Nashville St. Railway v. Tennessee/Opinion of the Court
Section 22 of the Act to Regulate Commerce, as amended by Act of March 2, 1889, c. 382, § 9, 25 Stat. 855, 862 (Comp. St. § 8595), provides, among other things:

'That nothing in this act shall prevent the carriage, storage      or handling of property free or at reduced rates for the      United States, state, or municipal governments, or for      charitable purposes, or to or from fairs and expositions for      exhibition thereat. * * *' 

Whether this section should be construed as denying to the Interstate Commerce Commission power to prohibit such reduced rates, even where they result in unjust discrimination or in undue prejudice to interstate commerce is the main question for decision.

On July 29, 1920, the Interstate Commerce Commission authorized a general increase, throughout Southern territory, of 25 per cent. in interstate freight rates. Ex parte 74, Increased Rates, 1920, 58 Interst. Com. Com'n R. 220. Thereafter the Railroad and Public Utilities Commission of Tennessee authorized, for that state, a like increase of intrastate rates. But the following articles (among others) were excluded from this increase: Carload shipments of stone and gravel when for use in building public highways and consigned to federal, state, county, and municipal authorities or their bona fide agents. To remove the exception, carrier applied to the Interstate Commerce Commission, claiming that the exception produced illegal discrimination against interstate commerce and an undue prejudice to persons and localities engaged in such commerce. The Commission found such discrimination; and ordered that the intrastate rates on these commodities, also, be increased to the level of the interstate rates. Tennessee Rates and Charges, 63 Interst. Com. Com'n R. 160, 172. On October 21, 1921, the state of Tennessee and its commission brought, in the federal court for the Middle District of Tennessee, this suit against the United States to have the order set aside. The Interstate Commerce Commission, the Nashville, Chattanooga   St. Louis Railway, and two other interstate carriers intervened as defendants. The case was heard by three judges under the Act of October 22, 1913, c. 32, 38 Stat. 220 (Comp. St. § 998). A final decree was entered, declaring the order void, and enjoining its enforcement. 284 Fed. 371. The case is here on two appeals. No. 396 is that of the carriers; No. 429, that of the United States and the Interstate Commerce Commission.

Railroad Commission of Wisconsin v. Chicago, Burlington & Quincy R. R. Co., 257 U.S. 563, 42 Sup. Ct. 232, 22 A. L. R. 1086, 66 L. Ed. 371, had been decided by this court before entry of the judgment appealed from. But the District Court considered that case inapplicable, and held that, by reason of section 22, the Interstate Commerce Commission is 'without jurisdiction to forbid the railroads from carrying freight for the public at a less price than it charges individuals for the same carriage of the same freight'; that the section 'excludes this particular traffic from the rate structure which the Commission is authorized to erect and control; in still other words, there is freedom of discrimination.'

The argument is, in substance, this: An order of the Interstate Commerce Commission, increasing intrastate rates to the level of interstate rates, must rest upon a finding of illegal preference resulting from the relation of intrastate to interstate rates. Preference to governmental shippers is expressly permitted by section 22 of the act. Hence a grant of such preference cannot be held to be unjust or unreasonable under sections 2 and 3 (Comp. St. §§ 8564, 8565). There was no finding that these lower intrastate rates resulted in failure of the intrastate traffic to yield its proper share of the earnings of the carriers. Consequently the order of the Commission is void.  The argument is, in our opinion, unsound.

Every rate which gives preference or advantage to certain persons, commodities, localities or traffic is discriminatory; for such preference prevents absolute equality of treatment among all shippers or all travelers. But discrimination is not necessarily unlawful. The Act to Regulate Commerce prohibits (by sections 2 and 3) only that discrimination which is unreasonable, undue, or unjust. Texas & Pacific Ry. Co. v. Interstate Commerce Commission, 162 U.S. 197, 219, 220, 16 Sup. Ct. 666, 40 L. Ed. 940; Manufacturers Railroad Co. v. United States, 246 U.S. 457, 481, 38 Sup. Ct. 383, 62 L. Ed. 831. Whether a preference or discrimination is undue, unreasonable, or unjust is ordinarily left to the Commission for decision; and the determination is to be made, as a question of fact, on the matters proved in the particular case. Interstate Commerce Commission v. Alabama Midland Ry. Co., 168 U.S. 144, 170, 18 Sup. Ct. 45, 42 L. Ed. 414. The Commission may conclude that the preference given is not unreasonable, undue or unjust, since it does not, in fact, result in any prejudice or disadvantage to any other person, locality, commodity, or class of traffic. On the other hand, preferential treatment of a class, ordinarily harmless, may become undue, because, under the special circumstances, it results in prejudice, or disadvantage to some other person, commodity, or locality, or to interstate commerce.

Section 22 must in this matter, as in others, be read in connection with the rest of the act, and be interpreted with due regard to its manifest purpose. Robinson v. Baltimore & Ohio R. Co., 222 U.S. 506, 511, 32 Sup. Ct. 114, 56 L. Ed. 288.  Congress did not intend, by this provision concerning reduced rates and free transportation, to create an instrument, by which the carrier was authorized, in its discretion, to subject interstate commerce to undue prejudice, or by which the state was empowered to compel the carriers so to do. The object of the section was to settle, beyond doubt, that the preferential treatment of certain classes of shippers and travelers, in the matters therein recited is not necessarily prohibited. And in this respect its provisions are illustrative, not exclusive. It limits, or defines, the requirement of equality in treatment which is imposed in other sections of the act. By so doing, it preserves the right of the carrier theretofore enjoyed of granting, in its discretion, preferential treatment to particular classes in certain cases. Only in this sense can it be said that the section is permissive. It confers no right upon any shipper or traveler. Nor does it confer any new right upon the carrier.

The grant of a lower rate on road material to a government, engaged in highway construction, may benefit the government without subjecting to prejudice any person, locality of class of traffic. But a lower rate may result in giving to a single quarry within the state all of the governmental business, so that competing quarries and localities within or without the state, or interstate traffic, would be prejudiced. That such undue discrimination does, and will, result from the order of the Tennessee Commission was expressly found by the Interstate Commerce Commission. Its findings are necessarily conclusive, since the evidence on which it acted was not introduced in this suit. Louisiana & Pine Bluff Railway Co. v. United States, 257 U.S. 114, 42 Sup. Ct. 25, 66 L. Ed. 156.

There is nothing in Interstate Commerce Commission v. Baltimore & Ohio R. R. Co., 145 U.S. 263, 278, 12 Sup. Ct. 844, 36 L. Ed. 699, Lake Shore & Michigan Southern Ry. Co. v. Smith, 173 U.S. 684, 19 Sup. Ct. 565, 43 L. Ed. 858, or Pennsylvania R. R. Co. v. Towers, 245 U.S. 6, 38 Sup. Ct. 2, 62 L. Ed. 117, L. R. A. 1918C, 475, inconsistent with the views expressed above. The decisions made by the Interstate Commerce Commission are in substantial harmoney with them. 

Reversed.

Mr. Justice SANFORD took no part in the consideration or decision of these cases. 

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