# Opinion — Texas & Pacific R. Co. v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386008_0378%3A16 ## Record - **Collection:** Supreme Court brief - **Document type:** Opinion - **Published:** January 1, 1933 - **Citation:** 289 U.S. 627 ## Text 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). = i a & 2 ™, EES ia Sat CE ae ee On ee eee ea a + 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 - 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 Z s BI = - 4 : q 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,