Earl Warren: Mr. Spencer, you may continue.
Harold E. Spencer: Mr. Chief Justice, may it please the Court. I would simply like to point out at this time where the milling-in-transit limitation occurs in the record so that you can take a look at it and its on page 212 of the record. And if you will look at that tariff publication about the middle of the page, there's an underscored portion. And it reads, "Rate applies only on corn and corn products when milled in transit." It's those four words, there milling -- that are the milling-in-transit limitation and that those are taken out of the tariff. As you will see, the rate applies both on corn and corn products. Now, that milling-in-transit limitation applied only to this part of the rate up to Kankakee. It doesn't have anything to do with the rate from Kankakee. Those rates are -- are published in a different tariff. And if that limitation is taken out, the rates apply both on corn and corn products. Now, we put -- set forth in our brief why that affects Chicago merchants, and I'm not going into that question here because I simply don't have time to discuss that. But what is presented here then by that milling-in-transit limitation is a straight question of law. Whether or not the Commission does have to consider and make findings on the discrimination against Chicago in this case. Now, Section 4 of the Act gives the Commission the power to grant relief from the long- and short-haul clause in special cases after investigation. This provision was in the original Act to regulate commerce in 1887. Neither in the original Act nor in any subsequent amendment thereof has Congress ever set forth any affirmative criteria as to what constitutes a special case. Now, this Court said, and I'm quoting from page 18 in my brief in the Intermountain Rate Cases, one of the early cases dealing with the Commission's power to grant relief from the long- and short-haul clause, “that the Commission's power is made by the statute to depend upon the facts established and the judgment of that body in the exercise of a sound legal discretion as to whether the request should be granted compatibly with a due consideration of the private and public interests concerned and in view of the preference and discrimination clauses of the second and third sections.” Our argument is that the Commission cannot find that there is a special case which justifies relief from Section 4 if the rates which are proposed would violate Section 3 of the Act. The Commission itself has held that in a long line of cases. We have collected in Appendix A to our brief 15 cases ranging from 1911 to 1960 in which the Commission has held that and in a couple of those cases, they've actually said they cannot find a special case if the rates would violate other sections of the Act. Our case was the only aberration in that whole line of cases. And after they decided our case, they went back to the other -- went back to the historical position and then two weeks -- about two months ago, they went back to the position that they took in our case in the Seatrain case, the aftermath of the Seatrain case and that cited in our reply brief. But they've now made up their mind definitively, apparently that they're not going to consider Section 3 cases in -- in Section 4 investigation unless this Court tells them to do so. Now, if there were any doubt --
Potter Stewart: I thought you've said they went back to their old position that they are going to.
Harold E. Spencer: They went back to their old position and they changed their mind again.
Potter Stewart: I see.
Harold E. Spencer: If there is any doubt about our interpretation of the Act being correct, that is settled by the National Transportation Policy. And the National Transportation Policy says that it's the policy of Congress to encourage the establishment and maintenance of reasonable charges for transportation services without unjust discrimination, undue preferences or advantages or unfair or destructive competitive practices. And the National Transportation Policy provides that all provisions of the Act shall be administered and enforced with a view to carrying out that declaration of policy. If there were any doubt about it, that determines it. Now, I would like to speak for just a moment about two of the points which are raised by the appellees. They say that the only material issues in a Section 4 case are whether the rates are compensatory and whether the competition is actual. The statute does not read that way. They are negative criteria. The Commission cannot grant relief if the rates are not compensatory and it cannot grant relief if the competition is not actual. It is true that the Commission can grant relief if there is a compensatory rate and the competition is actual but that is not to say that they must not consider other things and in -- in our argument is that they must consider Section 3. I have promised to leave time for the Solicitor General to argue the position of the United States so I will not be able to comment on the rest of my -- the rest of our comment upon the arguments made by the appellees but they are covered in our brief and in our reply brief. And I asked this Court to require the Commission to make findings on that issue and to set aside the Commission's order and return the case to the Commission.
Earl Warren: Mr. Goodman.
Frank I. Goodman: Mr. Chief Justice, may it please the Court. While the United States is nominally an appellee in this action, we agree substantially with all of the contentions advanced by the appellants, Mechling and the Board of Trade. With the appellants, we believe that the District Court's judgment should be reversed, the Commission's order set aside and the cause remanded to the Commission for further proceedings. In our view, the Commission urged in two principle respects. First, in refusing to past upon the Board of Trade's contentions that the proposed rates, because of a milling-in-transit restriction, discriminated against Chicago Shippers of wholegrain and thereby violated Section 3 Paragraph 1 of the Interstate Commerce Act. And secondly, the Commission urged in that -- its conclusion that the proposed rate reduction did not constitute a destructive competitive practice and did not impair the barge lines inherent advantage as the low cost mode of transportation. That -- that conclusion by the Commission was not supported either by adequate findings or by the evidence. Now, first, as to the Board of Trade's contention, Mr. Spencer has argued in his brief, and in the time available to him to some extent in his oral argument, that the Commission is under an absolute statutory duty to withhold its approval from rates under Section 4 which would violate other sections of the Act. While we do not disagree with Mr. Spencer's position, we don't think it necessary for the Court to go that far. To us, the dispositive consideration is the fact that the Commission itself, whether or not it was bound to do so, is that an original statutory matter has consistently taken the position for more than 40 years, both before and after the present case, that it would not, and indeed under the statute, could not approve any application for 4 Section relief where the resulting rate would be unjust and unreasonable under Section 1 or would be unduly discriminatory under Sections 2 or 3. Assuming that the Commission has some latitude now to depart from that policy or to make exceptions to it, nonetheless, we think it was foreclosed from doing so in the circumstances of this case. If the Commission was to depart from that policy, it could do so, we submit, only after giving the parties adequate notice in advance so that they could take steps to protect their interest at a time when its still might do them some good. Now in this case, the rates were originally filed in December of 1956 under a misapprehension that no 4 Section relief was necessary. Seven months later, in June of 1957, the application for 4 Section relief was filed. In July, the barge lines and the Board of Trade filed their protest. And it was made crystal clear in that protest that the Board of Trade's contention rested upon Section 3. No -- no objection was made at that time by the railroad that this contention was out of order or in anyway immaterial to the 4 Section proceeding. The hearing before the Examiner commenced in January of 1958, now more than a year after the rates had been in effect, the very outset of the hearing, the Board of Trade, Board of Trade's counsel again made it clear that he would raise contentions under Section 3. And during the course of the proceeding, evidence was introduced by the Board of Trade's counsel and witnesses which bore on the Section 3 issue. At no point during this hearing, with any objection raised as to the materiality of that evidence by the railroads, the evidence was not excluded by the Examiner, the Examiner did not so much as intimate that this evidence was somehow not germane to the 4 Section proceeding. The Examiner's opinion came down in March of 1959 that was now two and a half years after the rate originally went into effect. And in the Examiner's proposed order, it was stated that the Section 3 issue raised by the Board of Trade was not directly germane to the 4 Section issue. But in any event, there was no question to discuss those issues because he was finding -- he was finding the rate improper on strictly 4 Section ground. Finally, in June of 1960, three and a half years after the rates went into effect, three years after the protest was filed, the Commission, in its opinion, stated that it would not consider these Section 3 objections because they were not directly relevant to the 4 Section proceeding. At that point, the Commission told to Board of Trade what it should've told them in the first place, namely, that if they wanted these objections to be considered, they should go out and file a complain under Section 13 of the Act or ask for a commission investigation under Section 15 of the Act, three and a half years later. And the Commission so notified the Board of Trade at the outset and if the Board of Trade had followed that procedure, it would almost certainly have had a simultaneous adjudication of all of these issues. And if the Commission found merit in its position, the rate would almost certainly never have been approved. We don't think the Board of Trade should suffer as a result of the Commission's want of equity in that respect. Now, there's still another reason, we think, why the Commission was bound to consider the Board of Trade's objection in this case. This was not an extraneous consideration, an extraneous issue to the 4 Section issues per se. The fact is that, without considering the Board of Trade's contention, the Commission could reach no meaningful conclusion as to the degree of injury which was inflected upon the barge lines by this rate or as to whether the proposed rate was compensatory.
Potter Stewart: The Board of Trade's objection limited to the points that the rate is restricted to grain milled in transit rather than grain generally?
Frank I. Goodman: Well that is -- that is the objection to which I've been referring, Mr. Justice Stewart. The Board of Trade in its protest did make other contentions of discrimination against Chicago. Those are rather complex and it does not press them in its brief in this Court though it hasn't abandoned the belt.
Potter Stewart: But here, the objection is based upon the rates restriction to grain milled in transit?
Frank I. Goodman: That's correct.
Potter Stewart: And you're telling us that this is -- this objection is interrelated with the --
Frank I. Goodman: Yes, it is.
Potter Stewart: Well --
Frank I. Goodman: May I expand upon that? Well, briefly in two sentences, it's -- it's interrelated in this way. If the milling-in-transit restrictions were removed so that Chicago -- Chicago shippers of whole corn were free to use the 5.5-cent rate, which they now are not then presumably, a substantial amount of the corn which is now being shipped over the Belt way would -- would not stop in Kankakee the proper thing but would go via Kankakee to Chicago. And from Chicago be reshipped to the east. And if -- yet the Commission's whole conclusion that the 5.5-cent rate was compensatory rested upon the assumption that substantially all of that grain would be going to Kankakee.
Potter Stewart: I did not understand that the Commission concluded that the 5.5-cent rate was compensatory. I thought its conclusion was that the overall rate from the Belt Line station to west of Kankakee to the East was compensatory.
Frank I. Goodman: Well, it concluded, and I might say that there is no evidence in the record that the 55-cent rate all the way to the East was compensatory.
Potter Stewart: No, but I thought that was what the -- concluded about.
Frank I. Goodman: That is one thing that it concluded. But in addition to that, it concluded also that the proposed rate change would increase the railroads' net revenues. And the reason for that is that, every carload of corn which is being brought over the Belt Line to Kankakee would be displacing another carload of corn, which prior to 1957, the Kankakee processor would've bought on the Chicago grain market. After having reached Chicago either by barge or by some other railroad and which would then have been carried by the New York Central from Chicago to Kankakee at a rate which would later have been credited against the 49.5-cent reshipping rate. Now, that means that under the prior practice, the railroad would realize no net revenue whatever from each Chicago to Kankakee operation over and above the 49.5-cent reshipping rate. So the Commission says at the very least, the railroad is better off now to the extent of the 5.5 cents it gets for shipping that same corn over the Belt way -- Belt Line. And in addition to that, it's also better off by another 2 cents because on the Chicago to Kankakee operation, the railroad incurred a 2-cent switching charge in the Chicago Railroad Yards which it does not incur in the Belt way operation.
Potter Stewart: Now, as you point out in your brief, that reasoning would also support a rate of zero between the west of Kankakee.
Frank I. Goodman: That's correct. And -- and we think that's a reductio ad absurdum.
Potter Stewart: Yes --
Frank I. Goodman: But I might -- making it --
Potter Stewart: -- of course it is. But am I not right that the Commission didn't think that this -- that the -- I couldn't remember the terms of ours, but the term -- but the part of the rate between west of Kankakee and Kankakee was what have to be considered but rather the overall rate.
Frank I. Goodman: And I'm going to address myself to that contention, Mr. Justice Stewart, in just a moment. But I did want to make it clear that in addition to the argument we made in our brief, we're making in -- a further argument now. And that is that the whole contention, the whole basic for the Commission's conclusion that the 5.5-cent rate would increase the railroad's net revenues was based on the assumption that the corn moving on the Belt Line would displace corn or otherwise it moved from Chicago to Kankakee. And if the milling-in-transit restrictions were removed so that Chicago shippers could use that rate as well as Kankakee shippers, then presumably a substantial amount of the corn would be moving to Chicago and not to Kankakee. And those shipments to Chicago would be noncompensatory and non revenue increasing on any theory because -- first of all, they will involve additional out-of-pocket cost in addition to the 8.5 cents out-of-pocket cost to the Moronts or from the Belt Line to Kankakee trip. And secondly, they would not be displacing even more unremunerative shipments that the railroad had been obliged to make prior to 1957 to Kankakee. Now, with respect to the -- excuse me.
Hugo L. Black: Are both rates apply to anything except corn?
Frank I. Goodman: No, just to corn products, corn which is milled in transit, not to any other kind of grain.
Hugo L. Black: What's the difference in the effect of it? I'm -- I'm just asking because I don't understand. What's the difference in the effect if they had simply said, "We're going to reduce our rate on corn which is carried by -- because it's carried by barge line and we want to get that business?" Does this apply to anything, this reduced rate, benefit anybody at all except those who now can get their -- could get their corn carried and -- on barges? Who's benefited by the rate expect them?
Frank I. Goodman: Any shipper?
Hugo L. Black: Yes.
Frank I. Goodman: The only shippers who are benefited by the rate are the shippers along the Belt Line here who might otherwise be shipping by the Barge Line. I think that's substantially true.
Hugo L. Black: And corn is the only commodity?
Frank I. Goodman: Corn is the only commodity.
Potter Stewart: (Inaudible) by this, isn't it? It's uncontroverted in the record, isn't it?
Frank I. Goodman: Well, if the barge line that driven out of business as a result of this rate reduction, then obviously the farmers won't be benefited in the long run because a railroad will then be in a position to raise the rate right back up again. For the short run, while the barge lines are still in -- in business, let me say that on this record, dealing with the single year 1957, it's true that there's no evidence that there was any substantial reduction on the barge lines business. But as Mr. Hayes pointed out, the more recent figures for 1963 shall that the barge lines business had been very severely damaged. And the barge lines presented on the record of this case, many considerations which explained why the 1957 year was not a representative year. If the barge --
Hugo L. Black: (Inaudible) of the Interstate Commerce Commission was that there was a cut through -- there were rates reduced in the railroads, which could be -- puts somebody out of business and if it just run in short time and they could reduce those rates and into that time, the farmers and the other shippers will get an advantage. But then later on, when they put them out of business, the rates went back up.
Frank I. Goodman: That's entirely --
Hugo L. Black: Am I wrong in thinking that that was one of the reasons for the creation of Interstate Commerce Commission?
Frank I. Goodman: I believe that's right, Mr. Justice Black, and it is certainly one of the principal reasons for the adoption of the National Transportation Act in 1920 which amended Section 4 in which put in at some of the provisions that are relevant here. Now, if I may just to address myself now to the question which was raised earlier by Mr. Justice White, and more recently by Mr. Justice Stewart about the Commission's conclusion that it's the whole 55-cent rate that has to be compensatory and not be 5.5-cent component of it. Let's just suppose that the -- well, first of all, let me say that the authorities are all to the contrary. There are many Commission cases and there is one case by this Court, the Santa Fe case, all of which is cited on page 27 of the Mechling brief, which hold that the Commission must consider every separately published rate whether it's a proportional rate and it's part, let us say a part of a through rate or whether it's a separate flat rate at one time or the other. But beyond the authorities, let me point this out, this 55 -- this 55-cent through rate from origins to eastern destinations includes the 5.5-cent factor and the 49.5-cent factor. The Commission could not lawfully reduce that 49.5-cent factor because that rate, the 49.5-cent reshipping rate from Kankakee or from Chicago to New York, continue to apply to all ex-barge corn arriving in Chicago or all corn carried to -- that is Chicago or Kankakee, and to all corn which was carried by any other rail carrier to Chicago and Kankakee. And it's well-settled under the decisions of this Court that the New York Central could not charge a lower reshipping rate for corn which was brought to the reshipping point by its own Belt Line, then it could for corn which was brought to the reshipping point by corn competing carrier. Well, that means that not less than 49.5 cents must be attributed to the eastern portion of the route and therefore not more than 5.5 cents must be attributed to the western part of the route. In other words, the 55-cent rate has to be not only above the railroad's fully distributed cost but it has to be at least as high as the sum of the 49.5-cent reshipping rate plus the out-of-pocket cost for the inbound proportional part of the route over the Belt Line. Because if that's not true, then one of two things must be happening, either the railroad is charging a discriminatively low rate for the reshipping part or its charging an unremuneratively low rate for the inbound proportional part. Now, conceivably, if the railroad had been able to show in this case that by charging a 5.5-cent rate over the Belt Line, it was greatly increasing its traffic over the eastern part of the route. And if that eastern traffic was sufficiently profitable so that it generated additional revenues which would more than offset, the loss is incurred on the Belt Line, then conceivably, it might have avoided our contention about being a destructive competitive practice. But there's no evidence of that, there's no finding of that and there's been no contention by the railroads that they increased their business over the eastern part of the route. In fact, the record clearly shows that the sole purpose of putting this rate reduction into effect and probably the sole effect of it was to increase traffic over the Belt Line portion of the rate -- of the route by diverting traffic from the barge lines. And in no circumstances, we think it clear that the rate increases the revenues -- of the railroad's net revenues and its compensatory and is not a destructive competitive practice if but only if that additional traffic on the barge line pays its own way.
Byron R. White: Mr. Goodman, the rate only applied -- will keep the rate only applies for traffic that's going to go on to the East.
Frank I. Goodman: That's correct.
Byron R. White: And if against that background, the shipments in the Kankakee are increased, the shipments East of Kankakee are going increased too.
Frank I. Goodman: No, that's not the case, Mr. --
Byron R. White: Well, because the rate won't apply then?
Frank I. Goodman: No. That the shipment --
Byron R. White: The rate only applies on shipments that are going to be -- that's going to -- going to East.
Frank I. Goodman: I realized that, but the railroads theory, in the first place, is that every carload that moves over the Belt Line of Kankakee and then goes East from Kankakee, is the carload which would otherwise have been moved from Chicago to Kankakee --
Byron R. White: (Inaudible)
Frank I. Goodman: -- previously and then reshipped into the East from Kankakee. Those carloads would've been reshipped to the East in any event. The only change is that (Voice Overlap) --
Byron R. White: But what I'm talking about -- I'm talking -- you -- you just said that -- you just said that the inbound traffic of Kankakee would increase.
Frank I. Goodman: That's correct.
Byron R. White: Well, why would this -- because of this rate.
Frank I. Goodman: That's correct.
Byron R. White: If that's true, how -- why -- why must not traffic East of Kankakee increase?
Frank I. Goodman: Well, I was just explaining that. Because --
Byron R. White: Well, not very clearly I must say.
Frank I. Goodman: Well, if every carload appoints of additional corn that goes to Kankakee because of the 5.5-cent rate and then is reshipped from Kankakee to the East would otherwise and formerly had been moving from Chicago to Kankakee for processing there and then ship to the East from Kankakee.
William J. Brennan, Jr.: Your point is the cars, some of this number of cars don't increase that come on different routes.
Frank I. Goodman: The number of cars don't increase, the amount of grain doesn't increase because that grain would be additional grain which is now moving on the Belt Line and which --
William J. Brennan, Jr.: Throughout the barge.
Frank I. Goodman: Would've gone even under the former method to the East. It's just would have got to Kankakee by a different route. And I think --
Byron R. White: But -- aren't we talking -- we're talking about the New York Central.
Frank I. Goodman: That's correct.
Byron R. White: Now, isn't part of the argument here that -- that this -- the way this tariff is constructed there how to be more processing in Kankakee than there was before?
Frank I. Goodman: No, I don't think that's the contention. If there's more -- would be more processing in Kankakee, the contention is that --
Potter Stewart: You mean the elevator operators or the processes along the Belt Line are -- don't have any advantage out of this?
Frank I. Goodman: Well, one thing that the Commission found explicitly that the business of the elevator operators, the country elevator operators on the Belt Line, the total business had not increased. The Commission found that the only difference was that previously, they had not been performing -- that the only difference is that whereas previously, they have not been performing an elevation operation by putting things on the -- on the railcars along the Belt Line because there had been any movement on the Belt Line. They had instead been performing the function of merchandisers by carrying this corn to -- to the river or by acting its middleman for corn which would carry through the river. And nowadays, they're able to perform that elevating function on the railroad because of the reduced rate. But the implication of that is that all of the corn which is now moving over this line to Kankakee would otherwise upon by barge to Chicago that -- I don't think there's any evidence on the record.
Byron R. White: It might not have move East on New York Central?
Frank I. Goodman: Well, if it went to Kankakee, which is one of the principal arguments that's made by the railroad in order to show that they were savings of that because of not having to make its -- secured as route. If it is true that the Kankakee process has not increase its business any yet but it is merely getting strange from here now instead of buying in Chicago, then the arguments, which I made, were that difficult now. Suppose that the grain is now moving up to Chicago and not to Kankakee that may or may not show East on the New York Central just as before when it came by barge to Chicago, it may or may not have gone East from the New York Central. There's no evidence that the New York Central is getting any greater proportion of the grain moving from Chicago to the East directly than it did before. And that contention has not been made anywhere even if it were possible to infer it from the record by some sort of deductive logic which I submit that it isn't. There's no evidence in the record that that was the case or by how much it was the case or whether that additional grain was profitable if there was any.
Arthur J. Goldberg: (Inaudible)
Frank I. Goodman: Yes.
Speaker: They will get it?
Arthur J. Goldberg: (Inaudible)
Frank I. Goodman: Well, it has not done so. I didn't know that it is formerly declined in any way.
Arthur J. Goldberg: (Inaudible)
Frank I. Goodman: That may be, Mr. Justice Goldberg. Thank you.
Earl Warren: Mr. Garson.
H. Neil Garson: If it please the Court. The time for the appellees has been divided between myself and Mr. Murphy who represents the New York Central Railroad. For my portion of the time, I intended to discuss the rate situation as it occurred before the Commission, the procedure followed by the Commission and also the issues presented to the Commission by the 4 Section application and the reasons why the Commission did not rule on the alleged violations of other sections of the Act such as Section 3 (1) and 3 (4) in the 4 Section application proceeding. Now, in the interest of clarifying our position, I desire to restate to the Court the rate situation as it developed before the Commission, both prior to the appearance of the Chicago Broad of Trade and Mechling Barge Line before the Commission and thereafter. To begin with, let us go back to December 15, 1956.On that date, the New York Central made effect of a proportional rate of 5.5 cents, minimum 100,000 pounds on corn and corn products when milled in transit from 17 points in Illinois which are located on the Kankakee Belt Line to Kankakee over its line direct and restricted to apply on traffic destined to points in New York, Pennsylvania, Virginia, West Virginia, Delaware, the District of Columbia and to points in New England. Now, this diagram illustrates the -- the points that we are concerned with are on Kankakee Belt Line which is this portion of the New York Central's Railroad. The destinations were approximately here, all points East in New England and on the eastern seaboard. Now, for the sake of definitions, I'd like to make this point a proportional rate is one restricted so as to the applicable only on traffic having prior or subsequent transportation and is only a portion of the total through transportation charge. This proportional rate factor became effective in accordance with this 30-day statutory period of notice without any protests, objections or any representations, that the total transportation through charges resulting from the use of a new proportional rate created Section 4 long- and short-haul violations at the intermediate points or any other violations of law. Now, on occasion, I may refer to violations of the long- and short-haul clause of the Section 4 as Section 4 departures. Now, when the December 15, 1956 rate adjustment was filed with the Commission, the New York Central did not apply for relief from the long and short-haul provisions of Section 4 because it was thought that existing 4 Section relief, which had been previously granted by the Commission in conjunction with the rail through rate via Chicago and Kankakee, was sufficient to cover any 4 Section departures which occurred as a result of the application of the 5.5-cent proportional rate. The relief relied upon by the New York Central is applicable to the existing reshipping rate from Chicago to the East which was 54 cents. Now, if you will look at the diagram between pages 4 and 5 of the brief of the New York Central, it's the green brief, green cover, you can see that the reshipping rate from Chicago, you can see that the reshipping rate from Chicago to the East before December 15, 1956, that is before the competitive period, was 54 cents. This proportional reshipping rate was changed after December 15, 1956 to 59.5 cents as a result of general rate increases. This proportional reshipping rate is applicable from Kankakee as well as Chicago and it was to be used in conjunction with the new 5.5-cent proportional rate.
Potter Stewart: And it was applicable for Chicago via Kankakee as well as for Chicago back to New York.
H. Neil Garson: That's right. In other words, as was pointed out before, you could go use this rate, a 54 -- 59.5-cent from Chicago directly East or come down to Kankakee and then go East.
Potter Stewart: And from -- it's also 54 now 59.5-cent --
H. Neil Garson: It's not --
Potter Stewart: -- rate from Kankakee so that could be via Chicago or also --
H. Neil Garson: That's right.
Potter Stewart: Is that right?
H. Neil Garson: That's right. But my point --
Potter Stewart: Or is there -- is there east-west line going -- I suppose there is, it shows that there is in the (Inaudible)to Kankakee.
H. Neil Garson: Well, perhaps this might be a little bit clearer. If the Court will look at page 150 of the record, there is a map of the -- of the route involved. The red line indicates the direct route of the New York Central to the East. Now, I want to make this point that the reshipping rate from Chicago has been in the existence as the rate from Chicago, which is also applicable by way of Kankakee, has been in existence for a long time. And also, 4 Section relief applied on this rate for many years on these routes rather.
Hugo L. Black: And could this (Inaudible) bring in corn from the west, Wisconsin (Inaudible) go to Chicago to the East. There are some, I think.
H. Neil Garson: I assume that there are and as a matter of fact, the reshipping rate would be used in connection with those railroads as well. The -- the reshipping rate at Chicago is applicable both the ex-barge as well as ex-rail traffic.
Hugo L. Black: Suppose they do not go to Kankakee? Suppose -- suppose the corn comes in Chicago then go to Kankakee?
H. Neil Garson: The same thing would apply.
Hugo L. Black: Do you mean in that -- I thought you've said that the rate tariff they put on in 1956 applies only if the transportation of corn which went through Kankakee and Chicago, is that right or wrong?
H. Neil Garson: No, the rate that was filed at that time was a 5.5-cent rate which was to be applied in connection with a through movement --
Hugo L. Black: Oh, I suppose the through movement doesn't go --
H. Neil Garson: -- through Kankakee.
Hugo L. Black: -- wait, I'm not done, I suppose that the through movement doesn't go through Kankakee becomes -- goes up north of that line.
H. Neil Garson: Well, it can go up through Chicago. That same rate would apply through Chicago.
Hugo L. Black: Do you mean if -- if the rate is (Voice Overlap) --
H. Neil Garson: It has to go through Kankakee up to Chicago through the East.
Hugo L. Black: Corn coming from out through Chicago and goes on to New York, did they get the benefit of this reduced rate so that the part of it goes at the 5.5 cents (Voice Overlap) --
H. Neil Garson: No, they get the benefit of the reshipping rate. The reshipping rate from Chicago remains the same. The only change that has occurred is in this rate, in fact they're here to be used in connection with determining what the through movement would be and the event of a shipment originating on the Kankakee Belt Line destined to points in the East.
Hugo L. Black: I suppose -- do any -- does anybody get the benefit of that rate, unless, in railroad, unless they go through down in that section where they could get barge line shipment? Suppose they don't go through that section?
H. Neil Garson: Well, if I try to --
Hugo L. Black: All corn from the west doesn't -- doesn't go through Kankakee, doesn't it?
H. Neil Garson: That's right, it doesn't. It would go through Chicago.
Hugo L. Black: Suppose it doesn't go through Kankakee?
H. Neil Garson: Well the same rate applies out of Chicago.
Hugo L. Black: To Chicago -- to Chicago -- I'm talking about, to Chicago.
H. Neil Garson: Well, we don't know what's the rate is to Chicago.
Hugo L. Black: But it's --
William J. Brennan, Jr.: (Inaudible)
H. Neil Garson: Well, to make this clearer, the -- the 5.5-cent rate that we're talking about only applies in connection with the movement from this line here, from this railroad line between Moronts and Kankakee.
Hugo L. Black: But has the ICC approved that kind of rate or any railroad that doesn't compete for the barge line? I just -- I'll just -- at this credit?
H. Neil Garson: Well, if there are other railroads who would be -- who will concur in this tariff, in connection with this 5.5-cent rate from this line I presumed that they would be able to charge it.
Hugo L. Black: They'd be able to what?
H. Neil Garson: That they would be able to use this 5.5-cent rate if there are other railroads --
Hugo L. Black: Suppose it don't -- suppose it don't go through Kankakee?
H. Neil Garson: Well, the movement is through -- is to go through.
Hugo L. Black: In other words, this fits only the -- only the line where they compete with the barge line down there at Kankakee, doesn't it? Doesn't fit any other railroad transportation in the United States, doesn't it?
H. Neil Garson: That's right.
Hugo L. Black: That's right?
H. Neil Garson: That's right.
Hugo L. Black: So, it's just the same as though you had written by reason, isn't it? By reason that the fact that this barge transportation, we're going to give those railroad shippers who happen to go through Kankakee and might be able to get the barge line, we're going to give them the benefit of this rate that's cheaper than any other farmers in the west could get it.
H. Neil Garson: Well, they're getting the benefit of this rate. I -- I don't know what the other farmers are getting on -- on the other rates.
Hugo L. Black: Well, you do know don't you that this applies only to that place that goes to Kankakee whether --
H. Neil Garson: That's right.
Hugo L. Black: -- it competes with the barge line and that's the purpose of it?
H. Neil Garson: That's right, that's the purpose of it. Now, this proportion -- as I indicated the proportional rate became effective without any objections. Now, the --
Arthur J. Goldberg: (Inaudible)
H. Neil Garson: Well --
Arthur J. Goldberg: (Inaudible)
H. Neil Garson: If I can develop this, Mr. Justice Goldberg, perhaps it'll become a little clearer.
Arthur J. Goldberg: (Inaudible)
H. Neil Garson: Yes.
Arthur J. Goldberg: (Inaudible)
H. Neil Garson: Well, this is -- this is part of the argument and -- and is developed as I go along to illustrate the procedure followed by the Commission which is important in this case.
Hugo L. Black: (Inaudible)
H. Neil Garson: Well, the other Mechling case --
Hugo L. Black: Can we reject that argument there?
H. Neil Garson: I presume you're referring to the one on which the Commission grant a temporary relief and there were no hearings apply.
Hugo L. Black: I'm talking --
H. Neil Garson: We're not --
Hugo L. Black: No, I'm talking about the Mechling case that was here before. They -- they insisted then, didn't they, that they could proceed under another section rather the one they did on these -- on these rates?
H. Neil Garson: Yes.
Hugo L. Black: And they were accomplishing there, getting a high rate in -- from or the railroad for -- for the shipments that came in over the barge line in the -- where the railroads went through.
H. Neil Garson: Yes, but the facts in this case are not the same.
Hugo L. Black: Why -- the facts -- as the -- the proceeding should -- but the result is the same, isn't it?
H. Neil Garson: No, based --
Hugo L. Black: Isn't it the same? What's the difference?
H. Neil Garson: No, there is a difference here and I should like to explain it as I go along. Now, in order to give effects to the 5.5-cent proportional rate, the tariff contains provision which provided that the single factor rates from the origin points on the Kankakee Belt Line to final destination as well as the flat rate from Kankakee to final destination which will previously observed as the minimum rates were restricted so as not to apply when the combination of the proposed proportional rates to and from Kankakee to final destination is lower. The effect of this restriction also enabled compliance with the aggregate of intermediate provisions of Section 4. And this provision provide -- which is a facet of the long- and short-haul prohibitions of Section 4 declares that it is unlawful for rail carrier or water carrier which is subject to regulation by the Commission to charge any greater compensation as a through rate than the aggregate of intermediate rates. Now, however, it was subsequently discovered that by limiting the application of the combination proportional rates to the destination territory, as I have just noted in this area here, long- and short-haul violations were created at intermediate destination that is in this area here. And these were created in central territory and there are also at origin points. For an example, the first type of violation using Dwight, Illinois which is on the Kankakee Belt Line, about here, as a representative origin point and Philadelphia, as a representative more distant destination point and Akron, Ohio, as a representative intermediate destination in central territory. On December 14th, 1956, the combination rate from Dwight to Akron, Ohio was composed of the rate factors, Dwight to Kankakee, Kankakee to Akron. And it's amounted to 54 cents. This compared to 65.5 cents Dwight to Kankakee, Kankakee to Philadelphia. In other words, there were no 4 Section departures. The rate to Philadelphia was higher than the rates of the intermediate point of Akron, Ohio. After December 15, 1956, when the rate adjustment became effective, the rate from Dwight to Philadelphia became 56.5 cents which was 2 cents lower than the rate of 58.5 cents from Dwight to Akron so that the reversed situation occurred. Now, as an example of the origin departures, this can be illustrated by the following, from Moronts, Illinois to New York City, the combination rate was 59.5 cents. This compared to 72 cents from Kankakee which is the first higher rated intermediate point. In other words, the reduction occurs from here to here. But as you begin going East from Kankakee, the higher rates begin to apply. And then 61 cents from Hamilton, Indiana, which is the last higher rated point about here. Some of the origin 4 Section departures are simply tactical in nature. For example, the combination of proportional from Moronts, Illinois to New York is based upon 100,000-pound minimum. Whereas, the rate from Kankakee and Hamilton was based upon a 40,000-pound minimum thus, a shipper at the intermediate origin point would have to move at least 100,000 pounds in order to be eligible for a lower rate before he could complain of the higher charge at intermediate points. That should be noted that the departures at the intermediate origins are of the same nature as those previously authorized in connection with the reshipping rate from Chicago and Kankakee. Now, to alleviate the situation and to bring its rates into compliance with the 4 Section of New York Central for two steps, it published the tariff which broaden the destination territory to include points in central territory. In other words, it extended westward the destination points which could be used -- which could use this rate. Getting back to our example, the rate to Akron, Ohio from Dwight, Illinois was reduced to 44 cents whereas the rate to Philadelphia remained on the higher level at 56.5 cents. This eliminates violations from the long- and short-haul provision of Section 4 destinations. This tariff was published to become effective originally on July 30th, 1957 and the effective date was postponed voluntarily until August 29th, 1957. Although the New York Central could have broaden the rate adjustment of August 29th, 1957 to eliminate the origin departures, it elected instead to maintain its revenues at the intermediate origin points because they were not subjected to barge competition. Consequently, it filed an application on June 27th, 1957 in which it sought authority to continue the higher rates applicable from the intermediate origin points. That is between Kankakee and Hamilton, Indiana. It was at this time, more than six months after the 5.5-cent proportional rate became effective. And when the New York Central was attempting to bring its rates into compliance with the 4 Section that the appellants, Mechling Barge Line and the Chicago Board of Trade, first entered the picture. Now, they file protest against the 4 Section application urging that the relief be denied. In addition pursuant to the provisions of Section 15 (7) of the Act, they protested the rate adjustment scheduled to become effective August 29th, 1957. They contented that this rate revision resolved resulted in violations of Sections 1 and 3 of the Act. And they requested that the Commission invoked its discretionary authority under Section 15 (7) of the Act to suspend the rate revision for the seven months suspension period and to institute a general investigation for the lawfulness of the rates proposed to become effective August 29th, 1957. Now, in accordance with the Commission's long standing rate procedure, the matter of the 4 Section application and the pleadings filed in connection with the 4 Section applications were given initial consideration by the 4 Section board. The request for suspension and investigation were considered by the board of suspension. Both of these boards are composed of employees of the Commission who are authorized to take initial action on the rate issues. It should be noted that the proportional rate which became effective on December 15th, 1956 were not before the boards. The December 15, 1956 adjustment could not be suspended because it had become effective by operation of law. The suspension board acted first on August 26th, 1957. And it decided not to institute an investigation and not to suspend the rate revision which was scheduled to become effective August 29, 1957. The notice of the board of suspensions specifically stated that its action was not a final determination of the lawfulness of the rates but that they could be made subject to investigation by a formal complaint. The 4 Section board, after its investigation decided on August 27, 1957 to grant relief pending a hearing on the 4 Section application. These boards order also indicated that it -- that it did not approve any rates that may be filed under the order and that the rates could be made subject to complaint and investigation. Now, appeals were taken from the action of the boards. And the Commission Division 2, acting as an appellate division on August 27th and 28th, 1957, upheld the actions of the boards. The appellate division noted that its action did not constitute a final determination of the lawfulness of the rates. The Commission's determination not to invoke its discretionary power to suspend the rates and not to institute a general rate investigation pursuant to Section 57 -- 15 (7) placed the appellants unnoticed that any further challenge regarding the general lawfulness of the rates would have to be initiated by the appellants by filing a formal complaint under Section 13 (1) of the Act. Of course, the appellants were aware of the provisions of Section 1.42 of the Commission's General Rules of Practice which applies to initial rate proceedings under Section 15 (7). This rule specifically provides that no protest shall include a prayer that it is also be considered a formal complaint. Should a protested desire to proceed further against the tariff which is not suspended, a separate later formal complaint should be filed. Now, it is apparent that the pleadings filed by the appellants before the Commission attacking the rates scheduled to become effective August 29th, 1957 were insufficient to want the Commission exercising its discretionary authority to suspend those rates. Significantly, if the Commission had exceeded to the appellants' request for suspension, it would have resulted in the continuation of Section 4 destination violations which the August 29th, 1957 rate revision was intended to eliminate. Also, the refusal to grant any 4 Section relief pending a hearing would have prevented the maintenance of origin departures which were similar to those previously authorized by the Commission over the rail routes from Chicago and Kankakee. Thus, when the Commission set the 4 Section application down for hearing, the issue to be determined was whether the New York Central should be authorized to continue to maintain over its direct routes to the East, higher rates at the intermediate points between Kankakee, Illinois and Hamilton, Indiana and the lower rates from points on the Kankakee Belt Line such as Dwight, Illinois to destination points in the East. Now, getting to the 4 Section proceedings, in 4 Section proceedings generally, the principal burden resting upon the applicant carrier is twofold. First to show that the lower through rate to the more distant point is reasonably compensatory and secondly, to justify the charging of a lower rate at the more distant point than the corresponding rates at the higher rated intermediate points such --
Potter Stewart: In order to make it a -- a special case as the statute says.
H. Neil Garson: That's right. Now, such justification must be based upon transportation standard as distinguished from industrial or trade practices. That is to say that the justification for the variation in the rates or rate levels which result in violations of Section 4 between the more distant and intermediate points must be based upon a dissimilarity of material transportation circumstances and conditions surrounding the respective movements such as carrier or market competition at a more distant point and the absence of such competition at the higher rated intermediate stations. Stated in other way, such a showing is necessary to establish a special case. Now, it is true that the Commission will not grant 4 Section relief when the through rates authorized at either the more distant or intermediate points violates any other section of the Act. And such a situation may arise whether or not the complaining point or shipping interest is located on the route which relief is authorized. The matter to be emphasized is that the alleged rate damage must be caused by the through rate authorized at either the lower rated -- to lower rated more distant stations or the higher rated intermediate stations. In actual practice, the rates involved in a 4 Section case may be and they frequently are combination through rates composed of individual rate factors covering different segments of the through hauls to the more distant or higher rated intermediate point. Such individual rate factors embraced in the combination through rate may be lack rates which have separate or independent application on a shipment moving between the points covered by such a rate factor or proportional rates as in this case, which have no independent application and consequently may be used only in constructing the through rates. When as in the present situation, the through rates involved in the 4 Section departures are combination rates, whether composed of flat or proportional rates, no burden rest upon the applicants to justify the individual rate factors embraced in the through combination rates. Consequently, the problems in such a situation center around the lawfulness of the through combination rates within the meaning of the prohibition in Section 4 (1). And additionally, any claim of unlawfulness under any other section of the Act that would result from the application of the through rates for which relief from Section 4 sought, both the Chicago shipper protest under Section 3 (1) and the Mechling protest under Section 3 (4) and the allegation of unfair destructive competitive practices are directed primarily, if not entirely, against only one rate factor embraced in the through rates considered in the 4 Section case. And as previously explained, no burden whatever, rested upon the applicant carriers to justify a single factor embraced in the considered combination through rates for which relief was granted.
Arthur J. Goldberg: (Inaudible)
H. Neil Garson: No, the Commission is not afraid. However --
Arthur J. Goldberg: (Inaudible)
H. Neil Garson: However, this assumes that the allegation is properly directed or results from the allegation of violations actually result from the through rates and the through routes that are involved in this particular situation. Now --
Arthur J. Goldberg: (Inaudible)
H. Neil Garson: The --
Arthur J. Goldberg: (Inaudible)
H. Neil Garson: Essentially, I believed the position of the Board of Trade and as well as the Government comes down to simply a question of procedure. And the questions simply is, should the Commission had considered the allegation raised by the Chicago Board of Trade? And the answer --
Arthur J. Goldberg: (Inaudible)
H. Neil Garson: The allegation was made in relation to a group of shippers at Chicago who are not affected directly by the transportation rate involved. What they're affected by is a trade practice. They bought this whole corn but they didn't know what price to quote for the sale of it because they didn't know where it was going to be milled. They didn't know where in this area between Kankakee and ultimate destination, they were going to have a buyer who was going to be able to mill it in transit. Now, one thing is clear from this record that the -- that the corn product shipper and the corn -- and that is -- as between the corn product shipper at Kankakee. And those located in Chicago there is absolutely no difference in the rates or the rate treatments there. They had treated alike as between whole corn shipper of Kankakee and Chicago. They have the same situation. They are treated alike. The only one -- the only -- the only complaint that we have had is in relation to some whole corn speculators who don't happen to know who the final processor is going to be when they buy the corn.
Hugo L. Black: (Inaudible)
H. Neil Garson: They may have a right to challenge the law but they've got to come in and point out to where the transportation rate and the transportation conditions actually affect them. Now, what affects them here is not that, but the fact that they don't know who they're going to sell to.
Hugo L. Black: (Inaudible) that they are ignoring, the Commission is willfully ignoring the provision of the statute which Congress passed seeing that each type of transportation should be given in view of the advantage. Is that the central -- the heart of the (Inaudible)
H. Neil Garson: Well, I think that goes to the question of destructive competition that --
Hugo L. Black: But when I read those -- I'm not interested in names. If the Commission is not required by law to adopt (Inaudible) rigid rules of practices, is it? Didn't the Commission have ample authority here if it wanted to do so to consider this question which was raised, namely, that you are violating the Commission with deliberately doing that which this Court is telling them they couldn't do, denying that -- whether right or wrong, wasn't what they were charging?
H. Neil Garson: Well, the Commission --
Hugo L. Black: Violating the principle of the law that they must not deprive the barge line of the inherent advantages they have by reason of being barge line. Wasn't that fight?
H. Neil Garson: That was part of the case. Well, this is the case of the barge line.
Hugo L. Black: But -- but you have to --
H. Neil Garson: But --
Hugo L. Black: -- you have to start that under any -- you have to -- does Commission reached the point in its -- in its --
H. Neil Garson: Well, let me explain.
Hugo L. Black: -- limitation of old-fashioned law that you're about to say it's under 3 (4), under 3 (6) or under 3 (18) (a)?
H. Neil Garson: Well, I think the important point, Mr. Justice Black, is this, that what the Commission had reported in this case wouldn't have permitted it to go further --
Hugo L. Black: You mean the law from -- does not barge them from considering that the whole thing (Voice Overlap) --
H. Neil Garson: I -- I will -- I will try to develop it in my argument to point out why section -- why -- if -- even the Commission had denied the 4 Section application here, it wouldn't have helped the situation that Chicago undid. The three, four violations would have continued.
Hugo L. Black: What about the -- what about the situation -- what about the situation of the barge line? It's not any doubt, is it? I thought you told me a while ago, that undoubtedly --
H. Neil Garson: Well, let me make this point.
Hugo L. Black: Undoubtedly, this rate was fixed so it did nothing, except change the rate for the railroad at the place where barge lines competed with it.
H. Neil Garson: As -- as the -- the appellant here stated, and that's why I pointed out, the rate from Chicago, the reshipping rate, this had been in effect for many years. It's out of the reshipping rate that any cut-back comes and that rate as a separate rate had not -- was not before the Commission. Its lawfulness was not being challenged.
Hugo L. Black: Or forget -- forget shipping rates and everything else. Isn't it true? The main center of that thrust so far as the barge lines were concern was if you would deliberately setting up a contrivance of railroad rates, calling them by any name you see fit, the purpose of which was to put barge lines out of business.
H. Neil Garson: This is their argument.
Hugo L. Black: That was the argument, and that's what -- was --
H. Neil Garson: This is their argument.
Hugo L. Black: -- that is involved in the whole thing, wasn't it?
H. Neil Garson: This is their argument.
Hugo L. Black: And you say that they should have brought it up in another way, don't you?
H. Neil Garson: Not that they should've brought up in another way, but that it had nothing to do with this case that was before the Commission. And if in fact, they felt --
Hugo L. Black: You think the Commission had no power to consider it?
H. Neil Garson: The Commission could have if it had wanted to.
Hugo L. Black: That's why I agree to that. How we (Voice Overlap) wanted to.
H. Neil Garson: And this (Voice Overlap) different proceeding. They could -- the Commission could have instituted a different proceeding and other investigation. But that was no reason to holdup any action on this 4 Section application which had nothing to do with that situation.
Hugo L. Black: That's what I think. Has the Commission asked Congress to change this law?
H. Neil Garson: Not so far as I know.
Hugo L. Black: Have they made any report to Congress from year to year in which they suggested that this was a bad law that that -- with reference to -- in view of the advantage of the barge lines, in views to the railroad, it is all that could be changed.
H. Neil Garson: Well, this was brought up previously when the Section 15 (a) (3) of the Act was amended and there has been a case on that point. And I might add that my colleague has prepared to discuss that.
Hugo L. Black: Well, has -- has the Commission recommended such a change?
H. Neil Garson: Not that I know of.
Hugo L. Black: In law?
H. Neil Garson: I don't know of any recommendations of such a thing.
Speaker: And may I ask you a valuable question?
H. Neil Garson: Yes, Your Honor.
Speaker: Supposing your position sustained in the -- in the barge lines as submitted -- remitted to a Section 13 proceeding, how long would that take to come to (Inaudible)
H. Neil Garson: Well, Your Honor, a great -- many of these cases depend upon the parties primarily. The Commission, in the normal course of its proceedings, will move this thing along as rapidly as possible. It all depends upon when the parties are prepared to present their case -- when and --
Speaker: No, no.
H. Neil Garson: -- and to bring -- in the normal course of due process.
Speaker: Well, --
H. Neil Garson: Now --
Speaker: -- that's not a very illuminating answer. Is between -- sending --
H. Neil Garson: Well --
Speaker: -- the case back, let me put it this way, is between sending the case back to have the -- these questions determined in this proceeding and permitting the barge lines to independent proceeding under Section 13, what would be the difference in time elements?
H. Neil Garson: I don't think there would be too much difference. I think probably many of these cases run between a year and two years depending upon the evidence, depending upon whether the parties are prepared to go to hearing. These are imponderables which make it difficult to come up with any definite time limitation. But --
Speaker: Isn't it some of this evidence are already in the -- in this present record?
H. Neil Garson: Well, the evidence is here, but as I have pointed out in my brief, if this is what they're going to rely upon, my feeling is that the Commission could not come out with any other decision than it has. I might say this that the Commission has found in this record that could -- based upon the records, based upon the evidence, the Commission didn't ignored the evidence entirely now. I want to make that clear. The Commission in its report, and this is at page 27 of the record, specifically found that there was no indication of undue damage to Chicago. Now, I want to make this point that if the Commission -- if the Commission had said simply undue prejudice or any undue preference relationship here, it's simply a choice of words, and if it constitutes, I'd rather simply say undue damage, I would say that there was no prejudicial area shown in the use of such language.
Arthur J. Goldberg: First, going back to your essential argument and this is for enlightenment.
H. Neil Garson: Yes.
Arthur J. Goldberg: This is a Section 4 proceeding.
H. Neil Garson: A Section 4 proceeding.
Arthur J. Goldberg: Wasn't the guts of the proceeding, the basic issue involved the reduction in the rail rate then has existed between the uttermost western point of Kankakee, wasn't that the real issue?
H. Neil Garson: This was --
Arthur J. Goldberg: (Voice Overlap) the -- the larger rate and the New York Central wanted to reduce of it. Wasn't that the purpose of the -- the application?
H. Neil Garson: No, the purpose --
Arthur J. Goldberg: What was the purpose?
H. Neil Garson: The purpose of the application and I'd like to get back to that for one moment was this. The New York Central insofar as the 4 Section is concerned, now, we only have the 4 Section matter before us. That's all the Commission had before it. Had cleared all of the 4 Section except as to some origin departures which existed between Kankakee and Hamilton, Indiana. As to this -- as to this portion, that's all the application was concerned with is -- was to --
Arthur J. Goldberg: But in order -- in order to do that, that would have had an effect upon what they suppose to do with the combined rates, if not so, did you tell --
H. Neil Garson: It would've permitted -- it would've permitted continuing the reduced through rates from points on the Kankakee Belt Line, movements of traffic through Kankakee to ultimate destination in this area.
Arthur J. Goldberg: Could it not -- they could not have continued to that proposal that they can have without getting a new relief that they have, isn't that correct?
H. Neil Garson: Well, they had another alternative.
Arthur J. Goldberg: What was that?
H. Neil Garson: The other alternative would have been precisely what they were trying to do with the 19 -- with the 1957 rate revision and that would have been to clear the 4 Section departures that is grade the rate all the way through, and then there wouldn't have been any 4 Section case at all. Now, this is -- this is exactly what happens and what the Supreme Court has -- this Court has recognized in many 4 Section case -- in the other 4 Section cases in the past, that the railroads have the alternatives of adjusting this situation, raising or lowering, upgrading the rate all the way through to remove any prejudice to the undue prejudice to the intermediate point.
Hugo L. Black: That was not done.
H. Neil Garson: That -- that was not done but they could have this alternative if the 4 Section application had been denied. My time is up. I --
Hugo L. Black: (Inaudible) to relieve the intermediate prejudice, what do you mean by that?
H. Neil Garson: Well, the higher rated points, the points of the -- that the intermediate points -- the points --
Hugo L. Black: What -- what intermediate point?
H. Neil Garson: That is between Kankakee and Hamilton, Indiana. These were points that were going to be maintained at a higher rate level. And as to them --
Hugo L. Black: That's where barge line was competing?
H. Neil Garson: No, the barge line wasn't competing there at all.
Hugo L. Black: Well, they were not interested in the barge --
H. Neil Garson: That's precisely -- that's precisely our point, Your Honor.
Hugo L. Black: But it seems you have come out is all -- with the consequences.
H. Neil Garson: Well, what they're trying to do here, by in direction, is to get a cancellation of rates which they should have done and which they could have done a long time ago by going into a Section 13 (1) proceeding.
Hugo L. Black: The record indicates that it has been pretty difficult to get obtain that barge rates and railroad rates (Voice Overlap) --
H. Neil Garson: Well, they have to prove their case.
Hugo L. Black: As if --
H. Neil Garson: They have to prove their case.
Arthur J. Goldberg: Mr. Garson, before you sit down (Inaudible)
H. Neil Garson: No, this is -- this is an important point. They would have --
Arthur J. Goldberg: The barge lines --
H. Neil Garson: -- as a matter of --
Arthur J. Goldberg: -- the barge lines (Inaudible)
H. Neil Garson: The rates became effective on December 15th, 1956, the reductions along this line of railroad for use in connection with movements all the way through to New York. They became effective six months before they even came into the picture. And at that time, would --
Arthur J. Goldberg: And would that take a little period (Inaudible)
H. Neil Garson: That's right.
Arthur J. Goldberg: (Inaudible)
H. Neil Garson: And of course those rates have been filed with the Commission, the tariffs had been filed with the Commission under the proper statutes, Section 6 (3) which says that they have gave the -- everybody three days notice. Everyone had notice of these rates. They could have come in and protested. They could have come in and ask for a suspension. No one did.
Hugo L. Black: They did and that's been eight years, doesn't it?
H. Neil Garson: I'm sorry, Your Honor.
Hugo L. Black: They did come in and that's been eight years since they came in, doesn't it?
H. Neil Garson: That's true but they had eight years in which to rest toward the proceeding.
Hugo L. Black: What -- what reason have we to think if the Commission divides it up into parts. It wouldn't take eight years for the next one --
H. Neil Garson: Well, I appeal --
Hugo L. Black: -- to have a new one.
H. Neil Garson: I appeal this that as to the -- as to the type of allegations which they had raised, it was discretionary with the Commission as to whether or not to combine the two or at -- enlarge the -- the proceeding or to simply hold it down to the application which was before it.
Hugo L. Black: We have no reason to think it wouldn't take eight years, have we?
H. Neil Garson: I doubt that it would.
Hugo L. Black: Oh, you don't think it would take how many years (Voice Overlap) --
H. Neil Garson: As I -- I say this, the hearing in this case didn't take eight years, not that they --
Hugo L. Black: Take eight years to get here.
H. Neil Garson: Well --
Hugo L. Black: And they all have a right to come here, don't they?
H. Neil Garson: I -- I don't disagree with that one but --
Earl Warren: Mr. Murphy.
Richard J. Murphy: May it please the Chief Justice and this Court. I represent the New York Central Railroad Company, the appellant in this proceeding. In the argument and in the briefs, the Mechling Barge Lines asserts that our rates are lower than necessary to meet competition and they raised the question that the Commission carried in so finding. This question is one of the two principal questions presented under the 4 Section. Mr. Justice Black suggested that this question of whether or not the rates are lower than necessary to compete was a pivotal question and I agree with you, Your Honor. The competitive issue raised by Mechling can fairly be characterized as having dominated the hearing before the Commission. With the appellant Mechling and others suggesting that the rates should be as much as 13 cents, 100 pounds higher than our present rates. 35 witnesses testified at the hearing. 31 of which testified in respect to the competitive issue. And with this emphasis placed on the case, it's not surprising that a major portion of the Commission's report here deals with the competitive aspect of the case and deals with the subsidiary findings and discussion of facts that led to the Commission's ultimate conclusion that the rates are not lower than necessary to meet the competition. The line of the New York Central, west of Kankakee, and the barge line in the Illinois River serve a common territory. This area is one, which insofar as deserved by the New York Central, is an area that we can only handle corn or grain out of it. The Commission made a finding that our principal business at those stations is grain, preponderantly corn, that's at record 13. Now, while this origin territory is reached by and served by both the barge lines and the railroad, there was no competition between the two routes. The all-rail route from Moronts, for example, to the East via Kankakee versus the barge rail route to Chicago and then East by rail. The Commission did find that at one time, all of the corn move via the all-rail route but with the development of the Illinois River, the corn left the rails and move via this barge route. Mr. Spencer referred to a figure of 270 carloads of corn as having moved in 1956 and 45 carloads of corn has -- is having moved in 57. The record doesn't explain the unusual figure for 1956 but it was the 1955 previous are record -- are of record and the movement was less than a hundred carloads during the entire year from those 17 stations. When the all-rail routes lost the business to the barge lines, the small businesses along the New York Central on this line from Kankakee to Moronts were affected. The Commission found that they ceased the commercial elevation of corn and were relegated to the milling of corn -- elevation of corn from milling and resale locally. There's testimony to support that from country elevator operators who are located and have their businesses along the line of the New York Central which has testified in our support. It was to correct this situation and to put some business back in our railroad, to put our small business people into -- back into business that we published these rates, and I might mention that the record also shows that our business situation down there was so serious that we gave consideration to abandonment of a portion of that line. Again, referring to this important issue before the Commission, the Commission's ultimate finding that the rates are no lower than necessary to meet competition is based on three different types of proofs to that fact. First of these is the effect of the rates in the movement of traffic. As these rates were in effect before the year prior to the Commission hearing, the Commission had evidence based on the traffic experience under the actual competitive conditions created by these rates, which Mechling contends are so low its to be distractive. On that -- fortunately and admittedly, the 1957 corn crop was a good one. The barge business increased in Chicago to an excess of 34 million tons in total into approximately 27 million tons -- excuse me, bushels, from these ten competitive ports to Chicago. The rail movement from these 17 stations between Moronts and Kankakee in total was 5,362,000 bushels on which more than 20% or more than a million bushels moved for export on rates that were five to seven cents lower than those that are a sale is being destructive and non-compensatory.
Arthur J. Goldberg: Mr. Murphy, however, since that time (Inaudible)
Richard J. Murphy: Well, Your Honor, it's been pointed out. This record has been closed a long time. The figure of some 16 million tons that was mentioned by Mr. Hayes this morning was also mentioned in the reply brief which was filed yesterday. That was the first time that I saw those figures. I have no access to them, I've never seen or heard them before and I'm not prepared to say whether or not they are correct.
Speaker: But whether (Inaudible)
Richard J. Murphy: That's correct, Your Honor. And also, I'm not prepared to -- to say what the rail movement was during 1963 either. It may be that all of our business went to part. Maybe that there was some tremendous change that I'm not aware of and I -- I don't say that I don't believe Mr. Hayes but I have no way of arguing against the fact that I don't know anything about.
Speaker: (Inaudible)
Richard J. Murphy: A three year period is about this representative as we're aware of, Your Honor. The figures -- we have -- the figure for 1956 was 26 million bushels of corn to Chicago. 1957, as I stated, was a good year. There were 34 million bushels of corn to Chicago. The record does show --
Speaker: On the barges?
Richard J. Murphy: On the barges, yes. In 1956, the new -- the rail movement from these stations was less than a million bushels and that was almost all Government corn for export that moved on lower rates than those involved here.
Speaker: (Inaudible)
Richard J. Murphy: The only figures that I have -- any knowledge I have, Your Honor, are the figures of record.
Speaker: (Inaudible)
Richard J. Murphy: The rail movement during 1957 on the rates involved here was approximately 4 million bushels. Contrasted which --
Speaker: (Inaudible)
Richard J. Murphy: Well, the object of our asking for the decreased rate was to permit us to meet the competition at the barge lines.
Hugo L. Black: At the barge. The proper object was that for the judgment, that's in the --
Richard J. Murphy: Yes, Your Honor. I -- I --
Hugo L. Black: Proper judgment business objective, if it's lawful. The object was to take away the barge lines business as much as you could by getting a rate there and where you could meet that barge line.
Richard J. Murphy: I -- I say maybe with good intentions, I'd say yes, Your Honor. That's what it was.
Hugo L. Black: I'm not challenging the intention. That's -- that's business. When it's lawful, that's the question. Now, suppose, do you think that if the railroad was doing and actually was losing 11 cents for the time being ordered it was on -- on out-of-pocket expenses that it could be justified in light of the provision that the barge lines should be given its undue advantages on the basis that the railroad wanted to increase its business? Bear in mind the policy.
Richard J. Murphy: Well, Your Honor, if it were demonstrated on the record that the barge rail route with a low cost route, lower cost in the all-rail route.
Hugo L. Black: I don't --
Richard J. Murphy: And that the New York Central was going to lose money as a result of this rate publication, my answer is no, we should not be permitted to do that.
Hugo L. Black: Well, it did not any doubt --
Richard J. Murphy: But I --
Hugo L. Black: -- did not any doubt it was that the barge line is cheaper, it's lower. And I am saying this was a perfect realization that there's a big public policy problem connect with the barge lines have this business when the -- when the Government has developed the streams from the use and so forth.
Richard J. Murphy: Your Honor, I get --
Hugo L. Black: But I'm -- I'm talking about the policy the Congress has adopted. And do you believe that this was not present so that the -- do you support the Commission in its idea that with that policy staring them in the face and that issue being raised as it was that they should use a type of pleading and say that although we have discretion to do it, we've sent them off in rigid compartment or niches --
Richard J. Murphy: Well, I might --
Hugo L. Black: -- to start a new proceeding?
Richard J. Murphy: Well, I might -- might say, Your Honor, that on this question of destructive competition as raised by the barge line, I think that the whole report or the -- the most of this report deals with this competitive question. I don't think that Mr. Hayes has really much of an argument about the compartmentalization of the pleading argument that's raised --
Hugo L. Black: Well, I was talking about the argument of the Commission.
Richard J. Murphy: Well, the argument of the Commission, as I understand it, was in response to an argument of the Board of Trade and an argument of the Department of Justice which supports the Board of Trade. Mr. Hayes, he had his day in court in full.
Hugo L. Black: Well, I asked him --
Richard J. Murphy: The --
Hugo L. Black: -- about the other issue. I didn't understand (Voice Overlap)
Richard J. Murphy: Yes. Well, Mr. Hayes, when he argued here, he was not only arguing in support of the barge line, he was raising an issue of some grain merchants which are -- are represented very ably by Mr. Spencer. In that case, Mr. Hayes was presenting two arguments but I -- I think it should be clear here that the barge line had its full day before the Commission. The Commission in determining that these rates were no lower than necessary to compete with the barge rail route a full consideration to Mr. -- both in the evidence and procedurally, to Mr. Hayes' contentions.
Hugo L. Black: But your premise is what bothers me.
Richard J. Murphy: Well --
Hugo L. Black: Well, argue the necessary to compete, unless I'm mistaken what Congress said was that the -- the Commission shall not have power to reduce railroad rates in order them -- for them to get down to where they can get barge line business, if the barge line can carry it cheaper. And I -- I don't quite understand how you can say that if you can prove that it's necessary to reduce your rates far the little cost or anything else, of course, you can't compete for them at that charge. I don't see how you could say that that wouldn't violate the policy of the Act.
Richard J. Murphy: Well, Your Honor, we also prove that this was compensatory to the railroads.
Hugo L. Black: Well, that's -- that's a different issue. That's quite a different issue.
Richard J. Murphy: Yes, we did prove that as well as proving that the rates are not lower than necessary to compete.
Hugo L. Black: You do -- you do not argue, do you? I haven't noticed in -- this argument in your brief that in order -- you should be allowed to get your rates down even below this barge rate or to this, unless (Inaudible) your business offer (Inaudible)
Richard J. Murphy: Well, what I do -- no, I do not make the argument in those words. I'd like to state to myself if I may.
Hugo L. Black: Yes.
Richard J. Murphy: What we argue is that under the decision in New Haven verse or Interstate Commerce Commission versus New Haven decided by this Court last term in which you construed Section 15 (a) (3) of the Act and define destructive competition. You -- this Court said that a carrier cannot put in a rate if by so doing, it's going to destroy the business and the rate structure of a lower cost carrier who would thereby be forced to reduce its rate and possibly be seriously injured. That was the, as I understand it, rough understanding of the definition of destructive competition. In that case, this Court also said that the burden of establishing and proving destructive competition rest on the party who claims to have that inherent advantage.
Hugo L. Black: But not in a doubt what goes is destructive competition cares at it purposes. I'm not talking about illegal matter.
Richard J. Murphy: Well, I don't know that it's --
Hugo L. Black: (Voice overlap) you hope it would be necessary.
Richard J. Murphy: Well -- well, I don't think that we could be permitted to put in a rate that was lower than necessary to meet competition. Now, when we just go down --
Hugo L. Black: Well, to -- to meet competition of barge line and has in the Congress fixed what is -- what -- what you cannot do to meet competition with a barge line if you can carry it cheaper? If they can carry it cheaper.
Richard J. Murphy: Yes, the Congress' regulation is almost all embraced upon this subject. But I might say this, Your Honor, when the Commission found that our rate was no lower than necessary to meet competition, implicit in that is a finding that it isn't too low to meet the competition and thereby, that it won't -- could the barge lines out of business.
Hugo L. Black: Well, there's -- does that fact they were finding --
Richard J. Murphy: The facts they raised --
Hugo L. Black: -- that the railroads are -- that's a rate that they are entitled to under their -- and -- and he would cost to carry that transportation to you. And it means that this 3.5-cent rate they had before was outrageously high because they could have done it all the time at 6 or 7 cents, 18 or 10 or whatever it is.
Richard J. Murphy: I'm sorry, Your Honor.
Hugo L. Black: What I meant, the former rate was 23 cents, wasn't it?
Richard J. Murphy: Yes, Your Honor.
Hugo L. Black: And what was it cut to?
Richard J. Murphy: It was cut to 5.5 cents, the -- the rate to take the mass at the time of the hearing so that we're not concerned --
Hugo L. Black: Yes.
Richard J. Murphy: -- about the change. If the rate from Moronts to Kankakee was 25 cents a 100 pounds, the rate from -- the proportional rate from Kankakee to New York was 54 cents. The proportional rate that was established which applies only on corn that moves to destination beyond Kankakee and is milled in transit in a destination at a point prior to that destination is 5.5 cents making the through combination charge from Moronts to New York, 59.5 cents, as distinguished from a rate of 72 cents from Kankakee to New York.
Hugo L. Black: Now, if the barge line should run in the business, as I understand, the railroad rate structure, the railroads could raise their rate the next day, couldn't they but filing a rate like they did here.
Richard J. Murphy: Not under Section 4 of Interstate Commerce Act which prevents this from raising the rate if we manage to put Barge line out of business but --
Hugo L. Black: Well --
Richard J. Murphy: -- from my knowledge of history, we'd never been -- we'd never done that.
Hugo L. Black: (Inaudible) -- yes.
Byron R. White: (Inaudible)
Richard J. Murphy: Your Honor, the only --
Byron R. White: There would be no more grain (Inaudible)
Richard J. Murphy: Well, that -- that was Mr. Goodman's argument.
Byron R. White: (Inaudible)
Richard J. Murphy: No, he is correct in that. We -- we do not state that we're generating any greater demand for corn in the East.
Byron R. White: (Inaudible)
Richard J. Murphy: We -- we -- that is our purpose and that is our intention and that's -- that was our experience under this rate.
Byron R. White: (Inaudible)
Richard J. Murphy: Yes, Your Honor, very definitely.
Hugo L. Black: (Inaudible)
Richard J. Murphy: Both, Your Honor. We -- we were handling partially none from Moronts to Kankakee. We got some business there. We also increase their movement, our total through movement too.
Hugo L. Black: (Inaudible)
Richard J. Murphy: It went from -- from Chicago. It went from Chicago when the barge lines brought it to Chicago.
Hugo L. Black: (Inaudible)
Richard J. Murphy: Yes, Your Honor.
Hugo L. Black: (Inaudible)
Richard J. Murphy: Yes, Your Honor. I -- we have rail competition and I think competition is quite pervasive in the whole --
Speaker: (Inaudible)
Richard J. Murphy: I -- I don't understand that it's -- it's really --
Hugo L. Black: (Inaudible)
Richard J. Murphy: I --
Hugo L. Black: (Inaudible)
Richard J. Murphy: Well, there are also millers in Indianapolis where we are getting some this way too so --
Byron R. White: (Inaudible)
Richard J. Murphy: Yes, Your Honor. That is -- That is the thing.
Byron R. White: (Inaudible)
Richard J. Murphy: No, they can get it and process it.
Byron R. White: (Inaudible)
Richard J. Murphy: Well, no, Your Honor, they can process it in Chicago with no rate disadvantage whatsoever. They have the same rights as Kankakee. The fact is that Chicago is a grain terminal with large merchant elevators, there's not much milling done there.
Byron R. White: (Inaudible)
Richard J. Murphy: That's what Mr. Spencer is concerned about is this competition between the Chicago merchants and the people who actually use the corn. It's -- he's arguing for the middleman on the Board of Trade which is perfectly proper.
Hugo L. Black: (Inaudible)
Richard J. Murphy: Yes, Your Honor.
Hugo L. Black: (Inaudible)
Richard J. Murphy: Well, the Commission -- I -- I disagree with the suggestion that the Commission found what this cost worth.
Hugo L. Black: (Inaudible)
Richard J. Murphy: No, Your Honor, we did not present evidence on that proposition. The only one that presented evidence on that proposition with Mr. Hayes' file --
Hugo L. Black: But you could have been, you could have been, do you?
Richard J. Murphy: Yes, we could have.
Hugo L. Black: But you accept what he -- his evidence show?
Richard J. Murphy: No, he cross-examine his witness and we disagree with him but we did not try to rebut or prove this because we didn't consider that that was an issue in this particular case for the reason that it's the through charges that were involved. Now, in that connection, there was --
Hugo L. Black: Well, the main thing that's involved is that part there where you try to compete with the barge line --
Richard J. Murphy: Yes, Your Honor, that's the --
Hugo L. Black: -- of the corn.
Richard J. Murphy: -- that's the part of the rail route --
Hugo L. Black: (Voice Overlap) corn.
Richard J. Murphy: -- that's competitive with the barge route. I've readily concede that. But there's no finding by the Commission, I submit, that this -- that the rail cost from Moronts to Kankakee exceed the 5.5-cent rate.
William J. Brennan, Jr.: But what -- what you --
Richard J. Murphy: I --
William J. Brennan, Jr.: (Inaudible) you said your whole theory was that all it requires (Inaudible) of the combination rate (Inaudible) and that you were not required to justify just that segment, (Inaudible) 5.5, is that it?
Richard J. Murphy: That's correct, Your Honor.
Byron R. White: That's what the Commission held.
Richard J. Murphy: That's what the Commission held. And when -- when Mr. Hayes presented his evidence on that point, we cross-examined his witness but we didn't go into it. We didn't feel that it was substantial evidence as a matter of fact.
Speaker: (Inaudible)
Byron R. White: The only reason, the whole -- the whole (Inaudible)
Richard J. Murphy: No, Your Honor. We think we make money on the rate by itself west of Kankakee and in that --
Speaker: (Voice Overlap) --
Richard J. Murphy: -- what?
Speaker: (Inaudible)
Richard J. Murphy: We -- we think our costs are less than 5.5 cents that they're talking about but we didn't put in a cost study to rebut what they put in two pages. Our two sheets of paper, each one of them label is a separate exhibit which purport to be a cost study. The witness, I asked him, he'd never been to Kankakee, he'd never been in that territory, he'd never studied the operations, he made some assumptions and applied some average statistics to them and said, “This is the cost.”
Byron R. White: (Inaudible)
Richard J. Murphy: No, Your Honor. I think they recited the evidence. The Examiner found it and the Commission struck from this report, the finding and conclusion of the Examiner and merely left the recitation of what the evidence showed in and the full paragraph includes the statement that protest to this witness submitted thus and so.
Byron R. White: (Inaudible)
Richard J. Murphy: That's correct but I -- I submit that the -- the Commission did not make a finding that the rate was -- as to what the cost worth.
William J. Brennan, Jr.: (Inaudible)
Richard J. Murphy: Yes, Your Honor.
William J. Brennan, Jr.: (Inaudible)
Richard J. Murphy: Well, I -- I take a little stronger position than -- than the Commission takes on -- on that. Section 4 says that the Commission may, in a special case and if the rates are compensatory, grant relief from what would otherwise be prohibited discrimination i.e. the charging of a higher rate for a -- shorter than a longer included hall. That's all of the statute requires. It was that relief that we asked and it was that -- our application that was set down for hearing. Now, while the Commission may have discretion to enlarge its hearing, and I wouldn't say that they don't have it, there's nothing in this statute that requires them to enlarge the hearing and consider other issues.
William J. Brennan, Jr.: Do you agree that the fact (Inaudible)
Richard J. Murphy: Well, I -- I disagree with the analysis of those. I think there were 16 cases that Mr. Spencer --
William J. Brennan, Jr.: (Inaudible)
Richard J. Murphy: Well, there were more than enough as far as I was concern but we analyzed those cases. A large number of those cases were investigation cases instituted under Section 15, which are generally investigations in which, admittedly, the lawfulness of the rates under all aspects are -- at issue. A number of them were complaint cases.
William J. Brennan, Jr.: Well, how many of them were not?
Richard J. Murphy: A number of them were --
William J. Brennan, Jr.: (Inaudible)
Richard J. Murphy: There --
William J. Brennan, Jr.: (Inaudible)
Richard J. Murphy: There was -- a substantial number of them were 4 Section cases, Your Honor, but they were not necessarily just terminated by this issue because a lot of them, the relief was granted and the Commission's recitation of what it might do if some violation occurred, doesn't seem to me to be particularly meaningful.
William J. Brennan, Jr.: You mean (Voice Overlap) --
Richard J. Murphy: I would characterize it as dicta.
William J. Brennan, Jr.: The Section 4 relief was granted.
Richard J. Murphy: The Section 4 relief was granted. And in that -- some of the other cases, the relief was denied but the unlawfulness or prejudice occurred at the intermediate origin because the competitive conditions existing at the more distant point were also present at the intermediate origin therefore, there was no special case. But I -- think they were about three cases, and Mr. Spencer correctly states that in his reply brief where there were violations an -- other than the direct routes.
Byron R. White: So you're suggesting that the Commission was (Inaudible)
Richard J. Murphy: Yes, Your Honor, I --
Byron R. White: (Inaudible) has no rights to consider the law?
Richard J. Murphy: No, I say the -- well, they have a right to consider and I would not say that they have no right to consider. But I think they have a right to consider it or discretion to consider it. I --
Byron R. White: (Inaudible)
Richard J. Murphy: I suggest that there is no real well entrenched administrative practice that says they will in all instances consider it.
Hugo L. Black: Mr. Murphy, did (Inaudible) any evidence that the -- that the New York Central did anything to reduce its cost in any way and justify this reduction from 23 cents to 5 -- 5.5?
Richard J. Murphy: Well first, on reducing the rate from 23 to 5.5, we might as well reduce it from $1 to 5.5 cents because we weren't getting the business from the 23, it was virtually a noncompetitive paper rate. We did establish that we -- all this -- the distance from here to here is an average of 38 miles. The distance from Chicago to Kankakee is 75 miles. Over and a half holds a little shorter distance. Also, this is a rural area and we had a witness, Mr. Reynolds who testified in respect the operating conditions here and here. He testified to the effect that this was a expensive -- expensive operation here. Also, we had the absorption of switching charges in the congested Chicago terminal. So we cut off about 2 cents of the expense that we had to pay out to get 5.5 cents more money for handling it from here to here and then to New York and we did it from here to here and then to New York. We avoided a 2-cent loss or a pay out that put a 7.5 cents ahead, shorter distance less expensive operation. We think that we test --
Hugo L. Black: I believe I've been led to believe through the years that the railroads were having a pretty hard time and as I understand you now, you are saying that they've been charging 23 cents carrying freight where they carried to make a profit for 5.5-cent.
Richard J. Murphy: Unfortunately, we have not been carrying the rate under 23-cent rate because we were noncompetitive, Your Honors.
Hugo L. Black: (Inaudible) no business.
Richard J. Murphy: We had the rate -- yes.
Hugo L. Black: They had no business at all?
Richard J. Murphy: 45 cars in an entire year from 17 stations which is virtually no business. They -- I don't know why they came -- you're always going to get a little bit so --
Hugo L. Black: (Voice Overlap) you can tell a nominal rate up there of 23 and put a rate in, if you could get some freight, reduce it to five.
Richard J. Murphy: That's right.
Hugo L. Black: Pretty good reduction.
Richard J. Murphy: It's a -- it's a good reduction. I might say that if the railroads can't make practical reductions in what are otherwise noncompetitive rates, we will be having a very serious time.
Byron R. White: Well, I didn't -- I don't understand your (Inaudible) I thought you -- I thought you were saying that the (Inaudible)
Richard J. Murphy: I -- I do. And I -- I do stand or fall under the 4 Section on that proposition and the destructive competition. I think you'd have to consider these other factors. But in considering the compensativeness of the rates under Section 4, I think you must necessarily look at the true charges and I noticed that the Department of Justice agrees with us on that proposition.
Byron R. White: Do you -- do you agree with (Inaudible) considering the -- the destructive competition (Inaudible)
Richard J. Murphy: Yes, Your Honor. Oh, no, no, not on the destructive competition. I think on the destructive competition, you have to look at about 10 different points. And in -- look at these cost saving effects that we have in here. You've got to -- to look at the fact that the Commission found that these rates are no lower than necessary to compete. Again, look at the fact that the barge line increased its rate a year after these reductions became effective. And I think that when the barge line claiming before the Commission that it's going to be destroyed, goes ahead and in the face of our competitive rate, increases its rate, it's something that argues against a factor of destructive competition. I might mention that very little of our corn from Kankakee to Moronts goes through Cincinnati, although it's a work of a route. I believe that's -- I believe that just about, it concludes all I can cover. Thank you, Your Honors.
Earl Warren: Thank you, Mr. --