J. A. Munroe,
Omaha, Nebraska
It is reported you are antagonizing Standard Oil Company in Colorado. I hope you will do nothing to affect our joint relation with that company with regard to Pacific Coast business. Have you observed the large tonnage you have lately been handling for them? I think it is so great you should be careful how you jeopardize your own interest in this direction.
R. Gray
Under pressure from the Standard Oil, the Southern Pacific followed up this telegram by refusing to prorate on any basis lower than $1.60. As a result the objectionable circular was withdrawn.[371]
Rate Rebates
A third method of granting concessions to shippers whom the Central Pacific desired to favor, was that of the rebate. Rebates were usually granted in exchange for an undertaking by the shipper to send all his freight over the lines of the railroads by which the rebate was paid. Mr. Stubbs once explained to the United States Pacific Railway Commission that the granting of rebates was a regular practice, not only of the Central Pacific, but of all its connecting lines. He explained the mechanism of the operation as follows:
Suppose that you were a merchant, and I should go to you to make a contract for the rail lines—because all the lines were parties to it between New York and San Francisco. It was not a Central Pacific affair. You understand that all the lines between San Francisco and New York, probably embracing all the roads in the East, shared in this reduced rate that was given to the merchant in consideration of his exclusive patronage—I should go to you and make a contract, and should say that it is impossible for us, in billing, to bill this to you at the net rates. We will bill it at the full rates, and when you receive your goods at the depot you pay the full rates, and we will refund to you the difference between the agreed rate under the contract and the rates which you have paid. Of course that is an overcharge. We overcharged those goods above the price that you had previously agreed to pay for the transportation of them.[372]
In the single year of 1884 the Central Pacific paid out $1,060,275.92 as refunds in behalf of itself and its connections.