The "Chicago, Lake Shore and Eastern Railway" is another of these homeopathic railroads. It was organized in the interest of the Illinois Steel Company and is now owned by the Steel Trust (The United States Steel Corporation) which some time ago absorbed the Illinois Steel Company. Since 1897 this private railway has been allowed a division of 10 percent on business to New York and other seaboard points, 15 percent to Pittsburg, Buffalo, and other middle points, and 20 percent on traffic to the Missouri River. It also has a division on rates to the South. All Eastern and Southern lines as well as the Western roads divide their rates with this Trust road. These divisions amount to $6 to $12 a car for the switching service performed by the private road. Besides this, certain special divisions are made. On coke from the Connellsville region, for example, a division of 70 cents per ton is allowed. This gives the "Chicago, Lake Shore, etc.," above named, $700 to $1000 for hauling a train of coke 7 miles from Indiana Harbor to its plant in South Chicago, while the actual cost would not exceed one-tenth of this sum.

Railroad officers have claimed that such divisions of rates are justified because the little private road is the "gateway of the traffic." "The business originates on the little road and it controls the routing, and the division is only an application of the custom of allowing the road on which traffic originates a considerable percentage of the through rate, usually 25 percent." Other railroad men tell me that this is not true. President Tuttle, for example, says: "There is no such thing as a custom to give the initiating road 25 percent or 10 percent or any percent. The division is on the mileage basis, but if one road does special work, switching etc., a reasonable allowance may be made, 1 percent or 2 percent or whatever is fair to cover the special work or expense." Even if there were a custom to give 25 percent to the initiating railroad that could hardly explain the 70 cents per ton on traffic not originating on

the trust railroad in Chicago, but coming to it from Pennsylvania points.

Whatever may be the custom or analogy used as a warrant for these divisions it is clear that their effect is precisely the same as that of a giant rebate.

The Trust railroad in this case makes a net profit of 150 percent a year upon its capital stock of $650,000. How much the Steel Trust as a whole gets in this way through all the private railroads connected with its various plants is not known, but the Commission says it is certainly a "sum sufficient to pay dividends on several millions of dollars of capitalization." 6

The Illinois Glass Company at Alton, Ill., is the largest producer of glass bottles in the United States. In 1895 certain persons in its interest organized the Illinois Terminal Railroad Company, the principal business of which is to handle the cars of freight that come to and from the Glass Works. This terminal company in Alton is allowed by the railroads a division of rates amounting to 25 percent of the Chicago rate, and 15 percent of the rates to the Missouri River and to Eastern destinations, or $8 to $13 per car. This is the testimony of the Glass Works manager, but the Commission finds that as much as $17.10 has been paid the Terminal Company on a car shipped from Alton to Kansas City, an amount that is nearly double the 15 percent above mentioned. This $8 and $13 or $17 is a pretty heavy payment for switching a car, a service which the Terminal Company renders for $1.50 a car when the amount is to be paid by the Glass Works.

The St. Louis Preserving Company at Granite City, Ill., also gets large rebates in the form of divisions of rates with a toy railroad the company controls.8

6 I. C. C. Rep. 1904, p. 21; 10 I. C. C. Decis. 385, Nov. 1904. The Commission held that "the divisions are grossly excessive for the services rendered and afford unlawful preference for the U. S. Steel Corporation, which owns the Ill. Steel Co."

710 I. C. C. Decis., March 25, 1905, pp. 661, 667-669 et seq.

8 Ibid., p. 661.

Rate divisions have also been made by the railroads with boat lines belonging to or in league with large shippers, with "tap roads" belonging to lumber companies,1o etc., and this method of securing a practical rebate is being rapidly adopted by large concerns all over the country. A division of rates with a private line is not necessarily unfair but if there is a desire to give an unfair advantage, this system affords a cloak for it.

9 I. C. C. Decis., 664, March 12, 1904.

10 Ibid., 707, Feb. 7, 1905; also p. 681, March 19, 1904.

CHAPTER XXVI.

PRIVATE-CAR ABUSES.

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,1 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.2

1 The oil cars, dressed-meat cars, etc., of course are in use the year round, and even fruit and vegetables need refrigerator cars in the winter to keep them from freezing as well as in summer to keep them from spoiling. (Sen. Com., 1905, p. 370.)

2 The present system, however, does not always give good service. In April and May, 1905, for instance, hundreds and hundreds of cars of straw

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.3

The railroads began long ago 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,5 and especially with the

berries rotted at the stations in North Carolina for want of cars. The Armour Car-Line could not, or at least did not supply the needed cars, and as they have an exclusive contract with the Atlantic Coast Line no other cars are in the field. At one station only 4 cars were furnished in two days and 125 carloads of berries were left on the platform and the ground to spoil. The loss this season to the truck growers of this one section from insufficient car service is estimated at $600,000. (Sen. Com., 1905, pp. 2596, 2619.)

8 Some railroads have refrigerator lines of their own; the Pennsylvania, for example, and the Vanderbilts, the Goulds, the Santa Fe, the Northern Pacific, the Great Northern, etc., but they carry the private refrigerators also. Packers and other shippers owning cars insist on sending their goods in their own cars, and making the roads pay mileage. If the road refuses, the freight goes by some other line. "They compel us to take it in their cars and pay them for the use of them while our own cars stand on the side track, or else some other road gets the business." (Testimony of James J. Hill, Sen. Com., 1905, pp. 1504-1505.)

See above, pp. 57, 58.

6 This mileage rebate system began long ago. Way back in the seventies