The Sunday Oregonian., November 12, 1922, Section One, Page 7, Image 7

THE SUNDAY OREGONIAN, PORTLAND, NOVEMBER 12. 1922
7
ATE CII ASKED
B! ROADS DEED
Railway Interests Guarded
Against Their Will.
CHANGE IS DANGEROUS
Interstate Commission Insists on
Rates Reasonably Compen
satory for Western Roads.
(Continued From First Page.)
erounded on the low rates by steam
ship lines between Atlantic and gulf
ports and Pacific ports, and the
movement of a substantial volume
of traffic thereunder.
"Where water competition is in
volved, the applicants contend that
they demonstrate the propriety of
relief from the long and short haul
rule when they show that the com
petition by water is actual and
compelling; that the rates proposed
to meet the water compietition,
while less than they might be oth
erwise, are necessary if applicants
are to secure an equitable share of
the traffic; that the proposed rates
yield some margin over the extra
expense involved in taking in addi
tional traffic moving thereunder;
and that the rates maintained to in
termediate points are not unreason
able in themselves.
"Bach of these positions, they
contend, is demonstrated in the pres
ent record. This showing, they aver,
brings them squarely within the
rules under which we administered
the fourth -section prior to the
amendments of 1920. They further
contend that the present wording
of the fourth section, prohibiting
us from granting relief where the
charge to or from the more distant
point is not reasonably compensa
tory for the service performed, does
not in any wise invalidate the suf-
iiciency or tne snowing wmcn w.o adverse to the carriers of the coun
here make. In short, they contend adverse to tne "rn
...... .v. ob ,rrfin!.i i-at.a try generally, or of a large tern
that if the proposed terminal rates
are all they can get, and yield some
thing in the way of net revenue,
they are perforce reasonably com
pensatory. Crux of Issue Shown.
"This requirement of the amended
fourth section that 'irr exercising
the authority conferred upon it in
this 'proviso the commission shall
not permit the establishment of any
charge to or from the more distant
point that is not reasonably compen
satory for the service performed'
has proved to be the crux of the
issue presented as to meaning of
the amended fourth section.
"For the intermountain interests
it is argued that a rate to be rea
sonably compensatory to the more
distant terminal point must bear its
full share of operating expenses, in
terest on funded debt, equipment
and joint facility rents, taxes and
the percentage return fixed by us
pursuant to section 15A of the in
terstate commerce act. In support
of this interpretation various court
decisions are cited defining the
words "reasonably compensatory" or
words that are said to .be tanta
mount thereto.
"We are unable to accept this in
terpretation of the phrase reason
ably compensatory,' so interpreted.
The long-and-short-haul rule of the
fourth section must become abso
lute or rigid from the very nature
of the case. According to this ver
sion of 'reasonably compensatory,'
the rate to the farther distant point
must yield its full share of the ex
pense of utilizing the additional
track mileage covered as well as it
full share of the additional expenses
incident to the longer use of equip
ment required for the longer haul.
Law Intent Conjectural.
"There may be difficulty in dis
covering to a nicety the exact leg
islative intent in the amended fourth
section. But the rejection of an ab
solute long-and-short-haul clause by
both houses of congress is inconsis
tent with any construction of the
phrase in question which would be
equivalent in effect to an absolute
clause.
"A similar but less extreme in
terpretation of the words 'reason
ably compensatory' is urged on be
half of various state commissions
in the intermountain territory. It
is pointed out that there is a margin
between a rate which barely escapes
being confiscatory and the highest
rate which a regulating body may
lawfully allow. To the intermedi
ate point a rate might approach the
latter limit, while a rate to- a more
distant point might conceivably be
less and yet not so low as to be
confiscatory. Seemingly, the rate to
the more distant point may con
tribute something less than a full
proportionate share of return upon
investment and thus theoretically be
less than a greater rate to an inter
mediate point.
This version of 'reasonably com
pensatory' seems to agree with the
former interpretation in that both
require that the rate to the more
distant point must pay its full share
of all operating expenses, but x is
more elastic in not requiring that it
must contribute its full share to the
return designated as profit. Both
interpretations appear to hold in
common that a 'reasonable com
pensatory' rate cannto be less
than a rate which, imposed by a
regulatory tribunal, would be ad
judged not confiscatory.
Interpretation Held Unsafe
"We are unable to accept this in
terpretation of the words 'reason
ably compensatory as used in the
amended fourth section.
"Where a rate imppsed by a regu
latory body is unde judicial re
view upon the allegation that the
rate fixed is confiscatory it has been
held by the courts that a rate may
not lawfully be fixed by such tri
bunal which is based alone on the
out-of-pocket costs ascribable to
that particular traffic, but that to
be lawful the rate must be suffi
cient to cover a ratable proportion
of the average cost of freight traffic
generally, including a return on the
property devoted to public service.
To hold otherwise would compel the
performance of a certain specified
kind of service by the carrier at
less than average cost. The exten
sion of this principle to other classes
of traffic, if pursued far enough,
would bankrupt the road.
"Where, however, carriers volun
tarily propose to reduce certain
rates to an out-of-pocket-plus basis
in order to augment the total traf
fic carried a wholly different situa
tion is presented. The menace of
confiscation is absent, for volenti
non fit injuria, and the additional
traffic is secured with a resulting
augmentation of net revenue in
stead of laying the burden thereon
by bringing a greater tonnage
under contribution to net revenue.
Cases .Essentially Distinct.
"The criteria of a reasonable com
pensatory rate in a confiscation case
are therefore essentially distinct
from the criteria of a reasonably
compensatory rate where carriers
volunteer a reduction on certain
rates to an out-of-pocket-plus basis.
In the first set of cases the carrier
has presumably been charged with
seekine to extract from the public
I which is served more than the serv
ices are Reasonably worth; in the
second set of cases the carrier is ac
cused by protestants, not primarily
of seeking to extort more than the
service is reasonable worth to those
who receive the service but of work
ing undue discrimination as between
those who can and those who cannot
avail themselves of the lower rates
voluntarily proposed.
"The criterion of a reasonably
compensatory rate suggested by the
carriers has been indicated above.
It is summarized in the formula,
'out-of-pocket expenses-plus-some-profit."
"Just as we have rejected the two
interpretations of "reasonably com
pensatory.' suggested by the Pro
testants as too narrow, so we are
dlcposel to reject the single cri
terion suggested by the carriers in
the above formula as insufficient,
standing alone. It is probably true
that this formula was deemed by us
as adequate in disposing of fourth
section applications prior to the
amendments of the fourth section in
the transportation act of 1920.
Fourth Section Changed.
"We do not agree with the car
riers that the fourth section has
not been. changed in substance. The
amendment has made mandatory
what theretofore rested in our sound
discretion as to compensation for
the service performed to the more
distant point, as to circuity and' as
to potential water competition.
Moreover, in section 500 of the
transportation act of 1920 is ex
pressly declared the policy of con
gress to foster and preserve in full
vigor both rail and water trans
portation. "We think the amendment was the
congress' way of saying that we
should follow a less liberal policy
in dealing with departures from the
long-and-short-haul rule than had
been followed in former years. Our
administrative power at this time is
in some respects narrower than be
fore the amendment The fourth
section, as amended, requires the ob
servance by use of certain adminis
trative rules which we were enforc
ing prior to the amendment, but
which in some measure lay within
our sound discretion to modify or
"Moreover, the requirements of
section 15A may not be defeated or
jeopardized by the action of par
ticular rail carriers seeking to aug
ment their own net earnings, irre
spective or tne enect oi rate
torial group. It clearly would de
feat the intent o congress to foster1
transportation by rail and water in
full vigor if the rail carriers were
permitted, at practically little or no
profit to themselves, to operate so
as to deprive water carriers of
traffic which the water carriers
would naturally handle.
Burden Merely Shifted.
"Moreover, it must be borne in
mind that where the out-of-pocket
theory" is used as a rate basis, there
is inevitably thrown upon the rest
of the traffic the task of providing
the bulk of the net return contem
niatfid in section 15A. Too wide an
extension of the out-of-pocket the
ory would transpose the entire bur
ri.n of tirnducine dividends and in
terest and in meeting- other fixed
charges upon only a part of the
traffip. carried.
"In the light of these and similar
considerations, we are or opinion
and find that in the administration
of the fourth section tne wuruo
reasonably compensatory' imply
that a rate properly so aescriDeu
must, (1) Cover ana more umu
cover the extra or additional ex
pense incurred in handling the
traffie to which it applies; (2) Be
no lower than necessary to mm
existing competition; (3) Not be so
low as to threaten the extinction
of legitimate competition by water
carriers; and (4) TJot impose an un
due burden on other traffic or
jeopardize the appropriate return on
the value of carrier property sev
erally, as contemplated in section
15A of the act. It may be added
that rates of this character ought,
whenever possible, to bear some
relation to the value of the com
modity carried and the value of the
service rendered in connection
therewith.
Law Infractions Seen.
"We also find that where carriers
apply for relief from the long-aud-ghort-haul
clause of the fourth sec
tion and propose the application of
rates which they designate as 'rea
sonably compensatory,' they should
affirmatively show that the rates
-proposed conform to the criteria in
dicated above. It goes wunout sav
ing that carriers should not propose
rates or rate structures for approval
in a fourth - section application
which creates infractions of other
provisions of the interstate com
merce act, and particularly of sec
tion 3."
Commenting tn the rates proposed
by the railroads in their westbound
applications, the commission con
tinued: "Such profit as would accrue from
the proposed rates apparently would
be largely offset by what would be
lost thereby on the traffic that
would move by rail even wUhout the
reduction. Althoueh a large volume
of the traffic in the commodities in
question is moving by water, the
movement by rail is still very
heavy. The weter lines may for
some time to come continue to draw
an increasing volume of traffie to
their lines and make still more seri
ous inroads on the traffic of the
rail lines, but it is safe to say that
there will always be a substantial
movement of most of these com
modities by rail.
Prlcea Factor in Traffic.
"There are various reasons why
shippers prefer rail to water service.
The rise in price of, such articles as
pig iron, for example, which has
occurred since the hearing, makes
freight relatively less important
than when prices were on a lower
level. Expedited service is often
needed in case of unexpected demand
or emergency. It is not always
feasible to keep large stocks on
hand, for adequate capital and stor
age space may not be available
There are often shipments as to
which it is imperative to avoid dam
age. J?or the reasons hereinbefore
outlined rail movement is more re
liable in this respect.
"The rail lines, by hauling the
business overland, would deprive
themselves of revenue they are now
receiving for the haul from points
of production to the ports, based
largely on local rates presumed to
be reasonable and fully compen
satory. They believe, however, that
the proposed rates would yield
ggnccsXESCSI
,1
STANDARD
BABY GRAND 3
$675.00
TERMS
PRINCEHOUSE
IANO HOUSE
Located at Kofaler A Chase
Wholesale Ware room
86 Broadway Bdwy. 547.1
jf-'3JlJ
greater net returns per 100 pounds 1
than the local 'rates to the ports,
although the rates to the ports
would probably yield a greater per
centage of profit.'
Pittsburg; Traffic Cited.
"The intermountain interests con
tend that it is open to question I
whether such net returns as might j
be derived from the proposed rates j
would exceed those derived from
the local rates to the ports. Take,
for instance, Iron and steel from j
the Pittsburg district, by far the i
most important traffic involved, i
They are handling perhaps most of
this business now to Baltimore,
earning on the principal articles 35
cents per 100 pounds for a haul of
approximately 311 miles under what
are ordinarily considered favorable j
conditions. They are proposing to
take this same business westbound !
at a rate of $1, hauling it at least j
about 2o00 miles, or about seven- or
eight times as far, over mountains
of the west, in some cases under
difficult transportation conditions.
The discussion in the preceding
paragraphs regards the carriers as
a unit. If the eastern and western
lines be treated separately, it is
noted that the former propose to
haul the traffic about 468 miles
from Pittsburg to Chicago for a
division of the through rate or 4 a
proportion of IB cents, instead of
from Pittsburg to Baltimore, about
311 miles, at the local rate of 35
cents. Lines like the Baltimore &
Ohio and Pennsylvania, reaching
from Pittsburg to both Chicago and
Baltimore, would thus sacrifice their
revenues to the extent of 20 cents
per 100 pounds in order that the
business might be held to the rail
lines as a whole. Similar traffic
from Bethlehem, Pa., would yield the
lines to Chicago 25 j?er cent of the
through rate, or a proportion of
25 cents, for a haul of about 800
miles, whereas if allowed to go by
water it would yield the rail lines
to Philadelphia 14.5 cents for the
haul of about 66 miles.
Net Revenues' Reduced.
"It" appears that somewhere near
half of the traffic covered by this
application w.s moving by rail lines
and presumably still is. On the as
sumption that half of the traffic is
moving by rail and using the pro
posed rate on iron and steel articles
from Pittsburg as an illustration, the
carriers as a whole appear to lose in
net revenue in the establishment of
the proposed rates. Let us assume
a movement of 1,000,000 tons per an
num of iron and steel from Pitts
burg. The carriers proposed to re
duce the existing rate of $1,665 to f 1.
That means that on the 500,00ft ions
that the carriers were handling
there would be a direct loss of
16,650,000.
"If we assume thjit the effect of
establishing the reduced rate of H
is to take away from the boats one
half of the tonnage they now have
it will mean a gross gain to the car
riers of $5,000,000, which amount al
lows nothing' for the expense of
handling the additional busineso. If
$1,665 was a reasonable Tate the cost
of service would hardly be less than
half of that amount, or' about 83
cents. On that theory the tost of
handling the added business would
be $4,150,000, or a net gain from the
added traffic of only $850,000 to ap
ply against a loss on the traffic
which is now being handled of
i6,650,000, or a net loss of $5,800,000.
Other Division Assumed.
'Let us assume that the rail lines
are now handling only one-fourth
or tne. tonnage and that they can
still hope to draw away from the
Doat- lines one-half of the traffic
which the boat lines are now re
ceiving by the establishment of the
proposed rate of $1. On that theory,
the carriers would lose on the traf
fic they are now handling $3,325,
000, being 250,000 tons at 66.5 cents
per 100 pounds. They would make
a gross gain from the added traffic
received amounting to $7,500,000, viz.
375,000 tons at $1 per 100 pounds,
which amount allows nothing for
the cost of handling the added busi
ness. If we assume that the added
business costs 83 cents, the erross
cost would be $6,225,000. leavine- a
net profit from the additional busi
ness of $1,275,000, which manifestly
will not equal the loss of $3,325,000
on the traffic now being handled.
iven assuming that it costs the
arriers only 50 cents ner 10(1
pounds to handle this iron traffic
from Pittsburg, the cost of hand
ling the added 375,000 tons whioh
it is hoped to draw from the boat
lines would be $3,75'.-,0U0, leaving a
net profit of $3,750,000 to be derived
from the added business. Even on
this basis the gain from the added
business only sliehtlv upewie thu
oss on the business now beine I
handled. As a matter of fact, ex
cept on the assumption that ihe rail
l!nes are getting little or no busi
ness now, it is difficult to see how
tney can hope to gain much, if
my, net rovenue through the es
tablishment of greatly reduced rates
to tno water-competition points. If
they were not getting any business
now, then any net profit that might
result from -such business as they
( raw away from the boat lines
would be a gain to them.
Difference Still Greater.
In all cf the above instances the
difference would be still greater on
the important iron and steel articles
subject to a 90-cent rail rate. The
eastern lines during the past years
have neeaed and have teen accorded
greater rate increases than the
western rres.
'Lineoleum, except that produced
at Rock Island, 111., originates at or
near the seaboard, particularly at
Philadelphia and Lancaster, Pa., and
Trenton and Camden, N. J. The rail
rate proposed is $1.40, out of which
the lines east of Chicago would get
Zf per cent or 3o cents, for hauls of
800 or 900 miles, as compared with
local rates of 21.6 and 17.5 cents, re
spectively, for the short hauls from
Trenton and Lancaster to Philadel-t
phia. On the other hand," if the
proposed rate is not allowed the rail
lines may not handle any consider-i
able portion of the business from
Philadelphia and Camden, which
points are directly on the seaboard,
and on such traffic moving by water
they would get nothing, as compared
to the division of 35 cents that they
might otherwise secure to Chicago.
"It should be noted that the re
duction proposed would apply from
Rock Island. 111. This business is
Free!, Free!
WITH EACH ORDER
MORE.
OF $25 OR
This beautiful lamp complete, as
shown, less shade. Suitable for
dresser or mantel.
WHILE THEY LAST
STANLEY LUTZ
200 - 3 - S 7 Chamber of Commerce
Bids., Third Floor, 3d and Stark Sts.
1
(f KNIGHT
Attractive
Shoes
at
Attractive
Prices
Black Satin
Black Kid
' Brown Kid
Patent Leather
Patent Leather
Castor top
Black Kid
Oyster gray top
KNIGHT SHOE CO.
Morrison Near Broadway
Our Hosiery Section is
complete with Allen A Hose
now moving by rail and no doubt
would continue so to move unless
the Pacific coast x merchants buy
farther east, and the reduced rate
would entail loss to the carriers of
10 cents per 100 pounds, the present
rate being $1.50. If Rock Island is
not put on a substantial parity with
points in the east, Pacific coast buy
ers will be Inclined to purchase
more of their goods at or near the
seaboard, and the rail lines will lose
to the water lines traffic from the
seaboard which would otherwise
move all rail at the reduced rates
from Rock Island."
APPEAL- CONSIDERED LIKELY
Decision of Interstate Commission
' Blow to Railroads.
Decision of the interstate com
merce commission will come as a
blow to the railroads serving the
Pacific coast, as well as to ship
1 ers interested. The Portland
Traffic & Transportation associa
tion has long been active in seek
ing lower rail rates and the rail
ways have expected to be able to
meet the difficult competition of
the all-water routes through the
Panama canal by a favorable de
cision. The case is well known to Port
land! traffic officials and shippers,
having been up in some phase or
other for the past 25 years. It is
known among traffic men as the
"fourth section", or "intermountain"
rate case and it has always been the
contention that rates to Pacific
coast terminals by rail should be
ujtitimiimmimiiiiniiMHtuiimiimmnwmiiHummmmtmmHtim
A diamond and jewelry
store with a conscience
and an ideal!
TTERE at Portland's busiest corner,
where tens of thousands pass
daily is Aronson's.
AND here, at Aronson's,
on A flrowflf fnnntoi
floor to ceiling filled to overflowing with those things
which you like to own which you delight, upon occasion,
in giving to someone near and dear.
AND Aronson's has chosen with taste, and
" has bought with judgment You're pretty
certain to find here the thing you want.
A ND Aronson's is pretty certain to surprise
yoji in its price by its moderation.
A RON SON'S welcomes the vanguard of the
hosts, seeking gifts!
ARONSON'S
Washington at Broadway
"The Jewelry Store of Traditional Quality"
niiiiiiiiininiiiiiiiiiiiiiiiiiiiiiiiiimliiiimimtfmimitHnimiiiiiiHimiHiimiiimmiiiiii
JIIIIIIIIIIIIIIII1IIII1IIIIIIIIIIIII1II1III1IIII1IIIIIIIIIIIIIIII1IIIIIIIIIHIIIIIIIIIIIIIIIIIII2;
I Utah Best Coal
1 $13 PER TON -
1 THREE TONS AND OVER $12.50
Blue Seal has the highest heat units, least ash and moisture. j
5 No dirt or slate.v Most economical for any purpose. Straight
E from the Utah mine to consumer. Call up and learn ihe differ- E
5 ence between good coal and inferior coals and the comparative E
2 results from good coal and wood. Phone Broadway 6685. E
nllllllllllllllllllllllllllllllllllllllMlllllIllllllllllllinilllltllllllllllllllllllllllllllirr'U
J
We urge you to call,
and inspect them, for
we can honestly state
they are the best val
ues you have ever
seen. Formerly $12 to
$18.50, now
. $71
Come while we have a
complete range of sizes.
lower than to interior points from
the east because of the aotual or
potential competition of the all
water route. This was contended
long before the Panama canal was
started, since vessels sailing around
the horn were able to offer lower
freights than the rail lines.
The latest phase of the case was
the petition of the railroads to the
interstate commerce commission
last Juneto put' lower rates into
effect by virtue of the fourth sec
tion of the transportation act of
1920, which was held to warrant
lower coast terminal rates than to
the interior.
Jobbers of inland cities have never
been able to understand why rail
rates should be higher for a shorter
haul from the east than the whole
way to the Pacific coast, the rate
being that to the coast plus the
short haul tariff back.
Traffic men last night were loath
to comment upon the matter until
they have had opportunity to read
the full decision. However, it is re
garded as probable that a rehear
ing will be asked in the matter and
possibly an appeal will be taken to
the supreme court for ultimate de
cision, since the theory of water
competition as affecting rail rates
to coast terminals is regarded as a
highly active one and therefore to
be maintained in the interests of an
equitable rate fabric.
Grunge Plans Entertainment.
A dinner and bazaar will be given
by Russellville grange Wednesday.
There will be music, a programme
and dancing.
are shelf
an A aeo
iiiiiiiiiii
The first impression of you
First impressions, good or bad, die hard. Men
who wear Hart Schaffner & Marx clothes do not
have to live down bad first impressions. They
meet new acquaintances with the clothes half of
the battle won.
New Overcoats $35 to $75
Sam'l Rosenblatt
The home of Hart Schaffner & Marx
Fifth at Alder
iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiMto
L. C. Smith No. 8 $45
Royal No. 10. 50
Noiseless 45
and a complete line of late
Model UNDERWOODS
Rebuilt and
FULLY GUARANTEED
Machines sent anywhere en .
Pacific Coast for examination
TERMS
$5 MONTHLY IF DESIRED
LATE MODELS RENTED 3
MONTHS, $7.50 AND UP
Send for illustrated price list
or call and inspect our stock.
Retail Department
WHOLESALE
TYPEWRITER CO.
321 WASHINGTON ST.
Phone Broadway 7481.
Stores San Francisco, Seattle,
Los Angeles, Salt Lake City.
500
60b -FOE TO F1LTH-
Removes fi;r,
grease. Boap, rars,
etc.. from dra-lns,
sewer pipes, closets.
Ask Xour Dealer.
Phone Bdwjr. J405
or write.
Trade ' Mirk Company.
DRAIN PIPE 443 Stark St.,
CLEANER Portland. Or
HRST AMONG CLLAMM
85 Down and S3 a Month
EDISON MAZDA. LAMPS
10-watt clear S5c
15-watt clear 35c
25-watt clear 35c
40-watt clear ........3oc
EO-watt clear 35c
60-watt clear 40c
We also carry other types and
Blzes for general lighting: service.
Smith-McCoy Electric Co.
284 Alder Street
Phone Main 8011
J
ii!lliiil!liliiiiiiiij!liP1i:iilll)!liji;!liii;i
Copyright 1922 Hart Sehafraer & Mars
1 ww-p-wrrrl I
W L " ' "IlIPP f SI
H TRUSTWORTHY M
jjjj FmsTrarJG cleaners.
Premier is worthy of any woman's fel
complete faith. Its strong suction gets ttSI
all the imbedded dirt in the carpet and rl r
in crevices. The attachments clean !ll$0
everything furniture,curtains,clothes, mtfi
j . radiators and mattresses. It does the job 3,
so thoroughly that The Premier now
occupies a trusted position in 600,000 kj
homes. g
ELECTRIC VACUUM CLEANER CO. W
CLEVELAND, OHIO
Morrison Electric Co.
DOUBLE TRADING STAMPS
ON ALL
PREMIER
I CLEANERS
SOLD FOR CASH
Broadway 2844 Pittock Block
& Co.
clothes
Gasco Building
We sell ,
Premier Cleaners
and other high quality labor
saving household devices.
We do wiring and furnish elec
trical Installations of all kinds.
Piedmont Electric Co.
141 KtUIngsworlh Avenue
Phone Walnut 13-5