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 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]