a discount, or charging a rate less than a schedule rate to a shipper on account of the large amount shipped by him.
As you are acting, therefore, in the interest of the company, and endeavouring to increase its legitimate earnings as much as possible, I find nothing in the statutes to prevent your making a discrimination, especially where the circumstances are such that a large shipper declines to give your road his freight unless you allow him to ship at less than the schedule rates. Therefore, there is no legal objection to the making of an arrangement which in practical effect may be the same as that proposed, provided the objections pointed out above are obviated.
You may with propriety allow the Standard Oil Company to charge twenty-five cents per barrel for all oil transported through their pipes to your road, and I understand from Mr. Terry that it is practicable to so arrange the details that the company can, in effect, collect this direct, without its passing through your hands. You may agree to carry all such oil of the Standard Oil Company or of others delivered to your road through their pipes, at ten cents per barrel. You may also charge all other shippers thirty-five cents per barrel freight, even though they delivered oil to your road through their own pipes, and this I gather from your letter and from Mr. Terry would include Mr. Rice.
You are at liberty, also, to arrange for the payment of a freight by the Standard Oil Company calculated upon the following basis, viz.:
Such company to be charged an amount equal to ten cents per barrel, less an amount equivalent to twenty-five cents per barrel upon all oil shipped by Rice, the agreement between you and the company thus being that the charge to be paid by them is a certain sum ascertained by such a calculation. If it is impracticable so to arrange the business that the Standard Oil Company shall, in effect, collect the twenty-five cents per barrel from those persons using the company's pipes from the wells to the railroad without its passing into your hands, you may properly also deduct from the price to be paid by this company an amount equal to twenty-five cents per barrel upon the oil shipped by such persons provided your accounts, bills, vouchers, etc., are consistent with the real arrangement actually made, you will incur no personal responsibility by carrying out such an arrangement as I suggest. It is possible that by a proper application to the court, some person may prevent you in the future from permitting any discrimination. Even if Mr. Rice should compel you, subsequently, to refund to him the excess charged over the Standard Oil Company, the result would not be a loss to your road, taking into consideration the receipts from the Standard Oil Company, if I understand correctly the figures. There is no theory, however, in my opinion under the decisions of the courts, relating to this subject, upon which, for the purpose, an action could be successfully maintained in this instance.
Yours truly,
Edward S. Rapallo.
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