Scandal

From Kuwana, Iseden planned to extend its Main Line across the Kiso Three Rivers to Nagoya, paralleling the existing Kansai Main Line, in hopes of offering direct service from Nagoya to Ise that would be much faster than its Kokutetsu rival. However, the implementation of this plan was fraught with problems and was the beginning of the end for Iseden. The plan worked out by the company called for buying an existing, out-of-use Kokutetsu bridge crossing the considerably wide rivers and then building a relatively short dual track section the rest of the way to Nagoya Station. This plan initially received approval from the Japanese national government (which owned Kokutetsu), but it was soon learned that Kumazawa and Iseden had bribed the Japanese Minister of Transportation in hopes of having him convince Kokutetsu to sell the old bridge to Iseden for less money. Kumazawa stepped down, labor strife arose, and the company's image was heavily damaged; this made the Nagoya-extension plan impossible at the time and so it was put off. On top of these problems, Iseden had invested too much money during the late 1920s and, due to the worldwide Great Depression starting in 1929, the company often found itself in financial trouble.

Competition with Sankyū

The fatal blow, however, came from competition with Sangū Express Electric Railway (Sankyū) and the opening in 1930 of the Sankyū Main Line, a rival line that paralleled the southern section of the Iseden Main Line. In fact, the Sankyū line opened within weeks of the completion of the Iseden's Tsu ~ Ujiyamada extension. During the construction of the two lines, the two companies held some meetings with each other and eventually Sankyū put forth a joint-business plan crafted to allow both companies to prosper. Passengers would've been offered a special travel package to ride from Osaka to Ujiyamada on Sankyū, visit Ise Grand Shrine and other spots, then ride from Ujiyamada to Nagoya on Iseden for more sight-seeing, with a similar package for the reverse direction as well. However, since Iseden was unable to extend its Main Line north to Nagoya, this joint plan never came to fruition and tension arose between the two companies. Misunderstandings that arose from Iseden's Nagoya-style business practices and Sankyū's Osaka-style business practices also added considerably to that tension. The two rival companies fought on during the 1930s, both pouring a lot of money into their lines. Ridership on the Iseden Main Line did increase, but not as much as hoped and not nearly as much as the increase that the Sankyū Main Line saw at that time; this was simply because Sankyū linked with Osaka, a major city, but Iseden only linked with Kuwana and Ōgaki which are much smaller cities. Eventually a merger battle broke out with Sankyū aiming to acquire Iseden in hopes of offering direct service between Osaka and Nagoya. In the end, Iseden, along with its three lines, was absorbed by Sankyū in 1936.

Iseden's original plan to extend its Main Line from Kuwana to Nagoya was carried out and completed in 1938 by another company and that section, along with the rest of Iseden's lines and infrastructure, were ultimately absorbed by Kintetsu in 1944.

It can be said that the mixture of competition from Sankyū, which provided direct rail service to Ujiyamada from a major metropolitan area, and Iseden's inability to connect its own line with a major metropolitan area of similar size was the main cause of the company's downfall.