The San Francisco call., 1906-12-16
Secret System Of
Rebating Used
California

More than eighty distinct violations
Of tariffs on oil by California railroads.
besides other secret rebates and pri-
vate car determinations for the benefit
OF favored California shippers, are
shown by the recent report OF James r
Garfield, United States Commissioner OF
Corporations. on the transportation of
petroleum.
The report is fun Of interest for all
students of transportation and railway
rate regulation reforms, and is espe-
ciallv interesting to California pro-
ducers and consumers who are the vic
TINS of the determinations Touching
secret rates and rebates on oil in Cali
fornia, the Commissioner says:
An especially large number Of secret
rates and rebates in the transportation
Of oil was found in California. A pc
culiar feature OF the oil business in
California is the very extensive use of
crude oil for fuel purposes. The largest
individual consumers are the railroads
themselves. The situation is compli-
Gated by the fact that railroads not
only use an enormous amount of oil,
but themselves are owners of or are
Interested in production. This double
relation TO the industry has been a
serious injury TO the ordinary pro-
Queer.
TELLS OF SECRET RATES
Discrimination in rates in Califor-
MIA have not been confined to the
Standard Oil Company but have also
been enjoyed by several other large OIL
producing companies principally the
rnion Oil Company and the Associated
oil Company. the latter of which is
Virtually controlled by the Southern Pa
eiic Company. Moreover, secret rates
and rebates have been allowed to some
Of the largest consumers of fuel oil,
possibly owing TO the fact that these
concerns contribute a large amount Of
other traffic TO the railroads. AL
though the STANDARD Oil Company is
not the exclusive beneficiary of these
Determinations. il receives them more
extensively than any other interest, and
The secret rates discovered were almost
invariably denied to the smaller ship
pers. In the case of the Associated
oil Company there is considerable evil
dence that il is not a genuine COM
petitor Of the Standard.
"A distinctive feature of the dis
ordinations on the Pacific Coast is the
very general use of the rebate as
method Of settlement. The Southern
Pacific invariably used the rebates in
applying its secret rates; the Santa Fe
system at times employed the rebate
and at other times collected the secret
rate in the first instance
REBATES PAID TO C0NsIGNEEs
The tariff rate on crude oil from
Bakersfield TO Kiswick. Redding and
Red Bluff was 81 cents a barrell. The
southern Pacific put in a rate of about
59 cents per barrel, invariably applying
q by means of the rebate. These secret
Sates were ostensibly quoted to the
consumer to meet the competition, OF
rood IN the mountains for fuel pnr-
poses. IN several instances the re-
bate was paid the consignees
The only shipper receivirfg the
benefits of these secret rates was the
Standard Oil Company. The STANDARD
~ times gave the consignee practically
The fuli benefit of secret rates which il
Gsed in the form Of lower prices for the
Oh and thus obtained contracts in com
DeDtion with Independent shippers. who
were unaware OF these rates and who
Rere forced out OF the markets be-
cause Of this unfair advantage of the
Standard"
An even greater advantage is point
Cd out in the rate enjoyed bv the
Standard from the Point Richmond re-
Hnerles to these same points. In this
case the secret rate was arrived at
by most unusual and what the Com
missioner calls an extremely improper
manipulation. which resulted in Civ
nng the Standard a rate Of IS cents a
barrel. or a little over one-half the
fun tariff rate from Richmond
PAPER FIRM GETS DRAWBACK
The STANDARD also had 2 secret rate
of 63 cents barrel from Bakersfield
to Floriston, as against the tariff rate
Of s. cents. The rebate in this case
was enjoyed by the consignee. the
Floriston Pulp and Paper Company.
Other secret rates on oil were made
from Bakersfield 10 Lanoine and Boca
and from Richmond to Barnards. Chico,
moine rate was given to a local con-
signee, the Boca rate TO the Associated
Oil Company and the others to the
Standard
striking instance of discrimination
in California discovered by the agents
Of the bureau was that OF z secret
rate of 50.4 cents barrel on crude