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]