The Granger Laws.
In the early seventies (1872 and following years), Iowa, Nebraska, Minnesota, Kansas, and other States of the Middle West passed what are known as the “Granger laws,” fixing maximum rates and forbidding discriminations. Railroad commissions were also established in these States to control the roads, and it was hoped that these commissions, which grew out of the Granger agitation and were to represent the public interest and the people’s sovereignty in their relations with the railways, would be able to diminish greatly and perhaps abolish unjust discriminations. In this hope, however, the people were disappointed.
Speaking of this experience Governor Larrabee of Iowa said in 1893: “Every year seemed to add to the grievances of the public. Success greatly emboldened the railway companies. Discriminations seemed to increase in number and gravity. At many points in the western part of the State freight rates to Chicago were from 50 to 75 percent higher than from points in Kansas and Nebraska. A car of wheat hauled only across the State paid twice as much freight as another hauled twice the distance from its point of origin to Chicago. Minnesota flour was hauled a distance of 300 miles for a less rate than Iowa flour was carried 100 miles. Certain merchants received from the railroad companies a discount of 50 percent on all their freights, and thus were enabled to undersell all their competitors. The rate on coal in carload lots from Cleveland, Lucas County, to Glenwood was $1.80 per ton, and from the same point to Council Bluffs only $1.25, although the latter was about thirty miles longer haul. Innumerable cases of this kind could be cited. There was not a town or interest in the State that did not feel the influence of these unjust practices.”
The Hepburn Investigation.
This most famous and enlightening investigation of the early period was that of the Hepburn Committee of New York in 1879. The committee found that many shippers were paying two or three times, and in some cases five times, the rates paid by their rivals.
William H. Vanderbilt told the committee that, as a rule, all large shippers who asked for special rates got them. Among the men his road had helped to build up by special rates was A. T. Stewart, the great dry-goods merchant of New York. He had a rate of 13 cents from his factories over the New York Central to New York, while small concerns paid 20 to 40 cents for this same service. A big dealer in cotton cloth had a 20 cent rate, while others paid the regular 35 and 40 cent rate. Five grocery firms in Syracuse had a flat 9 cent rate instead of the published tariff of 37, 29, 25, and 18 cents, according to the class of goods. Four Rochester firms had a special rate of 13 cents against the regular tariff of 40, 30, 25, and 20 cents. Five firms at Binghamton and five at Elmira had rates from ⁵⁄₉ to ⅓ of the tariff. Three Utica dry-goods merchants had a rate of 9 cents and another had a rate of 10 cents, while the regular rates which the outside public paid were 33, 26, and 22 cents, according to class. Soap shipped by B. of New York to C. of Syracuse cost 12 cents freight per box if the freight was paid by the shipper in New York, but only 8 cents a box if the freight was paid by the consignee in Syracuse.
A report of the Erie Railroad showed 34 cases of special cut rates, and a New York Central report showed 33 examples. The books of the Central showed 6000 special rates granted during the first 6 months of 1880. About 90 percent of the Syracuse business and 50 percent of the entire business of the road was done on special rates.[[21]] It had given special rates to individuals and firms at 22 points on its line between Albany and Buffalo. The specials generally went down to about ⅓ of the scheduled rates to the same place, but in Syracuse a special agreement was unearthed in which the rate was so emaciated as to be only ⅕ of the size of the regular rate on first-class goods to which it applied.
The committee also found the long-haul discrimination in full bloom. Flour went from Milwaukee to New York for 20 cents, while the charge from Rochester to New York was 30 cents. On some goods the rate from New York to Syracuse, 291 miles, was 10 cents; New York to Little Falls, 217 miles, 20 cents; New York to Black Rock, 445 miles, 20 cents also. Syracuse must have had a strange fascination for the railroad men, to keep them from making a lower rate from the point 400 miles away than from the point 200 miles away, for they love long hauls. Goods were shipped from Rochester to New York and then from New York back over the same road through Rochester to Cincinnati more cheaply than they could be sent direct from Rochester to Cincinnati. W. W. Mack, a Rochester manufacturer, testified that he saved 14 cents a hundred in this way, and that he saved 18 cents a hundred in his St. Louis business in the same way. In both these cases the railroad company carried the goods 700 miles farther than the direct course for a charge considerably less than for the direct haul.
Butter was carried from St. Lawrence Co., N. Y., to Boston for 60 cents a hundred, while the rate from nearer stations was 70 cents, 80 cents, and even 90 cents at St. Albans, Vt., increasing as the distance decreased. The railroads appear to recognize the fact that happiness consists in the exercise of the faculties, and they wish to exercise their faculties to the utmost by securing long hauls even though the long rate may not leave nearly so much profit as the rate for the short haul.
Some of the worst discriminations of the early years were those connected with the oil business.[[22]] In 1872 the Oil Combine (then called the South Improvement Co.) secured a secret agreement from all the railroads running into the oil regions, first, to double freight rates on oil; second, not to charge the S. I. C. the increase; third, to pay the S. I. C. the increase collected from all other shippers. The rate to Cleveland was to be raised to 80 cents, except for the S. I. C., which continued to pay 40, and would receive 40 of the 80 paid by any one else. The rate to Boston was raised to $3, and the S. I. C. would receive $1.32 of it. The Combine was to have 40 cents to $1.32 a barrel rebate not only on their own oil which constituted only one-tenth of the business, but on all the oil their competitors shipped, so they would get $9 in rebates for every dollar they paid in freight. The S. I. C. were to receive an average of $1 a barrel on the 18,000 barrels produced daily in the oil regions. The rates were raised as agreed, but the excitement in the oil regions was so intense that mobs would have torn up the tracks of the railways if Scott and Vanderbilt and the rest had not telegraphed that the contracts were cancelled, and put the rates back. But some of the contracts afterwards came into court, and had not been cancelled at all. In 1874 the roads began gradually to carry out the plan that had been stopped by popular excitement in 1872.