INVESTIGATION AND SUSPENSION DOCKET No. 3257

COMPRESSION AND CONCENTRATION IN TRANSIT OF COTTON AND COTTON LINTERS AT POINTS IN TEXAS

Submitted June 1, 1929. Decided August 13, 1929

Schedules proposing to cancel the right of shippers to designate Fabens, Tex., as a point of compression for their cotton and cotton linters originating in California, Arizona, and New Mexico, with absorption of the compress charge by respondents, found justified. Order of suspension vacated and proceeding discontinued.

J. R. Bell, G. H. Muckley, J. L. Stewart, Robert Thompson, and C. M. Spence for respondents.

Alonzo Bennett, Edward W. Bailey, Carl B. Callaway, and Albert L. Reed for Federal Compress & Warehouse Company, Union Compress & Warehouse Company, El Paso Compress & Fumigation Company, and Texas-Oklahoma Compress & Warehouse Association, interveners on behalf of respondents.

F. W. Greuling, R. F. Burges, and C. A. Martin for protestants.

REPORT OF THE COMMISSION

DIVISION 3, COMMISSIONERS AITCHISON, TAYLOR, AND PORTER BY DIVISION 3:

By schedules filed to become effective March 16, 1929, respondents proposed to cancel a tariff provision under which shippers are accorded the right to designate Fabens, Tex., as a point of compression for their cotton and cotton linters originating in California, Arizona, and New Mexico, when the compress charge is borne by respondents.

Upon protest of the Arizona Pima Cotton Growers' Association of Phoenix, Ariz., the Fabens Compress & Fumigation Company of Fabens, the Farmers Cotton Finance Corporation of El Paso, Tex., the Salt River Valley Traffic Association of Phoenix, and the American Cotton Growers Exchange of Memphis, Tenn., operation of the proposed schedules was suspended by us until October 16, 1929.

Respondent, Texas & Pacific, effective December 15, 1917, provided that cotton and cotton linters originating in California, Arizona, and New Mexico, delivered to it at junction points in Texas and consigned to interstate destinations beyond its rails, might be compressed in transit at any compress located on its line in the direct line of movement, and that the cost of compression would be assumed by it under

appropriately published joint rates. Effective March 9, 1922, on shipments from Arizona and New Mexico the shippers were authorized to designate the compress point under the foregoing provisions. As to cotton originating in Texas the exception to the general provision was made September 4, 1928.

Concentration of cotton and cotton linters originating in this territory has also for some time been authorized by the Texas & Pacific at various points on its line in Texas, including Fabens, 29 miles east of El Paso, at the direction of the shipper, with the provision that the cost of compression would be assumed by the carrier. The distinction as described in the record between compressed-in-transit cotton and concentrated-in-transit cotton is that the first moves on a through bill of lading from origin to destination, is in control of the carrier for the entire journey, and is compressed by the carrier in order to conserve its equipment and reduce its cost of operation, the cost of compression being borne by the carrier; whereas in the case of concentration in addition to the cotton being stopped for compression for account of the carrier it is also stopped in transit for account of the shipper and is delivered into possession of the shipper. The stop for compression and the stop for concentration in connection with concentrated cotton may or may not take place at the same point and at the same facility. When cotton is concentrated in transit by and for account of the shipper, it is usual also to compress in transit for account of the carrier, the cost of compression being paid by the carrier out of the freight rate.

On September 17, 1928, respondent Texas & New Orleans similarly provided that cotton and cotton linters originating at certain specified stations in Arizona and New Mexico, delivered to it at El Paso, could be compressed or concentrated at Fabens at the direction of the shipper, and the cost of compression would be assumed by the carrier. Respondents do not propose any change in the concentration arrangement at Fabens.

Cotton originating in the territory here considered when moving eastbound passes through El Paso, at which point is located a compress operated by the El Paso Compress & Fumigation Company, hereinafter termed the El Paso Company, a subsidiary of the Federal Compress & Warehouse Company of Memphis, Tenn. Compresses are also located at Fabens and for this cotton to reach Fabens it must necessarily pass the compress at El Paso, a practice not ordinarily permitted by carriers. Protestants urge that compression at Fabens at expense of the carrier should be retained. Under the existing arrangement cotton may be trucked to El Paso, and at the request of the shipper compressed at Fabens at carrier's expense notwithstanding the presence of a compress in El Paso.

The compress at El Paso began operations in September, 1924, and is one of a number of compresses owned and operated in this territory by the El Paso Company. The principal compress at Fabens, built by the Fabens Compress & Fumigation Company, hereinafter termed the Fabens compress, began operations in September, 1927, and about the same time the El Paso Company also erected a compress at Fabens. The latter company states that one of the reasons for the erection of its facilities at El Paso was to meet the requirements of the Department of Agriculture that a fumigating plant be erected in the territory affected by the pink bollworms.

Respondents, in justification of the proposed cancellation, rely partly on the general practice which obtains in the Southwest with respect to the compression of cotton. They point out that, except for the rules in the suspended schedules, their tariffs provide that they will have the cotton compressed at their expense at origin, in transit, or at destination in their discretion, and that if a shipment is moved past a compress point at the direction of the shipper, the cost of compression shall be assumed by the shipper and not by the carrier. Under these provisions it has been their practice to compress the cotton at point of origin or at the first compress in direct line of transit except where departures have come about by reason of the competition of other lines. The Texas & New Orleans asserts that the exception as to Fabens was published by it to meet the competition of the Texas & Pacific which had previously provided that cotton originating in this territory could be moved past compresses on its line so that it would be compressed at Fort Worth, Tex., in competition with the first compress on the Southern Pacific, then located at San Antonio, Tex. This exception was published by the Texas & Pacific prior to the establishment of the compress at El Paso, and is the one here under consideration.

Although the production of cotton has gradually increased in this territory since the erection of the compress at Fabens in 1927, and of compresses in 1925, at Tucson, Ariz., and at Las Cruces, N. Mex., the number of bales compressed at El Paso has diminished from 74,089 for the season of 1924-25 to 21,308 for the season of 1927-28, and to 15,707 for that part of the 1928-29 season ending March 22, 1929. The Fabens compress handled 22,683 bales during the 1927-28 season and 21,296 bales up to March 22 of the 1928-29 season. The El Paso Company states that the reduction in its business has left it with an unprofitable investment of a quarter million dollars.

Protestants declare that the facility at Tucson, which is owned and operated by the El Paso Company, is unsatisfactory, that there has been undue delay in forwarding the cotton when ordered to destination, and that no better service could reasonably be expected of that

company at El Paso if the competition of the Fabens compress were to be eliminated. In their opinion the El Paso Company practically monopolizes the compresses in this territory, and they fear that if the proposed schedules become effective shippers will be left entirely to the mercy of that company.

Respondents believe that this dissatisfaction relates primarily to the concentration of cotton, which would still be permitted at Fabens should the suspended schedules become effective. To this protestants reply that it is not desirable to compress first and concentrate afterwards and at a different point, that this entails a great deal of patching of the bale covering due to the necessary sampling, and that it is far more desirable to concentrate and compress at the same point, the latter service to be performed when the cotton is ordered forward to destination.

The Atchison, Topeka & Santa Fe permits cotton originating in New Mexico north of El Paso to move through Las Cruces to El Paso, although the former point is 43 miles nearer the origin territory. No charge is made for this service, provided reshipment is made over the Santa Fe. Cotton originating at points north of Mojave, Calif., of which Bakersfield, a compress point, is representative, may be transported to San Pedro or Wilmington, Calif., for compression, and reshipped to destinations east of El Paso. No extra charge is made for this out-of-line movement. A number of other instances are referred to where back hauls are allowed by carriers ranging from 14 miles to 173 miles, and protestants contend that this out-of-line or back-haul service is indistinguishable, from a transportation standpoint, from that here considered of only 29 miles.

The Arizona Pima Cotton Growers' Association, a cooperative marketing organization, receives an allowance of 50 cents per bale for all of its cotton compressed at the Fabens compress. This allowance, apparently representing a reduction or abatement of the charges for various transit services, such as fumigation, storage, etc., is said to be given in lieu of the commission usually paid a solicitor in the field of production, and accrues to the cotton producer. The same interests that own the Fabens compress also comprise the Farmers Cotton Finance Corporation, an organization which finances the cotton growers under contract by which the cotton produced is sold to the finance corporation. Interveners on behalf of respondents insist that it is the interest of this Finance Corporation in the Fabens compress which prompts it to urge the retention of the present tariff rules. In fact the secretary of the Finance Corporation testified that after the organization of that corporation, the Fabens compress was built for the purpose of handling its cotton and because of the unsatisfactory services which had been rendered by other compresses. In this con

nection, to the date of hearing, April 20, 1929, the Fabens compress handled during the present season 23,000 bales of cotton for customers other than the Finance Corporation and the Arizona Pima Cotton Growers' Association, approximately 15,000 bales having been handled for the former, and 7,000 bales for the latter, or a total of 45,000 bales. Inasmuch as but 6,000 bales had been handled by the Fabens compress for interests other than the foregoing organizations during the previous season, protestants insist that this substantial increase clearly indicates the need for the Fabens compress and the dissatisfaction on the part of shippers with the El Paso facilities.

On brief protestants argue that the present arrangements permit competition among the compresses, thus encouraging the free movement and efficient handling of cotton. They contend that if the suspended schedules should become effective section 3 of the interstate commerce act would be violated as the cotton grower in the Rio Grande Valley would still have his choice of competitive compresses, whereas the Arizona producer would be restricted to the use of the noncompetitive El Paso compress. They urge also that to permit the suspended schedules to become effective would be in violation of section 1 of the act as these schedules would authorize a penalty of 18 cents per 100 pounds for a haul of only 29 miles, and furthermore would be in contravention of the mandate contained in the Hoch-Smith resolution, whereas a continuance of the existing arrangements would result in substantial financial assistance to the farmers.

Respondents and interveners on their behalf maintain that as the carrier pays the cost of compression it has the legal right to select the agency which shall perform the service. If the suspended schedules become effective the rules which are uniform throughout the cotton-producing territory west of the Mississippi River will apply, the exceptions in all instances being at the discretion of the carrier. The arrangements now in effect permit unlawful practices as demonstrated by the allowances made by the Fabens compress. Finally it is respondents' view that it has not been proved that any injury, transportation or otherwise, will result to protestants and the shipping public if the suspended schedules go into effect, but rather that a real and substantial injury to the El Paso facility and to the carriers will follow if our decision should be unfavorable to them.

In Transfer in St. Louis and East St. Louis by Dray and Truck, 155 I. C. C. 129, decided May 13, 1929, it was found that the carriers were within their rights in selecting a single transfer company to perform off-track station service in St. Louis as their agent, even though a monopoly was created thereby. Here we have a situation which is analogous. The carriers publish joint rates in a certain