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It has been remarked that the railroads generally furnish their own refrigerator equipment for the transportation of commodities whose movement is reasonably constant, but that private cars are very generally employed in cases where the movement is periodical. One commodity very generally moved in private cars at the present time is fresh fruit. 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. Each refrigerator car company was free to send its cars on to any line as the shippers might require. The railroad company paid the customary mileage for the use of the cars and the car line company furnished the refrigeration.
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 this 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. 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 the terms of this contract the Armour Company agrees to provide whatever cars may be needed for the movement of the fruit crop.
The railroad company pays for the use of these cars a fixed mileage and agrees that no other cars except those of the Armour Company shall be allowed to engage in this service upon its line. The Armour Company furnished the refrigeration, for which it makes a certain specified charge, which differs between different points. Under these contracts the shipper must use the Armour car. He can not furnish his own ice, but must pay the Armour Company whatever its refrigeration charges are. The result of these contracts has been, as a rule, to afford the public good service, and to generally provide a more adequate supply of cars than was formerly obtained, but the prices for refrigeration have been enormously and unreasonably increased.
For example, in 1898 the Armour Car Lines Company was furnishing cars for the movement of Michigan fruits from points on the Pere Marquette Railroad to Boston in competition with other private car companies, and its charge for refrigeration to Boston was $20 per
Its present charge to Boston is $55 per car. Before the present exclusive contract was entered into between the Armour Car Lines and the Pere Marquette Railroad Company the actual quantity of ice required was charged for at $2.50 per ton. Under this system the cost of refrigerating cars from Pawpaw, Mich., to Dubuque, lowa, averaged about $10 per car, while the present schedule of the Armour Car Lines is $37.50. The cost of icing from Mattawan, Mich., to Duluth was $7.50, as shown by an actual transaction in the year 1902, while the present refrigeration charge between those points is $45. The cost of icing pineapples from Mobile to Cincinnati under an exclusive contract with the Armour Car Lines is $45, while the cost of performing the same service from New Orleans to Cincinnati over the Illinois Central is $12.50 per car.
Illustrations without number like the above might be given. Some of these are extreme, but our impression is that under the operation of these exclusive contracts the cost of icing to the shipper has been advanced from 50 to 150 per cent, and that the charges in most cases are utterly unreasonable.
The stockholders of Armour & Company own the stock of the Armour Car Lines Company. Certain commission merchants claimed, in the course of our investigation, that Armour & Company was dealing in the fruits and vegetables which were transported under refrigeration in the cars of the Armour Car Lines Company, and that its control of these cars gave it an important advantage over them in the handling of these commodities.
It is apparent that this would be the case if Armour & Company does, in fact, deal in these articles. The right to use a car itself while denying one to its competitor; the right to name whatever charge it sees fit for the use of that car when used by its competitor; a knowledge of the exact location of every carload owned by its competitor, must give to Armour & Company a most decided advantage, which, in these times of small margins might amount to a practical monopoly in some sections. The Armour Car Lines Company denied, however, that Armour & Company was engaged in the handling of fruits. This was so stated at our hearing last June; at a subsequent hearing in September the attorney of the Armour Car Lines said that Armour & Company had finally withdrawn from business of that character, from which we infer that the charges of the complaining commission merchants might have been in a measure well founded.
It was conceded that Armour & Company is engaged in handling dairy products, including poultry and eggs, also vegetables-among other things potatoes—which are produced in certain parts of Michigan in large quantities. The movement of potatoes from this section during the winter months requires refrigerator cars, and shippers experience great difficulty in obtaining such cars. We are in receipt of complaints from the shippers of potatoes in Michigan, stating that Armour & Company is buying in competition with them; that while they are unable to obtain cars, Armour & Company sends its own cars to whatever point may be desired, and thereby secures a most important advantage in the item of transportation, which is gradually driving other buyers out of the market. These complaints were received too late for formal investigation at the recent hearing referred to. It is manifest that Armour & Company might obtain that advantage if it saw fit to do so. The proper supply of cars often determines the ability to engage in the handling of a particular commodity, and the person who controls that supply has an incalculable advantage over his competitor who does not.
IV. Armour & Company, as is well known, is an extensive shipper of dressed meats and packing-house products, from 150 to 200 cars being sent east daily from its plant at Chicago alone. It is also well understood that this firm, in common with all other large packing houses, ships its products in its own cars, which in this case are those of the Armour Car Lines Company. The use of these cars is paid for upon a mileage basis, being at the rate of 1 cent a mile from the Missouri River to Chicago and of three-fourths of a cent a mile from Chicago east, unless the traffic moves via Montreal, in which case 1 cent per mile is paid, the allowance being for the movement of the car in both directions. Whether a particular mileage is or is not profitable to the owner of a private car depends largely upon the manner in which those cars are used. If in constant motion, a given wheelage rate is much better, of course, than when use is less constant. These cars of the packers are moved east upon an express schedule; and the testimony tends to show that their owners require the prompt return of the cars, which usually come back empty. Without doubt, under the conditions of their use the mileage paid is extremely profitable. This sufficiently appears from the fact that the packing houses at Chicago have recently entered into a contract with the Pere Marquette Railroad Company, extending for a period of seven years, by which that company agrees that the present rates upon dressed meats and packing-house products shall not be advanced during the life of the contract, and that the mileage paid for the use of these cars shall not be reduced. In consideration of this, the packing houses each agree to deliver to the Pere Marquette a certain number of cars weekly.
Plainly, to whatever extent the amount paid for the use of these cars exceeds a reasonable compensation, the owner of the car is preferred in the matter of the freight rate to a shipper of the same commodity who owns no cars.
This discrimination can only be prevented, so long as the use of private cars is permitted, by making the compensation for the use of the car which is paid to the owner of the traffic carried subject to public control.
It must not be inferred that all the abuses springing from the use of the private car are enumerated above. The following is an example of what may be done:
Some two years ago certain individuals, for the most part with the Pabst Brewing Company of Milwaukee, organized a company known as the Milwaukee Refrigerator Dispatch. This company purchased the refrigerator cars of the Pabst Brewery in which the product of that concern had been previously transported, and acquired also certain additional refrigerator equipment. It then entered into a contract with certain railroads, among others the Erie and the Missouri, Kansas & Texas, by which it obtained a commission of 124 per cent of the freight rate upon whatever traffic it originated and sent over the line in question. This includes the product of the Pabst Brewery, so that when a carload of beer goes east by the Erie Railroad or south by the Missouri, Kansas & Texas Railway this refrigerator line obtains 127 per cent of the freight money. If the owners of the refrigerator line and the Pabst Brewery were identical, this would plainly be equivalent to a rebate by that amount. This illustration is referred to as indicating the possibility and disposition to manipulate rates through the agency of the private car.
As already said, the Commission has held that these exclusive contracts, when they result in unreasonable refrigeration charges, are unlawful, and that the failure of the carriers to publish such charges is also in violation of the statute. We feel reasonably certain that these holdings are correct and will be finally sustained. The private car lines and the railroad companies earnestly insist, however, that the icing is a private service, over which this Commission has no jurisdiction under the present law, and if it should turn out, after three or four years of litigation, that our opinion is wrong, the shipper will be entirely without remedy. Without in any way conceding the claims stated by the carriers and car lines, there can be no doubt that great good would be accomplished by legislation which would leave no room for such contentions and provide more adequate and certain remedies for the suppression of these abuses. The only way in which a complete remedy can be afforded is by investing this Commission, or some other tribunal, with power to inquire whether these charges are reasonable, and to make them reasonable if found unreasonable. can be accomplished in two ways:
H. Doc. 146,58–3–2
1. By making the common carriers responsible to the public in the matter of this special equipment and this refrigeration service, if they are not now responsible.
2. By bringing the car-line companies which provide this refrigeration for interstate shipments under the jurisdiction of the act to regulate commerce, and making their charges subject to the determination of this Commission.
Under the first method the following points should be ernbraced:
1. That the railway shall in all cases furnish the car needed for the movement of the traffic which it transports. This does not mean that the railway shall of necessity own the equipment itself, but that if it secures that equipment by lease it shall do so under conditions that the car, when provided, shall be its car. No railway should be permitted to transport the private cars of private individuals when it thereby works a discrimination against other shippers to whom it does not furnish similar cars.
2. That the railway shall furnish refrigeration when needed. This imposes no hardship upon that company.
company. At the present time practically all railways have ice houses at which ice can be and is habitually supplied. Even when the Armour Car Lines performs the refrigeration, it buys, in the majority of cases, that ice from the railway company and, as a rule, the railway makes delivery of the ice into the bunkers of the car. If the railway prefers to discharge this duty by contract with some private individual or corporation, it should, nevertheless, stand responsible to the public for the service rendered, to the end that it shall be performed with equality to all shippers at reasonable rates.
3. That the railway shall publish its charges for refrigeration and maintain those charges exactly as its transportation charges are published and maintained. That the charges as so published shall be subject to the jurisdiction of the Interstate Commerce Commission, which, when it finds the charges to be unreasonable, may determine what charges are reasonable.
4. Whenever the owner of the car is also the owner of the property transported, the compensation which the railroad company pays for the use of that car shall be subject to the jurisdiction of the Commission; and when the Commission has determined what is a reasonable compensation, no more shall be paid.
The second method would require legislation of the following import:
1. That all persons or companies furnishing refrigerator cars and refrigeration for interstate transportation shall be subject to the act to regulate commerce.
2. That all refrigeration charges made by such persons or companies shall be published and adhered to, as is now provided for the publication of railway transportation charges.