consignees are grouped in New York City within three or four blocks of each other; that the wagons, teams, and men used in such service in no way differ from those used generally in the express business, and that these facilities are used throughout the remainder of the day in such general business; that the justification advanced by the defendant for the increase in the rate complained of is that the rate previously existing was not remunerative, owing to the expense of the delivery service in New York City; that the United States Express Company has contracts with the Delaware, Lackawanna & Western Railroad Company by which the railroad company receives 45 per cent of the total gross receipts of the express company; that the service rendered by the railroad company is no greater or different under the new rate of $1 than it was under the old rate of 50 cents; that the railroad company now receives 45 per cent of the $1 rate, namely, 45 cents per 100 pounds; and that prior to May 1, 1906, the railroad company received but one-half of said amount for the same service; that the percentage of gross revenue paid by the Express Company to the Central Railroad Company of New Jersey is 43 per cent, and to the Lehigh Valley Railroad Company 40 per cent; that the United States Express Company employs agents at the points of origin here concerned, who are, generally speaking, paid for their services in gathering, billing, loading, unloading, and delivering express matter with a percentage of the gross receipts at such offices, which percentages range downward from 20 per cent; that such agents receive such commissions on the $1 rate; that their services with respect to flower shipments have decreased owing to a decrease in the flower-carrying business of the company since the $1 rate went into effect; that after the rate was raised in 1902 to 50 cents per 100 pounds a wagon express began business in the Chatham district, and has continued therein ever since, carrying flowers produced by that district to New York City at a rate of 60 cents per 100 pounds; that such wagon express calls at the greenhouses for the flowers and delivers them from one hour to an hour and a quarter earlier in New York City than the rail express, and delivers the empties at the greenhouses on its return trip; that it is a rule of the defendant that its agents shall call for packages to be carried by it within certain prescribed limits from the agents' offices and shall deliver packages within such limits; that such service has not been given to the shippers of flowers complaining, but that no complaint of this failure to obey the rules of the company was made to any of the general officers thereof; that the general merchandise rate for the Chatham district is one-half that on cut flowers; that the rate on meat and vegetables in corrugated paper boxes is 40 cents per 100 pounds; dry goods, notions, ice cream,

etc., are carried for 50 cents per 100 pounds; beer, ale, mineral waters, etc., for 35 cents per 100 pounds; berries, fruits, etc., 40 cents per 100 pounds; millinery, feathers, hats, and cameras (boxed), Saratoga chips, cigar boxes, doll carriages, and straw goods, 50 cents per 100 pounds.

Accepting the contention of the defendant that the special service given from the Hoboken station to the concentrated delivery points in New York City is so expensive as to justify some increase in the rate upon cut flowers over that charged upon general merchandise, no justification has been given for such an increase as that imposed by the new rate of 1906.

Elaborate tables have been presented by the defendant tending to prove that the rate of 50 cents was unremunerative, owing to the percentage which it paid to the railroad added to the percentage which it paid to its agents and the cost of delivery in New York. From these same figures it can also be adduced that the present rate of $1 is unremunerative; and it may well be said that from an analysis of the charges made upon any single commodity or class of commodities transported by this company a similar result could be arrived at.

It appears from the testimony of one witness that as an experiment he sent three flower boxes from New York City to his home in Chatham, N. J. One of these boxes contained waxed paper, was so labeled, shipped, and delivered to him. The charge on this box was 35 cents. He also sent an empty box just like the first, but empty, which was labeled "Roses." This was delivered at a charge of 55 or 60 cents. The third box was shipped as an empty rose box, and the charge on that was 50 cents. If it were attempted to estimate the cost of all the different services rendered as to any one of these boxes by the express company from the time notice was given the express company to call for it until the time when it was delivered and receipted for, it might be made to appear by most respectable figures that such cost exceeded the amount of the charge. This, however, is not a conclusive method of arriving at the reasonableness of a rate.

Fairness to the shipper requires that under no circumstances should he be forced to pay a rate greater than the value of the service rendered to him by the carrier, and this involves a determination of the value to him individually of the carriage and also of the cost to the carrier of the particular carriage. (Beale and Wyman on Railroad Rate Regulation, sec. 319.

The rate on one article of traffic may be reasonably high and the carrier fail to earn a fair return on the value of the entire property employed for the public convenience because of unreasonably low rates on other traffic, and, vice versa, the rate on one article of traffic may be unremunerative or unreasonably low and the return to the carrier for its entire business may be fair or reasonably high, the deficiency under the rate on the one article of traffic being made up by the rate on the balance of the traffic. Smyth v. Ames, 169 U. S., 466.

One evidentiary fact which tends to establish the inconclusiveness of any such method of arriving at the reasonable charge to be made for an express service is that which appears herein, namely, that an arbitrary increase of 100 per cent is now made in the return to the railroad and to the express company's agents for performing no greater service than was rendered prior to the 100 per cent increase in rates. The express company pays to the railroad company under its contract 223 cents more for carrying cut flowers than it did prior to May, 1906; and it does not appear in any way or from any testimony that the remuneration which the railroad received under the old rate was either unremunerative or unsatisfactory to it.

In order to increase its business, the express company gives an especially prompt service to flower raisers. There is no evidence that this is not done by all express companies, or that it does anything with respect to this traffic which transportation companies do not generally do as to certain classes of perishable freight. But, admitting that an extra return should be made over and above that received for the carrying of articles generally transported by express, no reason has been shown why the railroad charges and agents' pay should be doubled, excepting that the express company has to pay double the amount under its contracts to its agents and to the railroad companya necessity or condition which we can not recognize as controlling as

to rates.

The defense of this rate is not at all unlike that which a railroad might make upon complaint made against the reasonableness of its rates, were it to attempt to show that the value of the service which it renders was based upon contracts made with its bondholders by which the latter were entitled to receive a proportion of the proceeds of each individual rate, no matter how grossly excessive the resulting amount might be. Neither this Commission nor the courts have given sanction to any such inequitable and unscientific method of rate adjustment. For the purpose of illustrating the position of the express company let us assume a 50-cent rate, out of which the railroad company receives 22 cents for the service which it renders to the express company under its contract. There remains 27 cents for the express company. The agent also takes 20 per cent of the gross, which is 10 cents. This leaves the express company 173 cents, out of which it must pay its expenses of New York delivery and its general expenses of operation, management, and a profit. This 17 cents, we will assume, is insufficient to meet these demands. If, however, the rate is increased 10 cents, let us say, and thus made 60 cents instead of 50 cents, and this 10 cents can be appropriated by the company for the service which it renders apart from railroad carriage, it will be an entirely compensatory rate.

To such suggestion the answer of the express company, under the theory of the defendant's case herein, would be this:

"Out of the new 60-cent rate we are compelled to pay 27 cents to the railroad company and 12 cents to our agent, leaving us but 21 cents for our expense in making New York delivery and our general expenses. This is still entirely insufficient to meet general expenses and cost of delivery. We must, therefore, so increase this rate that the margin over and above what is allowed to the railroad company and our agent will at last compensate us for our New York delivery service and our general expenses."

Thus a rate must be imposed upon the shipper, by reason of the contracts which the express company has made with its agent and the railroad, which will yield twice or thrice as much to the railroad and the agent as the services they render are reasonably worth. very statement carries its own answer.

This

An express company can not justify a rate which, in comparison with other rates, is excessive and unreasonable, by showing that it gives a service that is exceptionally expensive, where the burden of the rate charged therefor, falling upon the shipper, increases an already sufficient return to the railroad. An express company is entitled to charge a reasonable amount for the service which it gives; and this service, being partly rendered by its own agents and employees, and partly rendered by a railroad, it can not justify a rate by the production of its own contracts made with the agents and the railroad.

To pay the agent a commission instead of a salary, and to pay the railroad a percentage instead of a fixed amount, or a mileage, or a tonnage, may be, practically, a very satisfactory arrangement between the express company and the railroad and the agent; but from the standpoint of the public such an arrangement can not be held to support the reasonableness of any rate which the express company may choose to charge. What if the express company had contracted with its agent to pay him 50 per cent of all gross receipts, or with the railroad to pay it 90 per cent of such receipts?

Such contracts are entirely between the parties themselves. They are not in the nature of fixed charges, because they are not fixed. They move upon a sliding scale dependent entirely upon the rate. And it would be against the highest public policy to permit rates to be controlled by such contracts, because such practice must inevitably tend to promote the increase of rates on express service. The railroads could, through such contracts, control the rates to be fixed by the express companies, and it would be to their interest always to increase rates so long as the traffic would move thereon, for thereby their portion of the receipts under the contract would be increased.

From all the facts before the Commission it appears that 60 cents per 100 pounds would be a reasonable rate on cut flowers from the Chatham district to New York, and that a similar increase of 10 cents over and above the rates existing on April 30, 1906, to the other points here involved would likewise be just and reasonable, and that the merchandise rate should apply on empty boxes, "not folded flat," on the return trip from New York. The order of the Commission will issue to this effect.

Petition is made in this case for reparation in the amount of excess paid by shippers over and above the rate herein determined as reasonable. Without expressing any opinion as to the right to reparation or the basis thereof, leave is hereby granted to such petitioners to present their claims.

No. 957.

HOLCOMB-HAYES COMPANY

v.

ILLINOIS CENTRAL RAILROAD COMPANY.

Decided April 29, 1907.

Defendant admitted that the insertion of a certain rate in its tariffs, which applied to complainant's particular shipments of cross-ties from Hopkinsville, Ky., to points in Illinois, was the result of clerical error. Subsequently this rate was voluntarily reduced by defendant. Upon complaint defendant expressed willingness to pay to complainant the excess collected by reason of such error, if protected by order of this Commission; and thereupon the Commission, having substantiated the facts, ordered such special reparation. Held, upon the foregoing facts, that the formal complaint be dismissed.

W. H. Holcomb for complainant.

J. M. Dickinson for defendant.

REPORT OF THE COMMISSION.

CLARK, Commissioner:

Complainant is a corporation engaged at Chicago, Ill., in the manufacture and sale of lumber. During the period from August 7 to November 13, 1905, complainant shipped 69 cars containing 23,595 cross-ties from Hopkinsville, Ky., to Herrin, Ill., over defendant's railroad, upon which a rate of 14 cents per tie was charged, aggregating $3,303.30; from November 6 to 11, 1905, complainant shipped 5 cars