of lines interested, and these lines were the principal railways leading from Kansas City and Chicago to Eastern destinations. The testimony of these witnesses was frankly given, and we have no doubt that the true state of affairs was fully disclosed. For the purpose of stating the results of this hearing rates may be divided here, as in the grain investigation, into those east of Chicago and west of Chicago, those east of Chicago being first considered.

RATES EAST OF CHICAGO.

It seems to be the custom of these railways to begin each new year with a resolution to maintain rates. The hearing was had, as previously said, on January 7, and all the witnesses testified with great positiveness that since January 1 rates upon packing-house products had been absolutely maintained. Such appears to have been the case in January, 1901, but those good resolutions were speedily broken and rates became more or less demoralized very early in the year.

Packing-house products are divided into two classes, known as dressed beef, which includes all kinds of fresh meat, and provisions, which embrace most of the other products of the packing house. The major part of the dressed beef is consumed in this country, while about 80 per cent of the other products would seem to be exported to foreign countries. Lines east of Chicago made no distinction in rates upon dressed beef between domestic and foreign shipments, but they did profess to maintain the published rate upon domestic shipments of provisions, applying cut rates exclusively to export traffic.

The published rate upon dressed beef at the beginning of the year was 45 cents per hundred pounds from Chicago to New York and corresponding points. This rate was cut about 5 cents per hundred pounds. For the purpose of meeting this and doing business upon the tariff basis the rate was reduced at some time during the summer to 40 cents per hundred pounds. It was not, however, maintained at this figure, the actual rate having been about 364 cents per hundred pounds.

Upon export provisions the published rate from Chicago to New York was 30 cents. This was reduced early in the season to 25 cents, and there seems to have been a tacit understanding between the lines that the actual rate should be 25 cents. This was subject to a further reduction later in the season of 2 cents per hundred pounds by some lines, probably by all lines.

From about the 1st of August these carriers, owing, it would appear, to some general understanding among themselves, billed export provisions at a rate of 25 cents, the published rate being 30 cents. Previous to this date, however, it seems to have been the custom to bill the traffic at the published rate and to take care of the reduction by the payment of a rebate. This rebate was paid in various ways and

to various persons. It is not deemed necessary to detail here the manner in which it was done in specific instances. The general traffic manager of the Michigan Central testified that the vouchers and other evidences of these transactions were destroyed soon after the transactions were completed. The testimony of the traffic manager of the Pennsylvania lines west of Pittsburg was to the same effect. The traffic manager of the Lake Shore road testified that he had never approved a voucher for the payment of rebate; that in his judgment it was better to take care of those matters in some other way. His way appears to have been by settlement through some fast freight line. The methods resorted to showed that all the carriers understood it to be a violation of law.

RATES WEST OF CHICAGO.

Rates from Kansas City east seem to have had much the same history as those from Chicago. Good resolutions marked the advent of the new year. These were speedily broken. Early in the spring, rates had become unsettled, the cut being first 2 or 3 cents, and finally 5 cents. From about April, 1901, the going rate from Kansas City has been 5 cents below the published tariff, a corresponding reduction being made from other Mississippi River points.

This difference was observed between these rates and those east of Chicago, that while lines east of Chicago had returned to a tariff basis January 1, those west of Chicago were still using the old cut rate. The reason for this, in part at least, appeared to be as follows:

The chief traffic official of the Santa Fe Railway Company testified that in the early months of 1901 his line was carrying into Kansas City 33 per cent of the live stock slaughtered there, and was carrying out of Kansas City less than 2 per cent of the product. His line was maintaining the published rate, but he was informed and believed that other lines were departing from that rate and thereby obtaining the business. After earnestly protesting against such conduct upon their part, without avail, he made a contract with one of the large packing houses at Kansas City to transport its product for one year at a rate 5 cents below the then published tariff. At the time he intended to publish this reduced rate, but was deterred from doing so by the earnest protest of other railways, the idea being apparently that if a rate of 18 cents were to be published and maintained by all lines for a year between Kansas City and Chicago the public might come to think that this was a reasonable rate. Since this line in obedience to that contract was under obligations to carry for this packing house until about June 1 at a rate of 184 cents, all other lines must of course make the same rate.

No attempt was made by lines leading east from Kansas City to distinguish between export and domestic business. The methods resorted to for giving the shipper the benefit of the cut were the same as

those east of Chicago, being sometimes by the payment of a rebate, sometimes by billing at the cut rate, sometimes by billing at the published rate and authorizing a reduction when the freight money was paid by the shipper.

EFFECT OF THESE REBATES.

The important fact to be deduced from this testimony is that packing-house products are habitually carried from points of origin to the seaboard at rates below the published tariff of from 5 to 10 cents per hundred pounds. All the carriers were required to furnish a detailed statement showing the number of cars shipped and the rates actually charged. Sufficient time has not yet elapsed for the preparation of these statements. When received they will afford a means of determining the gross amount of these rebates. At present it can only be said that they amount to many hundreds of thousands of dollars annually.

Inevitably the questions occur: Who has the benefit of this reduction in rates? Does it result in advantage to the producer and consumer, or is it absorbed by the packing house itself? Manifestly, no certain answers can be given to these inquiries. It seems probable that in case of a reduction like this, which seems to be tolerably uniform and long continued, the general public must obtain some advantage, but we think that in the main these sums swell the profits of the packers. The number of these great concerns is only some five or six, and there does not appear to be much discrimination between them. Each usually knows about what the lowest rate is, and usually manages to obtain that rate. The effect is, however, to give these large packers an enormous advantage over their smaller competitors who are located at other intermediate points. Already these competitors have in the main ceased to exist. We find in these disclosures a pregnant illustration of the manner in which secret concessions are tending to build up great trusts and monopolies at the expense of the small independent operator.

It is interesting to notice that all the railway traffic officials inquired of expressed the opinion that the published rate was decidedly too low upon packing-house products, although the testimony showed that this rate was not maintained until it had fallen about so far below the open tariff. This may or may not indicate that the published tariff is too high. If it is, it should be reduced and a just tariff put in effect which shall be open to all shippers and fairly adjusted between all localities.

RELATIVE RATES ON EXPORT WHEAT AND FLOUR.

In 1899 this Commission undertook an investigation into relative export rates upon wheat and flour from western points of origin to the Atlantic seaboard. In summing up our conclusions in that case it was

said that "public policy and good railway policy alike require the same rate upon export wheat and flour;" but it was further said that this Commission had no power to dictate public policy or railway policy, but only to enforce the provisions of the act to regulate commerce; and that a rate slightly higher on flour than on wheat was not obnoxious to the provisions of that act. It was held that this difference should not exceed 2 cents per hundred pounds.

Since the promulgation of that opinion published tariffs have generally conformed to this decision. Since January 1 of the present year the tariff export rate upon wheat and flour has been the same through Baltimore, and but 14 cents higher through New York. Nevertheless, exporting millers have asserted, both in the public press and in repeated communications to the Commission, that the freight rate still discriminates against that industry. The quantity of wheat exported during June, July, August, and September, 1900, through Atlantic and Gulf ports, was 28,518,963 bushels, and the quantity of flour 5,299,748 barrels, while in the corresponding four months of the year 1901 the number of bushels of wheat was 69,269,042 and the number of barrels of flour 5,629,043. This fact is pointed out as conclusive evidence that the exporting miller is not obtaining fair treatment. He insists that not only does he obtain no portion of this great increase in the exportation of breadstuffs, but that he finds even more difficulty to-day than ever before in holding what business is done.

In consequence of these complaints a further investigation has been recently held touching this matter. Certain of the facts developed are referred to here, not altogether as bearing upon the particular question under consideration, but also as an instructive illustration of the present condition of railway operations in some particulars.

SECRET RATES FROM CHICAGO TO THE SEABOARD.

Since the published tariffs had been nearly the same upon both wheat and flour, any serious discrimination against the latter commodity must have resulted from a failure to maintain the rate upon wheat. Rates from Chicago to the Atlantic seaboard were first taken under consideration, and our inquiry developed the fact that carriers made no serious pretense of having maintained these rates. There was a published rate applicable to domestic traffic and a different rate applicable to export traffic, but there was no claim that any export wheat moved upon this latter rate. Instead, the carriers operating between Chicago and the seaboard had agreed among themselves upon a rate 2 cents lower than the published export rate. This "agreed rate," as they termed it, professedly applied only to export grain, and was accorded only to Chicago. Intermediate points which usually take a percentage of the Chicago basis did not enjoy the benefit of this rate. While this rate was not published, the carriers stated that

its existence was generally known to the shipping public, and that all shippers were able to avail themselves of it.

As already stated, the published rate upon export flour was from 14 cents above down to the same as that upon export wheat, according to the port of export, and there was no understanding among the carriers that this rate should be departed from. If, therefore, the "agreed" rate upon wheat and the published rate upon flour were both maintained, a discrimination of from 2 to 4 cents east of Chicago would result. Witnesses did not agree as to how well these rates were observed. On the whole, we are inclined to think that neither of them was absolutely maintained. Concessions were made to particular shippers upon particular shipments according as the exigencies of the occasion were thought to require it, and these concessions varied from time to time. The entire profit in grinding export flour would not ordinarily equal 4 cents per hundred pounds.

WATER COMPETITION AS AFFECTING WHEAT AND FLOUR RATES.

Carriers put forward as a reason for these lower rates on wheat from Chicago to the seaboard the peculiar conditions as to water competition which surround these two commodities. The cost of carrying wheat by water from Chicago to Buffalo during the past season has averaged about 14 cents per bushel, and the rate from Buffalo to New York has been about 3 cents per bushel, making a total rate by lake and rail of 5 cents per bushel, or about 8 cents per hundred. Upon this rate the grain is received in the ship's hold at Chicago and delivered at the ship's side in New York Harbor. The published export rate during most of this past summer has been 13 cents from Chicago to New York. Ordinarily it is not a matter of much consequence whether wheat moves between these two points by water or by rail, and plainly it can not move to any extent by rail when that rate is 5 cents higher than the water rate.

Flour is also shipped by water from Chicago and corresponding points to the seaboard, but the conditions under which it moves are somewhat less favorable to the obtaining of a low rate than those which prevail in case of wheat. Wheat is largely carried by so-called tramp vessels, which take cargoes of grain from some point upon the Great Lakes, like Chicago or Duluth, to Buffalo, and carry cargoes of coal in the opposite direction. Flour is not transported by these tramp steamers, since they are not rigged for that service, but is taken altogether by what are known as "line boats;" that is, boats carrying package freight between Buffalo and other lake ports. These vessels also carry grain when they can not obtain more desirable lading.

It results that the actual expense of transporting flour from Chicago to New York by water is greater than the expense of transporting