Evening star., 1930-06-04
HIGHER FREIGHT
RATES FORESEEN
Court Decisions and Business
Conditions Likely to Cause
Increase by Railways.

BY the Associated Press.
A combination of recent court de-
cisionS and business conditions are re-
garded here as placing American rail-
roads in an advantageous technical
position to seek general advance in
freight rates.
Thus far there have been no au-
thoritative announcements from rail-
road quarters of an intention to take
advantage of the situation, although a
move in that direction would cause lit
tie surprise in Washington quarters
most interested. Since 1920, with
trivial exceptions, the course OF rail-
road rate adjustments in the United
States has been downward.
Supreme Court Action Cited.
The Supreme Court this week, by
invalidating a transcontinental rate re-
duction which the Interstate Commerce
Commission sought to make under its
Interpretation of the Hoch-Smith reso-
luton, contributed the newest factor to
the novel prospect on general rate IN
crease. The effect Of its finding, how
ever, can only be estimated in the light
of other new phases in the rate situ-
alton.
By the transportation act the Com
merce Commission is required to f1x
rates that will enable efncient carriers
to earn las nearly as may be" reason
able return on the capital invested in
their properties.
The commission has construed the
reasonable return provision to mean
534 per cent on property valuation.
Since January railroad earnings have
been tending downward, and the Bureau
of Railway Economics, an institution
maintained in Washington by the car
rierS, estimates that March and April
earnings barely amount to per cent
return on the value Of investment in
railroad property.
Hoch-Smith Resolution Quoted.
The Hoch-Smith resolution directed
the commission to apply to products OF
agriculture affected by depression the
Lowest possible rates compatible with
the maintenance of an efhcient trans
portation system" and while the COM
mission has not. yet put 1t into general
effect, it did follow its conception OF
the law in granting a reduction on Cal
ifornia deciduouS fruit shipments. The
court this week ruled that the reduce
ton was unlawful, taking into consid-
Grafton all the effects on rail earnings.
The previous decision bearing upon
the situation was rendered year ago
in the valuation test case Of the st.
Louis and O'Fallon Railroad. While
the complete result of this controversy
will not be known for an indefinite pc
riod, the decision is generally regarded
as assuring the railroads legal right
to estimate their returns in proportion
to a considerably larger valuation than
any the commission has been willing
to grant as yet.
Three Factors Considered.
Thus three of the factors bearing
upon rate policies have all been brought
to point in one direction. BY the
OFallon decision, railroads are entitled
to claim larger earnings to justify the
larger estimate Of value foreshadowed
for the property; by the current month
ly returns they are falling short OF
what has been construed offlcially as "a
reasonable return" and by the Hoch-
Smith resolution decision the commits
sion has been directed to revise its
conceptions of justifiable reductions.