Wealth against commonwealth

by Henry Demarest Lloyd

The courts have never been allowed to see it, but its provisions are known. Some of them were admitted before the Interstate Commerce Commission to be what was charged, and others were described on the trial by the counsel of the independents from personal knowledge. By this contract the railroad and the oil combination bound themselves to advance rates, and to keep them the same by pipe and rail. In return for this pledge by the railroad not to compete it was guaranteed one-quarter—26 per cent.—of the oil business to the seaboard. The Pennsylvania Railroad made no attempt to deny that it had made this contract. It admitted that it had an arrangement "substantially the same as stated."[212]

The combination was the largest shipper of oil, and yet it wanted freight rates advanced. It had pipe lines which could easily take to the seaboard all the oil that went thither, and yet it gave up a large part of the business to the Pennsylvania Railroad. The Pennsylvania Railroad knew that the pipe line was a competitor for the carriage of oil, and yet allowed it to dictate an arrangement by which the railroad got only one-quarter of the business, and signed away its rights to win a larger share if it could.

The railroad had persuaded the independent refiners to settle along its line by solemnly promising them fair and living rates, and yet now put its corporate seal to an agreement to make those rates whatever their enemy wanted them to be. Such was its honor. As for its shrewdness, that had at last brought it to this humiliation in a business where it had once been chief, of confining itself to this insignificant quarter of a restricted traffic instead of a competitive share of a traffic enlarged by freedom to the widest correspondence to the wants of the people. The mastery of the railroad men by the oil people was thorough. The latter did not agree to give the railroad one-quarter of their business. Not at all. All the traffic that came of itself to the railroad, or which its freight solicitors drummed up, must be put to the credit of the guarantee. All that was promised the railroad was that its total should amount to one-quarter of the whole traffic. All the rest the oil combination kept for itself.

The contract went at once into vigorous operation. Freight rates to the seaboard, which had been 34 cents, and, as was proved before the Interstate Commerce Commission, were profitable, were advanced to 52 cents a barrel—an increase of one-half. The railroad and the pipe line made the raise in concert, as had been agreed, and when the rates were changed again it was to still higher figures. Why should the clique, which had its principal refineries at the seaboard—to which it had to transport large quantities of oil—scheme in this way to raise the rates of transportation? Because it paid this excessive rate on only a small part of its own shipments, and compelled its rivals to pay it on all of theirs. The independents had no pipe line of their own, but the combination sent its own oil east by its own pipe line, excepting only the quantity it needed to add to the shipments over the Pennsylvania to make good its guarantee to that railroad of one-quarter of the traffic.

The cost of the pipe-line service to its owners is very small. When the manager of the pipe lines was before the Interstate Commerce Commission the lawyers of the railroads, as zealous for the oil combination, though it was not a party in the case, as for their own clients, fought through eleven pages of argument against having him compelled to tell the cost of pumping oil through the pipe to the seaboard; and when the Commission finally said, "Go on," all the general manager of the pipe lines had to say was, "I do not believe that it is possible to know."[213]

Finally, he was cornered into an estimate that the cost of pumping was 6 or 7 cents a barrel. His questioner, who had been the organizer and manager of a great pipe line—the Tidewater—knew that oil had been pumped through for 4 cents a barrel, but he could not get his witness, who, no doubt, had done it still cheaper, to admit anything of the kind.

The net effect of this pool with the railroad was that the oil combination succeeded in making its rivals pay 64 cents a barrel to reach the East and the seaboard, while it paid only 16[214]—except on the traffic guaranteed the Pennsylvania Railroad—a difference against competition of 48 cents a barrel, a difference not for cheapness. "It only costs the pipe line 7 cents," the independents explained to the Interstate Commerce Commission, "and the published rate is 52. They are willing to pay 52 or even 70 cents on some of their product if they can make the other people pay 52 upon the whole of theirs."

So much of the contract as we have referred to was admitted. Why was it, then, the counsel for the railroad fought against showing it, even to the point of pleading that it might incriminate his client?[215] It was asserted, as of his personal knowledge, by the counsel of the independents that this was because another part of the bargain gave the proof that the rates which had been made under the agreement to put them up and keep them up were extortionate; that by a bargain within the bargain the oil combination carried oil for the railroad for the 280 miles for which they ran practically side by side, and for this charged it only 8 cents a barrel. The public, shipping either by the railroad or by the pipe line, had to pay 52 cents a barrel for 500 miles; but by this arrangement between themselves the two carriers would do business at 8 cents a barrel for 280 miles, at which rate the charge to the public to the seaboard should have been not quite 15 cents instead of 52 cents.

The statement was also made that the oil combination, instead of giving the railroads the business it has guaranteed them, makes its obligation good by turning over to them periodically a check for the profits they would have had on hauling that amount of traffic. As the guarantee was made as a consideration for the maintenance of high freight rates, such a payment by it would amount, in cold fact, to paying those in charge of the highways a large bribe to deny the use of them to the people.

This declaration of the provisions of the bargain was made by the counsel for the refiners seeking relief from the Interstate Commerce Commission. In his argument demanding the production of the document he said: "I have had it in my hand and read every word of it, and know exactly what it contains."[216]