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diff --git a/old/68664-0.txt b/old/68664-0.txt deleted file mode 100644 index b985caf..0000000 --- a/old/68664-0.txt +++ /dev/null @@ -1,14298 +0,0 @@ -The Project Gutenberg eBook of The heart of the railroad problem, by -Frank Parsons - -This eBook is for the use of anyone anywhere in the United States and -most other parts of the world at no cost and with almost no restrictions -whatsoever. You may copy it, give it away or re-use it under the terms -of the Project Gutenberg License included with this eBook or online at -www.gutenberg.org. If you are not located in the United States, you -will have to check the laws of the country where you are located before -using this eBook. - -Title: The heart of the railroad problem - The history of railway discrimination in the United States, the - chief efforts at control and the remedies proposed, with hints - from other countries - -Author: Frank Parsons - -Release Date: August 1, 2022 [eBook #68664] - -Language: English - -Produced by: Richard Tonsing and the Online Distributed Proofreading - Team at https://www.pgdp.net (This file was produced from - images generously made available by The Internet Archive) - -*** START OF THE PROJECT GUTENBERG EBOOK THE HEART OF THE RAILROAD -PROBLEM *** - - - - - - THE HEART - OF THE - RAILROAD PROBLEM - THE HISTORY OF RAILWAY DISCRIMINATION IN THE UNITED STATES, THE CHIEF - EFFORTS AT CONTROL AND THE REMEDIES PROPOSED, WITH HINTS FROM OTHER - COUNTRIES - - - BY - - PROF. FRANK PARSONS, PH.D. - - AUTHOR OF “THE STORY OF NEW ZEALAND,” “THE WORLD’S BEST BOOKS,” “THE - CITY FOR THE PEOPLE,” “THE RAILWAYS, THE TRUSTS, AND THE PEOPLE” - - - BOSTON - LITTLE, BROWN, AND COMPANY - 1906 - - - - - _Copyright, 1906_, - BY FRANK PARSONS. - - - _All rights reserved_ - - - Published April, 1906 - - - THE UNIVERSITY PRESS, CAMBRIDGE, U. S. A. - - - - - PREFACE - - -This work is one of the consequences of a conversation years ago with -Dr. C. F. Taylor, of Philadelphia, editor and publisher of _The Medical -World_ and of Equity Series. The doctor said that Equity Series should -have a book on the railroad question. The writer replied that there was -room for a book dealing with the political, industrial, and social -effects of different systems of railway ownership and control. A plan -was adopted for a book, to be called “The Railways, the Trusts, and the -People,” which is now on the press of Equity Series. For the preparation -of this work the writer travelled through nine countries of Europe and -over three-fourths of the United States, studying railways, meeting -railroad presidents and managers, ministers of railways, members of -railway commissions, governors, senators, and leading men of every -class, in the effort to get a thorough understanding of the railway -situation. He also made an extensive study of the railroad literature of -leading countries, and examined thoroughly the reports and decisions of -commissions and courts in railroad cases in the United States. - -As these studies progressed, the writer became more and more convinced -that the heart of the railroad problem lies in the question of impartial -treatment of shippers. The chief complaint against our railroads is not -that the rates as a whole are unreasonable, but that favoritism is shown -for large shippers or special interests having control of railways or a -special pull with the management. This book consists, in the main, of -the broad study of railway favoritism, which was made as a basis for the -generalizations outlined in the brief chapter on that subject in “The -Railways, the Trusts, and the People,”—one of the thirty chapters of -that book. This study reveals the facts in reference to railway -favoritism or unjust discrimination from the beginning of our railway -history to the present time, discloses the motives and causes of -discrimination, discusses various remedies that have been proposed, and -gathers hints from the railway systems of other countries to clarify and -develop the conclusions indicated by our own railroad history. - -Special acknowledgments are due to Dr. Taylor, who paid a part of the -cost of the special investigations on which the book is based and has -taken a keen interest in the progress of the work from its inception, -and also to Mr. Ralph Albertson, who has worked almost constantly with -the writer for the past eight months and more or less for two years -before that, and has rendered great assistance in research, in -consultation and criticism, and in the checking and revision of proof. - - FRANK PARSONS. - - BOSTON, March, 1906. - - - - - CONTENTS - - - CHAPTER PAGE - I. THE LAW AND THE FACT 1 - II. PASSES AND POLITICS 3 - III. PASSENGER REBATES AND OTHER FORMS OF DISCRIMINATION IN - PASSENGER TRAFFIC 17 - The Deadhead Passenger Car 18 - Ticket Scalping 19 - IV. FREIGHT DISCRIMINATION 23 - V. THE EARLY YEARS, HEPBURN REPORT, ETC. 25 - The Granger Laws 26 - The Hepburn Investigation 27 - VI. THE SENATE INVESTIGATION OF 1885 AND THE INTERSTATE - COMMERCE ACT 37 - VII. THE INTERSTATE COMMISSION 43 - VIII. EFFECTS OF THE INTERSTATE ACT 49 - Direct Rebates 53 - IX. SUBSTITUTES FOR REBATES 57 - X. DENIAL OF FAIR FACILITIES 66 - XI. CLASSIFICATION AND COMMODITY RATES 70 - XII. OIL AND BEEF 73 - XIII. IMPORTS AND EXPORTS 84 - XIV. LOCALITY DISCRIMINATIONS 87 - XV. LONG-HAUL DECISIONS OF THE SUPREME COURT 95 - XVI. TEN YEARS OF FEDERAL REGULATION 104 - XVII. THE ELKINS ACT AND ITS EFFECTS 110 - XVIII. THE WISCONSIN REVELATIONS 120 - XIX. THE COLORADO FUEL REBATES AND OTHER CASES 124 - XX. FREE CARTAGE, STATE TRAFFIC, DEMURRAGE, THE EXPENSE BILL - SYSTEM, GOODS NOT BILLED, MILLING-IN-TRANSIT 142 - XXI. MIDNIGHT TARIFFS AND ELEVATOR FEES 147 - XXII. COMMODITY DISCRIMINATIONS 150 - XXIII. DISCRIMINATION BY CLASSIFICATION 155 - XXIV. VARIOUS OTHER METHODS 159 - XXV. TERMINAL RAILROADS 166 - XXVI. PRIVATE-CAR ABUSES 174 - XXVII. THE LONG-HAUL ANOMALY 208 - XXVIII. OTHER PLACE DISCRIMINATIONS 216 - XXIX. NULLIFYING THE PROTECTIVE TARIFF 221 - XXX. SUMMARY OF METHODS AND RESULTS 228 - XXXI. DIFFICULTIES OF ABOLISHING DISCRIMINATION 241 - XXXII. REMEDIES 252 - Pooling 265 - Wrestling with the Long-Haul Abuse 270 - A Drastic Cure for Rebating 271 - XXXIII. FIXING RATES BY PUBLIC AUTHORITY 274 - Alleged Errors of the Commission 279 - XXXIV. CAN REGULATION SECURE THE NEEDFUL DOMINANCE OF PUBLIC - INTEREST? 306 - XXXV. HINTS FROM OTHER COUNTRIES 313 - - APPENDIX - A. LATEST DECISIONS OF U. S. SUPREME COURT 335 - B. PRESIDENT HADLEY AND THE HEPBURN BILL. ENGLISH EXPERIENCE - IN THE REGULATION OF RATES 337 - - INDEX 345 - - - - - THE HEART OF - THE RAILROAD PROBLEM - - - - - CHAPTER I. - THE LAW AND THE FACT. - - -It is a principle of the common law that common carriers must be -impartial. “They cannot legally give undue or unjust preferences, or -make unequal or extravagant charges.... They are bound to provide -reasonable and sufficient facilities. They must not refuse to carry any -goods or passengers properly applying for transportation.... They have -no right to grant monopolies or special privileges or unequal -preferences, but are bound to treat all fairly and impartially.”[1] That -is the rule of the common law which represents the crystallized -common-sense and practical conscience of the Anglo-Saxon and every other -civilized race. The legal principle that a common carrier must be -impartial was established long before the Interstate Commerce Act was -passed, or the Granger laws enacted,—yes, before railways or steamboats -were born. They inherited the family character and the family law. It -has been applied to them in innumerable cases. There is a solid line of -decisions from the infancy of the English law to the present time. -Constitutional provisions and State and Federal statutes have been -passed to affirm and enforce the rule. The railroads themselves declare -the rule to be right. And yet, in spite of the railway conscience and -the common law, the universal sense of justice of mankind, and the whole -legislative, executive, and judicial power of the government, the rule -is not obeyed. On the contrary, disregard of it is chronic and -contagious, and constitutes one of the leading characteristics of our -railway system. In spite of law and justice our railway practice is a -tissue of unfair discrimination, denying the small man equal opportunity -with the rich and influential, and breaking the connection between merit -and success. - -The railways unjustly favor persons, places, and commodities, and they -do it constantly, systematically, habitually. If every instance of -unjust discrimination that occurs to-day were embodied in human form and -the process were continued for a year,[2] the outlaw host would dwarf -the Moslem hordes that deluged southern Europe in the days of Charles -Martel, outnumber many fold the Grand Army of the Republic in its -palmiest days, and, shoulder to shoulder, the dark and dangerous mob -would reach across the continent, across the ocean, over Europe and -Asia, and around the world. - -The railways discriminate partly because they wish to, and partly -because they have to. The managers favor some interests because they are -linked with the interests of the railways or the managers, and they -favor some other interests because they are forced to. The pressure of -private interest is stronger than the pressure of the law, and so the -railroad manager fractures his conscience and breaks the statutes and -common law into fragments. - - - - - CHAPTER II. - PASSES AND POLITICS. - - -One of the most important forms of discrimination is the railroad pass. -Many persons of wealth or influence, legislators, judges, sheriffs, -assessors, representatives of the press, big shippers, and agents of -large concerns, get free transportation, while those less favored must -pay not only for their own transportation, but for that of the railway -favorites also. - -A farmer and a lawyer occupied the same seat in a railroad car. When the -conductor came the farmer presented his ticket, and the lawyer a pass. -The farmer did not conceal his disgust when he discovered that his -seat-mate was a deadhead. The lawyer, trying to assuage the indignation -of the farmer, said to him: “My friend, you travel very cheaply on this -road.” “I think so myself,” replied the farmer, “considering the fact -that I have to pay fare for both of us.” - -The free-pass system is specially vicious because of its relation to -government. Passes are constantly given to public officials in spite of -the law, and constitute one of the most insidious forms of bribery and -corruption yet invented. I have in my possession some photographs of -annual passes given by the Pennsylvania Railroad in 1903, 1904, and 1905 -to members of the State Legislature, and the Common Council of -Philadelphia. - -The Constitution of Pennsylvania, Section 8 of Article 8, says: “No -railroad, railway, or other transportation company, shall grant free -passes, or passes at a discount, to any persons except officers or -employees of the company.” - -The question is whether the members of the Legislature are employees of -the Pennsylvania Railroad. - -Recently the Pennsylvania Railroad gave notice that after January 1, -1906, no free passes would be issued except to employees. As we have -seen reason to believe, this may still include members of the -Legislature, and even if the order should happen to be enforced -according to the common acceptation of the word “employees,” there are -plenty of ways in which free transportation can be given to men the -railroad management deems it desirable to favor. Railroads have made -such orders before, and in every case the fact has proved to be that the -order simply constituted an easy method of lopping off the overgrown -demand for passes, a ready excuse for denying requests the railroad does -not wish to honor, without in the least interfering with its power of -favoring those it really wishes to favor. In cutting off passes under -said order to multitudes of city officials in Pittsburg lately the -Pennsylvania railroad officers stated that the demand had become so -great that those having free rides were actually crowding the paying -passengers on many of the trains. The _Philadelphia North American_ -declared that in that city every big and little politician expected free -passage when he requested it, and that there was no ward heeler so -humble that he might not demand transportation for himself and friends -to Atlantic City, Harrisburg, or any other point on the Pennsylvania -line. The _Springfield Republican_ said: “It does not appear to be -recognized, in the praise given to the present action of the railroad -company, how great an impeachment of its management the old order -constituted. We are told that passes were issued literally in bundles -for the use of political workers, big and little.” - -We watched with much interest to see what the railroad would really do -when the time for full enforcement of the order came. In Pennsylvania, -as was anticipated, the order has been used as a basis for refusing -passes to the overgrown horde of grafters who have feasted so long at -the Pennsylvania’s tables. The railway does not want anything this year -in Pennsylvania that the grafters can give it, and it is an excellent -opportunity to punish the Pittsburg politicians for allowing the Gould -lines to enter the city. But in Ohio the situation is different, and, in -spite of the recent order, the time-honored free passes have been sent -to every member of the Ohio Legislature. A press despatch from Columbus, -January 1, says: “One of the notable events that marked the opening of -the general assembly to-day was the unexpected arrival of railroad -passes for every member. The Pennsylvania, first to announce that the -time-honored graft would be cut off, was the first to send the little -tickets, and the other lines followed suit.” - -The Pennsylvania is not alone in its delicate generosity to legislators -and other persons of influence. The _practice_ is _practically_ -universal.[3] From Maine to California there is not a State in which the -railroads refrain from giving passes to legislators, judges, mayors, -assessors, etc. And the roads expect full value for their favors. Some -time ago a member of the Illinois Legislature applied to the president -of a leading railroad for a pass. In reply he received the following: - -“Your letter of the 22nd to President ——, requesting an annual over the -railroad of this company, has been referred to me. A couple of years -ago, after you had been furnished with an annual over this line, you -voted against a bill which you knew this company was directly interested -in. Do you know of any particular reason, therefore, why we should favor -you with an annual this year?” - -The railroads give passes to legislators and public officials not, as a -rule, in any spirit of philanthropy or respect for public office, but as -a matter of business; and if a legislator does not recognize the -obligation that adheres to the pass, the pass is not likely to adhere to -him in subsequent years. - -In many cases the pass is the first step on the road to railroad -servitude. Governor Folk said to me: “The railroads debauch legislators -at the start by the free pass. It is a misdemeanor by the law of this -State to take such a favor.[4] But it seems so ordinary a thing that the -legislator takes it. He may start out with good intentions, but he takes -a pass and then the railroad people have him in their power. He has -broken the law, and if he does not do as they wish they threaten to -publish the number of his pass. He generally ends by taking bribe money. -He’s in the railroad power anyway to a certain extent, and thinks he -might as well make something out of it. In investigating cases of -corruption I have found that in almost every instance the first step of -the legislator toward bribery was the acceptance of a railroad pass.” - -At the annual dinner of the Boston Merchants’ Association, January, -1906, Governor Folk said: “One of our greatest evils is the domination -of public affairs by our great corporations, and we will never get rid -of corporation dominance till we get rid of the free pass. That is the -insidious bribe that carries our legislators over the line of probity. -First seduced by the free pass, destruction is easy. No legislator has a -right to accept a free pass; no more right than to accept its equivalent -in money.” Even the laws against the free pass, Governor Folk says, -often play into the hands of the railways and emphasize and fasten -corruption upon the State by putting legislators and officials at the -mercy of the railroads in consequence of the fact that the taking of a -pass is a violation of law, so that the railway has a special hold upon -the donee as soon as the favor is accepted. This is likely to be the -effect unless the law is so thoroughly enforced as to prevent the taking -of passes, which is very difficult and very seldom achieved. - -Governor Folk is doing his best to abolish the pass evil. It used to be -a common thing for officials of all grades to ride on passes. And any -influential person in Jefferson City could get a pass by seeing a member -of the House or Senate, who would send a note to Colonel Phelps and a -pass would be forthcoming. Now the legislators decline to accommodate -their friends by making these little requests, for the matter might come -to the ear of Governor Folk. Moreover the government employees in -Missouri have been cut off from these railroad “courtesies.” The statute -does not apply to appointive officers, but the Governor does not intend -that his department shall be honeycombed with railroad influence if he -can help it. One of the officers of a subordinate branch of the -government went to him and asked him about the matter. “I do not want a -pass for myself,” said the interrogator, “but Mr. W. told me that he -would like for me to see you before he accepted a pass and see if you -had any objections. And I want to add, Governor, that it has always been -the custom for the employees in this department to use free passes.” -Governor Folk’s countenance lost its smile for the moment, as he said -very slowly and sternly: “Tell the employees of your department that if -any of my appointees ride upon railway passes they will be instantly -discharged.” - -These insidious bribes in the guise of courtesy and honor for -position—these free passes which Governor Folk denounces as the first -steps to corruption—are prevalent in all our States. Even in honest old -Maine, the frosty forest State, I found the railroad pass in full bloom. -Speaking to a joint committee of the House and Senate at Augusta a few -months ago, I exhibited a number of photographs of passes given to -legislators and councilmen by one of our big railroads. The members -examined these photos with much interest and some facetious remarks. On -the way into town a famous lobbyist who has long and close acquaintance -with the legislature of Maine laughed till the tears ran down his cheeks -over the memory of the scene, puffing out between his explosions the -explanation of his merriment: “Every one of those fellows has a railroad -pass in his own pocket.” Inquiry in other directions tends to confirm -his statement. - -It is hardly possible to imagine that the ordinary legislator or judge -can be entirely impartial in reference to a railroad bill or suit when -he is under obligation to the railroads for past favors and hopes for -similar courtesies in the future. - -When a judge finds that jurors in a railroad case have accepted passes -from the railroad he discharges the jurors as unfit for impartial -service,[5] yet that same judge may have in his pocket an annual pass -over all the lines of the road that is plaintiff or defendant in the -case. - -Some railroad presidents and managers have told me that passes are given -as mere courtesies and are not intended to influence the conduct of -officials. This may be true in some cases, but as a rule the railroads -do not give charity; but expect favor for favor, and value for value, or -multiplied value for value. Railroad men have sometimes admitted to me -that the psychology of the pass is closely related to that of the bribe, -and that they sought and obtained political results from the -distribution of transportation favors. And aside from such admissions -the evidence on the facts is overwhelming. - -A prominent judge who had been on the bench for years in one of our best -States and had always received passes from various railroad companies, -found at the beginning of a new year that one of the principal railroads -had failed to send him the customary pass. Thinking it an oversight he -called the attention of the railroad’s chief attorney to the fact. -“Judge,” said the lawyer, “did you not recently decide an important case -against our company?” “And was not my decision in accordance with law -and justice?” said the judge. The attorney did not reply to this, but a -few days later the judge got his pass. After some months it again became -the duty of the judge to render a decision against the company. This -second act of judicial independence was not forgiven. The next time he -presented his pass the conductor confiscated it in the presence of many -passengers and required the judge to pay his fare. - -The railroad commission in one of our giant States says the fact “that -for the most part passes are given to official persons for the purpose -of influencing official conduct, is made manifest by the fact that they -are not given to such persons except while they hold official -positions.”[6] - -The president of an important railroad is stated to have said that he -“saved his company thousands of dollars a year by giving annual passes -to county auditors.” And a man who had been auditor for many years said -that the taxes of the —— railroad company were increased about $20,000 a -year because it was so stingy with its passes.[7] - -Members of legislatures and of Congress have told me that after voting -against railroad measures the usual passes were not forthcoming. - -A little while before the introduction of the rate legislation now -pending, in pursuance of President Roosevelt’s regulative policy, a -congressman from the Far West was visiting with us. He had free -transportation for himself and family anywhere in the United States any -time he wanted it. A lady in the family asked him if it was the same way -with the rest of the congressmen, and he said “Yes.” I have in my notes -conversations with senators and representatives from eighteen States, -and all of them stated, in reply to my questions, that passes were an -established and regular part of the perquisites of a member of Congress. - -But since the Esch-Townsend bill for the fixing of rates by a government -commission came on deck, I understand that the congressmen who supported -it are learning the lesson conveyed in the pass-denying letter above -quoted, as some of the railroads are refusing all the requests of such -congressmen for free transportation. The president of one of these -railroads is reported to have said: “I never was in favor of granting -political transportation, and now I have a good opportunity to cut off -some of these deadheads. Transportation has been given them in the past -on the theory that they were friends, but when we needed friends they -were not there.” - -This, however, is only a passing phase—an emergency measure to punish a -few congressmen who have shown so little appreciation of the right of -the railroads to make the laws affecting transportation, that they -actually voted for what they deemed right or for what the people -desired, rather than for what the railroads wanted. - -Aside from such little eddies, the great stream of dead-headism flows on -as smooth and deep as ever. The people take the thing so much as a -matter of course that it has been a constant cause of surprise to -passengers on the New York, New Haven, and Hartford Railroad to see -Governor Douglas pay his fare day by day as he travelled to and fro on -an ordinary commutation ticket. - -A prominent judge of Chicago tells me that for years the leading -railroads entering that city have sent him annual passes without -request. I found the same thing in Denver, San Francisco, New York, -Boston, and nearly everywhere else I have been in this country. The -mayor of one of our giant cities told me this very morning that the -principal railroads sent him annuals but he returned them. It would be -better if he would turn the next lot over to a publicity league or put -them in a museum. - -In many cases the railroads are practically forced to give passes. A. B. -Stickney, President of the Chicago and Great Western Railroad was asked -by the Industrial Commission[8] about the giving of passes to members of -the judiciary of Minnesota and Illinois. President Stickney said, “If -any of them ask for transportation, they get it; we don’t hesitate to -give to men of that class if they ask for passes; we never feel at -liberty to refuse.” - -“Is there any good reason why a judge who gets a good salary should have -a pass—any greater reason than why John Smith should have a pass?” - -“That depends,” said President Stickney, “on what you call a good -reason.... Twenty-five years ago I had charge of a little bit of a road -that was a sort of subordinate of a larger road. - -“I had occasion to visit the president of the superior road about -something, and he said: ‘Mr. Stickney, I see that the sheriff of this -county has a pass over your road. I should like to know on what -principle you gave that sheriff a pass.’ - -“‘I did it on the principle that he was a power, and I was afraid to -refuse him,’ I said. - -“‘Well,’ said he, ‘I refused him.’ - -“‘You will wish you hadn’t before the year is over,’ I replied. - -“Sometime afterwards, and during the year, I went into the office to see -the superintendent, but he was not in; I went into the general freight -agent’s office, and he was not in; I went into the general manager’s -office, and he was not in. So I then went into the office of the -president and said, ‘What kind of a road have you got? Your -superintendent is not here, your general freight agent is not here, and -your general manager is not here.’ - -“He hung his head down and said: ‘Do you remember that conversation we -had about that sheriff’s pass? He’s got all those men on the jury and -has got them stuck for about two weeks.’” - -Q. “That answer seems to indicate that railroads would be afraid to -refuse for fear of the penalties?” - -A. “I think the railroads find there is a class of men that it is to -their interest not to refuse if they ask for passes.” - -Van Oss says that at one time in this country half the passengers rode -on passes.[9] That seems incredible. There is no doubt, however, that -the pass evil was enormous before it was checked by State and Federal -legislation, and still prevails to an astonishing extent. Six years -after the Interstate Act prohibited all preferences, and twenty years -after the State crusade against passes and other discriminations began, -C. Wood Davis, a railway auditor of large experience, and an executive -officer having authority to issue passes, stated that “ten percent of -the railway travel of this country is free, the result being that the -great mass of railway users are yearly mulcted some $33,000,000 for the -benefit of the favored few. No account of these passes is rendered to -State, nation, or the confiding stockholders.”[10] If ten percent still -ride deadhead, as is quite probable, the resulting tax upon paying -railway users is now over $50,000,000 a year. The effect of legislation -has been to give the railways an excuse for shutting off the less -influential of the former deadheads, while the big people ride free in -spite of the law.[11] - -The Hon. Martin A. Knapp, Chairman of the Interstate Commerce -Commission, says: “A gentleman told me that on one occasion he came from -Chicago to Washington along in the latter days of November, and every -passenger in the Pullman car, besides himself, was a member of Congress -or other Government official, with their families, and that he was the -only passenger who paid a cent for transportation from Chicago to -Washington, either for his passage or for his Pullman car.”[12] - -Paul Morton says: “Passes are given for many reasons, almost all of -which are bad.... Passes are given for personal, political, and -commercial reasons.”[13] - -Big shippers and their agents get them as a premium on or inducement to -shipments over the donating railroad. When we went to the St. Louis -Exposition we had to pay our fare, but the shipping manager of a large -firm I have in mind was given free transportation for himself and -family, though he was abundantly able to pay. In fact, those best able -to pay ride free, while the poor have to pay for the rich as well as for -themselves. - -One way in which the railway managers evade the Interstate Commerce Law, -in giving passes to large shippers and others, is to designate the -recipients as employees of their own or other companies.[14] - -President Stickney, of the Chicago and Great Western Railroad, said in a -recent address before the Washington Economic Society: - -“The law which makes it a misdemeanor for any individual not an officer -of a railway company to use a pass was enacted by Congress and approved -by the President 18 years ago, and as an individual rule of action it -was ignored by the congressmen who passed it and by the President who -approved it; and subsequent congressmen and presidents, with rare -exceptions, have ignored its provisions. Travelling, they present the -evidence of their misdemeanor before the eyes of the public in a way -which indicates no regard for the law. The governors of the States, many -of the judges,—in short, all officialdom from the highest to the -lowest,—the higher clergy, college professors, editors, merchants, -bankers, lawyers, present the evidence of their misdemeanor in the same -manner.” - -As we shall see presently, there are other forms of passenger -discrimination, such as the free private car, the rate war, etc. - -But neither of these nor the selling of tickets below the normal rates -through scalpers, constitutes so inequitable or dangerous a form of -discrimination as the pass system. As Hadley says: “The really serious -form of passenger discrimination is the free-pass system. It is a -serious thing, not so much on account of the money involved, as on -account of the state of the public morals which it indicates (and -develops). When passes are given as a matter of mere favoritism, it is -bad enough. When they are given as a means of influencing legislation, -it is far worse. Yet this last form of corruption has become so -universal that people cease to regard it as corrupt. Public officials -and other men of influence are ready to expect and claim free -transportation as a right. To all intents and purposes they use their -position to levy blackmail against the railroad companies.”[15] - -Other leading countries are not afflicted with this pass disease to any -such extent as we are; some of them do not have the malady at all. In -France and Italy I was offered passes, but the government roads of -Austria, Germany, and Belgium not only did not offer passes, but refused -to grant them even when considerable pressure was brought to bear.[16] -The Minister of Railways in Austria informed me that he had no pass -himself, but paid his fare like any ordinary traveller. No amount of -personal or official pull could secure free transportation. The same -thing I found was true in Germany. Only railway employees whose duty -calls them over the road have passes. The Minister pays when he travels -on his own account. And the Emperor also pays for his railway travel. It -is the settled policy of government roads in all enlightened countries -to treat all customers alike so far as possible, concessions being made, -if at all, to those who cannot afford to pay or who have some claim on -the ground of public policy: as in South Africa where children are -carried free to school; in New Zealand, where men out of work are taken -to places where they may find employment, on credit or contingent -payment; and in Germany and other countries, where tickets are sold at -half price for the working-people’s trains in and out of the cities -morning and night. - -Even in England, though the roads are private like ours, the -working-people have cheap trains, and public officials pay full fare. -The King of England pays his fare when travelling, and if he has a -special train he pays regular rates for that too. Members of Parliament -also and minor public officers pay for transportation. Passes are not -given for political reasons. The law against this class of -discriminations is thoroughly enforced. But in this country not only -members of Congress and other public officials, but some of our -presidents even have subjected themselves to severe criticism by -accepting free transportation in disregard of Federal law. - - - - - CHAPTER III. - PASSENGER REBATES AND OTHER FORMS OF DISCRIMINATION IN PASSENGER - TRAFFIC. - - -In addition to the passengers who travel free on passes, there are many -who have free transportation in other forms. One method of favoritism is -the payment of rebates, which are in use in the passenger departments as -well as in the freight departments of our railroads. Passenger rebates -are repayments of a part or the whole of the amounts paid by favored -parties for tickets or mileage. For example, large concerns that employ -travelling men buy ordinary passenger mileage books, and when the -mileage is used the cover of the book is returned to the railroad and a -refund is made.[17] In the investigation of the Wisconsin railroads, -instituted by Governor La Follette in 1903, it was found that every -railroad of importance in the State had been paying passenger rebates in -large amounts every year for the whole six years that were covered by -the search. From 1897 to the end of 1903 the Chicago, Milwaukee and St. -Paul refunded $170,968 in passenger rebates, the Chicago and -Northwestern refunded $614,361; adding the Chicago, St. Paul, -Minneapolis and Omaha, the Wisconsin Central, and the “Soo Line,” the -total passenger rebates paid by the five roads named in the said time -was over $972,000. - -In the case of some favored shippers in Wisconsin it was found that the -railroads secretly refunded the entire original cost of the mileage -books bought by the said shippers for themselves or their agents, or $60 -per book. So that these favored houses “were able to send out their -entire force of travelling men without paying one cent of railroad fare, -while their competitors paid full fares.” - -One of these Wisconsin concerns, the Northern Grain Company, received -from the Northwestern Railroad alone $151,447 rebates in five years, or -over $30,000 a year, partly as refunds on the passenger mileage books of -their travelling men and partly as cash rebates on their business. The -president of the Northern Grain Company is O. W. Mosher, who was a State -senator in 1901 and 1903 and fought the railroad reforms proposed by -Governor La Follette. He vigorously defended “individual liberty” and -the right of the railroads to “control their own property,” and it is -easy to understand his earnest opposition to railroad regulation since -it has come out that “individual liberty” and railroad _laissez faire_ -meant $30,000 a year to his company. - - - _The Deadhead Passenger Car._ - -Along with the less-than-carload lots of deadheads travelling on trip -passes or annual passes, or transportation with a rebate attachment, -there are carload lots going deadhead in private passenger cars. - -In a tour to the Pacific coast and back a score of private cars at -different times were attached to the various trains I was on. A friend -who went a year or so later counted nine private cars on his journey in -California, four of them being attached to the same train at the same -time, and in the whole 9000 miles he travelled the total number of -private cars ran up to 54. Any trust or railroad magnate or governor of -a State may have a private car with his retinue, while the lesser -deadheads ride in the ordinary cars or Pullman coaches; and the common -people pay for it all. - - - _Ticket Scalping._ - -For many years the railroads aided and abetted the ticket scalpers, -paying commissions on the sale of tickets,[18] or making arrangements so -that scalpers could get tickets from the railway offices for less than -the regular prices. Railroad offices have been known to sell tickets -systematically to scalpers at 33, 50, and 66 percent off, or ⅔, ½, and ⅓ -of the regular rates. The scalper shared the discount with the -passenger, and the railway prevented some other line from getting the -traffic. - -In some cases scalpers induced conductors not to cancel tickets taken -up, so that they could be resold in the scalping offices, the profits -being divided with the conductors. In 10 States where statutes were -passed against scalping, the brokers and the railroads practically -nullified the law. And by collusion with these brokers the railroads -secretly violated the Interstate Commerce Act. - -A mass of facts upon this subject appears in the expert testimony pro -and con before committees of both Houses of Congress, notably in -January, 1898. It was shown that at that time 346 newspapers, -substantially all the railway and steamship passenger lines of the -United States, the laws of 10 States, the long example of Canada, the -resolutions of numerous national, State, and mercantile associations, -the resolutions of the railway commissioners of 19 States, the insistent -and repeated views of the Interstate Commerce Commission, the lesson -taught by every other railway country of the earth, the due protection -of the large organizations to whom special fares are granted and of the -railways granting them, the due observance of law, and the best moral -sense of all the commercial world, were all arrayed on the honest side -of every phase of this question. Ticket brokerage was defended by not -over 3 railroads and 560 ticket brokers. The two organized bodies of -scalpers, the American Ticket Brokers’ Association and the Guarantee -Ticket Brokers’ Association, stood behind the scalping business. - -George R. Blanchard, former commissioner of the Joint Traffic -Association, says in his testimony before the United States Industrial -Commission (IV, 623): “There are two organized bodies of scalpers: the -American Ticket Brokers’ Association and the Guarantee Ticket Brokers’ -Association. They have their directors, officers, and agents, rules and -regulations, and they adopt resolutions and discuss and decide questions -of cut fares.” - -One railroad president told me that most of the tickets the scalpers -sold they got directly from the railroads. Another railroad president -has given similar testimony before the Industrial Commission, and also -stated that he did not believe the railroads could stop the scalping -trade in unused tickets.[19] - -This method of discrimination has, however, received a serious setback -so far as railway collusion is concerned. The presidents of the leading -railroads have agreed with each other to support the law, and scalping -is a more limited profession than it formerly was. In fact, a much -larger claim than this is made by some. In going over this year the -materials I have collected on the subject, I came upon the statement -that “scalping has been practically abolished.” I put up my pen and went -down town to see. I found on Washington Street (Boston), in the -ticket-office district, a man with “Cut Rates” printed in large letters -on his back. The same sign was above a door near by, and on the -stairway. I went up. - -“What will it cost me to go to Chicago?” I asked. - -“I can give you a ticket for $12 if you are going within a few days.” - -“Suppose I don’t go for a month or two?” - -“Well, I can give you a $15 rate most any time.” - -“First-class?” - -“Yes.” - -“Over what route?” - -“The Boston & Maine and Grand Trunk.” - -“What can you do over the Boston & Albany?” - -“I’ll give you transportation on that route for $18.” - -“Will that be first-class?” - -“No.” - -“Tourist?” - -“Yes.” - -“Do you have the $12 tickets often?” - -“Sometimes; but I can give you a $15 rate any time.” - -I went to the railway ticket offices and learned that the fare from -Boston to Chicago by the Boston & Maine and Grand Trunk was $18 -first-class, and $17 tourist; by the Boston & Albany $22 first-class, -and $19 tourist, and through New York $25. - -It is clear, therefore, that scalping is not a lost art. The regular -one-price ticket agents say that the cut-rate business is still in -flourishing condition. It may be that railway offices no longer act with -scalpers to evade the law, but when a scalper says he will give you a -first-class ticket (worth $18 at the depot) for $15 any time you want -it, it looks as though he had some pretty certain source of supply. One -scalper here, I am told, is the brother of the advertising manager of a -monthly magazine. Railroads advertising in the magazines pay in tickets -and the manager turns these tickets over to the scalper. The same thing -is done in New York and Chicago, and probably in other places. Scalpers -also get unused portions of excursion and other tickets. And perhaps -some of the railways are still in direct collusion with scalpers. Every -freight pool or agreement to prevent cutting freight rates that was ever -made was broken by some railroad secretly cutting prices, and it may be -that an agreement to maintain fares is not safe against secret cutting -either. - -One of the most peculiar things about scalping is that, unlike other -forms of discrimination, its benefits go to the poor man instead of the -rich man. It is the only kind of discrimination that gives the poor man -any comfort or tends to diffuse wealth instead of concentrating it. In -this one case the rich help to pay for the poor man’s transportation; in -all other cases the poor man and the man of moderate wealth help to pay -for the service the rich man gets. Perhaps this partly explains why it -is that many railroads have taken a more decided stand against this -abuse than against any other in the long list of evils that afflict -transportation in this country. - - - - - CHAPTER IV. - FREIGHT DISCRIMINATION. - - -We come now to a kind of discrimination that enables a railway manager -to determine which of the merchants, manufacturers, mine owners, etc., -on his line shall prosper and which shall not; what cities and towns -shall grow, what States shall thrive, what industries shall be -developed. - -The purpose of discrimination may be (1) to keep business from going to -a competing line; (2) to increase revenue by creating new business for -which, if necessary, rates may be dropped very low, as anything above -the cost of handling on new business will add to income; (3) to simplify -and solidify traffic; (4) to favor persons who, through political -influence or other power may aid or injure the road, or who, through -friendship, marriage, business or civic relation, or otherwise, have a -“pull” with the management; (5) to advance the interests or enhance the -value of a business, or property, or place, in which the railway or its -officers or their friends are interested; or (6) to kill or injure a -place or person or business that has incurred the enmity of the railways -or their allies. - -As a result of the play of these motives our railroad history is full of -unfair discriminations between persons, places, and industries in the -United States, and between domestic and foreign trade. The methods and -forms are many and have grown more numerous with each succeeding epoch, -but the predominant forms vary in the different strata. We still have -plenty of living specimens of the species that prevailed in earlier -periods, but the leading forms now are comparatively recent evolutions. - -The history of discriminations would fill many volumes. The Hepburn -Committee (1879) appointed by the New York Legislature collected about -5000 cases of discrimination. It was shown to be a common thing for -railroads to give favored shippers discounts of 50, 60, 70, and even 80 -percent from the regular rates. The special contracts involving favors -in force for one year on a single railroad, the New York Central, were -estimated at 6000. The United States Senate Committee of 1885, the -Congressional Committee of 1888, the Interstate Commerce Commission, -1887–1905, the United States Industrial Commission, 1900–1902, the -Wisconsin investigation in the fall of 1903, the United States Senate -Committee of 1905, the State railroad commissions, the courts, and other -investigating bodies have brought to light additional thousands of -discriminations. We shall select some examples illustrating various -methods of discrimination. - - - - - CHAPTER V. - THE EARLY YEARS, HEPBURN REPORT, ETC. - - -One of the discriminations most complained of in early years was the -charging of lower rates for a long haul than for a short haul on the -same line—less for the whole than for a part. - -For example, the rate from New York to Ogden was $4.65 per hundred, -while $2.25 per hundred carried the same freight all the way from New -York to San Francisco. The railroads charged more if the car stopped -part way than if it went on to the Pacific,—more than twice as much, in -fact, for the part haul as for the full distance, so that the extra -charge for not hauling the car on from Ogden to Frisco was greater than -for hauling it the entire distance from ocean to ocean. They seemed to -be willing to take off half for the privilege of hauling the car another -1000 miles. These methods are still in practice. - -The C. B. & Q. hauled stock from points beyond the Missouri River to -Chicago for $30 a car, while charging $70 a car on much shorter hauls to -points in Iowa. The Northern Pacific charged twice as much from New York -to points a hundred miles or more east of Portland, as from New York -clear through to Portland. Freight was shipped from New York State to -Council Bluffs and then back to Atlantic, Iowa, 60 miles west of Council -Bluffs on the Rock Island, for less than the charge direct to Atlantic. -From Chicago to Kankakee, 56 miles, the Illinois Central charged 16 -cents per cwt. for fourth-class goods, while it carried the same goods -to Mattoon, 116 miles farther on, for 10 cents per cwt. The grain rate -on the Pennsylvania Railroad from Chicago to Pittsburg was 25 cents in -1878, while the same road would carry the grain clear through from -Chicago to New York for 15 cents. Glassware paid 28 cents a hundred from -Pittsburg to Chicago, and only 14 cents from Philadelphia to Chicago, -half the rate for nearly double the distance. A tub of butter from -Elgin, Ill., to New York, 1000 miles, paid 30 cents, while the freight -on the same tub from points 165 miles out of New York City was 75 cents. -The railways put the farmers of Western New York further from market -than their competitors in the West. By such arrangements as this it was -claimed the railroads had caused a depreciation of $400,000,000 in the -value of improved lands in New York, Pennsylvania, New Jersey, Maryland, -and Delaware, while the area of improved lands in those States had -increased 4,500,000 acres.[20] - -The evils of unjust rates and railway favoritism for persons and places -were earnestly discussed in the press, and in State legislatures, and in -Congress. One of the examples of discrimination that caused much -discussion in Congress was the Winona case. Cotton paid $1 a bale from -Memphis to New Orleans, 450 miles; from Winona to New Orleans, 275 -miles, travelling possibly in the same train with the Memphis bales, the -rate was $3.25 per bale. Another example adduced in Congress was the 75 -cent rate from New York to New Orleans, while points half way paid $1.00 -for the same service. - - - _The Granger Laws._ - -In the early seventies (1872 and following years), Iowa, Nebraska, -Minnesota, Kansas, and other States of the Middle West passed what are -known as the “Granger laws,” fixing maximum rates and forbidding -discriminations. Railroad commissions were also established in these -States to control the roads, and it was hoped that these commissions, -which grew out of the Granger agitation and were to represent the public -interest and the people’s sovereignty in their relations with the -railways, would be able to diminish greatly and perhaps abolish unjust -discriminations. In this hope, however, the people were disappointed. - -Speaking of this experience Governor Larrabee of Iowa said in 1893: -“Every year seemed to add to the grievances of the public. Success -greatly emboldened the railway companies. Discriminations seemed to -increase in number and gravity. At many points in the western part of -the State freight rates to Chicago were from 50 to 75 percent higher -than from points in Kansas and Nebraska. A car of wheat hauled only -across the State paid twice as much freight as another hauled twice the -distance from its point of origin to Chicago. Minnesota flour was hauled -a distance of 300 miles for a less rate than Iowa flour was carried 100 -miles. Certain merchants received from the railroad companies a discount -of 50 percent on all their freights, and thus were enabled to undersell -all their competitors. The rate on coal in carload lots from Cleveland, -Lucas County, to Glenwood was $1.80 per ton, and from the same point to -Council Bluffs only $1.25, although the latter was about thirty miles -longer haul. Innumerable cases of this kind could be cited. There was -not a town or interest in the State that did not feel the influence of -these unjust practices.” - - - _The Hepburn Investigation._ - -This most famous and enlightening investigation of the early period was -that of the Hepburn Committee of New York in 1879. The committee found -that many shippers were paying two or three times, and in some cases -five times, the rates paid by their rivals. - -William H. Vanderbilt told the committee that, as a rule, all large -shippers who asked for special rates got them. Among the men his road -had helped to build up by special rates was A. T. Stewart, the great -dry-goods merchant of New York. He had a rate of 13 cents from his -factories over the New York Central to New York, while small concerns -paid 20 to 40 cents for this same service. A big dealer in cotton cloth -had a 20 cent rate, while others paid the regular 35 and 40 cent rate. -Five grocery firms in Syracuse had a flat 9 cent rate instead of the -published tariff of 37, 29, 25, and 18 cents, according to the class of -goods. Four Rochester firms had a special rate of 13 cents against the -regular tariff of 40, 30, 25, and 20 cents. Five firms at Binghamton and -five at Elmira had rates from ⁵⁄₉ to ⅓ of the tariff. Three Utica -dry-goods merchants had a rate of 9 cents and another had a rate of 10 -cents, while the regular rates which the outside public paid were 33, -26, and 22 cents, according to class. Soap shipped by B. of New York to -C. of Syracuse cost 12 cents freight per box if the freight was paid by -the shipper in New York, but only 8 cents a box if the freight was paid -by the consignee in Syracuse. - -A report of the Erie Railroad showed 34 cases of special cut rates, and -a New York Central report showed 33 examples. The books of the Central -showed 6000 special rates granted during the first 6 months of 1880. -About 90 percent of the Syracuse business and 50 percent of the entire -business of the road was done on special rates.[21] It had given special -rates to individuals and firms at 22 points on its line between Albany -and Buffalo. The specials generally went down to about ⅓ of the -scheduled rates to the same place, but in Syracuse a special agreement -was unearthed in which the rate was so emaciated as to be only ⅕ of the -size of the regular rate on first-class goods to which it applied. - -The committee also found the long-haul discrimination in full bloom. -Flour went from Milwaukee to New York for 20 cents, while the charge -from Rochester to New York was 30 cents. On some goods the rate from New -York to Syracuse, 291 miles, was 10 cents; New York to Little Falls, 217 -miles, 20 cents; New York to Black Rock, 445 miles, 20 cents also. -Syracuse must have had a strange fascination for the railroad men, to -keep them from making a lower rate from the point 400 miles away than -from the point 200 miles away, for they love long hauls. Goods were -shipped from Rochester to New York and then from New York back over the -same road through Rochester to Cincinnati more cheaply than they could -be sent direct from Rochester to Cincinnati. W. W. Mack, a Rochester -manufacturer, testified that he saved 14 cents a hundred in this way, -and that he saved 18 cents a hundred in his St. Louis business in the -same way. In both these cases the railroad company carried the goods 700 -miles farther than the direct course for a charge considerably less than -for the direct haul. - -Butter was carried from St. Lawrence Co., N. Y., to Boston for 60 cents -a hundred, while the rate from nearer stations was 70 cents, 80 cents, -and even 90 cents at St. Albans, Vt., increasing as the distance -decreased. The railroads appear to recognize the fact that happiness -consists in the exercise of the faculties, and they wish to exercise -their faculties to the utmost by securing long hauls even though the -long rate may not leave nearly so much profit as the rate for the short -haul. - -Some of the worst discriminations of the early years were those -connected with the oil business.[22] In 1872 the Oil Combine (then -called the South Improvement Co.) secured a secret agreement from all -the railroads running into the oil regions, first, to double freight -rates on oil; second, not to charge the S. I. C. the increase; third, to -pay the S. I. C. the increase collected from all other shippers. The -rate to Cleveland was to be raised to 80 cents, except for the S. I. C., -which continued to pay 40, and would receive 40 of the 80 paid by any -one else. The rate to Boston was raised to $3, and the S. I. C. would -receive $1.32 of it. The Combine was to have 40 cents to $1.32 a barrel -rebate not only on their own oil which constituted only one-tenth of the -business, but on all the oil their competitors shipped, so they would -get $9 in rebates for every dollar they paid in freight. The S. I. C. -were to receive an average of $1 a barrel on the 18,000 barrels produced -daily in the oil regions. The rates were raised as agreed, but the -excitement in the oil regions was so intense that mobs would have torn -up the tracks of the railways if Scott and Vanderbilt and the rest had -not telegraphed that the contracts were cancelled, and put the rates -back. But some of the contracts afterwards came into court, and had not -been cancelled at all. In 1874 the roads began gradually to carry out -the plan that had been stopped by popular excitement in 1872. - -In 1874 the Oil Combine had on some lines 10 different transportation -advantages over its competitors, _i. e._, 49 cents direct rebate per -barrel of refined oil, 22 cents rebate on crude-oil pipeage, 8½ percent -of refined oil carried free (due to the method of calculating crude and -refined equivalents), 13 cents a barrel advantage through possession of -the railroad oil terminal facilities, 15 percent of by-products carried -free, a rate to New York 10 cents a barrel less than the published rate -on refined oil, and 15 cents on crude oil, exclusive use of tank cars, -underbilling of carload weights, twenty thousand lbs. often for cars -containing forty thousand or even sixty thousand lbs. of oil, or a lump -sum per car regardless of excess weight, and a mileage payment from the -railroads on the tank cars amounting in itself to a large rebate. - -Nearly all the refineries of the oil region and of Pittsburg passed by -sale or lease into the hands of the Combine in 1874–5. - -W. H. Vanderbilt, and other prominent railroad men were stockholders in -the Standard. - -Frank Rockefeller, brother of John D., testified before a congressional -committee July 7, 1876, that he believed Tom Scott, W. H. Vanderbilt, -and other big railroad men shared in the oil rebates. - -The New York Central and the Erie sold their terminal facilities for -handling oil to the Standard Oil Co., thereby making it practically -impossible for the roads to transport oil for the competitors of the -Trust. The Pennsylvania Railroad also, under compulsion of a rate war, -made a deal with the Standard by which the latter acquired the oil cars, -pipe lines, and refineries of the Empire Company, a creature of the -Pennsylvania Railroad.[23] - -Vanderbilt told the Hepburn Committee, August 27, 1879, that “if the -thing kept on the oil people would own the roads.” - -After the Pennsylvania fought the Standard in 1877 and lost, the Combine -paid 11 cents net freight (after deducting rebate) on each barrel of oil -to New York, while its competitors paid $1.90 per barrel,[24]—a -discrimination of 1600 percent by means of exclusive tank cars and rate -arrangements. The trunk lines would not furnish competitors of the -Standard with tank cars nor give them rates and conditions that would -allow them to use their own tank cars. - -The independents had to sell their tank cars or side-track them, because -the Oil Combine prevented the railroads from giving them practical -terms. At times when oil could have been shipped by the independents -they could not get cars, though hundreds were standing idle on the -switches. - -So the independents had to ship their oil in barrels, paying a higher -rate than on tank oil, and paying not only on the oil, but on eighty -lbs. of wood in the barrel, making four hundred lbs. per barrel instead -of three hundred twenty lbs. per barrel by tank. - -Josiah Lombard of New York, the largest independent refiner of oil at -the seaboard, testified as follows before the Hepburn Committee June 23, -1879: - -“Tom Scott, President of the Pennsylvania Railroad Co., was questioned -whether we could have, if there was any means by which we could have, -the same rate of freight as other shippers got, and he said flatly, -‘No.’ - -“And we asked him then, if we shipped the same amount of oil as the -Standard, and he said, ‘No.’ - -“We said that ‘if they had not sufficient cars to do the business with -we would put on the cars.’ - -“Mr. Scott said that they would not allow that, and said that ‘the -Standard Oil Co. were the only parties that could keep peace among the -roads.’” - -Cassatt, Vice-President, confirms the above and adds: - -“The discrimination would be larger on a high rate of freight than a low -rate of freight;” also admits that the “Standard Oil Co. had some 500 -cars full here and at Philadelphia and Baltimore; that he had not -discovered it until recently.” - -Mr. Lombard further testified: - -“Refineries were thus shut down for want of cars. - -“Cassatt threatened, if the independents built the Equitable Pipe Line -or any other lines of pipe [as follows]: - -“‘Well, you may lay all the pipe lines you like, and we will buy them up -for old iron.’ - -“R. C. Vilas, General Freight Agent of the Erie (and brother of Geo. H. -Vilas, Auditor of the Standard Oil Co.), absolutely refused us cars, -saying the Standard Oil Co. had engaged them all. - -“J. H. Rutter, General Freight Agent, New York Central, would not -furnish any cars, and also said, ‘We have no terminal facilities now.’” - -A. J. Cassatt testified before the New York Committee that in 18 months -the Standard Oil had received rebates amounting to $10,000,000. - -In addition to many other advantages enjoyed by the Standard people the -Pennsylvania Railroad in 1878 gave the Combine, through the “American -Transfer Co.,” a “commission” of 20 cents a barrel on all shipments of -petroleum,—not only on their own shipments, but on shipments made by the -independents also. At the same time the New York Central and the Erie -were paying the Standard “commissions” of 20 to 35 cents a barrel on all -the oil shipped over those roads. - -At one time the transcontinental lines charged $105 to return an empty -“cylinder” tank car from the Pacific Coast to the Missouri River, while -making no charge to the Standard for returning their “box” tank cars, -each of which contained a cylinder, which, however, was set upright -instead of being placed longitudinally; a distinction without a -difference, but it served to make a discrimination of over $100 a car in -favor of the Trust. - -The railroads allowed the Oil Trust to stop its cars and divide up a -tank load at two or more stations, but denied this privilege to the -competitors of the Trust. - -The Hepburn Committee reported (1879) that “the Standard Oil Co. -receives rebates from the trunk lines, ranging from 40 cents to $3.07 a -barrel on all oil shipments: That the trunk lines sell their oil-tank -car equipments to the Standard and agree to build no more: That the -Standard controls the terminal facilities for handling oil of the four -trunk lines by purchase or lease from the railroads: That it has frozen -out and gathered in refineries of oil all over the country: That it -dictates terms and rates to the railroads: That the trunk lines have -hauled its oil 300 miles for nothing to enable it to undersell seaboard -refineries not then under its control: That it has succeeded in -practically monopolizing the oil business: That the transactions of the -Standard are of such character that its officers have been indicted, and -that its members decline under oath to give details lest their testimony -should be used to convict them of crime.”[25] - -The oily people were able in one way or another to gain ascendency over -all the railroads. “We made our first contract with the Standard Oil -Company,” said Mr. Cassatt, “for the reason that we found that they were -getting very strong, and they had the backing of the other roads, and, -if we wanted to retain our full share of the business and get fair rates -on it, it would be necessary to make arrangements to protect ourselves.” - -The Combine used the railroads to ruin its rivals, and did it with a -definiteness and vigor of attack never before attempted, and with a -success that would have been impossible without the use of the railroad -power. An example or two will make the matter clear. - -Mr. Corrigan, an oil refiner of Cleveland, became so prosperous in the -seventies that he attracted the attention of the Standard Oil, and in -1877 he began to have trouble. He could not get the crude oil he bought -shipped to Cleveland, nor his product shipped away, with reasonable -promptness. The railroads refused him cars, and delayed his shipments -after they were loaded. And he was driven to lease and finally sell his -works to the Standard, which had no difficulty in getting cars and -securing prompt service. - -George Rice became a producer of oil in 1865. A little later he -established a refinery at Marietta, Ohio. In January, 1879, the freight -rates on oil were raised by the railroads leading out of Marietta, and -by their connections. In some cases the rates were doubled, while the -rates from Cleveland, Pittsburg, Wheeling, and other points where the -Combine had refineries, were lowered. The Baltimore & Ohio, the -Pennsylvania, the Lake Shore, and all the other railroads involved, made -the deal in unison, and after a secret conference of railway officials -with the Standard Oil people. The change hurt the railroads, cut off -their business in oil from Marietta entirely, but they obeyed the orders -of the Standard nevertheless. - -“What would be the inducement?” the freight agent of the B. & O. -connection was asked. - -“That is a matter I am not competent to answer,” he replied.[26] - -Rice, finding himself shut off from the West, North, and East, developed -new business in the South, but everywhere he went he was met with new -discriminations, and even refusals in some cases to give him any rates -at all. He could not ship to certain points at any price. In other cases -the oil rates were jumped up for his benefit, and his cars were delayed -or side-tracked by the railroads. Not satisfied with obstructing and in -large part blocking the shipment of refined oil out of Marietta, the -Combine did all it could to cut off Rice’s supply of crude oil from the -wells. It bought up and destroyed the little pipe line through which he -was getting most of his oil. Rice then turned to the Ohio fields and -brought his oil in by rail over the Cleveland and Marietta Railroad. -Under threat of withdrawing its patronage the Combine then compelled the -road to double the rates to Rice and pay over to the Combine -five-sevenths of all the freight the road collected on oil. Rice had -been paying 17 cents a barrel from the oil fields to his refinery. His -rate went up to 35 cents while the Combine paid only 10 and got 25 cents -of each 35 paid by Rice.[27] “Illegal and inexcusable abuse,” said Judge -Baxter when Rice took the case into court; and the Senate Committee was -also emphatic in its condemnation. The case is in line with the whole -history of the railroads in their relations with the Oil Combine, the -remarkable fact in this instance being that the victim had nerve enough -to fight the Combine. He took the facts to the Ohio Legislature, to the -courts, to investigating committees of New York, and Congress, and -rendered a great public service by bringing the ways of the railroads -and the trust to the light of publicity. If all the victims of the Oil -Combine had manifested equal pluck and public spirit, the evil we are -discussing would long since have ceased to exist.[28] - - - - - CHAPTER VI. - THE SENATE INVESTIGATION OF 1885 AND THE INTERSTATE COMMERCE ACT. - - -In 1885 the United States Senate appointed a committee to investigate -railway discriminations, etc., and this committee made one of the ablest -reports that has ever been issued in relation to railway abuses. It -threw a flood of light upon the nature and prevalence of discrimination, -and the reasons for it. On page 7 of this report the committee says that -our efficient service and low rates (low average rates) “have been -attained at the cost of the most unwarranted discriminations, and its -effect has been to build up the strong at the expense of the weak, to -give the large dealer an advantage over the small trader, to make -capital count for more than individual credit and enterprise, to -concentrate business at great commercial centres, to necessitate -combinations and aggregations of capital, to foster monopoly, to -encourage the growth and extend the influence of corporate power, and to -throw the control of the commerce of the country more and more into the -hands of the few.” - -On page 40 the committee says: “Railroad companies are not disposed to -regard themselves ‘as holding a public office and bound to the public,’ -as expressed in the ancient law. They do not deal with all citizens -alike. They discriminate between persons and between places, and the -States and Congress are consequently called on to in some way enforce -the plain principles of the common law for the protection of the people -against the unlawful conduct of common carriers in carrying on the -commerce of the country.” - -On page 188 the following example is given: “One reference to the -testimony must suffice to illustrate the universality of individual -favoritism, the reasons which influence the railroads in favoring one -shipper to the ruin of another, and the injustice of the system. Mr. C. -M. Wicker of Chicago, a former railroad official of many years’ -experience, was asked if he knew anything of discrimination upon the -part of the transportation companies as between individuals or -localities, and testified as follows: - -“MR. WICKER. Yes; I do. And this discrimination, by reason of rebates, -is a part of the present railroad system. I do not believe the present -railroad system could be conducted without it. Roads coming into this -field to-day and undertaking to do business on a legitimate basis of -billing the property at the agreed rates would simply result in getting -no business in a short time. - -“SENATOR HARRIS. Then, regardless of the popularly understood schedule -rates, practically it is a matter of underbidding for business by way of -rebates? - -“MR. WICKER. Yes, sir; worse than that. It is individual favoritism, the -building up of one party to the detriment of the other. I will -illustrate. I have been doing it myself for years and had to do it. - -“SENATOR HARRIS. Doing it for yourself in your position? - -“MR. WICKER. I am speaking now of when I was a railroad man. Here is -quite a grain point in Iowa, where there are 5 or 6 elevators. As a -railroad man I would try and hold all these dealers on a “level keel” -and give them all the same tariff rate. But suppose there was a road of -5 or 6 or 8 miles across the country, and these dealers should begin to -drop in on me every day or two and tell me that the road across the -country was reaching within a mile or two of our station and drawing to -itself all the grain. You might say that it would be the just and right -thing to do to give all the 5 or 6 dealers at this station a special -rate to meet that competition through the country. But as a railroad man -I can accomplish the purpose better by picking out one good, smart, live -man, and giving him a concession of 3 or 4 cents a hundred, let him go -there and scoop the business. I would get the tonnage, and that is what -I want. But if I give it to the five, it is known in a very short -time.... When you take in these people at the station on a private -rebate you might as well make it public and lose what you intend to -accomplish. You can take hold of one man and build him up at the expense -of the others, and the railroad will get the tonnage. - -“SENATOR HARRIS. The effect is to build the one man up and destroy the -others? - -“MR. WICKER. Yes, sir; but it accomplishes the purposes of the road -better than to build up the 6. - -“SENATOR HARRIS. And the road, in seeking its own preservation, has -resorted to that method of concentrating the business into the hands of -one or a few, to the destruction of the many? - -“MR. WICKER. Yes, sir; and that is a part and parcel of the system.” - -On page 189 the committee says: - -“The practice prevails so generally that it has come to be understood -among business men that the published tariffs are made for the smaller -shippers, and those unsophisticated enough to pay the established rates; -that those who can control the largest amounts of business will be -allowed the lowest rates; that those who, even without this advantage, -can get on ‘the inside,’ through the friendship of the officials or by -any other means, can at least secure valuable concessions; and that the -most advantageous rates are to be obtained only through personal -influence or favoritism, or by persistent ‘bulldozing.’ - -“It is in evidence that this state of affairs is far from satisfactory, -even to those specially favored, who can never be certain that their -competitors do not, or at any time may not, receive even better terms -than themselves. Not a few large shippers who admitted that they were -receiving favorable concessions testified that they would gladly -surrender the special advantages they enjoyed if only the rates could be -made public and alike to all.” - -Again, on page 191: - -“Universal complaint has been made to the committee as to the -discriminations commonly practised against places, and as to the -conspicuous discrepancies between what are usually termed ‘local’ rates -and what are known as ‘through’ rates.” - -In summing up the testimony on pages 180–182 of their report, the -committee presents this tremendous indictment: - -“The complaints against the railroad systems of the United States -expressed to the committee are based upon the following charges: - -“1. That local rates are unreasonably high, compared with through rates. - -“2. That both local and through rates are unreasonably high at -non-competing points, either from absence of competition or in -consequence of pooling agreements that restrict its operation. - -“3. That rates are established without apparent regard to the actual -cost of the service performed, and are based largely on what the traffic -will bear. - -“4. That unjustifiable discriminations are constantly made between -individuals, in the rates charged for like service under similar -circumstances. - -“5. That improper discriminations are made between articles of freight -and branches of business of a like character, and between different -quantities of the same class of freight. - -“6. That unreasonable discriminations are made between localities -similarly situated. - -“7. That the effect of the prevailing policy of railroad management is, -by an elaborate system of special secret rates, rebates, drawbacks, and -concessions, to foster monopoly, to enrich favored shippers, and to -prevent free competition in many lines of trade in which the item of -transportation is an important factor. - -“8. That such favoritism and secrecy introduce an element of uncertainty -into legitimate business that greatly retards the development of our -industries and commerce. - -“9. That the secret cutting of rates and the sudden fluctuations that -constantly take place are demoralizing to all business except that of a -purely speculative character, and frequently occasion great injustice -and heavy losses. - - * * * * * - -“14. That the differences in the classifications in use in various parts -of the country, and sometimes for shipments over the same roads in -different directions are a fruitful source of misunderstandings, and are -often made a means of extortion. - -“15. That a privileged class is created by the granting of passes, and -that the cost of the passenger service is largely increased by the -extent of this abuse. - -“16. That the capitalization and bonded indebtedness of the roads -largely exceed the actual cost of their construction or their present -value, and that unreasonable rates are charged in the effort to pay -dividends on watered stock, and interest on bonds improperly issued. - - * * * * * - -“18. That the management of the railroad business is extravagant and -wasteful, and that a needless tax is imposed upon the shipping and -travelling public by the unnecessary expenditure of large sums in the -maintenance of a costly force of agents engaged in the reckless strife -for competitive business.” - -The result of this investigation and report was the passage of the -Interstate Commerce Act, in 1887, affirming the common law rule that -carriers’ charges must be reasonable and impartial. Common carriers are -forbidden to give “any undue or unreasonable preference or advantage to -any person, locality, or description of traffic in any respect whatever, -or subject any person, locality or description of traffic to any undue -or unreasonable disadvantage in any respect whatsoever.” “No common -carrier” says Section 2, “shall directly or indirectly, by special rate, -rebate, drawback, or other device, charge or receive from any person -greater or less compensation for any service in the transportation of -passengers or property than it charges or receives from others for a -like and contemporaneous service under substantially similar -circumstances and conditions.” Section 4 makes it “unlawful to receive -more for a shorter than for a longer distance, including the shorter on -the same line, in the same direction, under substantially similar -circumstances and conditions,” except where the Commission created by -the Act shall authorize the carrier to charge less for the longer than -for the shorter distance. Rates must be published and filed with the -Commission, and 10 days’ notice must be given of advances. Any deviation -from the published tariff is unlawful. The Act excepted traffic “wholly -within one State,” and provided that property might be handled free or -at reduced rates for the United States, State, or municipal governments, -or for charitable or exhibition purposes; that preachers might have -reduced rates, and that passes might be given to employees of the road -or by exchange to employees of other roads. The penalty for breach of -the law was made a fine not exceeding $5000 for each offence, and -victims of discrimination, etc., could collect damages. - - - - - CHAPTER VII. - THE INTERSTATE COMMISSION. - - -A strong Commission was appointed, the Chairman being Thomas M. Cooley, -one of the ablest jurists in the country, Chief Justice of the Michigan -Supreme Court, author of “Constitutional Limitations” and other works of -the highest authority. The Commission started with a review of the evils -the Interstate Act was intended to abolish, and entered earnestly upon -the great work of enforcing the law. - -The Commission’s statement of the arrangements used by the railways for -discrimination is so admirably clear that a part of it cannot fail to be -useful here. - -“These arrangements,” says the Commission, “took the form of special -rates, rebates and drawbacks, underbilling, reduced classification, or -whatever might be best adapted to keep the transaction from the public; -but the public very well understood that private arrangements were to be -had if the proper motives were presented. The memorandum book carried in -the pocket of the general freight agent often contained the only record -of the rates made to the different patrons of the road, and it was in -his power to place a man or a community under an immense obligation by -conceding a special rate on one day, and to nullify the effect of it on -the next by doing even better by a competitor. - -“Special favors or rebates to large dealers were not always given -because of any profit which was anticipated from the business obtained -by allowing them; there were other reasons to influence their allowance. -It was early perceived that shares in railroad corporations were an -enticing subject for speculation, and that the ease with which the hopes -and expectations of buyers and holders could be operated upon pointed -out a possible road to speedy wealth for those who should have the -management of the roads. For speculative purposes an increase in the -volume of business might be as useful as an increase in net returns; for -it might easily be made to look to those who knew nothing of its cause -like the beginning of great and increasing prosperity to the road. But a -temporary increase was sometimes worked up for still other reasons, such -as to render plausible some demand for an extension of line or for some -other great expenditure, or to assist in making terms in a -consolidation, or to strengthen the demand for a larger share in a pool. - -“Whatever was the motive, the allowance of the special rate or rebate -was essentially unjust and corrupting; it wronged the smaller dealer -oftentimes to an extent that was ruinous, and it was generally -accompanied by an allowance of free personal transportation to the -larger dealer, which had the effect to emphasize its evils. There was -not the least doubt that had the case been properly brought to a -judicial test these transactions would in many cases have been held to -be illegal at the common law; but the proof was in general difficult, -the remedy doubtful or obscure, and the very resort to a remedy against -the party which fixed the rates of transportation at pleasure might -prove more injurious than the rebate itself. Parties affected by it, -therefore, instead of seeking redress in the courts, were more likely to -direct their efforts to the securing of similar favors on their own -behalf. They acquiesced in the supposition that there must or would be a -privileged class in respect to rates, and they endeavored to secure for -themselves a place in it. - -“Local discriminations, though not at first so unjust and offensive, -have nevertheless been exceedingly mischievous, and if some towns have -grown, others have withered away under their influence. In some sections -of the country if rates were maintained as they were at the time the -interstate commerce law took effect, it was practically impossible for a -new town, however great its natural advantages, to acquire the -prosperity and the strength which would make it a rival of the towns -which were specially favored in rates; for the rates themselves would -establish for it indefinitely a condition of subordination and -dependence to ‘trade centres.’ The tendency of railroad competition has -been to press the rates down and still further down at these trade -centres, while the depression at intermediate points has been rather -upon business than upon rates. - -“The inevitable result was that this management of the business had a -direct and very decided tendency to strengthen unjustly the strong among -the customers and to depress the weak. These were very great evils and -the indirect consequences were even greater and more pernicious than the -direct, for they tended to fix in the public mind a belief that -injustice and inequality in the employment of public agencies were not -condemned by the law, and that success in business was to be sought for -in favoritism rather than in legitimate competition and enterprise. - -“The evils of free transportation of persons were not less conspicuous -than those which have been mentioned. This, where it extended beyond -persons engaged in railroad service, was actual favoritism in a most -unjust and offensive form. Free transportation was given not only to -secure business, but to gain the favor of localities and of public -bodies; and while it was often demanded by persons who had, or claimed -to have, influence which was capable of being made use of to the -prejudice of the railroads, it was also accepted by public officers of -all grades and of all varieties of service. In this last case the pass -system was particularly obnoxious and baneful. A ticket entitling one to -free passage by rail was even more effective in enlisting the assistance -and support of the holder than its value in money would have been, and -in a great many cases it would be received and availed of when the offer -of money made to accomplish the same end would have been spurned as a -bribe. Much suspicion of public men resulted, and some deterioration of -the moral sense of the community traceable to this cause was -unavoidable. The parties most frequently and most largely favored were -those possessing large means and having large business interests. - -“The general fact came to be that in proportion to the distance they -were carried those able to pay the most paid the least. One without -means had seldom any ground on which to demand free transportation, -while one with wealth was likely to have many grounds on which he could -make it for the interest of the railroad company to favor him; and he -was oftentimes favored with free transportation not only for himself and -family, but for his business agents also, and even sometimes for his -customers. The demand for free transportation was often in the nature of -blackmail, and was yielded to unwillingly and through fear of damaging -consequences from a refusal. But the evils were present as much when it -was extorted as when it was freely given.”[29] - -The Commission had plenty to do. Complaints of unreasonable rates and -unjust discriminations between shippers, commodities, and places poured -in upon it, and vigorous decisions against favoritism and excessive -rates poured out upon the railroads. During 1887 and 1888 the Commission -dealt with cases of passes issued in contravention of law,[30] -preferential fares for drummers,[31] commissions on the sale of -tickets,[32] discounts on freight rates to large shippers,[33] -discrimination by combination rates,[34] by preference of tank shipments -of oil,[35] by unfair distribution of cars,[36] by underbilling,[37] -false classifications,[38] commissions to soliciting agents,[39] etc. -Underbilling, false classification, false weighing, and commissions to -soliciting agents were investigated by the Commission in 1888 at New -York, Buffalo, Detroit, Chicago, Omaha, Lincoln, and Washington.[40] All -these methods of discrimination were found widely prevalent, and new -legislation was asked for imposing a penalty on shippers who -fraudulently obtained reduced rates. - -When Congress met for the session of 1889 it was believed that the law -had greatly reduced the number of passes issued, straightened out a part -of the long-haul discriminations, and accomplished a good deal in the -way of suppressing rebates, but it was clear that much remained to be -done. In one way or another all over the country secret discriminations -were still being made for the benefit of favored shippers. Congress -therefore in March, 1889, amended the Interstate Commerce Act by adding -to the fine a penalty of two years’ imprisonment in the penitentiary in -case of unlawful discrimination, and pronouncing the same penalties -against shippers and their agents who secure advantage by false billing, -false classification, etc., or by soliciting or otherwise inducing a -railway to discriminate in their favor, or by aiding or abetting any -such discriminations. It was also provided that 3 days’ notice must be -given in case of any reduction of rates, and that homeless and destitute -persons, as well as preachers, might be favored with low fares. - -The stringent provision for imprisonment did not prove any more -effective than the milder law that preceded it, less so apparently, for -the following years were flooded with unfair discriminations.[41] - - - - - CHAPTER VIII. - EFFECTS OF THE INTERSTATE ACT. - - -An investigation by the Commission in May, 1889, concerning passes, and -covering 27 railroads, showed that passes were issued freely to -expressmen, telegraph men, press men, managers of excursions, attorneys, -persons contracting with the railroads in consideration of advertising, -shippers, members of legislative bodies, United States, State, and -municipal officers, officials of steamship and steamboat lines, etc. -These passes were chiefly limited to a State, but to some extent were -good for interstate journeys. Of State passes the larger numbers were -issued to members of legislatures and drovers; “complimentaries” came -next, with United States and municipal officers, newspapermen, and -shippers, in the order named. - -The Commission said: “The Interstate Commerce Act was intended to end -all the abuses attending free transportation of persons, and to a -considerable extent it has done so. But very largely the carriers, -especially the strong systems, where the abuse has been greatest, have -tried to avoid the law by falling back on State protection, and issuing -passes within the limits of each State. Three of the large railroad -systems, when called on by the Commission to make an exhibit of the -passes issued by them, declined to do so on the ground that the passes -were limited to the bounds of the State, and therefore not within the -jurisdiction of the Commission. If the New York Central and Pennsylvania -railroads can thus issue passes at discretion it is impracticable to -enforce the laws against their competitors.”[42] By issuing to a favored -individual a pass good in Pennsylvania, another good in Ohio, another -for Indiana, another for Illinois, etc., the Pennsylvania Railroad can -give the beneficiary as full freedom of its lines as any interstate pass -could give. - -Pass making went merrily on all over the country, with a complaint now -and then to let in the light, but no effective crusade against the -disease. The Boston and Maine, for example, issued passes in Maine, New -Hampshire, Vermont, and Massachusetts, to public officers of the States -and the United States, members of legislatures, and railroad -commissions, agents of ice companies, milk contractors, newspaper men, -etc.[43] The Commission recorded its protest and declared that the -“similar circumstances” of the Interstate Act do not relate to the -social or official position of the passenger;[44] but the pestilence is -beyond the reach of the national board, and after eighteen years of -Federal prohibition our railroad business is still honeycombed with -political and commercial passes, as we have already seen in the second -chapter of this book. - -Ticket scalping, “an obvious evasion of the law,” and the payment of -commissions on the sale of tickets in addition to salaries, so that the -brokers were tempted to cut rates dividing their commissions with their -customers, continued in full bloom in spite of the Federal law. The -commissions were $1 from New England points to Chicago; $1 from Chicago -to the Missouri River; and $1 from the river to Denver. In addition to -such definite amounts some roads paid 10 percent on their receipts for -the passage, making a total commission of $4 or $5 or more in some cases -for the sale of a single ticket.[45] “In cases of commissions of only $1 -for short distances there may be little or no inducement for the agent -to divide with the passenger, but in cases of cumulative commissions for -long distances the temptation to divide is stronger, and the probability -of abuse is so great that the impropriety of putting the opportunity -before the agent is manifest. It is not unusual for a single company to -pay a sum of $100,000 or even more in a year, and the aggregate entailed -reaches millions of dollars. This money is illegitimately spent; it is -paid in excess of salaries to agents for the purpose of taking business -from competitors, and when competitors all do it, it is difficult to see -how any benefit can accrue from it to any company.”[46] - -In 1890 the Commission reported that scalpers were supported by the -railroads. They found 15 scalping offices in Chicago, 9 in Cincinnati, -13 in New York, 7 in Kansas City, etc. In 1895 they found that scalping -“was steadily enlarging in scope and volume.”[47] In 1897 the “vicious -practice” was still in full swing, though New York, New Jersey, and -eight other States had passed stringent laws against it.[48] But it has -now been largely reduced, though by no means abolished, and the -diminution has come, not because the law acquired sufficient vigor to -get itself enforced, but because the railroad presidents combined to -stop the practice, which was recognized to be injurious to railroad -interests.[49] - -In respect to other forms of discrimination between passengers the -Commission ordered that rates for groups or parties must not be lower -than the regular fare for one passenger multiplied by the number of -persons in the party,[50] and that although separate cars might be -provided for colored persons, they must have equal accommodations with -white people who pay the same fare.[51] - -Turning to freight discriminations, we find that a bewildering mass of -questions and complaints has pressed upon the Commission. It has shown -an earnest desire for justice, and for the most part good judgment, but -it has accomplished comparatively little in the way of stopping unjust -discriminations. Witnesses refused to testify, on the ground that -testimony in respect to rebates and other forms of discrimination might -be used to convict them of crime. - -In the Counselman case (142 U. S. 547), Jan., 1892, the U. S. Supreme -Court decided that a witness could not be compelled to testify in regard -to discrimination in which he was involved, since the Federal law made -it a criminal offence to make or benefit by discrimination. Unless the -law exempts the witness from prosecution in consequence of his answers -or in relation to the subject of them, he is not obliged to answer a -question when the answer might tend to incriminate him.[52] Refusal to -answer on such a plea is of course equivalent to confession of guilt. In -this case Counselman, a large grain shipper, had been given rates on -corn some 5 cents less per hundred than the rates paid by others from -Kansas and Nebraska points to Chicago, over the Rock Island, Burlington, -and other railroads. Five cents a hundred is an enormous profit on corn -which the farmer had sold at 18 to 22 cents per hundred, and such a -margin would enable the favored shipper to drive every one else out of -the trade; and on many western roads it has been practically the case -that only the railway officials and their secret partners can do -business. Counselman refused to tell a United States grand jury whether -or no he had had any rebates from the railroads in 1890. He said he had -received none from Stickney’s road, nor from the Santa Fe, had had no -business with the latter, he thought, but as to the Rock Island, C. B. & -Q., etc., he declined to answer on the plea that to do so might -incriminate him. - -Some railroad officials testified freely, but neglected to tell the -truth.[53] Discriminations as a rule were secret. Even when it was -clearly known that favoritism was being shown, shippers were generally -afraid to complain, and in the small percent of cases where complaint -and investigation took place it seemed impossible to get at the truth in -any large way, because the railroad men for the most part would not -“cough up” the facts. Still, something was done by the Interstate -Commission, the courts, and the Industrial Commission. Some progress was -made and some light secured. The jets of flame that here and there came -up through the cracks from the under-world showed very clearly what was -going on beneath the surface of railway affairs. - - - _Direct Rebates._ - -Direct rebates on interstate traffic appear to have been checked for a -few months after the passage of the Commerce Act, but the railroads -admitted that they still gave rebates on traffic within a State[54] just -as they continued to give passes, making them good within one State, -insisting in respect to both rebates and passes that they had a right to -give them because the law did not reach State traffic. Nevertheless, as -the Commission remarked, such rebates inevitably affect the rates upon -interstate traffic, and a competing road whose traffic is taken a little -further, crossing the state line, may be compelled to give rebates or -surrender important business. - -As a matter of fact, discriminating rates and rebates on interstate as -well as State business were soon as much in fashion as ever.[55] - -In one small town in the Middle West judgments for nearly $40,000 were -recovered against a railroad for illegal discriminations in that one -town. In some cases the discriminations amount to $40 a car. These cases -were all subsequent to the Interstate Act. - -Some years ago the Chief Justice of Kansas declared that the Santa Fe -management preceding the present one was notorious for giving secret -rebates. The president of the road was asked to resign because the -railroad funds were some millions short, due, it is said, to the secret -rebates the company had paid. An expert went over the books and -discovered that some $7,000,000 had been paid in rebates by the Santa Fe -in a few years. - -Shippers who would not or could not get rebates or concessions were in -danger of serious loss and perhaps ruin. Mr. H. F. Douseman, for many -years a grain shipper in Chicago, and chairman of the board of trade of -that city, had to go out of business because he would not take the -rebates he might have had. Before 1887 he took rebates of 10 or 15 -percent (2 or 3 cents on the cwt.), but after that he refused them. -“Virtue is its own reward,” and Mr. Houseman got his pay in that form. -“I feel that I have been driven out of business because I would not -accept a rebate,” he told the Industrial Commission. “I have never taken -a rebate since the Interstate Law went into effect. I did not propose to -put myself in the shape of a criminal.”[56] - -It may be a matter of surprise to many that even one man of this kind -could be found in Chicago. If such virtue were prevalent the enforcement -of law would be easy. Mr. Douseman says that for 6 months after the -Interstate Law was passed no rebates were paid; everybody was on an -equality. “After the first six months, rebates began to be given. At the -end of the first year they were quite frequent, and they have continued -ever since. Prior to 1887 the only time when rates were absolutely -solid, when every one was on the same basis, was when the Vanderbilts -were trying to bankrupt the West Shore road, and rates were down to 12 -cents in New York. Everybody then, as I understand, had the same rates.” - -The condition of things in 1890 is shown by the reported statement of a -Chicago railroad manager quoted by the Commission. “The situation in the -West is so bad that it could hardly be worse. Rates are absolutely -demoralized, and neither shippers, passengers, railways, nor the public -in general make anything by this state of affairs. Take passenger rates -for instance; they are very low; but who benefits by the reduction? No -one but the scalpers.... In freight matters the case is just the same. -Certain shippers are allowed heavy rebates, while others are made to pay -full rates.... The management is dishonest on all sides, and there is -not a road in the country that can be accused of living up to the -Interstate Law. Of course when some poor devil comes along and wants a -pass to save him from starvation, he has several clauses of the -Interstate Act read to him; but when a rich shipper wants a pass, why, -he gets it at once.”[57] - -Complaints and investigations from time to time in subsequent years -showed the continuance of these conditions. For one concern a large -number of cars of corn were carried from Kansas City to St. Louis at 6 -cents per hundred lbs. while the tariff was 15 cents.[58] In the traffic -to Chicago one firm shipped all the grain over one road, and another -firm “had the rate” on another line. It was clear that these shippers -had advantages that enabled them to keep other shippers out of the -field.[59] - -A wholesale grocery house getting 25 percent rebate on its shipments -established branches in various cities. Through a disagreement with one -of the railroads that thought it was not getting its share of the -business, the rebate enjoyed by one of the branches was withdrawn, and -the branch in that city went out of business. A leading dry-goods firm -declared that so long as it secured a rebate of 25 percent it had no -objection to existing methods of rate-making.[60] - -The International Coal Company declared, in a suit against the -Pennsylvania Railroad for damages, that it was driven out of business by -discrimination, its rival receiving rebates of 20 cents per ton in -1898–9 and 10 cents per ton in 1899–1900. - -The railroads show a disposition to back each other in disregarding the -law. Mr. McCabe, traffic manager for the Pennsylvania lines west of -Pittsburg, said the Pennsylvania system would stand by any rate made by -its connecting lines.[61] - - - - - CHAPTER IX. - SUBSTITUTES FOR REBATES. - - -Numerous substitutes for the direct rebate were used. In some cases $10 -a car was paid on shipments of flour from the Northwest under pretence -of paying for the cost of loading the car above the minimum weight.[62] -Railroads paid 50 cents for the loading of each private stock car, and ¾ -of a cent for every mile the car was hauled, loaded or empty. Yardage -was also paid to the car-line for keeping the cattle in its charge in -its own yards, at the rate of 3½ cents per hundred lbs. for all cattle -hauled to its yards. “The amount of these rebates,” said the Commission, -“more than pays the entire cost of the improved stock cars within 2 -years, besides covering operating expenses.”[63] - -Twenty-six railroad companies operating in the territory extending in -different directions from Chicago, and engaged in the business in which -discriminations by allowances of car-mileage were supposed to exist, -were summoned to make a showing of the allowances paid by each of them -for car-mileage for the different classes of cars furnished by shippers, -car companies, and individuals, or connecting lines. A single railroad -company paid car-mileage to 65 different companies or firms owning cars, -of which number 54 were shippers and the rest fast freights. The -Commission found that the mileage paid on private cars yielded a profit -in many cases of 25 percent, 50 percent, and even more. - -“The rates allowed for car-mileage were shown to be as follows: For -ordinary freight cars, a uniform rate of ¾ of a cent a mile; for Pullman -palace cars, 3 cents a mile; for Pullman tourist sleepers, 1 cent a -mile; for ordinary passenger cars exchanged with other companies, 3 -cents a mile; for baggage, mail, and express cars exchanged with other -companies, 1½ cents a mile by some roads, and 3 cents a mile by others; -for refrigerator cars used for carrying dressed beef, 1 cent a mile in -some cases, and in other cases ¾ of a cent a mile; for furniture cars, -oil-tank cars, palace live-stock cars, and other cars owned by private -individuals and companies, ¾ of a cent a mile. Some companies pay -mileage on tank cars both loaded and empty, and some only when loaded. -For palace horse-cars no mileage is allowed on some roads, shippers in -such cars paying for the car. - -“The cost of the investment in cars, and the amount of mileage allowed -for their use, show that the investment is very profitable. Refrigerator -cars cost from $900 to $1000; private cattle-cars cost about $650; -oil-tank cars about $610; cars used for the transportation of live hogs -about $500; ordinary freight cars from $450 to $500. Repairs on the cars -are made by the railroad company in whose use they are when repairs are -required. The life of a box car averages 15 years, and of a refrigerator -car 8 years.”[64] - -“Private cars,” owned by the railroads but chartered for private use, -were the subject of discrimination of another kind. For example, a -commercial salesman travelled with his assistant over the Northern -Pacific in a private car stocked with samples. For the first trip he -paid 15 round-trip fares between St. Paul and Portland, but for -subsequent trips the road charged 15 local fares from point to point -where stoppages were made. As theatrical and other parties in private -cars were usually carried for 15 round-trip fares it was alleged to be -unfair to charge the drummer local rates.[65] - -Terminal charges for delivery at certain places were made a means of -discrimination.[66] Free cartage for some shippers and not for -others,[67] or for one town and not for another, gave a decided -advantage to the favored shippers. - -To get the business of B., a Pittsburg dealer in beer, the B. & O., with -the approval of Wight, one of its general officers, gave B. 3½ cents per -hundred for hauling his own beer from the station, while K., another -beer dealer there, received no such concession, but paid the same -freight rates and hauled his beer at his own expense. Wight was indicted -and convicted before the district court for violation of Section 2 of -the Interstate Act, and the United States Supreme Court sustained the -decision in 167 U. S. 512, May, 1897, holding that the cartage allowance -in one case and not in the other was a discrimination under the 2d -section of the Commerce Act. - -In Grand Rapids, Michigan, free cartage had been in vogue for 25 years, -but in Ionia, near by, no free cartage was afforded by the railroads, -although the station was nearer the centre or main delivery area of the -city than in Grand Rapids. This had the effect of a discrimination -against the merchants of Ionia amounting to about 2 cents per hundred -lbs.[68] - -In June, 1889, the Commission asked most of the leading roads, 585 in -number, for information about free cartage delivery. From the answers it -appears “that 65 railroads allowed free cartage delivery or equalizing -cartage allowances, and 389 railroads do neither; 200 companies only -switch cars over to mills and manufacturers. No company furnishes free -cartage delivery at all stations, but as a rule, only at a few stations. -The estimated cost of free cartage delivery will average about 2½ cents -per hundred pounds. Where an allowance is made for switching or for -equalizing distances from shippers, the average cost is about $2 per car -or $2.50.”[69] - -Denial of the stoppage-in-transit privilege at one locality while -allowing it to others is unlawful.[70] Differences in the time allowed -for unloading may amount to a substantial preference. At Philadelphia 96 -hours was allowed for unloading, against 72 hours at interior points, -for coal, coke, or iron, and 48 hours for other goods. With demurrage -charges of $1 for each day’s delay in unloading beyond the allotted -time, the difference between 48 and 96 hours would mean $2 a car.[71] - -Free storage is another method of favoritism, sometimes used -systematically and extensively, as described by the Commission. “A -shipper sends a carload of freight to a specific destination consigned -to his order by arrangement with the carrier. The freight is kept in the -car or freight house or some warehouse which the carrier controls, and -on orders of the shipper or his agent issued from time to time the -freight is delivered in small lots to designated persons. These persons -are the actual consignees, and the shipper is enabled by this means to -avoid paying the higher less-than-carload rate and to reap other -advantages through this privilege of storage. Such special facilities as -storage, handling, cartage, distribution, and reshipment of less -quantities, either without charge or at extremely low compensation for -the character of the service, amounted substantially to providing a -shipper with branch business houses.”[72] - -Overbilling and underbilling have been found to be very convenient -substitutes for the rebate. A bill of lading may acknowledge the receipt -of 70 barrels of flour; 65 only are shipped, and the railway pays -damages for the loss of the 5 non-existent barrels. On the other hand -railroads have been known to suggest to millers that they ship flour on -the generous plan of shipping 200 barrels and billing 125.[73] Some -shippers have been allowed to ship only 4 boxes of peaches to the -hundred lbs., while others were permitted to ship 6 boxes to the hundred -lbs. “That is the billing. Sometimes peaches are billed 4 boxes to the -hundred lbs. to one point, and 6 boxes to the hundred lbs. to a point -350 miles farther on.”[74] At another time the cashier of an important -firm is made a nominal agent for the railway company, and under the name -of commission to him an enormous rebate is allowed for all the business -his employers send over the line. Or again, the railway company -purchases from a favored trader its supplies of the goods in which he -deals, at a fancy price. - -The “expense bill system” has proved to be an instrument of preference -and fraud. On presentation of an “expense bill” showing payment for -shipments into Kansas City the railroads would allow reshipment of an -equal weight from Kansas City to Chicago at the balance of the through -rate from the point of origin to Chicago.[75] This gave grain from the -West an advantage over grain grown near Kansas City. When the rate from -Kansas City to Chicago was 20 cents on wheat and 17 cents on corn the -grain carried on the balance of the through rate under the expense bill -system was carried 8 to 10 cents less than grain grown in Missouri and -Iowa.[76] - -Not satisfied with the discounts obtained on actual expense bills, -shippers altered bills and forged new ones to enlarge their traffic at -the cut rates. In this way “expense bills showing a high balance were -constantly substituted for those showing a low balance.”[77] - -Rebate equivalents were given in the form of elevator rebates and -allowances. Elevators owned or controlled by railroad companies were -leased at nominal charges to favored shippers, or secret commissions -were paid to favored parties for all grain consigned to specified -elevators. One railroad for example paid a concern, holding a line of -elevators on the railroad, 1¼ cents per 100 on all grain consigned to -those elevators.[78] - -In this case the consignment was 150 cars a day from November to May, -averaging 32,000 to 34,000 lbs. a car. The commissions therefore -amounted to $4 a car, $600 a day, $120,000 a year. - -The United States Industrial Commission says, under the head of “Freight -discriminations and allowances to elevators:” “On each of the leading -railways from grain-producing sections to Chicago, allowances, ranging -from one-half to 1½ cents per bushel, are made on grain to one or two -favored firms.... The favored elevators are thus enabled to pay higher -prices for grain. The average profit in handling grain is less than 1½ -cents per bushel, and smaller buyers can thus easily be driven out of -business.... The small shipper being driven out of business, the large -dealer is then in a position to depress the price of grain to the -producer.”[79] - -The railroads deny equal rights in the building of elevators. A railroad -which had granted the right for two elevators at Elmwood on the -company’s right of way refused to give H. & Co. the same privilege. The -State Board of Transportation ordered the railroad to discontinue the -discrimination against H. & Co., and give them the same privileges as -others. But the United States Supreme Court held that the road could not -be forced to grant its property for private use.[80] - -One method of discrimination I learned of in the West a few years ago is -not adequately described in any report.[81] - -The head of a road running into Chicago from Missouri River points -formed a grain company to buy grain in Kansas City and sell it in -Chicago. The railway guaranteed the grain company against loss. When -wheat was 50 cents in Kansas City and 60 cents in Chicago, the grain -company paid 51 cents in Kansas City to get the grain. The railroad -charged the regular 10 cent tariff. The grain was sold at 60. The -railroad paid back 1 cent on the guarantee and still made 9 cents. And -the railroad-grain-company-combine was able to drive other buyers out of -the market and other railroads out of the traffic. The Santa Fe, for -example, carried 28 percent of the grain going into Kansas City, but -only hauled 3 percent out to Chicago. - -Railroads sometimes seek to evade the law by contracting to deliver -goods at a certain price including the freight and the payment for the -goods in one lump sum, so that the freight charge is merged and cannot -be ascertained. Nine years ago, in 1896, the Chesapeake and Ohio -Railroad contracted with the New York, New Haven and Hartford to deliver -2,000,000 tons of coal at New Haven at $2.75 a ton. The published -freight rate at that time was $1.15 and the price of the coal at the -mines $2 a ton. The Interstate Commerce Commission held that this was a -discrimination by the Chesapeake and Ohio Railroad against every -independent mine owner in its territory, and that the railroad had no -right to contract to sell coal at any price. The Federal Court sustained -this view, and it is stated that the Department of Justice will ask the -Supreme Court for a blanket injunction against the two railroads, -restraining them from carrying freight at less than the published rates. -It is said that J. Pierpont Morgan guaranteed that the Chesapeake and -Ohio would perform the contract. - -Action _against_ an individual or company is quite as effective a form -of discrimination as action in favor of a rival. Shippers at a certain -place on the Chicago and Northwestern were handicapped by refusal of -through rates on asbestos, compelling them to pay higher rates than -their competitors.[82] A Southern railroad charged the Bigby Packet -Company a much higher rate on cotton from Mobile to New Orleans than the -established rate on local shipments of cotton, in order to discourage -shipments by way of the Packet Company from the point of origin in -Alabama, and compel the cotton to travel all the way by rail.[83] - - - - - CHAPTER X. - DENIAL OF FAIR FACILITIES. - - -The refusal to furnish cars in fair proportion is a familiar form of -discrimination all through this period, usually in combination with -other forms of preference. In Kansas, on the line of the St. Louis and -San Francisco Railway, were two coal companies whose plants were of -about equal capacity, and several individual shippers. The railway and -its officials became interested in one of the coal companies, and by -rebate and other process it was given rates which averaged only forty -percent of the rates charged other shippers. The result was that all the -other shippers were driven out of business, part of them being -hopelessly ruined before giving up the struggle. In addition to rate -discrimination the railway practised gross favoritism in the -distribution of cars. For example, during one period of 564 days, as was -proven in court, the road delivered to the Pittsburg Coal Company 2,371 -empty cars to be loaded with coal, although such company had sale for, -and capacity to produce and load, during the same period, more than -15,000 cars. During the same time this railway company delivered to the -Rogers Coal Company, in which the railway company and C. W. Rogers, its -vice-president and general manager, were interested, no less than 15,483 -coal cars, while 466 were delivered to individual shippers. In other -words, the coal company owned in large part by the railway and its -officials, was given 82 percent of all the facilities to get coal to -market, although the other shippers had much greater combined capacity -than the Rogers Coal Company. - -During the last four months of the period named, and when the Pittsburg -Coal Company had the plant, force, and capacity to load thirty cars per -day, they received an average of one and one-fourth cars per day, -resulting as was intended, in the utter ruin of a prosperous business -and the involuntary sale of the property, while the railway coal -company, the railway officials, and the accommodating friends who -operated the Rogers Coal Company, made vast sums of money; and when all -other shippers had thus been driven off the line the price of coal was -advanced to the consumer. - -Another railway interested in a coal mine furnished cars in abundance to -that mine and to others that would sell their product to the mining -company in which the railway was interested, but systematically failed -to furnish cars to other operators.[84] One operator, after being forced -for years in this way to sell his product to the railway mining company -at a very low price, was obliged to build a railway of his own in order -to reach other lines of railroad and so have a fighting chance for cars. - -In Arkansas a coal mine owned by the Gould interests was able to ship -its product to market at very low rates, while the owners of an -adjoining mine were forced to haul their coal to the same market in -wagons because the rates charged them from the coal railway were so high -as to absorb the whole value of the coal at destination. - -A big capitalist in the West got hold of great oil fields on the Pacific -slope, wonderful prospects, contracts to supply big cities, etc. Some -one told him he had better see the railroads before he made his -contracts. He thought the transportation question would be all right and -went ahead. When he got his contracts made and wanted to ship the oil, -he asked for cars, and then he found the transportation question was not -all right. He could not get the cars. - -Sometimes a railroad has arbitrarily refused to haul goods to certain -consignees. A case of this kind came before the Texas Railway Commission -in the case of the Independent Compress _v._ Chicago, Rock Island and -Texas Railway Company. The Bowie Compress, located at the same station -with the Independent, had some sort of pull which caused the railroad to -refuse to haul cotton to that station unless consigned to the Bowie -Compress. The railway also allowed compression charges out of the -through rate on cotton shipped to the Bowie Compress, refused freight -from points of origin, and reshipped the cotton from the Bowie press at -through rates, while refusing such concessions to others.[85] - -The refusal to deliver at a certain place may be as effective sometimes -as the refusal to deliver at all. When in 1890 Mr. Nelson Morris tried -to establish competitive stock yards in Chicago to get rid of the graft -of the Union Stock Yards owned largely by railway interests, the -Vanderbilts being in the lead, his enterprise was loudly applauded by -the stock raisers of the West; but the railroads made short work of -Morris. They simply refused to deliver to his yards the cars shipped -there. They did not recognize any such place as the Morris yards and -calmly hauled all cars to the old terminal. If Mr. Morris wanted them he -must come and get them and pay switching charges. This ruined the -venture. - -Big shippers may be given an undue advantage by excessive difference -between the rates on carloads and less than carloads.[86] On June 29, -1898, the Western railroads advanced their less-than-carload rates to -the Pacific Coast to a minimum difference of 50 cents a cwt. above the -carload rate; and “on a great many commodities the difference is greater -than the profit on the goods.”[87] The Interstate Commission regards a -moderate reduction on carload shipments as fair, but will not sanction -lower rates for cargo or train-load quantities than for carloads.[88] - - - - - CHAPTER XI. - CLASSIFICATION AND COMMODITY RATES. - - -Classification and commodity rates afford many examples of -discrimination in the period we are studying. We find furs and fur -scraps classed as double first-class, while hats and fancy products, for -which these commodities constitute raw material, were first-class.[89] -Celery was classed with peaches and grapes, instead of with cauliflower -and asparagus, lettuce and peas.[90] The charge for beans and peas (70 -cents) was almost double the charge on tomatoes (44 cents).[91] Flour -for export was carried at much lower rates than wheat. Before 1886 wheat -was carried from Texas, Missouri, and Kansas at 15 cents per hundred -lbs. less than flour, without regard to distance. From 1886 to the end -of this middle period the rates on wheat for export show a difference of -4 to 11 cents per hundred below the rates on flour. As the profit to -American millers on flour for export is from 1 to 3 cents per hundred it -is clear that such discrimination is prohibitive upon American millers -in favor of English and other foreign millers. The public policy and -good railway policy seem to require the same rate on export wheat and -export flour.[92] Corn was carried between Kansas points and Texas -points for 7 cents per hundred less than corn meal,—a strong -discrimination against Kansas millers.[93] The Eastern railways also -carried corn at lower rates than corn meal to Eastern mills, and carried -the meal, hominy, ground corn, etc., back to Indiana. This gave the -railways more traffic, but it was a tremendous waste of industrial force -and injured the Western mills, since a discrimination of 5 percent was -sufficient to eat up three or four times the profit of any miller. - -The Southern Railway put soap in the sixth class with a rate of 49 cents -a hundred, or 33 cents when shipped by large manufacturers, while -Pearline was put in the fourth class with a rate of 73 cents a hundred. -Pearline and soap are competitors. There is no appreciable difference in -the cost of transportation. But Pearline commands a higher price, so the -railways charged more than double the rate they got for soap from the -manufacturers. In another case brought before the Commission in 1889, -soap in carload lots was put in class V, while sugar, cerealine, cracked -wheat, starch, rice, coffee, pickles, etc., were in class VI. One make -of soap was put by many railroads in the second class, while other soaps -of similar use and value were in the fourth class.[94] - -One of the strangest anomalies of classification is the rating of patent -medicines as first-class, while ale and beer are third class. In a -complaint on the latter score by a prominent manufacturer of patent -medicines against the New York Central and other railroads, it was shown -that the medicines were similar in bulk and intrinsic value to the -liquors, and it is possible that the similarity went much farther than -this. - -Blocks intended for wagon-hubs took one rate on the Lake Shore and -Michigan Southern and boards for wagon boxes another rate. - -Railroad ties have been charged a higher rate than lumber. A high rate -on railroad ties prevents their being shipped and depreciates their -value at home, so that the discriminating company is able to buy them at -a low price. - -The Union Pacific years ago made prohibitory rates on steel rails in -order to hinder or prevent the construction of a road that promised to -become a competitor of one of the Union Pacific’s connecting lines. -Prohibitory rates on rails, ties, etc., have often been maintained to -obstruct the building of competing lines, and to render them more -costly. - - - - - CHAPTER XII. - OIL AND BEEF. - - -Oil in Standard hands continued to receive favorable attention from the -railroads throughout the middle period. The Combine was preferred by an -“unreasonable mileage” payment of ¾ of a cent a mile on its tank cars, -loaded or empty,[95] while others who attempted to ship in tank cars had -to pay mileage to the railroads for the return of their empties; by -practically compelling independents to ship in barrels, and charging for -the weight of the barrel; and by making an arbitrary allowance of 42 -gallons for leakage on tank shipments with no allowance for waste in -barrel shipments.[96] - -The Commission held it unjust to allow for leakage on tank shipments and -not on barrel shipments; that the weight of the barrel must not be -charged for if the weight of the tank is not, the same quantity of oil -must have the same rate no matter what the package might be, unless the -shippers were offered facilities for shipment by tank as well as barrels -so that the option was theirs. The representative of the oil combination -was questioned by the Interstate Commerce Commissioners, in relation to -the mileage, etc. - -“Are you allowed mileage on tank cars?” - -“No, sir.” - -“Neither way?” - -“Neither way.” - -But the railroad officials in this case refused to commit oil-perjury. -Asked what mileage they paid the Combine they replied: “Three-quarters -of a cent a mile.” - -When Rice asked what the railroads would charge him for bringing back -his empty cars if he shipped in tanks, he was told he would have to pay -1½ cents or more a mile. He found that if he tried to sell his oil in -California it would cost him $95 to get the empty tank car back, while -the railroads paid the Standard for the privilege of hauling its empties -back. Rice saw that from the South he could get return loads of -turpentine, but the railroads absolutely refused to give him rates.[97] - -Besides all this the Standard was accorded the privilege of systematic -underbilling. According to the testimony before the Commission in 1898 -by the Boston & Albany agent in East Boston, the centre of the Standard -Oil business in New England, the Combine’s tank cars, which usually -weigh from 35,000 to 50,000 lbs., were ordinarily billed at 24,000 lbs. -Out of 14 cars sent over another road from East Boston to Newport, R. -I., at least half were billed and paid for on the basis of 24,000 lbs. -to the car, although their average weight was shown to be 48,550 lbs. -per car. It was claimed that these underbillings were clerical errors. -In considering the motives and reliability of such a claim we must not -forget the curious habit shown by these clerical errors of piling up in -great bunches in the Standard Oil business, and the still more curious -fact that all the errors are in favor of the Trust—none against it. Long -before the Commission had found that the railroads leading from the oil -fields were in the habit of “blind billing” the Standard cars at 20,000 -lbs., though the actual weight was frequently 30,000, 40,000, 44,000 or -more.[98] Rice complained of this to the Commission in July, 1887. -Immediately all the old numbers on the 3000 tank cars of the Oil Trust -were painted out and new numbers painted on, so that the cars mentioned -in the railroad accounts could no longer be identified with the cars on -the tracks.[99] The Standard has some very oily ways, and knows how to -use a pot of paint and a brush as well as a rebate. - -The Standard desired to fix the rates on oil to New England, the South, -and the West, and as usual the railroads let it have its way. The result -was a practice of adding the Boston rate to the local rate on shipments -of oil into New England, which puts the independent refiners at a great -disadvantage. The rate on corn from Cleveland to Boston is 15 cents per -hundred lbs., and to New Haven the same, but the rate on petroleum from -Cleveland to Boston is 24 cents, and to New Haven it is the Boston rate, -24 cents, plus the local rate, or a total of 36 cents from Cleveland to -New Haven. Now the Standard Oil has got large warehouses in East Boston, -and they bring their oil by boat and store it there, and then they get -the freight rates simply from Boston down to the Connecticut point, -whereas the Western refiner who has no storehouse has to pay first the -Boston rate, and then this local rate also to the other point, even -though the oil may go direct, so that the rates are practically -prohibitive to the Western refiners.[100] - -To shut out the oil fields and independent refineries of Colorado and -Wyoming, the Standard resorted to terrific discrimination in rates. The -Chicago and Northwestern Road would bring a carload of cattle from -Wyoming to Chicago for $105, but for a car of 75 barrels of oil the -freight was lifted to $348. The rates from the Western fields to San -Francisco were also put very high, and the Standard built great -storehouses on the Pacific Coast, which it fills from the Eastern -fields, the freight rates from the East being suddenly lowered when it -wishes to refill the said storehouses, and put back again as soon as -they are full. The people of California are compelled to buy Eastern oil -for the profit of the Trust, instead of buying Colorado oil, because the -freight on the latter is prohibitive. - -Aside from these sudden fainting spells of the oil tariff at convenient -seasons for the Standard, the ordinary arrangements showed thoughtful -care for its comfort. The regular rate on oil from the Colorado oil -wells to the Pacific Coast was made 96 cents per hundred, while the rate -from Chicago through Colorado is only 78½ cents per hundred.[101] - -The Chicago pork-packers generally had things their own way in this -period, but apparently not always. In 1890 the Commission decided that -the railroads were discriminating against the Chicago packers by lower -rates from the Missouri River on hog products than on live hogs.[102] -Even then, however, they were receiving rebates from the railroads which -made questions of tariff rates comparatively insignificant. - -In 1891 the Federal Grand Jury indicted Swift & Co., the Chicago -packers, for having received $5,000 a month in rebates from one road -alone, the Nickel Plate. Compared to the train loads of their cars -passing east and west on other lines, their traffic on the Nickel Plate -was light. - -In his testimony to the Senate Committee this spring, Mr. Davis said: “A -few years ago one of the Chicago packers was a director on a Western -railroad. He was a large receiver of live-stock from Kansas City, upon -which the freight rate was $54 per car. A rebate of $25 was paid to the -packer at the time of shipment, and it was the custom to file claims for -the remaining $29, which were allowed on the grounds of some imaginary -loss or damage to the stock in transit. The same party paid rebates -amounting to from $30,000 to $50,000 a month for every month in the -year. On putting down on a piece of paper the amount of $10,000, and -after placing this under the eyes of a superior officer, he would leave -and subsequently look for that amount in currency by express, and would -then proceed to divide it among certain favored shippers.”[103] - -A few years ago, in proceedings before Judge Grosscup of Chicago, it -appeared that while the published rate on packing-house products was 23½ -cents, the favored packers were given a rate as low as 15 cents. - -Investigations by the Commission in December, 1901, and January, 1902, -took the lid off of the dressed-meat business and discovered a large -congregation of secret rebates. The Pennsylvania system was cutting the -rate on packing-house products 5 to 7 cents below the published rate, -making it 25 cents and sometimes 22 cents, in place of 30 cents, from -Chicago to New York. Rates from Indianapolis, Cincinnati, and other -points were also cut.[104] - -The examination brought out the fact that President Cassatt and other -officers above the traffic manager knew what he was doing and authorized -or permitted the rate cutting.[105] - -“COMMISSIONER CLEMENTS. Who takes the responsibility for doing these -things, for making these serious departures and cuts, in regard to the -Pennsylvania Railroad? Is it you? Do you do it without any authority -from the officers of that road above you, or do you have their approval -of it? - -“MR. MCCABE. I am in charge of the freight traffic, and I do the best I -can under the circumstances. - -“COMMISSIONER CLEMENTS. Do you act independently of them, or do you have -to have their approval? - -“MR. MCCABE. I assume to do what I think is proper, being governed by -the competitive conditions. - -“COMMISSIONER CLEMENTS. Do you have reason to know that the officers -above you in the management of that company’s affairs knew of it? - -“MR. MCCABE. Not in detail. - -“COMMISSIONER CLEMENTS. I do not mean the details. I could have answered -that myself. But as to the general fact that the Pennsylvania Railroad -was cutting the rate in this serious way, was it known to the president -of that company and other officers? - -“MR. MCCABE. I do not know. - -“COMMISSIONER CLEMENTS. Have you ever had any conference with the -officers above you in the management of that company’s affairs in which -you disclosed this condition of things? - -“MR. MCCABE. I have said to them from time to time that rate conditions -were so and so; that rates were not being maintained, and that our -competitors were cutting the rates. - -“COMMISSIONER CLEMENTS. And that you must cut the rates? Did they -sanction it, or approve it, or tell you to stop it? - -“MR. MCCABE. I think they left it to my discretion.” - -The Big Four, a Vanderbilt line, cut rates 6 cents below the 30 cent -tariff from St. Louis.[106] - -Mr. Mitchell, traffic manager of the Michigan Central, says his road -carried dressed meats at 40 cents, or 5 cents below the published rate. - -“CHAIRMAN OF THE COMMISSION. Did you carry any considerable amount of -dressed meats during 1901 that paid the tariff rate? - -“MITCHELL. I think not. - -“CHAIRMAN. Practically all of it went at some secret rate? - -“MITCHELL. Yes, sir.” - -This man thought his road paid the four Beef Trust houses $200,000 or -$240,000 a year in rebates.[107] - -Mr. Mitchell said rebates were paid indirectly by means of bank drafts. -The railroad makes a deposit in bank. The traffic manager checks against -it, and the bank supplies drafts on New York or cashier’s checks which -are sent to the persons who are to receive rebates.[108] - -The railroads try to be good sometimes, make New Year’s resolutions, and -stop the rebates; but some naughty boy breaks his vows in two or three -weeks, and then the rest follow suit. Here is the testimony of a Western -traffic manager on this point.[109] - -“COMMISSIONER. What proportion of the traffic (in provisions) have you -carried at the tariff rate? - -“TRAFFIC MANAGER. It was a very small proportion of the total, and it -was probably along about the first of last year. - -“COMMISSIONER. You are accustomed to indulge in New Year’s resolutions? - -“MANAGER. Yes, sir; we all swear off on New Year’s, and begin again. - -“COMMISSIONER. Is it a fact that from Jan. 1, 1901, there was a period -when the tariff rate (on provisions) was actually applied by all the -roads? - -“MANAGER. Yes, sir; I think it was. - -“COMMISSIONER. How long did it last? - -“MANAGER. I think it lasted probably two weeks. - -“COMMISSIONER. What led you, then, to cut your rate through St. Louis? - -“MANAGER. Our agent in Kansas City discovered about January 20 that -provisions were moving through Chicago at less than tariff rate.” - -The Commission found that all the railroads made low rates for the Beef -Trust, but they could not find any railroad that led off in the business -of cutting rates. Each one said it cut rates because it found the others -were cutting. They were all followers.[110] - -The Chairman of the Commission said to the Vanderbilt traffic man: “I -observed that you spoke of your road as following the others. - -“MR. COST. Yes, sir. - -“THE CHAIRMAN. I have heard a similar statement from other gentlemen. -Have you any idea who is the leader? - -“MR. COST. No; I have not. I could not give you that information. - -“THE CHAIRMAN. You have never heard of the leader? - -“MR. COST. No, sir. - -“THE CHAIRMAN. They are all followers. - -“MR. COST. That does really seem to be the case.” - -Mr. Grammer, general traffic manager of the Lake Shore, testified in -1902 in respect to “provisions,” cut meats, lard, etc., from Chicago to -New York: “The minimum weight on a car of provisions is 28,000 lbs. The -rate is 25 cents. That is about the maximum rate obtained this last -year, 1901, and that means $70 a car. We pay out of that to the -stockyards $2.40 a car for switching, we pay $15 car-mileage for a round -trip of the car, and at New York we pay 3 cents a hundred lighterage; -that is, $2.40 and $15, $17.40, and $8.40—$25.80 which we pay out of -that rate as absolute arbitraries. That leaves the Lake Shore $16 or $17 -net for hauling that car to Buffalo, with the return car empty, and we -have to give practically passenger service to that traffic. I think it -is unremunerative business, and I have always taken the position that we -do not want any provisions on the Lake Shore road at less than the full -tariff rate, whatever that might be. The dressed-beef minimum will -average 22,000 lbs. That car is subject to the same arbitraries and -mileage. The lighterage is 3 cents a hundred, which would be $6.60 -instead of $8.40, and it is subject to the same service eastbound and -westbound as to movement; and there is not 1 percent of those cars -loaded east with dressed beef that are loaded with any freight coming -west.” In spite of the unremunerative character of the business Manager -Grammer says they cut the rate 5 cents a hundred.[111] - -Mr. Paul Morton, at the head of the traffic department of the Santa Fe, -testified in 1902[112] that his road carried dressed meats and -packing-house products below the published rates in violation of law. - -“MR. MORTON. We have carried the business from Kansas City to Chicago -for 5 cents less than the published tariff to Chicago and Chicago -junction points. - -“MR. DAY. Domestic as well as export? - -“MR. MORTON. Both.” - -“The Santa Fe,” he said, “at the beginning of 1901 joined with the other -roads in a general declaration of good faith and intention of an -absolute maintenance of rates. We maintained the rate until about April -1.” The Santa Fe found that they were only carrying 2 percent of the -packing-house business out of Kansas City, although they brought in 33⅓ -percent of all the live-stock that entered the city. So “we told one of -the largest shippers in Kansas City that if they would come and ship -with us we would give them 5 cents reduction from the tariff, and in -order to get them we had to promise to do it for a year—I think until -the first of July of this year, 1902.” - -Continuing, the witness admitted the illegality of the transaction. - -“MR. MORTON. Yes, sir; it is an illegal contract. It was illegal when we -made it, and we knew that. - -“COMMISSIONER CLEMENTS. Can you tell how much you paid out in a year? - -“MORTON. On this business? - -“CLEMENTS. Yes, sir. Have you any idea whether it is $50,000 or $100,000 -or $10,000—anything definite? Of course it is a mere guess and you do -not know— - -“MORTON. Well, I think there was a great deal more than any sum you -mention paid out. - -“CLEMENTS. By your company? - -“MORTON. By all the companies. I think we paid out $50,000 a year or -more. - -“CLEMENTS. Who would have the direction of that? Who would see that it -was paid? Who would direct it to be done? - -“MORTON. I would. - -“COMMISSIONER PROUTY. How much does it cost your company on all its -business in any one year to deviate from the published rates? - -“MORTON. I should think between $500,000 and $1,000,000 a year.” - -By means of private cars, mileage payments, rebates, and control of -rates, the big packers had advantages which enabled them to ruin the -smaller packers all over the country. The Lincoln, Neb., Packing -Company, for example, was “driven out of business,” the manager says, -“by freight discrimination, rebates, and the private car. After doing a -losing business for 5 or 6 years against these odds, the company closed -down with a loss of 75 percent of the investment.” And this is a fair -sample of what has happened to many, many of the competitors of the Beef -Trust. - - - - - CHAPTER XIII. - IMPORTS AND EXPORTS. - - -The low rates in favor of foreign goods and of domestic goods intended -for export amount to a serious discrimination. Paul Morton told the -United States Industrial Commission that goods were carried from Hamburg -to Denver for less than the rates from Chicago to Denver.[113] Complaint -was made many years ago that the Pennsylvania Railroad and other roads -charged lower rates, even 50 percent lower, on goods shipped in from -foreign countries than on domestic traffic of the same sort. -Investigation revealed in some cases a far greater difference than 50 -percent. - -At one time the rate on tin plate from Liverpool via Philadelphia and -the Pennsylvania Railroad to Chicago was 24 cents a hundred, while the -rate from Philadelphia over the same road was 28 cents. - -In the Texas and Pacific Case the record showed that books, buttons, -carpets, clothing, etc., were carried from England, via New Orleans to -San Francisco for $1.07 a hundred, while the same articles of domestic -manufacture paid $2.88 on the same trains from New Orleans to Frisco. -Boots and shoes, cashmere, confectionery, cutlery, gloves, hats and -caps, laces and linens, etc., took the same blanket rate of $1.07 from -Liverpool and London to San Francisco, while similar American goods paid -the railroads $3.70 a hundred from New Orleans to California. In some -cases the railroads received only ⅙ as much for the transportation of -foreign goods as for domestic goods. The Interstate Commission held that -“any difference in charge between foreign and domestic traffic is -unlawful,” and ordered the discrimination to cease, but after long -litigation the United States Supreme Court decided that among the -circumstances and conditions to be considered in judging rates are the -conditions of ocean traffic and water competition to interior ports in -the United States, etc., so that a carrier may be justified in making -low rates to secure foreign freights which would otherwise go by -competitive routes or not go at all.[114] The practical result appears -to be that railroads may nullify the protective tariff and discriminate -in favor of foreign shipments to any extent that is necessary to make -them move, regardless of the question whether or no they ought to move -under such conditions. - -Foreign manufacturers cannot only ship their goods across the country -more cheaply than our manufacturers can, or at least such of them as pay -schedule rates, but can also get special rates on all raw materials they -buy here and ship over our lines for export. For example, a Chicago -miller pays 21 cents per one hundred lbs. to get either wheat or flour -to New York, while the English miller can buy wheat in Chicago and take -it to New York for 13 cents. In some cases the rate on flour has been as -much as 11 cents more than the rate on wheat. Since 2 or 3 cents a -hundred lbs. is a good profit, our millers cannot grind for export -against the English millers.[115] The railroads turn down our millers -and establish a protective tariff for free trade England, protecting her -millers against competition. - -American shippers take such advantage of the low export rates as they -can, but sometimes these concessions are made to the shippers in one -city and not to those of other cities; for example, the railroads -carrying export flour from Minneapolis at a discount refused similar -concessions to shippers at intermediate points.[116] - - - - - CHAPTER XIV. - LOCALITY DISCRIMINATIONS. - - -Discriminations between localities, though less pronounced in this -period than in the first, were nevertheless multitudinous and vital. - -In 1896 the railroads carried Minneapolis flour to New York for 10 cents -a hundred, while charging New York State millers 18 cents a hundred to -New York City. - -President Stickney of the Chicago and Great Western Railroad, in a -discussion the same year with the representatives of other western roads -before the I. C. C., said: “You charge the Kansas and Nebraska farmer 13 -cents to haul his grain 200 miles while you charge the grain dealer 6 -cents to haul that same grain twice as far to Chicago.... I have been -acquainted with this northwestern country for thirty-five years. In all -that time there has never been a year that the corn crop was moved until -after the corn was in the hands of dealers who had the rate. Once the -farmer is compelled to sell his grain, then you fellows cut the rate for -the dealer.” That is, the railroads charge the farmer shipping to the -Missouri River a mileage rate 4 times as high as the rate to the dealers -shipping to Chicago, and freeze out the small dealers from shipping to -Chicago by making secret rates in favor of the big dealers. - -Coal was shipped from Chicago to Omaha and then reshipped to Grinnell, -Ia., 225 miles back toward Chicago, more cheaply than it could be got -direct from Chicago. - -“A large manufacturing establishment located in the latter town, making -agricultural implements which were sold principally on the Pacific -Coast, found it advantageous to abandon its plant and transfer its -machinery and employees to Chicago on account of the unfavorable rates. - -“A large factory for making barbed wire, located in the city of Des -Moines, in like manner abandoned its buildings and transferred its -establishment to Chicago, finding that it saved a large sum on every -carload of wire it shipped, although the wire was mainly carried -directly by or through its old location, 300 miles nearer the Pacific -Coast than Chicago.”[117] - -To certain towns in Nebraska and other States the railways have extended -the same rates that apply to Missouri River points, where the rates to -Chicago are very low, while other towns in the same region have to pay -the Missouri River rates to and from Chicago, plus the local rate from -the river point.[118] - -The extent to which railroads sometimes go in place discriminations is -shown by cases cited in Cator and Lewis. One of the towns on the route -of the Northern Pacific in Montana incurred the displeasure of the -railway authorities, and they determined to ruin it and build up a new -town. So they refused to stop their trains in the town or have a depot -there. The railroad built a new depot on lands of its own, 3 miles -beyond, and ran its trains through the old town to the new site, thereby -feeding its revenge and enhancing the value of its own land at the same -time, at the cost of ruining the town already established. The courts -sustained the railroad’s claim that it had a right to run through to the -new depot, though some of the judges dissented, regarding such favor as -despotic and destructive of public rights.[119] - -“A town in the State of Iowa, which had thriven under reasonable -railroad facilities, was almost depopulated by a change of ownership of -the railroad line upon which it depended. - -“As the result of discrimination forty American families were driven out -of this small town in a single year. Their property was rendered almost -worthless, and with great pecuniary loss from no fault of their own they -were obliged to abandon their homes and seek new habitations and new -avocations. Cases like this were abundant throughout the West. This -merely illustrates what was going on in a dozen great States where -cities, towns, and villages were being depopulated or their business -establishments placed at great disadvantage by reason of iniquitous -discriminations.”[120] - -Peopled flocked into the towns and cities favored with the low rates, -and when the competitive rates were removed, as they have been in many -cases, the boom towns collapsed, and the inflated building and business -interests shrunk to skin and bone. - -Better accommodations are frequently accorded to places in which the -railway or its officers are interested than to other places. When a new -road is projected there are usually town-lot and land companies along -the lines, in which prominent officials of the road may be directly or -indirectly interested. Their knowledge of the future location of the -road is utilized in purchasing tracts of land at low values to be used -for town sites and sold at high prices after the railway is built. - -“Sometimes the entire road becomes a land-grabbing scheme with a -town-lot speculation attachment. The western half of one of the -principal roads in Iowa was built mainly on this plan. Its natural route -was along one of the old stage roads running through the county seats of -the counties through which it must pass. About these towns was a -well-settled country, with rich farms well improved for that early day. -The towns were moderate in size, but had been established as trading -points for many years, and stores, schools, and churches had grown up. - -“But there was a belt of government land lying between the two belts of -settlement about the respective county seats, which the road coveted, -and if the line passed through the old towns there would be little -chance for the speculative directors to profit by laying out town sites. -So the road was laid out and built through the unsettled lands, avoiding -every old town on its route.”[121] - -Sometimes discriminations are made by the use of different -classifications for local and through traffic.[122] The rate on sugar -from San Francisco to Kearney, Neb., was 77 cents per hundred lbs., -against 50 cents, clear through to Omaha.[123] The rate on lumber from -Wilmington to Philadelphia and Boston was higher than the local rate -from Wilmington to Portsmouth or Norfolk plus the rate from Portsmouth -or Norfolk to Philadelphia or Boston.[124] - -The rates from the East to St. Cloud, Minn., were higher than to St. -Paul and other more distant points. The difference against St. Cloud was -7 cents per hundred on flour and 75 to 85 per ton on coal. This -difference was two or three times the profit made by the miller, so that -the price of wheat in St. Cloud was 6 cents below the price in -Minneapolis or Princeton or Elk River, and the value of land about St. -Cloud was thereby greatly lessened.[125] - -A canning factory in Emporia, Kansas, had good natural advantages and an -excellent trade in Kansas, Colorado, Texas, etc., when in 1891 the -freight rates were changed on the basis of water and rail competition -via Galveston so that canned goods could be shipped into this territory -from New York at rates that drove the Emporia factory out of business -with a loss of $50,000 and the ruin of the owner who had been the -heaviest tax payer in the county. - -The Emporia furniture factory, and the Emporia stockyards have also been -ruined, it is said, by freight discriminations. In the Spokane case the -rate to Portland, 2056 miles from the East, was $30 a ton, while the -rate to Spokane, only 1512 miles, was $52 per ton. The Commission said -this was unreasonable. “If a rate of 1½ cents per ton-mile yielded a -desirable margin over the cost, a rate of 3½ cents pays an unwarranted -return.” In a Georgia case it appeared that the rate from Cincinnati to -a non-competitive town, Marietta, was 6 times as much per ton-mile as -the rate to Atlanta. The business men of Spokane paid 2 or 3 times as -much for haulage as the men of Portland, and the business men of -Marietta paid 6 times as much in proportion as those in Atlanta. - -The Spokane merchants combined and put their freight business in the -hands of one agent, who could swing every pound of freight to the -Northern Pacific or to the Oregon Navigation Co., or to the Great -Northern, etc. Then the railways pooled against the merchants. The -latter adopted the policy of tendering a reasonable sum for freight, and -if the railways wouldn’t take it, the merchants replevied the goods and -left the companies to sue for the freight. The companies got tired of -that and made some concessions. But Spokane still suffers from severe -discrimination, as we shall see hereafter. Coal hauled fifty miles to -Leadville sold there for $7 a ton, while in Denver, after an additional -haul of 150 miles, the same coal was sold for $5.50 a ton. The Michigan -Central and other roads charged higher rates on carriages and buggies to -San Bernardino than to Los Angeles, some distance further on.[126] - -From Pittsburg to Colorado the rate on rails was $1.60, while the rate -all the way through to San Francisco was only 66 cents. From Pueblo to -San Francisco, 1,559 miles, the rate on bar iron and on rails was $1.60 -per hundred, while from Chicago to San Francisco, 2,418 miles, the rates -were 50 cents on bar iron and 60 cents on rails; and even from New York -to San Francisco the same rate of 60 cents was made for rails.[127] - -Sometimes the charge is much greater going one way between two given -points than it is going the other way between the same points. For -instance, “Gloves from San Francisco to Denver pay $2 a hundred. You -ship the same packages back from Denver, which has 5,000 feet of -elevation, to San Francisco at the sea level, downhill, like a toboggan -slide, and it is $3 a hundred downhill to $2 up.”[128] The -discriminations against Denver are severe both from Eastern and Western -points. Sugar is carried from San Francisco to Denver at 75 cents; to -Loveland it is 93 cents; but hundreds of miles further on, to Omaha, it -is only 50 cents.[129] “Mr. Kindel has been driven out of the -manufacture of upholstering goods and of spring beds in Denver because -of similar differences. He wished to manufacture albums in Denver, but -was forced to locate in Chicago because the freight rate on books from -Chicago to San Francisco was $1.75 per hundred and from Denver to San -Francisco $3, while the Denver manufacturer had to pay 97 cents freight -on his raw material (paper, etc.) from Chicago to Denver, $3.97 against -$1.75. So too, the freight rate on books from Chicago to New York is 75 -cents, from Denver to New York $2.72.”[130] - -“The difference in rates on coal oil has been so great that oil has -sometimes been shipped from Chicago to San Francisco and back again to -Denver.” - -“Boots and shoes are carried from Chicago to Colorado common points at -$2.05 per hundred, from Chicago to California at $1.50 per hundred. If a -jobber in Colorado wishes to ship boots and shoes to California he must -pay $3, making a total freight rate of $5.05 from Chicago to California -in this way. Cotton-piece goods under commodity rates are shipped from -Boston to the Missouri River for 52 cents per hundred, while the rate -from the Missouri River to Denver is $1.25 for a haul of one-third the -distance. The rate from the Missouri River through Denver to California -is only $1.”[131] - -No wonder a Denver manufacturer said to the Industrial Commission: “My -city, Denver, and State, Colorado, and all the territory embraced in the -one hundred and fifth meridian section, are violently discriminated -against by the railroads and express company. We are denied commercial -equality, which forbids the development of our resources. Our freight -rates are anywhere from 100 to 300 percent higher per ton per mile than -those of our Eastern and Western competitors.”[132] - -Such conditions tend to force dealers to points on the Missouri River or -east of it. The shipper at St. Joseph on the Missouri River, for -example, can get goods from Chicago at 80 cents and reship to San -Francisco for $1.50, while the Denver shipper must pay $2 from Chicago -to Denver and $3 from Denver to San Francisco,—$5 for the Denver shipper -against $2.30 for the St. Joseph man.[133] - - - - - CHAPTER XV. - LONG-HAUL DECISIONS OF THE SUPREME COURT. - - -The long-haul clause did not realize the intent of its framers. It -received a series of shocks from the United States Supreme Court, which -produced, if not paralysis, at least a bad case of nervous -prostration.[134] - -At first, believing that the law would be enforced in accordance with -its purpose and intent to get rid of unjust and needless discrimination -between localities, the Northern and Western roads revised their tariffs -in good faith in reference to long and short haul rates, but, later, -when they found that the Supreme Court did not intend to enforce the 4th -section, they joined the Southern roads in practical disregard of it -wherever they found it convenient to do so, and only in a few cases has -their disregard been checked. - -Within 5 days after the Commission was appointed a large number of -railroads applied for relief from the long and short haul clause; and in -many cases, on the ground of water competition, etc., relief was -given.[135] The Commission held that dissimilar circumstances existed -under the 4th section in case of competition with water carriers, or -railroads not under the Act (foreign railroads and railroads lying -wholly within a single State), and in “rare and peculiar cases of -competition between interstate railroads, when a strict application of -the rule would be destructive of legitimate competition,”[136] but -ordinarily competition between interstate roads was not regarded as -sufficient to relieve them from the 4th section. - -In November, 1892, the Commission decided the famous Alabama Midland -Case. The complaint was that rates from the East and Northeast to Troy, -Ala., were higher than to Montgomery, a longer haul passing through -Troy. The railroads pleaded competition at Montgomery. The Commission -held that railway competition would not justify departure from the rule -of Section 4 of the Interstate Act. Five years later, in November, 1897, -the United States Supreme Court sustained the judgment of the Circuit -Court and Circuit Appeals Court, overruling the Commission, and held -that the existence of railway competition at Montgomery made a -substantial difference of circumstances within the meaning of the -exception in Section 4.[137] - -The Court held that competition even of interstate lines is a -substantial difference of conditions which may justify a greater charge -for a short than for a long haul, but said, “We do not hold that the -mere fact of competition, no matter what its character or extent, -necessarily relieves the carrier from the restraints of the 3rd and 4th -sections.” - -In the 2d section, which prohibits any rebate or discrimination and is -intended to enforce equality of shippers over the same line, “‘similar -circumstances and conditions’ refers to matters of carriage, and does -not include competition between rival routes;” but in the 3d and 4th -sections “similar circumstances and conditions” includes competition, -which “is one of the most obvious and effective circumstances that make -the conditions under which a long and short haul is performed, and -substantially dissimilar.” The railroad people think the circumstances -are very dissimilar also when the Oil Trust or the Beef Combine -threatens to take hundreds of thousands of dollars worth of business if -they don’t get the rates and facilities they want, while Messrs. A. B. -C., etc., ship their goods and pay the schedule rates without suggesting -any reduction. This dissimilarity is harder for the railroads to deal -with than the other. They can stop competing among themselves on -long-haul schedule rates more easily than they can enforce equal rates -on the big shippers. - -In the Chattanooga Case it appeared that rates from New York and other -points via South Atlantic points to Chattanooga were higher than to -Nashville, 152 miles further on. The Commission in December, 1892, -ordered this discrimination to cease. The order was not obeyed. Suit to -enforce it was brought in the Circuit Court, and a decision sustaining -the Commission was rendered in February, 1898. And in November, 1899, -the Court of Appeals confirmed the decision, holding that the ruling of -the Supreme Court in the Midland Case did not apply, because “normal -competition” would give Chattanooga the same rates as Nashville.[138] -But the Supreme Court in 1901 reversed the lower courts and decided -against the Commission.[139] - -The Georgia Railroad Commission Cases, also decided by the Interstate -Commission in 1892, went the same way, the United States Supreme Court -again deciding against the Interstate Commission on the long and short -haul clause, holding that any substantial competition of markets or -railways creates dissimilar conditions within the 4th section.[140] - -The result is that dissimilarity of conditions created by the railroads -themselves becomes the means of freeing them from the long-haul rule of -the 4th section of the Interstate Act. - -In the South a method called the “basing-point system” is in vogue. The -railroads name certain towns as distributing centres and competing -points, fix the rates to and from these points, and make rates to and -from other localities by adding to such through rates the local charges -in force between the distributing centres, or “basing-points” and the -said other localities. - -The Commission says: “Our annual reports to Congress and reported -decisions in cases have uniformly condemned this distributing centre -theory of rate-making, but the Southern carriers have resisted our -efforts to correct the practice.”[141] - -A thoughtful writer in the _Popular Science Monthly_ says: “The most -serious class of unjust discriminations includes those which have for -their victims the entire populations of towns, cities, and even -extensive districts, which are made to suffer from the unfair adjustment -of railway rates. Practically the whole region south of the Potomac and -Ohio and east of the Mississippi has continuously suffered from -discriminations of this kind through the system of making charges to a -few selected cities the basis for through rates to all other points. -Through rates are made to and from about two hundred of the larger -towns, including Atlanta, Birmingham, Chattanooga, Vicksburg, New -Orleans, and Mobile, and traffic shipped from or to all other points is -charged the rate to one of these basing-points plus the local rate from -such basing-points to final destination. In practice it is common to -make the combination by the use of rates to and beyond whatever -basing-point will give the lowest total, whether on the line traversed -by the shipment or not. Thus a shipment from Cincinnati to a point on -the line from that city to New Orleans may be charged the full rate to -New Orleans plus that from the latter back to the local point. The -condemnation of such a system cannot be too severe. It not only limits -the commercial activities of the towns unjustly discriminated against -and restricts the sources from which they can directly draw supplies, -but by hindering their growth it retards the development of the entire -section, including the cities supposed to be favored.”[142] - -In a case decided in 1894 it was found that hay was being carried from -Memphis through Summerville to Charleston for 19 cents a hundred, -against 28 cents a hundred from Memphis to Summerville, the 9 cents -difference being equal to the local rate from Charleston back to -Summerville. “The difference of $1.80 per ton was sufficient to preclude -the Summerville dealer from selling in neighboring towns in competition -with Charleston dealers. The Summerville dealer was thus practically -confined to Summerville for a market, and even there had to compete with -dealers doing business at Charleston 19 miles away. If $3.80 per ton is -profitable to the carriers for bringing hay in carloads from Memphis to -Charleston, then $5.60 per ton, nearly 50 percent more, from Memphis to -Summerville, which is nearer than Charleston is to Memphis, represents -an extra profit of $1.80, which the carrier did not and could not show -to be equalled by extra cost of transporting a car of hay and delivering -the same at Memphis.” The Commission (June 1894) ordered the carriers -not to charge more from Memphis to Summerville than from Memphis to -Charleston, holding that competition of markets or of railways would not -justify a higher charge for a shorter than for a longer haul. The order -was made in September. In its report to Congress in December the -Commission said, “The order has not been obeyed.”[143] - -Social Circle, situated between Atlanta and Augusta in Georgia, was -required to pay a rate from Cincinnati made up of the rate to Atlanta -plus the local rate from Atlanta to Social Circle, while Augusta, -considerably more distant, had rates from Cincinnati no higher than -those to Atlanta. The Commission in June, 1891, ordered the railroad to -cease charging more from Cincinnati to Social Circle than for the longer -distance to Augusta.[144] - -Hill and Brother, in the wholesale grain, flour, and hay business at -Cordele, Ga., were in competition with dealers at Albany, Americus, and -Macon, which were made basing-points and had lower rates than Cordele -from the common source of supply. Cordele was shown to be nearer the -coast than the other points, and to have several railway routes from -Nashville, so that it could not be excluded from the low rate list on -competitive grounds. The railroad men said it was excluded because it -was not so large a distributing point as the other places, but admitted -that if it had equally low rates it would largely increase as a -distributing centre; so that the case stood thus: The railroads did not -give Cordele equally low rates because it was not a sufficiently large -distributing centre, and it was not a sufficiently large distributing -centre because it was denied equally low rates; _i. e._, the railroads -sought to excuse themselves for wrongdoing by offering the results of -the wrong in justification. The Commission refused to allow the -railroads to take advantage of their own wrong and condemned the Cordele -rates.[145] - -The Louisville and Nashville charged $3.69 per ton on pig iron from -Birmingham, Ala., to Cordele, Ga., 267 miles, and only $1.80 a ton from -Birmingham to Macon, 332 miles. On coal the rate was $2.60 to Cordele -and $1.60 to Macon. The Commission decided that the rates to Cordele -should be no higher than to Macon.[146] - -La Grange is 71 miles nearer New Orleans than Atlanta, yet the rates to -La Grange were made so much higher than to Atlanta that an Atlanta -dealer could ship goods from New Orleans through to Atlanta and then -back to La Grange as cheaply as the goods could be shipped direct to La -Grange.[147] - -To keep traffic from going to Savannah and make it go to the Northwest -or to Pensacola, the Louisville and Nashville made very high rates on -shipments to Savannah. On Savannah traffic the Nashville haul was short -and the receipts small; on shipments to the Northwest the Nashville -receipts were much larger, and in Pensacola it had a special interest. -So the Savannah cotton rate was advanced from $2.75 to $3.30 a bale, and -the rates on naval stores were also made much higher than to Pensacola -or to the Northwest.[148] The Commission ordered the railroad to -discontinue the discrimination against Savannah, January, 1900, and the -Circuit Court sustained the decision, July, 1902. - -The Commission has condemned the rates from New Orleans to Danville, -Va., as excessive in comparison with the rates on the longer haul to -Lynchburg;[149] also the rates on sugar and molasses from New Orleans to -Nashville as higher than on the long haul to Louisville;[150] the rates -from New York, Cincinnati, Chattanooga, Nashville, and New Orleans, as -discriminating against Dawson and in favor of Americus, Eufaula, and -Albany;[151] undue preference to Sioux City against Sioux Falls, in the -rates from Chicago and Duluth;[152] and many other discriminations -between localities, and violations of the long and short haul -clause;[153] yet all the complaints and decisions, numerous as they have -been, are but a cupful from the sea; and the evils removed in pursuance -of orders of the Commission which the Courts neglected to overrule form -an insignificant group compared to the mass that remained untouched. - - - - - CHAPTER XVI. - TEN YEARS OF FEDERAL REGULATION. - - -In “A Decade of Federal Railway Regulation,” after describing various -forms of discrimination, H. T. Newcomb says: “The conditions described -are fairly typical of those existing all over the United States. The -Interstate Commerce Law has mitigated but slightly, if at all, the evil -of unjust discrimination between individuals, has in but few and -relatively insignificant instances moderated unjust discriminations -between articles or classes of traffic, and has almost wholly failed to -remedy the far more serious inequities in rate-making, which operate to -the disadvantage of towns, cities, or districts.”[154] - -In 1897 the President of the Big Four Railway said: “Never in the -history of railways have tariffs been so little respected as to-day. -Private arrangements and understandings are more plentiful than regular -rates. The larger shippers, the irresponsible shippers, are obtaining -advantages which must sooner or later prove the ruin of smaller and more -conservative traders, and in the end will break up many of the -commercial houses in this country and ruin the railways. A madness seems -to have seized upon some railway managers, and a large portion of the -freight of the country is being carried at prices far below cost.... -There is a much more dangerous view, and that is the demoralization of -the men conducting these numerous enterprises and the want of respect -for the law which is being developed by the present situation.... There -is less faith to-day between railway managers, with reference to their -agreements to maintain tariffs, than was probably ever known on earth in -any other business. Men managing large corporations who would trust -their opponent with their pocket-book with untold thousands in it, will -hardly trust his agreement for the maintenance of tariffs while they are -in the room together. Good faith seems to have departed from the railway -world, so far as traffic agreements are concerned.”[155] - -The Texas Railway Commission in 1897 started suits against several -railways for discriminations, and before the end of the year three -railways pleaded guilty in 95 cases and paid fines amounting to $47,500, -promising to “be good.” The next year $20,000 more were paid by the -railways as fines in 20 cases for violation of this law in Texas. Many -other cases pending.[156] In the 1898 Report the Commission says that -express and railway agents do a business as shippers of fruit, etc., and -discriminate against the business of other shippers by underbilling -their own shipments and by delaying the other shipments. - -One of the most striking illustrations of the effectiveness of the -Interstate Act is to be found in the results of the Boston and Albany -investigation in 1900, during the consideration of the question of -leasing the road to the New York Central. The Interstate Act made it a -misdemeanor to depart from the published rates, but the railroad -followed the law only when it was convenient to do so, and most of the -rates in actual use constituted misdemeanors. - -“Various shippers, merchants, manufacturers, etc., were visited, and it -was found that the local rates were not followed, that shippers were -receiving widely varying discounts from the published rates, and that -shippers did not know at all what rates their competitors and neighbors -were getting. They were not satisfied with the system, but they were -afraid to complain, for if they made complaint they would lose whatever -advantages they possess and become marked men for railway persecution. -The Railroad Commission of Massachusetts advertised for shippers who -were not satisfied to come and make complaint; but they did not do so, -for the reason that any shipper who complained of a railroad would be -apt to fare a good deal worse afterwards than before; his goods would be -delayed, his facilities would be cut off and whatever reductions he was -getting would be stopped, and he would have to pay the full published -rates. He might also be involved in costly litigation, and he did not -dare to say anything. - -“The Railroad Commission was asked by the legislature about these -discriminations on the Boston and Albany, and a report was handed in by -the Commission (1900) saying that the reductions from the published -rates averaged 40 percent, and that in different cases they ran from 10 -to about 73 percent—fully confirming what the shippers had said. It was -admitted, however, that this report was not written by the Railroad -Commission. They had passed the question over to the Boston and Albany, -and a high official of the road had written the reply. The Railroad -Commission admitted that they did not know anything about it. They, -however, handed in the report of the railroad official as being true, -and it was admitted, both by the railroad, and by the Commission, that -these discounts on local rates were being given. The railroad official -claimed that the special rates were ‘open to all shippers sending -freight under similar circumstances and conditions,’ which may be true -if we understand circumstances and conditions’ to include the relations -of the shipper to the managers, and his pull with the railroad, but -cannot in any other way be made to square with the statements of -shippers and the other evidences in the case.” - -While favored shippers were receiving discounts of 10 percent to 73 -percent from the published rates, other shippers, and some doing -considerable business, declared that they got no discount at all. During -the legislative investigation the matter was put to Samuel Hoar, -attorney and director of the Boston and Albany, and he said: “I suppose -it is true that no shipper knows what his rival is getting. I suppose it -is true. But what of it? What has that to do with the lease?” - -The receipts per ton-mile on all classes of freight were less than -one-half the average of the published rates to the various stations on -the road for the cheapest class of freight, viz., coal. And the lowest -published local rate on coal was higher than the average rate on all -commodities. - -“The interstate-commerce law was passed in 1887 and the Interstate -Commerce Commission was established to abolish the evils of unjust -discrimination, but the work has not been accomplished. The Interstate -Commerce Commission has told us year after year that the discriminations -are still going on; and that they cannot be stopped under present laws -at least.”[157] - -Mr. George R. Blanchard of New York, former commissioner of the Joint -Traffic Association told the Industrial Commission[158] that -“Discriminations against persons result from secret rebates, combination -of rates on inward material and outward products, so as to affect the -through charges; favoritisms in terminal facilities; quicker time in -transit; unequal or hidden allowances in weights; dissimilar storage -periods in cars or warehouses; preferences in supplying cars; -differences in special charges, such as switching, loading or unloading, -or in cartage allowances; the leasing of elevators to or making elevator -contracts with large handlers of grain, to their exceptional advantage; -the grant of undue allowances under the fictitious guise of commissions, -etc.” - -Summing up the evidence gathered in its great investigation, 1900–1901, -the United States Industrial Commission concludes that the main effect -of the Interstate Act has been to concentrate the benefits of -discrimination in fewer hands,[159] which tends to build up trusts and -combines. It found discriminations everywhere prevailing. It says: -“There is a general consensus of opinion among practically all -witnesses, including members of the Interstate Commerce Commission, -representatives of shippers, and railway officers, that the railways -still make discriminations between individuals, and perhaps to as great -an extent as before. In fact, it is stated by numerous witnesses that -discriminations were probably worse during the year 1898 than at any -previous time. - -“It is claimed that direct rebates and secret rates are still frequently -granted; commissions are paid for securing freight; goods are billed at -less than the actual weight; traffic within a State not subject to the -Interstate Commerce Act is carried at lower rates; allowances and -advantages are made in handling and storing, etc. Several witnesses -refer to the practice of shipping goods under a false classification. -Sometimes this is done without the knowledge of the railways, but in -other cases they apparently connive. Thus fine hardware may be shipped -as some low-class kind of iron. - -“The representatives of the railways declare that so long as competition -exists the attempt to get traffic by secret rates must continue. It is -thought generally that there has been a considerable improvement in the -situation during the year 1899.... In the latter part of 1898, Messrs. -Cowen and Murray, receivers of the Baltimore and Ohio Railroad, -addressed a letter to the Interstate Commerce Commission declaring that -the practice of granting rates below the published tariffs was so -general as seriously to reduce the revenue of the railroads. More than -50 percent of the traffic, at least on certain roads, was affected. The -receivers expressed a determination to coöperate in the enforcement of -the law. Later, conferences were held between the Interstate Commerce -Commission and railway officers, which led to a general attempt to -reduce the extent of the evil. Many witnesses, however, including -representatives of the railroads, think that the improvement is only -temporary, and that when the present rush of traffic has ceased -discriminating rates will be granted more and more.” - -The investigations of the last five years show that these witnesses were -right in thinking the cessation of hostilities to be only a temporary -truce. - - - - - CHAPTER XVII. - THE ELKINS ACT AND ITS EFFECTS. - - -The “Elkins Act,” approved Feb. 19, 1903, amended the Interstate Act in -some important particulars. It provides that any failure to publish -rates and charges, or any departure from the published tariffs, or any -offer or grant of any discrimination, rebate, concession, or device of -any kind whereby transportation is obtained at a less rate than the -tariffs published and filed with the Commission, shall be a misdemeanor -of the corporation as well as of the officers or agents concerned. Every -shipper also who solicits or accepts any such rebate, concession, or -discrimination is guilty of a misdemeanor. In each case, whether the -suit is against the railway company, or its officials, or a shipper, the -punishment is a fine of $1,000 to $20,000 for each offence, the -imprisonment clause of the Interstate Act being repealed. - -Under these provisions the railroad companies themselves may be -attacked, in addition to the suits against the guilty officials provided -for by the Interstate Act, and shippers may be convicted by showing that -by any device they have obtained a lower rate than the published rate, -without proving that some one else paid more than the defendant, as was -formerly necessary. - -The act also expressly authorizes the United States Circuit courts to -restrain by injunction or other appropriate process any departure from -published rates, or any discrimination forbidden by law, without -prejudice to the bringing of suits for damages or other action under the -Commerce Act. And it further declares that “in proceedings under this -act and the acts to regulate commerce, the said courts shall have the -power to compel the attendance of witnesses, both upon the part of the -carrier and the shipper, who shall be required to answer on all subjects -relating directly or indirectly to the matter in controversy, and to -compel the production of all books and papers, both of the carrier and -the shipper, which relate directly or indirectly to such transaction; -the claim that such testimony or evidence may tend to criminate the -person giving such evidence shall not excuse such person from testifying -or such corporation from producing its books and papers, but _no person -shall be prosecuted or subjected to any penalty or forfeiture for or on -account of any transaction, matter, or thing concerning which he may -testify or produce evidence, documentary or otherwise, in such -proceeding_.” - -This is considered one of the best railroad measures so far enacted. It -is said by many that direct rebates have practically ceased since its -passage, and some declare that it has stopped all sorts of -discriminations. - -While Mr. Bacon, an important witness from Milwaukee, was speaking to -the Senate Committee, 1905, of which Senator Elkins was chairman, the -following conversation took place regarding the Elkins Act.[160] - -“SENATOR ELKINS. The Pennsylvania Railroad has not given a rebate since -the act was passed, and they do not want to. It has been a benefit to -the railroads, don’t you think so? - -“MR. BACON. It has benefited the railroads, by millions of dollars. - -“SENATOR ELKINS. I mean the good railroads. - -“MR. BACON. It will undoubtedly effect a saving of upwards of a hundred -million dollars a year.” - -Mr. Prouty of the Interstate Commission said to the Boston Economic Club -in March, 1905: “The Elkins Bill is one of the most beneficent measures -touching railway regulation of recent times. I have no words of -commendation too strong for that measure; but this bill, which has very -largely stopped the payment of rebates, as such, was a railroad measure, -conceived by the railroads, passed by the railroads, and in the interest -of the railroads, and no one thing in recent times has put into the -treasuries of railways of this country more money than that same -enactment.” - -Senator Elkins who drew the bill is the political “boss” of West -Virginia. He is director of a railroad that belongs to the Pennsylvania -system and is otherwise identified with railroad interests. He acted in -harmony with leading railroads in drawing the bill. In fact, it is said -on high authority that it was framed in the office of A. J. Cassatt, -President of the Pennsylvania Railroad. The law is in many respects a -good one, although there is a clause in it which may protect the -railroads from the consequences of wrongdoing, and it is thought by many -that the real effect of the law has not yet become apparent. Railroad -managers do undoubtedly desire to protect themselves from the -importunities of shippers to whom they do not wish to give concessions, -and to be free from the danger of imprisonment, and so far as possible -from any danger, in case they are caught giving preferences to persons -or companies in whose property they or their railroads have a special -interest. The Elkins Act accomplished all these purposes. It is claimed -that the words italicized in the above quotation from the act will -prevent the prosecution of any officer or road on account of any cause -in respect to which they give evidence or produce books. In other words, -they can only be prosecuted where the discrimination or departure from -schedule rates can be proved without their help. Commissioner Prouty -says: “I have no doubt that rebates to a greater or less extent are paid -in many parts of this country. And if it turns out, as the railroads -contend, that the disclosure by any officer of a railroad gives the -company its exemption under the Elkins Bill your law is good for -nothing. They can resume the payment of rebates whenever they -desire.”[161] - -The fact is, apparently, that for some months after the act was passed -the railroads in large measure discontinued rebates and some other -notorious forms of discrimination, just as they did for some months -after the Interstate Act was passed in 1887. The abuses “grew up again -afterwards, and almost every 1st of January, from that time down to -this, these railroad gentlemen get together and make a gentlemen’s -agreement that they will quit and reform and turn a new leaf and not do -it any more. They break down again and make a resolution again. They are -now under a good resolution.”[162] - -Some of the sweeping declarations of railway men and others about -discriminations, and especially about rebates, are as follows:[163] - -“All stopped.” “Eliminated.” “Almost annihilated since Elkins Law” -(February, 1903). “Almost entirely wiped out.” “Have known of no such -payments for over 12 years.” “Do not know of any in last three years.” -“Have not had any for about 20 years.” “Never had any.” “Know of none.” -“Have been practically abandoned.” “Past issue.” “Have no knowledge of.” -“No complaints of.” “None so far as I know.” - -Some of the witnesses give the railways a clean bill of character and -even put a coat of whitewash over the record of the Standard Oil from -1887 on. Mr. Hiland, head of the traffic department of the Chicago, -Milwaukee and St. Paul, says: “Unjust discriminations and rebates have -ceased.”[164] - -Mr. Bird, Vice-President of the Gould lines, says: “I believe there are -no rebates paid.” - -“CHAIRMAN. And discriminations? - -“MR. BIRD. No secret discriminations. There may be discriminations that -are open and published in the tariffs.... I do not believe that the -Standard Oil Company has received a rebate since 1887.... I do not -believe that the beef trusts are getting rebates.”[165] - -Mr. Brown, counsel for the Santa Fe, said: “My sole purpose in appearing -here is to put on record a sweeping denial that the A. T. and S. F. -Company has made any discriminatory rates or paid any rebates.”[166] - -Mr. Biddle, traffic manager of the Santa Fe, was not quite so sweeping. -He said: “It is true that rebates have been paid, although personally I -have not known of any such payments for over twelve years.”[167] - -A more impressive mass of negative evidence could hardly have been -secured, even if the Commission had selected the witnesses with a view -to their ignorance of rebates and kindred manœuvres. It is peculiarly -fortunate, just at this time, to have the statements of so many who seem -to have refrained from associating with rebates or seeing any -discriminations, in view of the vigorous anti-rebate remarks of -President Roosevelt in his recent messages to Congress, asking for -further legislation to check railroad abuses. The President is under the -impression that rebates and other evils still exist, but if the Senate -Committee can report to Congress that this is a mistake it will be clear -that the said new legislation is not needed. - -Unfortunately, however, the weight of evidence is against those who -affirm the conversion of the railroads to the ways of virtue. The -cessation of discriminations is denied by a large number of authorities -including railroad men of the highest position.[168] - -James J. Hill, President of the Great Northern, says discriminations -still exist and must exist. He thinks discriminations will never cease, -and declares that railroads “have to discriminate.”[169] - -Victor Morawetz, Chairman of the Executive Committee of the Santa Fe and -its chief counsel, says that discrimination still exists and is “bound -to exist” under present conditions. Many things the traffic managers do -are not authorized by their superiors and would not be approved by them, -but it is understood that concessions are given and must be given.[170] - -President Stickney of the Chicago and Great Western says that prior to -the injunctions against paying rebates “it was understood among business -men that schedules were made for the small shippers and those -unsophisticated enough to pay the established rates,” and since the -injunctions the knowledge of the traffic directors has been exerted in -“the problem of how to pay rebates without paying rebates.” They use -“elevator fees” and “midnight schedules” or sudden changes of tariff -known beforehand to favored shippers. These special tariffs “are of -frequent occurrence and result in greater injustice than secret -rebates.”[171] - -Mr. Rich, the general solicitor for the B. & M., said to the Providence -Economic Club, in the spring of 1905, that 75 percent of products is -carried below the published rates. He added that the rates are mostly -open. The published rates no doubt are open, but it is hard to believe -that the cut rates are mostly open. If they were, there would be no -reason for publishing rates other than those in use. Every rate below -the published tariff is a violation of law. And it is not easy to see -why the railroads should risk multitudinous violations of law simply to -establish open rates which might be published without interfering with -any purpose that is honest. I quoted Mr. Rich’s words to an excellent -authority and he said, “Cut rates are not open rates. Can’t make people -believe that.” - -Senator Dolliver said:[172] “A famous railway president, speaking in -this city a month ago, stated that the whole railway practice of America -was honeycombed with secret rebates and discriminations as late as last -January.” - -Professor Ripley says[173] that discriminations between localities and -between commodities through classification, etc., are still serious -evils. - -Governor Cummins of Iowa said:[174] “So long as there is competition -among the railroads in securing business, so long they will find some -way of getting that business through favors.” - -Mr. C. W. Robinson, representing the New Orleans Board of Trade, said: -“The direct rebate has been stopped by the Elkins law, but there still -remains the indirect rebate, or the almost innumerable forms of -discrimination, which are difficult to reach by legislation, and in the -practice of which some of the traffic managers are unquestionably -experts.”[175] - -The complaints made to the Interstate Commission in the last few -years[176] and the facts brought out in the investigations of the -Interstate Commission from March, 1903, to the present time, and in the -Hearings of the Senate Committee, 1905, abundantly confirm the opinions -of these witnesses. - -The Elkins Bill became law in February, 1903. In December of the same -year the Interstate Commerce Commission reported that they believed the -payment of rebates was largely discontinued, but that pressure upon the -companies to maintain published rates had “begotten a new crop of -expedients for the purpose of favoring particular shippers.”[177] -Private-car abuses and terminal-railway abuses especially have “grown up -much more intensely and to an aggravated degree since the Elkins Act -than ever before.”[178] In 1902, in consequence of the exposure of -wholesale rebates in the dressed-meat traffic, etc., temporary -injunctions were issued against 14 leading railroads of the West, and -while the matter was still before the court the Elkins Bill was passed, -settling the injunction question in favor of the Commission. The -railroads, convinced that rebates were dangerous, for the time at least, -turned their attention to methods of discrimination not so subject to -injunction or other judicial disorder. To these they have given their -main allegiance, though they have by no means abandoned the rebate. - - - - - CHAPTER XVIII. - THE WISCONSIN REVELATIONS. - - -In 1903, as stated in a previous chapter, Governor La Follette began an -investigation of the railroads in Wisconsin, in relation to illegal -deductions from the gross earnings returned by them as a basis for -taxation. The investigation covered the period from 1897 to 1903, and it -was found that $10,500,000 of illegal tax deductions had been made in -that time, about $7,000,000 of which was in the form of unlawful rebates -and discriminations. Every railroad of any importance in the State had -paid rebates every year in large amounts both on passenger traffic and -freight business. Here is a table of the rebates paid in violation of -the Interstate Commerce Act and the Elkins Law by the leading railways -in Wisconsin, so far as brought to light by the investigation:[179] - - ILLEGAL REBATES PAID TO SHIPPERS IN WISCONSIN, 1897–1903. - - FREIGHT. PASSENGER. - Chicago, Milwaukee & St. Paul $1,346,237. $170,968. - Chicago & Northwestern 3,023,810. 614,361. - Chicago, St. Paul, Minneapolis & Omaha 515,323. 64,559. - Wisconsin Central 244,492. 82,475. - “Soo Line” 464,041. 39,807. - Burlington 366,105. - Other Railroads 158,677. 489. - ——————————— ————————— - $6,118,689. $972,661. - -These figures represent only part of the rebates really paid, and do not -touch in any way the vast amount of favoritism which does not take the -rebate form nor appear in any cash item. - -Part of the Wisconsin rebates were paid on State business, but far the -larger part was on interstate traffic. The Elkins Law, instead of -putting an end to the payment of rebates, as so many railroad men have -declared, had no effect whatever, apparently, on the volume of rebates -paid. Here is the monthly record of rebates paid in 1903 by one of the -principal railroads operating in Wisconsin: - - January, 1903 $37,000 - February 57,000 - March 47,000 - April 36,000 - May 25,000 - June 13,000 - July 101,000 - August 32,000 - September 46,000 - October 9,000 - November 666 - December 2,032 - -The Elkins Act went into effect February 19, 1903; yet the rebates in -February and March were larger than in January; and the rebates for July -were nearly three times the January figure. It is clear, however, that -when the light of publicity was turned on by the investigation, which -began September 29, 1903, the rebate payments that could be checked up -on the books dropped from $46,000 in September to $9,000 in October, -$666 in November, and $2,032 in December. Instead of paying cash rebates -the railroads began to issue a great many “midnight tariffs,” that is, -rate schedules printed on purpose to give favored shippers advantages -over others and then revoked or superseded as soon as the purpose has -been accomplished, so that the midnight tariff has, in a different way, -done exactly what is done by the payment of the cash rebate. - -The impotency of the Elkins Law is still further shown by the fact that -the total rebates paid by the railroads in 1903 were greater than the -rebates of 1902. The Northwestern road, for example, jumped from -$212,075 rebates in 1902, before the Elkins Law, to $410,476 in 1903, -mostly after the Elkins Act took effect. - -We have seen in Chapter III how President Mosher of the Northern Grain -Company fought La Follette’s railroad reforms because of his deep -sympathy with, and appreciation of, the rights of railroads that were -paying his company $30,000 a year in secret rebates. Another man who -bitterly opposed La Follette, denouncing him as “an inciter,” a -demagogue, etc., was an officer of one of the refrigerator companies -that carries beer for a big Milwaukee brewery. At the very time this -official condemned La Follette, his company was receiving from one to -three thousand dollars a month in rebates from a single one of the -Wisconsin railways, in addition to the mileage profits on the cars. No -wonder the brewers and their allies opposed all progressive railroad -legislation when they were getting $73,240 a year in mileage rentals, -and many thousands more in secret rebates or commissions from the -Chicago, Milwaukee, and St. Paul alone. These men were strongly of -opinion that there was law enough already. - -An investigation in Minnesota a little before that of Wisconsin showed -precisely the same sort of facts, namely, enormous amounts in rebates -were paid by the Great Northern, the Northern Pacific, and other -Minnesota railroads. But in the Minnesota cases, to forestall further -agitation and publicity, most of the railroads paid the additional taxes -demanded by the State. - -The railroads do not by any means confine their rebate operations to the -States in which their lines are located. The case of the Camden Iron -Works, recently before the Interstate Commerce Commission, shows that a -railroad will reach half across the continent with a rebate in its hand -to grasp important shipments. In this case the Northern Pacific gave R. -D. Wood & Co. of Philadelphia, the owners of the Iron Works, a rebate of -5 cents a hundred on 1,500 tons of iron pipe. The Great Northern, the -Canadian Pacific, the Delaware & Hudson, and other roads had agents on -the spot trying to get the business away from the Pennsylvania, which -would naturally have taken the shipment, but the 5 cent rebate carried -the day and the iron went via the B. & O., the Great Lakes, and the -Northern Pacific. The rebate was paid by a check for $1,500, and no one -but the traffic managers knew of the transaction, which would probably -never have come out except for the complaint of a traffic agent on the -Pennsylvania, who had offered a rebate of 1 cent a hundred but did not -get the business and was therefore blamed by his superiors. - - - - - CHAPTER XIX. - THE COLORADO FUEL REBATES AND OTHER CASES. - - -In the Colorado Fuel and Iron Case, investigated by the Commission in -1904 and 1905, it was shown that the Santa Fe has persistently violated -the Interstate Act, the Elkins Act, and the injunctions issued by the -United States Circuit Court. The Santa Fe tariff filed with the -Interstate Commission May 24, 1903, and in effect till November 27, -1904, made the rate on coal from the Trinidad district, Colorado, to -Deming, N. M., $4.05 a ton; but Mr. Biddle, General Traffic Manager of -the Santa Fe, testified that during all this time $1.15 of the $4.05 was -always paid back by the railroad to the Colorado Fuel and Iron Company, -a concern in which the Standard Oil people are largely interested. -Similar favors were shown the Colorado Company in respect to shipments -from its mines at Gallup, N. M., giving that company a decided advantage -over competitors, who were obliged to pay the full rate.[180] - -It made a difference, also, who was to get the coal. The Santa Fe -carried Colorado Fuel and Iron Company coal to the El Paso and -Southwestern for $2.90 a ton, while charging $3.45 a ton for hauling the -same coal from the same mine to the same point, Deming, when the billing -was to the Southern Pacific. The El Paso could get coal on a rate of -$2.90, while the Southern Pacific must pay $3.45 and the published -tariff rate was $4.05. Anybody on the line of the El Paso who stood in -with the management could get the $2.90 rate, while his competitors -might be paying $4.05. - -Mr. Biddle testified as follows, December, 1904, in answer to the -questions of Mr. Field: “I say the freight rate we got from the Southern -Pacific was $3.45 at the time we were accepting $2.90 on coal destined -to the El Paso and Southwestern.” - -“MR. FIELD. That is to say, at that time you were charging the Southern -Pacific Railroad Company $3.45 per ton for transporting coal (to -Deming), when you were charging the El Paso and Southwestern Railroad -Company only $2.90? - -“MR. BIDDLE. Yes, sir. - -“MR. FIELD. And all upon a published tariff which showed a rate of $4 to -Deming? - -“MR. BIDDLE. No; the arrangement we had with the Southern Pacific was an -agreement as to what they would pay for their coal. - -“MR. FIELD. You paid no attention whatever to the published tariffs? - -“MR. BIDDLE. I don’t know that we published a tariff on Southern Pacific -coal at all. - -“MR. FIELD. When you published a tariff for the information of the -public and the Interstate Commerce Commission, it was with the -reservation that you might modify that tariff to certain consumers as -suited your business? - -“MR. BIDDLE. It didn’t apply to coal when destined to the Southern -Pacific. - -“MR. FIELD. That is another way of saying that it didn’t apply when you -didn’t want it to apply. - -“MR. BIDDLE. It means just exactly what I said it meant. I said that the -rate we published to Deming on coal was published with the full -knowledge that it did not apply on coal destined to the Southern -Pacific, or coal going to points on the El Paso and Southwestern. - -“MR. FIELD. With whose full knowledge? - -“MR. BIDDLE. With my full knowledge.” - -That is to say: The law requires all rates to be published and adhered -to, so that the Commission and the public may know what rates are being -charged. The traffic manager publishes a rate on coal, knowing that he -intends to give a secret cut rate to special customers, and then -testifies that the secret rate is no breach of the published tariff or -violation of law because the tariff was published with his full -knowledge that he wasn’t going to stick to it. The law in such case -depends entirely on what the railroad manager whispers to himself when -he issues the tariff. If the manager says to himself, “I intend to -follow this tariff which I’m sending to the Interstate Commerce -Commission,” then a rate lower than the tariff is in violation of the -law; but if the manager says, “I intend to give the Southern Pacific and -the El Paso lower rates than this tariff shows,” then the tariff is -issued with full knowledge that it doesn’t apply to Southern Pacific and -El Paso, and cut rates to Southern Pacific and El Paso and their -customers constitute no violation of law. - -The Caledonian Company was organized in 1888 to operate a coal mine at -Gallup, N. M., on the Santa Fe. - -The company sold large quantities of engine coal to the Santa Fe. The -contract expired in 1898 or 1899, and was not renewed, the parties not -being able to agree on the price; but the Santa Fe continued to buy more -or less coal from the Caledonian till 1901. Some time previous to the -expiration of the contract, the other mines at Gallup came under the -control of the Colorado Fuel Company. An agent of the Colorado Company -asked the Caledonian manager to name a price on his property, but he -declined to do so. “Soon after the Colorado Company took possession of -these mines, the Santa Fe system stopped receiving engine coal from the -Caledonian Company.” The Caledonian had a contract for engine coal with -another road, the majority of whose stock was owned by the Santa Fe. -This contract was also terminated in 1903, the manager of the road -stating that he did it, not because of any dissatisfaction, but by -direction of the purchasing agent for the Atchison.[181] - -The Caledonian sought other markets, but found itself handicapped by -discriminating freight rates. Coal from the Colorado Fuel Company’s -mines at Trinidad and at Gallup was being supplied at a price which just -about equalled the freight rate alone from the point of production to -destination. For example, the rate on lump coal from Gallup to Las -Cruces was $5.65, and the coal was selling at the mine for $1.60 to -$2.50 per ton; yet Gallup lump coal from the Colorado Fuel Company’s -mines was being sold in Las Cruces for $5.65 a ton, exactly what the -rival company, the Caledonian, would have to pay in freight. The -Caledonian shipped coal to Silver City, N. M., paying the published -rate, $5.90 a ton, while the Colorado Company was able to deliver Gallup -coal at Silver City at $5.75 total for freight and cost of coal. This -was in April, 1900. Later, the Caledonian shipped to Silver City at a -rate of $5.75 per ton, just what the Colorado sold for, freight and all. -As Gallup, Silver City, and Las Cruces are all in New Mexico, the -Interstate Act does not apply to traffic between those points; but “Mr. -Bowie (manager of the Caledonian) testified that he had made many -shipments from Gallup to El Paso, Tex., upon which he paid the published -rate, and that he found the same competitive conditions at El Paso and -at points in Arizona and Mexico which existed at Silver City.”[182] - -The result was that the Caledonian and other mines were practically -driven from the market, their business brought to a standstill, and the -Colorado Fuel Company obtained a virtual monopoly of the trade that -should have been divided with these companies. - -Before the Senate Committee, 1905, in answer to a question by Senator -Kean about the so-called discriminations in the matter of the Colorado -Fuel and Iron Company and the Santa Fe Railroad, Mr. Hearne of the -Colorado Fuel Company said: “This matter has been brought about largely -by sensational newspapers.... The coal produced by the Gallup people is -inferior,[183] carrying not more than half the heating power of our -high-grade bituminous. If the railroads have not extended to them the -same rate they have extended to us, I presume it is because the people -at Deming and El Paso, etc., do not want that fuel at any price.”[184] -In other words, the Gallup coal was so poor that the people at Deming -did not want it anyway, and so the railroad put a prohibitive rate on it -to keep the people at Deming from buying it instead of the far superior -Colorado coal which the people were determined to buy anyway. - -The Santa Fe used to own and operate coal mines, but in 1896 leased them -to the Colorado Fuel and Iron Company under a contract[185] supposed to -cover the question of freight rates. Afterward a circular in reference -to coal rates was issued from the central office of the Santa Fe in -Topeka.[186] It stated that coal originating at certain points (where -the Colorado Fuel and Iron Company had mines) would be delivered when -consigned to certain specified industries or parties at prices covering -both freight and cost of the coal, which total prices might be, as we -have seen, no greater than the published freight rate alone. The -circular was headed: “This publication is for the information of -employees only, and copies must not be given to the public.”[187] And it -gave notice to Santa Fe agents that the Colorado Company’s coal shipped -to points on the Santa Fe was “to be billed at figures furnished by the -Colorado Fuel and Iron Company which will include the freight rate and -the price of coal.”[188] - -The following questions of the I. C. C. counsel, Mr. Field, and answers -by Mr. Biddle, the general traffic manager of the Santa Fe, are of -interest in this connection: - -“MR. FIELD. You did not advise the Commission that the rate you made (on -the Colorado Company’s coal) included the price of the commodity? - -“MR. BIDDLE. No. - -“MR. FIELD. Why didn’t you? - -“MR. BIDDLE. I didn’t consider it necessary. - -“MR. FIELD. I ask you categorically if you didn’t do it with the -intention of deceiving the Interstate Commerce Commission and the -competitors of the Colorado Fuel and Iron Company as to that rate. - -“MR. BIDDLE. No, sir. - -“MR. FIELD. What was your purpose, Mr. Biddle? - -“MR. BIDDLE. Well, we did it for business reasons. - -“MR. FIELD. What were the business reasons? I want you to tell me the -reasons. - -“MR. BIDDLE. We did it for reasons we did not consider necessary to -tell; on coal to intermediate points—the rate that we found it necessary -to make to points reached by the El Paso and Southwestern. - -“MR. FIELD. You say upon your oath now, that you did not do it for the -purpose of deceiving the Interstate Commerce Commission or the -competitors of the Colorado Fuel and Iron Company? - -“MR. BIDDLE. Whatever answer I may make here I am making under oath. - -“MR. FIELD. Do you say that is so? - -“MR. BIDDLE. I repeat what I said. - -“MR. FIELD. You did not intend to conceal from the Interstate Commerce -Commission the fact that that rate as published included the price of -the commodity? - -“MR. BIDDLE. We did it for business reasons. - -“MR. FIELD. I ask you for a categorical answer. Did you or did you not -intend to conceal from the Interstate Commerce Commission the fact that -that rate included the price of the commodity? - -“MR. BIDDLE. I decline to answer.” - -In another part of the hearing, Mr. Field said to Mr. Biddle: “Can you -say, Mr. Biddle, how it happened that you issued a circular to your -subordinates in which you said, with reference to these coal rates, ‘To -be billed at figures furnished by the Colorado Fuel and Iron Company, -which include the freight rates and the price of coal; the rates issued -in the regular tariffs to be the minimum’?” - -“MR. BIDDLE. Yes, sir. - -“MR. FIELD. Will you tell us? - -“MR. BIDDLE. It is because the railroads—the Western railroads -particularly—I don’t know whether the Eastern roads do it or not—have -been engaged in the reprehensible occupation of serving as a collecting -agency for the coal companies, and those particular instructions were -given so that the Colorado Fuel and Iron Company could sell coal to John -Smith at a given place and charge him $1.25 and somebody else $1.50 for -that same coal.”[189] - -When the document was presented in evidence before the Interstate -Commerce Commission, counsel for the railway objected to its -introduction on the ground that it had been stolen. - -Morawetz says that the rate agreement in respect “to shipments to the El -Paso and Southwestern was a three-cornered arrangement made in New York -in 1901 between the Colorado Fuel Company, the Santa Fe, and Phelps, -Dodge & Co., who operated large copper mines and controlled the El Paso -and Southwestern Railway.”[190] - -Paul Morton, who was then the head of the Santa Fe traffic department, -says that in 1901 the people interested in smelting and mining in -Southern Arizona and Northern Mexico threatened to use Eastern coke or -build a coal railroad of their own unless lower prices were made on the -coal and coke they were receiving at El Paso and Deming. They were large -consumers, and their threat menaced a traffic worth nearly a million -dollars a year to the Atchison system. To protect its interests the -Santa Fe entered into an agreement with the Fuel Company and the El Paso -and Southwestern people the terms of which were that the Fuel Company -was to supply coal at $1.15 a ton, and the Santa Fe was to haul the coal -to El Paso and Deming “at the very low rate of $2.90 per ton, which was -in reality a division of rate, not usually published.” And “the -Southwestern people were to pay $4.05 for the coal which was to be used -by the railroad itself and the industries along its line.”[191] - -This arrangement was, in view of the rates charged shippers from other -points and other consignees at El Paso and Deming, a clear violation of -the common law and the Interstate Commerce Act. A Federal injunction was -served on the Santa Fe in March, 1902, forbidding departure from the -published rates, and the Elkins Bill was passed in February, 1903. The -El Paso arrangement was not at the start a defiance of injunction or the -law of 1903, but became such by its continuance after their issue. -General Traffic Manager Biddle and General Freight Agent Gorman sent out -general orders in March, 1902, and February, 1903, that the law was to -be obeyed, and that “no departure therefrom will be permitted so far as -this company is concerned,” but the law was not obeyed nevertheless. A -general order of a railroad manager counter to the financial interests -involved does not seem to count any more than a Federal injunction. - -The El Paso agreement was by no means the only breach of law in the -case. Even the discriminations in respect to shipments between New -Mexico points were in direct violation of settled principles of the -common law. - -The Commission found that the Santa Fe acted as agent for the Colorado -Fuel Company in collecting from its customers the price of the coal -itself along with the freight rate;[192] that for over five years (July, -1899, to Nov. 27, 1904) the railroad had paid the Colorado Fuel Company -a rebate of $1.10 to $1.25 per ton on shipments to Deming; that the -railroad and the Coal Company have “systematically and continuously” -violated the Interstate Commerce Act of 1887 and also the Elkins Act of -1903; and that from March 25, 1902, till Nov. 27, 1904 the railway had -been in “continuous disregard” of the order of the United States Circuit -Court (in a suit begun at the instance of the Interstate Commission) -enjoining the railway to observe its published schedules of rates.[193] - -Commissioner Prouty says: “In all my experiences with railway operations -I never saw such barefaced disregard of the law as the Santa Fe railroad -and the Colorado Fuel and Iron Company have manifested in this coal -case. For years the railroad company has received less than its -published rates from the Colorado Fuel and Iron Company while its -competitors have paid higher rates.” - -The counsel, Judson and Harmon, employed by the Government to examine -into the “alleged unlawful practices of the Santa Fe in the -transportation of coal and mine supplies” reported to the Attorney -General, February 28, 1905, as follows: “From August, 1902, until -December, 1904, the railway company continuously transported coal for -the Colorado Fuel and Iron Company at less than the published rates then -in force, from various points in Colorado and elsewhere to El Paso, -Tex., Deming, N. M., and other places, to which such transportation was -interstate commerce. - -“This was done by secret arrangement between the two companies, under -which the coal was apparently billed at the published rate of freight, -although in fact the price of the coal was included. The railroad -company collected the amount shown by the billing, and paid over part of -it to the fuel company as the price of the coal, making the real charge -for transportation less than the published rate by just that amount. At -the same time the rates given and charged other shippers were the -published tariff rates without any deduction. - -“This plan, and the way it was carried out, plainly indicate an -intention to deceive the Government and the public, and to enable the -fuel company to gain a monopoly of the coal supply at the points -involved by giving them a strong advantage over competitors in the -actual cost of transportation. The motive for thus favoring the fuel -company does not appear in the evidence thus far taken, but the fact is -clear. - -“This secret arrangement with the fuel company involved the carriage of -hundreds of cars per month. The concessions from the established rates -must have amounted to about a million dollars for the two and one-half -years during which they were granted; and it is incredible that this -scheme was devised and carried out by any authority but that of the -chief officers of the railway company, who were in control of its -traffic department. And it was the duty of each and all of these -officers to see that the injunction (of March, 1902) was obeyed.” - -The special counsel recommended that “the Atchison Company and all its -principal officers and agents who had, during the period above named or -any part thereof, power and authority over traffic agreements and -freight rates, be arraigned for contempt of court.” - -President Roosevelt has directed that proceedings for contempt be taken -against the companies in the Colorado Fuel Case and the International -Harvester Case, but will not proceed against individual officers -personally in any case until the department is in possession of “legal -evidence of wilful and deliberate violation” of law on their part. - -I went over the Santa Fe while these secret discriminations were in full -blast, and met President E. P. Ripley, Vice-President Paul Morton, and -other high officials, who impressed me so favorably in our talks about -rates, discriminations, etc., that I wrote in my notebook: “I believe I -have found one honest railroad in America, honest at least in intent, -whatever deviations from principle the system may force upon it.” Mr. -Spearman evidently got a similar impression, for he says: “The Santa Fe -has eliminated preferential rates entirely from its own traffic -problems; and this sturdy determination to put all shippers on a just -and equal footing, to maintain open and even rates, is the keynote of -President Ripley’s successful strategy.”[194] - -This is stronger than the impression I received, which was that -discriminations did exist and it was not thought possible that they -should cease to exist, so long as competition continues, but that there -was an earnest purpose to eliminate them so far as possible. -Notwithstanding the Colorado Case and others mentioned hereafter I still -think that the present administration of the Santa Fe is on the whole -relatively very honest and very admirable.[195] - -President Roosevelt was led to a similar conclusion by the frank and -manly stand taken by Paul Morton in his testimony in the Dressed-meat -Hearings, Jan. 7, 1902. In a letter to Mr. Morton, June 12, 1905, the -President says: “At the time when you gave this testimony the Interstate -Commerce Law in the matter of rebates was practically a dead letter. -Every railroad man admitted privately that he paid no heed whatever to -it, and the Interstate Commerce Commission had shown itself absolutely -powerless to secure this heed. When I took up the matter and endeavored -to enforce obedience to the law on the part of the railroads in the -question of rebates, I encountered violent opposition from the great -bulk of the railroad men and a refusal by all of those to whom I spoke -to testify in public to the very state of affairs which they freely -admitted to me in private. You alone stated that you would do all in -your power to break up this system of giving rebates.” It was this, the -President says, that led him to invite Mr. Morton to take a place in the -Cabinet. - -The high character and ability of Mr. Morton and President Ripley and -the fact that the Santa Fe management seems to represent high-water mark -in railroad honesty, gives great importance to the Santa Fe cases, and -the attitude of her leading officers towards the law, and the principle -of impartial treatment of shippers. - -Paul Morton is reported to have said to a representative of the Chicago -_Daily News_, December 31, 1904: “What Mr. Biddle did was exactly right, -in my judgment, and if I had been in his place I should have done the -same thing.” And President Ripley is stated to have said to a reporter -for the _Inter-Ocean_, “It was not rebating. It was simply a figure -agreed upon by private contract. Mr. Paul Morton was cognizant of it, -and though his name may not be affixed to the order, he was the man from -whom Mr. Biddle, the freight traffic manager, got authority to haul coal -for the Colorado Fuel and Iron Company on the terms named.” - -“Did you also know of it, Mr. Ripley?” - -“Why, yes, as I know of all of our business. I consider it absolutely -legitimate, and will do it again to-morrow if I like.” - -Knowing that serious misrepresentations have appeared in the papers,—for -example, that Mr. Morton was a stockholder in the Colorado Fuel Company, -and recreant to Atchison interests, which was untrue, as Mr. Morton had -sold his stock in the Fuel Company and all its auxiliaries when he left -its employ before entering the service of the Atchison in 1895—knowing -the frailty of newspaper reports I wrote to President Ripley and Paul -Morton asking if it were true that they had said Mr. Biddle did right in -making the arrangement with the Colorado Fuel Company in respect to the -rates to Deming, etc. They replied as follows: - - THE ATCHISON, TOPEKA & SANTA FE RAILWAY SYSTEM. - - _President’s Office._ - - CHICAGO, August 22d. 1905. - - DEAR SIR,—I did say to the Press that Mr. Biddle’s action in making - the rate was exactly right. The whole trouble arose from a mistake in - our tariff printing department in confusing the actual rate charged - with the amount to be collected at destination. It was our custom, and - that of all the other fuel roads in Colorado, to collect at - destination the price of the coal as well as the freight rate. - Inasmuch as the tariffs printed are a guide intended quite as much for - the information of our own agents as for the public, the clerks - included the price of coal in the tariff as a guide to collecting - agents, but it did not occur to them that the information was liable - to mislead the public, especially as it was a well-known fact that no - shipper except the Colorado Fuel and Iron Company could possibly be - interested. The whole transaction was a perfectly innocent one so far - as regards any intent to injure any interests or to deceive the public - in any way, nor was any person injured by the transaction. I think - that all this will transpire and be recognized by the court in the - case now pending at Kansas City, though, of course, I am not in - position to anticipate a court decision. The trouble with the whole - matter was the fact that Mr. Morton was a member of the Cabinet and - that certain portions of the Press made use of the incident for the - purpose of discrediting the Administration. - - The matter was unfortunate in so far as it may have constituted a - technical violation of the Interstate Commerce Law and of the - Injunction, but that is the worst that can be said of it. - - (_Signed_) E. P. RIPLEY. - - THE EQUITABLE LIFE ASSURANCE SOCIETY. - - _President’s Office._ - - NEW YORK, August 24, 1905. - - DEAR SIR,—Referring to your query relative to the remarks alleged to - have been made by me on December 31, 1904, to a reporter of the - Chicago _Daily News_, I have to say that although I do not now recall - everything that may have been said by me in conversations which were - not intended for publication, it is quite possible that I did remark - to some newspaper men that in my judgment Mr. Biddle’s personal action - in the case was entirely justifiable, and exactly what I or any other - railroad man would have done under similar circumstances. The contract - between the Railroad Company and the Fuel Company was of itself - neither unlawful nor unbusinesslike. On the other hand, it was - perfectly defensible from a legal standpoint, as well as being good - business ethics. - - The fault lay with the Railroad Company’s tariff bureau, which failed - to properly publish the tariff, which should have shown that the - published rate of $4.05 per ton included the price of the coal ($1.15 - per ton). There was no discrimination in favor of the Colorado Fuel - and Iron Company; in fact, discrimination was impossible, because - there was no other shipper of coal in that territory. - - (_Signed_) PAUL MORTON. - -There were, however, other mining companies in adjacent territory, along -the line of the Santa Fe in New Mexico, and at Gallup there were -competitors in the same field. The same day that the Commission began to -investigate the Colorado Case complaint was made about the rates from -San Antonio, N. M. San Antonio lies 150 miles north of El Paso on the -Santa Fe line from Trinidad, which is 500 miles from El Paso. The rate -paid by the Fuel Company from Trinidad was $2.90 and the rate from San -Antonio had been $1.25. “Under this adjustment of rates a coal operator -at Carthage whose product reached the iron of the Santa Fe at San -Antonio had been able to compete with the Colorado fields, and had -entered into a contract for furnishing the Mexican Central Railway -Company with its fuel. While that contract was pending the Santa Fe -advanced the freight rate from San Antonio to El Paso from $1.25 to -$1.50. By this action the operator at San Antonio was forced to give up -his contract and go out of business.”[196] - -It seems clear that even our best railroads, while unwilling to -countenance graft and desiring to avoid all criminal practices, see -nothing immoral in granting whatever favors or imposing whatever -disadvantages may be deemed necessary to forward the financial interests -of the road. - -The Santa Fe is by no means the only railroad that has been kicking over -the traces since the Elkins Bill was passed. Mr. Hendrickson, Secretary -of the Associated Merchants of Cumberland, Maryland, told the Senate -Committee that he came “to complain of coal discriminations. We are -charged 15 cents more a ton to tide water for our coal than is charged -other mines in more distant regions (50 to 75 miles further from market -on the same road), and we have a large amount of bituminous coal that -cannot be developed at the 15 cents differential.” - -“SENATOR DOLLIVER. Why do they make this differential against you? - -“MR. HENDRICKSON. I can only state that the Baltimore and Ohio -officials, when they were petitioned, said that other districts have -poorer coal than ours, a compliment we did not appreciate under these -circumstances; and they object to letting our coal reach market as -cheaply as these districts which they claim have poorer coal. -Nevertheless, it shuts our region out entirely. It is practically a -confiscation of our coal values, not our coal, but coal values, and that -amounts practically to the same thing.”[197] - -The B. & O. made certain charges when coal was loaded by tipple and -exacted more if it was loaded in any other way. This is an unreasonable -discrimination against all who do not load by tipple.[198] The Pere -Marquette Railway has been selling ice to the Armour Car-Line at $2 a -ton while charging other shippers $8 to $12 per ton.[199] - -The absorption of switching charges in some cases and not in others -constitutes an easy method of discrimination. For example, at Cincinnati -there is a large buyer of lumber whose yard is on what is called -“Hazen’s Switch.” To get to this switch from the Louisville and -Nashville Railroad, cars must go over part of the tracks of the P. C. C. -and St. Louis Railway and the Cinn. L. & N. Railway. These roads charge -the Louisville and Nashville $6.50 to $9 a car for switching. On lumber -originating at some points the shipper has to pay these switching -charges in addition to the freight; while on lumber from other points -the Louisville railroad pays the switching charges and the shipper is -favored to that extent.[200] - - - - - CHAPTER XX. - FREE CARTAGE, STATE TRAFFIC, DEMURRAGE, THE EXPENSE BILL SYSTEM, GOODS - NOT BILLED, MILLING-IN-TRANSIT. - - -In a recent St. Louis case it appears that the railroads were paying 5 -cents a hundred to transfer companies for carting goods across the river -from East St. Louis to the depots in St. Louis. They paid the same -amount to the Grant Chemical Company for hauling their own goods across -the river and also to the make-believe transfer company of the Simmons -Hardware Company, the traffic manager of which organized the company’s -own teams into a little transfer company on purpose to get 5 cents per -hundred from the railroads. Other shippers were refused the 5 cent -teaming allowance. The Interstate Commission held that the payments to -the Chemical Company and the burlesque Simmons transfer company were -unlawful rebates.[201] - -Traffic within a State not subject to the Interstate Commerce Act is -carried at low rates for favored shippers. Sometimes the shipper pays -the full interstate rates in consideration of receiving preferences on -shipments within the State to which the Interstate Act does not apply. -Allowances and advantages are accorded in handling and storing. -Commissions are paid, and goods are billed at less than actual weight. -And goods are shipped under false classification or to a false name -under the “straw man” system. This system is thus described by Mr. -Gallagher, representative of the Merchants’ Exchange of St. Louis: -“Instead of billing that stuff to the man I have sold it to I bill it to -a fictitious man, or straw man. On the bills he is the actual shipper. I -do not see him at all, don’t know anything about him, but he bills the -stuff to the man that I want it to go to, my customer, and it will go -through all right, and by and by the straw man sends me a check for a -rebate. You cannot find him; at least, I have not been able to do it. -That was also described to me by a man who practices it.”[202] Some -shippers are allowed to let carloads lie 15 days without demurrage, -while others have to pay for the car service they get.[203] In the West -I found many instances of this. In Butte, for example, one mining -company does not have to pay any demurrage, while other companies are -charged with demurrage. - -Railway purchasing agents are instructed to buy supplies from parties -who are large shippers, and these agents buy at prices which afford such -shippers all the benefits they would get from a rebate on the freight -rates.[204] This is, in fact, only another way of paying rebates. The -allowance of fictitious claims is still in vogue.[205] - -Abuse of the “rebilling privilege” or the “expense bill system” is still -in full bloom. Rebilling properly relates to the reshipment of goods -received in unbroken carload lots, so as to make them complete a -continuous trip at the through rate from the point of origin to final -destination. But it appears from a case passed upon this year, 1905, by -the Supreme Court of Mississippi, that merchants in Vicksburg receiving -freight over the Vicksburg, Shreveport and Pacific Railroad are allowed -to use their “expense bills,” showing the amount of freight received -over that line, in a way that enables them to get reduced rates. Within -90 days of the date of any expense bill the holder can ship out over -that road an equal quantity of freight not necessarily the same he had -received, but anything he chooses. By this means the Vicksburg merchants -can get grain by barge and ship it out at 3½ cents, while the merchants -of Meridian have to pay 10 cents on similar shipments, and the low rate -was not available either for merchants in Vicksburg who did not deal -with the said specially favored associated line having the through -rate.[206] - -In a still more recent investigation (July 1905) by the Interstate -Commission at Louisville, Ky., it appears that on presentation of an -expense bill for each car of grain from St. Louis at any time within the -preceding 90 days, the Louisville dealer may ship an equal amount of -grain on to Atlanta at a rate 3 cents per hundred below the tariff from -Louisville to Atlanta. One day during the hearing 67 expense bills were -presented in evidence, some of which had been altered and the rest -duplicated and even triplicated with the result of giving the guilty -shippers an unlawful advantage of 3 cents a hundred over their -competitors selling grain in the southeastern territory. Many of these -bills were admitted to be forgeries from beginning to end, while others -were altered by erasing the original words and writing in others. For -example, wheat was sent as bricks by erasing the word “bricks” on an -incoming bill, writing in the word “wheat” and using the altered bill to -forward a car of wheat at the expense bill discount. Every one of the -bills in the bunch we are speaking of was in favor of a single -Louisville firm which does an immense business in the Southeast. - -In other cases goods are not billed right. Dealers have been known to -ship cutlery as iron bolts, and dynamite as dried apples. False billing -as to weight is practised both in freight and express shipments. The -carrier acts in collusion with the shipper in some cases while at other -times the carrier is among the defrauded. - -Sometimes large amounts of freight are sent without being billed at all. -“I know of a point,” said Mr. Davies of Chicago, representing 70 fruit -associations of that city, “where 150 cases of strawberries were -systematically loaded on a car upon which there was never any freight -paid, and the rate was 21½ cents a crate.” - -“SENATOR KEAN. How long ago was that? - -“MR. DAVIES. A year or two ago. It is done to-day. - -“SENATOR KEAN. Do you have knowledge of it? - -“MR. DAVIES. Yes; and so can you, if you go around the freight yards. - -“SENATOR KEAN. Is this knowledge of yours a guilty knowledge? - -“MR. DAVIES. I just a moment ago told you not, and further, I will offer -to this committee the records of my business. - -“SENATOR KEAN. But you say you know these things are being done and have -made no complaint. - -“MR. DAVIES. Haven’t I? I would like to show you these papers that have -been nursed by the Interstate Commerce Commission for a year.” - -Mr. Prouty of the Interstate Commerce Commission says:[207] “I knew some -years ago that a train-load of wheat was transported from Minneapolis to -Chicago for nothing. There was simply no record of that shipment on the -books of the railroad.” - -“SENATOR CULLOM. What object had they in doing that? - -“MR. PROUTY. They wanted to prefer that man that had the wheat. Instead -of paying a rebate they carried the shipment for nothing.” - -The power to give or withhold the milling-in-transit privilege is a -serious means of discrimination. The Pennsylvania Railroad, for example, -grants this privilege to mills west of Pittsburg, but denies it to -millers at Harrisburg.[208] The Commission decided that the allowance of -the privilege of milling-in-transit by a carrier to shippers in one -section must be without wrongful prejudice to the rights of shippers in -another section served by its line. But the evidence in this case was -too meagre and incomplete to enable the Commission to make any order in -the premises involving the general extension of milling-in-transit -privileges into a territory where such privileges had not been -previously allowed. - -By refusing to accord the milling-in-transit privilege[209] to some when -it is granted to others the railroads may crush a mill more effectively -than it could be done by a hail storm in which each hailstone weighed a -ton. The big Atlantic Flour Mill at Beach and Green Streets, -Philadelphia, was rendered useless by the Pennsylvania Railroad’s -refusal to extend to it the milling-in-transit privileges enjoyed by -other Philadelphia mills.[210] - -Western roads give saw-mills operating on their lines and having logging -roads an allowance of 2 to 4 cents per hundred lbs. on the through -rates. Roads east of the Mississippi decline to make any such allowance, -so that the Western mills enjoy an advantage of 60 cents to $1.80 per -1000 feet in the through freight rates.[211] - - - - - CHAPTER XXI. - MIDNIGHT TARIFFS AND ELEVATOR FEES. - - -“Midnight tariffs” or “flying tariffs,” changed while you wait,[212] are -used to give rebates and preferences all wool and a yard wide, strictly -gilt-edged and in accord with the statutes made and provided for the -publication and observance of schedule rates. - -When a big shipper gets ready to send a large amount of freight the -railroads will suddenly make lower rates, publish them just in time to -fulfil the law, and the moment the shipment is made the lower rates are -withdrawn. For example a miller contracted for 17,000 bags of flour. At -400 to the car, 17,000 bags will make quite a string of freight. He went -to the railroad folks and got a cut rate of 5 cents a hundred on that -amount. They slapped in one of these “midnight tariffs,” published it, -and gave notice of withdrawal just as soon as the contract was -filled.[213] - -In the spring of 1905, a grain merchant who owned large elevators, -accumulated about 20,000,000 bushels of corn. When he got ready to ship, -the railroads reduced the tariff 2 cents per bushel, so that he could -ship at a low rate.[214] - -In some cases discriminations are the result of _intentional mistakes_ -in printing rate schedules. A tariff is printed with a 3, perhaps, in -place of an 8, so that a rate of 38 appears as 33, or a rate of 82 as -32. After a few copies have been printed and sent to favored shippers -the error is conveniently discovered and the schedule is corrected for -all ordinary shippers. - -The payment of elevator or commission fees continues to be a means of -discrimination beyond the reach of the law as it stands to-day. Some -lines which have buyers on their roads who own elevators at terminal -points allow an elevator charge or commission to their buyers, usually -1¼ cents per hundred, which constitutes practically a rebate or -preference not accorded to other shippers. Other lines which have no -elevators pay a rebate to their buyers equal to the elevator -charge.[215] - -A judgment has been obtained for $5,600 damages in favor of the Kellogg -Elevator against the Western Elevator Association and the four trunk -lines—the New York Central, the Erie, the Lackawanna, and the Lehigh—on -the ground of conspiracy to ruin the business of the Kellogg Elevator by -discrimination in freight rates in favor of the elevators in the -Combine. The charge was that the railroads contracted to pay the -elevator trust ½ cent per bushel for all grain shipped on their rails -from Buffalo, whether it was elevated from lake vessels by the Elevator -Trust or not. So, in effect, the Elevator Trust was given a rate of ½ -cent per bushel cheaper than the Kelloggs could get, and also that -premium on the Kelloggs’ business. The verdict of $5,600 was for three -weeks’ operation of the conspiracy. The Kelloggs claim that the annual -damage to them from discriminating rates amounts to $50,000 or $75,000. -The case is now pending on appeal to the Supreme Court of New York. - -In the investigation now going on in Kansas City (July, 1905) it appears -that some elevator men get double rebates, while others get no -allowances at all from certain roads. E. O. Moffat said he got 1¼ cents -a hundred from the Union Pacific, Rock Island, Burlington, Santa Fe, -Alton, and Missouri Pacific, but got nothing from the Milwaukee. That -railway he believed paid an allowance to the Simonds-Shields Company but -refused to allow him anything, though he is a heavy shipper.[216] - -M. H. McNeill, representing the Chicago and Great Western, admitted that -the custom was a senseless one and a wrong one, but said it had been -started at Omaha and had to be adopted at Kansas City. E. P. Shields of -the Simonds-Shields Company was asked by Commissioner Cockrell: “When -such allowances are made are not opportunities for discrimination and -the granting of rebates opened up?” - -“Certainly,” he replied. - -“I believe there are some abuses to-day regarding the matter of -allowances which ought to be corrected,” said the witness. - -“Do you believe double or triple allowances have been made in Kansas -City?” asked Mr. Barry. - -“I don’t know of my own knowledge,” replied the witness, “but I suspect -that they have been.” - - - - - CHAPTER XXII. - COMMODITY DISCRIMINATIONS. - - -Unfair discriminations in respect to special commodities are very -common. The New Haven and Hartford charges $80 a car on peaches from New -York to Boston, 228 miles, while the same peaches come from Georgia -points to New York, 1150 miles, for $162 a car. The Commission says the -$80 rate is arbitrary and unjust and that $50 a car would be a -reasonable charge.[217] - -The Atlantic Coast Line Railroad made its rate on peaches depend on the -valuation put on the fruit, in order that by increase of rate in -proportion to valuation, shippers might be led to put low valuation on -their shipments and so provide the railways with an argument against -paying the real damages in case of accident or loss.[218] - -From some places shingles are carried at rates as low as those applied -to lumber, while shingle shippers at other points pay more than the -lumber rates. This is held an unjust discrimination against shingles, -and against the places and shippers that pay the high rates.[219] - -Railroads make high rates on ties, higher than on lumber, in order to -prevent their shipment to other parts of the country, and so diminish -their value and lower their cost to the discriminating railroad. The -president of one railroad stated the policy clearly: “We are simply -following what we consider our interest, which is to prevent the -shipment of tie lumber.”[220] - -Early this year, 1905, the South Side Elevated road of Chicago wanted -400 carloads of ties. The blanket rate on ties from the entire yellow -pine belt to Chicago is 26 cents per hundred lbs. On shipments -originating between Luzon, La., and Pearl, Miss., the Illinois Central -made a special tariff (March 22 and April 6, 1905), fixing the rate on -ties at 26 cents per tie, each tie to be billed at 130 lbs. This was -equivalent to a reduction of the rate to 20 cents per hundred lbs., and -no shipper outside of the favored region could compete in the Chicago -market. It is suspected that the party who got the Elevated contract -knew beforehand that the railroad would issue this special tariff, and -was therefore able to underbid competitors in perfect safety.[221] - -A rate of 90 cents a ton is charged on coal for a special use such as -railroad supply, while the same coal must pay $1.85 between the same -points if intended for manufacturing or other industrial domestic -use.[222] - -It is unjust discrimination to charge more for carrying cattle and hogs -than for carrying packing-house products, and the desire of the carrier -to get more business by so doing is no excuse.[223] - -The railroads have carried dressed meats from Omaha to Chicago at 18½ -cents, while charging 23½ cents on live-stock from Iowa points nearer -Chicago. The packer could buy the cattle at Fort Dodge, Iowa, ship them -to Omaha, kill them and ship the dressed carcasses to Chicago, cheaper -than the live-stock owner at Fort Dodge could ship the cattle to -Chicago. Some years ago on arbitration, Mr. Fink and Judge Cooley being -the arbitrators, it was decided that the fair ratio between live-stock -and dressed meats from Chicago to New York would be 26 cents per hundred -for live cattle, and 45 cents for the dressed carcass. But the railroads -have reversed this relation, although the Interstate Commerce Commission -has decided that the rate on dressed meats should be higher than on -live-stock.[224] - -Recently, January 1905,[225] the Commission has reaffirmed its decision -of 1890 and held that it is unlawful to charge more for transporting -live-stock from Missouri River points and St. Paul to Chicago than for -carrying packing-house products between the same points, but the Beef -Trust cares nothing for the opinions of Judge Cooley nor for the orders -of the Interstate Commerce Commission, and the Trust controls the -railroads. - -On shipments from Chicago east to New York the rates are 28 cents per -hundred and 45 cents on dressed beef. Formerly the same rule applied in -the West, but when the Beef Trust began to build up great packing-houses -at Omaha, Kansas City, and St. Paul, they wanted to make the rates on -cattle from the West to Chicago higher than the rates on beef, so as to -force live-stock to come to their stockyards on the Missouri River where -they had a practically absolute monopoly, and the railroads obeyed their -behest. Shippers fought the change, and in 1890 the Interstate -Commission ordered the railroads to desist from charging more for -live-stock products than for packing-house products. The railroads did -not dare to raise Armour’s rate on dressed beef, so they reduced the -live-stock rate to 23½ cents, the same as the rate for dressed meats. -Armour then demanded and received a rebate of 5 to 8 cents a hundred -lbs. on packing-house products. The rebate was secret at first, but -after the Elkins Bill was passed the beef men made a contract with the -Great Western road at the rate of 18½ cents and the rate was published. -The cattle rate remained at 23½ cents so that Armour and his railroad -allies were again in open defiance of the orders of the United States -Government issued through its Interstate Commerce Commission. The new -decision of the Commission, January, 1905, requiring the railroads to -charge more for live-stock than for live-stock products has not been -obeyed and is not likely to be.[226] - -“Could anything more clearly show the power of the Trust,” says Mr. -Baker, “than this reversal of the order of rate-making as manifested in -the tariffs east of Chicago, so that beef, the high-priced product, is -shipped at 18½ cents, while cattle, the low-priced product, is shipped -at 23½ cents, simply to enable the Trust to close the Chicago market—the -best market in the country for export cattle—to thousands of western -cattle growers? They cannot afford to ship live-stock to Chicago at 23½ -cents when the Trust can ship the products of the same cattle, weighing -only 60 or 70 percent as much as the live animal, at 18½ cents. They are -therefore compelled to ship to Missouri River points where the Beef -Trust is in absolute control.” - -A rate of $1.25 per hundred lbs. on oranges from California to points on -and east of the Missouri River, while lemons are carried for $1 to the -same points—is held unreasonable.[227] A higher charge on rye and barley -than on wheat is unjust.[228] - -Western millers complain that the discrimination between flour and wheat -on shipments to the East is causing them much injury and will put them -out of business. The Commission decided that the difference should not -exceed 2 cents a hundred, but it has no power to enforce its order and -“frequently for considerable periods there is very great discrimination -between the rates on flour and the rates on wheat.”[229] - -Railroads can discriminate against a whole industry by advancing rates -on particular commodities above the fair level, as illustrated in the -recent advances on hay and lumber.[230] - - - - - CHAPTER XXIII. - DISCRIMINATION BY CLASSIFICATION. - - -The intricacies of classification afford boundless opportunity for -favoritism. Classification is always more or less arbitrary by -necessity, and is frequently more arbitrary than necessary. One industry -or wholesale trade is often charged two or three times as much as -another for the same service. The New York Railroad Commission found the -railroads charging twice as much on dry goods as on coffee or sugar and -protested against the rule as utterly indefensible, but the railroads -refused to comply with the request for a change. Iron and coal cost less -to transport than grain, yet the ton-mile rates on iron and coal from -Pittsburg have been at times for years together from 2 to 5 times the -rates on grain from New York to Chicago. - -In 1890 the Interstate Commerce Commission ordered the railroads to -transfer soap from the 5th to the 6th class. In 1900 the railroads -changed it back to 5th class in carload lots, and from 4th to 3d class -in less-than-carload lots, but if shipped in mixed lots with dressed -beef it goes as 5th class. So that Armour, Swift & Co., of the Beef -Trust, have been able to ship soap in less-than-carload lots at much -lower rates than their competitors.[231] The Commission ordered the -roads to cease their excessive discrimination on less than carload lots, -etc. The roads refused to obey. The Circuit Court has sustained the -order of the Commission. - -Under the Illinois Central tariffs at one time it made a difference of -$40 a car if a man shipped a peck of potatoes in a car of 16,000 lbs. of -strawberries. If there were no potatoes in the car so that it was not a -mixed load, it cost $40 more than if there were a peck of potatoes in -with the strawberries.[232] - -The classification of castor oil on the Lake routes affords a curious -example of the freaks of tariff classing. Vegetable castor oil is 5th -class, or 16½ cents a hundred, from Cleveland to Chicago, while mineral -castor oil takes a rate of 25 cents a hundred.[233] - -The law has not yet definitely touched the favoring of large shippers by -excessive difference in the rates on carloads and less than carloads. -There is not more than 5 percent difference in the cost of transporting -goods in carload lots and less-than-carload lots, and yet the rates vary -from 30 to 80 percent, as a rule, and sometimes 150 percent.[234] - -In a famous case three years ago, involving the rates on 400 commodities -from the Middle West to the Pacific Coast, the Commission held that a -differential between carloads and less than carloads, which is at once -more than 50 cents per hundred and more than 50 percent of the carload -rate, is _prima facie_ excessive, and puts the railroad on the defensive -to show special reason why so great a difference should be made.[235] -The difference between the carload rates and less-than-carload rates, -involved in this complaint, was held to be excessive in many cases. - -On the Yazoo and Mississippi Railroad and the Illinois Central, 1 horse -can go 667 miles for $36 and 4 horses pay $99, while 25 horses can take -the trip together for $100. This encourages social habits. The first -horse is billed at 2,000 lbs. no matter what he really weighs; the -second is billed at 1,500 lbs.; and each additional animal counts 1,000 -lbs. The rate is double first-class, or $1.80 per hundred, which the -Commission says is twice the fair rate.[236] - -In a recent case it appeared that the Texas and Pacific was charging 42½ -cents per hundred lbs. on cattle from Fort Worth to New Orleans, and $15 -a car additional on a shipment of less than ten carloads. This addition -of $15 a car was held unreasonable.[237] For 17 years the road made a -much lower rate—34 to 40 cents per hundred lbs., without any $15 a car -additional. In March, 1903, the rate was raised to 42½ cents, and in -October of the same year the additional charge of $15 a car was imposed. -The distance is 500 miles. The distance from Fort Worth to Kansas City -is about the same, while to St. Louis it is 700 miles. The rate on -cattle from Fort Worth to Kansas City is 36½ cents, and to St. Louis 42½ -cents, without any $15 addition. The Commission held the $15 charge to -be an unjust discrimination between the large and small shippers, and -against New Orleans in favor of St. Louis. - -Discriminative rates are made oftentimes without any intent to prefer -one shipper to another, but simply to make things move. For example, a -business man of Greensboro, N. C., wanted to build a smoke-stack of New -Jersey brick, but the rates from New Jersey were too high. “A quotation -was made me by the stack builder, whose office is in New York, and I -remarked to him, ‘That price is prohibitive; I cannot pay that price for -that stack.’ He said, ‘That is the best I can do; but if you will tell -me what you can afford to pay for that stack in competition with -home-burned brick, I will see what I can do with the railroad people.’ -He wanted to know how soon it would be necessary for him to give me a -reply, and I said, ‘I want to know within ten days.’ He said, ‘All -right; I will take it up with the railroad people.’ His quotation -included the delivery of the brick and the erection of the stack at my -plant. It would require something like 50 carloads of brick to build -that stack. Within a week he had his price revised, and gave me a -satisfactory quotation and took my contract for the stack.”[238] - -The railroads, having regard to what the traffic would bear, gave the -builder a special rate in order that the New Jersey brick might move -over their lines to North Carolina. - - - - - CHAPTER XXIV. - VARIOUS OTHER METHODS. - - -Railroads are in the habit of giving special rates on stuff sent over -their lines for other roads. “It is done,” says one of the leading -traffic managers of the country, “on everything that is -handled,—supplies, coal, and material.”[239] This enables any one who -stands in with the management of a railroad to have coal, etc., billed -at low rates to the railroad for him. - -The routing of freight is the source of a double discrimination. -Connecting lines in some cases pay shippers to route the goods over -their roads, while in other cases the connecting lines pay the rebates -to the originating line, or make an agreement with it for reciprocal -favors in the routing of freight.[240] Shippers receiving rebates from a -connecting line can afford to pay the originating road or its clerks to -route the goods over the said connecting line. Mr. Morawetz says it is -customary for shippers to pay clerks in the routing department $5 or $10 -to route the goods the way the shipper desires. Or it is done by giving -theatre parties or presents to wives and daughters.[241] - -In the California Orange Routing Case (132 Fed. Rep. 829) the United -States Circuit Court decided that an agreement between railroads as to -routing, whereby the apportionment of freight to connecting roads is -affected, is in the nature of a traffic pool and comes within the -prohibition of pooling, Section 5, of the Interstate Act. - -The Interstate Commission held that the regulations of the Southern -Pacific and Santa Fe, reserving to themselves the right of routing, were -unlawful under the discrimination clauses, but the court did not decide -this point. (I. C. C. Rep. 1904, p. 78.) - -Mr. Ferguson says the private car-lines “sell the tonnage to the highest -bidding connecting line. It is purely a matter of bargain and -sale.”[242] - -Unfair distribution of cars is an easy means of discrimination. Failure -to furnish cars to complainant for shipments of grain, while supplying -more than a fair proportion of cars to a competing shipper in the same -town, is as effective as any rebate could be.[243] - -Railways have refused cars to persons desiring to ship railroad ties -which the railways did not wish to have go out of their own field.[244] - -A Michigan railroad neglected to furnish the Richmond Elevator Company -with cars in which to ship the hay the company had contracted to -deliver, although the railroad was all the while supplying other -shippers with cars for hay and straw, etc.[245] - -The Pennsylvania Railroad has been recently sued by independent coal -companies along its line for $2,000,000 damages for refusal to furnish -cars in fair proportion. It is charged that the mines in which the -railroad company is interested have had all the cars they needed, while -the independents have not received cars enough to fill their orders; in -consequence of which great loss has been inflicted upon them and their -business diverted to the railway mines. - -The B. & O. was also sued for refusing to furnish cars to the Glade Coal -Company, while supplying cars to competing mines.[246] - -In the case of the West Virginia Northern Railroad[247] the Circuit -Court issued a mandamus ordering the road to cease from discrimination -against the Kingwood Coal Company in the supply of cars and to furnish -said company with a specified percentage of cars. In affirming this -decision the Circuit Court of Appeals said: - -“It is insisted that the court had no power in a proceeding of this -character to fix the percentage of cars the relator should have, and to -command that such percentage of cars should be furnished to the relator. -The acts of Congress forbade discrimination and made it unlawful to give -any undue or unreasonable preference or advantage to particular persons, -companies, corporations, or localities, or any particular description of -traffic, or to subject them to any undue or unreasonable prejudice or -disadvantage in any respect whatsoever, and vested jurisdiction in the -circuit and district courts to proceed by mandamus as a cumulative -remedy for violations of the statutory provisions. We are unable to -accept the view that Congress intended to confine the scope of the writ -to admonition merely, or to a general command to desist from -discrimination, rather than from the particular action in which the -discrimination consisted. By the findings, the delivery to the relator -of any less than 31 percent of the supply amounted to unlawful -discrimination, and the judgment of the court did no more than to -correct it.” - -Sometimes it is the denial of a switch, that blocks the independent; for -example, the railroads controlled by the coal pool refused to put in a -switch for the Johnson coal mine or to permit the company to put one in -until suit to forfeit its charter for refusing equal opportunities to -shippers was begun in the Ohio Supreme Court. Then the switch was put -in. - -The Coal Combine and its railroads have persistently pursued the policy -of crushing smaller rivals by denying them transportation facilities. - -An exasperating form of discrimination near of kin to this refusal of -cars is the refusal directly or indirectly to take shipments for certain -persons or to certain points. The Hope Cotton Oil Company operates a -mill at Hope, Ark., for the manufacture of cotton-seed oil. It desired -to buy seed at various points on the Texas and Pacific Railroad. This -seed could only reach the mill by passing over the Texas and Pacific to -Texarkana and from there to Hope by the St. Louis, Iron Mountain and -Southern Railroad. The published rate from the points in question to -Texarkana was 12½ cents per hundred, and 5 cents from Texarkana to Hope. -After receiving this information the agent of the Hope Company bought 49 -carloads of seed on the line of the Texas and Pacific, intending to send -them to Texarkana on the 12½ cent rate and from there to Hope on the 5 -cent rate. Seventeen cars were sent in this way. But when the General -Freight Agent of the Texas and Pacific ascertained what was being done, -he refused to allow the shipments to continue, insisting that the seed -must take the broad joint rate of 67 cents applicable to class A in -which cotton seed belonged. Under his orders the station agents on the -Texas and Pacific refused to bill the cars in any way to Texarkana on -the published local rate of 12½ cents. The 67 cent rate amounted to -$13.40 a ton on seed which only cost $14 a ton, and to insist on such a -rate the Commission says “was for all practical purposes to decline to -receive the cotton seed for shipment on any terms.”[248] The secret of -the situation was that the Texas and Pacific did not want the cotton -seed to go off of its line. If shipped to Texarkana mills or other mills -on its line the products would find their way to market over that road, -while if manufactured at Hope this would not probably be the case. - -Denying a private switch to one party while providing such facility for -a competing dealer[249] may amount to a preference similar to that -resulting from free cartage. - -A discrimination in the place of delivery of freight may work serious -injury to a shipper. For example, D. W. Miner, a dealer in beef and pork -products at Providence, complains to the Interstate Commerce Commission, -July, 1905, that the New Haven road refuses to deliver his merchandise -at the Canal Street yard where his place of business is located, -carrying his freight half a mile beyond, while delivery is made to his -competitors at the Canal Street yard. - -Sometimes railroads discriminate even on long hauls in interstate -traffic by taking advantage of the fact that the Interstate Commerce Act -does not apply to State traffic. They take the car across the State line -on a “mem.-bill,” then draw a new bill of lading marked “State -Business,” and then pay the rebate without fear of disagreeable -consequences. - -In other cases the full freight is charged on the way-bill, but a -fictitious entry is made in the prepaid column which is to be subtracted -from the total amount of charges when the bill is collected. If the -freight on a car amounted to $90, and $15 were entered in the prepaid -column, $75 would be collected and the consignee would be in the same -position as if he had received a rebate of $15 on the car. - -Another method, akin to this, is to give the local agent at the station -of delivery power to correct the way-bill, or deduct a certain -percentage from every bill presented to the favored shipper. The agent -forwards the amount collected as full payment, correcting his accounts -so as to give himself the necessary credit, which is O. K.’d by the -auditor of the road on his next visit to the station. - -Large payments are made by some railroads “to encourage new industries.” -They have the example of cities and States and of the nation to justify -appropriations for the establishment of infant industries and -development of the country, but they abuse the principle by making it a -cover for payments which are really rebates to favored shippers. Some of -the “new industries,” or infant undertakings, which the Wisconsin -investigators found were being “encouraged” by cash contributions from -the railroads, have been established and prosperous for 25 or 30 years, -one of them being founded away back in 1873 and others in the eighties. - -Sometimes the railroads make a low rate, joint or single, on certain -goods when intended for a specific purpose, thereby limiting the low -rate to certain favored shippers. For example, in a recent case decided -on complaint of the Capital City Gas Company the railroads had made a -joint rate of 90 cents per ton on bituminous coal from Norwood, N. Y., -to Montpelier, Vt., when intended for railroad supply, while the -ordinary combination rate of $1.85 per ton applied to such coal carried -between the same points and used for manufacturing or any other -industrial or domestic purpose. This was held by the Commission to be an -unlawful discrimination, on the ground that it is not permissible under -the Interstate Commerce Act for two or more carriers to establish a -joint through rate less than the sum of their locals, which shall be -applicable only to a particular shipper, or class of shippers, while -denying such low rate to other shippers of like traffic between the same -points.[250] - -A method of discrimination that has spread enormously in the last year -is to pay large salaries or commissions to traffic agents located at -important points, on the understanding that these traffic agents shall -divide their salaries or commissions with favored shippers. This is much -safer than paying rebates or commissions direct to the shipper, and is -one of the most difficult forms of discrimination to overcome. In the -recent investigations in Wisconsin and other States this method has been -found in frequent use, along with underbilling and underweighing of -freight, the allowance of cartage or switching charges to favored -shippers, permission to hold cars as a means of storage for considerable -time without demurrage, midnight tariffs, direct rebates, etc., etc. - - - - - CHAPTER XXV. - TERMINAL RAILROADS. - - -Another method of preference without departing from published rates is -the division of rates with private terminal companies or mere switching -roads, or roads existing only on paper. A man of large experience in -railroad matters said to me not two years ago that “Since injunction -suits were instituted by the Interstate Commerce Commission in 1900, -published tariffs have been more generally followed. But big concerns -build a mile or more of railroad of their own, or incorporate their -switch tracks and sidings in a railroad company, and the division of the -through rate permits any commission that may be desired. That is the new -kind of discrimination that is spreading very rapidly. The effect is to -concentrate discrimination and the advantages it gives more and more in -the hands of the largest concerns. Formerly any big shipper could get a -rebate. Now only those big enough to build a railroad or own an elevator -get lower rates than others.” This is a little too strong. There are -many other forms of preference still in prevalent use, as we have seen, -but there is no doubt that the private railroad and the private car do -tend to concentrate discrimination, giving greater and greater -advantages to those who need them least. - -They not only give the private railroads of some shippers a larger -percentage of through rates than they give to the private railroads of -other shippers, but they refuse to give the railroads of some shippers -any division of rates while dividing rates in this way with other -shippers in the same business.[251] - -A few examples will make clear the private railroad or “fake terminal” -method of discrimination. The first case of this kind came to light in -1903 through an investigation of the “Salt Trust” by the Interstate -Commission. Hutchinson is the centre of the salt industry in Kansas. -There are 16 mills, 9 of which are operated by the Hutchinson Salt -Company, known as the “Salt Trust,” while each of the independent mills -is operated by a different individual or company. In July, 1902, the -Hutchinson and Arkansas River Railroad was organized under the laws of -Kansas. It took possession of about 1 mile of side tracks which had been -built by the Salt Trust in connection with its works. This new -Lilliputian railroad company had no equipment of any kind. The president -of the Salt Trust and the president of the railroad were one and the -same man, Joy Morton, brother of Paul Morton, who was then at the head -of the traffic department of the Santa Fe. The Santa Fe, the Rock -Island, and the Missouri Pacific—all the railroads entering -Hutchinson—made an agreement with the switch-track Salt railroad to give -said little 1–mile Salt Trust railroad 25 percent of the rates on bulk -salt to Missouri River points, not to exceed, however, 50 cents a ton on -all the bulk salt shipped to such points. The rate to Omaha was 12 cents -per hundred and the rate to Kansas City was 10 cents. The division was -therefore equivalent to a rebate of 50 cents a ton, which is of itself -an excellent profit in the manufacture of salt. The result was that -without departing from published rates, or apparently violating any -provision of law, the trust and the railroads drove the independents out -of the bulk salt business on the Missouri River and elsewhere, and an -extension of the arrangement to all markets and all kinds of salt would -give the Trust a weapon with which it could at any time destroy the -independents.[252] - -Barton, one of the independents, had a contract to supply all the bulk -salt used by Swift & Co., at Missouri River points. The contract expired -April 1, 1903. Before asking renewal of the contract Barton went to the -coal people and the railroad to see what his costs were to be for the -coming year. He found that coal was to be advanced 25 cents a ton and -freight on it 25 cents a ton, making 50 cents a ton more on coal. As it -takes 1 ton of coal to produce 2 tons of salt, the increase in coal cost -meant 25 cents added to the cost of each ton of salt. Barton’s former -contract was on the basis of $2.25 at Hutchinson, now he must have -$2.50. While Barton was negotiating a renewal of his contract with the -Swifts, Hon. Frank Vincent, State Senator, manager of the Salt Trust, -and director in the Salt Trust railroad at Hutchinson, took a vacation -from the legislature, went to see the Swifts, and offered them salt on -the basis of $2.10 at Hutchinson, or 40 cents less than the independents -could afford to sell it. The Trust got the contract with Swift. This -gives an idea of the extent to which the railway favoritism enabled the -Trust to underbid the independents. - -The owner of one of the independent salt plants was asked: “From where -did you meet most competition, as far as you know?” “From the Santa Fe -Railroad,” he replied. - -One of the most remarkable facts in the case is that the division of -rates with the Salt railroad was made without even taking the trouble to -find out whether or no there was any railroad at all of any kind behind -the name presented in the request for a division. - -“MR. MARCHAND. Then you entered into this joint arrangement with the -Hutchinson and Arkansas River Railroad without really knowing whether -there was any road there or not? - -“MR. BIDDLE. I have done that hundreds of times.”[253] - -Another indication that the terminal railroad is not the real reason for -the division of rates is found in the fact that it is not every large -shipper who can get a rebate by owning a private railroad. One of the -independent salt mills, the Matthews mill, had a switch built and paid -for and expected to get a rebate of $1 a car on the strength of it. But -the railroad refused to give any division of rates. Matthews did not -belong to the Morton family, nor have any other special claim to -hospitality at the hands of the Santa Fe. - -The International Harvester Company, popularly known as the Harvester -Trust, was formed in 1902 to consolidate several big concerns -manufacturing farm machinery. It organized the “Illinois Northern -Railroad Company” and turned over to it the 17 miles of switching track -in the private grounds of its Chicago works. Till the end of 1903 this -vest-pocket railroad handled the cars of the Trust for a switching -charge of $1 to $3.50 per car, the average haul being about 4 miles. For -the works at Plano, another microscopic railway company, “The Chicago, -West Pullman and Southern Railroad,” with 4 miles of track, was -organized to switch the cars of the Harvester Trust. The International -Harvester Company owns these two railroads. Its officials are the -officials of those railroads in most instances. And it absolutely -controls the operations of the roads.[254] In January, 1904, contracts -were made for the division of rates to the Missouri River. The Santa Fe, -C. B. & Q., Rock Island, Chicago and Alton, Great Western, Chicago and -North Western, Wisconsin Central, Chicago, Milwaukee and St. Paul, -etc.—practically all the railroads going west—allowed the private Trust -railroads a division of 20 percent of the through rate with the Missouri -River as a maximum, amounting to $12 on an ordinary car of 20,000 lbs. -of farm machinery going from Chicago to any point in Kansas or Nebraska -or the Far West. The Interstate Commerce Commission says: “Since the -International Harvester Company owns the Illinois Northern Railroad, a -payment to the railroad is a payment to its owner, the International -Harvester Company. When a line transporting a carload of traffic from -Chicago to the Missouri River pays the Illinois Northern Railroad $12 -for switching that car from the McCormick works to its iron, it gives -the International Harvester Company a preference of at least $8.50 over -what any other shipper of that same carload would be obliged to pay.... -And there is no limit in law to the extent to which this shipper may be -preferred to other shippers in this way.”[255] In a suit brought July -11, 1905, by R. B. Swift, a former officer of the McCormick branch of -the Harvester Trust, it is declared that up to September 30, 1902, the -Trust received rebates from the railroads amounting to $500,000 through -the West Pullman switch road, and over $3,000,000 through the Illinois -Northern switch road. - -The “Chicago, Lake Shore and Eastern Railway” is another of these -homeopathic railroads. It was organized in the interest of the Illinois -Steel Company and is now owned by the Steel Trust (The United States -Steel Corporation) which some time ago absorbed the Illinois Steel -Company. Since 1897 this private railway has been allowed a division of -10 percent on business to New York and other seaboard points, 15 percent -to Pittsburg, Buffalo, and other middle points, and 20 percent on -traffic to the Missouri River. It also has a division on rates to the -South. All Eastern and Southern lines as well as the Western roads -divide their rates with this Trust road. These divisions amount to $6 to -$12 a car for the switching service performed by the private road. -Besides this, certain special divisions are made. On coke from the -Connellsville region, for example, a division of 70 cents per ton is -allowed. This gives the “Chicago, Lake Shore, etc.,” above named, $700 -to $1000 for hauling a train of coke 7 miles from Indiana Harbor to its -plant in South Chicago, while the actual cost would not exceed one-tenth -of this sum. - -Railroad officers have claimed that such divisions of rates are -justified because the little private road is the “gateway of the -traffic.” “The business originates on the little road and it controls -the routing, and the division is only an application of the custom of -allowing the road on which traffic originates a considerable percentage -of the through rate, usually 25 percent.” Other railroad men tell me -that this is not true. President Tuttle, for example, says: “There is no -such thing as a custom to give the initiating road 25 percent or 10 -percent or any percent. The division is on the mileage basis, but if one -road does special work, switching etc., a reasonable allowance may be -made, 1 percent or 2 percent or whatever is fair to cover the special -work or expense.” Even if there were a custom to give 25 percent to the -initiating railroad that could hardly explain the 70 cents per ton on -traffic not originating on the trust railroad in Chicago, but coming to -it from Pennsylvania points. - -Whatever may be the custom or analogy used as a warrant for these -divisions it is clear that their effect is precisely the same as that of -a giant rebate. - -The Trust railroad in this case makes a net profit of 150 percent a year -upon its capital stock of $650,000. How much the Steel Trust as a whole -gets in this way through all the private railroads connected with its -various plants is not known, but the Commission says it is certainly a -“sum sufficient to pay dividends on several millions of dollars of -capitalization.”[256] - -The Illinois Glass Company at Alton, Ill., is the largest producer of -glass bottles in the United States. In 1895 certain persons in its -interest organized the Illinois Terminal Railroad Company, the principal -business of which is to handle the cars of freight that come to and from -the Glass Works. This terminal company in Alton is allowed by the -railroads a division of rates amounting to 25 percent of the Chicago -rate, and 15 percent of the rates to the Missouri River and to Eastern -destinations, or $8 to $13 per car. This is the testimony of the Glass -Works manager, but the Commission finds that as much as $17.10 has been -paid the Terminal Company on a car shipped from Alton to Kansas City, an -amount that is nearly double the 15 percent above mentioned. This $8 and -$13 or $17 is a pretty heavy payment for switching a car, a service -which the Terminal Company renders for $1.50 a car when the amount is to -be paid by the Glass Works.[257] - -The St. Louis Preserving Company at Granite City, Ill., also gets large -rebates in the form of divisions of rates with a toy railroad the -company controls.[258] - -Rate divisions have also been made by the railroads with boat lines[259] -belonging to or in league with large shippers, with “tap roads” -belonging to lumber companies,[260] etc., and this method of securing a -practical rebate is being rapidly adopted by large concerns all over the -country. A division of rates with a private line is not necessarily -unfair but if there is a desire to give an unfair advantage, this system -affords a cloak for it. - - - - - CHAPTER XXVI. - PRIVATE-CAR ABUSES. - - -Some of the worst discriminations now prevailing are connected with the -private-car system. - -The private car originated in the need for special equipment for -particular purposes. It was clear that the transportation of live-stock, -fruit, vegetables, and other perishable products might be facilitated by -the use of special cars. When the inventors of improved stock cars and -refrigerator cars went to the railroad managers, they were informed that -the railroads had no money with which to make experiments in such lines, -but if cars that would do the work proposed were constructed the -railroads would be glad to hire them for a fair rental. So the cars were -built by private companies and used by the railroads on a mileage basis. -The fact that such special cars are needed in different parts of the -country at different seasons, their use in any large numbers being -confined on some roads to a few weeks in each year,[261] makes the local -ownership of such cars by the several railroads, less convenient and -economical than their ownership by car companies able to distribute the -cars to advantage throughout the country so that each section may have -the cars it needs, at the proper time, without unnecessary duplications -of equipment.[262] - -To move the Georgia peach crop the Southern Railway would need about -3,000 refrigerator cars. The shipments occupy about six weeks, beginning -about the middle of June. The Pere Marquette Railroad moves about 2,000 -carloads of fruit under refrigeration from Michigan points mostly in -September and October, and would need about 1,000 cars for the work. -These and other roads might well hesitate to invest the sums required to -provide expensive equipment when it would have to be idle the greater -part of the year; but this is easily done by a car company whose cars -can be employed in the orange trade from California and Florida in the -winter, in the Georgia peach traffic in June and July, and in the -Michigan and New York fruit business during the fall.[263] - -The railroads began long ago[264] and still continue paying mileage -rates for the use of stock cars, tank cars, and refrigerator cars, the -three chief kinds of private cars. This would be all right if the -mileage rate were fair, but serious injustice results when the mileage -is so great as to give the owners of the cars a practical rebate of -large amount on all their shipments in such cars, as is the case with -all three classes of cars above named,[265] and especially with the -refrigerator cars of the Armour Car-Lines which are operated in the -interest of the Beef Trust. The railroads allowed at first a mileage -rate of ¾ of a cent a mile when the car was loaded. After a little the -car companies got the roads to pay the mileage on the cars both ways, -loaded or empty. The mileage rate on refrigerator cars was raised from ¾ -of a cent to 1 cent over most of the territory west of Chicago and St. -Louis, and the 1 cent rate also applies to the movement of refrigerator -cars between Chicago and New England via Montreal.[266] From Chicago to -New York over the Vanderbilt lines is about 1,000 miles; so the mileage -on a refrigerator car amounts to $7.50 each way, or $15 for the trip. - -The car companies have secured various concessions from the railroads -besides the payment of mileage loaded or empty. They require the -railroads to run their cars at high speed in special trains. The average -run of the freight cars owned by the leading railroads is 25 miles a -day. The average run of the private tank cars (Standard Oil mostly) is -66 miles, private stock cars 72 miles, refrigerator cars 108 miles, and -refrigerators operated in the beef trade 135 miles per day.[267] - -There is evidence that Armour often makes his cars run 300 miles and -even 400 miles a day. He compels the railroads to push his cars day and -night whether loaded or empty. Most freight cars are loaded both going -and coming, which greatly lowers the cost of transportation, but Armour -requires the railroads to rush his cars back empty at full speed without -waiting for any return load. Ordinary freight trains go on a side-track -and wait till the Armour cars go by. The railroads sometimes even -side-track passenger trains in order that a meat train may be rushed by -to make a little more profit for the Beef Trust. Armour’s system of -checking his cars by means of his agents stationed at icing points along -the principal roads keeps his central office constantly informed of the -whereabouts of every car. If a train has lost time, if an Armour car is -side-tracked anywhere the Armour office asks over the wires: “What’s the -matter?” And if a railroad agent does not do as Armour bids he may lose -his position as a consequence. More than one railroad man, high in -authority, has been dismissed because he did not obey the Beef Trust. If -offences accumulate, some day the railroad finds that Armour has -diverted his entire business to a rival line which will hurry his cars -and otherwise obey his orders. What chance has the small shipper against -such a system? He may own private cars, but he cannot make them run, nor -can he obtain exclusive contracts such as Armour has on many roads, nor -make the railroads collect excessive icing charges for him, nor hold up -the roads in any other way; on the contrary, they are more likely to -hold him up. - -The result of high speed and the mileage rate loaded or empty, is that -refrigerator cars earn for their owners an average of $25 a month, and -cars engaged in the export meat trade from Chicago frequently get $30 -and upward per month from the railroads in mileage. This is enough to -pay the whole cost of the refrigerator car in 3 years, and its -maintenance in the meantime.[268] Private stock cars in some cases net -their owners 50 percent a year on the invested capital, repaying the -cost of the cars in 2 years, above operating expenses.[269] The average -mileage of through stock trains on the principal lines exceeds 100 miles -a day, yielding to the owner of such cars over 60 cents a day. This is -three times what the railroads pay each other for railroad cars in use -on a road other than the owning railway. A railroad receives 20 cents a -day for each day that one of its own freight cars is on another road, -while the same railroad pays the car companies 60 cents a day for the -use of a stock car, and $1 a day for the use of an Armour refrigerator -car in the dressed-beef business.[270] Yet a well built modern freight -car costs more than the average private stock car, and nearly as much, -many of them quite as much, as the average refrigerator car.[271] - -Out of a total of 50,000 refrigerator cars,[272] about 15,000 are owned -by the railroad lines. These earn, it is claimed, about 40 cents a day, -while the cars owned by the Armours and other private car-lines earn or -receive on the average 60 cents to $1 or more per day from the mileage -payments alone. - -The owners of the Beef Trust cars make enormous shipments of their own, -and have gained control of a vast amount of other business by offering a -share of the mileage receipts and other inducements to large shippers of -fruit, vegetables and dairy products, etc. With prodigious masses of -traffic in their hands which they could divert to any line they chose, -they have compelled the railroads to fix rates as they dictated,[273] -collect their icing charges for them, delay the cars of disobedient or -protesting shippers, blacklist them, shut off their credit, carry on a -system of espionage upon the business of their competitors, use their -power over railroads and shippers to drive their rivals out of -business,[274] and even make exclusive contracts prohibiting the use of -any other refrigerators on the lines of the contracting railroads. In -some cases the railroads pay the car-lines commissions of 10 to 12½ -percent of the freight rate in addition to the mileage on the cars -loaded or empty.[275] Certain repairs on the private cars are also made -by the railroads.[276] Annual passes are also granted to owners of -private cars in order that their officers and agents may travel with the -goods, watch the car, and look out for the care and disposal of the -contents.[277] A wholesale firm which owned but one car made three -members respectively president, vice-president and general manager of -their little car company and got annual passes for all three members on -the railroads on the strength of that one car.[278] - -One result of the exclusive contracts is that “charges for refrigeration -have been enormously and unreasonably increased.”[279] The Interstate -Commerce Commission says that “under the operation of these exclusive -contracts the cost of icing to the shipper (some shippers) has been -advanced from 50 to 150 percent and that the charges in most cases are -utterly unreasonable.[280] At first the railroads made no charge for -icing. Gradually the practice of making small charges for ice was -introduced, but the charges did not go much if any beyond the cost of -the service. They were very mild compared to the present refrigeration -taxes. The charges made by the railroads and even by the Armour Car-Line -before it secured the exclusive contracts, range from ½ to ⅙ of the -present Armour icing charges. From the Pacific to Duluth over the -Northern Pacific or the Great Northern, which still own and operate -their own refrigerator cars, the icing charge on a carload of fruit is -$25, while the Armour charge by the Southern lines is $107 per car. From -Rochester to Cincinnati railroads using their own refrigerator cars -charge $5 for icing. For the same distance and time the Trust charges -$35. The icing charge for a Pennsylvania car from Silver Creek, N. Y. to -Chicago, 500 miles, is $7.75 to $10; the Trust’s ice charge is $25 from -Lawton, Michigan, to Chicago, 120 miles. The icing charge under the -exclusive contract with the Armour lines is $45 on a car of pineapples -from Mobile to Cincinnati, against $12.50 from New Orleans to Cincinnati -over the Illinois Central. In 1898 the Armour charge for ice from -Michigan to Boston was $20 per car. In 1904 its charge was $55 a car for -the same service over the same route. The icing charge on an independent -refrigerator car from Chautauqua, N. Y., to Chicago, 550 miles, is $10, -against $84 in the Trust cars from Gibson to Chicago, 522 miles. In -1902, before the exclusive contract with the Pere Marquette Railroad, -the icing charge from Mattawan, Mich., to Duluth was $7.50, while the -present refrigerator charge between the same points in the same Armour -cars is $45. On shipments of strawberries, etc., from the South, the -Armour icing charges are $45 a car, against $10 to $15 over roads that -have not yet capitulated to the Beef Combine. The Armour icing charge on -strawberries from Tennessee to Chicago is $84, against $30 on the -Illinois Central and $15 actual cost.[281] From many points on the Pere -Marquette Railroad in Michigan to Chicago where the railroad charge for -refrigeration used to be $6 a car, the rate under the Armour contract -has been increased 416 percent.[282] In the Duluth case above mentioned -the increase was 500 percent. This, however, is more than the average. - -From the great vegetable growing regions of Mississippi and Alabama to -Cincinnati the charge for ice was $27 before the exclusive contracts -were made. Afterward the price was raised to $60 and a little later to -$75. - -In the summer of 1903 John Leverone of Cincinnati received 24 cars of -pineapples from Cuba. Ten cars came by the Illinois Central via New -Orleans with an icing charge of $11.37 a car. Fourteen carloads came on -Trust cars via Mobile, 100 miles nearer Cincinnati, with icing charges -of $45 a car. - -Even when shipments are made in railroad refrigerators from regions the -Trust claims as its own peculiar territory, the full Trust charges are -collected and paid over to the Trust. - -For example, in August, 1904, Coyne Bros. of Chicago received an -Illinois Central refrigerator car loaded with melons from Poseyville, -Indiana. The freight was $39 and the icing charge $45. The Illinois -Central icing charge for that distance was $10. Coyne Bros. went to the -manager of the railroad refrigerator service and found that the road had -an arrangement by which the Trust was to be paid at Trust rates on all -shipments from the melon region, whatever cars were used. If the firm -refused to pay the charge they would be boycotted or taken off the -credit list. - -August 11, 1904, Coyne Bros. received a Louisville and Nashville car -loaded with melons from Epworth, Indiana. On the bill were two charges -for icing, one was the railroad charge of $14 and the other the Trust -charge of $45. The firm asked if they were expected to pay both charges. -The railroad then erased the $14 item. The firm refused to pay the $45 -Trust charge for a service worth no more than the railroad charge of -$14, and the railroad took them off the credit list. Mr. Urion, attorney -for the Armour folks, came to Coyne Bros. and told their manager that -they must pay the ice charges or else everything shipped to them must be -prepaid. The firm found that shipments to them from the Michigan grape -region were cut off. They sent their own man to load the cars, but the -railroad agent refused to bill them. “I have my instructions from -Armour’s man here,” he said, “and I must follow them.” - -On a car of melons from Carlisle, Ind., to Mr. Scales of Chicago, the -freight was $35 and the icing charge $50, representing 20 tons of ice. -There was no re-icing, and the car bunkers would not hold more than 6 -tons of ice, so that there was a clear overcharge of $35 for -refrigeration. - -J. D. Mead & Co. of Boston were charged $99.90 by the Armour lines for -icing on a car of peaches from Missouri. This is a startling sum for a -service that the railroads used to perform free of charge. On another -car of peaches from Maryland, the charge was $64 for icing. As the car -bunkers would not hold more than 4 to 6 tons and only one re-icing was -necessary between Cumberland and Boston, the firm protested vigorously. -They were told that the bill was a “trial bill.” - -“What is that?” they asked. - -“Try to collect,” said the railroad manager. - -In this case, on appeal to New York, the bill was reduced to $24, a -slice of $40 off the icing bill, which was to Mr. Mead a _trial_ bill in -more senses than one. - -Ellis and Company of Chicago received a car of tomatoes from Gibson, -Tenn., 522 miles away, and another from New Orleans, 923 miles distant. -The first was a Trust car with $74 icing charge; the other was an -Illinois Central car with $15 icing charge. That is, the Trust charge -was 5 times as great as the railroad charge, though the railroad car -came 400 miles further, nearly double the distance in fact that the -Trust car covered. - -Grapes have been shipped from the New York grape field to Boston in -Vanderbilt refrigerator cars without any icing charge, while shipments -in Trust cars between the same points in the same month paid $22 for -ice. The Michigan Central has given notice that it has withdrawn from -the Armour contract and will handle Michigan fruit products in its own -cars supplying ice at cost which it says is $2.50 per ton. So the man -who can ship over the Michigan Central will get a rate of $15 to $25 a -car to Boston, while the man who has to use the Pere Marquette will pay -$45 a car for ice.[283] Two Boston men recently (1905) had occasion to -order each a carload of peaches from Michigan points some 20 miles -apart. One car came from Coloma over the Pere Marquette with Armour -charges of $45, while the other car came from Eau Claire over the -Michigan Central with the same freight rate, but only $13.13 for -icing,—$5.63 for the original icing, $5 for re-icing at Collingwood, and -$2.50 for re-icing at West Seneca. A year ago, before the Armour -contract with the Michigan Central expired, the icing charge on both -railroads was $55 to Boston; now the Armour charge has come down to $45, -but the Armour charge for ice in the case just stated was $9 a ton while -the Vanderbilt railroads charged only $2.50 a ton, which last the -Interstate Commission in a recent case has held to be a just and -reasonable charge.[284] There are no icing charges on dairy products. -The ice is paid for by the car company and the railroad. It takes as -much ice for dairy products as for fruit, but the Trust is carrying its -own goods in this field mostly and not the goods of other shippers, and -so it has not felt the need of changing the original arrangement in -respect to ice. - -The railroads have also bound themselves by secret contract to furnish -by wire “such information as may be requested by the car-line’s -representatives.” This enables the Trust to know what every other -shipper is doing all over the country on the lines of the -car-line-contract roads. The Armours thus have means of knowing -immediately of the shipments made by competitors and the destination of -the same, so that they can tell exactly what to do to capture or destroy -the competitive business. If a car of apples is loaded by a competitor -and billed for Worcester, the Trust knows of it in time to run in a car -of apples ahead of the competitor’s and sell out the market from under -him. At Buffalo, while the Trust was fighting to control the local fruit -market, it forestalled, they say, every shipment that was made to its -competitors. - -The Armour lines have another advantage, through the arrangement of the -freight tariffs, and the friendly inspection methods, or non-inspection -methods, which enable them to ship dairy products, fruits, vegetables, -etc., at much lower rates than others. Packing-house products, _i. e._, -hams, bacon, lard, etc., go from Chicago to New York in carloads at 30 -cents a hundred; fresh meats, 45 cents; eggs, 65 cents; poultry, 75 -cents; butter, 75 cents, etc. The Armours have a practical monopoly on -packing-house products and the fresh-meat business, as they own all the -slaughter houses of any importance, with 2 or 3 exceptions in the -country. So the bulk of their own goods go at 30 and 45 cents which are -regarded by railroad men as very low rates for goods transported in -refrigerator cars. On the other hand rates upon dairy products are very -much higher, and most shippers have to pay those rates. According to all -rules of classification packing-house products should pay higher rates -than fruit; but, in order to help out the infant beef industry, a -commodity tariff is arranged of which this is a sample:[285] - - ══════════════════════╤══════════╤════════════╤════════════╤═══════════ - │ │ │ Beef │ - │ │Fruit third │ (commodity │ - │Distance. │ class. │ rate). │Difference. - ──────────────────────┼──────────┼────────────┼────────────┼─────────── - │ │ Cents. │ Cents. │ Percent. - Chicago to Duluth │ 478│ 44│ 28½│ 54 - Kansas City to Duluth │ 699│ 53│ 40│ 33 - Omaha to Duluth │ 504│ 45│ 35│ 28 - Sioux City to Duluth │ 432│ 45│ 35│ 28 - Cedar Rapids to Duluth│ 409│ 44│ 28½│ 54 - ──────────────────────┴──────────┴────────────┴────────────┴─────────── - -President Ripley of the Santa Fe declares that the rates on beef -products between Kansas City and Chicago are so low that every carload -is carried at a loss to the roads. Here are his figures: - -Dressed meats: Actual cost per car, $82.19; revenue, $42.19; deficit, -per car, $40. - -Packing-house products: Cost per car, $85.03; revenue, $56; deficit, -$29.03. - -He also asserts that cattle are now hauled at a loss. - -Other witnesses have disputed President Ripley’s statement of cost, but -however this may be it is evident that the Beef Trust has been very -generous to itself in the rates it has compelled the railroads to adopt -for its shipments. - -The railroads do not like to be bossed either by the Beef Trust or the -Standard Oil, but they declare that they cannot help themselves. -President Ripley says: “The packing-house business to-day is -concentrated in so few hands that this fact, together with the -competition between the railroads, practically makes it possible for the -latter to dictate rates for dressed beef and the packing-house -products.” - -President Stickney of the Great Western Railroad says: “In fixing the -rate on dressed meat we don’t have very much to say. The packer -generally makes the rate. He comes to you and asks how much you charge -for a certain shipment of dressed meats. The published tariff may be 23 -cents a hundred, but he will not pay that. You say to him: ‘I’ll carry -your meat for 18 cents.’ He says: ‘Oh, no, you won’t. I won’t pay that.’ -Then you say: ‘Well, what will you pay for it?’ He then replies, ‘I can -get it hauled for 16 cents.’ So you haul it for 16 cents a hundred.” - -President Calloway, speaking to the Interstate Commission about the -speeding of the beef cars and other Armour exactions, said: - -“We do not do these foolish things from choice. I will say that the -thing is just as bad and foolish and stupid as can be, but what are you -going to do about it? We have built up these dressed-beef men and they -have all got their own cars, and they can dictate what they are going to -pay. They just keep these cars humping. We unload them and get them back -to Chicago just as quickly as we can. The Pennsylvania people also were -very much disinclined to allow or foster this dressed-beef business, but -were forced into it.” - -Very few railroads have dared to fight either Armour or Rockefeller -openly, but secretly the railroads did combine to fight these men and -employed an agent, Mr. Midgley of Chicago, for that purpose, whose -investigations and disclosures have done much to throw light upon the -hidden ways of the Trust magnates. - -Mr. Midgley told the Interstate Commission in April, 1904, how the -representatives of sixty railroads met in St. Louis in 1894 and tried to -stand up against the Trusts, beginning with a reduction of the -extortionate mileage rates on tank and refrigerator cars, but they could -not free themselves from the yoke of oil and beef. The Standard gave all -its shipments to the Great Western, which agreed to pay the old mileage. -The other lines out of Chicago could not get a carload to St. Paul or -the Missouri River. The railroads surrendered finally to both the -Standard Oil and the Beef Trust. They reduced the mileage rates on stock -cars, railroad cars, and other cars not controlled by the Trusts to 6 -mills per mile, but excepted refrigerator and tank cars out of respect -to the power of Armour and Rockefeller, because, the trunk lines said, -referring to the power of these Trusts: “We have never been able to -stand up against it.” - -We have not yet finished with the favors shown to Armour. The railroads -as a rule inspect the loading of every car and the unfavored shipper -cannot mix eggs or poultry with low-class provisions and bill it all at -a low rate. But the Armours can do this, for inspection in their case is -a mere form. There is one inspector for shipments that average 75 cars a -day. The inspector could not watch them all if he would, and in fact he -simply inspects the Armour records and takes their word for the contents -of the cars.[286] - -It is charged that Armour not only gets large quantities of high-class -freight carried at the rates appropriate to lower-class freight by -unreported mixing of his goods in carload lots billed at the lowest rate -applicable to any of the goods in the car; it is also further charged -that the space beneath the beef that is hung up in the refrigerator cars -is often crowded full of poultry, eggs, etc., which are carried for -nothing. No wonder Armour can undersell his rivals all over the country -and ruin his competitors in any market he chooses to enter. - -The Beef Trust has compelled the railroads to fix a very low minimum -carload limit—20,000 lbs. on dressed beef, etc., against 26,000 to -30,000 lbs. on products the big Trusts are not interested in. If a load -is below the carload limit it has to pay less-than-carload rates, which -are 20 percent or more higher than carload rates. It is for the interest -of the railroads to keep the minimum carload limit at a good height to -prevent hauling cars with small loads and low rates, and to reduce the -effect of the prevalent custom of billing Trust cars at the minimum no -matter how heavily they are really loaded. The railroads have made -efforts to unite on a higher carload limit, but without avail so far. On -Dec. 12, 1903, it is said, 16 presidents and managers of the greatest -railroads in America met in New York and decided to make 24,000 lbs. the -minimum on dressed meats. The proceedings were under promise of secrecy -by all concerned. But within two days the Trust people knew all about -the secret meeting, and they took measures which prevented the new order -from ever taking effect. No agreement has ever been formulated that will -stand against the power of the Trust, the seductiveness of its promises -of diverting new masses of business to the yielding road, and the terror -of its threats of withdrawal of traffic from the unyielding. - -These advantages—excessive mileage rates, high speed, exclusive -contracts, exorbitant icing charges, espionage of competitors, control -of tariffs, low carload limit, and go-as-you-please inspection—have the -same effect as a very large rebate; the private-car owners can ship at -very much lower cost than ordinary unprivileged shippers. The profits -are immense—$72,000 a day, it is said for the Armour cars. - -It is estimated that the railroads pay the Beef Trust’s car-lines about -$25,000,000 a year in rebates or payments in practical violation of the -law. - -On the basis of the very moderate Beef Trust Report of the Department of -Commerce, Mr. Baker figures the annual profits on the 14,000 Armour -refrigerator cars, from rentals alone, at $200 net per car, or -$2,800,000—nearly $3,000,000 a year, not including the enormous sums -extorted in excessive icing charges, nor the rebates and commissions -paid by the railroads in addition to the mileage. The estimate of $200 a -car is probably too low, for Mr. Robbins, manager of the Armour -Car-Lines, has testified that they rent old, inferior cars to breweries, -etc., at $204 to $280 per year. - -Mr. Baker says: “Can any simple-minded person see any difference between -a payment of $3,000,000 net profit on mileage annually to a favored -shipper like Armour, and an old-fashioned cash rebate of $3,000,000? I -confess I cannot.”[287] - -Mr. Baker has deducted operating expenses, repairs, and a liberal -allowance for depreciation, but he has not allowed for fair interest -upon the capital invested in the cars, a charge amounting to $650,000 a -year which should be deducted from the $2,800,000 in order to get the -portion of the mileage payment which is really equivalent to “an -old-fashioned cash rebate,”—an article that is not so old-fashioned, -however, as to be out of use, by any means, as we have seen. - -Wherever it serves their purposes the car-lines share their rebates with -important shippers. This has been of special service in inducing large -shippers like the fruit growers of California and the South to give -their trade to the profit-sharing car-lines. The car-lines would pay -shippers a bonus on condition that such shippers would call on the -railroad for the cars of the agreeing car-line. Both refrigerator lines -and stock car-lines use this method. Sometimes half the mileage is paid -to the favored shipper. Sometimes $10 or $15 or even $25 and $35 a car -is paid back to the shipper by the car-line, which is of course a rebate -pure and simple, and has precisely the same effect when paid by the -car-line as if paid by the railroad directly to the shipper. - -The Santa Fe car-line found it necessary to give a rebate of $25 a car -in California in order to get traffic in competition with the Armour -Car-Lines and on shipments going beyond Chicago the rebate that seemed -necessary to get business was $35 a car. So Mr. Leeds, the manager of -the Santa Fe car-line testified in April 1904 before the Interstate -Commerce Commission. Part of Mr. Leed’s testimony in answer to the -questions of the Commission and of its counsel Mr. Marchand was as -follows:[288] - -“MR. LEEDS. This is the first year that we entered into the deciduous -fruit business in Northern California, and I met the competition which -we found there when we began business. - -“MR. MARCHAND. What competition? - -“MR. LEEDS. I think it amounts to $25 a car. - -“MR. MARCHAND. $25 a car? - -“MR. LEEDS. Yes, sir. - -“MR. MARCHAND. By whom? - -“MR. LEEDS. We had only one competition. - -“MR. MARCHAND. Who was your competitor? - -“MR. LEEDS. The Armour Car-Line. - -“MR. MARCHAND. And it was necessary to give $25 or more in order to -secure the traffic—was that your idea? - -“MR. LEEDS. I believed so. - -“COMMISSIONER CLEMENTS. Uniformly $25 a car? - -“MR. LEEDS. I think there would be some exception, as to business -farther east than Chicago. - -“COMMISSIONER CLEMENTS. Would it be more than that? - -“MR. LEEDS. Yes, sir. - -“COMMISSIONER CLEMENTS. What on Eastern business? - -“MR. LEEDS. An additional $10. - -“COMMISSIONER CLEMENTS. $35? - -“MR. LEEDS. Yes, sir. - -“COMMISSIONER CLEMENTS. You pay $25 back to Chicago and points west of -Chicago? - -“MR. LEEDS. Yes, sir. - -“COMMISSIONER CLEMENTS. And $35 to points east of Chicago? - -“MR. LEEDS. That is what it would amount to. - -“COMMISSIONER PROUTY. Do you agree to do that before the shipment is -made, or afterwards? - -“MR. LEEDS. Before. - -“COMMISSIONER PROUTY. Are your agents authorized to make that discount? - -“MR. LEEDS. No; they are not. - -“COMMISSIONER PROUTY. Where is the agreement made, and with whom? - -“MR. LEEDS. Myself. - -“COMMISSIONER PROUTY. Do your agents there know anything about it? - -“MR. LEEDS. I do not think they know what it is. They may know that -something of that kind is going on, but not what it amounts to. - -“COMMISSIONER CLEMENTS. How does the shipper know that he can get this -$25 and $35 back? - -“MR. LEEDS. Well, he probably could not ship if he did not know it. - -“COMMISSIONER CLEMENTS. How does he find it out? You say your agents -there do not inform him. - -“MR. LEEDS. Well, I spent about three months there in the past year. - -“COMMISSIONER CLEMENTS. You have advised them all that that was done, -have you? - -“MR. LEEDS. We sought the business.” - -Mr. Watson appears to have received on California shipments about -$50,000 a year in rebates from the Fruit Growers’ Express (now an Armour -line), and perhaps the amount was nearer $100,000.[289] - -The reduction of icing charges to favored shippers is, of course, only -another way of paying rebates. Yet the car-lines contend that icing -charges are compensation for a private service which is not part of the -transportation service, and therefore outside the Interstate law. The -Interstate Commerce Commission says: “It has been very customary in the -past, and the practice still prevails in some quarters, to allow to -particular shippers a reduction in these refrigerator charges. Testimony -recently taken at Chicago shows that one large shipper of California to -various eastern destinations was allowed concessions of this kind, which -probably aggregated in a series of seven or eight years several hundred -thousand dollars.”[290] - -The testimony of H. J. Streychmans before the Commission at Chicago, May -12, 1905, throws much light on the Armour Car business. Mr. Streychmans -was for over 4 years, from April, 1900, to August 1904, in the employ of -Armour & Company, and the Fruit Growers’ Express, one of their car-line -systems. One of his duties was to check ice bills. He says the Armour -Car-Lines generally pay $2 to $2.50 a ton for ice, except on the St. -Paul and Northwestern and Erie. On the Northwestern the Armours paid $1 -a ton for ice, and on the Erie $1.25 or $1.50. “These were the main -lines. The Northwestern and St. Paul handled practically all the green -fruit shipments, and the Erie used to get the shipments east.” The -profits were “five or six hundred percent.” On the very long hauls the -percentage was not so high. From Fresno, California, to Boston, for -example, the cost of icing was about $38 and the Armour tariff charge -for icing was $125, leaving a margin of $87 a car. - -On some roads Streychmans says that rebates were paid the Armours on -ice. The Chicago, Milwaukee and St. Paul, for example, billed the ice at -$2.50, but in paying the railroad for the ice the Armours put in a -rebate claim for $1 a ton, reducing the net cost to $1.50. On the Texas -and Pacific, the company furnishing the ice remitted $1 per ton making -the net price $2.50. Ice cold rebates were also paid at Buffalo. - -The Armours in their turn made “allowances” to favored shippers. -Streychmans had to make up “allowance statements” “showing the number of -cars shipped by the shippers and giving him a rate of 60 percent of the -tariff rate.” A “rebate of $15 to $25 a car” was paid back. The last -statement Mr. Streychmans put in typewriting before leaving the Armour -service in California was for a rebate of 45 percent to Alden Anderson, -Lieutenant-Governor of California. The witness saw on the office file -statements of rebates to the Southern California Fruit Exchange of $10 a -car on 1904 shipments of oranges, etc. A number of shippers in -California got rebates amounting to 45 to 50 percent of the icing -charges. They paid the actual cost of icing plus a bonus of $10 to -Chicago, $15 to New York, and $20 to Boston. The cost and bonus together -were ordinarily less than half the tariff charges. For instance, the -Armour ice tariff to Boston from Southern California was $120, the cost -$38, and the bonus $20,—$58 total, or a little less than half the -tariff. The full tariff rates were collected and the difference paid -back. Shippers not in on the secret-rebate arrangement paid the full -rates and got no discount. - -From Portland, Ore., to Chicago the Armour icing charge was $45, because -the Northern Pacific cars are there to compete; but further south, at -Medford, Ore., where there is only the Southern Pacific, in league with -the Armours, the icing charge to Chicago is $75. - -When possible the car-line runs the cars without ice, sometimes for long -distances, but charges the shippers for icing just as if it had been -done. - -Some of the railroads pay a bonus for the Armour business, the St. Paul, -the Northwestern, and the Grand Trunk, for example; in other words, the -Armour lines not only charge extortionate rates for icing and get a -mileage on their cars loaded or empty, but in some cases sell their -tonnage to the railroads. In California, however, the witness believes -there is a traffic commission to settle questions of the division of -traffic between the Santa Fe cars and the Armour cars on the Southern -Pacific. - -Mr. Streychmans as a confidential clerk was supplied with a secret code -for use in his correspondence. The inside title-page says: -“Transportation Department, General Offices, 205 La Salle Street, -Chicago, Ill. Cipher code No. 100; for exclusive use between themselves -and H. Streychmans. July 1, 1902. Armour Printing Works, Chicago.”[291] - -Some of the cipher words and their meanings are as follows:— - -_Launching_—Can make rebate. - -_Laundry_—Force payment higher rebates. - -_Laura_—Handle rebate matters very carefully. - -_Laurus_—Pay rebates. - -_Lava_—Pay rebates from cash on hand. - -_Lavello_—Rebate must be confidential. - -_Lavishment_—Working for rebate on. - -_Kinsley_—Shade rates a little rather than lose business. - -_Apples_—What allowance is necessary to secure business. - -_Joculariss_—Divide rate. - -_Jewelry_—Rates being secretly cut by all lines. - -_Judiciary_—Keep your rates below all others. - -_Junior_—Rates must be made which will secure the business. - -_Junk_—If necessary to secure the shipment you can make the rate to. - -_Juvenal_—Maintain rates unless others cut. - -_Kadmaster_—Manipulate rates so as to. - -_Kalatna_—Meet any rate offered. - -_Footpath_—Interstate Commerce Commission. - -_Footprint_—Avoid service of summons from I. C. C. - -_Footrot_—Meeting of the I. C. C. at —— on —— to consider question of -——. - -_Imprint_—Martin A. Knapp of New York, Chairman. - -_Imprinted_—Judson C. Clements of Georgia. - -_Imprinting_—James D. Yeomans of Iowa. - -_Imprison_—Charles A. Prouty of Vermont. - -_Improbitas_—Joseph W. Fifer of Illinois. - -_Improbity_—Edward A. Mosely, Secretary. - -_Armour_—Arrange this with the utmost secrecy. - -It is evident that the Armour Car-Lines make a business of arranging -secret rebates, evading the law and eluding the Interstate Commission. - -There are some 300 private car-lines in the country owning and operating -about 130,000 private cars. But the law of concentration is acting on -the private cars as well as on the railways, and the private cars are -rapidly consolidating in few hands. Speaking of this movement in the -refrigerator business, the Interstate Commission says in its Report for -1904, p. 14: “Some years ago there were a number of these private-car -companies which provided refrigerator cars for the transportation of -fruit under refrigeration. Some of these were the Fruit Growers’ -Express, the Kansas City Fruit Express, the Continental Fruit Express, -and the Armour Refrigerator lines. These companies were all independent -of one another originally, and their cars were used in competition with -each other.... At the present day all the above car companies have been -absorbed by the Armour Car-Lines Company, which has to-day, in our -opinion, a practical monopoly of the movement of fruit in large -quantities in most sections of the country. There is the American -Transit Refrigerator Company, which operates over the Gould lines, and -the Santa Fe Fruit Express, which operates over the Santa Fe System, and -there are numerous refrigerator lines, having a small number of cars and -engaged in a particular service, but we know of no company other than -the Armour Car-Lines which could move the peach crop of Georgia or the -fruits of Michigan. And this company, having acquired sufficient -strength to do so, has adopted the rule that it will not allow its cars -to go on the line of any railroad for the purpose of moving fruit from -points of origin on that railroad, unless it be under what is known as -an exclusive contract.” - -By force of the enormous shipments the Armours control they have -compelled railroad after railroad to make the exclusive contracts they -desire, fix rates at their dictation, collect exorbitant icing charges, -give them an excessive mileage allowance, return their cars empty if -they will at high speed instead of detaining them for loading back, etc. -And “if any railroad dares to disobey their orders when they impose a -requirement it will not get any more of their traffic. The boycott -cannot be visited more effectively upon the railways. That is the secret -of the whole situation. They are the largest shippers, the most -arbitrary, the most remorseless that have ever been known.”[292] - -Is it any wonder that Mr. E. M. Ferguson, representing a dozen -associations of fruit and grocery and produce houses, should tell the -Senate Committee that the “situation is tantamount to commercial -slavery”? “It must be plain to all that commercial freedom in any line -of industry has ceased when a gigantic trust like the Armour interests -are permitted, through ownership and operation of private car-lines to -absolutely control the common highways in so far as the use of such -highways may be required in the transportation of that particular kind -of traffic for which their cars are a necessary instrumentality of -carriage, thus enabling the Armour interests (who, it will be -remembered, are also merchants in the commodities transported in their -cars) to completely dominate over all independent dealers to the extent -of fixing rates, conditions, and terms under which such independent -dealers may use the common highways.”[293] - -The fate of a man left to the mercy of the Armours and the mild -influence of the Sermon on the Mount is similar to the fate of a man -without a gun encountering a tiger in the jungles of Africa. Even the -Government seems to be unable to compel justice in this case. The big -guns of the Federal courts have little or no effect on the packers and -the railroads they have benevolently assimilated. They disobey -injunctions as freely as they do the principles of Christianity and the -dictates of conscience, with the excuse perhaps, as to the last, of lack -of acquaintance. - -Standard Oil still practically controls the railroads for the most part -so far as the transportation of oil is concerned, manipulating rates and -service so as to favor its own business and hinder or destroy the -business of competitors. - -In the recent examination of Standard Oil methods by the State of -Missouri, L. C. Lohman, for 30 years an oil dealer at Jefferson City, -testified that he had been forced to abandon his dealings with -independent oil companies because the Missouri Pacific and Missouri, -Kansas, and Texas roads refused to accept oil for shipment to him from -these companies. - -The railroads discriminate against the Texas oil wells by making the -rates on north-bound oil considerably higher than on south-bound oil. -Again the rate to various points from Lima, the centre of the Ohio and -Indiana oil fields, is considerably higher than from Chicago, the -Standard Oil shipping point. For example: - - Miles. Rate per hundred. - Lima to Chattanooga 470 43 - Chicago to Chattanooga 643 39.5 - Lima to Mobile 916 32.5 - Chicago to Mobile 926 23 - Lima to New Orleans 962 32.5 - Chicago to New Orleans 922 23 - Lima to Memphis 512 26.5 - Chicago to Memphis 526 18 - Lima to Cincinnati 132 10 - Chicago to Cincinnati 305 11 - -It costs 3½ cents more per hundred to ship from Lima, 470 miles, than -from Chicago, 643 miles; 9½ cents more from Lima, 916 miles, to Mobile, -than from Chicago, 926 miles, to the same place. The shorter distance -has the higher rate till you get 50 percent off, then the half distance -from Lima has about the same rate as the 100 percent distance from -Chicago. - -The average rate on 25 staple commodities is about 2 cents higher per -hundred from Cleveland to New Orleans than from Chicago to New Orleans, -while the rate on petroleum is 8 cents higher. This is a strong -discrimination against the Cleveland refineries in favor of the Chicago -shipping point at Whiting. The Standard Oil is the only shipper of oil -from Whiting.[294] - -The methods by which the Standard controls New England are still in full -swing. The report of the Industrial Commission tells how the Standard -Oil railroads keep the independent refineries at Cleveland out of New -England through high rates on oil by rail, while the Standard ships by -water, and by making oil second class unless the shipper has a private -siding or tank opposite the rails of the New Haven and Hartford -Railroad, but fifth class if the shipper has such siding or tank, _i. -e._, if the shipper is the Standard Oil Co.[295] “The freight rate from -Cleveland to Boston,” says the report, “was formerly 22 cents per -hundred pounds alike on iron articles, grain, and petroleum. But since -the Interstate Commerce Act the rates have been changed, so that the -rate on grain is 15 cents per hundred pounds, on iron 20 cents, and on -petroleum 24 cents. Again, on almost every commodity through rates are -made from Cleveland and other western points to points reached by the -New York, New Haven and Hartford Railroad. On petroleum there are no -through rates, but a local rate is added to the Boston rate. Moreover -the New York, New Haven and Hartford prescribes that petroleum and its -products shall be in the second class of freight unless the person to -whom it is shipped has a private siding or tank opposite the rails, in -which case it is fifth class, the rate for fifth class being probably -one-half that for second class. These arrangements are explainable by -the fact that the Standard Oil Company ships oil from its seaboard -refineries to Boston largely by tank steamers, and distributes it from -there for a comparatively short distance at the local rates.”[296] - -In the West the Standard has persuaded the railroads to lift the rates -on oil so high as to make competition difficult. The rate from -Pennsylvania points to Chicago was raised from 17½ cents to 19½ cents, -and the rate from Chicago to St. Paul went up from 10 cents to 20 -cents.[297] The Standard pumps oil to Chicago by pipe, and the higher -the rates by rail the more impossible it is for the independents to -compete. Of course it is against the direct interests of the railway -stockholders to have rates so high as to check the traffic in oil by -rail, but the Standard does not care about that, and it is a small -matter even to the railroad managers compared to incurring the -displeasure of Standard Oil, which has sufficient control in the railway -world to cause any disobedient railroad most serious loss and even make -a railroad war upon it. - -Before the Standard found other methods of controlling transportation -and milking the public it used to receive half a million dollars a month -in rebates. But some railroad men who are in a position to know say that -since 1900 the Standard Oil has not asked for rebates, the reason being -that the tariffs are made in such a way as to give the Trust all the -advantage it requires.[298] - -The fight now going on in Kansas between the people and the Oil Combine -has forcibly illustrated the methods of the Standard. When the Kansas -oil fields began to show signs of large prosperity the Standard went -into the State, put up refineries and storage tanks, laid pipe lines, -and began to build a through pipe line from Kansas to its Chicago -station at Whiting. By getting the railroads to raise their rates on -oil, compelling producers to agree to sell their oil only to the -Combine, resorting to cut-throat competition to drive them out of any -market they attempted to enter, they practically captured the oil -business of the State and were able to put the price of crude oil down -and squeeze the independents until many of them were ready to sell out -to the Combine at the victor’s own price. - -The power of the Trust over the railroads is illustrated by the case of -Mr. I. E. Knapp of Chanute, who went to the field in 1899 and secured a -number of paying wells. He also obtained a market for his crude oil with -the Omaha and Kansas City gas companies, transporting the oil in tank -cars of his own. In the recent investigation in Kansas it appeared that -he had enlarged his business till he had 20 tank cars in transit. He -paid the railroads 10 cents per hundred lbs. to Omaha and Kansas City, -and they counted the weight at 6.4 lbs. per gallon. With this rate and ¾ -of a cent mileage on his cars he was able to make a good profit, but -suddenly in May, 1902, two weeks after he had signed a year’s contract -with the gas companies, the railroads changed the weight classification -to 7.4 lbs. per gallon, adding thereby $7.50 per car to the freight, -while the freight on the products of crude remained unchanged. That is, -the Standard could still ship gas-oil as a product of crude at the old -weight of 6.4 lbs. a gallon.[299] - -Mr. Knapp protested and the railroad agents, admitting that the -classification was arbitrary and not general even on their own roads, -succeeded in getting the order reversed, but only for a short time, when -back it went, and in reply to further protest from the Kansas agents -their superior officers wrote that they were tired of the correspondence -and declined to discuss the matter further. So for 11 months Mr. Knapp -had to fulfil his contract with a handicap of $7.50 per car more cost -than he had figured on. The result was that in May, 1903, he turned over -his crude oil to the Standard which thereafter supplied the Omaha and -Kansas City gas companies, while Knapp’s 20 cars were side-tracked and -in the spring of 1905 were still idle at Chanute. - -The weight classification killed Knapp’s business, but a few small -independents lived in spite of it. So another move was made on the -railroad chess-board. Three great railroads tap the Kansas oil fields: -the Santa Fe, the Missouri, Kansas and Texas, and the Missouri Pacific. -In August, 1904, just as the Standard finished its pipe line to Kansas -City, the rates on crude oil and its products were raised by all the -railroads on the field. The rate to Kansas City went up from 10 cents to -17 cents a hundred; and the rate to St. Louis rose from 15 cents to 22 -cents. On a carload of fifty-five thousand lbs. the increase in the -freight to Kansas City was $38.50, or $93.50 total, and $121 to St. -Louis. This was prohibitive. In their testimony given in March last -(1905), shippers, even those who were using their own tank cars, -declared that the change in rates compelled them to stop business at -once and shut down their wells. - -The advance in freight was not a part of a general readjustment of -rates. It was made alone. And it made oil rates out of all proportion to -other rates. The freight from Chanute to Kansas City was $50 for a car -of wheat, $40 for corn, $66 for machinery, $28 for cattle, and $30 for a -car of fruit, against $93.50 for oil, the least valuable of all, and -formerly carried for $50 or $55 a car. - -The examiner at the recent Kansas investigation presented the following -letter in explanation of the railroads: “The reason the Santa Fe and the -‘Katy’ railroads raised rates on oil after the pipe line was completed -was because the Standard’s companies arranged with them to do so, by -agreeing to give them a percentage upon every barrel of oil that was run -through their pipe lines on condition the railroads would increase the -freight rate on oil to a prohibitive rate, so that all the oil would be -forced through the pipe line. Now the railroads have no oil, but get -about ten cents per barrel for all oil going through the pipe lines.” - -This is similar to an arrangement that existed for several years from -1884 on between the Pennsylvania Railroad and the Oil Combine by which -the railroad was to have a fixed sum per barrel on 26 percent of all the -oil going eastward from the Pennsylvania oil fields, whether the oil -went by rail or pipe line,[300] in consideration of which the railroad -was to put up the rates on oil. - -In the Kansas case there are other reasons more direct and powerful -perhaps than any traffic arrangement. The Standard people have acquired -a large interest in the Santa Fe. One of their strongest and most -unscrupulous men, H. H. Rogers, has taken a place on the board of -directors. John D. Rockefeller and Wm. Rockefeller are directors of the -Missouri, Kansas and Texas, and the Missouri Pacific is one of the -principal lines of the Gould-Rockefeller system. There are other -indications of the grip the Standard has upon the Kansas railroads. For -example, the Colorado Fuel Company that was so greatly favored by the -Santa Fe is largely owned and managed by the Standard Oil crowd, and the -Standard uses the Santa Fe’s right of way for its pipe lines in Kansas, -and for almost the entire distance from Kansas City to Whiting. - -Kansas has risen in revolt against the Oil Trust, and the Legislature -last year (1905) lowered the freight rates on oil and passed a bill for -the establishment of a State refinery to compete with the Standard and -give the oil producers of the State a chance to escape from the -“commercial tyranny” they are now subjected to in consequence of the -fact that there is practically only one buyer in the market. The State -Supreme Court, however, has decided that the State refinery act is -unconstitutional. The independents might, however, establish a -co-operative refinery of their own and do a good business, if they could -get equal freight rates and sufficient support from public sentiment to -withstand the boycott to which the Standard would be likely to resort. -Only the Standard, it is said, can get rates that encourage the shipment -of oil from Kansas wells at present. And the Standard custom of putting -prices very low where there is competition, keeping prices high in other -regions where there is no competition, making the people in -non-competitive localities pay the cost of killing competition in other -places, is exceedingly effective, as is also its diabolical habit of -ruining merchants who buy independent oil, by establishing competing -houses close to them and underselling them on the whole line of goods -they handle, the Trust’s wide business enabling it to stand such losses -easily, as the total is only an insignificant fraction of the profits -made in regions where no such fight is in progress. - - - - - CHAPTER XXVII. - THE LONG-HAUL ANOMALY. - - -The long and short haul clause is still broken by the railroads as well -as by the Supreme Court, especially in the West and in the South, where -the basing-point system causes such grievous discriminations. For -example, with a rate of 48 cents from New York to Atlanta and a local -rate of 38 cents from Atlanta to Suwanee, the rate from New York to -Suwanee is 86 cents, although Suwanee is 31 miles nearer New York than -Atlanta. This system is not confined to places that have water -competition. A considerable number of towns on the Southern Railway and -on the Louisville and Nashville have been made basing-points, though -they have no water competition.[301] - -Jacksonville is the main basing-point in Florida, and rates to other -destinations are the rate of Jacksonville plus the local rate from -Jacksonville to destination, even though the destination is nearer the -point of shipment than Jacksonville.[302] - -From New Orleans to the “Virginia Cities,” Richmond, Lynchburg, and -Norfolk, is about 800 miles. Charlotte, at the southern border of North -Carolina, is about half way. Yet the rates to Charlotte on a number of -articles are double the rates to the Virginia cities, twice the -distance. The Southern Railway and the Seaboard Air Line reach the city, -but there is no competition. Water competition must be met in Virginia, -but if the Virginia ton-mile rate will pay a profit, is not the fourfold -ton-mile rate to Charlotte an exorbitant charge?[303] - -Danville is an excellent example of the evils of place discrimination. -Prior to 1886 Danville enjoyed equal freight rates with Lynchburg and -Richmond through the competition of the Virginia Midland Railroad and -the Southern Railway, but in that year the Southern road (then known as -the Richmond and Danville) bought the Virginia Midland and deprived -Danville of its equal rates. In 1890 Danville subscribed $100,000 -towards the construction of another competing road, which was built, but -after a few years it too was purchased by the Southern Railway, and the -rates were made strongly adverse to Danville. The matter went to the -Commission and the courts, but the city has not been able to carry on -the litigation with the roads.[304] - -The Southern Railway carried bananas in 1902–1903 from Charleston to -Lynchburg for 20 cents a hundred lbs., but if the fruit stopped at -Danville, part way on the road to Lynchburg, the rate was 43 cents a -hundred. The road said it had to make low rates at Lynchburg to meet -competing bananas coming in by way of Baltimore. The Commission found, -however, that the Lynchburg rate was 13 cents lower than the rate -justified by competition from Baltimore or elsewhere.[305] It is claimed -that railroad discrimination has decreased the taxable values of -Danville several hundred thousand dollars from 1900 to 1904. The -Danville representative said, “I have heard a great deal about -confiscatory rates, fixed by a Commission authorized to fix rates, but I -have not heard anything about confiscatory rates fixed by the railroads, -whereby the property of the public and of municipalities and taxable -values are destroyed; but those facts exist. They exist in my town, and -these facts exist in spite of the fact that the city of Danville -contributed $100,000 to the building of the Lynchburg and Danville -Railroad.”[306] - -The rate on canned goods from Hoopeston, Ill., to Nashville, Tenn., is -27 cents per hundred. From Hoopeston to Memphis, several hundred miles -further, the rate is 19 cents. From Greenwood, Ind., to Nashville the -rate is 25 cents, to New Orleans 21 cents, to Mobile 20 cents, and to -Memphis 19 cents.[307] The Chesapeake and Ohio Railway, the Norfolk and -Western, and the Baltimore and Ohio, all carry lumber from the Blue -Ridge Mountains. The rate from the Shenandoah Valley to Philadelphia is -16 cents per hundred, while from points in the region a hundred miles or -so further west the rate is only 14 cents. “The man who is producing -lumber to-day on the eastern slope of the Blue Ridge Mountains, almost -within sight of us, must pay 2 cents per hundred lbs. more to get lumber -to Philadelphia than the man 50 or 75 miles further west, who gets his -lumber transported for 14 cents. Now, 2 cents a hundred lbs. is 40 cents -a ton. That is $12 a carload of 30,000 lbs., and that is probably about -all the margin of profit there is in lumber of that kind.” All three of -the railroads are controlled by one great railroad system, yet they -claim that competition among them justifies the lower rate in the region -where they cross.[308] - -The rate on lumber from Chattanooga to Buffalo via Cincinnati is 20 -cents, while from Chattanooga to Cleveland, a shorter haul over the same -road, it is 23 cents.[309] - -Corn rates now (1905) are 13 cents per hundred from Omaha, 1400 miles to -New York, and 25 cents from Boone, Iowa, 1252 miles to New York, 25 -cents also from Dennison, Iowa, 1341 miles to New York, etc. Many -similar facts might be named. And such discriminations between -contiguous markets do not violate the Interstate Law. There is no -requirement that one railroad line shall not charge less for a given -distance than another railroad line charges, and even on the same line -the long and short haul clause yields to the necessity of meeting -competition. - -When Dubuque wants to buy things from the South it must pay much higher -rates than Milwaukee, Madison, Chicago, Freeport, etc. Manufacturers in -Fort Dodge and Dubuque, Iowa, have to pay higher rates to the Pacific -than manufacturers in Chicago and the East. - -Iowa raises corn, cattle, and hogs, and would like to have -packing-houses, but cannot because of the discrimination in favor of -Chicago and Missouri River points.[310] Iowa business men also say that -small poultry and dressed-meat concerns cannot compete with the big -packers, on account of the private-car system and the concessions -granted the car-lines, and they complain vigorously of the -discrimination against them in the rates on shoes, grain, cattle, iron, -steel, etc. The railroads have decreed that Iowa shall not be a -manufacturing State. - -“THE CHAIRMAN. Why do you say that the railroads have decreed that Iowa -shall not become a manufacturing State? - -“HON. A. B. CUMMINS, Governor of Iowa. I reach that conclusion simply -because all our manufacturers, when they attempt to reach beyond our own -State, meet rates that so discriminate against them that they cannot -compete with manufacturers elsewhere.” - -In many cases a shipper at an intermediate point between Minneapolis and -Chicago can send his grain to Minneapolis, rebill it to Chicago, and -have it go back through his own town to destination more cheaply than he -can ship direct to destination.[311] - -From Cannon Falls the rate to Chicago is 15 cents a hundred on grain. -The rate from Cannon Falls to Minneapolis is 7 cents, and from -Minneapolis to Chicago 7½ cents. So it costs ½ cent a hundred more to -ship from Cannon Falls direct to Chicago than to ship to Minneapolis and -from there back through Cannon Falls to Chicago. And if he wants to send -his grain to Louisville, Ky., it will cost him 5 cents a hundred more to -ship from Cannon Falls to Louisville, than if he sends his grain to -Minneapolis and bills it from there to Louisville.[312] - -Denver still suffers from the sort of discrimination described in the -preceding section.[313] The rate in cotton goods from New England to -Denver is $2.24 per hundred. From New England to San Francisco, 1500 -miles further on, the rate is $1 a hundred in carload lots. On a -shipment in relation to which a Denver merchant made complaint, the -Burlington road received $25.95 from Chicago to Denver, whereas if the -same shipment had been intended for Frisco the Burlington would have -received only $4.50. - -Salt Lake City also is wrestling with adverse freight rates. On cotton -goods the rate from New York to Frisco is $1, while on the shorter haul -from New York to Salt Lake it is just double, $2 per hundred.[314] The -rate on window-shade cloth from New York to Salt Lake City is $2.30. -Carrying it 800 miles further, New York to California, the railroads -charge only $1, and this affords a slight profit. Is it not clear that -the $2.30 is excessive?[315] “The men who build a city in the interior -cannot expect to get as reasonable a rate as the men who build their -city on the shore of the sea, but the difference should be a reasonable -one.” - -It would seem that the men who build in the interior might expect that -they would not be called on to pay railway fixed charges on coast -traffic as well as on their own. It is unfair to give the coast people -the celerity of railway traffic at the cost of water traffic. The -railroad theory that every pound of freight is to be secured that will -pay the cost of hauling or a little more, though a water route or a -shorter rail line might carry the freight at less absolute cost, is not -in accord with sound public policy or the saving of industrial power. It -is an economic absurdity to haul by rail what can go more cheaply and as -safely by water. A co-operative company or a consolidated company of any -honest and sensible variety, owning both the railroads and the steamboat -lines, would divide the traffic in such a way as to secure the maximum -economy and convenience, and would make a reasonable payment for the -extra speed and other advantages of railway transit the main condition -of selecting that method of transportation, with an option in the -company under specified conditions to facilitate the full loading of -trains and boats through the adjustment of rates. - -The case of Spokane is a specially aggravated one. The rate on bar iron -from Chicago to Spokane is $2.07 a hundred against $1.25 to Seattle; -iron pipe $1 to Spokane, 50 cents to Seattle; lamps $2.35 to Spokane, -$1.10 to Seattle; belting $3.13 to Spokane, and $1.65 to Seattle; -mining-car wheels $1.26 to Spokane and 85 cents to Seattle; cottons -$1.75 to Spokane, 90 cents to the coast; soap (toilet) $1.23 to Spokane, -75 cents to coast cities; wire and wire goods $2.35 to Spokane, $1.50 to -the coast; sewing machines $2.25 to Spokane, $1.40 to coast; typewriters -$5.96 to Spokane, $3 to the cities of the coast. - -In general the rates from the East to Spokane are the through rates to -the coast plus the local rates from the coast back to Spokane.[316] - -The preference which Tacoma, Seattle, etc., have over Spokane is about -80 percent. Spokane pays about $1.80 on shipments from Chicago, while -Tacoma and Seattle pay $1.[317] Spokane is a great railroad junction, -but competition has been suppressed by agreement between the lines, -while competition is still active at Tacoma and Seattle, so that under -the decision of the Supreme Court the railroads are free to discriminate -against Spokane. Aside from water competition the railroads want to -build up Seattle. They have invested a great deal of money in docks and -facilities for doing business there. The manufacture of wooden pipe was -flourishing in Spokane. The company was shipping 2 carloads daily and -its pay roll was $3,000 a month. A rival factory in Seattle, backed by -the big lumber firms of the coast, got the railways to make rates that -enabled it to lay down the manufactured pipe in Spokane about 60 percent -cheaper than the Spokane factory could make it. The situation came to -light November, 1903, two months after the rates went into effect, when -the Spokane factory came into competition with the Seattle factory for a -contract at Butte. The bid of the Seattle firm was less than the pipe -could be sold for at Spokane by the factory in that city, and Butte is -384 miles east of Spokane. The rates shut off the Spokane factory from -the East entirely. In about 8 months that flourishing manufacture in -Spokane was wiped out.[318] There was no water competition here to make -an excuse for discrimination, for the cut was made from Seattle east to -Spokane and points still further east. - -The paper-box manufacture was forced out of existence in Spokane by -similar discriminations. Eastern factories can lay down the boxes in -Spokane cheaper than the local factories can get the strawboard. So with -other trades. The manufacture of sash would be rapidly developed if it -were not for the grievous discrimination on window glass, $1.38 from -Pittsburg to Spokane, against 90 cents to Portland, Seattle, etc. - - - - - CHAPTER XXVIII. - OTHER PLACE DISCRIMINATIONS. - - -There are multitudes of other place discriminations besides those -related to the long and short haul question. The Business Men’s League -of St. Louis and the St. Louis Merchants Exchange complain of serious -discrimination against their city as compared with Chicago, Kansas City, -Omaha, etc., in rates on corn, wheat, oats, groceries, hardware, and -cotton.[319] Des Moines gets supplies from Chicago at 60 cents, while -Fort Dodge, the same distance from Chicago, pays 72 cents.[320] Shoe -manufacturers and wholesale grocers of Atlanta who have had to close -down declare they were ruined by discriminative freight rates. Two years -ago a prohibitive rate was put on cotton bound for Atlanta, but the -freight agents of the leading railroads entering the city were indicted -by the Federal grand jury and the rate was withdrawn. Mobile complains -of loss of business because of discriminations in favor of New Orleans -on one side and Pensacola on the other. The Fort Wayne Commercial Club -complains of discrimination in rates, demurrage, switching, supply of -cars, etc. The lumber rate to Boston from points in West Virginia on the -Norfolk and Western is 29½ cents, while points on the B. & O. and -Chesapeake and Ohio in the same State and the same distance from Boston -have a rate of 23½ cents.[321] The Pennsylvania Railroad taking lumber -to points on the Long Branch Railroad made the rates by adding to the -New York rate an arbitrary charge of 5 cents a hundred lbs. if the -lumber came from Saginaw, Mich., but only 2 cents if the shipping point -was Buffalo; held an unlawful discrimination.[322] - -Even so important a city as Philadelphia has had serious complaints to -make at times of the favoritism shown New York by sending many of the -best trains from Washington north through Philadelphia without running -into Broad Street Station, but stopping only at West Philadelphia, and -by arranging excursion tickets so that southern buyers would go to New -York instead of Philadelphia.[323] - -In June, 1905, the New Haven and Hartford notified connecting lines that -it would not receive any further shipments of coal for delivery east of -the Connecticut River or north of Hartford after August 31. Such an -order constitutes a compound discrimination against certain localities -and a specific commodity. - -The whole of New England suffers from a discrimination of about 100 -percent in freight rates, the average rate in New England being about -double the average for the United States. Quoting my testimony before -the United States Industrial Commission: “Another phase of -discrimination was brought out very prominently in our studies in New -England, and the best source of information, perhaps, is the report made -by the Massachusetts Railroad Commission a few years ago (1894), in -which they compared the average freight rate on New England roads, -individual roads, and the average of all the roads there, showing that -our rates were about double the average freight rate in the Middle -States, or in the Middle West, and that it was clearly double what the -average freight rate was for the whole United States, and they argued -with much force that it was really a discrimination against New England -as a whole, especially against Boston. One of the pleas put forward in -discussing the question of leasing the Boston and Albany was that the -giving over of the Boston and Albany to the New York Central control -would intensify instead of relieve that sectional discrimination against -New England as a whole, because the road would come under the control of -those interested chiefly in the development of New York City, and not in -the development of Boston and the New England States.”[324] - -In the Cincinnati Maximum Rate Case, involving a large number of -railways and steamship lines, the Commission found discrimination -between the rates from the eastern seaboard and central territory to -southern points, and fixed a schedule of maximum rates from Cincinnati -and Chicago to Knoxville, Chattanooga, Rome, Atlanta, Meridian, -Birmingham, Anniston, and Selma, and required the railroads to revise -their rates to other points in the South in conformity with the -provisions of the order.[325] On appeal to the Supreme Court it was held -that the order could not be enforced against the railroads, it being the -opinion of the majority of the court that the Interstate Act does not -give the Commission power to fix rates, such power not being expressly -conferred and being too great to be implied from the prohibition of -unreasonable rates and the general authority given the Commission to -enforce the law,[326] so that the discrimination the Commission sought -to abolish between different sections of the country is still in -operation. - -Sectional discrimination, either intentional or unintentional, is bad -enough, but there is a still wider and more objectionable form of -discrimination as between the country and the big cities. The whole -inland territory is made tributary to a few competing points. - -As Hadley says: “The points where there is no competition are made to -pay the fixed charges.”[327] The railroads make whatever rates are -necessary to get business on the through routes, and compel the rural -districts to pay rates high enough to make up for the low rates on -through traffic. In many cases local rates in country districts are -almost as high as they were in the old stage-coach days. Senator -Dolliver suggests that every village and interior community in the -United States has a grievance against the railways on account of -discrimination against them in favor of the large centres.[328] Every -small town, and every small shipper and every farmer has to pay tribute -to the big cities. The effect is to build up the cities in wealth and -population at the expense of the country. For example, while -Indianapolis increased by 32,389 inhabitants from 1880 to 1890, 49 -counties remained stationary, and 21 counties lost. So Detroit grew -greatly, while 20 counties in the State, nearly all the counties in -Southern Michigan, lost population. “It is manifest that the railroads -are greatly aiding the cities in drawing to themselves the best and the -worst from the country, and every moment are increasing the magnitude of -the municipal problem.”[329] - -Mr. Alexander says that the railways should have credit for decreasing -the discriminations made by nature. “Thirty years ago it cost over a -dollar a pound to carry from New York machinery and tools to work the -mines of Utah, and the trip consumed the whole summer, during which the -purchaser lost the use of his money. Now the trip requires but two weeks -or less, and the rate is about two cents. Comparing these rates, and -considering the character of the present service as compared with the -old, it is not an exaggeration to say that the railroads have removed -about ninety-nine one-hundredths of the discrimination against Utah -which nature ordained in surrounding her with deserts and -mountains.”[330] - -It is true that the railways have greatly reduced the obstacles of -nature, but it is also true that they have used their power of reduction -unequally, arbitrarily, and unjustly. The discriminations of nature have -not the quality of justice or injustice that attaches to discrimination -by human agencies. In the exercise of the function of removing the -difficulties of nature the common carrier must be impartial. - - - - - CHAPTER XXIX. - NULLIFYING THE PROTECTIVE TARIFF. - - -The railroads continue to nullify the protective tariff upon imports, -and erect a counter protective tariff of their own in favor of foreign -goods and against domestic manufactures, aiming to supply home markets, -while on the other hand they facilitate the export of our productions by -rates much lower than the charges on the same goods for the same haul -when intended for domestic consumption. The effort seems to enable our -producers to capture foreign markets, and to give our markets, -especially the transcontinental markets, to foreign shippers. Anything -to get business, long hauls, ton-miles. - -The Industrial Commission found that merchandise for export went from -Chicago to New York at 80 percent of the ordinary transportation rates, -and grain from Kansas City to Chicago took 3 cents a hundred lower rate -if billed for export than if intended for local consumption.[331] The -export rate on wheat from Chicago to New York is 15 cents, the domestic -rate 20 cents; from Kansas City to Galveston the export rate is 17 cents -against a domestic rate of 33½ cents.[332] - -Another recent investigation shows that wheat from Kansas City to -Galveston was paying 27 cents if for domestic use, against 10 cents if -intended for export. The rates fluctuate, but if the domestic rate flies -low the foreign rate flies lower still. - -The price of grain in Liverpool is determined by world competition; the -railroads cut rates so that our grain can be sold in Liverpool. They get -a little more than the cost of hauling and are satisfied. - -When oil is selling at 9 cents a gallon here it can be bought at 3 cents -for shipment to Europe. - -Railroads often give manufacturers a reduction of 33⅓ percent for -export, and manufacturers sell at 30 percent less for export. Mr. Bacon -told the Senate Committee (1905) that the export rates from all inland -points to the seaboard have been for years 25 to 33 percent below the -rates on goods for domestic use.[333] - -The rate on rails from Pittsburg to Hongkong via San Francisco is only -60 cents per hundred, or less than the rate between points a few hundred -miles apart in this country. - -“For the past two years the trunk lines have given the steel and iron -producers a reduction of 33⅓ percent less than the published tariff on -domestic freights, so that all iron and steel exported is carried at -one-third less than the people of this country are required to pay on -freight of the same character.”[334] - -American steel has sold at Belfast for $24 a ton, while purchasers in -this country had to pay $32 a ton at Pittsburg for the same steel.[335] -American rails sell for $28 a ton for home use, but for foreign use they -can be bought in New York for $19 a ton and delivered in Beirut for -$22.88. Last year Mr. Wright, general manager of the Macon and Savannah -Railroad, stated that his road had to pay $29 a ton for 5,618 tons of -steel rails, although the same steel company offered him rails for -Honduras at $20 loaded on vessels chartered to a foreign port.[336] -During the last three or four years, while the home price has been $28, -the price for export has been $5 to $12 below the home price, and during -the period 1902–1904 the difference has been $8 to $12. The Great -Northern and the Northern Pacific pay $28 a ton for rails, while their -competitor, the Canadian Pacific, buys the same rails for $20 a ton and -sometimes for $18 a ton.[337] Even the United States Government could -not get fair prices at home for the materials and supplies needed for -the Panama Canal project, and found it necessary to open the competition -to foreign bids. Even if it were determined to use only American goods -they could be bought more cheaply abroad than at home. Matters are -arranged so that goods are hauled across the ocean to Europe and then -hauled back and sold here at lower prices than they could be bought for -at the factory here for home use. If the railways and the steamboats and -the allied interests make money they do not care how much industrial -power is wasted. - -An investigation last year brought out the interesting fact that the -cheapest way sometimes to get goods from Chicago to San Francisco is to -ship from Chicago across the Pacific Ocean and then back to California. -The Interstate Commission says: “The complainant desired to ship the -machinery for a stamp mill from Chicago to China. Being interested in a -line of steamships between San Francisco and the East, his intention was -to make shipment to San Francisco and thus to destination by his own -line. Upon investigation, however, he learned that the rate from Chicago -to San Francisco was $1.25 per hundred lbs., while from Chicago to -Shanghai it was 90 cents per hundred lbs. The rate at that time from -Shanghai to San Francisco was 20 cents per hundred lbs. Had he desired -to lay down his stamp mill at San Francisco, he could have shipped it to -Shanghai, and from Shanghai back for 15 cents per hundred lbs. less than -the direct rate from Chicago to San Francisco.”[338] - -President Tuttle of the Boston and Maine tells of a cargo of flour -carried from the Pacific Coast around the Horn to England and then back -to Boston to be delivered to a starch factory at Watertown. “A sailing -vessel had gone to the Pacific coast with goods from Europe. There was -some lack of a cargo for return. They found a lot of soft wheat flour -there with which they loaded that vessel and carried it to Liverpool and -put it in storage. Then the owner of the flour began to hunt around the -world for a market, and found that within ten miles of Boston he could -sell that flour to a starch factory at a profit and pay for the -additional land haul of 10 miles.” - -“THE CHAIRMAN. It first went to Liverpool? - -“MR. TUTTLE. Went from San Francisco around the Horn to Liverpool and -then across the Atlantic back to Boston. In order to carry that flour to -Watertown, across the continent by rail, the railroads would have had to -make a rate which was practically nothing, because the transportation by -water is so extremely low that you cannot put the railway rate against -it and make a profit. The cost of carriage of a ton of freight by a -large steamer is so low that there is hardly any way to figure it. We -have to meet those conditions. That is what we are doing.”[339] - -The low rates on imports enable European manufacturers to ship their -goods to our western States more cheaply than our own eastern -manufacturers can send their goods to the West. Rates on imports are -frequently only a third of rates on domestic goods over the same -lines,[340] and sometimes the difference is greater yet. And it is not -confined to manufacturers. Thousands of acres of Kaolin mines from which -the finest chinaware can be made are idle in the region round Macon, -Ga., because clay can be shipped from England to Ohio factories cheaper -than it can go from Macon to Ohio. Several mining companies have had to -quit business because of foreign competition favored by low import -freight rates. - -Both export and import reductions lead to serious discriminations, not -merely as between our people and foreigners, but among our cities and -shippers. - -Unscrupulous shippers take advantage of the export rates in the domestic -trade, billing their freight on the export basis. Grain, for example, is -“billed for export” to Chicago or New York or other centre; and then -“the destination is changed in transit,” that is, after the grain or -other shipment gets to Chicago or New York, the shipper stops it there, -or orders it to Albany or Worcester or otherwise changes the -destination.[341] The same thing is done in the packing-house trade to -New York. The Vanderbilt traffic manager says: “Our domestic business -does not amount to anything.” About all the dressed beef that goes east -appears to be for export. When asked how the eastern territory got its -dressed beef, the manager said: “I could not give you any information on -that point.”[342] - -Such results are worse even than the difference between the export rate -on wheat and on flour, which tends to discourage the milling of wheat in -this country and throw into the hands of foreign millers business that -belongs to our millers. Worse than this or than the discouragement of -home manufactures by cut rates on imports, is the discrimination in the -export and import rates in respect to different ports. - -“One of the most remarkable trade movements of recent times is the -growth of the Gulf ports at the expense of New York and other Atlantic -ports. New Orleans has become the second largest grain-exporting port, -and gives promise of becoming the first. Galveston’s export and import -trade is rapidly increasing. In 1897 New York handled 77.9 percent of -the wheat, corn, and flour exports, and in 1904 her share had dwindled -to 36.9 percent. The Gulf ports have made corresponding or greater -increases. Natural advantages, including proximity to supply centres, -and the extension of port facilities for handling cargoes, have had -something to do with this increase of exports from the Gulf ports, but -the chief factor has been the differentials made by railroads connecting -with those ports. So alarming is the decrease of commerce through the -port of New York that an effort is being made to secure a legislative -investigation of the subject.”[343] The Chairman of the Committee on -Foreign Commerce for the Baltimore Chamber of Commerce says: “We are -gradually shrivelling up because of discrimination in freight rates. -Ever since December last, 1904, when the grain rates were advanced 1 to -1½ cents on export grain and 3 cents for domestic delivery, business in -this city has almost come to a standstill.... The Gulf ports are getting -it all, and while millions of bushels of corn were accustomed to arrive -here, after the December marketing from the Southwest, not one has been -received since the first of the year. Firms formerly engaged in the -exporting business in this city have pulled up stakes and have gone to -New York in search of better railroad opportunities.... The Chamber of -Commerce here is meeting daily to devise a means of surmounting the -danger which now threatens the export business of Baltimore.” - -The Government is forbidden to favor one port more than another, but the -railroads are left free with a power of favoritism greater than any the -Government possesses, and they are using the power as we have seen. -Section 9, of Article 1, of the Federal Constitution says: “No -preference shall be given by any regulation of commerce in revenue to -ports of one State over those of another.” - -Congress itself cannot establish any differential that would give one -port of the United States an advantage over another port. But what the -Constitution forbids Congress to do the railroads can do and have done, -by manipulating the rates on exports and imports, thereby making -business flow to whatever ports they please. - - - - - CHAPTER XXX. - SUMMARY OF METHODS AND RESULTS. - - -We have dug down through the geologic epochs of discrimination, and have -examined the living varieties. The predominant forms have changed, but -none of the species we find among the fossils of the earlier strata have -become extinct, though some of them, ticket scalping and the direct -rebate for instance, are much less in evidence than formerly. - -Passes[344] and other personal discriminations[345] still prevail, and -the assortment of favoritisms in freight traffic is larger than ever. -Here is a list of more than 60 forms of discrimination that are now in -use, many of them constantly and others as occasion may demand:— - - Passes. - - Ticket brokerage. - - Private passenger-coaches. - - Gifts of stock. - - Tips on the market. - - Secret rates. - - Rebates. - - Elevator and compress fees. - - Commissions to favored shippers as though they were agents of the - company, to secure for it their own freight. - - Salaries to favored persons as nominal employees, or fees for nominal - services. - - High salaries or commissions to real traffic agents who divide with - favored shippers. - - Cash contributions to shippers in the guise of payments to “encourage - new industries.” - - Paying “transfer allowances” to some shippers for carting their own - goods. - - The “strawman” system. - - “Expense bill” abuses. - - Loans to dealers and shippers or consignees to increase shipments or - divert them from other roads. - - Combination rates of which informed shippers may take advantage. - - Making the published rate cover the price of the goods as well as the - freight for some shippers. - - Flying rates, or “midnight tariffs.” - - Terminal or private-railway abuses—unfair division of rates, etc. - - Private-car abuses—big mileage rates, excessive icing charges, - exclusive contracts, etc. - - Espionage, giving some shippers inside information of the business of - other shippers. - - Maintaining or paying for the maintenance of tracks or other property - belonging to the shipper. - - The long and short haul abuse. - - Unjust differences in the rates accorded different places to favor - certain localities, or individuals who have business interests - located there. - - Unduly low rates to “competitive points” in general, as compared with - local rates, building the cities at the expense of the country. - - Unfair classification. - - Use of different classification for local and for through traffic. - - Laxity of inspection in case of special shippers, enabling them to get - low rates on mixed goods in carloads billed at the rate appropriate - to the lowest product in the mass. - - Intentional mistakes in printing tariffs, a few copies being run off - for favored shippers, after which the mistakes are discovered and - corrected for the ordinary shipper and the Interstate Commission. - - Fictitious entries in the “prepaid” column of the freight bill. - - Instructions to agents to deduct a certain percentage from the face of - the bill when collecting for specified shippers. - - Payment of fictitious claims for damage, delay, or overcharge. - - Making a low joint rate (or single rate either) on a given commodity - when shipped for a purpose confined to a few shippers, while other - shippers using the same commodity for other purposes have to pay - much higher rates. - - False billing,— - - false weight—underbilling, - false number—billing a larger number of packages than are sent and - claiming pay for the difference, - false description—putting goods in a lower class than the one to - which they belong, - false destination—billing for export and changing destination in - transit. - - Not billing at all—carrying goods free. - - Excessive difference in the rates for large and small shipments. - - Unfair discrimination between shipments in different form—barrels and - tanks for example. - - Charging more when the freight is loaded in one than when it is loaded - in another way practically identical so far as the railway is - concerned. - - Favoritism in switching charges, demurrage, etc. - - Direct overcharges, causing loss through delay and expensive - litigation, or through excessive payments. - - Withholding cars. - - Delay in carriage and delivery. - - Refusal to deliver at a convenient place. - - Difference in time allowed for unloading. - - Refusing privileges accorded others,— - - milling-in-transit, - division of rates, - credit, or payment of freight at destination, - station and track facilities, - special speed. - - Selling or leasing terminal or other rights or properties to favored - shippers so as to exclude others absolutely. - - Refusing shipments to or from certain persons or certain places. - - Failing to run advertised trains or taking other special action in - order to interfere with plans of an opponent, _e. g._, to keep - people from going to mass meeting at which he is to speak. - - Unfair difference in the service accorded different places. - - Cutting off part or whole of a customary service. - - Side-tracking cities and towns, or depriving them entirely of railroad - facilities. - - Arranging stop-overs so as to drive business to other cities. - - Arbitrary routing of shipments. - - Payments for routing. - - Guarantee by railroad against loss upon shipments over its line. - - Unreasonable differences in the commodity rates on different articles. - - Prohibitive rates on special commodities or special shipments. - - Unreasonable differences between the rates on the same goods going and - coming between the same places. - - Special rates on goods for export. - - Special rates on imports. - -Even this long list does not cover the whole field. The cases on record -do not exhaust the possibilities of discriminations. The following bit -of testimony shows how easy it is to invent new ways of passing railroad -moneys into the treasuries of favored shippers,—ways that would not be -interfered with by any law short of public control of the purchase and -sale of merchandise. Mr. Gavin, the agent of the Vandalia line, was -being examined by the Interstate Commerce Commission in March, 1901. On -the question as to how business could be got by giving advantages to -shippers without cutting rates Mr. Gavin said: “There is nothing to -prevent my going down to the packing-house and paying $10 apiece for -hams if I wanted to; if I did not want to cut a rate, there is generally -a way out of the hole.” - -“COMMISSIONER CLEMENTS. A good many ways; and it is your belief that a -good many of these have been practised, is it not? - -“MR. GAVIN. I do not know. I would not like to say. - -“COMMISSIONER PROUTY. If you bought hams enough at $10 apiece the -packing-house could give you the traffic at full rates? - -“MR. GAVIN. Yes, sir. - -“COMMISSIONER PROUTY. Have you ever known that to be done? - -“MR. GAVIN. No, sir; but I say there are lots of ways out of the woods.” - -Almost everybody agrees, in public, that railway favoritism ought to be -stopped.[346] It disturbs the fair distribution of wealth, undermines -industrial justice, business morals, and political honesty; builds -monopoly; wastes resources, and causes enormous loss to the railroads as -well as to the persons and places that are discriminated against. - -Railway discrimination breaks down the equality of opportunity that is -one of the fundamental rights recognized in every country. It tends to -separate success from merit and industry, and make it depend on fraud -and favoritism. Judge Grosscup touched a vital point when he said to the -Boston Economic Club, March 11, 1905: “Any difference in rates permitted -by law, even though based on the bulk of the tonnage handled, is a -direct and effective blow, by the nation itself, at the principle that -every man, whatever his present business size, shall be given equal -conditions and equal opportunity.... In this country there is no such -thing as size to a business man. The man of little size expects to get -big. He has a right to get big. He has a right to have the atmosphere of -equal opportunity and equal conditions in which to grow, and excepting, -of course, some unit, such as a ton or a car, the charge ought to be the -same for the little as for the big shipper.”[347] - -The railways are public highways, they exercise governmental powers and -fulfil governmental functions, and it is an atrocious misuse of social -power to employ these so as to give special advantages to a few members -of the community. The Interstate Commission says: “The railroad is -justly regarded as a public facility which every person may enjoy at -pleasure, a common right to which all are admitted and from which none -can be excluded. The essence of this right is equality, and its -enjoyment can be complete only when it is secured on like conditions by -all who desire its benefits. The railroad exists by virtue of authority -proceeding from the State, and thus differs in its essential nature from -every form of private enterprise. The carrier is invested with -extraordinary powers which are delegated by the sovereign, and thereby -performs a governmental function. The favoritism, partiality, and -exactions which the law was designed to prevent resulted in large -measure from a general misapprehension of the nature of transportation, -and its vital relation to commercial and industrial progress. So far -from being a private possession, it differs from every species of -property, and is in no sense a commodity. Its office is peculiar, for it -is essentially public. The railroad, therefore, can rightfully do -nothing which the State itself might not do if it performed this public -service through its own agents, instead of delegating it to corporations -which it has created. The large shipper is entitled to no advantage over -his smaller rival in respect to rates or accommodations, for the -compensation exacted in every case should be measured by the same -standard. To allow any exceptions to this fundamental rule is to subvert -the principle upon which free institutions depend, and substitute -arbitrary caprice for equality of right.”[348] - -The losses to the railroads cannot be estimated accurately, but we have -some interesting hints. Franklin B. Gowan said in 1888: “The gross -receipts of the railroads of this country, in round numbers, are eight -hundred millions of dollars per annum, and I verily and honestly believe -that one hundred millions of dollars annually are taken out of the -pockets of the people of this country by unjust railway discrimination, -and turned over to this privileged class—and this is equal to a tax of -two dollars per head paid by the people for the sake of building up the -new aristocracy of wealth that in this free country arrogate to -themselves the position of the nobility of the older countries. It is -utterly impossible that there can be any success attending a monopoly of -natural products without the aid of the unjust discrimination of -railroad companies. And only when such discrimination ceases will all -people be placed on terms of equality.” - -If the losses were more than $100,000,000 a year when the total income -of the railroads was $800,000,000 a year, the losses now with an income -of about $2,000,000,000 a year are probably, at least, $200,000,000 a -year, allowing for all the saving that is claimed to have resulted from -the Elkins Act. A railroad officer who says his road has constantly -disregarded the Interstate Commerce Law declares that in more than one -year the net revenues of his company “would have been increased by more -than 15 percent if no rebates had been paid to favored customers.” The -hundreds of millions which the transportation systems of this country -have, during the period from 1887 to 1905, earned and repaid to the men -who controlled the large industrial products of the country—coal, iron, -grain, salt, sugar, oil, provisions, and lumber—belonged equitably to -employees and stockholders (or to the people). “And the history of this -period may be repeated as often as the whim or the interest of a traffic -manager or owning director prompts or requires.”[349] - -The losses through the disturbance of business, interference with the -relation between energy and industry on one side and success on the -other, depression of localities, and ruin of individuals, are beyond -computation. - -Most shippers would be glad to do away with discrimination if they could -be sure that there would be a square deal all round, fair play, and no -concessions to their rivals. And most railroad men would be glad to be -protected against the discriminations that are forced upon them by the -shippers, and by competition among the roads, if they could be sure that -the published rates would really be adhered to by their competitors. - -Law after law has been passed to prevent unjust discriminations, and yet -in spite of the contrary statements of some witnesses,[350] it is -perfectly clear that they have not ceased, and that comparatively little -has been done in that direction. - -Railroad men in high position declare that discriminations always will -exist. President Ripley of the Santa Fe says: “The situation is -practically remediless. I think it will always be.”[351] President J. J. -Hill of the Great Northern says: “You may say there shall be no -discrimination. But that condition will never exist. If there were no -discrimination the people would come down here in great throngs and ask -you to authorize discrimination. We have to discriminate.”[352] When I -asked President Fish of the Illinois Central how discriminations could -be stopped he said: “Tell me how to enforce the Ten Commandments and -I’ll tell you how to stop discriminations.” Another railroad president, -whose name I am not at liberty to give, said in reply to the same -question: “Discriminations will never cease so long as there is -competition among the railroads, or political favors and protection can -be secured thereby, or railways and railway men are interested in other -businesses than transportation.” President Hill also recognizes the -factor of special self-interest in addition to the influence of -competition. He says: “I think that every railway officer in this -country should be disqualified from having any interest, directly or -indirectly, in any large producer of traffic, whether it is a coal mine -or a factory or a mill or anything else, on a line of railway where he -is on the pay roll.” - -“SENATOR CLAPP. And the reason for that suggestion is what? - -“MR. HILL. That he cannot be fair to the other fellow and punish -himself. - -“SENATOR CLAPP. And the opportunity is such that it cannot be detected -and prevented? - -“MR. HILL. It is so easy, if there is a great demand for coal in one -direction, or for some commodity in one place, for him to help one -fellow and forget the other.”[353] - -One of the gravest dangers lies in the fact that men who are largely -interested in the great industrial corporations control certain railway -lines and have large influence with many others. The interlocking of -railroad interests with other industrial interests is a cause of -discrimination second only to the pressure of railroad competition for -traffic that is used by shippers as a means of extorting the favors they -desire. - -A railroad executive writing in _The Outlook_ for July 1, 1905 says: -“Notwithstanding the violations of the Interstate Commerce Law have been -open and notorious, and indictments have been numerous and prosecutions -not infrequent, no railroad officer has ever been incarcerated. For my -own part, the penal liability for such disobedience has never in any -wise deterred my purpose to secure my company’s share of tonnage by -whatever means competitors employed. I have the reputation of a -law-abiding citizen in my home city—am well known—of good personal -character. I flatter myself that a jury could not be found which would -commit me as a felon because I directed the payment of a rebate to a -shipper—a transaction which did not inure to my financial advantage. -Could a jury be found that would exact a felon’s punishment for such men -as Mr. Stuyvesant Fish, or Mr. Secretary Paul Morton, or Mr. Marvin -Hughitt for disobeying a statute in order that the revenues of the -company by which he was employed might not be decimated?” He had -previously said that the revenues of the railroads have been decimated -by hundreds of millions through the granting of discriminations, but he -argues that the revenues of any particular railroad that should refuse -concessions would be decimated still more largely. The truth of this -contention is strongly illustrated by the following incident. Some years -ago Judge Taft (now Secretary of War), as receiver for the “Cloverleaf” -Railroad from Toledo to St. Louis, appointed Mr. Samuel Hunt of -Cincinnati, a well-known and successful railroad manager, and required -him to comply strictly with the Interstate Law. In doing this Mr. Hunt -was obliged “to disregard many outstanding rebate obligations of his -predecessor in the receivership, thereby giving offence to many patrons -of the road and their friends, the result of which was a decrease of the -gross earnings of the road within twenty months of more than $340,000.” -The sacrifice of hundreds of thousands of dollars, the loss of the -good-will of shippers, the harsh criticism of competitors, and broken -health were the results of Mr. Hunt’s earnest efforts to obey the law. -M. E. Ingalls, President of the Big Four, said a few years ago to a -convention of State railroad commissioners: “Men managing large -corporations, who would trust their opponent with their pocket-book with -untold thousands in it will hardly trust his agreement for the -maintenance of tariffs while they are in the room together. - -“The railway official who desires to be honest sees traffic leave his -line. - -“The result is these men in despair are driven to do just what their -opponents are doing. They become lawbreakers themselves. - -“No one is going to try and send his competitor to prison. Besides, -there is the fear that he himself may have committed transgressions -which in turn will be discovered and punishment inflicted upon himself. - -“Unless some change is made, the small shippers of the country will be -extinguished, and a few men of large capital will control the entire -merchandise business. And railways ... will be seized upon by large -capitalists and combined into one monstrous company.” - - - - - CHAPTER XXXI. - DIFFICULTIES OF ABOLISHING DISCRIMINATION. - - -It is difficult to enforce the law against discrimination, because of -the strong interests that call for it, the secrecy of many of its forms, -the reluctance of shippers to make complaints for fear of persecution, -and the resistance offered by railway officers to efforts to get at the -facts, leaving the country during an investigation, refusing to answer -truthfully on the witness stand, burning books and papers that might -reveal the facts to courts or other investigating bodies or enable the -officers to refresh their memories so as to be able to answer questions. - -Often there are no records of the concessions granted favored shippers -except the memoranda in the personal note-books of the traffic managers. -Rebates or commissions are frequently paid by messenger boys sent from -the general freight office, or treasurer’s office, with the currency and -a slip of paper with some pencil marks on it, instead of sending a check -and obtaining a voucher.[354] The officers forget about the transaction -as soon as possible,—sooner than possible it seems sometimes,—or in some -other way try to prevent the Commission from getting the facts with -sufficient detail to bring suits. For example, in the “Dressed-meat” -Hearing at Kansas City, March 21, 1901, fifteen transportation men were -subpœnaed and examined without securing any important facts. The -witnesses, who occupied positions which would naturally lead one to -suppose they would know all about the matters in hand, manifested the -most persistent and remarkable ignorance, and the Commission had to go -to Chicago and try again before it got any light on the packing-house -transportation question. - -In March, 1898, the Interstate Commission investigated rebates on flour -from St. Paul, Minneapolis, and Duluth to Atlantic seaports. The -Commission had information of wide departures from the published tariff. -It says: “The inquiry was greatly hampered by the disappearance of -material witnesses before subpœnas for their attendance could be served, -the inability of several who did testify to recall transactions there of -recent date, and the evident reluctance of others to disclose any -information bearing on the subject involved. All of the railway -witnesses denied knowledge of any violation of the statute, and most of -the accounting officers testified to the effect that if rebates had been -paid they would necessarily know about them, and that their accounts did -not show any such payments. It was nevertheless fully established by the -investigation that secret concessions had been generally granted on this -traffic, and that the carriers had allowed larger rebates to some -shippers than to others.”[355] - -After the St. Paul investigation in 1898 the Commission entered on an -investigation at Portland, Ore., in respect to rates between the coast -and points on and east of the Missouri River. “It was established by the -proof that secret rates generally prevailed at Portland and common -points, and that transportation was, in effect, sold to the lowest -bidder. The lawful rates were ignored, except as they might serve as a -standard in making agreements for lower charges.... Some of the -merchants conformed to the law, but in so doing they were at a -disadvantage in competing with those who disregarded the statute; and in -many instances this disadvantage represented more than a fair profit -upon the commodities involved. Most of the merchants who admitted that -they had thus violated the law declared themselves unable to remember -who paid them the rebates, or when or upon what shipments any illegal -rate concessions had been made. Some testified that they had kept -account of the unlawful transactions, but that when they heard of this -investigation they destroyed their memoranda in order to defeat -prosecutions on account of their illegal acts. They insisted that -without these data they could give no specific testimony concerning any -of the transactions.”[356] - -The Commission found in these and other investigations that “unlawful -rebates have been and are being paid by a great number of carriers,” -but they could not get the specific evidence necessary for -prosecutions.[357] - -In its Report for 1904, p. 104, the Commission says: “Railroad officials -often seem to think that it is their duty to withhold facts, on account -of some real or supposed liability to make disclosures that will impair -the railroad’s rights or interests in future judicial proceedings. Some -companies seem to have adopted a settled policy to give the least -possible information, at all times, on any and all subjects.” - -Discussing the continuance of the payment of rebates and the reasons the -Interstate Commission has not been able to stop the practice, -Commissioner Prouty says:[358] “When I first came onto the Interstate -Commerce Commission (1897), I used to see continually in the newspapers -statements like these: ‘Rates sadly demoralized,’ ‘agreement between -railroad officers to restore rates,’ and everything of that sort. I said -to my associates, ‘Gentlemen, this thing will not do; we must stop the -payment of rebates.’ They said, ‘How are you going to stop the payment -of the rebates?’ I said, ‘We are going to call these gentlemen before -us; we are going to put them under oath, and we are going to make them -admit they paid these rebates, and we are going to use the evidence -which we obtain to convict them.’ We employed Mr. Day, who is now with -the Department of Justice. The rates which have been almost uniformly -demoralized have been the grain rates from Chicago to the Atlantic -seaboard. We called in the chief traffic officials of all these lines -and we put them under oath. Now, I would ask these gentlemen, ‘Are you -the chief traffic official of this road?’ ‘I am.’ ‘Would you know it if -a rebate was paid?’ ‘I would.’ ‘Are any rebates paid on your road?’ -‘There are none.’ ‘The rates are absolutely maintained?’ ‘They are.’ - -“Well, every traffic official who came before us in that capacity—and we -prosecuted it for three days at Chicago—testified that rates were -absolutely maintained.” - -“SENATOR NEWLANDS. How many did you have before you? - -“MR. PROUTY. We had the official of every trunk line leading from -Chicago to New York. They all testified the rates were absolutely -maintained from Chicago to New York. Two years after that I examined the -chief traffic officer of the Baltimore and Ohio, and of the New York -Central—do not think it was the same man in either case—and of the other -lines, and they all testified that rates had never been maintained. I -would like to know what I could do as Interstate Commerce Commissioner -to make those gentlemen admit that they paid rebates, and as they would -not tell that they paid rebates, I would be glad to know how I could -obtain evidence that they did. - -“Having gotten through, Senator, with the lines between Chicago and New -York, we said perhaps this is not a fair sample. Now, we will go up in -the Northwest, and we will take the lines that carry flour from -Minneapolis east. We instituted another investigation, and we put the -railroad and the traffic men of the millers on the stand, and they all -swore without exception that the rates were absolutely maintained. One -traffic official there, when it got a little bit too hot for him, became -sick enough so that he threw up his dinner, but he did not throw up the -truth. We could not get the admission from any man there that they had -ever paid a rebate. We said, ‘This does for the East; now let us go -West.’ So we went into the Pacific Coast, to Portland, Oregon, and went -over exactly the same performance there. We made one man admit that he -burned up his books rather than present them to the Commission, but we -could obtain no admission of the payment of any rebate there.” - -But the St. Louis Southwestern Traffic Committee or Traffic Association -employed a young man by the name of Camden and instructed him to lay -before the Interstate Commission any evidence he got of the payment of -rebates. “He had not been there more than two or three weeks before he -found some evidence to the effect that the Baltimore and Ohio Railroad -had been departing from the published rate, and he came up to Washington -and laid that evidence before the Interstate Commerce Commission, and we -began proceedings against the Baltimore and Ohio Railroad. That was the -first instance from the time I came onto the Commission that we could -obtain any evidence of a departure from the published rate. We directed -the Baltimore and Ohio road to file a statement showing what shipments -they had made during a certain time, and the rate of freight paid them -for the transportation. Thereupon they filed a statement showing a great -many departures from the published rate. At the same time they sent to -the Interstate Commerce Commission a letter. They said in that letter in -substance, that the roads in the territory in which they operated had -habitually departed from the published rate; that was after they had -sworn they maintained the published rate in that territory: ‘Now, for -us, the receivers of the Baltimore and Ohio, we have gotten through, but -we cannot maintain the rate unless our competitors maintain the rate. We -propose from this time on to maintain the rate ourselves, and we propose -to see that they maintain it; but in order that we may do that, we ask -you to call a conference of the railroad presidents in trunk-line -territory.’ - -“Now the Commission did, acting on that suggestion, invite every -president of the trunk-line railroads to come to Washington. They came, -all of them. Mr. Calloway was there for the New York Central; Mr. -Thompson was there for the Pennsylvania Railroad; Mr. Murray and Mr. -Cowan came there for the Baltimore and Ohio; Mr. Harris came from the -Philadelphia and Reading, and Mr. Walters was there for the Lehigh -Valley. I do not remember them all, but they all came there. Those -gentlemen all said: ‘It is true; we have departed from the published -rate. We did not like to do it, but we did. But we have gotten through. -We shall depart from the published rate no more. If you gentlemen will -only let bygones be bygones, we assure you that in the future there will -be no discrimination under this law.’ - -“Well, I expect, perhaps, that we ought to have said to them, ‘You are a -pack of consummate liars; we do not believe anything you say, and we -will prosecute you if we can. But we did not think so; we believed -exactly what they said, and we told them we did, and they went home, and -no prosecutions were begun on the facts which we had against the -Baltimore and Ohio. Then we called, at the request of certain persons in -the West, the presidents of all those lines, and they all came. Mr. -Marvin Hughitt came; Mr. Bird, of the Milwaukee line, came; in all, 30 -or 40; and we had the same sort of an experience meeting again. They all -said: ‘We have sinned, but we have got through. Now, gentlemen, just -help us to maintain the Act to regulate commerce.’ We said: ‘We will do -it.’ And they went home. - -“Now, I do not wish to pass any criticism at all on these gentlemen. I -have not the slightest doubt that they meant precisely what they said. I -think I know something about the difficulties under which they labored; -but they did not maintain those rates for a month, probably.... There -has not been a time since I have been an Interstate Commerce -Commissioner, when, if the traffic officers of the trunk lines between -Chicago and the Atlantic seaboard would have consented to tell the truth -under oath, the Interstate Commerce Commission would not have stopped -the payment of rebates. I have been able to discover no way in which to -make them tell the truth.” - -“SENATOR NEWLANDS. In regard to the future, will it not be possible for -them to commence again this system of rebates? - -“MR. PROUTY. I think they pay rebates now. - -“SENATOR NEWLANDS. You think they do? - -“MR. PROUTY. I think they do.” - -Victor Morawetz, Chairman of the Executive Committee of the Santa Fe, -was asked if it would not be wise to require the traffic manager of each -railroad, the auditor, and the president, to report every three months -on all existing contracts, and that there had been no violations of law, -no abuses, so far as they knew, and that they had made diligent inquiry -to ascertain if there had been. Morawetz replied that if such a law were -passed some men would perjure themselves every three months, and others -who were thoroughly honest would simply not take office.[359] - -Not all the railway officers refuse to tell the truth. There is every -reason to believe that Paul Morton and Mr. Biddle of the Santa Fe, for -example, spoke the truth in their testimony before the Commission. But -the evidence seems to be that the habit of truth telling is not very -prevalent. And when the railroad officers determine to prevent publicity -either by falsehood or by silence they take care to eliminate -documentary evidence that might be used to checkmate them. They destroy -their records so that they will be less liable to know anything about -the rebates they have paid, and to make it as hard as possible for the -Interstate Commerce Commission to get at the facts. - -The Commission is examining Mr. McCabe, freight traffic manager of the -Pennsylvania lines west of Pittsburg. - -“COMMISSIONER CLEMENTS. Are you in the habit of destroying records not a -year old? - -“MR. MCCABE. Sometimes. - -“COMMISSIONER CLEMENTS. But generally? - -“MR. MCCABE. If they are not essential or it is not important that they -should be kept. - -“COMMISSIONER CLEMENTS. What would be the particular reason for -destroying these papers and records? - -“MR. MCCABE. Possibly because we thought you might want them laid before -you sometime. - -“COMMISSIONER CLEMENTS. You destroyed the evidence of the illegal -transaction? - -“MR. MCCABE. Yes, sir, that is right.”[360] - -The general traffic manager of the Michigan Central said that papers -relating to refunds, etc., “were destroyed because their usefulness for -our purposes had gone and passed.” - -“COMMISSIONER CLEMENTS. Do you destroy your other papers as recent as -these? - -“MR. MITCHELL. Not as a rule, sir. - -“COMMISSIONER CLEMENTS. Well, I will ask you again if you destroy these -papers in order to destroy the evidence of the transactions to which -they relate? - -“MR. MITCHELL. Certainly we should dislike very much to have those -papers exposed to the general public. - -“COMMISSIONER CLEMENTS. Why? - -“MR. MITCHELL. It would be an unwise thing from a railroad standpoint to -have such matters going about. - -“COMMISSIONER CLEMENTS. Why would it be unwise to disclose the method of -procedure? - -“MR. MITCHELL. Well, on account of the Interstate Law. - -“COMMISSIONER CLEMENTS. Because it violates the law, yes. That is what -you really mean, is it not? - -“MR. MITCHELL. I suppose that is it, sir.”[361] - -The Rock Island freight traffic manager also testified to the -destruction of papers showing rebates or concessions. - -“COMMISSIONER CLEMENTS. Why are they destroyed? - -“MR. JOHNSON. Simply for the purpose of destroying any evidence there -may be. - -“COMMISSIONER CLEMENTS. All the papers you know about or entries that -you are familiar with are destroyed? - -“MR. JOHNSON. I understand they are all destroyed. - -“COMMISSIONER CLEMENTS. Have you any recent ones? - -“MR. JOHNSON. I do not think they are more than thirty days old. - -“COMMISSIONER CLEMENTS. You think that all up to within thirty days are -destroyed? - -“MR. JOHNSON. That is the rule or custom.”[362] - -The shippers who receive rebates, etc., adopt similar measures to keep -their modest affairs from the public. In April, 1904, the newspapers -reported that the Interstate Commerce Commission was going to Boston to -investigate rebates and private car-line abuses. The office force of the -Armour office at Boston was immediately set to work packing into barrels -all letters and records that might show a combination or understanding -among the houses or with the railroads, or other inconvenient matters, -and all these dangerous documents were incontinently fed to the -furnaces. - -On the other hand, shippers who are not of the favored class are afraid -to complain for fear of persecution by delay of freight, overcharges, -prolonged litigation of every difference or dispute, and probable -intensification in some form of the discrimination in favor of their -competitors. The Oregon Commission says: “The shipper preferred to -tamely submit to the injustice put upon him through discriminations -against him or unreasonable and extortionate charges and exactions for -transportation facilities, than to hazard the utter ruin of his business -by provoking the animosities of managers if he carried his grievances -into the courts in order to have his rights determined and enforced.... -Besides, if the shipper went to court with his grievances he was -confronted by powerful and wealthy corporations who contested, with the -aid of the ablest counsel money could procure, every inch of the ground -in the controversy, thus making each contest between the individual -shipper and these corporations an unequal one in proportion to the -ability of the shipper personally to press his case as compared with the -financial ability of the corporations.”[363] In a large majority of -cases the loss sustained by the individual through favoritism or -extortion is less than the probable injury resulting from litigation -with powerful corporations employing the ablest counsel, contesting -every inch of ground, defeating or delaying redress by every possible -means, and squeezing the plaintiff meanwhile perhaps with a grip upon -his business that means death to his prosperity, so that the shipper -thinks it better to bear the ills he has than fly to others to which he -has not been introduced. - - - - - CHAPTER XXXII. - REMEDIES. - - -Coming now to consider how railway favoritism may be abolished, we find -a wide divergence among railroad men, law-makers, and other authorities. -Some say that discriminations cannot be stopped,[364] others declare -that they have been stopped,[365] others that present laws are ample and -all that is needed is their enforcement,[366] while others state that -present remedies are insufficient,[367] and suggest further legislation -making the long and short haul clause binding except so far as relief is -granted by order of the Interstate Commission;[368] extending the power -of the Commission to private car-lines, fast freight and express -companies, and water carriers;[369] giving it, or a national court, -authority to fix reasonable rates in place of those which upon complaint -and investigation it finds unreasonable,[370] and to declare that a rate -resulting from any rebate or concession to favored shippers shall be -open to all shippers;[371] specifically enacting that the payments for -private cars and for switching shall not be greater than similar -payments made by the railroads to each other;[372] legalizing -combination and pooling;[373] forbidding railroad men to have any -interest in any large producer of traffic on their lines;[374] requiring -roads to make through routes and through rates with all connecting -lines;[375] protecting our railroads against the competition of Canadian -roads; providing for the public inspection of railroad books and -accounts;[376] requiring that all railroad monies shall be received and -paid out by Government officers;[377] or otherwise securing direct -representation of the public in the management;[378] and establishing a -sliding scale of taxation to apply in inverse ratio to the fairness and -openness of the railway administration, so that a railroad opening its -books freely to inspection and treating all fairly and impartially would -pay low taxes, while a railroad acting on opposite principles would be -taxed at a high rate.[379] The enactment of the Commerce Act by all the -States and territories so that the State and Federal laws may be in -harmony, and State and national commissions can co-operate in shutting -out discrimination from local and through traffic,[380] is also -suggested. Another view is that only public ownership of the railroads -under thorough civil service regulations can eliminate either the -motives or the power to discriminate,—the antagonism of public and -private interests being the tap-root of discrimination, it can be fully -overcome only by pulling up the root and making railroad managers the -agents of the public to run the roads for the public service instead of -being the agents of private interests to operate the roads for private -profit. - -In his message of December, 1904, President Roosevelt urged Congress to -give the Interstate Commission power “to revise rates and regulations, -the revised rate to go into effect at once and to stay in effect, unless -and until the court of review reverses it.” He laid especial emphasis -upon the necessity of stopping rebates and unjust discriminations, -saying: “Above all else, we must strive to keep the highways of commerce -open to all on equal terms; and to do this it is necessary to put a -complete stop to all rebates.” In his message of December, 1905, the -President alters his recommendation to the granting of power to fix a -“maximum reasonable rate, the decision to go into effect within a -reasonable time and to obtain from thence onward, subject to review by -the courts.” In case a “favorite shipper is given too low a rate,” the -President says, “the Commission would have the right to fix this already -established minimum rate as the maximum; and it would need only one or -two such decisions by the Commission to cure railroad companies of the -practice of giving improper minimum rates.” (See below, recommendations -of the New York Board of Trade, from which, perhaps, the President took -this suggestion.) - -The President says the law should make it clear that unfair commissions -and fictitious damages, free passes, reduced passenger rates and -payments of brokerage, are illegal; and that it might be wise “to confer -on the Government the right of civil action against the beneficiary of a -rebate for at least twice the value of the rebate; this would help stop -what is really blackmail. Elevator allowances should also be stopped. - -“All private car-lines, industrial roads, refrigerator charges, and the -like should be expressly put under the supervision of the Interstate -Commission or some similar body.... Neither private cars nor industrial -railroads, nor spur-tracks should be utilized as devices for securing -preferential rates. A rebate in icing charges or in mileage or in a -division of the rate for refrigerating charges is just as pernicious as -a rebate in any other way.... No lower rate should apply on goods -imported than actually obtains on domestic goods from the American -seaboard to destination except in cases where water competition is the -controlling influence. - -“There should be publicity of the accounts of common carriers.... Books -or memoranda should be open to the inspection of the Government. - -“The best possible regulation of rates would, of course, be that -regulation secured by honest agreement among the railroads themselves to -carry out the law.... The power vested in the Government to put a stop -to agreements to the detriment of the public should, in my judgment, be -accompanied by power to permit, under specified conditions and careful -supervision, agreements clearly in the interest of the public.... But -the vitally important power is the power to fix a given maximum rate, -which, after the lapse of a reasonable time, goes into full effect, -subject to review by the courts.” - -The President further says: “I urge upon the Congress the need of -providing for expeditious action.... The history of the cases litigated -under the present commerce act shows that its efficacy has been to a -great degree destroyed by the weapon of delay, almost the most -formidable weapon in the hands of those whose purpose it is to violate -the law.” - -A summary of the principal provisions in some of the rate bills that -have been brought before Congress will illustrate the various methods -proposed for the better control of railroads. The Dolliver Bill provides -that, when the Interstate Commerce Commission, after full hearing upon -complaint, is of the opinion that a rate is unjust, unreasonable, or -unduly discriminatory, it shall fix a just and reasonable maximum rate -to go into effect 30 days after notice. The power applies to joint -rates, fares, and charges, as well as to those within a railroad system. -Broad provision is also made to cover the fixing of mileage rates, car -rentals, etc. The Commission may order a carrier to cease and desist -from any regulation and practice found to be unjust, unreasonable, or -unduly discriminatory. All orders are to go into effect 30 days after -notice unless the Commission extends the time to 60 days, or the order -has been suspended or modified either by the Commission or by decree of -a competent court. A penalty of $5,000 for each day an order is -disobeyed, and for each separate offence, is provided for against any -carrier, officer, representative, or agent who knowingly fails or -neglects to obey any order as aforesaid; and the Commission may also -apply to the Circuit Court for injunction, or other proper process, to -compel obedience. Appeal may be taken to the Supreme Court. Railroads -must give 10 days’ public notice of advances in rates, and 3 days’ -notice of reductions, but the Commission may in its discretion allow -changes on less notice. - -The Foraker Bill, which is understood to be preferred by the railroads, -provides for thorough inspection of books, records, and transactions of -interstate roads by agents of the Commission; and if any rate is found -to be unjust, or unreasonable, or the carrier “is committing any -discriminations forbidden by law, whether as between shippers, places, -commodities, or otherwise, and whether affected by means of rates, -rebates, classifications, differentials, preferentials, private cars, -switching or terminal charges, elevator charges, failure to supply -shippers equally with cars, or in any other manner whatsoever, the -Commission, if the carrier will not desist upon due notice, may state -the case to the Attorney-General, who is to bring suit in the circuit -court in any district in which the act complained of, or part of it, was -committed, and the court shall summarily handle the case and enjoin such -rate or conduct as it finds unlawful or what is in excess of what is -reasonable and just.” Appeal shall lie to the Supreme Court. The Bill -authorizes agreements between railroads in respect to rates or charges -and their maintenance so long as the agreement is not in _unreasonable_ -restraint of trade. - -The provisions for inspection and combination seem to us eminently just -and useful, although the latter is strenuously opposed by many on the -ground that it authorizes and invites all the railroads of the United -States to form a huge trust and monopoly to fix rates for the whole -country. This, it is claimed by ex-Senator Chandler, “gives away all -that has been gained by the Supreme Court decisions in the cases of the -Trans-Missouri Freight Association, the Joint Traffic Association, and -the Northern Securities Company. In the Joint Traffic Association case -the nine railroad systems between New York and Chicago formed an -organization of three billions of capital, made all the rates, and -prohibited any one of the roads from lowering any rate without the -consent of the nine managers of the trust. The court destroyed this -three-billion monster. The Foraker Bill creates a fourteen-billion -monster, which will prevent any railroad anywhere in the country from -lowering any rates without the consent of the traffic managers of the -combination.” - -The plan of making the Interstate Commission a mere investigating body -with no power to fix a rate, but only to state the matter to the -Attorney-General, leaving the case to be tried on his initiative -piecemeal in the circuit courts all over the country, with appeal to the -Supreme Court, seems to us much more objectionable than the permission -to form rate agreements. Under any such form of court procedure it will -be possible for the railroads to delay final decision, fixing of a just -rate, or abolition of an unjust practice for years. - -Senator Elkins’ plan is substantially the same, his idea being to give -the Commission no real power over rates, but only the right of petition -for judicial action. And suits may be brought in the Federal courts of -every district through which the lines of the carrier in fault are -operated, with appeal on every suit to the Supreme Court of the United -States. - -Mr. Hearst has introduced a hill to bring the pipe lines carrying oil -within the Interstate Act and subject them to the jurisdiction of the -Commission; and another bill enabling the Commission to fix a rate, not -merely a maximum rate, but the actual rate that is to be used in place -of any rate found unreasonable or unjust. The order to take effect after -30 days. A special court of interstate commerce is provided for, which -shall have exclusive jurisdiction to review the orders of the -Commission, and suspend, annul, or enforce such orders, with an appeal -to the Supreme Court only on questions of constitutional law. These are -admirable measures in many ways, but are probably too radical for -passage through the Senate, in which railroad interests have so large a -representation. - -Of the other bills the most important are the Esch-Townsend Bill, the -Interstate Commission’s Bill, and the Hepburn Bill. The Esch-Townsend -Bill was intended to give the Interstate Commission full power to fix a -specific rate, either single or joint, in place of a rate found to be -unreasonable or unjust, and to establish a special court of -transportation to have exclusive original jurisdiction of all suits to -enforce or prevent the enforcement of orders issued by the Commission -under the act.[381] Last year this Bill was regarded as the most -important measure before Congress, but this year, 1906, it has been -superseded by the Hepburn Bill. - -The main points of the Commission’s Bill are: 1. That power be granted -the Commission, after full hearing, to fix the rate or practice to be -observed in the future in place of the rate or practice found by the -Commission to be unreasonable or unjust.[382] 2. That the Commission -shall have authority to prescribe the form in which railway books shall -be kept, with the right to examine such books at any and all times.[383] -3. That private car-lines, industrial railroads, import and export -rates, etc., shall be brought within the scope of the Commission’s -power. 4. That the time of notice of tariff changes shall be extended to -60 days, subject to modification in the discretion of the Commission, -and the Commission says: “We think that 60 days is not too long in the -great majority of cases, and that such length of notice would add -greatly to the stability of rates.” 5. That the Commission shall have -authority to order railways to continue through routes and joint rates -and to prescribe the divisions which the several carriers shall receive -in the distribution of those rates in case they fail to agree among -themselves. At present “carriers are under no legal obligations to -establish through routes or joint rates, and may at their pleasure -withdraw from such arrangements when they have been actually entered -into,” so that “if the Commission were to pronounce a joint rate -unreasonable and order a reduction of that rate and the carriers parties -to the rate should thereupon either cancel all joint arrangements, or, -as they might, cancel their joint rates upon the commodity in question, -the Commission would be practically powerless to enforce the reduced -rate. When it is considered that a large part of the most important -rates of this country are joint rates, it will be seen that the railways -have it in their discretion by this means to largely defeat the purpose -of the law.”[384] - -The Hepburn Bill, which is one of the strongest measures before -Congress, provides that the Interstate Commission, on complaint and -proof that any railway rates or charges, or any regulations or practices -affecting such rates are unjust, or unreasonable, unjustly -discriminatory, or unduly preferential or prejudicial, may determine and -prescribe what will, _in its judgment_,[385] be the just and reasonable -rate or charge, which shall thereafter be observed as the maximum in -such case; and what regulation or practice in respect to such -transportation is just, fair, and reasonable to be thereafter followed. -The order is to go into effect thirty days after notice to the carrier. -And any company, officer, or agent, receiver, trustee, or lessee who -knowingly fails and neglects to obey any such order is liable to a -penalty of $5,000 for each offence; and in case of a continuing -violation each day is to be deemed a separate offence. It is provided -that the Commission may establish maximum joint rates or through rates -as well as rates pertaining to a single company, and may adjust the -division of such joint rates if the companies fail to agree among -themselves. The Commission may also determine what is a reasonable -maximum charge for the use of private cars and other instrumentalities -and services, such as the switching services of terminal railways, etc. -No change is to be made in any rate except after thirty days’ notice to -the Commission, unless the Commission for good cause shown allows -changes upon shorter notice. - -The Commission may petition the Circuit Court to enforce any order the -railroads do not obey. And if on hearing “it appears that the _order_ -was _regularly made and duly served_, and that the carrier is in -disobedience of the same, the _court shall enforce_ obedience to such -order by a writ of injunction, or other proper process, mandatory or -otherwise, to restrain such carrier, its officers, agents, or -representatives, from further disobedience of such order, or to enjoin -upon it or them obedience to the same.” Appeal may be taken by either -party to the Supreme Court of the United States. The Commission may in -its discretion prescribe the forms of all accounts, records, and -memoranda to be kept by the railways, and provision is made for -inspection as follows: - -“The Commission shall at all times have access to all accounts, records, -and memoranda kept by carriers subject to this Act, and it shall be -unlawful for such carriers to keep any other accounts, records, or -memoranda than those prescribed or approved by the Commission, and it -may employ special agents or examiners, who shall have authority under -the order of the Commission to inspect and examine any and all accounts, -records, and memoranda kept by such carriers.”[386] - -We are heartily in favor of the Hepburn Bill and would be glad to see -far stronger regulative measures passed, but nothing more than a -moderate palliation of the railway evils under which we suffer must be -expected from such legislation. England with her rigid control has not -been able to stamp out railroad abuses, and the lesson of English -railroad regulation is that the subjecting of private railways to a -public control strong enough to accomplish any substantial elimination -of discrimination and extortion takes the life out of private railway -enterprise along with its evils. Even Germany, with all the power its -great government was compelled to exert, could not eliminate unjust -discrimination until it nationalized the railways, and so destroyed the -root of the evil which lies in the antagonism of interest between the -public, on the one hand, and owners of the railways and associated -industries on the other. - -It will be noted that none of the plans suggested proposes to give the -Commission any general power to initiate or originate rates, but only -the power of fixing a rate in place of one found unjust or unreasonable. -So that if the railroads obeyed the law and made no unreasonable rates -or unjust discriminations they would still have the whole rate-making -power in their own hands and the Commission would have nothing whatever -to do with fixing railroad rates. - -Let us now examine briefly the merits of the leading remedies proposed. - - - _Pooling._ - -Many railroad men have advocated the legalization of pooling and -combination as a remedy for discrimination. A number of railway -presidents and managers have told me they believed this would stop -discrimination, and that nothing else would. Others have assured me that -pooling could not stop discrimination, and even those most emphatic at -the start in the opinion that pooling is the needful remedy have -admitted on further questioning that pooling would only stop one class -of discrimination. Take for example the statement of the president of -one of the greatest railroad systems in the country who is a strong -advocate of the legalization of pooling. - -“How do you think unjust discrimination can be stopped?” I asked. - -“Give the railroads a right to pool,” he said. - -“Will pooling stop discriminations accorded to business concerns in -which the railways or their managers are interested?” - -“No.” - -“Will it stop any kind of discrimination except those that grow out of -competition among the railroads?” - -“No, I guess not.” - -To another railroad man of wide experience in inter-railway contracts, I -said: “Can any pool prevent the owners of big concerns in oil, beef, -grain, steel, etc., from getting special advantages, or abolish -discrimination in the supply of cars, quickness of carriage, division of -rates, classification, long and short haul, passes, political favors, -and other forms of favoritism originating in causes independent of -competition among the railroads?” - -“No, of course it cannot,” he replied. - -Such questions never fail to bring an admission that pooling cannot be -relied on for the whole of the work to be done in this field. In fact -only one of the six motives for discrimination[387] arises from the -competitive conditions that pooling is expected to remove. Combined -roads will make discriminative rates to create new business, to solidify -traffic, to favor places or concerns in which they are interested, to -favor persons of large influence who may aid or injure railroad -interests, or to injure persons or places that have incurred their -displeasure. All but 2 of the 64 methods of discrimination above -enumerated would find a use under a pooling system or even if -combination were complete and competition entirely done away with, as -the reader may see for himself by running over the list on pages -229–232. - -Even competitive discrimination is not eliminated by pooling, for the -railroads will not stick to the pool. A railroad president has been -known to go from the room in which he had agreed with other railroad -potentates to pool their business and maintain rates, and hunt up at -once a big shipper, offer him a cut rate, and get a contract taking the -whole of his business away from the other roads. - -Albert Fink, the greatest traffic association organizer we have had, -complained bitterly that rates agreed upon in a convention were -frequently cut before the convention had dispersed.[388] President -Tuttle of the Boston and Maine says: “I never knew a pooling arrangement -that prevented competition or was wholly satisfactory. There was never -what was considered an equitable distribution of traffic to anybody, -because the strong lines that could control and handle 50 percent of the -traffic were always struggling against parting with any of that 50 -percent, while the weak, 10 percent road was always trying to get 15 -percent.” - -The man who drew the first pooling contract made in this country and has -drawn many since says that pooling will not stop even competitive -discrimination, because the roads will slash rates on the sly to get -business. In other words pooling does not eliminate the struggle for -traffic. Company A has 25 percent of the pool money between certain -points. It cuts rates on the quiet and gets 30 or 35 percent of the -business, and then says: “Gentlemen, I’m carrying 35 percent of the -traffic and I want more of the pool money.” The gentleman just mentioned -told me that this sort of thing had been done in every case of pooling -with which he was acquainted. - -Sometimes the break in the rates is known to the Association but -assented to or tolerated because it is clear that a break is bound to -occur anyway, and may be enlarged rather than diminished by resistance. -Some years ago when Chauncey Depew was president of the New York Central -system, he said: “Large shippers arbitrarily transfer the whole of their -business from one line to another. That leaves a weak line denuded of -its business. - -“A weak line is a line which is dependent largely upon through traffic -and which has not much local business. These great shippers who control -anywhere from ten to twenty-five cars a day will take all their business -off this weak line and put it on the strongest line, which already has -all it can do. - -“Then the weak line is in trouble, and it comes to these shippers and -says: ‘Well, how can we get you back?’ The shippers say: ‘You can only -get us back by giving us five or ten cents a hundred off from the -tariff.’ The weak line invariably does it.” - -Then Mr. Depew gave an instance of “one of the great merchants of the -West” who, on the organization of the Joint Traffic Association, said: - -“I never have paid within twenty-five cents a hundred of tariff rates, -and I won’t do it now.” “His business,” continued Mr. Depew, “was on -what we call one of the weak lines. He took it off that line and put it -on one of the strongest lines. That left the weak line without any -westbound business. - -“Then the weak line said: ‘We have got to have business.’ So we simply -closed our eyes while the weak line gave a rate twenty-five cents a -hundred less than the rest of us charged, and this firm advanced while -the others were stationary or went out of business. This firm advanced -by leaps and bounds to the front rank and toward the control of the -business.” If all the roads in the field do not come into the pool there -is every temptation for the outsider to cut rates. For example, in 1896 -one of the trunk lines outside of the Joint Traffic Association was -carrying grain from Chicago to the seaboard at 13 cents per hundred when -the established tariff, which the Association was supposed to be -maintaining, was 20 cents.[389] - -The whole history of the traffic associations shows that discriminations -can be guarded against by pooling only to a very limited extent.[390] -The legalization of pooling would enable railroads that wished to insist -on the maintenance of rates to bring suit against roads disregarding the -agreement. This would make it harder to get all the railroads into a -pool, for part of the inducement is the impunity with which the -agreement may be shuffled off, while on the other hand the degree of -respect manifested by the railroads for the law does not justify much -hope that it would be effective in holding them to any pooling contract -if they thought they could make more by breaking it than by keeping it. -The fact is that the railroads understand each other now about as well -as if pooling were legalized. They constantly make rate agreements and -have no hesitation in securing whatever degree of unity they desire with -or without law. Pools at best do not apply to local traffic, but only to -business between competing points, so that all discriminations in local -traffic are left absolutely untouched. And as to competitive points, -pooling is far less effective than consolidation, and consolidation has -shown no tendency to do away with any more than one of the six classes -of discrimination, while it emphasizes and extends the discriminations -in favor of the great industrial interests whose ownership is -interlocked with that of the big railroad systems, so that the advance -of consolidation means the extension of the influence of the giant -industrials in whose favor the most grievous discriminations are -granted. - -Pooling and combination are good in many ways,[391] and ought to be -legalized;[392] but they cannot be relied on to abolish -discrimination,—they leave the worst forms untouched, intensify some of -them, and diminish only one of the six classes of preference. Shippers -have a strong prejudice against pooling, and the railroads do not care -so much about it as they used to, for consolidation and mutual -understanding have enabled them to accomplish in part the purposes they -had in view in the traffic agreements of earlier years.[393] - - - _Wrestling with the Long-Haul Abuse._ - -In respect to the long and short haul abuse, Commissioner Fifer, Brooks -Adams, and others argue that the practical remedy is to make the -long-haul clause of the Commerce Act binding except where the railroads -come in and get an order releasing them to a specified extent from the -operation of the clause.[394] The idea is to put the burden of showing -the need of an exception on the railroad. At present the burden really -rests on the complainant. The railroads disregard the law with impunity. -It is easy to show dissimilar circumstances, and then it is necessary -for the plaintiff to show that the circumstances are not so dissimilar -as to warrant the discrimination made. It is very difficult to satisfy a -court on this point, and so the rates stand and the clause is -practically nullified. Forbid departure from the clause absolutely -unless the carrier has obtained an order of release, and you put the -burden of proof where it should lie, namely, on the party that desires -to depart from the rule of equal treatment. - - - _A Drastic Cure for Rebating._ - -For the cure of discrimination, the Transportation Committee of the New -York Board of Trade suggests that Congress enact a law authorizing the -Interstate Commission, in case of any rebate or other device for -securing low rates, to declare that the net rate so made by the railway -or car owners shall be the regular tariff rate, published as such, and -open to all shippers; said new rate to take effect immediately, subject -to appeal within 60 days upon questions of law.[395] The Committee says -the proposal is based on the plan suggested by “Albert Fink, the ablest -of all American railroad managers,” and adopted by the joint executive -committee of the associated railroads in 1882.[396] “The giving of -unlawful rebates by traffic agents would be preventable if the agent -felt assured that such acts would be followed by his dismissal, and the -officers of the company would find a way to remove an offending agent or -to bring him under control if a punishment of suitable severity were -certain to be imposed upon the road for the violation of the law against -the giving of rebates.” - -This would indeed be a drastic remedy, and very effective for the -prevention of the discovery of discrimination. An association of -railroads might ferret out preferences under such a rule, but it would -be almost impossible for a public board to do it. It has been for the -most part, as we have seen, practically impossible for the Commission to -get evidence of specific facts of discrimination, even under the -comparatively mild laws they have tried to enforce. And under such a law -the difficulty would be increased tenfold. Moreover, if discrimination -were discovered and the rule proposed were put in action, -discriminations would thereby be crystallized and legalized, and great -disturbances produced in the business of railroads and of the community. -Suppose it were discovered that a certain shipper of wheat from Chicago -east had a 10 cent rate over the Erie, while the published rate on all -the lines was 15 cents. Immediately the 10 cent rate would be open to -all shippers over the Erie. The Erie might be stricken with a sudden -dearth of cars, and be unable to handle the traffic at all. It would pay -the other roads to arrange with the Erie to be stricken that way. For if -the Erie handled the traffic, the other roads would have to come down to -10 cents and suffer a severe loss, or lose the business and suffer a -severe loss that way. Moreover, the difference in rates on wheat and -flour and other commodities would constitute serious discrimination, -petrified and perpetuated by law. Again, if many cut rates were -discovered in various lines of business and various degrees of discount, -the whole tariff would be thrown into confusion worse than the normal -chaos. Rates not in the discovered list would have to be raised to save -the revenues of the roads, the long and short haul rule would go to the -winds, and bankruptcy would threaten not only the culprit railroads but -individuals and communities not conditioned so as to be favored by the -cut-rate lists. On the other hand, if the railroads tried to be good, -the pressure of the big shippers for concessions would put many roads to -serious inconvenience and threaten them with dangers and losses almost -as great as those accompanying disobedience, and far more immediate and -certain. Under such circumstances the temptation to secure secrecy at -any cost, and if need be to control the Commission and the courts, would -be irresistible. - -Most of those who favor further control of railroads advocate milder -methods. The favorite remedies are public inspection and the fixing of -rates by a commission or court of arbitration or tariff revision. The -facts above stated showing the secrecy of many forms of preference and -the difficulties of enforcing the law because of the impossibility of -getting railroad officers to reveal the facts indicate the necessity of -systematic and thorough public inspection, but also suggest a doubt as -to its effectiveness. If railroad officers destroy their papers and -refuse to state the facts on the witness stand, is it not possible that -they will keep any record of discrimination practices from appearing in -the books and papers they submit to inspection? Inspection and publicity -are excellent aids to reform, but they are insufficient in themselves. -We have had already a small-sized ocean of publicity through the -investigations of the Interstate Commerce Commission, but the results -have been very small. - - - - - CHAPTER XXXIII. - FIXING RATES BY PUBLIC AUTHORITY. - - -For years the Interstate Commerce Commission has been declaring that -when, on complaint and investigation it finds a rate to be unreasonable, -it ought to have power to fix a reasonable rate to take the place of the -unreasonable one, the order to be binding on the railroad for a moderate -period, subject to revision in the courts. For the first ten years after -the Interstate Commerce Act was passed no railroad denied the right of -the Commission to fix rates, and the Commission says it was supposed -that they possess the power. But the Supreme Court finally ejected this -impression in 1896, and again in 1897, and the Commission appealed to -Congress for the restoration of the authority that was swept away by the -interpretation of the majority of the Court. Congress for a long time -paid no attention to the Commission’s request for further powers, but -President Roosevelt took up the matter and pushed it with the splendid -vigor that characterizes all he does. In his message of 1904, already -referred to, he said: “Above all else, we must strive to keep the -highways of commerce open to all on equal terms; and to do this it is -necessary to put a complete stop to all rebates. Whether the shipper or -the railroad is to blame makes no difference; the rebate must be -stopped, the abuses of the private car and private terminal-track and -side-track systems must be stopped, and legislation of the Fifty-eighth -Congress, which declares it to be unlawful for any person or corporation -to offer, grant, give, solicit, accept, or receive any rebate, -concession, or discrimination in respect of the transportation of any -property in interstate or foreign commerce whereby such property shall -by any device whatever be transported at a less rate than that named in -the tariffs published by the carrier, must be enforced.... The -Government must in increasing degree supervise and regulate the workings -of the railways engaged in interstate commerce; and such increased -supervision is the only alternative to an increase of the present evils -on the one hand or a still more radical policy on the other. In my -judgment the most important legislative act now needed as regards the -regulation of corporations is this act to confer on the Interstate -Commerce Commission the power to revise rates and regulations, the -revised rate to at once go into effect, and to stay in effect unless and -until the court of review reverses it.” The President’s message of -December, 1905, has already been quoted at sufficient length in Chapter -XXXII. - -In the last two years the legislatures of 18 States have passed joint -resolutions petitioning Congress to enact legislation for the regulation -of railroad rates; 12 States took this action last winter, 1905, and -asked their representatives and senators to secure the enactment of such -a measure. Commercial bodies in various parts of the country have also -petitioned for such legislation, while others have protested against -it.[397] - -The Esch-Townsend Bill (1905) giving the Commission power to fix rates -passed the House, but failed to pass the Senate.[398] As stated in the -preceding chapter, the House has passed the Hepburn Bill by a very large -majority and it has gone to the Senate, where a determined effort will -undoubtedly be made to secure at least a provision for judicial review -on their merits of all orders of the Commission. - - - _Objections of Railroad Men._ - -Railroad men object to further regulation till the effectiveness of the -present laws has been thoroughly tested. In answer to the question what -he would do to stop discrimination, President Tuttle of the Boston and -Maine Railroad said to me this morning: “Enforce existing laws. The -Interstate Commission can investigate the railroads. It need not wait -for complaints. It can act on its own initiative. It can have experts -examine the railroad books. It can publish the facts, and publicity is a -powerful corrective. It can put the facts it secures in the hands of the -Attorney-General, and if the Department of Justice will prosecute -promptly discrimination can be stopped. There were no prosecutions even -after the Hutchinson salt investigation. The law is ample. The trouble -is that no adequate effort has been made to enforce it.” - -The Commission says that as a rule it cannot get the facts. In some -cases it has succeeded, but usually it is thwarted in respect to -personal discriminations (to which President Tuttle’s argument chiefly -applies) because they are secret, and neither railroad men nor the -favored shippers will ordinarily tell the truth about them, and railroad -books do not commonly contain any record of them.[399] Where the -Commission has obtained evidence of unlawful discrimination it has -turned the facts over to the Department of Justice, which has not -prosecuted promptly, in many cases not at all, and has sometimes -prevented prosecutions which United States district attorneys were ready -to begin. - -There seems to be good reason to believe it is true that existing laws -have not been fully enforced; that in addition to the difficulty, -perhaps impossibility, of getting at the facts in many cases, wrongdoers -have escaped punishment even where the facts were fully known; and that -a commission to investigate the Department of Justice, and try the -effect of publicity there, may be as essential as a commission to -investigate the railroads. Some criticism seems to attach also to the -Interstate Commission, as it does not appear that they have asked the -Department of Justice to prosecute senators and congressmen, -legislators, judges, etc., well known to be riding on passes, nor to -punish the railroads for giving them. - -As long as express companies and water carriers are not within the -Interstate Act, and doubt exists as to private cars and terminal -railroads, there is room for further legislation. And in respect to -excessive rates and tariff discriminations between places and -commodities, though the facts can be easily ascertained, the remedy is -regarded by the Commission as wholly inadequate under existing laws, -because of the emasculation of the long and short haul clause by the -interpretation given it by the Supreme Court, and because the railroads -are able, whenever they choose, to delay the enforcement of an order for -years by litigation, conceding at last perhaps only a small part of what -they should concede and so requiring further years of contest to -approach another step toward justice. So the Commission asks for power -to fix a reasonable rate in place of one found unreasonable, and to put -the new rate into effect at once subject to subsequent revision on -appeal by the carrier. - -The railroads seriously object, first, to the fixing of their rates by -anybody but themselves, and second, to the putting of such rates into -effect before they are tested in court. The immediate enforcement of a -rate order is most strenuously opposed, and with much force of reason. -The railroad people say that rate-making is very difficult and many -mistakes are likely to be made. Railroad history certainly affords ample -ground for this conclusion. But they say, or imply, that the Commission -makes more mistakes than they do. They declare that only trained traffic -experts can deal successfully with rate questions; that the Commission -has made so many errors that almost every one of its decisions that has -gone to the courts has been overruled; and that great havoc would have -been wrought if these decisions had been put into effect at once without -judicial review. “Take for example, the Maximum Rate Case where the -Commission ordered the rates from Cincinnati to important Southern -points cut down 15 or 20 percent. This change in rates to the -basing-points would have affected two or three thousand rates. Some of -the railroads didn’t have a margin of more than 15 or 20 percent and -they determined to fight the case. It is true that the Commission -exercised the power to fix rates a number of times in the first ten -years, but the cases were comparatively insignificant and the railroads -said, ‘Oh, well, let it go. We’ll take the rate the Commission wants.’ -But when it came to the Cincinnati case the situation was serious and -the railroads said, ‘These fellows haven’t got the power to make rates. -In the debates on the Commerce Bill in Congress it was distinctly -declared that no such power was intended to be given. We’ll take the -question to the courts.’ And the courts sustained the railroads. Now -what would have been the consequence if the Commission could have put -its order into effect at once? The railroads would have been subjected -to serious losses during all the time that might elapse before they -could get a decision reversing the order of the Commission. It often -takes years to get a final judgment and there would be no way for the -railroads to recover for the losses entailed by erroneous orders.” This -is the argument substantially as presented to me by President Tuttle and -there is great weight in it. - - - _Alleged Errors of the Commission._ - -Another railroad president turns the lime-light of mathematical analysis -on the errors of the Commission. David Willcox, President of the -Delaware and Hudson, says: “About 93 percent of the decisions of the -Commission which have been passed upon by the courts have been held to -be erroneous. In case, therefore, the Commission had the future -rate-fixing power, so far as its decisions were in force until the -courts passed upon them, injustice would be accomplished in 93 percent -of the cases. For this there would be no remedy, because no recovery -could be had from those whose goods had been carried at unjustly low -rates.”[400] - -We shall see that this statement gives too strong an impression of the -capacity of the Commission for mistakes, but there is no doubt that it -has made mistakes, that any person or persons attempting to fix rates, -even the railroad managers themselves, are liable to make mistakes, and -that losses result to the roads from their own mistakes and might -naturally result from the mistakes of a commission or court if its -erroneous orders were enforced upon them. - -It may be said that if the orders of the Commission went into force -immediately it would be the interest of the railroads to hasten the -proceedings in court instead of prolonging them indefinitely as they are -too apt to do, and that with reasonable provisions for prompt -adjudication and the stimulus of powerful railroad interests in that -direction, the delay of the law, or this branch of it, at least, would -vanish. It may also be said that the railroads could recoup themselves -for the losses under discussion by curtailing the service they render -for the new rates, or by raising other rates not fixed by the -Commission. But the Commission might veto the raising of other rates, -and the entailment of service would be very undesirable. The question -arises whether it would not be fair for the public to stand any loss -clearly resulting from an improper order of its Commission, or else -require that any order the validity of which is questioned should be -passed upon by the court before it is put into effect? The Commission is -itself perhaps a sufficient court in respect to questions of fact, and -if it were arranged that in case of dispute on a question of law the -Commission might call upon the Supreme Court for an immediate -interpretation of the law, the rulings of the Commission could be -squared with the law at the start, and the danger of loss from an -erroneous order would be reduced to a minimum. - -As above remarked, the mistakes of the Commission have not been so vast -as the reader might infer from the percentage of overruled cases stated -by President Willcox. - -The work of the Commission may be summarized as follows: - -It has received about 3,726 informal complaints relating to overcharges, -classification, rates, etc. Most of these, perhaps 3,200, have been -disposed of by correspondence or some mild form of arbitration, very -many have been settled satisfactorily, some have been abandoned, and -some have crystallized into formal complaints. The total number of -formal complaints has been about 854, including those that were formal -at the start and those that started as informal complaints and grew to -be formal through failure of adjustment by conciliatory methods. “From -1887 to October, 1904, the Commission rendered 297 decisions involving -353 cases, two or more cases being heard and decided together in some -instances. About 55 percent, or 194, of the decisions were in favor of -the complainant and 45 percent in favor of the railroads.[401] Mandatory -orders were issued to the number of 170. Of these 94 were complied with -by the railroads, 55 were disobeyed, and 21 were partly complied with -and partly disregarded. Some 43 suits were instituted to enforce the -orders of the Commission; and 34 of these have been finally -adjudicated.” The Commission claims that 8 cases of excessive rates and -unjust discrimination have been decided in its favor, while President -Willcox says that the courts have sustained the Commission on the merits -in only 3 cases.[402] Mr. H. T. Newcomb, who appeared before the Senate -Committee as the representative of several railroads, gives a table -showing that in the circuit courts the Commission has been sustained 7 -times and reversed 24 times, the Circuit Court of Appeals has sustained -the Commission 4½ times and reversed it 11½ times and the United States -Supreme Court has partly sustained the Commission in one case and -reversed it in 15.[403] - -Several comments are necessary. First, about ⅘ of the Commission’s -decisions have been right on the railroad’s own showing. They claim only -32 reversals out of 170 orders—nearly all the rest have been accepted by -the railroads or enforced upon them by the courts. Second, the reversals -have been based on questions of law in respect to which the courts -disagreed among themselves. The Commission has not been overruled in -respect to questions of fact, but on the application of what it believed -to be law (and what the framers of the law believed to be law) to the -removal of economic abuses. Third, the points of law in respect to which -it has been overruled are very few. The decisions have gone in bunches. -For instance while the Alabama Midland long and short haul case was -pending in the courts a number of other long-haul cases were decided by -the Commission, and when, after several years, the Supreme Court gave -final judgment, a whole block of the Commission’s rulings on this point -were discredited and subsequent reversals were simply repetitions -involving no new error. So the question of power to fix rates covers a -cluster of cases all thrown down in reality by one ruling.[404] And -these two questions represent nearly the whole difference between the -courts and the Commission. The 15 reversals in the Supreme Court do not -mean 15 errors, even in respect to legal points, but only a very few -errors if any. Fourth, the higher court reversed the lower in 9 out of -the 17 cases that went up from the Circuit Court, and in three of these -cases the Supreme Court reversed both the Circuit Court and the Court of -Appeals. Fifth, it is by no means certain that the Commission was wrong -and the court right. The fact is that the Supreme Court has not -interpreted the law according to its manifest and well-known intent, but -in a narrow, technical way that has defeated in large part the real -purpose of the law. It is an absurdity to rule that the law is valid and -then to decide that the railroads may escape from the long-haul section -by means of dissimilar circumstances created by themselves. And many -believe it to be an equal absurdity to declare that the Commission may -order the discontinuance, of an excessive rate or unjust discrimination, -but cannot fix a reasonable rate. - -Take the Kansas oil rate for example. The railroads at the dictation of -the Combine raised the rate, as we have seen, from 10 to 17 cents. -Suppose the Commission had ordered the roads to cease charging 17 cents, -that being found to be unreasonable. The railroads could appeal and -appeal, and if after several years the case went against them they could -make a rate of 16½ cents. Then a new investigation could be begun, the -Commission could make a new order, and after years in the courts the -rate might come down another half cent perhaps. And so on; even if all -the decisions went against the railroads it would take 105 years to -reduce the rate to 10 cents again, calculating on the basis of the -average period of 7½ years required for final litigation. Why not sum up -the process in a single order for the 10 cent rate and if objected to by -the railroads have one judicial contest and finish the business. By the -indirect method of declaring one rate after another to be unreasonable -the Commission has now the power at last to fix the rate. The -proposition to allow it to name a reasonable rate is only putting in -direct, brief, effective form the power it now has in indirect, -diffused, and ineffective form. The railroads might not act in the way -described, but the point is that they could do so; there is no power in -the law as it stands to-day to compel them to adopt a reasonable rate -within a reasonable time. - -Again, consider the predicament Commissioner Prouty presents.[405] If -the Commission, considering all the circumstances including railroad -competition, finds that the rates from certain points to W should not be -higher than the rates to O and orders the railroads to discontinue the -discrimination between the two cities, the court will sustain the order -and grant an injunction to enforce it. But if the Commission finds that -there should be some difference between the rates to the two places, -though not so much difference as there is, and it orders the rates to W -down so that they will be fair, the courts will annul the order because -the Commission has no power to fix rates in the opinion of the Supreme -Court. - -The railways contend that a relative order would be sufficient. The -Commission could say what percentage of the Omaha rate the advance for -Wichita should be, and in the Kansas case the rate on oil could be -determined in reference to the rates on other commodities. It is true -that a relative order could be made, but it might be more embarrassing -to the railroads to have a group of rates tied up by each decision so -that they could not vary any of them without changing the rest, than it -would be to have one rate definitely fixed; the subtraction from -elasticity might be greater, and the difficulty of determining the true -relations between various rates might be far more serious than the -fixing of a reasonable rate in the particular case. It would be possible -to give the Commission the option to make a relative order or to -definitely fix a reasonable rate providing that it should carefully -consider the preference of the carrier as to the form of order, the -reasons for that preference, and the guarantee the carrier may be -willing to give as to _bona fide_ compliance with the order, and then -make up its judgment in the light of the circumstances in such a way as -to accomplish the purpose in view with the greatest certainty and the -least friction or interference with the freedom of railroad management. - -But the railroads object to the fixing of rates in any manner by a -public board,[406] declaring that such a board could not be in -sufficiently close touch with traffic conditions all over the country to -adapt their rulings to the needs of business, that tariffs would lose -the elasticity requisite to keep them in harmony with changing economic -conditions. A rate that is reasonable to-day may be unreasonable -to-morrow. It is said that it keeps several hundred men, 500 to 700 -skilled traffic men, working all the time on the adjustment of rates, -and that it is beyond the power of half a dozen men to pass on the rate -question of a country like this; that Congress cannot delegate to a -commission the power to fix rates; that it would destroy the initiative -of railroads and hurt their power of borrowing money for improvements, -injure investors, and throw the whole railroad world out of gear; that -the centralization of power would be dangerous, the disturbance of -business and interference with development disastrous, and the practical -confiscation of railroad properties and values unjust; that a flood of -litigation would follow, and that discrimination would not be removed, -for agents hustling for business would cut under commission-made rates -as quickly as they cut railroad-made rates. - -There is much force in some of these points, none at all in others. -There is no reasonable doubt that Congress can authorize a commission to -fix rates. Railway Commissions in 21 States have power to fix rates, -either absolute or maximum, and some of them have exercised the power -vigorously, and a national commission may be given the same power over -interstate commerce that a State commission may have over State -commerce. - -There is more force in the objection based on the lack of elasticity in -commission-made rates. Elasticity, however, may easily be overdone and -much of the present elasticity is very undesirable. Many flying tariffs -and unfair discriminations lurk under cover of that reputable word -elasticity. Moreover the Commission would not interfere with any fair -rate-making by the railroads. The bulk of the rates would not be touched -but only those that were unjust. So that it would depend entirely on the -railroads how much of the flexibility they so much admire should be kept -in their own hands. They would keep it all unless they were guilty of -dishonest flexibility, in which case the elasticity, which, according to -impartial judgment, exceeded the bounds of justice, would be checked. - -In reference to the alleged necessity of flexibility in tariffs and the -ability of traffic managers to accommodate the rates to fluctuating -commercial conditions, Chairman Knapp of the Interstate Commission says -that there need not be any tendency to iron-clad rules or undue emphasis -of the mileage basis on the part of a Government board, but that the -necessity of frequent changes in tariffs is greatly overdrawn. He states -that the railroads have kept the same basis of rates since 1887 -throughout the most important part of the United States, the “official -classification territory” or the section north of the Ohio and Potomac -and east of the Mississippi, and that “the class rates which govern most -merchandise and articles of manufacture and ordinary household -consumption have remained unchanged in all that territory.” The -railroads changed the classification of many articles about 1900, “but -they did not change the rates or the adjustments between localities.” - -“I take it there is no agricultural product the price of which has shown -such wide fluctuations in the last few years as cotton. It is one of the -great staple articles of the country; the most valuable per pound of -anything that grows out of the ground in large volume. More than half of -it is exported and you know the price has gone from scarcely above 5 -cents to 16 or 17 cents. And if there is any article which would seem to -be susceptible to market fluctuations and the changes in commercial -conditions, it must be cotton. But an inspection of the tariffs will -show you that the rates on cotton have not been changed in ten years. - -“There has been no material change, I think, in any cotton rate in more -than ten years, except that certain reductions have been made in the -State of Texas by the commission of that State. - -“Now, when I observe instances of that kind, when the ablest and most -experienced traffic officials tell me that there is no sort of reason -for 500 to 1,000 changes in interstate tariffs every twenty-four hours, -as our files show there are, you must not be surprised if I fail to -accept at par value all that is said here about the necessity of -adapting rates to commercial conditions. Undoubtedly, when you take a -considerable period of time, great influences do operate to an extent -which may justly require material modifications in freight charges, but -to my mind it is quite unsuitable that the little surface fluctuations -in trade should find expression in extended changes in the daily -tariffs. I believe that those surface currents should adjust themselves -to the tariffs, and not the tariffs to the currents. And I am saying -this, gentlemen, not as a result so much from my own observation or from -any _à priori_ view of the case as because of the statements made and -arguments submitted to me by practical railroad men of the highest -distinction.”[407] - -To lay stress on the number of men required to arrange the details of -tariffs might seem to imply the belief that a very large part of -existing railroad rates will be found unreasonable and need the -attention of the Commission. It may however imply merely that there is -likely to be a very large number of complaints. The fact is that the -fixing of rates is a complex business, with a considerable percentage of -guesswork, experiment, broad judgment, and arbitrary decision. There are -some general principles of cost, distance, what the traffic can pay and -move, what shippers demand, what other carriers are charging, what rates -are necessary to create new business and fill up the cars both ways, -etc., but they are like the principles of law, you can come to any -conclusion you wish and then find a principle that will back up your -decision. Railroad men do not trouble themselves about consistency. They -do not and cannot adjust rates with reference to just relations between -places and commodities. They are looking for dividends and they make the -best rates they can with that object in view. The chief traffic officer -of one of the trunk lines, being pressed by the Commission as to his -method of making rates, said: “We make rates very much as the honey bee -makes its cells, by a sort of instinct.” When we look at his rates we -find that he is not so successful as the honey bee in respect to -symmetry and balance. Another traffic manager whose skill brings him a -salary of $50,000 a year, testifying as to the reasonableness of his -grain rates, was asked question after question as to methods of -determination, till finally he said: “To tell you the truth, gentlemen, -we get all we can.” Now it is because the railroads know that the -Commission would refuse to adopt this time-honored principle and would -aim primarily not at profit to the railroads, but at just and impartial -rates—it is this knowledge which more than anything else impels the -railroads to such strenuous opposition to any proposal for the fixing of -rates by a public board. The matter is of such moment that, when I asked -one of our leading railroad presidents what would happen if the -rate-making power were put in the hands of a commission, he said: “The -stake would be so great that the commission would have to be controlled, -that’s all.” - -The railroads have the Senate, and the Senate must confirm all -nominations to the Interstate Commission. Aside from the appointment of -Judge Cooley all nominations to the Commission from 1887 down have been -due, said this railroad president, not to any special fitness for the -work, but to political pull. If a commissioner is appointed from a -certain State, the senators from that State regard the place as a part -of their patronage, and when the term of his appointment expires they -insist on the nomination of another man from their State. They say: “The -place belongs to our State,” and it is always their man, a man they want -on the board, who is presented by them for nomination. Vermont for -example has had three members on the Commission in succession, Walker, -Veazie, and Prouty; each time a vacancy has occurred in the Vermont -representation it has been filled at the dictation of the senators from -that State; “even President Roosevelt did not appoint for fitness. When -a vacancy occurred he did not look for the man best fitted to serve on -such a Commission, but appointed Senator Cockrell of Missouri, a nice -old man of 70 that everybody liked, but without any special -qualification for the work. The election went to the Republicans in -Missouri, so Cockrell couldn’t go back to the Senate. He has many -friends. The senators all like him, Republicans as well as Democrats, -and they said to Roosevelt: ‘You must do something for Cockrell; here’s -a democratic vacancy on the Interstate Commission, put him in there,’ -and Roosevelt put him in.” - -This railroad president is a man of the highest character and of very -extensive information. Whether or no he is rightly informed in respect -to the appointment of commissioners, it is clear that the railroad -representation in the Senate could bring tremendous pressure to bear to -secure the appointment of men approved by railroad interests, that they -could block the appointment of any other sort of men even if nominated, -and that the temptation to exert this power to secure men who could be -controlled would be practically irresistible if the Commission were -given the rate-making power. - -The fear of confiscation does not seem to be well founded on the part of -the railroads; there is more to justify such a fear on the part of -companies and localities unfairly treated by the railroads. The -Commission will have no motive to make confiscatory orders, and the -courts will protect the roads from everything that is doubtful in the -slightest degree as they have done in the past. The real danger of -confiscation of values lies in leaving the railroads free to make such -orders as those in the San Antonio case or the Kansas oil case which -destroyed the business of independent operators. Adding 25 cents a ton -to the coal rates from San Antonio practically confiscated the coal -mines at that point, and raising the oil rates in Kansas from 10 to 17 -cents practically confiscated, during the continuation of the order, the -product of the independent oil wells. - -That some disturbance of tariffs and business might result from -conferring the rate-fixing power on a public board is quite likely. -There is a good deal of business that ought to be disturbed; that of the -Beef Trust and the Oil Trust for example would be the better for a -thorough house-cleaning. And the tariffs need considerable disturbance -to bring them into close relations with the principles of justice. But -the disturbance _might_ be more than is needful. Our railroads say that -Government boards the world over show a tendency to adopt some sort of a -mileage basis, in the shape of a zone system or some other form of -distance tariff. This would interfere with the equalization of rates, -which is one of the best elements in American railroading. The fruits of -California are carried all over the country at low blanket rates that -enable them to be sold in every hamlet in the country at prices the -common people can afford to pay. New England shoes are carried to St. -Louis at 1½ cents a pair and to San Francisco for 2 cents a pair. Milk -is brought into the cities at the same rate for many miles out. So with -the pulp mills in the forests of New York, Vermont, and Maine. The -railroads give them all equal rates to the great cities. When the big -mill at Millinocket, Me., was being planned the promoters went to the -railroads for rates. To make the product cheap they must build on a -large scale, and to justify this they must be able to reach many -markets; they must be able to supply newspapers in Boston, New York, -Philadelphia, and Chicago. So the railroads gave them rates that enabled -them to send their paper 1,500 miles to Chicago and sell it to -newspapers there at the same price they would have to pay for paper that -came only 500 miles.[408] This destroys nature’s discriminations due to -distance, and places men on an equality in the market to win by their -merits, not by natural advantages or disadvantages of location. This is -in many ways a beneficent process and if the railways did not create new -artificial discriminations of their own they would be entitled to be -placed among the great equalizers of the age. - -Years ago there was a vigorous argument about the rates on wire from -Worcester, Mass., to Chicago, and from Pittsburg to Chicago. The wire -mills of Worcester had a good business, employing some 5,000 men, and -marketing mostly in the West. Mills were built in Pittsburg, and being -much nearer Chicago got a lower rate to that city. The New York Central -at once met the rates so that the Worcester Mills could get to market on -a level with the Pittsburg people, who still had the advantage of -nearness to the coal and iron mines. Not satisfied with this, however, -they carried the question to the Traffic Association, claiming that as -they were 500 miles nearer Chicago, they should have a lower freight -rate than the Worcester mills. But they didn’t get it. The New York -Central said: “Here are 5,000 men at work in Worcester. What are they -going to do if we let you crowd them out of Chicago, which is their -principal market? We shall stand by them and meet any rate you make from -Pittsburg.” That was fine, as good as the raising of a rate to kill the -San Antonio mine was bad; the railroads can save industrial life as well -as commit industrial murder. - -It is said that government rate-fixing would not meet such cases; that -the principle of equalization is not recognized, and both justice and -business development would suffer thereby. - -It is not true that government rate-fixers do not recognize the -equalization principle. The national post-office has carried it to the -limit, and has based its business upon it to such an extent that it is -known as the post-office principle. It is applied in government -telegraph and telephone systems much more fully than in our private -systems. Even the State railways make considerable use of it. Although -the tendency is to adopt some sort of distance system as the main basis -of the tariff, there is constant recognition in Germany, Belgium, -Denmark, Switzerland, and the Australasian States, and it is announced -as a definite policy that so far as reasonably possible rival industries -shall be placed on an equality in the market. “We mean to bring the -manufacturer who is 100 miles away into the market on a level with the -man who is 10 miles away,” said the manager of one of these government -systems to me, and there is more or less of the same spirit and purpose -in all the government systems I am acquainted with. The fact is that a -movement toward the equalization of rates through application of the -principle to one commodity after another, or the gradual extension of -zone distances in a zone tariff, offers the only hope of attaining a -really just and scientific system of rates. Any sudden adoption of such -a system would disturb the values of real estate, etc., beyond all -reason, but it can be gradually approached, and that is what the -railroads in this and other countries are doing. - -Our Interstate Commission has, I believe, shown too little appreciation -of this fact, too much tendency to insist that a town or city is -entitled to the benefit of its geographical position. It is entitled to -the benefit of its geographical position to the extent that no place -more distant from its market should have lower rates to and from that -market, but the right to claim that the rates shall not be equal is very -questionable, and frequently it is clear that no such right exists. The -Commission has recognized this point in several cases. For example, in -the Business Men’s Association of St. Louis _v._ the Santa Fe, Northern -Pacific, Union Pacific, and other roads,[409] the Commission sustained a -blanket rate on many commodities from the Pacific Coast to all points -east of the Missouri River. And in the Orange Rate Case[410] decided -last year, a blanket rate of $1 per hundred on lemons from Southern -California to all points east of the Missouri was approved. In the milk -case, however, it held that “A blanket rate on milk on all the Delaware, -Lackawanna’s lines, New Haven road, Reading, Erie, New York Central, and -West Shore and other roads regardless of distance, viz., 32 cents on -milk and 50 cents on cream per can of 40 quarts, is unjust to producers -and shippers of the nearer points. There should be at least four -divisions of stations,—the first extending 40 miles from the terminal in -New Jersey, the second covering a distance of 60 miles and ending about -100 miles from such terminal, and the third covering the next 90 miles, -and the fourth covering stations more than 190 miles from the terminal. -The rates on milk in 40–quart cans should not exceed 23 cents from the -first group of stations, 26 cents from the second group, 29 cents from -the third, and the present rate of 32 cents from the fourth group.”[411] - -It is quite possible that the Commission made a mistake in this case, -though it is not easy for any but a railroad man, with a ravenous -appetite for tonnage and reckless of the waste of economic power, to see -any sense in arranging rates so as to take milk to New York from points -near Buffalo while Buffalo gets milk from places east of points shipping -to New York; but if the Commission did fall into error in this case, the -mistake of refusing to allow the distant man to come into the -metropolitan market on equal terms with the nearer man is nothing -compared to the mistake the railroads so frequently commit of allowing -some Chicago or Kansas City man to come into New York at lower rates -than the New York, Ohio, Pennsylvania, and New England producers have to -pay. - -In respect to the distance tariff question, Chairman Knapp of the -Commission says: “I am very far from believing that there should be -anything more than the most inconsiderable tendency, if any at all, -toward the adjustment of rates on a mileage basis, and I think the -prosperity of the railroads, the development of the different sections -of the country and their industries, justify the making of rates upon -what might be called a commercial basis rather than any distance basis; -but do you realize what an enormous power that is putting into the hands -of the railroads? That is the power of tearing down and building up. -That is the power which might very largely control the distribution of -industries. And I want to say in that connection that I think on the -whole it is remarkable that that power has been so slightly abused. But -it is there.... It comes back to the question which Senator Dolliver -asked, are the railroads to be left virtually free to make such rates as -they conceive to be in their interests? Undoubtedly their interest in -large measure and for the most part is the interest of the communities -they serve. Undoubtedly in large measure and for the most part they try -as honestly and as conscientiously as men can to make fair adjustments -of their charges. But suppose they do not. Is there not to be any -redress for those who suffer? That is really the question.... Suppose it -were true that a more potent exercise of government authority and the -adjustment of rates tended somewhat to increase the recognition of -distance with the result of producing a greater diffusion of industry -rather than its concentration.... I cannot believe that all those -institutions, laws, administrations which operate to the concentration -of industries and population are altogether to be commended. I doubt if -they result in happier homes, better lives, greater social comfort.” - -A public board might not be willing to apply the equalization principle -without limitation under competitive conditions. It might put the sash -and door makers of Michigan and Vermont on an equality in New York City, -and yet not think it best to enable the Vermont manufacturers to send -sash to Michigan and Indiana points at the same rates the Michigan -manufacturers pay, while the Michigan factories get the same rates to -Vermont and Massachusetts points as the Vermont people; nor to arrange -matters so that a train-load of bananas from the port of New York to -Boston would pass a train-load of bananas going from the port of Boston -to New York. It takes a lot of railroads working for profit, regardless -of the waste of industrial force, to see the wisdom of such -cross-hauling. A public board would be likely to recognize not merely -the principles of profit, equalization, and development of traffic, but -also the principles of economy from a national standpoint, the -adaptation of special localities to special work, the value of -diversification of industry, etc., etc. - -It is entirely possible to avoid such mistakes as those attributable to -the Commission in its geographical cases, and other mistakes that may -come from lack of thorough acquaintance with practical transportation -problems, by putting on the Commission two or three traffic men of high -character and long experience in the business of making rates. - -And as the business of the Commission would not be to make rates in the -first instance, but only to revise them on complaint, much as the chief -officers of railway departments do now, only with a public motive and -point of view instead of a private one, there is every reason to believe -that the work of revision could be intrusted to a well-selected -commission, with great advantage to the public. The very existence of an -effective power of revision ought to go a long way toward making the use -of the power unnecessary. And it is wholly just and practicable that -monopoly charges should be subject to the veto of a public board that is -in a position to take a broad, disinterested view of rates and other -transportation questions. - -How superior the Commission’s methods are in many ways to those in use -on our railways can hardly be appreciated by one who is not familiar -with the unscientific, chaotic rate-making practices everywhere in vogue -in this country, and also with the breadth and system that marks the -work of the Commission. - -An illustration may help to make the contrast clear. Take the case of -Kindel _v._ Boston & Albany, and other railroads, decided by the -Commission, December 28, 1905. The railroads were charging $2.24 per -hundred on cotton-piece goods from Boston, New York, and other eastern -points to Denver, and $1.50 on the same goods from the East clear -through to San Francisco. The local rate from Omaha or Kansas City to -Denver was $1.25, the same as the rate on first-class goods, and the -rate from the Atlantic to Denver was made by adding the said local rate -to the rate from the East to the Missouri River. Kindel complained that -the rate to Denver was unreasonable and unjust. The Commission carefully -studied the facts, took into consideration the relation between cotton -rates and first-class rates on various routes throughout the country, -put the data on a chart, a facsimile of which accompanies this -description, and came to the conclusion that “the exaction of -first-class rates on cotton-piece goods between Missouri River points -and Denver, in view of the long prevailing differentials in other parts -of the country and other existing conditions, is unjust and -unreasonable; and that the result of the excessive rate on cotton-piece -goods between the Missouri River and Denver and the application of full -locals in making up the through combination rate from New York, Boston -and other eastern points taking the same rates to Denver is to make the -through rate excessive, and that such through rate to Denver to be -reasonable should not exceed $1.50 per hundred pounds.”[412] - -[Illustration] - -If the reader will examine the chart he will see that the cotton figures -(which are placed below the route-lines) are less than the first-class -rates (which are printed above the route-lines) in every case except -between the Missouri River and Denver, and in some cases the cotton -rates are only half the first-class rates. In view of the practically -universal custom of the railroads in this relation, the deviation in the -case of Denver amounted to a practical discrimination against that city -and any shippers who desired to lay down cotton goods in Colorado. The -railroads carried the goods from Boston to Chicago for 55 cents, while -charging $1.25 from Omaha to Denver, more than double the charge for -half the distance. - -Railroad rate-makers do not base their tariffs on broad considerations -of justice, but get what they can out of the traffic for their own -lines, while the Commission asks what rate will yield a fair profit, and -will be just to the public and to the individuals and localities -involved, considering all the circumstances and their relation to -transportation conditions throughout the country. - -At best, however, it cannot be denied that great inconvenience and some -injustice might be inflicted upon the railroads by public rate revision. -It seems to come down to the choice of the least of two evils. The -President and the people say that if the railroads are left free to make -the rates they do not deal fairly; experience shows that they -discriminate unjustly between persons and places, and put some rates too -high and others too low. The railroads say that if a public board should -make the rates the companies might not be treated fairly. Both -statements are true. But it is clear that somebody must make the rates. -And it is equally clear that there is no system of rate-making that will -do perfect justice. I know of no railway minister or traffic manager in -Europe or America who even dreams he knows of any method of rate-making -that will do justice all round under present industrial conditions. The -post-office principle may ultimately be applied to diffuse the burden of -distance over the whole community, but it is not practicable at present. -If then a certain amount of injustice is unavoidable, and we must choose -between injustice to a small group of stockholders or to eighty millions -of people, which alternative shall we accept? If there is no way to -solve this problem that will not work injustice somewhere, shall it be -to the little group of profit-makers or to the great public, the people -of the United States? - -Besides this quantitative comparison, there is a qualitative comparison -that is still more weighty. Such injustice as may be done to the -railways is merely a matter of diminished dividends on stocks, a very -large part of which is water; while the false rates and unfair -discriminations made by the railway managers not only affect property -interests many times greater than railway stocks, but deny equal -opportunity and undermine morals, manhood, government, civilization, and -progress,—values far higher than any financial items whatever. Moreover, -it is not unlikely that a board constituted somewhat differently from -the present one might eliminate most of the errors of the Interstate -Commission as well as those of the railway. What are the causes at work -in the case? The reason the Commission has made some injurious rulings -is that they lack the thorough acquaintance with traffic conditions that -the railway managers possess. And the reason the railway managers make -rates that are contrary to public policy is that they are more or less -influenced by motives that are antagonistic to the public interest. The -Commission is disinterested; it has no wish or personal interest leading -to unfairness either to the railroads or the public; its motive is -right, but its knowledge is imperfect. The railway traffic managers, on -the other hand, have much more perfect understanding of the -transportation business, but their interest is not altogether in harmony -with justice and the public good. Is it not possible to create a board -that shall have the thorough knowledge of first-class railway experts, -together with the high motives and unmixed interests of an honorable -public commission or court, and so remove the chief causes that have -worked injustice in the past? - -It is possible that there may be another fair solution,—that the rates -may be made neither by the railroads themselves nor by a body -representing the public alone. As there are three partners in the -railroad business, as in every great industry,—viz., labor, capital, and -the public,—it may be regarded as a case for arbitration, or for -decision, not by any one partner alone, but by a board representing all -three partners. Should there not be a board on which the railways have a -right to representation, the workers being represented too, and the -public also having fair representation upon the board? Then the decision -would represent the co-ordination of thought and interest of the three -great parties concerned in the railway problem. Perhaps such a solution -would be superior in its justice to decision either by the railways -alone or by a body representing the public only. - -But it is clear that the final power to pass on transportation rates -must rest somewhere. That railways are public highways, and -transportation charges in the nature of taxes, are settled principles of -law and economics. That governments have a right to regulate railroad -rates is everywhere recognized. But how is the right to be effectively -exercised? If legislative bodies attempt to exercise it directly, the -lack of detailed information as to specific cases and the failure of -elasticity and adaptation to the needs of business, urged against -Commission work, would be emphasized a hundred fold. There is no way but -to delegate the power to an expert board, not with the expectation of -perfect justice, but of the greatest attainable justice. - -The most important question of all in this connection remains to be -considered, viz., would the possession of the rate-fixing power enable a -regulative board to stop discriminations? Practically every rate -question but one involves the question of discrimination. The exception -is the query: “Are the total charges unreasonable?” It is conceivable -that the relations of the various rates might be fair but the whole -tariff might be pitched too high or too low; then the reasonableness of -that tariff would be the only question on which action would be -requisite. But in practice there are always some rates that are low -enough, some too low, and some too high. And there are always two active -questions in reference to any rate: 1. Is it fair in relation to the -rates accorded to other persons, places, or commodities? 2. Is it -reasonable? In other words, is it such that if other rates stood in true -relations with it the total margin of profit would yield a fair return -and no more than a fair return on the investment? Both questions are -very difficult, especially the latter. The reasonableness of each -particular rate depends not only on its own individual circumstances, -but on a comparison with all other rates and a consideration of the -company’s entire business. Difficult as it is, it would seem necessary -to try to answer it in a broad way, at least in respect to the tariff as -a whole, for the failure to answer it may mean unjust taxation of -industry, inflation of capital values, dividends on watered stock, vast -accumulations of wealth in the hands of railway owners, political -corruption, and the whole train of evils that follow in the wake of -industrial aggression. Yet deeply important as it is to secure -reasonable rates, how futile it would appear to attempt to do it by -means of a board making orders as to this, that, and the other rate -complained of, but without power to revise the tariff as a whole, or to -require any particular standard of service in return for the rate -decided upon. For every cent cut off the rate by the Commission, the -railways, if they are agreed to act in harmony, can easily withdraw two -cents’ worth of facilities. Suppose the Commission can fix a reasonable -rate, what is the use of it unless it can schedule to its judgment a -minute specification of the quantity and quality of service to be -rendered in return for that rate? And it would have to schedule also the -price level, the crops, and all the conditions of home and foreign -markets and adjust the rate on a sliding scale, else the rate that is -reasonable now may become very unreasonable in a few weeks or months -from now. And if, instead of this patchwork, the public board attempts -to revise the tariff as a whole and fix the services to be rendered, it -will either get itself captured by the railroads or it will cripple -railroad enterprise. Railroad men are not going to work with much spirit -if you take the control of rates and service out of their hands, and if -you leave them control of either they will have you instead of your -having them. It always means a struggle for mastery where a body that -does not own seeks to control. The body that owns and has possession -will evade, pervert, defy if possible, and if overborne will lose -initiative and energy and take on the air of a conquered province. - -The case is no better in respect to discrimination. In the first place -it is clear that, as railroad managers have testified, it would be just -as easy to cut rates made by a commission as to disregard the rates made -by the railways and published by them and thereby made obligatory under -the law. Mr. J. H. Hiland, head of the traffic department of the -Chicago, Milwaukee and St. Paul, says: “I can cut a rate or give a -rebate on a rate fixed by a commission just as easily as though I had -made the rate myself.”[413] Mr. W. D. Hines, till recently -Vice-President of the Louisville and Nashville, says: “The Townsend Bill -made no provision whatever which looked to the prevention of rebates. It -provided that the Commission should fix rates, but there would have been -the same facilities and the same inducements to cut the rates made by -the Commission as to cut the rates established by the railroads.”[414] -President Tuttle of the Boston and Maine puts the case in this way. “A -big shipper says to the managers of the A, B, & C railroads ‘Give me a -cut rate.’ They refuse. Pretty soon all P’s business is going by the X -line. The A, B, & C folks notice that they are losing traffic and they -say ‘Look here, where’s all that business we used to get? The X line is -getting it all. P’s got a concession over there!’ Maybe he has and maybe -he hasn’t, but you can’t make those fellows on A, B, & C believe that he -hasn’t. They go to P and say: ‘What are you giving all your business to -the X line for?’ P says, ‘Well, I asked you to give me a lower rate and -you wouldn’t do it.’ He don’t say he’s got a lower rate on X, and maybe -he hasn’t, but the effect on A, B, & C is the same as if he had. They -say, ‘What do you want?’ P says, ‘Give me 2 cents a hundred off the rate -and I’ll distribute my business as I did before.’ So they give him 2 -cents off and they get the tonnage.” - -Mr. E. P. Vining, a former railroad manager, says that the reduction of -a rate found unreasonable by the Commission may result in new -discriminations unless other rates are reduced in fair proportion.[415] -It is also clear that in many cases the reduction of other rates by the -railroads may nullify the effect of the Commission’s order in respect to -the rate complained of. Take, for example, the railroads leading from -the wheat belt to Minneapolis and to Milwaukee. Excepting the Chicago, -Milwaukee and St. Paul the roads that lead to Minneapolis are not the -same roads that lead to Milwaukee. The Commission found that the rates -on grain to Milwaukee and Minneapolis subjected the former to undue -prejudice and disadvantage, but if the Milwaukee roads were ordered to -reduce their rates to a given level the Minneapolis roads could -neutralize the order by reducing their rates below the said level.[416] -In other words no mere right to designate a reasonable rate in place of -a rate complained of and found unreasonable can prevent unfair -discrimination between places. - -Nothing short of a general rate-making power can do the work properly. -Particular rate-fixing alone means patchwork and inefficiency, easy -evasion and new discriminations in place of the old ones. On the other -hand, to give a public board general power to revise rates would if -effective be tantamount to taking possession of the railroads without -compensation, and if ineffective would amount to little in the way of -stopping discrimination. If the tariffs were made by or subject to the -revision or approval of a public commission and the rates so made were -enforced, the most vital element in the ownership of the roads would be -made public. And if the rates were disregarded or the power not -vigorously and intelligently exercised the evils we are considering -would still continue. - - - - - CHAPTER XXXIV. - CAN REGULATION SECURE THE NEEDFUL DOMINANCE OF PUBLIC INTEREST? - - -It is questioned whether any form of regulation can overcome -discriminations. One of the ablest members of the Interstate Commerce -Commission said to me: “No, regulation can never stop discrimination.” -And the man who is regarded by many as the leading railroad expert in -the country replied to my question in substantially the same way. -“Regulation properly so-called cannot eliminate discrimination, though -it may greatly diminish it.” - -What he meant was that a control strong enough to eliminate -discrimination, would not be regulation, but ownership or -quasi-ownership. So long as men representing private interests continue -to possess control over rates and services they will continue to -discriminate, for private interests demand discrimination. And if -control of rates or services or both is placed in a public body, public -ownership or quasi-public ownership is thereby established, for control -is the essence of ownership. It makes little difference who has the -title to a farm if I have the control of it and can determine the way in -which the work shall be done and the price at which the crops shall be -sold. The “owner” in such case is little more than a mortgagee—he has -the interest on his capital, whatever I choose to allow him, and that’s -all. It would seem that if the people wish to control the railroads, -they should buy them at a fair value, and not establish complete or -quasi-ownership without compensation, under the name of regulation and -control. - -This is an interesting line of thought, and philosophically has -considerable force in respect to control extending beyond what the -public may have a right to claim as a partner by reason of the bestowal -of franchises and other benefits. It is also important to note that only -substitution of managers owing allegiance to the public interest in -place of managers representing private interests can eliminate the -motives to discrimination, and remove the antagonism of interest between -the owners and the public, which is the root of all railroad evils. - -This is a practical world, however, and the practical facts are that the -difficulties in the way of public ownership of railways in this country -at present are very great, and that much good may be accomplished by -judicious regulation. The long and short haul clause may be made -effective; the railroads can be prevented from paying shippers more for -cars or switches than they would pay each other; private car-lines, -express companies, and water carriers can be brought within the Commerce -Act; the Commission can be given power to name a reasonable rate or -practice in place of one found unjust, and either put it in force at -once, subject to revision in a special court devoted to transportation -cases, and acting promptly on all appeals, or themselves take the facts -and their conclusions at once to the court and get a ruling before -putting the order into effect; and railroad managers can be prohibited -from having any interest in any concern that can be aided by -transportation favors over their roads, as is already the case on James -J. Hill’s Great Northern, except with respect to Mr. Hill himself. - -Besides all this it may be possible to make the law so clear that the -courts cannot twist it out of shape, and the States might be got to pass -laws in complete harmony with the Federal statutes. Railroads and trusts -can be subjected to public inspection, and to the pressure of damage -suits, injunctions, and progressive taxation. If need be the public -could demand representation on the boards of direction of all the -railroads, or the traffic managers could be made public servants and -required, as receivers are now, to report semi-occasionally to the -Federal courts, and to State courts also, perhaps, with the power of -judicial removal in case of misconduct. There is a practical warrant for -demanding representation in the management of the roads, in the fact -that the franchises bestowed on them by the public represent a large -part, probably half, of their market values. The public is entitled, as -we have said, to be regarded as a partner in the railroads. - -If after thorough trial, regulation proves insufficient or -unsatisfactory, public ownership remains.[417] The movement of thought -in that direction in the last few years is very remarkable. In whatever -way relief may come, whether by regulation or public ownership, _the -essential fact is the dominance of public interest over private interest -at the points where private departs from public interest, and the -essential instrumentality for the realization of this fact in a republic -is the actual, complete, and continuous control of the Government by the -people_. - -That unjust discrimination in railroad rates and service can be -abolished, we know from the experience of other nations. Studying the -railways of ten countries on the ground, examining the railway -literature and talking with leading authorities of twenty-six countries, -and analyzing the writings of the principal critics of the various -systems, I find that the railroads of the United States are unique in -two respects—the efficiency of the service they render, and the extent -and viciousness of the discriminations they make. If efficiency and -injustice were essentially related, we might look with some degree of -leniency on the evils of railway favoritism, though the wise would -prefer justice even at the sacrifice of some degree of efficiency. But -there is no such relation. Efficiency is due to national characteristics -and economic conditions. In Italy I found the least efficiency -coexisting with the greatest development of railway favoritism that I -discovered anywhere in Europe, while the German roads are highly -efficient and absolutely free from favoritism. All over Europe shippers -and railway men assured me that no concessions could be obtained on the -German railroads, and that they were the best managed roads in Europe. -The railways of France and England are less efficient than those of -Germany, and are tainted with discrimination to a degree that is -insignificant compared with the phenomena in that line over here, but is -very emphatic when compared with the German standards. The press of -Great Britain has for years been holding up the management of the German -roads as a model to be followed in England, and attributing the success -that Germany is having in superseding English goods with her own in many -leading markets to the efficient and far-sighted policy of her railway -management. - -There does not seem to be any clear connection between efficiency and -the form of ownership. The private roads of America are the most -efficient and the private roads of Italy[418] the least efficient I have -examined. The public roads of Germany and Belgium, though less efficient -than our private roads, are more efficient than the private roads of -France and England. In the same country, under like economic conditions, -either private ownership or public ownership may secure the best -management and most efficient service according to the stage of -development. In the United States under existing political conditions -the managers of our railways have many facts on which to base an -argument that Government operation of railroads would be less efficient -than private operation; and the fact that our adverse political -conditions are due in large part to the private ownership of public -service monopolies does not destroy the whole force of the argument, -since our rings, bosses, party machines, spoils system, etc., are due in -part to other causes. But where public affairs can be managed with the -purity and business sense that characterize the railway managements of -Germany, Belgium, Denmark, New Zealand, and South Africa, there is -equally little reason to doubt that public operation is the more -economical and efficient. - -The low average freight rate in the United States is often adduced as -conclusive proof of the efficiency of private management. But the -average freight rate in England and France is higher than in Germany or -Belgium. - -If it is a valid argument to say that the low average freight rate in -the United States under private ownership proves the case as against the -higher average freight rate under the public systems, then why is it not -fair to say that the high rates in Great Britain and France under -private ownership in their turn prove the case for public ownership. The -average passenger rate in the United States and in Great Britain is -twice as high as in some of the public systems of the continent. If the -low freight rate proves the case for private ownership, why doesn’t the -low passenger rate in Germany and Belgium prove the case for public -ownership? The fact is that such comparisons of average rates prove -nothing as to the management. Differences in the density of traffic, -grades, curves, length of haul, wages, capitalization, etc., enter as -plural causes and make it impossible to ascertain the effect of the -element under consideration. Mr. Fink found that the ton-mile cost -varied eightfold on different lines in his own system, all under the -same management—700 percent more in some cases than in others. In view -of that fact, of what use is it to try to draw inferences from the -average rate? - -Underneath our low average freight rate there are not only vast masses -of low grade freight, coal, iron, lumber, etc., on very long hauls, but -a traffic of great density between the great cities, and innumerable -discriminations in favor of big shippers and big cities. Local rates in -many rural districts are very high, almost as high in some cases as in -the old stage-coach days. Labor is more efficient in this country than -in Europe; for example, it takes, according to Mulhall, 2 men in -England; 3 in France or Germany, and 4½ in Europe on the average, to -produce the same agricultural product as 1 man in the United States. In -manufactures and construction work the ratios of efficiency are nearly -the same; 1 man in the United States does almost as much as 2 men in -England, 3 in France or Germany, and 5 in Italy or Hungary. Again our -Government subsidizes the railroads by paying very large sums for the -carriage of mails, while in Europe the railways are required to carry -the mails free or for a very small payment. Moreover our railway -capitalization, though larger than it ought to be by the amount of -watered stock and fictitious securities, is nevertheless considerably -below the capitalization of European roads. In the United States, the -railways were mostly built through a new country thinly settled in -comparison with Europe, and in many cases not settled at all. The right -of way cost practically nothing as compared with the cost in Europe. The -Government aided the construction of a number of giant systems by -enormous grants of land and loans of money. Few roads were built that -did not receive large donations from the cities and towns which they -pass. And the abolition of grade crossings and other safety requirements -in Europe entail vast expenses from which our roads are comparatively -free. - -If Government operation were established in this country under good -political conditions and reasonable safeguards that would secure -efficient management, rates could be lower than they are now; for -hundreds of millions that go for profits on watered stock, legislative -and legal expenses, exorbitant salaries, competitive advertising, and -agencies, etc., etc., would be saved. The abolition of free passes and -freight concessions would permit a further reduction of the tariff; so -that the published rates the general public would pay could be much -lower, and even the ton-mile average would be somewhat lower than at -present. - - - - - CHAPTER XXXV. - HINTS FROM OTHER COUNTRIES. - - -Germany tried private railways for 25 years, and Austria tried them over -a quarter of a century, and they have tried the two methods side by side -ever since the public system was organized. In New Zealand, also, and -Australia the two systems have been tried side by side. And in every one -of these countries where they have thoroughly tried both systems the -conclusion by an overwhelming consensus of opinion is that public -railways serve the public interests best, and also make lower rates and -serve the people at less total cost. Switzerland, after a careful study -of both systems in various parts of the world, came to the same -conclusion, and her people voted 2 to 1 to transfer the railways to -public ownership and operation. All this is very strong evidence, and if -we turn from the tangled web of an international comparison of averages -and look at the principles and causes at work in the case, it will be -clear that public ownership tends to lower rates as well as to conserve -the higher wealth. - -In the same country and under similar conditions otherwise than in -respect to ownership and control, public ownership tends as a rule to -make lower rates than private ownership. This tendency results from the -fundamental difference of aim between the two systems. Private monopoly -aims at dividends for stockholders; public ownership aims at service for -all. A normal public institution aims at the public good, while a normal -private monopoly aims at private profit. It serves public interest also, -but such service is incidental, and not the primary purpose. It serves -the public interest so long as it runs along in the same direction and -is linked with private profit, but when the public interest departs from -or runs counter to the interests owning or controlling the system, the -public interests are subordinated. - -The conflict between public and private interest is specially strong in -the matter of rates. The rate-level that yields the greatest profit is -much higher than the rate-level that affords the greatest service, or -the greatest service without deficit; and since private monopoly aims at -profit it seeks the higher rate-level. Public ownership aims at service, -not at profit, and therefore gravitates to the lower rate-level, where -traffic and service are greater.[419] - -There need be no hesitation, therefore, on economic grounds about -pressing toward the dominance of public interest, either in the form of -regulation, or, when political conditions justify it, in the more -complete form of public ownership. And this dominance of public interest -is the only thing that can eliminate unjust discrimination and establish -an impartial railway service. - -The State railways of Germany, Austria, Switzerland, Belgium, Denmark, -and the Anglo-Saxon republics of South Africa and Australasia are -absolutely free from unjust discrimination. There are no complaints or -suspicions on that score. Shippers know to a certainty that their rivals -are paying the same charges that they are. Even the most strenuous -opponents of public railways do not accuse them of favoritism. The -railways privately operated in Holland, Denmark, Sweden and Norway, are -also free from discrimination. Thorough public control, natural honesty, -and lack of overwhelming temptation have combined to produce a pure -administration. In Prussia, the Government, strong as it was, did not -succeed in preventing discrimination on the private railways. President -A. T. Hadley, of Yale, says: “Where the system of granting special rates -becomes deeply rooted a great many are given without any principle at -all, through the caprice or favoritism of the railroad companies and -their agents.” The revelations made before the Hepburn Committee, as to -the practice of railroads in the matter of secret rates were simply -appalling. This is the most indefensible part of the whole system of -railroad management. It is characteristic that Bismarck, who always -chose his fighting ground with skill, made this a main base of -operations in his contest against private railroad policy in Prussia. -The Prussian Cabinet in the argument for the nationalization of the -railways submitted to the Parliament in 1879 made the following -statement: - -“The principles of the publicity of the rates and the equal treatment of -all shippers which are embodied in the railroad legislation of all -countries, are liable, as experience has shown, to be circumvented on -account of the competing interests of the railroads, and also by -individual interests which have influence with the managements. The -granting of these secret advantages in transportation in the most -diversified ways to individual shippers, and in particular the so-called -rebate system, is the most injurious misuse of the powers granted to -railroad corporations. It renders government control of rates -impossible, makes the competition between the different lines, as well -as that of the shippers dependent on them, dishonorable and unfair, -carries corruption among the railroad employés, and leads more and more -to the subordination of the railroad management to the special interests -of certain powerful cliques. It is the duty of the government to oppose -this evil, to uphold the principle of the equal treatment of all -shippers, and to enforce the legislative regulations on this subject. -The importance of this problem is only equalled by the difficulty of its -solution.” - -The problem was not solved till the railways were nationalized, and then -discrimination disappeared completely. I was not able to find a shipper -in Germany nor anywhere in Europe who knew, or had heard or had even a -suspicion, of the granting of any rebate or concession of any kind by -the German roads. Many of them did not stop with negative statements but -asserted positively that concessions could not be obtained. The nearest -I came in my search for a German fraud was the discovery of an -English-Italian fraud on the German roads. Leading business men in Italy -told me that while they could get no concessions from the German roads -directly, they could do it indirectly on transcontinental shipments by -means of a trick of the English traffic managers. They made their -bargains with the English manager, and he would pay a fictitious claim -for damages in transit, and then write the German office that he paid so -much for damages to the goods and that as it was not known in what part -of the journey the goods were injured the German system must stand its -part of the loss. They have to resort to fraud to get a discount on the -German railways. The principal motives to discrimination are absent and -the dangers to the guilty official are very great. His employers, the -railway management, and the Government back of it, are unalterably -opposed to the granting of unjust favors to any shipper. If a traffic -man should depart from the path of impartiality the public examiners -would be certain to find it out, and the traffic man would lose his job. -The railway management is in the closest touch with the people through -the local and national councils representing commercial bodies, labor, -manufacturing, agricultural, and other industrial interests. The law -requires the railway managers to consult these representative councils, -and their recommendations as to rates, time-tables, and other matters of -public interest are carefully considered and acted upon so far as -reasonably possible. - -In France the first railway manager I asked about secret discriminations -said: “There is no such thing in France. The criminal law is very severe -and it would mean imprisonment. There were complaints of favoritism a -dozen years ago, but there have been none in recent years.” Other -railway men told me substantially the same thing. But very different -ideas were expressed by representatives of shipping interests and -others. Here are some of their statements: “The railroads hold -manufacturers and merchants at their mercy. They favor the great, and -put the burdens on the little fellows. The tariffs are full of special -rates, and 80 or 85 percent of these special rates are made simply for -some favored merchant or manufacturer. The minister can reject or -approve a tariff as a whole, but has no detailed power over one bad -rate. If he retires a tariff the old one comes into effect. It is true -that complaints are not made. What is the use? The danger is too great. -Where is the merchant who dare undertake a campaign against the great -companies?” I was assured that the statement of M. Cawes, vol. iv, p. -136, of the “Cours d’Économique politique,” was still true: “The benefit -of reduced tariffs is accorded upon secret approaches and solicitations; -the companies dispense at their will industrial prosperity and ruin.” -The discrimination between localities is very great, owing largely to -the way in which the railways are laid out. And “the companies defeat -the national protective tariff by letting foreign goods ride more -cheaply than French goods.” For example, American wheat from Havre to -Paris pays 18 francs per ton, while French wheat from Ferte-Bernard to -Paris, 37 miles less distance, pays 20 francs a ton. If the nation -desires to favor the importation of foreign products, well and good, but -it is a curious state of things for the Government to adopt a protective -policy and then permit private railways to reverse, overrule, and -nullify that policy. - -We have already had occasion to throw a side light on English railroad -methods in describing the way in which Italian rebaters use the -elasticity of the English railway system to get fictitious damages. I -had to go to Italy to find the true character of the English railway -conscience. The railway men in England won’t tell. And nobody else, who -will tell, knows. Yet the English traffic man, though willing to pay -fake damage claims on proper occasions, is innocent of “flying tariffs,” -terminal railway abuses, systematic underbilling, classification -jugglery, and other preferential paraphernalia that belong to an -up-to-date railway system over here. The last case of personal -discrimination in rates that caused any stir was tried about 6 years ago -and the preference was so small that one of our trust magnates, used to -looking at large concessions, would not have been able to find it -without a microscope. Nevertheless a considerable number of complaints -(more than a hundred a year on the average) came before the Board of -Trade and the Railway Commissioners under the traffic acts of 1888 and -1894. The Secretary of the Board of Trade tells me that these complaints -relate chiefly to “high rates, poor facilities, and discriminations.” -About half the complaints charge excessive rates which amount in most -cases, on the face of the complaint, to discrimination between places or -commodities. A large number of complaints concern higher charges for -short hauls than for longer hauls on the same line, and another large -group allege disproportionate charges or higher rates for shorter -distances as compared with the rates on other lines. A fourth group, -containing about 25 percent of all the cases, includes complaints of -delay, overcharges, refusal of facilities or privileges accorded others, -personal preferences in rates, etc. For example the London and -Northwestern charged the complainant 12 cents a ton up to 20 miles for -hauling coal, while charging the complainant’s competitors only 9 cents. -Preferential treatment was alleged in the rates given to rival shipping -companies for the conveyance of goods from Hull to places in Yorkshire. -A coal shipper complained that the Midland Railway had for many years -made a practice of allowing a rebate of 6 cents a ton to large dealers, -and that in the lists of rates furnished the complainant no mention was -made of this rebate or allowance, though other rebates were mentioned. -The Midland replied that the system had been in operation since 1889, -when the company gave notice as required by law, in the public -rate-books, that they would allow a rebate to traders whose annual -tonnage exceeded 25,000 tons. - -The English law does not object to the paying of a commission on a large -amount of traffic provided the same discount is given to all shippers -who attain the stated volume of business, but a higher commission to one -big shipper than to another big shipper is vigorously repressed. A case -of this kind was decided by the Railroad Commission in 1901. The court -found that the Midland Railway had given Rickett, Smith & Company, coal -dealers, a preference of ¼ of one percent in rebates on their annual -traffic account, and it enjoined the railway and allowed damages to the -complaining shippers. Some 75 suits were entered by different shippers -for this one cause. In the same report 28 cases are listed relating to -discrimination in brewery traffic, and 16 other applications for -injunctions against undue preference in respect to facilities, rates on -coke, brick, flour and grain, and other commodities to certain shippers -or particular places, and one request from the Inverness Chamber of -Commerce for an order enjoining the railways from selling season tickets -to big shippers (with a traffic worth $1,200 to $5,000 or more a year) -at lower rates than they will sell them to ordinary passengers. This -last application was dismissed by the court. England does not object to -premiums on volume, provided all shippers of equal size receive the same -treatment. That’s the principle the Trusts believe in; if vigorously -worked the principle is a powerful trust builder. - -The English Commission has power to enjoin undue preference in rates or -facilities and give damages for the same, to fix reasonable charges in -some cases, and to order rates increased since the revision of 1892 to -be reduced to the previous level on proof of unreasonableness. - -In the last report at hand, dated 1903, and relating to the year 1902, -there are 270 odd cases, 95 of which charge undue preference, and as -these matters come first before the Board of Trade, which does not grant -an appeal to the Commission unless it believes there is cause of action, -the probability is that all or nearly all of these applications are -based on a real discrimination.[420] It appears that 72 of the suits are -for damages growing out of the Rickett rebate case; the rest are -scattering. A few examples will show their character: 1. Application for -order enjoining railways to desist from undue preference to -complainant’s competitors through rebates on flour. 2. For injunction -against railways granting preferences to the firm of Leethan & Sons on -their traffic. This case was tried, the preference found, and the -injunction granted. 3. Undue preferences to certain manufacturers of pig -iron in the rates on coke. 4. Undue preference to a certain shipping -company through superior facilities and lower rates than were given to -others on the same goods and the same routes. Case settled before trial. -5. Undue preference to Corral & Company by rebates on coal to certain -stations while refusing to make the same allowances to other shippers. -6. Charging higher rates than E. on coal to the same point. Case tried, -undue preference found. 7. Refusal of allowances for cartage made to -others. 8. Refusal to supply cars in due proportion. 9. Preference of -competing millers and subjecting traffic of applicant to undue -prejudice. 10. Preference of brewers at Burton and Lichfield by low -rates and terminal allowances. 11. Preferences in favor of brick-makers -in Nuncaton and Tamworth by assessing the weights of their bricks lower -than the bricks of complainants. 12. Allowing 93 cents a ton for -services in loading and unloading, etc., and refusing similar allowances -for similar services by other shippers. 13. Undue preference through -higher rates on coal for domestic use than on coal for export, etc. - -The English Railway Act of 1888 provides that “no railway company shall -make any difference in the tolls, rates or charges made for, or any -difference in the treatment of home and foreign merchandise, in respect -of the same or similar services.” But this part of the law has been -constantly and vigorously violated as we shall see in a moment. The main -aim of the English Government has been to keep the railways from lifting -the rates or overcharging, and it has carried this to a point which, -with the strenuous provisions against grade crossings and in respect to -fencing and other safety measures, has gone far to discourage English -railway development. The companies submit classifications and schedules -of maximum rates and charges to the Board of Trade, which hears all -objections and tries to arrive at an agreement with the companies. The -agreed tariffs, or, in cases where no agreement is reached, the tariffs -the Board thinks ought to be adopted, are embodied in Bills, introduced -to Parliament, and after hearing if need be enacted into law. Thus -Parliament enacts a tariff of maximum charges, and the law forbids -discrimination, and “whenever it is shown that any railway company -charges one trader or class of traders, or the traders in any district, -lower tolls, rates, or charges for the same or similar merchandise, or -lower tolls, rates, or charges for the same or similar services, than -they charge to other traders, or classes of traders, or to the traders -in another district, or make any difference in treatment in respect of -any such trader or traders, the burden of proving that such lower charge -or difference in treatment does not amount to an undue preference shall -lie on the railway company.” The long-haul abuse is met by a provision -free from any ambiguous “similar circumstances and conditions” clause. -“The Commissioners shall have power to direct that no higher charge -shall be made to any person for services in respect of merchandise -carried over a less distance than is made to any other person for -similar services in respect of the like description and quantity of -merchandise carried over a greater distance on the same line of -railway.” Section 31, provides that if any person believes a railway is -making an unreasonable charge, or treating him in any respect in an -oppressive or unreasonable manner he may complain to the Board of Trade, -which shall endeavor to settle the difficulty by conciliation and -arbitration. If this is not possible, and the case comes within the -jurisdiction of the Railway Commission the Board will give the plaintiff -a certificate to take the matter before the Commission for adjudication. -Under Section 1 of the Act of 1894 complaints may be made of the -unreasonable increase of any rate, directly or indirectly, since -December 31, 1892, and if the Board cannot effect an amicable settlement -the complainant may submit the case to the Railway Commission for -judgment. Some Northampton traders at once began proceedings under this -law, and after 2 years of litigation at a cost to the plaintiffs of -$10,000 they got a verdict, but the companies declined to accept the -case as a test, so that any one who feels aggrieved by an excessive rate -must spend the time and money necessary to carry his case through the -Commissioners’ Court to a decision. - -The Board of Trade reports to Parliament every few years all the -complaints presented to it and the disposition thereof. By the last -report at hand, issued in 1902 and covering the years 1899, 1900, and -1901, it appears that nearly 3,000 complaints (2,946) have been filed -from 1888 to 1902,—2,032 related to “unreasonable increase of rates” -since 1892, and in 101 of these cases, when no amicable settlement could -be made, the Board gave certificates of appeal to the Commission, but -only a few of the complaints were carried up. Complaint of excessive -rates (not cases of increase) numbered 423, 88 of them in the last 3 -years reported: higher charge for shorter distance than for a longer -haul on the same line, 66, 11 of them in the last 3 years; -disproportionate rates, or higher charge for a given distance on one -line than on another 157, 37 of them in the last 2 years; and 268 -miscellaneous cases, 95 of which were entered in the last 3 years. About -4 percent of the complaints relate to canals, the rest are railway -cases. It takes 50 large pages to state the 325 complaints entered in -the last 3 years. A very large part, practically all in fact, are either -in form or in substance, cases of discrimination; even in complaints of -excessive rates the gist of the charge is usually that the rates -complained of are excessive as compared with other rates the companies -make.[421] - -A few further concrete illustrations from recent years may be of -interest. 1. Refusal of free cartage to a manufacturer though another -mill further away had the benefit of free delivery. 2. Refusal of -allowance for loading, etc., on private siding though such allowance was -made to a rival firm. 3. Rates on coal from mines at Leigh and Abram to -Winnington, 26 miles, were 50 cents a ton against 42 cents from the mine -at Haydock, 29 miles. 4. Complaints of delay, insufficient facilities, -etc. 5. Fourteen complaints of increased charges for conveyance of small -parcels in freight-train transportation and that companies were not -following a decision of the Railway Commission. One of the complaints on -the ground just stated was filed against the railways generally by the -Co-operative Wholesale Society with practically 10,000,000 people back -of it in interest and sympathy. The companies revised the schedule and -reduced the rates. 6. Refusal to grant complainant the same facilities -for warehousing traffic as are granted to their competitors. The Board -succeeded in removing the preference without trial. 7. A rate of $11.25 -on india-rubber goods from Birmingham to Newcastle-on-Tyne against $8.95 -on the same goods intended for export. 8. One shipper stated that he was -charged $9.75 for a carload of coal (6 tons) from Cork to Baltimore, -while the Baltimore Fishery Schools were charged only $5.10 for the same -service. After the usual correspondence by the Board of Trade the matter -was settled by the railroads agreeing to give the plaintiff the same -rate as the Fishery Schools. 9. Another shipper alleged that since he -had sent his traffic from Methven via the North British route from Perth -instead of the Caledonian, the company had delayed his traffic at Perth -while other traffic was sent on; that the company had deprived him of -the use of facilities formerly enjoyed, and had stopped his credit. This -reads almost like an American case. - -The long and short haul cases also remind one of home in about the same -ratio that a raspberry bush reminds one of a full grown oak. Both -personal preference and the long-haul discrimination are comparatively -rare in England. The greatest resemblance to America is in the rates on -imports. The English railway manager has as good an appetite for foreign -goods as any American manager, and in this matter the law does not tie -him up as it does in so many respects with its maximum rates and large -discretion in the Railway Commissioners to prevent excessive rates and -undue preference. Foreign linen goes from Liverpool to London for $6.10 -a ton while home linen pays $9.25 or 50 percent more. Foreign woolen and -worsted goods are carried from Manchester to London for $6.10, against -$9.75 or 60 percent more for English goods. Foreign timber travels from -Hartlepool to Wimeaton for $3.12 a ton while English timber pays $7.50 -or 130 percent more. English dressed meats from Liverpool to London -$12.50 a ton, American meat $6.25, just half the home charge. American -cattle slaughtered at the wharf in Glasgow, $11.25 to London, home beef, -$19.25. Cheese goes all the way from New York past Chelford and other -English stations for less than the rate from those stations to London. - -“Foreign hops are conveyed from Boulogne, via Folkestone, to London at -$4.37 per ton, while the charge from Ashford, on the same line of -railway and much nearer to London, is $8.75—or just twice the amount for -about half the distance.... The rates for imported butter, cheese, -bacon, lard, and wool from Southampton Docks to London, distance -seventy-six miles, is $1.50 per ton. From Botley in the same county, and -a similar distance, the rate for all these goods is $4.80, or 219 -percent more than for foreign stuff. The difference in rates between -Southampton Dock station (foreign) and the Southampton Town station -(home) is as follows: Hops $1.50 and $5; apples $1.25 and $3.22; pressed -hay $1.25 and $2.50; eggs $1.66 and $5. Further, Professor Hunter showed -that while French fruit is charged at the rate of 4½ cents per ton per -mile to London by the South Eastern, the same company charge Kentish -farmers 11 cents per ton per mile, or more than double.”[422] The London -_Times_ declares that “there are no arguments within the range of human -ingenuity that will convince a Sussex hop-grower of the equity of an -arrangement by which foreign hops are brought from the other side of the -Channel for less than he has to pay to get across Surrey.... For nothing -can shake the belief of the home producer, and in our view nothing ought -to shake it, in the argument that if these low rates pay the companies, -he is shamefully overcharged, while if they do not pay, he is still -overcharged to cover the loss and bring up the average.” - -It is evident that England is far from being free from unfair -discrimination. A system of maximum rates, with penalties for undue -preference, and a commission able to countermand an unreasonable -increase of rates, is not sufficient. - -In Canada a railway commission of three appointed by the Governors in -Council for ten years (but removable at any time by the Governors in -Council for cause) has absolute power over rates, classification, speed, -safety appliances, etc.[423] The railways may submit tariffs, but the -Board can approve or disapprove of them in whole or in part, and -prescribe such rates and classification as it deems best, and the -railroads cannot charge either more or less than the rates authorized by -the Commission. All undue preferences between persons and localities in -rates or facilities is forbidden, but “the tolls for larger quantities, -greater numbers, or longer distances may be proportionately less than -the tolls for smaller quantities or numbers, or shorter distances, if -such tolls are, under substantially similar circumstances, charged -equally to all persons. The Board shall not approve or allow any toll, -which for the like description of goods or for passengers, carried under -substantially similar circumstances and conditions in the same direction -over the same line, is greater for a shorter than for a longer distance, -the shorter being included in the longer distance, unless the Board is -satisfied that, owing to competition, it is expedient to allow such a -toll.” The burden of proof is on the company to show that any difference -of treatment does not amount to an unjust discrimination. And “the Board -may determine, as questions of fact, whether or not traffic is or has -been carried under substantially similar circumstances and conditions, -and whether there has, in any case, been unjust discrimination, or undue -or unreasonable preference or advantage, or prejudice or disadvantage, -within the meaning of this Act, or whether in any case the company has -or has not complied with the provisions of this and the last preceding -section; and may by regulation declare what shall constitute -substantially similar circumstances and conditions, or unjust or -unreasonable preferences, advantages, prejudices, or disadvantages -within the meaning of this Act, or what shall constitute compliance or -noncompliance with the provisions of this and the last preceding section -relating to discrimination, long-haul,” etc. No Supreme Court rulings -can knock out this Commission, for it has clear authority in the law to -interpret its provisions as it deems best, to accomplish the purpose in -view. Whether this law will work well or ill is not yet apparent. - -In Holland, where the railways are owned by the State and operated by -private companies under lease from the Government, the Ministry assured -me that unfair discriminations between persons and places do not exist, -and I have every reason to believe they are right. The President of the -Government railways in Denmark said: “There are no discriminations -either on the public or company railroads. It would not be possible to -give such favors in Denmark.” And in reference to my description of some -of the American methods of favoritism, he said that nothing of the kind -had been attempted; and if it should be, every one concerned in the -transaction would be punished, and the guilty officials would lose their -positions. - -Railway men and publicists of Norway and Sweden tell me that there is no -discrimination. It would not be permitted. There are no provisions -against it in the law. Nothing of the kind has ever been known. - -A high official of the Japanese Government, whom I met in this country a -few months ago, said in answer to a question in which I stated some of -our discrimination methods, large and small: “The government fixes -maximum and minimum rates, and the companies are free between these -limits, except that the Minister keeps control sufficient to compel fair -rates if the companies should try to discriminate or otherwise make -unjust rates. We have had nothing like the Beef Trust or Standard Oil -discriminations you describe, nor any personal favoritism in -rate-making, but the government means to prevent the possibility.” - -The railways of New Zealand are not troubled with complaints of -discrimination, nor those of New South Wales or Queensland or Victoria. -And in these boiling and bubbling republics, if there were the slightest -suspicion of a reason for attacking the Government management on this -ground, it would be done by the political opponents of the -administrations. South Australia has had one case of alleged favoritism. -The complaint was that the Railway Commissioner gave a reduced rate on -carload lots of certain goods to certain points, to meet water -competition. A shipper, desiring to send his goods at low rates in the -opposite direction, asked the Commission to give him a reduction equal -to that accorded on the traffic above mentioned. The Commissioner said -he would give the same reductions if the shipments were made in carload -lots. The complaining shipper could not do this, as his trade was not -sufficient. The matter was brought before Parliament, and Parliament -sustained the Commissioner. The Parliament of each of these republics -acts as the people’s board of directors of all public works, calling the -managers to account; and any member, from the remotest rural district, -can ask the Ministry and the railway management any question he chooses, -and compel full disclosure of the facts. Secrecy is practically -impossible. - -The Government railways of Natal and Central South Africa are equally -free from secret concessions and favoritisms of every kind. In talking -with the manager of the Central South African Government railway, I -explained the nature of the favors granted to the big shippers in the -United States, using the Beef Trust, Salt Trust, Oil Trust, Fuel -Company, etc., as illustrations, and said: “Suppose a big concern tried -to get special rates or concessions of some kind on your railroads, and -made a secret agreement with the railway management?” - -“They couldn’t do it.” - -“Why not? Human nature is the same in South Africa as in America. -Suppose they made some traffic man a partner in their profits or brought -pressure enough on him in some way to get a concession?” - -“It wouldn’t be possible.” - -“Well, why? Suppose it were possible, what would happen?” - -“The Government auditors would find it out, and the manager would lose -his position.” - -“Couldn’t he cover up the thing?” - -“Not for any length of time.” - -“The people would have a fit if anything like that were attempted,” said -a member of the manager’s staff. - -“You have no attempts to secure preference, then?” - -“No it is not even attempted.” - -If those who employ and discharge the traffic managers desire -discrimination or aim at results which can be forwarded by -discrimination, then discrimination will exist unless the public control -is strong enough to keep the big shippers and the people in possession -of the railroads from carrying out their purposes. - -If, on the other hand, those who employ and discharge the traffic men -are sincerely opposed to discrimination and aim at results that can only -be secured by just and impartial management, then the traffic man who is -guilty of favoritism will lose his job, and the utmost possible -discouragement is put upon unjust discrimination. - -Once more the vital conclusions seem to be, the necessity of the -dominance of public interest, and the value of being in possession or -having your own servants in possession instead of merely giving orders -to the servants of another in possession who may or may not obey, and -who are in no danger of losing their positions by disobeying you and may -gain greatly by it—the value of having public interest at the helm to -steer the vessel in a safe course, instead of keeping private interest -at the wheel while public interest stands on a steam tug with a big -whistle and shouts orders through the fog to the steersman on the -passenger liner who is more than half inclined to steer the ship as he -pleases, and gets his pay and employment from men who do not wish the -public orders carried out, and whose instructions vary widely therefrom. -You cannot expect the servants of others to obey your orders as well as -your own servants, especially if the said servants of others are -employed by persons whose interests are largely contrary to your own. -Neither can a commander be as sure of winning a victory at the head of -an army trained in the camp of the enemy owing allegiance to them, and -constantly receiving orders from them, as he could at the head of his -own proper troops.[424] - -Is it fair to try to control in your own interest property that does not -belong to you? It is fair to try to exert sufficient control to secure -impartial treatment of persons, places, and industries; but can this be -done without fixing rates, and if this is resorted to will it not result -either in squeezing the life out of railway enterprise or in a vicious -struggle for mastery with new evasions of law and further -intensification of political evils, and corporate control of Government? -You will either deprive the owner of the right to determine the price at -which the product of his plant shall be sold, thus controlling his -profit and sapping his energy and incentive, or you will put a premium -on political corruption by making it necessary for the railroad owner to -control the Government in order to control his business and its profits. -You will check the development of railways and drive capital into -industries where the owners are free to fix prices, or you will check -the movement toward political purity. Public control in some form is -absolutely necessary in order to safeguard the public interest. The only -question relates to the form and degree. Is effective and adequate -public control of transport, with the unity, freedom, and hearty -co-operation that should characterize all business ventures, possible -without public ownership? And if not, isn’t it true that the economic -and governmental changes necessary to make public ownership safe and -successful constitute the essence of the ultimate railroad problem? - -If the railways were united into a national system under a great leader -like James J. Hill, or A. J. Cassatt, free to operate the roads on -business principles, untrammelled by the spoils system or any political -control, backed by a public interest that would not tolerate favoritism, -partyism, political influence or graft in any form, working with public -aims and public motives instead of private aims and motives, managing -the roads for the whole people as stockholders instead of for a small -part of the people as stockholders, paid, in common with the whole body -of employees, on the basis of a fixed remuneration plus an additional -compensation proportioned to efficiency, and in constant consultation -with local and national councils representing commercial, manufacturing, -mining, labor, and agricultural organizations and interests, we should -have a railway system and management whose efficiency would astonish the -world, whose methods would bear the light, and whose administration -would be an honor to twentiethcentury civilization. - - - - - APPENDIX - - - A.—THE COAL-CARRYING DECISION, U. S. SUPREME COURT. - -Since this book was put in type the United States Supreme Court has -sustained the Interstate Commerce Commission in an important suit -brought by the Commission against the Chesapeake and Ohio Railroad, and -the New York, New Haven and Hartford Railroad under the Elkins Act. The -Chesapeake and Ohio agreed to deliver at New Haven 60,000 tons of coal -at an aggregate cost which, after deducting the market price of the coal -at the mines and the cost of transportation from Newport News to -Connecticut, would leave the Chesapeake and Ohio Railway only about 28 -cents a ton for carrying the coal to Newport News, while the published -tariff was $1.45 per ton. Suit was brought by the Interstate Commission -to enjoin the carrying out of this contract. The Government challenged -the right of an Interstate carrier to perform a contract to sell and -deliver merchandise (coal) whenever the price to be received by the -railway is inadequate to cover its actual outlay, plus the published -freight rates, upon the ground that the actual result would be -discrimination and failure to collect the published tariff, in violation -of the Interstate Commerce Law. The answer of the railway company was in -effect that it charged the full rate for transportation, but sold the -coal at less than market rates, at a price in fact which involved a -loss, and that special circumstances justified it in so doing. The -companies maintained that, when acting in good faith, they had, as -dealers, the right to make contracts at a fixed price for sale and -delivery extending over a series of years and then go into the market, -buy the merchandise, and deliver it at destination, notwithstanding that -what they received therefor might not be sufficient to yield them a net -sum equal to the published freight rate, according to which shippers -generally were charged. - -In a strong decision rendered February 19, 1906, the Supreme Court -upheld the contention of the Government, declaring that a carrier cannot -deal in the goods it carries in such a way as to evade the provisions of -the Interstate Commerce Act, and therefore a railway cannot buy and sell -and underbid other owners of similar goods who are dependent on the -railroad for the transportation of their goods to market. “The existence -of such a power would enable a carrier, if it chose to do so, to select -the favored persons from whom he would buy and the favored persons to -whom he would sell, thus giving such persons an advantage over every -other, and leading to a monopolization in the hands of such persons of -all the products as to which the carrier chose to deal.... Because no -express prohibition against a carrier who engages in interstate commerce -becoming a dealer in commodities moving in such commerce is found in the -act, it does not follow that the provisions which are expressed in that -act should not be applied and be given their lawful effect.” - -The Court quotes an English case, Attorney General v. The Great Northern -Railway, in which the Vice-Chancellor decided on common-law principles -that a railway could not deal in coal because such dealing was -incompatible with its duties as a public carrier and calculated to -inflict injury on the public. - -The decision is important, and the railways, it is said, have already -begun to part company with their coal mines. But it must not be expected -that the evil at the bottom of this case can be so easily eradicated. It -will be a simple matter to put the coal mines in the hands of special -companies controlled by the same men who control the railways, and the -coal company and the railway can together continue to do precisely what -the railway alone has been doing in the double capacity of dealer and -carrier. - -Within a week of its decision sustaining the Commission in the -coal-carrying case, the Supreme Court has reversed the Commission and -the Circuit Court in the orange routing case. In 1899 all the railways -of Southern California fixed a through rate of $1.25 per hundred on -oranges from California to the Missouri River and the East, reserving -the right to route the freight. The Fruit Growers Association complained -of this as depriving shippers of their right to route their shipments -and as virtually constituting a pooling agreement or combination in -violation of the Interstate Act. The Commission and the Circuit Court -sustained this contention, but the U. S. Supreme Court has now (March, -1906) sustained the railroad plea that they have a right to fix through -rates on condition of determining the routing themselves. - - - B.—REGULATION OF RATES. - -In the Boston _Transcript_ for February 24, 1906, President Hadley, of -Yale University, criticises the Hepburn Bill because it makes “the -decision of the Commission itself final on all questions of fact,” and -he predicts that if such a bill is enacted into law it will be a -failure, although he does not believe it practicable to obtain a better -measure now. - -President Hadley bases his prediction of failure on his interpretation -of the experience of England. He says that the English Railway Act, -1873, “had many points of resemblance to the Hepburn bill. It provided -for a commission which, besides ascertaining the rates charged by -railroads and making reports to Parliament concerning their management, -should also be empowered to investigate complaints concerning unjust -rates of discrimination in facilities and give adequate and speedy -relief. It was intended to have the quick jurisdiction of these -Commissioners supplant the slow jurisdiction of the older courts.” - -“The twenty-sixth section of the act undertakes to restrict narrowly the -opportunity for appeal from the judgment of the Commission. The -Commissioners themselves may state a case; on the case thus stated, and -no further, the courts on appeal may decide what is the law. This was -intended not only to shut out the retrial of questions of fact, but to -give to the Commission, as far as the circumstances admitted, the power -of deciding which were questions of fact and which were not.” - -The Committee of 1883 is quoted as finding that “a case has been made -out for granting to litigants before the Railway Commission a right of -appeal,” and we are told that the Committee were “all agreed that the -attempt to prevent appeals from the Commissioners’ decisions had been a -complete failure.” - -President Hadley further says: “Parliament has abandoned the theory on -which the act (of 1873) was based, because the courts did not carry out -the law, but insisted on retrying questions in their entirety, instead -of acquiescing in the attempt to separate the law from the facts.” - -And we are told that “the evil effects of the attempt to give the -English Railroad Commission power of fixing rates did not stop here. The -attempted performance of this duty took up so much of their time that -they failed to perform other duties, which under more favorable -circumstances they might have carried out efficiently and usefully. They -did not have that influence on the formation of railroad tariffs which -their experience and high position would otherwise have secured.” - -Now as a matter of fact the English law never attempted to give the -Railway Commission power to fix rates, except a very limited power in -relation to through rates when the companies cannot agree, nor was it -intended that the Commission should have anything to do with the -“formation of tariffs.” Rates are fixed, not by the Commission, but by -Parliament with the advice of the Board of Trade. When Parliament orders -a revision of the maximum rates, the railways and the Board of Trade try -to agree on new schedules, and the Board embodies its conclusions in -Provisional Orders or rate bills which are passed by Parliament with or -without amendment as it sees fit. This was true in 1873 and has been -true ever since. The Commission’s duty in this connection was and is to -hear complaints of undue preference, and rates alleged to exceed the -maxima fixed by Parliament. If a through rate proposed by any company is -objected to by any forwarding company, the Commission has power to allow -or reject the rate subject to the limitation that it cannot require a -company to carry at lower mileage rates than it is legally charging for -like business on any other line between the same points. (Sections 11, -12, Railway Act of 1873.) The Commission may also determine the division -of through rates if the companies cannot agree. Since the Railway Act of -1894 the Commission has jurisdiction under Section 1 to order a return -to former rates charged by the company in case complaint is made of an -increase above the rates charged in 1892 (the date of the last -Provisional Orders or tariff revision), and the burden of proof is on -the company to show that the increase is reasonable. This puts a -limitation on the companies’ rate-making power in addition to the limit -of the parliamentary maxima, for no matter how much below the maximum a -rate in actual use in 1892 might have been, it cannot be increased if -the Commission on complaint and hearing forbids it. - -Further, it is not the case that Parliament “abandoned the theory of the -act of 1873” in the sense the reader might gather from the statements -made by President Hadley. On the contrary, the Railway Act of 1888 -(which resulted from the investigation of 1882, quoted by Hadley) -distinctly provides in section 17 that “no appeal shall lie from the -Commissioners upon a question of fact.” Subject to this provision an -appeal was given to a superior court of appeal, the change being that -under the old law the case went up on a statement by the Commission, -which could therefore itself determine what were questions of law and -what were questions of fact, while under the new law the case went up on -the record and the court above determined what questions of law were -involved. But the new law is exactly like the old in making the judgment -of the Commission final on all questions of fact. - -The truth is that England never attempted anything like the system of -regulation embodied in the Hepburn Bill; never delegated to any -commission the power to fix reasonable rates or make reasonable -regulations in place of rates or regulations found on complaint and -hearing to be unjust, but she has done and continues to do the other -thing that President Hadley gives us to understand she has tried and -abandoned, viz., the intrusting of power to a Railway Commission to -render final decision on questions of fact. - -In the _Transcript_ of April 1, 1905, President Hadley says he “urged -that a single hearing in the railroad court was better than two -successive hearings by two different kinds of bodies. Mr. Hepburn’s -committee desires to avoid the double hearing, but it undertakes to do -it by eliminating the court instead of the Commission. There is reason -to fear that this plan will not work.” - -That may be true. There is reason to fear that no plan for government -control of these giant interests will work so long as the ownership is -divorced from the said control. As stated in the text, one of the ablest -and most honorable of our railroad presidents, in answer to my question -as to what would happen if the Interstate Commission were really given -power to fix rates, replied, “The Commission would have to be -controlled, that’s all.” And when I quoted this to one of the leading -members of the Interstate Commission his comment was, “I always said the -railroads would own the Commission as soon as it was worth owning.” - -Even without owning the Commission the railroads can block it pretty -effectually by secret practices, extensive forgetfulness on the witness -stand, persistent persecution of shippers who make complaint, cunning -evasions, and interminable litigation. It is quite likely the proposed -regulation will not realize what is hoped for from it, but we cannot -predict such failure from English experience as President Hadley does -when he says, “The history of English railroad regulation shows that a -similar measure, passed under closely analogous circumstances, failed to -do the good which its advocates expected. The same failure is likely to -be repeated in the United States.” The Hepburn Bill in its scope and -directness is very different from anything that England has attempted. -It is quite likely that England may try some more vigorous measure than -she has yet adopted, but in spite of all her efforts at regulation Mr. -W. M. Acworth, the classic railway writer of England from the railway -standpoint, corresponding to President Hadley in this country, told me a -few months ago that dissatisfaction with the railway situation is so -great in England that “9 out of 10 would vote for public ownership of -the roads if the question were submitted to-morrow.” - -The general failure of regulation in England to accomplish what was -expected of it, may suggest a broad conclusion as to this country, but a -specific conclusion from any parallel to the Hepburn Bill is not -possible, because no such parallel has been tried. - -President Hadley thinks one hearing is enough, provided it is a hearing -before a court, not before the Commission. Like the railroads, President -Hadley has no use for the Commission. The reason perhaps is the -conscious or subconscious appreciation of the fact that rate-making -involves a vigorous _administrative_ element, which the Commission has -shown a tendency to use with great effectiveness, while a body -constituted as a court, by its very nature and traditions, is loath to -exercise administrative power or in any way disturb its exercise by the -companies except on the clearest kind of proof of the adequacy of the -new rate or condition proposed, which cannot in many cases be obtained -at all except by _bona fide_ trial of the new rate or regulation, since -a rate that is even below the present operating cost may develop traffic -enough to give it ample justification. Courts do not like to trust to -future proof. If rates do not seem justified on existing facts as shown -by accounts presented by the companies, the courts are apt to turn the -new rates down without a trial, as the United States Supreme Court did -in the Nebraska case when the law of that State fixing rates on local -traffic was declared unconstitutional. The companies made the division -between through local costs to suit themselves, and the Court not only -accepted their figures, but neglected to take into account the fact that -lower rates might easily develop new traffic enough to cover the slight -additional margin needed even on the companies’ own showing. - -President Hadley says: “What the United States needs is an act under -which the Commission will take part in the making of tariffs and give -effect to the public interest in the general questions of railroad -management, leaving the specific cases of violation to be stopped or -punished by the courts.” Very good. But how is the Commission to take -part in the making of tariffs? If it is to do any more than to give -advice (the efficacy of which is nil when it comes up against the Beef -Trust, Standard Oil, or other big private interest), it must have -authority, general or particular, to fix rates when the railways do not -make them just and reasonable. In England Parliament fixes maximum rates -on the basis of Board of Trade studies, and the commission acts as a -court. The plan has not prevented either discrimination or extortion, -but has taken the life out of the railways to a large extent. In this -country it is proposed to try the plan of letting a public board fix -individual maximum rates when injustice is shown. As there is an appeal -to the Federal courts and as Hadley declares that the courts insist on -retrying questions in their entirety, it would seem that the very system -President Hadley advocates would really come into being under the -Hepburn Bill,—the Commission will have a part in fixing the rates, and -violations of law will really be determined by the courts. - - - - - INDEX - - - [References are to pages.] - - A - - ACWORTH, W. M., Appendix B. - - ALABAMA MIDLAND CASE, 95. - - ARMOUR CAR-LINES, 151, 174–207. - mileage, 175, 188, 190. - speed of cars, 177, 178. - passes, 180. - exclusive contracts, 177, 180, 182, 190. - icing charges, 181–186, 194–196. - espionage, 185. - fixing rates, 186–189. - lax inspection, 188–189. - low minimum carload, 189. - rebates and profits, 190, 191, 194. - cipher code, 197. - - AUSTRIA, 315. - - - B - - BACON, E. P., - testimony, 111. - - BAKER, RAY STANNARD, - on Beef Trust, 153. - - BALTIMORE, - discriminated against, 226. - - BARBED WIRE CASE, 88. - - BASING-POINT SYSTEM, 98, 208 _et seq._ - - BEEF, - billed for export, 225. - - BEEF TRUST. (See ARMOUR.) - controls rates, 152. - runs private cars, 176. - intimidates roads, 177. - discriminations, advantages, etc., 176–207. - shipments of, 179. - favored by rates, 186–187. - Boston books destroyed, 250. - packer and road director, 76. - - BELGIUM, 315. - - BIDDLE OF SANTA FE, - testimony, 114, 124 _et seq._ - in salt case, 169. - - BISMARCK, 316. - - BLANCHARD, GEORGE R., - quoted, 107. - on ticket scalping, 20. - - “BLIND BILLING,” - Standard’s cars, 75. - - BOOKS DESTROYED, 248–250. - - BOSTON & ALBANY, 105–107. - - BOWIE COMPRESS, 68. - - BRICK CASE, - New Jersey to North Carolina, 157. - - BROKERS, TICKETS, 20. - - - C - - CALEDONIAN COAL CO., 126–129. - - CALIFORNIA FRUIT TRANS. CO., 180. - - CAMDEN IRON WORKS, - rebates, 122. - - CANADA, 327. - - CANNON FALLS CASE, 212. - - CAPITAL CITY GAS COMPANY’S REBATES, 164. - - CARLOAD, MINIMUM, 189. - - CARLOADS & L. C. L., 156. - - CAR-MILEAGE, - Pullman cars, express, refrigerator cars, etc., 58. - oil, 73. - Armour, 175, 188, 190. - Mr. Hill on, 178. - - CARS DENIED, 66, 160. - - CASSATT, A. J., - rebates, 77. - testimony, 32–33. - - CHAOS OF RATES, 156, 157. - - CHARLOTTE, N. C., CASE, 208. - - CHATTANOOGA CASE, 97. - - CHESAPEAKE & OHIO, - discriminations, 64. - coal-carrying case, Appendix A. - - CINCINNATI MAXIMUM RATE CASE, 218. - - CIPHER CODE, - Armour, 197. - - CITIES, - growth of, at expense of country, 219. - - CLASSIFICATION, - flour and wheat, 70. - soap, Pearline, patent medicines, 71. - railroad ties and lumber, 72. - discrimination by, 70, 155. - - COAL, - cars denied, 66, 160–162. - loading by tipple, 140. - Chesapeake & Ohio Case, Appendix A. - - COCKRELL, COMMISSIONER, - on quantity allowances, 149. - appointed to commission, 290. - - COLORADO FUEL & IRON CO., - rebates, etc., 124–141. - - COMMODITY, - rates, 70. - discriminations, 150. - - COMMON LAW, - requires impartiality, 1. - - CONFISCATION, - fears of, ungrounded, 290. - - CONTRACTS, - Armour’s exclusive, 177, 180, 182, 190. - - COOLEY, THOMAS M., 43. - as arbitrator, 152. - - CORDELE, GA., 100. - - CORRIGAN OF CLEVELAND, 34. - - COTTON-SEED-OIL CASE, 162. - - COYNE BROS., 183. - - CUMMINS, GOVERNOR, 117, 211. - - - D - - DANVILLE, VA., 209. - - DAVIES OF CHICAGO, - strawberries carried free, 145. - - DAVIS, C. WOOD, - passes cost $33,000,000, 12. - - DEAD-HEAD, - passenger cars, 18. - passengers, 2–15, 46, 49, 50, 180. - - DECADE OF FEDERAL REGULATION, 104–109. - - DEFIANCE OF LAW, 238–240. - - DEMURRAGE, 143. - - DENMARK, 315, 328. - - DENVER, - discriminated against, 92–94, 212, 297–298. - - DEPEW, CHAUNCEY, - on pooling, 267. - - DEPRECIATION OF LANDS CAUSED BY REBATES, 26. - - DISCRIMINATION, - motives for, 23. - history and investigations, 24, 120. - early cases, 25. - varieties discovered by I. C. C. first year, 47. - H. F. Douseman, 54. - passes, 2–15. - reasons for, 2. - C. & O. coal, 64, Appendix A. - great number of, 2. - in facilities, 66. - by classification, 70, 155. - confiscates land values, 26. - Hepburn cases, 27 _et seq._ - Standard Oil, 73–76. - beef, 76–83. - between localities, 87–94. - in favor of long hauls, 95–103. - Industrial Commission on, 108. - “all stopped,” etc., 113. - under Elkins Bill, 115–118. - Colorado F. & I. Co., 124. - various other forms, 142–149. - commodity, 150. - horses, cattle, and Jersey brick, 156–157. - to Beef Trust, 151–152. - oranges, 153. - hay and lumber, 154. - routing, 159–160. - refusal to furnish cars, 160–161. - cotton oil case, 162. - division of rates to fake terminals, 166–173. - in refrigerator charges, 181–186. - against independent oil, 201–205. - against non-competitive points, 208–215. - against New England, 217. - against rural points, 219. - against certain cities, 216–217. - in favor of foreign commerce, 221–226. - summary of methods and results, 228 _et seq._ - $10 apiece for hams? 232. - defended, 233. - disturbance of business, 236. - “cannot be stopped,” 237. - difficulties of abolishing, 241–251, 272–273. - countries where there is none, 315, 317. - - DISTANCE TARIFF, 287, 291, 293, 295. - - DIVISION OF RATE. (See TERMINAL RAILWAYS.) - - DOLLIVER BILL, 257. - - DOLLIVER, SENATOR, - on recent rebates, 116. - non-competitive points, 219. - - DOUGLAS, GOVERNOR, - pays his fare, 11. - - DOUSEMAN, H. F., 54. - - DRESSED MEAT, - rates, 151, 186–189. - billed for export, 225. - - - E - - “ELASTICITY” IN RATES, 286. - - ELEVATOR ALLOWANCES, 62, 148. - Industrial Commission on, 63. - - ELKINS ACT, - effect, 110. - in Wisconsin, 121, 122. - discriminations since, 140. - opinions as to efficiency, 252, 253. - only one case under, 253. - - ELKINS, SENATOR, 111–112. - - EMPIRE CO., 31. - - EMPORIA, KAN., 91. - - EMPTIES, - returned free for Standard, 33. - Armours’, rushed back and paid for, 175. - - ENGLAND, 318–327. - - EQUALIZATION OF RATES, 291–296. - - ERIE ROAD, - early cases, 28. - - ESCH-TOWNSEND BILL, - supporters lost passes, 10. - provisions, 260. - - ESPIONAGE, ARMOUR, 185. - - EXCLUSIVE CONTRACTS, - Armour cars, 177, 180, 182, 190. - - EXPENSE BILL SYSTEM, 62, 143. - - EXPORT RATES, - low, 84, 221–226. - not fair to all ports, 86. - on flour, 86. - - - F - - FACILITIES DENIED, 66, 88, 160. - - FALSE BILLING, 61, 144. - - FERGUSON, E. M., 199. - - FICTITIOUS CLAIMS, 143. - - FINK, ALBERT, 267, 271. - - FISH, STUYVESANT, - on scalping, 19. - discriminations, 237. - - FLAT RATES, 291–295. - - FLOUR AND WHEAT, 70. - - FOLK, GOVERNOR, - on passes, 6. - - FORAKER BILL, 258. - - FOREIGN COUNTRIES, HINTS FROM, 313–330. - Austria, Switzerland, Denmark, Hungary, etc., 313–315. - Germany, 313. - France, 317. - England, 318. - Canada, 327. - Holland, 328. - Norway and Sweden, 328. - New Zealand, 329. - Australia, 329. - South Africa, 330. - - FOREIGN MANUFACTURES FAVORED, 84. - - FRANCE, 317. - - FREE CARTAGE, 59. - St. Louis cases, 142. - - FREE FREIGHT, NO BILLS, 145. - - FREE STORAGE, 60. - - - G - - GEORGIA, - Railroad Commission cases, 98. - - GERMANY, 316. - - GLASGOW, 314. - - GOVERNMENT, - rates not on mileage principle alone, 287, 291–295. - ownership of railways, 313–317, 328–332. - - GOWAN, FRANKLIN B., - on railway favoritism, 235. - - GRAIN, - price controlled by roads, 63. - - GRANGER LAWS, 26. - - GRANT CHEMICAL CO., - free cartage, 142. - - GROSSCUP, JUDGE, - on discrimination, 233. - - GULF PORTS, 225. - - - H - - HADLEY, A. T., 14, 219–315. - on Hepburn Bill, Appendix B. - - HARVESTER CASE, 135. - terminal road, 169. - - HAZEN’S SWITCH CASE, 141. - - HEARST’S BILL, 260. - - HEPBURN BILL, 262, Appendix B. - - HEPBURN REPORT, 27. - - HILL, JAMES J., - discrimination, 115, 237. - refrigerators, 175, 178. - - HINTS FROM OTHER COUNTRIES, 313–330. - - HOLLAND, 328. - - HOPE COTTON OIL CASE, 162. - - HORSES, CHAOS OF RATES, 156. - - HUNGARY, 314. - - HUTCHINSON SALT CASE, 167–169. - - - I - - ICING CHARGES, 181–186, 194–196. - - IMPORT RATE CASE, 85. - - IMPORTS AND EXPORTS, 84. - - INDUSTRIAL COMMISSION, - on discrimination, 108. - on exports, 221. - on elevator rebates, 63. - on passes, 228. - - INGALLS, M. E., 104, 239. - - INSPECTION, - of Armour cars, lax, 188–189. - - INTERSTATE COMMERCE ACT, 41. - effects of, 49. - amendment of, 48, 89. - does not cover express companies, etc., 277. - - INTERSTATE COMMERCE COMMISSION, - created, 41. - chapter on, 43. - first report, 43–46. - on long haul, 96, 102. - overruled by Supreme Court, 96. - orders disobeyed, 100, 153. - rates condemned by, 102. - ten years of regulation, 104–109. - complaints received since Elkins Act, 117. - on effect of Elkins Act, 118. - on terminal roads, 170. - railways public facility, 234. - bill before Congress, 261. - criticised, 276. - alleged errors of, 279. - work of, 280. - appointments to, controlled by Senate, 289. - on equalization of rates, 293. - - INVESTIGATIONS, 24, 120. - (See INTERSTATE COMMISSION.) - - IOWA LONG AND SHORT HAUL CASES, 211. - - - J - - JAPAN, 328. - - JUDSON & HARMON REPORT ON SANTA FE, 133. - - - K - - KANSAS, - oil fight, 203, 283. - - KAOLIN, 225. - - KEARNEY, NEB., 90. - - KELLOGG ELEVATOR CASE, 148. - - KINDEL OF DENVER, 93, 297. - - KNAPP, I. E., 204. - - KNAPP, MARTIN A., - government officials have passes, 13. - on government rates, 287. - on distance tariff, 295. - - - L - - LA FOLLETTE, GOVERNOR, - investigations, 120. - - LAKE SHORE, - cuts beef rates, 80. - - LARRABEE, GOVERNOR, 27. - - LAW, DEFIANCE OF, 238–240. - - LAWSON, THOMAS W., 228. - - LINCOLN (NEB.) PACKING CO., 82. - - LOCALITY DISCRIMINATIONS, - barbed wire, 88. - Grinnell factory, 87. - Norfolk, Neb., 88. - ruining small towns, 89. - promoting towns, 89, 90. - Kearney & Omaha, 90. - St. Cloud, 90. - Emporia, 91. - Spokane, 91. - rails to Colorado, 92. - against Denver, 93. - (See CHAPTER ON LONG-HAUL DECISION, 95–103.) - - LOMBARD, JOSIAH, - testimony, 32. - - LONG AND SHORT HAUL CASES, 25, 27, 29, 47, 76, 87, 91, 92, 95–103, - 208–215. - - LONG HAUL, - decisions of Supreme Court, 95–103. - prohibition of abuse, 270. - - - M - - MAINE, - legislators have passes, 8. - - MASS. RAILWAY COMMISSION, - report on Boston & Albany, 106. - - MAXIMUM RATE CASE, 218. - - McCABE, A. C., 56, 77. - - MEAD, J. D., & CO., 184. - - “MEM. BILL” METHOD, 163. - - MESSAGES, - President Roosevelt’s, 256. - - MIDGLEY, J. W., - testimony, 188, 199. - - MIDNIGHT TARIFFS, 76, 147. - - MILEAGE PAYMENTS ON CARS, - Pullman, etc., 58. - oil, 73. - Armour, 175, 178, 188. - - MILK RATES, - flat, 294. - - MILLING-IN-TRANSIT, 145. - - MINER, D. W., 163. - - MINNESOTA, - investigation, 122. - - MISSOURI, - eliminating pass evil, 7. - - MOFFAT, E. O., - elevator allowances, 149. - - MONOPOLY ELEMENT IN RAILWAY BUSINESS, 233. - - MORAWETZ, VICTOR, 115, 131, 247. - - MORGAN, J. PIERPONT, 64. - - MORRIS, NELSON, - stock yards, 68. - - MORTON, PAUL, - testimony, 81, 84. - reasons for passes, 13. - fuel and iron case, 131. - letter to Roosevelt, 132. - Chicago _Daily News_, 136. - letter from, 138. - - - N - - NEWCOMB, H. T., 104, 282. - - NEW ENGLAND, - high rates, 217. - - NEW YEAR’S RESOLUTIONS, 79. - - NEW YORK CENTRAL, - early cases, 28. - - NEW YORK, NEW HAVEN & HARTFORD RAILROAD, - on peaches, 150. - coal, 217. - - NEW ZEALAND, 313, 329. - - NORFOLK (NEB.) CASE, 88. - - NORTHERN GRAIN COMPANY, - rebates $30,000 a year, 18. - fought La Follette, 122. - - - O - - OIL. (See STANDARD OIL COMPANY, TEXAS OIL, KANSAS.) - - ORANGE, - rate, 153. - routing case, 160, Appendix A. - - OUTLOOK, THE, - quoted, 238. - - - P - - PASSENGER REBATES, 17. - - PASSES, 2, 15. - and politics, 3. - Pennsylvania Railroad, 3. - reasons for, 2, 9, 10, 13. - legislators, congressmen, etc., 3, 5, 8, 10. - refused, 5. - Governor Folk on, 6. - Governor Douglas, 11. - jurors, 8. - judges, 9. - auditors, etc., 9. - Missouri, 7. - Maine, 8. - Stickney’s sheriff story, 11; Washington address, 13. - Martin A. Knapp, 13. - Paul Morton on, 13. - A. T. Hadley, 14. - C. Wood Davis, 12. - in foreign countries, 14, 15. - held unlawful, 46. - within a State, 49, 50. - owners of private cars, 180. - - PATENT MEDICINE CLASSIFICATION, 71. - - PEARLINE CLASSIFICATION, 71. - - PENNSYLVANIA RAILROAD, - passes, 3. - passes in 1906, 4. - rebate war, 31. - stand by any rate, 56. - favors foreign trade, 84. - cuts beef rate, 78. - milling-in-transit discrimination, 146. - sued for failure to accord car service, 160. - - PENNSYLVANIA STATE CONSTITUTION, - prohibits passes, 3. - - PHILADELPHIA, - passenger case, 217. - - PHILADELPHIA NORTH AMERICAN, - passes, 4. - stop-overs, 217. - - PLACE DISCRIMINATIONS, - long hauls, 208–215. - against St. Louis and other places, 216. - - POOLING, - advocated, 265. - difficulties of, 266–270. - - PRIVATE CARS, - to favored individuals, 18. - passenger, 58. - freight, 118. - abuses, 174. - advantages, 174–175. - increase of, 198. - - PROCTOR & GAMBLE CASE, 155. - - PROTECTIVE TARIFF, - for England, 86. - nullifying, 221. - - PROUTY, COMMISSIONER, - on the Elkins bill, 112. - on Santa Fe case, 133. - on the Colorado F. & I. case, 139. - on free wheat, 145. - on train loads, 234. - railway officials would not tell truth, 243–247. - commission rates, 284. - - PRUSSIAN CABINET STATEMENT, 316. - - PUBLIC v. PRIVATE INTEREST, 308. - - PULLMAN CARS, - mileage rate, 58. - - - R - - RAILWAY OFFICIALS, - as law breakers, 238–240. - - RATE REGULATION, - pros and cons, 253. - advocated by President Roosevelt, 256. - by Interstate Commission, 261, 274. - by 18 States, 275. - opposed by railroad men, 276, 278, 285. - merits of controversy, 299. - - RATE SCHEDULES DECEPTIVE, 148. - - RATES, - fixed to suit the Standard, 75. - condemned by I. C. C., 102. - on packing-house products and fruit, 186. - fixed by Government not strictly mileage, 287. - complexity of, 288. - making by “instinct,” 289. - all the traffic will bear, 289. - equalization of, 291–295. - - REAGAN CASE, 285. - - REBATES, - on tickets, 19. - substitutes for, 57. - New York investigation of, 27. - on beef, 76, 79. - Wisconsin investigation, 120. - to Armours from “C. & A.” and “U. P.,” 191. - Santa Fe car-line, 193–194. - cost to railways, 235–236. - - RECORDS DESTROYED, 248–250. - - REFRIGERATION CHARGES, 181 _et seq._ - - REFRIGERATOR CARS, 174–207. - - REFUSAL, - to haul goods, 68, 162. - to furnish cars, 66, 160. - - REGULATION OF RAILWAYS, - work of I. C. C., 104. - Texas Railway Commission, 105. - efforts at, 254–255. - difficulties of, 264–265, 272–273. - by State commissions, 254–255. - can it succeed? 306. - in England, 319–327. - in Canada, 327. - - REMEDIES, 252, 300. - - RICE, GEORGE, - story of, 34–36. - denied car-mileage, 74, 75. - - RIPLEY, PRESIDENT E. P., 135. - in Chicago _Inter-Ocean_, 137. - letter from, 137. - on packing-house business, 187. - discriminations permanent, 237. - - RIPLEY, PROFESSOR W. Z., 116, 208. - - ROBBINS OF ARMOUR CAR-LINES, 192. - - ROGERS COAL COMPANY, - denied cars, 66. - - ROOSEVELT, PRESIDENT, - favors rate regulation, 115. - messages, 256. - ruling on Paul Morton, 135. - letter to Paul Morton, 136. - - ROUTING, - fees for, 159. - orange routing case, 160, Appendix A. - by railroads unlawful, 160. - - - S - - SALT LAKE CITY, 212. - - SALT TRUST CASE, 167. - - SANTA FE, - early management, 54. - Colorado Fuel Co. case, 124–141. - Hutchinson Salt case, 167–169. - car-line, 191–194. - - SCALPING, 19–20. - - SENATE COMMITTEE OF 1885, 37–41. - - SENATE COMMITTEE OF 1905, 111–117. - - SIMMONS HARDWARE COMPANY, 142. - - SOAP CLASSIFICATION, 71, 155. - - SOCIAL CIRCLE CASE, 100. - - SOUTH AFRICA, 329. - - SPECULATION IN LAND AND TOWN SITES, 90. - - SPOKANE, WASHINGTON, 91, 213–215. - - SPRINGFIELD REPUBLICAN, - Pennsylvania passes, 4. - - STAMP MILL FROM CHICAGO TO SAN FRANCISCO VIA CHINA, 223. - - STANDARD OIL COMPANY, - car-mileage, 73. - barrel discrimination, 73. - underbilling cars at East Boston, 74. - paint out old car-numbers, 75. - control of New England, 75. - shuts out Western oil, 75. - rebate of 1872, 29. - ten advantages, 30. - secures terminals, 31. - private cars, 176. - favored by rates, 200–201. - - STATE OWNED RAILROADS, - comparisons, 308–311, 313–315. - - STATE RAILWAY COMMISSIONS, 254–255. - - STATE TRAFFIC, 142. - - ST. CLOUD, MINNESOTA, 90. - - STEEL RAILS, - export rates on, 222. - - STEEL TRUST TERMINAL RAILROAD, 171. - - STEWART, A. T., - rebates, 28. - - STICKNEY, A. B., - quoted, 87. - story of passless sheriff, 11. - on midnight tariffs, 116. - on passes, 13. - on rebating, 187. - - ST. LOUIS, - discriminated against, 216. - - STOCK YARD GRAFT, 68. - - STOPPAGE-IN-TRANSIT, 60. - - STRAWBERRY CASE, 174–175. - - “STRAW MAN” SYSTEM, 142. - - STREYCHMANS, H. J., - testimony, 195–198. - - SUBSTITUTES FOR REBATES, 57. - - SUMMARY OF METHODS AND RESULTS, 228. - - SUMMERVILLE CASE, 99. - - SUWANEE CASE, 208. - - SWIFT AND COMPANY, - indicted, 76. - - SWITCH DENIED, 163. - - SWITCHING CHARGES, 140. - - SWITZERLAND, 315. - - - T - - TARIFFS, - 1000 changes daily, 288. - - TAX, - Wisconsin roads, 120. - - TERMINAL CHARGES, 59. - - TERMINAL RAILWAYS, 118, 166. - logging allowances, 146. - Hutchinson salt case, 167. - International Harvester Company, 170. - Steel Trust, 171. - division of rates, 171. - Illinois Glass Company, 172. - - TEXARKANA CASE, 162. - - TEXAS AND PACIFIC CASE, 84. - - TEXAS OIL DISCRIMINATION, 201. - - TEXAS RAILWAY COMMISSION, 105. - - TICKET SCALPING, 19–22. - complaint of, by I. C. C., 50–51. - - TIES, - shipment prevented, 150. - rebate on, 151. - - TRAIN LOADS, 234. - - TUTTLE, PRESIDENT, - on division of rate, 171. - cargo-of-flour story, 234. - on pooling, 267. - on the I. C. C., 276. - Worcester Wise case, 292. - on getting rebates, 303. - - - U - - UNION PACIFIC, - steel rail rate, 72. - - UNION STOCK YARDS BEATS RIVALS, 68. - - UNITED STATES SUPREME COURT, - Counselman case, 52. - discriminations, 59. - import rate decision, 85. - ruled that I. C. C. cannot fix rates, 92. - long-haul decisions, 95. - Social Circle case, 100. - maximum rates, 218. - on pooling, 270. - reversals of I. C. C., 283, Appendix A. - coal-carrying case, Appendix A. - orange routing case, Appendix A. - - - V - - VANDERBILT, W. H., - before Hepburn Committee, 28. - stockholder in Standard, 31. - - - W - - WATSON OF PORTER BROS., 191. - - WILLCOX, DAVID, - criticism of I. C. C., 279. - - WISCONSIN, - railroads give passenger rebates, 17. - revelations, 120. - - WORCESTER WIRE CASE, 292. - ------ - -Footnote 1: - - See New England Exp. Co. _v._ Maine Central R. R., 57 Me. 188; - Fitchburg R. R. _v._ Gage, 12 Gray (Mass.), 393; Kenny _v._ Grand - Trunk R. R., 47 N. Y. 525; Messenger _v._ Penn. R. R., 8 Vroom (N. - J.), 531; Chicago, etc., R. R. _v._ People, 67 Ill. 11; Wheeler _v._ - San Francisco R. R., 31 Cal. 46. - -Footnote 2: - - Pass discrimination alone, it is estimated, amounts to some 200,000 - free transits a day, or over 70 millions in a year. And as for freight - discriminations, the reader who follows this history through will see - that like the leaves of the forest they defy computation. Just a hint - may be given here. Every day that one of the 300,000 private cars is - carried at the present mileage rates, a discrimination is made in - favor of the owner of the private car,—a hundred millions of unjust - discriminations, possibly, in this one item. - -Footnote 3: - - The New York Central, Baltimore and Ohio, and some other lines - announced the same purpose as the Pennsylvania in respect to passes - after January 1, 1906, but with them as with the Pennsylvania it - appears to be a case of more careful discrimination in the use of - discrimination, and an appreciation of the fact that it is very - important to make a good impression on the public mind just now, in - view of the widespread demand for drastic legislation in the direction - of railroad regulation. - -Footnote 4: - - A number of the States have laws against passes. The Interstate - Commerce law forbids them. And they are always against the moral law - whether they run beyond the State line or not. - -Footnote 5: - - In one case it appeared that a leading railroad attorney had been for - years in the habit of supplying jurors with passes. Opposing counsel - brought out the fact that all the jurors in the case on trial had - accepted passes from the railroad company which was the defendant in - the case, and that to have an equal chance for justice his client - would have to give each juror $50 to offset the railroad gifts. The - judge discharged the whole jury. - -Footnote 6: - - Condensation of statement of Texas Railroad Commission’s Report for - 1898, p. 17. See, further, “Bribery by Railway Passes,” _North - American Review_, 138, p. 89; and _Public Opinion_, 26, p. 167, Feb. - 9, 1899: “The Pass Evil in Three States” (Indiana, Minnesota, and - Washington). - -Footnote 7: - - “Railway Passes and the Public,” _Forum_, 3, p. 392. - -Footnote 8: - - Vol. iv, pp. 456–457. - -Footnote 9: - - American Railroads as Investments, p. 30. - -Footnote 10: - - See C. Wood Davis’ article in _The Arena_, vi (1891), pp. 281–282. - -Footnote 11: - - See the evidence cited below. - -Footnote 12: - - Report of U. S. Industrial Commission (1900), iv, p. 135. - -Footnote 13: - - Testimony before U. S. Industrial Commission (1900), iv, p. 490. - -Footnote 14: - - _Forum_, 3, p. 392. - -Footnote 15: - - Railroad Transportation, p. 109. - -Footnote 16: - - In order to test the attitude of the government roads, I did my best - to get passes, trying first through the American ambassadors in - Vienna, Berlin, and Brussels, and afterward by direct appeal to the - railway management. But it was of no use, although I had a letter from - the Chairman of the United States Industrial Commission saying that I - had rendered the government valuable service in connection with the - work of the Commission, and that any courtesies shown me or assistance - afforded me in my researches would be a public service. I had other - strong letters from men of high distinction in the United States and - England, and our ambassador at Berlin had been president of my alma - mater when I was in college, and was specially friendly and helpful; - but I was assured that no amount of influence or pull could secure a - pass or any other personal favor on the State railways. - -Footnote 17: - - See _McClure’s Magazine_, December, 1905, where Ray Stannard Baker has - stated the leading facts. - -Footnote 18: - - See, for example, the testimony of Stuyvesant Fish, President of the - Illinois Central, before the United States Industrial Commission, - calling attention to the fact that while railway officials could be - prohibited by law from selling tickets below published rates, - individuals could not be so prohibited, and that some railways sold - their tickets to competitive points to brokers, paying them a - commission for making the sale, out of which the brokers scalped the - rate. (Industrial Commission, 1900, iv, p. 334.) - -Footnote 19: - - Industrial Commission, iv, pp. 457–458. - -Footnote 20: - - Hudson, “The Railways and the Republic,” p. 42. - -Footnote 21: - - Hepburn Report, N. Y. Legislature Investigation, 1879, p. 120. - -Footnote 22: - - The facts appear at full length in the reports of the Hepburn - Committee, the Select Committee of the United States on Interstate - Commerce, 49th Congress, 1st Session, Lloyd’s “Wealth against - Commonwealth,” and Miss Tarbell’s “History of the Standard Oil - Company.” - -Footnote 23: - - Tarbell’s “History of the Standard Oil Co.,” pp. 185–190; Lloyd’s - “Wealth against the Commonwealth,” pp. 87–88. - -Footnote 24: - - The Standard paid nominally 60 cents a barrel, but got a rebate of 49 - cents, so that their net rate was 11 cents per barrel against $1.90 - for the independents. See report of the Hepburn Committee (N. Y.), - 1879, and George Rice’s pamphlet on “The Standard Oil Trust.” - -Footnote 25: - - Quoted from a synopsis of the Report. - -Footnote 26: - - Railroad Freights, Ohio House of Representatives, 1879, pp. 159–163. - -Footnote 27: - - Hardy _v._ Cleveland & Marietta R. R., Circuit Court, Ohio, E. D., - 1887, 31 Fed. Rep. 689; Senate Select Committee on Interstate - Commerce, 49th Congress, 1st Session, p. 199. - -Footnote 28: - - Besides the references already given on the Rice affair, see the Trust - Investigation of Congress, 1888; the testimony in the Rice case before - the Interstate Commerce Commission, Nos. 51–60, 1887; Decisions of the - I. C. C., vol. 1, pp. 503, 722; vol. 2, p. 389; vol. 3, p. 186; vol. - 4, p. 228; vol. 5, pp. 193, 660; State of Ohio _v._ Standard Oil Co., - 49 Ohio St. Rep. 317; Lloyd, chapters xv, xvi, xvii; and Tarbell’s - History. - -Footnote 29: - - I. C. C., First Report, 1887. - -Footnote 30: - - Passes (annual in this case) to persons not in the regular service of - the carrier held unlawful. State _v._ Northern Pacific, p. 359, vol. - 2, Decisions, 1888. - -Footnote 31: - - Sale of 1000–mile tickets to commercial travellers at $20 while - charging others $25 illegal. Chicago & Grand Trunk, p. 147, vol. 1, - Decisions, 1887. - -Footnote 32: - - Paying commissions; selling tickets through brokers at reduced rates; - rate wars, etc. Pennsylvania, New York Central, Wabash, Chicago & - Alton, vol. 2, 1888, p. 513. - -Footnote 33: - - Discounts to shippers receiving more than 30,000 tons a year illegal. - Providence and Worcester, vol. 1, 1887, p. 170. - -Footnote 34: - - In many cases the direct rate between two points, X and Y, was found - to be greater than the combination of the rate from X past Y to a - competitive point Z and the local rate back from Z to Y. For example, - goods could be shipped from the Pacific coast to Kansas City and then - back to points west of Kansas City more cheaply than they could be - sent direct from the coast to these intermediate points. This enabled - a shipper informed of the combination rates to get an advantage over - one with less information who relied on the published tariffs stating - the rates between his place of business and the points to or from - which his shipments were to be sent. The Commission took up this - matter in 1887 and the traffic managers of the roads agreed to revise - their tariffs so that the direct local rate should in no case exceed - the through rate plus the local rate back from the terminus or - competitive point. This rule resulted in many material reductions of - the rates to intermediate points; for example, the points between - Denver and the Missouri River on the lines controlled by the Southern - Pacific. See Martin _v._ Southern Pacific R.R. I. C. C. Decisions, - vol. 2, 1888, pp. 1, 4. - -Footnote 35: - - A higher rate on oil in barrels than in tanks held unjust, vol. 2, p. - 365. Report, 1888, p. 128. - -Footnote 36: - - Report, 1888, p. 112. - -Footnote 37: - - _Ibid._, p. 114 _et seq._ - -Footnote 38: - - _Ibid._ - -Footnote 39: - - _Ibid._ - -Footnote 40: - - _Ibid._ - -Footnote 41: - - The Commission’s reports, 1889 to 1891, dealt with numerous - discriminations between localities and persons through free - transportation, commissions on the sale of tickets, combination rates, - rebates, free cartage, payment of yardage charges, excessive car - mileage on private cars, discounts for quantity, unfair - classification, distribution of cars, special tariffs, advantage or - disadvantage to particular commodities or methods of shipment, low - rates on goods for export, etc., etc. - -Footnote 42: - - Report, 1889, p. 10. - -Footnote 43: - - 5 I. C. C. Decis. 69, 1891. - -Footnote 44: - - _Ibid._; see also 5 I. C. C. Decis. 153, 1892. Case against the - Louisville and Nashville for granting passes to members of the city - council of New Orleans. - -Footnote 45: - - Investigation of the Commission, 1889. - -Footnote 46: - - Report, Interstate Commerce Commission, 1889, p. 14. - -Footnote 47: - - Pages 103–107, I. C. C. Rep. 1895. - -Footnote 48: - - Report, 1897, p. 61. - -Footnote 49: - - See p. 20 above. - -Footnote 50: - - Heard _v._ Georgia R. R., 1 I. C. C. Decis. 428, and 3 I. C. C. Decis. - 111. But the United States Supreme Court decided against the - Commission on this point May 1, 1892 (145 U. S. 263), and the B. & O. - tickets for parties of 10 or more at ⅓ less than the regular rates - were sustained. - -Footnote 51: - - 2 I. C. C. Decis. 649, and 3 I. C. C. Decis. 465. - -Footnote 52: - - This rule of exemption works great injustice under present conditions. - It was built into the common law when people were struggling against - oppressors in high places. But the conditions which made it useful - have long since passed away, and it is now simply a millstone about - the neck of justice. - -Footnote 53: - - Senate Committee, 1905, iv, pp. 2900–2901. Speaking of an - investigation of rebates on flour from Minneapolis and Duluth, the - Commission says (p. 8, Report for 1898): “All the railway witnesses - denied knowledge of any violation of the statute, and most of the - accounting officers testified to the effect that if rebates had been - paid they would necessarily know about it and that their accounts did - not show any such payments. It was nevertheless fully established by - the investigation that secret rate concessions had been generally - granted on this traffic and that the carrier had allowed larger - rebates to some of the flour shippers than to others.” - -Footnote 54: - - I. C. C. Rep. 1889, p. 75. - -Footnote 55: - - See I. C. C. Rep. 1889, pp. 15, 16, 126, 130, 132, 237, 239, 240–242; - Decisions, vol. 3, 1889, p. 89, 25% rebates on coal to certain points; - p. 137, low rates on goods marked for export (10 cents on one hundred - lbs. discount); p. 652, unlawful discount of 50% on emigrants’ - movables; Rep. 1890, pp. 111, 190, 192, coal rates; 183, discount for - quantity; 189, export; 101, 192, hogs and hog rates; 184, stock yards; - 99, 100, 185–187, oil; 112, 192, wheat and flour; 187, 190, private - cars; 188, special tariffs; and other unjust discriminations relating - to localities, privileges, etc., and not directly in point under the - head we are dealing with. - -Footnote 56: - - Testimony, U. S. Ind. Com. iv, p. 353. - -Footnote 57: - - I. C. C. Rep. 1890, p. 25. - -Footnote 58: - - I. C. C. Rep. 1896, p. 78. - -Footnote 59: - - _Ibid._, p. 82. - -Footnote 60: - - Industrial Commission, 1900, iv, p. 442. - -Footnote 61: - - I. C. C. Dressed-meat Hearing, December, 1901, p. 94; Chicago and - Alton manager to same effect for his road, p. 136. - -Footnote 62: - - I. C. C. Rep. 1898, p. 6. - -Footnote 63: - - 4 I. C. C. Decis. 1891, p. 630. For example, on one line between - Chicago and New York, “200 stock cars more than paid for themselves - and all repairs, etc., in 2 years, and thereafter earned for the - owners upwards of $100,000 a year on no investment.” See Report Iowa - Railroad Commission, 1891, p. 30. - -Footnote 64: - - I. C. C. Rep. 1889, pp. 15–16. - -Footnote 65: - - 9 I. C. C. Decis. 1, 1901 Rep., p. 36. As the circumstances were - substantially different in the two cases, the Commission said the - local charge to the drummer was “not necessarily unjust.” - -Footnote 66: - - An additional charge by the Santa Fe of $2 a car on cattle consigned - to the Union Stock Yards at Chicago, where the Santa Fe had for years - delivered cattle, was held unlawful by the Commission, and its - judgment was sustained by the United States Circuit Court, but - overruled by the Court of Appeals. I. C. C. Rep. 1896, p. 45. - -Footnote 67: - - Free cartage for a distant shipper and not for a nearer one is - equivalent to a rebate for the former. Hegel Milling Company v. St. - Louis, etc., Railroad, 5 I. C. C. Decis. 1891, p. 57. - -Footnote 68: - - The railway charged the same rates from the East to Grand Rapids as to - Ionia, although the former was 33 miles a longer distance point on the - same line of road, and in addition gave free cartage to Grand Rapids - companies. Complaint was made in September, 1888; April 26, 1890, the - Commission held the free cartage to be in effect a rebate, and ordered - the railroad to desist from giving free cartage in Grand Rapids. (3 I. - C. C. Decis. 60; I. C. C. Rep. 1896, pp. 37–39; 1897, pp. 94–95.) The - Circuit Court upheld the order October, 1893 (57 Fed. Rep. 1002), but - the Circuit Court of Appeals overruled the decision April, 1896 (74 - Fed. Rep. 803), and the United States Supreme Court sustained the - Court of Appeals. (167 U. S. 633, May, 1897.) The Commission made the - mistake of resting the case on the 4th or long-haul section instead of - the 2d or 3d sections relating to undue preference, and the railway - should have been allowed the option of removing the discrimination by - giving free cartage in Ionia or making a lower rate there. The order - to discontinue free cartage in Grand Rapids was arbitrary and - unnecessary. - -Footnote 69: - - I. C. C. Rep. 1889, pp. 18–19. - -Footnote 70: - - Commercial Club _v._ Rock Island, 6 I. C. C. Decis. 1896, p. 647. - -Footnote 71: - - Pennsylvania Millers Association _v._ Reading R. R., 8 I. C. C. Decis. - 1900, p. 531. - -Footnote 72: - - I. C. C. Rep., 1898, pp. 46–47; 7 I. C. C. Decis. 1898, p. 556: - Illinois Central, charging some shippers for storage while others are - not charged for it, unlawful. - -Footnote 73: - - Industrial Commission, iv, 541. - -Footnote 74: - - _Ibid._, 543. - -Footnote 75: - - Investigation of expense bill frauds on grain shipments from Missouri - River points to Chicago and other destinations. I. C. C. Rep. 1896, p. - 75, on Santa Fe case. 7 I. C. C. Decis. 1897, p. 240, expense bill - system held illegal. - -Footnote 76: - - I. C. C. Rep. 1896, p. 79. - -Footnote 77: - - _Ibid._, p. 77. - -Footnote 78: - - _Ibid._, p. 80. The Commission has not felt able to declare such an - allowance unlawful (10 I. C. C. Decis. 1904, p. 309), but it seems - clear that substantial preferences may be given in this way. - -Footnote 79: - - Report, U. S. Industrial Commission, 1900, iv, p. 79. - -Footnote 80: - - I. C. C. Rep. 1896, pp. 46–48. - -Footnote 81: - - There is a statement concerning it in the I. C. C. Rep. 1896, p. 81, - but it does not bring out the facts at the core of the matter as - stated to me by the railway men. - -Footnote 82: - - 8 I. C. C. Decis. 1898, p. 316. - -Footnote 83: - - I. C. C. Rep. 1894, p. 9. - -Footnote 84: - - It was held in the Nichols case (66 P. A. C. Rep. 768) that where a - shipper orders cars to be delivered at a certain date, the company’s - action in filling subsequent orders before complying with the first is - unlawful. (Oregon Short Line.) - -Footnote 85: - - Report, Texas Railway Commission, 1896, p. 11. - -Footnote 86: - - The Commission holds that the difference must not be so great as to be - destructive of competition between large and small dealers. (5 I. C. - C. Decis. 638, following Thurber _v._ New York Central, Delaware & - Lackawanna, B. & O.; and 3 I. C. C. Decis. p. 473, March, 1890; Rep. - 1890, p. 87.) Many articles of groceries were so classified as to make - the difference between carload rates and less-than-carload rates - unjustly great in violation of the principles of the Interstate Act. - -Footnote 87: - - Industrial Commission, iv, 207. - -Footnote 88: - - Paine _v._ Lehigh Valley R. R., 7 I. C. C. Decis. 1897, p. 218. - -Footnote 89: - - 9 I. C. C. Decis. 78; 1901 Rep. 38. - -Footnote 90: - - 5 I. C. C. Decis. 663. - -Footnote 91: - - 7 I. C. C. Decis. 43. - -Footnote 92: - - 8 I. C. C. Decis. 214, 1898. See also 4 I. C. C. Decis. 417. and 7 I. - C. C. Decis. 481, Chicago, Milwaukee & St. Paul case, held that a - higher rate on wheat than on flour is unjust. - -Footnote 93: - - 8 I. C. C. Decis. 304. See also 3 I. C. C. Decis. 400, and 4 I. C. C. - 417. - -Footnote 94: - - 4 I C. C. Decis. 1891, p. 733: N. Y. Central, Pa., B. & O., C. B. & - Q., Wabash, Santa Fe, etc.,—a whole page full of railroads. - -Footnote 95: - - Rice cases, Nos. 51–60, I. C. C. Decis. 1887, 65, 131. - -Footnote 96: - - Rice _v._ R. R., 4 I. C. C. Decis. 131; 5 _ibid._, 193, 415. Railroads - commenced charging for barrel packages in 1888, and in a case tried in - 1892 against the Reading, Boston & Maine, and other roads the - Commission ordered them to cease, but they did not, and damages were - awarded two years later from 1888 to 1894. A similar order to desist - from charging for the barrel was issued against the Pennsylvania in - September 1890 and it complied. I. C. C. Rep. 1895, pp. 33–35. - -Footnote 97: - - Trust Investigation, Congress, 1888, pp. 531–533, 646–647. - -Footnote 98: - - Testimony, Rice cases, 1 I. C. C. Decis. 28. - -Footnote 99: - - See Trust Investigation, Congress, 1888, pp. 598–599. - -Footnote 100: - - Lloyd’s “Wealth against the Commonwealth,” pp. 427, 480–481. - -Footnote 101: - - U. S. Industrial Commission, iv, 53. - -Footnote 102: - - 4 I. C. C. Decis. 158. - -Footnote 103: - - Senate Committee, 1905, 3457. - -Footnote 104: - - Testimony of McCabe, Pennsylvania traffic manager, I. C. C. Beef - Hearing, Dec. 1901, pp. 101, 102, 103. - -Footnote 105: - - _Ibid._, pp. 101, 102. - -Footnote 106: - - Mr. Cost, traffic manager of the Big Four, I. C. C. Beef Hearing, Dec. - 1901, p. 105. - -Footnote 107: - - I. C. C. Beef Hearing, Dec. 1901, p. 114. - -Footnote 108: - - _Ibid._, pp. 113, 119. - -Footnote 109: - - I. C. C. Beef Hearing, Dec. 1901, pp. 85, 86. - -Footnote 110: - - I. C. C. Beef Hearing, Dec. 1901, p. 107. - -Footnote 111: - - I. C. C. Hearing in the dressed-meat cases, Chicago, Jan. 7, 1902, pp. - 152–154. - -Footnote 112: - - Evidence in the I. C. C. Hearing in the dressed-meat cases, Chicago, - Jan. 5, 1902, pp. 145, 148, 149. - -Footnote 113: - - Report, Industrial Commission, vol. iv, pp. 69, 493. - -Footnote 114: - - Import Rate Case. Texas and Pacific _v._ I. C. C., 162 U. S. 197, - March, 1896. The complaint was brought in December, 1889, by the New - York Board of Trade against the Pennsylvania Railroad and others. The - New York Central, B. & O., B. & M., Ill. Central, Union Pacific, - Southern Pacific, Northern Pacific, Texas & Pacific, etc., 33 - railroads in all, were joined as defendants. The Commission held - (Jan., 1891) that import traffic is entitled to no preference. 3 I. C. - C. Decis. 417. (See also 4 I. C. C. 447.) The Circuit Court sustained - the Commission in Oct., 1892 (52 Fed. Rep. 187), and the Court of - Appeals in Oct., 1893 (57 Fed. Rep. 948), but the Texas & Pacific - carried the case to the U. S. Supreme Court and the majority of the - Court, reversing the Commission and the Circuit Court, interpreted the - Commerce Act of Congress in such a way as to render substantially - inoperative the main clauses relating to discrimination and the long - haul, and practically nullify another Act of Congress so far as it - imposes duties on imports for the purpose of protecting home - industries. The Court accomplished this by focussing its attention on - the phrase relating to dissimilar conditions, instead of aiming to - enforce the act according to its clear purpose and intent. Chief - Justice Fuller and Justices Harlan and Brown dissented, holding that - the Interstate Act requires railways to make the same charge for the - same service, whether the goods carried are domestic or foreign. - -Footnote 115: - - For many other facts along the same lines, showing rates on flour from - the West to Baltimore, Philadelphia, New York, Boston, etc., 6 to 8 - cents higher than the rates on wheat, and much lower rates on the same - products for export than for domestic use, see Industrial Commission, - 1900, iv, 70. - - The Interstate Commerce Commission in 1899 found the export rates on - corn and wheat much lower than the domestic rates. I. C. C. Rep., - 1899, pp. 20–28, 31. - -Footnote 116: - - 8 I. C. C. Decis. 214 n. - -Footnote 117: - - Lewis, “National Consolidation of Railways,” p. 101. - -Footnote 118: - - Industrial Commission, 1900, vol. iv, pp. 441–442. Shippers in - Norfolk, Nebr. for example, pay the local rate of 45 cents per cwt. - (on first-class goods) to Sioux City on the Missouri River, plus the - rate from Sioux City to Chicago, while Fremont, a rival town near - Norfolk, has the same rates as Sioux City, the local rate not being - added in this case to the Missouri River rate. This gives Fremont - manufacturers and shippers a decided advantage over those of Norfolk, - and tends to build up Fremont and stunt the growth of Norfolk. The - witness suggested that “if the rates were established by the - Government instead of at the will and pleasure of the railway - managers, it is a natural conclusion that points having the same - general conditions would receive equal benefits.” - -Footnote 119: - - Cator’s “Rescue the Republic,” p. 15. - -Footnote 120: - - “National Consolidation of Railways,” Lewis, p. 102. - -Footnote 121: - - “National Consolidation of Railways,” Lewis, p. 83. - -Footnote 122: - - Martin _v._ Southern Pacific, Central Pacific, and Union Pacific - Railroads. 1 I. C. C. Decis. 1. - -Footnote 123: - - 8 I. C. C. Decis. 481. The Commission made an order that the Kearney - rate should not exceed the Omaha rate by more than 15 cents, but the - Southern Pacific refused to obey, and the Circuit Court declined to - enforce the order on the ground that the Commission had not found the - rate to Kearney unreasonable in itself, but only in comparison, citing - 190 U. S. 273. - -Footnote 124: - - 9 I. C. C. Decis. 17: Rep. 1901, 30. - -Footnote 125: - - I. C. C. Rep. 1899, p. 31. - -Footnote 126: - - The Commission ordered the roads to discontinue this practice. They - refused. And the United States Supreme Court sustained them in their - refusal. (4 I. C. C. Decis., July, 1890, p. 104; Rep. 1901, p. 25.) - -Footnote 127: - - Nov. 1895, the Commission ordered that the rates from Pueblo to - California should not exceed 75 percent of the rates from Chicago to - California. The railroads refused to obey. Proceedings in court were - begun by the Commission to enforce their order. Then the railroads - yielded. They kept the rates down about 2 years, till Oct. 17, 1898. - Then the Southern Pacific increased the rates. The Colorado Fuel & - Iron Company on whose complaint the investigation and order were made, - sued for damages and an injunction, Oct. 1898. The Circuit Court - enjoined the railroads from charging more than the rates fixed by the - Commission. But April 16, 1900, the Circuit Court of Appeals reversed - the decision on the ground that the United States Supreme Court had - ruled that the Commission cannot fix rates. (I. C. C. Rep. 1895, pp. - 41–43; and Rep. 1900, pp. 55–61); also (101 Fed. Rep. 779) an appeal - to the Supreme Court was dismissed per stipulation, Nov. 1901 (46 L. - Ed. 1264). - -Footnote 128: - - Ind. Com. iv, 257. - -Footnote 129: - - Ind. Com., iv, 257. - -Footnote 130: - - _Ibid._, 67. - -Footnote 131: - - _Ibid._ - -Footnote 132: - - Ind. Com. iv, 252. - -Footnote 133: - - _Ibid._, 257. - -Footnote 134: - - Alabama Midland Case. Decis. of U. S. Supreme Court, Nov. 8, 1897, 168 - U. S. 144; Behlmer Case, 175 U. S. 648, 676; 181 U. S. 1, 29; Dallas - Case, I. C. C. Rep. 1901, p. 27. Actual and controlling competition of - any sort is now held to justify a less charge for the longer than for - the shorter haul. 10 I. C. C. Decis. 289, June, 1904. See also Senate - Committee, 1905, 3339, where Chairman Knapp of the Interstate - Commission declares that the courts have interpreted the law so that - if the circumstances substantially differ, no matter what the reason, - the prohibition does not apply. Brooks Adams says, “The Supreme Court - is antagonistic to that clause,” (the long and short haul clause) and - does not intend to enforce it. “They have simply thrown out every - suitor but one who came in under that clause.” (Sen. Com., 1905, p. - 2922.) - -Footnote 135: - - I. C. C. Rep. 1887. Nearly a hundred pages are filled with both the - statements and petitions of railroads relating to the long-haul - clause. See also Rep. for 1895, pp. 24–28. Exemption from the - long-haul clause was allowed in the case of passenger fares to the - World’s Fair at Chicago. - -Footnote 136: - - _In re_ Louisville and Nashville, 1 I. C. C. Decis., 1887, p. 31. See - also Ga. Rd. Commission _v._ Clyde Steamship Co., 5 I. C. C. Decis. - 326. - -Footnote 137: - - Alabama Midland or Troy Case, 168 U. S. 144, 164, 166. Reference was - made to 31 Fed. Rep. 315, 862; 50 Fed. Rep. 295; 56 Fed. Rep. 925, - 943; 71 Fed. Rep. 835, Behlmer Case; 73 Fed. Rep. 409, I. C. C. _v._ - Louisville and Nashville. - -Footnote 138: - - I. C. C. Rep. 1899, pp. 66–68; 85 Fed. Rep. 1898, p. 107; 99 Fed. Rep. - 1899, p. 52. - -Footnote 139: - - 181 U. S. 1, April, 1901. - -Footnote 140: - - _Ibid._, 29, 1901. - -Footnote 141: - - Rep. 1895, p. 29. See Louisville & Nashville Case, 1 I. C. C. Decis. - 31; C. B. & Q. Case, 2 I. C. C. Decis. 46; Krewer Case, 4 I. C. C. - Decis. 686; Nashville, Chattanooga and St. Louis R. R. Co., 6 I. C. C. - Decis. 343. See also 8 I. C. C. Decis. 503. - -Footnote 142: - - H. P. Newcomb, _Popular Science Monthly_, p. 815, Oct. 1897. - -Footnote 143: - - I. C. C. Rep. 1894, p. 19; 1900, p. 52. The Railways declined to obey; - the Circuit Court ruled against the Commission (71 Fed. Rep. Jan. - 1896, p. 835); the Circuit Court of Appeals reversed the Circuit Court - decision (83 Fed. Rep. Nov. 1897, p. 898); and finally, in Jan. 1900, - the U. S. Supreme Court reversed the Court of Appeals and sustained - the railroads. (Behlmer Case, 175 U. S. 648.) - -Footnote 144: - - I. C. C. Rep. 1895, p. 29; 1896, pp. 16–23. In March, 1896, the U. S. - Supreme Court considered the case on appeal, and apparently accepted - the decision of the Commission on the question of similar conditions, - but overruled another part of its order, requiring the railroad not to - charge more than $1 per hundred on first-class goods from Cincinnati - to Atlanta. The Court placed its decision on the ground that the - Commission has no authority to fix rates, maximum, minimum, or - absolute. It may determine that a past rate is unreasonable, but - cannot fix a rate for the future. Interstate Commission _v._ - Cincinnati, New Orleans, and Texas Pacific, 162 U. S. 184; and 167 U. - S. 479. I. C. C. _v._ Texas and Pacific, 162 U. S. 197. - -Footnote 145: - - 6 I. C. C. Decis. 343; and Rep. 1895, pp. 29–31. - -Footnote 146: - - Rep. 1895, p. 31. - -Footnote 147: - - I. C. C. Rep. 1899, p. 68; 7 I. C. C. Decis. Dec. 1897, p. 431. The - Commission ordered that the charge to La Grange should not exceed the - rate for the longer haul to Atlanta, and two years later the Circuit - Court sustained the order (102 Fed. Rep. 709), but the Circuit Court - of Appeals reversed the decision in May, 1901 (108 Fed. Rep. 988), and - in May, 1903, the Supreme Court affirmed the ruling of the Court of - Appeals against the Commission (190 U. S. 273). - -Footnote 148: - - I. C. C. Rep. 1902, p. 48; 7 I. C. C. Decis. 431; 8 I. C. C. Decis. - 377; 118 Fed. Rep. 613; Sen. Com. 1905, pp. 2316, 2317, 2926. No - appeal appears to have been taken from the Circuit Court. - -Footnote 149: - - 8 I. C. C. Decis. Feb. 1900, p. 409; Rep. 1900, p. 34. - -Footnote 150: - - 8 I. C. C. Decis. 93, reversed by the Circuit Court, August, 1902 (117 - Fed. Rep. 741), and by the Court of Appeals, May, 1903 (122 Fed. Rep. - 800); now on appeal to U. S. Supreme Court. - -Footnote 151: - - 8 I. C. C. Decis. 142. - -Footnote 152: - - I. C. C. Rep. 1895, p. 39. - -Footnote 153: - - See 6 I. C. C. Decis. 257, 361, 458, 488, 568, 601; 7 I. C. C. 61, - 224, 286; 8 I. C. C. 93, 214, 277, 290, 304, 316, 346. See also vol. 9 - of the Decisions, and Rep., 1898, pp. 33, 246; 1899, p. 28; 1900, p. - 40; 1901, pp. 57, 65; etc. Wherein conditions substantially differ the - exemption is applied. For example, the Santa Fe is justified in - charging lower rates from the Pacific to the Missouri River than to - Denver on rice, hemp, blankets, books, boots, etc. (9 I. C. C. Decis. - 606); and a higher rate on lumber to Wichita from Western points than - to Kansas City is approved (9 I. C. C. Decis. 569). - - Rates of an individual road cannot be compared with joint rates made - by that road with others. Osborne Case, 52 Fed. Rep. 912; Tozer Case, - 52 Fed. Rep. 917; Union Pacific Case, 117 U. S. 355. - -Footnote 154: - - _Popular Science Monthly_, Oct. 1897, p. 816. - -Footnote 155: - - M. E. Ingalls, before National Convention of Railway Commissioners, - 1898, p. 14. - -Footnote 156: - - Rep. 1897, p. 6; and 1898, p. 15. - -Footnote 157: - - “The exaction of the published rate is the exception.... Men who in - every other respect are reputable citizens are guilty of acts which, - if the statute law of the land were enforced, would subject them to - fine or imprisonment.” See Rep. 1898, pp. 5, 6, 18, 19; Rep. 1899, p. - 8. - -Footnote 158: - - Report, vol. iv, 1900, p. 625. - -Footnote 159: - - Ind. Com. iv, pp. 6, 349, 359. - -Footnote 160: - - Testimony, p. 25. - -Footnote 161: - - Sen. Com. 1905, p. 2912. - -Footnote 162: - - Judge Clements of the Interstate Commission, Senate Committee, 1905, - p. 3238. When the reader examines the facts that follow in this book - he may wonder what the railroads will do when they are not under a - good resolution, in view of the record they have made while under a - good resolution. - -Footnote 163: - - See “Rebates” and “Discriminations” in index to Hearings of the Elkins - Committee, 1905. - - Some of these witnesses who do not know of any discriminations or - unreasonable rates declare in other parts of their testimony that if - the proposed legislation were enacted the Interstate Commission would - be deluged with complaints. And this is probably true, since - complaints of excessive rates and discriminations have been more - numerous in the last two or three years than in any other equal period - before. (Testimony of Judge Clements of the I. C. C., Senate - Committee, 1905, p. 3242.) - -Footnote 164: - - Sen. Com. 1905, p. 1331. - -Footnote 165: - - _Ibid._, pp. 2253, 2284. - -Footnote 166: - - _Ibid._, p. 3140. - -Footnote 167: - - _Ibid._, p. 1652. - -Footnote 168: - - On the question whether or no rebates and discriminations exist, the - testimony of credible witnesses who say they know of these secret - favors far outweighs the proving power of the negative statements of - witnesses who say they do not know of the said phenomena. Lots of - people did not know till recently that the Equitable paid a famous - railroad senator $20,000 a year for “advice.” And the statements of a - multitude that they did not know of it would weigh nothing against the - testimony of 2 or 3 well informed men who positively stated the facts. - Discriminations may go on without the railroad directors or principal - officers knowing about them. They may not know about them on purpose. - Where ignorance is protection ’tis folly to be wise. - - Railway men have told me that in many cases leading officers of a - railroad are purposely kept, or keep themselves, in perfect ignorance - of all discriminations and other wrongdoing in order that such - officers may appear in legislative and interstate commerce hearings - without knowledge of any facts that would be prejudicial to the - railroad. - -Footnote 169: - - Sen. Com. 1905, p. 1474. - -Footnote 170: - - Sen. Com. 1905, pp. 819, 820, 842. - -Footnote 171: - - _Ibid._, pp. 2122, 2123. - -Footnote 172: - - _Ibid._, p. 951. - -Footnote 173: - - _Ibid._, p. 2329. - -Footnote 174: - - Sen. Com. 1905, p. 2083. - -Footnote 175: - - In illustration of his statement the witness referred to the - prevalence of abuses in respect to terminal railroads, private cars, - purchasing agents, switching charges, special tariffs, milling in - transit, etc., describing a number of cases that have come under his - personal observation in the year 1905. Sen. Com. 1905, pp. 2432, 2434. - -Footnote 176: - - More complaints per annum have been filed with the Commission since - the Elkins Act took effect than were filed before the act was passed. - The reports of the I. C. C. show 145 formal complaints filed in 1903 - and 1904, carrying the total to 789, and 888 informal complaints, - carrying the total to 3223, making the whole number 1033 in the two - years, and 4012 since 1887—more than 25 percent of the complaints - having been filed in the last two years which constitute only 11 - percent of the time covered by the reports of the Commission. Out of - the 62 suits entered in 1904, 50 charge unjust discrimination of - serious character, and nearly all the rest involve discrimination in - some form. The complaints entered for amicable adjustment also relate - in large part to cases of discrimination between persons and places, - refusal to furnish cars, unreasonable delay, unfair classification, - discrimination in track facilities, unfair estimate of weights, - allowing competitors to underbill, refusal of the Transcontinental - Passenger Association to grant the American Federation of Labor the - usual special convention rate for their meeting at San Francisco, - refusal to route shipments as ordered by shippers, relatively - excessive rates on vegetables, lumber, lead, drugs, corn products, - coal, iron, shoes, leather, etc., violations of the long and short - haul clause, and outright refusal to accept shipments, besides a - number of complaints of overcharges, and rates alleged to be - unreasonable per se. - - Adding the figures for 1905, which have come to hand since the above - was written, we find that more than double the number of complaints of - discrimination have been made to the Interstate Commerce Commission in - the last three years, since the Elkins Law was passed, than in any - equal period before. The complaints filed in 1903, 1904, and 1905 - constitute more than a third of the whole number of complaints from - the beginning of the Commission in 1887. The average number of - complaints per year from 1887 to 1902 inclusive was 186, while the - yearly average for 1903–1905 is 534—more than double, nearly - threefold—and five-sixths of the suits entered charge facts that - constitute discrimination of serious character, and nearly all the - rest involve discrimination in some form. - -Footnote 177: - - In the report for 1905, p. 13, the Commission refers to the fact that - in the reports for 1903 and 1904 some favorable comments were made on - the effect of the Elkins Law upon the practice of paying rebates, and - says: “Further experience, however, compels us to modify in some - degree the hopeful expectations then entertained. Not only have - various devices for evading the law been brought into use, but the - actual payment of rebates as such has been here and there resumed. [It - never stopped in a good many places, judging by the La Follette facts - and other evidence, including the statements of many leading railroad - men.] Instances of this kind have been established by convincing - proof. More frequently the unjust preference is brought about by - methods which may escape the penalties of the law, but which plainly - operate to defeat its purpose.” - -Footnote 178: - - Judge Clements of the Commission, Sen. Com. 1905, p. 3238. - -Footnote 179: - - See the admirable summary of the investigation by Ray Stannard Baker - in _McClure’s Magazine_ for December, 1905. - -Footnote 180: - - The Interstate Commission says: “While giving rebates to the fuel and - iron company from tariff rates, it (the Santa Fe Railroad) charged the - full tariff rates on interstate shipments of coal by other shippers in - not only the general coal region involved, but in the same coal field. - This practice of the railway company resulted in closing markets for - coal to shippers competing with the Colorado Fuel and Iron Company.” - 10 I. C. C. Decis. 473, February, 1905. - -Footnote 181: - - 10 I. C. C. Decis. 475. - -Footnote 182: - - 10 I. C. C. Decis. 476–480. While the Caledonian Company was trying to - get to market on equal terms with the Colorado Fuel and Iron Company, - they got a letter from the Santa Fe traffic office, Nov. 15, 1900, - saying that they could sell their coal to the Colorado Fuel and Iron - Company, or keep it. Mr. Biddle, however, when shown the letter and - questioned about it, admitted the authorship, but said he did not - construe the letter as saying anything of the kind. (I. C. C. Santa Fe - Hearing, Dec. 1904, p. 154. The text of the letter is not given.) - -Footnote 183: - - There was a dispute about the relative steam power of the coals from - the different localities, but the point doesn’t seem to be material. - -Footnote 184: - - Sen. Com. 1905, pp. 3072, 3073. The Caledonian had a good market - before the agreements between the Santa Fe and the Colorado Coal - Company were made, and it had many orders afterwards, but could not - fill them except at a loss because of favoritism in freight rates. - -Footnote 185: - - I. C. C. Hearing, Dec. 1904, pp. 135, 148, Biddle. - -Footnote 186: - - Mr. Biddle says the coal rate circular was issued by his authority and - continued a practice that was in effect when the Santa Fe operated the - mines, but he could not say whether it was “simply continued at the - time the Colorado Company acquired the mines or whether there were - negotiations under which it was done” (I. C. C. Hearing, Dec. 1904, - pp. 135, 136, 147, 148). - -Footnote 187: - - A copy of this circular bearing the name of the traffic manager of the - Santa Fe was taken without permission by a dealer at El Paso from the - Santa Fe office there. - -Footnote 188: - - I. C. C. Santa Fe Hearing, Dec. 1904, p. 8. - -Footnote 189: - - I. C. C. Santa Fe Hearing, Dec. 1904, pp. 146–148. - -Footnote 190: - - Sen. Com., 1905, p. 848. - -Footnote 191: - - Mr. Morton’s letter to President Roosevelt, June 5, 1905. Secretary - Morton continues: “The tariff covering this arrangement was published - so as to show the freight rate to be $4.05 per ton instead of the - delivered price at El Paso and Deming, and did not separate the - freight rate from the cost of the coal at the mines, as it should have - done. Until the investigation of the case by the Interstate Commerce - Commission I did not know personally how the matter was being handled, - so far as the publication of the tariff was concerned. My own - connection with the case was to see that the traffic was secured to - the Atchison rails, and after that details were left to subordinates.” - -Footnote 192: - - Mr. Biddle testified that the same thing had been done for other coal - companies, and in one instance at least it was shown that it had been - done for the Victor Fuel Company, but in this case “the price of the - coal and the rate of freight were kept entirely separate, the price of - coal being treated in the nature of an advance charge.” The Commission - says further “If the Colorado Fuel and Iron Company had in all cases - paid the published tariff rate which was exacted from other shippers, - the fact that the price of the coal and the freight were included in a - single item would have worked no practical advantage to that company - so far as we can see. Neither, apparently, would there have been any - reason for this arrangement if the purpose of the parties had been - honest. If, however, there existed upon the part of the Santa Fe - Company an intent to charge the Colorado Fuel and Iron Company less - for the transportation of its coal than the published rate, it is - evident that this method of billing would afford a ready means for - concealing the transaction. In point of fact, during the entire period - covered by this investigation (July 1899 to Nov. 27, 1904) the Santa - Fe Company did transport coal for the Colorado Fuel and Iron Company - for less than its open tariff rates, and these concessions amounted in - many cases to the price of the coal itself.” (10 I. C. C. Decis. 482, - Feb. 1905.) - -Footnote 193: - - See 10 I. C. C. Decis. 473, 487, 488, Feb. 1, 1905. - -Footnote 194: - - “Strategy of Great Railroads,” 1904, p. 167. - -Footnote 195: - - I confess, however, that I do not see how, in the light of the records - in the Colorado Case, the Santa Fe counsel could tell the Senate - Committee this year that his road had made no discriminating rates - (see above, p. 114). Neither is it easy to see how Mr. Biddle could - testify that he had not known of the payment of any rebates for 12 - years. The Commission says the Santa Fe paid rebates to the Fuel - Company till November, 1904, and other preferences have been - unearthed, as we shall see hereafter. Some shippers and some - consignees have had better terms than others. Mr. Biddle does not call - these preferences rebates. The Commission sees that when the Santa Fe - collected the published freight rate, $4.05, from the El Paso people - and paid for the coal out of that, instead of collecting the $4.05 as - freight and leaving the El Paso folks to pay for the coal in addition, - the effect was the same to the El Paso people as the payment of a - rebate equal to the value of the coal, and the same to the Fuel - Company in respect to securing a monopoly of the market, and so the - Commission, looking at the substance of the matter and the form too so - far as could be judged from the published tariff, called the payments - rebates, or payments out of, or deductions from, the regular tariff - rates. - -Footnote 196: - - Commissioner Prouty to the Boston Economic Club, March 9, 1905. - -Footnote 197: - - Sen. Com. 1905, p. 3607. - -Footnote 198: - - 10 I. C. C. Decis. 226, and Rep. 1904, pp. 58–59. - -Footnote 199: - - Sen. Com. 1905, p. 367. Testimony of E. M. Ferguson, representing 12 - organizations of shippers, State and national. - -Footnote 200: - - Sen. Com. 1905, p. 2432. - -Footnote 201: - - I. C. C. Decis. 735, March 25, 1905. - -Footnote 202: - - Ind. Com. iv, 54. - -Footnote 203: - - Sen. Com. 1905, pp. 2284, 2429. - -Footnote 204: - - _Ibid._, p. 2432. - -Footnote 205: - - _Ibid._, p. 18. - -Footnote 206: - - Sen. Com. 1905, pp. 2484, 2490. - -Footnote 207: - - Sen. Com. 1905, p. 2912. - -Footnote 208: - - 10 I. C. C. Decis. 675, April 11, 1905; Rep. Dec. 1905, p. 39. - -Footnote 209: - - Under the milling-in-transit privilege grain may be shipped into the - mill from the West, ground, and shipped out from the mill to New York - or other destination at a total cost but little greater than the - straight through rate from the West to New York. But a mill without - this privilege must pay the rate from the West to Philadelphia, and - then the local rate from Philadelphia to New York, making the total - cost very much greater. - -Footnote 210: - - Some strong statements about this case may be found in the - Philadelphia _North American_ August 12, August 20, and other dates - during August, 1903. - -Footnote 211: - - Sen. Com. 1905, p. 2434. See 10 I. C. C. 1905, p. 505. - -Footnote 212: - - This trick was resorted to by the oily people many years ago, but the - railroads, realizing its potency in eluding the rebate prohibitions, - have lately extended its sphere of usefulness and it is becoming quite - frequent. See Sen. Com. 1905, p. 2123. - -Footnote 213: - - Ind. Com. iv, 544. The name “midnight tariff” by which this scheme is - known probably fits the case, but “flying tariff” is perhaps still - more appropriate. - -Footnote 214: - - _Outlook_, July 1, 1905, p. 579. - -Footnote 215: - - Sen. Com. 1905, pp. 2911, 2912, Commissioner Prouty; 2123, President - Stickney. See also p. 3231, and 10 I. C. C. Decis. 317. - -Footnote 216: - - Mr. Moffat was asked if he thought the allowances ought to be made. He - said: “I think that it ought to be made to the big shippers. I think - the man who ships 100,000 bushels a month ought to get a little better - deal than the man who ships only 1,000 bushels a year.” - - Commissioner Cockrell replied: “There is where I think you are - entirely wrong. No government could live under such a condition. The - rich would soon absorb everything and the small man would be wiped out - of existence. The whole business we are on now started from a railroad - giving a man a rebate. The minute the railroad does a thing like that - it opens the way to a swindling petty graft and bigger grafting and - crooked work. It is wrong, all wrong. It is so wrong that nobody knows - what to call it. Down in Louisville they call it a ‘swag.’ Here you - call it an ‘allowance.’ It is all wrong.” - -Footnote 217: - - 10 I. C. C. Decis. 274, June 4, 1904. - -Footnote 218: - - _Ibid._, 255, June 4, 1904. The practice was held unjust. - -Footnote 219: - - _Ibid._, 489, Feb. 2, 1895. Duluth Shingle Co. _v._ Northern Pacific, - Great Northern, Chicago, Milwaukee and St. Paul, and other railroads. - -Footnote 220: - - 10 I. C. C. Decis. 452, Jan. 7, 1905. - -Footnote 221: - - Sen. Com. 1905, pp. 2432, 2433. - -Footnote 222: - - 11 I. C. C. Decis. 104. - -Footnote 223: - - 10 _ibid._, 428, Jan. 1905. - -Footnote 224: - - Sen. Com. 1905, pp. 3426, 3427. S. H. Cowan, attorney of Cattle - Growers’ Interstate Committee; Chicago Board of Trade _v._ C. & A. R. - R., 4 I. C. C. Decis. 158. - -Footnote 225: - - 10 I. C. C. Decis. 428. Chicago Live-Stock Exchange _v._ Chicago and - Great Western. See also I. C. C. Rep. 1905, pp. 42, 63. - -Footnote 226: - - The United States Circuit Court has refused to enforce the order of - the Commission on the ground that the Chicago Great Western reduced - the rate for competitive reasons to get its share of the tariff. The - Commission justly says: “If the decision of the Circuit Court in this - case is sound any carrier is justified in making the widest - discriminations in rates as between competing commodities, regardless - of the effect upon non-favored industries, by simply asserting the - existence of general competition and the desire to increase the - traffic in particular commodities over its line.” - - I. C. C. Rep. December, 1905, p. 64. It is to be hoped that the case - will go up on appeal and a reversal of the Circuit decision be - obtained. - -Footnote 227: - - 10 I. C. C. Decis. 590, Feb. 11, 1905; Rep. 1905, p. 31. - -Footnote 228: - - Cannon Falls to St. Louis, 10 I. C. C. 650, March, 1905. - -Footnote 229: - - Sen. Com. 1905, p. 1775. Mr. Bacon of Milwaukee, speaking for a - convention of shippers. - - Rates to Texas also from Kansas and Missouri points are 5 cents per - hundred higher on flour than on wheat, and this differential is not - applied on shipments in any other direction from those points. (10 I. - C. C. Decis. 1904, 55.) - -Footnote 230: - - I. C. C. Cases, 707, 1905. - -Footnote 231: - - Proctor and Gamble Case, I. C. C. Rep., 1903, pp. 57–61; 1905. Rep. p. - 63. - -Footnote 232: - - Sen. Com. 1905, p. 346. - -Footnote 233: - - _Ibid._, p. 2742. - -Footnote 234: - - _Ibid._, p. 18. - -Footnote 235: - - Business Men’s League of St. Louis _v._ many railroads, 9 I. C. C. - Decis. 319, Nov. 17, 1902. - -Footnote 236: - - 10 I. C. C. Decis. 333, June 25, 1904. - -Footnote 237: - - _Ibid._, 327, June 25, 1904. - -Footnote 238: - - Sen. Com. 1905, p. 1925. - -Footnote 239: - - I. C. C. Dressed-meat Hearings, Dec. 1904, Biddle. - -Footnote 240: - - Sen. Com. 1905, pp. 351, 354, 364, 818, 2496. The routing instructions - to agents of the St. Louis and San Francisco Railroad Company were - introduced. The circular contained a list of the roads over which - shipments were to be routed unless shippers insisted on a different - routing. Agents were cautioned that “these instructions are - confidential and must not be made public. Under no circumstances must - representatives of foreign roads or fast lines be allowed to examine - the instructions contained in the circular.” (p. 351.) - -Footnote 241: - - Sen. Com. 1905, p. 818. - -Footnote 242: - - Sen. Com. 1905, p. 354. The witness derived his information as to the - sale of tonnage and reciprocal routing agreements from high officials - of the railroads, pp. 354, 364. - -Footnote 243: - - 10 I. C. C. Decis., 1904, p. 47. - -Footnote 244: - - _Ibid._, 422, Jan. 7, 1905. - -Footnote 245: - - _Ibid._, 630. - -Footnote 246: - - 10 I. C. C. Decis. 226, April 28, 1904; Rep. 1904, p. 58,—held - unlawful discrimination. See also p. 78, complaint against W. Va. - Northern for refusing due proportions of coal cars. - -Footnote 247: - - 134 Fed. Rep. 196; I. C. C. Rep., Dec. 1905, p. 65. - -Footnote 248: - - 10 I. C. C. Decis. 699. - -Footnote 249: - - _Ibid._, 47, 663. The favored party in this case was an agent for the - railroad. No relief could be given. - -Footnote 250: - - 11 I. C. C. Decis. 104. Rep. 1905, p. 45. Citing Wight _v._ United - States, 167 U. S. 512, and the Midland Case, 168 U. S. 144. - -Footnote 251: - - The Commission holds that the division agreed on must not be excessive - (10 I. C. C. Decis. 1905, p. 385. Harvester Trust and Steel Trust - Cases). But there is nothing in such granting or refusing of rate - concessions that necessarily violates the interstate law, provided the - little roads are common carriers for the public subject to the Act to - regulate commerce. If not, the division is held unlawful (10 I. C. C. - Decis., March 19, 1904, pp. 193, 505, 545, 546. Lumber). - - The plea that the division is accorded to the little road because it - controls the business of its routing does not explain cases of - division between a private railroad that brings logs, etc., to the - mill, and the railroad that takes the lumber, etc., from the mill. But - through the milling-in-transit principle a division may be arranged - between the common carrier by rail that brings the logs to the mill - and the carrier that takes the lumber away (10 I. C. C. Decis. 194). - -Footnote 252: - - I. C. C. Rep. 1903, pp. 18–22. - -Footnote 253: - - Testimony of Mr. Biddle, General Traffic Manager of the Santa Fe, - Hutchinson Salt Case. I. C. C. Hearing, Dec. 5, 1903, p. 35. - -Footnote 254: - - 10 I. C. C. Decis. 385, 392, Nov. 3, 1904. The Commission held that - $3.50 a car to the Illinois Northern, and $3 a car to the West - Pullman, would be reasonable for switching charges, and that switching - charges in excess of these sums amount to unlawful preferences in - favor of the International Harvester Company. - -Footnote 255: - - I. C. C. Rep. 1904, p. 21. - -Footnote 256: - - I. C. C. Rep. 1904, p. 21; 10 I. C. C. Decis. 385, Nov. 1904. The - Commission held that “the divisions are grossly excessive for the - services rendered and afford unlawful preference for the U. S. Steel - Corporation, which owns the Ill. Steel Co.” - -Footnote 257: - - 10 I. C. C. Decis., March 25, 1905, pp. 661, 667–669 _et seq._ - -Footnote 258: - - _Ibid._, p. 661. - -Footnote 259: - - I. C. C. Decis., 664, March 12, 1904. - -Footnote 260: - - _Ibid._, 707, Feb. 7, 1905; also p. 681, March 19, 1904. - -Footnote 261: - - The oil cars, dressed-meat cars, etc., of course are in use the year - round, and even fruit and vegetables need refrigerator cars in the - winter to keep them from freezing as well as in summer to keep them - from spoiling. (Sen. Com., 1905, p. 370.) - -Footnote 262: - - The present system, however, does not always give good service. In - April and May, 1905, for instance, hundreds and hundreds of cars of - strawberries rotted at the stations in North Carolina for want of - cars. The Armour Car-Line could not, or at least did not supply the - needed cars, and as they have an exclusive contract with the Atlantic - Coast Line no other cars are in the field. At one station only 4 cars - were furnished in two days and 125 carloads of berries were left on - the platform and the ground to spoil. The loss this season to the - truck growers of this one section from insufficient car service is - estimated at $600,000. (Sen. Com., 1905, pp. 2596, 2619.) - -Footnote 263: - - Some railroads have refrigerator lines of their own; the Pennsylvania, - for example, and the Vanderbilts, the Goulds, the Santa Fe, the - Northern Pacific, the Great Northern, etc., but they carry the private - refrigerators also. Packers and other shippers owning cars insist on - sending their goods in their own cars, and making the roads pay - mileage. If the road refuses, the freight goes by some other line. - “They compel us to take it in their cars and pay them for the use of - them while our own cars stand on the side track, or else some other - road gets the business.” (Testimony of James J. Hill, Sen. Com., 1905, - pp. 1504–1505.) - -Footnote 264: - - See above, pp. 57, 58. - -Footnote 265: - - This mileage rebate system began long ago. Way back in the seventies - the Erie and other roads allowed the Standard Oil Company to put tank - cars on their tracks and paid it a mileage sufficient to pay back the - values of the cars in less than 3 years. - -Footnote 266: - - The 1 cent rate applies to 15 to 25 percent of the total mileage of - the cars and the ¾ cent rate to the remaining mileage. (Bureau of - Commerce Rep. on Beef Industry, March, 1905, p. 273.) - -Footnote 267: - - Evidence in I. C. C. Hearings on private car-lines, April 28, 1904, p. - 8. The Beef Trust report of the Bureau of Commerce, 1905, presents - some conflicting evidence and sums up the case with a conservative - estimate which places the average daily run of _all_ the cars owned by - Armour and his associates and used in the beef business at 90 to 100 - miles. In the same report, however, the refrigerator cars of the - National Car-Line Company, and of the Provision Dealers’ Dispatch are - reported as running 300 miles a day, and the cars of Swift and Company - are estimated to make 373 miles a day in Iowa. (“Report of - Commissioner of Corporations on the Beef Industry.” March 3, 1905, pp. - 274–281.) - -Footnote 268: - - I. C. C. Rep. 1903, p. 23. - -Footnote 269: - - National Congress of Railway Commissioners, 1892, statement of the - Committee on Private Cars, p. 52 _et seq._ The Lackawanna Line Stock - Express Co., for example, netted 50 percent a year, or $343 per car. - See also 4 I. C. C. Decis. 630. - -Footnote 270: - - I. C. C. Rep. 1903, p. 24. Sometimes the payment for a refrigerator - car is much more than $1 a day. James J. Hill says: “If we take - another railway company’s car, we pay 20 cents a day for it for the - time we have had it, and we are in a hurry to get it back; and we load - the other man’s car back if we have anything to put in it. That is - always understood. But they do not want anything put in their cars. - They say: ‘Hurry it back; get it around quickly, and pay us, in place - of 20 cents a day, three-fourths of a cent a mile.’ They used to ask a - cent a mile, but I think that has been abandoned.” - - “SENATOR NEWLANDS. How much does that amount to a day, say at the rate - of a cent a mile? - - “MR. HILL. If they got a cent a mile and we hurried that car through - to the coast, we would take it about 300 miles a day, so that they - would get about $3 a day for the car. - - “SENATOR NEWLANDS. So that in the one case you pay 20 cents? - - “MR. HILL. And in the other we pay $3. - - “SENATOR NEWLANDS. And the private car-lines you pay $3. - - “MR. HILL. Yes—well, $3 would be the extreme figure. We will say - $2.50.” (Sen. Com. 1905, p. 1505.) - -Footnote 271: - - A refrigerator car costs $900 to $1000, as a rule. A first-class - steel-framed freight car costs about the same. Private stock cars of - good build cost about $800 each. (See evidence in Hearings on Private - Cars, I. C. C. April, 1904, pp. 19, 100; I. C. C. Rep. 1904, p. 14.) - The contracts provide that the railroads are to carry no perishable - goods except in Trust cars if the Trust cares to furnish the cars. If - by chance the railroads use their own or any other refrigerator cars - than those of the Trust they are to charge the full Trust rates and - turn over the said charges to the car-line just as if its cars had - been used. - -Footnote 272: - - Sen. Com. 1905, p. 776: 49,807 total, 15,269 railroad and 34,538 - private refrigerators; 14,792 tank cars; 11,357 stock cars; 325 - poultry cars; vehicle cars and furniture cars, 1,621. These with coal - and coke cars and other private cars make a total of 127,331 private - cars. The entire freight car equipment belonging to the railroads is - about 1,700,000 cars. - -Footnote 273: - - The Beef Trust is one of the largest shippers in the world. Its - packing-house shipments from Chicago are said to amount to some three - thousand million pounds (3,000,000,000 lbs.) a year. Its shipments - from Kansas City, Omaha, St. Joe, St. Louis, etc., are also enormous. - There is also a vast traffic in poultry, eggs, dairy products, fruit, - and vegetables, that is controlled by the Trust. Is it any wonder that - a railroad president or manager should refrain from action that might - lose him his share of this huge business? It would make a sad hole in - his receipts. Dividends would be emaciated and might vanish or appear - with a minus sign. His stock would sink in Wall Street. Angry - directors, bankers, investors, and stockholders would assail him and - attack his management. And as a result of defying the Trust he would - put himself out of office and his road perhaps in the hands of a - receiver. - -Footnote 274: - - C. B. Hutchins was the inventor of an improved refrigerator car. He - built five cars in 1886, and in 1890 he had the California Fruit - Transportation Company operating $200,000 worth of cars. In two years, - 1890 and 1891, the profits amounted to $250,000 or more than the total - investment, and the company thought they had something better than a - gold mine. But the Beef Trust undermined them by railroad favoritism - and compelled them to sell out to the Swifts. - - While the California Fruit Transportation Company was fighting for its - life with the Armour lines, it presented the Southern Pacific Railway - Company with $100,000 of its stock on condition of receiving an - exclusive contract. The contract was made, but the Armour cars - continued to go. An influence was at work stronger than the exclusive - contract and the power of the California Fruit Transportation Company. - -Footnote 275: - - Evidence, pp. 101, 133, 134, 146, etc. For example the manager of the - “Missouri River Despatch” operating 250 refrigerator cars testified - that the Erie paid 12½ percent commissions on the freight rates in - addition to the mileage. And the manager of the Santa Fe car-line said - the B. & O. paid them 12½ percent commissions on dairy products in - addition to the ¾ cent mileage, etc. etc. - -Footnote 276: - - Evidence, pp. 54–55, Armour Cars. - -Footnote 277: - - National Congress Railway Commissioners, above cited. - -Footnote 278: - - _Ibid._ - -Footnote 279: - - I. C. C. Rep. 1904, p. 14. Aug. 1, 1904 the Armour lines made an - exclusive contract with the Pere Marquette Railroad, the fruit carrier - of Michigan. Before that the railroad iced carloads of fruit free of - charge. On the date named icing charges went into effect as follows: - - $25 to Chicago, Detroit, Grand Rapids, and other Michigan points. - - $30 to Cleveland, Columbus, Cincinnati, Indianapolis, and other points - in Ohio and Indiana. - - $35 to Buffalo, Bloomington, and various other points in New York, - Illinois, and Wisconsin. - - $40 to Des Moines, Minneapolis, Nashville, and other points in Iowa, - Minnesota, Tennessee, etc. - - $45 to Duluth, Lincoln, Wichita, etc. - - $50 to New York City, Baltimore, Washington, Denver, etc. - - $55 to Boston, Hartford, Mobile, New Orleans, etc. - - $60 to Spokane, etc. - - From $25 to $60 for what a year ago the railroad gave free of charge. - -Footnote 280: - - Rep. 1904, p. 15, 10 I. C. C. Decis. 1904, p. 360. Dealers have - protested against paying 4 or 5 or 6 times the fair charge for ice, - and have now and then refused to pay, telling the companies they could - sue for the charges. But the car companies knew a better way. They - ordered the cars of the disobedient dealers delayed and notified them - that in future icing charges must be prepaid on all shipments to them - or from them. These orders were enforced by the railroads and the - kicking dealers were helpless. (Evidence, etc., 201–203.) - - With a commission business such as that involved in the case referred - to, an order for prepayment of icing charges or freight rates or both - means ruin. For farmers and other producers will not prepay charges on - perishables, and will not therefore ship to commission merchants to - whom the railroads do not give credit that permits the payment of - charges at their end of the line, _i. e._, on delivery. - -Footnote 281: - - Evidence, etc., 206, 207. - -Footnote 282: - - _Ibid._, 207. - -Footnote 283: - - Sen. Com. 1905, p. 2596; and the next item in the text. - -Footnote 284: - - 11 I. C. C. Decis, 129, and Rep. 1905, p. 30, holding the Pere - Marquette Armour charges excessive and approving the Michigan Central - charge of $2.50 per ton on interstate shipments by the car. - -Footnote 285: - - Sen. Com. 1905, p. 369. - -Footnote 286: - - I. C. C. Beef Hearing, 1904, p. 165 _et seq._ It is a physical - impossibility for a man to inspect the loading of 75 or 100 cars a - day, and if an inspector is overzealous and conscientious in watching - the cars he can attend to, the Trust has the railroad dismiss him. - -Footnote 287: - - _McClure’s_ for January, 1906, p. 323. - -Footnote 288: - - See testimony before the I. C. C. April, 1904, p. 27. Mr. Watson’s - memory was very hazy. He could not remember what he had formerly - testified on this subject before the referee. Neither could he tell - what “U. P.” meant nor recognize the clear meaning of “C. & A.” in the - car-line account books, though every one familiar with railway matters - knows that “U. P.” stands for Union Pacific and “C. & A.” for Chicago - and Alton. Mr. Marchand, counsel for the Commission, drew some curious - non-information and mal-information from Mr. Watson, the former head - of Porter Brothers, who were large shippers of fruit in Chicago. - - “MR. MARCHAND. What commission did you receive from the railroads on - account of Porter Brothers up to that time? - - “MR. WATSON. I told you that was all stopped about four years ago, to - the best of my recollection.” - - “MR. MARCHAND. Do you remember receiving from the Union Pacific - Railroad Company $1,400 in 1898—January 25, 1898? - - “MR. WATSON. I do not. - - “MR. MARCHAND. You have no recollection of that? - - “MR. WATSON. No, sir. - - “MR. MARCHAND. In 1899 there appears upon the ledger of Armour & Co., - or rather the Fruit Growers’ Express, an item of $47,000, a credit. Do - you know where that came from? - - “MR. WATSON. I do not know anything about the books of Armour & Co. - - “MR. MARCHAND. Do you remember having received from C. & A. as on the - books of Armour & Co., on the 10th of October, 1899, the sum of - $45,219? - - “MR. WATSON. I do not. I guess if you look it up you will find it is - ‘credits and allowances.’ - - “MR. MARCHAND. ‘C. & A.’ stands for ‘credits and allowances’? What - does ‘U. P.’ stand for? - - “MR. WATSON. I do not know. - - “MR. MARCHAND. Does that stand for ‘Union Pacific’? - - “MR. WATSON. I do not know whether it does or not.” - - Mr. Robbins, vice-president and manager of the Armour Car-Lines, was - also afflicted with loss of memory, which was specially unfortunate in - view of the fact that the Trust had destroyed the accounts some time - before the Hearing. - - “MR. MARCHAND. Can you explain the item of $14,000 paid to the Union - Pacific? - - “MR. ROBBINS. No, sir; I can not. - - “MR. MARCHAND. Is there anybody in your employ that can? - - “MR. ROBBINS. I do not think so. - - “MR. MARCHAND. You say you have destroyed your records. - - “MR. ROBBINS. Yes, sir.” - -Footnote 289: - - I. C. C. Hearing on Private Cars, 1904, pp. 147–149. Mr. Brown, - counsel for the Santa Fe, said to the Senate Committee, 1905, that he - wished to put on record a sweeping denial that the A. T. & S. F. Co. - has made any discriminatory rates or paid any rebates. The next - moment, in answer to a question about the reduction of $25 a car below - the published tariff, to which Mr. Leeds testified as given by the - Santa Fe car-line, Mr. Brown said: “It was a rebate given to every - one.” (Rep. Sen. Com. on Interstate Commerce, May, 1905, p. 3140.) He - first said the road did not give any rebates, and then admitted it did - give rebates, but said it gave the same rebate to every one that - shipped. The coal mines that paid the Santa Fe $4 against $2.90 paid - by the Colorado Fuel Co. would hardly agree to that statement. But Mr. - Brown had in mind the car-line case in which they said the same rebate - was given to every shipper. Mr. Leeds said it was a secret rate, and - that he went to California and solicited business from various - shippers. Under such circumstances, the fact that every one who - shipped got the rebate does not eliminate discrimination but - accentuates it. The discrimination is against the man who does not - ship, the man who is not informed of the secret rebate. The Santa Fe - car-line informed such dealers as it chose. No others could afford to - ship on the Santa Fe. The instructed dealers could easily hold the - market at prices that would prevent the uninstructed from thinking - about shipping such goods. - -Footnote 290: - - Rep. 1904, p. 13. - -Footnote 291: - - Mr. Streychmans has been accused of stealing this code book and also - certain letters and papers, but in fact he took no original papers, - but only carbon copies of letters and statements he wrote for the - company, and the code book was put into his possession for use in his - work by the secretary of Armour’s general manager. If any charge of - stealing or any other criminal charge could be made, Streychmans would - long ago have been prosecuted by the Beef Trust people. When he began - giving publicity to the facts in his possession the general manager - tried to buy him off. He was shamefully treated by some of the Armour - officers, and partly in revenge, probably, and partly in gratitude to - the editor of the San Francisco _Examiner_ for helping him out of - California and the Armour grip, he gave the editor copies of letters, - etc., the publication of which led to his examination by the - Commission. - -Footnote 292: - - Testimony of J. W. Midgley, for over 20 years commissioner, chairman - and arbitrator for various Western railroads. I. C. C. Hearing, April, - 1904, p. 8. The reader who is specially interested in the Beef Trust - and its doings should send for a copy of this Hearing, and those of - 1901–1902. The report of the Bureau of Commerce Mar. 3, 1905, and Mr. - Baker’s articles in _McClure’s_ for Jan. 1906 and following months, - are also of the deepest interest. - -Footnote 293: - - Sen. Com. 1905, p. 311. The organizations represented by Mr. Ferguson - are the Western Fruit Jobbers’ Association; the National Retail - Grocers’ Association; the Minnesota Jobbers’ Association; Wisconsin - Retail and General Merchandise Association; Wisconsin Master Butchers’ - Association; Minnesota State Retail Grocers’ Association, Superior, - Wis.; Lake Superior Butchers’ Association, Duluth, Minn.; Duluth - Commercial Club; Duluth Produce and Fruit Exchange, and the Iowa Fruit - Jobbers’ Association. - -Footnote 294: - - Rep. U. S. Industrial Commission, iv, p. 53. - -Footnote 295: - - The Standard has the tanks and private sidings all over the New - Haven’s territory while few are owned by the independents. Persons - without these facilities must pay 2d-class rates, while the Standard - Oil pays 5th class. The 5th class rate between Boston and New Haven is - 10 cents per hundred, while the 2d class is 20 cents, the difference - probably representing several times the profit in handling one hundred - lbs. of kerosene. (Commissioner Prouty, in Annals of American Academy - of Political and Social Science, January, 1900.) - -Footnote 296: - - Ind. Com. iv, p. 53. - -Footnote 297: - - Sen. Com., 1905, pp. 2740, 2742. - -Footnote 298: - - See _The Outlook_, July 1, 1905, p. 578. - -Footnote 299: - - See Miss Tarbell’s vigorous description of what the Standard did to - Kansas in _McClure’s_ for September, 1905. - -Footnote 300: - - Ind. Com. vi, pp. 663–665. The seaboard pipe line was completed in - 1884. - -Footnote 301: - - Sen. Com. 1905, p. 2322, Professor Ripley. - -Footnote 302: - - _Ibid._, p. 48. A member of the Florida State Commission says the - roads also show favoritism in the supply of cars and by giving rebates - to large shippers. (_Ibid._, p. 47, R. H. Burr.) - -Footnote 303: - - Sen. Com. 1905, pp. 3339, 3340, Commissioner Fifer. - -Footnote 304: - - _Ibid._, pp. 1816–1820, 3439, 3440. - -Footnote 305: - - 10 I. C. C. Decis. 342, June 25, 1904. - -Footnote 306: - - Sen. Com. 1905, p. 3441. Other witnesses agreed as to the oppressive - freight rates, and said the town had subsidized two roads, both of - which are now controlled by the Southern Railway, but they did not - think town values had decreased or that population had diminished (pp. - 2006, 2018). - -Footnote 307: - - _Ibid._, pp. 1761, 1762. - -Footnote 308: - - _Ibid._, p. 3294. - -Footnote 309: - - _Ibid._, p. 1878. - -Footnote 310: - - Sen. Com. 1905, p. 2040. - -Footnote 311: - - Sen. Com. 1905, p. 34. - -Footnote 312: - - _Ibid._ See 10 I. C. C. Decis. 650, and Rep. 1905, p. 36. - -Footnote 313: - - Complaint of Denver Chamber of Commerce, Sen. Com. 1905, p. 3257. - -Footnote 314: - - Sen. Com. 1905, p. 3336. - -Footnote 315: - - Question of Mr. Fifer of Interstate Commission to Sen. Com. 1905, p. - 3337. - -Footnote 316: - - Sen. Com. 1905, pp. 2930, 2940. - -Footnote 317: - - _Ibid._, p. 2914. - -Footnote 318: - - See statements of Chamber of Commerce of Spokane and testimony of its - representative, Brooks Adams, Sen. Com. 1905, pp. 2917, 2928. - -Footnote 319: - - Sen. Com. 1905, pp. 2527–2529. - -Footnote 320: - - Senator Dolliver, Sen. Com. 1905, p. 2094. - -Footnote 321: - - Sen. Com. 1905, p. 1870. - -Footnote 322: - - 10 I. C. C. Decis. 456, Jan. 13, 1905. - -Footnote 323: - - See the series of broadsides on these subjects in the Philadelphia - _North American_ during August, 1903, and the early part of 1904. An - excursion ticket from Washington to New York and return allowed 10 - days in New York. Formerly a southern buyer going north on such a - ticket could stop over in Philadelphia. But in 1903 this stop-over - privilege was revoked, and if the buyer stopped in Philadelphia and - then bought an excursion to New York he could only stay five days in - New York. The result was that southern buyers began to leave - Philadelphia out in the cold and merchants found that “the present - tariff arrangements are working incalculable injury to wholesale - houses in Philadelphia,” and some of them had to open houses in New - York. - -Footnote 324: - - Ind. Com. ix, p. 133. - -Footnote 325: - - 4 I. C. C. Decis. 593. The order was made May 29, 1894, on petition of - the Freight Bureau of the Cincinnati Chamber of Commerce _v._ 23 - railway companies, and the Chicago Freight Bureau _v._ 31 railways and - 5 steamship companies. The companies refused to comply and the Circuit - Court dismissed the bill for an enforcement, October, 1896, 62 Fed. - Rep. 690; 76 Fed. Rep. 183. - -Footnote 326: - - I. C. C. _v._ Railway, 167 U. S. 479, May, 1897, reaffirming 162 U. S. - 184 and citing 145 U. S. 263, 267. Justice Harlan dissented. - -Footnote 327: - - “Railroad Transportation,” p. 114. - -Footnote 328: - - Sen. Com. 1905, p. 844. - -Footnote 329: - - _Atlantic Monthly_, vol. 73, p. 803, June, 1894. - -Footnote 330: - - E. P. Alexander in “Railway Practice,” p. 8. - -Footnote 331: - - Ind. Com. iv, p. 194. - -Footnote 332: - - 10 I. C. C. Decis. 1904, p. 58. - -Footnote 333: - - Sen. Com., 1905, p. 19, Bacon. - -Footnote 334: - - _Ibid._, p. 19. - -Footnote 335: - - J. C. Wallace of the American Shipbuilding Co., June 28, 1904, to the - Congressional Merchant Marine. - -Footnote 336: - - See Wright’s letter printed in the speech of Senator Bacon of Georgia, - _Congressional Record_, April 25, 1904. - -Footnote 337: - - Testimony of James J. Hill before the Marine Commission. - -Footnote 338: - - 10 I. C. C. Decis. 1904, p. 81. - -Footnote 339: - - Sen. Com. 1905, p. 919. - -Footnote 340: - - _Ibid._, p. 20. Glass, for example, costs 53 cents a hundred from - Boston to Chicago, while it will go all the way from Antwerp to - Chicago for 40 cents, and the railroads get only a fraction of the - through charge. - -Footnote 341: - - Ind. Com. iv, p. 194. - -Footnote 342: - - I. C. C. Beef Hearing, Dec. 1901, pp. 106–107; see also pp. 87, 88. - -Footnote 343: - - Sen. Com. 1905, p. 1462. - -Footnote 344: - - See evidence adduced in Chapter II. The words of the Industrial - Commission are still true: “There seems to be a general agreement that - the issue of free passes is carried to a degree which makes it a - serious evil.... Passes are still frequently granted to the members of - State and national legislatures and to public officers of many - classes.... And stress is often laid on the opinion that the issue of - passes to public officers and legislators involves an element of - bribery.” (Vol. iv, p. 18.) - -Footnote 345: - - Salaries are paid to favored persons; stock is given to influential - people; and tips on the market are given to congressmen and others - whose favor may be of advantage. And the railroads act against those - they dislike as vigorously as they act in favor of their friends. A - curious illustration of the extent to which railways will sometimes go - in their breaches of neutrality occurred in connection with the recent - trip of Thomas W. Lawson in the West. During the Chatauqua exercises - at Ottawa, Kansas, the Santa Fe advertised specials to run every day. - The day that Lawson was to speak, however, no specials ran, and - thousands of people were unable to go, as they had expected, to hear - the man who was attacking Standard Oil and its allies. The specials - ran as advertised every day up to “Lawson Day,” and began running - again the day after. The Santa Fe may not approve of Mr. Lawson’s - statements and in common with all other citizens it has the right to - oppose him with disproof, but isn’t it a little strange in this land - of liberty, free speech, and equal rights, for one of the best - railroads in the country to boycott a Chatauqua day because a man it - does not approve of is to speak? - - Similar experiences with the railroad service are reported from the - Chatauqua at Fairbury, Neb., when Lawson spoke there. - -Footnote 346: - - Mr. Appleton Morgan, writing in the _Popular Science Monthly_ for - March, 1887, said (p. 588): “Rebates and discriminations are neither - peculiar to railways nor dangerous to the ‘republic.’ They are as - necessary and as harmless to the former as is the chromo which the - seamstress or the shopgirl gets with her quarter-pound of tea from the - small tea-merchant, and no more dangerous to the latter than are the - aforesaid chromos to the small recipients.” - - General Manager Van Etten of the B. & A. says discrimination is the - American principle. You find it everywhere. You buy goods at wholesale - much cheaper than you can get them at retail. It is the same with gas - and water and electric light. - - A number of railroad men take the view that “railroad service” is a - commodity to be sold like any other sort of private property at - whatever price the owner can get or chooses to take. - - The trouble with these statements (aside from the quantity plea which - may be allowed within reasonable limits) is that the differences - between railway service and ordinary mercantile service are not taken - into account. - - If people found they were unfairly treated by the bakeries or - groceries or shoe stores of a town, it would be easy to establish a - new store co-operatively or otherwise, that would be fair and - reasonable, and that possibility keeps the store fair as a rule even - where there is no direct competition. But when the railways do not - deal justly with the people of a town they cannot build a new road to - Chicago or San Francisco. It is the monopoly element, together with - the vital and all-pervading influence of transportation, that - differentiates the railroad service from any ordinary sort of - commerce. If bread stores or shoe stores combined, and, by means of - control of raw material or transportation facilities, erected a - practical monopoly or group of monopolies, and favoritism were shown - in the sale of goods by means of which those who were favored by the - monopolists got all the chromos and low rates, and grew prosperous and - fat, while those who were not favored went chromoless and grew thin in - body and emaciated in purse, it is not improbable that the President - would write a message on the bread question and the leather question, - and a Senate committee would be considering legislation to alleviate - the worst evils of the bread and shoe monopolies without stopping the - game entirely. - -Footnote 347: - - In their established tariffs our railroads do apply the same rates per - hundred whether the goods moved in carloads or train loads. The - Commission has held that the law requires this, and Commissioner - Prouty says that the open adoption of any different rule would create - an insurrection that Congress would hear from from all parts of the - country; but he thinks that in certain cases, live-stock and - perishable fruit for example, the railroads should have a right to - make lower rates by the train-load than by the carload. In reference - to cost of service there is ground for such a difference, but on - grounds of public policy is it not a mistake to favor the giant - shipper in this way and so help the building of trusts and monopolies? - -Footnote 348: - - Sixth Annual Report, Interstate Commerce Commission, p. 7. - -Footnote 349: - - _Outlook_, July 1, 1905, p. 577. - -Footnote 350: - - We have seen earlier in this chapter that a number of railroad men and - others told the Senate Committee that they believed rebates and - discriminations to have ceased. In his excellent book, “The Strategy - of Great Railroads,” Mr. Spearman says: “Alexander J. Cassatt has made - unjust discrimination in railroad traffic a thing of the past.” - Sometimes we are assured: “There can be no doubt but that, on the - whole, the freight rates of the country have been adjusted in very - nearly the best way possible for the upbuilding of the country’s - commerce.” (See “Freight Rates that were made by the Railroads,” W. D. - Taylor, _Review of Reviews_, July, 1905, p. 73.) For one who has in - mind the facts brought out in this book, comment on these statements - is hardly necessary. There is no doubt that President Cassatt is a - railroad commander of exceptional power, but he has not vanquished the - smokeless rebate, nor driven the hosts of unjust discrimination from - the railroads of the United States. - -Footnote 351: - - Ind. Com. Q. & Ans. iv, p. 596. - -Footnote 352: - - Sen. Com. 1905, p. 1474. - -Footnote 353: - - Sen. Com. 1905, p. 1521. The Texas Railway Commission says: “It is - plain that, if a railway company is permitted to become interested in - any kind of business competitive with business in the carrying on of - which for others it is engaged, the business in which it is interested - can be made to prosper at the expense of the business in which it has - no interest. The temptation to unfair discrimination in such a case is - so powerful that it ought to be removed.” (Report, 1896, p. 29.) - -Footnote 354: - - Sen. Com. 1905, p. 17. - -Footnote 355: - - I. C. C. Rep. 1898, p. 6. - -Footnote 356: - - I. C. C. Rep. 1898, p. 8. - -Footnote 357: - - On pages 65 and 66 of the last Report, Dec. 1905, the Commission - discusses a decision of the Circuit Court for the Southern District of - New York, in June last, to the effect that a _subpœna duces tecum_, - commanding the secretary and treasurer of a corporation supposed to - have violated the law to testify before the grand jury, and bring - numerous agreements, letters, telegrams, etc.,—practically all the - correspondence and documents of the company originating since the date - of its origin,—to enable the district attorney to ascertain whether - evidence of the alleged breach of law exists, constitutes an - unreasonable search and seizure of papers prohibited by the Fourth - Amendment to the Constitution. - -Footnote 358: - - Sen. Com. 1905, pp. 2899–2901, 2911. - -Footnote 359: - - Sen. Com. 1905, p. 829. - -Footnote 360: - - I. C. C. Beef Hearing, Dec. 1901, pp. 100, 101. - -Footnote 361: - - I. C. C. Beef Hearing, Dec. 1901, pp. 114–115. - -Footnote 362: - - _Ibid._, p. 126. - -Footnote 363: - - Report of Oregon Railway Commission, 1889, p. 32. - -Footnote 364: - - See above, p. 237. - -Footnote 365: - - See above, p. 113. - -Footnote 366: - - “There is ample law to-day” to stop rebates and unjust - discriminations, says President Tuttle of the Boston and Maine (Sen. - Com. 1905, p. 951), and he backs up his statement with vigorous - reasons for believing that the Government has never earnestly enforced - existing laws. President Ramsey of the Wabash also says that the - present law is ample to cover every unjust charge, and no further - legislation is needed to stop discrimination (Same, p. 1959). - - George R. Peck, general counsel for the Chicago, Milwaukee & St. Paul, - testified that “existing law is entirely adequate” (Same, p. 1301). - - Mr. Robbins, manager of the Armour Car-Lines and director in Armour & - Co., declares that the “Elkins Law is ample” (Same, p. 2387). See also - p. 2117, James J. Hill; pp. 2179, 2181, Carle; p. 2228, Grinnell; p. - 3068, Faxon; pp. 3274, 3276, 3285, 3290, Elliott; p. 2360, Woodworth; - p. 2829, Smith. - -Footnote 367: - - A number of witnesses declare that the delays and uncertainties and - inadequacies of redress under existing laws discourage shippers from - efforts to obtain relief. Mr. C. W. Robinson, representing the New - Orleans Board of Trade and the Central Yellow Pine Association, says - they had such bad luck with their lumber cases before the United - States courts that they are discouraged. - - “‘Don’t you think that the question of rebates and discriminations is - already covered by law and can be stopped by summary proceedings?’ - - “MR. ROBINSON. That they are not stopped is patent to every one who - uses a railway company as a shipper and who keeps his eyes open. - - “‘Has there been any suit brought within the last two or three years - for rebates and discriminations in this section of the country?’ - - “MR. ROBINSON. No; generally speaking, we have decided down there that - life is too short to litigate with the railroad companies” (Sen. Com. - 1905, p. 2492). - - Governor Cummins of Iowa says that no suits have been brought in Iowa - for discrimination under the Elkins Law because the remedy under that - law is regarded as inadequate (Sen. Com. p. 2081). It appears that - only one case, the Wichita sugar differential, is before the I. C. C. - under the Elkins Law (Sen. Com. p. 2874). - -Footnote 368: - - Fifer, Adams, etc., Sen. Com. pp. 2923, 3338. - -Footnote 369: - - Vining, Sen. Com. p. 1691, Knapp, p. 3294, etc. Robbins, however, - manager of the Armour Car-Lines, says they are opposed to being made - common carriers (pp. 2384, 2397, 2400). He says they do not indulge in - rebates, generally speaking (pp. 2382, 2387, 2403), and thinks they - would be worse off if put under the Interstate Law (pp. 2390, 2397, - 2401). - -Footnote 370: - - President Roosevelt, Governor La Follette, Governor Cummins, Sen. Com. - p. 2046; Professor Ripley, pp. 2330, 2338: Commissioner Knapp, p. - 3305, Commissioner Prouty, pp. 2794, 2873, 2881, and 2886, where he - says: “I do not think the Commission has to-day in its docket a case - that can be satisfactorily disposed of without determining the rate - for the future.” Commissioner Clements, p. 3243, Commissioner Fifer, - pp. 3344, 3350, and many other witnesses; also writers and speakers - throughout the country. - - On the other hand, James J. Hill, President of the Great Northern, - says he cannot imagine a greater misfortune than to attempt to fix - rates by law, p. 1486; it would hamper transportation and hinder - development. President Tuttle says that rate-making is practically the - only property right the railways have, p. 913. Railway men generally - are strongly opposed to fixing rates by commissions. - -Footnote 371: - - Sen. Com. p. 3482, N. Y. Chamber of Commerce. - -Footnote 372: - - Several witnesses suggest this. See, for example, Sen. Com. p. 3280. - But James J. Hill says that if present laws were enforced not one of - the car-lines could exist a moment, p. 1486. - -Footnote 373: - - Professor Ripley, p. 2345, Fordyce, p. 2202, and many railroad men; - see below, p. 265. But see p. 61, Cowan; p. 822, Victor Morawetz; pp. - 973 and 1003, President Tuttle. - -Footnote 374: - - James J. Hill, p. 1521. - -Footnote 375: - - Knapp, p. 3299; without such a provision the old roads can cripple a - new road unless it goes clear across the continent. - -Footnote 376: - - Morawetz, pp. 818, 824; Bacon, pp. 16, 23; Davies, p. 3470; and Report - of Industrial Commission. Publicity is an excellent aid, but is - insufficient alone. It must keep steady company with adequate - legislation and efficient enforcement of it. What has been the effect - of publicity on the Standard Oil Trust up to date? - -Footnote 377: - - Commissioner Prouty, p. 2912. “That would stop discriminations,” said - the Commissioner. “Unless they got possession of the man,” said - Senator Dolliver. - -Footnote 378: - - Judge Gaynor proposes that the traffic managers shall be appointed by - the Government. The present writer has suggested that the public might - be represented on the board of direction in consideration of the - franchises, etc. - -Footnote 379: - - _Arena_, vol. 24, p. 569, Parsons. - -Footnote 380: - - Many of the States have strong laws, but the inharmonious, - uncoordinated efforts of individual States have proved of little avail - against the giant railway systems. Of the 31 States which have - established railway commissions, 22 have given the commissions more or - less of the rate-making power. For example, the Alabama Code, 1886, - gives the Commission authority “to revise the tariffs and increase or - reduce any of the rates.” The California Constitution, 1880, confers - power “to establish rates;” Florida Laws, 1887, “to make and fix - reasonable and just rates;” Georgia Code, 1882, “to make reasonable - and just rates;” Illinois Laws, 1878, “to make for each railway a - schedule of reasonable maximum rates;” Iowa, 1888, and South Carolina, - 1888, the same as Illinois; Minnesota, 1887, power “to compel railways - to adopt such rates and classification as the Commission declares to - he equal and reasonable;” South Dakota, 1890, the same; Mississippi, - 1884, “to revise tariffs;” New Hampshire, 1883, “to fix tables of - maximum charges.” (See 63 N. H. 259.) Kansas: on complaint and proof - of unreasonable charge Commission may fix reasonable rates, and if - companies don’t comply they may be sued for damages. The Massachusetts - Commission has “authority to revise the tariffs and fix the rates for - the transportation of milk” (158 Mass. 1). In New York the board may - notify the railways of changes in the rates, etc., it deems requisite, - and the Supreme Court may in its discretion issue mandamus, etc., - subject to appeal. In Nebraska the State Supreme Court has held that - general language prohibiting unreasonable rates, and giving the - Commission power to enforce the law, is sufficient to confer authority - to fix reasonable rates in place of those found unreasonable, such - authority being essential to the efficient execution of the law - against excessive rates (22 Neb. 313). - - In none of the States does the power to regulate rates appear to have - produced results of much value. In some States, Georgia, Texas, - Nebraska, Iowa, etc., the power has been at times vigorously used, but - the effect has been to antagonize the railroads, which have so much - power that is beyond the reach of any State Commission that they can - arrange their tariffs and service so as to work against the aggressive - States and disgust the people with the consequences of trying to - control the rates. Senator Newlands, who is sincerely on the people’s - side in the struggle for justice in transportation, voiced the common - opinion when he said in the United States Senate, January 11, 1905, - “As to the rate-regulating power, my judgment is, and it is the belief - of almost all experienced men in this country, that the - rate-regulating power exercised by the States has not, as a rule, been - beneficially exercised.” - -Footnote 381: - - The Bill provides that “Whenever ... the Interstate Commerce - Commission shall ... make any finding or ruling declaring any rate, - regulation or practice whatsoever affecting the transportation of - persons or property to be unreasonable or unjustly discriminatory the - Commission shall have power and it shall be its duty to declare and - order what shall be a just and reasonable rate, practice or regulation - to be ... imposed or followed in the future in place of that found to - be unreasonable” etc. It also provides that the order of the - Commission shall take effect 30 days after notice, but may on appeal - within 60 days be reviewed by a special transportation court having - exclusive jurisdiction of all such cases. By Section 12, the case is - to be reviewed on the original record, except when there is newly - discovered evidence which was not known at the hearing before the - Commission, or could not have been known with due diligence, and the - findings of fact by the Commission are _prima facie_ evidence of each - and every fact found. The only appeal from the court of transportation - is to the United States Supreme Court. - -Footnote 382: - - I. C. C. Rep. 1905, p. 9. - -Footnote 383: - - The granting of such power of inspection and publicity has been urged - by the Commission upon Congress in previous reports. On page 11 of the - Report for December, 1905, the Commission says: “We have also called - attention to the fact that certain carriers now refuse to make the - statistical returns required by the Commission. For example, railways - are required, among other things, to indicate what permanent - improvements have been charged to operating expenses. Without an - answer to this question it is impossible to determine to what extent - gross earnings have been used in improving the property and the actual - cost of operation proper.... Certain important railways decline to - furnish this information at all, and others furnish it in a very - imperfect and unsatisfactory manner.” - -Footnote 384: - - I. C. C. Rep. 1905, pp. 9, 10. - -Footnote 385: - - This clause together with the words italicized in the next paragraph - make the ruling of the Commission final so far as the merits of the - case are concerned. (See Appendix B.) - -Footnote 386: - - As the galley proofs of this book go back to the printer, the Hepburn - Bill has passed the House by a big majority. If passed by the Senate - and put in force, it promises to operate as a serious check upon the - abuses connected with private cars, terminal railroads and midnight - tariffs, but it does not touch at all nine-tenths of the methods of - discrimination. We have seen that between 60 and 70 different methods - of unjust discrimination between persons and places are in use in our - railway business to-day. The fixing of a maximum rate cannot prevent - either secret rate cutting or favoritism in facilities and services, - or even open discrimination in the arrangement of classifications and - adjustment of rates between different localities. - - No doubt this law in the hands of an able and honest commission would - do much good, but it cannot reach the heart of the railroad problem, - which is the unjust discrimination between persons and places. No - amount of maximum rate-fixing or prescribing of regulations can - destroy discrimination so long as we have the pressure of great - private interests driving the railroads into the practice of - favoritism. - - The history of railroad legislation in this country shows that the - railways do not respect or obey the law when it conflicts with the - fundamental financial interests and orders of the railway owners and - trust magnates, whose gigantic power represents the real sovereignty - and control in America to-day. - - On page 3 of the House Report, 59th Congress, 1st Session, No. 591, - January 27, 1906, accompanying the Hepburn Bill the Committee on - Interstate and Foreign Commerce says: “It is proper to say to those - who complain of this legislation that the necessity for it is the - result of the misconduct of carriers.... If the carriers had in good - faith accepted existing statutes and obeyed them there would have been - no necessity for increasing the powers of the Commission or the - enactment of new coercive measures.” - - What reason is there to believe that the railroads will accept a new - statute in good faith and obey it any more than any former law? On the - contrary, the probability is that if the Hepburn Bill becomes a law - the main effect will be to compel railway managers and counsel to sit - up nights for a time planning methods to evade and overcome the new - provisions. Even if Congress gave the full power at first demanded by - the President, to fix the precise rate to be charged, the general - effect would probably be that railways would exert themselves to - control the Commission. They have always at hand the weapon of - practically interminable litigation, and it is very doubtful whether - the railroad representatives in the United States Senate will permit - any law to pass until it is amended so that the review in the courts - shall go to the merits of the Commission’s order in each case. - Powerful interests are opposed to any provision that will permit the - fixing of a rate, even a maximum, to go into effect before it is - connected already with the Federal courts. - -Footnote 387: - - See statement earlier in this discussion. - -Footnote 388: - - Sen. Com. 1905, p. 3485. - -Footnote 389: - - Dept. of Commerce, Monthly Summary, April, 1900, p. 3991. - -Footnote 390: - - See Ind. Com. vols. iv and ix, and Hudson, Hadley, etc. - -Footnote 391: - - They tend to stability, economy, and efficiency, diminishing the - fluctuation of rates, railroad wars, and the wastes of competition, - and improving the service by better co-ordination, distribution of - traffic, etc. - -Footnote 392: - - See the powerful statements of President Ingalls, President Fish, Paul - Morton, Professor Seligman, Commissioner Prouty, etc., Ind. Com. vol. - iv; and statements of Professor Ripley, Morawetz, Fordyce, etc., Sen. - Com. 1905. It is absurd to forbid co-operation for the maintenance of - reasonable rates and prevention of superfluous transportation, or any - other honest purpose. Traffic agreements may secure a co-ordination of - service approaching that which would be attained by unity of - management. The fetish-worship of competition is one of the prime - curses of our economic ignorance. We might as well worship - destruction, injustice, and inefficiency. Moreover, competition of the - kind that protects the public from oppressive rates cannot be - maintained in the railway world. Let the railways unite, and then - control them, insisting on the dominance of the public interest so far - as necessary to accomplish justice. - -Footnote 393: - - The United States Supreme Court held in the Trans-Missouri Case, March - 22, 1897, and the Joint Traffic Association Case, Oct. 24, 1898, that - railroads cannot lawfully agree on rates to competitive points. But no - law or decision can well prevent railroad managers from meeting and - coming to an understanding that they will adopt the same rates to such - points. No contract in restraint of trade or to limit competition is - necessary,—if each railroad publishes the same rates between - “competitive” points and maintains them, competition as to rates is - killed as effectually as if there were a pool or a traffic association - with a written agreement. - -Footnote 394: - - Sen. Com. 1905, pp. 2923, 3338. - -Footnote 395: - - Sen. Com. 1905, p. 3482. - -Footnote 396: - - _Ibid._, pp. 3485, 3486. The railroad managers decided to notify - offending railroads that unless rates were restored, the lowest cut - rates that had been made by any line would be adopted by all, to - punish the rebaters and stop them from getting business thereby. At a - meeting July 26, 1882, 30 railroads being represented, a resolution - was unanimously adopted, directing agents at connecting points to - examine waybills, and when rates were found to have been cut, to hold - the freight at the expense of the initial line until the waybills had - been corrected. - -Footnote 397: - - Sen. Com. 1905, p. 1908, and index, “Rate-Making.” - -Footnote 398: - - The Senate is too full of men interested in railroads in one way or - another to make it easy to pass any measure that might seriously - affect either the power or the profits of the roads. - -Footnote 399: - - President Tuttle agrees with the Commission on this point. In his - testimony to the Senate Committee, 1905, he said that the company’s - books would not show rebates, etc., “unless they wanted them to. I - will say to you frankly that if a company intended to evade the law by - giving rebates and commissions they would find some way of so covering - them up that all the experts on the face of the earth could not find - them. If you assume at the beginning that the railroad management is - deliberately going into violations of the law it is not going to make - records of those things which can ever be found out.” (Sen. Com. 1905, - p. 952.) But President Tuttle said: “There is ample opportunity to - ascertain if rebates exist. There are always opportunities. The - competitive shipper knows about it. There is always enough of the - loose end hanging out somewhere so that if the Interstate Commerce - Commission or whoever is authorized to move in those matters will take - the time to proceed upon the lines of information that they can always - get they will be easily ferreted out and punished. I do not think - there is any evidence that the Interstate Commerce Commission has - tried to enforce the Elkins Law.” (Same, p. 951.) Shippers have, - however, often stated that they felt sure some concession was being - made to their rivals, but they could not tell what, and in many cases - there is simply a vague suspicion; no one knows whether others are - paying the tariff rates or not. And railroad men have admitted, as in - the B. & A. case, that no shipper knew what rates others were getting. - -Footnote 400: - - Sen. Com. 1905, p. 3644. - -Footnote 401: - - Out of 37 passenger cases (20 rate cases and 17 miscellaneous) the - decision was favorable to the complainant in 9; and in 316 freight - cases the decision was for the complainant in 185 cases. In 70 of the - freight cases the complaint was of excessive charges (half of them - charging discrimination also, or relative excess as well as absolute - excess); 119 related to charges relatively unreasonable; 52 concerned - long and short haul abuses; 20 unreasonable classification, 8 unfair - distribution of cars, 41 miscellaneous. Ninety-six of the 316 freight - cases were dismissed, 13 settled while pending, 4 left without a - general statement and no order, and 17 held for further action. Nearly - 90 percent of all the cases, passenger and freight, related directly - to some form of discrimination, and indirectly discrimination of some - sort was an element in practically every case. - -Footnote 402: - - The 8 cases are the New York and Northern Case (3 I. C. C. 542) the - Social Circle Case (4 I. C. C. 744) the Minneapolis Case (5 I. C. C. - 571) the Colorado Fuel and Iron Case (6 I. C. C. 488) the St. Cloud - Case (89 I. C. C. 346) the Savannah Case (8 I. C. C. 377) the Tifton - Case (9 I. C. C. 160) and the California Orange Routing Case (9 I. C. - C. 182). Mr. Willcox thinks the Minneapolis Case and the Colorado Case - should be crossed off because the carriers complied with the orders - while suit was pending, so that there was no decision on the merits. - He says the decision was not on the merits in the New York Case, the - St. Cloud Case, or the Tifton Case. In the Social Circle Case the - Supreme Court sustained the order in respect to discrimination, but - reversed it so far as it attempted to fix a maximum rate. In the - Orange Case the Circuit Court sustained the Commission, but an appeal - was taken at once to the Supreme Court. In the Savannah Naval Stores - Case the Circuit Court sustained the Commission and no appeal was - taken. Two cases in favor of the Commission in the Court of Appeals - and one-half a case in the Supreme Court, and one of the circuit - decisions is on appeal—one and one-half final affirmatives on the - merits out of 34. One would think that Mr. Willcox might allow the - Commission the three cases that were decided in their favor although - the court did not find it necessary to go into the merits of the - matter, and he seems to be less generous about the Colorado Case than - Mr. Newcomb, who says the Commission was sustained by the court. - -Footnote 403: - - Work of the Interstate Commission, p. 14, 1905. (See Appendix A.) - -Footnote 404: - - As the average time required to reach a final decision in a case that - goes from the Commission through the Federal courts up to the United - States Supreme Court is 7½ years, it is clear that there is plenty of - time for the accumulation of a congregation of cases, birds of a - feather, waiting for judgment, on the same point. - -Footnote 405: - - Sen. Com. 1905, p. 2888. - -Footnote 406: - - The railroads would prefer a court to a Commission if any public body - is to have power over rates. They know that proceedings in court are - likely to be troubled with long delays, and great expense, and that - courts are very delicate about determining what is a reasonable rate. - In the Reagan case (154 U. S. 362) the Supreme Court says: “It has - always been recognized that if the carrier attempted to charge a - shipper an unreasonable sum the courts had jurisdiction to inquire - into that matter and award to the shipper any amount exacted from him - in excess of a reasonable rate; and, also, in a reverse case, to - render judgment in favor of the carrier for the amount found to be a - reasonable rate.” - - In any case of suit by a shipper to recover damages for unreasonable - charges the court would have to determine what was a reasonable rate - in order to fix the measure of damages, but Chairman Knapp of the I. - C. C. says he does not know of a case in which suit was ever brought - (Sen. Com. 1905, p. 3301). The fact that very many complaints have - been made of unreasonable rates and no suits brought in the courts - indicates that court procedure is regarded as inadequate. Courts are - by nature judicial, not legislative or executive. And the remedy which - can be administered by them in these railroad cases is uncertain, - limited, and indirect. (Sen. Com. p. 3362.) - -Footnote 407: - - Sen. Com. 1905, pp. 3297, 3298. - -Footnote 408: - - Sen. Com. 1905, p. 975. - -Footnote 409: - - 9 I. C. C. Decis. 318, Nov. 17, 1902. - -Footnote 410: - - 10 I. C. C. Decis. 590; Rep. 1905, p. 31. - -Footnote 411: - - Essex Milk Producers’ Association _v._ Railroads, 7 I. C. C. Decis. - 92, March 13, 1897. See also Howell _v._ New York, Lake Erie, and - Western, 2 I. C. C. Decis. 272, equal milk rates from all distances - unlawful. - -Footnote 412: - - 11 I. C. C. Decis. 31. - -Footnote 413: - - Sen. Com. 1905, p. 1339. - -Footnote 414: - - Sen. Com. 1905, p. 1165. The fact is that neither the Elkins Bill nor - the Esch-Townsend Bill reaches the private car abuses or terminal - railroads, or flying tariffs, or other evasive forms of - discrimination, and neither adds much to the power of the Commission - to deal with the subject. (See Sen. Com. pp. 2889, 2905, 2911). - -Footnote 415: - - Sen. Com. 1905, pp. 1675, 1676. - -Footnote 416: - - See Chamber of Commerce _v._ C. M. & St. P. Rd., 7 I. C. C. Decis. - 1898, p. 510 and I. C. C. Rep. 1898, p. 24. - -Footnote 417: - - The reasons for and against public ownership of railroads are dealt - with in the testimony of the writer before the Industrial Commission, - vol. ix., pp. 123–193, 883–890. President Roosevelt had the - possibility of public ownership in mind when he said in his message - that we must choose between an increase of existing evils, or - increased Government supervision, or a “still more radical policy.” - -Footnote 418: - - The railways of Italy were operated by private companies when I was - there; since then, in 1905, the Government has undertaken the - operation of them. - -Footnote 419: - - A few illustrations of the vigorous manner in which this law works out - in practice may be of advantage here: - - The Hungarian Government at a single stroke, in 1889, reduced State - railway fares 40 to 80 percent. Austria and Prussia have also made - great reductions in railway charges. Belgium started in the thirties - with the very low rate of ⅘ of a cent on her public railways. In New - Zealand and Australia also the Government managements have adopted the - settled policy of reducing railroad rates as fast as possible. - - When England made the telegraph public in 1870, rates were lowered 30 - to 50 percent at once, and still further reductions were afterwards - made. - - When France took over the telephone in 1889, rates were reduced from - $116 to $78 per year in Paris, and from $78 to $39 elsewhere, except - in Lyons, where the charge was made $58.50. - - Private turnpikes, bridges and canals levy sufficient tolls to get - what profit may be possible; but when the same highways, bridges and - canals become public the tolls are often abolished entirely, rendering - such facilities of transportation free, and when charges are made they - are lower than the rates of private monopolies under similar - conditions, and generally reach the vanishing point as soon as the - capital is paid off or before. - - When Glasgow took the management of her street railways in 1894, fares - were reduced at once about 33 percent, the average fare dropped to - about 2 cents, and 35 percent of the fares were 1 cent each. Since - then further reductions have been made, and the average fare now is - little more than a cent and a half; over 50 percent reduction in 6 - years, while we pay the 5 cent fare to the private companies in Boston - and other cities of the United States the same as we did 6 years ago, - instead of the 2½ cent fare we would pay if the same percentage of - reduction had occurred here as in Glasgow. - - According to Baker’s Manual of American Waterworks, the charges of - private water companies in the United States average 43 percent excess - above the charges of public waterworks for similar service. In some - states investigation shows that private water rates are double the - public rates. - - For commercial electric lighting Prof. John R. Commons says that - private companies charge 50 to 100 percent more than public plants. - - We could offer many other illustrations of the law that public - ownership tends to lower rates than private monopoly, but this - discussion may be sufficient to indicate the complexion of the facts. - -Footnote 420: - - The sixteenth annual report of the Commission, dated 1905, and - covering the year 1904, has come just in time for a note before the - galleys are made up into pages. Of the 103 suits entered before the - Commission in 1904, about a quarter (25) relate to undue preference, - rebates, refusal or neglect to afford such reasonable facilities as - were accorded to others under similar circumstances; and most of the - other cases, charging unreasonable rates, etc., were really based on - some element of unjust discrimination in one form or another. (See - Appendix B.) - -Footnote 421: - - While this book is on the press, the eighth report, covering 1902 and - 1903, has come to hand. More than half the 180 new complaints filed in - the 2 years directly relate to questions of discrimination—undue - preference, rebates, denial of facilities accorded to others, - excessive charges as compared with other rates, etc., and nearly all - the 180 cases involve discrimination directly or indirectly. (See - Appendix B.) - -Footnote 422: - - From the _Progressive Review_, vol. II, no. 11, pp. 441, 442, where a - number of facts relating to import rates are condensed from the - testimony before Parliamentary committees. - -Footnote 423: - - See “The Railway Act” 1903. - -Footnote 424: - - This and other phases of the problem relating to the comparison of - private management, government control, and government ownership, are - more fully dealt with in “The Railways, the Trusts and the People” by - the same author. Oct. 1905, Equity Series, 1520 Chestnut St., - Philadelphia. - -[Illustration] - ------------------------------------------------------------------------- - - - - - THE RAILWAYS, THE TRUSTS AND THE PEOPLE. - - - BY PROF. FRANK PARSONS, PH.D. - - _Edited and Published by C. F. TAYLOR, M.D., Editor and Publisher of - Equity Series, 1520 Chestnut Street, Philadelphia._ - - THE CONTENTS ARE AS FOLLOWS: - - PART I. - - THE RELATIONS OF THE RAILROADS TO THE PUBLIC, OR VITAL FACTS FROM THE - RAILWAY HISTORY OF THE UNITED STATES. - - CHAPTER - The Railway Empire I. - The Allied Interests II. - Railway Favoritism III. - Railways in Politics IV. - Fostering Monopoly V. - Watered Stock and Capital Frauds VI. - Gambling and Manipulation of Stock VII. - Railroad Graft and Official Abuse VIII. - Railways and the Postal Service IX. - The Express X. - The Chaos of Rates XI. - Taxation without Representation XII. - Railways and Panics XIII. - Railway Strikes XIV. - Railway Wars XV. - Defiance of Law XVI. - Nullification of the Protective Tariff XVII. - Railway Potentates XVIII. - The Failure of Control, How Far and Why XIX. - The Irrepressible Conflict XX. - - - PART II. - - THE RAILROAD PROBLEM IN THE LIGHT OF COMPARATIVE RAILROAD HISTORY - COVERING THE LEADING SYSTEMS OF THREE CONTINENTS. - - CHAPTER - The Problem XXI. - The Supreme Test XXII. - Lessons from Other Lands XXIII. - The Aim XXIV. - Contrasts in General Policy XXV. - Location.—Construction.—Capitalization, etc. - Management XXVI. - Safety.—Service.—Economy.—Progress. - The Rate Question XXVII. - General Policy.—Rate Level under Public and Private - Management.—Zone System. - Employees XXVIII. - Political, Industrial, and Social Effects XIX. - Remedies Proposed XXX. - Pooling.—Consolidation.—Regulation.—Public Ownership. - - - - - AMERICAN RAILROAD RATES - - - BY JUDGE WALTER C. NOYES - - _Author of “The Law of Intercorporate Relations,” etc._ - - * * * * * - -A masterly work, reviewing the most highly controversial economic issue -of the day in this country.—_New York Commercial._ - -Judge Noyes is the possessor of a thorough knowledge of the complicated -subject of rate-making.—_Chicago Record-Herald._ - -=The most intelligent discussion of the subject which has yet -appeared.=—_New York Law Journal._ - -Judge Noyes’ handling of the question is clear, impressive, and -indicative of a mastery of the legal or constitutional side of the -subject.—_Springfield Republican._ - -A careful reading will help toward a solution of the problem of federal -regulation of railway rates.—_Railway Age._ - -=We know of no book which will give the lay reader so clear and so -authoritative a statement of the fundamental legal principles which must -govern in the determination of the pending question concerning -government regulation of railway rates.=—_Outlook_, New York. - -It is truly refreshing to turn to the book. Every aspect, historical or -actual, of the question is dealt with, including discrimination, -pooling, competition.—_Chicago Evening Post._ - -A book covering completely a field heretofore only touched in -spots.—_Indianapolis News._ - -=A remarkable book, considered from every point of view—economic, -practical, legal.=—EDGAR J. RICH, _General Solicitor of the Boston & -Maine R. R._ - -For readers desirous of reaching a clear understanding both of the legal -and economic questions involved in the fixing of railroad rates there is -probably no better handbook. His whole attitude is eminently judicial, -open-minded, and impartial.—_St. Paul Pioneer Press._ - -The author is an expert in railroad management and his opinions are -judicial and wholly unbiased.—_American Law Review._ - - * * * * * - - PRICE, $1.50 net. Sent Postpaid on Receipt of $1.64 by - - LITTLE, BROWN, & CO., _Publishers_, BOSTON - ------------------------------------------------------------------------- - - - - - TRANSCRIBER’S NOTES - - - 1. Silently corrected obvious typographical errors and variations in - spelling. - 2. Retained archaic, non-standard, and uncertain spellings as printed. - 3. Re-indexed footnotes using numbers and collected together at the end - of the last chapter. - 4. Enclosed italics font in _underscores_. - 5. Enclosed bold font in =equals=. - -*** END OF THE PROJECT GUTENBERG EBOOK THE HEART OF THE RAILROAD -PROBLEM *** - -Updated editions will replace the previous one--the old editions will -be renamed. - -Creating the works from print editions not protected by U.S. copyright -law means that no one owns a United States copyright in these works, -so the Foundation (and you!) can copy and distribute it in the -United States without permission and without paying copyright -royalties. 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