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]