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Pacific coast lumber comes into competition with that produced in Wisconsin and Minnesota, and also with that from the southern forests. The lumber produced in all these sections can be, in the main, devoted to the same purposes. Whether the product from one territory or from the other shall be used depends upon the price at which it can be purchased and the price is materially affected by the rate of transportation. Rates from the Pacific coast have been made with a view to giving the lumber manufactured there an entrance into eastern markets, and the effect of any considerable advance in those rates must be to exclude that lumber, temporarily at least, from many markets in which it has previously been sold.

The complainants assert that they also meet competition upon the Pacific coast which must be recognized. The birch shipped to the coast is used almost exclusively in interior work. The oak is used partly for interior finish and partly in the construction of implements and other articles made in some part of wood and requiring some strong and heavy wood in their construction. Woods suitable for house finish are brought to the Pacific coast from Mexico, from South America, and from the Philippines. Oak which seems to compete at all points with American oak is brought in from Japan · and Siberia. This lumber bears no duty if imported in the log or rough-hewed, and for this reason it is generally imported in that form and sawed upon the Pacific coast. Mills have been and are being established for this purpose. The testimony leaves no doubt that the use of hardwood lumber is largely increasing upon the Pacific coast and that this increase is being supplied, to a considerable extent, from foreign countries. The rates at which this foreign lumber moves are water rates and extremely low. It was said that Japanese oak came in upon a tariff of 35 cents per 100 pounds.

With this foreign lumber the complainants certainly do compete, and without doubt that competition in the future will be even more keen than in the past. The prices at which this lumber sells, however, are high, and the nature of the use to which it is put is such, in many cases, that a slight difference in the price does not determine what lumber shall be used, but 10 cents per 100 pounds amounts to from $4 to $4.50 per 1,000 feet upon this hardwood, and it can not be doubted that a difference in price of this amount does exercise a controlling influence, to a considerable extent, in the sale of hardwood lumber. To permanently increase the cost of Amerian hardwood upon the Pacific coast by $4.50 per 1,000 feet would be to place that product under a very serious handicap in its competition with foreign hardwoods.

While this is so, however, that competition is not as acute as in case of soft-wood lumber. With hardwood there is but a single high grade, while with soft wood all grades are in competition.

There is competition upon the Pacific coast in the sale of this hard wood which we must recognize, but that competition is not of the same active kind, the freight rate is not of the same controlling importance that it is in case of soft-wood lumber from the west. We feel that competitive conditions on the whole justify a somewhat lower rate east than is applied west.

The defendants also say that the lower rate is justified by the greater volume of traffic. Volume of traffic may excuse a lower rate partly because freight can be handled more cheaply in large quantities than in small, and partly because a railroad is justified in making a low rate to induce a large volume of traffic where the circumstances are such that the rate will have this effect. The first of these reasons refers to the cost of the service, and this we have already considered. While this hardwood lumber does not move west in trainloads, the character of the freight is such that it can be moved at the convenience of the carrier and that single carloads may therefore be retained at junction points until they can be consolidated into trains of any desired weight. This element is not in favor of the eastern movement, but probably on the whole, of the western movement. The second reason, that the low rate is necessary in order to secure a large volume of traffic, is a competitive one which has also just been referred to. This eastern rate is required both in the interest of the producer upon the Pacific coast and of the consumer in the east, and of the carrier.

The position of the complainants-that if the carriers make a rate of 50 cents from the west to Chicago, they should make a corresponding rate from Chicago to the west-we do not think, therefore, is well taken. The west-bound rate may properly be higher than the eastbound rate.

The complainants also rely with confidence upon the fact that these defendants for many years maintained in effect a lower rate than the present. Below is given a table which shows the history of these rates to Pacific coast terminals from 1888 down to the present time.

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The defendants claim that these lumber rates are the product of water competition. At the present time, as appears from the testimony in this record, hardwood lumber does not move, to any considerable extent, to the Pacific coast from points east of Buffalo and Pittsburg, but such has not always been the case. Some years ago

such lumber was produced in the New England states and was transported from there by water to Pacific coast points. It is doubtless true that the rates established from the Atlantic seaboard in 1888 were influenced by water competition.

The complainant argues that this could not have been true, since the rate from New York was higher than the rate from Chicago or the Missouri River, although there was no water competition at Chicago; but, at that time, what were known as "graded" rates were generally in effect from territory east of the Missouri River to Pacific coast terminals; that is, the rate somewhat decreased going west from the Atlantic seaboard. When once water competition established a rate from New York the carriers, by agreement among themselves, applied a less rate from various western points of origin. For this reason the rate from New York, although induced by water competition, was higher than that from Chicago where no such competition existed.

For some four years, beginning in 1893, transcontinental rates were in a most demoralized condition. It will be seen from the above table that on April 12, 1894, a rate of 75 cents was established from Chicago common points and other territory west. This was really an extension of the Missouri River rate, which had been in effect ever since March 6, 1888, as far east as Chicago, and may very likely have been induced by the disturbances above referred to. In 1897, when the differences, which had led to this disturbance in transcontinental rates were composed and the rates restored, the 75-cent rate at Chicago was not advanced, but was simply extended to the eastern seaboard. It will be seen, therefore, that for a period of about ten years the defendants maintained a rate of 75 cents from the territory in question. It also fairly appears that this rate during that period of ten years was not forced by water competition. For four years, from 1893 to 1897, the rate did not apply from the Atlantic seaboard at all, and since 1894 only an insignificant amount of lumber has moved from the east upon this rate. The testimony of one witness was that hardwood lumber had been shipped from points in Tennessee and Kentucky to the Atlantic seaboard, and thence taken by water to the Pacific coast; but, although requested to furnish & statement of some such shipment, the witness has not done so. Neither, so far as this record discloses, were there any other condi

tions which required or compelled these defendants to maintain, during this period, an abnormally low rate upon lumber. It appears, therefore, that for ten years previous to January, 1904, these defendants voluntarily maintained, as a rate suitable to be applied to the movement of this traffic, a tariff of 75 cents per 100 pounds.

This Commission has often said that where a rate is voluntarily established and maintained for a considerable period this fact, although not conclusive, is strong evidence of the reasonableness of the rate. The force of this presumption is greatly weakened and might be altogether destroyed by the circumstances under which the rate was established and maintained; but if no particular reason is shown for the putting in of the rate, if no commercial or competitive condition prevents the maintenance of a higher rate, if, in other words, the maintenance of this rate has been voluntary upon the part of the carrier, the force of the admission becomes exceedingly strong. In this case, as already suggested, we find no cause which has operated to compel these defendants to maintain a lower rate for the transportation of this lumber than in their judgment was just and fair during these ten years. Some justification should therefore be

shown for its advance.

The defendants do justify this upon the ground that it was rendered necessary by increased cost of operation. In two instances the Commission has expressed the opinion that similar advances made for the same reason, at about this time, were not justified; that while cost of operation had increased, increase in traffic and improved methods of handling the business had more than made good to the carriers the advance in the prices of supplies and labor. Re Proposed Advance in Freight Rates, 9 I. C. C. Rep., 382; In the Matter of Class and Commodity Rates from St. Louis to Texas Common Points, 11 I. C. C. Rep., 238.

These investigations did not relate to the transcontinental lines which are mainly involved in this proceeding, but we have, within the year, conducted extended investigations which do involve the financial operations of all these transcontinental systems, and we have no hesitation in saying that the conclusions reached by us with respect to those advances would apply with still greater force in case of these defendants; for nowhere has the increase of traffic been greater and the saving in operating cost more marked than upon these transcontinental railroads. We should certainly scrutinize with care any advance in rates made by these lines upon the sole ground that their revenues were insufficient.

That is but another way of saying that the advance in question ought not to be permitted unless the original rate was abnormally low and the present rate is clearly reasonable.

As said by Knapp, chairman, in Marten v. L. & N. R. R. Co., 9 I. C. C. Rep., 581, 589:

Lumber is inexpensive freight, and much below the average in cost of transportation, while only a few other commodities furnish to carriers a larger tonnage. For these reasons, among others, it is universally accorded rates of transportation that are relatively low.

It is stated in the brief of the defendants, who are also the defendants here, filed in the cases involving rates east bound from the mills of Washington and Oregon, that the average rate per ton-mile of the railroads of the United States on lumber is 6 mills. We have no information as to the correctness of this statement, but it is probably true that, as applied to hauls of 1,000 miles and over, the ton-mile rate is less than 6 mills. The distance from Chicago to San Francisco is about 2,250 miles, and this would perhaps be a fair average distance for the actual haul of this hardwood lumber from producing points in the east to consuming points upon the Pacific coast. A rate of 75 cents applied to this distance would yield substantially 7 mills per ton-mile. Now, as a general proposition we think that for the transportation of lumber over these transcontinental lines, with both a gross income and a net income per mile much above the average for the whole United States, with a density of traffic materially higher than the average, with a cost of operation below the average, 7 mills per ton-mile is sufficient, even though that lumber be of a somewhat higher grade and should perhaps bear a somewhat higher rate than lumber on the average.

The Commission has just held in Thompson v. Illinois Central R. R. Co., 13 I. C. C. Rep., 657, that a rate of 12 cents per 100 pounds, equivalent to about 6 mills per ton-mile, for the movement of this same oak lumber from Memphis to New Orleans is excessive and has established a rate of 10 cents per 100 pounds, equaling about 5 mills per ton-mile. To one not familiar with conditions it might seem inconsistent to allow a rate of 7 mills per ton-mile for the long transcontinental haul, while we require the establishment of a 5 mill per ton-mile rate for a haul of only 400 miles. There is, however, no analogy between the movement of the traffic in the two cases. The line of the Illinois Central between Memphis and New Orleans is practically a water grade, and freight can be moved at an extremely low cost. The general level of rates upon the line of that railroad is far below that upon the transcontinental lines involved in this proceeding. The volume of traffic to which our decision applies is much greater in case of the movement to New Orleans than with the transcontinental movement. We feel confident that the 10-cent rate from Memphis to New Orleans is as profitable to the carrier as is the 75-cent rate to the Pacific coast to the defendants in this case.

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