Alabama, Atlanta & West Point Railroad Company, Seaboard Air Line Railway, and Atlantic Coast Line Railroad Company.

REPORT OF THE COMMISSION.

PROUTY, Commissioner:

The original petition in this case was filed December 9, 1903. A large amount of testimony was taken during 1904 and 1905, and the case was finally submitted on brief August 14, 1906. Under the rulings of the Commission no order could be made upon the record thus presented after August 28, 1906, without opportunity to all parties for further hearing. August 21, 1907, the complainant filed a petition asking that the case be reopened and further proceeded with. This petition was granted and the case was further heard November 12, 1907, all the parties being represented by counsel. No party desired to introduce additional testimony, and the case was therefore submitted upon oral argument and now stands for disposition.

Most mills in the States of South Carolina, Georgia, and Alabama weave cotton cloth from yarns which have not been dyed. The gray cloths produced at these mills are subsequently treated at bleacheries or dye works, sometimes being whitened and perhaps stiffened, and sometimes colored by dyeing. This process, which is called converting, is seldom, if ever, performed at the mill where the goods are woven. It would appear that these cotton piece goods are generally handled from the mill by commission houses and that these houses are often interested in the bleacheries or dye works at which the process of converting is carried on. The complainant in the present case is a Kentucky corporation, whose stock is controlled by the large commission firm of Putnam-Hooker Company, for many years located at Cincinnati, Ohio.

The complainant operates dye works for the treating and coloring of these cotton fabrics. Our understanding is that these works are located at Covington, Ky., but the base of its operations has been continually spoken of in this hearing as Cincinnati, and since the rates to Covington and Cincinnati are the same, we shall in this report treat its location as Cincinnati. The complaint is that freight rates are so adjusted as to discriminate against the works of the complainant in comparison with certain similar establishments at Clearwater, S. C., and Lanette, Ala. The claim of the complainant will be best understood by one or two practical illustrations.

The rate on cotton piece goods from all points in Georgia and Alabama to Chicago is 55 cents per 100 pounds, to Cincinnati 49 cents. From South Carolina mills the rate to Chicago is 65 cents, to Cincinnati 59 cents. The local rate from Cincinnati to Chicago is 25 cents per 100 pounds.

These fabrics, which are produced in the South, are very largely sold for shipment to points north of the Ohio River, of which Chicago is much the largest consumer and may be taken as typical of the whole. While Clearwater is actually in the State of South Carolina, it is just across the river from Augusta, Ga., and takes, along with some other mills in that immediate vicinity, the Georgia rate on cotton fabrics. The Southern Railway establishes a rate of 17 cents per 100 pounds from all South Carolina mill points to Clearwater upon cotton piece goods.

If we take, now, some point in South Carolina, the combination I would be as follows:

This gives Clearwater an advantage in the rate of 12 cents per 100 pounds.

It was said that from many points the rate to Lanette was 8 cents per 100 pounds. Taking such a point, the following combination results:

This shows an advantage in favor of Lanette of 11 cents per 100 pounds.

It is evident that from points where the rate to Lanette or Clearwater is as given above the transportation advantage is against the complainant, as claimed by it.

The reason for this is found in the fact that the through rate from the southern mill to Chicago is less than the combination upon the Ohio River. Ordinarily rates from points in the South to destinations north of the Ohio River are determined by adding together the rate to the River and the rate from the River. If the Chicago rate on cotton piece goods were constructed in this manner, it would be from Georgia and Alabama to Chicago 74 cents instead of 55, and from South Carolina 84 instead of 65.

Upon further examination we are told that in case of cotton piece goods the through rate is established by naming a base rate to the Ohio River, which is 35 cents from Georgia and Alabama and 45 cents from South Carolina. It also appears that the rate from the Ohio River is shrunk 5 cents by the northern lines, being 25 cents when the shipment is local, 20 when it is through. The line leading up to the Ohio River receives 35 cents for its through haul and the line from the Ohio River 20 cents, while on local business the line to the River receives 49 cents and that from the River 25 cents.

It has been said that ordinarily rates from points in the South to destinations in the Middle West are constructed by the combination upon the Ohio River, but to this rule there are many exceptions besides cotton piece goods. In no other case, however, which was called to our attention is the difference between the local rate and the base rate from the southern point to the River as wide as 14 cents.

The complainant points out that this wide discrimination between the rate to Cincinnati for beyond and to that same point for local consumption is what creates the prejudice against it, and asks the Commission to reduce that disparity. The defendants reply that these rates from the South to Chicago and Cincinnati on cotton piece goods are forced by competition, and that, therefore, while the discrimination may exist it is not undue.

It is well known that the manufacture of cotton piece goods was originally confined almost entirely to New England and the East. Gradually this industry developed in the South, and to-day the production there is fully equal to that in the North. The product of these southern spindles could be sold, to some extent, in the South, but the principal prospective market lay in the great and populous Middle West, and when these southern mills began their struggle for existence they appealed to the railroads leading from the South into that territory for a rate which would put them upon an equality with New England. This claim of the southern weaver was recognized by the railroad, and rates to Chicago, which was the largest consuming point, were made the same from a large section of the South that they were from New England. The rate to-day from New England mills to Chicago is 55 cents, and from southern mills in Georgia and Alabama the same.

The complainant insists that while the carriers may labor under the impression that this so-called competition exists, that impression is an erroneous one, for the reason that the character of the goods manufactured in the South and in New England is so utterly dissimilar that they do not come into competition at all. He states, in substance, that the fine goods are made in New England, the coarser grades in the South, and that while the product of New England mills may compete with that of southern mills in the West in some

few instances, that competition is not sufficient to justify the adjustment of rates in effect.

The principal witness who testified upon this point has enjoyed long experience with this cotton industry, has seen the mills of the South develop, and is thoroughly familiar with the character of the production of those mills as well as the mills in New England. It is quite probable that what he says is, in the main, true to-day. Originally it was not true, for all cotton fabrics were made in the North, and in the beginning there must have been direct competition between the cotton factory in the South and that in the North. It is only after a struggle of years that the cotton mills of the South have demonstrated their ability to manufacture for the market in the Middle West cotton piece goods of a certain kind more advantageously than they can be made at New England mills. In establishing this fact it is quite probable that the low freight rates which southern lines established have been necessary, and it is further probable that a continuation of these rates may reasonably be demanded by southern mills in holding that business. There must always be competition between New England and the South, for either section is always ready and willing to invade the territory of the other when it can do so to advantage.

That this Chicago rate is competitive is shown by comparing it with class rates. Cotton piece goods take the regular class rate from New England points to Chicago. In Southern Classification cotton piece goods are fourth class, and this class rate from Atlanta to Chicago is 97 cents. Here, therefore, competition has produced a shrinkage of 42 cents per 100 pounds from the regular class rates.

This through rate from southern mills to Chicago has been demanded by southern factories as necessary to meet New England competition. It has been conceded by the railways carrying this traffic as necessary for that purpose. Southern mill owners still make the same demand and these railways still grant the same concession. Under these circumstances we must find that this rate is in fact a competitive rate, and we can not find that it is materially lower than competitive conditions fairly require.

The defendants claim that the rate to Cincinnati from southern mills is also competitive with that from New England. Rates on cotton piece goods from New England points to various Ohio River crossings and East St. Louis are as follows:

From southern points the rates are the same, 49 cents, to all Ohio River crossings, being 1 cent higher to East St. Louis. It will be seen, therefore, that the southern mill has a very substantial advantage at these points over the eastern mill, except at Cincinnati.

Cincinnati is an important point for the distribution of cotton piece goods; its location is such that the same competitive conditions might well exist there as at Chicago. The class rate which would carry cotton piece goods under the Southern Classification is 68 cents from Atlanta to Cincinnati, showing a concession of 19 cents to this commodity from the regular rate. It would seem probable that the same conditions which require substantially the same rate from New England and the South to Chicago would obtain at Cincinnati.

The disparity between the rate to the Ohio River for local consumption and that for beyond is wider than it should be in the absence of some justifying reason, but we are constrained to hold that this relation is justified by the competitive stress under which these rates from the South have been made. This being so, we do not think that these railroads ought to be required to disturb this relation for the simple purpose of removing discrimination against the business of this complainant. Such discrimination would not be, under all the circumstances, undue. It would be unreasonable to require these defendants to reduce all their rates to the Ohio River simply that the complainant may locate its dye works at Cincinnati rather than at some point north of the river to which a through rate applies or at some point south of the river from which a through rate is in effect. We hold, therefore, that the disparity in rates against which this complaint is directed is not unlawful.

The complainant also urges that this same discrimination in rate results from the making of unduly low rates by the defendants from mills in the South to the southern dye works at Clearwater and Lanette. In determining whether the complainant does business upon a corresponding freight charge with its competitor the rate from the mill to the southern plant and thence to Chicago must be compared with the rate from the mill to the plant of the complainant and thence to Chicago.

The complainant alleges that the defendants, or some of them, who participate in these through rates to Chicago and to the Ohio River have made unduly low local rates from the producing mill to the southern dyeing establishment. That one upon which the complainant seems to dwell more than any other is a rate of 17 cents per 100 pounds from South Carolina mills to Clearwater. Clearwater is situated in the State of South Carolina, although it takes the rate applicable to Georgia points, and since these low rates from the mills to