VALUE OF THE SERVICE AS A FACTOR IN RATE MAKING 527 Cary v. Eureka Springs Railway Co.,'^^ decided by the In- terstate Commerce Commission in 1897, is relied on by Mr. Wyman ^^ for the proposition that rates may be so high as to be "unreasonable in themselves," although the company is "earning no more than a fair return." In that case two roads were in- volved. The Eureka Springs Railway Company had for many years earned an average profit far in excess of six per cent on its investment, besides accumulating a large surplus. Its earnings during the two years preceding the suit did not exceed six per cent; but the commission considered that the falling off in those years (1895 and 1896) could "only be deemed casual and tem- porary," as it was due to "temporary financial contingencies arising from exceptional causes," and that the "additional earn- ings" of previous years were "amply sufficient" to meet such contingencies. The commission further found that the "decrease in the earnings . . . was largely in the passenger traffic" (the rates charged for which the commission did not reduce), and that "more moderate rates will hardly fail to induce travel and in- crease the volume of freight as well as passenger business." In other words, it was found not merely that the existing freight rates — which the commission lowered — were high as compared with rates elsewhere, but also that, taking one year with an- oth*er, the existing rates were giving the company an excessive return, and that the prescribed reduction would not reduce the company's returns below a reasonable point. The rates were also found to be discriminatory as between localities, and this was an additional ground for lowering them. Of the other railroad in- volved, the commission said: "Nor is there anything in the facts ascertained, to justify the belief that under ordinary industrial conditions, the net earnings of this com- pany are not, and with the moderate reduction proposed will not be, sufficiently and amply remunerative." The case, then, fixed no rates which were not expected to produce a reasonable return on the value of the property involved. It there- fore completely fails to support the theory that unremunerative rates may be fixed in order that the value of the service may not be exceeded. « 7 I. C. C. 286, 316-18 (1897).
- Bruce Wyman, 2 ed., Beale and Wyman, Railroad Rate Regulation, § 445.
