Philadelphia on the bases of rates now in effect to those deliveries. They contend that if made available without charge, the refrigeration service proposed will be used in connection with practically all shipments by rail to north Atlantic ports. They estimate the cost thereof to applicants at approximately $400,000, based on the 11,499 carloads moved by rail to the port cities in the 1936-37 season at $34 per car, and based on an assumption that the net revenue of the rail lines after deducting $34 per car for refrigeration would approximate $200 per car, it would be necessary to handle approximately 2,000 additional carloads to offset the additional expense of furnishing such refrigeration services. In their opinion, there is no reasonable assurance that applicants will obtain any additional traffic as a result of the added service. They further contend that, applicants' proposal in this respect is in conflict with our view, as expressed in Charges for Protective Service to Perishable Freight, 215 I. C. C. 684, 687, 796, that it is impracticable to include in the line-haul rate charges to cover refrigeration costs; that the absorption of such charges would remove in whole or in part the differential in favor of the truck-water routes, provided by the present charges for refrigeration assessed by the rail carriers in addition to the rates for transportation; and that differentials in favor of the truck-water routes are, in their opinion, necessary to attract traffic to their lines in competition with rail carriers. They point out that the time in transit over truck-water routes is longer by at least one day, and that more handling of the fruit is necessary than when the service is by rail, which tends to cause breakage and decrease attractiveness of the packages. It is emphasized that the latter factors are particularly prominent in connection with traffic to Philadelphia, where the market is some distance from the steamship piers and fruit arriving by water is loaded into cars and switched to consignees. Reconsignment and diversion arrangements accorded, when movement is by rail, generally are not available to movements over truck-water routes. These arrangements are particularly important with respect to rail traffic to Baltimore and Philadelphia, from which points many cars are diverted to other destinations.

Other alleged disadvantages encountered by the water lines result from the location of packing plants on the rail lines, by reason of which representatives of the rail lines are in closer contact with the shippers than are representatives of the water lines; the necessity of making arrangements for truck service when the movement is by truck-water routes; and equipment that is less elastic than that of the rail lines. The disruption of schedules due to fogs and ice in the Delaware River and Chesapeake Bay during severe winter

weather is advanced as an additional deterrent to the use of the truck-water routes to Philadelphia and Baltimore. It is also asserted that the results of the last shipping season demonstrate that with rates to Baltimore 5.6 cents lower than the all-rail rates, and to Philadelphia the same as the all-rail rates, the water lines cannot obtain a fair share of the traffic to those ports. In view of the various alleged disadvantages in connection with truck-water transportation as compared with all-rail services, it is urged that relief, if granted in connection with the all-rail rates to those ports, should be limited to rates, not including the refrigeration service proposed, not less than 10 cents per standard box of 90 pounds higher than the truck-water rates from the same origin points to those ports. Although the movement to Philadelphia deliveries was approximately 29 percent greater during the 1936-37 season than during the preceding season, the volume handled to that port by the truck-water routes during the 1936-37 season was approximately 10 percent less than during the preceding season. As shown in appendix 2, the movement of citrus fruit to Baltimore during the 1935-36 and 1936-37 seasons was 1,510 and 2,016 carloads respectively. Of these, 1,098 and 1,454 carloads, or 72.7 and 72.1 percent respectively, moved over the all-rail routes, and 412 and 562 carloads, or 27.3 and 27.9 percent respectively, moved over the truck-water routes.

The Merchants and Miners Transportation Company serves Baltimore and Philadelphia, but not New York. The volume of citrus fruit traffic moving over that line to the two former ports has steadily declined since the 1933-34 shipping season, when it amounted to 1,961,550 boxes. During the succeeding three seasons, that line handled 1,700,537, 1,232,518, and 1,012,976 boxes, respectively. The record does not show the effect on this line of competition by other water carriers to those ports.

The water lines also emphasize the importance of maintaining their volume of traffic. It is asserted that many of the ships operated during the last season were not loaded to full capacity and that approval of applicants' proposals will force the water lines to reduce their rates on this traffic. As an indication of their ability to reduce such rates, they show that the earnings on citrus fruit are approximately twice as much as on general traffic handled by them between the same points, and they intimate that, in the event of loss of a substantial amount of this fruit traffic, efforts will be made to replace such loss with vegetable traffic, of which there is a heavy movement by rail lines from Florida to north Atlantic ports. We adhere to our conclusions in another proceeding, quoted at page 549

8 Lumber from Pacific Coast to Eastern Points, 210 I. C. C. 317.

of the original report herein, with respect to the threat of a rate war as a result of proposed changes in rate schedules.

As noted in prior reports herein, the competition of the water and truck-water routes encountered in territory served by the Florida East Coast Railway Company (W. R. Kenan, Jr., and S. M. Loftin, receivers) is particularly severe, and that carrier attributes its reduced revenues in recent years mainly to such competition. During the years 1932, 1933, and 1934, it failed to earn operating expenses. In 1936 the net railway operating revenue was $877,796 and the rate of return was 0.77 percent on the property investment, as submitted by this applicant. Citrus fruit originating in territory served by the Florida East Coast moves principally to eastern markets. During the 1931-32 shipping season that carrier transported 3,215 carloads of citrus fruits, as compared with 117 carloads handled by water or truck-water routes. During the respective 1935-36 and 1936-37 seasons it handled 962 and 1,075 carloads, while the competing water routes handled 6,314 and 6,142 carloads. The Florida East Coast attributes the increased rail movement during the last shipping season to labor troubles during the early part of that season, which threatened the operations of the water lines.

Melrose Junction, to which relief is sought by application No. 16717, which was not embraced in the prior reports, is in the general vicinity of other uptown New York stations to which relief was granted in the report on further hearing. The competitive situation with respect to traffic to that station is similar to that encountered in connection with traffic to other uptown New York stations and need not be further discussed.

We are of the opinion that applicants' proposals are not in contravention of the law and therefore should be approved. It is established beyond question that under those proposals the rates at the intermediate points will be not unreasonable. The evidence is also convincing that the rates to the ports will be reasonably compensatory. They will produce revenues per car-mile well above the minimum fixed in the previous reports and hereinafter again prescribed. We are further of the view that the granting of these applications is not inconsistent with the policy declared in section 500 of the Transportation Act, 1920. This provision of the law was construed by the Supreme Court in Mississippi Valley Barge Line Co. v. United States, 292 U. S. 282. This was a suit brought by a barge company to enjoin and set aside our order in Sugar Cases of 1933, 195 I. C. C. 127, wherein, among other things, we approved, with modifications, reduced rates on sugar from New Orleans to northern

226 I. C. C.

points proposed by the rail lines in order to meet competition of barge lines. The court there said:

We are told for the appellant that upon the face of the report the Commission has been heedless of the mandate of a statute. By Section 500 of Transportation Act, 1920, (Feb. 28, 1920, c. 91, 41 Stat. 499; 49 U. S. C. Sec. 142) "it is declared to be the policy of Congress to promote, encourage and develop water transportation, service, and facilities in connection with the commerce of the United States, and to foster and preserve in full vigor both rail and water transportation." * By earlier sections of the act, Sec. 418; 49 U. S. C. Sec. 15; 15 (1), 15 (4), the regulatory powers of the Commission had been broadened in respect of through or joint rates for carriers by rail and water, Chicago, R. I. & P. Ry. Co. v. United States, 274 U. S. 29, 36; and by the Inland Waterways Transportation Act as amended in 1928, these powers had a new extension. Act of May 29, 1928, c. 891, Sec. 2, 45 Stat. 978; 49 U. S. C. Sec. 153 (e); United States v. Illinois Central R. Co., 291 U. S. 457.

For the determination of this case there is no need to go into the question whether the declaration of the policy of Congress to foster rail and water transportation creates a new standard of duty for the Commission in the ordering of rates, or is a source of private rights if the duty is ignored. That question does not become important until the policy of the lawmakers appears to have been flouted; and here it was obeyed. The admonition does not mean that carriers by rail shall be required to maintain a rate that is too high for fear that through the change they may cut into the profits of carriers by water. The most that it can mean, unless, conceivably, in circumstances of wanton or malicious injury, is that where carriers by land and water are brought within the range of the regulatory powers of the Commission, as e. g., in establishing through routes or joint rates, there shall be impartial recognition and promotion of the interests of all.

No discrimination of that kind is proved or even charged. The rates affected by this schedule do not involve the division of joint earnings between land and water carriers. The appellant makes its own rates from port to port, and may increase or lower them at will. What has been done by the Commission affects the carriers by rail alone, at least in its immediate consequences. Transportation by water may feel the repercussions of regulation elsewhere. It has not been regulated directly. Even for transportation by land, the Commission has done no more than establish a permissive minimum, and this a minimum sufficient to give assurance that the carriage of the sugar will not involve a loss. "There is no reasonable doubt," we are told in the report, "that the proposed rates are high enough to pay more than the cost of service." The situation here disclosed is analogous to that in the case cited and we are of the opinion that the same principles are applicable. Applicants will be authorized to continue, or to establish and maintain, for the transportation, including the refrigeration service hereinbefore described, of citrus fruits, in carloads, from origins in Florida to the north Atlantic ports, and other deliveries considered herein, rates on the bases set forth above, and to maintain higher rates and charges for similar services from, to, and between intermediate points; provided that the rates between the more distant

points shall not be lower than rates which would yield 12 cents per car-mile, based on a minimum carload weight of 36,000 pounds and the distance over the operating route over which applied, and provided further, that the rates and refrigeration charges from, to, and between the higher-rated intermediate points shall not exceed rates and charges on the bases hereinbefore described, and that the rates shall not exceed the lowest combination of rates subject to the act, nor in any instance a rate more than 50 percent higher than the rate to the more distant point. All other relief is denied. The findings in the previous reports are modified accordingly. An appropriate order will be entered.

LEE, Commissioner, concurring in part:

I concur in the conclusions of the majority to the extent that whatever rates are maintained should apply on all days, instead of on only four days a week.

The rates and refrigeration charges here proposed by the carriers from Orlando, Fla., a representative shipping point, to Baltimore, Philadelphia, and New York average but 56.8 percent of rates and charges prescribed by us as reasonable for this traffic in Florida R. Commrs. v. Aberdeen & R. R. Co., 144 I. C. C. 603, and Refrigeration Charges on Fruits, Etc., from the South, 151 I. C. C. 649 and 172 I. C. C. 3. In those proceedings the carriers urged the necessity of maintaining rates and charges higher than those prescribed, because of increased costs of operation and higher costs incident to handling perishable traffic, and they are now before us asking for further increases in those and other rates because of great financial necessity. A large volume of traffic is involved. In 1936-37, 32,647 carloads moved to Baltimore, Philadelphia, New York, and Boston.

The relief granted by the majority permits the carriers to maintain, over rail routes, rates and charges approximately the same as apply ever truck-water routes from and to the same points, subject to the conditions that it will not apply to rates yielding less than 12 cents per car-mile for distances over operating routes, to rates at intermediate points more than 50 percent higher than rates to the more distant points, nor to rates exceeding combinations of rates subject to the act. The carriers are required to pay private-car owners 2 cents per car-mile for the use of refrigerator cars in loaded and empty movement, and this would necessitate deduction from the minimum 12-cent per car-mile revenue shown above of 4 cents on private cars handled under load and returned empty, leaving a net of but 8 cents per loaded-car mile.

The record shows that in the season of 1936-37, 72.1 percent of the traffic to Baltimore, 56.6 percent to Philadelphia, and 25 percent to