Report

was first made, but the changes have been few, and there has been little complaint. If the shippers of any town thought their rate too high, they would make their complaint to the general freight agent of their road. If any road felt that its town was injured by an unjustly high rate, it would, no doubt, get such an injustice corrected. As a rule the Eastern connections take it for granted that the men where the traffic originates know most about the situation, and carry out what they suggest. So the question of maintaining or reducing rates rests chiefly with the road that first receives the freight. (561-563.)

Mr. MUSSELMAN, president of the Grand Rapids Board of Trade, states that the rate from Grand Rapids to the seaboard is 96 per cent of the Chicago rate, and that he believes that Grand Rapids is justly entitled, on the actual mileage basis, to a 90 per cent rate. Grand Rapids was on a 100 per cent basis up to 1891. At that time the Grand Rapids Board of Trade undertook to get the rate changed to the 90 per cent basis, and succeeded in getting a reduction to 96 per cent. Mr. Musselman believes that the present basis still amounts to a discrimination against his town. (556.)

B. Long and short haul discriminations generally.—Mr. BLANCHARD states the principle of the long and short haul clause in the interstate-commerce act as follows: An interstate rate or fare made between any two points shall not be exceeded by the rate on the same article moved over the same line in the same direction under similar circumstances and conditions. He regards the requirement as just in the majority of cases, but declares there are some justifiable exceptions, especially on account of water competition or the competition of Canadian railroads. He mentions a number of specifie instances justifying lower rates to through points. Mr. NEWCOMB, of the division of statistics, Department of Agriculture, says that under this provision of the interstate-commerce act the courts have interpreted dissimilar conditions" to include conditions of competition and other conditions which make the provision practically ineffective. The witness does not consider a change of the law sufficiently important to be pressed if it is likely to arouse opposition to other needed legislation. (104.)

Mr. BACON, of the Milwaukee Board of Trade, thinks that the provision in the long and short haul clause as to the dissimilarity of circumstances and conditions should be stricken out, leaving it, however, to the Interstate Commerce Commission to suspend the operation of the clause where judged expedient, as in the case of water transportation. The decision of the Supreme Court that railroad competition justifies lower rates for longer hauls seems to the witness unwarranted. (420.)

Messrs. KNAPP, PROUTY, and CLEMENTS, of the Interstate Commerce Commission, are unanimous in saying that the discriminations between long and short hauls made by railways are exceedingly numerous, and are probably the most serious abuse now existing. The evil is most conspicuous in the Southeastern States and in the far Western States. These States are peculiarly situated with reference to water transportation, and the railways defend the lower rates to terminal points on this account. Mr. Clements, however, points out that no such great inequalities in rates exist in the vicinity of the Great Lakes of the North. The Supreme Court holds that a dissimilarity in conditions sufficient to justify departure from the rule of the law is made by competition, whether by water or among railways themselves. Mr. Clements points out that the railways never did, before the interstate-commerce act, charge less for longer hauls than for shorter ones, except on account of competition, and he would favor inserting a clause in the law by which competition should not be allowed to count as constituting dissimilar circumstances. Ownership of property in particular towns by railway officers is pointed out as another influence leading to discriminations. Mr. Knapp and Mr. Clements agree that the method of adjusting rates as between competitive and noncompetitive points on the same road is usually that the rates to the noncompetitive points increase with the distance until the rate equals the through rate to the terminal point plus the local rate back from the terminal point to the point of destination. It would thus be as cheap to send the goods through and back again as to stop them off; but of course, as a matter of fact, they do not go through. Mr. Clements especially declares that since rates include terminal charges, the dealer in the small town has to pay practically four terminal charges, besides the charge for transportation pure and simple for a distance greater than that to the terminal point, whereas the dealer at the terminal point has to pay only two terminal charges. It is as cheap to ship goods, for example, to a point 50 miles beyond Atlanta as to a point 50 miles this side. The effect of the prevalence of this practice in the South is seen in the marked difference between the prosperity of the few trade centers and that of the small intermediate towns, whereas the small towns of the North often show a high degree

of prosperity. It is impossible to establish manufacturing enterprises in small towns in the face of such discriminations. (Knapp, 134, 137; Clements, 154, 155.) Mr. VANLANDINGHAM, freight commissioner of the St. Louis Traffic Bureau, also comments on the disregard of the long and short haul rule in the Southeastern States on account of water competition. He is not sure that the effect is altogether injurious to local stations. The jobbing houses at the central points may be able to sell goods at lower rates to the local stations, through having a lower freight rate, than would probably be secured if all the rates were made uniform. Mr. Vanlandingham further points out that the interpretation of the courts regarding the long and short haul clause puts the water carriers at a disadvantage in competition. The railways can make their rates to the few points reached by the water carrier so low as to drive it out of business, while holding up their rates to intermediate territory. (202, 206.)

Mr. SPENCER, president of the Southern Railway, thinks that if the rates for shorter hauls are themselves reasonable in view of the amount of traffic and the cost of service, there should be no objection to the railways making whatever rates are necessary to meet competition or to develop traffic to through points. Otherwise it might not get the long-distance traffic at all. In sparsely settled regions the amount of business is less, and the cost of construction and operation is always relatively greater, and often absolutely greater. It would be impossible to satisfy all communities in any case, since no two persons or cominunities will consider in the same light the unlike conditions which exist in different cases. Large cities, by the very nature of things, have certain advantages in business over small places, and this advantage must extend to railway transportation. (275, 281, 284.)

Mr. TUCKER, chairman of the Central Freight Association, considers that there are strong arguments against the long and short haul clause. The competition of the Galveston route to Liverpool from Kansas City, for instance, forces the making of very low rates from Kansas City eastward. The long and short haul clause compels the making of the same rates from intermediate points, where there is not the same competition, the same necessity. (560.)

Mr. CALLAWAY, president of the New York Central, says that it is the policy of the Vanderbilt lines to make local rates substantially proportional to through rates, under the belief that local business and local prosperity can not be built up at rates so high that competitive business could be done much cheaper. (232.)

C. Specific cases of place discriminations, water competition, etc.-1. Differentials as to Eastern ports.-Mr. KELLEY, freight commissioner for the Trades League of Philadelphia, testifies that that city is peculiarly situated between New York and Baltimore, and has only 4 trunk lines from the West. Its coastwise trade is practically limited to a single line of steamers running to Norfolk. The city is allowed a differential of 2 cents as compared with New York on grain freight rates from Western points, while Baltimore has a differential of 3 cents; i. e., the rates are respectively so much lower than those to New York. (185, 186.)

Mr. NEALL, a shipping merchant of Philadelphia, also speaks of the existing differentials. He considers that Philadelphia is unfairly discriminated against still, especially because of the larger differentials allowed to the more southern ports. (173.)

Mr. CALLAWAY, of the New York Central, testifies that the existing practice of allowing differentials on shipments from the West to Philadelphia, Baltimore, and other more southern ports as compared with New York was established about 20 years ago, when the average freight rates were very much higher than at present, ranging from 52 to 60 cents. At present the rates on grain, for example, have been reduced to 15 or 18 cents, and the differential is thus proportionately greater, and, in the opinion of the witness, excessive. At present, by an arrangement with the Baltimore and Ohio and Chesapeake and Ohio, the experiment of making the differential only 1 or 1 cents on export grain is being tried, but on other commodities the 3-cent differential is retained. Improvements in the ports of Baltimore and other Southern cities have also lessened the justifiability of such a differential. The terminal changes are, so Mr. Callaway thinks, adjusted in practically the same way at each of these ports. The New York Central has an extensive system of lighters, and its freight rate includes the charge for carrying the grain to the side of the ship in the lighter, but not for transferring it to the ship. As a matter of fact, most grain coming from Chicago goes by way of the Great Lakes, so long as they are open, and the New York Central. The Southern ports are less used for Chicago shipments, but St. Louis shipments go to them, as well as to the Gulf ports. Mr. Callaway is not prepared to say that a complete removal of the differential, so as to make the rates from the Western points to Eastern ports uniform, would be acceptable or

even tolerable for the Chesapeake and Ohio and Baltimore and Ohio railroads; but he is convinced that the present differential is too high. Permission to the railways to pool their business would undoubtedly do away with this complication. (224-226, 235.)

Mr. BLANCHARD refers to the establishment of the present differential rates as between the leading Eastern seaboard points. The system was first adopted in 1877, after the railways had squandered millions of dollars in rate wars. Irregularities in steamship sailings and rates, with many other complicating elements, made the adjustment of rail rates on goods intended for export at the different ports exceedingly difficult. Often the railroads had made through rates from inland points to foreign ports, and had afterwards found the entire inland charge absorbed by the increased ocean rates. After a long discussion an agreement was reached fixing differences in charges over the lines reaching the various ports. (673.)

Mr. SNYDACKER, a grain merchant of Chicago, also refers to the differential in favor of Baltimore and other Southern ports and to the relative decrease of the export business through New York. He says that the terminal charges for grain at New York may also be higher than at other ports. (397.)

2. Southern States.-Mr. KNAPP, of the Interstate Commerce Commission, thinks injustice is done by the Southern railways in charging more for shipments going north than on those going south. (135.)

Mr. SPENCER, president of the Southern Railway, declares that the reason why higher rates are frequently charged for hauling products from the South to the North than vice versa is not because the dominating load goes north, and the cars would often be empty if lower rates were not made from the North. The direction of the dominating load varies at different seasons of the year. The classes of freight on which the rate from the South to the North is high are largely fruit and vegetables, which are exceedingly perishable, which require a special class of equipment and especially high speed of transportation, and with which a large amount of ice must usually be hauled free. (275.)

Mr. VANLANDINGHAM testifies that rates from the Northeastern States to the Southeast have been lower than from Chicago, St. Louis, and Cincinnati, thus injuring the general merchants and manufacturers of these more western cities. The Interstate Commerce Commission has four times ruled against this discrimination, but its order has never been obeyed. (202.)

3. Shipments by way of Gulf of Mexico and their effect on other routes.-Mr. VANLANDINGHAM, of the St. Louis Traffic Bureau, testifies that there has been a very large increase in ocean transportation from Galveston and other Gulf ports, and consequently in railway transportation from the middle West to the Gulf. Every freight rate from west of the Mississippi River as far north as the Platte River is affected by Gulf competition, which practically determines the freight rates to the Atlantic seaboard. The Illinois Central also carries a considerable traffic to the Gulf. The ocean freight rate is about 44 cents per hundred higher from Gulf ports than from Atlantic ports. The difference between export rates and domestic rates on the railways leading to the Gulf is even higher than on those leading to the eastern seaboard.

Mississippi River transportation also has a considerable influence. This influence varies according to the condition of the river, but often practically determines the rail rate on grain from St. Louis to Baltimore. The river traffic has, however, fallen off somewhat as compared with several years ago, and may be still further injured by the excessive competition of railways. (197,206.)

Mr. KNAPP, of the Interstate Commerce Commission, says that the freight rates from New York to Chicago, St. Louis, and Kansas City have for years been adjusted with reference to one another. The first-class railway rate to Kansas City has been $1.47. Recently the Kansas City, Pittsburg and Gulf, being in the hands of receivers, in connection with the Mallory Steamship Line, made a rate of 80 cents from New York by way of Galveston. This has since been abandoned by order of the court in charge. (133; see also Mr. KENNARD, p. 364.

Mr. VANLANDINGHAM also refers to the recent adjustment of rates from Eastern points, extending as far west as Buffalo, by way of ocean carriers to Galveston and thence to Missouri River and other Western points, by which shipments could be made as cheaply as from Chicago or St. Louis to the same place. This abuse has been remedied at present. (202.)

Mr. KENNARD, of the Chicago Butter and Egg Board, also refers to the fact that in April, 1898, the railroads entering Kansas City and other Kansas points charged the same rates from those points to the seaboard as was charged from Chicago to the seaboard. The cut was first made by a railroad not entering Chicago, but those which do reach that city were then compelled to meet the cut. The object

of this arrangement is largely to develop the business of the through fast-freight lines on the Eastern roads. The witness thinks that Gulf competition has little to do with the practice, which is decidedly injurious to the interests of Chicago. (365.)

Mr. CALLAWAY, president of the New York Central, likewise refers to the increased competition of the Gulf ports with the Atlantic ports in export trade, and declares that practically all the rail rates have been reduced by this competition. It is no longer possible to increase the rates on grain over the railways when navigation on the Great Lakes closes. The competition of the St. Lawrence for grain shipments also keeps down rail rates. The freight rates are also affected by the ocean rates, since the railways must enable American products to be exported in competition with foreign products. _ (225.)

Mr. FISH, president of the Illinois Central Railroad Company, on the other hand, thinks that the Gulf ports do not get a natural proportion of traffic. He points out the immense importance of the territory tributary to the Mississippi River. It contains 41 per cent of the area of the United States and nearly half its population. Because of the constant reduction in freight rates the matter of railway grades is increasingly important in determining the direction of railway traffic. The level prairies of the Mississippi are specially favorable. New Orleans is the natural outlet of this great valley. The air-line distance from Chicago to New York is 709 miles, and to New Orleans 826 miles; but owing to the mountainous character of the Eastern States, the shortest railroad from Chicago to New York, 912 miles, is of the same length as the shortest to New Orleans. On this shortest line to New York, moreover, there is a dead lift in altitude of 1,571 feet, while the lift to New Orleans is only 214 feet.

The following table shows the short-line distance by rail from the leading interior grain markets to New York and New Orleans, respectively:

Kansas City, Mo.

164

332

363

146

535

281

121

382

576

457

New Orleans has six great railroad systems, reaching a very wide extent of territory, with a total mileage of 19,086 miles. Although the railroads of the South immediately after the war were largely physical and financial wrecks, they have gradually improved, until now in safety, speed, and regularity of service they equal, if they do not excel, the Eastern railroads.

In view of these facts a much larger proportion of traffic, especially for export purposes, ought to be carried by way of New Orleans than is now carried. The railways do not discriminate in favor of that point, but, if anything, against it. Only 16.4 per cent of the freight carried by the Illinois Central Railroad in 1898 was through freight. The gross receipts of all the railroads entering New Orleans during 1898 were 30 per cent more than the value of all imports and exports at New Orleans. (321-324.)

It is not true. Mr. Fish continues, that the exportation rates on grain and other products from Chicago by way of New Orleans regulate the rates by way of New The witness does not think that the difference in the disYork, but vice versa. tance from New Orleans to Liverpool accounts for the small proportion of business at New Orleans. The distance is perhaps 50 per cent greater and the average time of the ocean voyage is relatively still longer by way of New Orleans as compared with New York. But the vessels from New Orleans avoid the most northern course, and the duration of the voyage is relatively less important in the case of products exported, where there is little haste for delivery. The imports by way of New Orleans are especially light. That city was formerly the market for

nearly everything brought into the Mississippi Valley, and it is still the natural gate for the entrance of coffee and many other products. Although the import traffic is so small, the north-bound freight on the Illinois Central is usually about equal to that south bound, so there is no special expense from hauling empty cars. The barge transportation on the Mississippi River is a much less important factor than formerly, since the rail rates have been made practically as low as the water rates.

There is constant competition between business by way of New Orleans and Cairo and by way of Kansas City and Galveston. (329, 330.)

4. Discrimination against Chicago.-Mr. KENNARD also points out that the freight rate on cheese and similar articles from Wisconsin to Chicago is higher than that from Michigan and New York to Chicago for similar distances. The railroads assign as the justification for the lower freight rates going west the fact that cars largely go back empty. (365.)

Mr. MALLORY considers that the terminal charge of $2 per car on cattle brought into Chicago (see p. 48) amounts to a discrimination against Chicago in favor of Kansas City and other markets. It has diverted a good deal of business from Chicago. The feeling of injustice which it gives rise to is more effective in driving away business than the money demand in itself. Competing markets use it as an argument against shipping to Chicago. (588.)

Books

Report, Volume 4