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]

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:

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.