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arrive or depart over connecting lines, the Railway Company seems to receive in nearly all cases a division of the through rate. We have seen that the railroads of the International Harvester Company had no divisions with eastern lines; but the railway of the Illinois Steel Company seems to be more favored in this respect. Its divisions with all eastern connections are ten per cent on traffic to the seaboard, fifteen per cent when the destination is Buffalo and Pittsburgh, and twenty per cent on business to the Missouri River and beyond. It does not clearly appear what division it receives upon traffic destined to the south. It further appears that in some cases it enjoys special divisions. The testimony shows, for example, that the Baltimore & Ohio has in the past, and does now, accord to the Chicago, Lake Shore & Eastern a division of seventy cents per ton on coke from the Connellsville region.
These divisions are plainly excessive. The rate from Chicago to New York on iron articles is 2712 cents per hundred pounds, with a minimum of 30,000 pounds. Assuming that a car contained only the minimum loading, the aggregate freight would be $82.50 per car, of which the Lake Shore & Eastern would receive $8.25 for moving the car to a connection with the eastern line at, Indiana Harbor. Commodities taking this rate usually load considerably above 30,000 pounds, so that the amount actually received per car would be considerably more than that above given. Other destinations would show on the average a division fully equal to this. Coke from the Connellsville region moves in train loads, in cars especially designed for that purpose. While the testimony in this case does not show either the car loading or the number of cars to the train, it is safe to say that the carload would equal 30 tons at least, and that the trainload would be forty cars. The Chicago, Lake Shore & Eastern would receive $840 for hauling this train-load from Indiana Harbor to its destination.
While it can be confidently affirmed that these divisions are grossly excessive, the exact amount of that excess cannot be determined with the same confidence that it could be in case of the Illinois Northern and the Chicago, West Pullman & Southern Railroads, for the reason that the service rendered by the
Lake Shore & Eastern differs greatly in different cases, according as the movement
may be to one or the other of its various plants. Its principal plant is evidently at South Chicago, and the distance which it ordinarily moves a car to or from that plant would not exceed six or seven miles. For the rendition of this service, under the conditions prevailing, $3.00 per car would be ample compensation. The cost of moving a train-load of coke from Indiana Harbor to South Chicago and moving the empty cars back again, for which the Lake Shore & Eastern receives $840, would not probably exceed $40. If, however, the movement is to Joliet, a distance of thirty miles, or some of its other plants, in case of which the distance does not appear, it is evident that the cost of the service would be greater.
That these charges are extravagant is at least indicated by the financial report which this Company makes to the Interstate Commerce Commission, although that report may be misleading, and we do not base our conclusions upon it. The capital stock of the Chicago, Lake Shore & Eastern is $650,000, and its bonded indebtedness is $3,200,000, upon which the interest aggregates $168,700 annually. The Company earned from operations during the year ending June 30, 1904, $3,134,550, and its operating expenses were $1,698,356, leaving the income from operation $1,436,194. Its taxes for that year were $19,233, and its rentals paid $221,780. Apparently, therefore, after deducting its fixed charges and its taxes, there would remain as a net result a sum equal to more than one hundred and fifty per cent upon its capital stock. No dividend was paid. The Company expended $195,000 in permanent improvements. What became of the balance the report does not show.
It will be noticed that out of these operating expenses the . Lake Shore & Eastern maintains, without expense to the Illinois Steel Company, the miles of track within its private yards above set forth. When it is remembered that the South Chicago division of the International Harvester Company has within the limits of its plant at South Chicago six or seven miles of track, upon which it uses three locomotives, all of which it constructs and maintains without assistance from the railways, it will be readily understood that the construction and maintenance of all
these private tracks of the United States Steel Corporation in and about Chicago must cost a large sum annually. Indeed, it is fairly inferable that the greater part of the operating expenses of this Company are incurred in that manner. It should, perhaps, be said in this connection that under certain circumstances the Illinois Steel Company pays the Lake Shore & Eastern Railway Company a certain charge for the movement of cars within the private limits of these plants.
We are of the opinion in this case, as in the case of the Illinois Northern and the Chicago, West Pullman & Southern Railroads, that the only service for which the railways transporting the traffic of the Illinois Steel Company to and from Chicago can properly charge is the switching service to and from the plants. of that Company; that the divisions in question are much in excess of any fair charge for that service; that they are intended and understood to be in excess of what would be a reasonable charge; that they are, in fact, paid to secure the traffic of the Illinois Steel Company; and that they do, in fact, amount to a preference in favor of that Company by whatever amount they exceed a fair compensation for the service rendered. What that amount is cannot be determined upon this record; it is clear that it annually aggregates what to the ordinary apprehension is an enormous sum.
Some testimony was taken with reference to certain other enterprises of this character, most of which are still in a somewhat embryonic state. Its chief value is to illustrate the tendency to seek preferences by this means, and it does not seem necessary to go into details here.
The International Harvester Company owns the Illinois Northern Railroad. Whatever profit accrues to that railroad inures to the benefit of the Harvester Company, its owner, alone. When any one of these lines leading from Chicago to the Missouri River pays to the Illinois Northern Railroad Company $12.00 for the performance of a switching service, which is worth reasonably but $3.00, it gives to the International Harvester Company, the shipper of that carload of merchandise,
$9.00. If these divisions, which have been in effect since January, 1904, are legal, there is no practical limit to the extent to which the lines granting them may prefer the International Harvester Company over other shippers. It is, therefore, a matter of great consequence to determine how far such practices are lawful. That preferences of this kind will be granted as a matter of fact, if they can be as a matter of law, abundantly appears from this investigation.
It must be assumed that the Illinois Northern Railroad is a common carrier within the provisions of the first section of the Act to regulate commerce. It is incorporated as a railroad company under the laws of Illinois. It actually owns and operates a line of railroad. It maintains a freight station, at which it receives and delivers for the general public considerable quantities of less than carload freight. Its main business is the moving of loaded cars to and from various industries along its line, and in this capacity it serves more than two hundred plants, besides that of the International Harvester Company. Manifestly there is no reason in law why this railroad may not make joint rates, file joint tariffs, and agree upon joint divisions as other railroads do. We are not called upon to decide what the situation might be if this road were a private carrier maintaining switch tracks and switching cars to and from the McCormick works exclusively.
The mere fact that this road is to-day entirely owned by the largest individual shipper over it, or that it was originally organized and built for the purpose of doing the work of that shipper, is not, in our opinion, controlling against the legality of the transaction before us. While there may be grave objections to allowing shippers to build and operate railroads over which their traffic moves, the Interstate Commerce Act contains no prohibition of that kind. This was so ruled by us in Central Yellow Pinc Asso. v. Vicksburg, S. & P. R. Co. 10 I. C. C. Rep. 193. We also held, in Re Allowances to Elevators by the Union P. R. Co. 10 I. C. C. Rep. 309, that the Union Pacific Company might pay an elevator company for transferring grain from its cars to the cars of its connections at Council Bluffs, so long as the transaction was in good faith, even though the greater
part of the grain so transferred belonged to the Elevator Company receiving the compensation.
The vice in the present case is to be found in the thing done, not in the manner of doing it. A cardinal purpose of the Act to regulate commerce is to prohibit all preference between shippers, and the framers of that Act and its amendments have evidently attempted to make the language sufficiently comprehensive to render every sort of preference, by whatever means attempted, unlawful. The second section of the original Act provides that no greater compensation shall be collected of one shipper than of another "by any special rate, rebate, drawback, or other device.” The third section provides that it shall be unlawful for a common carrier subject to the Act to grant any undue preference to any individual or any species of traffic "in any respect whatsoever.” The amendment of the Act, approved February 19, 1903, commonly known as the Elkins Bill, requires carriers in all cases to publish their tariffs, and prohibits, under severe penalty, any practice upon the part of the carrier “whereby any such poperty shall, by any device whatever, be transported at a less rate than that named in the tariff,
or whereby any other advantage is given or discrimination is practiced.”
We think these divisions, if not in violation of the express language of the second section of the original Act, are plainly within the prohibition of the Elkins Bill. When the Santa Fe Railway pays to the Illinois Northern Railroad $12.00 for the moving of a car loaded with the traffic of the International Harvester Company from the McCormick works to its Corwith yard, a service which it might exact under its contract for $1.00, for the performance of which $3.00 is a reasonable compensation, which was never exceeded previous to January 1, 1904; and when it does this in order to obtain the traffic of the International Harvester Company, it thereby grants that Company in effect a rebate of $9.00 upon that carload of freight. It certainly is guilty of an act by which an advantage is given and a discrimination is produced in favor of the International Harvester Company. As already said, if such a proceeding is not in violation of law, there is no limit to the granting of preferences