United States. Industrial Commission.

Preliminary report on trusts and industrial combinations, together with testimony, review of evidence, charts showing effects on prices, and topical digest online

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that the affidavit was improperly made, why, of course, our case failing, we could
not renew it. That is all there was about it. Our attorneys denominated it a
technical matter, and not one of good law. I don't know anything about it.


The stock that these people purchased in the United States Pipe Line belonged,
some of it, to three of the largest refinery owners in the association of refiners.'
The refineries belonging to the independents have no connection with any of the
stock companies. 'The refineries are owned by individual operators, and have
nothing in common with the United States Pipe Line, or the Pure Oil Company,
or the Producers' Oil Company, Limited, or any other transportation or oil market-

1 Sl'i? Mr. Lee, p. liTI); Mr. Archbold, p. 577; Mr. Phillips, 590.
•' Si-.j Mr. Westgatu, p. 1370.


ing company. Tliey market their oils individually. They are competitors with
one another. I go into the market and I meet there my brother refiner, and I put
a price upon my goods and he puts a price upon his goods. No objection; free,
open competition among all these refineries that are in the field. There are to-day
something like 15 of them, which furnish oil to the transportation companies;
and we sell oil not only to the Pure Oil Company, doing business in Europe, but
we sell oil to England, France, Italy, and every other country, independently of
the Pure Oil Company. So do not confound these refineries with what we are
going to finally deal with — the trust; because they have no connection with it.
They are independent; all competing against one another in the markets of the
world. ^

Q. (By Mr. Farquhar.) Do these refineries also sell to the Standard?— A. Oh,
yes. I sell the Standard lots of goods, and I make them pay all I can, too, like
everybody else.


These three gentlemen that I referred to as owning three of the largest refiner-
ies connected with this refiners' association — if you choose to call them such;
they are not an association — when they sold their stock they sold their refineries
as well, and they received a large sum of money for them. Within less than
8 months fi'om the purchase of these refineries by the Standard Oil Company one
of them, belonging to Mr. Ramage, was dismantled and destroyed. The next to
be partially dismantled was that belonging to Hon. John Pertig, of Titusville,
known as the National Befining Company. The nest was the Continental Befin-
ing Company. All these refineries were first class, and built, especially the last
two, in modern times, and with every improvement; so was Mr. Bamage's; in
fact, he made more by-products, etc., than any other. All these refineries have
been demolished and taken from the ground where they originally stood. That
has all happened since 1895.-

Q. (By Mr. Phillips.) Was any efliort made to buy other refineries? — A. Oh,
yes.* These people seemed to constitute themselves a committee. They labored
with me, and labored with others. They said that it was the best thing to sell
out and quit. The rest of us did not think so, and we are on earth yet. I should
have been glad to have gentlemen who are anxious to hear about these modern
things hear those representations.


Q. Now, will you explain something in regard to the Producers' Oil Com-
pany? — A. The Standard Oil Company bought a majority of the stock of the
Producers' Oil Company, Limited. Its method of operation in purchasing that
stock, you have before you already.* Through the same method they purchased
a majority of the stock of the Pure Oil Company, Limited. They have not been
permitted by the courts to vote it, and it has had to go back into the hands of the
original owners, if necessary, by order of court.

Q. Will you make some statement in regard to the Pure Oil Company as
organized thereafter?— A. The Pure Oil Company is organized under the'laws of
New Jersey. Its capital at present, I believe, is S'3,000,000, with 83TT,000 paid in.
We are very much afraid that when our United States Pipe Line Trust expires,
which will be within the next 15 months, there may be some attempt to get pos-
session of more of that stock. We have felt the necessity of combining or putting
the stock of the several companies into 'the hands of the Pure Oil Company and
forming a voting trust, solely for the purpose of protection. I desire to say that
the paper' which was referred to has been amended. First, it isnot a permanent
voting trust. Second, three-fifths of the stock voted at any time can dissolve the
trust, or can overrule the power of the voting trust. Only one-half of this stock,
and ten shares over, is put in trust, and three-fifths of the whole at any time can
control the policy of the company. Under the terms of the charter it terminates
within 46 years. Therefore it is not perpetual.

Q. (By Mr. Farquhar.) Is that one of the new amendments?— A. Yes.

1 See Mr. Lee, pp. 270, 271, 390.

^SeeMr. Westgate, p. 370.

' See Mr. Archbold, p. 530; Mr. Westgate, p. 371.

= See p. 508,^wliere the amended form of this voting trust agreement, as well as the original
form, is given.


Q. (By Mr. Phii.lips.) Was it originally formed for over 50 years? — A. No;
chartered for 50 years.

Q. (By Mr. Faequhar.) The old form required four-fifths? — A. Yes.

Q. Section four of section 12 (reading): " This agreement may be canceled and
the trust hereby created dissolved only by the winding up of the Pure Oil Com-
pany, or by the copsent in writing, duly executed, of the equitable owners of
four-fifths of the shares held in trust hereunder, and of four-fifths of all the other
shares of the company, after providing in full for the redemption or purchase, at
§110 per share, in cash, of all the preferred and common shares of the company
at the time outstanding." — A. Yes.

Q. Is this redemption feature still maintained, that the trust can not he dis-
solved until after providing in full for redemption or purchase at $110? — A. That
provision is wiped out by the fact that three-fifths can control or change the
by-laws, or change anything pertaining to the organization or management of
the company.

Q. Well, is this stock-redemption feature still retained? — A. I don't know, sir;
I can't answer that question.


Q. Now, it has been said here that this Pure Oil Company is not a trust. I
called the attention of another witness to the fact that it is specifically mentioned
as a trust in your articles of agreement and also of incorporation. — A. Yes.

Q. So that you are not afraid to call it a trust? — A. I call it a voting trust. I will
submit your question to decision, if you choose, according to the definition of a
trust given by the Commercial Year Book of the New York Journal of Com-
merce. The definition is, "As popularly used, the word ' Trust' is now applied
to any consolidation, combine, pool, or agreement of two or more naturally
competing concerns, which establishes a partial or complete monopoly, in certain
territory, with power to fix px'ices or rates in any industry. Viewed from the
standpoint of the consumer, the informal agreement and the ironclad combine
look alike if the one has the same effect as the other upon prices."'

Now, there is nothing in the world about the Pure Oil Company that can possi-
bly lead up to that definition. There are several other definitions that I can
refer to.

Q. Let me suggest that there are five true definitions given by Mr. Cook, who
is an authority, one of the greatest lawyers in the country, and also by Von Halle.
There are five forms of trusts.

Q. (By Mr. Phillips.) I would ask the Senator to read the definition, under
the Sherman act, of a trust, if he has it there. — A. It needs no argument to show
that the Pure Oil Coinpany is not a trust. It lacks every element of a trust. A
trust is defined by the antitrust law known as the Sherman act of 1890 as fol-
lows: "All trusts and combinations in restraint of trade are unlawful." Another
accepted definition is that a corporation or combination of corporations, with
vast capital, made for the purpose of securing and maintaining a monopoly in
any branch of industry, is a trust. The odious feature is the aim and purpose to
secure a monopoly. The Pure Oil Company was organized, not to secure a
monopoly, but to prevent a monopoly in the oil industry. The Pure Oil Com-
pany is not in restraint of trade, but in aid of trade, and to maintain competition.
It expires by the expiration of its charter 40 years from the 6th day of next
November. It is therefore neither permanent nor jjerpetual as alleged. It would
be silly to hold that a corporation with a paid up capital of only §377,000, opposed
by a trust in the same industry with a par capital over 200 times and a market
value over 1.000 times as great, could be a monopoly or restrain trade; and unless
it is a monopoly, or restrains trade, it can not be a trust. That the power to vote
one-half of its stock has been placed in the hands of trustees, to prevent a great
monopoly from intruding to destroy it, does not change the character of the cor-
poration or make it a trust.-' If the Pure Oil Company should ever develop monop-
olistic tendencies, the present holders ^\'ould be glad to have it destroyed. If
any antitrust legislation, at any time, brings within its restrictive or destructive
provisions the Pure Oil Company, the stockholders of that company will welcome
its destruction.


Q. You are a large holder in most of these companies. You are president of
the United States Pipe Line Company, and you are a large holder in the Pure Oil

^ Coraniercial Yiuir Book, ISDti, p.G43.

2 See Mr. Boyle, pp. 4i8, 444, 413, 464, 488; Mr. Archbold, p. .507; Mr. Phillips, pp. 591, 594-598.


Company. Do you know of any effort ever having been made to make a com-
bine of these various companies with the Standard?— A. No, never; no, sir.

Q. (By Mr. Fahquhar.) The commission has been furnished the original form
of the incorporation of the Pure Oil Company, and it will be printed as a part of
the minutes of this commission. Now, can you furnish with your testimony a
copy of the amended one in proper form?— A. Oh, yes; I shall be very glad to.'


Q. That is what I wanted to know.— A. Now, as to the changing of that trust;
we have not got the voting trust yet. We, perhaps, are crossing the bridge before
we get to it: but this has not been accomplished. It has not been accomplished,
so far as the combination of the stock of those companies is concerned. All that
is in the shape of a trust, out of about three or four million dollars, is ^377,000.
The other is in contemplation, because we fear that when this present trust of
ourc — the United States Pipe Line — expires, we shall be in danger, and we are
going to put ourselves under cover; that is all.

Q. You have incorporated in the State of New Jersey the Pure Oil Company?—
A. Yes.

Q. Yoti have how much capital paid in? — A. .$377,000.

Q. You are still under the operations of a majority of the stockholders bring-
ing in other companies? — A. Oh, no; we are simply talking about it and hope to
accomplish it. It is not a question that has absolutely been decided, though I
expect that it will be done. The amendments have not even been printed; but
we are going to try to get this stock in for self -protection, and put it into the vot-
ing trust. It has not been accomplished yet by any means.


Q. (By Mr. Phillips.) Now, will you answer the other question in regard to
any effort amongst all these companies to make a combine with the Standard Oil
Trust? — A. I was pi'esident and general manager of the United States Pipe Line
Company from its inception up to a little over a year ago, and probably I should
have been still in the management of it had my health not failed. I was always
present at general meetings and had, under our by-laws, the appointment of all
committees. During our trouble that I have recited relative to the construction
of this line, I appointed a committee, as chairman of the board of directors, to go
to New York and see if some arrangement could not be made with the Standard
Oil Company by which they would permit us to go under the railroads of the
country. We did not go to the railroads. The railroads had nothing to say about
it. We went to the Standard Oil Company, but not for the purpose of selling one
single share or one dollar's worth of our property. The resolution or motion
offered was that the committee go to New York for the purpose of seeing if the
Standard Oil Company would not let up and let us go through to the coast. I
appointed that committee under that resolution. Mr. Phillips, Mr. Lee, Mr.
Murphy, Mr. King, Mr. Jennings of Pittsburg, and some other gentlemen were
appointed to go there for the purpose I have named. They had no authority to
make any proposition to sell any portion of this property or to make any settle-
ment with the Standard Oil Company on any such basis as selling out any part of
the company's property. I am sure they did not make any such proposition. -



Q. In regard to the opposition to laying the pipe line through Pennsylvania it
was said by Senator Lee that certain dodgers were circulated in the eastern part of
the State.3 Can you state the purport of these dodgers, or have you any knowl-
edge of them?— A. In 1868 the legislature of Pennsylvania passed an act for the
incorporation of pipe-line companies, as I told you yesterday. We got such a
law, through the permission of Mr. Thomas A. Scott,* for eight counties in the
northern part of Pennsylvania, and the Wallace act of 1874 repealed that law.
Immediately upon the repeal we attempted to get a law passed giving the right
of eminent domain for the construction of pipe lines. That was mtroduced regu-
larly from 1874 up to 1883— every session during my career in the legislature, both
House and Senate, for 10 years. It was my duty to introduce this bill and

1 See D 508 for both forms of the trust agreement. = See p. 262.

2 See Mr. Archbold, pp. 530, .531, 548; Mr. Phillips, p. 593. « See p. 605.


endeavor to pass it. In 18s3 the bill was pending, and the Standard Oil Company,
by its agents, had gone all over the southern portion of the State of Pennsylvania,
which is a very beautiful part of the country, as you know, and had said to the
farmers that if the pipe lines were laid in that region there would be a general
destruction of their property; that their orchards would be destroyed, and there
would be general havoc, and the pipe lines would explode and probably destroy
life as well as property. At the same time they had thousands and thousands of
miles of pipe line in the States of Pennsylvania, Ohio, and West Virginia. In
order to meet and counteract the imjjression among the people Senator Lee and
myself, night after night and week after week, visited the schoolhouses and court-
houses, and every place where we could get a gathering of people to listen to our
explanation of the necessity of the passage of this law. Dodgers were issued and
pushed under my arm. The effort was to get my attention to them. As I entered
the court-house in Lancaster, Pa., there was pushed under my arm a paper which
read: " Look out for false prophets." Beneath it read, "These people are endeav-
oring to pass a law that will destroy the springs on your farms; it will blow up
your houses; it will create havoc in your fields, when the pipe bursts, by killing
the grass. The most dangerous of all laws. "

We had placed our circulars in all of the seats of the court-house in Lancaster,
Pa. , and some miscreant went in there and took all of our circulars setting forth
our object and what we were after, and in their place dropped into the seats these
yellowpapers, on which was written, " Look out for false prophets." Those dodg-
ers were furnished — I don't care what the other witness said.' He was not on the
ground to make any speeches in behalf of the oil country. He can not say that
those dodgers were not circulated, and if he does he certainly says that which he
does not know anything about. I was there through the whole of it, and we
went on with that operation week in and week out and month in and month out.
We were from 1874 to 1883 getting that law.

810,000,000 IN REBATES FROM OCTOBER 17, 1»77, TO MARCH 31, 1879— THE EVIDENCE.

Q. There was one other question on which your testimony was brought into
dispute; that of the .$10,000, 000 in rebates that was said to have been paid to the
Standard Oil Company in a given time. This, I believe, was denominated a lie or
a lusty lie. I think it was in connection with this question. — A. Well, gentle-
men, I do not mean to lie ; I do not mean to tell anything but the truth as I under-
stand it, and I have said nothing before this commission that I can not prove, and
my statements made in 1888 are just as sacred to me to-day as they were when I
made them. If I have told any lie I shall beg the pardon of the great United States
of America and all my friends therein, and endeavor to rectify any wrong that I
have done.

My authority for that, which I will produce, is unquestioned, and I defy any-
body to prove that my assertions or statements at that time were false. I desire
you to turn to page 101 of my pamphlet, which I have given you. I need not
take your time by reading over all the evidence. It is before you on pages 101,
102. and 103; you can read it as well as I can, but we will go over to 104; ther? is
a recapitulation of the oil business. (See Fiftieth Congress, first session, House
Reports, vol. 9, pp. 242,343.)

I hold in my hand a book of testimony in the case of The Commonwealth against
the Pennsylvania Railroad Company. This testimony can be had, I think, in the
Library of Congress. It can be found in the library at Harrisburg, and undoubt-
edly at many other places.

I had the honor to be one of a committee of three to visit Gov. John F. Hart-
ranft and lay before him our grievances; and we invoked the aid of the Common-
wealth of Pennsylvania. That good, great, and kind man gave it to us. He
required the Pennsylvania Railroad Company to answer the charges made against
them with regard to the South Improvement Company contract and other acts,
from the commencement of the history of the Standard Oil Company or the South
Improvement Company, from 1873 to the final hearing of the suits in 1879. This
is the testimony of Mr. Cassatt, first vice-president of the Pennsylvania Railroad,
making a clean breast of everything pertaining to the contracts. From his admis-
sions and from the admissions of other oificers connected with the road I have
computed the shipments of oil during 1878 and the first quarter of 1879, making a
grand total of 18, .'350,377 barrels of oil shipped; and from this testimony I have
deduced the fact that .55 cents per barrel was paid upon the transportation of that
petroleum. I charge the rebates on all that oil to the Standard Oil Company; not
only on what was shipped to the coast. As I showed you yesterday, on all oil

' See Mr. Ai-chbold, p. 513. See also Mr. Lee, p. liUS.


that went west also they had to have their rebate. Again, it was carrying out
the provisions of the ohl agreement, the South Improvement contract, although
that had been repealed. The drawbacks on that oil are even greater than I have
said in this report or in my evidence in 1888.

Q. (By Mr. Kennedy.) How much space did Mr. Cassatfs testimony occupy
in that book?— A. Some .")() or 60 pages. It begins on page 600 and runs to page
737. Here is my authority, and I have given the pages in my testimony. Let
anybody prove that I am mistaken. But SIO.000,000 is nothing compared to the
rebates paid; it is a bagatelle.


Q. (By Mr. A. L. Harris.) I think it was stated that the testimony of Mr.
Cassatt has been perverted, and the conclusions drawn are not warranted by the
testimony." That is the reason, I suppose, that you were asked to refer to the
part of the testimony in which this admission is made. — A. I have given each
page in my testimony of 1888.

Q. (By Mr. Kennedy. ) I thought there might be a paragraph or a page in
which he made the admission. — A. The testimony is not by him only, but by other
of&cers of the Pennsylvania Railroad; that was the object, to find out what the
discrimination was.

Q. I think the testimony was to the effect that this .S-t, 771,000 which the Penn-
sylvania Railroad got was all that you could figure from his statement, and all
the rest is assumption. — A. Oh, no; tsecause, not only did the Pennsylvania Rail-
road Company get it, if he admits they got §4,000,000, in this t^'^'elve or foi^rteen
millions they must have participated.

Q. He says that is an assirmption. — A. It has been proved; proved by the Hep-
burn committee, just as plainly as this is proved. If he admits $4,000,000 was
paid to the Pennsylvania Railroad alone, it is more than I gave them. My com-
putation is based on the total shipments of oil. I did not say that the Pennsyl-
vania alone got it. I say the rebate is so much; even more.

Q. I do not think he makes the admission in regard to the amount; but his
statement is that Mr. Cassatfs admission was in regard to the Pennsylvania Rail-
road's transportation, and not with reference to the others. — A. I have shown
the collection of these rebates by contracts. I could produce the three contracts.
These railroads were under contract to transport certain classes of oil at certain
rates. This all happened from 1872 to 1877. or 1879. I have shown you the 2'3
cents from the pipe line to the car, and the 49 cents was to go for the transporta-
tion of oil from Cleveland and common points in the oil country to Ncav York.


Q. (By Mr. Phillips. ) It was stated here '' that the cost of drilling a well in
1890, or during the last 10 years, was about §3,000. You are a large operator in
all the fields, and we should like to have your estimate of the cost of drilling wells
during that time. — A. Of course, I have drilled a great many wells, running into
several thousand, and we always keep track of the expense in our office and the
cost of each and every well. We have drilled wells in the lower country, which
we call deep territory, that have cost us $8,000, $10,000, some as high as $30,000
each, to drill. When you come up to $30,000, that, of course, is accounted for by
the fact that you sometimes stick your tools or drop something into the hole, or
the well may cave in. Then you are obliged to move your derricks. We have
always figured that our lower country wells cost us on an average $8,000. In the
upper country we have figured that we could drill our wells for $3,500. We can
not do it for that now. That was when you could get pipe for less than half its
present price. The reason why wells are so expensive in the lower country is
that you have to put in three lengths of casing. Some of that casing runs down
into the earth 1,600 feet, 2,000 feet. I have loaded into a single hole 150 tons of
iron. I should say this— without going into a close calculation of it, the question
being sprung upon me here at this moment— that the average cost of a well in the
oil country under the present condition of things is nearly $4,000, in my judgment.

Q. (By Mr. Farquhar.) On account of the high cost of iron at the present
time?— A. I think it was $4,000 before prices advanced so largely. We can not
do it for that now. You can not drill wells at a profit now, at the present price
of oil. Iron has gone up 100 per cent and more.

Q. (By Mr. Phillips.) What is your estimate of the average production per

1 See Mr. Archbold, pp. 514^516. • ^ See Mr. Boyle, p. 434.

83a 43


well, taking the wells as a whole, during the period named, from 1890V — A. That

Online LibraryUnited States. Industrial CommissionPreliminary report on trusts and industrial combinations, together with testimony, review of evidence, charts showing effects on prices, and topical digest → online text (page 118 of 237)