§ 414. “Give Preference.”

The object of this prohibition is to prevent federal favoritism and partiality. In commercial and other kindred regulations. As any law which gives a preference in contravention of this section will be unconstitutional, and therefore void, it becomes highly important to examine the meaning of the word.

A preference is a discrimination considered in relation to the person or State in whose favour such discrimination is. (See Note on “Preference or discrimination,” § 430, infra.) The prohibition here is absolute and without qualification. In the case of preferences by the States there is merely a power given to the Parliament to forbid such preferences as are undue and unreasonable, or unjust to any State; in the case of the Commonwealth, every preference whatever is forbidden by the Constitution itself, irrespective of injustice or unreasonableness.

A preference involves a departure from the standard of equality; but it is not always easy to determine what that standard is. Where, in any two cases that may be compared, there is exact similarity of all material circumstances, any departure from equality of treatment is easily detected. But exact similarity of circumstances seldom occurs; and in comparing dissimilar circumstances it must often be difficult to determine what constitutes inequality of treatment, i.e., a preference. Where the circumstances are dissimilar, a preference may arise either because the dissimilarity of treatment is excessive, or because the similarity of treatment is excessive. With regard to taxation, perhaps no serious difficulty is likely to arise; but with regard to charges for services, equal charges for different services may cause as great inequality as unequal charges for similar services. For instance if on a railway line there are three points, A, B, C, in that order, a rate for the long haul A C may be preferential by being lower than, or equal to, the rate for the short haul A B; or the rate for the short haul A B may be preferential by falling disproportionately short of the rate for the long haul A C.

The Constitution prescribes no definite test of equality under dissimilar circumstances. Cost of service will presumably be a main element; but if it were the only

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element, it would lead to the illegality of “group rates” on railways of the Commonwealth—i.e., equal rates from one point to all points within a “group” or “zone.” It would also be inapplicable to postage rates, where equality of charges—even where the cost of service varies largely—is almost essential, and where any attempt to proportion the charge to the cost of service is both impracticable and undesirable. It is submitted that in deciding what is and what is not a preference the following principles should be applied:—

(1.) The section should be construed in a broad and liberal manner, with especial reference to the evil which it is intended to prevent, viz., arbitrary discriminations between States or localities. The rule that no law of the Parliament will be held invalid unless it appears clearly to infringe the Constitution requires that only a plain and substantial preference should justify judicial interference.

(2.) In determining what constitutes equality of treatment, recognition should be given to the practical necessities of the case, and to all the sound administrative or business principles involved. The cost of service should be a main element, but should not exclude other considerations; such as the expediency of a zone system on railways, or the expediency of a uniform charge for postal and telegraphic services.

It seems, in short, that though the section contains no such words as “undue or unreasonable,” but prohibits preferences in general, yet in order to arrive at a decision as to what is a preference, the question of what is due and reasonable is to a certain extent involved. If a difference of treatment is arbitrary, or if its purpose is to advantage or prejudice a locality, it is undue and unreasonable, and is accordingly a preference. If on the other hand the difference of treatment is the reasonable result of the dissimilarity of circumstances — or if it is based on recognized and reasonable principles of administration — it is no preference. The intention and the effect must both be looked to in order to decide whether a preference exists; and in neither inquiry can reasonableness be ignored.

This does not mean that the words “undue or unreasonable” are to be read into the section. On the contrary, their absence would seem to materially increase its stringency. Reasonableness must be taken into consideration in ascertaining whether a preference exists; but a preference, though ascertained by that test to exist, need not necessarily be an unreasonable preference.

Preferences within the meaning of this section are not confined to fiscal regulations.

“We can easily conceive that, if the spirit of sectionalism ever should take possession of Congress, the dominant section might devise many little petty annoyances for boats entering the harbours of the other section which would amount to an unjust preference of the ports of the former. The mere improvement of a particular harbour, the clearing of the navigation of a river which involves the altering of its channel (South Carolina v. Georgia, 93 U.S. 4), the erection of a bridge which obstructs navigation (Pennsylvania v. Wheeling Bridge Co., 18 How. 421)—all these, while they may incidentally benefit one port more than another, are not preferences within the meaning of the prohibition. The people, in adopting the Constitution, intended to stop forever one State requiring exactions from the people of another for its own peculiar benefit; but they never intended to prevent the federal Government for the good of all the States from undertaking public works in a particular locality.” (Lewis, Federal Power over Commerce, pp. 20–21.)