Oil in Standard hands continued to receive favorable attention from the railroads throughout the middle period. The Combine was preferred by an “unreasonable mileage” payment of ¾ of a cent a mile on its tank cars, loaded or empty,[95] while others who attempted to ship in tank cars had to pay mileage to the railroads for the return of their empties; by practically compelling independents to ship in barrels, and charging for the weight of the barrel; and by making an arbitrary allowance of 42 gallons for leakage on tank shipments with no allowance for waste in barrel shipments.[96]
The Commission held it unjust to allow for leakage on tank shipments and not on barrel shipments; that the weight of the barrel must not be charged for if the weight of the tank is not, the same quantity of oil must have the same rate no matter what the package might be, unless the shippers were offered facilities for shipment by tank as well as barrels so that the option was theirs. The representative of the oil combination was questioned by the Interstate Commerce Commissioners, in relation to the mileage, etc.
“Are you allowed mileage on tank cars?”
“No, sir.”
“Neither way?”
“Neither way.”
But the railroad officials in this case refused to commit oil-perjury. Asked what mileage they paid the Combine they replied: “Three-quarters of a cent a mile.”
When Rice asked what the railroads would charge him for bringing back his empty cars if he shipped in tanks, he was told he would have to pay 1½ cents or more a mile. He found that if he tried to sell his oil in California it would cost him $95 to get the empty tank car back, while the railroads paid the Standard for the privilege of hauling its empties back. Rice saw that from the South he could get return loads of turpentine, but the railroads absolutely refused to give him rates.[97]
Besides all this the Standard was accorded the privilege of systematic underbilling. According to the testimony before the Commission in 1898 by the Boston & Albany agent in East Boston, the centre of the Standard Oil business in New England, the Combine’s tank cars, which usually weigh from 35,000 to 50,000 lbs., were ordinarily billed at 24,000 lbs. Out of 14 cars sent over another road from East Boston to Newport, R. I., at least half were billed and paid for on the basis of 24,000 lbs. to the car, although their average weight was shown to be 48,550 lbs. per car. It was claimed that these underbillings were clerical errors. In considering the motives and reliability of such a claim we must not forget the curious habit shown by these clerical errors of piling up in great bunches in the Standard Oil business, and the still more curious fact that all the errors are in favor of the Trust—none against it. Long before the Commission had found that the railroads leading from the oil fields were in the habit of “blind billing” the Standard cars at 20,000 lbs., though the actual weight was frequently 30,000, 40,000, 44,000 or more.[98] Rice complained of this to the Commission in July, 1887. Immediately all the old numbers on the 3000 tank cars of the Oil Trust were painted out and new numbers painted on, so that the cars mentioned in the railroad accounts could no longer be identified with the cars on the tracks.[99] The Standard has some very oily ways, and knows how to use a pot of paint and a brush as well as a rebate.
The Standard desired to fix the rates on oil to New England, the South, and the West, and as usual the railroads let it have its way. The result was a practice of adding the Boston rate to the local rate on shipments of oil into New England, which puts the independent refiners at a great disadvantage. The rate on corn from Cleveland to Boston is 15 cents per hundred lbs., and to New Haven the same, but the rate on petroleum from Cleveland to Boston is 24 cents, and to New Haven it is the Boston rate, 24 cents, plus the local rate, or a total of 36 cents from Cleveland to New Haven. Now the Standard Oil has got large warehouses in East Boston, and they bring their oil by boat and store it there, and then they get the freight rates simply from Boston down to the Connecticut point, whereas the Western refiner who has no storehouse has to pay first the Boston rate, and then this local rate also to the other point, even though the oil may go direct, so that the rates are practically prohibitive to the Western refiners.[100]
To shut out the oil fields and independent refineries of Colorado and Wyoming, the Standard resorted to terrific discrimination in rates. The Chicago and Northwestern Road would bring a carload of cattle from Wyoming to Chicago for $105, but for a car of 75 barrels of oil the freight was lifted to $348. The rates from the Western fields to San Francisco were also put very high, and the Standard built great storehouses on the Pacific Coast, which it fills from the Eastern fields, the freight rates from the East being suddenly lowered when it wishes to refill the said storehouses, and put back again as soon as they are full. The people of California are compelled to buy Eastern oil for the profit of the Trust, instead of buying Colorado oil, because the freight on the latter is prohibitive.
Aside from these sudden fainting spells of the oil tariff at convenient seasons for the Standard, the ordinary arrangements showed thoughtful care for its comfort. The regular rate on oil from the Colorado oil wells to the Pacific Coast was made 96 cents per hundred, while the rate from Chicago through Colorado is only 78½ cents per hundred.[101]
The Chicago pork-packers generally had things their own way in this period, but apparently not always. In 1890 the Commission decided that the railroads were discriminating against the Chicago packers by lower rates from the Missouri River on hog products than on live hogs.[102] Even then, however, they were receiving rebates from the railroads which made questions of tariff rates comparatively insignificant.
In 1891 the Federal Grand Jury indicted Swift & Co., the Chicago packers, for having received $5,000 a month in rebates from one road alone, the Nickel Plate. Compared to the train loads of their cars passing east and west on other lines, their traffic on the Nickel Plate was light.
In his testimony to the Senate Committee this spring, Mr. Davis said: “A few years ago one of the Chicago packers was a director on a Western railroad. He was a large receiver of live-stock from Kansas City, upon which the freight rate was $54 per car. A rebate of $25 was paid to the packer at the time of shipment, and it was the custom to file claims for the remaining $29, which were allowed on the grounds of some imaginary loss or damage to the stock in transit. The same party paid rebates amounting to from $30,000 to $50,000 a month for every month in the year. On putting down on a piece of paper the amount of $10,000, and after placing this under the eyes of a superior officer, he would leave and subsequently look for that amount in currency by express, and would then proceed to divide it among certain favored shippers.”[103]
A few years ago, in proceedings before Judge Grosscup of Chicago, it appeared that while the published rate on packing-house products was 23½ cents, the favored packers were given a rate as low as 15 cents.
Investigations by the Commission in December, 1901, and January, 1902, took the lid off of the dressed-meat business and discovered a large congregation of secret rebates. The Pennsylvania system was cutting the rate on packing-house products 5 to 7 cents below the published rate, making it 25 cents and sometimes 22 cents, in place of 30 cents, from Chicago to New York. Rates from Indianapolis, Cincinnati, and other points were also cut.[104]
The examination brought out the fact that President Cassatt and other officers above the traffic manager knew what he was doing and authorized or permitted the rate cutting.[105]
“Commissioner Clements. Who takes the responsibility for doing these things, for making these serious departures and cuts, in regard to the Pennsylvania Railroad? Is it you? Do you do it without any authority from the officers of that road above you, or do you have their approval of it?
“Mr. McCabe. I am in charge of the freight traffic, and I do the best I can under the circumstances.
“Commissioner Clements. Do you act independently of them, or do you have to have their approval?
“Mr. McCabe. I assume to do what I think is proper, being governed by the competitive conditions.
“Commissioner Clements. Do you have reason to know that the officers above you in the management of that company’s affairs knew of it?
“Mr. McCabe. Not in detail.
“Commissioner Clements. I do not mean the details. I could have answered that myself. But as to the general fact that the Pennsylvania Railroad was cutting the rate in this serious way, was it known to the president of that company and other officers?
“Mr. McCabe. I do not know.
“Commissioner Clements. Have you ever had any conference with the officers above you in the management of that company’s affairs in which you disclosed this condition of things?
“Mr. McCabe. I have said to them from time to time that rate conditions were so and so; that rates were not being maintained, and that our competitors were cutting the rates.
“Commissioner Clements. And that you must cut the rates? Did they sanction it, or approve it, or tell you to stop it?
“Mr. McCabe. I think they left it to my discretion.”
The Big Four, a Vanderbilt line, cut rates 6 cents below the 30 cent tariff from St. Louis.[106]
Mr. Mitchell, traffic manager of the Michigan Central, says his road carried dressed meats at 40 cents, or 5 cents below the published rate.
“Chairman of the Commission. Did you carry any considerable amount of dressed meats during 1901 that paid the tariff rate?
“Mitchell. I think not.
“Chairman. Practically all of it went at some secret rate?
“Mitchell. Yes, sir.”
This man thought his road paid the four Beef Trust houses $200,000 or $240,000 a year in rebates.[107]
Mr. Mitchell said rebates were paid indirectly by means of bank drafts. The railroad makes a deposit in bank. The traffic manager checks against it, and the bank supplies drafts on New York or cashier’s checks which are sent to the persons who are to receive rebates.[108]
The railroads try to be good sometimes, make New Year’s resolutions, and stop the rebates; but some naughty boy breaks his vows in two or three weeks, and then the rest follow suit. Here is the testimony of a Western traffic manager on this point.[109]
“Commissioner. What proportion of the traffic (in provisions) have you carried at the tariff rate?
“Traffic Manager. It was a very small proportion of the total, and it was probably along about the first of last year.
“Commissioner. You are accustomed to indulge in New Year’s resolutions?
“Manager. Yes, sir; we all swear off on New Year’s, and begin again.
“Commissioner. Is it a fact that from Jan. 1, 1901, there was a period when the tariff rate (on provisions) was actually applied by all the roads?
“Manager. Yes, sir; I think it was.
“Commissioner. How long did it last?
“Manager. I think it lasted probably two weeks.
“Commissioner. What led you, then, to cut your rate through St. Louis?
“Manager. Our agent in Kansas City discovered about January 20 that provisions were moving through Chicago at less than tariff rate.”
The Commission found that all the railroads made low rates for the Beef Trust, but they could not find any railroad that led off in the business of cutting rates. Each one said it cut rates because it found the others were cutting. They were all followers.[110]
The Chairman of the Commission said to the Vanderbilt traffic man: “I observed that you spoke of your road as following the others.
“Mr. Cost. Yes, sir.
“The Chairman. I have heard a similar statement from other gentlemen. Have you any idea who is the leader?
“Mr. Cost. No; I have not. I could not give you that information.
“The Chairman. You have never heard of the leader?
“Mr. Cost. No, sir.
“The Chairman. They are all followers.
“Mr. Cost. That does really seem to be the case.”
Mr. Grammer, general traffic manager of the Lake Shore, testified in 1902 in respect to “provisions,” cut meats, lard, etc., from Chicago to New York: “The minimum weight on a car of provisions is 28,000 lbs. The rate is 25 cents. That is about the maximum rate obtained this last year, 1901, and that means $70 a car. We pay out of that to the stockyards $2.40 a car for switching, we pay $15 car-mileage for a round trip of the car, and at New York we pay 3 cents a hundred lighterage; that is, $2.40 and $15, $17.40, and $8.40—$25.80 which we pay out of that rate as absolute arbitraries. That leaves the Lake Shore $16 or $17 net for hauling that car to Buffalo, with the return car empty, and we have to give practically passenger service to that traffic. I think it is unremunerative business, and I have always taken the position that we do not want any provisions on the Lake Shore road at less than the full tariff rate, whatever that might be. The dressed-beef minimum will average 22,000 lbs. That car is subject to the same arbitraries and mileage. The lighterage is 3 cents a hundred, which would be $6.60 instead of $8.40, and it is subject to the same service eastbound and westbound as to movement; and there is not 1 percent of those cars loaded east with dressed beef that are loaded with any freight coming west.” In spite of the unremunerative character of the business Manager Grammer says they cut the rate 5 cents a hundred.[111]
Mr. Paul Morton, at the head of the traffic department of the Santa Fe, testified in 1902[112] that his road carried dressed meats and packing-house products below the published rates in violation of law.
“Mr. Morton. We have carried the business from Kansas City to Chicago for 5 cents less than the published tariff to Chicago and Chicago junction points.
“Mr. Day. Domestic as well as export?
“Mr. Morton. Both.”
“The Santa Fe,” he said, “at the beginning of 1901 joined with the other roads in a general declaration of good faith and intention of an absolute maintenance of rates. We maintained the rate until about April 1.” The Santa Fe found that they were only carrying 2 percent of the packing-house business out of Kansas City, although they brought in 33⅓ percent of all the live-stock that entered the city. So “we told one of the largest shippers in Kansas City that if they would come and ship with us we would give them 5 cents reduction from the tariff, and in order to get them we had to promise to do it for a year—I think until the first of July of this year, 1902.”
Continuing, the witness admitted the illegality of the transaction.
“Mr. Morton. Yes, sir; it is an illegal contract. It was illegal when we made it, and we knew that.
“Commissioner Clements. Can you tell how much you paid out in a year?
“Morton. On this business?
“Clements. Yes, sir. Have you any idea whether it is $50,000 or $100,000 or $10,000—anything definite? Of course it is a mere guess and you do not know—
“Morton. Well, I think there was a great deal more than any sum you mention paid out.
“Clements. By your company?
“Morton. By all the companies. I think we paid out $50,000 a year or more.
“Clements. Who would have the direction of that? Who would see that it was paid? Who would direct it to be done?
“Morton. I would.
“Commissioner Prouty. How much does it cost your company on all its business in any one year to deviate from the published rates?
“Morton. I should think between $500,000 and $1,000,000 a year.”
By means of private cars, mileage payments, rebates, and control of rates, the big packers had advantages which enabled them to ruin the smaller packers all over the country. The Lincoln, Neb., Packing Company, for example, was “driven out of business,” the manager says, “by freight discrimination, rebates, and the private car. After doing a losing business for 5 or 6 years against these odds, the company closed down with a loss of 75 percent of the investment.” And this is a fair sample of what has happened to many, many of the competitors of the Beef Trust.