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to whatever shipper has the means of building and operating a railroad.
It is urged that all this is simply an arrangement between two connecting railroads; that there is no negotiation with the shipper, and no payment to the shipper. This is a mere play upon words. The Illinois Northern Railroad Company and the International Harvester Company are one and the same thing. It is entirely immaterial whether this money goes in the first instance into the treasury of the International Harvester Company or that of its creature, the Illinois Northern Railroad Company. That subterfuges of this sort cannot avail has been often decided, and was affirmed within the year by the Supreme Court of the United States in Interstate Commerce Commission v. Baird, 194 U. S. 25, 48 L. ed. 860, 24 Sup. Ct. Rep. 563, in which it was held that it made no difference whether certain contracts were entered into with a railroad company itself or with a coal company the stock of which was entirely owned by the railroad company.
It is said that competition necessitates the allowance of these divisions, and that they are not of unusual amount.
It is undoubtedly true, that many instances may be found in which divisions as great or greater than those under investigation are allowed by one connecting road to another for the performance of no greater service than is here involved; it is quite probable that the files of this Commission may afford such illustrations; but such cases are not in point. There the railroads are principals. . The division is granted to obtain traffic which the railroad controls, or to gain a corresponding advantage at some other point of connection, or in some other respect. Here the International Harvester Company is the principal, not the Illinois Northern Railroad Company. It is to obtain the traffic of that Company, a shipper, not a carrier, that these divisions are allowed; and it is because all parties understand that the Harvester Company is the ultimate beneficiary that four times the sum which has in the past been accounted as reasonable is today paid for the performance of these switching services.
In a certain view, competition does force the allowance of these divisions. In the same sense, competition compels the granting of most rebates and the allowance of most preferences. If one grants these divisions, all must grant them or lose the traffic. If one line pays the rebate, all must follow; but this does not make the act lawful.
The manifest intention of the Act to regulate commerce, especially as expressed in the Elkins Bill, is to strike through all pretense, all ingenious device, to the substance of the transaction itself. So, viewing this transaction, there is not the slightest doubt that the granting of these divisions is the allowance of a preference to the International Harvester Company, which is in violation of law. There is no substantial distinction between this case and that of Re Transportation of Salt from Hutchinson, Kansas, 10 I. C. C. Rep. 1.
It has been seen that the Illinois Northern Company handles much traffic aside from that originating at the McCormick plant, and that divisions are allowed upon much of this traffic. The question, therefore, arises: Does a division granted with respect to traffic not received from the International Harvester Company amount to an unlawful concession in favor of that Company? In our opinion, it does. While it might in a sense be held that a division paid for the handling of a carload of traffic from the International Harvester Company was a rebate or a preference with respect to that particular car, still it is more correct to say that the whole arrangement is in the nature of a discrimination in favor of this shipper, and that discrimination is created by the allowance of divisions upon traffic not originating with it, just as really as upon traffic which it furnishes. The essential thing is that all divisions are allowed because the International Harvester Company owns this railroad, and as a concession to that company. A general payment to a shipper or the performance of a general service for a shipper might be unlawful even though it were impossible to apply it to any particular traffic.
The question presented by the operations of the Chicago, West Pullman & Southern Railroad differs from that involved in those of the Illinois Northern in that the International Harvester Company owns a controlling interest in the West Pullman Company, but has not the entire ownership. Other industries along its line are stockholders to some extent,just how far does not appear. This does not, however, in our opinion, change the situation. The fact that these shippers obtain by their part ownership of this road an advantage which inures to them in proportion to their ownership, does not divest the transaction of its illegal character. A joint payment to two shippers may work a preference, if so understood and intended. In the case before us, while other parties are in reality interested, the International Harvester Company is, without doubt, the overshadowing factor.
In our opinion, then, the payment of anything in excess of $3.00 per car in case of the Chicago, West Pullman & Southern, and of $3.50 per car in case of the Illinois Northern under the circumstances developed in this case, is an illegal concession to the shippers owning those railroads. Of course, the compensation allowed these roads may be either by an arbitrary switching charge or by a division of a joint rate, the one being as legal as the other. We have stated what would, in our opinion, amount to a reasonable charge in dollars per car, because that has in the past been the usual method followed in arriving at the compensation allowed.
The Chicago, Lake Shore & Eastern, as found, is the creature of the United States Steel Corporation. The questions presented by its operations differ from those already discussed, chiefly in that the practices are of longer continuance and of wider scope. The International Harvester Company, through the medium of its railroads, obtains no divisions whatever from eastern lines; but the United States Steel Corporation, with its greater power, has been able to force from eastern connections divisions on all business. The International Harvester Company has not yet been able to compel the railroads which handle its traffic to maintain its tracks or perform its switching service within its iron working plant at South Chicago; but the Illinois Steel Company has for the last eight years obtained from the railways transporting its traffic compensation for the maintenance and operation of the miles of track which are located within its private works. In this respect the Steel Trust, to use the popular expression, is as far in advance of the Harvester Trust as the latter Company is ahead of the ordinary shipper.
It has been seen that the Chicago, Lake Shore & Eastern, by virtue of its trackage rights, is enabled to handle large quantities of traffic from point of origin to destination. Whenever this movement is interstate, a tariff is filed with the Commission and the rate paid by the United States Steel Corporation. In these operations there seems to be no violation of law, although there may be an advantage to that corporation. If the Steel Trust can build and operate a railroad cheaper than it can hire transportation from some other railroad, that is its privilege, assuming that it acts within the limitations of its charter.
This railroad also handles large quantities of traffic between connecting roads and the various plants which formerly belonged to the Illinois Steel Company. With respect to that traffic, it bears exactly the same relation to the United States Steel Corporation that the Illinois Northern does to the International Harvester Company. It is entirely owned by that Corporation, and an excessive charge paid to it inures entirely to the advantage of that Corporation. These extravagant divisions are allowed because it is owned by that corporation. To the extent that they exceed a reasonable charge for the performance of the service they are, in our opinion, an unlawful preference in favor of that Corporation. Just how far they do exceed what is reasonable cannot be determined upon this record; but while we cannot affirm the exact amount by which the Illinois Steel Company has profited through these illegal practices in the past, or just how far the United States Steel Corporation is profiting today, the amounts are certainly enormous; sufficient unquestionably, for the payment of dividends upon millions of capitalization.
This being a general investigation in which no specific charges have been formulated against particular defendants no order can be made, nor would any order apparently add to the prohibition of the statute itself. The inquiry will be continued into other similar practices, and whatever means the law affords employed to stop those above referred to.
10 I. C. C. REP.
EDWARD G. DAVIES
THE PERE MARQUETTE RAILROAD COMPANY, and THE MICHIGAN CENTRAL RAILROAD COMPANY.
Decided January 5, 1905.
Complainant alleged the collection by defendants of charges in excess of
the tariff rate on certain shipments of fruit from Michigan points to Chicago, and an unlawful contract with a delivering agent in Chicago, and thereupon complainant insisted that defendants had been guilty of penal offenses under the law which should be reported for prosecution. The complainant disclaimed at the hearing any demand for damages or reparation. The facts show errors in charges arising from lack of knowledge by the agent at Chicago of the kind of package used, or the actual contents of the package shipped to complainant, the shipments having been unloaded by complainant, and also from a practice by the agent of the initial carrier at one point temporarily used as a receiving station for fruit, of making a charge in addition to the freight rate without the knowledge of the railroad company. The compensation paid to the delivering agent in Chicago for unloading and handling the freight in that city was apparently reasonable. Held, upon consideration of the evidence, that defendants were not guilty of any wilful or intentional violation of the law.
G. W. Plummer for Complainant.
REPORT AND OPINION OF THE COMMISSION.
The complaint in this case alleges in substance:
That complainant is a general consignee and distributor of