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The reason for rebates was that such was the railroads' method of business. A public rate was made and collected by the railroad companies, but, so far as my knowledge extends, was seldom retained in full; a portion of it was repaid to the shippers as a rebate.
Those who complain of the management of the railways allege that established rates are not maintained; that rebates and similar devices are habitually resorted to; that these preferences are usually in favor of the large shipper; that they drive out of business the smaller competitor; that while many rates are too low, many others are excessive; and that gross preferences are made, affecting both localities and commodities.
To understand the situation which affected the giving and taking of rebates it must be remembered that the railroads were all eager to enlarge their freight traffic. They were competing with the facilities and rates offered by the boats on lake and canal and by the pipe-lines.
Scherer, I've been making a study of the Boyne Iron Works. You are clever men, but you are building up monopolies which we propose to stop. 'By what means?" I asked. "'Rebates, for one, said he, 'you get preferential rates from your railroad which give you advantages over your competitors. Foolishness!" Mr. Scherer exclaimed.
This policy of deception often degenerates into down-right fraud, as in the case of secret rebates and other forms of discrimination through which one competitor obtains an undue and perhaps crushing advantage over others; or it may take the form of adulteration or other trade frauds by which the business man may rob the general public.
Business began to pour in from Brauer and, frankly, Fred was disturbed. He wasn't sure of Brauer's business scruples. "I wonder if he's promising these people rebates," he said to Helen one day, following an avalanche of new risks. "Well, you'll know soon enough when he begins to collect the premiums," she replied, indifferently.
"Th-then s-s-sublime th-things c-c-cost d-dear," answered the goodman, as the banker warmly wrung his hand. "But this, my dear Grandet, if the president will excuse me, is a purely commercial matter, and needs a consummate business man. Your agent must be some one fully acquainted with the markets, with disbursements, rebates, interest calculations, and so forth.
Above all else, we must strive to keep the highways of commerce open to all on equal terms; and to do this it is necessary to put a complete stop to all rebates.
It has often occurred that a shipper has been told by a traffic officer to buy a large quantity of some commodity and then after it has been bought an open reduction is made in the rate to take effect immediately, the arrangement resulting to the profit of one shipper and the one railroad and to the damage of all their competitors; for it must not be forgotten that the big shippers are at least as much to blame as any railroad in the matter of rebates.
The proof was that, to destroy competitors, prices had been temporarily reduced in various localities, spies had been used on competitors' business, bogus independent companies operated, and rebates given and taken.
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