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of $4.25 at Kansas City; that coal had advanced, approximately, 50 cents per ton, and that this would increase the price of manufacturing salt 25 cents per ton. He, therefore, thought that he ought to obtain some advance in price upon his contract with the Swift Company; but the Morton Company took the contract from him at a price of $4.10. The independent producers insisted that this division was equivalent to the payment of a rebate of 50 cents per ton; that 50 cents per ton was a fair profit in the manufacture of salt; and that the Hutchinson, Kans., Salt Company, with that advantage, could run at a fair profit while the independent operator did business at an actual loss.
The various railroad systems entering Hutchinson urged that the granting of this division was not a violation of law since they simply allowed, as they had a perfect right to, a division to a connecting road. The Hutchinson & Arkansas River Railroad Company insisted that it had paid no rebate and been guilty of no infraction of law, since the money which had been received by it under this arrangement was still either in its treasury or had been expended for property which it then owned. The Hutchinson, Kans., Salt Company declared that it had violated no law, for it had received no money from the various systems actually transporting this salt, nor from the Hutchinson & Arkansas River Railroad Company.
The traffic officials of the three systems transporting this salt to the Missouri River all stated that they granted the division for the purpose of inducing the movement of bulk salt and because they believed that it would not move otherwise. Being inquired of how the granting of such a division could induce the movement of salt to the Missouri River unless the company which produced and sold that salt, or the persons interested in that company, in some way or other obtained the benefit of the division, they were inclined to admit that if they had considered the matter they would probably have come to the conclusion that it could not, but they had given it no serious thought. Mr. Morton, the president both of the Railroad Company and of the Hutchinson, Kans., Salt Company, testified that neither he nor the salt company had derived any benefit from the payment of these divisions. He was asked who Mr. Tracy was; why he had subscribed to this stock; for whose benefit he held the stock. He stated, at first, that Mr. Tracy had purchased it on his own account, but finally said that the purchase had been made at his (Morton's) suggestion, and that while Mr. Tracy did not hold the stock as legal trustee for him or any other person, he would probably dispose of it and vote it as Morton requested him to do. If this is the case, this money, in the hands of the Hutchinson & Arkansas River Railroad Company, can at any time be diverted to any purpose or person as Mr. Morton may direct. Mr. Morton admitted that the price of $2.10 was an extremely low one and would not have been made had not the divi
sion been given the railroad company, but insisted that the direction to make that price was given by him, and without any expectation or intention that any portion of the division should be paid to the Hutchinson, Kans., Salt Company.
No opinion is here expressed as to the legal quality of this transaction; as to its effect there can be no question. The tariffs of the Missouri Pacific and the Santa Fe made no distinction between barrel and bulk salt, and the first-named carrier in some instances actually paid divisions on barrel salt. If the thing here done is legal, plainly it might be extended to cover all salt. But 50 cents per ton is a fair profit in the production of that commodity; hence the Hutchinson, Kans., Salt Company, or its owners, with that advantage, could shut down every rival salt factory in Kansas.
It should, perhaps, be said that while the independent operators have been driven out of the bulk salt business on the Missouri River and elsewhere, their condition in Kansas is to-day prosperous. Nor does there seem to be a present disposition on the part of the Hutchinson, Kans., Salt Company to treat its competitors oppressively. The only idle mills are owned by that company.
Its rivals urge, however, that the so-called "trust" should not be armed with this weapon, with which it may at any moment destroy them; and the facts have been reported at this length for the purpose of showing how an apparently insignificant discrimination in the freight rate may produce a monopoly in an important industry. Nor can it be assumed that because published rates are maintained discrimination has disappeared.
EVILS RESULTING FROM THE USE OF PRIVATE CARS.
The Commission deems it proper to refer again in this report to the evils resulting from excessive payments by railroad companies for the use of private cars, particularly those owned or controlled by shippers. This matter has been the subject of further inquiry during the past year by Mr. J. W. Midgley, of Chicago, former commissioner of the Western Traffic Association, who has issued a series of circular letters upon the subject which have attracted much attention. As the material facts are nowhere seriously questioned, they deserve consideration by those who desire to promote justice and fair dealing in railway operations. Anything like a complete review of the question will not be attempted, but a brief statement of its more salient features may properly be made.
The three kinds of cars mainly involved are those known as refrigerator cars, tank cars, and stock cars. In the sense that they constitute better and safer vehicles of conveyance than those formerly used for these respective purposes they may be regarded as improved cars. Undoubtedly the introduction and development of these special types
of cars were due to the demands of producers and shippers. The refrigerator cars, for example, in which fresh meats and other perishable traffic are carried, came into use because a car was needed which would insure to its contents a cool and even temperature. From the first crude designs, by test and experiment, the modern refrigerator car has been evolved, and the use of this particular kind of vehicle has grown to large proportions.
At first the railroad companies charged the owner for hauling these cars when they were not loaded; but as the business of shipping dressed meats grew and the movement of live stock declined, and as the competition of carriers for the traffic of the packers became more intense, the owners of refrigerator cars were able to secure the allowances for each mile their cars were hauled, whether loaded or empty. The mileage rate at first allowed was three-fourths of a cent per car for each mile run, but this was afterwards increased to 1 cent in the territory west of Chicago and St. Louis; and the 1-cent allowance, as we understand, applies to the movement of refrigerator cars between Chicago and New England via Montreal. These allowances still continue to be made. In addition to this, and a factor of great importance, is the running of refrigerator cars in special trains and on fast schedules, and the prompt return of empty cars, thus securing to the owners of these vehicles extraordinary mileage and compensation. It is said that cars engaged in the export meat trade from Chicago frequently earn $30 and upward per month, a sum which in three years would probably amount to as much as the cost of a refrigerator car and its maintenance in the meantime. It is asserted that the average earnings of the refrigerator cars operated by the leading packers are not less than $25 per car per month. As there was no adequate check upon the allowance made for these cars, and as the shippers claimed to be exempt from the act to regulate commerce, concessions to such shippers were often granted by unduly swelling their receipts for mileage, as has been set forth in previous reports of the Commission.
Under conditions which have long prevailed, and for reasons which need not be more particularly stated, the owners of these private cars have had special advantages through their control of an immense tonnage of competitive freight and the vehicles in which it was carried. Not only could they select the line or lines to be favored, but they were able to, and did in great measure, dictate the rates paid for the carriage of their commodities. Notably has this been true in the case of shipments of dressed meat. One method employed, which has come to the knowledge of the Commission in a recent investigation, is to make a contract with a given road, in consideration of furnishing it an agreed percentage of all packing-house shipments, that the transportation rate for a term of years shall not exceed a specified sum per 100 pounds. In that way a rate of 20 cents per 100 pounds from Mis
souri River points to Chicago, and of 45 cents from Chicago to New England, became established, a rate declared by many railroad officers to be abnormally low, if not actually unremunerative. When the relatively low earnings from rates thus brought about are further depleted by the mileage allowances above mentioned (three-fourths of a cent and 1 cent per car per mile run, loaded and empty), and account is taken of the fast time at which train loads of this traffic are moved, thus insuring unusual mileage returns as compared with the per diem rental of cars owned by the carriers, it is not difficult to understand that the owners of these private cars are unjustly favored.
The facts in regard to private stock cars are of similar character. The average mileage of through stock trains upon the principal carrying lines to the East exceeds, it is said, 100 miles per car per day, yielding to the owner of such cars a return of over 60 cents per car per day. This return is three times that allowed for the exchange of railroad cars, most of which cost more than the average value of private stock cars. As much as 85 cents per day, it is asserted, has been received for several consecutive months within the past year by the owners of private stock cars employed in through runs as above stated. To insure the use of these stock cars by leading shippers-who are often prominent packers-it is charged to have been the practice of the concerns owning such cars to divide with the shippers the mileage received from the railroad companies, a practice which operated to the same effect as the payment of rebates to such shippers, thus placing their smaller competitors at an unfair disadvantge. Such unjust discriminations would not be possible if the car owners were restricted to an allowance which would give them only a fair return upon their investment.
Whether extravagant allowances are made to shippers for cars which they own, or made to outside car owners who divide the allowances with the shippers, is a difference in method only. The same discriminating result follows in both cases, in that several dollars per car is allowed more than is proper or reasonable for the use of private The only distinction is that in the case of refrigerators, which the shippers own, the excess goes directly to them from the carriers, whereas in the case of live-stock shipments the equivalent of a rebate is paid by the stock-car company, which is able to make such payments out of the large allowances received from the railroads.
That the earnings of shippers' cars of the refrigerator type are grossly excessive is generally believed. As far back as 1894 efforts were made by the carriers to bring about a reduction in the amounts allowed. These efforts originated with roads located west of Chicago and St. Louis which at the time were allowing 1 cent per car per mile run. Notwithstanding a proposal was then made by a leading packer to accept a reduction of 25 per cent, which would indicate that three
fourths of a cent per mile was at least sufficient, the rate of 1 cent per mile was and has since been continued by the several companies operating west of Chicago and St. Louis. Some idea of the magnitude of the allowance then in question may be formed when it is stated that a reduction of 25 per cent in the payments for refrigerator cars from 1894 to the present time would approximate $5,000,000. Yet the same railroad managers who submit to the exactions of these powerful shippers-permitting them to dictate the allowances for the use of their cars and the rates paid for the transportation of the property carried therein―resent every proposal to endow this Commission with authority to review the charges of common carriers and require the same to be put on a reasonable basis.
It is interesting to contrast the earnings of shippers' cars used for the movement of packing-house products with those of the same description which are owned by the railroad companies. The latter, it is claimed, do not average more than 40 cents per car per day, yet out of a total of 50,000 refrigerator cars upward of 15,000 are owned by carriers, although operated in the name of the Merchants' Dispatch & Transportation Company, American Refrigerator Transit Company, Santa Fe Refrigerator Dispatch Company, etc. Bearing in mind that refrigerator cars cost the same to build and maintain whether controlled by a carrier or by private parties, it is easy to see the nature and extent of the discriminations in this manner effected.
Without commenting further upon this subject, or mentioning the various methods of reform which have been proposed, we repeat the opinion heretofore expressed that the private ownership of cars by shippers, or by outside concerns which furnish them to shippers, is wrong in principle, because of the unjust and discriminating results which naturally, if not inevitably, attend the use of equipment not owned or absolutely controlled by the carrier. This is in accord with the views set forth by the Commission so early as its third annual report, wherein this matter was discussed at length and the conclusion reached stated as follows:
It is an obvious deduction from all the facts that cars for the various kinds of business done by a carrier should be owned by the carrier itself and furnished to all alike, or if owned by the shipper, only such reasonable allowance for their use should be made as to permit no advantage to the private owner of cars who is also a shipper, nor afford a margin for paying rebates to other shippers.
In line with the opinion then formed, the following recommendation was made in the same report:
Third. The regulation of the payment of car mileage for the use of cars of private companies or individuals.
This recommendation is now renewed.
Unless some better plan can
be devised, either through voluntary action by the carriers or with the aid of legislation on different lines, the allowance for the use of