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Supreme Court of the United States. 
 
 -^'% 
 
 OCTOBER teRM, 1910 
 
 No. 398. 
 
 STANDARD Oil, COMPANY OF NEW JERSEY BT Ai.., 
 
 Appellariis, 
 
 against 
 UNITED STATES OF AMERICA, 
 
 Appellee. 
 
 On Rearsftunent of the Appeal from the Circuit Court of the 
 
 ITuited States for the pastern Division of the pastern 
 
 District of Missouri. 
 
 Oral Arguments on Behalf of Appellants. 
 
 C: ''r?-'.'';V ' t'- 
 
 C C BUBXMTn, 7s to }6 Sprinc tXn** , Mnr ToA. 
 
^ZbSISt 
 
J. I. C. CLARKE 
 STANDARD OIL COMPANY 
 
 26 Broadway, N. Y. 
 
 February 23, 1911. 
 
 Dear Sir: 
 
 ^ I am forwarding to you, under separate 
 cover, with the compliments of the Standard 
 Oil Company, a printed copy of the " Oral 
 Argument on Behalf of Appellants" made by 
 Counsel for the Standard Oil Company before 
 the Supreme Court of the United States on 
 the recent "Reargument of the Appeal from 
 the Circuit Court of the United States for 
 the Eastern Division of the Eastern District 
 of Missouri." 
 Believe me. 
 
 Yours faithfully, 
 
 J. I. C. Clarke, 
 
 Publicity Department. 
 
IND£X. 
 
 PAGB 
 
 Argument of Mr. John G. Milburn 1 
 
 Aigument of Mr. David T. Watson 63 
 
 Argument of Mr. John G. Johnson 85 
 
^n tixe Jtipvcme ®o«rt of Uxz WinxUtX ^UUs, 
 
 OCTOBER TERM, 1910. 
 
 No. 398. 
 
 Standard Oil Company et al., 
 Appellants, 
 
 vs. 
 
 The United States. 
 
 Present on behalf of the appellants, John G. Johnson, 
 Esq., John G. Milbuen, Esq., D. T. Watson, Esq., M. F. 
 Elliott, Esq., Frank L. Crawford, Esq., and Martin Carey, 
 Esq. 
 
 Argument of JOHN G. MILBTJRN, on behalf 
 of the appellants. 
 
 Mr. Milbuen : May it please the Court, this is a proceeding 
 instituted by the Government in the Eastern Division of th& 
 Eastern District of Missouri against the Standard Oil Com- 
 pany of New Jersey and seventy-eight other defendants. 
 There was only one defendant, the Waters Pierce Oil Com- 
 pany, which resided in that district, and could be served with 
 process there. The Standard Oil Company of New Jersey 
 owned some three-fourths of its capital stock, and it was a 
 marketing company, operating in the Southwest and other 
 States. Contemporaneously with the filing of the petition an 
 order was made by the Court, under Section 5 of the Act per- 
 mitting the service of process! upon all of the other defendants 
 — the other seventy-eight defendants — outside of the district ; 
 
that section providing that in a pending proceeding the court 
 may in the interests of justice bring in otber defendants by 
 the service of process upon them outside of the district. Mo- 
 tions were made on affidavits showing the residence of the 
 parties to set aside that order as without jurisdiction or war- 
 rant of law, which were overruled ; and then special pleas to 
 the jurisdiction raising the same question, were filed, which 
 were overruled. Process was served on all the other defend- 
 ants under that order. I mention those facts simply to show 
 that that question is before this Court in this case. 
 
 The bill is founded upon an alleged conspiracy originating 
 in the seventies, first of Mr. John D. Rockefeller, Mr. William 
 Eockefeller and Mr. Flagler, and later joined by Mr. Oliver 
 Payne, Mr. Charles Pratt, Mr. Rogers and Mr. Archbold, to 
 control and monopolize the trade in petroleum and the prod- 
 ucts of petroleum. The operations of this conspiracy are di- 
 vided by the bill into three periods, the first extending from 
 1870 to 1882, during which it is alleged that these indi- 
 vidual defendants, associating others with them, through 
 agreements with other refiners, through acquiring stock inter- 
 ests iu other refining companies, and through acquiring con- 
 trol of pipe-lines, monopolized ninety per cent, of the oil 
 business, or gathered the means of monopolizing that amount 
 of the business. 
 
 The next period is from 1882 to 1899, beginning with the 
 so-called Standard Oil trust, whereby all of these stocks and 
 properties were transferred to nine trustees, with power to 
 vote the stock, and with the widest powers of management, 
 certificates being issued to the beneficial owners of the stocks 
 and properties. In that period it is alleged that as a result 
 of a decision of the Supreme Court of Ohio the trust was 
 dissolved pursuant to provisions enabling it to be dissolved 
 contained in the original trust agreement ; and it is said that 
 it was dissolved in such a manner that the control was pre- 
 served and continued down to 1899. That is the second 
 period. 
 
 The third period is from 1899 down to the time the bill 
 was filed, the central fact of that period being that in 1899 
 the Standard Oil Company of New Jersey was enlarged, its 
 stock was increased, and it acquired all the stocks of the sub- 
 sidiary companies, and has held them ever since, and has been 
 
the owning, managing, directing corporation of all of the cor- 
 porations of which this organization consists. 
 
 Then the bill goes on, having through those allegations 
 sought to establish that a combination in restraint of trade 
 was the result, to allege various illegal means pursued through 
 these years to effect a monopolization of the oil business, the 
 control of pipe-lines, restrictive agreements, railroad rebates 
 and discriminations, unfair competition — all of which 
 are set out at great length — with the result, as the bill 
 charges, that from ninety to ninety-five per cent, of this busi- 
 ness from 1882 down to the time of the filing of the bill was 
 acquired, an incident of which was the control of prices, and 
 very large profits. 
 
 Now, that is the case that is made by the bill. I will only 
 add that, according to its allegations, in 1882, when the 
 Standard Oil trust was formed, what were assembled were a 
 mass of independent, competing companies, and that it was 
 those companies — and others tiiat had been added — that in 
 1899 were subjected to the control of the Standard Oil Com- 
 pany of New Jersey. Answers were filed, and an enormous 
 mass of testimony was taken ; but the great organic facts, 
 counsel should be able to state so that the Court can compre- 
 hend them without any particular reference to the record, 
 because they are not in dispute ; and if I and my opponents 
 do not fall into extravagance of statement or figurative lan- 
 guage, we should be able to make them clear to the Court. 
 
 The opinion in the Court below proceeded in this way — 
 just to state very briefly its conclusions. It found that the 
 transfer of the stocks in 1899 to the Standard Oil Company of 
 New Jersey was a combination in restraint of trade under Sec- 
 tion 1 of the Sherman Act. That is the first proposition of 
 the opinion. The Court recognized that all of these corpora- 
 tions were owned by the same individuals, in precisely the 
 same proportions, and had been, as to those that existed in 
 1879, since that time, and as to those that had been created 
 after that time since their creation, in the same common own- 
 ership. But the Court said that although the same men 
 owned all these corporations in the same proportions, there 
 were three thousand of them, and the transfer of their stocks 
 to the Standard Oil Company of New Jersey created a more 
 durable and efficient administration of those joint properties. 
 
4 
 
 and tended to prevent their disintegration into separate own- 
 erships through the sale by individuals of the stock of some 
 of the corporations and not of the stocks of others ; that out of 
 that disintegrations there might possibly come competition 
 and therefore there was restraint of trade. Then the 
 Court said that that illegal combination under Section 
 1 was an illegal means of monopolizing under Section 2 of 
 tlie Act, and therefore it found it unnecessary to pass upon 
 all these extra, additional means of monopolizing vrhich were 
 alleged in the bill. We are here without any findings what- 
 soever on those matters. 
 
 Then comes the decree, which was that the transaction of 
 1899, the transfer to the Standard Oil Company of New Jersey, 
 was an illegal combination under Section 1, and that all the 
 companies specifically named were in that illegal combination ; 
 and all the subsidiary companies are restrained from paying 
 any dividends to the Standard Oil Company of New Jersey, and 
 the Standard Oil Company of New Jersey is restrained from 
 exercising any control over them, except to distribute their 
 stocks pro rata amongst its stockholders. Then the decree 
 goes on and in a very radical and elaborate subdivision pre- 
 scribes what tliese companies, when the stocks have been dis- 
 tributed, shall not do in relation to each other, in regard to 
 transfers of property and various other matters — a special 
 code, as it were, for the future government of the individual 
 stockholders who shall own these stocks after the distribution 
 is made. Then it says that the corporation or the combina- 
 tion may not, unless the combination be dissolved, engage in 
 interstate commerce. The decree further provides that its op- 
 eration shall be suspended, if an appeal be taken, until thirty 
 days after its affirmance by this Court, if it be afiSrmed, thus 
 allowing us thirty days for the disintegration of this institu- 
 tion. 
 
 Me. Justice Day : What is the condition precedent to en- 
 gaging in interstate commerce ? 
 
 Me. MiLBUiiN : That we shall dissolve the combination. 
 
 Me. Justice Day: That is, when the stock is dis- 
 tributed. 
 
 Me. Milbuen : The distribution will be a dissolution. The 
 decree is without prejudice to the distribution of the stocks 
 of all of the corporations among the individual stockholders. 
 
Me. Justice Day : The effect of tlie decree is, that that 
 being done, the inhibition as to engaging in interstate com- 
 merce is withdrawn V 
 
 Mr. Milbubn : Yes. The inhibition is only if the combi- 
 nation is coutiuued. 
 
 Mr. Justice MoKenna : In other words, the status apply- 
 ing before the formation of the last Standard Oil Company 
 would be restored ? 
 
 Mr. Milbuen : Would be restored. 
 
 Now I come (having stated these matters so that the 
 Court might have before it what was claimed, what was de- 
 cided, and what is decreed) to an effort to make clear to you 
 what the history of this institution has been. The use of 
 petroleum through processes of refining, began in the period 
 between 1860 and 1870. The location of the original field 
 was in a portion of Pennsylvania. As it was developed a 
 vast mass of refineries sprang up, and congeries of little pipe- 
 line systems were built, to reach from the wells to some i ail- 
 road point or other — the Pennsylvania, the Erie, through its 
 connection with the Atlantic and Great Western, and the New 
 York Central with the Lake Shore, early extending lines 
 towards the fields. It was in everj' way a scene of the greatest 
 excitement and of the greatest speculation. One result 
 was an immense over-production of refining capacity. The 
 whole of that part of Pennsylvania was dotted over with make- 
 shift refineries. Some of the men who engaged in the business 
 succeeded in establishing more durable plants. Many men 
 had not the means to do that and went out of business. No 
 condition could be more accurately described as chaotic than 
 the conditions which existed in every branch of the industry 
 during those years in the oil regions. 
 
 There was one very young man who in the early sixties, 
 with a small amount of money that he had saved, went into 
 this business at Cleveland, who possessed the gifts and qualities 
 of genius — because business has its genius just as finance or 
 war or government or literature or art has its genius. That 
 man was John D. Rockefeller. Jrlealiziug the conditions which 
 existed, the uncertainties of the raw material, and all the 
 features of instability that were present, he grasped certain 
 fundamental facts. One was that with this great over-pro- 
 duction of refining capacity the profits of refining were falling 
 
and falling, and that the cure for that condition was volume 
 of business. Another was, that you must distribute your 
 refining capacity to meet the demands of different localities ; 
 I mean by that, a geographical distribution of refineries. 
 Another was that pipe lines were the arterial system of a re- 
 finery, supplying its daily needs ; and that refining could not 
 be carried on in a large way without its own pipe-lines ; and 
 another was that success in the business depended upon its 
 economical conduct ; I mean, economy in methods not only in 
 connection with the refining, but in connection with the sale 
 and distribution of the manufactured product. 
 
 I do not say that these ideas burst from his brain in an 
 instant, but he was quick to see what was inevitable, and I 
 have no doubt made up his mind that to the extent that means 
 could be obtained therefor, those must be the lines that any 
 business must proceed on if it was going to live, and if it was 
 going to be successful. 
 
 He became in 1864, or 1865, associated with Mr. Andrews, 
 who was a practical refiner, and they built a refinery. I say 
 Mr. Andrews was a practical refiner. He was a practical 
 mechanic — a very able man. Those were the two men who 
 originally established the refinery in Cleveland, Ohio. In the 
 next year Mr. Kockefeller associated with them his brother 
 William and formed the firm of William Kockefeller and Com- 
 pany — the other firm being Eockefeller and Andrews — and 
 they built another refinery at Cleveland. Then, to realize one 
 of the ideas which I outlined, they established a warehouse 
 in New York for the export trade, with lightering facilities, 
 and a sales department to handle their own business, and save 
 all the expenses of this character that refiners generally had to 
 pay to others. 
 
 The next year Mr. FLagler joined them in the co-partner- 
 ship, bringing in more capital ; and then it became Rockefel- 
 ler, Andrews and Flagler ; and that firm took over the prop- 
 erties of Eockefeller and Andrews and William Rockefeller & 
 Company, so that they had the two Refineries in Cleveland, 
 and the facilities in New York for exporting and marketing 
 their products. 
 
 Mr. Justice McKenna : Excuse me just one minute. Did 
 the Rockefellers establish two refineries ? 
 
 Mb. Milbukn : They had two refineries on adjoining prop- 
 
erty. That continued until 1870, and during that time those 
 men had impressed themselves upon their community by the 
 things that they had done. Take the matter of barrels alone, 
 for instance, which refiners bought, made as they were out of 
 green wood, and costing $2.50. They bought timber lands ; 
 built their own barrel factory, and made their barrels out of 
 seasoned timber, so that there would be the least amount of 
 leakage, besides saying a large amount on the cost of each 
 barrel. That is an illustration of how they conducted their 
 business, and then they had the necessary credit to carry on 
 and extend their operations because of the confidence they 
 had inspired. 
 
 In 1870 those men had succeeded in so extending and de- 
 veloping their business that they did about one-tenth of the 
 whole petroleum business. In that year the Standard Oil 
 Company of Ohio was organized, into which some new men 
 came, with a capitalization of $1,000,000, and the properties of 
 these concerns were transferred to the Company. That is the 
 origin of the first Standard Oil Company — the Standard Oil 
 Company of Ohio, which began its operations at that time, 
 and is continuing them to-day. 
 
 In 1871 there was a lot of refineries in Cleveland which 
 had grown up as I have described, and it was perfectly 
 realized at that time that the conditions of the business had 
 so changed that unless a man had capital to keep advancing, 
 to keep increasing, to keep applying every discovery of the 
 art, at no matter what expense, that unless he could reach out 
 and establish his own marketing facilities, he must go by the 
 board. The Standard Oil Company in 1871 and 1872 bought 
 I should say fifteen or sixteen of these refineries in the City of 
 Cleveland. The owners were all Cleveland men and Cleveland 
 was a small city at that time. I know from experience what 
 those cities were in those times, as compared with what they 
 are now, because it was about that time that I went to one of 
 them myself. These men were all well and intimately known 
 to each other ; and the conditions of the business were per- 
 fectly realized by all of them. As Mr. Rockefeller described 
 them, they were all friends and neighbors. Those refineries 
 were bought and were conveyed to the Standard Oil Company 
 of Ohio, and they were paid for, at the election of their 
 owners, either in stock of the Company or in cash. So little 
 
8 
 
 confidence was there in the business at that time that many 
 who took stock sold it to get the cash, which was surer. 
 These refineries were connected by pipe lines, were from time 
 to time consolidated, and, in one way and another, all utilized 
 in such ways as would be natural to secure the most economical 
 use of them. 
 
 Now, from that time on to 1879 or 1880, a period of about 
 ten years, a great many transactions took place resulting 
 in the acquisition of refining properties. During those years 
 the oil-producing territory was confined to Pennsylvania — a 
 part of Pennsylvania. The oil-refining centers were the oil 
 regions — Titusville, Franklin, and various other places ; Pitts- 
 hurg and Cleveland ; and on the Atlantic Coast, New York 
 harbor, Baltimore, Philadelphia, and in a very minor degree, 
 Boston. Through a succession of separate, distinct and inde- 
 pendent transactions, refineries were bought at all of those 
 points beginning first with New York harbor ; and amongst 
 them there were some large purchases. In 1874 Charles Pratt 
 and Company owned one or two refineries and had an im- 
 portant trade, the principal refinery being the Pratt Works, 
 to-day in operation. The refineries of that Company were 
 acquired. I will tell a little later how these acquisitions were 
 paid for. I confine myself just now to what they were. It 
 was in connection with that purchase that Mr. Charles Pratt 
 and Mr. H. H. Eogers became identified with the Standard 
 Oil interests. 
 
 There was a refining interest which had grown up in Pitts- 
 burg and Philadelphia, made up of men whose names were 
 Warden, Frew and Lockhart. They had one firm name in Pitts- 
 burg and another firm name in Philadelphia, and they owned 
 in Philadelphia a refinery called the Atlantic Refinery, and in 
 Pittsburg some four or five or six refineries. Those properties 
 were purchased in 1874. These were the chief purchases. In 
 1875 refineries at Titusville and other points in the oil regions 
 were acquired for the advantages of refining there. 
 
 There was always intense feeling on the part of the Penn- 
 sylvania Railroad that the oil traffic belonged to it. Its 
 line was at Pittsburg and the oil fields were near to Pittsburg. 
 Its railroad was the direct railroad communication with the 
 seaboard at Philadelphia and other points. The New York 
 Central and Erie with their western connecting lines were 
 
longer and more circuitous loutes. Mr. Scott's position was 
 that they were intruders in that territory, and there was bitter 
 and relentless war between these railroads with short intervals 
 of peace.^ Mr. Scott was an aggressive personality. He had a 
 corporation created, known as the Empire Transportation 
 Company, which built pipe-lines into the oil fislds, and which 
 built refineries and went into the refining busine.ss in Phila- 
 delphia and Pittsburg, and was beginning to do the same 
 thing on the Jersey shore. Then in 1877 arose the greatest 
 war of all. The Erie and the New York Central said: 
 " With your pipe-lines bringing the crude to you, and your 
 refineries, you are getting all the business, and we object to it." 
 The Standard Oil Company took the position : " You should 
 not be refining oil as against us, and we will withdraw all of 
 our traffic from your road." The Erie and the Central stood 
 with the Standard in that position, for their own oil traflic, 
 and the result of that tight, aud the demoralization it involved, 
 was that the Pennsylvania Eailroad, or rather its auxiliary 
 company, sold its refineries and pipe lines to the Standard, 
 although Mr. Cassatt's testimony, which was read into the 
 record, says that he insisted that they should take the pipe- 
 lines against their wishes. That was a large purchase, and 
 that was how it came about. 
 
 Eefiueries were acquired at Baltimore in 1877, and there 
 ■was a slight production in West Virginia, and a refinery at 
 Parkersbnrg — whether one or more I have forgotten — was 
 acquired. The object was, as they had the means, to establish 
 themselves at all the principal refining points, including in 
 the oil regions themselves such places as Franklin and Titus- 
 ville. It was in 1877 that they made up their minds to extend 
 their operations to lubricating oil. Lubricating oil is made 
 from the residuum after the refined oil is taken ofi^. The 
 lighter products become the illuminating oils, also called refined 
 oil. Out of the residuum the heavier lubricating oils are made ; 
 and they began that development of their business in 1877 by 
 acquiring interests in lubricating plants — four or five or six of 
 them, amongst others the Galena Oil Company, at Franklin, 
 Pennsylvania. 
 
 Mr. Justice Holmes : When was the war over with the 
 Pennsylvania Eailroad ? When did they finish their fight 
 with the Pennsylvania ? 
 
10 
 
 Mr. Milbuen : In 1877. I wish now to refer to the pipe- 
 lines — the development that there had been to take the oil as 
 it came from the wells Tour Honors no doubt know that oil. 
 when it is found, is pursued with relentless energy, because it 
 is a subterranean lake, and whoever gets there first begins to 
 drain the lake. Thereupon everybody who has any property 
 in the vicinity sinks wells to get his share of the lake and 
 when the lake is dry, that is the end of that particular region. 
 
 Pipe-lines, with high-sounding names, had been run in 
 there largely for temporary purposes, and in the early seven- 
 ties there were a few hundred miles of them. 
 
 The Chief Justice : Between these wells and the re- 
 fineries ? 
 
 Mr. Milbuen : Between the wells and railroad points. 
 There -would be the little gathering lines, and then a pipe 
 running to a railroad point. First they carted it to the rail- 
 road, as the railroads were built into the oil region ; then they 
 ran a pipe to the railroad. The gathering pipes converged in 
 a pipe which conveyed the oil to some railroad point, and then 
 the railroad transported it to its destination. The production 
 of crude oil in 1870, was 5,000,000 barrels. 
 
 The Chief Justice : In 1870 ? 
 
 Mb. Milbuen : In 1870 ; and it began increasing rapidly 
 from that tinae on — not a phenomenal increase at first, but 
 6,000,000 the next year, and 7,000,000 barrels the next year, 
 and so on. There was need of rapid pipe-line construction. 
 If the oil is not saved when it comes out of the ground it is 
 lost ; and it was in 1874 that these interests first bought a 
 little line. 
 
 The Chief Justice : In 1874 they did what? You dropped 
 your voice, and I did not catch it. 
 
 Me. Milbuen : In 1874 they bought a small line, just a few 
 miles, called the American Transfer Company. There was a 
 more considerable concern, called the United Pipe Lines. 
 That was a descriptive title. Eight then, or shortly after, 
 they bought a third interest in that concern. These pur- 
 chases were due to the necessity of pipe-lines to assure a 
 steady supi)ly of crude oil for refining purposes. 
 
 Between that time and 1877 various of the other small 
 systems were bought by this United Pipe Lines concern from 
 time to time. These systems were merely gathering lines ii» 
 
11 
 
 the oil fields, with shorter lines ninnin^ to the railroad points, 
 right in the oil fields. There were only a few hundred miles 
 of them altogether, including those that the Pennsylvania 
 Eailroad Company had constructed and sold to the Standard. 
 That was the origin of the pipe-line ownership. 
 
 In addition other interests of a marketing character had 
 been acquired. For instance, there was a concern, a small 
 concern in those early days at Louisville, Kentucky, known 
 as Chess, Carley & Company. It had a little bit of a refinery 
 and a marketing business in the southwest. Wishing to ex- 
 tend the sale of their oil in the south west they joined with 
 Chess, Carley & Company, and bought an interest in that 
 business, and furnished capital to expand and develop it. 
 Capital was the great necessity of that time. The production 
 of crude oil was increasing, and with it the production of 
 refined oil was also increasing, and markets had to be de- 
 veloped. Other similar purchases during these years were 
 those of an interest in the marketing business of Alexander 
 McDonald & Co. at Cincinnati and in the marketing business 
 of the Waters-Pierce Company at St. Louis. This is the 
 history of the acquisitions during the seventies. 
 
 Now, how was this done ? Who did it ? For whom was 
 it done ? Who became the owner of all of these refineries and 
 pipe-lines and other properties as they were bought ? How 
 were they paid for ? 
 
 Let me answer those questions. The Standard Oil Com- 
 pany of Ohio was limited in its corporate powers as to owning 
 stocks in other corporations. As to some of these properties, 
 the stocks of the corporations which owned them were ac- 
 quired, or parts of their stocks were acquired ; and as to others, 
 sometimes the physical property was transferred, and where 
 the physical property was transferred it would be transferred 
 to the Standard Oil Company of Ohio or to some individual in 
 trnst. Those properties were all acquired for the stockholders 
 of the Standard Oil Company of Ohio— the individuals who 
 were the stockholders at any given time. They were the pur- 
 chasers. They became the owners. The capital stock of the 
 Standard Oil Company had been increased from one million to 
 two millions and a half, in connection with the acquisition 
 of the Cleveland refineries. In connection with the purchase 
 of Charles Pratt & Company, and the Warden-Frew interests 
 
12 
 
 in Philadelphia and Pittsburg, it was increased a million 
 dollars more at that time. So that in 1874 its capital stock 
 became three million and a half dollars, and its capital stock 
 remains at that figure to-day. 
 
 Me. Justice McKenna : Was that increase supposed to be 
 based on the estimated value of the properties acquired? 
 
 Me. Milbuen : No. I said " no," right out, but I would be 
 inclined to say, on reflection, that it was. It was estimated 
 that what those two plants could be acquired for would be 
 about that million dollars ; because as I remember (I did not 
 remember it just at the moment) the evidence fairly shows 
 that that increase went for the acquisition of those properties.* 
 As other purchases were made they were either paid for 
 directly in cash, which was furnished from the treasury of the 
 Standard Oil Company of Ohio, out of its undivided profits, 
 its surplus, instead of being distributed to its stockholders ; 
 the shares of stock acquired being taken over by individuals 
 in trust, or a new corporation was organized and its stock sub- 
 scribed for and paid in cash. When a new corporation was 
 organized, the property was conveyed to it, and the cash in its 
 treasury paid for its stock, was paid to the vendors. Let me give 
 you some illustrations. Take the Charles Pratt & Company 
 purchase. Its stockholders transferred all of the stock of that 
 company to a trustee, to an individual, representing the stock- 
 holders of the Standard Oil Company of Ohio. It was paid 
 for with stock of the Standard Oil Company of Ohio. Take 
 the Sone & Fleming Refinery, which is one of the refineries of 
 the Standard Oil Company to-day, and which was acquired 
 from the Pennsylvania Railroad's auxiliary company. It was 
 paid for in ca.sh and its stock was transferred to individuals 
 to hold in trust. Take the situation at Parkersburg, West 
 Virginia. In that case a corporation was organized. Its cap- 
 ital stock was the purchase price of the properties, or more. 
 It was subscribed for by Standard interests, and then those 
 properties were conveyed to the new corporation, the Camden 
 Consolidated Company, and paid for out of the subscriptions 
 to its stock. Those were the methods in which the properties 
 were paid for. The stocks that were acquired w^ere taken in 
 
 * Note : Tliis is a slight error. Mr. Rockefeller testified that these prop- 
 erties acquired in 1874 were worth $3,000,000 (Vol. 16, p. 3083). 
 
13 
 
 the names of various individuals to hold temporarily until 
 something was arranged as to how these properties were to be 
 held for this common ownership ; and they were all trans- 
 ferred on the books of the companies at the time of the 
 transactions, so that any reference to the books of the com- 
 panies would show who were the owners of the stock — these 
 individuals who were holding it as trustees. That was the 
 situation in 1879. 
 
 You can see, your Honors, what a mixed condition it was 
 at that time. There was the Standard Oil Company of Ohio, 
 with its stockholders, and there was a mass of properties 
 which had been acquired, represented mainly by stocks, the 
 whole or portions of the stocks of various corporations. 
 Those stocks were held by various individuals as trustees 
 for the stockholders of the Standard Oil Company of Ohio. 
 
 We come now to a transaction in 1879 which is of conse- 
 quence as showing, with the precision of documentary evidence, 
 what the exact status was at that time, so that it does not de- 
 pend upon oral testimony or on theories or on constructions of 
 transactions, or anything else. In 1879 all these parties who 
 held these various stocks came together. The certificates were 
 in the possession of the Standard Oil Company of Ohio. 
 
 Me. Justice Holmes : Tou mean the trustees ? 
 
 Mr. Milbukn : The trustees, the men who held as trustees. 
 They came together, and they executed an instrument whereby 
 they transferred to Vilas, Keith and Chester, three trustees, 
 all of the properties that had been acquired, and all of the 
 stocks which are enumerated in the instrument itself, which 
 they were to hold for the benefit of the individuals mentioned 
 in the instrument, in the proportions stated, which were the 
 proportions of the stock of the Standard Oil Company of 
 Ohio which they owned. For instance, take William Eocke- 
 feller. Sixteen hundred thirty-five-thousandths was his 
 interest as beneficiary in the trust propertj'. There were 
 35,000 shares of the Standard Oil Company of Ohio, and 
 he owned 1600. That was his proportion of all of this 
 property which had been acquired. John D. Eockeleller 
 owned 8984 shares out of the 35,000. That was his pro- 
 portion. The same is true of any then stockholder of the 
 Standard Oil Company of Ohio. This property was con- 
 veyed to these trustees " to have and to hold said stocks. 
 
14 
 
 and interests to them and tlieir survivors and successors, in 
 trust, nevertheless, for the following purposes, to wit : To 
 hold, control and manage the said stocks and interests for the 
 exclusive use and benefit of the following named persons and 
 in the following proportions named :" — then there is enumerated 
 all of the individuals who were all of the stockholders of the 
 Standard Oil Company of Ohio, and the proportion of their 
 stock ownership — " and to divide and distribute the same as 
 soon as they can conveniently do so between the said persons 
 for whose benefit they hold the same as aforesaid, and in the 
 respective proportions aforesaid." 
 
 It is plain that this was no mock instrument. It was 
 a very important instrument, and it was executed by all 
 these parties. The ultimate disposition of these prop- 
 erties had not been determined. So far as they had 
 reached any conclusion at that time — this body of owners — it 
 was to distribute amongst the individuals who owned the 
 properties, each in his proportion, the stocks which consti- 
 tuted the trust estate. That evidently was their idea at that 
 time, until, no doubt, the impracticability of such a step was 
 seen, and the desirability of continuing the common prop- 
 erty in a common ownership was fully realized. Then came 
 the trust agreement of 1882. 
 
 It is unquestionably true, in some instances where stocks 
 of corporations were acquired ajd paid for with stock of the 
 Standard Oil Company of Ohio, that individuals who received 
 such stock continued to hold it. A great many did not. They 
 sold their stock. Nobody was compelled to hold his stock. He 
 took his stock in payment for his interest in his corporation, 
 and he could sell it or not sell it as he saw fit. If he sold it, 
 his interest was gone. If he kept it, he remained a stockholder of 
 the Standard Oil Company of Ohio as long as he saw fit to hold 
 it. There was no requirement that he should hold it. There 
 was no prohibition upon him of any kind whatsoever. He 
 was perfectly free ; and not a vendor of any of these properties 
 was restricted in any way whatsoever with reference to going 
 into the oil business— not one. They could go into the busi- 
 ness again if they saw fit. Not one was produced as a witness 
 to complain that any of these purchases was forced or coerced. 
 There was nothing of that kind, and no man was placed under 
 a ban of any kind, either as to his stock or as to the engage- 
 
15 
 
 men t of himself and his capital and his energies in the busi- 
 ness in the future. 
 
 That was the situation in 1879. I want to bring home to 
 the Court the realization, because I feel that it is a pivotal 
 fact, that those properties at this time had been acquired for 
 a body of common owners, and were owned by a body of 
 common owners, and so the Court below found ; and that 
 body of common owners, not always composed of the same 
 individuals, but all the same a body of common owners — one 
 might sell out and another man take his place — has continued 
 to own them and all of the properties of the Standard Oil 
 Company from that day to this. You can see from that trust 
 instrument of 1879, and from the acquisition of these proper- 
 ties from time to time over a period of eight or nine years, 
 that there had been very little integration in 18(9. They 
 quote testimony given on investigations at that time, and say 
 that it was not a frank revelation of the common ownership. 
 I do not think it is necessary to take up time with that. At 
 best, it is merely a criticism of individuals. It does not throw 
 any light on the facts in this case. At that time, nobody 
 knew but what, if those stocks were distributed, the corpora- 
 tions would be owned by all sorts of individuals. Though the 
 process of integration had not proceeded far, it is a miscon- 
 struction to say that these properties that were acquired were 
 not owned by a common body of owners. There is the evi- 
 dence of the fact, and it is a document, the original of 
 which, after a great search, we succeeded in finding and pro- 
 ducing. 
 
 After 1879 and prior to 1882 there were some further 
 acquisitions, but not at all extensive ; and in 1882 the 
 trust agreement of that year was entered into, and 
 then Vilas, Keith and Chester turned over all of this 
 property to the trustees mentioned in the trust agreement, 
 and the beneficiaries joined in the instrument of transfer— who 
 were this body of stockholders of the Standard Oil Company 
 of Ohio. They joined in that transfer, and at that time, in 
 1882, that particular trust, which is known as the Standard Oil 
 trust, was established. I should mention that there had been 
 organized a company, or rather the charter of the National 
 Transit Company had been acquired, in 1881, in which what- 
 ever pipe-line interests that had been acquired, and whatever 
 
16 
 
 pipe lines had been constructed after 1873 or 1874, were 
 vested. 
 
 Let us stop at 1882 for a moment. Let me ask the Court 
 to realize the condition of this trade at that time, and what 
 the oil business then was, by figures which I think I can give 
 approximately. 
 
 The total production in 1870 was 5,000,000 barrels, and it 
 had risen at the end of 1881, or in the year 1881, to, in round 
 figures, -25,000,000 barrels. 
 
 Me. Justice McKenna : Twenty-five million or thirty-five 
 million ? 
 
 Mr. Milbuen : Twenty-five million. The Standard's 
 consumption was something over sixteen million barrels, out 
 of this total of twenty-five million. Its refining plants were 
 situated then at Cleveland, in the Oil Regions, Pittsburg, 
 Parkersburg, West Virginia, Philadelphia, Baltimoi-e and New 
 York Harbor. The value of the I'efiuing plants was $17,- 
 000,000. It had about 3,500 miles of pipe lines, gathering 
 lines and trunk lines, every mile of which had been con- 
 structed by itself, excepting about 700 miles of gathering 
 lines. 
 
 The Chief Justice : Will you repeat those figures, if you 
 please ? 
 
 Me. Milbuen : They had in 1882, in round figures, 3,500 
 miles of pipe lines in Pennsylvania, part of Western 
 New York, and to some extent in West Virginia. 
 Of those about 1,000 or a little over 1,000 were trunk lines, 
 which I will speak of in a moment. About 2,000 odd were 
 gathering lines. Those they had built themselves — the whole 
 thing, io its entirety — with the exception of about 700 miles 
 of the gathering lines that there were in Pennsylvania in the 
 seventies, which had been acquired from the Pennsylvania 
 E^ilroad and from other little pipe line concerns. 
 They had built all of the trunk lines — unless we 
 call a line running from the oil regions to Pitts- 
 burg (the Columbia) forty-two to forty-eight miles 
 in length, which had been purchased, a trunk line. 
 If that is called a trunk line, then all of the trunk lines except- 
 ing the Columbia had been built by Standard interests. Now, 
 why that construction ? It was because of the enormous in- 
 crease in the later years of the seventies, and 1880 and 1881, 
 
17 
 
 of the production of crude oil. I have heard many criticisms 
 of the Standard Oil Company in my time, and I have read 
 them in this record, which embodies all that has been said 
 against the Standard Oil Company in the forty years of its 
 life. Any one who desired to come and testify against it did 
 so. But there is one fact that stands out, and they all say 
 that they want to make it an exception. Its bitterest enemy, 
 Mr. Emery, who has been its bitter enemy from the very 
 earliest time, says the great service they then rendered has 
 to be admitted, and that was that when the oil poured out of 
 the ground after 1875 and 1876, beyond any possibility of its 
 use, they borrowed money and found all the capital that they 
 could, and built pipe-lines to reach it and tanks to store it, 
 until they had 30,000,000 barrels of oil in store that had been 
 saved from destruction. That is one of the historical facts of 
 the oil regions, and that is how this rapid increase of pipe-line 
 mileage came about. And, mind you, a storage tank, is filled 
 and sealed, and is never opened until it is used ; and they 
 never use it as long as there is production to use. It is an 
 indefinite time when a tank will be emptied. No other interest 
 could have done that work. It cost millions of money, and 
 they stood there, as they have always stood, ready to buy 
 every gallon of oil tendered to them, so that every producer 
 could sell his product and get his money if he wanted to do so. 
 If not, he could store it on conditions which I will describe 
 later. 
 
 At that time, the structure was created practically as it is 
 to-day, with the exception of the additions that it has created 
 itself since. I have shown you what the volume of business 
 was at that time, what the production of crude oil was, and 
 what proportion it used ; and I should say, if round figures 
 may be given, that at that time it had, of the domestic refined 
 oil business, somewhere in the vicinity of ninety per cent. 
 
 The Chief Justice : You may suspend. 
 
 (The Court thereupon took a recess until 2:30 o'clock, p. m.) 
 
18 
 
 APTEE EECESS. 
 
 Opening Argument of John G. Milbnrn, £sq. 
 
 (Continued.) 
 
 Me. Milbuen : If your Honors please : It is charged and 
 strenuously insisted that these properties were acquired during 
 the '70's, or their acquisition was faciHtated, through the rail- 
 road situation of that time, and the ability of the Standard 
 Oil people to get better rates than anybody else in the oil 
 business. And certain particular contracts are referred to as 
 evidence of that state of things. 
 
 I can only briefly refer to those contracts, but I feel that I 
 should touch upon them in passing. 
 
 I may say that there is not a particle of evidence that any 
 of the purchases made during this period resulted from any 
 incidence of railroad rates. No one testified that he was 
 forced to sell or did sell because he could not stay in the 
 business as a result of the railroad rates that the Standard 
 obtained. We know, from the nature of the acquisitions and 
 purchases, that that is not true as to the great bulk of them. 
 Charles Pratt & Company and Warden, Frew and Lockhart 
 did not sell their plants at New York, Philadelphia and Pitts- 
 burg, and the acquisitions from the Pennsylvania Railroad in 
 1877 were not made, as the result of any necessity produced 
 by the railroads or railroad rates. And the only man who 
 refers to the subject at all in connection with the sale of his 
 own refinery does so as to the operation of a particular con- 
 tract to which I will refer that affected everybody in the 
 business. The element which he said was injurious to him, 
 was an element which affected everybody. 
 
 I cannot dwell upon the railroad situation of the 'TO's 
 generally. That is a matter of history. In judging of events 
 and transactions that took place in those times, we have to 
 reconstruct for ourselves as best we can the conditions of 
 those times. It is a difficult operation. But some effort of 
 the kind must be made, because it is useless to judge 1870- 
 1880 by the conditions of to-day, by all that has been legis- 
 lated and decided since that time. We have to judge each 
 matter by the conditions which existed when it arose. And 
 
19 
 
 if there is any fact established and shown by history — 
 I refer to the history of railroads — it is that in the '70's 
 and even later than that, rates, schedule rates, or -whatever 
 you may call them, were merely nominal ; that every man who 
 had any amount of freight to ship, to quote the language of 
 the time " shopped around " among the railroads to get the 
 best rate that he could. It was also the time of bitter rail- 
 road wars ; and efforts and means of adjusting those wars 
 that would not obtain now did obtain in those days. 
 
 I simply ask that in looking at any contract, it be looked 
 at in the light of the life of the day when it was made and 
 when it arose, and of its operation under conditions which 
 existed at that time ; and that it be not looked at in the light 
 of a condition of things which did not exist. 
 
 The first matter that is referred to is one which has been 
 lodged in the ease and in the history, or, rather, the romance, 
 of that time, and which seemingly will never die, regardless of 
 the facts, and that is the South Improvement Company. 
 
 In January, 1872, the situation was such that the railway 
 men, particularly Mr. Scott, of the Pennsylvania, and the 
 Philadelphia refiners, conceived an idea which they tried to 
 put into force that was certainly comprehensive. It was noth- 
 ing less than an arrangement which took in the railroads and 
 the refiners, and ultimately was to take in the producers, 
 whereby the whole business should be conducted by one 
 company for the benefit of everybody, and the results equit- 
 ably distributed between the various interests. A contract 
 was made between that projected company and the railroads 
 whereby rates were fixed, and many other matters arranged as 
 a part of that comprehensive scheme. 
 
 Mr. Eockefeller says, in his testimony in this case, that he 
 never believed that it was a practicable scheme. But he says 
 the railroad men believed in it and Mr. Scott was a very 
 powerful person. I think those were the words that he used. 
 He said the refiners in Philadelphia and Pittsburg were great 
 believers in it, and he did not care to take a position that 
 antagonized them. So Mr. Eockefeller and his associates took 
 some of the shares of the stock of the South Improvement 
 Company that were subscribed, but they were a minority in- 
 terest. Though he did so, he felt perfectly assured that the 
 scheme never could be carried out— that it was impracticable, 
 
20 
 
 but rather than try to convince them by argument he let expe- 
 rience do it. 
 
 It was made public, and there was an explosion of feeling 
 and sentiment and everything else in the oil regions. This 
 was in January, 1872. The legislature of Pennsylvania was 
 then in session, and a law was passed right through repeal- 
 ing the charter of the South Improvement Company, and it 
 died then and there. It never went into operation, and not a 
 ton of freight was shipped under the contract that it made. 
 Mr. Kockefeller's prediction in regard to it was thoroughly 
 justified. 
 
 In the earlier years of the oil business, and before the 
 Standard had anything to do with them, the oil terminals of 
 various railroads were operated by the oil men, for the reason 
 that it was a special traflSc and required special attention. 
 Oil was transported in barrels. They leaked; they needed 
 cooperage ; they needed a special place for their reception 
 and transfer to lighters ; it was a service of such a special 
 character that the railroad men of that time could not under- 
 take it. They had, as I said, before 1873 and 1874, turned it 
 over to the oil men, and from the beginning it was done under 
 proper regulations with the railroads. In 1874 and 1875 the 
 Standard Oil Company had such an arrangement with the Erie 
 and the New York Central, and for aught I know with the 
 Pennsylvania Railroad, although I think there is no evidence 
 as to the Pennsylvania. What it did was under a contract 
 with the railroads to handle the oil as it was received at the 
 terminals, do the cooperage that was required, and warehouse 
 it or forward it by lighter or otherwise to its destination. 
 
 Mb. Justice Holmes : "Who did that, do you say ? I lost 
 that. Who do you say did these things ? 
 
 Me. Milboen : The oil men had always done it, your 
 Honors ; and the Standard Oil Company had those contracts 
 in 1873, 1874 and 1875. The rates to be charged for this ser- 
 vice, as a reference to the contracts shows, were fixed by the 
 railroads. So far as the New York Central was concerned, it 
 did not want to provide oil terminals if it could avoid it, and 
 the Standard provided them and rendered the terminal service, 
 its compensation being a fixed proportion of its freight on the 
 oil that was transported for it. 
 
 Those contracts were in force in 1874 and 1875. As I say, 
 
21 
 
 they followed a usual practice. They were a necessity, or re- 
 garded as a necessiry, because the ordinary railroad employees 
 could not handle that kind of traffic. As the largest shipper 
 it fell to the Standard Oil Company ; and as long as the con- 
 tracts were in force, it did that work. I see no evidence show- 
 ing that the operation of those contracts coerced anybody to 
 sell his property, or affected his business. 
 
 The next contract is what is called the " Kailroad Pooling 
 contract of 1874." What that contract did was just this : 
 There were the interior refineries in Pennsylvania ; there were 
 the seaboard refineries. There had to be some equilibrium 
 established between the rates on crude to the seaboard and 
 the rates on refined to the seaboard if those refineries were 
 to co-exist. This contract provided what are called draw- 
 backs and allowances, so that the man who refined oil in the 
 oil regions and then sent it to New York for export, and the 
 man who got his crude from the oil regions and refined it at 
 the seaboard, paid exactly the same railroad transportation. 
 Thus the seaboard refiner had no advantage over the interior 
 refiner so far as railroad transportation was concerned ; nor 
 had the interior refiner any advantage over the seaboard 
 refiner. I do not know whether I make that clear or not, 
 but it is really a very simple matter, and should be put 
 clearly. 
 
 All refining points in the interior had the same rates to the 
 seaboard. The interior refiner was refunded the money he had 
 paid for the transportation of the crude to his refinery from 
 the oil field. The seaboard refiner who had received his crude 
 by railroad, was refunded a fixed sum per barrel. The result 
 was that the seaboard refiner was paying exactly the same 
 amount of railroad transportation for his crude oil to the sea- 
 board that the interior refiner was paying for the transporta- 
 tion of his refined oil to the seaboard. In this way both sets 
 of refiners were placed on an equality so far as railroad trans- 
 portation was concerned. The contract afi^ected all refiners in 
 the same way, and not one differently from another. 
 
 There was a contract in 1877 — what was known in those 
 days as an " evening " contract. It was a method in vogue, which 
 we read about in the histories of railroad transactions, whereby 
 the railroads kept peace between themselves temporarily ; and 
 they did it in this way : They established the proportions of the 
 
22 
 
 traffic that each railroad was entitled to. For instance, take the 
 oil traffic : The Pennsylvania, Baltimore & Ohio, New York Cen- 
 tral and Erie — four lines — divided that whole traffic up among 
 themselves in certain proportions. One got eleven per cent., 
 another got forty-six per cent., another got such and such a 
 per cent., and the other a certain other per cent. It was the 
 same with all the big classes of traffic from interior points, to 
 the seaboard. Then the railroads would go to the biggest 
 shipper and say : " If you will make your shipments so as to 
 carry out and observe these percentages, whether it suits your 
 convenience or not, we will pay you so much — give you an 
 allowance on your rate." That was called the " evening " 
 contract. It evened things up between the railroads. It was 
 a crude method, but a great deal has been said in its favor. 
 The Standard, being the great oil shipper, was the " evener " 
 for the comparatively short time that that contract lasted. It 
 shipped to Philadelphia if the Pennsylvania Eailroad's traffic was 
 falling off, so as to bring its proportion up, whether it wanted 
 to ship to Philadelphia or not. If the Erie was not getting 
 its proportion, its twenty-four per cent., we will say, then the 
 Standard shipped by the Erie, regardless of its own conven- 
 ience. That was the plan. And for doing that in connection 
 with certain guarantees as to the volume of traffic, it got, I 
 think, ten per cent, of the rate on its own shipments. 
 
 There was a contract with the American Transfer Company 
 in 1878. That was a pipe line company which was building 
 the pipe lines necessary to gather the oil and bring it to the 
 Pennsylvania Railroad — bringing practically all the crude oil 
 that was carried by the Pennsylvania Railroad. It was laying 
 out large sums in construction for this purpose and did not 
 think that what it was paid for gathering the oil and bringing 
 it to the Pennsylvania Railroad was enough. It brought 
 this freight to the Pennsylvania Railroad, and its position 
 was that it should have a portion of the railroad rate, so much 
 a barrel, twenty cents a barrel, or thereabouts, for the service 
 it rendered in connection with the freight. That contract was 
 in force a very short time. It is said that it applied to all 
 oil, whether it was brought by the American Transfer Com- 
 pany or not. But the fact is that practically all of the oil 
 that was brought to the Pennsylvania Railroad at that time 
 
23 
 
 was brought by this American Transfer Company and its as- 
 sociate the United Pipe Lines. 
 
 There is also cited under this head a special rate that 
 lasted for a few months in 1878, when the independent refiners 
 had established a route consisting of a pipe line to some place I 
 do not have in mind ; thence by railroad to Buffalo, and thence 
 by canal to New York, with a rate of seventy cents. The rail- 
 road companies made a rate of eighty cents to meet that rate. 
 That lasted until the canal had closed for the winter. And 
 that reduction of the railroad rate to meet, during the summer, 
 the competitive rate by the canal, is charged to have been a 
 device to give the Standard a rebate. 
 
 Those are the railroad contracts that are mentioned. I 
 say you must judge them by the times. I say that they did 
 not bring about the sales of the properties which the Standard 
 acquired. 
 
 I want to add only one more word on this subject. I wish 
 to correct what I think is a wrong impression of counsel on the 
 other side. He says that lower rates for larger shipments 
 than for small ones are unlawful at common law. I dispute 
 that proposition. I say that it is well established by English 
 cases and by cases in this country that the natural rule ob- 
 tained at common law ; that a big shipper, a man who brought 
 trainloads, was entitled to, and it was lawful for him to get, 
 a lower rate than a man who brought a carload occasionally, 
 say once or twice a week. I say that was not discrimination 
 at common law. The rule of equality between big and little 
 shippers came in with the Interstate Commerce Act of 1887. 
 It is an arbitrary rule. All the logic is in favor of the 
 shipper who ships trainloads getting a lower rate than the 
 shipper who ships carloads just as m commerce the wholesale 
 price is lower than the retail. 
 
 But as a matter of policy, to put everybody on the same 
 plane, the Interstate Commerce Act established the rule of 
 equality. That is what it did, and that is what the railroads 
 and shippers have come by degrees to accept. But, your 
 Honors, a great deal of the rebating that has prevailed was 
 the inevitable protest that always arises in business when an 
 arbitrary rule is imposed upon it which is contrary to the 
 common sense of the situation. The common sense was that 
 
24 
 
 if a shipper sends out a trainload of twenty, thirty or forty 
 cars every day, which goes right through, he should have a 
 better rate than a man who brings a carload three or four 
 times a week. That was the rule at common law. As to the 
 other rule of equality, it has only been gradually accepted. It 
 is practically accepted now ; but it has been a slow, hard 
 process. 
 
 If the Standard had openly had contracts between 1870 
 and 1880 or 1887, giving it for its great traffic more 
 favorable rates than the ordinary refiner, they would have been 
 justified in the law so far as they were reasonable. There is 
 nothing here to show anything unreasonable about the con- 
 tracts to which I have referred. 
 
 I have finished with that subject. 
 
 I come now to the situation in 1882 ; and I think it will 
 be better for me to trace onwards from that time first the 
 organic things that were done in regard to the holding of 
 these properties, and then to trace the growth and expansion 
 of the business and show how many of the corporations 
 came into existence which it is said were naturally competitive 
 and illegally combined. The trust agreement of 1882—1 need 
 not go into the agreement in detail, because it is found in the 
 record — was in efi'ect a transfer of all of these joint properties 
 to nine trustees to manage — to hold and to manage. The 
 actual physical properties (which included a great amount 
 of oil in storage) were then on the books at $55,000,000, 
 or thereabouts. They were taken over at what Mr. Arch- 
 bold said was considered to be their fair value at that time. 
 They were put into the trust at $70,000,000 ; and the original 
 issue of certificates for the properties, including the stock of the 
 Standard Oil Company of Ohio, was $70,000,000. The trust 
 certificates recited (they were just like shares of stock in that 
 regard) that they represented the holder's interest in the joint 
 property. The provision in the trust agreement is : 
 
 " The various bonds, stocks, and moneys held under said 
 trust shall be held for all parties in interest jointly, and the 
 trust certificates so issued shall be the evidence of the inter- 
 est held by the several parties in this trust." 
 
 The Government says that this was a combination of separ- 
 ately-owned independent corporations. We insist that it was 
 a transfer by joint owners of the legal title to the stocks con- 
 
25 
 
 stituting the joint property to trustees, the joint owners retain- 
 ing the equitable ownership evidenced by the certificates. 
 
 At that time, in 1882, the Standard Oil Company of New 
 Jersey and the Standard Oil Company of New York were 
 created. They were created out of the loins of the Standard 
 Oil Company of Ohio. Properties on the seaboard were 
 vested in the Standard Oil Company of New Jersey, and it 
 was supplied with cash capital, and in return the Trustees 
 took its stock. Other properties were transferred and cash 
 capital to the Standard Oil Company of New York, and in 
 return the Trustees received its stock. That is how and that 
 is when the Standard Oil Company of New Jersey came into 
 existence. It is and always has been a great corporation — a 
 great manufacturing corporation. It was created at that time 
 and in that way — in 1882. 
 
 Me. Justice Day : Was that the first Standard Oil Company 
 of New Jersey ? 
 
 Mk. Milbuen : That was the first Standard Oil Company 
 of New Jersey — the only one there ever was. 
 
 Mb. Justice Day : There never has been any reorganiza- 
 tion ? 
 
 Me. Milbubn : No, sir. 
 
 The Chief Justice : When did they increase their capital 
 stock ? 
 
 Mk. Milbuen : The increase was made in 1899. 
 
 Me. Justice Day : It was organized in 1882 ? 
 
 Mb. Milbuen : In 1882. 
 
 Me. Justice Holmes : Then the stock of the New Jersey 
 corporation was held by these trustees ? 
 
 Me. Milbuen : By these trustees. 
 
 Mb. Justice Holmes : And the various human beings who 
 were interested in the trust had trustees' certificates which 
 represented the stock in all these different Standard Oil cor- 
 porations, and also in anything else that they had ? 
 
 Me. Milbuen : Anything else that came into the trust 
 estate. 
 
 Mb. Justice Holmes : I see. 
 
 The Chief Justice : As well as in the New Jersey cor- 
 poration ? 
 
 Mb. Milbuen : As well as in the New Jersey company. 
 That was the whole scheme— to bring everything in the trust 
 
26 
 
 estate into a single trust. That is when it was brought there. 
 The original idea was (which they modified a day or two after- 
 wards) to organize Standard Oil Companies in the various 
 States where there were properties, and to transfer the prop- 
 erty in each State to the Standard Oil Company of that State ; 
 when the stocks of those Standard Oil Companies would be 
 substituted in the trust estate for the stocks of the corpora- 
 tions which had been turned over to them. 
 
 They did that so far as New Jersey was concerned, and the 
 refineries there, and so far as New York was concerned and the 
 refineries there ; but it was found impracticable then to carry 
 out that plan elsewhere. The result was that a number of the 
 original corporations continued right along as they were 
 before, their stocks being held by the trustees. 
 
 At that time the process of integration proceeded to 
 that extent, and this was the situation : The Standard 
 Oil Company of New Jersey was a great refining company on 
 the seaboard, with the New Jersey refineries, which were 
 largely constructed by it. The Standard Oil Company of New 
 York was another great refining company on the seaboard, 
 with refineries in Brooklyn and on Lor^g Island. The At- 
 lantic Refinery, at Philadelphia, was not turned into a Stand- 
 ard Oil Company of Pennsylvania. It was acquired in 1874, 
 and was continued. There was no Standard Oil Company of 
 Pennsylvania created. The Standard Oil Company of Ohio 
 continued with the refineries at Cleveland as the base for the 
 trade in the west and northwest ; and the National Transit 
 Company held all the pipe line interests owned at that time. 
 
 That was the situation in 1882. 
 
 In 1892 the State of Ohio brought a suit against the Stand- 
 ard Oil Company of Ohio, a quo warranto proceeding, which 
 resulted in a decree that it was an ultra vires act on its part 
 to be a party to the trust agreement, and that it must with- 
 draw from the agreement. That is an important case, and I 
 want to make just what it decided as clear as I can, because it 
 is used and will be used to the crack of doomto substantiate 
 statements in regard to the trust that are not borne out by 
 the record. 
 
 The bill as filed set up the tmst agreement of 1882, and 
 alleged that because all the stockholders of the Standard Oil 
 Company of Ohio were parties to it, the corporation itself 
 
27 
 
 was therefore a party though not in name a party ; that its 
 participation in the agreement was an abdication of its cor- 
 porate functions because it vested the control of its stock in 
 the nine ti^ustees instead of in its stockholders, and that it 
 was thereby ultra vires, an ultra vires act on its part. There 
 was a second count in the bill in which it was alleged that the 
 trust agreement was illegal because it created a monopoly and 
 was in restraint of trade. The Company answered and denied 
 the allegations of monopoly and restraint of trade, and was 
 ready to go to trial on those issues. If the parties had gone 
 to trial on those issues at that time, the facts would have 
 been disclosed as to the common ownership which this case 
 brought out. 
 
 The State then amended its bill, withdrawing all allega- 
 tions of restraint of trade and monopoly, or that this trust 
 agreement violated the law in those respects, and every charge 
 against the Standard Oil Company of Ohio excepting the 
 charge that, treating it as a party to the agreement, it had 
 exceeded its corporate powers in becoming a party to it. A 
 demurrer was interposed to the answer to the amended peti- 
 tion as then framed, and the case came up on that demurrer. 
 No testimony was ever taken. The Supreme Court of Ohio 
 held that the Standard Oil Company, though not in form a 
 party, was through its stockholders, a party ; and that it was 
 beyond its corporate power to enter into an agreement of that 
 kind. Its decree reads : 
 
 " The said corporation has, as alleged in the petition, 
 exercised the power, franchise, and privilege of executing 
 and performing the agreements set forth in the petition con- 
 trary to and without the authority of the laws of the State of 
 Ohio, and in violation of the law of its incorporation ; where- 
 fore it is ordered, adjudged, and decreed that the said cor- 
 poration be and the same is hereby ousted from the power, 
 franchise, and privilege of making or entering into such agree- 
 ments, or from performing the same, directly or indirectly." 
 
 But the Court in its opinion, with no issue in the case of 
 restraint of trade or monopoly, without a word of testimony 
 ever having been taken, the issue having been withdrawn 
 from the case by the amendment of the bill, with no knowl- 
 edge or information before it of the relations of these com- 
 panies or their origins or anything of the kind, said the trust 
 
28 
 
 agreement was illegal because it created a monopoly and re- 
 strained trade. 
 
 I submit that what the opinion says on that subject follows 
 neither pleadings nor proofs. There was no pleading raising 
 any such issue ; there was no evidence taken or submitted. 
 How then can the case be a binding adjudication that this 
 was an unlawful agreement because in restraint of trade or 
 tending to monopoly ? 
 
 The case passed off on precisely the same ground as the 
 North River Sugar Kefinery case did in the State of New 
 York. There, although the lower court went into the ques- 
 tion of monopoly and held that the trust was monopolistic, 
 when the case got to the Court of Appeals, that court held 
 that the Sugar Company being a party to the agreement, it 
 was ultra vires ; that it was without the corporate power to 
 join in the agreement ; and it dissolved the corporation for 
 violating its charter in going into it. It did not consider or 
 pass upon the question of monopoly or restraint of trade (121 
 N. Y., 582). 
 
 Therefore I have a right to say that the Ohio case may not 
 be cited as an authority that this was an illegal combination, 
 as a monopoly or in restraint of trade. The reference to it in 
 the books as such an authority (and it is the case that is put 
 prominently forward) is unwarranted. The Court did not 
 decide that it was a monopoly, although I admit that it said 
 it was in its opinion. There was nothing before the court on 
 which to base that portion of its opinion, and certainly not 
 the facts that are here in this record. 
 
 The result of that case was to force the Standard Oil Com- 
 pany of Ohio out of the trust agreement, and the trustees at 
 once surrendered its stock, and it paid no more dividends to 
 them. The Trustees at once dissolved the trust by the ma- 
 chinery provided in the agreement for that purpose. They 
 passed resolutions to distribute all the trust property amongst 
 the certificate holders pro rata. There were some of the com- 
 panies that were no longer necessary ; and by transfers of 
 property to this corporation and the other, and the winding up 
 of some unnecessary ones, the stocks of twenty corporations 
 were then held by the trustees. Those are the twenty cor- 
 porations set out in the bill. Pursuant to the resolutions an 
 assignment was executed to each certificate holder of an inter- 
 
29 
 
 est in the shares of each of the twenty companies correspond- 
 ing to the number of his certificates. 
 
 There were $97,250,000 of the certificates outstanding. 
 This was in 1892 — the date of the decision of the case. The 
 illustration given in the bill is of Mr. Eockefeller's assign- 
 ment. He owned just about a quarter, 260,000 shares or 
 certificates. Therefore he got an assignment of his 260,000 
 972,500ths of the stocks of each of the twenty separate cor- 
 porations. Every certificate holder was entitled to a like 
 assignment. 
 
 There were about three thousand holders of these cer- 
 tificates at that time — a body of common owners. Many of 
 them were very small holders. 
 
 Certain large holders surrendered their certificates, ob- 
 tained their assignments, and converted their assignments into 
 the shares of the separate corporations to which they were 
 entitled. Just more than a majority in interest did that. So 
 that every corporation then had more than a majority of its 
 stock in the hands of the men who had surrendered their cer- 
 tificates. The Trustees advertised for people to bring in their 
 certificates for surrender, but the small holders did not bring 
 them in. There was no coercion exercised to bring them in. 
 
 That transaction is criticised in the opinion of the Circuit 
 Court. It is said that the dissolution was effected in a way 
 to preserve the common control. Of course it was. 
 
 Me. Justice Holmes : Which one is this ? 
 
 Mr. Milbden : The court below said in its opinion that 
 the mode of dissolution or distribution adopted tended to 
 preserve the common control. Of course it did. 
 
 Mr. Justice Dat: How many companies were there in 
 which stock was taken ? 
 
 Me. Milbuen : At this time, your Honor ? Twenty com- 
 panies in 1892. 
 
 The Chief Justice : It just left them exactly where they 
 stood, practically, except that they were transferred ? I mean,^ 
 the ownership was the same ? 
 
 Me. Milbuen : One man had his shares in the separate 
 companies and another man had his certificates representing 
 his shares. But here is the point, your Honor : It is said : 
 " Why did you not coerce all the holders to surrender their 
 certificates and take their shares in the separate companies ? " 
 
30 
 
 It would have been cruel to do so. What would have hap- 
 pened to the small holders if they had been coerced ? We 
 have an illustration in the decree in this case, that we have to 
 execute if you affirm it. There are five thousand stock- hold- 
 ers of the Standard Oil Company of New Jersey, many of them 
 small ones. To-day they have their one hundred dollar shares 
 of the stock of that Company. There are, I will say, $100,- 
 000,000 of those shares. (There are ninety-seven odd mil- 
 lions.) That is, a million shares are outstanding, represent- 
 ing $100,000,000 par value. The market value is $600 a share. 
 The shares, therefore, represent $600,000,000— the $100,000,000 
 of shares of the Standard Oil Company of New Jersey— to- 
 day. If a man owns ten shares of this stock, they represent 
 a value of $6,000, and they represent his interest in all of 
 these properies. We have to distribute the shares of 
 the subsidiary companies. We have to leave him hia 
 shares of the Standard Oil Company of New Jersey, and we 
 have to give him his proportion of the shares, I think, of 
 thirty-seven corporations. He keeps his shares of the 
 Standard Oil Company of New Jersey, but they represent a 
 mutilated corporation. He is entitled to his proportion of the 
 shares of all the other companies. If he owns one share of 
 Standard Oil stock, he will get in the Standard Oil Company 
 of Indiana a fractional interest of one dollar. He will get in the 
 smallest one, the Chesebrough Manufacturing Company, a 
 fractional interest of 28 cents — an interest of 28 
 cents in a very prosperous concern ! I could take up all of 
 these corporations, and show you that a share of stock of 
 the Standard Oil Company of New Jersey will represent any- 
 where from $2.50 down to 28 cents. It takes 100 shares of 
 the stock of the Standard Oil Company of New Jersey, worth 
 $60,000, to get one share of the stock of the Standard Oil 
 Company of Indiana. The shares of the Standard Oil 
 Company of New York, the National Transit Company, and 
 of the other subsidiary companies were never on the market. 
 They have no market value. And each of the small holders 
 will get this handful of scrip to represent his interest in the 
 Standard Oil organization. 
 
 Mb. Justice Day : You may have stated (but it has escaped 
 me if you did) what percentage of the certificate holders took 
 stock. 
 
31 
 
 Me. Milbubn : Fifty-two ; fifty-one per cent, not in num- 
 bers but in interest. They held their shares together until 
 some plan was devised in regard to these common properties, 
 your Honor. They held them from 1892 to 1899, wondering 
 what they could do, and not calling upon the small holders 
 to surrender their certificates, because they could use them in 
 their banks, and sell them ; and if they had brought them in 
 and given them up in exchange for fractional interests in the 
 different corporations, they would have had nothing that they 
 could use, nothing that they could borrow money on. If 
 they had done that they could only have sacrificed their frac- 
 tional interests if they had to use them. What are the small 
 holders going to do now if this decree is to be executed — the 
 people who have $10,000 or $15,000 or $30,000 worth of 
 Standard Oil stock ? Their shares are the family provision of 
 many people. What are they going to do with all of the 
 fractional interests they are bound to receive under the de- 
 cree ? They will be at the mercy of speculators. If the big 
 men of the company want to get it all, there is their oppor- 
 tunity. 
 
 What we are going to do under those circumstances I do 
 not know. We will have to do the best we can, but it is an 
 awful situation. We could increase the stock of some of the 
 subsidiary companies if we had time. We are given thirty 
 days to disintegrate this organization. We might, for in- 
 stance, increase the capital stock of the Standard Oil Com- 
 pany of Indiana to the value of its assets, so that a share 
 of Standard Oil of New Jersey stock would be entitled to a 
 fractional share of twenty-five dollars in that company instead 
 of one dollar. I cannot help thinking of the matter from 
 these practical standpoints. I do not wish to magnify any- 
 thing. I do not want to prophesy calamity. I am an opti- 
 mistic person, and think that somehow or other we will work 
 it out — but I do not know how. I stop to say this because it 
 is the reason why the small certificate-holders were not 
 coerced back in 1892, to come in and give up their certifi- 
 cates, which they could use, and receive for them a lot of stuff 
 which they could not use. 
 
 Mb. Justice Day : This was in 1892 ? 
 
 Me. Milbubn : This was in 1892, at the time of the 
 dissolution ; and the court misapprehended the situation, or it 
 would not have criticised what was done. Mr. Archbold said 
 
32 
 
 it would have been cruel, it would have been wrong, to coerce 
 the small holders at that time. 
 
 We come now to 1899, and the plan of that year to pre- 
 serve this common property and its management with due 
 respect to the separate corporations and their obedience to the 
 law of their being, which was the transfer of the shares of the 
 subsidiary companies to the Standard Oil Company of New 
 Jersey. It was the biggest corporation in the common 
 ownership. All these owners, whether they owned the shares 
 of stock into which they had converted their certificates, or held 
 their certificates, owned the same proportion of the Standard 
 Oil Company of New Jersey and of all the other twenty 
 corporations. Every man had precisely the same proportion- 
 ate interest in each corporation as he had in the Standard Oil 
 Company of New Jersey. 
 
 They all transferred the shares that their certificates had 
 represented to the Standard Oil Company of New Jersey, and 
 it issued its capital stock for them, and acquired them in that 
 way. After that was done, a share of the Standard of 
 New Jersey represented just what a certificate ot the trustees 
 had represented before. That is the simplest way to put it ; 
 and it was arranged so that the small holders could make the 
 transfers without inconvenience. A stipulation in the record 
 covers the method adopted with respect to them. 
 
 Me. Justice Day : Tou have not stated, Mr. Milburn, and 
 I suppose we are to infer, what was done with the stock of 
 these smaller outlying companies at the time of the increase of 
 the capital stock. 
 
 Me. Milbuen: There were only twenty companies at the 
 time of the dissolution. Preparatory to it, as I said, in 1892, 
 they had wound up some of the companies that were un- 
 necessary, and had transferred the properties of others so as 
 to reduce those held in the trust to twenty companies, one of 
 which was the Standard Oil Company of New Jersey. The 
 stocks of the twenty companies were all the stocks the trustees 
 then held. 
 
 Me. Justice Lueton : What became of the property of 
 those companies that are lost sight of ? 
 
 Me. Milbuen : All were in the twenty companies.t 
 
 tNoTE : There was in addition a considerable number of other companies 
 whose stocks were thereafter held by one or other of the twenty companies. 
 
33 
 
 Mr. Justice Lubton : That is, the twenty absorbed the 
 others ? 
 
 Mr. Milbden : Yes ; their properties or their stocks. For 
 instance, there was the Chesebrough Manufacturing corpora- 
 tion, which makes a by-product, in which the Standard Oil 
 Company had taken an interest. 
 
 Mb. Justice Day : Their property or stocks were conveyed 
 to the Standard Oil Company of New Jersey ? 
 
 Mr. Milbubn : Its stock was transferred to the Standard 
 Oil Company of New Jersey before this time in 1892 in con- 
 nection with the dissolution of the trust' to simplify it. It wa& 
 just as if to-day, your Honors, — 
 
 Mr. Justice Day : I am asking you for the fact, the date. 
 That was done in 1899 ? 
 
 Mb. Milburn : That was done, your Honor, in 1892, at the 
 time of the dissolution proceedings ; the companies were then 
 reduced to twenty in number. 
 
 Mb. Justice Day : I know ; but what became of the twenty ? 
 
 Mb. Milbubn : They are all in existence. 
 
 Me. Justice Day : And holding their properties and stocks ? 
 
 Mr. Milbubn : Yes. They are in existence, and their 
 stocks are held by the Standard Oil Company of New Jersey. 
 
 Mb. Justice Day : Exactly ; that is the fact I am asking 
 for. "When was that stock turned over to the Standard Oil 
 Company of New Jersey ? 
 
 Mb. Milbubn : In 1899. A man brought his certificate,^ 
 which represented his interest in all of those companies, to the 
 Standard Oil Company of New Jersey, which was one of the 
 twenty companies in which he owned the same interest, and he 
 transferred what a certificate represented of fractional shares 
 in all the companies to the Standard Oil Company of New- 
 Jersey, and got back a share of its stock in return. It is 
 a very simple proceeding, your Honor, if I could make it 
 clear. 
 
 If I myself owned a certificate of the trustees, that repre- 
 sented my interest in all of the trust properties. Now then, I 
 came to the Standard Oil Company of New Jersey, and it gave 
 me a share of its stock ; and that share then represented jusi 
 what my certificate had represented. 
 
 Mb. Justice Day : Of course, as the basis of that, the 
 
34 
 
 Standard Oil Company of New Jersey had acquired the stock 
 of the twenty companies ? 
 
 Mr. Milburn : It acquired them through these transfers of 
 1899. 
 
 Me. Justice Hughes : As I understand it, the stocks of 
 these twenty companies were held by trustees at the time of 
 the dissolution ? 
 
 Mb. Milburn : Yes, sir. 
 
 Me. Justice Hughes : And when the new arrangement was 
 effected, those stocks were held by the Standard Oil Company 
 of New Jersey instead of by the trustees ? 
 
 Me. Milbuen : Practically that, your Honor. 
 
 Me. Justice Hughes : And those who had held the cer- 
 tificates from the trustees, after that arrangement was effected 
 held the certificates of stock in the Standard Oil Company of 
 New Jersey ? 
 
 Me. Milburn : Excepting that in 1892 the majority in in- 
 terest of them, for purposes of administration, converted their 
 certificates into the actual shares of the companies. Some did 
 not. They never converted until the very end. Then, at the 
 very end, they surrendered all their shares and interests in the 
 subsidiary companies for shares of the Standard Oil Company 
 of New York. 
 
 Me. Justice Hughes : I mean, that was the process ? 
 
 Me. Milburn : That was the process. 
 
 Me. Justice Hughes : So far as it was carried out, that 
 was the process ? 
 
 Me. Milbuen : The men that had held the $97,250,000 of 
 certificates when the transaction of 1899 was completed, owned 
 $97,250,000 of the shares of the Standard Oil Company of New 
 Jersey. 
 
 Mr. Justice Day : Did this process result in taking up all 
 the certificates ? 
 
 Me. Milburn : Every certificate. 
 
 Me. Justice Day : There are no certificate holders now ? 
 All of them have shares of the Standard Oil Company of New 
 Jersey ? 
 
 Me. Milbuen : Yes, sir ; they all have shares of the Stand- 
 ard Oil Company of New Jersey. 
 
 Mr. Justice McKenna : That, though, under the decree, 
 is to be turned back to them ; is it not ? 
 
35 
 
 Mb. Milbubn : That, uuder the decree, and much more, 
 has to be turned back to them. 
 
 Me. Justice McKenna : The status prior to the organiza- 
 tion of the Standard— the status of 1899 — would remain ; 
 would it ? 
 
 Mr. Milbubn : No ; a great many changes have taken 
 place since then — a great many changes. It is this transaction 
 of 1899 that the court below held to be a combination in re- 
 straint of trade and in violation of Section 1 of the Sherman 
 Act. 
 
 Mb. Justice Day : Was the turning in of the shares of 
 stock of these twenty companies to the Standard Oil Com- 
 pany of New Jersey what the court below held to be a com- 
 bination ? 
 
 Mb. Milbubn : Yes, sir. 
 
 Mb. Justice Hughes : As I understand it, the stock of the 
 Standard Oil Company of New Jersey was itself held, prior 
 to the increase of stock and the new arrangement, by the 
 trustees ? 
 
 Mb. Milbubn : By the trustees. 
 
 Me. Justice Hughes : Yes. In other words, the stock of 
 the twenty companies was held by the trustees ? 
 
 Mb. Milbubn : Precisely. 
 
 Me. Justice Hughes : And one of the twenty companies 
 was the Standard Oil Company of New Jersey ? 
 
 Mb. Milbubn : One of the twenty companies was the 
 Standard Oil Company of New Jersey. 
 
 Mb. Justice Hughes : When the new arrangement was 
 effected, the net result of it was that the Standard Oil Com- 
 pany of New Jersey stood in place of the trustees ; and those 
 who owned the various interests in the stocks of the twenty 
 companies represented by the beneficial certificates issued by 
 the trustees thereafter held directly as stockholders of the 
 Standard Oil Company of New Jersey, which had taken the 
 place of the trustees ? 
 
 Mb. Milbubn : Precisely. So you had a change in the 
 form of the common ownership, and that is all. It was a 
 transaction of common owners, who had been such from the 
 very beginning. 
 
 Mb. Justice Lubton : I suppose, Mr. Milburn, you under- 
 take to distinguish between that situation and that in the 
 
36 
 
 Northern Securities case ? Was or was not this New Jersey 
 corporation a holding company ? 
 
 Mr. Milbuen : That is going to be discussed, your Honor. 
 Will you let me take that up when I come to it, if I ever do ? 
 It is not in my province, but I may come to it. 
 
 Mk. Justice Lueton : Oh, certainly. It arises at the time 
 when we are getting these facts ; but go ahead. Let it come 
 up in its due order. 
 
 Mr. Milburn : In the Northern Securities Company case 
 there was Mr. Harriman who had acquired for the Union Pacific 
 lines a majority of the stock of the Northern Pacific ; there was 
 Mr. Morgan, who owned Northern Pacific, and his associates ; 
 there was Mr. Hill, who owued Great Northern, and his as- 
 sociates, and also Northern Pacific. Those separate and di- 
 verse interests met and organized the Northern Securities 
 Company. 
 
 The Chief Justice : In other words, in the Northern Se- 
 curities case, each man by the effect of that arrangement 
 got an interest in property which before he had no in- 
 terest in ? 
 
 Mr. Milburn : Precisely. Take, for instance, the Harri- 
 man interests : They bought Northern Pacific until they 
 thought they had control of it, but they had not a dollar of 
 interest in Great Northern until the Northern Securities Com- 
 pany was organized and through it. 
 
 Mk. Justice Lueton : Was there not a power of competi- 
 tion in each of these corporations as against every other be- 
 fore that transfer ? 
 
 Mr. Milburn : Was there a power of competition ? 
 
 Mr. Justice Lurton : Yes. 
 
 Mr. Milbuen : Now, your Honor — 
 
 Me. Justice Lueton : Was there not a potentiality of com- 
 petition existing there ? 
 
 Mr. Milbuen : I am now going to a branch of my subject 
 which brings out whether they were competitive, potentially 
 and naturally competitive, or not. I want to trace how many 
 of these principal corporations came into being ; and then I 
 think the whole picture will be before you. 
 
 The Chief Justice : You are approaching now the ques- 
 tion whether they were either potentially or otherwise com- 
 
37 
 
 petitors before the taking of the interest by the New Jersey 
 corporation ? 
 
 Mr. Milburn : Precisely. I have followed the stream down 
 to the formation of the trust of 188'2 ; and I showed you 
 wha,t was then the volume of production and the volume of 
 business. Let me compare or contrast the conditions then 
 with the conditions in 1906 when this proceeding was begun. 
 
 In the first place, the total crude production in the United 
 States in 1881— that is, at the time the trust was entered into— 
 was 25,000,000 or 26,000,000 barrels per annum. In 1906 it was 
 126,000,000 barrels. The value of the Standard refineries in 
 1882 was $17,000,000. In 1906 it was $58,000,000. The pipe- 
 lines in 1882 were 3,531 miles in length. In 1906 they were 
 54,615 miles in length. The marketing stations (that is, 
 where they had storage places from which the tank-wagons 
 are loaded and go to serve the retailers) were 150 in 1882, and 
 in 1906 they were 3,573. 
 
 Mr. Justice Holmes : What was the first year that you 
 contrasted with 1906 ? 
 
 Mr. Milburn : 1882. 
 
 In 1882 the oil field was confined to the Appalachian 
 field, which was a part of Pennsylvania, running a little into 
 New York, a little into West Virginia, a little in eastern Ohio, 
 and a little in Kentucky. In 1906 the oil fields existed in 
 fifteen States. There was the Lima-Indiana field in western 
 Ohio and eastern Indiana ; there was the Illinois field, extending 
 beyond that ; the mid-continent field in Oklahoma and Kansas ; 
 the Texas field ; the California field ; and the last to burst 
 forth with the best oil that is produced except in Pennsyl- 
 vania, is Louisiana. In the new Caddo field, in that State is 
 now a large production, which started since the last argument 
 of this case. 
 
 I have given the figures of the two periods. How did the 
 growth occur ? Let me describe it. 
 
 From 1886 to 1888 there came, and demonstrated itself as 
 a substantial thing, a production of oil in what is called the 
 Lima-Indiana field, which is situated in western Ohio and 
 eastern Indiana. It then began to come in great volume. That 
 oil is impregnated with sulphur to such an extent as to be 
 very difficult to refine, and is not refinable without some special 
 process which eliminates or substantially eliminates the sul- 
 
38 
 
 phur. Inasmuch as the Pennsylvania field was then declining, 
 it came as a new and needed deTcIopment. It sold as low as 
 fifteen cents a barrel, because it could only be used for fuel 
 purposes. 
 
 It was a great field. It was open to everybody to go into 
 it. The Standard Trustees believed they could discover a 
 process which would refine the oil on any scale, no matter 
 how much of it there was — not simply refine minor quantities 
 of it. So they went in there, and built pipe-lines and storage 
 tanks ; they put its chemists at work ; and they devised a 
 process by which the production of the field could be refined on 
 any scale. They organized the Standard Oil Company of In- 
 diana, which built the great refinery at Whiting. They organ- 
 ized the Solar Kefining Company, which built the refinery at 
 Lima, Ohio. They took all the oil that was offered from the 
 field. A little along the northern fringe of the field could be 
 used for refining by ordinary processes, but only on a small 
 scale. They built the trunk pipe-line to Whiting, Indiana, 
 to supply the refinery there from the field, and also one to 
 Cleveland to supply one of the refineries there. The price of 
 the crude went up from fifteen cents to as high as $1.30 a 
 barrel ; and all of it found a market. These are the develop- 
 ments that followed the discovery of the Lima-Indiana field. 
 
 That is the origin of the Standard Oil Company of Indiana. 
 The Trustees organized it with a million dollars of cap- 
 ital, and furnished all the money for the construction of its 
 plant and the establishment of its business. The same is true 
 of the Solar Eefining Company and its refinery at Lima. 
 They furnished all the money to build the pipe lines. They 
 furnished all the money to build the tankage for as vast a 
 quantity as 20,000,000 barrels at one time. 
 
 There in its totality is one great creation. The Standard 
 Oil Company of Indiana to-day supplies a population of 
 20,000,000 people in the region which it occupies. And yet 
 you have before you a finding that it is potentially com- 
 petitive or naturally competitive with the Standard Oil Cbm- 
 pany of New Jersey ! 
 
 Mb. Justice Lueton : Is all of the stock in the Indiana 
 Company held by the Standard Oil Company of New Jersey ? 
 
 Mr. Milbuen : It is all held by it excepting the qualify- 
 ing shares for directors. The common ownership created it. 
 
39 
 
 The trustees of the common owners created it, and created the 
 Solar Refining Company, and created the Buckeye Pipe Line 
 Company to own and build the thousands upon thousands of 
 miles of pipe lines for the Lima-Indiana field — to take the oil 
 of that field which was open to everybody. How can those 
 corporations be held to be naturally competitive? I take 
 naturally competitive to mean that according to the normal law 
 of their being they would be competitive ; and yet the relation 
 between them and the common ownership is that of parent 
 and child, creator and created. The stock of the Standard Oil 
 Company of Indiana has to be distributed and scattered under 
 the decree in this case. Why ? So that there may be a possi- 
 bility of its ownership getting separated from the ownership 
 of the Standard of New Jersey ; and, through that disintegra- 
 tion, competition may be brought about between the Indiana 
 and New Jersey Companies. 
 
 Me. Justice Ldrton : What was the decree of the Court 
 below with respect to the stock in the Indiana corporation ? 
 
 Me. Milbubn : It forces the distribution of the stocks of 
 all the Companies without discrimination — 
 
 Me. Justice Lukton : But what becomes of it ? Who is to 
 get the stock ? 
 
 Me. Milbuen : Well, sir, a man who owns ten shares of the 
 Standard Oil Company of New Jersey when the distribution 
 is made will get an interest of ten dollars in the Standard Oil 
 Company of Indiana. He will have scrip for ten dollars. 
 
 Mb. Justice Lueton : He is to get a share ? 
 
 Me. Milbuen : He cannot get a share, sir. He can get 
 scrip which will represent — 
 
 The Chief Justice : An aliquot part of a share ? 
 
 Mr. Milbuen : An aliquot part of a share. 
 
 Me. Justice Lueton : It is a distribution of the supposed 
 value of the Indiana property, represented by scrip amounting 
 to a share of the Standard Oil Company ? 
 
 Me. Milbuen : No, sir ; it is a distribution of the stock of 
 the Indiana Company which is held by the New Jersey Com- 
 pany to the stockholders of the latter Company. After the 
 distribution, the New Jersey Company will not own the 
 $1,000,000 of shares of the Indiana Company, but its stock- 
 holders will. 
 
 Mb. Justice Lubton : The stockholders will ? 
 
Mr. Milburn : Yes, sir. That is forced, not on the theory 
 that they ever were competitive, that they ever did compete, 
 but on the theory that the law can coerce and bring about a 
 condition of things which may bring competition into being. 
 
 Mr. Justice Lurton : You said the capital stock of the In- 
 diana Company was only $1,000,000 ? Is that it ? 
 
 Mr. Milburn : $1,000,000. It should be $25,000,000, we 
 will say. 
 
 Mb. Justice Lueton : The value of the property is 
 $25,000,000 ? 
 
 Me. Milbuen : The assets, the last I knew of them, in 1906, 
 were about $24,000,000 ; and I suppose, if there were time, and 
 men were going about this thing to do it properly, if there is 
 to be a change of the status, they would increase its capital 
 stock ; and then, for each share of Standard of New Jersey 
 that a stockholder owned he would get — instead of getting one 
 dollar — $25 or a quarter of a share of the Indiana Company. 
 
 I have shown you how the Standard Oil Company 
 of Indiana came into being. Let us now go to the 
 next oil field. There were in 1898 signs of substan- 
 tial development in California. It presents a very in- 
 teresting situation. There had been efforts to retine the 
 California crude, and some refining ; but the product could 
 only be made merchantable by mixing thirty per cent, of the 
 California refined product with seventy per cent, of east- 
 ern oils. 
 
 As there were more and more signs of greater production, 
 the Standard, which had never been a refiner out there, 
 made up its mind that it was a field where refining should 
 be done on a large scale. It found a company there called 
 the Pacific Coast Oil Company, with forty or fifty acres of 
 producing property, a pipe-line from that producing prop- 
 erly to the coast at Yentura, and a little tank steamer to 
 take the crude up to San Francisco harbor, where it had a little 
 refinery with a capacity of 260 barrels a day. For $760,000 it 
 bought that refinery and the production, the whole thing, in 
 the year 1900 to experiment and work out a means of refining 
 the California crude ; and it discovered a process by which it 
 could be refined. I do not say that other refiners have not proc- 
 esses by which it can be refined ; I do not say that it discov- 
 ered the only process ; but it went to work to discover a 
 
41 
 
 process that was satisfactory to it ; and did discover one. 
 And what was the result ? It was the Standard Oil Company 
 of Neio Jersey itself that did this. 
 
 Mk. Justice Holmes : In what year ? 
 
 Me. Milbuen : 1900 and 1901 ; that was when it began 
 this development. It discovered a process ; it built a refinery 
 with a capacity of 25,000 to 28,000 barrels a day; it built 
 pipe-lines to the newly-discovered oil fields in California, 
 which are now a part of its pipe-line system ; and it put 
 $17,000,000 of money in the construction of that refinery and 
 the establishment of the plant in its entirety. 
 
 The old refinery is listed in the Government exhibit as a 
 dismantled refinery, though we substituted a refinery of 
 28,000 barrels a day for one of 260 barrels a day that was 
 moribund, and the new one is one of the great refineries of the 
 country. The name of the company was changed to the Stand- 
 ard Oil Company of California, and that is how the Standard 
 Oil Company of California was created. It now has an enor- 
 mous business ; there is a production of 40,000,000 barrels a 
 year in California ; but all the figures are in the brief. 
 
 Me. Ceawfohd : Nine millions. 
 
 Me. Milbuen : The total production of the field is 40,000,- 
 000, and we take only a part of it. It is a most interesting 
 atory — the development of that business. The export trade 
 grew from something like 60,000 barrels in 1902 to over a 
 million in 1906. But I cannot stop to go into details. The 
 plant and its pipe-line system and its great business .-ire en- 
 tirely a creation of the Standard of New Jersey out of its own 
 funds, and yet by the decree they are to be torn from it that a 
 separate ownership may possibly arise. 
 
 The substantial production of oil in Texas occurred in 
 the years 1898-1900. I have not time to go from field 
 to field in any detail, but I must say a word about the 
 Texas situation. The Standard would like to have estab- 
 lished refineries in Texas, but it thought there were 
 prudential reasons why it should not, and it did not, itself. 
 There is an enormous mass of testimony about that. In one 
 part of the Texas field two Standard men under the name of 
 the Corsicana Eefining Company, with money advanced by one 
 of the Standard companies, built a refinery. In another part 
 there was a company known as the Security Company which 
 
42 
 
 built a refinery, the stock of which was owned by an English 
 company. The Government's claim is that they were Standard 
 companies. They were certainly friendly to the Standard. 
 They were not owned by the Standard Oil Company of New 
 Jersey, but they were friendly companies. It was perfectly 
 legitimate to utilize the Texas production ; but there was a 
 very peculiar anti-trust law in Texas ; and the Standard was 
 embarrassed in the establishment of new plants in Texas by the 
 ownership of its interest in the Waters-Pierce Company, which 
 was then in Texas. It is not embarrassed any longer, be- 
 cause the State of Texas eliminated the Waters-Pierce Com- 
 pany by the imposition of a fine of $1,300,000 or thereabouts, 
 which, within a small amount, was just the value of the Texas 
 property of the Company at that time. So the State took it 
 all, and it is gone from there. 
 
 But the Government says that the Corsicana and Security 
 companies are Standard companies. Let us assume that they 
 are Standard Companies. Then they were established there 
 as new ventures in a new field to compete with any other 
 interests. I could never understand why there was such an 
 effort on the part of the Government, to show that they were 
 Standard companies, when if they are Standard companies 
 they present no question of the acquisition or elimination of 
 competitors, but were new creations. 
 
 Next came the mid-continent field in Oklahoma and Kan- 
 sas in 1900. It proved a wonderful field. A great pro- 
 duction began to manifest itself in the years after 1900 that 
 was open to all the world. All the world could go there 
 and mine for oil, and build pipe-lines, and do what they 
 pleased. The Standard went there and organized the Prairie 
 Oil and Gas Company, which is a private corporation, to deal 
 in oil. It built gathering lines and a trunk line to Griffith, 
 Indiana, to supply the Whiting Refinery, and through con- 
 necting lines to supply the refineries in Pennsylvania, New 
 York and New Jersey. There was an enormous development 
 through the Prairie Oil and Gas Company of trunk-line 
 mileage and gathering lines. The Standard Oil Company of 
 Indiana built a refinery at Sugar Creek, Missouri, to refine 
 the oil of that field ; and the Standard Oil Company of Kan- 
 sas was created, which built a new refinery at Neodesha, in 
 Kansas, for the same purpose. All of that pipe-line mileage, 
 
43 
 
 and the two new refineries, were created by the Standard. 
 They were built by Standard companies— purely Standard 
 creations. Was it a conspiracy or combination, to go into 
 that field and buy the oil and refine it ? The Gulf Com- 
 pany of Texas— a big company ; the Texas Company of Texas, 
 another big company — both independent companies — built 
 pipe-lines ; built refineries on the Gulf, and get their oil from 
 that field. Anybody could have done what they did and what 
 the Standard did. 
 
 This is another illustration of how the pipe-line mileage 
 has grown, how the refining capacity has grown — by new 
 creations of the Standard itself, and why should they, the 
 Prairie Oil and Gas Company and the Standard Oil Company 
 of Kansas, be severed from the main company ? 
 
 Finally, in 1906, the Illinois field began producing to a 
 substantial extent a quality of petroleum that is refinable. 
 Leaving out the new discovery in Louisiana, the Pennsylvania 
 oil is the best as to quality ; next in order of quality is the 
 mid-continent ; and next comes the Illinois crude. The oils 
 of Texas and California and Lima-Indiana, need treatment ; 
 they need special processes. A refinery was built at Wood 
 Kiver, Illinois, by the Standard Oil Company of Indiana to 
 refine the production of the Illinois field on the spot, which 
 involved more pipe line construction. 
 
 Along with these developments great changes took place 
 in the old refineries. There is no semblance between the 
 present and the original refineries. Take Bayonne, New 
 Jersey. In the deal with the Pennsylvania Eailroad in 1877 
 there was some real estate acquired at that place, and the 
 beginnings of a small refinery. The Standard Oil Company 
 of New Jersey got that property in 1882, as I have 
 already said, when it was organized. It has been there 
 ever since, increasing the original refinery, adding new re- 
 fineries, and increasing its trade. To-day the Standard Oil 
 Company of New Jersey refines at Bayonne more oil than 
 was refined or than was produced in 1882. It refines more oil 
 there to-day than all the Standard refineries did in 1882. All 
 that additional capacity has been created by new expenditures. 
 The same is true, though in a less degree, of the Atlantic 
 refitneries in Pennsylvania ; the Atlas refinery, at Bufi"alo, and 
 the others. The original investment of seventy or eighty 
 
u 
 
 thousand dollars when the Atlas was bought has now de- 
 Teloped into $2,000,000. So everywhere it has transformed 
 its plants. 
 
 The pipe-line system has grown from 3,000 to over 50,000 
 miles by the pipe-lines that have been built for the 
 Lima-Indiana field, for the Mid-Continent field, for the Cali- 
 fornia field, and for the Illinois field. It is practically all a 
 Standard creation. I will come to what there has been of 
 acquisition in a few moments. The fact is that it is the de- 
 velopments I have just described which account for the 
 growth of the business and plants of the Standard in the 
 twenty-five years which have elapsed since 1882. 
 
 Let me mention in this connection the development of the 
 marketing side of the business. In 1886 the Standard Oil 
 Company of Kentucky was organized to do a marketing business 
 largely in the south, supplemental to the marketing facilities 
 of the refining companies, with a nucleus of an acquired busi- 
 ness, or an interest in an acquired business, which I have 
 already mentioned as the business of Chess, Carley & Co., at 
 Louisville. The Continental Oil Company was organized in 
 1885 as a marketing company for the Eocky Mountain States, 
 the nucleus of which was an interest in a marketing business 
 carried on there by a Mr. Blake. Both of these companies 
 have grown and extended their facilities enormously from year 
 to year. In 1888 the Anglo-American Oil Company, which is 
 the marketing company for the British Islands, was organized. 
 Why sever that company created by the Standard for its 
 foreign trade ? It has no business in this country. It gets 
 its oil here and sells it only over there and nowhere else. It 
 can only exist by virtue of the relations which it has to the 
 Standard refineries. I should have mentioned as I went 
 along, and for fear I may forget it altogether I will mention it 
 now, that all tJiese separate entities are parts of an organism, 
 members of a great single business. Tear them apart and 
 who knows what will become of them or what their value 
 will be ? The Standard Oil Company of New York is used 
 by the others as a great marketing company. Can any one 
 know anything about the value of the Standard of New York 
 when there is a severance ? These companies have no inde- 
 pendent existence from the point of view of value. 
 
 The Colonial Oil Company was organized for foreign trade 
 in 1901. The Standard does business all over the globe 
 
45 
 
 wherever men use oil and the products of petroleum. That 
 fact has necessitated the organization of a great number of 
 foreign companies— in Germany, Italy, Turkey, Moldavia, and 
 everywhere. We hear of the enormous number of corporations 
 that are controlled by the Standard. "Will any lawyer tell me 
 how a great manufacturing business, with plants in different 
 States and property and marketing facilities in all the States 
 and many foreign countries, can be carried on without a great 
 many allied and subsidiary corporations ? The learned 
 Attorney General knows as well as I how such corpora- 
 tions have to be multiplied in connection with a world-wide 
 business. Hence the number of corporations is indicative of 
 nothing. 
 
 I must mention another matter in the development of the 
 business, and then I am done with this branch of my subject. 
 
 Along in the '90's the Standard put into practice what it 
 believed to be a sound policy ; and that was to establish its 
 marketing stations all over this country. That is why it now 
 has over 3,500 instead of only the 150 that it had in 1882. At 
 those stations it has tanks for the storage of oil and tank 
 wagons for its distribution. It is by this means that it reaches 
 the retailer, and it is with the retailer that it now deals. That 
 step necessarily affected a great many jobbers who were in the 
 business when it did not reach the retailers ; and the effect 
 upon them I will explain when I touch upon another subject. 
 I want the Court to appreciate just at present the fact that it 
 has so multiplied its facilities as to deal directly with the 
 retail merchant all over this country, and it is carrying out the 
 same policy more and more in foreign countries. To-day the 
 oil that flows out of the wells in Oklahoma is delivered in India 
 by Standard instrumentalities from the beginning to the end, and 
 without ever being confined in a case or package of any kind. 
 The oil flows through the pipe lines from Oklahoma to Bayonne, 
 is pumped into the refinery, is pumped from the refinery into 
 the tank steamers which go to India, is pumped from the tank 
 steamers there into the tank railroad cars, out of which it is 
 pumped into storage tanks, from which the tank wagons are 
 supplied for local delivery. Only a complex, highly eflScient 
 and constantly extending organization could accomplish such 
 a work and successfully undertake all the operations of a 
 worldwide business of this character. 
 
46 
 
 I now pass to the question as to what has been acquired 
 since 1882. I have shown how mucli has been original crea- 
 tion since that year to meet the demands of new oil fields and 
 an expanding trade. How much has been acquisition of com- 
 petitive plants ? I believe that is deemed of some importance 
 now-a-days. I have always assumed that competitive plants 
 could be bought and sold. I have never found any rule or 
 principle of the common law to the contrary. But now it is 
 argued that when competitive plants are acquired we are 
 pretty near the prison house because the great regulative 
 statute which we call the Sherman Act is a criminal statute. 
 The modern tendency of framing these regulative statutes as 
 criminal statutes is making the lot of the lawyer a very difficalt 
 one in determining what can be done and what cannot be done 
 under them. If he is wrong in his construction or application 
 of the statute, the result is not that he involves his client in 
 money loss, which is unfortunate, but not irretrievable, 
 but in a criminal prosecution. I mention that fact for what 
 importance it has. I will give the facts as to what acquisitions 
 of that kind there have been. Others will discuss how much 
 of a figure they cut in the legal solution of the case. 
 
 There have been acquisitions since 1882 and since 1890. 
 I have said before, and I say now, that they were not 
 matters of substance ; that is, they did not affect the 
 history and development of the Standard organization. 
 The acquisitions prior to 1882 I have already discussed. 
 
 From time to time since 1882 refineries have been bought — 
 some small, and some more important. There never has been 
 a time when refineries were not going out of commission, and 
 the Standard has always been willing when a refiner could not 
 go on because of lack of capital, or inability to cope with the 
 changing conditions of the business, or whatever the reason, to 
 buy his refinery at its value. There have been purchases of 
 refineries worth only $14,000 or $15,000 as late as a year or 
 two before this case was begun. Can any motive be attributed 
 to them than the decent one of relieving such men of a total 
 loss without any detriment to the Standard because it could 
 utilize the materials in the plant ? There are several in that 
 category. There are five or six such refineries in Cleveland 
 listed in the Government's table of acquisitions. One of the 
 vendors testified that he could not go on ; that the appraised 
 
47 
 
 value of his refinery was $14,000 ; and that lie offered it to 
 the Standard. Some of his neighbors did the same with their 
 refineries. They took it at the appraised value, and paid 
 him his $14,000. They need not have given him a penny. 
 If they had not taken it his business would simply have died 
 of dry-rot. Those conditions have always existed in this busi- 
 ness from the beginning. There have always been refiners on a 
 small scale who could not keep the pace ; whose plants were 
 becoming worthless on their hands ; who had to retire ; and 
 who turned to the Standard as a purchaser to realize what 
 value their plants had. They had a little trade, and the 
 Standard got the benefit of that. It could utilize the materials 
 of the refineries, the tanks, pipes, and so on — a great deal of 
 it. There have been at all times acquisitions of that sort. 
 Since 1882, fifteen or sixteen refineries, mainly of that class, 
 have been acquired for relatively speaking small sums. 
 
 There was a pipe-line system, the Crescent, a trunk-line 
 from the oil regions, 271 miles long, to Philadelphia, with 
 some two or three hundred miles of gathering lines. That was 
 a separate system. It was owned by the Mellons, who I be- 
 lieve are rich and powerful people. They wanted to sell and 
 the Standard bought it in 1895. That is the only important 
 independent pipe-line acquisition that there has been since 
 1882, in the growth of the system from 3,000 miles to 55,000 
 miles. 
 
 A few other minor pipe-lines were acquired with the 
 refineries to which they were attached. Forty or fifty miles of 
 pipe-line were acquired with the refinery of Holdship & Irwin. 
 Mr. Irwin was a witness in this case. He sold his refinery 
 in 1886. Why did he sell ? The Government put him 
 on the witness stand, and pressed him to show that he was 
 driven out. He testified : " I could read the handwriting on 
 the wall. That is one reason why we sold out. We could see 
 that the Standard Oil Company were getting great facilities for 
 doing business; they had pipe-lines to the seaboard, and they 
 had agencies all over the country— tank stations and all that. 
 We could not compete with them in that respect." There was 
 a man with an ordinary refinery. He sized up the conditions 
 —that the business had assumed such a form that if he was 
 to go on it would have to be with capital and expansion— 
 and he sold. Most of the refinery acquisitions since 1882 
 were of that character. 
 
48 
 
 There were two refineries built by a Mr. Reighard (I do not 
 know whom he was representing) — one at Philadelphia and 
 one at Pittsburg, known as the Globe refineries, with a gather- 
 ing pipe-line system attached. The Oudahys, well known in 
 another industry, built a refinery with a pipe-line system 
 attached in Indiana. When these refineries were completed, 
 or just about the time that they were completed, they were 
 sold to the Standard. There is no evidence of any coercion. 
 We have no more information in the record as to their reason 
 for selling than that. They were substantial refineries. My 
 own inference — we can all draw our inferences — is that if men 
 like the Cudahys, or whoever it may be, build a refinery plant 
 and sell it right out before it is completed, it was probably 
 built for that purpose. The Standard has not been immune 
 from such ventures. It is a very serious practical situation 
 that faces any important industrial organization when a large 
 plant is built, and it is intimated that it can be purchased or 
 operated to cause a great loss, which can easily be done 
 because a big concern is very vulnerable in that regard. I 
 am not saying that that was the case here. It is just mv 
 inference — my explanation. I do not see why, if those people 
 had gone into the business seriously, they should sell out 
 when their refineries got to the point of completion. 
 
 There was another refinery in Ohio with a pipe line 
 system attached which was built some years ago by New York 
 men interested in the illuminating gas business. They were 
 not oil men and their participation in the business was an in- 
 cident to their acquisition of properties to obtain a supply of 
 gas, gas producing territories being also in many instances oil 
 producing. This company was called the Manhattan. Tou 
 will hear a great deal about it. Its stock was acquired in 
 1899 or 1900. The Standard of New Jersey could not acquire 
 the pipe-line system because of a State law ; and it does not 
 hold the title to the stock of the Manhattan Company. It 
 never acquired it. Friendly interests did ; and the pipe line 
 is connected with the Standard system. The owners of the 
 Manhattan obtained a contract from the Standard Company of 
 Indiana for a ten-years' supply of natural gas and sold their 
 plant. This is a sufficient statement of that transaction. 
 
 I have now substantially covered the refinery and pipe-line 
 acquisitions since 1882. They added nothing to the power 
 
49 
 
 and structure of the Standard. They cut no figure. Its course 
 and history would have been the same without them. The 
 acquisitions did not curtail the production or diminish the 
 refining capacity necessary to supply the trade to its fullest 
 extent. And of the growth of the Standard's pipe-line 
 system from 3,000 miles in 1882 to 54,000 miles in 1906 not 
 more than 1,000 miles were acquired, including the Crescent 
 system. 
 
 "When in the '90'sthe Standard adopted the policy of reach- 
 the retail merchants themselves, through the establishment of 
 stations all over this country, the jobber had necessarily to a 
 very large extent to go out of business. He was buying from 
 the Standard Oil Company and making a profit in selling to 
 the retailer. When the Standard reached the retailer the 
 jobbers' profit was eliminated ; and a great many of their (the 
 jobbers') plants, mainly consisting of wagons and storage tanks 
 (many of them very insignificant) were at their solicitation 
 taken by the Standard at their value. They were no longer of 
 any use to them. There are fifty or sixty uf those little mar- 
 keting concerns, and some that you would not describe as little, 
 that were acquired under those conditions. 
 
 I wish now to say a few words about dismantling, as to 
 which we have heard a good deal. As these refineries were 
 acquired there was no reduction of the total output. No 
 refinery was ever acquired to reduce the volume of the 
 product which was being manufactured. On the contrary the 
 output has always been increasing. The Standard bought 
 refineries under the circumstances I have stated, and it 
 has utilized them by consolidation and by the use of their 
 materials. There was nothing else to do with many of them 
 because they were sold for the reason that they could not be 
 successfully and economically operated. They would buy such 
 refineries to-morrow, unless some ban is put upon them. If a 
 refiner goes out of business or wishes to sell they will give 
 him the value of his refinery. They need not do it, but they 
 can utilize the materials ; they acquire what trade he has, and 
 he is saved from the loss of the value of his plant. 
 
 I have endeavored to present to you as fairly as I can the 
 development of this institution both in its internal and ex- 
 ternal aspects. I have shown you the corporations that it has 
 itself created. I have shown, if we fix the end of the period 
 
50 
 
 of substantial acquisition at 1879, 1880 or 1881, what it had 
 acquired prior to that time, and I have shown what it has 
 built itself, what corporations it has created, what it has ac- 
 quired, and what the course and development of the business 
 has been since that time. Those are the facts on which it has 
 to be determined whether it is a combination in restraint of 
 trade or not. 
 
 The Chief Justice : Yon may suspend here, Mr. Milburn. 
 
 Thereupon, at 4:30 o'clock P. M., the Court adjourned until 
 to-morrow, Friday, January 13th, 1911, at 12 o'clock M. 
 
 WASHiNGTOff, D, C, Friday, January 13, 1911. 
 12 o'clock m. 
 
 The Court met pursuant to adjournment. 
 
 The Ooukt : Gentlemen, you may proceed with the case. 
 
51 
 
 Argument of John G. Milbnrn, on Behalf of 
 the Appellants (Continued). 
 
 Mr. Milburn. May it please the Court, I finished last night 
 the presentation of the facts upon which it has to be de- 
 termined whether the Standard Oil Company of New Jersey 
 is an illegal combination in restraint of interstate trade 
 within the meaning of the first section of the Sherman 
 Act. I now proceed merely to mention with slight comments 
 (as that is all my time will allow) various matters which are 
 alleged in the bill as illegal means of monopolizing pursued 
 by the Standard, the principal of which is the control and 
 use of the Standard's pipe-line system. The allegations in 
 the bill (which are quoted in the brief) in that regard are very 
 specific, and I have no hesitation in saying that not one of 
 them has been established. 
 
 To begin with, the pipe-line systems fall into two classes — 
 the private and public. The private pipe lines are those of the 
 Prairie Oil and Gas Company, in the mid-continent field; of the 
 Ohio Oil Company in the Illinois field, and of the Standard 
 Company of California in California. These lines are purely 
 private lines. They are not common carriers, and the com- 
 panies are not quasi-public companies. They are private 
 corporations ; they buy and deal in oil, and have built their 
 pipe lines for their own purposes. They never carry oil for 
 anybody else, and have never held themselves out as ready to 
 do so, and are under no legal obligation to do so. 
 
 The same is true of the private lines across the States of 
 New Jersey and Maryland, which were built for the Standard 
 refineries in New Jersey and at Baltimore. It is charged that 
 those lines, which originally belonged to the National and 
 New York Transit companies, were, in view of the Hepburn 
 Act of 1906, which brought pipe lines under its jurisdiction, 
 conveyed to the Standard Oil Company of New Jersey, to 
 evade the Act. There is no foundation for that statement. 
 These lines across the State of New Jersey, from the New 
 York line on the north and the Pennsylvania line on the south, 
 and across Maryland from the Pennsylvania line to Baltimore, 
 were built on private property exclusively for the use of the 
 Standard's own refineries, without any franchises obtained or 
 
52 
 
 being required. The National Transit Company and the New 
 York Transit Company, which built them for the supply of those 
 refineries have no franchises and no corporate right to operate 
 franchises in the States of New Jersey and Maryland. They 
 have no franchise to carry on any public business in those 
 States. 
 
 In some rearrangement of pipe lines in 1905, or at the end 
 of 1905, one of the things that was done (as the pipe lines 
 across the States of New Jersey and Maryland were built ex- 
 clusively for the refineries at Bayonne and Baltimore) was to 
 convey them to the Standard of New Jersey which owned the 
 refineries. That was done in November, 1905. The Hepburn 
 Act was not introduced until January, 1906, and it was not 
 until April, 1906, that the first amendment was moved with 
 respect to bringing pipe-lines within the Act. The convey- 
 ance was a perfectly proper transaction and was not under- 
 taken to evade any law. 
 
 There is some criticism of another transaction, which it is 
 said in the Government's brief was done under my advice. 
 That is right and true ; and I said it was done under my 
 advice to relieve counsel from further examination of wit- 
 nesses as to how it came to be done. As the State lines 
 between New Jersey and Maryland and New York and Penn- 
 sylvania were the termini of the public pipe-lines in New York 
 and Pennsylvania, terminals were provided at those points 
 consisting of storage tanks, so that as the Standard of New 
 Jersey takes its oil at those termini and pumps it into its own 
 pipes running to its refineries, any refiner or shipper could 
 do the same thing by providing a pipe line connection in New 
 Jersey or Maryland with the terminal storage tanks, or other- 
 wise taking it from the tanks. The provision of the storage 
 tanks was a proper step whether it was necessary or not under 
 the circumstances. 
 
 A great part of the Standard's pipe-line system belongs to 
 the four companies that I have mentioned. It is purely pri- 
 vate ; has never been used by anybody else ; has never been 
 held out as being available to anybody else. The Hepburn 
 Act, as I construe it, does not pretend to make them common 
 carriers, and could not have done so if that had been its 
 intention. I am not going to argue the question, but I deny 
 the right of Congress to make a private business a public 
 business. 
 
53 
 
 Mk. Justice Holmes : Let me understand that. Do you 
 say that these pipe-lines that you refer to were bnilt on private 
 property, without any exercise of the right of eminent domain ? 
 Me. Milbuen : Without any exercise of the right of emi- 
 nent domain. 
 
 Mk. Justice Holmes : And they have never held themselves 
 out as carrying for anybody except their own people ? 
 
 Me. Milbuen : Never. The one qualification is in the case 
 of the Prairie Oil and Gas Company, which, by private arrange- 
 ment, laid its pipe on a railroad bed part of its distance. 
 It made an arrangement with the railroad company, but bought 
 the rest of its right of way. It bought the property and built 
 the pipe line, and has never carried a gallon of oil for anybody 
 but itself. It has never carried any oil but its own, and has 
 never held itself out as a common carrier. 
 
 The public pipe-lines are in the States of New York, 
 Pennsylvania, Ohio, Indiana, and West Virginia. In those states 
 through the right of eminent domain being necessary and the 
 organization of the companies under public pipe-line Acts, 
 the lines are public pipe-lines. The pipe-line systems in those 
 States consist of two parts. There are first the gathering 
 lines. When a well is opened a pipe is laid to it. The oil 
 flows into the pipes from the wells, and is carried to central 
 storage places in the district where there are railroad and 
 trunk pipe-line connections. JoLyhjady-can-put his oil into the 
 gathering pipes for a gathering charge of 20 cents per barrel. 
 Upon the payment of the gathering charge a man can keep 
 his oil in the pipe-line for thirty days without further charge. 
 fAfter that he can keep it in the storage tanks for twenty-five 
 I cents a thousand barrels per day. If a producer runs a thou- 
 ^sand barrels from the Pennsylvania field into the pipes, worth 
 thirteen or fourteen or fifteen or sixteen hundred dollars, he 
 pays the gathering charge, and nothing more for thirty days ; 
 and after that, for twenty-five cents a day, he can store it in- 
 definitely and sell when he pleases. I mention that point be- 
 cause refiners who buy the crude oil must have it, whilst the 
 producer may temporarily store and not sell, and it is that 
 relation which governs the price of the crude oil. When it is 
 said that anyone can make the price of crude oil any price 
 he pleases— the Standard Oil Company or anybody else— it is a 
 monstrous absurdity, because the refiners must have the oil 
 
54 
 
 and the producer is not bound to sell. No producer has testi- 
 fied on this trial that anybody has the power of fixing the 
 price at which they shall sell, or ever has had that power, or 
 that any injustice has ever been done to any miner or producer , 
 of oil by reason of the price paid. From the gathering sys-^^ 
 terns in Pennsylvania into which anybody can run his oil 
 there are trunk pipe-line connections with the seaboard at 
 Philadelphia, with Cleveland and Buffalo and various places 
 in the oil regions through which the oil can be transported to 
 those refining points if desired. 
 
 But the vital, pcmt is this. No human being has ever 
 asked to have oil transported by the Standard's trunk lines. 
 Every refining interest has its own pipe line association. 
 That is how the business has grown and developed. No con^~ 
 cern goes into the refining business on a considerable scale 
 without having its own pipe-line system or being associated 
 with a pipe-line system as a part owner, as is the case with 
 the Pure Oil, the Tide-Water, the Gulf and the Texas Eefin- 
 ing Companies and others. They all have their pipe-line 
 systems. The fact is that a pipe-line system is a necessary 
 adjunct of a refinery. 
 f" Technically the public lines are common carriers ; but no- 
 / body uses them. They run full, night and day, lor the supply 
 / of the Standard's refineries for which they were built ; but if 
 j anybody tendered oil for transportation, they would take it. 
 M&nder the Hepburn Act of 1906 the public lines had to 
 file tariffs, and tariffs were filed, and rules and regulations. 
 They have been in force for four years. Grave complaints are 
 made in this case about the rates, rules and regulations. But 
 nobody has applied for relief to the Interstate Commerce 
 Commission, which has full and complete jurisdiction. ^obcDdy 
 has laid a complaint before the Commission. Nobody has in- 
 voked that tribunal to correct any wrong in the tariffs, regula- 
 tions or anything else. Then why should it be argued here 
 that we have excluded people, that we have discriminated 
 against people, that we have refused to provide terminals 
 for them, when there is not a syllable of testimony to that 
 effect, and when the fact is that no human being has ever 
 asked to use the trunk lines ; nobody has ever asked us to pr<> 
 Tide additional terminals ; nobody has made any complaint of 
 any kind, although there has been a tribunal for four years to 
 
55 
 
 which they could have gone with full power to correct any 
 wrong or injustice. No human being has gone before that 
 tribunal, notwithstanding the publicity which this case has 
 given to the Government's charges in regard to the utilization 
 of the pipe-lines for the purposes of monopoly. 
 
 I say that the pipe-line system is simply an adjunct to the 
 refineries, and it has excluded nobody from the business. 
 
 Another charge is in regard to the control of the refined 
 prices. It is said that we have unnecessarily raised prices and 
 manipulated prices over wide areas to suppress competition. 
 
 Mr. Justice Holmes : When you said a few minutes ago 
 that it was absurd to talk about the Standard controlling 
 prices, you meant the purchase price of the crude oil ? 
 
 Mr Milbukn : Yes. 
 
 Me. Justice Holmes : At first I did not quite understand 
 that. 
 
 Me. Milbuen : That is what I referred to. Its price is the 
 price that it will pay for crude oil. There are a great many 
 other buyers, the independents having a large volume of busi- 
 ness, and the producers need not sell by reason of the cheap- 
 ness of the storage. They can hold their oil for bet- 
 ter prices ; but the refineries must have it. That is my 
 point. Pennsylvania oil is not now in storage. All of it 
 that is produced is used. Whilst many yefirs ago there was 
 Pennsylvania oil in storage it has practically all been used. 
 For a long time there has been a limited supply and a constant 
 demand, and that is why Pennsylvania oil, apart from its 
 quality, commands its high price. When an extra gush comes 
 and there is more oil the price goes down. 
 
 Regarding the prices of refined oil — the manufactured 
 products— we present the Government's figures showing the 
 rise in prices of commodities generally for twenty years, from 
 1890 to 1910 ; and annexed to our brief is a chart graphically 
 illustrating the rise in prices during that period of com- 
 modities generally. That is the Government's classifica- 
 tion, and it comprises some 245 commodities. Another 
 chart shows the rise in prices and the fall in prices of 
 refined oil. It is a graphic illustration of the whole 
 situation. It shows that refined oil has followed the 
 general flow of prices. There is another chart of a selected 
 number of the principal commodities, and it shows that the 
 
56 
 
 general course of oil prices was below that of those com- 
 modities. There is another chart showing the relation of the 
 crude to the refined, and how the refined has followed the 
 crude in its prices. No one can look at those charts (which 
 simply picture the facts and are not theoretical) without being 
 convinced that there has been no arbitrary dealing with oil 
 prices, and without seeing that they have been the result of 
 economic causes and the operation of natural laws, and not 
 of the fiat of the Standard Oil Company or anybody else. 
 
 It is argued that the Standard has economized so in its 
 manufacturing processes that, though labor and commodities 
 used in the processes have increased in cost, its manufactur- 
 ing cost has not increased ; that the Standard has met those 
 increases in costs by the constant application of economies, 
 and that therefore the price of oil should not have risen. But 
 that position entirely ignores the fact that because of the rise 
 of prices of commodities generally, $690 purchased in 1895 
 what $1,000 purchased in 1906. That fact is demonstrated by 
 the Government's chart and figures. 
 
 The Chief Justice : In 1906 ? 
 
 Me. Milbuen : When we were trying the case. That is 
 when our figures were made. We had to stop at that period. 
 We were trying it in 1907 and 1908. 
 
 The Chief Justice : You meant in 1895 ? 
 
 Me. Milbuen : 1895. 
 
 The Chief Justice : I thought you said 1905. 
 
 Me. Milbden : No ; 1895 and 1906. 
 
 The Chief Justice : Pardon me. All right. _ 
 
 Me. Milbuen : If a manufacturer's cost of production does 
 not increase, still the price of his product must go up with the 
 prices of general commodities, so that his net revenues may 
 continue to have equal purchasing power. His price had to goj 
 up, because $1,000 of net revenue in 1906 was only equal in 
 purchasing power to $690 in 1895. No man, because his costs 
 have not increased by reason of economies, can keep his prices 
 stationary. With the net revenue that he gets he can only 
 buy in the ratio that I have mentioned, and therefore all com- 
 modities have to follow a general course, so that net revenues 
 will bear the same relation to the purchasing power of money 
 from time to time. That would seem to be a very obvious 
 proposition. 
 
57 
 
 They give an instance of the Standard's alleged control of 
 prices when, for sinister purposes, as thej allege, to injure 
 certain refiners, it in 1893 to 1895 raised the price of the 
 crude and depressed the price of the export oil, so that 
 there was practTcairy '^no margin of profit, and as those re- 
 "IfinersHbad to depend a great "Heal upon exporting their oil 
 they were thereby deprived of their profit. The course of 
 the crude and export prices during the period indicated is 
 charged to the Standard Oil Company like everything else 
 that has happened in the oil trade, as if it were a force of 
 nature. They do not look anywhere else for the explanation 
 of events. They do not look into the facts; there is the 
 Standard Oil Company and it is damned for everything. It 
 is praised for nothing and damned for everything that has 
 happened. 
 
 On the Government's figures the Standard is the great 
 buyer of crude oil — fifty or sixty milllion barrels a year, a great 
 amount anyway. Just think ! If to hurt somebody with a 
 total business of about one million dollars a year (that being 
 the gross business at that time of the refiners who originate 
 this charge) the Standard arbitrarily put up the price of crude 
 thirty cents a barrel, it meant a loss to it of $6,000,000 ; and if 
 it depressed the price of the product it sold for export (be- 
 cause the export price of oil is the price at which the Standard 
 sells oil in New York for export, and it amounts to a great 
 deal — dealers buy it in New York and ship it to their foreign 
 customers) another great loss would ensue. It would appear 
 if anybody sat down with a pencil and figured the matter out, 
 that (assuming that the Standard manipulated the prices as is 
 claimed to injure a few refiners) it could only have done so at a 
 cost or loss to itself of anywhere from twenty to forty millions 
 of dollars. But let us look at the economic causes to see if 
 they do not furnish an adequate explanation of what hap- 
 pened. They are set forth in the record. They are admitted 
 by the witnesses, but they would not connect them with the 
 result. The stocks of crude oil during those years were run- 
 ning down in Pennsyiyania, — tbe Pennsylvania stocks— and the 
 price" of crude always goes up at such times. The figures 
 in the record show that condition. In the same years during 
 the panic of 1893 and the times that followed, with the de- 
 creased demand in this country, the decreased consumption. 
 
58 
 
 the export business was pushed and materially increased. 
 The falling off ot the domestic, demand forced the Standard 
 and other refiners to send more and more refined oil abroSJ 
 for a market, thereby necessarily reducing the price of export 
 oil, Those are the economic reasons for the prices of crude 
 and export oil in 1893, 1894 and 1895. 
 
 The Government charges that the Standard has cut prices 
 and lowered them in competitive areas and made high 
 prices and high margins of profit in non-competitive. The 
 price exhibits are in evidence, and the arguments both ways 
 are in the briefs. I cannot stop to explain the exhibits. I 
 assert from a careful study of them that they demonstrate that 
 the prices of the Standard, generally speaking, are normal all 
 over. Of course they vary. Throughout our opponents 
 brief they are always contrasting the prices and mar- 
 gins of profit in various regions with the prices and 
 margins of profit in the Eocky Mountain States where 
 the communities are small and widely scattered, un- 
 stable and not permanent, and where it is the uniform 
 experience that prices and profits are higher. Volume of 
 business as a determining factor is entirely disregflldsd. It is 
 not worthwhile "carrying on business unless you get a net re- 
 turn adequate in amount, and that may compel a greater rate 
 of profit. And when tbey criticise our prices and margins of 
 profit in any region as indicating an effort to suppress compe- 
 tition they always take the high margins of profit in the 
 Rocky Mountain States as the basis of comparison. Of course 
 they are much higher there for the obvious reasons I have 
 given. But I must pass that subject. 
 
 Now, as to our profits. They have much to say in regard 
 to our profits. They assume that the decision of this Court 
 in the Consolidated Gas case that six per cent, is a fair return 
 applies to a great business of this kind. They take our capi- 
 tal of $70,000,000 in 1882 and say that all of the increases 
 since that time have been made out of surplus earnings, and 
 should not therefore be taken into account in computing the 
 percentage of profit ; that the capital assets should be disre- 
 garded ; and although the capital assets have now a value of 
 over $359,000,000, they figure out our profits on a basis of 
 $70,000,000, and make them very great. They take, for in- 
 stance, a particular company like the Standard of Indiana, 
 
59 
 
 with capital assets of twenty -five or thirty millions of dollars, 
 but only a nominal capital of $1,000,000, and computing its 
 profits with reference to its nominal capital say it has made one 
 thousand and one per cent. It did make one thousand and 
 one per cent, on $1,000,000 but such a statement is absolutely 
 meaningless. If we take all the profits of this business (the 
 figures are in the record) down to 1897 or 1898, they averaged 
 fourteen per cent, per annum of the capital assets of the business, 
 the tangible assets only, and not including the good-will and 
 other intangible assets of these going concerns ; and since 1900 
 twenty -five per cent, of the capital assets — the tangible assets. 
 The figures for the years 1898 and 1899 are not in the record, 
 but there is no reason to assume that they would vary these 
 percentages. 
 
 I undertake to say that if we had assembled in this room 
 the most prominent business men in the United States, they 
 would agree, if asked what should be the net revenues from a 
 great business of this kind to provide liberal dividends, to 
 provide funds for construction, development and expansion to 
 meet the demands of expanding trade and new oil fields from 
 time to time, they would say twenty-five per cent, of the cap- 
 ital assets. I have no doubt of that. The increase of profits 
 in the later years is due to the increase of by-products, calling 
 everything by-products that is not illuminating oil, which all 
 yield a larger profit than illuminating oil — the product of pop- 
 ular consumption. The increase in by-products in 1906 over 
 1895, was 112 per cent. In 1895 61 per cent, of the Stand- 
 ard's product was refined oil, and 39 per cent, by-products. 
 In 1906 refined oil had gone down to 47 per cent, and by-pro- 
 ducts had gone up to 53 per cent. Of the 47 per cent, that was 
 illuminating oil 63 per cent, was exported and sold through- 
 out the world, and 37 per cent, in the United States. As 
 an indication of the growth and prosperity of its competitors 
 we have only to refer to the Government's brief where it is said 
 that in 1879 the Standard had from 90 to 95 per cent, of 
 the business, whilst in 1904 it consumed 79.3 per cent, of 
 the crude oil refined in the United States and produced 80 per 
 cent, of the refined oil and 77.1 per cent, of the naphtha, 
 which are the products of the greatest magnitude.t The truth 
 
 t Note.— See Government's Brief, Vol. I, p. 145. 
 
60 
 
 « 
 
 is that as the independent refiners have given up scolding at 
 the Standard and emulated its enterprise and energy and won 
 confidence, their trade has been increasing and every percent- 
 age of the Standard has been going down and down ; and so 
 it will continue in the natural course of things. 
 
 I will read, as expressing the independent situation better 
 than I can (and it is done by no friendly hand — the Commis- 
 sioner of Corporations) — the following from one of his reports : 
 
 " Many independent concerns have gone a good way 
 in the direction of integration. Thus many of the small 
 refiners of Western Pennsylvania and Ohio are inter- 
 ested in crude-oil production, and supply part of the 
 oil which they refine. A considerable number of them 
 have small pipe lines or are part owners of pipe lines 
 for supplying their refineries with crude. A large pro- 
 portion of them have facilities for selling their products 
 directly to retail dealers or are interested in marketing 
 concerns which have such facilities. The great majority 
 of the refiners, it is true, have not carried integration 
 nearly so far as the Standard. But some of them, such 
 as the Pure Oil Co., the Gulf Refining Co. (in conjunc- 
 tion with the J. M. Guffey Petroleum Co., which is 
 owned by the same interests), the National Refining Co. 
 of Cleveland, and the Union Oil Co. of California, have 
 developed the system of integration to a degree ap- 
 proaching that of the Standard itself. All of these 
 concerns have pipe lines, refineries and local marketing 
 facilities. All of them carry the elaboration of by-prod- 
 ucts to substantially the most complete point permitted 
 by the character of the crude which they use. All ex- 
 cept the National Eefining Co. are large producers of 
 crude oil. All of them own tank cars and all, except 
 the National Refining Co., own tank vessels. Probably 
 none of these concerns manufactures the accessory mate- 
 rials of refining, packages, etc., to any such extent as the 
 Standard does, but otherwise their system of integration 
 is nearly as complete as that of the Standard. The 
 difi"erence between them and the Standard is rather in 
 the volume of business than in its comprehensiveness." t 
 
 t Report of Commissioner ol Corporations on the Oil Industry of August 
 5th, 1907, at pages 636, 687. 
 
61 
 
 Thus it appears that as the independents have put them- 
 selves in shape to do business efficiently and economically they 
 are doing more and more of it, from year to year as tbey 
 could have done in the past if they had been alert, courageous 
 and enterprising. 
 
 I cannot touch upon the question of undue competition 
 or railroad discrimination, much as I would like to do so. I 
 cannot take any more time. 
 
 Mr. Justice Day : Let me ask you whether these briefs and 
 this volume A contain all of the record that the Court will need 
 in order to inform itself about the case ? 
 
 Mb. Milbcen : The facts are given in our brief, in 
 Volume 2. 
 
 Mr. Justice Day : We have here some twenty-three 
 volumes. 
 
 Mb. Milbukn : Yes. 
 
 Mr. Justice Day : But do we need anything more than has 
 been furnished to us ? 
 
 Mr. Milbuen : I do not think so, except that yon will have 
 to refer — 
 
 Mb. Justice Day : By reference, of course. 
 
 Mb. Milbuen (continuing) : To particular parts of the 
 record. There is an efifort in our brief to bring to your atten- 
 tion every material fact, with references to the testimony, and 
 to present them fairly. The Government has done that also. 
 From my point of view, I prefer the notes to the Government's 
 brief, with their references to the record, to the brief itself, 
 which is very ample, and which gathers up all the hearsay and 
 all the suspicions and all the rumors of forty years and pre- 
 sents them as the facts in the case with considerable literary 
 power. 
 
 Mb. Justice McKenna : You submit your case on the brief 
 and the argument ? 
 
 Me. Milbuen : I submit our case on the facts set forth in 
 our brief. 
 
 The Chief Justice : On the facts referred to there. 
 
 Mb. Milbuen : Yes ; on the facts referred to and the refer- 
 ences to the record. 
 
 Me. Justice Day : You do not present the facts with any 
 less force than do the Government ? 
 
 Mb. Milbuen : We are modest. The facts are particularly 
 
62 
 
 complex. Everything is embodied in the record that has oc- 
 curred during the forty years of the life of this concern. That 
 it has done some things in strenuous times (and there have 
 been strenuous times) which it should not have done I am not 
 here to dispute. That is human, and the men who manage 
 corporations are just as human as the men who manage their 
 individual affairs. Forty years of continuous history is a long 
 expanse ; but there it is, and whatever there may be that from 
 a moral standpoint seems to suggest criticism, there is nothing 
 that goes to the root of the matter when both sides of the 
 question are examined. We have to depend as to all such 
 matters on the careful attention that I know the Court will 
 give to this record. I have presented the subject imperfectly, 
 there is so much of it. There are still many features of the 
 \case I would like to discuss, but I have not the time. The 
 great issue is the common ownership, and the division of the 
 
 ' single token of that ownership with its definite value into 
 
 "^ thirty-seven tokens, the value of each of which will be a matter 
 of future experience. I need not say how momentous a matter 
 that is to the owners of the stock of the Standard of New 
 Jersey, the market value of which is over $600,000,000 and 
 whose dividends are $40,000,000 a year. No one can say what 
 the market value of the substituted shares of the thirty-seven 
 
 corporations will be if many of them can find a market at all. 
 Should stockholdings of such immense total value be revolu- 
 
 1 tionized merely to conYer t_an_ equi table ownership^of the 
 thirt y-seven corporations into.AJegsiL,awn^^]^"?~Tsiiot that 
 the net result of the decree because it does not seek to dis- 
 turb the common ownership beyond that ? It is a momentous 
 issue, and one can only be thankful that it is, for final solution, 
 before a Court which follows the star of reason, and does not 
 hear the voice of passion or prejudice. 
 
63 
 
 AFTER RECESS. 
 
 Argument of DAVID T. "WATSON, Esq., on 
 behalf of the Standard Oil Company, of 
 New Jersey, et al. 
 
 Mr. Watson : With the permission of your Honors, it is 
 my duty to try to argue to your Honors two questions in this 
 case ; and I am allotted one hour to do this. 
 
 The Chief Justice : Tou have two hours and seven min- 
 utes left on your side. 
 
 Mb. Watson : Tes ; but for myself, I mean. 
 
 Mr. Johnson : Take the hour and seven minutes yourself. 
 
 Mb. Watson : Each of these questions involves very con- 
 siderable detail, and if fully discussed would require the 
 citation of authorities, and the discussion of them, and 
 the citation of evidence. That, it is apparent, it is im- 
 possible for me to do within that time. Therefore, if my ar- 
 gument seems to be rather sketchy, rather a drawing, as vivid 
 as I can make it in chalk, of the outlines and the prominent 
 features which I think should determine these two questions, 
 you will understand why it is. 
 
 Before I go specifically to these questions, while perhaps 
 after all this discussion it is not necessary, I do desire to im- 
 press upon this Court this fact, which stands pre-emi- 
 nent in this case : You never have had a case like this 
 before you under the Sherman Act. Every case that 
 you have decided was decided on grounds and under facts 
 which are dissimilar, notably dissimilar, from the case at bar. 
 And I take up, just for a moment, a rapid sketch of how this 
 Standard Oil plant arose. Now let me tell you : 
 
 Oil was discovered in Western Pennsylvania in 1859, in 
 small quantities at first ; but in 1865 it increased to a produc- 
 tion of 2,500,000 barrels. Then it was that John D. Rocke- 
 feller and William Rockefeller and several other men entered 
 into the oil business. This oil, if your Honors please, was at 
 first produced in a small section of Pennsylvania. The wells 
 were what were called gushing wells—" gushers." The busi- 
 ness grew after a while to a production of three and four 
 thousand barrels of oil per day ; with the result that producers 
 
64 
 
 not having the facilities to take care of it, not having the 
 facilities to refine it, at least one-half of that oil, for weeks 
 at a time, was wasted and lost. 
 
 As I have said, the field of production started in Western 
 Pennsylvania. Slowly, but very slowly, it traveled into New 
 York. Then, as the years passed, as what was called " wild- 
 catting " went ahead, oil was discovered in Ohio, in Indiana, 
 in Oklahoma, in California, in Texas, and in very many of the 
 States of this Union. The production of oil jumped in rapid 
 figures from 2,500,000 barrels in 1865 to 126,000,000 barrels in 
 1906. Notice that, if your Honors please — it grew to fifty times 
 the production of 1865 in 1906. Notice, too, the figures by 
 which this quantity was rapidly approached. It jumped up to 
 26, to 30, to 40, to 50 and to 60 millions. This, too, was in 
 the case of a product which, when it started, many men 
 thought would suddenly cease ; a mining production, the 
 location of which no man knew. Millions, literally millions of 
 dollars were thrown away in what are called " wild-cat " wells. 
 And when you talk about the great earnings of oil, let me take 
 your Honors to Western Pennsylvania or any deserted field, 
 and you will find as much money, within a small proportion 
 of the oil territory, sunk in unproductive wells as you will 
 find made out of the oil that had been produced from the 
 ground. 
 
 It was necessary in the first place for people who intended 
 to make this a life work to carefully consider and lay out their 
 ground, and see what was to be done. The very first thing 
 that was required was the protection of the production. The 
 next thing was its transportation to the refineries. The third 
 was the economy of the refining, and the improvement of the 
 quality of the oil. And the next was the transportation of the 
 refined oil and the by-products from the different refineries to 
 the different places for sale. 
 
 As the production increased, as it gi'ew and jumped from 
 State to State, these men who had entered into this business, — 
 our friends say, simply as conspirators to evade the law — 
 these men who made this business their life work, who put 
 into it every dollar they owned, and risked the fortunes of 
 themselves and their families in this business and in the ex- 
 tension of it — this Court is asked to believe that these men 
 
65 
 
 got up a conspiracy in 1870 by whioli all they sought was a 
 maleficent effect upon the trade in the oil business. 
 
 Why, look at it— look at it, if the Court please ! 
 
 First they built a refinery at Cleveland. How did they get 
 their oil there ? They paid $2 a barrel for taking their oil 
 there. Look at the amount of that. Next, all along through 
 the oil regions there was refinery after refinery erected, 
 temporary structures for the refining of oil. In Cleveland 
 there was erected a first-class plant by these men, producing 
 first-class oil, making it for less, selling it for less on the 
 market, and, of course, taking the trade. Then, as the pro- 
 duction went West, look how they followed it ! I have a 
 map here that I will hand to your Honors, with your per- 
 mission, hereafter, by which you can trace the whole develop- 
 ment of this plant, and follow it in connected links (not dis- 
 connected units, not things standing alone and built for that 
 purpose, but in connected units), running from Oklahoma until 
 it reaches the Atlantic Oceau near New York. 
 
 Not only that : The oil that is developed in Oklahoma 
 connects, through these pipe-lines, with every one of the 
 eighteen refineries. No one of these refineries was erected 
 except to supply the necessities of the immediate location^ 
 All these were built by whom ? By one group. There never 
 was a division. They were built by one group, by one great 
 partnership. They started first individually. Then they or- 
 ganized as partners. Then they organized as a corporation. 
 Then they organized as a trust in 1879. Then, in 1882, it 
 went into the formal trust ; and then, in 1899, it was con- 
 veyed to the Standard Oil Company of New Jersey. But it 
 was always one connected whole — always. It was always 
 owned by one group of owners. There never was a diversity 
 of ownership. There never was competition between these 
 people. You could not imagine that partners themselves 
 would compete among themselves, or that the owners of stock 
 in a corporation that held fifteen or twenty refineries 
 would compete among themselves by means of these different 
 refineries which they owned. 
 
 So, if your Honors please, when you come down to to-day and 
 look upon this case, remember that you have got what you never 
 had before : You have a connected, unified plant ; you hav© 
 
66 
 
 a plant that was necessary for the economic production and 
 refining and transportation of this oil. Not a single link in 
 that whole chain of buildings, of physical structures, is tainted. 
 It may be thjit some men have used these machineries to make 
 oil, which oil they put into interstate commerce, in an im- 
 proper way. But that did not taint the refineries or the 
 pipe-lines or the reservoirs or the tank-cars. All men 
 and women, irrespective of their attitude toward the Stand- 
 ard Oil Company, must admit that here is a plant un- 
 equaled in the world — unequaled in the world for the purposes 
 for which it was built. It is an honest plant. It is built 
 without regard to money. The refineries are the best. The 
 pipes in the pipe-lines are the best. The reservoirs are the 
 best. They are located in the most advantageous positions. 
 And taking it all together, if your Honors will search this 
 country far and wide, here is an unequaled plant. Here is a 
 plant capable of infinite good. Why should it be destroyed ? 
 It is capable of infinite good. And it is the disintegration, prac- 
 tically the destruction, of this unified plant, in which to-day is 
 invested probably $400,000,000 — it is this disintegration, this 
 destruction of this unified plant against which I formally and 
 pronouncedly protest, and come immediately to the discussion 
 of the questions which are committed to me. 
 
 If your Honors please, there is in reference to these 
 trust cases one rule to which I may refer. I must 
 find the issue, as my friends must on the other side, in the 
 pleadings. There must be something averred and something 
 denied, and the point raised. Now, what was it that was 
 averred in this case, and what was the issue that was raised ? 
 
 Why, the averments were that in 1870 John D. Eockefeller, 
 William Eockefeller, and one or two others, combined and con- 
 spired to associate themselves together for the purpose of re- 
 stricting trade and monopolizing the oil business. It was not 
 any divergence into any other trade. These men built this 
 plant. It is only fit for the production and the refining and 
 transportation of oil. And the charge made in this petition 
 was — just let me read you a line of it : I read from page 6 of 
 Kecord A : 
 
 " That the defendants, John D. Eockefeller, William Eock- 
 efeller and Henry M. Flagler, in or about the year 1870, and 
 at all times since that time, together with the other individual 
 
67 
 
 defendants herein, who thereafter from time to time, between 
 said time and 1882, joined said conspiracy, to wit, Henry H. 
 Bogers, John D. Archbold, Oliver H. Payne, and Charles M. 
 Pratt, entered into and have ever since been engaged in a con- 
 spiracy with each other, and with other persons, corporations, 
 co-partnerships and limited partnerships " — 
 
 To do this thing that I tell you. And then, if your Honors 
 please, here follow some three hundred pages of the averment 
 of all kinds of things — rebates, illegal contracts, taking unfair 
 advantage of competitors, etc. We denied this averment ; and 
 the issue then, of course, was : ' Is this true ? Was there a 
 combination made in 1870, and was it continued through ? ' 
 And the question seemed to be simple enough. 
 
 Twenty thousand pages of testimony were taken on that 
 issue, and your Honors have that record before you. When the 
 court below came to consider it all, what did it say ? There 
 is not a single page of it that is relevant to the issue that we 
 have before us. It turned its back ou it all ; and while it 
 held that the Standard Oil Company of New Jersey had vio- 
 lated the Sherman Act, it said that the reason it had violated 
 it was not because of a conspiracy in 1870, carried down 
 through all these years ; not because of these things that our 
 friends have reiterated and colored and tried to make promi- 
 nent to your Honors— not that. The court below said that 
 the combination that was formed was since 1890 ; not in 1870. 
 They said it was since 1890, since the twenty years in which 
 our friends locate these alleged illegal acts— since 1890. And 
 then that the conspiracy consisted in what ? Anything fraud- 
 ulent ? Any deceit ? Not at all ; not at all. It consisted in\ 
 the joint owners of this joint plant conveying it to the Stand-1 
 ard Oil Company of New Jersey and taking stock for the \ 
 
 same. 
 
 There is the length and breadth of their offending. That 
 is this fraudulent organization that stops only at the prison 
 bars. When we had a trial in the court below, the only thing 
 they condemned us for was that— You in 1899, then a lawful 
 body of men, holding a lawful property, built with your own 
 means, owned by you all as a single group, under control of 
 trustees-you men in 1899 conveyed this properly to the 
 Standard Oil Company of New Jersey and you took stock for 
 it ; and that is a violation of the Sherman Act. That in itself 
 
68 
 
 is a restriction of trade. That in itself is a monopoly, seeking 
 by illegal means to exclude other traders from this oil busi- 
 ness. 
 
 Not only that, if your Honors please : What did this 
 petition pray for when it was presented ? Why, let me show 
 you. 
 
 The petition prayed that the court below would do what ? 
 Would dissect, would cut into thirty-eight pieces, this one 
 plant ? Not at all — not at all. What it prayed was that the 
 court would enjoin every one of the defendants, and each and 
 every one of them, from doing any act in pursuance of or for 
 the purpose of carrying out this conspiracy. Your Honor will 
 find that in Record A, page 111. 
 
 What did the court do ? Why, the court made a decree 
 practically confiscating this property, this plant — practically 
 destroying it. I say " practically " : I do not mean to say, of 
 course, that it destroyed one hundred per cent. But it did in 
 great degree destroy this plant. It cut it into thirty-eight 
 sections, and it bound hand and foot the men who as a single 
 group owned each one of these separate plants, as I will 
 hereafter describe to you, until it made it practically impos- 
 sible (I use that expression advisedly) for the owners of this 
 group under this decree, to successfully operate any of these 
 plants. 
 
 But, if the Court please, there was not only that in the 
 case ; they not only restricted them in that way, but they did 
 this as to each one of these thirty-eight plants. Each one of 
 them is owned by exactly the same three thousand men. 
 Each plant has to stand alone. It is the oil business, you 
 know ; and we have got to produce oil somehow. We have 
 got to get it from the wells up into our refineries and our 
 reservoirs. We have got to refine the oil. We have got to 
 find some way to transport it from the refinery. If we want 
 to export it, we must use ships. We are thirty-eight groups, 
 each of the same three thousand men. 
 
 Me. Justice McKenna : You say " thirty-eight " because 
 there were thirty-eight corporations ? 
 
 Me. Watson: Yes, sir; thirty-eight corporations, by means 
 of which we hold all these different properties. The Court 
 segregates these thirty-eight groups and in effect the Court 
 says : If you make a contract, express or implied, whether in 
 
69 
 
 reference to the price, to the transportation, to the purchase 
 or to the sale of oil, you violate this injunction. And that is 
 the decree that was made under this prayer to restrain these 
 people from continuing those illegal acts. 
 
 If the Court please, what is the first question to which I 
 now come ? 
 
 That question is, the opinion in which the Court gave its 
 reasons for the decision against these defendants. And I shall 
 take up the findings in the first section of the decree, to wit : 
 
 In Section 1 it was decreed that this sale to the New Jersey 
 corporation was a violation of the Sherman Act, and consti- 
 tuted the offense of which we were convicted. And just let 
 me urge this, because I never think of it without being 
 impressed with the peculiar situation we are in : What is 
 the thing that we did that was illegal ? And I press that 
 on your Honors now. There is not a single sentence of 
 the Court below finding fraud. There is not a single sentence 
 of the Court finding intent. There is not a single thing] 
 said about our desire to exclude others from the trade, or 
 that, illegally, we ever did exclude them from the trade — | 
 not a single sentence. And yet the Court held that this con- 1 
 veyance to the Standard Oil Company of New Jersey was a| 
 crime under both sections of the Sherman Act. And, if so,l 
 these people who participated in it became criminals, liable to 
 be punished for making that conveyance. That is true. _J 
 
 If your Honors please, look at it with me now for a 
 moment, because I do not think any one admires the Circuit 
 Court of the Eighth Circuit more than I do. The learning 
 and ability of those gentlemen is beyond dispute. And yet 
 for the life of me I cannot understand this decision. 
 
 I could have understood it if the Court had found as a 
 fact that this conspiracy had existed^; that it was carried out 
 by unlawful means ; that it was using unlawful means to eject 
 others from the_ trade. I could understandV of course, that 
 by~gbing under a corporation we did not shield ourselves from 
 those unlawful things. We could no more commit wrong 
 under a corporation than we could under a partnership or a 
 trust. And that is what your Honors really decided in the 
 Northern Securities case. 
 
 But the Court did not find that. It said : Apart from all 
 these charges, not connected with them, not influenced by 
 
70 
 
 them, the very thing that you did (this conveyance to the 
 Standard Oil Company of New Jersey)— you, the lawful own- 
 ers of a lawful plant, operating it under the law, amenable to 
 the law, the owners of it, the men who built it as one whole, 
 who made it a unique and a perfected plant — this thing done 
 by you men, simply because you resolved to take advantage 
 of the laws of New Jersey and convey this plant to them, is a 
 violation of the Sherman Act ; it is a restraint of trade ; it is 
 an attempt to monopolize trade. 
 
 Why, if the Court please, we did not gain one p,ow,§r under 
 the corporation that we did Jiat-Jxaye under the trust. There 
 were no new managers put into the field. There was no 
 new property anywhere. There were no new paths that we 
 trod. It was the same identical people. We did not associate 
 other people with us. It was the same joint ownership. We 
 did not put in alien property. It was the same joint property 
 that we owned. Pray tell me how a conveyance to the Standard 
 Oil Company of New Jersey, under the circumstances, could 
 restrain, could monopolize the oil business by unlawful ex- 
 clusion ? 
 
 Was it unlawful to convey to the Standard Oil Company of 
 New Jersey, except under a decision like this ? Was not the 
 question of the right a question of the law of New Jersey ? Is 
 it true that the Federal courts sit in the avenues of interstate 
 trade to question the methods in which the citizens of the dif- 
 ferent States carry on their business? Is it true that the 
 Federal courts sit to investigate the question of the title and 
 the combinations of the titles of the physical structures in the 
 State, merely because, perchance, I may use a refinery to make 
 oil, which oil I take and introduce into interstate trade ? 
 
 I trow not. And yet this conveyance per se and in itself, 
 and not anything else, is the great crime of which we have 
 been convicted, and for which this sentence is made. 
 
 Why did the Court do that ? The court said because they 
 were bound to ; they had to follow this Court ; and they said 
 that is what your Honors decided in the Northern Securities 
 case. 
 
 I knew something of that case in its origin in St. 
 Louis. Let me see if I cannot, in three different ways at 
 least, and without any difficulty, make the broad dividing 
 line, so that the man who looks and wants to get the truth 
 
71 
 
 never can doubt that tlie one case bears no relation to the 
 other. 
 
 What was the Northern Securities case ? Here were two 
 parallel and competing railroads, with their connections, run- 
 ning from Chicago to the Pacific Ocean. They were parallel 
 and competing. Morgan and Hill and some others got up two 
 groups of stockholders for the purpose of merging those roads. 
 The case finally came into this Court, and is known as the 
 Pearsall case. And your Honors gave them warning then, and 
 said in so doing that it was perhaps not the direct issue in 
 the case before you — but you gave them warning then that 
 if they attempted to and did merge and consolidate those 
 roads, it was a conspiracy in restraint of trade and a monopo- 
 lization of the trade, and it was illegal. 
 
 Morgan and Hill at once abandoned it. Then the ques- 
 tion was, " Is there any legal way by which this can be done ? " 
 And some learned gentleman in the East (I have never heard 
 who it vi^as ; since the decision of this Court I never could find 
 the man who did it, or who would admit that he did it) advised 
 that if Morgan and Hill and these other people created a cor- 
 poration under the laws of the State of New Jersey, it would 
 have the power to buy the capital stock of each of these 
 companies ; that thereby they could, under the law of New 
 Jersey, merge and consolidate ; and the effect would be that 
 the New Jersey corporation (and of course the stockholders 
 in it) gained a power to do what ? Why, to do what your 
 Honors said in Pearsall's case could not be done— combine 
 and merge these two parallel and competing roads. 
 
 Do not your Honors see that they were after a legal power 
 to merge and consolidate these roads, and they thought they 
 had it in the New Jersey corporation ? And, if your Honors 
 will remember, the battle in part there was over the question 
 of the passing of the title, and the power of this Court in ref- 
 erence to interstate commerce. But you all agreed, as of 
 course yon would, that no matter what the attempt was, no 
 matter under what form or guise or disguise, no person could 
 evade the Sherman Act, and that this attempt under the laws 
 of New Jersey to do that was of course futile. 
 
 Have you any such case as that here ? Did we seek to 
 gain any new power under the Standard Oil Company of New 
 Jersey. Not a bit. After we had conveyed to the Standard 
 
72 
 
 Oil Company of New Jersey we had exactly what we had be- 
 fore, except that before we held a trustee's certificate ; after- 
 wards we held stock of the Standard Oil_Compaiiy. But we 
 had identically the interest,' of the identical value, under the 
 control of the identical persons, that it was before. We did 
 not get a power ; we did not seek a power ; we did not restrict 
 competition. There was no competition to restrict. The 
 group that conveyed was a jointly-owning group Tihat did not 
 compete. 
 
 Is there any similarity between these two cases ? 
 
 Again : there were two groups that owned these two rail- 
 roads. They both sold to the Northern Securities Company ; 
 and then the stockholders in each got an interest in the stock 
 of both companies. You see, there was a merger of the two 
 roads. A stockholder in the Northern Securities Company, 
 who was formerly a stockholder of the Northern Pacific, now 
 got an interest in both the Northern Pacific and the Great 
 Northern. Is there any such thing as that in our ease? 
 There they gained new property. There they gained a new 
 power. There they advanced on the road to monopoly and 
 the restraint of trade. 
 
 My friend, Mr. Kellogg, (and of course he is unintentionally 
 mistaken) says that there was only one group of stockholders 
 that owned the Northern Pacific and the Great Northern ; that 
 they were not competing at all. I do not know why they con- 
 veyed to the Northern Securities Company if that is true, be- 
 cause if they had merged before I do not see why they wanted 
 to go in under cover of that. But he says there was only one 
 group. Why, if your Honors please, what do we find when 
 we turn to the bill in that case ? I have said to your Honors 
 that I had something to do with that case originally, and I 
 thought I knew at least that much about it — as to what it was 
 the Government charged. 
 
 I find that the bill says : 
 
 " That at the time mentioned " — 
 
 That is, at the time of this conveyance to the Northern 
 Securities Company — 
 
 " These two railway systems were then engaged in active 
 competition with one another " (193 U. S., 203). 
 
 It was not a merged, consolidated group. There were two 
 
73 
 
 independent roads actually engaged in competition with each 
 other. That is the charge in the Northern Securities bill. 
 
 It is said that there was an inside group. As I understood 
 Mr. Kellogg, he said that Mr. Hill and some distinguished 
 gentleman from Canada had an inside group of stockholders in 
 both properties. But if your Honors will turn to the testi- 
 mony of Mr. Hill, which I have before me, you will find that 
 Mr. Hill says that that is not so. He says some of his 
 friends and himself held, together, from seventeen and a half 
 to twenty millions of the Northern Pacific. (Printed record 
 of No. Sec. Case, Vol. I., pages 47, 48 ; 52, 53.) What was the 
 capital stock of the Northern Pacific ? One hundred and 
 fifty-five millions. My friend said that the preferred stock 
 could not vote there. He is mistaken. The preferred stock 
 could and did vote, although the common had the right to 
 and did, in the end, retire the preferred. So that when the 
 Court below said that they were bound by the decision of 
 this Court in the Northern Securities ease to decide as they 
 did, with great submission to their learning and ability I do 
 think that they made a plain mistake. 
 
 But what else did the Court say ? And I want to empha- 
 size this, because I do not want to argue this case on some 
 question that I think is perfectly clear on the facts as the 
 Court below found them, and then be told that I have not 
 discussed other facts. I am presenting the question as it 
 was presented by the court. I am discussing the reasons the 
 Court gave for the decision. And I am attempting to per- 
 suade your Honors that that conclusion is wrong. 
 
 What else did the court below say ? Why was it that this 
 simple change of ownership from a partnership to a corporate 
 form — that simple change and nothing else— was the offense ? 
 
 In the Joint Trafiflc case, when pressed with an argument 
 to the effect that if the Act was literally enforced all 
 kinds of combinations would be restraints of trades, and 
 society would be disintegrated, each man as a warrior 
 to protect himself, your Honors said that it never had 
 been suggested, within your knowledge, that the organiza- 
 tion under a corporate form was a violation of any law, 
 that that was a combination in restraint of trade, or that 
 that was a monopoly. That was a lawful means which has 
 
74 
 
 produced iintold good, and I agree in large degree has pro- 
 duced wrong. But it was a lawful means organized for the 
 purpose of developing trade, that enabled the poor man of 
 whom we hear so much, to take an interest in the joint enter- 
 prise without the danger of being ruined by a failure. And 
 yet it was the conveyance to this lawful means, it was the 
 conveyance to this lawful corporation, by people who had 
 a right to convey, that was our offense. 
 
 But the Court said : You are able to look after the details 
 of your affairs better by this conveyance. You are able to 
 agree more easily as to profits. You are able to agree more 
 readily as to prices and one or two other things ; and these 
 are the abhorrent things that prevent you from coming to- 
 gether, under this Corporation. 
 
 But is that true ? Under our trusteeship, under our 
 joint ownership, could we not easily agree upon prices ? What 
 is a trustee ? He is an agent appointed to represent me in 
 my business, and the scope of his power depends upon my 
 [consent. What is a trust '? It is a conveyance, known for 
 jhundreds of years, whereby one man puts his real estate or 
 his personal property in the charge of his agent to manage 
 and care for. Did we not, under the trust organization, have 
 every bit of power that we had under the corporate organiza- 
 tion ? 
 
 Mr. Justice Harlan : Whom do you mean by " we " ? 
 
 Mr. Watson : I mean the Standard Oil group, sir. 
 
 Mr. Justice Harlan : That group of thirty odd corpora- 
 tions ? 
 
 Mr. Watson : Yes, sir. 
 
 Mr. Justice Harlan : Let me ask you this question just 
 there : Suppose we call one of those corporations A, and one 
 B, and one C, for illustration. They were each managing 
 separate properties ; were they ? 
 
 Mr. Watson : Yes, sir. 
 
 Mr. Justice Harlan : Separate oil ? 
 
 Mr. Watson : I do not want to mislead your Honors. You 
 ask " separate oil ? " Do you mean separate ownership ? 
 
 Mr. Justice Harlan : No, no ; I mean separate plants. 
 
 Mr. Watson : Your Honor used the word " oil," and I did 
 not understand you. 
 
75 
 
 Mb. Justice Harlan: They were managing separate 
 plants ? 
 
 Mr. Watson : Yes. 
 
 Mb. Justice Haelan : In different parts of the country ? 
 
 Mb. Watson : Yes. 
 
 Mb. Justice Hablan : Did the ownership of stock in Cor- 
 poration C entitle these stockholders, per se, to an interest in 
 the stock of Corporation A ? 
 
 Mb. Watson : Through the trust ? 
 
 Mb. Justice Haelan : Through the trust. 
 
 Mb. Watson : Yes, sir ; through the trust. 
 
 Me. Justice Haelan : Without the trust they would have 
 been entirely separate ? 
 
 Mb. Watson : Oh, yes, sir. But they are all owned by the 
 same persons, sir, if you could say " separate " under those 
 circumstances. 
 
 Mb. Justice Haelan : Do you mean that the stockholders 
 in Corporation C were exactly the same stockholders as those 
 in Corporation B ? 
 
 Me. Watson : Just exactly. There was not a divergence of 
 interest. 
 
 Me. Justice Haelan : Eunning different plants ? 
 
 Me. Watson : Eunning different plants. 
 
 Mr. Justice Haelan : In different parts of the country. 
 
 Me. Watson : In different parts of the country — all owned 
 by the same people. There was no separation of ownership at 
 all. There was no separation of the persons. 
 
 The Chief Justice : I was under the impression that the 
 judgment of the lower court proceeded upon the assumption 
 that the combination of these owners in the trust was subject 
 to the same infirmity as would be their combination in this 
 corporation. 
 
 Mb. Watson : It expressly said, sir, that it would not con- 
 sider or determine the question of legality, but did say that 
 they were subject not to the same infirmity, but to the same 
 control. Perhaps I did not understand your Honor's question. 
 
 The Chief Justice : Did not the Court below proceed upon 
 the theory that the aggregation of the owners of all these cor- 
 porations in a trust was subject to the same infirmity that the 
 aggregation of all these owners in the Standard Oil Company 
 of New Jersey was ? 
 
76 
 
 Mr. Watson : Oh, no, sir. 
 
 The Chief Justice : Then your argument, as I understand 
 it, proceeds upon this theory : You start with the premise that 
 the trust was legal ; and, therefore, you say, the trust being 
 legal, the Standard Oil Company was legal ? 
 
 Mk. Watson : Yes, sir. 
 
 The Chief Justice : Are you not, therefore, begging the 
 very question upon which the lower court put its decision ? 
 
 Mb. Watson : Oh, no, sir ! That is what I said to your 
 Honor, and that is what I read from the decree, and that is 
 what is undoubtedly in the case. The Court assumed the val- 
 idity of that trust. I do not say it conceded it. I do not say 
 it held it. 
 
 Me. Justice McKenna : Do you mean to say that the Court 
 has held that if the trust had been in the situation of the 
 Standard Oil Company, it would not have dissolved the trust ? 
 
 Me. Watson : Oh, no, sir ; it did not say so. But what I 
 do say is this : The Court said that all that happened prior to 
 the conveyance ia 1899 to the Standard Oil Company of New 
 Jersey was unimportant, and that they would not consider it. 
 They said that the illegality was the conveyance to the Stand^ 
 ard Oil Company of New Jersey. If I had time, sir, I could 
 read you half a dozen extracts from the opinion along that 
 line. 
 
 Mu. Justice McKenna : Was not that because at that time 
 the law condemning this combination was not in existence ? 
 
 Me. Watson : Oh, no, sir ; because, remember, the combi- 
 nation was carried on until 1899. It is so alleged, you know. 
 Our trusteeship in part existed until 1899. It operated nine 
 years after the Sherman Act was passed. Oh, no ! 
 
 Me. Justice McKenna : What page are you reading from ? 
 
 Me. Watson : I am looking now at page 17 of my brief — 
 page 17 of my revised brief. You will find a number of cita- 
 tions there. Let me just make certain of that now, while I am 
 at this point. 
 
 The Chief Justice : I did not want to interrupt you. 
 
 Mb. Watson : Oh, no, sir ; I beg your Honor's pardon. 
 I thank you for interrupting me, because I do not want to talk 
 here for talk's sake. 
 
 The Chief Justice : I understand that. 
 
77 
 
 Mr. "Watson : I am trying to convince your Honors that I 
 am right about this ; and I am certain, if your Honors will 
 pardon me for saying it directly, that when you read the 
 opinion of the Court you will agree with me. 
 
 The Chief Justice : That is all I wanted to know. I would 
 not stop to explain it, because your time is limited ; and I cer- 
 tainly see your answer to it now. 
 
 Mb. Watson : Yes, sir. 
 
 The Chief Justice : And I must investigate it. I just 
 wanted to understand your position. 
 
 Mb. Watson: I must rely, of course, upon my brief for 
 erer so many things here. 
 
 The Chief Justice : Yes ; pardon me. 
 
 Mb. Watson : You know I have only fifteen minutes more. 
 
 The Chief Justice : Yes. I am sorry you have not an 
 hour. 
 
 Mb. Watson : Your Honor is very kind indeed, 
 
 Now let me ask another thing : What did the Court 
 say were the illegal things that we were doing after this 
 conveyance was made in 1899, and down to 1906 ? Did 
 they find that we were taking rebates ? Not at all. Did 
 they find any fraud or deceit, or that we were holding our- 
 selves out as fictitious companies and deceiving the public ? 
 Not at all. Is there anything in the four corners of that 
 opinion which designates any act by these people between 
 1899 and 1906 as fraudulent and unlawful ? Not at all. 
 What were the illegal things that we were doing ? Why, let 
 me read to your Honors the things that the Court said were 
 illegal things that we were doing in 1906 : 
 
 " The power to vote the stock," — now, remember, these 
 are the illegal things in the Standard Oil Company — " to 
 elect the officers of the subsidiary corporations, to control 
 and operate them and thereby to restrict their competition in 
 interstate and international commerce was illegally granted " — 
 
 And I call your Honor's attention to this, because it is a 
 direct answer to your question — 
 
 " Was illegally granted to the Standard Oil Company of 
 New Jersey in 1899, and that company ever since has exer- 
 cised unlawfully and is still so using that authority, the seven 
 individual defendants are dominating and directing its exer- 
 cise of this power, the subsidiary corporations are knowingly 
 
78 
 
 submitting to and assisting that exercise and all of them are 
 participating in the fruits of it. These " — 
 
 Not fraud ; not rebates ; not unlawful exclusion of other 
 people — 
 
 " These are menacing and continuing violations of the Act 
 which the Congress has imposed the duty upon the courts to 
 restrain and prevent " (Record A, page 583). 
 
 The illegal power granted in 1899 is continued by these 
 votes for the directors, and that is the menacing thing — 
 not unlawful acts ; not going out and seizing some small 
 trader in South Africa and defrauding him out of his busi- 
 ness ; not any of those things that my friend here has spent 
 some three hours in discussing. It is these menacing things — 
 the methods of exercising of the power that the Standard Oil 
 Company of New Jersey has by reason of the conveyance of 
 the property to it. 
 
 Let me come now to the second question, and that is the 
 d,ecree. 
 
 / I say this decree is practically a confiscation ; and there is 
 {nothing in the Sherman Act which authorizes a confiscation 
 /except under Section 7, where, if the property is caught in 
 /transit, the court may confiscate or forfeit it. But that is the 
 only instance in the Act where confiscation is allowed. 
 
 Look at what this Court did. First, it enjoined the Stand- 
 ard Oil Company from voting the stocks in all these other 
 companies. Suppose, if the Court please, just to illustrate the 
 matter, I had wanted to go into the oil business in 1865, and 
 that as the business developed I wanted to follow it. That 
 would be perfectly natural — to want to follow it. Suppose I 
 wanted to create a large business, and I took in my friend, the 
 Attorney General — who was a better business man than I was : 
 As we went on, he might think that the thing was a little risky, 
 and say : " Well, now, Watson, as we go along, we will incor- 
 porate under the laws of each of the States. That is the easier 
 way to hold real estate ; it is the easier way to manage it, and 
 it is the easier way to manage our afi'airs." So suppose 
 we incorporated under the laws of a dozen difi'erent States : 
 Would that have been a restriction of competition ? Would 
 that have been a monopolizing of trade ? And yet that is 
 what these people did — that is all. They obeyed the laws of 
 the different States. 
 
79 
 
 In the first place, under this decree the Standard Oil Com- 
 pany cannot vote any of the stocks of these companies that it 
 holds for 5,000 stockholders. It cannot receive any divi- 
 dends. It cannot in any way interfere with the manage- 
 ment of these subsidiary companies. Now, remember, in 
 the end it is the same people who owhT the subsidiary 
 companies that own the Standard Oil Company of New 
 Jersey. So there is a restriction against the group here, 
 calling themselves the Standard Oil Company of New Jersey, 
 and against that same group over there, calling themselves 
 the Standard Oil Company of Indiana, that they shall not in- 
 terfere with each other ; they shall not exercise any influence 
 on the other group in the other State. Of course, if the Stand- 
 ard Oil cannot get any dividends, if it cannot get any money 
 to declare a dividend, its stock at once becomes practically 
 worthless. And here you have, in the Standard Oil Company 
 of New Jersey, 1,600 stockholders whose holdings amount to 
 from one to five shares ; and that stock, held by them as an 
 investment, as a thing they can borrow money on, or sell, or 
 receive dividends on, is depreciated until it is practically 
 worthless. 
 
 Then the Court said: But you may disintegrate. You 
 mav convey to each one of the stockholders of the Standard 
 Oil Company his share in the thirty-seven sub-companies, giv- 
 ing him his proportionate interest in each. 
 
 It results in this : Any man that owns less than five shares 
 of the stock of the Standard Oil Company gets a fractional in- 
 terest in the stock of these thirty-seven different companies — 
 a fractional interest only. He cannot vote it, because a^quarter 
 of a share of stock cannot be voted. There is no way of trans- 
 ferrmgit. Nobody wants to buy it. And under the decree 
 here, as I will show you in a moment, he cannot unite it with 
 something else. And therefore he is ruined so far as his stock 
 is concerned. 
 '" The sixth section of the decree begins : 
 
 " That the defendants named in Section 2 of this decree "— 
 
 That is, the thirty-eight companies, including the 
 Standard Oil Company of New Jersey— 
 
 " Their oflScers, directors, agents, servants and employees, 
 are enjoined and prohibited " — 
 
 Let me ask your Honors to follow, now, the great skill 
 
80 
 
 with which this decree is drawn. In the first place, it enjoins 
 all of them from continuing the combination adjudged illegal 
 thereby. If your Honors are looking for that decree, you 
 will find it on page 528 of Record A. They are enjoined, in 
 the first place, — 
 
 "From continuing or carrying into further effect the com- 
 bination adjudged illegal hereby." 
 
 Second : 
 
 " From entering into or performing any like combination 
 or conspiracy the effect of which is, or will be, to restrain 
 commerce in petroleum or its products among the States, or 
 in the Territories, or with foreign nations." 
 
 That goes outside the combination charged. Not only 
 shall you not continue your present combination, but you 
 shall not make any other combination. 
 
 And, third, you are forbidden — 
 
 " To prolong the unlawful monopoly of such commerce ob- 
 tained and possessed by defendants as before stated." 
 
 Let me ask your Honors in all sincerity to read with me 
 the latter part of that decree, and to answer this question : 
 Would any intelligent man who had a respect for his own 
 person, and did not want to run the danger of inhabiting a 
 prison, attempt to operate any of these plants under these 
 conditions ? 
 
 You must not do these things, either — 
 
 " (1) By the use of liquidating certificates, or other written 
 evidences, of a stock interest in two or more potentially com- 
 petitive parties to the illegal combination." 
 
 Here are these men that only have five shares of stock. If 
 the Court would allow the defendants, in a distribution like 
 that, they might make up and give to these small stockholders 
 a share representing an interest in several subsidiary com- 
 panies. But the Court says : " You shall not do it. You shall 
 not put two companies in one certificate." 
 
 " (2) By causing the conveyance of the physical property 
 and business of any of said parties to a potentially competitive 
 party to this combination." 
 
 Here are thirty-eight companies. Here are eighteen re- 
 fineries. What does " potentially competitive " mean? I sup- 
 pose it means " power to compete." The refineries do not 
 compeie, though. These structures do not compete. It is the 
 
81 
 
 men who use them. And now you have a restriction here that 
 one hundred men owning this plant and one hundred men own- 
 ing that plant cannot consolidate those plants and all of them 
 own both together. 
 
 Take the question of potential competition : Why, that is a 
 rule which your Honor, one of the dissenting justices in the 
 Northern Securities case said, would cut society into fragments, 
 and make warriors, instead of traders and peaceful citizens, of 
 men. Competition is not a duty ; it is a privilege. I am not 
 bound to compete with my neighbor. If I am in a partner- 
 ship of ten persons, and we own ten stores in the same town, 
 does any person suppose that each one of those ten stores 
 has to compete against each one of the others ? Yet here 
 it is ; it is the " potential competition " that is referred to. 
 
 Why, see how that would restrict liberty ! See how that 
 would restrict trade ! Look at it ! Is it true that the man 
 who starts in life, for instance, to produce and refine oil, who 
 intends to make that his life work, cannot buy this site over 
 here on which he can put an additional plant as his business 
 progresses ? Is it true that he cannot add to it, if he has the 
 money, a dozen other sites that, if used by some other person, 
 might be competitive ? Is not that his liberty ? 
 
 The Sherman Act does not say : " You shall not have or 
 buy more than one plant or one store.' It does not forbid 
 magnitude. It does not forbid the ordinary, proper growth 
 of trade and business. It fosters it. It was passed 
 to foster it. It was passed to allow the fullest liberty in trade 
 to every citizen in this country. And do you tell me that 
 there should be a subtle construction of this penal law, that 
 you should find that citizens of the United States commit a 
 constructive crime, because, forsooth, they hold three dififerent 
 stores, two of which, if two other people had owned them, 
 might compete ? Or, if they had one refinery, because they 
 bought another refinery, the product of which might compete ? 
 Is it not true, sir, that it is often the illustration of the eflfect 
 of a doctrine that demonstrates its unsoundness much more 
 than any technical reasoning could ? 
 
 Then the Court says, further on : 
 
 " By causing the conveyance of the property and business 
 of two or more of the potentially competitive parties to this 
 combination to any party thereto." 
 
82 
 
 There, again, it is said : " You shall not sell any one of 
 these plants to any other person. You shall not even agree 
 among yourselves." Here we are, one hundred men. We 
 have got, we will say, fifty plants. We come along and say : 
 " Well, Tom, Dick, Harry and John will take four of these 
 plants, composed of a combination of pipe-lines and wells and 
 reservoirs." The Court says : " You cannot do that ; you shall 
 not do it under this decree." 
 
 Then the decree goes on — and I confess I do not under- 
 stand this : 
 
 " By placing the control of any of said corporations in a 
 trustee, or group of trustees." 
 
 Why may not the owners of these properties put ,th_em_ijL. 
 the hands of a trustee ? Here we have a refinery. Why 
 may not I, if I have the Attorney General with 
 me, convey that to a trustee, and let the trustee hold and man- 
 age it ? This Court says : " You shall not do it. It is a vio- 
 lation of the Sherman Act." 
 
 Then the decree says : 
 
 " By causing its stock or property to be held by others than 
 its equitable owners." 
 
 Why? What difference does it make under the Sherman 
 Anti-Trust Law whether I hold my stock by the legal title or 
 by the equitable title ? How is that a violation of the Sher- 
 man Act ? 
 
 Those are positive prohibitions. We are told, " You shall 
 not do those diffei'ent things, because the Court has deter- 
 mined in advance that those things will produce a deleterious 
 effect." And then, in addition, the decree says as follows : 
 
 "Or by making any express or implied agreement or 
 arrangement together, or one with another, like that adjudged 
 illegal hereby " 
 
 Here are eighteen refineries and pipe-lines, etc. You have got 
 to have some connection between them. Yon have got to have 
 a connection with a pipe-line if you want to get your oil from 
 the producing wells, and you have got to have some conaec- 
 tion with the transportation lines. And yet you shall not make 
 any express agreement with them, and, lo and behold ! You 
 shall not make any implied one. 
 
 Think of transacting business with a number of other 
 
83 
 
 people, in danger of being put in jail if what you have done 
 some court should hold, some day, was an implied agreement! 
 
 We are also told that we shall not do this — 
 
 " Eelative to the control or management of any of 
 said corporations, or the price or terms of purchase, or 
 of sale, or the rates of transportation of petroleum or its 
 products in interstate or international commerce, or relative to 
 the quantities thereof purchased, sold, transported or manu- 
 factured by any of said corporations which will have a like 
 effect in restraint of commerce," etc. 
 
 Think of that ! I ask your Honors again, with all sin- 
 cerity : Would any man desiring to protect himself from igno- 
 miny by being put in jail, attempt to operate any of these plants 
 under that decree ? Have not your Honors said — did you not 
 say in the Swift case — that you were bound to point out with 
 particularity the things which the people are forbidden to do 
 and the things which they are allowed to do ? Did you not 
 say you were bound to do that ? Did you not say in that case 
 that all the rules in reference to relief in equity forbade you 
 from issuing a blanket injunction to cover indefinitely the 
 future business of an organization ? And yet this injunction 
 has absolutely no limitation as to time. It not only seeks to 
 control the uses, but it seeks to regulate the acquisition and 
 the title and the holding and the methods of these State citi- 
 zens, organized under the State laws, and never touching inter- 
 state trade until they put into the avenues of trade the products 
 that were made from some of these physical structures ! 
 
 Now, in five minutes, will not your Honors allow me to 
 say (and I had a good deal more to say on that point) first, 
 this : 
 
 The Court below said : This case is ruled by the North- 
 ern Securities ease. We are bound to decide it according to 
 that. The cases are parallel. The rule that governs one must 
 govern the other — If so, why did they not make the decree 
 that which this Court approved in the Northern Securities 
 case ? That was simply a decree putting the persons in the 
 places where they were prior to the time of the conveyance. 
 Why did they not do that, if the cases are similar ? But let 
 me call your Honors' attention more specifically to the fact 
 that the Court disregarded the decree in the Swift case. Did 
 
84 
 
 not your Honors decide, in the Swift case, first, that a com- 
 bination was legal under the Sherman Act provided it did not 
 restrict trade, or did not exclude others from the trade ? And 
 did you not review the decree of the Circuit Court in that case, 
 and say that the broad expressions "any other method or 
 device, the purpose and effect of which is to restrain commerce 
 as aforesaid," were improper in that decree, and strike them 
 out ? Did you not say in that case that the only thing you 
 could do there, sitting as a court of equity, was not to punish 
 by confiscation for some alleged wrong that had happened 
 twenty years ago — that was not the power given you as a court 
 of equity— but to restrain the specific things which were being 
 done when the petition was filed ; that your power was to re- 
 strain and prevent, and it was the only power that was given 
 to you ? And then, more than that, did you not in that decree 
 put right on the face of the decree : " But nothing herein 
 contained shall be construed as an attempt to interfere with 
 the lawful conduct of the business of these different plants " ? 
 
 Tou said that, and you said more : " Provided, further, 
 that we restrict you only as to certain things that are illegal " — 
 the fixing of the price, the allotments, etc. " But you as a 
 combination may proceed in the future, and you may operate 
 this business, provided you do not do these illegal things from 
 which you are now enjoined." 
 
 Tou did not strike down the combination. You have not 
 done it in a single case. You did compel the disintegra- 
 tion in the Northern Securities case because they were two 
 avenues of interstate commerce, and the law forbade them to 
 be together. Here are private traders. The law allows them 
 to be together, and does not forbid it. 
 
 The Chief Justice : I am sorry, Mr. Watson, that your time 
 has expired. 
 
85 
 
 Concluding; Argnment of JOHN G. JOHNSON, 
 Esq., on Behalf of the Appellants. 
 
 Me. Johnson : It must bave occurred to the Court, during 
 ■ the course of Mr. Kellogg's long argument, that there is very 
 little help to be gathered by it, in dealing with the situation 
 which exists in 1910, from telling a big roll of alleged sins of 
 thirty or forty years ago. And it is rather a significant fact 
 that in order to give the proper color and raise the proper 
 amount of indignation, it is necessary for him to go back thirty 
 or forty years, rather than to hunt at the present time for sins 
 committed by this corporation. 
 
 I have neither the time nor the ability to follow him in his 
 labored dissertation upon all the ills that have been attempted 
 and accomplished by this Company. Certainly I have not the 
 time to follow him in his allegation of illegal rebates taken 
 since the year 1899. I refer the Court to the very elaborate 
 discussion of that matter upon our briefs, with the assertion of 
 the belief that after reading those briefs upon that subject you 
 will be satisfied that there was no foundation whatever for his 
 assertion. 
 
 As to the alleged cutting of prices : I think you will find, 
 I think the brief demonstrates, that unless the alleged cutting 
 is of a time up to or beyond which the memory of man does 
 not go, that it was the result (certainly our testimony presents 
 that fact) of an attempt to meet the cutting of rates by others. 
 And undoubtedly, whatever might be the rule in some other 
 forum, in the forum of business the presenting of the second 
 cheek to be smitten after the smiting of the first cheek does not 
 preva 1. 
 
 In order, however, that the Court may have some little 
 illustration of the manner in which in an oral argument things 
 may be said for which a close consideration of the testimony 
 will show no warrant, I will refer to a few of the very palpable 
 errors which have been made in the way of accusation— most 
 of them, as I say, in the distant past. 
 
 Mr. Kellogg said this in the course of his argument (I 
 quote) : 
 
 " In 1870, 1871, 1872, and 1875, when the independ- 
 ent men in this country were shipping their goods to 
 
86 
 
 Europe and building up a foreign trade, in those days 
 they were sending from $36,000,000 to $57,000,000 of 
 products to Europe ; and it has never since exceeded 
 $93,000,000." 
 
 That was a rather startling presentation of an alleged fact 
 — that the independents alone in 1871 had sent to Europe from 
 $36,000,000 to $57,000,000 of these oil products, and that at 
 the present time the independents and the Standard together 
 are sending only $93,000,000. The fact is that in 1871 there 
 were exported in all 2,643,000 (I ignore the odd numbers) 
 barrels of illuminating oil, at $12.67 per barrel. In 1906 the 
 Standard alone exported 15,159,000 barrels — or six times the 
 amount exported in 1871 — at an average price of $3 per barrel. 
 In 1875 the total value of the exports was $31,000,000, and 
 not $57,000,000 ; and these exports were not by the indepen- 
 dents alone, but were largely Standard oil. 
 
 Moreover, in the early days of the trade, to which he was 
 referring, there was practically no production of crude oil in 
 Europe ; and therefore it depended altogether upon America 
 for its supply; but in 1901 to 1905 the product of crude oil 
 outside of the United States averaged 97,000,000 barrels. 
 
 So much for that. 
 
 There was an attempt to put a little color into the case by 
 enumerating a large number of companies owned by the Stand- 
 ard (the number stated being 114), without allusion to the 
 fact that forty-nine of these are corporations organized alto- 
 gether in foreign countries and not parties to the bill ; sixteen 
 are American corporations that are not parties to the bill ; and 
 twelve are defendants as to which the bill was dismissed. 
 
 Then there was rather a taking statement made with re- 
 gard to some cutting and competition in Los Angeles. But the 
 truth about that matter was that there there was a company, 
 or some companies, manufacturing asphalt from petroleum, 
 and a by-product of that manufacture was oil. Of course, as 
 it was a by-product, they could afford to sell it very cheaply. 
 The question then was whether the Standard Oil Company 
 should permit them to take away the whole trade, or whether 
 they should meet the low prices which they made by equally 
 low prices. And they met them. 
 
 Another statement was made — one of those incautious 
 
87 
 
 statements that counsel in the secrecy of their own chambers 
 (I will not say at night) perhaps regret making— to the efifect 
 that the producers, as Mr. Kellogg stated, store oil in the 
 Standard's tanks " at storing charges which, the record shows, 
 would eat them up in a year." 
 
 The storage charges for 1,000 barrels are 25 cents a day, 
 or $91.25 a year. One thousand barrels of Pennsylvania crude, 
 at $1.58 per barrel (the average price for five years, 1903-7) 
 were worth $1,580. In other words, the storage charge 
 amounted to six per cent. Would that the years that would 
 be exhausted in that way might be the years that might 
 be allotted to us for the balance of our lives, and that a year 
 might spin out to that length ? 
 
 Then there was a statement made with reference to a man 
 named Harrison, engaged in South African trade ; and the 
 treatment that we are said to have accorded him seemed 
 almost Zulu-like in its barbarity. But in the hurry of an oral 
 argument Mi. Kellogg forgot to add the explanation that the 
 Standard were shipping under contracts which gave full ship- 
 loads, and stipulated for a very large amount of shipment per 
 month ; whilst Haixison was making what were comparatively 
 spasmodic, or certainly very small, shipments irregularly. 
 There was not the slightest connection in the evidence between 
 the Oil Company and the fixing of those charges by the carrier 
 companies. The shipping men were having whole ship-loads 
 sent by the Standard, and of course the rates were lower. 
 
 Then there was a statement made to the effect that in the 
 proceedings before the Hepburn Committee in 1879 there 
 was a concealment of relations between the Standard Oil Com- 
 pany, Charles Pratt & Company and others. At that very 
 hearing, where that concealment is seriously alleged to have 
 been made, there was given this t testimony, by Mr. H. H. 
 Rogers, one of the Standard people : 
 
 " Q. What are the refiners that are 'now in associa- 
 tion with the Standard Oil ? 
 
 " A. The people that are now working in harmony 
 with us comprise about, 1 should think, 90 or 95 per 
 cent, of the refiners. 
 
 t See Government Brief, Vol. I., p. 41. 
 
88 
 
 " Q. Now, tell us their names, the leading ones ? 
 
 " A. Some of the leading ones ? The Standard Oil 
 Company, Charles Pratt & Co., the Sone & Fleming 
 Manufacturing Company ; Warden, Frew & Co., of 
 Philadelphia ; the Standard Oil Company, of Pittsburg ; 
 the Acme Oil Refining Company, of Titusville ; the Im- 
 perial Eefining Company, of Oil City ; the Baltimore 
 United Oil Company, of Baltimore." 
 
 What is the use of talking of concealment, when there in 
 the record from which the charge of concealment comes is the 
 fullest disclosure at the time of the full extent, with the state- 
 ment " comprising 90 or 95 per cent " ? 
 
 The advantage of discussion in court — above all when the 
 bench sometimes participates in the discussion with the bar — 
 is that it is a great thrashing-machine which winnows the chaff 
 and leaves the kernel of the issue. And there is very little 
 left, after the discussion in this case, but the consideration of 
 some very elementary principles, and the presentation of some 
 very elementary thoughts. 
 
 I will put what I have to say under these propositions : 
 
 First. It is the duty of the Government to define the 
 meaning of the words " combination in restraint of trade " and 
 " monopolizing " . and that where they have attempted to per- 
 form that duty, their definitions are unwarranted, vague and 
 indefinite. 
 
 The next proposition is that acquisition, in the course of 
 
 conducting a business, of competitors, is not a combination in 
 
 ■restraint of trade, however large; and that moropolizing is 
 
 the acquiring by means of illegally excluding others from 
 
 their rights. 
 
 The next proposition is that the combination which existed 
 in 1899 was in all respects a legal one. 
 
 The next proposition is that there was nothing whatever 
 violative either of the prohibition against restraint 
 of trade or that against monopolizing in what was done in 
 1899, in transferring those corporations and properties to the 
 Standard Oil Company of New Jersey. 
 
 The next proposition is that there were no acts of illegality 
 or abuse shown since 1899 ; and that if there were, the result 
 
89 
 
 would not be the confiscation of the property, but the punish- 
 ment in the way prescribed by that Act. 
 
 And the last proposition is that this case is ruled by the 
 Knight case. 
 
 Let us take up now the first proposition, with regard to the 
 duty of the Government to define. 
 
 It will not do to say, as was said by the learned Assistant 
 Attorney General in one of these discussions : " It is not the 
 business of the Government to define ' monopolizing.' Let 
 these parties go ahead and do their acts, and after that it will 
 be determined what was done, and a definition will be given of 
 the word ' monopolizing '." 
 
 It is the duty of every legislature which enacts a criminal 
 statute to so write it — not so high that neither eyes nor mind 
 can see, but to write it so plainly — that every man may know 
 whether he offends. For instance, I know what three feet are ; 
 but I cannot tell whether three feet constitute a yard unless I 
 know how many feet f re in a yard. In the same way, I cannot 
 be indicted for monopolizing, and I cannot be convicted of 
 monopolizing, unless the statute which prohibits defines with 
 sufficient clearness what " monopolizing " is. "^ 
 
 That thought is akin to what was stated by a very 
 prominent and distinguished member of the Lower House 
 when the Act was passed, when he was asked to say 
 what the Statute meant, and utterly ignored as a part of legis- 
 lative duty the giving of any definition to it, saying, " That is 
 for the judicial department ; it is for the court to find out." 
 But the person who is to be punished must know in advance 
 whether he is committing the offense. 
 
 Several definitions have been given by the Government, 
 and I now propose to consider them. They are definitions 
 that have been given orally, and definitions that have been 
 given in printed briefs. Those in the printed briefs differ not 
 so much from the oral definitions, except that they are more 
 ornate, and contain more flowers of speech. But perhaps that 
 is attributable to the fact that the atmosphere of this court- 
 room in oral argument is rather chilly for the cultivation of 
 that kind of flower. 
 
 Now let us take up some of the definitions that have been 
 given by the Government. And I take in the first place the 
 
90 
 
 definition which was given by Mr. Kellogg in his original 
 oral argument in the Standard case : 
 
 " Every corporation and every combination under Section 
 1, having the power to suppress competition and control prices 
 or output, whether it be the intent or a condition of it, tends 
 to a monopoly, that is, if it tends to that degree of power so 
 as to enable them to be a controlling factor in commerce, is 
 void." 
 
 The gist of that definition is that every corporation which 
 has the power to suppress competition and control prices or 
 output may do it. 
 
 The next definition is : 
 
 The Chief Justice : Pardon me, Mr. Johnson. You say, 
 " may do it ? " 
 
 Me. Johnson : That is what he says. He says that every 
 combination which has the power to suppress competition and 
 control prices or output is a combination that is illegal under 
 the first section of the Sherman Act. 
 
 The Chief Justice : Then you mean to say that he says 
 that every corporation that has that power violates the law ? 
 
 Mk. Johnson : Yes ; whether they do it or not. I am 
 going just to refer to that rather anomalous idea of criminal 
 law a little later. 
 
 The Chief Justice : Pardon me. 
 
 Mr. Johnson : Then the next definition I refer to is in 
 one of the briefs in this case, on page 52 ; and it reads thus : 
 
 " We do not maintain that every sort of restraint of 
 interstate or foreign commerce is denounced by the Sher- 
 man Act, and certainly no such doctrine is essential to 
 the relief asked. But when, as in the present case, the 
 restraint is a direct consequence of, or that to which the 
 challenged contract, combination or conspiracy neces- 
 sarily tends, and also of a material or substantial char- 
 acter, it is clearly within the meaning of the statute." 
 
 There is the plainest possible statement that the Govern- 
 ment does not maintain that every sort of restraint of inter- 
 state trade is contrary to the Act ; and it must be of a mate- 
 rial and substantial character. But why did Congress insert 
 that word " every " ? In order to get a definition that was 
 
91 
 
 never iDtended by the legislature, they are obliged to state the 
 definition and withdraw some of the incidents that would go 
 with it. But this Court has said that you _coiild-^naL insert j 
 before the words " restraint of trade " the word " reasonable.''/ 
 How, then, can we deal with a defiDition which gives such a ~1 
 meaning to this as requires the person who defines, to state / 
 that he disclaims that which the Act of Congress expressly / 
 says^ — that every restraint of trade shall accomplish that fact ? < 
 
 The next definition is this : ^~-j 
 
 " The law says "— 
 
 I think this is a new statute that has been written in a 
 Government oflBce. I have never read it in any of the printed 
 volumes of Congressional enactments. 
 
 " The law says that parties shall not, by contract or com- 
 bination in the form of trust or otherwise, remove the incen- 
 tive to compete, leaving it to the natural laws of trade to 
 create and foster competition." 
 
 The next definition is thus : It was made in the oral argu- 
 ment by the learned Attorney General ; and it gets very close 
 to what our definition is — so close that we almost come 
 together : 
 
 " I have never contended, and the Government does 
 not contend here, that the mere ownership of all of an 
 existing commodity, where the avenue is open to any- 
 body else to go in and purchase the same commodity, 
 and the possessor does not interfere in the slightest 
 degree with the exercise of that right by that other per- 
 son, consists in, and of itself is, an illegal monopoly. 
 That is the position I have always taken, and it is the 
 position I conceive to be the sound one, and it is the 
 position taken by those very eminent lawyers in drafting 
 this proposed bill." 
 
 The present Chief Justice asked whether the argument 
 addressed itself to the fact that enormous wealth 
 enabled it to do injury, and that the monopoly was the result 
 of its enormous wealth? The Attorney General replied: 
 " No ; not necessarily." 
 
 Bear in mind, now, what is contained in that definition : 
 " The mere ownership of all of the commodity is not monop- 
 
92 
 
 oJy," says the Attorney General, " within the meaning of the 
 Act, unless the possessor interferes with the exercise of their 
 rights by other persons." 
 
 Now let us come to still another definition, which you will 
 find in the new brief by the Attorney General on page 39 : 
 
 " It is not necessary in this case " — 
 
 He forgets some of the kind intentions with which he con- 
 strued the Act before, and he hardens the lines upon us : 
 
 " It is not necessary in this case, and we doubt 
 whether, in any case, it is possible, to make a compre- 
 hensive definition of monopoly which will cover every 
 case that may arise." 
 
 That is the heresy which was announced orally. 
 
 " It is sufficient if the case at bar clearly comes 
 within the provisions of this Act." 
 
 But how can you know whether it comes within the pro- 
 visions of the Act unless you have clearly defined in your 
 mind what it is that the Act punishes, and what " monopoliz- 
 ing " means ? 
 
 I quote further from the same passage : 
 
 " We believe that the defendants have acquired a 
 monopoly by means of the combination of the principal 
 manufacturing concerns through a holding company; 
 that they have, by reason of the very size of the com- 
 bination, been able to maintain this monopoly through 
 unfair methods of competition, discriminatory freight- 
 rates, and the other means set forth in the proofs. If 
 the Act did not mean this kind of monopoly ", etc. 
 
 I am now going to consider that all these abuses are 
 within the idea of exclusion ; and even in that definition we 
 have to interlard, with the statement of the monopoly, the 
 use of the discriminatory methods and the exercise of the 
 abuses. 
 
 Then there is another definition, wbich was given in 
 another brief, on page 99 of it ; and that definition reads 
 thus : — or, rather, T will read the definition that is given in 
 
93 
 
 the present oral argument. The learned Attorney-General 
 
 says : 
 
 " Senator Hoar defines ' monopolizing ' as the sole 
 engrossing to a man's self by means which prevent other 
 men from engaging in fair competition." 
 
 r That is a clear-cut exclusion, because it is an engrossing 
 ^^eans_of_exclusion. The Attorney-General defines " en- 
 grossing " to be "appropriating trade and merchandise to a 
 particular person or persons or body politic, to the exclusion 
 of others ; " and he says that " to-day monopoly is engrossing 
 with the added protection of a State charter." " Engrossing " 
 he defines as the exclusion of others ; and " monopoly " con- 
 tains an engrossing that carries with it that exclusion. 
 Another definition in their brief is : 
 
 " Monopoly is the outcome of the practical cessa- 
 tion of business competition. * * * Trade and 
 commerce in any commodity are monopolized whenever, 
 as the result of the concentration of competing busi- 
 nesses — not occurring as an incident to the orderly 
 growth and development of one of them — one or a few 
 corporations (or persons) acting in concert practically 
 acquire power to control prices." 
 
 Now let us see where we stand upon that definition. 
 They are dealing, now, with a combination not only big, 
 but one tbat^ contains everything, and e;scludes.aJULothers. But 
 Pthey say that that combination is not in restraint of trade if 
 I it is the result of orderly growth. But we have a statute 
 which punishes every combination in restraint of trade, which 
 does not exclude the combination which restrains trade be- 
 cause its power to do it is the result of orderly growth. And 
 must we not cry a challenge upon that method of defining 
 which again puts upon the statute a definition that its 
 language does not warrant, and escapes from its consequences 
 by putting an exception in a statute which permits none ? 
 
 But they now say that the acquisition of competiug plants 
 is not necessarily an offense ; that is necessarily permitted 
 (notwithstanding the decision in another case by a learned 
 
94 
 
 circuit court), because otherwise you would stop every trans- 
 action. Therefore we have a concession, first, that the acquisi- 
 tion of competitors is not a violation of the Act ; secondly, 
 we have a definition, which is that the mere bigness of a com- 
 bination is not in violation of the Act, unless there is an affix 
 or a suffix ; unless, from one point of view, it is so big that 
 it excludes others by its bigness ; or, from another point of 
 view of the Government, unless it is so big and excludes 
 others by interfering with their just rights. 
 
 If the result of natural and orderly growth in the case 
 of a combination so big as to exclude all others is 
 not a violation of the Act, wbat js orde rly growth ? In this 
 case there were some acquisitions; but the property as it 
 exists today is a property that was built up and reconstructed. 
 It is impossible to find any of the original elements. It is a 
 property the enormous proportion of which results from its 
 growth in the effort to do a trade as large as the demands of 
 this country and of foreign countries should require. Is not 
 that orderly growth ? 
 
 The acquisitions by purchase from others are but the 
 drops in the bucket. The real extent and strength and 
 power and wealth of this corporation today results from its 
 own creations, and the accretions resulting from its own 
 exertions. 
 
 I ask again. What is orderly growth ? Thei-e are several 
 competitors, all of them engaged in the fierce competition 
 which I understand the law says shall have no limit. In that 
 competition all of them go to the wall but one ; and that man 
 is left in full possession of the trade. Is he a criminal ? 
 Because as the result of that competition which he is told by 
 the courts it is his duty to indulge in, he is the acquisitor of 
 all the trade, is he a criminal ? When does he become so ? 
 At what stage of the competition ? Is he a criminal whether 
 he buys out the people who, going to the wall, make the best 
 of what is left, or whether he does not buy them out, and their 
 property goes to ruin ? 
 
 Or there is a large corporation, say like this, which they 
 say dominates trade; and the independent competitors (and 
 there was a peculiar answer given to a question by one of the 
 learned Justices addressed to this matter) band together for the 
 purpose of beating the larger competitor ; and as the result 
 
95 
 
 of their brains, skill, and exertions, the larger competitor 
 IS beaten, and they are left in possession of the field : Are 
 they, at the moment of their victory, instead of realizing the 
 results of their exertions, to be punished as criminals for the 
 accomplishment of that which they are told to do? Is that 
 orderly growth ? If it is, the learned Attorney General says 
 it is not punishable under this Act. 
 
 Or, a man by his knowledge of secret processes of trade, 
 and his skill, succeeds in obtaining the whole trade : Is that 
 orderly growth ? And yet he is in possession of the whole 
 trade ; and as a result of that possession, under one theory, 
 others are excluded from it. 
 
 And if bigness, a certain amount of bigness, is not punish- 
 able, and a certain large amount of bigness is punishable, how 
 big is it to be ? What fraction ? Why did not the legis- 
 lature, in language much plainer than they have used, define 
 this matter of bigness ? And where do we come to the sus- 
 taining of this decree upon the Government's interpretation 
 of the Act ? That interpretation is : " You may buy out 
 competitors ; you may acquire, by orderly growth, all, but you 
 may buy out competitors ; you may have a very great degree 
 of bigness ; but you must not be so big as to exclude others." 
 Take it on either horn of the dilemma. 
 
 Then what is the justification of this decree? If, then, 
 this corporation is too big, it sins only to the extent that it 
 is big beyond the percentage which enables it to exclude. 
 You cannot dismember it. You cannot cut it all in pieces. 
 You cannot deal with it as has been done in this case. You 
 must define up to what point it does not violate the Act, it is 
 not big enough to violate the Act. And you leave it at any 
 rate in possession of that bigness on their presentation of the 
 definition. 
 
 But what has been done in this case ? Pipe lines owned 
 by two or three different companies, organized as different 
 companies because the laws of the State perhaps compelled it, 
 form one continuous pipe line. That continuous pipe line, 
 the aggregation of fragments in the different States, has been 
 built with the property of these people for the purpose of sup- 
 plying refineries, to them belonging, with oil. This decree not 
 only strips away from the refinery which requires it the use of 
 a pipe line that has been constructed for it, but it cuts that 
 
96 
 
 pipe line in pieces, and puts the strongest sort of a ban upon 
 ever uniting the fragments of that pipe line. There is a com- 
 pany which owns the tank cars that have been used in this 
 general business for the carrying on of all the business; 
 and that company, so owning all those tank cars, is stripped 
 away from the companies which have built the tank cars under 
 that charter ; and you separate them so that the tank cars, 
 without any business to be done, are to be owned separately 
 from the companies which give them the business. 
 
 So with the ships and steamers that have been built up 
 under a corporation owned by these people ; built up not for 
 the purpose of transacting the foreign trade of one, but for the 
 purpose of transacting the foreign trade of all. You strip 
 them from the companies for whose use they were built, and 
 you prevent them from ever again owning them in any way. 
 
 Under this idea (to reduce it to its elements), if a combi- 
 nation is too big, why not reduce it to a permitted size ? If 
 we have top many arms and too many legs, why cut them 
 all off ? Why add vivisection ? It is too much like Chinese 
 punishment. 
 
 Who says — what work upon political economy, what court, 
 has ever said — that if you have so large a corporation as that 
 simply by its largeness others may be excluded, that is to be 
 condemned? 
 
 But let us not deal with theory ; let us deal with the pres- 
 ent case. On their theory that it is all right however big it is 
 unless you exclude others from trade, where do they stand ? 
 Why, it is in evidence in this case that from 90 to 95 per cent, 
 of the total, the production of this Company has gone down 
 to 80 per cent. How significant is that ! It is in evidence in 
 this case, from the Bureau of Corporations, that there are 
 growing up corporations engaged in this business which are 
 most prosperous, and are transacting a very large business. 
 How is it possible to say, if their definition be correct, that it 
 is only punishable when it is so big as to exclude, in view of 
 the fact that, instead of excluding others, more and more are 
 coming into the trade and are succeeding ? Away goes this 
 idea of exclusion ! 
 
 How on earth are you going to have an exclusion of others 
 from the trade in the matter of manufacturing ? Manufact- 
 uring requires brains and courage aud capital and raw mate- 
 
97 
 
 rial ; and as long as those four are open, it is idle to talk of 
 exclusionTJ^Brains and courage are not the subject of legis- 
 lative gifts. The man who possesses them is entitled to all 
 the good he can get therefrom. Capital is not monopolized in 
 this country, because, with the enormous wealth outside of 
 this corporation, what is to prevent others from going into it, 
 unless by abuses ; which subject I will deal with later. And 
 raw material : With but eleven per cent, in the control of this 
 corporation, how are we excluding ? Give them the worst 
 definition for this corporation that can be given ; let it be 
 that the exclusion must simply be by being so big that there 
 is no business left for the others : As a fact the business is 
 left for the others ; and as a demonstrable fact, you cannot 
 monopolize that business, because none of the elements which 
 are necessary for the transaction of that business can be 
 monopolized. 
 
 Now we come to our definition, which is : That the ac- 
 quisition, however great, in the course of business, is not 
 a restraint upon trade ; and that monopolizing goes farther 
 than some of the definitions of the Government, and means an 
 exclusion by illegal means. 
 
 Mb. Justice Day : Mr. Johnson, just a moment : I do not 
 undersand your " eleven per-cent." 
 
 Me. Johnson : Eleven per cent, of the crude oil is in the 
 control of these people, and the rest of it is in the control of 
 outside parties ; that is, the raw material out of which all 
 these products are made. 
 
 Mr. Kellogg : Do you mean the oil wells ? 
 
 Me. Johnson : I mean the supply of crude oil ; I do not 
 know whether it is from wells or from above or below. It is 
 the supply of the crude product. 
 
 The Chief Justice : That was stated over and over, in the 
 argument of this case, is about those proportions, as I recall 
 it. 
 
 Me. Milbuen : Yes ; that is right. 
 
 The Chief Justice : As I say, in about those proportions, 
 it has been stated over and over. 
 
 Mb. Johnson : That is about right. I do not carry the 
 fractions in my head. 
 
 Now, with regard to monopolizing : Have I answered your 
 Honor Mr. Justice Day's question ? I meant to. 
 
98 
 
 Me. Justice Day : Do you mean to say that eleven per 
 cent, of the crude oil produced in the country is controlled by 
 the Standard Company? 
 
 Me. Johnson : t Eleven per cent, of the production of crude 
 oil alone is owned by us ; the rest we buy. 
 
 The Chief Justice : Of course your opponents answer 
 that by saying that that percentage is calculated upon the 
 total product, and contemplates the product of oil which is 
 not susceptible of being refined as well as the refinable oil. 
 
 Me. Johnson : I think you will find by reference to the 
 figures that their statement is not correct. 
 
 In the first place, as I have said before, the mere chatter 
 of the men who talk in Congress goes for nothing. But where 
 a man like Senator Hoar, a distinguished lawyer, drew a bill, 
 and so drew it that after all sorts of attempted amendment it 
 was finally enacted in the words in which it was written, we 
 do get some light upon the meaning of the bill from what he 
 says. And he defines monopolizing as the exclusion of others 
 by such acts as constituted engrossing in the old times. I 
 have just read that definition. 
 
 These words " restraint of trade" are words that had been 
 known to lawyers for several centuries. They had a very dis- 
 tinct meaning. " Combination in restraint of trade " were 
 words that had a very distinct meaning. Who ever supposed 
 that under that head you were to cover acquisitions ? Bear in 
 mind that the power to buy and sell is one of those 
 things which alone makes a property right valuable. It 
 is not necessary to argue that, because they have not done it. 
 Congress may interfere with the right of buying and selling,, 
 but it has not done it in this case. And there is not a word 
 here to indicate any legislative intent to restrict the power to 
 buy or sell, or interfere with those transactions of life which 
 consist of acquisition. 
 
 The fact that there is no remedy prescribed except indict- 
 ment, injunction, and three-fold damages, shows that they 
 
 t In 1906, the Standard's production of crude oil was about 11 per cent, 
 of the total crude produced in the United States. The Government's Brief, 
 Vol. I., p. 139, admits the above, but says that the Standard in 1906 pro- 
 duced 36 per cent, of tlie total Pennsylvania crude produced and 31 per 
 cent, of the total Lima crude produced. 
 
99 
 
 were not contemplating the doing of something which could 
 not be dealt with by those remedies, and that what they did 
 have in their minds was an offense which could be remedied 
 by either of the three. And under our definition you caii so 
 remedy it. 
 
 Then, again : What was contemplated was some definite 
 wrongdoing. It was the monopolizing or attempting to 
 monopolize any part of the trade. Upon their definition of 
 monopolizing, where do we stand ? It has got to be the ac- 
 quisition of so much of the trade as accomplishes certain re- 
 sults. But upon our definition, whether it interferes with all 
 or whether it interferes with the smallest part ; whether it 
 interferes with a great corporation possessed of millions or a 
 man possessed of but a dollar, if any part of the trade is at- 
 tempted to be monopolized, that is the offense. And, there- 
 fore, I put it to you that their definition necessarily fails, be- 
 cause the thing that was clearly in the legislative mind was a 
 thing which, in all its parts, without exception, was under the 
 ban of the law, because it was an illegal act. 
 
 How much time have I remaining ? The learned Attor- 
 ney-General got over fifteen minutes beyond his time. 
 
 Thk Chief Justice : Go on, Mr. Johnson. Tour time will 
 have expired at about twenty minutes of two ; but we will 
 hear you at all events until the hour of adjournment, with 
 great pleasure. 
 
 Mb. Johnson : I am very mucli obliged to the Court. 
 
 My third proposition is that the ownership was legal at 
 the time of the transfer in 1899. 
 
 Let us do away with the cheval-de-frise of what occurred 
 in 1899. These properties were all owned by the same 
 owners. Mr. Kellogg has put most erroneously what took 
 place in the Northern Securities case. Mr. Harriman in that 
 case owned the majority of the stock of the Northern Pacific 
 Eailroad, and did not own a share of stock in the Great 
 Northern. In the fight for the possession, some of the owners 
 of Great Northern acquired some of the shares of the Northern 
 Pacific stock. But in this case we have a lot of owners 
 owning together the whole of this property. 
 
 Was that illegal? The best answer to that question is 
 that the Court has decreed that we shall resume our owner- 
 ship. Therefore I need not waste your time by discussing the 
 
100 
 
 contention that the ownership which existed at that time was 
 a proper ownership, in view of the fact that we are compelled 
 to resume it. 
 
 The reason for the holding of corporate shares was that one 
 corporation, as the policies of the state then were, could not 
 have sufficient capital to own the whole ; and some of the 
 States would not permit them to own a pipe-line or do such 
 business excepting under a corporate charter. But what ex- 
 isted, though the corporate guise was used, so far as the Federal 
 law was concerned, was this : It was precisely in the same 
 position as if all those properties, as properties, were owned 
 by us. The malediction that was put upon it was simply 
 because it was ultra vires of a corporation to be controlled by 
 other than its own shareholders. But that was not a Federal 
 question. And therefore we had a corporation which did not 
 get anything by virtue of a combination. It had the thing 
 before the combination existed. We had a corporation which 
 had conducted a business, enlarging it from time to time ; and 
 that corporation, owning that business, by different owners, 
 was in a position to hold it ; and if nothing had been done, it 
 would not at the present time have come under this statute, 
 according to the Government ; and up to 1899 it conducted 
 its business under it. 
 
 Now (for I must hurry), I come to the proposition that the 
 transfer of that property at that time was not illegal. 
 
 "Why was it ? How was it a restraint of trade, with all the 
 property owned by these people, for them to put the property 
 so owned by them in a corporation in which they owned ex- 
 actly the same number of shares? They owned in a corpora- 
 tion which owned all the property precisely what before they 
 owned directly in the property. Was that a restraint of 
 trade? Was that a monopolizing? Certainly it was not aT'^, 
 restraint of trade or intended to be a restraint of trade ;J 
 for we went on with the business unlimitedly, enlarg- 
 ing it as rapidly as we could. Certainly it was not a mon^ 
 opolizing, because the acquisitions after that time are too in-\ 
 significant to be noted ; and whatever we had, we had. -^ 
 
 Suppose that several persons as a partnership had been 
 conducting business, and the men were growing old — it is a 
 thing which occurs every day in the experience of practicing 
 lawyers— and, having built up a business which, unless it can 
 
101 
 
 be conducted, will not yield to those who came after them a 
 tithe of what it is worth, they form a corporation for the 
 purpose of enabling that business to be transacted after their 
 death : Would any one say for one moment that that was 
 contemplated by the legislature under a criminal restraint of 
 trade, or under a monopolizing ? Can it possibly be that if 
 a certain number of men own a property, and it becomes nec- 
 essary for them in order to better utilize that property to put 
 it in a corporation, there is anything criminal in that, or that 
 there was ever any intent to punish that thing ? 
 
 And now we come to the very heart of the Government's 
 contention. 
 
 The learned Attorney General saw precisely where was the 
 pinch of this case ; and he said, as said the Court at St. 
 Louis, that the wrong that was done was the destruction of 
 potential competition. 
 
 Such destruction is only a wrong to the State if the 
 State is entitled to the competition. Here were these people 
 with a property which it was necessary for them to hold to- 
 gether in order that they might get out of it the best value. 
 And because of that purpose and that purpose alone — not to 
 monopolize, not to restrain ; they had nothing to gain from 
 that, but in order that the title might be vested in them — 
 they did this thing, they committed an oflfense, because they 
 deprived the Government at some future time of potential 
 competition ! 
 
 Suppose that those different owners, by their wills, valid 
 under the law of the State, provided (because the learned 
 Attorney General said they might die, and it would be scat- 
 tered) that these shares should be held together as a unit in 
 the hands of their estates : Would anybody pretend that they 
 had violated the law in endeavoring to use their property to 
 the best advantage ? 
 
 Potential competition : I am entitled to put my property 
 in the shape in which it will be most useful to myself ; and I 
 violate no law when I put it in that shape. The Government 
 has no right to speculate upon a dismemberment or a destruc- 
 tion of the value of my property by my death. I have a right, 
 and it violates no right of theirs. The argument comes to 
 this : It is not wrong in the present ; but simply because, 
 while not monopolizing anything at present, at some future 
 
102 
 
 time I may be so unfortunate as to want to sell and be 
 obliged to sell my property, I shall have to sell it in a ruinous 
 way. Is it likely that these people will sell their property so 
 it will be disintegrated ? 
 
 I cannot deal with the question of illegal acts. All I have 
 to say under that head is that they are not proven, and that if 
 there was illegality in the act, it did not confiscate my prop- 
 erty. The Act prescribes the punishment ; and amongst the 
 punishments prescribed is not that of confiscation. 
 
 I come now to the proposition that the property is within 
 the ruling of the Knight case. 
 
 Here we have pipe-lines altogether within the State, refin- 
 eries within the State, marketing stations within the State, 
 tank-cars located in a certain place ; and that, we say, comes 
 within the definition of the Knight case. 
 
 What is to prevent any man from going into a State and 
 buying a refinery ? What boots it to say that the result of his 
 buying that refinery and dismantling it is that there will be no 
 commerce in it ? He has a right to say whether there shall 
 be commerce or not. So in the case of wheat lands and 
 corn lands, there will be no commerce because they are bought. 
 But commerce is the next stage ; and he is not obliged to fur- 
 nish it. 
 
 The Knight case was decided fifteen years ago. It was de- 
 cided with the concurrence of eight members of this Court. 
 It has never been questioned by this Court in its rulings. The 
 legislature, with fifteen years' knowledge of the interpretation 
 put upon it by this Court, has never amended that Act. 
 Enormous investments of property have been made upon the 
 faith of that decision, and acts done which this Court is now 
 asked to brand as criminal. 
 
 Nowadays we hear a great deal of what are called or stig- 
 matized as " reactionary courts " — by which I understand the 
 courts that go to the statutes as printed, and to the volumes 
 of decisions by. which the law is settled, and not to the files of 
 newspapers or to the speeches of oratorical demagogues. For 
 myself, the foundations of property, and with property society, 
 will be better maintained by the time-honored rule of stare 
 decisis. 
 
 In a moment of hysterical contemplation of the sins of 
 others (for we are never so apt to exaggerate our own), we are 
 

 103 
 
 apt to mistake the extent of their wrongdoing and the remedy 
 to be applied therefor. In the case of these large corpora- 
 tions, the need is not for their extirpation or their disintegra- 
 tions. By their mere largeness the country does not suffer, 
 but profits. Without these corporation prices will be higher ; 
 
 I hundreds of thousands of men will be deprived of employment ; 
 
 \ and our foreign trade (more and more dependent upon our 
 manufactures because of the alarming increase and growth of our 
 population which consumes our agricultural products) will be 
 destroyed. We shall have no chance in the competition 
 of the world for trade with a rival like Germany, the most in- 
 telligent of them all, which by special legislation fosters the 
 
 ^combination which you are asked to condemn as criminal. 
 
 Mr. Kellogg was unduly lacking in faith when he told you 
 that the abuses which these corporations might perpetrate 
 could not be prevented under the law ; but he was somewhat 
 inconsistent when he added, later, that the growth and pros- 
 perity of those that were now existing and growing up resulted 
 from the checking of these abuses. He underestimated the 
 potency of the power which this Court has conferred upon the 
 Government in preliminary investigations of all their books 
 and papers and transactions. He underestimated the potency 
 of injunction, indictment and three-fold damages. Certainly 
 he need not fear any over-fondness for these corporations by 
 judges, and hardly need lose his sleep at night in apprehension 
 of their receiving too much favor from juries. 
 
 Let the channels of commerce be open for all who may de- 
 sire to enter, whether with ocean steamer or with dugout, with 
 Eockefeller wealth or with naught but their brains and their 
 hands, unfettered by their own improper restraints, and unin- 
 terfered with by the abuses of others, and all will have been 
 done that is wise. Beyond that lies the antagonism of irre- 
 sistible economic necessity, and danger of disaster the length 
 and the breadth of which no man can foretell. 
 
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