It is charged that Armour not only gets large quantities of high-class freight carried at the rates appropriate to lower-class freight by unreported mixing of his goods in carload lots billed at the lowest rate applicable to any of the goods in the car; it is also further charged that the space beneath the beef that is hung up in the refrigerator cars is often crowded full of poultry, eggs, etc., which are carried for nothing. No wonder Armour can undersell his rivals all over the country and ruin his competitors in any market he chooses to enter.
The Beef Trust has compelled the railroads to fix a very low minimum carload limit—20,000 lbs. on dressed beef, etc., against 26,000 to 30,000 lbs. on products the big Trusts are not interested in. If a load is below the carload limit it has to pay less-than-carload rates, which are 20 percent or more higher than carload rates. It is for the interest of the railroads to keep the minimum carload limit at a good height to prevent hauling cars with small loads and low rates, and to reduce the effect of the prevalent custom of billing Trust cars at the minimum no matter how heavily they are really loaded. The railroads have made efforts to unite on a higher carload limit, but without avail so far. On Dec. 12, 1903, it is said, 16 presidents and managers of the greatest railroads in America met in New York and decided to make 24,000 lbs. the minimum on dressed meats. The proceedings were under promise of secrecy by all concerned. But within two days the Trust people knew all about the secret meeting, and they took measures which prevented the new order from ever taking effect. No agreement has ever been formulated that will stand against the power of the Trust, the seductiveness of its promises of diverting new masses of business to the yielding road, and the terror of its threats of withdrawal of traffic from the unyielding.
These advantages—excessive mileage rates, high speed, exclusive contracts, exorbitant icing charges, espionage of competitors, control of tariffs, low carload limit, and go-as-you-please inspection—have the same effect as a very large rebate; the private-car owners can ship at very much lower cost than ordinary unprivileged shippers. The profits are immense—$72,000 a day, it is said for the Armour cars.
It is estimated that the railroads pay the Beef Trust’s car-lines about $25,000,000 a year in rebates or payments in practical violation of the law.
On the basis of the very moderate Beef Trust Report of the Department of Commerce, Mr. Baker figures the annual profits on the 14,000 Armour refrigerator cars, from rentals alone, at $200 net per car, or $2,800,000—nearly $3,000,000 a year, not including the enormous sums extorted in excessive icing charges, nor the rebates and commissions paid by the railroads in addition to the mileage. The estimate of $200 a car is probably too low, for Mr. Robbins, manager of the Armour Car-Lines, has testified that they rent old, inferior cars to breweries, etc., at $204 to $280 per year.
Mr. Baker says: “Can any simple-minded person see any difference between a payment of $3,000,000 net profit on mileage annually to a favored shipper like Armour, and an old-fashioned cash rebate of $3,000,000? I confess I cannot.”[[287]]
Mr. Baker has deducted operating expenses, repairs, and a liberal allowance for depreciation, but he has not allowed for fair interest upon the capital invested in the cars, a charge amounting to $650,000 a year which should be deducted from the $2,800,000 in order to get the portion of the mileage payment which is really equivalent to “an old-fashioned cash rebate,”—an article that is not so old-fashioned, however, as to be out of use, by any means, as we have seen.
Wherever it serves their purposes the car-lines share their rebates with important shippers. This has been of special service in inducing large shippers like the fruit growers of California and the South to give their trade to the profit-sharing car-lines. The car-lines would pay shippers a bonus on condition that such shippers would call on the railroad for the cars of the agreeing car-line. Both refrigerator lines and stock car-lines use this method. Sometimes half the mileage is paid to the favored shipper. Sometimes $10 or $15 or even $25 and $35 a car is paid back to the shipper by the car-line, which is of course a rebate pure and simple, and has precisely the same effect when paid by the car-line as if paid by the railroad directly to the shipper.
The Santa Fe car-line found it necessary to give a rebate of $25 a car in California in order to get traffic in competition with the Armour Car-Lines and on shipments going beyond Chicago the rebate that seemed necessary to get business was $35 a car. So Mr. Leeds, the manager of the Santa Fe car-line testified in April 1904 before the Interstate Commerce Commission. Part of Mr. Leed’s testimony in answer to the questions of the Commission and of its counsel Mr. Marchand was as follows:[[288]]
“Mr. Leeds. This is the first year that we entered into the deciduous fruit business in Northern California, and I met the competition which we found there when we began business.