Los Angeles herald. [microfilm reel] (Los Angeles [Calif.]) 1900-1911, 1907-07-14
Effect of Control

this firm refused to disclose the extent of
| it's interest in these securities.
Effect of Control
"The effect of the control of the South
ern Pacific by the Union Pacific has been
to unity and amalgamate the manage
ment of those two railways and their
steamship lines and to eliminate compe-
! tition between them in transcontinental
| business and in business to and from
oriental points.
1.-The Union Pacific controls the San
| Pedron, Los Angeles e. Salt Lake rail-
road, the stock of which is deposited in
| the hands of trustee This line was
originally intended as an independent
broad, extending from Salt Lake, where 1t
connects with the Union Pacific and with
the enver & Rio Grande, to Los Angeles
and San Pedro, Cal. There is, therefore,
no competition between this line and the
Union and Southern Pacific.
| ut appears that the Union Pacific also
| owns $10000,000 par value of the stock of
the Atchison, Topeka Santa Fe Rail-
way company and about s30,O000O0 more is
owned by individuals connected with the
| Union Pacific, making $40,000,0OO, or sub
| stantially II per cent of the entire cap
ital stock of the Santa Fe system. Who
| owns this stock outside of the 600
Mr.. Hartman declined to state. Two
directors of the Union Pacific are also
| directors of the Santa Fe company, and
there is now division of the oriental
traffic by the Pacific Mail Steamship
| company between the Union Pacific and
| the Santa Fe system.
at appears that there also has been
division of the fruit traffic between
certain California territory and the
/ east. each taking a certain percentage
i and that north of San Francisco the
Union Pacific and the Santa Fe have
/ Joined and amalgamated their interests
in the Northwestern Pacific railroad and
that a Joint control has been inaugu-
rated similar to that of the Alton.
Prior to the acquisition of the
Southern Pacific by the Union Pacific
the Denver & Rio Grande system, ex-
tending from Denver, where it connects
with various lines to the east to Salt
Lake and Ogden, was given equal
facilities over the Central Pacific and
thereby practically formed another
transcontinental line.
Since the amalgamation of the
Union Pacific and Southern Pacific and
| the construction of the San Pedro road
this line has been denied equal facili-
ties in the receipt and transportation of
business over the Central Pacific and
| the San Pedro lines It's business there
| fore has decreased and its ability to
| compete with the Union Pacific and
Southern Pacific railway companies has
undoubtedly eliminated competition be-
tween the Alton and the Rock Island
between Chicago, st. Louis and Kansas
City. These are conspicuous illustra-
lions of the development of the theory
of community of interest and 'har-
mony of management which Mr.. Har-
riman suggested when he demanded
representation upon the board. If the
policy of purchasing and controlling
stocks in competing lines is permitted
to continue it must mean suppression
OF competition.
Recommendation Made
"G) The function of railroad cor
l poration should be confined to the fur
nishing of transportation Railroads
should not be permitted to invest gem
orally in the stocks bonds and securi-
ties of other railway and of steamship
companies, of present connecting lines
for the purpose of forming through
rates of transportation, including
branches and feeders.
TT is in the interest of the public to
facilitate the consolidation of connect
ing lines. The credit of railroad COM
pany is founded upon the resources and
prosperity of the country through
which it runs. Its surplus funds and
credit should be used for the better
ment of it's lines and in extensions of
branches to develop the country con-
tiguous to it. The testimony taken
shows that about 100000 square miles
of territory in the state of oregon, sur
rounded by the lines of the oregon
Short Line Railroad company, the Ore
gon Railroad and Navigation company
and the Southern Pacific company is not
developed, while the funds of those
companies which could be used for that
purpose are being invested in stocks
like the New York Central and other
lines having only remote relation to
the territory in which the Union Pacific
system is located.
Railroad securities should be safe
and conservative investments for the
people. To this end the risks of the
railroad should be reduced to a min
imum. Every one knows that railroad
securities fluctuate more or less accord
ing to the prosperity of the times, and
also by reason of the wide speculation
in those securities. 1t therefore adds
| an element of hazard to a railroads
capital and credit to have it's funds in
vested in the stocks of other companies,
j thereby endangering it's solvency and
it's ability to pay regular dividends on
its own capital stock. 1t is a serious
menace to the financial condition of the
country to have large railway systems
fail to meet their obligations or go into
the hands of receivers, and the object
of legislation and administration should
be to lessen the risks of railway invest
ments.~
Contrary to Law
"(2) 1t is contrary to public policy,
as we'll as unlawful, for railways to
acquire control of parallel and Compel
ing lines This policy is expressed in
the federal laws and in the constitu-
lions and laws of nearly every state in
| the union.
I'VE have examined the constitutions
and laws of all states and find in about
| forty of them prohibitions against con-
solidation of capital stock, or franchises
of competing railways or the purchase
and acquisition by a railway of COM
j peting lines. Competition between