Several witnesses assert that discrimination by railroads is the greatest of all possible evils to shippers, and that it makes less difference whether the rates are high or low than it does whether they are uniform or otherwise. The enormous power of railroads over the prosperity of individual businesses is emphasized. It is also declared that discriminations are nearly always in favor of large shippers, of the strong against the weak, and that trusts and combinations have been especially fostered by them.

The methods of discrimination are referred to by some of the witnesses above named and also by two or three representatives of railroads. It is stated that secret rebates are still made, sometimes by methods which it is impossible to detect. Sometimes the discrimination is by an underclassification of freight or by underbilling. In certain instances shippers deceive the railroads regarding the classification of goods, and railway officers assert that it is very difficult to prevent this practice, although inspectors are maintained for that purpose. Mr. McGovern, a representative of the railroads, holds that railroads seldom connive in underclassification or underbilling of goods. It is also asserted that railroads sometimes agree to pay cartage in order to secure traffic of particular shippers.'

Mr. Langley asserts that the recent advances made in the various railroad classifications do not apply, in general, to articles made by great combinations, but affect those produced especially by smaller establishments.2

Several railway officers and others maintain that the granting of discriminations has been very greatly reduced, especially within the past year or two, when the prosperity of the railroads, as well as the agreements and community of interest which have been established between them, have tended to minimize the practice. These officers in several cases admit by contrast with present conditions that discriminations have hitherto often existed, even in the face of the interstate-commerce law. The fact that a number of railroad men urge the advantages of the consolidation of railroads, community of interest, and pooling, especially on the ground that such establishment of harmony will do away with the secret discriminations which result from excessive competition for traffic, is also, of course, an admission of the existence of the practice. A representative of the Pittsburg Chamber of Commerce declares, however, that that body abandoned its transportation board, which had aimed especially to prevent discrimination, because there were no complaints.3

DISCRIMINATION BETWEEN PLACES-LONG AND SHORT HAUL RATES. Generally.-Professor Ripley, Professor Parsons, Mr. Wilson, of the Cincinnati Board of Trade, and one or two other witnesses, criticise the practice of the railroads in making discriminations between places, and particularly in making unduly low rates for larger towns where competition between carriers is active, while maintaining excessively high rates for intermediate places which are not subject t› competition. It is declared by the witnesses above named, and incidentally by some others, that the railroads very generally make the rates to competitive points much lower than those to intermediate points. The interstate-commerce act prohibits railroads from charging more for a shorter haul over the same track than is charged for a longer haul, unless the circumstances be dissimilar. Water competition has been held by the courts to constitute a difference in conditions justifying a lower rate for the longer haul. It is stated by several witnesses that the railroads in many cases, more particularly in the South, make these lower rates for the longer haul to points where there is no water competition, but only where there is competition between

1 Ripley, pp. 286-290: Griswold, p. 623; Nicholson, p. 726; McGovern, pp. 672-674. Langley, pp. 867-870.

Markham, pp. 432, 433; Griswold, pp. 614, 615; Talcott, p. 627; Nicholson, p. 728; Greene, p. 487; Woodlock, pp. 463, 464; Anderson, p. 639; Dunlap, pp. 2, 4; Stubbs, pp. 762, 765.

4 Ripley, pp. 296, 297; Wilson, p. 695; Parsons, p. 136.

different railroads. It is asserted further that the railroads thus possess an enormous power over the prosperity of communities, and especially that they attempt constantly to build up the larger towns at the expense of the smaller ones. The undue aggregation of people in the cities is considered by some of these witnesses as an evil in itself. One witness argues that under Government ownership of railroads the motive to make such discriminations between places disappears. Others, in alluding not only to the discriminations in favor of larger towns, but to those between certain cities and sections themselves, declare that the railroads assume an unjustifiable degree of paternalism, and that they ought not to deprive cities and sections of their natural advantages of location and resources by making rates which put other less favorably situated places on an equality.1

Southern basing-point system.-Mr. Wilson in particular discusses the long and short haul discriminations in the Southern States. The railroads, he asserts, have adopted almost universally what is known as the basing-point system, giving lower rates to certain competitive centers than to smaller noncompetitive points, even those nearer the point of origin of the traffic. In theory these basing points have been established by water competition, but in practice unduly favorable rates are given to many towns where there is no water competition, greatly to the detriment of the smaller places. Mr. McGovern, of the Southern classification committee; Mr. Markham, of the Illinois Central Railroad, and two or three other railway officers 2 admit the existence of this practice in the South, and admit that basing-point rates have been extended to places where there is no water competition. They assert that railroads reaching towns not subject to water competition have insisted on the right to establish rates which will enable those towns to do business with others having water competition. As railroads have been constructed and towns have grown up, these favorable rates have been extended from one to another with a view to creating jobbing centers from which the surrounding territory may be supplied. Mr. McGovern insists that it would not be just to require the railroads to grant as low rates to smaller places as they are forced to make to these competitive points. Mr. Markham presents the same argument, but lays a special stress on the influence of coastwise and river transportation in the forcing of the establishment of low rates to trade centers. He says that although in some instances no boats are operated on rivers reaching these centers, the mere possibility of establishing such means of transportation forces the railroads to make low rates. This witness especially maintains that the intermediate communities are not harmed by the granting of low rates to competitive points. The railroad could not get the through traffic at all unless it made such rates, so that it can not be said that the traffic is diverted from the small towns. The through business may not contribute to the fixed charges of the railroad, or may contribute proportionally less than the local business, but it does leave a profit after paying the added expense of transportation which it actually causes, and by means of this profit the railroads are even enabled to reduce rates to the intermediate points below what they would otherwise have to be.

Alleged discrimination against Middle West in rates to Southern States.—Mr. Wilson, a representative of the Cincinnati Board of Trade, asserts that the railroads leading from the North to the Southern States have discriminated against Cincinnati, Chicago, and other Middle Western cities in making rates. He says that formerly Cincinnati did a very large business in the distribution of goods through the South, but that when more railroads were built competition became active until an agreement was reached in 1879 between the railroads from the Eastern cities and those from the Western cities as regards the Southern traffic. By this agreement the Eastern roads were to maintain low rates on manufactured articles which would favor the cities of the Eastern seaboard, while the roads leading South from the Ohio River were to be

1 Wheeler, p. 745; Wilson, p. 695.

2 McGovern, pp. 678-680; Markham, pp. 436-439; Dunlap, p. 2; Talcott, p. 629.

given control of the traffic in grain, packing-house products, and similar articles. Since 1879 manufacturing business has moved westward, and these Western cities now demand-but, according to Mr. Wilson, demand in vain-concessions in rates which will enable them to compete fairly with the Eastern cities in the Southern markets. The witness gives numerous instances of the wide difference of rates from the Eastern and Western cities to the South. Thus, while the distance from Cincinnati to Atlanta is only 54 per cent of the distance from New York to Atlanta, the rates from Cincinnati to Atlanta are 94 per cent of the New York rates, and still greater differences exist to some other points. A suit brought by the Western shippers before the Interstate Commerce Commission, with a view to securing more favorable rates, is still pending before the Supreme Court of the United States. Mr. Wilson says further that there is some conflict between the interests of some of the Western cities, Chicago and Cincinnati especially acting together, while Louisville and St. Louis seem indifferent to this movement. The witness also holds that St. Louis has been favored in rates on agricultural products to the South, as compared with Cincinnati. It is the hope of Cincinnati people that the lease of the Cincinnati Southern Railroad, a road which was built by the city of Cincinnati to facilitate its Southern trade, to the Cincinnati, New Orleans and Texas Pacific Railroad, which is controlled by the Southern Railway, will do away with the motive on the part of the Southern Railway to discriminate in favor of the Eastern points which it reaches.1 To these complaints regarding discriminations against Cincinnati it is replied by Mr. Guillaudeu, of the Old Dominion Steamship Company, that the volume of trade from these Western cities to the South is rapidly increasing, and that the Eastern railroads feel that the rates made by the Western lines are even more favorable than those from the Eastern cities. It is also held that the competition of coastwise steamship lines largely determines the rates made by the Eastern railroads.2

Alleged discriminations against Pacific coast cities.—In the spring of 1901 a case was being heard before the Interstate Commerce Commission, involving the freight rates from interior cities to the Pacific coast. The jobbers of St. Louis, Chicago, and other Middle West cities were undertaking to secure an order from the commission directing that the rates from those cities to the Pacific coast should be lower than those from New York and the Atlantic seaboard, on the ground that the distance is shorter. They also demanded that the considerable differentials, which had been made by all of the transcontinental railroads except the Northern Pacific and Great Northern, in favor of carload lots as against smaller shipments, should be reduced in order that the Middle West jobbers might more readily ship goods directly to retailers on the Pacific coast. A third demand was that the rates on certain similar classes of articles, which have hitherto been different, should be made the same in order that several classes might be shipped in a single package at a rate lower than that previously charged on the highest rated article in the package, a change which would also facilitate small direct shipments to coast towns. These demands were opposed by the San Francisco merchants, particularly by the Pacific Coast Jobbers' Association, and also by several of the transcontinental railroads.

Mr. Wheeler, representing the Pacific coast jobbers, and Mr. Stubbs, representing the Southern Pacific Company, were heard before the Industrial Commission, but no testimony of the representatives of the other side of the case was taken. Mr. Langley, of the New York Merchants' Association, testifies briefly on the same subject, agreeing in the position taken by the two other witnesses. Mr. Wheeler and Mr. Stubbs maintain that, although the distance from the Middle Western cities to the Pacific coast is considerably less than the distance from the Atlantic seaboard, the low cost of water transportation justifies a low rail rate from seaboard to seaboard to meet water competition. It is held that the rates from the Middle Western cities to the Pacific coast ought to be even higher than those from the seaboard. At present 1 Wilson, pp. 687-694.

2 Pages 447, 448,

they are usually the same. To make the intermediate rates lower than those from the Atlantic seaboard would be to deprive New York and San Francisco alike of their natural advantages of location growing out of the cheapness of water transportation. These witnesses further assert that the practice of making differential rates in favor of carload shipments to jobbing centers is common throughout the country, and that it is eminently desirable that the jobbing centers of each section should in this way be given the advantage of their natural location.

Both of these witnesses maintain that there is stronger competition on the part of the sea carriers at San Francisco now than there has been for some time before. They allude especially to the establishment of the American-Hawaiian Steamship Line, which makes regular voyages by way of the Straits of Magellan, and carries freight at very low rates, and with promptness and regularity.

These witnesses further argue that the ordinary interpretation of the long and short haul clause of the interstate commerce act by the Interstate Commerce Commission and other authorities, as well as by shippers generally, has been such as to justify the making of lower rates for longer distances where water competition exists. The rates from New York to San Francisco by rail are lower than those to interior points in California and adjacent States, the local rate back from San Francisco to interior towns being added to the through rate. It is maintained that the same principle should apply both ways, and that interior cities in the East should pay as high or higher rates to the Pacific coast than those from the Atlantic seaboard.1 Alleged discriminatian against Denver.-Mr. Griffith, a representative of the Denver Chamber of Commerce, alludes to the case of Kindel v. The Atchison, Topeka and Santa Fe Railroad, which is also discussed more fully in the first report of this commission on transportation." This witness states that the decision of the Interstate Commerce Commission in that case was that the railroads might not charge more from Denver to the Pacific coast than from the Missouri River and more eastern points, and it was believed at the time of his testimony (May, 1901) that the changed rates would very soon be put in force by the railroad companies. Mr. Stubbs, of the Southern Pacific Company, says that the railroads had had no desire to make the rates from Denver so high, but that the Interstate Commerce Commission would not recognize railroad competition as a justification for making the rate for the longer distance less than that for the shorter distance, while the railroads were not willing to admit that Denver was affected by sea competition from the Eastern seaboard to the Pacific coast, and was therefore entitled to a lower rate than other mountain points. To reduce the rates from Denver, without the justification of sea competition, would have meant a reduction of rates from other points in the West also.3

The representative of the Denver Chamber of Commerce states also that manufacturers in Colorado complain that the rates on raw materials from the East are unduly high as compared with those on manufactured products, so that they are placed at a disadvantage. The most vigorous complaint, however, comes from the Denver jobbers. This witness presents figures showing that the rates from Denver to common points in Montana, Utah, and other neighboring States are nearly as high as the rates from Missouri River points to those States, while the rate from Missouri River points to Denver is also nearly as high as the rate from Missouri River to these more distant common points. Denver jobbers are therefore at a great disadvantage, since the rate from the East to Denver, plus the rate from Denver to these common points, is very much higher than the direct rate from the cities on the Missouri River and farther east. This witness thinks that a new base line for making of rates should be established for Denver and cities parallel with it, so that they should have a fair opportunity for becoming distributing centers.

1 Wheeler, pp. 744-747; Stubbs, pp. 758-760, 763. 2 Vol. IV, pp. 251-264.

Stubbs, p. 760; Griffith, pp. 849, 852.

4 Griffith, pp. 849–854.

Miscellaneous discriminations between places.'—Several witnesses also discuss other alleged discriminations between particular places. Reference should be made to the digest, pages cvII-cxx, for a fuller summary of this testimony. The principal alleged discriminations which are discussed are those in favor of Savannah as against Atlanta, in favor of Birmingham as against Atlanta, and in favor of Norfolk on through traffic over the Southern Railway through Asheville as against Charleston on traffic through the same city. Reference is also made to the differentials established by the trunk lines as between the Eastern seaboard cities. This subject is, however, more fully discussed in the previous report of the Industrial Commission on transportation. The commissioner of the Memphis freight bureau thinks that the Southern railroads make an unjust discrimination against the cotton mills in North and South Carolina and in favor of those in Massachusetts and the North. The freight rate on cotton from Memphis to cotton mills in New England was stated to be based on a rate of 554 cents to Boston, while the rate to Carolina mill points was stated at 59 cents. The rates from Memphis to Liverpool are sometimes lower than those to Carolina points. This witness does not believe that the railroads should be forced to reduce their rates to the Southern mills unduly, but thinks that there should he some change. Mr. Markham, of the Illinois Central Railroad, says that the rates made by the railroad companies on cotton from Southern centers to the seaports for export shipment are practically determined by the ocean rates, the port which secures the lowest ocean rate to Liverpool fixing the rail rate to all the ports.*

GOVERNMENT REGULATION OF RAILROADS.

Powers of Interstate Commerce Commission.-Several witnesses, especially representing shippers, but including two or three railroad officers, the railroad editor of the Wall Street Journal, and one or two others, think that the Interstate Commerce Commission has comparatively little power at present to regulate railroad rates. They are inclined to hold that the commission has exercised a somewhat beneficial influence through public opinion and the publicity which it has given to railroad questions. Two or three railroad officers especially declare that the commission has accomplished all that Congress expected it to accomplish, or that it is wise for the country that it should accomplish. Several other witnesses, however, believe that the powers of the commission should be increased in various directions, and assert that it is now not able to correct numerous abuses which exist, especially discriminations in rates as between different localities. Mr. Jackson sees no reason why the Interstate Commerce Commission should not have all the powers which the Massachusetts Railroad Commission possesses as regards State railroads."

The more general thought of shippers and disinterested witnesses is that, while the commission should not be permitted to prescribe all rates in the first instance, because of the complexity of the problem involved, it should have the power to revise rates, either directly when tariffs are submitted by the railroads, or on complaint, and to put its decisions into immediate effect, pending an appeal to the courts. The long delays resulting from the present system of appeals to the courts are held to work great hardship and injustice to shippers, who are compelled to continue for months or years paying the rates against which complaint is made. These witnesses believe that the burden of appeal should rest upon the railroads rather than upon shippers."

1McGovern, pp. 680–686; Markham, p. 441; Langley, pp. 874-870.

"Vol. IV, p. 62 of Digest.

Davant, pp. 5-8.

Page 442.

Jackson, p. 848.

Ripley, p. 290; Wilson, p. 690; Bacon, p. 76; Teisberg, p. 372; Haddock, p. 535; Langley, pp. 877-882; Wheeler, p. 735; Davant, p. 6.