Dixie Carriers v. United States/Opinion of the Court

Sulphur mined near Galveston, Texas, can be shipped to Danville, Illinois, either by rail or by barge and rail. If the sulphur goes by barge and rail, it is transported up the Mississippi via New Orleans to East St. Louis and then by rail to Danville. The total charge for that movement is $9.77 per ton. The total of the various local rates for all-rail shipments from the mines to Danville is $11.68. But the railroads have established a joint all-rail rate of $9.184 which is lower than both the combination all-rail rate and the combination rail-barge rate.

Appellants, who are water carriers, requested the competing railroads to establish a joint rail-barge rate of $7.67 on sulphur from Galveston to Danville. The railroads refused. Appellants thereupon filed a complaint with the Interstate Commerce Commission alleging that the existing rail-barge rates on sulphur were excessive and unreasonable, that through rail-barge routes and joint rates with reasonable differentials below the all-rail rates should be established, and that the refusal of the railroads to establish such joint rates discriminated against the barges as connecting carriers in violation of the Interstate Commerce Act, as amended by the Transportation Act of 1940. Appellants requested the Commission to establish a through rail-barge route and a joint rate and suggested that the joint rate be fixed at $7.67. Appellants proposed that the Danville railroads receive $2.26 as a division of that rate, calculated to be the same as they receive from the all-rail rate from Galveston to Danville. Under the proposed rate, the cost of rail-barge shipments from the mines to Danville would be $9.17 as compared with the all-rail rate of $9.184.

A Division of the Commission dismissed the complaint, one Commissioner dissenting. 287 I.C.C. 403. The Commission affirmed the Division, three Commissioners dissenting. 291 I.C.C. 422. A three-judge District Court sustained the Commission. 129 F.Supp. 28. The case is here on appeal, 28 U.S.C. §§ 1253, 2101(b), 2325, 28 U.S.C.A. §§ 1253, 2101(b), 2325.

Section 3(4) of the Act provides that 'All carriers subject to the provisions of this part * *  * shall not discriminate in their rates, fares, and charges between connecting lines *  *  * .' Section 3(4) defines 'connecting line' as including 'any common carrier by water subject to Part III.' Appellants are common carriers by water within that definition. They maintain that it is unlawful under § 3(4) of the Act for a railroad to refuse to join in through routes and joint rates with a water carrier when it has already joined in such routes and rates with a connecting rail line. They further maintain that the power of the Commission under § 307(d) to establish through routes and joint rates should have been exercised here.

We had a closely related question before us in Interstate Commerce Commission v. Mechling, 330 U.S. 567, 67 S.Ct. 894, 91 L.Ed. 1102. In that case we invalidated an order of the Commission which approved higher rail rates for the transportation of grain east of Chicago if it had arrived in Chicago by barge, rather than by rail. We reviewed the history of the Transportation Act of 1940 and concluded that that Act 'unequivocally required the Commission to fix rates which would preserve for shippers the inherent advantages of barge transportation: lower cost of equipment, operation, and therefore service.' Id., 330 U.S. at page 575, 67 S.Ct. at page 898. We held that the discrimination which was outlawed applied to through rates as well as to ordinary rates.

The Mechling case involved an attempt to deprive water transportation of one of its 'inherent advantages,' as that phrase is used in the preamble of the 1940 Act, 49 U.S.C.A. note preceding section 1, by increasing the cost of barge service. The Commission's present decision achieves the same result through the device of a joint rate allowed carriers by rail but denied carriers by water. It was recognized in the debates on the bill that became the Transportation Act of 1940 that manipulation of rail rates downward might deprive water carriers of their 'inherent advantages' and therefore violate the Act. It was emphasized that one of the evils to be remedied was cutthroat competition, whereby strong rail carriers would reduce their rates, putting water carriers out of business. There was recognition that for shippers to get the benefit of the 'inherent advantages' of water transportation there frequently would have to be joint rail-barge rates. Barge transportation frequently covers only one segment of the journey to market. The failure of the railroads to establish nondiscriminatory joint rates with barges might, therefore, seriously impair the development of barge service as a vital component of our national transportation system. Section 3 outlaws discrimination in all its forms. See State of New York v. United States, 331 U.S. 284, 296, 67 S.Ct. 1207, 1213, 91 L.Ed. 1492. Where there is discrimination by the use of a joint rate to favor rail carriers over carriers by water and to deprive the latter of their 'inherent advantages,' the Commission has a duty to end it under § 307(d). That subsection makes it mandatory for the Commission to establish through routes and joint rates 'whenever deemed by it to be necessary or desirable in the public interest.' The public interest, as defined in the Act, is the guide to the Commission's action. McLean Trucking Co. v. United States, 321 U.S. 67, 82, 64 S.Ct. 370, 378, 88 L.Ed. 544. The policy is to preserve all the 'inherent advantages' of the water carriers. That means that a joint barge-rail rate must be established when it appears, as here, that a joint rail rate discriminates against the water carriers. Otherwise a manipulated rate structure will take the business from the water carriers. In absence of the joint all-rail rate, the rail-barge combination rate for sulphur would be $1.91 per ton less than the all-rail combination rate between the same points. That differential reflects the lower cost of the barge segment of the journey. It is at once lost to shippers when joint rates are allowed rail carriers and withheld from the water carriers. To hold otherwise would be to sanction a rate structure which, through the use of discriminatory joint rates, denies shippers the 'inherent advantages' of water transportation.

Reversed.