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against the National Packing Company, the leaders of the
Big Four companies soon after their acquittal notified the
Government of their intention to terminate their j oint owner-
ship in the National Packing Company by dissolving it. The
dissolution was carried out in 1912 and approved by the
Government. No doubt the vigorous trust prosecution which
had just brought about the dissolution of a number of large

"The Federal Antitrust Laws, p. 64.
"Moody's Manual, 1913, pp. 1657-8.
68 Outlook, V. 96, p. 144.

Decisions and Dissolution Decrees 53

combinations was effective in leading the packers to take this

In dissolving the National Packing Company the distri-
bution of the assets was based upon share holdings in the
company. The $15,000,000 of outstanding stock were held
by the Swift, Armour, and Morris interests. In dissolving
the company, the Swift interests received 46 percent of the
assets, the Armour interests 40 percent, and the Morris
interests 14 percent. 60 The Swift interests received 16 pack-
ing plants and stockyard interests and control of 84 branch
houses and selling agencies. The Armour interests received
10 packing plants and control of about 75 branch houses
and selling agencies. The Morris group received 4 packing
plants and control of about 30 branch houses and selling
agencies. Thus, after nine years of litigation the packers
somewhat admitted of having an illegal combination by vol-
untarily dissolving it, under the prc .mre of public opinion
and new impending prosecution.

There is no evidence to show that any material changes
were effected by the dissolution. The complaint of the public
press temporarily subsided, but is rising again. During the
three years following the dissolution (1913-1915), the Swift
company increased its sales to $500,000,000 annually. 61 In
the last of these years 11,000,000 head of live stock were
handled by the company, and the earnings for the year were
$14,179,362 or 19 percent on the capital stock. The lowest
annual earnings during these years were much higher
than those of any previous year. During the fourth year
following dissolution (1916) the sales of the company rose to
$575,000,000, and the earnings rose to $20,465,000, or to
28.6 percent on the capital stock which had been more than
doubled from 1905 to 1912. President Swift said the profits
for the year amounted to one-half a cent per pound of out-
put. 62 In this year the earnings of the Armour company
were $20,100,000, or over 100 percent on its $20,000,000 of
stock which had not been increased since 1904. 63 Both com-

The Chronicle, V. 95, pp. 547-8.

Moody's Manual, 1916, pp. 3571-3.

"The Chicago Daily Tribune, Jan. 5, 1917, p. 16.

Ibid., Jan. 15.

54 Trust Dissolution

panics have increased their capital stock to $100,000,000
by the declaration of a stock dividend.

In 1915, five packing companies, including the Swift,
Armour, and Morris companies and two of their subsidiaries,
were each fined $25,000 by the Missouri Supreme Court for
violating the state antitrust laws. 64 The defendants made an
appeal from this decree, but the appeal was dropped late in
1916 as part of an agreement with the Court by which the
companies agreed to pay half of the fines and to give a
written promise to obey the laws of the state and the orders
of the Court. In the latter year a resolution was introduced
in Congress to have the Federal Trade Commission make an
investigation of conditions in the packing industry. This
resulted in intermittent hearings before a sub-committee of
the house judiciary committee. At these hearings the cattle-
men claimed, among other things, that the packers exercised
undue control over the animal industry through their con-
trol of the stock yards by refusing to buy animals before 10
or 11 o'clock in the morning in order to allow greater shrink-
age to take place ; by refusing to sell sites around the yards
for building competing packing establishments; and by re-
fusing to bid against each other for live stock. Despairing
of action on the resolution by the committee or by the House,
Congressman Doolittle of Kansas filed a copy of the hearings
and charges against the packers with the Federal Trade

In conclusion it may be said that conditions are still
very favorable for maintaining combination among the pack-
ers through a "gentlemen's agreement." It is doubtful
whether any investigation could reveal the extent and effects
of collusion among the big packing companies ; their agree-
ments always have been elusive. The steady encroachment
of the demand upon the meat supply of the country has no
doubt aided successful combination in the industry. Per-
haps the employment of other means of storing meat and the
increasing tendency on the part of both consumers and stock
growers to organize for the purpose of better marketing and
distribution will help to bring competition more generally
64 The Chicago Daily Tribune, Dec. 17, 1916, p. 1.

into th

Decisions and Dissolution Decrees 55

into the meat industry. But as long as the bulk of the busi-
ness remains under the control of three large companies
whose extensive plants, selling agencies, and stockyards are
strategically located throughout the country and whose
stocks are largely held by a few cooperating individuals living
in the same place, it will be difficult to break up a harmony
of action that has been successful and highly profitable for
many years.

NOTE. Since the above was written a report of the
Federal Trade Commission on the packing industry has
been published, which reaffirms in 1918 nearly all the previous
charges against the packers. 65 The Commission charges the
packers with being in a definite and positive conspiracy for
the purpose of regulating the purchase of live stock and
controlling the price of meat, and alleges that the "big five"
companies (formerly the "Bix Six" before the dissolution
of the National), the Armour, Swift, Morris, Wilson, and
Cudahy, have a monopoly not only in the meat industry, but
also in eggs, cheese, and vegetable-oil products and are
rapidly extending it to cover fish and other foodstuffs. Not
only do they control the meat industry in the United States,
but they also control more than half of the export meat
production of Argentina, Brazil, and Uruguay, and have
large investments in other surplus meat-producing countries,
including Australia. Although the five companies handled
from 60 to 80 percent in the principal branches of the
industry, the Commission claimed that their monopolistic
position rested primarily upon the ownership, separately or
jointly, of stock yards, car lines, cold-storage plants, branch
houses, and other essential facilities for the distribution of
perishable food. It also pointed out that the control of
the "big five" was held by a very small group of individuals
and that, excluding the profits of the Swift company on its
South American business, the profits of the Armour, Swift,
Morris, Wilson, and Cudahy companies for 1917 were
19.8, 33.4, 22.6, 29.6, and 23.2 percent respectively.

88 Annals of the American Academy of Political and Social Sciences,
V. 92, pp. 170 et seq.

56 Triist Dissolution

To make an end of the monopoly, the Commission recom-
mended that the Government should acquire through the
Railroad Administration all rolling stock used for the trans-
portation of meat animals ; the principal stock yards of
country to be treated as freight depots and to be operated
under such conditions as to insure competitive markets; all
privately owned refrigerator-cars, and all necessary equip-
ment for their proper operation ; such branch houses, cold-
storage plants, and warehouses as are necessary to provide
facilities for the competitive marketing and storage of food
products in the principal centers of distribution and con-



HE suit brought by the United States against the Stand-
ard Oil Company of New Jersey was decided by the Su-
preme Court on May 15, 191 1. 1 This decision, in which the
whole trust policy of the court was reviewed, attracted much
attention and discussion, since it ordered the dissolution of
the oldest, the best known, and financially, the most power-
ful of our trusts.

The petroleum industry is one of constantly increasing
importance throughout the world. The world's output in
1905 was about 215,000,000 barrels 45 percent more than
in 1900. The United States more than doubled its produc-
tion from 1900 to 1905. The total output of crude oil in
this country in 1905 was 134,717,580 barrels of 42 gallons
each, or more than 60 percent of the world's total produc-
tion. Of this amount more than 99 percent came from the
six leading oil fields known as the Appalachian, Lima-Indiana,
Illinois, Mid-Continent, Gulf (Texas), and California fields.
The crude oil from the Gulf and California fields contrib-
uted little to the supply of illuminating oil and other high
grade products. In this same year 66,982,862 barrels of
crude oil were used for refining purposes, yielding products
valued at $175,005,320. 2 Of these products, illuminating
oils made up 52.2 percent of the value, lubricating oils 14.2
percent, naphtha and gasoline 12.2 percent, paraffin wax
5.7 percent, fuel and residuum 7.1 percent, and all other
products 8.6 percent. 3 During the decade following 1905,

*221 U. S. 1.

2 Report of the Commissioner of Corporations on the Petroleum In-
dustry, part I, p. 260.

"Report on Petroleum Industry, Part I, p. 261.


58 Trust Dissolution

the production of petroleum in the country was again more
than doubled and the value of its products more than kept

Four periods may be marked out in the history of the
Standard Oil interests. 4 During the first period, ending in
1882, almost complete mastery of the oil industry was se-
cured. A concentration of oil interests which formed the
basis of the Standard Oil system began with a partnership
organized at Cleveland, Ohio, in 1867, under the name of
Rockefeller, Andrews and Flagler. In 1870 this partnership
was converted into corporate form by organizing the Stand-
ard Oil Company of Ohio with a capital stock of $1,000,000.
Although this company was from the start the most import-
ant individual refining concern, it had only about 10 percent
of the total refining capacity, the remaining 90 percent being
divided among about 250 refineries. 5 It had no refineries
outside of Cleveland and was not interested in the production
of crude oil. A policy of expansion was rapidly carried out
by the company and by 1879 combining oil interests, working
through the Standard Oil Company of Ohio, obtained more
than 90 percent of the refining business. The control was
secured through rebates and discriminating rates obtained
from railroads, monopolization of the pipe lines extending
from the oil fields to the refineries, local price cutting, ab-
sorption of competing refineries, and restraining contracts
with competitors. 7 The Standard Oil was unexcelled in the
use of unfair methods of competition by means of which it
built up and maintained its monopoly. In a brief history
only a few typical examples can be given to show how far the
Standard's position is attributable to unfair methods.

The most important factor in establishing the Standard's
monopoly was the railroad rebate. Favored rates and re-
bates were a vital factor because the crude oil being a rela-
tively heavy, bulky, and cheap commodity, the transporta-

4 Report of the Commissioner of Corporations on the Petroleum In-
dustry, Part I; Part II; Report of the Commissioner on the Trans-
portation of Petroleum; 221 U. S. 30-45; Brief of Facts and Argument
for Petitioner in suit against the Standard Oil Company. See Biblio.

Report on Petroleum Industry, Part I, p. 48.

"Ibid., pp. 49, 54.

f lbid., pp. 49-66; 221 U. S. 32, 33.

The Dissolution of the Standard Oil Company 59

lion charge made up a large part of the price of the oil
delivered at the refineries. The company continuously re-
ceived favored rates. The first and one of the most striking
illustrations of rebates is furnished in the case of the South
Improvement Company. 8 This corporation was organized
by the Standard interests in 1872. It aimed to secure con-
trol of the business of shipping oil, and for this purpose it
entered into agreements with the Pennsylvania, the Erie and
the New York Central and Hudson River railroad companies,
under which a division of the Standard's traffic was to be
made among the three roads. At this time competition
among the railroads, as well as the refiners, was keen. The
Standard, being the largest refiner and located at Cleveland
where strong railroads competed for the traffic, was able to
secure favored rates into the city. The agreements named
the gross charges for transporting oil from the oil fields to
refining centers and to the seaboard, and expressly provided
for rebates from the gross rates on oil transported and con-
trolled by the South Improvement Company. The gross
rates, which the independents paid were sharply advanced.
They were also much higher from the chief shipping points
in the oil regions used by the independents than from the
points used by the Standard. 9 The agreements provided for
rebates to the Standard ranging in the case of crude oil from
about 40 to 50 percent and on refined oils from about 25
to 45 percent of the gross rates. The higher rebates favored
those points .used by the Standard. A far more striking
and effective provision of the agreements was that similar
rebates should be paid to the South Improvement Company
on all oil transported for other parties. 10 No competitor
could long hold out against such odds. For example, the
gross rate from any common point to Cleveland was eighty
cents a barrel. The Standard secured a .forty cent rebate
on all oil controlled by it and in addition a forty cent cash
rebate on all oil shipped by the independents. The agree-
ments also provided that the South Improvement Company
should be furnished daily with duplicate copies of the man-

8 Report on Petroleum Industry, Part I, p. 55 ff.

9 Ibid., pp. 55-6.
"Ibid., p. 55.

60 Tru$t Dissolution

ifest and way bills of all oil shipments, which should show the
name of the consignor, place of shipment, exact kind and
quantity of product shipped, name of consignee, and the
destination of shipments. In this way were provided com-
plete facilities for espionage upon the shipments of com-

The details of the arrangements with the railroads were
effectively concealed for a time but the facts soon became
known to the independent shippers and provoked most in-
tense antagonism. In March, 1872, less than three months
after the contracts were entered into, the railroads agreed
to abandon them, to reduce rates, and to refrain in the future
from all discriminations in charges upon oil. But during
these few months, as a result of impossible competition and
fear, twenty-one of the twenty-six refineries at Cleveland
sold out to the Standard. These acquisitions gave the
Standard 20 percent of the total output. This success was
soon followed by an extensive campaign for control of re-
fineries in other fields.

The Standard interests also entered into several alliances
with other refiners. The first of these was the Petroleum
Refiners' Association organized in 1872, which is reported
to have embraced four-fifths of the refining interests of the
country. Mr. Rockefeller was president of the association.
This organization lasted less than a year. In 1874 the Cen-
tral Association of Refiners was organized with Mr. Rocke-
feller as president. This association embraced a large per-
centage of the refining capacity of the country. The prin-
cipal feature of the association agreement was that the
refiners entering it were to conduct their manufacturing
operations separately, but that the Standard was to have
authority to make all purchases of crude oil and sales of
refined oil, to decide how much oil each refiner should manu-
facture, and to negotiate all freight and pipe line expenses. 11
The influence secured by the Standard over other refiners
was further increased because the Standard, in making all
rates, secured a ten percent rebate from the railroads. 12

"Report on Petroleum Industry, Part I, pp. 49-50.

The Dissolution of the Standard Oil Company 61

In the same year many important refineries were acquired
by the Standard and many independents were driven into
bankruptcy. 13 In the following year the Standard Oil in-
creased its capital stock to $3,500,000. Continuous acqui-
sitions of property in the oil regions followed. The Stand-
ard was also active on the Atlantic seaboard where it ac-
quired the terminal facilities for unloading, storing and
handling the oil of the most important railroads.

It has been pointed out above how the Standard con-
tinued to secure preferential rates and rebates which had
been the object of the South Improvement Company. In
1879 the Standard was receiving a rebate on its crude oil
from western Pennsylvania fields amounting to no less than
51% cents on a tariff rate of $1.40 per barrel. 14 At the
same time it was obtaining a net rate of 80 cents per barrel
on refined oil to the seaboard from Cleveland and western
Pennsylvania points, while its competitors in western Penn-
sylvania, nearer the seaboard, were paying $1.44^/2. 15 When
these rebates became known in 1879, suits were brought
against the Pennsylvania Railroad and the United Pipe
Lines. Indictments were also obtained against a number of
the most prominent Standard Oil men. This litigation was
abandoned, however, in 1880, as a result of an agreement
on the part of both the railroads and the Standard interests
to discontinue these abuses. 16 This second pledge was not
kept and the Standard continued to obtain secret rates and
other discriminating concessions.

Next to railroad discriminations, the most important
factor in building up the Standard's supremacy in the oil
industry was the monopolization of the pipe lines, first,
those running from the oil fields to the refineries, and later
those built to the seaboard. The superior efficiency and
safety of pipe-line transportation, as compared with that by
rail, was early recognized. By the early seventies nearly
all oil producing districts in the Appalachian field were con-
nected by pipe lines with nearby refineries or with railroads

"Report on Petroleum Industry, Part I, pp. 49-50.
"Ibid., pp. 63-4.
"Ibid., pp. 63-4.
"Ibid., p. 65.

62 Trust Dissolution

which completed the haul to refineries at the seaboard or
other refining centers. There were five pipe-line systems in
these oil regions. The Standard proceeded to secure a
monopoly by employing the same methods used in securing
the refining business. Throughout the Standard had the aid
of the railroad rebates to subdue independent pipe lines.
The first system acquired was the United Pipe Lines in 1874.
The acquisition of many other pipe lines soon followed. In
1877 the Empire Transportation Company, the strongest
pipe line rival of the Standard, was acquired after a bitter
fight. 17 This company was affiliated with the Pennsylvania
Railroad and in the bitter fight that ensued the Standard
had the assistance of other railroads entering the oil regions.
For a time the Standard withdrew all its oil business from
the Pennsylvania road, but after a few months the Pennsyl-
vania terminated the struggle by a complete surrender of
the Empire Transportation Company with all its pipe lines,
refineries, and tank cars to the Standard Oil Company. 18
This, together with other acquisitions in 1877, gave the
Standard a dominant control of the pipe line facilities in the
oil regions. 19 It soon had 80 percent of the pipe lines then
in existence. 20 No one could reach the railroads without the
Standard's consent.

The Standard, aided by both railroad advantages and
control of the pipe lines, rapidly increased its control of the
oil refining business. The Standard absorbed practically all
the independent refineries in the Oil Creek district of north-
western Pennsylvania and twenty of the remaining inde-
pendent refineries in the Pittsburg district between 1875
and 1877. 21 Practically the entire group of independent
refineries at Baltimore were absorbed in 1877. 22 Not a year
passed without the acquisition of concerns competing in the
production, transportation, refining or marketing of petrol-
eum and its products. Among these were the largest oil

11 Report on Petroleum Industry, Part I, p. 53.

18 Ibid.

19 Ibid.

Ibid., p. 52.
81 Ibid., p. 50.

The Dissolution of the Standard Oil Company 63

concerns in the country. A great many of the plants were
dismantled as soon as acquired.

Some of the larger acquisitions were made by the ex-
change of stock in the Standard Oil of Ohio. Others were
acquired through the purchase of stock by cash taken from
earnings. In only a few instances were the acquired prop-
erties conveyed to the Standard Oil Company. The stocks
of the acquired concerns were put in the names of the various
stockholders of the Standard Oil of Ohio, but were held for
the benefit of all the stockholders. The previous owners of
the larger concerns which were acquired by the exchange of
stock became stockholders in the Standard. They usually
remained with their concern in the capacity of manager.
Often there was no change and the plant was continued as a
bogus independent. In this way the number of stockholders
in the Standard Oil of Ohio increased from 6 in 1870 to 37
in 1879. This arrangement of the acquired interests allowed
the greatest measure of secrecy and avoided showing a direct
acquisition by the Standard Oil Company.

The Standard interests having obtained a monopoly con-
trol of the refining and pipe line business, proceeded to per-
fect the organization of the companies brought under their
control. In 1879 a trust agreement was entered into by the
terms of which the sfocks held by the Standard interests were
turned over to three trustees, to hold, control, and manage
the same for the Standard Oil Company of Ohio. 23 The
trustees agreed "as soon as they could conveniently do so"
to divide and distribute the stocks among the stockholders
according to their respective proportions and interests. 24

The Standard promptly entered into arrangements for
a division of its heavy traffic among the various railroads
entering the oil fields. The attempt to harmonize the sit-
uation was soon disturbed by an unexpected move on the
part of some independent oil interests. This was the con-
struction of a through pipe line from the oil fields of north-
western Pennsylvania to the seaboard, 109 miles distant, by
the Tide Water Pipe Company. The independent refiners

28 Brief of Facts and Argument for Petitioner, V. I, p. 21.

64 Trust Dissolution

were ready to assist the Tide Water enterprise because it
would free them from the railroads. The pipe line project
was at first regarded by both the Standard and the railroads
as being utterly impracticable, but its successful operation
in 1879 soon proved that a new era had come when oil trans-
portation would be largely freed from the railroads. The
day of the railroads as the chief transporters of oil, upon
which the Standard's monopoly was dependent, was doomed.
The Standard quickly attempted to gain control of the pipe
line. Again the Standard was assisted by the railroads
whose interests were also involved. The railroad rate from
western Pennsylvania to New York Harbor dropped almost
in a single day from $1.15 to 30 cents a barrel, while the
Standard got still lower secret rates. 25 The Standard cut
its local pipe line charges. It then proceeded to buy up the
feeders upon which the pipe line was dependent, thus reduc-
ing the volume of business and increasing its cost per unit.
Attempts were also made to ruin the credit of the Tide Water
Company. In 1881 the Standard interests acquired all ex-
cept one of the independent refineries at New York, which
furnished the market for the Tide Water Company's prod-
uct. 26 The Tide Water interests immediately commenced
the construction of their own refineries at the seaboard.

In the meantime the Standard planned a pipe line of its
own, but on a larger scale. In 1881 it organized the Na-
tional Transit Company with a capital of $5,000,000 for
the construction of a trunk line to the seaboard which should
connect with local pipe line systems. About the same time

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