A COLORADO RAILROAD POOL

BY JOHN BURTON PHILLIPS

A railroad's power over the rates to be maintained in any section of territory is determined by its ability to control all the transportation facilities existing in that section of the country. In so far as the terminals are common points from which the shipper has the choice of route in sending out his consignments, no one railroad alone can long control the situation as to the rates to be charged without an agreement with the other roads. This is the reason for the existence of railway pools. When the locality to be served by the railroads is far removed from the eastern parts of the country where there are numerous rail and also many water facilities in the matter of transportation, and when the remote locality is served by comparatively few railroads and no water transportation, the conditions favoring a powerful pool are propitious. It is also easier to maintain a railway pool when there is no likelihood of its being interfered with by ocean or inland water transportation. Therefore, the situation of Colorado, favorable in both these respects to pooling agreements, early made the citizens familiar with these railroad combinations, and placed their prosperity in great degree in the control of the men at the head of the great transportation systems.

A railroad pool is commonly thought of as an agreement according to which each road binds itself to maintain a certain rate agreed upon in the conference. The other matters with which pools concern themselves are not usually thought of as of great importance, nor is the power of the pool to control the entire development of a state generally understood. It is therefore interesting to know the effect of the pool formed by the railroads which first entered the state of Colorado-a pool, however, which was not formed primarily for the purpose of arranging rates.

On March 22, 1880, a tripartite agreement was made between the three leading railroads of the state of Colorado. They divided up the territory alloting certain portions to each of the parties to the contract and agreed not to build railroads there nor to take freight or passengers from

nor in any way connect with any railroads that might be built in these particular sections of territory. The territory thus divided among the three parties to the contract comprised the state of Colorado and the northern part of New Mexico. The parties to this agreement were the Union Pacific, Atchison, Topeka a id Santa Fe, and Denver & Rio Grande.

The facts in the case seem to have been these. The Denver and New Orleans Railroad Company operated a line of railroad from Denver to Pueblo. The Denver and Rio Grande also had a road between the same two points. The Atchison, Topeka and Santa Fe Company had a line from Kansas City to the Colorado state line and from there to Pueblo leased the line of the Pueblo and Arkansas Valley Railroad. It was 634 miles from Kansas City to Pueblo over the two railroads. When the Atchison, Topeka and Santa Fe thus reached Pueblo, it had no connections of its own with Denver. The Denver and Rio Grande was built from Denver to Pueblo but the gauge was different from that of the Santa Fe. The latter railroad accordingly made an agreement with the Denver and Rio Grande. A third rail was ultimately to be put down on the track of the Denver and Rio Grande to enable the Santa Fe to get its cars into Denver. This agreement was made in 1879. According to the terms of this contract the Denver and Rio Grande was to receive compensation at the rate of one and one-half miles for every mile hauled. Later in March, 1880, the tripartite agreement mentioned above was entered into. By 1882 the Denver and New Orleans Railroad had reached Pueblo and the general superintendent made a request of the general manager of the Atchison, Topeka and Sante Fe for the establishment of an agreement whereby an interchange of business might be brought about and through traffic over the Denver and New Orleans Railroad established. This request was refused. The Atchison, Topeka and Santa Fe declined to receive or deliver freight or passengers at the junction of the Denver and New Orleans Railroad, or give through bills of lading, or sell or receive through tickets or check baggage over that road. The Atchison, Topeka and Santa Fe Company charged more for tickets east from the junction than it received on through tickets east sold in Denver by the Denver and Rio Grande.

This refusal of the Santa Fe to carry to or from Denver and points between Denver and Pueblo except in connection with the Rio Grande at the same price was equivalent to saying to the public which railroad it should use and was supposed at once to be a plain violation of the constitution of the state. The matter was taken into court by the Denver and New Orleans Railroad. In defense of its refusal to deal in any way with this latter road the Santa Fe stated that it had made a contract with the Denver and Rio Grande for a through line from the Missouri River to Denver and that this contract was of great advantage to itself, and that this advantage could not be maintained except by keeping this contract requiring the exclusive dealing between the parties thereto.

In his decision Judge Hallett said this answer did not explain the true nature of the contract. The contract was an agreement between the Union Pacific of the first part, the Santa Fe and its leased lines of the second part, and the Rio Grande of the third part, for a division of traffic and territory in Colorado and New Mexico. When the contract was made, March 22, 1880, these three companies owned or controlled all the railroads in Colorado and the northern half of New Mexico. By the agreement, says Judge Hallett, they assumed to divide the country and allot to each of the parties its separate portion for the purpose of building new railroads. The parties were each bound not to trespass upon the territory of the other parties as defined in the agreement, and each stipulates with the other that it will not "voluntarily connect with, or take business from or give business to, any railroad which may be hereafter constructed" in the territory of the other. Having thus settled the matter of railroad building, the arrangements for a division of the traffic are as follows:

SECTION 4. All traffic to and from the Missouri River, and all competitive local traffic, both passenger and freight, to and from the territory south and west of Denver, reached by and covered by the Denver and Rio Grande Ry. Co. or Denver, South Park and Pacific Ry. Co., and lines constructed or to be constructed by them or either of them, shall be pooled between the Union Pacific Ry. Co. and the Atchison, Topeka and Santa Fe Ry. Co., one-half to each; also all traffic to and from the Missouri River, and to and from competitive local points, both freight and passenger to and from Denver, shall be divided, three-fourths to the Union Pacific Ry. Co. and onefourth to the Atchison, Topeka and Santa Fe Ry. Co., each company in each case to

deduct 40 per cent. as cost of operating; it being understood and agreed that all local business, both passenger and freight, to and from the Denver, South Park and Pacific Railroad Co. east of and including Weston station, shall be treated as Denver business and divided accordingly. It is also understood that the party of the third part is not to do any through business to and from Trinidad, or to and from New Mexico via Trinidad or El Moro.

SECTION 5. That as long as the parties of the second part, and each of them shall keep the agreements on their behalf herein contained, one-half of all the traffic, both passenger and freight, originating in Colorado and also in New Mexico at points as far south as the party of the third part is authorized to build under this agreement and coming or delivered to the party of the third part for transportation over any of the lines of the party of the third part, constructed or promoted by it, or coming or delivered to it for transportation from lines connecting with it and destined for points east of the line between Denver and El Moro and said line extended northerly and southerly, shall be delivered at South Pueblo for transportation over the railroads controlled by the party of the second part and the other half at Denver, for transportation over the railroads controlled by the party of the first part, as far as the party of the third part can legally control such traffic. It is further agreed that as to all traffic, both freight and passenger, interchanged between the party of the third part and the other parties hereto, to and from Denver via South Pueblo, and from and to South Pueblo via Denver, the party of the third part shall be entitled to and shall prorate with the other parties at the rate of one mile and one-half to one; that is to say, shall be entitled to and shall share in the distribution of such total fare and freight moneys for each mile of actual haul done by the Denver and Rio Grande Ry. as if the same were carried by it one mile and a half; but the allowance of the extra mileage shall in no event exceed local rates and in case of any more favorable pro rata being given to the party of the first part, the same shall be given to the party of the second part. It is further agreed that the rates between South Pueblo and Leadville and between South Pueblo and all other points west of Pueblo shall be as low as between the same points and Denver under any and all circumstances, and the party of the third part shall not discriminate against the parties of the second part in respect of cars and other facilities for the transfer of freight or persons.

SECTION 6. In order to enable the party of the third part to carry out its obligations under the above article, and for its protection it is further agreed that the parties of the second part shall, as long as the party of the third part shall keep the agreement on its behalf herein contained, deliver at South Pueblo for transportation and traffic, passengers or freight destined from points east of the said line of the party of the third part to points on its line, constructed or to be constructed or promoted by it or connected with it, in Colorado and also in New Mexico, to points on its line as far south as the party of the third part is authorized to build under section two of this agreement, and shall not deliver to, or cause to be transported over or voluntarily