RAILROADS: Pullman Monopoly

The U. S. Government is like a crippled octopus that cannot quite coordinate all its arms. Many of these arms last week were struggling with the vast problem of rearming the U. S. One, however, found time to buck the trend. The Department of Justice fired an anti-trust suit at a defense industry: Pullman, Inc., a holding company; subsidiary Pullman Co., owner and operator of virtually all U. S. sleeping cars; and subsidiary Pullman-Standard Car Manufacturing Co., No. 1 U. S. freight and sleeping car maker.

Nub of Assistant Attorney General Thurman Arnold’s charge was that Pullman has: 1) monopolized the making of and operation of sleeping cars; 2) charged railroads and the public unreasonably high rates for sleeping car service; 3) forced railroads to pay unreasonably high prices for rolling stock; 4) prevented the roads from using lightweight, streamlined equipment made by competitors. Caught in the suit’s 80-page web were Pullman Directors J. P. Morgan, Harold S. Vanderbilt, Richard K. Mellon, Alfred P. Sloan Jr., George Whitney, others—as potent a list of defendants as ever graced a civil action. (Since the Government, through reports filed with ICC, has long been aware of the practices to which it is objecting, Trustbuster Arnold considered a civil action “more appropriate” than a criminal.)

There was no doubt that Pullman is (and long has been) a virtual monopoly. In 73 years, from a $1,250,000 company in a bitterly competitive world, it has bought and fought its way to a $221,000,000 giant whose service contracts cover all U. S. railroads. Since 1900 Pullman and its subsidiaries have manufactured all U. S. sleeping cars except 15. It also collects all revenues from sleeping and parlor car ticket sales. If any car fails to gross a net sum (normally $9,000 yearly) to cover its share of Pullman expenses (porters, linens, maintenance, etc.) and what Pullman calls a fair return, Pullman keeps the car’s entire sleeping ticket revenue. If the car earns more than its set fee, Pullman splits (usually 50-50) the excess with the railroads at year’s end.

Justification for this double monopoly has long rested on three main points: 1) if individual railroads had to meet traffic peaks with their own sleeping and parlor cars, they would be burdened with a large excess investment; 2) because many sleeping car operations are through operations over several roads’ tracks, it takes a single building and operating company to make them efficient; 3) such a service requires a specialized personnel and equipment maintained by one company.

Trustbuster Arnold asked for separation of Pullman’s operating and manufacturing functions. He also asked revision of its railroad car contracts to give the roads and other, newer train makers (such as Budd Manufacturing Co.) a better break. Chief apparent weakness of his suit was its timing. For Pullman-Standard is busy on a $3,000,000 shell order from Britain, last week got a $254,000 educational order for shells from the U. S. War Department. Moreover, Pullman-Standard’s freight car capacity (74,700) may well be sorely needed to keep U. S. railroads ahead of Defense requirements. Question last week was whether either Pullman-Standard or the Department of Justice could spare the time for legal sparring now.