Railroads: Rates and RegulationsRipley, William Zebina
History
Railroads: Rates and Regulations
Ripley, William Zebina
Railroads -- Freight -- Rates -- United States; Railroads and state -- United States
The so-called "midnight tariff" was a strictly legal way of conferring
favors upon certain shippers. It was much in evidence during the grain
wars between lines serving the Gulf ports about 1903. And it seems
to have been a device used at times all over the country. A traffic
manager wishing to steal all the business of a large shipper from some
competing road, and to build him up at the expense of his rivals,
secretly agrees to put into effect a low rate on a given date. The
shipper then enters into contracts calling for perhaps several hundred
carloads of grain to be delivered at that time. This reduction is
publicly filed, perhaps thirty days in advance, with the Interstate
Commerce Commission at Washington. But who is to discover it, in the
great medley of new tariffs placed on file every day? Yet this is not
all. A second tariff, restoring the full rate, is also filed to take
effect very shortly,--perhaps only a day,--after the reduction occurs.
All these are public, and open to all shippers alike. But only the one
who was forewarned is able to take advantage of them. He rushes all
his shipments forward while the reduced rates are in effect. Before
other competitors can assemble their grain or other goods, the brief
reduction has come to an end; and rates are restored to their former
figure.
The President of the Chicago Great Western Railway has concisely
described the commercial effect of one of these midnight tariffs.
"A clean profit, he says, over all expenses of one half of a
cent per bushel is a satisfactory profit to the middleman;
and a guaranteed rate of transportation of even so small a
sum as one-quarter of a cent per bushel less than any other
middleman can get, will give the man possessing it a monopoly
of the business of handling the corn in the district covered by
the guaranty. Why? Such are the facilities of trade by means
of bills of lading, drafts, telegraphs, banks, etc., that
to do an enormous corn trade, the middleman requires only a
comparatively small capital to use as a margin. A capital of
$50,000 is ample thus to handle 15,000,000 bushels, and with
activity, double that amount, per annum. One quarter of a cent
per bushel profit on 15,000,000 bushels would amount to $37,500
which is equal to .75 per cent. per annum on the capital
employed."
A similar device was used by the Burlington road in its dealings with
the Missouri river packing houses on export traffic. They signed an
agreement making a rate to Germany of twenty-three cents per hundred
to last until December 31, 1905. Before the expiration of this time,
however, the roads concerned, publicly filed an amended tariff
presumably for all shippers of thirty-five cents per hundred. They
nevertheless continued the old rate to the packers. This case went to
the Supreme Court which decided in 1908 that the device was unlawful
and discriminatory.[175]
Public-domain text, read in full here on John Shaqi.
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