GIFT OF 
 
GIFT 
 FFH 25 1913 
 
 CONSTRUCTION 
 
 CONSTITUTIONALITY 
 
 LONG AND SHORT HAUL CLAUSE 
 
 INTERSTATE COMMERCE ACT AS AMENDED 
 JUNE 18, 1910 
 
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 A. PAPER Br 
 
 AI.FRED P. THOM 
 
 Gbitbhai. CoiTirsBt at Washington- of Southkrn 
 
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Digitized by the Internet Archive 
 
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 Microsoft Corporation 
 
 http://www.archive.oVg/details/constructionconsOOthomrich 
 
CONSTRUCTION 
 
 CONSTITUTIONALITY 
 
 LONG AND SHORT HAUL CLAUSE 
 
 INTERSTATE COMMERCE ACT AS AMENDED 
 
 JUNE 18, 1910 
 
 
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 AI.FREI3 P. THOM 
 
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IS SECTION 4 OF THE ACT TO REGULATE 
 COMMERCE, AS AMENDED JUNE 18, 1910, 
 CONSTITUTIONAL IN SO FAR AS IT UNDER- 
 TAKES TO PROHIBIT A SMALLER CHARGE 
 FOR THE TRANSPORTATION OF PASSEN- 
 GERS, OR OF LIKE KIND OF PROPERTY, FOR 
 A LONGER THAN FOR A SHORTER DISTANCE 
 OVER THE SAME LINE OR ROUTE IN THE 
 SAME DIRECTION UNDER THE CONDITIONS 
 AND WITH THE QUALIFICATIONS STATED IN 
 THE ACT? 
 
 In order to determine this question it is necessary 
 to arrive at the proper interpretation of the section as 
 it now stands. 
 
 So far as pertinent to the inquiry, the language of 
 the statute is as follows : 
 
 **That it shall be unlawful for any common 
 carrier subject to the provisions of this Act to 
 charge or receive any greater compensation in 
 the aggregate for the transportation of passen- 
 gers, or of like kind of property, for a shorter 
 than for a longer distance over the same line or 
 route in the same direction, the shorter being in- 
 cluded within the longer distance. * * * Pro- 
 vided, however, that upon application to the 
 Interstate Commerce Commission such common 
 carrier may in special cases, after investigation, 
 
 (3) 
 
 257194 
 
be authorized by the Commission to charge less 
 for longer than for shorter distances for the 
 transportation of passengers or property, and 
 the Conmiission may from time to time pre- 
 scribe the extent to which such designated com- 
 mon carrier may be relieved from the operation 
 of this section." 
 
 The proviso to the above section is practically the 
 same as the proviso contained in section 4 of the Act to 
 Eegulate Commerce before it was amended on June 18, 
 1910. 
 
 The first part of the section was, however, before 
 the amendment of June 18, 1910, as follows: 
 
 **That it shall be unlawful for any common 
 carrier subject to the provisions of this act to 
 charge or receive any greater compensation in 
 the aggregate for the transportation of passen- 
 gers, or of like kind of property, under substan- 
 tially similar circumstances and conditions, for 
 a shorter than for a longer distance over the 
 same line in the same direction, the shorter 
 being included within the longer distance/' 
 
 It will, therefore, be seen that, considered from the 
 standpoint of the question now under discussion, the 
 important amendment introduced by the act of June 
 18, 1910, was to omit from the section, as it previously 
 was, the words ^^ under substantially similar circum- 
 stances and conditions.'' 
 
 The question for determination, therefore, is, what 
 
is the effect of the omission of these words upon the 
 interpretation of the statute? 
 
 In order to ascertain this, it would be well to revert 
 to the established interpretation of this section of the 
 act as it stood before the amendment in question. 
 
 In respect to this it is to be noted that at no time has 
 it been the intention of Congress to make an inflexible 
 rule that there should be no smaller charge for a longer 
 distance in cases covered by the statute. 
 
 When the Act to Regulate Commerce, finally adopted 
 in 1887, was before Congress for consideration, the 
 House, under the leadership of Mr. Eeagan, of Texas, 
 adopted an inflexible rule on this subject forbidding 
 absolutely the greater charge for the shorter haul, 
 while the Senate adopted the view that the rule should 
 be subject to exceptions when the circumstances and 
 conditions required it. These divergent views between 
 the House and Senate were sent to a conference 
 committee, and as a result of such conference the sec- 
 tion, as it stood prior to the amendment of June 18, 
 1910, was adopted by both houses of Congress and 
 became the law — the law thus providing that the rule 
 should not be inflexible, but should be subject to the 
 exceptions required by any substantial dissimilarity 
 of circumstances and conditions. 
 
 Again, when the amendment to the 4th section was 
 under consideration by Congress in 1910, Mr. Hardy, 
 of Texas, proposed an amendment, the effect of which 
 was to strike out all provisos and make an inflexible 
 
rule forbidding absolutely the greater charge for the 
 shorter haul. His views on this subject were thus 
 expressed by him on page 5917 of the Congressional 
 Eecord : 
 
 **Now, Mr. Chairman, to state briefly the pur- 
 poses of the amendment offered by me, it means 
 simply to leave the unconditional proviso that 
 no road should ever be allowed to charge more 
 for the short haul than the long haul covering 
 the same space or portion of the railway. ' ' 
 
 It thus appears that, on both occasions when this 
 section was under consideration by Congress, the prop- 
 osition was presented, debated, and rejected that there 
 should be a hard and fast rule on this subject. In view 
 of this and of the debates in Congress on the subject, 
 we think it may be fairly stated that the exception was 
 considered by Congress as necessary to meet a sub- 
 stantial condition, and that without it the rule would 
 never have been enacted. 
 
 As soon as the act of 1887 was passed, important 
 questions arose as to its interpretation. In re- 
 spect to these questions, elaborate hearings were had 
 and most mature consideration given by the Interstate 
 Commerce Commission. Two views of the meaning 
 of the act were presented, one view being that no ex- 
 ception from the general rule was lawful unless made 
 with the previous sanction of the Commission, and the 
 other that no order of relief from the Commission 
 was required when the circumstances and conditions 
 
were substantially dissimilar ; since the carrier, in act- 
 ing in accordance with them, would commit no breach 
 of the law, although it would be responsible in case it 
 should afterwards be found that the circumstances and 
 conditions were misconceived or misjudged. 
 
 On this question the Commission, as then consti- 
 tuted, was unanimous, and Judge Cooley, delivering 
 its opinion, held: 
 
 **We have listened, with an earnest desire to 
 reach a just conclusion, to all the arguments 
 presented on the construction of the statute, by 
 those appearing either to advocate or to oppose 
 the applications, and after mature consideration 
 we are satisfied that the statute does not require 
 that the Commission shall prescribe in every 
 instance the exceptional ca^e and grant its order 
 for relief before the carrier is at liberty in its 
 tariffs to depart from the general rule. The 
 terms of the statute clearly lead to the opposite 
 conclusion. It declares : 
 
 '* *It shall be unlawful for any common car- 
 rier subject to the provisions of this act to 
 charge or receive any greater compensation in 
 the aggregate for the transportation of passen- 
 gers or of the like kind of property under sub- 
 stantially similar circumstances and conditions 
 for a shorter than for a longer distance over the 
 same line in the same direction, the shorter 
 being included in the longer distance.' 
 
 **Here we have clearly stated what is unlaw- 
 ful and forbidden, and for doing the unlawful 
 and forbidden act penalties are then provided. 
 But that which the act does not declare unlawful 
 
8 
 
 must remain lawful if it was so before, and that 
 which it fails to forbid the carrier is left at lib- 
 erty to do without permission from any one. 
 The charging or receiving the greater compen- 
 sation for the shorter than for the longer haul 
 is seen to be forbidden only when both are 
 under substantially similar circumstances and 
 conditions, and, therefore, if in any case the 
 carrier, without first obtaining an order of re- 
 lief, shall depart from the general rule, its doing 
 so will not alone convict it of illegality, since if 
 the circumstances and conditions of the two 
 hauls are dissimilar the statute is not violated/' 
 
 This view was sustained by the Supreme Court of 
 the United States in 
 
 Interstate Commerce Commission vs. Alabama 
 Midland Ey., 168 U. S., 168. 
 
 Under the law, therefore, as it was prior to the 
 amendment of 1910, the carrier possessed the right, 
 without any previous action of the Commission, to 
 charge less for a longer than for a shorter haul, if the 
 circumstances and conditions of the two hauls were 
 substantially dissimilar. 
 
 The result of this, of course, was that the 4th sec- 
 tion, as it then stood, afforded no relief for those who 
 complained of the smaller charge for the longer dis- 
 tance unless the complaining party should file a peti- 
 tion before the Interstate Commerce Commission, and 
 should obtain an order affirmatively declaring that the 
 circumstances and conditions of the longer haul were 
 
not substantially dissimilar from those of the shorter 
 haul. 
 
 When Congress came to the consideration of amend- 
 ments to this section, in 1910, it had become convinced, 
 justly or unjustly, that the carrier, availing itself of 
 the power of initiation just mentioned, was practically 
 administering all prohibitions as to the smaller charge 
 for the longer distance out of the law. It had become 
 convinced that this was a great evil, and listened with 
 approval to the protest that was made against this 
 power by a considerable portion of the public. It had 
 come to believe that the courts had given such a con- 
 struction to the section as, in the language of Mr. 
 Mann, ^^to destroy its life.'' 
 
 It was thought that the general rule on this subject 
 had been wiped out of existence by the initiative of the 
 carriers. 
 
 We do not think, however, that by the omission of 
 the words ^' under similar circumstances and condi- 
 tions,'' it was the intention of the act to change the 
 principles of the law which had governed the making 
 of rates. 
 
 The Act to Eegulate Commerce still provides in its 
 first section that — 
 
 "all charges made for any service rendered or 
 to be rendered in the transportation of passen- 
 gers or property shall be just and reasonable;" 
 
 in its second section that 
 
 ''no carrier shall collect or receive from any 
 person or persons a greater or less compensa- 
 
10 
 
 tion for any service rendered, or to be rendered, 
 in the transportation of passengers or property, 
 than it collects or receives from any other per- 
 son or persons for doing for him or them a like 
 and contemporaneous service in the transporta- 
 tion of a like kind of traffic under similar cir- 
 cumstances and conditions,^' 
 
 and, in section three, that it shall be unlawful for any 
 common carrier, subject to the provisions of the act, 
 
 '*to make or give any undue or unreasonable 
 preference or advantage to any particular per- 
 son, etc., or locality, or any particular descrip- 
 tion of traffic in any respect whatever.'' 
 
 These provisions of the Act to Eegulate Commerce 
 express its substantial and dominating purposes and 
 are to be read into, and to be considered a qualifica- 
 tion of, every other provision of the act. This, in ef- 
 fect, was stated, in respect to the requirement of the 
 first section, by Mr. Mann in the debate in the House 
 of Representatives on this subject. 
 
 At page 4796 of the Congressional Record, in dis- 
 cussing the question as to whether the discretion cre- 
 ated by the proviso of the act was a limited or un- 
 limited discretion, and, therefore, whether or not it 
 was a delegation of legislative power, he says : 
 
 '^Remember, whatever the Commission does 
 in respect to this matter, it is always bound by 
 the act of Congress that rates shall be just and 
 reasonable and that railroad companies shall 
 
11 
 
 not establish unjust and unreasonable rates ; so 
 that practically what we do here is to give the 
 Commission power to say what in a particular 
 case shall be a just and reasonable rate, al- 
 though we declare as a general proposition that 
 it shall be unjust and unreasonable to charge a 
 higher rate for a short haul than for a long 
 haul/' 
 
 He further stated, when this bill was introduced in 
 the House, and he was making his explanation in re- 
 spect to it, that there were serious conditions of com- 
 petition which the law must not undertake absolutely 
 to forbid. 
 
 Thus, on page 4795 of the Congressional Eecord, he 
 says: 
 
 ^^The intention of the act (the original act) 
 was undoubtedly to provide that in general, as 
 an ordinary proposition, a railroad company 
 could not charge less between two points than it 
 charged between one of those points and a point 
 midway, or part way, between the original two 
 points. In other words, they should not be al- 
 lowed to run freight from point A through point 
 B to point C, and charge less between A and C 
 than they charge between A and B. And yet 
 water competition seems to prevent a hard and 
 fast rule on that subject, because railroads are 
 necessarily in competition not only with regular 
 passenger and freight steamers, but also with 
 tramp ships on the ocean and on the lakes and 
 rivers, and must compete with these vessels. 
 And it may often happen that the railroad com- 
 pany under the principles which underlie the 
 
12 
 
 making of freight rates cannot afford to make 
 its rate lower than it does between points A and 
 B, and yet can afford to make some profit out 
 of carrying freight at a lower rate between 
 points A and C. That theory controlled Con- 
 gress when it enacted the original act, and I 
 think no one has ever contended that there may 
 not be cases where, under proper management 
 of railroads, a less charge may be made for a 
 long haul than for a short haul.'' 
 
 Again : 
 
 ^^The Commission may say what is a reason- 
 able rate to different points ; but if, in order to 
 get some of the business which otherwise would 
 all go by water, the railroad company wants to 
 carry freight at less than is a reasonable rate 
 on all its business, nobody would wish to pre- 
 vent it doing that, because to that extent you 
 could lower the rates.'' 
 
 And again, on page 4797, in answer to the question: 
 
 ^ ^ Is it practicable to legislate so as to deprive 
 New York and San Francisco of the benefit of 
 the ocean, that no injustice may be done to the 
 towns inland?" 
 
 Mr. Mann said: 
 
 **I think not. I think that San Francisco and 
 New York and other ports on the ocean have a 
 natural advantage which cannot, and ought not 
 if it could, be taken away from them. In other 
 words, when you come to the question of fixing 
 freight rates, please remember these proposi- 
 tions: A railroad company must pay its oper- 
 
13 
 
 ating expenses. It must pay the cost of main- 
 tenance. It must pay the cost of its general 
 offices. It must pay the interest on its bonds. 
 It must pay, if it is successful, dividends on its 
 stock. It must carry some freight at profit 
 enough to make dividends on the stock. 
 
 ^^It may carry some freight which will help 
 it to pay interest on its bonds, and it may be met 
 by a situation where it can carry a large amount 
 of freight at rates which will more than pay 
 the operating expenses or a proportionate share 
 of the operating expenses, which will more than 
 pay its proportionate share of the cost of main- 
 tenance, which will more than pay its share of 
 the cost of the general offices, which will con- 
 tribute something to the interest on the bonds, 
 but which will not contribute anything towards 
 dividends on the stock or which will not even 
 contribute enough towards the interest on the 
 bonds to pay more than 1 or 2 per cent, whereas 
 the rate would be 4 or 5 per cent. Now, with 
 that large amount of freight which it may get 
 if it competes successfully with other methods 
 of transportation, it is the duty of the railroad 
 company to secure that freight at lower terms 
 than are practicable to pay interest and divi- 
 dends if it carried all freight on the same basis, 
 and that will be true forever in railroads in com- 
 petition between New York and San Francisco, 
 competing with ocean methods of transporta- 
 tion, and ought to be so. It is true through 
 many parts of the United States, and ought to 
 be so, because in the end it tends to reduce the 
 rates on freight throughout the country. 
 
14 
 
 *'0f course, under existing law, as construed 
 by the courts, the long and short-haul clause 
 amounts to nothing. Under the proposition 
 which we have presented, if enacted into law, 
 there must be application made in special cases 
 to the Commission which grants authority to 
 charge a less amount for the longer distance 
 than for the shorter distance, and we think the 
 power can safely be lodged in the hands of the 
 Commission. It is perfectly patent it must be 
 lodged somewhere. We will never reach a basis 
 in this country, and ought not, with our im- 
 mense railroad mileage and with our great 
 water carriage, with our long lines of road, 
 where we charge railroad rates on the mileage 
 basis or where we put all classes upon the same 
 basis.'' 
 
 It will thus be seen that there are conditions of 
 competition well recognized by the promoters of this 
 legislation as conditions which the law must not under- 
 take absolutely to ignore or forbid. Most of these 
 illustrations, as given on the floor of the House, were 
 of water competition, but they were not confined to 
 water competition. One of the notable cases, having 
 no reference to water competition, is that of the com- 
 petition of commodities between the citrus fruits of 
 California and the citrus fruits of Florida in the com- 
 peting markets of the country, and throughout the de- 
 bate it was recognized that the economic rule which 
 justifies the smaller charge for the longer haul was 
 not at stake, but that the administration of the law 
 
15 
 
 which, in the judgment of Congress, was faulty, was at 
 stake and must be corrected. 
 
 If, therefore, as stated by Mr. Mann on the floor 
 of the House, and as seems to be certainly true, the 
 provision of the first section of the act, requiring all 
 charges made for any service rendered in the trans- 
 portation of passengers and property to be just and 
 reasonable, must be taken as a qualification of section 
 4, and must, therefore, qualify the power of the In- 
 terstate Commerce Commission under the proviso to 
 permit or forbid a smaller charge for the longer 
 distance, then it will be necessary for the Com- 
 mission, in passing on applications for this re- 
 lief, to determine whether, under the circum- 
 stances and conditions of the longer and of 
 the shorter haul, the charging of a smaller rate 
 for the longer distance is just and reasonable. In 
 other words, in passing on such applications, it will 
 be necessary for the Commission to determine whether 
 the traffic moves to the longer distance and to the 
 shorter distance, ^^ under substantially similar circum- 
 stances and conditions.*' 
 
 Under the law as it was before the amendment, the 
 carrier was entitled to the initiative in determining 
 this question, but its determination might upon appli- 
 cation to the Commission be overruled. Under the 
 law as changed, the carrier cannot take the initiative 
 in respect to it, but the question must in the first in- 
 stance be determined by the Commission. The ques- 
 
16 
 
 tion, however, to be determined in both cases is the 
 same; only the method of determination is altered by 
 the amendment. 
 
 This is in line with the policy of Congress in respect 
 to another important matter embraced in the same 
 amendatory act of June 18, 1910. Prior to that act,^ 
 the carriers could, in all instances, increase their rates 
 without the previous consent of the Commission. The 
 initiative as to increases of rates was, prior to the 
 amendment, completely in the carrier. By the amend- 
 ment, the Commission was given the discretionary 
 power to deprive the carrier of its rights to initially 
 increase rates and was authorized to inaugurate an 
 investigation, either upon complaint or upon its own 
 motion, for the purpose of determining upon the pro- 
 priety of proposed increases. The only difference be- 
 tween this last-mentioned case and the case of the 
 long and short-haul clause, is that the carrier is de- 
 prived in a qualified way of its power of initiation in 
 respect to increase of rates, while it is deprived abso- 
 lutely of its power of initiation in respect to the long 
 and short-haul charge; and the Commission is clothed 
 with a discretionary power to assume the initiative in 
 respect to an increase of rates, while it is made its 
 absolute duty, on the application of the carrier, to as- 
 sume the initiative in relation to the long and short- 
 haul charge. 
 
 In this view of the amendment, the statute would 
 confer upon the Commission a power, in respect to 
 
17 
 
 fixing rates for the longer haul, measured by the rule 
 that the rates so fixed shall be just and reasonable 
 under the circumstances and conditions of the longer 
 haul as compared with the circumstances and con- 
 ditions of the shorter haul, and not an unqualified, un- 
 controlled, and unmeasured discretion. 
 
 It is believed that this is the proper construction of 
 the act. As thus construed, it is believed to be con- 
 stitutional, notwithstanding the fact that it deprives the 
 carrier of the initiative as to these rates. If the Com- 
 mission should decide arbitrarily against the applica- 
 tion of the carrier for relief, in a case where there 
 existed, as a fact, such substantial dissimilarity of 
 circumstances and conditions as to make the smaller 
 charge for the longer haul just and reasonable, or if 
 the Commission should determine that question er- 
 roneously, it is believed that the carrier would have 
 relief in the courts to the same extent that it would 
 have if there was, in a proper case, an arbitrary or 
 erroneous determination by the Commission against 
 the right of the carrier to increase its rates. 
 
 In stating the proposition that, as thus construed, 
 the fourth section is constitutional, we have not over- 
 looked the contention, very intelligently made, that 
 the requirement of the act that all rates shall be just 
 and reasonable, is not a sufficient primary standard 
 to prevent the power conferred upon the Commission 
 in this regard from being a delegation of legislative 
 authority, and the further contention that, irrespective 
 2— E 
 
18 
 
 of the sufficiency of the primary standard, the power 
 involves the delegation of legislative power because 
 the Commission's authority cannot be exercised ex- 
 cept upon application of the carrier. 
 
 In respect to the contention that the primary stand- 
 ard prescribed by the act is not sufficiently definite, it 
 would seem only necessary to refer to the following 
 cases : 
 
 Field vs. Clark, 143 U. S., 649 ; 
 Buttfield vs. Stranahan, 192 U. S., 470; 
 Union Bridge Co. vs. United States, 204 U. S., 
 
 364; 
 United States vs. Heinszen, 206 U. S., 370; 
 St. Louis & Iron Mountain Ry. Co. vs. Taylor, 
 
 210U. S., 281; 
 Monongahela Bridge Co. vs. United States, 216 
 U. S., 177. 
 
 In these cases enough is stated, in: respect to the 
 primary standard, to show conclusively, in my judg- 
 ment, that the Supreme Court will hold that a require- 
 ment that a rate to be authorized by the Commission 
 shall be just and reasonable, is a sufficient primary 
 standard and that an exercise of power by the Com- 
 mission, under such authority, will not amount to the 
 exercise of legislative power. 
 
 In respect to the contention that, irrespective of the 
 sufficiency of the primary standard, the power of the 
 Commission cannot be exercised except upon the ini- 
 
19 
 
 tiative' of the carrier in making the application, it is 
 not believed that in the present trend of popular and 
 judicial thought a proposition of this kind, no matter 
 how technically meritorious, will be approved by the 
 Supreme Court. In fact, if the primary standard of 
 determination by the Commission is sufficient, that 
 would seem to end the question of whether or not the 
 delegation of power is legislative; for, if the delega- 
 tion of power in itself is not the delegation of a 
 legislative power, it could hardly be made so by the 
 method of its exercise. It would seem more pertinent 
 to inquire, in this connection, whether the operation 
 of the law would be equal and uniform, but, as above 
 stated, it is not believed that any constitutional objec- 
 tion would, under current conditions, be upheld. The 
 same relief and the same equality of protection under 
 the law would be open to all alike. 
 
 That the foregoing interpretation of this amend- 
 ment is proper, is strengthened by the consideration 
 that any other construction would render the act un- 
 constitutional. 
 
 As said by Mr. Justice White, in delivering the opin- 
 ion of the court in United States vs. Delaware "& Hud- 
 son Company, 213 U. S., 366, 407-8 : 
 
 ^*It is elementary when the constitutionality 
 of a statute is assailed, if the statute be reason- 
 ably susceptible of two interpretations, by one 
 of which it would be unconstitutional and by 
 the other valid, it is our plain duty to adopt 
 that construction which will save the statute 
 
20 
 
 from constitutional infirmity. Knights Tem- 
 plars Indemnity Co. vs, Jarman, 187 U. S., 197, 
 205. And unless this rule be considered as 
 meaning that our duty is to first decide that a 
 statute is unconstitutional and then proceed to 
 hold that such ruling was unnecessary because 
 the statute is susceptible of a meaning, which 
 causes it not to be repugnant to the Constitu- 
 tion, the rule plainly must mean that where a 
 statute is susceptible of two constructions, by 
 one of which grave and doubtful constitutional 
 questions arise and by the other of which such 
 questions are avoided, our duty is to adopt the 
 latter, Harriman vs. Interstate Com. Com., 
 211 U. S., 407.'^ 
 
 Before proceeding, to discuss the question whether, 
 assuming that the above construction is unsound, the 
 clause is valid, it may be well to state certain prin- 
 ciples which have been established by the courts as to 
 what are circumstances and conditions which make a 
 lower charge for the longer distance just and reason- 
 able. 
 
 From a reference to the adjudicated cases it will be 
 seen that all the substantial facts surrounding a serv- 
 ice must be considered in determining whether a charge 
 for it is just and reasonable. In the cases thus far 
 presented, the question of whether or not a lower 
 charge for a longer than for a shorter distance is just 
 and reasonable, has always arisen under a statute 
 which in terms permitted a lower charge for the longer 
 than for the shorter distance if the circumstances and 
 conditions of the service were substantially dissimilar ; 
 
21 
 
 but it is held, as in Louisville & Nashville Railroad 
 Company vs. Behlmer, 175 U. S., 674, that the deter- 
 mination of the question whether in any ease substan- 
 tial dissimilarity of circumstances and conditions ex- 
 ists, must be made subject to **the absolute command 
 of the statute that all rates shall be just and reason- 
 able.^' 
 
 The decisions, therefore, which hold that all the ma- 
 terial facts surrounding the service, including the ex- 
 istence of substantial competition, whether from water 
 carriers or other sources, must be considered, are, in 
 effect, decisions establishing the principle that a rate 
 made lower for a longer than for a shorter haul by 
 substantial competition, is, to the extent that it is in- 
 fluenced by such competition, just and reasonable. 
 
 Cincinnati, New Orleans & Texas Pacific Ry. vs. 
 Interstate Commerce Conunission, 162 U. S., 
 184; 
 Texas & Pacific Ry. vs. Interstate Commerce 
 
 Commission, 162 U. S., 197 ; 
 Interstate Commerce Commission vs, Alabama 
 
 Midland Ry., 168 U. S., 144; 
 Louisville & Nashville R. R. vs. Behlmer, 175 
 
 U. S., 648; 
 East Tennessee, Virginia & Georgia Ry. vs, In^ 
 terstate Commerce Commission, 181 U. S., 1; 
 Interstate Commerce Commission vs. Louisville 
 
 & Nashville R. R., 190 U. S., 273; 
 Interstate Commerce Commission vs. Chicago 
 Great Western Ry., 209 U. S., 108. 
 
22 
 
 IF THE FOREGOINa INSTRUCTION IS NOT 
 SOUND, IS THE PROVISION OF THE ACT AS 
 IT NOW STANDS CONSTITUTIONAL? 
 
 In addition to the interpretation above given of the 
 amendment of June 18, 1910, one other construction 
 may be suggested. This construction is that the pro- 
 viso by which authority is conferred upon the Com- 
 mission to permit the making of a smaller charge for 
 a longer than a shorter haul, amounts to an absolute 
 discretion in the Commission, unlimited by any rule 
 laid down by Congress, and subject to no supervision. 
 It is believed that any such construction of the amend- 
 ment would make it unconstitutional. It would be either 
 a delegation by Congress to the Commission of power 
 to make rates without providing any rule to be admin- 
 istered by it, or it would be a delegation by Congress 
 to the Commission of authority, in its unlimited, un- 
 qualified, and unregulated discretion, to suspend a 
 legislative act of Congress. To do one or the other 
 would involve the exercise of a legislative power by 
 the Commission. 
 
 The making of rates is essentially a legislative act. 
 Prentis vs. Atlantic Coast Line R. R., 211 U. S., 
 226. 
 
 The suspension of a law of Congress at the absolute 
 discretion of the officer entrusted with the power, and 
 
23 
 
 not made to depend upon the finding by him of a cer- 
 tain fact, is also the exercise of a legislative power. 
 Field vs. Clark, 143 U. S., 693. 
 
 The principle which forbids the delegation by Con- 
 gress of any part of its legislative power is thus an- 
 nounced by Mr. Justice Lamar: 
 
 * * That no part of its legislative power can be 
 delegated by Congress to any other department 
 of the Government, executive or judicial, is an 
 axiom in constitutional law, and is universally 
 recognized as a principle essential to the integ- 
 rity and maintenance of the system of govern- 
 ment ordained by the Constitution.'' 
 
 The same principle is, in the case of Field vs. Clark, 
 thus announced by Mr. Justice Harlan, who delivered 
 the opinion of the majority of the court : 
 
 **That Congress cannot delegate legislative 
 power to the President is a principle universally 
 recognized as vital to the integrity and mainte- 
 nance of the system of government ordained by 
 the Constitution.'' 
 
 Of course, the same principle applies to any other 
 delegation of legislative power. 
 
 The delegation of power by Congress to suspend 
 one of its acts is, when justified at all, universally jus- 
 tified on the ground that the effect of the act is to 
 direct the exercise of the power of suspension upon the 
 ascertainment, by the person to whom the power is 
 delegated, of the existence of a particular fact or state 
 of conditions or circumstances. Union Bridge Co. vs. 
 
24 
 
 U. S., 204 U. S., 382. If, therefore, in this case. Con- 
 gress has established a rule that the rates which the 
 Commission may authorize shall be just and reason- 
 able under the circumstances of the carriage, then the 
 delegation of power to the Commission to first ascer- 
 tain that fact and afterwards to authorize a rate in 
 accordance with it, is, as heretofore stated, believed 
 to be a valid delegation of power ; but if the limitation 
 that rates shall be just and reasonable under the cir- 
 cumstances of the service does not apply to this sec- 
 tion, and if Congress has thus fixed no rule for the 
 government of the Commission in this regard, but 
 simply means to delegate its 'legislative discretion to 
 the Commission without determining the standard of 
 its exercise, it is a delegation of legislative power and 
 is unconstitutional. 
 
 Moreover, if the power expressed in this proviso to 
 section 4 is purely arbitrary and is controlled by no 
 regulation or restraint, it is unconstitutional for that 
 reason alone. The very idea that one man may be 
 compelled to hold his property, or any material right 
 essential to its enjoyment, at the mere will or caprice 
 of another, is intolerable in any country where free- 
 dom prevails, and is contrary to the Constitution. 
 
 Yick Wo vs. Hopkins, 118 U. S., 356; 
 
 City of Baltimore vs, Kadecke, 49 Md., 217 ; 
 
 Ex parte Sing Lee, 96 Cal., 354; 
 
 City of Sioux Falls vs. Kirby, 6 S. D., 62; 
 
 City of Eichmond vs. Dudley, 129 Ind., 112; 
 
 State vs. Mahner, 43 La., 496. 
 
25 
 
 This last-stated proposition is, however, denied, in 
 respect to the immediate question before us, by the Su- 
 preme Court of the United States in Louisville & 
 Nashville R. R. ^5. Kentucky, 183 U. S., 503 ; but, for 
 reasons hereinafter stated, it is hoped that this case 
 will not be adhered to by the Supreme Court when 
 the question is presented for further consideration. 
 
 In the event that the delegation of power contained 
 in the proviso to the 4th section is unconstitutional, it 
 becomes proper to consider whether the effect of that 
 unconstitutionality is to render invalid the whole of 
 the 4th section, or only the proviso, leaving an in- 
 flexible rule forbidding the charging of a smaller rate 
 for the longer distance. This question will now be con- 
 sidered. 
 
 IS THE SECTION SEPARABLE, AND WILL THE 
 PROVISO ONLY BE DECLARED INVALID? 
 
 It is not believed that the court would hold that the 
 proviso of the section is separable from the other por- 
 tion of it. As has been hereinbefore noted, Congress, 
 when enacting the original law in 1887, and also in 
 adopting the amendment in 1910, was confronted with 
 the proposition to enact an absolute, inflexible rule on 
 the subject. On both occasions it refused, and delib- 
 erately refused, to do so. It can, therefore, in the light 
 of this legislative history, hardly be claimed that Con- 
 gress would have adopted an absolute rule without 
 
26 
 
 condition, and, if not, the two parts of the statute can- 
 not be considered separable. 
 
 Moreover, when the reasons are examined which 
 caused Congress to decline to enact an absolute and in- 
 flexible rule, it will be found that they are so potential 
 as to prevent a court from concluding that the two pro- 
 visions of the statute are separable. It is shown in 
 Judge Cooley^s opinion, hereinbefore referred to, that 
 the commerce of the country could not be conducted 
 under an inflexible rule. Thus it was said by Judge 
 Cooley : 
 
 ^^It was fairly shown before us, that instances 
 exist, and may be found, along the route of pe- 
 titioner's lines in the States of Kentucky, Ten- 
 nessee, Georgia, Alabama, Mississippi, and Lou- 
 isiana, where the competition of water-ways 
 forces down the railroad rates below what it is 
 possible to make them at noncompetitive points 
 and still maintain the roads with success or 
 ejSiciency. The reason is that the carriers by 
 water can perform the service at very much less 
 cost than the carriers by land. The general 
 fact is that railroad rates for the transportation 
 of property ""must approximate closely those 
 which are made between the same points by 
 steamer, and the steamer rates are generally, 
 if not invariably, much below what the railroads 
 can afford to accept upon all their business. In 
 such cases, if competition is maintained, more 
 must be charged at interior points than can be 
 obtained at the points of competition; and if 
 the competitive rates are such as are productive 
 of some gain, however slight, the non-competi- 
 
27 
 
 tive points are likely to receive indirect advan- 
 tage therefrom, while the competitive points 
 have the larger and more direct benefit, and are 
 afforded a choice of agencies in transportation 
 whose rivalry may fairly be expected to keep the 
 cost down to a minimum. The interior points 
 may have no ground for complaint in such a 
 case, provided the rates they are charged are 
 in themselves just and reasonable, even though 
 the fact be that in some cases more is charged 
 for the short than for the long haul over the 
 same line in the same direction. This general 
 fact is recognized the world over; and of Eng- 
 lish railways it has been often remarked that 
 some of them would be deprived of much of 
 their value if they were not allowed to meet 
 water competition by such concessions at the 
 points of contact as the competition would 
 compel. 
 
 ^*Low rates are a necessity of the situation; 
 and if railroads compete with water transporta- 
 tion either on the ocean or the navigable rivers, 
 they have no choice but to accept such rates. 
 To compel the roads to observe strictly the gen- 
 eral rule laid down by the fourth section would 
 necessitate their abandonment of some classes 
 of business in which their competition with 
 water transportation is now of public impor- 
 tance. ' ' 
 
 I Annual Eep. I. C. C, p. 75. 
 
 , This same view was extended to embrace all classes, 
 whether from water carriers or otherwise, of substan- 
 tial competition, by the decisions of the Supreme 
 
28 
 
 Court of the United States in the following series of 
 cases : 
 
 Cincinnati, New Orleans & Texas Pacific By. vs. 
 
 Interstate Commerce Commission, 162 U. S., 
 
 184; 
 Texas & Pacific By. vs. Interstate Commerce 
 
 Commission, 162 U. S., 197; 
 Interstate Commerce Commission vs. Alabama 
 
 Midland B. B., 168 U. S., 144; 
 Louisville & Nashville B. B. vs, Behlmer, 175 
 
 U. S., 648; 
 East Tennessee, Virginia & Georgia B. B. vs. 
 
 Interstate Commerce Commission, 181 U. S., 
 
 1; 
 
 Interstate Commerce Commission vsi Louisville 
 & Nashville B. B., 190 U. S., 273; 
 
 Interstate Commerce Commission vs, Chicago 
 Great Western By., 209 U. S., 108. 
 
 It will thus be seen that the economic law, which con- 
 trols the movement of trafl&c under the dissimilar cir- 
 cumstances and conditions produced by controlling 
 forces in respect to the longer as compared to the 
 shorter haul, is so well recognized and is so potential 
 that it is not believed that the Supreme Court will 
 hold that the proviso in section 4 is separable from 
 the remainder of the statute. 
 
 Of course, if the court should hold that the two por- 
 tions of the statute are inseparable, then, if the pro- 
 viso is unconstitutional, the whole section will fall. 
 
29 
 
 If, however, the court should, contrary to this view, 
 hold the two portions of the section separable, and 
 should further hold that the proviso is unconstitutional 
 in that it is an attempt by Congress to confer upon 
 a commission a portion of its legislative power, or in 
 that it is the delegation of an arbitrary, irresponsible, 
 and tyrannical power, then the result would be that the 
 rule forbidding a lower charge for the longer than for 
 the shorter haul, would be absolute and inflexible, and 
 this brings me to the consideration of the question 
 whether an absolute and inflexible rule on this sub- 
 ject would be constitutional. 
 
 AN ABSOLUTE AND INFLEXIBLE RULE 
 UNCONSTITUTIONAL. 
 
 We are met at the outset, in considering this prop- 
 osition, by the case of Louisville & Nashville R. R. Co. 
 vs, Kentucky, 183 U. S., 503. If that case was rightly 
 decided, or is upon reconsideration adhered to, and is 
 held to be applicable to the act of Congress now under 
 examination, it will, of course, be an end of the con- 
 troversy. 
 
 It should be noted, however, that the opinion in that 
 case is most unsatisfactory and seems to assert propo- 
 sitions of constitutional law which are clearly inde- 
 fensible. 
 
 In its opinion the court seems to consider that the 
 fact that the rule in respect to the long and short haul 
 
30 
 
 clause is contained in the constitution of the State, 
 has some bearing upon the question to be determined. 
 It says : 
 
 ^*But, apart from such contentions (the con- 
 tentions referred to being contentions growing 
 out of the contract clause and the commerce 
 clause), and looking only at the case of a com- 
 pany voluntarily formed to carry on business 
 wholly within a State, we are unable to see how 
 such a company can successfully contend that it 
 can be exempted by the courts from the opera- 
 tion of the constitution of the State.'' 
 
 The Louisville & Nashville Eailroad Company had 
 been chartered and had been constructed long before 
 the constitution of the State of Kentucky then being 
 considered was adopted, and, therefore, there was no 
 question in the case of the railroad company holding 
 its property rights subject to rules in respect thereto 
 established by a constitution in force at the time of and 
 before they were acquired. 
 
 It would seem, therefore, that the proposition of 
 the court just stated would have no relevancy to the 
 question under consideration, unless it were proposed 
 to assert that a property right of a corporation organ- 
 ized under the laws of a State may be violated by its 
 constitutional provisions thereafter enacted, and yet 
 such a proposition is so clearly opposed to all the de- 
 cisions of the Supreme Court itself, which uniformly 
 hold that a State cannot violate the 14th Amendment 
 to the Federal Constitution by its own constitution any 
 
31 
 
 more than it can by its statutes, or by any other agency 
 
 of the State, that it seems impossible to suppose that 
 
 any view of this sort was in the mind of the court. 
 
 Eailroad Company vs, McClure, 10 Wall., 511, 
 
 515; 
 Gunn vs. Barry, 15 Wall., 610, 623. 
 New Orleans Gas Co. vs, Louisiana Light Co., 
 
 115 U. S., 650, 672; 
 Bier vs. McGehee, 148 U. S., 137, 140. 
 
 That the court was, in its opinion, however, laying 
 some especial stress upon the fact that the provision in 
 question was contained in the State's constitution is 
 emphasized by the following quotation from the 
 court's opinion: 
 
 **When citizens of Kentucky voluntarily seek 
 and obtain a grant from the State of a charter 
 that it takes, holds, and operates its right sub- 
 ject to the constitutional inhibition we are con- 
 sidering, and are without power to challenge its 
 validity. ' ' 
 
 It seems impossible to suppose that the court in- 
 tended by this expression to question the right of a 
 railroad company to challenge the validity of the pro- 
 vision of the State constitution referred to, or any 
 other provision of that constitution, if the effect of the 
 challenged provision was to deprive it of its property 
 without due process of law, or to deny to it the equal 
 protection of the laws contrary to the fourteenth 
 
32 
 
 Amendment to the Federal Constitution, and yet why 
 should this reference to the State constitution be made 
 unless it, in the mind of the court, had some efficacy 
 differentiating it from other forms of State action, in 
 relation to the question of whether or not a property 
 right of the railroad company was violated. Does it 
 not seem that the court in making this decision was 
 acting on the theory that the constitution of Kentucky, 
 enacted after the Louisville and Nashville Railroad 
 Company had acquired its property, qualified in some 
 way that company's rights in its property and to some 
 extent deprived the company of its right to the use and 
 enjoyment of its property? 
 
 While this would seem to be the necessary conse- 
 quence of the emphasis laid upon the constitution of 
 the State in the opinion of the court, still the court 
 seems to go on to consider, in a way, whether the right 
 to charge less for a longer than for a shorter haul is a 
 property right protected by the Federal Constitution, 
 but, in determining that question, it gives no reason 
 except that the company holds its property subject to 
 the constitution of the State. It says : 
 
 **What we now say is, that a State corpora- 
 tion, voluntarily formed, cannot exempt itself 
 from the control reserved to itself by the State 
 by its constitution, and that the plaintiff in 
 error, if not protected by a valid contract, can- 
 not successfully invoke the interposition of the 
 Federal courts, in respect to the long and short- 
 haul clause in the State constitution, on the 
 ground simply that the railroad is property. ' ' 
 
33 
 
 It would thus seem that the fundamental questions 
 which should have controlled this question were not 
 considered, or certainly were not dealt with in the 
 opinion of the court. Moreover, it should be noted 
 that the reason given by the court in its decision seems 
 to refer the power exercised by the State to the power 
 impliedly reserved in its constitution to deal with cor- 
 porations organized under its laws. If this be the 
 only reason on which the court acted, it may well be 
 questioned whether the doctrine of that case will ex- 
 tend to an act of Congress exercised in respect to a 
 corporation organized under the laws of a State. How- 
 ever this may be, it seems to me that the decision of the 
 case is manifestly erroneous and withdraws some of 
 the most substantial and valuable property rights, 
 which a railroad company has, from the protection of 
 the Constitution of the United States. 
 
 It seems fair to hope that a case so little considered 
 and so inadequately reasoned as the one now under 
 discussion will not, upon further consideration, be ad- 
 hered to by the Supreme Court of the United States, 
 and will take rank, as an abandoned precedent, with the 
 case of Munn vs, Illinois, 94 U. S., 113, which was, in 
 effect, overruled by the Supreme Court in Wabash 
 E. E. vs, Illinois, 118 U. S., 557, and other cases. 
 
 Moreover, it must be remembered that the system 
 
 of governmental regulation has been greatly developed 
 
 and advanced since 1902, when this case was decided. 
 
 Legislation on the subject has step by step been pressed 
 3— E 
 
34 
 
 further and further, until it has assumed an impor- 
 tance at this day hardly realized or appreciated ten 
 years ago. In this view of the larger place which 
 governmental regulation has assumed as a matter of 
 fact in our governmental institutions, it would seem 
 proper that principles announced in the early stages 
 of governmental regulation should, in view of their 
 importance and of their far-reaching consequences, 
 be now reviewed by the courts, unembarrassed by 
 precedents which were established at a time when com- 
 paratively little attention had been paid to this subject 
 and its underlying principles had not been given thor- 
 ough and scientific examination. It therefore seems 
 to me that, in respect to no question possessing such 
 fundamental and far-reaching consequences in its in- 
 fluence upon our institutions and upon our constitu- 
 tional rights, should we feel it is improper to ask or 
 unjustifiable to expect a thorough and scientific re- 
 examination of the principles on which previous de- 
 cisions have rested. 
 
 It is, therefore, proposed to re-examine this question 
 on principle, unembarrassed by a consideration of the 
 precedents which have been made. 
 
 This would seem to be especially justifiable where 
 the principles asserted in respect to governmental reg- 
 ulation involve consequences so far reaching as prac- 
 tically to involve throughout the country the success 
 or failure of railroad operations in private hands, and, 
 consequently, the success or failure of private owner- 
 
35 
 
 ship of railroad property. In respect to this long and 
 short haul clause, it must be noted that an inflexible 
 rule established by Congress, forbidding a lower 
 charge for the longer haul, would, if valid, as shown 
 by statistics offered by the Louisville & Nashville Eail- 
 road Company to the Interstate Commerce Commis- 
 sion some years ago, deprive that company of one- 
 third of its entire freight traffic, and it is now esti- 
 mated, by competent authority, that the rule in ques- 
 tion would involve a deprivation of the carriers in 
 southeastern territory of at least forty per cent 
 of their freight traffic. When these enormous 
 figures are considered, the criticism of the Kentucky 
 case hereinbefore mentioned, made by the Hon. 
 Charles G. Washburn, of Massachusetts, on the floor 
 of the House, when this clause was under considera- 
 tion, becomes all the more striking. He said: 
 
 **The Kentucky law applied to perhaps one- 
 fourth of the railroad business in the State. 
 The mileage of railroads in Kentucky was about 
 one and one-half per cent of the total mileage 
 of the United States. We may say, therefore, 
 roughly speaking, that the business to which 
 the Kentucky long and short haul law applied, 
 was less than one-half of one per cent of the 
 total business of the railroads in the United 
 States.'' 
 
 Record, p. 4993. 
 
 A court, out of deference to local conditions in a 
 State, and actuated by a desire to uphold the State's 
 
36 
 
 laws, might possibly view with unconcern an effect so 
 comparatively trivial on the business of the country, 
 but would feel it necessary to re-examine the question 
 if brought face to face with ruinous consequences to so 
 large a portion of the business of the transportation 
 companies as would be subject to the operation of this 
 law of Congress. 
 
 In view of these immense consequences, we feel jus« 
 tified in re-examining this question on principle. 
 
 In pursuing this inquiry, there are certain funda- 
 mental propositions which do not seem, either in the 
 light of reason or in the light of authority, to be open 
 to question. 
 
 It seems to be beyond question that the use of prop- 
 erty is property, and that to deprive a carrier of the 
 use of its property is to deprive it of the property 
 itself. This is not only true in fact, but has been re- 
 peatedly held by the Supreme Court. 
 
 Thus it was said by that court in Chicago, Milwau- 
 kee & St. Paul Railway Co. vs, Minnesota, 134 U. S., 
 458: 
 
 **If the company is deprived of the power of 
 charging reasonable rates for the use of its 
 property, and such deprivation takes place in 
 the absence of an investigation by judicial ma- 
 chinery, it is deprived of the lawful use of its 
 property, and thus, in substance and effect, of 
 the property itself, without due process of law 
 and in violation of the Constitution of the 
 United States; and in so far as it is thus de- 
 prived, while other persons are permitted to re- 
 
37 
 
 ceive reasonable profits upon their invested 
 capital, the company is deprived of the equal 
 protection of the laws." 
 
 And in Cleveland, etc., vs. Backus, 154 U. S., 445, it 
 is said: 
 
 **The value of property results from the use 
 to which it is put, and varies with the profitable- 
 ness of that use, present and prospective, actual 
 and anticipated. There is no pecuniary value 
 outside of that which results from such use." 
 
 And in Monongahela Navigation Co. vs. United 
 States, 148 U. S., 328, the court says : 
 
 '*The value of property, generally speaking, 
 is determined by its productiveness — the profits 
 which its use brings to the owner." 
 
 Again: 
 
 **For each separate use of one's property by 
 others, the owner is entitled to a reasonable com- 
 pensation, and the number and amount of such 
 uses determines the productiveness and the 
 earnings of the property, and therefore, largely 
 its value." 
 
 The same doctrine is stated in the case of In re Mar- 
 shall, 102 Fed., 323, where it is said: 
 
 **The constitutional guaranty, said the Court 
 of Appeals of New York in Re Jacobs, 98 N. Y., 
 105, that no person shall be deprived of prop- 
 erty without due process of law, may be violated 
 without the physical taking of property for pub- 
 
38 
 
 lie or private use. Property may be destroyed 
 or its value may be annihilated. It is owned 
 and kept for some useful purpose, and it has no 
 value unless it can be used. Its capability for 
 enjoyment and adaptability to some use are es- 
 sential characteristics and attributes without 
 which property cannot be conceived, and hence 
 any law which destroys it or its value, or takes 
 away any of its essential attributes, deprives 
 the owner of his property.'' 
 
 It would seem, therefore, unquestionable that every 
 owner of property has a property right, protected by 
 the Constitution, to use it in every legitimate way. 
 
 It would seem equally certain that the use of prop- 
 erty which is inherently proper and in the public in- 
 terest, cannot be made illegal by a statute, for, if it 
 could be thus made illegal, all that a legislature would 
 have to do in order to confiscate property would be 
 to declare illegal all uses to which it might be put, and, 
 by force of such statutory declaration, the owner of 
 the property would be effectively deprived of all protec- 
 tion from the Constitution. That a statute cannot 
 make a use of property illegal which is wholly proper, 
 is shown by innumerable decisions of the Supreme 
 Court of the United States. For example, many of 
 the States have passed laws declaring that it shall be 
 illegal for railroads to use their property for more 
 than a certain designated rate. The Supreme Court 
 has repeatedly held that this legislative declaration 
 of what would be illegal did not make it illegal con- 
 
39 
 
 trary to the fact, because a property right was in- 
 volved and the effect of snch holding would be to de- 
 prive the carrier of the beneficial use of its property, 
 in violation of the Constitution. This same proposi-* 
 tion is established by all the cases defining the proper 
 scope and use of the police power. 
 
 In respect to this, I print in the appendix, as Appen- 
 dix A, a valuable note made by my assistant, Mr. John 
 K. Graves. 
 
 It is a sound principle of economics, and is admitted 
 by both the Interstate Commerce Commission and by 
 the Supreme Court of the United States, that, in no 
 case where substantial competition exists, can a rail- 
 road property be used except in recognition of, and in 
 obedience to, the law of competition. As the chairman 
 of the committee, who introduced the original Inter- 
 state Commerce Bill, stated on the floor: **It (the law 
 of competition) is stronger than any law we can 
 make. ' ' 
 
 Thus it is stated by Judge Cooley : 
 
 **Low rates are a necessity of the situation, 
 and if railroads compete with water transporta- 
 tion, either on the ocean or on the navigable 
 rivers, they have no choice but to accept such 
 rates. To compel the roads to observe strictly 
 the general rule laid down by the fourth section 
 would necessitate their abandonment of some 
 classes of business in which their competition 
 with water transportation is now of public im- 
 portance. ' ' 
 
40 
 
 And again: 
 
 *'The fact still remains that they must either 
 be allowed to compete with vessel owners and 
 make low charges for the purpose, or they must 
 leave vessel owners in possession of the busi- 
 ness without the check upon charges which com- 
 petition would afford.*' 
 
 This same view is approved by the Supreme Court 
 of the United States. It says : 
 
 ^^It must also be conceded that the defendant 
 would lose the foreign traffic, by reason of the 
 competition referred to, and the revenue de- 
 rived therefrom, unless it carries at the lower 
 rates and by so doing is enabled to get part of 
 it.** 
 
 Texas & Pacific Ey. Co. vs. Interstate 
 Commerce Commission, 162 U. S., 236. 
 
 This is also apparent from the following decisions 
 of the Supreme Court : 
 
 Interstate Com. Com*n vs, Alabama Midland 
 
 Ry. Co., 168 U. S., 144; 
 Louisville & Nashville R. R. Co. vs. Behlmer, 
 
 175U. S., 653; 
 East. Tenn., etc., Ry. Co. vs. Interstate Com. 
 Com*n, 181 U. S., 1. 
 
 It is likewise true that this use of a carrier's prop- 
 erty, in accordance with and in obedience to an irre- 
 sistible law of economics, is right in itself and is in 
 the interest of the public. 
 
41 
 
 In connection with this view of the subject, the fol- 
 lowing expressions from Judge Cooley in the Louis- 
 ville & Nashville case, examined by the Commission in 
 1887, are of interest : 
 
 "Every railroad company ought, when it is 
 practicable, to so arrange its tariffs that the bur- 
 den upon freights shall be proportional on all 
 portions of its line and with a view to revenue 
 sufficient to meet all the items of current ex- 
 pense, including the cost of keeping up the road, 
 buildings, and equipment, and of returning a 
 fair profit to owners. But it is obvious that, in 
 some cases, when there is water competition at 
 leading points, it may be impossible to make 
 some portion of the traffic pay its equal propor- 
 tion of the whole cost. If it can then be made 
 to pay anything toward the cost, above what the 
 taking of it would add to the expense, the rail- 
 road ought not, in general, to be forced to reject 
 it, since the surplus, under such circumstances, 
 would be profit. As has been tersely said by 
 M. de la Gournerie, formerly inspector-general 
 of bridges and railways in France, a railroad 
 ^ ought not to neglect any traffic of a kind that 
 will increase its receipts more than its ex- 
 penses ' ; and long-haul traffic which can only be 
 had on these terms may sometimes be taken 
 without wronging any one, when, to carry all 
 traffic, or even the major part of it, at the like 
 rates, would be simply ruinous. But we desire 
 to apply generally to every kind of competition 
 herein discussed the observation above made, 
 that when competition leads to the transporta- 
 tion of property below actual cost, fairly com- 
 
42 
 
 puted, it ceases to be legitimate. Fair and 
 reasonable competition is a public benefit; ex- 
 cessive and unreasonable competition is a public 
 injury. Competition is to be regulated, not 
 abolished. The other sections of the law of 
 themselves imply ample authority for its regu- 
 lation, and, in connection with the fourth sec- 
 tion, support the interpretation that it is wholly 
 inadmissible to press competition to a point 
 where expenses are increased beyond the in- 
 crease of income.^' 
 
 And in one of the quotations above made from this 
 same opinion it is shown that — 
 
 **to compel roads to observe strictly the general 
 rule laid down by the fourth section would ne- 
 cessitate their abandonment of some classes of 
 business in which their competition with water 
 transportation is now of public importance.'' 
 
 And as is said by the Supreme Court : 
 
 **It is self-evident that many cases may and 
 do arise where, although the object of the car- 
 riers is to secure the traffic for their own pur- 
 poses and upon their own lines, yet, neverthe- 
 less, the very fact that they seek, by the charges 
 they make, to secure it, operates in the interests 
 of the public.'' 
 
 Texas & Pacific Ey. Co. vs. Int. Com. 
 Com., 162 U. S., 218. 
 
 The main fact which makes the participation of the 
 rail carrier in this competitive traffic to the interest 
 of the public is that, if a carrier is excluded from any 
 
43 
 
 material portion of traffic which pays a margin of 
 profit, then the loss which such exclusion involves must 
 be put on the remaining portion of its traffic and in- 
 crease the cost to the public interested in such re- 
 mainder. 
 
 This fact is thus stated by Justice White, in the 
 case of East Tennessee, etc., Ey. Co. vs. Interstate 
 Commerce Commission, 181 U. S., 20: 
 
 ** Applying the principle to which we have ad- 
 verted to the condition as above stated, it is ap- 
 parent that if the carrier was prevented under 
 the circumstances from meeting the competitive 
 rate at Nashville, when it could be done at a 
 margin of profit over the cost of transportation, 
 it would produce the very discrimination which 
 would spring from allowing the carrier to meet 
 a competitive rate where the traffic must be car- 
 ried at an actual loss. To compel the carriers to 
 desist from all Nashville traffic under the cir- 
 cumstances stated would simply result in de- 
 flecting the traffic to Nashville to other routes, 
 and thus entail upon the carriers who were in- 
 hibited from meeting the competition, although 
 they could do so at a margin of profit, the loss 
 which would arise from the disappearance of 
 such business, without anywise benefiting the 
 public." 
 
 In view of the foregoing considerations, and of all 
 the decisions of the Supreme Court, the following prin- 
 ciples may be stated as true, as self-evident and as fun- 
 damental : 
 
44 
 
 First. That the use of property is property within 
 the meaning of the Fifth Amendment to the Consti- 
 tution ; 
 
 Second. That a use of property is legitimate which 
 is in accordance with, and in obedience to, a fair rule 
 of trade and an irresistible law of economics; 
 
 Third. That such use is not only proper and legiti- 
 mate in itself, but is in the interest of the public; 
 Fourth. That such use cannot be taken away from 
 a carrier by legislation of Congress without a viola- 
 tion of the Fifth Amendment to the Constitution. 
 The case may be stated thus : 
 
 A carrier, in accordance with the law, has con- 
 structed a railroad between two competitive points 
 through a number of non-competitive points. It is not 
 the short rail line. It is in competition with water 
 carriers on the ocean which are not subject to the Act 
 to Regulate Commerce. It is subject to the con- 
 trolling competition of short line rail carriers. 
 It is subject to controlling competition of com- - 
 modities and of markets. It seeks to partici- 
 pate in competitive traffic and to make a rate 
 between its competitive points lower than to inter- 
 mediate points, which gives to it some margin of profit 
 and which is made necessary by the competitive condi- 
 tions. All its rates to intermediate non-competitive 
 points are reasonable in and of themselves. The cir- 
 cumstances of the service between the competitive 
 points so differ from the circumstances of the service 
 
45 
 
 to intermediate non-competitive points that the differ- 
 ence in charge **is in exact conformity with the differ- 
 ence of circumstances/' In such a case could Con- 
 gress prevent the carrier from carrying between the 
 two competitive points at the rate mentioned? 
 
 In considering this question it must be remembered 
 that Congress, in the language of Judge Cooley, has 
 studiously omitted to bring the steamboat and other 
 independent water lines within its control and must, 
 therefore, have contemplated and approved the con- 
 tinuance of that kind of competition. 
 
 It is likewise spending millions of dollars annually 
 of the public money in the improvement of rivers and 
 harbors for the purpose of making such competition 
 more substantial and effective. 
 
 Under the act, likewise, the rate in question is per- 
 mitted and is possible over the shorter line of rail- 
 road. Moreover, the rate is necessary to the carrier in 
 question because of economic conditions produced at 
 competitive points by competition of products and 
 competition of markets. If, under these circumstances, 
 the carrier can be prevented from carrying between 
 the two competitive points at the rate proposed, it is 
 in effect prevented from using its property at all be- 
 tween those points. It is certainly prevented from 
 using it in fair recognition of, and in obedience to, a 
 controlling economic law, which Congress does not 
 undertake to alter or destroy, but the application of 
 which to the conditions supposed, it is, by appropri- 
 
46 
 
 ations from the public treasury, fostering and 
 building up. If, therefore. Congress has the consti- 
 tutional power to prevent this legitimate commercial 
 use of property, it has in practical effect the power of 
 confiscation. 
 
 The only alternative to this consequence would be to 
 say that Congress does not prevent the use of the 
 carrier's property between two competitive points at 
 a competitive rate, but in such case only requires that 
 the intermediate rate should be made no higher. This, 
 however, in the case supposed, would simply shift the 
 method of confiscation. While permitting the carrier 
 to participate in the competitive trafiic at the rates 
 found necessary to such participation, and thus not 
 confiscating that use, the effect would be to deprive the 
 carrier, in the case supposed, of the right to charge 
 reasonable, and not unduly discriminatory rates, to 
 intermediate points. This latter right is a right of 
 property as distinctly as the other, and in preventing 
 the use of the property at intermediate points at 
 reasonable rates Congress would be taking away from 
 the carrier a legitimate use of its property. 
 
 In reaching this conclusion, I am not forgetful of 
 the fact that the decisions thus far have made the cri- 
 terion of confiscation to be a fair return upon the car- 
 rier's property, and have not yet adopted as a cri- 
 terion a fair compensation for each individual service. 
 In respect to this, however, it should be remarked 
 again that the extent of governmental regulation has 
 
47 
 
 become so far reaching, and both its extent and its 
 limitations so important, that the principles which 
 have heretofore been announced in respect to it are 
 legitimately entitled to a re-examination in the light of 
 the greater governmental authority which is claimed. 
 On principle it is true, as has been announced by the 
 Supreme Court, that — 
 
 **If a company is deprived of the power of 
 charging reasonable rates for the use of its 
 property, and such deprivation takes place in 
 the absence of an investigation by judicial ma- 
 chinery, it is deprived of the lawful use of its 
 property, and thus, in substance and effect, of 
 the property itself (Chicago, Milwaukee & St. 
 Paul Eailway Co. vs. Minn., 134 U. S., 458); 
 and that — 
 
 **for each separate use of one's property by 
 others, the owner is entitled to a reasonable 
 compensation, and the number and amount of 
 such uses determines the productiveness and the 
 earnings of the property, and, therefore, largely 
 its value *' (Monongahela Nav. Co. vs. United' 
 States, 184 U. S., 328). 
 
 In other words, a carrier has a right to do business ; 
 it has a right to charge for each separate service that 
 which is reasonable compensation therefor, and the 
 legislature may not deny it such reasonable com- 
 pensation and may not interfere simply because out of 
 the multitude of its transactions the amount of its 
 profits is large. 
 
48 
 
 The rule by which the value of all other property 
 than that subjected to a public use is arrived at is 
 to ascertain its reasonable earning capacity, and, by 
 capitalizing that, to ascertain the property value. 
 
 The rule heretofore acted on by the courts, in re- 
 spect to properties subjected to a public use, is that 
 the value of the property must be first arrived at, 
 and from that deduce its reasonable earning capacity. 
 An arbitrary reversal of the method applicable to all 
 other property, whether by legislative authority or by 
 judicial decree, is, as applied to this one class of prop- 
 erty, a manifest deprivation of a valuable interest in 
 property, as well as a denial of the equal protection 
 of the laws. There can be no difference between prop- 
 erty devoted to a public use and other private prop- 
 erty except such difference as is measured by the 
 legitimate consequences of the public use. The in- 
 terest of the public, in the property of a carrier and 
 in its transactions, can only be that the ' car- 
 rier shall not charge more for a service than 
 a reasonable compensation therefor; that it shall 
 not unduly discriminate as between persons or 
 localities or commodities, or subject any of them 
 to undue prejudice or disadvantage, and that its 
 facilities shall be adequate. Every power of regula- 
 tion asserted by the Government, in respect to private 
 property subject to a public use, must be measured 
 and tested by whether or not it legitimately tends to 
 secure one or other of these results. If the carrier 
 
performs faithfully these three duties, then, subject 
 to them, its property is its own and is beyond the 
 reach of governmental interference. In other words, 
 when the thing is done that is required by the Act to 
 Regulate Commerce to be done by the Commission, 
 namely, when there is a determination, in the language 
 of the first section, that the rate of the carrier is just 
 and reasonable for the service rendered, and, as re- 
 quired by other sections, that there is no unjust dis- 
 crimination as between persons or localities or com- 
 modities, then there exists a property right in the 
 carrier to charge and receive this reasonable rate, and 
 its right to do so cannot be taken away or affected by 
 the amount of the return upon its property. It may be 
 that it cannot make a reasonable return on its prop- 
 erty by charging reasonable rates. If so, the Govern- 
 ment need not and cannot give it that power. It may 
 be that, by reason of favorable and wise design and 
 good management, it is able, by charging a reasonable 
 rate for each of its services, to make a large profit 
 on the amount>invested. This profit in every one of its 
 factors is beyond the reach of governmental power, 
 and is the private property of the owners. 
 
 If the subject be viewed from another standpoint the 
 result is the same. 
 
 Let us suppose a case where the return upon a prop- 
 erty is not more than a reasonable return on the 
 amount invested, and let us suppose that this return 
 results from a system of rates, some of which are too 
 4— E 
 
50 • 
 
 low and some of which are too high. In such a case 
 the carrier cannot justify those that are too high by 
 showing that the average is right, for that would be 
 throwing unjustly on the class of traffic bearing the 
 rates which are too high a burden unjustly taken from 
 the other class of traffic on which the charges are un 
 duly low. The Government could not maintain or re- 
 quire rates that are too low for the service on the 
 ground that other rates of the carrier are too high, and 
 that the average makes only a proper return upon the 
 property, for that would be creating an unlawful dis- 
 crimination between the two classes of traffic to the 
 prejudice of those that were charged too much. It is, 
 therefore, manifest that any philosophic and just reg 
 ulation of this subject, in which the interests of the 
 public are duly preserved, and in which the property 
 rights of the carrier are duly respected, must arise 
 from a proper and just adjustment of each rate to each 
 service. This necessity grows out of the nature of the 
 situation. 
 
 It is no answer to say that it is difficult to de- 
 termine what is a reasonable compensation for the 
 service. This very thing is required of the Interstate 
 Commerce Commission by the Act to Regulate Com- 
 merce whenever the reasonableness and justice of a 
 rate is brought to its consideration. The statute re- 
 quires it to determine whether that rate is just and 
 reasonable for the service. It is manifestly impossi- 
 ble, in respect to any individual rate, for the Commis- 
 
51 
 
 sion to be guided by the value of the property and the 
 total returns therefrom. It is not denied that the de- 
 termination of the question of reasonableness is diffi- 
 cult, but the application of a false standard is never 
 justified by the difficulty of applying the true one, and 
 in this connection it is apparent that Congress itself 
 has applied the true one in the Act to Regulate Com- 
 merce. If the law-making body can ascertain and de- 
 clare what rate is reasonable, there is no reason why 
 the courts, with methods at least equally adequate, 
 should not be able to do so. The suggestion made 
 in this note is not as to the application of a 
 new standard, but merely that, when the stand- 
 ard created by Congress itself in respect to 
 the powers of the Interstate Commerce Commis- 
 sion is applied, the result of the proper application 
 of that standard is to bring the case within the protec- 
 tion of the Constitution, and not to give it merely a 
 statutory sanction. Whether or not the Commission 
 has done this in any case is a judicial question. 
 
 In respect to the difficulty of the application of this 
 standard, it must likewise be remembered that it is no 
 more difficult to apply the test of reasonableness to a 
 rate than it is to apply it to most other services. The 
 whole principle of quantum meruit at the common law 
 is built up on the necessity of determining, by courts 
 and juries, what is reasonable, and the same test of 
 what is reasonable in respect to any other service 
 would apply in the determination of what is reasonable 
 
52 
 
 in respect to the service of a carrier. The test of 
 usage, the test of comparison, the test of expert opin- 
 ion, the test of effect npon commerce and upon the 
 proper distribution of burdens and advantages be- 
 tween all interested, and other tests which might 
 be enumerated, would apply to and determine the 
 question of reasonableness in such a case. 
 
 As interesting in this connection, I print in the ap- 
 pendix, as Appendix B, an extract from a recent ad- 
 dress of Mr. W. W. Finley, President of Southern Eail- 
 way Company. 
 
 The foregoing considerations seem to justify the 
 conclusion that an inflexible rule forbidding a smaller 
 charge for the longer distance, notwithstanding the 
 fact that the smaller charge for the longer distance 
 would be justified by the laws of trade and necessitated 
 by economic forces, would be an unconstitutional in- 
 vasion of the property rights of the carrier. 
 
 If this be true, and if likewise true that an unre- 
 stricted and unmeasured discretion in the Commission 
 would be an unconstitutional delegation of legislative 
 power, then it would seem that the only constitutional 
 interpretation of the fourth section as amended would 
 be that given in the first part of this paper, and it is 
 believed that the interpretation there given is the 
 proper construction of the law. 
 
 EespectfuUy submitted. 
 
 Alfred P. Thom. 
 
 WASHmoTON, D. C, February, 1911. 
 
APPENDIX A. 
 
 THE FEDERAL LONG AND SHORT HAUL 
 CLAUSE AND THE FIFTH AMENDMENT. 
 
 Notes by John K. Graves. 
 
 Mr. Thom : 
 
 The question submitted is, whether, assuming that 
 the long and short haul clause (Clause 4 of the Act to 
 Regulate Commerce) gives the Commission arbitrary 
 power to allow or refuse to allow the carrier to charge 
 less for the haul to the longer distance destination 
 than for the haul to the shorter distance point, even 
 though controlling competition exist at the longer 
 distance point, the clause, as so construed, violates 
 the Fifth Amendment to the Constitution of the 
 United States. 
 
 There will not be considered in these notes any ques- 
 tion with respect to the effect of any action of the 
 Commission under the clause, as resulting in an in- 
 adequate return to the carrier upon the value 
 of its entire property; and the short-haul rate will 
 be assumed to be reasonable. Also, no question 
 is raised as to delegation of legislative power. **The 
 clause'' as hereinafter used, without explanation, will 
 mean the Federal long and short haul clause construed 
 as above indicated. 
 
 The question put seems to resolve itself into whether 
 Congress can enact a rigid long and short haul clause. 
 The clause would give the Conmiission arbitrary and 
 
 (63) 
 
54 
 
 discretionary power in the premises, which means 
 that there could be no review of its action in the 
 courts. Whether, under the Minnesota case in 134 
 U. S., such an enactment could stand, depends upon 
 whether the constitutional rights of the carrier could 
 be taken away by any action of the Commission which 
 the clause gives it the power to take. The clause em- 
 powers the Commission to refuse to allow the carrier 
 to charge less to the longer distance point, though con- 
 trolling competition exists there, and though the 
 shorter distance rate is reasonable in and of itself, 
 thus inevitably depriving the carrier of traffic to the 
 longer distance point. If such an exercise of power 
 by the agent of Congress violates the Fifth Amend- 
 ment, then the act authorizing such exercise of power 
 must fall. It will not do to undertake to save the act, 
 as did the Kentucky Court of Appeals in the case of 
 Louisville & Nashville Eailroad Co. vs. Common- 
 wealth, 51 S. W., 164, where, in defending the Ken- 
 tucky constitutional provision (which is identical with 
 the Federal long and short haul clause as it was be- 
 fore the recent amendment) against the charge that it 
 violated the Fourteenth Amendment if controlling 
 competition at the longer distance point were held (as 
 it had been by the Kentucky courts) not to create dis- 
 similar circumstances, the court sustained the pro- 
 vision on the theory that the Commission was 
 empowered to make any exception that it desired, 
 and that it was not to be supposed that it would 
 do injustice to the carrier. If the exercise of 
 the discretion reposed in the Commission could in 
 any case deprive the carrier of its constitu- 
 tionar rights, then the Kentucky constitutional pro- 
 vision should have been wiped out, as authorizing an 
 invasion of the carrier's constitutional rights without 
 recourse to the refuge of the courts, if the Minnesota 
 
55 
 
 case is still of any efficacy and if this land can still 
 boast a government of laws, not of men. 
 
 If the Supreme Court was right in condemning the 
 statute in United States vs. Eeese, 92 U. S., 214, 221, 
 where Chief Justice Waite remarked that, 
 
 '*It would certainly be dangerous if the legis- 
 lature could set a net large enough to catch all 
 possible offenders and leave it to the courts to 
 step inside and say who could be rightfully de- 
 tained and who should be set at large, ' ' 
 
 an act of Congress giving free rein to an administra- 
 tive body not capable of affording due process of law 
 to take away property rights must be condenmed. 
 
 The question to be determined is, then. Would a 
 rigid long and short haul clause enacted by Congress 
 deprive the carrier of its property in violation of the 
 Fifth Amendment? 
 
 There is a very unpleasant decision in 183 U. S. (p. 
 503) — Louisville & Nashville E. Co. vs. Kentucky — 
 involving the validity, under the Fourteenth Amend- 
 ment, of the Kentucky constitutional provision, which 
 is identical with the Federal clause as it existed prior 
 to the recent amendment. As hereinbefore indicated, 
 the Kentucky courts had excluded controlling competi- 
 tion at the long distance point as a circumstance cre- 
 ating dissimilarity of conditions. The Supreme Court 
 upheld the clause as thus construed, saying (p. 514) : 
 
 * * The evil sought to be prevented was the use 
 of public highways in such a manner as to pre- 
 fer, by difference of rates, one locality to 
 another, and the remedy adopted by the State 
 was to declare such preferences illegal, and to 
 prohibit any person, corporation, or common 
 carrier from resorting to them. That remedy 
 
56 
 
 included in its scope every one, without dis- 
 tinction, whose calling, public in its character, 
 gave an opportunity to do the mischief which 
 the State desired to prevent. The practical in- 
 efficiency of this remedy to reach the desired 
 end, and the resulting injury to the welfare of 
 both the producers and the consumers of an 
 article like coal, when brought into competition 
 with coal brought from without the State, are 
 strongly urged in behalf of the plaintiff in 
 error; but, however well founded such objec- 
 tions may be, they go to the wisdom and policy 
 of the enactment, not to its validity in a Federal 
 point of view.'* 
 
 Let us consider that the principles involved did not 
 receive that careful consideration which their impor- 
 tance demanded (and the opinion indicates great con- 
 fusion in the mind of the court), and consider those 
 ])rinciples in the light of reason and the other decisions 
 of the courts. 
 
 In the first place, the clause may be assumed to be 
 within the general bounds of the powers conferred on 
 Congress by the commerce clause. It seems clear that 
 the purpose of the enactment is to destroy and prevent 
 discrimination, and that that is its only purpose. See 
 the Kentucky case in 183 U. S., supra; Texas & Pacific 
 Ry. Co. vs. Interstate Commerce Commission, 162 
 U. S., 184, 197. It cannot be denied that such purpose 
 is a proper one. 
 
 The validity, then, of the clause will depend upon 
 the answer to the question, Is the enactment reason- 
 able, or is it arbitrary? 
 
 In order for an act to successfully meet this test, it 
 must be adapted to the accomplishment of the end 
 sought (it having been assumed that its purpose is 
 
57 
 
 legitimate), and in accomplishing such end, the re- 
 sults must not be so destructive as to plainly and de- 
 cisively outweigh the good it is calculated to do. The 
 more important the accomplishment of the purposes 
 of an act, and the better adapted the act is to accom- 
 plish such purposes, the more incidental damage it 
 may do without thereby overstepping constitutional 
 bounds. 
 
 In McCulloch vs. Maryland, 4 Wheat., 316, 421, 423, 
 Chief Justice Marshall declared : 
 
 *^The sound construction of the Constitution 
 must allow to the national legislature that dis- 
 cretion, with respect to the means by which the 
 powers it confers are to be carried into execu- 
 tion, which will enable that body to perform the 
 high duties assigned to it, in the manner most 
 beneficial to the people. Let the end be legiti- 
 mate, let it be within the scope of the Constitu- 
 tion, and all means which are appropriate, 
 which are plainly adapted to that end, which are 
 not prohibited, but consist with the letter and 
 spiri of the Constitution, are constitutional."" 
 
 Again : 
 
 *^ Where the law is not prohibited, and is 
 really calculated to effect any of the objects en- 
 trusted to the Government, to undertake here 
 to inquire into the degree of its necessity, would 
 be to pass the line which circumscribes the judi- 
 cial department, and to tread on legislative 
 ground. ' ' 
 
 Interstate Commerce Commission vs. Brimson, 154 
 U. S., 447, illustrates the principle that legislative en- 
 actments to be sustained must be designed to ac- 
 
58 
 
 complish the proper ends of government and must in 
 fact be adapted to the accomplishment of such ends. 
 In that case the court declared that the prohibition of 
 discriminations in the matter of interstate rates was a 
 proper exercise of the power of Congress under the 
 commerce clause, and that the provisions of section 
 12 of the act, empowering the Commission to inquire 
 into the management of the business of carriers sub- 
 ject to the act, and to subpoena witnesses to testify 
 concerning the subjects involved in the act, were 
 ''plainly adapted to the objects intended to be ac- 
 complished. ' ' 
 
 '' Interpreting the Interstate Commerce Act as ap 
 plicable," said the court, **and as intended to apply, 
 only to matters involved in the regulation of com- 
 merce, and which Congress may rightfully subject to 
 investigation by a commission established for the pur- 
 pose of enforcing that act, we are unable to say that 
 its provisions are not appropriate and plainly adapted 
 to the protection of interstate commerce from burdens 
 that are or may be, directly or indirectly, imposed 
 upon it by means of unjust and unreasonable discrimi- 
 nations, charges, and preferences. Congress is not lim- 
 ited in its employment of means to those that are abso- 
 lutely essential to the accomplishment of objects within 
 the scope of the powers granted to it. It is a settled 
 principle of constitutional law that 'the government 
 which has a right to do an act, and has imposed on it the 
 duty of performing that act, must, according to the 
 dictates of reason, be allowed to select the means ; and 
 those who contend that it may not select any appro- 
 priate means, that one particular mode of effecting 
 the object is excepted, take upon themselves the bur- 
 den of establishing that exception.' 4 Wheat., 316, 
 409.'' 
 
 Where the enactment, although its purpose may be 
 
59 
 
 to promote the interests of the public, is so destructive 
 of individual rights as plainly to outweigh the sup- 
 posed advantages accruing from its operation, the 
 courts will strike it down. A good illustration of 
 this is found in the cases on rate regulation. 
 Whatever may be the true theory with respect 
 to Government control over railroad rates, the 
 theory that is now and has for a long time been 
 applied by the courts is that where an enactment 
 fixing rates reaches the point where the carrier is not 
 allowed an adequate return upon the value of its prop- 
 erty, such enactment is considered not to be a regula- 
 tion adapted to the accomplishment of a proper public 
 purpose, and is regarded as confiscatory. This is 
 practically the application of the principle of reason- 
 ableness. 
 
 In Eailroad Commission Cases, 116 U. S., 307, Chief 
 Justice Waite said that — 
 
 *' under pretense of regulating fares on trains 
 the State cannot require a railroad corporation 
 to carry persons or property without reward, 
 neither can it do that which in law amounts to 
 the taking of private property for public use 
 without just compensation or without due pro- 
 cess of law.'' 
 
 In the Eeagan case (154 U. S., 362, 399) it was de- 
 clared that 
 
 ' * it is within the scope of judicial power and a 
 part of judicial duty to restrain anything which, 
 in the form of a regulation of rates, operates to 
 deny to the owners of property invested in the 
 business of transportation that equal protection 
 which is the constitutional right of i\\] owners 
 of other property.'' 
 
60 
 
 In Smyth vs, Ames, 169 U. S., these cases are re- 
 ferred to by the court, and it again declares that the 
 Federal Constitution forbids legislation, ^^in whatever 
 form it may be enacted, '' by which a person's property 
 is taken from him without compensation, and that ^ * the 
 forms of law and the machinery of government, with 
 all their reach and power, must, in their actual work- 
 ings, stop on the hither side of unnecessary and un- 
 compensated taking or destruction of any private 
 property legally acquired and legally held.'' 
 
 Thus, if a rate-fixing statute goes beyond the limit 
 of regulation, it ceases to be adapted to proper govern- 
 mental purposes, and is condemned as an arbitrary 
 interference by the Government with property rights. 
 
 In Lochner vs. New York, 198 U. S., 45, the Supreme 
 Court struck down a statute of New York providing 
 that employees in bakeries should not be required or 
 permitted to work more than 10 hours a day, the court 
 saying (pp. 56-57) : 
 
 **It must, of course, be conceded that there 
 is a limit to the valid exercise of the police 
 power by the State. There is no dispute con- 
 cerning this general proposition. Otherwise 
 the Fourteenth Amendment would have no effi- 
 cacy and the legislatures of the States would 
 have unbounded power, and it would be enough 
 to say that any piece of legislation was enacted 
 to conserve the morals, the health or the safety 
 of the people; such legislation would be valid, 
 no matter how absolutely without foundation 
 the claim might be. The claim of the police 
 power would be a mere pretext — become 
 another and delusive name for the supreme 
 sovereignty of the State to be exercised free 
 from constitutional restraint. This is not con- 
 tended for. In every case that comes before 
 
61 
 
 this court, therefore, where legislation of this 
 character is concerned and where the protection 
 of the Federal Constitution is sought, the ques- 
 tion necessarily arises: Is this a fair, reason- 
 able and appropriate exercise of the police 
 power of the State, or is it an unreasonable, un- 
 necessary and arbitrary interference with the 
 right of the individual to his personal liberty 
 or to enter into those contracts in relation to 
 labor which may seem to him appropriate or 
 necessary for the support of himself and his 
 family? Of course the liberty of contract re- 
 lating to labor includes both parties to it. The 
 one has as much right to purchase as the other 
 to sell labor. 
 
 **This is not a question of substituting the 
 judgment of the court for that of the legislature. 
 If the act be within the power of the State it is 
 valid, although the judgment of the court might 
 be totally opposed to the enactment of such a 
 law. But the question would still remam: Is 
 it within the police power of the State? An^l 
 that question must be answered by the court.'' 
 
 Again (pp. 57-8) : 
 
 **It is a question of which of two powers or 
 rights shall prevail — the power of the State to 
 legislate or the right of the individual to iibertv 
 of person and freedom of contract. The mere 
 assertion that the subject relates though but in 
 a remote degree to the public health does not 
 necessarily render the enactment valid. The 
 act must have a more direct relation, as a means 
 to an end, and the end itself must be appro- 
 priate and legitimate, before an act can be held 
 to be valid which interferes with the general 
 
62 
 
 right of an individual to be free in his person 
 and in his power to contract in relation to his 
 own labor.'' 
 
 Again (p. 61) :• 
 
 * * Statutes of the nature of that under review, 
 limiting the hours in which grown and intelli- 
 gent men may labor to earn their living, are 
 mere meddlesome interferences with the rights 
 of the individual, and they are not saved from 
 condemnation by the claim that they are passed 
 in the exercise of the police power and upon the 
 subject of the health of the individual whose 
 rights are interfered with, unless, there be 
 some fair ground, reasonable in and of itself, 
 to say that there is material danger to the pub- 
 lic health or to the health of the employees, if 
 the hours of labor are not curtailed." 
 
 In Atlantic Coast Line E. Co. vs. North Carolina 
 Corporation Commission (Selma Connection Case), 
 206 U. S., 1, the Supreme Court (per Justice White) 
 said (p. 20) : 
 
 **As the public power to regulate railways 
 and the private right of ownership of such prop- 
 erty coexist and do not the one destroy the 
 other, it has been settled that the right of own- 
 ership of railway property, like other property 
 rights, finds protection in constitutional guar- 
 anties, and, therefore, wherever the power of 
 regulation is exerted in such an arbitrary and 
 unreasonable way as to cause it to be in effect 
 not a regulation, but an infringement upon the 
 right of ownership, such an exertion of power 
 is void because repugnant to the due process 
 
63 
 
 and equal protection clauses of the 14th Amend 
 ment. ' ' 
 
 The court upheld the statute, although it was shown 
 that the operation of the train would not be profitable, 
 saying (p. 27) : 
 
 ''Of course the fact that the furnishing of a 
 necessary facility ordered may occasion an in- 
 cidental pecuniary loss is an important criteria 
 (sic) to be taken into view in determining the 
 reasonableness of the order, but it is not the 
 only one.'' 
 
 See Missouri Pacific E. Co. vs. Kansas, 216 U. S., 
 262; Interstate Commerce Commission vs. Northern 
 Pacific E. Co., 216 U. S., 538. 
 
 In C, B. & Q. E. Co. vs. Drainage Commissioners, 
 200 XJ. S., 561, where an act of Illinois under which the 
 railroad was required to rebuild its bridge over a 
 creek, made necessary by its enlargement by the Drain- 
 age Commission, was upheld by the Supreme Court, 
 the court thus laid down the principle governing the 
 case (p. 592) : 
 
 ''The validity of a police regulation, whether 
 established directly by the State or by some 
 public body acting under its sanction, must de- 
 pend upon the circumstances of each case and 
 the character of the regulation, whether arbi- 
 trary or reasonable and whether really designed 
 to accomplish a legitimate public purpose." 
 
 It clearly appears from the foregoing cases that if a 
 rigid long and short haul clause is arbitrary and un- 
 reasonable because not adapted to effect a legitimate 
 public purpose, or because so burdensome upon 
 
64 
 
 the carrier as decisively to outweigh any advantage 
 that may accrue to the public from it, it must be con- 
 demned. Let us, then, inquire whether the clause is 
 adapted to the accomplishment of legitimate public ob- 
 jects, or whether it cannot be considered as so adapted 
 because arbitrarily interfering with the property 
 rights of the carrier. 
 
 The construction originally put upon the long and 
 short haul clause by the Commission denied the efficacy 
 of competition at the longer distance point with other 
 carriers subject to the Act as producing a dissimilarity 
 of circumstances authorizing a lower rate to the longer 
 distance point. This construction of the Act was de- 
 molished by the Supreme Court. Cincinnati, N. 0. & 
 T. P. E. Co. vs. Interstate Commerce Commission, 162 
 U. S., 184; Texas & Pacific Eailway Co. vs. Interstate 
 Commerce Commission, 162 U. S., 197; Interstate 
 Commerce Commission vs. Alabama Midland E. Co., 
 168 U. S., 144; Louisville & Nashville E. Co. vs. Behl- 
 mer, 175 U. S., 648. 
 
 In overruling the position taken by the Commission, 
 the Supreme Court in effect declared that it was unable 
 to adopt a construction of the Act that would interfere 
 with and destroy commerce and unnecessarily inter- 
 fere with the business of the carriers. 
 
 Texas & Pacific E. Co. vs. Interstate Commerce Com- 
 mission, supra, involved the validity of an order of the 
 Interstate Commerce Commission requiring the de- 
 fendant company to desist from carrying import traf- 
 fic from port to destination at a less rate than it car- 
 ried inland traffic between such points. While the case 
 involved the construction of section 3, the principles 
 laid down are equally applicable to section 4. Indeed, 
 the purposes of the entire Act were reviewed by the 
 court. At page 211, the court (by Justice Shiras) 
 said: 
 
65 
 
 ' ' So, too, it could not be readily supposed that 
 Congress intended, when regulating such com- 
 merce, to interfere with and interrupt, much less 
 destroy, sources of trade and commerce already 
 existing, nor to overlook the property rights of 
 those who had money invested in the railroads 
 of the country, nor to disregard the interests of 
 the consumers, to furnish whom with merchan- 
 dise is one of the principal objects of all systems 
 of transportation.'^ 
 
 Again, on page 218: 
 
 *^We think that Congress has here pointed 
 out that, in considering questions of this sort, 
 the Commission is not only to consider the 
 wishes and interests of the shippers and mer- 
 chants of large cities, but to consider also the 
 desire and advantage of the carriers in securing 
 special forms of traffic, and the interest of the 
 public that the carriers should secure that traffic, 
 rather than abandon it, or not attempt to secure 
 it. It is self-evident that many cases may and 
 do arise where, although the object of the car- 
 riers is to secure the traffic for their own pur- 
 poses and upon their own lines, yet, neverthe- 
 less, the very fact that they seek, by the charges 
 they make, to secure it, operates in the interests 
 of the public. '' 
 
 Again (p. 219) : 
 
 ^'Commerce, in its largest sense, must be 
 deemed to be one of the most important subjects 
 of legislation, and an intention to promote and 
 facilitate it, and not to hamper or destroy it, is 
 naturally to be attributed to Congress. The 
 5— E 
 
66 
 
 very terms of the statute, that charges must be 
 reasonable^ that discrimination must not be un- 
 just, and that preference or advantage to any 
 particular person, firm, corporation, or locality 
 must not be undue or unreasonable, necessarily 
 imply that strict uniformity is not to be en- 
 forced; but that all circumstances and condi- 
 tions which reasonable men would regard as 
 affecting the welfare of the carrying companies, 
 and of the producers, shippers, and consumers, 
 should be considered by a tribunal appointed 
 to carry into effect and enforce the provisions 
 of the act." 
 
 On page 222 the court declared that the order of the 
 Commission created the very discrimination which it 
 was the object of the act to destroy : 
 
 **The effort of the Commission, by a rigid 
 general order, to deprive the inland consumers 
 of the advantage of through rates, and to thus 
 give an advantage to the traders and manufac- 
 turers of the large seaboard cities, seems to cre- 
 ate the very mischief which it was one of the ob- 
 jects of the act to remedy.'* 
 
 The court reviewed the English cases arising out of 
 the English act from which section 3 of the Act to 
 Regulate Commerce was taken. It called attention to 
 the decision in Phipps vs. London & Northwestern 
 Railway, 2 Q. B. D., 1892, 229, where a violation of the 
 long and short haul principle, caused by controlling 
 competition at the longer distance point, was claimed 
 to constitute an undue discrimination. The following 
 language of Lord Herschell is quoted : 
 
67 
 
 * * Of course, if the circumstances so differ that 
 the difference of charge is in exact conformity 
 with the difference of circumstances, there 
 would be no preference at all. * ' 
 
 The court approves the language of Lord Selborne, 
 in Denaby Main Colliery Company vs. Manchester, 
 etc., Railway Co., 3 Railway and Canal Traffic Cases, 
 426, where he said : 
 
 ^*It is said that it is unfair to the trader who 
 is nearer the market that he should enjoy the 
 full benefit of the advantage to be derived from 
 his geographical situation at a point on the rail- 
 way nearer the market than his fellow-trader 
 who trades at a point more distant ; but I cannot 
 see, looking at the matter as between the two 
 traders, why the advantageous position of the 
 one trader in having his works so placed that 
 he has two competitive routes is not as much a 
 circumstance to be taken into consideration as 
 the geographical position of the other trader, 
 who, though he has not the advantage of compe- 
 tition, is situated at a point on the line geo- 
 graphically nearer the market. Why the local 
 situation in regard to its proximity to the mar- 
 ket is to be the only consideration to be taken 
 into account in dealing with the matter as a 
 matter of what is reasonable and right as be- 
 tween the two traders, I cannot understand. 
 * * * One class of cases, unquestionably in- 
 tended to be covered by the section, is that in 
 which traffic from a distance, of a character that 
 competes with traffic nearer the market, is 
 charged low rates, because unless such low rates 
 were charged, it would not come into the market 
 
68 
 
 at all. It is certain, unless some such principle 
 as that were adopted, a large town would neces- 
 sarily have its food supply greatly raised in 
 price. So that, although the object of the com- 
 pany is simply to get the traffic, the public have 
 an interest in their getting the traffic and allow- 
 ing the carriage at a rate which will render that 
 traffic possible, and so bring the goods at a 
 cheaper rate, and one which makes it possible 
 for those at a greater distance to compete with 
 those situate nearer to it. * * * 
 
 ** Suppose that to insist on absolutely equal 
 rates would practically exclude one of the two 
 railways from the traffic, it is obvious that these 
 members of the public who are in the neighbor- 
 hood where they can have the benefit of this 
 competition, would be prejudiced by any such 
 proceedings. And, further, inasmuch as com- 
 petition undoubtedly tends to diminution of 
 charges, and the charge of carriage is one which 
 ultimately falls upon the consumer, it is obvious 
 that the public have an interest in the proceed- 
 ings under this act of Parliament not being so 
 used as to destroy a traffic which can never be 
 secured but by some such reduction of charge, 
 and the destruction of which would be preju- 
 dicial to the public by tending to increase 
 prices.'' 
 
 In this case the court goes on record to the effect 
 that an enactment causing a rigid equality of rates, 
 though the circumstances are dissimilar, is not adapted 
 to preventing or destroying undue discrimination, and 
 is not in the interests of the public. It also clearly 
 recognizes the fact that such an enactment would be 
 
69 
 
 destructive of commerce and of the interests of the 
 carriers engaged in such commerce. 
 
 In East Tennessee, etc., R. Co. vs. Interstate Com- 
 merce Commission, 181 U. S., 1, where Justice White 
 delivered the opinion, the question was whether the 
 defendant violated the long and short haul clause by 
 carrying traffic from eastern points to Nashville 
 through Chattanooga at a rate less than the rate to 
 Chattanooga, the lower rate for the longer distance 
 being induced by competition with other carriers 
 at Nashville. The court reaffirmed its previous 
 ruling on the question, and declared, in effect, that a 
 contrary decision would not relieve the discrimination 
 as against Chattanooga, and that in fact there could 
 not be said to be discrimination by the carrier, since 
 the conditions causing lower rates to Nashville were 
 beyond its control. On page 18 the court said : 
 
 **In a supposed case when, in the first in- 
 stance, upon an issue as to a violation of the 
 fourth section of the act, it is conceded or estab- 
 lished that the rates charged to the shorter dis- 
 tance point are just and reasonable in and of 
 themselves, and it is also shown that the lesser 
 rate charged for the longer haul is not wholly 
 unremunerative and has been forced upon the 
 carriers by competition at the longer distance 
 point, it must result that a discrimination 
 springing alone from a disparity in rates can- 
 not be held, in legal effect, to be the voluntary 
 act of the defendant carriers, and as a conse- 
 quence the provisions of the third section of the 
 act forbidding the making or giving of an undue 
 or unreasonable preference or advantage will 
 not apply. The prohibition of the third section, 
 when that section is considered in its proper re- 
 
70 
 
 lation, is directed against unjust discrimination 
 or undue preference arising from the voluntary 
 and wrongful act of the carriers complained of 
 as having given undue preference, and does not 
 relate to acts the result of conditions wholly 
 beyond the control of such carriers. And special 
 attention was directed to this view in the 
 Behlmer case, in the passage which we have 
 previously excerpted. To otherwise construe 
 the statute would involve a departure from its 
 plain language, and would be to confound cause 
 with effect. For, if the preference occasioned 
 in favor of a particular place by competition 
 there gives rise to the right to charge the lesser 
 rate to that point, it cannot be that the availing 
 of this right is the cause of the preference, and 
 especially is this made clear in the case sup- 
 posed, since it is manifest that forbidding the 
 carrier to meet the competition would not re- 
 move the discrimination.' ' 
 
 The court also pointed out that unless the carrier 
 were permitted to make a lower rate to Nashville it 
 would be deprived of the Nashville business. On 
 pages 18-19 the court said : 
 
 * * The only principle by which it is possible to 
 enforce the whole statute is the construction 
 adopted by the previous opinions of this court ; 
 that is, that competition which is real and sub- 
 stantial, and exercises a potential influence on 
 rates to a particular point, brings into play the 
 dissimilarity of circumstance and condition 
 provided by the statute, and justifies the lesser 
 charge to the more distant and competitive 
 point than to the nearer and non-competitive 
 
71 
 
 place, and that this right is not destroyed by 
 the mere fact that incidentally the lesser charge 
 to the competitive point may seemingly give a 
 preference to that point, and the greater rate to 
 the non-competitive point may apparently en- 
 gender a discrimination against it. We say 
 seemingly on the one hand and apparently on 
 the other, because in the supposed cases the 
 preference is not * undue' or the discrimination 
 * unjust/ This is clearly so, when it is consid- 
 ered that the lesser charge upon which both the 
 assumption of preference and discrimination is 
 predicated is sanctioned by the statute, which 
 causes the competition to give rise to the right 
 to make such lesser charge. Indeed, the find- 
 ings of fact made by the Commission in this case 
 leave no room for the contention that either un- 
 due preference in favor of Nashville or unjust 
 discrimination against Chattanooga arose 
 merely from the act of the carriers in meeting 
 the competition existing at Nashville. The 
 Commission found that if the defendant carriers 
 had not adjusted their rates to meet the com- 
 petitive condition at Nashville, the only conse- 
 quence would have been to deflect the traffic at 
 the reduced rates over other lines. From this 
 it follows that, even though the defendant car- 
 riers had not taken the dissimilarity of circum- 
 stance and condition into view, and had con- 
 tinued their rates to Nashville just as if there 
 had been no dissimilarity of circumstance and 
 condition, the preference in favor of Nashville 
 growing out of the conditions there existing 
 would have remained in force and hence the 
 discrimination which thereby arose against 
 Chattanooga would have likewise continued to 
 
72 
 
 exist. In other words, both Nashville and Chat- 
 tanooga would have been exactly in the same 
 position if the long and short haul clause had 
 not been brought into play. ' ' 
 
 Again, on page 20, the court points out that to con- 
 strue the clause as preventing the carrier from mak- 
 ing a lower rate to Nashville would not only not pre- 
 vent but would create discrimination, and emphasizes 
 the proposition that such a construction of the statute 
 would not benefit the public, while driving the carrier 
 out of the competitive business. After limiting its 
 doctrine as follows: 
 
 '^Take a case where the carrier cannot meet 
 the competitive rate to a given point without 
 transporting the merchandise at less than the 
 cost of transportation, and therefore without 
 bringing about a deficiency, which would have 
 to be met by increased charges upon other busi- 
 ness. Clearly, in such a case, the engaging in 
 such competitive traffic would both bring about 
 an unjust discrimination and a disregard of the 
 public interest, since a tendency towards un- 
 reasonable rates on other business would arise 
 from the carriage of traffic at less than the cost 
 of transportation to particular places.'' 
 
 The court said: 
 
 ''Applying the principle to which we have ad- 
 verted to the condition as above stated, it is ap- 
 parent that if the carrier was prevented under 
 the circumstances from meeting the competitive 
 rate at Nashville, when it could be done at a 
 margin of profit over the cost of transportation, 
 it would produce the very discrimination which 
 
73 
 
 would spring from allowing the carrier to meet 
 a competitive rate where the traffic must be car- 
 ried at an actual loss. To compel the carriers 
 to desist from all Nashville traffic under the cir- 
 cumstances stated would simply result in de- 
 flecting the traffic to Nashville to other routes, 
 and thus entail upon the carriers who were in- 
 hibited from meeting the competition, although 
 they could do so at a margin of profit, the loss 
 which would arise from the disappearance of 
 such business, without anywise benefiting the 
 public. ' ' 
 
 Coming down through the decisions of the Supreme 
 Court above cited on this question, we find that the 
 court consistently takes the position that it cannot be 
 supposed that Congress intended the disastrous conse- 
 quences to carrier and public alike of construing the 
 act as it had been originally construed by the Conunis- 
 sion. 
 
 From these decisions it would appear that the clause 
 cannot be saved by regarding the matter as dealing 
 with a matter wholly within the discretion of the legis- 
 lature, as it was treated in C, B. & Q. E. Co. vs. Ander- 
 son (Neb.), 101 N. W., 1019, in a seemingly ill-consid- 
 ered opinion. A contrary conclusion was reached by 
 the Circuit Court for the District of Oregon, in Ex 
 Parte Koehler, Receiver, 23 Fed., 529, which came up 
 upon an application of the Receiver for instructions 
 as to whether his company should obey a statute of 
 Oregon fixing the charges for carrying property, and 
 providing: ^'No greater rate shall be charged for car- 
 rying similar property a short haul than a long haul 
 in the same direction.'^ That part of the opinion deal- 
 ing with the long and short haul question is as follows 
 (pp. 532-4) : 
 
74 
 
 *'As to the matter of long and short hauls, 
 the question, although prima facie one of dis- 
 crimination, directly involves the right to a 
 reasonable compensation. I assume that the 
 State has the power to prevent a railway com- 
 pany from discriminating between persons and 
 places for the sake of putting one up or another 
 down, or any other reason than the real exi- 
 gencies of its business. Such discrimination, it 
 seems to me, is a wanton injustice, and may 
 therefore be i)rohibited. It violates the funda- 
 mental maxim, which in effect forbids any one 
 to so use his property as to injure another, sic 
 utere tuo ut alienum non laedas. The pro- 
 visions of the act that I have condensed in para- 
 graphs 3, 4, and 6 aforesaid are intended to pre- 
 vent this practice. But where the discrimina- 
 tion is between places only, and is the result of 
 competition with other lines or means of trans- 
 portation, the case, I think, is different. For in- 
 stance, the act prescribes a reasonable rate for 
 carrying freight between Corvallis and Port- 
 land, or from either to points intermediate 
 thereto. But Corvallis is on the river, and has 
 the advantage of water transportation for some 
 months in the year. The carriage of goods by 
 water usually costs less than by land, and as 
 water craft are allowed to carry at a rate less 
 than the maximum fixed for the railway, they 
 will get all the freight from this point unless 
 the latter is allowed to compete with it. But 
 if, to do this, it must adopt the water rate for 
 all the points intermediate between Portland 
 and Corvallis, where there is no such competi- 
 tion, it is, in effect, required to carry freight to 
 and from such points at a less rate than that 
 
75 
 
 which the legislature has declared to be reason- 
 able, or else give up the business at Corvallis 
 altogether. And the same result would follow 
 as to Salem and other points on the east and 
 west side lines, where there is convenient access 
 to water transportation. 
 
 **If the legislature cannot require a railway 
 corporation, formed under the laws of the 
 State, to carry freight for nothing, or at any 
 less rate than a reasonable one, then it neces- 
 sarily follows that this provision of the act can- 
 not be enforced so far as to prevent the railway 
 from competing with the water craft at Cor- 
 vallis and other similarly situated points, even 
 if in so doing they are compelled to charge less 
 for a long haul than a short one in the same 
 direction. It is not the fault or contrivance of 
 the railway that compels this discrimination, 
 but it is the necessary result of circumstances 
 altogether beyond its control. It is not done 
 wantonly for the purpose of putting one place 
 up or the other down, but only to maintain its 
 business against rival and competing lines of 
 transportation. In other words, the matter, so 
 far as the railway is concerned, resolves itself 
 into a choice of evils. It must either compete 
 with the boats during the season of water trans- 
 portation, and carry freight below what the 
 legislature has declared to be a reasonable rate, 
 or abandon the field, and let its road go to rust. 
 Nor can the shipper at the non-competing point, 
 or over the short haul complain, so long as his 
 goods are carried at a reasonable rate. It is 
 not the fault of the railway that the shipper who 
 does business at a competing point has the ad- 
 vantage of him. It is a natural advantage 
 
76 
 
 which he must submit to, unless the legislature 
 will undertake • to equalize the matter by pro- 
 hibiting the carriage of goods by water for a 
 less rate than by rail ; and when this is done, the 
 inequalities of distance as well as place may 
 also be overcome by requiring goods to pay the 
 same rate over a short haul as a long one, and 
 then the shipper at Ashland will be as near the 
 market as any one.'' 
 
 To the effect that a rigid long and short haul rule 
 is unconstitutional, see Chicago & Alton R. Co. vs. 
 People, 69 111., 11. See as to the effect of competition 
 between railroads at the longer distance point, Illinois 
 Central R. R. Co. vs. People, 121 III, 304. To the 
 effect that a rigid long and short haul clause does not 
 violate the Fourteenth Amendment, see McGrew vs. 
 Mo. Pac. Ry. Co. (Mo.), 132 S. W., 1076, 1088. 
 
 It seems to me that the clause runs counter to the 
 principles laid down in Adair vs. United States, 208 
 U. S., 161, where an act of Congress was condemned on 
 two grounds, one of which was that it violated the 
 Fifth Amendment. The act in question was section 
 10 of the Erdman Act, making it unlawful for carriers 
 to discharge employees on account of membership in 
 labor organizations, etc. At page 172, the court said: 
 
 **In our opinion that section, in the particular 
 mentioned, is an invasion of the personal lib- 
 erty, as well as of the right of property, guar- 
 anteed by that amendment. Such liberty and 
 right embraces the right to make contracts for 
 the purchase of the labor of others, and equally 
 the right to make contracts for the sale of one 's 
 own labor ; each right, however, being subject to 
 the fundamental condition that no contract. 
 
77 
 
 whatever its subject-matter, can be sustained 
 which the law, upon reasonable grounds, forbids 
 as inconsistent with the public interests or as 
 hurtful to the public order or as detrimental to 
 the common good/' 
 
 Consider also Louisville & Nashville R. Co. vs. Cen- 
 tral Stock Yards Co., 212 U. S., 132, where the court 
 held that a provision in the Kentucky constitution re- 
 quiring the carrier to deliver its cars to connecting 
 carriers, and a Kentucky law requiring the carrier to 
 accept cars offered by competing roads at arbitrary 
 points near its terminus for the purpose of obtaining 
 the use of its terminal facilities, violated the Fourteenth 
 Amendment. Here the convenience of the public 
 would have been subserved, but that consideration was 
 held not sufficient to justify the requirement imposed 
 upon the carrier. With respect to the clause we are 
 considering, have endeavored to show that it is not 
 adapted to subserving the public interest in any aspect 
 of the case. See also Missouri Pacific R. Co. vs. Ne- 
 braska, 217 U. S., 196, where a Nebraska statute com- 
 pelling railroad companies to put in switches at their 
 own expense on the application of the owners of any 
 elevator erected within a specified limit was held to 
 violate the Fourteenth Amendment. Even under the 
 decision in Atlantic Coast Line vs. Riverside Mills 
 (Carmack Amendment Case, decided January 3, 1911), 
 which goes very far in depressing the value of stock in 
 constitutional rights, the clause is not justified. The 
 decision in that case was controlled by the importance 
 attached by the Supreme Court to the public con- 
 venience involved. The court said : 
 
 *^If the power existed, and the regulation is 
 adapted to the purposes in view, the public ad- 
 
78 
 
 vantage justifies the discretion exercised and 
 upholds the legislation as within the limit of the 
 grant conferred upon Congress.'' 
 
 Again : 
 
 * * The power of government extends to the de- 
 nial of the liberty of contract to the extent of 
 forbidding or regulating any contract which is 
 reasonably calculated to injuriously affect the 
 public interests.'' 
 
 Again : 
 
 ** Having the express power to make rules for 
 the conduct of commerce among the States, the 
 range of Congressional discretion as to the reg- 
 ulation best adapted to remedy a practice found 
 inefficient or hurtful, is a wide one.'* 
 
 Under the declarations of the Supreme Court, the 
 practice of charging lower rates to long distance points 
 is not hurtful, and the enactment is not adapted to the 
 prevention and destruction of discrimination, which is 
 ostensibly the purpose of the act. 
 
 There can be no question that to deprive the carrier 
 of the use of its property is to deprive it of the prop- 
 erty itself. As said by the Supreme Court in the Min- 
 nesota case, supra (134 U. S.), at page 458: 
 
 '*If the company is deprived of the power of 
 charging reasonable rates for the use of its 
 property, and such deprivation takes place in 
 the absence of investigation by judicial ma- 
 chinery, it is deprived of the lawful use of its 
 property, and thus, in substance and effect, of 
 the property itself, without due process of law 
 
79 
 
 and in violation of the Constitution of the 
 United States; and in so far as it is thus de- 
 prived, while other persons are permitted to re- 
 ceive reasonable profits upon their invested cap- 
 ital, the company is deprived of the equal pro- 
 tection of the laws/' 
 
 In Cleveland, etc., E. Co. vs. Backus, 154 U. S., 445, 
 it is said: 
 
 ^*The value of property results from the use 
 to which it is put, and varies with the profitable- 
 ness of that use, present and prospective, actual 
 and anticipated. There is no pecuniary value 
 outside of that which results from such use.*' 
 
 In Monongahela Navigation Co. vs. U. S., 148 U. S., 
 328, the court says : 
 
 **The value of property, generally speaking, 
 is determined by its productiveness — the profits 
 which its use brings to the owner." 
 
 Again : 
 
 **For each separate use of one's property by 
 others, the owner is entitled to a reasonable 
 compensation, and the number and amount of 
 such uses determines the productiveness and the 
 earnings of the property, and, therefore, largely 
 its value." 
 
 In the case of In re Marshall, 102 Fed., 323, Circuit 
 Judge Ross said (324-5) : 
 
 ^* *The constitutional guaranty,' said the 
 Court of Appeals of New York in i^e Jacobs, 
 98 N. Y., 105, 'that no person shall be deprived 
 
80 
 
 of property without due process of law, may be 
 violated without the physical taking of property 
 for public or private use. Property may be 
 destroyed, or its value may be annihilated. It 
 is owned and kept for some useful purpose, and 
 it has no value unless it can be used. Its capa-. 
 bility for enjoyment and adaptability to some 
 use are essential characteristics and attributes 
 without which property cannot be conceived, 
 and hence any law which destroys it or its value, 
 or takes away any of its essential attributes, 
 deprives the owner of his property.' See also, 
 Pumpelly vs. Green Bay Co., 13 Wall., 177 ; 20 
 L. Ed., 557; Wynehamer vs. People, 13 N. Y., 
 398; People vs. Otis, 90 N. Y., 48.'' 
 
 There is an aspect of the effect of the clause upon 
 the carrier's rights other than the mere question of 
 deprivation of property itself (though inseparably 
 connected with that aspect of the matter), and that is 
 the interference with the right of the carrier to manage 
 its own affairs. The idea is well illustrated by the 
 language of Justice Jackson, then circuit judge, in the 
 case of Interstate Commerce Commission vs. Balti- 
 more & Ohio R. Co., 43 Fed., 37, which is adopted by 
 the Supreme Court in C, N. 0. & T. P. R. Co. vs. 
 Interstate Commerce Commission, 162 U. S., 184, 197 
 (and approved in Interstate Commerce Commission 
 vs, Alabama Midland R. Co., 168 U. S., 144, 173, and 
 other cases, including the late case of Interstate Com- 
 merce Commission vs. Chicago, etc., R. Co., 209 U. S., 
 108, 119) : 
 
 ^^ Subject to the two leading prohibitions 
 that their charges shall not be unjust or un- 
 reasonable, and that they shall not unjustly dis- 
 
81 
 
 criminate, so as to give undue preference or dis- 
 advantage to persons or traffic similarly circum- 
 stanced, the Act to Regulate Commerce leaves 
 common carriers as they were at the common 
 law, free to make special contracts looking to the 
 increase of their business, to classify their 
 traffic, to adjust and apportion their rates so as 
 to meet the necessities of commerce, and gen- 
 erally to manage their important interests upon 
 the same principles which are regarded as 
 sound, and adopted in other trades and pur- 
 suits.'^ 
 
 The case of Lake Shore, etc., R. Co. vs. Smith, 173 
 U. S., 674, forcibly illustrates the principle. In that 
 case a statute of Michigan requiring railroads to sell 
 mileage books at a reduced rate was condemned by the 
 Supreme Court as violating the Fourteenth Amend- 
 ment. The principles upon which the case was decided 
 will appear from the following quotation : 
 
 **The legislature having established such 
 maximum as a general law now assumes to 
 interfere with the management of the company 
 while conducting its affairs pursuant to and 
 obeying the statute regulating rates and 
 charges, and notwithstanding such rates it as- 
 sumes to provide for a discrimination, an ex- 
 ception in favor of those who may desire and 
 are able to purchase tickets at what might be 
 called wholesale rates — a discrimination which 
 operates in favor of the wholesale buyer, leav- 
 ing the others subject to the general rule. And 
 it assumes to regulate the time in which the 
 tickets purchased shall be valid and to lengthen 
 it to double the period the railroad company has 
 6-E 
 
82 
 
 ever before provided. It thus invades the gen- 
 eral right of a company to conduct and manage 
 its own affairs, and compels it to give the use 
 of its property for less than the general rate to 
 those who come within the provisions of the 
 statute, and to that extent it would seem that 
 the statute takes the property of the company 
 without due process of law/' 
 
 Again, p. 692: 
 
 ^^The right to claim from the company trans- 
 portation at reduced rates by purchasing a cer- 
 tain amount of tickets is classed as a conven- 
 ience. As so defined it would be more con- 
 venient if the right could be claimed without 
 any compensation whatever. But such a right 
 is not a convenience at all within the meaning 
 of the term as used in relation to the subject 
 of furnishing conveniences to the public. And 
 also the convenience which the legislature is 
 to protect is not the convenience of a small por- 
 tion only of the persons who may travel on 
 the road, while refusing such alleged conven- 
 ience to all others, nor is the right to obtain 
 tickets for less than the general and otherwise 
 lawful rate to be properly described as a con- 
 venience. If that were true, the granting of the 
 right to some portion of the public to ride free 
 on all trains and at all times might be so de- 
 scribed. What is covered by the word * con- 
 venience' it might be difficult to define for all 
 cases, but we think it does not cover this case. 
 An opportunity to purchase a thousand-mile 
 ticket for less than the standard rate we think 
 is improperly described as a convenience." 
 
83 
 Again (pp. 694-695) : 
 
 **If the legislature can interfere by directing 
 the sale of tickets at less than the generally es- 
 tablished rate, it can compel the company to 
 carry certain persons or classes free. If the 
 maximum rates are too high in the judgment of 
 the legislature, it may lower them, provided 
 they do not make them unreasonably low as that 
 term is understood in the law; but it cannot 
 enact a law making maximum rates, and then 
 proceed to make exceptions to it in favor of such 
 persons or classes as in the legislative judgment 
 or caprice may seem proper. What right has 
 the legislature to take from the company the 
 compensation it would otherwise receive for the 
 use of its property in transporting an individual 
 or classes of persons over its road, and compel 
 them to transport them free or for a less sum 
 than is provided for by the general law? Does 
 not such an act, if enforced, take the property 
 of the company without due process of law? 
 We are convinced that the legislature cannot 
 thus interfere with the conduct of the affairs of 
 corporations.*' 
 
 This case is followed in a dissenting opinion by three 
 judges of the Kentucky Court of Appeals, in Louis- 
 ville & Nashville R. Co. vs. Commonwealth, 51 S. W., 
 supra, at page 1012, which is directly in point in con- 
 nection with the question here to be determined. The 
 court said (pp. 1012-1013) : 
 
 ^* Under the law as construed by the majority 
 opinion, the company must (1) increase its rates 
 from the Kentucky mines to Louisville beyond 
 the rates fixed to Lebanon, or (2) decrease the 
 
84 
 
 rates from the mines to Lebanon below those 
 charged to Louisville, or (3) depend upon the 
 arbitrary will of the railroad commissioners to 
 adjust the rates as to them may seem proper. 
 If the first alternative is forced on the company, 
 the result is a prohibition of the carriage of coal 
 from the mines to Louisville, as none could be 
 sold there. This result would be confessedly 
 an unwarrantable interference with the reason- 
 able use of the company's property. If the sec- 
 ond, then the company is forced to furnish the 
 use of its property at a price below that which 
 is reasonable, and at rates below those which 
 afford a fair and just return on the capital in- 
 vested. This is true, because it is to be assumed 
 that the rates from the mines to Lebanon are 
 already reasonable and just. The proof offered 
 is conclusive on this point. The only remaining 
 refuge of the company is to submit its manage- 
 ment to the arbitrary will of the commissioners. 
 And this, say the court in effect, is better than 
 to leave the matter at issue to a jury. I think 
 the court overlooks the fact that a jury must act 
 within the rules of law. A trial before a jury 
 is had under the ordinary forms of law. The 
 judge and jury are at least controlled and bound 
 by legal principles and precedents. I think, in 
 the first place, neither Congress nor the consti- 
 tutional convention ever intended to vest their 
 respective boards of commissioners with such 
 extraordinary powers ; and, in the second place, 
 I think the law so construed would result in an 
 unwarrantable interference with the reasonable 
 use of the appellants ' property, and to an extent 
 not permissible under either State or Federal 
 Constitution. ' ' 
 
In Piatt vs, Le Cocq, 150 Fed., 391, the Circuit Court 
 for the District of South Dakota was called upon to 
 construe a statute of South Dakota making it unlawful 
 for any common carrier to give any preference to any 
 person, locality, etc., or subject any kind of traffic to 
 any disadvantage. The court interpreted the statute 
 to refer to undue advantage and undue prejudice, say- 
 ing (p. 397) : 
 
 ^*The legislature could not have intended a 
 literal enforcement of the statute, because that 
 would leave the express company no discretion 
 in the conduct of this business whatever, and, if 
 the law could be construed as prohibiting any 
 prejudice or disadvantage, the validity of the 
 law would be in danger. ' ' 
 
 In Interstate Commerce Commission vs. Chicago, 
 etc., R. Co., 209 U. S., 108, where it was necessary for 
 the court to determine whether the Interstate Com- 
 merce Act permitted the carrier to make a lower rate 
 for manufactured packing-house products than for live 
 stock, the court said, Justice Brewer delivering the 
 opinion (118-119) : 
 
 '^It must be remembered that railroads are 
 the private property of their owners ; that while 
 from the public character of the work in which 
 they are engaged the public has the power to 
 prescribe rules for securing faithful and efficient 
 service and equality between shippers and com- 
 munities, yet in no proper sense is the public a 
 general manager.'' 
 
 In Chicago, etc., R. Co. vs. Chicago (C. C. N. D. 
 111.), 142 Fed., 844, a city ordinance requiring a street 
 railroad to accept transfers issued by other companies 
 
86 
 
 was condemned under the Fourteenth Amendment, 
 Judge Grosscup saying : 
 
 **The enjoyment of property meant by the 
 14th Amendment is that full exercise of domin- 
 ion over one's own property — over that which 
 one has himself created— that the whole law of 
 property, from ancient times down to the pres- 
 ent time, gives to a man, subject only to the par- 
 amount rights of the State. * * * Domin- 
 ion is enjoyment, and dominion is a part of the 
 property right that the 14th Amendment was in- 
 tended to protect.'* 
 
 In Lawton vs, Steele, 152 U. S., 133, the court said: 
 
 **The legislature may not, under the guise of 
 protecting the public interests, arbitrarily inter- 
 fere with private business, or impose unusual 
 or unnecessary restrictions upon lawful occupa- 
 tions." 
 
 See Allgeyer vs, Louisiana, 165 U. S., 578, 589 ; Story 
 on the Constitution, section 1950 ; 2 Tiedeman, Control 
 of Persons and Property, p. 939. 
 
 In Bonnett vs, Vallier, 17 L. E. A. (N. S.), 496, the 
 court declared: 
 
 ** While the police power is one whose proper 
 use makes most potently for good, in its unde- 
 fined scope and inordinate exercise lurks no 
 small danger to the Republic. For the difficulty 
 which is experienced in defining its just limits 
 and bounds, affords a temptation to the legis- 
 lature to encroach upon the rights of citizens 
 with experimental laws, none the less dangerous 
 because well meant." 
 
87 
 
 In Wyatt vs. Ashbrook, 48 L. R. A., 265, the court 
 said: 
 
 **Mere legislative assumption of the right to 
 direct and indicate the channel and course into 
 which the private energies of the citizen shall 
 flow, or the attempt to abridge or hamper his 
 right to pursue any lawful calling or avocation 
 which he may choose without unreasonable reg- 
 ulation or molestation, have ever been con- 
 demned in all free government." 
 
 John K. Graves. 
 January, 1911. 
 
88 
 
 APPENDIX B. 
 
 Extract from Address by Mr. W. W. Finley, President of Southern Rail- 
 way Company, before the Traffic Club of Philadelphia, on February 18, 
 1911. 
 
 About a month ago, in an address which I delivered 
 before the Traffic Club, of Washington, D. C, I stated, 
 what I had said on previous occasions, that **the only 
 just method of determining the reasonableness of 
 transportation charges is to measure them by the serv- 
 ice performed." A newspaper, in commenting edito- 
 rially on my address, said, in effect : ' ' This is all right 
 as far as it goes, but will not Mr. Finley tell us just 
 how to apply this yard-stick?" That is what I 
 shall attempt to do this evening. 
 
 In order to lay a broad and firm foundation, I shall 
 first state some underlying facts and principles which 
 I believe to be self-evident. 
 
 At the outset, it should be borne in mind that the 
 railways of the United States — although public high- 
 ways, and, as such, properly subject to such govern- 
 mental regulation as will insure to all citizens equality 
 of rights on them, under similar circumstances and 
 conditions, and as will prevent unreasonable or extor- 
 tionate charges — have, nevertheless, been built with 
 private capital and are the private property of their 
 owners. 
 
 It is a fundamental economic truth that the invest- 
 ment of funds in any class of property is dependent on 
 the safety of the principal and the rate of profit that 
 may be expected as compared with the rate that can be 
 
89 
 
 earned on investments in other kinds of business. In 
 other words, the flow of capital into any particular 
 business will be retarded unless it may be expected to 
 earn a reasonable profit as compared with the earn- 
 ings of capital in other enterprises. The wise men 
 who framed the Constitution of the United States took 
 cognizance of this principle when they threw the pro- 
 tection of that supreme law of our land about private 
 property in language which the profound lawyers who 
 have composed our Supreme Court have held to cover 
 not only the property itself but the right to its profit- 
 able use. Thus, as the Supreme Court said, in the 
 case of Chicago, Milwaukee & St. Paul R. R. Co. vs, 
 Minnesota : 
 
 **If the company is deprived of the power of 
 charging reasonable rates for the use of its 
 property, and such deprivation takes place in 
 the absence of investigation by judicial ma- 
 chinery, it is deprived of the lawful use of its 
 property, and thus, in substance and effect, of 
 the property itself, without due process of law 
 and in violation of the Constitution of the 
 United States; and in so far as it is thus de- 
 prived, while other persons are permitted to re- 
 ceive reasonable profits upon their invested 
 capital, the company is deprived of the equal 
 protection of the laws.'' ' 
 
 Thus the constitutional standard and the economic 
 standard for the fixing of a charge for any specific 
 service by a privately owned railway are the same. It 
 must be reasonable, as measured by the service per- 
 formed. It is the common-law rule that he who per- 
 forms service, in the absence of a specific contract, is 
 entitled to just compensation for that service, and it is 
 
90 
 
 this rule which has governed the courts of England 
 for centuries, and of our own country from colonial 
 times, in determining all controversies as to prices of 
 commodities and charges for services. 
 
 The United States Interstate Commerce Law pro- 
 vides that ^*all charges made for any service rendered 
 or to be rendered in the transportation of passengers 
 or property * * * shall be just and reasonable/* 
 This is simply the legislative enactment of the consti- 
 tutional and economic standard to which I have re- 
 ferred. 
 
 The standard is thus clearly established. It is the 
 right of the carrier to receive reasonable compensa- 
 tion for each service, as measured by that service. 
 That the application of this standard, in specific in- 
 stances, may be difficult does not excuse failure to ap- 
 ply it. It is being applied with more or less exactness 
 in the practical every-day fixing of charges by the 
 railways and in the cases before the Interstate Com- 
 merce Commission and the courts involving the rea- 
 sonableness of specific charges. 
 
 The question of what is a reasonable charge for a 
 specific service is complicated by the fact that neither, 
 as a matter of transportation policy or of public policy, 
 can charges on all classes of traffic be uniform. Com- 
 modities of great weight or bulk in proportion to their 
 value must be carried at rates substantially lower than 
 those which may properly be charged for the carriage 
 of commodities which are of high value in proportion 
 to their weight or bulk. 
 
 As a result of the necessity for different rates on 
 different classes of commodities, each individual rate 
 or each rate applying to a class of commodities must 
 be considered on its merits in its relation to the par- 
 ticular service performed. The cost of performing the 
 service, as nearly as it can be ascertained, must cer- 
 
91 
 
 tainly be taken into consideration. No rate should be 
 made so low as not to pay something more than what 
 Mr. Acworth, the eminent English economist, has 
 aptly termed 'Hhe actual out-of-pocket cosf of mov- 
 ing that particular traffic. If it pays this cost and con- 
 tributes, even in small measure, toward the general ex- 
 penses and fixed charges of the carrier, it is a profit- 
 able rate, provided the carrier has a considerable vol- 
 ume of traffic moving at higher rates. The low-class 
 traffic moved at these low rates is not a burden on the 
 higher-class traffic, for, by just so much as it contrib- 
 utes to general expenses and fixed charges, it reduces 
 the amount which the higher-class traffic must con- 
 tribute. In practical rate-making the question of the 
 cost of the service has a controlling bearing only as 
 determining the level below which a rate cannot prop- 
 erly be made. 
 
 The value of the service is another important factor 
 in rate-making and in determining the reasonableness 
 of a rate that may be challenged. Transportation en- 
 ables those engaged in any given industry to carry on 
 their business in those localities best suited for it and 
 to market elsewhere the surplus not needed for con- 
 sumption at the point of production. By moving com- 
 modities from places where the supply exceeds the 
 local demand to places where they are scarce and are 
 wanted, additional value is given to the whole volume 
 of production — including the proportion consumed lo- 
 cally, as well as to that carried to other markets. As 
 affecting the consumer of — let us say, cotton goods, by 
 way of illustration — the carriage of the raw cotton to 
 the mill and the transportation of the finished goods 
 to his market, is a process of production. This trans- 
 portation gives added value to the raw cotton produced 
 on the farm, and to the goods produced in the cotton 
 mill, and the carrier is, therefore, entitled to fair rec- 
 
92 
 
 ognition for its service in the process of producing the 
 finished cloth and placing it in the hands of consumers, 
 just the same as is the farmer and the cotton-mill 
 owner. 
 
 The increased value given to a commodity by trans- 
 portation is the measure of the value of the service to 
 the owner of the commodity. It is not, however, the 
 absolute measure of a reasonable rate, for, if the trans- 
 portation charges were so high as to absorb all of this 
 increased value, the owner would have no incentive to 
 ship and the traffic would not move. This may be il- 
 lustrated by referring to the rail movement of a very 
 low-grade commodity, such as ordinary sand — a com- 
 modity which is found in abundance in most localities 
 and the value of which, generally speaking, can be very 
 little increased by transportation. It is manifest that 
 it would be impossible to make a practical rate on sand 
 for any such distance as from Philadelphia to Chi- 
 cago, for the reason that the out-of-pocket cost of per- 
 forming the service would be far in excess of the value 
 of the service to the shipper. 
 
 As transportation has contributed all of the in- 
 creased value which is given a commodity by its car- 
 riage to market, which, as we have seen, is a factor in 
 effective production, the carrier is entitled to a reason- 
 able share of that increase. The value of the service 
 is, therefore, a most important factor in determining 
 what is a reasonable charge for a specific transaction. 
 Out of the intimate relation of the cost of the service 
 and the value of the service to the reasonableness of a 
 transportation charge grows the fact that, in an era of 
 generally advancing prices, when both the cost of the 
 service and the value of the service are increasing, the 
 level of the reasonable charge for the service thus af- 
 fected also advances. 
 
93 
 
 In determining the proportion of the value of the 
 service which the carrier may reasonably and justly 
 charge for its part in creating that value, intelligent 
 consideration must be given to comparison with rates 
 charged by the carrier for other similar services, to 
 comparison with the rates of competing carriers, to 
 comparison with the rates at which carriers in other 
 localities move the same commodity under similar cir- 
 cumstances and conditions, to comparison with the rates 
 on similar commodities which might be substituted in 
 use for the one in question, to the intrinsic value of the 
 commodity, to the risk of breakage or other injury in 
 transit, to the insurance risk, to the effect of the rate 
 on the volume of traffic, and to the general condition of 
 the business to which the special traffic is related. 
 When the reasonableness of a rate is called into ques-* 
 tion, consideration and great weight must be given to 
 expert testimony. 
 
 Of all these guides for determining the reasonable- 
 ness of a specific rate, the effect on traffic is perhaps 
 the most important, for an increasing volume of traffic 
 is prima facie, and almost conclusive, evidence that the 
 rate is not unreasonably high, though it may be un- 
 reasonably low. 
 
 It will be seen that, in the final analysis, the reason- 
 ableness of a transportation charge is largely a mat- 
 ter of expert judgment. So is the reasonableness of 
 any price or charge that may be called into question. 
 If one of you employs a lawyer, without any agreement 
 as to what his fee shall be, and, after the service has 
 been performed, you decline to pay his bill on the 
 ground that it is too high, he sues you for the amount 
 of his bill. The question raised is what would consti- 
 tute a reasonable charge for the service performed, 
 and, on this, testimony will be introduced to show, pri- 
 marily and principally, the value of the service to you. 
 
94 
 
 Testimony will also be presented as to the usual fees 
 which this lawyer and other lawyers receive for sim- 
 ilar services, as to the amount of time consumed, and 
 the skill which he displayed in rendering the service. 
 Based on this testimony the jury will form a judgment 
 as to what is a reasonable charge for the specific serv- 
 ice performed. The same method is followed in con- 
 demnation proceedings when a railway company seeks 
 to acquire land for railway purposes and fails to reach 
 an agreement with the owner as to the price to be paid. 
 The question here presented is as to the fair and rea- 
 sonable present value of the land to its owner and as to 
 the fair and reasonable amount to be allowed him for 
 the damage, if any, that may result to his remaining 
 property by the construction of a railway through it. 
 Evidence will be considered as to the value of that par- 
 ticular strip of land, as to the profitableness of the 
 uses to which it has been put by its owner or of the 
 uses to which it might be put. Evidence will also be 
 considered as to the prices at which other tracts of 
 land in the same locality have been sold, and on all 
 these points expert testimony will be considered. The 
 amount which the owner paid for the land, if bought 
 sufficiently near the time of condemnation to be perti- 
 nent, may be introduced in evidence and will be con- 
 sidered, but it is not controlling on the jury, which, 
 from all the evidence introduced, must determine what 
 is the just and reasonable compensation to its owner 
 at the particular time when it is taken. 
 
 You will note that I have said nothing as to the cost 
 of a railway, its value, or its capitalization as factors 
 in determining the reasonableness of any specific 
 transportation charge. The reason is that, while it is 
 essential to the continued development of the railway 
 system of the United States that the whole body of 
 charges shall be such as to yield such profits as will 
 
95 
 
 attract capital to investment in railway enterprises, 
 neither cost, value, nor capitalization can have any 
 controlling bearing on the reasonableness of any par- 
 ticular charge for a specific service by any particular 
 railway. 
 
 Every railway traffic official strives to obtain such 
 an adjustment of each charge for a specific service as 
 will result in the total charges for all services rendered 
 by his company yielding a maximum of revenue. 
 When he comes to the fixing of any specific charge, 
 however, he finds that his discretion is limited very 
 narrowly by economic forces entirely beyond his con- 
 trol. He must consider the competition of other car- 
 riers. He must consider the competition of producers 
 in localities off of the line of his road who are market- 
 ing the same commodity in the same markets as the 
 producers on his road. He must consider the compe- 
 tition of markets which are seeking to draw com- 
 modities produced along his line away from the mark- 
 kets which it serves. He must consider the competi- 
 tion of similar commodities which may possibly be 
 used in substitution for the one affected by the specific 
 charge under consideration. These competitive forces, 
 and the necessity for so adjusting the charge as to en- 
 courage the movement of traffic, effectively fix a level 
 above which he is powerless to advance the charge. 
 He cannot give practical consideration to either the 
 cost of the railway, its value, or its capitalization. If 
 it were otherwise, and if, as seems to be believed in 
 some quarters, transportation charges could be so ad- 
 justed as to yield a certain return on railway capital, 
 every railway would be profitable to its owners and 
 such a thing as a bankrupt railway company would be 
 unknown, unless caused by dishonesty or mismanage- 
 ment. 
 
96 
 
 Transportation charges being controlled so largely 
 by the competitive forces to which I have referred and 
 by the necessity of keeping each charge below the max- 
 imum of the value of the service in order to insure 
 the movement of traffic, it follows that the intelligent 
 railway manager, having in view the ultimate inter- 
 ests of the property intrusted to his care, will seek so 
 to adjust each specific charge that it will be reasonable 
 as measured by the specific service. If, through 
 faulty judgment or for any other cause, he shall err 
 in the fixing of any specific charge, his error may be 
 corrected by the machinery which the law has provided 
 for the correction of any charge that may be unreason- 
 able as measured by this standard. 
 
 When the specific charges of a railway company have 
 been so adjusted that each is reasonable, as measured 
 by the service performed, and when that company ab- 
 stains from any undue discrimination in charges or 
 service between individuals, localities, or commodities, 
 if, by reason of the poor location of the railway, high 
 cost of construction, faulty management, or any other 
 cause, the revenues derived from all of its charges 
 are so small as to yield no net return on its capitaliza- 
 tion, that is the misfortune of its owners. On the other 
 hand, if, by reason of the favorable location of the 
 road, low cost of construction, efficiency of manage- 
 ment, or any other cause, the net return to the owners 
 of the property is substantial, that is their good for- 
 tune. They are entitled to the use and enjoyment of 
 the whole of such net returns in the same measure as 
 the farmer whose land is fertile and is favorably lo- 
 cated is entitled to the use and enjoyment of all that 
 he can make out of his farm by the most efficient man- 
 agement. 
 
 The reciprocal obligations of the railways and the 
 people were clearly stated by Senator Bailey, of Texas, 
 
97 
 
 in an address dealing with this subject delivered be- 
 fore the New York State Bar Association on January 
 20, 1910, in which he said : 
 
 **The obligation of every railroad to the peo- 
 ple is to render them a prompt, safe, and proper 
 service; and to render every person the same 
 service for the same pay. The obligation of the 
 people to every railroad is to pay a just com- 
 pensation for such services as they require of it ; 
 and the whole duty, as well as the whole power 
 of the Government, begins and ends with the 
 due enforcement of these reciprocal obliga- 
 tions." 
 
 Senator Bailey thus clearly defines the limit of the 
 duty and the power of government in the regulation 
 of railways built and operated by private capital. His 
 clear and logical mind rejects as legally and econom- 
 ically unsound the measuring of the reasonableness of 
 a transportation charge by any other standard than 
 that of just compensation for the service performed. 
 In the same address he exposes the legal fallacy and 
 the practical impossibility of considering the value of 
 railway property as a controlling factor in determin- 
 ing the reasonableness of a charge for transportation 
 service. 
 
 While it was not a case involving railway rates, I 
 believe that the views announced by Justice Brewer 
 of the Supreme Court in Cotting vs. Kansas City 
 Stock Yards Company lay down in clear and unmis- 
 takable language the rule which should be applied to 
 the determination of the reasonableness of any rail- 
 way charge. Speaking of a person who has devoted 
 his property to a public use, Justice Brewer said : 
 
 7~E 
 
98 
 
 '^The State's regulation of his charges is not 
 to be measured by the aggregate of his profits, 
 determined by the volume of business, but by 
 the question whether any particular charge to 
 an individual dealing with him is, considering 
 the service rendered, an unreasonable exaction. 
 In other words, if he has a thousand transac- 
 tions a day, and his charges in each are but a 
 reasonable compensation for the benefit re- 
 ceived by the party dealing with him, such 
 charges do not become unreasonable because, by 
 reason of the multitude, the aggregate of his 
 profits is large. The question is not how much 
 he makes out of his volume of business, but 
 whether in each particular transaction the 
 charge is an unreasonable exaction for the serv- 
 ices rendered. He has a right to do business. 
 He has a right to charge for each separate serv- 
 ice that which is reasonable compensation there- 
 for, and the legislature may not deny him such 
 reasonable compensation, and may not interfere 
 simply because, out of the multitude of his 
 transactions, the amount of his profits is large." 
 
 In this cas^ Justice Brewer clearly announces the 
 rule which I believe should be applied to all questions 
 affecting the reasonableness of railway charges. He 
 clearly lays down the principle that the only question 
 involved in the matter there under discussion was 
 whether any particular charge for a specific service 
 was an unreasonable exaction as measured by that serv- 
 ice. He indicates that the value of the service to the 
 person for whom it is rendered must be the principal 
 factor in determining the reasonableness of the charge. 
 This rule eliminates from consideration, except as I 
 shall hereafter explain, all questions of capitalization 
 
99 
 
 and of the value or cost of the property used in per- 
 forming the service by declaring explicitly that *'the 
 legislature may not deny him such reasonable compen- 
 sation, and may not interfere simply because, out of 
 the multitude of his transactions, the amount of his 
 profits is large/' The application of this rule to pri- 
 vately owned railways, which I believe to be proper 
 and will ultimately be done, clearly denies to govern- 
 ment the right to place any limitation on the amount 
 that may be earned on railway capital. It would in- 
 vite the people of the United States to invest their 
 money in the great and honorable business of trans- 
 portation with the assurance that the properties they 
 create will have the equal protection of the laws and 
 will be surrounded by the same safeguards as are 
 thrown around property in other forms. It would en- 
 courage those engaged in this business to strive con- 
 stantly to make their service more efficient by the 
 adoption of improved appliances and methods, with 
 the assurance that they will be permitted to reap the 
 profits of their enterprise and skill. 
 
 While it is an economic and practical impossibility 
 so to adjust any charge for a specific transportation 
 service that it shall bear a fixed and predetermined re- 
 lation to railway value or capitalization, there are cer- 
 tain conditions under which the return on the capital 
 invested must be considered in determining questions 
 as to the reasonableness of charges. I believe I have 
 established the proposition that when the charges of 
 a railway are not exorbitant or unreasonably high, as 
 measured by the service performed, 'the right to pos- 
 sess and enjoy the profits it may earn, be they much or 
 little, is a property right in which its owners are pro- 
 tected by the Constitution of the United States. It 
 follows that, unless it can be- clearly established that the 
 charges of a railway are exorbitant and unreasonably 
 
100 
 
 high, as measured by the standard of service, any re- 
 duction attempted to be made by governmental author- 
 ity is an unconstitutional act, and evidence showing 
 that such reduction would deprive the owners of the 
 property of a reasonable return on their investment 
 would be conclusive as to its unconstitutionality. Fur- 
 ther, in a time of advancing commodity prices and 
 labor costs, the fact that the whole body of its trans- 
 portation charges fails to yield a fair and reasonable 
 return on the capital invested in a railway is pre- 
 sumptive evidence that there has been such an increase 
 in the cost of the service and in the value of the serv- 
 ice as to require a readjustment of charges upon a 
 higher average level. This is but another way of say- 
 ing that rates must be reasonable for, and under the 
 conditions and circumstances of, the service. In the 
 changed conditions growing out of higher prices for 
 everything else a higher price for railway transporta- 
 tion becomes reasonable. 
 
 Under such conditions it is to the public interest 
 that such a readjustment should take place, for the 
 primary interest of the public in the railways is in 
 adequacy of facilities and efficiency of service, and 
 these can be provided, in a country with a constantly 
 increasing volume of traffic, only when the average re- 
 turn on capital invested in railways bears such a rela- 
 tion to the returns on investments in other forms of 
 property as to insure a constant flow of new capital 
 into railway enterprises. In other words, the fair 
 maintenance of the just credit of the railways is a cir- 
 cumstance which, should be taken into consideration in 
 determining the reasonableness of rates, not only in 
 the interest of the railways, but in the interest of the 
 public. In this connection, I think we may properly 
 refer to the relation of the governmental policy of Ger- 
 many to the wonderful industrial development that has 
 
• • ••. 
 .* • •• . 
 
 101 
 
 marked the recent history of that country and is still 
 in progress. It is not without significance that we find 
 the highest court in the German Empire saying : 
 
 ''When in a branch of industry the prices of 
 a product fall too low, and the successful con- 
 duct of the industry is endangered or becomes 
 impossible, the crisis which sets in is detri- 
 mental, not merely to individuals, but to soci- 
 ety as a whole. It is in the interests of the com- 
 munity, therefore, that inordinately low prices 
 should not exist in any industry for a long 
 time." 
 
 If this is true as to the prices of the products of any 
 industry, Mr. Toastmaster, I believe it is equally true 
 of the charges of a railway, for transportation is a part 
 of production, and, in our modern civilization, the 
 prosperity of every industry and of every individual 
 is affected, directly or indirectly, by transportation. 
 
 The desire of each man to better his condition and 
 to provide for his family is the mainspring of human 
 progress. I believe that each man should have the 
 most ample liberty to achieve success consistent with 
 the preservation of the same degree of liberty to all 
 other men. I do not believe that, as to those of our 
 fellow-citizens engaged in the business of transporta- 
 tion or any other lawful calling, the intelligent public 
 opinion of the United States will return an affirmative 
 answer to the question which Justice Brewer asked in 
 the Cotting case, to which I have referred, as follows : 
 
 ' ' Is it true in this country that one who, by at- 
 tention to business, by his efforts to satisfy cus- 
 tomers, by his sagacity in discerning the prob- 
 able courses of trade, and by contributing of his 
 

 102 
 
 means to bring trade into those lines, succeeds 
 in building up a large and profitable business, 
 becomes thereby a legitimate object of the legis- 
 lative scalping knifeT' 
 
 I believe, Mr. Toastmaster, that the preservation of 
 individual liberty is essential to our progress as a peo- 
 ple, and that the millions of Americans, each seeking 
 to preserve the most ample opportunities for himself 
 and his children, would look upon it as a national 
 calamity if we should say to any citizen ^'that his in- 
 dustry, ability, activity, and foresight may be re- 
 warded up to a certain extent and that beyond that he 
 may not go. ' ' 
 
 [10609J 
 
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