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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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 95 of 237)
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Q. (By Mr. Phillips.) You stated, if the Chair remembers, that since the pas-
sage of the interstate-commerce law your profits liave been greater than they
were prior to that. Now, was that due to the passage of the interstate-commerce
law, or on account of the larger business and less competitionV — A. Well, I think
that one of the causes — a number of causes may have combined in the growth of
the business — but one of the causes is the better settled condition of business inci-
dent to the passage of the interstate-comnaerce law. I think that my assertion
that the consumer was given cut rates of freight is not only true, but that the
effect was greater than I have stated it; for, in the strain, the anxiety, that the
manufacturer was necessarily under lest Ms neighbor, his competitor, might get
a lower rate than he was getting, tliey were always all very anxious sellers of oil.
I think that oftentimes the price was made lower than it needed to be because of
the belief or expectation that lower rates of freight were either prevailing or
might prevail. I think the business was sacrificed on that acooiint.

Q. But you do not wish to leave the impression that yotir greater income or
greater profits are due to the interstate-commerce law? — A. Oh, no; business has

Q. And competition has not been so great? — A. Oh, I think competition has
been quite as vigorous.


Mr. Lee made the statement," as to the course of prices for domestic refined
oil for New York, or Greater New York, during the period from March, 1896, to
July, 1898, I think it was, that the Pure Oil Company, the company with which
he is related, having made its advent in the market of Greater New York in
March of 1896, found the price which we were charging to the people of that great
metropolis to be 9+ cents a gallon, and that because of their advent and of their
supposed competition we dropped the prices on them until in July of the same
year it was 54- cents. He spoke of this not only as illustrating our method of attack
as against the competitor, but, I believe, claimed some credit from the people of
Greater New York to the Pure Oil Company because of their advent there. I
will read from the list prices of the period named as they prevailed at the time
and show that, to all the trade in Greater New York and its vicinity, in March,
1896, our selling price averaged for the month 7.98 cents, as against his statement
of 9i cents.

Q. In that immediate territory? — A. In that immediate territory.

Q. (By Mr. Phillips.) Was that immediately before or at the time of the
advent of the Pure Oil Company? — A. Their advent there was in March, accord-
ing to his statement.

Q. Can you give us the statement of the month prior to that? — A. I made it
only for the period covered by him in his testimony. I can give you the other.
And I will also quote from that statement as showing the relation between the
two — the crud,.e-oil prices as they prevailed. In March the average price of crude
oil per barrel of 42 gallons at the wells was .':il.42. In April our price was 7.31
cents, the average price of crude oil being $1.23. In May the average price of
refined was 6.94 cents, and the average price of crude was $1.14. In June the
average price of refined was 6.72 cents, and the price of crude .$1.1.5. In July, the
average price was 6.23 cents, and the price of crude $1.09. It is only an illustra-
tion of the carelessness which marks the statements which our compietitors make,
with reference to any feature of the business in which they want to make a point.

Q. (By Mr. Phillips.) One question there; did you sell any oil in March as
high as 9 cents? — A. I give the average prices.

Q. Was there any other selling price? — A. I should say not, because there could
not be an average of that.

Q. It could be sold at 10 or 11 cents in the beginning and 3 or 4 cents at the
close? — A. The following month would show that.


Q. (By Mr. Jenks.) You give these average prices for Greater New York.
The statement has been made at different times that it is your habit in dealing
with the customers of competitors to find (nit the individual cirstomers and make
special cut rates to them. It might easily be, therefore, that your average price
would be what you have given, and that to a good many special customers, with

' See p. 265. See also Mr. Westgate, p. 365.



whom the Pure Oil Company was trying to deal, it would be 5i cents? — A. I can
not make any definite statement, but I would I'eply that it would be utterly
impossible for us to have any great variation in price to any special customers in
any locality. It would be speedily known, and it would be dishonest, and I want
to say that dishonesty will 'not win in any businei-s. "We have got our hold on
the trade in 80 years Iseoause we treated the trade honestly and not dishonestly.

Q. You would be safe in saying that in March, 1896, no oil was sold to any cus-
tomer for less than 6 or 6+ cents? — A. Oh, not for less than 6|.


Mr. Lee makes a statement regarding the difficulty of his pipe line, the United
States Pipe Line, in crossing railroads and securing right of way to the seaboard,
and makes a general statement implying that we have instituted and carried out
great obstruction to their progress. ' I want to make general denial of this state-
ment. We have not at any time had any different relations with reference to
any obstruction or effort at obstruction of their line than would attach to any
competitor in a line of business engaging against another. With reference to the
special features referred to by Mr. Lee, and which he attempts, by implication
at any rate, to connect us with, in the crossing of the Delaware and Lackawanna
Railroad in New Jersey, 1 want to say that the contention in that respect was
entirely at the hands of the railroad, and not at our hands in any possible respect
They went there surreptitiously and endeavored to force their way, on a Sunday,
over a line where they had no right, either by private purchase or by public fran-
chise. Having accomplished the crossing of the road in that surreptitious way,
they stationed there an armed force to prevent the railroad company from asserting
its rights and taking out their lines, and kept that force there for a long period.
The railroad went about it in a peaceful way, in the courts, and the final result
is that the decision is against the line, after the case has been carried up finally to
the supreme court of the State, and they must, of course, remove their line. But
any statement on Mr. Lee's part, or any other witness, that we had anything to
do with that matter, or with reference to any of the difficulties interposed in their
progress to the seaboard, is absolutely false.

Q. (By Mr. Phillips) Did your company own in fee simple the tract of ground,
and was a roadway reserved by the landholder? Was that purchased by them? —
A. It was not my case, and I am not conversant with the details regarding it. The
fact that after having been fought in the newspapers and in the courts for a term
of years, seeking the sympathy of the judges as well as the public, the supreme
court of the State has ruled against them is the best evidence, I think, that the
right was against them. I want to say with reference to our pipe lines, that we
never endeavored to cross any man's right of way without first seeing him about it.

Q. Still did they not go through the railroad on their own ground, and was not
this the final decision, that they had not the right to lay a pipe line where a man
had reserved a right of way under the ground?— A. It was not only decided that
they had no right there, but they were ordered to remove.


I want also to present a statement showing the rate of freight which Mr. Lee's
United States Pipe Line enjoys from the Central Railroad of New Jersey on the
crude oil and refined oil also transported over that line from the terminal pomt
of their pipe line to the seaboard; it being a lower freight, I think, than the Stand-
ard Oil Company ever had for an equal distance at anytime in the history of their
business. (Witness here reads a letter from the Central Railroad of New Jersey. )

Central Railroad of Neiv Jersey's rate to United States Piioe Line, Hampton Junc-
tion, N. J., to Bayonne, N. J.

[Distance, .53! miles; mileage, i cent each way, equals 78 cents per car; empty car returned free.
Weight per gallon, crude oil, OJ pounds; refined oil, b,; pounds.]

Crude ...
Eefined .

Bate per

barrel of 50


0. 0693
. 0769


weight per

barrel of

50 gallons.

Rate per
100 pounds

0. 0308
. 033(10

Rate per
oar of 120


Rate per
car, less


iSeep 3(J7. Compare also the testimony of Mr. Phillips, p. 593; Mr. Emery, pp. 650-655; Mr.
Boyle, p' 486.


The above shows that this oil is being carried 53| miles in tank cars, averaging
120 barrels or 20 tons to the car, at a gross average revenue to the railroad, on the
crude and refined oil, of Si'. 93 per car, and out of this revenue the railroad returns
the empty car free.'

The contract between the railroad and the pipe line is for 100 years from Jan-
uary 1, 1894, and provides for various rates from different points along the line of
the Central Railroad of New Jersey to tidewater. The oil is now (and has been
for three years) shipped from Hampton Junction, and the above rates are being

The contract further provides the right upon the part of the Pipe Line Com-
pany to abrogate the arrangement upon 5 years' notice at any time during the
100 years. The railroad has no right to cancel, excepting" for violation of lea§e.

Q. (By Mr. Smyth. )'The lease is on record?— A. Yes; it would seem that if
there ever was a preferential contract, that is one of them.

Q. (By Mr. Jenks.) You say this is on record? — A. It is not a lease; it is a

Q. (By Mr. Phillips. ) You do not assume to say that it is an illegal contract?—
A. I am not a lawyer; I am not passing on the legality of the question.


Mr. Lee claims at great length and with great particularity that we have at
different times done our best to buy them out, offering them large inducements
in the way of extraordinary prices for their properties, and have done our best to
get them out of the business by purchase.'' I want to say that any approaches on
that line that have been made have come from Mr. Lee's side to us; and I want
to say, now that he has forced the question, that approaches of that kind have
been made by pretty nearly every person in connection •with, his company, evei*y
prominent person in connection with his company, at various times, including not
only Mr. Lee, but Mr. Phinips,Mr.Nichols, Mr. Murphy, Mr. Jennings, Mr. King,
and Mr. McDonald, and, as I said, pretty much every gentleman prominent in the
affairs of that company. I want to say further that we have persistently declined
the considering of any such combination with them on the ground, first, as we
have said to them at various times, of its illegality; and, second — and this would
have been enough in itself — our unwillingness to enter into any business relations
■with them because of our lack of faith in them. We have had experience with
the gentlemen, different ones of them, at different times, and we should have
known if there had been no legal difficulty in the way of such combination that
it was impossible for us to enter into any such relation with them.^ I am making
the broadest possible denial to Mr. Lee's statement that we have gone after them
with reference to their purchase or combination; and I am making in return a
statement that they have up to this very day, within the period of your sitting
here, approached us on this question.

Q. (By Mr. Phillips.) Do you mean to include all of them?— A. I mean to
include the gentlemen I have named and others I have not named.-*

Q. Have any persons or any agent or gentleman from whom you bought prop-
erty approached individual members, coming direct from your office, to solicit the
selling of an interest to you? — A. No; I say broadly that the approaches have
been made from your side, and the answer is as broad as I can make it.*

Q. You have no knowledge of a person coming from your office after soliciting
you to make a transaction with these people? — A. I have knowledge of persons
coming to our office who came there at the instance of different people in that
connection, to raise a question about it; you came there — many of them — if that is
what you mean.


Q. Was not that to have a stop put to the litigation that was going on in New
Jersey, and to have a right to live as a comjiany? — A. I do not know what you
mean by that.

(By Mr. Rogers.) May I have the privilege of prompting Mr. Archbold?

(By Mr. Phillips.) Certainly, you have the privilege.

(By Mr. Smyth.) I think so, certainly.

(By Mr. Phillips.) Any information of that kind is entirely admissible.

(After talking with Mr. Rogers.) A. I answer broadly again, after conference
with Mr. Rogers, that we have never sent anybody for any purpose.

' Compare Mr. Phillips, p. 601; Mr. Bmery, p. 653.

2 Si.e pp. 370, 371. Compare Mr. WestKate, pp. 370, 383.

2 Cionipare the testimony of Mr. Phillips, pp. 508, 594.

■' Soo Mr. Phillips, p. 594.

'• Sue Mr. Westgate, pp. 370, 371.


Q. (By Representative Livingston.) Those propositions, were they written or
veAal? — A. Oh. no; they were all oral. Yon do not get that comi)any into mak-
ing written propositions; they are too crafty.

Q. (By Mr. Phillips.) Do yon say, Mr. Arohbolcl, that yon were approached
by a large per cent of those persons in an unfair and nnjust way? — A. Oh, I did
not say so; I do not say so. It may have been entirely fair and. jnst in their
view; bnt their proposition, in our view, was illegal and not to be entertained.

Q. Was not that after yon had purchased a large amount of stock, a controlling-
interest, in the Producers' Oil Company, Limited, and also purchased a large
amount of the United States Company's stock, and was it not to make some fair,
honorable , and just contract that would leave these companies the privilege of living
and doing business years ago when they were very badly crippled by opposition
fi'om the Standard Oil Company , by the lowering of prices of oil in Europe and other
places? — A. Using your own case, Mr. Phillips, as an illustration — and you can
hardly find fault with that — I do not think that at the time you came to Mr. Rogers
or myself you raised any question whatever with reference to any possible minor-
ity ownership in any of these companies. What you and they proposed was sim-
ply that a division of the business be made, so that you would have a percentage
and we a percentage, in order to cooperate in the marketing of the oil ahd in all
that pertained to the welfare of the business; is it not so? '

Q. Was it not to get the privilege of handling the capacity of the lines then
existing, and to cease further opposition, and to do away with the opposition
which was very badly crippling these companies; and had you not at that time
lowered the price of oil in Germany, so as to make it entirely unprofitable to the
refiners? They lost very large sums of money, and you had bought out a per cent
of the refineries that were engaged in these independent lines ? — A. Nothing of
the kind existed. Our business was entirely satisfactory, was on a profitable basis
in Germany and elsewhere, so far as I am aware; and we had no special desire that
a combination should be made, as is evidenced by the fact that we were unvsdlling
to entertain it. And I now further state that we were unwilling to entertain it
not only because of its illegality, but because of our lack of faith in the indi-
viduals connected with it. There can be no question abotit that.-

Q. Well, do you know that- at that time a Mr. Poth was managing the business
of the independent refiners in Germany? Did he not sell out to the Standard Oil
Company the tankage procured in Germany, so that these companies could not
do business ? Did they not have to reestablish connections and send agents there,
and build tankage in which their oil could be received and distributed in Ger-
many? For a number of years, did not you put the prices there so that there was
no profit? And during that period did not you buy out some of the largest refin-
eries that were connected with these companies?— A. My answer, Mr. Phillips
broadly is that none of these questions have anything to do with this company,
with that proposition, "tou came to us seeking these propositions. That is my
statement and you dare not deny it. That is true, every word of it.


In answer to the query regarding gentlemen prominent in the Standard Oil
Company, Mr. Lee saw fit to speak of them in a most depreciatory way.' It is
not amiss for me to ask these gentlemen to think for a moment of J. D. Rockefeller,
WiUiam Rockefeller, H. M. Flagler, William. G. Warden, Charles Pratt, J. W.
Bostwick, Benjamin Brewster, Henry H. Rogers, W. .H. Tilford, and James
Magee, and I might mention scores of others prominent in the Standard Oil con-
nection, whose business genius and boundless energy have been given to the
building up of the petroleum industry. Will you think of these gentlemen m
comparison with the men who have appeared here to defame them? I might go
further and speak of the beneficent use these gentlemen are making of their
substance, but they require no such eulogy at my hands. ■, ^-i r^

In answer to the query as to what would be the effect if the Standard Oil Com-
pany were abandoned or dismantled, Mr. Lee said that the prices of refined pro-
ducts would go lower all over the world.-" I -will not occupy your time by any
lengthy argument in refutation of this most absurd proposition, that if we were
really out of existence, and put out of existence that which represents to-day
two-thirds or three-fourths of the active capital, energy, and equipment employed
in the manufacturing and distribution of oil, the prices would go lo-wer; but I
■mil call your attention to what Mr. Lee says in practically the same breath, as
showing his utter inconsistency. He gives it as his opinion that if the Standard

1 Compare the testimony of Mr. Phillips, p. 593.

2 Compare Mr. Phillips, pp. 593, 594.

s See p. 271, under the heading "Practical experience.'
« See p. 273.


^'ere out of the way prices would be lower, and in the same breath testified that
he wanted them out of the way because for 5 years he, in his own business, has
not made a fair profit. And the utter inconsistency of his testimony is shown by
this question and answer: " Q. (By Mr. North.) What do you call a fair manu-
facturing profit? — A. They would be entirely. satisfied to do this business at 10
cents a barrel on crude oil that runs through the refinery; I think the Standard
Oil Company makes SI. 50 to $2 on every barrel that goes through their works."'
If it is true that the Standard Oil Company make |1..50 to l|2, and they can not
make 10 cents, they are not good people to serve the public.


He says that the quality of Standard oil has deteriorated because of using Ohio,
crude, and that the reason is that Lima oil contains arsenic and sulphur.^ I want
to say of the gentlemen connected with the companies represented by Mr. Lee,
that they have from the very beginning of the great production of oil in Ohio and
Indiana, because of their small interest in competition -w^ith it in the Pennsyl-
vania region, done their very utmost to depreciate and discredit the standing of
the products of Ohio oil in the markets of the world. They came to New York,
and before the New York Produce Exchange made a very vigorous effort to have
the exchange rule that refined oil produced from Ohio crude should not be a good
delivery in the markets of the world. Their course has been utterly indefensible
in respect to the great interest involved in those States, and nothing but the most
active effort on our part has saved to those States the markets which are to-day
giving them the profit that is iniiring to them in the production of the oil in those
States. And I want to say that this is in spite of the fact, which they must have
known or could have known, if they had any intelligence on the subject what-
ever, that after the sulphur element in the Ohio crude was conquered — and it was
a very difficult work to conquer it, which we applied ourselves to successfully—
the average of the refined oil produced from the Ohio crude has been and is quite
equal to that produced from the Pennsylvania crude. That is now admitted by
all buyers and in all markets, and it is known to consumers where they know any-
thing about it at all." The talk which the agents of the Pure Oil Company and
which the Pure Oil Company have made, and continue to make, as to the superi-
ority of their products over even that which we make from the Ohio crude is
entire nonsense; it is not true.

I want to call attention to Mr. Lee's testimony, given somewhat in detail, indi-
cating that we obtained higher prices for oil abroad than we do in this country.''
If that is so — and I do not admit that it is so, but admitting for the sake of the
argument that it is — it is a pretty good argument that the consumers in the
United States are being very well troated by the Standard Oil Company.


He makes a long talk about foreign governmental control,'' which is about as silly
as anybody ever listened to, and I will not take the time to comment on it.

He makes a statement regarding the comparative population and oil consump-
tion of Germany and Prance, and I refer to this statement only to show how
exceedingly careless he is in respect to statements made before this body on mat-
ters in which he seeks to influence your minds and that of the public. (Reading.)
" Q. Abroad, where the oil of the independent refineries goes, which is not of such
a grade as can be consumed in the States here, does it come into competition with
the oil sent there and sold by the Standard? — A. Yes; the Standard is doing a
very large business in Germany. Germany is the largest oil market in the world;
although the population is about the same as France, it uses probably twenty times
as much oil as Prance. I think I am not far wrong in that." °

The relative population of Germany and Prance, by the last census of 1891, was:
German population, 49,421,803; French, 38,343,192. The consumption of oilinthe
year 1898, the last year of record, in barrels of 50 gallons, was, in Germany,
3,3.57,397, and in Prance, 1,688,146. Mr. Lee said it was twenty times as great in
one as the other, and that their population was about the same. I submit this
statement to you.

1 See p. 273. See also p. 277. Also Mr. Phillips, p. W2.

- See p 27H.

'Compare Mr. Emery, p. 024; Mr. Gall, pp. 072, 681.

■• See p. 270. Compare Mr. Emery, pp. (ilO, o;fl, o:K, and chart of prices in introduction.

" See pp. 370, 277. See also Mr. Emery, pp. 010-018,

" See p. 278. Compare also Mr. Emery, p. 633.




He makes the statement that the Standard fixes its own price at which it buys
coal, and is thus enabled to oppress not only labor in its own line of business, but
also the coal labor. > The statement is entirely and absolutely untruthful. The
Standard buys its coal on competitive offerings, and if the price is so low as to
compel low prices for labor it is the result of competition.

He claims that prices were fixed by the South Improvement Company, ' when
he knew well that the South Improvement Company never did any business.


He goes into an elaborate argument to prove that the prices paid for crude oil

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 95 of 237)