The practice is not approved by the Commission, however, when the difference in the transportation expense from the various parts of such district is considerable and substantial.''605

Texas has heretofore been arranged in groups for rate-making purposes, and when the parties to the case are satisfied with the system, the Commission will not disturb it.606

But, in referring to the holding in the Farmers, Merchants & Shippers Club case, supra, the Commission said: "In so holding we said that the reasonableness of these rates must be determined not by considering the rate from the point of origin to a particular station in the group, but rather as applicable to the entire group. It is evident that every system of group rates must occasion more or less discrimination. The rate to the nearer edge of the group as compared with that to the more distant edge is of necessity discriminatory.607

In concluding the opinion of the Commission, Mr. Commissioner Prouty said: "It is impossible to pass abruptly from the group system."

There are many cases in the reports of the Commission recognizing the group system of rates, some of which will be discussed in the chapter on Equality in Rates. In this section, the reasonableness of rates is under discussion and the group system is opposed to the distance basis.

Considering distance and the group system, the Commission said: "Distance is, of course, a factor to be considered in determining the reasonableness of rates, and when rates are constructed upon this basis, and other things are equal, it may become a very important factor. When, however, as in this case, rates are constructed and maintained upon the group

605 Newland v. N. Pac. R. Co., 6 I. C. C. 131, 4 I. C. R. 474, 480; Merchants' Union of Spokane Falls v. N. Pac. R. Co., 5 I. C. C. 478, 4 I. C. R. 183; Rea v. Mobile & O. R. Co., 7 I. C. C. 43.

606 Farmers, Merchants & Shippers Club v. Atchison, T. & S. F. Ry. Co., 12 I. C. C. 351, 365. Although when such grouping results in unjust

discrimination it will be changed, Kaufman Commercial Club v. T. & N. O. R. Co., 31 I. C. C. 161.

607 Mitchell v. Atchison, T. & S. F. Ry. Co., 12 I. C. C. 324, 325. For a discussion and history of the Texas common point territory and a comparison with the transcontinental group, see Texas Common Point Case, 26 I. C. C. 528, 529.

system and the subject matter is a heavy commodity like coal, and the differences in distance are relatively inconsiderable, such differences do not of themselves compel differences in rates. "'60s

As a general rule, in establishing the boundary lines of groups, some measure or principle, such as radial or operating distance, competition, character of the freight, the contours of the country and the location of transportation lines, should be followed.609

§ 114. Grouping Producing Points, and Making Zones Taking Same Rates. The principles discussed in the foregoing section have been applied by the Commission to cases where a more or less contiguous territory is given the same rate to the markets. In speaking of such system already in existence, the Commission said:

"When the United States Government transports a package 10 miles for one citizen for 10 cents, while it charges his neighbor the same amount for transporting a like parcel 3,000 miles, a clear discrimination is made, but it is a discrimination of that character which by universal consent is in the public interest. So, here, it is by no means certain that these postage-stamp rates as applied to the distribution of the products of the Pacific coast states are not upon the whole for the general public good. Under this system the producers upon the Pacific coast are given the widest possible market for their products; the carriers obtain a certain amount of long-distance business at remunerative rates, which they would not otherwise have; the freight rate does not so far enter into the cost of these articles to the consumer that any noticeable burden is imposed upon any section of the country. If this Commission were required to establish a reasonable schedule of rates for the transportation of citrous fruits from southern California to eastern destinations, we should not feel at liberty to put in this blanket; but to establish graded rates at this time upon lemons would be to break up this rate system which is highly satisfactory to all parties concerned, and while the action of the court may in the end compel us to do this, we feel

608 Vietor Manufacturing Co. V.

609 Humphrey Brick & Tile Co. v. Southern Ry. Co., 27 I. C. C. 661, 663. P. R. R. Co., 50 I. C. C. 457, 462.

that we can for the present, properly leave this situation as it is. ''610

The rates resulting from this system of rate-making must, of course, be reasonable and not unjustly or unduly discriminatory.611 The system has its irregularities at best, but there are reasons why, at least until a more scientific basis of ratemaking is possible, it should be tolerated. In giving such reasons, the Commission has said:

"In transportation of low-grade commodities that move in bulk and in large quantities it is a long established custom to group or blanket a number of stations or a large expanse of territory. Such rate adjustments necessarily to some extent disregard distances. If strictly distance rates were applied to grain moving from points of origin it is apparent that at a certain distance from a market that is prepared to purchase the surplus the rate would be prohibitive. ''612

In prescribing rates, the Commission has adopted a system of zones "as an appropriate solution" of a particular rate situation.613 The courts recognize that the Commission has the jurisdiction to determine the effect of the custom of the carriers in making groups and zones.614 It is interesting to note that in prescribing parcel-post rates, the postage-stamp system was abandoned to an extent and zone rates applied.

It is not impossible that a strict enforcement of the equidistant clause of the fourth section of the Interstate Commerce Act would disrupt, if not practically destroy, most of the existing grouping or blanketing systems of rates.

610 Arlington Heights Fruit Exchange v. Southern Pac. Co., 22 I. C. C. 149, 156; order sustained by Commerce Court, Atchison, T. & S. F. Ry. Co. v. United States, 203 Fed. 56; Opinion Commerce Court No. 61, p. 537.

611 Sun Company v. Indianapolis Sou. R. Co., 22 I. C. C. 194, 197; Clyde Coal Co. v. Pennsylvania R. Co., 23 I. C. C. 135.

612 Kansas City Transp. Bureau v. Atchison, T. & S. F. Ry. Co., 16 I. C. C. 195, 204. For typical grouping,

see Ferguson Saw Mill Co. v. St. Louis, I. M. & S. Ry. Co., 18 I. C. C. 396, 398; Re Transportation of Wool, Hides and Pelts, 23 I. C. C. 151, 164; Coal, Transportation Bureau of Wichita v. St. Louis, I. M. & S. Ry. Co., 23 I. C. C. 679, 680.

613 Pacific Creamery Co. v. Atchison, T. & S. F. Ry. Co., 29 I. C. C. 405, 408, and cases cited.

614 Int. Com. Com. v. Chicago, R. I. & P. Ry. Co., 218 U. S. 88, 54 L. Ed. 946, 30 Sup. Ct. 651.

§ 115. Basing-Point System.-What this system is and the attitude of the Commission thereon cannot be better stated than by using the language of the Commission itself. In Board of Trade of Hampton v. Nashville, Chattanooga & St. L. R. Co.,615 it was said by Mr. Commissioner Clements:

"As stated in our finding of fact, through rates made in this way—that is, composed of rates to 'basing points' and local rates back-are in pursuance of what is known as the 'basing point' system of rate-making, which according to the evidence of the witness (Cutler), prevails 'throughout the southern territory.' This system has been heretofore several times discussed and disapproved by the Commission. Re Louisville & N. R. Co., 1 I. C. C. Rep. 84, 85, 1 Inters. Com. Rep. 287; Martin v. Chicago, B. & Q. R. Co., 2 I. C. C. Rep. 25, 46, 47, 2 Inters. Com. Rep. 32; Re Tariffs and Classifications of A. & W. P. R. Co., 3 I. C. C. Rep. 19, 24, 25, 46-49, 2 Inters. Com. Rep. 461.

"Under this system, where the haul is through the basing point to a point beyond, the rate to the latter is the through rate to the basing point plus the local rate from the basing point on and where, as in the present case, the haul is to an intermediate point, the rate to the intermediate point is the rate for the haul through such intermediate point to the basing point plus the local rate back over the same line. In the former case, the haul is not treated as a continuous haul through the basing point to the point beyond, but as two distinct hauls; one a through haul to the basing point, and the other a local haul from the basing point to the point beyond; and in the latter case, not as a through haul to the intermediate point, but as a haul through the intermediate point to the basing point beyond plus a local haul back. Local hauls, as is well known, are much more expensive to the carrier per mile than long through hauls, or any proportion of such through hauls. Therefore local rates are properly made much higher for the same distance than through rates, and hence the

615 Board of Trade of Hampton v. Nashville, C. & St. L. R. Co., 8 I. C. C. 503, 520, 521, 522. See also Board of Trade of Dawson v. Central of Ga. Ry. Co., 8 I. C. C. 142. Competition

at one place may justify a different rate to another, Roberts Cotton Oil Co. v. Illinois C. R. Co., 21 I. C. C. 248.

charge of a local rate for a part of a through haul, when the extra expense of a local haul has not been incurred, is prima facie excessive-Augusta Southern R. Co. v. Wrightsville & T. R. Co., 74 Fed. Rep. 522.

"It is a significant fact, that the result of this system of rate-making is to enable the basing-point merchants to compete with the local merchants of surrounding localities at their own doors on equal terms, while the latter are debarred from such competition with the former, and as to territory intermediate between the basing points and surrounding localities merchants at the basing points are given such an advantage in rates as to enable them to undersell merchants at surrounding localities, and drive them out of the 'jobbing business' in such intermediate territory as the testimony shows has been the result in the present case. The direct tendency and almost invariable outcome of the system is that basing points are built up and flourish at the expense of surrounding localities. The building up of one locality at the expense of another, by rates favoring the former and discriminating against the latter, was undoubtedly one of the principal evils which the Act to Regulate Commerce was designed to remedy, and it would seem that due allowance might and should be made for the effect of competition without defeating the object of the law."

The system of making the rate to the point beyond the full local from the basing point was abandoned by the carriers and a system of differentials or arbitraries over the basing point established. Even this, when resulting in discrimination, is illegal and the principle was announced by the Commission that "rates to the basing points should bear some reasonable relation to the total distances involved."616 In adjusting rates under the amended fourth section of the Act, the basing point

616 Board of Trade of Carrollton v. Central of Ga. Ry. Co., 28 I. C. C. 154. See also Mayor and Council of Boston, Ga. v. Atlantic C. L. R. Co., 24 I. C. C. 50; City of Montezuma v. Central of Ga. Ry. Co., 28 I. C. C. 280; Town of Pelham, Ga. v. Atlantic C. L. R. Co., 28 I. C. C. 433; Mayor and Council of Douglas, Ga. v. At

lantic, B. & A. R. Co., 28 I. C. C. 445; Mayor and Council of Vienna, Ga. v. Georgia, S. & F. Ry. Co., 28 I. C. C. 173; LaGrange Chamber of Commerce v. Atlanta & W. P. R. Co., 28 I. C. C. 178; Mayor and Council of Tifton, Ga. v. Louisville & N. R. Co., 9 I. C. C. 160; Columbia Grocery Co. v. Louisville & N. R. Co., 18 I. C. C. 502.