PRE-COOLING CASE.

Atchison, Topeka & Santa Fe Ry. Co. v. United States, 232 U. S.,

199.

This case involved two orders of the Commission, one reducing the rate on pre-cooled and pre-iced fruit from points in southern California to eastern destinations and the other requiring the carriers to maintain tariffs permitting pre-icing or pre-cooling of their shipments by shippers. "Pre-icing" or "pre-cooling" by shippers signifies the service performed by shippers in pre-cooling the fruit and placing in the bunkers of the cars the ice necessary for the preservation of the fruit during transportation.

The carriers sought to annul both orders, contending that the rate fixed was confiscatory and that shippers had no right to pre-ice. The Commerce Court sustained the Commission's orders and dismissed the petitions, 204 Fed., 647.

In affirming the decree of the Commerce Court and sustaining the validity of the orders the Supreme Court held on the question of confiscation that a rate fixed by the Commission which apparently excluded any compensation for hauling ice for refrigeration is not confiscatory when it appears, as in this case, that the rate for the fruit itself practically includes the rate for the ice. On the preicing feature the court held that a tariff withdrawing the privilege of pre-icing affects a rule and practice within the meaning of section 15 of the act empowering the Commission to determine whether any new practice is unreasonable; that it depends upon the facts and circumstances of each case whether icing is a part of the preparation for a shipment to be done by shippers or is a part of transportation to be furnished by the carrier; that neither the shipper nor carrier can insist upon a wasteful or expensive service for which the consumer must ultimately pay; and that, under the circumstances of this case, the shippers have the right to pre-ice their shipments.

TAP LINE CASES.

United States et al. v. Louisiana & Pacific Ry. Co. et al., Woodworth & Louisiana Central Ry. Co., Mansfield Railway & Transportation Co. et al., Victoria, Fisher & Western R. R. Co. et al., and Butler County R. R. Co., 234 U. S., 1, 29.

These cases involved certain divisions of through rates demanded by tap lines and held by the Commission to be unlawful.

After an extensive investigation of the tap lines in the lumber regions, particularly in Arkansas, Missouri, Louisiana, and Texas, the Commission held that the tap lines involved were, with respect to the proprietary lumber industries, merely plant facilities and not common carriers, although the tap lines had assumed the form of

common carriers; and ordered the trunk lines to cease and desist from paying divisions or allowances to the tap lines on traffic of the proprietary industries. On nonproprietary traffic, the Commission held that the trunk lines could lawfully pay such divisions and allowances to the tap lines.

The position of the Commission was that the proprietors of the tap lines in controversy were receiving rebates from the trunk lines prior to the passage of the Hepburn Act; and that after the Hepburn Act went into effect the proprietors incorporated the tap lines as common carriers, and then received in the shape of divisions what before they had gotten as rebates. This assumption by the tap lines of the character of common carriers was held by the Commission to be merely a device.

The Commerce Court annulled the Commission's order, 209 Fed., 244. The Commission appealed.

In affirming the decree of the Commerce Court and holding the Commission's order to be invalid, the Supreme Court decided three propositions: (1) That the Commission can not hold that the assumption of the form or character of common carrier by a tap line is a mere device to shield rebates when by the public policy of the State and the National Governments, as evidenced by legislation on the subject, tap lines are recognized to be common carriers; (2) that there can be no discrimination between proprietary and nonproprietary traffic-that is to say, if a tap line is entitled to a division or an allowance on traffic carried for strangers, it is also entitled to a similar division or allowance on traffic carried for the industry of which the tap line is an adjunct; and (3) that the Commission can fix the divisions of through rates to prevent discrimination and rebating without establishing through routes and joint rates and without a disagreement on the question of divisions among the carriers. On this last point the court said:

Because we reach the conclusion that the tap lines involved in these appeals are common carriers, as well of proprietary as nonproprietary traffic, and as such entitled to participate in joint rates with other common carriers, that determination falls far short of deciding, indeed does not at all decide, that the divisions of such joint rates may be made at the will of the carriers involved and without any power of the Commission to control. That body has the authority and it is its duty to reach all unlawful discriminatory practices resulting in favoritism and unfair advantages to particular shippers or carriers. It is not only within its power, but the law makes it the duty of the Commission to make orders which shall nullify such practices resulting in rebating or preferences, whatever form they may take and in whatsoever guise they may appear. If the divisions of joint rates are such as to amount to rebates or discriminations in favor of the owners of tap lines because of their disproportionate amount in view of the service rendered, it is within the province of the Commission to reduce the amount so that a tap line shall receive just compensation only for what it actually does.

FLORIDA EAST COAST CASE.

Florida East Coast Ry. Co. v. United States, 234 U. S., 167. This case involved an order of the Commission reducing certain rates on citrus fruits and vegetables from gathering points in Florida to the basing point of Jacksonville when those rates formed parts of through rates to points beyond Jacksonville in other states.

The carrier attacked the order in the Commerce Court on two grounds, namely: (1) That there was no substantial evidence before the Commission to support a finding that the existing rates were unreasonable, and (2) that the rates fixed by the Commission were confiscatory. That court held that there was substantial, though conflicting, evidence to support the order and that there was no basis for a charge of confiscation, and dismissed the petition, 200 Fed., 797. The carrier appealed.

The Supreme Court reversed the decree of the Commerce Court and remanded the cause to the proper district court with directions to restrain the enforcement of the order on the sole ground that there was no substantial evidence before the Commission to support the Commission's finding that the existing rates were unreasonable.

WILLAMETTE VALLEY CASE.

Southern Pacific Co. et al. v. United States et al., 232 U. S., 736. This case involved an order of the Commission reducing rates on rough green fir lumber and lath from points in the Willamette valley in Oregon to San Francisco and other points in California.

The Commission's first order herein is reported in 14 I. C. C., 61. This order was attacked by the carriers in the Circuit Court for the Northern District of California, which court certified the case to the Supreme Court. Holding that the case was not properly certified, the Supreme Court remanded the case to the circuit court, 215 U. S., 226, whereupon the circuit court entered a decree sustaining the Commission's order, 177 Fed., 963. From such decree the carriers appealed to the Supreme Court, which held that the Commission's order was invalid on the ground that the action of the Commission in reducing the rate was not an attempt on its part to fix a reasonable rate, but was rather in the nature of a decree enforcing an equitable estoppel between the parties. The Supreme Court did not find that the rate fixed was too low, but simply held that the Commission had no power to reduce a rate on the theory that a carrier is estopped to charge a higher rate after maintaining a lower rate for many years and leading shippers to believe that the lower rate would be continued, 219 U. S., 433.

Another hearing was had in the case and a large amount of testimony taken, but practically no new facts developed before the Com

mission, which, expressly excluding from consideration any matter of estoppel, again reduced the rates, 21 I. C. C., 389. Thereupon the carriers attacked the new order in the Commerce Court, contending that, in disregard of the Supreme Court's decision, the Commission allowed the same views to prevail. The Commerce Court held that in making its second order the Commission had not attempted to enforce any equitable estoppel and sustained the order as valid, 197 Fed., 167. The carriers again appealed to the Supreme Court. On March 17, 1914, the appeal of the carriers was dismissed in the Supreme Court upon motion of the carriers.

HILLSDALE CAR DISTRIBUTION CASE.

Pennsylvania R. R. Co. v. Interstate Commerce Commission et al., not yet reported.

This case involved an order of the Commission requiring the carrier to cease and desist from a discrimination which results from certain rules of the Pennsylvania Railroad pertaining to the distribution of coal cars.

The carrier attacked the order in the Commerce Court on the ground that it was invalid because it related to cars for intrastate as well as interstate shipments. That court held that "we see no reason to doubt the authority of the Commission to make these orders, even though they are intended to have the application and effect which petitioner appears to apprehend," 193 Fed., 81. The carrier appealed to the Supreme Court.

On October 13, 1914, the carrier's appeal in the Supreme Court was dismissed upon motion of the carrier.

CASES DECIDED IN LOWER COURTS, CASES INSTITUTED, AND CASES PENDING.

Since the date of our last report decisions involving orders or requirements of the Commission have been rendered in courts other than the United States Supreme Court in 11 cases, 7 in favor of, and 4 against, the Commission.

Sixteen new cases involving orders or requirements of the Commission have been instituted, 14 in Federal district courts and 2 in courts of the District of Columbia. In two other cases, the Meeker Cases, the Commission intervened in the Supreme Court of the United States.

Twenty-three cases involving orders or requirements of the Commission are now pending; in the United States Supreme Court, 8; in Federal district courts, 13; and in the Court of Appeals of the District of Columbia, 2.

Lists embracing all the foregoing are given in Appendix B.

DIVISION OF CARRIERS' ACCOUNTS.

At the date of the last report a general revision of the accounting classifications for steam railways, electric railways, and express companies was in progress. This work has been completed and the revised classifications were made effective July 1, 1914.

This general revision has been in the direction of development rather than change in principle. Additional accounts have been provided, instructions have been amplified, item lists extended, and the terminology simplified and made more descriptive. The grouping of accounts has also been so changed as better to show their relations. In the classifications of operating expenses for steam railways, electric railways, and express companies accounts have been provided for depreciation upon several classes of fixed property as well as equipment. The carriers are required to report to the Commission the bases used by them in calculating depreciation. The revenues and expenses of certain auxiliary, or "outside" operations of steam railways, heretofore shown separately in income account, are now combined with those of the main operations to which they are incidental, although they are still chargeable to separate primary accounts. The increasing use of electricity as an auxiliary in the operation of steam railways has been recognized by the addition of several new accounts.

A new feature of some importance is a change in the basis of division between property accounts and operating expense accounts of steam railways in accounting for expenditures for the replacement of property retired from service. Heretofore, except in the case of equipment, the amount chargeable to operating expenses has been the "cost of replacing in kind." Through the operation of this rule changes in prices of labor and material have been absorbed in operating expenses and have not affected the property accounts. Under the current rules the cost of retired property is deducted from property accounts, and the cost of the new is added, the effect being that property accounts reflect the actual cost of the new property. By this change the treatment of the larger units of fixed property is brought into harmony with that of equipment. Owing to practical difficulties, however, any increase in the cost of replacing without betterment the smaller units of property, such as ties and rails, is still reflected in operating expenses and does not affect property accounts.

The system of accounts for electric railways has been completed by the addition of classifications of income, profit and loss, and balance-sheet accounts, and that of express companies by the addition of income and profit and loss accounts. A system of accounts for small telephone companies has been prepared and will become effective January 1, 1915. The task of revising and completing the