The general constitutional power of the States to regulate the rates of public service corporations, including railway and other transportation corporations, whether of domestic or foreign incorporation, as well as of industries affected by a public interest is well established. The only federal limitations upon this power are: those of the Fourteenth Amendment requiring the equal protection of the laws and that the rates thus fixed shall not be so unreasonable as to amount to a taking of property without due process of law; and that under the guise of an attempt at the regulation of domestic services interstate commerce shall not be un-duly affected. That to a certain extent the regulation of domestic railway rates should affect interstate service has been recognized by the courts as unavoidable, but, so long as this interference is not too pronounced or serious, the laws have not been held thereby unconstitutional and void.42

41 See also Sherlock v."Ailing, 3 Otto, 99: 23 L. ed. 819; Missouri R. R. Co. v. Larabee Flour Co., 211 U. S. 612; 29 Sup. Ct. Rep. 214; 53 L. ed. 352; McNeill v. Southern R. R. Co., 202 U. S. 543; 26 Sup. Ct. Rep. 722; 50 L. ed. 1142; Chicago R. R. Co. v. Solan, 169 U. S. 133; 18 Sup. Ct. Rep. 289; 42 L. ed. 688; Lake Shore R. R. Co. v. Ohio, 173 U. S. 285; 19 Sup. Ct. Rep. 465; 43 L. ed. 702. Cf. Columbia Law Review, IX, 375, article by E. Parmalee Prentice, "Federal Common Law and Interstate Commerce."

42 There are eminent jurists who, however, hold that the Supreme Court has been too extreme and, indeed, illogical, in the degree in which it has permitted the States, in the regulation of domestic railway rates, substantially to affect interstate rates. Certain it is that under the pressure of increased need, there is the way opened for the federal courts, when they desire to do so, greatly to limit, by a stricter construction of state laws, the powers at present enjoyed and exercised by the States in the regulation of domestic railway rates. Judge Amidon in an address before the American Bar Association, delivered in 1907, has excellently expressed this point of view. He says: "Whenever a State prescribes a schedule of rates for local business, it thereby directly and necessarily regulates interstate business as well. There can be no sudden lifts and falls at state lines. They have no relation whatever to the cost of service, and can afford no justification for discrimination in rates. As the result of the schedule of rates prescribed by the State of Minnesota during the past winter, the rates on the western side of an invisible line were from twenty-five to fifty per cent. higher than those on the eastern side. The railroads could not maintain both these rates without discriminating against North Dakota points in a manner which would constitute a gross violation of that portion of the interstate commerce act which forbids discrimination against any locality. The necessary result of the enforcement of the local rates was to compel a reduction of all through rates. This the Supreme Court has decided is such a direct interference with interstate commerce as to render the action of the state void. But further, if one State may prescribe a schedule of rates, all States may, and the inevitable result of such a practice is to place the whole body of interstate commerce under the actual domination of state laws. In that way the authority which extends to only fifteen per cent, of the business, regulates the entire business. The necessary consequence is that either the nation must take control of railroad transportation within the States or the States will take control of such transportation among the States. We deceive ourselves by a mere form of words when we speak of the separate regulation of local business by the State and through business by the nation. The State cannot formulate and enforce any schedule of rates which will not necessarily and directly regulate interstate rates; neither can the

In a series of oases beginning with Munn v. Illinois43 the court conceded to the States the constitutional power to fix rates of public service corporations with reference not only to purely domestic business, but to the portions of interstate services performed within the State.44 But in Wabash, St. L. & P. R. Co. v. Illinois45 a quite different doctrine is declared, the court holding that the state laws fixing railway rates cannot be applied to any part of an interstate transportation. The court say: "If the Illinois statute could be construed to apply exclusively to contracts for carriage which begins and ends within the State, disconnected from a continuous transportation through or into other States, there does not seem to be any difficulty in holding it to be valid." But this, the court held, was not the limited effect of the statute, and, after reviewing the earlier cases, the court declare: "We must therefore hold that it is not, and never has been, the deliberate opinion of a majority of this court that a statute of a State which attempts to regulate the fares and charges of railway companies within its limits, for a transportation which constitutes a part of commerce among the States, is a valid law."

In Covington & Cincinnati Bridge Co. v. Kentucky46 the question is again carefully examined, and the doctrine of the Wabash case affirmed. "To that doctrine," the court declare," we still adhere." In this bridge case it was held that a State is without the power to regulate tolls upon a bridge connecting the State with another State.

In still further limitation of the power of the States to regulate domestic rates of public service corporations, is the doctrine nation formulate and enforce any schedule of interstate rates which will not necessarily and directly change local rates. The truth is that governmental regulation of rates is not a regulation of commerce, but of the railroads as an instrument of commerce, and when the nation and the State both prescribe to a railroad a schedule of rates, they are both regulating the same thing. This gives rise to a conflict of authority which Marshall declared in Gibbons v. Ogden ought never to be permitted to occur."

43 94 U. S. 113; 24 L, ed 77.

44 C. B. & Q. R. Co. v. Iowa, 94 U. S. 155; 24 L. ed. 94; Peik v. C. & N. W. R. Co., 94 U. S. 164; 24 L. ed. 97.

45 118 U. S. 557; 7 Sup. Ct. Rep. 4; 30 L. ed. 244.

46 154 U. S. 204; 14 Sup. Ct. Rep. 1087; 38 L. ed. 962.

that a State, in determining whether a proposed rate will leave a reasonable net profit to the company, may not take into consideration the entire business of the company if some of that business is interstate in character. In Smyth v. Ames47 the justice says: "In my judgment it must be held that the reasonableness or unreasonableness of rates prescribed by a State for the transportation of persons and property wholly within its limits must be determined without reference to the interstate business done by the carrier, or to the profits derived from it. The State cannot justify unreasonably low rates for domestic transportation, considered alone, upon the ground that the carrier is earning large profits on its interstate business, over which, so far as rates are concerned, the State has no control. Nor can the carrier justify unreasonably high rates on domestic business upon the ground that it will be able only in that way to meet losses on its interstate business. So far as rates of transportation are concerned, domestic business should not be made to bear the losses on interstate business, nor the latter the losses on domestic business. It is only rates for the transportation of persons and property between points within the State that the State can prescribe; and when it undertakes to prescribe rates not to be exceeded by the carrier it must do so with reference exclusively to what is just and reasonable, as between the carrier and the public, in respect of domestic business. The argument that a railroad line is an entirety; that its income goes into, and its expenses are provided for, out of a common fund; and that its capitalization is on its entire line, within and without the State, - can have no application where the State is without authority over rates on the entire line, and can only deal with local rates, and make such regulations as are necessary to give just compensation on local business."

It is established that the fact that a railway company is organized under a federal charter does not exempt it from the same regulative control by the States as that to which state chartered companies are subject. This doctrine is stated in Reagan v. Trust Co.,48 the court pointing out that it is to be presumed that Congress will expressly provide for those cases in which the interest of the nation, and the discharge of federal duties, if any are imposed, require the exemption of the road from state control.

47 169 U. S. 466; 18 Sup. Ct. Rep. 418; 42 L. ed. 819. 48 154 U. S. 418; 14 Sup. Ct, Rep. 1062; 38 L. ed. 1030.

In Smyth v. Ames49 this principle is approved, in that case the court holding that even the express reservation by Congress of the authority to reduce rates of fare when found unreasonably high, and to fix rates and establish them by law whenever the net earnings of the road, ascertained upon a named basis, should exceed a certain amount, was not to be taken as evidence that Congress, when not itself acting, desired to exempt the road from state regulation as to charges for transportation begun and completed within the State. "It ought not to be supposed," the court say, "that Congress intended, that, so long as it forbore to establish rates on the Union Pacific Railroad, the corporation itself could fix such rates for transportation as it saw proper, independently of the rights of the States through which the road was constructed to prescribe regulations for transportation beginning and ending within their respective limits. . . . Congress not having exerted this power, we do not think that the national character of the corporation constructing the Union Pacific Railroad stands in the way of a State prescribing rates for transporting property on that road wholly between points within its territory."