Page:Harvard Law Review Volume 32.djvu/573

537 VALUE OF THE SERVICE AS A FACTOR IN RATE MAKING 537 classification, though the long minority opinion of Mr. Justice Brewer contains abundant dicta to that effect. The court had no opportunity, if it had the inclination, to decide such a thing, and the majority did not intimate that it had any such inclination. On the other hand, two decisions of the United States Supreme Court involve, though they do not express, both the constitu- tional proposition that the state may reduce to cost rates which exceed it, even if the value of the service be higher, and the com- mon-law proposition that rates which exceed cost are unreason- able and should be reduced, even if the value of the service be higher. In Central Yellow Pine Association v. Illinois Central Railroad,^^ and Tift v. Soutliern Railway ^^^ the Interstate Commerce Commission held that the increased prosperity of the lumber business did not justify increases in rates which were already remunerative, and ordered the carriers to reduce their rates. In the Tift case, the commission said: " It is clear that, if a rate on an article of trafl&c is already renumera- tive, the increased prosperity of the business of manufacturing that article is no ground for an advance of the. rate. The claim to the con- trary on the part of the carriers is based upon the erroneous assumption, so prevalent among traflSc managers, that a rate may be made as high as 'the traflSc will bear' . . . 'The test of the reasonableness of a rate is not the amount of the profit in the business of a shipper or manufac- turer, but whether the rate yields a reasonable compensation for the services rendered. If the prosperity of the manufacturer is to have a controlling influence, this would justify a higher rate on the traffic of the prosperous manufacturer than on that of one less prosperous. The right to participate in the prosperity of a shipper by raising rates is simply a license to the carrier to appropriate that prosperity, or in other words, to transfer the shipper's legitimate profit in his business from the shipper to the carrier.'" ^^ Both of these cases were followed by proceedings in the United States courts, and ultimately in the Supreme Court, in which the commission's orders were sustained and the roads were required to obey them. In the Tift case,'^ the Circuit Coxwrt pointed out that the antecedent rates were conceded to be remunerative, and that the roads were prosperous, and declared that the roads had 6« 10 I. C. C. 50s (1905). •9 Ibid., 548. 70 liid^^ 54g^ 582. " Tift V. Southern Railway, 138 Fed. 753, 763 (1905).