Antitrust Status of Farmer Cooperatives: - USDA Rural Development ...

Eastern rail owners learned that a high volume of through traffic
was essential to the health of their capital-intensive companies. They
moved swiftly to control midwestern lines and gain direct access to
Chicago, St. Louis, and other emerging business centers. They also
learned that business couldn't be taken for granted and that purchases
and leases of other lines was the most effective way to guarantee the
generation of sufficient revenue.
While the railroads were operating more efficiently and hauling
more traffic at falling rates, large numbers of shippers and, for
different but related reasons, the railroads themselves were unhappy
with the existing situation. Most problems stemmed from variations
in the degree of competition faced by the railroads. Frequently,
several lines operated over long distances between major cities. And
it was just as common for a single railroad to be the only service
provider between cities and their surrounding countryside. This led
the carriers to charge relatively low rates on long, competitive hauls
and higher rates on noncompetitive short hauls.
The railroads wanted relief from the cutthroat competition
between cities. Competing lines negotiated cartel arr angements with
the objective of sharing traffic and revenue in an orderly manner.
These efforts to reduce competition were only modestly successful.
They lacked a legal foundation and represented little more than
gentlemen's agreements. Both participants and outsiders frequently cut
prices to increase profits by taking business away from carriers who
honored the cartel agreement.
Shippers throughout the Nation began to complain about volatile
and discriminatory freight rates. In the East, "rate wars" were so
common that charges often changed every week. A period of low
rates would be followed by one of excessively high rates. Smaller
shippers protested discriminator y low rates in favor of big shippers,
such as John D. Rockefeller and his Standard Oil Company.
Midwest and Great Plains farmers were particularly impacted by
questionable rail practices. They had to rely on rail transportation and
were often served by a single rail line. They were subjected to shorthaul
rates that exceeded those of longer hauls, downgrading of their
grain by rail-owned local elevators, and the general practice of
charging what the traffic will bear.
In 1867, Oliver Hudson Kelley led farmers to organize the
National Grange of the Patrons of Husbandry. By 1875, it had grown
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