Government’s Contention of Previous Competition
The arguments of railroad counsel in defense of the Union Pacific-Southern Pacific merger rested predominantly, although not wholly, upon points of law such as have been mentioned. Fundamental as some of these were, the main interest in the case for the ordinary student will be found in the elaborate analysis of the competitive relations between the Southern Pacific and the Union Pacific which the government developed in the course of its argument. So far as the writer is aware, no record has ever been presented to any court in which the nature and extent of the competition between two great railroad systems has been so thoroughly discussed.
In establishing the fact that competition had been active between the Southern Pacific and the Union Pacific before the merger of the two companies in 1901, the government insisted upon the fact that the Central and Southern Pacific managers had continuously diverted all the traffic which they could control to the Sunset route so long as they remained independent of Union Pacific dictation.[593] The government examined no less than seventy witnesses—shippers, Southern Pacific employees and ex-employees, and representatives of independent railroad lines. Among those who testified were Mr. Hawley, for nineteen years eastern agent of the Southern Pacific and afterwards a financier of prominence; Messrs. Stubbs, Spence, and Munroe, of the traffic department of the Southern Pacific; Paul Morton, one-time vice-president of the Equitable Life Assurance Company; Mr. Jeffery, president of the Denver and Rio Grande; and Mr. Hannaford, in charge of traffic on the Northern Pacific.
Substantially all these witnesses testified that traffic from the Atlantic seaboard could move to the Pacific Coast either via the Morgan Steamship Line to New Orleans and thence over the Sunset route of the Southern Pacific to San Francisco, or via the trunk lines and their connections to Omaha, thence over the Union Pacific to Ogden and over the Central Pacific to the coast. Although the Southern Pacific was interested in both of these routes, it secured all the revenues from freight moving via the Sunset route, and only 30.1 per cent of the total revenue from freight delivered to it by the Union Pacific at Ogden. In consequence, it used its best efforts to influence freight to travel by the southern line.
Map showing mileage owned in 1913 by the Central Pacific Railway and the Southern Pacific Railroad.
The government showed by the evidence of shippers that freight was actually solicited in competition between the two Pacific companies. The Southern Pacific, it appeared, took traffic at New York rates from as far west as Buffalo and Pittsburgh, not including those cities, and from as far south as Norfolk. Not only this, but the Union Pacific was not altogether restricted to the route via Ogden. By diverting freight at Granger and sending it north to Portland over the Oregon Short Line and the Oregon Railroad and Navigation Company, it could affect the transcontinental rate in two ways. In the first place, it was physically possible for traffic to move from Portland to San Francisco by boat; and in the second place, a slight reduction in the rate to Portland compelled a cut to every Pacific terminal point in order to maintain these different cities in the same relative position for the distribution of eastern goods. As Mr. Stubbs expressed it, “Let the rate be cut on the Great Northern, and it goes down to the Gulf of California.”
Mention may also be made of the route via the Isthmus of Panama, in which the Southern Pacific had an interest by virtue of its control of a steamship line from San Francisco to Panama. The business was not large, but in so far as any moved this way it was in competition with the rail lines via Ogden.