tenance of trestle work and the making of frequent repairs on account of high water.

The original cost of the Louisville, Henderson & St. Louis was $6,598,000, though it is claimed it would cost greatly in excess of that amount to reproduce the road, on account of the advance in real estate values in the section which it traverses and in the cost of materials; also on account of the improvements which have been added. The present capitalization is $6,500,000, and the net income for the fiscal year ending June 30, 1905, was $27,239.64. The bonds of this road, when first issued, sold for 83 and 84. The outstanding bonds, with a face value of $2,500,000, were quoted at the time of the hearing at about 111 and bear interest at the rate of 5 per cent. The par value of the stock is $4,000,000, but it was selling at the time of the hearing at 21 cents on the dollar, with an actual value of $840,000. No dividends have ever been declared on this stock.

The all-rail first-class rate, New York to Evansville, is 83 cents per 100 pounds. The short-line distance being 987 miles, the rate per ton per mile on first-class traffic is 1.68 cents. The all-rail first-class rate, New York to Owensboro, is 90 cents per 100 pounds, and the short-line distance being 979 miles, gives a rate per ton per mile of 1.84 cents. The same rate applying to Henderson, on the short-line mileage of 998, yields a rate per ton per mile of 1.8 cents.

Taking the all-rail first-class rates applying from New York and Chicago to a few important points in the south for the purpose of comparison, we find that the first-class rate of $1.17 for the haul of 876 miles, New York to Atlanta, yields revenue per ton per mile of 2.7 cents; the first-class rate of $1.05, New York to Chattanooga, for a haul of 847 miles, 2.48 cents; New York to Nashville, 91 cents per 100 pounds, 998 miles, 1.82 cents; New York to Memphis, $1 per 100 pounds, 1,157 miles, 1.7 cents.

The first-class rate of $1.33 per 100 pounds, Chicago to Atlanta, for a haul of 733 miles, will yield a revenue of 3.6 cents per ton per mile; Chicago to Chattanooga, $1.11 per 100 pounds, 595 miles, 3.7 cents; Chicago to Nashville, 88 cents per 100 pounds, 444 miles, 3.96 cents; Chicago to Memphis, 85 cents per 100 pounds, 527 miles, 3.2 cents.

It appears that the rates applying between Evansville and southern territory are the same as the rates between Owensboro and Henderson and that territory, with the exception of certain territory contiguous to these last mentioned places. Prior to the construction of the Cincinnati Southern road the Evansville rates were higher to the south than the Henderson and Owensboro rates. That road however initiated the same rates from Cincinnati and other points on the north bank of the Ohio River served by it as were in force from Louisville and other points on the south bank to southern territory.

This action forced the carriers serving Evansville and other points north of the river to so readjust the rates to the south as to maintain the relative adjustment between points in Central Freight Association territory, and the parity existing between Evansville, Owensboro, and Henderson rates to southern points is directly attributable to the construction of the Cincinnati Southern road and the competition thus created for traffic between Evansville and points in Central Freight Association territory generally and points in southern territory. In competing for this traffic moving between Evansville and southern territory the Louisville & Nashville can better afford to absorb the bridge toll in crossing the Ohio River than on the traffic from Owensboro and Henderson to the north, for the reason that on the former it participates in much longer hauls over its own rails.

The testimony is not convincing that the rates to and from Owensboro and Henderson are, at this time, under present conditions, unreasonable in and of themselves. The main question, therefore, to be determined is whether or not the circumstances and conditions under which traffic is handled to and from Owensboro and Henderson are similar to the circumstances and conditions pertaining to traffic handled from the same points of origin to Evansville to such an extent as to make the charging of higher rates to the first-mentioned two points unjustly discriminatory. The fact that one of these points lies in territory throughout which applies a certain method of rate adjustment based on the conditions therein prevailing, and which secures to that territory relatively lower rates than those applying throughout another arbitrarily prescribed territory, does not, of course, carry greater weight than may be properly accorded the considerations which should actuate the carriers themselves in adjusting the rates irrespective of the arbitrary line between such territories. The carriers most directly interested in the Evansville rates for the most part serve the territory north of the Ohio River, while those most directly interested in the rates to Owensboro and Henderson serve the territory south of the river. There is greater density of population and of traffic in the territory north of the Ohio River known as Central Freight Association territory, and in which Evansville is situated, than in territory south of the river, in which Owensboro and Henderson are situated. Such differences in conditions reasonably and inevitably result in a different adjustment of rates in the respective territories. Generally the cost per ton of handling freight decreases in proportion to the increase in its volume. Rates applying in a given section are more or less interdependent, since they must be relatively adjusted, as far as may be possible, with regard to the peculiar conditions obtaining at the various points, so that there may be no unjust discrimination as

between places. The general adjustment of rates throughout Central Freight Association territory due to the conditions therein prevailing naturally has a forceful effect upon the Evansville rates. The larger volume of traffic and greater number of carriers operating in that territory create a greater degree of competition, and the rates generally have been adjusted with a view to meeting the conditions resulting therefrom. This competition between carriers likewise creates so-called market competition, each carrier being compelled by considerations of expediency to establish such rates to points which it serves as will enable them to compete with other points where more active railroad competition may have brought about lower rates.

While it is true that by certain routes the distance between Trunk Line territory and Evansville is somewhat greater than between the same territory and Owensboro and Henderson, and that traffic moving via these routes is handled over the same lines at higher rates for the shorter than for the longer distance, such higher rates can not, under the decisions of the courts, be regarded as unjustly discriminatory unless the traffic is handled under substantially similar circumstances and conditions. The rates to Evansville are made by the trunk lines operating through a section of the country in which lower rates generally prevail than in the section served by the carriers handling the bulk of the traffic to Owensboro and Henderson. The more intense competition for the Evansville traffic is also in great measure responsible for the lower rates applied thereon. The carriers handling the bulk of the Owensboro and Henderson traffic are forced to accept, on the small percentage of Evansville business which they are able to secure, rates fixed by those lines directly serving Evansville, and we do not consider that those carriers, simply because they pass through Owensboro and Henderson in moving the traffic to Evansville at lower rates, are for that reason alone unjustly discriminating against the first two mentioned points. The fact that Evansville, which is principally served by carriers traversing a territory in which the volume of traffic is greater and competition more intense, is given rates somewhat lower than those accorded Owensboro and Henderson by the lines directly serving these last-mentioned points, and which operate mainly in a territory of less density of traffic, does not of itself establish the unreasonableness of the Owensboro and Henderson rates, since the lines serving Evansville are confronted there by conditions which do not prevail at Owensboro and Henderson.

It is not incumbent upon a road to measure the rates to all points on its line from and to which it handles the bulk of the traffic by lower rates fixed by competitors operating over a more direct route to some other point also on its line but to which it handles an unappreciable volume of traffic. In other words, a road in accepting, on a comparatively small volume of traffic moving to a given point,

exceptionally low competitive rates, which it must establish in order to secure any part of the traffic, is not thereby estopped from charging reasonably remunerative rates to other points to which it handles the bulk of the traffic from which it must derive the principal part of its revenues. So to hold would be totally to disregard the effect of competitive conditions which the Supreme Court has held in numerous cases as justifying the application of lower rates to farther distant points over the same line in the same direction. The long and short haul clause of the act, as construed by the courts, prohibits the charging of a higher rate to a less distant point only where the carrier responsible for both rates occupies a like relation to the more distant point to which the lower rate applies. The Louisville, Henderson & St. Louis and the Louisville & Nashville, which are the principal defendants in this proceeding, do not stand in the same relation to Evansville as to Owensboro and Henderson, since those roads do not handle the bulk of the Evansville traffic and do not control the rate situation at that point. The carriers serving Evansville are forced by competitive and other general conditions obtaining in Central Freight Association territory to make lower rates to and from that place, therefore the existence of such rates does not establish the unreasonableness of the higher rates applying to Owensboro and Henderson. If it were shown that places farther distant from the points of origin in question and served primarily by the Louisville, Henderson & St. Louis and the Louisville & Nashville are given lower rates than Owensboro and Henderson, and that such rates did not result from greater competition between carriers at such more distant points, but were directly attributable to conditions created by those roads and within their control, this might properly be held to constitute unjust discrimination forbidden by law; but the testimony does not show such a state of facts to exist. On the contrary, it appears that Owensboro and Henderson enjoy advantages in the matter of freight rates secured to them by reason of their proximity to Evansville and which are not enjoyed by other points along the lines of the Louisville, Henderson & St. Louis and the Louisville & Nashville and served principally by those roads.

It is contended by complainants that the defendant carriers have by agreement among themselves fixed the rates here involved in violation of the anti-trust laws, and thus by concerted action have suppressed competition which might naturally have resulted in lower rates to Owensboro and Henderson. While such a method of fixing rates, when proven to exist, leads us to scrutinize more carefully the rates so established with a view to ascertaining whether or not it has in fact resulted in the maintenance of unreasonable transportation charges, and evidence thereof is admissible for that purpose, that fact alone is not conclusive evidence of the unreasonableness of the rates.

It follows that the complaint must be dismissed.

No. 1341.

LYKES STEAMSHIP LINE

2.

COMMERCIAL UNION; ATCHISON, TOPEKA & SANTA FE RAILWAY COMPANY; GULF, COLORADO & SANTA FE RAILWAY COMPANY; MISSOURI PACIFIC RAILWAY COMPANY; TEXAS & PACIFIC RAILWAY COMPANY; ST. LOUIS, IRON MOUNTAIN & SOUTHERN RAILWAY COMPANY; INTERNATIONAL & GREAT NORTHERN RAILROAD COMPANY; CHICAGO, ROCK ISLAND & PACIFIC RAILWAY COMPANY; CHICAGO, ROCK ISLAND & GULF RAILWAY COMPANY; ST. LOUIS, KANSAS CITY & COLORADO RAILROAD COMPANY; ST. LOUIS & SAN FRANCISCO RAILROAD COMPANY; ST. LOUIS, SAN FRANCISCO & TEXAS RAILWAY COMPANY; TRINITY & BRAZOS VALLEY RAILWAY COMPANY; MISSOURI, KANSAS & TEXAS RAILWAY COMPANY, AND MISSOURI, KANSAS & TEXAS RAILWAY COMPANY OF TEXAS.

Submitted March 18, 1908. Decided April 6, 1908.

1. An ocean carrier established under the laws of Cuba and transporting traffic between Habana and Galveston is not subject to the act to regulate

commerce.

2. The rule laid down in the case of the Cosmopolitan Shipping Company, 13 I. C. C. Rep., 266, followed.

3. The word "adjacent,” as used in the act to modify the words “foreign country," would seem to mean adjacent in the sense of the possibility of substantial continuity of rails.

Cowan, Burney & Goree and John B. Daish for complainant. Robert Dunlap, T. J. Norton, J. W. Terry, and J. H. Hawley for defendants.

REPORT OF THE COMMISSION.

COCKRELL, Commissioner:

The complaint in this case was filed November 23, 1907. The complainant is a copartnership acting as a common carrier engaged in the transportation of freight between Galveston, Tex., Habana, and