338.1 N47r OA1T55T ,HDSF REPLY OF -*sr SPECIAL COMMITTEE OF THE New Orleans Cotton Exchange on Discrimination in Trans- portation Rates AND OTHER BURDENS Upon the Cotton Commerce OF THE City of New Orleans TO THE ILLINOIS CENTRAL RAILROAD. _ DECEMBER 11. 1909. ;;aRY UNIVERSITY OF ILLINOIS AT UR." PAIGN REPL.Y OF SPECIAL COMMITTEE OF THE New Orleans Cotton Exchange on Discrimination in Transportation Rates and Other Burdens Upon the Cotton Commerce OF THE CITY OF NEW ORLEANS TO THE ILLINOIS CENTRAL RAILROAD To the Board of Directors of the New Orleans Cotton Exchange: Your special committee on Discrimination in Transportation Rates and other BurcUns upon the Cotton Commerce of the City of New Orleans, submits as supplemental to its report of Novem- ber 26, 1909, the following : Subsequent to the publication of our report of November 26th. the general agent of the Illinois Central Railroad Company, pre- ferred the request that the said company be given a bearing in order that certain alleged mistakes of fact contained in our said report, might be corrected. This request was readily acceded to, and pursuant to appointment, on Thursday the . afternoon of December 2nd, our committee received the president, the general traffic manager, the general agent, the general freight agent, the foreign freight agent, and several other officials of the Illinois Central Railroad, together with the local representatives of the Leyland and Harrison Steamship lines. Reply ok Special Committee on Discrimination. After a courteous assurance by the president of the railroad company of his own and his company's friendly regard for the people and the port of New Orleans, and after the further state- ment that his company had spent and was still spending large sums of money for the purpose of giving this port a system of terminals among the finest in the world, another official of the railroad company read a brief which purported to be the specific denial promised, of the correctness of the allegations of fact con- tained in our said report, in so far as such allegations related to the Illinois Central Kailroad. This alleged denial of facts as presented to our committee and as published in the newspapers of the 3rd instant, and which denial, it is assumed, constitutes the railroad's case, is marshalled under five separate heads. We shall consider each head separ- ately, answer each categorically, and confine the discussion to an acceptance of each specific challenge. We shall show that : Item No. 1 is a denial of a charge that was not made, and an admission of the charge that was made. Item No. 2 is an unequivocal admission of the charge it pur ports to answer. Item No. 3 is a denial of the correctness of an illustration and not a denial, hut an admission of the truth sought to be illus- trated. Item No. 4 is equivocal and does not answer our charge. Item No. 5 is an unequivocal admission of the facts alleged in our report. We now discuss the defenses in order : Reply op Special Committee on Discrimination. Control op Ocean Booking and Effect of Combination Between the Railroad Company and Preferred Steamship Lines. Under this head the railroad alleges: "We have no arrangement, agreement or compact of any sort with any regular steamship lines or railroads whereby we are given the power to make rates and control the move- ment of cotton ; no understanding exists that would pre- vent our patronizing tramp steamers if in our opinion we should find it to be of advantage to do so at any time. ' ' The statement then trails off into an argument going to show that the interest of the railroad, the steamship lines, the shipper and all concerned is best served by the very arrangement that we charge the railroad and the steamship lines with having made. In no part of our report do we make the allegation that the railroad had any arrangement, agreement or compact whereby, or by reason of which, the railroad was given the power to fix rates and control the movement of cotton. We stated that the railroad had the power to do these things and exercised this power, and was thereby enabled to make the arrangement com- plained of. to the detriment of our market and our port. We have nowhere alleged that the railroad was in any arrangement or compact that would prevent it from patronizing tramp steam- ers or any other kind of steamers, if, in its opinion, advantage would accrue to it therefrom. We have not complained that the railroad has tied itself up with any steamship or railroad lines in such way as to prevent it looking after its own interests. On the contrary, we have complained that the railroad has. and ex- ercises, too much liberty in this regard. We have made the statement that the railroad through the exclusive ocean booking privilege which it claims and enforces, Reply op Special Committee on Discrimination. denies the shipper any choice in the selection of the ocean car- rier of his cotton ; and this the railroad does not deny. We have made the statement that the railroad has selected two lines of steamships, with which lines it has for years booked exclusively every bale of cotton that it carries to this port on a through bill of lading to Liverpool; and this, neither the railroad nor the steamship lines deny, but admit. "We have made the statement that these two lines have a monopoly of the Liverpool rates, that all other ships or lines, whether tramp or regular, or whether reliable or otherwise, have been driven out of the Liverpool trade from this port, and that competition in Liverpool traffic out of New Orleans is dead. These allegations neither the railroad nor the steamship lines in question deny, nor attempt to deny, nor can deny, because they are facts indisputable and known to all. They expressly admit this monopoly by defending it. The railroad does not call it monopoly, however, but the ' ' prevention of congestion" and claims that the benefits thereof to all con- cerned outweigh the advantage of open competition. This we deny. II. The Two Cent Brokerage. In our report we stated that the collection by the railroads ol 2 cents per bale for ocean booking was not attempted or per- mitted in any ports except New Orleans and Mobile. The rail- road does not deny this statement ; on the contrary, it is specifi- cally admitted. It is further stated by the railroad that it has been collecting this brokerage for the past twenty years and that this fact was well known to some of the members of our com- mittee. The point here made being apparently that, although the railroad does collect the brokerage, its right to do so is pro- tected by some sort of unwritten law of limitations. The rail- road claims that the charge does not fall upon the shipper or consignee, and that no one is hurt thereby ; and it finally con- Reply op Special Committee on Discrimination. 5 eludes the paragraph with an offer to waive this brokerage, pro- vided that all the other railroad lines and freight brokers will do likewise. The collection of the 2 cents brokerage is not in itself im- portant. It becomes important because it is a development of the injurious and unjust system of compulsory ocean booking en- forced by the railroad. It is worthy of notice because it is an outgrowth of the monopoly arrangement complained of. The freight broker earns his brokerage by stirring competition be- tween the ocean carriers and securing lower rates out of the port, to the benefit of the port and the shipper. The railroad secures its brokerage through stifling competition and enabling the exclusive ocean carriers to fix their own rates, to the injury of the port and the shipper. The offer of the railroad to waive its brokerage if the other railroad lines will do the same, is fair, but the offer as applied to the freight brokers is unfair, if not disingenuous. The service performed by the two agencies is radically different in purpose and in result. The one earns its compensation for work actually done in the promotion of com- petition for freight ; the other is enabled to levy this assessment because it has destroyed such competition. We do not find in this paragraph of the railroad's answer any denial of any statement of fact made in our report. III. Discrimination Against New Orleans by Means op the "Billing" and "Reshipping" Rates. The Canton Example. The only actual contradiction of any statement of fact made in our report occurs in this third sub-division of the railroad's brief. But the denial is not a denial at all. It goes to the letter, not to the substance of our complaint. We stated that the "bill- ing" and "reshipping" rates and arrangements gave the Mem- 6 Reply of Special Committee on Discrimination. phis market an unwarranted and unjust advantage over the New Orleans market. We selected Canton, Mississippi, because it was about midway between Memphis and New Orleans, and we applied these rates and regulations to shipments out of Canton as an illustration. The railroad does not deny the charge of discrimin- ation, but claims that it can "easily refute the statement of the specific instances of rate discrimination referred to." It do^s not deny the charge of discrimination, but says that such dis- crimination does not apply to shipments out of Canton. We quote this sub-division in full : "Third. We can easily refute the statement of the specific Instances of Rate Discrimination referred to. In the case of Canton, it is a fact that the rate on uncompressed cotton, Canton to New Orleans, is $2.40 per bale, the distance being 205 miles, and the same rate applies from Canton to Memphis, a distance of 188 miles, but it is not correct that under the reshipping arrangements referred to in the report of the committee, that this rate, Canton to Memphis, is afterwards reduced by refund of 77y 2 cents per bale to a net rate of $1.62y 2 per bale. It appears, however, that, through a mistake of a rate clerk in our central freight office, we publish from Canton a net reshipping rate of $1.62y 2 per bale on cotton destined to Eastern cities, but as Canton is a compress point, it never was the intention to give reshipping arrangements at Mem- phis on cotton from compress points; but, even so, the re- shipping rate of $1.62% which, as stated, was made through mistake, would not apply on a shipment to New Orleans, but only on a reshipment to Eastern cities. However, since October 19 of this year, when the rate was canceled by the present tariff, there has been no such reshipping rate of $1.62 ] /» on cotton from Canton, even to Eastern cities, so that we now have the following adjustment: Reply of Special Committee on Discrimination. Per bale. Canton to New Orleans (uncompressed) $2.40 Drayage to shipside .15 Total $2.55 Canton to Memphis (uncompressed) $2.40 Memphis to New Orleans, shipside (compressed).. 1.00 Total $3.40 which shows a difference in favor of direct shipment from Canton to New Orleans of 85 cents per bale, as against the combination on Memphis. We fail to see wherein any just grounds of discrimination can be lodged against us on this score. ' ' It will be observed that the railroad admits that, through an error of one of its rate clerks, it published in one of its tariffs a net "reshipping" rate of $1.62% from Canton into Memphis, as was alleged in our report, but denies that this rate could be obtained on reshipments to New Orleans, but only on reshipments to Eastern cities. It is claimed, however, that since October 19, 1909, a new tariff has been in effect which cancels the reshipping rate from Canton and other compress towns, and since that time there has been no such rate out of Canton, even to Eastern cities. It is then shown by figures taken from the new tariff that the rate on a bale of cotton from Canton to Memphis and thence back through New Orleans is $3.40 instead of $2.62% as stated by us. The railroad thus summarily dismisses this charge of dis- crimination by the assertion that it is answered. Is it '.' Tariff 314-B now in force, and which the railroad claims cor- rected its own previous mistakes and rectified the discrimination complained of. shows on pages 12, 13, 14, that there are more than three hundred Mississippi points enjoying the Memphis "re- shipping" rates and arrangements. We admit that Canton is not among these points. It is also true that many of these towns 8 Reply of Special Committee on Discrimination. are in the neighborhood of Memphis, but many others are not. Take, for instance, the eighteen towns in the Aberdeen district, the twenty-one towns in the Yazoo district, the twenty-five towns in the Water Valley district, or, to come nearer heme, take the five towns in the Canton district, all on the line of the Illinois Central Railroad between Canton and Jackson, and, to be more specific, take one of these towns — Madison, for instance. Madison is distant 201 miles from Memphis, and 191 miles from New Orleans. It is twelve miles south of Canton and only twelve miles north of Jackson. The "billing" rate on an un- compressed bale of cotton from Madison to Memphis is $2.40; the rate to New Orleans is $2.35. But the "reshipping" rate from Madison to Memphis is $1.92%, or 47i/oc less than the ' ' billing ' ' rate. Therefore, the consignee of a shipment of uncom- pressed cotton from Madison is able, by reason of the reshipping rates and regulations authorized by Tariff 314-B. now in force, to bring cotton into Memphis from said point for 42 \/ 2 cents per bale less than the consignee at the New Orleans spot market can bring the same shipment to New Orleans ; and this in spite of the fact that Madison is six miles nearer to New Orleans than it is to Memphis. Unless, therefore, this Madison rate has been pub- lished through an error of a rate clerk, it serves to illustrate our contention fully as well as the Canton example recently denied. Tariff 314-B, now in force, gives even stronger grounds for complaint than Tariff 314-A, from which we endeavored to quote in our former report. As we understood the "reshipping" rules and regulations at Memphis, we concluded that the refund on re- shipments applied only upon equivalent shipments out of Mem- phis through New Orleans. "We are now definitely informed by Tariff 314-B, now in force, as well as by the explanation in the railroad's brief here quoted, that such refund can be obtained only upon the condition that the equivalent shipment out of Memphis shall go to Eastern cities. According to our former understanding the railroad, while discriminating against the New Reply of Special Committee on Discrimination. Orleans spot market, was offering an inducement to increase the volume of shipments through the port. It now appears that the spot market is still discriminated against, and even the port move- ment is not favored. In view of the foregoing, it would hardly seem necessary to defend in any detail our use of the Tariff 314-A, which has been superseded by Tariff 314-B. It may, however, be well to observe that Tariff 314-B shows under the head of "Cancellation" the following exception: "The rates and rules shown herein supersede rates and rules in Tariff 314-A, I. C. C. No. 4016, C. R. C. No. 89, except that cotton which moved from original points of shipment prior to October 19, 1909, into Memphis, Tenn:, and is reshipped compressed from Memphis, Tenn., on or after October 19, 1909, is subject to the rates and rules shown in Tariff 314-A, I. C. C. No. 4016, C. R. C. No. 89." It is, therefore, true that whatever the "reshipping" rates and rules incorporated in said erroneous tariff might have been, such rates and rules are permitted now, and will continue to permit, until the end of the season, the collection of the refund upon the amount of cotton shipped out of Memphis to Eastern cities, equivalent to the amount of this early moving crop shipped into Memphis from original points prior to October 19, 1909. The premises considered, we reiterate our charges of discrim- ination against the New Orleans market and in favor of the Memphis market in the matter of the "billing" and "reship- ping" rates and regulations; and, in substantiation of said charge, we refer to I. C. R. R. and Y. & M. V. R. R. Tariff No. 314-B, now admitted by the railroad to be in effect and acknowl- edged to be correct. 10 Reply op Special Committee on Discrimination. IV. Discriminations at the Terminals. (1) Under this head the railroad denies "that the consignee of a car of compressed cotton on a local bill of lading must re- ceive the shipment at the I. C. local depot, even though he has engaged ocean freight room and wants to ship his cotton directly out." The railroad further states that "we are willing to permit a local consignee to load his cotton into the ship on the railroad's terminals if he so elects, provided, of course, that the consignee gives notice of his desire in time to have his car switched along with the through cotton to the terminals instead of to the local depot." It would be more satisfactory if the above denial was some- what broader and not so literal. Our charge had reference to what had been done in the premises; the railroad states what it is willing to do. It would also clarify the issue to some extent if the railroad would state whether or not the above mentioned permission carried with it any additional charge to the consignee. As the railroad 's answer is worded, we are not quite sure whether the denial applies to the conditions of the immediate present or to the rules that governed in the past ; nor are we quite sure whether the substance or the mere form of our complaint is contradicted. (2) Under this head the railroad further states: "With reference to terminating our responsibility on cot- ton delivered to the Public Belt, it is not our desire or in- tention to evade any responsibility which legally or legiti- mately belongs to this company, but we cannot undertake • to be responsible for loss or damage to cotton or other freight occurring after the same has been delivered to the Public Belt Railroad. This rule governs all transportation companies, and is in full force and effect throughout the entire country." Reply of Special Committee on Discrimination. 11 Our charge, against which the foregoing denial is supposed to apply, was that the railroad prevented the local consignee from directing transfer to the Belt, by declining responsibility, not only for the completeness and safety of the shipment subsequent to the delivery to the Belt, which we admitted was right, but for shortage occurring or damage inflicted prior to .such delivery, which we declared was wrong. The railroad evades, avoids, or does not notice the only charge made by us on this count. Discriminations Against New Orleans in the Matter op Through Cotton. Under this head the railroad discusses our charge that because of rate manipulation by the railroads centering at Memphis, New Orleans is deprived of the benefits to which it is logically entitled by reason of its natural advantage in point of location and proximity, and the south Atlantic ports to that extent favored. We claimed that on the natural and equitable basis of mileage, or distance, the Memphis rate through New Orleans to Liverpool should be 45 cents per bale less than the rate from Memphis through the south Atlantic ports, whereas, under the adjustment now in force, the rate from Memphis through New Orleans is practically the same as the rate from Memphis through the south Atlantic ports. The railroad makes no denial of the correctness of our state- ment of rates and distances, but defends the present adjustment upon the ground that the keen competition out of Memphis forces an equality in rates from Memphis to Liverpool without regard to the fact that the railroad haul from Memphis via New Orleans is 400 miles, as against 700 miles via the south Atlantic ports. If this theory of rate adjustment is correct, then position and proximity cease to be factors. If competition annihilates three 12 Reply of Special Committee on Discrimination. hundred miles of space it can absorb a thousand miles. If there was competition at Jackson, Mississippi, for instance, in ship- ments via south Atlantic ports, under this theory it would be entirely proper to so adjust rates that Jackson cotton, and cotton localed into Jackson, would go to Liverpool through Savan- nah on the same rate that it would take through New Orleans to the foreign port. The keenness of competition at Memphis is admitted, but the trouble seems to be that the railroads leading to the south Atlantic, ports are competing somewhat more vigorously and to somewhat better purpose than are the railroads leading to New Orleans. At this point this question naturally arises: If rail competition in the interior works so potently towards the reduction of inland rates, why would not competition in ocean rates at the pert be similarly operative in the adjust- ment of foreign rates? The Protest op the Steamship Lines in the Combination. The spokesman for the Harrison and Leyland lines of steam- ships protested that there existed no binding compact between the said lines and the railroad company that would prevent the former from drawing out of the New Orleans trade, or the latter from patronizing any other lines of steamers should it see fit to do so. We have at no time nor in any place alleged the existence of any such compact. The steamship representative made an argument going to show that the monopoly of ocean carriage and the arrangement that produced such monopoly were beneficial to all concerned. We expected that all parties interested in such monopoly and in such arrangement would so argue. The representative in question extolled the regularity and ex- cellence of the service maintained by said steamship lines. Reply of Special Committee on Discrimination. 13 We have never denied this excellence and regularity; on the contrary, it gives us pleasure to testify to the excellence and regularity of the service maintained by these lines, and to com- mend the same. Our complaint is not against the service main- tained by the steamship lines, but against the combination be- tween said lines and the railroad, whereby other ships and other lines are prevented from offering the same or better service at lower rates. The said representative took some pains to show by figures covering a series of years that the rates from New Orleans to Liverpool given by his lines were actually lower tlian the rates to certain Continental ports. We do not controvert these figures. It would be unnatural and extraordinary if the Liverpool rates were not lower, for one reason — because Liverpool is nearer. But this representative does not undertake to deny our statement that the south Atlantic ports, by reason of steamship competition there, at times enjoy a Liverpool rate as low as 18 cents, and sometimes lower, which is, relatively, 6 or more cents lower than the rate given by the two exclusive lines out of New Orleans. Nor does he deny or explain why the Liverpool rate from the city wharves in New Orleans, charged the merchant of New Orleans, on local ship- ments, is from 1 to 2 cents higher than the rate from the I. C. terminals in New Orleans, charged the interior merchant on a through bill of lading. Conclusion. The essential allegations of fact contained in our report — fo- unt: that the combination between the railroad and the pre- ferred steamship lines deprived the shipper of any voice in the selection of the ocean carrier of his cotton, created a monopoly in ocean rates and injuriously affected the business and com- merce of this city and port: that the railroad discriminated against the local market and in favor of the through business. 14 Reply op Special Committee on Discrimination. and not only favored the latter but imposed burdens and re- strictions upon the former — are not controverted in the answer of the railroad and steamship lines in question. Barring the wholly immaterial inaccuracy in the selection of one city and town in one of our illustrations, when a nurabar of other places could have been used to fully demonstrate the principle contended for, we must re-affirm the allegations made, and the conclusions reached in our report of November 2Gth last. Respectfully submitted, W. B. Thompson, Chairman; S. W. Weis, Chas. W. Shepard, Wm. A. Lorenzen, Silas I. Hyman, Jeff. D. Hardin, Jr., Edward Nathan. Committee. New Orleans, December 11, 1909. uNivERsrrv of illinois-urbana 3 0112 064385443