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.