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Vol. 88 No. 1

NEW YORK, JANUARY 4, 1908

Published by the Outlook Company, 287 Fourth Ave., New York. Chicago Office, Marquette Building. Lawrence F. Abbott, President. William B. Howland, Treasurer. Karl V. S. Howland, Secretary. Lyman Abbott, Editor-in-Chief. H. W. Mabie, Associate Editor. R. D. Townsend, Managing Editor.

of Indiana

was

When the StandThe Commissioner of ard Oil Company Corporations and the Standard Oil Company fined twenty-nine million dollars for the violation of the Elkins Law, its officials appealed to public opinion against the justice of the conviction. The principal appeal was made in a statement by Mr. James A. Moffett, the President of the Indiana Company, which was reported in The Outlook shortly after its appearance. The Commissioner of Corporations, whose Bureau collected the material on which the indictment was based, has now issued a statement in reply to the allegations of Mr. Moffett. It will be remembered that the charge on which the Standard was convicted was that of having accepted from the Chicago and Alton Railway a rate of six cents a hundred pounds on oil shipped from hiting, Indiana, to East St. Louis, Illinois, when the only rate openly published and filed with the Inter-State Commerce Commission, and therefore the only legal rate, was eighteen cents. The allegations of the Standard may be briefly summarized as follows:

1. There was no question of rebate or discrimination in the case; it was merely a question whether the six-cent rate was legal.

2. Six cents was an open, legal rate on oil from Chicago to East St. Louis, and an "application sheet" extending this rate to Whiting had actually been filed with the Inter-State Commerce Commission.

3. During the two years covered by the indictment the Chicago and Eastern Illinois Railroad had a lawful published and filed rate between Whiting and East St. Louis of six and a quarter cents, and the Standard shipped over two thousand cars of oil a year over that road at that rate. Therefore the Standard could have

$3 a year 10с. а сору

had no motive for shipping over the Alton at an illegal rate.

4. Other products were carried between the same points during the same period at rates ranging from five to ten cents a hundred pounds. Therefore the six-cent rate was a reasonable one.

5. The Standard was advised by the rate clerk of the Alton that the six-cent rate had been filed with the Inter-State Commerce Commission, and it therefore had no reason to suppose that the rate was illegal.

The Commissioner's Reply

Commissioner Smith replies to these arguments in a statement which may be summarized as follows:

1. Mr. Moffett's contention seems to be that there was no rebate because the Standard did not actually pay the higher rate and have the difference of twelve cents a hundred pounds actually returned to it in money. This is merely an evasion; the rate constituted a rebate in essence, if not in form. He seems to hold that there was no discrimination because no one else is known to have paid the eighteen-cent rate. On the contrary, this very situation proves that not only was there discrimination, but that this discrimination had worked out its logical result by producing a complete state of monopoly in the vicinity of Chicago.

2. The application sheet merely stated that the rates from Chicago should apply also from Whiting, enumerated the tariffs to which it referred, and named specifically the tariff containing the eighteencent rate; but it made no mention of the unfiled "Special Billing Order " containing the six-cent rate. "Of course this sort of thing was absolutely no notice to any one of the unpublished six-cent rate, nor was it intended to be."

3. The Chicago and Eastern Illinois

rate was not only no justification for the Alton shipments, but it was an additional wrong in itself. It was quite as secret as the Alton rate. It was contained in a single mimeograph sheet filed with the Inter-State Commerce Commission, giving a rate on oil from Dolton, Illinois, to East St. Louis of six and one-quarter cents; a note indicated that the rate might also be used from Whiting. There is no evidence that this sheet was ever distributed to any shipper except the Standard. Dolton is a town of insignificant size just outside Chicago. "Its only claim to note is that it has been for many years the point of origin for this and similar secret rates." This obscure rate was still further concealed by the filing of the same eighteen-cent tariff which the Alton had; and this rate was the only one which could ever come to the notice of the ordinary shipper.

4. The question is not one of the reasonableness of the six-cent rate. "The question is whether this rate constituted a discrimination as against other shippers of oil. Oil refiners in Chicago and elsewhere were not vitally concerned in the rates on popcorn." Mr. Moffett also claimed in his statement that "thousands of tons of freight have been shipped from these points during the last fifteen years under the same circumstances as the Standard shipments." He was thereupon summoned before the Grand Jury, and was unable to substantiate this statement by definite information as to a single pound of freight shipped, except by the Standard, at a rate less than the lawful rate. "This remarkable admission of Mr. Moffett shows the general value of his defense."

5. Every way-bill for oil shipped over the Alton was "falsely billed," showing on its face a rate of eighteen cents, although the actual rate collected from the Standard was six cents. On the Chicago and Eastern Illinois the waybills were "blind billed," no rate appearing on them until they reached the general offices of the railway. Both schemes effectually concealed the actual rate from the local freight agent and any one else outside the general offices; and both schemes were used only with shipments by the Standard, Furthermore, the usual

method of collecting freight charges, through the local agent, was not followed in these cases; all the collections were made through the general offices. The Standard knew that this method of collecting freight charges was entirely. exceptional; it knew that its shipments were being "false billed" and "blind billed." "Moreover, the only possible motive for that secrecy which the railroads admit that they maintained regarding this rate was to conceal it from competitors of the Standard, and it is inconceivable that the Standard should not have known of the practices which inured solely to its advantage." Bearing on this professed ignorance is the fact that memoranda found in the files of the Chicago and Eastern Illinois Railroad show, in the case of another illegal rate from Whiting, that the traffic manager of the Standard initiated it, dictated it to the railways, and arranged for its secrecy by frequent consultations with the highest officers of the road. The report of the Commissioner of Corporations on the transportation of petroleum, issued in May, 1906, showed that similar rates especially favoring the Standard were in existence covering a large part of the United States. It is significant that every such rate criticised by the Bureau as illegal was canceled by the railways within three months. The offense on which the Standard was convicted was, therefore, as Judge Landis remarked in imposing the fine, by no means its first offense; it was merely one of a great system of discriminatory rates practically covering the country.

When a case is still before the courts, as this case still is, on appeal, it ought not to be tried before any other tribunal, either of the press or of public opinion. But the Standard has appealed from a question of strict legality to a question of equity and good faith; and such an appeal makes it not improper for the Commissioner of Corporations, whose Bureau was responsible for the indictment, to meet the charges which it embodies. Whether he has done so to the satisfaction of the public, the public must determine. It should be remembered that one jury of presumably impartial citizens has already recorded its opinion

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