce of N. Y. v. N. Y. C. & H. R. R. Co., 24 I. C. C. 55;

Astoria v. S. P. & S. Ry. Co., 38 I. C. C. 16.

23It snid (24 1. C. C. Th): ‘eo, . . the Boston interests join in the

contention that the railroads should se adjust their rates as to insure move-

ment of a certain or substantial part of the traffic through those ports.

Neither the carriers nor the Commission has any right to undertake to so ap-

portion the traffic between rival ports or cities’? . . . ‘* . . . the

‘Pennsylvania and the Baltimore & Ohio have the lawful right to. maintain

lower rates to and from Baltimore and Philadelphia than they eontempor-

aneously maintain to and from New York. They would probably also have

the right to make these rates the same to and from all of those ports if they

Po DE SUR aI

Texas & Pacific Ry. Co. et al. vs. United States et al. 11

was prejudiced by exaction of higher export rates from origin ter-

ritory than those to Seattle and Tacoma. Though the haul to As-

toria was longer, the Commission required equalization. The Com-

mission in this case asserted its authority to deal with export rate

relationship solely in the interests of the affected ports. Whether

the order made was within the competence of that body or not, the

important fact is that it did not prescribe differentials, but in the

interest of competition opened the three ports to export shipment

on equal terms.**

We think that at the date of the passage of the Transportation

Aet, no such administrative practice had been established as to

require the conclusion that in failing to amend Section 3 the Con-

gress approved any asserted power to adjust export and import

rates in the interests of the ports alone.

It remains to determine whether since 1920 there has been such

a uniform and repeated assertion of this authority as would con-

strain us to adopt the principle. The instances in which the Com-

mission has considered export and import traffic fall into several

classes: First, where shippers’ complaints concerning port dif-

ferentials established by carriers were dismissed,*° or were found

justified and prejudice ordered removed ;** secondly, where, on

shippers’ complaint against differentials, equalization of rates was

ordered ;*? thirdly, where on complaint by a port differentials vol-

untarily established by the carriers were aliered.** These are not

relevant to the present controversy. In two decisions rendered

prior to the instant one the Commission, on complaint of port in-

terests, exercised the supposed power to compel the establishment

of differentials as between ports.*® But we are not persuaded

chose to do so. The Boston lines have an undoubted right to make such rates

to and froin Boston as their interests demand, subject only to the limitations

that the rates must be reasonable’’; ,

“Compare, however, Galveston Commercial Assn, v. A. & S. Ry. Co., 109

I. 'C. ©, 134,126,

“Cotton and Cotton Linters to Pacific Coast Ports, 69 I. C. C. 735; Sugar

Cases, 1922, 81 I. C. C, 448.

“Canned Goods, Iron & Steel from Gulf Ports, 91 TI. C. C. 623.

“Inland Empire Shippers League v. Direetor General, 59 I. C. C. 321,

28Maritime Assn. v. Ann Arbor R. Co., 95 I. C. C. 539; 126 I. C. C. 199.

“Coffee from Galveston and other Gulf Ports, —8 I. C. C. 716; 64 1. C. C,

26; Charleston Traffic Bureau v. Alabama G, 8. R. Co., 89 I. C. C. 501. Ina

number of other cases the Commission has indicated a belief that it possessed

such authority.

NIT NI BE Kw

12 Texas & Pacific Ry. Co. et al. vs. United States et al.

these rulings form a body of administrative action sufficient to

overthrow the evident purpose of Section 3.

We conclude that ports as such are not localities with respect to

export and import traffic routed through them, susceptible of un-

due preference or prejudice within the intent of the Act.

While the Commission’s jurisdiction of port rate relation was

fully argued, the appellees seek to support the orders under the

power to abate discrimination between persons and shippers. The

argument is based upon averments of the complaint as to preju-

dice of persons at Galveston. There is, however, no allegation

that shippers or consignees in the interior, are prejudiced or pre-

ferred by the equalization of the New Orleans rates with those to

the Texas ports, and the Commission made no finding of preference

or prejudice of shippers or consignees, or localities of origin and

destination.*° It compared at great length the facilities of the

ports, their volume of traffic, the relative growth of their export

and import business, their respective steamship facilities, and

reached the conclusion that though relative distance is not con-

elusive and competitive conditions are to be regarded, the Texas

ports are entitled to an advantage in rate consequent upon the

shorter haul to and from the interior territory. The Commis-

sion’s three reports abound with statements that a differential in

favor of the Texas ports will divert traffic running to New Orleans

and send it through the Texas ports. Petroleum is one of the

commodities as to which complaint was made. There is no trans-

portation difference discoverable in the record between this traffic

and that of the other freights affected by the order. But the Com-

mission concluded that New Orleans was not receiving more than

its fair share of this business, and that a differential advantage

would be of little benefit to the Texas ports by diverting this com-

modity to them, and therefore refused to make any order respect-

ing the rates on petroleum and its products.*' It has since, ap-

parently upon similar considerations, refused to prescribe differen-

tials in the rates on blackstrap molasses.** The actual basis of the

30In a dissenting opinion Commissioner Hall said (128 I. C. C. 399): ‘In

deciding this strife between Texas ports and Louisiana ports, confined as it is

to import, export, and coastwise rates, the producers and shippers who pay

those rates scem to have been lost from sight.’’

31See the Commission’s findings, 128 I. C. C. 366, 372, 374-376 and the

opinions of Commissioners MeManamy and Taylor, 128 I. C. C. 399.

82Blackstrap Molasses from Louisiana Points and Ports, 171 I. C. C. 583,

591.

Texas & Pacific Ry. Co. et al. vs. United States et al. 13

decision is, moreover, avowed by the Commission. In the first

report it said:

‘‘We find that the present relationships of the assailed rates on

export, import, and coastwise traffie, . . . are unduly preju-

dicial to Galveston and unduly preferential of New Orleans’’ (100

I. C. C. 122).

In its second report it stated:

‘We find that the present parity of rates as between the Texas

and Louisiana ports . . . does not result in substantial injury

to the Texas perts in respect of petroleum and its products, but

does result In substantial injury to and prejudice against the Texas

ports in respect of the other commodities considered.’’

(128 I. C. C. 388).

And finally:

‘‘Upon further consideration we now find . . . that the

present relationships of the assailed carload rates on export, import

and coastwise traffic . . . are, and for the future will be, un-

duly prejudicial to Galveston and the other Texas ports taking the

same rates, and unduly preferential of New Orleans’’ (160 I. C. C.

399).

The action of the Commission cannot be justified upon any

theory that it was protecting shippers and consignees, who would

naturally desire all possible routes for foreign shipment. On the

contrary, the orders prohibited a practice born of competition, and

not proved to involve a loss of revenue to the appellants. The

plain purpose of the orders was to build up the Texas ports by

diverting export and import traffic to them. As we have shown,

Section 3 grants no such power.

2. The Commission’s action is challenged for another, and wholly

independent reason, which, if sustained, also requires a reversal of

the decree. By its second order the Commission excluded the Texas

& Pacific and the L. R. & N. from its findings of undue preference

and prejudice and exempted them from the requirement as to dif-

ferentials. The Texas & Pacific had been included by the first

order on the theory that it was part of the Missouri Pacific system

which served both New Orleans and the Texas ports. Upon re-

hearing the conclusion was that the line was independently oper-

ated. Exemption was thereupon granted both appellants pur-

suant to a rule which the Commission had consistently followed

since its organization: namely, that a carrier may not be held re-

sponsible for undue prejudice or preference unless both of the

LRG PME ALLE DE RIA ABRIL ALIAS we EO foe

14 ‘Texas & Pacific Ry. Co. et al. vs. United States et al.

localities affected are upon its lines, or it effectively participates

in the rates to both. In the final report these roads were denied

exemption under the belief that this court had held the principle

inapplicable in the circumstances here disclosed. The appellants

insist the rule is a reasonable one, consonant with the purposes of

the Act, and that our decisions have not narrowed it so as to ex-

clude this case from its scope.

The line of the Texas & Pacific in Texas is intersected at inter-

vals of about 40 miles by north-and-south lines directly or indi-

rectly serving the Texas ports. The population of these junction

points is over ten times as great as that of all other open stations

on this appellant's line in Texas, and the greater volume of export

and import traftie originates and terminates at the junctions.**

Thus the question is whether the Texas & Pacifie may continue

to participate in the handling of the traffie moving through the

ports to and from points on its own rails, on an equality of rates

i

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with competing lines which extend to the Texas ports, or may be

forbidden so to do because it is a party with the competing ear-

riers to joint rates from stations on its own line to the Texas

ports. The same issue is presented with respect to the L. RL & N.

Neither of the appellants controls the rates to the Texas ports and

the Commission so finds.°* Though the Texas port lines ean re-

duce their rates to and from those ports without the eoneurrenee

of the New Orleans lines, no reductions can be made in those rates

by the New Orleans lines, even from or to their local stations,

without the coneurrence of one or more lines reaching the Texas

ports. Clearly the New Orleans carriers have no effective control

over the rates between their junction points and the Texas ports.

As respects local stations, their participation in joint rates with the

lines to Texas ports is required by Section 1 (4) of the Aet; but

23The conditions on the L. R. & N., while differing in fact from those af-

fecting the T. & P., present the same question and need not be separately

stated.

3sThe finding is: ‘‘The New Orleans carriers participate in a full line of

joint commodity rates to and from Gulf ports from and to both the junction

and local points on their lines. While, under the rules governing the south-

western carriers and their tariff-publishing agents, the New Orleans curriers

have the power to increase the rates from points served by them to the Texas

ports without concurrence of their connections, a reduction in such rates

would require the consent and concurrence of the participating Texas lines.’’

(160 I. C. C. 356.)

ee ee er ee ee ee

Texas & Pacific Ry. Co. et al. vs. United States et al. 15

such rates may not be higher than reasonable maxima fixed by

national or state authority nor lower than the amount agreed to by

their connections to the Texas ports. The appellants insist that

their compulsory participation in rates to and from the Texas

ports has no legal significance, and the question remains whether

they in fact exercise effective control over those rates.

The elassical case of discrimination in rates is presented where

a single carrier serving two points approximately equidistant from

a common origin on the carrier’s line, exacts unequal rates for the

two hauls. Not only is the prejudice obvious, but equally so the

ability of the carrier to abate it by raising the rates to the point

enjoying the lower rates, or decreasing those to the point subject

to the higher charge. The principle comprehends, as well, in-

stances of joint rates where the same carriers participate in the

rates to both points.*° and where the originating (or delivering)

earriers are different. but the delivering (or originating) carriers

are the same.** So, too, a carrier may be responsible for preference

or prejudice where it participates in one of several through routes

between point of origin and the prejudiced destinations, although

its own line may reach only one or neither of the latter, St. Louis

S. W. Ry. v. United States, 245 U.S. 136, for the discrimination

is brought about by the disparity of rates, and the order requiring

its abatement necessarily runs against all the carriers parties to

them. If one or more of the railroads whose lines make up the

through route should refuse, upon an order to equalize rates, to

afford one of the others a proper division of the rate, the latter

may obtain redress from the Commission under Section 15 (6).

Where, however. a carrier whose lines reach, or which controls the

rate to, one of the destinations, is a party to a joint rate to the

other but cannot make or control the latter rate, or though it

were to withdraw as a party thereto, or to cancel the rate, the

discrimination would still continue—it cannot be held responsible,

nor can any order to remove the prejudice run against it.” This

rule has been consistently applied in respect of export and import

Southern Ry. Co. v. United States, 204 Fed. 465; Chicago, I. & L. Ry. vw.

United States, 270 U. S. 287; Rates on Grain Milled in Transit, 35 I. C. C. 27.

Lake Dock Coal Cases, 89 I. C. C. 170; Seneca Wire & Mfg. Co. v.

B. & O. R. Co., 112 I. C. C. 95.

*This doctrine has been *pplicd by the Commission in at least forty-five

eases, under varying circumstances containing one or more of the elements

aN,

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16 Texas & Pacific Ry. Co. et al. vs. United States et al.

rates to the ports.** The reason for the doctrine is that preference

or prejudice can be found only by a comparison of two rates,

If these are the rate of one carrier to point A and that of

another to point B while a relationship of one to the other may be

determined neither the first nor the second carrier alone can be

held to have created the relation. Assuming that neither rate is

unreasonable, the one carrier cannot be compelled to alter its rate,

because the other’s is higher or lower for the same service. A

carrier or group of carriers must be the common source of the

discrimination—must effectively participate in both rates, if an

order for correction of the disparity is to run against it or them,

Where an order is made under section 3 an alternative must be

afforded.°? The offender or offenders may abate the diserimina-

tion by raising one rate, lowering the other, or altering both.

Compare American Express Co. v. Caldwell, 244 U. 8. 617, 624;

United States v. Penna. R. Co., 266 U.S. 191; Chicago I. & L. Ry.

Co. v. United States, 270 U.S. 287, 292; Minneapolis & St. L. R.

Co. v. Peorta & Pekin U. R. Co., 270 U.S. 580, 582. The situation

must be such that the carrier or carriers if given an option have an

actual alternative.

The principle has been approved in decisions of this court with

respect to practices, Interstate Commerce Comm. v. Diffenbaugh,

222 U.S. 42; Central Railroad of New Jersey v. United States, et

mentioned. It was first announced soon after the organization of the Com-

mission in Eau Claire Board of Trade v. C. M. & St. P. R. Co., 5 I. C. C. 264,

was elaborated in Ashland Fire Brick Co. v. Southern Ry. Co., 22 I. C. C. 115,

and has been referred to as the doctrine of the Ashland Fire Brick case since

that time. For a reference to some of the decisions applying the rule see the

dissenting opinion of Commissioner Porter in Duluth Chamber of Commerce 0.

C. & N. W. By. Co., 156 I. C. C. 156, 173.

ssChamber of Commerce of New York v. N. Y. C. & H. R. R. Co., 241.0. ¢.

55, 75; Molasses from Mobile, 28 I. C. C. 666, 669; Sugar Cases of 1922,

SLI. C. C. 448, 471; Valley Camp Coal Co. v. B. & O. R. R. Co., 88 I. C. C. 682,

686; Maritime Assn. of Boston v. Ann Arbor R. R. Co., 95 I. C. C. 539, 565,

572-3, 574, 575; Id., 126 1. C. C. 215; Lake Cargo Coal Rates, 1925, 101 I. ¢. ¢.

513, 545; Mobile Chamber of Commerce v. M. S. B. & P. R. Co., 129 I. C. C.

419, 422; Bananas from Gulf Ports, 140 I. C. C. 682 (Eastman, Commissioner,

concurring, at p. 684); Lake Charles Harbor & T. Dist. v. Brimstone 8. & C.

Co., 157 I. C. C. 720, 723.

*°This is not true of an order pursuant to Section 15 (1), prescribing maxi-

mum or minimum or maximum and minimum rates; but the present orders

were not issued under that section.

el s son A ee, eee eer

Texas & Pacific Ry. Co. et al. vs. United States et al. 17

al., 257 U. S. 247, and rates, East Tenn. V. & G. Ry. Co. v. Inter-

state Commerce Comm., 181 U. S. 1; Penn Refining Co. v. Western

N.Y. & P. R. R. Co., 208 U. 8. 208, 221.

In the Central Railroad case it was said (p 259): ‘‘But par-

ticipation merely in joint rates does not make connecting carriers

partners. They can be held jointly and severally responsible for

unjust discrimination only if each carrier has participated in some

way in that which causes the unjust discrimination; as where a

lower joint rate is given to one locality than to another similarly

situated. (Citing eases.) If this were not so, the legality or ille-

gality of a carrier’s practice would depend, not on its own act, but

on the acts of its connecting carriers. . . . What Congress

sought to prevent by that section [3], as originally enacted, was not

differences between localities in transportation rates, facilities and

privileges, but unjust discrimination between them by the same

earrier or earriers.’’ While this language was used with respect

to circumstances differing from those here disclosed, it applies to

the situation of appellants, who are by the Commission’s order

held responsible for what is not and cannot be the result of their

own acts,—the level of the rates to the Texas ports.

In the East Tennessee case the court said (p. 18):

‘The prohibition of the third section, when that section is con-

sidered in its proper relation, is directed against unjust discrimi-

nation or undue preference arising from the voluntary and wrong-

ful act of the carriers complained of as having given undue prefer-

ence, and does not relate to acts the result of conditions wholly

beyond the control of such carriers.”’

The appellees contend, however, and the Commission concluded

that in later eases the court has held the principle inappli-

cable in circumstances so like those here exhibited that it

should not control our decision in the instant case. One of these

is St. Louis S. W. Ry. Co. v. United States, 245 U. 8. 136, cited for

the proposition that the Commission has power to prevent car-

riers which participate in rates from blanket territory from dis-

criminating against a particular destination, although one of them

does not with its own lines reach such destination, but bills through

traffic to it over connecting lines. The order there under review

was for the establishment of a reasonable joint rate, or in the al-

ternative new through routes with joint rates, under Section 15

of the Act, and was held by this court to be primarily an order

PAY

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MOTE Fe . PEGE CEASA OE OS

18 Texas & Pacific Ry. Co. et al. vs. United States et al.

under that section, and not under Section 3. The statement with

respect to the possibility of unjust discrimination by all the par-

ticipating carriers, even though the rails of some did not reach the

locality prejudiced, is clearly sound, but is beside the point here

in issue; for in that ease no question as to the control of the rate

to both points by any carrier affected by the order was raised or

decided.

Chicago, I. & L. Ry. Co. v. United States, 270 U. S. 287, is relied

upon because of the statement in the opinion that ‘‘ Wherever dis-

crimination is, in fact, practiced, an order to remove it may issue;

and the order may extend to every carrier who participates in

inflicting the injury’’. This was said with respect to a mandate

to three carriers serving Michigan City, each of which had refused

to enter into interchange arrangements with an electric railroad.

Their lines did not connect directly with the electric line, but re-

quired for interchange the service of an intermediate switching

carrier. The order of the Commission was held proper because

each defendant railroad was solely responsible for the prejudice

resulting from its own refusal to maintain interchange arrange-

ments with the electric line, and for the preference of maintaining

such arrangements with other carriers at Michigan City. Each

could, without reference to the conduct of any other, correct the

unjust discrimination which it individually practiced. The very

question here is whether the New Orleans lines in fact control the

rates to the Texas ports and the Commission has answered it in the

negative. .

Principal reliance is placed upon United States v. Illinois Cen-

tral R. R., and Wyoming Ry. Co. v. United States, 263 U.S. 515.

In the first it appeared that the Illinois Central equalized rates on

lumber to certain destinations from all its main and branch line

points in blanket origin territory, and from points on certain inde-

pendent short lines within the blanket area, but refused to extend

similar blanket rates to producing points on the Fernwood & Gulf,

an independent short line serving the same area. The Illinois Cen-

tral’s excuse was that it could not afford to shrink its earnings by

larger divisions to the Fernwood & Gulf. The complaint before

the Commission was against both carriers and the Commission

required that both should abate the unjust discrimination.”

“Swift Lumber Co. v. F. & G. R. R. Co., 61 I. C. C. 485.

MR ayers Tek

a

Texas & Pacific Ry. Co. et al. vs. United States et al. 19

In the second case it was shown that the Burlington published

a blanket rate on lumber to destinations on a portion of its main

ine and to points located on its branch lines, but refused to join

jn an equal rate to a point on an independent branch line con-

nected with the blanketed portion of the main line. The service

to the latter point at the higher combination rate was less than

was rendered to points on the Burlington’s branch lines. The

Commission ordered both carriers to abolish the undue preference

and prejudice.**

It will be noted that in the one case the Illinois Central and in

the other the Burlington made the one rate and was a party to the

other. Not only so, but in each case the trunk line carrier con-

trolled the joint or combination rate to or from the prejudiced lo-

eality. Quite clearly the independent line could not equalize that

rate with the one in foree to the preferred locality without the con-

eurrence of the trunk line. Both railroads joined in the bill to en-

join enforcement of the order in the J/imois Central ease, but only

the independent carrier filed the | n the Burlington ease.

The appellees insist that as t rders ran against the inde-

pendent road as well as the * ind this court refused to

set them aside, it necessar fT] that a carrier may be liable

for unjust discrimination by** - ts mere participation in

one of the rates whether or s that rate. The argu-

ment ignores the substance ar ‘the decision. The trunk line

controlled both rates, and by its action alone could the disparity

be corrected. But the short line was a party to one of the rates

which created the illegal relation; and was therefore properly

joined in the order. Compare Virginian Ry. Co. v. United States,

272 U. S. 658, 665. The fact, however, that the order included the

short line is entirely insignificant on the question whether the

same carrier in fact controlled both rates and was, in fact, respon-

sible for the undue preference and prejudice. The contention of

the short line that it did not participate in the discrimination be-

eause it did not join in the lower rates to the preferred locality

maintained by the Illinois Central, and could not, therefore, by its

own act, remove the discrimination, was properly overruled. As

said by the court, that carrier, in joining the Illinois Central in

establishing the prejudicial through rate, was as much a party to

the discrimination as if it had also joined in the lower rates to the

41Pioneer Lumber Co. v. Director General, 64 I. C. C. 485.

=

20 Texas & Pacific Ry. Co. et al. vs. United States et al.

other points alleged to be unduly preferred. If Fernwood & Gulf

eould not persuade the Illinois Central to join in a new non-dis-

criminatory rate and accord it a proper division, it had a plain

remedy under Section 15 of the Act. To make the decision a

precedent for the instant case it would have to be found that the

New Orleans carriers effectively controlled both the rates to New

Orleans and those to the Texas ports. If they did, obviously an

order might run not only against the New Orleans carriers but

against their connections to the Texas ports, albeit the latter did

not control those rates.

We find nothing in any of the decisions which renders inappli-

eable the principle upon which the Commission has acted, with

the approval of this court, for more than forty years in the ad-

ministration of Section 3, and conclude that the New Orleans

lines could not properly be held guilty of unjust discrimination

against the Texas ports in the absence of a finding of effective

participation it the rates to them.

3. The conclusions announcec render it unnecessary to con-

sider the other questions pressed by the appellants.

The judgment must be reversed and the cause remanded to the

District Court for further proceedings in conformity with this

opinion.

It is so ordered.

A true copy.

Test:

Clerk, Supreme Court, U. 8.

PRO

i A ¢ ate i . : ME AEE TNS TIE EM ITY ST

SUPREME COURT OF THE UNITED STATES.

No. 1.—OctToBer TERM, 1932.

Texas & Pacific Railway Company, et

al., Appellants,

vs.

United States of America, Interstate

Commerce Commission, et al.

Appeal from the District

Court of the United

States for the Southern

District of Texas.

[May 29, 1933.]

Mr. Justice STONE, dissenting.

The Interstate Commerce Commission, acting under § 3 (1)

and §15 (1), of the Interstate Commerce Act, 24 Stat. 379, as

amended by Transportation Act, 1920, 41 Stat. 456, after ex-

tensive investigation, has found that the rates of rail carriers

on commodities moving in import, export and coastwise trans-

portation from or to points in Texas, Oklahoma and Southern

Kansas, and in Louisiane west of the Mississippi River were unduly

prejudicial to Galveston and other Texas gulf ports and unduly

preferential of New Orleans. Its order, framed to restrict, but

not to remove entirely the discrimination, sustained by the District

Court of three judges below, is now held void and set aside by this

Court. I think that the order is within the competency of the

Commission, is supported by the evidence, and should in all re-

spects be upheld.

Stated generally, the discrimination complained of is the main-

tenance of rates by the rail carriers which give no recognition to

the proximity of Galveston and other Texas ports to the interior

points involved. The rates thus deprive the Texas ports of the

natural advantage of their geographical position over that of a

rival port, New Orleans; and as the commercial advantages of New

Orleans exceed those of the Texas ports, the rates result in the

diversion of traffic to the former from territory normally tributary

to the latter. The Commission found that although the length of

haul from the interior shipping points to the Texas ports is less

than that to New Orleans, the difference varying from 162 to 213

2 Terxas & Pacific Ry. Co. et al. vs. United States et al.

miles from typical points,’ the carriers have long maintained the

same, and in u.any instances substantially lower rates to New Or.

leans. In territory nearer to New Orleans than to the Texas ports,

the lesser service has, on the other hand, been given recognition by

correspondingly lower rates. The Commission has found, and y

is not questioned, that transportation costs and conditions through.

out the southwest territory are substantially the same; that the

rates established by the carriers disregard generally and materially

the amounts and costs of service; that the discrimination has de

prived and will continue to deprive the Texas ports of the natural

advantage of their more favorable geographical position, and has

resulted and will continue to result in building up the port of New

Orleans to their detriment and at their expense. The order as.

sailed seeks to curtail this discrimination and the injury whieh it

inflicts. It leaves undisturbed the lower rates in force to New

Orleans from points nearer that city than Galveston and permits

parity of rates where the distance to New Orleans does not exceed

that to Galveston by more than 25°7, but for differences in distance

exceeding 25% it has named minimum differentials under the rates

maintained to New Orleans.

In holding that the Commission is without power to make the

order, the Court does not deny that a discrimination which is pro-

duced by charging equal rates for unequal service is prohibited by

the statute as much as one resulting from unequal rates for equal

service. Compare The Shreveport Case, 234 U. S. 342, 346. Nor

does the Court consider material, in this respect, the findings of

the Commission that the rates to Texas ports and New Orleans are

both reasonable to shippers, in that the former are not too high, or

the latter so low as to cast a burden on other traffic. For it is not

denied that the Commission may remove a discrimination effected

by rates which are within the zone of reasonableness if the dis-

crimination is one forbidden by §3 (1) of the Act. American

Express Co. v. Caldwell, 244 U. 8S. 617; United States vy. Illinois

Central Ry. Co., 263 U.S. 515, 524. It is not suggested that a

discrimination effected by reasonable rates may not result in gross

injury to the locality discriminated against; and the opinion does

1The distances range from 162 miles from typical points in southern Kansas

and 174 miles from typical points in Oklahoma to 213 miles from typical

points in northern Texas. Waco is 233, Dallas 291, and Fort Worth 308 miles

nearer Galveston than New Orleans.

ie

Teras & Pacific Ry. Co. et al. vs. United States et al. 3

not question the correctness of the findings here that such injury

is inflicted on the Texas ports by the prohibited rates. The issue

is thus narrowed to two questions, first, whether the acts of Con-

gress waving broad powers to the Commission to remove discrimina-

tions resulting in undue or unreasonable prejudice to a ‘‘locality’’,

, bave conferred any power on the Commission to curtail an unduly

prejudicial diserimination against a port, and second, whether, as-

suming that the Commission has such power, it mev order the re-

moval of the discrimination by the appellant carriers who par-

ticipate in the discriminatory rates, although their rails reach only

New Orleans, and not the Texas ports.

First. The Court holds that this power is lacking because the

locality injured by the discrimination, a port, is neither the origin

nor the ultimate destination of the traffic involved, but a gateway

through which it passes, albeit it is arrested there pending its

transshipment upon a new and independent contract for ocean

transportation. It is said that a gateway is not a ‘‘locality’’ within

the meaning of the Act because it was never intended that the

statute should forbid discrimination against localities which are

not points of origin or ultimate destination, however unreasonable

and unjust the discrimination may be.

The words of the statute neither state nor suggest such an excep-

tion.

Section 3 (1) of the Interstate Commerce Act declares:

“that it shall be unlawful for any common earrier . . . to

make or give any undue or unreasonable preference or advantage

to any particnlar person, company, firm, corporation or locality,

or any particular description of traffic, in any respect whatsoever,

or to subject any particular person, company, firm, corporation or

locality, or any particular description of traffie to any undue or

unreasonable prejudice or disadvantage in any respect whatsoever.’”’

Section 15 (1) gives to the Commission plenary power to remove

any such ‘‘unjustly discriminatory or unduly preferential’’ indi-

vidual or joint rate, by ordering the carrier or carriers to cease

and desist from the violation, and by prescribing a just and rea-

sonable individual or joint rate to be observed by the carrier or

carriers concerned. On its face the prohibition of any undue and

unreasonable prejudice to ‘‘any particular loeality’’, ‘‘in any re-

spect whatsoever’’, would seem so plainly to include a port as to

leave no room for construction. Compare United States v. Shreve-

EAR Re EG RANE asada : ‘

SARS aCe tie ine;

state seth Werke od

4 Texas & Pacific Ry. Co. et al. vs. United States et al.

port Grain & Elevator Co., 287 U.S. 77; Crooks v. Harrelson, 282

U. S. 55; Van Camp & Sons v. American Can Co., 278 U.S. 245,

253.

I can find nothing in the purpose or history of the statute which

suggests that it means any less than it says. This Court has often

declared that the purpose of the all-embracing language of the

statute was to suppress every form of unreasonable discrimina-

tion which it was within the power of Congress to condemn. Mer-

chants Warehouse Co. v. United States, 2838 U.S. 501, 512; Lowis-

ville &@ Nashville R. R. Co. v. United States, 282 U. 8S. 740, 749-

750; The Shreveport Case, supra, 356; Louisville & Nashville

R. R. Co. v. Moitley, 219 U.S. 467. It has said that discrimination

was the principal thing aimed at and ‘‘the purpose of Congress

was to cut up by the roots every form of discrimination, favoritism

and inequality’’. Louisville & Nashville R. R. Co. v. Mottley,

supra, 478.

Statutory language so unambiguous and a purpose so compre-

hensive do not readily yield to the conclusion that a locality which

is a port is not a ‘‘locality’’ within the meaning of the Aet.

The bare fact that a port is a gateway and not the ultimate

destination of the traffic, does not support that conclusion, for

the commercial interests of a port, always of great magnitude,

may suffer the same destruction from discriminatory rates as do

shippers or other industrial interests at points of origin or desti-

nation. <A rate structure which diverts from one port to another

a portion of the ocean-borne traffic, which would otherwise natur-

ally pass through the former, sufficient to destroy the business of

banks, marine insurance companies, freight forwarders, freight and

ship brokers, stevedores, tonnage companies, pilots, dry docks,

ship supply and bunker coal merchants, customs brokers, ex-

port and import commission houses, centered there, would seem to

have an effect upon the commerce and general welfare of the

country of precisely the kind which the aet was intended to pro-

hibit and the Commission empowered to prevent. So the Com-

mission has concluded in a series of eases dealing with discrimi-

nation against ports, going back to the first years of its existence.

See NV. Y. Produce Exch. v. B. & 0. BR. R. Co., 7 I. C. C. 612,

658, 660; In re Export and Domestic Rates, 8 I. C. C. 214; In

re Differential Rates, 11 1. C. C. 13; Chamber of Commerce of N.

Y. v. New York Central, 24 1. C. ©. 55, 27 I. C. C. 238; Astoria v.

Py eae

SEO 2 Ie RI IPL RABI TEI NES “¥ PA Fe AL PS Aas CURT AR, ay

Texas & Pacific Ry. Co. et al. vs. United States et al. 5

8. P.& 8. R. Co., 38 1. C.. C. 16; In re Import Rates, 24 I. C. C. 78;

New York Harbor Case, 47 I. C. C. 643; Mobile Chamber of Com-

merce V. Mobile & O. R. Co., 57 I. C. C. 554; Coffee from Galveston

and other Gulf Ports, 58 I. C. C. 716; 64 I. C. C. 26; Charleston

Trafic Bureau v. Ala. & G. 8S. R. Co., 89 1. C. C. 501; Maritime

Assn., Chamber of Commerce, Boston v. Ann Arbor R. Co., 95

I. C. C. 589; Oswego v. B. & O. R. Co., 151 I. C. C. 717.

This administrative practice and construction cannot be dismissed

with the observation that where ‘‘a statutory body has assumed a

power plainly not granted no amount of such interpretation is

binding upon the court’’, for the question obviously is whether or

not a power was granted which the language of the statute plainly

embraces and which certainly was not plainly denied. In de-

termining that question when the meaning of the statute is doubt-

ful on its face, we have often said that administrative construe-

tion is of persuasive force, see United States v. Chicago, North

Shore & Milwaukee R. R. Co., 288 U. S. 1; N. Y., N. H. &

H. R. R. Co. v. Interstate Commerce Commission, 200 U. 8S. 361,

401, particularly where, as here, the statute has been frequently

amended and the provision relied upon retained in _ identical

form. Compare Brewster v. Gage, 280 U. S. 327, 336; National

Lead Co. v. United States, 252 U. 8. 140, 147. This construction

certainly cannot be summarily disregarded in favor of another

which departs both from the plain meaning of the words and from

the policy which has hitherto been thought to have inspired their

use. /

To support such a departure it is said that as the railroads,

before the enactment of the statute, had in some instances at-

tempted to equalize competing ports by setting up a rate structure

which did not conform wholly to the carrier service involved, and

as Congress, in the Interstate Commerce Act evinced no intention

to prevent competition for business between rail carriers, it could

not have intended by this legislation forbidding discrimination

prejudicial to localities to forbid discriminations between rival

ports, however unreasonable and injurious.

The port differentials and equalizations maintained prior to the

passage of the original act, in order to secure a fair distribution of

traffic among the Atlantic ports and the carriers serving them were

very different in quality and prejudicial effect upon the localities

concerned from the rate structure resulting in the discrimination

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6 Texas & Pacific Ry. Co. et al. vs. Umited States et al.

disclosed here.*. The existence of those equalizations before 1887

and the fact that in some instances since that date they have

been regarded as innocuous even by the Commission itself, can

hardly lend support to the supposition that the statute was not

intended to forbid destructive discriminations in that form as well

as in any other. The argument seems to be that the statute cannot

be deemed to forbid unjust discriminations against ports since if

it did all rates to competing ports not measured by mileage or car-

rier “ervice would be forbidden whether unjust or not. With equal

plausibility it was argued that because competition between car-

riers was an established practice before the enactment of § 3 and

is not forbidden by the Act, no discrimination induced by carrier

competition was forbidden. But that construction was rejected

by this Court, Wight v. United States, 167 U. 8S. 512, 517; United

States v. Illinois Central R. R. Co., supra; Merchants Warehouse

Co. v. United States, supra, for the same reason that the present

construction should be rejected—that although carrier competition

was not destroyed by the Interstate Commerce Act, it was limited

by the prohibition of §3 of those discriminations which, in the

light of all the cireumstances, are found to be undue or unreason-

able.

The statute does not purport to prohibit all discriminations. It

reaches only those against either localities or shippers which result

in prejudice which is ‘‘undue or unreasonable’’. Cf. Nashville,

C. & St. L. Ry. v. Tennessee, 262 U. 8. 318, 322. Hence, in de-

termining whether a discrimination involved in a port equalization

is ‘‘undue or unreasonable’’, competition is a factor which may not

be ignored (see Interstate Commerce Commission v. Alabama Mid-

land Ry., 168 U.S. 144, 170) the Commission is not to leave out of

account either past history or practical experience, or the effect

of the discrimination on the ports concerned. But even though

2Differentials were adopted by voluntary agreement of the carriers to elimi-

nate competitive rate wars, ruinous to the railroads, and to the localities con-

cerned. Their effect was to preserve rather than to destroy a fair distribution

of the traffic from the west to the Atlantic Seaboard. See John B. Daish,

Atlantic Port Differentials (1918); Preferential Transportation Rates, Re-

port of the United States Tariff Commission, 1922, p. 279; ef. Commissioner

Prouty, In the Matter of Differential Rates, 11 I. C. C. 13, 61 ff. and the briefs

in the same case reprinted in the appendix to the hearings on the Hepburn

Amendment before the Senate Committee on Interstate Commerce (1905), Vol.

V, p. 407.

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Texas & Pacific Ry. Co. et al. vs. United Staies et al. 7

the exigencies of competition may be entitled to greater considera-

tion in a case of discrimination between ports than in one of dis-

crimination between shippers, the weight which is given to it and

to the other relevant facts, in determining whether the discrimi-

nation is so unjust as to be forbidden, does not go to the Commis-

sion’s power but to the propriety of its exercise. United States v.

Illinois Central R. R. Co., supra, 525; Interstate Commerce Com-

mission V. Alabama Midland Ry., supra. That the Commission so

conceives its powers and function in considering a rate adjustment

equalizing ports, is apparent from its statement of the problem in

the present case:

‘Such an adjustment necessarily disregards distance and com-

mercial instead of natural advantages control. We have consist-

ently refused to condemn such an adjustment where it is shown to

serve the best interests of the public, but where, as here, it builds

up one port at the expense of another equally favored by natural

advantages from the origin territory here considered, a line must

be found beyond which distance may not be disregarded.’’

This language of the Commission appears to me to suggest the

only reasonable interpretation of the statute consonant with its

language, its history and its background. The statute does not

command or the Commission’s order direct that the rates shall be

measured exclusively by mileage or carrier service; carrier com-

petition for business passing through gateways or elsewhere is not

forbidden, but when the discrimination goes so far beyond the line

of reasonableness as to result in the commercial destruction of a

locality, the Commission may declare it ‘‘undue or unreasonable’’

- and, therefore, forbidden by the statute, whether aimed at ports or

points of shipment or destination. Nothing that this Court has

ever said is inconsistent with this conclusion. The legislative his-

tory of the statute seems to support, rather than to deny it.

Close scrutiny of the legislative history of the original act and

of the Hepburn Amendment fails to disclose any intention to ex-

cept from the forbidden discriminations against localities, undue

or unreasonable discriminations against ports. Senator Cullom,

who was in charge of the earlier bill, made no reference to the

present question in his explanatory statement,® cited in the opinion

SWith respect to §3 Senator Cullom said: ‘‘The third section .. . con-

tains a general prohibition of every variety of unjust discrimination. The

section covers two subjects. The first paragraph prohibits the giving of any

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8 Texas & Pacific Ry. Co. et al. vs. United States et al.

of the Court,‘ and none is to be found in the House proceedings

to which reference is also made.* Senator Cullom emphasized the

fact that the discriminations forbidden included those against lo-

calities and nowhere suggested any exceptions. Mention in the

Report of the Senate Committee of the investigation of a committee

of the British Parliament and the quotation of its conclusions,*

are without significance here. Those conclusions were not endorsed

undue or unreasonable preference to any particular person or locality, or any

particular description of traffic, in any respect whatever, and declares such

a preference unlawful. . . . This covers in general terms, though by no means

so completely, the provision of section 2 as to discriminations against persons,

but goes further and includes discriminations against localities or particular

descriptions of traffic. The language adopted in this paragraph is substantially

that of the English statute on the subject which has been repeatedly con-

strued by the English courts, so that its meaning has already been judicially

established . . .’’ (Cong. Ree., 49th Cong., Ist Sess., vol. 17, p. 3472). It

may not be without significance that the English antecedents of § 3, The Rail-

way and Canal Traffic Act of 1854 (17 & 18 Viet., e. 31, §2) and the Act

of 1873, amending it (36 & 37 Vict., ¢. 48, §11) failed to include preference

of localities.

See also Senator Cullom’s final answer to Senator Hoar’s question whether

the effect of § 4 of the proposed act, prohibiting the charging of more for a

shorter than a longer distance over the same line under substantially similar

conditions, would not eliminate port differentials, then in existence, favoring

Boston: ‘‘ ... if we are going to regulate these corporations at all, if we

are going to stop unjust discriminations and the secret rebates by which towns

are built up and towns are destroyed, by which individuals are destroyed and

individuals are built up, we must have something in the bill which will mean

something, or else we might as well lay the bill on the table and go at other

business’’. (Cong. Ree., 49th Cong., 2d Sess., vol. 18, pp. 485, 486.) Compare

his statement in discussing the conference report: ‘‘It has been said over

and over again here that the railroad companies would build up one man and

crush another; that their policy has been to destroy one locality or city and

build up another. Here we have undertaken to so regulate them as to pre-

vent them from doing those things so far as we can de so.’’ (Cong. Ree.,

49th Cong., 2d Sess., vol. 18, p. 660.)

4See the opinion of the Court, note 18.

5See Cong. Rec., 49th Cong., Ist Sess., vol. 17, pp. 7277, 7294, 7298.

6Report No. 46, 49th Cong., Ist Sess., p. 57. Compare the Committee’s

statement of the fundamental theory and purpose of the bill (p. 215): ‘‘The

provisions of the bill are based upon the theory that the paramount evil

chargeable against the operation of the transportation systems of the United

States as now conducted is unjust discrimination between persons, places,

commodities, or particular descriptions of traffic. The underlying purpose and

aim of the measure is the prevention of thes discriminations. . . .’’

ee AOE S Dee FRETS er

Texas & Pacific Ry. Co. et al. vs. United States et al. 9

by the Senate Committee and did not deal with undue diserimina-

tions produced by railroad competition. It is true that in the de-

bates in Congress on the Hepburn Amendment it was pointed out

in several instances that the bill did not confer on the Commission

the general power to fix differentials to ports or to any other points,”

but it was also pointed out that *‘ Section 3 of the original act applies

just the same. We have not undertaken to amend, limit, or extend

Section 3. Whatever is unjust and discriminatory under Section

3 is unjust under the provisions of this bill and such will be pro-

hibited . . .’ Moreover the basis for this want of power to

fix differentials was not that a port is not a “‘locality’’ within the

meaning of § 3, but that differential rates on different roads ean-

not be fully controlled without the fixing of a minimum rate.®

And it was recognized in the decisions of this Court prior to the

enactment of Transportation Act, 1920, conferring the power to fix

see nouvel

*See Cong. Ree., 59th Cong., Ist Sess., vol. 40, pp. 1788, 2084-5, 2247, 2248,

3792, 6683.

*For the full quotation, see note 9, infra.

*Compare the statement of Mr. Stevens, a member of the House Committee:

‘‘My people are just as much interested that there should not be any undue

control of differential rates. . . . But it is just as clear to us and to the whole

committee that there is no such power in this bill. . . . The situation presented

by the bill and the reasons why differentials are not covered are very simple.

Under this bill the Commission would have authority to fix what, in its judg-

ment, would be a just, reasonable, and fairly remunerative rate or rates as

the maximum to be charged. It would have no authority to fix an absolute

rate, Which must be observed by the carrier, and no authority to fix a minimum

rate, below which the carrier eannot go; and a preferential ean not be con-

trolled without there is authority to control absolutely both legs of the differ-

ential. In this ease the Commission eannot control either. It must fix a rate

which shall be just and reasonable and fairly remunerative as the maximum

to be charged. This leaves the carrier to charge anything it pleases below the

maximum. And sinee there is no power to fix any absolute rate and no mini-

mum rate, there is no power in the Commission to control the relation of rates,

and so no power to control the differential.’’ Mr. Olmsted then asked whether

‘‘under this bill the railroads may make as many unjust discriminations as

they please and the Commission would be powerless to correct them’’. Mr.

Stevens answered: ‘*Oh, no; . . . Seetion 3 of the original act applies just

the same. We have not undertaken to amend, limit, or extend section 3. What-

ever is unjust and discriminatory under section 3 is unjust under the provisions

of this bill, and such will be prohibited; but we will not allow the making of

4 minimum or absolute rate, which is the only adequate way of controlling a

differential’’. Cong. Ree., vol. 40, p. 2085. It does not appear that Mr.

Mann's statement ( Cong. Ree., vol. 40, p. 2247) quoted by the Court (note 20)

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10 Texas & Pacific Ry. Co. et al. vs. United States et al.

minimum rates, that unjust discriminations produced by the re-

lation of rates charged or participated in by the same carrier might

be forbidden by the Commission by lowering the higher rate, (com-

pare St. Louis 8. W. Ry. Co. v. United States, 245 U.S. 136, 144)

or by an order which left the carrier free to raise or continue the

lower rate; ‘*the compulsion being that if the low rate is retained

the rate applicable to the lecality or article discriminated against

must be reduced’’. Skinner & Eddy Corp. v. United States, 249

U.S. 557, 566.

Second. The Court also holds that even if a port is a ‘‘ locality”

within the meaning of the statute, and prejudicial diserimina-

was intended te have any different meaning. Indeed his reference to ports

and to ‘‘cities’’ would seem to indicate that he did not believe that ports

were in any different position with reference to differentials than points of

origin or destination. See also Cong. Ree., vol. 40, p. 3792, and compare the

remarks of Senator Lodge, Cong. Rec., vol. 40, p. 4111, which indicate, if any-

thing, his belief that the differentials between Boston and other Atlantic ports

Were within the control of the Commission. ’* F

It was also pointed out that relative rates on different roads were not within. .

the control of the Commission. In discussing differentials, Senator Raynor

pointed out that the provisions of the bill ‘‘are limited to discriminations upon

the same roads. The words ‘unjustly diseriminatory’ or ‘unduly preferential’

or ‘prejudicial’ apply to rates and regulations and practices upon the same

road, because there can be no such thing as an unjust discrimination or an

undue preference between different roads supplying different territory and

terminating at different points. . . . If one road charges an unreasonable rate

or a discriminating rate, that would surely not justify the Commission’s ad-

justing the rate between this road and some other road that has no connection

with it by law or privity of contract... .?" (Cong. Ree., vol. 40, p. 6683.)

Read in the light of this statement, there is nothing to support the conclusion

of the Court in the other statement of Senator Raynor referred to in the

opinion (note 20) that there is no ‘‘power Whatever in the Commission to

adjust clative rates and strike the proper proportions between them. The

ports of the United States, therefore, are not within the jurisdiction of the

Hepburn Act. If there is a differential between different ports upon different

lines of railroads, there is no provision in this measure that invests the Com-

mission with the right to change it. It has a perfect right, of course, where

discrimivation exists upon the same line, as if a rate to an inland point com-

pared wih a rate to a terminal point is unreasonable or unjustly diserimin-

atory, to preseribe 4 maximum rate; but it has no right to bring competitive

roads struggling for competitive markets within its jurisdiction, and I deny

in its entirety the proposition that the Commission could by any exercise of

its power, direc, or inferential, take away from any railroad its right to

charge its own rates, unless the rate is unreasonable or unduly preferential or.

discriminatory upon its own line’’. (Cong. Ree., vol. 40, p. 3792.)

Texas & Pacific Ry. Co. et al. vs. United States et al. 11

tions against it are forbidden, still the Commission is without

power to order the Texas & Pacific R. R. Co. and the Louisiana

Railroad & Navigation Company to remove the discrimination.

Both these lines reach New Orleans with their own rails and both

participate in through rates and a full line of joint rates between

local and junction points on their own lines and the Texas ports.

They thus control the rate to New Orleans and are parties to rates

to the Texas ports and to the prejudicial discrimination. Never-

theless, it is said that the Commission is without power to make an

order removing the discrimination which does not afford to the ear-

riers an alternative method of removing it, either by lowering the

rates to the Texas ports or raising those to New Orleans, and that

the present order does not afford such an alternative because of the

appellants’ inability to control the rates to the Texas ports.

The Commission may, in directing the removal of a discrimin-

atory rate or practice, not otherwise objectionable, allow to the

carrier a choice of methods of removing the discrimination by the

modification of one rate or practice or the other. By the present

order the two carriers are left free to remove the discrimination

by raising the New Orleans rate which they control, or by enter-

ing into lower joint or through rates with the connecting carriers

to the Texas ports—a latitude which may serve the interest of the

earriers better than would an order specifically directing them to

raise the New Orleans rates. Beyond question these roads ean re-

move the discrimination by raising the New Orleans rates and it

neither appears, nor is it argued, that they cannot remove it by

lowering the rates to the Texas ports by agreement with their eon-

necting carriers or, in default of agreement, by reducing their own

division and securing a corresponding reduction of the joint rate

on application to the Commission under § 15 (6). See St. Louis

Southwestern R. R. Co. v. United States, 245 U.S. 136, 139, note 2:

compare United States v. Illinois Central R. R. Co., supra, 521.

But the statute does not compel the Commission to afford

such an alternative or permit an offending carrier to avoid its

salutary provisions merely for the reason that, although partici-

pating in both the offending rates, it ean with certainty control

only one. It is true that in cases arising before the enactment of

Transportation Act, 1920, by which power was given to the Com-

mission to fix a minimum rate, it could not remove a diserimina-

tion by preseribing a minimum rate to one of the competing loeali-

ties. But it could remove the discrimination by imposing a

lower maximum rate, even though a joint rate participated in by

12 Texas & Pacific Ry. Co. et al. vs. United States et al.

the carrier whose rails did not reach the locality discriminated

against, (compare St. Louis Southwestern Ry. Co. v. United States,

supra) or, as already mentioned, i+ could leave the carriers free to

remove the discrimination by raising one or lowering the other.

See American Express Co. v. Caldwell, supra, 624; United States

v. Pennsylvania Railroad Co., 266 U. S. 191. And now that the

Commission has power under § 15 (1) to fix a minimum rate it may

equally command the removal of the discrimination by directing a

rate to be raised, just as where the carrier maintains diserimina-

tory practices the Commission may direct the modification of one

and not the other, and is not bound to allow the carrier a choice.

Merchants Warehouse Co. v. United States, supra, 513; New York,

New Haven & Hartford R. R. v. Interstate Commerce Commis-

ston, supra, 404. The fact that the Commission has given to the

earrier an option to remove the discrimination by arrangement

with the connecting carriers, through which the traffie reaches the

Texas ports, does not afford to the carrier any ground for com-

plaint or impair the power of the Commission to make the order.

The situation here appears to be identical with that presented

to this Court in United States v. Illinois Central R. R. Co., supra,

and in St. Louis Southwestern Ry. Co. v. United States, supra. In

both cases the carriers’ rails reached one of the competing points

only through its connections. In the first the order leaving the

earrier free to remove the discrimination by raising one rate or

lowering the other, and in the second an order requiring the ear-

rier to remove the discrimination by establishing a lower joint rate

with its connections, was upheld by this Court. In St. Louis &

Southwestern Ry. Co. v. United States, this Court said, page 144:

**Carriers insist also that the order is void on the ground

that, since their ‘rails do not reach Paducah, they cannot be

guilty of discrimination against that city’. They, however, bill

traffic via Cairo or Memphis through to Paducah in connection

with the Illinois Central, thus reaching Paducah, although not on

their own rails. And, thereby, they become effective instruments

of discrimination. Localities require protection as much from com-

binations of connecting carriers as from single carriers whose ‘rails’

reach them. Clearly the power of Congress and of the Commis-

sion to prevent interstate carriers from practicing discrimination

against a particular locality is not confined to those whose rails

enter it.”’

The judgment should be affirmed.

The Cuter Justice, Mr. Justice Branpms and Mr. Justice Car-

pozo concur in this opinion.

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