The Project Gutenberg eBook of The heart of the railroad problem, by Frank Parsons

1. See New England Exp. Co. v. Maine Central R. R., 57 Me. 188; Fitchburg R. R. v. Gage, 12 Gray (Mass.), 393; Kenny v. Grand Trunk R. R., 47 N. Y. 525; Messenger v. Penn. R. R., 8 Vroom (N. J.), 531; Chicago, etc., R. R. v. People, 67 Ill. 11; Wheeler v. San Francisco R. R., 31 Cal. 46.

2. Pass discrimination alone, it is estimated, amounts to some 200,000 free transits a day, or over 70 millions in a year. And as for freight discriminations, the reader who follows this history through will see that like the leaves of the forest they defy computation. Just a hint may be given here. Every day that one of the 300,000 private cars is carried at the present mileage rates, a discrimination is made in favor of the owner of the private car,—a hundred millions of unjust discriminations, possibly, in this one item.

3. The New York Central, Baltimore and Ohio, and some other lines announced the same purpose as the Pennsylvania in respect to passes after January 1, 1906, but with them as with the Pennsylvania it appears to be a case of more careful discrimination in the use of discrimination, and an appreciation of the fact that it is very important to make a good impression on the public mind just now, in view of the widespread demand for drastic legislation in the direction of railroad regulation.

4. A number of the States have laws against passes. The Interstate Commerce law forbids them. And they are always against the moral law whether they run beyond the State line or not.

5. In one case it appeared that a leading railroad attorney had been for years in the habit of supplying jurors with passes. Opposing counsel brought out the fact that all the jurors in the case on trial had accepted passes from the railroad company which was the defendant in the case, and that to have an equal chance for justice his client would have to give each juror $50 to offset the railroad gifts. The judge discharged the whole jury.

6. Condensation of statement of Texas Railroad Commission’s Report for 1898, p. 17. See, further, “Bribery by Railway Passes,” North American Review, 138, p. 89; and Public Opinion, 26, p. 167, Feb. 9, 1899: “The Pass Evil in Three States” (Indiana, Minnesota, and Washington).

7. “Railway Passes and the Public,” Forum, 3, p. 392.

8. Vol. iv, pp. 456–457.

9. American Railroads as Investments, p. 30.

10. See C. Wood Davis’ article in The Arena, vi (1891), pp. 281–282.

11. See the evidence cited below.

12. Report of U. S. Industrial Commission (1900), iv, p. 135.

13. Testimony before U. S. Industrial Commission (1900), iv, p. 490.

14. Forum, 3, p. 392.

15. Railroad Transportation, p. 109.

16. In order to test the attitude of the government roads, I did my best to get passes, trying first through the American ambassadors in Vienna, Berlin, and Brussels, and afterward by direct appeal to the railway management. But it was of no use, although I had a letter from the Chairman of the United States Industrial Commission saying that I had rendered the government valuable service in connection with the work of the Commission, and that any courtesies shown me or assistance afforded me in my researches would be a public service. I had other strong letters from men of high distinction in the United States and England, and our ambassador at Berlin had been president of my alma mater when I was in college, and was specially friendly and helpful; but I was assured that no amount of influence or pull could secure a pass or any other personal favor on the State railways.

17. See McClure’s Magazine, December, 1905, where Ray Stannard Baker has stated the leading facts.

18. See, for example, the testimony of Stuyvesant Fish, President of the Illinois Central, before the United States Industrial Commission, calling attention to the fact that while railway officials could be prohibited by law from selling tickets below published rates, individuals could not be so prohibited, and that some railways sold their tickets to competitive points to brokers, paying them a commission for making the sale, out of which the brokers scalped the rate. (Industrial Commission, 1900, iv, p. 334.)

19. Industrial Commission, iv, pp. 457–458.

20. Hudson, “The Railways and the Republic,” p. 42.

21. Hepburn Report, N. Y. Legislature Investigation, 1879, p. 120.

22. The facts appear at full length in the reports of the Hepburn Committee, the Select Committee of the United States on Interstate Commerce, 49th Congress, 1st Session, Lloyd’s “Wealth against Commonwealth,” and Miss Tarbell’s “History of the Standard Oil Company.”

23. Tarbell’s “History of the Standard Oil Co.,” pp. 185–190; Lloyd’s “Wealth against the Commonwealth,” pp. 87–88.

24. The Standard paid nominally 60 cents a barrel, but got a rebate of 49 cents, so that their net rate was 11 cents per barrel against $1.90 for the independents. See report of the Hepburn Committee (N. Y.), 1879, and George Rice’s pamphlet on “The Standard Oil Trust.”

25. Quoted from a synopsis of the Report.

26. Railroad Freights, Ohio House of Representatives, 1879, pp. 159–163.

27. Hardy v. Cleveland & Marietta R. R., Circuit Court, Ohio, E. D., 1887, 31 Fed. Rep. 689; Senate Select Committee on Interstate Commerce, 49th Congress, 1st Session, p. 199.

28. Besides the references already given on the Rice affair, see the Trust Investigation of Congress, 1888; the testimony in the Rice case before the Interstate Commerce Commission, Nos. 51–60, 1887; Decisions of the I. C. C., vol. 1, pp. 503, 722; vol. 2, p. 389; vol. 3, p. 186; vol. 4, p. 228; vol. 5, pp. 193, 660; State of Ohio v. Standard Oil Co., 49 Ohio St. Rep. 317; Lloyd, chapters xv, xvi, xvii; and Tarbell’s History.

29. I. C. C., First Report, 1887.

30. Passes (annual in this case) to persons not in the regular service of the carrier held unlawful. State v. Northern Pacific, p. 359, vol. 2, Decisions, 1888.

31. Sale of 1000–mile tickets to commercial travellers at $20 while charging others $25 illegal. Chicago & Grand Trunk, p. 147, vol. 1, Decisions, 1887.

32. Paying commissions; selling tickets through brokers at reduced rates; rate wars, etc. Pennsylvania, New York Central, Wabash, Chicago & Alton, vol. 2, 1888, p. 513.

33. Discounts to shippers receiving more than 30,000 tons a year illegal. Providence and Worcester, vol. 1, 1887, p. 170.

34. In many cases the direct rate between two points, X and Y, was found to be greater than the combination of the rate from X past Y to a competitive point Z and the local rate back from Z to Y. For example, goods could be shipped from the Pacific coast to Kansas City and then back to points west of Kansas City more cheaply than they could be sent direct from the coast to these intermediate points. This enabled a shipper informed of the combination rates to get an advantage over one with less information who relied on the published tariffs stating the rates between his place of business and the points to or from which his shipments were to be sent. The Commission took up this matter in 1887 and the traffic managers of the roads agreed to revise their tariffs so that the direct local rate should in no case exceed the through rate plus the local rate back from the terminus or competitive point. This rule resulted in many material reductions of the rates to intermediate points; for example, the points between Denver and the Missouri River on the lines controlled by the Southern Pacific. See Martin v. Southern Pacific R.R. I. C. C. Decisions, vol. 2, 1888, pp. 1, 4.

35. A higher rate on oil in barrels than in tanks held unjust, vol. 2, p. 365. Report, 1888, p. 128.

36. Report, 1888, p. 112.

37. Ibid., p. 114 et seq.

41. The Commission’s reports, 1889 to 1891, dealt with numerous discriminations between localities and persons through free transportation, commissions on the sale of tickets, combination rates, rebates, free cartage, payment of yardage charges, excessive car mileage on private cars, discounts for quantity, unfair classification, distribution of cars, special tariffs, advantage or disadvantage to particular commodities or methods of shipment, low rates on goods for export, etc., etc.

42. Report, 1889, p. 10.

43. 5 I. C. C. Decis. 69, 1891.

44. Ibid.; see also 5 I. C. C. Decis. 153, 1892. Case against the Louisville and Nashville for granting passes to members of the city council of New Orleans.

45. Investigation of the Commission, 1889.

46. Report, Interstate Commerce Commission, 1889, p. 14.

47. Pages 103–107, I. C. C. Rep. 1895.

48. Report, 1897, p. 61.

49. See p. 20 above.

50. Heard v. Georgia R. R., 1 I. C. C. Decis. 428, and 3 I. C. C. Decis. 111. But the United States Supreme Court decided against the Commission on this point May 1, 1892 (145 U. S. 263), and the B. & O. tickets for parties of 10 or more at ⅓ less than the regular rates were sustained.

51. 2 I. C. C. Decis. 649, and 3 I. C. C. Decis. 465.

52. This rule of exemption works great injustice under present conditions. It was built into the common law when people were struggling against oppressors in high places. But the conditions which made it useful have long since passed away, and it is now simply a millstone about the neck of justice.

53. Senate Committee, 1905, iv, pp. 2900–2901. Speaking of an investigation of rebates on flour from Minneapolis and Duluth, the Commission says (p. 8, Report for 1898): “All the railway witnesses denied knowledge of any violation of the statute, and most of the accounting officers testified to the effect that if rebates had been paid they would necessarily know about it and that their accounts did not show any such payments. It was nevertheless fully established by the investigation that secret rate concessions had been generally granted on this traffic and that the carrier had allowed larger rebates to some of the flour shippers than to others.”

54. I. C. C. Rep. 1889, p. 75.

55. See I. C. C. Rep. 1889, pp. 15, 16, 126, 130, 132, 237, 239, 240–242; Decisions, vol. 3, 1889, p. 89, 25% rebates on coal to certain points; p. 137, low rates on goods marked for export (10 cents on one hundred lbs. discount); p. 652, unlawful discount of 50% on emigrants’ movables; Rep. 1890, pp. 111, 190, 192, coal rates; 183, discount for quantity; 189, export; 101, 192, hogs and hog rates; 184, stock yards; 99, 100, 185–187, oil; 112, 192, wheat and flour; 187, 190, private cars; 188, special tariffs; and other unjust discriminations relating to localities, privileges, etc., and not directly in point under the head we are dealing with.

56. Testimony, U. S. Ind. Com. iv, p. 353.

57. I. C. C. Rep. 1890, p. 25.

58. I. C. C. Rep. 1896, p. 78.

60. Industrial Commission, 1900, iv, p. 442.

61. I. C. C. Dressed-meat Hearing, December, 1901, p. 94; Chicago and Alton manager to same effect for his road, p. 136.

62. I. C. C. Rep. 1898, p. 6.

63. 4 I. C. C. Decis. 1891, p. 630. For example, on one line between Chicago and New York, “200 stock cars more than paid for themselves and all repairs, etc., in 2 years, and thereafter earned for the owners upwards of $100,000 a year on no investment.” See Report Iowa Railroad Commission, 1891, p. 30.

64. I. C. C. Rep. 1889, pp. 15–16.

65. 9 I. C. C. Decis. 1, 1901 Rep., p. 36. As the circumstances were substantially different in the two cases, the Commission said the local charge to the drummer was “not necessarily unjust.”

66. An additional charge by the Santa Fe of $2 a car on cattle consigned to the Union Stock Yards at Chicago, where the Santa Fe had for years delivered cattle, was held unlawful by the Commission, and its judgment was sustained by the United States Circuit Court, but overruled by the Court of Appeals. I. C. C. Rep. 1896, p. 45.

67. Free cartage for a distant shipper and not for a nearer one is equivalent to a rebate for the former. Hegel Milling Company v. St. Louis, etc., Railroad, 5 I. C. C. Decis. 1891, p. 57.

68. The railway charged the same rates from the East to Grand Rapids as to Ionia, although the former was 33 miles a longer distance point on the same line of road, and in addition gave free cartage to Grand Rapids companies. Complaint was made in September, 1888; April 26, 1890, the Commission held the free cartage to be in effect a rebate, and ordered the railroad to desist from giving free cartage in Grand Rapids. (3 I. C. C. Decis. 60; I. C. C. Rep. 1896, pp. 37–39; 1897, pp. 94–95.) The Circuit Court upheld the order October, 1893 (57 Fed. Rep. 1002), but the Circuit Court of Appeals overruled the decision April, 1896 (74 Fed. Rep. 803), and the United States Supreme Court sustained the Court of Appeals. (167 U. S. 633, May, 1897.) The Commission made the mistake of resting the case on the 4th or long-haul section instead of the 2d or 3d sections relating to undue preference, and the railway should have been allowed the option of removing the discrimination by giving free cartage in Ionia or making a lower rate there. The order to discontinue free cartage in Grand Rapids was arbitrary and unnecessary.

69. I. C. C. Rep. 1889, pp. 18–19.

70. Commercial Club v. Rock Island, 6 I. C. C. Decis. 1896, p. 647.

71. Pennsylvania Millers Association v. Reading R. R., 8 I. C. C. Decis. 1900, p. 531.

72. I. C. C. Rep., 1898, pp. 46–47; 7 I. C. C. Decis. 1898, p. 556: Illinois Central, charging some shippers for storage while others are not charged for it, unlawful.

73. Industrial Commission, iv, 541.

75. Investigation of expense bill frauds on grain shipments from Missouri River points to Chicago and other destinations. I. C. C. Rep. 1896, p. 75, on Santa Fe case. 7 I. C. C. Decis. 1897, p. 240, expense bill system held illegal.

76. I. C. C. Rep. 1896, p. 79.

78. Ibid., p. 80. The Commission has not felt able to declare such an allowance unlawful (10 I. C. C. Decis. 1904, p. 309), but it seems clear that substantial preferences may be given in this way.

79. Report, U. S. Industrial Commission, 1900, iv, p. 79.

80. I. C. C. Rep. 1896, pp. 46–48.

81. There is a statement concerning it in the I. C. C. Rep. 1896, p. 81, but it does not bring out the facts at the core of the matter as stated to me by the railway men.

82. 8 I. C. C. Decis. 1898, p. 316.

83. I. C. C. Rep. 1894, p. 9.

84. It was held in the Nichols case (66 P. A. C. Rep. 768) that where a shipper orders cars to be delivered at a certain date, the company’s action in filling subsequent orders before complying with the first is unlawful. (Oregon Short Line.)

85. Report, Texas Railway Commission, 1896, p. 11.

86. The Commission holds that the difference must not be so great as to be destructive of competition between large and small dealers. (5 I. C. C. Decis. 638, following Thurber v. New York Central, Delaware & Lackawanna, B. & O.; and 3 I. C. C. Decis. p. 473, March, 1890; Rep. 1890, p. 87.) Many articles of groceries were so classified as to make the difference between carload rates and less-than-carload rates unjustly great in violation of the principles of the Interstate Act.

87. Industrial Commission, iv, 207.

88. Paine v. Lehigh Valley R. R., 7 I. C. C. Decis. 1897, p. 218.

89. 9 I. C. C. Decis. 78; 1901 Rep. 38.

90. 5 I. C. C. Decis. 663.

91. 7 I. C. C. Decis. 43.

92. 8 I. C. C. Decis. 214, 1898. See also 4 I. C. C. Decis. 417. and 7 I. C. C. Decis. 481, Chicago, Milwaukee & St. Paul case, held that a higher rate on wheat than on flour is unjust.

93. 8 I. C. C. Decis. 304. See also 3 I. C. C. Decis. 400, and 4 I. C. C. 417.

94. 4 I C. C. Decis. 1891, p. 733: N. Y. Central, Pa., B. & O., C. B. & Q., Wabash, Santa Fe, etc.,—a whole page full of railroads.

95. Rice cases, Nos. 51–60, I. C. C. Decis. 1887, 65, 131.

96. Rice v. R. R., 4 I. C. C. Decis. 131; 5 ibid., 193, 415. Railroads commenced charging for barrel packages in 1888, and in a case tried in 1892 against the Reading, Boston & Maine, and other roads the Commission ordered them to cease, but they did not, and damages were awarded two years later from 1888 to 1894. A similar order to desist from charging for the barrel was issued against the Pennsylvania in September 1890 and it complied. I. C. C. Rep. 1895, pp. 33–35.

97. Trust Investigation, Congress, 1888, pp. 531–533, 646–647.

98. Testimony, Rice cases, 1 I. C. C. Decis. 28.

99. See Trust Investigation, Congress, 1888, pp. 598–599.

100. Lloyd’s “Wealth against the Commonwealth,” pp. 427, 480–481.

101. U. S. Industrial Commission, iv, 53.

102. 4 I. C. C. Decis. 158.

103. Senate Committee, 1905, 3457.

104. Testimony of McCabe, Pennsylvania traffic manager, I. C. C. Beef Hearing, Dec. 1901, pp. 101, 102, 103.

105. Ibid., pp. 101, 102.

106. Mr. Cost, traffic manager of the Big Four, I. C. C. Beef Hearing, Dec. 1901, p. 105.

107. I. C. C. Beef Hearing, Dec. 1901, p. 114.

108. Ibid., pp. 113, 119.

109. I. C. C. Beef Hearing, Dec. 1901, pp. 85, 86.

110. I. C. C. Beef Hearing, Dec. 1901, p. 107.

111. I. C. C. Hearing in the dressed-meat cases, Chicago, Jan. 7, 1902, pp. 152–154.

112. Evidence in the I. C. C. Hearing in the dressed-meat cases, Chicago, Jan. 5, 1902, pp. 145, 148, 149.

113. Report, Industrial Commission, vol. iv, pp. 69, 493.

114. Import Rate Case. Texas and Pacific v. I. C. C., 162 U. S. 197, March, 1896. The complaint was brought in December, 1889, by the New York Board of Trade against the Pennsylvania Railroad and others. The New York Central, B. & O., B. & M., Ill. Central, Union Pacific, Southern Pacific, Northern Pacific, Texas & Pacific, etc., 33 railroads in all, were joined as defendants. The Commission held (Jan., 1891) that import traffic is entitled to no preference. 3 I. C. C. Decis. 417. (See also 4 I. C. C. 447.) The Circuit Court sustained the Commission in Oct., 1892 (52 Fed. Rep. 187), and the Court of Appeals in Oct., 1893 (57 Fed. Rep. 948), but the Texas & Pacific carried the case to the U. S. Supreme Court and the majority of the Court, reversing the Commission and the Circuit Court, interpreted the Commerce Act of Congress in such a way as to render substantially inoperative the main clauses relating to discrimination and the long haul, and practically nullify another Act of Congress so far as it imposes duties on imports for the purpose of protecting home industries. The Court accomplished this by focussing its attention on the phrase relating to dissimilar conditions, instead of aiming to enforce the act according to its clear purpose and intent. Chief Justice Fuller and Justices Harlan and Brown dissented, holding that the Interstate Act requires railways to make the same charge for the same service, whether the goods carried are domestic or foreign.

115. For many other facts along the same lines, showing rates on flour from the West to Baltimore, Philadelphia, New York, Boston, etc., 6 to 8 cents higher than the rates on wheat, and much lower rates on the same products for export than for domestic use, see Industrial Commission, 1900, iv, 70.

The Interstate Commerce Commission in 1899 found the export rates on corn and wheat much lower than the domestic rates. I. C. C. Rep., 1899, pp. 20–28, 31.

116. 8 I. C. C. Decis. 214 n.

117. Lewis, “National Consolidation of Railways,” p. 101.

118. Industrial Commission, 1900, vol. iv, pp. 441–442. Shippers in Norfolk, Nebr. for example, pay the local rate of 45 cents per cwt. (on first-class goods) to Sioux City on the Missouri River, plus the rate from Sioux City to Chicago, while Fremont, a rival town near Norfolk, has the same rates as Sioux City, the local rate not being added in this case to the Missouri River rate. This gives Fremont manufacturers and shippers a decided advantage over those of Norfolk, and tends to build up Fremont and stunt the growth of Norfolk. The witness suggested that “if the rates were established by the Government instead of at the will and pleasure of the railway managers, it is a natural conclusion that points having the same general conditions would receive equal benefits.”

119. Cator’s “Rescue the Republic,” p. 15.

120. “National Consolidation of Railways,” Lewis, p. 102.

121. “National Consolidation of Railways,” Lewis, p. 83.

122. Martin v. Southern Pacific, Central Pacific, and Union Pacific Railroads. 1 I. C. C. Decis. 1.

123. 8 I. C. C. Decis. 481. The Commission made an order that the Kearney rate should not exceed the Omaha rate by more than 15 cents, but the Southern Pacific refused to obey, and the Circuit Court declined to enforce the order on the ground that the Commission had not found the rate to Kearney unreasonable in itself, but only in comparison, citing 190 U. S. 273.

124. 9 I. C. C. Decis. 17: Rep. 1901, 30.

125. I. C. C. Rep. 1899, p. 31.

126. The Commission ordered the roads to discontinue this practice. They refused. And the United States Supreme Court sustained them in their refusal. (4 I. C. C. Decis., July, 1890, p. 104; Rep. 1901, p. 25.)

127. Nov. 1895, the Commission ordered that the rates from Pueblo to California should not exceed 75 percent of the rates from Chicago to California. The railroads refused to obey. Proceedings in court were begun by the Commission to enforce their order. Then the railroads yielded. They kept the rates down about 2 years, till Oct. 17, 1898. Then the Southern Pacific increased the rates. The Colorado Fuel & Iron Company on whose complaint the investigation and order were made, sued for damages and an injunction, Oct. 1898. The Circuit Court enjoined the railroads from charging more than the rates fixed by the Commission. But April 16, 1900, the Circuit Court of Appeals reversed the decision on the ground that the United States Supreme Court had ruled that the Commission cannot fix rates. (I. C. C. Rep. 1895, pp. 41–43; and Rep. 1900, pp. 55–61); also (101 Fed. Rep. 779) an appeal to the Supreme Court was dismissed per stipulation, Nov. 1901 (46 L. Ed. 1264).

128. Ind. Com. iv, 257.

129. Ind. Com., iv, 257.

132. Ind. Com. iv, 252.

134. Alabama Midland Case. Decis. of U. S. Supreme Court, Nov. 8, 1897, 168 U. S. 144; Behlmer Case, 175 U. S. 648, 676; 181 U. S. 1, 29; Dallas Case, I. C. C. Rep. 1901, p. 27. Actual and controlling competition of any sort is now held to justify a less charge for the longer than for the shorter haul. 10 I. C. C. Decis. 289, June, 1904. See also Senate Committee, 1905, 3339, where Chairman Knapp of the Interstate Commission declares that the courts have interpreted the law so that if the circumstances substantially differ, no matter what the reason, the prohibition does not apply. Brooks Adams says, “The Supreme Court is antagonistic to that clause,” (the long and short haul clause) and does not intend to enforce it. “They have simply thrown out every suitor but one who came in under that clause.” (Sen. Com., 1905, p. 2922.)

135. I. C. C. Rep. 1887. Nearly a hundred pages are filled with both the statements and petitions of railroads relating to the long-haul clause. See also Rep. for 1895, pp. 24–28. Exemption from the long-haul clause was allowed in the case of passenger fares to the World’s Fair at Chicago.