1849 1859 1869 1879 1889 1899 1909 1919 1929 1939 10 fully occupied workers in manufacturing in Official Territory decreased from 70.5 per cent to 69.4 per cent of the nation's total, while in the South there was an increase from 10 per cent to 11.9 per cent. A number of manufacturing activities have increased more rapidly in the South than in Official Territory, though the reverse has been true in other industries. But in spite of the growth in industrial activities in the South and West (which ap 284 Opinion of the Court. pellants stress heavily), the percentage comparisons are not particularly revealing because of the great disparity between the bases on which they are computed. The fact remains that economic development in the South and West has lagged and still lags behind Official Territory. In 1940 the average annual dollar income per person employed in Official Territory was $1,988; in Southern, $940; in Southwestern, $1,177; in Western Trunk-Line, $1,411. Official has 69 per cent of all workers engaged in manufacturing in the United States and 29 per cent of all workers in extractive industries. It has, for example, a high concentration in the manufacture of steel and copper products, though less than 4 per cent of the iron ore reserves, and no reserves of metallic copper. The South and West furnish raw materials to Official and buy finished products back. They are also dependent to a great extent on the markets for their products in Official, which has over 48 per cent of the population of the country, 76 per cent of the national market for industrial machinery and raw materials, 64 per cent for all goods and sources, 62 per cent for consumer luxuries, and 53 per cent for consumer necessities. Yet the South and West suffer rate handicaps when they seek to reach those markets.18 One of the many illustrations will suffice. Cottonseed oil is a basic agricultural commodity. Class rates on it are 18 The Commission stated, 262 I. C. C. pp. 695-696: "Although manufacturing has grown in the South and Southwest and to a lesser extent in western trunk-line territory in the last decade, it is still vastly less in diversification and amount than in official territory. The increases in manufacturing in these territories has created a demand for rates which will at once permit the free movement of the manufactured articles, but because of the level of the intraterri'torial and iterterritorial class rates, such free movement has been impeded insofar as such commodities move at class rates. In most instances it has been necessary either to reduce the class-rate levels or to establish exception or commodity rates in order that the manufactured products may move freely, and this action has frequently been 7 per cent higher from Southern to Official Territory than they are within Official Territory. If the cottonseed oil is manufactured into oleomargarine, the rates from Southern to Official Territory are 35 per cent higher than the rates within Official Territory. It is said in reply, however, that the disparities which we have mentioned reflect only natural advantages which justify differences in rates. The great concentration of population in the East is said to show that its more favorable rates are justified by the fact that it has many more people to support the roads. The unfavorable income comparisons with the East are thought to establish one of the handicaps under which the roads in the South and West operate. It is pointed out that the heavy preponderance of the nation's total natural resource of energy supply is located in Official Territory-40 to 45 per cent of the total bituminous and semi-bituminous coal supply, practically all of the anthracite resources; 60 per cent of all electric energy originates there. It is said that Official Territory is the logical location for industries which use metals from other territories, since it has the natural supplies of coal. It is also pointed out that the gross income from crops and livestock in Official Territory is the highest subject to long delays because of the failure of individual carriers or groups of carriers to agree upon a basis. "Official territory is the greatest consuming territory in the country, and is the market that nearly all manufacturers desire to reach, particularly where they have a surplus of their products to sell. In shipping to official territory, manufacturers in the other territories not only have the disadvantage of location, but are subjected to an additional burden in those instances where they must pay class rates on a much higher level than their competitors in official territory. This situation reacts to the disadvantage of manufacturers in the other territories, and to the advantage of those in official territory, tends to restrict the growth and expansion of the manufacturers in the other territories, and, to some extent, to prevent the establishment of new manufacturing plants in those territories." 284 Opinion of the Court. in the country, amounting to 31 per cent of the total. From these and comparable data it is argued that the lower rates in Official Territory reflect only inherent advantages which the other territories do not enjoy. It is, therefore, argued that what the Commission has sought to do is to equalize economic advantages, to enter the field of economic planning, and to arrange a rate structure designed to relocate industries, cause a redistribution of population, and in other ways to offset the natural advantages which one territory has over another. It is asserted that such a program is unlawful under Interstate Commerce Commission v. Diffenbaugh, 222 U. S. 42, 46, where the Court held that the Act, in its condemnation of discrimination, "does not attempt to equalize fortune, opportunities or abilities." And see United States v. Illinois Central R. Co., supra, p. 524; Texas & Pacific R. Co. v. United States, supra, pp. 637-638. We will revert to this matter when we come to consider whether territorial conditions justify the differences in rates. It is sufficient at this point to say that the record makes out a strong case for the inference that natural disadvantages alone are not responsible for the retarded development of the South and the West, that the discriminatory rate structure has also played a part. How much a part cannot be determined, for every effect is the result of many factors. But the inference of prejudice from the discriminatory rate structure is irresistible. If this discriminatory rate structure is not justified by territorial conditions, then its continued maintenance preserves not the natural advantages of one region but manmade trade barriers which have been imposed upon the country. Such a result cannot be reconciled with the great purposes of § 3 (1) as amended in 1940. Fifth. The Commission found that conditions peculiar to the respective territories did not justify the differences in the territorial class-rate structures. In reaching that 755552 0-48-24 conclusion it first inquired whether the differences in the costs of furnishing the railroad service in the several rate territories justified the existing differences in the levels and patterns of the class rate scales." The basis of its inquiry was a cost study submitted by its staff. For cost analysis purposes the United States is divided into areas roughly but not exactly approximating the classification territories. Thus there are three districts: Eastern, Southern and Western. Southern district is further divided into Pocahontas region and Southern region. Eastern district plus Pocahontas region is substantially the equivalent of Official territory.20 In the cost study, railroads were assigned to geographical areas; expenses for individual roads were divided into groups, each group being associated with appropriate service units which included revenue car-miles, revenue gross ton-miles, and cars originated and terminated; unit costs were then obtained by dividing the aggregate of the territorial expenses in each group by the applicable territorial units; the costs of particular services were then built up from the unit costs. Costs were put into two classes (1) out-of-pocket or variable expenses which vary directly with the kind of traffic handled; (2) constant or fixed costs not capable of assignment to particular kinds of traffic costs 21 which 19 In Northern Pacific R. Co. v. North Dakota, 236 U. S. 585, 597, the Court stated, "The outlays that exclusively pertain to a given class of traffic must be assigned to that class, and the other expenses must be fairly apportioned. It may be difficult to make such an apportionment, but when conclusions are based on cost the entire cost must be taken into account." 20 For description of exact boundaries, see 262 I. C. C. 605. For some cost purposes the United States is also divided into 11 cost territories, various combinations of which are equivalent to the rate territories. For definitions of these cost territories, and a collection of a substantial portion of the Commission's cost data, see S. Doc. No. 63, 78th Cong., 1st Sess. 21 The sum of the out-of-pocket costs plus a pro rata distribution of the constant or fixed costs is referred to as fully distributed cost. |