mountain points should not exceed the through rates by more than 15 per cent.; and that, on traffic from the section between the Buffalo-Pittsburgh district and the Atlantic seaboard (Zone 4), the rates to intermountain points should not exceed the rates through to the Pacific seaboard terminals by more than 25 per cent. These percentages indicate the commission's estimate of the influence of the Panama and Tehuantepec routes upon the transcontinental railroad rates before the opening of the Panama Canal. The transcontinental rates to and from the southeastern part of the United States (Zone 5) were not included in the percentage adjustment. The five zones are charted on Map 5.

(c) Another effect of the competition of the coastwise lines with the transcontinental railroads was the blanketing of westbound rates over the eastern half of the United States. The rates to the west coast on most commodities were the same from all points east of the Missouri River; i. e., the same rate prevailed from New York, Chicago, St. Louis and Kansas City to west coast points.

Both class rates and commodity rates westbound as well as eastbound are stated by lettered “rate groups" A to J, into which the eastern half of the United States is divided. Map 6 shows the area covered by the several rate groups. In the case of class rates, there is some grading of charges by rate groups on westbound traffic, and to a greater extent upon eastbound freight. However, most commodities shipped from the eastern half of the United States to the west coast pay the same rate

whether shipped from the Atlantic seaboard section or from the central West.1

The through route between the two seaboards via the Southern Pacific Railroad from the Pacific coast to Galveston and New Orleans and from those cities to New York by the Southern Pacific Company's steamers (the Morgan Line) was established in 1883. The Sunset-Gulf route immediately began an active warfare against its competitors by rail and by water lines, and secured a large share of the traffic from coast to coast. The transcontinental railroads, other than the Southern Pacific, ran from the Mississippi and Missouri rivers to the Pacific coast and were primarily interested in the development of traffic between the middle West and the Pacific coast. The rates by the Sunset-Gulf route from New York to San Francisco were made the same as the rates by the transcontinental lines from St. Louis and Missouri River crossings to the Pacific. Gradually the rates by the through all-rail lines from the Atlantic to the Pacific were made the same as the rates from Chicago, St. Louis and Missouri River crossings to the Pacific seaboard. This system of blanket rates was worked out by 1896, and has since prevailed on westbound traffic.2

1For a full explanation of transcontinental freight rates see Johnson and Huebner, Railroad Traffic and Rates, I. chap. χχίν (1911).

2 See Johnson, Panama Canal Traffic and Tolls, 52.

This policy of the Southern Pacific had much to do in bringing about the blanketing of westbound transcontinental rates. The other cause that brought about this system of blanketing rates was the insistence of manufacturers in Chicago, St. Louis, St. Paul and other central western points, as well as the demand of the railroads connecting the Mississippi Valley with the Pacific coast, that the middle West should be allowed to market its products on the west coast in even competition with manufacturers located at or near the Atlantic seaboard whose rates by rail to the Pacific coast were regulated by competition between the coastwise and rail lines.

Eastbound rates from west coast points to places on and east of the Missouri River were, in part, blanketed over the territory east of the Missouri River, but the system of blanketing the territory east of the Missouri River did not prevail so fully in eastbound as in westbound tariffs. Eastbound rates were, and still are, graded by zones, or by so-called "rate groups," as explained above, but in the case of fruit, lumber and other important commodities there is little grading of rates as between different parts of the territory east of the Missouri River.

Such was the system of transcontinental railroad rates at the time of the opening of the canal. Shortly before the canal route became available,

the Supreme Court had, as stated above, upheld the decisions of the Interstate Commerce Commission in the Intermountain Rate cases and the commission had issued an order establishing the percentage adjustment above described between the through rates to the west coast and the rates to intermediate intermountain points. Had that system of percentage adjustments remained unchanged, whatever effect the canal may have had upon through rates by rail between the two seaboards it would have had upon the rates to intermediate intermountain points which would have changed automatically with variations in the through rates. The Pacific railroads, supported by certain business interests in the middle West, were, however, desirous of securing authority to reduce rates by rail from the middle West to the Pacific coast without being obliged thereby to lower the charges to intermediate places in the Rocky Mountain territory; and the Interstate Commerce Commission was petitioned to permit the reduction of some through rates without making a change in the intermediate charges. In other words, the Interstate Commerce Commission was petitioned to modify its decisions in the Spokane and Reno cases; and, after hearings held in October, 1914, the Interstate Commerce Commission, in an opinion rendered January 29, 1915, permitted the railroads under certain limi