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.