United States. Congress. Senate. Committee on Inte.

Regulation of railway rates : Hearings before the Committee on Interstate Commerce, United States Senate, in special session, pursuant to Senate Resolution No. 288, Fifty-eighth Congress, third session, April 17, 1905- online

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Online LibraryUnited States. Congress. Senate. Committee on InteRegulation of railway rates : Hearings before the Committee on Interstate Commerce, United States Senate, in special session, pursuant to Senate Resolution No. 288, Fifty-eighth Congress, third session, April 17, 1905- → online text (page 23 of 123)
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proposition that every locality that has natural advantages is en-
titled to the benefit of those advantages in its transportation facili-
ties. That course has been pursued in this country uniformly from
the time of the establishment of the Commission to the present time,
and very properly, and nobody has made any objection to it or found
any fault with it, with the exception of perhaps a few localities that
are under a natural disadvantage, that feel that they ought to be
relieved of those disadvantages by the Commission. But the Com-



SEVENTEENTH DAY. 47

inission has uniformly refused to grant any relief from natural
disadvantages.

Take the transcontinental traffic. The rates from the Atlantic to
the Pacific coast are regulated Ijy water competition and are neces-
sarily very much lower than rates for half the distance. Xumerous
ca-es have been brought before the Commission by localities part
way across the continent to be relieved of that difference which the
waterways have given the Pacific coast the advantage of, and the
Commission has refused to do so.

Senator Ctji.lom. That involves the long and short haul question,
does it not \

Mr. Bacon. It invohes that question, but the Commission has in
all its decisions taken the ground that water competition justifies a
departure from the long and short haul provision of the interstate-
conunerce act ; and very properly so. The Pacific coast is now under
a good deal of con-ternation in view of the effort to secure this legis-
lation, lest it be depri^•ed of that natural advantage by the work of
the Commission. But the course of the Commission heretofore shows
clearly that it has no reason for any such apprehension.

Senator Keax. You say the Pacific coast has protested against
this legislation \

Mr. Bacox. I was going to say that it has sent in numerous pro-
tests against the legislation under that misapprehension, as I am
informed \y\ officers of commercial organizations on the Pacific
coast, under the instigation of the railway companies, chiefly the
Southern Pacific, and the Atchison, Toj^elia and Santa Fe.* They
have made strenuous efforts to obtain action on the part of commer-
cial organizations in that section to remonstrate against this legisla-
tion, trying to convev to them or in fact convejdng to them the idea
that if the Commission has the control of those rates, has power to
change these rates on complaint if found unreasonable, the Pacific
coast will be deprived of the advantage which it has heretofore en-
joj-ed. But that is shown to be utterly baseless from the decisions
that have been made by the Commission.

I had occasion not long ago to go over a number of its decisions, to
tabulate them, synopsize them, and publish them, for the purpose of
showing to commercial organizations that Avere so situated, that had
natural advantages which they were enjoying the benefit of that the
Commission would maintain those advantages if it had the power to
order changes in rates. So that the protests that have come from the
Pacific coast against this legislation have come entirely under that
misapprehension.

Senator Cullom. You say some organizations are taking ste^DS to
cotuiteract this change ?

]Mr. Bacox. Some on the Pacific coast — yes. Two or three of the
San Francisco organizations have taken direct action, and in fact
have presented resolutions to this committee during the last session
of Congress, remonstrating against this legislation, for fear that it
would interfere with the natural advantages which they possess.

Senator Culloji. I thought you said that since that these organi-
zations are changing back again, and are willing to let this legislation
go on.

]Mr. Bacox. Probablv nine-tenths of the commercial organizations



48 SEVENTEENTH DAY.

of the Pacific coast are as strenuous in the advocacy of this legisla-
tion as any organizations in the country.

Senator Cullo:m. You mean by '' this legislation " giving the Com-
mission poAver to make rates?

Mr. Bacon. Giving the Commission this power. There are some
forty-odd commercial organizations in California that are associated
in this movement represented by the committee of which I am chair-
man ; and they are as persistent in their desire for legislation as they
over have been, although the railroad people have endeavored to
imbue their minds with the idea that they might be deprived of their
present advantages.

Senator Dolliver. Is there any more glaring injustice in the rail-
vfaj situation than the case of cities like Salt Lake and the city of
Spokane, Wash.? I mean, practical injustice?

Mr. Bacon. Well, Senator, that is a pretty difficult question to dis-
cuss, and I would not want to go into it very much, because it will
take a great deal of time. But it is very apparent that in the case of
San Francisco, Los Angeles, and other places on the Pacific coast
that are accessible by water all the way from the Atlantic coast, and
that consequently can and do obtain rates by water that are exceed-
ingly low, the railroads should be permitted to meet those rates.

Senator Dolliver. At the expense of the interior?

Mr. Bacon. Well, there comes the question. If the rate to any of
these intermediate points is unreasonable in itself, it should certainly
be reduced; but if the rates to those points are reasonable

Senator Dolliver. Do you think they never can be shown to be
unreasonable ?

Mr. Bacon. There have been several cases brought before the Com-
mission in which the Commission has decided that they were not
unreasonable.

Senator Dollr-er. A man in Spokane who reached the conclusion
that there was no remedy for his troubles would probably lose inter-
est in the Interstate Commerce Commission, would he not ?

Mr. Bacon. Those are cases each of which must be determined on
its own merits. Spokane is only 300 miles east of the Pacific coast ^
and whether it is just or not to charge Spokane the rate to the
Pacific coast, to Seattle, and back from Seattle to Spokane, is a ques-
tion that some competent body should determine. That is one of the
things that is included and will be included in this proposed legisla-
tion. It will invest the Commission with the power to say whether an
unjust rate is or is not really charged to Spokane and to other places
similarly situated.

Senator Dolliver. But, in your opinion, no commission would ever
take that position ?

Mr. Bacon. In my opinion the Commission, from the fact that it
never has taken that position, is not likely ever to take it.

Senator Newlands. Seattle would not be content to have any
change made in that rate from the present condition, would it ?

Mr. Bacon. Certainly not.

Senator Newlands. Whereas Spokane would insist upon it?

Mr. Bacon. Spokane is very desirious to obtain the same rate that
Seattle has.

Senator Newlands. Yes.

Mr. Bacon. And if the rate which it is charged is unreasonable



SEVENTEENTH DAY. 49

in itself, then it should be reduced and would be reduced by the Com-
mission. But if the Commission finds it to be in itself a reasonable
rate, the fact that it is higher than the rate to the Pacific coast is no
reason why it should be reduced. That is the ground that the Com-
mission has taken.

Senator Kean. It is a little like the case of Milwaukee and Minne-
apolis, is it not ?

Mr. Bacon. No; it is entirely different from those cases. The
situation there is that grain originating over a certain extent of terri-
tory is carried to Minneapolis at a less difference in rates as compared
with the rates to Milwaukee and Chicago than is customarily charged
for corresponding distances, and that was so declared by the Commis-
sion in the case that was brought by the Milwaukee Chamber of
Commerce, but the railroads refused to comply with the decision ren-
dered by the Commission. Now, I did not want to allude to the Mil-
waukee case

Senator Ctxllom. Did the (jase where the Commission determined
the question as between your town and St. Paul go any further?
Was the case appealed to the court after the Commission determined
it and the railroad paid no attention to it ?

Mr. Bacon. It was not appealed "by the Commission, for the reason
that it immediately followed the decision of the Supreme Court,
rendered in 1897, that the Commission had no authority to order a
specific change in rates.

Inasmuch as this incident has been referred to, I want to refer to
the testimony given by Mr. Hiland here a few days ago on that par-
ticular case, m which I find, from reading the report, that his memorj?^
is very greatly at fault. He states that the railroads did not comply
with that decision for the reason that they found it would interfere
with what he terms the correlation of rates, meaning to other places ;
and he said he declined to comply with the Commission's order on
account of the disturbance which it would produce in those corre-
lated rates.

Mr. Hiland at that time was general freight agent of the Chicago,
Milwaukee and St. Paul Railway, of which he is now traffic manager,
and was entirely familiar with the facts and had directly to do with
them; but it is a considerable length of time since, and evidently
the circumstances have gone out of his mind. The facts, however, are
these : Before the case was brought before the Commission, the Chi-
cago, Milwaulcee and St. Paul Railway had been conferred with by
representatives of the Milwaukee Chamber of Commerce during a
period of two years or more, in the endeavor to obtain amicably a
proper and satisfactory adjustment of rates, but without success.
When the case was brought before the Commission and was decided
in favor of the Milwaukee Chamber of Commerce, the St. Paul Rail-
way Company, through Mr. Hiland, immediately prepared tariffs
complying with the decision of the Interstate Commerce Commis-
sion and submitted those tariffs to the several railway companies that
were interested. I believe there were six of those, besides the St. Paul
road, and all of the companies with the exception of one assented to
the adoption of those tariffs. That company, which was the Chicago
and Northwestern, being identified with the Chicago, St. Paul, Min-
neapolis and Omaha road (which leads to Miimeapolis and has no
17 i>— 05 M 4



50 SBVENTEEN-TH DAY.

terminals of importance, which does not reach Milwaukee or Chi-
cago on its own tracks), refused to accede to the adoption of that
tariff. Under the rules of their traffic association, if one company-
refused to accede to the adoption of a tariff proposed it could not be
adopted ; or, rather, it would not be adopted.

Senator Cullom. They attempted to put the decision in force, tiien?

Mr. Bacon. They made the attempt to put the decision in force,
and took all the necessary steps to do so, and were prevented by the
dissent of this one company.

Senator Kean. Which ran to Minneapolis.

Mr. Bacon. My point is that if it had been impossible to adjust
those rates without disturbing other correlated rates to an intolerable
extent, the St. Paul Company would not have taken those steps-
But it did take those steps, and took them in good faith, and with the
intention of carrying them out.

After the matter had been submitted to the railway attorneys, and
the companies had refused to put it into effect, the St. Paul Company
took the matter up independently of those companies; and the
manager or president of that road, Mr. Earling, at that point, in my
presence, directed Mr. Ililand to put those tariffs into effect notwith-
staiading the refusal of this one road to abide by the order. It not
only took nteps to adjust its rates to comply with the ruling of the
Commission, but went so far after the various companies interested
had refused to adopt the tariff by the veto of the Northwestern Koad
as to order the rates to be put into effect.

Mr. Bird, who was then traffic manager, was absent at that time
on a vacation. He returned in three or four days; and upon his
return it was decided, for some reason (whatever it may have been) ,
that they would not put that tariff into effect.

I simply refer to that to show that the statement that it was imprac-
ticable to put it into effect owing to the disturbance produced in rela-
tion to other rates was not correct, and it was not a leading motive
in this matter; but, on the other hand, the St. Paul Company was
disposed and ready to do it.

Senator Kean. The St. Paul Company would have reduced the
rate to Milwaukee ; but the other roads, if they had reduced the rate
to Milwaukee, would also have reduced the rate to Minneapolis,
would they not ?

Mr. Bacon. This was an arrangement between the roads interested
in all three of the markets; and all the roads, with the exception of
the Omaha road, assented to the adoption of the rates to comply
with the decision of the Commission.

Senator Kean. And they had no market in Milwaukee ?

Mr. Bacon. Not over their own tracks. They connected with the
Northwestern, and those two lines were largely in common interest.
But I speak of this to show that the general statement can readily
be made that rates can not be adjusted without such a disturbance
as to render it impracticable to put proper and just rates into effect.

Senator Kean. If those rates had gone into effect there would not
have been any of this agitation, would there ?

Mr. Bacon. I do not think this agitation is dependent upon those
rates; but I will say this— that the futility of the Interstate Com-
merce Commission, which was demonstrated by that case, led me to



SEVENTEENTH DAY. 51

take an interest in an effort to confer powers somewhere that might
remedy injustices of that kind.

Senator Kean. Was that a unanimous opinion by the Interstate
Commerce Commission ?

Mr. Bacon. Yes, sir ; but I do not think that point has any bear-
ing. As far as my observation goes, the decisions of the Supreme
Court on important questions have generally been determined by a
majority of one, by a vote of 5 to i. In all cases of any importance
that have come up, to my knowledge, as a layman, I have observed
that to be the case.

The fact of this one road refusing to put in the rate was not on the
ground of its injustice, but simply on the ground that it might de-
prive that road of some share of the business it had been receiving.
And I put the question to the traffic manager of that road whether
he was prepared — because it might have that effect — to prevent the
putting into effect of rates that had been found by the Commission to
be just and right, and that were acknowledged by all of the other com-
panies in interest to be so. He merely replied that he would not
accede to anything that would interfere with the interests of Minne-
apolis, and that he feared this would.

(At this point the statement of Mr. Bacon was suspended in order
to permit brief statements to be made by a number of gentlemen who
wished to leave town, it being understood that Mr. Bacon should be
allowed to continue his statement in the morning.)

STATEMENT OF MR. OLIVER S. GARRISON.

The Chaieiian. Please state j'our name, occupation, and residence.

Mr. Garrison. JNIy name is Oliver S. Garrison; residence, St.
Louis; president of the Big Muddy Coal and Iron Company, and
chairman of the Illinois Coal Operatives' Association, an association
composed of nearly all the operatives of the State of Illinois, and
representing 90 per cent of the tonnage of the State.

The Chairman. What is the aggregate shipment, in tons, of this
association and these companies you are connected with ?

Mr. Garrison. The Illinois Coal Operatives' Association repre-
sents about 34,000,000 tons of coal.

The Chairman. They ship that much ?

Mr. Garrison. They ship that much ; yes.

The Chairman. And how much do the others ship ?

Mr. Garrison. The Big Muddy Coal and Iron Company, the com-
pany I am directly identified with as president, ships about 1,000,000
tons.

The Chaie3ian. Xow make your statement, as briefly as you can.

Mr. Garrison. As I recall the President's message, it referred to
some railroad legislation, one of the subjects being rebates, the other
fixing of rates by a commission.

As regards the rebate question, I supposed that that was a matter
of the past, as I do not know of any parties who have enjoyed any
special privileges since the passage of the Elkins law.

Senator Kean. Did you know of any before?

Mr. Garrison. I heard of them : I do not know that I can mention
any cases.

Senator Kean. Do you know of any?



52 SEVENTEENTH DAY.

Mr. Garrison. I believe that numerous complaints in regard to that
existed before the passage of the Elkins law.

Our business covers the territory from New Orleans to Minnesota
and Dakota, the North and Northwest, and if there were any rebates
being offered at this time, or obtainable at this time, I think our
company would be in a position to secure them, or, in other words.
I think the railroads would offer all the inducements that others
might receive.

Now, as to fixing the rates by a commission, I feel that the present
rate situation is very satisfactory, so far as our part of the country
is concerned, and I am speaking to that. The rates have been grad-
ually reduced, until to-day we enjoy about what is considered fair
rates. To disturb the present situation would, in my opinion, be a
serious matter to the commercial interests of our country. I do not
believe any body of men, Avho have not been trained as our traffic men
have been, are able to go into the question of the railroad conditions of
this country and properly deal with the different propositions that
arise. "Where differences have arisen it has been my experience that
they could be, adjusted with the freight men whenever we could con-
vince them that our position ^'las correct.

A further serious matter, according to my way of thinking, would
be that if this fixing of rates by a commission were enforced it would
have a tendency to affect the financial interests of our country to a
very great extent. People will not invest their money in railroads,
not only in extensions, but in the betterment of the present lines, with
any doubt in their minds as to what their returns are going to be.
Within the last ten or fifteen years my experience has been that our
large sj'stems have been nearly all rebuilt, that the old rails have
been taken up and new and better ones substituted, and that equip-
ment generally has been vastly improved, and I sincerely hope noth-
ing will take place to disturb the present conditions as to freight
rates.

The Chairman. "\'\Tiat do you mean by disturbing? Do you mean
changing the present method of fixing rates by the railroads and giv-
ing it to a commission ?

Mr. Garrison. Yes, Mr. Chairman; that is what I intended to
state.

The CitAiR3iAN. In your business and in the business in which you
are associated is there any complaint of high or excessive rates any-
Avhere ?

Mr. Garrison. Not at this time.

The Chairman. Now, as to shippers generally, so far as you
know, is there complaint in your section of the country-^in the Mis-
sissippi Valley — of rates being too high ?

Mr. Garrison. Mr. Chairman, when I was asked to appear before
this committee I took occasion to talk with a number of our merchants
and people who are largely interested in and connected with our busi-
ness interests of the West, and the general expression was that they
were satisfied Math the rates; that all they wanted to see prevented
was this rebate proposition ; that if all were on the same footing they
could take care of themselves. I found that sentiment to exist uni-
versally. I do not know that I met a single merchant or manufac-
turer who differed from that proposition.



SEVENTEENTH DAY. 53

The Chairmax. Have the commercial bodies of St. Louis, or those
•with which you are comiected, taken any action about this rate-
making pbwer ?

Mr. Garrisox. Xot at the present time. I believe there was some
action taken, INIr. Chairman, but I was in Europe that year.

The Chairmax". You think that conferring power on a commission
to fix rates or to change rates would be to reduce rates. What I mean
is, would that necessarily follow that the rates would be reduced if
complained of, and that if reduced that would create a doubt in the
minds of proposing investors in railroad securities to any extent, or to
a sufficient extent that those proposing to build railroads could not
borrow the money with which to do it ?

Mr. Gareisox. It is my belief, Mr. Chairman, that that would be
the case, and that was the purpose I had in view in making my
statement.

Senator Cullom. Are you connected with any railroads?

Mr. Garrison. I have no official position with any railroads. I am
a director in the Missouri Pacific Eailway.

Senator CuLiX)3r. You are more connected with merchandising
operations ?

Mr. Garrisox'. "With mining coal in the Murphysboro district in
Illinois.

Senator Cullom. You do not find anj' fault with the conduct of the
railroads, so far as you are concerned ?

Mr. Garrison. As I stated before you came in, Senator, we think
the rates at the present time are fair.

Senator Newlands. You say that you are not an officer of any rail-
road, but that you are a director in the Missouri Pacific. Are you a
stockholder ?

Mr. Garrison. Yes, sir.

Senator Xewlaxds. Are you largely interested in railroads or rail-
road securities ?

Mr. Garrison. My holding of railroad securities is less than
$20,000, and in manufacturing and other enterprises about $400,000
to $500,000.

Senator Kewlaxds. So that your interest in shipments far out-
weighs your interest as a railway investor ?

Mr. Garrisox. Far outweighs it; yes.

Senator NE^^'LAXDS. Your familiarity is with the rates of freight
on coal, is it ?

Mr. Gakeisox". Mostly.

Senator Newlands. Where do you ship your coal ?

jNIr. Garrison. To the territory as far south as New Orleans, and to
intermediate points as well as to that point; and to the north to St.
Paul and Minneapolis, and some into the Dakotas, no large amounts,
but we ship some into the Dakotas, and to Nebraska also.

Senator Newi.axds. Do you find that the rates on your coal differ
very largely, for the same distance, according to the direction it takes ?

Mr. Garrisox. You now refer to interstate business purely?

Senator Newlands. Yes.

Mr. Garrisox"^. We have more favorable rates for most points for
interstate business than for State business, somewhat more favorable.

Senator Newlands. Do you find that the rate, for instance, for the
same distance south is less than it is for the same distance west?



54 SEVENTEENTH DAY.

Mr. Garrison. Yes, sir.

Senator Newlands. Is there much difference?
Mr. Garrison. I should say offhand probably 33^ per cent ; that
may not be exactly accurate.

Senator Newlands. Wliy is that ?

Mr. Garrison. To the south we have competition at New Orleans
by water from. Pittsburg, and so we are obliged to obtain rates from
the railroads that will let us meet that competition. In fact, all of
our business is based on competitive conditions.

Senator Newlands. What is your rate per ton to New Orleans?

Mr. Garrison. About $2 a ton to New Orleans.

Senator Newlands. How many miles is that ?

Mr. Garrison. About 800 miles.

Senator Newlands. Is it a distance rate ?

Mr. Garrison. No. I was figiu-ing to see about what it was per
ton per mile. I thought that was your question.

Senator Newlands. What would the rate be for 800 miles to the
west?

Mr. Garrison. We have never shipped that far to the west.
Therefore I can not answer that.

Senator Newlands. I presume the rate would diminish very
rapidly.

Mr' Garrison. Yes, sir; the Colorado properties would take care
of that business.

Senator Newlands. As to preferences and rebates, have you had
any familiarity with that question?

The Chairman. I think he has answered that.

Mr. Garrison. My answer was that for the past two or three years,
or since the Elkins law was passed, I know of no rebates whatever.

Senator Newlands. They were very frequent before that, were
they not?

Mr. Garrison. Prior to that I heard from parties that they had
had rebates.

Senator Newlands. Did all the shippers seek to get them?

Mr. Garrison. I rather think they did. I think they tried to get
the best rates they could, either in the way of low rates or rebates.

Senator Newlands. In order to get some advantage over their com-
petitors the shippers did not hesitate to accept rebates ?

Mr. Garrison. I think not. I think they would take them on all
occasions.

Senator Newlands. And urge it ?

Mr. Garrison. Yes, sir ; I think they would urge it.



Online LibraryUnited States. Congress. Senate. Committee on InteRegulation of railway rates : Hearings before the Committee on Interstate Commerce, United States Senate, in special session, pursuant to Senate Resolution No. 288, Fifty-eighth Congress, third session, April 17, 1905- → online text (page 23 of 123)